Marshall
Money
Market
Fund
ANNUAL REPORT
TO SHAREHOLDERS
Dated August 31, 1994
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
3091409 (10/94)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Annual Report of the Marshall Money Market Fund for
the fiscal year ended August 31, 1994. It provides you with complete financial
information for the Fund, including the Investment Review by the portfolio
manager, a complete list of investments, and the Financial Statements. In
addition, Financial Highlights have been included for Investment Shares and
Trust Shares.
The Fund puts your cash to work by investing in a diversified portfolio of
high-quality money market securities. Of course, the Fund also is managed to
maintain a stable share price of $1.00.*
Reflecting increased investor participation in the Fund, net assets climbed to
more than $979 million at the end of the report period.
Thank you for your ongoing confidence in the Marshall Money Market Fund. As
always, we welcome your questions or comments.
Sincerely,
James F. Duca, II
President
Marshall Funds, Inc.
October 14, 1994
* Money market funds seek to maintain a stable net asset value of $1.00 per
share. There can be no assurance that they will be able to do so. Investments
in mutual funds are neither insured nor guaranteed by the U.S. government.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
A rising economy, rising fear of inflation, and rising interest rates
characterized the recently completed fiscal year of the Marshall Funds. Gross
Domestic Product advanced more than 3% for the period. Although consumer
confidence declined in recent months, indications are positive for the important
Christmas selling season, and high business confidence suggests further capital
spending gains. Continued economic expansion and corporate cost cutting are
translating into sustained earnings gains for American industry.
Inflation worries surfaced this year, but to date, scant evidence of
acceleration at the retail level has materialized. Consumer prices edged up only
2.9% over the last 12 months. Nevertheless, clouds are gathering on the horizon,
with climbing commodity costs especially ominous. With the pricing power in the
manufacturing sector having increased significantly, industrial prices are
firming. Capacity utilization stands at a five-year high, and labor markets are
tightening. Expect inflation to advance to the 3.5% area in 1995.
Over the past year, investors have been reintroduced to the anguish of rapidly
rising interest rates. From the lows last October, long-term Treasury yields
jumped two percentage points. Starting in February, the Federal Reserve Board
(the "Fed") pushed up short-term interest rates 1.75 percentage points in five
incremental moves. The Fed is well aware that the economic cycle is past the
point where inflation usually begins to pick up. Rising rates are now beginning
to bite, with housing among the early victims. If the Fed is forced to move from
its present neutral policy to an even more restrictive one, the expansion could
stall by 1996--but for now, enjoy the expansion.
MARSHALL MONEY MARKET FUND
For the fiscal year ended August 31, 1994, the Fund's Investment Shares and
Trust Shares had total returns of 3.11% and 3.41%, respectively.* This compared
to Donoghue's Taxable Money Market Fund Average total return of 3.11%.** The
performance relative to Donoghue's index was the result of several different
factors. First, throughout the year, the Fund had a shorter average maturity
relative to Donoghue's. Second, the Fund has several high quality floating rate
notes which have frequent reset dates. Finally, purchases of fixed rate
commercial paper were timed to coincide with the Fed increases. Short-term rates
were relatively tranquil in the first half of the period, but that tranquility
ended on February 4, 1994 when the Fed began what has become a series of
interest rate increases. By August 31, 1994, the Fed had intervened five times,
pushing the Fed Funds' rate from 3.25% to 4.75%.
Even though the Fed has raised interest rates 175 basis points since the start
of the year, housing and auto sales have been remarkably strong. Given the level
of economic activity, the bond market's attention has focused on renewed fears
of inflation. Commodity indexes such as the Commodity Research Bureau Raw Spot
Price Index** and the Journal of Commerce 18 Industrial Materials Price Index**
are both at new four-year highs. While commodities have hit new highs, wage
inflation remains low, thus holding overall inflation down to 2.9% as measured
by the Consumer Price Index. Going forward, it remains to be seen whether the
Fed increases in the past year will be enough to control inflation or if further
tightening will be needed.
* Performance quoted represents past performance and is not indicative of
future returns.
** These indices are unmanaged.
MARSHALL MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
**COMMERCIAL PAPER--55.0%
- -------------------------------------------------------------------------------------
ASSET-BACKED--17.0%
-----------------------------------------------------------------
$ 8,000,000 Beta Finance, Inc., 4.83%, 11/23/94 $ 7,910,913
-----------------------------------------------------------------
44,600,000 CIESCO, Inc., 4.47%--4.625%, 9/6/94--9/19/94 44,543,530
-----------------------------------------------------------------
40,000,000 Corporate Asset Funding Corp., 4.47%--4.625%, 9/6/94--9/14/94 39,959,427
-----------------------------------------------------------------
35,500,000 Corporate Receivables Corp., 4.49%--4.85%, 9/16/94--11/16/94 35,335,307
-----------------------------------------------------------------
39,125,000 PREFCO, 4.47%--4.70%, 9/7/94--9/20/94 39,069,834
----------------------------------------------------------------- ------------
Total 166,819,011
----------------------------------------------------------------- ------------
BANKING--2.5%
-----------------------------------------------------------------
25,000,000 Abbey National N.A. Corp., 4.81%--4.83%, 11/21/94 24,728,988
----------------------------------------------------------------- ------------
FINANCE--AUTOMOTIVE--0.6%
-----------------------------------------------------------------
6,400,000 Ford Motor Credit Co., 4.83%, 11/16/94 6,334,741
----------------------------------------------------------------- ------------
FINANCE--COMMERCIAL--7.9%
-----------------------------------------------------------------
15,000,000 General Electric Credit Corp., 4.82%, 11/22/94 14,835,317
-----------------------------------------------------------------
18,150,000 Hanson Finance PLC, 4.82%--4.83%, 11/2/94--11/28/94 17,964,279
-----------------------------------------------------------------
45,000,000 Whirlpool Financial Corp., 4.45%--4.87%, 9/13/94--11/17/94 44,746,561
----------------------------------------------------------------- ------------
Total 77,546,157
----------------------------------------------------------------- ------------
FOOD AND BEVERAGES--9.2%
-----------------------------------------------------------------
45,200,000 Coca-Cola Enterprises, Inc., 4.52%--4.87%, 9/1/94--11/8/94 44,969,168
-----------------------------------------------------------------
45,212,000 Seagram (Joseph E.) & Sons, Inc., 4.50%--4.85%, 9/13/94--11/14/94 44,947,429
----------------------------------------------------------------- ------------
Total 89,916,597
----------------------------------------------------------------- ------------
HEALTHCARE--1.0%
-----------------------------------------------------------------
10,000,000 Smithkline Beecham Corp., 4.50%, 10/3/94 9,960,000
----------------------------------------------------------------- ------------
LEASING--5.1%
-----------------------------------------------------------------
15,000,000 Concord Leasing, Inc., 4.70%, 9/21/94 14,960,833
-----------------------------------------------------------------
35,000,000 International Lease Finance Corp., 4.80%--4.83%,
11/21/94--11/22/94 34,618,321
----------------------------------------------------------------- ------------
Total 49,579,154
----------------------------------------------------------------- ------------
MINING--9.1%
-----------------------------------------------------------------
44,300,000 Arco Coal Australia, 4.63%--4.85%, 9/12/94--11/18/94 43,972,446
-----------------------------------------------------------------
45,400,000 RTZ America, Inc., 4.76%--4.85%, 11/8/94--11/22/94 44,951,408
----------------------------------------------------------------- ------------
Total 88,923,854
----------------------------------------------------------------- ------------
</TABLE>
MARSHALL MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
**COMMERCIAL PAPER--CONTINUED
- -------------------------------------------------------------------------------------
RAILWAYS--2.6%
-----------------------------------------------------------------
$15,737,000 Norfolk Southern Corp., 4.51%, 10/3/94 $ 15,673,912
-----------------------------------------------------------------
9,500,000 Union Pacific Corp., 4.50%, 9/20/94 9,477,438
----------------------------------------------------------------- ------------
Total 25,151,350
----------------------------------------------------------------- ------------
TOTAL COMMERCIAL PAPER 538,959,852
----------------------------------------------------------------- ------------
CORPORATE BONDS--0.4%
- -------------------------------------------------------------------------------------
3,500,000 General Motors Acceptance Corp., 8.15%, 9/15/94 3,505,254
----------------------------------------------------------------- ------------
MEDIUM TERM NOTES--5.6%
- -------------------------------------------------------------------------------------
ASSET-BACKED--0.5%
-----------------------------------------------------------------
4,974,666 Premier Auto Trust, 3.28%, 2/2/95 4,974,666
----------------------------------------------------------------- ------------
BROKER/DEALER--1.9%
-----------------------------------------------------------------
19,000,000 Bear, Stearns & Co., Inc., 3.70%, 9/29/94 18,999,510
----------------------------------------------------------------- ------------
FINANCE--AUTOMOTIVE--2.9%
-----------------------------------------------------------------
27,900,000 Ford Motor Credit Co., 5.50%--5.70%, 12/5/94--12/23/94 28,043,287
----------------------------------------------------------------- ------------
LEASING--0.3%
-----------------------------------------------------------------
3,050,000 International Lease Finance Corp., 8.45%, 9/1/94 3,050,000
----------------------------------------------------------------- ------------
TOTAL MEDIUM TERM NOTES 55,067,463
----------------------------------------------------------------- ------------
***VARIABLE RATE NOTES--35.0%
- -------------------------------------------------------------------------------------
ASSET-BACKED--2.0%
-----------------------------------------------------------------
20,000,000 Beta Finance, Inc., 4.83%, 2/10/95 20,000,000
----------------------------------------------------------------- ------------
BANKING--2.0%
-----------------------------------------------------------------
20,000,000 Abbey National Trust Services, 4.855%, 4/27/95 20,000,000
----------------------------------------------------------------- ------------
BROKERS/DEALERS--17.5%
-----------------------------------------------------------------
15,000,000 Bear, Stearns & Co., Inc., 4.60%, 2/7/95 15,000,000
-----------------------------------------------------------------
45,000,000 Donaldson, Lufkin, & Jenrette Securities Corp., 4.75%, 9/1/94 45,000,000
-----------------------------------------------------------------
20,000,000 Goldman, Sachs & Co., 4.938%, 1/13/95 20,000,000
-----------------------------------------------------------------
36,000,000 J.P. Morgan Securities, Inc., 4.60%, 9/1/94 36,000,000
-----------------------------------------------------------------
15,000,000 Shearson Lehman Brothers Holdings, Inc., 5.463%, 2/22/95 15,055,667
-----------------------------------------------------------------
20,000,000 Merrill Lynch & Co., Inc., 4.88%, 1/19/95 19,997,462
-----------------------------------------------------------------
20,000,000 Salomon Brothers, Inc., 4.925%, 6/26/95 20,000,000
----------------------------------------------------------------- ------------
Total 171,053,129
----------------------------------------------------------------- ------------
FINANCE--AUTOMOTIVE--4.2%
-----------------------------------------------------------------
41,000,000 General Motors Acceptance Corp., 4.757%, 9/1/94 41,000,000
----------------------------------------------------------------- ------------
FOOD AND BEVERAGES--2.0%
-----------------------------------------------------------------
20,000,000 PepsiCo, Inc., 4.855%, 4/13/95 20,000,000
----------------------------------------------------------------- ------------
</TABLE>
MARSHALL MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
***VARIABLE RATE NOTES--CONTINUED
- -------------------------------------------------------------------------------------
GOVERNMENT AGENCY--1.6%
-----------------------------------------------------------------
$15,585,000 Student Loan Marketing Association, 4.88%, 9/7/94 $ 15,588,407
----------------------------------------------------------------- ------------
INSURANCE--4.1%
-----------------------------------------------------------------
40,000,000 Commonwealth Life Insurance Co., 4.77%, 9/2/94 40,000,000
----------------------------------------------------------------- ------------
UTILITIES--1.6%
-----------------------------------------------------------------
4,999,000 Wisconsin Gas Co., 4.75%, 9/6/94 4,999,000
-----------------------------------------------------------------
10,000,000 Wisconsin Public Service Corp., 4.72%, 9/1/94 10,000,000
----------------------------------------------------------------- ------------
Total 14,999,000
----------------------------------------------------------------- ------------
TOTAL VARIABLE RATE NOTES 342,640,536
----------------------------------------------------------------- ------------
*REPURCHASE AGREEMENT--4.1%
- -------------------------------------------------------------------------------------
40,139,000 BZW Securities, Inc., 4.80%, dated 8/31/94, due 9/1/94
(at amortized cost) 40,139,000
----------------------------------------------------------------- ------------
TOTAL INVESTMENTS, (AT AMORTIZED COST AND VALUE) $980,312,105+
----------------------------------------------------------------- ------------
</TABLE>
* The repurchase agreement is fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
** Each issue shows the rate of discount at the time of purchase.
*** Current rate and next demand date shown.
+ Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($979,916,653) at August 31, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in securities $940,173,105
- -----------------------------------------------------------------
Investments in repurchase agreements 40,139,000
- ----------------------------------------------------------------- ------------
Total investments at amortized cost and value $980,312,105
- --------------------------------------------------------------------------------
Cash 200,000
- --------------------------------------------------------------------------------
Interest receivable 2,953,632
- --------------------------------------------------------------------------------
Receivable for capital stock sold 19,393
- --------------------------------------------------------------------------------
Deferred expenses 173,981
- -------------------------------------------------------------------------------- ------------
Total assets 983,659,111
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Dividends payable 3,162,362
- -----------------------------------------------------------------
Payable for capital stock redeemed 199,171
- -----------------------------------------------------------------
Accrued expenses 380,925
- ----------------------------------------------------------------- ------------
Total liabilities 3,742,458
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 979,916,653 shares of capital stock outstanding $979,916,653
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
Trust Shares (net assets of $967,987,704 / 967,987,704 shares of
capital stock outstanding) $1.00
- -------------------------------------------------------------------------------- ------------
Investment Shares (net assets of $11,928,949 / 11,928,949 shares of
capital stock outstanding) $1.00
- -------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL MONEY MARKET FUND
STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------
Interest income $35,176,906
- -----------------------------------------------------------------------------------
EXPENSES--
- -----------------------------------------------------------------------------------
Investment advisory fee $4,623,880
- ---------------------------------------------------------------------
Directors' fees 8,850
- ---------------------------------------------------------------------
Administrative personnel and services fee 887,132
- ---------------------------------------------------------------------
Custodian fees 117,800
- ---------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 75,381
- ---------------------------------------------------------------------
Fund share registration costs 210,069
- ---------------------------------------------------------------------
Auditing fees 15,382
- ---------------------------------------------------------------------
Legal fees 16,251
- ---------------------------------------------------------------------
Printing and postage 15,311
- ---------------------------------------------------------------------
Portfolio accounting fees 185,198
- ---------------------------------------------------------------------
Insurance premiums 18,295
- ---------------------------------------------------------------------
Taxes 87,200
- ---------------------------------------------------------------------
Shareholder services fees 138,716
- ---------------------------------------------------------------------
Distribution services fees 14,553
- ---------------------------------------------------------------------
Miscellaneous 32,145
- --------------------------------------------------------------------- ----------
Total expenses 6,446,163
- ---------------------------------------------------------------------
Deduct--
- ---------------------------------------------------------------------
Waiver of investment advisory fee $2,639,185
- --------------------------------------------------------
Waiver of custodian fees 48,321 2,687,506
- -------------------------------------------------------- ---------- ----------
Net expenses 3,758,657
- ----------------------------------------------------------------------------------- -----------
Net investment income $31,418,249
- ----------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-----------------------------------
1994 1993*
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------
Net investment income $ 31,418,249 $ 16,462,620
- ----------------------------------------------------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -----------------------------------------------------------
Dividends to shareholders from net investment income:
- -----------------------------------------------------------
Trust Shares (31,253,782) (16,431,216)
- -----------------------------------------------------------
Investment Shares (164,467) (31,404)
- ----------------------------------------------------------- --------------- ---------------
Change in net assets from distributions to
shareholders (31,418,249) (16,462,620)
- ----------------------------------------------------------- --------------- ---------------
CAPITAL STOCK TRANSACTIONS--
- -----------------------------------------------------------
Proceeds from sale of shares 2,698,258,215 2,335,502,436
- -----------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of dividends declared 3,620,348 2,389,738
- -----------------------------------------------------------
Cost of shares redeemed (2,499,832,541) (1,560,121,643)
- ----------------------------------------------------------- --------------- ---------------
Change in net assets from capital stock transactions 202,046,022 777,770,531
- ----------------------------------------------------------- --------------- ---------------
Change in net assets 202,046,022 777,770,531
- -----------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------
Beginning of period 777,870,631 100,100
- ----------------------------------------------------------- --------------- ---------------
End of period $ 979,916,653 $ 777,870,631
- ----------------------------------------------------------- --------------- ---------------
</TABLE>
* For the period from September 23, 1992 (start of business) to August 31, 1993.
(See Notes which are an integral part of the Financial Statements)
MARSHALL MONEY MARKET FUND--INVESTMENT SHARES
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
----------------------
1994 1993*
----- -----
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00
- ---------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------
Net investment income 0.03 0.02
- --------------------------------------------------------------- ----- -----
LESS DISTRIBUTIONS
- ---------------------------------------------------------------
Dividends to shareholders from net investment income (0.03) (0.02)
- --------------------------------------------------------------- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00
- --------------------------------------------------------------- ----- -----
TOTAL RETURN** 3.11% 1.89%
- ---------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------
Expenses 0.70% 0.72%(b)
- ---------------------------------------------------------------
Net investment income 3.39% 2.72%(b)
- ---------------------------------------------------------------
Expense waiver (a) 0.29% 0.28%(b)
- ---------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------
Net assets, end of period (000 omitted) $11,929 $1,980
- ---------------------------------------------------------------
</TABLE>
* Reflects operations for the period from December 17, 1992 (date of initial
public investment) to August 31, 1993.
** Based on net asset value.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
MARSHALL MONEY MARKET FUND--TRUST SHARES
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
----------------------
1994 1993*
----- -----
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00
- ---------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------
Net investment income 0.03 0.02
- --------------------------------------------------------------- ----- ----
LESS DISTRIBUTIONS
- ---------------------------------------------------------------
Dividends to shareholders from net investment income (0.03) (0.02)
- --------------------------------------------------------------- ----- ----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00
- --------------------------------------------------------------- ----- ----
TOTAL RETURN** 3.41% 2.33 %
- ---------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------
Expenses 0.40% 0.40 %(b)
- ---------------------------------------------------------------
Net investment income 3.40% 2.97 %(b)
- ---------------------------------------------------------------
Expense waiver (a) 0.29% 0.28 %(b)
- ---------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------
Net assets, end of period (000 omitted) $967,988 $775,890
- ---------------------------------------------------------------
</TABLE>
* Reflects operations for the period from November 23, 1992 (date of initial
public investment) to August 31, 1993.
** Based on net asset value.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
MARSHALL MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Marshall Funds, Inc. (the "Corporation"), is an open-end, management investment
company, established as a Wisconsin corporation under the Articles of
Incorporation on July 31, 1992. The Corporation consists of eleven diversified
portfolios: Marshall Balanced Fund, Marshall Equity Income Fund, Marshall
Government Income Fund, Marshall Intermediate Bond Fund, Marshall Intermediate
Tax-Free Fund, Marshall Mid-Cap Stock Fund, Marshall Money Market Fund, Marshall
Short-Term Income Fund, Marshall Short-Term Tax-Free Fund, Marshall Stock Fund,
and Marshall Value Equity Fund. Marshall Money Market Fund is offered in two
classes of shares: Trust Shares and Investment Shares. The assets of each
portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held. The financial statements included herein are
only those of Marshall Money Market Fund (the "Fund"). The financial statements
of the other portfolios are presented separately.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value its portfolio
securities is in accordance with Rule 2a-7 under the Investment Company Act of 1940, as
amended (the "Act").
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian bank to take
possession, to have legally segregated in the Federal Reserve Book Entry System, or to
have segregated within the custodian bank's vault, all securities held as collateral in
support of repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's underlying collateral to ensure that the value of collateral at least equals
the principal amount of the repurchase agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the Fund's adviser to
be creditworthy pursuant to the guidelines established by the Board of Directors (the
"Directors"). Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued
daily. Bond premium and discount, if applicable, are amortized as required by the
Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are
recorded on the ex-dividend date.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to shareholders each year
substantially all of its taxable income. Accordingly, no provisions for federal tax are
necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-issued or
delayed delivery transactions. The Fund records when-issued securities on the trade date
and maintains security positions such that sufficient liquid assets will be available to
make payment for the securities purchased. Securities purchased on a when-issued or
delayed delivery basis are marked to market daily and begin earning interest on the
settlement date.
</TABLE>
MARSHALL MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to registration of its
shares in its first fiscal year, excluding the initial expense of registering its shares,
have been deferred and are being amortized using the straight-line method not to exceed a
period of five years from the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the trade date.
</TABLE>
(3) CAPITAL STOCK
The Articles of Incorporation of the Marshall Funds, Inc. permit the Directors
to issue 50 billion full and fractional shares of common stock, par value
$0.0001 per share. At August 31, 1994, the capital paid-in for the Fund was
$979,916,653. Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
---------------------------------
TRUST SHARES 1994 1993*
<S> <C> <C>
- ------------------------------------------------------------ -------------- --------------
Shares sold 2,652,693,310 2,319,027,553
- ------------------------------------------------------------
Shares issued to shareholders in payment of dividends
declared 3,467,566 2,358,435
- ------------------------------------------------------------
Shares redeemed (2,464,063,526) (1,545,595,634)
- ------------------------------------------------------------ -------------- --------------
Net change resulting from Trust share transactions 192,097,350 775,790,354
- ------------------------------------------------------------ -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-----------------------------
INVESTMENT SHARES 1994 1993*
<S> <C> <C>
- ---------------------------------------------------------------- ----------- -----------
Shares sold 45,564,905 16,474,883
- ----------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 152,782 31,303
- ----------------------------------------------------------------
Shares redeemed (35,769,015) (14,526,009)
- ---------------------------------------------------------------- ----------- -----------
Net change resulting from Investment share transactions 9,948,672 1,980,177
- ---------------------------------------------------------------- ----------- -----------
Net change resulting from Fund share transactions 202,046,022 777,770,531
- ---------------------------------------------------------------- ----------- -----------
</TABLE>
* For the period from September 23, 1992 (start of business) to August 31, 1993.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--M&I Investment Management Corp., the Fund's investment
adviser (the "Adviser"), receives for its services an annual investment advisory
fee equal to 0.50 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Corporation for the period or a
minimum annual fee of $50,000 per Fund. FAS may voluntarily choose to waive a
portion of its fee.
DISTRIBUTION AND SHAREHOLDER SERVICES FEE--The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the
Plan, the Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's Investment Shares. The Plan provides that the
Fund may incur distribution expenses up to 0.30 of 1% of the average daily net
assets of the Investment Shares, annually, to compensate FSC.
MARSHALL MONEY MARKET FUND
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES FEE--Marshall Funds Investors Services ("MFIS") is the
Fund's shareholder servicing agent. Under the terms of a shareholder service
agreement with MFIS, the Fund will pay MFIS a fee to obtain certain personal
services for shareholders and the maintenance of shareholder accounts. The fee
is based on the level of the Fund's average net assets for the period.
TRANSFER AND DIVIDEND DISBURSING AGENT, ACCOUNTING AND CUSTODY FEES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. The FServ fee is based on the size, type, and number of accounts and
transactions made by shareholders.
FServ also maintains the Fund's accounting records. The fee is based on the
level of the Fund's average net assets for the period, plus out-of-pocket
expenses.
Marshall and Ilsley Trust Company is the Fund's custodian. The fee is based on
the level of the Fund's average net assets for the period.
ORGANIZATIONAL EXPENSES--Organizational expenses ($59,536) were borne initially
by FAS. The Fund has agreed to reimburse FAS for the organizational expenses
during the five year period following October 1, 1992 (date the Fund first
became effective). For the year ended August 31, 1994, the Fund paid $7,372
pursuant to this agreement.
Certain of the Officers and Directors of the Corporation are Officers and
Directors or Trustees of the above companies.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
MARSHALL MONEY MARKET FUND:
We have audited the accompanying statement of assets and liabilities, including
the schedule of portfolio investments, of the Marshall Money Market Fund (one of
the portfolios constituting the Marshall Funds, Inc., a Wisconsin corporation)
as of August 31, 1994, and the related statements of operations, changes in net
assets, and financial highlights for the periods presented. These financial
statements and financial highlights are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1994, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Marshall Money Market Fund (one of the portfolios constituting the Marshall
Funds, Inc.) as of August 31, 1994, and the results of its operations, changes
in its net assets and financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
October 11, 1994
<TABLE>
<S> <C>
DIRECTORS OFFICERS
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Ody J. Fish Edward C. Gonzales
John DeVincentis Chairman and Treasurer
Edward C. Gonzales James F. Duca, II
Paul E. Hassett President
Joseph S. Machi
Vice President and Assistant
Treasurer
Peter J. Germain
Secretary
Victor R. Siclari
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the FDIC, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves risk,
including possible loss of principal. Although money market funds seek to
maintain a stable net asset value of $1.00 per share, there is no assurance that
they will be able to do so.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.
Marshall
Equity
Funds
Combined Annual Report
TO SHAREHOLDERS
Dated August 31, 1994
Federated Securities Corp.
Distributor
A Subsidiary of Federated INVESTORS
FEDERATED INVESTORS TOWER
Pittsburgh, PA 15222-3779
3091401 (10/94)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Annual Report of the Marshall Equity Funds for the
fiscal year ended August 31, 1994. This report provides you with complete
financial information for the Funds, including the Investment Reviews by the
portfolio managers, a list of investments for each Fund, and the Financial
Statements.
Rising interest rates, which affected all financial markets, did impact the
Marshall Equity Funds. However, despite the market's ups and downs, the share
value of the Marshall Value Equity Fund increased during the reporting period.
And, all funds rewarded shareholders with distributions during the period.
Net assets in the Marshall Equity Funds totaled more than $593.6 million at the
end of the period.
Net assets in the Marshall Balanced Fund, a portfolio of stocks and bonds, stood
at $21.7 million. During the reporting period, the Fund paid distributions of
$0.21 per share.
The Marshall Equity Income Fund, an investment portfolio composed of stocks
selected for their ability to pay regular dividends, grew in net assets to $49.4
million. The Fund paid distributions of $0.23 per share.
The Marshall Value Equity Fund net assets also grew to $218.7 million. Managed
to help you pursue growth through investments in stocks selected for their
ability to increase in value, the Fund paid distributions of $0.10 per share.
Net assets in the Marshall Stock Fund, a fund that seeks long-term growth
through common stocks, decreased to $250.2 million. The Fund paid distributions
of $0.07 per share.
And the Marshall Mid-Cap Stock Fund, which strives for returns through stocks
issued by mid-sized companies, reported net assets of $53.6 million.
Distributions amounted to $0.04 per share.
Thank you for pursuing growth through one or more of the Marshall Equity Funds.
As always, we welcome your questions or comments.
Sincerely,
James F. Duca, II
President
Marshall Funds, Inc.
October 14, 1994
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
A rising economy, rising fear of inflation, and rising interest rates
characterized the recently completed fiscal year of the Marshall Funds. Gross
Domestic Product ("GDP") advanced more than 3% for the period. Although consumer
confidence declined in recent months, indications are positive for the important
Christmas selling season, and high business confidence suggests further capital
spending gains. Continued economic expansion and corporate cost cutting are
translating into sustained earnings gains for American industry.
Inflation worries surfaced this year, but to date, scant evidence of
acceleration at the retail level has materialized. Consumer prices edged up only
2.9% over the last 12 months. Nevertheless, clouds are gathering on the horizon,
with climbing commodity costs especially ominous. With the pricing power in the
manufacturing sector having increased significantly, industrial prices are
firming. Capacity utilization stands at a five-year high, and labor markets are
tightening. Expect inflation to advance to the 3.5% area in 1995.
Over the past year, investors have been reintroduced to the anguish of rapidly
rising interest rates. From the lows last October, long-term Treasury yields
jumped two percentage points. Starting in February, the Federal Reserve Board
(the "Fed") pushed up short-term interest rates 1.75 percentage points in five
incremental moves. The Fed is well aware that the economic cycle is past the
point where inflation usually begins to pick up. Rising rates are now beginning
to bite, with housing among the early victims. If the Fed is forced to move from
its present neutral policy to an even more restrictive one, the expansion could
stall by 1996 -- but for now, enjoy the expansion.
MARSHALL BALANCED FUND
During the second half of the Fund's fiscal year, the financial markets were
subjected to a myriad of stresses and strains primarily resulting from the Fed's
actions to increase interest rates. Their moves focused investor attention on
inflationary expectations and possibly weaker economic growth next year. Despite
higher short-term rates, the dollar showed significant weakness, particularly
against the Japanese yen. Also, unsettling to the market was the adverse
leverage of interest rate hikes caused by widespread use of derivative
instruments.
Despite these concerns, the economic expansion continues with only modest
upticks in inflation rates. GDP expanded at about a 3.5% pace during the first
half of 1994, aided in the second quarter by inventory accumulation. The third
quarter is likely to witness a winddown of excess inventories but a robust
fourth quarter is forecast notwithstanding the high interest rate environment.
Price increases did begin to appear in certain commodity areas, in particular in
certain types of paper and chemicals as capacity rates rose. Investors focused
on these increases and drove stock prices higher in these areas. Also, on the
positive side, health care issues rallied as prospects for the Administration's
health plan dimmed. On the negative side, pressures on interest-rate related
sectors, such as building and consumer durables, intensified as interest rates
rose.
The Fund underperformed the Standard & Poor's 500 Index ("S&P 500")* during the
second half of fiscal 1994, primarily because of its holdings in interest
sensitive securities. For this six-month period, the Marshall Balanced Fund
declined 2.1%. For fiscal 1994, the Fund posted a decline of 0.2%. Going
forward, the Marshall Balanced Fund will be focused on those stocks and sectors
with clearly defined earnings growth. Earnings growth is likely to be rewarded
in the period ahead as interest rate concerns cloud the overall market outlook.
MARSHALL EQUITY INCOME FUND
The Fund, introduced on September 30, 1993, invests in a broadly diversified
portfolio of common stocks with above average dividend yields. The portfolio is
structured to equal or exceed a stated yield objective of 100 basis points (or
1%) above the S&P 500. On August 31, 1994, the S&P 500 had a dividend yield of
2.67%, while the Fund had a SEC 30-day yield of 3.30%** and a current portfolio
yield of 4.28%.
* This index is unmanaged.
** Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
The Fund's emphasis on higher yielding common stocks makes the portfolio more
interest rate sensitive than the general market. Since the Fund's date of
inception, interest rates have risen sharply, creating a difficult period for
income investors (stocks and bonds). During this time, the myth that utility
stocks are conservative and safe investments into which widows, orphans, and
retired persons should invest their savings has been dispelled. Unfortunately
for some, it has been a very expensive lesson. For this time period, traditional
yield groups represented by the S&P Electric Utility Index and the S&P Telephone
Utility Index declined 22.01% and 7.86%, respectively.* Additionally, the energy
sector represented by the S&P Domestic Oil Index and the S&P International Oil
Index declined 2.28% and 0.89%, respectively.*
This eleven-month period is a classic example of the benefits of
diversification. Thanks to the benefits of diversification, the Fund produced a
total return of 2.02%.** The Fund currently holds overweighted positions in
healthcare (12.9%), tobacco (5.1%), and banks (11.2%). As protection against
another hike in interest rates by the Fed later this year and the weak stock
market that we think would result, the Fund currently holds a 16% short-term
investment reserve. We continue to underweight electric and telephone utilities
and oil stocks.
MARSHALL VALUE EQUITY FUND
The Fund, introduced on September 30, 1993, invests in value-oriented stocks
which sell at discounts to their asset value and perceived business potential.
These stocks are typically characterized as being undervalued, out-of-favor, or
neglected. For the eleven months ended August 31, 1994, the Fund produced a
total return of 10.59%.** This compares to total returns of 6.25% and 4.21% for
the S&P 500 and the Barra Value Index, respectively.*
During this investment period, the stock market benefitted from a strengthening
domestic economy, but was pressured by rising interest rates. Concerns of higher
inflation and more tightening measures by the Fed added to the market's
volatility.
