1933 Act File No. 33-48907
1940 Act File No. 811-7047
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. ..........
Post-Effective Amendment No. 15 .......... X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 16 ........................ X
MARSHALL FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
-
on pursuant to paragraph (b)
- ---------------
60 days after filing pursuant to paragraph (a) (i)
-
on pursuant to paragraph (a) (i)
X 75 days after filing pursuant to paragraph (a)(ii)
on pursuant to paragraph (a)(ii) of Rule 485.
-----------------
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of 1940,
and:
filed the Notice required by that Rule on ; or
------------
X intends to file the Notice required by that Rule on or about
October 15, 1996; or
during the most recent fiscal year did not sell any securities pursuant
to Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to
Rule 24f-2(b)(2), need not file the Notice.
CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of Marshall Funds, Inc.,
which consists of twelve portfolios including: (1)Marshall Equity Income
Fund; (2) Marshall Government Income Fund; (3) Marshall Intermediate Bond
Fund; (4) Marshall Intermediate Tax-Free Fund; (5) Marshall Mid-Cap Stock
Fund; (6) Marshall Money Market Fund, (a) Class A Shares; (b) Class B Shares;
(7) Marshall Short-Term Income Fund; (8) Marshall Short-Term Tax-Free Fund;
(9) Marshall Stock Fund; (10) Marshall Value Equity Fund; (11) Marshall
International Stock Fund; and (12) Marshall Small-Cap Stock Fund, (a) Class A
Shares, and (b) Class B Shares; relates only to one of the portfolios,
Marshall Small-Cap Stock Fund, and is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page...............(1-12)Cover Page.
Item 2. Synopsis.................(1-12)Summary of Fund Expenses.
Item 3. Condensed Financial
Information.............(1-11) Financial Highlights; (1-12)
Performance Information.
Item 4. General Description of
Registrant..............(1-12) Summary of Investment Information;
(1-12) Investment Objectives of each Fund;
(1-12) Portfolio Investments and
Strategies.
Item 5. Management of the Fund...(1-12) Marshall Funds, Inc. Information;
(1-12) Management (of Marshall Funds,
Inc.); (1-12) Distribution of Fund Shares;
(1-12) Administrative Arrangements;
Brokerage Transactions; (6,11, 12(b))
Distribution Plan; (1-12) Administration
of the Fund(s); (1-12) Expenses of the
Fund(s).
Item 6. Capital Stock and Other
Securities..............(1-12) Dividends and Capital Gains;
Certificates and Confirmations; (1-12)
Shareholder Information; (1-12) Common
Stock and Voting Rights; (1-12) Effect of
Banking Laws; (1-12) Tax Information; (1-
12) Federal Income Tax.
Item 7. Purchase of Securities Being
Offered.................(1-12) Net Asset Value; (1-12) How to Buy
Fund Shares; (1-12) Share Purchases; (1-
12) Minimum Investments; (1-12) What
Shares Cost; (1-12) Certificates and
Confirmations; (1-12) Exchange Privilege;
Telephone Transactions.
Item 8. Redemption or Repurchase.(1-12) Redeeming Shares; (1-12) Accounts
with Low Balances.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page...............(1-12) Cover Page.
Item 11. Table of Contents........(1-12) Table of Contents.
Item 12. General Information and
History.................(1-12) Banking Laws.
Item 13. Investment Objectives and
Policies................(1-12) Policies and Acceptable
Investments; (1-12) Investment
Limitations.
Item 14. Management of the Fund...(1-12) Marshall Funds, Inc. Management;
Directors' Compensation.
Item 15. Control Persons and
Principal Holders of
Securities..............Not applicable.
Item 16. Investment Advisory and
Other Services..........(1-12) Investment Advisory Services; (1-
11) Administrative Services; (12) Other
Services.
Item 17. Brokerage Allocation.....(1-12) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities..............Not applicable.
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered (1-11) Purchasing Shares with
Securities; (6, 11, 12(b)) Distribution
Plan; (1-12) Determining Market Value;
Redemption in Kind.
Item 20. Tax Status...............(1-12) Tax Status.
Item 21. Underwriters.............Not applicable.
Item 22. Calculation of Performance
Data....................(1-12) Yield; Performance Comparisons; (1-
5, 7-12) Total Return; (6) Effective
Yield; (4, 8) Tax-Equivalent Yield.
Item 23. Financial Statements.....(1-10) The Financial Statements for the
fiscal period ended August 31, 1994, are
incorporated herein by reference from the
Funds' Annual Reports dated August 31,
1994. (11) Filed in Part A.
MARSHALL SMALL-CAP STOCK FUND
Class A Shares
Class B Shares
PROSPECTUS
SEPTEMBER 1, 1996
The CLASS A SHARES and CLASS B SHARES offered in this prospectus represent
interests in MARSHALL SMALL-CAP STOCK FUND ("Fund"), a diversified investment
portfolio of Marshall Funds, Inc. (the "Corporation"), an open-end,
management investment company (a mutual fund). The investment objective of
the Fund is to seek appreciation of capital. The Corporation has the
following eleven separate investment portfolios. Each portfolio
(individually, a "Marshall Fund" and collectively, the "Marshall Funds")
offers its own shares and has a distinct investment goal to meet specific
investor needs.
EQUITY FUNDS TAX-FREE INCOME FUNDS
o MARSHALL EQUITY INCOME FUND O MARSHALL INTERMEDIATE TAX-FREE FUND
o MARSHALL VALUE EQUITY FUND
O MARSHALL STOCK FUND
O MARSHALL MID-CAP STOCK FUND
O MARSHALL INTERNATIONAL STOCK FUND
O MARSHALL SMALL-CAP STOCK FUND
INCOME FUNDS MONEY MARKET FUND
o MARSHALL SHORT-TERM INCOME FUNDO MARSHALL MONEY MARKET FUND
O MARSHALL INTERMEDIATE BOND FUND
O MARSHALL GOVERNMENT INCOME FUND
This prospectus relates only to CLASS A SHARES and CLASS B SHARES of the Fund
and contains the information you should read and know before you invest. Keep
this prospectus for future reference.
THE CLASS A SHARES AND CLASS B SHARES OFFERED BY THIS PROSPECTUS ARE NOT
DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED BY, MARSHALL & ILSLEY
CORP. OR ANY OF ITS BANKING SUBSIDIARIES ("M&I CORP."), AND ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR
ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN CLASS A SHARES AND CLASS B SHARES
INVOLVES INVESTMENT RISKS INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
The Fund has also filed a Statement of Additional Information dated September
1, 1996 for CLASS A SHARES and CLASS B SHARES, with the Securities and
Exchange Commission ("SEC"). The information contained in the Statement of
Additional Information is incorporated by reference into this prospectus. You
may request a copy of the Statement of Additional Information or a paper copy
of this prospectus, if you have received your prospectus electronically, free
of charge, obtain other information, or make inquiries about the Fund by
writing to or calling Marshall Funds Investor Services at 414-287-8555 or 1-
800-236-8554, or M&I Brokerage Services, Inc. The Statement of Additional
Information, material incorporated by reference into this document, and other
information regarding the Fund is maintained electronically with the SEC at
Internet Web site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Page
Table of Contents...................................................
Summary of Investment Information...................................
Who May Want To Invest In The Corporation? .......................
Who Manages The Fund? ............................................
How to Buy And Sell Shares .......................................
What About Investment Risks? .....................................
Summary of Fund Expenses............................................
Fund Objective and Policies.........................................
How to Buy Fund Shares..............................................
Minimum Investments ..............................................
Net Asset Value ..................................................
How to Redeem Shares................................................
Additional Conditions ............................................
Exchange Privilege..................................................
Telephone Transactions..............................................
Marshall Funds, Inc. Information....................................
Organization and History .........................................
Management .......................................................
Distribution of Fund Shares ......................................
Administration of the Fund..........................................
Brokerage Transactions ...........................................
Expenses of the Fund .............................................
Net Asset Value.....................................................
Shareholder Information.............................................
Certificates and Confirmations ...................................
Dividends and Capital Gains ......................................
Voting Rights and Common Stock ...................................
Performance Information.............................................
Portfolio Investments and Strategies................................
Additional Investment Risks ......................................
Tax Information.....................................................
Federal Income Tax ...............................................
State and Local Taxes ............................................
Effect of Banking Laws..............................................
Addresses
SUMMARY OF INVESTMENT INFORMATION
WHO MAY WANT TO INVEST IN THE CORPORATION?
The Corporation offers investment opportunities to a wide range of investors,
from those who may be investing for the short term and wish to take little
investment risk to those with long-term goals willing to bear the risks of
the stock market for potentially greater rewards. The Corporation currently
offers the following eleven professionally-managed, diversified portfolios:
o MARSHALL EQUITY INCOME FUND -- seeks above-average dividend income with
appreciation of capital by investing primarily in common and preferred
stock of companies with large capitalization;
o MARSHALL VALUE EQUITY FUND -- seeks long-term capital growth and income
by investing primarily in common and preferred stocks selected on the
basis of traditional research including assessment of earnings, dividend
growth and risk volatility of the company's industry;
o MARSHALL STOCK FUND -- seeks growth of capital and income by investing
primarily in common stocks of companies with an established market;
o MARSHALL MID-CAP STOCK FUND -- seeks appreciation of capital by
investing primarily in common and preferred stocks issued by medium-
sized companies whose market capitalizations generally range from $200
million to $7.5 billion;
o MARSHALL INTERNATIONAL STOCK FUND -- seeks long-term capital growth by
investing primarily in equity securities of companies and governments
outside the United States;
o MARSHALL SMALL-CAP STOCK FUND -- seeks appreciation of capital by
investing primarily in common and preferred stocks issued by small-sized
companies whose market capitalizations are under $1 billion. Shares of
the MARSHALL SMALL-CAP STOCK FUND are offered in two separate classes:
CLASS A SHARES and CLASS B SHARES;
o MARSHALL SHORT-TERM INCOME FUND -- seeks to maximize total return
consistent with current income by investing primarily in short- to
intermediate-term high-grade bonds and notes;
o MARSHALL INTERMEDIATE BOND FUND -- seeks to maximize total return
consistent with current income by investing primarily in intermediate-
term high-grade bonds and notes;
o MARSHALL GOVERNMENT INCOME FUND -- seeks to provide current income by
investing primarily in securities which are issued or guaranteed as to
payment of principal and interest by the U.S. government or U.S.
government agencies or instrumentalities;
o MARSHALL INTERMEDIATE TAX-FREE FUND -- seeks to provide as high a level
of income which is exempt from federal income tax as is consistent with
preservation of capital by investing in high-grade municipal securities
that generate such income; and
o MARSHALL MONEY MARKET FUND -- seeks to provide current income
consistent with stability of principal by investing in money market
instruments maturing in 397 days or less. Shares of the MONEY MARKET
FUND are offered in two separate classes: CLASS A SHARES and CLASS B
SHARES.
WHO MANAGES THE FUNDS?
M&I Investment Management Corp. serves as investment adviser (the "Adviser")
to the Marshall Funds. The Adviser is owned by Marshall & Ilsley Corp. ("M&I
Corp.") of Milwaukee, Wisconsin. Templeton Investment Counsel, Inc. of Ft.
Lauderdale, Florida serves as subadviser (the "Subadviser") to the MARSHALL
INTERNATIONAL STOCK FUND.
HOW TO BUY AND SELL SHARES?
You may buy and sell shares of any of the Marshall Funds through several
related Marshall & Ilsley companies by telephone, by mail or in person. All
shares are both sold and redeemed at net asset value without any sales
charges. Your first purchase in any Marshall Fund must be at least $1,000
and your later purchases must be at least $50 each. These minimums may be
waived or lowered from time to time in certain instances, such as for M&I
Corp. employees. The Corporation also offers you the privilege of exchanging
shares of one Marshall Fund for another at net asset value without any sales
charge. For more information, please see "How to Buy Fund Shares," "How to
Redeem Fund Shares," "Exchange Privilege" and "Telephone Transactions."
WHAT ABOUT INVESTMENT RISKS?
All mutual funds, including the Marshall Funds, take investment risks. The
STOCK FUNDS must contend with the volatility and unpredictability of the U.S.
stock market. The MARSHALL INTERNATIONAL STOCK FUND may experience
additional uncertainty in foreign markets and with foreign currency
transactions. The INCOME FUNDS invest heavily in debt securities, whose
values move in the opposite direction of prevailing interest rates and whose
exposure to market price fluctuation increase with the lengthening of their
maturities. Some of the Marshall Funds may use options and futures contracts
to hedge their investments or increase their income, although the successful
use of such investment techniques cannot be guaranteed and may result in a
loss instead. Each Marshall Fund may invest at least some of its assets in
mortgage-backed securities and may lend its portfolio securities to other
institutions. The risks associated with these and other investments are
fully explained under "Portfolio Investments and Strategies."
In all types of investments, reward and risk go hand in hand. If you seek
high investment returns, you must be willing to assume a comparably higher
level of risk. On the other hand, if you are comfortably with only a small
amount of risk, you should not expect a large return. Set forth below is a
risk/reward chart that explains the investment potential and corresponding
risks associated with different types of mutual funds and investments. The
Marshall Funds are listed under the relevant categories.
At the top of the chart are equity funds and stocks, which have historically
produced over the long-term a higher level of return than other types of
investments, but also have the highest potential risk. In the middle of the
chart are income funds and bonds, which offer a middle range of potential
risk and return. At the bottom of the chart are money market funds and money
market instruments, which have a lower amount of risk and return. As with
any investment, however, past performance does not predict future
performance. Your investment return will vary, and the redemption value of
your mutual fund shares may be lower than their original purchase price.
HIGHER POTENTIAL RETURN AND RISK
EQUITY FUNDS AND STOCKS
MARSHALL SMALL-CAP STOCK FUND
MARSHALL INTERNATIONAL STOCK FUND
MARSHALL MID-CAP STOCK FUND
MARSHALL STOCK FUND
MARSHALL VALUE EQUITY FUND
MARSHALL EQUITY INCOME FUND
INCOME FUNDS AND BONDS
MARSHALL INTERMEDIATE TAX-FREE FUND
MARSHALL INTERMEDIATE BOND FUND
MARSHALL GOVERNMENT INCOME FUND
MARSHALL SHORT-TERM INCOME FUND
MONEY MARKET FUNDS AND MONEY MARKET INSTRUMENTS
MARSHALL MONEY MARKET FUND
LOWER POTENTIAL RETURN AND RISK
SUMMARY OF FUND EXPENSES
Shareholder Transaction Expenses
CLASS A CLASS B
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).............. None None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)............. None None
Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds, as
applicable) ................................ None None
Redemption Fee (as a percentage of amount
redeemed, if applicable)....................... None None
Exchange Fee.................................... None None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
CLASS A CLASS B
Management Fees ............................... 1.00% 1.00%
12b-1 Fees (after waiver)(1)................... None 0.23%
Total Other Expenses .......................... 0.45% 0.45%
Shareholder Servicing Fee ................. 0.02%
Total Annual Fund Operating Expenses(2) ...... 1.45% 1.68%
(1) The maximum 12b-1 fee for the Class B Shares is 0.25%.
(2) Total Annual Fund Operating Expenses for the Class B Shares are
estimated to be 1.70% absent the voluntary waiver of the 12b-1 fee.
* Annual Fund Operating Expenses are estimated based on average expenses
expected to be incurred during the fiscal year ending August 31, 1997.
During the course of this period, expenses may be more or less than the
average amount shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER WILL BEAR, EITHER DIRECTLY OR
INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND EXPENSES,
SEE "INVESTING IN THE FUND" AND "MARSHALL FUNDS, INC. INFORMATION." Wire-
transferred redemptions may be subject to an additional fee.
Long-term CLASS B shareholders may pay more than the economic equivalent of
the maximum front-end sales charge permitted under the rules of the National
Association of Securities Dealers, Inc.
EXAMPLE CLASS A CLASS B
You would pay the following expenses on a
$1,000 investment assuming (1) 5% annual
return and (2) redemption at the end
of each time period. The Fund charges
no redemption fees.
1 Year ...................................... $15 17
3 Years ..................................... $46 $53
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING AUGUST
31, 1997.
FUND OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek appreciation of capital. The
Fund will pursue this objective by investing, under normal market conditions,
at least 65% of its total assets in common and preferred stocks issued by
small-sized companies whose market capitalizations are under $1 billion. The
Fund's investment adviser will invest primarily in equity securities of
companies with above-average earnings growth prospects or in companies where
significant fundamental changes are taking place. These changes could include
significant new products, services, or methods of distribution; restructuring
or reallocating business; or significant share price appreciation. The
investment objective of the Fund cannot be changed without shareholder
approval. While the Fund cannot assure that it will achieve its investment
objective, it attempts to do so by following the investment policies
described below..
Unless indicated otherwise, the investment policies of the Fund may be
changed by the Board of Directors ("Directors") without shareholder approval.
However, shareholders will be notified before any material change in these
policies becomes effective.
Acceptable investments for the Fund include the following:
o common stocks of U.S. companies that are either listed on the New York
or American Stock Exchange, or other domestic exchange, or traded in
over-the-counter markets;
o preferred stocks;
o convertible securities rated investment grade by a nationally recognized
statistical rating organization ("NRSRO") (such as BBB or better by
Standard & Poor's Ratings Group ("S&P") or Fitch Investors Service, Inc.
("Fitch"), or Baa or better by Moody's Investors Services, Inc.
("Moody's")) or, if unrated, of comparable quality as determined by the
Fund's Adviser (see "Convertible Securities" in the "Portfolio and
Investments and Strategies" section);
o U.S. Government Securities, including certain Mortgage-Backed Securities
(as defined under "Portfolio Investments and Strategies");
o debt obligations (including bonds, notes and debentures) issued by U.S.
corporations and rated in the top three categories by an NRSRO (such as
A or better by S&P, Fitch or Moody's) or, if unrated, of comparable
quality as determined by the Adviser;
o American Depositary Receipts ("ADRs") (limited to 20% of the Fund's net
assets);
o Asset-Backed Securities (as defined under "Portfolio Investments and
Strategies");
o put and call options on securities and indices and futures contracts;
o swap transactions, including interest rate and index-based swaps;
o Prime Commercial Paper (as defined under "Portfolio Investments and
Strategies");
o foreign and domestic Bank Instruments (as defined under "Portfolio
Investments and Strategies");
o warrants (no more than 5% of the Fund's net assets);
o repurchase agreements; and
o shares of other investment companies.
Notwithstanding the limits set forth above, the Fund may invest up to 5% of
its net assets in foreign securities other than ADRs.
HOW TO BUY FUND SHARES
Shares of the Funds are offered in two classes of shares: CLASS A SHARES and
CLASS B SHARES. CLASS A SHARES are available to retirement plans and IRA
accounts for which M&I Trust or its affiliates acts as a fiduciary. CLASS B
SHARES are available to all other customers and may be sold through
institutions and other entities that have entered into marketing arrangements
to make Fund shares available to their clients, customers or other specified
groups of investors, or that have agreed to provide sales and/or
administrative services as agents for holders of CLASS B SHARES.
You can buy CLASS A SHARES, if eligible, and CLASS B SHARES of the Fund at
net asset value, without a sales charge, on any day the New York Stock
Exchange is open for business. You order must be received by the Fund by 3:00
p.m. (Central Time) to get that day's net asset value. See "Net Asset Value"
below. The Fund reserves the right to reject any purchase request.
Investors may purchase Fund shares by contacting Marshall Funds Investor
Services ("MFIS") at 1-800-236-8554, by placing a purchase order through any
authorized broker or dealer, including through any M&I Bank employing a
representative of M&I Brokerage Services, or by any of the following methods.
Trust customers of Marshall & Ilsley Trust Company ("M&I Trust Company"), M&I
Marshall & Ilsley Trust Company of Arizona and Marshall & Ilsley Trust
Company of Florida (these companies will be referred to as "M&I Trust
Companies") may contact their account officer in order to make purchase
requests. Texas residents must purchase shares through M&I Brokerage
Services, Inc. ("M&I Brokerage Services") at 1-800-236-8554.
MINIMUM INVESTMENTS
$1,000 To open an Account
$50 To add to an Account (including through a Systematic
Investment Program)
The Fund may waive or lower these minimums from time to time, such as for M&I
Corp. employees.
PHONE Contact MFIS. Complete an application for a new
1-800-236-8554 account. If you authorized telephone exchange privileges
in your account application or by subsequent
authorization form, you may exchange shares from another
Marshall Fund having an identical shareholder
registration. See "Telephone Transactions" on page
--
for more information.
MAIL To open a new Fund account, send in your completed
account application and a check payable to "Marshall
Funds" to:
Marshall Funds Investor Services
P.O. Box 1348
Milwaukee, WI 53201-1348
To add to your existing Fund Account, send in your check,
payable to the Fund, to the same address. Indicate your
Fund account number on the check.
PERSON Bring in your completed account application (for new
accounts) and a check to Marshall Funds Investor
Services, 1000 North Water Street (M-F 8-5 Central Time),
any M&I Bank employing a representative of M&I Brokerage
Services, or to any authorized broker or dealer.
WIRE o First notify MFIS at 1-800-236-8554 by 3:00 p.m.
(Central Time).
o Then wire the money to:
M&I Marshall & Ilsley Bank
ABA Number 075000051
Credit to: Federated Shareholder Services Company
Deposit Account Number 27480
Further credit to: Marshall Small-Cap Stock Fund -
designate class of shares
Re: [Shareholder name and account number]
o If a new Fund Account, fax to MFIS at 414-287-8511 and
mail a completed account application to the Fund at the
address above under "Mail."
SYSTEMATIC You can have money automatically withdrawn from your
checking account on
INVESTMENT PROGRAM predetermined dates and invest it in the Fund at the next
Fund share price determined after MFIS receives the
order. Investors purchasing shares through
(EXISTING ACCOUNTS the Systematic Investment Program are not subject to the
$1,000 minimum
ONLY) investment requirement. Call
MFIS at 1-800-236-8554 to apply for this
program.
ADDITIONAL INFORMATION ABOUT ORDERS BY:
CHECK If your check does not clear, you purchase will be canceled and you
will be charged a $15 fee. Purchases orders by check are
considered received after your check is converted by MFIS into
federal funds, which is generally the next business day after MFIS
receives your check.
