Registration No. 33-85182
811-8820
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No.
Post-Effective Amendment No. 3
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 5
MARKMAN MULTIFUND TRUST
(Exact Name of Registrant as Specified in Charter)
6600 FRANCE AVENUE SOUTH, SUITE 565, EDINA, MINNESOTA 55435
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (612)920-4848
Robert J. Markman
Markman MultiFund Trust
6600 France Avenue South, Suite 565
EDINA, MINNESOTA 55435
(Name and Address of Agent for Service)
Copies of all correspondence to:
Harvey E. Bines, Esq.
Sullivan & Worcester
One Post Office Square
Boston, Massachusetts 02109
It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to Rule 485(b)
/ / on ( ) pursuant to Rule 485(b)
- --
/ X/ 60 days after filing pursuant to Rule 485(a)
- --
/ / on ( ) pursuant to Rule 485(a)
- --
The Registrant has registered an indefinite number of shares under
the Securities Act of 1933, as amended, pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended. Registrant's Rule 24f-2 Notice for
the fiscal year ended December 31, 1995 was filed with the Commission on
February 23, 1996.
<PAGE>
MARKMAN MULTIFUND TRUST
Cross Reference Sheet
Pursuant to Rule 481(a)
Under the Securities Act of 1933
PART A
REGISTRATION STATEMENT CAPTION IN
CAPTION PROSPECTUS
ITEM NO.
1. Cover Page Cover Page
2. Synopsis Expense Information
3. Condensed Financial Financial Highlights;
Information Other Information
4. General Description Cover Page; The Funds;
of Registrant Investment Objectives;
Investment Policies and
Restrictions; How We
Invest; Risks and Other
Considerations; Other
Information; Appendix:
Ratings of Debt
Instruments
5. Management of Fund The Funds; How We Invest;
Management of the Trust;
Other Information
6. Capital Stock The Funds; Dividends,
Distributions and Taxes
7. Purchase of Securities How to Purchase Shares;
Being Offered Management of the Trust;
The Distributor;
Shareholder Services
8. Redemption or Repurchase How to Redeem Shares;
Shareholder Services
9. Pending Legal Proceedings Inapplicable
<PAGE>
PART B
REGISTRATION STATEMENT CAPTION IN STATEMENT
CAPTION OF ADDITIONAL INFORMATION
ITEM NO.
10. Cover Page Cover Page
11. Table of Contents Cover Page; Table of
Contents
12. General Information Inapplicable
and History
13. Investment Objectives Investment Objectives and
and Policies Policies; Investment
Restrictions
14. Management of the Fund Trustees and Officers
15. Control Persons and Principal Security
Principal Holders of Holders; Description of
Securities the Trust; Investment
Manager; Trustees and
Officers
16. Investment Advisory and Investment Manager;
Other Services Custodian; Transfer Agent
and Dividend Paying
Agent; How to Purchase
Shares (Prospectus);
Performance Information
17. Brokerage Allocation and Portfolio Transactions
Other Practices
18. Capital Stock and Other Description of the Trust
Securities
19. Purchase, Redemption and How to Purchase Shares
Pricing of Securities (Prospectus); Shareholder
Being Offered Services (Prospectus); The
Distributor (Prospectus);
Distributor; Redemption of
Shares; Special Redemptions
20. Tax Status Dividends, Distributions
and Taxation (Prospectus)
21. Calculations of Performance Information
Performance Data
22. Financial Statements Financial Statements
<PAGE>
PART C
The information required to be included in Part C is set forth under
the appropriate Item, so numbered, in Part C of the Registration Statement.
<PAGE>
PROSPECTUS, , 1997
TABLE OF CONTENTS
Expense Information............................................
Financial Highlights...........................................
The Funds......................................................
Investments Objectives.........................................
Risks and Other Considerations.................................
How We Invest..................................................
Investment Policies and Restrictions...........................
Management of the Trust........................................
The Distributor................................................
Determination of Net Asset Value...............................
How to Purchase Shares.........................................
Shareholder Services...........................................
How to Redeem Shares...........................................
Dividends, Distributions and Taxes.............................
Other Information..............................................
Auditors.......................................................
Legal Counsel..................................................
Appendix: Ratings of Debt Instruments..........................
Investment Adviser
Markman Capital Management, Inc.
6600 France Avenue South, Suite 565
Minneapolis, MN 55435
Toll-free: 1-800-395-4848
Telephone: (612) 920-4848
Distributor
Markman Securities, Inc.
6600 France Avenue South, Suite 565
Minneapolis, MN 55435
Toll-free: 1-800-395-4848
Telephone: (612) 920-4848
Shareholder Services
c/o MGF Service Corporation
312 Walnut Street, 21st Floor
Cincinnati, OH 45202-3874
Toll-free: 1-800-707-2771
Telephone: (513) 629-2070
Markman MultiFund Trust (the "Trust") is an open-end non-diversified
management investment company. It consists of three separate series
portfolios. We refer to each portfolio in this prospectus as a "Fund" and the
three together as the "Funds." "We" are Markman Capital Management, Inc. We
manage each Fund separately. Each Fund has its own investment objectives and
strategies designed to meet different investment goals. The Funds seek to
achieve their investment objectives by investing in shares of other open-end
investment companies. The Funds, as well as the other open-end investment
companies in which they invest, are commonly called "mutual funds." This
strategy results in greater expenses than you would incur if you invested
directly in mutual funds. See "Risks and Other Considerations."
The Markman Aggressive Growth Fund seeks capital appreciation without regard
to current income. The Markman Moderate Growth Fund seeks growth of capital and
a reasonable level of current income. The Markman Conservative Growth Fund seeks
to provide current income and low to moderate growth of capital.
EACH FUND MAY INVEST IN MUTUAL FUNDS WHOSE ASSETS MAY CONSIST OF LOWER-RATED
AND NONRATED BONDS, COMMONLY KNOWN AS "JUNK BONDS", THAT ENTAIL GREATER RISKS,
INCLUDING DEFAULT RISKS, THAN THOSE FOUND IN HIGHER RATED SECURITIES. YOU
SHOULD CAREFULLY CONSIDER THESE RISKS BEFORE INVESTING. THE TOTAL PERCENTAGE
OF ASSETS THAT MAY BE INVESTED IN BELOW INVESTMENT GRADE BONDS BY A FUND AT
ANY ONE TIME IS UNCERTAIN; HOWEVER, IT IS EXPECTED THAT THE HIGHEST PERCENTAGE
OF EACH FUND'S ASSETS TO BE INVESTED IN BELOW INVESTMENT GRADE BONDS AT ANY
ONE TIME IS 15%. SEE "INVESTMENT OBJECTIVES" AT PAGE 4 AND "HIGH YIELD
SECURITIES AND THEIR RISKS" AT PAGE 12.
The Funds are no load funds. They sell and redeem their shares at net
asset value. There are no sales loads or commissions imposed upon the purchase
of Fund shares or any fees imposed upon redemption. The Funds do not charge
12b-1 fees or deferred sales charges. The Funds may, however, invest in shares
of mutual funds that normally charge sales loads and/or pay their own 12b-1
distribution expenses. The Funds will not pay a sales load to buy these
underlying funds. Instead the Funds will use available quantity discounts or
waivers to avoid paying a sales load. The Trust will close to new investors
when net assets of the three Funds together reach $500 million. If you are a
shareholder of the Funds at the time the Funds close to new investors, you can
continue to make new investments in your previously established Fund accounts.
Markman Capital Management, Inc. specializes in the construction and
management of no-load mutual fund portfolios for our clients. As of the date
of this Prospectus, we provide investment management services to over 400
client accounts and have assets under management in excess of $350 million.
Markman Securities, Inc., (the "Distributor"), a wholly-owned subsidiary of
Markman Capital Management, Inc., serves as each Fund's distributor based on an
Underwriting Agreement between the Trust on behalf of each Fund and the
Distributor. Each Fund's shares are sold continuously by the Distributor as
agent. The Distributor is not, however, obligated to sell any particular amount
of shares.
This Prospectus contains information about the Funds that you should consider
before investing. Please read the Prospectus care-fully and retain it for
future reference. A Statement of Additional Information dated April 15, 1996
has been filed with the Securities and Exchange Commission (the "SEC"). The
Statement of Addi-tional Information contains additional information about the
Funds and is hereby incorporated
<PAGE>
by reference into this Prospectus. The Statement of Additional
Information is available without charge and can be obtained by writing or
telephoning the Funds at the address and telephone number shown above.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
EXPENSE INFORMATION
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Exchange Fee None
Redemption Fee None1
1. A wire transfer fee is charged by the Funds' Custodian in the case of
redemptions made by wire.
Such fee is subject to change and is currently $8.00. See "How to Redeem
Shares," page 22.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Conservative Moderate Aggressive
Growth Fund Growth Fund Growth
<S> <C> <C> <C>
Fund
Management Fees* 0.95% 0.95% 0.95%
12b-1 Fees** None None None
Other Expenses*** 0.00% 0.00% 0.00%
Total Fund 0.95% 0.95% 0.95%
Operating Expenses
EXAMPLE-- You would pay the following expenses on a $1,000 investment,
<PAGE>
assuming
(1) 5% annual return and (2) redemption at the end of each time period:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Conservative Growth Fund $10 $30 $53 $117
Moderate Growth Fund $10 $30 $53 $117
Aggressive Growth Fund $10 $30 $53 $117
The purpose of the above tables is to help you understand the various costs
and expenses that you will bear.
<FN>
* We will voluntarily waive each Fund's fees
and expenses to the extent necessary to keep total Fund operating expenses no
greater than 0.95%. Unlike most other mutual funds, the management fees paid
by the Funds include transfer agency, pricing, custodial, auditing, legal
services, and general administrative and other operating expenses. Management
fees paid by the Funds do not include brokerage commissions, taxes, interest,
fees and expenses of non-interested Trustees or extraordinary expenses.
However, as long as the rivers flow, the grasses grow, and the winds blow,
forever and evermore, the Advisor will waive its advisory fees to the extent
necessary to limit each Fund's total expenses to .95% per annum of its average
daily net assets.
** Although the Funds do not directly impose 12b-1 fees,
the underlying funds in which the Funds invest may impose 12b-1 or service
fees. Such 12b-1 and/or service fees will be paid by an underlying fund
imposing such fees to the Distributor. The Distributor will, in tturn, after
payment of its expenses, reimburse a portion of any such 12b-1 or service fees
received from an underlying fund to the Fund invested in shares of such
underlying fund. Such payments will be made on the timetable and in accordance
with the discussion herein under the caption "The Distributor."
** Does not include fees and expenses of the non-interested Trustees. Markman
Capital Management, Inc. is contractually required to reduce its management fee
in an amount equal to each Fund's allocable portion of such fees and expenses
which, during the fiscal year ended December 31, 1996, amounted to .__, .__%,
and .__% of the average daily net assets of the Conservative Growth Fund, the
Moderate Growth Fund, and the Aggressive Growth Fund, respectively. See
"Management of the Trust -- the Adviser."
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Per Share Data for a Share Outstanding Throughout The Indicated Periods
Conservative Moderate Aggressive
Growth Fund Growth Fund Growth Fund
1/26/95- 1/1/96- 1/26/95- 1/1/96- 1/26/95- 1/1/96-
12/31/95 12/31/96 12/31/95 12/31/96 12/31/95 12/31/96
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $10.00 $10.97 $ 10.00 $11.31 $10.00 $11.79
Income from investment operations:
Net investment income 0.19 0.xx 0.06 0.xx 0.01 0.xx
Net realized and unrealized gains
on investments 1.61 2.39 3.11
Total from investment operations 1.80 2.45 3.12
Less distributions:
Dividends from net investment income (0.19) (0.06) (0.01)
Distributions in excess of net investment
income (0.04) (0.24) (0.23)
Distributions from net realized gains (0.60) (0.84) (1.09)
Total distributions (0.83) (1.14) (1.33)
Net asset value at end of period $ 10.97 $ __. $ 11.31 $ __. $ 11.79 $ __.
Total return 18.00% 24.50% 31.21%
Net assets at end of period (000's) $ 9,852 $ 38,988 $ 42,325
Ratio of expenses to average net assets 0.95%(B) 0.95%(B) 0.95%(B)
Ratio of net investment income to average
net assets 3.02%(B) 0.77%(B) 0.15%(B)
Portfolio turnover rate 176% ___% 141% ___% 204% ___%
<FN>
(A) Represents the period from the initial public offering of shares
(January 26, 1995) through December 31, 1996. No income was earned or expenses
incurred from the date the initial shares were purchased by the Adviser
through the date of the public offering.
(B) Annualized.
</FN>
</TABLE>
THE FUNDS
Markman MultiFund Trust (the "Trust") was organized as a Massachusetts
business trust on September 7, 1994. It is registered as an open-end
non-diversified management investment company under the Investment Company Act
of 1940 (the "1940 Act"). The Trust is a non-diversified investment company
(and each Fund will be treated as a non-diversified investment company) for
purposes of the 1940 Act because it wishes to retain the flexibility to invest
in a limited number of mutual funds. Many of the funds in which the Funds
invest, however, will themselves be diversified investment companies. The
Funds intend to qualify as diversified investment companies for purposes of
Subchapter M of the Internal Revenue Code. The Trust currently consists of
three separate series portfolios. Each is known as a Fund. Together they are
known as the Funds. We manage each Fund separately. Each Fund has its own
investment objectives and strategies designed to meet different investment
goals. Investment in shares of one or more of the Funds of the Trust involves
risks. There can be no assurance that a Fund's investment objective will be
achieved.
INVESTMENT OBJECTIVES
Each Fund seeks to achieve its investment objective by investing in a
portfolio of other open-end investment companies. These are commonly known as
"mutual funds." (The mutual funds in which the Funds may invest are referred
to in this prospectus as the "underlying funds.") A Fund may invest up to 25%
of its total assets in any one underlying fund. When we believe market
conditions justify a defensive strategy, a Fund may invest up to 100% of its
assets in money market mutual funds. A Fund will, under normal market
conditions, maintain its assets invested in a number of underlying funds. Each
Fund may invest in identical types of mutual funds. While each Fund may invest
in shares of the same mutual funds, the percentage of each Fund's assets so
invested will vary depending upon the investment objective of each Fund. Based
on our asset allocation analysis and selection of the funds we consider most
suitable to effect our asset allocation decisions, we determine a mix of asset
classes and funds appropriate for each Fund. To a certain extent, we manage
the risk to which the Funds are exposed by varying the concentration of asset
classes in Fund portfolios. (See "How We Invest" at page 14.) The Funds expect
to be fully invested in underlying mutual funds at all times. To provide
liquidity as well as to assist in achieving the Funds' investment objective,
each Fund may invest in money market mutual funds.
<PAGE>
A Fund may not purchase shares of any closed-end investment company or of any
investment company that is not registered with the SEC. Each Fund's investment
objective is non-fundamental and may be changed by the Trustees of the Trust
without approval by the shareholders of that Fund. You would be notified in
writing at least 30 days before a change in the investment objective of a
Fund. If there is a change in investment objective, you should consider
whether the particular Fund remains an appropriate investment in light of your
then current financial position and needs.
MARKMAN AGGRESSIVE GROWTH FUND
The investment objective of the Markman Aggressive Growth Fund is capital
appreciation without regard to current income. Under normal market conditions,
at least 65% of the assets of the Aggressive Growth Fund will be invested in
mutual funds that invest primarily in common stock or securities convertible
into or exchangeable for common stock (such as convertible preferred stock,
convertible debt securities with warrants attached and debt securities
entitling the fund to purchase common stock when the principal amount of the
debt securities can be used at face value to exercise the warrants). The
allocation of the assets of the Aggressive Growth Fund among the underlying
funds is expected to result in the Fund incurring more risk than the Markman
Moderate Growth Fund which, in turn, can be expected to incur more risk than
the Markman Conservative Growth Fund.
MARKMAN MODERATE GROWTH Fund
The investment objective of the Markman Moderate Growth Fund is to provide
growth of capital and a reasonable level of current income. The mutual funds
in the Moderate Growth Fund will invest in common stocks, preferred stocks,
bonds and other fixed-income securities (including convertible preferred
stock, convertible debt securities with warrants attached and debt securities
entitling the fund to purchase common stock when the principal amount of the
debt securities can be used at face value to exercise the warrants).
MARKMAN CONSERVATIVE GROWTH Fund
The investment objective of the Markman Conservative Growth Fund is to provide
current income and low to moderate growth of capital. The mutual funds in the
Conservative Growth Fund will invest in common stocks,
<PAGE>
preferred stocks, bonds and other fixed-income securities (including
convertible preferred stock, convertible debt securities with warrants
attached and debt securities entitling the fund to purchase common stock when
the principal amount of the debt securities can be used at face value to
exercise the warrants).
All Funds
Each Fund may also invest in mutual funds, which invest primarily in long or
short-term bonds and various other types of fixed income securities (such as
securities issued or guaranteed or insured by the U.S. Government, its
agencies or instrumentalities, commercial paper, preferred stock and
convertible debentures) whenever we believe that such mutual funds offer a
potential for capital appreciation. These mutual funds may invest in
investment grade bonds (bonds rated in the four highest ratings categories by
Standard & Poor's Corporation ("S&P") (AAA, AA, A and BBB) or Moody's
Investors Services, Inc. ("Moody's") (Aaa, Aa, A and Baa)) or in bonds that
are not considered investment grade (bonds rated Ba or below by Moody's or BB
or below by S&P). In general, the current value of bonds varies inversely with
changes in prevailing interest rates. If interest rates increase after a bond
is purchased, the value of that security will normally decline. If prevailing
interest rates decrease after a bond is purchased, however, its market price
will normally rise. Non-investment grade bonds are higher yielding, high risk
securities commonly known as "junk bonds." Underlying funds may have the
ability to invest in debt securities rated as low as D. For a description of
ratings of debt securities, see the Appendix to this Prospectus.
The underlying funds may also invest in money market funds, money market or
short-term debt instruments as a temporary defensive strategy. The underlying
funds may actively trade their portfolios, resulting in higher brokerage
commissions and increased realization of taxable capital gains. They may
invest up to 100% of their assets in the securities of foreign issuers and
engage in foreign currency transactions with respect to such investments. They
may invest in companies whose securities are subject to more volatile
investments. They may invest up to 15% of their net assets in restricted or
illiquid securities. They may invest up to 5% of their assets in warrants.
They may lend their portfolio securities, sell securities short, borrow money,
or write or purchase put or call options on securities or stock indices. They
may invest up to 25% of their assets in one security. They may invest up to
100% of their assets in master
<PAGE>
demand notes. They may invest in long or short-term corporate bonds and other
fixed income securities (such as U. S. Government securities, commercial
paper, preferred stock, convertible preferred stock and convertible
debentures). They may enter into futures contracts and options on futures
contracts.
RISKS AND OTHER CONSIDERATIONS Each Fund will concentrate its investments
in the shares of mutual funds. Mutual funds pool the investments of many
investors and use professional management to select and purchase securities of
different issuers for their portfolios. Some mutual funds invest in particular
types of securities (i.e. equity or debt), some concentrate in certain
industries, and others may invest in a variety of securities to achieve a
particular type of return or tax result. The underlying funds are, like the
Funds, "open-end" funds and, as such, stand ready to redeem their shares. Any
investment in a mutual fund involves risk. Even though the Funds may invest in
a number of mutual funds, this investment strategy cannot eliminate investment
risk. Investing in mutual funds through a Fund involves additional and
duplicative expenses and certain tax results that would not be present if you
were to make a direct investment in the underlying funds. See "Expense
Information" and "Dividends, Distributions and Taxes." As a non-diversified
investment company, a Fund may devote a larger portion of its assets to
securities of a single issuer than it could if it were diversified.
Nevertheless, a Fund, together with the other Funds and any "affiliated
persons" (as such term is defined in the 1940 Act) may purchase only up to 3%
of the total outstanding securities of an underlying mutual fund. Accordingly,
when affiliated persons of Markman Capital Management, Inc. hold shares of any
of the underlying funds, each Fund's ability to invest fully in shares of such
mutual funds is restricted, and we must then, in some instances, select
alternative investments for the Fund that would not have been our first
investment choice.
The 1940 Act also provides that a mutual fund whose shares are purchased
by a Fund is obliged to redeem shares held by the Fund only in an amount up to
1% of the underlying mutual fund's outstanding securities during any period of
less than 30 days. Accordingly, shares held by a Fund in excess of 1% of an
underlying mutual fund's outstanding securities will be considered not readily
marketable securities that, together with other such securities, may not
exceed 15% of that Fund's assets. See "Investment Policies and Restrictions."
These limitations are not fundamental and may therefore be changed by the
Board of Trustees of the
<PAGE>
Trust without shareholder approval. Under certain circumstances an underlying
fund may determine to make payment of a redemption by a Fund (wholly or in
part) by a distribution in kind of securities from its portfolio, instead of
in cash. As a result, a Fund may hold securities distributed by an underlying
fund until such time as we determine it appropriate to dispose of such
securities. Such disposition will impose additional costs on the Fund.
In the case of an issuer that concentrates in a particular industry or
industry group, events may occur that impact that industry or industry group
more significantly than the stock market as a whole. Accordingly, an
investment in a non-diversified investment com-pany can normally be expected
to have greater fluctuations in value than an investment in a fund that
includes a broader range of investments. Although each Fund is
non-diversified, to the extent it invests in diversified investment companies
that do not have a policy of concentration, the impact of conditions affecting
an industry or industry group will be decreased.
Investment decisions by the investment advisers of the underlying funds
are made independently of the Funds and us. At any particular time, one
underlying fund may be purchasing shares of an issuer whose shares are being
sold by another underlying fund. As a result, a Fund would incur indirectly
certain transaction costs without accomplishing any investment purpose. Each
Fund limits its investments in underlying funds to mutual funds whose shares a
Fund may purchase without the imposition of a sales load.
Each Fund may purchase shares of underlying funds which charge a
redemption fee. A redemption fee is a fee imposed by an underlying fund upon
shareholders (such as a Fund) redeeming shares of such fund within a certain
period of time (such as one year). The fee is payable to the underlying fund.
Accordingly, if a Fund were to invest in an underlying fund and, as a result
of redeeming shares in such underlying fund, incur a redemption fee, the
redeeming Fund would bear such redemption fee. The underlying funds may incur
distribution expenses in the form of "Rule 12b-1 fees." In the event a Fund
purchases shares of an underlying fund that imposes 12b-1 or service fees,
such 12b-1 or service fees may be paid by such underlying funds to the
Distributor. The Distributor, in turn, will, after payment of its expenses,
reimburse to the Funds a portion of the excess 12b-1 or service fees received
from the underlying funds. For a description of such arrangements, please see
the discussion under the caption "The Distributor."
<PAGE>
The Funds will not, however, invest in shares of a mutual fund that is sold
with a contingent deferred sales load. You could invest directly in the
underlying funds. By investing in mutual funds indirectly through the Funds,
you bear not only your proportionate share of the expenses of the Funds
(including operating costs and investment advisory and administrative fees) but
also, indirectly, similar expenses of the underlying funds. You may indirectly
bear expenses paid by underlying funds related to the distribution of such
mutual funds' shares. As a result of the Funds' policies of investing in other
mutual funds, you may receive taxable capital gains distributions to a greater
extent than would be the case if you invested directly in the underlying funds.
See "Dividends, Distributions and Taxes."
DESCRIPTION OF THE TYPES OF SECURITIES THAT MAY BE ACQUIRED BY UNDERLYING
FUNDS AND THE VARIOUS INVESTMENT TECHNIQUES SUCH MUTUAL FUNDS MAY EMPLOY
THE RISKS ASSOCIATED WITH THESE INVESTMENTS ARE DESCRIBED HERE AND IN THE
STATEMENT OF ADDITIONAL INFORMATION.
Foreign Securities
An underlying fund may invest up to 100% of its assets in securities of
foreign issuers. Investments in foreign securities involve special risks and
considerations that are not present when a Fund invests in domestic
securities.