Even though inflation concerns have undermined both stocks and bonds, the
stronger economy has fueled overall business activity leading to rising
corporate profitability and efficiency -- thus supporting higher stock prices.
While this polarized investment environment has been negative for some stocks,
others that have demonstrated earning improvement have been amply rewarded.
Although stock selection in the Fund is done on a bottom-up basis, certain
investment themes have emerged over the past year. One was to focus on companies
exhibiting pricing flexibility and rising sales. This is a result of increasing
demand and limited supply for the company's products. These companies have been
able to raise prices, thus improve profit margins. Stocks in the Fund
experiencing this opportunity have been in the steel, copper, paper and chemical
businesses. The Fund made a significant commitment to these groups early in the
year.
Another theme has been to invest in companies involved in a major restructuring,
for the purpose of becoming more competitive. The Fund's largest stock position,
IBM, was based on this premise.
Also, the Fund took advantage of undervalued stocks within the health care group
as concerns over health care reform intensified. Subsequently, the stocks
rebounded as reform measures moderated and industry consolidation actions
increased. One such action was the tender offer at a 50% premium for the Fund's
position in American Cyanamid.
* These indices are unmanaged.
** Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
MARSHALL STOCK FUND
During the second half of the Fund's fiscal year, the financial markets were
subjected to a myriad of stresses and strains primarily resulting from the Fed's
actions to increase interest rates. Their moves focused investor attention on
inflationary expectations and possibly weaker economic growth next year. Despite
higher short-term rates, the dollar showed significant weakness, particularly
against the Japanese yen. Also, unsettling to the market was the adverse
leverage of interest rate hikes caused by widespread use of derivative
instruments.
Despite these concerns, the economic expansion continues with only modest
upticks in inflation rates. GDP expanded at about a 3.5% pace during the first
half of 1994, aided in the second quarter by inventory accumulation. The third
quarter is likely to witness a winddown of excess inventories but a robust
fourth quarter is forecast notwithstanding the high interest rate environment.
Price increases did begin to appear in certain commodity areas, in particular in
certain types of paper and chemicals as capacity rates rose. Investors focused
on these increases and drove stock prices higher in these areas. Also, on the
positive side, health care issues rallied as prospects for the Administration's
health plan dimmed. On the negative side, pressures on interest-rate related
sectors, such as building and consumer durables, intensified as interest rates
rose.
The Fund underperformed the S&P 500* during the second half of fiscal 1994,
primarily because of its holdings in interest sensitive securities. For this
six-month period, the Marshall Stock Fund declined 3.2% while the S&P 500 showed
an increase of 3.2%.* For fiscal 1994, the Fund posted a gain of 0.4% versus an
increase of 5.4%* for the S&P 500. Going forward, the Marshall Stock Fund will
be focused on those stocks and sectors with clearly defined earnings growth.
Earnings growth is likely to be rewarded in the period ahead as interest rate
concerns cloud the overall market outlook.
MARSHALL MID-CAP STOCK FUND
Since its launch a short eleven months ago, the Marshall Mid-Cap Fund has grown
to $53.6 million in net assets. During this time, the Fund has had to weather
stormy investment waters as the favorable winds of declining interest rates
changed abruptly in February 1994. The Fed dramatically altered the environment
as it became convinced a strengthening economy would cause inflation to be a
significant threat and proceeded to ratchet up the Fed Funds' rate several
times. Mr. Clinton's attempt to restructure health care, 14% of the economy,
caused moves in health care stocks as well as ripples in other industries which
could be affected. The bond and stock market had to deal with major losses in
both money funds and a multitude of corporations, as they fell victim to the
"conservative" use of derivatives. Overall, the popular averages have masked
significant turmoil in the market. Smith Barney reports that from its high, the
average S&P 500 stock is down 18%, the average NYSE stock is down 21%, and the
average NASDAQ stock is down over 30%. In the S&P Mid-Cap 400*, 50% of all
stocks through September 1994 are off over 5% with 40% off in excess of 10%.
In this climate, the Fund has produced a slight negative return of (2.74%)**
versus a slight positive return of 3.5%* for the S&P Mid-Cap 400. However, as
interest rates have stabilized, the Fund has rallied 11.1% from its lows of June
versus a 9.8%* gain in the S&P Mid-Cap 400.
As the Fund enters its second year, we are staying consistent with our charter
of selecting rapidly growing smaller stocks. The median market capitalization of
the Fund is $1.6 billion. Of 55 issues, 17 are less than $1 billion and 37 are
less than $2 billion.
We expect the market in fiscal 1995 to be buffeted by continued concerns over
the Fed's policy, uncertainty over the strength or weakness of the economy, and
inflation. While the consensus views would emphasize higher rates for both bond
yields and inflation, we believe the consensus will likely be in error and look
for moderation in economic growth and level or declining bond yields. We will
use this period to continue to acquire companies with higher growth rates at
attractive prices.
* These indices are unmanaged.
** Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
MARSHALL BALANCED FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN MARSHALL BALANCED FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Balanced Fund (the "Fund") from September 30, 1993 (start of
performance) to August 31, 1994 compared to the Standard & Poor's 500 ("S&P
500") and the Lehman Brother's Government/Corporate Intermediate ("LGCI").*
<TABLE>
<CAPTION>
Lehman
Brothers
Govern-
ment/Corp
orate Inter-
Measurement Period Marshall Bal- Standard & mediate in-
(Fiscal Year Covered) anced Fund Poor's 500 dex
<S> <C> <C> <C>
9/30/93 10000 10000 10000
8/31/94 9947 10630 10074
AVERAGE ANNUAL TOTAL RETURN FOR THE
PERIOD ENDED AUGUST 31, 1994
Start of Performance (September 30, 1993) (Cumulative)........... (0.53%)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 and the LGCI have been adjusted to reflect
reinvestment of dividends on securities in the indices.
The S&P 500 and LGCI are not adjusted to reflect sales loads, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance.
MARSHALL EQUITY INCOME FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN MARSHALL EQUITY INCOME FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Equity Income Fund (the "Fund") from September 30, 1993 (start of
performance) to August 31, 1994 compared to the Standard & Poor's 500 (S&P 500)
and Standard & Poor's/BARRA Equity Income Index ("SPBEI").*
<TABLE>
<CAPTION>
Standard &
Marshall Eq- Poor's Barra
Measurement Period uity Income Standard & Eq uity In-
(Fiscal Year Covered) Fund Poor's 500 come Index
<S> <C> <C> <C>
9/30/93 10000 10000 10000
8/31/94 10202 10630 10486
AVERAGE ANNUAL TOTAL RETURN FOR THE
PERIOD ENDED AUGUST 31, 1994
Start of Performance (September 30, 1993) (Cumulative)............ 2.02%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 and SPBEI has been adjusted to reflect reinvestment
of dividends on securities in the indices.
The S&P 500 and SPBEI are not adjusted to reflect sales loads, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance.
MARSHALL VALUE EQUITY FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN MARSHALL VALUE EQUITY FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Value Equity Fund (the "Fund") from September 30, 1993 (start of
performance) to August 31, 1994 compared to the Standard & Poor's 500 Index
("S&P 500") and the Standard & Poor's/BARRA Value Index ("SPBV").*
<TABLE>
<CAPTION>
Marshall Standard &
Measurement Period Value Equity Standard & Poor's Barra
(Fiscal Year Covered) Fund Poor's 500 Val ue Index
<S> <C> <C> <C>
9/30/93 10000 10000 10000
8/31/94 11059 10630 10421
AVERAGE ANNUAL TOTAL RETURN FOR THE
PERIOD ENDED AUGUST 31, 1994
Start of Performance (September 30, 1993) (Cumulative)............ 10.59%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 and SPBV have been adjusted to reflect reinvestment
of dividends on securities in the indices.
The S&P 500 and SPBV are not adjusted to reflect sales loads, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance.
MARSHALL STOCK FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN MARSHALL STOCK FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Stock Fund (the "Fund") from November 20, 1992 (start of performance)
to August 31, 1994 compared to the Standard & Poor's 500 Index ("SP500").*
<TABLE>
<CAPTION>
Standard &
Measurement Period Marshall Poor's 500
(Fiscal Year Covered) Stock Fund Index
<S> <C> <C>
11/20/92 10000 10000
8/31/93 10167 10977
8/31/94 10212 11577
AVERAGE ANNUAL TOTAL RETURN FOR THE
PERIOD ENDED AUGUST 31, 1994
1 Year............................................................ 0.44%
Start of Performance (November 20, 1992).......................... 1.19%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Fund's performance assumes the reinvestment of all dividends and
distributions. The SP500 has been adjusted to reflect reinvestment of
dividends on securities in the index.
The SP500 is not adjusted to reflect sales loads, expenses, or other fees that
the SEC requires to be reflected in the Fund's performance.
MARSHALL MID-CAP STOCK FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN MARSHALL MID-CAP STOCK FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Mid-Cap Stock Fund (the "Fund") from September 30, 1993 (start of
performance) to August 31, 1994 compared to the Standard & Poor's Mid-Cap 400
Index ("SPMC").*
<TABLE>
<CAPTION>
Marshall
Measurement Period Mid-Cap Stock S&P Mid-Cap
(Fiscal Year Covered) Fund 400 Index
<S> <C> <C>
9/30/93 10000 10000
8/31/94 9726 10354
AVERAGE ANNUAL TOTAL RETURN FOR THE
PERIOD ENDED AUGUST 31, 1994
Start of Performance (September 30, 1993) (Cumulative)............ (2.74%)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Fund's performance assumes the reinvestments of all dividends and
distributions. The SPMC has been adjusted to reflect reinvestment of dividends
on securities in the index.
The SPMC is not adjusted to reflect sales loads, expenses, or other fees that
the SEC requires to be reflected in the Fund's performance.
MARSHALL BALANCED FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- -----------
<C> <C> <S> <C>
LONG-TERM INVESTMENTS--94.4%
- ------------------------------------------------------------------------------------
COMMON STOCKS--58.0%
- ------------------------------------------------------------------------------------
CAPITAL GOODS--17.3%
----------------------------------------------------------------
Electrical Equipment
----------------------------------------------------------------
5,000 General Electric Co. $ 248,750
---------------------------------------------------------------- -----------
Electronics
----------------------------------------------------------------
5,500 Harris Corp. 266,063
----------------------------------------------------------------
3,000 Intel Corp. 197,250
----------------------------------------------------------------
5,000 ** Litton Industries, Inc. 194,375
----------------------------------------------------------------
10,000 ** Solectron Corp. 305,000
----------------------------------------------------------------
2,000 Texas Instruments, Inc. 155,750
---------------------------------------------------------------- -----------
Total 1,118,438
---------------------------------------------------------------- -----------
Office Equipment
----------------------------------------------------------------
9,000 Adobe Systems, Inc. 285,750
----------------------------------------------------------------
15,000 ** Indigo 264,375
----------------------------------------------------------------
4,500 ** Lotus Development Co. 183,937
---------------------------------------------------------------- -----------
Total 734,062
---------------------------------------------------------------- -----------
Other Capital Goods
----------------------------------------------------------------
5,000 ** ADC Telecommunications, Inc. ++ 232,500
----------------------------------------------------------------
4,000 Alco Standard Corp. 261,000
----------------------------------------------------------------
12,000 ** Computer Sciences Corp. 538,500
----------------------------------------------------------------
4,500 Ericsson (LM) Telephone Co. 243,563
----------------------------------------------------------------
3,000 Minnesota Mining & Mfg. Co. 165,375
----------------------------------------------------------------
5,000 Parker Hannifin Corp. 210,000
---------------------------------------------------------------- -----------
Total 1,650,938
---------------------------------------------------------------- -----------
Total Capital Goods 3,752,188
---------------------------------------------------------------- -----------
CONSUMER DURABLES--4.3%
----------------------------------------------------------------
Automotive and Related
----------------------------------------------------------------
7000 Federal Mogul Corp. 200,375
----------------------------------------------------------------
4,000 Hayes Wheels International, Inc. 98,000
---------------------------------------------------------------- -----------
Total 298,375
---------------------------------------------------------------- -----------
Other Consumer Durables
----------------------------------------------------------------
15,000 ** American Homestar Corp. 138,750
----------------------------------------------------------------
5,000 Masco Corp. 138,750
----------------------------------------------------------------
5,000 PPG Industries, Inc. 208,125
----------------------------------------------------------------
</TABLE>
MARSHALL BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- -----------
<C> <C> <S> <C>
LONG-TERM INVESTMENTS--CONTINUED
- ------------------------------------------------------------------------------------
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------
CONSUMER DURABLES--CONTINUED
----------------------------------------------------------------
Other Consumer Durables--Continued
----------------------------------------------------------------
8,000 Shaw Industries, Inc. $ 139,000
---------------------------------------------------------------- -----------
Total 624,625
---------------------------------------------------------------- -----------
Total Consumer Durables 923,000
---------------------------------------------------------------- -----------
CONSUMER NON-DURABLES--23.4%
----------------------------------------------------------------
Beverage and Foods
----------------------------------------------------------------
3,000 Kellogg Co. 169,875
----------------------------------------------------------------
10,000 McDonalds Corp. 282,500
---------------------------------------------------------------- -----------
Total 452,375
---------------------------------------------------------------- -----------
Health Care
----------------------------------------------------------------
6,000 ** Amgen, Inc. 316,500
----------------------------------------------------------------
8,000 Cardinal Distribution, Inc. 310,000
----------------------------------------------------------------
12,222 ** Coram Healthcare Corp. 189,441
----------------------------------------------------------------
11,000 IVAX Corp. ++ 218,625
---------------------------------------------------------------- -----------
Total 1,034,566
---------------------------------------------------------------- -----------
Photography
----------------------------------------------------------------
7,500 Eastman Kodak Co. 373,125
---------------------------------------------------------------- -----------
Media
----------------------------------------------------------------
5,500 Capital Cities/ABC, Inc. 461,313
----------------------------------------------------------------
730 CBS, Inc. 234,604
----------------------------------------------------------------
5,000 McGraw-Hill, Inc. 348,125
----------------------------------------------------------------
12,600 ** Telecommunications, Inc. 284,287
---------------------------------------------------------------- -----------
Total 1,328,329
---------------------------------------------------------------- -----------
Retail
----------------------------------------------------------------
5,000 ** Kohl's Corp. 243,125
----------------------------------------------------------------
9,000 ** Nine West Group, Inc. 254,250
----------------------------------------------------------------
10,000 ** Price Costco, Inc. 156,875
---------------------------------------------------------------- -----------
Total 654,250
---------------------------------------------------------------- -----------
Services
----------------------------------------------------------------
12,000 Browning-Ferris Industries, Inc. 379,500
----------------------------------------------------------------
4,500 Dun & Bradstreet Corp. 259,313
----------------------------------------------------------------
3,000 ** Federal Express Corp. 212,625
----------------------------------------------------------------
9,000 ** GTECH Holdings Corp. 209,250
---------------------------------------------------------------- -----------
Total 1,060,688
---------------------------------------------------------------- -----------
</TABLE>
MARSHALL BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- -----------
<C> <C> <S> <C>
LONG-TERM INVESTMENTS--CONTINUED
- ------------------------------------------------------------------------------------
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------
CONSUMER NON-DURABLES--CONTINUED
----------------------------------------------------------------
Utilities--Telephone
----------------------------------------------------------------
4,000 Southwestern Bell Corp. $ 165,500
---------------------------------------------------------------- -----------
Total Consumer Non-Durables 5,068,833
---------------------------------------------------------------- -----------
ENERGY--7.0%
----------------------------------------------------------------
International Oil
----------------------------------------------------------------
2,500 Mobil Corp. 210,625
----------------------------------------------------------------
4,200 Royal Dutch Petroleum Co. ++ 473,025
---------------------------------------------------------------- -----------
Total 683,650
---------------------------------------------------------------- -----------
Oil & Gas Products
----------------------------------------------------------------
3,000 Anadarko Petroleum Corp. 140,625
----------------------------------------------------------------
7,100 Enron Corp. 216,550
----------------------------------------------------------------
6,000 Noble Affiliates, Inc. 154,500
---------------------------------------------------------------- -----------
Total 511,675
---------------------------------------------------------------- -----------
Oil Service
----------------------------------------------------------------
2,500 Schlumberger, Ltd. 142,500
----------------------------------------------------------------
4,000 ** Western Atlas, Inc. 177,500
---------------------------------------------------------------- -----------
Total 320,000
---------------------------------------------------------------- -----------
Total Energy 1,515,325
---------------------------------------------------------------- -----------
FINANCIAL--6.0%
----------------------------------------------------------------
Insurance
----------------------------------------------------------------
1,700 American International Group, Inc. 159,800
----------------------------------------------------------------
8,000 MGIC Investment Corp. 246,000
---------------------------------------------------------------- -----------
Total 405,800
---------------------------------------------------------------- -----------
Other Financial
----------------------------------------------------------------
7,500 ** Capstone Capital Trust, Inc. 132,188
----------------------------------------------------------------
5,000 First Chicago Corp. 260,000
----------------------------------------------------------------
6,000 First Financial Management Corp. 364,500
----------------------------------------------------------------
8,000 Regency Realty Corp. 136,000
---------------------------------------------------------------- -----------
Total 892,688
---------------------------------------------------------------- -----------
Total Financial 1,298,488
---------------------------------------------------------------- -----------
TOTAL COMMON STOCKS (IDENTIFIED COST $12,467,354) 12,557,834
---------------------------------------------------------------- -----------
</TABLE>
MARSHALL BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- -----------
<C> <C> <S> <C>
LONG-TERM INVESTMENTS--CONTINUED
- ------------------------------------------------------------------------------------
U.S. TREASURY NOTES--25.5%
- ------------------------------------------------------------------------------------
$ 830,000 5.50%, 4/30/96 ++ $ 824,032
----------------------------------------------------------------
480,000 6.375%, 1/15/2000 470,501
----------------------------------------------------------------
75,000 6.50%, 5/15/97 75,243
----------------------------------------------------------------
545,000 6.75%, 2/28/97 550,902
----------------------------------------------------------------
705,000 6.75%, 6/30/99 704,006
----------------------------------------------------------------
550,000 7.25%, 8/15/2004 ++ 552,833
----------------------------------------------------------------
700,000 7.625%, 4/30/96 718,382
----------------------------------------------------------------
175,000 7.875%, 1/15/98 ++ 182,095
----------------------------------------------------------------
120,000 7.875%, 8/15/2001 125,870
----------------------------------------------------------------
400,000 8.25%, 7/15/98 421,844
----------------------------------------------------------------
250,000 8.625%, 10/15/95 258,437
----------------------------------------------------------------
610,000 9.25%, 1/15/96 638,133
---------------------------------------------------------------- -----------
TOTAL U.S. TREASURY NOTES (IDENTIFIED COST $5,711,323) 5,522,278
---------------------------------------------------------------- -----------
CORPORATE BONDS--8.2%
- ------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--1.2%
----------------------------------------------------------------
90,000 American Express Master, 5.375%, 7/15/2001 81,352
----------------------------------------------------------------
180,000 First Chicago Master Trust, 7.15%, 4/15/2001 180,000
---------------------------------------------------------------- -----------
Total Asset-Backed Securities 261,352
---------------------------------------------------------------- -----------
BANKING--1.6%
----------------------------------------------------------------
75,000 First Bank N.A., 7.55%, 6/15/2004 73,257
----------------------------------------------------------------
175,000 NBD Bank, 5.00%, 1/30/98 164,855
----------------------------------------------------------------
100,000 Wachovia Bank, 5.50%, 6/29/98 94,922
---------------------------------------------------------------- -----------
Total Banking 333,034
---------------------------------------------------------------- -----------
FINANCIALS--1.9%
----------------------------------------------------------------
75,000 Associates Corp. of North America, 7.05%, 5/15/97 75,275
----------------------------------------------------------------
100,000 Associates Corp. of North America, 6.65%, 6/16/97 100,012
----------------------------------------------------------------
100,000 Chrysler Financial Corp., 9.50%, 12/15/99 108,875
----------------------------------------------------------------
135,000 Lehman Brothers, Inc., 7.00%, 5/15/97 ++ 134,243
---------------------------------------------------------------- -----------
Total Financials 418,405
---------------------------------------------------------------- -----------
INDUSTRIALS--0.9%
----------------------------------------------------------------
200,000 Burlington Resources, Inc., 7.15%, 5/1/99 199,180
---------------------------------------------------------------- -----------
MORTGAGE--1.0%
----------------------------------------------------------------
225,000 Securitized Asset Sales, Inc., 7.00%, (Series 1994-5A3),
7/25/2024 213,891
---------------------------------------------------------------- -----------
</TABLE>
MARSHALL BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- -----------
<C> <C> <S> <C>
LONG-TERM INVESTMENTS--CONTINUED
- ------------------------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------
YANKEE--1.6%
----------------------------------------------------------------
$ 15,000 African Development Bank, 13.25%, 12/1/94 $ 15,247
----------------------------------------------------------------
150,000 CRA Financial USA, Ltd., 6.50%, 12/1/2003 136,463
----------------------------------------------------------------
200,000 Hanson Overseas BV Notes, 7.375%, 1/15/2003 195,356
---------------------------------------------------------------- -----------
Total Yankee 347,066
---------------------------------------------------------------- -----------
TOTAL CORPORATE BONDS (IDENTIFIED COST $1,819,337) 1,772,928
---------------------------------------------------------------- -----------
U.S. GOVERNMENT OBLIGATIONS--2.7%
- ------------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK--0.6%
----------------------------------------------------------------
135,000 7.26%, 9/6/2001 135,676
---------------------------------------------------------------- -----------
FEDERAL HOME LOAN MORTGAGE CORP.--1.0%
----------------------------------------------------------------
116,664 6.00%, 11/15/2019 (Series 1486-A) 112,174
----------------------------------------------------------------
100,000 7.00%, 11/15/2020 (Series 96-D) 95,533
---------------------------------------------------------------- -----------
Total Federal Home Loan Mortgage Corp. 207,707
---------------------------------------------------------------- -----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--1.1%
----------------------------------------------------------------
242,753 7.50%, 3/15/2009 242,145
---------------------------------------------------------------- -----------
TOTAL U.S. GOVERNMENT OBLIGATIONS (IDENTIFIED COST $599,668) 585,528
---------------------------------------------------------------- -----------
TOTAL LONG-TERM INVESTMENTS (IDENTIFIED COST $20,597,682) 20,438,568
---------------------------------------------------------------- -----------
*REPURCHASE AGREEMENT--3.3%
- ------------------------------------------------------------------------------------
723,000 BZW Securities, Inc., 4.80%, dated 8/31/94, due 9/1/94
(at amortized cost) 723,000
---------------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $21,320,682) $21,161,568+
---------------------------------------------------------------- -----------
* The repurchase agreement is fully collateralized by U.S. government and/or agency
obligations based on market prices at the date of the portfolio.
** Non-income producing.
+ The cost of investments for federal tax purposes amounts to $21,341,204. The net
unrealized depreciation of investments on a federal tax basis amounts to $179,636, which
is comprised of $809,251 appreciation and $988,887 depreciation at August 31, 1994.
++ Certain shares on loan to broker.
</TABLE>
Note: The categories of investments are shown as a percentage of net assets
($21,659,369) at August 31, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------
Investments in securities $20,438,568
- -------------------------------------------------------------------
Investments in repurchase agreements 723,000
- ------------------------------------------------------------------- -----------
Total investments, at value (identified cost $21,320,682, tax cost
$21,341,204) $21,161,568
- ---------------------------------------------------------------------------------
Cash 503
- ---------------------------------------------------------------------------------
Interest receivable 99,013
- ---------------------------------------------------------------------------------
Receivable for investments sold 954,420
- ---------------------------------------------------------------------------------
Collateral for security lending 2,653,719
- ---------------------------------------------------------------------------------
Dividends receivable 26,655
- ---------------------------------------------------------------------------------
Deferred expenses 16,591
- --------------------------------------------------------------------------------- -----------
Total assets 24,912,469
- ---------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------
Security lending payable 2,653,719
- -------------------------------------------------------------------
Payable for investments purchased 542,218
- -------------------------------------------------------------------
Payable for capital stock redeemed 17,993
- -------------------------------------------------------------------
Accrued expenses 39,170
- ------------------------------------------------------------------- -----------
Total liabilities 3,253,100
- --------------------------------------------------------------------------------- -----------
NET ASSETS for 2,224,338 shares of capital stock outstanding $21,659,369
- --------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------
Paid-in capital $22,386,483
- ---------------------------------------------------------------------------------
Net unrealized depreciation of investments (159,114)
- ---------------------------------------------------------------------------------
Accumulated net realized loss on investments (664,593)
- ---------------------------------------------------------------------------------
Undistributed net investment income 96,593
- --------------------------------------------------------------------------------- -----------
Total Net Assets $21,659,369
- --------------------------------------------------------------------------------- -----------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
(net assets of $21,659,369 / 2,224,338 shares of capital stock outstanding) $9.74
- --------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL BALANCED FUND
STATEMENT OF OPERATIONS
PERIOD ENDED AUGUST 31, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------
Interest income (net of interest expense of $19,721) $ 613,409
- ------------------------------------------------------------------------------------
Dividend income 178,674
- ------------------------------------------------------------------------------------ ---------
Total investment income 792,083
- ------------------------------------------------------------------------------------
EXPENSES--
- ------------------------------------------------------------------------------------
Investment advisory fee $162,629
- ------------------------------------------------------------------------
Directors' fees 180
- ------------------------------------------------------------------------
Administrative personnel and services fee 45,479
- ------------------------------------------------------------------------
Custodian fees 4,337
- ------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 12,054
- ------------------------------------------------------------------------
Legal fees 3,392
- ------------------------------------------------------------------------
Printing and postage 10,755
- ------------------------------------------------------------------------
Portfolio accounting fees 42,731
- ------------------------------------------------------------------------
Taxes 2,201
- ------------------------------------------------------------------------
Shareholder services fees 3,253
- ------------------------------------------------------------------------
Miscellaneous 3,868
- ------------------------------------------------------------------------ --------
Total expenses 290,879
- ------------------------------------------------------------------------
Deduct--
- ------------------------------------------------------------------------
Waiver of investment advisory fee $76,957
- --------------------------------------------------------------
Waiver of administrative personnel and services fee 24,698
- --------------------------------------------------------------
Waiver of custodian fees 2,710 104,365
- -------------------------------------------------------------- ------- --------
Net expenses 186,514
- ------------------------------------------------------------------------------------ ---------
Net investment income 605,569
- ------------------------------------------------------------------------------------ ---------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
- ------------------------------------------------------------------------------------
Net realized loss on investments (identified cost basis) (664,593)
- ------------------------------------------------------------------------------------
Net change in unrealized depreciation on investments (159,114)
- ------------------------------------------------------------------------------------ ---------
Net realized and unrealized loss on investments (823,707)
- ------------------------------------------------------------------------------------ ---------
Change in net assets resulting from operations $(218,138)
- ------------------------------------------------------------------------------------ ---------
</TABLE>
* For the period from October 1, 1993 (date of initial public investment) to
August 31, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1994*
-----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------
Net investment income $ 605,569
- -------------------------------------------------------------------------
Net realized loss on investments ($33,023 net loss, as computed for
federal tax purposes) (664,593)
- -------------------------------------------------------------------------
Net change in unrealized depreciation on investments (159,114)
- ------------------------------------------------------------------------- ---------------
Change in net assets resulting from operations (218,138)
- ------------------------------------------------------------------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------------------------------
Dividends to shareholders from net investment income (508,976)
- ------------------------------------------------------------------------- ---------------
CAPITAL STOCK TRANSACTIONS--
- -------------------------------------------------------------------------
Proceeds from sale of shares 45,382,092
- -------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends
declared 507,095
- -------------------------------------------------------------------------
Cost of shares redeemed (23,502,704)
- ------------------------------------------------------------------------- ---------------
Change in net assets from capital stock transactions 22,386,483
- ------------------------------------------------------------------------- ---------------
Change in net assets 21,659,369
- -------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------
Beginning of period --
- ------------------------------------------------------------------------- ---------------
End of period (including undistributed net investment income of $96,593) $ 21,659,369
- ------------------------------------------------------------------------- ---------------
</TABLE>
* For the period from October 1, 1993 (date of initial public investment) to
August 31, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL BALANCED FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1994*
-----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income 0.25
- ----------------------------------------------------------------------
Net realized and unrealized loss on investments (0.30)
- ---------------------------------------------------------------------- -----------
Total from investment operations (0.05)
- ---------------------------------------------------------------------- -----------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.21)
- ---------------------------------------------------------------------- -----------
NET ASSET VALUE, END OF PERIOD $ 9.74
- ---------------------------------------------------------------------- -----------
TOTAL RETURN** (0.53%)
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 0.86%(b)
- ----------------------------------------------------------------------
Net investment income 2.78%(b)
- ----------------------------------------------------------------------
Expense waiver (a) 0.48%(b)
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period (000 omitted) $21,659
- ----------------------------------------------------------------------
Portfolio turnover rate 138%
- ----------------------------------------------------------------------
* Reflects operations for the period from October 1, 1993 (date of initial public
investment) to August 31, 1994.
** Based on net asset value.
(a) This voluntary expense decrease is reflected in both the expense and net investment
income ratios shown above.
