The
Marshall Family
of Funds
Annual Report Dated August 31, 1997
Marshall Equity Income Fund Marshall Large-Cap Growth & Income Fund Marshall
Mid-Cap Value Fund Marshall Mid-Cap Growth Fund Marshall International Stock
Fund Marshall Small-Cap Growth Fund Marshall Short-Term Income Fund Marshall
Intermediate Bond Fund Marshall Government Income Fund Marshall Intermediate
Tax-Free Fund Marshall Money Market Fund
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TABLE OF CONTENTS
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FUND PERFORMANCE......................................................... 1
COMMENTARIES
Marshall Equity Income Fund............................................ 2
Marshall Large-Cap Growth & Income Fund (formerly, Marshall Stock
Fund)................................................................. 4
Marshall Mid-Cap Value Fund (formerly, Marshall Value Equity Fund)..... 6
Marshall Mid-Cap Growth Fund (formerly, Marshall Mid-Cap Stock Fund)... 8
Marshall International Stock Fund...................................... 10
Marshall Small-Cap Growth Fund (formerly, 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 Large-Cap Growth & Income Fund.............................. 24
Marshall Mid-Cap Value Fund.......................................... 26
Marshall Mid-Cap Growth Fund......................................... 27
Marshall International Stock Fund.................................... 29
Marshall Small-Cap Growth Fund....................................... 32
Marshall Short-Term Income Fund...................................... 33
Marshall Intermediate Bond Fund...................................... 35
Marshall Government Income Fund...................................... 37
Marshall Intermediate Tax-Free Fund.................................. 37
Marshall Money Market Fund........................................... 41
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..................................................... 64
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[_] FUND PERFORMANCE
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MORNINGSTAR
AVERAGE ANNUAL TOTAL RETURNS (9/30/97)/5/ 3-YEAR
MARSHALL FUNDS SINCE INCEPTION RATING/6/
1-YEAR 3-YEAR INCEPTION DATE (9/30/97)
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<S> <C> <C> <C> <C> <C>
EQUITY FUNDS:
Equity Income Fund/1/ 33.30% 25.78% 18.65% 9/30/93 *****
Large-Cap Growth
& Income Fund/1/ 34.45% 23.65% 13.80% 11/20/92 ***
Mid-Cap Value Fund/1/ 32.50% 19.35% 16.64% 9/30/93 ***
Mid-Cap Growth Fund/1/ 19.12% 25.54% 17.28% 9/30/93 **
International Stock Fund/2/ 30.67% 16.10% 14.16% 9/1/94 ****
Small-Cap Growth Fund/7/ 21.11% n/a 51.66% 11/1/95 n/a
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INCOME FUNDS:
Short-Term Income Fund/3/ 6.99% 6.48% 5.07% 11/1/92 ****
Intermediate Bond Fund/3/ 8.07% 7.50% 5.59% 11/23/92 ***
Government Income Fund/3/ 8.97% 8.69% 6.08% 12/13/92 ***
Intermediate Tax-Free Fund/4/ 6.97% 6.28% 4.59% 2/2/94 ***
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Money Market Fund
Class A Shares 5.37% 5.46% 4.63% 11/23/92 n/a
Class B Shares 5.06% 5.15% 4.34% 12/17/92 n/a
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1 There were 2,143 funds in Morningstar's domestic equity category for the
3-year period.
2 There were 601 funds in Morningstar's international equity category for the
3-year period.
3 There were 1,309 funds in Morningstar's taxable bond category for the 3-year
period.
4 There were 1,374 funds in Morningstar's municipal category for the 3-year
period.
5 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.
6 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. 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.
7 The Marshall Small-Cap Growth 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.
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No Bank Guarantee Not FDIC Insured May Lose Value
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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).*
SUCCESSFUL STRATEGY REPEATS SUCCESS.
