Semi-Annual
Report
Dated February 28, 1997
Marshall Funds
M&I Investment Management Corp.
Invstment Advisor
TABLE OF CONTENTS
<TABLE>
<S> <C>
PRESIDENTS LETTER......................................................... 1
COMMENTARIES
Marshall Equity Income Fund............................................. 2
Marshall Value Equity Fund.............................................. 4
Marshall Stock Fund..................................................... 6
Marshall Mid-Cap Stock Fund............................................. 8
Marshall International Stock Fund....................................... 10
Marshall Small-Cap Stock Fund........................................... 12
Marshall Short-Term Income Fund......................................... 14
Marshall Intermediate Bond Fund......................................... 16
Marshall Government Income Fund......................................... 18
Marshall Intermediate Tax-Free Fund..................................... 20
Marshall Money Market Fund.............................................. 22
FINANCIAL INFORMATION
Portfolio of Investments................................................ 23
Marshall Equity Income Fund........................................... 23
Marshall Value Equity Fund............................................ 25
Marshall Stock Fund................................................... 26
Marshall Mid-Cap Stock Fund........................................... 28
Marshall International Stock Fund..................................... 29
Marshall Small-Cap Stock Fund......................................... 32
Marshall Short-Term Income Fund....................................... 33
Marshall Intermediate Bond Fund....................................... 35
Marshall Government Income Fund....................................... 36
Marshall Intermediate Tax-Free Fund................................... 37
Marshall Money Market Fund............................................ 40
Statements of Assets and Liabilities.................................... 44
Statements of Operations................................................ 46
Statements of Changes in Net Assets..................................... 48
Financial Highlights.................................................... 52
Notes to Financial Statements........................................... 54
DIRECTORS & OFFICERS...................................................... 62
</TABLE>
[ ] MARSHALL FUNDS
Dear Shareholder:
I am pleased to present the Marshall Funds Semi-Annual Report for the period
ended February 28, 1997.
We have made some changes to the report in an effort to make it more
informative and easy to read. The performance chart below lists each fund's
average annual total return and Morningstar ratings. We have also included a
table of contents to help you locate your fund quickly.
The Marshall Funds are a family of 11 no-load mutual funds. We invite you to
review all our fund commentaries to become familiar with the funds we have to
offer. We hope you consider additional Marshall Funds when assessing your
financial goals.
If you have any questions about your account or any of our funds, please call
us at 1-800-236-3863. We look forward to continuing to help you pursue your
financial goals.
Sincerely,
/s/ James F. Duca, II
James F. Duca, II
President
<TABLE>
<CAPTION>
MORNINGSTAR MORNINGSTAR
AVERAGE ANNUAL TOTAL RETURNS (3/31/97)/4/ 3-YEAR 1-YEAR
MARSHALL FUNDS SINCE INCEPTION RATING/5/ RATING/5/
1-YEAR 3-YEAR INCEPTION DATE (3/31/97) (3/31/97)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EQUITY FUNDS:/1/
Equity Income Fund 18.07% 19.95% 15.44% 9/30/93 ***** ****
Value Equity Fund 7.14% 14.99% 12.23% 9/30/93 *** ***
Stock Fund 16.51% 15.69% 10.47% 11/20/92 *** ****
Mid-Cap Stock Fund -0.52% 13.69% 10.24% 9/30/93 ** **
International Stock Fund 17.95% n/a 10.67% 9/1/94 n/a n/a
Small-Cap Stock Fund/6/ 8.16% n/a 37.96% 11/1/95 n/a n/a
- -----------------------------------------------------------------------------------------------------
INCOME FUNDS:
Short-Term Income Fund/2/ 5.45% 5.36% 4.67% 11/1/92 **** ****
Intermediate Bond Fund/2/ 4.58% 5.36% 5.01% 11/20/92 *** ***
Government Income Fund/2/ 4.95% 6.09% 5.24% 12/13/92 *** ***
Intermediate Tax-Free Fund/3/ 4.27% 5.19% 3.83% 2/2/94 **** ****
- -----------------------------------------------------------------------------------------------------
Money Market Fund
(Class A Shares) 5.24% 5.22% 4.53% 11/22/92 n/a n/a
</TABLE>
1 There were 1919 and 3048 funds in Morningstar's domestic equity category for
the 3- and 1-year periods, respectively.
2 There were 1172 and 1696 funds in Morningstar's taxable bond category for the
3- and 1-year periods, respectively.
3 There were 1237 and 1751 funds in Morningstar's municipal bond category for
the 3- and 1-year periods, respectively.
4 Past performance does not guarantee future results. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
5 Morningstar proprietary ratings reflect historical risk-adjusted performance.
They are subject to change every month. Past performance is no guarantee of
future results. Ratings are calculated from the Funds' 3-, 5- and 10-year
average annual returns in excess of 90-day Treasury bill returns with
appropriate fee adjustments, and a risk factor that reflects Fund performance
below 90-day Treasury bill returns. The 1-year rating is calculated using the
same methodology, but is not a component of the overall rating. Ten percent
of funds in a rating universe receive 5 stars, the next 22.5% receive 4
stars, 35% receive 3 stars, 22.5% receive 2 stars and 10% receive 1 star.
6 The Marshall Small-Cap Stock Fund is the successor to a collective trust
fund. The quoted performance data includes performance of the collective
trust fund for periods before the Fund's registration statement became
effective on August 30, 1996, as adjusted to reflect the Fund's anticipated
expenses. 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 imposed by the 1940 Act. If the collective trust fund
had been registered under the 1940 Act, the performance may have been
adversely affected. Small-cap funds may experience a higher degree of
volatility than others.
No Bank Guarantee Not FDIC Insured May Lose Value
SEMI-ANNUAL REPORT--COMMENTARY
[ ]
MARSHALL EQUITY INCOME FUND
The Marshall Equity Income Fund (the "Fund") seeks capital appreciation and
current income through a disciplined approach of investing in a broadly
diversified portfolio of common stocks with above-average dividend yields. The
portfolio is structured to pursue a yield at least 100 basis points (1%) more
than the Standard & Poor's 500 Index ("S&P 500").*
FUND RECOGNIZED FOR PERFORMANCE AND YIELD.
For the six-month period ended February 28, 1997, the Fund provided a total
return of 19.00%**, compared to 17.57% provided by the Lipper Equity Income
Funds Index (LEIFI).* On February 28, 1997, the yield of the portfolio was
3.51%, and the Fund's SEC 30-day yield+ (total income less fees and expenses)
was 2.25%.** At the same time, the S&P 500 was yielding a historic low 1.90%.
As of 3/31/97, the Fund was awarded the highest rating--five stars--for its
overall performance by Morningstar++ and was recognized in Fortune magazine's
Investors' Guide '97 for its performance over the three years ended October 31,
1996.
STICKING WITH A SUCCESSFUL FORMULA.
Over the last six months, the Fund has benefited from a strong exposure to
financial, tobacco and pharmaceutical stocks. The top performing stocks
included H.F. Ahmanson up 64.5%, Philip Morris up 49.7%, and Bristol Myers
Squibb up 48.7%. We continued to maintain an overweighted position in energy
stocks and a full weighted position in financials and drugs.
DISCIPLINED APPROACH HELPS TO MINIMIZE VOLATILITY.
Today, the stock market as measured by the S&P 500 is trading at all-time highs
on the basis of price and all-time lows based on dividend yield. Investing in
attractively priced stocks of companies paying above-average dividends is the
cornerstone of our disciplined investment approach. The Fund provided solid
results in the strong bull market years of 1995 and 1996.
Equally important, however, our investment style achieved these results with a
low-risk profile. Of course, any investment involves risk, including the
possible loss of principal. The portfolio's above-average dividend yield
combined with its low historical volatility should help reassure our investors
that participation in any further market advance will be built around an
investment style designed to protect their assets on the downside.
Sincerely,
/s/ Bruce P. Hutson
Bruce P. Hutson
Manager, Marshall Equity Income Fund
`Graphic representation ``1A'' omitted. See Appendix.'' [PHOTO]
++As of 3/31/97, there were 1919, 1919, and 3048 funds in Morningstar's
domestic equity category for the overall, 3- and 1-year periods, respectively.
The Fund received four stars for the 1-year period ended 3/31/97. Morningstar
proprietary ratings reflect risk-adjusted performance and are subject to
change every month. Overall ratings are calculated from a fund's 3-, 5-, and
10-year average annual returns. 10% of the funds in an investment category
receive 5 stars, the next 22% receive 4 stars.
[ ] MARSHALL EQUITY INCOME FUND
`Graphic representation ``2A'' omitted. See Appendix.''
`Graphic representation ``3A'' omitted. See Appendix.''
This graph illustrates the hypothetical investment of $10,000 in the Fund from
its
inception on September 30, 1993 to February 28, 1997, compared to the S&P 500
and the LEIFI.*
- --------------------------------------------------------------------------------
*The S&P 500 and LEIFI are not adjusted to reflect sales loads, expenses or
other fees that the SEC requires to be reflected in a mutual fund's
performance. These indices are unmanaged. Actual investments may not be made
in an index. The S&P 500 is a composite index measuring changes in stock
market conditions based on the average performance of 500 widely held common
stocks in industry, transportation, financial and public utility. Lipper
figures represent an average of the total returns reported by 30 of the
largest mutual funds designated by Lipper Analytical Services, Inc. as falling
into the respective categories indicated.
**Past performance is not indicative of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they
may be worth more or less than original cost.
***Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions. The
S&P 500 and LEIFI have been adjusted to reflect reinvestment of dividends on
securities in the indices.
+Current gross portfolio yield is calculated by annualizing the total of the
most recent dividend payments of the securities owned by the Fund at the end
of the period and dividing by the Fund's net asset value as of the last day of
the period. The 30-day current net yield is calculated by dividing the net
investment income per share for the 30 days ended on the date of calculation
by the maximum offering price per share on that date. The figure is compounded
and annualized.
SEMI-ANNUAL REPORT--COMMENTARY
[ ]
MARSHALL VALUE EQUITY FUND
The Marshall Value Equity Fund (the "Fund") uses a value-oriented approach to
purchasing common stocks within a mid-to-large market capitalization range. The
stocks purchased are typically characterized as being undervalued, out of favor
or neglected.
VALUE APPROACH SOMETIMES COUNTERS MARKET MOMENTUM.
For the six-month period ended February 28, 1997, the Fund provided a total
return of 12.57%.* For the same period, the Standard & Poor's 500 Index ("S&P
500")** returned 22.55%.
While the Fund underperformed the S&P 500 for this period, it bears reiterating
that the Fund's investment style does not necessarily move with market
momentum, either on the upside or downside. As a result, the Fund's performance
may lag in up markets but out-perform the index in down markets. In December
1996, for instance, the market's total return was down 1.98% while the Fund
returned a positive 1.33%.*
PATIENCE WAS REWARDED.
The market continued to reward large-cap names that exhibit positive price
momentum. The Fund uses a pure stock-picking approach, with no emphasis placed
on sector rotation or group momentum. We buy out-of-favor, undervalued stocks
and patiently wait for the company to benefit from the changes it has
implemented to enhance profitability. We sell when positive momentum once again
takes the stock to valuation levels beyond normal historical ranges.
A few stocks that proved to be worth the wait during this six-month period
were:
.. Acuson Corp., up 105%, benefiting from the increasingly positive capital
spending cycle and from increased market share from its new ultrasound
products.
.. Trizec Hahn, up 76%, whose combination with Horsham Corp. has provided the
cash flow necessary to make major real estate acquisitions.
.. Allstate Corp., up 42% as a result of progress on its restructuring goals,
including a reduction in catastrophe exposure.
While the market continues to drift to large-cap growth stocks that dominate
the S&P 500, we feel our disciplined approach of strong fundamental research
will help us identify additional opportunities in undervalued stocks.
Sincerely,
/s/ Gerry M. Sandel
Gerry M. Sandel
Manager, Marshall Value Equity Fund
`Graphic representation ``1B'' omitted. See Appendix.'' [PHOTO]
[ ] MARSHALL VALUE EQUITY FUND
`Graphic representation ``2B'' omitted. See Appendix.''
`Graphic representation ``3B'' omitted. See Appendix.''
This graph illustrates the hypothetical investment of $10,000 in the Fund from
its inception
on September 30, 1993 to February 28, 1997, compared to the S&P 500 and the
LGIFI.**
- --------------------------------------------------------------------------------
*Past performance is not indicative of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they
may be worth more or less than original cost.
**The S&P 500 and LGIFI are not adjusted to reflect sales loads, expenses or
other fees that the SEC requires to be reflected in a mutual fund's
performance. These indices are unmanaged. Actual investments may not be made
in an index. The S&P 500 is a composite index measuring changes in stock
market conditions based on the average performance of 500 widely held common
stocks in industry, transportation, financial and public utility. Lipper
figures represent an average of the total returns reported by 30 of the
largest mutual funds designated by Lipper Analytical Services, Inc. as falling
into the respective categories indicated.
***Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions. The
S&P 500 and LGIFI have been adjusted to reflect reinvestment of dividends on
securities in the indices.
SEMI-ANNUAL REPORT--COMMENTARY
[ ]
MARSHALL STOCK FUND
The Marshall Stock Fund (the "Fund") invests in large capitalization stocks
with a growth and income orientation. The Fund holdings are well diversified,
with representation in the major sectors of the economy. Companies held are
typically leaders in their respective industries and have records of above-
average financial performance and proven superior management.
STOCK FUND PROVIDED OUTSTANDING RETURN.
For the six-month period ended February 28, 1997, the Fund provided total
return of 21.04%,* compared to 22.55% for the Standard & Poor's 500 Index ("S&P
500")** and the Lipper Growth and Income Funds Index (LGIFI)** return of
18.65%.
LARGE STOCKS CONTINUED TO DOMINATE.
While the S&P 500 returned 22.55%, it is interesting to note than an equal
weighted S&P returned 15.65%, indicating that a narrow group of large
capitalization stocks continued to dominate the market's overall performance.
However, this select group of stocks continued to deliver on the earnings front
and have yet to disappoint investors. The Fund's focus on first tier companies,
such as Microsoft, Merck, Philip Morris and
American International Group, to name a few--helped boost our performance over
the past six months.
A positive interest rate environment over the last six months boosted the S&P
Financial Index** 36.43% over the same period. The overweighting in the
financial sector contributed to the Fund's total return. Finally, the Fund
intends to continue to underweight the technology sector.
CONFIDENCE IN OUR DIVERSIFIED APPROACH.
The Fund's focus tends to be on the larger, more dominant company that can
generate free cash flow and deliver on the earnings front. We maintain that a
diversified portfolio continues to be the best strategy, given the ebbs and
flows of popular opinion on the economy, interest rates, and the fleeting
popularity of various market groups. The market has not been rewarding
investors for making big bets.
Sincerely,
/s/ William J. O'Connor
William J. O'Connor
Manager, Marshall Stock Fund
`Graphic representation ``1C'' omitted. See Appendix.'' [PHOTO]
[ ] MARSHALL STOCK FUND
`Graphic representation ``2C'' omitted. See Appendix.''
`Graphic representation ``3C'' omitted. See Appendix.''
This graph illustrates the hypothetical investment of $10,000 in the Fund from
its
inception on November 20, 1992 to February 28, 1997, compared to the S&P 500
and the LGIFI.**
- --------------------------------------------------------------------------------
*Past performance is not indicative of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they
may be worth more or less than original cost.
**The S&P 500 and LGIFI are not adjusted to reflect sales loads, expenses or
other fees that the SEC requires to be reflected in a mutual fund's
performance. These indices are unmanaged. Actual investments may not be made
in an index. S&P 500 is a composite index of common stocks in industry,
transportation, financial and public utility. S&P's Financial Index is a
capitalization-weighted index of all stocks designed to measure the
performance of the financial sector of the S&P 500. Lipper figures represent
an average of the total returns reported by 30 of the largest mutual funds
designated by Lipper Analytical Services, Inc. as falling into the respective
categories indicated.
***Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions. The
S&P 500 and LGIFI have been adjusted to reflect reinvestment of dividends on
securities in the indices.
SEMI-ANNUAL REPORT--COMMENTARY
[ ]
MARSHALL MID-CAP STOCK FUND
The Marshall Mid-Cap Stock Fund's (the "Fund") goal is to seek capital
appreciation by investing in companies with market capitalizations between $200
million and $7.5 billion that are exhibiting strong financial characteristics
and expected growth significantly above the average corporation.
RETURN REFLECTS OUR AGGRESSIVE GROWTH STRATEGY.
For the six-month period ended February 28, 1997, the Fund provided a total
return of 1.77%*, compared to the Standard & Poor's Mid-Cap 400 Stock Price
Index (SPMC)** total return of 13.89%. The SPMC has a significant exposure to
utilities, which does not conform to our aggressive growth strategy. The lack
of dividend support within our portfolio significantly affected our return.
PERFORMANCE REFLECTS MARKET SHIFT.
The major factor that contributed to the Fund's performance this period was a
significant shift in the marketplace to large-cap stocks. Investors were much
more willing to pay larger multiples of price to earnings (P/E) ratios for the
General Electrics and Coca-Colas. The exact opposite occurred in the small-cap
market, where selling pressure created multiple compression.
REAFFIRMING OUR SUCCESSFUL STRATEGY.
In response, the Fund has increased its exposure to specialty finance stocks
that have growth
characteristics, such as Sirrom Capital and The Money Store. In the energy
sector, we have created an exposure to companies that are benefiting from the
growth of off-shore exploration, such as ENSCO. We have increased our exposure
in health care, which we feel will provide very positive opportunities in 1997.
We are also looking for opportunities in consumer-sensitive areas, and have
added to our position in Kohl's Department Stores.
Over the next six months, we do not intend to deviate from the growth strategy
that made us successful for the last two years. The market shift has created
more values in the small- and mid-cap arena, and we are cautiously optimistic
that they will begin to perform better in the not too distant future.
Sincerely,
/s/ Steve D. Hayward
Steve D. Hayward
Manager, Marshall Mid-Cap Stock Fund
`Graphic representation ``1D'' omitted. See Appendix.'' [PHOTO]
[ ] MARSHALL MID-CAP STOCK FUND
`Graphic representation ``2D'' omitted. See Appendix.''
`Graphic representation ``3D'' omitted. See Appendix.''
This graph illustrates the hypothetical investment of $10,000 in the Fund from
its
inception on September 30, 1993 to February 28, 1997, compared to the SPMC and
the LMCFI.**
- --------------------------------------------------------------------------------
*Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they
may be worth more or less than original cost.
**The SPMC and the LMCFI are not adjusted to reflect sales loads, expenses or
other fees that the SEC requires to be reflected in a mutual fund's
performance. These indices are unmanaged. Actual investments may not be made
in an index. SPMC is a composite index of 400 common stocks with market
capitalizations between $200 million and $7.5 billion in industry,
transportation, financial and public utility. Lipper figures represent the
average of the total returns reported by 30 of the largest mutual funds
designated by Lipper Analytical Services, Inc. as falling into the respective
categories indicated.
***Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions. The
SPMC and LMCFI have been adjusted to reflect reinvestment of dividends on
securities in the indices.
SEMI-ANNUAL REPORT--COMMENTARY
[ ]
MARSHALL INTERNATIONAL STOCK FUND
The Marshall International Stock Fund (the "Fund"), which is sub-advised by
Templeton Investment Counsel, Inc., seeks long-term capital appreciation
through a flexible policy of investing in stocks and debt obligations of
companies and governments outside the United States.+
FUND CONTINUED OUTSTANDING PERFORMANCE.
For the six-month period ended February 28, 1997, the Fund provided a total
return of 12.69%,* compared to a total return of 2.29% by the Morgan Stanley
Capital International Europe, Australia and Far East Index ("EAFE Index").**
VALUE SELECTION PROVES CRITICAL.
The Fund continued to outperform the index primarily because of our low
exposure in Japan. While we still use Japan as a universe of opportunity, we
are currently unable to find bargains there compared with the rest of the
world. We maintain a positive outlook and continue to seek opportunities in
Japan that are consistent with our value-based philosophy.
We were, however, overweighted in markets that performed exceptionally well,
including Spain, Sweden, France, Hong Kong and Brazil. Telebras, the Brazilian
telephone company, has grown into one of our larger holdings due to price
appreciation which was driven by the positive trend in privatization and
deregulation of the Brazilian telephone industry.
WE BELIEVE BARGAINS STILL EXIST IN WESTERN EUROPE AND EMERGING MARKETS.
Banks have done well on a global basis, but are becoming fully valued in Europe
and Australia, resulting in our sale of financials in Sweden and Spain. On the
other hand, HSBC Holdings, a Hong Kong financial, is well positioned to benefit
from the growing Asian economy. Our exposure in Hong Kong should remain high,
as we feel the long-term fundamentals remain sound despite the June 1997
handover of the British colony to China.
We have also added Fiat, which is benefiting from brisk sales of new models,
and Canadian Imperial Bank, which is profiting from restructuring and lower
interest rates.
It is interesting to note that our bargain list has a near historic low level
of U.S. securities, highlighting the point that international markets can offer
greater value opportunities than the U.S. We will continue to invest in
companies that come onto our bargain list, with an emphasis on significant new
opportunities in the United Kingdom and South Korea.
Sincerely,
/s/ Gary R. Clemons
Gary R. Clemons
Manager, Marshall International Stock Fund
`Graphic representation ``1E'' omitted. See Appendix.''
[ ] MARSHALL INTERNATIONAL STOCK FUND
`Graphic representation ``2E'' omitted. See Appendix.''
`Graphic representation ``3E'' omitted. See Appendix.''
This graph illustrates the hypothetical investment of $10,000 in the Fund from
its
inception on September 1, 1994 to February 28, 1997, compared to the EAFE Index
and the LIFI.**
- --------------------------------------------------------------------
+Foreign investing involves special risks including currency risk, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
*Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they
may be worth more or less than original cost.
**The EAFE Index and the LIFI are not adjusted to reflect sales loads, expenses
or other fees that the SEC requires to be reflected in a mutual fund's
performance. These indices are unmanaged. Actual investments may not be made
in an index. The EAFE Index is a market capitalization-weighted foreign
securities index, which is widely used to measure the performance of
European, Australian and New Zealand, and Far East stock markets. Lipper
figures represent the average of the total returns reported by 30 of the
largest mutual funds designated by Lipper Analytical Services, Inc. as
falling into the respective categories indicated.
***Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions. The
EAFE Index and LIFI have been adjusted to reflect reinvestment of dividends
on securities in the indices.
SEMI-ANNUAL REPORT--COMMENTARY
[ ]
MARSHALL SMALL-CAP STOCK FUND
The Marshall Small-Cap Stock Fund (the "Fund") seeks capital appreciation by
investing in stocks issued by smaller-sized companies. The Fund focuses on
high-growth companies with market capitalizations as high as $1 billion and as
low as $150 million to $200 million.
SIX-MONTH PERFORMANCE.
For the six-month period ended February 28, 1997, the Fund provided a total
return of 0.14%.* During the same period, the Russell 2000 Index ("Russell
2000")** returned 8.79%.
MARKET MIGRATION CREATES PRICING DISPARITY.
The small-cap sector experienced a significant correction last July and August
and has continued to underperform large-caps ever since. Liquidity issues have
exasperated this performance differential as investors flock to large, "safe"
domestic companies, bidding up valuations in the process. Looking at the market
today, we believe many small-cap stocks are attractively valued relative to the
overall market.
While there were fundamental disappointments at a few of the companies in the
portfolio, the majority continued to meet or exceed growth and earnings
expectations. In most cases, however, the market did not reward strong
fundamentals with strong price appreciation. That was the case with Apollo
Group, Landry's Seafood, Regal Cinemas and Transaction Systems Architects. Each
of these companies maintained 30%+ earnings growth during the period without a
positive response in stock prices.
MAKING CHANGES IN THE MIX.
Aiding the positive move in the Russell 2000 was the significant exposure to
financial stocks, which
comprise 26% of the Index. We have maintained an underweighted position in this
area, as many financial stocks do not meet our growth criteria. While we feel
many bank stocks are extended, we have and will continue to own specialty
finance stocks that provide above-average growth, including Sirrom Capital and
Redwood Trust.
In the energy sector, we have increased our exposure to roughly 8%, primarily
in the services sector, with companies such as Camco International and Offshore
Logistics.
WE ANTICIPATE THAT A SHIFT BACK TO SMALL CAPS COULD OCCUR.
While the last six months have not favored small-cap stocks, we believe such
periods are a normal part of investing in this sector. This has created
valuation disparities that represent very attractive investment opportunities
in some of the most rapidly growing domestic companies. We remain committed to
our strategy of investing in quality, rapidly growing companies, and we believe
this will reward our investors over time.
Sincerely,
/s/ Steven D. Hayward
Steven D. Hayward
Co-Manager, Marshall Small-Cap Stock Fund
/s/ David J. Lettenberger
David J. Lettenberger
Co-Manager, Marshall Small-Cap Stock Fund
`Graphic representation ``1F'' omitted. See Appendix.'' [PHOTO]
[ ] MARSHALL SMALL-CAP STOCK FUND
`Graphic representation ``2F'' omitted. See Appendix.''
`Graphic representation ``3F'' omitted. See Appendix.''
This graph illustrates the hypothetical investment of $10,000 in the Fund from
its
inception on November 1, 1995+ to February 28, 1997, compared to the Russell
2000 and the LSCFI.**
- --------------------------------------------------------------------
* Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate, so when shares are redeemed, they
may be worth more or less than original cost.
** The Russell 2000 and LSCFI are not adjusted to reflect sales loads, expenses
or other fees that the SEC requires to be reflected in a mutual fund's
performance. These indices are unmanaged. Actual investments may not be made
in an index. Lipper figures represent the average of the total returns
reported by 30 of the largest mutual funds designated by Lipper Analytical
Services, Inc. as falling into the respective categories indicated. The
Russell 2000 is an index of common stocks whose market capitalizations
generally range from $200 million to $5 billion. Small-cap funds may
experience a higher degree of market volatility.
*** Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions.
The Russell 2000 and LSCFI have been adjusted to reflect reinvestment of
dividends on securities in the indices.
+ The Marshall Small-Cap Stock Fund is the successor to a collective trust
fund. The quoted performance data includes performance of the collective
trust fund for periods before the Fund's registration statement became
effective on August 30, 1996, as adjusted to reflect the Fund's anticipated
expenses. 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 imposed by the 1940 Act. If the collective trust fund
had been registered under the 1940 Act, the performance may have been
adversely affected. Small-cap funds may experience a higher degree of
volatility than others.
SEMI-ANNUAL REPORT--COMMENTARY
[ ]
MARSHALL SHORT-TERM INCOME FUND
The Marshall Short-Term Income Fund (the "Fund") seeks to maximize total return
consistent with current income, while minimizing price fluctuation. The Fund
invests in a diversified portfolio of short- to intermediate-term high-grade
bonds and notes.
FUND COMPARED FAVORABLY TO BENCHMARKS.
For the six-month period ended February 28, 1997, the Fund provided a total
return of 3.61%,* compared to 2.42% for the IBC/Donoghue's Taxable Money Fund
Average (DMFA)** and 3.54% provided by the Merrill Lynch 1-3 Year U.S. Treasury
Index.**
NO REWARDS FOR LONGER DURATIONS.
Yield continued to be a critical factor in managing performance for short-term
funds. We maintained a heavy overweighting in asset-backed and mortgage-backed
securities to maximize yield in this narrow trading range environment.
An equally critical dynamic is the steepness of the short end of the yield
curve. Currently, investors going from one year to two years are rewarded with
45 basis points; from two years to three the advantage narrows to 15 basis
points. We expect the short end of the yield curve will get even steeper as the
market reacts to anticipated Federal Reserve Board activity.
THE FUND INTENDS TO CONTINUE TO STRESS YIELD.
In light of a mature economic cycle and stagnant bond prices, the Fund will
continue to employ a more defensive posture, emphasizing yield as the dominant
component of total return. We anticipate that asset-backed and mortgage-backed
securities will continue to provide the yield and low volatility we are looking
for.
Sincerely,
/s/ Mark D. Pittman
Mark D. Pittman
Manager, Marshall Short-Term Income Fund
`Graphic representation ``1G'' omitted. See Appendix.'' [PHOTO]
[ ] MARSHALL SHORT-TERM INCOME FUND
`Graphic representation ``2G'' omitted. See Appendix.''
`Graphic representation ``3G'' omitted. See Appendix.''