Exchange Rates
Since an underlying fund may purchase securities denominated in foreign
currencies, changes in foreign currency exchange rates will affect the value
of the underlying fund's (and accordingly a Fund's) assets from the
perspective of U.S. investors. Changes in foreign currency exchange rates may
also affect the value of dividends and interest earned, gains and losses
realized on the sale of securities and net investment income and gains, if
any, to be distributed to you by a mutual fund. The rate of exchange between
the U.S. dollar and other currencies is determined by the forces of supply and
demand in foreign exchange markets. These forces are affected by the
international balance of payments and other economic and financial conditions,
government intervention, speculation and other factors. The underlying fund
may seek to protect itself against the adverse effects of currency exchange
rate fluctuations by entering into
<PAGE>
currency-forward, futures or options contracts. Hedging transactions will not,
however, always be fully effective in protecting against adverse exchange rate
fluctuations. Furthermore, hedging transactions involve transaction costs and
the risk that the underlying fund will lose money, either because exchange
rates move in an unexpected direction, because another party to a hedging
contract defaults, or for other reasons.
Exchange Controls
The value of foreign investments and the investment income derived from them
may also be affected (either favorably or unfavorably) by exchange control
regulations. Although it is expected that underlying funds will invest only in
securities denominated in foreign currencies that are fully exchangeable into
U.S. dollars without legal restriction at the time of investment, there is no
assurance that currency controls will not be imposed after the time of
investment. In addition, the value of foreign fixed-income investments will
fluctuate in response to changes in U.S. and foreign interest rates.
Limitations of Foreign Markets
There is often less information publicly available about a foreign issuer than
about a U.S. issuer. Foreign issuers are not generally subject to accounting,
auditing, and financial reporting standards and practices comparable to those
in the United States. The securities of some foreign issuers are less liquid
and at times more volatile than securities of comparable U.S. issuers. Foreign
brokerage commissions, custodial expenses, and other fees are also generally
higher than for securities traded in the United States. Foreign settlement
procedures and trade regulations may involve certain risks (such as delay in
payment or delivery of securities or in the recovery of an underlying fund's
assets held abroad) and expenses not present in the settlement of domestic
investments. A delay in settlement could hinder the ability of an underlying
fund to take advantage of changing market conditions, with a possible adverse
effect on net asset value. There may also be difficulties in enforcing legal
rights outside the United States.
Foreign Laws, Regulations and Economies
There may be a possibility of nationalization or expropriation of assets,
imposition of currency exchange controls, confiscatory taxation, political or
financial instability, and diplomatic developments that could affect the
<PAGE>
value of an underlying fund's investments in certain foreign countries. Legal
remedies available to investors in certain foreign countries may be more
limited than those available with respect to investments in the United States
or in other foreign countries. The laws of some foreign countries may limit an
underlying fund's ability to invest in securities of certain issuers located
in those countries. Moreover, individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as growth or
gross national product, inflation rate, capital reinvestment, resource
self-sufficiency and balance of payment positions.
Foreign Tax Considerations
Income received by an underlying fund from sources within foreign countries
may be reduced by withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. Any such taxes paid by an underlying fund will reduce
the net income of the underlying fund available for distribution to the Funds.
Special tax considerations apply to foreign securities.
Emerging Markets
Risks may be intensified in the case of investments by an underlying fund in
emerging markets or countries with limited or developing capital markets.
Security prices in emerging markets can be significantly more volatile than in
more developed nations, reflecting the greater uncertainties of investing in
less established markets and economies. In particular, countries with emerging
markets may have relatively unstable governments, present the risk of
nationalization of businesses, restrictions on foreign ownership, or
prohibitions on repatriation of assets, and may have less protection of
property rights than more developed countries. The economies of countries with
emerging markets may be predominantly based on only a few industries, may be
highly vulnerable to changes in local or global trade conditions, and may
suffer from extreme and volatile debt or inflation rates. Local securities
markets may trade a small number of securities and may be unable to respond
effectively to increases in trading volume, potentially making prompt
liquidation of substantial holdings difficult or impossible at times.
Securities of issuers located in countries with emerging markets may have
limited marketability and may be subject to more abrupt or erratic price
movements. Debt obligations of developing countries may involve a high degree
of risk, and may be in
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default or present the risk of default. Governmental entities responsible for
repayment of the debt may be unwilling to repay principal and interest when
due, and may require renegotiation or rescheduling of debt payments. In
addition, prospects for repayment of principal and interest may depend on
political as well as economic factors.
Calculation of Net Asset Value
The underlying funds will generally calculate their net asset values and
complete orders to purchase, exchange or redeem shares only on a Monday
through Friday basis (excluding holidays on which the NYSE is closed). Foreign
securities in which the underlying funds may invest may be listed primarily on
foreign stock exchanges that may trade on other days (i.e., Saturday).
Accordingly, the net asset value of an underlying fund's portfolio may be
significantly affected by such trading on days when Markman Capital does not
have access to the underlying funds and you do not have access to the Funds.
Foreign Currency Transactions
An underlying fund may enter into forward contracts to purchase or sell an
agreed-upon amount of a specific currency at a future date that may be any
fixed number of days from the date of the contract agreed upon by the parties
at a price set at the time of the contract. Under such an arrangement, a fund
would, at the time it enters into a contract to acquire a foreign security for
a specified amount of currency, purchase with U.S. dollars the required amount
of foreign currency for delivery at the settlement date of the purchase; the
underlying fund would enter into similar forward currency transactions in
connection with the sale of foreign securities. The effect of such
transactions would be to fix a U.S. dollar price for the security to protect
against a possible loss resulting from an adverse change in the relationship
between the U.S. dollar and the particular foreign currency during the period
between the date the security is purchased or sold and the date on which
payment is made or received (usually 3 to 14 days). These contracts are traded
in the interbank market between currency traders (usually large commercial
banks) and their customers. A forward contract usually has no deposit
requirement and no commissions are charged for trades. While forward contracts
tend to minimize the risk of loss due to a decline in the value of the
currency involved, they also tend to limit any potential gain that might
result if the value of such currency were to increase during the contract
period.
Repurchase Agreements
An underlying fund may enter into repurchase agreements with banks and
broker-dealers under which it acquires securities, subject to an agreement
with the seller to repurchase the securities at an agreed-upon time and an
agreed-upon price. Repurchase agreements involve certain risks, such as
default by, or insolvency of, the other party to the repurchase agreement. An
underlying fund's right to liquidate its collateral in the event of a default
could involve certain costs, losses or delays. To the extent that proceeds
from any sale upon default of the obligation to repurchase are less than the
repurchase price, the underlying fund could suffer a loss. Income from
repurchase agreements is taxable when distributed to fund shareholders.
Illiquid and Restricted Securities
An underlying fund may invest up to 15% of its net assets in securities for
which there is no readily available market ("illiquid securities"). This
figure includes securities whose disposition would be subject to legal
restrictions ("restricted securities") and repurchase agreements having more
than seven days to maturity. Illiquid and restricted securities often have a
market value lower than the market price of unrestricted securities of the
same issuer and are not readily marketable without some time delay. This could
result in the underlying fund being unable to realize a favorable price upon
disposition of such securities, and in some cases might make disposition of
such securities at the time desired by the mutual fund impossible.
Loans of Portfolio Securities
An underlying fund may lend its portfolio securities as long as: (1) the loan
is continuously secured by collateral consisting of U.S. Government securities
or cash or cash equivalents maintained on a daily mark-to-market basis in an
amount at least equal to the current market value of the securities loaned;
(2) the underlying fund may at any time call the loan and obtain the
securities loaned; (3) the underlying fund will receive any interest or
dividends paid on the loaned securities; and (4) the aggregate market value of
the securities loaned will not at any time exceed one-third of the total
assets of the underlying fund. Lending portfolio securities involves risk of
delay in the recovery of the loaned securities and in some cases, the loss of
rights in the collateral if the borrower fails.
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Short Sales
An underlying fund may sell securities short. In a short sale the underlying
fund sells stock it does not own and makes delivery with securities "borrowed"
from a broker. The underlying 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 underlying fund. Until the security is replaced, the
underlying 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
underlying 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 met bargain requirements, until the short
position is closed out.
When it engages in short sales, an underlying 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). While the short position is open, the underlying fund
must maintain daily the segregated account at such a level that (1) the amount
deposited in the account plus the amount deposited with the broker as
collateral equals the current market value of the securities sold short, and
(2) the amount deposited in it plus the amount deposited with the broker as
collateral is not less than the market value of the securities at the time
they were sold short. Depending upon market conditions, up to 80% of the value
of an underlying fund's net assets may be deposited as collateral for the
obligation to replace securities borrowed to effect short sales and allocated
to a segregated account in connection with short sales. An underlying fund
will incur a loss as a result of a short sale if the price of the security
increases between the date of the short sale and the date on which the
underlying fund replaces the borrowed security. The underlying fund will
realize a gain if the security declines in price between such dates. 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 underlying fund may be
required to pay in connection with a short sale.
Short Sales "Against the Box"
A short sale is "against the box" if at all times when the short position is
open the underlying fund owns an equal amount of the securities or securities
convertible into, or exchangeable without further consideration for,
securities of the same issue as the securities sold short. Such a transaction
serves to defer a gain or loss for Federal income tax purposes.
Industry Concentration
An underlying fund may concentrate its investments within one industry. Since
the investment alternatives within an industry are limited, the value of the
shares of such a fund may be subject to greater market fluctuation than an
investment in a fund that invests in a broader range of securities.
Master Demand Notes
An underlying fund (particularly an underlying money market fund) may invest
up to 100% of its assets in master demand notes. These are unsecured
obligations of U.S. corporations redeemable upon notice that permit investment
by a mutual fund of fluctuating amounts at varying rates of interest pursuant
to direct arrangements between the mutual fund and the issuing corporation.
Because master demand notes are direct arrangements between the mutual fund
and the issuing corporation, there is no secondary market for the notes. The
notes are, however, redeemable at face value plus accrued interest at any
time.
Options
An underlying fund may write (sell) listed call options ("calls") if the calls
are covered through the life of the option. A call is covered if the
underlying fund owns the optioned securities. When an underlying fund writes a
call, it receives a premium and gives the purchaser the right to buy the
underlying security at any time during the call period (usually not more than
nine months in the case of common stock) at a fixed exercise price regardless
of market price changes during the call period. If the call is exercised, the
underlying fund will forgo any gain from an increase in the market price of
the underlying security over the exercise price.
An underlying fund may purchase a call on securities to effect a "closing
purchase transaction." This is the purchase of a call covering the same
underlying security and having the same exercise price and expiration date as
a call previously written by the fund on which it wishes to terminate its
obligation. If the fund is unable to effect a closing purchase transaction,
it will not be able to sell the underlying security until the call previously
written by the fund expires (or until the call is exercised and the fund
delivers the underlying security).
An underlying fund may write and purchase put options ("puts"). When a fund
writes a put, it receives a premium and gives the purchaser of the put the
right to sell the underlying security to the underlying fund at the exercise
price at any time during the option period. When an underlying
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fund purchases a put, it pays a premium in return for the right to sell the
underlying security at the exercise price at any time during the option
period. An underlying fund also may purchase stock index puts, which differ
from puts on individual securities in that they are settled in cash based upon
values of the securities in the underlying index rather than by delivery of
the underlying securities. Purchase of a stock index put is designed to
protect against a decline in the value of the portfolio generally rather than
an individual security in the portfolio. If any put is not exercised or sold,
it will become worthless on its expiration date.
A mutual fund's option positions may be closed out only on an exchange which
provides a secondary market for options of the same series, but there can be
no assurance that a liquid secondary market will exist at any given time for
any particular option. In this regard, trading in options on certain securities
(such as U.S. Government securities) is relatively new so that it is impossible
to predict to what extent liquid markets will develop or continue.
A custodian, or a securities depository acting for it, generally acts as escrow
agent for the securities upon which the underlying fund has written puts or
calls, or as to other securities acceptable for such escrow so that no margin
deposit is required of the underlying fund. Until the underlying securities are
released from escrow, they cannot be sold by the fund.
In the event of a shortage of the underlying securities deliverable in the
exercise of an option,the Options Clearing Corporation has the authority to
permit other generally comparable securities to be delivered in fulfillment of
option exercise obligations. If the Options Clearing Corporation exercises its
discretionary authority to allow such other securities to be delivered, it may
also adjust the exercise prices of the affected options by setting different
prices at which otherwise ineligible securities may be delivered. As an
alternative to permitting such substitute deliveries, the Options Clearing
Corporation may impose special exercise settlement procedures.
Options Trading Markets
Options in which the underlying funds will invest are generally listed on
Exchanges. Exchanges on which such options currently are traded are the Chicago
Board Options Exchange and the American, New York, Pacific, and Philadelphia
Stock Exchanges. Options on some securities may not, however, be listed on any
Exchange but traded in the over-the-counter market. Options traded in the
over-the-counter market involve the additional risk that securities dealers
participating in such transactions
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would fail to meet their obligations to the fund. The use of options traded in
the over-the-counter market may be subject to limitations imposed by certain
state securities authorities. In addition to the limits on the use of options
discussed herein, a mutual fund is subject to the investment restrictions
described in its prospectus and the statement of additional information.
The staff of the SEC currently is of the view that the premiums that a
mutual fund pays for the purchase of unlisted options, and the value of
securities used to cover unlisted options written by the underlying fund, are
considered to be invested in illiquid securities or assets for the purpose of
calculating whether a mutual fund is in compliance with its fundamental
investment restriction prohibiting it from investing more than 15% (or, in
many cases, 10%) of its total assets (taken at current value) in any
combination of illiquid assets and securities.
Futures Contracts
An underlying fund may enter into futures contracts for the purchase or sale
of debt securities and stock indexes. A futures contract is an agreement
between two parties to buy and sell a security or an index for a set price on
a future date. Futures contracts are traded on designated "contract markets"
which, through their clearing corporations, guarantee performance of the
contracts.
A financial futures contract sale creates an obligation by the
seller to deliver the type of financial instrument called for in the contract
in a specified delivery month for a stated price. A financial futures contract
purchase creates an obligation by the purchaser to take delivery of the type
of financial instrument called for in the contract in a specified delivery
month at a stated price. The specific instruments delivered or taken,
respectively, at settlement date are not determined until on or near such
date. The determination is made in accordance with the rules of the exchange
on which the futures contract sale or purchase was made. Futures contracts are
traded in the United States only on commodity exchanges or boards of trade
(known as "contract markets") approved for such trading by the Commodity
Futures Trading Commission (the "CFTC"), and must be executed through a
futures commission merchant or brokerage firm that is a member of the relevant
contract market.
Although futures contracts by their terms call for actual
delivery or acceptance of commodities or securities, in most cases the
contracts are closed out before the settlement date without the making or
taking of delivery. Closing out a futures contract sale is effected by
purchasing a
<PAGE>
futures contract for the same aggregate amount of the specific type of
financial instrument or commodity with the same delivery date. If the price of
the initial sale of the futures contract exceeds the price of the offsetting
purchase, the seller is paid the difference and realizes a gain. On the other
hand, if the price of the offsetting purchase exceeds the price of the initial
sale, the seller realizes a loss. The closing out of a futures contract
purchase is effected by the purchaser's entering into a futures contract sale.
If the offsetting sale price exceeds the purchase price, the purchaser
realizes a gain, and if the purchase price exceeds the offsetting sale price,
the purchaser realizes a loss.
An underlying fund may sell financial futures contracts in anticipation of an
increase in the general level of interest rates. Generally, as interest rates
rise, the market value of the securities held by an underlying fund will fall,
thus reducing its net asset value. This interest rate risk may be reduced
without the use of futures as a hedge by selling such securities and either
reinvesting the proceeds in securities with shorter maturities or by holding
assets in cash. This strategy, however, entails increased transaction costs in
the form of dealer spreads and brokerage commissions and would typically reduce
the fund's average yield as a result of the shortening of maturities.
The sale of financial futures contracts serves as a means of hedging against
rising interest rates. As interest rates increase, the value of an underlying
fund's short position in the futures contracts will also tend to increase, thus
offsetting all or a portion of the depreciation in the market value of the
fund's investments being hedged. While an underlying fund will incur commission
expenses in selling and closing out futures positions (by taking an opposite
position in the futures contract), commissions on futures transactions tend to
be lower than transaction costs incurred in the purchase and sale of portfolio
securities.
An underlying fund may purchase interest rate futures contracts in
anticipation of a decline in interest rates when it is not fully invested. As
such purchases are made, an underlying fund would probably expect that an
equivalent amount of futures contracts will be closed out.
Unlike when an underlying fund purchases or sells a security, no price is paid
or received by the fund upon the purchase or sale of a futures contract. Upon
entering into a contract, the underlying fund is required to deposit with its
custodian in a segregated account in the name of the futures broker an amount
of cash and/or U.S. Government securities.
<PAGE>
This is known as "initial margin." Initial margin is similar to a performance
bond or good faith deposit which is returned to an underlying fund upon
termination of the futures contract, assuming all contractual obligations have
been satisfied. Futures contracts also involve brokerage costs.
Subsequent payments, called "variation margin" or "maintenance margin", to and
from the broker (or the custodian) are made on a daily basis as the price of the
underlying security or commodity fluctuates, making the long and short
positions in the futures contract more or less valuable. This is known as
"marking to the market."
An underlying fund may elect to close some or all of
its futures positions at any time prior to their expiration in order to reduce
or eliminate a hedge position then currently held by the fund. The underlying
fund may close its positions by taking opposite positions that will operate to
terminate the fund's position in the futures contracts. Final determinations
of variation margin are then made, additional cash is required to be paid by
or released to the underlying fund, and the fund realizes a loss or a gain.
Such closing transactions involve additional commission costs.
A stock index futures contract may be used to hedge an underlying fund's
portfolio with regard to market risk as distinguished from risk related to a
specific security. A stock index futures contract is a contract to buy or sell
units of an index at a specified future date at a price agreed upon when the
contract is made. A stock index futures contract does not require the physical
delivery of securities, but merely provides for profits and losses resulting
from changes in the market value of the contract to be credited or debited at
the close of each trading day to the respective accounts of the parties to the
contract. On the contract's expiration date, a final cash settlement occurs.
Changes in the market value of a particular stock index futures contract
reflect changes in the specified index of equity securities on which the
future is based.
In the event of an imperfect correlation between the futures
contract and the portfolio position that is intended to be protected, the
desired protection may not be obtained and the fund may be exposed to risk of
loss. Further, unanticipated changes in interest rates or stock price
movements may result in a poorer overall performance for the fund than if it
had not entered into futures contracts on debt securities or stock indexes.
The market prices of futures contracts may also be affected by certain
factors. First, all participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin
deposit requirements, you may close futures contracts through offsetting
transactions, which could distort the normal relationship between the
securities and futures markets. Second, the deposit requirements in the
futures market are less stringent than margin requirements in the securities
market. Accordingly, increased participation by speculators in the futures
market may also cause temporary price distortions.
Positions in futures contracts may be closed out only on an exchange or board
of trade providing a secondary market for such futures. There is no assurance
that a liquid secondary market on an exchange or board of trade will exist for
any particular contract or at any particular time.
In order to assure that mutual funds have sufficient assets to satisfy their
obligations under their futures contracts, the underlying funds are required to
establish segregated accounts with their custodians. Such segregated accounts
are required to contain an amount of cash, U.S. Government securities and other
liquid, high-grade debt securities equal in value to the current value of the
underlying instrument less the margin deposit.
The risk to an underlying fund from investing in futures is potentially
unlimited. Gains and losses on investments in options and futures depend upon
the underlying fund's investment adviser's ability to predict correctly the
direction of stock prices, interest rates and other economic factors.
Options on Futures Contracts
An underlying fund may also purchase and sell listed put and call options on
futures contracts. An option on a futures contract gives the purchaser the
right in return for the premium paid, to assume a position in a futures
contract (a long position if the option is a call and a short position if the
option is a put), at a specified exercise price at any time during the option
period. When an option on a futures contract is exercised, delivery of the
futures position is accompanied by cash representing the difference between
the current market price of the futures contract and the exercise price of the
option. The underlying fund may also purchase put options on futures contracts
in lieu of, and for the same purpose as, a sale of a futures contract. An
underlying fund may also purchase such put options in order to hedge a long
position in the underlying futures contract in the
<PAGE>
same manner as it purchases "protective puts" on securities.
The holder of an option may terminate the position by selling an option of the
same series. There is, however, no guarantee that such a closing transaction
can be effected. An underlying fund is required to deposit initial and
maintenance margin with respect to put and call options on futures contracts
written by it pursuant to brokers' requirements similar to those applicable to
futures contracts described above and, in addition, net option premiums
received will be included as initial margin deposits.
In addition to the risks which apply to all options transactions, there are
several risks relating to options on futures contracts. The ability to
establish and close out positions on such options is subject to the development
and maintenance of a liquid secondary market. It is not certain that this
market will develop. In comparison with the use of futures contracts, the
purchase of options on futures contracts involves less potential risk to a fund
because the maximum amount of risk is the premium paid for the option (plus
transaction costs). There may, however, be circumstances when the use of an
option on a futures contract would result in a loss to an underlying fund when
the use of a futures contract would not, such as when there is no movement in
the prices of the underlying securities. Writing an option on a futures
contract involves risks similar to those arising in the sale of futures
contracts, as described above.
Hedging
An underlying fund may employ many of the investment techniques described for
investment and hedging purposes. For example, an underlying fund may purchase
or sell put and call options on common stocks to hedge against movements in
individual common stock prices, or purchase and sell stock index futures and
related options to hedge against market wide movements in common stock prices.
Although such hedging techniques generally tend to minimize the risk of loss
that is hedged against, they also may limit the potential gain that might have
resulted had the hedging transaction not occurred. Also, the desired
protection generally resulting from hedging transactions may not always be
achieved.
Warrants
An underlying fund may invest in warrants. Warrants are options to
purchase equity securities at specific prices valid for a specified period
<PAGE>
of time. The prices do not necessarily move in parallel to the prices of the
underlying securities. Warrants have no voting rights, receive no dividends
and have no rights with respect to the assets of the issuer. If a warrant is
not exercised within the specified time period, it becomes worthless and the
mutual fund loses the purchase price and the right to purchase the underlying
security.
Leverage
An underlying fund may borrow up to 25% of the value of its net assets on an
unsecured basis from banks to increase its holdings of portfolio securities.
Under the 1940 Act, such fund is required to maintain continuous asset
coverage of 300% with respect to such borrowings and to sell (within three
days) sufficient portfolio holdings in order to restore such coverage if it
should decline to less than 300% due to market fluctuation or otherwise. Such
sale must occur even if disadvantageous from an investment point of view.
Leveraging aggregates the effect of any increase or decrease in the value of
portfolio securities on the underlying fund's net asset value. In addition,
money borrowed is subject to interest costs (which may include commitment fees
and/or the cost of maintaining minimum average balances) which may or may not
exceed the interest and option premiums received from the securities purchased
with borrowed funds.
High Yield Securities and their Risks
An underlying fund may invest in high yield, high-risk, lower-rated
securities, commonly known as "junk bonds." Such fund's investment in such
securities is subject to the risk factors outlined below.
Youth and Growth of the High Yield Bond Market
The high yield, high risk market is relatively new and at times is subject to
substantial volatility. An economic downturn or increase in interest rates may
have a more significant effect on the high yield, high risk securities in an
underlying fund's portfolio and their markets, as well as on the ability of
securities' issuers to repay principal and interest. Issuers of high yield,
high risk securities may be of low credit worthiness and the high yield, high
risk securities may be subordinated to the claims of senior lenders. During
periods of economic downturn or rising interest rates, the issuers of high
yield, high risk securities may have greater potential for insolvency and a
higher incidence of high yield, high risk bond defaults may be experienced.
Sensitivity of Interest Rate and Economic Changes
The prices of high yield, high risk securities have been found to be less
sensitive to interest rate changes than higher-rated investments but are more
sensitive to adverse economic changes or individual corporate developments.
