Markman
MULTIFUNDS
Annual
Report
December 31, 1999
AGGRESSIVE ALLOCATION PORTFOLIO
MODERATE ALLOCATION PORTFOLIO
CONSERVATIVE ALLOCATION PORTFOLIO
INCOME ALLOCATION PORTFOLIO
<PAGE>
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LOOKING BACK:
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AS WE'VE SAID MANY TIMES BEFORE, the market always manages to confound at least
some of the conventional wisdom. Even so, I've never, in almost two decades in
the investment business, seen so many conventional views from the beginning of
the year turn out to be so incredibly wrong by the end of the year. The chart
below shows how dangerous it was to listen to the legion of chin-rubbing,
furrow-browed "prudent" pundits as 1999 began.
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THE "PRUDENT" PUNDITS SAID... WHAT ACTUALLY HAPPENED...
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* The S&P 500, after four 20%+ * The S&P gained over 20% with
years, could not repeat again with dividends reinvested, its fifth
solid gains. straight great year.
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* After such a multi-year runup in * While the stock market soared,
the stock market, it might be a bonds experienced their worst
good idea to take some chips off decline in a generation.
the table and reallocate to bonds.
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* Y2K disruptions could throw the * Y2 what?
U.S. economy into a reces-sion, or
at least cause a severe decline in
the stock market as investors pull
out dollars. To be sure, markets
overseas that have prepared less
than we have will be severely
impacted.
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* Market "leadership" is much too * Leadership stayed in the same few
narrow. This bull market cannot favorites with the split widening
continue to move up on the backs between the haves and have nots.
of just a few favorite stocks. The Amazingly, even on the Nasdaq,
market will need to broaden out to which gained over 85% for the
survive and prosper. year, almost half the stocks
actually lost money!
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* Growth stocks have appreciated too * Growth once again trounced value
far, too fast. Value stocks are by a huge margin. The S&P mid-cap
the smarter bet now for investors growth index rose over 50% while
looking to buy low and ride the the mid-cap value index was
market up. virtually unchanged.
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* The Internet bubble will burst! * Maybe so...someday. In the
These valuations are simply meantime, some Internet funds
unsustainable! Repent ye dot-com posted gains in 1999 of over 200%.
sinners! Arghhh....
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Markman
<PAGE>
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1999 IN PERSPECTIVE
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Given how absurdly off base the conventional wisdom was last year, I can't help
taking this opportunity to dig back in the archives and reprint what we wrote in
last year's annual report:
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WHAT WE SAID LAST YEAR:
o "It's hard to imagine a serious and extended setback for the market..."
o "The biggest risk we run this year is not recession, but an economy too
strong for the Federal Reserve to tolerate."
o "Treasuries will be in for some tough sledding..."
o "Small-cap stocks should do better this year. That doesn't mean, however,
that they will outperform large stocks."
o "Technology...will continue to be a driving force in the economy. We intend
to maintain our overweighting in tech stocks..."
o "Overall, I am extremely optimistic about 1999 and think that potentially
significant gains are possible."
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No doubt it was our good fortune to see the year unfold quite as we anticipated,
which in turn led to the superior per-formance of all of the Markman MultiFund
Portfolios. As you can see by the accompanying charts and graphs, all of the
Portfolios significantly out-performed their comparative Fund of Fund and
general market index bench-marks. The Aggressive Allocation Portfolio's 49.88%
return is, of course, attributable to the overweighting in technology-oriented
fund investments that we were committed to -- and stuck with -- even when media
pundits shouted to head for the hills.
On the other end of the volatility spec-trum, the Conservative Allocation
Portfolio's 24.97% return outdistanced its peers not only by having an equity
allocation that showed superior perfor-mance, but also by our choice of bond
investments. As we've noted, bonds had a lousy year. We foresaw at the
begin-ning of the year that the high quality/government bond choices one would
normally see in a conservative-type portfolio simply wouldn't do the job in
1999. We opted to over-allocate into high-yield bond funds. Many eye-brows were
raised by our use of "junk" bond funds for cautious investors, but we felt that,
given the economic picture, junk was likely to hold its value much more than
high-quality bonds. And the reality was that even though the high-yield funds
did not perform as well as we had hoped, they did manage to turn in positive
returns for the year, greatly outperforming their higher quality brethren.
As always, the Moderate Allocation Portfolio continually plays a balancing act
between the zip of the Aggressive Allocation and the caution of the Conservative
Allocation. Given how well our choices were at the extremes, it is not
surprising that the Moderate Allocation, with its 35.49% return, did so much
better than its Fund of Fund peers.
The Income Allocation did not open to investors until May 1, and has not yet had
one full year of operation. Still, even in the short period of time it has been
available, it, too, has outper- formed its peer group. Given how dif-ficult it
is to create significant value in the bond arena, we are particularly pleased
with the degree to which it did better than its peers.
Kudos to you, too, the Markman MultiFund shareholders who also did what few
expected at the beginning of 1999: you stayed the course, didn't panic, and, in
many cases, moved intelligently to take advantage of opportunities as the year
unfolded.
----------------------------------------------
1999 RETURNS
----------------------------------------------
MARKMAN AGGRESSIVE ALLOCATION 49.88%
Average Growth Fund of Funds 24.36%
S&P 500 20.89%
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MARKMAN MODERATE ALLOCATION 35.49%
Average Moderate Fund of Funds 18.36%
S&P 500 20.89%
----------------------------------------------
MARKMAN CONSERVATIVE ALLOCATION 24.97%
Average Conservative Fund of Funds 11.40%
S&P 500 20.89%
----------------------------------------------
MARKMAN INCOME ALLOCATION* 3.27%
Average Income Fund of Funds -1.39%
Lipper General Bond Fund Index -0.95%
----------------------------------------------
The Funds of Funds Association provides monthly performance indices for funds of
funds. It divides asset allocation funds of funds into Conservative, Moderate,
and Growth categories based on their degree of daily price volatility compared
to the S&P 500 in 1998. Income funds of funds have 85% or more of their assets
invested in bond funds. Independent data from Lipper Analytical Services is used
to calculate the average returns within these categories. These indices are not
audited as part of the financial statement audit. Markman Capital Management,
the adviser to the Markman MultiFunds, is a founding member of the Funds of
Funds Association. Additional information is available at www.fundsoffunds.org.
* From May 1, 1999
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Markman
1
<PAGE>
- ---------------------------------------------------------
[GRAPHIC OMITTED]
DEC 31, 1999
------------
S&P 500 $34,175
Markman Aggressive Allocation Portfolio $33,509
Funds of Funds Growth $25,291
Past performance is not predictive of future performance.
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[GRAPHIC OMITTED]
DEC 31, 1999
------------
Markman Moderate Allocation Portfolio $34,175
S&P 500 $27,048
Funds of Funds Moderate $22,368
Past performance is not predictive of future performance.