The graph illustrates the hypothetical investment of $10,000 in the Fund from
its
inception on November 1, 1992 to February 28, 1997, compared to LSTIBI, DMFA,
and STFB.**
- --------------------------------------------------------------------------------
* Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they
may be worth more or less than original cost.
** The LSTIBI, DMFA, and STFB are not adjusted to reflect sales loads,
expenses, or other fees that the SEC requires to be reflected in a mutual
fund's performance. These indices are unmanaged. Actual investments may not
be made in an index. IBC/Donoghue's Money Fund Report(TM) publishes
annualized yields of hundreds of money market funds on a weekly basis and
through its Money Market Insight publication reports monthly and year-to-
date investment results for the same money funds. The Merrill Lynch 1-3 Year
U.S. Treasury Index is an index tracking short-term U.S. government
securities with maturities between 1 and 2.99 years. The index is produced
by Merrill Lynch, Pierce, Fenner & Smith, Inc. The STFB consists of a
weighted average of 50% DMFA and 50% Lehman Brothers 1-3 Year Government
Bond Index. Lipper figures represent the average of the total returns
reported by 30 of the largest mutual funds designated by Lipper Analytical
Services, Inc. as falling into the respective categories indicated.
*** Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions.
The LSTIBI, DMFA, and STFB have been adjusted to reflect reinvestment of
dividends on securities in the indices.
SEMI-ANNUAL REPORT--COMMENTARY
[ ]
MARSHALL INTERMEDIATE BOND FUND
The goal of the Marshall Intermediate Bond Fund (the "Fund") is to maximize
total return consistent with current income. The Fund primarily buys high-grade
bonds and notes with a maturity of 3 to 10 years.
THE FUND OUTPERFORMED THE BENCHMARK.
For the six-month period ended February 28, 1997, the Fund provided a total
return of 4.62%,* compared to a return of 4.48% by the Lehman Brothers
Intermediate Government/Corporate Bond Index (LGCI).**
STRATEGY FOCUSED ON MAXIMIZING YIELD.
In the latter half of 1996, interest rates fell into a narrow trading range,
forcing the Fund to concentrate on maximizing the portfolio's yield to enhance
return. For most of that period we were overweighted in mortgage-backed
securities and corporate bonds, and were able to benefit from subsequent
tightening of the spreads on both. We have also had a full allocation in the
bank and brokerage sectors which have been strong performers.
REACTING TO NARROW SPREADS ON CORPORATE BONDS.
More recently, the Fund has concentrated on upgrading quality and reducing some
of the corporate bond exposure. While corporates have performed exceedingly
well, spreads are very narrow. It is not a question of which way they will go;
rather, it is a question of when. While we do not want to jump ship until we
see the torpedo, we have started to take profits and reduce overall corporate
exposure.
Going forward, we anticipate interest rates to move toward the upper end of
their trading range. Accordingly, the Fund intends to maintain an interest rate
exposure that is in line with the index and will attempt to maximize yield
where possible.
Sincerely,
/s/ Mark D. Pittman
Mark D. Pittman
Manager, Marshall Intermediate Bond Fund
`Graphic representation ``1H'' omitted. See Appendix.'' [PHOTO]
[ ] MARSHALL INTERMEDIATE BOND FUND
`Graphic representation ``2H'' omitted. See Appendix.''
`Graphic representation ``3H'' omitted. See Appendix.''
This graph illustrates the hypothetical investment of $10,000 in the Fund from
its
inception on November 20, 1992 to February 28, 1997, compared to the LGCI and
the LIBF.**
- --------------------------------------------------------------------------------
*Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they
may be worth more or less than original cost.
**The LGCI and the LIBF are not adjusted to reflect sales loads, expenses or
other fees that the SEC requires to be reflected in a mutual fund's
performance. These indices are unmanaged. Actual investments may not be made
in an index. LGCI is an index comprised of government and corporate bonds
rated BBB or higher with maturities between 1-10 years. Lipper figures
represent the average of the total returns reported by 30 of the largest
mutual funds designated by Lipper Analytical Services, Inc. as falling into
the respective categories indicated.
***Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions. The
LGCI and the LIBF have been adjusted to reflect reinvestment of dividends on
securities in the indices.
SEMI-ANNUAL REPORT--COMMENTARY
[ ]
MARSHALL GOVERNMENT INCOME FUND
The Marshall Government Income Fund (the "Fund") seeks to generate a high level
of current income while maximizing total return with moderate share-value
volatility. Strategies are focused on the investment opportunities within the
mortgage-backed securities market, in particular the government agency-backed,
whole loan and home equity loan sectors of the mortgage market.
MORTGAGE FUNDS PROVIDED IMPRESSIVE RETURN.
For the six-month period ended February 28, 1997, the Fund provided a total
return of 5.01%,* compared to the Lehman Brothers Mortgage-Backed Securities
Index (LMI)** return of 5.73%.
MORTGAGE-BACKED AND CORPORATE SECURITIES WERE HIGHLY VALUED.
Mortgages continued to perform well compared to other asset classes. Interest
rates have been in a well-defined trading range for the past six months, with
the absolute level of rates having risen only 10 or 15 basis points since
August 1996. In this environment, we are maintaining a relatively neutral
stance on duration and seeking out higher yielding investments. Accordingly,
the market is buying more corporates, asset-backed and mortgage-backed
securities, creating very favorable demand for mortgages.
With corporates and mortgages nearing their highest valuation, however, we have
gradually begun to add some structured products, including PACs, pass-throughs
and sequential bonds. While we have been a bit early and spreads have yet to
tighten, we are confident this strategy will help lessen our risk should rates
decline.
THE OUTLOOK IS GOOD FOR BONDS.
Our expectations for the market are favorable for the next three to six months.
We will continue to use yield-enhancing strategies and maintain neutral
duration as long as the market continues to trade in a range. In the long run,
if the Federal Reserve Board finds it necessary to raise rates, the mortgage
market should benefit. If the economy begins to slow and interest rates fall
later this year, refinancing activity should pick up. We are prepared to make
portfolio adjustments by adding Treasuries if that scenario plays out.
Sincerely,
/s/ Lawrence J. Pavelec
Lawrence J. Pavelec
Manager, Marshall Government Income Fund
`Graphic representation ``1I'' omitted. See Appendix.'' [PHOTO]
[ ] MARSHALL GOVERNMENT INCOME FUND
`Graphic representation ``2I'' omitted. See Appendix.''
`Graphic representation ``3I'' omitted. See Appendix.''
This graph illustrates the hypothetical investment of $10,000 in the Fund from
its
inception on December 13, 1992 to February 28, 1997, compared to the LMI and
the LUSMI.**
- --------------------------------------------------------------------------------
*Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they
may be worth more or less than original cost.
**The LMI and LUSMI are not adjusted to reflect sales loads, expenses or other
fees that the SEC requires to be reflected in a mutual fund's performance.
These indices are unmanaged. Actual investments may not be made in an index.
LMI is an index comprised of fixed rate securities backed by mortgage pools
of Government National Mortgage Association (GNMA), Federal Home Loan
Mortgage Corp. (FHLMC) and Federal National Mortgage Association (FNMA).
Lipper figures represent the average of the total returns reported by 30 of
the largest mutual funds designated by Lipper Analytical Services, Inc. as
falling into the respective categories indicated.
***Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions. The
LMI and LUSMI have been adjusted to reflect reinvestment of dividends on
securities in the indices.
SEMI-ANNUAL REPORT--COMMENTARY
[ ]
MARSHALL INTERMEDIATE TAX-FREE FUND
The primary goal of the Marshall Intermediate Tax-Free Fund (the "Fund") is to
generate income that is exempt from federal income tax.+ For the past six
months, high-tax-bracket shareholders enjoyed not only the benefits of
municipal interest, but an upward price per share move as well, as interest
rates declined.
RETURN EXCEEDED BENCHMARK AND MARKET.
For the six-month period ended February 28, 1997, the Fund provided a total
return of 4.38%,* comparing favorably to the 3.97% benchmark return of the
Lehman Brothers 5-Year General Obligations Index (L5GO).** The market, as
represented by the Lipper Intermediate Municipal Funds Index (LIMI)** provided
a 3.95% total return.
MARKET RESPONDS TO CREDIT QUALITY AND INTEREST RATE VOLATILITY.
The municipal bond market environment can now be characterized by a few
discernible factors. The election ended with the virtual elimination of any
lingering tax reform fears. The strength of the equity market attracted most
new cash flow, even though the rally in bonds during the second half of the
year brought municipal rates back to their starting point.
Credit quality continued to improve as evidenced by numerous credit rating
upgrades, an obvious by-product of continued economic growth. For those issuers
of lower
quality, the availability of bond insurance allowed for interest cost savings
and increased market liquidity. Overall market sensitivity to economic data
remains the dominant cause of interest rate volatility.
LONGER DURATION STRATEGY CAN ENHANCE YIELD.
Our recent strategy includes a modest extension of average maturities,
continued swaps to higher quality paper, and efforts to eliminate callable,
defensive bond structures. Although the past strategy of buying on weakness
should continue, we remain vigilant to future Federal Reserve Board action. Any
evidence of certain monetary policy tightening will trigger a defensive
reaction and a reduction in portfolio average maturity.
For the present, the steepness of the municipal yield curve allows for
substantial yield pick-up by moving out further in the maturity spectrum.
Absent any economic boom, this emphasis should continue to reap benefits for
our shareholders.
Sincerely,
/s/ John D. Boritzke
John D. Boritzke
Manager, Marshall Intermediate Tax-Free Fund
`Graphic representation ``1J'' omitted. See Appendix.'' [PHOTO]
+Income may be subject to the federal alternative minimum tax and state and
local taxes.
[ ] MARSHALL INTERMEDIATE TAX-FREE FUND
`Graphic representation ``2J'' omitted. See Appendix.''
`Graphic representation ``3J'' omitted. See Appendix.''
This graph illustrates the hypothetical investment of $10,000 in the Fund from
its inception on February 2, 1994 to February 28, 1997, compared to the L5GO
and the LIMI.**
- --------------------------------------------------------------------------------
*Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they
may be worth more or less than original cost.
**The L5GO and LIMI are not adjusted to reflect sales loads, expenses or other
fees that the SEC requires to be reflected in a mutual fund's performance.
These indices are unmanaged. Actual investments may not be made in an index.
L5GO is an index comprised of all state general obligation debt issues with
maturities between four and six years. Lipper figures represent the average
of the total returns reported by 30 of the largest mutual funds designated by
Lipper Analytical Services, Inc. as falling into the respective categories
indicated.
***Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions. The
L5GO and LIMI have been adjusted to reflect reinvestment of dividends on
securities in the indices.
SEMI-ANNUAL REPORT--COMMENTARY
[ ]
MARSHALL MONEY MARKET FUND
The goal of the Marshall Money Market Fund (the "Fund") is to provide current
income consistent with stability of principal. The Fund's adviser attempts to
generate an annual net return exceeding IBC's Taxable Money Fund Report
Average(TM) while maintaining a stable $1.00 price per share.* The Fund
purchases high-quality, short-term money market securities, including banker's
acceptances, certificates of deposit, first-tier commercial paper, master
notes, repurchase agreements, and U.S. Treasury and Agency securities.
FUND OUTPERFORMED BENCHMARK.
For the six-month period ended February 28, 1997, the Marshall Money Market
Fund provided a total return of 2.58%** for Class A Shares, compared to a
return of 2.42% for the IBC/Donoghue's Taxable Money Fund Average.*** Class B
Shares, which closely mirror the Donoghue's average, provided a total return of
2.43%.**
MARKET REWARDED INCREASED MATURITY.
The market began the period by rallying strongly on news of slower economic
growth and favorable inflation data. By the end of the period, the market
reversed course in response to comments made by Federal Reserve Board (the
"Fed") Chairman Alan Greenspan during the Humphrey-Hawkins testimony. With the
higher yields, we have found several opportunities in longer dated paper.
Higher rates also favor floating rate notes which we have added as well.
SIGNS OF INFLATION MAY LEAD TO TIGHTENING.
During this extended period of low inflation and low unemployment, the
potential for wage increases is a pivotal factor. With confidence so high,
workers are likely to risk seeking raises or looking for higher paying
positions. Consumer confidence is at record levels since the mid-"80s. Last
year saw records for home sales and retail sales remain robust. If the Fed
perceives any signs of wage inflation or falling unemployment, we may see them
tighten rates in an effort to slow economic growth.
STRONG RETURN IS A QUALITY ISSUE.
With corporate spreads as tight as they are, no one benefits from taking
additional credit risk. Over the next six months, we will strive to continue
our strategy of maintaining exposure to only the highest quality corporate
credits and actively managing the average maturity in an attempt to maximize
shareholder return.
Sincerely,
/s/ Richard M. Rokus
Richard M. Rokus
Manager, Marshall Money Market Fund
`Graphic representation ``K'' omitted. See Appendix.'' [PHOTO]
*Although money market funds seek to maintain a stable net asset value of $1.00
per share, there is no assurance that they will be able to do so. An
investment in the Fund is neither insured nor guaranteed by the U.S.
government.
**Performance quoted represents past performance and is not indicative of
future results. Yields will vary.
***IBC/Donoghue's Money Fund Report(TM) publishes annualized yields of hundreds
of money market funds on a weekly basis and through its Money Market Insight
publication reports monthly and year-to-date investment results for the same
money funds.
February 28, 1997 (unaudited)
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
EQUITY INCOME FUND
<TABLE>
---------------------------------------------------
<CAPTION>
Shares Description Value
---------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 87.3%
CAPITAL GOODS -- 5.0%
AEROSPACE AND DEFENSE
27,900 Northrop Grumman Corp. $2,026,238
6,400 Textron, Inc. 631,200
----------
Total 2,657,438
----------
ELECTRONICS
18,900 Amp, Inc. 734,737
21,000 General Signal Corp. 916,125
----------
Total 1,650,862
----------
MACHINERY & MACHINE TOOLS
10,300 Cooper Industries, Inc. 455,775
----------
OFFICE EQUIPMENT
96,800 Xerox Corp. 6,050,000
----------
OTHER CAPITAL GOODS
26,000 ITT Industries, Inc. 676,000
47,100 Tenneco, Inc. 1,854,563
----------
Total 2,530,563
----------
Total Capital Goods 13,344,638
----------
CONSUMER DURABLES -- 4.7%
APPLIANCE
93,300 Maytag Corp. 2,052,600
----------
AUTOMOTIVE & RELATED
62,000 Chrysler Corp. 2,100,250
57,800 Ford Motor Co. 1,900,175
115,500 General Motors Corp. 6,684,563
----------
Total 10,684,988
----------
Total Consumer Durables 12,737,588
----------
CONSUMER NON-DURABLES -- 22.2%
BEVERAGES & FOODS
44,000 Anheuser-Busch Cos., Inc. 1,958,000
11,000 General Mills, Inc. 717,750
----------
Total 2,675,750
----------
COSMETICS/TOILETRIES
80,000 Dial Corp. 1,200,000
----------
HEALTH CARE
70,200 American Home Products Corp. 4,492,800
19,100 Bausch & Lomb, Inc. 713,862
62,300 (a)Baxter International, Inc. 2,865,800
40,500 Bristol Myers Squibb Co. 5,285,250
53,300 Merck & Co., Inc. 4,903,600
115,000 Pharmacia & Upjohn, Inc. 4,262,750
31,700 SmithKline Beecham Corp., ADR 2,353,725
----------
Total 24,877,787
----------
PHOTOGRAPHY
41,900 Eastman Kodak Co. 3,755,287
----------
PRINTING & PUBLISHING
15,600 Knight-Ridder, Inc. 620,100
22,000 McGraw-Hill Cos., Inc. 1,141,250
----------
Total 1,761,350
----------
</TABLE>
<TABLE>
-----------------------------------------------------
<CAPTION>
Shares Description Value
-----------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
CONSUMER NON-DURABLES (continued)
RETAIL
71,000 Intimate Brands, Inc. $1,384,500
16,300 May Department Stores Co. 759,988
51,200 Penney JC, Inc. 2,521,600
25,600 Sears, Roebuck & Co. 1,388,800
----------
Total 6,054,888
----------
SERVICES
21,200 Ryder Systems, Inc. 667,800
----------
TOBACCO
24,700 American Brands, Inc. 1,299,837
68,200 Philip Morris Cos., Inc. 9,215,525
129,000 RJR Nabisco Holdings 4,724,625
108,800 UST, Inc. 3,359,200
----------
Total 18,599,187
----------
Total Consumer Non-Durables 59,592,049
----------
ENERGY -- 17.9%
DOMESTIC & INTERNATIONAL OIL
41,400 Amoco Corp. 3,498,300
14,600 Atlantic Richfield Co. 1,825,000
91,500 Exxon Corp. 9,138,562
16,000 Kerr-McGee Corp. 1,002,000
38,900 Mobil Corp. 4,774,975
184,800 Occidental Petroleum Corp. 4,712,400
41,600 Royal Dutch Petroleum Co., ADR 7,975,300
48,900 Sun, Inc. 1,320,300
44,100 Texaco, Inc. 4,360,388
79,900 Unocal Corp. 3,086,138
139,300 USX Marathon Group 3,708,863
----------
Total 45,402,226
----------
OIL & GAS PRODUCTS
68,900 Dresser Industries, Inc. 2,092,837
22,400 Ultramar Diamond Shamrock
Corp. 683,200
----------
Total 2,776,037
----------
Total Energy 48,178,263
----------
FINANCIAL -- 16.5%
BANKS
69,100 Ahmanson (H.F.) & Co. 2,841,737
57,700 Banc One Corp. 2,546,012
66,200 Bank Of New York, Inc. 2,565,250
39,400 Bankamerica Corp. 4,481,750
18,500 Bankers Trust New York Corp. 1,678,875
40,832 Chase Manhattan Corp. 4,088,304
17,700 First American Corp. 1,135,013
37,900 First Commerce Corp. 1,572,850
18,900 Fleet Financial Group, Inc. 1,152,900
21,300 KeyCorp 1,139,550
24,200 Mellon Bank Corp. 1,945,075
24,700 Mercantile Bancorporation, Inc. 1,429,513
59,800 NationsBank Corp. 3,580,525
30,500 Summit Bancorp 1,456,375
----------
Total 31,613,729
----------
</TABLE>
(See Notes to Portfolios of Investments)
[ ] MARSHALL FUNDS
- --------------------------------------------------------------------------------
EQUITY INCOME FUND (continued)
<TABLE>
------------------------------------------------------------
<CAPTION>
Shares Description Value
------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
FINANCIAL (continued)
INSURANCE
23,900 Cigna Corp. $3,653,712
37,300 IPC Holdings Ltd. 913,850
36,200 ITT Hartford Group, Inc. 2,715,000
20,000 Safeco Corp. 835,000
----------
Total 8,117,562
----------
OTHER FINANCIAL
24,000 American General Hospitality Corp. 657,000
26,500 Capstone Capital Trust, Inc. 629,375
20,000 First Industrial Realty Trust 597,500
19,000 Healthcare Realty Trust, Inc. 527,250
23,700 Hospitality Properties Trust 767,288
45,000 Storage Trust Realty 1,209,375
15,000 Summit Properties, Inc. 303,750
----------
Total 4,691,538
----------
Total Financial 44,422,829
----------
RAW MATERIALS/INTERMEDIATE GOODS -- 5.7%
CHEMICALS
34,800 Dow Chemical Co. 2,818,800
42,500 Goodrich B.F. Co. 1,726,563
55,000 Hercules, Inc. 2,557,500
31,000 Millennium Chemicals, Inc. 592,875
22,500 Nalco Chemical Co. 826,875
24,100 Olin Corp. 964,000
----------
Total 9,486,613
----------
METALS
18,500 USX-U.S. Steel Group, Inc. 580,438
23,300 Worthington Industries, Inc. 486,388
----------
Total 1,066,826
----------
PAPERS
20,900 International Paper Co. 872,575
20,800 Kimberly-Clark Corp. 2,204,800
39,700 Weyerhaeuser Co. 1,836,125
----------
Total 4,913,500
----------
Total Raw Materials/Intermediate Goods 15,466,939
----------
TRANSPORTATION -- 0.4%
RAILROAD
19,600 Union Pacific Corp. 1,180,900
----------
UTILITIES -- 14.9%
ELECTRIC
29,100 Carolina Power & Light Co. 1,080,337
42,800 Duke Power Co. 1,893,900
82,600 Edison International 1,775,900
38,100 Entergy Corp. 1,004,887
64,200 FPL Group, Inc. 2,921,100
42,400 Houston Industries, Inc. 985,800
60,200 Nipsco Industries, Inc. 2,400,475
100,800 Pinnacle West Capital Corp. 3,150,000
45,800 Texas Utilities Co. 1,849,175
15,600 Wisconsin Energy Corp. 399,750
10,600 WPS Resources Corp. 284,875
----------
Total 17,746,199
----------
GAS DISTRIBUTION
40,000 Consolidated Natural Gas Co. 2,040,000
26,000 Enron Corp. 1,036,750
</TABLE>
<TABLE>
------------------------------------------------------------------------------
<CAPTION>
Shares or
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
UTILITIES (continued)
GAS DISTRIBUTION (continued)
18,200 MCN Corp. $550,550
24,000 Questar Corp. 870,000
32,400 Sonat, Inc. 1,490,400
23,000 Wicor, Inc. 807,875
------------
Total 6,795,575
------------
TELECOMMUNICATIONS
66,000 AT&T Corp. 2,631,750
75,900 BellSouth Corp. 3,557,812
74,200 GTE Corp. 3,468,850
56,300 Pacific Telesis Group 2,294,224
20,600 SBC Communications, Inc. 1,184,500
37,800 Sprint Corp. 1,719,900
15,600 U.S. West, Inc. 561,600
------------
Total 15,418,636
------------
Total Utilities 39,960,410
------------
TOTAL COMMON STOCKS (identified cost, $191,662,057) 234,883,616
------------
CONVERTIBLE BONDS -- 0.2%
$550,000 Hilton Hotels Corp., Conv. Sub. Note, 7.7444%,
5/15/2006 559,933
------------
TOTAL CONVERTIBLE BONDS (identified cost, $550,000) 559,933
------------
CONVERTIBLE PREFERRED STOCKS -- 0.6%
CONSUMER NON-DURABLES -- 0.5%
23,000 K Mart Corp., Conv. Pfd., $3.88 1,259,250
------------
ENERGY -- 0.1%
10,700 Sun, Inc., Conv. Pfd., Series A, $1.80 291,575
------------
TOTAL CONVERTIBLE PREFERRED STOCKS (identified
cost, $1,376,630) 1,550,825
------------
(B)REPURCHASE AGREEMENT -- 13.8%
36,987,000 Goldman Sachs & Co., 5.33%, dated 2/28/1997, due
3/3/1997 (at amortized cost) 36,987,000
------------
TOTAL INVESTMENTS
(identified cost, $230,575,687) $273,981,374
============
</TABLE>
(See Notes to Portfolios of Investments)
February 28, 1997 (unaudited)
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
VALUE EQUITY FUND
<TABLE>
--------------------------------------------------------------
<CAPTION>
Shares Description Value
--------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 91.8%
CAPITAL GOODS -- 6.0%
ELECTRICAL EQUIPMENT
158,500 (c)Silicon Graphics, Inc. $3,823,813
----------
MACHINERY AND MACHINE TOOLS
275,650 Giddings & Lewis, Inc. 3,807,416
----------
OFFICE EQUIPMENT
134,500 (c)(d)Apple Computers, Inc. 2,185,625
----------
Total Capital Goods 9,816,854
----------
CONSUMER DURABLES -- 12.9%
AUTOMOTIVE AND RELATED
159,000 (d)Stewart & Stevenson Services 4,153,875
----------
BUILDING AND FOREST PRODUCTS
80,000 American Greetings Corp.,
Class A 2,480,000
18,000 Champion International Corp. 794,250
12,500 Georgia-Pacific Corp. 975,000
36,700 Houghton Mifflin Co. 2,023,087
42,000 (d)James River Corp. of Virginia 1,375,500
56,000 (d)Louisiana-Pacific Corp. 1,190,000
20,900 Mead Corp. 1,217,425
----------
Total 10,055,262
----------
HOUSEHOLD PRODUCT/WARES
201,000 Rubbermaid, Inc. 4,798,875
21,600 (d)Singer Co., N.V. 364,500
64,400 (d)Sunbeam Corp. 1,762,950
----------
Total 6,926,325
----------
Total Consumer Durables 21,135,462
----------
CONSUMER NON-DURABLES -- 28.4%
BEVERAGES AND FOODS
408,000 (d)Darden Restaurants, Inc. 2,958,000
123,000 Dean Foods Co. 4,012,875
105,200 International Multifoods Corp. 2,222,350
93,900 Supervalu, Inc. 2,910,900
----------
Total 12,104,125
----------
COSMETICS/TOILETRIES
116,000 Dial Corp. 1,740,000
----------
PHARMACEUTICALS AND HEALTH CARE
168,700 (c)Acuson Corp. 4,681,425
60,050 Mallinckrodt, Inc. 2,552,125
40,804 (c)(d)Novartis AG, ADR 2,330,929
76,600 (c)Perrigo Co. 928,775
141,200 (c)Tenet Healthcare Corp. 3,830,050
21,500 (c)Value Health, Inc. 516,000
----------
Total 14,839,304
----------
PRINTING & PUBLISHING
17,500 Dow Jones & Co. 702,187
----------
RETAIL
52,500 Dillard Department Stores, Inc., Class A 1,581,562
75,000 (c)Federated Department Stores, Inc. 2,606,250
147,778 Limited, Inc. 2,807,782
----------
Total 6,995,594
----------
</TABLE>
<TABLE>
--------------------------------------------------------------
<CAPTION>
Shares Description Value
--------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
CONSUMER NON-DURABLES (continued)
SERVICES
72,000 (d)Olsten Corp. $1,287,000
113,000 Viad Corp. 1,808,000
48,000 WMX Technologies, Inc. 1,518,000
----------
Total 4,613,000
----------
TOBACCO
203,952 (c)Imperial Tobacco Group PLC, ADR 2,810,714
88,000 UST, Inc. 2,717,000
----------
Total 5,527,714
----------
Total Consumer Non-Durables 46,521,924
----------
ENERGY -- 5.1%
INTERNATIONAL OIL
15,400 (d)Royal Dutch Petroleum Co., ADR 2,664,200
----------
OIL & GAS PRODUCTS
21,700 Mobil Corp. 2,663,675
56,000 Occidental Petroleum Corp. 1,428,000
60,320 USX Marathon Corp. 1,606,020
----------
Total 5,697,695
----------
Total Energy 8,361,895
----------
FINANCIAL -- 9.1%
BANKS
32,900 PNC Financial Corp. 1,394,138
----------
INSURANCE
31,800 Aetna Services, Inc. 2,635,425
20,596 Allstate Corp. 1,305,271
63,000 Everest Reinsurance Holdings, Inc. 1,984,500
98,500 IPC Holdings Ltd. 2,413,250
40,400 Torchmark Corp. 2,378,550
----------
Total 10,716,996
----------
OTHER FINANCIAL
116,750 Trizec Hahn Corp. 2,729,031
----------
Total Financial 14,840,165
----------
RAW MATERIALS/INTERMEDIATE GOODS -- 14.5%
CHEMICALS
335,600 Calgon Carbon Corp. 3,775,500
32,975 Eastman Chemical Co. 1,817,747
42,250 (d)Imperial Chemical Industries PLC, ADR 2,256,844
97,000 Lawter International, Inc. 1,127,625
26,500 (d)Nalco Chemical Co. 973,875