(b) Computed on an annualized basis.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--81.9%
- --------------------------------------------------------------------------------------
CAPITAL GOODS--8.8%
-------------------------------------------------------------------
Electrical Equipment
-------------------------------------------------------------------
47,000 General Electric Co. $ 2,338,250
------------------------------------------------------------------- -----------
Other Capital Goods
-------------------------------------------------------------------
3,300 Briggs & Stratton Corp. 254,512
-------------------------------------------------------------------
13,000 Minnesota Mining & Mfg. Co. ++ 716,625
-------------------------------------------------------------------
19,900 Ogden Corp. 445,262
-------------------------------------------------------------------
12,300 Tenneco, Inc. 605,775
------------------------------------------------------------------- -----------
Total 2,022,174
------------------------------------------------------------------- -----------
Total Capital Goods 4,360,424
------------------------------------------------------------------- -----------
CONSUMER DURABLES--3.2%
-------------------------------------------------------------------
Appliances
-------------------------------------------------------------------
18,200 Maytag Corp. 332,150
------------------------------------------------------------------- -----------
Automotive and Related
-------------------------------------------------------------------
27,600 Ford Motor Co. ++ 807,300
------------------------------------------------------------------- -----------
Building and Forest Products
-------------------------------------------------------------------
9,400 Weyerhaeuser Co. 431,225
------------------------------------------------------------------- -----------
Total Consumer Durables 1,570,675
------------------------------------------------------------------- -----------
CONSUMER NON-DURABLES--23.2%
-------------------------------------------------------------------
Health Care
-------------------------------------------------------------------
26,000 Abbott Labs 780,000
-------------------------------------------------------------------
9,700 American Home Products Corp. 575,937
-------------------------------------------------------------------
15,000 Baxter International, Inc. 425,625
-------------------------------------------------------------------
20,800 Bristol Myers Squibb Co. 1,196,000
-------------------------------------------------------------------
43,100 Merck & Co., Inc. 1,470,788
-------------------------------------------------------------------
9,200 Pfizer, Inc. 627,900
-------------------------------------------------------------------
7,300 Schering Plough Corp. 510,088
-------------------------------------------------------------------
6,600 Upjohn Co. 238,425
-------------------------------------------------------------------
6,700 Warner Lambert Co. 560,287
------------------------------------------------------------------- -----------
Total 6,385,050
------------------------------------------------------------------- -----------
Media
-------------------------------------------------------------------
8,800 Gannett, Inc. 440,000
-------------------------------------------------------------------
9,400 McGraw Hill, Inc. 654,475
------------------------------------------------------------------- -----------
Total 1,094,475
------------------------------------------------------------------- -----------
</TABLE>
MARSHALL EQUITY INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------
CONSUMER NON-DURABLES--CONTINUED
-------------------------------------------------------------------
Retail
-------------------------------------------------------------------
10,000 Sears Roebuck & Co. $ 473,750
------------------------------------------------------------------- -----------
Services
-------------------------------------------------------------------
12,500 De Luxe Corp. 378,125
-------------------------------------------------------------------
10,100 Dun & Bradstreet Corp. 582,012
------------------------------------------------------------------- -----------
Total 960,137
------------------------------------------------------------------- -----------
Tobacco
-------------------------------------------------------------------
14,000 American Brands, Inc. 504,000
-------------------------------------------------------------------
26,000 Philip Morris Cos., Inc. 1,586,000
-------------------------------------------------------------------
14,000 UST, Inc. 437,500
------------------------------------------------------------------- -----------
Total 2,527,500
------------------------------------------------------------------- -----------
Total Consumer Non-Durables 11,440,912
------------------------------------------------------------------- -----------
ENERGY--13.0%
-------------------------------------------------------------------
Domestic and International Oil
-------------------------------------------------------------------
13,400 Amoco Corp. 775,525
-------------------------------------------------------------------
16,400 Chevron Corp. ++ 694,950
-------------------------------------------------------------------
35,600 Exxon Corp. 2,118,200
-------------------------------------------------------------------
11,900 Mobil Corp. 1,002,575
-------------------------------------------------------------------
6,200 Royal Dutch Petroleum Co. ++ 698,275
-------------------------------------------------------------------
7,800 Texaco, Inc. 481,650
-------------------------------------------------------------------
25,700 USX-Marathon Group 443,325
------------------------------------------------------------------- -----------
Total 6,214,500
------------------------------------------------------------------- -----------
Oil Service
-------------------------------------------------------------------
10,600 Dresser Industries, Inc. 213,325
------------------------------------------------------------------- -----------
Total Energy 6,427,825
------------------------------------------------------------------- -----------
FINANCIAL--15.7%
-------------------------------------------------------------------
Banks
-------------------------------------------------------------------
21,950 Banc One Corp. 762,763
-------------------------------------------------------------------
7,300 Bankamerica Corp. 360,437
-------------------------------------------------------------------
33,500 Chase Manhattan Corp. 1,264,625
-------------------------------------------------------------------
5,200 Crestar Financial Corp. 250,900
-------------------------------------------------------------------
7,200 Cullen Frost Bankers, Inc. 273,600
-------------------------------------------------------------------
8,950 First Security Corp. 290,875
-------------------------------------------------------------------
5,300 Integra Financial Corp. 259,038
-------------------------------------------------------------------
13,200 Magna Group, Inc. 272,250
-------------------------------------------------------------------
</TABLE>
MARSHALL EQUITY INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------
FINANCIAL--CONTINUED
-------------------------------------------------------------------
Banks--Continued
-------------------------------------------------------------------
6,800 Michigan National Corp. $ 530,400
-------------------------------------------------------------------
8,500 Nationsbank Corp. ++ 473,875
-------------------------------------------------------------------
14,100 PNC Bank Corp. 394,800
-------------------------------------------------------------------
10,000 UJB Financial Corp. 290,000
-------------------------------------------------------------------
5,000 Victoria Bankshares, Inc. 143,750
------------------------------------------------------------------- -----------
Total 5,567,313
------------------------------------------------------------------- -----------
Insurance
-------------------------------------------------------------------
3,700 Aetna Life & Casualty Co. 182,688
-------------------------------------------------------------------
33,500 American General Corp. 1,000,813
-------------------------------------------------------------------
11,900 Lincoln National Corp. 458,150
-------------------------------------------------------------------
10,300 Transamerica Corp. 549,762
------------------------------------------------------------------- -----------
Total 2,191,413
------------------------------------------------------------------- -----------
Total Financial 7,758,726
------------------------------------------------------------------- -----------
RAW MATERIALS/INTERMEDIATE GOODS--6.1%
-------------------------------------------------------------------
Chemicals
-------------------------------------------------------------------
5,300 Dow Chemical Co. 398,163
-------------------------------------------------------------------
9,700 Du Pont (E.I.) DeNemours 586,850
-------------------------------------------------------------------
10,300 Goodrich B.F. Co. 491,825
------------------------------------------------------------------- -----------
Total 1,476,838
------------------------------------------------------------------- -----------
Papers
-------------------------------------------------------------------
8,500 Kimberly Clark Corp. 504,687
-------------------------------------------------------------------
6,800 Union Camp Corp. 342,550
------------------------------------------------------------------- -----------
Total 847,237
------------------------------------------------------------------- -----------
Other Raw Materials
-------------------------------------------------------------------
34,000 Hanson PLC ++ 675,750
------------------------------------------------------------------- -----------
Total Raw Materials/Intermediate Goods 2,999,825
------------------------------------------------------------------- -----------
UTILITIES--11.9%
-------------------------------------------------------------------
Telecommunications
-------------------------------------------------------------------
19,200 Bell Atlantic Corp. 1,051,200
-------------------------------------------------------------------
11,100 Bellsouth Corp. 659,063
-------------------------------------------------------------------
17,100 GTE Corp. 542,925
------------------------------------------------------------------- -----------
Total 2,253,188
------------------------------------------------------------------- -----------
Electric
-------------------------------------------------------------------
10,300 Entergy Corp. 256,212
-------------------------------------------------------------------
</TABLE>
MARSHALL EQUITY INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------
UTILITIES--CONTINUED
-------------------------------------------------------------------
Electric--Continued
-------------------------------------------------------------------
8,000 New England Electric System $ 265,000
-------------------------------------------------------------------
25,700 PSI Resources, Inc. 575,038
-------------------------------------------------------------------
22,400 SCE Corp. 305,200
-------------------------------------------------------------------
21,200 Texas Utilities Co. 710,200
-------------------------------------------------------------------
13,900 Wisconsin Energy Corp. 361,400
-------------------------------------------------------------------
9,100 Wisconsin Public Service Corp. 265,037
------------------------------------------------------------------- -----------
Total 2,738,087
------------------------------------------------------------------- -----------
Gas Distributors
-------------------------------------------------------------------
23,000 Consolidated Natural Gas Co. 917,125
------------------------------------------------------------------- -----------
Total Utilities 5,908,400
------------------------------------------------------------------- -----------
TOTAL COMMON STOCKS (IDENTIFIED COST $40,131,921) 40,466,787
------------------------------------------------------------------- -----------
PREFERRED STOCKS--1.9%
- --------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS
-------------------------------------------------------------------
4,000 General Motors Corp., Pfd C 229,500
-------------------------------------------------------------------
100,000 RJR Nabisco Holdings, Pfd C 700,000
------------------------------------------------------------------- -----------
Total Convertible Preferred Stocks 929,500
------------------------------------------------------------------- -----------
TOTAL PREFERRED STOCKS (IDENTIFIED COST $877,780) 929,500
------------------------------------------------------------------- -----------
TOTAL COMMON AND PREFERRED STOCKS (IDENTIFIED COST $41,009,701) 41,396,287
------------------------------------------------------------------- -----------
*REPURCHASE AGREEMENT--16.5%
- --------------------------------------------------------------------------------------
$8,135,000 BZW Securities, Inc., 4.80%, dated 8/31/94, due 9/1/94
(at amortized cost) 8,135,000
------------------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $49,144,701) $49,531,287+
------------------------------------------------------------------- -----------
</TABLE>
* The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
+ The cost of investments for federal tax purposes amounts to $49,165,134. The
net unrealized appreciation of investments on a federal tax basis amounts to
$366,153, which is comprised of $1,888,981 appreciation and $1,522,828
depreciation at August 31, 1994.
++ Certain shares on loan to broker.
Note: The categories of investments are shown as a percentage of net assets
($49,395,557) at August 31, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL EQUITY INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------
Investments in securities $41,396,287
- -------------------------------------------------------------------
Investments in repurchase agreements 8,135,000
- ------------------------------------------------------------------- -----------
Total investments, at value (identified cost $49,144,701,
tax cost $49,165,134) $49,531,287
- ---------------------------------------------------------------------------------
Cash 674
- ---------------------------------------------------------------------------------
Collateral for security lending 3,163,200
- ---------------------------------------------------------------------------------
Receivable for capital stock sold 672,012
- ---------------------------------------------------------------------------------
Dividends receivable 182,372
- ---------------------------------------------------------------------------------
Interest receivable 1,353
- ---------------------------------------------------------------------------------
Deferred expenses 16,523
- --------------------------------------------------------------------------------- -----------
Total assets 53,567,421
- ---------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------
Security lending payable $ 3,163,200
- -------------------------------------------------------------------
Payable for investments purchased 809,472
- -------------------------------------------------------------------
Payable for capital stock redeemed 125,746
- -------------------------------------------------------------------
Accrued expenses 73,446
- ------------------------------------------------------------------- -----------
Total liabilities 4,171,864
- --------------------------------------------------------------------------------- -----------
NET ASSETS for 4,959,920 shares of capital stock outstanding $49,395,557
- --------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------
Paid-in capital $49,170,485
- ---------------------------------------------------------------------------------
Net unrealized appreciation of investments 386,586
- ---------------------------------------------------------------------------------
Accumulated net realized loss on investments (392,814)
- ---------------------------------------------------------------------------------
Undistributed net investment income 231,300
- --------------------------------------------------------------------------------- -----------
Total Net Assets $49,395,557
- --------------------------------------------------------------------------------- -----------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
(net assets of $49,395,557 / 4,959,920 shares of capital stock outstanding) $9.96
- --------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL EQUITY INCOME FUND
STATEMENT OF OPERATIONS
PERIOD ENDED AUGUST 31, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------
Interest income $ 187,859
- -----------------------------------------------------------------------------------
Dividend income 1,220,912
- ----------------------------------------------------------------------------------- ----------
Total investment income 1,408,771
- -----------------------------------------------------------------------------------
EXPENSES--
- -----------------------------------------------------------------------------------
Investment advisory fee $245,116
- -----------------------------------------------------------------------
Directors' fees 270
- -----------------------------------------------------------------------
Administrative personnel and services fee 45,481
- -----------------------------------------------------------------------
Custodian fees 6,536
- -----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 14,070
- -----------------------------------------------------------------------
Legal fees 4,892
- -----------------------------------------------------------------------
Printing and postage 13,604
- -----------------------------------------------------------------------
Portfolio accounting fees 40,090
- -----------------------------------------------------------------------
Taxes 2,700
- -----------------------------------------------------------------------
Shareholder services fees 4,902
- -----------------------------------------------------------------------
Miscellaneous 6,255
- ----------------------------------------------------------------------- --------
Total expenses 383,916
- -----------------------------------------------------------------------
Deduct--
- -----------------------------------------------------------------------
Waiver of investment advisory fee $39,343
- -------------------------------------------------------------
Waiver of administrative personnel and services fee 10,965
- -------------------------------------------------------------
Waiver of custodian fees 4,085 54,393
- ------------------------------------------------------------- ------- --------
Net expenses 329,523
- ----------------------------------------------------------------------------------- ----------
Net investment income 1,079,248
- ----------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -----------------------------------------------------------------------------------
Net realized loss on investments (identified cost basis) (392,814)
- -----------------------------------------------------------------------------------
Net change in unrealized appreciation on investments 386,586
- ----------------------------------------------------------------------------------- ----------
Net realized and unrealized loss on investments (6,228)
- ----------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $1,073,020
- ----------------------------------------------------------------------------------- ----------
</TABLE>
* For the period from October 1, 1993 (date of initial public investment) to
August 31, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL EQUITY INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1994*
-----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------
Net investment income $ 1,079,248
- -------------------------------------------------------------------------
Net realized loss on investments ($41,996 net loss, as computed for
federal tax purposes) (392,814)
- -------------------------------------------------------------------------
Net change in unrealized appreciation on investments 386,586
- ------------------------------------------------------------------------- ---------------
Change in net assets resulting from operations 1,073,020
- ------------------------------------------------------------------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------------------------------
Dividends to shareholders from net investment income (847,948)
- ------------------------------------------------------------------------- ---------------
CAPITAL STOCK TRANSACTIONS--
- -------------------------------------------------------------------------
Net proceeds from sale of shares 61,917,199
- -------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends
declared 645,885
- -------------------------------------------------------------------------
Cost of shares redeemed (13,392,599)
- ------------------------------------------------------------------------- ---------------
Change in net assets from capital stock transactions 49,170,485
- ------------------------------------------------------------------------- ---------------
Change in net assets 49,395,557
- -------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------
Beginning of period --
- ------------------------------------------------------------------------- ---------------
End of period (including undistributed net investment income of $231,300) $ 49,395,557
- ------------------------------------------------------------------------- ---------------
</TABLE>
* For the period from October 1, 1993 (date of initial public investment) to
August 31, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1994*
-----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income 0.28
- ----------------------------------------------------------------------
Net realized and unrealized loss on investments (0.09)
- ---------------------------------------------------------------------- -----------
Total from investment operations 0.19
- ---------------------------------------------------------------------- -----------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.23)
- ---------------------------------------------------------------------- -----------
NET ASSET VALUE, END OF PERIOD $ 9.96
- ---------------------------------------------------------------------- -----------
TOTAL RETURN** 2.02%
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 1.01%(b)
- ----------------------------------------------------------------------
Net investment income 3.30%(b)
- ----------------------------------------------------------------------
Expense waiver (a) 0.16%(b)
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period (000 omitted) $49,396
- ----------------------------------------------------------------------
Portfolio turnover rate 44%
- ----------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 1, 1993 (date of initial
public investment) to
August 31, 1994.
** Based on net asset value.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
MARSHALL VALUE EQUITY FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------ --------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--86.8%
- ------------------------------------------------------------------------------------
CAPITAL GOODS--15.0%
---------------------------------------------------------------
Aerospace and Related
---------------------------------------------------------------
47,550 Raytheon Co. $ 3,215,569
---------------------------------------------------------------
42,900 Rockwell International Corp. 1,549,763
--------------------------------------------------------------- ------------
Total 4,765,332
--------------------------------------------------------------- ------------
Electronics
---------------------------------------------------------------
107,800 Avnet, Inc. 4,002,075
---------------------------------------------------------------
141,800 ** Borland International, Inc. ++ 1,896,575
---------------------------------------------------------------
27,600 General Electric Co. 1,373,100
---------------------------------------------------------------
86,320 International Business Machines 5,923,710
---------------------------------------------------------------
13,000 Litton Industries, Inc. 505,375
---------------------------------------------------------------
158,450 ** Sun Microsystems, Inc. ++ 4,198,925
---------------------------------------------------------------
82,500 Tandy Corp. 3,320,625
--------------------------------------------------------------- ------------
Total 21,220,385
--------------------------------------------------------------- ------------
Machinery and Machine Tools
---------------------------------------------------------------
155,650 Giddings & Lewis, Inc. 2,918,438
--------------------------------------------------------------- ------------
Packaging and Containers
---------------------------------------------------------------
93,000 Ball Corp. ++ 2,592,375
---------------------------------------------------------------
27,100 ** Stone Container Corp. 535,225
---------------------------------------------------------------
13,500 Temple Inland, Inc. 761,063
--------------------------------------------------------------- ------------
Total 3,888,663
--------------------------------------------------------------- ------------
Total Capital Goods 32,792,818
--------------------------------------------------------------- ------------
CONSUMER DURABLES--5.7%
---------------------------------------------------------------
Automotive and Related
---------------------------------------------------------------
13,200 Ford Motor Co. ++ 386,100
---------------------------------------------------------------
68,500 General Motors Corp. 3,442,125
--------------------------------------------------------------- ------------
Total 3,828,225
--------------------------------------------------------------- ------------
</TABLE>
MARSHALL VALUE EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------ --------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------
CONSUMER DURABLES--CONTINUED
---------------------------------------------------------------
Building and Forest Products
---------------------------------------------------------------
21,000 ** Abitibi Price, Inc. $ 299,250
---------------------------------------------------------------
12,000 Bowater, Inc. 336,000
---------------------------------------------------------------
13,000 Federal Paper Board, Inc. 394,875
---------------------------------------------------------------
29,000 Georgia-Pacific Corp. ++ 2,156,875
---------------------------------------------------------------
14,500 James River Corp. 338,937
---------------------------------------------------------------
39,200 Willamette Industries, Inc. 2,018,800
--------------------------------------------------------------- ------------
Total 5,544,737
--------------------------------------------------------------- ------------
Homebuilders
---------------------------------------------------------------
111,900 Standard Pacific Corp. 993,113
--------------------------------------------------------------- ------------
Household Products/Wares
---------------------------------------------------------------
44,000 Premark International, Inc. 1,991,000
--------------------------------------------------------------- ------------
Total Consumer Durables 12,357,075
--------------------------------------------------------------- ------------
CONSUMER NON-DURABLES--16.8%
---------------------------------------------------------------
Apparel and Textiles
---------------------------------------------------------------
14,000 Russell Corp. 453,250
--------------------------------------------------------------- ------------
Beverages and Foods
---------------------------------------------------------------
54,000 Archer-Daniels Midland Co. 1,390,500
---------------------------------------------------------------
74,100 Hershey Foods Corp. 3,556,800
---------------------------------------------------------------
98,500 PepsiCo. Inc. 3,262,813
--------------------------------------------------------------- ------------
Total 8,210,113
--------------------------------------------------------------- ------------
Health Care
---------------------------------------------------------------
44,400 ** Amgen, Inc. ++ 2,342,100
---------------------------------------------------------------
149,850 Caremark International, Inc. ++ 3,633,862
---------------------------------------------------------------
131,050 Mallinckrodt Group, Inc. 4,226,362
--------------------------------------------------------------- ------------
Total 10,202,324
--------------------------------------------------------------- ------------
Photography
---------------------------------------------------------------
45,200 Eastman Kodak Co. 2,248,700
--------------------------------------------------------------- ------------
Retail
---------------------------------------------------------------
61,500 ** Federated Department Stores, Inc. ++ 1,299,187
---------------------------------------------------------------
134,400 K Mart Corp. 2,301,600
---------------------------------------------------------------
16,000 Melville Corp. 606,000
---------------------------------------------------------------
181,300 ** Price Costco, Inc. 2,844,144
---------------------------------------------------------------
116,300 Sears, Roebuck & Co. 5,509,712
--------------------------------------------------------------- ------------
Total 12,560,643
--------------------------------------------------------------- ------------
</TABLE>
MARSHALL VALUE EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------ --------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------
CONSUMER NON-DURABLES--CONTINUED
---------------------------------------------------------------
Services
---------------------------------------------------------------
104,550 WMX Technologies, Inc. $ 3,136,500
--------------------------------------------------------------- ------------
Total Consumer Non-Durables 36,811,530
--------------------------------------------------------------- ------------
ENERGY--10.6%
---------------------------------------------------------------
International Oil
---------------------------------------------------------------
31,250 British Petroleum PLC 2,375,000
---------------------------------------------------------------
24,200 Royal Dutch Petroleum Co. ++ 2,725,525
--------------------------------------------------------------- ------------
Total 5,100,525
--------------------------------------------------------------- ------------
Oil & Gas Equipment and Services
---------------------------------------------------------------
163,200 Baker Hughes, Inc. 3,060,000
---------------------------------------------------------------
145,500 Tidewater, Inc. 3,291,937
--------------------------------------------------------------- ------------
Total 6,351,937
--------------------------------------------------------------- ------------
Oil & Gas Products
---------------------------------------------------------------
45,000 Exxon Corp. 2,677,500
---------------------------------------------------------------
33,100 Mobil Corp. 2,788,675
---------------------------------------------------------------
68,000 Occidental Petroleum Corp. 1,513,000
---------------------------------------------------------------
21,600 Tenneco, Inc. 1,063,800
---------------------------------------------------------------
217,720 USX-Marathon Group 3,755,670
--------------------------------------------------------------- ------------
Total 11,798,645
--------------------------------------------------------------- ------------
Total Energy 23,251,107
--------------------------------------------------------------- ------------
FINANCIAL--14.1%
---------------------------------------------------------------
Banks
---------------------------------------------------------------
94,220 Banc One Corp. 3,274,145
---------------------------------------------------------------
51,800 Bancorp Hawaii, Inc. 1,677,025
---------------------------------------------------------------
21,000 Bank of Boston Corp. 551,250
---------------------------------------------------------------
20,700 J.P. Morgan & Co. 1,363,612
---------------------------------------------------------------
86,900 PNC Bank Corp. 2,433,200
--------------------------------------------------------------- ------------
Total 9,299,232
--------------------------------------------------------------- ------------
</TABLE>
MARSHALL VALUE EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------ --------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------
FINANCIAL--CONTINUED
---------------------------------------------------------------
Insurance
---------------------------------------------------------------
57,400 Aetna Life & Casualty Co. $ 2,834,125
---------------------------------------------------------------
38,500 American General Corp. 1,150,187
---------------------------------------------------------------
29,200 American International Group, Inc. 2,744,800
---------------------------------------------------------------
49,550 Cigna Corp. 3,319,850
---------------------------------------------------------------
18,500 Lincoln National Corp. 712,250
---------------------------------------------------------------
34,200 MBIA, Inc. 2,094,750
--------------------------------------------------------------- ------------
Total 12,855,962
--------------------------------------------------------------- ------------
Other Financial
---------------------------------------------------------------
153,660 American Express Co. 4,321,688
---------------------------------------------------------------
13,500 Dean Witter Discover & Co. 575,437
---------------------------------------------------------------
31,200 ITT Corp. 2,558,400
---------------------------------------------------------------
34,000 Student Loan Marketing Assoc. 1,309,000
--------------------------------------------------------------- ------------
Total 8,764,525
--------------------------------------------------------------- ------------
Total Financial 30,919,719
--------------------------------------------------------------- ------------
RAW MATERIALS/INTERMEDIATE GOODS--14.1%
---------------------------------------------------------------
Chemicals
---------------------------------------------------------------
179,000 Calgon Carbon Corp. 2,282,250
---------------------------------------------------------------
50,875 Eastman Chemical Co. 2,683,656
---------------------------------------------------------------
29,500 IMC Fertilizer Group, Inc. 1,183,687
---------------------------------------------------------------
61,750 Imperial Chemical Industries PLC 3,149,250
--------------------------------------------------------------- ------------
Total 9,298,843
--------------------------------------------------------------- ------------
Intermediate Goods
---------------------------------------------------------------
163,100 Hanson PLC 3,241,612
--------------------------------------------------------------- ------------
Metals
---------------------------------------------------------------
27,000 ** AK Steel Holdings Corp. 850,500
---------------------------------------------------------------
185,500 Bethlehem Steel Corp. ++ 4,266,500
---------------------------------------------------------------
13,000 British Steel PLC 323,375
---------------------------------------------------------------
357,950 Horsham Corp. 5,279,763
---------------------------------------------------------------
152,300 ** LTV Corp. 2,912,738
--------------------------------------------------------------- ------------
Total 13,632,876
--------------------------------------------------------------- ------------
</TABLE>
MARSHALL VALUE EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------ --------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------
RAW MATERIALS/INTERMEDIATE GOODS--CONTINUED
---------------------------------------------------------------
Papers
---------------------------------------------------------------
75,850 Champion International Corp. $ 2,730,600
---------------------------------------------------------------
20,000 Louisiana Pacific Corp. 710,000
---------------------------------------------------------------
24,300 Union Camp Corp. 1,224,113
--------------------------------------------------------------- ------------
Total 4,664,713
--------------------------------------------------------------- ------------
Total Raw Materials/Intermediate Goods 30,838,044
--------------------------------------------------------------- ------------
TRANSPORTATION--4.7%
---------------------------------------------------------------
Airlines
---------------------------------------------------------------
47,600 ** AMR Corp. 2,867,900
---------------------------------------------------------------
39,800 FlightSafety International, Inc. 1,557,175
--------------------------------------------------------------- ------------
Total 4,425,075
--------------------------------------------------------------- ------------
Other Transportation
---------------------------------------------------------------
107,250 Alexander & Baldwin, Inc. ++ 2,681,250
---------------------------------------------------------------
56,900 American President Cos., Ltd. 1,500,737
--------------------------------------------------------------- ------------
Total 4,181,987
--------------------------------------------------------------- ------------
Railroads
---------------------------------------------------------------
93,000 Canadian Pacific, Ltd. 1,639,125
--------------------------------------------------------------- ------------
Total Transportation 10,246,187
--------------------------------------------------------------- ------------
UTILITIES--5.8%
---------------------------------------------------------------
Electric Distribution
---------------------------------------------------------------
77,500 CMS Energy Corp. 1,743,750
---------------------------------------------------------------
32,500 Commonwealth Edison Co. 780,000
---------------------------------------------------------------
87,700 Entergy Corp. 2,181,537
---------------------------------------------------------------
53,500 Illinova Corp. 1,116,813
---------------------------------------------------------------
30,000 Peco Energy Co. 817,500
---------------------------------------------------------------
108,900 PSI Resources, Inc. 2,436,638
---------------------------------------------------------------
123,300 Pacificorp. 2,111,513
---------------------------------------------------------------
84,500 Pinnacle West Capital Corp. 1,563,250
--------------------------------------------------------------- ------------
Total Utilities 12,751,001
--------------------------------------------------------------- ------------
TOTAL COMMON STOCKS (IDENTIFIED COST $182,229,646) 189,967,481
--------------------------------------------------------------- ------------
</TABLE>
MARSHALL VALUE EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ------------ --------------------------------------------------------------- ------------
<C> <C> <S> <C>
PREFERRED STOCKS--0.8%
- ------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK
---------------------------------------------------------------
18,500 Ford Motor Co., Series A, Convertible, 12/31/2049 $ 1,776,000
--------------------------------------------------------------- ------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST $1,799,125) 1,776,000
--------------------------------------------------------------- ------------
TOTAL COMMON AND PREFERRED STOCKS (IDENTIFIED COST
$184,028,771) 191,743,481
--------------------------------------------------------------- ------------
*REPURCHASE AGREEMENT--13.9%
- ------------------------------------------------------------------------------------
$30,426,000 BZW Securities, Inc., 4.80%, dated 8/31/94, due 9/1/94
(at amortized cost) 30,426,000
--------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $214,454,771) $222,169,481+
--------------------------------------------------------------- ------------
</TABLE>
* The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
** Non-income producing.
+ The cost of investments for federal tax purposes amounts to $214,622,859. The
net unrealized appreciation of investments on a federal tax basis amounts to
$7,546,622, which is comprised of $8,451,891 appreciation and $905,269
depreciation at August 31, 1994.
++ Certain shares on loan to broker.
Note: The categories of investments are shown as a percentage of net assets
($218,755,375) at
August 31, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL VALUE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ----------------------------------------------------------------------------------
Investments in securities $191,743,481
- -------------------------------------------------------------------
Investments in repurchase agreements 30,426,000
- ------------------------------------------------------------------- ------------
Total investments, at value (identified cost $214,454,771,
tax cost $214,622,859) $222,169,481
- ----------------------------------------------------------------------------------
Collateral for security lending 12,379,700
- ----------------------------------------------------------------------------------
Receivable for capital stock sold 2,042,999
- ----------------------------------------------------------------------------------
Dividends receivable 501,320
- ----------------------------------------------------------------------------------
Receivable for investments sold 233,329
- ----------------------------------------------------------------------------------
Interest receivable 5,981
- ----------------------------------------------------------------------------------
Deferred expenses 16,476
- ---------------------------------------------------------------------------------- ------------
Total assets 237,349,286
- ----------------------------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------------------------
Security lending payable 12,379,700
- -------------------------------------------------------------------
Payable for capital stock redeemed 6,064,335
- -------------------------------------------------------------------
Payable for investments purchased 7,512
- -------------------------------------------------------------------
Accrued expenses 142,364
- ------------------------------------------------------------------- ------------
Total liabilities 18,593,911
- ---------------------------------------------------------------------------------- ------------
NET ASSETS for 19,979,667 shares of capital stock outstanding $218,755,375
- ---------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- ----------------------------------------------------------------------------------
Paid-in capital $209,055,936
- ----------------------------------------------------------------------------------
Net unrealized appreciation of investments 7,714,710
- ----------------------------------------------------------------------------------
Accumulated net realized gain on investments 1,666,910
- ----------------------------------------------------------------------------------
Undistributed net investment income 317,819
- ---------------------------------------------------------------------------------- ------------
Total Net Assets $218,755,375
- ---------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
(net assets of $218,755,375 / 19,979,667 shares of capital stock outstanding) $10.95
- ---------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL VALUE EQUITY FUND
STATEMENT OF OPERATIONS
PERIOD ENDED AUGUST 31, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------
Interest income $ 290,475
- ----------------------------------------------------------------------------------
Dividend income 879,733
- ---------------------------------------------------------------------------------- -----------
Total investment income 1,170,208
- ----------------------------------------------------------------------------------
EXPENSES--
- ----------------------------------------------------------------------------------
Investment advisory fee $310,939
- ----------------------------------------------------------------------
Directors' fees 180
- ----------------------------------------------------------------------
Administrative personnel and services fee 54,953
- ----------------------------------------------------------------------
Custodian fees 8,292
- ----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 18,892
- ----------------------------------------------------------------------
Legal fees 6,892
- ----------------------------------------------------------------------
Printing and postage 17,677
- ----------------------------------------------------------------------
Portfolio accounting fees 42,434
- ----------------------------------------------------------------------
Taxes 2,600
- ----------------------------------------------------------------------
Shareholder services fees 6,219
- ----------------------------------------------------------------------
Miscellaneous 7,503
- ---------------------------------------------------------------------- --------
Total expenses 476,581
- ----------------------------------------------------------------------
Deduct--
- ----------------------------------------------------------------------
Waiver of investment advisory fee $45,477
- ------------------------------------------------------------
Waiver of administrative personnel and services fees 9,451
- ------------------------------------------------------------
Waiver of custodian fees 4,467 59,395
- ------------------------------------------------------------ ------- --------
Net expenses 417,186
- ---------------------------------------------------------------------------------- -----------
Net investment income 753,022
- ---------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
- ----------------------------------------------------------------------------------
Net realized gain on investments (identified cost basis) 1,666,910
- ----------------------------------------------------------------------------------
Net change in unrealized appreciation on investments 7,714,710
- ---------------------------------------------------------------------------------- -----------
Net realized and unrealized gain on investments 9,381,620
- ---------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $10,134,642
- ---------------------------------------------------------------------------------- -----------
</TABLE>
* For the period from October 1, 1993 (date of initial public investment) to
August 31, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL VALUE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1994*
-----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------
Net investment income $ 753,022
- -------------------------------------------------------------------------
Net realized gain on investments ($1,834,999 net gain, as computed
for federal tax purposes) 1,666,910
- -------------------------------------------------------------------------
Net change in unrealized appreciation on investments 7,714,710
- ------------------------------------------------------------------------- ---------------
Change in net assets resulting from operations 10,134,642
- ------------------------------------------------------------------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------------------------------
Dividends to shareholders from net investment income (435,203)
- ------------------------------------------------------------------------- ---------------
CAPITAL STOCK TRANSACTIONS--
- -------------------------------------------------------------------------
Proceeds from sale of shares 224,111,601
- -------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
dividends declared 223,675
- -------------------------------------------------------------------------
Cost of shares redeemed (15,279,340)
- ------------------------------------------------------------------------- ---------------
Change in net assets from capital stock transactions 209,055,936
- ------------------------------------------------------------------------- ---------------
Change in net assets 218,755,375
- -------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------
Beginning of period --
- ------------------------------------------------------------------------- ---------------
End of period (including undistributed net investment income of $317,819) $ 218,755,375
- ------------------------------------------------------------------------- ---------------
</TABLE>
* For the period from October 1, 1993 (date of initial public investment) to
August 31, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL VALUE EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1994*
-----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income 0.12
- ----------------------------------------------------------------------
Net realized and unrealized gain on investments 0.93
- ---------------------------------------------------------------------- -----------
Total from investment operations 1.05
- ----------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.10)
- ---------------------------------------------------------------------- -----------
NET ASSET VALUE, END OF PERIOD $ 10.95
- ---------------------------------------------------------------------- -----------
TOTAL RETURN** 10.59%
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 1.00%(b)
- ----------------------------------------------------------------------
Net investment income 1.82%(b)
- ----------------------------------------------------------------------
Expense waiver (a) 0.15%(b)
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period (000 omitted) $218,755
- ----------------------------------------------------------------------
Portfolio turnover rate 39%
- ----------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 1, 1993 (date of initial
public investment) to August 31, 1994.
