Registration No. 33-85182
811-8820
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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. 5
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 7
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 LLP
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, 1996 was filed with the Commission on February 25, 1997.
<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;
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);
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>
MARKMAN MULTIFUND TRUST
PROSPECTUS
TABLE OF CONTENTS
Expense Information.......................................... 2
Financial Highlights......................................... 3
The Portfolios............................................... 4
Investment Objectives........................................ 4
Risks and Other Considerations............................... 5
How We Invest................................................ 14
Investment Policies and Restrictions......................... 19
Management of the Trust...................................... 19
Determination of Net Asset Value............................ 20
How to Purchase Shares....................................... 21
Shareholder Services......................................... 22
How to Redeem Shares......................................... 22
Dividends, Distributions and Taxes........................... 24
Other Information............................................ 25
Auditors..................................................... 26
Legal Counsel................................................ 26
Appendix: Ratings of Debt Instruments........................A-1
<PAGE>
PROSPECTUS, March 31, 1997
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
Shareholder Services
c/o Countrywide Fund Services, Inc.
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 diversified management
investment company. It consists of three separate series portfolios. We refer to
each portfolio in this prospectus as a "Portfolio" and the three together as the
"Portfolios." "We" are Markman Capital Management, Inc. We manage each Portfolio
separately. Each Portfolio has its own investment objectives and strategies
designed to meet different investment goals. The Portfolios seek to achieve
their investment objectives by investing in shares of other open-end investment
companies. The Portfolios, 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 Allocation Portfolio seeks capital appreciation without
regard to current income.
The Markman Moderate Allocation Portfolio seeks growth of capital and a
reasonable level of current income.
The Markman Conservative Allocation Portfolio seeks to provide current income
and low to moderate growth of capital.
Each Portfolio 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. See
"Investment Objectives" at page 4 and "High Yield Securities and Their Risks" at
page 12.
The Portfolios 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
Portfolio shares or any fees imposed upon redemption. The Portfolios do not
charge 12b-1 fees or deferred sales charges. The Portfolios may, however, invest
in shares of mutual funds that normally charge sales loads and/or pay their own
12b-1 distribution expenses. The Portfolios will not pay a sales load to buy
these underlying funds. Instead the
<PAGE>
Portfolios 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
Portfolios together reach $500 million. If you are a shareholder of the
Portfolios at the time the Portfolios close to new investors, you can continue
to make new investments in your previously established Portfolio 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.
This Prospectus contains information about the Portfolios that you should
consider before investing. Please read the Prospectus carefully and retain it
for future reference. A Statement of Additional Information dated March 31, 1997
has been filed with the Securities and Exchange Commission (the "SEC"). The
Statement of Additional Information contains additional information about the
Portfolios and is hereby incorporated by reference into this Prospectus. The
Statement of Additional Information is available without charge and can be
obtained by writing or telephoning the Portfolios at the address and telephone
number shown above.
SHARES OF THE PORTFOLIOS 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.
<PAGE>
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 Portfolios' 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.
Annual Portfolio Operating Expenses (as a percentage of average net assets)
<TABLE>
<CAPTION>
Conservative Moderate Aggressive
Allocation Allocation Allocation
Portfolio Portfoilio Portfolio
<S> <C> <C> <C>
Management Fees* 0.95% 0.95% 0.95%
12b-1 Fees** None None None
Other Expenses*** 0.00% 0.00% 0.00%
Total Portfolio
Operating Expenses 0.95% 0.95% 0.95%
Example - You would pay the following expenses on a $1,000 investment, 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
Allocation
Portfolio $10 $30 $53 $117
Moderate
Allocation
Portfolio $10 $30 $53 $117
Aggressive
Allocation
Portfolio $10 $30 $53 $117
<PAGE>
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 Portfolio's fees and expenses to the extent
necessary to keep total Portfolio operating expenses no greater than 0.95%.
Unlike most other mutual funds, the management fees paid by the Portfolios
include transfer agency, pricing, custodial, auditing, legal services, and
general administrative and other operating expenses. Management fees paid by the
Portfolios 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
Portfolio's total expenses to .95% per annum of its average daily net assets.
** Although the Portfolios do not directly impose 12b-1 fees, the underlying
funds in which the Portfolios invest may impose 12b-1 or service fees.
*** 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 Portfolio's allocable portion of such fees and
expenses which, during the fiscal year ended December 31, 1996, amounted to
.05%, .02%, and .02% of the average daily net assets of the Conservative
Allocation Portfolio, the Moderate Allocation Portfolio, and the Aggressive
Allocation Portfolio, respectively. See "Management of the Trust - the Adviser."
</FN>
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
The following information, which has been audited by Arthur Andersen LLP, is an
integral part of the audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of
December 31, 1996 and related auditors' report appear in the Statement of
Additional Information of the Funds, which can be obtained by shareholders at no
charge by calling Countrywide Fund Services, Inc. (Nationwide call toll-free
800-320-2212; in Cincinnati call 629-2070) or by writing to the Trust at the
address on the front of this Prospectus.
Per Share Data for a Share Outstanding Throughout The Indicated Periods
<TABLE>
<CAPTION>
Conservative Moderate Aggresive
Allocation Allocation Allocation
Portfolio Portfolio Portfolio
1/26/95 - 1/1/96- 1/26/95- 1/1/96- 1/26/95- 1/1/96-
12/31/95(A) 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 0.28 0.06 0.18 0.01 0.05
Net realized and unrealized gains 1.61 1.19 2.39 1.08 3.11 1.34
Total from investment operations 1.80 1.47 2.45 1.26 3.12 1.39
Less distributions:
Dividends from net investment income (0.19) (0.28) (0.06) (0.18) (0.01) (0.05)
Distributions in excess of net
investment income (0.04) (0.18) (0.24) (0.14) (0.23) (0.11)
Distributions from net
realized gains (0.60) (0.49) (0.84) (0.76) (0.109) (0.76)
Total distributions (0.83) (0.95) (1.14) (1.08) (1.33) (0.92)
Net asset value at end of period $ 10.97 $ 11.49 $ 11.31 $ 11.49 $ 11.79 $ 12.26
Total return 18.00% 13.41% 24.50% 11.11% 31.21% 11.72%
Net assets at end of period (000's) $ 9,852 $ 42,579 $ 38,988 $78,627 $ 42,325 $ 84,329
Ratio of expenses to average
net assets 0.95%(B) 0.95% 0.95%(B) 0.95% 0.95%(B) 0.95%
Ratio of net investment income
to average net assets 3.02%(B) 3.21% 0.77%(B) 1.34% 0.15%(B) 0.34%
Portfolio turnover rate 176% 104% 141% 280% 204% 340%
<FN>
(A) Represents the period from the initial public offering of shares
(January 26, 1995) through December 31, 1995. 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>
<PAGE>
THE PORTFOLIOS
Markman MultiFund Trust (the "Trust") was organized as a Massachusetts business
trust on September 7, 1994. It is registered as an open-end diversified
management investment company under the Investment Company Act of 1940 (the
"1940 Act"). The Trust is a diversified investment company (and each Portfolio
will be treated as a diversified investment company) and many of the underlying
funds in which the Portfolios invest will themselves be diversified investment
companies. The level of diversification the Portfolios obtain from being
invested in a number of underlying funds reduces the risk associated with an
investment in a single underlying fund. This risk is further reduced because
each underlying fund's investments are also spread over a range of issuers,
industries, and countries. The Trust currently consists of three separate series
portfolios. Each is known as a Portfolio. Together they are known as the
Portfolios. We manage each Portfolio separately. Each Portfolio has its own
investment objectives and strategies designed to meet different investment
goals. Investment in shares of one or more of the Portfolios of the Trust
involves risks. There can be no assurance that a Portfolio's investment
objective will be achieved.
INVESTMENT OBJECTIVES
Each Portfolio 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 Portfolios may invest are
referred to in this prospectus as the "underlying funds.") A Portfolio may
invest up to 25% of its total assets in any one underlying fund. When we believe
market conditions justify a defensive strategy, a Portfolio may invest up to
100% of its assets in money market mutual funds. A Portfolio will, under normal
market conditions, maintain its assets invested in a number of underlying funds.
Each Portfolio may invest in identical types of mutual funds. While each
Portfolio may invest in shares of the same mutual funds, the percentage of each
Portfolio's assets so invested will vary depending upon the investment objective
of each Portfolio. 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 Portfolio. To a
certain extent, we manage the risk to which the Portfolios are exposed by
varying the concentration of asset classes in the Portfolios. (See "How We
Invest" at page 14.) The Portfolios expect to be fully invested in underlying
mutual funds at all times. To provide liquidity as well as to assist in
achieving the Portfolios' investment objective, each Portfolio may invest in
money market mutual funds. A Portfolio may not purchase shares of any closed-end
investment company or of any investment company that is not registered with the
SEC. Each Portfolio's investment objective is non-fundamental and may be changed
by the Trustees of the Trust without approval by the shareholders of that
Portfolio. You would be notified in writing at least 30 days before a change in
the investment objective of a Portfolio. If there is a change in investment
objective, you should consider whether the particular Portfolio remains an
appropriate investment in light of your then current financial position and
needs.
MARKMAN AGGRESSIVE ALLOCATION PORTFOLIO
The investment objective of the Markman Aggressive Allocation Portfolio is
capital appreciation without regard to current income. Under normal market
conditions, at least 65% of the
<PAGE>
assets of the Aggressive Allocation Portfolio 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 Allocation Portfolio among the underlying funds is expected to
result in the Portfolio incurring more risk than the Markman Moderate Allocation
Portfolio which, in turn, can be expected to incur more risk than the Markman
Conservative Allocation Portfolio.
MARKMAN MODERATE ALLOCATION PORTFOLIO
The investment objective of the Markman Moderate Allocation Portfolio is to
provide growth of capital and a reasonable level of current income. The mutual
funds in the Moderate Allocation Portfolio 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 ALLOCATION PORTFOLIO
The investment objective of the Markman Conservative Allocation Portfolio is to
provide current income and low to moderate growth of capital. The mutual funds
in the Conservative Allocation Portfolio 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).
ALL PORTFOLIOS
Each Portfolio 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
<PAGE>
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 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 Portfolio 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 Portfolios, "open-end" funds and, as such,
stand ready to redeem their shares. Any investment in a mutual fund involves
risk. Even though the Portfolios may invest in a number of mutual funds, this
investment strategy cannot eliminate investment risk. Investing in mutual funds
through a Portfolio 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 diversified investment company, a Portfolio may not, with respect
to 75% of its total assets, (1) invest more than 5% of its total assets in the
securities of any one issuer, other than U.S. government securities and other
investment companies, or (2) acquire more than 10% of the outstanding voting
securities of any one issuer. Furthermore, a Portfolio, together with the other
Portfolios 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 Portfolio'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 Portfolio
that would not have been our first investment choice.
The 1940 Act also provides that a mutual fund whose shares are purchased by a
Portfolio is obliged to redeem shares held by the Portfolio 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 Portfolio 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. However, since the Portfolio has elected to
reserve the right to pay redemption requests by a distribution in kind of
securities from its portfolio, instead of in cash, these positions may be
treated as liquid. See "Investment Policies and Restrictions." These limitations
are not fundamental and may therefore be changed by the Board of Trustees of the
Trust without shareholder approval. Under certain circumstances an underlying
fund may determine to make payment of a redemption by a Portfolio (wholly or in
part) by a distribution in kind of securities from its portfolio, instead
<PAGE>
of in cash. As a result, a Portfolio 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 Portfolio.
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. An investment in a
non-diversified investment company can normally be expected to have greater
fluctuations in value than an investment in a fund that includes a broader range
of investments. To the extent a Portfolio 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 Portfolios 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 Portfolio would incur indirectly certain
transaction costs without accomplishing any investment purpose. Each Portfolio
limits its investments in underlying funds to mutual funds whose shares a
Portfolio may purchase without the imposition of a sales load. Each Portfolio
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 Portfolio) 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
Portfolio were to invest in an underlying fund and, as a result of redeeming
shares in such underlying fund, incur a redemption fee, the redeeming Portfolio
would bear such redemption fee. The underlying funds may incur distribution
expenses in the form of "Rule 12b-1 fees." The Portfolios 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 Portfolios, you bear not only your proportionate
share of the expenses of the Portfolios (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 Portfolios' 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."
<PAGE>
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. Invest ments in foreign securities involve special risks and
considerations that are not present when a Portfolio 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 Portfolio'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 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.
<PAGE>
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 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 Portfolios.
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
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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 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
Portfolios.
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.
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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.
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
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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).
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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 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
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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 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
<PAGE>
the making or taking of delivery. Closing out a futures contract sale is
effected by purchasing a 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.
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.
<PAGE>
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 if 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' 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
<PAGE>
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 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 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
<PAGE>
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 Portfolio'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.
<PAGE>
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 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
<PAGE>
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.
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HOW WE INVEST
General
We try to get the greatest return for the level of risk assumed by each
Portfolio. 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 significant.