252,800 (c)Pegasus Gold, Inc. 2,164,600
40,000 (d)Rhone-Poulenc, ADR 1,395,000
159,900 Wellman, Inc. 2,798,250
----------
Total 16,309,441
----------
INTERMEDIATE GOODS
73,000 Canadian Pacific Ltd. 1,806,750
51,975 (d)Hanson PLC, ADR 1,156,444
----------
Total 2,963,194
----------
METALS
188,200 LTV Corp. 2,352,500
----------
</TABLE>
(See Notes to Portfolios of Investments)
[ ] MARSHALL FUNDS
- --------------------------------------------------------------------------------
VALUE EQUITY FUND (continued)
<TABLE>
------------------------------------------------------------------------------
<CAPTION>
Shares or
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
RAW MATERIALS/INTERMEDIATE GOODS (continued)
OTHER RAW MATERIALS
81,000 Ball Corp. $2,045,250
------------
Total Raw Materials/
Intermediate Goods 23,670,385
------------
TELECOMMUNICATIONS -- 5.8%
SERVICES
57,500 GTE Corp. 2,688,125
258,200 (c)(d)Tele-Communications, Inc., Class A 3,066,125
200,000 (c)U.S. West Media Group 3,675,000
------------
Total Telecommunications 9,429,250
------------
TRANSPORTATION -- 4.7%
OTHER TRANSPORTATION
144,100 APL, Ltd. 3,314,300
165,250 Alexander & Baldwin, Inc. 4,420,436
------------
Total Transportation 7,734,736
------------
UTILITIES -- 5.3%
ELECTRIC DISTRIBUTION
51,975 (c)(d)Energy Group PLC, ADR 1,767,150
153,600 Entergy Corp. 4,051,200
72,000 Telephone and Data Systems, Inc. 2,880,000
------------
Total Utilities 8,698,350
------------
TOTAL COMMON STOCKS (identified cost,
$142,300,367) 150,209,021
------------
(E)COLLATERAL FOR SECURITIES LENDING -- 12.8%
$ 3,000,000 (f)Bear, Stearns & Co., Inc., 5.688%, 3/10/1997 3,000,000
3,000,000 (f)Chrysler Corp., 5.541%, 3/19/1997 2,998,290
142,425 Dreyfus Cash Management Plus (shares at net asset
value) 142,425
3,300,000 (b)First Boston Repurchase Agreement, 5.558%,
3/3/1997 3,300,000
2,000,000 (f)General Electric Capital Corp., 5.48%, 3/3/1997 1,997,200
3,000,000 (f)Heller Financial Corp., 5.47%, 3/3/1997 3,000,000
3,500,000 (b)Merrill Lynch Corp., Repurchase Agreement,
5.40%, 3/3/1997 3,500,000
3,000,000 (f)Sears, Roebuck & Co., 5.483%, 3/19/1997 2,997,480
------------
TOTAL COLLATERAL FOR SECURITIES LENDING (at
amortized cost) 20,935,395
------------
(B)REPURCHASE AGREEMENT -- 8.3%
$13,552,000 Goldman Sachs & Co., 5.33%, dated 2/28/1997, due
3/3/1997 (at amortized cost) $13,552,000
------------
TOTAL INVESTMENTS (identified cost, $176,787,762) $184,696,416
============
</TABLE>
- --------------------------------------------------------------------------------
STOCK FUND
<TABLE>
-----------------------------------------------------------
<CAPTION>
Shares Description Value
-----------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 97.7%
BASIC INDUSTRIES -- 8.1%
CHEMICALS
72,000 (d)Air Products & Chemicals, Inc. $5,337,000
34,400 Du Pont (E.I.) De Nemours & Co. 3,689,400
----------
Total 9,026,400
----------
METALS
55,100 Aluminum Co. of America 3,925,875
----------
PAPER
59,400 Kimberly-Clark Corp. 6,296,400
----------
Total Basic Industries 19,248,675
----------
CAPITAL GOODS -- 22.6%
AEROSPACE AND RELATED
54,900 Boeing Co. 5,586,075
64,900 General Dynamics Corp. 4,364,525
----------
Total 9,950,600
----------
COMPUTER SERVICES
68,800 Electronic Data Systems Corp. 3,104,600
100,600 First Data Corp. 3,684,475
47,500 (c)Microsoft Corp. 4,631,250
30,500 (c)Oracle Corp. 1,197,125
----------
Total 12,617,450
----------
COMPUTERS
41,100 Hewlett-Packard Co. 2,301,600
28,700 International Business Machines Corp. 4,125,625
----------
Total 6,427,225
----------
ELECTRICAL EQUIPMENT
35,100 Emerson Electric Co. 3,474,900
63,300 General Electric Co. 6,511,987
----------
Total 9,986,887
----------
ELECTRONICS
24,800 Intel Corp. 3,518,500
53,300 Motorola, Inc. 2,978,136
----------
Total 6,496,636
----------
OTHER CAPITAL GOODS
56,600 Fluor Corp. 3,431,375
156,000 WMX Technologies, Inc. 4,933,500
----------
Total 8,364,875
----------
Total Capital Goods 53,843,673
----------
CONSUMER DURABLES -- 1.3%
BUILDING & FOREST PRODUCTS
39,100 Georgia-Pacific Corp. 3,049,800
----------
CONSUMER NON-DURABLES -- 30.5%
BEVERAGES & FOODS
107,000 Anheuser-Busch Cos., Inc. 4,761,500
118,300 Pepsico, Inc. 3,889,113
86,500 Quaker Oats Co. 3,103,188
19,700 (d)Unilever N.V., ADR 3,752,850
----------
Total 15,506,651
----------
</TABLE>
(See Notes to Portfolios of Investments)
February 28, 1997 (unaudited)
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
STOCK FUND (continued)
<TABLE>
-----------------------------------------------------------
<CAPTION>
Shares Description Value
-----------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
CONSUMER NON-DURABLES (continued)
ENTERTAINMENT
13,800 Disney (Walt) Co. $1,024,650
----------
HEALTH CARE
81,400 Abbott Laboratories 4,578,750
53,300 Merck & Co., Inc. 4,903,600
82,200 Pharmacia & Upjohn, Inc. 3,031,125
53,300 Schering Plough Corp. 4,084,113
----------
Total 16,597,588
----------
MANUFACTURING
54,900 Eastman Kodak Co. 4,920,412
----------
MEDIA
57,400 Gannett Co., Inc. 4,577,650
83,800 New York Times Co., Class A 3,729,100
50,000 Time Warner, Inc. 2,050,000
----------
Total 10,356,750
----------
MEDICAL SUPPLIES
38,900 (d)Smithkline Beecham Corp., ADR 2,888,325
----------
OTHER CONSUMER NON-DURABLES
30,500 Minnesota Mining & Manufacturing Co. 2,806,000
----------
RETAIL
118,300 (c)Federated Department Stores, Inc. 4,110,925
81,900 (c)Kohl's Corp. 3,767,400
95,000 Walgreen Co. 4,082,625
----------
Total 11,960,950
----------
TOBACCO
49,600 Philip Morris Cos., Inc. 6,702,200
----------
Total Consumer Non-Durables 72,763,526
----------
ENERGY -- 9.1%
INTERNATIONAL OIL & GAS
38,100 Amerada-Hess Corp. 2,033,588
53,300 Exxon Corp. 5,323,337
145,200 Occidental Petroleum Corp. 3,702,600
23,000 (d)Royal Dutch Petroleum Co., ADR 3,979,000
42,000 (d)Texaco, Inc. 4,152,750
----------
Total 19,191,275
----------
OIL & GAS PRODUCTS
63,800 Enron Corp. 2,544,025
----------
Total Energy 21,735,300
----------
FINANCIAL -- 18.2%
BANKS
114,500 Bank of New York Co., Inc. 4,436,875
53,300 BankAmerica Corp. 6,062,875
59,600 Chase Manhattan Corp. 5,967,450
38,100 Mellon Bank Corp. 3,062,288
----------
Total 19,529,488
----------
INSURANCE
34,400 (d)American International Group, Inc. 4,162,400
66,600 ITT Hartford Group, Inc. 4,995,000
45,000 Provident Cos., Inc. 2,452,500
----------
Total 11,609,900
----------
</TABLE>
<TABLE>
---------------------------------------------------------------------------
<CAPTION>
Shares or
Principal
Amount Description Value
---------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
FINANCIAL (continued)
OTHER FINANCIAL
49,500 American Express Co. $3,236,062
114,500 Equifax, Inc. 3,406,375
182,900 Federal Home Loan Mortgage Corp. 5,441,276
-----------
Total 12,083,713
-----------
Total Financial 43,223,101
-----------
TRANSPORTATION -- 0.5%
RAILROAD
19,200 Union Pacific Corp. 1,156,800
-----------
UTILITIES -- 7.4%
ELECTRIC
39,700 (d)Duke Power Co. 1,756,725
-----------
GAS DISTRIBUTION
37,900 Consolidated Natural Gas Co. 1,932,900
-----------
TELECOMMUNICATIONS
57,400 AT & T Corp. 2,288,825
57,400 Ameritech Corp. 3,659,250
87,200 GTE Corp. 4,076,600
66,900 SBC Communications, Inc. 3,846,750
-----------
Total 13,871,425
-----------
Total Utilities 17,561,050
-----------
TOTAL COMMON STOCKS (identified cost,
$182,933,029) 232,581,925
-----------
(G)U.S. TREASURY BILLS -- 0.2%
$415,000 3/13/1997 414,597
15,000 3/6/1997 14,999
-----------
TOTAL U.S. TREASURY BILLS (at amortized cost) 429,596
-----------
(E)COLLATERAL FOR SECURITIES LENDING -- 7.9%
266,800 Dreyfus Cash Management Plus (shares at net asset
value) 266,800
12,200,000 (b)First Boston Corporate Repurchase Agreement,
5.56%, dated 2/28/97, due 3/3/1997 12,200,000
6,400,000 (b) Merrill Lynch Corporate Repurchase Agreement,
5.55%, dated 2/28/1997, due 3/3/1997 6,400,000
-----------
TOTAL COLLATERAL FOR SECURITIES LENDING (at
amortized cost) 18,866,800
-----------
(B)REPURCHASE AGREEMENT -- 2.0%
4,780,000 Goldman Sachs & Co., 5.33%, dated 2/28/1997, due
3/3/1997 (at amortized cost) 4,780,000
-----------
TOTAL INVESTMENTS (identified cost, $207,009,425) 256,658,321
-----------
</TABLE>
(See Notes to Portfolios of Investments)
[ ] MARSHALL FUNDS
- --------------------------------------------------------------------------------
MID-CAP STOCK FUND
<TABLE>
----------------------------------------------------------------------
<CAPTION>
Shares Description Value
----------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 92.6%
CAPITAL GOODS -- 9.4%
ELECTRICAL EQUIPMENT
40,000 (c)Altera Corp. $1,815,000
50,000 (c)Analog Devices, Inc. 1,162,500
50,000 (c)(d)Atmel Corp. 1,868,750
60,000 (c)(d)LSI Logic Corp. 2,070,000
50,000 Linear Technology Corp. 2,275,000
70,000 Molex, Inc. 2,502,500
75,000 (c)(d)Parametric Technology Corp. 4,228,125
----------
Total Capital Goods 15,921,875
----------
CONSUMER DURABLES -- 1.8%
AUTOMOTIVE AND RELATED
80,000 Harley-Davidson, Inc. 2,990,000
----------
CONSUMER NON-DURABLES -- 51.4%
BROADCASTING
75,000 (c)Emmis Broadcasting Corp.,
Class A 2,587,500
50,000 (c)Lin Television Corp. 2,075,000
100,000 (c)(d)Westwood One, Inc. 1,862,500
----------
Total 6,525,000
----------
COMMERCIAL SERVICES
75,000 (c)Firearms Training Systems, Inc. 1,096,875
90,000 (c)FiServ, Inc. 2,947,500
65,000 (c)MSC Industrial Direct Co. 2,145,000
70,000 (c)Superior Services, Inc. 1,522,500
90,000 (c)USA Waste Services, Inc. 3,240,000
----------
Total 10,951,875
----------
COMPUTER SERVICES
70,000 (c)BMC Software, Inc. 2,996,875
60,000 (c)Cadence Design Systems, Inc. 2,212,500
60,000 Equifax, Inc. 1,785,000
50,000 Paychex, Inc. 2,175,000
30,000 (c)Saville Systems Ireland PLC, ADR 1,080,000
50,000 (c)Transaction Systems Architects, Inc., Class A 1,300,000
----------
Total 11,549,375
----------
COSMETICS
40,000 Estee Lauder Cos., Inc. Class N 1,860,000
----------
DRUGS
80,000 (c)(d)Elan Corp. PLC, ADR 2,770,000
125,000 (c)North American Vaccine, Inc. 2,828,125
120,000 (c)(d)Parexel International Corp. 3,360,000
----------
Total 8,958,125
----------
ENERGY
75,000 (d)Apache Corp. 2,428,125
75,000 (c)ENSCO International, Inc. 3,253,125
85,000 (c)(d)Nabors Industries, Inc. 1,306,875
50,000 Pennzoil Co. 2,868,750
----------
Total 9,856,875
----------
HEALTH CARE
75,000 (d)Cardinal Health, Inc. 4,612,500
45,000 (c)(d)HEALTHSOUTH Corp. 1,811,250
125,000 (c)Health Management Association, Class A Shares 3,312,500
75,000 Omnicare, Inc. 1,987,500
75,000 (c)Tenet Healthcare Corp. 2,034,375
----------
Total 13,758,125
----------
</TABLE>
<TABLE>
--------------------------------------------------------------------------
<CAPTION>
Shares Description Value
--------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
CONSUMER NON-DURABLES (continued)
LEISURE AND RECREATION
50,000 (c)(d)Choice Hotels International, Inc. $768,750
110,000 (c)(d)Regal Cinemas, Inc. 2,928,750
-----------
Total 3,697,500
-----------
MEDICAL SUPPLIES
85,000 (c)Henry Schein, Inc. 2,295,000
-----------
RESTAURANTS
80,000 (c)(d)Landrys Seafood Restaurants, Inc. 1,440,000
50,000 (c)(d)Papa Johns International, Inc. 1,218,750
-----------
Total 2,658,750
-----------
RETAIL
75,000 (c)Bed Bath & Beyond, Inc. 1,950,000
60,000 (d)Callaway Golf Co. 1,912,500
70,000 (c)Kohl's Corp. 3,220,000
100,000 (c)(d)Staples, Inc. 2,162,500
-----------
Total 9,245,000
-----------
SERVICES
75,000 (c)Apollo Group, Inc., Class A 2,025,000
100,000 (c)Stewart Enterprises, Inc.,
Class A 3,531,250
-----------
Total 5,556,250
-----------
Total Consumer Non-Durables 86,911,875
-----------
FINANCIAL -- 21.2%
60,000 Alex Brown, Inc. 3,487,500
2,500 Bear Stearns Cos., Inc. 75,000
50,000 (c)(d)Credit Acceptance Corp. 1,062,500
50,000 First of America Bank Corp. 3,131,250
100,000 Firstar Corp. 3,062,500
50,000 Green Tree Financial Corp. 1,875,000
50,000 (d)Mercantile Bancorporation, Inc. 2,893,750
75,000 (d)The Money Store, Inc. 1,940,625
65,000 Northern Trust Corp. 2,762,500
70,000 (d)Redwood Trust, Inc. 3,342,500
75,000 Charles Schwab Corp. 2,812,500
60,000 Sirrom Capital Corp. 2,430,000
50,000 State Street Boston Corp. 4,018,750
65,000 (d)TCF Financial Corp. 2,949,375
-----------
Total 35,843,750
-----------
INSURANCE -- 1.9%
60,000 Allstate Corp. 3,285,000
-----------
TELECOMMUNICATIONS -- 4.8%
70,000 (c)Andrew Corp. 3,850,000
50,000 (c)PairGain Technologies, Inc. 1,478,125
70,000 (c)Tellabs, Inc. 2,791,250
-----------
Total 8,119,375
-----------
TRANSPORTATION -- 2.1%
RAILROAD
100,000 (c)(d)Wisconsin Central Transportation Corp. 3,587,500
-----------
TOTAL COMMON STOCKS (identified cost, $145,495,591) 156,659,375
-----------
</TABLE>
(See Notes to Portfolios of Investments)
February 28, 1997 (unaudited)
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
MID-CAP STOCK FUND (continued)
<TABLE>
----------------------------------------------------------------------------
<CAPTION>
Shares or
Principal
Amount Description Value
----------------------------------------------------------------------------
<C> <S> <C>
(G)U.S. TREASURY BILL -- 0.1%
155,000 3/13/1997 (identified cost, $154,751) $154,850
------------
(E)COLLATERAL FOR SECURITIES LENDING -- 20.3%
206,600 Dreyfus Cash Management Plus (shares at net asset
value) 206,600
3,750,000 Federal Signal Corp., 5.49%, 3/3/1997 3,750,000
5,000,000 General Motors Acceptance Corp., 5.33%, 3/3/1997 5,000,000
3,000,000 J.P. Morgan Securities, 5.45%, 3/3/1997 3,000,000
19,400,000 (b)Merrill Lynch Corporate Repurchase Agreement,
5.55%, dated 2/28/1997, due 3/3/ 1997 19,400,000
3,000,000 Sears Roebuck Acceptance Corp., 5.34%, 3/3/1997 3,000,000
------------
TOTAL COLLATERAL FOR SECURITIES LENDING (at
amortized cost) 34,356,600
------------
(B)REPURCHASE AGREEMENTS -- 4.2%
7,057,000 Goldman Sachs & Co., 5.33%, dated 2/28/1997, due
3/3/1997 (at amortized cost) 7,057,000
------------
TOTAL INVESTMENTS (identified
cost, $187,063,942) $198,227,825
============
</TABLE>
- --------------------------------------------------------------------------------
INTERNATIONAL STOCK FUND
<TABLE>
----------------------------------------------------------------
<CAPTION>
Shares Description Value
----------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 79.8%
ARGENTINA -- 1.1%
TELEPHONE -- 1.1%
65,750 (c)(d)(h)Telefonica De Argentina S.A., ADR $2,079,344
----------
AUSTRALIA -- 4.0%
AIR TRAVEL -- 0.5%
50,500 (h)Qantas Airways, Ltd., ADR 956,344
----------
BANKING -- 0.7%
225,200 (d)Westpac Bank Corp., Ltd. 1,276,961
----------
BROADCASTING -- 0.2%
64,235 News Corp., Ltd. 342,281
----------
BUSINESS SERVICES -- 0.2%
17,771 Brambles Industries, Ltd. 299,542
----------
CONSTRUCTION EQUIPMENT -- 0.8%
481,200 Pioneer International, Ltd. 1,431,564
----------
INDUSTRIAL -- 0.2%
81,390 BTR PLC, Class A 316,102
----------
INSURANCE -- 1.4%
915,000 (d)Gio Australia Holdings, Ltd. 2,572,859
----------
Total Australia 7,195,653
----------
</TABLE>
<TABLE>
------------------------------------------------------------------------
<CAPTION>
Shares Description Value
------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
AUSTRIA -- 1.7%
ELECTRIC UTILITIES -- 0.8%
9,900 Evn Energie-Versorgung Niederoesterreich AG $1,458,298
----------
INDUSTRIAL MACHINERY -- 0.9%
11,000 VA Technologie AG 1,660,260
----------
Total Austria 3,118,558
----------
BELGIUM -- 1.4%
CHEMICALS -- 0.8%
2,200 (d)Solvay S.A. 1,350,964
----------
NON-FERROUS METALS -- 0.6%
15,900 (c)NV Union Miniere S.A. 1,176,221
----------
Total Belgium 2,527,185
----------
BERMUDA -- 1.5%
INSURANCE -- 1.5%
83,000 PartnerRe Ltd. 2,739,000
----------
BRAZIL -- 2.8%
BROADCASTING -- 1.9%
36,250 Telecomunicacoes Brasileiras S.A., ADR 3,516,250
----------
RETAIL TRADE -- 0.9%
105,700 Lojas Americanas S.A., ADR 1,625,138
----------
Total Brazil 5,141,388
----------
CANADA -- 2.7%
BANKING -- 1.6%
60,000 Canadian Imperial Bank of Commerce 2,910,661
----------
ELECTRONICS -- 0.6%
37,000 (c)Newbridge Networks Corp. 1,176,301
----------
INSURANCE -- 0.3%
37,200 London Insurance Group, Inc. 537,572
----------
MINING -- 0.2%
58,000 (c)Inmet Mining Corp. 390,429
----------
Total Canada 5,014,963
----------
CHILE -- 0.6%
TELEPHONE -- 0.6%
40,375 Compania Telecomunicacion
Chile, ADR 1,180,969
----------
CHINA -- 0.5%
ELECTRIC UTILITIES -- 0.5%
94,100 Shandong Huaneng Power Company, Ltd., Class N, ADR 976,288
----------
CZECHOSLOVOKIA -- 1.9%
BANKING -- 0.4%
4,000 Komercni Banka A.S. 377,592
12,000 (c)(h)Komercni Banka A.S., GDR 420,000
----------
Total 797,592
----------
ELECTRIC UTILITIES -- 0.6%
28,315 (c)CEZ A.S. 1,171,206
----------
TELECOMMUNICATIONS -- 0.9%
12,200 (c)SPT Telekom A.S. 1,583,002
----------
Total Czechoslovakia 3,551,800
----------
DENMARK -- 1.3%
TELEPHONE -- 1.3%
47,000 (d)Tele Danmark A.S., Class B 2,448,716
----------
</TABLE>
(See Notes to Portfolios of Investments)
[ ] MARSHALL FUNDS
- --------------------------------------------------------------------------------
INTERNATIONAL STOCK FUND (continued)
<TABLE>
--------------------------------------------------------------------------
<CAPTION>
Shares Description Value
--------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
FINLAND -- 1.7%
CONGLOMERATES -- 0.6%
47,500 Amer Group, Ltd., Class A $992,320
----------
FINANCIAL SERVICES -- 0.8%
425,000 (c)Merita Ltd., Class A 1,530,510
----------
PAPER -- 0.3%
73,500 (d)Metsa-Serla Oy, Class B 614,194
----------
Total Finland 3,137,024
----------
FRANCE -- 8.2%
AUTOMOBILES -- 0.8%
53,218 Renault S.A. 1,372,735
----------
BANKING -- 1.2%
50,581 Banque Nationale de Paris 2,295,907
----------
CHEMICALS -- 1.6%
82,332 Rhone-Poulenc, Class A 2,891,378
----------
CONSUMER ELECTRIC -- 0.2%
1,500 Compagnie Generale D'Industrie Et De Participation 428,007
----------
ELECTRICAL EQUIPMENT -- 1.0%
18,842 Alcatel Alsthom 1,935,482
----------
GAS EXPLORATION -- 1.3%
25,592 Elf Aquitaine S.A. 2,449,103
----------
HOLDING COS.-DIVERSIFIED -- 0.1%
1,766 Marine-Wendel S.A. 184,507
----------
INSURANCE -- 1.2%
32,819 AXA 2,185,820
----------
MINING -- 0.8%
29,000 Eramet SLN 1,450,764
----------
Total France 15,193,703
----------
GERMANY -- 2.3%
BANKING -- 1.1%
37,650 (d)Deutsche Bank, AG 1,956,076
----------
CHEMICALS -- 1.2%
53,500 (d)Bayer AG 2,260,764
----------
Total Germany 4,216,840
----------
GREAT BRITAIN -- 8.5%
ELECTRIC UTILITIES -- 1.2%
264,434 National Power Co. PLC 2,116,721
----------
ELECTRICAL EQUIPMENT -- 0.9%
345,694 The BICC Group 1,554,693
----------
FOOD & BEVERAGES -- 1.8%
2,211,306 Albert Fisher Group PLC 1,567,407
585,865 Hillsdown Holdings PLC 1,823,369
----------
Total 3,390,776
----------
GAS & PIPELINE UTILITIES -- 1.8%
880,800 British Gas PLC 2,447,065
880,800 (c)Centrica PLC 940,074
----------
Total 3,387,139
----------
HOLDING COS.-DIVERSIFIED -- 1.3%
612,500 BTR PLC 2,400,297
----------
POLLUTION CONTROL -- 0.2%
60,000 (c)Waste Management International PLC, ADR 450,000
----------
</TABLE>
<TABLE>
------------------------------------------------------------------
<CAPTION>
Shares Description Value
------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
RETAIL TRADE -- 0.4%
146,100 Kwik Save Group PLC $727,286
----------
WATER UTILITIES -- 0.9%
125,166 Hyder PLC 1,692,810
----------
Total Great Britain 15,719,722
----------
HONG KONG -- 5.0%
BANKING -- 1.4%
104,807 HSBC Holdings PLC 2,558,018
----------
CONGLOMERATES -- 1.7%
210,000 Hutchinson Whampoa 1,600,010
171,500 Swire Pacific, Ltd. 1,472,778
----------
Total 3,072,788
----------
ELECTRIC UTILITIES -- 0.5%
288,000 Hong Kong Electric Holdings, Ltd. 996,733
----------
FINANCIAL SERVICES -- 0.9%
485,500 Jardine Strategic Holdings, Ltd. 1,592,440
----------
SERVICES -- 0.5%
455,000 Hong Kong Ferry Holdings 866,672
----------
Total Hong Kong 9,086,651
----------
HUNGARY -- 0.8%
OIL & GAS -- 0.8%
88,814 (h)MOL Magyar Olay, ADR 1,565,347
----------
INDONESIA -- 1.0%
BANKING -- 0.7%
922,500 Lippo Bank 1,077,372
210,000 PT Pan Indonesia Bank 289,051
----------
Total 1,366,423
----------
FOREST PRODUCTS -- 0.3%
599,500 (c)Barito Pacific Timber 543,863
----------
Total Indonesia 1,910,286
----------
ITALY -- 3.8%
AUTOMOTIVE -- 1.7%
1,019,000 (d)Fiat S.P.A. 3,144,560
----------
PAPER -- 0.4%
170,000 (d)Burgo (Cartiere) S.P.A. 778,871
----------
SERVICES -- 0.1%
825,000 (c)Seat S.P.A. 190,697
----------
TELEPHONE -- 1.6%
825,000 Stet Societa Finanziaria Telefonica S.P.A. 2,882,416
----------
Total Italy 6,996,544
----------
JAPAN -- 2.3%
ELECTRICAL EQUIPMENT -- 0.7%
163,000 Hitachi, Ltd. 1,408,149
----------
ENGINEERING & CONSTRUCTION -- 0.5%
55,000 Daito Trust Construction 539,104
47,000 Kyudenko, Co., Ltd. 359,181
----------
Total 898,285
----------
HOUSEHOLD APPLIANCES & FURNISHINGS -- 1.1%
27,000 Sony Corp. 1,953,483
----------
Total Japan 4,259,917
----------
MEXICO -- 1.4%
CONTAINER & GLASS -- 0.3%
182,400 (d)Vitro SA 507,049
----------
</TABLE>
(See Notes to Portfolios of Investments)
February 28, 1997 (unaudited)
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
INTERNATIONAL STOCK FUND (continued)
<TABLE>
----------------------------------------------------------------------
<CAPTION>
Shares Description Value
----------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
MEXICO (continued)
HOLDING COS.-DIVERSIFIED -- 1.1%
346,000 Alfa, S.A. de C.V., Class A $1,967,195
----------
Total Mexico 2,474,244
----------
NETHERLANDS -- 3.9%
CHEMICALS -- 1.2%
11,700 Azko Nobel N.V. 1,686,048
20,000 European Vinyls Corp., International N.V. 563,781
----------
Total 2,249,829
----------
ENGINEERING & CONSTRUCTION -- 0.5%
18,135 Ballast Nedam N.V. 934,508
----------
FINANCIAL SERVICES -- 1.3%
63,750 ING Groep, N.V. 2,468,847
----------
INSURANCE -- 0.6%
15,140 Aegon N.V. 1,004,334
----------
RETAIL TRADE -- 0.3%
9,657 Koninklijke Bijenkorf Beheer 623,311
----------
Total Netherlands 7,280,829
----------
NEW ZEALAND -- 1.7%
CONSTRUCTION MATERIALS -- 0.2%
137,500 Fletcher Challenge Building 413,405
----------
INVESTMENT SERVICES -- 1.0%
1,853,300 Brierley Investments, Ltd. 1,784,611
----------
OIL -- 0.2%
137,500 (c)Fletcher Challenge Energy 353,395
----------
PAPER -- 0.3%
275,000 (c)Fletcher Challenge Paper 542,951
----------
Total New Zealand 3,094,362
----------
NORWAY -- 3.5%
COMMERCIAL SERVICES -- 0.3%
39,500 (d)Unitor Ships Service 510,837
----------
DRUGS -- 0.4%
56,000 (c)Nycomed ASA, Class B 832,441
----------
ELECTRIC UTILITIES -- 0.2%
56,000 (d)Hafslund Nycomed, Class B 370,436
----------
ENGINEERING & CONSTRUCTION -- 1.5%
61,800 Kvaerner A.S., Class B $2,755,976
----------
NON-FERROUS METALS -- 0.5%
56,000 (d)Elkem A.S., Class A 899,037
----------
PROCESS INDUSTRIES -- 0.6%
60,500 Saga Petroleum A.S., Class A 1,020,744
----------
Total Norway 6,389,471
----------
PERU -- 0.5%
TELEPHONE -- 0.5%
43,700 (c)CPT Telefonica de Peru S.A., Class B, ADR 961,400
----------
PHILIPPINES -- 0.2%
TELEPHONE -- 0.2%
12,820 (h)Philippine Long Distance Telephone Co., GDR 435,880
----------
</TABLE>
<TABLE>
--------------------------------------------------------------------------
<CAPTION>
Shares Description Value
--------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
PORTUGAL -- 0.5%
BANKING -- 0.2%
32,700 Banco Totta & Acores Nationalisiert, Class B $485,972
----------
FINANCIAL SERVICES -- 0.3%
25,000 BPI-SGPS S.A. 371,980
9,500 (c)BPI-SGPS S.A. 141,352
----------
Total 513,332
----------
Total Portugal 999,304
----------
SINGAPORE -- 0.8%
HOLDING COS.-DIVERSIFIED -- 0.6%
170,000 Jardine Matheson 1,028,500
----------
RETAIL TRADE -- 0.2%
588,229 Dairy Farm International Holdings, Ltd. 455,877
----------
Total Singapore 1,484,377
----------
SPAIN -- 7.0%
BANKING -- 2.5%
46,000 Banco Bilbao Vizcaya SA 2,711,640
91,500 (d)Corporacion Bancaria de Espana SA, ADR 1,852,875
----------
Total 4,564,515
----------
ELECTRIC UTILITIES -- 1.9%
24,500 Empresa Nac De Electridad 1,495,518
191,500 Iberdrola SA 2,090,742
----------
Total 3,586,260
----------
PETROLEUM SERVICES -- 1.1%
53,500 Repsol SA 2,034,079
----------
TELEPHONE -- 1.5%
118,500 (d)Telefonica de Espana 2,728,034
----------
Total Spain 12,912,888
----------
SWEDEN -- 4.4%
AUTOMOBILES -- 1.1%
76,500 (d)Volvo AB, Class B 1,917,498
----------
BANKING -- 1.1%
75,000 Svenska Handelsbanken, Stockholm 2,099,888
----------
DRUG & HEALTHCARE -- 0.9%
34,500 Astra AB, Class B 1,614,514
----------
FOREST PRODUCTS -- 0.7%
98,000 (d)Stora Kopparbergs, Class B 1,326,196
----------
OFFICE & BUSINESS EQUIPMENT -- 0.6%
47,000 Esselte AB, Class A 1,137,339
----------
Total Sweden 8,095,435
----------
SWITZERLAND -- 2.8%
BANKING -- 0.8%
13,800 Credit Suisse Group 1,472,119
----------
BUSINESS SERVICES -- 0.4%
300 Societe Generale de Surveillance Holding SA, Class B 681,772
----------
ELECTRONICS -- 0.8%
1,350 ABB AG 1,534,903
----------
INSURANCE -- 0.3%
1,800 Zurich Versicherungsgesellschaft 536,056
----------
</TABLE>
(See Notes to Portfolios of Investments)
[ ] MARSHALL FUNDS
- --------------------------------------------------------------------------------
INTERNATIONAL STOCK FUND (continued)
<TABLE>
---------------------------------------------------------------------------
<CAPTION>
Shares or
Principal
Amount Description Value
---------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
SWITZERLAND (continued)
LEISURE -- 0.5%
350 Reiseburo Kuoni AG, Class B $921,240
-----------
Total Switzerland 5,146,090
-----------
TOTAL COMMON STOCKS (identified cost,
$120,851,888) 147,334,178
-----------
PREFERRED STOCKS -- 1.5%
AUSTRALIA -- 1.2%
BROADCASTING -- 1.2%
491,572 (d)News Corp., Ltd., Pfd. 2,222,269
-----------
ITALY -- 0.3%
ENGINEERING & CONSTRUCTION -- 0.3%
260,000 (d)Autostrade Priv 536,431
-----------
TOTAL PREFERRED STOCKS (identified cost,
$2,470,088) 2,758,700
-----------
CONVERTIBLE BONDS -- 0.9%
CAYMAN ISLANDS -- 0.9%
$1,790,000 PIV Investment Finance, Company Guarantee, 4.50%,
12/1/2000 (identified cost, $1,431,133) 1,619,950
-----------
CONVERTIBLE PREFERRED STOCKS -- 2.3%
ARGENTINA -- 0.8%
24,080 (d)Cointel, Telefonica de Argentina S.A. $5.04,
PRIDES 1,474,900
-----------
GREAT BRITAIN -- 0.1%
107,100 Hyder PLC, Pfd. 187,168
-----------
MEXICO -- 0.9%
42,978 Nacional Financiera, SNC, PRIDES, $6.79 1,719,120
-----------
PHILIPPINES -- 0.5%
29,000 Philippine Long Distance Telephone Co., Conv.