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[GRAPHIC OMITTED]
DEC 31, 1999
------------
S&P 500 $34,175
Markman Conservative Allocation Portfolio $21,409
Funds of Funds Conservative $18,428
Lehman Intermediate Government Bond Index $13,754
Past performance is not predictive of future performance.
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[GRAPHIC OMITTED]
DEC 31, 1999
------------
Markman Income Allocation Portfolio $10,327
Lipper General Bond Fund Index $9,906
Funds of Funds Income $9,861
Past performance is not predictive of future performance.
- ---------------------------------------------------------
LOOKING AHEAD:
Our Take on 2000
ALL THE INGREDIENTS ARE IN PLACE TO MAKE 2000 ANOTHER GREAT YEAR IN THE MARKET.
First among the factors that investors must consider is the simple reality that
we've passed through the dreaded Y2K transition intact. Over the past year, many
billions of dollars and tens of thousands of man hours have been spent making
sure that the world would not grind to a screeching halt as 2000 hit. Much of
that effort displaced other purchases and activities that would normally have
occurred last year. Now, those resources -- both financial and human -- will be
directed to other, more productive areas of technology. After some potential
slowing during the first part of the year, we expect technology spending to
accelerate to levels far above what most analysts are anticipating.
Another "big picture" positive that will affect on returns in 2000 is the
continued overseas recovery and global expansion that finally seems to be firmly
in place after the disruptions of 1997-1998. This bodes well for the large U.S.
growth investments that dominate our portfolios. Over a third of the profits
from companies in the S&P come from non-U.S. sources. These over-seas
operations, previously a drag on recent performance, are now in a position to
add financial tailwind to U.S. large caps.
Once again, we begin the year having to listen to the yammering of ersatz
investment gurus who continue to deny the reality of the information-based
economy. By obsessing about whether stock prices are too high over the short
term, they are once again missing the big story evolving right under their
noses: With each passing day, more and more of our economy becomes connected to
the evolving technological world fabric. This is not a fad. This is not a bubble
(at least in the sense that we have always understood bubbles, as something of
no real value that will eventually burst leaving behind little or nothing). Cell
phones, Email, Internet commerce, and the many other growth areas of technology
that didn't even exist a decade ago are transforming economic man at a rate and
to a degree that no other technology burst has ever done before in the history
of man. Comparing computers to the railroads of the last century is like
comparing sixteen wheelers to golf carts. What makes this information revolution
so potent is the speed with which it evolves and transforms. Think of the wealth
that was created worldwide during the course of the 150-year Industrial
Revolution. Then think of that same level of wealth creation compressed into a
generation or two. That's the potent dynamic we are faced with. When long-term
investors ignore this larger picture for the sake of concerns about temporary
short-term valuations, the result is wealth-creation suicide.
There is one thing, though, that the nervous nellies are right about. As the
information revolution continues to unfold, many of the companies now attracting
attention in the market will ultimately fail. I might even be so bold as to say
that most of them won't survive. The ones that do, however, will grow in such an
exponential way as to over-whelm the effects of the losers. Of course, with very
few exceptions, it's probably impossible to predict who will still be left
standing ten years from now. That's why now, more than ever, mutual funds loom
large as the smart way to make money in the twenty-first century. By
constructing a well-diversified pool of companies at the leading edge of
technology, we significantly reduce the risk that we won't benefit from the
dynamic growth ahead of us. We all know that in recent years many investors, for
tax or performance reasons, have migrated away from funds to buying individual
stocks. For some, initially, this may look like a good move. Ultimately, though,
in the fast-changing complex world of technology, the risks and dangers of this
approach far outweigh the potential benefits.
The managers of the underlying funds we own have discussed with us how they, on
their level, attempt to participate in the upside potential of the information
revolution while avoiding the most egregious risks. This is what is commonly
referred to as the "bricks and mortar" approach to profiting from the technology
boom. With this strategy, investors are directed to look beyond the companies
making big news vying for consumer attention, such as ebay, Amazon.com,
Priceline, Dell and the like and focus instead on those companies that make the
stuff that these better-known names use to do their business. Companies like Sun
Microsystems, Oracle, Qualcomm, Broadcomm and Cisco, to name just a few. The
strategy here says that it doesn't really matter who makes the piece of plastic
surrounding the cell phone or computer hard
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Once again, we begin the year having to listen to the yammering of ersatz
investment gurus who continue to deny the reality of the information-based
economy.
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Markman
2 and 3
<PAGE>
drive. It's the people who create and make the guts underneath the plastic that
will ultimately be the winners. On the Internet, don't obsess about who is
selling what to consumers. Focus on the companies that are creating and selling
the technologies that enable the consumer to be reached in the first place.
Some call this the "pick and shovel" strategy. This reference uses the example
of the 1849 gold rush as a lesson in how to benefit from a "mania." As we all
know, for every prospector who made his fortune in the California gold fields,
many more went bust. In all that uncertainty, however, the merchants who sold
the forty-niners the picks, shovels, and other essen-tials made -- and kept --
secure for-tunes. (I just read that in most mining boomtowns, the most
prosperous person was the woman who did the miners' laundry!)
That said, I can assure you that technology stocks, and the funds that own them,
will experience some extreme volatility this year. So what else is new? What you
as shareholders have learned -- and what other, ostensibly smart investors have
yet to learn -- is that volatility is not the same as risk. Short-term
fluctuations matter little in long-term investments. If anything, these
fluctuations give the superior managers to whom we've entrusted your dollars
opportunities to buy at bargain prices.
Nevertheless, I can be a technology bull without being a Pollyanna about some of
the potential pain we have to endure in order to reap those long-term gains. So
hang in there, folks, and don't let the short-term noise and static make you
lose sight of what's really important long term.
Our overall approach and strategy as we move ahead in 2000 remains the same as
that which rewarded us so well in 1999. We remain convinced that the best
opportunities, particularly on a risk-adjusted basis, are here in the U.S. We
also continue to believe that large U.S. companies will dominate the economic
landscape. Given that an increasingly large percentage of our economic growth is
coming from the technology sector, we will overweight that area in an attempt to
stay ahead of the curve, rather than simply play catch-up.
[PHOTO]
/s/ Bob Markman
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Shameless Book Promotion Department
[GRAPHIC]
Bob has written a book that "tells all" about what works and doesn't work in the
mutual fund world. HAZARDOUS TO YOUR WEALTH: EXTRAORDINARY POPULAR DELUSIONS AND
THE MADNESS OF MUTUAL FUND EXPERTS shows up the conventional wisdom for the odd
collection of dangerous myths it really is. Bob shares with you, in depth, how
he looks at the world and investments. It will give you great insights as to how
we achieved the kind of performance that made 1999 a year to remember in the
Markman MultiFunds. It's a fun, easy read and is available now at bookstores
everywhere as well as on the Net at Amazon.com. Bob urges everyone to buy
multiple copies for all of your family members.
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Mutual funds loom large as the smart way to make money in the twenty-first
century. By constructing a well-diversified pool of companies at the leading
edge of technology, we significantly reduce the risk that we won't benefit from
the dynamic growth ahead of us.
