Marshall
Income
Funds
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
February 28, 1994
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
0000000 (4/94)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report of the Marshall Income Funds for
the six-month period ended February 28, 1994. This report provides you with
complete financial information for the Funds, including investment reviews by
the portfolio managers, a list of investments for each Fund, and the financial
statements.
Please note the following highlights from this reporting period.
Assets in the Marshall Income Funds totaled more than $484 million at the end of
the period. Net assets in the Marshall Intermediate Bond Fund stood at $320.8
million, while the Fund paid distributions of $0.56 per share to its
shareholders. The Marshall Government Income Fund assets grew to $62.2 million,
and the Fund paid distributions of $0.54 per share to its shareholders. Assets
in the Marshall Short-Term Income Fund grew to $101 million, and the Fund paid
distributions of $0.22 per share to its shareholders.
Thank you for pursuing income through one or more of the Marshall Income Funds.
We hope you're pleased with your progress. As always, we welcome your questions
or comments.
Sincerely,
James F. Duca, II
President
Marshall Funds, Inc.
April 15, 1994
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
Interest rates are not waiting! Economic growth is slowing from the blistering
pace of the last quarter of 1993, during which real GDP soared at a 7.5% rate.
When taxes were raised last year, politicians insisted a shrinking Federal
budget deficit would placate investors' fears. Inflation remains in check, with
the Consumer Price Index ("CPI") up 2.5% in the last year and other measures
showing even less price pressure.
Still, interest rates are already heading higher. Worries about the possibility
of accelerating inflation later this year--or even next--sparked an almost 1%
rise in long-term Treasury yields from the October low through the end of
February. Short-term rates, which held steady for more than a year, also began
edging higher in early February, following the Federal Reserve's first
tightening move.
Rising interest rates make all but certain a deceleration from the late 1993
pace of economic growth. Housing and related purchases accounted for a
disproportionate share of the gain last year. In addition, lower monthly
payments on mortgages refinanced at historically low rates freed up funds for
other purchases. With these forces now diminished, economic growth for all of
1994 should only marginally exceed that of the last two years.
For the months ahead, inflation should stay under 3%, but investors worry,
perhaps prematurely, that it will not remain at these relatively restrained
rates. Unit labor costs, up less than 1% in the last year, however, foreshadow
modest inflation numbers. Over the long run, the rise in the cost of labor and
the CPI closely correlate. Increasing commodity prices, rising capacity
utilization rates, and a more restrictive Fed are the focus of current concerns.
The emergence of these typically late cycle characteristics apparently is
convincing markets not to wait for actual manifestations of accelerating
inflation.
MARSHALL GOVERNMENT INCOME FUND
For the six-month period ended February 28, 1994, total return for the Fund was
0.14%,* trailing the 1.28% return of the Lehman Mortgage Index. An overweighting
in higher coupon Collateralized Mortgage Obligations and an underweighting in
GNMA mortgages resulted in the underperformance during the period. Fast
prepayment rates in a declining interest rate environment caused mortgages to
underperform last year. Subsequently, as interest rates bottomed in October and
started their precipitous rise, the mortgage sector outperformed the government
and corporate sectors by a wide margin.
To protect the principal value and the future income stream against prepayment
risk, the portfolio's mortgage holdings were diversified by coupon and maturity.
The transition to higher mortgage rates and slower prepayment rates requires a
change in portfolio structure to overweighting higher coupon mortgages. Our
strategy is to maintain a shorter portfolio duration and seek securities with
limited extension risk as refinancing activity slows. This will be achieved by
seeking higher coupon mortgages and overweighting the 15-year mortgage sector.
The income enhancing strategy termed "dollar roll" is still in place, which
should prove beneficial in the current rising interest rate environment.
- --------------------------------------------------------------------------------
MARSHALL INTERMEDIATE BOND FUND
For the six-month period ended February 28, 1994, the Fund provided a total
return of -0.47%.* The Fund's total return lagged the Lehman Intermediate
Government/Corporate Bond Index, which registered a total return of 0.19% over
the same period. The difference in return resulted from weakness in our mortgage
allocation early in the period. The mortgage allocation subsequently
outperformed and benefitted the Fund in the later months of the period.
During the period, the weighted average duration of the Fund ranged from 3.82
years to 3.16 years. Reflecting the belief that interest rates would move
higher, duration has been shortened in the portfolio. By shortening the
duration, the portfolio has taken a more defensive stance against declining
market values.
Interest rates moved significantly higher during the period. A defensive
strategy was also implemented to add yield to the portfolio. The rise in
interest rates provided an opportunity to add high quality corporate notes in
the industrial sector. An income enhancement strategy termed "dollar roll" was
maintained over the period. To take advantage of a flattening yield curve, the
portfolio structure was altered to a slightly barbelled stance, with particular
emphasis in the less than two-year segment as well as the 7-10 year maturity
range.
MARSHALL SHORT-TERM INCOME FUND
For the six-month period ended February 28, 1994, the Fund provided a total
return of 1.02%.* The Fund lagged the performance of the prospectus benchmarks
due to exposure to high coupon mortgages. Restructuring the Fund's mortgage
position should add to performance as rates continue to rise and investors begin
to favor mortgage securities. Consistent with a rising interest rate
environment, the Fund's duration was shortened to 0.78 years as of February 28,
1994, down from 1.14 years on August 31, 1993.
Ensuing fears of inflation and the potential for continued Fed tightening are
likely to create volatility in the bond markets over the near term. The Fund
will continue to maintain its defensive posture, which should allow it to emerge
in a position to take advantage of market opportunities in a higher interest
rate environment. The Fund's current strategy involves purchasing short-term
securities in various sectors that offer a relative yield advantage.
* 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
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ----------------------------------------------------------------- -----------
<C> <C> <S> <C>
LONG-TERM SECURITIES--106.1%
- ------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES--97.6%
- ------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.--40.4%
-----------------------------------------------------------------
$ 56,595 FHLMC, 10.50%, 10/1/2000 $ 60,344
-----------------------------------------------------------------
32,357 FHLMC, 9.50%, 2/1/2001 34,218
-----------------------------------------------------------------
319,326 FHLMC, 8.75%, 4/1/2001 333,696
-----------------------------------------------------------------
707,141 FHLMC, 8.00%, 7/1/2007 737,414
-----------------------------------------------------------------
1,203,975 FHLMC, 8.00%, 11/1/2007 1,254,386
-----------------------------------------------------------------
1,667,721 FHLMC, 7.00%, 2/1/2008 1,703,677
-----------------------------------------------------------------
168,439 FHLMC, 8.00%, 3/1/2008 175,491
-----------------------------------------------------------------
1,904,943 FHLMC, 7.50%, 4/1/2008 1,969,235
-----------------------------------------------------------------
1,442,061 FHLMC, 6.50%, 8/1/2008 1,444,758
-----------------------------------------------------------------
1,002,494 FHLMC, 7.00%, 11/2009 1,024,108
-----------------------------------------------------------------
400,000 FHLMC, Series 1578, Class C, 5.50%, 11/15/2012 398,348
-----------------------------------------------------------------
250,000 FHLMC, Series 1268, Class E, 7.40%, 1/15/2016 253,030
-----------------------------------------------------------------
1,164,570 FHLMC, 8.50%, 2/1/2017 1,229,343
-----------------------------------------------------------------
750,000 FHLMC, Series 1590, Class FA, 5.50%, 1/15/2019 705,578
-----------------------------------------------------------------
400,000 FHLMC, Series 1560, Class PG, 6.00%, 4/15/2019 382,048
-----------------------------------------------------------------
522,502 FHLMC, Series 1486, Class A, 6.00%, 11/15/2019 523,793
-----------------------------------------------------------------
1,123,936 FHLMC, 7.50%, 1/1/2020 1,156,946
-----------------------------------------------------------------
4,273,006 FHLMC, Series 1443--K, 3.9375%, 4/15/2020 4,275,698
-----------------------------------------------------------------
1,000,000 FHLMC, Series 1614, Class H, 6.00%, 6/15/2020 961,600
-----------------------------------------------------------------
1,197,652 FHLMC, Series 1658, Class AG, 10.00%, 4/15/2021 1,345,491
-----------------------------------------------------------------
2,694,110 FHLMC, Series 1611, Class G, 4.00%, 5/15/2021 2,695,807
-----------------------------------------------------------------
2,450,000 FHLMC, 7.00%, 2/1/2024 2,460,706
----------------------------------------------------------------- -----------
Total 25,125,715
----------------------------------------------------------------- -----------
</TABLE>
MARSHALL GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ----------------------------------------------------------------- -----------
<C> <C> <S> <C>
MORTGAGE-BACKED SECURITIES--CONTINUED
- ------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--40.9%
-----------------------------------------------------------------
$1,083,873 FNMA, 8.00%, 1/1/2005 $ 1,130,945
-----------------------------------------------------------------
1,559,142 FNMA, 7.00%, 5/1/2007 1,612,247
-----------------------------------------------------------------
787,407 FNMA, 7.00%, 6/1/2007 803,156
-----------------------------------------------------------------
1,706,126 FNMA, 7.00%, 5/1/2008 1,740,249
-----------------------------------------------------------------
440,949 FNMA, REMIC, Series 1993--140, Class L, 7.00% 7/25/2012 444,896
-----------------------------------------------------------------
500,000 FNMA, REMIC, Series 1993--169, Class D, 5.60%, 8/25/2012 489,865
-----------------------------------------------------------------
1,000,000 FNMA, 9.00%, 2/1/2020 1,069,370
-----------------------------------------------------------------
792,387 FNMA, 8.50%, 6/1/2021 838,195
-----------------------------------------------------------------
1,993,947 FNMA, 9.00%, 5/1/2022 2,132,267
-----------------------------------------------------------------
548,233 FNMA, 8.00%, 7/1/2022 571,703
-----------------------------------------------------------------
1,351,629 FNMA, REMIC, Series 1992--204, Class F, 3.90625%, 10/25/2022 1,355,548
-----------------------------------------------------------------
1,534,886 FNMA, 7.50%, 5/1/2023 1,578,047
-----------------------------------------------------------------
1,719,207 FNMA, 8.00%, 5/1/2023 1,797,104
-----------------------------------------------------------------
787, 682 FNMA, Series 1993--216, Class B, 5.403%, PO, 8/25/2023 714,081(a)
-----------------------------------------------------------------
3,650,000 * FNMA, 15 Year TBA, 6.50%, 1/1/2099 3,653,394
-----------------------------------------------------------------
5,500,000 * FNMA, 30 Year TBA, 7.00%, 1/1/2099 5,513,750
----------------------------------------------------------------- -----------
Total 25,444,817
----------------------------------------------------------------- -----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--16.3%
-----------------------------------------------------------------
119,513 GNMA, 10.50%, 10/15/2000 130,342
-----------------------------------------------------------------
86,415 GNMA, 11.00%, 11/15/2000 94,894
-----------------------------------------------------------------
158,596 GNMA, 9.00%, 5/15/2016 169,598
-----------------------------------------------------------------
222,780 GNMA, 9.00%, 7/15/2016 238,234
-----------------------------------------------------------------
285,594 GNMA, 9.00%, 8/15/2016 305,405
-----------------------------------------------------------------
165,262 GNMA, 9.00%, 12/15/2016 176,726
-----------------------------------------------------------------
191,605 GNMA, 9.00%, 1/15/2017 204,896
-----------------------------------------------------------------
115,327 GNMA, 9.00%, 7/15/2017 123,327
-----------------------------------------------------------------
1,134,467 GNMA, 9.50%, 7/15/2019 1,226,280
-----------------------------------------------------------------
</TABLE>
MARSHALL GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ----------------------------------------------------------------- -----------
<C> <C> <S> <C>
MORTGAGE-BACKED SECURITIES--CONTINUED
- ------------------------------------------------------------------------------------
$1,327,378 GNMA, 10.00%, 11/15/2020 $ 1,463,434
-----------------------------------------------------------------
979,202 GNMA, 8.50%, 4/15/2021 1,039,178
-----------------------------------------------------------------
2,435,377 GNMA, 7.50%, 11/15/2022 2,503,860
-----------------------------------------------------------------
959,919 GNMA, 8.00%, 5/15/2023 1,007,608
-----------------------------------------------------------------
491,128 GNMA, 8.00%, 12/15/2023 515,527
-----------------------------------------------------------------
1,000,000 * GNMA, 30 Year TBA, 6.50%, 1/1/2099 974,060
----------------------------------------------------------------- -----------
Total 10,173,369
----------------------------------------------------------------- -----------
TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $61,191,906) 60,743,901
----------------------------------------------------------------- -----------
U.S. TREASURY NOTES--8.5%
- ------------------------------------------------------------------------------------
3,000,000 12.625% 8/15/94 3,120,930
-----------------------------------------------------------------
2,000,000 8.125%, 2/15/98 2,194,360
----------------------------------------------------------------- -----------
TOTAL U.S. TREASURY NOTES (IDENTIFIED COST $5,629,531) 5,315,290
----------------------------------------------------------------- -----------
TOTAL LONG-TERM SECURITIES (IDENTIFIED COST $66,821,437) 66,059,191
----------------------------------------------------------------- -----------
**REPURCHASE AGREEMENT--8.1%
- ------------------------------------------------------------------------------------
5,027,000 Goldman, Sachs & Co., Inc., 3.45%, dated 2/28/94
due 3/1/94 (at amortized cost) (Note 2B) 5,027,000
----------------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $71,848,437) $71,086,191+
----------------------------------------------------------------- -----------
</TABLE>
(a) Represents a security with notional or nominal principal amount causing the
stated rate to be different than the effective rate.
* Includes securities with a market value of $10,141,204 subject to dollar roll
transactions.
** 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 $71,848,437. The
net unrealized depreciation on a federal tax cost basis amounts to $762,246,
which is comprised of $45,726 appreciation and $807,972 depreciation at
February 28, 1994.
The following abbreviations are used in this portfolio:
PO--Principal Only
REMIC--Real Estate Mortgage Investment Conduit
TBA--To be announced
Note: The category of investments are shown as a percentage of net assets
($62,245,109) at
February 28, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL GOVERNMENT INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------
Investments in securities, at value (Notes 2A and 2B)
(identified and tax cost, 71,848,437) $71,086,191
- ---------------------------------------------------------------------------------
Cash 195
- ---------------------------------------------------------------------------------
Receivable for investments sold 10,052,388
- ---------------------------------------------------------------------------------
Interest receivable 313,086
- ---------------------------------------------------------------------------------
Receivable for capital stock sold 15,673
- ---------------------------------------------------------------------------------
Prepaid/Deferred Expenses (Note 2G) 38,617
- --------------------------------------------------------------------------------- -----------
Total assets 81,506,150
- ---------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------
Payable for investments purchased $10,247,164
- -------------------------------------------------------------------
Payable for Dollar Roll Transactions (Note 2F) 8,873,784
- -------------------------------------------------------------------
Payable for capital stock redeemed 82,851
- -------------------------------------------------------------------
Accrued expenses 57,242
- ------------------------------------------------------------------- -----------
Total liabilities 19,261,041
- --------------------------------------------------------------------------------- -----------
NET ASSETS for 6,423,773 shares of capital stock outstanding $62,245,109
- --------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------
Paid-in capital $64,310,680
- ---------------------------------------------------------------------------------
Unrealized depreciation of investments (762,246)
- ---------------------------------------------------------------------------------
Accumulated net realized loss on investments (1,269,174)
- ---------------------------------------------------------------------------------
Accumulated distributions in excess of net investment income (34,151)
- --------------------------------------------------------------------------------- -----------
Total Net Assets $62,245,109
- --------------------------------------------------------------------------------- -----------
NET ASSET VALUE, Offering Price and Redemption Price Per Share:
($62,245,109 / 6,423,773 shares of capital stock outstanding) $9.69
- --------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL GOVERNMENT INCOME FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------
Interest income (Note 2C)(net of interest expense of $79,852) $ 2,069,395
- ---------------------------------------------------------------------------------------------- -----------
EXPENSES--
- ----------------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $ 206,907
- -------------------------------------------------------------------------------
Directors' fees 394
- -------------------------------------------------------------------------------
Administrative personnel and services fees (Note 5) 26,907
- -------------------------------------------------------------------------------
Custodian fees (Note 5) 5,517
- -------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees (Note 5) 32,288
- -------------------------------------------------------------------------------
Recordkeeping fee (Note 5) 18,310
- -------------------------------------------------------------------------------
Legal fees 3,913
- -------------------------------------------------------------------------------
Auditing fees 5,806
- -------------------------------------------------------------------------------
Registration fees 24,774
- -------------------------------------------------------------------------------
Taxes 2,380
- -------------------------------------------------------------------------------
Insurance 2,399
- -------------------------------------------------------------------------------
Printing and postage 8,493
- -------------------------------------------------------------------------------
Shareholder services fees (Note 5) 4,138
- -------------------------------------------------------------------------------
Miscellaneous 1,686
- ------------------------------------------------------------------------------- -----------
Total expenses 343,912
- -------------------------------------------------------------------------------
Deduct--
- --------------------------------------------------------------------
Waiver of investment advisory fee (Note 5) $105,970
- --------------------------------------------------------------------
Waiver of custodian fees (Note 5) 3,448 109,418
- -------------------------------------------------------------------- -------- -----------
Net expenses 234,494
- ---------------------------------------------------------------------------------------------- -----------
Net investment income 1,834,901
- ---------------------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------------------------------
Net realized (loss) on investments (identified cost basis) (1,268,910)
- ---------------------------------------------------------------------------------------------- -----------
Net change in unrealized (depreciation) on investments (657,736)
- ---------------------------------------------------------------------------------------------- -----------
Net realized and unrealized loss on investments (1,926,646)
- ---------------------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $ (91,745)
- ---------------------------------------------------------------------------------------------- -----------
</TABLE>
* (unaudited)
(See Notes which are an integral part of the Financial Statements)
MARSHALL GOVERNMENT INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
--------------------------
1994** 1993*
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------------
Net investment income $ 1,834,901 $ 2,344,420
- ------------------------------------------------------------------
Net realized gain (loss) on investments ($1,268,910 net loss and
$733,258 net gain, respectively, as computed for federal tax
purposes) (Note 2D) (1,268,910) 733,258
- ------------------------------------------------------------------
Net change in unrealized (depreciation) on investments (657,736) (104,510)
- ------------------------------------------------------------------ ----------- -----------
Change in net assets resulting from operations (91,745) 2,973,168
- ------------------------------------------------------------------ ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- ------------------------------------------------------------------
Dividends to shareholders from net investment income (2,144,281) (2,035,040)
- ------------------------------------------------------------------
Distributions in excess of net investment income (34,151) --
- ------------------------------------------------------------------
Dividends to shareholders from capital gains (733,522) --
- ------------------------------------------------------------------ ----------- -----------
Change in net assets resulting from distributions to
shareholders (2,911,954) (2,035,040)
- ------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS (NOTE 4)--
- ------------------------------------------------------------------
Proceeds from sale of shares 27,458,432 109,176,418
- ------------------------------------------------------------------
Net asset value of shares issued to shareholders electing to
receive payment of dividends in capital stock 2,407,765 1,779,788
- ------------------------------------------------------------------
Cost of shares redeemed (22,438,890) (54,072,933)
- ------------------------------------------------------------------ ----------- -----------
Change in net assets from capital stock transactions 7,427,307 56,883,273
- ------------------------------------------------------------------ ----------- -----------
Change in net assets 4,423,608 57,821,401
- ------------------------------------------------------------------
NET ASSETS--
- ------------------------------------------------------------------
Beginning of period 57,821,501 100
- ------------------------------------------------------------------ ----------- -----------
End of period $62,245,109 $57,821,501
- ------------------------------------------------------------------ ----------- -----------
</TABLE>
* The period from December 14, 1992 (date of initial public investment) to
August 31, 1993.
** Six months ended February 28, 1994 (unaudited).
(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>
PERIOD ENDED
-----------------
1994** 1993*
------ ------
<S> <C> <C>
- ----------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.22 $10.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income 0.28 0.47
- ----------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.27 ) 0.16
- ---------------------------------------------------------------------- ----- ------
Total from investment operations 0.01 0.63
- ---------------------------------------------------------------------- ----- ------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.28 ) (0.41)
- ----------------------------------------------------------------------
Distributions in excess of net investment income (0.12 )(c) --
- ----------------------------------------------------------------------
Dividends to shareholders from capital gains (0.14 ) --
- ---------------------------------------------------------------------- ----- ------
Total distributions (0.54 ) (0.41)
- ----------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $9.69 $10.22
- ---------------------------------------------------------------------- ----- ------
TOTAL RETURN*** 0.14 % 6.40%
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses (a) 0.85 %(b) 0.85%(b)
- ----------------------------------------------------------------------
Net investment income (a) 6.65 %(b) 6.56%(b)
- ----------------------------------------------------------------------
Expense waiver/ reimbursement (a) 0.40 %(b) 0.33%(b)
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period (000 omitted) $62,245 $57,822
- ----------------------------------------------------------------------
Portfolio turnover rate 78 % 218%
- ----------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from December 14, 1992 (date of initial
public investment) to August 31, 1993.
** Six months ended February 28, 1994 (unaudited).
*** Based on net asset value.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(b) Computed on an annualized basis.
(c) Distributions in excess of net investment income were a result of certain
book and tax timing differences. These distributions did not represent a
return of capital for federal income tax purposes.