WIRE Your bank may charge a fee for wiring funds. Wire orders are
accepted only on days when the Fund, M&I Bank and the Federal
Reserve wire system are open for business.
NET ASSET VALUE
Shares of the Fund are sold at their share price, which is the net asset
value without any sales charge, next determined after your order is received.
The net asset value is determined at or after the close of the New York Stock
Exchange (normally 3:00 p.m. Central time), Monday through Friday, except on:
(i) days on which there are not sufficient changes in the value of the Fund's
portfolio securities that its net asset value might be materially affected;
(ii) days during which no shares are tendered for redemption and no orders to
purchase shares are received; and (iii) the following holidays: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
The Fund's net asset value per share fluctuates. The net asset value for
CLASS A and CLASS B SHARES is determined by adding the interest of each class
of shares in the market value of all securities and other assets of the Fund,
subtracting the interest of each class of shares in the liabilities of the
Fund and those attributable to each class of shares, and dividing the
remainder by the total number of each class of shares outstanding. The net
asset value for each class of shares may differ due to the variance in daily
net income realized by each class. Such variance will reflect only accrued
net income to which the shareholders of a particular class are entitled. The
net asset value of shares of the Fund and the other Marshall Funds are listed
daily in your newspaper's mutual fund quotations section under the bold
heading "MARSHALL FUNDS."
HOW TO REDEEM SHARES
You may redeem your Fund shares at their net asset value next determined
after the Fund receives the redemption request. Redemptions will be made on
days when the Fund computes its net asset value. See "Net Asset Value"
above. Telephone or written requests for redemptions must be received in
proper form as described below and can be made through MFIS or M&I Brokerage
Services. It is the responsibility of MFIS and M&I Brokerage Services to
promptly submit redemption requests to the Fund. Trust customers of M&I
Trust Companies should contact their account officer in order to make
redemption requests. Redemption requests for the Fund must be received by
3:00 p.m. (Central time) in order for shares to be redeemed at that day's net
asset value. Redemption proceeds will normally be mailed, or wired if by
written request, the following business day, but in no event more than seven
days, after the request is made. See "Wire/Electronic Transfer" below.
PHONE If you have authorized the telephone redemption privilege
in your account application
1-800-236-8554 or by a subsequent authorization form, you may redeem
shares by telephone. If you
(EXCEPT RETIREMENT are a Trust customer, or a customer of M&I Brokerage
Services, you must contact
ACCOUNTS) your account officer or account representative. See
"Telephone Transactions" below for more information.
MAIL Send in your written request to the following address,
indicating your name, the Fund's name, your account
number, and the number of shares or the dollar amount you
want to redeem to:
Marshall Funds Investor Services
P.O. Box 1348
Milwaukee, WI 53201-1348
If you want to redeem shares held in certificate form,
you must properly endorse the certificated shares and
send them by registered or certified mail.
Additional documentation may be required from
corporations, executors, administrators, trustees, or
guardians.
For additional assistance, call 1-800-236-8554.
PERSON Bring in written redemption request with the information
described in "Mail" above to any M&I Bank employing a
representative of M&I Brokerage Services, MFIS, 1000
North Water Street (M-F 8-5 Central Time), or to any
authorized broker or dealer.
WIRE/ELECTRONIC TRANSFER Upon written request, redemption proceeds can be
directly deposited by Electronic Funds Transfer or wired
directly to a domestic commercial bank previously
designated by you in your account application or by
subsequent form. Wire payments of redemption orders will
only be accepted on days on which the Fund, M&I Bank, and
the Federal Reserve wire system are open for business.
Wire-transferred redemptions may be subject to an
additional fee
SYSTEMATIC If you have a Fund account balance of at least $10,000,
then you can have
WITHDRAWAL PROGRAM predetermined amounts of at least $100 automatically
redeemed from your Fund
(EXISTING ACCOUNTS account on predetermined dates on a monthly or quarterly
basis. Contact MFIS or
ONLY) M&I Brokerages Services to apply for this program.
ADDITIONAL CONDITIONS
SIGNATURE GUARANTEES. In the following instances, you must have a signature
guarantee on written redemption requests:
o when you are requesting a redemption of $50,000 or more;
o when you want a redemption to be sent to an address other than the
one you have on record with the Fund, or
o when you want the redemption payable to someone other than the
shareholder of record.
Notaries do not guarantee signatures. A notary public seal is not an
acceptable replacement for a signature guarantee. Instead, the signatures
must be guaranteed by:
o a trust company or commercial bank whose deposits are insured by the
Bank Insurance Fund, which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
o a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
o a savings bank or savings and loan association whose deposits are
insured by the Savings Association Insurance Fund, which is
administered by the FDIC; or
o any other "eligible guarantor institution," as defined in the
Securities Exchange Act of 1934.
The Corporation and its transfer agent have adopted standards for accepting
signature guarantees from the above institutions. The Corporation may elect
in the future to limit eligible signature guarantors to institutions that are
members of a signature guarantee program. The Corporation and its transfer
agent reserve the right to amend these standards at any time without notice.
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR. When you purchase Fund shares
by check or through the Automated Clearing House system, the proceeds from
the redemption of those shares (whether redeemed by mail, by telephone or by
checkwriting) are not available, and the shares may not be exchanged, until
MFIS is reasonably certain that the purchase check has cleared, which could
take up to seven calendar days.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts
with low balances, the Fund may redeem shares in your account and pay you the
proceeds if your account balance falls below the required minimum value of
$1,000. Before shares are redeemed to close an account, you will be notified
in writing and allowed 30 days to purchase additional shares to meet the
minimum account balance requirement.
EXCHANGE PRIVILEGE
You may exchange shares of a Marshall Fund (including the Fund's shares) for
shares of any of the other Marshall Funds at net asset value without a sales
charge, provided you have received a copy of the current prospectus of the
other Marshall Fund, and you meet the investment minimum of the Marshall
Fund. The exchange privilege is available to shareholders residing in any
state in which the Marshall Fund shares you are acquiring may legally be
sold.
Upon receipt of proper instructions and all necessary supporting documents,
the Marshall Fund's shares you submit for exchange will be redeemed at the
next-determined net asset value. Written exchange instructions may require a
signature guarantee. See "Signature Guarantees" above. An exchange is
treated as a sale for federal income tax purposes and, depending on the
circumstances, you may realize a short or long-term capital gain or loss.
The exchange privilege may be terminated at any time, and you will be
notified of such termination. You may obtain further information on the
exchange privilege by calling MFIS.
With the exception of Marshall Money Market Fund, the other Marshall Funds
currently offer only one class of shares. If such funds should add a second
class of shares, exchanges may be limited to shares of the same class of each
Marshall Fund.
EXCHANGING SECURITIES FOR FUND SHARES. The Fund may accept securities in
exchange for Fund shares. The Fund will allow such exchanges only upon prior
approval of the Fund and a determination by the Fund and the Adviser that the
securities to be exchanged are acceptable. Any securities exchanged must
meet the investment objective and policies of the Fund, must have a readily
ascertainable market value, and must be liquid. The market value of any
securities exchanged in an initial investment, plus any cash, must be at
least equal to the minimum investment in the Fund. The Fund acquires the
exchanged securities for investment and not for resale.
Any interest accrued or dividends declared but not paid on the securities
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the securities
become the property of the Fund, along with the securities.
If an exchange is permitted, it will be treated as a sale for federal income
tax purposes. Depending upon the cost basis of the securities exchanged for
Fund shares, a gain or loss may be realized by the investor.
TELEPHONE TRANSACTIONS
If you have completed a telephone authorization section in your account
application or have completed an authorization form obtained through MFIS or
M&I Brokerage Services, you may telephone instructions to MFIS to redeem Fund
shares or to request a purchase of Marshall Fund shares by exchanging between
Marshall Fund accounts that have identical shareholder registrations. Trust
customers should contact their account officer. Telephone exchange
instructions must be received before 3:00 p.m. (Central Time) for shares to
be exchanged the same day. However, you will not receive a dividend of the
Marshall Fund into which you exchange on the date of the exchange. Telephone
redemption requests are subject to the time requirements explained above in
"How to Redeem Fund Shares."
Shares held in certificate form cannot be exchanged or redeemed by telephone.
Instead, you must forward the certificates to the transfer agent through MFIS
for credit to your mutual fund account before they can be exchanged or
redeemed.
Shareholders requesting a telephone exchange or redemption service authorize
the Fund and its agents to act upon their telephonic instructions to exchange
or redeem shares from any account for which they have authorized such
services. Telephone instructions may be recorded. If reasonable procedures
are not followed by the Marshall Funds, they may be liable for losses due to
unauthorized or fraudulent telephone instructions.
The telephone privileges may be modified or terminated at any time. You will
be notified of such modification or termination. During times of drastic
economic or market changes, you may experience difficulty in making exchanges
or redemptions by telephone through banks, brokers, and other financial
institutions. In such cases, you should make the exchange or redemption
request in writing and sent it by overnight mail.
MARSHALL FUNDS, INC. INFORMATION
ORGANIZATION AND HISTORY
The Corporation was incorporated under the laws of Wisconsin on July 31,
1992. The Corporation may offer separate series of shares representing
interests in separate portfolios of securities, and the shares in any one
portfolio may be offered in separate classes.
MANAGEMENT
BOARD OF DIRECTORS. The Directors are responsible for managing the business
affairs of the Corporation and for exercising all of the powers of the
Corporation except those reserved for the shareholders.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the
Corporation, M&I Investment Management Corp. serves as the investment adviser
(the "Adviser") to the Fund, subject to direction by the Directors. The
Adviser continually conducts investment research and supervision for the Fund
and is responsible for the purchase and sale of portfolio instruments, for
which it receives an annual fee from the Fund.
Both the Corporation and the Adviser have adopted strict codes of ethics
governing the conduct of all employees who manage the Marshall Funds and
their portfolio securities. these codes recognize that such persons owe a
fiduciary duty to the Marshall Funds' shareholders and must place the
interests of shareholders ahead of the employees' own interests. Among other
things, the codes: require preclearance and periodic reporting of personal
securities transactions; prohibit personal transactions in securities being
purchased or sold, or being considered for purchase or sale, by the Marshall
Funds; prohibit purchasing securities in initial public offerings; and
prohibit taking profits on securities held for less than sixty days.
Violations of the codes are subject to review by the Board of Directors, and
could result in severe penalties.
ADVISORY FEES. The Adviser is entitled to receive an annual investment
advisory fee equal to 1.00%. The fee paid by the Fund may be higher than the
advisory fees paid by mutual funds in general but is comparable to the fee
paid by many mutual funds with objectives and policies similar to the Fund.
The investment advisory contract allows the voluntary waiver in whole or in
part of the investment advisory fees or the reimbursement of expenses by the
Adviser from time to time. The Adviser can terminate any voluntary waiver of
its fees or reimbursement of expenses at any time in its sole discretion.
Investment decisions for the Fund will be made independently from those of
any fiduciary or other accounts that may be managed by the Adviser or its
affiliates. If, however, such accounts, the Fund, or the Adviser for its own
account, are simultaneously engaged in transactions involving the same
securities, the transactions may be combined and allocated to each account.
Although this system may adversely affect the price the Fund pays or
receives, or the size of the position it obtains, it may also enable the Fund
to benefit from lower transaction costs.
ADVISER'S BACKGROUND. M&I Investment Management Corp. is a registered
investment adviser and a wholly-owned subsidiary of Marshall & Ilsley Corp.,
a registered bank holding company headquartered in Milwaukee, Wisconsin. As
of April 30, 1996, M&I Investment Management Corp. had approximately $7.3
billion in assets under management and has managed investments for
individuals and institutions since its inception in 1973. The Adviser has
managed the Fund since its inception, has managed the other Marshall Funds
since 1992, and managed the Newton Funds (predecessors to certain of these
Marshall Funds) since 1985. As part of its regular banking operations,
affiliates of the Adviser may make loans to public companies. Thus, it may
be possible, from time to time, for the Fund to hold or acquire securities of
issuers which are also lending clients of the Adviser's affiliates. The
lending relationship will not be a factor in the selection of securities.
The Fund is co-managed by Steve D. Hayward and David Lettenberger. Prior to
joining M&I Investment Management Corp. as Vice President in December 1993,
Mr. Hayward served as Senior Portfolio Manager of AMOCO Corporation. Mr.
Hayward, who is a Chartered Financial Analyst, received a B.A. in Economics
from North Park College, and an M.B.A. in Finance from Loyola University.
Prior to joining M&I Investment Management Corp. in 1993, Mr. Lettenberger
was employed by M&I Marshall & IIsley Bank. He has been an analyst on the
Marshall Mid-Cap Stock Fund since the fund's inception during 1993. Mr.
Lettenberger holds an B.B.A. degree in Finance and Economics from Marquette
University and has completed the Chartered Financial Analyst program.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp., a subsidiary of Federated Investors, is the
principal distributor for shares of the Marshall Funds and a number of other
investment companies. The distributor may offer certain items of nominal
value from time to time to any shareholder or investor in connection with the
sale of Fund shares.
ADMINISTRATIVE ARRANGEMENTS. The distributor may select brokers, dealers and
administrators (including depository or other institutions such as commercial
banks and savings associations) to provide distribution and/or administrative
services for which they will receive fees from the distributor based upon
shares owned by their clients or customers. These administrative services
include distributing prospectuses and other information, providing account
assistance, and communicating or facilitating purchases and redemptions of
the Fund's shares. The fees are calculated as a percentage of the average
aggregate net asset value of shareholder accounts held during the period for
which the brokers, dealers, and administrators provide services. Any fees
paid for these services by the distributor will be reimbursed by the Adviser
and not the Fund.
DISTRIBUTION PLAN. Under a Rule 12b-1 Plan (the "Plan"), the Fund may pay to
the distributor on behalf of CLASS B SHARES an amount computed at an annual
rate of 0.25% of the average daily net asset value of CLASS B SHARES to
finance any activity which is principally intended to result in the sale of
the shares subject to the Plan ("Plan Shares"). The distributor may, from
time to time and for such periods as it deems appropriate, voluntarily reduce
its compensation under the Plan. The distributor has no present intention of
receiving more than 0.23% of the average daily net asset value of CLASS B
SHARES as compensation under the Plan.
The distributor may select certain entities to provide sales and/or
administrative services as agents for holders of Plan Shares. Administrative
services may include, but are not limited to, the following functions:
providing office space, equipment, telephone facilities, and various
clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routing client inquiries regarding
Plan Shares; assisting clients in changing dividend options, account
designations, and addresses; and providing such other services as the Fund
reasonably requests. Such entities will receive fees from the distributor
based upon Plan Shares owned by their clients or customers. The schedules of
such fees and the basis upon which such fees will be paid will be determined
from time to time by the distributor.
The Fund's Plan is a compensation type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund
does not pay for unreimbursed expenses of the distributor, including amounts
expended by the distributor in excess of amounts received by it from the
Fund, interest, carrying or other financing charges in connection with excess
amounts expended, or the distributor's overhead expenses. However, the
distributor may be able to recover such amount or may earn a profit from
future payments made by the Fund under the Plan.
The Glass-Steagall Act prohibits a depository institution (such as a
commercial bank or a savings association) from being an underwriter or
distributor of most securities. In the event the Glass-Steagall Act is deemed
to prohibit depository institutions from acting in the administrative
capacities described above or should Congress relax current restrictions on
depository institutions, the Directors will consider appropriate changes in
the services.
State securities laws governing the ability of depository institutions to act
as underwriters or distributors of securities may differ from interpretations
given to the Glass-Steagall Act and, therefore, banks and financial
institutions may be required to register as dealers pursuant to state law.
In addition, some state securities laws may require administrators to
register as brokers and dealers.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. The distributor, the Adviser or
their affiliates, at their own expense and out of their own assets, may also
provide other compensation to institutions in connection with sales of Fund
shares or as financial assistance for providing substantial marketing, sales
and operational support. The support may include initiating customer
accounts, providing sales literature, or participating in sales, educational
and training seminars (including those held at recreational facilities).
Such assistance will be predicated upon the amount of shares of the Fund or
the Corporation the institution sells or may sell and/or upon the type and
nature of sales, operational or marketing support furnished by the
institution. Any payments made by the distributor may be reimbursed by the
Adviser or its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services ("FAS"), a
subsidiary of Federated Investors, provides the Fund with certain
administrative personnel and services necessary to operate the Fund, such as
legal and accounting services. FAS provides these services for an annual fee
equal to .12 of 1% on the Fund's average daily net assets. Marshall & Ilsley
Trust Company ("M&I Trust Company"), a subsidiary of M&I Corp., serves as
sub-administrator to the Fund and as such, provides certain administrative
services (as delegated by FAS) necessary to operate the Fund. FAS pays M&I
Trust Company approximately .031 of 1% from its administrative fee for sub-
administrative services.
The administrative fee received during any fiscal year shall be at least
$50,000. FAS may choose voluntarily to reimburse a portion of its fee at any
time.
SHAREHOLDER SERVICING ARRANGEMENTS. Marshall Funds Investor Services
("MFIS"), Milwaukee, Wisconsin, a subsidiary of M&I Corp., is the shareholder
servicing agent for the Fund. As such, MFIS provides shareholder services
which include, but are not limited to, distributing prospectuses and other
information, providing shareholder assistance, and communicating or
facilitating purchases and redemptions of shares. The Fund may pay MFIS a fee
equal to approximately 0.02% of the average daily net asset value of Fund
shares for which MFIS provides shareholder services. MFIS may voluntarily
choose to waive all or a portion of its fee at any time.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the Adviser looks for prompt execution of the order at
a favorable price. In working with dealers, the Adviser will generally
utilize those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. In selecting among firms believed to meet these criteria, the
Adviser may give consideration to those firms which have sold or are selling
shares of the Fund and other mutual funds distributed by Federated Securities
Corp. The Adviser makes decisions on portfolio transactions and select
brokers and dealers subject to review by the Directors.
EXPENSES OF THE FUND
Holders of CLASS A SHARES and CLASS B SHARES pay their allocable portion of
Corporation and Fund expenses.
The Corporation expenses for which holders of CLASS A SHARES and CLASS B
SHARES pay their allocable portion include, but are not limited to: the cost
of organizing the Corporation and continuing its existence; registering the
Corporation with federal and state securities authorities; Directors' fees;
auditors' fees, the cost of meetings of Directors; legal fees of the
Corporation; association membership dues; and such non-recurring and
extraordinary items as may arise from time to time.
The Fund expenses for which holders of CLASS A SHARES and CLASS B SHARES pay
their allocable portion include, but are not limited to: registering the Fund
and shares of the Fund; investment advisory services; taxes and commissions;
custodian fees; insurance premiums; auditors' fees; and such non-recurring
and extraordinary items as may arise from time to time.
The only expenses allocated to CLASS B SHARES as a class are expenses under
the Fund's Rule 12b-1 Distribution Plan which relate to such shares.
However, the Directors reserve the right to allocate certain other expenses
to holders of Fund shares as they deem appropriate ("Class Expenses"). In any
case, Class Expenses would be limited to: transfer agent fees as identified
by the transfer agent as attributable to holders of Fund shares; printing and
postage expenses related to preparing and distributing materials such as
shareholder reports, prospectuses and proxies to current shareholders;
registration fees paid to the SEC and registration fees paid to state
securities commissions; expenses related to administrative personnel and
services as required to support holders of Fund shares; legal fees relating
solely to Fund shares; and Directors' fees incurred as a result of issues
relating solely to Fund shares.
SHAREHOLDER INFORMATION
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Shareholder Services Company
maintains a share account for each shareholder of record. Upon written
request, you can receive share certificates without charge, but only for
whole shares of the Fund. You may contact MFIS to direct the transfer agent
to issue you certificates or deliver certificates for redemption or credit to
your account. Federated Shareholder Services Company is a subsidiary of
Federated Investors.
The Fund will send you a detailed confirmation of each purchase or redemption
or dividend payment. At a minimum, you will receive a monthly statement. You
may request photocopies of confirmations for transactions affecting your
account in prior years at a fee of $5 per year to cover the cost of obtaining
this information.
DIVIDENDS AND CAPITAL GAINS
Dividends of the Fund are declared and paid quarterly. Only shareholders
invested in the Fund on the record date of the dividend declaration are paid
that dividend. Capital gains, when realized by the Fund, will be distributed
at least once every 12 months. Unless you request cash payments by writing to
the Fund, your dividends and capital gains are automatically reinvested in
additional shares of the Fund on payment dates at the ex-dividend date net
asset value.
COMMON STOCK AND VOTING RIGHTS
The Directors have authorized the issuance of shares of Common Stock
representing ownership interests in the Fund. You are entitled to one vote
for each full share of Common Stock and proportionate fractional votes for
fractional shares. All shares of each Marshall Fund or class in the
Corporation have equal voting rights and will generally vote in the aggregate
and not by Marshall Fund or class, unless required by law. For example, only
shares of a particular Marshall Fund or class are entitled to vote on matters
affecting that Marshall Fund or class. Voting rights are not cumulative;
consequently, the holders of more than 50% of the Corporation's shares of
Common Stock can elect the entire Board of Directors.
The Corporation does not intend to hold annual meetings of shareholders,
unless required by the Act or applicable law. Directors may be removed by the
Directors or by the shareholders at a special meeting, which may be called by
the Directors upon written request of shareholders owning at least 10% of the
Corporation's outstanding voting shares.
PERFORMANCE INFORMATION
From time to time, the Fund may advertise total return and yield for CLASS A
SHARES and CLASS B SHARES.
Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield for CLASS A SHARES and CLASS B SHARES is calculated by dividing the
net investment income per share (as defined by the SEC) earned by a class of
shares over a thirty-day period by the offering price per share of that class
of shares on the last day of the period. This number is then annualized using
semi-annual compounding. The yield does not necessarily reflect income
actually earned by that class of shares and, therefore, may not correlate to
the dividends or other distributions paid to shareholders.
Total return and yield will be calculated separately for CLASS A SHARES and
CLASS B SHARES.
From time to time, the advertisements for CLASS A SHARES and CLASS B SHARES
of the Fund may refer to ratings, rankings, and other information in certain
financial publications and/or compare the performance of the CLASS A SHARES
and CLASS B SHARES to certain indices.
