MARSHALL FUNDS
Dear Shareholder:
I am pleased to present the Annual Report of the Marshall Funds, Inc. for the
fiscal year ended August 31, 1995.
The last twelve months showed considerable strength in both the stock and bond
markets. The S&P 500 Stock Index* rose a remarkable 21.45%. Bonds, as measured
by the Lehman Brothers Intermediate Bond Index,* rose 9.47% during that time.
During this period of strong markets, the Marshall Funds fared relatively well
and most finished the year with performance competitive with that of the
averages for comparable funds and their market index benchmarks. Here are a few
examples.
Perhaps the most impressive performance was turned in by the Marshall Mid-Cap
Stock Fund which ended its fiscal year with a total return of 27.06%** compared
with its index, the S&P MidCap 400 Index,* which turned in a record of 20.50%
for the same period. Lipper Analytical Services, Inc. ranked the Mid-Cap Stock
Fund 20th out of the 92 funds in the Mid-Cap Funds category, based on total
return, for the one-year period ended September 30, 1995.
Over the last twelve months, performance of world stock markets was generally
not as strong as that of the domestic market. Nevertheless, we are very pleased
with the performance of the newest addition to the Marshall Funds family, the
Marshall International Stock Fund. This Fund completed its first fiscal year
with a total return of 2.11%** compared with its index benchmark, the Morgan
Stanley Capital International Europe, Australia and Far East (EAFE) Index*
which returned 0.5%. This performance ranked the Fund 34th out of 221
international stock funds by Lipper Analytical Services, Inc., based on total
return, for the one-year period ended September 30, 1995.
Once again, the Marshall Money Market Fund had an impressive year. Its fiscal
year total return performance was 5.57%** for Class A shares and 5.25%** for
Class B shares, compared with the IBC/Donoghue's Taxable Money Fund Average*
which returned 5.25% for the period. The Marshall Money Market Fund's Class A
shares and Class B shares had average annual total returns of 5.66%** and
5.35%,** respectively, for the period ended September 30, 1995, compared to the
Money Fund Report average of 5.25% as reported in IBC/Donoghue.*
Another impressive performance in total return for the one-year period ended
September 30, 1995 came from the Marshall Government Income Fund. It was ranked
15th out of 59 U.S. Mortgage Funds as compiled by Lipper Analytical Services,
Inc.
Additionally, the Marshall Equity Income Fund ranked 14th out of 118 Equity
Income Funds as reported by Lipper Analytical Services, Inc. for the one-year
period ended September 30, 1995, placing it in the top 12%.
These are just a few illustrations of the successes of the Marshall Funds over
the past year. I encourage you to read the Management Discussion & Analysis for
each Fund for more details. Perhaps you will find an additional Marshall Fund
that fits your investment needs. If you have questions, or would like further
information, please contact our investor services department at 800-236-8554.
We value you as a Marshall Funds Investor and thank you for your continued
confidence in our family of mutual funds.
Very truly yours,
James F. Duca, II President October 15, 1995
- ------
*These indices are unmanaged.
** Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
SHARES OF THE MARSHALL FUNDS, INC., ARE NOT DEPOSITS OR OBLIGATIONS OF OR
ENDORSED OR GUARANTEED BY M&I BANKS OR ANY OF ITS BANKING SUBSIDIARIES. THE
FUND SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE FDIC, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENTS IN MUTUAL FUNDS INVOLVE RISK
AND POSSIBLE LOSS OF PRINCIPAL.
MANAGEMENT DISCUSSION & ANALYSIS
EQUITY INCOME FUND
The investment objective of the Marshall Equity Income Fund is to provide
above-average dividend income with appreciation of capital. The Fund pursues
this objective by investing in a broadly diversified portfolio of common stocks
with above- average dividend yields. The portfolio is structured to pursue a
yield at least 100 basis points (1%) more than the Standard & Poor's 500 Index
("S&P 500").* On August 31, 1995, the S&P 500 had a dividend yield of 2.40%,
while the Fund had a SEC 30-day yield (total income less fees and expenses) of
3.05%.** We feel it is important to note that the yield of the S&P 500 is at an
all-time low.
Since December 1994, the stock market has been surprisingly strong. The
economy's apparent soft landing has resulted in continued low inflation and
interest rates without the pain of a recession. During most of 1995, technology
stocks have been the market leaders. These companies typically pay little or no
dividends and, therefore, were not represented in the Fund. Despite the absence
of technology investments, the Fund provided a total return of 16.40%** for the
twelve months ended August 31, 1995. This performance compares favorably to
other equity income funds. For the one-year period ended September 30, 1995,
the Fund was ranked 14 out of 118 Equity Income Funds, based on total return,
according to Lipper Analytical Services, Inc.
Typically, conservative, higher yielding common stocks underperform during
periods of significant stock market strength. Oil stocks, a traditional high
yield group, have been significant underperformers over the past year. The S&P
Domestic Oil Index was up only 4.67%, and the S&P International Oil Index was
ahead 12.78%.* This compares to a total return of 21.45% for the S&P 500.*
Other noteworthy influences on the Fund's performance were its bank and
insurance holdings. Banks have benefited from good fundamentals and a rising
tide of acquisitions. Merger activity is expected to continue as the industry
consolidates. Reflecting the absence of large catastrophe losses, coupled with
strong operating margins and good news concerning charges for the environmental
Superfund, the property/casualty companies turned in the best performance in
many years. The S&P Property/Casualty Insurance Index was ahead 30.08%, while
the S&P Bank Composite Index was ahead 22.61% for the twelve months ended
August 31, 1995.*
Presently, we continue to hold overweighted positions in insurance and bank
stocks. We also continue to underweight electric utilities and
telecommunications. Both of these industries are experiencing fundamental
changes, which we believe will continue to negatively affect earning and
dividend growth.
GROWTH OF $10,000 INVESTED IN MARSHALL EQUITY INCOME FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Equity Income Fund (the "Fund") from September 30, 1993 (start of
performance) to August 31, 1995 compared to the Standard & Poors 500 (SP500)
and the Lipper Equity Income Funds Index (LEIFI).*
"Graphic representation "A" omitted. See Appendix."
* These indices are not adjusted to reflect sales loads, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance. These
indices are unmanaged. Actual investments may not be made in an index.
** Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they
may be worth more or less than original cost.
*** Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions.
The SP500 and the LEIFI have been adjusted to reflect investment of
dividends on securities in the indices.
MARSHALL FUNDS
VALUE EQUITY FUND
The Marshall Value Equity Fund, introduced on September 30, 1993, invests in
value-oriented stocks that sell at discounts to their net asset value and
perceived business potential. These stocks are typically characterized as being
undervalued, out-of-favor, or neglected. For the twelve months ended August 31,
1995, the Fund produced a total return of 13.57%.* This compares to total
returns of 21.45% and 24.34% for the S&P 500 Index ("S&P 500") and the
S&P/BARRA Value Index, respectively.** Since inception, the Fund, the S&P 500,
and the S&P/BARRA Value Index generated returns of 25.60%, 29.04%, and 24.07%,
respectively.
During the fiscal year, the Fund made a considerable investment in the
securities of companies that had outlined significant restructuring programs.
Common to all of these companies was the desire to reduce costs and increase
operating efficiencies, some by implementing drastic measures to improve
performance. Stocks in the Fund showing substantial gains as a result of their
restructuring efforts during the period were International Business Machines,
British Petroleum, Champion International, Conrail, Sun Microsystems, and
Sears, Roebuck.
Another strategy that worked well was to invest in companies that had
acquired other companies in order to increase their market share and benefit
from better economies of scale. Fleming Companies, Giddings & Lewis, and
Federated Department Stores all gained from such corporate actions.
Still another theme generating good investment returns during the period
was to purchase the stock of companies with large international markets.
Although the companies we invested in were selling at low relative valuations,
we believed their sales would benefit from a weak U.S. dollar. As a result, our
investments in Eastman Kodak, Pepsico, and Premark yielded significant capital
gains.
The Fund continues to look for restructuring situations for investment as
well as stocks selling at discounts to their intrinsic worth.
We believe the U.S. dollar has probably bottomed and therefore would not expect
export growth to benefit as much going forward.
GROWTH OF $10,000 INVESTED IN MARSHALL VALUE EQUITY FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Value Equity Fund (the "Fund") from September 30, 1993 (start of
performance) to August 31, 1995 compared to the Standard & Poors 500 Index
(SP500) and the Lipper Growth and Income Funds Index (LGIFI).**
"Graphic representation "B" omitted. See Appendix."
* Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they
may be worth more or less than original cost.
** The SP500, S&P BARRA/Value Index, and LGIFI are not adjusted to reflect
sales loads, expenses, or other fees that the SEC requires to be reflected
in the Fund's performance. These indices are unmanaged. Actual investments
may not be made in an index.
*** Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions.
The SP500 and the LGIFI have been adjusted to reflect reinvestment of
dividends on securities in the indices.
MANAGEMENT DISCUSSION & ANALYSIS
STOCK FUND
The Marshall Stock Fund invests in large-capitalization stocks with a growth
and income orientation. The Fund holdings are well diversified, with
representation in most sectors of the economy. Companies held generally have
long records of successful operations and tend to hold dominant positions in
their industries. Current yield is of secondary concern as emphasis is placed
on total return, largely through capital appreciation.
During the second half of the Fund's fiscal year, equities moved steadily
higher, led by technology stocks. Expectations that the Federal Reserve Board
had finished its interest rate increases were confirmed with a nominal rate cut
in July. Investors, faced with a benign interest rate environment, generally
strong earnings gains, and an economy that appears to be growing moderately,
poured money into mutual funds. Inflation continues to be kept under wraps and
expectations on this front are aided by the real attempts at budget reform in
Washington.
For the fiscal year ended August 31, 1995, the Fund posted a total return
of 16.85%.* During this same period, total returns for the S&P 500 Index and
the Lipper Growth and Income Funds Index were 21.45% and 16.86%,
respectively.** The Fund's performance compares favorably to other growth and
income funds. For the one-year period ended September 30, 1995, the Fund was
ranked 145 out of 394 Growth and Income Funds, based on total return, according
to Lipper Analytical Services, Inc. The Fund has benefited from its technology
holdings over the course of the year as well as from interest-sensitive and
media holdings. Some consumer cyclical issues detracted from the Fund's
performance as did energy holdings, which did not match the market's increase.
Going forward, the rate of economic growth, as well as the budget
resolution in Washington, will be watched closely by the market. The Fund's
emphasis continues to be on those companies exhibiting above-average earnings
growth. While some market consolidation should be expected in the period ahead,
economic and political conditions continue to favor further gains in equity
prices.
GROWTH OF $10,000 INVESTED IN MARSHALL STOCK FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Stock Fund (the "Fund") from November 20, 1992 (start of performance)
to August 31, 1995 compared to the Standard & Poor's 500 Index (SP500) and the
Lipper Growth & Income Funds Index (LGIFI).**
"Graphic representation "C" omitted. See Appendix."
* Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they
may be worth more or less than original cost.
** The SP500 and the LGIFI are not adjusted to reflect sales loads, expenses or
other fees that the SEC requires to be reflected in the Fund's performance.
These indices are unmanaged. Actual investments may not be made in an index.
*** Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions.
The SP500 and the LGIFI have been adjusted to reflect reinvestment of
dividends on securities in the indices.
MARSHALL FUNDS
MID-CAP STOCK FUND
The objective of the Marshall Mid-Cap Stock Fund is to seek capital
appreciation. The Fund pursues this objective by investing in companies with
market capitalizations between $200 million and approximately $4.0 billion. In
addition, the Fund seeks investments in companies exhibiting strong financial
characteristics and expected growth significantly above the average
corporation.
For the fiscal year ended August 31, 1995, the Fund produced a total return
of 27.06%* vs. the 20.50% return for the Standard & Poor's Midcap 400 Stock
Price Index.** This performance compares favorably to other mid-cap funds. For
the one-year period ended September 30, 1995, the Fund was ranked 20 out of 92
Mid-Cap Funds, based on total return, according to Lipper Analytical Services,
Inc.
Noteworthy influences on performance were overweightings in technology,
telecommunications, and specialty finance. In technology, significant gains
were achieved in semiconductor issues, such as Integrated Device Technology and
Atmel Corp. Other important contributions in technology were from Informix
Corp. and ABR Information Services. Telecommunications returns were driven by
substantial positions in Tellabs Inc., ADC Telecommunications, and Andrew Corp.
Additional above average returns were generated by investments in such eclectic
issues as Apollo Group, Department 56, and Tommy Hilfiger.
We remain optimistic, even at current market levels. We anticipate shifting
the portfolio during the next fiscal year toward smaller domestic companies in
such areas as retail, lodging, and restaurants. We believe these areas will
benefit from continued strengthening of the dollar as well as the possibility
of lower interest rates. The specter of capital gains tax reduction could
provide additional impetus to smaller stocks.
GROWTH OF $10,000 INVESTED IN MARSHALL MID-CAP STOCK FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Mid-Cap Stock Fund (the "Fund") from September 30, 1993 (start of
performance) to August 31, 1995 compared to the Standard & Poors Mid-Cap 400
Index (SPMC) and the Lipper Mid-Cap Funds Index (LMCFI).**
Graphic representation "D" omitted. See Appendix."
* Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they
may be worth more or less than original cost.
** The SPMC and the LMCFI are not adjusted to reflect sales loads, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance.
These indices are unmanaged. Actual investments may not be made in an index.
*** Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions.
The SPMC and the LMCFI have been adjusted to reflect reinvestment of
dividends on securities in the indices.
MANAGEMENT DISCUSSION & ANALYSIS
INTERNATIONAL STOCK FUND
For the fiscal year ended August 31, 1995, the Marshall International Stock
Fund, which is sub-advised by Templeton Investment Counsel, Inc., outperformed
its benchmark index, the Morgan Stanley Capital International Europe, Australia
and Far East Index* and peer funds with similar investment mandates. These
results relative to the benchmark index are primarily due to the portfolio's
low Japanese weighting. The Japanese market was burdened by adverse political
and economic developments. The Fund's performance relative to peer funds was
enhanced by maintaining a well-diversified, unhedged portfolio. Many investors,
for example, were penalized by overweighting their emerging markets exposure in
one or two Latin American countries. The Fund's portfolio, however, has an
emerging markets exposure that is distributed among many markets, thus reducing
risk. The Fund also did not hedge foreign currencies. This investment policy
yielded good relative results because many overseas currencies strengthened
during this period.
Our overall expectation for stocks as an asset class is not as favorable as
it has been in the past. We believe stocks, in general, are currently fairly
valued. This conclusion is based on fundamental research and seems reasonable
given above-average performance of many U.S. stocks. International stocks,
compared to U.S. stocks, however, are considered attractive given good relative
stock valuations and better economic growth prospects. Furthermore, many
overseas markets, in local currency terms, have significantly underperformed
the U.S. market for two years, which we believe is unjustified.
The Fund's portfolio remains underweighted in Japan, but it is our
expectation this weighting may increase given on-going political and economic
changes. Although valuations for most Japanese companies remain unattractive
versus other global alternatives, we are identifying a few opportunities due to
these changes. We believe shareholders' rights will continue to improve, and it
is interesting to note that Japanese companies are now able to repurchase
shares.
Another topic deserving comment is the emerging markets arena, which has
proven disappointing in recent months. Our outlook for the longer-term remains
positive, however, we should never lose sight of the fact that these
investments are best categorized as high risk/high return potential. The Fund's
weighting will, therefore, never be excessive. We remain cautious on Latin
America and are continuing to explore opportunities in Central Europe (e.g.,
Czech Republic).
Many foreign currencies vis-a-vis the U.S. dollar have also recently
weakened after having been strong over the past year. This trend, if
sustainable, could erode the value of your overseas investments. Historically,
however, adverse currency movements have been offset by capital appreciation of
foreign stocks. For example, in 1993, the translation of foreign investments
into U.S. dollar terms was negatively affected by weaker foreign currencies but
strong performance of overseas markets significantly offset this negative
translation. Alternatively, in 1994, when many overseas markets registered poor
returns, a U.S. dollar-based investor was helped by positive currency
movements. It is for this reason, diversification, and other hidden costs of
currency hedging, that the Fund's investments continue to remain unhedged for
the time being, despite the probability that overseas currencies may weaken.
The Fund has also had low turnover, consistent with its long-term
investment philosophy, and has maintained its cash weighting at reasonable
levels. Very few holdings have been sold and a few new holdings have been
selectively added.
Finally, we realize your expectations are high. We respect the confidence
you have shown by placing your assets in our care and we remain, as always,
dedicated to the tasks at hand. In the 1990's, international investing should
continue to offer opportunity.
MARSHALL FUNDS
GROWTH OF $10,000 INVESTED IN MARSHALL INTERNATIONAL STOCK FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Marshall International Stock Fund (the "Fund") from September 1, 1994 (start of
performance) to August 31, 1995 compared to the Morgan Stanley Capital Europe,
Australia, Far East Index (EAFE) and the Lipper International Funds Index
(LIFI).*
"Graphic representation "E" omitted. See Appendix."
Past Performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they may
be worth more or less than original cost.
* The EAFE and the LIFI are not adjusted to reflect sales loads, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance.
These indices are unmanaged. Actual investments may not be made in an index.
** Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions. The
EAFE and the LIFI have been adjusted to reflect reinvestment of dividends on
securities in the indices.
MANAGEMENT DISCUSSION & ANALYSIS
SHORT-TERM INCOME FUND
The Marshall Short-Term Income Fund posted a total return of 6.47%* for the
fiscal year ended August 31, 1995. The Fund's maturity profile suggests
performance should fall between that of the IBC/Donoghue's Taxable Money Fund
Average ("Donoghue Average") and the Merrill Lynch Corporate A Rated 1-3 year
Bond Index ("Merrill Lynch Index").** For the fiscal year ended August 31,
1995, the Donoghue Average returned 5.25% and the Merrill Lynch Index returned
8.32%.**
Just as short-term bonds spent most of 1994 pricing in several rounds of
tightening by the Federal Reserve Board, the first part of 1995 was spent
pricing in an easier monetary policy. The Fund was able to take advantage of
rising bond prices by extending maturities to the two and three-year sector. At
fiscal year end, the Fund's duration was near its 1.5 year maximum. We believe
the currently unfolding scenario is one of modest economic growth and a secular
trend toward lower inflation. This scenario, in conjunction with improved
prospects for deficit reduction, would be very positive for the bond market.
While corporate spreads have narrowed significantly, the Fund's exposure to
asset-backed and mortgage securities has allowed the maintenance of a yield
advantage without sacrificing quality.
GROWTH OF $10,000 INVESTED IN MARSHALL SHORT-TERM INCOME FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Short-Term Income Fund (the "Fund") from November 1, 1992 (start of
performance) to August 31, 1995 compared to the Merrill Lynch Corporate A Rated
1-3 Year Bond Index (MLBI) and the Lipper Short-Term Investment Grade Bond
Funds Index (LSTIBI) and IBC/Donoghue's Taxable Money Fund Average (DMFA).**
"Graphic representation "F" omitted. See Appendix."
* Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they
may be worth more or less than original cost.
** The MLBI, LSTIBI and DMFA are not adjusted to reflect sales loads, expenses,
or other fees that the SEC requires to be reflected in the Fund's
performance. These indices are unmanaged. Actual investments may not be made
in an index.
*** Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions.
The MLBI, LSTIBI and DMFA have been adjusted to reflect reinvestment of
dividends on securities in the indices.
MARSHALL FUNDS
INTERMEDIATE BOND FUND
The bond market rally of 1995 helped the Marshall Intermediate Bond Fund post a
total return of 8.58%* for the fiscal year ended August 31, 1995. Bond prices
spent most of 1994 falling sharply in response to strong economic growth and
tightening monetary policy. The bond market did an about-face in 1995, and
prices rose rapidly as the economy slowed and the Federal Reserve Board shifted
to an easier monetary policy. The defensive strategy that helped the Fund
preserve principal in the second half of 1994 caused it to lag during the
market's reversal in early 1995. Accordingly, while the Fund's absolute
performance was strong, it underperformed the Lehman Brothers Intermediate
Government/Corporate Index total return of 9.57%.**
To seek maximized performance during the bond rally, the Fund reduced
exposure to mortgage securities, which typically lag in strong markets.
Additionally, the Fund increased exposure to corporate securities. A strong
fundamental outlook for corporate profitability has narrowed spreads on
corporate bonds. Duration has been extended close to its maximum, as a slow
growth economy and a secular trend toward lower inflation creates an ideal
environment for bonds.
GROWTH OF $10,000 INVESTED IN MARSHALL INTERMEDIATE BOND FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Intermediate Bond Fund (the "Fund") from November 20, 1992 (start of
performance) to August 31, 1995 compared to the Lehman Brothers Intermediate
Government/Corporate Index (LGCI) and the Lipper Intermediate Investment Grade
Bond Funds Index (LIBF).**
"Graphic representation "G" omitted. See Appendix."
* Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they
may be worth more or less than original cost.
** The LGCI and the LIBF are not adjusted to reflect sales loads, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance.
These indices are unmanaged. Actual investments may not be made in an index.
*** Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions.
The LGCI and the LIBF have been adjusted to reflect reinvestment of
dividends on securities in the indices.
MANAGEMENT DISCUSSION & ANALYSIS
GOVERNMENT INCOME FUND
For the fiscal year ended August 31, 1995, the Marshall Government Income Fund
generated a total return of 9.78%.* This performance compares favorably to
other mortgage funds. For the one-year period ended September 30, 1995, the
Fund was ranked 15 out of 59 U.S. Mortgage Funds, based on total return,
according to Lipper Analytical Services, Inc. The bond market, and mortgages in
particular, produced strong returns since the Federal Reserve Board (the "Fed")
raised rates by 0.75% in November 1994. During the first fiscal quarter ended
November 30, 1994, the Fund's return was
- -2.0%, while over the last three quarters ended August 31, 1995, the return was
+12.0%. The improved bond market reflected the belief the latest moves by the
Fed to slow the economy and control inflation had been successful.
The mortgage market was roiled by the dramatic changes in interest rates
over the last twelve months. Higher mortgage rates late in 1994 slowed
prepayment rates, and the dramatic rally in 1995 brought significantly lower
mortgage rates. This resurrected concerns over faster prepayments as homeowners
would look to refinance current mortgages. The magnitude of the changing
interest and prepayment rates was seen in the duration of the Lehman Brothers
Mortgage-Backed Securities Index.** On August 31, 1994, the duration of the
Lehman Brothers Mortgage-Backed Securities Index was 4.7 years, and by August
31, 1995, the duration had fallen to 3.5 years.
The Fund's total return was 9.78%* which compares to the Lehman Brothers
Mortgage-Backed Securities Index, which returned 10.94% for the fiscal year
ended August 31, 1995.** A more defensive posture for the Fund in early 1995,
which included an overweighting in higher coupons and 15-year mortgages, had an
impact on performance. By June 1995, the Fund had moved to a much longer
duration relative to its index benchmark and added long Treasuries to its
portfolio to offset the shortening mortgage durations. Following the Fed easing
in July, the Fund added to its Treasury position and moved its duration to its
maximum position based on our outlook for lower interest rates.
