Markman
MULTIFUNDS
Semi-Annual
Report
June 30, 2000
Unaudited
Income Allocation Portfolio
Conservative Allocation Portfolio
Moderate Allocation Portfolio
Aggressive Allocation Portfolio
<PAGE>
================================================================================
MIXED SIGNALS:
--------------------------------------------------------------------------------
In twenty years in the investment business, I don't think I've ever seen a
six-month period that, in the absence of any major "event," exhibited so much
volatility. Examples abound, but a quick look at the new "glamour" benchmark,
the NASDAQ Composite, tells the story in a nutshell.
From January 1 through March 9, the Nasdaq continued its torrid 1999 pace,
soaring an additional 24%. Euphoria reigned supreme. Then, on March 13, the
Nasdaq began a historic plunge, shedding some 37% in just 10 weeks. As we
approached Memorial Day 2000, a black hole of losses yawned before investors.
Suddenly, in the midst of this gloom and "I told you sos," someone rang the
proverbial bell and it was off to the races once again. From May 23 though June
30 the Nasdaq proceeded to rack up a stunning 25% gain, thus managing to finish
the first half with a relatively benign 2.5% loss. Everybody had his or her own
take on it: An undervalued market soared. An overvalued market plunged. A fairly
valued market merely moved sideways. Take your pick. Whatever your worldview and
intellectual/emotional perspective, you'll find ample evidence in just the last
six months to support it. Clearly, the ratings gods were smiling on CNBC.
Rarely have the battle lines been so starkly drawn in the investment arena. Some
experienced and knowledgeable observers continue to maintain that we are in the
midst of a dangerous financial bubble of tragically historic proportions that
will absolutely devastate much of the stock market wealth built up in recent
years. Others claim that we are seeing the birth of a "new economy" that is
transforming the way we do business and value corporate enterprises. And that
stocks' valuations, rather than being absurdly high, are merely accurately and
rationally reflecting this changing reality.
SO WHAT DO WE THINK NOW?
As you know, we have for some time argued for an equity allocation that focuses
on funds that invest in U.S. growth companies, heavily weighted toward
technology. Sure, in recent months, this tack has resulted in severe volatility.
And yes, other more traditional diversification allocations have held up better
over the very recent short term. But I would suggest to you that the recent
strength in areas such as real estate and value funds are more akin to dead cat
bounces than omens of a resurgent long term move. The fact
--------------------------------------------------------------------------------
The fact remains that almost any company--or any individual career--that wishes
to survive, let alone prosper, in the 21st century must embrace technology. And
they must do it as fast as they possibly can.
--------------------------------------------------------------------------------
remains that almost any company--or any individual career--that wishes to
survive, let alone prosper, in the 21st century must embrace technology. And
they must do it as fast as they possibly can. The level of spending in this
area, and its rate of acceleration is enormous. To be sure, speed and greed,
while ultimately beneficial driving forces, can destroy over the short term.
Those who lost money this year in the dot-com mania will attest to that. All the
attention given to small Internet startups
--------------------------------------------------------------------------------
All the attention given to small Internet startups that crash and burn should
not, however, distract us from the huge real profits being made right now by
real companies using genuine proven business models.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Markman
<PAGE>
================================================================================
MAKING SENSE OUT OF THIS YEAR'S MANIC FIRST HALF
--------------------------------------------------------------------------------
that crash and burn should not, however, distract us from the huge real profits
being made right now by real companies using genuine proven business models. And
while skepticism is normally a virtue well rewarded in the investment business,
more of us would do well to remember that during
--------------------------------------------------------------------------------
Time after time over the past ten years normally sharp-eyed analysts have
stumbled by underestimating the strength, depth and breadth of trends in
information technology.
--------------------------------------------------------------------------------
transformational periods such as the one we're in, the spoils usually go to the
optimists. Time after time over the past ten years normally sharp-eyed analysts
have stumbled by underestimating the strength, depth and breadth of trends in
information technology. In hindsight, Microsoft, Intel, Cisco, et al. all look
like sure things. But most analysts, most fund managers, most reporters, and
most individual investors thought these stocks were overvalued regularly over
the past decade. (Did you know that as recently as just four years ago you could
have bought Intel at a PE of about 12? And that lots of "smart" analysts thought
it was by no means cheap at that level.)
Speaking of Intel, another example of this tendency to underestimate strength
and future prospects was recently reported in Barron's Magazine. Last October,
Barron's ran a story skeptical of Intel's ability to produce results that would
justify its then lofty price of $75 per share. Just this week, however, they
reported:
Since then, the company and the market proved us wrong...While '99 earnings came
in dead-in-line with our expectations at $2.33 a share, Street analysts are
looking for 2000 earnings...to grow by 44% to $3.36 a share, a pace far faster
than seemed credible eight months ago. That reflects the high profit Intel is
now realizing on some of its canny technology investments. But in part it's also
due to the start of whole new revenue streams from the 'Net and the dawn of the
digital handheld wireless world, a world where Intel has made itself a major
player.
(Barron's July 9, 2000)
Intel closed this week at $139 per share. I could not have made up a more
perfect example of how ostensibly smart observers can so completely miss what's
right beneath their noses. Intel did not grow earnings over the past eight
months by magic. The Internet and the emergence of handheld wireless is not some
sudden and unforeseen development. In hindsight, missing those elements in
Intel's future growth prospects is a complete "duh!" Yet this same dynamic, and
these same mistakes, occur every day on Wall Street. As incredible as it seems,
one can only conclude that a great many pundits and money managers simply do not
understand the model by which modern technology companies operate. What's even
more astonishing is that they seem to be proud of their hidebound ways. Recently
a well-known value manager had the audacity to say, "We have not changed the way
we do things for the 26 years that we've operated." Can you imagine it:
conducting business the same way you did when Gerald Ford buttered his first
English muffin in the White House? It's no wonder this manager's flagship fund
has lost more than
--------------------------------------------------------------------------------
Recently a well-known value manager had the audacity to say, "We have not
changed the way we do things for the 26 years that we've operated." Can you
imagine it: conducting business the same way you did when Gerald Ford buttered
his first English muffin in the White House?