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Markman
4
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AGGRESSIVE ALLOCATION PORTFOLIO
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OUR GOAL: TO ACHIEVE HIGH LONG-TERM GROWTH CONSISTENT WITH REASONABLE
DIVERSIFICATION. A FULLY INVESTED PORTFOLIO, LARGELY STOCK ORIENTED, WILL BE
MAINTAINED AT ALL TIMES, THUS CREATING RELATIVELY HIGH VOLATILITY.
The Aggressive Allocation Portfolio benefited all year from its disciplined
overweighting in funds that were heavy own-ers of technology stocks. Those of
you who followed the daily and weekly short-term price movements of the Fund
(and you know who you are -- tsk, tsk) know that while this strategic move that
we made back in 1998 has increased the very short-term volatility of the
portfolio, it has also enabled us to finally participate in the leading edge of
equity investing.
As we went into the fourth quarter, we began to see more and more solid
indications that the tech rally, which previ-ously had been largely concentrated
in large-cap stocks, was spreading out into the second and third tier names. We
moved on this trend by taking positions in Pin Oak Aggressive Stock Fund and
Firsthand Technology Innovators Fund. Both of these funds work the small- to
mid-cap spectrum of the technology arena and have shown a remarkable ability in
the past to be in the right stocks at the right time. Technology Innovators
closed to new investors a couple of months ago, but we are still able to buy it
and I expect it to be one of our larger holdings before long.
By walking our talk from an allocation standpoint, and holding our ground when
things looked grim in October, we were able to make the most of the "melt up" in
the final two months of the year. The Portfolio's fourth quarter gain of 33.4%
was the largest quarterly gain we've ever achieved.
Of course, the funds we own in turn own more than just technology stocks.
Financials and health loom large in our strategy. This enables us to look long
term with our overall strategy of allocating the Portfolio to what we and our
fund managers feel are the best U.S. growth companies available.
---------------------------------------------
CONTENT BREAKDOWN
---------------------------------------------
Unaudited
[GRAPHIC OMITTED]
U.S. Stocks . . . . . . . . . . . . . . 92%
International Stocks . . . . . . . . . . 2%
Bonds . . . . . . . . . . . . . . . . . 0%
Cash . . . . . . . . . . . . . . . . . . 6%
PORTFOLIO COMPARISON (Unaudited)
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[GRAPHIC OMITTED]
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Markman Aggressive Funds of Funds Association
Allocation Portfolio Growth Index
12 months ending 12/99 49.9% 24.4%
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3 years annualized 31.0% 19.9%
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Annualized since inception* 27.5% 20.7%
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*from February 1, 1995
<TABLE>
<CAPTION>
==============================================================================================
PORTFOLIO OF INVESTMENTS
Markman Aggressive Allocation Portfolio-- December 31, 1999
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Fund Shares Market Value % of Total
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Rydex Series OTC Fund* 333,051 $ 27,430,062 20.1%
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Janus Twenty Fund 320,642 26,751,134 19.6%
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Davis New York Venture Fund, Inc.-- Class Y 631,904 18,331,529 13.4%
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White Oak Growth Stock Fund* 295,445 18,057,612 13.2%
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Liberty-Stein Roe Growth Stock Fund* 293,608 16,262,962 11.9%
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Marsico Focus Fund* 305,967 7,174,921 5.3%
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Transamerica Premier Equity Fund* 211,131 6,747,743 5.0%
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Pin Oak Aggressive Stock Fund* 107,144 5,755,794 4.2%
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The Internet Fund* 101,260 5,034,659 3.7%
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Firsthand Technology Innovators Fund* 92,152 4,548,638 3.3%
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Miscellaneous-- Money Market Fund 602,857 602,857 0.4%
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TOTAL INVESTMENTS (COST $77,825,586) 136,697,911 100.1%
- ----------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (335,851) (0.1)%
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NET ASSETS $ 136,362,060 100.0%
============= =====
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* Non-income producing security. See accompanying notes to financial statements.
</TABLE>
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Markman
5
<PAGE>
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MODERATE ALLOCATION PORTFOLIO
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OUR GOAL: TO BLEND OUR CONSERVATIVE AND AGGRESSIVE APPROACHES IN A
MIDDLE-OF-THE-ROAD PORTFOLIO THAT AIMS FOR HIGHER RETURN THAN A CONSERVATIVE
APPROACH BUT LOWER VOLATILITY THAN AN AGGRESSIVE STANCE.
The Moderate Allocation Portfolio was fortunate in 1999 to be in the position to
blend our successful Conservative and Aggressive strategies. Of course, the
driving force in the Portfolio has been its exposure to the large-cap growth
sector of the U.S. market. During the fall of 1999, we further enhanced the
return potential of the Portfolio by adding to our technology positions. We
increased the Rydex OTC share of the portfolio and added both The Internet Fund
and Firsthand Technology Innovators Fund to the mix.
As with the Conservative Allocation, we have taken steps to offset the increased
volatility of these new positions by shifting our fixed-income strategy away
from the high-yield sector toward the very short end of the yield curve. We no
longer have positions in high-yield bonds; most of those dollars have, as in the
Conservative Allocation, been reallocated to Pimco Short Term Bond Fund and
Strong Advantage.
The overall allocation to equities remains at the high end of the range that we
consider reasonable for this portfolio. This is a reflection of our continued
positive outlook on the economy and the markets.
---------------------------------------------
CONTENT BREAKDOWN
---------------------------------------------
Unaudited
[GRAPHIC OMITTED]
U.S. Stocks . . . . . . . . . . . . . . 69%
International Stocks . . . . . . . . . . 2%
Bonds . . . . . . . . . . . . . . . . . 17%
Cash . . . . . . . . . . . . . . . . . . 12%
PORTFOLIO COMPARISON (Unaudited)
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[GRAPHIC OMITTED]
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Markman Moderate Funds of Funds
Allocation Portfolio Association Moderate Index
12 months ending 12/99 35.5% 18.4%
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3 years annualized 24.2% 16.9%
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Annualized since inception* 21.9% 18.9%
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*from February 1, 1995
<TABLE>
<CAPTION>
==============================================================================================
PORTFOLIO OF INVESTMENTS
Markman Moderate Allocation Portfolio-- December 31, 1999
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Fund Shares Market Value % of Total
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<S> <C> <C> <C>
Janus Twenty Fund 256,396 $ 21,391,126 21.2%
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Marsico Focus Fund* 847,847 19,882,017 19.7%
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The Rydex Series OTC Fund* 174,011 14,331,538 14.2%
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PIMCO Short Term Fund-- Institutional 1,011,708 10,066,493 10.0%
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Davis New York Venture Fund, Inc.-- Class Y 270,587 7,849,720 7.8%
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Strong Advantage Fund-- Institutional 760,645 7,507,563 7.5%
- ----------------------------------------------------------------------------------------------
Paap America-Abroad Fund* 174,078 6,136,262 6.1%
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Firsthand Technology Innovators Fund* 81,762 4,035,768 4.0%
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The Internet Fund* 43,175 2,146,660 2.1%
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Miscellaneous-- Money Market Fund 7,786,336 7,786,336 7.7%
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TOTAL INVESTMENTS (COST $69,142,268) 101,133,483 100.3%
- ----------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (334,715) (0.3)%
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NET ASSETS $ 100,798,768 100.0%
============= ======
* Non-income producing security. See accompanying notes to financial statements.