Pfd., Series II, $1.44 986,000
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS (identified
cost, $3,808,085) 4,367,188
-----------
GOVERNMENT AGENCIES -- 8.2%
(I)FEDERAL HOME LOAN BANK DISCOUNT
NOTE -- 2.2%
4,030,000 5.22%, 4/24/1997 3,998,445
-----------
(I)FEDERAL HOME LOAN MORTGAGE CORPORATION DISCOUNT NOTES --
4.1%
2,875,000 5.23%, 3/21/1997 2,866,647
736,000 5.23%-5.30%, 3/5/1997 735,573
4,010,000 5.15%-5.18%, 4/25/1997 3,979,003
-----------
Total 7,581,223
-----------
(I)FEDERAL NATIONAL MORTGAGE ASSOCIATION DISCOUNT NOTES--
1.9%
2,220,000 5.20%, 3/7/1997 2,218,076
915,000 5.24%, 4/18/1997 908,870
435,000 5.21%, 4/21/1997 431,894
-----------
Total 3,558,840
-----------
TOTAL GOVERNMENT AGENCIES (identified cost,
$15,137,465) 15,138,508
-----------
</TABLE>
<TABLE>
----------------------------------------------------------------------------
<CAPTION>
Shares or
Principal
Amount Description Value
----------------------------------------------------------------------------
<C> <S> <C>
U.S. TREASURY ISSUES -- 6.2%
U.S. TREASURY SECURITIES -- 6.2%
$2,140,000 Treasury Bill, 6/5/1997 $2,112,351
3,933,000 (d)Treasury Bill, 5/1/1997 3,901,772
4,578,000 (d)Treasury Bill, 4/24/1997 4,546,183
836,000 Treasury Note, 5.125%, 4/30/1998 830,073
------------
TOTAL U.S. TREASURY ISSUES
(identified cost, $11,388,883) 11,390,379
------------
(E)COLLATERAL FOR SECURITIES
LENDING -- 20.0%
460,975 Dreyfus Cash Management Plus (shares at net asset
value) 460,975
36,500,000 (b)Merrill Lynch Corporate Repurchase Agreement,
5.40%, dated 2/28/97, due 3/3/97 36,500,000
------------
TOTAL COLLATERAL FOR SECURITIES LENDING (at
amortized cost) 36,960,975
------------
TOTAL INVESTMENTS (identified
cost, $192,048,517) $219,569,878
============
</TABLE>
- --------------------------------------------------------------------------------
SMALL-CAP STOCK FUND
<TABLE>
--------------------------------------------------------------------
<CAPTION>
Shares Description Value
--------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 84.4%
BASIC INDUSTRY -- 0.8%
CHEMICAL
25,000 Spartech Corp. $290,625
---------
CAPITAL GOODS -- 14.5%
COMPUTER SERVICES
25,000 (c)Computer Products, Inc. 428,125
15,000 (c)Microchip Technology, Inc. 560,625
25,000 (c)Network Appliance, Inc. 1,000,000
15,000 (c)Saville Systems Ireland PLC, ADR 540,000
5,000 (c)Transaction Systems Architects, Inc., Class A 130,000
25,000 (c)TriTeal Corp. 412,500
15,000 Xircom, Inc. 298,125
---------
Total 3,369,375
---------
ELECTRICAL EQUIPMENT
20,000 (c)Integrated Process Equipment Corp. 505,000
---------
ELECTRONICS
22,500 (c)Nichols Research Corp. 568,125
20,000 (c)Vitesse Semiconductor Corp. 838,750
---------
Total 1,406,875
---------
Total Capital Goods 5,281,250
---------
CONSUMER NON-DURABLES -- 44.0%
BROADCASTING
22,500 (c)Cox Radio, Inc., Class A 430,313
22,000 (c)Emmis Broadcasting Corp., Class A 759,000
20,000 (c)Heftel Broadcasting Corp., Class A 807,500
30,000 (c)Westwood One, Inc. 558,750
---------
Total 2,555,563
---------
</TABLE>
(See Notes to Portfolios of Investments)
February 28, 1997 (unaudited)
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
SMALL-CAP STOCK FUND (continued)
<TABLE>
---------------------------------------------------------
<CAPTION>
Shares Description Value
---------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
CONSUMER NON-DURABLES (continued)
COMMERCIAL SERVICES
30,000 (c)Diamond Home Services, Inc. $525,000
20,000 Eagle USA Airfreight, Inc. 670,000
25,000 (c)Firearms Training Systems, Inc. 365,625
25,000 (c)MSC Industrial Direct Co. 825,000
30,000 (c)Rental Service Corp. 615,000
10,000 (c)Superior Services, Inc. 217,500
20,000 (c)U.S. Filter Corp. 700,000
----------
Total 3,918,125
----------
COSMETICS/TOILETRIES
20,000 (c)French Fragrances, Inc. 155,000
----------
DRUGS
15,000 (c)North American Vaccine, Inc. 339,375
20,000 (c)Parexel International Corp. 560,000
----------
Total 899,375
----------
HEALTH CARE
25,000 (c)AmeriSource Health Corp., Class A 1,259,375
20,000 NCS HealthCare, Inc., Class A 505,000
30,000 (c)Sybron Corp., Rights 892,500
----------
Total 2,656,875
----------
LEISURE & RECREATION
25,000 (c)Regal Cinemas, Inc. 665,625
30,000 (c)Steiner Leisure Ltd. 705,000
----------
Total 1,370,625
----------
MEDICAL SUPPLIES
20,000 (c)Henry Schein, Inc. 540,000
----------
RESTAURANTS
30,000 (c)Landrys Seafood Restaurants, Inc. 540,000
15,000 (c)Papa Johns International, Inc. 365,625
----------
Total 905,625
----------
RETAIL
30,000 (c)Stage Stores, Inc. 637,500
----------
SERVICES
10,000 (c)Apollo Group, Inc., Class A 270,000
35,000 (c)Choice Hotels International, Inc. 538,125
15,000 (c)Learning Tree International, Inc. 465,000
30,000 Stewart Enterprises, Inc.,
Class A 1,059,375
----------
Total 2,332,500
----------
Total Consumer Non-Durables 15,971,188
----------
ENERGY -- 7.6%
OIL & GAS EQUIPMENT & SERVICES
10,000 Camco International, Inc. 386,250
20,000 (c)Weatherford Enterra, Inc. 600,000
----------
Total 986,250
----------
OIL & GAS PRODUCTS
35,000 (c)Offshore Logistics, Inc. 638,750
30,000 Parker & Parsley Petroleum Co. 885,000
23,300 (c)Titan Exploration, Inc. 244,650
----------
Total 1,768,400
----------
Total Energy 2,754,650
----------
</TABLE>
<TABLE>
-------------------------------------------------------------------------
<CAPTION>
Shares or
Principal
Amount Description Value
-------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
FINANCIAL -- 15.2%
18,000 (c)Credit Acceptance Corp. $382,500
30,000 (c)Metris Cos., Inc. 840,000
25,000 Protective Life Corp. 1,075,000
30,000 Redwood Trust, Inc. 1,432,500
30,000 Sirrom Capital Corp. 1,215,000
25,000 Western National Corp. 575,000
-----------
Total Financial 5,520,000
-----------
TELECOMMUNICATIONS -- 2.3%
35,000 (c)Powerwave Technologies, Inc. 778,750
5,000 (c)Yurie Systems, Inc. 63,750
-----------
Total Telecommunications 842,500
-----------
TOTAL COMMON STOCKS
(identified cost, $31,257,793) 30,660,213
-----------
U.S. TREASURY -- 0.3%
$75,000 United States Treasury Bill, 3/13/1997 74,927
20,000 United States Treasury Bill, 5/15/1997 19,802
-----------
TOTAL U.S. TREASURY (identified cost, $94,672) 94,729
-----------
(B)REPURCHASE AGREEMENT -- 13.6%
4,948,000 Goldman Sachs & Co., 5.33%, dated 2/28/1997, due
3/3/1997 (at amortized cost) 4,948,000
-----------
TOTAL INVESTMENTS (identified cost, $36,300,465) $35,702,942
===========
</TABLE>
- --------------------------------------------------------------------------------
SHORT-TERM INCOME FUND
<TABLE>
------------------------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
ASSET-BACKED SECURITIES -- 26.0%
$2,684,797 BCF LLC, Series 1996-C2,
Class A, 7.615%, 4/15/1999 $2,758,629
1,710,960 Contimortgage Home Equity Loan Trust, Series 1995-4,
Class A3, 6.20%, 10/15/2010 1,705,622
3,412,973 Contitrade Services Home Equity Loan Trust, Series
1991-1, Class A, 8.80%, 1/15/2006 3,435,737
3,082,621 Contitrade Services Home Equity Loan Trust, Series
1991-2, Class A, 7.70%, 9/15/2006 3,136,073
1,042,785 Equicon Home Equity Loan Trust, Series 1992-7, Class
A, 5.90%, 9/18/2005 1,033,858
174,610 Ford Credit Grantor Trust, Series 1993-B, Class A,
4.30%, 7/15/1998 174,170
327,914 Green Tree Financial Corp., Series 1994-4, Class A1,
6.55%, 7/15/2019 328,459
3,000,000 Green Tree Home Equity Loan Trust, Series 96-C, Class
A2, 7.10%, 6/15/2026 3,013,140
</TABLE>
(See Notes to Portfolios of Investments)
[ ] MARSHALL FUNDS
- --------------------------------------------------------------------------------
SHORT-TERM INCOME FUND (continued)
<TABLE>
----------------------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
----------------------------------------------------------------------------
<C> <S> <C>
ASSET-BACKED SECURITIES (continued)
$192,790 HFC Revolving Home Equity Loan Trust, Series 1992-1,
Class A, 5.93%, 11/15/2017 $193,580
925,546 Olympic Automobile Receivables, Series 1994-A,
5.65%, 1/15/2001 924,722
1,327,754 Olympic Automobile Receivables, Series 1995-B, Class
A2, 7.35%, 10/15/2001 1,344,391
467,376 Premier Auto Trust, Series
1993-4, Class A2, 4.65%,
2/2/1999 466,100
2,803,132 Residential Asset Securitization Trust, Series 1996-
A8, Class A1, 8.00%, 12/25/2026 2,843,155
2,094,282 Structured Asset Securities Corp., Series 1995-C1,
Class A1A, 7.375%, 9/25/2024 2,112,607
2,450,000 The Money Store Home Equity Loan Trust, Series 1995-
C, Class A2, 6.25%, 8/15/2016 2,431,772
2,068,601 The Money Store Home Equity Loan Trust, Series 1992-
D2, Class A3, 7.55%, 1/15/2018 2,085,274
802,221 UCFC Home Equity Loan, Series 1994-C1, Class A2,
7.275%, 6/10/2007 805,694
2,000,000 UCFC Home Equity Loan, Series 1996-A, Class A4,
6.30%, 12/31/2099 1,985,600
998,373 Western Financial Grantor Trust, Series 1994-2,
Class A1, 6.375%, 9/1/1999 1,003,295
----------
TOTAL ASSET-BACKED SECURITIES (identified cost,
$31,744,077) 31,781,878
----------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 31.2%
FEDERAL HOME LOAN MORTGAGE
CORPORATION -- 8.4%
79,625 6.00%, 7/15/2010, (Series 1468), Class C 79,543
383,637 7.75%, 1/15/2018, (Series 1259), Class H 385,621
748,230 10.00%, 7/15/2018, (Series 10D) 759,236
4,665,401 7.00%, 1/15/2020, (Series 1834), Class A 4,677,765
4,480,998 6.05%, 9/15/2020, (Series 1818), Class A 4,361,203
----------
Total 10,263,368
----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION -- 0.7%
846,671 7.50%, 4/25/2014, REMIC (Series 1991-06-K) 849,381
----------
OTHER FINANCIAL -- 22.1%
2,064,360 CMC Securities Corp., III, Series 1994-E, Class A1,
6.00%, 3/25/2024 2,051,644
246,972 Citicorp Mortgage Securities, Inc., Series 1992-19,
Class A2, 7.50%, 1/25/2019 246,335
</TABLE>
<TABLE>
----------------------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
----------------------------------------------------------------------------
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS (continued)
OTHER FINANCIAL (continued)
$3,036,396 GE Capital Mortgage Services, Inc., Series 1995-8,
Class A3, 7.00%, 10/25/2025 $3,028,745
3,000,000 GE Capital Mortgage Services, Inc., Series 1994-28,
Class A3, 8.00%, 8/25/2024 3,050,970
2,397,048 Independent National Mortgage Corp., Series 1995-R,
Class A1, 7.25%, 11/25/2010 2,409,800
4,000,000 Norwest Asset Securities Corp. 1996-9, Series 1996-
9, Class A5, 10.00%, 1/25/2027 4,147,520
619,827 PaineWebber CMO Trust, Class 0-4, 9.50%, 6/1/2017 622,982
1,912,069 PNC Mortgage Securities Corp., Series 1994-1, Class
T7, 6.00%, 2/25/2024 1,844,171
2,505,000 Prudential Home Mortgage Securities Co., Series
1993-54, Class A21, 5.50%, 1/25/2024 2,439,369
2,175,000 Prudential Home Mortgage Securities Co., Series
1992-32, Class A4, 7.15%, 10/25/2022 2,174,891
3,137,000 Residential Accredit Loans, Inc., Series 1996-QS5,
Class A15, 7.60%, 9/25/2026 3,169,499
1,794,243 Residential Funding Mortgage Securities I, Series
1993-S41, Class A1,
6.85%, 9/25/2023 1,787,515
----------
Total 26,973,441
----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(identified cost, $38,176,772) 38,086,190
----------
CORPORATE BONDS -- 10.7%
FINANCE -- 2.6%
3,000,000 Lehman Brothers Holdings, Inc., 8.875%, 2/15/2000 3,172,170
----------
FINANCE--AUTOMOTIVE -- 2.5%
3,000,000 Ford Holdings, Inc., 9.25%, 7/15/1997 3,041,010
----------
OTHER FINANCIAL -- 5.6%
4,000,000 (h)Corestates Capital Corp., Bank Guarantee,
6.1325%, 2/15/2027 3,903,840
3,000,000 (h)Old Kent Capital Trust I, Company Guarantee,
6.3625%, 2/1/2027 2,982,840
----------
Total 6,886,680
----------
TOTAL CORPORATE BONDS (identified cost,
$13,193,369) 13,099,860
----------
MORTGAGE BACKED SECURITIES -- 13.7%
FEDERAL HOME LOAN MORTGAGE
CORPORATION -- 2.3%
2,459,375 11.00%, 8/1/2019 2,757,573
----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION -- 11.4%
1,358,173 8.00%, 8/1/2007 1,401,892
</TABLE>
(See Notes to Portfolios of Investments)
February 28, 1997 (unaudited)
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
SHORT-TERM INCOME FUND (continued)
<TABLE>
-----------------------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
-----------------------------------------------------------------------------
<C> <S> <C>
MORTGAGE BACKED SECURITIES (continued)
FEDERAL NATIONAL LOAN MORTGAGE
ASSOCIATION (continued)
$4,043,958 8.00%, 5/1/2008 $4,169,078
7,918,990 9.50%, 1/1/2025 8,399,622
------------
Total 13,970,592
------------
TOTAL MORTGAGE BACKED SECURITIES (identified cost,
$16,764,062) 16,728,165
------------
U.S. TREASURY NOTE -- 12.5%
15,000,000 6.875%, 3/31/2000 (identified cost, $15,358,594) 15,268,950
------------
(B)REPURCHASE AGREEMENT -- 12.5%
15,246,000 Goldman Sachs & Co., 5.33%, dated 2/28/1997, due
3/3/1997 (at amortized cost) 15,246,000
------------
TOTAL INVESTMENTS (identified cost, $130,482,874) $130,211,043
============
</TABLE>
- --------------------------------------------------------------------------------
INTERMEDIATE BOND FUND
<TABLE>
------------------------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
ASSET-BACKED SECURITIES -- 16.7%
$10,000,000 Bridgestone/Firestone Master Trust, Series 1996-1,
Class A, 6.17%, 7/1/2003 $9,913,200
14,630,000 Citibank Credit Card Master Trust I, Series 1996-1,
Class A, 5.79%, 2/7/2003 11,348,784
5,000,000 Contimortgage Home Equity Loan Trust, Series 1995-4,
Class A5, 6.56%, 12/15/2010 4,990,650
4,325,000 Green Tree Financial Corp., Series 1994-7, Class A4,
8.35%, 3/15/2020 4,534,070
12,000,000 Green Tree Financial Corp., Series 1996-6, Class A3,
6.75%, 9/15/2027 12,042,960
6,436,310 Mortgage Capital Funding Inc., Series 1995-MC1,
Class A1A, 7.75%, 5/25/2027 6,556,990
5,840,000 Olympic Automobile Receivables Trust, Series 1995-D,
Class A4, 6.05%, 11/15/2000 5,845,373
12,000,000 The Money Store, Series 1996-B, Class A7, 7.55%,
8/15/2020 12,123,720
----------
TOTAL ASSET-BACKED SECURITIES (identified cost,
$67,149,866) 67,355,747
----------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 15.9%
8,988,630 Federal Home Loan Mortgage Association, Series 1829,
Class H, 6.50%, 10/15/2021 8,786,386
6,531,562 Federal Home Loan Mortgage Association, Series 1834,
Class A, 7.00%, 1/15/2020 6,548,870
</TABLE>
<TABLE>
-----------------------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
-----------------------------------------------------------------------------
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS (continued)
$12,000,000 Norwest Asset Securities Corp., Series 1996-9,
Class A5, 10.00%, 1/25/2027 $12,442,560
10,275,000 Prudential Home Mortgage Securities Corp., Series
1993-54, Class A21, 5.50%, 1/25/2024 10,005,795
12,000,000 Rasta, Series 1996-A, Class A2, 7.50%, 11/11/2025 12,121,080
7,000,000 Residential Accredit Loans, Inc., Series 1996-QS5,
Class AI5, 7.60%, 9/25/2026 7,072,520
6,980,939 Structured Asset Securities Corp., Series 1995-C1,
Class A1A, 7.375%, 9/25/2024 7,042,022
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(identified cost, $63,927,578) 64,019,233
-----------
CORPORATE BONDS -- 49.7%
BANKING -- 14.7%
8,000,000 Fleet Financial Group, Inc., Sub. Note, 8.125%,
7/1/2004 8,489,360
12,000,000 Mercantile Capital Trust I, 6.4125%, 2/1/2027 11,931,600
9,000,000 Merita Bank Ltd., 6.50%, 1/15/2006 8,564,310
6,350,000 NationsBank Corp., 6.94%, 4/12/2002 6,379,210
8,000,000 Provident Bank, 6.125%, 12/15/2000 7,835,280
10,000,000 Santander Financial Issuances, Sub. Note, 7.25%,
5/30/2006 10,045,000
6,000,000 Toronto-Dominion Bank, 7.875%, 8/15/2004 6,125,580
-----------
Total 59,370,340
-----------
BROKER -- 8.0%
8,000,000 Bear Stearns & Co., Inc., 7.00%, 1/15/2027 7,974,872
7,000,000 Donaldson, Lufkin and Jenrette Securities Corp.,
5.625%, 2/15/2016 6,738,340
10,000,000 Goldman Sachs Group, LP, 6.25%, 2/1/2003 9,618,110
7,525,000 Lehman Brothers Holdings, Inc., 8.875%, 2/15/2000 7,956,860
-----------
Total 32,288,182
-----------
CONSUMER SERVICES -- 0.7%
2,750,000 Marriott International, Inc., Series C, 7.125%,
6/1/2007 2,714,965
-----------
FINANCE -- 20.1%
12,500,000 Corestates Capital Corp., 6.1325%, 2/15/2027 12,199,500
4,000,000 Corestates Capital Corp., 6.2125%, 1/15/2027 3,931,720
12,000,000 Firstar Capital Trust I, 8.32%, 12/15/2026 12,238,200
6,750,000 Ford Motor Credit Corp., 6.25%, 12/20/2002 6,539,670
</TABLE>
(See Notes to Portfolios of Investments)
[ ] MARSHALL FUNDS
- --------------------------------------------------------------------------------
INTERMEDIATE BOND FUND (continued)
<TABLE>
------------------------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C> <C>
CORPORATE BONDS (continued)
FINANCE (continued)
$5,000,000 Ford Motor Credit Corp., 8.24%, 1/15/2002 $5,280,550
5,165,000 General Motors Acceptance Corp., 7.00%, 6/6/2003 5,189,947
6,700,000 General Motors Acceptance Corp., 7.50%, 6/9/2000 6,869,644
10,000,000 Heller Financial, Inc., 6.50%, 11/1/2001 9,861,700
12,000,000 Old Kent Capital Trust I, 6.3625%, 2/1/2027 11,931,360
7,090,000 Sears Roebuck Acceptance Corp., Series 1, 6.40%,
9/25/2000 7,015,626
-----------
Total 81,057,917
-----------
INDUSTRIAL SERVICES -- 3.2%
5,000,000 Dayton-Hudson Corp., 6.40%, 2/15/2003 4,858,800
7,000,000 Dayton-Hudson Corp., 9.75%, 7/1/2002 7,865,550
-----------
Total 12,724,350
-----------
UTILITIES-GAS -- 1.4%
5,590,000 Burlington Resources, Inc., 7.15%, 5/1/1999 5,673,179
-----------
UTILITIES-TELEPHONE -- 1.6%
6,070,000 NYNEX Capital Funding Co., Series B, 8.10%,
11/1/1999 6,266,729
-----------
TOTAL CORPORATE BONDS (identified cost,
$201,222,440) 200,095,662
-----------
CORPORATE NOTES -- 2.0%
BROKER/DEALERS -- 2.0%
8,000,000 Bear Stearns & Co., Inc., 6.75%, 5/1/2001
(identified cost $7,974,720) 8,004,160
-----------
MORTGAGE BACKED SECURITIES -- 6.1%
FEDERAL HOME LOAN MORTGAGE ASSOCIATION -- 6.1%
25,000,000 (j)6.50%, TBA 24,500,250
12,661 8.75%, 4/1/2001 13,021
-----------
TOTAL MORTGAGE-BACKED SECURITIES (identified
cost, $24,255,449) 24,513,271
-----------
U.S. TREASURY SECURITIES AGENCY -- 14.0%
(D)TREASURY NOTES -- 14.0%
35,000,000 6.375%, 5/15/1999 35,191,800
20,000,000 7.875%, 8/15/2001 21,153,600
-----------
TOTAL U.S. TREASURY SECURITIES --AGENCY
(identified cost, $56,710,938) 56,345,400
-----------
(E)COLLATERAL FOR SECURITIES LENDING -- 14.5%
5,000,000 (f)Bear Stearns & Co., Inc., 5.688%, 3/10/1997 5,000,000
3,750,000 (f)Carco Auto Trust, 5.475%, 3/17/1997 3,762,375
5,000,000 (f)Chrysler Corp., 5.54%, 3/19/1997 4,997,150
79,354 Dreyfus Cash Management Plus (shares at net
asset value) 79,354
</TABLE>
<TABLE>
----------------------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
----------------------------------------------------------------------------
<C> <S> <C> <C>
(E)COLLATERAL FOR SECURITIES LENDING (continued)
$15,000,000 (f)Ford Motor Credit Co., 5.67%, 5/27/1997 $15,024,000
3,000,000 (f)General Electric Capital Corp., 5.48%,
3/3/1997 2,995,800
5,000,000 (f)Heller Financial Corp., 5.47%, 3/3/1997 5,000,000
10,000,000 JP Morgan Securities, Inc., Master Note,
5.448%, 3/3/1997 10,000,000
1,500,000 (b)Morgan Stanley & Co., Inc., Repurchase
Agreement, 5.50%, 3/3/1997 1,500,000
5,000,000 (f)National Bank, 5.465%, 3/24/1997 5,000,000
5,000,000 (f)Sears Roebuck & Co., 5.483%, 3/19/1997 4,995,800
------------
TOTAL COLLATERAL FOR SECURITIES LENDING (at
amortized cost) 58,354,479
------------
(B)REPURCHASE AGREEMENT -- 1.3%
5,152,000 Goldman Sachs & Co., 5.33%, dated 2/28/1997,
due 3/3/1997 (at amortized cost) 5,152,000
------------
TOTAL INVESTMENTS (identified
cost, $484,747,470) $483,839,952
============
</TABLE>
- --------------------------------------------------------------------------------
GOVERNMENT INCOME FUND
<TABLE>
----------------------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
----------------------------------------------------------------------------
<C> <S> <C>
ASSET-BACKED SECURITIES -- 0.8%
$1,538,580 Contitrade Services Home Equity Loan Trust, 7.70%,
9/15/2006, (Series 1991-2) (identified cost
$1,555,889) $1,565,259
----------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 30.0%
3,466,983 BCF LLC, 7.615%, 4/15/1999, (Series 1996-C2) 3,562,325
3,141,526 Chase Mortgage Finance
Corp., 6.25%, 11/25/2009, (Series 1993-M-CL-A6) 3,037,919
711,105 Citicorp Mortgage Securities, Inc., 7.50%,
1/25/2019,
(Series 1992-19-CL-A2) 709,271
4,087,457 GE Capital Mortgage Services, Inc., 7.00%,
10/25/2025, (Series 1995-8-A3) 4,077,156
5,000,000 GE Capital Mortgage Services, Inc., 8.00%,
8/25/2024,
(Series 1994-28-A3) 5,084,950
4,040,036 Independent National Mortgage Corp., 7.25%,
11/25/2010, (Series 1995-M-A2) 4,061,529
6,450,000 Independent National Mortgage Corp., 7.50%,
9/25/2025, (Series 1995-M-C) 6,483,411
3,275,000 Midland Realty Acceptance Corp., 7.23%, 12/25/2006,
(Series 1996-C2-CL-A2) 3,279,618
</TABLE>
(See Notes to Portfolios of Investments)
February 28, 1997 (unaudited)
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
GOVERNMENT INCOME FUND (continued)
<TABLE>
----------------------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
----------------------------------------------------------------------------