During an economic downturn or substantial period of rising interest rates,
highly leveraged issuers may experience financial stress that would adversely
affect their ability to service their principal and interest payment
obligations, to meet projected business goals, and to obtain additional
financing. If the issuer of a high yield, high risk security owned by an
underlying fund defaults, the fund may incur additional expenses in seeking
recovery. Periods of economic uncertainty and changes can be expected to
result in increased volatility of market prices of high yield, high risk
securities and the Fund's net asset value. Yields on high yield, high risk
securities will fluctuate over time. Furthermore, in the case of high yield,
high risk securities structured as zero coupon or pay-in-kind securities,
their market prices are affected to a greater extent by interest rate changes
and thereby tend to be more volatile than market prices of securities which
pay interest periodically and in cash.
Payment Expectations
Certain securities held by an underlying fund, including high yield, high
risk securities, may contain redemption or call provisions. If an issuer
exercises these provisions in a declining interest rate market, such fund
would have to replace the security with a lower yielding security, resulting
in a decreased return for the investor. Conversely, a high yield, high risk
security's value will decrease in a rising interest rate market, as will the
value of the underlying fund's assets.
Liquidity and Valuation
The secondary market may at times become less liquid or respond to adverse
publicity or investor perceptions, making it more difficult for an underlying
fund to accurately value high yield, high risk securities or dispose of them.
To the extent such fund owns or may acquire illiquid or restricted high yield,
high risk securities, these securities may involve special registration
responsibilities, liabilities and costs, and liquidity difficulties, and
judgment will play a greater role in valuation because there is less reliable
and objective data available.
Taxation
Special tax considerations are associated with investing in high yield bonds
structured as zero coupon or pay-in-kind securities. An underlying fund will
report the interest on these securities as income even though it receives no
cash interest until the security's maturity or payment date. Further, an
underlying fund must distribute substantially all of its income to you to
qualify for pass-through treatment under the tax law. Accordingly, such a fund
may have to dispose of its portfolio securities under disadvantageous
circumstances to generate cash or may have to leverage itself by borrowing the
cash to satisfy distribution requirements.
Credit Ratings
Credit ratings evaluate the safety of principal and interest payments, not the
market value risk of high yield, high risk securities. Since credit rating
agencies may fail to change the credit ratings in a timely manner to reflect
subsequent events, the investment adviser to an underlying fund should monitor
the issuers of high yield, high risk securities in the fund's portfolio to
determine if the issuers will have sufficient cash flow and profits to meet
required principal and interest payments, and to attempt to assure the
securities' liquidity so the fund can meet redemption requests. To the extent
that an underlying fund invests in high yield, high risk securities, the
achievement of the fund's investment objective may be more dependent on the
underlying fund's own credit analysis than is the case for higher quality
bonds. An underlying fund may retain a portfolio security whose rating has
been changed.
Asset-backed securities
An underlying fund may invest in mortgage pass-through securities, which are
securities representing interest in pools of mortgage loans secured by
residential or commercial real property in which payments of both interest and
principal on the securities are generally made monthly, in effect passing
through monthly payments made by individual borrowers on mortgage loans which
underlie the securities (net of fees paid to the issuer or guarantor of the
securities). Early repayment of principal on some mortgage-related securities
(arising from prepayments of principal due to sale of the underlying property,
refinancing, or foreclosure, net of fees and costs which may be incurred) may
expose an underlying fund to a lower rate of return upon reinvestment of
principal. Also, if a security subject to
<PAGE>
prepayment has been purchased at a premium, in the event of prepayment the
value of the premium would be lost.
Like other fixed income securities, when interest rates rise, the value of a
mortgage-related security generally will decline; however, when interest rates
are declining, the value of mortgage-related securities with prepayment
features may not increase as much as other fixed income securities.
An underlying fund may invest in collateralized mortgage obligations (CMOs),
which are hybrid mortgage-related instruments. Similar to a bond, interest and
pre-paid principal on a CMO are paid, in most cases, semiannually. CMOs are
collateralized by portfolios of mortgage pass-through securities and are
structured into multiple classes with different stated maturities. Monthly
payments of principal, including prepayments, are first returned to
investors holding the shortest maturity class; investors holding the longer
maturity classes receive principal only after the first class has been retired.
Other mortgage-related securities in
which an underlying fund may invest include other securities that directly or
indirectly represent a participation in, or are secured by and payable from,
mortgage loans on real property, such as CMO residuals or stripped
mortgage-backed securities, and may be structured in classes with rights to
receive varying proportions of principal and interest. In addition, the
underlying funds may invest in other asset-backed securities that have been
offered to investors or will be offered to investors in the future. Several
types of asset-backed securities have already been offered to investors,
including certificates for automobile receivables, which represent undivided
fractional interests in a trust whose assets consist of a pool of motor
vehicle retail installment sales contracts and security interest in the
vehicles securing the contracts.
HOW WE INVEST
General
We try to get the greatest return for the level of risk assumed by each Fund.
Our investment strategy stresses three factors: asset allocation, fund
selection and portfolio structure.
Asset Allocation
Different asset classes produce different results, both absolutely and
relative to each other, over various periods. Table One below shows that the
variability of returns in the major mutual fund asset classes can be
<PAGE>
significant.
Table One shows that the average annual investment results achieved in each
fund category have changed from year to year. Each Fund retains the
flexibility to invest in each fund category listed in Table One. We formatted
Table One relying on data provided by Morningstar, Inc.
The fund categories that experienced some of the greatest one year gains also
performed worse than other fund categories in other years. Thus, although a
correct guess in any year as to the best performing fund category would have
produced superior results, a wrong decision would have led to disappointing
results. Furthermore, choosing the wrong year for the fund categories that in
other years provided some of the best one-year performances would have produced
some of the worst one-year results. Therefore, we believe that Table One
provides support for the proposition that relying on any single asset class as
the basis for investment can be risky.
<TABLE>
<CAPTION>
TABLE ONE
No. of
Category Funds 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth 94 33.49% -3.28% 19.40% 8.55% 53.93%
Growth 879 30.85% -1.85% 11.60% 8.43% 37.36%
Growth & Income 492 31.57% -1.07% 11.04% 8.28% 28.84%
Equity Income 135 29.45% -1.55% 13.67% 9.53% 26.58%
Small Company 368 31.32% -0.66% 17.16% 14.18% 49.38%
World 178 15.81% -2.28% 31.68% 0.00% 23.00%
Foreign 341 6.57% -2.05% 37.66% -4.43% 12.57%
Europe 41 16.71% 2.95% 27.50% -5.11% 8.27%
Pacific 95 3.13% -8.16% 57.82% -3.98% 13.68%
Asset Allocation 173 23.88% -1.82% 11.95% 8.10% 21.98%
Balanced 299 24.80% -2.81% 11.25% 7.48% 26.20%
Corp. High Yield 140 16.41% -3.76% 18.85% 17.39% 36.58%
Corp. General 403 16.46% -3.56% 10.45% 7.42% 16.53%
Corp. High Quality 220 13.63% -1.89% 8.34% 6.34% 14.25%
Government Bond 650 14.38% -3.54% 7.77% 6.02% 14.31%
<FN>
Return data for each fund category formatted by us from data provided by
Morningstar, Inc.
*After fund expenses but prior to applicable sales charges, if any.
</FN>
THIS TABLE PORTRAYS AVERAGE PERFORMANCE OF GENERAL CATEGORIES OF MUTUAL FUNDS AND
DOES NOT PORTRAY PAST OR FUTURE PERFORMANCE OF THE FUNDS.
</TABLE>
Diversification across asset classes is the appropriate protection against the
risk of being wrong about the prospects for an asset class. Diversification
takes advantage of the fact that asset classes do not perform the same way
relatively and absolutely at all times. Diversification allows investors to
counterbalance the more volatile swings in value typically experienced by
riskier asset classes with the greater stability of less risky asset classes.
Proper diversification allows for the tendency of certain asset classes to
behave contrary to the behavior of other asset classes during a given investment
period. Investing in asset classes that are inversely correlated helps assure
that unanticipated adversity in a particular asset class will be counterbalanced
by stronger performance in others. Broadly accepted contemporary economic
theory of financial markets maintains that failure to combine relatively
uncorrelated asset classes imposes additional risk on a portfolio that
generally is not offset by greater reward.
We use computer software and data supplied by Ibbotson Associates,
Inc. and Morningstar, Inc. to test the performance of specific fund categories
and various combinations of fund categories against actual market experience.
We can thus find out both how particular asset classes have previously
correlated with each other and how a given mix of asset classes would have
responded in the market environments that prevailed in the periods studied.
Although analysis of historical price data cannot assure that in the future an
asset class will
<PAGE>
reflect the same level of volatility as in the past or that various asset
classes will continue to correlate as in the past, we believe that these
historical data, continually monitored and evaluated for volatility and
correlation, are an appropriate basis for some of our asset allocation
determinations for the Funds.
As part of the asset allocation process, we perform a forward-looking analysis
of economic and market trends which includes both broad macro-economic concerns
and more narrowly-focused sector concerns. We perform a "top down"
macro- economic analysis on a global basis, examining the strength of the
economy as a whole, as well as various sectors, inflation, currency, money
flows, and interest rate considerations and political concerns.
Additionally, we use various technical and fundamental
analytical techniques to determine at any given point the actual relative
weighting of various asset classes in the portfolio. Thus, depending on
current and projected market conditions, funds may be bought or sold to effect
a change in the composition of the portfolio. Technical techniques used in
this market analysis include price chart patterns, price to earnings ratios,
moving average analysis, breadth and volume analysis, investment advisory
sentiment analysis, cash position analysis, relative strength analysis,
relative strength studies of industry sectors and styles, and momentum
analysis, among others.
Fundamental analytical techniques for equities include
price-earnings ratios, dividend yield, sales per dollar of market value,
price-to-book value, return on capital, capital turnover, earnings margin,
return on equity, growth in sales, and growth in total return. For debt
instruments, fundamental analytical techniques include credit rating analysis,
yield to maturity, and price volatility, among others.
After performing the "top down" macro-economic analysis and market analysis
described above and the fund manager survey described below under "Fund
Selection" and "Portfolio Structure," we arrive at positive, neutral, or
negative outlooks for the short, intermediate, and long terms. Comparing the
outlooks at which we arrive to current condition period trends, we examine
whether the outlook indicates confirmation and continuation of a particular
trend or potential reversal of a trend.
Fund Selection
Among mutual funds in a particular category, the performance of the best funds
often varies substantially from the average. Based on data furnished
<PAGE>
by Morningstar, Inc. and formatted by us, Table Two below sets forth average
three-year results for all funds and for the funds reporting returns in the
top 10 percent of all funds in the categories appearing in Table One.
<TABLE>
<CAPTION>
TABLE TWO
Number of Avg. Performance Avg. Performance
Funds in of Category of Top 10% of funds
Category 1993-1995* 1993-1995*
<S> <C> <C> <C>
Aggressive Growth 50 14.83% 22.02%
Growth 437 12.74% 18.51%
Growth & Income 270 12.96% 16.82%
Equity Income 68 12.88% 16.45%
Small Company 172 14.73% 22.94%
World 64 13.95% 18.42%
Foreign 122 13.61% 17.85%
Europe 19 15.17% 19.56%
Pacific 32 14.75% 19.11%
Asset Allocation 55 10.85% 13.57%
Balanced 131 10.54% 13.24%
Corp. High Yield 72 10.16% 12.72%
Corp. General 182 7.55% 10.06%
Corp. High Quality 119 6.61% 8.69%
Government Bond 347 5.84% 9.18%
<FN>
Return data for each fund category formatted by us from data provided by
Morningstar, Inc.
*After fund expenses but prior to applicable sales charges, if any.
</FN>
THIS TABLE PORTRAYS AVERAGE PERFORMANCE OF GENERAL CATEGORIES OF MUTUAL FUNDS AND
DOES NOT PORTRAY PAST OR FUTURE PERFORMANCE OF THE FUNDS.
</TABLE>
The substantial differences in return between funds performing in the top
10 percent of all funds in the same category and the average return in that
fund's category in each period support the proposition that certain funds are
more successful than others during certain periods in taking advantage of the
investment opportunities offered by the kinds of assets in which they and
similar funds are invested. Differences in performance among funds in a
particular category can be attributed to several factors. Relative success in
an asset class can be explained by the level of exposure to risk, and often is
dominated by that factor. Other things being equal, in a rising market, a fund
investing in an asset class will generally outperform other funds investing in
the same asset class if its portfolio is riskier than the others, and in a
falling market, the contrary will generally be true. The investment judgment
and other capabilities of a fund's investment adviser can also account for
better performance. The perceived capabilities of a fund manager to
potentially enhance value can, at times, be a primary consideration in the
selection of funds. Another relevant, though minor, factor is the expense
level of comparable funds. Again, other things being equal, funds with
relatively high management, administration and 12b-1 fees will do worse than
less expensive, similar funds (however, all other things are never exactly
equal).
As part of our fund selection process, we analyze general historical
performance of funds over at least the past one, three, and five year periods.
In this regard, we use both absolute and risk-adjusted measures. We also
identify the "current condition period" (the time that the current investing
conditions have been in place) and research and analyze fund performance in
other particular time frames using various absolute and risk-adjusted measures.
In doing so, we look for what we call "idiosyncratic advantage," which means a
unique edge provided by a fund's management based on its knowledge, methods,
skills, and insights.
In evaluating a fund, we calculate the fund's volatility during the period under
consideration, both as a measure of risk inherent in the fund and as a basis
for comparison with other funds. We also conduct fundamental and technical
analysis of the fund's portfolio. We also evaluate the fund's management for
background, service capability, stability, technical and research support, and
other indications of quality of investment judgment including, to the extent
feasible, interviews with the fund's portfolio manager.
Portfolio Structure
We believe that strategies of portfolio structure and management should also
be diversified. We believe there are three major strategies for structuring
and managing mutual fund portfolios: buy-and-hold, sector rotation, and market
timing.
In managing the Funds, we use a combination of the buy-and- hold,
sector rotation and market timing strategies. A buy-and- hold strategy
involves researching mutual funds primarily by doing fundamental analysis.
This includes analysis of perfor-mance records and capabilities and investment
styles of fund managers. The objective is to match a fund or combination of
funds to the goals and tolerance for risk of each Fund. Mutual funds so
selected are considered to be long-term investment vehicles and are not likely
to be subject, under normal market conditions, to frequent trading. A buy-and-
hold strategy focuses on results over one or more market cycles rather than
short-term performance. Risks of the buy-and-hold strategy include management
turnover, managers of funds losing their ability or their interest in managing
the fund, and a fund growing so large that its ability to invest is restricted.
A sector rotation strategy is based on a view of the market not as
a monolithic whole, but as a mix of many sub-markets. It is intended to take
advantage of the fact that certain sub-markets are not closely correlated with
many other sub-markets. Sector rotation is an active strategy, relying on
techniques for shifting asset concentrations to and from various sectors to
realize the benefits of sectors anticipated to strengthen and to diminish the
effects of sectors anticipated to decline. A sector rotation strategy thus
allows a portfolio to remain more fully invested over time by frequently
replacing assets in one sector with assets from others. The primary risk
associated with sector rotation is that anticipated trends may not appear.
A market timing strategy assumes that the general trend of the market is very
important and has a greater impact on investment returns than the quality of a
particular fund or fund manager. Thus, market timing depends on macroeconomic
and market oriented analytic techniques to discern market direction. Moreover,
market timing typically involves continual portfolio adjustments. The primary
risk associated with a market timing strategy is that trends anticipated may
not appear. (In other words, we might guess wrong.)
The assumption is that there is limited correlation between certain sectors
(utility stocks vs. technology stocks, for example) and that at any given point
there are likely to be one or more sectors that are
<PAGE>
outperforming or have the potential to outperform the overall market. A sector
rotator will thus likely stay fully invested over time, but may well
frequently buy and sell in order to move assets from one sector to another. On
the other hand, a market timer will stay fully invested only when he or she
believes the market is going up and will hold varying percentages of cash, up
to 100% cash, depending on his or her level of confidence that the market is
going down.
We integrate these three investment strategies by structuring the
portfolio like a "daisy." The core investment portfolio of a Fund -- the
center part of the daisy -- will consist of funds that we expect to hold for
the long term. We select each Fund's core portfolio by giving priority to
managers of funds that have the potential to do well under various market
conditions. We evaluate a fund's performance potential by close analysis of
the historical record, including determining how the persons who actually
managed a fund performed. Therefore, we may choose a relatively new fund for
inclusion in a Fund's core portfolio if the portfolio manager of the fund has
an appropriate performance record. Although no assurance can be given that a
Fund will achieve its investment objectives, the goal of a fund included in
the core portfolio will be to outperform, on a risk-adjusted basis, a
comparable market average.
A buy-and-hold strategy will predominate in the selection of the core
portfolio for each Fund. Thus, we will not trade funds in a Fund's core
portfolio frequently, although a fund's proportion of the core portfolio may
vary over time. Further, we may eliminate funds from or introduce funds into
the core portfolio from time to time because of changes in the management of a
fund, long- term shifts in the markets in which a fund invests, or for other
reasons. We anticipate that the percentage of a Fund that will be invested in
its core portfolio will vary over time, but will typically remain between 40
and 60 percent of the Fund's portfolio.
The balance of each Fund's portfolio (the petals of the daisy) will consist of
funds selected primarily based on sector rotation and market timing strategies.
The "petals" funds will, in our judgment, have the potential to enhance
performance over the short to intermediate term (six to twenty-four months).
We will seek performance enhancement in several ways. During periods of
anticipated upward market moves, performance enhancement may result in
additional investment or greater concentration in funds having higher
volatilities compared with the market than a Fund
<PAGE>
typically includes in its portfolio. During such periods, we will also invest
in sector funds that will intensify the impact of certain sectors that, in our
judgment, are currently or are likely to experience stronger performance than
other sectors. On the other hand, during periods of market uncertainty, or
anticipated significant downward pressure, performance enhancement would mean
the selection of funds that historically have been more stable than the
general market. Sometimes, we would move part of the portfolio out of stock or
bond funds and into money market funds or short-term fixed income funds. We
would also typically reduce risk exposure in certain sectors by liquidating or
reducing a Fund's investment in sector funds. In selecting petal funds, we
regard the long-term track record of funds and managers to be a lesser
consideration.
Market timing and sector rotation strategies are complex,
involve risk that contemporary economic theory of financial markets suggests
may not be fully compensated measured by expected return, and are highly
dependent on subjective judgments. Further, any strategy designed to enhance
returns also enhances risk of loss and thus carries with it the potential
instead for reducing gains or causing losses. There can be no assurance that
in carrying out market timing and sector rotation strategies, we will
successfully enhance the performance of the Funds.
Based on our asset allocation analysis and selection of the funds we consider
most suitable to effect our asset allocation decisions, we determine a mix of
asset classes and funds appropriate for each Fund. To a certain extent, we
manage the risk to which the Funds are exposed by varying the concentration
of asset classes in Fund portfolios.
INVESTMENT POLICIES and RESTRICTIONS
Each Fund has adopted certain fundamental investment
policies. These policies may not be changed without the vote of a majority of
that Fund's outstanding voting securities, as defined under "Other Information
- -- Voting." Each Fund has also adopted certain investment policies that are
not fundamental and therefore may be changed by the Board of Trustees of the
Trust without shareholder approval. Under each Fund's fundamental investment
policies, no Fund may (1) invest more than 25% of its total assets in the
securities of mutual funds that concentrate themselves (i.e., invest more than
25% of their assets) in any one industry. (Through its portfolio investments,
however, a Fund may indirectly invest more than 25% of its assets in one
industry), (2) borrow money, (except that as a temporary measure for
extraordinary or emergency purposes -- including meeting redemptions without
having to sell portfolio securities immediately -- a Fund may borrow from a
bank in an amount not in excess of 5% of the Fund's total assets), or (3)
pledge or hypothecate its assets, except that a Fund may pledge up to 5% of
its total assets to secure such borrowings for temporary or emergency purposes
or to effect redemptions. A Fund will not make additional investments at any
time during which it has outstanding borrowings. Under each Fund's
non-fundamental policies, no Fund may (1) invest more than 25% of its assets
in the shares of any one mutual fund, (2) purchase or otherwise acquire the
securities of any mutual fund (except in connection with a merger,
consolidation, acquisition of substantially all of the assets or
reorganization of another
<PAGE>
investment company) if, as a result, a Fund and its affiliates (including the
other Funds) would own more than 3% of the total outstanding stock of such
mutual fund, or (3) purchase a security which is not readily marketable if, as
a result, more than 15% of that Fund's assets would consist of such
securities. For this purpose, securities that are not readily marketable
include repurchase agreements maturing in more than seven days (see page 8 to
this Prospectus) and shares of an underlying fund in an amount exceeding 1% of
the total outstanding securities of such mutual fund. See "Risks and Other
Considerations." Each Fund may invest in money market funds. These and other
investment strategies and restrictions are discussed in the section titled
"Risks and Other Considerations" to this Prospectus and in the Statement of
Additional Information.
The underlying funds may, but will not necessarily, have the same investment
objective and policies as the Funds. For example, although the Aggressive
Growth Fund will not borrow money for investment purposes, it may invest up to
25% of its total assets in a mutual fund that borrows money for investment
purposes (i.e., a mutual fund that engages in leveraging). A general discussion
of the investments that may be made by underlying funds and the risks
associated with such investments is found under "Investment Objectives" and
"Investment Policies and Restrictions" and in the section titled "Risks and
Other Considerations" in this Prospectus.
MANAGEMENT OF THE TRUST
The Trustees
The business and affairs of the Trust are managed under the direction of the
Board of Trustees. Additional information about the Trustees, as well as the
executive officers of the Trust, may be found in the Trust's Statement of
Additional Information under "Trustees and Officers."
The Adviser
We maintain our principal office at 6600 France Avenue South, Suite 565,
Minneapolis, Minnesota 55435. In addition to serving as investment adviser to
the Trust and its Funds, we provide investment supervisory services on a
continuous basis to individuals, pension and profit sharing plans,
corporations, partnerships, trusts and estates (including charitable
organizations) and other financial professionals through our Professional Fund
Advisor service. We specialize in the construction and management of no load
mutual fund
<PAGE>
portfolios for our clients. As of the date of this Prospectus, we provide
investment management services to over 500 client accounts and have assets
under management in excess of $400 million. Pursuant to an Investment
Management Agreement with the Trust, we provide investment management services
to each Fund. We are responsible for the investment management of each Fund's
assets, including the responsibility for making investment decisions and
placing orders for the purchase and sale of the Funds' investments directly
with the issuers or with brokers or dealers we select. See "Portfolio
Transactions." We also furnish to the Board of Trustees of the Trust, which
controls the Trust and the Funds and has overall responsibility for the
business and affairs of the Trust and the Funds, periodic reports on the
investment performance of the Funds. Unlike most mutual funds, the management
fees paid by the Funds to us include transfer agency, pricing, custodial,
auditing and legal services, and general administrative and other operating
expenses of each Fund except brokerage commissions, taxes, interest, fees and
expenses of non-interested Trustees and extraordinary expenses.
For the services provided to the Funds, we receive from each Fund a fee, payable
monthly, at the annual rate of 0.95% of each Fund's average daily net assets.
We are contractually obligated to reduce our management fee in an amount equal
to each Fund's allocable portion of the fees and expenses of the Trust's
non-interested Trustees. Most investment companies pay lower investment
management fees. Most, if not all of such investment companies, however, also
pay, in addition to an investment management fee, certain of their own
expenses, while we pay almost all of the Funds' expenses, as described above,
out of investment management fees we receive from the Funds.
Robert J. Markman, Chairman of the Board of Trustees and President of the
Trust, serves as the Portfolio Manager of the Trust and is responsible for the
day to day management of the Funds. From 1981-1990, Mr. Markman was a registered
representative of Linsco Private Ledger Financial Services and a partner of
Webb Markman & Co. He has served as President of Markman Capital since its
organization in September 1990.
Markman Securities, Inc. (the "Distributor"), a subsidiary of Markman Capital
Management, Inc., located at the same address as Markman Capital Management,
Inc., serves as distributor of the Trust's shares based on a distribution
agreement between it and the Trust.