(See Notes which are an integral part of the Financial Statements)
MARSHALL INTERMEDIATE BOND FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
LONG-TERM SECURITIES--111.0%
- ------------------------------------------------------------------------------------
CORPORATE BONDS--14.1%
- ------------------------------------------------------------------------------------
BANKING--1.5%
----------------------------------------------------------------
$ 5,015,000 Wachovia Bank, Medium Term Notes, 5.50%, 6/29/98 $ 4,936,866
---------------------------------------------------------------- ------------
FINANCE--AUTOMOTIVE--4.6%
----------------------------------------------------------------
6,910,000 Ford Motor Credit Co., Medium Term Note, 6.95%-9.65%,
1/8/96-7/7/97 7,299,508
----------------------------------------------------------------
7,500,000 General Motors Acceptance Corp., Medium Term Notes, 6.00%,
1/25/95 7,591,275
---------------------------------------------------------------- ------------
Total 14,890,783
---------------------------------------------------------------- ------------
FINANCE--BROKERAGE--1.3%
----------------------------------------------------------------
4,200,000 Salomon Brothers Inc., Medium Term Note, 5.37%, 2/1/95 4,212,348
---------------------------------------------------------------- ------------
FINANCE--COMMERCIAL--1.4%
----------------------------------------------------------------
4,545,000 American Express Master Trust, Series 1993, Class A, 5.375%,
7/15/2001 4,321,613
---------------------------------------------------------------- ------------
FINANCE--COMMODITY--1.6%
----------------------------------------------------------------
5,120,000 CRA Finance USA Ltd, 6.50%, 12/01/2003 4,985,549
---------------------------------------------------------------- ------------
INDUSTRIAL--3.5%
----------------------------------------------------------------
2,715,000 Campbell Soup Co., 5.625%, 9/15/2003 2,536,434
----------------------------------------------------------------
5,320,000 Hanson PLC, 7.375%, 1/15/2003 5,527,214
----------------------------------------------------------------
3,055,000 Philip Morris Cos., Inc., 9.80%, 12/15/98 3,297,292
---------------------------------------------------------------- ------------
Total 11,360,940
---------------------------------------------------------------- ------------
YANKEE--0.2%
----------------------------------------------------------------
733,000 African Dev. Bank, 13.25%, Senior Note, 12/1/94 778,131
---------------------------------------------------------------- ------------
TOTAL CORPORATE BONDS (IDENTIFIED COST, $46,452,548) 45,486,230
---------------------------------------------------------------- ------------
</TABLE>
MARSHALL INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
LONG-TERM SECURITIES--CONTINUED
- ------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--2.0%
- ------------------------------------------------------------------------------------
$ 868,893 GMAC 1990-A Grantor Trust, Series 1990 AA, 8.25%, 11/15/95 $ 875,540
----------------------------------------------------------------
4,235,486 Resolution Trust Corp. Series 1992 C-6, Class A-2, 4.125%,
7/25/2024 4,303,000
----------------------------------------------------------------
265,654 U.S. Auto Receivables Trust, Series 1991-C, 8.15%, 1/16/96 267,149
----------------------------------------------------------------
738,245 Western Financial Grantor Trust 1991-3, 6.75%, 1/1/97 751,637
---------------------------------------------------------------- ------------
TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $6,149,659) 6,197,326
---------------------------------------------------------------- ------------
MORTGAGE-BACKED SECURITIES--52.9%
- ------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.--29.2%
----------------------------------------------------------------
49,819 FHLMC, 8.75%, 4/1/2001 52,061
----------------------------------------------------------------
2,000,000 FHLMC, 7.40%, Series 1268, Class E, 1/15/2016 2,024,240
----------------------------------------------------------------
14,190,000 FHLMC, 5.50% Series 1590, Class FA, 1/15/2019 13,349,526
----------------------------------------------------------------
4,158,834 FHLMC, 6.00%, Series 1486, Class A, 11/15/2019 4,169,106
----------------------------------------------------------------
18,007,031 FHLMC, 3.9375%, Series 1443, Class K, 4/15/2020 18,018,376
----------------------------------------------------------------
6,510,000 FHLMC, 6.00%, Series 1614, Class H, 6/15/2020 6,260,016
----------------------------------------------------------------
5,988,262 FHLMC, 10.00%, Series 1658, Class AG, 4/15/2021 6,727,453
----------------------------------------------------------------
43,204,626 FHLMC, 4.00%, Series 1611, Class G, 5/15/2021 43,231,844
---------------------------------------------------------------- ------------
Total 93,832,622
---------------------------------------------------------------- ------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--18.3%
----------------------------------------------------------------
24,500,000 * FNMA, 6.50%, 1/1/2099 TBA 24,522,785
----------------------------------------------------------------
34,000,000 * FNMA, 7.00%, 1/25/2099 TBA 34,085,000
---------------------------------------------------------------- ------------
Total 58,607,785
---------------------------------------------------------------- ------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION, REMIC--5.4%
----------------------------------------------------------------
4,890,127 FNMA, 7.00%, Series 1993-140, Class L, 7/25/2022 4,933,894
----------------------------------------------------------------
7,616,548 FNMA, 3.90625%, Series 1992-204, Class F, 10/25/2022 7,638,636
----------------------------------------------------------------
5,131,582 FNMA, 4.902%, PO, REMIC PAC, Series 1993-216, Class B, 8/25/2023 4,652,087(a)
---------------------------------------------------------------- ------------
Total 17,224,617
---------------------------------------------------------------- ------------
TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST, $171,076,161) 169,665,024
---------------------------------------------------------------- ------------
U.S. TREASURY NOTES--41.6%
- ------------------------------------------------------------------------------------
15,900,000 8.625%, 10/15/95 16,903,608
----------------------------------------------------------------
9,000,000 9.25%, 1/15/96 9,736,830
----------------------------------------------------------------
20,000,000 ++ 7.625%, 4/30/96 21,156,200
----------------------------------------------------------------
15,000,000 7.25%, 8/31/96 15,815,550
----------------------------------------------------------------
</TABLE>
MARSHALL INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
LONG-TERM SECURITIES--CONTINUED
- ------------------------------------------------------------------------------------
U.S. TREASURY NOTES--CONTINUED
- ------------------------------------------------------------------------------------
$10,000,000 6.75%, 2/28/97 $ 10,462,400
----------------------------------------------------------------
9,005,000 8.125%, 2/15/98 9,880,106
----------------------------------------------------------------
14,015,000 8.25%, 7/15/98 15,499,609
----------------------------------------------------------------
14,220,000 ++ 5.25%, 7/31/98 14,073,250
----------------------------------------------------------------
11,000,000 6.375%, 1/15/2000 11,319,660
----------------------------------------------------------------
8,800,000 ++ 5.75%, 8/15/2003 8,527,728
---------------------------------------------------------------- ------------
TOTAL U.S. TREASURY NOTES (IDENTIFIED COST, $136,736,100) 133,374,941
---------------------------------------------------------------- ------------
TOTAL LONG-TERM SECURITIES (IDENTIFIED COST, $360,414,468) 354,723,521
---------------------------------------------------------------- ------------
**REPURCHASE AGREEMENT--4.1%
- ------------------------------------------------------------------------------------
13,068,000 Goldman, Sachs & Co., 3.45%, dated 2/28/94, due 3/1/94
(at amortized cost) (Note 2B) 13,068,000
---------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST, $373,482,468) $367,791,521+
---------------------------------------------------------------- ------------
</TABLE>
(a) Represents security with notional or nominal principal amount causing the
stated rate to be different than the effective rate.
* Includes securities with a market value of $58,607,785 subject to dollar roll
transactions.
** 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 $373,482,468. The
net unrealized depreciation on a federal tax cost basis amounts to
$5,690,947, which is comprised of $302,029 appreciation and $5,992,976
depreciation at February 28, 1994.
++ Certain shares on loan to broker.
The following abbreviations are used in this portfolio:
PO--Principal Only
TBA--To be announced.
Note: The categories of investments are shown as a percentage of net assets
($320,880,477) at February 28, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL INTERMEDIATE BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in securities, at value (Notes 2A and 2B)
(identified and tax cost, $373,482,468) $367,791,521
- --------------------------------------------------------------------------------
Cash 700
- --------------------------------------------------------------------------------
Receivable for investments sold 62,796,581
- --------------------------------------------------------------------------------
Collateral for security lending (Note 2H) 21,474,750
- --------------------------------------------------------------------------------
Interest receivable 2,894,240
- --------------------------------------------------------------------------------
Receivable for capital stock sold 2,557,821
- --------------------------------------------------------------------------------
Prepaid/deferred expenses (Note 2G) 84,377
- -------------------------------------------------------------------------------- ------------
Total assets 457,599,990
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for investments purchased $59,169,899
- ------------------------------------------------------------------
Payable for Dollar Roll Transactions (Note 2F) 55,761,715
- ------------------------------------------------------------------
Security lending payable (Note 2H) 21,474,750
- ------------------------------------------------------------------
Payable for capital stock redeemed 157,932
- ------------------------------------------------------------------
Accrued expenses and other liabilities 155,217
- ------------------------------------------------------------------ -----------
Total liabilities 136,719,513
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 32,771,217 shares of capital stock outstanding $320,880,477
- -------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid-in capital $330,167,762
- --------------------------------------------------------------------------------
Unrealized depreciation of investments (5,690,947)
- --------------------------------------------------------------------------------
Accumulated net realized loss on investments (3,578,217)
- --------------------------------------------------------------------------------
Accumulated distributions in excess of net investment income (18,121)
- -------------------------------------------------------------------------------- ------------
Total Net Assets $320,880,477
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price and Redemption Price Per Share:
(net assets of $320,880,477 / 32,771,217 shares of capital stock outstanding) $9.79
- -------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL INTERMEDIATE BOND FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------
Interest income (Note 2C) (net of interest expense of $724,388) $ 10,887,530
- ----------------------------------------------------------------------------------
EXPENSES --
- ----------------------------------------------------------------------------------
Investment advisory fee (Note 5) $ 944,136
- --------------------------------------------------------------------
Directors' fees 2,521
- --------------------------------------------------------------------
Administrative personnel and services fees (Note 5) 153,613
- --------------------------------------------------------------------
Custodian fees (Note 5) 28,133
- --------------------------------------------------------------------
Transfer and dividend disbursing agent fees (Note 5) 13,097
- --------------------------------------------------------------------
Recordkeeping fee (Note 5) 39,483
- --------------------------------------------------------------------
Legal fees 8,945
- --------------------------------------------------------------------
Auditing fees 7,630
- --------------------------------------------------------------------
Registration fees 20,280
- --------------------------------------------------------------------
Taxes 18,819
- --------------------------------------------------------------------
Insurance 5,498
- --------------------------------------------------------------------
Printing and postage 7,421
- --------------------------------------------------------------------
Shareholder services fees (Note 5) 23,603
- --------------------------------------------------------------------
Miscellaneous 2,000
- -------------------------------------------------------------------- ----------
Total expenses 1,275,179
- --------------------------------------------------------------------
Deduct--
- ---------------------------------------------------------
Waiver of investment advisory fee (Note 5) $157,356
- ---------------------------------------------------------
Waiver of custodian fees (Note 5) 16,331 173,687
- --------------------------------------------------------- -------- ----------
Net expenses 1,101,492
- ---------------------------------------------------------------------------------- ------------
Net investment income 9,786,038
- ---------------------------------------------------------------------------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------------------
Net realized (loss) on investments (identified cost basis) (2,421,498)
- ----------------------------------------------------------------------------------
Net change in unrealized (depreciation) on investments (8,885,395)
- ---------------------------------------------------------------------------------- ------------
Net realized and unrealized loss on investments (11,306,893)
- ---------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $ (1,520,855)
- ---------------------------------------------------------------------------------- ------------
</TABLE>
* (unaudited)
(See Notes which are an integral part of the Financial Statements)
MARSHALL INTERMEDIATE BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
----------------------------
1994** 1993*
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------
Net investment income $ 9,786,038 $ 13,043,460
- -----------------------------------------------------------------
Net realized gain (loss) on investments ($2,421,498 net loss and
$4,036,087 net gain, respectively as computed for federal tax
purposes) (Note 2D) (2,421,498) 4,036,087
- -----------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on
investments (8,885,395) 3,194,448
- ----------------------------------------------------------------- ------------ ------------
Change in net assets resulting from operations (1,520,855) 20,273,995
- ----------------------------------------------------------------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- -----------------------------------------------------------------
Dividends to shareholders from net investment income (12,230,710) (10,598,788)
- -----------------------------------------------------------------
Distributions in excess of net investment income (18,121)
- -----------------------------------------------------------------
Dividends to shareholders from capital gains (5,192,806) --
- ----------------------------------------------------------------- ------------ ------------
Change in net assets resulting from distributions to
shareholders (17,441,637) (10,598,788)
- -----------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS (NOTE 4)--
- -----------------------------------------------------------------
Proceeds from sale of shares 58,840,689 359,874,598
- -----------------------------------------------------------------
Net asset value of shares issued to shareholders electing to
receive payment of dividends in capital stock 15,431,179 10,068,800
- -----------------------------------------------------------------
Cost of shares redeemed (81,236,934) (32,810,670)
- ----------------------------------------------------------------- ------------ ------------
Change in net assets from capital stock transactions (6,965,066) 337,132,728
- ----------------------------------------------------------------- ------------ ------------
Change in net assets (25,927,558) 346,807,935
- -----------------------------------------------------------------
NET ASSETS --
- -----------------------------------------------------------------
Beginning of period 346,808,035 100
- ----------------------------------------------------------------- ------------ ------------
End of period $320,880,477 $346,808,035
- ----------------------------------------------------------------- ------------ ------------
</TABLE>
* For the period from November 23, 1992 (date of initial public investment) to
August 31, 1993.
**Six months ended February 28, 1994 (unaudited).
(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>
PERIOD ENDED
--------------------------------
1994** 1993*
- --------------------------------------------------------------- -------------- --------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.40 $10.00
- ---------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------
Net investment income 0.32 0.46
- ---------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.37) 0.33
- --------------------------------------------------------------- ---------- ----------
Total from investment operations (0.05) 0.79
- --------------------------------------------------------------- ---------- ----------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------
Dividends to shareholders from net investment income (0.32) (0.39)
- ---------------------------------------------------------------
Distributions in excess of net investment income (0.07)(c) --
-------------------------------------------------------------
Dividends to shareholders from capital gains (0.17) --
- --------------------------------------------------------------- ---------- ----------
Total distributions (0.56) (0.39)
- ---------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.79 $10.40
- --------------------------------------------------------------- ---------- ----------
TOTAL RETURN*** (0.47%) 7.99%
- ---------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------
Expenses (a) 0.70%(b) 0.70%(b)
- ---------------------------------------------------------------
Net investment income (a) 6.22%(b) 6.08%(b)
- ---------------------------------------------------------------
Expense/waiver reimbursement (a) 0.11%(b) 0.10%(b)
- ---------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------
Net assets, end of period (000 omitted) $320,880 $346,808
- ---------------------------------------------------------------
Portfolio turnover rate 112% 220%
- ---------------------------------------------------------------
</TABLE>
* Reflects operations for the period from November 23, 1992 (date of initial
public investment) to August 31, 1993.
** Six months ended February 28, 1994 (unaudited).
*** Based on net asset value.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(b) Computed on an annualized basis.
(c) Distributions in excess of net investment income were a result of certain
book and tax timing differences. These distributions did not represent a
return of capital for federal income tax purposes.
(See Notes which are an integral part of the Financial Statements).
MARSHALL SHORT-TERM INCOME FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ------------------------------------------------------------------ ------------
<C> <S> <C>
SHORT-TERM SECURITIES--8.9%
- ---------------------------------------------------------------------------------
MASTER NOTES--8.9%
------------------------------------------------------------------
$4,500,000 Donaldson, Lufkin & Jenrette Securities Corp., 3.375%, 3/1/94 $ 4,500,000
------------------------------------------------------------------
4,500,000 J. P. Morgan Securities Inc., 3.225%, 3/1/94 4,500,000
------------------------------------------------------------------ ------------
TOTAL SHORT-TERM SECURITIES (AT AMORTIZED COST) (NOTE 2A) 9,000,000
------------------------------------------------------------------ ------------
LONG-TERM SECURITIES--86.8%
- ---------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--1.0%
- ---------------------------------------------------------------------------------
986,289 Residential Funding Mortgage Securities, 6.40%, 11/25/2007 980,105
------------------------------------------------------------------ ------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(IDENTIFIED COST $1,002,316) 980,105
------------------------------------------------------------------ ------------
CORPORATE BONDS--33.4%
- ---------------------------------------------------------------------------------
AEROSPACE--1.2%
------------------------------------------------------------------
1,250,000 Lockheed Corp., 4.65%, 4/5/95 1,253,475
------------------------------------------------------------------ ------------
BANKING--10.3%
------------------------------------------------------------------
870,000 Associates Corp. of North America, 6.00%, 12/1/95 884,425
------------------------------------------------------------------
450,000 CitiCorp, 8.05%, 3/5/96 472,531
------------------------------------------------------------------
4,500,000 Fuji Bank of New York, 3.18%, 4/21/94 4,495,770
------------------------------------------------------------------
3,000,000 Nationsbank Corp., 4.42%--4.75%, 7/20/95--8/15/96 2,993,180
------------------------------------------------------------------
1,535,000 PNC Funding Corp., 4.875%, 5/15/95 1,543,197
------------------------------------------------------------------ ------------
Total 10,389,103
------------------------------------------------------------------ ------------
FINANCE--10.1%
------------------------------------------------------------------
1,466,850 Heller Financial Inc., 6.45%, 2/15/97 1,489,219
------------------------------------------------------------------
200,000 Household Finance Corp., 3.89%*, 3/24/94 200,015
------------------------------------------------------------------
300,000 Household Finance Corp., 8.40%, 8/3/94 304,368
------------------------------------------------------------------
3,750,000 Morgan Stanley Group, Inc., 3.45%*, 1/20/97 3,750,000
------------------------------------------------------------------
4,500,000 Whirlpool Financial Corp., 3.13%, 4/14/94 4,474,890
------------------------------------------------------------------ ------------
Total 10,218,492
------------------------------------------------------------------ ------------
FINANCE--AUTOMOTIVE--4.2%
------------------------------------------------------------------
1,497,189 Ford Motor Credit Corp., Series 1993--B, Class A, 4.30%, 7/15/98 1,479,762
------------------------------------------------------------------
</TABLE>
MARSHALL SHORT-TERM INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ------------------------------------------------------------------ ------------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- ---------------------------------------------------------------------------------
FINANCE--AUTOMOTIVE--CONTINUED
------------------------------------------------------------------
$ 775,000 General Motors Acceptance Corp., 9.45%, 5/15/94 $ 783,045
------------------------------------------------------------------
2,000,000 Toyota Motor Credit Corp., 4.08%, 4/24/95 1,995,540
------------------------------------------------------------------ ------------
Total 4,258,347
------------------------------------------------------------------ ------------
FINANCE--LEASING--0.8%
------------------------------------------------------------------
800,000 International Lease Financial Corp., 9.30%, 6/15/95 840,944
------------------------------------------------------------------ ------------
FINANCE--RETAIL--1.6%
------------------------------------------------------------------
1,175,000 Dayton Hudson Corp., 4.65%, 3/11/96 1,168,526
------------------------------------------------------------------
450,000 Discover Credit Corp., 3.76%*, 7/25/94 449,775
------------------------------------------------------------------ ------------
Total 1,618,301
------------------------------------------------------------------ ------------
FINANCE--SECURITIES--5.2%
------------------------------------------------------------------
2,785,000 Dean Witter Discover & Co., 3.575%*, 1/28/97 2,783,385
------------------------------------------------------------------
500,000 Merrill Lynch & Co., Inc., 5.875%, 12/1/95 509,140
------------------------------------------------------------------
1,350,000 Salomon Brothers, Inc., 9.00%, 7/1/95 1,418,931
------------------------------------------------------------------
500,000 Lehman Brothers, Inc., 4.405%, 5/25/94 500,280
------------------------------------------------------------------ ------------
Total 5,211,736
------------------------------------------------------------------ ------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $33,935,351) 33,790,398
------------------------------------------------------------------ ------------
ASSET-BACKED SECURITIES--6.5%
- ---------------------------------------------------------------------------------
662,062 Green Tree Acceptance Corp., Series 1993--1, Class A1, 4.90%,
4/15/2018 654,647
------------------------------------------------------------------
1,286,820 Green Tree Acceptance Corp., Series 1993--2, Class A1, 3.875%*,
7/15/2018 1,289,227
------------------------------------------------------------------
1,084,878 Green Tree Acceptance Corp., Series 1993--3, Class A1, 4.60%,
10/15/2018 1,074,756
------------------------------------------------------------------
2,199,970 Premier Auto Trust, Series 1993--4, Class A2, 4.65%, 2/2/99 2,178,058
------------------------------------------------------------------
258,342 Revolving Home Equity Loan Trust, Series 1992--1, Class A,
3.8675%, 11/15/2017 258,213
------------------------------------------------------------------
250,000 Sears Credit Account Trust, Series 1990--A, 8.75%, 1/15/95 261,178
------------------------------------------------------------------
31,419 U.S. Auto Receivables Trust, 1990--4, Class A, 8.65%, 11/15/95 31,959
------------------------------------------------------------------
770,960 U.S. Auto Receivables Trust, 1991--1, Class A, 8.15%, 1/16/96 775,301
------------------------------------------------------------------ ------------
TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $6,577,955) 6,523,339
------------------------------------------------------------------ ------------
</TABLE>
MARSHALL SHORT-TERM INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ------------------------------------------------------------------ ------------
<C> <S> <C>
MORTGAGE-BACKED SECURITIES--31.8%
- ---------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.--18.6%
------------------------------------------------------------------
$ 360,710 FHLMC, Series 1393--A, Class A, 4.10%, 7/15/97 $ 358,794
------------------------------------------------------------------
2,591,373 FHLMC, 5.50%, 5/1/98 2,583,262
------------------------------------------------------------------
1,800,000 ** FHLMC, 5.50%, 1/1/99 TBA 1,794,366
------------------------------------------------------------------
3,046,553 FHLMC, REMIC, Series 1506, Class FD 4.4375%, 5/15/2008 3,060,689
------------------------------------------------------------------
800,000 FHLMC, Series 1468, Class C, 6.00%, 7/15/2010 797,864
------------------------------------------------------------------
235,115 FHLMC, Series 77, Class C, 8.50%, 11/15/2012 234,134
------------------------------------------------------------------
600,000 FHLMC, Series 1468, Class FB, 3.9375%, 1/15/2013 600,750
------------------------------------------------------------------
2,000,000 FHLMC, Series 1268, Class E, 7.40%, 1/15/2016 2,024,240
------------------------------------------------------------------
1,948,357 FHLMC, Series 1259, Class H, 7.75%, 1/15/2018 1,965,970
------------------------------------------------------------------
706,084 FHLMC, Series 1486, Class A, 6.00%, 11/15/2019 707,828
------------------------------------------------------------------
1,956,676 FHLMC, Series 1585, Class H, 3.8875%, 1/15/2021 1,956,989
------------------------------------------------------------------
878,941 FHLMC, Series 1443-K, 3.9375%, 4/15/2020 879,495
------------------------------------------------------------------
1,850,000 FHLMC, REMIC, Series 1421, 3.8375%, 11/15/2022 1,847,687
------------------------------------------------------------------ ------------
Total 18,812,068
------------------------------------------------------------------ ------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--2.8%
------------------------------------------------------------------
1,945,225 FNMA, REMIC, Series 1993--056, Class PF, 3.65625%, 6/25/2022 1,947,637
------------------------------------------------------------------
932,168 FNMA, PO, Series 1993--216, Class B, 5.429%, 8/25/2023 845,066(a)
------------------------------------------------------------------ ------------
Total 2,792,703
------------------------------------------------------------------ ------------
OTHER--10.4%
------------------------------------------------------------------
4,000,000 Capstead Securities Corp., Series 1994--E, Class AM, 6.00%,
3/31/2024 4,021,875
------------------------------------------------------------------
1,800,000 First Boston Mortgage Securities, Series 1993--4, Class A,
3.965%*, 6/26/2000 1,817,442
------------------------------------------------------------------
4,255,816 Prudential Home Mortgage Securities Co., Series 1993--53, Class
A1, 6.00%, 1/25/2009 4,266,966
------------------------------------------------------------------
383,494 Resolution Trust Corp., Series 1992--C6, Class A2, 4.125%*,
7/25/2024 389,607
------------------------------------------------------------------ ------------
Total 10,495,890
------------------------------------------------------------------ ------------
TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $32,286,469) 32,100,661
------------------------------------------------------------------ ------------
U.S. GOVERNMENT AGENCIES--2.2%
- ---------------------------------------------------------------------------------
2,200,000 Student Loan Mortgage Association, 3.56%*, 7/19/96 2,194,720
------------------------------------------------------------------ ------------
TOTAL U.S. GOVERNMENT AGENCIES (IDENTIFIED COST $2,200,000) 2,194,720
------------------------------------------------------------------ ------------
</TABLE>
MARSHALL SHORT-TERM INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ------------------------------------------------------------------ ------------
<C> <S> <C>
U.S. TREASURY NOTES--11.9%
- ---------------------------------------------------------------------------------
$3,500,000 6.00%, 11/15/94 $ 3,548,090
------------------------------------------------------------------
3,000,000 5.50%, 2/15/95 3,038,430
------------------------------------------------------------------
1,000,000 ++ 4.00%, 1/31/96 987,490
------------------------------------------------------------------
4,500,000 4.625%, 2/29/96 4,494,330
------------------------------------------------------------------ ------------
TOTAL U.S. TREASURY NOTES (IDENTIFIED COST $12,174,883) 12,068,340
------------------------------------------------------------------ ------------
TOTAL LONG-TERM SECURITIES (IDENTIFIED COST $88,176,974) 87,657,563
------------------------------------------------------------------ ------------
***REPURCHASE AGREEMENT--9.0%
- ---------------------------------------------------------------------------------
9,079,000 Goldman, Sachs & Co., 3.45%, dated 2/28/94, due 3/1/94
(at amortized cost) (Note 2B) 9,079,000
------------------------------------------------------------------ ------------
TOTAL INVESTMENTS (IDENTIFIED COST, $106,255,974) $105,736,563+
------------------------------------------------------------------ ------------
</TABLE>
(a) Represents a security with notional or nominal principal amount causing the
stated rate to be different than the effective rate.
* Variable rate security.
** Includes securities with a market value of $1,794,366 subject to dollar roll
transactions.