The Fund has generated very competitive returns versus other money managers
for the fiscal year. The Lipper U.S. Mortgage Funds,** which comprises 64 other
mortgage mutual funds, returned 9.22% for the period ended August 31, 1995,
while the Fund produced a total return of 9.78%.* We anticipate our long
duration positioning and Treasury allocation will benefit the Fund during the
anticipated declining interest rate environment.
GROWTH OF $10,000 INVESTED IN MARSHALL GOVERNMENT INCOME FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Government Income Fund (the "Fund") from December 13, 1992 (start of
performance) to August 31, 1995 compared to the Lehman Brothers Mortgage-Backed
Securities Index (LMI) and the Lipper U.S. Mortgage Funds Index (LUSMI).**
"Graphic representation "H" omitted. See Appendix."
* Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they
may be worth more or less than original cost.
** The LMI and the LUSMI are not adjusted to reflect sales loads, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance.
These indices are unmanaged. Actual investments may not be made in an index.
*** Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions.
The LMI and the LUSMI have been adjusted to reflect reinvestment of
dividends on securities in the indices.
MARSHALL FUNDS
SHORT-TERM TAX-FREE FUND
For the fiscal year ended August 31, 1995, the Marshall Short-Term Tax-Free
Fund generated a total return of 5.41%.* A year ago, investor sentiment
continued bearish, as most bond market participants expected further Federal
Reserve Board (the "Fed") interest rate boosts. Expectations became reality as
the Fed continued to raise short-term interest rates until March 1995, when it
became obvious the economy was no longer in danger of overheating.
Subsequently, the Fed has now eased by modest proportions and actually cut
short-term interest rates during July 1995. This change in direction signals a
policy shift directly influencing the portfolio strategy of the Fund.
In recent months, the Fund has been lengthened by moving the average
maturity of the portfolio to 2.5 years. Under the Fund's prospectus, the
maximum average maturity of the portfolio can be three years. We expect to move
even closer to the maximum allowable average maturity throughout the balance of
1995. In contrast, one year ago, the average maturity of the portfolio was 2.0
years and moving shorter.
As we approach the election year of 1996, tax reform talk will cause
municipal investors to weigh the trade-off between short and long maturity
purchases. Shareholders should be aware that tax reform is destined to be a
multi-year issue stretching well into 1997. Continuing discussion surrounding
the notion of comprehensive tax reform in the United States creates increased
demand for short-term municipal bond investments. Meanwhile, the Fund will
strive to fill the niche of providing investors with a competitive level of
tax-exempt income without major net asset value fluctuations.
GROWTH OF $10,000 INVESTED IN MARSHALL SHORT-TERM TAX-FREE FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Short-Term Tax-Free Fund (the "Fund") from February 2, 1994 (start of
performance) to August 31, 1995 compared to the Lehman Brothers 3-Year General
Obligations Bonds Index (L3GO) and the Lipper Short-Term Municipal Funds Index
(LSTMI).**
"Graphic representation "I" omitted. See Appendix."
* Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they
may be worth more or less than original cost.
** The L3GO and the LSTMI are not adjusted to reflect sales loads, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance.
These indices are unmanaged. Actual investments may not be in an index.
*** Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions.
The L3GO and the LSTMI have been adjusted to reflect reinvestment of
dividends on securities in the indices.
MANAGEMENT DISCUSSION & ANALYSIS
INTERMEDIATE TAX-FREE FUND
For the fiscal year ended August 31, 1995, the Marshall Intermediate Tax-Free
Fund produced a total return of 6.58%.* During the limited history of this Fund
(inception was February 1994), investors with patience were rewarded as the
municipal bond market regained much of the losses sustained during the
difficult market environment of 1994. Recent economic data supports the notion
of slower growth and benign inflation. As a result, fixed-income investors are
slowly returning to bond mutual funds as evidenced by recent positive monthly
inflows.
Portfolio strategy within the Fund has shifted from the defensive posture
of last year. Specifically, the average maturity of the Fund's portfolio is now
6.4 years, compared to 3.9 years in March 1994. This action was taken based on
our expectation of lower interest rates. The change in direction of the Federal
Reserve Board to a policy of lowering short-term interest rates serves to
reinforce our lengthening strategy.
All municipal bond fund shareholders should be aware of the increasingly
popular idea of tax reform. As we approach the election year of 1996, political
rhetoric will include several versions of tax reform for consideration. Most
tax reform approaches call for the lowering of tax brackets for individuals in
exchange for the elimination of many or all deductions. As tax bracket levels
would be lowered, the relative attractiveness of municipal securities would
decrease. Already, some of these ideas have caused investors concern when
considering the purchase or continued holding of LONG-TERM tax-exempt issues.
We expect continued discussion of tax reform would cause investors to favor
short-term and intermediate-term municipal bonds. The Fund will strive to
provide shareholders with a reasonable level of tax-exempt income without the
increased market risk inherent in many longer, higher yielding funds.
GROWTH OF $10,000 INVESTED IN MARSHALL INTERMEDIATE TAX-FREE FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Intermediate Tax-Free Fund (the "Fund") from February 2, 1994 (start
of performance) to August 31, 1995 compared to the Lehman Brothers 5-Year
General Obligations Bonds Index (L5GO) and the Lipper Intermediate Municipal
Funds Index (LIMI).**
"Graphic representation "J" omitted. See Appendix."
* Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they
may be worth more or less than original cost.
** The L5GO and the LIMI are not adjusted to reflect sales loads, expenses, or
other fees that the SEC requires to be reflected in the Fund's performance.
These indices are unmanaged. Actual investments may not be made in an index.
*** Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions.
The L5GO and the LIMI have been adjusted to reflect reinvestment of
dividends on securities in the indices.
MARSHALL FUNDS
MONEY MARKET FUND
For the fiscal year ended August 31, 1995, the Marshall Money Market Fund
provided a total return of 5.57%* for Class A shares and 5.25%* for Class B
shares, compared with IBC/Donoghue's Taxable Money Fund Average of 5.25%.**
This outperformance can be attributed to a shorter average maturity while rates
were rising, a longer average maturity while rates were declining, selective
timing of commercial paper purchases, and thorough credit research. While the
Fund began the year with an average maturity of 36 days, it ended the year at
52 days in response to a declining interest rate environment. Large amounts of
cash flowing into the money market sector caused spreads on floating rate notes
to decline. As a result, the Fund increased exposure to master notes and
funding agreements. Due to the overall drop in interest rates, exposure to
fixed rate commercial paper increased.
Strong economic growth and early signs of inflation caused the Federal
Reserve Board (the "Fed") to tighten rates throughout 1994. By February 1995,
the high growth, higher inflation scenario was cause for the Fed to raise the
Fed Funds Rate to 6.00%. Economic growth, however, did not continue at the pace
set in 1994. The Gross Domestic Product for the last quarter of 1994 rose 5.1%,
but rose only 2.7% in the first quarter of 1995 and an even more anemic 1.1% in
the second quarter. Indicators across the board showed a rapidly slowing
economy. This data sparked a strong bull market in bonds, which resulted in the
Fed lowering the Fed Funds rate by 25 basis points to 5.75% at their July
meeting.
With inflation in check, the bond market is focusing on signs of economic
growth. The question preoccupying the market today is whether growth is strong
enough to prevent the Fed from further easing or if growth is slowing
dramatically enough to allow further cuts. If past history is any guide, the
Fed historically has eased in a series of moves and not just once.
* Performance quoted represents past performance and is not indicative of
future results. Although money market funds seek to maintain a stable net
asset value of $1.00 per share, there is no assurance that they will be able
to do so. An investment in the Fund is not insured or guaranteed by the U.S.
government.
** This Average is unmanaged.
August 31, 1995
PORTFOLIO OF INVESTMENTS
EQUITY INCOME FUND
<TABLE>
<CAPTION>
Shares Description Value
---------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS-- 83.7%
CAPITAL GOODS -- 8.2%
ELECTRICAL EQUIPMENT
62,800 General Electric Co. $ 3,697,350
------------
ELECTRONICS
14,000 EG & G Inc. 266,000
------------
MACHINERY & MACHINE TOOLS
14,000 Briggs & Stratton Corp. 530,250
------------
MANUFACTURING
9,000 Textron, Inc. 616,500
------------
OFFICE EQUIPMENT
12,100 Xerox Corp. 1,461,075
------------
OTHER CAPITAL GOODS
10,000 Minnesota Mining & Manufacturing Co. 546,250
35,400 Ogden Corp. 823,050
18,800 Tenneco, Inc. 911,800
------------
Total 2,281,100
------------
Total Capital Goods 8,852,275
------------
CONSUMER DURABLES-- 2.5%
APPLIANCES
38,600 Maytag Corp. 598,300
------------
AUTOMOTIVE & RELATED
68,000 Ford Motor Co. 2,082,500
------------
Total Consumer Durables 2,680,800
------------
CONSUMER NON-DURABLES-- 19.5%
BEVERAGES & FOODS
21,000 General Mills, Inc. 1,084,125
------------
COSMETICS/TOILETRIES
22,000 Tambrands, Inc. 987,250
------------
HEALTH CARE
9,700 American Home Products Corp. 746,900
10,000 Baxter International, Inc. 390,000
20,800 Bristol Myers Squibb Co. 1,427,400
66,800 Merck & Co., Inc. 3,331,650
14,600 Schering Plough Corp. 680,725
14,900 Upjohn Co. 631,388
------------
Total 7,208,063
------------
PRINTING & PUBLISHING
10,500 McGraw Hill Companies, Inc. 826,875
8,000 Readers Digest Association, Inc. 370,000
------------
Total 1,196,875
------------
RETAIL
8,000 Dayton Hudson Corp. 585,000
51,500 K Mart Corp. 701,687
14,000 May Department Stores Co. 593,250
22,800 Penney J C Inc. 1,031,700
23,800 Sears Roebuck & Co. 770,525
25,500 TJX Cos., Inc. 318,750
------------
Total 4,000,912
------------
SERVICES
14,000 Block H&R, Inc. 546,000
11,700 Dun & Bradstreet Corp. 677,137
------------
Total 1,223,137
------------
</TABLE>
<TABLE>
----------------------------------------------------------------
<CAPTION>
Shares Description Value
----------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (Continued)
CONSUMER NON-DURABLES (Continued)
TOBACCO
21,500 American Brands, Inc. $ 903,000
44,400 Philip Morris Cos., Inc. 3,313,350
38,000 RJR Nabisco Holdings 1,083,000
------------
Total 5,299,350
------------
Total Consumer Non-Durables 20,999,712
------------
ENERGY-- 14.6%
DOMESTIC & INTERNATIONAL OIL
16,500 Amoco Corp. 1,051,875
18,300 Ashland, Inc. 599,325
7,000 Atlantic Richfield Co. 763,875
25,000 Chevron Corp. 1,209,375
36,300 Exxon Corp. 2,495,625
13,000 Mobil Corp. 1,238,250
86,000 Occidental Petroleum Corp. 1,870,500
15,000 Royal Dutch Petroleum Corp. 1,788,750
24,000 Shell Transport & Trading PLC 1,665,000
12,111 Sun Co., Inc. 322,455
10,500 Texaco, Inc. 679,875
49,000 USX--Marathon Group 1,010,625
28,200 YPF Sociedad Anonima--ADR 497,025
------------
Total 15,192,555
------------
OIL SERVICE
21,000 Dresser Industries, Inc. 504,000
------------
Total Energy 15,696,555
------------
FINANCIAL-- 17.6%
BANKS
41,000 Banc One Corp. 1,378,625
15,000 Bankamerica Corp. 847,500
10,800 Baybanks, Inc. 866,700
21,300 Chase Manhattan Corp. 1,224,750
8,800 Crestar Financial Corp. 496,100
11,000 First Tennessee National Corp. 583,000
9,000 Integra Financial Corp. 505,125
10,000 Michigan National Corp. 1,075,625
14,000 Nationsbank Corp. 859,250
31,000 NBD Bancorp, Inc. 1,108,250
24,500 UJB Financial Corp. 848,313
9,400 Victoria Bankshares, Inc. 272,600
------------
Total 10,065,838
------------
INSURANCE
11,900 Aetna Life & Casualty Co. 812,175
22,063 Allstate Corp. 747,384
21,000 American General Corp. 740,250
16,500 Cigna Corp. 1,596,375
6,900 Marsh & McLennan Cos. 568,388
8,600 Safeco Corp. 555,775
12,300 Transamerica Corp. 836,400
------------
Total 5,856,747
------------
OTHER FINANCIAL
15,000 Federal National Mortgage Association 1,430,625
9,400 Hospitality Properties Trust 235,000
50,000 Storage Trust Realty 1,050,000
</TABLE>
(See Notes to Portfolio of Investments)
MARSHALL FUNDS
EQUITY INCOME FUND (CONTINUED)
<TABLE>
<CAPTION>
Shares Description Value
------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (Continued)
FINANCIAL (Continued)
OTHER FINANCIAL (Continued)
15,000 Summit Properties, Inc. $ 273,750
------------
Total 2,989,375
------------
Total Financial 18,911,960
------------
RAW MATERIALS/INTERMEDIATE GOODS-- 7.2%
CHEMICALS
14,500 Dow Chemicals Co. 1,073,000
47,000 Du Pont (E.I.) DeNemours 3,072,625
12,600 Goodrich B.F. Co. 749,700
21,500 PPG Industries, Inc. 919,125
------------
Total 5,814,450
------------
OTHER RAW MATERIALS
41,600 Hanson PLC, ADR 712,400
------------
PAPERS
10,000 Kimberly Clark Corp. 638,750
9,900 Union Camp Corp. 563,063
------------
Total 1,201,813
------------
Total Raw Materials/ Intermediate Goods 7,728,663
------------
UTILITIES-- 14.1%
ELECTRIC
30,000 Entergy Corp. 720,000
33,000 Long Island Lighting Co. 561,000
15,500 New England Electric System 542,500
12,000 New York State Electric & Gas Corp. 289,500
15,800 Nipsco Industries, Inc. 517,450
23,600 Pinnacle West Capital Corp. 587,050
12,000 Texas Utilities Co. 417,000
13,900 Wisconsin Energy Corp. 373,563
9,100 WPS Resources Corp. 262,763
------------
Total 4,270,826
------------
GAS DISTRIBUTION
24,300 Enron Corp. 817,087
15,000 Enron Global Power & Pipelines 348,750
25,500 Sonat, Inc. 809,625
------------
Total 1,975,462
------------
TELECOMMUNICATIONS
32,000 Alltel Corp. 904,000
44,000 AT & T Corp. 2,486,000
12,200 Bellsouth Corp. 838,750
49,500 Frontier Corp. 1,379,812
42,000 GTE Corp. 1,538,250
33,500 Sprint Corp. 1,189,250
13,000 U S West, Inc. 565,500
------------
Total 8,901,562
------------
Total Utilities 15,147,850
------------
TOTAL COMMON STOCKS
(identified cost $79,200,036) 90,017,815
------------
</TABLE>
<TABLE>
<CAPTION>
Shares or
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
CONVERTIBLE PREFERRED STOCKS -- 3.0%
ELECTRONICS -- 0.6%
9,600 General Motors Corp., Convertible Pfd C $ 637,200
------------
FINANCE -- COMMERCIAL -- 1.0%
20,000 Merrill Lynch & Co., Inc., 6.50% STRYPES, due
8/15/1998 1,085,000
------------
INSURANCE -- 0.6%
12,000 American General Cap. Corp., 6.00% monthly Inc.
Ser. A 636,000
------------
SERVICES -- 0.8%
23,500 Browning Ferris Industries, Inc., 7.25% ACES
Converts 6/30/98 837,187
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(identified cost $2,960,604) 3,195,387
------------
(B)REPURCHASE AGREEMENT -- 12.9%
$13,882,000 Barclays de Zoete Wedd Securities, Inc., 5.80%,
dated 8/31/1995, due 9/1/1995 (at amortized cost) 13,882,000
------------
TOTAL INVESTMENTS
(identified cost $96,042,640) $107,095,202
============
</TABLE>
(See Notes to Portfolio of Investments)
August 31, 1995
PORTFOLIO OF INVESTMENTS
VALUE EQUITY FUND
<TABLE>
<CAPTION>
Shares Description Value
-----------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 90.1%
CAPITAL GOODS -- 5.4%
AEROSPACE AND RELATED
52,650 Raytheon Co. $ 4,258,069
-----------
ELECTRONICS
74,800 (d)Avnet, Inc. 3,852,200
-----------
MACHINERY AND MACHINE TOOLS
232,650 Giddings & Lewis, Inc. 3,809,644
-----------
Total Capital Goods 11,919,913
-----------
CONSUMER DURABLES -- 4.9%
BUILDING AND FOREST PRODUCTS
47,000 Georgia-Pacific Corp. 4,230,000
-----------
HOMEBUILDERS
207,000 Kaufman & Broad Home Corp. 2,768,625
-----------
HOUSEHOLD PRODUCTS/WARES
41,000 Rubbermaid, Inc. 1,219,750
164,000 Sunbeam Corp. 2,665,000
-----------
Total 3,884,750
-----------
Total Consumer Durables 10,883,375
-----------
CONSUMER NON-DURABLES -- 22.3%
BEVERAGES AND FOODS
200,000 (c)Darden Restaurants, Inc. 2,050,000
197,300 Fleming Companies, Inc. 5,746,363
80,200 International Multifoods Corp. 1,804,500
153,000 Smith's Food & Drug Centers, Inc. 2,887,875
93,900 (d)Supervalu, Inc. 2,781,788
-----------
Total 15,270,526
-----------
PHARMACEUTICALS AND HEALTH CARE
185,400 (c)(d)Acuson Corp. 2,433,375
209,850 (d)Caremark International, Inc. 4,354,388
123,050 (d)Mallinckrodt Group, Inc. 4,629,756
191,200 (c)Tenet Healthcare Corp. 3,035,300
-----------
Total 14,452,819
-----------
RETAIL
40,500 Dayton-Hudson Corp. 2,961,563
244,400 (d)K-Mart Corp. 3,329,950
173,000 Limited, Inc. 3,200,500
16,000 Melville Corp. 534,000
213,000 (c)Price Costco, Inc. 3,594,375