--------------------------------------------------------------------------------
13% over the past year. Something to think about next time you see someone on
CNBC soberly and with furrowed brow pronounce tech stocks as foolish
speculations.
--------------------------------------------------------------------------------
Markman
1
<PAGE>
================================================================================
REAL SIGNS AMID THE DISTRACTIONS
--------------------------------------------------------------------------------
We are committed to keeping your portfolio on the leading edge of the economy
and market during this transformational period. That doesn't mean we have to
invest in speculative dot coms, or worthless IPO dreams, or any of the other
flotsam and jetsam of the investment world. The new economy is unfolding in an
arena filled with strong and established companies, some of which are
surprisingly unexpected participants in this new paradigm. Let's look at a few
snapshots from some of the best known, and best run companies on the planet.
MICROSOFT ANNOUNCED PLANS IN JUNE TO TRANSFORM THEIR COMPANY WITH THE
DEVELOPMENT AND INTRODUCTION OF MICROSOFT.NET. What makes this such a
significant development? First, it represents a huge shift for a colossus the
size of Microsoft. As Bill Gates put it, "We are betting the company on this."
This willingness to risk and change is the hallmark of new economy companies and
represents a dynamic uncharted in the models of corporate lifecycle that
economists and Wall Street analysts still cling to. More specifically, Dot Net
will integrate the products and services not only of Microsoft, but those of
other companies with the Internet. This revolutionary undertaking will enable
more individually tailored uses of the Internet without an increase in the
technical knowledge you need to manipulate data. This will result in increasing
the use of the Internet and inevitably increasing the profitability of the
Internet economy.
FORD MOTOR COMPANY, THE EPITOME OF AN OLD ECONOMY COMPANY, HAS ALSO QUIETLY AND
RELENTLESSLY BEGUN TO TRANSFORM ITSELF. The plan is to shed much of its
capital-intensive, physical structure and outsource to other business partners
the basic manufacturing of an automobile. Creating an efficient "B2B" (business
to business) structure like this will result in enormous efficiencies and much
greater flexibility, the ultimate goals, of course, being
--------------------------------------------------------------------------------
The new economy is unfolding in an arena filled with strong and established
companies, some of which are surprisingly unexpected participants in this new
paradigm.
--------------------------------------------------------------------------------
greater profitability. But that's only half of the planned new economy
transformation. The "B2C" (business to consumer) side of the equation involves
use of state-of-the-art information technologies to put Ford and its suppliers
in intimate touch with consumer wants and needs. The goal is to make a company
that is more responsive to consumer demand, a company that makes cars in colors
and models and with options that buyers actually want. (The model now is to
guess and make the cars and then convince the public to want them.) In not much
more than a decade, Ford will no longer be an old economy manufacturer
encumbered by factories and masses of workers. It will be a new economy
coordinator, efficiently fulfilling the wishes of consumers. It will be more
profitable, and, due to its new leaner, more capital-efficient structure, will
be accorded a greater market multiple. It is a textbook example of how the old
economy is being transformed by technology.
GENERAL ELECTRIC, TOO, HAS BEEN BUSY AGGRESSIVELY EMBRACING TECHNOLOGY IN THE
QUEST FOR EFFICIENCY, PROFITABILITY AND COMPETITIVE ADVANTAGE. And it's no
wonder. Merrill Lynch estimates that Internet-derived productivity can save from
20-50% of selling, general and administrative expenses. Talk about a boost in
potential profits! With its many different operations, GE buys lots of stuff:
office furniture, light bulbs, paper, copiers, etc. Using the Web to group
orders together and get the best prices can drive down costs enormously. A
company VP estimated that if all the year's purchases were done on the Internet,
transaction costs would drop from $50-100 each to as low as $5. And that's just
the purchasing side. Selling and servicing also are ripe for greater
efficiencies. According to Forbes Magazine "Each customer phone call that comes
in about one of GE's consumer appliances costs about $5 by the time it is
fielded and answered. The same information disseminated over the Web costs only
20 cents." That's a 95% reduction in costs.
These are just a few examples in some of the more visible companies out there.
It's happening now, and it's happening fast. It's not being done with pencils
and order books, or concrete and steel. It's all happening on the back of fiber
optics, routers, switches, storage devices, wireless technology and all the
other building blocks of the new economy. That's why we invest the way we do and
why, even in the midst of admittedly painful short term declines, we remain
supremely confident that we will achieve the results we are seeking.
--------------------------------------------------------------------------------
Markman
2
<PAGE>
================================================================================
AGGRESSIVE ALLOCATION PORTFOLIO
--------------------------------------------------------------------------------
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 Portfolio arrived at mid-year slightly behind the start of
the year, a not inconsiderable achievement, considering the extreme volatility
exhibited by the markets, particularly the Nasdaq. Despite the bumpy ride, our
resolve remains firm. We remain committed to large U.S. growth companies, with
an overweighting toward technology, financials and health care, particularly
biotech.
To this end we have established a position in Rydex Series Biotech Fund,
which is a market-cap weighted fund that maintains investments in the largest
biotech stocks and keeps the weighting as close as possible to their relative
market capitalizations. In this way biotech companies that succeed in the market
automatically have their relative allocations increased in the Rydex
Biotechnology fund. Over the long run, we believe biotechnology will provide the
best returns of any sector in the market.
Three new funds in the Portfolio are the result of strategically deployed
tax-advantaged transactions. We have maintained the same relative position in
each category by purchasing funds with similar dynamics, while simultaneously
establishing a tax loss to keep the year-end tax distrribution down. Funds
purchased to replace (funds sold) are: Rydex Series Biotech Fund (Janus Global
Life Sciences Fund); Munder International Net Net Fund (Munder Net Net Fund);
and Firsthand Technology Value Fund (Firsthand Technology Innovators Fund).
Early in the year we replaced The Internet Fund with Munder Net Net Fund,
believing that the Munder organization would give us greater long-term potential
return. We also eliminated the Davis New York Venture Fund so that we could
invest more assets in technology-oriented funds.