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS (continued)
$5,000,000 Norwest Asset Securities
Corp., 7.25%, 3/25/2027, (Series 1997-3) $4,894,200
5,500,000 Norwest Asset Securities
Corp., 8.00%, 11/25/2026, (Series 1996-5-CL-A17) 5,634,915
6,901,318 Prudential Home Mortgage Securities, 7.40%,
5/25/2007, (Series 1992-B) 6,900,214
3,619,792 Residential Asset Securitization Trust, 8.00%,
12/25/2026, (Series 1996-A8) 3,671,476
4,981,261 Saxon Mortgage Securities
Corp., 5.68%, 11/25/2023, (Series 1993-10-CL-A2) 4,724,327
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(identified cost $55,858,930) 56,121,311
-----------
MORTGAGE-BACKED SECURITIES -- 65.5%
FEDERAL HOME LOAN MORTGAGE CORP. -- 17.2%
10,000,000 (a)(j)7.00%, TBA 9,768,800
10,000,000 (a)(j)7.50%, TBA 10,003,100
5,579,771 7.50%, 5/1/2024 5,635,569
82,572 8.75%, 4/1/2001 84,920
5,654,096 9.00%, TBA 5,960,661
604,837 9.00%, 5/1/2017 647,176
11,021 9.50%, 2/1/2001 11,417
161,197 9.50%, 7/1/2020 172,381
19,383 10.50%, 10/1/2000 20,377
-----------
Total 32,304,401
-----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION -- 16.9%
5,018,390 6.50%, 7/1/2008 4,954,104
10,034,450 6.90%, 5/25/2021 9,551,592
6,157,423 7.50%, 1/1/2024 6,167,028
1,629,807 8.00%, 8/1/2007 1,682,271
4,689,142 8.50%, 8/1/2022 4,881,115
601,437 11.00%, 6/1/2020 672,870
1,428,439 11.50%, TBA 1,636,462
1,334,809 11.50%, 7/1/2006 1,458,279
617,774 11.50%, 10/1/2015 700,727
-----------
Total 31,704,448
-----------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 31.4%
15,000,000 (a)6.50%, TBA 14,325,000
6,250,000 7.00%, 2/16/2024 5,993,900
10,000,000 (a)8.00%, TBA 10,200,100
7,824,358 8.00%, 8/15/2024 7,997,981
909,597 9.00%, 2/15/2020 970,713
13,783,642 (a)9.00%, 5/20/2025 14,451,322
429,552 9.50%, 7/15/2019 466,197
3,429,319 9.50%, 10/15/2024 3,721,874
502,621 10.00%, 11/15/2020 553,355
8,158 10.50%, 10/15/2000 8,709
26,628 10.50%, 10/15/2000 28,425
34,076 11.00%, 11/15/2000 36,717
-----------
Total 58,754,293
-----------
TOTAL MORTGAGE-BACKED SECURITIES (identified cost,
$123,292,386) 122,763,142
-----------
</TABLE>
<TABLE>
------------------------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
AGENCY BONDS -- 2.1%
$4,025,000 (f)MBNA Global Capital Securities Floating Rate
Note, 6.36%, 5/1/1997 (Series B) (identified cost,
$3,978,879) $3,978,713
------------
CORPORATE BONDS -- 7.3%
7,757,650 Jordan Aid, 8.75%, 9/1/2019 8,635,816
5,000,000 (f)Old Kent Capital Trust I Floating Rate Note,
6.36%, 5/1/1997 4,971,400
------------
TOTAL CORPORATE BONDS (identified cost,
$13,723,847) 13,607,216
------------
(B)REPURCHASE AGREEMENT -- 11.6%
21,721,000 Goldman Sachs & Co., 5.33%, dated 2/28/1997, due
3/3/1997 (at amortized cost) 21,721,000
------------
TOTAL INVESTMENTS (identified cost, $220,130,931) $219,756,641
============
</TABLE>
- --------------------------------------------------------------------------------
INTERMEDIATE TAX-FREE FUND
<TABLE>
------------------------------------------------------------------------------
<CAPTION>
Principal Credit
Amount Description Rating(k) Value
------------------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPALS -- 96.9%
ARIZONA -- 2.7%
$1,000,000 Maricopa County, AZ, Community College
District, GO UT Bonds (Series A), 6.00%,
7/1/2006, Callable 7/1/2003 @ 101 AA $1,068,150
1,000,000 Maricopa County, AZ, School District No. 4,
GO UT Bonds, 5.375% (FGIC INS), 7/1/2009,
Callable 7/1/2006 @ 101 AAA 1,020,760
----------
Total 2,088,910
----------
HAWAII -- 1.3%
1,000,000 Hawaii State, GO UT Bonds (Series CA),
5.50%, 1/1/2012 AA 1,020,270
----------
ILLINOIS -- 12.8%
1,500,000 Arlington Heights, IL, GO UT Refunding
Bonds (Series B), 4.55%, 12/1/2001 AA 1,510,065
2,000,000 Illinois Development Finance Authority,
Refunding Revenue Bonds, 4.625% (WMX
Technologies, Inc.)/(MBIA INS), 2/1/1998
(AMT) AAA 2,011,820
2,500,000 Illinois State, GO UT Bonds, 5.25% (FGIC
INS), 9/1/2004 AAA 2,592,325
</TABLE>
(See Notes to Portfolios of Investments)
[ ] MARSHALL FUNDS
- --------------------------------------------------------------------------------
INTERMEDIATE TAX-FREE FUND (continued)
<TABLE>
------------------------------------------------------------------------------
<CAPTION>
Principal Credit
Amount Description Rating(k) Value
------------------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPALS (continued)
ILLINOIS (continued)
$2,500,000 Lake County, IL, Community School District
No. 60, GO LT (Series B), 5.30% (FSA INS),
12/1/2005 AAA $2,595,400
1,085,000 Waukegan, IL, GO UT Bonds, 6.40% (MBIA
INS), 12/30/2004, Callable 12/30/2002 @
100 AAA 1,186,523
----------
Total 9,896,133
----------
INDIANA -- 4.8%
2,700,000 Indiana Transportation Finance Authority,
Refunding Revenue Bonds (Series A), 5.25%
(AMBAC INS), 6/1/2009 AAA 2,724,057
1,000,000 Indiana University, Refunding Revenue Bonds
(Series K), 5.00%, University and College
Improvements (Student Fee), 8/1/2001 AA- 1,021,340
----------
Total 3,745,397
----------
IOWA -- 1.4%
1,050,000 Cedar Rapids, IA, GO UT Bonds (Series B),
5.20%, Airport and Marina Improvements,
Public and Water Utility Improvements,
6/1/2007, Callable 6/1/2004 @ 100 AAA 1,067,640
----------
LOUISIANA -- 2.8%
1,000,000 Louisiana Public Facility Revenue
Authority, Student Loan Refunding Revenue
Bonds (Series A-2), 6.75%, 9/1/2006,
Callable 9/1/2002 @ 102 AAA 1,060,770
1,000,000 Mississippi River Bridge Authority, LA,
Revenue Bonds, 6.625%, 11/1/2006, Callable
@ 102, Mandatory Sinking Fund 11/1/2003 @
100 A- 1,098,390
----------
Total 2,159,160
----------
MARYLAND -- 2.7%
1,000,000 Maryland State, GO UT Bonds, 5.20%, State
and Local Facilities Loan Bond, 3/15/2003 AAA 1,041,940
1,000,000 Northeast, MD, Waste Disposal Authority,
Solid Waste Revenue Bonds, 6.00%, 7/1/2007 A 1,035,700
----------
Total 2,077,640
----------
</TABLE>
<TABLE>
------------------------------------------------------------------------------
<CAPTION>
Principal Credit
Amount Description Rating(k) Value
------------------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPALS (continued)
MASSACHUSETTS -- 1.4%
$1,000,000 New England Educational Loan Marketing
Corp., Student Loan Revenue Bonds, 6.60%
(Series F), 9/1/2002 A $1,061,200
----------
MINNESOTA -- 7.9%
2,050,000 Minneapolis Special School District No.
001, MN, GO UT Bonds, 5.00%, 2/1/2004 AA 2,108,938
2,400,000 Minnesota State, GO UT Bonds, 5.00%, Public
Improvements, 8/1/2003 AA+ 2,475,456
1,525,000 Owatonna, MN Independent School District
No. 761, GO UT Bonds, 5.25%, 2/1/2009,
Callable 2/1/2006 @ 100 Aa1 1,544,398
----------
Total 6,128,792
----------
MISSOURI -- 1.5%
1,000,000 Missouri State Environmental Improvement &
Energy Authority, Water Pollution Control
State Revolving Fund Program Revenue Bonds
(Series B), 6.65%, 7/1/2006, Callable
7/1/2004 @ 102 AA 1,131,770
----------
NEBRASKA -- 1.4%
1,000,000 Nebraska Higher Education Loan Program,
Inc., Senior Subordinated Lien Student
Loan Revenue Bonds (Series A-5), 6.65%,
6/1/2008, Mandatory Sinking Fund 6/1/2003
@ 100 AA 1,050,460
----------
NEVADA -- 1.9%
1,500,000 Las Vegas, NV, GO LT Sewer Refunding
Revenue Bonds (Series B), 4.875% (MBIA
INS), 1/1/2006, Callable 1/1/2003 @ 101 AAA 1,502,310
----------
NEW YORK -- 5.9%
3,000,000 New York State Environmental Facilities
Corp., Revenue Bonds, 4.55% (General
Electric Capital Corp.), 12/1/2018 AAA 2,997,270
</TABLE>
(See Notes to Portfolios of Investments)
February 28, 1997 (unaudited)
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
INTERMEDIATE TAX-FREE FUND (continued)
<TABLE>
------------------------------------------------------------------------------
<CAPTION>
Principal Credit
Amount Description Rating(k) Value
------------------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPALS (continued)
NEW YORK (continued)
$1,500,000 New York State Environmental Facilities
Corp., Revenue Bonds, 5.70%, 6/15/2006,
Callable 6/15/2004 @ 102 AA $1,579,335
----------
Total 4,576,605
----------
OKLAHOMA -- 3.9%
2,000,000 Oklahoma Housing Finance Agency, Refunding
Revenue Bonds (Series A-3), 5.50% (FNMA
Collateral), 11/1/2025, Callable 5/1/2005
@ 100, Mandatory Put 11/1/2005 @ 100 AAA 2,020,760
1,000,000 Tulsa, OK, Public Improvements GO UT Bonds,
5.125%, 5/1/2001 AA 1,030,200
----------
Total 3,050,960
----------
OREGON -- 5.4%
1,000,000 Metro, OR, GO UT Bonds (Series A), 5.00%
(Open Spaces Program), 9/1/2002 AA 1,030,930
3,000,000 Multnomah County, OR, School District, GO
UT Bonds, 5.50%, 6/1/2005 AA- 3,164,220
----------
Total 4,195,150
----------
PUERTO RICO -- 2.3%
1,500,000 Puerto Rico Municipal Finance Agency,
Revenue Bonds (Series A), 5.10% (FSA INS),
7/1/2000 AAA 1,541,820
250,000 Puerto Rico Public Building Authority,
Revenue Refunding Bonds (Series K), 6.10%
(FGIC INS), 7/1/2002 AAA 271,805
----------
Total 1,813,625
----------
SOUTH CAROLINA -- 2.0%
1,055,000 South Carolina State, GO UT Bonds, Highway
Improvements (Series B), 5.625%, 7/1/2011,
Callable 7/1/2006 @ 102 AAA 1,088,359
500,000 South Carolina State, GO UT Refunding
Capital Improvement Bonds, 4.30%, 4/1/2003 AAA 492,115
----------
Total 1,580,474
----------
</TABLE>
<TABLE>
------------------------------------------------------------------------------
<CAPTION>
Principal Credit
Amount Description Rating(k) Value
------------------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPALS (continued)
TENNESSEE -- 2.6%
$2,000,000 Memphis, TN, GO UT Refunding Bonds (Series
A), 4.60%, 8/1/2002 AA $2,015,140
----------
TEXAS -- 8.5%
1,000,000 Arlington, TX, ISD, GO UT Refunding Bonds,
6.50% (PSF GTD), 2/15/2002 AAA 1,092,830
1,000,000 Brazosport, TX, ISD, GO UT, 5.10% (PSF
GTD), 2/15/2009, Callable 2/15/2007 @ 100 Aaa 1,000,740
100,000 Dallas-Fort Worth, TX, Regional Airport,
Refunding Revenue Bonds (Long Opt.
Period/Series A CR 104), 5.875% (FGIC
INS), 11/1/2006, Optional Put 5/1/1998 @
100, Callable 5/1/2004 @ 102 AAA 102,204
700,000 El Paso, TX, ISD, GO UT Bonds, 7.50% (PSF
GTD), 8/15/2000 AAA 774,753
945,000 San Angelo, TX, ISD, GO UT Bonds, School
Improvements, 5.30% (PSF GTD), 2/15/2007,
callable 2/15/2006 @ 100 AAA 972,764
1,220,000 Tarrant County, TX, Jr. College District,
GO LT Bonds, 5.30%, University and College
Improvements, 2/15/2009 Callable 2/15/2006
@ 100 AA 1,210,374
1,475,000 Texas Water Development Board, Revenue
Bonds, 4.40% (State Revolving Fund
Program/Sr. Lien), 7/15/2001 AAA 1,481,313
----------
Total 6,634,978
----------
UTAH -- 2.6%
1,000,000 Washington County, UT, School District, GO
UT, 5.00%, 3/1/2008 AAA 1,003,110
1,000,000 Washington County, UT, School District, GO
UT, 5.00%, 3/1/2007, Callable 3/1/2007 @
100 AAA 1,010,960
----------
Total 2,014,070
----------
</TABLE>
(See Notes to Portfolios of Investments)
[ ] MARSHALL FUNDS
- --------------------------------------------------------------------------------
INTERMEDIATE TAX-FREE FUND (continued)
<TABLE>
------------------------------------------------------------------------------
<CAPTION>
Principal Credit
Amount Description Rating(k) Value
------------------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPALS (continued)
VIRGINIA 5.7%
$1,730,000 Chesapeake, VA, GO UT Bonds, 5.60%, School,
Recreational and Public Improvements,
5/1/2006, Callable 5/1/2004 @ 101 AA $1,819,804
1,000,000 Fairfax County, VA, GO UT Refunding Bonds
(Series C), 4.60%, 5/1/2001 AAA 1,019,250
1,500,000 Virginia State Housing Development
Authority, Mortgage Revenue Bonds (Series
A), 6.40%, 7/1/2002 AA+ 1,578,345
----------
Total 4,417,399
----------
WASHINGTON -- 6.2%
1,480,000 Clark County, WA, Sewer Revenue Bonds,
5.40% (MBIA INS), 12/1/2007, Callable
12/1/2006 @ 100 AAA 1,522,772
1,125,000 Kitsap County, WA, Sewer Revenue, Revenue
Bonds, 5.90% (MBIA INS), 7/1/2012,
Callable 7/1/2006 @ 100 AAA 1,161,518
1,000,000 Port Longview, WA, Industrial Development
Corp., Solid Waste Disposal Revenue Bonds,
6.875% (Weyerhaeuser Co.), 10/1/2008 A 1,126,570
1,000,000 Skagit County, WA, Consolidated School
District #320, GO UT Bonds, Refunding
Bonds, 5.15% (FGIC INS), 12/1/2007,
Callable 12/1/2006 @ 100 AAA 1,017,550
----------
Total 4,828,410
----------
WISCONSIN -- 9.2%
1,000,000 Racine County, WI, GO UT Promissory Notes,
4.80%, 6/1/2000 AA 1,017,620
1,000,000 Wausau, WI, School District, GO UT
Promissory Notes, School Improvements,
4.40%, 3/1/2003 AA 992,720
</TABLE>
<TABLE>
-----------------------------------------------------------------------------
<CAPTION>
Principal
Amount or Credit
Shares Description Rating(k) Value
-----------------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPALS (continued)
WISCONSIN (continued)
$1,000,000 Wisconsin Housing & Economic Development
Authority, Refunding Revenue Bonds
(Series A), 6.00% (Wisconsin Housing &
Economic Development Authority LOC),
11/1/2000 A $1,034,970
1,000,000 Wisconsin State, GO UT Bonds (Series C),
5.00%, University and College
Improvements, 5/1/2002 AA 1,026,880
2,950,000 Wisconsin State, GO UT Bonds (Series C),
5.30%, 5/1/2008, Callable 5/1/2007 @ 100 AA 3,029,060
-----------
Total 7,101,250
-----------
TOTAL LONG-TERM MUNICIPALS
(identified cost, $73,474,045) 75,157,743
-----------
MUTUAL FUNDS -- 3.4%
1,295,212 Fidelity Tax Exempt Money Market 1,295,212
1,341,919 Goldman Sachs Financial Square Tax Exempt
Money Market 1,341,919
-----------
TOTAL MUTUAL FUND SHARES
(at net asset value) 2,637,131
-----------
(L)TOTAL INVESTMENTS
(identified cost, $76,111,176) $77,794,874
===========
</TABLE>
- --------------------------------------------------------------------------------
MONEY MARKET FUND
<TABLE>
------------------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
------------------------------------------------------------------------
<C> <S> <C>
CERTIFICATES OF DEPOSIT -- 4.6%
BANKING -- 4.6%
$45,900,000 Bankers Trust New York Corp., 5.417%-5.450%,
3/4/1997 $45,889,641
15,000,000 Societe Generale, New York, 5.850%, 3/3/1998 14,994,260
-----------
TOTAL CERTIFICATES OF DEPOSIT 60,883,901
-----------
(I)COMMERCIAL PAPER -- 22.6%
ASSET-BACKED COMMERCIAL PAPER -- 4.6%
37,500,000 Beta Finance, Inc., 5.443%-5.631%, 3/26/1997-
5/16/1997 37,254,867
20,000,000 CXC, Inc., 5.31%, 5/13/1997 19,784,650
</TABLE>
(See Notes to Portfolios of Investments)
February 28, 1997 (unaudited)
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
MONEY MARKET FUND (continued)
<TABLE>
----------------------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
----------------------------------------------------------------------------
<C> <S> <C>
(I)COMMERCIAL PAPER (continued)
ASSET-BACKED COMMERCIAL PAPER (continued)
$5,000,000 Corporate Receivables Corp., 5.368%, 5/21/1997 $4,940,375
-----------
Total 61,979,892
-----------
BANKING -- 0.8%
11,000,000 Government Development Bank for Puerto Rico,
5.445%, 4/23/1997 10,913,036
-----------
BROKER/DEALERS -- 4.0%
14,000,000 Goldman Sachs & Co., 5.514%, 7/21/1997 13,707,322
40,000,000 Merrill Lynch & Co., Inc., 5.418%, 5/28/1997 39,478,844
-----------
Total 53,186,166
-----------
CHEMICAL -- 2.6%
35,000,000 Arco Chemical Co., 5.424%-5.455%, 5/7/1997-
5/14/1997 34,634,786
-----------
FOREIGN BANKS -- 3.3%
45,000,000 Spintab-Swedmortgage AB, 5.476%-5.477%, 4/14/1997-
4/15/1997 44,699,250
-----------
PERSONAL CREDIT -- 0.6%
8,000,000 General Motors Acceptance Corp., 5.541%, 8/18/1997 7,799,022
-----------
SHORT-TERM BUSINESS CREDIT -- 4.1%
25,000,000 Heller Financial, Inc., 5.436%, 3/3/1997 24,992,486
30,000,000 Sears Roebuck Acceptance Corp., 5.539%, 8/29/1997 29,197,567
-----------
Total 54,190,053
-----------
SOFT DRINK BOTTLERS/DISTRIBUTORS -- 2.6%
35,000,000 Coca Cola Enterprises, Inc., 5.418%-5.434%,
3/25/1997-5/5/1997 34,753,144
-----------
TOTAL COMMERCIAL PAPER 302,155,349
-----------
CORPORATE BONDS -- 2.4%
AUTOMOTIVE -- 0.9%
12,024,000 Ford Capital BV, 9.375%, 1/1/1998 12,373,094
-----------
BANKING -- 0.4%
4,625,000 NationsBank Corp., 6.625%, 1/15/1998 4,659,446
-----------
INSURANCE -- 0.2%
3,000,000 American General Finance Corp., 7.250%, 3/1/1998 3,038,340
-----------
PERSONAL CREDIT -- 0.9%
5,000,000 Associates Corp. of North America, 8.125%,
1/15/1998 5,096,865
7,000,000 General Motors Acceptance Corp., 5.750%, 4/11/1997 7,001,497
-----------
Total 12,098,362
-----------
TOTAL CORPORATE BONDS 32,169,242
-----------
CORPORATE NOTES -- 6.1%
AEROSPACE & DEFENSE -- 0.3%
4,000,000 Rockwell International Corp., 7.625%, 2/17/1998 4,069,420
-----------
</TABLE>
<TABLE>
------------------------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
CORPORATE NOTES (continued)
COMPUTER SERVICES -- 1.1%
$15,000,000 International Business Machines Corp., 5.650%,
1/22/1998 $14,993,708
-----------
LEASING -- 1.1%
5,000,000 International Lease Finance Corp., 5.840%, 8/7/1997 5,004,757
10,000,000 International Lease Finance Corp., 8.050%, 2/3/1998 10,190,369
-----------
Total 15,195,126
-----------
PERSONAL CREDIT -- 1.7%
5,100,000 Beneficial Corp., 9.125%, 2/15/1998 5,256,253
12,000,000 General Motors Acceptance Corp., 7.850%, 11/17/1997 12,183,779
5,000,000 Household Finance Corp., 6.850%, 7/21/1997 5,023,057
-----------
Total 22,463,089
-----------
SHORT-TERM BUSINESS CREDIT -- 1.9%
25,000,000 IBM Credit Corp., 5.540%, 12/9/1997 24,977,965
-----------
TOTAL CORPORATE NOTES 81,699,308
-----------
(F)VARIABLE RATE NOTES -- 60.0%
BANKING -- 3.9%
7,000,000 First Union Corp., 5.660%, 5/24/1997 7,014,973
5,000,000 Fleet Financial Group, Inc., Series H, 5.604%,
5/13/1997 5,006,777
15,000,000 MBNA America Bank, NA, 5.707%, 3/10/1997 15,021,096
25,000,000 Norwest Corp., Series E, 5.643%, 4/26/1997 25,035,662
-----------
Total 52,078,508
-----------
BROKER/DEALERS -- 11.0%
20,000,000 Bear Stearns Cos., Inc., 5.427%, 5/26/1997 20,000,000
30,000,000 Bear Stearns Cos., Inc., Series B, 5.482%,
5/12/1997 30,000,000
52,200,000 (h)J.P. Morgan Securities Corp., 5.448%, 3/1/1997 52,200,000
45,000,000 (h)Republic New York Securities Corp., 5.538%,
3/1/1997 45,000,000
-----------
Total 147,200,000
-----------
CONSTRUCTION EQUIPMENT -- 2.2%
30,000,000 Caterpillar Financial Services Corp., 5.513%,
4/9/1997 30,000,000
-----------
CONSUMER ELECTRIC -- 3.7%
50,000,000 (h)Sony Capital Corp., 5.470%, 3/29/1997 50,000,000
-----------
DIVERSIFIED MANUFACTURING -- 1.5%
20,000,000 (h)Danaher Corp., 5.438%, 3/1/1997 20,000,000
-----------
FOREST PRODUCTS -- 1.5%
20,000,000 (h)Willamette Industries, Inc., 5.530%, 3/4/1997 20,000,000
-----------
</TABLE>
(See Notes to Portfolios of Investments)
[ ] MARSHALL FUNDS
- --------------------------------------------------------------------------------
MONEY MARKET FUND (continued)
<TABLE>
------------------------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
VARIABLE RATE NOTES (continued)
INSURANCE -- 18.3%
$10,000,000 (h)Commonwealth Life Insurance, 5.620%, 4/1/1997 $10,000,000
40,000,000 (h)Commonwealth Life Insurance, 5.670%, 3/1/1997 40,000,000
55,000,000 (h)General American Life Insurance Company, 5.640%,
3/1/1997 55,000,000
50,000,000 (h)Jackson National Life Insurance Company, 5.570%,
5/1/1997 50,000,000
40,000,000 (h)Transamerica Life Insurance and Annuity Co.,
5.563%, 4/1/1997 40,000,000
50,000,000 (h)Travelers Insurance Company, 5.613%, 4/1/1997 50,000,000
-----------
Total 245,000,000
-----------
LEASING -- 0.4%
5,000,000 USL Capital Corp., 5.553%, 4/3/1997 5,001,407
-----------
PERSONAL CREDIT -- 12.6%
25,000,000 (h)American Honda Finance Corp., 5.551%, 3/3/1997 24,999,946
5,000,000 (h)American Honda Finance Corp., 5.526%, 5/15/1997 5,000,000
20,000,000 (h)American Honda Finance Corp., 5.603%, 4/23/1997 20,000,000
20,000,000 Avco Financial Services, Inc., 5.456%, 5/17/1997 20,000,000
25,000,000 Beneficial Corp., 5.634%, 4/14/1997 25,005,357
20,000,000 Dean Witter, Discover & Co., Series I, 5.763%,
3/24/1997 20,029,699
17,805,000 (h)Ford Motor Credit Corp., 5.763%, 5/3/1997 17,833,586
25,000,000 General Motors Acceptance Corp., 5.363%, 5/11/1997 24,966,774
5,000,000 Household Finance Corp., 5.660%, 3/15/1997 5,003,778
6,000,000 Household International, Inc., 5.688%, 5/27/1997 6,002,738
-----------
Total 168,841,878
-----------
SHORT-TERM BUSINESS CREDIT -- 3.0%
40,000,000 (h)American Express Co., 5.310%, 3/7/1997 40,000,000
-----------
UTILITIES -- 1.9%
15,000,000 Northern Indiana Public Service, Series D, 5.863%,
4/25/1997 15,018,916
</TABLE>
<TABLE>
-----------------------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
-----------------------------------------------------------------------------
<C> <S> <C>
VARIABLE RATE NOTES (continued)
UTILITIES (continued)
$10,000,000 (h)Wisconsin Public Service, 5.330%, 3/4/1997 $10,000,000
--------------
Total 25,018,916
--------------
TOTAL VARIABLE RATE NOTES 803,140,709
--------------
(B)REPURCHASE AGREEMENT -- 8.7%
116,290,000 Lehman Brothers, Inc., 5.375%, dated 2/28/1997,
due 3/3/1997 116,290,000
--------------
TOTAL INVESTMENTS (at amortized cost) $1,396,338,509
==============
</TABLE>
(See Notes to Portfolios of Investments)
NOTES TO PORTFOLIOS OF INVESTMENTS
(a) Represents a delayed delivery security.