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</TABLE>
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Markman
6
<PAGE>
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CONSERVATIVE ALLOCATION PORTFOLIO
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OUR GOAL: TO CAPTURE RETURNS CLOSE TO THOSE OF A TYPICAL PORTFOLIO -- CAUTIOUSLY
BALANCED AMONG STOCKS, BONDS, AND MONEY MARKET FUNDS -- WHILE KEEPING SHORT-TERM
VOLATILITY CLOSER TO THAT OF AN INTERMEDIATE BOND PORTFOLIO.
Although we remain careful in the Conservative Allocation not to let our
enthusiasm with the market get the better of us, we did think it prudent to take
advantage of the late summer, early fall weakness to add to our equity
positions. We took small positions in Rydex OTC and Firsthand Technology
Innovators to get our market exposure consistent with our overall view of where
the strength is and would be. As you can see from the pie chart below, our stock
exposure is now 48%, low relative to many other balanced portfolios, but still
higher than the 37% figure as of 9/30/99.
The added volatility inherent in this slightly higher equity allocation has, in
our estimation, been offset by the tactical shift we have taken with the
fixed-income portion of the portfolio. During the fourth quarter we sold all
existing bond positions, which consisted mostly of high-yield bonds. This was in
no way a reflection of our feelings about those particular funds. We continue to
see them as excellent investments in the right situation. In this case, however,
we are looking for a fixed-income component that will give us a greater
assurance of ongoing stability. Thus we have shift-ed the allocation to
short-term bond and money market funds. Funds such as Pimco Short Term Bond and
Strong Advantage provide very high ongoing stability, which, along with our
money market position, will help to stabilize the volatility that our equity
positions present us.
Since we are very bullish on the economy's strength, one of the biggest
potential risks we foresee in 2000 is on the interest rate front. Should rates
increase, we are assured of higher stability by sticking to the short end of the
bond maturity range. Indeed, if rising rates cause a significant setback in
stock prices, we would have resources in those bond positions to deploy back
into stocks at lower prices.
---------------------------------------------
CONTENT BREAKDOWN
---------------------------------------------
Unaudited
[GRAPHIC OMITTED]
U.S. Stocks . . . . . . . . . . . . . . 48%
International Stocks . . . . . . . . . . 1%
Bonds . . . . . . . . . . . . . . . . . 38%
Cash . . . . . . . . . . . . . . . . . . 13%
PORTFOLIO COMPARISON (Unaudited)
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[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
Markman Conservative Funds of Funds Association
Allocation Portfolio Conservative Index
12 months ending 12/99 25.0% 11.4%
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3 years annualized 16.5% 11.5%
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Annualized since inception* 16.5% 13.0%
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*from February 1, 1995
<TABLE>
<CAPTION>
==============================================================================================
PORTFOLIO OF INVESTMENTS
Markman Conservative Allocation Portfolio-- December 31,1999
- ----------------------------------------------------------------------------------------------
Fund Shares Market Value % of Total
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PIMCO Short-Term Fund-- Institutional 683,188 $ 6,797,716 19.7%
- ----------------------------------------------------------------------------------------------
Marsico Focus Fund* 289,450 6,787,594 19.6%
- ----------------------------------------------------------------------------------------------
Strong Advantage Fund-- Institutional 659,225 6,506,555 18.8%
- ----------------------------------------------------------------------------------------------
Janus Twenty Fund 63,513 5,298,879 15.3%
- ----------------------------------------------------------------------------------------------
Firsthand Technology Value Fund* 22,145 2,004,544 5.8%
- ----------------------------------------------------------------------------------------------
The Rydex Series OTC Fund* 24,120 1,986,493 5.7%
- ----------------------------------------------------------------------------------------------
Selected American Shares 52,882 1,893,186 5.5%
- ----------------------------------------------------------------------------------------------
Miscellaneous-- Money Market Fund 3,116,087 3,116,087 9.0%
- ----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $27,329,672) 34,391,054 99.4%
- ----------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET 207,844 0.6%
- ----------------------------------------------------------------------------------------------
NET ASSETS $ 34,598,898 100.0%
============= ======
* Non-income producing security. See accompanying notes to financial statements.
- ----------------------------------------------------------------------------------------------
</TABLE>
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Markman
7
<PAGE>
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INCOME ALLOCATION PORTFOLIO
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OUR GOAL: TO PROVIDE HIGH CURRENT INCOME AND LOW SHARE PRICE FLUCTUATION.
The Income Allocation, from its inception in the Spring of 1999, has faced a
challenging market dynamic. How does one achieve a high current yield and
stability of principal in an environment that is negative for bonds? It helped
enormously that we were fortunate to have made the tactical decision that
high-yield bonds would likely give us the best total return in 1999. Over half
of the Fund's portfolio has been allocated to this area. This is, to be sure, a
much higher allocation to high yields than other income funds have. And,
admittedly, it is, on paper, not the most cautious of allocations. But, as we
always say, "stable is as stable does." If this mar-ket dictates that the best
return is to be found at the lower end of the quality range, we see no reason to
mindlessly ignore reality for the sake of dogmatic adherence to traditional bond
allocations.
Additionally, as is no doubt obvious by now, we also received an extra bit of
tailwind in the portfolio by our minor allocation to stock funds. This enabled
us to maintain a positive total return profile, something few of our peers were
able to achieve.
We go into 2000 more positive than ever about the prospects for this Portfolio.
While we expect the sled-ding to continue to be rough for the bond market, we do
think high yield will perform better than last year and will once again far
outperform higher quality bond choices. This should be good news for
shareholders as it will allow us to maintain a high dividend and produce
potentially superior total return numbers.