The Administrator
The Trust has retained MGF Service Corp. ("MGF"), P.O. Box 5354,
Cincinnati, Ohio, 45201-5354, to serve as the Funds' transfer agent, dividend
paying agent, and shareholder service agent. MGF is a subsidiary of Leshner
Financial, Inc., of which Robert H. Leshner is the controlling shareholder.
Certain of the Trust's officers are also officers of MGF.
MGF also provides accounting and pricing and administrative services to the
Funds. MGF calculates daily net asset value per share and maintains such books
and records as are necessary to enable it to perform its duties. MGF supplies
executive, administrative and regulatory services, supervises the preparation
of the Funds' tax returns, and coordinates the preparation of reports to
shareholders and reports to and filings with the SEC and state securities
authorities.
We pay MGF monthly, out of the investment management fee we
receive from each Fund, a base fee of $15,000, an additional fee based upon
the number of shareholder accounts, and an additional fee at the annual rate
of .04% of aggregate average daily net assets of the Funds up to $200 million,
.03% of such assets between $200 million and $500 million, and .02% of such
assets in excess of $500 million.
The Custodian
The Board of Trustees of the Trust has also approved a Custodian Agreement
between the Trust and Fifth Third Bank pursuant to which the Bank provides
custodial services to the Trust and each of the Funds. The principal business
address of the Bank is 38 Fountain Square Plaza, Cincinnati, Ohio 45202.
Portfolio Transactions
Pursuant to the Investment Management Agreement, we place orders for the
purchase and sale of portfolio securities for a Fund's accounts with brokers
or dealers, selected by it in its discretion or directly with issuers or in
privately arranged transactions in which a premium may be paid by a Fund.
Each Fund is actively managed and has no restrictions upon portfolio turnover.
Each Fund's rate of portfolio turnover may be greater than that of many other
mutual funds. A 100% annual portfolio turnover rate would be achieved if each
security in a Fund's portfolio (other than securities with less than one year
remaining to maturity) were replaced once during the year. Trading also may
result in realization of net short-term capital gains that would not otherwise
be realized, and shareholders are taxed on
<PAGE>
such gains when distributed from that Fund at ordinary income tax rates. High
turnover increases the possibility that the Funds would not qualify as
regulated investment companies under Subchapter M of the Internal Revenue
Code; a Fund will not qualify as a regulated investment company if it derives
more than 30% of its gross income from gains (without offset for losses) from
the sale or other disposition of securities held for less than three months.
See "Dividends, Distributions and Taxes." There is no limit on the portfolio
turnover rates of the underlying funds.
The Distributor
Markman Securities, Inc. (the "Distributor"), is a wholly-owned subsidiary of
ours and is located at the same address as we are. The Distributor serves as the
exclusive agent for the distribution of the Trust's shares based on a
distribution agreement between it and the Trust.
Each Fund has authority to purchase shares of underlying funds that
impose Rule12b-1 or service fees. In the event a Fund purchases shares of such
an underlying fund, such underlying fund will pay such fees to the
Distributor. Such underlying funds will sign dealer agreements with the
Distributor pursuant to which the Distributor may provide certain services to
such underlying funds. Such services may include: sub-accounting, account
status information, forwarding of communications from such underlying funds to
a Fund, and share purchase processing, exchange, and redemption assistance. In
the absence of such a dealer agreement, an underlying fund would retain the
Rule 12b-1 or service fees.
After payment of the operating expenses of the Distributor through the payment
by underlying funds to the Distributor of any Rule 12b-1 or service fees, the
Distributor will, out of any Rule 12b-1 or service fees it receives from
underlying funds imposing such fees, reimburse the Funds in accordance with
the following schedule:
Gross Annual Percentage to
Rule 12b-1/Service Fee Distributor/Relevant Fund
- ---------------------- -------------------------
Less than $150,000 90/10
$150,000 - $199,999 80/20
$200,000 - $249,999 70/30
$250,000-$299,999 60/40
$300,000 - $349,999 50/50
$350,000-$399,999 40/60
$400,000-$449,999 35/65
Above $450,000 30/70
Reimbursement will be made by the Distributor to a Fund in proportion to
<PAGE>
the Fund's share of Rule 12b-1 or service fee income from an underlying fund.
Within 90 days of the end of each calendar year any amounts to be reimbursed
to a Fund will be reimbursed to such Fund in accordance with the foregoing
schedule. If, however, in any calendar quarter, Gross Annual Rule 12b-1 and
service fees paid to the Distributor by underlying funds imposing such fees
exceed (after payment of the Distributor's estimated annual expenses), in the
aggregate, $30,000, the Distributor will reimbuse the Funds as soon as
practical after the close of such quarter.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each Fund is calculated at 4:00 p.m.
EST, Monday through Friday, on each day that the New York Stock Exchange (the
"NYSE") is open for trading (which excludes the following national business
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day). The net
asset value per share of each Fund is calculated by dividing the sum of the
value of the securities held by the Fund plus cash or other assets minus all
liabilities (including estimated accrued expenses) by the total number of
outstanding shares of the Fund, rounded to the nearest cent.
Shares of the underlying funds are valued at their respective net asset values
under the 1940 Act. The underlying funds value securities in their portfolios
for which market quotations are readily available at their current market value
(generally the last reported sale price) and all other securities and assets
at fair value pursuant to methods established in good faith by the Board of
Trustees or Directors of the underlying mutual fund. Money market funds with
portfolio securities that mature in one year or less may use the amortized
cost or penny-rounding methods to value their securities. Securities having 60
days or less remaining to maturity generally are valued at their amortized
cost, which approximates market value.
Other assets of each Fund are valued at their current market value if market
quotations are readily available and, if market quotations are not available,
they are valued at fair value pursuant to methods established in good faith by
the Board of Trustees.
HOW TO PURCHASE SHARES
Shares of the Funds are offered as an investment vehicle for individuals,
institutions, corporations and fiduciaries. Each Fund may invest in underlying
funds, which are sold with a sales charge; however, the Funds will use various
quantity discount programs and/or applicable waivers to avoid imposition of
any sales loads. Prospectuses, sales material and applications can be obtained
from MGF Service Corp. at the address and telephone number listed on the back
cover of this Prospectus.
Shares of each Fund are sold without a sales charge at the next price
calculated after receipt of an order in proper form by the Funds. The minimum
initial investment in a Fund is $25,000, except that the Trust reserves the
right, in its sole discretion, to waive the minimum initial
investment amount for certain investors, or to waive or reduce the minimum
initial investment for tax-deferred retirement plans. The minimum subsequent
investment is $500. The minimum initial investment is waived for purchases by
Trustees, officers and employees of the Trust, of MGF Service Corp., and of
Markman Capital and private clients of Markman Capital, including members of
such persons' immediate families. Each Fund also reserves the right to waive
the minimum initial investment for financial intermediaries. All purchase
payments are invested in full and fractional shares. The Trust is authorized
to reject any purchase order.
No Transaction Fee Program
If you purchase a minimum of $25,000 of shares of the Funds (either in a Fund
or spread across two or three Funds) through a discount broker, we will
reimburse you for the amount of the transaction fee that you paid the discount
broker for that purchase within a week of us receiving a copy of your trade
confirmation.
Shares of each Fund are sold on a continuous basis at the net asset value next
determined after receipt of a purchase order by the Trust. Investors should
note, however, that due to time constraints involved in the pricing of shares
of mutual funds such as the Funds, the net asset value of Fund shares reported
in newspapers will lag the Funds' actual net asset value by one business day.
Purchase orders received by dealers prior to 4:00 p.m. EST on any business
day, and transmitted to the Trust's transfer agent, MGF Service Corp., by 5:00
p.m. EST that day are confirmed at the net asset value determined as of the
close of the regular session of trading on the NYSE on that day. It is the
responsibility of dealers to transmit properly completed orders so that they
will be received by MGF Service Corp. by 5:00 p.m. EST. Broker-dealers or
other agents may charge you a fee for effecting transactions. Direct purchase
orders received by MGF Service Corp. by 4:00 p.m. EST are confirmed at that
day's net asset value. Direct
<PAGE>
investments received by MGF Service Corp. after 4:00 p.m. and orders
received from dealers after 5:00 p.m. are confirmed at the net asset value
next determined on the following business day.
You may open an account and make an initial investment in any Fund by sending
a check and a completed account application form to MGF Service Corp., P.O.
Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made payable to the
Markman MultiFund Trust. An account application kit is included with this
Prospectus.
The Trust mails to shareholders confirmations of all purchases or
redemptions of shares of the Funds. Certificates representing shares will not
be issued. The Trust reserves the rights to limit the amount of investments
and to refuse to sell to any person.
The Funds' account application contains certain provisions in favor of the
Trust, MGF Service Corp. and certain of their affiliates, excluding such
entities from certain liabilities (including, among others, losses resulting
from unauthorized shareholder transactions) relating to the various services
(for example, telephone redemptions and exchanges) made available to investors.
If an order to purchase shares is cancelled because your check does not clear,
you will be responsible for any resulting losses or fees incurred by the Trust
or MGF Service Corp. in the transaction.
You may also purchase shares of the Funds by wire. Please call
MGF Service Corp. (Nationwide call toll-free 800-707-2771; in Cincinnati call
513-629-2070) for instructions. You should be prepared to give the name in
which the account is to be established, the address, telephone number, and
taxpayer identification number for the account, and the name of the bank that
will wire the money.
Investments in a Fund will be made at the Fund's net
asset value next determined after a wire is received together with the account
information outlined above. If the Trust does not receive timely and complete
account information, there may be a delay in the investment of money and any
accrual of dividends. To make an initial wire purchase, you must mail a
completed account application to MGF Service Corp. Banks may impose a charge
for sending a wire. There is presently no fee for receipt of wired funds, but
MGF Service Corp. reserves the right to charge shareholders for this service
upon thirty days' prior notice to shareholders.
You may purchase and add shares to your account by mail or by bank wire. Checks
should be sent to MGF Service Corp., P.O. Box 5354, Cincinnati, Ohio 45201-5354.
Checks should be made payable or endorsed to the Markman MultiFund Trust. Bank
wires should be sent as outlined above. Each additional purchase request must
contain the account name and number to permit proper crediting.
<PAGE>
SHAREHOLDER SERVICES
Contact MGF Service Corp. (Nationwide call toll-free 1-800-707-2771; in
Cincinnati call 513-629-2070) for additional information about the shareholder
services described below.
Automatic Withdrawal Plan
If the shares in your account have a value of at least $25,000, you may elect
to receive, or may designate another person to receive, monthly, quarterly, or
annual payments in a specified amount. There is no charge for this service.
Access to the Portfolio Manager
If the shares in your account have a value of at least $100,000, you may
contact Mr. Robert Markman directly by telephone. If you qualify, call MGF
Service Corp. at the above telephone number
to obtain your special access toll-free telephone number direct to Mr.
Markman.
Tax-Deferred Retirement Plans
Shares of the Funds are available for purchase in connection with the
following tax-deferred retirement plans:
- -- Keogh Plans for self-employed individuals
- -- Individual retirement account (IRA) plans for individuals and their
non-employed spouses
- -- Qualified pension and profit-sharing plans for
employees, including those profit-sharing plans with a 401(k) provision
- -- 403(b)(7) custodial accounts for employees of public school systems,
hospitals, colleges and other non-profit organizations meeting certain
requirements of the Internal Revenue Code
Automatic Investment Plan
You may make automatic monthly investments in the Funds from your bank,
savings and loan or other depository institution account. The minimum initial
and subsequent investments must be $25,000 and $500 under the plan. MGF
Service Corp. pays the costs associated with these transfers, but reserves the
right, upon thirty days' written notice, to make reasonable charges for this
service. A depository institution may impose its own charge for debiting your
account, which would reduce the return from an investment in a Fund.
HOW TO REDEEM SHARES
Shares of the Funds may be redeemed on each day that the Trust
is open for business. You will receive the net asset value per share next
determined after receipt by MGF Service Corp. of a redemption request in the
form described below. Payment is ordinarily sent by mail or by wire within
three business days after tender in such form, provided that payment in
redemption of shares purchased by check will be effected only after the check
has been collected, which may take up to fifteen days from the purchase date.
To eliminate this delay, you may purchase shares of the Funds by certified
check or by wire.
By Telephone
Shares of the Funds may also be redeemed by telephone. The proceeds will be
sent by mail to the address designated on your account or wired directly to
your existing account in any commercial bank or brokerage firm in the United
States as designated on the application. To redeem by
telephone, call MGF Service Corp. (Nationwide call toll-free 800-707-2771; in
Cincinnati call 513-629-2070). The redemption proceeds will usually be sent by
mail or by wire within three business days after receipt of telephone
instructions. IRA accounts are not redeemable by telephone.
The telephone redemption privilege is automatically available to you. You may
change the bank or brokerage account designated under this procedure at any time
by writing to MGF Service Corp. with the signature guaranteed by any eligible
guarantor institution (including banks, brokers and dealers, municipal
securities brokers and dealers, government securities brokers and dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations) or by completing a
supplemental telephone redemption authorization form. Contact MGF Service
Corp. to obtain this form. Further documentation will be required to change
the designated account if shares are held by a corporation, fiduciary or other
organization.
Neither the Trust, MGF Service Corp., nor their respective
affiliates will be liable for complying with telephone instructions they
reasonably believe to be genuine or for any loss, damage, cost or expense in
acting on such telephone instructions. The investor will bear the risk of any
<PAGE>
such loss. The Trust or MGF Service Corp. or both will employ reasonable
procedures to determine that telephone instructions are genuine. If the Trust
and/or MGF Service Corp. do not employ such procedures, they may be liable for
losses due to unauthorized or fraudulent instructions. Such procedures may
include, among others, requiring forms of personal identification prior to
acting upon telephone instructions, providing written confirmation of the
transactions and/or tape recording telephone instructions.
By Mail
Shares of the Funds may also be redeemed by written request to MGF Service
Corp. The request must state the number of shares or the dollar amount to be
redeemed and the relevant account number. The request must be signed exactly
as your name appears on the Trust's account records. If the shares to be
redeemed have a value of $25,000 or more, your signature must be guaranteed by
any of the eligible guarantor institutions outlined above.
Written redemption requests may also direct that the proceeds be deposited
directly in the bank account or brokerage account designated on an investor's
account application for telephone redemptions. Proceeds of redemptions
requested by mail are mailed within three business days following receipt of
instructions in proper form.
Through Broker-Dealers
Shares may also be redeemed by placing a wire redemption request through a
securities broker or dealer. Broker-dealers or other agents may impose a fee
for this service. You will receive the net asset value per share next
determined after receipt by the Trust or its agent of your wire redemption
request. It is the responsibility of broker-dealers to promptly transmit wire
redemption orders.
Additional Redemption Information
For each wire redemption you will be charged an $8 processing fee by the
Trust's Custodian. The Trust reserves the right, upon thirty days' written
notice, to change the processing fee. All charges will be deducted from
shareholder accounts by redemption of shares in the account. Your bank or
brokerage firm may also impose a charge for processing the wire. In the event
that wire transfer of funds is impossible or impracticable, the redemption
proceeds will be sent by mail to the designated account.
Redemption requests may direct that the proceeds be deposited directly in a
shareholder's account with a commercial bank or other depository
<PAGE>
institution by way of an Automated Clearing House (ACH) transaction. There is
currently no charge for ACH transactions. Contact MGF Service Corp. for more
information about ACH transactions.
At the discretion of the Trust, corporate shareholders and other associations
may be required to furnish an appropriate certification authorizing redemptions
to ensure proper authorization. The Trust reserves the right to require you to
close your account if at any time the value of the shares is less than $25,000
(based on actual amounts invested, unaffected by market fluctuations) or such
other minimum amount as the Trust may from time to time determine. After
notification of the Trust's intention to close your account, you will be given
sixty days to increase the value of your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to postpone
the date of payment for more than three business days under unusual
circumstances as determined by the SEC.
Exchange Privilege
Shares of the Funds may be exchanged for each other at net asset value. You
may request an exchange by sending a written request to MGF Service Corp. The
request must be signed exactly as your name appears on the Trust's account
records. Exchanges may also be requested by telephone. If you are unable to
execute a transaction by telephone (for example during times of unusual market
activity) you should consider requesting that the exchange be made by mail. An
exchange will be effected at the next determined net asset value after receipt
of a request by MGF Service Corp.
Exchanges may only be made for shares of Funds then offered for sale in your
state of residence and are subject to the applicable minimum initial investment
requirements. The exchange privilege may be modified or terminated by the Board
of Trustees upon 60 days' prior notice to you. An exchange results in a sale
of Fund shares, which may cause you to recognize a capital gain or loss.
DIVIDENDS, DISTRIBUTIONS and TAXES
Each Fund intends to qualify as a regulated investment company under Subchapter
M of the Internal Revenue Code of 1986, as amended (the "Code"). In any year in
which a Fund qualifies as a regulated investment company and distributes
substantially all of its investment company taxable income (which includes,
among other items, the excess of net short-term capital gains over net
long-term capital losses) and its net
<PAGE>
capital gains (the excess of net long-term capital gains over net short-term
capital losses) the Fund will not be subject to Federal income tax to the
extent it distributes to you such income and capital gains in the manner
required under the Code. Amounts not distributed on a timely basis in
accordance with a calendar year distribution requirement are subject to a
nondeductible 4% excise tax. To avoid imposition of the excise tax, each Fund
must distribute for each calendar year an amount equal to the sum of (1) at
least 98% of its net ordinary income (excluding any capital gains or losses)
for the calendar year, (2) at least 98% of the excess of its capital gains
over capital losses (adjusted for certain ordinary losses) realized during the
one-year period ending October 31 of such year, and (3) all ordinary income
and capital gains for previous years that were not distributed during such
years. A distribution will be treated as paid on December 31 of the calendar
year if it is declared by a Fund in October, November or December of that year
with a record date in such a month and paid by the Fund during January of the
following calendar year. Such distributions will be taxable to you in the
calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received. Each Fund intends to
distribute its income in accordance with this requirement to prevent
application of the excise tax. Each year the Trust will notify you of the tax
status of dividends and distributions.
Income received by a Fund from a mutual fund in that Fund's portfolio
(including dividends and distributions of short-term capital gains) will be
distributed by the Fund (after deductions for expenses) and will be taxable to
you as ordinary income. Because the Funds are actively managed and may realize
taxable net short-term capital gains by selling shares of a mutual fund in its
portfolio with unrealized portfolio appreciation, investing in a Fund rather
than directly in the underlying funds may result in increased tax liability to
you since the Fund must distribute its gains in accordance with certain rules
under the Code. A Fund's ability to dispose of shares of underlying funds held
less than three months may be limited by requirements relating to a Fund's
qualification as a regulated investment company for federal income tax purposes.
Distributions of net capital gains (the excess of net long-term capital gains
over net short-term capital losses) received by a Fund from the underlying
funds, as well as net long-term capital gains realized fund shares or other
securities held by a Fund for more than one year, will be distributed by the
Fund and will be taxable to you as long-term capital gains (even if you have
held the shares for less than one year). If a
<PAGE>
shareholder who has received a capital gains
distribution suffers a loss on the sale of his or her shares not more than six
months after purchase, the loss will be treated as a long-term capital loss to
the extent of the capital gains distribution received. Long-term capital
gains, including distributions of net capital gains are currently subject to a
maximum federal tax rate of 28% which is less than the maximum rate imposed on
other types of taxable income. Capital gains may be advantageous since, unlike
ordinary income, they may be offset by capital losses.
For purposes of determining the character of income received by a Fund when an
underlying fund distributes net capital gains to a Fund, the Fund will treat
the distribution as a long-term capital gain, even if the Fund has held shares
of the underlying fund for less than one year. Any loss incurred by a Fund on
the sale of such mutual fund's shares held for six months or less, however, will
be treated as a long-term capital loss to the extent of the gain distribution.
The tax treatment of distributions from a Fund is the same whether the
distributions are received in additional shares or in cash. Share-holders
receiving distributions in the form of additional shares will have a cost
basis for Federal income tax purposes in each share received equal to the net
asset value of a share of the Fund on the reinvestment date.
A Fund may invest in mutual funds with capital loss carry-forwards. If such a
mutual fund realizes capital gains, it will be able to offset the gains to the
extent of its loss carry-forwards in determining the amount of capital gains
which must be distributed to shareholders. To the extent that gains are offset
in this manner, distributions to a Fund and its shareholders will not be
characterized as capital gain dividends but may be ordinary income.
Depending upon your residence for tax purposes, distributions may also be
subject to state and local taxes, including withholding taxes. You should
consult your own tax adviser regarding the tax consequences of ownership of
shares of a Fund in your particular circumstances.
The Funds are generally required to withhold Federal income tax at a rate of
31% ("backup withholding") from dividends paid to you if (1) you fail to
furnish the Trust with and to certify your correct taxpayer identification
number or social security number, (2) the Internal Revenue Service (the "IRS")
notifies the Trust that you have failed to report properly certain interest
and dividend income to the IRS and to
<PAGE>
respond to notices to that effect or (3) you fail to certify that you are not
subject to backup withholding.
Each Fund will distribute investment company taxable income and any net
realized capital gains at least annually. All dividends and distributions will
be reinvested automatically at net asset value in additional shares of the
Fund making the distribution, unless you notify the Fund in writing of your
election to receive distributions in cash.
OTHER INFORMATION
The Trust
The Trust was organized as a Massachusetts business trust on September 7,
1994. The Trust currently consists of three separately managed portfolios --
the Markman Aggressive Growth Fund, the Markman Moderate Growth Fund and the
Markman Conservative Growth Fund. The Board of Trustees of the Trust has the
power to establish additional series of the Trust in the future. The
capitalization of the Trust consists solely of an unlimited number of shares
of beneficial interest with no par value. When issued, shares of the Funds are
fully paid, non-assessable and freely transferable.
Under Massachusetts law, shareholders of the Trust could, under certain
circumstances, be held personally liable for the obligations of the Trust.
The Declaration of Trust of the Trust, however, disclaims liability of the
shareholders, Trustees and officers of the Trust for acts or obligations of
the Trust that are binding only upon the assets and property of the Trust and
requires that notice of the disclaimer be given in each contract or obligation
entered into or executed by the Trust or the Trustees. The Declaration of
Trust provides for indemnification out of Trust property for all loss and
expense of any shareholder held personally liable for the obligations of the
Trust. The risk of a shareholder incurring financial loss because of
shareholder liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations and is remote.
Voting
Shareholders of each Fund have the right to vote for the election of Trustees
and on any matters which by law or the provisions of the Declaration of Trust
they may be entitled to vote upon. The Trust is not required to hold annual
meetings of its shareholders and does not intend to do so. See "Description of
the Trust" in the Statement of Additional Information.
The Declaration of Trust of the Trust provides that the holders of not less
than two-thirds of the outstanding shares of the Trust may remove a person
serving as Trustee either by declaration in writing or at a meeting called for
such purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of any person serving as Trustee if requested in
writing to do so by the holders of not less than 10% of the outstanding shares
of the Trust.
Shares of the Trust entitle their holders to one vote per share (with
proportionate voting for fractional shares). As used in this Prospectus, the
term "vote of a majority of the outstanding shares" of the Fund (or of the
Trust) means the vote of the lesser of: (1) 67% of the shares of the Fund (or
the Trust) present at a meeting of shareholders if the holders of more than
50% of the outstanding shares are present in person or by proxy or (2) more
than 50% of the outstanding shares of the Fund (or the Trust). In compliance
with applicable provisions of the 1940 Act, shares of the mutual funds owned
by the Trust will be voted in the same proportion as the vote of all other
holders of the shares of such funds.
Performance Information
From time to time a Fund may advertise its "average annual total return" in
advertisements or reports to shareholders or prospective shareholders.
Quotations of "average annual total return" will be expressed in terms of the
average annual compounded rate of return of a hypothetical investment in a
Fund over periods of 1, 5, and 10 years (up to the life of the Fund). A Fund
may also advertise total return (a "nonstandardized quotation") which is
calculated differently from "average annual total return." A nonstandardized
quotation of total return may be a cumulative return which measures the
percentage change in the value of an account between the beginning and end of
a period, assuming no activity in the account other than reinvestment of
dividends and capital gains distributions. A nonstandardized return may also
indicate average annual compounded rates of return over periods other than
those specified for "average annual total return." A nonstandardized quotation
of total return will always be accompanied by a Fund's "average annual total
return" as described above.