Table One shows that the average annual investment results achieved in each fund
category have changed from year to year. Each Portfolio 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
<TABLE>
<CAPTION>
TABLE ONE
Category - No. Of Funds - Average Performance by Year
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth 117 13.75% 33.49% -3.28% 19.40% 8.55%
Growth 1008 19.21% 30.85% -1.85% 11.60% 8.43%
Growth & Income 532 31.97% 31.57% -1.07% 11.04% 8.28%
Equity Income 156 18.84% 29.45% -1.55% 13.67% 9.53%
Small Company 445 19.89% 31.32% -0.66% 17.16% 14.18%
World 198 16.80% 15.81% -2.28% 31.68% 0.00%
Foreign 426 12.42% 6.57% -2.05% 37.66% -4.43%
Europe 62 24.07% 16.71% 2.95% 27.50% -5.11%
Pacific 136 5.31% 3.13% -8.16% 57.82% -3.98%
Asset Allocation 196 12.43% 23.88% -1.82% 11.95% 8.10%
Balanced 335 13.20% 24.80% -2.81% 11.25% 7.48%
Corp. High Yield 166 13.65% 16.41% -3.76% 18.85% 17.39%
Corp. General 432 3.62% 16.46% -3.56% 10.45% 7.42%
Corp. High Quality 244 14.03% 13.63% -1.89% 8.34% 6.34%
Government Bond 631 2.90% 14.38% -3.54% 7.77% 6.02%
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.
</TABLE>
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.
Diversification across asset classes is the appropriate protection against the
risk of being
<PAGE>
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
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 Portfolios.
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
<PAGE>
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 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.
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
sup-
TABLE TWO
<TABLE>
<CAPTION>
Category Number of Funds Avg. Performance of Avg. Perfoemance of Top 10%
in Category Category 1994-1996 of Funds 1994/1996
<S> <C> <C> <C>
Aggressive Growth 73 13.69% 22.92%
Growth 571 15.30% 22.10%
Growth & Income 332 16.39% 20.33%
Equity Income 91 14.84% 18.12%
Small Company 242 15.11% 24.26%
World 100 9.88% 16.46%
Foreign 178 6.09% 12.15%
Europe 23 13.97% 19.79%
Pacific 51 -.53% 5.08%
Asset Allocation 86 11.67% 18.77%
Balanced 198 11.24% 15.48%
Corp. High Yield 95 8.34% 11.32%
Corp. General 254 5.30% 7.50%
Corp. High Quality 153 5.05% 6.59%
Government Bond 448 4.36% 6.25%
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.
</TABLE>
port, 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 Portfolios, 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 performance 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 Portfolio. 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.
<PAGE>
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 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 Portfolio ( the center part of the
daisy) will consist of funds that we expect to hold for the long term. We select
each Portfolio'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 Portfolio's
core portfolio if the portfolio manager of the fund has an appropriate
performance record. Although no assurance can be given that a Portfolio 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 Portfolio. Thus, we will not trade funds in a Portfolio'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 Portfolio that will be invested in its
core portfolio will vary over time, but will typically remain between 40 and 60
percent of the Portfolio's portfolio. The balance of each Portfolio'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 Portfolio 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
<PAGE>
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 Portfolio=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
Portfolios.
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 Portfolio. To a certain extent, we
manage the risk to which the Portfolios are exposed by varying the concentration
of asset classes in Portfolio portfolios.
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
Each Portfolio has adopted certain fundamental investment policies. These
policies may not be changed without the vote of a majority of that Portfolio's
outstanding voting securities, as defined under "Other Information -Voting."
Each Portfolio 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 Portfolio's fundamental investment
policies, no Portfolio 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 Portfolio 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 Portfolio may borrow from a
bank in an amount not in excess of 5% of the Portfolio's total assets), or (3)
pledge or hypothecate its assets, except that a Portfolio may pledge up to 5% of
its total assets to secure such borrowings for temporary or emergency purposes
or to effect redemptions. A Portfolio will not make additional investments at
any time during which it has outstanding borrowings. Under each Portfolio's
non-fundamental policies, no Portfolio 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 investment company) if, as a result, a Portfolio and its affiliates
(including the other Portfolios) 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 Portfolio'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). See "Risks and Other Considerations." Each Portfolio
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 Portfolios. For example, although the Aggressive
Allocation Portfolio 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 leverag ing). 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.
<PAGE>
In addition to serving as investment adviser to the Trust and
its Portfolios, 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 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. Pursuant to an Investment Management Agreement with the Trust,
we provide investment management services to each Portfolio. We are responsible
for the investment management of each Portfolio's assets, including the
responsibility for making investment decisions and placing orders for the
purchase and sale of the Portfolios' 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
Portfolios and has overall responsibility for the business and affairs of the
Trust and the Portfolios, periodic reports on the investment performance of the
Portfolios. Unlike most mutual funds, the management fees paid by the Portfolios
to us include transfer agency, pricing, custodial, auditing and legal services,
and general administrative and other operating expenses of each Portfolio except
brokerage commissions, taxes, interest, fees and expenses of non-interested
Trustees and extraordinary expenses.
For the services provided to the Portfolios, we receive from each Portfolio a
fee, payable monthly, at the annual rate of 0.95% of each Portfolio's average
daily net assets. We are contractually obligated to reduce our management fee in
an amount equal to each Portfolio'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 Portfolios' expenses, as described
above, out of investment management fees we receive from the Portfolios.
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 Portfolios. 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.
The Administrator
The Trust has retained Countrywide Fund Services, Inc. ("the Transfer Agent"),
P.O. Box 5354, Cincinnati, Ohio, 45201-5354, to serve as the Portfolios'
transfer agent, dividend paying agent, and shareholder service agent. The
Transfer Agent is an indirect wholly-owned subsidiary of Countrywide Credit
Industries, Inc., a New York Stock Exchange listed company principally engaged
in the business of residential mortgage lending. Certain of the Trust's officers
are also officers of the Transfer Agent.
The Transfer Agent also provides accounting and pricing and administrative
services to the Portfolios. The Transfer Agent calculates daily net asset value
per share and maintains such books and records as are necessary to enable it to
perform its duties. The Transfer Agent supplies executive, administrative and
regulatory services, supervises the preparation of the
<PAGE>
Portfolios' tax returns, and coordinates the preparation of reports to
shareholders and reports to and filings with the SEC and state securities
authorities.
We pay the Transfer Agent monthly, out of the investment management fee we
receive from each Portfolio, 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 Portfolios 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 Portfolios. 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 Portfolio'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
Portfolio.
Each Portfolio is actively managed and has no restrictions upon portfolio
turnover. Each Portfolio'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 Portfolio'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 such gains when
distributed from that Portfolio at ordinary income tax rates. High turnover
increases the possibility that the Portfolios would not qualify as regulated
investment companies under Subchapter M of the Internal Revenue Code; a
Portfolio 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.
DETERMINATION OF
NET ASSET VALUE
The net asset value per share of each Portfolio 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 Portfolio is calculated by dividing the sum of the value of the securities
held by the Portfolio plus cash or other assets minus all liabilities (including
estimated accrued expenses) by the total number of outstanding shares of the
Portfolio, 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
<PAGE>
(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 Portfolio 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 Portfolios are offered as an investment vehicle for individuals,
institutions, corporations and fiduciaries. Each Portfolio may invest in
underlying funds, which are sold with a sales charge; however, the Portfolios
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 the Transfer Agent at the address and telephone number listed
on the back cover of this Prospectus.
Shares of each Portfolio are sold without a sales charge at the next price
calculated after receipt of an order in proper form by the Portfolios. The
minimum initial investment in a Portfolio 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 the Transfer Agent, and of
Markman Capital and private clients of Markman Capital, including members of
such persons' immediate families. Each Portfolio 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.
Shares of each Portfolio 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 Portfolios, the net asset value of Portfolio shares
reported in newspapers will lag the Portfolios' 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 Transfer Agent 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 the
Transfer Agent by 5:00 p.m. EST. Broker-dealers or other agents may charge you a
fee for effecting transactions. Direct purchase orders received by the Transfer
Agent by 4:00 p.m. EST are confirmed at that day's net asset value. Direct
investments received by the Transfer Agent 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 Portfolio by
sending a check and a completed account application form to the Transfer Agent,
P.O. Box 5354, Cincinnati, Ohio 45201-5354.
<PAGE>
Checks should be made payable to the Markman MultiFund Trust. An account
application is included with this Prospectus.
The Trust mails to shareholders confirmations of all purchases or redemptions of
shares of the Portfolios. 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 Portfolios' account application contains certain provisions in favor of the
Trust, the Transfer Agent 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 canceled because your check does not clear,
you will be responsible for any resulting losses or fees incurred by the Trust
or the Transfer Agent in the transaction.
You may also purchase shares of the Portfolios by wire. Please call the Transfer
Agent (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 Portfolio will be made at the Portfolio'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 the Transfer Agent. Banks may impose a charge for sending a wire.
There is presently no fee for receipt of wired funds, but the Transfer Agent
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 the Transfer Agent, P.O. Box 5354, Cincinnati, Ohio
45201-5354. Checks should be made payable 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.
No Transaction Fee Program
If you purchase a minimum of $25,000 of shares of the Portfolios (either in a
Portfolio or spread across two or three Portfolios) through a discount broker
and we do not participate in that discount broker's no transaction fee program,
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.
SHAREHOLDER SERVICES
Contact the Transfer Agent (Nationwide call toll-free 1-800-707-2771; in
Cincinnati call 513-629-2070) for additional information about the shareholder
services described below.
<PAGE>
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 the Transfer
Agent 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 Portfolios 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 Portfolios 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. the Transfer
Agent 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 Portfolio.
HOW TO REDEEM SHARES
Shares of the Portfolios 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 the Transfer Agent 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 Portfolios by certified check or by wire.
By Telephone
Shares of the Portfolios 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 the Transfer
Agent (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
<PAGE>
bank or brokerage account designated under this procedure at any time by writing
to the Transfer Agent 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 the Transfer Agent 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, the Transfer Agent, 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 such loss. The Trust or the
Transfer Agent or both will employ reasonable procedures to determine that
telephone instructions are genuine. If the Trust and/or the Transfer Agent 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 Portfolios may also be redeemed by written request to the Transfer
Agent 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.
<PAGE>
Redemption requests may direct that the proceeds be deposited directly in a
shareholder's account with a commercial bank or other depository institution by
way of an Automated Clearing House (ACH) transaction. There is currently no
charge for ACH transactions. Contact the Transfer Agent 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 Portfolios may be exchanged for each other at net asset value. You
may request an exchange by sending a written request to the Transfer Agent. 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 the Transfer Agent.
Exchanges may only be made for shares of Portfolios 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 Portfolio shares, which may cause you to recognize a capital gain or
loss.
DIVIDENDS, DISTRIBUTIONS
AND TAXES
Each Portfolio 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 Portfolio 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 capital gains (the excess of net long-term
capital gains over net short-term capital losses) the Portfolio 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%
<PAGE>
excise tax. To avoid imposition of the excise tax, each Portfolio 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 Portfolio in October, November or December of that year with a
record date in such a month and paid by the Portfolio 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 Portfolio 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 Portfolio from a mutual fund in that Portfolio's portfolio
(including dividends and distributions of short-term capital gains) will be
distributed by the Portfolio (after deductions for expenses) and will be taxable
to you as ordinary income. Because the Portfolios 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
Portfolio rather than directly in the underlying funds may result in increased
tax liability to you since the Portfolio must distribute its gains in accordance
with certain rules under the Code. A Portfolio's ability to dispose of shares of
underlying funds held less than three months may be limited by requirements
relating to a Portfolio'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 Portfolio from the underlying
funds, as well as net long-term capital gains realized by a Portfolio from the
purchase and sale (or redemption) of mutual fund shares or other securities held
by a Portfolio for more than one year, will be distributed by the Portfolio 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 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 Portfolio when
an underlying fund distributes net capital gains to a Portfolio, the Portfolio
will treat the distribution as a long-term capital gain, even if the Portfolio
has held shares of the underlying fund for less than one year. Any loss incurred
by a Portfolio 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.
<PAGE>
The tax treatment of distributions from a Portfolio is the same whether the
distributions are received in additional shares or in cash. Shareholders
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 Portfolio on the reinvestment date.
A Portfolio may invest in mutual funds with capital loss carryforwards. If such
a mutual fund realizes capital gains, it will be able to offset the gains to the
extent of its loss carryforwards 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 Portfolio 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 Portfolio in your particular circumstances.
The Portfolios 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 respond to notices to that effect or (3) you
fail to certify that you are not subject to backup withholding.
Each Portfolio 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
Portfolio making the distribution, unless you notify the Portfolio 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 Allocation Portfolio, the Markman Moderate Allocation
Portfolio and the Markman Conservative Allocation Portfolio. 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 Portfolios 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
<PAGE>
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 Portfolio 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 Portfolio (or of the
Trust) means the vote of the lesser of: (1) 67% of the shares of the Portfolio
(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 Portfolio (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 Portfolio 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
Portfolio over periods of 1, 5, and 10 years (up to the life of the Portfolio).
A Portfolio 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 Portfolio's "average annual total
return" as described above. All total return figures will reflect the deduction
of a proportional share of Portfolio 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
Portfolios during the particular time period on which the calculations are
based. Total return for a Portfolio will vary based upon changes in market
conditions and the level of the Portfolio's expenses and should not be
considered an indication of future performance. The Portfolios may also compare
their performance with that of other mutual funds as listed in the
<PAGE>
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
Portfolio's total return, see the Statement of Additional Information.
Additional information about the Portfolios' performance will be contained in
the Portfolios' Annual Report to Shareholders, which may be obtained without
charge from the Transfer Agent 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, 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.