*** 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 $106,255,974.
The net unrealized depreciation on a federal tax cost basis amounts to
$519,411, which is comprised of $50,930 appreciation and $570,341
depreciation at February 28, 1994.
++ Certain shares on loan to broker.
The following abbreviations are used in this portfolio:
PO --Principal Only
REMIC--Real Estate Mortgage Investment Conduit
TBA --To be announced
Note: The categories of investments are shown as a percentage of net assets
($101,092,378) at February 28, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL SHORT-TERM INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in securities, at value (Notes 2A and 2B)
(identified and tax cost, $106,255,974) $105,736,563
- --------------------------------------------------------------------------------
Cash 159
- --------------------------------------------------------------------------------
Receivable for investments sold 2,645,325
- --------------------------------------------------------------------------------
Collateral for security lending (Note 2H) 1,013,750
- --------------------------------------------------------------------------------
Receivable for capital stock sold 360,142
- --------------------------------------------------------------------------------
Interest receivable 103,482
- --------------------------------------------------------------------------------
Prepaid/Deferred expenses (Note 2G) 22,597
- -------------------------------------------------------------------------------- ------------
Total assets 109,882,018
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for investments purchased $5,842,625
- -------------------------------------------------------------------
Payable for Dollar Roll Transactions (Note 2F) 1,524,258
- -------------------------------------------------------------------
Security lending payable (Note 2H) 1,013,750
- -------------------------------------------------------------------
Payable for capital stock redeemed 361,377
- -------------------------------------------------------------------
Accrued expenses and other liabilities 47,630
- ------------------------------------------------------------------- ----------
Total liabilities 8,789,640
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 10,284,462 shares of capital stock outstanding $101,092,378
- -------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid-in capital $102,441,028
- --------------------------------------------------------------------------------
Unrealized depreciation of investments (519,411)
- --------------------------------------------------------------------------------
Accumulated net realized loss on investments (768,784)
- --------------------------------------------------------------------------------
Accumulated distributions in excess of net investment income (60,455)
- -------------------------------------------------------------------------------- ------------
Total Net Assets $101,092,378
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price and Redemption Price Per Share:
(net assets of $101,092,378 / 10,284,462 shares of capital stock outstanding) $9.83
- -------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL SHORT-TERM INCOME FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------
Interest income (Note 2C) (net of interest expense of $18,510) $ 2,099,047
- ----------------------------------------------------------------------------------
EXPENSES--
- ----------------------------------------------------------------------------------
Investment advisory fee (Note 5) $257,391
- ----------------------------------------------------------------------
Directors' fees 568
- ----------------------------------------------------------------------
Administrative personnel and services fees (Note 5) 41,822
- ----------------------------------------------------------------------
Custodian fees (Note 5) 8,580
- ----------------------------------------------------------------------
Transfer and dividend disbursing agent fees (Note 5) 12,394
- ----------------------------------------------------------------------
Recordkeeping fee (Note 5) 19,188
- ----------------------------------------------------------------------
Legal fees 4,440
- ----------------------------------------------------------------------
Auditing fees 6,692
- ----------------------------------------------------------------------
Registration fees 17,409
- ----------------------------------------------------------------------
Taxes 2,744
- ----------------------------------------------------------------------
Insurance 2,798
- ----------------------------------------------------------------------
Printing and postage 7,094
- ----------------------------------------------------------------------
Shareholder services fees (Note 5) 6,392
- ----------------------------------------------------------------------
Miscellaneous 2,268
- ---------------------------------------------------------------------- --------
Total expenses 389,780
- ----------------------------------------------------------------------
Deduct--
- -----------------------------------------------------------
Waiver of investment advisory fee (Note 5) $169,925
- -----------------------------------------------------------
Waiver of custodian fees (Note 5) 5,362 175,287
- ----------------------------------------------------------- -------- --------
Net expenses 214,493
- ---------------------------------------------------------------------------------- -----------
Net investment income 1,884,554
- ---------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------------------
Net realized (loss) on investments (identified cost basis) (703,188)
- ----------------------------------------------------------------------------------
Net change in unrealized (depreciation) on investments (343,221)
- ---------------------------------------------------------------------------------- -----------
Net realized and unrealized loss on investments (1,046,409)
- ---------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $ 838,145
- ---------------------------------------------------------------------------------- -----------
</TABLE>
* (unaudited)
(See Notes which are an integral part of the Financial Statements)
MARSHALL SHORT-TERM INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
----------------------------
1994** 1993*
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------
Net investment income $ 1,884,554 $ 1,640,833
- -----------------------------------------------------------------
Net realized (loss) on investments ($703,188 net loss and $65,596
net loss, respectively, as computed for federal tax purposes)
(Note 2D) (703,188) (65,596)
- -----------------------------------------------------------------
Net change in unrealized (depreciation) on investments (343,221) (176,190)
- ----------------------------------------------------------------- ------------ ------------
Change in net assets resulting from operations 838,145 1,399,047
- ----------------------------------------------------------------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- -----------------------------------------------------------------
Dividends to shareholders from net investment income (1,907,276) (1,618,111)
- -----------------------------------------------------------------
Distributions in excess of net investment income (60,455) --
- ----------------------------------------------------------------- ------------ ------------
Change in net assets resulting from distributions to
shareholders (1,967,731) (1,618,111)
- ----------------------------------------------------------------- ------------ ------------
CAPITAL STOCK TRANSACTIONS (NOTE 4)--
- -----------------------------------------------------------------
Proceeds from sale of shares 56,286,309 91,606,998
- -----------------------------------------------------------------
Net asset value of shares issued to shareholders electing to
receive payment of dividends in capital stock 1,357,272 1,389,731
- -----------------------------------------------------------------
Cost of shares redeemed (30,163,429) (18,035,953)
- ----------------------------------------------------------------- ------------ ------------
Change in net assets from capital stock transactions 27,480,152 74,960,776
- ----------------------------------------------------------------- ------------ ------------
Change in net assets 26,350,566 74,741,712
- -----------------------------------------------------------------
NET ASSETS--
- -----------------------------------------------------------------
Beginning of period 74,741,812 100
- ----------------------------------------------------------------- ------------ ------------
End of period $101,092,378 $ 74,741,812
- ----------------------------------------------------------------- ------------ ------------
</TABLE>
* For the period from November 2, 1992 (date of initial public investment) to
August 31, 1993.
** Six months ended February 28, 1994 (unaudited).
(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>
PERIOD ENDED
----------------------------
1994** 1993*
------------ ------------
<S> <C> <C>
- --------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.95 $10.00
- --------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------
Net investment income 0.22 0.40
- --------------------------------------------------------
Net realized and unrealized (loss) on investments (0.12) (0.05)
- -------------------------------------------------------- --------- ---------
Total from investment operations 0.10 0.35
- -------------------------------------------------------- --------- ---------
LESS DISTRIBUTIONS
- --------------------------------------------------------
Dividends to shareholders from net investment income (0.22) (0.40)
- --------------------------------------------------------
Distributions in excess of net investment income -- --
- -------------------------------------------------------- --------- ---------
Total distributions (0.22) (0.40)
- --------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.83 $ 9.95
- -------------------------------------------------------- --------- ---------
TOTAL RETURN*** 1.02% 3.57%
- --------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------
Expenses (a) 0.50%(b) 0.50%(b)
- --------------------------------------------------------
Net investment income (a) 4.39%(b) 4.91%(b)
- --------------------------------------------------------
Expense waiver/reimbursement (a) 0.41%(b) 0.51%(b)
- --------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------
Net assets, end of period (000 omitted) $101,092 $74,742
- --------------------------------------------------------
Portfolio turnover rate 50% 51%
- --------------------------------------------------------
</TABLE>
* Reflects operations for the period from November 2, 1992 (date of initial
public investment) to August 31, 1993.
** Six months ended February 28, 1994 (unaudited).
*** Based on net asset value.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(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
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(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 currently consists of twelve
portfolios. The financial statements included herein are only those of Marshall
Government Income Fund, Marshall Intermediate Bond Fund, and Marshall Short-Term
Income Fund (hereinafter each individually referred to as a "Fund", or
collectively as the "Funds"). The financial statements of Marshall Money Market
Fund, Marshall Balanced Fund, Marshall Equity Income Fund, Marshall Value Equity
Fund, Marshall Stock Fund, Marshall Mid-Cap Stock Fund, Marshall Short-Term
Tax-Free Fund, and Marshall Intermediate Tax-Free Fund are presented separately.
As of February 28, 1994, Marshall Tax-Free Money Market Fund was effective but
did not have public investment. The assets of each portfolio are segregated and
a shareholder's interest is limited to the portfolio in which shares are held.
The Articles of Incorporation permit shares in any portfolio to be offered in
separate classes.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles (GAAP).
<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 securities/asset backed securities) are
valued at the last sale price on national securities exchanges on that day, if available.
Otherwise, unlisted bonds (and other fixed income securities/asset backed securities) and
short-term obligations are valued at the prices provided by an independent pricing
service. However, short-term obligations with maturities of sixty days or less may be
valued 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 the value at least equals the
principal amount of the repurchase transaction, including accrued interest.
</TABLE>
MARSHALL FUNDS, INC.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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 guidelines established by 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. INCOME--Interest income is recorded on the accrual basis and includes interest and
discount earned less any premium on short-term obligations, and interest earned on all
other debt securities including discount (net of premium) and original issue discount as
required by the Internal Revenue Code.
D. FEDERAL TAXES--It is each Fund's policy to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute to
shareholders each year all of its taxable income, including any net realized gain on
investments. Accordingly, no provisions for federal tax are necessary. At August 31,
1993, Marshall Short-Term Income Fund had net capital losses of $65,596, attributable to
security transactions incurred after October 31, 1992, and are treated as arising on the
first day of the Fund's 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 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 sell mortgage
securities to financial institutions and simultaneously agree to repurchase substantially
similar (same type, coupon and maturity) securities at a later date at an agreed upon
price. During the period between the sale and repurchase, the Funds forgo principal and
interest paid on the mortgage securities sold. The Funds are compensated by the interest
earned on the cash proceeds of the initial sale and any additional fee income received on
the sale.
G. DEFERRED EXPENSES--The costs incurred by each Fund with respect to registration of its
shares in its first fiscal year, excluding the initial expense of registering the shares,
have been deferred and are being amortized using the straight-line method over a period
of five years from the Funds' commencement date.
H. PORTFOLIO SECURITES LOANED--Certain of 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, plus
interest, if applicable, of investments on loan. Collateral received in the form of cash
is invested in short-term obligations by the custodian. Earnings of such short-term
obligations are divided between the custodian, as a fee for its services under the
program, and the Funds, according to agreed-upon rates. As of February 28, 1994
investments on loan and related collateral were as follows:
</TABLE>
MARSHALL FUNDS, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
VALUE OF MARKET
SECURITIES VALUE OF
LOANED COLLATERAL
- ----------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Marshall Government Income Fund $ -- $ --
- -----------------------------------------------------------------
Marshall Intermediate Bond Fund 20,674,711 21,474,750
- -----------------------------------------------------------------
Marshall Short-Term Income Fund 987,490 1,013,750
- -----------------------------------------------------------------
I. OTHER--Investment transactions are accounted for on the date of the transaction.
</TABLE>
(3) DIVIDENDS
Dividends from net investment income are declared and paid monthly.
Distributions of any net realized capital gains will be made at least once every
twelve months. Dividends and distributions are automatically reinvested in
additional shares of the Funds on payment dates at the ex-dividend date net
asset value, unless cash payments are requested. Dividends and capital gain
distributions, if any, are recorded on the ex-dividend date. Income
distributions are determined in accordance with income tax regulations which may
differ from GAAP. These distributions do not represent a return of capital for
federal income tax purposes.
(4) CAPITAL STOCK
The Articles of Incorporation permit the Directors to issue 50 billion full and
fractional shares of common stock (capital stock) par value $0.0001 per share.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED 1994+
-------------------------------------------
MARSHALL MARSHALL MARSHALL
GOVERNMENT INTERMEDIATE SHORT-TERM
INCOME BOND INCOME
FUND FUND FUND
- ----------------------------------------------- ---------- ------------ -----------
<S> <C> <C> <C>
Shares outstanding, beginning of period 5,658,012 33,341,770 7,512,136
- -----------------------------------------------
Shares sold 2,785,596 5,832,214 5,684,001
- -----------------------------------------------
Shares issued to shareholders electing to
receive payment of dividends in capital stock 243,870 1,537,637 137,412
- -----------------------------------------------
Shares redeemed (2,263,705) (7,940,404) (3,049,087)
- ----------------------------------------------- --------- ------------ ----------
Shares outstanding, end of period 6,423,773 32,771,217 10,284,462
- ----------------------------------------------- --------- ------------ ----------
</TABLE>
+ Six months ended February 28, 1994.
MARSHALL FUNDS, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED 1993
-------------------------------------------
MARSHALL MARSHALL MARSHALL
GOVERNMENT INTERMEDIATE SHORT-TERM
INCOME BOND INCOME
FUND* FUND** FUND***
- ----------------------------------------------- ---------- ------------ -----------
<S> <C> <C> <C>
Shares outstanding, beginning of period 10 10 10
- -----------------------------------------------
Shares sold 6,685,663 35,555,379 9,181,049
- -----------------------------------------------
Shares issued to shareholders electing to
receive payment of dividends in capital stock 174,459 986,338 139,547
- -----------------------------------------------
Shares redeemed (1,202,120) (3,199,957) (1,808,470 )
- ----------------------------------------------- --------- ------------ ----------
Shares outstanding, end of period 5,658,012 33,341,770 7,512,136
- ----------------------------------------------- --------- ------------ ----------
</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.
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
M&I Investment Management Corp., the Fund's investment adviser ("Adviser"),
receives for its services an annual investment advisory fee equal to .75 of 1%
of the average daily net assets for Marshall Government Income Fund and .60 of
1% of the average daily net assets for Marshall Intermediate Bond Fund and
Marshall Short-Term Income Fund. The Adviser may voluntarily choose to waive a
portion of its fee or reimburse certain operating expenses of each Fund.
Federated Administrative Services ("FAS") provides each Fund with certain
administrative personnel and services. The fee is based on the level of average
aggregate net assets for the period. FAS may voluntarily choose to waive a
portion of its fee from each Fund.
Marshall & Ilsley Trust Company is the Funds' custodian. The fee is based on the
level of average net assets for the period plus out-of-pocket expenses. The
custodian may voluntarily choose to waive a portion of its fee from each Fund.
Organization expenses were borne initially by FAS. The Funds have agreed to
reimburse FAS for the organization expenses borne by FAS during the five-year
period following the date the Funds' portfolio first became effective. For the
six months ended February 28, 1994, the following amounts were paid to FAS
pursuant to this agreement.
MARSHALL FUNDS, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ORGANIZATIONAL ORGANIZATIONAL
EXPENSES EXPENSES PAID
- ----------------------------------------------------------- -------------- --------------
<S> <C> <C>
Marshall Government Income Fund $ 22,735 $1,418
- -----------------------------------------------------------
Marshall Intermediate Bond Fund 23,413 1,440
- -----------------------------------------------------------
Marshall Short-Term Income Fund 23,033 1,528
- -----------------------------------------------------------
</TABLE>
Federated Services Company serves as transfer agent and dividend disbursing
agent for the Funds. The Funds pay fees based on the type, size, number of
accounts and number of transactions made by shareholders.
Federated Services Company also maintains the Funds' accounting records. The fee
is based on the level of average net assets for the month plus out-of-pocket
expenses.
Marshall Funds Investor 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 average
net assets for the period.
Certain Officers and Directors of the Funds are Officers and Directors or
Trustees of the above companies.
(6) INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term obligations) for the
six months ended February 28, 1994 were as follows:
<TABLE>
<CAPTION>
MARSHALL MARSHALL MARSHALL
GOVERNMENT INTERMEDIATE SHORT-TERM
INCOME BOND INCOME
FUND FUND FUND
- ----------------------------------------------- ----------- ------------ -----------
<S> <C> <C> <C>
PURCHASES-- $48,786,977 $441,594,324 $61,866,745
- ----------------------------------------------- ---------- ----------- ----------
SALES-- $45,703,961 $406,070,294 $38,108,627
- ----------------------------------------------- ---------- ----------- ----------
</TABLE>
<TABLE>
<S> <C>
DIRECTORS OFFICERS
- ---------------------------------------------------------------------------------------------
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 obligations of or insured by any bank nor are they insured
by the federal government or any of its agencies. Investment in these shares
involves risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded
or accompanied by the Fund's prospectus which contains facts concerning their
investment objective and policies, management fees, expenses, and other
information.
4030405 (4/94)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report of the Marshall Equity Funds for
the six-month period ended February 28, 1994. It provides you with complete
financial information for the Funds, including an investment review by the
portfolio manager, a complete list of investments, and the financial statements.
With the addition of several new funds, the Marshall Equity Funds now offer you
five distinct ways to pursue your long-term financial goals through stocks.
Total assets in the Funds grew to more than $366 million by the end of the
period.
The new Marshall Balanced Fund, a portfolio of stocks and bonds that began
operations on September 30, 1993 grew to $24.7 million in assets by the end of
the period.
Also new to the Marshall family is the Marshall Equity Income Fund. This Fund,
which began operation on September 30, 1993, invests in a diversified portfolio
of high-quality stocks selected for their ability to pay regular dividends.
Total assets in this Fund grew to $35.2 million by the end of the period.
We introduced the Marshall Value Equity Fund on September 30, 1993 to help
investors pursue growth through a portfolio of stocks that are selected for
their ability to increase in value. Total assets in this Fund reached $36.1
million by the end of the period.
To help you pursue the long-term growth opportunities of stocks, the Marshall
Stock Fund continues to invest in common stocks issued by some of the country's
leading companies. Net assets of this Fund had reached more than $243 million by
the end of the period.
Finally, the new Marshall Mid-Cap Stock Fund, introduced on September 30, 1993,
offers you a way to invest in stocks issued by mid-size companies -- a strategy
that offers higher potential returns than are generally available through
large-company stocks. Net assets in this Fund reached $27.9 million by the end
of the period.
We're extremely excited about our new additions to the Marshall Equity Funds.
Thank you for pursuing long-term growth through one or more of these Funds.
We'll continue to keep you informed on your progress.
Sincerely,
James F. Duca, II
President
Marshall Funds, Inc.
April 15, 1994
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
Interest rates are not waiting! Economic growth is slowing from the blistering
pace of the last quarter of 1993, during which real GDP soared at a 7.5% rate.
When taxes were raised last year, politicians insisted a shrinking Federal
budget deficit would placate investors' fears. Inflation remains in check, with
the Consumer Price Index ("CPI") up 2.5% in the last year and other measures
showing even less price pressure.
Still, interest rates are already heading higher. Worries about the possibility
of accelerating inflation later this year -- or even next -- sparked an almost
1% rise in long-term Treasury yields from the October low through the end of
February. Short-term rates, which held steady for more than a year, also began
edging higher in early February, following the Federal Reserve's first
tightening move.
Rising interest rates make all but certain a deceleration from the late 1993
pace of economic growth. Housing and related purchases accounted for a
disproportionate share of the gain last year. In addition, lower monthly
payments on mortgages refinanced at historically low rates freed up funds for
other purchases. With these forces now diminished, economic growth for all of
1994 should only marginally exceed that of the last two years.
For the months ahead, inflation should stay under 3%, but investors worry,
perhaps prematurely, that it will not remain at these relatively restrained
rates. Unit labor costs, up less than 1% in the last year, however, foreshadow
modest inflation numbers. Over the long run, the rise in the cost of labor and
the CPI closely correlate. Increasing commodity prices, rising capacity
utilization rates, and a more restrictive Fed are the focus of current concerns.
The emergence of these typically late cycle characteristics apparently is
convincing markets not to wait for actual manifestations of accelerating
inflation.
MARSHALL BALANCED FUND
The Fund began operations on September 30, 1993. In a period of extreme
volatility, the Fund has performed well. Total return over the five-month period
was 1.55%*, with the gains coming primarily from exposure to the equity market.
During this same period, the benchmark (50% Standard & Poor's 500 Index/50%
Lehman Intermediate Government/Corporate Bond Index) produced a total rate of
return of 1.35%.
Economic activity accelerated during the first half of the fiscal year, and
while the rate of growth will likely lessen, continued expansion is anticipated
as the year progresses. The strengthening economy has not gone unnoticed by the
fixed income markets or the Federal Reserve. The long decline in interest rates
appears to have ended in October 1993. Worries over inflationary pressures
pushed up interest rates throughout the fourth quarter. Concerns over the
direction of interest rates has led the portfolio to hold a slightly higher
percentage of stocks than fixed income instruments. The portfolio currently
consists of approximately 60% in stocks and 40% in fixed income investments.
The weighted average duration of the bonds in the portfolio range from 3.82
years to 3.16 years. Duration has been shortened in the portfolio to provide a
more defensive stance against declining market values. Our mortgage allocation,
which restrained returns early in the period ended Febru-
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
ary 28, 1994, has more recently had a favorable impact on Fund performance. To
take advantage of the flattening yield curve, the portfolio structure has been
altered to a slightly barbelled stance.
The strengthening economy has continued to keep the stock market focused on more
cyclically sensitive issues during this fiscal period. In structuring the equity
portion of the portfolio to take advantage of this focus, the emphasis has been
placed more toward industrial growth companies. The Fund continues in the
attempt to identify and invest in companies that are exhibiting accelerating
rates of earnings growth, as earnings growth above anticipated levels generally
leads to superior stock price performance.
Interest rates will continue to be the principal near-term driving force for
both the fixed income and the stock markets. Therefore, the focus of the Fund
will be on providing a defensive posture for our fixed income portfolio and
maintaining our stock exposure to those companies that are exhibiting above
average earnings growth within our quality and valuation parameters.
MARSHALL EQUITY INCOME FUND
The Fund has a current yield objective of 1% above the S&P 500 Index. Reflecting
this emphasis on high current yield, the portfolio's performance is sensitive to
changes in the level of interest rates. To achieve our yield objective, it is
safe to assume that the traditional high yield stock groups (utilities,
financials, and energy) will always be a major portion of the portfolio. The
portfolio, however, seeks to hold stocks from any industry that provides high
current dividend yield and the potential for future dividend and principal
growth. Traditionally, high yield stocks perform well over full market cycles
but can, and do, perform in a variant fashion over shorter time spans.
The past five months are representative of a short-term period that demonstrates
the portfolio's interest rate sensitivity. Since September 30, 1993, when the
Fund began operations, interest rates have risen sharply. The Fund produced a
total return of -0.84%* for the five months ended February 28, 1994. For the
same period, the total return of the S&P 500 was 2.93%. Interest sensitive
groups represented by the S&P Utility Index and the S&P Financial Index were
down 10.62% and 7.57%, respectively. Additionally, the S&P Oil Composite was
down 1.80% for the same period. These three industry groups represented
approximately 35% of the Fund for most of this time period.
Recently, we have increased these combined groups to some 45% of the portfolio
to take advantage of the more favorable valuations. In late 1993 and early 1994,
we added several economically sensitive companies, such as capital good
manufacturers, raw materials producers, and consumer durable manufacturers for
participation in the U.S. economic recovery.
MARSHALL VALUE EQUITY FUND
The Fund, introduced on September 30, 1993, invests in value-oriented stocks, as
measured by a low price-to-book value ratio. Low price-to-book stocks, in
general, experienced excellent performance in the first three quarters of 1993,
but underperformed in the fourth quarter as the market favored traditional
growth names. For the five months ended February 28, 1994, the Fund produced a
total
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
return of 2.00%*. This compares to total returns of 2.93% and 1.30% for the S&P
500 and the S&P Barra Value Index, respectively.
Over the past several months, the stock market has favored economically
sensitive issues. The Fund is well represented in a diversified selection of
stocks that should continue to do well as the economy continues to grow. On the
other hand, utility stocks, which have been poor relative performers, have had
very little representation in the Fund. Looking forward, we will continue to
take advantage of undervalued securities whose business prospects should improve
given the current economic environment.