** Based on net asset value.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
MARSHALL STOCK FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--84.6%
- -----------------------------------------------------------------------------------
CAPITAL GOODS--24.9%
----------------------------------------------------------------
Electronics
----------------------------------------------------------------
90,000 Harris Corp. $ 4,353,750
----------------------------------------------------------------
50,000 Intel Corp. 3,287,500
----------------------------------------------------------------
92,100 ** Litton Industries, Inc. ++ 3,580,388
----------------------------------------------------------------
190,000 ** Solectron Corp. ++ 5,795,000
----------------------------------------------------------------
34,000 Texas Instruments, Inc. 2,647,750
---------------------------------------------------------------- ------------
Total 19,664,388
---------------------------------------------------------------- ------------
Electrical Equipment
----------------------------------------------------------------
110,000 General Electric Co. 5,472,500
---------------------------------------------------------------- ------------
Office Equipment
----------------------------------------------------------------
160,000 Adobe System, Inc. ++ 5,080,000
----------------------------------------------------------------
200,000 ** Indigo 3,525,000
----------------------------------------------------------------
76,500 ** Lotus Development Corp. 3,126,937
---------------------------------------------------------------- ------------
Total 11,731,937
---------------------------------------------------------------- ------------
Other Capital Goods
----------------------------------------------------------------
80,000 ** ADC Telecommunications, Inc. 3,720,000
----------------------------------------------------------------
72,400 Alco Standard Corp. 4,724,100
----------------------------------------------------------------
175,000 ** Computer Sciences Corp. 7,853,125
----------------------------------------------------------------
55,000 Ericsson L.M. Telephone Co. 2,976,875
----------------------------------------------------------------
52,300 Minnesota Mining & Manufacturing Co. 2,883,037
----------------------------------------------------------------
75,000 Parker Hannifin Corp. 3,150,000
---------------------------------------------------------------- ------------
Total 25,307,137
---------------------------------------------------------------- ------------
Total Capital Goods 62,175,962
---------------------------------------------------------------- ------------
CONSUMER DURABLES--8.8%
----------------------------------------------------------------
Automotive and Related
----------------------------------------------------------------
150,000 Federal Mogul Corp. ++ 4,293,750
----------------------------------------------------------------
100,000 Hayes Wheels International, Inc. 2,450,000
----------------------------------------------------------------
100,000 Mark IV Industries, Inc. ++ 2,062,500
---------------------------------------------------------------- ------------
Total 8,806,250
---------------------------------------------------------------- ------------
Other Consumer Durables
----------------------------------------------------------------
157,500 American Homestar Corp. 1,456,875
----------------------------------------------------------------
100,000 Masco Corp. 2,775,000
----------------------------------------------------------------
125,000 Kaufman & Broad Home Corp. 1,937,500
----------------------------------------------------------------
</TABLE>
MARSHALL STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
CONSUMER DURABLES--CONTINUED
----------------------------------------------------------------
78,600 PPG Industries, Inc. $ 3,271,725
----------------------------------------------------------------
215,000 Shaw Industries, Inc. 3,735,625
---------------------------------------------------------------- ------------
Total 13,176,725
---------------------------------------------------------------- ------------
Total Consumer Durables 21,982,975
---------------------------------------------------------------- ------------
CONSUMER NON-DURABLES--30.8%
----------------------------------------------------------------
Beverages and Foods
----------------------------------------------------------------
53,000 Kellogg Co. 3,001,125
----------------------------------------------------------------
175,000 McDonalds Corp. 4,943,750
---------------------------------------------------------------- ------------
Total 7,944,875
---------------------------------------------------------------- ------------
Health Care
----------------------------------------------------------------
110,000 ** Amgen, Inc. 5,802,500
----------------------------------------------------------------
125,000 Cardinal Health, Inc. 4,843,750
----------------------------------------------------------------
165,000 ** Coram Healthcare Corp. 2,557,500
----------------------------------------------------------------
179,400 IVAX Corp. ++ 3,565,575
---------------------------------------------------------------- ------------
Total 16,769,325
---------------------------------------------------------------- ------------
Photography
----------------------------------------------------------------
110,000 Eastman Kodak Co. 5,472,500
---------------------------------------------------------------- ------------
Media
----------------------------------------------------------------
93,150 Capital Cities/ABC, Inc. 7,812,956
----------------------------------------------------------------
7,300 CBS, Inc. 2,346,038
----------------------------------------------------------------
75,000 McGraw-Hill, Inc. 5,221,875
----------------------------------------------------------------
230,900 ** Telecommunications, Inc. 5,209,681
---------------------------------------------------------------- ------------
Total 20,590,550
---------------------------------------------------------------- ------------
Retail
----------------------------------------------------------------
75,400 ** Kohl's Corp. 3,666,325
----------------------------------------------------------------
133,500 ** Nine West Group, Inc. ++ 3,771,375
----------------------------------------------------------------
200,000 ** Price Costco, Inc. 3,137,500
---------------------------------------------------------------- ------------
Total 10,575,200
---------------------------------------------------------------- ------------
Services
----------------------------------------------------------------
175,000 Browning Ferris Industry, Inc. 5,534,375
----------------------------------------------------------------
75,000 Dun & Bradstreet Corp. 4,321,875
----------------------------------------------------------------
40,000 ** Federal Express Corp. 2,835,000
----------------------------------------------------------------
130,000 ** GTECH Holdings, Inc. ++ 3,022,500
---------------------------------------------------------------- ------------
Total 15,713,750
---------------------------------------------------------------- ------------
Total Consumer Non-Durables 77,066,200
---------------------------------------------------------------- ------------
</TABLE>
MARSHALL STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
ENERGY--9.8%
----------------------------------------------------------------
Oil and Gas Products
----------------------------------------------------------------
50,000 Anadarko Pete Corp. $ 2,343,750
----------------------------------------------------------------
120,000 Enron Corp. 3,660,000
----------------------------------------------------------------
100,000 Noble Affiliates, Inc. ++ 2,575,000
---------------------------------------------------------------- ------------
Total 8,578,750
---------------------------------------------------------------- ------------
International Oil and Gas
----------------------------------------------------------------
40,000 Mobil Corp. 3,370,000
----------------------------------------------------------------
71,700 Royal Dutch Petroleum Co. ++ 8,075,213
---------------------------------------------------------------- ------------
Total 11,445,213
---------------------------------------------------------------- ------------
Oil and Gas Service
----------------------------------------------------------------
40,000 Schlumberger, Ltd. 2,280,000
----------------------------------------------------------------
50,000 ** Western Atlas, Inc. 2,218,750
---------------------------------------------------------------- ------------
Total 4,498,750
---------------------------------------------------------------- ------------
Total Energy 24,522,713
---------------------------------------------------------------- ------------
FINANCIAL--9.0%
----------------------------------------------------------------
Insurance
----------------------------------------------------------------
26,500 American International Group, Inc. 2,491,000
----------------------------------------------------------------
156,200 MGIC Investment Corp. ++ 4,803,150
---------------------------------------------------------------- ------------
Total 7,294,150
---------------------------------------------------------------- ------------
Other Financial
----------------------------------------------------------------
67,500 ** Capstone Capital Trading, Inc. 1,189,688
----------------------------------------------------------------
103,800 First Chicago Corp. 5,397,600
----------------------------------------------------------------
110,000 First Financial Management Corp. 6,682,500
----------------------------------------------------------------
120,000 Regency Realty Corp. 2,040,000
---------------------------------------------------------------- ------------
Total 15,309,788
---------------------------------------------------------------- ------------
Total Financial 22,603,938
---------------------------------------------------------------- ------------
UTILITIES--1.3%
----------------------------------------------------------------
Telephone
----------------------------------------------------------------
80,000 SouthWestern Bell Corp. 3,310,000
---------------------------------------------------------------- ------------
Total Utilities 3,310,000
---------------------------------------------------------------- ------------
TOTAL COMMON STOCKS (IDENTIFIED COST $201,754,795) 211,661,788
---------------------------------------------------------------- ------------
</TABLE>
MARSHALL STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
*REPURCHASE AGREEMENT--12.1%
- -----------------------------------------------------------------------------------
$30,197,000 BZW Securities, Inc., 4.80%, dated 8/31/94, due 9/1/94
(at amortized cost) $ 30,197,000
---------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $231,951,795) $241,858,788+
---------------------------------------------------------------- ------------
</TABLE>
* The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
** Non-income producing.
+ The cost of investments for federal tax purposes amounts to $231,986,150. The
net unrealized appreciation of investments on a federal tax basis amounts to
$9,872,638, which is comprised of $19,383,249 appreciation and $9,510,611
depreciation at August 31, 1994.
++ Certain shares on loan to broker.
Note: The categories of investments are shown as a percentage of net assets
($250,154,936) at August 31, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL STOCK FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in securities $211,661,788
- -----------------------------------------------------------------
Investments in repurchase agreements 30,197,000
- ----------------------------------------------------------------- ------------
Total investments, at value (identified cost $231,951,795,
tax cost $231,986,150) $241,858,788
- --------------------------------------------------------------------------------
Collateral for security lending 36,891,700
- --------------------------------------------------------------------------------
Receivable for capital stock sold 8,989,820
- --------------------------------------------------------------------------------
Receivable for investments sold 6,110,256
- --------------------------------------------------------------------------------
Dividends receivable 429,952
- --------------------------------------------------------------------------------
Interest receivable 14,582
- --------------------------------------------------------------------------------
Deferred expenses 68,856
- -------------------------------------------------------------------------------- ------------
Total assets 294,363,954
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Security lending payable 36,891,700
- -----------------------------------------------------------------
Payable for investments purchased 7,077,484
- -----------------------------------------------------------------
Payable for capital stock redeemed 18,400
- -----------------------------------------------------------------
Accrued expenses 221,434
- ----------------------------------------------------------------- ------------
Total liabilities 44,209,018
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 24,897,891 shares of capital stock outstanding $250,154,936
- -------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid-in capital $243,328,148
- --------------------------------------------------------------------------------
Net unrealized appreciation of investments 9,906,993
- --------------------------------------------------------------------------------
Accumulated net realized loss on investments (3,457,305)
- --------------------------------------------------------------------------------
Undistributed net investment income 377,100
- -------------------------------------------------------------------------------- ------------
Total Net Assets $250,154,936
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
(net assets of $250,154,936 / 24,897,891 shares of capital stock outstanding) $10.05
- -------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL STOCK FUND
STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------
Dividend income $ 3,746,045
- ------------------------------------------------------------------------------
Interest income 662,358
- ------------------------------------------------------------------------------ ------------
Total investment income 4,408,403
- ------------------------------------------------------------------------------
EXPENSES--
- ------------------------------------------------------------------------------
Investment advisory fee $1,877,194
- -----------------------------------------------------------------
Directors' fees 2,794
- -----------------------------------------------------------------
Administrative personnel and services fee 241,079
- -----------------------------------------------------------------
Custodian fees 48,888
- -----------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 94,831
- -----------------------------------------------------------------
Fund share registration costs 44,161
- -----------------------------------------------------------------
Auditing fees 15,150
- -----------------------------------------------------------------
Legal fees 13,040
- -----------------------------------------------------------------
Printing and postage 23,049
- -----------------------------------------------------------------
Portfolio accounting fees 66,027
- -----------------------------------------------------------------
Insurance premiums 11,352
- -----------------------------------------------------------------
Taxes 32,921
- -----------------------------------------------------------------
Shareholder services fees 37,544
- -----------------------------------------------------------------
Miscellaneous 3,916
- ----------------------------------------------------------------- ----------
Total expenses 2,511,946
- -----------------------------------------------------------------
Deduct--Waiver of custodian fees 30,085
- ----------------------------------------------------------------- ----------
Net expenses 2,481,861
- ------------------------------------------------------------------------------ ------------
Net investment income 1,926,542
- ------------------------------------------------------------------------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ------------------------------------------------------------------------------
Net realized gain on investments (identified cost basis) 13,279,160
- ------------------------------------------------------------------------------
Net change in unrealized depreciation on investments (12,123,274)
- ------------------------------------------------------------------------------ ------------
Net realized and unrealized gain on investments 1,155,886
- ------------------------------------------------------------------------------ ------------
Change in net assets resulting from operations $ 3,082,428
- ------------------------------------------------------------------------------ ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL STOCK FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
----------------------------
1994 1993*
- ------------------------------------------------------------------ ------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------------
Net investment income $ 1,926,542 $ 2,924,758
- ------------------------------------------------------------------
Net realized gain (loss) on investments ($3,422,951 net loss and
$0, respectively, as computed for federal tax purposes) 13,279,160 (16,736,465)
- ------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on
investments (12,123,274) 22,030,267
- ------------------------------------------------------------------ ------------- ------------
Change in net assets resulting from operations 3,082,428 8,218,560
- ------------------------------------------------------------------ ------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------------------
Dividends to shareholders from net investment income (1,993,902) (2,480,298)
- ------------------------------------------------------------------ ------------- ------------
CAPITAL STOCK TRANSACTIONS--
- ------------------------------------------------------------------
Proceeds from sale of shares 98,818,795 329,072,350
- ------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
dividends declared 1,882,088 2,446,695
- ------------------------------------------------------------------
Cost of shares redeemed (160,762,127) (28,129,753)
- ------------------------------------------------------------------ ------------- ------------
Change in net assets from capital stock transactions (60,061,244) 303,389,292
- ------------------------------------------------------------------ ------------- ------------
Change in net assets (58,972,718) 309,127,554
- ------------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------------
Beginning of period 309,127,654 100
- ------------------------------------------------------------------ ------------- ------------
End of period (including undistributed net investment
income of $377,100 and $444,460, respectively) $ 250,154,936 $309,127,654
- ------------------------------------------------------------------ ------------- ------------
</TABLE>
* For the period from November 23, 1992 (date of initial public investment) to
August 31, 1993.
(See Notes which are an integral part of the Financial Statements)
MARSHALL STOCK FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-------------------------
1994 1993*
------ ------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.08 $10.00
- -------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------
Net investment income 0.07 0.10
- -------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.03) 0.07
- ------------------------------------------------------------- ------ -----
Total from investment operations 0.04 0.17
- -------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------
Dividends to shareholders from net investment income (0.07) (0.09 )
- ------------------------------------------------------------- ------ -----
NET ASSET VALUE, END OF PERIOD $10.05 $10.08
- ------------------------------------------------------------- ------ -----
TOTAL RETURN** 0.44% 1.67 %
- -------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------
Expenses 0.99% 0.94 %(b)
- -------------------------------------------------------------
Net investment income 0.77% 1.39 %(b)
- -------------------------------------------------------------
Expense waiver (a) 0.01% 0.03 %(b)
- -------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------
Net assets, end of period (000 omitted) $250,155 $309,128
- -------------------------------------------------------------
Portfolio turnover rate 86% 98 %
- -------------------------------------------------------------
</TABLE>
* Reflects operations for the period from November 23, 1992 (date of initial
public investment) to August 31, 1993.
** Based on net asset value.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
MARSHALL MID-CAP STOCK FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
COMMON STOCKS--91.9%
- -------------------------------------------------------------------------------------
BASIC INDUSTRIES--1.1%
------------------------------------------------------------------
Chemicals
------------------------------------------------------------------
20,000 Witco Corp. $ 615,000
------------------------------------------------------------------ -----------
CAPITAL GOODS--15.2%
------------------------------------------------------------------
Electronics
------------------------------------------------------------------
25,000 ** Applied Materials, Inc. 1,262,500
------------------------------------------------------------------
15,000 ** Cirrus Logic, Inc. ++ 414,375
------------------------------------------------------------------
50,000 Danka Business System ++ 1,025,000
------------------------------------------------------------------
15,000 E Sys, Inc. 645,000
------------------------------------------------------------------
25,000 Micron Technology, Inc. 1,006,250
------------------------------------------------------------------
25,000 Modine Manufacturing Co. 706,250
------------------------------------------------------------------
30,000 Molex, Inc. 1,185,000
------------------------------------------------------------------
15,000 Sensormatic Electronics Corp. 519,375
------------------------------------------------------------------
30,000 ** Silicon Graphics, Inc. 787,500
------------------------------------------------------------------ -----------
Total 7,551,250
[A ------------------------------------------------------------------ -----------
Office Equipment
------------------------------------------------------------------
25,000 ** Office Depot, Inc. 593,750
------------------------------------------------------------------ -----------
Total Capital Goods 8,145,000
------------------------------------------------------------------ -----------
CONSUMER DURABLES--11.7%
------------------------------------------------------------------
Automotive and Related
------------------------------------------------------------------
25,000 Exide Corp. 1,303,125
------------------------------------------------------------------
30,000 General Motors Corp. 1,091,250
------------------------------------------------------------------
30,000 Harley Davidson, Inc. ++ 1,695,000
------------------------------------------------------------------
20,000 Magna International, Inc. 782,500
------------------------------------------------------------------
30,000 ** Top Source, Inc. ++ 195,000
------------------------------------------------------------------ -----------
Total 5,066,875
------------------------------------------------------------------ -----------
Household Products/Wares
------------------------------------------------------------------
25,000 Newell Co. 1,190,625
------------------------------------------------------------------ -----------
Total Consumer Durables 6,257,500
------------------------------------------------------------------ -----------
CONSUMER NON-DURABLES--35.9%
------------------------------------------------------------------
Apparel and Textiles
------------------------------------------------------------------
35,000 Shaw Industries, Inc. 608,125
------------------------------------------------------------------ -----------
Beverage and Foods
------------------------------------------------------------------
30,000 ** Brinker International, Inc. 727,500
------------------------------------------------------------------
</TABLE>
MARSHALL MID-CAP STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
CONSUMER NON-DURABLES--CONTINUED
------------------------------------------------------------------
Beverage and Foods--Continued
------------------------------------------------------------------
20,000 Cracker Barrel Old Country Style, Inc. $ 510,000
------------------------------------------------------------------
30,000 Dean Foods Co. 960,000
------------------------------------------------------------------ -----------
Total 2,197,500
------------------------------------------------------------------ -----------
Drugs
------------------------------------------------------------------
25,000 IVAX Corp. ++ 496,875
------------------------------------------------------------------ -----------
Environmental
------------------------------------------------------------------
40,000 ** USA Waste Services, Inc. 585,000
------------------------------------------------------------------ -----------
Health Care
------------------------------------------------------------------
20,000 Cardinal Health, Inc. 775,000
------------------------------------------------------------------
25,000 ** Healthsouth Rehabilitation 900,000
------------------------------------------------------------------
25,000 ** Healthtrust, Inc. 768,750
------------------------------------------------------------------
55,000 ** North American Vaccine, Inc. 701,250
------------------------------------------------------------------
25,000 ** Physician Corp. America 525,000
------------------------------------------------------------------ -----------
Total 3,670,000
------------------------------------------------------------------ -----------
Leisure and Recreation
------------------------------------------------------------------
50,000 ** Host Marriott Corp. ++ 556,250
------------------------------------------------------------------
30,000 ** Mirage Resorts, Inc. 633,750
------------------------------------------------------------------ -----------
Total 1,190,000
------------------------------------------------------------------ -----------
Retail
------------------------------------------------------------------
40,000 ** Bed, Bath & Beyond, Inc. 1,175,000
------------------------------------------------------------------
40,000 ** Department 56, Inc. 1,525,000
------------------------------------------------------------------
20,000 Heilig Myers Co. 537,500
------------------------------------------------------------------
30,000 ** Kohl's Corp. ++ 1,458,750
------------------------------------------------------------------
30,000 ** Tommy Hilfiger Corp. ++ 1,256,250
------------------------------------------------------------------ -----------
Total 5,952,500
------------------------------------------------------------------ -----------
Services
------------------------------------------------------------------
30,000 Cintas Corp. 952,500
------------------------------------------------------------------
30,000 First Data Corp. 1,462,500
------------------------------------------------------------------
40,000 ** Franklin Quest Co. 1,510,000
------------------------------------------------------------------
25,000 Loewen Group, Inc. 628,125
------------------------------------------------------------------ -----------
Total 4,553,125
------------------------------------------------------------------ -----------
Total Consumer Non-Durables 19,253,125
------------------------------------------------------------------ -----------
</TABLE>
MARSHALL MID-CAP STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
CONSUMER NON-DURABLES--CONTINUED
------------------------------------------------------------------
FINANCIAL--16.2%
------------------------------------------------------------------
Banks
------------------------------------------------------------------
30,000 Bancorp Hawaii, Inc. ++ $ 971,250
------------------------------------------------------------------
25,000 Bank of New York, Inc. 812,500
------------------------------------------------------------------
20,000 Crestar Financial Corp. 965,000
------------------------------------------------------------------
30,000 First Bank Systems, Inc. 1,110,000
------------------------------------------------------------------
30,000 First Virginia Banks, Inc. 1,185,000
------------------------------------------------------------------
30,000 UJB Financial Corp. 870,000
------------------------------------------------------------------ -----------
Total 5,913,750
------------------------------------------------------------------ -----------
Other Financial
------------------------------------------------------------------
25,000 Advanta Corp. 737,500
------------------------------------------------------------------
40,000 Mercury Finance Co. 635,000
------------------------------------------------------------------
20,000 Morgan Stanley Group, Inc. 1,395,000
------------------------------------------------------------------ -----------
Total 2,767,500
------------------------------------------------------------------ -----------
Total Financial 8,681,250
------------------------------------------------------------------ -----------
TRANSPORTATION--3.1%
------------------------------------------------------------------
Airlines
------------------------------------------------------------------
25,000 Southwest Airlines Co. 662,500
------------------------------------------------------------------ -----------
Railroads
------------------------------------------------------------------
25,000 ** Wisconsin Central Transportation Corp. 1,000,000
------------------------------------------------------------------ -----------
Total Transportation 1,662,500
------------------------------------------------------------------ -----------
UTILITIES--8.7%
------------------------------------------------------------------
Gas Distributions
------------------------------------------------------------------
20,000 Anadarko Petroleum Corp. 937,500
------------------------------------------------------------------ -----------
Telecommunications
------------------------------------------------------------------
30,000 ** ADC Telecommunications, Inc. ++ 1,395,000
------------------------------------------------------------------
30,000 ** Bell Cablemedia PLC 652,500
------------------------------------------------------------------
</TABLE>
MARSHALL MID-CAP STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
UTILITIES--CONTINUED
------------------------------------------------------------------
40,000 ** Tellabs, Inc. $ 1,685,000
------------------------------------------------------------------ -----------
Total 3,732,500
------------------------------------------------------------------ -----------
Total Utilities 4,670,000
------------------------------------------------------------------ -----------
TOTAL COMMON STOCKS (IDENTIFIED COST $48,330,481) 49,284,375
------------------------------------------------------------------ -----------
PREFERRED STOCKS--2.7%
- -------------------------------------------------------------------------------------
CAPITAL GOODS--2.7%
------------------------------------------------------------------
Electronics
------------------------------------------------------------------
10,000 ** Dell Computer Corp. 1,463,750
------------------------------------------------------------------ -----------
TOTAL PREFERRED STOCKS (IDENTIFIED COST $1,545,000) 1,463,750
------------------------------------------------------------------ -----------
TOTAL COMMON AND PREFERRED STOCKS (IDENTIFIED COST $49,875,481) 50,748,125
------------------------------------------------------------------ -----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- ---------- ------------------------------------------------------------------
<C> <C> <S> <C>
*REPURCHASE AGREEMENT--5.0%
- -------------------------------------------------------------------------------------
$2,667,000 BZW Securities, Inc., 4.80%, dated 8/31/94, due 9/1/94
(at amortized cost) 2,667,000
------------------------------------------------------------------ -----------
TOTAL INVESTMENTS (IDENTIFIED COST $52,542,481) $53,415,125+
------------------------------------------------------------------ -----------
</TABLE>
* The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
** Non-income producing.
+ The cost of investments for federal tax purposes amounts to $52,542,481. The
net unrealized appreciation of investments on a federal tax basis amounts to
$872,644, which is comprised of $3,003,589 appreciation and $2,130,945
depreciation at August 31, 1994.
++ Certain shares on loan to broker.
Note: The categories of investments are shown as a percentage of net assets
($53,641,925) at
August 31, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL MID-CAP STOCK FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------
Investments in securities $50,748,125
- -----------------------------------------------------------------
Investments in repurchase agreements 2,667,000
- ----------------------------------------------------------------- -----------
Total investments, at value (identified and tax cost $52,542,481) $53,415,125
- -------------------------------------------------------------------------------
Cash 594
- -------------------------------------------------------------------------------
Interest receivable 1,119
- -------------------------------------------------------------------------------
Receivable for capital stock sold 3,409,827
- -------------------------------------------------------------------------------
Collateral for security lending 3,627,200
- -------------------------------------------------------------------------------
Dividends receivable 51,400
- -------------------------------------------------------------------------------
Deferred expenses 16,476
- ------------------------------------------------------------------------------- -----------
Total assets 60,521,741
- -------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------
Security lending payable 3,627,200
- -----------------------------------------------------------------
Payable for Fund shares redeemed 1,734,114
- -----------------------------------------------------------------
Payable for investments purchased 1,446,968
- -----------------------------------------------------------------
Accrued expenses 71,534
- ----------------------------------------------------------------- -----------
Total liabilities 6,879,816
- ------------------------------------------------------------------------------- -----------
NET ASSETS for 5,536,038 shares of capital stock outstanding $53,641,925
- ------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------------
Paid-in capital $54,224,427
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments 872,644
- -------------------------------------------------------------------------------
Accumulated net realized loss on investments (1,498,435)
- -------------------------------------------------------------------------------
Undistributed net investment income 43,289
- ------------------------------------------------------------------------------- -----------
Total Net Assets $53,641,925
- ------------------------------------------------------------------------------- -----------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
(net assets of $53,641,925 / 5,536,038 shares of capital stock outstanding) $9.69
- ------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL MID-CAP STOCK FUND
STATEMENT OF OPERATIONS
PERIOD ENDED AUGUST 31, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------
Interest income $ 94,609
- ----------------------------------------------------------------------------------
Dividend income 218,411
- ---------------------------------------------------------------------------------- -----------
Total investment income 313,020
- ----------------------------------------------------------------------------------
EXPENSES--
- ----------------------------------------------------------------------------------
Investment advisory fee $189,976
- ----------------------------------------------------------------------
Directors' fees 135
- ----------------------------------------------------------------------
Administrative personnel and services fee 45,481
- ----------------------------------------------------------------------
Custodian fees 5,066
- ----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 16,115
- ----------------------------------------------------------------------
Legal fees 4,904
- ----------------------------------------------------------------------
Printing and postage 13,310
- ----------------------------------------------------------------------
Portfolio accounting fees 39,582
- ----------------------------------------------------------------------
Taxes 2,200
- ----------------------------------------------------------------------
Shareholder services fees 3,800
- ----------------------------------------------------------------------
Miscellaneous 7,034
- ---------------------------------------------------------------------- --------
Total expenses 327,603
- ----------------------------------------------------------------------
Deduct--
- ----------------------------------------------------------------------
Waiver of investment advisory fee $56,834
- ------------------------------------------------------------
Waiver of administrative personnel and services fee 12,101
- ------------------------------------------------------------
Waiver of custodian fees 3,166 72,101
- ------------------------------------------------------------ ------- --------
Net expenses 255,502
- ---------------------------------------------------------------------------------- -----------
Net investment income 57,518
- ---------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------------------
Net realized loss on investment transactions (identified cost basis) (1,460,302)
- ----------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 872,644
- ---------------------------------------------------------------------------------- -----------
Net realized and unrealized loss on investments (587,658)
- ---------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $ (530,140)
- ---------------------------------------------------------------------------------- -----------
</TABLE>
* For the period from October 1, 1993 (date of initial public investment) to
August 31, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL MID-CAP STOCK FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1994*
-----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------
Net investment income $ 57,518
- --[6~-----------------------------------------------------------------------
Net realized loss on investments ($38,184 net gain, as computed
for federal tax purposes) (1,460,302)
- -------------------------------------------------------------------------
Net change in unrealized appreciation on investments 872,644
- ------------------------------------------------------------------------- ---------------
Change in net assets resulting from operations (530,140)
- ------------------------------------------------------------------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------------------------------
Dividends to shareholders from net investment income (14,229)
- -------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment
transactions (38,133)
- ------------------------------------------------------------------------- ---------------
Change in net assets from distributions to shareholders (52,362)
- ------------------------------------------------------------------------- ---------------
CAPITAL STOCK TRANSACTIONS--
- -------------------------------------------------------------------------
Proceeds from sale of shares 62,129,088
- -------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends
declared 31,053
- -------------------------------------------------------------------------
Cost of shares redeemed (7,935,714)
- ------------------------------------------------------------------------- ---------------
Change in net assets from capital stock transactions 54,224,427
- ------------------------------------------------------------------------- ---------------
Change in net assets 53,641,925
- -------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------
Beginning of period --
- ------------------------------------------------------------------------- ---------------
End of period (including undistributed net investment income of $43,289) $53,641,925
- ------------------------------------------------------------------------- ---------------
</TABLE>
* For the period from October 1, 1993 (date of initial public investment) to
August 31, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL MID-CAP STOCK FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1994*
-----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income 0.02
- ----------------------------------------------------------------------
Net realized and unrealized loss on investments (0.29)
- ---------------------------------------------------------------------- -----------
Total from investment operations (0.27)
- ---------------------------------------------------------------------- -----------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.01)
- ----------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment
transactions (0.03)
- ---------------------------------------------------------------------- -----------
Total distributions (0.04)
- ---------------------------------------------------------------------- -----------
NET ASSET VALUE, END OF PERIOD $ 9.69
- ---------------------------------------------------------------------- -----------
TOTAL RETURN** (2.74%)
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 1.01%(b)
- ----------------------------------------------------------------------
Net investment income 0.23%(b)
- ----------------------------------------------------------------------
Expense waiver (a) 0.28%(b)
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period (000 omitted) $53,642
- ----------------------------------------------------------------------
Portfolio turnover rate 113%
- ----------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 1, 1993 (date of initial
public investment) to August 31, 1994.
** Based on net asset value.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
MARSHALL FUNDS, INC.
EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Marshall Funds, Inc. (the "Corporation") is an open-end, management investment
company, established as a Wisconsin corporation under the Articles of
Incorporation on July 31, 1992. The Corporation consists of eleven diversified
portfolios: Marshall Balanced Fund, Marshall Equity Income Fund, Marshall
Government Income Fund, Marshall Intermediate Bond Fund, Marshall Intermediate
Tax-Free Fund, Marshall Mid-Cap Stock Fund, Marshall Money Market Fund, Marshall
Short-Term Income Fund, Marshall Short-Term Tax-Free Fund, Marshall Stock Fund,
and Marshall Value Equity Fund. Marshall Money Market Fund is offered in two
classes of shares: Trust Shares and Investment Shares. The assets of each
portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held. The financial statements included herein are
only those of Marshall Balanced Fund, Marshall Equity Income Fund, Marshall
Value Equity Fund, Marshall Stock Fund, and Marshall Mid-Cap Stock Fund
(individually referred to as the "Fund," or collectively as the "Funds"). The
financial statements of the other portfolios are presented separately.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by each Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--Listed equity securities, corporate bonds and other fixed income
securities are valued at the last sale price reported on national securities exchanges.
Unlisted securities and bonds are generally valued at the price provided by an
independent pricing service. U.S. government obligations are generally valued at the mean
between the over-the-counter bid and asked prices as furnished by an independent pricing
service. Short-term securities with remaining maturities of sixty days or less at the
time of purchase may be stated at amortized cost, which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Funds to require the custodian bank to
take possession, to have legally segregated in the Federal Reserve Book Entry System, or
to have segregated within the custodian bank's vault, all securities held as collateral
in support of repurchase agreement investments. Additionally, procedures have been
established by the Funds to monitor, on a daily basis, the market value of each
repurchase agreement's underlying collateral to ensure that the value of collateral at
least equals the principal amount of the repurchase agreement, including accrued
interest.
The Funds will only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the Funds' adviser to
be creditworthy pursuant to the guidelines established by the Board of Directors (the
"Directors"). Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Funds could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Interest income and expenses are
accrued daily. Bond premium and discount, if applicable, are amortized as required by the
Internal Revenue Code, as amended (the "Code").