The Fund is the successor to the portfolio of a collective trust fund managed
by the Adviser. It is anticipated that, at the Fund's commencement of
operations, the assets from the collective trust fund will be transferred to
the Fund in exchange for Fund shares. The Adviser has represented that the
Fund's investment objective, policies and limitations are in all material
respects identical to those of the collective trust fund.
The Fund's average annual total return for the period from ,
------------
199 (date of commencement of operations of collective trust fund) to March
--
31, 1996 was %. The quoted performance data includes the performance of
---
the collective trust fund for periods before the Fund's registration
statement became effective, as adjusted to reflect the Fund's anticipated
expenses as set forth in the "Expenses of the Fund" section of this
prospectus. The collective trust fund was not registered under the
Investment Company Act of 1940 ("1940 Act") and therefore was not subject to
certain investment restrictions that are imposed by the 1940 Act. If the
collective trust fund had been registered under the 1940 Act, the performance
may have been adversely affected.
PORTFOLIO INVESTMENTS AND STRATEGIES
ASSET-BACKED SECURITIES. The Fund may invest in Asset-Backed Securities
rated, at the time of purchase, in the top three rating categories, by an
NRSRO (A or better by S&P, Fitch or Moody's), or, if unrated, of comparable
quality as determined by the Adviser. Asset-Backed Securities have structural
characteristics similar to Mortgage-Backed Securities but have underlying
assets that generally are not mortgage loans or interests in mortgage loans.
The Fund may invest in Asset-Backed Securities including, but not limited to,
interests in pools of receivables, such as motor vehicle installment purchase
obligations and credit card receivables, equipment leases, manufactured
housing (mobile home) leases, or home equity loans. These securities may be
in the form of pass-through instruments or asset-backed bonds. The securities
are issued by non-governmental entities and carry no direct or indirect
government guarantee.
BANK INSTRUMENTS. The Fund may invest in domestic Bank Instruments, which are
instruments (including time and savings deposits, bankers' acceptances and
certificates of deposit) of banks and savings and loans that have capital,
surplus and undivided profits of over $100 million or for which the principal
amount of the instrument is insured by the Bank Insurance Fund or the Savings
Association Insurance Fund, which are administered by the Federal Deposit
Insurance Corporation. To a limited extent (up to 5% of the Fund's total
assets), the Fund may purchase foreign Bank Instruments, which include
Eurodollar Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit
("Yankee CDs") and Eurodollar Time Deposits ("ETDs"). ECDs are U.S. dollar-
denominated certificates of deposits issued by foreign branches of U.S. banks
or foreign banks. Yankee CDs are U.S. dollar-denominated certificates of
deposits issued in the U.S. by branches and agencies of foreign banks. ETDs
are U.S. dollar-denominated deposits in foreign branches of U.S. banks or
foreign banks. The Fund will treat securities credit enhanced with a bank's
irrevocable letter of credit or unconditional guaranty as Bank Instruments.
CONVERTIBLE SECURITIES. The Fund may invest in convertible securities which
are rated, at the time of purchase, investment grade by an NRSRO (such as BBB
or better by S&P or Fitch, or Baa or better by Moody's), or, if unrated, are
of comparable quality as determined by the Adviser. Convertible securities
are fixed income securities which may be exchanged or converted into a
predetermined number of the issuer's underlying common stock at the option of
the holder during a specified time period. Convertible securities may take
the form of convertible bonds, convertible preferred stock or debentures,
units consisting of "usable" bonds and warrants or a combination of the
features of several of these securities. The investment characteristics of
each convertible security vary widely, which allows convertible securities to
be employed for different investment objectives. In selecting a convertible
security, the Adviser evaluates the investment characteristics of the
convertible security as a fixed income instrument, and the investment
potential of the underlying security for capital appreciation.
Convertible bonds and convertible preferred stocks generally retain the
investment characteristics of fixed income securities until they have been
converted but also react to movements in the underlying equity securities.
The holder is entitled to receive the fixed income of a bond or the dividend
preference of a preferred stock until the holder elects to exercise the
conversion privilege. Usable bonds are corporate bonds that can be used in
whole or in part, customarily at full face value, in lieu of cash to purchase
the issuer's common stock. Convertible securities are senior to equity
securities, and therefore have a claim to assets of the corporation prior to
the holders of common stock in the case of liquidation. However, convertible
securities are generally subordinated to similar nonconvertible securities of
the same company. The interest income and dividends from convertible bonds
and preferred stocks provide a stable stream of income with generally higher
yields than common stocks, but lower than nonconvertible securities of
similar quality. The Fund will exchange or convert the convertible
securities held in its portfolio into shares of the underlying common stocks
when, in the opinion of the Adviser, the investment characteristics of the
underlying common shares will assist the Fund in achieving its investment
objective. Otherwise, the Fund will hold or trade the convertible
securities.
DEPOSITARY RECEIPTS. The other Fund may invest only in ADRs. ADRs are
Depositary Receipts typically issued by a U.S. bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation.
Generally, Depositary Receipts in registered form are designed for use in the
U.S. securities market and Depositary Receipts in bearer form are designed
for use in securities markets outside the United States. Depositary Receipts
may not necessarily be denominated in the same currency as the underlying
securities into which they may be converted. Ownership of unsponsored
Depositary Receipts may not entitle the Fund to financial or other reports
from the issuer of the underlying security, to which it would be entitled as
the owner of sponsored Depositary Receipts. Depositary Receipts also involve
the risks of other investments in foreign securities.
ILLIQUID SECURITIES. These are any securities a Fund owns which it may not be
able to sell quickly (within seven days) at a fair price. The Fund's
investments in illiquid securities may not exceed 15% of its net assets.
LENDING PORTFOLIO SECURITIES. In order to generate additional income, the
Fund is permitted as a fundamental investment policy to lend portfolio
securities on a short-term or long-term basis, or both, up to one-third of
the value of its total assets to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the
Adviser has determined are creditworthy under guidelines established by the
Directors and will receive collateral in the form of cash, U.S. government
securities or other high quality liquid money market instruments equal to at
least 100% of the value of the securities loaned. Collateral received in the
form of cash may be invested in highly liquid investments, including
repurchase agreements and other money market instruments.
There is the risk that when lending portfolio securities, the securities may
not be available to the Fund on a timely basis and the Fund may, therefore,
lose the opportunity to sell the securities at a desirable price. In
addition, in the event that a borrower of securities would file for
bankruptcy or become insolvent, disposition of the securities may be delayed
pending court action.
MORTGAGE-BACKED SECURITIES. The Fund may invest in Mortgage-Backed Securities
rated, at the time of purchase, in the top three rating categories by an
NRSRO (A or better by S&P, Fitch or Moody's), or, if unrated, of comparable
quality as determined by the Fund's Adviser. Mortgage-Backed Securities are
securities that directly or indirectly represent a participation in, or are
secured by and payable from, mortgage loans on real property. The Fund may
invest in Mortgage-Backed Securities that are issued or guaranteed by the
U.S. government or one of its agencies or instrumentalities, such as
Government National Mortgage Association ("Ginnie Mae"), the Federal National
Mortgage Association ("Fannie Mae") and Federal Home Loan National Mortgage
Corporation ("Freddie Mac").
ADJUSTABLE RATE MORTGAGE SECURITIES. Adjustable rate mortgage securities
("ARMS") are pass-through mortgage securities with adjustable rather
than fixed interest rates. The ARMS in which the Fund invests are issued
by Ginnie Mae, Fannie Mae, and Freddie Mac and are actively traded. The
underlying mortgages which collateralize ARMS issued by Ginnie Mae are
fully guaranteed by the Federal Housing Administration ("FHA") or
Veterans Administration ("VA"), while those collateralizing ARMS issued
by Fannie Mae or Freddie Mac are typically conventional residential
mortgages conforming to strict underwriting size and maturity
constraints.
OPTIONS ON SECURITIES OR INDICES AND FUTURES CONTRACTS. In order to hedge
against market shifts, the Fund may purchase put and call options on
securities or securities indices. In addition, the Fund may seek to generate
income to offset operating expenses and/or may hedge a portion of its
portfolio investments through writing (i.e., selling) covered put and call
options. An option on a security is a contract that permits the purchaser of
the option, in return for the premium paid, the right to buy a specified
security (in the case of a call option) or to sell a specified security (in
the case of a put option) from or to the writer of the option at a designated
price during the term of the option. An option on a securities index permits
the purchaser of the option, in return for the premium paid, the right to
receive from the seller cash equal to the difference between the closing
price of the index and the exercise price of the option. The Fund may write a
call or put option only if the option is "covered." This means that so long
as the Fund is obligated as the writer of a call option, it will own the
underlying securities subject to the call, or hold a call at the same
exercise price, for the same exercise period, and on the same securities as
the written call. A put is covered if the Fund maintains liquid assets with a
value equal to the exercise price in a segregated account, or holds a put on
the underlying securities at an equal or greater exercise price. The value of
the underlying securities on which options may be written at any one time
will not exceed 50% of the net assets of the Fund. The Fund will not purchase
put or call options if the aggregate premium paid for such options would
exceed 5% of its total assets at the time of the purchase.
Options purchased or written by the Fund may be traded on United States and
foreign exchanges or in the over-the-counter markets. Over-the-counter
options are two-party contracts with price and terms negotiated between buyer
and seller. In contrast, exchange-traded options are third-party contracts
with standardized strike prices and expirations dates and are purchased from
a clearing corporation. Exchange-traded options generally have a continuous
liquid market while over-the-counter options may not. The Fund purchases and
writes options only with investment dealers and other financial institutions
(such as commercial banks or savings and loan associations) deemed
creditworthy by the Fund's Adviser.
The Fund may invest in futures for bona fide hedging purposes. Although the
Fund has the ability to invest up to 5% of its net assets in futures for
other than bona fide hedging purposes, it has no present intention of doing
so. The ability to engage in futures transactions is a fundamental
investment policy. For hedging purposes only, the Fund may buy and sell
covered financial futures contracts, stock index futures contracts, foreign
currency futures contracts and options on any of the foregoing. A financial
futures contract is an agreement between two parties to buy or sell a
specified debt security at a set price on a future date. An index futures
contract is an agreement to take or make delivery of an amount of cash based
on the difference between the value of the index at the beginning and at the
end of the contract period. A futures contract on a foreign currency is an
agreement to buy or sell a specified amount of a currency for a set price on
a future date. When the Fund enters into a futures contract, it must make an
initial deposit, known as "initial margin," as a partial guarantee of its
performance under the contract. As the value of the security, index, or
currency fluctuates, either party to the contract is required to make
additional margin payments, known as "variation margin," to cover any
additional obligation it may have under the contract. In addition, when the
Fund enters into a futures contract, it will segregate assets to "cover" its
position in accordance with the Act. See "Investment Objectives and Policies
- - Futures and Options Transactions" in the Statement of Additional
Information.
PORTFOLIO TURNOVER. Although the Fund does not intend to invest for the
purpose of seeking short-term profits, securities will be sold whenever the
Fund's Adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular
security may have been held The Fund anticipates its portfolio turnover rate
to be approximately 150%. A higher rate of portfolio turnover involves
correspondingly greater transaction expenses which must be borne directly by
the Fund and, thus, indirectly by its shareholders. In addition, a high rate
of portfolio turnover may result in the realization of larger amounts of
capital gains which, when distributed to the Fund's shareholders, are taxable
to them. Nevertheless, transactions for a Fund's portfolio will be based upon
investment considerations and will not be limited by any other considerations
when the Fund's Adviser deems it appropriate to make changes in the Fund's
portfolio.
RATINGS. Securities rated in the fourth highest investment grade category
(Baa by Moody's, or BBB by S&P or Fitch), have speculative characteristics
and changes in economic conditions or other circumstances are more likely to
lead to a weakened capacity to make principal and interest payments than
higher rated securities. The Fund's Statement of Additional Information
contains complete descriptions of ratings.
The Fund's Adviser will evaluate downgraded securities on a case-by-case
basis and will sell any security determined not to be an acceptable
investment.
RESTRICTED SECURITIES. The Fund may invest in restricted securities. These
are securities in which the Fund normally invests but which are subject to
legal restrictions when the Fund sells them. Restricted securities which are
not determined by the Directors to be liquid will be limited to 5% of the
Fund's total assets..
REPURCHASE AGREEMENTS. The securities in which the Fund invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell U.S. government securities or other securities to the Fund
and agree at the time of sale to repurchase them at a mutually agreed upon
time and price. To the extent that the original seller does not repurchase
the securities from the Fund, the Fund could receive less than the repurchase
price on any sale of such securities.
SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest in the
securities of other investment companies, but will not own more than 3% of
the total outstanding voting stock of any investment company, invest more
than 5% of its respective total assets in any one investment company, or
invest more than 10% of its respective total assets in investment companies
in general. The Fund will invest in other investment companies primarily for
the purpose of investing short-term cash which has not yet been invested in
other portfolio instruments. Although the Adviser will waive its investment
advisory fee on that portion of the Fund's assets invested in securities of
open-end investment companies, there will still be some duplication of
expenses caused by one investment company investing in another.
The Fund will only purchase shares of other open-end investment companies
whose sales loads, if any, are less than 1.00% of their offering prices.
SWAP TRANSACTIONS. As one way of managing its exposure to different types of
investments, the Fund may invest up to 5% of its net assets in swap
transactions, including interest rate and index-based swaps. See "Investment
Objectives and Policies - Swap Transactions" in the Statement of Additional
Information.
TEMPORARY INVESTMENTS. When the Adviser judges that market conditions warrant
a defensive investment position, the Fund may temporarily invest without
limit in short-term debt obligations (money market instruments). These
investments include commercial paper, bank instruments, U.S. government
obligations, repurchase agreements, and/or securities of other investment
companies. The Fund's temporary investments must be of comparable quality to
its primary investments.
U.S. GOVERNMENT SECURITIES. The Fund may invest in U.S. Government
Securities, which generally include direct obligations of the U.S. Treasury
(such as U.S. Treasury bills, notes, and bonds) and obligations (including
Mortgage-Backed Securities, bonds, notes and discount notes) issued or
guaranteed by the following U.S. government agencies or instrumentalities:
Federal Home Loan Banks, Federal National Mortgage Association, Government
National Mortgage Association, Bank for Cooperatives (including Central Bank
for Cooperatives), Federal Land Banks, Federal Intermediate Credit Banks,
Tennessee Valley Authority, Export-Import Bank of the United States,
Commodity Credit Corporation, Federal Financing Bank, The Student Loan
Marketing Association, Federal Home Loan Mortgage Corporation, or National
Credit Union Administration. These securities are backed by: the full faith
and credit of the U.S. Treasury; the issuer's right to borrow an amount
limited to a specific line of credit from the U.S. Treasury; the
discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or the credit of the agency or
instrumentality issuing the obligations.
Examples of agencies and instrumentalities which are permissible investments
which may not always receive financial support from the U.S. government are:
Federal Farm Credit Banks; Federal Home Loan Banks; Federal National Mortgage
Association; The Student Loan Marketing Association; and Federal Home Loan
Mortgage Corporation.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
portfolio securities on a when-issued or delayed delivery basis. These
transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. Accordingly, the Fund may pay
more or less than the market value of the securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the Adviser deems
it appropriate to do so. In addition, the Fund may enter into transactions to
sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at
later dates. The Fund may realize short-term profits or losses upon the sale
of such commitments.
ADDITIONAL INVESTMENT RISKS
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. Mortgage-Backed and Asset-Backed
Securities generally pay back principal and interest over the life of the
security. At the time the Fund reinvests the payments and any unscheduled
prepayments of principal received, the Fund may receive a rate of interest
which is actually lower than the rate of interest paid on these securities
("prepayment risks"). Mortgage-backed and Asset-Backed Securities are subject
to higher prepayment risks than most other types of debt instruments with
prepayment risks because the underlying mortgage loans or the collateral
supporting Asset-Backed Securities may be prepaid without penalty or premium.
Prepayment risks on Mortgage-Backed Securities tend to increase during
periods of declining mortgage interest rates because many borrowers refinance
their mortgages to take advantage of the more favorable rates. Prepayments on
Mortgage-Backed Securities are also affected by other factors, such as the
frequency with which people sell their homes or elect to make unscheduled
payments on their mortgages. Although Asset-Backed Securities generally are
less likely to experience substantial prepayments than are Mortgage-Backed
Securities, certain factors that affect the rate of prepayments on Mortgage-
Backed Securities also affect the rate of prepayments on Asset-Backed
Securities.
While Mortgage-Backed Securities generally entail less risk of a decline
during periods of rapidly rising interest rates, Mortgage-Backed Securities
may also have less potential for capital appreciation than other similar
investments (e.g., investments with comparable maturities) because as
interest rates decline, the likelihood increases that mortgages will be
prepaid. Furthermore, if Mortgage-Backed Securities are purchased at a
premium, mortgage foreclosures and unscheduled principal payments may result
in some loss of a holder's principal investment to the extent of the premium
paid. Conversely, if Mortgage-Backed Securities are purchased at a discount,
both a scheduled payment of principal and an unscheduled prepayment of
principal would increase current and total returns and would accelerate the
recognition of income, which would be taxed as ordinary income when
distributed to shareholders.
Asset-Backed Securities present certain risks that are not presented by
Mortgage-Backed Securities. Primarily, these securities do not have the
benefit of the same security interest in the related collateral. Credit card
receivables are generally unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of
which give such debtors the right to set off certain amounts owed on the
credit cards, thereby reducing the balance due. Most issuers of Asset-Backed
Securities backed by motor vehicle installment purchase obligations permit
the service of such receivables to retain possession of the underlying
obligations. If the service sells these obligations to another party, there
is a risk that the purchaser would acquire an interest superior to that of
the holders of the related Asset-Backed Securities. Further, if a vehicle is
registered in one state and is then re re-registered because the owner and
obligor moves to another state, such re-registration could defeat the
original security interest in the vehicle in certain cases. In addition,
because of the large number of vehicles involved in a typical issuance and
technical requirements under state laws, the trustee for the holders of
Asset-Backed Securities backed by automobile receivables may not have a
proper security interest in all of the obligations backing such receivables.
Therefore, there is the possibility that recoveries on repossessed collateral
may not, in some cases, be available to support payments on these securities.
STOCK MARKET. As with other mutual funds that invest primarily in equity
securities, the Fund is subject to market risks. That is, the possibility
exists that common stocks will decline over short or even extended periods of
time, and the United States equity market tends to be cyclical, experiencing
both periods when stock prices generally increase and periods when stock
prices generally decrease.
SMALL CAPITALIZATION STOCKS. However, because the Fund invests
primarily in small capitalization stocks, there are some additional risk
factors associated with investment in the Fund. In particular, stocks
in the small capitalization sector of the United States equity market
have historically been more volatile in price than larger capitalization
stocks, such as those included in the S&P 500. This is because, among
other things, small companies have less certain growth prospects than
larger companies, have a lower degree of liquidity in the equity market;
and tend to have a greater sensitivity to changing economic conditions.
Further, in addition to exhibiting greater volatility, the stocks of
small companies may, to some degree, fluctuate independently of the
stocks of large companies. That is, the stocks of small companies may
decline in price as the prices of large company stocks rise or vice
versa. Therefore, investors should expect that the Fund, which invests
primarily in small capitalization stocks, to be more volatile than, and
may fluctuate independently of, broad stock market indices such as the
S&P 500.
FUTURES AND OPTIONS. When the Fund uses futures and options on futures as
hedging devices, there is a risk that the prices of the securities subject to
the futures contracts may not correlate with the prices of the securities in
the Fund's portfolio. This may cause the futures contract and any related
options to react differently than the portfolio securities to market changes.
In addition, the Fund's investment adviser could be incorrect in its
expectations about the direction or extent of market factors such as interest
or currency exchange rate movements. In these events, the Fund may lose money
on the futures contract or option. Also, it is not certain that a secondary
market for positions in futures contracts or for options will exist at all
times. Although the Fund's investment adviser will consider liquidity before
entering into such transactions, there is no assurance that a liquid
secondary market on an exchange or otherwise will exist for any particular
futures contract or option at any particular time. The Fund's ability to
establish and close out futures and options positions depends on this
secondary market.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund will not pay federal income tax because it expects to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such
companies. The Fund will be treated as a single, separate entity for federal
income tax purposes so that income (including capital gains) and losses
realized by the other Marshall Funds of the Corporation, if any, will not be
combined for tax purposes with those realized by any of the other Marshall
Funds, including the Fund.
Unless otherwise exempt, you are required to pay federal income tax on any
dividends and other distributions received, including capital gains
distributions. These tax consequences apply whether dividends are received
in cash or as additional shares. Distributions representing long-term capital
gains, if any, will be taxable to you as long-term capital gains no matter
how long you have held your shares. Information on the tax status of
dividends and distributions is provided annually.
STATE AND LOCAL TAXES
State laws differ on this issue, and you are urged to consult with your tax
adviser regarding the status of your account under state and local tax laws,
including treatment of distributions as income or return of capital.
EFFECT OF BANKING LAWS
M&I Corp. believes, based on the advice of its counsel, that M&I Investment
Management Corp. may perform the services contemplated by the investment
advisory agreement with the Corporation without violation of the Glass-
Steagall Act or other applicable banking laws or regulations. Changes in
either federal or state statutes and regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, as well as further
judicial or administrative decisions or interpretations of such present or
future statutes and regulations, could prevent M&I Investment Management
Corp. or M&I Corp. from continuing to perform all or a part of the above
services for its customers and/or the Fund. In such event, the Directors
would consider alternative advisers and means of continuing available
investment services.
ADDRESSES
MARSHALL SMALL-CAP STOCK FUND
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Distributor
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Investment Adviser
M&I Investment Management Corp.
1000 North Water Street
Milwaukee, Wisconsin 53202
Custodian
Marshall & Ilsley Trust Company
1000 North Water Street
Milwaukee, Wisconsin 53202
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Shareholder Servicing Agent
Marshall Funds Investor Services
P.O. Box 1348
Milwaukee, Wisconsin 53201-1348
OR
1000 North Water Street
Milwaukee, Wisconsin 53202-1348
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
Cusip:
G01756-01(6/96)
MARSHALL SMALL-CAP STOCK FUND
(A PORTFOLIO OF MARSHALL FUNDS, INC.)
CLASS A SHARES
CLASS B SHARES
STATEMENT OF ADDITIONAL INFORMATION
September 1, 1996
This Statement of Additional Information should be read with the
prospectus, dated September 1, 1996, for Class A Shares and Class B Shares
of Marshall Small-Cap Stock Fund ("Fund").