---------------------------------------------
CONTENT BREAKDOWN
---------------------------------------------
Unaudited
[GRAPHIC OMITTED]
U.S. Stocks . . . . . . . . . . . . . . 16%
International Stocks . . . . . . . . . . 0%
Bonds . . . . . . . . . . . . . . . . . 65%
Cash . . . . . . . . . . . . . . . . . . 19%
PORTFOLIO COMPARISON (Unaudited)
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
Markman Income Funds of Funds Association
Allocation Portfolio Income Index
8 months ending 12/99* 3.3% -1.4%
- --------------------------------------------------------------------------------
3 years annualized N/A N/A
- --------------------------------------------------------------------------------
Annualized since inception* N/A N/A
- --------------------------------------------------------------------------------
*Inception: May 1, 1999
<TABLE>
<CAPTION>
==============================================================================================
PORTFOLIO OF INVESTMENTS
Markman Income Allocation Portfolio-- December 31, 1999
- ----------------------------------------------------------------------------------------------
Fund Shares Market Value % of Total
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PIMCO Total Return Fund-- Institutional 36,514 $ 361,494 19.1%
- ----------------------------------------------------------------------------------------------
Northeast Investors Trust 34,536 337,421 17.8%
- ----------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund 34,192 317,645 16.8%
- ----------------------------------------------------------------------------------------------
INVESCO High Yield Fund 49,140 315,967 16.7%
- ----------------------------------------------------------------------------------------------
Marsico Growth & Income Fund* 6,429 140,537 7.4%
- ----------------------------------------------------------------------------------------------
White Oak Growth Stock Fund* 2,028 123,974 6.5%
- ----------------------------------------------------------------------------------------------
Miscellaneous-- Money Market Fund 298,375 298,375 15.7%
- ----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $1,880,614) 1,895,413 100.0%
- ----------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET 668 0.0%
- ----------------------------------------------------------------------------------------------
NET ASSETS $ 1,896,081 100.0%
============= ======
* Non-income producing security. See accompanying notes to financial statements.
- ----------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Markman
8
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES o December 31, 1999
Markman Markman Markman Markman
Income Conservative Moderate Aggressive
Allocation Allocation Allocation Allocation
Portfolio Portfolio Portfolio Portfolio
=============================================================================================================================
ASSETS
Investments in securities:
<S> <C> <C> <C> <C>
At acquisition cost ...................................... $ 1,880,614 $ 27,329,672 $ 69,142,268 $ 77,825,586
============= ============= ============= =============
At value (Note 1) ........................................ $ 1,895,413 $ 34,391,054 $ 101,133,483 $ 136,697,911
Receivable for capital shares sold ......................... -- 321,025 6,275 44,485
Dividends receivable ....................................... 2,087 16,857 13,377 1,891
Other assets ............................................... 421 4,592 459 8,985
------------- ------------- ------------- -------------
TOTAL ASSETS ............................................. 1,897,921 34,733,528 101,153,594 136,753,272
------------- ------------- ------------- -------------
=============================================================================================================================
LIABILITIES
Payable for capital shares redeemed ........................ 1,000 59,895 223,171 176,909
Distributions payable to shareholders ...................... -- 47,884 54,076 111,487
Payable to affiliates (Note 3) ............................. 840 26,851 77,579 102,816
------------- ------------- ------------- -------------
TOTAL LIABILITIES ........................................ 1,840 134,630 354,826 391,212
------------- ------------- ------------- -------------
=============================================================================================================================
NET ASSETS ................................................. $ 1,896,081 $ 34,598,898 $ 100,798,768 $ 136,362,060
============= ============= ============= =============
Net assets consist of:
Paid-in capital ............................................ $ 1,888,248 $ 27,535,956 $ 68,805,045 $ 77,659,150
Undistributed net investment income ........................ -- 1,560 2,508 --
Distributions in excess of net realized gains .............. -- -- -- (169,415)
Accumulated net realized losses from security transactions . (6,966) -- -- --
Net unrealized appreciation on investments ................. 14,799 7,061,382 31,991,215 58,872,325
------------- ------------- ------------- -------------
NET ASSETS ................................................. $ 1,896,081 $ 34,598,898 $ 100,798,768 $ 136,362,060
============= ============= ============= =============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) (Note 5) ...... 189,166 2,439,128 6,039,826 6,141,519
============= ============= ============= =============
Net asset value, redemption price and offering
price per share (Note 1) ................................. $ 10.02 $ 14.18 $ 16.69 $ 22.20
============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
Markman
9
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
======================================================================================================================
STATEMENTS OF OPERATIONS o For the year ended December 31, 1999(A)
Markman Markman Markman Markman
Income Conservative Moderate Aggressive
Allocation Allocation Allocation Allocation
Portfolio Portfolio Portfolio Portfolio
INVESTMENT INCOME
<S> <C> <C> <C> <C>
Dividend income ......................................... $ 22,154 $ 1,559,127 $ 2,547,549 $ 195,676
------------ ------------ ------------ ------------
EXPENSES
Investment advisory fees ................................ 1,857 292,256 811,956 972,333
Independent trustees' fees .............................. -- 14,000 14,000 14,000
------------ ------------ ------------ ------------
TOTAL EXPENSES (NOTE 3) ................................. 1,857 306,256 825,956 986,333
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ............................ 20,297 1,252,871 1,721,593 (790,657)
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains (losses) from security transactions .. (7,411) 1,547,664 5,902,722 8,966,456
Capital gain distributions from
other investment companies ............................ 445 442,856 1,546,791 3,183,646
Net change in unrealized appreciation/
depreciation on investments ........................... 14,799 3,981,393 18,152,745 33,815,297
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS ........ 7,833 5,971,913 25,602,258 45,965,399
------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS FROM OPERATIONS .............. $ 28,130 $ 7,224,784 $ 27,323,851 $ 45,174,742
============ ============ ============ ============
<CAPTION>
========================================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
Markman Income Markman Conservative
Allocation Portfolio Allocation Portfolio
Period ended Year ended Year ended
Dec. 31, 1999(A) Dec. 31, 1999 Dec. 31, 1998
FROM OPERATIONS:
<S> <C> <C> <C>
Net investment income (loss) ................... $ 20,297 $ 1,252,871 $ 568,587
Net realized gains (losses) from
security transactions ........................ (7,411) 1,547,664 1,067,694
Capital gain distributions from
other investment companies ................... 445 442,856 515,255