44,400 Sears, Roebuck & Co. 1,437,450
87,200 (c)Toys R Us, Inc. 2,267,200
61,455 (c)U.S. Industries, Inc. 960,234
-----------
Total 18,285,272
-----------
SERVICES
19,000 Fluor Corp. 1,111,500
-----------
Total Consumer Non-Durables 49,120,117
-----------
ENERGY-- 11.3%
INTERNATIONAL OIL
25,400 (d)Royal Dutch Petroleum Co. 3,028,950
-----------
OIL & GAS EQUIPMENT AND SERVICES
187,900 (d)Baker Hughes, Inc. 4,227,750
19,000 Schlumberger, Ltd. 1,225,500
198,400 Tidewater, Inc. 4,910,400
-----------
Total 10,363,650
-----------
OIL & GAS PRODUCTS
21,000 Coastal Corp. 687,750
23,700 Mobil Corp. 2,257,425
68,000 Occidental Petroleum Corp. 1,479,000
45,400 Texaco, Inc. 2,939,650
</TABLE>
<TABLE>
-----------------------------------------------------------
<CAPTION>
Shares Description Value
-----------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (Continued)
ENERGY (Continued)
OIL & GAS PRODUCTS (Continued)
202,120 USX-Marathon Group $ 4,168,725
-----------
Total 11,532,550
-----------
Total Energy 24,925,150
-----------
FINANCIAL -- 15.0%
BANKS
80,900 (d)Ahmanson (H.F.) & Co. 1,921,375
150,400 (d)PNC Bank Corp. 3,948,000
-----------
Total 5,869,375
-----------
INSURANCE
104,100 American General Corp. 3,669,525
96,196 Allstate Corp. 3,258,640
32,750 (d)Cigna Corp. 3,168,562
40,000 MBIA, Inc. 2,720,000
24,400 Torchmark Corp. 976,000
53,600 UNUM Corp. 2,572,800
89,800 Washington Mutual, Inc. 2,323,575
-----------
Total 18,689,102
-----------
OTHER FINANCIAL
90,195 Bear Stearns Co., Inc. 1,860,271
61,000 Franklin Resources, Inc. 3,355,000
34,200 Painewebber Group, Inc. 658,350
50,200 Student Loan Marketing Assoc. 2,717,075
-----------
Total 8,590,696
-----------
Total Financial 33,149,173
-----------
RAW MATERIALS/INTERMEDIATE GOODS--16.8%
CHEMICALS
314,000 Calgon Carbon Corp. 3,571,750
33,075 (d)Eastman Chemical Co. 2,137,471
52,100 IMC Global, Inc. 3,295,325
80,250 (d)Imperial Chemical Industries
PLC, ADR 3,821,906
260,500 (c)(d)Pegasus Gold, Inc. 3,256,250
-----------
Total 16,082,702
-----------
INTERMEDIATE GOODS
339,100 (d)Hanson PLC, ADR 5,807,087
-----------
METALS
185,700 (c)(d)Bethlehem Steel Corp. 2,715,862
57,000 Birmingham Steel Corp. 1,154,250
467,950 Horsham Corp. 6,317,325
312,300 (c)LTV Corp. 4,879,688
-----------
Total 15,067,125
-----------
Total Raw Materials/
Intermediate Goods 36,956,914
-----------
TELECOMMUNICATIONS -- 4.6%
SERVICES
86,000 GTE Corp. 3,149,750
170,000 (d)MCI Communications Corp. 4,090,625
68,000 (d)US West, Inc. 2,958,000
-----------
Total Telecommunications 10,198,375
-----------
TRANSPORTATION -- 5.7%
OTHER TRANSPORTATION
137,250 Alexander & Baldwin, Inc. 3,122,438
116,100 American President Cos., Ltd. 3,410,438
-----------
6,532,876
-----------
RAILROADS
213,000 Canadian Pacific, Ltd. 3,594,374
36,000 Conrail, Inc. 2,421,000
-----------
Total 6,015,374
-----------
Total Transportation 12,548,250
-----------
</TABLE>
(See Notes to Portfolio of Investments)
MARSHALL FUNDS
VALUE EQUITY FUND (continued)
<TABLE>
<CAPTION>
Shares or
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (Continued)
UTILITIES -- 4.1%
ELECTRIC DISTRIBUTION
70,000 AT&T $ 3,955,000
107,500 Entergy Corp. 2,580,000
59,000 Telephone & Data Systems, Inc. 2,419,000
------------
Total Utilities 8,954,000
------------
TOTAL COMMON STOCKS (identified cost
$182,324,599) 198,655,267
------------
(I)COLLATERAL FOR SECURITIES LENDING -- 18.3%
$ 2,000,000 American Honda Finance Co., 5.935, 5/15/1996 2,000,000
3,000,000 Bear, Stearns & Co., Inc., 6.125%, 8/7/1997 3,000,000
2,812,500 Beta Financial, 5.50%, 11/9/1995 2,812,500
2,811,621 Carco Auto Trust, 5.945, 10/15/2000 2,821,781
2,998,290 Chrysler Corp., 6.04%, 7/31/1997 2,998,290
1,997,200 General Electric Capital Corp., 6.09%,
8/5/1996 1,997,200
937,500 General Electric Capital Corp., 4.875%,
4/25/1997 937,500
5,500,000 GMAC, 5.821%, 9/5/1995 5,500,000
615,513 Goldman Sachs Money Market Fund, 5.742%, 615,513
3,000,000 Heller Financial Corp., 6.08%, 6/13/1997 3,000,000
2,000,000 J.P. Morgan Securities, Inc., 5.885%, 9/1/1995 2,000,000
141,493 Lehman Brothers Money Market Fund, 5.80%, 141,493
527,254 Premiere Auto Trust, 5.75%, 9/2/1996 527,095
2,000,000 Sears, Roebuck & Co., 5.819%, 9/5/1995 2,000,000
2,997,480 Sears, Roebuck & Co., 5.975%, 5/12/1997 2,997,480
5,000,000 Strong Money Market Fund, 5.833%, 5,000,000
2,001,875 Superior Wholesale Inventory Financing Trust,
6.025%, 1/15/1999 2,001,200
------------
TOTAL COLLATERAL FOR SECURITIES LENDING
(identified cost $40,350,052) 40,350,052
------------
(B)REPURCHASE AGREEMENT -- 9.4%
$20,712,000 Barclays de Zoete Wedd Securities, Inc.,
5.80%, dated 8/31/1995, due 9/1/1995 (at
amortized cost) 20,712,000
------------
TOTAL INVESTMENTS (identified cost
$243,386,651) $259,717,319
============
</TABLE>
STOCK FUND
<TABLE>
<CAPTION>
Shares Description Value
---------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 94.2%
BASIC INDUSTRIES -- 2.5%
CHEMICALS
60,000 Dow Chemicals Co. $ 4,440,000
-----------
STEEL
40,000 Nucor Corp. 1,960,000
-----------
Total Basic Industries 6,400,000
-----------
CAPITAL GOODS -- 16.4%
COMPUTER SERVICES
50,000 (c)Computer Sciences Corp. 3,012,500
150,000 General Motors Corp.--Class E 6,993,750
-----------
Total 10,006,250
-----------
ELECTRICAL EQUIPMENT
30,000 (c)AVX Corp. 952,500
125,000 General Electric Co. 7,359,375
-----------
Total 8,311,875
-----------
ELECTRONICS
85,000 AMP, Inc. 3,453,125
40,000 Intel Corp. 2,455,000
75,000 (c)Solectron Corp. 2,662,500
65,000 (c)STB Systems, Inc. 812,500
-----------
Total 9,383,125
-----------
MACHINERY/EQUIPMENT
60,000 Parker Hannifin Corp. 2,377,500
-----------
OFFICE EQUIPMENT
50,000 Apple Computer, Inc. 2,150,000
-----------
OTHER CAPITAL GOODS
50,000 Alco Standard Corp. 4,025,000
150,000 Ericsson (L.M.) Telephone
Co.--ADR 3,206,250
50,000 Minnesota Mining & Manufacturing Co. 2,731,250
-----------
Total 9,962,500
-----------
Total Capital Goods 42,191,250
-----------
CONSUMER DURABLES -- 3.4%
AUTOMOTIVE AND RELATED
50,000 Ford Motor Co. 1,531,250
80,000 Hayes Wheels International, Inc. 1,700,000
126,000 Mark IV Industries, Inc. 2,803,500
-----------
Total 6,034,750
-----------
OTHER CONSUMER DURABLES
175,000 Shaw Industries, Inc. 2,625,000
-----------
Total Consumer Durables 8,659,750
-----------
CONSUMER NON-DURABLES -- 41.7%
BEVERAGE AND FOODS
100,000 (c)Darden Restaurants, Inc. 1,025,000
50,000 General Mills, Inc. 2,581,250
60,000 Heinz (H.J.) Co. 2,542,500
125,000 McDonalds Corp. 4,562,500
-----------
Total 10,711,250
-----------
COSMETICS/TOILETRIES
40,000 Procter & Gamble Co. 2,775,000
80,000 Tambrands, Inc. 3,590,000
-----------
Total 6,365,000
-----------
</TABLE>
(See Notes to Portfolio of Investments)
August 31, 1995
PORTFOLIO OF INVESTMENTS
STOCK FUND (CONTINUED)
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (Continued)
CONSUMER NON-DURABLES (Continued)
ENTERTAINMENT
20,000 Disney (Walt) Co. $ 1,122,500
75,000 Gaylord Entertainment Co. 2,081,250
------------
Total 3,203,750
------------
HEALTH CARE
50,000 (c)Alza Corp. 1,187,500
40,000 (c)Amgen, Inc. 1,915,000
100,000 Cardinal Health, Inc. 5,350,000
100,000 (c)Coram Healthcare Corp. 487,500
50,000 (c)Elan Corporation PLC--ADR 1,962,500
150,000 IVAX Corp. 3,843,750
75,000 (c)Lincare Holdings, Inc. 2,240,625
70,000 Merck & Co., Inc. 3,491,250
45,000 (c)Owen Healthcare Inc. 714,375
60,000 Teva Pharmaceutical Industries, Ltd. 2,272,500
------------
Total 23,465,000
------------
MEDIA
40,000 Capital Cities ABC, Inc. 4,600,000
100,000 (c)General Cable, PLC-ADR 1,425,000
35,000 McGraw-Hill, Inc. 2,756,250
160,000 (c)New World Communications 3,720,000
90,000 SBC Communications, Inc. 4,556,250
50,000 (c)Telecommunications, Inc. 925,000
250,000 (c)Telecommunications International, Inc. 3,906,250
60,000 Time Warner, Inc. 2,527,500
------------
Total 24,416,250
------------
RETAIL
35,000 (c)BT Office Products International, Inc. 424,375
150,000 (c)Federated Department Stores, Inc. 4,050,000
50,000 (c)Global Directmail Corp. 1,375,000
50,000 Home Depot, Inc. 1,993,750
80,000 (c)Kohls Corp. 3,760,000
75,000 (c)Nine West Group, Inc. 3,196,875
120,000 (c)Play By Play Toys & Novelties 1,500,000
200,000 (c)Price Costco, Inc. 3,375,000
125,000 Wal-Mart Stores, Inc. 3,078,125
------------
Total 22,753,125
------------
SERVICES
150,000 Browning-Ferris Industries, Inc. 5,043,750
100,000 (c)GTECH Holdings, Inc. 2,900,000
------------
Total 7,943,750
------------
TOBACCO
50,000 Philip Morris Cos., Inc. 3,731,250
160,000 RJR Nabisco Holdings Corp. 4,560,000
------------
Total 8,291,250
------------
Total Consumer Non-Durables 107,149,375
------------
ENERGY -- 11.1%
INTERNATIONAL OIL AND GAS
40,000 Mobil Corp. 3,810,000
60,000 Royal Dutch Petroleum Co. 7,155,000
100,000 Union Texas Petroleum Holdings, Inc. 1,950,000
------------
Total 12,915,000
------------
</TABLE>
<TABLE>
<CAPTION>
Shares or
Principal
Amount Description Value
- ------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (Continued)
OIL & GAS PRODUCTS
40,000 Anadarko Pete Corp. $ 1,910,000
125,000 Enron Corp. 4,203,125
60,000 (c)Input/Output, Inc. 2,235,000
65,466 Sun, Inc. 1,743,032
------------
Total 10,091,157
------------
OIL AND GAS SERVICES
60,000 (c)Landmark Graphics Corp. 1,530,000
60,000 Schlumberger, Ltd. 3,870,000
------------
Total 5,400,000
------------
Total Energy 28,406,157
------------
FINANCIAL -- 12.6%
BANKING
80,000 First Chicago Corp. 5,070,000
------------
INSURANCE
100,000 American International Group, Inc. 8,062,500
25,000 General Reinsurance Corp. 3,715,625
100,000 MGIC Investment Corp. 5,600,000
------------
Total 17,378,125
------------
OTHER FINANCIAL
60,000 Capstone Capital Corp. 1,072,500
40,000 First Data Corp. 2,335,000
60,000 First Financial Management Corp. 5,407,500
70,000 Regency Realty Corp. 1,251,250
------------
Total 10,066,250
------------
Total Financial 32,514,375
------------
UTILITIES -- 5.2%
OTHER UTILITIES
100,000 Enron Global Power Pipelines 2,325,000
------------
TELECOMMUNICATIONS
150,000 Ameritech Corp. 7,687,500
60,000 AT&T Corp. 3,390,000
------------
Total 11,077,500
------------
Total Utilities 13,402,500
------------
TRANSPORTATION -- 1.3%
RAILROAD
50,000 Conrail, Inc. 3,362,501
------------
TOTAL COMMON STOCKS (identified cost $209,997,083) 242,085,908
------------
(B)REPURCHASE AGREEMENT -- 4.7%
$11,972,000 Barclays de Zoete Wedd Securities, Inc., 5.80%,
dated 8/31/1995, due 9/1/1995 (at amortized cost) 11,972,000
------------
TOTAL INVESTMENTS
(identified cost $221,969,083) $254,057,908
============
</TABLE>
(See Notes to Portfolio of Investments)
MARSHALL FUNDS
MID-CAP STOCK FUND
<TABLE>
<CAPTION>
Shares Description Value
-----------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 96.4%
CAPITAL GOODS -- 22.5%
COMPUTERS
25,000 (c)Dell Computer Corp. $ 1,925,000
70,000 (c)Informix Corp. 1,960,000
75,000 (c)Transaction Systems
Architects--Class A 1,837,500
------------
Total 5,722,500
------------
ELECTRICAL EQUIPMENT
60,000 (c)Atmel Corporation 1,897,500
50,000 (c)Bay Networks, Inc. 2,375,000
40,000 (c)Cidco, Inc. 1,400,000
25,000 (c)Cincinnati Microwave, Inc. 450,000
40,000 (c)Integrated Device Technologies, Inc. 2,305,000
20,000 Linear Technology Corp. 1,620,000
40,000 (c)LSI Logic Corp. 1,970,000
25,000 (c)Parametric Technology Corp. 1,381,250
35,000 (c)Stormedia, Inc. 1,452,500
------------
Total 14,851,250
------------
OFFICE EQUIPMENT
75,000 Danka Business Systems--ADR 2,268,750
50,000 (c)Office Depot, Inc. 1,556,250
------------
Total 3,825,000
------------
Total Capital Goods 24,398,750
------------
CONSUMER DURABLES -- 1.8%
AUTOMOTIVE AND RELATED
50,000 Harley Davidson, Inc. 1,387,500
70,000 (c)Top Source, Inc. 577,500
------------
Total Consumer Durables 1,965,000
------------
CONSUMER NON-DURABLES -- 47.2%
BROADCASTING
50,000 (c)Cox Communication, Inc. 987,500
75,000 (c)Westwood One, Inc. 1,387,500
------------
Total 2,375,000
------------
COMMERCIAL SERVICES
45,000 (c)ABR Information Services, Inc. 1,023,750
40,000 (c)BDM International, Inc. 1,005,000
60,000 (c)Ceridian Corp. 2,625,000
35,000 First Data Corp. 2,043,125
50,000 (c)Sitel Corp. 1,075,000
------------
Total 7,771,875
------------
DRUGS
40,000 (c)Biogen, Inc. 2,190,000
35,000 (c)Forest Labs, Inc. 1,566,250
40,000 IVAX Corp. 1,025,000
100,000 (c)North American Vaccine, Inc. 1,012,500
40,000 (c)Ostex International, Inc. 680,000
------------
Total 6,473,750
------------
ENVIRONMENTAL
60,000 (c)Sanifill, Inc. 1,912,500
------------
FOOD & BEVERAGE
40,000 Riviana Foods, Inc. 510,000
------------
FOREST PRODUCTS & PAPER
30,000 Consolidated Papers, Inc. 1,815,000
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
--------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (Continued)
CONSUMER NON-DURABLES (Continued)
HEALTHCARE
72,500 (c)Angeion Corp. $ 561,875
25,000 Arrow International, Inc. 1,025,000
50,000 (c)Lincare Holdings, Inc. 1,493,750
------------
Total 3,080,625
------------
HOUSEHOLD PRODUCTS
50,000 Amway Asia Pacific Ltd. 1,987,500
50,000 (c)Sola International, Inc. 1,143,750
------------
Total 3,131,250
------------
LEISURE AND RECREATION
50,000 (c)Circus Circus Enterprises 1,637,500
50,000 (c)Doubletree Corp. 962,500
40,000 (c)Mirage Resorts, Inc. 1,375,000
------------
Total 3,975,000
------------
PRINTING & PUBLISHING
50,000 Nelson Thomas, Inc. 1,275,000
------------
RESTAURANTS
50,000 (c)Outback Steakhouse, Inc. 1,612,500
------------
RETAIL
50,000 (c)Bed, Bath & Beyond, Inc. 1,365,625
40,000 Casey's General Stores, Inc. 805,000
20,000 (c)CDW Computer Centers, Inc. 1,080,000
10,000 (c)Creative Computers, Inc. 290,000
75,000 (c)Department 56, Inc. 3,318,750
60,000 (c)Kohl's Corp. 2,820,000
20,000 (c)Proffitts, Inc. 527,500
80,000 (c)Tommy Hilfiger Corp. 2,680,000
------------
Total 12,886,875
------------
SERVICES
60,000 (c)Apollo Group, Inc.--Class A 1,800,000
65,000 Loewen Group, Inc. 2,486,250
------------
Total 4,286,250
------------
Total Consumer Non-Durables 51,105,625
------------
FINANCIAL -- 10.5%
60,000 Advanta Corp--Class B 2,242,500
40,000 Green Tree Financial Corp. 2,330,000
75,000 Mercury Finance Co. 1,715,625
30,000 Morgan Stanley Group, Inc. 2,606,250
50,000 UJB Financial Corp. 1,731,250
40,000 (c)Union Acceptance Corp. 750,000
------------
Total Financial 11,375,625
------------
INSURANCE -- 3.8%
40,000 MGIC Investment Corp. 2,240,000
50,000 NAC Reinsurance Corp. 1,825,000
------------
Total Insurance 4,065,000
------------
TELECOMMUNICATIONS -- 10.6%
45,000 (c)ADC Telecommunications, Inc. 1,743,750
40,000 (c)Bell Cablemedia PLC--ADR 760,000
10,000 (c)Glenayre Technologies 652,500
30,000 (c)Paging Network, Inc. 1,185,000
50,000 (c)Periphonics Corp. 1,187,500
50,000 (c)Tele Communications International, Inc. 781,250
80,000 (c)Tellabs, Inc. 3,740,000
50,000 (c)Vanguard Cellular Systems--
Class A 1,356,250
------------
Total Telecommunications 11,406,250
------------
TOTAL COMMON STOCKS
(identified cost $87,030,483) 104,316,250
------------
</TABLE>
(See Notes to Portfolio of Investments)
August 31, 1995
PORTFOLIO OF INVESTMENTS
MID-CAP STOCK FUND (CONTINUED)
<TABLE>
<CAPTION>
Principal
Amount Description Value
--------------------------------------------------------------------------
<C> <S> <C>
(G)U.S. TREASURY BILLS -- 0.1%
$ 100,000 Treasury Bills 9/28/95 (amortized cost $99,595) $ 99,635
------------
(B)REPURCHASE AGREEMENT -- 4.2%
4,593,000 Barclays de Zoete Wedd Securities, Inc., 5.80%,
dated 8/31/95 due 9/1/95
(at amortized cost) 4,593,000
------------
TOTAL INVESTMENTS
(identified cost $91,723,078) $109,008,885
============
</TABLE>
INTERNATIONAL STOCK FUND
<TABLE>
<CAPTION>
Shares Description Value
--------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 77.4%
AUSTRALIA -- 4.7%
AIR TRAVEL -- 0.3%
16,000 Qantas Airways Ltd. ADR $ 261,395
----------
BANKING -- 0.9%
225,200 Westpac Bank Corp. 846,552
----------
BROADCASTING -- 0.5%
92,235 News Corporation 529,790
----------
BUSINESS SERVICES -- 0.8%
72,000 Brambles Industries Ltd. 724,275
----------
CONSTRUCTION MATERIALS -- 1.2%
436,200 Pioneer International Ltd. 1,134,691
----------
INDUSTRIAL MACHINERY -- 1.0%
357,000 BTR Nylex Limited 950,139
----------
Total Australia 4,446,842
----------
AUSTRIA -- 2.3%
ELECTRIC UTILITIES -- 1.0%
7,500 EVN Energ Versorg 979,951
----------
INDUSTRIAL MACHINERY -- 1.3%
11,000 VA Technologie AG 1,214,587
----------
Total Austria 2,194,538
----------
BELGIUM -- 2.3%
CHEMICALS -- 1.2%
2,200 Solvay 1,154,942
----------
NON-FERROUS METALS -- 1.1%
15,900 (c)Union Miniere 1,047,993
----------
Total Belgium 2,202,935
----------
BERMUDA -- 1.0%
FINANCIAL SERVICES -- 1.0%
307,500 Jardine Strategic 965,550
----------
BRAZIL -- 0.9%
BROADCASTING -- 0.9%
20,700 Telecomunicacoes Brasileiras ADR 874,575
----------
CANADA -- 3.0%
BANKING -- 1.3%
48,000 Canadian Imperial Bank Toronto 1,179,449
----------
ELECTRONICS -- 0.8%
25,000 (c)Newbridge Networks Corp. 725,987
----------
INSURANCE -- 0.4%
18,600 London Ins. Group Inc. 368,745
----------
MINING -- 0.5%
58,000 (c)Inmet Mining Corp. 458,861
----------
Total Canada 2,733,042
----------
CHILE -- 0.8%
TELEPHONE -- 0.8%
9,500 Companhia De Telecomucicacione ADR 693,500
----------
CHINA -- 0.7%
ELECTRIC UTILITIES -- 0.7%
Shandong Huaneng Power Dev.