MARSHALL STOCK FUND
During the first half of the Fund's fiscal year, the economy showed signs of
acceleration. Buoyed by record mortgage refinancing, low interest rates, and
firmer employment trends, consumer spending rose, particularly on large ticket
durables, such as autos. Combined with strengthening capital spending, GDP
increased a substantial 7.5% in the fourth quarter of 1993. Despite adverse
weather this winter in much of the nation, the economic expansion has continued
during the first quarter of 1994.
The improving economy did not go unnoticed by the fixed income markets or the
Federal Reserve. The long decline in interest rates appears to have ended in
October 1993. Worries over inflationary pressures pushed up interest rates
throughout the fourth quarter. Recently, the Federal Reserve nudged up
short-term interest rates, evidencing concerns over commodity prices and a
desire to prevent the repercussions of an overheating economy.
The strengthening economy continued to keep the stock market focused on more
cyclically sensitive issues during this fiscal year period. Traditional high
quality growth stocks continued to flounder, as earnings growth comparisons with
cyclicals tended to favor the economically sensitive issues. Drug stocks, in
particular, continued to feel the effects of downward pressure on pricing
ability as a result of legislative prospects.
The Fund performed relatively well during this latest period. Having reoriented
the emphasis more toward industrial growth companies, the Fund produced a total
return of 3.75%* vs. 2.14% for the S&P 500 Index in the six-month period ended
February 1994. The Fund has attempted to identify and invest in companies
exhibiting accelerating rates of earnings growth. This growth stems from such
diverse sources as margin improvement (due to operational and price
rationalizations), new products, and formats spurring revenue growth. Earnings
growth above anticipated levels generally leads to superior stock price
performance.
Going forward, with the interest rate background not likely to be as benign as
in recent years, the stock market will likely be even more strongly focused on
earnings growth. Likewise, the focus of the Fund will be on identifying those
companies exhibiting above-average earnings growth within our quality and
valuation parameters.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
MARSHALL MID-CAP STOCK FUND
The objective of the Fund is to seek capital appreciation through investment in
companies with market capitalizations between $200 million and approximately
$7.5 billion. In addition, the Fund seeks investments in companies exhibiting
strong financial characteristics and expected growth significantly above the
average corporation. This selection process should yield superior results over
time, although there will be times when exogenous events may cause periods of
underperformance.
For the five months ended February 28, 1994, the Fund produced a total return of
0.97%*. For the same period, the S&P Mid-Cap 400 Index had a total rate of
return of 3.56%. A number of factors contributed to the Fund's underperformance
during this period. Since inception, assets of the Fund rapidly increased to the
current $27.9 million. This rapid funding has provided an interesting challenge,
as contributions have not always coincided with opportunistic investing periods.
Additionally, the decision to underweight technology issues during the formative
period of the Fund's existence as a risk control device, limited returns, as the
technology area was particularly strong. Subsequently, the Fund has increased
exposure in the technology area, given the continued strong growth prospects for
this segment of the market.
The S&P Mid-Cap 400 investment arena continues to be heavily influenced by
interest rates, with a 30% financial/utility weighting and the remainder
influenced by the interest rate impact on price/earnings multiples. We continue
to maintain an underweighting in both financials and utilities, as they do not
present the same opportunities available in higher growth sectors. We believe
the current rate levels are of concern, but companies with continued high
earnings growth offer significant long-term opportunities.
* 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
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ----------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--59.3%
- ------------------------------------------------------------------------------------
CAPITAL GOODS--16.2%
-----------------------------------------------------------------
Electronics
-----------------------------------------------------------------
5,000 *** Applied Materials, Inc. $ 237,500
-----------------------------------------------------------------
10,000 Loral Corp. 386,250
-----------------------------------------------------------------
8,500 Harris Corp. 432,438
-----------------------------------------------------------------
12,000 *** Solectron Corp.++ 373,500
-----------------------------------------------------------------
3,000 Texas Instruments, Inc. 242,250
----------------------------------------------------------------- -----------
Total 1,671,938
----------------------------------------------------------------- -----------
Electrical Equipment
-----------------------------------------------------------------
5,000 General Electric Co. 526,875
----------------------------------------------------------------- -----------
Office Equipment
-----------------------------------------------------------------
9,000 Adobe Systems, Inc. 263,250
-----------------------------------------------------------------
6,000 *** Lotus Development Co. 417,000
----------------------------------------------------------------- -----------
Total 680,250
----------------------------------------------------------------- -----------
Other Capital Goods
-----------------------------------------------------------------
5,000 Alco Standard Corp. 279,375
-----------------------------------------------------------------
15,000 *** Computer Sciences Corp. 585,000
-----------------------------------------------------------------
2,600 Minnesota Mining & Mfg. Co. 273,975
----------------------------------------------------------------- -----------
Total 1,138,350
----------------------------------------------------------------- -----------
Total Capital Goods 4,017,413
----------------------------------------------------------------- -----------
CONSUMER DURABLES--8.2%
-----------------------------------------------------------------
Appliances
-----------------------------------------------------------------
4,000 Whirlpool Corp. 271,000
----------------------------------------------------------------- -----------
Automotive and Related
-----------------------------------------------------------------
8,000 Federal Mogul Corp. 279,000
-----------------------------------------------------------------
8,000 Hayes Wheels International, Inc. 255,000
-----------------------------------------------------------------
</TABLE>
MARSHALL BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ----------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------
CONSUMER DURABLES--CONTINUED
-----------------------------------------------------------------
6,000 Mark IV Industries, Inc.++ $ 116,250
----------------------------------------------------------------- -----------
Total 650,250
----------------------------------------------------------------- -----------
Other Consumer Durables
-----------------------------------------------------------------
12,500 Masco Corp. 439,063
-----------------------------------------------------------------
10,000 Kaufman & Broad Home Corp.++ 206,250
-----------------------------------------------------------------
2,500 PPG Industries, Inc. 191,875
-----------------------------------------------------------------
15,000 Shaw Industries, Inc. 281,250
----------------------------------------------------------------- -----------
Total 1,118,438
----------------------------------------------------------------- -----------
Total Consumer Durables 2,039,688
----------------------------------------------------------------- -----------
CONSUMER NON-DURABLES--19.9%
-----------------------------------------------------------------
Beverage and Foods
-----------------------------------------------------------------
7,000 McDonalds Corp. 424,375
-----------------------------------------------------------------
8,300 *** Shoney's, Inc. 192,975
----------------------------------------------------------------- -----------
Total 617,350
----------------------------------------------------------------- -----------
Health Care
-----------------------------------------------------------------
7,000 *** Amgen, Inc. 292,250
-----------------------------------------------------------------
8,000 Cardinal Distribution, Inc. 386,000
-----------------------------------------------------------------
18,000 IVAX Corp.++ 632,250
----------------------------------------------------------------- -----------
Total 1,310,500
----------------------------------------------------------------- -----------
Photography
-----------------------------------------------------------------
5,000 Eastman Kodak Co.++ 215,000
----------------------------------------------------------------- -----------
Media
-----------------------------------------------------------------
600 Capital Cities/ABC, Inc.++ 399,075
-----------------------------------------------------------------
5,500 McGraw-Hill, Inc. 387,750
-----------------------------------------------------------------
14,000 *** Telecommunications, Inc. 330,750
----------------------------------------------------------------- -----------
Total 1,117,575
----------------------------------------------------------------- -----------
</TABLE>
MARSHALL BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ----------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------
CONSUMER NON-DURABLES--CONTINUED
-----------------------------------------------------------------
Retail
-----------------------------------------------------------------
5,000 *** Kohl's Corp. $ 255,000
-----------------------------------------------------------------
8,500 Tandy Corp. 352,750
-----------------------------------------------------------------
6,500 *** Toys R Us, Inc. 237,250
----------------------------------------------------------------- -----------
Total 845,000
----------------------------------------------------------------- -----------
Services
-----------------------------------------------------------------
7,000 Dun & Bradstreet Corp. 426,125
-----------------------------------------------------------------
11,500 *** GTECH Holdings Corp.++ 405,375
----------------------------------------------------------------- -----------
Total 831,500
----------------------------------------------------------------- -----------
Total Consumer Non-Durables 4,936,925
----------------------------------------------------------------- -----------
ENERGY--6.1%
-----------------------------------------------------------------
Oil And Gas Products
-----------------------------------------------------------------
13,000 Coastal Corp. 409,500
----------------------------------------------------------------- -----------
International Oil
-----------------------------------------------------------------
4,500 Royal Dutch Petroleum Co. 480,937
----------------------------------------------------------------- -----------
Oil Service
-----------------------------------------------------------------
6,000 Noble Affiliates, Inc. 154,500
-----------------------------------------------------------------
8,000 Schlumberger, Ltd. 455,000
----------------------------------------------------------------- -----------
Total 609,500
----------------------------------------------------------------- -----------
Total Energy 1,499,937
----------------------------------------------------------------- -----------
FINANCIAL--5.5%
-----------------------------------------------------------------
Insurance
-----------------------------------------------------------------
4,000 American International Group, Inc. 351,000
-----------------------------------------------------------------
8,000 MGIC Investment Corp.++ 248,000
----------------------------------------------------------------- -----------
Total 599,000
----------------------------------------------------------------- -----------
</TABLE>
MARSHALL BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ---------- ----------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------
FINANCIAL--CONTINUED
-----------------------------------------------------------------
Other Financial
-----------------------------------------------------------------
6,000 Dean Witter Discover & Co. $ 216,000
-----------------------------------------------------------------
1,500 Federal National Mortgage Association 124,687
-----------------------------------------------------------------
4,500 First Financial Management Corp.++ 264,938
-----------------------------------------------------------------
8,000 Regency Realty Corp. 150,000
----------------------------------------------------------------- -----------
Total 755,625
----------------------------------------------------------------- -----------
Total Financial 1,354,625
----------------------------------------------------------------- -----------
MISCELLANEOUS--3.4%
-----------------------------------------------------------------
9,000 Browning-Ferris Industries, Inc. 256,500
-----------------------------------------------------------------
5,000 *** Litton Industries, Inc.++ 334,375
-----------------------------------------------------------------
4,500 Tenneco, Inc. 250,875
----------------------------------------------------------------- -----------
Total Miscellaneous 841,750
----------------------------------------------------------------- -----------
TOTAL COMMON STOCK (IDENTIFIED COST $14,067,340) 14,690,338
----------------------------------------------------------------- -----------
CORPORATE BONDS--3.5%
- ------------------------------------------------------------------------------------
Financials
-----------------------------------------------------------------
$ 15,000 African Development Bank, 13.25%, 12/1/94 15,924
-----------------------------------------------------------------
90,000 American Express Master 5.375%, 7/15/2001 85,576
-----------------------------------------------------------------
150,000 CRA Financial USA, Ltd., 6.50%, 12/1/2003 146,061
-----------------------------------------------------------------
45,000 Ford Motor Credit Co., 9.65%, 1/8/96 Medium Term Note 48,533
-----------------------------------------------------------------
90,000 Ford Motor Credit Co., 6.95%, 7/7/97 94,083
-----------------------------------------------------------------
3,791 GMAC 1990 Grantor Trust, 8.25%, 11/15/95 3,820
-----------------------------------------------------------------
67,671 Resolution Trust Corp., (Series 1992 C6, Class A2), 4.1875%,
7/25/2024 68,749(a)
-----------------------------------------------------------------
85,000 Salomon, Inc., 5.37%, 2/1/95 Medium Term Note 85,250
-----------------------------------------------------------------
100,000 Wachovia Bank, 5.50%, 6/29/98 98,442
----------------------------------------------------------------- -----------
Total 646,438
----------------------------------------------------------------- -----------
</TABLE>
MARSHALL BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ----------------------------------------------------------------- -----------
<C> <C> <S> <C>
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------
Industrials
-----------------------------------------------------------------
$ 55,000 Campbell Soup Co., 5.625%, 9/15/2003 $ 51,383
-----------------------------------------------------------------
100,000 Hanson Overseas BV Notes, 7.375%, 1/15/2003 103,895
-----------------------------------------------------------------
55,000 Philip Morris Cos., Inc., 9.80%, 12/15/98 59,362
----------------------------------------------------------------- -----------
Total 214,640
----------------------------------------------------------------- -----------
TOTAL CORPORATE BONDS (IDENTIFIED COST $883,998) 861,078
----------------------------------------------------------------- -----------
MORTGAGE-BACKED SECURITIES--14.3%
- ------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.
-----------------------------------------------------------------
50,000 7.40%, 1/15/2016 (Series 1268-E) 50,606
-----------------------------------------------------------------
100,000 5.50%, 1/15/2019 (Series 1590-FA) 94,077
-----------------------------------------------------------------
141,217 6.00%, 11/15/2019 (Series 1486-A) 141,565
-----------------------------------------------------------------
338,054 3.9375%, 4/15/2020 (Series 1443-K) 338,267(a)
-----------------------------------------------------------------
200,000 6.00%, 6/15/2020 (Series 1614-H) 192,320
-----------------------------------------------------------------
199,609 10.00%, 4/15/2021 (Series 1658-AG) 224,248
-----------------------------------------------------------------
988,664 4.00%, 5/15/2021 (Series 1611-G) 989,287(a)
----------------------------------------------------------------- -----------
Total 2,030,370
----------------------------------------------------------------- -----------
Federal National Mortgage Association
-----------------------------------------------------------------
750,000 * 6.50%, 1/1/99 750,698
-----------------------------------------------------------------
500,000 * 7.00%, 1/1/99 501,250
----------------------------------------------------------------- -----------
Total 1,251,948
----------------------------------------------------------------- -----------
Federal National Mortgage Association--REMIC
-----------------------------------------------------------------
132,285 7.00%, 7/25/2012 (Series 1993-L) 133,469
-----------------------------------------------------------------
128,031 3.90625%, 10/25/2022 (Series 1992-F) 128,402(a)
----------------------------------------------------------------- -----------
Total 261,871
----------------------------------------------------------------- -----------
TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST, $3,566,823) 3,544,189
----------------------------------------------------------------- -----------
</TABLE>
MARSHALL BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ----------------------------------------------------------------- -----------
<C> <C> <S> <C>
U.S. TREASURY NOTES--21.1%
- ------------------------------------------------------------------------------------
$ 500,000 8.625%, 10/15/95 $ 531,560
-----------------------------------------------------------------
500,000 9.25%, 1/15/96 540,935
-----------------------------------------------------------------
700,000 7.625%, 4/30/96 740,467
-----------------------------------------------------------------
225,000 7.25%, 8/31/96 237,233
-----------------------------------------------------------------
725,000 6.75%, 2/28/97 758,524
-----------------------------------------------------------------
625,000 8.125%, 2/15/98 685,737
-----------------------------------------------------------------
400,000 8.25%, 7/15/98 442,372
-----------------------------------------------------------------
410,000 5.25%, 7/31/98 405,769
-----------------------------------------------------------------
500,000 6.375%, 1/15/2000 514,530
-----------------------------------------------------------------
375,000 5.75%, 8/15/2003++ 363,398
----------------------------------------------------------------- -----------
TOTAL U.S. TREASURY NOTES (IDENTIFIED COST $5,375,111) 5,220,525
----------------------------------------------------------------- -----------
TOTAL LONG-TERM INVESTMENTS (IDENTIFIED COST, $23,893,272) 24,316,130
----------------------------------------------------------------- -----------
**REPURCHASE AGREEMENT--6.2%
- ------------------------------------------------------------------------------------
1,525,000 Goldman, Sachs & Co., 3.45%, dated 2/28/94, Due 3/1/94
(at amortized cost) (Note 2B) 1,525,000
----------------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST, $25,418,272) $25,841,130+
----------------------------------------------------------------- -----------
(a) Variable rate security.
* Includes securities with a market value of $1,251,948 subject to dollar roll
transactions.
** 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 $25,418,272. The net
unrealized appreciation on a federal tax cost basis amounts to $422,858, which is
comprised of $1,050,554 appreciation and $627,696 depreciation at February 28, 1994.
++ Certain shares on loan to broker.
</TABLE>
The following abbreviation is used in this portfolio:
REMIC--Real Estate Mortgage Investment Conduit
Note: The categories of investments are shown as a percentage of net assets
($24,754,836) at February 28, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------
Investments in securities, at value (Notes 2A and 2B)
(identified and tax cost $25,418,272) $25,841,130
- ---------------------------------------------------------------------------------
Cash 2,984
- ---------------------------------------------------------------------------------
Collateral for security lending (Note 2H) 3,160,900
- ---------------------------------------------------------------------------------
Receivable for investments sold 2,057,703
- ---------------------------------------------------------------------------------
Dividends and interest receivable 105,844
- ---------------------------------------------------------------------------------
Receivable for capital stock sold 34,240
- ---------------------------------------------------------------------------------
Prepaid/Deferred Expenses (Note 2G) 18,664
- --------------------------------------------------------------------------------- -----------
Total assets 31,221,465
- ---------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------
Security lending payable (Note 2H) $3,160,900
- --------------------------------------------------------------------
Payable for Dollar Roll Transactions (Note 2F) 1,944,856
- --------------------------------------------------------------------
Payable for investments purchased 1,316,843
- --------------------------------------------------------------------
Accrued expenses and other liabilities 44,030
- -------------------------------------------------------------------- ----------
Total liabilities 6,466,629
- --------------------------------------------------------------------------------- -----------
NET ASSETS for 2,455,527 shares of capital stock outstanding $24,754,836
- --------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------
Paid-in capital $24,600,449
- ---------------------------------------------------------------------------------
Unrealized appreciation of investments 422,858
- ---------------------------------------------------------------------------------
Accumulated net realized loss on investments (354,351)
- ---------------------------------------------------------------------------------
Undistributed net investment income 85,880
- --------------------------------------------------------------------------------- -----------
Total Net Assets $24,754,836
- --------------------------------------------------------------------------------- -----------
NET ASSET VALUE, Offering Price and Redemption Price Per Share:
(net assets of $24,754,836 / 2,455,527 shares of capital stock outstanding) $ 10.08
- --------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL BALANCED FUND
STATEMENT OF OPERATIONS
PERIOD ENDED FEBRUARY 28, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------------------------
Dividends $ 84,415
- -------------------------------------------------------------------------------------
Interest (net of interest expense of $11,172) 274,532
- ------------------------------------------------------------------------------------- --------
Total investment income (Note 2C) 358,947
- -------------------------------------------------------------------------------------
EXPENSES--
- -------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $ 73,656
- -------------------------------------------------------------------------
Directors' fees 275
- -------------------------------------------------------------------------
Administrative personnel and services fees (Note 5) 9,546
- -------------------------------------------------------------------------
Custodian fees (Note 5) 1,964
- -------------------------------------------------------------------------
Transfer and dividend disbursing agent fees (Note 5) 5,368
- -------------------------------------------------------------------------
Recordkeeping fee (Note 5) 12,800
- -------------------------------------------------------------------------
Legal fees 1,890
- -------------------------------------------------------------------------
Taxes 627
- -------------------------------------------------------------------------
Printing and postage 4,869
- -------------------------------------------------------------------------
Shareholder services fees (Note 5) 1,473
- -------------------------------------------------------------------------
Miscellaneous 2,928
- ------------------------------------------------------------------------- --------
Total expenses 115,396
- -------------------------------------------------------------------------
Deduct--
- ---------------------------------------------------------------
Waiver of investment advisory fee (Note 5) $30,691
- ---------------------------------------------------------------
Waiver of custodian fees (Note 5) 1,228 31,919
- --------------------------------------------------------------- ------- --------
Net expenses 83,477
- ------------------------------------------------------------------------------------- --------
Net investment income 275,470
- ------------------------------------------------------------------------------------- --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -------------------------------------------------------------------------------------
Net realized loss on investments (identified cost basis) (354,351)
- -------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments 422,858
- ------------------------------------------------------------------------------------- --------
Net realized and unrealized gain on investments 68,507
- ------------------------------------------------------------------------------------- --------
Change in net assets resulting from operations $343,977
- ------------------------------------------------------------------------------------- --------
</TABLE>
* For the period from September 30, 1993 (date of initial public investment) to
February 28, 1994 (unaudited).
(See Notes which are an integral part of the Financial Statements)
MARSHALL BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
1994*
-------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------
Net investment income $ 275,470
- ----------------------------------------------------------------------------
Net realized loss on investments ($354,351 net loss, as computed for
federal tax purposes) (Note 2D) (354,351)
- ----------------------------------------------------------------------------
Net change in unrealized appreciation on investments 422,858
- ---------------------------------------------------------------------------- -------------
Change in net assets resulting from operations 343,977
- ---------------------------------------------------------------------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- ----------------------------------------------------------------------------
Dividends to shareholders from net investment income (189,590)
- ---------------------------------------------------------------------------- -------------
CAPITAL STOCK TRANSACTIONS (NOTE 4)--
- ----------------------------------------------------------------------------
Proceeds from sale of shares 41,181,033
- ----------------------------------------------------------------------------
Net asset value of shares issued to shareholders electing to receive payment
of dividends in capital stock 189,178
- ----------------------------------------------------------------------------
Cost of shares redeemed (16,769,762)
- ---------------------------------------------------------------------------- -------------
Change in net assets from capital stock transactions 24,600,449
- ---------------------------------------------------------------------------- -------------
Change in net assets 24,754,836
- ----------------------------------------------------------------------------
NET ASSETS--
- ----------------------------------------------------------------------------
Beginning of period --
- ---------------------------------------------------------------------------- -------------
End of period (including undistributed net investment income of $85,880) $24,754,836
- ---------------------------------------------------------------------------- -------------
</TABLE>
* For the period from September 30, 1993 (date of initial public investment) to
February 28, 1994 (unaudited).
(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
1994*
- ------------------------------------------------------------------------- -------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- -------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------
Net investment income 0.11
- -------------------------------------------------------------------------
Net realized and unrealized gain on investments 0.05
- ------------------------------------------------------------------------- --------
Total from investment operations 0.16
- ------------------------------------------------------------------------- --------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.08)
- ------------------------------------------------------------------------- --------
NET ASSET VALUE, END OF PERIOD $ 10.08
- ------------------------------------------------------------------------- ---------
TOTAL RETURN** 1.55%
- -------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------
Expenses (a) 0.85%(b)
- -------------------------------------------------------------------------
Net investment income (a) 2.81%(b)
- -------------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.33%(b)
- -------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------
Net assets, end of period (000 omitted) $24,755
- -------------------------------------------------------------------------
Portfolio turnover rate 63%
- -------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from September 30, 1993 (date of initial
public investment) to February 28, 1994 (unaudited).