<PAGE>
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 the Transfer
Agent
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 Portfolios 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 Portfolios. 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
<PAGE>
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 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 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
<PAGE>
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
<PAGE>
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.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
You may use the Investor Application and Request INVESTMENT ADVISER
Forms included with this prospectus to invest Markman Capital Management, Inc.
directly in the Markman MultiFunds. To obtain 6600 France Avenue South
additional applications, call 1-800-707-2771. Suite 565
The minimum direct investment is $25,000. Minneapolis, Minnesota 55435
If you want to invest less than $25,000, you may ADMINISTRATOR AND TRANSFER AGENT
purchase the Markman MultiFunds through Countrywide Fund Services, Inc.
Charles Schwab & Company (1-800-266-5623) P.O. Box 5354
Fidelity Investments (1-800-544-7558), Jack White Cincinnati, Ohio 45201-5354
and Company (1-800-323-3263), and Waterhouse
(1-800-934-4443). There is No Transaction Fee if you CUSTODIAN
purchase from one of these discount brokers. Fifth Third Bank
38 Fountain Square Plaza
For additional forms or answers to any questions, Cincinnati, Ohio 45202
call the Markman MultiFunds at 1-800-707-2771
between the hours of 8:30 AM and 5:00 PM EST.
(In Cincinnati: 513-629-2070). INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP
For a current update on our views on the market 425 Walnut Street
and what funds are in each of the portfolios Cincinnati, Ohio 45202
call the Hotline at 1-800-975-5463.
LEGAL COUNSEL
For updated fund prices as of the close of the Sullivan & Worcester
previous day, call 1-800-536-8679. One Post Office Square
Boston, Massachusetts 02109
To order additional prospectuses call 1-800-232-4792.
Our Internet Home Page (for net asset values,
current portfolios, and more) is www.markman.com
</TABLE>
<PAGE>
March 31, 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 March 31, 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. TRANSFER AGENT AND ADMINISTRATOR.................... 9
VII. REDEMPTION OF SHARES................................ 10
VIII. SPECIAL REDEMPTIONS................................. 10
IX. CUSTODIAN........................................... 10
X. PORTFOLIO TRANSACTIONS.............................. 10
XI. PERFORMANCE INFORMATION............................. 11
A. Total Return.................................... 11
B. Non-Standardized Total Return................... 12
C. Other Information Concerning Fund Performance... 12
XII. DESCRIPTION OF THE TRUST............................ 18
XIII. ADDITIONAL INFORMATION.............................. 19
XIV. FINANCIAL STATEMENTS................................. 20
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I. INVESTMENT OBJECTIVES AND POLICIES
Markman MultiFund Trust (the "Trust") is an open-end, 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 "Portfolios"). The Portfolios
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 ALLOCATION PORTFOLIO seeks capital appreciation without
regard to current income.
MARKMAN MODERATE ALLOCATION PORTFOLIO seeks long-term growth of capital and
a reasonable level of income.
MARKMAN CONSERVATIVE ALLOCATION PORTFOLIO seeks to provide current income
and low to moderate growth of capital.
II. INVESTMENT RESTRICTIONS
Fundamental Investment Policies. Each Portfolio 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 Portfolio are present or represented by
proxy, or (2) more than 50% of the outstanding voting securities of the
Portfolio. These fundamental policies provide that a Portfolio may not:
1. Purchase or otherwise acquire interests in real estate, real estate
mortgage loans or interests therein, except that a Portfolio 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 there-
of.
6. Purchase securities on margin, except that a Portfolio may obtain such
short-term credits as may be necessary for the clearance of purchases
and sales of securities.
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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 Portfolio 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 Portfolio will itself concentrate its investments in
investment companies.
As non-fundamental policies a Portfolio 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 Portfolio'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 Portfolios may invest may, but need not, have
the same investment policies as a Portfolio. Although all of the Funds may from
time to time invest in shares of the same underlying mutual fund, the percentage
of each Portfolio's assets so invested may vary, and the Portfolios' investment
adviser will determine that such investments are consistent with the investment
objectives and policies of each Portfolio. The investments that may, in general,
be made by underlying funds in which the Portfolios may invest, as well as the
risks associated with such investments, are described in the Prospectus and in
the Appendix to the Prospectus.
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.,
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the Portfolios' investment adviser, and Countrywide Fund Services, Inc.,
the Portfolios' 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. Lindgren 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
John F. Splain 40 Secretary 0
Mark J. Seger 35 Treasurer 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. LINDGREN, 5560 Nathan Lane #1, Plymouth, Minnesota 55442
- -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.
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PETER DROSS, 3807 Xerxes Avenue South, Minneapolis, Minnesota 55410
- -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.
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, Suite 565, Edina,
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 Countrywide Fund Services, Inc. (a registered
transfer agent) and Treasurer of Countrywide Investments, Inc. (a registered
broker-dealer and the Trust's principal underwriter) and Countrywide Financial
Services, Inc. (a financial services company and parent of Countrywide
Investments, Inc. and Countrywide Fund Services, Inc.). He is also Vice
President of Brundage, Story and Rose Investment Trust, PRAGMA Investment Trust,
Maplewood Investment Trust, a series company, The Thermo Opportunity Fund, Inc.
and Capitol Square Funds and Assistant Vice President of Williamsburg Investment
Trust, The Tuscarora Investment Trust, Schwartz Investment Trust, Fremont Mutual
Funds, Inc., The Gannett Welsh & Kotler Funds and Interactive Investments (all
of which are registered investment companies).
JOHN F. SPLAIN, 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45201
- -- Secretary and General Counsel of Countrywide Investments, Inc. and
<PAGE>
Countrywide Financial Services, Inc. and Vice President, Secretary and General
Counsel of Countrywide Fund Services, Inc. He is also Secretary of Countrywide
Investment Trust, Countrywide Tax-Free Trust, Countrywide Strategic Trust,
Brundage, Story and Rose Investment Trust, PRAGMA Investment Trust, The
Tuscarora Investment Trust, Williamsburg Investment Trust, Maplewood Investment
Trust, a series company, and The Thermo Opportunity Fund, Inc. and Assistant
Secretary of Schwartz Investment Trust, Fremont Mutual Funds, Inc., Capitol
Square Funds, The Gannett Welsh & Kotler Funds and Interactive Investments (all
of which are registered investment companies).
MARK J. SEGER, 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45201 --
Vice President and Fund Controller of Countrywide Fund Services, Inc. He is also
Treasurer of Countrywide Investment Trust, Countrywide Tax-Free Trust,
Countrywide Strategic Trust, Brundage, Story and Rose Investment Trust, PRAGMA
Investment Trust, Williamsburg Investment Trust, Maplewood Investment Trust, a
series company, The Thermo Opportunity Fund, Inc. and Capitol Square Funds,
Assistant Treasurer of Schwartz Investment Trust, The Tuscarora Investment
Trust, The Gannett Welsh & Kotler Funds and Interactive Investments and
Assistant Secretary of 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 Portfolios.
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 March 21, 1997, Charles Schwab & Co., Inc., 101 Montgomery
Street, San Francisco, California, owned of record 19.7% of the outstanding
shares of the Markman Aggressive Allocation Portfolio, 18.9% of the outstanding
shares of the Markman Moderate Allocation Portfolio and 9.6% of the outstanding
shares of the Markman Conservative Allocation Portfolio.
As of March 21, 1997, 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 Portfolio.
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V. INVESTMENT MANAGER
Markman Capital Management, Inc. ("Markman Capital") serves as
investment manager to the Trust and its Portfolios 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 Portfolios 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 Portfolios for any costs incurred. As
compensation for its services, each Portfolio 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
year ended December 31, 1996, the Markman Aggressive Allocation Portfolio, the
Markman Moderate Allocation Portfolio and the Markman Conservative Allocation
Portfolio paid advisory fees of $847,620, $772,803 and $270,354, respectively.
For the fiscal period ended December 31, 1995, the Markman Aggressive Allocation
Portfolio, the Markman Moderate Allocation Portfolio and the Markman
Conservative Allocation Portfolio paid advisory fees of $173,422, $202,419 and
$38,783, respectively.
Markman Capital pays out of the investment management fees it receives
from the Portfolios, all the expenses of the Portfolios 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 Portfolio's
allocable portion of the fees and expenses of the noninterested Trustees. The
investment management agreement with Markman Capital provides that if the total
expenses of a Portfolio in any fiscal year exceed the permissible limits
applicable to the Portfolio in any state in which shares of the Portfolio 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 Portfolio, subject to readjustment during
the Portfolio'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 Portfolio'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 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
<PAGE>
penalty, by the Board of Trustees, by a vote of the majority of a Portfolio'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. TRANSFER AGENT AND ADMINISTRATOR
The Board of Trustees of the Trust has approved an Administration,
Accounting and Transfer Agency Agreement among the Trust, Countrywide Fund
Services, Inc. ("Countrywide") and Markman Capital. Pursuant to such Agreement,
Countrywide serves as the Trust's transfer and dividend paying agent and
performs shareholder service activities. Countrywide 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 Portfolios provided by Countrywide 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 Portfolios, including
coordination of the services performed by Markman Capital, the custodian,
independent accountants, legal counsel and others. In addition, Countrywide
furnishes office space and facilities required for conducting the business of
the Trust and pays the compensation of the Trust's officers and employees
affiliated with Countrywide. For these services, Countrywide receives from
Markman Capital out of the investment advisory fee paid to Markman Capital by
each Portfolio a fee, as described under "The Administrator" in the Prospectus.
For the fiscal year ended December 31, 1996, Markman Capital paid fees of
$283,773 to Countrywide. Countrywide also receives reimbursement for certain
out-of-pocket expenses incurred in rendering such services.
Countrywide is a wholly-owned subsidiary of Countrywide Financial
Services, Inc., which in turn is a wholly-owned subsidiary of Countrywide Credit
Industries, Inc., a New York Stock Exchange listed company principally engaged
in the business of residential mortgage lending. Countrywide and its affiliates
currently provide administrative and distribution services for certain other
registered investment companies. The Portfolios will not invest in these funds
or in any other fund which may in the future be affiliated with Countrywide or
any of its affiliates. The principal business address of Countrywide is 312
Walnut Street, 21st Floor, Cincinnati, Ohio 45202-5354.
VII. 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
Portfolio of securities owned by
<PAGE>
it is not reasonably practicable or it is not reasonably practicable for a
Portfolio 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.
VIII. 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 Portfolio
to make payment wholly or partly in cash, that Portfolio 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 Portfolio, 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.
IX. 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 Portfolios. The principal business address of The
Fifth Third Bank is 38 Fountain Square Plaza, Cincinnati, Ohio 45202.
X. PORTFOLIO TRANSACTIONS
Markman Capital is responsible for decisions to buy and sell securities
for the Portfolios and for the placement of the Portfolios' portfolio business
and negotiation of commissions, if any, paid on these transactions.
The Portfolios 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.
XI. PERFORMANCE INFORMATION
A. TOTAL RETURN
From time to time, quotations of a Portfolio'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
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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 Portfolio 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.
Total returns quoted in advertising reflect all aspects of a
Portfolio's return, including the effect of reinvesting dividends and capital
gain distributions, and any change in the Portfolio'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
Portfolio 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
Portfolio'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 Portfolio.
The average annual total returns of the Portfolios 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
Aggressive Allocation Portfolio 11.7% 22.1%
Moderate Allocation Portfolio 11.1% 18.5%
Conservative Allocation Portfolio 13.4% 16.4%
B. NONSTANDARDIZED TOTAL RETURN
In addition to the performance information described above, a Portfolio
may provide total return information for designated periods, such as for the
most recent rolling six months or most recent rolling twelve
<PAGE>
months. A Portfolio 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 Portfolios for the period from the initial
public offering of shares on January 26, 1995 through December 31, 1996 were
46.58%, 38.34% and 33.82% for the Markman Aggressive Allocation Portfolio, the
Markman Moderate Allocation Portfolio and the Markman Conservative Allocation
Portfolio, respectively.
C. OTHER INFORMATION CONCERNING FUND PERFORMANCE
A Portfolio 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 Portfolio in advertising is historical and is not intended to
indicate future returns. A Portfolio's share prices and total returns fluctuate
in response to market conditions and other factors, and the value of a
Portfolio's shares when redeemed may be more or less than their original cost.
A Portfolio 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 Portfolio'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 Portfolio 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
Portfolio'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 Portfolio (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 Portfolio's performance may be compared in advertising to the
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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
Portfolio. 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.
From time to time a Portfolio may publish the ranking of the
performance of its shares by Morningstar, an independent mutual fund monitoring
service that ranks mutual funds, including the Portfolio, in broad investment
categories (equity, taxable bond, tax-exempt and other) monthly, based upon each
Portfolio's one, three, five and ten-year average annual total returns (when
available) and a risk adjustment factor that reflects Portfolio 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.
From time to time, in reports and promotional literature, a Portfolio'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 Portfolios, 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 Portfolio 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
Portfolio may discuss the performance of financial markets and indices over
various time periods.
<PAGE>
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-valueweighted index of the ninth and tenth
decimals 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.
Other widely used indices that the Portfolios 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 Portfolios 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
<PAGE>
holding periods. Such comparisons may compare these investment categories
to each other or to changes in the CPI.
A Portfolio 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 Portfolios 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 Portfolio performance made by independent sources may
also be used in advertisements concerning the Portfolios, including reprints of,
or selections from, editorials or articles about the Portfolio. These editorials
or articles may include quotations of performance from other sources such as
Lipper or Morningstar. Sources for Portfolio performance information and
articles about the Portfolios 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.