</TABLE>
MARSHALL FUNDS, INC.
EQUITY FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
D. FEDERAL TAXES--It is the Funds' policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to shareholders each year
substantially all of their taxable income. Accordingly, no provisions for federal tax are
necessary. At August 31, 1994, the Marshall Balanced Fund, Marshall Equity Income Fund
and Marshall Stock Fund, for federal tax purposes, had capital loss carryforwards of
$33,023, $41,996 and $3,422,951, respectively, which will reduce the Funds' taxable
income arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions to
shareholders which would otherwise be necessary to relieve the Funds of any liability for
federal tax. Pursuant to the Code, such capital loss carryforwards will expire in 2002.
Additionally, the Marshall Balanced Fund, Marshall Equity Income Fund and Marshall
Mid-Cap Stock Fund had net capital losses of $611,049, $330,385 and $1,498,486,
respectively, attributable to security transactions incurred after October 31, 1993 which
are treated as arising on the first day of the Funds' next taxable year.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Funds may engage in when-issued or
delayed delivery transactions. The Funds record when-issued securities on the trade date
and maintain security positions such that sufficient liquid assets will be available to
make payment for the securities purchased. Securities purchased on a when-issued or
delayed delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. DOLLAR ROLL TRANSACTIONS--The Funds enter into dollar roll transactions, with respect to
mortgage securities issued by GNMA, FNMA and FHLMC, in which the Funds agree to sell
securities that they hold to financial institutions and simultaneously agree to purchase
substantially similar (same type, coupon and maturity) securities at a later date at an
agreed upon price. Dollar roll transactions are treated for accounting and tax purposes
as short-term financing arrangements which will not exceed twelve months. The Funds will
use the proceeds generated from the transactions to invest in short-term investments,
which may enhance the Funds' current yields and total returns.
G. SECURITIES LENDING--The Funds participate in a securities lending program providing for
the lending of corporate bonds, equity and government securities to qualified brokers.
Collateral on all securities loaned is accepted in cash or government securities.
Collateral is maintained at a minimum level of 100% of the market value on investments
loaned, plus interest, if applicable. The custodian receives a fee for its services under
the program according to agreed-upon rates. As of August 31,1994, the value of the
securities loaned and the value of the collateral were as follows:
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE OF MARKET
SECURITIES VALUE OF
LOANED COLLATERAL
--------------------------------------------------------- ----------- -----------
<S> <C> <C>
Marshall Balanced Fund $ 2,602,743 $ 2,653,719
---------------------------------------------------------
Marshall Equity Income Fund 3,067,220 3,163,200
---------------------------------------------------------
Marshall Value Equity Fund 11,975,634 12,379,700
---------------------------------------------------------
Marshall Stock Fund 35,377,737 36,891,700
---------------------------------------------------------
Marshall Mid-Cap Stock Fund 3,514,500 3,627,200
---------------------------------------------------------
H. DEFERRED EXPENSES--The costs incurred by the Funds with respect to registration of their
shares in their first fiscal year, excluding the initial expense of registering their
shares, have been deferred and are being amortized using the straight-line method not to
exceed a period of five years from each Fund's commencement date.
I. OTHER--Investment transactions are accounted for on the trade date.
</TABLE>
MARSHALL FUNDS, INC.
EQUITY FUNDS
- --------------------------------------------------------------------------------
(3) CAPITAL STOCK
The Articles of Incorporation of the Marshall Funds, Inc. permit the Directors
to issue 50 billion full and fractional shares of common stock, par value
$0.0001 per share. At August 31, 1994, the capital paid-in for Marshall Balanced
Fund, Marshall Equity Income Fund, Marshall Value Equity Fund, Marshall Stock
Fund, and Marshall Mid-Cap Stock Fund was $22,386,483, $49,170,485,
$209,055,936, $243,328,148 and $54,224,427, respectively. Transactions in shares
were as follows:
<TABLE>
<CAPTION>
MARSHALL BALANCED MARSHALL EQUITY MARSHALL VALUE
FUND INCOME FUND EQUITY FUND
---------------------- ---------------------- ----------------------
PERIOD ENDED AUGUST PERIOD ENDED AUGUST PERIOD ENDED AUGUST
31, 31, 31,
---------------------- ---------------------- ----------------------
1994* 1994* 1994*
- ----------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Shares sold 4,548,366 6,256,917 21,409,502
- -----------------------
Shares issued to
shareholders in payment
of dividends declared 52,159 66,609 22,375
- -----------------------
Shares redeemed (2,376,187) (1,363,606) (1,452,210)
- ----------------------- ----------------- ----------------- -----------------
Net change resulting
from Fund share
transactions 2,224,338 4,959,920 19,979,667
- ----------------------- ----------------- ----------------- -----------------
</TABLE>
<TABLE>
<CAPTION>
MARSHALL MID-CAP
STOCK FUND
MARSHALL STOCK FUND ----------------------
-------------------------- PERIOD ENDED AUGUST
YEAR ENDED AUGUST 31, 31,
-------------------------- ----------------------
1994 1993** 1994*
- -------------------------------------------- ----------- ---------- ----------------------
<S> <C> <C> <C>
Shares sold 9,896,396 33,240,827 6,367,440
- --------------------------------------------
Shares issued to shareholders in payment of
dividends declared 186,739 243,627 3,112
- --------------------------------------------
Shares redeemed (15,846,005) (2,823,693) (834,514)
- -------------------------------------------- ----------- ---------- ----------------
Net change resulting from Fund share
transactions (5,762,870) 30,660,761 5,536,038
- -------------------------------------------- ----------- ---------- ----------------
</TABLE>
* For the period from October 1, 1993 (date of initial public investment) to
August 31, 1994.
** For the period from November 23, 1992 (date of initial public investment) to
August 31, 1993.
MARSHALL FUNDS, INC.
EQUITY FUNDS
- --------------------------------------------------------------------------------
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--M&I Investment Management Corp., the Funds' investment
adviser (the "Adviser"), receives for its services an annual investment advisory
fee equal to 0.75 of 1% of each Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Funds
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Corporation for the period. FAS may
voluntarily choose to waive a portion of its fee.
SHAREHOLDER SERVICES FEE--Marshall Funds Investors Services ("MFIS") is the
Funds' shareholder servicing agent. Under the terms of a shareholder service
agreement with MFIS, the Funds will pay MFIS a fee to obtain certain personal
services for shareholders and the maintenance of shareholder accounts. The fee
is based on the level of each Fund's average net assets for the period.
TRANSFER AND DIVIDEND DISBURSING AGENT, ACCOUNTING AND CUSTODY FEES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Funds. The FServ fee is based on the size, type, and number of accounts and
transactions made by shareholders.
FServ also maintains the Funds' accounting records. The fee is based on the
level of each Fund's average net assets for the period, plus out-of-pocket
expenses.
Marshall and Ilsley Trust Company is the Funds' custodian. The fee is based on
the level of each Fund's average net assets for the period.
ORGANIZATIONAL EXPENSES--Organizational expenses were borne initially by FAS.
The Funds have agreed to reimburse FAS for the organizational expenses during
the five year period following August 28, 1993 (date Marshall Balanced Fund,
Marshall Equity Income Fund, Marshall Value Equity Fund, and Marshall Mid-Cap
Stock Fund first became effective) and October 1, 1992 (date Marshall Stock Fund
first became effective). For the period ended August 31, 1994, the following
amounts were paid to FAS pursuant to this agreement.
<TABLE>
<CAPTION>
ORGANIZATIONAL ORGANIZATIONAL
EXPENSES EXPENSES PAID
- --------------------------------------------------------- -------------- --------------
<S> <C> <C>
Marshall Balanced Fund $ 16,593 $1,291
- ---------------------------------------------------------
Marshall Equity Income Fund 18,857 1,467
- ---------------------------------------------------------
Marshall Value Equity Fund 18,485 1,438
- ---------------------------------------------------------
Marshall Stock Fund 30,018 3,102
- ---------------------------------------------------------
Marshall Mid-Cap Stock Fund 16,434 1,279
- ---------------------------------------------------------
</TABLE>
INTERFUND TRANSACTIONS--During the period ended August 31, 1994, the Marshall
Balanced Fund, Marshall Equity Income Fund and Marshall Value Equity Fund
engaged in purchase and sale transactions with other affiliated funds at current
value pursuant to Rule 17a-7 under the Investment Company Act of 1940 amounting
to $10,981,536 and $0, $25,767,909 and $0 and $93,234,557 and $0, respectively.
Certain of the Officers and Directors of the Corporation are Officers and
Directors or Trustees of the above companies.
MARSHALL FUNDS, INC.
EQUITY FUNDS
- --------------------------------------------------------------------------------
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended August 31, 1994, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
- ----------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Marshall Balanced Fund $ 51,415,594 $ 30,162,433
- -----------------------------------------------------------------
Marshall Equity Income Fund 55,245,518 13,843,003
- -----------------------------------------------------------------
Marshall Value Equity Fund 200,178,437 17,816,576
- -----------------------------------------------------------------
Marshall Stock Fund 203,191,094 286,413,031
- -----------------------------------------------------------------
Marshall Mid-Cap Stock Fund 80,269,208 28,933,425
- -----------------------------------------------------------------
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
MARSHALL BALANCED FUND
MARSHALL EQUITY INCOME FUND
MARSHALL VALUE EQUITY FUND:
MARSHALL STOCK FUND
MARSHALL MID-CAP STOCK FUND:
We have audited the accompanying statements of assets and liabilities, including
the schedules of portfolio investments, of the Marshall Balanced Fund, the
Marshall Equity Income Fund, Marshall Value Equity Fund, the Marshall Stock
Fund, and the Marshall Mid-Cap Stock Fund, (five of the portfolios constituting
the Marshall Funds, Inc., a Wisconsin corporation) as of August 31, 1994, and
the related statements of operations, changes in net assets and financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1994, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting the Marshall Funds, Inc., as
identified above, as of August 31, 1994, the results of their operations, the
changes in their net assets and the financial highlights for the periods
presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
October 11, 1994
<TABLE>
<CAPTION>
DIRECTORS OFFICERS
<S> <C>
- -----------------------------------------------------------------------------
Ody J. Fish Edward C. Gonzales
John DeVincentis Chairman and Treasurer
Edward C. Gonzales James F. Duca, II
Paul E. Hassett President
Joseph S. Machi
Vice President and Assistant
Treasurer
Peter J. Germain
Secretary
Victor R. Siclari
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the FDIC, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves risk,
including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Funds' prospectus which contains facts concerning
their objective and policies, management fees, expenses, and other information.
Marshall
Income
Funds
COMBINED ANNUAL REPORT
TO SHAREHOLDERS
Dated August 31, 1994
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
3091402 (10/94)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Annual Report of the Marshall Income Funds for the
fiscal year ended August 31, 1994. This report provides you with complete
financial information for the Funds, including the Investment Reviews by the
portfolio managers, a list of investments for each Fund, and the Financial
Statements.
Rising interest rates, which affected all financial markets, had an impact on
the Marshall Income Funds. As bond prices tend to fall in times of increasing
interest rates, the Funds experienced declines in their share values. Of course,
the Funds continued to reward shareholders with a healthy income stream.
Assets in the Marshall Income Funds totaled more than $521.8 million at the end
of the period. The Marshall Government Income Fund net assets grew to $64.8
million, and the Fund paid distributions of $0.82 per share to its shareholders.
Net assets in the Marshall Intermediate Bond Fund stood at $357 million, while
the Fund paid distributions of $0.84 per share to its shareholders. Net assets
in the Marshall Short Term Income Fund grew to $100 million, and the Fund paid
distributions of $0.44 per share to its shareholders.
We appreciate your ongoing confidence in the Marshall Income Funds as a way to
earn income. As always, we welcome your questions or comments.
Sincerely,
James F. Duca, II
President
Marshall Funds, Inc.
October 14, 1994
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
A rising economy, rising fear of inflation, and rising interest rates
characterized the recently completed fiscal year of the Marshall Funds. Gross
Domestic Product advanced more than 3% for the period. Although consumer
confidence declined in recent months, indications are positive for the important
Christmas selling season, and high business confidence suggests further capital
spending gains. Continued economic expansion and corporate cost cutting are
translating into sustained earnings gains for American industry.
Inflation worries surfaced this year, but to date, scant evidence of
acceleration at the retail level has materialized. Consumer prices edged up only
2.9% over the last 12 months. Nevertheless, clouds are gathering on the horizon,
with climbing commodity costs especially ominous. With the pricing power in the
manufacturing sector having increased significantly, industrial prices are
firming. Capacity utilization stands at a five-year high, and labor markets are
tightening. Expect inflation to advance to the 3.5% area in 1995.
Over the past year, investors have been reintroduced to the anguish of rapidly
rising interest rates. From the lows last October, long-term Treasury yields
jumped two percentage points. Starting in February, the Federal Reserve Board
(the "Fed") pushed up short-term interest rates 1.75 percentage points in five
incremental moves. The Fed is well aware that the economic cycle is past the
point where inflation usually begins to pick up. Rising rates are now beginning
to bite, with housing among the early victims. If the Fed is forced to move from
its present neutral policy to an even more restrictive one, the expansion could
stall by 1996--but for now, enjoy the expansion.
GOVERNMENT INCOME FUND
The investment objective of the Fund is to provide current income by investing
primarily in a portfolio of securities issued or guaranteed as to payment of
principal and interest by the U.S. government or U.S. government agencies and
instrumentalities and certain mortgage-backed securities. The Fund experienced a
(1.34%)* total return for the fiscal year ended August 31, 1994, which compared
to 0.37%** for the Lehman Mortgage Index. The Lehman Mortgage Index is a
universe of mortgage securities. The Fund held positions in collateralized
mortgage obligations (CMO's) that underperformed with rising interest rates,
contributing to the Fund's return lagging the Lehman Index.
Interest rates rose significantly during the fiscal year. With stronger economic
growth raising inflation fears, the Fed moved to increase short-term rates. The
shorter maturities experienced the largest yield increases, 2.28% for the 2-Year
Treasury while the 30-Year Treasury yield rose 1.35%. This had a tremendous
impact on the mortgage market. It effectively eliminated the refinancing
activity and slowed new issuance of mortgage securities. Focus moved to
extension risk, as expectations of prepayment speeds moved lower and the
duration of existing mortgages lengthened. The Fund's duration increased to 4.7
years from 3.18 years on August 31, 1993. The adviser added 15-year and higher
coupon, seasoned mortgages to limit the degree of extension risk to the Fund.
The adviser actively manages the Fund to exploit opportunities in undervalued
securities and trends in interest rates. In contrast to 1993, mortgage
securities experienced extension risk, as the refinancing boom stopped with
higher interest rates. The average life of a mortgage-backed security extends as
expected prepayment speeds slow. As changes in interest rates and lack of CMO
creation made the returns unattractive, the dollar-roll strategy was eliminated.
Following difficult months in March and April, the mortgage market outperformed
the government and corporate sectors for the balance of the fiscal year.
Mortgages returned 2.5%, while governments and investment-grade corporates
earned 1.49% and 2.01%, respectively+. The attractiveness of mortgages on a
spread basis and the expectations of reduced supply resulted in the greater
relative performance.
+ Returns from Lehman Brothers Indices August 31, 1994.
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
** This index is unmanaged.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
MARSHALL INTERMEDIATE BOND FUND
The investment objective of the Fund is to generate consistently high,
risk-adjusted returns over interest rate cycles. Since February 1994, interest
rates moved higher in response to stronger economic growth and inflationary
fears. The Fed acted several times, raising short-term rates in an attempt to
circumvent inflation pressures. The Fed's actions sent yields higher across the
yield curve with shorter rates experiencing the largest increases, 2.28% for the
2-Year Treasury while the 30-Year Treasury rose 1.35%. This meant negative
returns for maturities longer than three years. For the fiscal year ended August
31, 1994, the Fund, with an average weighted duration of 3.27 years, returned
(2.02%).* Affecting the performance of the Fund were positions in collateralized
mortgage obligations (CMO's), which underperformed in the rising interest rate
environment.
While the market was biased toward higher rates, it experienced extreme
volatility around Fed tightening acts. The bond market struggled with the impact
of higher rates on the economy and uncertainty when the next Fed action would
take place. The corporate and mortgage market performed well during the fiscal
year. A reduction in supply and need for extra yield caused spreads to tighten
versus Treasuries. The Fund had a market weighting in investment grade
corporates and has added mortgage-backed securities, while reducing the CMO
positions.
The strategy in the Fund has been to upgrade the quality of issues. Although
corporates have narrowed significantly, there may be opportunities to add
high-quality corporates in the near future should spreads widen. Mortgage-backed
securities with greater liquidity replaced the CMO position. The Fund's Treasury
allocation will be reduced to add yield to the portfolio.
MARSHALL SHORT-TERM INCOME FUND
The short end of the yield curve proved vulnerable to fears of accelerating
inflation. During the twelve-month period ended August 31, 1994, yields on bonds
with maturities of one to three years rose approximately 2.25%--significantly
more than any other area of the yield curve. In a rising interest rate
environment, investments with shorter durations will generally perform the best.
Accordingly, bonds with maturities longer than five years suffered losses, while
shorter term bonds posted modest gains. Thirty-year bonds declined nearly 10%,
while two-year notes gained approximately 1.75%.
The Marshall Short-Term Income Fund posted a total return of 2.05% for the
fiscal year ended August 31, 1994.* Performance was achieved during market
adversity by maintaining a defensive posture through a well diversified
portfolio of high quality investments. The Fund held a relatively short duration
throughout the bond market decline, making it less sensitive to interest rate
risk. Strategic positioning on the yield curve also played a key role in
performance. As bond yields rose through March and April, the opportunity cost
to holding cash increased. The short end of the yield curve steepened, taking
the yield spread between cash securities and two-year bonds from less than 70
basis points to more than 170 basis points. A steep yield curve provides
investors opportunities to earn incremental return by allowing bonds to "roll
down the curve." To take advantage of this phenomenon, the Fund positioned bonds
in the two-year area of the yield curve. Narrowing spreads on corporate and
mortgage securities added to performance.
The Marshall Short-Term Income Fund's maximum average maturity of three years
and maximum duration of 1.5 years make it well suited to perform in a bear
market versus its longer-term peers.
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
MARSHALL GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN MARSHALL GOVERNMENT INCOME FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Government Income Fund (the "Fund") from December 13, 1992 (start of
performance) to August 31, 1994 compared to the Lehman Brothers Mortgage-Backed
Index ("LMI").*
<TABLE>
<CAPTION>
Lehman
Marshall Brothers
Measurement Period Government Mortgage
(Fiscal Year Covered) Income Fund Backed Index
<S> <C> <C>
12/13/92 10000 10000
8/31/93 10640 10715
8/31/94 10498 10756
AVERAGE ANNUAL TOTAL RETURN FOR THE
PERIOD ENDED AUGUST 31, 1994
1 Year............................................................. (1.34%)
Start of Performance (December 13, 1992)........................... 2.86%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Fund's performance assumes the reinvestment of all dividends and
distributions. The LMI has been adjusted to reflect reinvestment of dividends
on securities in the index.
The LMI is not adjusted to reflect sales loads, expenses, or other fees that
the SEC requires to be reflected in the Fund's performance.
MARSHALL INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN MARSHALL INTERMEDIATE BOND FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Intermediate Bond Fund (the "Fund") from November 20, 1992 (start of
performance) to August 31, 1994 compared to the Lehman Brothers
Government/Corporate Intermediate Bond Index ("LGCI").*
<TABLE>
<CAPTION>
Lehman
Brothers
Govern-
Marshall In- ment/Corporate
Measurement Period termediate Intermediate
(Fiscal Year Covered) Bond Fund Index
<S> <C> <C>
11/20/92 10000 10000
8/31/93 10799 10961
8/31/94 10581 10923
AVERAGE ANNUAL TOTAL RETURN FOR THE
PERIOD ENDED AUGUST 31, 1994
1 Year............................................................. (2.02%)
Start of Performance (November 20, 1992)........................... 3.23%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Fund's performance assumes the reinvestment of all dividends and
distributions. The LGCI has been adjusted to reflect reinvestment of dividends
on securities in the index.
The LGCI is not adjusted to reflect sales loads, expenses, or other fees that
the SEC requires to be reflected in the Fund's performance.
MARSHALL SHORT-TERM INCOME FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN MARSHALL SHORT-TERM INCOME FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Short-Term Income Fund (the "Fund") from November 1, 1992 (start of
performance) to August 31, 1994 compared to the Merrill Lynch Corporate A Rated
1-3 Year Bond Index ("MLBI") and the Donoghue's Money Fund Average ("DMFA").*
<TABLE>
<CAPTION>
Merrill Lynch
Corporate A
Marshall Rated 1-3 Donoghue's
Measurement Period Short-Term Year Bond Money Fund
(Fiscal Year Covered) Income Fund Index Averages
<S> <C> <C> <C>
11/1/92 10000 10000 10000
8/31/93 10400 10636 10200
8/31/94 10569 10897 10548
AVERAGE ANNUAL TOTAL RETURN FOR THE
PERIOD ENDED AUGUST 31, 1994
1 Year............................................................. 2.05%
Start of Performance (November 1, 1992)............................ 3.06%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Fund's performance assumes the reinvestment of all dividends and
distributions. The MLBI and the DMFA have been adjusted to reflect
reinvestment of dividends on securities in the indices.
The MLBI and DMFA are not adjusted to reflect sales loads, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance.
MARSHALL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ----------------------------------------------------------------- -----------
<C> <C> <S> <C>
LONG-TERM INVESTMENTS--95.8%
- ------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.--25.6%
-----------------------------------------------------------------
$ 400,000 5.50%, 11/15/2012, REMIC (Series 1578-C) $ 383,420
-----------------------------------------------------------------
1,476,854 6.00%, 4/1/2001, REMIC 1,414,546
-----------------------------------------------------------------
400,000 6.00%, 4/15/2019, REMIC (Series 1560-PG) 360,276
-----------------------------------------------------------------
443,321 6.00%, 11/15/2019 (Series 1486-A) 426,262
-----------------------------------------------------------------
1,406,228 6.50%, 8/1/2008 1,340,740
-----------------------------------------------------------------
1,542,845 7.00%, 2/1/2008 1,505,231
-----------------------------------------------------------------
978,981 7.00%, 1/1/2009 955,113
-----------------------------------------------------------------
900,000 7.00%, 11/15/2020, REMIC (Series 96-D) 859,797
-----------------------------------------------------------------
2,383,050 7.00%, 2/1/2024 2,254,961
-----------------------------------------------------------------
1,700,242 7.50%, 4/1/2008 1,693,866
-----------------------------------------------------------------
921,649 7.50%, 1/1/2020 912,718
-----------------------------------------------------------------
608,448 8.00%, 7/1/2007 616,815
-----------------------------------------------------------------
1,005,177 8.00%, 11/1/2007 1,018,998
-----------------------------------------------------------------
112,076 8.00%, 3/1/2008 113,618
-----------------------------------------------------------------
430,134 8.00%, 7/1/2022 428,787
-----------------------------------------------------------------
930,942 8.50%, 2/1/2017 956,832
-----------------------------------------------------------------
256,481 8.75%, 4/1/2001 263,134
-----------------------------------------------------------------
969,800 9.00%, 5/1/2017 1,005,255
-----------------------------------------------------------------
25,089 9.50%, 2/1/2001 26,132
-----------------------------------------------------------------
45,494 10.50%, 10/1/2000 47,783
----------------------------------------------------------------- -----------
TOTAL FEDERAL HOME LOAN MORTGAGE CORP.
(IDENTIFIED COST $17,349,533) 16,584,284
----------------------------------------------------------------- -----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--34.4%
-----------------------------------------------------------------
500,000 5.60%, 8/25/2012, REMIC (Series 1993-169-D) 471,680
-----------------------------------------------------------------
2,000,000 6.25%, 2/25/2007, REMIC (Series 1993-129-E) 1,839,740
-----------------------------------------------------------------
4,648,509 6.50%, 2/1/2024 4,262,078
-----------------------------------------------------------------
685,962 7.00%, 6/1/2007 668,813
-----------------------------------------------------------------
1,627,787 7.00%, 5/1/2008 1,587,092
-----------------------------------------------------------------
1,315,144 7.50%, 5/1/2007 1,308,976
-----------------------------------------------------------------
1,463,480 7.50%, 5/1/2023 1,422,766
-----------------------------------------------------------------
1,954,861 7.50%, 5/1/2024 1,900,476
-----------------------------------------------------------------
1,972,994 8.00%, 6/1/2014 1,973,611
-----------------------------------------------------------------
</TABLE>
MARSHALL GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ----------------------------------------------------------------- -----------
<C> <C> <S> <C>
LONG-TERM INVESTMENTS--CONTINUED
- ------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--CONTINUED
-----------------------------------------------------------------
$1,711,432 8.00%, 5/1/2023 $ 1,705,014
-----------------------------------------------------------------
607,690 8.50%, 6/1/2021 618,513
-----------------------------------------------------------------
873,580 9.00%, 2/1/2020 906,610
-----------------------------------------------------------------
1,576,117 9.00%, 5/1/2022 1,635,710
-----------------------------------------------------------------
1,910,682 9.50%, 1/1/2022 2,019,935
----------------------------------------------------------------- -----------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION
(IDENTIFIED COST $22,831,259) 22,321,014
----------------------------------------------------------------- -----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--25.2%
-----------------------------------------------------------------
1,015,428 6.50%, 3/15/2024 914,829
-----------------------------------------------------------------
2,035,490 7.00%, 3/15/2009 1,984,603
-----------------------------------------------------------------
1,940,879 7.50%, 3/15/2009 1,936,027
-----------------------------------------------------------------
2,334,821 7.50%, 11/15/2022 2,254,550
-----------------------------------------------------------------
160,594 8.00%, 8/15/2018 159,590
-----------------------------------------------------------------
157,952 8.00%, 12/15/2021 156,965
-----------------------------------------------------------------
858,410 8.00%, 1/15/2022 853,442
-----------------------------------------------------------------
701,605 8.00%, 6/15/2022 697,219
-----------------------------------------------------------------
159,311 8.00%, 7/15/2022 158,316
-----------------------------------------------------------------
872,027 8.00%, 5/15/2023 866,578
-----------------------------------------------------------------
483,404 8.00%, 12/15/2023 480,384
-----------------------------------------------------------------
2,018,680 8.00%, 7/15/2024 2,006,064
-----------------------------------------------------------------
709,292 8.50%, 4/15/2021 721,925
-----------------------------------------------------------------
127,606 9.00%, 5/15/2016 133,906
-----------------------------------------------------------------
193,199 9.00%, 7/15/2016 202,737
-----------------------------------------------------------------
261,973 9.00%, 8/15/2016 274,907
-----------------------------------------------------------------
144,424 9.00%, 12/15/2016 151,554
-----------------------------------------------------------------
157,584 9.00%, 1/15/2017 165,364
-----------------------------------------------------------------
114,301 9.00%, 7/15/2017 118,943
-----------------------------------------------------------------
740,028 9.50%, 7/15/2019 784,422
-----------------------------------------------------------------
1,010,224 10.00%, 11/15/2020 1,087,254
-----------------------------------------------------------------
98,839 10.50%, 10/15/2000 105,387
-----------------------------------------------------------------
76,540 11.00%, 11/15/2000 82,185
----------------------------------------------------------------- -----------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(IDENTIFIED COST $16,846,759) 16,297,151
----------------------------------------------------------------- -----------
</TABLE>
MARSHALL GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ----------------------------------------------------------------- -----------
<C> <C> <S> <C>
LONG-TERM INVESTMENTS--CONTINUED
- ------------------------------------------------------------------------------------
U.S. TREASURY NOTES--10.6%
- ------------------------------------------------------------------------------------
$4,800,000 7.25%, 8/15/2004++ $ 4,824,720
-----------------------------------------------------------------
2,000,000 7.50%, 11/15/2001 2,055,700
----------------------------------------------------------------- -----------
TOTAL U.S. TREASURY NOTES (IDENTIFIED COST $6,836,344) 6,880,420
----------------------------------------------------------------- -----------
TOTAL LONG-TERM INVESTMENTS (IDENTIFIED COST $63,863,895) 62,082,869
----------------------------------------------------------------- -----------
*REPURCHASE AGREEMENT--5.1%
- ------------------------------------------------------------------------------------
3,286,000 BZW Securities, Inc., 4.80%, dated 8/31/94,
due 9/1/94 (at amortized cost) 3,286,000
----------------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $67,149,895) $65,368,869+
----------------------------------------------------------------- -----------
</TABLE>
* The repurchase agreement is fully collateralized by U.S. Treasury obligations
based on market prices at the date of the portfolio.
+ The cost of investments for federal tax purposes amounts to $67,149,895. The
net unrealized depreciation of investments on a federal tax basis amounts to
$1,781,026, which is comprised of $88,141 appreciation and $1,869,167
depreciation at August 31, 1994.
++ Certain shares on loan to broker.
Note: The categories of investments are shown as a percentage of net assets
($64,823,046) at August 31, 1994.
The following abbreviation is used in this portfolio:
REMIC--Real Estate Mortgage Investment Conduit
(See Notes which are an integral part of the Financial Statements)
MARSHALL GOVERNMENT INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------
Investments in securities $62,082,869
- -------------------------------------------------------------------
Investments in repurchase agreements 3,286,000
- ------------------------------------------------------------------- -----------
Total investments, at value (identified and tax cost $67,149,895) $65,368,869
- ---------------------------------------------------------------------------------
Collateral for security lending 4,884,000
- ---------------------------------------------------------------------------------
Receivable for capital stock sold 551,428
- ---------------------------------------------------------------------------------
Interest receivable 418,660
- ---------------------------------------------------------------------------------
Deferred expenses 33,228
- --------------------------------------------------------------------------------- -----------
Total assets 71,256,185
- ---------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------
Security lending payable $ 4,884,000
- -------------------------------------------------------------------
Payable for investments purchased 1,416,949
- -------------------------------------------------------------------
Payable for capital stock redeemed 60,231
- -------------------------------------------------------------------
Accrued expenses 71,959
- ------------------------------------------------------------------- -----------
Total liabilities 6,433,139
- --------------------------------------------------------------------------------- -----------
NET ASSETS for 7,001,696 shares of capital stock outstanding $64,823,046
- --------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------
Paid-in capital $69,655,072
- ---------------------------------------------------------------------------------
Net unrealized depreciation of investments (1,781,026)
- ---------------------------------------------------------------------------------
Accumulated net realized loss on investments (3,163,142)
- ---------------------------------------------------------------------------------
Undistributed net investment income 112,142
- --------------------------------------------------------------------------------- -----------
Total Net Assets $64,823,046
- --------------------------------------------------------------------------------- -----------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
(net assets of $64,823,046 / 7,001,696 shares of capital stock outstanding) $9.26
- --------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL GOVERNMENT INCOME FUND
STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------
Interest income (net of interest expense of $133,443) $ 4,327,226
- ----------------------------------------------------------------------------------
EXPENSES--
- ----------------------------------------------------------------------------------
Investment advisory fee $436,508
- ----------------------------------------------------------------------
Administrative personnel and services fee 55,895
- ----------------------------------------------------------------------
Custodian fees 11,646
- ----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 73,988
- ----------------------------------------------------------------------
Fund share registration costs 36,969
- ----------------------------------------------------------------------
Auditing fees 14,150
- ----------------------------------------------------------------------
Legal fees 7,569
- ----------------------------------------------------------------------
Printing and postage 16,702
- ----------------------------------------------------------------------
Portfolio accounting fees 49,729
- ----------------------------------------------------------------------
Insurance premiums 5,847
- ----------------------------------------------------------------------
Taxes 5,800
- ----------------------------------------------------------------------
Shareholder services fees 8,730
- ----------------------------------------------------------------------
Miscellaneous 5,489
- ---------------------------------------------------------------------- --------
Total expenses 729,022
- ----------------------------------------------------------------------
Deduct--
- -----------------------------------------------------------
Waiver of investment advisory fee $224,038
- -----------------------------------------------------------
Waiver of custodian fees 7,275 231,313
- ----------------------------------------------------------- -------- --------
Net expenses 497,709
- ---------------------------------------------------------------------------------- -----------
Net investment income 3,829,517
- ---------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
- ----------------------------------------------------------------------------------
Net realized loss on investments (identified cost basis) (3,162,878)
- ----------------------------------------------------------------------------------
Net change in unrealized depreciation on investments (1,676,516)
- ---------------------------------------------------------------------------------- -----------
Net realized and unrealized loss on investments (4,839,394)
- ---------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $(1,009,877)
- ---------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL GOVERNMENT INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
--------------------------
1994 1993*
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------------
Net investment income $ 3,829,517 $ 2,344,420
- ------------------------------------------------------------------
Net realized gain (loss) on investments ($521,493 net loss and
$733,258 net gain, respectively, as computed for federal tax
purposes) (3,162,878) 733,258
- ------------------------------------------------------------------
Net change in unrealized depreciation on investments (1,676,516) (104,510)
- ------------------------------------------------------------------ ----------- -----------
Change in net assets resulting from operations (1,009,877) 2,973,168
- ------------------------------------------------------------------ ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------------------
Dividends to shareholders from net investment income (4,026,755) (2,035,040)
- ------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment
transactions (733,522) --
- ------------------------------------------------------------------ ----------- -----------
Change in net assets from distributions to shareholders (4,760,277) (2,035,040)
- ------------------------------------------------------------------ ----------- -----------
CAPITAL STOCK TRANSACTIONS--
- ------------------------------------------------------------------
Proceeds from sale of shares 40,774,599 109,176,418
- ------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of dividends declared 3,961,419 1,779,788
- ------------------------------------------------------------------
Cost of shares redeemed (31,964,319) (54,072,933)
- ------------------------------------------------------------------ ----------- -----------
Change in net assets from capital stock transactions 12,771,699 56,883,273
- ------------------------------------------------------------------ ----------- -----------
Change in net assets 7,001,545 57,821,401
- ------------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------------
Beginning of period 57,821,501 100
- ------------------------------------------------------------------ ----------- -----------
End of period (including undistributed net investment income
of $112,142 and $309,380, respectively) $64,823,046 $57,821,501
- ------------------------------------------------------------------ ----------- -----------
</TABLE>
* For the period from December 14, 1992 (date of initial public investment) to
August 31, 1993.