All total return figures will reflect the deduction of a proportional share
of Fund expenses on an annual basis, and will assume that all dividends and
distributions are reinvested when paid. Quotations of total return reflect
only the performance of a hypothetical investment in the Funds during the
particular time period on which the calculations are based.
<PAGE>
Total return for a Fund will vary based upon changes in market conditions and
the level of the Fund's expenses and should not be considered an indication of
future performance.
The Funds may also compare their performance with that of
other mutual funds as listed in the rankings prepared by Lipper Analytical
Services, Inc., Morningstar, Inc., or similar independent services that
monitor mutual fund performance, and with appropriate securities indices,
which may assume reinvestment of dividends but usually do not reflect
deductions for administrative and management costs and expenses. For more
complete information on the methods used to calculate each Fund's total
return, see the Statement of Additional Information. Additional information
about the Funds' performance will be contained in the Funds' Annual Report to
Shareholders, which may be obtained without charge from MGF Service Corp. at
the address or telephone number listed on the back cover of this Prospectus.
Use of Morningstar, Inc. Data
THE FUNDS ARE NOT PROMOTED, SPONSORED OR ENDORSED BY, NOR IN ANY
WAY AFFILIATED WITH MORNINGSTAR, INC. MORNINGSTAR, INC. IS NOT
RESPONSIBLE FOR AND HAS NOT REVIEWED THE FUNDS, THIS PROSPECTUS, NOR
ANY ASSOCIATED LITERATURE OR PUBLICATIONS. MORNINGSTAR, INC. MAKES NO
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THEIR ACCURACY,
OR COMPLETENESS, OR OTHERWISE.
MORNINGSTAR, INC. RESERVES THE RIGHT, AT ANY TIME AND WITHOUT
NOTICE, TO ALTER, AMEND, TERMINATE OR IN ANY WAY CHANGE HOW IT
CATEGORIZES AND COMPILES INFORMATION ON MUTUAL FUNDS AND HAS NO
OBLIGATION TO TAKE THE NEEDS OF THE FUNDS, THEIR SHAREHOLDERS OR
ANY OTHER PRODUCT OR PERSON INTO CONSIDERATION IN COMPUTING ITS
REPORTS.
MORNINGSTAR, INC.'S PUBLICATION OF ITS VARIOUS REPORTS IN NO WAY
SUGGESTS OR IMPLIES ANY OPINION BY MORNINGSTAR, INC. AS TO THE
ATTRACTIVENESS OR APPROPRIATENESS OF INVESTMENT IN THE FUNDS.
MORNINGSTAR, INC. MAKES NO REPRESENTATION,
WARRANTY, OR GUARANTEE AS TO THE ACCURACY,
COMPLETENESS, RELIABILITY, OR OTHERWISE OF ANY DATA INCLUDED IN ITS
REPORTS AND USED HEREIN. MORNINGSTAR, INC. MAKES NO REPRESENTATION
OR WARRANTY REGARDING THE USE, OR THE RESULTS OF USE, OF ITS
REPORTS OR ANY DATA IN ITS REPORTS AND USED HEREIN. MORNINGSTAR,
<PAGE>
INC. MAKES NO OTHER EXPRESS OR IMPLIED WARRANTY, AND EXPRESSLY
DISCLAIMS ANY WARRANTY, OF ANY KIND, INCLUDING, WITHOUT MEANS OR
LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE WITH RESPECT TO ANY DATA INCLUDED IN
ITS REPORTS AND USED HEREIN.
Shareholder Inquiries
All shareholder inquiries should be directed to the Trust at the telephone
number and address shown on the back cover of this Prospectus for MGF Service
Corp.
AUDITORS
Arthur Andersen LLP, 425 Walnut Street, Cincinnati, Ohio 45202, serves as
independent accountant for the Trust and will audit the financial statements
of the Funds annually.
LEGAL COUNSEL
Sullivan & Worcester LLP, Washington, D. C. and Boston, Massachusetts,
is legal counsel to the Trust.
- --------------------------------------------------------------------------
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus or in the
Statement of Additional Information, and, if given or made, such other
information or representations must not be relied upon as having been
authorized by the Funds. This Prospectus does not constitute an offering
by the Trust in any jurisdiction in which such offering may not be lawfully
made.
- ---------------------------------------------------------------------------
Appendix
Ratings of Debt Instruments
Standard & Poor's Corporation ("S&P")
Corporate Bond Ratings
An S&P corporate bond rating is a current assessment of the credit worthiness
of an obligor, with respect to a specific obligation. This assessment may take
into consideration obligors such as guarantors, insurers or lessees. The debt
rating is not a recommendation to purchase, sell or hold a security inasmuch
as it does not comment as to market price
<PAGE>
or suitability for a particular investor. The ratings are based on current
information furnished by the issuer or obtained by S&P from other sources it
considers reliable. S&P does not perform any audit in connection with the
ratings and may, on occasion, rely on unaudited financial information.
The ratings are based, in varying degrees, on the following considerations: (a)
likelihood of default capacity and willingness of the obligor as to the timely
payment of interest and repayment of principal in accordance with the terms of
the obligation; (b) nature of and provisions of the obligation; and (c)
protection afforded by and relative position of the obligation in the event of
bankruptcy reorganization or other arrangement under the laws of bankruptcy
and other laws affecting creditors' rights. To provide more detailed
indications of credit quality, ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the
major rating categories.
A provisional rating is sometimes used by S&P. It
assumes the successful completion of the project being financed by the debt
being rated and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of, or the risk
of default upon failure of, such completion.
Bond ratings are as follows:
AAA -- Bonds rated AAA have the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A -- Bonds rated A have strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher rated categories.
BB, B, CCC, CC -- Bonds rated BB, B, CCC or CC are regarded on balance, as
predominantly speculative with respect to the issuer's capacity to pay
<PAGE>
interest and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C -- The rating C is reserved for income bonds on which no interest is
being paid.
D -- Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
S&P Note Ratings
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating. The following criteria are used in making that assessment: (a)
Amortization schedule (the larger the final maturity relative to other
maturities, the more likely it will be treated as a note), and (b) Source of
payment (the more dependent the issue is on the market for its refinancing,
the more likely it will be treated as a note).
Note ratings are as follows:
SP-1 -- Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given
a plus (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
SP-3 -- Speculative capacity to pay principal and interest.
Demand Bonds. S&P assigns "Dual" ratings to all long-term debt issues that have
as part of their provisions a demand or double feature. The first rating
addresses the likelihood of repayment of principal and interest as
due, and the second rating addresses only the demand feature. The long-term
debt rating symbols are used for bonds to denote the long-term maturity and
the commercial paper rating symbols are used to denote the put options (for
example, "AAA/A-1+). For the newer "Demand Notes," S&P note rating symbols,
combined with the commercial paper symbols, are used (for example,
"SP-1+/A-1+").
Moody's Corporate Bond Ratings
Moody's ratings are as follows:
Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa -- Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of great amplitude or there may be other elements
present that make the long-term risks appear somewhat larger than in Aaa
securities.
A -- Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present that suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds that are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Moody's applies numerical modifiers, 1, 2 and 3, in each generic rating
classification from Aa through Baa in its corporate bond rating system.
The modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
Ba -- Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds that are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments, or of maintenance of
other terms of the contract over any long period of time, may be small.
Caa -- Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Ca -- Bonds
rated Ca represent obligations that are speculative in a high degree. Such
issues are often in default or have other marked shortcomings.
C -- Bonds rated C are the lowest rated class of bonds and issues so rated can
be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Moody's Note Ratings. Moody's Short-Term Loan Ratings --
Moody's ratings for short-term obligations will be designated Moody's
Investment Grade (MIG). This distinction is in recognition of the differences
between short-term credit risk and long-term risk. Factors affecting the
liquidity of the borrower are uppermost in importance in short-term borrowing,
while various factors of major importance in bond risk are of lesser
importance over the short run.
Rating symbols and their meanings follow:
MIG 1 -- This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support, or
demonstrated broad-based access to the market for refinancing.
MIG 2 -- This designation denotes high quality. Margins of protection are
ample, although not so large as in the preceding group.
MIG 3 -- This designation denotes favorable quality. All security elements are
accounted for, but this is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
MIG 4 -- This designation denotes adequate quality.
Protection commonly regarded as required of an investment security is present
and, although not distinctly or predominantly speculative, there is specific
risk.
You may use the Investor Application and Request Forms included in the
most recent Markman MultiFunds Quarterly Report to invest directly in the
Markman MultiFunds. The minimum direct investment is $25,000.
If you want to invest less than $25,000, you may purchase the Markman
MultiFunds through Charles Schwab & Company (1-800-266-5623) Fidelity
Investments (1-800-544-7558), and Jack White and Company (1-800-323-3263),
among others.
For additional forms or answers to any questions, call the Markman MultiFunds
at 1-800-707-2771 between the hours of 8:30 AM and 5:00 PM
<PAGE>
EST. (In Cincinnati: 513-629-2070).
For a current update on our views on the market and what funds are in each of
the portfolios call the Hotline at 1-800-975-5463.
For updated fund prices as of the close of the previous day, call
1-800-536-8679.
To order additional prospectuses call 1-800-232-4792.
<PAGE>
________, 1997
STATEMENT OF ADDITIONAL INFORMATION
MARKMAN MULTIFUND TRUST
312 Walnut Street
21st Floor
Cincinnati, Ohio 45202
(800) 707-2771
This Statement of Additional Information is not a prospectus, but expands upon
and supplements the information contained in the Prospectus of Markman
MultiFund Trust (the "Trust"), dated ________, 1997, as supplemented from time
to time. The Statement of Additional Information should be read in conjunction
with the Prospectus. The Trust's Prospectus may be obtained by writing to the
Trust at the above address or by telephoning the Trust nationwide toll-free at
800-707-2771.
<PAGE>
TABLE OF CONTENTS
PAGE
I. INVESTMENT OBJECTIVES AND POLICIES.................. 3
II. INVESTMENT RESTRICTIONS............................. 3
III. TRUSTEES AND OFFICERS............................... 5
IV. PRINCIPAL SECURITY HOLDERS.......................... 7
V. INVESTMENT MANAGER.................................. 8
VI. DISTRIBUTOR......................................... 9
VII. TRANSFER AGENT AND ADMINISTRATOR.................... 9
VIII. REDEMPTION OF SHARES................................ 10
IX. SPECIAL REDEMPTIONS................................. 10
X. CUSTODIAN........................................... 10
XI. PORTFOLIO TRANSACTIONS.............................. 11
XII. PERFORMANCE INFORMATION............................. 11
A. Total Return.................................... 11
B. Non-Standardized Total Return................... 12
C. Other Information Concerning Fund Performance... 12
XIII. DESCRIPTION OF THE TRUST............................ 18
XIV. ADDITIONAL INFORMATION.............................. 19
XV. FINANCIAL STATEMENTS................................. 20
<PAGE>
I. INVESTMENT OBJECTIVES AND POLICIES
Markman MultiFund Trust (the "Trust") is an open-end, non-diversified
management investment company, registered as such under the Investment Company
Act of 1940. The Trust currently consists of three separate portfolios
(series), each with different investment objectives (the "Funds"). The Funds
seek to achieve their investment objectives by investing in shares of other
open-end investment companies ("mutual funds"). As of the date of this
Statement of Additional Information, the Trust's series are:
MARKMAN AGGRESSIVE GROWTH FUND seeks capital appreciation without regard
to current income.
MARKMAN MODERATE GROWTH FUND seeks long-term growth of capital and a
reasonable level of income.
MARKMAN CONSERVATIVE GROWTH FUND seeks to provide current income and low
to moderate growth of capital.
II. INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT POLICIES. Each Fund has adopted certain
fundamental investment policies. These fundamental investment policies cannot
be changed unless the change is approved by the lesser of (1) 67% of more of
the voting securities present at a meeting, if the holders of more than 50% of
the outstanding voting securities of the Fund are present or represented by
proxy, or (2) more than 50% of the outstanding voting securities of the Fund.
These fundamental policies provide that a Fund may not:
1. Purchase or otherwise acquire interests in real estate, real estate
mortgage loans or interests therein, except that a Fund may purchase
securities issued by issuers, including real estate investment
trusts, which invest in real estate or interests therein.
2. Make loans.
3. Purchase the securities of an issuer if one or more of the Trustees
or officers of the Trust individually owns more than one half of 1%
of the outstanding securities of such issuer and together
beneficially own more than 5% of such securities.
4. Make short sales of securities
5. Invest in puts, calls, straddles, spreads or combinations
thereof.
<PAGE>
6. Purchase securities on margin, except that a Fund may obtain such
short-term credits as may be necessary for the clearance of purchases
and sales of securities.
7. Purchase or acquire commodities or commodity contracts.
8. Act as an underwriter of securities of other issuers except to the
extent that in selling portfolio securities, it may be deemed to be
an underwriter for purposes of the Securities Act of 1933.
9. Issue senior securities, except as appropriate to evidence
indebtedness that the Fund is permitted to incur.
10. Purchase or sell interests in oil, gas or other mineral
leases, exploration or development programs (although it may
invest in companies which own or invest in such interests).
11. Invest more than 25% of its total assets in the securities
of investment companies which themselves concentrate
although each Fund will itself concentrate its investments
in investment companies.
As non-fundamental policies a Fund may not:
1. Invest in securities for the purpose of exercising control
over or management of the issuer.
2. Purchase securities of any closed-end investment company or
any investment company the shares of which are not
registered in the United States.
3. Invest in warrants, valued at the lower of cost or market value, in
excess of 5% of the value of its net assets. Included within that
amount, but not to exceed 2% of a Fund's net assets, may be warrants
which are not listed on the New York Stock Exchange or the American
Stock Exchange.
4. Invest in real estate limited partnerships.
The mutual funds in which the Funds may invest may, but need not, have
the same investment policies as a Fund. Although all of the Funds may from
time to time invest in shares of the same underlying mutual fund, the
percentage of each Fund's assets so invested may vary, and Markman Capital
will determine that such investments are consistent with the investment
objectives and policies of each Fund. The investments that may, in general, be
made by underlying funds in which the Funds may invest, as well as the risks
associated with such investments, are described in the Prospectus and in the
Appendix to the Prospectus.
<PAGE>
III. TRUSTEES AND OFFICERS
The following is a list of the Trustees and executive officers of the
Trust and their aggregate compensation from the Trust for the fiscal year
ended December 31, 1996. As described below, certain of the executive officers
of the Trust are affiliates of organizations that provide services to the
Trust. These organizations are Markman Capital Management, Inc., the Funds'
investment adviser, and MGF Service Corp., the Funds' transfer agent and
administrator. Emilee Markman is married to Robert J. Markman.
<TABLE>
<CAPTION>
COMPENSATION
NAME AGE POSITION HELD FROM TRUST
- ---- --- ------------- ----------
<S> <C> <C> <C>
Richard Edwin Dana 50 Trustee $ 6,000
+Peter Dross 40 Trustee 6,000
*Judith E. Fansler 46 Trustee 0
+Susan Gale 44 Trustee 6,000
Susan M. Hawkes 32 Trustee 6,000
*Richard W. London 54 Trustee 0
Melinda S. Machones 42 Trustee 6,000
*Emilee Markman 43 Trustee 6,000
*Robert J. Markman 45 Chairman of the Board 0
of Trustees and President
+Michael J. Monahan 46 Trustee 6,000
Robert G. Dorsey 40 Vice President 0
Mark J. Seger 35 Treasurer 0
John F. Splain 40 Secretary 0
<FN>
* An "interested person" of the Trust as such term is defined in
the Investment Company Act of 1940.
+ Member of Audit Committee.
</FN>
</TABLE>
The principal occupations of the Trustees and executive officers of
the Trust during the past five years are set forth below:
SUSAN M. HAWKES, 3311 139th Avenue, N.W., Andover, Minnesota 55304 --
President/Sole Proprietor, Anything is Possible and kidvironments, Andover,
Minnesota (Anything is Possible is a consulting firm offering customized
experiential work shops for personal effectiveness, team building and
leadership; kidvironments creates custom interior and exterior environments
for children of any age) (August 1994-Present); Contract Employee, Lifespring,
San Rafael, California (Lifespring offers experiential personal effectiveness
courses internationally) (August 1994-Present); Executive Vice President,
Personal Empowerment Resource Center! ("PERC!"), Minneapolis, Minnesota (PERC!
offered experiential personal effectiveness courses) (April 1992-July 1994).
RICHARD EDWIN DANA, 748 Goodrich Avenue, Saint Paul, Minnesota 55105
- --Managing Member, JET Construction and Remodeling L.L.C.
<PAGE>
PETER DROSS, 2424 Mendelssohn Lane, Golden Valley, Minnesota 55427
- --Director of Development, The Center for Victims of Torture, Minneapolis,
Minnesota (provider of treatment and rehabilitation services to survivors of
politically-motivated torture)(May 1993- Present); Executive Director,
Minneapolis Chamber Symphony (September 1990-December 1992).
JUDITH E. FANSLER, 6600 France Avenue South, Suite 565, Edina,
Minnesota 55435 -- Chief Operating Officer, Markman Capital Management, Inc.
SUSAN GALE, 235 King Creek Road, Golden Valley, Minnesota 55416 - -
Homemaker.
RICHARD W. LONDON, 6600 France Avenue South, Suite 565, Edina,
Minnesota 55435 -- Chief Financial Officer, Markman Capital
Management, Inc. (December 1991-Present).
MELINDA S. MACHONES, 2138 Ponderosa Circle, Duluth, Minnesota
55811 -- Director of Information Technologies, The College of St.
Scholastica (December 1994 to Present); Principal, INDUS Systems
(computer consulting) (September 1993-Present); Manager, International
Business Machines Corporation (1977-1993).
EMILEE MARKMAN, 5320 Kellogg Avenue South, Edina, Minnesota 55425 --
Student (January 1994 - Present); Registered Representative, American Asset
Management, Inc. (April 1990 - December 1993).
ROBERT J. MARKMAN, 6600 France Avenue South, Edina, Suite 565,
Minnesota 55435 -- President, Treasurer and Secretary, Markman Capital
Management, Inc.
MICHAEL J. MONAHAN, One Shelby Place, St. Paul, Minnesota 55116 -
- - Vice President, External Relations, Ecolab, Inc. (June 1994 -
Present) (provider of premium institutional cleaning and sanitizing
products and services worldwide); Vice President, Investor Relations,
Ecolab, Inc. (May 1992 - June 1994); Director, Strategic Planning,
Ecolab, Inc. (July 1989 - May 1992).
ROBERT G. DORSEY, 312 Walnut Street, 21st Floor, Cincinnati, Ohio
45201 -- President and Treasurer of MGF Service Corp. (a registered
transfer agent) and Treasurer of Midwest Group Financial Services,
Inc. (a registered broker-dealer and investment adviser) and Leshner
Financial, Inc. (a financial services company and parent of MGF
Service Corp. and Midwest Group Financial Services, Inc.). He is also
Vice President of Brundage, Story and Rose Investment Trust, PRAGMA
Investment Trust, Maplewood Investment Trust, The Thermo Opportunity
Fund, Inc. and Capitol Square Funds and Assistant Vice President of
Williamsburg Investment Trust, The Tuscarora Investment Trust, The
Gannett Welsh & Kotler Funds, Schwartz Investment Trust and Fremont
Mutual Funds, Inc. (all of which are registered investment companies).
<PAGE>
MARK J. SEGER, 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45201
- -- Vice President of Leshner Financial, Inc. and MGF Service Corp. He is also
Treasurer of Midwest Trust, Midwest Group Tax Free Trust, Midwest Strategic
Trust, Brundage, Story and Rose Investment Trust, Maplewood Investment Trust,
The Thermo Opportunity Fund, Inc., PRAGMA Investment Trust, Williamsburg
Investment Trust and Capitol Square Funds, Assistant Treasurer of Schwartz
Investment Trust, The Tuscarora Investment Trust and The Gannett Welsh &
Kotler Funds and Assistant Secretary of Fremont Mutual Funds, Inc. (all of
which are registered investment companies).
JOHN F. SPLAIN, 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45201
- -- Secretary and General Counsel of MGF Service Corp., Midwest Group Financial
Services, Inc. and Leshner Financial, Inc. He is also Secretary of Midwest
Trust, Midwest Group Tax Free Trust, Midwest Strategic Trust, Brundage, Story
and Rose Investment Trust, Maplewood Investment Trust, The Thermo Opportunity
Fund, Inc., PRAGMA Investment Trust, The Tuscarora Investment Trust and
Williamsburg Investment Trust and Assistant Secretary of Schwartz Investment
Trust, The Gannett Welsh & Kotler Funds, Capitol Square Funds and Fremont
Mutual Funds, Inc.
The Trustees who are not employed by the Adviser each receive a
$3,000 annual retainer to be paid $750 per quarter, plus a $750 fee for each
Board meeting attended.
The Trust's Declaration of Trust provides that the Trust will
indemnify its Trustees and officers against liabilities and expenses incurred
in connection with litigation in which they may be involved as a result of
their positions with the Trust, unless, as to liability to the Trust or its
shareholders, it is finally adjudicated that they engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in their offices, or unless with respect to any other matter it is
finally adjudicated that they did not act in good faith in the reasonable
belief that their actions were in the best interests of the Trust and its
Funds. In the case of settlement, such indemnification will not be provided
unless it has been determined by a court or other body approving the
settlement or other disposition, or by a reasonable determination, based upon
a review of readily available facts, by vote of a majority of disinterested
Trustees or in a written opinion of independent counsel, that such officers or
Trustees have not engaged in willful misfeasance, bad faith, gross negligence
or reckless disregard of their duties.
IV. PRINCIPAL SECURITY HOLDERS
As of November 29, 1996, Charles Schwab & Co., Inc., 101 Montgomery
Street, San Francisco, California, owned of record 21.6% of the outstanding
shares of the Markman Aggressive Growth Fund, 21.3% of the outstanding shares
of the Markman Moderate Growth Fund and 11.4% of the outstanding shares of the
Markman Conservative Growth Fund.
<PAGE>
As of November 29, 1996, the Trustees and officers of the Trust as a
group owned of record and beneficially less than 1% of the outstanding shares
of the Trust and of each Fund.
V. INVESTMENT MANAGER
Markman Capital Management, Inc. ("Markman Capital") serves as
investment manager to the Trust and its Funds pursuant to a written investment
management agreement. Markman Capital is a Minnesota corporation organized in
1990, and is a registered investment adviser under the Investment Advisers Act
of 1940, as amended. Robert J. Markman, Chairman of the Board of Trustees and
President of the Trust, is President, Treasurer and Secretary of Markman
Capital. Richard W. London and Judith E. Fansler, employees of Markman
Capital, also serve as Trustees of the Trust.
Certain services provided by Markman Capital under the investment
management agreement are described in the Prospectus. In addition to those
services, Markman Capital may, from time to time, provide the Funds with
office space for managing their affairs, with the services of required
executive personnel, and with certain clerical services and facilities. These
services are provided without reimbursement by the Funds for any costs
incurred. As compensation for its services, each Fund pays Markman Capital a
fee based upon average daily net asset value. This fee is computed daily and
paid monthly. The rate at which the fee is paid is described in the
Prospectus. For the fiscal period ended December 31, 1996, the Markman
Aggressive Growth Fund, the Markman Moderate Growth Fund and the Markman
Conservative Growth Fund paid advisory fees of $_______, $_______ and $______,
respectively.
Markman Capital pays out of the investment management fees it
receives from the Funds, all the expenses of the Funds except brokerage
commissions, taxes, interest, fees and expenses of the non- interested
Trustees of the Trust and extraordinary expenses. Markman Capital is
contractually required to reduce its management fee in an amount equal to each
Fund's allocable portion of the fees and expenses of the non-interested
Trustees. The investment management agreement with Markman Capital provides
that if the total expenses of a Fund in any fiscal year exceed the permissible
limits applicable to the Fund in any state in which shares of the Fund are
then qualified for sale, the compensation due Markman Capital for such fiscal
year shall be reduced by the amount of such excess by a reduction or refund
thereof at the time such compensation is payable after the end of each
calendar month during such fiscal year of the Fund, subject to readjustment
during the Fund's fiscal year.