82,600 Ltd. ADR 691,775
----------
</TABLE>
(See Notes to Portfolio of Investments)
MARSHALL FUNDS
INTERNATIONAL STOCK FUND (CONTINUED)
<TABLE>
<CAPTION>
Shares Description Value
-----------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (Continued)
CZECHOSLOVAKIA -- 1.0%
BANKING -- 0.2%
4,000 Komercni Banka $ 205,281
----------
ELECTRIC UTILITIES -- 0.6%
13,500 (c)Cez (Cesk En Zavody) 527,148
----------
FINANCIAL SERVICES -- 0.2%
7,237 (c)Creditanstalt Cesky Inv. 200,504
----------
Total Czechoslovakia 932,933
----------
FINLAND -- 1.5%
CONGLOMERATES -- 0.9%
51,000 Amer Group 869,549
----------
PAPER -- 0.6%
14,700 Metsa Serla Oy 579,677
----------
Total Finland 1,449,226
----------
FRANCE -- 5.6%
AUTOMOBILES -- 1.1%
35,400 Renault (Regie Nationale) 1,001,847
----------
BANKING -- 1.1%
24,900 Banque National Paris 1,021,503
----------
CHEMICALS -- 1.2%
53,900 Rhone Poulenc SA 1,105,603
----------
ELECTRONIC EQUIPMENT -- 1.0%
9,000 Alcatel ALST(CGE) 902,533
----------
GAS EXPLORATION -- 1.2%
16,100 Soc Elf Aquitaine 1,178,990
----------
Total France 5,210,476
----------
GERMANY -- 4.0%
BANKING -- 1.3%
26,950 Deutsche Bank AG 1,246,954
----------
CHEMICALS -- 1.4%
5,150 Bayer AG 1,331,806
----------
ELECTRIC UTILITIES -- 1.3%
32,500 Veba AG 1,243,305
----------
Total Germany 3,822,065
----------
GREAT BRITAIN -- 8.1%
BANKING -- 1.2%
100,000 Barclays PLC 1,119,044
----------
BUSINESS SERVICES -- 1.2%
99,167 Welsh Water PLC 1,171,288
----------
FOOD & BEVERAGES -- 2.9%
1,718,900 Albert Fisher Group PLC 1,427,303
436,955 Hillsdown Holdings PLC 1,295,335
----------
Total 2,722,638
----------
GAS & PIPELINE UTILITIES -- 1.2%
266,800 British Gas PLC 1,149,108
----------
POLLUTION CONTROL -- 0.2%
(c)Waste Management International
18,600 PLC, ADR 199,950
----------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
--------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (Continued)
GREAT BRITAIN (Continued)
RETAIL TRADE -- 1.4%
228,700 Burton Group PLC $ 362,058
81,600 Kwik Save Group PLC 915,040
----------
Total 1,277,098
----------
Total Great Britain 7,639,126
----------
HONG KONG -- 4.4%
BANKING -- 1.4%
96,600 HSBC Holdings 1,297,817
----------
CONGLOMERATES -- 2.4%
210,000 Hutchinson Whampoa 1,011,885
171,500 Swire Pacific 1,284,976
----------
Total 2,296,861
----------
RETAIL TRADE -- 0.6%
550,000 Dairy Farm International 511,500
----------
Total Hong Kong 4,106,178
----------
INDONESIA -- 0.7%
FOREST PRODUCTS -- 0.7%
599,500 Barito Pac Timber 648,037
----------
ITALY -- 2.4%
PAPER -- 1.1%
150,000 Burgo (Cartiere) Spa 1,017,755
----------
TELEPHONE -- 1.3%
515,000 Stet 1,258,262
----------
Total Italy 2,276,017
----------
JAPAN -- 2.6%
ELECTRICAL EQUIPMENT -- 1.2%
104,000 Hitachi 1,138,181
----------
HOUSEHOLD APPLIANCES & FURNISHINGS -- 1.4%
24,000 Sony Corp. 1,310,832
----------
Total Japan 2,449,013
----------
MEXICO -- 0.6%
CONTAINERS & GLASS-- 0.6%
182,400 Vitro SA 549,380
----------
NETHERLANDS -- 5.9%
CHEMICALS -- 2.2%
10,500 Azko Nobel NV 1,238,674
20,000 European Vinyls Corp. International NV 850,106
----------
Total 2,088,780
----------
INSURANCE -- 3.0%
41,465 Aegon NV 1,394,354
25,500 International Nederlanden 1,417,270
----------
Total 2,811,624
----------
RETAIL TRADE -- 0.7%
9,160 Kon Bijenkorf Beh 615,494
----------
Total Netherlands 5,515,898
----------
NEW ZEALAND -- 2.5%
FOREST PRODUCTS -- 1.3%
450,000 Fletcher Challenge 1,223,335
----------
INVESTMENT COMPANIES-- 1.2%
1,553,600 Brierley Investment Ltd. 1,151,863
----------
Total New Zealand 2,375,198
----------
</TABLE>
(See Notes to Portfolio of Investments)
August 31, 1995
PORTFOLIO OF INVESTMENTS
INTERNATIONAL STOCK FUND (CONTINUED)
<TABLE>
<CAPTION>
Shares Description Value
------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (Continued)
NORWAY -- 3.0%
DRUGS & HEALTH CARE -- 1.5%
60,000 Hafslund Nycomed $ 1,421,336
-----------
NON-FERROUS METALS -- 0.7%
56,000 Elkem AS 672,017
-----------
PETROLEUM SERVICES -- 0.8%
60,500 Saga Petroleum 759,020
-----------
Total Norway 2,852,373
-----------
SPAIN -- 7.8%
BANKING -- 2.5%
44,500 BCO Bilboa Vizcaya 1,346,496
52,000 Corporacion Bancaria De Espana ADR 988,000
-----------
Total 2,334,496
-----------
ELECTRIC UTILITIES -- 2.6%
22,000 Emp Nac Electricid 1,141,923
172,000 Iberdrola SA 1,320,651
-----------
Total 2,462,574
-----------
PETROLEUM SERVICES -- 1.3%
40,000 Repsol SA 1,254,983
-----------
TELEPHONE -- 1.4%
95,000 Telefonica De Esp 1,287,673
-----------
Total Spain 7,339,726
-----------
SWEDEN -- 7.0%
AUTOMOBILES -- 1.4%
67,500 Volvo AB 1,341,378
-----------
BANKING -- 2.8%
70,000 Stadshypotek AB 1,141,628
90,000 Svenska Handelsbnk 1,406,134
-----------
Total 2,547,762
-----------
DRUGS & HEALTH CARE -- 1.5%
44,500 Astra AB 1,445,399
-----------
FOREST PRODUCTS-- 1.3%
98,000 Stora Kopparbergs 1,222,213
-----------
Total Sweden 6,556,752
-----------
SWITZERLAND -- 4.6%
BUSINESS SERVICES -- 1.5%
775 SGS Holding 1,392,427
-----------
ELECTRICAL EQUIPMENT -- 1.5%
1,350 BBC Brown Boveri 1,423,942
-----------
INSURANCE -- 1.6%
5,650 Zurich Versicherun 1,444,149
-----------
Total Switzerland 4,260,518
-----------
TOTAL COMMON STOCKS
(identified cost $69,966,779) 72,785,673
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares or
Principal
Amount Description Value
----------------------------------------------------------------------------
<C> <S> <C>
PREFERRED STOCKS -- 0.6%
AUSTRALIA -- 0.4%
BROADCASTING -- 0.4%
81,572 News Corporation Limited, 6.25% $ 421,935
----------
GREAT BRITAIN -- 0.2%
BUSINESS SERVICES -- 0.2%
107,100 Welsh Water, 7.875% 170,798
----------
TOTAL PREFERRED STOCKS
(identified cost $315,635) 592,733
----------
CLOSED-END INVESTMENT COMPANIES-- 3.5%
353,400 India Fund 688,370
49,367 Thai Fund, Inc. 1,190,979
59,000 (c)Turkish Growth Fund 759,625
12 (c)Korea International Trust 606,000
----------
TOTAL CLOSED-END INVESTMENT COMPANIES (identified
cost
$3,730,954) 3,244,974
----------
CONVERTIBLE BONDS -- 2.7%
GREAT BRITAIN -- 1.4%
$ 720,000 National Power, 6.25%, 9/8/2023 1,357,753
----------
UNITED STATES -- 1.3%
1,430,000 PIV Investment Finance, 4.50%, 12/1/2000 1,172,600
----------
TOTAL CONVERTIBLE BONDS
(identified cost $2,387,127) 2,530,353
----------
CONVERTIBLE PREFERRED STOCK--1.7%
ARGENTINA -- 0.9%
25,554 Nacional Financiera SNC, 11.25%, 5/15/1998 875,225
----------
MEXICO -- 0.8%
Compania De Inversiones En Telecom (Cointel) 7%,
14,870 3/3/1998 743,500
----------
TOTAL CONVERTIBLE PREFERRED STOCKS (identified cost
$1,695,365) 1,618,725
----------
GOVERNMENT AGENCIES -- 7.0%
FEDERAL HOME LOAN MORTGAGE DISCOUNT NOTES -- 1.5%
100,000 5.64%, 9/20/1995 99,702
230,000 5.67%, 9/20/1995 229,312
1,120,000 5.65%, 9/29/1995 1,115,078
----------
Total (at amortized cost) 1,444,092
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION DISCOUNT NOTES-- 5.5%
1,130,000 5.67%, 9/06/1995 1,129,110
1,650,000 5.68%, 9/08/1995 1,648,178
670,000 5.65%, 9/21/1995 667,897
1,300,000 5.64%, 10/10/1995 1,292,057
400,000 5.64%, 10/23/1995 396,741
----------
Total (at amortized cost) 5,133,983
----------
TOTAL GOVERNMENT AGENCIES
(amortized cost $6,578,075) 6,578,075
----------
</TABLE>
(See Notes to Portfolio of Investments)
MARSHALL FUNDS
INTERNATIONAL STOCK FUND (CONTINUED)
<TABLE>
<CAPTION>
Principal
Amount Description Value
------------------------------------------------------------
<C> <S> <C>
U.S. TREASURY ISSUES -- 6.9%
$2,000,000 Treasury Bill, 9/7/1995 $ 1,998,200
730,000 Treasury Bill, 10/5/1995 726,308
-----------
Total (at amortized cost) 2,724,508
-----------
2,965,000 Treasury Bill, 9/14/1995 2,960,286
800,000 Treasury Note, 8.875%, 2/15/1996 811,504
-----------
Total (identified cost $3,772,543) 3,771,790
-----------
TOTAL U.S. TREASURY ISSUES 6,496,298
-----------
TOTAL INVESTMENTS
(identified cost $91,170,986) $93,846,831
===========
</TABLE>
SHORT-TERM INCOME FUND
<TABLE>
<CAPTION>
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
ASSET-BACKED SECURITIES -- 23.6%
$ 2,389,837 Equicon Home Equity Loan Trust, Series 1992-7,
Class A, 5.90%, 9/18/2005 $ 2,350,255
781,687 Ford Credit Grantor Trust, Series 1993-B, Class A,
4.30%, 7/15/98 770,774
369,537 Green Tree Acceptance Corp., Series 1993-3, Class
A1, 4.60%, 10/15/2018 365,213
2,112,623 Green Tree Acceptance Corp., Series 1994-4, Class
A1, 6.55%, 7/15/2019 2,118,895
447,989 Green Tree Acceptance Corp., Series 1993-1, Class
A1, 4.90%, 4/15/2018 442,729
2,123,316 Olympic Automobile Receivables, Series 1994, Class
A, 5.65%, 1/15/2001 2,108,771
2,500,000 Olympic Automobile Receivables, Series 1995, Class
B, 7.35%, 10/15/2001 2,542,723
1,379,331 Premier Auto Trust, Series 1993-4, Class A2, 4.65%,
2/2/1999 1,361,965
2,300,000 Premier Auto Trust, Series 1995-1, Class A, 7.85%,
2/4/1998 2,352,463
283,083 (f)Revolving Home Equity Loan Trust, Series 1992-1,
Class A, 6.4925%, 9/15/1995 283,974
2,626,811 UCFC Home Equity Loan, Series 1994-C1, Class A2,
7.275%, 6/10/2007 2,659,646
2,517,006 Western Financial Grantor Trust, Series 1994-2,
Class A1, 6.375%, 9/1/1999 2,524,230
-----------
TOTAL ASSET-BACKED SECURITIES (identified cost
$19,763,801) 19,881,638
-----------
CORPORATE BONDS -- 16.9%
BANKING -- 3.4%
1,025,000 Citicorp, 8.05%, 3/5/1996 1,037,146
1,800,000 Nationsbank Corp., 7.50%, 2/15/1997 1,834,434
-----------
Total 2,871,580
-----------
FINANCE -- 4.8%
3,360,000 (f)Dean Witter Discover & Co., 6.075%, 9/20/1995 3,359,328
716,750 Heller Financial, Inc., 6.45%, 2/15/1997 718,907
-----------
Total 4,078,235
-----------
FINANCE-AUTOMOTIVE -- 3.7%
3,000,000 Ford Holdings, 9.25%, 7/15/1997 3,156,660
-----------
FINANCIAL SECURITIES -- 0.7%
550,000 Merrill Lynch & Co., Inc., 5.875%, 12/1/1995 550,116
-----------
RETAIL -- 2.1%
1,755,000 Dayton Hudson Corp., 4.65%, 3/11/1996 1,745,207
-----------
</TABLE>
(See Notes to Portfolio of Investments)
August 31, 1995
PORTFOLIO OF INVESTMENTS
SHORT-TERM INCOME FUND (CONTINUED)
<TABLE>
<CAPTION>
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS (Continued)
TELECOMMUNICATIONS-- 2.2%
$ 1,800,000 Northern Telecom, 8.25%, 6/13/1996 $ 1,832,148
-----------
TOTAL CORPORATE BONDS
(identified cost $14,242,097) 14,233,946
-----------
MORTGAGE-BACKED SECURITIES -- 27.5%
FEDERAL HOME LOAN MORTGAGE
CORP. -- 4.7%
800,000 6.00%, 7/15/2010
(Series 1468-C) 798,712
1,114,980 7.75%, 1/15/2018
(Series 1259-H) 1,124,223
2,019,260 10.00%, 7/15/2018, REMIC (Series 10-D) 2,066,753
-----------
Total 3,989,688
-----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION -- 8.7%
2,093,022 8.00%, 8/1/2007 2,152,543
2,626,004 7.50%, 4/25/2014, REMIC (Series 1991-06-K) 2,640,683
1,145,009 7.25%, 9/25/2018, REMIC (Series 1991-G34-C) 1,145,284
1,374,219 6.00%, 7/25/2019, REMIC (Series 1992-009-G) 1,369,657
-----------
Total 7,308,167
-----------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 2.9%
2,393,762 7.50%, 10/17/2015, CMO
(Class E) 2,410,968
-----------
OTHER -- 11.2%
3,493,206 CMC Securities Corp., III, Series 1994 E, Class AM,
6.00%, 3/25/2024 3,446,266
2,043,627 GE Capital Mortgage Services, Inc., Series 1994-10,
Class A1, 5.00%, 3/25/2024 2,028,300
2,411,449 PaineWebber CMO Trust, Class 0-4, 9.50%, 6/1/2017 2,442,556
1,582,581 Prudential Home Mortgage Securities Co., Series
1993-53, Class A1, 6.00%, 1/25/2009 1,572,167
-----------
Total 9,489,289
-----------
TOTAL MORTGAGE-BACKED SECURITIES
(identified cost $23,228,173) 23,198,112
-----------
U.S. TREASURY SECURITIES-AGENCY -- 32.8%
22,000,000 5.875%, 8/15/1998 21,962,160
2,000,000 8.325%, 12/6/1999
(Series KC99) 2,013,080
2,200,000 8.00%, 3/15/2000 2,222,836
1,450,000 7.84%, 4/26/2000 1,467,487
-----------
TOTAL U.S. TREASURY SECURITIES-AGENCY (identified
cost $27,601,422) 27,665,563
-----------
(B)REPURCHASE AGREEMENTS -- 1.7%
1,414,000 Barclays de Zoete Wedd Securities, Inc., 5.80%,
dated 8/31/1995, due 9/1/1995 (at amortized cost) 1,414,000
-----------
TOTAL INVESTMENTS
(identified cost $86,249,493) $86,393,259
===========
</TABLE>
INTERMEDIATE BOND FUND
<TABLE>
<CAPTION>
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
ASSET-BACKED SECURITIES -- 12.4%
$ 4,690,000 American Express Master Trust, Series 1994-2,
Class A, 7.60%, 8/15/2002 $ 4,936,225
6,025,000 Banc One Credit Card Master Trust, Series 1994-B,
7.55%, 12/15/1999 6,192,570
3,612,143 Ford Credit Grantor Trust, 7.30%, 10/15/1999 3,669,576
4,325,000 Green Tree Financial Corp., 8.35%, 3/15/2020 4,597,340
7,973,089 Mortgage Capital Funding, Inc., 7.75%, 5/25/2027 8,162,449
3,865,836 Olympic Automobile Receivables, Series 1994-A,
5.65%, 1/15/2001 3,839,355
5,935,000 Premier Auto Trust, Series 1995-1, Class A, 7.85%,
2/4/1998 6,070,377
5,000,000 Prime Credit Card Master Trust, Series 1995-1,
Class A, 6.75%, 11/15/2005 5,033,594
176,402 Western Financial Grantor Trust, Series 1991-3,
6.75%, 1/1/1997 176,734
------------
TOTAL ASSET-BACKED SECURITIES
(identified cost $41,721,774) 42,678,220
------------
CORPORATE BONDS -- 26.4%
BANKING -- 6.2%
8,000,000 Banc One Corp., 7.00%, 7/15/2005 8,022,240
7,050,000 Citicorp, 7.125%, 9/1/2005 7,132,203
6,000,000 PNC Funding Corp., 7.75%, 6/1/2004 6,281,340
------------
Total 21,435,783
------------
CONSUMER SERVICES -- 2.2%
5,000,000 Marriott International, Inc., 7.875%, 4/15/2005 5,255,700
2,500,000 Marriott International, Inc., 7.125%, 6/1/2007 2,478,375
------------
Total 7,734,075
------------
FINANCE -- 7.2%
5,000,000 Ford Motor Credit Co., 8.24%, 1/15/2002 5,398,950
6,750,000 Ford Motor Credit Co., 8.20%, 2/15/2002 7,258,005
6,700,000 General Motors Acceptance Corp., 8.00%, 2/3/1997 6,857,852
5,165,000 General Motors Acceptance Corp., 7.00%, 6/6/2003 5,205,132
------------
Total 24,719,939
------------
HEALTH CARE -- 3.0%
10,000,000 American Home Products, 7.70%, 2/15/2000 10,465,100
------------
SERVICES -- 4.2%
9,000,000 Browning Ferris Industries, Inc., 7.875%,
3/15/2005 9,671,850
4,500,000 WMX Technologies, Inc., 8.125%, 2/1/1998 4,683,240
------------
Total 14,355,090
------------
</TABLE>
(See Notes to Portfolio of Investments)
MARSHALL FUNDS
INTERMEDIATE BOND FUND (CONTINUED)
<TABLE>
<CAPTION>
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS (Continued)
UTILITIES-GAS -- 1.7%
$ 5,590,000 Burlington Resources, Inc., 7.15%, 5/1/1999 $ 5,718,850
------------
UTILITIES-TELEPHONE -- 1.9%
6,070,000 NYNEX Capital Funding Co., 8.10%, 11/1/1999 6,418,175
------------
TOTAL CORPORATE BONDS
(identified cost $88,353,758) 90,847,012
------------
MORTGAGE-BACKED SECURITIES -- 14.6%
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 13.2%
23,996 8.75%, 4/1/2001 24,851
20,000,000 7.00%, 1/1/2009 20,062,200
25,000,000 (h)8.00%, 1/1/2024 25,523,000
------------
Total 45,610,051
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 1.4%
4,638,392 7.50%, 10/17/2015 4,671,731
------------
TOTAL MORTGAGE-BACKED SECURITIES (identified cost
$49,946,408) 50,281,782
------------
U.S. TREASURY SECURITIES-AGENCY -- 50.2%
FEDERAL HOME LOAN BANK -- 1.8%
5,810,000 7.26%, 9/6/2001 6,086,847
------------
TREASURY BONDS -- 3.8%
10,000,000 10.375%, 11/15/2012 13,124,800
------------
TREASURY NOTES -- 44.6%
31,265,000 (d)7.875%, 1/15/1998 32,621,588
27,000,000 (d)6.125%, 5/15/1998 27,138,240
28,280,000 (d)6.75%, 6/30/1999 28,959,003
23,480,000 (d)7.125%, 2/29/2000 24,433,992
5,000,000 6.25%, 8/31/2000 5,039,900
7,000,000 (d)6.375%, 8/15/2002 7,072,030
28,000,000 (d)6.50%, 5/15/2005 28,377,720
------------
Total 153,642,473
------------
TOTAL U.S. TREASURY SECURITIES- AGENCY (identified
cost $170,049,774) 172,854,120
------------
(I)COLLATERAL FOR SECURITIES LENDING -- 28.4%
3,000,000 American Honda Finance Co., 5.935%, 5/15/1996 3,000,000
5,000,000 Bear Stearns & Co., Inc., 6.125%, 8/7/1997 5,000,000
3,750,000 Beta Financial, 5.50%, 11/9/1995 3,750,000
3,748,828 Carco Auto Trust, 5.945%, 10/15/2000 3,762,375
4,997,150 Chrysler Corp., 6.04%, 7/31/1997 4,997,150
3,750,000 Federal Signal, 5.92%, 9/1/1995 3,750,000
15,009,525 Ford Motor Credit Co., 6.125%, 5/27/1997 15,036,000
2,995,800 General Electric Capital Corp., 6.09%, 4/25/1997 2,995,800
1,250,000 General Electric Co., 4.875%, 8/5/1996 1,250,000
10,000,000 GMAC, 5.821%, 9/1/1995 10,000,000
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
(I)COLLATERAL FOR SECURITIES LENDING (Continued)
$ 732,725 Goldman Sachs Money Market Fund, 5.74% $ 732,725
5,000,000 Heller Financial Corp., 6.08%, 6/13/1997 5,000,000
6,750,000 J.P. Morgan Securities, Inc., 5.885%, 9/1/1995 6,750,000
967,521 Lehman Brothers Money Market Fund, 5.80% 967,521
703,005 Premier Auto Trust, 5.75%, 9/2/1996 702,794
3,000,000 Republic, 6.0625%, 9/1/1995 3,000,000
5,000,000 Sears Roebuck & Co., 5.819%, 9/5/1995 5,000,000
4,995,800 Sears Roebuck & Co., 5.975%, 5/12/1997 4,995,800
4,000,000 Strong Money Market Fund, 5.806% 4,000,000
3,002,813 Superior Wholesale Inventory Financing Trust,
6.025%, 1/15/1999 3,001,800
10,000,000 Willamette Industries, 6.02%, 9/1/1995 10,000,000
------------
TOTAL COLLATERAL FOR SECURITIES LENDING
(identified cost
$97,691,965) 97,691,965
------------
(B)REPURCHASE AGREEMENT -- 10.9%
37,481,000 Barclays de Zoete Wedd Securities, Inc., 5.80%,
dated 8/31/1995, due 9/1/1995 (at amortized cost) 37,481,000
------------
TOTAL INVESTMENTS
(identified cost $485,244,679) $491,834,099
============
</TABLE>
(See Notes to Portfolio of Investments)
August 31, 1995
PORTFOLIO OF INVESTMENTS
GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
Principal
Amount Description Value
---------------------------------------------------------------------------
<C> <S> <C>
ASSET-BACKED SECURITIES -- 9.8%
$ 3,000,000 EQCC Home Equity Loan Trust, 7.80%, 12/15/2010,
(Series 1995-2A-A4) $ 3,102,660
3,854,208 GE Capital Mortgage Services, Inc., 6.50%,
1/25/2024, (Series 1994-3-A12) 3,554,890
3,500,000 Resolution Trust Corp., 7.50%, 10/25/2028,
REMIC, (Series 1995-1-A2D) 3,492,344
------------
Total Asset-Backed Securities
(identified cost $9,737,252) 10,149,894
------------
MORTGAGE-BACKED SECURITIES -- 81.9%
FEDERAL HOME LOAN MORTGAGE CORP. -- 11.1%
5,500,000 6.25%, 9/15/2023, REMIC
(Series 1666-H) 5,217,685
156,497 8.75%, 4/1/2001 162,070
5,000,000 (h)9.00%, TBA 5,212,450
811,123 9.00%, 5/1/2017 848,629
18,558 9.50%, 2/1/2001 19,422
33,903 10.50%, 10/1/2000 35,756
------------
Total 11,496,012
------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION -- 57.0%
4,725,000 5.50%, 9/25/2007, REMIC (Series 1993-221-C) 4,459,691
5,945,638 6.00%, 6/1/2009 5,754,188
5,919,225 6.50%, 7/1/2008 5,830,377
6,147,862 7.00%, 10/1/1999 6,199,627
10,000,000 (h)7.00%, TBA 9,831,100
2,511,627 8.00%, 8/1/2007 2,583,051
9,704,398 8.00%, 4/1/2022 9,892,421
8,000,000 (h)8.50%, TBA 8,259,920
4,181,278 9.00%, 4/1/2025 4,357,603
915,298 11.00%, 11/15/2000 1,013,979
839,717 11.50%, 10/1/2015 948,880
------------
Total 59,130,837
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 13.8%
5,100,000 7.00%, 8/20/2025 4,980,354
4,612,013 7.00%, 3/15/2009 4,633,551
1,809,854 7.50%, 3/15/2009 1,845,454
1,147,171 7.50%, 10/17/2015, REMIC, (Series 3-E) 1,155,416
588,467 9.50%, 7/15/2019 626,347
881,319 10.00%, 11/15/2020 959,801
81,840 10.50%, 10/15/2000 87,414
64,204 11.00%, 11/15/2000 69,059
------------
Total 14,357,396
------------
Total Mortgage-Backed Securities (identified
cost $85,001,748) 84,984,245
------------
U.S. TREASURY BONDS -- 8.0%
1,000,000 6.875%, 8/15/2025 1,028,840