This Statement is not a prospectus itself. You may request a copy of a
prospectus or a paper copy of this Statement of Additional Information, if
you have received it electronically, free of charge, by writing or calling
Marshall Funds Investor Services at 414-287-8500 or 1-800-326-8560 or M&I
Brokerage Services, Inc., or any M&I Bank.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
[logo]
FEDERATED SECURITIES CORP.
Distributor
A SUBSIDIARY OF FEDERATED INVESTORS
Cusip
-------
G01756-02(6/96)
POLICIES AND ACCEPTABLE INVESTMENTS
INVESTMENT LIMITATIONS
FUNDAMENTAL LIMITATIONS
NON-FUNDAMENTAL LIMITATIONS
MARSHALL FUNDS, INC. MANAGEMENT
OFFICERS AND DIRECTORS
FUND OWNERSHIP
DIRECTORS' COMPENSATION
INVESTMENT ADVISORY SERVICES
ADVISER TO THE FUND
ADVISORY FEES
STATE EXPENSE LIMITATIONS
BROKERAGE TRANSACTIONS
DISTRIBUTION PLAN
DETERMINING MARKET VALUE
MARKET VALUES
REDEMPTION IN KIND
BANKING LAWS
TAX STATUS
THE FUNDS' TAX STATUS
SHAREHOLDERS' TAX STATUS
CAPITAL GAINS
TOTAL RETURN
YIELD
PERFORMANCE COMPARISONS
APPENDIX
THIS STATEMENT CONTAINS ADDITIONAL INFORMATION ABOUT THE MARSHALL FUNDS, INC.
(THE "CORPORATION") AND ITS MARSHALL SMALL-CAP STOCK FUND. THIS STATEMENT
USES THE SAME TERMS AS DEFINED IN THE PROSPECTUS.
POLICIES AND ACCEPTABLE INVESTMENTS
ASSET-BACKED SECURITIES. Asset-Backed Securities are bonds or notes backed
by loans or accounts receivable originated by banks, or other credit
providers or financial institutions. Asset-Backed Securities may be pooled
and then divided into classes of securities, known as tranches, and resold.
Each tranche has a specified interest rate and maturity. The cash flows from
the underlying pool of Asset-Backed Securities are applied first to pay
interest and then to retire securities. All principal payments are directed
first to the shortest-maturity tranche. When those securities are completely
retired, all principal payments are then directed to the next-shortest-
maturity tranche. This process continues until all of the tranches have been
completely retired.
CONVERTIBLE SECURITIES. When owned as part of a unit along with warrants,
which entitle the holder to buy the common stock, convertible securities
function as convertible bonds, except that the warrants generally will expire
before the bonds' maturity. The Fund will exchange or convert the convertible
securities held in its portfolio into shares of the underlying common stocks
when, in the Adviser's opinion, the investment characteristics of the
underlying common shares will assist the Fund in achieving its investment
objective. Otherwise, the Fund will hold or trade the convertible
securities. In evaluating these matters with respect to a particular
convertible security, the Fund's Adviser considers numerous factors,
including the economic and political outlook, the value of the security
relative to other investment alternatives, trends in the determinants of the
issuer's profits, and the issuer's management capability and practices.
FUTURES AND OPTIONS TRANSACTIONS. As a means of reducing fluctuations in the
net asset value of shares of the Fund, the Fund may attempt to hedge all or a
portion of its portfolio by buying and selling futures contracts and options
on futures contracts, and buying put and call options on portfolio securities
and securities indices. The Fund may also write covered put and call options
on portfolio securities to attempt to increase its current income or to hedge
a portion of its portfolio investments. The Fund will maintain its positions
in securities, option rights, and segregated cash subject to puts and calls
until the options are exercised, closed, or have expired. An option position
on futures contracts may be closed out over-the-counter or on a nationally
recognized exchange which provides a secondary market for options of the same
series.
FUTURES CONTRACTS. The Fund may purchase and sell financial futures
contracts to hedge against the effects of changes in the value of
portfolio securities due to anticipated changes in interest rates and
market conditions without necessarily buying or selling the securities.
Although some financial futures contracts call for making or taking
delivery of the underlying securities, in most cases these obligations
are closed out before the settlement date. The closing of a contractual
obligation is accomplished by purchasing or selling an identical
offsetting futures contract. Other financial futures contract by their
terms call for cash settlements.
The Fund also may purchase and sell stock index futures contracts with
respect to any stock index traded on a recognized stock exchange or board
of trade to hedge against changes in prices. Stock index futures
contracts are based on indices that reflect the market value of common
stock of the firms included in the indices. An index futures contract is
an agreement pursuant to which two parties agree to take or make delivery
of an amount of cash equal to the differences between the value of the
index at the close of the last trading day of the contract and the price
at which the index contract was originally written. No physical delivery
of the underlying securities in the index is made. Instead, settlement in
cash must occur upon the termination of the contract, with the settlement
being the difference between the contract price and the actual level of
the stock index at the expiration of the contract.
A futures contract is a firm commitment by two parties: the seller who
agrees to make delivery of the specific type of security called for in
the contract ("going short") and the buyer who agrees to take delivery of
the security ("going long") at a certain time in the future. For example,
in the fixed income securities market, prices move inversely to interest
rates. A rise in rates means a drop in price. Conversely, a drop in rates
means a rise in price. In order to hedge its holdings of fixed income
securities against a rise in market interest rates, the Fund could enter
into contracts to deliver securities at a predetermined price (i.e., "go
short") to protect itself against the possibility that the prices of its
fixed income securities may decline during the Fund's anticipated holding
period. The Fund would "go long" (agree to purchase securities in the
future at a predetermined price) to hedge against a decline in market
interest rates.
"MARGIN" IN FUTURES TRANSACTIONS. Unlike the purchase or sale of a
security, the Fund does not pay or receive money upon the purchase or
sale of a futures contract. Rather, the Fund is required to deposit an
amount of "initial margin" in cash, U.S. government securities or highly-
liquid debt securities with its custodian (or the broker, if legally
permitted). The nature of initial margin in futures transactions is
different from that of margin in securities transactions in that initial
margin in futures transactions does not involve the borrowing of funds by
the Fund to finance the transactions. Initial margin is in the nature of
a performance bond or good faith deposit on the contract which is
returned to the Fund upon termination of the futures contract, assuming
all contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund
pays or receives cash, called "variation margin," equal to the daily
change in value of the futures contract. This process is known as
"marking to market." Variation margin does not represent a borrowing or
loan by the Fund but is instead settlement between the Fund and the
broker of the amount one would owe the other if the futures contract
expired. In computing its daily net asset value, the Fund will mark to
market its open futures positions. The Fund is also required to deposit
and maintain margin when it writes call options on futures contracts.
When the Fund purchases futures contracts, an amount of cash and cash
equivalents, equal to the underlying commodity value of the futures
contracts (less any related margin deposits), will be deposited in a
segregated account with the Fund's custodian (or the broker, if legally
permitted) to collateralize the position and thereby insure that the use
of such futures contracts is unleveraged.
To the extent required to comply with CFTC Regulation 4.5 and thereby
avoid status as a "commodity pool operator," the Fund will not enter into
a futures contract for other than bona fide hedging purposes, or purchase
an option thereon, if immediately thereafter the initial margin deposits
for futures contracts held by it, plus premiums paid by it for open
options on futures contracts, would exceed 5% of the market value of the
Fund's net assets, after taking into account the unrealized profits and
losses on those contracts it has entered into; and, provided further,
that in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in computing such 5%.
Second, the Fund will not enter into these contracts for speculative
purposes; rather, these transactions are entered into only for bona fide
hedging purposes, or other permissible purposes pursuant to regulations
promulgated by the CFTC. Third, since the Fund does not constitute a
commodity pool, it will not market itself as such, nor serve as a vehicle
for trading in the commodities futures or commodity options markets.
Finally, because the Fund will submit to the CFTC special calls for
information, the Fund will not register as a commodities pool operator.
PUT OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS. A Fund may
purchase listed put options on financial and stock index futures
contracts to protect portfolio securities against decreases in value
resulting from market factors, such as an anticipated increase in
interest rates or decrease in stock prices. Unlike entering directly into
a futures contract, which requires the purchaser to buy a financial
instrument on a set date at a specified price, the purchase of a put
option on a futures contract entitles (but does not obligate) its
purchaser to decide on or before a future date whether to assume a short
position at the specified price.
Generally, if the hedged portfolio securities decrease in value during
the term of an option, the related futures contracts will also decrease
in value and the option will increase in value. In such an event, the
Fund will normally close out its option by selling an identical option.
If the hedge is successful, the proceeds received by the Fund upon the
sale of the second option will be large enough to offset both the premium
paid by the Fund for the original option plus the decrease in value of
the hedged securities.
Alternatively, the Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures contract
of the type underlying the option (for a price less than the strike price
of the option) and exercise the option. The Fund would then deliver the
futures contract in return for payment of the strike price. If the Fund
neither closes out nor exercises an option, the option will expire on the
date provided in the option contract, and only the premium paid for the
contract will be lost.
The Fund may write listed put options on financial or stock index futures
contracts to hedge its portfolio against a decrease in market interest
rates or increase in stock prices. The Fund will use these transactions
to attempt to protect its ability to purchase portfolio securities in the
future at price levels existing at the time it enters into the
transaction. When the Fund writes (sells) a put on a futures contract,
it receives a cash premium in exchange for granting to the purchaser of
the put the right to receive from the Fund, at the strike price, a short
position in such futures contract (the Fund undertakes the obligation to
assume a long futures position), even though the strike price upon
exercise of the option is greater than the value of the futures position
received by such holder. As market interest rates decrease or stock
prices increase, the market price of the underlying futures contract
normally increases. As the market value of the underlying futures
contract increases, the buyer of the put option has less reason to
exercise the put because the buyer can sell the same futures contract at
a higher price in the market. If the value of the underlying futures
position is not such that exercise of the option would be profitable to
the option holder, the option will generally expire without being
exercised. The premium received by the Fund can then be used to offset
the higher prices of portfolio securities to be purchased in the future.
It will generally be the policy of the Fund, in order to avoid the
exercise of an option sold by it, to cancel its obligation under the
option by entering into a closing purchase transaction, if available,
unless it is determined to be in the Fund's interest to deliver the
underlying futures position. A closing purchase transaction consists of
the purchase by the Fund of an option having the same term as the option
sold by the Fund, and has the effect of canceling the Fund's position as
a seller. The premium which the Fund will pay in executing a closing
purchase transaction may be higher than the premium received when the
option was sold, depending in large part upon the relative price of the
underlying futures position at the time of each transaction. If the
hedge is successful, the cost of buying the second option will be less
than the premium received by the Fund for the initial option.
CALL OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS. In addition
to purchasing put options on futures, the Fund may write (sell) listed
and over-the-counter call options on financial and stock index futures
contracts to hedge its portfolio. When the Fund writes a call option on a
futures contract, it is undertaking the obligation of assuming a short
futures position (selling a futures contract) at the fixed strike price
at any time during the life of the option if the option is exercised. As
stock prices fall or market interest rates rise, causing the prices of
futures to go down, the Fund's obligation under a call option on a future
(to sell a futures contract) costs less to fulfill, causing the value of
the Fund's call option position to increase. In other words, as the
underlying futures price goes down below the strike price, the buyer of
the option has no reason to exercise the call, so that the Fund keeps the
premium received for the option. This premium can substantially offset
the drop in value of the Fund's portfolio securities.
Prior to the expiration of a call written by the Fund, or exercise of it
by the buyer, the Fund may close out the option by buying an identical
option. If the hedge is successful, the cost of the second option will be
less than the premium received by the Fund for the initial option. The
net premium income of the Fund will then substantially offset the
decrease in value of the hedged securities.
An additional way in which the Fund may hedge against decreases in market
interest rates or increases in stock prices is to buy a listed call
option on a financial or stock index futures contract. The Fund will use
these transactions to attempt to protect its ability to purchase
portfolio securities in the future at price levels existing at the time
it enters into the transaction. When the Fund purchases a call on a
financial futures contract, it receives in exchange for the payment of a
cash premium the right, but not the obligation, to enter into the
underlying futures contract at a strike price determined at the time the
call was purchased, regardless of the comparative market value of such
futures position at the time the option is exercised. The holder of a
call option has the right to receive a long (or buyer's) position in the
underlying futures contract. As market interest rates fall or stock
prices increase, the value of the underlying futures contract will
normally increase, resulting in an increase in value of the Fund's option
position. When the market price of the underlying futures contract
increases above the strike price plus premium paid, the Fund could
exercise its option and buy the futures contract below market price.
Prior to the exercise or expiration of the call option, the Fund could
sell an identical call option and close out its position. If the premium
received upon selling the offsetting call is greater than the premium
originally paid, the Fund has completed a successful hedge.
LIMITATION ON OPEN FUTURES POSITIONS. The Fund will not maintain open
positions in futures contracts it has sold or call options it has written
on futures contracts if, in the aggregate, the value of the open
positions (marked to market) exceeds the current market value of its
securities portfolio plus or minus the unrealized gain or loss on those
open positions, adjusted for the correlation of volatility between the
hedged securities and the futures contracts. If this limitation is
exceeded at any time, the Fund will take prompt action to close out a
sufficient number of open contracts to bring its open futures and options
positions within this limitation.
PURCHASING PUT AND CALL OPTIONS ON SECURITIES. The Fund may purchase put
options on portfolio securities to protect against price movements in the
Fund's portfolio securities. A put option gives the Fund, in return for a
premium, the right to sell the underlying security to the writer (seller)
at a specified price during the term of the option. The Fund may
purchase call options on securities acceptable for purchase to protect
against price movements by "locking in" on a purchase price for the
underlying security. A call option gives the Fund, in return for a
premium, the right to buy the underlying security from the seller at a
specified price during the term of the option.
WRITING COVERED CALL AND PUT OPTIONS ON PORTFOLIO SECURITIES. The Fund
may also write covered call and put options to generate income and
thereby protect against price movements in the Fund's portfolio
securities. As writer of a call option, the Fund has the obligation upon
exercise of the option during the option period to deliver the underlying
security upon payment of the exercise price. The Fund may only sell call
options either on securities held in its portfolio or on securities which
it has the right to obtain without payment of further consideration (or
has segregated cash or U.S. government securities in the amount of any
additional consideration). As a writer of a put option, the Fund has the
obligation to purchase a security from the purchaser of the option upon
the exercise of the option. In the case of put options, the Fund will
segregate cash or U.S. Treasury obligations with a value equal to or
greater than the exercise price of the underlying securities.
STOCK INDEX OPTIONS. The Fund may purchase or sell put or call options
on stock indices listed on national securities exchanges or traded in the
over-the-counter market. A stock index fluctuates with changes in the
market values of the stocks included in the index. Upon the exercise of
the option, the holder of a call option has the right to receive, and the
writer of a put option has the obligation to deliver, a cash payment
equal to the difference between the closing price of the index and the
exercise price of the option. The effectiveness of purchasing stock
index options will depend upon the extent to which price movements in the
Fund's portfolio correlate with price movements of the stock index
selected. Because the value of an index option depends upon movements in
the level of the index rather than the price of a particular stock,
whether the Fund will realize a gain or loss from the purchase of options
on an index depends upon movements in the level of stock prices in the
stock market generally or, in the case of certain indices, in an industry
or market segment, rather than movements in the price of a particular
stock. Accordingly, successful use by the Fund of options on stock
indices will be subject to the ability of the Fund's Adviser to predict
correctly movements in the directions of the stock market generally or of
a particular industry. This requires different skills and techniques
than predicting changes in the price of individual stocks.
OVER-THE-COUNTER OPTIONS. The Fund may generally purchase and write
over-the-counter options on portfolio securities or in securities indices
in negotiated transactions with the buyers or writers of the options when
options on the portfolio securities held by the Fund or when the
securities indices are not traded on an exchange. The Fund purchases and
writes options only with investment dealers and other financial
institutions (such as commercial banks or savings and loan associations)
deemed creditworthy by the Fund's Adviser.
Over-the-counter options are two-party contracts with price and terms
negotiated between buyer and seller. In contrast, exchange-traded
options are third-party contracts with standardized strike prices and
expiration dates and are purchased from a clearing corporation.
Exchange-traded options have a continuous liquid market while over-the-
counter options may not.
RISKS. When the Fund uses futures and options on futures as hedging
devices, there is a risk that the prices of the securities subject to the
futures contracts may not correlate perfectly with the prices of the
securities in the Fund's portfolio. This may cause the futures contract
and any related options to react differently to market changes than the
portfolio securities. In addition, the Fund's Adviser could be incorrect
in its expectations about the direction or extent of market factors such
as stock price movements. In these events, the Fund may lose money on
the futures contract or option.
It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the Fund's
Adviser will consider liquidity before entering into these transactions,
there is no assurance that a liquid secondary market on an exchange or
otherwise will exist for any particular futures contract or option at any
particular time. The Fund's ability to establish and close out futures
and options positions depends on this secondary market. The inability to
close these positions could have an adverse effect on the Fund's ability
to hedge its portfolio.
To minimize risks, the Fund may not purchase or sell futures contracts or
related options if immediately thereafter the sum of the amount of margin
deposits on the Fund's existing futures positions and premiums paid for
related options would exceed 5% of the market value of the Fund's total
assets after taking into account the unrealized profits and losses on
those contracts it has entered into; and, provided further, that in the
case of an option that is in-the-money at the time of purchase, the in-
the-money amount may be excluded in computing such 5%. When the Fund
purchases futures contracts, an amount of cash and cash equivalents,
equal to the underlying commodity value of the futures contracts (less
any related margin deposits), will be deposited in a segregated account
with the Fund's custodian (or the broker, if legally permitted) to
collateralize the position and thereby insure that the use of such
futures contract is unleveraged. When the Fund sells futures contracts,
it will either own or have the right to receive the underlying future or
security, or will make deposits to collateralize the position as
discussed above.
LENDING OF PORTFOLIO SECURITIES. The collateral received when the Fund lends
portfolio securities must be valued daily and, should the market value of the
loaned securities increase, the borrower must furnish additional collateral
to the Fund. During the time portfolio securities are on loan, the borrower
pays the Fund any dividends or interest paid on such securities. Loans are
subject to termination at the option of the Fund or the borrower. The Fund
may pay reasonable administrative and custodial fees in connection with a
loan and may pay a negotiated portion of the interest earned on the cash or
equivalent collateral to the borrower or placing broker. If the Fund does not
have the right to vote securities on loan, it would terminate the loan and
regain the right to vote if that were considered important with respect to
the investment.
MORTGAGE-BACKED SECURITIES. The following is additional information about
Mortgage-Backed Securities.
INTEREST ONLY AND PRINCIPAL ONLY INVESTMENTS. Some of the securities
purchased by a Fund may represent an interest solely in the principal
repayments or solely in the interest payments on Mortgage-Backed
Securities (stripped mortgage-backed securities or "SMBSs"). SMBSs are
usually structured with two classes and receive different proportions of
the interest and principal distributions on the pool of underlying
mortgage-backed securities. Due to the possibility of prepayments on the
underlying mortgages, SMBSs may be more interest-rate sensitive than
other securities purchased by the Funds. If prevailing interest rates
fall below the level at which SMBSs were issued, there may be substantial
prepayments on the underlying mortgages, leading to the relatively early
prepayments of principal-only SMBSs (the principal-only or "PO" class)
and a reduction in the amount of payments made to holders of interest-
only SMBSs (the interest-only or "IO" class). Because the yield to
maturity of an IO class is extremely sensitive to the rate of principal
payments (including prepayments) on the related underlying mortgage-
backed securities, it is possible that the Fund might not recover its
original investment on interest-only SMBSs if there are substantial
prepayments on the underlying mortgages. The Funds' inability to fully
recoup their investments in these securities as a result of a rapid rate
of principal prepayments may occur even if the securities are rated by an
NRSRO. Therefore, interest-only SMBSs generally increase in value as
interest rates rise and decrease in value as interest rates fall, counter
to changes in value experienced by most fixed income securities.
REPURCHASE AGREEMENTS. The Fund requires its custodian to take possession of
the securities subject to repurchase agreements and these securities are
marked to market daily. To the extent that the original seller does not
repurchase the securities from the Fund, the Fund could receive less than the
repurchase price on any sale of such securities. In the event that such a
defaulting seller files for bankruptcy or becomes insolvent, disposition of
such securities by the Fund might be delayed pending court action. The Fund
believes that, under the regular procedures normally in effect for custody of
the portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions, such as
broker/dealers, which are deemed by a Fund's Adviser to be creditworthy
pursuant to guidelines established by the Directors.
RESTRICTED SECURITIES. The Fund may invest in commercial paper issued in
reliance on the exemption from restriction afforded by Section 4(2) of the
Securities Act of 1933. Section 4(2) commercial paper is restricted as to
disposition under federal securities law and is generally sold to
institutional investors, such as the Fund, who agree that they are purchasing
the paper for investment purposes and not with a view to public distribution.
Any resale by the purchaser must be in an exempt transaction. Section 4(2)
commercial paper is normally resold to other institutional investors like the
Fund through or with the assistance of the issuer or investment dealers who
make a market in Section 4(2) commercial paper, thus providing liquidity.
The Fund believes that Section 4(2) commercial paper and possibly certain
other restricted securities which meet the criteria for liquidity established
by the Directors are quite liquid. The Fund intends, therefore, to treat the
restricted securities which meet the criteria for liquidity established by
the Directors, including Section 4(2) commercial paper (as determined by a
Fund's Adviser), as liquid and not subject to the investment limitation
applicable to illiquid securities. In addition, because Section 4(2)
commercial paper is liquid, the Fund does not intend to subject such paper to
the limitation applicable to restricted securities.
REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements. This transaction is similar to borrowing cash. In a reverse
repurchase agreement, the Fund transfers possession of a portfolio instrument
to another person, such as a financial institution, broker, or dealer, in
return for a percentage of the instrument's market value in cash, and agrees
that on a stipulated date in the future the Fund will repurchase the
portfolio instrument by remitting the original consideration plus interest at
an agreed upon rate. The use of reverse repurchase agreements may enable the
Fund to avoid selling portfolio instruments at a time when a sale may be
deemed to be disadvantageous, but the ability to enter into reverse
repurchase agreements does not ensure that the Fund will be able to avoid
selling portfolio instruments at a disadvantageous time. When effecting
reverse repurchase agreements, liquid assets of the Fund, in a dollar amount
sufficient to make payment for the obligations to be purchased, are
segregated at the trade date. These securities are marked to market daily and
maintained until the transaction is settled.