** Based on net asset value.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
MARSHALL EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--89.4%
- --------------------------------------------------------------------------------------
CAPITAL GOODS--7.2%
-------------------------------------------------------------------
Electrical Equipment
-------------------------------------------------------------------
8,000 General Electric Co. $ 843,000
------------------------------------------------------------------- -----------
Office Equipment
-------------------------------------------------------------------
6,000 Pitney Bowes, Inc. 263,250
------------------------------------------------------------------- -----------
Other Capital Goods
-------------------------------------------------------------------
6,500 Minnesota Mining & Manufacturing Co. 684,937
-------------------------------------------------------------------
5,000 TRW, Inc. 365,625
-------------------------------------------------------------------
6,800 Tenneco, Inc. 379,100
------------------------------------------------------------------- -----------
Total 1,429,662
------------------------------------------------------------------- -----------
Total Capital Goods 2,535,912
------------------------------------------------------------------- -----------
COMMERCIAL SERVICES--0.9%
-------------------------------------------------------------------
13,500 Ogden Corp. 307,125
------------------------------------------------------------------- -----------
Total Commercial Services 307,125
------------------------------------------------------------------- -----------
CONSUMER DURABLES--5.1%
-------------------------------------------------------------------
Appliances
-------------------------------------------------------------------
21,000 Maytag Corp. 367,500
------------------------------------------------------------------- -----------
Automotive and Related
-------------------------------------------------------------------
17,300 Ford Motor Co. 1,074,763
------------------------------------------------------------------- -----------
Building and Forest Products
-------------------------------------------------------------------
7,300 Weyerhaeuser Co. 346,750
------------------------------------------------------------------- -----------
Total Consumer Durables 1,789,013
------------------------------------------------------------------- -----------
CONSUMER NON-DURABLES--25.2%
-------------------------------------------------------------------
Cosmetics and Soap
-------------------------------------------------------------------
9,000 Clorox Co. 480,375
------------------------------------------------------------------- -----------
</TABLE>
MARSHALL EQUITY INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------
CONSUMER NON-DURABLES--CONTINUED
-------------------------------------------------------------------
Health Care
-------------------------------------------------------------------
22,800 Abbott Labs $ 629,850
-------------------------------------------------------------------
8,500 American Home Products Corp. 508,937
-------------------------------------------------------------------
15,000 Baxter International, Inc. 341,250
-------------------------------------------------------------------
18,300 Bristol Myers Squibb Co. 1,011,075
-------------------------------------------------------------------
7,400 Lilly Eli & Co. 407,925
-------------------------------------------------------------------
28,800 Merck & Co., Inc. 932,400
------------------------------------------------------------------- -----------
Total 3,831,437
------------------------------------------------------------------- -----------
Media
-------------------------------------------------------------------
6,800 Gannett, Inc. 367,200
-------------------------------------------------------------------
9,400 McGraw Hill, Inc. 662,700
------------------------------------------------------------------- -----------
Total 1,029,900
------------------------------------------------------------------- -----------
Photography
-------------------------------------------------------------------
14,000 Eastman Kodak Co.++ 602,000
------------------------------------------------------------------- -----------
Retail
-------------------------------------------------------------------
37,700 K-Mart Corp. 716,300
------------------------------------------------------------------- -----------
Services
-------------------------------------------------------------------
11,400 De Luxe Corp. 387,600
-------------------------------------------------------------------
8,000 Dun & Bradstreet Corp. 487,000
------------------------------------------------------------------- -----------
Total 874,600
------------------------------------------------------------------- -----------
Tobacco
-------------------------------------------------------------------
22,800 American Brands, Inc. 755,250
-------------------------------------------------------------------
10,600 Philip Morris Cos, Inc. 593,600
------------------------------------------------------------------- -----------
Total 1,348,850
------------------------------------------------------------------- -----------
Total Consumer Non-Durables 8,883,462
------------------------------------------------------------------- -----------
</TABLE>
MARSHALL EQUITY INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------
ENERGY--7.4%
-------------------------------------------------------------------
International Oil
-------------------------------------------------------------------
4,700 Exxon Corp. $ 304,913
-------------------------------------------------------------------
10,500 Mobil Corp. 825,562
-------------------------------------------------------------------
5,400 Royal Dutch Petroleum Co. 577,125
-------------------------------------------------------------------
9,300 Texaco, Inc. 603,338
------------------------------------------------------------------- -----------
Total 2,310,938
------------------------------------------------------------------- -----------
Oil and Gas Products
-------------------------------------------------------------------
17,100 USX-Marathon Group 294,975
------------------------------------------------------------------- -----------
Total Energy 2,605,913
------------------------------------------------------------------- -----------
FINANCIAL--17.2%
-------------------------------------------------------------------
Banks
-------------------------------------------------------------------
19,250 Banc One Corp. 654,500
-------------------------------------------------------------------
6,400 Bankamerica Corp. 276,000
-------------------------------------------------------------------
12,000 Chase Manhattan Corp. 391,500
-------------------------------------------------------------------
11,400 Corestates Financial Corp. 294,975
-------------------------------------------------------------------
4,000 Crestar Financial Corp. 175,000
-------------------------------------------------------------------
3,200 Cullen Frost Bankers, Inc. 113,600
-------------------------------------------------------------------
6,150 First Security Corp. 178,350
-------------------------------------------------------------------
7,000 First Union Corp. 287,000
-------------------------------------------------------------------
12,000 Key Corp. 378,000
-------------------------------------------------------------------
9,200 Magna Group, Inc. 177,100
-------------------------------------------------------------------
2,900 Michigan National Corp. 189,225
-------------------------------------------------------------------
5,000 Nationsbank Corp.++ 244,375
-------------------------------------------------------------------
12,700 PNC Bank Corp. 350,837
-------------------------------------------------------------------
7,000 UJB Financial Corp. 183,750
-------------------------------------------------------------------
6,500 U.S. Bancorp 172,250
------------------------------------------------------------------- -----------
Total 4,066,462
------------------------------------------------------------------- -----------
</TABLE>
MARSHALL EQUITY INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------
FINANCIAL--CONTINUED
-------------------------------------------------------------------
Insurance
-------------------------------------------------------------------
22,800 American General Corp. $ 612,750
-------------------------------------------------------------------
8,500 Lincoln National Corp. 346,375
-------------------------------------------------------------------
9,000 Transamerica Corp. 456,750
------------------------------------------------------------------- -----------
Total 1,415,875
------------------------------------------------------------------- -----------
Savings and Loans
-------------------------------------------------------------------
8,600 Ahmanson H.F. & Co. 151,575
-------------------------------------------------------------------
24,800 Great Western Financial Corp.++ 424,700
------------------------------------------------------------------- -----------
Total 576,275
------------------------------------------------------------------- -----------
Total Financial 6,058,612
------------------------------------------------------------------- -----------
RAW MATERIALS/INTERMEDIATE GOODS--9.3%
-------------------------------------------------------------------
Chemicals
-------------------------------------------------------------------
11,100 Dow Chemical Co. 706,238
-------------------------------------------------------------------
9,700 Du Pont (E.I.) DeNemours 517,737
-------------------------------------------------------------------
13,700 Goodrich B.F. Co. 561,700
------------------------------------------------------------------- -----------
Total 1,785,675
------------------------------------------------------------------- -----------
Paper
-------------------------------------------------------------------
8,500 Kimberly Clark Corp. 469,625
-------------------------------------------------------------------
6,800 Union Camp Corp. 327,250
------------------------------------------------------------------- -----------
Total 796,875
------------------------------------------------------------------- -----------
Other Raw Materials
-------------------------------------------------------------------
34,000 Hanson PLC 709,750
------------------------------------------------------------------- -----------
Total Raw Materials/Intermediate Goods 3,292,300
------------------------------------------------------------------- -----------
</TABLE>
MARSHALL EQUITY INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------
UTILITIES--17.1%
-------------------------------------------------------------------
Telecommunications
-------------------------------------------------------------------
19,200 Bell Atlantic Corp. $ 1,051,200
-------------------------------------------------------------------
11,100 Bellsouth Corp. 618,825
-------------------------------------------------------------------
22,800 GTE Corp. 743,850
------------------------------------------------------------------- -----------
Total 2,413,875
------------------------------------------------------------------- -----------
Electric
-------------------------------------------------------------------
14,100 Entergy Corp. 468,825
-------------------------------------------------------------------
6,800 New England Electric System 243,100
-------------------------------------------------------------------
18,000 PSI Resources, Inc. 432,000
-------------------------------------------------------------------
22,400 SCE Corp. 403,200
-------------------------------------------------------------------
21,200 Texas Utilities Co. 818,850
-------------------------------------------------------------------
12,200 Wisconsin Energy Corp. 305,000
-------------------------------------------------------------------
8,000 Wisconsin Public Service Corp. 231,000
------------------------------------------------------------------- -----------
Total 2,901,975
------------------------------------------------------------------- -----------
Gas Distributors
-------------------------------------------------------------------
16,000 Consolidated Natural Gas Co. 702,000
------------------------------------------------------------------- -----------
Total Utilities 6,017,850
------------------------------------------------------------------- -----------
TOTAL COMMON STOCKS (IDENTIFIED COST $32,336,568) 31,490,187
------------------------------------------------------------------- -----------
PREFERRED STOCK--0.5%
- --------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK
-------------------------------------------------------------------
3,500 Ahmanson H.F. & Co. cum. conv. 6% 171,938
------------------------------------------------------------------- -----------
TOTAL PREFERRED STOCKS (IDENTIFIED COST $179,375) 171,938
------------------------------------------------------------------- -----------
TOTAL COMMON AND PREFERRED STOCKS (IDENTIFIED COST $32,515,943) 31,662,125
------------------------------------------------------------------- -----------
</TABLE>
MARSHALL EQUITY INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
*REPURCHASE AGREEMENT--12.1%
- --------------------------------------------------------------------------------------
$4,246,000 Goldman, Sachs & Co., 3.45%, dated 2/28/94, due 3/1/94
(at amortized cost) (Note 2B) $ 4,246,000
------------------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $36,761,943) $35,908,125+
------------------------------------------------------------------- -----------
</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.
+ The cost of investments for federal tax purposes amounts to $36,761,943. The
net unrealized depreciation on a federal tax cost basis amounts to $853,818,
which is comprised of $857,160, appreciation and $1,710,978, depreciation at
February 28, 1994.
++ Certain shares on loan to broker.
Note: The categories of investments are shown as a percentage of net assets
($35,211,391) at February 28, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL EQUITY INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------------------------
Investments, in repurchase agreements, at amortized cost $ 4,246,000
- ---------------------------------------------------------------------
Investments in other securities, at value 31,662,125
- --------------------------------------------------------------------- -----------
Total investments (Notes 2A and 2B) (identified and tax cost $36,761,943) $35,908,125
- -----------------------------------------------------------------------------------
Cash 514
- -----------------------------------------------------------------------------------
Collateral for security lending (Note 2H) 1,298,400
- -----------------------------------------------------------------------------------
Receivable for investments sold 474,207
- -----------------------------------------------------------------------------------
Dividends and interest receivable 171,634
- -----------------------------------------------------------------------------------
Receivable for capital stock sold 73,800
- -----------------------------------------------------------------------------------
Prepaid/Deferred expenses (Note 2G) 18,831
- ----------------------------------------------------------------------------------- -----------
Total assets 37,945,511
- -----------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------
Security lending payable (Note 2H) $ 1,298,400
- ---------------------------------------------------------------------
Payable for investments purchased 1,224,037
- ---------------------------------------------------------------------
Payable for capital stock redeemed 145,030
- ---------------------------------------------------------------------
Accrued expenses and other liabilities 66,653
- --------------------------------------------------------------------- -----------
Total liabilities 2,734,120
- ----------------------------------------------------------------------------------- -----------
NET ASSETS for 3,577,435 shares of capital stock outstanding $35,211,391
- ----------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------
Paid-in capital $35,795,871
- -----------------------------------------------------------------------------------
Unrealized depreciation of investments (853,818)
- -----------------------------------------------------------------------------------
Accumulated undistributed net realized gain on investments 95,996
- -----------------------------------------------------------------------------------
Undistributed net investment income 173,342
- ----------------------------------------------------------------------------------- -----------
Total Net Assets $35,211,391
- ----------------------------------------------------------------------------------- -----------
NET ASSET VALUE, Offering Price and Redemption Price Per Share:
(net assets of $35,211,391 / 3,577,435 shares of capital stock outstanding) $ 9.84
- ----------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL EQUITY INCOME FUND
STATEMENT OF OPERATIONS
PERIOD ENDED FEBRUARY 28, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------
Dividends $ 500,931
- ------------------------------------------------------------------------------------
Interest 60,355
- ------------------------------------------------------------------------------------ ---------
Total investment income (Note 2C) 561,286
- ------------------------------------------------------------------------------------
EXPENSES--
- ------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $100,202
- ------------------------------------------------------------------------
Directors' fees 213
- ------------------------------------------------------------------------
Administrative personnel and services fees (Note 5) 20,274
- ------------------------------------------------------------------------
Custodian fees (Note 5) 2,672
- ------------------------------------------------------------------------
Transfer and dividend disbursing agent fees (Note 5) 9,053
- ------------------------------------------------------------------------
Recordkeeping fee (Note 5) 17,317
- ------------------------------------------------------------------------
Legal fees 2,815
- ------------------------------------------------------------------------
Taxes 1,228
- ------------------------------------------------------------------------
Printing and postage 7,536
- ------------------------------------------------------------------------
Shareholder services fees (Note 5) 2,004
- ------------------------------------------------------------------------
Miscellaneous 4,689
- ------------------------------------------------------------------------ --------
Total expenses 168,003
- ------------------------------------------------------------------------
Deduct--
- --------------------------------------------------------------
Waiver of investment advisory fee (Note 5) $26,534
- --------------------------------------------------------------
Waiver of administrative personnel and services fees (Note
5) 6,197
- --------------------------------------------------------------
Waiver of custodian fees (Note 5) 1,670 34,401
- -------------------------------------------------------------- ------- --------
Net expenses 133,602
- ------------------------------------------------------------------------------------ ---------
Net investment income 427,684
- ------------------------------------------------------------------------------------ ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ------------------------------------------------------------------------------------
Net realized gain on investments (identified cost basis) 95,996
- ------------------------------------------------------------------------------------
Net change in unrealized depreciation on investments (853,818)
- ------------------------------------------------------------------------------------ ---------
Net realized and unrealized loss on investments (757,822)
- ------------------------------------------------------------------------------------ ---------
Change in net assets resulting from operations $(330,138)
- ------------------------------------------------------------------------------------ ---------
</TABLE>
* For the period from September 30, 1993 (date of initial public investment) to
February 28, 1994 (unaudited).
(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
1994*
-------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------
Net investment income $ 427,684
- ----------------------------------------------------------------------------
Net realized gain on investments ($95,996 net gain, as computed for
federal tax purposes) (Note 2D) 95,996
- ----------------------------------------------------------------------------
Net change in unrealized depreciation on investments (853,818)
- ---------------------------------------------------------------------------- -------------
Change in net assets resulting from operations (330,138)
- ---------------------------------------------------------------------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- ----------------------------------------------------------------------------
Dividends to shareholders from net investment income (254,342)
- ---------------------------------------------------------------------------- -------------
CAPITAL STOCK TRANSACTIONS (NOTE 4)--
- ----------------------------------------------------------------------------
Proceeds from sale of shares 41,997,213
- ----------------------------------------------------------------------------
Net asset value of shares issued to shareholders electing to receive payment
of dividends in capital stock 219,325
- ----------------------------------------------------------------------------
Cost of shares redeemed (6,420,667)
- ---------------------------------------------------------------------------- -------------
Change in net assets from capital stock transactions 35,795,871
- ---------------------------------------------------------------------------- -------------
Change in net assets 35,211,391
- ----------------------------------------------------------------------------
NET ASSETS--
- ----------------------------------------------------------------------------
Beginning of period --
- ---------------------------------------------------------------------------- -------------
End of period (including undistributed net investment income of $173,342) $35,211,391
- ---------------------------------------------------------------------------- -------------
</TABLE>
* For the period from September 30, 1993 (date of initial public investment) to
February 28, 1994 (unaudited).
(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
1994*
-------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- -------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------
Net investment income 0.13
- -------------------------------------------------------------------------
Net realized and unrealized loss on investments (0.21)
- ------------------------------------------------------------------------- ---------
Total from investment operations (0.08)
- ------------------------------------------------------------------------- ---------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.08)
- ------------------------------------------------------------------------- ---------
NET ASSET VALUE, END OF PERIOD $ 9.84
- ------------------------------------------------------------------------- ---------
TOTAL RETURN** (0.84 %)
- -------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------
Expenses (a) 1.00 %(b)
- -------------------------------------------------------------------------
Net investment income (a) 3.20 %(b)
- -------------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.26 %(b)
- -------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------
Net assets, end of period (000 omitted) $35,211
- -------------------------------------------------------------------------
Portfolio turnover rate 19 %
- -------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from September 30, 1993 (date of initial
public investment) to February 28, 1994 (unaudited).
** Based on net asset value.
<TABLE>
<C> <S>
(a) This voluntary expense decrease is reflected in both the expense and net investment
income ratios shown above (Note 5).
(b) Computed on an annualized basis.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL VALUE EQUITY FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------ ---------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--87.8%
- -------------------------------------------------------------------------------------
CAPITAL GOODS--18.6%
----------------------------------------------------------------
Aerospace and Related
----------------------------------------------------------------
17,650 Raytheon Co. $ 1,094,300
---------------------------------------------------------------- -----------
Electronics
----------------------------------------------------------------
26,100 Avnet, Inc. 1,128,825
----------------------------------------------------------------
31,100 ** Borland International, Inc. 431,513
----------------------------------------------------------------
10,000 International Business Machines 528,750
----------------------------------------------------------------
44,600 ** Quantum Corp. 752,625
----------------------------------------------------------------
18,050 ** Seagate Technology 462,531
----------------------------------------------------------------
30,550 ** Sun Microsystems, Inc. 828,669
---------------------------------------------------------------- -----------
Total 4,132,913
---------------------------------------------------------------- -----------
Machinery and Machine Tools
----------------------------------------------------------------
34,150 Giddings & Lewis, Inc. 870,825
---------------------------------------------------------------- -----------
Packaging and Containers
----------------------------------------------------------------
24,200 Ball Corp. 611,050
---------------------------------------------------------------- -----------
Total Capital Goods 6,709,088
---------------------------------------------------------------- -----------
CONSUMER DURABLES--4.1%
----------------------------------------------------------------
Building and Forest Products
----------------------------------------------------------------
10,000 Georgia-Pacific Corp. 712,500
----------------------------------------------------------------
13,600 Willamette Industries, Inc. 782,000
---------------------------------------------------------------- -----------
Total Consumer Durables 1,494,500
---------------------------------------------------------------- -----------
CONSUMER NON-DURABLES--18.6%
----------------------------------------------------------------
Apparel and Textiles
----------------------------------------------------------------
14,000 NIKE, Inc. 724,500
---------------------------------------------------------------- -----------
</TABLE>
MARSHALL VALUE EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------ ---------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
CONSUMER NON-DURABLES--CONTINUED
----------------------------------------------------------------
Health Care
----------------------------------------------------------------
16,950 American Cyanamid $ 752,156
----------------------------------------------------------------
15,500 ** Amgen, Inc. 647,125
----------------------------------------------------------------
31,850 Caremark International, Inc.++ 688,756
----------------------------------------------------------------
23,850 IMCERA Group, Inc. 885,431
---------------------------------------------------------------- -----------
Total 2,973,468
---------------------------------------------------------------- -----------
Retail
----------------------------------------------------------------
15,900 Dayton Hudson Corp. 1,136,850
----------------------------------------------------------------
25,500 K Mart Corp. 484,500
----------------------------------------------------------------
23,100 Sears, Roebuck & Co. 1,053,938
---------------------------------------------------------------- -----------
Total 2,675,288
---------------------------------------------------------------- -----------
Services
----------------------------------------------------------------
13,950 WMX Technologies, Inc. 343,518
---------------------------------------------------------------- -----------
Total Consumer Non-Durables 6,716,774
---------------------------------------------------------------- -----------
ENERGY--8.9%
----------------------------------------------------------------
International Oil
----------------------------------------------------------------
16,650 British Petroleum PLC 1,084,331
---------------------------------------------------------------- -----------
Oil and Gas Products
----------------------------------------------------------------
33,550 Coastal Corp. 1,056,825
----------------------------------------------------------------
61,800 USX-Marathon Group 1,066,050
---------------------------------------------------------------- -----------
Total 2,122,875
---------------------------------------------------------------- -----------
Total Energy 3,207,206
---------------------------------------------------------------- -----------
FINANCIAL--16.8%
----------------------------------------------------------------
Banks
----------------------------------------------------------------
24,320 Banc One Corp. 826,880
----------------------------------------------------------------
19,350 Bancorp Hawaii, Inc. 902,194
----------------------------------------------------------------
20,900 Bankamerica Corp.++ 901,312
----------------------------------------------------------------
</TABLE>
MARSHALL VALUE EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------ ---------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
FINANCIAL--CONTINUED
----------------------------------------------------------------
5,400 Wells Fargo & Co. $ 744,525
---------------------------------------------------------------- -----------
Total 3,374,911
---------------------------------------------------------------- -----------
Insurance
----------------------------------------------------------------
12,250 Cigna Corp. 802,375
---------------------------------------------------------------- -----------
Other Financial
----------------------------------------------------------------
27,250 American Express Co. 797,063
----------------------------------------------------------------
19,750 Federal Home Loan Mortgage Corp. 1,101,062
---------------------------------------------------------------- -----------
Total 1,898,125
---------------------------------------------------------------- -----------
Total Financial 6,075,411
---------------------------------------------------------------- -----------
RAW MATERIALS/INTERMEDIATE GOODS--16.0%
----------------------------------------------------------------
Chemicals
----------------------------------------------------------------
6,275 Eastman Chemical Co. 261,981
----------------------------------------------------------------
23,750 Imperial Chemical Industries PLC 1,083,594
---------------------------------------------------------------- -----------
Total 1,345,575
---------------------------------------------------------------- -----------
Intermediate Goods
----------------------------------------------------------------
43,900 Hanson PLC 916,413
---------------------------------------------------------------- -----------
Metals
----------------------------------------------------------------
79,050 Horsham Corp. 1,096,819
----------------------------------------------------------------
54,400 ** LTV Corp. 897,600
---------------------------------------------------------------- -----------
Total 1,994,419
---------------------------------------------------------------- -----------
Papers
----------------------------------------------------------------
33,750 Champion International Corp.++ 1,063,125
----------------------------------------------------------------
9,200 Union Camp Corp. 442,750
---------------------------------------------------------------- -----------
Total 1,505,875
---------------------------------------------------------------- -----------
Total Raw Materials/Intermediate Goods 5,762,282
---------------------------------------------------------------- -----------
</TABLE>
MARSHALL VALUE EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ------------ ---------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
TRANSPORTATION--2.6%
----------------------------------------------------------------
Other Transportation
----------------------------------------------------------------
37,250 Alexander & Baldwin, Inc. $ 949,875
---------------------------------------------------------------- -----------
UTILITIES--2.2%
----------------------------------------------------------------
Telecommunications
----------------------------------------------------------------
17,900 Telephone & Data Systems, Inc. 812,213
---------------------------------------------------------------- -----------
TOTAL COMMON STOCKS (IDENTIFIED COST $31,833,369) 31,727,349
---------------------------------------------------------------- -----------
*REPURCHASE AGREEMENT--14.5%
- -------------------------------------------------------------------------------------
$5,226,000 Goldman Sachs & Co., 3.45%, dated 2/28/94, due 3/1/94 (at
amortized cost) (Note 2B) 5,226,000
---------------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $37,059,369) $36,953,349+
---------------------------------------------------------------- -----------
</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 $37,059,369. The
net unrealized depreciation on a federal tax cost basis amounts to $106,020,
which is comprised of $902,729 appreciation and $1,008,749 depreciation at
February 28, 1994.
++ Certain shares on loan to broker.