USA Today, a nationally distributed newspaper.
U.S. News and World Report, a national business weekly that periodi-
cally reports mutual fund performance data.
<PAGE>
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
Portfolio with other investments, investors should understand that certain other
investments have different risk characteristics than an investment in shares of
the Portfolios. 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
Portfolio'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 Portfolios is not fixed or guaranteed.
Performance quotations should not be considered to be representative of
performance of a Portfolio for any period in the future. The performance of a
Portfolio 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 Portfolio's performance.
XII. DESCRIPTION OF THE TRUST
The Trust is an open-end, 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 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
<PAGE>
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 Portfolios 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
Portfolios. 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.
XIII. 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>
THE MARKMAN MULTIFUNDS
ANNUAL REPORT
DECEMBER 31, 1996
HILLEL ON THE MARKET
1997: WILL LOWER RISK MEAN HIGHER GAIN?
UPDATES ON CONSERVATIVE, MODERATE, AGGRESSIVE PORTFOLIOS
Why is this man smiling?
photographic image of Bob Markman
<PAGE>
PPESIDENT'S MESSAGE
Photographic image of Bob Markman
Bob Markman
CEO & President
The Markman MultiFunds
Dear Fellow Investors,
Wait a second.
What is wrong with that picture? The guy is worried about the market; his
caution has caused his Funds to lag in 1996. So, yeah, why is this man
smiling?
The answer is simple: While I foresee a difficult year for the overall market,
there are, at the same time, opportunities for significant gains in areas with
more limited downside. More upside, less risk - I can't wait.
Of course, the minute I make a statement like that, our attorneys start
reaching for the Tagamet, so let me explain and put it in context.
<PAGE>
THE GOLDEN RULE:
IN ANCIENT TIMES, A STUDENT ASKED THE GREAT JEWISH SAGE HILLEL WHAT THE TRUE
MESSAGE WAS OF THE SCRIPTURES. HILLEL REPLIED, "THERE IS ONLY ONE MESSAGE,
`LOVE THY NEIGHBOR.' ALL ELSE IS COMMENTARY." THE GOLDEN RULE FOR US IS "BUY
LOW, SELL HIGH." ALL ELSE IS COMMENTARY.
Long term, prudent investing is, has always been, and always will be, grounded
in the concept of buying an asset at a bargain price and selling it when it is
overvalued - or at least fully valued.
This sounds simple enough on the surface until we confront the fact that
discussions and disagreements on full, fair, under and overvaluations are the
everyday coin of Wall Street, with thousands of differing opinions proclaimed
daily. Every trade on every stock is a microcosm inwhich one side says "cheap,"
the other says "dear." So the "truth" about values is elusive and difficult
to determine.
Only children, fools (and perhaps most baby boomers) believe that the world
was created fresh for them, with new rules designed to create maximum fun,
ease, and pleasure. The more unpleasant, dull, and realistic view of life is
that we all exist within an historic context; there are rules, norms, and
long-established processes.
Certainly change does occur. One can profit handsomely by recognizing when and
where it does, but there is good reason why smart investors know that the four
most dangerous words in the investment world are "this time it's different."
So a good starting point for cutting through all the noise of the marketplace
to attempt to recognize value is always to understand the historic context of
the situation. What can previous experiences about valuations, sentiment, and
cycles tell us about where we are now and what we might prudently do?
Buy low, sell high. Buy low, sell high. Buy low, sell high. Buy low, sell
high. Buy low, sell high. Buy low, sell high.
<PAGE>
Regression to the Mean: THE FIRST SHOE DROPS
In my last quarterly report to you (September 30, 1996), I laid out the case
that, given long-term historic ranges of returns, we are likely entering the
tail end of this incredible bull market. I made the point that the bloated
returns achieved by some funds over the past three to five years were simply
unsustainable. I specifically pointed out that:
"Risks are particularly acute in those funds that pursue aggressive momentum
strategies."
Accordingly, we cut way back on those holdings and noted in our report that in
our Aggressive Fund we eliminated eight small and mid-cap aggressive funds.
And what indeed happened? In a quarter of otherwise excellent returns, none of
these funds managed to show a gain; some sank like stones:
- ----------------------------------------------------
GRAVITY WORKS
Perkins Opportunity Down 12.3%
IAI Emerging Growth Down 11.7%
Van Wagoner Emerging Growth Down 10.9%
PBHG Growth Down 6.9%
Navallier Aggressive Small Cap Down 6.7%
Parkstone Small Cap Down 3.9%
Scudder Development Down 2.8%
Warburg Pincus Post Venture Down 1.9%
Average loss of aggressive
funds sold Down 7.14%
Gain of Markman Aggressive
Growth Fund in 4th Quarter Up +6.22%
These are all good (some excellent) funds with
experienced capable and, in some cases, brilliant
managers. We do NOT mean to imply that we are smarter
than they are. WE'RE NOT. Our only point is that nature
commands even the most magnificent high-flying bird to
return to earth eventually.
- ----------------------------------------------------
<PAGE>
The S&P and the Dow: THE OTHER SHOE WILL DROP
The aggressive small cap momentum funds moved furthest, fastest. So they began
to experience regression to the mean first. But the big blue chip stocks that
are propelling the Dow and S&P 500 are not immune from this immutable law of
market physics either. As we begin the new year, we are in the midst of a late
stage blue chip feeding frenzy; a buying panic just as mindless in its own way
as the momentum buying of last spring. This, too, will end badly. Perhaps not
in a vicious decline, but certainly in a way that causes expectations of index
fund investors to be crushed.
But I'm smiling.
Even in the midst of stumbling momentum stocks and stalling blue chips, I see
exciting upside opportunities in several areas that will, I believe, help our
portfolios achieve impressive performance this year. Here's a quick look at
two:
<PAGE>
A Sampling:
REAL ESTATE FUNDS
Funds that invest in real estate investment trusts (REITS) have begun to
significantly outperform after an extended slumber. While they began to do
well again earlier in 1996, the real acceleration began just a month or so
ago. What's behind this? First, while the market begins to show concerns about
the prospect for earnings and cash flow in the blue chip sector, we are in a
period of strong earnings and cash flow for REITS. Fundamentally, the wind is
at our back here. Second, because the underlying "product" of a REIT is a real
piece of property, the movement of REIT prices does not always change in
lockstep with the market as a whole. They have historically provided
stabilizing diversification -- an attractive trait in a potentially rocky
year. Third, REITS sport healthy yields of 4-7%, very attractive compared to
the less than 2% offered by blue chips today. Because of their defensive
nature and high yield, REITS are seeing investment dollars flow to them that
normally, in other times like this, would have gone to utility stocks.
Increased cash flow into a sector never hurts it, and the significance and
potential of increased attention and direction of dollars loom large when you
consider one amazing fact: AS THE NEW YEAR BEGAN, THE MARKET CAP OF ONE BLUE
CHIP, MERCK, WAS 50% GREATER THAN THE COMBINED MARKET CAP OF ALL PUBLICLY
TRADED REITS.
<TABLE>
<CAPTION>
<S> <C>
S&P 500 +70%
Cohen & Steers Realty +42%
[mountain chart representing comparative performance of S&P 500 vs.
Cohen & Steers Realty from January 1994 through December 1996]
REITS (as illustrated by C&S Realty, a fund we consider the best run overall
in the sector) have lagged the broad market by a wide margin over the past
three years. We think it's time for some "catch up."
</TABLE>
S&P 500
Cohen & Steers Realty
[mountain chart representing comparative performance of S&P 500 vs.
Cohen & Steers Realty from January 1996 through December 1996]
1996 was a good year for REITS, but the outperformance only began as recently
as December. We think we're still in the early stages of the catch-up move.
<PAGE>
SMALL CAP VALUE
We have recently made additions to another area that we believe will produce
excellent risk-adjusted returns in 1997 and beyond: small cap value.
The seemingly inexorable rise in the dozen market-leading large cap growth
stocks has left many small caps in a sleepy and relatively stagnant backwater.
This is more a result of current fad and fashion than a reflection of the
underlying relative merits the two groups. From just about any perspective,
historic price earnings ratios, price-to-book, earnings growth, etcetera,
"bargains" in the small cap arena far exceed those in the narrow list of blue
chip high fliers.
Does that mean small caps must revive and begin to outperform their larger
brethren? We believe that while markets may act irrationally and inefficiently
in the short term, over the long haul we can expect efficient and rational
relationships. As you can see from the accompanying charts, blue chips (as
represented by the S&P 500) have moved well ahead of small caps (Russell 2000).
At some point (next week? next year?) the lines will begin to move closer,
probably due to some combination of strength in small caps and weakness in
blue chips. Thus, in a market that the casual observer sees as troubled, we
may be experiencing attractive gains. This should be especially noticeable
in the low PE, non-momentum value end of the small cap spectrum.
<TABLE>
<CAPTION>
<S> <C>
S&P 500 +70%
Russell 2000 +39%
[mountain chart representing comparative performance of S&P 500 vs.
Russell 2000 from January 1994 through December 1996]
Over the past three years, the large caps (S&P 500) have zoomed ahead of the
small caps (Russell 2000). Long-term historic relationships indicate that this
is an unrealistic margin, one that is likely to narrow at some point.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
S&P 500 +23%
Russell 2000 +15%
[mountain chart representing comparative performance of S&P 500 vs.
Russell 2000 from January 1996 through December 1996]
Relative performance between large cap and small cap widened enormously in
1996. When these lines get closer (as they are likely to do) it will mean
superior small cap performance.
</TABLE>
In conclusion, we fully expect 1997 to be "pay back time" for those shareholders
who have shown the patience that is the hallmark of all long-term investors.
/s/ Bob Markman
<PAGE>
MANAGEMENT'S DISCUSSION OF PERFORMANCE
A representation of the graphic material contained in the Markman Multifund
Trust's December 31, 1996 Annual Report is set forth below.