SWAP TRANSACTIONS. In a standard swap transaction, two parties agree to
exchange the returns (or differentials in rates of return) earned or realized
on particular predetermined investments or instruments, which may be adjusted
for an interest factor. The gross returns to be exchanged or "swapped"
between the parties are generally calculated with respect to a "notional
amount," which is the return on or increase in value of a particular dollar
amount invested at a particular interest rate, or in a "basket" of securities
representing a particular index. For example, a $10 million LIBOR swap would
require one party to pay the equivalent of the London Interbank Offer Rate on
$10 million principal amount in exchange for the right to receive the
equivalent of a fixed rate of interest on $10 million principal amount.
Neither party to the swap would actually advance $10 million to the other.
The Fund expects to enter into swap transactions primarily to hedge against
changes in the price of other portfolio securities. For example, the Fund may
hedge against changes in the market value of a fixed rate note by entering
into a concurrent swap that requires the Fund to pay the same or a lower
fixed rate of interest on a notional principal amount equal to the principal
amount of the note in exchange for a variable rate of interest based on a
market index. Interest accrued on the hedged note would then equal or exceed
the Fund's obligations under the swap, while changes in the market value of
the swap would largely offset any changes in the market value of the note.
The Fund may also enter into swaps and caps to preserve or enhance a return
or spread on a portfolio security. The Fund does not intend to use these
transactions in a speculative manner.
The Fund will usually enter into swaps on a net basis (i.e., the two payment
streams are netted out), with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. The net amount of the excess, if
any, of the Fund's obligations over its entitlements with respect to each
interest rate swap will be accrued on a daily basis, and the Fund will
segregate liquid assets in an aggregate net asset value at least equal to the
accrued excess, if any, on each business day. If the Fund enters into a swap
on other than a net basis, the Fund will segregate liquid assets in the full
amount accrued on a daily basis of the Fund's obligations with respect to the
swap. If there is a default by the other party to such a transaction, the
Fund will have contractual remedies pursuant to the agreements related to the
transaction.
The swap market has grown substantially in recent years with a large number
of banks and investment banking firms acting both as principals and agents
utilizing standardized swap documentation. The Adviser has determined that,
as a result, the swap market has become relatively liquid. Interest rate caps
and floors are more recent innovations for which standardized documentation
has not yet been developed and, accordingly, they are less liquid than
other swaps. To the extent swaps, caps or floors are determined by the
investment adviser to be illiquid, they will be included in the Fund's
limitation on investments in illiquid securities. To the extent the Fund
sells caps and floors, it will maintain in a segregated account cash and/or
U.S. government securities having an aggregate net asset value at least equal
to the full amount, accrued on a daily basis, of the Fund's obligations with
respect to caps and floors.
The use of swaps is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
securities transactions. If the Adviser is incorrect in its forecasts of
market values, interest rates and other applicable factors, the investment
performance of the Fund would diminish compared with what it would have been
if these investment techniques were not utilized. Moreover, even if the
Adviser is correct in its forecasts, there is a risk that the swap position
may correlate imperfectly with the price of the portfolio security being
hedged.
Swap transactions do not involve the delivery of securities or other
underlying assets or principal. Accordingly, the risk of loss with respect to
a default on an interest rate swap is limited to the net asset value of the
swap together with the net amount of interest payments owed to the Fund by
the defaulting party. A default on a portfolio security hedged by an interest
rate swap would also expose the Fund to the risk of having to cover its net
obligations under the swap with income from other portfolio securities.
WARRANTS. The Fund may purchase warrants. Warrants are basically options to
purchase common stock at a specific price (usually at a premium above the
market value of the optioned common stock at issuance) valid for a specific
period of time. Warrants may have a life ranging from less than a year to
twenty years or may be perpetual. However, most warrants have expiration
dates after which they are worthless. In addition, if the market price of the
common stock does not exceed the warrant's exercise price during the life of
the warrant, the warrant will expire as worthless. Warrants have no voting
rights, pay no dividends, and have no rights with respect to the assets of
the corporation issuing them. The percentage increase or decrease in the
market price of the warrant may tend to be greater than the percentage
increase or decrease in the market price of the underlying common stock.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. These transactions are made
to secure what is considered to be an advantageous price or yield for the
Funds. Settlement dates may be a month or more after entering into these
transactions, and the market values of the securities purchased may vary from
the purchase prices. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of a Fund sufficient
to make payment for the securities to be purchased are segregated on a Fund's
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled.
INVESTMENT LIMITATIONS
FUNDAMENTAL LIMITATIONS
The following investment limitations are fundamental and cannot be changed
without shareholder approval.
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin, but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of portfolio securities. A deposit or
payment by a Fund of initial or variation margin in connection with futures
contracts, forward contracts or related options transactions is not
considered the purchase of a security on margin.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money, directly or through reverse repurchase agreements, in amounts up to
one-third of the value of its total assets including the amounts borrowed;
and except to the extent that a Fund is permitted to enter into futures
contracts, options or forward contracts. The Fund will not borrow money or
engage in reverse repurchase agreements for investment leverage, but rather
as a temporary, extraordinary, or emergency measure or to facilitate
management of its portfolio by enabling the Fund to meet redemption requests
when the liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while any
borrowings in excess of 5% of its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, the Fund may pledge assets
having a market value not exceeding the lesser of the dollar amounts borrowed
or 15% of the value of its total assets at the time of the pledge. For
purposes of this limitation, the following are not deemed to be pledges:
margin deposits for the purchase and sale of futures contracts and related
options; and segregation of collateral arrangements made in connection with
options activities, forward contracts or the purchase of securities on a
when-issued basis.
LENDING CASH OR SECURITIES
The Fund will not lend any of their assets except portfolio securities. Loans
may not exceed one-third of the value of the Fund's total assets. This shall
not prevent the Fund from purchasing or holding U.S. government obligations,
money market instruments, variable rate demand notes, bonds, debentures,
notes, certificates of indebtedness, or other debt securities, entering into
repurchase agreements, or engaging in other transactions where permitted by
the Fund's investment objective, policies, and limitations.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts. However, the Fund may purchase and sell futures
contracts and related options.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited partnership
interests, although the Fund may invest in the securities of companies whose
business involves the purchase or sale of real estate or in securities which
are secured by real estate or which represent interests in real estate.
DIVERSIFICATION OF INVESTMENTS
With respect to securities comprising 75% of the value of its total assets,
the Fund will not purchase securities issued by any one issuer (other than
cash, cash items or securities issued or guaranteed by the government of the
United States or its agencies or instrumentalities and repurchase agreements
collateralized by such securities) if as a result more than 5% of the value
of its total assets would be invested in the securities of that issuer or if
it would own more than 10% of the outstanding voting securities of such
issuer.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of its total assets in any one industry.
However, investing in U.S. government securities shall not be considered
investments in any one industry.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of restricted securities which the Fund may purchase pursuant
to its investment objective, policies and limitations.
NON-FUNDAMENTAL LIMITATIONS
The following investment limitations are non-fundamental and, therefore, may
be changed by the Directors without shareholder approval. Shareholders will
be notified before any material change in these limitations becomes
effective.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements providing for settlement
in more than seven days after notice, non-negotiable fixed time deposits with
maturities over seven days, over-the-counter options, guaranteed investment
contracts, and certain securities not determined by the Directors to be
liquid.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers which have records of less than three years of
continuous operations, including the operation of any predecessor.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND DIRECTORS OF
THE CORPORATION
The Fund will not purchase or retain the securities of any issuer if the
Officers and Directors of the Corporation or of the Fund's Adviser, owning
individually more than 1/2 of 1% of the issuer's securities, together own
more than 5% of the issuer's securities.
INVESTING IN MINERALS
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, except they may purchase the
securities of issuers which invest in or sponsor such programs.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not purchase securities of a company for the purpose of
exercising control or management.
INVESTING IN WARRANTS
The Fund may invest in warrants, but it will not invest more than 5% of its
net assets in warrants, including those acquired in units or attached to
other securities. To comply with certain state restrictions, the Fund will
limit its investment in such warrants not listed on the New York or American
Stock Exchanges to 2% of its net assets. (If state restrictions change, this
latter restriction may be revised without notice to shareholders.) For
purposes of this investment restriction, warrants will be valued at the lower
of cost or market, except that warrants acquired by the Fund in units with or
attached to securities may be deemed to be without value.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will limit its investment in other investment companies to no more
than 3% of the total outstanding voting stock of any investment company, will
invest no more than 5% of total assets in any one investment company, and
will invest no more than 10% of its total assets in investment companies in
general. The Fund will purchase securities of closed-end investment
companies only in open market transactions involving only customary broker's
commissions. However, these limitations are not applicable if the securities
are acquired in a merger, consolidation, reorganization, or acquisition of
assets. The Adviser will waive its investment advisory fee on assets
invested in securities of open-end investment companies. In accordance with
certain state restrictions, each Fund will limits its investments in
securities of other investment companies to those with sales loads of less
than 1.00% of the offering price of such securities.
INVESTING IN OPTIONS
Except for bona fide hedging purposes, the Fund may not invest more than 5%
of the value of its net assets in the sum of (a) premiums on open option
positions on futures contracts, plus (b) initial margin deposits on futures
contracts.
The Fund will not purchase put options or write call options on securities
unless the securities are held in the Fund's portfolio or unless the Fund is
entitled to them in deliverable form without further payment or has
segregated cash in the amount of any further payment.
The Fund will not write call options in excess of 50% of the value of its net
assets.
Except with respect to borrowing money, if a percentage limitation is adhered
to at the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a
violation of such restriction. For purposes of its policies and limitations,
the Fund considers instruments (such as certificates of deposit and demand
and time deposits) issued by a U.S. branch of a domestic bank or savings and
loan having capital, surplus, and undivided profits in excess of $100,000,000
at the time of investment to be "cash items."
In order to permit the sale of the Fund's shares in certain states, the Fund
may make commitments more restrictive than the investment limitations
described above. If state requirements change, these restrictions may be
changed without notice to shareholders. In this regard, to comply with
certain state restrictions, the Fund will not invest more than 5% of its
total assets in securities subject to restrictions on resale under the
Securities Act of 1933, except for commercial paper issued under Section 4(2)
of the Securities Act of 1933 and certain other restricted securities
(including securities subject to restrictions on resale under Rule 144A of
the Securities Exchange Act of 1934) which meet the criteria for liquidity as
established by the Directors. If state requirements change, these
restrictions may be changed without notice to shareholders.
MARSHALL FUNDS, INC. MANAGEMENT
The Corporation was established as a Wisconsin corporation under the laws of
the State of Wisconsin on July 31, 1992. The Corporation's authorized
capital consists of 50,000,000,000 shares of common stock with a par value of
$.0001 per share. Shareholders of each Fund are entitled: (i) to one vote
per full share of Common Stock; (ii) to such distributions as may be declared
by the Corporation's Directors out of funds legally available; and (iii) upon
liquidation of the Corporation, to participate ratably in the assets of the
Fund available for distribution. Each share of the Fund gives the
shareholder one vote in the election of Directors and other matters submitted
to shareholders for vote. All shares of each portfolio or class in the
Corporation have equal voting rights, except that only shares of a particular
portfolio or class are entitled to vote on matters affecting that portfolio
or class. There are no conversion or sinking fund provisions applicable to
the shares, and the holders have no preemptive rights and may not cumulate
their votes in the election of Directors. Consequently, the holders of more
than 50% of the Corporation's shares of common stock voting for the election
of Directors can elect the entire Board of Directors, and, in such event, the
holders of the Corporation's remaining shares voting for the election of
Directors will not be able to elect any person or persons to the Board of
Directors.
The Wisconsin Business Corporation Law (the "WBCL") permits registered
investment companies, such as the Corporation, to operate without an annual
meeting of shareholders under specified circumstances if an annual meeting is
not required by the Act. The Corporation has adopted the appropriate
provisions in its By-laws and does not anticipate holding an annual meeting
of shareholders to elect Directors unless otherwise required by the Act.
Directors may be removed by the shareholders at a special meeting. A special
meeting of the shareholders may be called by the Directors upon written
request of shareholders owning at least 10% of the Corporation's outstanding
voting shares.
The shares are redeemable and are transferable. All shares issued and sold
by the Corporation will be fully paid and nonassessable except as provided in
WBCL Section 180.0622(2)(b). Fractional shares of common stock entitle the
holder to the same rights as whole shares of common stock except the right to
receive a certificate evidencing such fractional shares.
The definitions of the terms "series" and "class" in the WBCL differ from the
meanings assigned to those terms in the prospectus and this Statement of
Additional Information. The Articles of Incorporation of the Corporation
reconcile this inconsistency in terminology, and provide that the prospectus
and Statement of Additional Information may define these terms consistently
with the use of those terms under the Act and the Internal Revenue Code.
OFFICERS AND DIRECTORS
Officers and Directors are listed with their addresses, birth dates,
principal occupations during the past five years, and present positions,
including any affiliation with Marshall & Ilsley Corp., Federated Investors,
Federated Securities Corp., Federated Shareholder Services, Federated
Shareholder Services Company, and Federated Services Company.
Edward C. Gonzales*
Federated Investors Tower
Pittsburgh, PA
October 22, 1930
Chairman, Director and Treasurer
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research Ltd.;
Executive Vice President and Director, Federated Securities Corp.; Trustee,
Federated Shareholder Services Company; Trustee or Director, Executive Vice
President, Vice President and/or Treasurer of certain investment companies
advised or distributed by affiliates of Federated Investors.
John DeVincentis
4700 21st Street
Racine, WI 53406
March 27, 1934
Director
Independent Financial Consultant; retired, Senior Vice President of Finance,
In-Sink-Erator Division of Emerson Electric.
Ody J. Fish
547 Progress Drive
Hartland, WI
June 16, 1925
Director
Formerly, Director, Newton Income Fund, Inc. and Newton Growth Fund, Inc.;
Private Investor; formerly President Pal-O-Pak Insulation Company.
Paul E. Hassett
1630 Capital Avenue
Madison, WI
September 4, 1917
Director
Formerly, Director, Newton Income Fund, Inc. and Newton Growth Fund, Inc.;
Retired, formerly President, Wisconsin Manufacturers and Commerce.
James F. Duca, II
1000 N. Water Street
Milwaukee, WI
January 9, 1958
President
Vice President, Marshall & Ilsley Trust Company; Vice President, Marshall &
Ilsley Trust Company of Florida, formerly Secretary, Marshall & Ilsley Trust
Company and Marshall & Ilsley Trust Company of Florida.
Joseph S. Machi
Federated Investors Tower
Pittsburgh, PA
May 22, 1962
Vice President and Assistant Treasurer
Vice President, Federated Administrative Services; Director, The Proprietary
Client Management and Services Group, Federated Investors; Vice President and
Assistant Treasurer of certain funds for which Federated Securities Corp. is
the principal distributor.
Peter J. Germain
Federated Investors Tower
Pittsburgh, PA
September 3, 1959
Secretary
Senior Corporate Counsel, Federated Investors.
* This Director is deemed to be an "interested person" of the Fund or the
Corporation as defined in the Investment Company Act of 1940.
DIRECTORS' COMPENSATION
NAME, AGGREGATE
POSITION WITH COMPENSATION
CORPORATION FROM CORPORATION*#
Edward C. Gonzales,
Chairman, Director, and Treasurer $ -0-
John DeVincentis, $ 11,000
Director
Ody J. Fish, $ 11,000
Director
Paul E. Hassett, $ 11,000
Director
* Information is furnished for the fiscal year ended August 31, 1995. The
Corporation is the only investment company in the Fund Complex.
# The aggregate compensation is provided for the Corporation which is
comprised of eleven portfolios.
INVESTMENT ADVISORY SERVICES
ADVISER TO THE FUND
The Fund's investment adviser is M&I Investment Management Corp. ("Adviser").
The Adviser shall not be liable to the Corporation, the Funds or any
shareholder of the Funds for any losses that may be sustained in the
purchase, holding, or sale of any security, or for anything done or omitted
by it, except acts or omissions involving willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties imposed upon it by its
contract with the Corporation. Because of the internal controls maintained by
the Adviser's affiliates to restrict the flow of non-public information, Fund
investments are typically made without any knowledge of the Adviser or its
affiliates' lending relationships with an issuer.
ADVISORY FEES
For its investment advisory services, the Adviser receives an annual advisory
fee from the Fund, as described in the prospectus.
OTHER SERVICES
ADMINISTRATIVE SERVICES
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. M&I Trust Company, a subsidiary of M&I Corp.,
serves as sub-administrator to the Fund for a fee as described in the
prospectus.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, Pittsburgh, Pennsylvania, through its registered
transfer agent, maintains all necessary shareholder records. For its
services, the transfer agent receives a fee based on the size, type and
number of accounts and transactions made by shareholders. The fee is based
on the level of the Fund's average net assets for the period plus out-of-
pocket expenses.
CUSTODIAN
Marshall & Ilsley Trust Company ("M&I Trust Company"), Milwaukee, Wisconsin,
a subsidiary of Marshall & Ilsley Corp., is custodian for the securities and
cash of the Fund. For its services as custodian, M&I Trust Company receives
an annual fee, payable monthly, based on a percentage of a Fund's average
aggregate daily net assets. M&I Trust Company has entered into agreements
with foreign subcustodians approved by the Directors pursuant to Rule 17f-5
under the Act. The foreign subcustodians may not hold certificates for the
securities in their custody, but instead have book records with domestic and
foreign securities depositories, which in turn have book records with the
transfer agents of the issuers of the securities. Compensation for the
services of the foreign subcustodians is based on a schedule of charges
agreed on from time to time.
INDEPENDENT PUBLIC ACCOUNTANTS
The Independent Public Accountants for the Fund are Arthur Andersen LLP.
BROKERAGE TRANSACTIONS
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund, or to the
Adviser, and may include: advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry
studies; receipt of quotations for portfolio evaluations; and similar
services.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of the
brokerage and research services provided.
Research services provided by brokers and dealers may be used by the Adviser
in advising the Fund and other accounts. To the extent that receipt of these
services may supplant services for which the Adviser or its affiliates might
otherwise have paid, it would tend to reduce their expenses.
Although investment decisions for the Fund are made independently from those
of the other accounts managed by the Adviser, investments of the type the
Fund may make may also be made by those other accounts. When the Fund and
one or more other accounts managed by the Adviser are prepared to invest in,
or desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the Adviser
to be equitable to each. In some cases, this procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained
or disposed of by the Fund. In other cases, however, it is believed that
coordination and the ability to participate in volume transactions will be to
the benefit of the Fund.
DISTRIBUTION PLAN
The Corporation has adopted a plan for the Fund ("Plan Shares") pursuant to
Rule 12b-1 (the "Plan") which was promulgated by the Securities and Exchange
Commission pursuant to the Act. The Plan provides that the Fund's
distributor, Federated Securities Corp., shall act as the distributor of Plan
Shares, and it permits the payment of fees to brokers, dealers and
administrators for distribution and/or administrative services. The Plan is
designed to (i) stimulate brokers, dealers and administrators to provide
distribution and/or administrative support services to the Fund and holders
of Plan Shares. These services are to be provided by a representative who has
knowledge of the shareholder's particular circumstances and goals, and
include, but are not limited to: providing office space, equipment, telephone
facilities, and various personnel, including clerical, supervisory, and
computer, as necessary or beneficial to establish and maintain shareholder
accounts and records; processing purchase and redemption transactions and
automatic investment of client account cash balances; answering routine
client inquiries regarding the Plan Shares; assisting clients in changing
dividend options, account designations, and addresses; and providing such
other services as the Funds reasonably request.
Other benefits which the Fund hopes to achieve through the Plan include, but
are not limited to, the following: (1) an efficient and effective
administrative system; (2) a more efficient use of assets of holders of Plan
Shares by having them rapidly invested in the Funds with a minimum of delay
and administrative detail; and (3) an efficient and reliable records system
for holders of Plan Shares and prompt responses to shareholder requests and
inquiries concerning their accounts.
By adopting the Plan, the Directors expect that the Fund will be able to
achieve a more predictable flow of cash for investment purposes and to meet
redemptions. This will facilitate more efficient portfolio management and
assist the Fund in seeking to achieve their investment objectives. By
identifying potential investors in Plan Shares whose needs are served by the
Funds' objectives and properly servicing these accounts, the Funds may be
able to curb sharp fluctuations in rates of redemptions and sales.
Currently, no fee is being accrued for the Fund].
DETERMINING MARKET VALUE
MARKET VALUES
Market values of portfolio securities of the Fund are determined as follows:
o for domestic equity securities, according to the last reported sales
price on a recognized securities exchange, if available;
o in the absence of recorded sales for domestic equity securities,
according to the mean between the last closing bid and asked prices;
o for domestic bonds and other fixed income securities, at the last sales
price on a national securities exchange if available, otherwise as
determined by an independent pricing service;
o for domestic short-term obligations, according to the mean between bid
and asked price as furnished by an independent pricing service;
o for short-term obligations with remaining maturities of less than 60
days at the time of purchase, at amortized cost, which approximates fair
value; or
o at fair value as determined in good faith by the Directors.
If a security is traded on more than one exchange, the price on the primary
market for that security, as determined by the Adviser, is used. Prices
provided by independent pricing services may be determined without relying
exclusively on quoted prices and may reflect institutional trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics, and other market data.
The Fund will value futures contracts, and options on stocks, stock indices
and futures contracts at their market values established by the exchanges at
the close of option trading on such exchanges unless the Directors determine
in good faith that another method of valuing these positions is necessary.
REDEMPTION IN KIND
Although the Corporation intends to redeem shares in cash, it reserves the
right under certain circumstances to pay the redemption price in whole or in
part by a distribution of securities from a Fund's portfolio. To the extent
available, such securities will be readily marketable.
Redemption in kind will be made in conformity with applicable Securities and
Exchange Commission rules, taking such securities at the same value employed
in determining net asset value and selecting the securities in a manner the
Directors determine to be fair and equitable.