Note: The categories of investments are shown as a percentage of net assets
($36,104,298) at
February 28, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL VALUE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------------------------
Investments, in repurchase agreements, at amortized cost $ 5,226,000
- ---------------------------------------------------------------------
Investments in securities, at value 31,727,349
- --------------------------------------------------------------------- -----------
Total investments (Notes 2A and 2B) (identified and tax cost $37,059,369) $36,953,349
- -----------------------------------------------------------------------------------
Cash 288
- -----------------------------------------------------------------------------------
Collateral for security lending (Note 2H) 1,944,000
- -----------------------------------------------------------------------------------
Receivable for investments sold 474,137
- -----------------------------------------------------------------------------------
Receivable for capital stock sold 201,029
- -----------------------------------------------------------------------------------
Dividends and interest receivable 83,652
- -----------------------------------------------------------------------------------
Prepaid/Deferred expenses (Note 2G) 18,536
- ----------------------------------------------------------------------------------- -----------
Total assets 39,674,991
- -----------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------
Security lending payable (Note 2H) $ 1,944,000
- ---------------------------------------------------------------------
Payable for investments purchased 1,578,785
- ---------------------------------------------------------------------
Payable for capital stock redeemed 4,951
- ---------------------------------------------------------------------
Accrued expenses and other liabilities 42,957
- --------------------------------------------------------------------- -----------
Total liabilities 3,570,693
- ----------------------------------------------------------------------------------- -----------
NET ASSETS for 3,551,572 shares of capital stock outstanding $36,104,298
- ----------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------
Paid-in capital $36,361,951
- -----------------------------------------------------------------------------------
Unrealized depreciation of investments (106,020)
- -----------------------------------------------------------------------------------
Accumulated net realized loss on investments (230,504)
- -----------------------------------------------------------------------------------
Undistributed net investment income 78,871
- ----------------------------------------------------------------------------------- -----------
Total Net Assets $36,104,298
- ----------------------------------------------------------------------------------- -----------
NET ASSET VALUE, Offering Price and Redemption Price Per Share:
(net assets of $36,104,298 / 3,551,572 shares of capital stock outstanding) $ 10.17
- ----------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL VALUE EQUITY FUND
STATEMENT OF OPERATIONS
PERIOD ENDED FEBRUARY 28, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------
Dividends $ 132,214
- ------------------------------------------------------------------------------------
Interest 41,235
- ------------------------------------------------------------------------------------ ---------
Total investment income (Note 2C) 173,449
- ------------------------------------------------------------------------------------
EXPENSES--
- ------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $44,456
- -------------------------------------------------------------------------
Directors' fees 123
- -------------------------------------------------------------------------
Administrative personnel and services fees (Note 5) 20,275
- -------------------------------------------------------------------------
Custodian fees (Note 5) 1,185
- -------------------------------------------------------------------------
Transfer and dividend disbursing agent fees (Note 5) 4,478
- -------------------------------------------------------------------------
Recordkeeping fee (Note 5) 9,723
- -------------------------------------------------------------------------
Legal fees 1,620
- -------------------------------------------------------------------------
Taxes 605
- -------------------------------------------------------------------------
Printing and postage 4,172
- -------------------------------------------------------------------------
Shareholder services fees (Note 5) 889
- -------------------------------------------------------------------------
Miscellaneous 3,125
- ------------------------------------------------------------------------- -------
Total expenses 90,651
- -------------------------------------------------------------------------
Deduct--
- ---------------------------------------------------------------
Waiver of investment advisory fee (Note 5) $21,185
- ---------------------------------------------------------------
Waiver of administrative personnel and services fees (Note 5) 9,451
- ---------------------------------------------------------------
Waiver of custodian fees (Note 5) 741 31,377
- --------------------------------------------------------------- ------- -------
Net expenses 59,274
- ------------------------------------------------------------------------------------ ---------
Net investment income 114,175
- ------------------------------------------------------------------------------------ ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ------------------------------------------------------------------------------------
Net realized loss on investments (identified cost basis) (230,504)
- ------------------------------------------------------------------------------------
Net change in unrealized depreciation on investments (106,020)
- ------------------------------------------------------------------------------------ ---------
Net realized and unrealized loss on investments (336,524)
- ------------------------------------------------------------------------------------ ---------
Change in net assets resulting from operations $(222,349)
- ------------------------------------------------------------------------------------ ---------
</TABLE>
* For the period from September 30, 1993 (date of initial public investment) to
February 28, 1994 (unaudited).
(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
1994*
-------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------
Net investment income $ 114,175
- ----------------------------------------------------------------------------
Net realized loss on investments ($230,504 net loss, as computed
for federal tax purposes) (Note 2D) (230,504)
- ----------------------------------------------------------------------------
Net change in unrealized depreciation on investments (106,020)
- ---------------------------------------------------------------------------- -------------
Change in net assets resulting from operations (222,349)
- ---------------------------------------------------------------------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- ----------------------------------------------------------------------------
Dividends to shareholders from net investment income (35,304)
- ---------------------------------------------------------------------------- -------------
CAPITAL STOCK TRANSACTIONS (NOTE 4)--
- ----------------------------------------------------------------------------
Proceeds from sale of shares 39,726,662
- ----------------------------------------------------------------------------
Net asset value of shares issued to shareholders electing to receive payment
of dividends in capital stock 18,848
- ----------------------------------------------------------------------------
Cost of shares redeemed (3,383,559)
- ---------------------------------------------------------------------------- -------------
Change in net assets from capital stock transactions 36,361,951
- ---------------------------------------------------------------------------- -------------
Change in net assets 36,104,298
- ----------------------------------------------------------------------------
NET ASSETS--
- ----------------------------------------------------------------------------
Beginning of period --
- ---------------------------------------------------------------------------- -------------
End of period (including undistributed net investment income of $78,871) $36,104,298
- ---------------------------------------------------------------------------- -------------
</TABLE>
* For the period from September 30, 1993 (date of initial public investment) to
February 28, 1994 (unaudited).
(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
1994*
- ------------------------------------------------------------------------- -------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- -------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------
Net investment income 0.05
- -------------------------------------------------------------------------
Net realized and unrealized gain on investments 0.15
- ------------------------------------------------------------------------- ---------
Total from investment operations 0.20
- ------------------------------------------------------------------------- ---------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.03)
- ------------------------------------------------------------------------- ---------
NET ASSET VALUE, END OF PERIOD $ 10.17
- ------------------------------------------------------------------------- ---------
TOTAL RETURN** 2.00 %
- -------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------
Expenses (a) 1.00 %(b)
- -------------------------------------------------------------------------
Net investment income (a) 1.93 %(b)
- -------------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.53 %(b)
- -------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------
Net assets, end of period (000 omitted) $36,104
- -------------------------------------------------------------------------
Portfolio turnover rate 27 %
- -------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from September 30, 1993 (date of initial
public investment) to February 28, 1994 (unaudited).
** Based on net asset value.
<TABLE>
<C> <S>
(a) This voluntary expense decrease is reflected in both the expense and net investment
income ratios shown above (Note 5).
(b) Computed on an annualized basis.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL STOCK FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--95.0%
- -----------------------------------------------------------------------------------
CAPITAL GOODS--25.5%
----------------------------------------------------------------
Electronics
----------------------------------------------------------------
80,000 ** Applied Materials, Inc.++ $ 3,800,000
----------------------------------------------------------------
100,000 Loral Corp. 3,862,500
----------------------------------------------------------------
140,000 Harris Corp.++ 7,122,500
----------------------------------------------------------------
215,000 ** Solectron Corp.++ 6,691,875
----------------------------------------------------------------
50,000 Texas Instruments, Inc. 4,037,500
---------------------------------------------------------------- ------------
Total 25,514,375
---------------------------------------------------------------- ------------
Electrical Equipment
----------------------------------------------------------------
75,000 General Electric Co. 7,903,125
---------------------------------------------------------------- ------------
Office Equipment
----------------------------------------------------------------
125,000 Adobe Systems, Inc. 3,656,250
----------------------------------------------------------------
100,000 ** Lotus Development Co.++ 6,950,000
---------------------------------------------------------------- ------------
Total 10,606,250
---------------------------------------------------------------- ------------
Other Capital Goods
----------------------------------------------------------------
75,000 Alco Standard Corp. 4,190,625
----------------------------------------------------------------
225,000 ** Computer Sciences Corp. 8,775,000
----------------------------------------------------------------
50,000 Minnesota Mining & Manufacturing Co.++ 5,268,750
---------------------------------------------------------------- ------------
Total 18,234,375
---------------------------------------------------------------- ------------
Total Capital Goods 62,258,125
---------------------------------------------------------------- ------------
CONSUMER DURABLES--14.1%
----------------------------------------------------------------
Appliances
----------------------------------------------------------------
60,000 Whirlpool Corp.++ 4,065,000
---------------------------------------------------------------- ------------
Automotive and Related
----------------------------------------------------------------
150,000 Federal Mogul Corp.++ 5,231,250
----------------------------------------------------------------
</TABLE>
MARSHALL STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
CONSUMER DURABLES--CONTINUED
----------------------------------------------------------------
150,000 Hayes Wheels International, Inc. $ 4,781,250
----------------------------------------------------------------
125,000 Mark IV Industries, Inc.++ 2,421,875
---------------------------------------------------------------- ------------
Total 12,434,375
---------------------------------------------------------------- ------------
Other Consumer Durables
----------------------------------------------------------------
220,000 Masco Corp.++ 7,727,500
----------------------------------------------------------------
150,000 Kaufman & Broad Home Corp.++ 3,093,750
----------------------------------------------------------------
30,000 PPG Industries, Inc. 2,302,500
----------------------------------------------------------------
250,000 Shaw Industries, Inc. 4,687,500
---------------------------------------------------------------- ------------
Total 17,811,250
---------------------------------------------------------------- ------------
Total Consumer Durables 34,310,625
---------------------------------------------------------------- ------------
CONSUMER NON-DURABLES--32.1%
----------------------------------------------------------------
Beverage and Foods
----------------------------------------------------------------
125,000 McDonalds Corp.++ 7,578,125
----------------------------------------------------------------
125,000 ** Shoney's, Inc.++ 2,906,250
---------------------------------------------------------------- ------------
Total 10,484,375
---------------------------------------------------------------- ------------
Health Care
----------------------------------------------------------------
125,000 ** Amgen, Inc. 5,218,750
----------------------------------------------------------------
125,000 ** Cardinal Distribution, Inc. 6,031,250
----------------------------------------------------------------
175,000 IVAX Corp.++ 6,146,875
---------------------------------------------------------------- ------------
Total 17,396,875
---------------------------------------------------------------- ------------
Photography
----------------------------------------------------------------
100,000 Eastman Kodak Co.++ 4,300,000
---------------------------------------------------------------- ------------
Media
----------------------------------------------------------------
10,000 Capital Cities/ABC, Inc.++ 6,651,250
----------------------------------------------------------------
100,000 McGraw-Hill, Inc. 7,050,000
----------------------------------------------------------------
250,000 ** Telecommunications, Inc. 5,906,250
---------------------------------------------------------------- ------------
Total 19,607,500
---------------------------------------------------------------- ------------
Retail
----------------------------------------------------------------
73,000 ** Kohl's Corp. 3,723,000
----------------------------------------------------------------
</TABLE>
MARSHALL STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
CONSUMER NON-DURABLES--CONTINUED
----------------------------------------------------------------
150,000 Tandy Corp.++ $ 6,225,000
----------------------------------------------------------------
125,000 ** Toys R Us, Inc. 4,562,500
---------------------------------------------------------------- ------------
Total 14,510,500
---------------------------------------------------------------- ------------
Services
----------------------------------------------------------------
125,000 Dun & Bradstreet Corp.++ 7,609,375
----------------------------------------------------------------
125,000 ** GTECH Holdings Corp.++ 4,406,250
---------------------------------------------------------------- ------------
Total 12,015,625
---------------------------------------------------------------- ------------
Total Consumer Non-Durables 78,314,875
---------------------------------------------------------------- ------------
ENERGY--9.8%
----------------------------------------------------------------
Oil and Gas Products
----------------------------------------------------------------
200,000 Coastal Corp.++ 6,300,000
---------------------------------------------------------------- ------------
International Oil
----------------------------------------------------------------
75,000 Royal Dutch Petroleum Co. 8,015,625
---------------------------------------------------------------- ------------
Oil Service
----------------------------------------------------------------
100,000 Noble Affiliates, Inc.++ 2,575,000
----------------------------------------------------------------
125,000 Schlumberger, Ltd. 7,109,375
---------------------------------------------------------------- ------------
Total 9,684,375
---------------------------------------------------------------- ------------
Total Energy 24,000,000
---------------------------------------------------------------- ------------
FINANCIAL--8.8%
----------------------------------------------------------------
Insurance
----------------------------------------------------------------
60,000 American International Group, Inc. 5,265,000
----------------------------------------------------------------
150,000 MGIC Investment Corp.++ 4,650,000
---------------------------------------------------------------- ------------
Total 9,915,000
---------------------------------------------------------------- ------------
</TABLE>
MARSHALL STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------
FINANCIAL--CONTINUED
----------------------------------------------------------------
Other Financial
----------------------------------------------------------------
70,000 Dean Witter Discover & Co. $ 2,520,000
----------------------------------------------------------------
28,000 Federal National Mortgage Association 2,327,500
----------------------------------------------------------------
75,000 First Financial Management Corp.++ 4,415,625
----------------------------------------------------------------
120,000 Regency Realty Corp. 2,250,000
---------------------------------------------------------------- ------------
Total 11,513,125
---------------------------------------------------------------- ------------
Total Financial 21,428,125
---------------------------------------------------------------- ------------
MISCELLANEOUS--4.7%
----------------------------------------------------------------
125,000 Browning-Ferris Industries, Inc. 3,562,500
----------------------------------------------------------------
60,000 ** Litton Industries, Inc.++ 4,012,500
----------------------------------------------------------------
70,000 Tenneco, Inc. 3,902,500
---------------------------------------------------------------- ------------
Total Miscellaneous 11,477,500
---------------------------------------------------------------- ------------
TOTAL COMMON STOCKS (IDENTIFIED COST $209,343,116) 231,789,250
---------------------------------------------------------------- ------------
*REPURCHASE AGREEMENT--4.9%
- -----------------------------------------------------------------------------------
$12,008,000 Goldman, Sachs & Co., 3.45%, dated 2/28/94, due 3/1/94
(at amortized cost) (Note 2B) 12,008,000
---------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $221,351,116) $243,797,250+
---------------------------------------------------------------- ------------
</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 $221,351,116. The
net unrealized appreciation on a federal tax cost basis amounts to
$22,446,134, which is comprised of $27,098,559 appreciation and $4,652,425
depreciation at February 28, 1994.
++ Certain shares on loan to broker.
Note: The categories of investments are shown as a percentage of net assets
($243,926,273) at February 28, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL STOCK FUND
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in securities, at value (Notes 2A and 2B) (identified
and tax cost $221,351,116) $243,797,250
- --------------------------------------------------------------------------------
Cash 45,325
- --------------------------------------------------------------------------------
Collateral for security lending (Note 2H) 69,053,400
- --------------------------------------------------------------------------------
Receivable for capital stock sold 779,249
- --------------------------------------------------------------------------------
Dividends and interest receivable 448,920
- --------------------------------------------------------------------------------
Receivable for investments sold 260,000
- --------------------------------------------------------------------------------
Prepaid/Deferred expenses (Note 2G) 80,021
- -------------------------------------------------------------------------------- ------------
Total assets 314,464,165
- --------------------------------------------------------------------------------
LIABILITIES:
- ------------------------------------------------------------------
Security lending payable (Note 2H) $69,053,400
- ------------------------------------------------------------------
Payable for investments purchased 753,200
- ------------------------------------------------------------------
Payable for capital stock redeemed 518,701
- ------------------------------------------------------------------
Accrued expenses 212,591
- ------------------------------------------------------------------ -----------
Total liabilities 70,537,892
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 23,433,331 shares of capital stock outstanding $243,926,273
- -------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid-in capital $229,217,862
- --------------------------------------------------------------------------------
Unrealized appreciation of investments 22,446,134
- --------------------------------------------------------------------------------
Accumulated net realized loss on investments (7,937,186)
- --------------------------------------------------------------------------------
Accumulated distributions in excess of net investment income 199,463
- -------------------------------------------------------------------------------- ------------
Total Net Assets $243,926,273
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price and Redemption Price Per Share:
(net assets of $243,926,273 / 23,433,331 shares of capital stock outstanding) $ 10.41
- -------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL STOCK FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------------
Dividends $ 2,223,135
- --------------------------------------------------------------------------------------
Interest 242,659
- -------------------------------------------------------------------------------------- -----------
Total investment income (Note 2C) 2,465,794
- --------------------------------------------------------------------------------------
EXPENSES--
- --------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $1,016,887
- -------------------------------------------------------------------------
Directors' fees 2,823
- -------------------------------------------------------------------------
Administrative personnel and services fees (Note 5) 132,458
- -------------------------------------------------------------------------
Custodian fees (Note 5) 25,915
- -------------------------------------------------------------------------
Transfer and dividend disbursing agent fees (Note 5) 51,999
- -------------------------------------------------------------------------
Recordkeeping fee (Note 5) 26,981
- -------------------------------------------------------------------------
Legal fees 9,307
- -------------------------------------------------------------------------
Auditing fees 8,097
- -------------------------------------------------------------------------
Registration fees 24,718
- -------------------------------------------------------------------------
Taxes 18,838
- -------------------------------------------------------------------------
Insurance 5,634
- -------------------------------------------------------------------------
Printing and postage 11,886
- -------------------------------------------------------------------------
Shareholder services fees (Note 5) 20,338
- -------------------------------------------------------------------------
Miscellaneous 495
- ------------------------------------------------------------------------- ----------
Total expenses 1,356,376
- -------------------------------------------------------------------------
Deduct--
- -------------------------------------------------------------------------
Waiver of custodian fees (Note 5) 15,746
- ------------------------------------------------------------------------- ----------
Net expenses 1,340,630
- -------------------------------------------------------------------------------------- -----------
Net investment income 1,125,164
- -------------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- --------------------------------------------------------------------------------------
Net realized gain on investments (identified cost basis) 8,799,279
- --------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments 415,867
- -------------------------------------------------------------------------------------- -----------
Net realized and unrealized gain on investments 9,215,146
- -------------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $10,340,310
- -------------------------------------------------------------------------------------- -----------
</TABLE>
* (unaudited)
(See Notes which are an integral part of the Financial Statements)
MARSHALL STOCK FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
----------------------------
1994** 1993*
------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------------
Net investment income $ 1,125,164 $ 2,924,758
- ------------------------------------------------------------------
Net realized gain (loss) on investments ($8,799,279 net gain, and
$16,736,465 net loss, respectively as computed for federal tax
purposes) (Note 2D) 8,799,279 (16,736,465)
- ------------------------------------------------------------------
Net change in unrealized appreciation on investments 415,867 22,030,267
- ------------------------------------------------------------------ ------------- ------------
Change in net assets resulting from operations 10,340,310 8,218,560
- ------------------------------------------------------------------ ------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- ------------------------------------------------------------------
Dividends to shareholders from net investment income (1,370,161) (2,480,298)
- ------------------------------------------------------------------ ------------- ------------
CAPITAL STOCK TRANSACTIONS (NOTE 4)--
- ------------------------------------------------------------------
Proceeds from sale of shares 41,802,886 329,072,350
- ------------------------------------------------------------------
Net asset value of shares issued to shareholders electing to
receive payment of dividends in capital stock 1,324,298 2,446,695
- ------------------------------------------------------------------
Cost of shares redeemed (117,298,714) (28,129,753)
- ------------------------------------------------------------------ ------------- ------------
Change in net assets from capital stock transactions (74,171,530) 303,389,292
- ------------------------------------------------------------------ ------------- ------------
Change in net assets (65,201,381) 309,127,554
- ------------------------------------------------------------------
NET ASSETS--
- ------------------------------------------------------------------
Beginning of period 309,127,654 100
- ------------------------------------------------------------------ ------------- ------------
End of period (including undistributed net investment
income of $199,463) $ 243,926,273 $309,127,654
- ------------------------------------------------------------------ ------------- ------------
</TABLE>
* For the period from November 23, 1992 (date of initial public investment) to
August 31, 1993.
** Six months ended February 28, 1994 (unaudited).
(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>
PERIOD ENDED
-------------------------
1994** 1993*
- ----------------------------------------------------------------- -------- --------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.08 $ 10.00
- -----------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------
Net investment income 0.04 0.10
- -----------------------------------------------------------------
Net realized and unrealized gain on investments 0.34 0.07
- ----------------------------------------------------------------- -------- --------
Total from investment operations 0.38 0.17
- ----------------------------------------------------------------- -------- --------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------
Dividends to shareholders from net investment income (0.05) (0.09)
- ----------------------------------------------------------------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 10.41 $ 10.08
- ----------------------------------------------------------------- -------- --------
TOTAL RETURN*** 3.75% 1.67%
- -----------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------
Expenses (a) 0.99%(b) 0.94%(b)
- -----------------------------------------------------------------
Net investment income (a) 0.83%(b) 1.39%(b)
- -----------------------------------------------------------------
Expense waiver/reimbursement (a) 0.01%(b) 0.03%(b)
- -----------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------
Net assets, end of period (000 omitted) $243,926 $309,128
- -----------------------------------------------------------------
Portfolio turnover rate 54 % 98 %
- -----------------------------------------------------------------
* Reflects operations for the period from November 23, 1992 (date of initial public
investment) to August 31, 1993.
** Six months ended February 28, 1994 (unaudited).
*** Based on net asset value.
(a) This voluntary expense decrease is reflected in both the expense and net investment
income ratios shown above (Note 5).