(See Notes which are an integral part of the Financial Statements)
MARSHALL GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-----------------------
1994 1993*
------- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.22 $10.00
- -----------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------
Net investment income 0.64 0.47
- -----------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.78) 0.16
- ----------------------------------------------------------------- ------ ------
Total from investment operations (0.14) 0.63
- ----------------------------------------------------------------- ------ ------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------
Dividends to shareholders from net investment income (0.68) (0.41)
- -----------------------------------------------------------------
Distributions to shareholders from net realized gain on
investment transactions (0.14) --
- ----------------------------------------------------------------- ------ ------
Total distributions (0.82) (0.41)
- ----------------------------------------------------------------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 9.26 $10.22
- ----------------------------------------------------------------- ------ ------
TOTAL RETURN** (1.34)% 6.40%
- -----------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------
Expenses 0.86% 0.85%(b)
- -----------------------------------------------------------------
Net investment income 6.58% 6.56%(b)
- -----------------------------------------------------------------
Expense waiver (a) 0.40% 0.33%(b)
- -----------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------
Net assets, end of period (000 omitted) $64,823 $57,822
- -----------------------------------------------------------------
Portfolio turnover rate 175% 218%
- -----------------------------------------------------------------
</TABLE>
* Reflects operations for the period from December 14, 1992 (date of initial
public investment) to August 31, 1993.
** Based on net asset value.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
MARSHALL INTERMEDIATE BOND FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
LONG-TERM INVESTMENTS--97.3%
- ------------------------------------------------------------------------------------
CORPORATE BONDS--17.5%
- ------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--3.2%
----------------------------------------------------------------
$ 4,645,000 American Express Master Trust, Series 1993, Class A, 5.375%,
7/15/2001 $ 4,198,662
----------------------------------------------------------------
6,575,000 First Chicago Master Trust, Series 1994-L, 7.15%, 4/16/2001 6,575,000
----------------------------------------------------------------
74,256 U.S. Auto Receivables Trust, Series 1991-2, 8.00%, 3/15/96 74,443
----------------------------------------------------------------
504,018 Western Financial Grantor Trust, Series 1991-3, 6.75%, 1/1/97 505,056
---------------------------------------------------------------- ------------
Total Asset-Backed Securities 11,353,161
---------------------------------------------------------------- ------------
BANKING--3.7%
----------------------------------------------------------------
3,525,000 First Bank N.A., 7.55%, 6/15/2004 3,443,079
----------------------------------------------------------------
5,200,000 NBD Bank N.A., 5.00%, 1/30/98 4,898,556
----------------------------------------------------------------
5,115,000 Wachovia Bank, 5.50%, 6/29/98 4,855,260
---------------------------------------------------------------- ------------
Total Banking 13,196,895
---------------------------------------------------------------- ------------
FINANCE--AUTOMOTIVE--3.9%
----------------------------------------------------------------
3,400,000 Associates Corp. of North America, Tranche SR 00890, 7.05%,
5/15/97 3,412,478
----------------------------------------------------------------
5,975,000 Associates Corp. of North America, Tranche SR 00018, 6.65%,
6/16/97 5,975,717
----------------------------------------------------------------
4,200,000 Chrysler Financial Corp., 9.50%, 12/15/99 4,572,750
---------------------------------------------------------------- ------------
Total Finance 13,960,945
---------------------------------------------------------------- ------------
FINANCE--BROKERAGE--1.3%
----------------------------------------------------------------
4,550,000 Lehman Brothers, Inc., 7.00%, 5/15/97++ 4,524,475
---------------------------------------------------------------- ------------
INDUSTRIAL--1.5%
----------------------------------------------------------------
5,300,000 Burlington Resources, 7.15%, 5/1/99 5,278,270
---------------------------------------------------------------- ------------
YANKEE--3.9%
----------------------------------------------------------------
733,000 African Development Bank, 13.25%, 12/1/94 745,094
----------------------------------------------------------------
5,230,000 CRA Finance USA Ltd., 6.50%, 12/1/2003 4,757,993
----------------------------------------------------------------
8,940,000 Hanson PLC, 7.375%, 1/15/2003 8,732,413
---------------------------------------------------------------- ------------
Total Yankee 14,235,500
---------------------------------------------------------------- ------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $64,579,551) 62,549,246
---------------------------------------------------------------- ------------
</TABLE>
MARSHALL INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
LONG-TERM INVESTMENTS--CONTINUED
- ------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES--9.4%
- ------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.--4.6%
----------------------------------------------------------------
$ 3,508,655 6.00%, 11/15/2019, REMIC (Series 1486-A) $ 3,373,642
----------------------------------------------------------------
3,650,000 7.00%, 11/15/2020, REMIC (Series 96-D) 3,486,955
----------------------------------------------------------------
9,500,000 8.00%, 11/15/2019, TBA (Gold) 9,470,265
----------------------------------------------------------------
39,327 8.75%, 4/1/2001 40,347
---------------------------------------------------------------- ------------
Total Federal Home Loan Mortgage Corp. 16,371,209
---------------------------------------------------------------- ------------
FEDERAL HOME LOAN BANK--1.6%
----------------------------------------------------------------
5,605,000 7.26%, 9/6/2001 5,633,081
---------------------------------------------------------------- ------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--1.4%
----------------------------------------------------------------
4,855,057 7.50%, 3/15/2009 4,842,920
---------------------------------------------------------------- ------------
OTHER--1.8%
----------------------------------------------------------------
7,000,000 Securitized Asset Sales, Series 1994-5, Class A3, 7.00%,
7/25/2024 6,654,375
---------------------------------------------------------------- ------------
TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $33,876,247) 33,501,585
---------------------------------------------------------------- ------------
U.S. TREASURY NOTES--70.4%
- ------------------------------------------------------------------------------------
9,655,000 5.25%, 7/31/98 9,202,470
----------------------------------------------------------------
23,655,000 5.50%, 4/30/96++ 23,484,921
----------------------------------------------------------------
10,130,000 6.375%, 1/15/2000 9,929,527
----------------------------------------------------------------
48,950,000 6.50%, 5/15/97-8/15/97 49,057,848
----------------------------------------------------------------
28,790,000 6.75%, 2/28/97-6/30/99 28,788,819
----------------------------------------------------------------
39,850,000 7.25%, 8/31/96-8/15/2004++ 40,309,823
----------------------------------------------------------------
20,000,000 7.625%, 4/30/96 20,525,200
----------------------------------------------------------------
14,450,000 7.875%, 1/15/98++ 15,035,803
----------------------------------------------------------------
9,255,000 8.125%, 2/15/98 9,708,402
----------------------------------------------------------------
14,015,000 8.25%, 7/15/98++ 14,780,359
----------------------------------------------------------------
10,400,000 8.625%, 10/15/95 10,751,000
----------------------------------------------------------------
19,425,000 9.25%, 1/15/96 20,320,881
---------------------------------------------------------------- ------------
TOTAL U.S. TREASURY NOTES (IDENTIFIED COST $258,329,233) 251,895,053
---------------------------------------------------------------- ------------
TOTAL LONG-TERM INVESTMENTS (IDENTIFIED COST $356,785,031) 347,945,884
---------------------------------------------------------------- ------------
</TABLE>
MARSHALL INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
*REPURCHASE AGREEMENT--7.0%
- ------------------------------------------------------------------------------------
$25,169,000 BZW Securities, Inc., 4.80%, dated 8/31/94, due 9/1/94
(at amortized cost) $ 25,169,000
---------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $381,954,031) $373,114,884+
---------------------------------------------------------------- ------------
</TABLE>
* The repurchase agreement is fully collateralized by U.S. Treasury obligations
based on market prices at the date of the portfolio.
+ The cost of investments for federal tax purposes amounts to $381,991,438. The
net unrealized depreciation of investments on a federal tax basis amounts to
$8,876,554 which is comprised of $213,364 appreciation and $9,089,918
depreciation at August 31, 1994.
++ Certain shares on loan to broker.
Note: The categories of investments are shown as a percentage of net assets
($357,739,673) at August 31, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL INTERMEDIATE BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in securities $347,945,884
- -----------------------------------------------------------------
Investments in repurchase agreement 25,169,000
- ----------------------------------------------------------------- ------------
Total investments, at value
(identified cost $381,954,031; tax cost $381,991,438) $373,114,884
- --------------------------------------------------------------------------------
Collateral for security lending 73,580,656
- --------------------------------------------------------------------------------
Receivable for investments sold 22,511,188
- --------------------------------------------------------------------------------
Interest receivable 3,807,347
- --------------------------------------------------------------------------------
Receivable for capital stock sold 2,920,111
- --------------------------------------------------------------------------------
Deferred expenses 72,603
- -------------------------------------------------------------------------------- ------------
Total assets 476,006,789
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Security lending payable $ 73,580,656
- -----------------------------------------------------------------
Payable for investments purchased 44,153,334
- -----------------------------------------------------------------
Payable for capital stock redeemed 332,723
- -----------------------------------------------------------------
Accrued expenses 200,403
- ----------------------------------------------------------------- ------------
Total liabilities 118,267,116
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 38,203,257 shares of capital stock outstanding $357,739,673
- -------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid-in capital $381,167,658
- --------------------------------------------------------------------------------
Net unrealized depreciation of investments (8,839,147)
- --------------------------------------------------------------------------------
Accumulated net realized loss on investments (15,114,213)
- --------------------------------------------------------------------------------
Undistributed net investment income 525,375
- -------------------------------------------------------------------------------- ------------
Total Net Assets $357,739,673
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
(net assets of $357,739,673 / 38,203,257 shares of capital stock outstanding) $9.36
- -------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL INTERMEDIATE BOND FUND
STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------
Interest income (net of interest expense of $1,070,860) $ 21,744,806
- ----------------------------------------------------------------------------------
EXPENSES--
- ----------------------------------------------------------------------------------
Investment advisory fee $1,873,380
- --------------------------------------------------------------------
Directors' fees 3,444
- --------------------------------------------------------------------
Administrative personnel and services fee 300,278
- --------------------------------------------------------------------
Custodian fees 56,251
- --------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 37,851
- --------------------------------------------------------------------
Fund share registration costs 42,691
- --------------------------------------------------------------------
Auditing fees 14,150
- --------------------------------------------------------------------
Legal fees 11,614
- --------------------------------------------------------------------
Printing and postage 13,877
- --------------------------------------------------------------------
Portfolio accounting fees 82,345
- --------------------------------------------------------------------
Insurance premiums 10,197
- --------------------------------------------------------------------
Taxes 34,900
- --------------------------------------------------------------------
Shareholder services fees 46,835
- --------------------------------------------------------------------
Miscellaneous 5,528
- -------------------------------------------------------------------- ----------
Total expenses 2,533,341
- --------------------------------------------------------------------
Deduct--
- --------------------------------------------------------------------
Waiver of investment advisory fee $296,925
- ---------------------------------------------------------
Waiver of custodian fees 32,806 329,731
- --------------------------------------------------------- -------- ----------
Net expenses 2,203,610
- ---------------------------------------------------------------------------------- ------------
Net investment income 19,541,196
- ---------------------------------------------------------------------------------- ------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
- ----------------------------------------------------------------------------------
Net realized loss on investments (identified cost basis) (13,957,495)
- ----------------------------------------------------------------------------------
Net change in unrealized depreciation on investments (12,033,595)
- ---------------------------------------------------------------------------------- ------------
Net realized and unrealized loss on investments (25,991,090)
- ---------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $ (6,449,894)
- ---------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL INTERMEDIATE BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
[6~<CAPTION>
YEAR ENDED AUGUST 31,
-----------------------------
1994 1993*
------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------
Net investment income $ 19,541,196 $ 13,043,460
- ----------------------------------------------------------------
Net realized gain (loss) on investments ($1,157,829 and
$4,036,087 net gains, respectively, as computed for federal
tax purposes) (13,957,495) 4,036,087
- ----------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on
investments (12,033,595) 3,194,448
- ---------------------------------------------------------------- ------------- ------------
Change in net assets resulting from operations (6,449,894) 20,273,995
- ---------------------------------------------------------------- ------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------
Dividends to shareholders from net investment income (21,460,493) (10,598,788)
- ----------------------------------------------------------------
Distributions to shareholders from net realized gain on
investment transactions (5,192,805) --
- ---------------------------------------------------------------- ------------- ------------
Change in net assets from distributions to shareholders (26,653,298) (10,598,788)
- ---------------------------------------------------------------- ------------- ------------
CAPITAL STOCK TRANSACTIONS--
- ----------------------------------------------------------------
Proceeds from sale of shares 171,805,103 359,874,598
- ----------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
dividends declared 22,497,295 10,068,800
- ----------------------------------------------------------------
Cost of shares redeemed (150,267,568) (32,810,670)
- ---------------------------------------------------------------- ------------- ------------
Change in net assets from capital stock transactions 44,034,830 337,132,728
- ---------------------------------------------------------------- ------------- ------------
Change in net assets 10,931,638 346,807,935
- ----------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------
Beginning of period 346,808,035 100
- ---------------------------------------------------------------- ------------- ------------
End of period (including undistributed net investment income of
$525,375 and $2,444,672, respectively) $ 357,739,673 $346,808,035
- ---------------------------------------------------------------- ------------- ------------
</TABLE>
* For the period from November 23, 1992 (date of initial public investment) to
August 31, 1993.
(See Notes which are an integral part of the Financial Statements)
MARSHALL INTERMEDIATE BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-------------------------
1994 1993*
-------- --------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.40 $10.00
- ---------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------
Net investment income 0.61 0.46
- ---------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.81) 0.33
- --------------------------------------------------------------- ------ ------
Total from investment operations (0.20) 0.79
- --------------------------------------------------------------- ------ ------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------
Dividends to shareholders from net investment income (0.67) (0.39)
- ---------------------------------------------------------------
Distributions to shareholders from net realized gain on
investment transactions (0.17) --
- --------------------------------------------------------------- ------ ------
Total distributions (0.84) (0.39)
- --------------------------------------------------------------- ------ ------
NET ASSET VALUE, END OF PERIOD $9.36 $10.40
- --------------------------------------------------------------- ------ ------
TOTAL RETURN** (2.02%) 7.99%
- ---------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------
Expenses 0.71% 0.70%(b)
- ---------------------------------------------------------------
Net investment income 6.26% 6.08%(b)
- ---------------------------------------------------------------
Expense waiver (a) 0.11% 0.10%(b)
- ---------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------
Net assets, end of period (000 omitted) $357,740 $346,808
- ---------------------------------------------------------------
Portfolio turnover rate 228% 220%
- ---------------------------------------------------------------
</TABLE>
* Reflects operations for the period from November 23, 1992 (date of initial
public investment) to August 31, 1993.
** Based on net asset value.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements).
MARSHALL SHORT-TERM INCOME FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
<C> <C> <S> <C>
SHORT-TERM INVESTMENTS--9.0%
- -----------------------------------------------------------------------------------
MASTER NOTES--9.0%
---------------------------------------------------------------
$ 4,500,000 Donaldson, Lufkin & Jenrette Securities Corp., 4.75%**, 9/1/94 $ 4,500,000
---------------------------------------------------------------
4,500,000 General Motors Acceptance Corp., 4.757**, 9/1/94 4,500,000
--------------------------------------------------------------- ------------
TOTAL SHORT-TERM INVESTMENTS (AT AMORTIZED COST) 9,000,000
--------------------------------------------------------------- ------------
LONG-TERM INVESTMENTS--92.4%
- -----------------------------------------------------------------------------------
CORPORATE BONDS--24.1%
- -----------------------------------------------------------------------------------
BANKING--5.7%
---------------------------------------------------------------
900,000 Citicorp, 8.05%, 3/5/96 914,958
---------------------------------------------------------------
3,250,000 NBD Bank N.A., 5.00%, 1/5/95 3,239,048
---------------------------------------------------------------
1,600,000 Nationsbank Corp., 4.75%, 8/15/96 1,548,608
--------------------------------------------------------------- ------------
Total 5,702,614
--------------------------------------------------------------- ------------
FINANCE--4.4%
---------------------------------------------------------------
3,210,000 Dean Witter Discover & Co., 4.888%**, 1/28/97 3,206,983
---------------------------------------------------------------
1,200,150 Heller Financial Inc., 6.45%, 2/15/97 1,199,550
--------------------------------------------------------------- ------------
Total 4,406,533
--------------------------------------------------------------- ------------
FINANCE--AUTOMOTIVE--3.7%
---------------------------------------------------------------
3,850,000 Ford Motor Credit Corp., 5.625%, 3/3/97 3,739,890
--------------------------------------------------------------- ------------
FINANCE--SECURITIES--6.9%
---------------------------------------------------------------
2,585,000 Lehman Brothers, Inc., 7.00%, 5/15/97 2,570,498
---------------------------------------------------------------
550,000 Merrill Lynch & Co., 5.875%, 12/1/95 546,865
---------------------------------------------------------------
3,875,000 Morgan Stanley Group, Inc., 4.95%**, 1/20/97 3,861,902
--------------------------------------------------------------- ------------
Total 6,979,265
--------------------------------------------------------------- ------------
RETAIL--1.6%
---------------------------------------------------------------
1,630,000 Dayton Hudson Corp., 4.65%, 3/11/96 1,588,728
--------------------------------------------------------------- ------------
TELECOMMUNICATION--1.8%
---------------------------------------------------------------
1,800,000 Northern Telecom, 8.25%, 6/13/96 1,853,064
--------------------------------------------------------------- ------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $24,469,545) 24,270,094
--------------------------------------------------------------- ------------
ASSET-BACKED SECURITIES--15.4%
- -----------------------------------------------------------------------------------
3,005,000 First Deposit Master Trust, Series 1994--1, Class A, 6.90%,
8/15/2001 3,015,097
---------------------------------------------------------------
3,000,000 ++ Ford Credit Auto Loan Master Trust, Series 1994--1, Class A,
4.983%**, 7/15/2001 3,001,875
---------------------------------------------------------------
1,375,398 ++ Ford Credit Grantor Trust, Series 1993--B, Class A, 4.30%,
7/15/98 1,342,320
---------------------------------------------------------------
</TABLE>
MARSHALL SHORT-TERM INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
<C> <C> <S> <C>
LONG-TERM INVESTMENTS--CONTINUED
- -----------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--CONTINUED
- -----------------------------------------------------------------------------------
$ 793,354 Green Tree Acceptance Corp., Series 1993--1, Class A1, 4.90%,
4/1/2018 $ 767,578
---------------------------------------------------------------
974,249 Green Tree Acceptance Corp., Series 1993--3, Class A1, 4.60%,
10/15/2018 946,980
---------------------------------------------------------------
2,471,235 Green Tree Acceptance Corp., Series 1994--4, Class A1, 6.55%,
7/15/2019 2,458,879
---------------------------------------------------------------
2,165,169 ++ Premier Auto Trust, Series 1993--4, Class A2, 4.65%, 2/2/99 2,110,585
---------------------------------------------------------------
363,401 Revolving Home Equity Loan Trust, Series 1992--1, Class A,
5.1175%, 11/15/2017 361,242
---------------------------------------------------------------
1,400,000 Sears Credit Account Trust, Series 1990--A, 8.75%, 1/15/95 1,435,182
--------------------------------------------------------------- ------------
TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $15,601,998) 15,439,738
--------------------------------------------------------------- ------------
MORTGAGE-BACKED SECURITIES--20.4%
- -----------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.--3.0%
---------------------------------------------------------------
188,187 4.10%, 7/15/97 (Series 1393--A) 187,261
---------------------------------------------------------------
800,000 6.00%, 7/15/2010 (Series 1468--C) 774,696
---------------------------------------------------------------
1,515,164 7.75%, 1/15/2018 (Series 1259--H) 1,531,361
---------------------------------------------------------------
583,318 6.00%, 11/15/2019 (Series 1486--A) 560,872
--------------------------------------------------------------- ------------
Total 3,054,190
--------------------------------------------------------------- ------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--2.5%
---------------------------------------------------------------
2,522,661 6.00%, 7/25/2019, REMIC (Series 1992--009--G) 2,500,083
--------------------------------------------------------------- ------------
OTHER--14.9%
---------------------------------------------------------------
4,023,596 CMC Securities Corp., III, Series 1994--E, Class A1, 6.00%,
3/25/2024 3,921,120
---------------------------------------------------------------
4,002,249 Countrywide Funding Corp., Series 1994--13, Class A9, 6.50%,
6/25/2009 3,862,170
---------------------------------------------------------------
3,790,137 GE Capital Mortgage Services, INC., Series 1994--10, Class A1,
5.00%, 3/25/2024 3,728,547
---------------------------------------------------------------
3,439,658 Prudential Home Mortgage Securities Co., Series 1993--53, Class
A1, 6.00%, 1/25/2009 3,417,919
--------------------------------------------------------------- ------------
Total 14,929,756
--------------------------------------------------------------- ------------
TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $20,915,849) 20,484,029
--------------------------------------------------------------- ------------
U.S. GOVERNMENT AGENCIES--2.6%
- -----------------------------------------------------------------------------------
2,600,000 Student Loan Marketing Association, 4.88%**, 7/19/96 2,595,632
--------------------------------------------------------------- ------------
TOTAL U.S. GOVERNMENT AGENCIES (IDENTIFIED COST $2,600,500) 2,595,632
--------------------------------------------------------------- ------------
</TABLE>
MARSHALL SHORT-TERM INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
<C> <C> <S> <C>
LONG-TERM INVESTMENTS--CONTINUED
- -----------------------------------------------------------------------------------
U.S. TREASURY NOTES--29.9%
- -----------------------------------------------------------------------------------
$10,000,000 ++ 6.00%, 6/30/96 $ 9,990,400
---------------------------------------------------------------
11,000,000 ++ 6.125%, 7/31/96 11,005,060
---------------------------------------------------------------
9,000,000 ++ 6.50%, 8/15/97 9,016,110
--------------------------------------------------------------- ------------
TOTAL U.S. TREASURY NOTES (IDENTIFIED COST $29,979,922) 30,011,570
--------------------------------------------------------------- ------------
TOTAL LONG-TERM INVESTMENTS (IDENTIFIED COST $93,567,814) 92,801,063
--------------------------------------------------------------- ------------
*REPURCHASE AGREEMENT--2.7%
- -----------------------------------------------------------------------------------
2,721,000 BZW Securities, Inc., 4.80%, dated 8/31/94, due 9/1/94
(at amortized cost) 2,721,000
--------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $105,288,814) $104,522,063+
--------------------------------------------------------------- ------------
</TABLE>
* The repurchase agreement is fully collateralized by U.S. Treasury obligations
based on market prices at the date of the portfolio.
** Each issue shows the rate of discount at the time of purchase.
+ The cost of investments for federal tax purposes amounts to $105,288,814. The
net unrealized depreciation of investments on a federal tax cost basis
amounts to $766,751, which is comprised of $33,671 appreciation and $800,422
depreciation at August 31, 1994.
++ Certain shares on loan to broker.
Note: The categories of investments are shown as a percentage of net assets
($100,452,145) at August 31, 1994.
The following abbreviation is used in this portfolio:
REMIC--Real Estate Mortgage Investment Conduit
(See Notes which are an integral part of the Financial Statements)
MARSHALL SHORT-TERM INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in securities $101,801,063
- -----------------------------------------------------------------
Investments in repurchase agreement 2,721,000
- ----------------------------------------------------------------- ------------
Total investments, at value
(identified and tax cost $105,288,214) $104,522,063
- --------------------------------------------------------------------------------
Cash 547
- --------------------------------------------------------------------------------
Collateral for security lending 27,062,500
- --------------------------------------------------------------------------------
Interest receivable 681,034
- --------------------------------------------------------------------------------
Receivable for capital stock sold 581,750
- --------------------------------------------------------------------------------
Deferred expenses 19,444
- -------------------------------------------------------------------------------- ------------
Total assets 132,867,338
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Security lending payable $ 27,062,500
- -----------------------------------------------------------------
Payable for investments purchased 4,358,589
- -----------------------------------------------------------------
Payable for capital stock redeemed 932,872
- -----------------------------------------------------------------
Accrued expenses 61,232
- ----------------------------------------------------------------- ------------
Total liabilities 32,415,193
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 10,339,999 shares of capital stock outstanding $100,452,145
- -------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid-in capital $103,097,584
- --------------------------------------------------------------------------------
Net unrealized depreciation of investments (766,751)
- --------------------------------------------------------------------------------
Accumulated net realized loss on investments (2,004,333)
- --------------------------------------------------------------------------------
Undistributed net investment income 125,645
- -------------------------------------------------------------------------------- ------------
Total Net Assets $100,452,145
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
(net assets of $100,452,145 / 10,339,999 shares of capital stock outstanding) $9.71
- -------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL SHORT-TERM INCOME FUND
STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------
Interest income (net of interest expense of $36,271) $ 4,869,016
- ----------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------
Investment advisory fee $575,101
- ----------------------------------------------------------------------
Directors' fees 923
- ----------------------------------------------------------------------
Administrative personnel and services fee 91,808
- ----------------------------------------------------------------------
Custodian fees 19,170
- ----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 29,235
- ----------------------------------------------------------------------
Fund share registration costs 34,324
- ----------------------------------------------------------------------
Auditing fees 14,150
- ----------------------------------------------------------------------
Legal fees 5,795
- ----------------------------------------------------------------------
Printing and postage 10,370
- ----------------------------------------------------------------------
Portfolio accounting fees 44,779
- ----------------------------------------------------------------------
Insurance premiums 5,917
- ----------------------------------------------------------------------
Taxes 5,800
- ----------------------------------------------------------------------
Shareholder services fees 14,377
- ----------------------------------------------------------------------
Miscellaneous 3,566
- ---------------------------------------------------------------------- --------
Total expenses 855,315
- ----------------------------------------------------------------------
Deduct--
- ----------------------------------------------------------------------
Waiver of investment advisory fee $361,083
- -----------------------------------------------------------
Waiver of custodian fees 11,981 373,064
- ----------------------------------------------------------- -------- --------
Net expenses 482,251
- ---------------------------------------------------------------------------------- -----------
Net investment income 4,386,765
- ---------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
- ----------------------------------------------------------------------------------
Net realized loss on investments (identified cost basis) (1,938,737)
- ----------------------------------------------------------------------------------
Net change in unrealized depreciation on investments (590,561)
- ---------------------------------------------------------------------------------- -----------
Net realized and unrealized loss on investments (2,529,298)
- ---------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $ 1,857,467
- ---------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL SHORT-TERM INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-----------------------------
1994 1993*
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------
Net investment income $ 4,386,765 $ 1,640,833
- ---------------------------------------------------------------
Net realized loss on investments ($302,405 and $65,596 net
losses, respectively, as computed for federal tax purposes) (1,938,737) (65,596)
- ---------------------------------------------------------------
Net change in unrealized depreciation on investments (590,561) (176,190)
- --------------------------------------------------------------- ------------ ------------
Change in net assets resulting from operations 1,857,467 1,399,047
- --------------------------------------------------------------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------
Dividends to shareholders from net investment income (4,283,842) (1,618,111)
- --------------------------------------------------------------- ------------ ------------
CAPITAL STOCK TRANSACTIONS--
- ---------------------------------------------------------------
Proceeds from sale of shares 117,021,684 91,606,998
- ---------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of dividends declared 2,820,624 1,389,731
- ---------------------------------------------------------------
Cost of shares redeemed (91,705,600) (18,035,953)
- --------------------------------------------------------------- ------------ ------------
Change in net assets from capital stock transactions 28,136,708 74,960,776
- --------------------------------------------------------------- ------------ ------------
Change in net assets 25,710,333 74,741,712
- ---------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------
Beginning of period 74,741,812 100
- --------------------------------------------------------------- ------------ ------------
End of period (including undistributed net investment income
of $125,645 and $22,722, respectively) $100,452,145 $ 74,741,812
- --------------------------------------------------------------- ------------ ------------
</TABLE>
* For the period from November 2, 1992 (date of initial public investment) to
August 31, 1993.
(See Notes which are an integral part of the Financial Statements)
MARSHALL SHORT-TERM INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
------------------------
1994 1993*
-------- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.95 $10.00
- ----------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------
Net investment income 0.45 0.40
- ----------------------------------------------------------------
Net realized and unrealized loss on investments (0.25) (0.05)
- ---------------------------------------------------------------- ------ ------
Total from investment operations 0.20 0.35
- ---------------------------------------------------------------- ------ ------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------
Dividends to shareholders from net investment income (0.44) (0.40)
- ---------------------------------------------------------------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 9.71 $ 9.95
- ---------------------------------------------------------------- ------ ------
TOTAL RETURN** 2.05% 3.57%
- ----------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------
Expenses 0.50% 0.50%(b)
- ----------------------------------------------------------------
Net investment income 4.58% 4.91%(b)
- ----------------------------------------------------------------
Expense waiver (a) 0.39% 0.51%(b)
- ----------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------
Net assets, end of period (000 omitted) $100,452 $74,742
- ----------------------------------------------------------------
Portfolio turnover rate 185% 79%
- ----------------------------------------------------------------
</TABLE>
* Reflects operations for the period from November 2, 1992 (date of initial
public investment) to August 31, 1993.
** Based on net asset value.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
MARSHALL FUNDS, INC.
INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Marshall Funds, Inc. (the "Corporation") is an open-end, management investment
company, established as a Wisconsin corporation under the Articles of
Incorporation on July 31, 1992. The Corporation consists of eleven diversified
portfolios: Marshall Balanced Fund, Marshall Equity Income Fund, Marshall
Government Income Fund, Marshall Intermediate Bond Fund, Marshall Intermediate
Tax-Free Fund, Marshall Mid-Cap Stock Fund, Marshall Money Market Fund, Marshall
Short-Term Income Fund, Marshall Short-Term Tax-Free Fund, Marshall Stock Fund,
and Marshall Value Equity Fund. Marshall Money Market Fund is offered in two
classes of shares: Trust Shares and Investment Shares. The assets of each
portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held. The financial statements included herein are
only those of Marshall Government Income Fund, Marshall Intermediate Bond Fund,
and Marshall Short-Term Income Fund (individually referred to as the "Fund," or
collectively as the "Funds"). The financial statements of the other portfolios
are presented separately.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by each Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--U.S. government obligations are generally valued at the mean
between the over-the-counter bid and asked prices as furnished by an independent pricing
service. Corporate bonds (and other fixed-income and asset-backed securities) are valued
at the last sale price reported on national securities exchanges on that day, if
available. Otherwise, corporate bonds (and other fixed-income and asset-backed
securities) and short-term obligations are valued at the prices provided by an
independent pricing service. Short-term securities with remaining maturities of sixty
days or less at the time of purchase may be stated at amortized cost, which approximates
value.