---------------------------------------------
CONTENT BREAKDOWN
---------------------------------------------
Unaudited
[GRAPHIC OMITTED]
U.S. Stocks ........................ 96%
International Stocks ............... 1%
Bonds .............................. 0%
Cash ............................... 3%
PORTFOLIO COMPARISON -- June 30, 2000
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
--------------------------------------------------------------------------------
Markman Aggressive Funds of Funds Association 1
Allocation Portfolio Growth Index
---------------------------------------------------
Year-to-date -1.9% 0.9%
--------------------------------------------------------------------------------
12 months ending 6/30/00 27.6% 15.0%
--------------------------------------------------------------------------------
3 years annualized 25.0% 16.1%
--------------------------------------------------------------------------------
5 years annualized 22.4% 16.8%
--------------------------------------------------------------------------------
Annualized since inception* 24.1% 18.4%
--------------------------------------------------------------------------------
*from February 1, 1995
1 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.
<TABLE>
<CAPTION>
=========================================================================================
PORTFOLIO OF INVESTMENTS (Unaudited)
Markman Aggressive Allocation Portfolio -- June 30, 2000
-----------------------------------------------------------------------------------------
FUND SHARES MARKET VALUE % OF TOTAL
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Rydex Series OTC Fund * 1,018,218 $ 28,204,635 18.6%
-----------------------------------------------------------------------------------------
White Oak Growth Stock Fund * 339,675 26,932,834 17.8%
-----------------------------------------------------------------------------------------
Janus Twenty Fund 296,066 22,862,239 15.2%
-----------------------------------------------------------------------------------------
Liberty-Stein Roe Growth Stock Fund * 276,352 16,929,324 11.2%
-----------------------------------------------------------------------------------------
The Rydex Series Biotechnology Fund * 350,540 11,234,813 7.5%
-----------------------------------------------------------------------------------------
Firsthand Technology Value Fund * 83,956 9,604,601 6.4%
-----------------------------------------------------------------------------------------
Firsthand Technology Innovators Fund * 139,466 8,684,576 5.8%
-----------------------------------------------------------------------------------------
Pin Oak Aggressive Stock Fund * 107,144 7,689,749 5.1%
-----------------------------------------------------------------------------------------
Transamerica Premier Equity Fund * 211,131 6,956,762 4.6%
-----------------------------------------------------------------------------------------
Munder International Net Net Fund - Class A * 658,132 5,837,630 3.9%
-----------------------------------------------------------------------------------------
Marsico Focus Fund * 260,990 5,624,332 3.7%
-----------------------------------------------------------------------------------------
Munder Net Net Fund - Class A * 4,702 329,257 0.2%
------------- ------
-----------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $94,823,071) 150,890,752 100.0%
-----------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (10,446) (0.0%)
-----------------------------------------------------------------------------------------
NET ASSETS $ 150,880,306 100.0%
============= ======
-----------------------------------------------------------------------------------------
* Non-income producing security. See accompanying notes to financial statements.
</TABLE>
--------------------------------------------------------------------------------
Markman
3
<PAGE>
================================================================================
MODERATE ALLOCATION PORTFOLIO
--------------------------------------------------------------------------------
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 best-laid plans of mice and men..." A convergence of market factors
beyond our control conspired to make our goal unattainable during the first half
of 2000. Following a huge run-up by all three Portfolios in 1999, the Moderate
Portfolio began the year somewhat closer in its potential dynamic to the
Conservative Portfolio than to the Aggressive Portfolio. Some of the funds in
the Moderate Portfolio were not performing up to our expectations, and we had
resolved to gradually replace them with others that we hoped would meet our
objectives. We were not planning to do this during one of the most volatile
periods in the history of the market.
We made the changes that we felt would be best in the long run in an
orderly way--but the market itself was anything but orderly. The Nasdaq Index
climbed a sheer wall--up about 30% from its low in just 12 days--then fell off
the cliff, dropping some 33% in three weeks. Our long-term repositioning was
being sabotaged by the short-term vagaries of the market. Janus Global Life
Sciences, for example, rose 70% between January 1st and March 3rd. Five weeks
later it was back to where it had begun the year.
We were able to make lemonade from lemons, taking tax losses wherever
possible in order to minimize the potential tax distribution for year end. And
by the time the market reached its bottom, we had succeeded in getting the three
Portfolios back into alignment. But some damage was done, and the performance of
the Moderate Portfolio year-to-date is behind both the Conservative and
Aggressive Portfolios.
We believe the changes that were made will benefit Moderate shareholders in
the long run. The Moderate Portfolio today has what we believe is the very best
ideas from both the Aggressive and Conservative Portfolios, and we will work
diligently to maintain the relationship among the three.
---------------------------------------------
CONTENT BREAKDOWN
---------------------------------------------
Unaudited
[GRAPHIC OMITTED]
U.S. Stocks ........................ 74%
International Stocks ............... 1%
Bonds .............................. 20%
Cash ............................... 5%
PORTFOLIO COMPARISON -- June 30, 2000
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
--------------------------------------------------------------------------------
Markman Moderate Funds of Funds Association 1
Allocation Portfolio Moderate Index
--------------------------------------------------
Year-to-date -10.1% 0.4%
--------------------------------------------------------------------------------
12 months ending 6/30/00 10.7% 11.1%
--------------------------------------------------------------------------------
3 years annualized 15.3% 12.5%
--------------------------------------------------------------------------------
5 years annualized 16.3% 15.4%
--------------------------------------------------------------------------------
Annualized since inception* 17.3% 16.4%
--------------------------------------------------------------------------------
*from February 1, 1995
1 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.