By its terms, the Trust's investment management agreement remains in
effect from year to year, subject to annual approval by (a) the Board of
Trustees or (b) a vote of the majority of a Fund's outstanding voting
securities; provided that in either event continuance is also approved by a
majority of the Trustees who are not interested persons of the Trust, by a
vote cast in person at a meeting
<PAGE>
called for the purpose of voting such approval. The Trust's investment
management agreement may be terminated at any time, on sixty days' written
notice, without the payment of any penalty, by the Board of Trustees, by a
vote of the majority of a Fund's outstanding voting securities, or by Markman
Capital. The investment management agreement automatically terminates in the
event of its assignment, as defined by the Investment Company Act of 1940 and
the rules thereunder.
VI. THE DISTRIBUTOR
Markman Securities, Inc. (the "Distributor"), a wholly-owned
subsidiary of Markman Capital, with its principal offices at 6600 France
Avenue South, Suite 565, Minneapolis, Minnesota 55435, serves as the
distributor of the Funds' shares. The Distributor is obligated to sell shares
of the Funds on a best efforts basis only against purchase orders for the
shares. Shares of the Funds are offered to the public on a continuous basis.
Although the Funds do not directly impose Rule 12b-1 fees or service
fees, the underlying funds in which the Funds invest may impose such fees.
Rule 12b-1 fees imposed by an underlying fund could be as high as .75% of an
underlying fund's net assets and service fees could be as high as .25% of an
underlying fund's net assets. In the aggregate, such combined fees could be as
high as 1.00% of an underlying fund's net assets. Such Rule 12b-1 or service
fees will be paid to the Distributor by such underlying funds or such fund's
distributors. For a description of the arrangements pursuant to which
underlying funds imposing 12b-1 or service fees pay such fees to the
Distributor and the process by which the Distributor will reimburse the Funds
with a portion of such fees, see the discussion in the Prospectus entitled
"The Distributor."
VII. TRANSFER AGENT AND ADMINISTRATOR
The Board of Trustees of the Trust has approved an Administration,
Accounting and Transfer Agency Agreement among the Trust, MGF Service Corp.
("MGF") and Markman Capital. Pursuant to such Agreement, MGF serves as the
Trust's transfer and dividend paying agent and performs shareholder service
activities. MGF also calculates daily net asset value per share and maintains
such books and records as are necessary to enable it to perform its duties.
The administrative services necessary for the operation of the Trust and its
Funds provided by MGF include among other things (i) preparation of
shareholder reports and communications, (ii) regulatory compliance, such as
reports to and filings with the Securities and Exchange Commission and state
securities commissions and (iii) general supervision of the operation of the
Trust and its Funds, including coordination of the services performed by
Markman Capital, the custodian, independent accountants, legal counsel and
others. In addition, MGF furnishes office space and facilities required for
<PAGE>
conducting the business of the Trust and pays the compensation of the Trust's
officers and employees affiliated with MGF. For these services, MGF receives
from Markman Capital out of the investment advisory fee paid to Markman
Capital by each Fund a fee, as described under "The Administrator" in the
Prospectus. For the fiscal period ended December 31, 1996, Markman Capital
paid fees of $_______ to MGF. MGF also receives reimbursment for certain
out-of-pocket expenses incurred in rendering such services.
MGF is a wholly-owned subsidiary of Leshner Financial, Inc. and its
affiliates currently provide administrative and distribution services for
certain other registered investment companies. The Funds will not invest in
these funds or in any other fund which may in the future be affiliated with
MGF or any of its affiliates. The principal business address of MGF is 312
Walnut Street, 21st Floor, Cincinnati, Ohio 45202-5354.
VIII. REDEMPTION OF SHARES
Detailed information on redemption of shares is included in the
Prospectus. The Trust may suspend the right to redeem its shares or postpone
the date of payment upon redemption for more than three business days (i) for
any period during which the New York Stock Exchange is closed (other than
customary weekend or holiday closings) or trading on the exchange is
restricted; (ii) for any period during which an emergency exists as a result
of which disposal by a Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for a Fund fairly to determine
the value of its net assets; or (iii) for such other periods as the Securities
and Exchange Commission may permit for the protection of shareholders of the
Trust.
IX. SPECIAL REDEMPTIONS
If the Board of Trustees of the Trust determines that it would be
detrimental to the best interests of the remaining shareholders of a Fund to
make payment wholly or partly in cash, that Fund may pay the redemption price
in whole or in part by a distribution in kind of securities (mutual fund
shares) from the portfolio of that Fund, instead of in cash, in conformity
with applicable rules of the Securities and Exchange Commission. The Trust
will, however, redeem shares solely in cash up to the lesser of $250,000 or 1%
of its net assets during any 90-day period for any one shareholder. The
proceeds of redemption may be more or less than the amount invested and,
therefore, a redemption may result in a gain or loss for federal income tax
purposes.
<PAGE>
X. CUSTODIAN
Pursuant to a Custodian Agreement between the Trust, The Fifth Third
Bank and Markman Capital, The Fifth Third Bank provides custodial services to
the Trust and each of the Funds. The principal business address of The Fifth
Third Bank is 38 Fountain Square Plaza, Cincinnati, Ohio 45202.
XI. PORTFOLIO TRANSACTIONS
Markman Capital, is responsible for decisions to buy and sell
securities for the Funds and for the placement of the Funds' portfolio
business and negotiation of commissions, if any, paid on these transactions.
The Funds will arrange to be included within a class of investors
entitled not to pay sales charges by purchasing load fund shares under letters
of intent, rights of accumulation, cumulative purchase privileges and other
quantity discount programs.
XII. PERFORMANCE INFORMATION
A. TOTAL RETURN
From time to time, quotations of a Fund's performance may be included
in advertisements, sales literature or reports to shareholders or prospective
investors. These performance figures may be calculated in the following
manner:
Total return is computed by finding the average annual compounded rates of
return over the designated periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P(1+T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the designated
period assuming a hypothetical $1,000 payment made at the
beginning of the designated period
The calculation set forth above is based on the further assumptions that:
(i) all dividends and distributions of a Fund during the period were
reinvested at the net asset value on the reinvestment dates; and (ii) all
recurring expenses that were charged to all shareholder accounts during the
applicable period were deducted.
<PAGE>
Total returns quoted in advertising reflect all aspects of a Fund's
return, including the effect of reinvesting dividends and capital gain
distributions, and any change in the Fund's net asset value per share (NAV)
over the period. Average annual returns are calculated by determining the
growth or decline in value of a hypothetical historical investment in a Fund
over a stated period, and then calculating the annually compounded percentage
rate that would have produced the same result if the rate of growth or decline
in value had been constant over the period. For example, a cumulative return
of 100% over ten years would produce an average annual return of 7.18%, which
is the steady annual return rate that would equal 100% growth on a compounded
basis in ten years. While average annual returns are a convenient means of
comparing investment alternatives, investors should realize that a Fund's
performance is not constant over time, but changes from year to year, and that
average annual returns represent averaged figures as opposed to the actual
year-to-year performance of the Fund.
The average annual total returns of the Funds for the one year period
ended December 31, 1996 and for the period since inception (January 26, 1995)
are as follows:
ONE YEAR SINCE INCEPTION
Markman Aggressive Growth Fund ______% ______%
Markman Moderate Growth Fund ______% ______%
Markman Conservative Growth Fund ______% ______%
B. NONSTANDARDIZED TOTAL RETURN
In addition to the performance information described above, a Fund
may provide total return information for designated periods, such as for the
most recent rolling six months or most recent rolling twelve months. A Fund
may quote unaveraged or cumulative total returns reflecting the simple change
in value of an investment over a stated period. Average annual and cumulative
total returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, and/or a series
of redemptions over any time period. Total returns may be broken down into
their components of income and capital (including capital gains and changes in
share price) in order to illustrate the relationship of these factors and
their contributions to total return. Total returns and other performance
information may be quoted numerically or in a table, graph or similar
illustration.
The total returns of the Funds for the period from the initial public
offering of shares on January 26, 1995 through December 31, 1996 were _____%,
_____% and _____% for the Markman Aggressive Growth Fund, the Markman Moderate
Growth Fund and the Markman Conservative Growth Fund, respectively.
<PAGE>
C. OTHER INFORMATION CONCERNING FUND PERFORMANCE
A Fund may quote its performance in various ways, using various types
of comparisons to market indices, other funds or investment alternatives, or
to general increases in the cost of living. All performance information
supplied by a Fund in advertising is historical and is not intended to
indicate future returns. A Fund's share prices and total returns fluctuate in
response to market conditions and other factors, and the value of a Fund's
shares when redeemed may be more or less than their original cost.
A Fund may compare its performance over various periods to various
indices or benchmarks, including the performance record of the Standard &
Poor's 500 Composite Stock Price Index (S&P), the Dow Jones Industrial Average
(DJIA), the NASDAQ Industrial Index, the Ten Year Treasury Benchmark and the
cost of living (measured by the Consumer Price Index, or CPI) over the same
period. Comparisons may also be made to yields on certificates of deposit,
treasury instruments or money market instruments. The comparisons to the S&P
and DJIA show how such Fund's total return compared to the record of a broad
average of common stock prices (S&P) and a narrower set of stocks of major
industrial companies (DJIA). The Fund may have the ability to invest in
securities or underlying funds not included in either index, and its
investment portfolio may or may not be similar in composition to the indices.
Figures for the S&P and DJIA are based on the prices of unmanaged groups of
stocks, and unlike the Fund's returns, their returns do not include the effect
of paying brokerage commissions and other costs of investing.
Comparisons may be made on the basis of a hypothetical initial
investment in the Fund (such as $1,000), and reflect the aggregate cost of
reinvested dividends and capital gain distributions for the period covered
(that is, their cash value at the time they were reinvested). Such comparisons
may also reflect the change in value of such an investment assuming
distributions are not reinvested. Tax consequences of different investments
may not be factored into the figures presented.
A Fund's performance may be compared in advertising to the
performance of other mutual funds in general or to the performance of
particular types of mutual funds, especially those with similar objectives.
Other groupings of funds prepared by Lipper Analytical Services,
Inc. ("Lipper") and other organizations may also be used for
comparison to the Fund. Although Lipper and other organizations such
as Investment Company Data, Inc. ("ICD"), CDA Investment Technologies,
Inc. ("CDA") and Morningstar Investors, Inc. ("Morningstar"), include
funds within various classifications based upon similarities in their
investment objectives and policies, investors should be aware that
these may differ significantly among funds within a grouping.
<PAGE>
From time to time a Fund may publish the ranking of the performance
of its shares by Morningstar, an independent mutual fund monitoring service
that ranks mutual funds, including the Fund, in broad investment categories
(equity, taxable bond, tax-exempt and other) monthly, based upon each Fund's
one, three, five and ten-year average annual total returns (when available)
and a risk adjustment factor that reflects Fund performance relative to
three-month U.S. treasury bill monthly returns. Such returns are adjusted for
fees and sales loads. There are five ranking categories with a corresponding
number of stars: highest (5), above average (4), neutral (3), below average
(2) and lowest (1). Ten percent of the funds, series or classes in an
investment category receive 5 stars, 22.5% receive 4 stars, 35% receive 3
stars, 22.5% receive 2 stars, and the bottom 10% receive one star. Morningstar
ranks the shares of the Fund in relation to other taxable bond funds.
From time to time, in reports and promotional literature, a Fund's
yield and total return will be compared to indices of mutual funds and bank
deposit vehicles such as Lipper's "Lipper - Fixed Income Fund Performance
Analysis," a monthly publication which tracks net assets, total return, and
yield on approximately 1,700 fixed income mutual funds in the United States.
Ibbotson Associates, CDA Wiesenberger and F.C. Towers are also used for
comparison purposes as well as the Russell and Wilshire Indices. Comparisons
may also be made to Bank Certificates of Deposit, which differ from mutual
funds, such as the Funds, in several ways. The interest rate established by
the sponsoring bank is fixed for the term of a CD, there are penalties for
early withdrawal from CDs, and the principal on a CD is insured. Comparisons
may also be made to the 10 year Treasury Benchmark.
Performance rankings and ratings reported periodically in national
financial publications such as Money Magazine, Forbes, Business Week, The Wall
Street Journal, Micropal, Inc., Morningstar, Stanger's, Barron's, etc. will
also be used.
Ibbotson Associates of Chicago, Illinois (Ibbotson) and others
provide historical returns of the capital markets in the United States. A Fund
may compare its performance to the long-term performance of the U.S. capital
markets in order to demonstrate general long-term risk versus reward
investment scenarios. Performance comparisons could also include the value of
a hypothetical investment in common stocks, long-term bonds or treasuries. A
Fund may discuss the performance of financial markets and indices over various
time periods.
The capital markets tracked by Ibbotson are common stocks, small
capitalization stocks, long-term corporate bonds, intermediate-term government
bonds, long-term government bonds, Treasury Bills, and the U.S. rate of
inflation. These capital markets are based on the returns of several different
indices. For COMMON STOCKS the S&P is used. For SMALL CAPITALIZATION STOCKS,
return is based on the return achieved by Dimensional Fund Advisors (DFA)
Small Company Fund. This fund is a market-value-weighted index of the ninth
and tenth decimals
<PAGE>
of the New York Stock Exchange (NYSE), plus stocks listed on the American
Stock Exchange (AMEX) and over-the-counter (OTC) with the same or less
capitalization as the upper bound of the NYSE ninth decile.
LONG-TERM CORPORATE BOND returns are based on the performance of the
Salomon Brothers Long-Term-High-Grade Corporate Bond Index which includes
nearly all Aaa- and Aa-rated bonds. Returns on INTERMEDIATE-TERM GOVERNMENT
BONDS are based on a one-bond portfolio constructed each year, containing a
bond which is the shortest noncallable bond available with a maturity not less
than 5 years. This bond is held for the calendar year and returns are
recorded. Returns on LONG-TERM GOVERNMENT BONDS are based on a one-bond
portfolio constructed each year, containing a bond that meets several
criteria, including having a term of approximately 20 years. The bond is held
for the calendar year and returns are recorded. Returns on U.S. TREASURY BILLS
are based on a one-bill portfolio constructed each month, containing the
shortest-term bill having not less than one month to maturity. The total
return on the bill is the month-end price divided by the previous month-end
price, minus one. Data up to 1976 is from the U.S. Government Bond file at the
University of Chicago's Center for Research in Security Prices; the Wall
Street Journal is the source thereafter. INFLATION rates are based on the CPI.
Ibbotson calculates total returns in the same method as the Fund.
Other widely used indices that the Funds may use for comparison
purposes include the Lehman Bond Index, the Lehman Aggregate Bond Index, The
Lehman GNMA Single Family Index, the Lehman Government/Corporate Bond Index,
the Salomon Brothers Long-Term High Yield Index, the Salomon Brothers
Non-Government Bond Index, the Salomon Brothers Non-U.S. Government Bond
Index, the Salomon Brothers World Government Bond Index and the J.P. Morgan
Government Bond Index. The Salomon Brothers World Government Bond Index
generally represents the performance of government debt securities of various
markets throughout the world, including the United States. Lehman
Government/Corporate Bond Index generally represents the performance of
intermediate and long-term government and investment grade corporate debt
securities. The Lehman Aggregate Bond Index measures the performance of U.S.
corporate bond issues, U.S. government securities and mortgage-backed
securities. The J.P. Morgan Government Bond Index generally represents the
performance of government bonds issued by various countries including the
United States. The foregoing bond indices are unmanaged indices of securities
that do not reflect reinvestment of capital gains or take investment costs
into consideration, as these items are not applicable to indices.
The Fund may also discuss in advertising the relative performance of
various types of investment instruments, such as stocks, treasury securities
and bonds, over various time periods and covering various holding periods.
Such comparisons may compare these investment categories to each other or to
changes in the CPI.
<PAGE>
A Fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a program,
the investor invests a fixed dollar amount in a fund at periodic intervals,
thereby purchasing fewer shares when prices are high and more shares when
prices are low. While such a strategy does not assure a profit or guard
against loss in a declining market, the investor's average cost per share can
be lower than if fixed numbers of shares had been purchased at those
intervals. In evaluating such a plan, investors should consider their ability
to continue purchasing shares through periods of low price levels.
The Funds may be available for purchase through retirement plans or
other programs offering deferral of or exemption from income taxes, which may
produce superior after-tax returns over time. For example, a $1,000 investment
earning a taxable return of 10% annually, compounded monthly, would have an
after-tax value of $2,009 after ten years, assuming tax was deducted from the
return each year at a 31% rate. An equivalent tax-deferred investment would
have an after-tax value of $2,178 after ten years, assuming tax was deducted
at a 31% rate from the deferred earnings at the end of the ten year period.
Evaluations of Fund performance made by independent sources may also
be used in advertisements concerning the Funds, including reprints of, or
selections from, editorials or articles about the Fund. These editorials or
articles may include quotations of performance from other sources such as
Lipper or Morningstar. Sources for Fund performance information and articles
about the Funds may include the following:
BANXQUOTE, an on-line source of national averages for leading
money market and bank CD interest rates, published on a weekly basis
by Masterfund, Inc. of Wilmington, Delaware.
BARRON'S, a Dow Jones and Company, Inc. business and financial
weekly that periodically reviews mutual fund performance data.
BUSINESS WEEK, a national business weekly that periodically reports
the performance rankings and ratings of a variety of mutual funds investing
abroad.
CDA INVESTMENT TECHNOLOGIES, INC., an organization which provides
performance and ranking information through examining the dollar results of
hypothetical mutual fund investments and comparing these results against
appropriate market indices.
CHANGING TIMES. THE KIPLINGER MAGAZINE, a monthly investment
advisory publication that periodically features the performance of a
variety of securities.
CONSUMER DIGEST, a monthly business/financial magazine that includes
a "Money Watch" section featuring financial news.
<PAGE>
FINANCIAL WORLD, a general business/financial magazine that includes
a "Market Watch" department reporting on activities in the mutual fund
industry.
FORBES, a national business publication that from time to time
reports the performance of specific investment companies in the mutual fund
industry.
FORTUNE, a national business publication that periodically rates the
performance of a variety of mutual funds.
IBC/DONOGHUES' MONEY FUND REPORT, a weekly publication of the
Donoghue Organization, Inc. of Holliston, Massachusetts, reporting on the
performance of the nation's money market funds, summarizing money market fund
activity, and including certain averages as performance benchmarks,
specifically "Donoghue's Money Fund Average," and
"Donoghue's Government Money Fund Average."
IBBOTSON ASSOCIATES, INC., a company specializing in investment
research and data.
INVESTMENT COMPANY DATA, INC., an independent organization which
provides performance ranking information for broad classes of mutual funds.
INVESTOR'S DAILY, a daily newspaper that features financial,
economic, and business news.
LIPPER ANALYTICAL SERVICES, INC.'S MUTUAL FUND PERFORMANCE ANALYSIS,
a weekly publication of industry-wide mutual fund averages by type of fund.
MONEY, a monthly magazine that from time to time features both
specific funds and the mutual fund industry as a whole.
MUTUAL FUND VALUES, a bi-weekly Morningstar, Inc. publication
that provides ratings of mutual funds based on fund performance, risk
and portfolio characteristics.
THE NEW YORK TIMES, a nationally distributed newspaper which
regularly covers financial news.
PERSONAL INVESTING NEWS, a monthly news publication that often
reports on investment opportunities and market conditions.
PERSONAL INVESTOR, a monthly investment advisory publication that
includes a "Mutual Funds Outlook" section reporting on mutual fund performance
measures, yields, indices and portfolio holdings.
SUCCESS, a monthly magazine targeted to the world of entrepreneurs
and growing business, often featuring mutual fund performance data.
<PAGE>
USA TODAY, a nationally distributed newspaper.
U.S. NEWS AND WORLD REPORT, a national business weekly that
periodically reports mutual fund performance data.
WALL STREET JOURNAL, a Dow Jones and Company, Inc. newspaper
which regularly covers financial news.
WIESENBERGER INVESTMENT COMPANIES SERVICES, an annual compendium of
information about mutual funds and other investment companies, including
comparative data on funds' background, management policies, salient features,
management results, income and dividend records, and price ranges.
WORKING WOMAN, a monthly publication that features a "Financial
Workshop" section reporting on the mutual fund/financial industry.
When comparing yield, total return and investment risk of shares of a
Fund with other investments, investors should understand that certain other
investments have different risk characteristics than an investment in shares
of the Funds. For example, certificates of deposit may have fixed rates of
return and may be insured as to principal and interest by the FDIC, while a
Fund's returns will fluctuate and its share values and returns are not
guaranteed. Money market accounts offered by banks also may be insured by the
FDIC and may offer stability of principal. U.S. Treasury securities are
guaranteed as to principal and interest by the full faith and credit of the
U.S. government. Money market mutual funds may seek to offer a fixed price per
share.
The performance of the Funds is not fixed or guaranteed. Performance
quotations should not be considered to be representative of performance of a
Fund for any period in the future. The performance of a Fund is a function of
many factors including its earnings, expenses and number of outstanding
shares. Fluctuating market conditions, purchases and sales of underlying
funds, sales and redemptions of shares of beneficial interest, and changes in
operating expenses are all examples of items that can increase or decrease a
Fund's performance.
XIII. DESCRIPTION OF THE TRUST
The Trust is an open-end non-diversified series management investment
company established as an unincorporated business trust under the laws of The
Commonwealth of Massachusetts pursuant to a Declaration of Trust dated
September 7, 1994.
The Trustees of the Trust have authority to issue an unlimited number
of shares of beneficial interest in an unlimited number of series (each, a
"Series"), each share without par value. Currently, the Trust consists of
three Series. Each share in a particular Series represents an equal
proportionate interest in that Series with each
<PAGE>
other share of that Series and is entitled to such dividends and distributions
as are declared by the Trustees of the Trust. Upon any liquidation of a
Series, shareholders of that Series are entitled to share pro rata in the net
assets of that Series available for distribution. Shareholders in one of the
Series have no interest in, or rights upon liquidation of, any of the other
Series.
The Trust will normally not hold annual meetings of shareholders to
elect Trustees. If less than a majority of the Trustees of the Trust holding
office have been elected by shareholders, a meeting of shareholders of the
Trust will be called to elect Trustees. Under the Declaration of Trust of the
Trust and the Investment Company Act of 1940, the record holders of not less
than two-thirds of the outstanding shares of the Trust may remove a Trustee by
votes cast in person or by proxy at a meeting called for the purpose or by a
written declaration filed with the Trust's custodian bank. Except as described
above, the Trustees will continue to hold office and may appoint successor
Trustees.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Declaration of Trust of the Trust disclaims shareholder liability
for acts or obligations of the Trust and requires that notice of this
disclaimer be given in each agreement, obligation or instrument entered into
or executed by the Funds or the Trustees. The Declaration of Trust of the
Trust provides for indemnification out of the Trust's property for all loss
and expense of any shareholder held personally liable for obligations of the
Trust and its Funds. Accordingly, the risk of a shareholder of the Trust
incurring a financial loss on account of shareholder liability is limited to
circumstances in which the Trust itself would be unable to meet its
obligations. The likelihood of such circumstances is remote.
XIV. ADDITIONAL INFORMATION
The Prospectus and this Statement of Additional Information
do not contain all of the information included in the Trust's Registration
Statement filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, with respect to the securities offered
hereby. Certain portions of the Registration Statement have been omitted
pursuant to the rules and regulations of the Securities and Exchange
Commission. Such Registration Statement, including the exhibits filed
therewith, may be examined at the offices of the Securities and Exchange
Commission in Washington, D.C.
Statements contained in the Prospectus and this Statement of
Additional Information as to the contents of any agreement or other documents
referred to are not necessarily complete, and, in each instance, reference is
made to the copy of such agreement or other documents filed as an exhibit to
the Registration Statement, each such statement being qualified in all
respects by such reference.