<TABLE>
<CAPTION>
1. Growth of $10,000 invested on 1/31/95
DATE MARKMAN CONSERVATIVE LEHMAN INTERMEDIATE LIPPER BALANCED
GROWTH FUND GOVERNMENT BOND FUND INDEX
INDEX
<S> <C> <C> <C>
1/31/95 10000 10000 10000
10140 10125 10032
10150 10152 10057
10140 10230 10094
10200 10276 10195
10040 10197 10143
10160 10362 10247
10190 10384 10237
10270 10500 10263
10350 10542 10302
10380 10577 10362
10390 10597 10382
10430 10662 10369
10600 10828 10500
10680 10908 10530
10630 10873 10527
10710 11007 10659
10780 11065 10692
10800 11105 10729
10900 11210 10742
10870 11200 10761
11070 11415 10814
11150 11456 10781
11030 11293 10685
11190 11439 10709
11180 11434 10739
11180 11404 10699
11250 11447 10724
11250 11487 10789
11420 11667 10846
11550 11834 10903
11550 11788 10867
11530 11794 10852
11510 11792 10934
11550 11855 10978
11490 11815 10961
11390 11781 11009
11490 11883 11038
11440 11906 11066
11490 12001 11078
11670 12124 11115
11760 12254 11160
11730 12231 11168
11650 12166 11182
11760 12266 11241
11832 12325 11255
11735 12200 11290
11810 12300 11306
11950 12405 11308
12198 12671 11352
12294 12758 11394
12241 12625 11282
12273 12607 11233
12380 12703 11250
12241 12547 11151
12359 12644 11179
12391 12614 11137
12423 12541 11076
12456 12599 11156
12553 12645 11167
12671 12705 11157
12617 12487 11092
12789 12809 11175
12897 12899 11187
12886 12824 11161
12864 12869 11128
12832 12816 11150
12692 12785 11160
12746 12890 11254
12596 12643 11160
12337 12411 11252
12413 12491 11257
12359 12448 11244
12520 12885 11378
12542 12850 11388
12628 12898 11393
12671 12889 11341
12660 12783 11307
12735 13085 11396
12725 13125 11368
12768 13204 11438
12875 13428 11522
12864 13424 11515
12886 13500 11550
12843 13358 11557
12940 13729 11663
13058 13852 11705
13133 13930 11717
13209 14113 11765
13176 13914 11717
13155 13797 11710
13273 13991 11710
12/31/96 13382 13940 11706
Past performance is not predictive of future performance.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2. Growth of $10,000 invested on 1/31/95
DATE MARKMAN MODERATE S&P 500 LIPPER EQUITY
GROWTH FUND INCOME FUND INDEX
<S> <C> <C> <C>
1/31/95 10000 10000 10000
10220 10229 10136
10270 10276 10200
10220 10283 10254
10320 10389 10321
10240 10285 10212
10340 10521 10376
10350 10569 10397
10440 10763 10560
10550 10826 10681
10590 10822 10681
10580 10873 10741
10630 11011 10816
10730 11222 10975
10840 11310 11072
10860 11232 10988
10860 11448 11148
10970 11447 11180
11040 11526 11198
11180 11689 11275
11130 11711 11291
11420 11971 11515
11590 12049 11561
11430 11917 11471
11740 12120 11615
11600 12067 11645
11670 12070 11597
11710 12042 11641
11660 12087 11707
11980 12320 11899
12140 12610 12112
12150 12602 12087
12160 12671 12091
12060 12606 12088
12120 12652 12130
12160 12667 12061
12060 12594 11941
12130 12707 12061
12120 12782 12111
12140 13028 12322
12340 13196 12458
12440 13388 12613
12390 13411 12656
12280 13274 12600
12390 13354 12704
12395 13456 12815
12241 13241 12653
12483 13351 12723
12659 13593 12876
13033 14163 13243
13110 14297 13335
13110 14141 13214
13176 14285 13202
13253 14279 13361
13033 14008 13173
13121 14192 13314
13099 14191 13340
13132 14098 13250
13154 14116 13285
13286 14182 13335
13496 14322 13436
13320 13982 13189
13683 14595 13582
13804 14764 13713
13694 14664 13644
13716 14793 13693
13595 14638 13622
13309 14661 13612
13452 14749 13666
13165 14362 13417
12516 13833 13084
12615 13954 13138
12560 13894 13087
12868 14639 13575
12813 14603 13544
12835 14676 13643
12945 14675 13654
12879 14485 13551
13088 15044 13888
13143 15193 13952
13198 15201 13987
13364 15560 14251
13342 15571 14229
13353 15714 14368
13231 15436 14211
13452 16126 14601
13540 16318 14779
13584 16476 14889
13716 16801 15136
13617 16423 14925
13551 16187 14767
13716 16639 15021
12/31/96 13834 16469 15036
Past performance is not predictive of future performance.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
3. Growth of $10,000 invested on 1/31/95
DATE MARKMAN AGGRESSIVE S&P 500 LIPPER GROWTH
GROWTH FUND FUND INDEX
<S> <C> <C> <C>
1/31/95 10000 10000 10000
10250 10229 10215
10270 10276 10329
10190 10283 10368
10230 10389 10371
10160 10285 10315
10300 10521 10510
10330 10569 10558
10590 10763 10783
10450 10826 10728
10620 10822 10827
10480 10873 10790
10720 11011 10986
10780 11222 11133
11010 11310 11293
11190 11232 11274
11000 11448 11318
11230 11447 11443
11440 11526 11568
11800 11689 11843
11620 11711 11745
12190 11971 12194
12530 12049 12350
12170 11917 12060
12710 12120 12416
12420 12067 12312
12620 12070 12416
12710 12042 12469
12560 12087 12419
13070 12320 12820
13250 12610 13021
13220 12602 12972
13190 12671 12931
12900 12606 12740
12930 12652 12836
13060 12667 12809
12950 12594 12730
12950 12707 12852
12840 12782 12827
12690 13028 12836
13050 13196 13082
13080 13388 13173
12960 13411 13049
12900 13274 12945
13030 13354 13030
12931 13456 13117
12720 13241 12858
13087 13351 13103
13298 13593 13294
13777 14163 13768
13776 14297 13862
13810 14141 13794
13866 14285 13843
13833 14279 13926
13632 14008 13758
13677 14192 13827
13632 14191 13810
13710 14098 13802
13855 14116 13868
14133 14182 13979
14511 14322 14161
14322 13982 13882
14945 14595 14401
15135 14764 14514
14868 14664 14335
14823 14793 14419
14589 14638 14316
14100 14661 14172
14322 14749 14272
13888 14362 13880
12942 13833 13230
13098 13954 13394
12965 13894 13348
13443 14639 14040
13321 14603 13989
13298 14676 14023
13432 14675 14111
13298 14485 13960
13655 15044 14448
13755 15193 14596
13799 15201 14675
14055 15560 15015
14033 15571 15035
14022 15714 15021
13777 15436 14752
14155 16126 15321
14311 16318 15479
14356 16476 15559
14534 16801 15826
14356 16423 15602
14278 16187 15353
14478 16639 15610
12/31/96 14658 16469 15527
Past performance is not predictive of future performance.
</TABLE>
<PAGE>
By its very nature, a fund of funds such as the Markman MultiFund Trust will
tend to have a portfolio that is much more diversified than the contents of
most single market averages. There will be times when that diversification
leads to either a short period of out-performance or under-performance. The
theory is that over extended market cycles, a broadly diversified portfolio
may produce superior risk-adjusted returns. The Funds' first 23 months of
existence were marked by a sharp and steady advance in the S&P 500. Not only
was the two year period 1995-1996 one of the best in history for the S&P 500,
its return was accomplished without a significant correction. In this
environment, the diversification of the Funds acted as a drag on performance.
Additionally, all three portfolios suffered, to varying degrees, from the
buy/sell decisions that, in hindsight, were too short-term oriented. This
had particular impact during the summer months, when we experienced
the downside volatility of a relatively aggressive stance and then did not
rebound as strongly as the market due to more cautious repositioning.
As we noted in our 3rd quarter report, we have taken steps to avoid the
potential pitfalls associated with too frequent trading. Shareholders will note
that in all three portfolios the major positions as of 12/31 are essentially
the same as those on 9/30. This extension of time horizons along with selective
active allocation will, we believe, produce the returns we expect.
For more information on each Fund, see the subsequent discussions.
<PAGE>
THE MARKMAN MULTIFUNDS PERFORMANCE
Markman CONSERVATIVE Growth Fund
This is a good time to again stress how high a premium we place on stability
and regularity of return in this Fund.
We made very few changes in the portfolio in the past quarter; the same funds,
representing some 70%+ of our assets, remained in the top five spots. They are
a remarkable group managed by iconoclastic and independent thinking managers.
What is of particular comfort to our "steady as she goes" Conservative Fund
investors is that the average length of experience for these managers
approaches 25 years. I doubt there is much the market could show these guys
that would surprise them.
This is a good time to again stress how high a premium we place on STABILITY
and REGULARITY of return in this Fund. As our new quarterly snapshot feature,
the "HOW WE GOT THERE" graph illustrates, the ride a shareholder experiences
in the Conservative Fund bears little resemblance to the often
pothole-cluttered road of the market.
<PAGE>
<TABLE>
MARKMAN CONSERVATIVE GROWTH FUND COMPARISON
<CAPTION>
Markman Conservative Lipper Balanced Lehmen Int.
Growth Fund Fund Index Gov't. Bond Index
<S> <C> <C> <C>
4TH QTR. 1996 4.8% 5.6% 2.3%
1996 13.4% 13.0% 4.0%
SINCE INCEPTION* 16.4% 18.9% 8.6%
<FN>
* From February 1, 1995 (annualized)
</FN>
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - MARKMAN CONSERVATIVE GROWTH FUND - DECEMBER 31, 1996
FUND SHARES MARKET VALUE % OF TOTAL STATUS*
(UNAUDITED)
<S> <C> <C> <C> <C>
SOGEN INTERNATIONAL FUND, INC....................... 277,372 $ 7,236,632 17.0% +
NORTHEAST INVESTORS TRUST........................... 650,332 7,231,695 17.0 -
FRANKLIN MUTUAL QUALIFIED FUND...................... 219,842 7,138,262 16.8 +
THE MERGER FUND..................................... 459,485 6,483,338 15.2 +
THE ROBERTSON STEPHENS CONTRARIAN FUND**............ 194,691 3,226,024 7.6 -
YACKTMAN FUND, INC.................................. 226,021 3,015,124 7.1 +
COHEN & STEERS REALTY SHARES........................ 57,264 2,582,039 6.1 NEW
LINDNER DIVIDEND FUND, INC.......................... 73,151 2,011,662 4.7 -
T. ROWE PRICE SMALL CAP VALUE FUND.................. 102,202 1,999,066 4.7 -
VANGUARD SPECIALIZED HEALTH CARE PORTFOLIO.......... 27,058 1,578,835 3.7 -
---------- ------
TOTAL INVESTMENTS (COST $41,796,822)............................. 42,502,677 99.9
OTHER ASSETS AND LIABILITIES (NET)................................ 76,455 0.1
---------- ------
NET ASSETS........................................................ $42,579,132 100.0%
========== ======
See accompanying notes to financial statements.
<FN>
* "+" means larger percentage than end of prior quarter, "-" means smaller
percentage than end of prior quarter, "new" means did not appear in prior
quarter.
** Non-income producing security
</FN>
FUNDS ELIMINATED DURING
THE 4TH QUARTER: NONE
</TABLE>
<PAGE>
THE MARKMAN MULTIFUNDS PERFORMANCE
Markman MODERATE Growth Fund
We believe we have a lineup of winners in this portfolio; we intend to let
them do their thing for us.
We are pleased with the nearly 5% gain in the portfolio this quarter, given
the lower-risk stance we took.
As our "middle-of-the-road" offering, we continue to combine what we feel are
the best ideas from both the Conservative and Aggressive portfolios along with
choices that we believe will produce a balanced risk/reward profile. As we
proceed through 1997, we will continue to stress broad diversification and
greatly reduced turn-over. We believe we have a lineup of winners in this
portfolio; we intend to let them do their thing for us.
The "HOW WE GOT THERE" snapshot graph of the fourth quarter helps to give you
a fuller picture of the dynamic we are attempting to create. As you can see,
in a strong S&P 500 uptrend we WILL lag; but when things get rocky and
volatile (as in December), we have the potential to shine.
<PAGE>
<TABLE>
MARKMAN MODERATE GROWTH FUND COMPARISON
<CAPTION>
Markman Moderate S&P 500 Lipper Equity
Growth Fund Income Fund Index
<S> <C> <C> <C>
4TH QTR. 1996 4.8% 8.3% 7.5%
1996 11.1% 22.9% 17.9%
SINCE INCEPTION* 18.5% 29.8% 23.7%
<FN>
* From February 1, 1995 (annualized)
</FN>
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - MARKMAN MODERATE GROWTH FUND - DECEMBER 31, 1996
FUND SHARES MARKET VALUE % OF TOTAL STATUS*
(UNAUDITED)
<S> <C> <C> <C> <C>
FRANKLIN MUTUAL DISCOVERY FUND........................ 683,101 $ 11,735,682 14.9% +
FRANKLIN MUTUAL BEACON FUND........................... 290,494 11,314,732 14.4 +
YACKTMAN FUND, INC.................................... 829,463 11,065,039 14.1 +
NORTHEAST INVESTORS TRUST............................. 965,281 10,733,922 13.6 +
JANUS WORLDWIDE FUND.................................. 235,394 7,930,420 10.1 +
VANGUARD U.S. GROWTH PORTFOLIO........................ 264,374 6,276,238 8.0 -
OAKMARK INTERNATIONAL FUND............................ 324,263 5,084,439 6.5
STEIN ROE CAPITAL OPPORTUNITY FUND**.................. 115,516 3,247,161 4.1 -
COHEN & STEERS REALTY SHARES.......................... 59,059 2,662,973 3.4 NEW
VANGUARD SPECIALIZED HEALTH CARE PORTFOLIO............ 43,447 2,535,145 3.2 +
ARTISAN SMALL CAP FUND**.............................. 180,241 2,400,813 3.1 NEW
FRANKLIN MUTUAL EUROPEAN FUND......................... 138,852 1,581,520 2.0 NEW
THE ROBERTSON STEPHENS PARTNERS FUND.................. 103,631 1,513,013 1.9 NEW
----------- -----
TOTAL INVESTMENTS (COST $75,919,101).............................. 78,081,097 99.3
OTHER ASSETS AND LIABILITIES (NET)................................ 545,712 .7
----------- -----
NET ASSETS........................................................ $78,626,809 100.0%
=========== =====
See accompanying notes to financial statements.
<FN>
* "+" means larger percentage than end of prior quarter, "-" means smaller
percentage than end of prior quarter, "new" means did not appear in prior
quarter.
** Non-income producing security
</FN>
FUNDS ELIMINATED DURING
THE 4TH QUARTER:
RYDEX SERIES TRUST-URSA FUND
PBHG SELECT EQUITY FUND
T. ROWE PRICE BLUE CHIP FUND
ARTISAN INTERNATIONAL FUND
</TABLE>
<PAGE>
THE MARKMAN MULTIFUNDS PERFORMANCE
Markman AGGRESSIVE Growth Fund
Our late summer rotation away from high price to earnings aggressive momentum
growth funds and into U.S. value and diversified international funds has paid
off thus far.
Our late summer rotation away from high price to earnings aggressive momentum
funds and into U.S. value and diversified international funds has paid off
thus far. While the Fund did slightly lag the blow-out numbers of the S&P 500,
during the 4th quarter we exceeded most other relevant comparative indices
including the Lipper Growth, NASDAQ, Russell 2000, and Investor's Daily Growth
Fund Index.
As with the Conservative and Moderate portfolios, reduced turnover and our
diversification helped us to weather a rocky year-end. As you can see in the
"snapshot" graph, we continued to move ahead in December while the S&P 500 was
LOSING 2%. While we would not want you to assume from that very brief period
that we could always make money in a down market, we do think it gives some
real confirmation that our well thought out diversification can help to
maintain an excellent upside while sidestepping overly speculative risk
levels.