<TABLE>
<CAPTION>
=========================================================================================
PORTFOLIO OF INVESTMENTS (Unaudited)
Markman Moderate Allocation Portfolio -- June 30, 2000
-----------------------------------------------------------------------------------------
FUND SHARES MARKET VALUE % OF TOTAL
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
White Oak Growth Stock Fund * 213,592 $ 16,935,711 19.4%
-----------------------------------------------------------------------------------------
Marsico Focus Fund * 625,192 13,472,881 15.4%
-----------------------------------------------------------------------------------------
Janus Twenty Fund 153,818 11,877,803 13.6%
-----------------------------------------------------------------------------------------
PIMCO Short Term Fund - Institutional 1,015,476 10,103,990 11.6%
-----------------------------------------------------------------------------------------
Strong Advantage Fund - Institutional 769,156 7,583,875 8.7%
-----------------------------------------------------------------------------------------
Firsthand Technology Innovators Fund * 83,055 5,171,855 5.9%
-----------------------------------------------------------------------------------------
Firsthand Technology Value Fund * 42,827 4,899,439 5.6%
-----------------------------------------------------------------------------------------
Profunds Ultra OTC Fund 54,554 4,450,496 5.1%
-----------------------------------------------------------------------------------------
Munder Net Net Fund - Class A * 60,467 4,234,535 4.9%
-----------------------------------------------------------------------------------------
The Rydex Series Biotechnology Fund * 130,105 4,169,849 4.8%
-----------------------------------------------------------------------------------------
The Rydex Series OTC Fund * 120,884 3,348,482 3.8%
-----------------------------------------------------------------------------------------
Miscellaneous - Money Market Fund 1,289,475 1,289,475 1.4%
------------- ------
-----------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $69,357,227) 87,538,391 100.2%
-----------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (206,096) (0.2%)
-----------------------------------------------------------------------------------------
NET ASSETS $ 87,332,295 100.0%
============= ======
-----------------------------------------------------------------------------------------
* Non-income producing security. See accompanying notes to financial statements.
</TABLE>
--------------------------------------------------------------------------------
Markman
4
<PAGE>
================================================================================
CONSERVATIVE ALLOCATION PORTFOLIO
--------------------------------------------------------------------------------
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.
With the excessive volatility exhibited by our favorite equity investment
categories, it was a real challenge to achieve our objective of maintaining
short-term volatility closer to that of an intermediate bond fund portfolio.
During the most volatile period of the year so far, when the NASDAQ dropped 33%
in just 3 weeks, we succeeded in holding the Conservative Portfolio's downward
volatility to less than 14% because short-term bond funds, which represent close
to half the Conservative Portfolio, remained quite steady throughout the period,
while returning a dividend slightly better than money market funds. The typical
intermediate bond fund portfolio had a volatility range of about 5% during the
period, with a return only slightly greater than its short-term counterpart.
This year the spread of returns between short- and long-term bonds has been
extremely small, less than half a percent, so we did not feel the need to take
undue risk with either intermediate or long-term bond funds.
On the equity side, we sold Selected American Shares and redeployed those
assets in small to mid-cap technology with investments in Firsthand Technology
Value and Firsthand Technology Innovators, in order to take advantage of a trend
we first noticed last year. During the period of market melt-up, we trimmed some
large-cap growth assets in order to maintain a balance between equity funds and
bond funds. When the market later reversed itself, we captured tax losses
wherever possible.
As the second half begins, we are poised to take advantage of the continued
health of the economy. If the Federal Reserve stops increasing interest rates
and the economy slows, we may make adjustments in the bond side of the
portfolio. If the stock markets improve during the second half, we will in all
probability trim equity assets wherever possible, without incurring an excessive
tax burden, to maintain an equilibrium between equity funds and bond funds. On
the other hand, if the so-called "soft landing" fails to materialize, and the
economy weakens and stocks fall, we will have sufficient assets in the form of
bond and money market investments to acquire additional stock funds at
attractive lower prices.
---------------------------------------------
CONTENT BREAKDOWN
---------------------------------------------
Unaudited
[GRAPHIC OMITTED]
U.S. Stocks ........................ 48%
International Stocks ............... 1%
Bonds .............................. 43%
Cash ............................... 8%
PORTFOLIO COMPARISON -- June 30, 2000
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
--------------------------------------------------------------------------------
Markman Conservative Funds of Funds Association 1
Allocation Portfolio Conservative Index
--------------------------------------------------
Year-to-date -4.2% 1.9%
--------------------------------------------------------------------------------
12 months ending 6/30/00 11.7% 9.7%
--------------------------------------------------------------------------------
3 years annualized 12.2% 9.8%
--------------------------------------------------------------------------------
5 years annualized 13.2% 11.4%
--------------------------------------------------------------------------------
Annualized since inception* 13.9% 12.4%
--------------------------------------------------------------------------------
*from February 1, 1995
1 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.
<TABLE>
<CAPTION>
=========================================================================================
PORTFOLIO OF INVESTMENTS (Unaudited)
Markman Conservative Allocation Portfolio -- June 30, 2000
-----------------------------------------------------------------------------------------
FUND SHARES MARKET VALUE % OF TOTAL
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
PIMCO Short-Term Fund - Institutional 704,835 $ 7,013,110 21.8%
-----------------------------------------------------------------------------------------
Strong Advantage Fund - Institutional 682,027 6,724,783 20.9%
-----------------------------------------------------------------------------------------
Firsthand Technology Value Fund * 35,428 4,052,938 12.6%
-----------------------------------------------------------------------------------------
Marsico Focus Fund * 134,910 2,907,306 9.0%
-----------------------------------------------------------------------------------------
The Rydex Series OTC Fund * 100,909 2,795,187 8.7%
-----------------------------------------------------------------------------------------
White Oak Growth Stock Fund * 34,725 2,753,318 8.6%
-----------------------------------------------------------------------------------------
Janus Twenty Fund 35,616 2,750,305 8.5%
-----------------------------------------------------------------------------------------
Firsthand Technology Innovators Fund * 24,426 1,521,006 4.7%
-----------------------------------------------------------------------------------------
Miscellaneous - Money Market Fund 1,734,296 1,734,296 5.4%
------------- ------
-----------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $27,818,286) 32,252,249 100.2%
-----------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (59,068) (0.2%)
-----------------------------------------------------------------------------------------
NET ASSETS $ 32,193,181 100.0%
============= ======
-----------------------------------------------------------------------------------------
* Non-income producing security. See accompanying notes to financial statements.