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS:
INCLUDED IN PART A:
Financial Highlights for the Periods Ended December 31, 1996 and 1995*
INCLUDED IN PART B:
Portfolio of Investments, December 31, 1996*
Statement of Assets and Liabilities as of December 31, 1996*
Statement of Operations for the Period Ended December 31, 1996*
Statement of Changes in Net Assets for the Periods Ended December 31, 1996
and 1995*
Financial Highlights for the Periods Ended December 31, 1996 and 1995*
Notes to Financial Statements, December 31, 1996*
- -------------------------------------------
* To be supplied by amendment.
INCLUDED IN PART C:
The required Schedules are omitted because the required information is
included in the financial statements included in Part A or Part B, or because
the conditions requiring their filing do not exist.
(B)EXHIBITS
Exhibit
NUMBER DESCRIPTION OF EXHIBIT
*(1) Declaration of Trust of the Registrant
*(2) Bylaws of the Registrant
(3) Inapplicable
*(4) Form of Share Certificate of Registrant
<PAGE>
*(5) Investment Advisory Agreement
between Registrant and Markman Capital
Management, Inc. ("Markman Capital")
(6) Form of Underwriting Agreement between Registrant
and Markman Securities, Inc.
(7) Inapplicable
*(8)(a) Custodian Agreement among Registrant,
Markman Capital and The Fifth Third Bank
*(9)(a) Administration, Accounting and Transfer Agency
Agreement among Registrant, Markman Capital and MGF
Service Corp.
*(9)(b) Consent to Use of Name
*(10) Opinion and Consent of Counsel
(11) Consent of Independent Public Accountants
(12) Inapplicable
*(13) Subscription Agreement between Registrant
and Markman Capital
*(14) Individual Retirement Account Plan
(15) Inapplicable
(16) Inapplicable
**(17)(a) Financial Data Schedule - Markman Conservative
Growth Fund
**(17)(b) Financial Data Schedule - Markman Moderate
Growth Fund
**(17)(c) Financial Data Schedule - Markman Aggressive
Growth Fund
(18) Inapplicable
- --------------------
* Incorporated herein by reference to this Registration Statement as
originally filed with the Securities and Exchange Commission or as
subsequently amended.
** To be supplied by amendment.
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
The Registrant is not directly or indirectly controlled by or under common
control with any person other than the Trustees. The Registrant does not have
any subsidiaries.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
Set forth below are the number of record holders, as of December 1, 1996, of
the shares of beneficial interest of the Registrant:
Number of Record
TITLE OF CLASS HOLDERS
Shares of Beneficial Interest 454
no par value, Conservative Growth Fund
Shares of Beneficial Interest 874
no par value, Moderate Growth Fund
Shares of Beneficial Interest 1,060
no par value, Aggressive Growth Fund
ITEM 27. INDEMNIFICATION
Under the Registrant's Declaration of Trust and Bylaws, any past or present
Trustee or Officer of the Registrant is indemnified to the fullest extent
permitted by law against liability and all expenses reasonably incurred by him
or her in connection with any action, suit or proceeding to which he or she
may be a party or is otherwise involved by reason of his or her being or
having been a Trustee or Officer of the Registrant. The Declaration of Trust
and Bylaws of the Registrant do not authorize indemnification where it is
determined, in the manner specified in the Declaration of Trust and the Bylaws
of the Registrant, that such Trustee or Officer has not acted in good faith in
the reasonable belief that his or her actions were in the best interest of the
Registrant. Moreover, the Declaration of Trust and Bylaws of the Registrant do
not authorize indemnification where such Trustee or Officer is liable to the
Registrant or its shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of his duties.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to Trustees, Officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Trustee, Officer or
<PAGE>
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such Trustee, Officer or controlling person
in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
questions whether such indemnification is against public policy as expressed
in the Act and will be governed by the final adjudication of such issue.
The Advisory Agreement with Markman Capital Management, Inc. (the "Adviser")
provides that the Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Registrant in connection with
the matters to which the Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence of the Adviser in the
performance of its duties or from the reckless disregard by the Adviser of its
obligations under the Agreement.
The Underwriting Agreement with Markman Securities, Inc. (the "Underwriter")
provides that the Underwriter, its directors, officers, employees,
shareholders and control persons shall not be liable for any error of judgment
or mistake of law or for any loss suffered by Registrant in connection with
the matters to which the Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of any of such
persons in the performance of the Underwriter's duties or from the reckless
disregard by any of such persons of Underwriter's obligations and duties under
the Agreement. Registrant will advance attorneys' fees or other expenses
incurred by any such person in defending a proceeding, upon the undertaking by
or on behalf of such person to repay the advance if it is ultimately
determined that such person is not entitled to indemnification.
The Registrant, its Trustees and Officers, its investment adviser, and persons
affiliated with them are insured under a policy of insurance maintained by the
Registrant and its investment adviser, within the limits and subject to the
limitations of the policy, against certain expenses in connection with the
defense of actions, suits or proceedings, and certain liabilities that might
be imposed as a result of such actions, suits or proceedings, to which they
are parties by reason of being or having been such Trustees or officers. The
policy expressly excludes coverage for any Trustee or officer whose personal
dishonesty, fraudulent breach of trust, lack of good faith, or intention to
deceive or defraud has been adjudicated or may be established or who willfully
fails to act prudently.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Markman Capital Management, Inc. (the "Adviser"), is a registered
investment adviser providing investment advice to individuals, employee
benefit plans, charitable and other nonprofit organizations, and
corporations.
<PAGE>
Set forth below is a list of the Officers and Directors of the Adviser
together with information as to any other business, profession, vocation or
employment of a substantial nature engaged in by such officers and directors
during the past two years.
POSITION WITH
NAME THE ADVISER OTHER BUSINESSES, ETC.
Robert J. Markman Chairman of the None
Board, President,
Treasurer and
Secretary
Judith E. Fansler Chief Operations None
Officer
Jeffrey Caulfield Chief Compliance None
Officer
Richard W. London Chief Financial None
Officer
ITEM 29. PRINCIPAL UNDERWRITERS
(a) None
(b) POSITION WITH POSITION WITH
NAME UNDERWRITER REGISTRANT
Jeffrey W. Caulfield President, Secretary Assistant Secretary
and Director
Richard W. London Vice President, Trustee
Treasurer and Director
(c) None
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The Registrant maintains the records required by Section 31(a) of
the Investment Company Act of 1940, as amended and Rules 31a-1 to 31a-3
inclusive thereunder at its Cincinnati office located at 312 Walnut Street,
21st Floor, Cincinnati, Ohio 45202. Certain records, including records
relating to the Registrant's shareholders and the physical possession of its
securities, may be maintained pursuant to Rule 31a-3 at the main offices of
the Registrant's transfer agent, dividend disbursing agent and custodian
located, as to the custodian, at 38 Fountain Square Plaza, Cincinnati, Ohio
45202, and, as to the transfer and dividend disbursing agent functions, at 312
Walnut Street, Cincinnati, Ohio 45202.
<PAGE>
ITEM 31. MANAGEMENT SERVICES
Inapplicable.
ITEM 32. UNDERTAKINGS
(a) Inapplicable
(b) Inapplicable
(c) The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered a copy of the Registrant's
annual report (when available) to shareholders upon
request and without charge.
(d) The Registrant hereby undertakes that, if requested to do
so by holders of at least 10% of the Trust's outstanding
shares, it will call a meeting of shareholders for the
purpose of voting upon the question of removal of a
trustee or trustees and will assist in communications
between shareholders for such purpose as provided in
Section 16(c) of the Investment Company Act of 1940, as
amended.
<PAGE>
NOTICE
The names "Markman MultiFund Trust," "Markman Aggressive Growth Fund,"
"Markman Moderate Growth Fund" and "Markman Conservative Growth Fund" are the
designations of the Trustees under the Declaration of Trust of the Trust dated
September 7, 1994, as amended from time to time. The Declaration of Trust has
been filed with the Secretary of State of The Commonwealth of Massachusetts
and the Clerk of the City of Boston, Massachusetts. The obligations of the
Registrant are not personally binding upon, nor shall resort be had to the
private property of, any of the Trustees, shareholders, officers, employees or
agents of the Registrant, but only the Registrant's property shall be bound.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the Registrant,
Markman MultiFund Trust, has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in The
City of Edina and the State of Minnesota on this 12th of December, 1996.
MARKMAN MULTIFUND TRUST
/s/ Robert J. Markman
By:
--------------------------
Robert J. Markman,
Chairman of the Board and
President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/S/ ROBERT J. MARKMAN Chairman of the December 12, 1996
Robert J. Markman Board of Trustees
and President
(Principal execu-
tive officer)
/S/ MARK J. SEGER Treasurer (Principal December 12, 1996
Mark J. Seger financial and
accounting officer)
* Trustee
Richard Edwin Dana
* Trustee
Peter Dross
* Trustee
Judith E. Fansler
* Trustee
Susan Gale
* Trustee
Susan M. Hawkes
* Trustee
Richard W. London
<PAGE>
* Trustee
Melinda S. Machones
* Trustee
Emilee Markman
* Trustee
Michael J. Monahan
/S/ DAVID M. LEAHY December 12, 1996
- -------------------------
David M. Leahy
Attorney-in-Fact*
EXHIBIT INDEX
1. Form of Underwriting Agreement between Registrant and Markman
Securities, Inc.
2. Administration, Accounting and Transfer Agency Agreement among
Registrant, Markman Capital Management, Inc. and MGF Service Corp.
3. Consent of Independent Public Accountants
UNDERWRITING AGREEMENT
This Agreement made as of ____________ by and between Markman MultiFund
Trust, a Massachusetts business trust (the "Trust"), and Markman Securities,
Inc., a wholly-owned subsidiary of Markman Capital Management, Inc., both
Minnesota corporations, ("Underwriter").
WHEREAS, the Trust is an investment company registered under the Investment
Company Act of 1940, as amended (the "Act"); and
WHEREAS, Underwriter is a broker-dealer registered with the
Securities and Exchange Commission and a member of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, Underwriter wishes to serve as the principal underwriter of shares
of beneficial interest (the "Shares") of each series of shares of the Trust
(the "Series") and the Trust wants such an arrangement;
NOW, THEREFORE, in consideration of the promises and agreements of the
parties herein, the parties agree as follows:
1. APPOINTMENT.
The Trust appoints Underwriter as its exclusive agent for the
distribution of the Shares, and Underwriter accepts such appointment under the
terms of this Agreement. While this Agreement is in force, the Trust will not
sell any Shares except on the terms set forth in this Agreement. Despite any
other provision hereof, the Trust may end, suspend, or withdraw the offering
of Shares whenever, in its sole discretion, it deems such action to be
desirable.
<PAGE>
2. SALES AND REPURCHASE OF SHARES.
(a) Underwriter will have the right, as agent for the Trust, to sell
Shares to the public against orders therefor at their net asset value.
(b) Underwriter will also have the right to take, as agent for the
Trust, all actions which, in Underwriter's judgment, are necessary to carry
into effect the distribution of the Shares.
(c) The net asset value of the Shares of each Series will be
determined in the manner provided in the Trust's Registration Statement, and
when determined will be applicable to transactions as provided for in the
Registration Statement. The net asset value of the Shares of each Series will
be calculated by the Trust or by another entity for the Trust. Underwriter
will have no duty to inquire into or liability for the accuracy of the net
asset value per Share as calculated.
(d) Underwriter will have the right, as agent for the Trust, to enter
into dealer agreements with underlying funds that sell shares to the Funds
with a Rule 12b-1 distribution plan fee or a service fee and to collect Rule
12b-1 and service fees from such mutual funds. Such fees will be shared
between Underwriter and the Trust according to Schedule A attached and
incorporated herein.
(e) When it receives purchase instructions, Underwriter will forward
such instructions to the Trust or its transfer agent for registration of the
account applications and payments to the Trust or its transfer agent for
further processing.
<PAGE>
(f) On every sale, the Trust shall receive the applicable net asset
value of the Shares promptly, but in no event later than the tenth business
day following the date on which Underwriter shall have received an order for
the purchase of the Shares.
(g) Underwriter, as agent of and for the account of the Trust may
repurchase the Shares at such prices and upon such terms and conditions as
shall be specified in the Registration Statement.
3. SALE OF SHARES OF THE TRUST.
The Trust reserves the right to issue any Shares at any time directly
to the holders of Shares ("Shareholders"), to sell Shares to its Shareholders
or to other persons approved by Underwriter at not less than net asset value
and to issue Shares in exchange for substantially all the assets of any
corporation or trust or for the shares of any corporation or trust.
4. BASIS OF SALE OF SHARES.
(a) Underwriter does not agree to sell any specific number of Shares.
Underwriter, as agent for the Trust, undertakes to sell Shares on a best
efforts basis only against orders therefor.
5. RULES OF NASD, ETC.
(a) Underwriter will conform to the Rules of Fair
Practice of the NASD and the securities laws of any jurisdiction
in which it sells any Shares.
(b) Underwriter, at its own expense, will qualify as
a dealer or broker, or otherwise, under all applicable State or
<PAGE>
federal laws required in order that Shares may be sold in such States as may
be mutually agreed upon by the parties.
(c) Underwriter shall not make, or permit any representative to make,
in connection with any sale of Shares, any representations concerning the
Shares except those contained in the then current prospectus and statement of
additional information covering the Shares and in printed information approved
by the Trust as information supplemental to such prospectus and statement of
additional information.
6. EXPENSES.
In the performance of its obligations under this Agreement,
Underwriter will pay the costs incurred in qualifying as a broker or dealer
under state and federal laws. Underwriter may be reimbursed for certain such
costs by the Funds, as described in the Registration Statement. All other
costs in connection with the offering of the Shares will be paid by the Trust
or Underwriter in accordance with agreements between them as permitted by
applicable law, including the Act and rules and regulations promulgated
thereunder.
7. INDEMNIFICATION OF TRUST.
Underwriter, to the extent of the net fees received by it from
underlying funds as described elsewhere herein but to no greater amount,
agrees to indemnify and hold harmless the Trust, and each person who has been,
is, or may hereafter be a trustee, officer, employee, shareholder or control
person of the Trust, against any loss, damage or expense (including the
reasonable costs of investigation) reasonably incurred by any of them in
<PAGE>
connection with any claim or in connection with any action, suit or proceeding
to which any of them may be a party, which arises out of or is alleged to
arise out of or is based upon any untrue statement or alleged untrue statement
of a material fact, or the omission or alleged omission to state a material
fact necessary to make the statements not misleading, on the part of
Underwriter or any agent or employee of Underwriter or any other person for
whose acts Underwriter is responsible, unless such statement or omission was
made in reliance upon written information furnished by the Trust. Underwriter
likewise, to the extent of the net fees received by it from underlying funds
as described elsewhere herein but to no greater amount, agrees to indemnify
and hold harmless the Trust and each such person in connection with any claim
or in connection with any action, suit or proceeding which arises out of or is
alleged to arise out of Underwriter's failure to exercise reasonable care and
diligence with respect to its services, if any, rendered in connection with
investment, reinvestment, automatic withdrawal and other plans for Shares. The
term "expenses" for purposes of this and the next paragraph includes amounts
paid in satisfaction of judgments or in settlements which are made with
Underwriter's consent. The foregoing rights of indemnification shall be in
addition to any other rights to which the Trust or each such person may be
entitled as a matter of law.
8. INDEMNIFICATION OF UNDERWRITER.
Underwriter, its directors, officers, employees, shareholders and
control persons shall not be liable for any
<PAGE>
error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith, or gross negligence on the part
of any such persons in the performance of Underwriter's duties or from the
reckless disregard by any of such persons of Underwriter's obligations and
duties under this Agreement. The Trust will advance attorneys' fees and other
expenses incurred by any such person in defending a proceeding, upon the
undertaking by or on behalf of such person to repay the advance if it is
ultimately determined that such person is not entitled to indemnification. Any
person employed by Underwriter who may also be or become an officer or
employee of the Trust shall be deemed, when acting within the scope of his
employment by the Trust, to be acting in such employment solely for the Trust
and not as an employee or agent of Underwriter.
9. TERMINATION AND AMENDMENT OF THIS AGREEMENT.
This Agreement shall automatically terminate, without
the payment of any penalty, in the event of its assignment. This Agreement may
be amended only if such amendment is approved (i) by Underwriter, (ii) either
by action of the Board of Trustees of the Trust or by the affirmative vote of
a majority of the outstanding Shares, and (iii) by a majority of the Trustees
of the Trust who are not interested persons of the Trust or of Underwriter by
vote cast in person at a meeting called for the purpose of voting on such
approval.
<PAGE>
Either the Trust or Underwriter may at any time terminate this
Agreement on sixty (60) days' written notice delivered or mailed by registered
mail, postage prepaid, to the other party.
10. EFFECTIVE PERIOD OF THE AGREEMENT.
This Agreement shall take effect upon its execution
and shall remain in full force and effect for a period of two (2) years from
the date of its execution (unless terminated automatically as set forth in
Section 9), and from year to year thereafter, subject to annual approval (i)
by Underwriter, (ii) either by action of the Board of Trustees of the Trust or
by the affirmative vote of a majority of the outstanding Shares, and (iii) by
a majority of the Trustees of the Trust who are not interested persons of the
Trust or of Underwriter by vote cast in person at a meeting called for the
purpose of voting on such approval.
11. LIMITATION ON LIABILITY.
The term "Markman MultiFund Trust" means and refers to the Trustees
from time to time serving under the Trust's Declaration of Trust as the same
may subsequently thereto have been, or subsequently hereto be, amended. It is
expressly agreed that the obligations of the Trust hereunder shall not be
binding upon any of the Trustees, Shareholders, nominees, officers, agents or
employees of the Trust, personally, but bind only the trust property of the
Trust, as provided in the Declaration of Trust of the Trust. The execution and
delivery of this Agreement have been authorized by the Trustees of the Trust
and signed by
<PAGE>
the officers of the Trust, acting as such, and neither such authorization by
such Trustees nor such execution and delivery by such officers shall be deemed
to have been made by any of them individually or to impose any liability on
any of them personally, but shall bind only the trust property of the Trust as
provided in its Declaration of Trust.
12, NEW SERIES.
The terms and provisions of this Agreement shall become automatically
applicable to any additional series of the Trust established during the
initial or renewal term of this Agreement.
13. SUCCESSOR INVESTMENT COMPANY.
Unless this Agreement has been terminated in
accordance with Paragraph 9, the terms and provisions of this Agreement shall
become automatically applicable to any investment company which is a successor
to the Trust as a result of a reorganization, recapitalization or change of
domicile.
14. SEVERABILITY.
In the event any provision of this Agreement is determined to be void
or unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
15. QUESTIONS OF INTERPRETATION.
(a) This Agreement shall be governed by the laws of
the State of Minnesota.
(b) Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or
provision of the Act shall be resolved by
<PAGE>
reference to such term or provision of the Act and to interpretation thereof,
if any, by the United States courts or in the absence of any controlling
decision of any such court, by rules, regulations or orders of the Securities
and Exchange Commission issued pursuant to said Act. In addition, where the
effect of a requirement of the Act, reflected in any provision of this
Agreement is revised by rule, regulation or order of the Securities and
Exchange Commission, such provision shall be deemed to incorporate the effect
of such rule, regulation or order.
17. NOTICES.
Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Trust and of
Underwriter for this purpose shall be 6600 France Avenue South, Suite 565,
Minneapolis, MN 55435.
IN WITNESS WHEREOF, the Trust and Underwriter have each caused this
Agreement to be signed in duplicate on its behalf, all as of the day and year
first above written.
ATTEST: MARKMAN MULTIFUND TRUST
________________________________ By: __________________________
ATTEST: MARKMAN SECURITIES, INC.
________________________________ By: __________________________
ADMINISTRATION, ACCOUNTING AND TRANSFER AGENCY AGREEMENT
AGREEMENT dated as of April 1, 1996 by and between Markman MultiFund Trust
(the "Trust"), a Massachusetts business trust, Markman Capital Management,
Inc. ("Markman"), a Minnesota corporation, and MGF Service Corp. ("MGF"), an
Ohio corporation.
WHEREAS, the Trust has been organized to operate as an open-end investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, Markman is registered as an investment adviser under the Investment
Advisers Act of 1940 and provides advisory services to the Trust pursuant to
an Investment Advisory Agreement; and
WHEREAS, under the Investment Advisory Agreement Markman is responsible for
retaining and compensating agents to provide non- advisory services to the
Trust; and
WHEREAS, Markman desires to appoint MGF to serve as its administrative
agent, accounting and pricing agent and transfer agent, dividend disbursing
agent, shareholder service agent, plan agent and shareholder purchase and
redemption agent, and MGF is willing to act in such capacities upon the terms
and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. APPOINTMENT.
MGF is hereby appointed to provide the Trust with those services
described in this Agreement, and MGF accepts such appointment and agrees to
provide such services under the terms and conditions set forth herein.
2. DOCUMENTATION.
The Trust will furnish from time to time the following documents:
A. Each resolution of the Board of Trustees of the Trust
authorizing the original issue of its shares;
B. Each Registration Statement filed with the Securities
and Exchange Commission (the "SEC") and amendments
thereof;
<PAGE>
C. A certified copy of each amendment to the Agreement
and Declaration of Trust and the Bylaws of the Trust;
D. Certified copies of each resolution of the Board of
Trustees authorizing officers to give instructions to MGF;
E. Specimens of all new forms of share certificates
accompanied by Board of Trustees' resolutions
approving such forms;
F. Such other certificates, documents or opinions which
MGF may, in its discretion, deem necessary or
appropriate in the proper performance of its duties;
G. Copies of all Underwriting and Dealer Agreements in
effect;
H. Copies of all Advisory Agreements in effect; and
I. Copies of all documents relating to special investment
or withdrawal plans which are offered or may be
offered in the future by the Trust and for which MGF
is to act as plan agent.
3. TRUST ADMINISTRATION.
Subject to the direction and control of Markman and the Trust, MGF
shall supervise the Trust's business affairs not otherwise supervised by other
agents of the Trust. To the extent not otherwise the primary responsibility
of, or provided by, other agents of Markman or the Trust, MGF shall supply (i)
non-investment related statistical and research data, (ii) internal regulatory
compliance services, and (iii) executive and administrative services. MGF
shall coordinate the preparation of (i) tax returns, (ii) reports to
shareholders of the Trust, (iii) reports to and filings with the SEC and state
securities authorities including preliminary and definitive proxy materials
and post-effective amendments to the Trust's registration statement, and (iv)
necessary materials for meetings of the Trust's Board of Trustees unless
prepared by other parties under agreement with Markman or the Trust. MGF shall
provide personnel to serve as officers of the Trust if so elected by the Board
of Trustees; provided, however, that Markman shall reimburse MGF for the
reasonable out-of-pocket expenses incurred by such personnel in attending
Board of Trustees' meetings and shareholders' meetings of the Trust.
<PAGE>
4. CALCULATION OF NET ASSET VALUE.
MGF will maintain and keep current the general ledger for each series
of the Trust, recording all income and expenses, capital share activity and
security transactions of the Trust. MGF will calculate the net asset value of
each series of the Trust and the per share net asset value of each series of
the Trust, in accordance with the Trust's current prospectus and statement of
additional information, once daily as of the time selected by the Trust's
Board of Trustees. MGF will prepare and maintain a daily valuation of all
securities and other assets of the Trust in accordance with instructions from
a designated officer of the Trust or Markman and in the manner set forth in
the current prospectus and statement of additional information. In valuing
securities of the Trust, MGF may contract with, and rely upon market
quotations provided by, outside services.
5. PAYMENT OF TRUST EXPENSES.
MGF shall process each request received from the Trust or its
authorized agents for payment of the Trust's expenses. Upon receipt of written
instructions signed by an officer or other authorized agent of the Trust, MGF
shall prepare checks in the appropriate amounts which shall be signed by an
authorized officer of MGF and mailed to the appropriate party.