<PAGE>
<TABLE>
MARKMAN AGGRESSIVE GROWTH FUND COMPARISON
<CAPTION>
Markman Aggresive S&P 500 Lipper Growth
Growth Fund Fund Index
<S> <C> <C> <C>
4TH QTR. 1996 6.2% 8.3% 5.8%
1996 11.7% 22.9% 17.5%
SINCE INCEPTION* 22.1% 29.8% 25.8%
<FN>
* From February 1, 1995 (annualized)
</FN>
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS - MARKMAN AGGRESIVE GROWTH FUND - DECEMBER 31, 1996
FUND SHARES MARKET VALUE % OF TOTAL STATUS*
(UNAUDITED)
<S> <C> <C> <C> <C>
FRANKLIN MUTUAL SHARES................................ 162,512 $ 15,089,231 17.8% +
VANGUARD U.S. GROWTH PORTFOLIO........................ 443,604 10,531,151 12.5 -
OAKMARK INTERNATIONAL FUND............................ 504,163 7,905,284 9.4 +
YACKTMAN FUND, INC.................................... 588,489 7,850,444 9.3 +
TWENTIETH CENTURY INTERNATIONAL DISCOVERY FUND........ 882,340 6,494,026 7.7 -
FRANKLIN MUTUAL EUROPEAN FUND......................... 553,936 6,309,329 7.5 +
OAKMARK SMALL CAP FUND**.............................. 418,971 6,049,945 7.1 +
INVESCO EUROPEAN FUND................................. 344,093 5,457,323 6.5 +
STEIN ROE CAPITAL OPPORTUNITY FUND**.................. 166,714 4,686,332 5.6 -
FEDERATED MINI-CAP FUND............................... 324,304 4,553,224 5.4 NEW
T. ROWE PRICE BLUE CHIP FUND.......................... 226,954 4,325,749 5.1 -
COHEN & STEERS REALTY SHARES.......................... 94,840 4,276,320 5.1 NEW
---------- ----
TOTAL INVESTMENTS (COST $81,195,693).............................. 83,528,358 99.0
OTHER ASSETS AND LIABILITIES (NET................................. 800,540 1.0
---------- ----
NET ASSETS........................................................ $84,328,898 100.0%
========== ======
See accompanying notes to financial statements.
<FN>
* "+" means larger percentage than end of prior quarter, "-" means smaller
percentage than end of prior quarter, "new" means did not appear in prior
quarter.
** Non-income producing security
</FN>
FUNDS ELIMINATED DURING
THE 4TH QUARTER:
FIDELITY LATIN AMERICA FUND
PBHG SELECT EQUITY FUND
RYDEX SERIES TRUST - NOVA FUND
PBHG EMERGING GROWTH FUND
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 1996
- -----------------------------------------------------------------------------------------------------
CONSERVATIVE MODERATE AGGRESSIVE
ASSETS GROWTH FUND GROWTH FUND GROWTH FUND
<S> <C> <C> <C>
INVESTMENTS IN SECURITIES:
AT ACQUISITION COST........................... $ 41,796,822 $ 75,919,101 $ 81,195,693
============= ============= =============
AT VALUE (NOTE 1)............................. $ 42,502,677 $ 78,081,097 $ 83,528,358
CASH............................................. --- 741,470 1,290,398
RECEIVABLE FOR SECURITIES SOLD................... 399,990 --- ---
RECEIVABLE FOR CAPITAL SHARES SOLD............... 151,916 137,280 25,111
DIVIDENDS RECEIVABLE............................. 2,456 3,823 3,581
OTHER ASSETS 273 --- 8,294
------------- ------------- -------------
TOTAL ASSETS $ 43,057,312 $ 78,963,670 $ 84,855,742
------------- ------------- -------------
- -----------------------------------------------------------------------------------------------------
LIABILITIES
PAYABLE FOR CAPITAL SHARES REDEEMED.............. $ 266,788 $ 197,159 $ 381,944
DISTRIBUTIONS PAYABLE TO SHAREHOLDERS............ 69,715 73,666 75,398
PAYABLE FOR BANK OVERDRAFT....................... 107,346 --- ---
PAYABLE TO AFFILIATES (NOTE 3)................... 34,299 64,280 69,404
OTHER LIABILITIES................................ 32 1,756 98
------------- ------------- -------------
TOTAL LIABILITIES............................. $ 478,180 $ 336,861 $ 526,844
------------- ------------- -------------
- -----------------------------------------------------------------------------------------------------
NET ASSETS
NET ASSETS CONSIST OF:
CAPITAL SHARES................................... $ 41,991,717 $ 76,659,367 $ 82,001,304
UNDISTRIBUTED NET INVESTMENT INCOME.............. 1,335 29 32
DISTRIBUTIONS IN EXCESS OF NET REALIZED GAINS.... (119,775) (194,583) (5,103)
NET UNREALIZED APPRECIATION ON INVESTMENTS....... 705,855 2,161,996 2,332,665
------------- ------------- -------------
NET ASSETS.................................... $ 42,579,132 $ 78,626,809 $ 84,328,898
============= ============= =============
SHARES OF BENEFICIAL INTEREST OUTSTANDING
(UNLIMITED NUMBER OF SHARES AUTHORIZED,
NO PAR VALUE)(NOTE 4)......................... 3,706,796 6,842,584 6,879,341
============= ============= =============
NET ASSET VALUE, REDEMPTION PRICE AND
OFFERING PRICE PER SHARE (NOTE 1)............. $ 11.49 $ 11.49 $ 12.26
============= ============= =============
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1996
- ---------------------------------------------------------------------------------------------------------
CONSERVATIVE MODERATE AGGRESSIVE
INVESTMENT INCOME GROWTH FUND GROWTH FUND GROWTH FUND
<S> <C> <C> <C>
DIVIDEND INCOME............................... $ 1,249,147 $ 1,897,127 $ 1,171,534
------------- ------------- -------------
EXPENSES
INVESTMENT ADVISORY FEES...................... 270,354 772,803 847,620
INDEPENDENT TRUSTEES' FEES.................... 14,000 14,000 14,000
------------- ------------- -------------
TOTAL EXPENSES (NOTE 3).................... 284,354 786,803 861,620
------------- ------------- -------------
NET INVESTMENT INCOME......................... 964,793 1,110,324 309,914
------------- ------------- -------------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
NET REALIZED GAINS FROM SECURITY TRANSACTIONS. 612,693 1,942,355 1,705,972
CAPITAL GAIN DISTRIBUTIONS FROM OTHER
INVESTMENT COMPANIES....................... 1,573,569 3,505,633 3,846,983
NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION ON INVESTMENTS... 530,876 797,362 2,238,283
------------- ------------- -------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 2,717,138 6,245,350 7,791,238
------------- ------------- -------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 3,681,931 $ 7,355,674 $ 8,101,152
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS - FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
- -----------------------------------------------------------------------------------------------------------------------------------
CONSERVATIVE MODERATE AGGRESSIVE
FROM OPERATIONS GROWTH FUND GROWTH FUND GROWTH FUND
1996 1995 1996 1995 1996 1995
------------------------ ------------------------ -------------------------
<S> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME......................... $ 964,793 $ 157,456 $1,110,324 $ 174,168 $ 309,914 $ 29,514
NET REALIZED GAINS FROM SECURITY TRANSACTIONS. 612,693 340,634 1,942,355 2,000,269 1,705,972 2,755,722
CAPITAL GAIN DISTRIBUTIONS FROM OTHER
INVESTMENT COMPANIES....................... 1,573,569 193,168 3,505,633 1,361,368 3,846,983 1,448,986
NET CHANGE IN UNREALIZED APPRECIATION/
DEPRECIATION ON INVESTMENTS............... 530,876 174,979 797,362 1,364,634 2,238,283 94,382
----------- --------- --------- ---------- --------- ---------
NET INCREASE IN NET ASSETS FROM OPERATIONS.... 3,681,931 866,237 7,355,674 4,900,439 8,101,152 4,328,604
----------- --------- --------- ---------- --------- ---------
FROM DISTRIBUTIONS TO SHAREHOLDERS
DIVIDENDS FROM NET INVESTMENT INCOME.......... (963,458) (157,456) (1,110,295) (174,168) (309,882) (29,514)
DISTRIBUTIONS IN EXCESS OF
NET INVESTMENT INCOME (NOTE 1).............. (627,137) (33,397) (860,538) (743,836) (689,085) (728,239)
DISTRIBUTIONS FROM NET REALIZED GAINS......... (1,678,900) (500,405) (4,782,033) (2,617,801) (4,868,973) (3,476,469)
----------- --------- ----------- ---------- ----------- ---------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS.............. (3,269,495) (691,258) (6,752,866) (3,535,805) (5,867,940) (4,234,222)
----------- --------- ----------- ---------- ----------- ---------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 4)
PROCEEDS FROM SHARES SOLD..................... 49,145,757 11,949,211 70,199,331 40,307,575 80,691,707 42,808,631
NET ASSET VALUE OF SHARES ISSUED IN
REINVESTMENT OF DISTRIBUTIONS
TO SHAREHOLDERS............................ 3,199,781 686,564 6,679,202 3,504,110 5,792,545 4,179,128
PAYMENTS FOR SHARES REDEEMED.................. (20,031,002) (2,988,594) (37,842,170) (6,228,681) (46,714,062) (4,786,645)
----------- ---------- ----------- ---------- ----------- ---------
NET INCREASE IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS................ 32,314,536 9,647,181 39,036,363 37,583,004 39,770,190 42,201,114
----------- --------- ----------- ---------- ----------- ---------
TOTAL INCREASE IN NET ASSETS.................. 32,726,972 9,822,160 39,639,171 38,947,638 42,003,402 42,295,496
NET ASSETS:
BEGINNING OF YEAR............................. 9,852,160 30,000 38,987,638 40,000 42,325,496 30,000
----------- ----------- ----------- ---------- ----------- -----------
END OF YEAR................................... $42,579,132 $9,852,160 $78,626,809 $38,987,638 $84,328,898 $42,325,496
=========== =========== =========== =========== =========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME $ 1,335 $ - $ 29 $ - $ 32 $ -
=========== =========== =========== =========== =========== ===========
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS - MARKMAN CONSERVATIVE GROWTH FUND Per share data for a
share outstanding throughout each period.
YEAR PERIOD
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1996 1995 (A)
<S> <C> <C>
NET ASSET VALUE - BEGINNING OF PERIOD........................................ $ 10.97 $ 10.00
----------- ----------
INCOME FROM INVESTMENT OPERATIONS:
NET INVESTMENT INCOME..................................................... 0.28 0.19
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS.......................... 1.19 1.61
----------- ----------
TOTAL FROM INVESTMENT OPERATIONS............................................. 1.47 1.80
----------- ----------
LESS DISTRIBUTIONS:
DIVIDENDS FROM NET INVESTMENT INCOME...................................... (0.28) (0.19)
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME.......................... (0.18) (0.04)
DISTRIBUTIONS FROM NET REALIZED GAINS..................................... (0.49) (0.60)
----------- ----------
TOTAL DISTRIBUTIONS.......................................................... (0.95) (0.83)
----------- ----------
NET ASSET VALUE - END OF PERIOD.............................................. $ 11.49 $ 10.97
=========== ==========
TOTAL RETURN................................................................. 13.41% 18.00%
=========== ==========
NET ASSETS - END OF PERIOD (000'S)........................................... $ 42,579 $ 9,852
=========== ==========
RATIO OF EXPENSES TO AVERAGE NET ASSETS...................................... 0.95% 0.95%(B)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS......................... 3.21% 3.02%(B)
PORTFOLIO TURNOVER RATE...................................................... 104% 176%
<CAPTION>
FINANCIAL HIGHLIGHTS - MARKMAN MODERATE GROWTH FUND Per share data for a share
outstanding throughout each period.
<S> <C> <C>
NET ASSET VALUE - BEGINNING OF PERIOD........................................ $ 11.31 $ 10.00
----------- ----------
INCOME FROM INVESTMENT OPERATIONS:
NET INVESTMENT INCOME..................................................... 0.18 0.06
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS.......................... 1.08 2.39
----------- ----------
TOTAL FROM INVESTMENT OPERATIONS.......................................... 1.26 2.45
----------- ----------
LESS DISTRIBUTIONS:
DIVIDENDS FROM NET INVESTMENT INCOME...................................... (0.18) (0.06)
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME.......................... (0.14) (0.24)
DISTRIBUTIONS FROM NET REALIZED GAINS..................................... (0.76) (0.84)
----------- ----------
TOTAL DISTRIBUTIONS.......................................................... (1.08) (1.14)
----------- ----------
NET ASSET VALUE - END OF PERIOD.............................................. $ 11.49 $ 11.31
=========== ==========
TOTAL RETURN................................................................. 11.11% 24.50%
=========== ==========
NET ASSETS - END OF PERIOD (000'S)........................................... $ 78,627 $ 38,988
=========== ==========
RATIO OF EXPENSES TO AVERAGE NET ASSETS...................................... 0.95% 0.95%(B)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS......................... 1.34% 0.77%(B)
PORTFOLIO TURNOVER RATE...................................................... 280% 141%
<PAGE>
<CAPTION>
FINANCIAL HIGHLIGHTS - MARKMAN AGGRESSIVE GROWTH FUND Per share data for a
share outstanding throughout each period.