3,000,000 7.625%, 2/15/2025 3,347,160
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Description Value
---------------------------------------------------------------------------
<C> <S> <C>
U.S. TREASURY BONDS (Continued)
$ 3,000,000 10.375%, 11/15/2012 $ 3,937,440
------------
TOTAL U.S. TREASURY BONDS
(identified cost $8,200,469) 8,313,440
------------
(B)REPURCHASE AGREEMENT -- 16.8%
17,407,000 Barclays de Zoete Wedd Securities, Inc., 5.80%,
dated 8/31/95, due 9/1/95 (at amortized cost) 17,407,000
------------
TOTAL INVESTMENTS
(identified cost $120,346,469) $120,854,579
============
</TABLE>
(See Notes to Portfolio of Investments)
MARSHALL FUNDS
SHORT-TERM TAX-FREE FUND
<TABLE>
<CAPTION>
Principal Credit
Amount Description Ratings(a) Value
------------------------------------------------------------------------------
<C> <S> <C> <C>
MUNICIPAL SECURITIES -- 94.5%
ARIZONA -- 12.2%
$ 750,000 Arizona St. Transportation Board (Maricopa
County), AZ, 7.10% Revenue Bonds,
7/1/1996 AA- $ 769,598
300,000 Mesa, AZ, 7.125% UT GO Bonds, 7/1/1999,
Prerefunded 7/1/1996 @102 A+ 313,893
1,000,000 Salt River Project, AZ, 4.45% Revenue
Bonds, (Series B), 1/1/2000 AA 1,005,400
500,000 Scottsdale, AZ, 5.40% Special Assessment
Bonds (No. I3704 Bell Road), 1/1/1999 A 513,850
----------
Total 2,602,741
----------
DISTRICT OF COLUMBIA-- 1.0%
200,000 District of Columbia, 7.875% UT GO Bonds,
(Series A)/(BIGI Insured), 6/1/2006,
Prerefunded 6/1/1996 @102 AAA 209,506
----------
FLORIDA -- 3.6%
750,000 Cape Coral, FL 4.75% UT GO Bonds, Water &
Sewage, FGIC Insured, 1/1/1999 AAA 765,885
----------
IDAHO -- 4.7%
1,000,000 Idaho Student Loan Fund Marketing
Association, 6.25% Revenue Bonds,
4/1/1998 NR 1,010,780
----------
ILLINOIS -- 4.7%
1,000,000 Cook County, IL, 4.85% UT GO Bonds, School
District 211, 12/1/1996 Aa1 1,011,810
----------
IOWA -- 5.8%
1,245,000 Le Claire, IA, 4.125%, Electric Revenue
Bonds, 9/1/2026, Mandatory Put, 9/1/1996 Sp1+ 1,248,872
----------
MAINE -- 4.7%
750,000 Maine Municipal Bond Bank, 4.70% (Series
A), 11/1/2000 A+ 760,230
250,000 Maine Municipal Bond Bank, 5.00% (Series
B), 11/1/1996, Revenue Bonds A+ 253,243
----------
Total 1,013,473
----------
MARYLAND -- 2.5%
500,000 Maryland State Department of
Transportation, 6.60% Revenue Bonds,
11/15/1997 AA 528,055
----------
</TABLE>
<TABLE>
<CAPTION>
Principal Credit
Amount Description Ratings(a) Value
------------------------------------------------------------------------------
<C> <S> <C> <C>
MUNICIPAL SECURITIES (Continued)
MASSACHUSETTS -- 2.5%
$ 500,000 New England Educational Loan Marketing
Corp., MA, 6.60% Student Loan Revenue
Bonds, 9/1/2002, Subject to AMT A $ 539,350
-----------
MISSISSIPPI -- 4.8%
1,000,000 Raleigh, MS, 6.00% Urban Renewal Revenue
Bonds, (Phase II Redeveloment Project),
12/5/2017, Mandatory Put, 12/5/1997 Sp1+ 1,028,830
-----------
NEVADA -- 3.6%
750,000 Clark Country, NV, 5.40% LT GO Bonds,
(Flood Control)/ (AMBAC Insured),
11/1/1996 AAA 764,167
-----------
PUERTO RICO -- 7.7%
625,000 Puerto Rico Electric Power Authority,
4.25% Revenue Bonds (Series W), MBIA
Insured, 7/1/1999 AAA 624,312
1,000,000 Puerto Rico Municipal Finance Agency,
5.10% Revenue Bonds,
(Series A)/(FSA Insured), 7/1/2000 AAA 1,029,160
-----------
Total 1,653,472
-----------
SOUTH CAROLINA -- 2.5%
500,000 Charleston County, SC, 6.10% UT GO Bonds,
6/1/1998 AA 524,935
-----------
SOUTH DAKOTA -- 3.3%
700,000 Rapid City, SD, 4.60% Revenue Bonds,
(Series C)/(FGIC Insured), 12/1/1999 AAA 703,164
-----------
TENNESSEE -- 3.5%
750,000 Metropolitan Government Nashville &
Davidson County, TN, 4.625% UT GO Bonds,
5/15/2000 AA 758,302
-----------
TEXAS -- 2.5%
500,000 Texas State, 7.50% UT GO Bonds, (Series
B), 10/1/1997 Aa 534,915
-----------
WASHINGTON -- 3.7%
300,000 King County, WA, 4.00%, UT GO Bonds,
School District 210, FGIC Insured,
12/1/1996 AAA 300,453
</TABLE>
(See Notes to Portfolio of Investments)
August 31, 1995
PORTFOLIO OF INVESTMENTS
SHORT-TERM TAX-FREE FUND (CONTINUED)
<TABLE>
<CAPTION>
Principal Credit
Amount Description Ratings(a) Value
------------------------------------------------------------------------------
<C> <S> <C> <C>
MUNICIPAL SECURITIES (Continued)
WASHINGTON (Continued)
$ 200,000 Marysville, WA, 4.20% Water & Sewer
Revenue Bonds, (MBIA Insured), 12/1/1996 AAA $ 200,562
300,000 Washington State Refunding, 3.85% UT GO
Bonds, (Series R), 10/1/1996 AA 299,958
-----------
Total 800,973
-----------
WISCONSIN -- 21.2%
1,000,000 Milwaukee, WI, 5.00% UT GO Notes, (Area
Technical College District)/(Series B),
6/1/1997 AA 1,015,370
1,000,000 New Richmond, WI, 4.75% School District
Tax & Revenue Anticipation Note,
11/1/1995 NR 1,001,290
720,000 West Bend, WI, 5.75% UT GO Bonds, School
District No. 1, 4/1/1997 A1 740,390
1,000,000 Wisconsin Housing & Economic Development
Authority, 6.00% Revenue Bonds, (Series
A), 11/1/2000 GO of Authority A 1,031,130
750,000 Wisconsin State, 4.50% UT GO Bonds,
(Series 1), 11/1/1997 AA 758,393
-----------
Total 4,546,573
-----------
Total Municipal Securities (identified
cost $20,006,418) 20,245,803
-----------
MUTUAL FUND SHARES -- 4.2%
150,673 Fidelity Tax Exempt Money Market 150,673
750,000 Goldman Sachs Financial Square Tax Exempt
Money Market 750,000
-----------
Total Mutual Fund Shares
(at net asset value) 900,673
-----------
TOTAL INVESTMENTS
(identified cost $20,907,091) $21,146,476
===========
</TABLE>
INTERMEDIATE TAX-FREE FUND
<TABLE>
<CAPTION>
Principal Credit
Amount Description Ratings(a) Value
------------------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPALS -- 100.0%
ARIZONA -- 7.9%
$1,000,000 Arizona State Wastewater Management
Authority (Revenue Bonds), 5.60%,
7/1/1997 AA+ $ 1,025,830
1,000,000 Maricopa County, AZ, 6.00%, UT GO Bonds,
(Series A), Community College District,
7/1/2006, Callable 7/1/2003 @101 AA 1,062,470
500,000 Maricopa County, AZ, School District,
6.75% (District No. 48 Scottsdale
Improvement), 7/1/2010, Prerefunded
7/1/2001 @101 AA 560,850
1,000,000 Salt River Project Arizona Agriculture,
4.45%, Refunding Revenue Bonds, (Series
B), 1/1/2000 AA 1,005,400
-----------
Total 3,654,550
-----------
CALIFORNIA -- 3.6%
105,000 Corona, CA, 10.375% ETM, Certificates of
Participation, (Series B), 11/1/2000,
Subject to Mandatory Sinking Fund
11/1/1995 AAA 124,689
1,500,000 Sacramento, CA, School Insurance
Authority, 5.70% Revenue Bonds,
(Liability Program)/
(Series D), 6/1/2003 Mandatory Sinking
Fund 6/1/1997 @100 A- 1,511,040
-----------
Total 1,635,729
-----------
COLORADO -- 2.2%
1,000,000 Aurora, CO, Refunding GO Revenue Bonds,
4.625%, 11/01/2000 AA- 1,006,550
-----------
CONNECTICUT -- 4.9%
750,000 Connecticut State, 5.80% (Series B),
11/15/1999 AA- 793,853
150,000 Connecticut State, 6.00% (Series B),
11/15/2001 AA- 161,694
1,000,000 Enfield, CT, 5.25% UT GO Bonds, 5/15/1996 AA 1,010,540
300,000 South Central, CT, Regional Water
Authority, 5.40%, (Water System)/
(FGIC Insured), 8/1/2002 AAA 312,063
-----------
Total 2,278,150
-----------
HAWAII -- 1.7%
750,000 Hawaii State, 5.25%, (Series BZ),
10/1/2000 AA 776,258
-----------
</TABLE>
(See Notes to Portfolio of Investments)
MARSHALL FUNDS
INTERMEDIATE TAX-FREE FUND (CONTINUED)
<TABLE>
<CAPTION>
Principal Credit
Amount Description Ratings(a) Value
------------------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPALS (Continued)
ILLINOIS -- 2.5%
$1,085,000 Waukegan, IL, 6.40% UT GO Bonds, (MBIA
Insured), 12/30/2004, Callable
12/30/2002 @100 AAA $ 1,168,100
-----------
INDIANA -- 4.4%
1,000,000 Indiana Bond Bank, 4.65%, Common School
Funding, (AMBAC Insured), 2/1/2000 AAA 1,000,740
1,000,000 Indiana University, 5.00%, University and
College Improvements, Refunding Revenue
Bonds, (Student Fee)/(Series K),
8/1/2001 AA- 1,023,540
-----------
Total 2,024,280
-----------
IOWA -- 2.3%
1,050,000 Cedar Rapids, IA, 5.20%, Airport and
Marina Improvements, Public and Water
Utility Improvements, (Series B),
6/1/2007, Callable 6/1/2004 @100 AAA 1,055,765
-----------
LOUISIANA -- 2.3%
1,000,000 Louisiana Public Facility Revenue
Authority, 6.75% Refunding Revenue
Bonds, (Student Loan)/(Series A-2),
9/1/2006, Callable 9/1/2002 @102,
(Subject to AMT) AAA 1,070,350
-----------
MARYLAND -- 4.5%
1,000,000 Maryland State, 5.20%, State and Local
Facilities Loan Bond, 3/15/2003 AAA 1,038,430
1,000,000 Northeast Maryland Waste Disposal
Authority, 6.00%, Resource Recovery
Revenue Bonds, 7/1/2007, (Subject to
AMT) A 1,022,850
-----------
Total 2,061,280
-----------
MASSACHUSETTS -- 5.6%
1,500,000 Massachusetts State Health and
Educational Facilities Authority, 6.00%
Revenue Bonds, (Daughters of Charity
National Health System for the Carney
Hospital)/(Series D), 7/1/2009, Callable
7/1/2004 @102 AA 1,516,500
</TABLE>
<TABLE>
<CAPTION>
Principal Credit
Amount Description Ratings(a) Value
-----------------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPALS (Continued)
MASSACHUSETTS (Continued)
$1,000,000 New England Education Loan Marketing
Corp., MA, 6.60%, Student Loan Revenue
Bonds,
(Series F), 9/1/2002, (Subject to AMT) A $ 1,078,700
-----------
Total 2,595,200
-----------
MICHIGAN -- 1.1%
500,000 Chelsea, MI, School District, 5.25%,
(FGIC Insured), 5/1/2001 AAA 518,760
-----------
MINNESOTA -- 2.2%
1,000,000 Minnesota State, 5.00%, 8/1/2000 AA+ 1,030,160
-----------
MISSISSIPPI -- 2.4%
1,000,000 Mississippi River Bridge Authority,
6.625%, Revenue Bonds, 11/1/2006,
Callable 11/1/2002 @102 A- 1,103,670
-----------
MISSOURI -- 2.5%
1,000,000 Missouri State Environmental Improvement
and Energy Resource Authority, 6.65%
Water Pollution Control Revenue Bonds,
(State Revolving Fund Program)/(Series
B), 7/1/2006, Callable 7/1/2004 @102 AA 1,128,620
-----------
NEBRASKA -- 2.3%
1,000,000 Nebraska Higher Education Loan Program,
6.65% Revenue Bonds, (Sr. Sub.
Lien)/(Series A-5), 6/1/2008, (Subject
to AMT), Mandatory Sinking Fund
6/1/2003 @100 AA 1,046,410
-----------
NEVADA -- 3.2%
1,500,000 Las Vegas, NV, 4.875%, Refunding Revenue
Bonds, (MBIA Insured)/(Series B),
1/1/2006, Callable 1/1/2003 @101 AAA 1,457,820
-----------
NEW JERSEY -- 0.6%
250,000 New Jersey State, 6.25%, 9/15/2000 AA+ 271,465
-----------
NEW YORK -- 3.4%
1,500,000 New York State Environmental Facilities
Corp. Pollution Control Revolving Fund,
5.70%, Refunding Revenue Bonds,
6/15/2006, Callable 6/15/2004 @102 AA 1,548,645
-----------
</TABLE>
(See Notes to Portfolio of Investments)
August 31, 1995
PORTFOLIO OF INVESTMENTS
INTERMEDIATE TAX-FREE FUND (CONTINUED)
<TABLE>
<CAPTION>
Principal Credit
Amount Description Ratings(a) Value
------------------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPALS (Continued)
OHIO -- 2.2%
$1,000,000 Columbus, OH, 4.90% GO Bonds, 9/15/2001 AAA $ 1,024,070
-----------
OREGON -- 2.2%
1,000,000 Metro, OR, 5.00%, Open Spaces Program,
(Series A), 9/1/2002 AA+ 1,026,060
-----------
PENNSYLVANIA -- 2.2%
1,000,000 Pennsylvania State, 5.00%, Public,
Correctional, and Recreational
Facilities, (First Series), 5/1/1997 AA- 1,016,260
-----------
PUERTO RICO -- 7.8%
750,000 Puerto Rico Commonwealth, 5.50%,
Refunding Revenue Bonds, (MBIA Insured),
7/1/2001 AAA 787,574
1,000,000 Puerto Rico Electric Power Authority,
4.25%, Refunding Revenue Bonds, (Series
W), (MBIA Insured), 7/1/1999 AAA 998,900
1,500,000 Puerto Rico Municipal Financial Agency,
5.10%, Revenue Bonds, (Series A), (FSA
Insured), 7/1/2000 AAA 1,543,740
250,000 Puerto Rico Public Building Authority,
6.10%, Refunding Revenue Bonds, (Series
K), (FGIC Insured), 7/1/2002 AAA 272,480
-----------
Total 3,602,694
-----------
TEXAS -- 8.9%
1,000,000 Arlington, TX, ISD, 6.50% Refunding
Revenue Bonds (PFS Guaranteed),
2/15/2002 AAA 1,100,210
510,000 Brazos, TX, Higher Education Authority,
5.85%, Refunding Revenue Bonds, (Student
Loan)/(Series A-2), 6/1/2001, (Subject
to AMT) AAA 528,512
1,000,000 Dallas, TX, Dallas Denton and Collin Co.,
4.50%, GO Bonds, 2/15/2000 AAA 1,006,370
100,000 Dallas/Ft. Worth, TX, Regional Airport,
5.875% (Long Opt. Period)/(Series A CR
104), (FGIC Insured), 11/1/2006,
Optional Put 5/1/1998 @100, Callable
5/1/2004 @102 AAA 103,901
700,000 El Paso, TX, ISD, 7.50%, PSF GTD.,
8/15/2000 AAA 787,850
</TABLE>
<TABLE>
<CAPTION>
Shares or
Principal Credit
Amount Description Ratings(a) Value
------------------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPALS (Continued)
TEXAS (Continued)
$500,000 Montgomery County, TX, Hospital District,
6.625% Refunding Revenue Bonds, (Series
B)/(FSA Insured), 4/1/2017, Prerefunded
4/1/2002 @102 AAA $ 564,240
------------
Total 4,091,083
------------
VIRGINIA -- 8.4%
1,730,000 Chesapeake, VA, School, Recreational and
Public Improvements, 5.60%, 5/1/2006,
Callable 5/1/2004 @101 AA 1,793,075
500,000 Virginia Beach, VA, 4.30%, 11/1/1997 AA 504,480
1,500,000 Virginia State Housing Development
Authority, 6.40%, Revenue Bonds,
(Commonwealth Mortgage)/(Series A),
7/1/2002, (Subject to AMT) AA+ 1,586,250
------------
Total 3,883,805
------------
WISCONSIN -- 8.7%
170,000 Appleton, WI, Sewer Revenue Bonds, 3.95%
BANs, 10/1/1995 MIG1 170,011
1,000,000 New Richmond, WI, School District, 4.73%
TRANs, 11/1/1995 NR 1,001,260
1,000,000 Racine County,WI, 4.80%, Correctional
Facilities, 6/1/2000 AA 1,016,440
1,000,000 Wisconsin Housing and Economic
Development Authority, 6.00%, Refunding
Revenue Bonds, (Series A), 11/1/2000,
(GO of Authority) A1 1,031,134
750,000 Wisconsin State Transportation Revenue
Bonds, 5.00% (Series B), 7/1/2000 A1 766,687
------------
Total 3,985,532
------------
TOTAL LONG-TERM MUNICIPALS
(identified cost $45,116,509) 46,061,266
------------
MUTUAL FUNDS -- 1.8%
298,665 Fidelity Tax Exempt Money Market 298,665
516,102 Goldman Sachs Financial Square Tax Exempt
Money Market 516,102
------------
TOTAL MUTUAL FUND SHARES
(at net asset value) 814,767
------------
TOTAL INVESTMENTS
(identified cost $45,931,276) $46,876,033
============
</TABLE>
(See Notes to Portfolio of Investments)
MARSHALL FUNDS
MONEY MARKET FUND
<TABLE>
<CAPTION>
Principal
Amount Description Value
-----------------------------------------------------------------------------
<C> <S> <C>
CERTIFICATE OF DEPOSITS -- 3.0%
BANKING -- 3.0%
$10,000,000 Bayerische Landesbank, 6.08%, 7/5/96 $ 10,000,000
25,000,000 Fuji Bank Ltd., 5.80%, 10/25/95 25,000,370
--------------
TOTAL CERTIFICATE OF DEPOSITS 35,000,370
--------------
(E)COMMERCIAL PAPER -- 64.9%
ASSET-BACKED SECURITIES -- 15.3%
33,450,000 Beta Finance, Inc., 5.68%-5.85%, 9/8/95-2/16/96 33,111,861
20,000,000 Corporate Asset Funding Corp., 6.06%, 11/1/95 19,794,633
24,250,000 Corporate Receivables Corp., 5.85%, 9/14/95 24,198,772
50,200,000 CXC, Inc., 5.65%-5.67%, 10/11/95-10/24/95 49,834,192
50,375,000 Preferred Receivables Funding Corp., 5.67%-
5.97%, 9/6/95-11/14/95 49,943,034
--------------
Total 176,882,492
--------------
BANKING -- 6.1%
50,000,000 Abbey National N.A. Corp., 5.65%, 10/3/95-
10/25/95 49,679,833
21,350,000 Bankers Trust N.Y. Corp., 5.68%, 10/19/95 21,188,309
--------------
Total 70,868,142
--------------
BROKERS/DEALERS -- 3.0%
35,000,000 Goldman, Sachs & Co., 5.80%-5.87%, 9/11/95-
10/12/95 34,843,431
--------------
CONSUMER ELECTRONICS -- 1.7%
20,000,000 Duracell, Inc., 5.78%, 9/11/95 19,967,889
--------------
DIVERSIFIED MANUFACTURING -- 4.3%
50,000,000 Hanson Finance PLC, 5.645%-5.81%, 10/12/95-
10/20/95 49,638,849
--------------
DRUGS -- 3.9%
46,000,000 American Home Food Products, 5.63%, 11/6/95-
11/7/95 45,519,417
--------------
INSURANCE -- 4.1%
48,315,000 ITT Hartford Group, Inc., 6.00%, 11/9/95-
11/15/95 47,731,063
--------------
LEASING -- 1.3%
15,000,000 International Lease Finance Corp., 6.05%,
10/30/95 14,851,271
--------------
MINING -- 3.7%
14,926,000 Arco Coal Australia, 5.66%, 11/13/95 14,754,691
28,000,000 U.S. Borax, 5.65%-6.05%, 10/10/95-10/25/95 27,804,983
--------------
Total 42,559,674
--------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Description Value
-----------------------------------------------------------------------------
<C> <S> <C>
(E)COMMERCIAL PAPER (Continued)
PERSONAL CREDIT -- 4.1%
$15,000,000 American General Finance Corp., 5.85%, 9/18/95 $ 14,958,563
15,000,000 General Electric Capital Corp., 6.12%, 10/10/95 14,900,550
18,000,000 General Motors Acceptance Corp., 5.49%-6.01%,
9/20/95-2/15/96 17,764,541
------------
Total 47,623,654
------------
RAILROADS -- 1.0%
11,150,000 Norfolk Southern Corp., 5.70%, 10/31/95 11,044,075
------------
SHORT-TERM BUSINESS CREDIT -- 12.6%
52,000,000 American Express Credit Corp., 5.415%-5.80%,
11/2/95-3/15/96 51,187,164
51,985,000 Caterpillar Financial Services N.V., 6.03%-6.12%,
10/30/95-12/11/95 51,256,965
25,000,000 Sears Roebuck Acceptance Corp., 5.70%, 2/12/96 24,350,833
20,000,000 Whirlpool Financial Corp., 5.675%, 1/22/96 19,549,153
------------
Total 146,344,115
------------
SOFT DRINK BOTTLERS/DISTRIBUTORS -- 3.8%
45,000,000 Coca-Cola Enterprises, Inc., 5.70%-6.00%,
10/23/95-11/16/95 44,517,083
------------
TOTAL COMMERCIAL PAPER 752,391,155
------------
CORPORATE NOTES -- 3.0%
BANKING -- 1.7%
20,000,000 Bank of New York, 6.40%, 6/3/96 20,000,000
------------
LEASING -- 0.4%
5,200,000 International Lease Finance Corp., 6.625%, 6/1/96 5,224,493
------------
PERSONAL FINANCE -- 0.9%
5,200,000 American General Finance Corp., 5.00%, 6/15/96 9,936,087
------------
TOTAL CORPORATE NOTES 35,160,580
------------
(F)VARIABLE RATE NOTES -- 24.5%
ASSET-BACKED SECURITIES -- 1.0%
12,000,000 Beta Financial Corp., 5.52%, 9/7/95 12,000,000
------------
BROKERS/DEALERS -- 6.6%
15,000,000 Bear, Stearns & Co., Inc., 5.99%, 9/6/95 15,000,000
11,875,000 Donaldson, Lufkin, & Jenrette Securities Corp.,
6.125%, 9/1/95 11,875,000
50,000,000 J.P. Morgan Securities, Inc., 5.885%, 9/1/95 50,000,000
------------
Total 76,875,000
------------
FOREST PRODUCTS -- 2.6%
30,000,000 Williamette Corp., 6.02%, 9/1/95 30,000,000
------------
</TABLE>
(See Notes to Portfolio of Investments)
August 31, 1995
PORTFOLIO OF INVESTMENTS
MONEY MARKET FUND (CONTINUED)
<TABLE>
<CAPTION>
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
(F)VARIABLE RATE NOTES (Continued)
GOVERNMENT AGENCY -- 3.1%
$35,585,000 Student Loan Marketing Association, 5.65%-5.71%,
9/6/95 $ 35,586,596
--------------
INSURANCE -- 5.2%
40,000,000 Commonwealth Life Insurance Co., 6.02%, 11/23/95 40,000,000
20,000,000 Transamerica Life Insurance Co., 5.96%, 9/1/95 20,000,000
--------------
Total 60,000,000
--------------
PERSONAL CREDIT -- 4.7%
22,000,000 American Honda Finance Corp., 6.0625%, 9/1/1995 21,995,081
32,300,000 General Motors Acceptance Corp., 5.821%, 9/1/95 32,300,000
--------------
Total 54,295,081
--------------
UTILITIES -- 1.3%
4,999,000 Wisconsin Gas Co., 5.81%, 9/1/95 4,999,000
10,000,000 Wisconsin Public Service Corp., 5.76%, 9/1/95 10,000,000
--------------
Total 14,999,000
--------------
TOTAL VARIABLE-RATE NOTES 283,755,677
--------------
(B)REPURCHASE AGREEMENT -- 4.8%
55,418,000 Barclays de Zoete Wedd Securities, Inc., 5.80%,
dated 8/31/95, due 9/1/95 55,418,000
--------------
TOTAL INVESTMENTS,
(at amortized cost) $1,161,725,782
==============
</TABLE>
(See Notes to Portfolio of Investments)
NOTES TO PORTFOLIOS OF INVESTMENTS
(a) Current credit ratings are unaudited. Please refer to the Statement of
Additional Information for an explanation of the credit ratings.