(b) Computed on an annualized basis.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL MID-CAP STOCK FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
COMMON STOCKS--96.6%
- -------------------------------------------------------------------------------------
CAPITAL GOODS--19.2%
------------------------------------------------------------------
Electronics
------------------------------------------------------------------
15,000 ** Applied Materials, Inc. $ 712,500
------------------------------------------------------------------
5,000 ** Cabletron Systems, Inc. 625,000
------------------------------------------------------------------
10,000 ** Cirrus Logic, Inc. 405,000
------------------------------------------------------------------
20,000 Modine Manufacturing Co. 545,000
------------------------------------------------------------------
15,000 Molex, Inc. 510,000
------------------------------------------------------------------
15,000 ** Silicon Graphics, Inc. 358,125
------------------------------------------------------------------
15,000 ** Symantec Corp. 208,125
------------------------------------------------------------------
5,000 ** Wellfleet Communications, Inc. 397,500
------------------------------------------------------------------ -----------
Total 3,761,250
------------------------------------------------------------------ -----------
Machinery and Machine Tools
------------------------------------------------------------------
10,000 Stewart & Stevenson Services, Inc. 497,500
------------------------------------------------------------------ -----------
Newspapers and Publishing
------------------------------------------------------------------
35,000 ** Harte Hanks Communications 717,500
------------------------------------------------------------------ -----------
Office Equipment
------------------------------------------------------------------
10,000 ** Office Depot, Inc. 370,000
------------------------------------------------------------------ -----------
Total Capital Goods 5,346,250
------------------------------------------------------------------ -----------
CONSUMER DURABLES--8.0%
------------------------------------------------------------------
Automotive and Related
------------------------------------------------------------------
25,000 ** Bailey Corp. 325,000
------------------------------------------------------------------
15,000 Harley Davidson, Inc. 735,000
------------------------------------------------------------------
15,000 Magna International, Inc. 729,375
------------------------------------------------------------------
25,000 ** Top Source, Inc. 143,750
------------------------------------------------------------------ -----------
Total 1,933,125
------------------------------------------------------------------ -----------
</TABLE>
MARSHALL MID-CAP STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
CONSUMER DURABLES--CONTINUED
------------------------------------------------------------------
Building and Forest Products
------------------------------------------------------------------
10,000 Medusa Corp. $ 310,000
------------------------------------------------------------------ -----------
Total Consumer Durables 2,243,125
------------------------------------------------------------------ -----------
CONSUMER NON-DURABLES--51.2%
------------------------------------------------------------------
Beverage and Foods
------------------------------------------------------------------
10,000 ** Brinker International, Inc. 452,500
------------------------------------------------------------------
15,000 Cracker Barrel Old Country Style, Inc.++ 393,750
------------------------------------------------------------------
20,000 Dean Foods Co. 630,000
------------------------------------------------------------------
10,000 Pioneer Hi Bred International, Inc. 367,500
------------------------------------------------------------------ -----------
Total 1,843,750
------------------------------------------------------------------ -----------
Drugs
------------------------------------------------------------------
15,000 IVAX Corp. ++ 526,875
------------------------------------------------------------------ -----------
Environmental
------------------------------------------------------------------
25,000 ** USA Waste Services, Inc. 328,125
------------------------------------------------------------------ -----------
Health Care
------------------------------------------------------------------
6,000 ** Chiron Corp. 465,000
------------------------------------------------------------------
10,000 ** Forest Labs, Inc. 501,250
------------------------------------------------------------------
15,000 ** Healthsouth Rehabilitation 442,500
------------------------------------------------------------------
25,000 ** Healthtrust, Inc. 709,375
------------------------------------------------------------------
10,000 ** Kendall International, Inc. 445,000
------------------------------------------------------------------
30,000 ** North American Vaccine, Inc. 345,000
------------------------------------------------------------------
20,000 ** Perrigo Co. 580,000
------------------------------------------------------------------
10,000 ** Renal Treatment Centers, Inc. 237,500
------------------------------------------------------------------
10,000 U.S. Healthcare, Inc. 635,000
------------------------------------------------------------------ -----------
Total 4,360,625
------------------------------------------------------------------ -----------
</TABLE>
MARSHALL MID-CAP STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
CONSUMER NON-DURABLES--CONTINUED
------------------------------------------------------------------
Leisure and Recreation
------------------------------------------------------------------
15,000 ** Circus Circus Enterprises $ 558,750
------------------------------------------------------------------
35,000 ** Host Marriott Corp. 428,750
------------------------------------------------------------------
25,000 ** Mirage Resorts, Inc. 631,250
------------------------------------------------------------------ -----------
Total 1,618,750
------------------------------------------------------------------ -----------
Retail
------------------------------------------------------------------
15,000 ** Bed, Bath & Beyond, Inc. 408,750
------------------------------------------------------------------
25,000 ** Department 56, Inc. 768,750
------------------------------------------------------------------
20,000 Heilig Myers Co. 660,000
------------------------------------------------------------------
15,000 ** Kohl's Corp. 765,000
------------------------------------------------------------------
20,000 ** Tommy Hilfiger Corp. 682,500
------------------------------------------------------------------ -----------
Total 3,285,000
------------------------------------------------------------------ -----------
Services
------------------------------------------------------------------
20,000 Cintas Corp. 635,000
------------------------------------------------------------------
12,000 Equifax, Inc. 282,000
------------------------------------------------------------------
15,000 First Data Corp. 658,125
------------------------------------------------------------------
20,000 ** Franklin Quest Co. 745,000
------------------------------------------------------------------ -----------
Total 2,320,125
------------------------------------------------------------------ -----------
Total Consumer Non-Durables 14,283,250
------------------------------------------------------------------ -----------
ENERGY--1.3%
------------------------------------------------------------------
Oil and Gas Products
------------------------------------------------------------------
20,000 ** Offshore Pipelines, Inc. 367,500
------------------------------------------------------------------ -----------
FINANCIAL--7.3%
------------------------------------------------------------------
Banks
------------------------------------------------------------------
10,000 Bank of New York, Inc. 543,750
------------------------------------------------------------------
18,700 First Virginia Banks, Inc. 710,600
------------------------------------------------------------------ -----------
Total 1,254,350
------------------------------------------------------------------ -----------
</TABLE>
MARSHALL MID-CAP STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
FINANCIAL--CONTINUED
------------------------------------------------------------------
Other Financial
------------------------------------------------------------------
30,000 Mercury Finance Co. $ 457,500
------------------------------------------------------------------
5,000 Morgan Stanley Group, Inc. 333,125
------------------------------------------------------------------ -----------
Total 790,625
------------------------------------------------------------------ -----------
Total Financial 2,044,975
------------------------------------------------------------------ -----------
RAW MATERIALS/INTERMEDIATE GOODS--3.3%
------------------------------------------------------------------
Chemicals
------------------------------------------------------------------
15,000 Witco Corp. 508,125
------------------------------------------------------------------ -----------
Steel
------------------------------------------------------------------
15,000 Huntco, Inc. 414,375
------------------------------------------------------------------ -----------
Total Raw Materials/Intermediate Goods 922,500
------------------------------------------------------------------ -----------
TRANSPORTATION--4.4%
------------------------------------------------------------------
Airlines
------------------------------------------------------------------
15,000 Southwest Airlines Co. 511,875
------------------------------------------------------------------ -----------
Railroads
------------------------------------------------------------------
10,000 ** Wisconsin Cent Transn Corp. 720,000
------------------------------------------------------------------ -----------
Total Transportation 1,231,875
------------------------------------------------------------------ -----------
UTILITIES--1.9%
------------------------------------------------------------------
Electric
------------------------------------------------------------------
20,000 ** York Research Corp.++ 91,250
------------------------------------------------------------------ -----------
Gas Distributions
------------------------------------------------------------------
10,000 Anadarko Petroleum Corp. 445,000
------------------------------------------------------------------ -----------
Total Utilities 536,250
------------------------------------------------------------------ -----------
TOTAL COMMON STOCK (IDENTIFIED COST $26,622,799) 26,975,725
------------------------------------------------------------------ -----------
</TABLE>
MARSHALL MID-CAP STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
*REPURCHASE AGREEMENT--5.5%
- -------------------------------------------------------------------------------------
$1,539,000 Goldman, Sachs & Co., 3.45%, dated 2/28/94,
due 3/1/94 (at amortized cost) (Note 2B) $ 1,539,000
------------------------------------------------------------------ -----------
TOTAL INVESTMENTS (IDENTIFIED COST $28,161,799) $28,514,725+
------------------------------------------------------------------ -----------
</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 $28,161,799. The
net unrealized appreciation on a federal tax cost basis amounts to $352,926,
which is comprised of $1,410,674 appreciation and $1,057,748 depreciation at
February 28, 1994.
++ Certain shares on loan to broker.
Note: The categories of investments are shown as a percentage of net assets
($27,903,226) at
February 28, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL MID-CAP STOCK FUND
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------------------------
Investments in securities, at value (Notes 2A and 2B)
(identified and tax cost $28,161,799) $28,514,725
- ----------------------------------------------------------------------------------- -----------
Cash 514
- -----------------------------------------------------------------------------------
Collateral for security lending (Note 2H) 1,190,000
- -----------------------------------------------------------------------------------
Receivable for investments sold 463,750
- -----------------------------------------------------------------------------------
Receivable for capital stock sold 247,756
- -----------------------------------------------------------------------------------
Dividends and interest receivable 12,313
- -----------------------------------------------------------------------------------
Prepaid/Deferred expenses (Note 2G) 18,536
- ----------------------------------------------------------------------------------- -----------
Total assets 30,447,594
- -----------------------------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------------
Payable for investments purchased $1,319,292
- ----------------------------------------------------------------------
Security lending payable (Note 2H) 1,190,000
- ----------------------------------------------------------------------
Accrued expenses and other liabilities 35,076
- ---------------------------------------------------------------------- ----------
Total liabilities 2,544,368
- ----------------------------------------------------------------------------------- -----------
NET ASSETS for 2,772,776 shares of capital stock outstanding $27,903,226
- ----------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------
Paid-in capital $27,761,896
- -----------------------------------------------------------------------------------
Unrealized appreciation of investments 352,926
- -----------------------------------------------------------------------------------
Accumulated net realized loss on investments (202,799)
- -----------------------------------------------------------------------------------
Accumulated distributions in excess of net investment income (8,797)
- ----------------------------------------------------------------------------------- -----------
Total Net Assets $27,903,226
- ----------------------------------------------------------------------------------- -----------
NET ASSET VALUE, Offering Price and Redemption Price Per Share:
(net assets of $27,903,226 / 2,772,776 shares of capital stock outstanding) $ 10.06
- ----------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL MID-CAP STOCK FUND
STATEMENT OF OPERATIONS
PERIOD ENDED FEBRUARY 28, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------
Dividends $ 41,812
- ------------------------------------------------------------------------------------
Interest 29,263
- ------------------------------------------------------------------------------------ ---------
Total investment income (Note 2C) 71,075
- ------------------------------------------------------------------------------------
EXPENSES--
- ------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $49,233
- -------------------------------------------------------------------------
Directors' fees 117
- -------------------------------------------------------------------------
Administrative personnel and services fees (Note 5) 20,274
- -------------------------------------------------------------------------
Custodian fees (Note 5) 1,313
- -------------------------------------------------------------------------
Transfer and dividend disbursing agent fees (Note 5) 3,739
- -------------------------------------------------------------------------
Recordkeeping fees (Note 5) 8,271
- -------------------------------------------------------------------------
Legal fees 1,062
- -------------------------------------------------------------------------
Taxes 407
- -------------------------------------------------------------------------
Printing and postage 3,311
- -------------------------------------------------------------------------
Shareholder services fees (Note 5) 985
- -------------------------------------------------------------------------
Miscellaneous 2,306
- ------------------------------------------------------------------------- -------
Total expenses 91,018
- -------------------------------------------------------------------------
Deduct--
- ---------------------------------------------------------------
Waiver of investment advisory fee (Note 5) $19,159
- ---------------------------------------------------------------
Waiver of administrative personnel and services fees (Note 5) 5,394
- ---------------------------------------------------------------
Waiver of custodian fees (Note 5) 821 25,374
- --------------------------------------------------------------- ------- -------
Net expenses 65,644
- ------------------------------------------------------------------------------------ ---------
Net investment income 5,431
- ------------------------------------------------------------------------------------ ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ------------------------------------------------------------------------------------
Net realized loss on investments (identified cost basis) (164,666)
- ------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments 352,926
- ------------------------------------------------------------------------------------ ---------
Net realized and unrealized gain on investments 188,260
- ------------------------------------------------------------------------------------ ---------
Change in net assets resulting from operations $ 193,691
- ------------------------------------------------------------------------------------ ---------
</TABLE>
* For the period from September 30, 1993 (date of initial public investment) to
February 28, 1994 (unaudited).
(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
1994*
-------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------
Net investment income $ 5,431
- ----------------------------------------------------------------------------
Net realized loss on investments ($164,666 net loss, as computed
for federal income tax purposes) (Note 2D) (164,666)
- ----------------------------------------------------------------------------
Net change in unrealized appreciation on investments 352,926
- ---------------------------------------------------------------------------- -------------
Change in net assets resulting from operations 193,691
- ---------------------------------------------------------------------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- ----------------------------------------------------------------------------
Dividends to shareholders from net investment income (5,431)
- ----------------------------------------------------------------------------
Distributions in excess of net investment income (8,797)
- ----------------------------------------------------------------------------
Distributions paid from capital gains (38,133)
- ---------------------------------------------------------------------------- -------------
Change in net assets resulting from distributions to shareholders (52,361)
- ---------------------------------------------------------------------------- -------------
CAPITAL STOCK TRANSACTIONS (NOTE 4)--
- ----------------------------------------------------------------------------
Proceeds from sale of shares 29,609,438
- ----------------------------------------------------------------------------
Net asset value of shares issued to shareholders electing to receive payment
of dividends in capital stock 31,053
- ----------------------------------------------------------------------------
Cost of shares redeemed (1,878,595)
- ---------------------------------------------------------------------------- -------------
Change in net assets from capital stock transactions 27,761,896
- ---------------------------------------------------------------------------- -------------
Change in net assets 27,903,226
- ----------------------------------------------------------------------------
NET ASSETS--
- ----------------------------------------------------------------------------
Beginning of period --
- ---------------------------------------------------------------------------- -------------
End of period $27,903,226
- ---------------------------------------------------------------------------- -------------
</TABLE>
* For the period from September 30, 1993 (date of initial public investment) to
February 28, 1994 (unaudited).
(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
1994*
- ------------------------------------------------------------------------------ -------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------
Net investment income 0.01
- ------------------------------------------------------------------------------
Net realized and unrealized gain on investments 0.09
- ------------------------------------------------------------------------------ ------------
Total from investment operations 0.10
- ------------------------------------------------------------------------------ ------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.01)
- ------------------------------------------------------------------------------
Distributions in excess of net investment income --
- ------------------------------------------------------------------------------
Dividends to shareholders from net capital gains (0.03)
- ------------------------------------------------------------------------------ ------------
Total distributions (0.04)
- ------------------------------------------------------------------------------ ------------
NET ASSET VALUE, END OF PERIOD $ 10.06
- ------------------------------------------------------------------------------ ------------
TOTAL RETURN** 0.97%
- ------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------
Expenses (a) 1.00%(b)
- ------------------------------------------------------------------------------
Net investment income (a) 0.08%(b)
- ------------------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.39%(b)
- ------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $27,903
- ------------------------------------------------------------------------------
Portfolio turnover rate 73%
- ------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from September 30, 1993 (date of initial
public investment) to
February 28, 1994 (unaudited).
** Based on net asset value.
<TABLE>
<C> <S>
(a) This voluntary expense decrease is reflected in both the expense and net investment
income ratios shown above (Note 5).
(b) Computed on an annualized basis.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL FUNDS, INC.
EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(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. As of February 28, 1994, the Corporation
consisted of twelve portfolios. The financial statements included herein are
only those of Marshall Balanced Fund, Marshall Equity Income, Marshall Value
Equity Fund, Marshall Stock Fund, and Marshall Mid-Cap Stock Fund (hereinafter
each individually referred to as a "Fund," or collectively as the "Funds"). The
financial statements of Marshall Money Market Fund, Marshall Government Income
Fund, Marshall Intermediate Bond Fund, Marshall Short-Term Income Fund, Marshall
Short-Term Tax Free Fund, and Marshall Intermediate Tax-Free Fund are presented
separately. As of February 28, 1994, the Marshall Tax-Free Money Market Fund was
effective but did not have public investment. The assets of each portfolio are
segregated and a shareholder's interest is limited to the portfolio in which
shares are held. The Articles of Incorporation permit shares in any portfolio to
be offered in separate classes.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles (GAAP).
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--Listed equity securities are valued at last sale prices reported
on national securities exchanges. Unlisted securities or listed securities in which there
were no sales are valued at the mean between bid and asked prices. Corporate bonds and
other fixed income securities are valued at the last sale price on a national securities
exchange on that day, if available. Unlisted bonds and other fixed income securities and
short-term obligations are valued at the prices provided by an independent pricing
service. However, short-term obligations with maturities of sixty days or less may be
valued 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 the value at least equals the
principal amount of the repurchase transaction, including accrued interest.
</TABLE>
MARSHALL FUNDS, INC.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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 guidelines established by 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. INCOME--Dividend income is recorded on the ex-dividend date. Interest income is recorded
on the accrual basis and includes interest and discount earned less any premium on
short-term obligations, and interest earned on all other debt securities, including
original issue discount as required by the Internal Revenue Code. Dividends to
shareholders and capital gain distributions, if any, are recorded on the ex-dividend
date.
D. FEDERAL TAXES--It is each Fund's policy to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies and distribute to shareholders
each year all of its taxable income, including any net realized gain on investments.
Accordingly, no provisions for federal tax are necessary.
At August 31, 1993, The Marshall Stock Fund had a net capital loss of $16,736,465,
attributable to security transactions incurred after October 31, 1992, and are treated as
arising on September 1, 1993, the first day of the Fund's 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 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.
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 sell mortgage
securities to financial institutions and simultaneously agree to repurchase substantially
similar (same type, coupon and maturity) securities at a later date at an agreed upon
price. During the period between the sale and repurchase, the Funds forego principal and
interest paid on the mortgage securities sold. The Funds are compensated by the interest
earned on the cash proceeds of the initial sale and any additional fee income received on
the sale.
G. DEFERRED EXPENSES--The costs incurred by each Fund with respect to registration of its
shares in its first fiscal year, excluding the initial expense of registering the shares,
have been deferred and are being amortized using the straight-line method over a period
of five years from the Funds' commencement date.
H. PORTFOLIO SECURITIES LOANED--Certain of 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, plus
interest, if applicable, of
</TABLE>
MARSHALL FUNDS, INC.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
investments on loan. Collateral received in the form of cash is invested in short-term
obligations by the custodian. Earnings of such short-term obligations are divided between
the custodian, as a fee for its services under the program, and the Funds, according to
agreed-upon rates. As of February 28, 1994, investments on loan and related collateral
were as follows:
</TABLE>
MARSHALL FUNDS, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
VALUE OF MARKET
SECURITIES VALUE OF
LOANED COLLATERAL
------------------------------------------------- ----------- -----------
<S> <C> <C>
Marshall Balanced Fund $ 3,109,887 $ 3,160,900
-------------------------------------------------
Marshall Equity Income Fund 1,271,075 1,298,400
-------------------------------------------------
Marshall Value Equity Fund 1,878,325 1,944,000
-------------------------------------------------
Marshall Stock Fund 67,946,681 69,053,400
-------------------------------------------------
Marshall Mid-Cap Stock Fund 1,159,375 1,190,000
-------------------------------------------------
I. OTHER--Investment transactions are accounted for on the date of the transaction.
</TABLE>
(3) DIVIDENDS
Dividends from net investment income are declared and paid quarterly.
Distributions of any net realized long-term capital gains will be made at least
once every twelve months. Dividends and capital gain distributions, if any, are
recorded on the ex-dividend date. Income distributions are determined in
accordance with income tax regulations which may differ from GAAP. These
distributions do not represent a return of capital for federal income tax
purposes.
MARSHALL FUNDS, INC.
- --------------------------------------------------------------------------------
(4) CAPITAL STOCK
The Articles of Incorporation permit the Directors to issue 50 billion full and
fractional shares of common stock (capital stock), par value $0.0001 per share.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED 1994
------------------------------------------------------------
MARSHALL MARSHALL MARSHALL
MARSHALL EQUITY VALUE MARSHALL MID-CAP
BALANCED INCOME EQUITY STOCK STOCK
FUND* FUND* FUND* FUND** FUND*
- --------------------------------------- ---------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Shares outstanding, beginning of period -- -- -- 30,660,761 --
- ---------------------------------------
Shares sold 4,108,405 4,196,229 3,880,856 4,101,226 2,955,477
- ---------------------------------------
Shares issued to shareholders electing
to receive payment of dividends in
Fund shares 18,843 21,780 1,846 129,148 3,112
- ---------------------------------------
Shares redeemed (1,671,721) (640,574) (331,130) (11,457,804) (185,813)
- --------------------------------------- ---------- --------- --------- ----------- ---------
Shares outstanding, end of period 2,455,527 3,577,435 3,551,572 23,433,331 2,772,776
- --------------------------------------- ---------- --------- --------- ----------- ---------
</TABLE>
* For the period from September 30, 1993 (date of initial public investment) to
February 28, 1994.
** Six months ended February 28, 1994.
<TABLE>
<CAPTION>
PERIOD ENDED 1993
------------------------------------------------------------
MARSHALL MARSHALL MARSHALL
MARSHALL EQUITY VALUE MARSHALL MID-CAP
BALANCED INCOME EQUITY STOCK STOCK
FUND FUND FUND FUND*** FUND
- --------------------------------------- ---------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Shares outstanding, beginning of period -- -- -- -- --
- ---------------------------------------
Shares sold -- -- -- 33,240,827 --
- ---------------------------------------
Shares issued to shareholders electing
to receive payment of dividends in
Fund shares -- -- -- 243,627 --
- ---------------------------------------
Shares redeemed -- -- -- (2,823,693) --
- --------------------------------------- ---------- --------- --------- ----------- ---------
Shares outstanding, end of period -- -- -- 30,660,761 --
- --------------------------------------- ---------- --------- --------- ----------- ---------
</TABLE>
*** For the period from November 23, 1992 (date of initial public investment)
to August 31, 1993.
MARSHALL FUNDS, INC.
- --------------------------------------------------------------------------------
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
M&I Investment Management Corp., the Fund's investment adviser ("Adviser"),
receives for its services an annual investment advisory fee equal to .75 of 1%
of the average daily net assets for Marshall Balanced Fund, Marshall Equity
Income Fund, Marshall Value Equity Fund, Marshall Stock Fund, and Marshall
Mid-Cap Stock Fund. The Adviser may voluntarily choose to waive a portion of its
fee or reimburse certain operating expenses of each Fund.
Federated Administrative Services ("FAS") provides for each Fund certain
administrative personnel and services. The fee is based on the level of average
net assets for the period. FAS may voluntarily choose to waive a portion of its
fee from each Fund.
Marshall & Ilsley Trust Company is the Funds' custodian. The fee is based on the
level of average net assets for the period plus out-of-pocket expenses. The
custodian may voluntarily choose to waive a portion of its fee from each Fund.
Organization expenses were borne initially by FAS. The Funds have agreed to
reimburse FAS for the organization expenses borne by FAS during the five year
period following the date the Funds' portfolio became effective. For the period
ended February 28, 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 $ 25,000 $ 462
- -----------------------------------------------------------
Marshall Equity Income Fund 25,000 487
- -----------------------------------------------------------
Marshall Value Equity Fund 25,000 483
- -----------------------------------------------------------
Marshall Stock Fund 30,018 1,226
- -----------------------------------------------------------
Marshall Mid-Cap Stock Fund 25,000 460
- -----------------------------------------------------------
</TABLE>
Federated Services Company serves as transfer agent and dividend disbursing
agent for the Funds. The Funds pay fees based on the type, size, number of
accounts and number of transactions made by shareholders.
Federated Services Company also maintains the Funds' accounting records. The fee
is based on the level of average net assets for the period plus out-of-pocket
expenses.
Marshall Funds Investor 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 average
net assets for the period.
MARSHALL FUNDS, INC.
- --------------------------------------------------------------------------------
Certain Officers and Directors of the Funds are also Officers and Directors or
Trustees of the above companies.
(6) INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term obligations), for the
period ended February 28, 1994, for each Fund were as follows:
<TABLE>
<CAPTION>
MARSHALL MARSHALL MARSHALL
MARSHALL EQUITY VALUE MARSHALL MID-CAP
BALANCED INCOME EQUITY STOCK STOCK
FUND FUND FUND FUND FUND
- --------------------------------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
PURCHASES $37,836,533 $37,976,579 $35,789,898 $112,881,132 $37,671,937
- --------------------------------- ----------- ----------- ----------- ------------ -----------
SALES $13,693,370 $ 5,556,632 $ 3,726,025 $181,079,715 $10,884,472
- --------------------------------- ----------- ----------- ----------- ------------ -----------
</TABLE>
<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 obligations of or insured by any bank nor are they insured
by the federal government or any of its agencies. Investment in these shares
involves risk, including the 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 investment objective and
policies, management fees, expenses and other information.
4030404 (4/94)
Marshall
Money
Market
Fund
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
February 28, 1994
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
3091409 (4/94)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report of the Marshall Money Market Fund
for the six-month period ended February 28, 1994. It provides you with complete
financial information for the Fund, including an investment review by the
portfolio manager, a complete list of investments, and the financial statements.
To put your cash to work earning competitive income, the Fund invests 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 had climbed
to $983 million at the end of the report period.
Thank you for putting your cash to work through the Marshall Money Market Fund.
As always, we welcome your questions or comments.
Sincerely,
James F. Duca, II
President
Marshall Funds, Inc.
April 15, 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
- --------------------------------------------------------------------------------
Interest rates are not waiting! Economic growth is slowing from the blistering
pace of the last quarter of 1993, during which real GDP soared at a 7.5% rate.
When taxes were raised last year, politicians insisted a shrinking Federal
budget deficit would placate investors' fears. Inflation remains in check, with
the Consumer Price Index ("CPI") up 2.5% in the last year and other measures
showing even less price pressure.
Still, interest rates are already heading higher. Worries about the possibility
of accelerating inflation later this year--or even next--sparked an almost 1%
rise in long-term Treasury yields from the October low through the end of
February. Short-term rates, which held steady for more than a year, also began
edging higher in early February, following the Federal Reserve's first
tightening move.
Rising interest rates make all but certain a deceleration from the late 1993
pace of economic growth. Housing and related purchases accounted for a
disproportionate share of the gain last year. In addition, lower monthly
payments on mortgages refinanced at historically low rates freed up funds for
other purchases. With these forces now diminished, economic growth for all of
1994 should only marginally exceed that of the last two years.
For the months ahead, inflation should stay under 3%, but investors worry,
perhaps prematurely, that it will not remain at these relatively restrained
rates. Unit labor costs, up less than 1% in the last year, however, foreshadow
modest inflation numbers. Over the long run, the rise in the cost of labor and
the CPI closely correlate. Increasing commodity prices, rising capacity
utilization rates, and a more restrictive Fed are the focus of current concerns.
The emergence of these typically late cycle characteristics apparently is
convincing markets not to wait for actual manifestations of accelerating
inflation.