</TABLE>
--------------------------------------------------------------------------------
Markman
5
<PAGE>
================================================================================
INCOME ALLOCATION PORTFOLIO
--------------------------------------------------------------------------------
OUR GOAL: TO PROVIDE HIGH CURRENT INCOME AND LOW SHARE PRICE FLUCTUATION.
The Income Allocation Portfolio continued to face a challenging market
dynamic. The Federal Reserve's regular increases had a particularly large
negative effect on high-yield bond funds, which represent one-third of the
Portfolio. Rather than providing its historic double-digit return, the
high-yield market was basically flat for the first half of the year. We believe
that this series of rate increases will soon come to an end and may in fact
already be over. If, as we suspect, the economy is in for a "soft landing," then
high-yield bond funds will probably recover.
The short-term bond market, while providing predicted stability, fared no
better during the first six months. After adjusting for dividends, the bond
funds were essentially flat. Values suffered from increasing short-term rates.
If rates stabilize, as we expect, the short-term bond funds will retain their
values and the dividends they generate will add to the overall return for the
Portfolio.
The 15% equity portion of the Portfolio experienced the same rocky times as
the three other Portfolios. As the market improves in response to strong
earnings, particularly from technology companies, we expect that the equity
portion will make a positive contribution to total returns. Therefore, we have
shifted assets from the Marsico Growth and Income Fund into White Oak Growth
Stock Fund and ProFunds Ultra OTC Fund. White Oak, which has done very well so
far this year, focuses on medium and large companies, and is currently
overweighted in technology, health care, and financial services, the three
sectors that we believe will do best over both the short and long run. ProFunds
Ultra OTC invests in the 100 largest Nasdaq stocks and therefore is almost 100%
large-cap technology oriented. It is quite volatile, but we believe it will be
one of the best performing funds over the long term.
---------------------------------------------
CONTENT BREAKDOWN
---------------------------------------------
Unaudited
[GRAPHIC OMITTED]
U.S. Stocks ........................ 15%
International Stocks ............... 0%
Bonds .............................. 69%
Cash ............................... 16%
PORTFOLIO COMPARISON -- June 30, 2000
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
--------------------------------------------------------------------------------
Markman Income Funds of Funds Association 1
Allocation Portfolio Income Index
--------------------------------------------------
Year-to-date -1.5% 2.2%
--------------------------------------------------------------------------------
12 months ending 6/30/00 2.7% 2.8%
--------------------------------------------------------------------------------
3 years annualized n/a n/a
--------------------------------------------------------------------------------
5 years annualized n/a n/a
--------------------------------------------------------------------------------
Annualized since inception* 1.5% 2.5%
--------------------------------------------------------------------------------
*from May 1, 1999
1 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.
<TABLE>
<CAPTION>
=========================================================================================
PORTFOLIO OF INVESTMENTS (Unaudited)
Markman Income Allocation Portfolio -- June 30, 2000
-----------------------------------------------------------------------------------------
FUND SHARES MARKET VALUE % OF TOTAL
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
PIMCO Total Return Fund - Institutional 10,297 $ 102,664 22.0%
-----------------------------------------------------------------------------------------
Fidelity Capital & Income Fund 9,462 84,020 18.0%
-----------------------------------------------------------------------------------------
INVESCO High Yield Fund 12,982 78,413 16.8%
-----------------------------------------------------------------------------------------
Northeast Investors Trust 8,229 75,212 16.1%
-----------------------------------------------------------------------------------------
White Oak Growth Stock Fund * 611 48,461 10.4%
-----------------------------------------------------------------------------------------
Profunds Ultra OTC Fund 238 19,410 4.2%
-----------------------------------------------------------------------------------------
Miscellaneous - Money Market Fund 58,546 58,546 12.5%
-----------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $458,617) 466,726 100.0%
-----------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET 181 0.0%
-----------------------------------------------------------------------------------------
NET ASSETS $ 466,907 100.0%
-----------------------------------------------------------------------------------------
* Non-income producing security. See accompanying notes to financial statements.
</TABLE>
--------------------------------------------------------------------------------
Markman
6
<PAGE>
--------------------------------------------------------------------------------
FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES o June 30, 2000 (Unaudited)
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 ............................... $ 458,617 $ 27,818,286 $ 69,357,227 $ 94,823,071
============= ============= ============= =============
At value (Note 1) ................................. $ 466,726 $ 32,252,249 $ 87,538,390 $ 150,890,753
Cash ................................................. -- -- -- 104,716
Receivable for capital shares sold ................... -- 2,959 79,250 112,681
Dividends receivable ................................. 2,171 87,422 106,110 1,749
Other assets ......................................... 1,861 4,830 6,095 --
------------- ------------- ------------- -------------
TOTAL ASSETS ...................................... 470,758 32,347,460 87,729,845 151,109,899
------------- ------------- ------------- -------------
===========================================================================================================================
LIABILITIES
Payable for capital shares redeemed .................. 1,500 48,491 214,550 46,684
Payable for securities purchased ..................... 1,719 80,524 102,584 --
Distributions payable to shareholders ................ 383 -- -- --
Payable to affiliates (Note 3) ....................... 249 25,264 80,416 182,909
------------- ------------- ------------- -------------
TOTAL LIABILITIES ................................. 3,851 154,279 397,550 229,593
------------- ------------- ------------- -------------
===========================================================================================================================
NET ASSETS ........................................... $ 466,907 $ 32,193,181 $ 87,332,295 $ 150,880,306
============= ============= ============= =============
Net assets consist of:
Paid-in capital ...................................... $ 483,223 $ 26,529,037 $ 65,493,955 $ 95,227,124
Undistributed net investment income (loss) ........... 3,246 348,012 321,641 (661,869)
Accumulated net realized gains (losses)
from security transactions ........................ (27,671) 882,169 3,335,536 247,369
Net unrealized appreciation on investments ........... 8,109 4,433,963 18,181,163 56,067,682
------------- ------------- ------------- -------------
NET ASSETS ........................................ $ 466,907 $ 32,193,181 $ 87,332,295 $ 150,880,306
============= ============= ============= =============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) (Note 5) 48,774 2,368,104 5,819,149 6,927,968
============= ============= ============= =============
Net asset value, redemption price and offering
price per share (Note 1) .......................... $ 9.57 $ 13.59 $ 15.01 $ 21.78
============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
Markman
7
<PAGE>
--------------------------------------------------------------------------------
FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
================================================================================
STATEMENTS OF OPERATIONS o For the six months ended June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
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 ...................................... $ 17,761 $ 503,131 $ 765,805 $ 23,678
------------ ------------ ------------ ------------
EXPENSES
Investment advisory fees ............................. 2,074 149,679 439,672 678,547
Independent Trustees' fees ........................... -- 7,000 7,000 7,000
------------ ------------ ------------ ------------
Total Expenses (Note 3) .............................. 2,074 156,679 446,672 685,547
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ......................... 15,687 346,452 319,133 (661,869)
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains (losses) from security transactions (20,705) 882,169 3,335,536 416,784
Net change in unrealized appreciation/
depreciation on investments ....................... (6,690) (2,627,419) (13,810,052) (2,804,643)
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED LOSSES
ON INVESTMENTS .................................... (27,395) (1,745,250) (10,474,516) (2,387,859)
------------ ------------ ------------ ------------
NET DECREASE IN NET ASSETS FROM OPERATIONS ........... $ (11,708) $ (1,398,798) $(10,155,383) $ (3,049,728)
============ ============ ============ ============
</TABLE>
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS o For the periods ended June 30, 2000 and
December 31, 1999, 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.