(b) The repurchase agreements are fully collateralized by U.S. Government
and/or agency obligations based on market prices at the date of the
portfolio.
(c) Non-income producing.
(d) Certain shares or principal amounts on loan to broker.
(e) Each issue shows the rate of discount at the time of purchase.
(f) Current rate and next demand date shown.
(g) Represents securities held as collateral within a margin account, used to
ensure the Fund is able to satisfy the obligations of its outstanding long
futures contracts.
(h) Includes securities subject to dollar roll transactions.
(i) Shares purchased with cash collateral proceeds from securities on loan to
brokers.
The following abbreviations are used in these portfolios:
- --------------------------------------------------------------------------------
ADR -- American Depositary Receipt GTD -- Guaranteed
AMBAC -- American Municipal Bond Assurance Corporation
ISD -- Independent School District
AMT -- Alternative Minimum Tax LT -- Limited Tax
BANs -- Bond Anticipation Notes PLC -- Public Limited Company
BIGI -- Bond Investors Guaranty Insurance
PSF -- Permanent School Fund
CMO -- Collateralized Mortgage Obligation
MBIA -- Municipal Bond Investors Assurance
ETM -- Escrowed to Maturity REMIC -- Real Estate Mortgage Investment
Conduit
FGIC -- Financial Guaranty Insurance Company
TBA -- To Be Announced
FSA -- Financial Security Assurance
TRANs -- Tax Revenue Anticipation Notes
GO -- General Obligation UT -- Unlimited Tax
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COST OF NET UNREALIZED GROSS GROSS
INVESTMENTS APPRECIATION/ UNREALIZED UNREALIZED
FOR DEPRECIATION APPRECIATION DEPRECIATION TOTAL
FEDERAL TAX FOR FEDERAL FOR FEDERAL FOR FEDERAL NET
MARSHALL FUNDS PURPOSES TAX PURPOSES TAX PURPOSES TAX PURPOSES ASSETS**
-------------- -------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Equity Income Fund $ 96,058,331 $11,036,871 $11,524,278 $ 487,407 $ 107,498,678
Value Equity Fund 243,466,376 16,250,943 21,450,987 5,200,044 220,436,028
Stock Fund 222,016,432 32,041,476 38,186,992 6,145,516 257,019,439
Mid-Cap Stock Fund 91,807,453 17,201,432 18,014,544 813,112 108,256,065
International Stock Fund 91,340,908 2,505,923 6,399,513 3,893,590 94,047,554
Short-Term Income Fund 86,249,493 143,766 400,790 257,024 84,273,166
Intermediate Bond Fund 485,362,479 6,471,620 6,675,027 203,407 344,070,682
Government Income Fund 120,346,469 508,110 897,188 389,078 103,707,576
Short-Term Tax-Free Fund 20,907,091 239,385 241,724 2,339 21,421,828
Intermediate Tax-Free 45,931,276 944,757 961,023 16,266 46,050,809
Fund
Money Market Fund 1,161,725,782* 0 0 0 1,158,953,469
</TABLE>
* At amortized cost.
**The categories of investments are shown as a percentage of net assets at
August 31, 1995.
(See Notes which are an integral part of the Financial Statements)
August 31, 1995
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
------- ------- ------- ------- -------
EQUITY VALUE MID-CAP INTERNATIONAL
INCOME EQUITY STOCK STOCK STOCK
FUND FUND FUND FUND FUND
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in
securities, at value $ 93,213,202 $239,005,319 $242,085,908 $104,415,885 $93,846,831
Investments in
repurchase
agreements 13,882,000 20,712,000 11,972,000 4,593,000 --
Cash 303 912 269 689 42,298
Income receivable 360,797 555,933 348,966 15,015 374,421
Receivable for
investments sold -- 487,496 4,768,014 -- 37,998
Receivable for daily
variation margin -- -- -- 8,250 --
Receivable for
capital stock sold 151,755 173,303 14,638 60,152 96,681
Receivable for
foreign currency
sold -- -- -- -- 47,651
Deferred expenses 17,748 55,575 46,456 19,190 35,238
------------ ------------ ------------ ------------ -----------
Total assets 107,625,805 260,990,538 259,236,251 109,112,181 94,481,118
------------ ------------ ------------ ------------ -----------
LIABILITIES:
Payable to Adviser -- -- 165,780 63,320 --
Income distribution
payable -- -- -- -- --
Payable for
investments
purchased -- -- 1,021,850 728,701 81,593
Payable for capital
stock redeemed -- 14,868 962,604 6,096 --
Payable on collateral
due to broker -- 40,350,052 -- -- --
Payable for foreign
currency purchased -- -- -- -- 47,561
Taxes payable -- -- -- -- 26,510
Accrued expenses 127,127 189,590 66,578 57,999 277,900
Dollar Roll Interest
Expense Payable -- -- -- -- --
------------ ------------ ------------ ------------ -----------
Total liabilities 127,127 40,554,510 2,216,812 856,116 433,564
------------ ------------ ------------ ------------ -----------
NET ASSETS CONSIST OF:
Paid-in-capital 95,581,183 190,221,355 214,012,086 86,443,186 90,201,432
Net unrealized
appreciation
(depreciation) on
investments,
collateral, futures
contracts and
foreign currency
transactions 11,052,562 16,330,668 32,088,825 17,531,805 2,667,130
Accumulated net
realized gain (loss)
on investments,
futures contracts
and foreign currency
transactions 405,062 13,144,196 10,578,565 4,281,074 (598,495)
Undistributed net
investment income 459,871 739,809 339,963 -- 1,777,487
------------ ------------ ------------ ------------ -----------
Total Net Assets $107,498,678 $220,436,028 $257,019,439 $108,256,065 $94,047,554
------------ ------------ ------------ ------------ -----------
NET ASSET VALUE,
Offering Price, and
Redemption Proceeds
Per Share:
Class A Shares $11.22 $12.08 $11.64 $12.30 $10.16
Class B Shares -- -- -- -- --
------------ ------------ ------------ ------------ -----------
SHARES OUTSTANDING:
Class A Shares 9,585,200 18,243,540 22,080,353 8,804,452 9,257,933
Class B Shares -- -- -- -- --
------------ ------------ ------------ ------------ -----------
Total shares
outstanding
($0.0001 par
value) 9,585,200 18,243,540 22,080,353 8,804,452 9,257,933
============ ============ ============ ============ ===========
Investments, at
identified cost $ 96,042,640 $243,386,651 $221,969,083 $ 91,723,078 $91,170,986
============ ============ ============ ============ ===========
Investments, at tax
cost $ 96,058,331 $243,466,376 $222,016,432 $ 91,807,453 $91,340,908
============ ============ ============ ============ ===========
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL FUNDS
<TABLE>
<CAPTION>
----------- ------- ------- ------- ------- -------
SHORT-TERM INTERMEDIATE GOVERNMENT SHORT-TERM INTERMEDIATE MONEY
INCOME BOND INCOME TAX-FREE TAX-FREE MARKET
FUND FUND FUND FUND FUND FUND
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$84,979,259 $454,353,099 $103,447,579 $21,146,476 $46,876,033 $1,106,307,782
1,414,000 37,481,000 17,407,000 -- -- 55,418,000
890 773 -- -- -- 17
614,828 4,429,074 623,001 333,439 687,095 2,674,768
-- 5,478,752 7,071,343 -- 558,889 --
-- -- -- -- -- --
50,000 54,254 2,690,407 32,382 141,905 7,219
-- -- -- -- -- --
13,119 48,985 22,419 12,471 17,666 317,387
----------- ------------ ------------ ----------- ----------- --------------
87,072,096 501,845,937 131,261,749 21,524,768 48,281,588 1,164,725,173
----------- ------------ ------------ ----------- ----------- --------------
-- -- -- -- -- --
195,963 681,468 223,716 41,806 149,266 5,360,892
-- 58,883,570 27,244,060 -- 2,034,028 --
2,558,523 313,741 715 48,000 -- 52,386
-- 97,691,965 -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
44,444 188,902 85,682 13,134 47,485 358,426
-- 15,609 -- -- -- --
----------- ------------ ------------ ----------- ----------- --------------
2,798,930 157,775,255 27,554,173 102,940 2,230,779 5,771,704
----------- ------------ ------------ ----------- ----------- --------------
86,908,327 362,599,900 105,524,078 21,254,372 45,756,581 1,158,953,469
143,766 6,589,420 508,110 239,385 944,757 --
(2,778,927) (25,118,638) (2,324,612) (71,929) (650,529) --
-- -- -- -- -- --
----------- ------------ ------------ ----------- ----------- --------------
$84,273,166 $344,070,682 $103,707,576 $21,421,828 $46,050,809 $1,158,953,469
----------- ------------ ------------ ----------- ----------- --------------
$9.74 $9.51 $9.51 $10.05 $9.91 $1.00
-- -- -- -- -- $1.00
----------- ------------ ------------ ----------- ----------- --------------
8,654,058 36,198,112 10,908,777 2,130,667 4,646,887 1,128,622,836
-- -- -- -- -- 30,330,633
----------- ------------ ------------ ----------- ----------- --------------
8,654,058 36,198,112 10,908,777 2,130,667 4,646,887 1,158,953,469
=========== ============ ============ =========== =========== ==============
$86,249,493 $485,244,679 $120,346,469 $20,907,091 $45,931,276 $1,161,725,782
=========== ============ ============ =========== =========== ==============
$86,249,493 $485,362,479 $120,346,469 $20,907,091 $45,931,276 $1,161,725,782
=========== ============ ============ =========== =========== ==============
</TABLE>
Year Ended August 31, 1995
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
------- ------- ------- ------- --------
EQUITY VALUE STOCK MID-CAP INTERNATIONAL
INCOME FUND EQUITY FUND FUND STOCK FUND STOCK FUND*
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 746,643 $ 1,370,124 $ 862,379 $ 255,028 $ 704,470
Dividend income 2,727,183 4,861,527 3,622,056 428,215 2,173,628(a)
----------- ----------- ----------- ----------- ----------
Total income 3,473,826 6,231,651 4,484,435 683,243 2,878,098
----------- ----------- ----------- ----------- ----------
EXPENSES:
Investment advisory
fee 584,150 1,592,905 1,813,889 585,271 727,503
Directors' fees 6,314 5,798 3,137 6,476 2,718
Administrative
personnel and
services fees 70,707 193,180 219,917 70,878 66,944
Custodian fees 15,577 42,477 48,011 15,607 238,730
Portfolio accounting
fees 51,002 59,030 60,899 54,528 55,528
Transfer and dividend
disbursing agent fees
and expenses 29,821 25,633 100,366 29,985 14,402
Shareholder services
fees 14,413 38,070 43,568 14,323 13,349
Capital stock
registration costs 38,665 35,228 28,289 32,529 --
Auditing fees 11,034 10,132 15,441 11,316 --
Legal fees 4,502 2,117 3,241 4,392 6,181
Printing and postage 14,366 6,543 13,069 12,267 15,329
Insurance premiums 4,961 5,055 6,159 5,058 --
Distribution services
fees -- -- -- -- --
Taxes 5,982 16,133 19,865 6,307 4,893
Miscellaneous 2,696 1,378 6,589 1,188 6,268
----------- ----------- ----------- ----------- ----------
Total expenses 854,190 2,033,679 2,382,440 850,125 1,151,845
DEDUCT--
Waiver of investment
advisory fee 69,757 -- 17,481 64,161 31,759
Waiver of
administrative
personnel and
services fees -- -- -- -- --
Reimbursement of other
expenses by Adviser -- -- -- -- --
----------- ----------- ----------- ----------- ----------
NET EXPENSES 784,433 2,033,679 2,364,959 785,964 1,120,086
----------- ----------- ----------- ----------- ----------
NET INVESTMENT INCOME 2,689,393 4,197,972 2,119,476 (102,721) 1,758,012
----------- ----------- ----------- ----------- ----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS, FOREIGN
CURRENCY AND FUTURES
CONTRACTS:
Net realized gain
(loss) on investment
transactions
(identified cost
basis) 797,876 13,637,946 14,035,870 5,757,618 (472,259)
Net realized gain
(loss) on foreign
currency -- -- -- -- (178,615)
Net realized gain on
futures contracts
(identified cost
basis) -- -- -- 146,087 --
Net change in
unrealized
appreciation
(depreciation) on
investments,
collateral, futures
contracts and foreign
currency transactions 10,665,976 8,615,958 22,181,832 16,659,161 2,667,130
----------- ----------- ----------- ----------- ----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS, FOREIGN
CURRENCY AND FUTURES
CONTRACTS 11,463,852 22,253,904 36,217,702 22,562,866 2,016,256
----------- ----------- ----------- ----------- ----------
CHANGE IN NET ASSETS
RESULTING FROM
OPERATIONS $14,153,245 $26,451,876 $38,337,178 $22,460,145 $3,774,268
=========== =========== =========== =========== ==========
</TABLE>
*For the period from September 2, 1994 (date of initial public investment)
to August 31, 1995.
(a)Net of Foreign taxes withheld of $291,494.
(b)Net of dollar roll interest expense of $39,312.
(c)Net of dollar roll interest expense of $131,639.
(See Notes which are an integral part of the Financial Statements)
MARSHALL FUNDS
<TABLE>
<CAPTION>
- ---------- ------- ------- ------- ------- -------
SHORT-TERM INTERMEDIATE GOVERNMENT SHORT-TERM INTERMEDIATE MONEY
INCOME BOND INCOME TAX-FREE TAX-FREE MARKET
FUND FUND FUND FUND FUND FUND
- ---------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$5,628,495 $ 24,564,665(b) $ 6,265,818(c) $ 1,031,943 $ 2,015,559 $63,587,190
-- -- -- -- -- --
- ---------- ------------ ----------- ----------- ----------- -----------
5,628,495 24,564,665 6,265,818 1,031,943 2,015,559 63,587,190
- ---------- ------------ ----------- ----------- ----------- -----------
537,366 2,046,206 635,592 115,704 243,850 5,435,257
3,308 1,095 3,004 4,553 4,459 5,490
81,509 310,184 77,015 50,000 50,000 988,602
17,912 59,104 16,949 4,628 8,128 133,705
51,228 76,121 53,694 48,539 55,515 126,333
32,354 29,944 72,083 22,657 21,308 141,156
15,860 61,234 15,385 4,092 7,339 194,970
16,626 37,863 27,182 15,058 16,796 79,064
16,284 14,616 14,786 9,797 10,082 14,532
5,127 4,949 5,607 3,067 1,058 8,028
12,431 4,919 7,156 11,070 9,357 17,034
6,048 8,549 4,879 4,064 4,689 18,901
-- -- -- -- -- 63,394
7,498 25,238 6,308 1,725 3,174 77,012
6,692 5,543 3,507 1,809 662 17,256
- ---------- ------------ ----------- ----------- ----------- -----------
810,243 2,685,565 943,147 296,763 436,417 7,320,734
355,637 272,827 216,611 109,424 176,613 2,826,334
-- -- -- 28,938 13,052 --
-- -- -- 41,000 -- --
- ---------- ------------ ----------- ----------- ----------- -----------
454,606 2,412,738 726,536 117,401 246,752 4,494,400
- ---------- ------------ ----------- ----------- ----------- -----------
5,173,889 22,151,927 5,539,282 914,542 1,768,807 59,092,790
- ---------- ------------ ----------- ----------- ----------- -----------
(774,594) (10,004,792) 838,530 (60,957) (440,633) --
-- -- -- -- -- --
-- -- -- -- -- --
910,517 15,428,567 2,289,136 320,938 1,354,952 --
- ---------- ------------ ----------- ----------- ----------- -----------
135,923 5,423,775 3,127,666 259,981 914,319 --
- ---------- ------------ ----------- ----------- ----------- -----------
$5,309,812 $ 27,575,702 $ 8,666,948 $ 1,174,523 $ 2,683,126 $59,092,790
========== ============ =========== =========== =========== ===========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
-------------------------- --------------------------
EQUITY VALUE
INCOME EQUITY
FUND FUND
-------------------------- --------------------------
Period
Year Ended Period Ended Year Ended Ended
August 31, August 31, August 31, August 31,
1995 1994* 1995 1994*
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
OPERATIONS--
Net investment income $ 2,689,393 $ 1,079,248 $ 4,197,972 $ 753,022
Net realized gain
(loss) on investments
transactions 797,876 (392,814) 13,637,946 1,666,910
Net realized gain
(loss) on foreign
currency transactions -- -- -- --
Net realized gain on
futures contracts -- -- -- --
Net change in
unrealized
appreciation
(depreciation) of
investments,
collateral, futures
contracts and foreign
currency transactions 10,665,976 386,586 8,615,958 7,714,710
------------ ------------ ------------ ------------
Change in net assets
resulting from
operations 14,153,245 1,073,020 26,451,876 10,134,642
------------ ------------ ------------ ------------
DISTRIBUTIONS TO
SHAREHOLDERS--
Dividends to
shareholders from net
investment income (2,460,822) (847,948) (3,775,982) (435,203)
Distributions to
shareholders from net
realized gain
on investments -- -- (2,160,660) --
Distributions to
shareholders in excess
of net investment
income -- -- -- --
------------ ------------ ------------ ------------
Change in net assets
from distributions to
shareholders (2,460,822) (847,948) (5,936,642) (435,203)
------------ ------------ ------------ ------------
CAPITAL STOCK
TRANSACTIONS
Proceeds from sales of
shares 71,731,172 61,917,199 67,783,603 224,111,601
Net asset value of
shares issued to
shareholders in
payment
of dividends declared 1,212,846 645,885 2,806,140 223,675
Cost of shares redeemed (26,533,320) (13,392,599) (89,424,324) (15,279,340)
------------ ------------ ------------ ------------
Change in net assets
from capital stock
transactions 46,410,698 49,170,485 (18,834,581) 209,055,936
------------ ------------ ------------ ------------
Change in net assets 58,103,121 49,395,557 1,680,653 218,775,375
NET ASSETS:
Beginning of period 49,395,557 -- 218,755,375 --
------------ ------------ ------------ ------------
End of period 107,498,678 49,395,557 220,436,028 218,755,375
============ ============ ============ ============
Undistributed net
investment income
included in net assets
at end of period $ 459,871 $ 231,300 $ 739,809 $ 317,819
Net gain (loss) as
computed for federal
tax purposes $ 556,941 ($ 41,996) $ 13,549,583 $ 1,834,999
============ ============ ============ ============
</TABLE>
*For the period from October 1, 1993 (date of initial public investment) to
August 31, 1994.
**For the period from September 2, 1994 (date of initial public investment) to
August 31, 1995.
(See Notes which are an integral part of the Financial Statements)
MARSHALL FUNDS
^
<TABLE>
<CAPTION>
---------------------------- ------------------------- ------------- --------------------------
MID-CAP SHORT-TERM
STOCK INTERNATIONAL INCOME
STOCK FUND FUND STOCK FUND FUND
---------------------------- ------------------------- ------------- --------------------------
Period
Year Ended Year Ended Year Ended Ended Period Ended Year Ended Year Ended
August 31, August 31, August 31, August 31, August 31, August 31, August 31,
1995 1994 1995 1994* 1995** 1995 1994
------------- ------------- ------------ ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,119,476 $ 1,926,542 ($ 102,721) $ 57,518 $ 1,758,012 $ 5,173,889 $ 4,386,765
14,035,870 13,279,160 5,757,618 (1,460,302) (472,259) (774,594) (1,938,737)
-- -- -- -- (178,615) -- --
-- -- 146,087 -- -- --
22,181,832 (12,123,274) 16,659,161 872,644 2,667,130 910,517 (590,561)
------------- ------------- ------------ ----------- ------------ ------------ ------------
38,337,178 3,082,428 22,460,145 (530,140) 3,774,268 5,309,812 1,857,467
------------- ------------- ------------ ----------- ------------ ------------ ------------
(2,156,613) (1,993,902) (43,289) (14,229) (354,783) (5,299,534) (4,283,842)
-- -- -- (38,133) (8,672) -- --
-- -- (21,475) -- -- -- --
------------- ------------- ------------ ----------- ------------ ------------ ------------
(2,156,613) (1,993,902) (64,764) (52,362) (363,455) (5,299,534) (4,283,842)
------------- ------------- ------------ ----------- ------------ ------------ ------------
83,952,870 98,818,795 69,072,658 62,129,088 129,883,397 60,772,757 117,021,684
1,642,441 1,882,088 35,263 31,053 216,668 2,867,333 2,820,624
(114,911,373) (160,762,127) (36,889,162) (7,935,714) (39,463,324) (79,829,347) (91,705,600)
------------- ------------- ------------ ----------- ------------ ------------ ------------
(29,316,062) (60,061,244) 32,218,759 54,224,427 90,636,741 (16,189,257) 28,136,708
------------- ------------- ------------ ----------- ------------ ------------ ------------
6,864,503 (58,972,718) 54,614,140 53,641,925 94,047,554 (16,178,979) 25,710,333
250,154,936 309,127,654 53,641,925 -- -- 100,452,145 74,741,812
------------- ------------- ------------ ----------- ------------ ------------ ------------
257,019,439 250,154,936 108,256,065 53,641,925 94,047,554 84,273,166 100,452,145
============= ============= ============ =========== ============ ============ ============
$ 339,963 $ 377,100 -- $ 43,289 $ 1,777,487 -- $ 125,645
$ 10,625,913 ($ 3,422,951) $4,632,874 $ 38,184 $ 8,481 ($ 1,898,650) ($ 302,405)
============= ============= ============ =========== ============ ============ ============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
---------------------------
INTERMEDIATE
BOND FUND
---------------------------
Year Year
Ended Ended
August 31, August 31,
1995 1994
------------ -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS--
Net investment income $ 22,151,927 $ 19,540,828
Net realized gain (loss) on investments (10,004,792) (13,957,127)
Net change in unrealized appreciation
(depreciation) of investments,
collateral and futures contracts 15,428,567 (12,033,595)
------------ -------------
Change in net assets resulting from operations 27,575,702 (6,449,894)
------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS--
Dividends to shareholders from net investment
income:
Class A Shares (22,676,934) (21,460,493)
Class B Shares -- --
Distributions to shareholders from net realized
gain on investments: -- (5,192,805)
------------ -------------
Change in net assets from distributions to
shareholders (22,676,934) (26,653,298)
------------ -------------
CAPITAL STOCK TRANSACTIONS--
Proceeds from sale of capital stock 145,019,009 171,805,103
Net asset value of shares issued to shareholders
in payment of dividends declared 13,873,286 22,497,295
Cost of shares redeemed (177,460,054) (150,267,568)
------------ -------------
Change in net assets from capital stock
transactions (18,567,759) 44,034,830
------------ -------------
Change in net assets (13,668,991) 10,931,638
------------ -------------
NET ASSETS:
Beginning of period 357,739,673 346,808,035
------------ -------------
End of period 344,070,682 357,739,673
============ =============
Undistributed net investment income included in
net assets at end of period -- $ 525,007
Net gain (loss) as computed for federal tax
purposes ($16,531,233) $ 1,157,829
============ =============
</TABLE>
*For the period from February 2, 1994 (date of initial public investment) to
August 31, 1994.