Net change in unrealized appreciation/
depreciation on investments .................. 14,799 3,981,393 1,106,083
------------- ------------- -------------
Net increase in net assets from operations ..... 28,130 7,224,784 3,257,619
------------- ------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income ........... (20,297) (1,097,151) (657,761)
Distributions in excess of
net investment income (Note 1) ............... -- -- (45,764)
Return of capital .............................. (11,458) -- --
Distributions from net realized gains .......... -- (1,647,858) (1,102,192)
------------- ------------- -------------
Decrease in net assets from
distributions to shareholders ................ (31,755) (2,745,009) (1,805,717)
------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS (Note 4):
Proceeds from shares sold ...................... 2,939,910 7,944,542 11,129,490
Net asset value of shares issued in reinvestment
of distributions to shareholders ............. 31,755 2,697,126 1,563,886
Payments for shares redeemed ................... (1,071,959) (10,989,293) (20,358,721)
------------- ------------- -------------
Net increase (decrease) in net assets from
capital share transactions ................... 1,899,706 (347,625) (7,665,345)
------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........ 1,896,081 4,132,150 (6,213,443)
NET ASSETS:
Beginning of period ............................ -- 30,466,748 36,680,191
------------- ------------- -------------
End of period .................................. $ 1,896,081 $ 34,598,898 $ 30,466,748
============= ============= =============
UNDISTRIBUTED NET INVESTMENT INCOME ............ $ -- $ 1,560 $ --
============= ============= =============
<CAPTION>
Markman Moderate Markman Aggressive
Allocation Portfolio Allocation Portfolio
Year ended Year ended Year ended Year ended
Dec. 31, 1999 Dec. 31, 1998 Dec. 31, 1999 Dec. 31, 1998
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income (loss) ................... $ 1,721,593 $ 691,704 $ (790,657) $ (513,567)
Net realized gains (losses) from
security transactions ........................ 5,902,722 3,062,796 8,966,456 (231,303)
Capital gain distributions from
other investment companies ................... 1,546,791 1,388,199 3,183,646 1,291,832
Net change in unrealized appreciation/
depreciation on investments .................. 18,152,745 8,491,783 33,815,297 18,912,136
------------- ------------- ------------- -------------
Net increase in net assets from operations ..... 27,323,851 13,634,482 45,174,742 19,459,098
------------- ------------- ------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income ........... (1,607,343) (691,704) -- (21,208)
Distributions in excess of
net investment income (Note 1) ............... -- (260,772) -- --
Return of capital .............................. -- -- -- --
Distributions from net realized gains .......... (6,205,785) (3,393,190) (10,222,408) (340,273)
------------- ------------- ------------- -------------
Decrease in net assets from
distributions to shareholders ................ (7,813,128) (4,345,666) (10,222,408) (361,481)
------------- ------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS (Note 4):
Proceeds from shares sold ...................... 12,400,277 12,188,071 23,265,400 16,927,645
Net asset value of shares issued in reinvestment
of distributions to shareholders ............. 7,759,052 4,298,339 10,110,921 350,390
Payments for shares redeemed ................... (22,670,359) (28,364,444) (23,581,252) (29,162,161)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets from
capital share transactions ................... (2,511,030) (11,878,034) 9,795,069 (11,884,126)
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........ 16,999,693 (2,589,218) 44,747,403 7,213,491
NET ASSETS:
Beginning of period ............................ 83,799,075 86,388,293 91,614,657 84,401,166
------------- ------------- ------------- -------------
End of period .................................. $ 100,798,768 $ 83,799,075 $ 136,362,060 $ 91,614,657
============= ============= ============= =============
UNDISTRIBUTED NET INVESTMENT INCOME ............ $ 2,508 $ -- $ -- $ --
============= ============= ============= =============
</TABLE>
(A) Except for the Markman Income Allocation Portfolio which represents the
period from the initial public offering of shares (May 1, 1999) through
December 31, 1999.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
Markman
10
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
================================================================================
MARKMAN INCOME ALLOCATION PORTFOLIO o FINANCIAL HIGHLIGHTS
Per Share Data for a Share Outstanding throughout the Period
Period ended
December 31, 1999(A)
Net asset value at beginning of period ..................... $ 10.00
----------
Income from investment operations:
Net investment income .................................... 0.24
Net realized and unrealized gains on investments ......... 0.08
----------
Total from investment operations ........................... 0.32
----------
Less distributions:
Dividends from net investment income ..................... (0.24)
Return of capital ........................................ (0.06)
----------
Total distributions ........................................ (0.30)
----------
NET ASSET VALUE AT END OF PERIOD ........................... $ 10.02
==========
TOTAL RETURN ............................................... 3.27%(B)
==========
NET ASSETS AT END OF PERIOD (000'S) ........................ $ 1,896
==========
Ratio of expenses to average net assets .................... 0.64%(C)
Ratio of net investment income to average net assets ....... 6.97%(C)
Portfolio turnover rate .................................... 78%(C)
(A) Represents the period from the initial public offering of shares (May 1,
1999) through December 31, 1999.
(B) Not annualized.
(C) Annualized.
<TABLE>
<CAPTION>
=================================================================================================================================
MARKMAN CONSERVATIVE ALLOCATION PORTFOLIO o FINANCIAL HIGHLIGHTS
Per Share Data for a Share Outstanding throughout Each Period
Year ended Year ended Year ended Year ended Period ended
December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995(A)
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period ............. $ 12.33 $ 11.82 $ 11.49 $ 10.97 $ 10.00
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income ............................ 0.55 0.25 0.33 0.28 0.19
Net realized and unrealized gains on investments . 2.53 1.03 1.31 1.19 1.61
--------- --------- --------- --------- ---------
Total from investment operations ................... 3.08 1.28 1.64 1.47 1.80
--------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income ............. (0.49) (0.28) (0.30) (0.28) (0.19)
Distributions in excess of net investment income . -- (0.02) (0.15) (0.18) (0.04)
Distributions from net realized gains ............ (0.74) (0.47) (0.86) (0.49) (0.60)
--------- --------- --------- --------- ---------
Total distributions ................................ (1.23) (0.77) (1.31) (0.95) (0.83)
--------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD ................... $ 14.18 $ 12.33 $ 11.82 $ 11.49 $ 10.97
========= ========= ========= ========= =========
TOTAL RETURN ....................................... 24.97% 10.83% 14.27% 13.41% 18.00%
========= ========= ========= ========= =========
NET ASSETS AT END OF PERIOD (000'S) ................ $ 34,599 $ 30,467 $ 36,680 $ 42,579 $ 9,852
========= ========= ========= ========= =========
Ratio of expenses to average net assets ............ 0.95% 0.95% 0.95% 0.95% 0.95%(B)
Ratio of net investment income to average net assets 3.89% 1.70% 2.38% 3.21% 3.02%(B)
Portfolio turnover rate ............................ 78% 165% 48% 104% 176%
</TABLE>
(A) Represents the period from the initial public offering of shares (January
26, 1995) through December 31, 1995.