<TABLE>
<CAPTION>
Markman Income Markman Conservative
Allocation Portfolio Allocation Portfolio
Six months ended Period ended Six months ended Year ended
June 30, 2000 Dec. 31, 1999(A) June 30, 2000 Dec. 31, 1999
(Unaudited) (Unaudited)
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income (loss) ............................. $ 15,687 $ 20,297 $ 346,452 $ 1,252,871
Net realized gains (losses) from security transactions ... (20,705) (7,411) 882,169 1,547,664
Capital gain distributions from other investment companies -- 445 -- 442,856
Net change in unrealized appreciation/depreciation
on investments ........................................ (6,690) 14,799 (2,627,419) 3,981,393
------------- ------------- ------------- -------------
Net increase (decrease) in net assets from operations .... (11,708) 28,130 (1,398,798) 7,224,784
------------- ------------- ------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income ..................... (12,441) (20,297) -- (1,097,151)
Return of capital ........................................ -- (11,458) -- --
Distributions from net realized gains .................... -- -- -- (1,647,858)
------------- ------------- ------------- -------------
Decrease in net assets from distributions to shareholders (12,441) (31,755) -- (2,745,009)
------------- ------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS (Note 4):
Proceeds from shares sold ................................ 860,102 2,939,910 5,548,682 7,944,542
Net asset value of shares issued in
reinvestment of distributions to shareholders ......... 11,673 31,755 -- 2,697,126
Payments for shares redeemed ............................. (2,276,800) (1,071,959) (6,555,601) (10,989,293)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets from
capital share transactions ............................ (1,405,025) 1,899,706 (1,006,919) (347,625)
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .................. (1,429,174) 1,896,081 (2,405,717) 4,132,150
NET ASSETS:
Beginning of period ................................... 1,896,081 -- 34,598,898 30,466,748
------------- ------------- ------------- -------------
End of period ......................................... $ 466,907 $ 1,896,081 $ 32,193,181 $ 34,598,898
============= ============= ============= =============
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) ............... $ 3,246 $ -- $ 348,012 $ 1,560
============= ============= ============= =============
<CAPTION>
Markman Moderate Markman Aggressive
Allocation Portfolio Allocation Portfolio
Six months ended Year ended Six months ended Year ended
June 30, 2000 Dec. 31, 1999 June 30, 2000 Dec. 31, 1999
(Unaudited) (Unaudited)
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income (loss) ............................. $ 319,133 $ 1,721,593 $ (661,869) $ (790,657)
Net realized gains (losses) from security transactions ... 3,335,536 5,902,722 416,784 8,966,456
Capital gain distributions from other investment companies -- 1,546,791 -- 3,183,646
Net change in unrealized appreciation/depreciation
on investments ........................................ (13,810,052) 18,152,745 (2,804,643) 33,815,297
------------- ------------- ------------- -------------
Net increase (decrease) in net assets from operations .... (10,155,383) 27,323,851 (3,049,728) 45,174,742
------------- ------------- ------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income ..................... -- (1,607,343) -- --
Return of capital ........................................ -- -- -- --
Distributions from net realized gains .................... -- (6,205,785) -- (10,222,408)
------------- ------------- ------------- -------------
Decrease in net assets from distributions to shareholders -- (7,813,128) -- (10,222,408)
------------- ------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS (Note 4):
Proceeds from shares sold ................................ 11,084,874 12,400,277 28,979,242 23,265,400
Net asset value of shares issued in
reinvestment of distributions to shareholders ......... -- 7,759,052 -- 10,110,921
Payments for shares redeemed ............................. (14,395,964) (22,670,359) (11,411,268) (23,581,252)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets from
capital share transactions ............................ (3,311,090) (2,511,030) 17,567,974 9,795,069
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .................. (13,466,473) 16,999,693 14,518,246 44,747,403
NET ASSETS:
Beginning of period ................................... 100,798,768 83,799,075 136,362,060 91,614,657
------------- ------------- ------------- -------------
End of period ......................................... $ 87,332,295 $ 100,798,768 $ 150,880,306 $ 136,362,060
============= ============= ============= =============
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) ............... $ 321,641 $ 2,508 $ (661,869) $ --
============= ============= ============= =============
</TABLE>
(A) Represents the period from the initial public offering of shares (May 1,
1999) through December 31, 1999.