<S> <C> <C>
NET ASSET VALUE - BEGINNING OF PERIOD....................................... $ 11.79 $ 10.00
----------- ----------
INCOME FROM INVESTMENT OPERATIONS:
NET INVESTMENT INCOME.................................................... 0.05 0.01
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS......................... 1.34 3.11
----------- ----------
TOTAL FROM INVESTMENT OPERATIONS............................................ 1.39 3.12
----------- ----------
LESS DISTRIBUTIONS:
DIVIDENDS FROM NET INVESTMENT INCOME..................................... (0.05) (0.01)
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME......................... (0.11) (0.23)
DISTRIBUTIONS FROM NET REALIZED GAINS.................................... (0.76) (1.09)
----------- ----------
TOTAL DISTRIBUTIONS......................................................... (0.92) (1.33)
----------- ----------
NET ASSET VALUE - END OF PERIOD............................................. $ 12.26 $ 11.79
=========== ==========
TOTAL RETURN................................................................ 11.72% 31.21%
=========== ==========
NET ASSETS - END OF PERIOD (000'S).......................................... $ 84,329 $ 42,325
=========== ==========
RATIO OF EXPENSES TO AVERAGE NET ASSETS..................................... 0.95% 0.95%(B)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS........................ 0.34% 0.15%(B)
PORTFOLIO TURNOVER RATE..................................................... 340% 204%
<FN>
(A) Represents the period from the initial public offering of shares (January
26, 1995) through December 31, 1995. No income was earned or expenses incurred
from the date the initial shares were purchased by the Adviser through the
date of public offering.
(B) Annualized.
</FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Markman MultiFund Trust (the Trust) is registered under the Investment
Company Act of 1940, as amended (the 1940 Act), as an open-end non-diversified
management investment company. The Trust was organized as a Massachusetts
business trust on September 7, 1994. The Trust offers three series of shares
to investors: the Markman Conservative Growth Fund, the Markman Moderate
Growth Fund and the Markman Aggressive Growth Fund (collectively, the Funds).
The Trust was capitalized on November 28, 1994, when the Funds' investment
adviser, Markman Capital Management, Inc. (the Adviser), purchased the initial
shares of each Fund at $10.00 per share. The public offering of shares
commenced on January 26, 1995. The Trust had no operations prior to the public
offering of shares except for the initial issuance of shares to the Adviser.
The Markman Conservative Growth Fund seeks to provide current income and low
to moderate growth of capital. The Markman Moderate Growth Fund seeks growth
of capital and a reasonable level of current income. The Markman Aggressive
Growth Fund seeks capital appreciation without regard to current income.
THE FOLLOWING IS A SUMMARY OF THE TRUST'S SIGNIFICANT ACCOUNTING POLICIES:
SECURITIES VALUATION -- The Funds' portfolio securities are valued as of the
close of business of the regular session of trading on the New York Stock
Exchange (currently 4:00 p.m., Eastern time). Shares of open-end management
investment companies (mutual funds) in which the Funds invest are valued at
their respective net asset values as determined under the 1940 Act. Such
mutual 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 in which the Funds
also invest generally value securities in their portfolios on an amortized
cost basis, which approximates market.
SHARE VALUATION -- The net asset value per share of each Fund is calculated
daily by dividing the total value of that Fund's assets, less liabilities, by
the number of shares outstanding, rounded to the nearest cent. The offering
and redemption price per share of each Fund are equal to the net asset value
per share.
<PAGE>
INVESTMENT INCOME -- Dividend income is recorded on the ex-dividend date. For
financial reporting purposes, the Funds record distributions of short-term and
long-term capital gains made by mutual funds in which the Funds invest as
realized gains. For tax purposes, the short-term portion of such distributions
is treated as dividend income by the Funds.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders arising from
each Fund's net investment income and net realized capital gains, if any, are
distributed at least once each year. Income distributions and capital gain
distributions are determined in accordance with income tax regulations, which
may differ from generally accepted accounting principles.
SECURITY TRANSACTIONS -- Security transactions are accounted for on the trade
date. Securities sold are valued on a specific identification basis.
ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
FEDERAL INCOME TAX -- It is each Fund's policy to comply with the special
provisions of the Internal Revenue Code (the Code) available to regulated
investment companies. As provided therein, in any fiscal year in which a Fund
so qualifies and distributes at least 90% of its taxable net income, the Fund
(but not the shareholders) will be relieved of federal income tax on the
income distributed. Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also each Fund's intention to declare as dividends
in each calendar year at least 98% of its net investment income (earned during
the calendar year) and 98% of its net realized capital gains (earned during
the twelve months ended October 31) plus undistributed amounts from prior
years.
Each of the Funds files a tax return annually using tax accounting methods
required under provisions of the Code which may differ from generally accepted
accounting principles, the basis on which these financial statements are
prepared. The differences arise primarily from the treatment of short-term
gain distributions made by mutual funds in which the Funds invest and the
deferral of certain losses under federal income tax regulations. Accordingly,
the amount of net investment income and net realized capital gain or loss
reported in the financial statements may differ from that reported in the
Funds' tax returns and, consequently, the character of distributions to
shareholders reported in the Statements of Changes in Net Assets and the
Financial Highlights may differ from that reported to shareholders for federal
income tax purposes. As a result of such differences, reclassifications were
made to the components of net assets to conform with generally accepted
accounting principles.
<TABLE>
<CAPTION>
FEDERAL INCOME TAX
The following information is based upon the federal income tax cost of
portfolio investments as of December 31, 1996:
CONSERVATIVE MODERATE AGGRESSIVE
GROWTH FUND GROWTH FUND GROWTH FUND
<S> <C> <C> <C>
GROSS UNREALIZED APPRECIATION $1,111,159 $2,512,204 $2,911,234
GROSS UNREALIZED DEPRECIATION (525,653) (544,794) (619,589)
- -------------------------------------------------------------------------------------------------------
NET UNREALIZED APPRECIATION $585,506 $1,967,410 $2,291,645
=======================================================================================================
FEDERAL INCOME TAX COST $41,917,171 $76,113,687 $81,236,713
=======================================================================================================
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
2. INVESTMENT TRANSACTIONS
During the year ended December 31, 1996, purchases and proceeds from sales of
portfolio securities, other than short-term investments, amounted to
$60,831,327 and $29,171,071, respectively, for the Markman Conservative Growth
Fund, $254,909,767and $217,973,558, respectively, for the Markman Moderate
Growth Fund, and $321,099,286 and $284,090,104, respectively, for the Markman
Aggressive Growth Fund.
3. TRANSACTIONS WITH AFFILIATES
The Chairman of the Board and President of the Trust is also the President of
Markman Capital Management, Inc. (the Adviser). Certain other trustees and
officers of the Trust are officers of the Adviser or of MGF Service Corp.
(MGF), the administrative services agent, shareholder servicing and transfer
agent, and accounting services agent for the Trust.
INVESTMENT ADVISORY AGREEMENT
The Funds' investments are managed by the Adviser pursuant to the terms of an
Investment Management Agreement. Each Fund pays the Adviser an investment
management fee, computed and accrued daily and paid monthly, at an annual rate
of .95% of average daily net assets of each Fund. The Adviser pays all
operating expenses of the Funds except brokerage commissions, taxes, interest,
fees and expenses of independent trustees and any extraordinary expenses. In
addition, the Adviser is contractually obligated to reduce its investment
management fee in an amount equal to each Fund's allocable portion of the fees
and expenses of the Trust's independent trustees.
ADMINISTRATION, ACCOUNTING, AND TRANSFER AGENCY AGREEMENT
Under the terms of the Administration, Accounting, and Transfer Agency
Agreement between the Trust, the Adviser and MGF, MGF supplies non-investment
related statistical and research data, internal regulatory compliance
services, and executive and administrative services for each of the Funds. MGF
supervises the preparation of tax returns for the Funds, reports to
shareholders of the Funds, reports to and filings with the Securities and
Exchange Commission and state securities commissions and materials for
meetings of the Board of Trustees. In addition, MGF maintains the records of
each shareholder's account, answers shareholders' inquiries concerning their
accounts, processes purchases and redemptions of each Fund's shares, acts as
dividend and distribution disbursing agent and performs other shareholder
service functions. MGF also calculates the daily net asset value per share and
maintains the financial books and records of each Fund. For the performance of
these services, the Adviser, out of its investment management fee, pays MGF a
monthly base fee, an asset based fee, and a fee based on the number of
shareholder accounts. In addition, the Adviser pays out-of-pocket expenses
including but not limited to, postage and supplies.
4. CAPITAL SHARE TRANSACTIONS
Proceeds and payments on capital share transactions as shown in the State
ments of Changes in Net Assets are the result of the following capital share
transactions for the years ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 CONSERVATIVE MODERATE AGGRESSIVE
GROWTH FUND GROWTH FUND GROWTH FUND
<S> <C> <C> <C>
Share Sold 4,224,322 5,984,900 6,577,451
Shares Issued in Reinvestment
of Distributions to Shareholders 278,484 581,306 472,475
Shares Redeemed (1,694,000) (3,169,616) (3,759,415)
---------- ----------- ----------
Net Increase in Shares Outstanding 2,808,806 3,396,590 3,290,511
Shares Outstanding, Beginning of Year 897,990 3,445,994 3,588,830
---------- ----------- ----------
Shares Outstanding, End of Year 3,706,796 6,842,584 6,879,341
========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
1995 CONSERVATIVE MODERATE AGGRESSIVE
GROWTH FUND GROWTH FUND GROWTH FUND
<S> <C> <C> <C>
Shares Sold 1,099,287 3,661,638 3,621,298
Shares Issued in Reinvestment
of Distributions to Shareholders 62,586 309,824 354,464
Shares Redeemed (266,883) (529,468) (389,932)
--------- ---------- ---------
Net Increase in Shares Outstanding 894,990 3,441,994 3,585,830
Shares Outstanding, Beginning of Year 3,000 4,000 3,000
--------- ---------- ---------
Shares Outstanding, End of Year 897,990 3,445,994 3,588,830
========= ========== =========
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF THE
MARKMAN MULTIFUND TRUST:
We have audited the accompanying statement of assets and liabilities of the
Markman Conservative Growth Fund, the Markman Moderate Growth Fund and the
Markman Aggressive Growth Fund of Markman MultiFund Trust (a Massachusetts
business trust), including the portfolios of investments, as of December 31,
1996, and the related statement of operations, the statement of changes in net
assets, and the financial highlights for the periods indicated thereon (see
pages 7, 9, 11-16). These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1996, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Markman Conservative Growth Fund, the Markman Moderate Growth Fund and the
Markman Aggressive Growth Fund as of December 31, 1996, the results of their
operations, the changes in their net assets, and their financial highlights
for the periods indicated thereon, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
CINCINNATI, OHIO
JANUARY 10, 1997
<PAGE>
FIRST CLASS
THE MARKMAN MULTIFUNDS
6600 France Avenue So., Suite 565
Minneapolis, Minnesota 55435
PORTFOLIO/STRATEGY UPDATE
To hear Bob Markman's weekly
market overview and
MultiFund activity report,
dial 1-800-975-5463.
PROSPECTUS
For copies of the
Markman Prospectus,
dial 1-800-232-4792.
PRICELINE
Call anytime for
up-to-the-minute net
asset values
at 1-800-536-8679.
HELPLINE
For an application form,
for assistance in
completing an application,
or for general administrative
questions, dial 1-800-707-2771.
ONLINE
Bob's on the Internet!
Check for net asset values and more
at http://www.markman.com
Authorized for distribution only if preceded or accompanied by a current
prospectus.
INVESTMENT ADVISER
Markman Capital Management, Inc.
6600 France Ave. So., Suite 565
Minneapolis, Minnesota 55435
Telephone: 612-920-4848
Toll-free: 1-800-395-4848
SHAREHOLDER SERVICES
c/o MGF Service Corp.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-3874
Telephone: 513-629-2070
Toll-free: 1-800-707-2771
100% NO-LOADTM MUTUAL FUND COUNCIL
<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
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
*(5) Investment Advisory Agreement
between Registrant and Markman Capital
Management, Inc. ("Markman Capital")
(6) Inapplicable
<PAGE>
(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
Countrywide Fund Services, Inc.
*(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 Aggressive
Allocation Portfolio
(17)(b) Financial Data Schedule - Markman Moderate
Allocation Portfolio
(17)(c) Financial Data Schedule - Markman Conservative
Allocation Portfolio
(18) Inapplicable
- --------------------
* Incorporated herein by reference to this Registration Statement as
originally filed with the Securities and Exchange Commission or as
subsequently amended.
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.
<PAGE>
Item 26. Number of Holders of Securities
Set forth below are the number of record holders, as of March 1, 1997, of the
shares of beneficial interest of the Registrant:
Number of Record
Title of Class Holders
Shares of Beneficial Interest 1,021
no par value, Aggressive Allocation Portfolio
Shares of Beneficial Interest 856
no par value, Moderate Allocation Portfolio
Shares of Beneficial Interest 441
no par value, Conservative Allocation Portfolio
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 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.
<PAGE>
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 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 invest-
ment adviser providing investment advice to individuals, employee benefit
plans, charitable and other nonprofit organizations, and corporations.
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
<PAGE>
Item 29. Principal Underwriters
(a) Inapplicable
(b) Inapplicable
(c) Inapplicable
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.
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 Allocation Portfolio,"
"Markman Moderate Allocation Portfolio" and "Markman Conservative Allocation
Portfolio" 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 31st of March, 1997.
MARKMAN MULTIFUND TRUST
By: /s/ Robert J. Markman
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 March 31, 1997
Robert J. Markman Board of Trustees
and President
(Principal execu-
tive officer)
/s/ Mark J. Seger Treasurer (Principal March 31, 1997
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 March 31, 1997
David M. Leahy
Attorney-in-Fact*
EXHIBIT INDEX
1. Administration, Accounting and Transfer Agency Agreement
among Registrant, Markman Capital Management, Inc. and
Countrywide Fund Services, Inc.