(B) Annualized.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
Markman
11
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
=================================================================================================================================
MARKMAN MODERATE ALLOCATION PORTFOLIO o FINANCIAL HIGHLIGHTS
Per Share Data for a Share Outstanding throughout Each Period
Year ended Year ended Year ended Year ended Period ended
December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995(A)
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period ............. $ 13.35 $ 11.90 $ 11.49 $ 11.31 $ 10.00
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income ............................ 0.31 0.12 0.26 0.18 0.06
Net realized and unrealized gains on investments . 4.43 2.06 1.96 1.08 2.39
--------- --------- --------- --------- ---------
Total from investment operations ................... 4.74 2.18 2.22 1.26 2.45
--------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income ............. (0.29) (0.12) (0.26) (0.18) (0.06)
Distributions in excess of net investment income . -- (0.04) (0.21) (0.14) (0.24)
Distributions from net realized gains ............ (1.11) (0.57) (1.34) (0.76) (0.84)
--------- --------- --------- --------- ---------
Total distributions ................................ (1.40) (0.73) (1.81) (1.08) (1.14)
--------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD ................... $ 16.69 $ 13.35 $ 11.90 $ 11.49 $ 11.31
========= ========= ========= ========= =========
TOTAL RETURN ....................................... 35.49% 18.32% 19.38% 11.11% 24.50%
========= ========= ========= ========= =========
NET ASSETS AT END OF PERIOD (000'S) ................ $ 00,799 $ 83,799 $ 86,388 $ 78,627 $ 38,988
========= ========= ========= ========= =========
Ratio of expenses to average net assets ............ 0.95% 0.95% 0.95% 0.95% 0.95%(B)
Ratio of net investment income to average net assets 1.98% 0.84% 1.96% 1.34% 0.77%(B)
Portfolio turnover rate ............................ 68% 117% 82% 280% 141%
<CAPTION>
=================================================================================================================================
MARKMAN AGGRESSIVE ALLOCATION PORTFOLIO o FINANCIAL HIGHLIGHTS
Per Share Data for a Share Outstanding Tthroughout Each Period
Year ended Year ended Year ended Year ended Period ended
December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995(A)
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period ............. $ 16.01 $ 12.74 $ 12.26 $ 11.79 $ 10.00
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income (loss) ..................... (0.13) (0.09) 0.01 0.05 0.01
Net realized and unrealized gains on investments . 8.12 3.42 2.32 1.34 3.11
--------- --------- --------- --------- ---------
Total from investment operations ................... 7.99 3.33 2.33 1.39 3.12
--------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income ............. -- -- (0.01) (0.05) (0.01)
Distributions in excess of net investment income . -- -- (0.19) (0.11) (0.23)
Distributions from net realized gains ............ (1.80) (0.06) (1.65) (0.76) (1.09)
--------- --------- --------- --------- ---------
Total distributions ................................ (1.80) (0.06) (1.85) (0.92) (1.33)
--------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD ................... $ 22.20 $ 16.01 $ 12.74 $ 12.26 $ 11.79
========= ========= ========= ========= =========
TOTAL RETURN ....................................... 49.88% 26.17% 18.96% 11.72% 31.21%
========= ========= ========= ========= =========
NET ASSETS AT END OF PERIOD (000'S) ................ $ 136,362 $ 91,615 $ 84,401 $ 84,329 $ 42,325
========= ========= ========= ========= =========
Ratio of expenses to average net assets ............ 0.95% 0.95% 0.95% 0.95% 0.95%(B)
Ratio of net investment income (loss)
to average net assets ............................ (0.76)% (0.62)% 0.05% 0.34% 0.15%(B)
Portfolio turnover rate ............................ 56% 101% 141% 340% 204%
</TABLE>
(A) Represents the period from the initial public offering of shares (January
26, 1995) through December 31, 1995.
(B) Annualized.
See accompanying notes to financial statements..
- --------------------------------------------------------------------------------
Markman
12
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Markman MultiFund Trust (the Trust) is registered under the Investment Company
Act of 1940, as amended (the 1940 Act), as an open-end diversified management
investment company. The Trust was organized as a Massachusetts business trust on
September 7, 1994. The Trust offers four series of shares to investors: the
Markman Income Allocation Portfolio, the Markman Conservative Allocation
Portfolio, the Markman Moderate Allocation Portfolio and the Markman Aggressive
Allocation Portfolio (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
(except for the Markman Income Allocation Portfolio) at $10.00 per share. The
public offering of shares of such Funds 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 public offering of shares of the Markman
Income Allocation Portfolio commenced on May 1, 1999.
The Markman Income Allocation Portfolio seeks to provide high current income and
low share price fluctuation. The Markman Conservative Allocation Portfolio seeks
to provide current income and low to moderate growth of capital. The Markman
Moderate Allocation Portfolio seeks growth of capital and a reasonable level of
current income. The Markman Aggressive Allocation Portfolio 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 (normally 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.
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.
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are determined on a specific identification basis.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles (GAAP) 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 Fund files a tax return annually using tax accounting methods required
under provisions of the Code which may differ from GAAP, 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
- --------------------------------------------------------------------------------
Markman
13
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 Fund's tax return 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 are made to the components of net assets to conform to
generally accepted accounting principles.
The following information is based on the federal income tax cost of portfolio
investments as of December 31, 1999:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
MARKMAN MARKMAN MARKMAN MARKMAN
INCOME CONSERVATIVE MODERATE AGGRESSIVE
ALLOCATION ALLOCATION ALLOCATION ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Gross unrealized appreciation $ 28,425 $ 7,067,427 $ 32,000,130 $58,702,910
Gross unrealized depreciation (13,626) (6,045) (8,915) --
----------- ------------ ------------ -----------
Net unrealized appreciation . $ 14,799 $ 7,061,382 $ 31,991,215 $58,702,910
Federal income tax cost of
portfolio investments ....... $ 1,880,614 $ 27,329,672 $ 69,142,268 $77,995,001
=========== ============ ============ ===========
- --------------------------------------------------------------------------------------------------
</TABLE>
2. INVESTMENT TRANSACTIONS
During the period ended December 31, 1999, cost of purchases and proceeds from
sales of portfolio securities, other than short-term investments, amounted to
$1,812,482 and $222,831, respectively, for the Markman Income Allocation
Portfolio; $24,156,535 and $28,608,839, respectively, for the Markman
Conservative Allocation Portfolio; $58,533,209 and $73,043,945, respectively,
for the Markman Moderate Allocation Portfolio; and $60,409,495 and $57,993,346,
respectively, for the Markman Aggressive Allocation Portfolio.
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
offi-cers of the Trust are also officers of the Adviser or of Countrywide Fund
Services, Inc. (CFS), 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
man-agement fee, computed and accrued daily and paid monthly, at an annual rate
of 0.95% of average daily net assets of the Markman Conservative Allocation
Portfolio, the Markman Moderate Allocation Portfolio and the Markman Aggressive
Allocation Portfolio and 0.65% of the average daily net assets of the Markman
Income Allocation Portfolio. 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 CFS, CFS supplies non-investment related
statistical and research data, internal regulatory compliance services and
executive and administrative services for each of the Funds. CFS 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, CFS 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. CFS 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 CFS a monthly base fee, an asset based fee, and
a fee based on the number of shareholder accounts. In addition, the Adviser pays
CFS out-of-pocket expenses including, but not limited to, postage and supplies.
4. BANK LOANS
The Trust has an unsecured $10,000,000 bank line of credit; borrowings under
this arrangement bear interest at a rate determined by the bank at the time of
borrowing. As of December 31, 1999, no Funds in the Trust had outstanding
borrowings under the line of credit. The maximum amount outstanding during the
year ended December 31, 1999, for the Markman Moderate Allocation Portfolio was
$722,000 at an interest rate of 6.00%.