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
Markman
8
<PAGE>
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
================================================================================
MARKMAN INCOME ALLOCATION PORTFOLIO o FINANCIAL HIGHLIGHTS
Per Share Data for a Share Outstanding Throughout The Period
Six months ended Period ended
June 30, 2000 December 31,
(Unaudited) 1999(A)
Net asset value at beginning of period ......... $ 10.02 $ 10.00
-------- --------
Income from investment operations:
Net investment income ....................... 0.37 0.24
Net realized and unrealized gains
(losses) on investments .................. (0.52) 0.08
-------- --------
Total from investment operations ............... (0.15) 0.32
-------- --------
Less distributions:
Dividends from net investment income ........ (0.30) (0.24)
Return of capital ........................... .--- (0.06)
-------- --------
Total distributions ............................ (0.30) (0.30)
-------- --------
NET ASSET VALUE AT END OF PERIOD ............... $ 9.57 $ 10.02
======== ========
TOTAL RETURN ................................... (1.50%)(B) 3.27%(B)
======== ========
NET ASSETS AT END OF PERIOD (000'S) ............ $ 467 $ 1,896
======== ========
Ratio of expenses to average net assets ........ 0.65%(C) 0.64%(C)
Ratio of net investment income
to average net assets ....................... 4.98%(C) 6.97%(C)
Portfolio turnover rate ........................ 111%(C) 78%(C)
(A) Represents the period from the initial public offering of shares (May 1,
1999) through December 31, 1999.
(B) Annualized
(C) Not annualized.
See accompanying notes to financial statements.
================================================================================
MARKMAN CONSERVATIVE ALLOCATION PORTFOLIO o FINANCIAL HIGHLIGHTS
Per Share Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Six months ended Year ended Year ended Year ended Year ended Period ended
June 30, 2000 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 1999 1998 1997 1996 1995(A)
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period . $ 14.18 $ 12.33 $ 11.82 $ 11.49 $ 10.97 $ 10.00
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income ............... 0.15 0.55 0.25 0.33 0.28 0.19
Net realized and unrealized gains
(losses) on investments .......... (0.74) 2.53 1.03 1.31 1.19 1.61
-------- -------- -------- -------- -------- --------
Total from investment operations ....... (0.59) 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 ....... $ 13.59 $ 14.18 $ 12.33 $ 11.82 $ 11.49 $ 10.97
======== ======== ======== ======== ======== ========
TOTAL RETURN ........................... (4.16%)(C) 24.97% 10.83% 14.27% 13.41% 18.00%(C)
======== ======== ======== ======== ======== ========
NET ASSETS AT END OF PERIOD (000'S) .... $ 32,193 $ 34,599 $ 30,467 $ 36,680 $ 42,579 $ 9,852
======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.95%(B) 0.95% 0.95% 0.95% 0.95% 0.95%(B)
Ratio of net investment income to
average net assets .................. 2.10%(B) 3.89% 1.70% 2.38% 3.21% 3.02%(B)
Portfolio turnover rate ................ 101%(B) 78% 165% 48% 104% 176%(C)
</TABLE>
(A) Represents the period from the initial public offering of shares (January
26, 1995) through December 31, 1995.
(B) Annualized.
(C) Not annualized.
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
Markman
9
<PAGE>
--------------------------------------------------------------------------------
FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
=============================================================================================================================
MARKMAN MODERATE ALLOCATION PORTFOLIO o FINANCIAL HIGHLIGHTS
Per Share Data for a Share Outstanding Throughout Each Period
Six months ended Year ended Year ended Year ended Year ended Period ended
June 30, 2000 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 1999 1998 1997 1996 1995(A)
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period . $ 16.69 $ 13.35 $ 11.90 $ 11.49 $ 11.31 $ 10.00
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income ............... 0.05 0.31 0.12 0.26 0.18 0.06
Net realized and unrealized gains
(losses) on investments .......... (1.73) 4.43 2.06 1.96 1.08 2.39
-------- -------- -------- -------- -------- --------
Total from investment operations ....... (1.68) 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 ....... $ 15.01 $ 16.69 $ 13.35 $ 11.90 $ 11.49 $ 11.31
======== ======== ======== ======== ======== ========
TOTAL RETURN ........................... (10.07%)(C) 35.49% 18.32% 19.38% 11.11% 24.50%(C)
======== ======== ======== ======== ======== ========
NET ASSETS AT END OF PERIOD (000'S) .... $ 87,332 $100,799 $ 83,799 $ 86,388 $ 78,627 $ 38,988
======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.95%(B) 0.95% 0.95% 0.95% 0.95% 0.95%(B)
Ratio of net investment income to
average net assets .................. 0.68%(B) 1.98% .84% 1.96% 1.34% 0.77%(B)
Portfolio turnover rate ................ 200%(B) 68% 117% 82% 280% 141%(C)
(A) Represents the period from the initial public offering of shares (January
26, 1995) through December 31, 1995.
(B) Annualized.
(C) Not Annualized.
See accompanying notes to financial statements.
<CAPTION>
===============================================================================================================================
MARKMAN AGGRESSIVE ALLOCATION PORTFOLIO o FINANCIAL HIGHLIGHTS
Per Share Data for a Share Outstanding Throughout Each Period
Six months ended Year ended Year ended Year ended Year ended Period ended
June 30, 2000 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 1999 1998 1997 1996 1995(A)
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period ..... $ 22.20 $ 16.01 $ 12.74 $ 12.26 $ 11.79 $ 10.00
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income (loss) ............ (0.10) (0.13) (0.09) 0.01 0.05 0.01
Net realized and unrealized gains
(losses) on investments .............. (0.32) 8.12 3.42 2.32 1.34 3.11
-------- -------- -------- -------- -------- --------
Total from investment operations ........... (0.42) 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 ........... $ 21.78 $ 22.20 $ 16.01 $ 12.74 $ 12.26 $ 11.79
======== ======== ======== ======== ======== ========
TOTAL RETURN ............................... (1.89%)(C) 49.88% 26.17% 18.96% 11.72% 31.21%(C)
======== ======== ======== ======== ======== ========
NET ASSETS AT END OF PERIOD (000'S) ........ $150,880 $136,362 $ 91,615 $ 84,401 $ 84,329 $ 42,325
======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets .... 0.95%(B) 0.95% 0.95% 0.95% 0.95% 0.95%(B)
Ratio of net investment income (loss) to
average net assets ...................... (0.92%)(B) (0.76%) (0.62%) 0.05% 0.34% 0.15%(B)
Portfolio turnover rate .................... 136%(B) 56% 101% 141% 340% 204%(C)
</TABLE>
(A) Represents the period from the initial public offering of shares (January
26, 1995) through December 31, 1995.