The Corporation has elected to be governed by Rule 18f-1 under the Act, which
obligates the Corporation to redeem shares for any one shareholder in cash
only up to the lesser of $250,000 or 1% of a Fund's net asset value during
any 90-day period.
Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving their securities and selling them before
their maturity could receive less than the redemption value of their
securities and could incur transaction costs.
BANKING LAWS
Banking laws and regulations presently prohibit a bank holding company
registered under the federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing, controlling or
distributing the shares of a registered, open-end management investment
company continuously engaged in the issuance of its shares, and prohibit
banks generally from issuing, underwriting, or distributing securities.
However, such banking laws and regulations do not prohibit such a holding
company, affiliate, or banks generally from acting as investment adviser,
transfer agent or custodian to such an investment company or from purchasing
shares of such a company as agent for and upon the order of such a customer.
M&I Corp. is subject to such banking laws and regulations.
M&I Corp. believes, based on the advice of its counsel, that M&I Investment
Management Corp. may perform the services contemplated by the investment
advisory agreement with the Corporation without violation of the Glass-
Steagall Act or other applicable banking laws or regulations. Changes in
either federal or state statutes and regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, as well as further
judicial or administrative decisions or interpretations of such present or
future statutes and regulations, could prevent M&I Investment Management
Corp. or M&I Corp. from continuing to perform all or a part of the services
described in the prospectus for its customers and/or the Fund. If M&I
Investment Management Corp. and M&I Corp. were prohibited from engaging in
these activities, the Directors would consider alternative advisers and means
of continuing available investment services. In such event, changes in the
operation of the Fund may occur, including possible termination of any
automatic or other Fund share investment and redemption services then being
provided by M&I Investment Management Corp. and M&I Brokerage Services or
MFIS. It is not expected that existing shareholders would suffer any adverse
financial consequences if another adviser with equivalent abilities to M&I
Investment Management Corp. is found as a result of any of these occurrences.
State securities laws governing the ability of depository institutions to act
as underwriters or distributors of securities may differ from interpretations
given to the Glass-Steagall Act and, therefore, banks and financial
institutions may be required to register as dealers pursuant to state law.
TAX STATUS
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because the Fund expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, each Fund must,
among other requirements:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o derive less than 30% of its gross income from the sale of securities
held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
There are tax uncertainties with respect to whether increasing rate
securities will be treated as having an original issue discount. If it is
determined that the increasing rate securities have original issue discount,
a holder will be required to include as income in each taxable year, in
addition to interest paid on the security for that year, an amount equal to
the sum of the daily portions of original issue discount for each day during
the taxable year that such holder holds the security. There may also be tax
uncertainties with respect to whether an extension of maturity on an
increasing rate note will be treated as a taxable exchange. In the event it
is determined that an extension of maturity is a taxable exchange, a holder
will recognize a taxable gain or loss, which will be a short-term capital
gain or loss if the holder holds the security as a capital asset, to the
extent that the value of the security with an extended maturity differs from
the adjusted basis of the security deemed exchanged therefor.
SHAREHOLDERS' TAX STATUS
The dividends received deduction for corporations will apply to ordinary
income distributions to the extent the distribution represents amounts that
would qualify for the dividends received deduction to the Fund if the Fund
were a regular corporation, and to the extent designated by the Fund as so
qualifying. Otherwise, these dividends and any short-term capital gains are
taxable as ordinary income. These dividends, and any short-term capital
gains, are taxable as ordinary income.
CAPITAL GAINS
Capital gains, when experienced by the Fund, could result in an increase in
dividends. Capital losses could result in a decrease in dividends. When a
Fund realizes net long-term capital gains, it will distribute them at least
once every 12 months.
TOTAL RETURN
The average annual total return for the Fund is the average compounded rate
of return for a given period that would equate a $1,000 initial investment to
the ending redeemable value of that investment. The ending redeemable value
is computed by multiplying the number of shares owned at the end of the
period by the net asset value per share at the end of the period. The number
of shares owned at the end of the period is based on the number of shares
purchased at the beginning of the period with $1,000, adjusted over the
period by any additional shares, assuming the quarterly reinvestment of any
dividends and distributions.
YIELD
The yield for the Fund is determined by dividing the net investment income
per share (as defined by the Securities and Exchange Commission) earned by
the Fund over a thirty-day period by the offering price per share of the Fund
on the last day of the period. This value is annualized using semi-annual
compounding. This means that the amount of income generated during the
thirty-day period is assumed to be generated each month over a twelve-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by the Fund because of certain adjustments
required by the Securities and Exchange Commission and, therefore, may not
correlate to the dividends or other distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in a
Fund, performance will be reduced for those shareholders paying those fees.
PERFORMANCE COMPARISONS
The Fund's performance depends upon such variables as: portfolio quality;
average portfolio maturity; type of instruments in which the portfolio is
invested; changes in interest rates and market value of portfolio securities;
changes in Fund or class expenses; the relative amount of Fund cash flow; and
various other factors.
Investors may use financial publications and/or indices to obtain a more
complete view of a Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index
used, prevailing market conditions, portfolio compositions of other funds,
and methods used to value portfolio securities and compute offering price. In
additon to various other indices, the financial publications and/or indices
which the Fund uses in advertising may include:
o RUSSELL 1000 GROWTH INDEX consists of those Russell 2000 securities
with a greater-than-average growth orientation. Securities in this
index tend to exhibit higher price-to-book and price-earnings ratios,
lower dividend yields and higher forecasted growth rates.
o RUSSELL 2000 INDEX is a broadly diversified index consisting of
approximately 2,000 small capitalization common stocks that can be used
to compare to the total returns of funds whose portfolios are invested
primarily in small capitalization common stocks.
o STANDARD & POORS RATINGS GROUP SMALL STOCK INDEX is a broadly
diversified index consisting of approximately 600 small capitalization
common stocks that can be used to compare to the total returns of funds
whose portfolios are invested primarily in small capitalization common
stocks.
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all capital gains distributions and income
dividends and takes into account any change in net asset value over a
specific period of time. From time to time, a Fund will quote its Lipper
ranking in advertising and sales literature.
o CONSUMER PRICE INDEX is generally considered to be a measure of
inflation.
o DOW JONES INDUSTRIAL AVERAGE ("DJIA") is an unmanaged index representing
share prices of major industrial corporations, public utilities, and
transportation companies. Produced by the Dow Jones & Company, it is
cited as a principal indicator of market conditions.
o STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a
composite index of common stocks in industry, transportation, financial,
and public utility companies. The Standard & Poor's index assumes
reinvestment of all dividends paid by stocks listed on the index. Taxes
due on any of these distributions are not included, nor are brokerage or
other fees calculated in the Standard & Poor's figures.
o MORNINGSTAR, INC., an independent rating service, is the publisher of
the bi-weekly Mutual Fund Values. Mutual Fund Values rates more than
1,000 NASDAQ-listed mutual funds of all types, according to their risk-
adjusted returns. The maximum rating is five stars, and ratings are
effective for two weeks.
o BANK RATE MONITOR NATIONAL INDEX, Miami Beach, Florida, is a financial
reporting service which publishes weekly average rates of 50 leading
bank and thrift institution money market deposit accounts. The rates
published in the index are an average of the personal account rates
offered on the Wednesday prior to the date of publication by ten of the
largest banks and thrifts in each of the five largest Standard
Metropolitan Statistical Areas. Account minimums range upward from
$2,500 in each institution and compounding methods vary. If more than
one rate is offered, the lowest rate is used. Rates are subject to
change at any time specified by the institution.
o THE S&P/BARRA VALUE INDEX AND THE S&P/BARRA GROWTH INDEX are constructed
by Standard & Poor's and BARRA, Inc., an investment technology and
consulting company, by separating the S&P 500 Index into value stocks
and growth stocks. The S&P/BARRA Growth and S&P/BARRA Value Indices are
constructed by dividing the stocks in the S&P 500 Index according to
their price-to-book ratios. The S&P/BARRA Growth Index, contains
companies with higher price-to-earnings ratios, low dividends yields,
and high earnings growth (concentrated in electronics, computers, health
care, and drugs). The Value Index contains companies with lower price-
to-book ratios and has 50% of the capitalization of the S&P 500 Index.
These stocks tend to have lower price-to-earnings ratios, high dividend
yields, and low historical and predicted earnings growth (concentrated
in energy, utility and financial sectors). The S&P/BARRA Value and
S&P/BARRA Growth Indices are capitalization-weighted and rebalanced
semi-annually. Standard & Poor's/BARRA calculates these total return
indices with dividends reinvested.
o STANDARD & POOR'S MIDCAP 400 STOCK PRICE INDEX, a composite index of 400
common stocks with market capitalizations between $200 million and $7.5
billion in industry, transportation, financial, and public utility
companies. The Standard & Poor's index assumes reinvestment of all
dividends paid by stocks listed on the index. Taxes due on any of these
distributions are not included, nor are brokerage or other fees
calculated in the Standard & Poor's figures.
Investors may also consult the fund evaluation consulting universes listed
below. Consulting universes may be composed of pension, profit sharing,
commingled, endowment/foundation, and mutual funds.
o FIDUCIARY CONSULTING GRID UNIVERSE, for example, is composed of over
1,000 funds, representing 350 different investment managers, divided
into subcategories based on asset mix. The funds are ranked quarterly
based on performance and risk characteristics.
o SEI DATA BASE for equity funds includes approximately 900 funds,
representing 361 money managers, divided into fund types based on
investor groups and asset mix. The funds are ranked every three, six,
and twelve months.
o MERCER MEIDINGER, INC. compiles a universe of approximately 600 equity
funds, representing about 500 investment managers, and updates their
rankings each calendar quarter as well as on a one, three, and five year
basis.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar cost averaging, and systematic investment. In addition, the Fund can
compare its performance , or performance for the types of securities in which
it invests, to a variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by Fund portfolio managers and their views and analysis on how
such developments could affect the Fund. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute ("ICI"). For example, according to the ICI,
twenty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as business and
institutions, have entrusted over $3 trillion to the more than 5,500 mutual
funds available.
Appendix
STANDARD AND POOR'S RATINGS GROUP BOND RATINGS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher rated categories.
NR--Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy.
PLUS (+) OR MINUS (-):--The ratings from AA to BBB may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS
AAA--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
AA--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or fluctuation
of protective elements may be of greater amplitude or there may be other
elements present which make the long term risks appear somewhat larger than
in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
BAA--Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment characteristics
and, in fact, have speculative characteristics as well.
NR--Not rated by Moody's.
FITCH INVESTORS SERVICE, INC. LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA--Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated AAA. Because bonds rated in the
AAA and AA categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore, impair timely payment.
NR--NR indicates that Fitch does not rate the specific issue.
STANDARD AND POOR'S RATINGS GROUP COMMERCIAL PAPER RATINGS
A-1--This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. The issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation.
A-2--Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues
designated A-1.
MOODY'S INVESTORS SERVICES, INC. COMMERCIAL PAPER RATINGS
P-1--Issuers rated PRIME-1 (for related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. PRIME-1
repayment capacity will normally be evidenced by the following
characteristics: conservative capitalization structures with moderate
reliance on debt and ample asset protection; broad margins in earning
coverage of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources
of alternate liquidity.
P-2--Issuers rated PRIME-2 (for related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
FITCH INVESTORS SERVICE, INC. SHORT-TERM RATINGS
F-1+--(Exceptionally Strong Credit Quality). Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1--(Very Strong Credit Quality). Issues assigned to this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-
1+.
F-2--(Good Credit Quality). Issues carrying this rating have a satisfactory
degree of assurance for timely payment but the margin of safety is not as
great as the F-1+ and F-1 categories.
STANDARD AND POOR'S RATINGS GROUP MUNICIPAL BOND RATINGS
AAA -- Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
NR -- NR indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy.
Plus (+) or minus (-): The ratings "AA" and "A" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
MOODY'S INVESTORS SERVICE, INC. MUNICIPAL BOND RATINGS
AAA -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
AA -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long term risks appear somewhat larger than
in Aaa securities.
A -- Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment some time in the
future.
NR -- Not rated by Moody's.
Moody's applies numerical modifiers, 1, 2 and 3 in the generic rating
classification of "Aa" and "A" in its corporate or municipal bond rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking;
and the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
STANDARD AND POOR'S CORPORATION MUNICIPAL NOTE RATINGS
SP-1 -- Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
MOODY'S INVESTORS SERVICE, INC. SHORT-TERM DEBT RATINGS
MIG1/VMIG1 -- This designation denotes best quality. There is a present
strong protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG2/VMIG2 -- This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements. (1-11) The Financial Statements for the
fiscal period ended August 31, 1995, are incorporated herein
by reference from the Funds' Annual Report dated August 31,
1995.
(b) Exhibits:
(1) Conformed copy of Articles of Incorporation of the
Registrant (8.);
(i)Conformed copy of Amendment No. 1 to the Articles
of Incorporation (8.);
(ii)Conformed copy of Amendment No. 2 to the Articles
of Incorporation (8.);
(iii)Conformed copy of Amendment No. 3 to the Articles
of Incorporation (8.);
(iv)Conformed copy of Amendment No. 4 to the Articles
of Incorporation (6.);
(v)Conformed copy of Amendment No. 5 to the Articles
of Incorporation (8.);
(vi)Conformed copy of Amendment No. 6 to the Articles
of Incorporation; +
(vii)Copy of Amendment No. 7 to the Articles of
Incorporation; +
(2) Copy of By-Laws of the Registrant (8.);
(3) Not applicable;
(4) Copy of Specimen Certificate for Shares of Capital Stock
of the Registrant (2.);
(5) Conformed copy of Investment Advisory Contract of the
Registrant (4.);
(i) Conformed copy of Exhibit G of the Investment
Advisory Contract (5.);
(ii)Conformed copy of Exhibit H of the Investment
Advisory Contract (5.);
(iii)Conformed copy of Exhibit I of the Investment
Advisory Contract (5.);
(iv)Conformed copy of Exhibit J of the Investment
Advisory Contract (5.);
+ All exhibits have been filed electronically.
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment #1 on Form N-1A filed September 28, 1992. (File Nos. 33-48907
and 811-7047).
4. Response is incorporated by reference to Registrant's Post-Effective
Amendment #5 on Form N-1A filed April 23, 1993. (File Nos. 33-48907 and
811-7047).
5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 on Form N-1A filed October 29, 1993. (File Nos. 33-
48907 and 811-7047).
6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 8 on Form N-1A filed December 28, 1993. (File Nos. 33-
48907 and 811-7047).
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment N0. 11 on Form N-1A filed October 21, 1994. (File Nos. 33-
48907 and 811-7047).
(v) Conformed copy of Exhibit K of the Investment
Advisory Contract (7.);....
(vi) Conformed copy of Exhibit L of the Investment
Advisory Contract (7.);
(vii)Conformed copy of Exhibit M of the Investment
Advisory Contract; +
(viii) Conformed copy of Federated Management Sub-
Advisory Agreement with the Registrant (7.);
(ix)Conformed copy of Templeton Investment Counsel,
Inc., Sub-Advisory Agreement with the M & I
Investment Management, Inc.(9.);
(x)Form of Exhibit N of the Investment Advisory
Contract; +
(6) (i) Conformed copy of Distributor's Contract of the
Registrant, including conformed copies of Exhibits
A through J; +
(ii) Form of Exhibit K of the Distributor's Contract; +
(iii)Form of Exhibit L of the Distributor's Contract; +
(7) Not applicable;
(8) (i) Conformed copy of Custodian Contract of the
Registrant (7.);
(ii) Conformed copy of Sub-Transfer Agency and
Services Agreement (10.);
(9) (i) Conformed copy of Fund Accounting and Shareholder
Recordkeeping Agreement of the Registrant (11.);
(ii)Conformed copy of Administrative Services Agreement
(7.);
+ All exhibits have been filed electronically.
7. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 10 on Form N-1A filed July 1, 1994. (File
Nos. 33-48907 and 811-7047).
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 on Form N-1A filed December 21, 1994. (File Nos. 33-
48907 and 811-7047).
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed April 3, 1995. (File Nos. 33-48907
and 811-7047).
11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed December 26, 1995. (File Nos. 33-
48907 and 811-7047).
(iii) Conformed copy of Shareholder Services Agreement
(4.);
(iv)Conformed copy of Amendment No. 1 to Schedule A of
the Shareholder Services Agreement (6.);
(v)Conformed Copy of Amendment No. 2 to Schedule A of
the Shareholder Services Agreement (7.);
(vi)Conformed copy of Amendment No. 3 to Schedule A of
the Shareholder Services Agreement; +
(vii) Copy of Amendment No. 1 Schedule B of the
Shareholder Services Agreement (11.);
(viii) Conformed copy of Marshall Funds, Inc. Multiple
Class Plan (Marshall Money Market Fund Class A
Shares and Class B Shares) (11.);
(ix) Form of Amendment No. 4 to Schedule A of the
Shareholder Services Agreement; +
(10) Conformed copy of Opinion and Consent of Counsel as to
legality of shares being registered (4.);
(11) Not applicaable;
(12) Not applicable;
(13) Conformed copy of Initial Capital
Understanding; (11)
(14) Not applicable;
(15) (i)Conformed copy of Distribution Plan (4.);
(ii)Conformed copy of Exhibit B of Distribution Plan
(9.);
(iii) Conformed copy of Exhibit A of Distribution Plan;
(11.)
(iv)Form of 12b-1 Agreement through and including
Exhibit B; (11.)
(v) Copy of Exhibit C to Rule 12b-1 Agreement of the
Registrant; +
(vi) Form of Exhibit C to the Distribution Plan of the
Registrant; +
(16) (i) Conformed copy of Schedule for Computation of Fund
Performance Data (6.);
(ii) Copy of Schedule for Computation of Fund
Performance Data for Marshall
International Stock Fund (10.);
+ All Exhibits have been filed electronically.
4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed April 23, 1993. (File Nos. 33-48907
and 811-7047).
6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 8 on Form N-1A filed December 28, 1993. (File Nos. 33-
48907 and 811-7047).
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed July 1, 1994. (File Nos. 33-48907
and 811-7047).
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 on Form N-1A filed December 21, 1994. (File Nos. 33-
48907 and 811-7047.
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed April 3, 1995. (File Nos. 33-48907
and 811-7047).
11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed December 26, 1995. (File Nos. 33-
48907 and 811-7047).
(17) Not applicable;
(18) Not Applicable;
(19) (i) Conformed copy of Power of Attorney (11.);
(ii) Conformed copy of Power of Attorney dated
December 27, 1993 with respect to James F. Duca,
II, President of the Corporation
(6.);
Item 25. Persons Controlled by or Under Common Control with Registrant:
None
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of June 10, 1996
-----
Shares of capital stock
Marshall Intermediate Bond Fund 378
Marshall Government Income Fund 2,131
Marshall Money Market Fund
Class A Shares 2,851
Marshall Money Market Fund
Class B Shares 1,695
Marshall Short-Term Income Fund 214
Marshall Stock Fund 3,474
Marshall Equity Income Fund 375
Marshall Mid-Cap Stock Fund 494
Marshall Value Equity Fund 416
Marshall Intermediate Tax-Free Fund 30
Marshall Short-Term Tax-Free Fund 24
Marshall International Stock Fund 262
Item 27. Indemnification: (5.)
5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 on Form N-1A filed October 29, 1993. (File Nos. 33-
48907 and 811-7047).
6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 8 on Form N-1A filed December 28, 1993. (File Nos.33-48907
and 811-7047).
Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed December 26, 1995. (File Nos. 33-
48907 and 811-7047).
Item 28. Business and Other Connections of Investment Adviser:
M&I INVESTMENT MANAGEMENT CORP.
(a)M&I Investment Management Corp. is a registered investment
adviser and wholly-owned subsidiary of Marshall & Ilsley
Corporation, a registered bank holding company headquartered in
Milwaukee, Wisconsin. As of April 30, 1996 M&I Investment
Management Corp. had approximately $7.3 billion in assets under
management and has managed investments for individuals and
institutions since its inception in 1973. M&I Investment
Management Corp. served as investment adviser to Newton Money
Fund, Newton Income Fund and Newton Growth Fund.
For further information about M & I Investment Mangagement
Corp., its officers and directors, response is incorporated by
reference to M & I Investment Management Corp.'s Form ADV, File
No. 801-9118, dated March 4, 1996 as amended.
TEMPLETON INVESTMENT COUNSEL, INC.
(b)Templeton Investment Counsel, Inc. ("TICI"), 500 East Broward
Blvd., Suite 2100, Ft. Lauderdale, FL 33394-3091, is a
professional investment counseling firm which has been
providing investment services since 1979. As of March 31,
1996, TICI had discretionary investment management of $13.7
billion of assets.
For a list of the officers and directors of TICI and for
further information about TICI, any other business, vocation or
employment of a substantial nature in which a director or
officer of TICI is, or at any time in the past two fiscal years
has been, engaged for his or her own account or in the capacity
of director, officer, employee, partner or trustee, response is
incorporated by reference to TICI's Form ADV, File No. 801-
15125, dated February 1, 1996 as amended.
Item 29. Principal Underwriters:
(a)Federated Securities Corp., the Distributor for shares of the
Registrant, also acts as principal underwriter for the
following open-end investment companies:
111 Corcoran Funds; Annuity Management Series; Arrow Funds;
Automated Government Money Trust; BayFunds; Blanchard Funds;
Blanchard Precious Metals Fund, Inc.; Cash Trust Series II;
Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones &
Co. Daily Passport Cash Trust; Federated Adjustable Rate U.S.
Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Equity Funds; Federated Equity
Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government
Income Securities, Inc.; Federated Government Trust; Federated
High Income Bond Fund, Inc.; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust;
Federated Index Trust; Federated Institutional Trust; Federated
Insurance Series; Federated Master Trust; Federated Municipal
Opportunities Fund, Inc.; Federated Municipal Securities Fund,
Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated
Stock and Bond Fund, Inc.; Federated Stock Trust; Federated
Tax-Free Trust; Federated Total Return Series, Inc.; Federated
U.S. Government Bond Fund; Federated U.S. Government Securities
Fund: 1-3 Years; Federated U.S. Government Securities Fund: 2-5
Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed
Income Securities, Inc.; Fortress Utility Fund, Inc.; High
Yield Cash Trust; Independence One Mutual Funds; Intermediate
Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty U.S. Government
Money Market Trust; Liquid Cash Trust; Managed Series Trust;
Marshall Funds, Inc.; Money Market Management, Inc.; Money
Market Obligations Trust; Money Market Trust; Municipal
Securities Income Trust; Newpoint Funds; Peachtree Funds; RIMCO
Monument Funds; SouthTrust Vulcan Funds; Star Funds; Targeted
Duration Trust; Tax-Free Instruments Trust; The Biltmore Funds;
The Biltmore Municipal Funds; The Monitor Funds; The Planters
Funds; The Starburst Funds; The Starburst Funds II; The Virtus
Funds; Tower Mutual Funds; Trust for Financial Institutions;
Trust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations;
Vision Group of Funds, Inc.; andWorld Investment Series, Inc.
Federated Securities Corp. also acts as principal underwriter
for the following closed-end investment company: Liberty Term
Trust, Inc.- 1999.
(b)
Name and Principal Positions and Offices
Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief --
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary, and Asst.
Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive ViceChairman, Director
Federated Investors Tower President, Federated, and Treasurer
Pittsburgh, PA 15222-3779 Securities Corp.
John W. McGonigle Director, Federated --
Federated Investors Tower Securities Corp.
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Name and Principal Positions and Offices
Positions and Offices
Business Address With Underwriter With Registrant
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust, Federated
Pittsburgh, PA 15222-3779 Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Name and Principal Positions and Offices
Positions and Offices
Business Address With Underwriter With Registrant
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securites Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael D. Fitzgerald Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joeseph Kenedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Name and Principal Positions and Offices
Positions and Offices
Business Address With Underwriter With Registrant
Steven A. La Versa Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John C. Shelar, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jamie M. Teschner Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Name and Principal Positions and Offices
Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Timothy Radcliff Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas R. Donahue Asstistant Secretary, --
Federated Investors Tower Assistant Treasurer,
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Joseph M. Huber Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 30. Location of Accounts and Records:
Marshall Funds, Inc...... Federated Investors Tower
......................... Pittsburgh, PA 15222-3779
Federated Shareholder Services Federated Investors Tower
Company Pittsburgh, PA 15222-3779
("Transfer Agent, Dividend
Disbursing Agent, and Portfolio
Accounting Services")
Federated Administrative Services Federated Investors Tower
("Administrator")........ Pittsburgh, PA 15222-3779
M & I Investment Management Corp. 1000 North Water Street
("Adviser").............. Milwaukee, WI 53202
Marshall & Ilsley Trust Company 1000 North Water Street
("Custodian")............ Milwaukee, WI 53202
Templeton Investment Counsel, Inc. 500 East Broward Blvd.
("Sub-Adviser").......... Suite 2100
......................... Ft. Lauderdale, FL 33394-3091
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholders meetings by
shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered, a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, MARSHALL FUNDS, INC., has
duly caused this Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Pittsburgh
and Commonwealth of Pennsylvania, on the 17th day of June, 1996.
MARSHALL FUNDS, INC.
BY: /s/ C. Todd Gibson
C. Todd Gibson, Assistant Secretary
Attorney in Fact for Edward C. Gonzales
June 17, 1996
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person
in the capacity and on the date indicated:
NAME TITLE DATE
By:/s/Peter J. Germain
Peter J. Germain Attorney In Fact June 17, 1996
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
Edward C. Gonzales Chairman, Director, June 17, 1996
and Treasurer (Chief
Executive Officer, Principal
Financial and Accounting
Officer)
James F. Duca, II President
John DeVincentis Director
Ody J. Fish Director
Paul E. Hassett Director
Exhibit No. 9(ix) under Form N-1A
Exhibit No. 10 under Item 601/Reg SK
Amendment #4
Dated
to
Schedule A
Shareholder Services Agreement
between
MARSHALL FUNDS, INC.
and
MARSHALL & ILSLEY TRUST COMPANY
MARSHALL FUNDS, INC. (the "Corporation") consists of the following
portfolios and classes:
Name
MARSHALL BALANCED FUND
MARSHALL EQUITY INCOME FUND
MARSHALL GOVERNMENT INCOME FUND
MARSHALL INTERMEDIATE BOND FUND
MARSHALL MID-CAP STOCK FUND
MARSHALL MONEY MARKET FUND - CLASS A AND B SHARES
MARSHALL SHORT-TERM INCOME FUND
MARSHALL STOCK FUND
MARSHALL TAX-FREE MONEY MARKET FUND
MARSHALL VALUE EQUITY FUND
MARSHALL SHORT-TERM TAX-FREE FUND
MARSHALL INTERMEDIATE TAX-FREE FUND
MARSHALL INTERNATIONAL STOCK FUND
MARSHALL SMALL-CAP STOCK FUND - CLASS A AND B SHARES
ATTEST: MARSHALL FUNDS, INC.
Exhibit No. 6(iii) under Form N-1A
Exhibit No. 1 under Item 601/Reg SK
Exhibit L
to the
Distributor's Contract
MARSHALL FUNDS, INC.
MARSHALL SMALL-CAP STOCK FUND
CLASS B SHARES
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated the 1st day of October, 1992 between MARSHALL
FUNDS, INC. and Federated Securities Corp. with respect to Classes of the
Funds set forth above.
1. The Fund hereby appoints FSC to engage in activities principally
intended to result in the sale of shares. Pursuant to this appointment, FSC
is authorized to select a group of brokers ("Brokers") to sell shares of the
above-listed Fund ("Shares") at the current offering price thereof as
described and set forth in the respective prospectuses of the Fund, and to
render administrative support services to the Fund and its shareholders. In
addition, FSC is authorized to select a group of administrators
("Administrators") to render administrative support services to the Fund and
its shareholders.
2. Administrative support services may include, but are not limited
to, the following functions: 1) account openings: the Broker or
Administrator communicates account openings via computer terminals located on
the Broker's or Administrator's premises; 2) account closings: the Broker or
Administrator communicates account closings via computer terminals; 3) enter
purchase transactions: purchase transactions are entered through the
Broker's or Administrator's own personal computer or through the use of a
toll-free telephone number; 4) enter redemption transactions: Broker or
Administrator enters redemption transactions in the same manner as purchases;
5) account maintenance: Broker or Administrator provides or arranges to
provide accounting support for all transactions. Broker or Administrator
also wires funds and receives funds for Fund share purchases and redemptions,
confirms and reconciles all transactions, reviews the activity in the Fund's
accounts, and provides training and supervision of its personnel; 6) interest
posting: Broker or Administrator posts and reinvests dividends to the Fund's
accounts; 7) prospectus and shareholder reports: Broker or Administrator
maintains and distributes current copies of prospectuses and shareholder
reports; 8) advertisements: the Broker or Administrator continuously
advertises the availability of its services and products; 9) customer lists:
the Broker or Administrator continuously provides names of potential
customers; 10) design services: the Broker or Administrator continuously
designs material to send to customers and develops methods of making such
materials accessible to customers; and 11) consultation services: the Broker
or Administrator continuously provides information about the product needs of
customers.
3. During the term of this Agreement, the Fund will pay FSC for
services pursuant to this Agreement, a monthly fee computed at the annual
rate of .25% of the average aggregate net asset value of the Class B Shares
of the MARSHALL SMALL-CAP STOCK FUND held during the month. For the month in
which this Agreement becomes effective or terminates, there shall be an
appropriate proration of any fee payable on the basis of the number of days
that the Agreement is in effect during the month.
4. FSC may from time-to-time and for such periods as it deems
appropriate reduce its compensation to the extent any Shares' expenses exceed
such lower expense limitation as FSC may, by notice to the Fund, voluntarily
declare to be effective.
5. FSC will enter into separate written agreements with various
firms to provide certain of the services set forth in Paragraph 1 herein.
FSC, in its sole discretion, may pay Brokers and Administrators a periodic
fee in respect of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon which such fees
will be paid shall be determined from time to time by FSC in its sole
discretion.
6. FSC will prepare reports to the Board of Directors of the Fund
on a quarterly basis showing amounts expended hereunder including amounts
paid to Brokers and Administrators and the purpose for such payments.
7. In the event any amendment to this Agreement materially increases
the fees set forth in Paragraph 3, such amendment must be approved by a vote
of a majority of the outstanding voting securities of the particular class.
In consideration of the mutual covenants set forth in the Distributor's
Contract dated OCTOBER 1, 1992 between MARSHALL FUNDS, INC. and Federated
Securities Corp., MARSHALL FUNDS, INC. executes and delivers this Exhibit on
behalf of the Fund set forth in this Exhibit.
Witness the due execution hereof this DAY OF , 1996.
ATTEST: MARSHALL FUNDS, INC.
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
Exhibit No. 1(vii) under Form N-1A
Exhibit No. 3(a) under Item 601/Reg SK
MARSHALL FUNDS, INC.
Amendment No. 7
to
ARTICLES OF INCORPORATION
Dated July 30, 1992
THESE Articles of Incorporation are amended as follows:
Delete Section (a) of Article IV and substitute in its place the
following:
" (a) The Corporation is authorized to issue fifty billion
(50,000,000,000) shares of common stock, par value $.0001 per share. Subject
to the following paragraph, the authorized shares are classified as follows:
Authorized Number
Class Series of
Shares
Marshall Balanced Fund 1,000,000,000
Marshall Equity Income Fund 1,000,000,000
Marshall Government Income Fund 1,000,000,000
Marshall Intermediate Bond Fund 1,000,000,000
Marshall Mid-Cap Stock Fund 1,000,000,000
Marshall Money Market Fund A Shares
5,000,000,000
Marshall Money Market Fund B Shares 5,000,000,000
Marshall Short-Term Income Fund 1,000,000,000
Marshall Stock Fund
1,000,000,000
Marshall Value Equity Fund 1,000,000,000
Marshall Short-Term Tax-Free Fund 1,000,000,000
Marshall Intermediate Tax-Free Fund 1,000,000,000
Marshall International Stock Fund 1,000,000,000
Marshall Small-Cap Stock Fund A Shares 1,000,000,000
Marshall Small-Cap Stock Fund B Shares 1,000,000,000
The remaining 27,000,000,000 shares shall remain unclassified until action is
taken by the Board of Directors pursuant to the following paragraph."
The undersigned Secretary of Marshall Funds, Inc. certifies that the
above stated amendment is a true and correct Amendment to the Articles of
Incorporation, as adopted by the Directors of the Corporation as of the
day of , 1996, in accordance with Section 180.1002 of the
Wisconsin Business Corporation Law.
WITNESS the due execution hereof this day of ,
1996.
Peter J. Germain
Secretary
Prepared by: C. Todd Gibson
Federated Administrative Services
Federated Investors Tower
Exhibit No. 5(x) under Form N-1A
Exhibit No. 10 under Item 601/Reg SK
EXHIBIT N
to the
Investment Advisory Contract
MARSHALL SMALL-CAP STOCK FUND
For all services rendered by Adviser hereunder, the above-named
Portfolio of the Fund shall pay to Adviser and Adviser agrees to accept as
full compensation for all services rendered hereunder, an annual investment
advisory fee equal to 1.00% of the average daily net assets of the
Portfolio.
The portion of the fee based upon the average daily net assets of the
Portfolio shall be accrued daily at the rate of 1/365TH OF 1.00% applied to
the daily net assets of the Portfolio.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this DAY OF , 1996.
Attest: M&I INVESTMENT MANAGEMENT CORP.
By:
Attest: MARSHALL FUNDS, INC.
Exhibit No. 15(vi) under Form N-1A
Exhibit No. 1 under Item 601/Reg SK
EXHIBIT C
to the
Plan
MARSHALL FUNDS, INC.
MARSHALL SMALL-CAP STOCK FUND
CLASS B SHARES
This Plan is adopted by the Marshall Funds, Inc. with respect to the
portfolio of the Corporation set forth above.
In compensation for the services provided pursuant to this Plan, FSC
will be paid a monthly fee computed at the annual rate of .25 of 1% of the
average aggregate net asset value of the Class B Shares of Marshall Small-Cap
Stock Fund, a portfolio of Marshall Funds, Inc. held during the month.
Witness the due execution hereof this day of ,
1996.
Marshall Funds, Inc.
Exhibit No. 15(v) under Form N-1A
Exhibit No. 1 under Item 601/Reg SK
MARSHALL FUNDS, INC.
EXHIBIT C to 12b-1 Agreement with
Federated Securities Corp. ("FSC")
Portfolios
FSC will pay Administrator fees for the following portfolio (the "Fund")
effective as of the dates set forth below:
Name Date
MARSHALL SMALL-CAP STOCK FUND SEPTEMBER 1, 1996
CLASS B SHARES
Administrative Fees
1. During the term of this Agreement, FSC will pay Administrator a
quarterly fee in respect of the Fund. This fee will be computed at the
annual rate of .25% of the average net asset value of Shares held during the
quarter in accounts for which the Administrator provides services under this
Agreement, so long as the average net asset value of Shares in the Fund
during the quarter equals or exceeds such minimum amount as FSC shall from
time to time determine and communicate in writing to the Administrator.
2. For the quarterly period in which the Agreement becomes effective or
terminates, there shall be an appropriate proration of any fee payable on the
basis of the number of days that the Agreement is in effect during the
quarter.
Exhibit No. 6(ii) under Form N-1A
Exhibit No. 1 under Item 601/Reg SK
Exhibit K
to the
Distributor's Contract
MARSHALL FUNDS, INC.
MARSHALL SMALL-CAP STOCK FUND
CLASS A SHARES
In consideration of the mutual covenants set forth in the Distributor's
Contract dated October 1, 1992 between Marshall Funds, Inc. and Federated
Securities Corp., Marshall Funds, Inc. executes and delivers this Exhibit on
behalf of the Portfolios, with respect to the separate Classes of Shares
thereof, first set forth in this Exhibit.
Witness the due execution hereof this day of , 1996.
ATTEST: Marshall Funds, Inc.
By:
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
By:
Exhibit No. 6(i) under Form N-1A
Exhibit No.1 under Item 601/Reg SK
MARSHALL FUNDS, INC.
DISTRIBUTOR'S CONTRACT
AGREEMENT made this 1ST DAY OF OCTOBER, 1992, by and between MARSHALL
FUNDS, INC. (THE "FUND"), a Wisconsin corporation, and FEDERATED SECURITIES
CORP. ("FSC"), a Pennsylvania Corporation.
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints FSC as its agent to sell and distribute
shares of the Fund, in jurisdictions wherein the shares may be legally
offered for sale, which may be offered in one or more series (the
"Portfolios") consisting of one or more classes (the "Classes") of shares
(the "Shares"), as described and set forth on one or more exhibits to this
Agreement, at the current offering price thereof as described and set forth
in the current Prospectuses of the Fund. FSC hereby accepts such appointment
and agrees to provide such other services for the Fund, if any, and accept
such compensation from the Fund, if any, as set forth in the applicable
exhibit to this Agreement.
2. The sale of any Shares may be terminated, withdrawn or suspended by
the Board of Directors without prior notice whenever in the judgment of the
Fund it is in its best interest to do so.
3. Neither FSC nor any other person is authorized by the Fund to give
any information or to make any representation relative to any Shares other
than those contained in the Registration Statement, Prospectuses, or
Statements of Additional Information ("SAIs") filed with the Securities and
Exchange Commission, as the same may be amended from time to time, or in any
supplemental information to said Prospectuses or SAIs approved by the Fund.
FSC agrees that any other information or representations other than those
specified above which it or any dealer or other person who purchases Shares
through FSC may make in connection with the offer or sale of Shares, shall be
made entirely without liability on the part of the Fund. No person or
dealer, other than FSC, is authorized to act as agent for the Fund for any
purpose. FSC agrees that in offering or selling Shares as agent of the Fund,
it will, in all respects, duly conform to all applicable state and federal
laws and the rules and regulations of the National Association of Securities
Dealers, Inc., including its Rules of Fair Practice. FSC will submit to the
Fund copies of all sales literature before using the same and will not use
such sales literature unless approved by the Fund.
4. This Agreement is effective with respect to each Class as of the
date of execution of the applicable exhibit and shall continue in effect with
respect to each Class presently set forth on an exhibit and any subsequent
Classes added pursuant to an exhibit during the initial term of this
Agreement for one year from the date set forth above, and thereafter for
successive periods of one year if such continuance is approved at least
annually by the Directors of the Fund including a majority of the members of
the Board of Directors of the Fund who are not interested persons of the Fund
and have no direct or indirect financial interest in the operation of any
Distribution Plan relating to the Fund or in any related documents to such
Plan ("Disinterested Directors") cast in person at a meeting called for that
purpose. Prior to voting on renewal of this Agreement, FSC shall furnish to
the Fund's Board of Directors such information as they may determine
reasonably necessary to evaluate the terms of this Agreement. If a Class is
added after the first annual approval by the Directors as described above,
this Agreement will be effective as to that Class upon execution of the
applicable exhibit and will continue in effect until the next annual approval
of this Agreement by the Directors and thereafter for successive periods of
one year, subject to approval as described above.
5. This Agreement may be terminated with regard to a particular
Portfolio or Class at any time, without the payment of any penalty, by the
vote of a majority of the Disinterested Directors or by a majority of the
outstanding voting securities of the particular Portfolio or Class on not
more than sixty (60) days' written notice to any other party to this
Agreement. This Agreement may be terminated with regard to a particular
Portfolio or Class by FSC on sixty (60) days' written notice to the Fund.
6. This Agreement may not be assigned by FSC and shall automatically
terminate in the event of an assignment by FSC as defined in the Investment
Company Act of 1940, provided, however, that FSC may employ such other
person, persons, corporation or corporations as it shall determine in order
to assist it in carrying out its duties under this Agreement. Any such
employment or delegation carried out pursuant to this section shall not
reduce or limit FSC's responsibilities under this agreement.
7. FSC shall not be liable to the Fund for anything done or omitted by
it, except acts or omissions involving willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties imposed by this Agreement.
8. This Agreement may be amended at any time by mutual agreement in
writing of all the parties hereto, provided that such amendment is approved
by the Directors of the Fund including a majority of the Disinterested
Directors of the Fund cast in person at a meeting called for that purpose.
9. This Agreement shall be construed in accordance with and governed
by the laws of the State of Wisconsin.
10. (a) Subject to the conditions set forth below, the Fund agrees to
indemnify and hold harmless FSC and each person, if any, who controls FSC
within the meaning of Section 15 of the Securities Act of 1933 and Section 20
of the Securities Act of 1934, as amended, against any and all loss,
liability, claim, damage and expense whatsoever (including but not limited to
any and all expenses whatsoever reasonably incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or
any claim whatsoever) arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectuses or SAIs (as from time to time amended and
supplemented) or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein not misleading, unless such statement or omission was made in
reliance upon and in conformity with written information furnished to the
Fund about FSC by or on behalf of FSC expressly for use in the Registration
Statement, any Prospectuses and SAIs or any amendment or supplement thereof.
If any action is brought against FSC or any controlling person thereof
with respect to which indemnity may be sought against the Fund pursuant to
the foregoing paragraph, FSC shall promptly notify the Fund in writing of the
institution of such action and the Fund shall assume the defense of such
action, including the employment of counsel selected by the Fund and payment
of expenses. FSC or any such controlling person thereof shall have the right
to employ separate counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of FSC or such controlling person unless
the employment of such counsel shall have been authorized in writing by the
Fund in connection with the defense of such action or the Fund shall not have
employed counsel to have charge of the defense of such action, in any of
which events such fees and expenses shall be borne by the Fund. Anything in
this paragraph to the contrary notwithstanding, the Fund shall not be liable
for any settlement of any such claim of action effected without its written
consent. The Fund agrees promptly to notify FSC of the commencement of any
litigation or proceedings against the Fund, any of its Portfolios or Classes,
or any of its officers or Directors or controlling persons in connection with
the issue and sale of Shares or in connection with the Registration
Statement, Prospectuses, or SAI's.
(b) FSC agrees to indemnify and hold harmless the Fund, each of its
Portfolios or Classes, each of its Directors, each of its officers who have
signed the Registration Statement and each other person, if any, who controls
the Fund within the meaning of Section 15 of the Securities Act of 1933, but
only with respect to statements or omissions, if any, made in the
Registration Statement or any Prospectus, SAI, or any amendment or supplement
thereof in reliance upon, and in conformity with, information furnished to
the Fund about FSC by or on behalf of FSC expressly for use in the
Registration Statement or any Prospectus, SAI, or any amendment or
supplement thereof. In case any action shall be brought against the Fund or
any other person so indemnified based on the Registration Statement or any
Prospectus, SAI, or any amendment or supplement thereof, and with respect to
which indemnity may be sought against FSC, FSC shall have the rights and
duties given to the Fund, and the Fund and each other person so indemnified
shall have the rights and duties given to FSC by the provisions of subsection
(a) above.
(c) Nothing herein contained shall be deemed to protect any person
against liability to the Fund or its shareholders to which such person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of the duties of such person or by reason of
the reckless disregard by such person of the obligations and duties of such
person under this Agreement.
(d) FSC shall be an independent contractor, and neither FSC nor any of
its officers or employees as such is or shall be an employee of the Fund.
FSC is responsible for its own conduct and the employment, control and
conduct of its employees and for injury to such employees or to others
through its employees. FSC assumes full responsibility for its employees
under applicable statutes and agrees to pay all employer taxes thereunder.
(e) Insofar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of 1940 for Directors,
officers, FSC and controlling persons of the Fund by the Fund pursuant to
this Agreement, the Fund is aware of the position of the Securities and
Exchange Commission as set forth in the Investment Company Act Release
No. IC-11330. Therefore, the Fund undertakes that in addition to complying
with the applicable provisions of this Agreement, in the absence of a final
decision on the merits by a court or other body before which the proceeding
was brought, that an indemnification payment will not be made unless in the
absence of such a decision, a reasonable determination based upon factual
review has been made (i) by a majority vote of a quorum of non-party
Disinterested Directors, or (ii) by independent legal counsel in a written
opinion that the indemnitee was not liable for an act of willful misfeasance,
bad faith, gross negligence or reckless disregard of duties. The Fund
further undertakes that advancement of expenses incurred in the defense of a
proceeding (upon undertaking for repayment unless it is ultimately determined
that indemnification is appropriate) against an officer, Director, FSC or
controlling person of the Fund will not be made absent the fulfillment of at
least one of the following conditions: (i) the indemnitee provides security
for his undertaking; (ii) the Fund is insured against losses arising by
reason of any lawful advances; or (iii) a majority of a quorum of non-party
Disinterested Directors or independent legal counsel in a written opinion
makes a factual determination that there is reason to believe the indemnitee
will be entitled to indemnification.