2. Consent of Independent Public Accountants
3. Financial Data Schedule - Markman Aggressive Allocation
Portfolio
4. Financial Data Schedule - Markman Moderate Allocation
Portfolio
5. Financial Data Schedule - Markman Conservative Allocation
Portfolio
ADMINISTRATION, ACCOUNTING AND TRANSFER AGENCY AGREEMENT
AGREEMENT dated as of February 28, 1997 by and between Markman
MultiFund Trust (the "Trust"), a Massachusetts business trust,
Markman Capital Management, Inc. ("Markman"), a Minnesota corpo-
ration, and Countrywide Fund Services, Inc. ("Countrywide"), 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 nonadvisory
services to the Trust; and
WHEREAS, Markman desires to appoint Countrywide 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 Countrywide 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.
Countrywide is hereby appointed to provide the Trust with
those services described in this Agreement, and Countrywide 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;
C. A certified copy of each amendment to the Agreement and
- 2 -
<PAGE>
Declaration of Trust and the Bylaws of the Trust;
D. Certified copies of each resolution of the Board of Trust-
ees authorizing officers to give instructions to Country-
wide;
E. Specimens of all new forms of share certificates accompa-
nied by Board of Trustees' resolutions approving such
forms;
F. Such other certificates, documents or opinions which Coun-
trywide may, in its discretion, deem necessary or appropri-
ate 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 Countrywide is to act as
plan agent.
3. TRUST ADMINISTRATION.
Subject to the direction and control of Markman and the
Trust, Countrywide 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,
Countrywide shall supply (i) non-investment related statistical and research
data, (ii) internal regulatory compliance services, and (iii) executive and
administrative services. Countrywide 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. Countrywide shall provide personnel to serve as officers of the
Trust if so elected by the Board of Trustees; provided, however, that Markman
shall reimburse Countrywide for the reasonable out-of-pocket expenses incurred
by such personnel in attending Board of Trustees' meetings and shareholders'
meetings of the Trust.
- 3 -
<PAGE>
4. CALCULATION OF NET ASSET VALUE.
Countrywide 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. Countrywide 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. Countrywide 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, Countrywide may contract with,
and rely upon market quotations provided by, outside services.
5. PAYMENT OF TRUST EXPENSES.
Countrywide 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, Countrywide shall prepare checks in the appropriate amounts which shall
be signed by an authorized officer of Countrywide and mailed to the appropriate
party.
6. COUNTRYWIDE TO RECORD SHARES.
Countrywide 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. Countrywide 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. COUNTRYWIDE TO VALIDATE TRANSFERS.
Upon receipt of a proper request for transfer and upon
surrender to Countrywide of certificates, if any, in proper form for transfer,
Countrywide 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, Countrywide shall notify the Trust in writing of each such
transaction and shall make appropriate entries on the shareholder records
maintained by Countrywide.
- 4 -
<PAGE>
8. SHARE CERTIFICATES.
If the Trust authorizes the issuance of share certificates
and an investor requests a share certificate, Countrywide 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 Countrywide with a sufficient supply of
blank share certificates and from time to time shall renew such supply upon
request of Countrywide. 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, Countrywide 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 Countrywide and the
Trust, and issued by a surety company satisfactory to Countrywide 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, Countrywide 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,
Countrywide 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 Countrywide
to establish a shareholder account, Countrywide 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
- 5 -
<PAGE>
or by computer report at the close of each business day of such 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 Countrywide is notified by the Trust's
Custodian that any check or other order for the payment of money is returned
unpaid for any reason, Countrywide 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 Countrywide pursuant to this
Agreement.
12. DIVIDENDS AND DISTRIBUTIONS.
The Trust shall furnish Countrywide with appropriate
evidence of trustee action authorizing the declaration of dividends and other
distributions. Countrywide 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, Countrywide 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 Countrywide shall
disburse dividends to shareholders of record in accordance with the Trust's then
current prospectus and statement of additional information. Countrywide 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. Countrywide shall mail to the
shareholders periodic statements, as requested by the Trust,
- 6 -
<PAGE>
showing the number of full and fractional shares and the net asset value per
share of shares so credited. When requested by the Trust, Countrywide shall
prepare and file with the Internal Revenue Service, and when required, shall
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.
Countrywide shall, at least annually, furnish in writing to
the Trust the names and addresses, as shown in the shareholder accounts
maintained by Countrywide, 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. Countrywide 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. Countrywide 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 Countrywide. Upon its approval of such
redemption transactions, Countrywide, 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, Countrywide shall either: (a)
prepare checks in the appropriate amounts for approval and verification by the
Trust and signature by an authorized officer of Countrywide 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 Countrywide. If Countrywide or the Trust
determines that a request for redemption does not comply with the requirements
for redemptions, Countrywide 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, Countrywide, in accor-
- 7 -
<PAGE>
dance 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 agent, shall review and approve all exchange
requests and shall, on behalf of the Trust's shareholders, process such approved
exchange requests.
C. Countrywide 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 Countrywide
and the Trust consistent with the then current prospectus and statement of
additional information.
D. The authority of Countrywide 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.
Countrywide 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 Countrywide 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.
Countrywide 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 Countrywide. Upon receipt of any check drawn or endorsed to the Trust
(or Countrywide, as agent) or otherwise identified as being payment of an
outstanding wire-order, Countrywide will stamp said check
- 8 -
<PAGE>
with the date of its receipt and deposit the amount represented by such check to
Countrywide's deposit accounts maintained with the Custodian. Countrywide 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 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 Countrywide 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.
Countrywide 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.
Countrywide 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 Countrywide 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. Countrywide 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.
Countrywide 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;
- 9 -
<PAGE>
D. Historical information regarding the account of each share-
holder, 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;
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 with-
holding is required by the Internal Revenue Code of
1986, as amended; and
K. Any information required in order for Countrywide to per-
form the calculations contemplated under this Agreement.
20. TAX RETURNS AND REPORTS.
Countrywide 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.
Countrywide 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.
- 10 -
<PAGE>
Subject to such instructions, verification and approval of
the Custodian and the Trust as shall be required by any agreement or applicable
law, Countrywide 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.
23. ACCESS TO SHAREHOLDER INFORMATION.
Upon request, Countrywide shall arrange for the Trust's
investment adviser to have direct access to shareholder information contained in
Countrywide's computer system, including account balances, performance
information and such other information which is available to Countrywide with
respect to shareholder accounts.
24. COOPERATION WITH ACCOUNTANTS.
Countrywide 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.
Countrywide 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. Countrywide 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 Countrywide will notify the Trust of any correspondence or inquiries
which may require an answer from the Trust.
26. PROXIES.
Countrywide 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.
- 11 -
<PAGE>
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 Countrywide's obligations under this
Agreement, Markman shall pay Countrywide, on the first business day following
the end of each month, a monthly fee in accordance with the schedule attached
hereto as Schedule A. Countrywide shall not be required to reimburse the Trust
or Markman for (or have deducted 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 Countrywide for
any out-of-pocket expenses and advances which are to be paid by the Trust in
accordance with Paragraph 29.
29. EXPENSES.
Countrywide 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
Countrywide 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 Countrywide for services provided under
this Agreement. Postage for mailings of dividends, proxies, reports and other
mailings to all shareholders shall be advanced to Countrywide three business
days prior to the mailing date of such materials.
30. REFERENCES TO COUNTRYWIDE.
The Trust or Markman shall not circulate any printed matter
which contains any reference to Countrywide without the prior written approval
of Countrywide, excepting solely such printed matter as merely identifies
Countrywide 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 Countrywide in draft
form, allowing sufficient time for review by Countrywide and its counsel prior
to any deadline for printing.
31. EQUIPMENT FAILURES.
- 12 -
<PAGE>
In the event of equipment failures beyond Countrywide's
control, Countrywide shall take all steps necessary to minimize service
interruptions but shall have no liability with respect thereto. Countrywide
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.
32. INDEMNIFICATION OF COUNTRYWIDE.
A. Countrywide 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 Countrywide 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
Countrywide under this Agreement or by reason of reckless disregard by any of
such persons of the obligations and duties of Countrywide under this Agreement.
B. Any person, even though also a director, officer, employee,
shareholder or agent of Countrywide, 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 Countrywide 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 Countrywide, 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 Countrywide may
sustain or incur or which may be asserted against Countrywide by any person by
reason of, or as a result of: (i) any action taken or omitted to be taken by
Countrywide 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
- 13 -
<PAGE>
or its own counsel; or (ii) any action taken or omitted to be taken by
Countrywide 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 Countrywide 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.
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 Countrywide, (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 Countrywide such compensation as may be due as
of the date of such termination, and shall likewise reimburse Countrywide for
any out-of-pocket expenses and disbursements reasonably incurred by Countrywide
to such date.
C. In the event that in connection with the termination of
this Agreement a successor to any of Countrywide's duties or responsibilities
under this Agreement is designated by the Trust or by Markman by written notice
to Countrywide, Countrywide shall, promptly upon such termination and at the
expense of Markman, transfer all records maintained by Countrywide under this
Agreement and shall cooperate in the transfer of such duties and
responsibilities, including provision for assistance from Countrywide'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 Countrywide or any
affiliated person (as defined in the 1940 Act) of Countrywide from providing
services for any other person, firm or corporation (including other investment
companies); provided, however, that Countrywide expressly represents that it
will undertake no
- 14 -
<PAGE>
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 Countrywide to perform any
services for the Trust or Markman which services could cause Countrywide 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 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 Countrywide, 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
- 15 -
<PAGE>
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 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 Countrywide 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 Countrywide 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.
- 16 -
<PAGE>
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.
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
COUNTRYWIDE FUND SERVICES, INC.
By: /s/ Robert G. Dorsey
Its: President
- 17 -
<PAGE>
Schedule A
COMPENSATION
For the administrative, fund accounting, transfer agent and
shareholder services provided by Countrywide Fund Services, Inc. to the Markman
MultiFund Trust, Markman will pay to Countrywide Fund Services, Inc. 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.
- 18 -
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in
this Post-Effective Amendment No. 5 of our report dated January 10, 1997 and to
all references to our Firm included in or made a part of this Post-Effective
Amendment.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Cincinnati, Ohio,
March 28, 1997
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<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 81,195,693
<INVESTMENTS-AT-VALUE> 83,528,358
<RECEIVABLES> 28,692
<ASSETS-OTHER> 8,294
<OTHER-ITEMS-ASSETS> 1,290,398
<TOTAL-ASSETS> 84,855,742
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 526,844
<TOTAL-LIABILITIES> 526,844
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 82,001,304
<SHARES-COMMON-STOCK> 6,879,341
<SHARES-COMMON-PRIOR> 3,588,830
<ACCUMULATED-NII-CURRENT> 32
<OVERDISTRIBUTION-NII> 0
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<OVERDISTRIBUTION-GAINS> 5,103
<ACCUM-APPREC-OR-DEPREC> 2,332,665
<NET-ASSETS> 84,328,898
<DIVIDEND-INCOME> 1,171,534
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 861,620
<NET-INVESTMENT-INCOME> 309,914
<REALIZED-GAINS-CURRENT> 5,552,955
<APPREC-INCREASE-CURRENT> 2,238,283
<NET-CHANGE-FROM-OPS> 8,101,152
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 998,967
<DISTRIBUTIONS-OF-GAINS> 4,868,973
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<NUMBER-OF-SHARES-SOLD> 6,577,451
<NUMBER-OF-SHARES-REDEEMED> 3,759,415
<SHARES-REINVESTED> 472,475
<NET-CHANGE-IN-ASSETS> 42,003,402
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 847,620
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 861,620
<AVERAGE-NET-ASSETS> 90,811,502
<PER-SHARE-NAV-BEGIN> 11.79
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 1.34
<PER-SHARE-DIVIDEND> .16
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.26
<EXPENSE-RATIO> .95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
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<NAME> MARKMAN MULTIFUND TRUST
<SERIES>
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<NAME> MARKMAN MODERATE ALLOCATION PORTFOLIO
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 75,919,101
<INVESTMENTS-AT-VALUE> 78,081,097
<RECEIVABLES> 141,103
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 741,470
<TOTAL-ASSETS> 78,963,670
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 336,861
<TOTAL-LIABILITIES> 336,861
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 76,659,367
<SHARES-COMMON-STOCK> 6,842,584
<SHARES-COMMON-PRIOR> 3,445,994
<ACCUMULATED-NII-CURRENT> 29
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 194,583
<ACCUM-APPREC-OR-DEPREC> 2,161,996
<NET-ASSETS> 78,626,809
<DIVIDEND-INCOME> 1,897,127
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 786,803
<NET-INVESTMENT-INCOME> 1,110,324
<REALIZED-GAINS-CURRENT> 5,447,988
<APPREC-INCREASE-CURRENT> 797,362
<NET-CHANGE-FROM-OPS> 7,355,674
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,970,833
<DISTRIBUTIONS-OF-GAINS> 4,782,033
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,984,900
<NUMBER-OF-SHARES-REDEEMED> 3,169,616
<SHARES-REINVESTED> 581,306
<NET-CHANGE-IN-ASSETS> 39,639,171
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 772,803
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 786,803
<AVERAGE-NET-ASSETS> 82,929,631
<PER-SHARE-NAV-BEGIN> 11.31
<PER-SHARE-NII> .18
<PER-SHARE-GAIN-APPREC> 1.08
<PER-SHARE-DIVIDEND> .32
<PER-SHARE-DISTRIBUTIONS> .76
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.49
<EXPENSE-RATIO> .95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
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<SERIES>
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
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