(See Notes which are an integral part of the Financial Statements)
MARSHALL FUNDS
<TABLE>
<CAPTION>
-------------------------- ------------------------- ------------------------- ------------------------------
GOVERNMENT SHORT-TERM INTERMEDIATE MONEY
INCOME TAX-FREE TAX-FREE MARKET
FUND FUND FUND FUND
-------------------------- ------------------------- ------------------------- ------------------------------
Year Year Year Period Year Period Year Year
Ended Ended Ended Ended Ended Ended Ended Ended
August 31, August 31, August 31, August 31, August 31, August 31, August 31, August 31,
1995 1994 1995 1994* 1995 1994* 1995 1994
------------ ------------ ------------ ----------- ------------ ----------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 5,539,282 $ 3,829,517 $ 914,542 $ 318,874 $ 1,768,807 $ 571,762 $ 59,092,790 $ 31,418,249
838,530 (3,162,878) (60,957) (10,972) (440,633) (209,896) -- --
2,289,136 (1,676,516) 320,938 (81,553) 1,354,952 (410,195) -- --
------------ ------------ ------------ ----------- ------------ ----------- -------------- --------------
8,666,948 (1,009,877) 1,174,523 226,349 2,683,126 (48,329) 59,092,790 31,418,249
------------ ------------ ------------ ----------- ------------ ----------- -------------- --------------
(5,651,424) (4,026,755) (914,542) (318,874) (1,768,807) (571,762) (57,991,992) (31,253,782)
-- -- -- -- -- -- (1,100,798) (164,467)
-- (733,522) -- -- -- -- -- --
------------ ------------ ------------ ----------- ------------ ----------- -------------- --------------
(5,651,424) (4,760,277) (914,542) (318,874) (1,768,807) (571,762) (59,092,790) (31,418,249)
------------ ------------ ------------ ----------- ------------ ----------- -------------- --------------
65,993,189 40,774,599 8,203,098 29,765,118 21,065,244 39,630,036 3,145,304,448 2,698,258,215
3,624,389 3,961,419 423,192 203,173 141,974 88,011 7,699,494 3,620,348
(33,748,572) (31,964,319) (12,367,466) (4,972,743) (11,282,666) (3,886,018) (2,973,967,126) (2,499,832,541)
------------ ------------ ------------ ----------- ------------ ----------- -------------- --------------
35,869,006 12,771,699 (3,741,176) 24,995,548 9,924,552 35,832,029 179,036,816 202,046,022
------------ ------------ ------------ ----------- ------------ ----------- -------------- --------------
38,884,530 7,001,545 (3,481,195) 24,903,023 10,838,871 35,211,938 179,036,816 202,046,022
------------ ------------ ------------ ----------- ------------ ----------- -------------- --------------
64,823,046 57,821,501 24,903,023 -- 35,211,938 -- 979,916,653 777,870,631
------------ ------------ ------------ ----------- ------------ ----------- -------------- --------------
103,707,576 64,823,046 21,421,828 24,903,023 46,050,809 35,211,938 1,158,953,469 979,916,653
============ ============ ============ =========== ============ =========== ============== ==============
-- $ 112,142 -- -- -- -- -- --
($ 1,806,126) ($ 521,493) ($ 16,364) -- ($ 254,695) -- -- --
============ ============ ============ =========== ============ =========== ============== ==============
</TABLE>
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Net Realized Distributions to
and Dividends to Shareholders Distributions to
Period Net Asset Unrealized Shareholders from Net Shareholders in
Ended Value, Net Gain/(Loss) Total from from Net Realized Gain on excess of Net
August beginning Investment on Investment Investment Investment Investment
31, of period Income Investments Operations Income Transactions Income
------ --------- ---------- ------------ ---------- ------------ ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
EQUITY INCOME FUND
1994(b) $10.00 0.28 (0.09) 0.19 (0.23) -- --
1995 $9.96 0.33 1.26 1.59 (0.33) -- --
VALUE EQUITY FUND
1994(b) $10.00 0.12 0.93 1.05 (0.10) -- --
1995 $10.95 0.22 1.22 1.44 (0.20) (0.11) --
STOCK FUND
1993(a) $10.00 0.10 0.07 0.17 (0.09) -- --
1994 $10.08 0.07 (0.03) 0.04 (0.07) -- --
1995 $10.05 0.09 1.59 1.68 (0.09) -- --
MID-CAP STOCK FUND
1994(b) $10.00 0.02 (0.29) (0.27) (0.01) (0.03) --
1995 $9.69 (0.00) 2.61 2.61 (0.01) -- 0.00
INTERNATIONAL STOCK FUND
1995(g) $10.00 0.20 0.01 0.21 (0.05) 0.00 --
SHORT-TERM INCOME FUND
1993(c) $10.00 0.40 (0.05) 0.35 (0.40) -- --
1994 $9.95 0.45 (0.25) 0.20 (0.44) -- --
1995 $9.71 0.56 0.05 0.61 (0.58) -- --
INTERMEDIATE BOND FUND
1993(a) $10.00 0.46 0.33 0.79 (0.39) -- --
1994 $10.40 0.61 (0.81) (0.20) (0.67) (0.17) --
1995 $9.36 0.61 0.16 0.77 (0.62) -- --
GOVERNMENT INCOME FUND
1993(d) $10.00 0.47 0.16 0.63 (0.41) -- --
1994 $10.22 0.64 (0.78) (0.14) (0.68) (0.14) --
1995 $9.26 0.60 0.26 0.86 (0.62) -- --
SHORT-TERM TAX-FREE FUND
1994(e) $10.00 0.18 (0.08) 0.10 (0.18) -- --
1995 $9.92 0.39 0.13 0.52 (0.39) -- --
INTERMEDIATE TAX-FREE FUND
1994(e) $10.00 0.19 (0.29) (0.10) (0.19) -- --
1995 $9.71 0.42 0.20 0.62 (0.42) -- --
MONEY MARKET FUND--CLASS A SHARES
1993(a) $1.00 0.02 -- 0.02 (0.02) -- --
1994 $1.00 0.03 -- 0.03 (0.03) -- --
1995 $1.00 0.05 -- 0.05 (0.05) -- --
MONEY MARKET FUND--CLASS B SHARES
1993(f) $1.00 0.02 -- 0.02 (0.02) -- --
1994 $1.00 0.03 -- 0.03 (0.03) -- --
1995 $1.00 0.05 -- 0.05 (0.05) -- --
</TABLE>
<TABLE>
<C> <S>
(a) Reflects operations for the period from November 23, 1992 (date of initial public
investment) to August 31, 1993.
(b) Reflects operations for the period from October 1, 1993 (date of initial public investment)
to August 31, 1994.
(c) Reflects operations for the period from November 2, 1992 (date of initial public
investment) to August 31, 1993.
(d) Reflects operations for the period from December 14, 1992 (date of initial public
investment) to August 31, 1993.
(e) Reflects operations for the period from February 2, 1994 (date of initial public
investment) to August 31, 1994.
(f) Reflects operations for the period from December 17, 1992 (date of initial public
investment) to August 31, 1993.
(g) Reflects operations for the period from September 2, 1994 (date of initial public
investment) to August 31, 1995.
(h) Based on net asset value.
(i) Computed on an annualized basis.
(j) This voluntary expense decrease is reflected in both the expense and net investment income
ratios shown above.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MARSHALL FUNDS
<TABLE>
<CAPTION>
Ratios to Average Net Assets
--------------------------------
Net Assets,
Net Asset Net end of Portfolio
Total Value, end Total Investment Expense period turnover
Distributions of period Return(h) Expenses Income Waiver(j) (000 omitted) rate
- ------------- ---------- --------- -------- ---------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(0.23) $9.96 2.02% 1.01%(i) 3.30%(i) 0.16%(i) $49,396 44%
(0.33) $11.22 16.40% 1.01% 3.45% 0.09% $107,499 43%
(0.10) $10.95 10.59% 1.00%(i) 1.82%(i) 0.15%(i) $218,755 39%
(0.31) $12.08 13.57% 0.96% 1.98% 0.00% $220,436 78%
(0.09) $10.08 1.67% 0.94%(i) 1.39%(i) 0.03%(i) $309,128 98%
(0.07) $10.05 0.44% 0.99% 0.77% 0.01% $250,155 86%
(0.09) $11.64 16.85% 0.98% 0.88% 0.01% $257,019 79%
(0.04) $9.69 (2.74%) 1.01%(i) 0.23%(i) 0.28%(i) $53,642 113%
(0.01) $12.30 27.06% 1.01% (0.13%) 0.08% $108,256 157%
(0.05) $10.16 2.11% 1.54%(i) 2.42%(i) 0.04%(i) $94,048 61%
(0.40) $9.95 3.57% 0.50%(i) 4.91%(i) 0.51%(i) $74,742 79%
(0.44) $9.71 2.05% 0.50% 4.58% 0.39% $100,452 185%
(0.58) $9.74 6.47% 0.51% 5.78% 0.40% $84,273 194%
(0.39) $10.40 7.99% 0.70%(i) 6.08%(i) 0.10%(i) $346,808 220%
(0.84) $9.36 (2.02%) 0.71% 6.26% 0.11% $357,740 228%
(0.62) $9.51 8.58% 0.71% 6.50% 0.08% $344,071 232%
(0.41) $10.22 6.40% 0.85%(i) 6.56%(i) 0.33%(i) $57,822 218%
(0.82) $9.26 (1.34%) 0.86% 6.58% 0.40% $64,823 175%
(0.62) $9.51 9.78% 0.86% 6.54% 0.26% $103,708 360%
(0.18) $9.92 0.98% 0.52%(i) 3.22%(i) 0.71%(i) $24,903 37%
(0.39) $10.05 5.41% 0.51% 3.95% 0.78% $21,422 71%
(0.19) $9.71 (0.94%) 0.62%(i) 3.58%(i) 0.59%(i) $35,212 45%
(0.42) $9.91 6.58% 0.61% 4.35% 0.47% $46,051 105%
(0.02) $1.00 2.33% 0.40%(i) 2.97%(i) 0.28%(i) $775,890 --
(0.03) $1.00 3.41% 0.40% 3.40% 0.29% $967,988 --
(0.05) $1.00 5.57% 0.41% 5.44% 0.26% $1,128,623 --
(0.02) $1.00 1.89% 0.72%(i) 2.72%(i) 0.28%(i) $1,980 --
(0.03) $1.00 3.11% 0.70% 3.39% 0.29% $11,929 --
(0.05) $1.00 5.25% 0.71% 5.21% 0.26% $30,331 --
</TABLE>
As of August 31, 1995
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Marshall Funds, Inc. (the "Corporation") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end management
investment company. The Corporation consists of eleven diversified portfolios
(individually referred to as the "Fund", or collectively as the "Funds") which
are presented herein:
<TABLE>
<CAPTION>
PORTFOLIO NAME
--------------
<S> <C>
Marshall Equity Income Fund Marshall Intermediate Bond Fund ("Intermediate Bond Fund")
("Equity Income Fund")
Marshall Value Equity Fund Marshall Government Income Fund ("Government Income Fund")
("Value Equity Fund")
Marshall Stock Fund ("Stock Marshall Short-Term Tax-Free Fund ("Short-Term Tax-Free Fund")
Fund")
Marshall Mid-Cap Stock Fund Marshall Intermediate Tax-Free Fund ("Intermediate Tax-Free Fund")
("Mid-Cap Stock Fund")
Marshall International Stock Fund Marshall Money Market Fund ("Money Market Fund")
("International Stock Fund")
Marshall Short-Term Income Fund
("Short-Term Income Fund")
</TABLE>
Money Market Fund is offered in two classes of shares: Class A Shares and
Class B Shares. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
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. These
policies are in conformity with generally accepted accounting principles.
Investment Valuations--Short-term securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value. Investments in other open-end investment
companies are valued at net asset value. All other securities are valued at
prices provided by an independent pricing service.
Listed equity securities, corporate bonds and other fixed income securities
and asset-backed securities are valued at the last sale price reported on
national securities exchanges. 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. Unlisted securities and bonds are generally
valued at the price provided by an independent pricing service. Short-term
securities purchased with remaining maturities of sixty days or less may be
stated at amortized cost, which approximates value. Investments in other
regulated investment companies are valued at net asset value. Futures contracts
are valued daily at the last sale price provided by the board of trade or
exchange from which they were purchased.
Money Market Fund's use of the amortized cost method to value its portfolio
securities is in accordance with Rule 2a-7 under the Act.
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 under repurchase agreement transactions.
Additionally, procedures have been established by the Funds to monitor, on a
daily basis, the market value of each repurchase agreement's collateral to
ensure that the value of collateral at least equals the repurchase price to be
paid under the repurchase agreement transaction including accrued interest.
The Funds will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Funds' adviser to be creditworthy pursuant to guidelines and/or standards
reviewed or established by the Board of Directors (the "Directors"). Risks may
arise from the potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Funds could receive less than the
repurchase price on the sale of collateral securities.
Investment Income, Expenses and Distributions--Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Interest
income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code").
Federal Taxes--It is the Funds' policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of their income. Accordingly, no
provisions for federal tax are necessary.
However, federal taxes may be imposed on the International Stock Fund upon
the disposition of certain investments in passive foreign investment companies.
Withholding taxes on foreign dividends have been provided for in accordance
with the International Stock Fund's understanding of the applicable country's
tax rules and rates.
At August 31, 1995, Short-Term Income Fund, Intermediate Bond Fund,
Government Income Fund, Short-Term Tax-Free Fund, and Intermediate Tax-Free
Fund had capital loss carryforwards of $2,201,055, $16,531,233, $2,327,619,
$16,364, and $254,695, respectively for federal tax purposes, which will reduce
each Fund's taxable income arising from future net realized gain on
investments, if any, to the extent permitted by the Code, and thus will reduce
the amount of the distributions to shareholders which would otherwise be
necessary to relieve each Fund of any liability for federal tax. Pursuant to
the Code, such capital loss carryforwards will expire as listed below:
<TABLE>
<CAPTION>
CAPITAL LOSS CAPITAL LOSS
CARRYFORWARD CARRYFORWARD
TO EXPIRE IN TO EXPIRE IN
FUND 2002 2003
---- ------------ ------------
<S> <C> <C>
Short-Term Income Fund $302,405 $1,898,650
Intermediate Bond Fund -- 16,531,233
Government Income Fund 521,493 1,806,126
Short-Term Tax-Free Fund -- 16,364
Intermediate Tax-Free Fund -- 254,695
</TABLE>
- --------------------------------------------------------------------------------
Net capital losses on Equity Income Fund, International Stock Fund, Short-
Term Income Fund, Intermediate Bond Fund, Short-Term Tax-Free Fund, and
Intermediate Tax-Free Fund of $94,192, $454,951, $590,410, $8,598,994, $55,564
and $395,834, attributable to security transactions incurred after October 31,
1994, are treated as arising on September 1, 1995, the first day of each Fund's
next taxable year.
In addition, net capital losses on International Stock Fund of $117,247
attributable to foreign currency transactions incurred after October 31, 1994,
are treated as arising on September 1, 1995, the first day of the International
Stock Fund's next taxable year.
When-Issued and Delayed Delivery Transactions--The Funds may engage in when-
issued or delayed delivery transactions. The Funds record when-issued
securities on the trade date and maintain security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
marked to market daily and begin earning interest on the settlement date.
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 its shares, have been deferred and are being amortized
using the straight-line method over a period of five years from each Funds'
commencement date.
Futures Contracts--Upon entering into a financial futures contract with a
broker, the Funds are required to deposit in a segregated account an amount of
cash or U.S. government securities equal to a percentage of the contract value.
The Funds agree to receive from or to pay to the broker an amount of cash equal
to a specific dollar amount multiplied by the difference between the closing
value and the price at which the contract was made. On a daily basis, the value
of the financial futures contracts are determined and any difference between
such value and the original futures contracts values are reflected in the
"daily variation margin" account. Daily variation margin adjustments, arising
from this "marking to market" process, are recorded by the Funds as unrealized
gains or losses.
The Funds may decide to close their position on a contract at any time prior
to the contract's expiration. When a contract is closed, the Funds recognize a
realized gain or loss. Risks of entering into futures contracts include the
possibility that a change in the value of the contract may not correlate with
changes in the value of the underlying securities. At August 31, 1995, Mid-Cap
Stock Fund had outstanding futures contracts as set forth below:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EXPIRATION CONTRACTS UNREALIZED
DATE TO RECEIVE POSITION APPRECIATION
-------------- ------------------------- -------- ------------
<S> <C> <C> <C>
September 1995 30 S&P Midcap 400 Futures Long $245,998
</TABLE>
- --------------------------------------------------------------------------------
Foreign Currency Commitments--The International Stock Fund may enter into
foreign currency commitments for the delayed delivery of securities or foreign
currency exchange transactions. Risks may arise upon entering into these
transactions from the potential inability of counterparties to meet the terms
of their commitments and from unanticipated movements in security prices or
foreign exchange rates. The foreign currency transactions are adjusted by the
daily exchange rate of the underlying currency and any gains or losses are
recorded for financial statement purposes as unrealized until the settlement
date. At August 31, 1995, the Fund had outstanding foreign currency commitments
as set forth below:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT COMMITMENTS TO APPRECIATION
DATE DELIVER/RECEIVE IN EXCHANGE FOR (DEPRECIATION)
----------------- ------------------------ --------------- --------------
<S> <C> <C> <C>
September 1, 1995 22,105 Czech Koruna $ 819 $ 3
September 1, 1995 3,119,727 Spanish Peseta 24,775 99
September 1, 1995 4,341 Pound Sterling 6,734 (5)
September 5, 1995 1,208,438 Spanish Peseta 9,606 29
September 5, 1995 3,623 Pound Sterling 5,586 (36)
----
Total $90
====
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENT (CONTINUED)
Foreign Currency Translation--The accounting records of the International
Stock Fund are maintained in U.S. dollars. All assets and liabilities
denominated in foreign currencies ("FC") are translated into U.S. dollars based
on the rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Funds do not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of FCs, currency gains or losses
realized between the trade and settlement dates on securities transactions, the
difference between the amounts of dividends, interest, and foreign withholding
taxes recorded on the Funds' books, and the U.S. dollar equivalent of the
amounts actually received or paid. Net unrealized foreign exchange gains and
losses arise from changes in the value of assets and liabilities other than
investments in securities at fiscal year end, resulting from changes in the
exchange rate.
Dollar Roll Transactions--The Funds, except for Money Market Fund, may enter
into dollar roll transactions, with respect to mortgage securities issued by
Government National Mortgage Association, Federal National Mortgage
Association, and Federal Home Loan Mortgage Corporation, in which the Funds
loan mortgage securities to financial institutions and simultaneously agree to
accept substantially similar (same type, coupon and maturity) securities at a
later date at an agreed upon price. Dollar roll transactions are short-term
financing arrangements which will not exceed twelve months. The Funds will use
the proceeds generated from the transactions to invest in short-term
investments, which may enhance the Funds' current yield and total return.
Securities Lending--The Funds participate in a securities lending program
providing for the lending of corporate bonds, equity and government securities
to qualified brokers. Collateral received for securities loaned must be in cash
or government securities. Collateral is maintained at a minimum level of 100%
of the market value on securities loaned, plus interest, if applicable. Income
earned on collateral is divided between the custodian, as a fee for its
services under the program, and the Funds, according to agreed-upon rates.
As of August 31, 1995, collateral held for securities loaned was as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET VALUE OF MARKET VALUE
FUND SECURITIES LOANED OF COLLATERAL
---- ----------------- -------------
<S> <C> <C>
Value Equity $39,234,607 $40,350,052
Intermediate Bond $94,751,347 $97,691,965
</TABLE>
- --------------------------------------------------------------------------------
Reclassification--The Funds adopted Statement of Position 93-2 Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies ("SOP 93-2").
Accordingly, permanent book and tax differences have been reclassified to paid-
in capital. These differences are primarily due to differing treatments for net
operating losses, distributions in excess of net investment income, and foreign
currency transactions. Amounts as of August 31, 1995 have been reclassified to
reflect the following:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCREASE (DECREASE)
--------------------------------------------------
UNDISTRIBUTED NET
INVESTMENT
ACCUMULATED INCOME/ACCUMULATED
PAID-IN NET REALIZED DISTRIBUTIONS IN EXCESS OF
FUND NAME CAPITAL GAIN/LOSS NET INVESTMENT INCOME
--------- --------- ------------ --------------------------
<S> <C> <C> <C>
Mid-Cap Stock Fund -- ($124,196) $124,196
International Stock Fund ($435,309) $61,051 $374,258
</TABLE>
- --------------------------------------------------------------------------------
Net investment income, net realized gains/losses, and net assets were not
affected by this change.