(b) The repurchase agreements are fully collateralized by U.S. Government
and/or agency obligations based on market prices at date of the portfolio.
(c) Non-income producing.
(d) Certain shares or principal amounts on loan to broker.
(e) Securities purchased with cash collateral proceeds from securities on loan
to brokers.
(f) Current rate and next demand date shown.
(g) Represents securities held as collateral within a margin account, used to
ensure the Fund is able to satisfy the obligations of its outstanding long
futures contracts.
(h) Denotes a restricted security which is subject to restrictions on resale
under Federal and International Securities laws. At the end of the period,
these securities amounted to $5,456,915, $6,886,680, and $550,033,532 which
represents 3.0%, 5.6%, and 41.1% of Marshall International Stock Fund's,
Marshall Short-Term Income Fund's and Marshall Money Market Fund's net
assets, respectively.
(i) Each issue shows the rate of discount at the time of purchase.
(j) Includes securities subject to dollar roll transactions.
(k) Current credit ratings are unaudited. Please refer to the Statement of
Additional Information for an explanation of the credit ratings.
(l) Securities that are subject to alternative minimum tax represent 15.3% of
Intermediate Tax-Free Fund's portfolio as calculated based upon total
portfolio market value.
The following abbreviations are used in these portfolios:
- --------------------------------------------------------------------------------
ACES--Adjustable Convertible Extendable Securities
ADR--American Depositary Receipt
AMBAC--American Municipal Bond Assurance Corporation
AMT--Alternative Minimum Tax
CMO--Collateralized Mortgage Obligation
FGIC--Financial Guaranty Insurance Company
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance
GO--General Obligation
GDR--Global Depositary Receipt
GTD--Guaranteed
INS--Insured
ISD--Independent School District
LLC--Limited Liability Corporation
LOC--Letter of Credit
LP--Limited Partnership
LT--Limited Tax
MBIA--Municipal Bond Investors Insurance
PLC--Public Limited Company
PRIDES--Preferred Redeemable Increased Dividend Equity Securities
PSF--Permanent School Fund
REMIC--Real Estate Mortgage Investment Conduit
TBA--To Be Announced
TRANs--Tax Revenue Anticipation Notes
UT--Unlimited Tax
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COST OF NET UNREALIZED GROSS GROSS
INVESTMENTS APPRECIATION/ UNREALIZED UNREALIZED
FOR (DEPRECIATION) APPRECIATION DEPRECIATION
FEDERAL TAX FOR FEDERAL FOR FEDERAL FOR FEDERAL TOTAL NET
MARSHALL FUNDS PURPOSES TAX PURPOSES TAX PURPOSES TAX PURPOSES ASSETS**
- -------------- ------------- -------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Equity Income Fund $230,591,378 $43,389,996 $44,376,876 $986,880 $268,927,843
Value Equity Fund 176,810,057 7,886,359 20,113,060 12,226,701 163,587,519
Stock Fund 207,063,518 49,594,803 51,524,653 1,929,850 238,021,830
Mid-Cap Stock Fund 187,354,367 10,873,458 17,156,076 6,282,618 169,187,714
International Stock Fund 192,048,517 27,521,361 33,509,753 5,988,392 184,650,902
Small-Cap Stock Fund 36,300,465 (597,523) 1,624,928 2,222,451 36,314,224
Short-Term Income Fund 130,482,874 (271,831) 354,228 626,059 122,113,336
Intermediate Bond Fund 484,747,470 (907,518) 1,986,826 2,894,344 402,921,194
Government Income Fund 220,130,931 (374,290) 747,869 1,122,159 187,418,977
Intermediate Tax-Free Fund 76,111,176 1,683,698 1,716,957 33,259 77,590,893
Money Market Fund 1,396,338,509* -- -- -- 1,337,721,942
</TABLE>
*At amortized cost.
**The categories of investments are shown as a percentage of net assets at
February 28, 1997.
(See Notes which are an integral part of the Financial Statements)
February 28, 1997 (unaudited)
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
------- ------- ------- ------- -------
EQUITY VALUE MID-CAP INTERNATIONAL
INCOME EQUITY STOCK STOCK STOCK
FUND FUND FUND FUND FUND
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in
securities, at value $236,994,374 $164,344,416 $233,278,321 $171,770,825 $183,069,878
Investments in
repurchase agreements 36,987,000 13,552,000 4,780,000 7,057,000 --
Repurchase agreements
held as collateral
for securities
lending -- 6,800,000 18,600,000 19,400,000 36,500,000
Cash 834 454 358 83 29,385
Cash denominated in
foreign currencies
(at cost, $177,768) -- -- -- -- 175,427
Income receivable 832,920 411,062 394,822 42,940 225,621
Receivable for
investments sold -- 4,978,743 -- 6,123,946 1,805,324
Receivable for daily
variation margin -- -- -- -- --
Deferred expenses 8,893 27,837 13,062 9,617 16,154
------------ ------------ ------------ ------------ ------------
Total assets 274,824,021 190,114,512 257,066,563 204,404,411 221,821,789
------------ ------------ ------------ ------------ ------------
LIABILITIES:
Capital gain
distribution payable -- -- -- -- --
Payable to bank -- -- -- -- --
Income distribution
payable -- -- -- -- --
Payable for
investments purchased 5,676,868 5,468,622 -- 716,198 --
Payable on collateral
due to broker -- 20,935,395 18,866,800 34,356,600 36,960,975
Payable for daily
variation margin -- -- 5,250 -- --
Payable for Dollar
Roll Transactions -- -- -- -- --
Taxes payable -- -- -- -- 9,103
Accrued expenses 219,310 122,976 172,683 143,899 200,809
------------ ------------ ------------ ------------ ------------
Total liabilities 5,896,178 26,526,993 19,044,733 35,216,697 37,170,887
------------ ------------ ------------ ------------ ------------
NET ASSETS CONSIST OF:
Paid-in-capital 215,178,342 142,025,243 172,114,357 147,383,695 155,359,258
Net unrealized
appreciation
(depreciation) on
investments,
collateral, futures
contracts and foreign
currency translation 43,405,687 7,908,654 49,733,083 11,383,579 27,475,381
Accumulated net
realized gain (loss)
on investments,
futures contracts and
foreign currency
transactions 9,576,025 13,214,138 15,941,270 10,920,968 1,956,613
Undistributed net
investment
income/(Net operating
loss) 767,789 439,484 233,120 (500,528) (140,350)
------------ ------------ ------------ ------------ ------------
Total Net Assets $268,927,843 $163,587,519 $238,021,830 $169,187,714 $184,650,902
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE,
Offering Price, and
Redemption Proceeds Per
Share:
Class A Shares $14.38 $11.42 $12.61 $12.66 $12.12
Class B Shares -- -- -- -- --
------------ ------------ ------------ ------------ ------------
SHARES OUTSTANDING:
Class A Shares 18,700,807 14,323,887 18,880,252 13,359,439 15,239,392
Class B Shares -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Total shares
outstanding ($0.0001
par value) 18,700,807 14,323,887 18,880,252 13,359,439 15,239,392
============ ============ ============ ============ ============
Investments, at $230,575,687 $176,787,762 $207,009,425 $187,063,942 $192,048,517
identified cost
============ ============ ============ ============ ============
Investments, at tax cost $230,591,378 $176,810,057 $207,063,518 $187,354,367 $192,048,517
============ ============ ============ ============ ============
</TABLE>
(See Notes which are an integral part of the Financial Statements)
[ ] MARSHALL FUNDS
<TABLE>
<CAPTION>
- ----------- ------- ------- ------- ------- -------
SMALL-CAP SHORT-TERM INTERMEDIATE GOVERNMENT INTERMEDIATE MONEY
STOCK INCOME BOND INCOME TAX-FREE MARKET
FUND FUND FUND FUND FUND FUND
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$30,754,942 $114,965,043 $477,187,952 $198,035,641 $77,794,874 $1,280,048,509
4,948,000 15,246,000 5,152,000 21,721,000 -- 116,290,000
-- -- 1,500,000 -- -- --
758 41 -- -- -- 963
-- -- -- -- -- --
4,195 1,049,626 4,366,515 1,692,519 1,080,459 6,808,731
675,212 -- -- 36,403,371 -- --
17,850 -- -- -- -- --
-- 3,688 13,776 6,305 9,729 233,012
- ----------- ------------ ------------ ------------ ----------- --------------
36,400,957 131,264,398 488,220,243 257,858,836 78,885,062 1,403,381,215
- ----------- ------------ ------------ ------------ ----------- --------------
38,583 -- -- -- -- --
-- -- -- 2,602 -- --
-- 601,951 2,079,597 922,822 261,106 5,125,478
48,150 8,511,484 -- 61,392,620 1,003,157 60,250,682
-- -- 58,354,479 -- -- --
-- -- -- -- -- --
-- -- 24,645,834 7,998,571 -- --
-- -- -- -- -- --
-- 37,627 219,139 123,244 29,906 283,113
- ----------- ------------ ------------ ------------ ----------- --------------
86,733 9,151,062 85,299,049 70,439,859 1,294,169 65,659,273
- ----------- ------------ ------------ ------------ ----------- --------------
37,495,068 125,760,348 425,994,138 191,308,100 76,381,578 1,337,721,942
(597,523) (271,831) (907,518) (374,290) 1,683,698 --
(480,179) (3,375,181) (22,165,426) (3,514,833) (474,383) --
(103,142) -- -- -- -- --
- ----------- ------------ ------------ ------------ ----------- --------------
$36,314,224 $122,113,336 $402,921,194 $187,418,977 $77,590,893 $1,337,721,942
- ----------- ------------ ------------ ------------ ----------- --------------
$10.07 $9.62 $9.40 $9.42 $10.04 $1.00
-- -- -- -- -- $1.00
- ----------- ------------ ------------ ------------ ----------- --------------
3,607,262 12,694,060 42,856,406 19,904,626 7,731,366 1,225,927,508
-- -- -- -- -- 111,794,434
- ----------- ------------ ------------ ------------ ----------- --------------
3,607,262 12,694,060 42,856,406 19,904,626 7,731,366 1,337,721,942
=========== ============ ============ ============ =========== ==============
$36,300,465 $130,482,874 $484,747,470 $220,130,931 $76,111,176 $1,396,338,509
=========== ============ ============ ============ =========== ==============
$36,300,465 $130,482,874 $484,747,470 $220,130,931 $76,111,176 $1,396,338,509
=========== ============ ============ ============ =========== ==============
</TABLE>
Six Months Ended February 28, 1997 (unaudited)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
------- ------- ------- ------- --------
EQUITY VALUE STOCK MID-CAP INTERNATIONAL
INCOME FUND EQUITY FUND FUND STOCK FUND STOCK FUND
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 827,745 $ 577,295 $ 126,015 $ 273,707 $ 729,752
Dividend income 3,217,177 1,708,226 2,487,450 227,330 1,135,958(b)
----------- ----------- ----------- ----------- -----------
Total income 4,044,922 2,285,521 2,613,465 501,037 1,865,710
----------- ----------- ----------- ----------- -----------
EXPENSES:
Investment advisory fee 825,005 684,575 913,343 605,839 815,042
Directors' fees 1,660 1,448 1,779 1,086 1,984
Administrative
personnel and services
fees 96,347 80,034 106,761 70,782 71,409
Custodian fees 21,855 18,255 24,246 16,156 120,111
Portfolio accounting
fees 34,704 25,884 35,801 26,969 31,485
Transfer and dividend
disbursing agent fees
and expenses 42,776 34,681 65,061 36,776 35,775
Shareholder services
fees 269,535 222,034 296,500 197,440 199,246
Capital stock
registration costs 31,648 19,692 19,189 12,023 8,610
Auditing fees 6,261 6,154 7,557 6,516 8,409
Legal fees 1,770 2,172 2,541 2,715 3,040
Printing and postage 2,401 5,068 3,171 4,538 4,201
Insurance premiums 2,014 2,172 2,287 1,810 2,036
Distribution services
fees -- -- -- -- --
Taxes 9,067 9,050 9,461 6,516 5,484
Miscellaneous 3,729 14,043 6,011 12,399 3,216
----------- ----------- ----------- ----------- -----------
Total expenses 1,348,772 1,125,262 1,493,708 1,001,565 1,310,048
DEDUCT--
Waiver of investment
advisory fee -- -- -- -- --
Waiver of shareholder
services fees -- -- -- -- --
Waiver of portfolio
accounting fees -- -- -- -- --
----------- ----------- ----------- ----------- -----------
TOTAL WAIVERS -- -- -- -- --
----------- ----------- ----------- ----------- -----------
NET EXPENSES 1,348,772 1,125,262 1,493,708 1,001,565 1,310,048
----------- ----------- ----------- ----------- -----------
NET INVESTMENT INCOME
(LOSS) 2,696,150 1,160,259 1,119,757 (500,528) 555,662
----------- ----------- ----------- ----------- -----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS,
COLLATERAL, FOREIGN
CURRENCY AND FUTURES
CONTRACTS:
Net realized gain
(loss) on investment
transactions
(identified cost
basis) 11,309,870 15,958,987 15,873,467 12,150,100 2,063,776
Net realized (loss) on
foreign currency
transactions -- -- -- -- (80,325)
Net realized gain on
futures contracts
(identified cost
basis) -- -- 121,591 69,736 --
Net change in
unrealized
appreciation
(depreciation) on
investments,
collateral, futures
contracts and foreign
currency translation 23,931,188 5,065,219 30,270,768 (10,017,517) 17,134,403
----------- ----------- ----------- ----------- -----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS,
COLLATERAL, FOREIGN
CURRENCY AND FUTURES
CONTRACTS 35,241,058 21,024,206 46,265,826 2,202,319 19,117,854
----------- ----------- ----------- ----------- -----------
CHANGE IN NET ASSETS
RESULTING FROM
OPERATIONS $37,937,208 $22,184,465 $47,385,583 $ 1,701,791 $19,673,516
=========== =========== =========== =========== ===========
</TABLE>
(a)For the period from September 3, 1996 (date of initial public
investment) to February 28, 1997.
(b)Net of Foreign taxes withheld of $102,786.
(c)Net of dollar roll interest expense of $882,491.
(d)Net of dollar roll interest expense of $235,723.
(See Notes which are an integral part of the Financial Statements)
[ ] MARSHALL FUNDS
<TABLE>
<CAPTION>
- ------------- ------- ------- ------- ------- -------
GOVERNMENT INTERMEDIATE MONEY
SMALL-CAP SHORT-TERM INTERMEDIATE INCOME TAX-FREE MARKET
STOCK FUND(A) INCOME FUND BOND FUND FUND FUND FUND
- ------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$ 120,186 $3,738,828 $14,308,098(c) $5,788,991(d) $1,802,903 $33,182,196
16,697 -- -- -- -- --
----------- ---------- ----------- ---------- ---------- -----------
136,883 3,738,828 14,308,098 5,788,991 1,802,903 33,182,196
----------- ---------- ----------- ---------- ---------- -----------
141,173 315,029 1,258,690 575,485 215,999 2,988,991
1,471 1,595 1,850 1,724 1,267 774
16,941 46,016 183,862 67,230 31,547 523,826
2,824 10,501 33,375 15,346 7,200 72,177
17,546 27,511 48,145 26,245 26,245 70,263
9,990 17,451 25,539 43,381 16,683 86,203
35,191 128,088 511,754 187,475 87,920 119,560
8,005 7,877 42,742 15,964 8,076 54,070
-- 8,517 7,064 7,421 6,516 7,864
1,442 2,270 2,071 1,991 2,353 2,472
1,393 1,499 3,698 6,887 3,258 7,655
-- 2,533 2,863 2,101 1,267 4,008
-- -- -- -- -- 150,503
1,626 2,997 14,787 7,068 3,620 43,469
2,423 5,444 31,099 6,154 2,896 7,607
----------- ---------- ----------- ---------- ---------- -----------
240,025 577,328 2,167,539 964,472 414,847 4,139,442
-- 194,220 188,804 135,060 114,508 1,554,275
-- 117,587 469,798 172,128 80,720 --
-- 6,417 -- -- -- --
----------- ---------- ----------- ---------- ---------- -----------
-- 318,224 658,602 307,188 195,228 1,554,275
----------- ---------- ----------- ---------- ---------- -----------
240,025 259,104 1,508,937 657,284 219,619 2,585,167
----------- ---------- ----------- ---------- ---------- -----------
(103,142) 3,479,724 12,799,161 5,131,707 1,583,284 30,597,029
----------- ---------- ----------- ---------- ---------- -----------
(480,179) (117,212) 465,190 (569,361) 27,614 --
-- -- -- -- --
-- -- -- -- --
(597,523) 378,071 5,823,866 2,447,943 1,437,704 --
----------- ---------- ----------- ---------- ---------- -----------
(1,077,702) 260,859 6,289,056 1,878,582 1,465,318 --
----------- ---------- ----------- ---------- ---------- -----------
$(1,180,844) $3,740,583 $19,088,217 $7,010,289 $3,048,602 $30,597,029
=========== ========== =========== ========== ========== ===========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
-------------------------- --------------------------
EQUITY VALUE
INCOME EQUITY
FUND FUND
-------------------------- --------------------------
Six Months Six Months
Ended Year Ended Year
February 28, Ended February 28, Ended
1997 August 31, 1997 August 31,
(unaudited) 1996 (unaudited) 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS--
Net investment income
(loss) $ 2,696,150 $ 4,155,674 $ 1,160,259 $ 3,485,946
Net realized gain
(loss) on investment 11,309,870 13,207,077 15,958,987 27,219,156
transactions
Net realized gain
(loss) on foreign
currency transactions -- -- -- --
Net realized gain on
futures contracts -- -- -- --
Net change in
unrealized
appreciation
(depreciation) of
investments,
collateral, futures
contracts and foreign
currency translation 23,931,188 8,421,937 5,065,219 (13,487,233)
------------ ------------ ------------ ------------
Change in net assets
resulting from
operations 37,937,208 25,784,688 22,184,465 17,217,869
------------ ------------ ------------ ------------
DISTRIBUTIONS TO
SHAREHOLDERS--
Dividends to
shareholders from net
investment income (2,495,697) (4,048,209) (1,399,660) (3,546,870)
Distributions to
shareholders from net
realized gain on
investments (13,127,663) (2,218,321) (28,282,066) (14,826,135)
------------ ------------ ------------ ------------
Change in net assets
from distributions to
shareholders (15,623,360) (6,266,530) (29,681,726) (18,373,005)
------------ ------------ ------------ ------------
CAPITAL STOCK
TRANSACTIONS--
Proceeds from sale of
shares 83,513,681 78,109,568 17,239,818 43,778,924
Net asset value of
shares issued to
shareholders in
payment of
distributions declared 6,786,619 2,944,867 17,379,533 10,799,787
Cost of shares redeemed (17,088,803) (34,668,773) (58,600,211) (78,793,963)
------------ ------------ ------------ ------------
Change in net assets
from capital stock
transactions 73,211,497 46,385,662 (23,980,860) (24,215,252)
------------ ------------ ------------ ------------
Change in net assets 95,525,345 65,903,820 (31,478,121) (25,370,388)
NET ASSETS:
Beginning of period 173,402,498 107,498,678 195,065,640 220,436,028
------------ ------------ ------------ ------------
End of period $268,927,843 $173,402,498 $163,587,519 $195,065,640
============ ============ ============ ============
Undistributed net
investment income
included in net assets
at end of period $ 767,789 $ 567,336 $ 439,484 $ 678,885
============ ============ ============ ============
Net gain (loss) as
computed for federal
tax purposes $ 11,309,870 $ 13,112,886 $ 15,958,987 $ 27,161,725
============ ============ ============ ============
</TABLE>
*For the period from September 3, 1996 (date of initial public investment) to
February 28, 1997.
(See Notes which are an integral part of the Financial Statements)
[ ] MARSHALL FUNDS
<TABLE>
<CAPTION>
- -------------------------- -------------------------- -------------------------- ----------- --------------------------
MID-CAP SMALL-CAP SHORT-TERM
STOCK INTERNATIONAL STOCK INCOME
STOCK FUND FUND STOCK FUND FUND FUND
- -------------------------- -------------------------- -------------------------- ----------- --------------------------
Period
Six Months Six Months Six Months Ended Six Months
Ended Year Ended Year Ended Year February Ended Year
February 28, Ended February 28, Ended February 28, Ended 28, February 28, Ended
1997 August 31, 1997 August 31, 1997 August 31, 1997* 1997 August 31,
(unaudited) 1996 (unaudited) 1996 (unaudited) 1996 (unaudited) (unaudited) 1996
- ------------ ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1,119,757 $ 3,401,365 $ (500,528) $ (577,882) $ 555,662 $ 3,036,590 $ (103,142) $ 3,479,724 $ 5,545,327
15,873,467 38,737,034 12,150,100 16,139,633 2,063,776 1,683,883 $ (480,179) (117,212) (479,042)
-- -- -- -- (80,325) 262,327 -- -- --
121,591 -- 69,736 344,671 -- -- -- -- --
30,270,768 (12,626,510) (10,017,517) 3,869,291 17,134,403 7,673,848 $ (597,523) 378,071 (793,668)
- ------------ ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------
47,385,583 29,511,889 1,701,791 19,775,713 19,673,516 12,656,648 (1,180,844) 3,740,583 4,272,617
- ------------ ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------
(1,373,605) (3,254,360) -- -- (3,691,415) (2,228,753) -- (3,479,724) (5,545,327)
(35,001,328) (14,368,059) (13,454,023) (8,032,341) (1,303,354) (281,633) -- -- --
- ------------ ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------
(36,374,933) (17,622,419) (13,454,023) (8,032,341) (4,994,769) (2,510,386) -- (3,479,724) (5,545,327)
- ------------ ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------
11,931,302 52,242,455 57,149,279 64,585,992 36,512,686 62,521,333 41,547,693 41,476,330 69,199,369
27,832,142 13,817,438 7,216,847 4,740,168 2,303,869 1,224,349 -- 1,164,664 3,021,176
(64,335,338) (83,385,728) (26,662,067) (46,089,710) (12,627,431) (24,156,467) (4,052,625) (21,634,601) (54,374,917)
- ------------ ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------
(24,571,894) (17,325,835) 37,704,059 23,236,450 26,189,124 39,589,215 37,495,068 21,006,393 17,845,628
- ------------ ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------
(13,561,244) (5,436,365) 25,951,827 34,979,822 40,867,871 49,735,477 36,314,224 21,267,252 16,572,918
251,583,074 257,019,439 143,235,887 108,256,065 143,783,031 94,047,554 -- 100,846,084 84,273,166
- ------------ ------------ ------------ ------------ ------------ ------------ ----------- ------------ ------------
$238,021,830 $251,583,074 $169,187,714 $143,235,887 $184,650,902 $143,783,031 $36,314,224 $122,113,336 $100,846,084
============ ============ ============ ============ ============ ============ =========== ============ ============
$ 233,120 $ 486,968 -- -- -- $ 2,995,403 -- -- --
============ ============ ============ ============ ============ ============ =========== ============ ============
$ 15,995,058 $ 38,743,777 $ 12,219,836 $ 16,225,854 $ 1,983,451 $ 1,584,255 $ (480,179) $ (117,212) $ (556,158)
============ ============ ============ ============ ============ ============ =========== ============ ============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
--------------------------
INTERMEDIATE
BOND FUND
--------------------------
Six Months
Ended Year
February 28, Ended
1997 August 31,
(unaudited) 1996
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 12,799,161 $ 23,026,563
Net realized gain (loss) on investments 465,190 2,488,022
Net change in unrealized appreciation
(depreciation) of investments,
collateral, futures contracts, and foreign
currency transactions 5,823,866 (13,320,804)
------------ ------------
Change in net assets resulting from operations 19,088,217 12,193,781
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS--
Dividends to shareholders from net investment
income:
Class A Shares (12,799,161) (23,026,563)
Class B Shares -- --
------------ ------------
Change in net assets from distributions to
shareholders (12,799,161) (23,026,563)
------------ ------------
CAPITAL STOCK TRANSACTIONS--
Proceeds from sale of shares 59,716,106 152,140,924
Net asset value of shares issued to shareholders
in payment of dividends declared 6,319,833 14,029,528
Cost of shares redeemed (73,060,527) (95,751,626)
------------ ------------
Change in net assets from capital stock
transactions (7,024,588) 70,418,826
------------ ------------
Change in net assets (735,532) 59,586,044
NET ASSETS:
Beginning of period 403,656,726 344,070,682
------------ ------------
End of period $402,921,194 $403,656,726
============ ============
Undistributed net investment income included in
net assets at end of period -- --
============ ============
Net gain (loss) as computed for federal tax
purposes $ 465,190 ($ 6,100,494)
============ ============
</TABLE>
(See Notes which are an integral part of the Financial Statements)
[ ] MARSHALL FUNDS
<TABLE>
<CAPTION>
-------------------------- ------------------------- --------------------------------
GOVERNMENT INTERMEDIATE MONEY
INCOME TAX-FREE MARKET
FUND FUND FUND
-------------------------- ------------------------- --------------------------------
Six Months Six Months Six Months
Ended Year Ended Year Ended Year
February 28, Ended February 28, Ended February 28, Ended
1997 August 31, 1997 August 31, 1997 August 31,
(unaudited) 1996 (unaudited) 1996 (unaudited) 1996
------------ ------------ ------------ ----------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$ 5,131,707 $ 8,145,710 $ 1,583,284 $ 2,275,789 $ 30,597,029 $ 59,009,479
(569,361) (620,860) 27,614 148,532 -- --
2,447,943 (3,330,343) 1,437,704 (698,763) -- --
------------ ------------ ----------- ----------- --------------- ---------------
7,010,289 4,194,507 3,048,602 1,725,558 30,597,029 59,009,479
------------ ------------ ----------- ----------- --------------- ---------------
(5,131,707) (8,145,710) (1,583,284) (2,275,789) (28,161,997) (55,633,616)
-- -- -- -- (2,435,032) (3,375,863)
------------ ------------ ----------- ----------- --------------- ---------------
(5,131,707) (8,145,710) (1,583,284) (2,275,789) (30,597,029) (59,009,479)
------------ ------------ ----------- ----------- --------------- ---------------
54,520,863 55,044,557 14,807,516 28,270,867 2,061,342,034 3,908,130,179
2,273,888 4,687,901 126,070 249,701 6,694,347 13,501,781
(9,712,211) (21,030,976) (4,735,262) (8,093,895) (1,854,684,954) (3,956,214,914)
------------ ------------ ----------- ----------- --------------- ---------------
47,082,540 38,701,482 10,198,324 20,426,673 213,351,427 (34,582,954)
------------ ------------ ----------- ----------- --------------- ---------------
48,961,122 34,750,279 11,663,642 19,876,442 213,351,427 (34,582,954)
138,457,855 103,707,576 65,927,251 46,050,809 1,124,370,515 1,158,953,469
------------ ------------ ----------- ----------- --------------- ---------------
$187,418,977 $138,457,855 $77,590,893 $65,927,251 $ 1,337,721,942 $ 1,124,370,515
============ ============ =========== =========== =============== ===============
-- -- -- -- -- --
============ ============ =========== =========== =============== ===============
$ (569,361) $ (983,300) $ 27,614 $ (247,302) -- --
============ ============ =========== =========== =============== ===============
</TABLE>
FINANCIAL HIGHLIGHTS ^
(For a Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
Net Realized and Distributions to
Unrealized Shareholders from Net
Gain/(Loss) on Dividends to Realized Gain Distributions to
Period Net Asset Net Investments, Shareholders on Investment Shareholders in
Ended Value, Investment Collateral, Futures Total from from Net Transactions, Futures Excess of Net
August beginning Income/ Contracts, and Investment Investment Contracts, and Foreign Investment
31, of period (Loss) Foreign Currency Operations Income Currency Transactions Income
- ------ --------- ---------- ------------------- ---------- ------------ ---------------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
EQUITY INCOME FUND
1994(c) $10.00 0.28 (0.09) 0.19 (0.23) -- --
1995 $ 9.96 0.33 1.26 1.59 (0.33) -- --
1996 $11.22 0.34 2.00 2.34 (0.35) (0.21)
1997(a) $13.00 0.16 2.24 2.40 (0.16) (0.86)
VALUE EQUITY FUND
1994(c) $10.00 0.12 0.93 1.05 (0.10) -- --
1995 $10.95 0.22 1.22 1.44 (0.20) (0.11) --
1996 $12.08 0.21 0.78 0.99 (0.21) (0.88) --
1997(a) $11.98 0.08 1.34 1.42 (0.09) (1.89) --
STOCK FUND
1993(b) $10.00 0.10 0.07 0.17 (0.09) -- --
1994 $10.08 0.07 (0.03) 0.04 (0.07) -- --
1995 $10.05 0.09 1.59 1.68 (0.09) -- --
1996 $11.64 0.16 1.17 1.33 (0.15) (0.66) --
1997(a) $12.16 0.06 2.40 2.46 (0.07) (1.94) --
MID-CAP STOCK FUND
1994(c) $10.00 0.02 (0.29) (0.27) (0.01) (0.03) --
1995 $ 9.69 (0.00) 2.62 2.62 (0.01) -- (0.00)
1996 $12.30 (0.06) 2.24 2.18 -- (0.92) --
1997(a) $13.56 (0.04) 0.36 0.32 -- (1.22) --
INTERNATIONAL STOCK FUND
1995(h) $10.00 0.20 0.01 0.21 (0.05) (0.00) --
1996 $10.16 0.21 0.96 1.17 (0.22) (0.03) --
1997(a) $11.08 0.02 1.37 1.39 (0.26) (0.09) --
SMALL-CAP STOCK FUND
1997(l) $10.00 (0.03) 0.10 0.07 -- -- --
SHORT-TERM INCOME FUND
1993(d) $10.00 0.40 (0.05) 0.35 (0.40) -- --
1994 $ 9.95 0.45 (0.25) 0.20 (0.44) -- --
1995 $ 9.71 0.56 0.05 0.61 (0.58) -- --
1996 $ 9.74 0.62 (0.15) 0.47 (0.62) -- --
1997(a) $ 9.59 0.31 0.03 0.34 (0.31) -- --
INTERMEDIATE BOND FUND
1993(b) $10.00 0.46 0.33 0.79 (0.39) -- --
1994 $10.40 0.61 (0.81) (0.20) (0.67) (0.17) --
1995 $ 9.36 0.61 0.16 0.77 (0.62) -- --
1996 $ 9.51 0.58 (0.25) 0.33 (0.58) -- --
1997(a) $ 9.26 0.29 0.14 0.43 (0.29) -- --
GOVERNMENT INCOME FUND
1993(e) $10.00 0.47 0.16 0.63 (0.41) -- --
1994 $10.22 0.64 (0.78) (0.14) (0.68) (0.14) --
1995 $ 9.26 0.60 0.27 0.87 (0.62) -- --
1996 $ 9.51 0.62 (0.24) 0.38 (0.62) -- --
1997(a) $ 9.27 0.31 0.15 0.46 (0.31) -- --
INTERMEDIATE TAX-FREE FUND
1994(f) $10.00 0.19 (0.29) (0.10) (0.19) -- --
1995 $ 9.71 0.42 0.20 0.62 (0.42) -- --
1996 $ 9.91 0.43 (0.08) 0.35 (0.43) -- --
1997(a) $ 9.83 0.22 0.21 0.43 (0.22) -- --
MONEY MARKET FUND--CLASS A SHARES
1993(b) $ 1.00 0.02 -- 0.02 (0.02) -- --
1994 $ 1.00 0.03 -- 0.03 (0.03) -- --
1995 $ 1.00 0.05 -- 0.05 (0.05) -- --
1996 $ 1.00 0.05 -- 0.05 (0.05) -- --
1997(a) $ 1.00 0.03 -- 0.03 (0.03) -- --
MONEY MARKET FUND--CLASS B SHARES
1993(g) $ 1.00 0.02 -- 0.02 (0.02) -- --
1994 $ 1.00 0.03 -- 0.03 (0.03) -- --
1995 $ 1.00 0.05 -- 0.05 (0.05) -- --
1996 $ 1.00 0.05 -- 0.05 (0.05) -- --
1997(a) $ 1.00 0.02 -- 0.02 (0.02) -- --
</TABLE>
(a) Six months ended February 28, 1997 (unaudited).