MARSHALL MONEY MARKET FUND
For the six-month period ended February 28, 1994, the Fund provided a total
return of 1.49%.* This compares to Donoghue's Taxable Money Fund Average return
of 1.34%. In anticipation of rising interest rates, the average maturity of the
Fund was shortened from 63 days to 52 days. This strategy proved beneficial, as
on February 4, 1994, the Federal Reserve ended 17 months of inaction and raised
short-term interest rates 0.25%. On March 22, 1994, another 0.25% raise was
implemented, bringing the Fed Funds Rate up to 3.50%.
For the rest of 1994, the credit markets will be focused on whether the Federal
Reserve has raised rates enough to dampen inflation fears. Despite moderate
economic growth and low inflation, it appears likely the Federal Reserve will
act again to increase the Fed Funds Rate. Our strategy for the Fund continues to
be a shortening of the average maturity in anticipation of higher rates.
* Performance quoted represents past performance and is not indicative of future
returns.
MARSHALL MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
CERTIFICATES OF DEPOSIT--YANKEE--8.1%
- ------------------------------------------------------------------------------------
$30,000,000 Dai-Ichi Kangyo Bank, 3.18%, 4/26/94--5/3/94 $30,001,152
----------------------------------------------------------------
40,000,000 Fuji Bank of New York, 3.15%--3.25%, 3/11/94--4/21/94 40,001,155
----------------------------------------------------------------
10,000,000 Mitsubishi Bank of New York, 3.42%, 3/31/94 10,002,425
---------------------------------------------------------------- -----------
TOTAL CERTIFICATES OF DEPOSIT--YANKEE 80,004,732
---------------------------------------------------------------- -----------
*COMMERCIAL PAPER--48.4%
- ------------------------------------------------------------------------------------
ASSET-BACKED--17.7%
----------------------------------------------------------------
10,000,000 Beta Finance, Inc., 3.40%, 4/11/94 9,961,278
----------------------------------------------------------------
37,700,000 CIESCO, Inc., 3.11%--3.15%, 3/7/94--5/2/94 37,594,697
----------------------------------------------------------------
44,000,000 Corporate Asset Funding Corp., 3.08%--3.39%, 3/2/94--4/11/94 43,931,050
----------------------------------------------------------------
43,000,000 Corporate Receivables Corp., 3.11%--3.40%, 3/3/94--5/4/94 42,867,415
----------------------------------------------------------------
40,000,000 PREFCO, 3.45%--3.48%, 4/18/94--4/21/94 39,809,450
---------------------------------------------------------------- -----------
Total 174,163,890
---------------------------------------------------------------- -----------
BANKING--3.1%
----------------------------------------------------------------
15,000,000 Abbey National N.A. Corp., 3.21%, 3/21/94 14,973,250
----------------------------------------------------------------
15,000,000 Government Development Bank of Puerto Rico, 3.10%, 3/15/94 14,981,917
---------------------------------------------------------------- -----------
Total 29,955,167
---------------------------------------------------------------- -----------
CHEMICALS--0.7%
----------------------------------------------------------------
7,000,000 Waste Management, Inc., 3.13%, 3/9/94 6,995,131
---------------------------------------------------------------- -----------
CONSUMER ELECTRONICS--2.0%
----------------------------------------------------------------
20,000,000 Sony Capital Corp., 3.11%, 4/5/94 19,939,528
---------------------------------------------------------------- -----------
ELECTRICAL EQUIPMENT--1.7%
----------------------------------------------------------------
17,000,000 General Electric Co., 3.16%--3.17%, 3/8/94--3/14/94 16,985,841
---------------------------------------------------------------- -----------
FINANCE--AUTOMOTIVE--2.6%
----------------------------------------------------------------
26,000,000 General Motors Acceptance Corp., 3.12%--3.17%, 3/25/94--4/13/94 25,913,738
---------------------------------------------------------------- -----------
</TABLE>
MARSHALL MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
*COMMERCIAL PAPER--CONTINUED
- ------------------------------------------------------------------------------------
FINANCE--COMMERCIAL--6.3%
----------------------------------------------------------------
$15,000,000 General Electric Capital Corp., 3.35%, 3/3/94 $14,997,208
----------------------------------------------------------------
47,000,000 Whirlpool Financial Corp., 3.08%--3.14%, 3/10/94--4/14/94 46,867,191
---------------------------------------------------------------- -----------
Total 61,864,399
---------------------------------------------------------------- -----------
FOOD AND BEVERAGES--6.0%
----------------------------------------------------------------
42,000,000 Coca-Cola Enterprises, Inc., 3.12%--3.45%, 3/2/94--4/19/94 41,909,006
----------------------------------------------------------------
17,500,000 PepsiCo, Inc., 3.20%, 4/29/94 17,408,222
---------------------------------------------------------------- -----------
Total 59,317,228
---------------------------------------------------------------- -----------
LEASING--4.0%
----------------------------------------------------------------
40,000,000 International Lease Finance Corp., 3.46%--3.57%, 4/18/94--5/3/94 39,782,783
---------------------------------------------------------------- -----------
MOVIES/ENTERTAINMENT--1.3%
----------------------------------------------------------------
12,000,000 MCA Funding Corp., 3.21%, 3/1/94 12,000,000
---------------------------------------------------------------- -----------
PHOTOGRAPHIC PRODUCTS--1.5%
----------------------------------------------------------------
14,200,000 Fuji Photo Film, 3.12%, 4/20/94 14,138,467
---------------------------------------------------------------- -----------
RAILWAYS--1.5%
----------------------------------------------------------------
15,000,000 Union Pacific Corp., 3.45%, 4/8/94 14,945,375
---------------------------------------------------------------- -----------
TOTAL COMMERCIAL PAPER 476,001,547
---------------------------------------------------------------- -----------
CORPORATE BONDS--1.4%
- ------------------------------------------------------------------------------------
13,500,000 General Motors Acceptance Corp., 5.25%-8.15%, 7/13/94-9/15/94 13,619,052
---------------------------------------------------------------- -----------
MEDIUM TERM NOTES--1.5%
- ------------------------------------------------------------------------------------
BROKER/DEALER
----------------------------------------------------------------
15,000,000 Bear, Stearns & Co., Inc., 3.3031%, 2/7/95 15,000,000
---------------------------------------------------------------- -----------
**VARIABLE RATE NOTES--39.3%
- ------------------------------------------------------------------------------------
ASSET-BACKED--2.7%
----------------------------------------------------------------
6,201,461 Capital Auto Receivables Asset, 3.30%, 10/17/94 6,200,282
----------------------------------------------------------------
20,000,000 Premier Auto Trust, 3.28%, 2/2/95 20,000,000
---------------------------------------------------------------- -----------
Total 26,200,282
---------------------------------------------------------------- -----------
</TABLE>
MARSHALL MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
**VARIABLE RATE NOTES--CONTINUED
- ------------------------------------------------------------------------------------
BROKERS/DEALERS--19.1%
----------------------------------------------------------------
$22,000,000 Bear, Stearns & Co., Inc., 3.2656%--3.70%, 4/26/94--9/29/94 $22,000,000
----------------------------------------------------------------
7,000,000 Bear, Stearns & Co., Inc., 3.2656%--3.70%, 4/26/94--9/29/94 6,996,084
----------------------------------------------------------------
41,000,000 Donaldson, Lufkin, & Jenrette, 3.375%, 3/1/94--5/18/94 41,000,000
----------------------------------------------------------------
4,000,000 Donaldson, Lufkin, & Jenrette, 3.375%, 3/1/94 4,000,000
----------------------------------------------------------------
20,000,000 Goldman, Sachs & Co., 3.25%, 1/13/95 20,000,000
----------------------------------------------------------------
15,000,000 Goldman, Sachs & Co. LP., 3.50%, 4/29/94 15,000,000
----------------------------------------------------------------
6,300,000 J.P. Morgan Securities, Inc., 3.225%, 3/1/94 6,300,000
----------------------------------------------------------------
38,700,000 J.P. Morgan Securities, Inc., 3.225%, 3/1/94 38,700,000
----------------------------------------------------------------
30,000,000 Lehman Brothers Securities, Inc., 3.75%-4.275%, 5/19/94-2/15/95 30,117,000
----------------------------------------------------------------
4,000,000 Lehman Brothers Securities, Inc., 3.8125%, 5/19/94 4,000,935
---------------------------------------------------------------- -----------
Total 188,114,019
---------------------------------------------------------------- -----------
FINANCE--AUTOMOTIVE--4.1%
----------------------------------------------------------------
4,000,000 Ford Motor Credit Co., 8.00%, 6/1/94 4,043,628
----------------------------------------------------------------
27,900,000 Ford Motor Credit Co., 5.50%-5.70%, 12/5/94-12/23/94 28,289,598
----------------------------------------------------------------
8,050,000 General Motors Acceptance Corp., 8.30%-8.50%, 3/7/94-3/21/94 8,060,915
---------------------------------------------------------------- -----------
Total 40,394,141
---------------------------------------------------------------- -----------
FINANCE--COMMERCIAL--2.1%
----------------------------------------------------------------
16,000,000 John Deere Capital Corp., 3.30%, 7/13/94 16,000,000
----------------------------------------------------------------
5,000,000 John Deere Capital Corp., 3.425%, 7/13/94 4,996,261
---------------------------------------------------------------- -----------
Total 20,996,261
---------------------------------------------------------------- -----------
GOVERNMENT AGENCY--1.6%
----------------------------------------------------------------
15,585,000 Student Loan Marketing Association, 3.56%, 3/2/94 15,589,320
---------------------------------------------------------------- -----------
INSURANCE--4.1%
----------------------------------------------------------------
40,000,000 Commonwealth Life Insurance Co., 3.48%, 5/31/94 40,000,000
---------------------------------------------------------------- -----------
LEASING--4.1%
----------------------------------------------------------------
37,000,000 Concord Leasing, 3.30%, 6/30/94 37,000,000
----------------------------------------------------------------
3,050,000 International Lease Finance Corp., 8.45%, 9/1/94 3,119,242
---------------------------------------------------------------- -----------
Total 40,119,242
---------------------------------------------------------------- -----------
</TABLE>
MARSHALL MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
**VARIABLE RATE NOTES--CONTINUED
- ------------------------------------------------------------------------------------
UTILITIES--1.5%
----------------------------------------------------------------
$ 4,999,000 Wisconsin Gas Co., 3.38%, 3/1/94 $ 4,999,000
----------------------------------------------------------------
10,000,000 Wisconsin Public Service Corp., 3.42%, 3/1/94--5/11/94 10,000,000
---------------------------------------------------------------- -----------
Total 14,999,000
---------------------------------------------------------------- -----------
TOTAL VARIABLE RATE NOTES 386,412,265
---------------------------------------------------------------- -----------
***REPURCHASE AGREEMENT--1.2%
- ------------------------------------------------------------------------------------
11,388,000 Goldman, Sachs & Co., 3.45%, dated 2/28/94, due 3/1/94 (Note 2B) 11,388,000
---------------------------------------------------------------- ----------
TOTAL INVESTMENTS, (AT AMORTIZED COST) $982,425,596+
---------------------------------------------------------------- ----------
</TABLE>
* Each issue shows the rate of discount at the time of purchase.
** Current rate and next demand date shown.
*** The repurchase agreement is fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
+ Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($983,541,658) at February 28, 1994.
(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>
PERIOD ENDED
-----------------
1994** 1993*
------ ------
<S> <C> <C>
- -----------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00
- -----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------
Net investment income 0.01 0.02
- ----------------------------------------------------------------------- ------ ------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------
Dividends to shareholders from net investment income (0.01) (0.02)
- ----------------------------------------------------------------------- ------ ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00
- ----------------------------------------------------------------------- ------ ------
TOTAL RETURN*** 1.34% 1.89%
- -----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------
Expenses(a) 0.70%(b) 0.72%(b)
- -----------------------------------------------------------------------
Net investment income(a) 2.74%(b) 2.72%(b)
- -----------------------------------------------------------------------
Expense waiver/reimbursement(a) 0.28%(b) 0.28%(b)
- -----------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------
Net assets, end of period (000 omitted) $4,765 $1,980
- -----------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from December 17, 1992 (date of initial
public investment) to August 31, 1993.
** Six months ended February 28, 1994 (unaudited).
*** Based on net asset value.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(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>
PERIOD ENDED
--------------------------
1994** 1993*
-------- --------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00
- -------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------
Net investment income 0.01 0.02
- ------------------------------------------------------------- -------- --------
LESS DISTRIBUTIONS
- -------------------------------------------------------------
Dividends to shareholders from net investment income (0.01) (0.02)
- ------------------------------------------------------------- -------- --------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00
- ------------------------------------------------------------- -------- --------
TOTAL RETURN*** 1.49% 2.33%
- -------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------
Expenses(a) 0.40%(b) 0.40%(b)
- -------------------------------------------------------------
Net investment income(a) 3.00%(b) 2.97%(b)
- -------------------------------------------------------------
Expense waiver/reimbursement(a) 0.28%(b) 0.28%(b)
- -------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------
Net assets, end of period (000 omitted) $978,777 $775,890
- -------------------------------------------------------------
</TABLE>
* Reflects operations from November 23, 1992 (date of initial public
investment) to August 31, 1993.
** Six months ended February 28, 1994 (unaudited).
*** Based on net asset value.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
MARSHALL MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------
Investments in securities, at value (Note 2A and 2B) $ 982,425,596
- -------------------------------------------------------------------------------
Cash 200,426
- -------------------------------------------------------------------------------
Receivable for capital stock sold 92,444
- -------------------------------------------------------------------------------
Interest receivable 3,178,653
- -------------------------------------------------------------------------------
Prepaid/Deferred Expenses (Note 2F) 202,195
- ------------------------------------------------------------------------------- -------------
Total assets 986,099,314
- -------------------------------------------------------------------------------
LIABILITIES:
- ------------------------------------------------------------------
Dividends payable $1,979,671
- ------------------------------------------------------------------
Payable for capital stock redeemed 344,412
- ------------------------------------------------------------------
Accrued expenses and other liabilities 233,573
- ------------------------------------------------------------------ ----------
Total liabilities 2,557,656
- ------------------------------------------------------------------------------- -------------
NET ASSETS for 983,541,658 shares of capital stock outstanding $ 983,541,658
- ------------------------------------------------------------------------------- -------------
NET ASSET VALUE, Offering Price and Redemption Price Per Share:
Trust Shares (net assets of $978,776,782 / 978,776,782 shares of
capital stock outstanding) $1.00
- ------------------------------------------------------------------------------- -------------
Investment Shares (net assets of $4,764,876 / 4,764,876 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
SIX MONTHS ENDED FEBRUARY 28, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------
Interest income (Note 2C) $14,507,432
- -----------------------------------------------------------------------------------
EXPENSES--
- -----------------------------------------------------------------------------------
Investment advisory fee (Note 5) $2,133,282
- ---------------------------------------------------------------------
Director's fees 6,821
- ---------------------------------------------------------------------
Administrative personnel and services fees (Note 5) 415,540
- ---------------------------------------------------------------------
Custodian fees (Note 5) 55,177
- ---------------------------------------------------------------------
Transfer and dividend disbursing agent fees (Note 5) 38,656
- ---------------------------------------------------------------------
Recordkeeping fee (Note 5) 69,895
- ---------------------------------------------------------------------
Legal fees 11,892
- ---------------------------------------------------------------------
Auditing fees 6,094
- ---------------------------------------------------------------------
Registration fees 61,307
- ---------------------------------------------------------------------
Taxes 35,033
- ---------------------------------------------------------------------
Insurance 7,350
- ---------------------------------------------------------------------
Printing and postage 7,633
- ---------------------------------------------------------------------
Shareholder services fees (Note 5) 63,998
- ---------------------------------------------------------------------
Distribution services fees (Note 5) 3,424
- ---------------------------------------------------------------------
Miscellaneous 11,764
- --------------------------------------------------------------------- ----------
Total expenses 2,927,866
- ---------------------------------------------------------------------
Deduct--
- --------------------------------------------------------
Waiver of investment advisory fee (Note 5) $1,194,638
- --------------------------------------------------------
Waiver of custodian fees (Note 5) 23,178 1,217,816
- -------------------------------------------------------- ---------- ----------
Net expenses 1,710,050
- ----------------------------------------------------------------------------------- -----------
Net investment income $12,797,382
- ----------------------------------------------------------------------------------- -----------
</TABLE>
* (unaudited)
(See Notes which are an integral part of the Financial Statements)
MARSHALL MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
-----------------------------------
1994** 1993*
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------
Net investment income $ 12,797,382 $ 16,462,620
- ----------------------------------------------------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- -----------------------------------------------------------
Dividends to shareholders from net investment income
Trust Shares (12,766,064) (16,431,216)
- -----------------------------------------------------------
Investment Shares (31,318) (31,404)
- ----------------------------------------------------------- --------------- ---------------
Total (12,797,382) (16,462,620)
- ----------------------------------------------------------- --------------- ---------------
CAPITAL STOCK TRANSACTIONS (NOTE 4)--
- -----------------------------------------------------------
Proceeds from sale of shares 1,362,754,948 2,335,502,436
- -----------------------------------------------------------
Net asset value of shares issued to shareholders electing
to receive payment of dividends in capital stock 1,584,193 2,389,738
- -----------------------------------------------------------
Cost of shares redeemed (1,158,668,114) (1,560,121,643)
- ----------------------------------------------------------- --------------- ---------------
Change in net assets from capital stock transactions 205,671,027 777,770,531
- ----------------------------------------------------------- --------------- ---------------
Change in net assets 205,671,027 777,770,531
- -----------------------------------------------------------
NET ASSETS --
- -----------------------------------------------------------
Beginning of period 777,870,631 100,100
- ----------------------------------------------------------- --------------- ---------------
End of period $ 983,541,658 $ 777,870,631
- ----------------------------------------------------------- --------------- ---------------
</TABLE>
* For the period from September 23, 1992 (start of business) to August 31,
1993.
** Six months ended February 28, 1994 (unaudited).
(See Notes which are an integral part of the Financial Statements)
MARSHALL MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(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 currently consists of twelve
portfolios. The financial statements included herein are only those of Marshall
Money Market Fund (the "Fund"). The financial statements of Marshall Government
Income Fund, Marshall Intermediate Bond Fund, Marshall Short-Term Income Fund,
Marshall Balanced Fund, Marshall Equity Income Fund, Marshall Value Equity Fund,
Marshall Stock Fund, Marshall Mid-Cap Stock Fund, Marshall Short-Term Tax-Free
Fund, and Marshall Intermediate Tax-Free Fund are presented separately. As of
February 28, 1994, Marshall Tax-Free Money Market Fund was effective but did not
have public investment. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
Articles of Incorporation permit shares in any portfolio to be offered in
separate classes.
The Fund provides two classes of shares, known as Trust Shares and Investment
Shares. Investment Shares will be identical in all respects to Trust Shares
except that Investment Shares will be sold pursuant to a distribution plan
("Plan") adopted in accordance with Investment Company Act Rule 12b-1.
(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. The
policies are in conformity with generally accepted accounting principles (GAAP).
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--The Fund uses the amortized cost method to value its portfolio
securities in accordance with Rule 2a-7 under the Investment Company Act of 1940.
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 the value at least equals the principal
amount of the repurchase transaction, 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 guidelines established by the Directors. Risks may arise from
the potential inability of
</TABLE>
MARSHALL MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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. INCOME--Interest income is recorded on the accrual basis and includes discount earned
less any premium, plus short-term gain if any.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute to
shareholders each year 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 will record when-issued securities 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.
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 the shares,
have been deferred and are being amortized using the straight-line method over a period
of five years from the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the date of the transaction.
</TABLE>
(3) DIVIDENDS
Dividends from net investment income are declared daily and paid monthly.
Distributions of any net realized capital gains are made at least once every
twelve months. Dividends and capital gain distributions, if any, are recorded on
the ex-dividend date.
MARSHALL MONEY MARKET FUND
- --------------------------------------------------------------------------------
(4) CAPITAL STOCK
The Articles of Incorporation permit the Directors to issue 50 billion full and
fractional shares of common stock (capital stock), par value $.0001 per share.
At February 28, 1994, the Fund's capital paid-in aggregated $983,541,658.
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
---------------------------------
1994** 1993*
-------------- --------------
TRUST SHARES SHARES SHARES
<S> <C> <C>
- ------------------------------------------------------------ -------------- --------------
Shares outstanding, beginning of period 775,890,353 100,000
- ------------------------------------------------------------
Shares sold 1,346,440,829 2,319,027,553
- ------------------------------------------------------------
Shares issued to shareholders electing to receive payment of
dividends in capital stock 1,554,701 2,358,435
- ------------------------------------------------------------
Shares redeemed (1,145,109,101) (1,545,595,634)
- ------------------------------------------------------------ -------------- --------------
Shares outstanding, end of period 978,776,782 775,890,354
- ------------------------------------------------------------ -------------- --------------
</TABLE>
* For the period from September 23, 1992 (start of business) to August 31,
1993.
** Six months ended February 28, 1994.
<TABLE>
<CAPTION>
PERIOD ENDED
-----------------------------
1994** 1993*
----------- -----------
INVESTMENT SHARES SHARES SHARES
<S> <C> <C>
- ---------------------------------------------------------------- ----------- -----------
Shares outstanding, beginning of period 1,980,278 100
- ----------------------------------------------------------------
Shares sold 16,314,119 16,474,883
- ----------------------------------------------------------------
Shares issued to shareholders electing to receive payment of
dividends in capital stock 29,492 31,303
- ----------------------------------------------------------------
Shares redeemed (13,559,013) (14,526,009)
- ---------------------------------------------------------------- ----------- -----------
Shares outstanding, end of period 4,764,876 1,980,277
- ---------------------------------------------------------------- ----------- -----------
</TABLE>
* For the period from September 23, 1992 (start of business) to August 31,
1993.
** Six months ended February 28, 1994.
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
M&I Investment Management Corp., the Fund's investment adviser ("Adviser"),
receives for its services an annual investment advisory fee equal to .50 of 1%
of the Fund's average daily net assets.
MARSHALL MONEY MARKET FUND
- --------------------------------------------------------------------------------
The Adviser may voluntarily choose to waive a portion of its fee or reimburse
certain operating expenses of the Fund.
Federated Administrative Services ("FAS") provides the Fund with certain
administrative personnel and services. The fee is based on the level of average
aggregate net assets of the Fund for the period. FAS may voluntarily choose to
waive a portion of its fee.
Marshall & Ilsley Trust Company is the Fund's custodian. The fee is based on the
level of average net assets for the period plus out-of-pocket expenses. The
custodian may voluntarily choose to waive a portion of its fee from the Fund.
Federated Services Company serves as transfer agent and dividend disbursing
agent for the Fund. The Fund pays fees based on the type, size, number of
accounts and number of transactions made by shareholders.
Federated Services Company also maintains the Fund's accounting records. The fee
is based on the level of average net assets for the period plus out-of-pocket
expenses.
The Fund has adopted the Plan pursuant to Rule 12b-1 under the Investment
Company Act of 1940. The Fund will compensate Federated Securities Corp.
("FSC"), the principal distributor, from the assets of Investment Shares of the
Fund to finance activities principally intended to result in the sale of
Investment Shares subject to the Plan. The Plan provides that the Fund will pay
up to .30 of 1% of the average daily net assets of Investment Shares, annually,
to pay commissions, maintenance fees and to compensate the distributor. FSC may
voluntarily waive a portion of its fee.
Marshall Funds Investor 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 personnel services for shareholders and
the maintenance of shareholder accounts. The fee is based on the level of
average net assets for the period.
Organization expenses were borne initially by FAS. The Funds have agreed to
reimburse FAS for the organization expenses borne by FAS during the five-year
period following the date the Funds' portfolio first became effective. For the
six months ended February 28, 1994, $2,551 was paid to FAS pursuant to this
agreement.
Certain Officers and Directors of the Fund are Officers and Directors of the
above companies.
<TABLE>
<S> <C>
DIRECTORS OFFICERS
- --------------------------------------------------------------------------------
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 obligations of or insured by any bank nor are they insured
by the federal government or any of its agencies.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus which contains facts
concerning its investment objective and policies, management fees,
expenses, and other information.
4030406 (4/94)