6. MGF TO RECORD SHARES.
MGF shall record the issuance of shares of the Trust and maintain
pursuant to applicable rules of the SEC a record of the total number of shares
of the Trust which are authorized, issued and outstanding, based upon data
provided to it by the Trust. MGF shall also provide the Trust on a regular
basis or upon reasonable request the total number of shares which are
authorized, issued and outstanding, but shall have no obligation when
recording the issuance of the Trust's shares, except as otherwise set forth
herein, to monitor the issuance of such shares or to take cognizance of any
laws relating to the issue or sale of such shares, which functions shall be
the sole responsibility of the Trust.
7. MGF TO VALIDATE TRANSFERS.
Upon receipt of a proper request for transfer and upon surrender to
MGF of certificates, if any, in proper form for transfer, MGF shall approve
such transfer and shall take all necessary steps to effectuate the transfer as
indicated in the transfer request. Upon approval of the transfer, MGF shall
notify the Trust in writing of each such transaction and shall make
appropriate entries on the shareholder records maintained by MGF.
<PAGE>
8. SHARE CERTIFICATES.
If the Trust authorizes the issuance of share certificates and an
investor requests a share certificate, MGF will countersign and mail, by
insured first class mail, a share certificate to the investor at his address
as set forth on the transfer books of the Trust, subject to any other
instructions for delivery of certificates representing newly purchased shares
and subject to the limitation that no certificates representing newly
purchased shares shall be mailed to the investor until the cash purchase price
of such shares has been collected and credited to the account of the Trust
maintained by the Custodian. The Trust shall supply MGF with a sufficient
supply of blank share certificates and from time to time shall renew such
supply upon request of MGF. Such blank share certificates shall be properly
signed, manually or, if authorized by the Trust, by facsimile; and
notwithstanding the death, resignation or removal of any officers of the Trust
authorized to sign share certificates, MGF may continue to countersign
certificates which bear the manual or facsimile signature of such officer
until otherwise directed by the Trust. In case of the alleged loss or
destruction of any share certificate, no new certificates shall be issued in
lieu thereof, unless there shall first be furnished an appropriate bond
satisfactory to MGF and the Trust, and issued by a surety company satisfactory
to MGF and the Trust.
9. RECEIPT OF FUNDS.
Upon receipt of any check or other instrument drawn or endorsed to it
as agent for, or identified as being for the account of, the Trust, MGF shall
stamp the check or instrument with the date of receipt and shall forthwith
process the same for collection. Upon receipt of notification of receipt of
funds eligible for share purchases in accordance with the Trust's then current
prospectus and statement of additional information, MGF shall notify the
Trust, at the close of each business day, in writing of the amount of said
funds credited to the Trust and deposited in its account with the Custodian.
10. PURCHASE ORDERS.
Upon receipt of a check or other order for the purchase of shares of
the Trust, accompanied by sufficient information to enable MGF to establish a
shareholder account, MGF shall, as of the next determination of net asset
value after receipt of such order in accordance with the Trust's then current
prospectus and statement of additional information, compute the number of
shares due to the shareholder, credit the share account of the shareholder,
subject to collection of the funds, with the number of shares so purchased,
shall notify the Trust in writing or by computer report at the close of each
business day of such
<PAGE>
transactions and shall mail to the shareholder and/or dealer of record a
notice of such credit when requested to do so by the Trust.
11. RETURNED CHECKS.
In the event that MGF is notified by the Trust's Custodian that any
check or other order for the payment of money is returned unpaid for any
reason, MGF will:
A. Give prompt notification to the Trust of the non-
payment of said check;
B. In the absence of other instructions from the Trust, take such
steps as may be necessary to redeem any shares purchased on the basis of such
returned check and cause the proceeds of such redemption plus any dividends
declared with respect to such shares to be credited to the account of the
Trust and to request the Trust's Custodian to forward such returned check to
the person who originally submitted the check; and
C. Notify the Trust of such actions and correct the
Trust's records maintained by MGF pursuant to this Agreement.
12. DIVIDENDS AND DISTRIBUTIONS.
The Trust shall furnish MGF with appropriate evidence of trustee
action authorizing the declaration of dividends and other distributions. MGF
shall establish procedures in accordance with the Trust's then current
prospectus and statement of additional information and with other authorized
actions of the Trust's Board of Trustees under which it will have available
from the Custodian or the Trust any required information for each dividend and
other distribution. After deducting any amount required to be withheld by any
applicable laws, MGF shall, as agent for each shareholder who so requests,
invest the dividends and other distributions in full and fractional shares in
accordance with the Trust's then current prospectus and statement of
additional information. If a shareholder has elected to receive dividends or
other distributions in cash, then MGF shall disburse dividends to shareholders
of record in accordance with the Trust's then current prospectus and statement
of additional information. MGF shall, on or before the mailing date of such
checks, notify the Trust and the Custodian of the estimated amount of cash
required to pay such dividend or distribution, and the Trust shall instruct
the Custodian to make available sufficient funds therefor in the appropriate
account of the Trust. MGF shall mail to the shareholders periodic statements,
as requested by the Trust, showing the number of full and fractional shares
and the net asset value per share of shares so credited. When requested by the
Trust, MGF shall prepare and file with the Internal Revenue Service, and when
required, shall
<PAGE>
address and mail to shareholders, such returns and information relating to
dividends and distributions paid by the Trust as are required to be so
prepared, filed and mailed by applicable laws, rules and regulations.
13. UNCLAIMED DIVIDENDS AND UNCLAIMED REDEMPTION PROCEEDS.
MGF shall, at least annually, furnish in writing to the Trust the
names and addresses, as shown in the shareholder accounts maintained by MGF,
of all shareholders for which there are, as of the end of the calendar year,
dividends, distributions or redemption proceeds for which checks or share
certificates mailed in payment of distributions have been returned. MGF shall
use its best efforts to contact the shareholders affected and to follow any
other written instructions received from the Trust concerning the disposition
of any such unclaimed dividends, distributions or redemption proceeds.
14. REDEMPTIONS AND EXCHANGES.
A. MGF shall process, in accordance with the Trust's then current
prospectus and statement of additional information, each order for the
redemption of shares accepted by MGF. Upon its approval of such redemption
transactions, MGF, if requested by the Trust, shall mail to the shareholder
and/or dealer of record a confirmation showing trade date, number of full and
fractional shares redeemed, the price per share and the total redemption
proceeds. For each such redemption, MGF shall either: (a) prepare checks in
the appropriate amounts for approval and verification by the Trust and
signature by an authorized officer of MGF and mail the checks to the
appropriate person, or (b) in the event redemption proceeds are to be wired
through the Federal Reserve Wire System or by bank wire, cause such proceeds
to be wired in federal funds to the bank account designated by the
shareholder, or (c) effectuate such other redemption procedures which are
authorized by the Trust's Board of Trustees or its then current prospectus and
statement of additional information. The requirements as to instruments of
transfer and other documentation, the applicable redemption price and the time
of payment shall be as provided in the then current prospectus and statement
of additional information, subject to such supplemental instructions as may be
furnished by the Trust and accepted by MGF. If MGF or the Trust determines
that a request for redemption does not comply with the requirements for
redemptions, MGF shall promptly notify the shareholder indicating the reason
therefor.
B. If shares of the Trust are eligible for exchange with shares of
any other investment company, MGF, in accordance with the then current
prospectus and statement of additional information and exchange rules of the
Trust and such other investment company, or such other investment company's
transfer
<PAGE>
agent, shall review and approve all exchange requests and shall, on behalf of
the Trust's shareholders, process such approved exchange requests.
C. MGF shall notify the Trust and the Custodian on each business day
of the amount of cash required to meet payments made pursuant to the
provisions of this Paragraph, and, on the basis of such notice, the Trust
shall instruct the Custodian to make available from time to time sufficient
funds therefor in the appropriate account of the Trust. Procedures for
effecting redemption orders accepted from shareholders or dealers of record by
telephone or other methods shall be established by mutual agreement between
MGF and the Trust consistent with the then current prospectus and statement of
additional information.
D. The authority of MGF to perform its responsibilities under
Paragraph 10, Paragraph 12, and this Paragraph 14 shall be suspended with
respect to any series of the Trust upon receipt of notification by it of the
suspension of the determination of such series' net asset value.
15. AUTOMATIC WITHDRAWAL PLANS.
MGF will process automatic withdrawal orders pursuant to the
provisions of the withdrawal plans duly executed by shareholders and the
current prospectus and statement of additional information of the Trust.
Payments upon such withdrawal order shall be made by MGF from the appropriate
account maintained by the Trust with the Custodian on approximately the last
business day of each month in which a payment has been requested, and will
withdraw from a shareholder's account and present for repurchase or redemption
as many shares as shall be sufficient to make such withdrawal pursuant to the
provisions of the shareholder's withdrawal plan and the current prospectus and
statement of additional information of the Trust. From time to time on new
automatic withdrawal plans a check for payment date already past may be issued
upon request by the shareholder.
16. WIRE-ORDER PURCHASES.
MGF will send written confirmations to the dealers of record
containing all details of the wire-order purchases placed by each such dealer
by the close of business on the business day following receipt of such orders
by MGF. Upon receipt of any check drawn or endorsed to the Trust (or MGF, as
agent) or otherwise identified as being payment of an outstanding wire- order,
MGF will stamp said check with the date of its receipt and deposit the amount
represented by such check to MGF's deposit accounts maintained with the
Custodian. MGF will cause the Custodian to transfer federal funds in an amount
equal to the net asset value of the shares so purchased to the Trust's account
<PAGE>
with the Custodian, and will notify the Trust before noon of each business day
of the total amount deposited in the Trust's deposit accounts, and in the
event that payment for a purchase order is not received by MGF or the
Custodian on the tenth business day following receipt of the order, prepare an
NASD "notice of failure of dealer to make payment."
17. OTHER PLANS.
MGF will process such group programs and other plans or programs for
investing in shares of the Trust as are now provided for in the Trust's
current prospectus and statement of additional information and will act as
plan agent for shareholders pursuant to the terms of such plans and programs
duly executed by such shareholders.
18. RECORDKEEPING AND OTHER INFORMATION.
MGF shall create and maintain all records required by applicable
laws, rules and regulations, including but not limited to records required by
Section 31(a) of the 1940 Act and the rules thereunder, as the same may be
amended from time to time, pertaining to the various functions performed by it
and not otherwise created and maintained by another party pursuant to contract
with Markman or the Trust. All such records shall be the property of the Trust
at all times and shall be available for inspection and use by the Trust. Where
applicable, such records shall be maintained by MGF for the periods and in the
places required by Rule 31a-2 under the 1940 Act. The retention of such
records shall be at the expense of Markman. MGF shall make available during
regular business hours all records and other data created and maintained
pursuant to this Agreement for reasonable audit and inspection by the Trust,
Markman, or any regulatory agency having authority over the Trust.
19. SHAREHOLDER RECORDS.
MGF shall maintain records for each shareholder account showing the
following:
A. Names, addresses and tax identifying numbers;
B. Name of the dealer of record, if any;
C. Number of shares held of each series;
D. Historical information regarding the account of each
shareholder, including dividends and distributions in
cash or invested in shares;
E. Information with respect to the source of all dividends
and distributions allocated among income, realized
short-term gains and realized long-term gains;
<PAGE>
F. Any instructions from a shareholder including all forms
furnished by the Trust and executed by a shareholder
with respect to (i) dividend or distribution elections
and (ii) elections with respect to payment options in
connection with the redemption of shares;
G. Any correspondence relating to the current maintenance
of a shareholder's account;
H. Certificate numbers and denominations for any
shareholder holding certificates;
I. Any stop or restraining order placed against a
shareholder's account;
J. Information with respect to withholding in the case of a
foreign account or any other account for which
withholding is required by the Internal Revenue Code of
1986, as amended; and
K. Any information required in order for MGF to perform the
calculations contemplated under this Agreement.
20. TAX RETURNS AND REPORTS.
MGF will prepare in the appropriate form, file with the Internal
Revenue Service and appropriate state agencies and, if required, mail to
shareholders of the Trust such returns for reporting dividends and
distributions paid by the Trust as are required to be so prepared, filed and
mailed and shall withhold such sums as are required to be withheld under
applicable federal and state income tax laws, rules and regulations.
21. FORM N-SAR.
MGF shall maintain such records within its control and shall be
requested by the Trust to assist the Trust in fulfilling the requirements of
Form N-SAR.
22. OTHER INFORMATION TO THE TRUST.
Subject to such instructions, verification and approval of the
Custodian and the Trust as shall be required by any agreement or applicable
law, MGF will also maintain such records as shall be necessary to furnish to
the Trust the following: annual shareholder meeting lists, proxy lists and
mailing materials, shareholder reports and confirmations and checks for
disbursing redemption proceeds, dividends and other distributions or expense
disbursements.
<PAGE>
23. ACCESS TO SHAREHOLDER INFORMATION.
Upon request, MGF shall arrange for the Trust's investment adviser to
have direct access to shareholder information contained in MGF's computer
system, including account balances, performance information and such other
information which is available to MGF with respect to shareholder accounts.
24. COOPERATION WITH ACCOUNTANTS.
MGF shall cooperate with the Trust's independent public accountants
and shall take all reasonable action in the performance of its obligations
under this Agreement to assure that the necessary information is made
available to such accountants for the expression of their unqualified opinion
where required for any document for the Trust.
25. SHAREHOLDER SERVICE AND CORRESPONDENCE.
MGF will provide and maintain adequate personnel, records and
equipment to receive and answer all shareholder and dealer inquiries relating
to account status, share purchases, redemptions and exchanges and other
investment plans available to Trust shareholders. MGF will answer written
correspondence from shareholders relating to their share accounts and such
other written or oral inquiries as may from time to time be mutually agreed
upon, and MGF will notify the Trust of any correspondence or inquiries which
may require an answer from the Trust.
26. PROXIES.
MGF shall assist the Trust in the mailing of proxy cards and other
material in connection with shareholder meetings of the Trust, shall receive,
examine and tabulate returned proxies and shall, if requested by the Trust,
provide at least one inspector of election to attend and participate as
required by law in shareholder meetings of the Trust.
27. FURTHER ACTIONS.
Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
28. COMPENSATION.
For the performance of MGF's obligations under this Agreement,
Markman shall pay MGF, on the first business day following the end of each
month, a monthly fee in accordance with the schedule attached hereto as
Schedule A. MGF shall not be required to reimburse the Trust or Markman for
(or have deducted
<PAGE>
from its fees) any expenses in excess of expense limitations imposed by
certain state securities commissions having jurisdiction over the Trust. The
Trust shall promptly reimburse MGF for any out-of-pocket expenses and advances
which are to be paid by the Trust in accordance with Paragraph 29.
29. EXPENSES.
MGF shall furnish, at its expense and without cost to the Trust (i)
the services of its personnel to the extent that such services are required to
carry out its obligations under this Agreement and (ii) use of data processing
equipment. All costs and expenses not expressly assumed by MGF under this
Paragraph 29 shall be paid by Markman, including, but not limited to, costs
and expenses for postage, envelopes, checks, drafts, continuous forms,
reports, communications, statements and other materials, telephone, telegraph
and remote transmission lines, use of outside pricing services, use of outside
mailing firms, necessary outside record storage, media for storage of records
(e.g., microfilm, microfiche, computer tapes), printing, confirmations and any
other shareholder correspondence and any and all assessments, taxes or levies
assessed on MGF for services provided under this Agreement. Postage for
mailings of dividends, proxies, reports and other mailings to all shareholders
shall be advanced to MGF three business days prior to the mailing date of such
materials.
30. REFERENCES TO MGF.
The Trust or Markman shall not circulate any printed matter which
contains any reference to MGF without the prior written approval of MGF,
excepting solely such printed matter as merely identifies MGF as
Administrative Services Agent, Transfer, Shareholder Servicing and Dividend
Disbursing Agent and Accounting Services Agent. The Trust or Markman will
submit printed matter requiring approval to MGF in draft form, allowing
sufficient time for review by MGF and its counsel prior to any deadline for
printing.
31. EQUIPMENT FAILURES.
In the event of equipment failures beyond MGF's control, MGF shall
take all steps necessary to minimize service interruptions but shall have no
liability with respect thereto. MGF shall endeavor to enter into one or more
agreements making provision for emergency use of electronic data processing
equipment to the extent appropriate equipment is available.
<PAGE>
32. INDEMNIFICATION OF MGF.
A. MGF may rely on information reasonably believed by it to be accurate and
reliable. Except as may otherwise be required by the 1940 Act and the rules
thereunder, neither MGF nor its shareholders, officers, directors, employees,
agents, control persons or affiliates of any thereof shall be subject to any
liability for, or any damages, expenses or losses incurred by the Trust or
Markman in connection with, any error of judgment, mistake of law, any act or
omission connected with or arising out of any services rendered under or
payments made pursuant to this Agreement or any other matter to which this
Agreement relates, except by reason of willful misfeasance, bad faith or gross
negligence on the part of any such persons in the performance of the duties of
MGF under this Agreement or by reason of reckless disregard by any of such
persons of the obligations and duties of MGF under this Agreement.
B. Any person, even though also a director, officer, employee, shareholder
or agent of MGF, or any of its affiliates, who may be or become an officer,
trustee, employee or agent of the Trust, shall be deemed, when rendering
services to the Trust or acting on any business of the Trust, to be rendering
such services to or acting solely as an officer, trustee, employee or agent of
the Trust and not as a director, officer, employee, shareholder or agent of or
one under the control or direction of MGF or any of its affiliates, even
though paid by one of these entities.
C. Notwithstanding any other provision of this Agreement, the Trust and
Markman shall each indemnify and hold harmless MGF, its directors, officers,
employees, shareholders, agents, control persons and affiliates from and
against any and all claims, demands, expenses and liabilities (whether with or
without basis in fact or law) of any and every nature which MGF may sustain or
incur or which may be asserted against MGF by any person by reason of, or as a
result of: (i) any action taken or omitted to be taken by MGF in good faith in
reliance upon any certificate, instrument, order or share certificate believed
by it to be genuine and to be signed, countersigned or executed by any duly
authorized person, upon the oral instructions or written instructions of an
authorized person of the Trust or upon the opinion of legal counsel for the
Trust or its own counsel; or (ii) any action taken or omitted to be taken by
MGF in connection with its appointment in good faith in reliance upon any law,
act, regulation or interpretation of the same even though the same may
thereafter have been altered, changed, amended or repealed. However,
indemnification under this subparagraph shall not apply to actions or
omissions of MGF or its directors, officers, employees, shareholders or agents
in cases of its or their own gross negligence, willful misconduct, bad faith,
or reckless disregard of its or their own duties hereunder.
<PAGE>
33. TERMINATION
A. The provisions of this Agreement shall be effective on the date
first above written, shall continue in effect for two years from that date and
shall continue in force from year to year thereafter, but only so long as such
continuance is approved (1) by MGF, (2) by Markman, (3) by vote, cast in
person at a meeting called for the purpose, of a majority of the Trust's
trustees who are not parties to this Agreement or interested persons (as
defined in the 1940 Act) of any such party, and (4) by vote of a majority of
the Trust's Board of Trustees or a majority of the Trust's outstanding voting
securities.
B. Any party may terminate this Agreement on any date by giving the
other parties at least sixty (60) days' prior written notice of such
termination specifying the date fixed therefor. Upon termination of this
Agreement, Markman shall pay to MGF such compensation as may be due as of the
date of such termination, and shall likewise reimburse MGF for any
out-of-pocket expenses and disbursements reasonably incurred by MGF to such
date.
C. In the event that in connection with the termination of this
Agreement a successor to any of MGF's duties or responsibilities under this
Agreement is designated by the Trust or by Markman by written notice to MGF,
MGF shall, promptly upon such termination and at the expense of Markman,
transfer all records maintained by MGF under this Agreement and shall
cooperate in the transfer of such duties and responsibilities, including
provision for assistance from MGF's cognizant personnel in the establishment
of books, records and other data by such successor.
34. SERVICES FOR OTHERS.
Nothing in this Agreement shall prevent MGF or any affiliated person
(as defined in the 1940 Act) of MGF from providing services for any other
person, firm or corporation (including other investment companies); provided,
however, that MGF expressly represents that it will undertake no activities
which, in its judgment, will adversely affect the performance of its
obligations to the Trust under this Agreement.
35. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
The parties hereto acknowledge and agree that nothing contained
herein shall be construed to require MGF to perform any services for the Trust
or Markman which services could cause MGF to be deemed an "investment adviser"
of the Trust within the meaning of Section 2(a)(20) of the 1940 Act or to
supersede or
<PAGE>
contravene the prospectus or statement of additional information of the Trust
or any provisions of the 1940 Act and the rules thereunder. Except as
otherwise provided in this Agreement and except for the accuracy of
information furnished to it by MGF, the Trust assumes full responsibility for
complying with all applicable requirements of the 1940 Act, the Securities Act
of 1933, as amended, and any other laws, rules and regulations of governmental
authorities having jurisdiction.
36. LIMITATION OF LIABILITY.
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust, personally, but bind only the
trust property of the Trust. The execution and delivery of this Agreement have
been authorized by the Trustees of the Trust and signed by an officer of the
Trust, acting as such, and neither such authorization by such Trustees nor
such execution and delivery by such officer shall be deemed to have been made
by any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the Trust.
37. SEVERABILITY.
In the event any provision of this Agreement is determined to be void
or unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
38. QUESTIONS OF INTERPRETATION.
This Agreement shall be governed by the laws of the State of Ohio.
Any question of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of the
1940 Act shall be resolved by reference to such term or provision of the 1940
Act and to interpretations thereof, if any, by the United States Courts or in
the absence of any controlling decision of any such court, by rules,
regulations or orders of the SEC issued pursuant to said 1940 Act. In
addition, where the effect of a requirement of the 1940 Act, reflected in any
provision of this Agreement, is revised by rule, regulation or order of the
SEC, such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
39. NOTICES.
Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt
<PAGE>
of such notice. Until further notice to the other party, it is agreed that the
address of the Trust and of Markman for this purpose shall be 6600 France
Avenue South, Edina, Minnesota 55435 and that the address of MGF for this
purpose shall be 312 Walnut Street, Cincinnati, Ohio 45202.
40. BINDING EFFECT.
Each of the undersigned expressly warrants and represents that he has
the full power and authority to sign this Agreement on behalf of the party
indicated, and that his signature will operate to bind the party indicated to
the foregoing terms.
41. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
42. FORCE MAJEURE.
If MGF shall be delayed in its performance of services or prevented
entirely or in part from performing services due to causes or events beyond
its control, including and without limitation, acts of God, interruption of
power or other utility, transportation or communication services, acts of
civil or military authority, sabotages, national emergencies, explosion,
flood, accident, earthquake or other catastrophe, fire, strike or other labor
problems, legal action, present or future law, governmental order, rule or
regulation, or shortages of suitable parts, materials, labor or
transportation, such delay or non-performance shall be excused and a
reasonable time for performance in connection with this Agreement shall be
extended to include the period of such delay or non-performance.
43. MISCELLANEOUS.
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
MARKMAN MULTIFUND TRUST
By: /S/ ROBERT J. MARKMAN
Its: Chairman of the Board
MARKMAN CAPITAL MANAGEMENT, INC.
By: /S/ ROBERT J. MARKMAN
Its: President
MGF SERVICE CORP.
By: /S/ ROBERT G. DORSEY
Its: President
<PAGE>
SCHEDULE A
COMPENSATION
For the administrative, fund accounting, transfer agent and shareholder
services provided by MGF Service Corp. to the Markman MultiFund Trust, Markman
will pay to MGF Service Corp. a monthly fee calculated based upon the
following schedule:
BASE FEES MONTHLY FEE
3 Funds $15,000
6 Funds 24,000
ADDITIONAL FEES
A monthly fee calculated at an annual rate of the Trust's average
daily net assets according to the following schedule:
PERCENTAGE AVERAGE DAILY
RATE NET ASSETS
.04% First $200,000,000
.03% Next 300,000,000
.02% Over 500,000,000
PER ACCOUNT FEES
An annual per account fee of $8.00 for each shareholder account,
payable monthly.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our name
and to all references to our Firm included in or made a part of this
Post-Effective Amendment No.3.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Cincinnati, Ohio,
December 15, 1996