(b) Reflects operations for the period from November 23, 1992 (date of initial
public investment) to August 31, 1993.
(c) Reflects operations for the period from October 1, 1993 (date of initial
public investment) to August 31, 1994.
(d) Reflects operations for the period from November 2, 1992 (date of
initial public investment) to August 31, 1993.
(e) Reflects operations for the period from December 14, 1992 (date of initial
public investment) to August 31, 1993.
(f) Reflects operations for the period from February 2, 1994 (date of initial
public investment) to August 31, 1994.
(g) Reflects operations for the period from December 17, 1992 (date of initial
public investment) to August 31, 1993.
(h) Reflects operations for the period from September 2, 1994 (date of initial
public investment) to August 31, 1995.
(i) Based on net asset value.
(j) Computed on an annualized basis.
(k) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(l) Reflects operations for the period from September 3, 1996 (date of initial
public investment) to February 28, 1997 (unaudited).
(m) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
This disclosure is required for fiscal years beginning on or after
September 1, 1995.
(See Notes which are an integral part of the Financial Statements)
[ ] MARSHALL FUNDS
<TABLE>
<CAPTION>
Ratios to Average Net Assets
---------------------------------
Net Assets, Average
Net Asset Net end of Commission Portfolio
Total Value, end Total Investment Expense period Rate Turnover
Distributions of period Return(i) Expenses Income Waiver(k) (000 omitted) Paid(m) Rate
- ------------- ---------- --------- -------- ---------- --------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(0.23) $ 9.96 2.02% 1.01%(j) 3.30%(j) 0.16%(j) $ 49,396 -- 44%
(0.33) $11.22 16.40% 1.01% 3.45% 0.09% $ 107,499 -- 43%
(0.56) $13.00 21.20% 0.98% 2.83% -- $ 173,402 $0.0450 60%
(1.02) $14.38 19.00% 1.23%(j) 2.45%(j) -- $ 268,928 $0.0595 29%
(0.10) $10.95 10.59% 1.00%(j) 1.82%(j) 0.15%(j) $ 218,755 -- 39%
(0.31) $12.08 13.57% 0.96% 1.98% -- $ 220,436 -- 78%
(1.09) $11.98 8.53% 0.98% 1.68% -- $ 195,066 $0.0592 67%
(1.98) $11.42 12.57% 1.23%(j) 1.27%(j) -- $ 163,588 $0.0599 33%
(0.09) $10.08 1.67% 0.94%(j) 1.39%(j) 0.03%(j) $ 309,128 -- 98%
(0.07) $10.05 0.44% 0.99% 0.77% 0.01% $ 250,155 -- 86%
(0.09) $11.64 16.85% 0.98% 0.88% 0.01% $ 257,019 -- 79%
(0.81) $12.16 11.56% 0.97% 1.28% -- $ 251,583 $0.0600 147%
(2.01) $12.61 21.04% 1.23%(j) 0.92%(j) -- $ 238,022 $0.0617 24%
(0.04) $ 9.69 (2.74%) 1.01%(j) 0.23%(j) 0.28%(j) $ 53,642 -- 113%
(0.01) $12.30 27.06% 1.01% (0.13%) 0.08% $ 108,256 -- 157%
(0.92) $13.56 18.92% 1.01% (0.47%) -- $ 143,236 $0.0598 189%
(1.22) $12.66 1.77% 1.24%(j) (0.62%)(j) -- $ 169,188 $0.0599 88%
(0.05) $10.16 2.11% 1.54%(j) 2.42%(j) 0.04%(j) $ 94,048 -- 61%
(0.25) $11.08 11.71% 1.35% 2.58% -- $ 143,783 $0.0059 26%
(0.35) $12.12 12.69% 1.61%(j) 0.68%(j) -- $ 184,651 $0.0163 34%
-- $10.07 0.14% 1.70%(j) (0.73%)(j) -- $ 36,314 $0.0599 72%
(0.40) $ 9.95 3.57% 0.50%(j) 4.91%(j) 0.51%(j) $ 74,742 -- 79%
(0.44) $ 9.71 2.05% 0.50% 4.58% 0.39% $ 100,452 -- 185%
(0.58) $ 9.74 6.47% 0.51% 5.78% 0.40% $ 84,273 -- 194%
(0.62) $ 9.59 4.92% 0.51% 6.16% 0.40% $ 100,846 -- 144%
(0.31) $ 9.62 3.61% 0.51%(j) 6.63%(j) 0.59%(j) $ 112,113 -- 48%
(0.39) $10.40 7.99% 0.70%(j) 6.08%(j) 0.10%(j) $ 346,808 -- 220%
(0.84) $ 9.36 (2.02%) 0.71% 6.26% 0.11% $ 357,740 -- 228%
(0.62) $ 9.51 8.58% 0.71% 6.50% 0.08% $ 344,071 -- 232%
(0.58) $ 9.26 3.52% 0.72% 6.14% 0.09%(j) $ 403,657 -- 201%
(0.29) $ 9.40 4.62% 0.72%(j) 6.10%(j) 0.31%(j) $ 402,921 -- 76%
(0.41) $10.22 6.40% 0.85%(j) 6.56%(j) 0.33%(j) $ 57,822 -- 218%
(0.82) $ 9.26 (1.34%) 0.86% 6.58% 0.40% $ 64,823 -- 175%
(0.62) $ 9.51 9.78% 0.86% 6.54% 0.26% $ 103,708 -- 360%
(0.62) $ 9.27 4.02% 0.86% 6.51% 0.19% $ 138,458 -- 268%
(0.31) $ 9.42 5.01% 0.86%(j) 6.69%(j) 0.40%(j) $ 187,419 -- 70%
(0.19) $ 9.71 (0.94%) 0.62%(j) 3.58%(j) 0.59%(j) $ 35,212 -- 45%
(0.42) $ 9.91 6.58% 0.61% 4.35% 0.47% $ 46,051 -- 105%
(0.43) $ 9.83 3.57% 0.61% 4.34% 0.37% $ 65,927 -- 41%
(0.22) $10.04 4.38% 0.61%(j) 4.40%(j) 0.54%(j) $ 77,591 -- 12%
(0.02) $ 1.00 2.33% 0.40%(j) 2.97%(j) 0.28%(j) $ 775,890 -- --
(0.03) $ 1.00 3.41% 0.40% 3.40% 0.29% $ 967,988 -- --
(0.05) $ 1.00 5.57% 0.41% 5.44% 0.26% $1,128,623 -- --
(0.05) $ 1.00 5.39% 0.41% 5.29% 0.26% $1,039,659 -- --
(0.03) $ 1.00 2.58% 0.41%(j) 5.11%(j) 0.26%(j) $1,225,928 -- --
(0.02) $ 1.00 1.89% 0.72%(j) 2.72%(j) 0.28%(j) $ 1,980 -- --
(0.03) $ 1.00 3.11% 0.70% 3.39% 0.29% $ 11,929 -- --
(0.05) $ 1.00 5.25% 0.71% 5.21% 0.26% $ 30,331 -- --
(0.05) $ 1.00 5.07% 0.71% 4.92% 0.26% $ 84,711 -- --
(0.02) $ 1.00 2.43% 0.71%(j) 4.85%(j) 0.26%(j) $ 111,794 -- --
</TABLE>
February 28, 1997 (unaudited)
NOTES TO FINANCIAL STATEMENTS
^
1. ORGANIZATION
Marshall Funds, Inc. (the "Corporation") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end management
investment company. The Corporation consists of eleven diversified portfolios
(individually referred to as the "Fund", or collectively as the "Funds") which
are presented herein:
<TABLE>
<CAPTION>
PORTFOLIO NAME INVESTMENT OBJECTIVE
-------------- --------------------
<C> <S>
Marshall Equity Income Fund ("Equity Income Fund") Above-average dividend
income with
appreciation of
capital.
Marshall Value Equity Fund ("Value Equity Fund") Long-term capital growth
and income.
Marshall Stock Fund ("Stock Fund") Growth of capital and
income.
Marshall Mid-Cap Stock Fund ("Mid-Cap Stock Fund") Appreciation of capital.
Marshall International Stock Fund ("International Stock Fund") Long-term capital
growth.
Marshall Small-Cap Stock Fund ("Small-Cap Stock Fund") Appreciation of capital.
Marshall Short-Term Income Fund ("Short-Term Income Fund") Maximize total return
consistent with current
income.
Marshall Intermediate Bond Fund ("Intermediate Bond Fund") Maximize total return
consistent with current
income.
Marshall Government Income Fund ("Government Income Fund") Current income.
Marshall Intermediate Tax-Free Fund ("Intermediate Tax-Free Fund") Provide as high a level
of income that is exempt
from federal
income tax as is
consistent with
preservation of capital.
Marshall Money Market Fund ("Money Market Fund") Current income
consistent with
stability of principal.
</TABLE>
Money Market Fund is offered in two classes of shares: Class A Shares and
Class B Shares. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles.
Investment Valuations--Municipal bonds are valued by an independent pricing
service, taking into consideration yield, liquidity, risk, credit quality,
coupon, maturity, type of issue, and any other factors or market data the
pricing service deems relevant. U.S. government securities, listed corporate
bonds, other fixed income and asset-backed securities, and unlisted securities
and private placement securities are generally valued at the mean of the latest
bid and asked price as furnished by an independent pricing service. Listed
equity securities and investments in closed-end investment companies are valued
at the last sale price reported on a national securities exchange. Money Market
Fund uses the amortized cost method to value portfolio securities in accordance
with Rule 2a-7 under the Act. For all other funds within the Corporation,
short-term securities are valued at the prices provided by an independent
pricing service. However, short-term securities purchased with remaining
maturities of sixty days or less may be valued at amortized cost, which
approximates fair market value. Investments in other open-end regulated
investment companies are valued at net asset value.
Repurchase Agreements--It is the policy of the Funds to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve Book
Entry System, or to have segregated within the custodian bank's vault, all
securities held as collateral under repurchase agreement transactions.
Additionally, procedures have been established by the Funds to monitor, on a
daily basis, the market value of each repurchase agreement's collateral to
ensure that the value of collateral at least equals the repurchase price to be
paid under the repurchase agreement transaction, including accrued interest.
The Funds will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Funds' adviser (or sub-adviser with respect to International Stock Fund) to
be creditworthy pursuant to the guidelines and/or standards reviewed or
established by the Board of Directors (the "Directors"). Risks may arise from
the potential inability of counterparties to honor the terms of the repurchase
agreement. Accordingly, the Funds could receive less than the repurchase price
on the sale of collateral securities.
Investment Income, Expenses and Distributions--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Dividend income
and distributions to shareholders are recorded on the ex-dividend date. Certain
dividends from foreign securities may be recorded after the ex-dividend date
based upon when information becomes available to the International Stock Fund.
Federal Taxes--It is the Funds' policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of their income. Accordingly, no
provisions for federal tax are necessary.
[ ] MARSHALL FUNDS
However, federal taxes may be imposed on the International Stock Fund upon
the disposition of investments in passive foreign investment companies.
Withholding taxes on foreign dividends have been provided for in accordance
with the International Stock Fund's understanding of the applicable country's
tax rules and rates.
At August 31, 1996, the following Funds had capital loss carryforwards for
federal tax purposes, which will reduce each Fund's taxable income arising from
future net realized gain on investments, if any, to the extent permitted by the
Code, and thus will reduce the amount of the distributions to shareholders
which would otherwise be necessary to relieve each Fund of any liability for
federal tax. Pursuant to the Code, such capital loss carryforwards will expire
as listed below:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL LOSS CAPITAL LOSS CAPITAL LOSS
CARRYFORWARD CARRYFORWARD CARRYFORWARD TOTAL
TO EXPIRE IN TO EXPIRE IN TO EXPIRE IN CAPITAL LOSS
FUND 2002 2003 2004 CARRYFORWARD
- ---- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Short-Term Income Fund $302,405 $ 1,898,650 $ 556,158 $ 2,757,213
Intermediate Bond Fund -- $16,531,233 $6,100,494 $22,631,727
Government Income Fund $155,781 $ 1,806,126 -- $ 1,961,907
Intermediate Tax-Free Fund -- $ 254,695 $ 247,302 $ 501,997
</TABLE>
- --------------------------------------------------------------------------------
Net realized capital losses on Short-Term Income Fund and Government Income
Fund of $500,756 and $983,300, respectively, attributable to security
transactions incurred after October 31, 1995, were treated as arising on the
first day of each Fund's next taxable year (September 1, 1996).
Net realized losses on International Stock Fund of $77,314, attributable to
foreign currency transactions incurred after October 31, 1995, were treated as
arising on the first day of International Stock Fund's next taxable year
(September 1, 1996).
When-Issued and Delayed Delivery Transactions--The Funds may engage in when-
issued or delayed delivery transactions. The Funds record when-issued
securities on the trade date and maintain security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
marked to market daily and begin earning interest on the settlement date.
Deferred Expenses--The costs incurred by each Fund with respect to
registration of their shares in their first fiscal year, excluding the initial
expense of registering their shares, have been deferred and are being amortized
over a period not to exceed five years from each Fund's commencement date.
Futures Contracts--Stock Fund and Mid-Cap Stock Fund purchase stock index
futures contracts to manage cashflows, enhance yield, and to potentially reduce
transaction costs. Upon entering into a stock index futures contract with a
broker, the Fund is required to deposit in a segregated account a specified
amount of cash or U.S. government securities. Futures contracts are valued
daily and unrealized gains or losses are recorded in a "variation margin"
account. Daily, the Fund receives from or pays to the broker a specified amount
of cash based upon changes in the variation margin account. When a contract is
closed, the Fund recognizes a realized gain or loss. Futures contracts have
market risks, including the risk that the change in the value of the contract
may not correlate with changes in the value of the underlying securities.
At February 28, 1997, Stock Fund had outstanding futures contracts as set forth
below:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION DATE CONTRACTS TO RECEIVE POSITION APPRECIATION
- --------------- -------------------- -------- ------------
<S> <C> <C> <C>
March 1997 5 S&P 500 Futures Long $84,187
</TABLE>
- --------------------------------------------------------------------------------
At February 28, 1997, Mid-Cap Stock Fund had outstanding futures contracts as
set forth below:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION DATE CONTRACTS TO RECEIVE POSITION APPRECIATION
- --------------- ------------------------- --------- ------------
<S> <C> <C> <C>
March 1997 40 S&P Midcap 400 Futures Long $219,696
</TABLE>
- --------------------------------------------------------------------------------
Foreign Exchange Contracts--International Stock Fund may enter into foreign
currency exchange contracts as a way of managing foreign exchange rate risk.
The Fund may enter into these contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date as a hedge or cross hedge
against either specific transactions or portfolio positions. The objective of
the Fund's foreign currency hedging transactions is to reduce the risk that the
U.S. dollar value
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
of the Fund's foreign currency denominated securities will decline in value due
to changes in foreign currency exchange rates. All foreign currency exchange
contracts are "marked to market" daily at the applicable translation rates
resulting in unrealized gains or losses. Realized gains or losses are recorded
at the time the foreign currency exchange contract is offset by entering into a
closing transaction or by the delivery or receipt of the currency. Risk may
arise upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar. At
February 28, 1997, International Stock Fund had outstanding foreign exchange
contracts as set forth below:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL
COMMITMENTS TO CONTRACTS AT UNREALIZED
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR VALUE DEPRECIATION
- --------------- --------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
Contracts Sold:
March 3, 1997 19,910 British Pound Sterling $32,434 $32,443 $ 9
</TABLE>
- --------------------------------------------------------------------------------
Foreign Currency Translation--The accounting records of International Stock
Fund are maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FCs") are translated into U.S. dollars based on the rate
of exchange of such currencies against U.S. dollars on the date of valuation.
Purchases and sales of securities, income and expenses are translated at the
rate of exchange quoted on the respective date that such transactions are
recorded. Differences between income and expense amounts recorded and collected
or paid are adjusted when reported by the custodian bank. The Funds do not
isolate that portion of the results of operations resulting from changes in
foreign exchange rates on investments from the fluctuations arising from
changes in market prices of securities held. Such fluctuations are included
with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
FCs, currency gains or losses realized between the trade and settlement dates
on securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Funds' books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in the exchange rate.
Dollar Roll Transactions--The Funds, except for Money Market Fund, may enter
into dollar roll transactions, with respect to mortgage securities issued by
Government National Mortgage Association, Federal National Mortgage Association
and Federal Home Loan Mortgage Corporation, in which the Funds loan mortgage
securities to financial institutions and simultaneously agree to accept
substantially similar (same type, coupon and maturity) securities at a later
date at an agreed upon price. Dollar roll transactions are short-term financing
arrangements which will not exceed twelve months. The Funds will use the
proceeds generated from the transactions to invest in short-term investments,
which may enhance the Funds' current yield and total return.
Securities Lending--The Funds may participate in a securities lending program
providing for the lending of corporate bonds, equity and government securities
to qualified brokers. Collateral is maintained at a minimum level of 100% of
the market value on securities loaned, plus interest, if applicable. The Funds
reimburse the custodian for the costs directly associated with the Funds'
participation in the securities lending program, subject to a maximum.
As of February 28, 1997, collateral held for securities loaned was as
follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET VALUE OF MARKET VALUE
FUND SECURITIES LOANED OF COLLATERAL
- ---- ----------------- -------------
<S> <C> <C>
Value Equity Fund $20,037,919 $20,935,395
Stock Fund $18,098,450 $18,866,800
Mid-Cap Stock Fund $33,441,488 $34,356,600
International Stock Fund $35,194,988 $36,960,975
Intermediate Bond Fund $56,345,400 $58,354,479
</TABLE>
- --------------------------------------------------------------------------------
Restricted Securities--Restricted securities are securities that may only be
resold upon registration under federal securities laws or in transactions
exempt from such registration. In some cases, the issuer of restricted
securities has agreed to register such securities for resale, at the issuer's
expense either upon demand by the Fund or in connection with another registered
offering of the securities. Many restricted securities may be resold in the
secondary market in transactions exempt from registration. Such restricted
securities may be determined to be liquid under criteria established by the
Directors. The Funds will not incur any registration costs upon such resales.
International Stock Fund and Short-Term Income Fund's restricted securities are
valued at the price provided by dealers in the secondary market or, if no
market
[ ] MARSHALL FUNDS
prices are available, at the fair value as determined by the Fund's pricing
committee. Money Market Fund's restricted securities are valued at amortized
cost in accordance with Rule 2a-7 under the Investment Company Act of 1940.
Additional information on each restricted security held by International
Stock Fund at February 28, 1997, is as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATES ACQUISITION COST
- -------- ----------------- ----------------
<S> <C> <C>
Telefonica De Argentina S.A., ADR 9/7/94-11/14/96 $1,557,970
Qantas Airways Ltd., ADR 7/31/95-3/7/96 $ 832,511
Komercni Banka A.S., GDR 5/22/96-6/17/96 $ 316,800
MOL Magyar Olay, ADR 11/22/95-5/7/96 $ 806,418
Philippine Long Distance Telephone Co., GDR 9/29/95 $ 499,980
</TABLE>
- --------------------------------------------------------------------------------
Additional information on each restricted security held by Short-Term Income
Fund at February 28, 1997, is as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATES ACQUISITION COST
- -------- ----------------- ----------------
<S> <C> <C>
Corestates Capital Corp., Bank Guarantee 2/25/97 3,916,040
Old Kent Capital Trust I, Company Guarantee 1/28/97 2,966,169
</TABLE>
- --------------------------------------------------------------------------------
Additional information on each restricted security held by Money Market Fund
at February 28, 1997, is as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATES ACQUISITION COST
- -------- ----------------- ----------------
<S> <C> <C>
J.P. Morgan Securities Corp., 5.448%,
3/1/1997 4/4/94-1/15/97 $52,200,000
Republic New York Securities Corp., 5.538%,
3/1/1997 2/28/97 $45,000,000
Sony Capital Corp., 5.47%, 3/29/1997 8/29/96 $50,000,000
Danaher Corp., 5.438%, 3/1/1997 9/12/95-7/8/96 $20,000,000
Willamette Industries, Inc., 5.53%,
3/4/1997 2/7/96-1/15/97 $20,000,000
Commonwealth Life Insurance, 5.62%,
4/1/1997 10/16/96 $10,000,000
Commonwealth Life Insurance, 5.67%,
3/1/1997 9/2/94 $40,000,000
General American Life Insurance Co., 5.64%,
3/1/1997 9/3/96-3/3/97 $55,000,000
Jackson National Life Insurance Co., 5.57%,
5/1/1997 4/8/96 $50,000,000
Transamerica Life Insurance and Annuity
Co., 5.563%, 4/1/1997 1/6/97 $40,000,000
Travelers Insurance Company, 5.613%,
4/1/1997 1/20/97 $50,000,000
American Honda Finance Corp., 5.551%,
3/3/1997 3/1/96 $24,990,000
American Honda Finance Corp., 5.526%,
5/15/1997 8/15/96 $ 5,000,000
American Honda Finance Corp., 5.603%,
4/23/1997 4/23/96 $20,000,000
Ford Motor Credit Corp., 5.763%, 5/3/1997 11/4/96 $17,836,942
American Express Co., 5.310%, 3/7/1997 1/17/97-2/5/97 $40,000,000
Wisconsin Public Service, 5.33%, 3/4/1997 11/12/93-5/11/94 $10,000,000
</TABLE>
- --------------------------------------------------------------------------------
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities, expenses and
revenues reported in the financial statements. Actual results could differ from
those estimated.
Other--Investment transactions are accounted for on the trade date.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. CAPITAL STOCK
The Articles of Incorporation permit the Directors to issue 50 billion full
and fractional shares of common stock, par value $0.0001 per share. At February
28, 1997, capital paid-in was as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND CAPITAL PAID-IN
- ---- ---------------
<S> <C>
Equity Income Fund $ 215,178,342
Value Equity Fund $ 142,025,243
Stock Fund $ 172,114,357
Mid-Cap Stock Fund $ 147,383,695
International Stock Fund $ 155,359,258
Small-Cap Stock Fund $ 37,495,068
Short-Term Income Fund $ 125,760,348
Intermediate Bond Fund $ 425,994,138
Government Income Fund $ 191,308,100
Intermediate Tax-Free Fund $ 76,381,578
Money Market Fund $1,337,721,942
</TABLE>
- --------------------------------------------------------------------------------
Transactions in capital stock were as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------- ----------------------- -----------------------
EQUITY INCOME FUND VALUE EQUITY FUND STOCK FUND
----------------------- ----------------------- -----------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31, FEBRUARY 28, AUGUST 31, FEBRUARY 28, AUGUST 31,
1997 1996 1997 1996 1997 1996
------------ ---------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 6,089,728 6,255,226 1,481,027 3,603,620 953,907 4,298,980
Shares issued to
shareholders in payment
of distributions
declared 497,896 238,663 1,580,282 930,711 2,303,652 1,144,142
Shares redeemed (1,225,046) (2,740,860) (5,023,581) (6,491,712) (5,074,123) (6,826,659)
---------- ---------- ---------- ---------- ---------- ----------
Net change resulting
from share transactions 5,362,578 3,753,029 (1,962,272) (1,957,381) (1,816,564) (1,383,537)
========== ========== ========== ========== ========== ==========
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------- ----------------------- ----------------
INTERNATIONAL SMALL-CAP
MID-CAP STOCK FUND STOCK FUND STOCK FUND
----------------------- ----------------------- ----------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED PERIOD ENDED
FEBRUARY 28, AUGUST 31, FEBRUARY 28, AUGUST 31, FEBRUARY 28,
1997 1996 1997 1996 1997*
------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Shares sold 4,227,014 4,934,068 3,146,830 5,874,333 3,986,910
Shares issued to
shareholders in payment
of distributions
declared 534,978 406,183 197,927 120,388 --
Shares redeemed (1,967,477) (3,579,779) (1,084,496) (2,273,523) (379,648)
---------- ---------- ---------- ---------- ---------
Net change resulting
from share transactions 2,794,515 1,760,472 2,260,261 3,721,198 3,607,262
========== ========== ========== ========== =========
</TABLE>
- --------------------------------------------------------------------------------
*For the period from September 3, 1996 (date of initial public investment) to
February 28, 1997.