Other--Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
The Articles of Incorporation permit the Directors to issue 50 billion full
and fractional shares of common stock, par value $0.0001 per share. At August
31, 1995, the capital paid-in was as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND CAPITAL PAID-IN
---- ---------------
<S> <C>
Equity Income Fund $ 95,581,183
Value Equity Fund 190,221,355
Stock Fund 214,012,086
Mid-Cap Stock Fund 86,443,186
International Stock Fund 90,201,432
Short-Term Income Fund 86,908,327
Intermediate Bond Fund 362,599,900
Government Income Fund 105,524,078
Short-Term Tax-Free Fund 21,254,372
Intermediate Tax-Free Fund 45,756,581
Money Market Fund 1,158,953,469
</TABLE>
- --------------------------------------------------------------------------------
Transactions in capital stock were as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------- -------------------------------- -------------------------------
EQUITY INCOME FUND VALUE EQUITY FUND STOCK FUND
-------------------------------- -------------------------------- -------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
AUGUST 31, 1995 AUGUST 31, 1994* AUGUST 31, 1995 AUGUST 31, 1994* AUGUST 31, 1995 AUGUST 31, 1994
--------------- ---------------- --------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 7,087,265 6,256,917 6,271,401 21,409,502 8,136,287 9,896,396
Shares issued to
shareholders in
payment of
distributions
declared 118,743 66,609 268,477 22,375 159,631 186,739
Shares redeemed (2,580,728) (1,363,606) (8,276,005) (1,452,210) (11,113,456) (15,846,005)
---------- ---------- ---------- ---------- ----------- -----------
Net change resulting
from share
transactions 4,625,280 4,959,920 (1,736,127) 19,979,667 (2,817,538) (5,762,870)
========== ========== ========== ========== =========== ===========
</TABLE>
- --------------------------------------------------------------------------------
*For the period from October 1, 1993 (date of initial public investment) to
August 31, 1994.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------- ------------------------ -------------------------------
MID-CAP STOCK FUND INTERNATIONAL STOCK FUND SHORT-TERM INCOME FUND
---------------------------- ------------------------ -------------------------------
YEAR ENDED
AUGUST PERIOD ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
31, 1995 AUGUST 31, 1994* AUGUST 31, 1995*** AUGUST 31, 1995 AUGUST 31, 1994
---------- ---------------- ------------------------ --------------- ---------------
<S> <C> <C> <C> <C> <C>
Shares sold 6,886,800 6,367,440 13,379,463 6,280,358 11,893,678
Shares issued to
shareholders in payment
of distributions
declared 3,751 3,112 23,373 296,781 287,651
Shares redeemed (3,622,137) (834,514) (4,144,903) (8,263,080) (9,353,466)
---------- --------- ---------- ---------- ----------
Net change resulting
from
share transactions 3,268,414 5,536,038 9,257,933 (1,685,941) 2,827,863
========== ========= ========== ========== ==========
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------- ------------------------------- ---------------------------------
INTERMEDIATE BOND FUND GOVERNMENT INCOME FUND SHORT-TERM TAX-FREE FUND
------------------------------- ------------------------------- ---------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, 1995 AUGUST 31, 1994 AUGUST 31, 1995 AUGUST 31, 1994 AUGUST 31, 1995 AUGUST 31, 1994**
--------------- --------------- --------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 15,646,570 17,818,710 7,182,308 4,215,121 826,416 2,991,957
Shares issued to
shareholders in
payment of
distributions
declared 1,495,282 2,287,787 393,550 411,267 42,680 20,492
Shares redeemed (19,146,997) (15,245,010) (3,668,777) (3,282,704) (1,249,332) (501,546)
----------- ----------- ---------- ---------- ---------- ---------
Net change resulting
from share
transactions (2,005,145) 4,861,487 3,907,081 1,343,684 (380,236) 2,510,903
=========== =========== ========== ========== ========== =========
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------
INTERMEDIATE TAX-FREE FUND
---------------------------------
YEAR ENDED PERIOD ENDED
AUGUST 31, 1995 AUGUST 31, 1994**
--------------- -----------------
<S> <C> <C>
Shares sold 2,185,693 4,020,183
Shares issued to shareholders in payment
of distributions declared 14,635 9,030
Shares redeemed (1,180,355) (402,299)
---------- ---------
Net change resulting from share
transactions 1,019,973 3,626,914
========== =========
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------
MONEY MARKET FUND
--------------------------------
YEAR ENDED YEAR ENDED
CLASS A SHARES AUGUST 31, 1995 AUGUST 31, 1994
--------------- ---------------
<S> <C> <C>
Shares sold 3,007,907,156 2,652,693,310
Shares issued to shareholders in payment of
distributions declared 6,704,839 3,467,566
Shares redeemed (2,853,976,863) (2,464,063,526)
-------------- --------------
Net change resulting from Class A Share
transactions 160,635,132 192,097,350
============== ==============
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------
MONEY MARKET FUND
-------------------------------
YEAR ENDED YEAR ENDED
CLASS B SHARES AUGUST 31, 1995 AUGUST 31, 1994
--------------- ---------------
<S> <C> <C>
Shares sold 137,397,292 45,564,905
Shares issued to shareholders in payment of
distributions declared 994,655 152,782
Shares redeemed (119,990,263) (35,769,015)
------------ -----------
Net change resulting from Class B Share
transactions 18,401,684 9,948,672
------------ -----------
Net change resulting from Fund Share
transactions 179,036,816 202,046,022
============ ===========
</TABLE>
- --------------------------------------------------------------------------------
*For the period from October 1, 1993 (date of initial public investment) to
August 31, 1994.
**For the period from February 2, 1994 (date of initial public investment)
to August 31, 1994.
***For the period from September 2, 1994 (date of initial public investment)
to August 31, 1995.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Advisory Fee--M&I Investment Management Corp., the Funds'
investment adviser (the "Adviser"), receives for its services an annual
investment advisory fee based on a percentage of each Fund's average daily net
assets as listed below. The Adviser may voluntarily choose to waive any portion
of its fee. The Adviser can modify or terminate this voluntary waiver at any
time at its sole discretion.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND ANNUAL RATE
---- -----------
<S> <C>
Equity Income Fund 0.75%
Value Equity Fund 0.75%
Stock Fund 0.75%
Mid-Cap Stock Fund 0.75%
International Stock Fund 1.00%
Short-Term Income Fund 0.60%
Intermediate Bond Fund 0.60%
Government Income Fund 0.75%
Short-Term Tax-Free Fund 0.50%
Intermediate Tax-Free Fund 0.60%
Money Market Fund 0.50%
</TABLE>
- --------------------------------------------------------------------------------
Templeton Investment Counsel, Inc., is the sub-adviser ("Sub-Adviser") for
International Stock Fund. The Adviser compensates the Sub-Adviser based on the
level of average aggregate daily net assets of International Stock Fund.
Administrative Fee--Federated Administrative Services ("FAS") provides the
Funds with certain administrative personnel and services. This fee is based on
the level of average aggregate net assets of the Corporation for the period.
FAS may voluntarily choose to waive a portion of its fee.
Distribution Services Fee--International Stock Fund and Money Market Fund
have adopted Distribution Plans (the "Plans") pursuant to Rule 12b-1 under the
Act. Under the terms of the Plans, the Funds will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of
each Fund to finance activities intended to result in the sale of International
Stock Fund's shares and Money Market Fund's Class B Shares. The Plans provide
that the Funds may incur distribution expenses up to 0.25 of 1% and 0.30 of 1%.
respectively, of the average daily net assets of International Stock Fund and
Money Market Fund's Class B Shares annually, to compensate FSC.
Shareholder Services Fee--Marshall Funds Investors Services ("MFIS") is the
Funds' shareholder servicing agent. Under the terms of a shareholder service
agreement with MFIS, the Funds will pay MFIS a fee to obtain certain services
for shareholders and for the maintenance of shareholder accounts. The fee is
based on the level of each Fund's average net assets for the period.
Transfer Agent Fees--Federated Services Company ("FServ") serves as transfer
and dividend disbursing agent for the Funds for which it receives a fee. This
fee is based on the size, type, and number of accounts and transactions made by
shareholders.
Portfolio Accounting Fees--FServ maintains the Funds' accounting records for
which it receives a fee. The fee is based on the level of each Fund's average
daily net assets for the period, plus out-of-pocket expenses.
Custodian Fees--Marshall & Ilsley Trust Co. is the Funds' custodian for which
it receives a fee. The fee is based on the level of each Fund's average daily
net assets for the period.
Organizational Expenses--Organizational expenses were borne initially by FAS.
The Funds have agreed to reimburse FAS for the organizational expenses during
the five year period following each Fund's effective date. For the year ended
August 31, 1995, the following amounts were paid pursuant to this agreement:
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
^
<TABLE>
<CAPTION>
ORGANIZATIONAL ORGANIZATIONAL
FUND EXPENSES EXPENSES PAID
---- -------------- --------------
<S> <C> <C>
Equity Income Fund $18,857 $ 2,619
Value Equity Fund 18,485 2,567
Stock Fund 30,018 5,404
Mid-Cap Stock Fund 16,434 2,282
International Stock Fund 25,000 1,667
Short-Term Income Fund 23,033 4,517
Intermediate Bond Fund 23,413 3,993
Government Income Fund 22,735 3,857
Short-Term Tax-Free Fund 17,646 2,031
Intermediate Tax-Free Fund 16,416 1,997
Money Market Fund 59,536 11,141
</TABLE>
- --------------------------------------------------------------------------------
General--Certain of the Officers and Directors of the Corporation are
Officers and Directors of the above companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended August 31, 1995, were as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND PURCHASES SALES
---- ------------ ------------
<S> <C> <C>
Equity Income Fund $ 69,127,125 $ 28,753,629
Value Equity Fund 146,751,782 161,925,813
Stock Fund 179,161,733 184,907,609
Mid-Cap Stock Fund 147,624,833 116,130,141
International Stock Fund 121,734,078 39,560,256
Short-Term Income Fund 147,909,564 155,875,638
Intermediate Bond Fund 775,661,503 772,362,304
Government Income Fund 337,144,483 298,907,439
Short-Term Tax-Free Fund 15,690,917 17,448,081
Intermediate Tax-Free Fund 49,010,049 38,161,349
</TABLE>
- --------------------------------------------------------------------------------
6. CONCENTRATION OF CREDIT RISK
International Stock Fund invests in equity and fixed income securities of
non-U.S. issuers. Although the Fund maintains a diversified investment
portfolio, the political or economic developments within a particular country
or region may have an adverse effect on the ability of domiciled issuers to
meet their obligations. Additionally, political or economic developments may
have an effect on the liquidity and volatility of portfolio securities and
currency holdings.
At August 31, 1995, the diversification of common and preferred stock was as
follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY % OF NET ASSETS INDUSTRY % OF NET ASSETS
-------- --------------- -------- ---------------
<S> <C> <C> <C>
Air Travel 0.3% Food & Beverage 2.9%
Automobiles 2.5% Forest Products 3.3%
Banking 12.7% Gas & Pipeline Utilities 1.2%
Broadcasting 1.8% Gas Exploration 1.2%
Business
Services 3.7% Household Appliances & Furnishing 1.4%
Chemicals 6.0% Industrial Machinery 2.3%
Conglomerates 3.3% Insurance 5.0%
Construction
Materials 1.2% Investment Companies 1.2%
Containers &
Glass 0.6% Mining 0.5%
Drugs &
Health Care 3.0% Non-Ferrous Metals 1.8%
Electric
Utilities 6.2% Paper 1.7%
Electrical
Equipment 2.7% Petroleum Services 2.1%
Electronic
Equipment 1.0% Pollution Control 0.2%
Electronics 0.8% Retail Trade 2.7%
Financial
Services 1.2% Telephone 3.5%
</TABLE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
MARSHALL EQUITY INCOME FUND
MARSHALL VALUE EQUITY FUND
MARSHALL STOCK FUND
MARSHALL MID-CAP STOCK FUND
MARSHALL INTERNATIONAL STOCK FUND
MARSHALL SHORT-TERM INCOME FUND
MARSHALL INTERMEDIATE BOND FUND
MARSHALL GOVERNMENT INCOME FUND
MARSHALL SHORT-TERM TAX-FREE FUND
MARSHALL INTERMEDIATE TAX-FREE FUND
MARSHALL MONEY MARKET FUND
We have audited the accompanying statements of assets and liabilities,
including the schedules of portfolio of investments of the Marshall Equity
Income Fund, the Marshall Value Equity Fund, the Marshall Stock Fund, the
Marshall Mid-Cap Stock Fund, the Marshall International Stock Fund, the
Marshall Short-Term Income Fund, the Marshall Intermediate Bond Fund, the
Marshall Government Income Fund, the Marshall Short-Term Tax-Free Fund, the
Marshall Intermediate Tax-Free Fund, and the Marshall Money Market Fund (the
eleven portfolios constituting the Marshall Funds, Inc., a Wisconsin
corporation), as of August 31, 1995, and the related statements of operations,
changes in net assets and the financial highlights for the periods presented.
These financial statements and financial highlights are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1995, by correspondence with the custodian and brokers. As to
securities purchased but not received, we requested confirmation from brokers
and, when replies were not received, we carried out other alternative auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting the Marshall Funds, Inc., as
identified above, the results of their operations, the changes in their net
assets and their financial highlights for the periods presented, in conformity
with generally accepted accounting principles.
Arthur Andersen LLP
Pittsburgh, Pennsylvania,
October 13, 1995
DIRECTORS OFFICERS
Ody J. Fish Edward C. Gonzales
John DeVincentis Chairman and Treasurer
Edward C. Gonzales
Paul E. Hassett James F. Duca, II
President
Joseph S. Machi
Vice President and Assistant Treasurer
Peter J. Germain
Secretary
Victor R. Siclari
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal. Although money market funds seek to
maintain a stable net asset value of $1.00 per share, there is no assurance
that they will be able to do so.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus, which contains facts
concerning the Fund's objective and policies, management fees, expenses, and
other information.
A. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left corner.
The Marshall Equity Income Fund is represented by a broken line, whereas the
Standard & Poor's 500 Index is represented by a broken dotted line and the
Lipper Equity Income Funds Index is represented by a solid line. The line graph
is a visual representation of a comparison of change in the value of a
hypothetical investment of $10,000 in the Fund and Standard & Poor's 500 Index
and Lipper Equity Income Funds Index for the period from
September 30, 1993 (start of performance) to August 31, 1995. The "y" axis
reflects the cost of the investment. The "x"axis reflects computation periods
from the ending value of the hypothetical investment in the Fund as compared to
Standard & Poor's 500 Index and Lipper Equity Income Funds Index; the ending
values are $11,875; $12,909; and $11,996, respectively. Beneath the line graph
are the following total return data for the Fund: total return figures for the
one-year period, inception-to-date cumulative total return, and inception-to-
date average annualized total return are as follows: 16.40%; 18.75%; and 9.36%,
respectively. The performance disclaimer and footnotes are listed directly
under the graphic presentation.
B. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left corner.
The Marshall Value Equity Fund is represented by a broken line, whereas Standard
& Poor's 500 Index is represented by a broken dotted line and Lipper Growth and
Income Funds Index is represented by a solid line. The line graph is a visual
representation of a comparison of change in the value of a hypothetical
investment of $10,000 in the Fund and Standard & Poor's 500 Index and Lipper
Growth and Income Funds Index for the period from September 30, 1993 (start of
performance) to August 31, 1995. The "y" axis reflects the cost of the
investment. The "x" axis reflects computation periods from the ending value of
the hypothetical investment in the Fund as compared to Standard & Poor's 500
Index and Lipper Growth and Income Funds Index; the ending values are $12,560;
$12,909; and $12,372, respectively. Beneath the line graph are the following
total return data for the Fund: total return figures for the one-year period,
inception-to-date cumulative total return, and inception-to-date average
annualized total return are as follows: 13.57%; 25.60%; and 12.60%,
respectively. The performance disclaimer and footnotes are listed directly
under the graphic presentation.
C. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left corner.
The Marshall Stock Fund is represented by a broken line, whereas the Standard &
Poor's 500 Index is represented by a broken dotted line and Lipper Growth and
Income Funds Index is represented by a solid line. The line graph is a visual
representation of a change in value of a hypothetical investment of $10,000 in
the Fund and Standard & Poor's 500 Index and Lipper Growth and Income Funds
Index for the period from November 20, 1992 (start of performance) to August 31,
1995. The "y" axis reflects the cost of the investment. The "x" axis reflects
computation periods from the ending value of the hypothetical investment in the
Fund as compared to Standard & Poor's 500 Index and Lipper Growth and Income
Funds Index; the ending values are $11,932; $14,060; and $14,080, respectively.
Beneath the line graph are the following total return data for the Fund: total
return figures for the one-year period, inception-to-date cumulative total
return, and inception-to-date average annualized total return are as follows:
16.85%; 19.32%; and 6.56%, respectively. The performance disclaimer and
footnotes are listed directly under the graphic presentation.
D. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left corner.
The Marshall Mid-Cap Stock Fund is represented by a broken line, whereas the
Standard & Poor's Mid-Cap 400 Index is represented by a broken dotted line and
Lipper Mid-Cap Funds Index is represented by a solid line. The line graph is a
visual representation of a comparison of change in the value of a hypothetical
investment of $10,000 in the Fund and Standard & Poor's Mid-Cap 400 Index and
Lipper Mid-Cap Funds Index for the period from September 30, 1993 (start of
performance) to August 31, 1995. The "y" axis reflects the cost of the
investment. The "x" axis reflects computation periods from the ending value of
the hypothetical investment in the Fund as compared to Standard & Poor's Mid-Cap
400 Index and Lipper Mid-Cap Funds Index; the ending values are $12,357;
$12,685; and $12,480, respectively. Beneath the line graph are the following
total return data for the Fund: total return figures for the one-year period,
inception-to-date cumulative total return, and inception-to-date average
annualized total return are as follows: 27.06%; 23.57%; and 11.65%,
respectively. The performance disclaimer and footnotes are listed directly
under the graphic presentation.
E. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left corner.
The Marshall International Stock Fund is represented by a broken line, whereas
the Morgan Stanley Capital Europe, Australia, Far East Index is represented by a
broken dotted line and Lipper International Funds Index is represented by a
solid line. The line graph is a visual representation of a comparison of change
in the value of a hypothetical investment of $10,000 in the Fund and Morgan
Stanley Capital Europe, Australia, Far East Index and Lipper International Funds
Index for the period from September 1, 1994 (start of performance) to August 31,
1995. The "y" axis reflects the cost of the investment. The "x" axis reflects
computation periods from the ending value of the hypothetical investment in the
Fund as compared to Morgan Stanley Capital Europe, Australia, Far East Index and
Lipper International Funds Index; the ending values are $10,211; $10,050; and
$9,898, respectively. Beneath the line graph are the following total return
data for the Fund: total return figures for the one-year period and inception-
to-date average annualized total return are as follows: 2.11% and 2.11%,
respectively. The performance disclaimer and footnotes are listed directly
under the graphic presentation.
F. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left corner.
The Marshall Short-Term Income Fund is represented by a broken line, whereas the
Merrill Lynch Corporate A-Rated 1-3 Year Bond Index is represented by a dotted
line, Lipper Short-Term Investment Grade Bond Funds Index is represented by a
solid line, and IBC/Donoghue's Taxable Money Fund Average is represented by a
broken dotted line. The line graph is a visual representation of a hypothetical
investment of $10,000 in the Fund and Merrill Lynch Corporate A-Rated 1-3 Year
Bond Index, Lipper Short-Term Investment Grade Bond Funds Index, and
IBC/Donoghue's Taxable Money Fund Average for the period from November 1, 1992
(start of performance) to August 31, 1995. The "y" axis reflects the cost of
the investment. The "x" axis reflects computation periods from the ending value
of the hypothetical investment in the Fund as compared to Merrill Lynch A-Rated
1-3 Year Bond Index, Lipper Short-Term Investment Grade Bond Funds Index, and
IBC/Donoghue's Taxable Money Fund Average; the ending values are $11,251;
$11,822; $11,467; and $11,096, respectively. Beneath the line graph are the
following total return data for the Fund: total return for the one-year,
inception-to-date cumulative total return, and inception-to-date average
annualized total return are as follows: 6.47%; 12.52%; and 4.25%, respectively.
The performance disclaimer and footnotes are listed directly under the graphic
presentation.
G. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left corner.
The Marshall Intermediate Bond Fund is represented by a broken line, whereas the
Lehman Brothers Intermediate Government/Corporate Index is represented by a
broken dotted line and Lipper Intermediate Investment Grade Bond Index is
represented by a solid line. The line graph is a visual representation of a
comparison of change in the value of a hypothetical investment of $10,000 in the
Fund and Lehman Brothers Intermediate Government/Corporate Index and Lipper
Intermediate Investment Grade Bond Index for the period from November 20, 1992
(start of performance) to August 31, 1995. The "y" axis reflects the cost of
the investment. The "x" axis reflects computation periods from the ending value
of the hypothetical investment in the Fund as compared to Lehman Brothers
Intermediate Government/Corporate Index and Lipper Intermediate Investment Grade
Bond Index; the ending values are $11,492; $11,956; and $12,013, respectively.
Beneath the line graph are the following total return data for the Fund: total
return figures for the one-year period, inception-to-date cumulative total
return, and inception-to-date average annualized total return are as follows:
8.58%; 14.89%; and 5.12%, respectively. The performance disclaimer and
footnotes are listed directly under the graphic presentation.
H. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left corner.
The Marshall Government Income Fund is represented by a broken line, whereas the
Lehman Brothers Mortgage-Backed Securities Index is represented by a broken
dotted line and Lipper U.S. Mortgage Funds Index is represented by a solid line.
The line graph is a visual representation of a comparison of change in the value
of a hypothetical investment of $10,000 in the Fund and Lehman Brothers
Mortgage-Backed Securities Index and Lipper U.S. Mortgage Funds Index for the
period from December 13, 1992 (start of performance) to August 31, 1995. The
"y" axis reflects the cost of the investment. The "x" axis reflects computation
periods from the ending value of the hypothetical investment in the Fund as
compared to Lehman Brothers Mortgage-Backed Securities Index and Lipper U.S.
Mortgage Funds Index; the ending values are $11,524; $11,934; and $11,489,
respectively. Beneath the line graph are the following total return data for
the Fund: total return figures for the one-year period, inception-to-date
cumulative total return, and inception-to-date average annualized total return
are as follows: 9.78%; 15.24%; and 5.35%, respectively. The performance
disclaimer and footnotes are listed directly under the graphic presentation.
I. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left corner.
The Marshall Short-Term Tax-Free Fund is represented by a broken line, whereas
the Lehman Brothers 3-Year General Obligations Bonds Index is represented by a
broken dotted line and Lipper Short-Term Municipal Funds Index is represented by
a solid line. The line graph is a visual representation of a comparison of
change in the value of a hypothetical investment of $10,000 in the Fund and
Lehman Brothers 3-Year General Obligations Bonds Index and Lipper Short-Term
Municipal Funds Index for the period from February 2, 1994 (start of performance
) to August 31, 1995. The "y" axis reflects the cost of the investment. The
"x" axis reflects computation periods from the ending value of the hypothetical
investment in the Fund as compared to Lehman Brothers 3-Year General Obligations
Bonds Index and Lipper Short-Term Municipal Funds Index; the ending values are
$10,643; $10,693; and $10,510, respectively. Beneath the line graph are the
following total return data for the Fund: total return figures for the one-year
period, inception-to-date cumulative total return, and inception-to-date average
annualized total return are as follows: 5.41%; 6.44%; and 4.03%, respectively.
The performance disclaimer and footnotes are listed directly under the graphic
presentation.
J. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left corner.
The Marshall Intermediate Tax-Free Fund is represented by a broken line, whereas
the Lehman Brothers 5-Year General Obligations Bonds Index is represented by a
broken dotted line and the Lipper Intermediate Municipal Funds Index is
represented by a solid line. The line graph is a visual representation of a
comparison of change in the value of a hypothetical investment of $10,000 in the
Fund and Lehman Brothers 5-Year General Obligations Bonds Index and Lipper
Intermediate Municipal Funds Index for the period from February 2, 1994 (start
of performance) to August 31, 1995. The "y" axis reflects the cost of the
investment. The "x" axis reflects computation periods from the ending value of
the hypothetical investment in the Fund as compared to Lehman Brothers 5-Year
General Obligations Index and Lipper Intermediate Municipal Funds Index; the
ending values are $10,559; $10,679; and $10,371, respectively. Beneath the line
graph are the following total return data for the Fund: total return figures
for the one-year period, inception-to-date cumulative total return, and
inception-to-date average annualized total return are as follows: 6.58%; 5.58%;
and 3.50%, respectively. The performance disclaimer and footnotes are listed