11. If at any time the Shares of any Portfolio are offered in two or
more Classes, FSC agrees to adopt compliance standards as to when a class of
shares may be sold to particular investors.
12. This Agreement will become binding on the parties hereto upon the
execution of the attached exhibits to the Agreement.
13. FSC agrees on behalf of itself and its affiliates and employees to
treat confidentially and as proprietary information of the Fund all records
and other information relative to prior, present, or potential shareholders
of the Fund, and not to use such records and information for any purpose
other than performance of its responsibilities and duties hereunder, except
after prior notification to and approval in writing by the Fund which
approval shall not be unreasonably withheld and may not be withheld where FSC
may be exposed to civil or criminal contempt proceedings for failure to
comply, when requested to divulge such information by duly constituted
authorities, or when so requested by the Fund.
Exhibit A
to the
Distributor's Contract
MARSHALL FUNDS, INC.
MARSHALL MONEY MARKET FUND
TRUST SHARES
In consideration of the mutual covenants set forth in the Distributor's
Contract dated OCTOBER 1, 1992 between MARSHALL FUNDS, INC. and Federated
Securities Corp., MARSHALL FUNDS, INC. executes and delivers this Exhibit on
behalf of the Portfolios, and with respect to the separate Classes of Shares
thereof, first set forth in this Exhibit.
Witness the due execution hereof this 1ST DAY OF OCTOBER, 1992
ATTEST: MARSHALL FUNDS, INC.
/s/ Peter J. Germain By:/s/ Edward C. Gonzales
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/ S. Elliott Cohan By:/s/ Richard B. Fisher
Secretary President
(SEAL)
Exhibit B
to the
Distributor's Contract
MARSHALL FUNDS, INC.
MARSHALL MONEY MARKET FUND
INVESTMENT SHARES
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated the 1ST DAY OF OCTOBER, 1992, between MARSHALL
FUNDS, INC. and Federated Securities Corp. with respect to Classes of the
Funds set forth above.
1. The Fund hereby appoints FSC to engage in activities principally
intended to result in the sale of Shares of the Classes. Pursuant to this
appointment FSC is authorized to select a group of brokers ("Brokers") to
sell shares of the above-listed Classes ("Shares"), at the current offering
price thereof as described and set forth in the respective prospectuses of
the Fund, and to render administrative support services to the Fund and its
shareholders. In addition, FSC is authorized to select a group of
Administrators ("Administrators") to render administrative support services
to the Fund and its shareholders.
2. Administrative support services may include, but are not limited to,
the following eleven functions: (1) account openings: the Broker or
Administrator communicates account openings via computer terminals located on
the Broker or Administrator's premises; 2) account closings: the Broker or
Administrator communicates account closings via computer terminals; 3) enter
purchase transactions: purchase transactions are entered through the Broker
or Administrator's own personal computer or through the use of a toll-free
telephone number; 4) enter redemption transactions: Broker or Administrator
enters redemption transactions in the same manner as purchases; 5) account
maintenance: Broker or Administrator provides or arranges to provide
accounting support for all transactions. Broker or Administrator also wires
funds and receives funds for Fund share purchases and redemptions, confirms
and reconciles all transactions, reviews the activity in the Fund's accounts,
and provides training and supervision of its personnel; 6) interest posting:
Broker or Administrator posts and reinvests dividends to the Fund's accounts;
7) prospectus and shareholder reports: Broker or Administrator maintains and
distributes current copies of prospectuses and shareholder reports; 8)
advertisements: the Broker or Administrator continuously advertises the
availability of its services and products; 9) customer lists: the Broker or
Administrator continuously provides names of potential customers; 10) design
services: the Broker or Administrator continuously designs material to send
to customers and develops methods of making such materials accessible to
customers; and 11) consultation services: the Broker or Administrator
continuously provides information about the product needs of customers.
3. During the term of this Agreement, the Fund will pay FSC for
services pursuant to this Agreement, a monthly fee computed at the annual
rate of .30% of the average aggregate net asset value of the Investment
Shares of the MARSHALL MONEY MARKET FUND held during the month. For the
month in which this Agreement becomes effective or terminates, there shall be
an appropriate proration of any fee payable on the basis of the number of
days that the Agreement is in effect during the month.
4. FSC may from time-to-time and for such periods as it deems
appropriate reduce its compensation to the extent any Classes, expenses
exceed such lower expense limitation as FSC may, by notice to the Fund,
voluntarily declare to be effective.
5. FSC will enter into separate written agreements, as set forth in the
Rule 12b-1 Plan adopted on behalf of the Classes listed above, with various
firms to provide certain of the services set forth in Paragraph 1 herein.
FSC, in its sole discretion, may pay Brokers and Administrators a periodic
fee in respect of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon which such fees
will be paid shall be determined from time to time by FSC in its sole
discretion.
6. FSC will prepare reports to the Board of Directors of the Fund on a
quarterly basis showing amounts expended hereunder including amounts paid to
Brokers and Administrators and the purpose for such payments.
7. In the event any amendment to this Agreement materially increases
the fees set forth in Paragraph 3, such amendment must be approved by a vote
of a majority of the outstanding voting securities of the particular class.
In consideration of the mutual covenants set forth in the Distributor's
Contract dated OCTOBER 1, 1992 between MARSHALL FUNDS, INC. and Federated
Securities Corp., MARSHALL FUNDS, INC. executes and delivers this Exhibit on
behalf of the Fund, and with respect to the separate Classes of Shares
thereof, first set forth in this Exhibit.
Witness the due execution hereof this 1ST DAY OF OCTOBER, 1992.
ATTEST: MARSHALL FUNDS, INC.
/s/ Peter J. Germain By:/s/ Edward C. Gonzales
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/ S. Elliott Cohan By:/s/ Richard B. Fisher
Secretary President
(SEAL)
Exhibit C
to the
Distributor's Contract
MARSHALL FUNDS, INC.
MARSHALL GOVERNMENT INCOME FUND
In consideration of the mutual covenants set forth in the Distributor's
Contract dated OCTOBER 1, 1992 between MARSHALL FUNDS, INC. and Federated
Securities Corp., MARSHALL FUNDS, INC. executes and delivers this Exhibit on
behalf of the Portfolios, and with respect to the separate Classes of Shares
thereof, first set forth in this Exhibit.
Witness the due execution hereof this 1ST DAY OF OCTOBER, 1992
ATTEST: MARSHALL FUNDS, INC.
/s/ Peter J. Germain By:/s/ Edward C. Gonzales
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/ S. Elliott Cohan By:/s/ Richard B. Fisher
Secretary President
(SEAL)
Exhibit D
to the
Distributor's Contract
MARSHALL FUNDS, INC.
MARSHALL STOCK FUND
In consideration of the mutual covenants set forth in the Distributor's
Contract dated OCTOBER 1, 1992 between MARSHALL FUNDS, INC. and Federated
Securities Corp., MARSHALL FUNDS, INC. executes and delivers this Exhibit on
behalf of the Portfolios, and with respect to the separate Classes of Shares
thereof, first set forth in this Exhibit.
Witness the due execution hereof this 1ST DAY OF OCTOBER, 1992
ATTEST: MARSHALL FUNDS, INC.
/s/ Peter J. Germain By:/s/ Edward C. Gonzales
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/ S. Elliott Cohan By:/s/ Richard B. Fisher
Secretary President
(SEAL)
Exhibit E
to the
Distributor's Contract
MARSHALL FUNDS, INC.
MARSHALL TAX-FREE MONEY MARKET FUND
In consideration of the mutual covenants set forth in the Distributor's
Contract dated OCTOBER 1, 1992 between MARSHALL FUNDS, INC. and Federated
Securities Corp., MARSHALL FUNDS, INC. executes and delivers this Exhibit on
behalf of the Portfolios, and with respect to the separate Classes of Shares
thereof, first set forth in this Exhibit.
Witness the due execution hereof this 1ST DAY OF OCTOBER, 1992
ATTEST: MARSHALL FUNDS, INC.
/s/ Peter J. Germain By:/s/ Edward C. Gonzales
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/ S. Elliott Cohan By:/s/ Richard B. Fisher
Secretary President
(SEAL)
Exhibit F
to the
Distributor's Contract
MARSHALL FUNDS, INC.
MARSHALL SHORT-TERM INCOME FUND
In consideration of the mutual covenants set forth in the Distributor's
Contract dated OCTOBER 1, 1992 between MARSHALL FUNDS, INC. and Federated
Securities Corp., MARSHALL FUNDS, INC. executes and delivers this Exhibit on
behalf of the Portfolios, and with respect to the separate Classes of Shares
thereof, first set forth in this Exhibit.
Witness the due execution hereof this 1ST DAY OF OCTOBER, 1992
ATTEST: MARSHALL FUNDS, INC.
/s/ Peter J. Germain By:/s/ Edward C. Gonzales
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/ S. Elliott Cohan By:/s/ Richard B. Fisher
Secretary President
(SEAL)
Exhibit G
to the
Distributor's Contract
MARSHALL FUNDS, INC.
MARSHALL INTERMEDIATE BOND FUND
In consideration of the mutual covenants set forth in the Distributor's
Contract dated OCTOBER 1, 1992 between MARSHALL FUNDS, INC. and Federated
Securities Corp., MARSHALL FUNDS, INC. executes and delivers this Exhibit on
behalf of the Portfolios, and with respect to the separate Classes of Shares
thereof, first set forth in this Exhibit.
Witness the due execution hereof this 1ST DAY OF OCTOBER, 1992
ATTEST: MARSHALL FUNDS, INC.
/s/ Peter J. Germain By:/s/ Edward C. Gonzales
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/ S. Elliott Cohan By:/s/ Richard B. Fisher
Secretary President
(SEAL)
Exhibit H
to the
Distributor's Contract
MARSHALL FUNDS, INC.
MARSHALL BALANCED FUND
MARSHALL EQUITY INCOME FUND
MARSHALL MID-CAP STOCK FUND
MARSHALL VALUE EQUITY FUND
In consideration of the mutual covenants set forth in the Distributor's
Contract dated OCTOBER 1, 1992 between MARSHALL FUNDS, INC. and Federated
Securities Corp., MARSHALL FUNDS, INC. executes and delivers this Exhibit on
behalf of the Portfolios, and with respect to the separate Classes of Shares
thereof, first set forth in this Exhibit.
Witness the due execution hereof this 26TH DAY OF APRIL, 1993.
ATTEST: MARSHALL FUNDS, INC.
/s/Peter J. Germain By:/s/E. C. Gonzales
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/S. Elliott Cohan By:/s/John A. Staley, IV
Secretary Executive Vice President
(SEAL)
Exhibit I
to the
Distributor's Contract
MARSHALL FUNDS, INC.
MARSHALL SHORT-TERM TAX-FREE FUND
MARSHALL INTERMEDIATE TAX-FREE FUND
In consideration of the mutual covenants set forth in the Distributor's
Contract dated OCTOBER 1, 1992 between MARSHALL FUNDS, INC. and Federated
Securities Corp., MARSHALL FUNDS, INC. executes and delivers this Exhibit on
behalf of the Portfolios, and with respect to the separate Classes of Shares
thereof, first set forth in this Exhibit.
Witness the due execution hereof this 1ST DAY OF NOVEMBER, 1993.
ATTEST: MARSHALL FUNDS, INC.
/s/Peter J. Germain By:/s/Joseph A. Machi
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/S. Elliott Cohan By:/s/E. C. Gonzales
Secretary President
(SEAL)
Exhibit J
to the
Distributor's Contract
MARSHALL FUNDS, INC.
MARSHALL INTERNATIONAL STOCK FUND
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated the 1ST DAY OF OCTOBER, 1992 between MARSHALL
FUNDS, INC. and Federated Securities Corp. with respect to the Fund set
forth above.
1. The Fund hereby appoints FSC to engage in activities principally
intended to result in the sale of Shares. Pursuant to this appointment FSC
is authorized to select a group of brokers ("Brokers") to sell shares of the
above-listed Fund ("Shares"), at the current offering price thereof as
described and set forth in the prospectus of the Fund, and to render
administrative support services to the Fund and its shareholders. In
addition, FSC is authorized to select a group of Administrators
("Administrators") to render administrative support services to the Fund and
its shareholders.
2. Administrative support services may include, but are not limited to,
the following eleven functions: (1) account openings: the Broker or
Administrator communicates account openings via computer terminals located on
the Broker or Administrator's premises; 2) account closings: the Broker or
Administrator communicates account closings via computer terminals; 3) enter
purchase transactions: purchase transactions are entered through the Broker
or Administrator's own personal computer or through the use of a toll-free
telephone number; 4) enter redemption transactions: Broker or Administrator
enters redemption transactions in the same manner as purchases; 5) account
maintenance: Broker or Administrator provides or arranges to provide
accounting support for all transactions. Broker or Administrator also wires
funds and receives funds for Fund share purchases and redemptions, confirms
and reconciles all transactions, reviews the activity in the Fund's accounts,
and provides training and supervision of its personnel; 6) interest posting:
Broker or Administrator posts and reinvests dividends to the Fund's accounts;
7) prospectus and shareholder reports: Broker or Administrator maintains and
distributes current copies of prospectuses and shareholder reports; 8)
advertisements: the Broker or Administrator continuously advertises the
availability of its services and products; 9) customer lists: the Broker or
Administrator continuously provides names of potential customers; 10) design
services: the Broker or Administrator continuously designs material to send
to customers and develops methods of making such materials accessible to
customers; and 11) consultation services: the Broker or Administrator
continuously provides information about the product needs of customers.
3. During the term of this Agreement, the Fund will pay FSC for
services pursuant to this Agreement, a monthly fee computed at the annual
rate of .25% of the average aggregate net asset value of the Shares of the
MARSHALL INTERNATIONAL STOCK FUND held during the month. For the month in
which this Agreement becomes effective or terminates, there shall be an
appropriate proration of any fee payable on the basis of the number of days
that the Agreement is in effect during the month.
4. FSC may from time-to-time and for such periods as it deems
appropriate reduce its compensation to the extent any Shares' expenses exceed
such lower expense limitation as FSC may, by notice to the Fund, voluntarily
declare to be effective.
5. FSC will enter into separate written agreements, as set forth in the
Rule 12b-1 Plan adopted on behalf of the Fund listed above, with various
firms to provide certain of the services set forth in Paragraph 1 herein.
FSC, in its sole discretion, may pay Brokers and Administrators a periodic
fee in respect of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon which such fees
will be paid shall be determined from time to time by FSC in its sole
discretion.
6. FSC will prepare reports to the Board of Directors of the Fund on a
quarterly basis showing amounts expended hereunder including amounts paid to
Brokers and Administrators and the purpose for such payments.
7. In the event any amendment to this Agreement materially increases
the fees set forth in Paragraph 3, such amendment must be approved by a vote
of a majority of the outstanding voting securities of the Fund.
In consideration of the mutual covenants set forth in the Distributor's
Contract dated OCTOBER 1, 1992 between MARSHALL FUNDS, INC. and Federated
Securities Corp., MARSHALL FUNDS, INC. executes and delivers this Exhibit on
behalf of the Fund set forth in this Exhibit.
Witness the due execution hereof this 1ST DAY OF AUGUST, 1994.
ATTEST: MARSHALL FUNDS, INC.
/s/ Victor R. Siclari By:/s/ Joseph S. Machi
Assistant Secretary Vice President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/ S. Elliott Cohan By:/s/ Edward C. Gonzales
Secretary Executive Vice President
Exhibit No. 5(vii) under Form N-1A
Exhibit No.10 under Item 601/Reg SK
EXHIBIT M
to the
Investment Advisory Contract
Marshall International Stock Fund
1. FEES. For all services rendered by Adviser hereunder, the above-
named Portfolio to the Fund (hereinafter, the "Portfolio") shall pay to
Adviser and Adviser agrees to accept as full compensation for all services
rendered hereunder, an annual investment advisory fee equal to 1% of the
average daily net assets of the Portfolio. The portion of the fee based upon
the average daily net assets of the Portfolio shall be accrued daily at the
rate of 1/365 of 1% applied to the daily net assets of the Portfolio. The
advisory fee so accrued shall be paid to the Adviser daily.
2. INDEMNIFICATION. Reference is hereby made to the Subadvisory
Contract dated August 1, 1994 between the Adviser and Templeton Investment
Counsel, Inc. (the "Subadvisory Contract"). All capitalized terms used
herein shall have the same meaning as used in the Subadvisory Contract. The
Adviser shall indemnify and hold the Portfolio harmless for acts or omissions
of Subadviser as a result of Subadviser's willful misfeasance, bad faith,
gross negligence, or reckless disregard of Subadviser's obligations or duties
under the Subadvisory Contract. In the absence of Subadviser's willful
misfeasance, bad faith, or gross negligence or reckless disregard of
Subadviser's duties, Adviser shall not be liable to the Fund or to the
Portfolio or to any shareholder of the Fund, or to any person, firm or
organization, for any act or omission in the course of or connected in any
way with rendering services or for any losses that may be sustained in the
purchase, holding, or sale of any security or other investment of the
Portfolio.
3. SALES LITERATURE. The Adviser acknowledges that all sales
literature for investment companies (such as the Portfolio) are subject to
strict oversight. The Adviser agrees to submit any proposed sales literature
for the Portfolio (including any sales literature that Adviser is aware that
is proposed to be used by the Subadviser), or for itself and its affiliates
that mentions the Portfolio to the Fund's distributor for review and filing
with the appropriate regulatory authorities prior to the public release of
any such sales literature; provided, however, that nothing herein shall be
construed so as to create any obligation or duty on the part of the Adviser
to produce sales literature for the Portfolio or Fund. The Fund agrees to
cause its distributor to promptly review all such sales literature to ensure
compliance with relevant requirements, to promptly notify Adviser of any
deficiencies contained in such sales literature, to promptly file complying
sales literature with the relevant authorities, and to cause such sales
literature to be distributed to prospective investors in the Portfolio.
Witness the due execution hereof this 1st day of August, 1994.
Attest: M & I INVESTMENT MANAGEMENT CORP.
/s/ Anthony R. Leszczymski By:/s/ David W. Schulz
Vice President President
Attest: MARSHALL FUNDS, INC.
/s/ Victor R. Siclari By: /s/ James F. Duca
Assistant Secretary President
Exhibit No. 9(vi) under Form N-1A
Exhibit No.10 under Item 601/Reg SK
Amendment #3
Dated AUGUST 1, 1994
to
Schedule A
Shareholder Services Agreement
between
MARSHALL FUNDS, INC.
and
MARSHALL & ILSLEY TRUST COMPANY
MARSHALL FUNDS, INC. (the "Corporation") consists of the following
portfolios and classes:
Name
MARSHALL BALANCED FUND
MARSHALL EQUITY INCOME FUND
MARSHALL GOVERNMENT INCOME FUND
MARSHALL INTERMEDIATE BOND FUND
MARSHALL MID-CAP STOCK FUND
MARSHALL MONEY MARKET FUND - TRUST AND INVESTMENT SHARES
MARSHALL SHORT-TERM INCOME FUND
MARSHALL STOCK FUND
MARSHALL TAX-FREE MONEY MARKET FUND
MARSHALL VALUE EQUITY FUND
MARSHALL SHORT-TERM TAX-FREE FUND
MARSHALL INTERMEDIATE TAX-FREE FUND
MARSHALL INTERNATIONAL STOCK FUND
ATTEST: MARSHALL FUNDS, INC.
/s/ Victor R. Siclari By: /s/ James F. Duca, II
Assistant Secretary President
ATTEST: MARSHALL & ILSLEY TRUST COMPANY
/s/ R. W. Mitchell By: /s/ James F. Duca, II
Vice President Vice President
Schedule B
Shareholder Services Agreement
2
between
MARSHALL FUNDS, INC.
and
MARSHALL & ILSLEY TRUST COMPANY
Compensation for Shareholder Services
For the services described in this Agreement, each Fund or class shall pay
the Trust Company an annual fee of .015 of 1% of its average daily net
assets. The Trust Company may voluntarily waive all or a portion of its fee
at any time without notice.
Exhibit No. 1(vi) under Form N-1A
Exhibit No. 3(a) under Item 601/Reg SK
MARSHALL FUNDS, INC.
Amendment No. 6
to
ARTICLES OF INCORPORATION
Dated July 30, 1992
THESE Articles of Incorporation are amended as follows:
Delete Section (a) of Article IV and substitute in its place the
following:
" (a) The Corporation is authorized to issue fifty billion
(50,000,000,000) shares of common stock, par value $.0001 per share.
Subject to the following paragraph, the authorized shares are classified as
follows:
Authorized
Number
Class Series of
Shares
Marshall Balanced Fund 1,000,000,000
Marshall Equity Income Fund 1,000,000,000
Marshall Government Income Fund 1,000,000,000
Marshall Intermediate Bond Fund 1,000,000,000
Marshall Mid-Cap Stock Fund 1,000,000,000
Marshall Money Market Fund A Shares 5,000,000,000
Marshall Money Market Fund B Shares 5,000,000,000
Marshall Short-Term Income Fund 1,000,000,000
Marshall Stock Fund
1,000,000,000
Marshall Value Equity Fund 1,000,000,000
Marshall Short-Term Tax-Free Fund 1,000,000,000
Marshall Intermediate Tax-Free Fund 1,000,000,000
Marshall International Stock Fund 1,000,000,000
The remaining 29,000,000,000 shares shall remain unclassified until action
is taken by the Board of Directors pursuant to the following paragraph."
The undersigned Secretary of Marshall Funds, Inc. certifies that the
above stated amendment is a true and correct Amendment to the Articles of
Incorporation, as adopted by the Directors of the Corporation as of the 24th
day of October, 1994, in accordance with Section 180.1002 of the Wisconsin
Business Corporation Law.
WITNESS the due execution hereof this 24th day of October, 1994.
/s/ Peter J. Germain
Peter J. Germain
Secretary
Prepared by: Victor R. Siclari
Federated Administrative Services
Federated Investors Tower