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Markman
14
<PAGE>
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NOTES TO FINANCIAL STATEMENTS
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5. FUND SHARE TRANSACTIONS
Proceeds and payments from capital share transactions as shown in the Statements
of Changes in Net Assets are the result of the following capital share
transactions for the years ended December 31, 1999, and December 31, 1998 (A):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
MARKMAN INCOME MARKMAN CONSERVATIVE
ALLOCATION PORTFOLIO ALLOCATION PORTFOLIO
Period ended Year ended Year ended
Dec. 31, 1999 (A) Dec. 31, 1999 Dec. 31, 1998
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares sold ........................... 294,119 609,311 934,987
Shares issued in reinvestment of
distributions to shareholders ......... 3,181 190,206 126,836
Shares redeemed ....................... (108,134) (830,853) (1,695,443)
---------- ---------- ----------
Net increase (decrease) in
shares outstanding .................... 189,166 (31,336) (633,620)
Shares outstanding, beginning of period -- 2,470,464 3,104,084
---------- ---------- ----------
Shares outstanding, end of period ..... 189,166 2,439,128 2,470,464
========== ========== ==========
<CAPTION>
MARKMAN MODERATE MARKMAN AGGRESSIVE
ALLOCATION PORTFOLIO ALLOCATION PORTFOLIO
Year ended Year ended Year ended Year ended
Dec. 31, 1999 Dec. 31, 1998 Dec. 31, 1999 Dec. 31, 1998
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ........................... 856,136 970,847 1,270,649 1,234,363
Shares issued in reinvestment of
distributions to shareholders ......... 464,892 321,973 455,447 21,885
Shares redeemed ....................... (1,558,964) (2,273,277) (1,308,199) (2,158,375)
---------- ---------- ---------- ----------
Net increase (decrease) in
shares outstanding .................... (237,936) (980,457) 417,897 (902,127)
Shares outstanding, beginning of period 6,277,762 7,258,219 5,723,622 6,625,749
---------- ---------- ---------- ----------
Shares outstanding, end of period ..... 6,039,826 6,277,762 6,141,519 5,723,622
========== ========== ========== ==========
(A) Except for the Markman Income Allocation Portfolio which represents the period from the initial
public offering of shares (May 1, 1999) through December 31, 1999.
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</TABLE>
6. FEDERAL TAX INFORMATION FOR SHAREHOLDERS (UNAUDITED)
On December 31, 1999, the Markman Conservative Allocation Portfolio declared and
paid a long-term capital gain of $0.4702 per share and a short-term capital gain
distribution of $0.2673 per share, the Markman Moderate Allocation Portfolio
declared and paid a long-term capital gain of $0.9933 per share and a short-term
capital gain distribution of $0.1773 per share, and the Markman Aggressive
Allocation Portfolio declared and paid a long-term capital gain of $1.1328 per
share and a short-term capital gain distribution of $0.6629 per share. In
January of 2000, shareholders will be provided with Form 1099-DIV which reports
the amount and tax status of the capital gain distributions paid during calendar
year 1999.
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Markman
15
<PAGE>
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF THE MARKMAN MULTIFUND TRUST:
We have audited the accompanying statements of assets and liabilities, including
the port-folios of investments, of the Markman MultiFund Trust (comprising,
respectively, the Markman Income Allocation Portfolio, the Markman Conservative
Allocation Portfolio, the Markman Moderate Allocation Portfolio, and the Markman
Aggressive Allocation Portfolio), as of December 31, 1999, and the related
statements of operations, the statement of changes in net assets, and the
financial highlights for the periods indicated thereon. 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 audits.
We conducted our audit 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 and
financial highlights. Our procedures included confirmation of securities owned
as of December 31, 1999, 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 audit provides 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 each
of the respective portfolios constituting the Markman MultiFund Trust as of
December 31, 1999, 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 7, 2000
<PAGE>
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STAY INFORMED
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1-800-975-5463
PORTFOLIO/STRATEGY UPDATE
To hear Bob Markman's weekly market
overview and MultiFund activity report.
www.markman.com/funds.htm
ONLINE
Check for net asset values and more.
1-800-536-8679
PRICELINE
For up-to-the-minute net asset values
and account values.
1-800-707-2771
HELPLINE
For a prospectus, an application form,
for assistance in completing an application,
or for general administrative questions.
- --------------------------------------------------------------------------------
RECENT SERVICE IMPROVEMENT
As a fund of funds, we cannot price our fund shares daily until all of the
underlying funds we own have transmitted their own daily share price. In the
past, the underlying funds we owned have not priced their shares in time for us
to get our shares priced before the cutoff for net asset value transmittal to
newspapers around the country. This leads to the frustrating, and sometimes
con-fusing, situation of our share price in the newspaper being one day behind.
All independent funds of funds, not just us, have this same problem. But we were
sick of it. So after almost five years of everyone in the industry telling us
that it was impossible to do anything about it, we decided to do something about
it.
A mixture of team work, cajoling, and quick action by all our support
organizations, has enabled us -- on most days -- to get the current daily share
price into the national system in time for it to show up in your paper on the
correct date. Thus, barring the usual glitches that are bound to happen from
time to time, the price you see in the paper each day will now be the correct
price for that day's market trading. To the best of our knowledge, we are the
only inde-pendent fund of funds that has been able to accomplish this, and we're
pleased to be able to start the new millennium by providing you with information
that is timely and accurate.
These forms are available:
o Account Application
o IRA Application
o Roth IRA Application
o IRA Transfer Request
o Roth IRA Conversion Request
o Dollar Cost Averaging Application
o Systematic Withdrawal Plan Request
o Automatic Investment Request
o Company Retirement Account Application
o Company Retirement Plan Prototype
[includes Profit Sharing, Money Purchase, 401(k)]
o 403(b) Plan and Application
The minimum direct investment is $25,000. If you want to invest less than
$25,000, you may purchase the Markman MultiFunds through:
Charles Schwab & Company (1-800-266-5623), Fidelity Investments (1-800-544-
7558), and T. D. Waterhouse (1-800-934-4448), among others. There is no
transaction fee when you purchase the Markman MultiFunds through these discount
brokers.
For additional forms or answers to any questions just contact the Markman
MultiFunds (between the hours of 8:30 AM and 5:30 PM EST): Toll-free:
1-800-707-2771
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
MARKMAN INVESTMENT ADVISER SHAREHOLDER SERVICES
================ MULTIFUNDS Markman Capital Management, Inc. c/o Countrywide Fund Services, Inc.
NO-LOAD ---------- 6600 France Ave. So. 312 Walnut Street, 21st Floor
100% MUTUAL FUND For investors too smart Minneapolis, Minnesota 55435 Cincinnati, Ohio 45202-3874
COUNCIL to do it themselves(sm) Telephone: 612-920-4848 Telephone: 513-629-2070
================ Toll-free: 1-800-395-4848 Toll-free: 1-800-707-2771
</TABLE>
Authorized for distribution only if preceded or accompanied by a current
prospectus.
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Markman
<PAGE>
Markman
MULTIFUNDS
- ---------------------- FIRST CLASS
For investors to smart
to do it themselves (sm)
6600 France Avenue South
Minneapolis, Minnesota 55435