B. REPURCHASE AGREEMENTS--It is the policy of the Funds to require the custodian bank to
take possession, to have legally segregated in the Federal Reserve Book Entry System, or
to have segregated within the custodian bank's vault, all securities held as collateral
[6~ in support of repurchase agreement investments. Additionally, procedures have been
established by the Funds to monitor, on a daily basis, the market value of each
repurchase agreement's underlying collateral to ensure that the value of collateral at
least equals the principal amount of the repurchase agreement, including accrued
interest.
The Funds will only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the Funds' adviser to
be creditworthy pursuant to the guidelines established by the Board of Directors (the
"Directors"). Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Funds could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued
daily. Bond premium and discount, if applicable, are amortized as required by the
Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are
recorded on the ex-dividend date.
</TABLE>
MARSHALL FUNDS, INC.
INCOME FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
D. FEDERAL TAXES--It is the Funds' policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to shareholders each year
substantially all of their taxable income. Accordingly, no provisions for federal tax are
necessary. At August 31, 1994, the Marshall Government Income Fund and Marshall
Short-Term Income Fund, for federal tax purposes, had capital loss carryforwards of
$521,493 and $302,405, respectively, which will reduce the Funds' taxable income arising
from future net realized gain on investments, if any, to the extent permitted by the
Code, and thus will reduce the amount of the distributions to shareholders which would
otherwise be necessary to relieve the Funds of any liability for federal tax. Pursuant to
the Code, such capital loss carryforwards will expire in 2002. Additionally, the Marshall
Government Income Fund, Marshall Intermediate Bond Fund and Marshall Short-Term Income
Fund had net capital losses of $2,641,385, $15,077,549 and $1,701,928, respectively,
attributable to security transactions incurred after October 31, 1993 which are treated
as arising on the first day of the Funds' next taxable year.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Funds may engage in when-issued or
delayed delivery transactions. The Funds record when-issued securities on the trade date
and maintain security positions such that sufficient liquid assets will be available to
make payment for the securities purchased. Securities purchased on a when-issued or
delayed delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. DOLLAR ROLL TRANSACTIONS--The Funds enter into dollar roll transactions, with respect to
mortgage securities issued by GNMA, FNMA and FHLMC, in which the Funds agree to sell
securities that they hold to financial institutions and simultaneously agree to purchase
substantially similar (same type, coupon and maturity) securities at a later date at an
agreed upon price. Dollar roll transactions are treated for accounting and tax purposes
as short-term financing arrangements which will not exceed twelve months. The Funds will
use the proceeds generated from the transactions to invest in short-term investments,
which may enhance the Funds' current yields and total returns.
G. SECURITIES LENDING--The Funds participate in a securities lending program providing for
the lending of corporate bonds, equity and government securities to qualified brokers.
Collateral on all securities loaned is accepted in cash or government securities.
Collateral is maintained at a minimum level of 100% of the market value on investments
loaned, plus interest, if applicable. The custodian receives a fee for its services under
the program according to agreed-upon rates. As of August 31, 1994, the value of the
securities loaned and the value of the collateral were as follows:
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE OF MARKET
SECURITIES VALUE OF
LOANED COLLATERAL
- ----------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Marshall Government Income Fund $ 4,843,688 $ 4,884,000
- -----------------------------------------------------------------
Marshall Intermediate Bond Fund 72,802,643 73,580,656
- -----------------------------------------------------------------
Marshall Short-Term Income Fund 26,658,253 27,062,500
- -----------------------------------------------------------------
H. DEFERRED EXPENSES--The costs incurred by the Funds with respect to registration of their
shares in their first fiscal year, excluding the initial expense of registering their
shares, have been deferred and are being amortized using the straight-line method not to
exceed a period of five years from each Fund's commencement date.
I. OTHER--Investment transactions are accounted for on the trade date.
</TABLE>
MARSHALL FUNDS, INC.
INCOME FUNDS
- --------------------------------------------------------------------------------
(3) CAPITAL STOCK
The Articles of Incorporation of the Marshall Funds, Inc. permit the Directors
to issue 50 billion full and fractional shares of common stock, par value
$0.0001 per share. At August 31, 1994, the capital paid-in for Marshall
Government Income Fund, Marshall Intermediate Bond Fund, and Marshall Short-Term
Income Fund was $69,655,072, $381,167,658, and $103,097,584, respectively.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
MARSHALL MARSHALL
GOVERNMENT INTERMEDIATE
INCOME FUND BOND FUND
------------------------- -------------------------
YEAR ENDED AUGUST 31, YEAR ENDED AUGUST 31,
------------------------- -------------------------
1994 1993* 1994 1993**
- ----------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Shares sold 4,215,121 6,685,663 17,818,710 35,555,379
- -----------------------------------------
Shares issued to shareholders in payment
of dividends declared 411,267 174,459 2,287,787 986,338
- -----------------------------------------
Shares redeemed (3,282,704) (1,202,120) (15,245,010) (3,199,957)
- ----------------------------------------- ----------- ----------- ----------- -----------
Net change resulting from Fund share
transactions 1,343,684 5,658,002 4,861,487 33,341,760
- ----------------------------------------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MARSHALL SHORT-TERM
INCOME FUND
-------------------------
YEAR ENDED AUGUST 31,
-------------------------
1994 1993***
- ------------------------------------------ ----------- -----------
<S> <C> <C>
Shares sold 11,893,678 9,181,049
- ------------------------------------------
Shares issued to shareholders in payment
of dividends declared 287,651 139,547
- ------------------------------------------
Shares redeemed (9,353,466) (1,808,470)
- ------------------------------------------ ----------- -----------
Net change resulting from Fund share
transactions 2,827,863 7,512,126
- ------------------------------------------ ----------- -----------
</TABLE>
* For the period from December 14, 1992 (date of initial public investment) to
August 31, 1993.
** For the period from November 23, 1992 (date of initial public investment) to
August 31, 1993.
*** For the period from November 2, 1992 (date of initial public investment) to
August 31, 1993.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--M&I Investment Management Corp., the Funds' investment
adviser (the "Adviser"), receives for its services an annual investment advisory
fee based on a percentage of each Fund's average daily net assets. The Adviser
may voluntarily choose to waive a portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.
<TABLE>
<CAPTION>
ANNUAL RATE
- ------------------------------------------------------------------------------ ------------
<S> <C>
Marshall Government Income Fund 0.75%
- ------------------------------------------------------------------------------
Marshall Intermediate Bond Fund 0.60%
- ------------------------------------------------------------------------------
Marshall Short-Term Income Fund 0.60%
- ------------------------------------------------------------------------------
</TABLE>
MARSHALL FUNDS, INC.
INCOME FUNDS
- --------------------------------------------------------------------------------
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Funds
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Corporation for the period. FAS may
voluntarily choose to waive a portion of its fee.
SHAREHOLDER SERVICES FEE--Marshall Funds Investors Services ("MFIS") is the
Funds' shareholder servicing agent. Under the terms of a shareholder service
agreement with MFIS, the Funds will pay MFIS a fee to obtain certain personal
services for shareholders and the maintenance of shareholder accounts. The fee
is based on the level of each Fund's average net assets for the period.
TRANSFER AND DIVIDEND DISBURSING AGENT, ACCOUNTING AND CUSTODY FEES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Funds. The FServ fee is based on the size, type, and number of accounts and
transactions made by shareholders.
FServ also maintains the Funds' accounting records. The fee is based on the
level of each Fund's average net assets for the period, plus out-of-pocket
expenses.
Marshall and Ilsley Trust Company is the Funds' custodian. The fee is based on
the level of each Fund's average net assets for the period.
ORGANIZATIONAL EXPENSES--Organizational expenses were borne initially by FAS.
The Funds have agreed to reimburse FAS for the organizational expenses during
the five year period following October 2, 1992 (date the Funds first became
effective). For the year ended August 31, 1994, the following amounts were paid
to FAS pursuant to this agreement.
<TABLE>
<CAPTION>
ORGANIZATIONAL ORGANIZATIONAL
EXPENSES EXPENSES PAID
- ----------------------------------------------------------- -------------- --------------
<S> <C> <C>
Marshall Government Income Fund $ 22,735 $2,521
- -----------------------------------------------------------
Marshall Intermediate Bond Fund 23,413 6,199
- -----------------------------------------------------------
Marshall Short-Term Income Fund 23,033 3,928
- -----------------------------------------------------------
</TABLE>
Certain of the Officers and Directors of the Corporation are Officers and
Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
year ended August 31, 1994, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
- --------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Marshall Government Income Fund $109,216,636 $103,588,161
- ---------------------------------------------------------------
Marshall Intermediate Bond Fund 776,309,833 803,567,715
- ---------------------------------------------------------------
Marshall Short-Term Income Fund 183,796,770 152,386,448
- ---------------------------------------------------------------
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors
MARSHALL GOVERNMENT INCOME FUND
MARSHALL INTERMEDIATE BOND FUND
MARSHALL SHORT-TERM INCOME FUND:
We have audited the accompanying statements of assets and liabilities, including
the schedules of portfolio investments, of the Marshall Government Income Fund,
the Marshall Intermediate Bond Fund and the Marshall Short-Term Income Fund
(three of the portfolios constituting the Marshall Funds, Inc., a Wisconsin
corporation) as of August 31, 1994, and the related statements of operations,
changes in net assets and financial highlights for the periods presented. These
financial statements and financial highlights are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1994, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits 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 Marshall Funds, Inc., as
identified above, as of August 31, 1994, the results of their operations, the
changes in their net assets and the financial highlights for the periods
presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
October 11, 1994
<TABLE>
<S> <C>
DIRECTORS OFFICERS
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Ody J. Fish Edward C. Gonzales
John DeVincentis Chairman and Treasurer
Edward C. Gonzales James F. Duca, II
Paul E. Hassett President
Joseph S. Machi
Vice President and Assistant
Treasurer
Peter J. Germain
Secretary
Victor R. Siclari
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the FDIC, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves risk,
including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Funds' prospectus which contains facts concerning
their objective and policies, management fees, expenses, and other information.
MARSHALL TAX-FREE FUNDS
COMBINED ANNUAL REPORT
TO SHAREHOLDERS
DATED August 31, 1994
---------------------------------------------------
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
---------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
---------------------------------------------------
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
3091408 (10/94)
---------------------------------------------------
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Annual Report of the Marshall Tax-Free Funds for the
fiscal year ended August 31, 1994. This report provides you with complete
financial information for the Funds, including the Investment Reviews by the
portfolio managers, a list of investments for each Fund, and the Financial
Statements.
Tax planning is an important element of a sound investment program. The Funds
strive to help you hold on to more of your hard-earned money by investing in
tax-free securities. This advantage can make the Funds a vital part of your
financial plans.
Net assets in the Marshall Short-Term Tax-Free Fund reached $24.9 million and
paid distributions of $0.18 per share. Net assets in the Marshall Intermediate
Tax-Free Fund--a more aggressive approach to tax-free income--grew to $35.2
million and paid distributions of $0.19 per share.
Thank you for seeking tax-free income through the Marshall Tax-Free Funds. We
will keep you informed about your progress as we strive to provide you with the
highest level of service.
Sincerely,
James F. Duca, II
President
Marshall Funds, Inc.
October 14, 1994
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
A rising economy, rising fear of inflation, and rising interest rates
characterized the recently completed fiscal year of the Marshall Funds. Gross
Domestic Product advanced more than 3% for the period. Although consumer
confidence declined in recent months, indications are positive for the important
Christmas selling season, and high business confidence suggests further capital
spending gains. Continued economic expansion and corporate cost cutting are
translating into sustained earnings gains for American industry.
Inflation worries surfaced this year, but to date, scant evidence of
acceleration at the retail level has materialized. Consumer prices edged up only
2.9% over the last 12 months. Nevertheless, clouds are gathering on the horizon,
with climbing commodity costs especially ominous. With the pricing power in the
manufacturing sector having increased significantly, industrial prices are
firming. Capacity utilization stands at a five-year high, and labor markets are
tightening. Expect inflation to advance to the 3.5% area in 1995.
Over the past year, investors have been reintroduced to the anguish of rapidly
rising interest rates. From the lows last October, long-term Treasury yields
jumped two percentage points. Starting in February, the Federal Reserve Board
(the "Fed") pushed up short-term interest rates 1.75 percentage points in five
incremental moves. The Fed is well aware that the economic cycle is past the
point where inflation usually begins to pick up. Rising rates are now beginning
to bite, with housing among the early victims. If the Fed is forced to move from
its present neutral policy to an even more restrictive one, the expansion could
stall by 1996--but for now, enjoy the expansion.
MARSHALL SHORT-TERM TAX-FREE FUND
The Marshall Short-Term Tax-Free Fund is managed to provide current income that
is exempt from federal income tax.+ Under most market conditions, this objective
is attainable. However, since the inception of this Fund was February 1994, the
fiscal year ended August 31, 1994 encompassed an extremely volatile seven-month
period. Although we met the objective of providing income free from federal tax,
as managers, we needed to protect the Fund from the pressure of rising interest
rates.
On August 31, 1994, the net asset value (NAV) of the Fund was $9.92 per share.
When the Fund began, the NAV price was $10.00. Therefore, without including the
income collected, the value of the Fund dropped less than 1.0% in price. Adding
back the income, the Fund experienced a total return of 0.98%* during the
initial "short" fiscal year.
Looking ahead, we see a continuation of the trend toward higher short-term
interest rates. The eyes of the market will focus closely on the pace of
economic growth and subsequent inflationary expectations. The Fund will seek to
take advantage of higher interest rates by gradually lengthening maturities
closer to the allowable maximum of three years. For now, the strategy will be to
maintain flexibility by keeping current holdings relatively short (i.e. two
years and less).
MARSHALL INTERMEDIATE TAX-FREE FUND
The investment objective of the Fund is to provide income exempt from federal
income tax, as is consistent with preservation of capital.+ Given the upward
bias of interest rates since the February 1994 inception of this Fund,
preservation of capital has been difficult. Faster than expected economic growth
has caused inflationary fears to increase, prompting the Fed to raise short-term
interest rates in several steps. Although intermediate and long-term interest
rates are not necessarily tied to short-term interest rate changes, bond
investors generally have demanded higher interest rates across the entire
maturity spectrum.
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
+ Income may be subject to the federal alternative minimum tax and state and
local taxes.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
As of August 31, 1994, the first fiscal year of the Fund concluded. The initial
year only included seven months, as the Fund was launched in February. Over this
time period, the Fund fell in value by (0.94%).* While a negative return is
never good news, the Fund has fared relatively well in comparison to other
intermediate funds. Municipal bond new issue supply has tapered off as well,
allowing tax-free securities to outperform comparable maturity taxable issues.
Strategically, we are not yet ready to extend the average maturity of the
portfolio. Quality spreads remain extremely narrow, so we continue to emphasize
top-tier credits with any new purchases. There will be significant opportunities
to pick up yield and increase the return to shareholders when the economy cools
down. Presently, maintaining liquidity to protect the NAV per share from any
major decline remains the overriding goal.
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
MARSHALL SHORT-TERM TAX-FREE FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN MARSHALL SHORT-TERM TAX-FREE FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Short-Term Tax-Free Fund (the "Fund") from February 1, 1994 (start of
performance) to August 31, 1994 compared to the Lehman Brothers 3 Year G.O.
("L3GO").*
<TABLE>
<CAPTION>
Marshall Lehman
Measurement Period Short-Term Brothers 3
(Fiscal Year Covered) Tax-Free Fund Year G.O.
<S> <C> <C>
2/1/94 10000 10000
8/31/94 10098 10012
AVERAGE ANNUAL TOTAL RETURN FOR THE
PERIOD ENDED AUGUST 31, 1994
Start of Performance (February 1, 1994) (Cumulative)............... 0.98%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Fund's performance assumes the reinvestment of all dividends and
distributions. The L3GO has been adjusted to reflect reinvestment of dividends
on securities in the index.
The L3GO is not adjusted to reflect sales loads, expenses, or other fees that
the SEC requires to be reflected in the Fund's performance.
MARSHALL INTERMEDIATE TAX-FREE FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN MARSHALL INTERMEDIATE TAX-FREE FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Intermediate Tax-Free Fund (the "Fund") from February 1, 1994 (start of
performance) to August 31, 1994 compared to the Lehman Brothers 5 Year G.O.
("L5GO").*
<TABLE>
<CAPTION>
Marshall In- Lehman
Measurement Period termediate Brothers 5
(Fiscal Year Covered) Tax-Free Fund Year G.O.
<S> <C> <C>
2/1/94 10000 10000
8/31/94 9906 9876
AVERAGE ANNUAL TOTAL RETURN FOR THE
PERIOD ENDED AUGUST 31, 1994
Start of Performance (February 1, 1994) (Cumulative)............... (0.94%)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Fund's performance assumes the reinvestment of all dividends and
distributions. The L5GO has been adjusted to reflect reinvestment of dividends
on securities in the index.
The L5GO is not adjusted to reflect sales loads, expenses, or other fees that
the SEC requires to be reflected in the Fund's performance.
MARSHALL SHORT-TERM TAX-FREE FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
SHARES OR RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- ---------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
MUTUAL FUND SHARES--7.0%
- ------------------------------------------------------------------------
988,086 Fidelity Tax Exempt Money Market $ 988,086
----------------------------------------------------------
750,000 Goldman Sachs Financial Square Tax Exempt Money Market 750,000
---------------------------------------------------------- -----------
TOTAL MUTUAL FUND SHARES (AT NET ASSET VALUE) 1,738,086
---------------------------------------------------------- -----------
LONG-TERM MUNICIPAL SECURITIES--87.9%
- ------------------------------------------------------------------------
ALASKA--4.4%
----------------------------------------------------------
$ 800,000 Alaska Municipal Bond Bank Authority, 4.20%-6.75%,
(MBIA Insured), 7/1/95-6/1/96 A 808,499
----------------------------------------------------------
300,000 Fairbanks North Star Boro, AK, 4.00%, (MBIA Insured),
3/1/96 AAA 297,954
---------------------------------------------------------- -----------
Total 1,106,453
---------------------------------------------------------- -----------
ARIZONA--7.3%
----------------------------------------------------------
750,000 Arizona St. Transportation Board (Maricopa County), AZ,
7.10%, Revenue Bonds, 7/1/96 A+ 786,067
----------------------------------------------------------
300,000 Mesa, AZ, 7.125%, UT GO Bonds, 7/1/99, Prerefunded
7/1/96 @ 102 A+ 320,163
----------------------------------------------------------
700,000 Scottsdale, AZ, 5.40%, Special Assessment Bonds, (No.
I3704 Bell Road), 1/1/99 A 707,714
---------------------------------------------------------- -----------
Total 1,813,944
---------------------------------------------------------- -----------
CALIFORNIA--4.1%
----------------------------------------------------------
1,000,000 California State, 5.75%, Warrants, (Series C), 4/25/96 Sp1 1,016,020
---------------------------------------------------------- -----------
CONNECTICUT--4.9%
----------------------------------------------------------
500,000 Connecticut State, 4.75%, Special Tax Obligation Revenue
Bonds, (Transportation Infrastructure)/(Series A), 4/1/99 AA- 495,540
----------------------------------------------------------
700,000 Enfield, CT, 5.25%, UT GO Bonds, 5/15/96 AA 711,340
---------------------------------------------------------- -----------
Total 1,206,880
---------------------------------------------------------- -----------
DISTRICT OF COLUMBIA--0.8%
----------------------------------------------------------
200,000 District of Columbia, 6.40%, (Series D)/(BIG Insured),
6/1/95 AAA 203,116
---------------------------------------------------------- -----------
FLORIDA--5.1%
----------------------------------------------------------
750,000 Florida State Board of Education Capital Outlay, 5.10%, UT
GO Bonds, (Series E), 6/1/97 AA 762,540
----------------------------------------------------------
300,000 Polk County, FL, 4.20%, School Board, Certificates of
Participation, (Series A)/(FSA Insured), 1/1/97 AAA 297,507
----------------------------------------------------------
200,000 Tampa, FL, 6.70%, Water & Sewer Revenue Bonds, (Series B)/
(AMBAC Insured), 10/1/94 AAA 200,358
---------------------------------------------------------- -----------
Total 1,260,405
---------------------------------------------------------- -----------
</TABLE>
MARSHALL SHORT-TERM TAX-FREE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- ---------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
ILLINOIS--4.3%
----------------------------------------------------------
$ 750,000 Cook County, IL, 5.60%, School District 205, (FGIC
Insured), 6/1/98 AAA $ 764,820
----------------------------------------------------------
300,000 Winnebago & Boone Counties, IL, 4.20%, School District,
(FGIC Insured), 2/1/96 AAA 299,262
---------------------------------------------------------- -----------
Total 1,064,082
---------------------------------------------------------- -----------
IOWA--3.0%
----------------------------------------------------------
750,000 LeClaire, IA, 4.125%, Electric Revenue Bonds, 9/1/2026,
Mandatory Put 9/1/96 Sp1+ 743,317
---------------------------------------------------------- -----------
MAINE--1.0%
----------------------------------------------------------
250,000 Maine Municipal Bond Bank, 5.00% (Series B), 11/1/96 AA 254,773
---------------------------------------------------------- -----------
MARYLAND--2.1%
----------------------------------------------------------
500,000 Maryland State Department of Transportation, 6.60%,
Revenue Bonds, 11/15/97 AA 530,040
---------------------------------------------------------- -----------
NEBRASKA--4.0%
----------------------------------------------------------
1,000,000 Nebraska Public Power District Revenue Bonds, 4.90%,
(Nuclear Facility), 7/1/98 A+ 1,003,370
---------------------------------------------------------- -----------
NEVADA--4.1%
----------------------------------------------------------
750,000 Clark County, NV, 5.40%, LT GO Bonds, (Flood Control)/
(AMBAC Insured), 11/1/96 AAA 765,930
----------------------------------------------------------
250,000 Las Vegas, NV, 4.70%, LT GO Revenue Bonds, 10/1/94 A 250,295
---------------------------------------------------------- -----------
Total 1,016,225
---------------------------------------------------------- -----------
NEW JERSEY--4.2%
----------------------------------------------------------
300,000 New Jersey State Housing & Mortgage Finance, 3.40%,
Revenue Bonds, (Series 1993 B-1), 4/1/2024, Mandatory Put
3/29/95 A+ 299,430
----------------------------------------------------------
750,000 New Jersey State Transportation Transit Authority, 4.50%,
Revenue Bonds, (Series A), 12/15/95 A+ 758,265
---------------------------------------------------------- -----------
Total 1,057,695
---------------------------------------------------------- -----------
NEW YORK--4.0%
----------------------------------------------------------
1,000,000 New York State Highway Authority Revenue Bonds, 4.20%
(Series A), 4/1/96 A- 999,820
---------------------------------------------------------- -----------
NORTH CAROLINA--4.0%
----------------------------------------------------------
1,000,000 North Carolina Municipal Power Agency, 4.50%, Catawba
Electric Revenue Bonds, 1/1/96 A 1,000,820
---------------------------------------------------------- -----------
</TABLE>
MARSHALL SHORT-TERM TAX-FREE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- ---------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
SOUTH CAROLINA--2.1%
----------------------------------------------------------
$ 500,000 Charleston, SC, 6.10%, UT GO Bonds, 6/1/98 AA $ 521,915
---------------------------------------------------------- -----------
TENNESSEE--2.1%
----------------------------------------------------------
500,000 Metropolitan Govt. Nashville & Davidson County, TN, 7.00%,
UT GO Bonds, 6/15/97 AA 528,640
---------------------------------------------------------- -----------
TEXAS--7.1%
----------------------------------------------------------
200,000 Garland, TX, Independent School District, 7.40%, UT GO
Bonds, (Series 1986), 2/15/2001, Prerefunded 2/15/96 @ 100 AAA 208,820
----------------------------------------------------------
300,000 Port Houston Authority, TX, 3.20%, (Series 1993), 10/1/95 AA 298,257
----------------------------------------------------------
200,000 San Antonio, TX, 4.30%, Electric & Gas Revenue, 2/1/96 AA 200,314
----------------------------------------------------------
500,000 Tarrant County, TX, 7.625%, LT GO Bonds, 7/15/95, Escrowed
to Maturity AA+ 515,220
----------------------------------------------------------
500,000 Texas State, 7.50%, UT GO Bonds, (Series B), 10/1/97 AA 541,715
---------------------------------------------------------- -----------
Total 1,764,326
---------------------------------------------------------- -----------
UTAH--5.0%
----------------------------------------------------------
500,000 Intermountain Power Agency, UT, 4.60%, Power Supply
Revenue Refunding Bonds, (Series B), 7/1/95 AA 501,555
----------------------------------------------------------
750,000 Salt Lake City, UT, 4.40%, Granite School District, UT GO
Refunding Bonds, 6/1/96 Aa1 751,687
---------------------------------------------------------- -----------
Total 1,253,242
---------------------------------------------------------- -----------
VERMONT--2.1%
----------------------------------------------------------
500,000 Vermont State, 6.70%, (Series A), 2/1/96 AA- 516,690
---------------------------------------------------------- -----------
WASHINGTON--3.2%
----------------------------------------------------------
300,000 King County, WA, 4.00% School District 210,
(FGIC Insured), 12/1/96 AAA 296,331
----------------------------------------------------------
200,000 Marysville, WA, 4.20%, Water & Sewer Revenue Bonds,
(MBIA Insured), 12/1/96 AAA 199,146
----------------------------------------------------------
300,000 Washington State Refunding, 3.85%, (Series R), 10/1/96 AA 296,712
---------------------------------------------------------- -----------
Total 792,189
---------------------------------------------------------- -----------
WISCONSIN--9.0%
----------------------------------------------------------
720,000 West Bend, WI, 5.75%, UT GO Bonds, (School District No.
1), 4/1/97 A1 741,384
----------------------------------------------------------
750,000 Wisconsin State, 4.50%, UT GO Bonds, (Series 1), 11/1/97 AA 750,390
----------------------------------------------------------
</TABLE>
MARSHALL SHORT-TERM TAX-FREE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- ---------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
WISCONSIN--CONTINUED
----------------------------------------------------------
$ 750,000 Wisconsin State Health & Educational Facilities, 4.25%,
Revenue Bonds, (Froedtert Memorial Lutheran Hospital)/
(Series A), 10/1/96 AAA $ 749,392
---------------------------------------------------------- -----------
Total 2,241,166
---------------------------------------------------------- -----------
TOTAL LONG-TERM MUNICIPAL SECURITIES
(IDENTIFIED COST $21,976,681) 21,895,128
---------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $23,714,767) $23,633,214+
---------------------------------------------------------- -----------
</TABLE>
* Please refer to the Appendix to the Combined Statement of Additional
Information for an explanation of the credit ratings. Current credit ratings
are unaudited.
+ The cost for federal tax purposes amounts to $23,714,767. The net unrealized
depreciation of investments on a federal tax basis amounts to $81,553, which
is comprised of $13,985 appreciation and $95,538 depreciation at August 31,
1994.
Note: The categories of investments are shown as a percentage of net assets
($24,903,023) at
August 31, 1994.
The following abbreviations are used in this portfolio:
<TABLE>
<S> <C>
AMBAC --American Municipal Bond Assurance Corporation
BIG --Bond Investors Guaranty
FGIC --Financial Guaranty Insurance Co.
FSA --Financial Security Assurance
GO --General Obligation
LT --Limited Tax
MBIA --Municipal Bond Investors Assurance
UT --Unlimited Tax
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL SHORT-TERM TAX-FREE FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ----------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost $23,714,767) $23,633,214
- ----------------------------------------------------------------------------
Receivable for capital stock sold 1,795,000
- ----------------------------------------------------------------------------
Interest receivable 263,570
- ----------------------------------------------------------------------------
Deferred expenses 12,389
- ---------------------------------------------------------------------------- -----------
Total assets 25,704,173
- ----------------------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------------------
Payable for investments purchased $741,368
- ----------------------------------------------------------------
Dividends payable 31,683
- ----------------------------------------------------------------
Accrued expenses 28,099
- ---------------------------------------------------------------- --------
Total liabilities 801,150
- ---------------------------------------------------------------------------- -----------
NET ASSETS for 2,510,903 shares of capital stock outstanding $24,903,023
- ---------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ----------------------------------------------------------------------------
Paid-in capital $24,995,548
- ----------------------------------------------------------------------------
Net unrealized depreciation of investments (81,553)
- ----------------------------------------------------------------------------
Accumulated net realized loss on investments (10,972)
- ---------------------------------------------------------------------------- -----------
Total Net Assets $24,903,023
- ---------------------------------------------------------------------------- -----------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
(net assets of $24,903,023 / 2,510,903 shares of capital stock outstanding) $9.92
- ---------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL SHORT-TERM TAX-FREE FUND
STATEMENT OF OPERATIONS
PERIOD ENDED AUGUST 31, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------------------------
Interest income $369,911
- -------------------------------------------------------------------------------------
EXPENSES--
- -------------------------------------------------------------------------------------
Investment advisory fee $ 49,536
- -------------------------------------------------------------------------
Directors' fees 45
- -------------------------------------------------------------------------
Administrative personnel and services fee 28,767
- -------------------------------------------------------------------------
Custodian fees 1,982
- -------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 6,780
- -------------------------------------------------------------------------
Legal fees 1,011
- -------------------------------------------------------------------------
Printing and postage 1,806
- -------------------------------------------------------------------------
Portfolio accounting fees 25,915
- -------------------------------------------------------------------------
Taxes 1,501
- -------------------------------------------------------------------------
Shareholder services fees 1,486
- -------------------------------------------------------------------------
Miscellaneous 2,375
- ------------------------------------------------------------------------- --------
Total expenses 121,204
- -------------------------------------------------------------------------
Deduct--
- -------------------------------------------------------------------------
Waiver of investment advisory fee $49,536
- ---------------------------------------------------------------
Waiver of administrative personnel and services fee 19,393
- ---------------------------------------------------------------
Waiver of custodian fees 1,238 70,167
- --------------------------------------------------------------- ------- --------
Net expenses 51,037
- ------------------------------------------------------------------------------------- --------
Net investment income 318,874
- ------------------------------------------------------------------------------------- --------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
- -------------------------------------------------------------------------------------
Net realized loss on investments (identified cost basis) (10,972)
- -------------------------------------------------------------------------------------
Net change in unrealized depreciation on investments (81,553)
- ------------------------------------------------------------------------------------- --------
Net realized and unrealized loss on investments (92,525)
- ------------------------------------------------------------------------------------- --------
Change in net assets resulting from operations $226,349
- ------------------------------------------------------------------------------------- --------
</TABLE>
* For the period from February 2, 1994 (date of initial public investment) to
August 31, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL SHORT-TERM TAX-FREE FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1994*
-----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------
Net investment income $ 318,874
- -------------------------------------------------------------------------
Net realized loss on investments ($0 net loss as computed for federal tax
purposes) (10,972)
- -------------------------------------------------------------------------
Net change in unrealized depreciation on investments (81,553)
- ------------------------------------------------------------------------- ---------------
Change in net assets resulting from operations 226,349
- ------------------------------------------------------------------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------------------------------
Dividends to shareholders from net investment income (318,874)
- ------------------------------------------------------------------------- ---------------
CAPITAL STOCK TRANSACTIONS--
- -------------------------------------------------------------------------
Proceeds from sale of shares 29,765,118
- -------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends
declared 203,173
- -------------------------------------------------------------------------
Cost of shares redeemed (4,972,743)
- ------------------------------------------------------------------------- ---------------
Change in net assets from capital stock transactions 24,995,548
- ------------------------------------------------------------------------- ---------------
Change in net assets 24,903,023
- -------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------
Beginning of period --
- ------------------------------------------------------------------------- ---------------
End of period $24,903,023
- ------------------------------------------------------------------------- ---------------
</TABLE>
* For the period from February 2, 1994 (date of initial public investment) to
August 31, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL SHORT-TERM TAX-FREE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1994*
-----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- -------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------
Net investment income 0.18
- -------------------------------------------------------------------------
Net realized and unrealized loss on investments (0.08)
- ------------------------------------------------------------------------- -----------------
Total from investment operations 0.10
- -------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.18)
- ------------------------------------------------------------------------- -----------------
NET ASSET VALUE, END OF PERIOD $9.92
- ------------------------------------------------------------------------- -----------------
TOTAL RETURN** 0.98%
- -------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------
Expenses 0.52%(b)
- -------------------------------------------------------------------------
Net investment income 3.22%(b)
- -------------------------------------------------------------------------
Expense waiver (a) 0.71%(b)
- -------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------
Net assets, end of period (000 omitted) $24,903
- -------------------------------------------------------------------------
Portfolio turnover rate 37%
- -------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from February 2, 1994 (date of initial
public investment) to August 31, 1994.