[ ] MARSHALL FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------- ------------------------ -----------------------
SHORT-TERM INTERMEDIATE GOVERNMENT
INCOME FUND BOND FUND INCOME FUND
----------------------- ------------------------ -----------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31, FEBRUARY 28, AUGUST 31, FEBRUARY 28, AUGUST 31,
1997 1996 1997 1996 1997 1996
------------ ---------- ------------ ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 4,299,579 7,157,123 6,340,858 15,992,321 5,758,745 5,753,556
Shares issued to
shareholders in payment
of distributions
declared 120,643 311,379 669,632 1,476,468 240,157 494,460
Shares redeemed (2,242,944) (5,605,778) (7,735,629) (10,085,356) (1,028,218) (2,222,851)
---------- ---------- ---------- ----------- ---------- ----------
Net change resulting
from share transactions 2,177,278 1,862,724 (725,139) 7,383,433 4,970,684 4,025,165
========== ========== ========== =========== ========== ==========
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-----------------------
INTERMEDIATE
TAX-FREE FUND
-----------------------
SIX MONTHS
ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31,
1997 1996
------------ ----------
<S> <C> <C>
Shares sold 1,490,400 2,848,116
Shares issued to shareholders in payment of
distributions declared 12,631 25,159
Shares redeemed (475,796) (816,031)
--------- ---------
Net change resulting from share transactions 1,027,235 2,057,244
========= =========
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------
MONEY MARKET FUND
------------------------------
SIX MONTHS
ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31,
1997 1996
CLASS A SHARES -------------- --------------
<S> <C> <C>
Shares sold 1,759,493,723 3,347,680,311
Shares issued to shareholders in payment of
distributions declared 4,678,434 10,071,706
Shares redeemed (1,577,904,060) (3,446,715,442)
-------------- --------------
Net change resulting from Class A Share
transactions 186,268,097 (88,963,425)
============== ==============
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------
MONEY MARKET FUND
--------------------------
SIX MONTHS
ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31,
1997 1996
CLASS B SHARES ------------ ------------
<S> <C> <C>
Shares sold 301,848,311 560,449,868
Shares issued to shareholders in payment of
distributions declared 2,015,913 3,430,075
Shares redeemed (276,780,894) (509,499,472)
------------ ------------
Net change resulting from Class B Share
transactions 27,083,330 54,380,471
------------ ------------
Net change resulting from Fund Share
transactions 213,351,427 (34,582,954)
============ ============
</TABLE>
- --------------------------------------------------------------------------------
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Advisory Fee--M&I Investment Management Corp., the Funds'
investment adviser (the "Adviser"), receives for its services an annual
investment advisory fee based on a percentage of each Fund's average daily net
assets as listed below. The Adviser may voluntarily choose to waive any portion
of its fee. The Adviser can modify or terminate this voluntary waiver at any
time at its sole discretion.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND ANNUAL RATE
- ---- -----------
<S> <C>
Equity Income Fund 0.75%
Value Equity Fund 0.75%
Stock Fund 0.75%
Mid-Cap Stock Fund 0.75%
International Stock Fund 1.00%
Small-Cap Stock Fund 1.00%
Short-Term Income Fund 0.60%
Intermediate Bond Fund 0.60%
Government Income Fund 0.75%
Intermediate Tax-Free Fund 0.60%
Money Market Fund 0.50%
</TABLE>
- --------------------------------------------------------------------------------
Templeton Investment Counsel, Inc., is the sub-adviser (the "Sub-Adviser")
for International Stock Fund. The Adviser compensates the Sub-Adviser based on
the level of average aggregate daily net assets of International Stock Fund.
Administrative Fee--Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Funds with administrative
personnel and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of the Corporation for the period.
Distribution Services Fee--International Stock Fund, Small-Cap Stock Fund and
Money Market Fund have adopted Distribution Plans (the "Plans") pursuant to
Rule 12b-1 under the Act. Under the terms of the Plans, the Funds will
compensate Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of each Fund to finance activities intended to result in the
sale of shares of International Stock Fund, Small-Cap Stock Fund and Money
Market Fund's Class B Shares. The Plans provide that the Funds may incur
distribution expenses up to 0.25%, 0.25% and 0.30%, respectively, of the
average daily net assets of International Stock Fund, Small-Cap Stock Fund and
Money Market Fund's Class B Shares annually, to compensate FSC. The
International Stock Fund and Small-Cap Stock Fund have no present intention of
paying or accruing 12b-1 fees at this time.
Shareholder Services Fee--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services Company ("FSSC"), the Funds (except for the
Money Market Fund) will pay FSSC up to 0.25% of average daily net assets of the
Funds for the period. The fee paid to FSSC is used to finance certain services
for shareholders and to maintain shareholder accounts. FSSC may voluntarily
choose to waive any portion of its fee. FSSC can modify or terminate this
voluntary waiver at any time at its sole discretion. FSSC may hire third
parties, including Marshall Funds Investor Services, ("MFIS") Milwaukee,
Wisconsin, a division of M&I Trust Company, to provide shareholder services to
the Funds. MFIS is the shareholder servicing agent for Money Market Fund. Money
Market Fund may pay MFIS a fee equal to approximately 0.02% of the average
daily net assets of the Fund for which MFIS provides shareholder services.
Transfer and Dividend Disbursing Agent Fees and Expenses--FServ through its
subsidiary, FSSC, serves as transfer and dividend disbursing agent for the
Funds. The fee paid to FSSC is based on the size, type, and number of accounts
and transactions made by shareholders.
Portfolio Accounting Fees--FServ maintains the Funds' accounting records for
which it receives a fee. The fee is based on the level of each Fund's average
daily net assets for the period, plus out-of-pocket expenses.
Custodian Fees--M&I Trust Company is the Funds' custodian. M&I Trust Company
receives fees based on the level of each Fund's average daily net assets for
the period. The custodian also charges a fee in connection with securities
lending activities of the Funds.
Organizational Expenses--Organizational expenses were borne initially by
FServ. The Funds have agreed to reimburse FServ for the organizational expenses
during the five year period following each Fund's effective date. For the
period ended February 28, 1997, the following amounts were paid pursuant to
this agreement:
[ ] MARSHALL FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ORGANIZATIONAL ORGANIZATIONAL
FUND EXPENSES EXPENSES PAID
- ---- -------------- --------------
<S> <C> <C>
Equity Income Fund $18,857 $2,514
Value Equity Fund 18,485 2,465
Stock Fund 30,018 4,474
Mid-Cap Stock Fund 16,434 2,694
International Stock Fund 18,401 1,856
Small-Cap Stock Fund 35,592 --
Short-Term Income Fund 23,033 3,759
Intermediate Bond Fund 23,413 3,337
Government Income Fund 22,735 3,228
Intermediate Tax-Free Fund 16,416 2,451
Money Market Fund 59,536 9,109
</TABLE>
- --------------------------------------------------------------------------------
General--Certain of the Officers and Directors of the Corporation are
Officers and Directors of the above companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended February 28, 1997, were as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND PURCHASES SALES
- ---- ------------ ------------
<S> <C> <C>
Equity Income Fund $106,521,378 $ 54,565,950
Value Equity Fund 53,567,971 84,218,309
Stock Fund 58,286,800 116,844,893
Mid-Cap Stock Fund 155,893,491 138,422,973
International Stock Fund 73,007,231 50,850,111
Small-Cap Stock Fund 51,129,042 19,296,359
Short-Term Income Fund 62,793,565 42,468,387
Intermediate Bond Fund 325,357,030 322,226,543
Government Income Fund 196,445,385 118,579,795
Intermediate Tax-Free Fund 8,347,792 19,849,618
</TABLE>
- --------------------------------------------------------------------------------
6. CONCENTRATION OF CREDIT RISK
International Stock Fund invests in equity and fixed income securities of
non-U.S. issuers. Although the Fund maintains a diversified investment
portfolio, the political or economic developments within a particular country
or region may have an adverse effect on the ability of domiciled issuers to
meet their obligations. Additionally, political or economic developments may
have an effect on the liquidity and volatility of portfolio securities and
currency holdings.
DIRECTORS OFFICERS
Ody J. Fish Edward C. Gonzales
John DeVincentis Chairman and Treasurer
Edward C. Gonzales
Paul E. Hassett James F. Duca, II
President
Joseph S. Machi
Vice President and Assistant Treasurer
Peter J. Germain
Secretary
C. Todd Gibson
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal. Although money market funds seek to
maintain a stable net asset value of $1.00 per share, there is no assurance
that they will be able to do so.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus, which contains facts
concerning the Fund's objective and policies, management fees, expenses, and
other information.
Marshall Funds Investor Services
1000 North Water Street
PO Box 1348
Milwaukee, Wisconsin 53201-1348
1-800-236-FUND (3863) or 1-414-287-8595
TDD: Speech and Hearing Impaired Services
1-800-209-3520
http://www.marshallfunds.com
Federated Securities Corp.
Distributor
G00406.02 (4/97)
1A. The graphic representation here displayed consists of two charts. One
chart outlines the top five business sectors that the Marshall Equity
Income Fund (`Equity Income Fund'') invests in as well as its percentage
of net assets as of February 28, 1997. The information is as follows:
Consumer Non-Durables, 22.7%; Energy, 18.0%; Financial, 16.5%; Utilities,
14.9%; Raw Materials/Intermediate Goods, 5.7%. The second chart outlines
the Equity Income Fund's five largest stock holdings and its percentage of
net assets as of February 28, 1997. The information is as follows: Philip
Morris Companies, Inc., 3.4%; Exxon Corp., 3.3%; Royal Dutch Petrolieum
Co., 3.0%; General Motors Corporation, 2.4%; Xerox Corporation, 2.2%.
2A. The graphic representation here displayed consists of two charts. One
chart outlines the average annual total returns for the Equity Income Fund
as of March 31, 1997 for the 1-year, 3-year, and since inception (9/30/93)
periods. The returns are as follows: 18.07%; 19.95%; and 15.44%,
respectively. The second chart outlines the Equity Income Fund's six-month
total return as of February 28, 1997. The six-month return is 19.00%.
3A. The graphic presentation here displayed consists of a line graph. The
corrresponding components of the line graph are listed beneath the graphic
presentation. The Equity Income Fund is represented by a solid line,
whereas Standard & Poor's 500 Index (`S&P 500'') is represented by a
broken dotted line and Lipper Equity Income Funds Index (`LEIFI'') is
represented by a dotted line. The line graph is a visual representatin of
a comparison of change in value of a hypothetical investment of $10,000 in
the Equity Income Fund and S&P 500 and LEIFI from its inception on
September 30, 1993 to February 28, 1997. The `y'' axis reflects the cost
of the investment. The `x'' axis reflects computation periods from the
ending value of the hypothetical investment in the Equity Income Fund as
compared to S&P 500 and LEIFI; the ending values are $17,128; $18,780; and
$16,216, respectively.
1B. The graphic representation here displayed consists of two charts. One
chart outlines the top five business sectors that the Marshall Value Equity
Fund (`Value Equity Fund'') invests in as well as its percentage of net
assets as of February 28, 1997. The information is as follows: Consumer
Non-Durables, 28.4%; Raw Materials/Intermediate Goods, 14.5%; Consumer
Durables, 12.9%; Financial, 9.1%; and Capital Goods, 6.0%. The second
chart outlines the Value Equity Fund's five largest stock holdings and its
percentage of net assets as of February 28, 1997. The information is as
follows: Rubbermaid, Inc., 2.9%; Acuson Corp., 2.9%; Alexander & Baldwin,
Inc., 2.7%; Steward & Stevenson Services, 2.5%; and Energy Corp., 2.5%.
2B. The graphic representation here displayed consists of two charts. One
chart outlines the average annual total returns for the Value Equity Fund
as of March 31, 1997 for the 1-year, 3-year, and since inception (9/30/93)
periods. The returns are as follows: 7.14%; 14.99%; and 12.23%,
respectively. The second chart outlines the Value Equity Fund's six-month
total return as of February 28, 1997. The six-month return is 12.57%.
3B. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed beneath the graphic
presentation. The Value Equity Fund is represented by a solid line,
whereas Standard & Poor's 500 Index (`S&P 500'') is represented by a
broken dotted line and Lipper Growth and Income Funds Index (`LGIFI'') is
represented by a dotted line. The line graph is a visual representation of
a comparison of change in value of a hypothetical investment of $10,000 in
the Value Equity Fund and S&P 500 and LGIFI from its inception on September
30, 1993 to February 28, 1997. The `y'' axis reflects the cost of the
investment. The `x'' axis reflects computation periods from the ending
value of the hypothetical investment in the Value Equity Fund as compared
to S&P 500 and LGIFI; the ending values are $15,342; $18,780; and $16,958,
respectively.
1C. The graphic representation here displayed consists of two charts. One
chart outlines the top five business sectors that the Marshall Stock Fund
(`Stock Fund'') invests in as well as its percentage of net assets as of
February 28, 1997. The information is as follows: Consumer Non-Durables,
30.5%; Capital Goods, 22.6%; Financial, 18.2%; Energy, 9.1%; and Basic
Industries, 8.1%. The second chart outlines the Stock Fund's five largest
stock holdings and its percentage of net assets as of February 28, 1997.
The information is as follows: Philip Morris Companies, Inc., 2.8%; General
Electric Company, 2.7%; Kimberly Clark Corporation, 2.6%; Bank America
Corporation, 2.5%; and Chase Manhattan Corporation, 2.5%.
2C. The graphic representation here displayed consists of two charts. One
chart outlines the average annual total returns for the Stock Fund as of
March 31, 1997 for the 1-year, 3-year, and since inception (11/20/92)
periods. The returns are as follows: 16.51%; 15.69%; and 10.47%,
respectively. The second chart outlines the Stock Fund's six-month total
return as of February 28, 1997. The six-month return is 21.04%.
3C. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed beneath the graphic
presentation. The Stock Fund is represented by a solid line, whereas
Standard & Poor's 500 Index (`S&P 500'') is represented by a broken dotted
line and Lipper Growth and Income Funds Index (`LGIF'') is represented by
a dotted line. The line graph is a visual representation of a comparison
of change in value of a hypothetical investment of $10,000 in the Stock
Fund and S&P 500 and LGIF from its inception on November 20, 1992 to
February 28, 1997. The `y'' axis reflects the cost of the investment.
The `x'' axis reflects computation periods from the ending value of the
hypothetical investment in the Stock Fund as compared to S&P 500 and LGIF;
the ending values are $16,111; $20,456; and $19,302, respectively.
1D. The graphic representation here displayed consists of two charts. One
chart outlines the top five business sectors that the Marshall Mid-Cap
Stock Fund (`Mid-Cap Stock Fund'') invests in as well as its percentage of
net assets as of February 28, 1997. The information is as follows:
Consumer Non-Durables, 51.4%; Financial, 21.2%; Capital Goods, 9.4%;
Telecommunications, 4.8%; Transportation, 2.1%. The second chart outlines
the Mid-Cap Stock Fund's five largest stock holdings and its percentage of
net assets as of February 28, 1997. The information is as follows:
Cardinal Health, Inc., 2.7%; Parametric Technology, Corp., 2.5%; State
Street Boston Corp., 2.4%; Andrew Corp., 2.3%; Wisconsin Central
Transportation Corp., 2.1%.
2D. The graphic representation here displayed consists of two charts. One
chart outlines the average annual total returns for the Mid-Cap Stock Fund
as of March 31, 1997 for the 1-year, 3-year, and since inception (9/30/93)
periods. The returns are as follows: -0.52%; 13.69%; and 10.24%,
respectively. The second chart outlines the Mid-Cap Stock Fund's six-month
total return as of February 28, 1997. The six-month return is 1.77%.
3D. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed beneath the graphic
presentation. The Mid-Cap Stock Fund is represented by a solid line,
whereas Standard & Poor's Mid-Cap 400 Index (`SPMC'') is represented by a
broken dotted line and the Lipper Mid-Cap Funds Index (`LMCFI'') is
represented by a dotted line. The line graph is a visual representation of
a comparison of change in value of a hypothetical investment of $10,000 in
the Mid-Cap Stock Fund and SPMC and LMCFI from its inception on September
30, 1993 to February 28, 1997. The `y'' axis reflects the cost of the
investment. The `x'' axis reflects computation periods from the ending
value of the hypothetical investment in the Mid-Cap Stock Fund as compared
to SPMC and LMCFI; the ending values are $14,955; $15,908; and $15,301,
respectively.
1E. The graphic presentation here displayed consists of four charts. One
chart outlines the top five business sectors that the Marshall
International Stock Fund (`International Stock Fund'') invests in as well
as its percentage of net assets as of February 28, 1997. The information
is as follows: Banking, 11.7%; Telephone, 8.1%; Electric Utilities, 5.7%;
Insurance, 5.3%; Chemicals, 4.8%. The second chart outlines the
International Stock Fund's five largest stock holdings and its percentage
of net assets as of February 28, 1997. The information is as follows:
Telecommunicacoes Brasileiras S.A., ADR, 1.9%; Fiat SPA, 1.7%; Canadian
Imperial Bank of Commerce, 1.6%; Rhone-Poulenc, Class A, 1.6%; STET Societa
Finanzieria Telefonica SPA, 1.6%. The third chart outlines the
International Stock Fund's regional exposure and its percentage of net
assets as of February 28, 1997. The information is as follows: Europe,
51.9%; Pacific Rim, 17.5%; Latin America, 7.9%; North America, 4.1%; Japan,
2.3%. The fourth chart outlines the International Stock Fund's country
allocations and its percentage of net assets as of February 28, 1997. The
information is as follows: Great Britain, 8.6%; France, 8.2%; Spain, 7.0%;
Australia/New Zealand, 6.9%; Hong Kong, 5.0%.
2E. The graphic representation here displayed consists of two charts. One
chart outlines the average annual total returns for the International Stock
Fund as of March 31, 1997 for the 1-year and since inception (9/1/94)
periods. The returns are as follows: 17.95% and 10.67%, respectively. The
second chart outlines the International Stock Fund's six-month total return
as of February 28, 1997. The six-month return is 12.69%.
3E. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed beneath the graphic
presentation. The International Stock Fund is represented by a solid line,
whereas the Morgan Stanley Capital Europe, Australia, Far East Index
(`EAFE'') and the Lipper International Funds Index (``LIFI'') is
represented by a dotted line. The line graph is a visual representation of
a comparison of change in value of a hypothetical investment of $10,000 in
the International Stock Fund and EAFE and LIFI from its inception on
September 1, 1994 to February 28, 1997. The `y'' axis reflects the cost
of the investment. The `x'' axis reflects computation periods from the
ending value of the hypothetical investment in the International Stock Fund
as compared to EAFE and LIFI; the ending values are $12,857; $11,090; and
$11,860, respectively.
1F. The graphic representation here displayed consists of two charts. One
chart outlines the top five business sectors that the Marshall Small-Cap
Stock Fund (`Small-Cap Stock Fund'') invests in as well as its percentage
of net assets as of February 28, 1997. The information is as follows:
Consumer Non-Durables, 44.0%; Financial, 15.2%; Capital Goods, 14.5%;
Energy, 7.6%; Telecommunications, 2.3. The second chart outlines the
Small-Cap Stock Fund's five largest stock holdings and its percentage of
net assets as of February 28, 1997. The information is as follows: Redwood
Trust, Inc., 3.9%; AmeriSource Health Corp. Class A, 3.5%; Sirrom Capital
Corp., 3.3%; Protective Life Corp., 3.0%; Stewart Enerprises, Inc. Class A,
2.9%.
2F. The graphic representation here displayed consists of two charts. One
chart outlines the average annual total returns for the Small-Cap Stock
Fund as of March 31, 1997 for the 1-year and since inception (11/1/95)
periods. The returns are as follows: 8.16% and 37.96%, respectively. The
second chart outlines the Small-Cap Stock Fund's six-month total return as
of February 28, 1997. The six-month return is 0.14%.
3F. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed beneath the graphic
presentation. The Small-Cap Stock Fund is represented by a solid line,
whereas the Russell 2000 Index (`Russell 2000'') is represented by a
broken dotted line and Lipper Small Cap Funds Index (LSCFI') is
represented by a dotted line. The line graph is a visual representation of
a comparison of change in value of a hypothetical investment of $10,000 in
the Small-Cap Stock Fund and Russell 2000 and LSCFI from its inception on
November 1, 1995 to February 28, 1997. The `y'' axis reflects the cost of
the investment. The `x'' axis reflects computation periods from the
ending value of the hypothetical investment in the Small-Cap Stock Fund as
compared to Russell 2000 and LSCFI; the ending values are $16,721; $12,399;
and $11,549, respectively.
1G. The graphic representation here displayed consists of two charts. One
chart outlines the portfolio diversification of the Marshall Short-Term
Income Fund (`Short-Term Income Fund'') as well as its percentage of net
assets as of February 28, 1997. The information is as follows: AAA Rated
Corporate Bonds, 41.3%; Government Agency, 22.8%; U.S. Treasury, 12.5%;
Cash & Cash Equivalents, 12.5%; A Rated Corporate Bonds, 10.7%; AA Rated
Corporate Bonds, 6.8%. The second chart outlines the Short-Term Income
Fund's fund statistics as of February 28, 1997. The information is as
follows: SEC 30-day yield, 6.36%; Dollar-weighted average maturity, 3.8
years; Duration, 1.5 years.
2G. The graphic representation here displayed consists of two charts. One
chart outlines the average annual total returns for the Short-Term Income
Fund as of March 31, 1997 for the 1-year, 3-year, and since inception
(11/1/92) periods. The returns are as follows: 5.45%; 5.36%; and 4.67%,
respectively. The second chart outlines the Short-Term Income Fund's six-
month total return as of February 28, 1997. The six-month return is 3.61%.
3G. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed beneath the graphic
presentation. The Short-Term Income Fund is represented by a solid line,
whereas the Lipper Short-Term Investment Grade Bond Fund Index (`LSTIBI'')
is represented by a broken line, IBC/Donoghue's Taxable Money Fund Average
(`DMFA'') is represented by a dotted line, and Short-Term Fund Benchmark
(`STFB'') is represented by a broken dotted line. The line graph is a
visual representation of a comparison of change in value of a hypothetical
investment of $10,000 in the Short-Term Income Fund and LSTIBI, DMFA, and
STFB from its inception on November 1, 1992 to February 28, 1997. The
`y'' axis reflects the cost of the investment. The ``x'' axis reflects
computation periods from the ending value of the hypothetical investment in
the Mid-Cap Stock Fund as compared to LSTIBI, DMFA, and STFB; the ending
values are $12,231; $12,469; $11,958, and 12,255, respectively.
1H. The graphic representation here displayed consists of two charts. One
chart outlines the portfolio diversification of the Marshall Intermediate
Bond Fund (`Intermediate Bond Fund'') as well as its percentage of net
assets as of February 28, 1997. The information is as follows: A Rated
Corporate Bonds, 42.0%; AAA Rated Corporate Bonds, 28.8%, U.S. Treasury,
14.0%, Government Agency, 9.9%; BBB Rated Corporate Bonds, 8.2%; AA Rated
Corporate Bonds, 1.5%; Cash & Cash Equivalents, 1.3%. The second chart
outlines the Intermediate Bond Fund's fund statistics as of February 28,
1997. The information is as follows: SEC 30-day yield, 6.05%; Dollar-
weighted average maturity, 7.6 years; Duration, 3.4 years.
2H. The graphic representation here displayed consists of two charts. One
chart outlines the average annual total returns for the Intermediate Bond
Fund as of March 31, 1997 for the 1-year, 3-year, and since inception
(11/20/92) periods. The returns are as follows: 4.58%; 5.36%; and 5.01%,
respectively. The second chart outlines the Intermediate Bond Fund's six-
month total return as of February 28, 1997. The six-month return is 4.62%.
3H. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed beneath the graphic
presentation. The Intermediate Bond Fund is represented by a solid line,
whereas Lehman Brothers Government/Corporate Intermediate Index (`LGCI'')
is represented by a broken dotted line and Lipper Intermediate Investment
Grade Bond Funds Index (`LIBF'') is represented by a dotted line. The
line graph is a visual representation of a comparison of change in value of
a hypothetical investment of $10,000 in the Intermediate Bond Fund and LGCI
and LIBF from its inception on November 20, 1992 to February 28, 1997. The
`y'' axis reflects the cost of the investment. The ``x'' axis reflects
computation periods from the ending value of the hypothetical investment in
the Intermediate Bond Fund as compared to LGCI and LIBF; the ending values
are $12,443; $13,026; and $13,106, respectively.
1I. The graphic representation here displayed consists of two charts. One
chart outlines the portfolio diversification of the Marshall Government
Income Fund (`Government Income Fund'') as well as its percentage of net
assets as of February 28, 1997. The information is as follows: CMO/ABS,
30.8%; GNMA/MBS, 31.4%; FHLMC/MBS, 17.2%; FNMA/MBS, 16.9%; Corporate, 7.3%;
Agency, 2.1%. The second chart outlines the Government Income Fund's fund
statistics as of February 28, 1997. The information is as follows: SEC
30-day yield, 5.88%; Dollar-weighted average maturity, 8.4 years; Duration,
4.1 years.
2I. The graphic representation here displayed consists of two charts. One
chart outlines the average annual total returns for the Government Income
Fund as of March 31, 1997 for the 1-year, 3-year, and since inception
(12/13/92) periods. The returns are as follows: 4.95%; 6.09%; and 5.24%,
respectively. The second chart outlines the Government Income Fund's six-
month total return as of February 28, 1997. The six-month return is 5.01%.
3I. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed beneath the graphic
presentation. The Government Income Fund is represented by a solid line,
whereas Lehman Brothers Mortgage-Backed Securities Index (`LMI'') is
represented by a broken dotted line and Lipper U.S. Mortgage Funds Index
(`LUSMI'') is represented by a dotted line. The line graph is a visual
representation of a comparison of change in value of a hypothetical
investment of $10,000 in the Government Income Fund and LMI and LUSMI from
its inception on December 13, 1992 to February 28, 1997. The `y'' axis
reflects the cost of the investment. The `x'' axis reflects computation
periods from the ending value of the hypothetical investment in the
Government Income Fund as compared to LMI and LUSMI; the ending values are
$12,594; $13,245; and $12,552, respectively.
1J. The graphic representation here displayed consists of two charts. One
chart outlines the portfolio diversification of the Marshall Intermediate
Tax-Free Fund (`Intermediate Tax-Free Fund'') as well as its percentage of
net assets as of February 28, 1997. The information is as follows:
Illinois, 12.8%; Wisconsin, 9.2%; Texas, 8.5%; Minnesota, 7.9%; Washington,
6.2%. The second chart outlines the Intermediate Tax-Free Fund's fund
statistics as of February 28, 1997. The information is as follows: SEC
30-day yield, 4.23%; Dollar-weighted average maturity, 7.3 years; Duration,
5.9 years.
2J. The graphic representation here displayed consists of two charts. One
chart outlines the average annual total returns for the Intermediate Tax-
Free Fund as of March 31, 1997 for the 1-year, 3-year, and since inception
(2/2/94) periods. The returns are as follows: 4.27%; 5.19%; and 3.83%,
respectively. The second chart outlines the Intermediate Tax-Free Fund's
six-month total return as of February 28, 1997. The six-month return is
4.38%.
3J. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed beneath the graphic
presentation. The Intermediate Tax-Free Fund is represented by a solid
line, whereas Lehman Brothers 5 Year G.O. Index (`L5GO'') is represented
by a broken dotted line and Lipper Intermediate Municipal Funds Index
(`LIMI'') is represented by a dotted line. The line graph is a visual
representation of a comparison of change in value of a hypothetical
investment of $10,000 in the Intermediate Tax-Free Fund and L5GO and LIMI
from its inception on February 2, 1994 to February 28, 1997. The `y''
axis reflects the cost of the investment. The `x'' axis reflects
computation periods from the ending value of the hypothetical investment in
the Intermediate Tax-Free Fund as compared to L5GO and LIMI; the ending
values are $11,415; $11,509; and $11,330, respectively.
K. The graphic representation here displayed consists of one chart which
outlines the Marshall Money Market Fund's fund statistics as of February
28, 1997. The information is as follows: Current Yield, Class A Shares--
5.17%; Class B Shares--4.87%; Effective Yield, Class A Shares--5.30%; Class
Class B Shares 4.98%; Dollar-Weighted Avg. Maturity, 45 days.