(B) Annualized.
(C) Not annualized.
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
Markman
10
<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 non-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 of the Funds 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 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 upon the federal income tax cost of portfolio
investments as of June 30, 2000:
<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 $ 16,631 $ 4,446,638 $ 18,307,726 $ 56,344,822
Gross unrealized depreciation (8,522) (12,675) (126,563) (277,140)
------------ ------------ ------------ ------------
Net unrealized appreciation $ 8,109 $ 4,433,963 $ 18,181,163 $ 56,067,682
Federal income tax cost of
portfolio investments $ 458,617 $ 27,818,286 $ 69,357,227 $ 94,823,071
============ ============ ============ ============
------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Markman
11
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
2. INVESTMENT TRANSACTIONS
During the six months ended June 30, 2000, cost of purchases and proceeds from
sales of portfolio securities, other than short-term investments, amounted to
$338,145 and $1,499,608, respectively, for the Markman Income Allocation
Portfolio, $16,498,467 and $15,510,231, respectively, for the Markman
Conservative Allocation Portfolio, $89,281,284 and $85,905,000, respectively,
for the Markman Moderate Allocation Portfolio, and $114,524,000 and $97,340,445,
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
officers of the Trust are also officers of the Adviser or of Integrated Fund
Services, Inc. (IFS), 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 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 IFS, IFS supplies non-investment related
statistical and research data, internal regulatory compliance services and
executive and administrative services for each of the Funds. IFS 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, IFS 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. IFS 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 IFS 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. 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 June 30, 2000, no Funds in the Trust had outstanding borrowings
under the line of credit. No compensating balances are required.
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 periods ended June 30, 2000 and December 31, 1999:(A)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
MARKMAN INCOME MARKMAN CONSERVATIVE
ALLOCATION PORTFOLIO ALLOCATION PORTFOLIO
Six months ended Period ended Six months ended Year ended
June 30, 2000 Dec. 31, 1999(A) June 30, 2000 Dec. 31, 1999
(Unaudited) (Unaudited)
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ..................... 86,947 294,119 396,325 609,311
Shares issued in reinvestment of
distributions to shareholders 1,212 3,181 -- 190,206
Shares redeemed ................. (228,551) (108,134) (467,349) (830,853)
------------ ------------ ------------ ------------
Net increase (decrease) in
shares outstanding ........... (140,392) 189,166 (71,024) (31,336)
Shares outstanding,
beginning of period .......... 189,166 -- 2,439,128 2,470,464
------------ ------------ ------------ ------------
Shares outstanding, end of period 48,774 189,166 2,368,104 2,439,128
============ ============ ============ ============
<CAPTION>
MARKMAN MODERATE MARKMAN AGGRESSIVE
ALLOCATION PORTFOLIO ALLOCATION PORTFOLIO
Six months ended Year ended Six months ended Year ended
June 30, 2000 Dec. 31, 1999 June 30, 2000 Dec. 31, 1999
(Unaudited) (Unaudited)
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ..................... 681,653 856,136 1,297,484 1,270,649
Shares issued in reinvestment of
distributions to shareholders -- 464,892 -- 445,447
Shares redeemed ................. (902,330) (1,558,964) (511,035) (1,308,199)
------------ ------------ ------------ ------------
Net increase (decrease) in
shares outstanding ........... (220,677) (237,936) 786,449 417,897
Shares outstanding,
beginning of period .......... 6,039,826 6,277,762 6,141,519 5,723,622
------------ ------------ ------------ ------------
Shares outstanding, end of period 5,819,149 6,039,826 6,927,968 6,141,519
============ ============ ============ ============
(A) Represents the period from the initial public offering of shares (May 1,
1999) through December 31, 1999.
------------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Markman
12
<PAGE>
================================================================================
STAY INFORMED
--------------------------------------------------------------------------------
PORTFOLIO/STRATEGY UPDATE
800-975-5463
Bob Markman's weekly
market overview and
MultiFund activity report.
ONLINE
www.markman.com/funds.htm
Check for net asset values
and more.
PRICELINE
800-536-8679
For up-to-the-minute net asset
values and account values.
HELPLINE
800-707-2771
For a prospectus, an application
form, for assistance in
completing an application,
or for general administrative
questions.
--------------------------------------------------------------------------------
WEBSITE PROVIDES UPDATES ON-LINE
For expanded performance information, portfolio allocations updated biweekly,
on-line access to the Prospectus and forms, and other helpful information, log
on to the MultiFunds web site at:
www.markman.com/funds.htm
Soon to come: on-line account access.
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 (800-266-5623), Fidelity Investments (800-544-7558), and T.D. Waterhouse
(800-934-4443), 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:
800-707-2771.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
MARKMAN INVESTMENT ADVISER SHAREHOLDER SERVICES DISTRIBUTOR
MULTIFUNDS Markman Capital Management, Inc. c/o Integrated Fund Services, Inc. Markman Securities, Inc.
---------- 6600 France Avenue South P.O. Box 5354 6600 France Avenue South
For investors too smart Minneapolis, Minnesota 55435 Cincinnati, Ohio 54201-5354 Minneapolis, Minnesota 55435
to do it themselves(sm) Telephone: 952-920-4848 Toll-free: 800-707-2771 Telephone: 952-920-4848
Toll-free: 800-395-4848 Toll-free: 800-395-4848
</TABLE>
Authorized for distribution only if preceded or accompanied by a current
prospectus.
--------------------------------------------------------------------------------
Markman
<PAGE>
Markman
MULTIFUNDS
---------------------- FIRST CLASS
For investors to smart
to do it themselves (sm)
6600 France Avenue South
Minneapolis, Minnesota 55435