** Based on net asset value.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
MARSHALL INTERMEDIATE TAX-FREE FUND
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
SHARES OR RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- ---------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
MUTUAL FUND SHARES--1.9%
- ------------------------------------------------------------------------
387,584 Fidelity Tax Exempt Money Market $ 387,584
----------------------------------------------------------
272,276 Goldman Sachs Financial Square Tax Exempt Money Market 272,276
---------------------------------------------------------- -----------
TOTAL MUTUAL FUND SHARES (AT NET ASSET VALUE) 659,860
---------------------------------------------------------- -----------
SHORT-TERM MUNICIPAL SECURITIES--1.4%
- ------------------------------------------------------------------------
GEORGIA--1.1%
----------------------------------------------------------
$ 400,000 Georgia State, 3.10%, Refunding UT GO Bond, (Series E),
7/1/95 AAA 398,108
---------------------------------------------------------- -----------
MINNESOTA--0.2%
----------------------------------------------------------
60,000 Roseville, MN, 5.10%, (Tax Increment), 2/1/95 AA- 60,393
---------------------------------------------------------- -----------
PENNSYLVANIA--0.1%
----------------------------------------------------------
45,000 Washington County, PA, Industrial Development, 4.08%,
(Fltg, Hercules, Inc. Proj.), 8/9/95 NR 45,000
---------------------------------------------------------- -----------
TOTAL SHORT-TERM MUNICIPAL SECURITIES
(IDENTIFIED COST $505,892) 503,501
---------------------------------------------------------- -----------
LONG-TERM MUNICIPAL SECURITIES--96.5%
- ------------------------------------------------------------------------
ARIZONA--7.3%
----------------------------------------------------------
1,000,000 Arizona State Wastewater Management Authority, 5.60%,
7/1/97 AA+ 1,031,360
----------------------------------------------------------
1,000,000 City of Scottsdale, AZ, 5.40%, (Bell Road Improvement
District), 1/1/2003 A- 992,650
----------------------------------------------------------
500,000 Maricopa County, AZ, School District, 6.75%, (District No.
48 Scottsdale Improvement), 7/1/2010, Prerefunded 7/1/2001
@ 101 NR 550,485
---------------------------------------------------------- -----------
Total 2,574,495
---------------------------------------------------------- -----------
ARKANSAS--0.1%
----------------------------------------------------------
50,000 North Slope Boro, AK, 7.50%, (Series C)/(AMBAC Insured),
6/30/97 AAA 53,492
---------------------------------------------------------- -----------
CALIFORNIA--7.8%
----------------------------------------------------------
75,000 Arroyo Grande, CA, 10.375%, ETM, Certificates of
Participation, (Series A), 11/1/2000, Subject to Mandatory
Sinking Fund 11/1/95 AAA 88,780
----------------------------------------------------------
1,000,000 California State, 6.20%, 9/1/2005 AA 1,039,550
----------------------------------------------------------
</TABLE>
MARSHALL INTERMEDIATE TAX-FREE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- ---------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
CALIFORNIA--CONTINUED
----------------------------------------------------------
$ 105,000 Corona, CA, 10.375%, ETM, Certificates of Participation,
(Series B), 11/1/2000, Subject to Mandatory Sinking
Fund 11/1/95 AAA $ 124,293
----------------------------------------------------------
1,500,000 Sacramento, CA, School Insurance Authority, 5.70%, Revenue
Bonds, (Liability Program)/(Series D), 6/1/2003 A- 1,504,965
---------------------------------------------------------- -----------
Total 2,757,588
---------------------------------------------------------- -----------
COLORADO--1.8%
----------------------------------------------------------
125,000 Denver, CO, City & County, 5.10%, (Series D), 8/1/99 AA 126,450
----------------------------------------------------------
250,000 Jefferson County, CO, School District, 4.10%, (Series A),
12/15/99 AA 237,007
----------------------------------------------------------
250,000 Thornton, CO, 5.65%, (FGIC Insured), 12/1/2003, Callable
12/1/2002 @ 101 AAA 256,665
---------------------------------------------------------- -----------
Total 620,122
---------------------------------------------------------- -----------
CONNECTICUT--7.1%
----------------------------------------------------------
750,000 Connecticut State, 5.80%, (Series B), 11/15/99 AA- 779,820
----------------------------------------------------------
150,000 Connecticut State, 6.00%, (Series B), 11/15/2001 AA- 157,471
----------------------------------------------------------
250,000 Connecticut State, 5.00%, (Special Tax Obligation),
9/1/2003 AA- 243,300
----------------------------------------------------------
1,000,000 Enfield, CT, 5.25% UT GO Bonds, 5/15/96 AA 1,016,200
----------------------------------------------------------
300,000 South Central, CT, Regional Water Authority, 5.40%,
(Water System)/(FGIC Insured), 8/1/2002 AAA 304,992
---------------------------------------------------------- -----------
Total 2,501,783
---------------------------------------------------------- -----------
DELAWARE--0.2%
----------------------------------------------------------
50,000 Delaware State, 6.85%, 5/1/2000 AA+ 54,268
---------------------------------------------------------- -----------
DISTRICT OF COLUMBIA--1.4%
----------------------------------------------------------
200,000 District of Columbia, 7.75%, 6/1/2004, Prerefunded 6/1/96
@ 102 A- 214,562
----------------------------------------------------------
175,000 District of Columbia, 7.00%, (BIG Insured), 6/1/98,
Callable 6/1/96 @102 AAA 184,018
----------------------------------------------------------
75,000 District of Columbia, 7.70%, Refunding Revenue Bonds,
(Series A)/(BIG Insured), 6/1/98, Callable 6/1/96 @ 102 AAA 79,801
---------------------------------------------------------- -----------
Total 478,381
---------------------------------------------------------- -----------
FLORIDA--1.4%
----------------------------------------------------------
500,000 Hillsborough County, FL, 5.00%, Solid Waste & Resources
Recovery Revenue Bonds, (MBIA Insured), 10/1/99 AAA- 501,755
---------------------------------------------------------- -----------
</TABLE>
MARSHALL INTERMEDIATE TAX-FREE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- ---------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
GEORGIA--1.2%
----------------------------------------------------------
$ 450,000 Georgia State, 4.50%, UT GO Bonds, (Series E), 7/1/2002 AA+ $ 427,176
---------------------------------------------------------- -----------
HAWAII--2.2%
----------------------------------------------------------
750,000 Hawaii State, 5.25%, (Series BZ), 10/1/2000 AA 760,845
---------------------------------------------------------- -----------
ILLINOIS--0.5%
----------------------------------------------------------
65,000 Illinois Development Financing Authority, 5.35%, Sinking
Fund Bonds, 9/1/2000, Callable 6/1/95 @ 102 NR 65,933
----------------------------------------------------------
100,000 Illinois State Sales Tax Revenue, 5.30%, 6/15/96 AAA 101,491
---------------------------------------------------------- -----------
Total 167,424
---------------------------------------------------------- -----------
LOUISIANA--0.1%
----------------------------------------------------------
50,000 Louisiana Public Facility Revenue Authority, 7.30%,
12/1/2015, Mandatory Put 6/1/97 A- 52,961
---------------------------------------------------------- -----------
MAINE--0.2%
----------------------------------------------------------
75,000 Maine Municipal Bond Bank, 7.10%, (Series B), 11/1/99 A+ 82,312
---------------------------------------------------------- -----------
MARYLAND--1.7%
----------------------------------------------------------
250,000 Maryland State, 4.90%, (State & Local Loan Facilities
Second Series), 10/15/2003 AAA 242,837
----------------------------------------------------------
375,000 Maryland State Department of Transportation Cons., 4.20%,
(Series 1993 Second Issue), 12/15/2001 AA 347,359
---------------------------------------------------------- -----------
Total 590,196
---------------------------------------------------------- -----------
MASSACHUSETTS--8.8%
----------------------------------------------------------
50,000 Massachusetts State, 7.10%, (Cons. Ln. Series A)/(MBIA
Insured), 2/1/97 AAA 52,745
----------------------------------------------------------
50,000 Massachusetts State, 7.10%, (Series A)/(FGIC Insured),
2/1/98 AAA 53,320
----------------------------------------------------------
1,500,000 Massachusetts State, 5.50%, (FGIC Insured), 8/1/2005,
Callable 8/1/2004 @ 102 AAA 1,493,835
----------------------------------------------------------
1,500,000 Massachusetts State Health and Educational Facilities
Authority, 6.00%, Revenue Bonds, (Daughters of Charity
National Health System for the Carney Hospital)/(Series
D), 7/1/2009 AA- 1,494,015
---------------------------------------------------------- -----------
Total 3,093,915
---------------------------------------------------------- -----------
MINNESOTA--2.9%
----------------------------------------------------------
1,000,000 Metropolitan Council, MN, 5.40%, Refunding Bonds,
(Series A), 12/1/98 AAA 1,036,970
---------------------------------------------------------- -----------
MISSISSIPPI--2.9%
----------------------------------------------------------
1,000,000 Mississippi State Capital Improvement, 5.75%, (Series A),
6/1/2008, Callable 6/1/2004 @ 100 AA- 1,004,330
---------------------------------------------------------- -----------
</TABLE>
MARSHALL INTERMEDIATE TAX-FREE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- ---------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
NEBRASKA--2.8%
----------------------------------------------------------
$1,000,000 Nebraska Public Power District Revenue Bonds, 4.90%,
(Nuclear Facility), 7/1/98 A+ $ 1,003,370
---------------------------------------------------------- -----------
NEVADA--3.1%
----------------------------------------------------------
150,000 Clark County, NV, 5.20% (AMBAC Insured), 11/1/95 AAA 151,990
----------------------------------------------------------
200,000 Clark County, NV, Highway Improvement Revenue, 5.625%,
(Motor Vehicle Fuel Tax)/(AMBAC Insured), 7/1/2002 AAA 203,840
----------------------------------------------------------
750,000 Clark County, NV, School District, 5.00%, (FGIC Insured),
5/1/2001 AAA 739,538
---------------------------------------------------------- -----------
Total 1,095,368
---------------------------------------------------------- -----------
NEW JERSEY--4.6%
----------------------------------------------------------
150,000 Burlington County, NJ, 4.50% Refunding Revenue Bonds,
(Series A), 3/15/2002 AA 141,301
----------------------------------------------------------
200,000 Burlington County, NJ, 4.60% Refunding Revenue Bonds,
(Series A), 3/15/2003 AA 187,236
----------------------------------------------------------
250,000 New Jersey State, 6.25%, 9/15/2000 AA+ 266,067
----------------------------------------------------------
1,000,000 New Jersey State Transportation Transit Authority, 4.50%,
Revenue Bonds, (Series A), 12/15/95 A+ 1,011,020
---------------------------------------------------------- -----------
Total 1,605,624
---------------------------------------------------------- -----------
NORTH CAROLINA--2.3%
----------------------------------------------------------
750,000 North Carolina Eastern Municipal Power Authority, 7.40%
(Series A), 1/1/99 (Callable 1/1/96 @ 103) A- 795,405
---------------------------------------------------------- -----------
OHIO--10.4%
----------------------------------------------------------
1,000,000 Columbus, OH, 4.90%, GO Bonds, 9/15/2001 AA+ 991,210
----------------------------------------------------------
1,000,000 Franklin County, OH, 7.60%, Hospital Revenue Bonds,
5/15/2020, Prerefunded 5/15/2000 @ 102 AAA 1,142,300
----------------------------------------------------------
1,500,000 Mahoning County, OH, 5.70%, (MBIA Insured), 12/1/2005 AAA 1,527,255
---------------------------------------------------------- -----------
Total 3,660,765
---------------------------------------------------------- -----------
PENNSYLVANIA--1.1%
----------------------------------------------------------
350,000 Pennsylvania State Turnpike Commission, 7.50%, Turnpike
Revenue, (Series K), 12/1/2019, Prerefunded 12/1/99 @ 102 AAA 397,806
---------------------------------------------------------- -----------
PUERTO RICO--1.1%
----------------------------------------------------------
250,000 Puerto Rico Public Building Authority, 6.10%, Refunding
Revenue Bonds, (Series K), 7/1/2002 AAA 264,110
----------------------------------------------------------
</TABLE>
MARSHALL INTERMEDIATE TAX-FREE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- ---------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PUERTO RICO--CONTINUED
----------------------------------------------------------
$ 100,000 Puerto Rico Public Building Authority, 6.90%, Refunding
Revenue Bonds, (Series I)/(FGIC Insured), 7/1/2000 AAA $ 109,421
---------------------------------------------------------- -----------
Total 373,531
---------------------------------------------------------- -----------
TEXAS--6.8%
----------------------------------------------------------
200,000 Austin, TX, Utilities System Revenue, 7.30%, (Series A)/
(FGIC Insured), 11/15/97 AAA 215,814
----------------------------------------------------------
100,000 Dallas/Ft. Worth, TX, Regional Airport, 5.875% (Long Opt.
Period)/(Series A CR 104), 11/1/2006, Optional Put 5/1/98
@ 100 AAA 102,629
----------------------------------------------------------
700,000 El Paso, TX, ISD, 7.50%, PSF Gtd., 8/15/2000 AAA 789,656
----------------------------------------------------------
1,300,000 Granbury, TX, ISD, 5.70%, PSF Gtd., 8/1/2007 AAA 1,296,386
---------------------------------------------------------- -----------
Total 2,404,485
---------------------------------------------------------- -----------
VIRGIN ISLANDS--0.4%
----------------------------------------------------------
125,000 Virgin Islands Public Finance Authority, 7.30% ,(Revenue
Series A), 10/1/2018, Prerefunded 10/1/2000 @ 101 AAA 141,851
---------------------------------------------------------- -----------
VIRGINIA--4.5%
----------------------------------------------------------
600,000 Fairfax County, VA, 4.70%, GO Bonds, 6/1/99 AAA 598,446
----------------------------------------------------------
500,000 Virginia Beach, VA, 4.30%, 11/1/97 AA 499,245
----------------------------------------------------------
500,000 Virginia Beach, VA, 4.00%, Refunding Public Improvement
Bonds, 11/1/96 AA 498,245
---------------------------------------------------------- -----------
Total 1,595,936
---------------------------------------------------------- -----------
WASHINGTON--1.2%
----------------------------------------------------------
50,000 Spokane, WA, 6.70% UT Bonds, 1/1/99, Callable 1/1/98 @ 100 AA 52,499
----------------------------------------------------------
60,000 Washington State, 8.00%, 10/1/95 AA 62,620
----------------------------------------------------------
160,000 Washington State, 4.75%, Refunding Bonds, (Series R92C),
9/1/96 AA 161,078
----------------------------------------------------------
100,000 Washington State Public Power Supply, 7.10% (Series B),
7/1/2000 AA 108,323
----------------------------------------------------------
50,000 Washington State Public Power Supply, 7.00%, Refunding
Revenue Bonds, (Series B)/(FGIC Insured), 7/1/99 AAA 54,071
---------------------------------------------------------- -----------
Total 438,591
---------------------------------------------------------- -----------
WEST VIRGINIA--0.2%
----------------------------------------------------------
50,000 Monongalia County, WV, Education Board, 6.80%,
(MBIA Insured), 4/1/99 AAA 53,714
---------------------------------------------------------- -----------
</TABLE>
MARSHALL INTERMEDIATE TAX-FREE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- ---------------------------------------------------------- -------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
WISCONSIN--10.4%
----------------------------------------------------------
$ 170,000 Appleton, WI, Sewer Revenue Bonds, 3.95%, BAN, 10/1/95 MIG1 $ 169,351
----------------------------------------------------------
225,000 Wisconsin State, 6.00%, 5/1/2002 AA 236,221
----------------------------------------------------------
1,000,000 Wisconsin State, 4.75%, Clean Water Revenue Bonds,
(Series Z), 6/1/2005 AA- 917,650
----------------------------------------------------------
50,000 Wisconsin State Health & Education Authority, 7.20%
(Authority Revenue)/(FGIC Insured), 8/1/97 AAA 53,290
----------------------------------------------------------
50,000 Wisconsin State Health & Education Authority, 7.20%,
Community Provider Program, (Series A)/(FGIC Insured),
1/15/2001 AAA 53,955
----------------------------------------------------------
1,500,000 Wisconsin State Health & Educational Facilities Authority,
5.10%, Revenue Bonds, (Froedtert Memorial Lutheran
Hospital)/(Series A)/(MBIA Insured), 10/1/2002 AAA 1,471,786
----------------------------------------------------------
750,000 Wisconsin State Transportation Revenue Bonds, 5.00%,
(Series B), 7/1/2000 A1 745,463
---------------------------------------------------------- -----------
Total 3,647,716
---------------------------------------------------------- -----------
TOTAL LONG-TERM MUNICIPAL SECURITIES
(IDENTIFIED COST $34,379,979) 33,972,175
---------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $35,545,731) $35,135,536+
---------------------------------------------------------- -----------
</TABLE>
* Please refer to the Appendix to the Combined Statement of Additional
Information for an explanation of the credit ratings. Current credit ratings
are unaudited.
+ The cost for federal tax purposes amounts to $35,545,731. The net unrealized
depreciation of investments on a federal tax basis amounts to $410,195, which
is comprised of $54,945 appreciation and $465,140 depreciation at August 31,
1994.
Note: The categories of investments are shown as a percentage of net assets
($35,211,938) at August 31, 1994.
The following abbreviations are used in this portfolio:
<TABLE>
<S> <C>
AMBAC --American Municipal Bond Assurance Corporation
BAN --Bond Anticipation Note
BIG --Bond Investors Guaranty
ETM --Escrowed to Maturity
FGIC --Financial Guaranty Insurance Co.
GO --General Obligation
ISD --Independent School District
MBIA --Municipal Bond Investors Assurance
PSF --Permanent School Fund
UT --Unlimited Tax
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL INTERMEDIATE TAX-FREE FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost $35,545,731) $35,135,536
- ---------------------------------------------------------------------------------
Receivable for investments sold 762,571
- ---------------------------------------------------------------------------------
Interest receivable 487,315
- ---------------------------------------------------------------------------------
Receivable for capital stock sold 21,000
- ---------------------------------------------------------------------------------
Deferred expenses 13,693
- --------------------------------------------------------------------------------- -----------
Total assets 36,420,115
- ---------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------
Payable for investments purchased $1,042,040
- --------------------------------------------------------------------
Dividends payable 111,639
- --------------------------------------------------------------------
Accrued expenses 54,498
- -------------------------------------------------------------------- ----------
Total liabilities 1,208,177
- --------------------------------------------------------------------------------- -----------
NET ASSETS for 3,626,914 shares of capital stock outstanding $35,211,938
- --------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------
Paid-in capital $35,832,029
- ---------------------------------------------------------------------------------
Net unrealized depreciation of investments (410,195)
- ---------------------------------------------------------------------------------
Accumulated net realized loss on investments (209,896)
- --------------------------------------------------------------------------------- -----------
Total Net Assets $35,211,938
- --------------------------------------------------------------------------------- -----------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
(net assets of $35,211,938 / 3,626,914 shares of capital stock outstanding) $9.71
- --------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL INTERMEDIATE TAX-FREE FUND
STATEMENT OF OPERATIONS
PERIOD ENDED AUGUST 31, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------
Interest income $ 670,038
- ------------------------------------------------------------------------------------
EXPENSES--
- ------------------------------------------------------------------------------------
Investment advisory fee $ 95,876
- ------------------------------------------------------------------------
Directors' fees 581
- ------------------------------------------------------------------------
Administrative personnel and services fee 28,767
- ------------------------------------------------------------------------
Custodian fees 3,196
- ------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 10,116
- ------------------------------------------------------------------------
Legal fees 4,361
- ------------------------------------------------------------------------
Printing and postage 7,601
- ------------------------------------------------------------------------
Portfolio accounting fees 31,781
- ------------------------------------------------------------------------
Taxes 2,400
- ------------------------------------------------------------------------
Shareholder services fee 2,397
- ------------------------------------------------------------------------
Miscellaneous 4,057
- ------------------------------------------------------------------------ --------
Total expenses 191,133
- ------------------------------------------------------------------------
Deduct--
- ------------------------------------------------------------------------
Waiver of investment advisory fee $77,214
- --------------------------------------------------------------
Waiver of administrative personnel and services fee 13,646
- --------------------------------------------------------------
Waiver of custodian fees 1,997 92,857
- -------------------------------------------------------------- ------- --------
Net expenses 98,276
- ------------------------------------------------------------------------------------ ---------
Net investment income 571,762
- ------------------------------------------------------------------------------------ ---------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
- ------------------------------------------------------------------------------------
Net realized loss on investments (identified cost basis) (209,896)
- ------------------------------------------------------------------------------------
Net change in unrealized depreciation on investments (410,195)
- ------------------------------------------------------------------------------------ ---------
Net realized and unrealized loss on investments (620,091)
- ------------------------------------------------------------------------------------ ---------
Change in net assets resulting from operations $ (48,329)
- ------------------------------------------------------------------------------------ ---------
</TABLE>
* For the period from February 2, 1994 (date of initial public investment) to
August 31, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL INTERMEDIATE TAX-FREE FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1994*
-----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------
Net investment income $ 571,762
- -------------------------------------------------------------------------
Net realized loss on investments ($0 net loss as computed
for federal tax purposes) (209,896)
- -------------------------------------------------------------------------
Net change in unrealized depreciation on investments (410,195)
- ------------------------------------------------------------------------- ---------------
Change in net assets resulting from operations (48,329)
- ------------------------------------------------------------------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------------------------------
Dividends to shareholders from net investment income (571,762)
- ------------------------------------------------------------------------- ---------------
CAPITAL STOCK TRANSACTIONS--
- -------------------------------------------------------------------------
Proceeds from sale of shares 39,630,036
- -------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of dividends declared 88,011
- -------------------------------------------------------------------------
Cost of shares redeemed (3,886,018)
- ------------------------------------------------------------------------- ---------------
Change in net assets from capital stock transactions 35,832,029
- ------------------------------------------------------------------------- ---------------
Change in net assets 35,211,938
- -------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------
Beginning of period --
- ------------------------------------------------------------------------- ---------------
End of period $35,211,938
- ------------------------------------------------------------------------- ---------------
</TABLE>
* For the period from February 2, 1994 (date of initial public investment) to
August 31, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL INTERMEDIATE TAX-FREE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31, 1994*
-----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- -------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------
Net investment income 0.19
- -------------------------------------------------------------------------
Net realized and unrealized loss on investments (0.29)
- ------------------------------------------------------------------------- -----------------
Total from investment operations (0.10)
- -------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.19)
- ------------------------------------------------------------------------- -----------------
NET ASSET VALUE, END OF PERIOD $9.71
- ------------------------------------------------------------------------- -----------------
TOTAL RETURN** (0.94)%
- -------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------
Expenses 0.62%(b)
- -------------------------------------------------------------------------
Net investment income 3.58%(b)
- -------------------------------------------------------------------------
Expense waiver (a) 0.59%(b)
- -------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------
Net assets, end of period (000 omitted) $35,212
- -------------------------------------------------------------------------
Portfolio turnover rate 45%
- -------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from February 2, 1994 (date of initial
public investment) to August 31, 1994.
** Based on net asset value.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
MARSHALL FUNDS, INC.
TAX-FREE FUNDS
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Marshall Funds, Inc. (the "Corporation") is an open-end, management investment
company established as a Wisconsin corporation under the Articles of
Incorporation on July 31, 1992. The Corporation consists of eleven diversified
portfolios: Marshall Balanced Fund, Marshall Equity Income Fund, Marshall
Government Income Fund, Marshall Intermediate Bond Fund, Marshall Intermediate
Tax-Free Fund, Marshall Mid-Cap Stock Fund, Marshall Money Market Fund, Marshall
Short-Term Income Fund, Marshall Short-Term Tax-Free Fund, Marshall Stock Fund,
and Marshall Value Equity Fund. Marshall Money Market Fund is offered in two
classes: Trust Shares and Investment Shares. The assets of each portfolio are
segregated and a shareholder's interest is limited to the portfolio in which
shares are held. The financial statements included herein are only those of
Marshall Short-Term Tax-Free Fund and Marshall Intermediate Tax-Free Fund
(individually referred to as the "Fund," or collectively as the "Funds"). The
financial statements of the other portfolios are presented separately.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by each Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--Municipal bonds are valued by an independent pricing service
taking into consideration yield, liquidity, risk, credit, quality, coupon, maturity, type
of issue, and any other factors or market data it deems relevant in determining
valuations for normal institutional size trading units of debt securities. The
independent pricing service does not rely exclusively on quoted prices. Short-term
securities with remaining maturities of sixty days or less at the time of purchase may be
stated at amortized cost, which approximates value. Investments in other regulated
investment companies are valued at net asset value.
B. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued
daily. Bond premium and discount, if applicable, are amortized as required by the
Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are
recorded on the ex-dividend date.
C. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to shareholders each year
substantially all of their tax-exempt income. Accordingly, no provisions for federal tax
is necessary. Additionally, the Marshall Short-Term Tax-Free Fund and Marshall
Intermediate Tax-Free Fund had net capital losses of $10,972 and $209,896, respectively,
attributable to security transactions incurred after October 31, 1993 which are treated
as arising on the first day of the Funds' next taxable year.
D. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Funds may engage in when-issued or
delayed delivery transactions. The Funds record when-issued securities on the trade date
and maintain security positions such that sufficient liquid assets will be available to
make payment for the securities purchased. Securities purchased on a when-issued or
delayed delivery basis are marked to market daily and begin earning interest on the
settlement date.
E. DEFERRED EXPENSES--The costs incurred by the Funds with respect to registration of their
shares in its first fiscal year, excluding the initial expense of registering their
shares, have been deferred and
</TABLE>
MARSHALL FUNDS, INC.
TAX-FREE FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
are being amortized using the straight-line method not to exceed a period of five years
from each Fund's commencement date.
F. OTHER--Investment transactions are accounted for on the trade date.
</TABLE>
(3) CAPITAL STOCK
The Articles of Incorporation of the Marshall Funds, Inc. permit the Directors
to issue 50 billion full and fractional shares of common stock, par value
$0.0001 per share. At August 31, 1994, the capital paid-in for Marshall
Short-Term Tax-Free Fund and Marshall Intermediate Tax-Free Fund was $24,995,548
and $35,832,029, respectively. Transactions in shares were as follows:
<TABLE>
<CAPTION>
MARSHALL SHORT-TERM MARSHALL INTERMEDIATE
TAX-FREE FUND TAX-FREE FUND
PERIOD ENDED PERIOD ENDED
AUGUST 31, 1994* AUGUST 31, 1994*
- -------------------------------------------- -------------------- -----------------------
<S> <C> <C>
Shares sold 2,991,957 4,020,183
- --------------------------------------------
Shares issued to shareholders in payment of
dividends declared 20,492 9,030
- --------------------------------------------
Shares redeemed (501,546) (402,299)
- -------------------------------------------- --------------- -----------------
Net change resulting from Fund share
transactions 2,510,903 3,626,914
- -------------------------------------------- --------------- -----------------
</TABLE>
* For the period from February 2, 1994 (date of initial public investment) to
August 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--M&I Investment Management Corp., the Funds' investment
adviser
(the "Adviser"), receives for its services an annual investment advisory fee
based on a percentage of each Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.
<TABLE>
<CAPTION>
ANNUAL RATE
------------------------------------------------------ -----------
<S> <C>
Marshall Short-Term Tax-Free Fund 0.50%
------------------------------------------------------
Marshall Intermediate Tax-Free Fund 0.60%
------------------------------------------------------
</TABLE>
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Funds
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Corporation for the period. FAS may
voluntarily choose to waive a portion of its fee.
SHAREHOLDER SERVICES FEE--Marshall Funds Investors Services ("MFIS") is the
Funds' shareholder servicing agent. Under the terms of a shareholder service
agreement with MFIS, the Funds will pay MFIS a fee to obtain certain personal
services for shareholders and the maintenance of shareholder accounts. The fee
is based on the level of each Fund's average net assets for the period.
TRANSFER AND DIVIDEND DISBURSING AGENT, ACCOUNTING AND CUSTODY FEES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Funds. The FServ fee is based on the size, type, and number of accounts and
transactions made by shareholders.
MARSHALL FUNDS, INC.
TAX-FREE FUNDS
- --------------------------------------------------------------------------------
FServ also maintains the Funds' accounting records. The fee is based on the
level of each Fund's average net assets for the period, plus out-of-pocket
expenses.
Marshall and Ilsley Trust Company is the Funds' custodian. The fee is based on
the level of each Fund's average net assets for the period.
ORGANIZATIONAL EXPENSES--Organizational expenses were borne initially by FAS.
The Funds have agreed to reimburse FAS for the organizational expenses during
the five year period following December 28, 1993 (date the Funds first became
effective). For the period ended August 31, 1994, the following amounts were
paid to FAS pursuant to this agreement.
<TABLE>
<CAPTION>
ORGANIZATIONAL ORGANIZATIONAL
EXPENSES EXPENSES PAID
- --------------------------------------------------------- -------------- ----------------
<S> <C> <C>
Marshall Short-Term Tax-Free Fund $ 17,646 $838
- --------------------------------------------------------- ----------- -----------
Marshall Intermediate Tax-Free Fund 17,384 829
- --------------------------------------------------------- ----------- -----------
</TABLE>
INTERFUND TRANSACTIONS--During the period ended August 31, 1994, the Marshall
Intermediate Tax-Free Fund engaged in purchase and sale transactions with other
affiliated funds at current value pursuant to Rule 17a-7 under the Investment
Company Act of 1940 amounting to $12,377,757 and $0, respectively.
Certain of the Officers and Directors of the Corporation are Officers and
Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended August 31, 1994, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
- ----------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Marshall Short-Term Tax-Free Fund $26,983,361 $5,459,828
- ----------------------------------------------------------------- ----------- -----------
Marshall Intermediate Tax-Free Fund 46,630,500 11,474,264
- ----------------------------------------------------------------- ----------- -----------
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors
MARSHALL SHORT-TERM TAX-FREE FUND
MARSHALL INTERMEDIATE TAX-FREE FUND
We have audited the accompanying statements of assets and liabilities, including
the schedules of portfolio investments, of the Marshall Short-Term Tax-Free Fund
and the Marshall Intermediate Tax-Free Fund (two of the portfolios constituting
the Marshall Funds, Inc., a Wisconsin corporation) as of August 31, 1994, and
the related statements of operations, changes in net assets and financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1994, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting the Marshall Funds, Inc., as
identified above, as of August 31, 1994, the results of their operations, the
changes in their net assets and the financial highlights for the periods
presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
October 11, 1994
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DIRECTORS OFFICERS
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Ody J. Fish Edward C. Gonzales
John DeVincentis Chairman and Treasurer
Edward C. Gonzales James F. Duca, II
Paul E. Hassett President
Joseph S. Machi
Vice President and Assistant
Treasurer
Peter J. Germain
Secretary
Victor R. Siclari
Assistant Secretary
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Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the FDIC, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves risk,
including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Funds' prospectus which contains facts concerning
their objective and policies, management fees, expenses, and other information.