For the 12 months ended August 31, 1997, the Fund provided a total return of
30.95%,** while the S&P 500 provided a total return of 40.65% and the Lipper
Equity Income Funds Index (LEIFI)* returned 31.89%. Also, as of 9/30/97, the
Fund was awarded the highest rating--five stars--for its overall performance
among 2,143 domestic equity funds by Morningstar.+
FINANCIALS, ENERGY PLAY AN IMPORTANT ROLE.
Money center banks were the dominant group influencing performance for this
one-year period. The S&P Banks/Money Centers Index* was up 56.37% and S&P Major
Regional Banks Index* was up 50.58%. Within the Fund's portfolio, for example,
10 of the 15 top performers were financial stocks, including H.F. Ahmanson, up
106.5%; First American Corp. of Tennessee, up 89.4%; and Mellon Bank, up 80.4%.
Throughout the year, the Fund maintained a very substantial representation in
banks. On August 31, 1997, the Fund held 16.05% in bank stocks, compared to just
over 8% representation in the S&P 500. The Fund also benefited by its overweight
position in energy stocks, which made up 16.2% of the portfolio on August 31,
1997. The S&P International Oil Stock Index* was up 43.08% over the one-year
period. Tobacco stocks were also good performers. The S&P Tobacco Index* was up
46.93% for the year.
RISK PROTECTION SOUGHT IN REITS.
The most significant strategy change this year was the addition of Real Estate
Investment Trusts, which made up 9.1% of the portfolio at fiscal year end. REITs
are traditionally considered to be a conservative, high-yield, low- volatility
investment; we look to them to add a defensive posture to the portfolio while
pursuing attractive current yield and growth opportunities.
DISCIPLINED APPROACH HELPS TO MINIMIZE VOLATILITY.
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 and has
continued to do so in 1997.
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 help 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 Appears Here
[_] 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 August 31, 1997,
compared to the S&P 500 and the LEIFI.*
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*The S&P 500 and LEIFI are not adjusted to reflect sales charges, 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. The S&P
Banks/Money Centers, Major Regional Banks, International Oil, and Tobacco
Indices are capitalization-weighted indices of all stocks within each
respective sector designed to measure the performance of each respective
sector of the Standard & Poor's 500 Index. Lipper figures represent the
average of the total returns reported by all of the mutual funds designated
by Lipper Analytical Services, Inc. as falling into the respective categories
indicated.
**Performance quoted represents past performance and is not indicative of
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.
***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.
+Morningstar proprietary ratings reflect historical risk-adjusted performance
as of 9/30/97. 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 T-bill returns. The fund received 5 stars for the
three-year period and was rated among 2,143 domestic equity funds,
respectively. Ten percent of funds in a rating universe receive 5 stars, the
next 22.5% receive 4 stars, the next 35% receive 3 stars.
ANNUAL REPORT--COMMENTARY
[-]
MARSHALL LARGE-CAP GROWTH & INCOME FUND
(FORMERLY, MARSHALL STOCK FUND)
The Marshall Large-Cap Growth & Income Fund (the "Fund") invests in large
capitalization stocks with growth and income orientation. The Fund's 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.
FUND PERFORMANCE MIRRORED BENCHMARK.
For the 12 months ended August 31, 1997, the Fund provided a total return of
34.50%,* mirroring the Lipper Growth and Income Funds Index (LGIFI)** return of
34.68%.
TWO SECTORS WORTH NOTING.
An overweighting in financial stocks and broad diversification in economically
sensitive sectors helped the Fund achieve substantial growth. Superior
performers in the financial sector included BankAmerica, up 67%; Bank of New
York, up 60%; and American Express, up 75% for this 12-month period. Strong
performers in the more economically sensitive sectors were Air Products &
Chemicals, up 49%; and General Electric, up 48%.
The technology sector underperformed the market in the first half of the Fund's
fiscal year. However, it rebounded strongly off the April 1997 market lows
through the fiscal year-end. For example, Fund holdings, such as IBM appreciated
76%; Microsoft, 113%; and Intel, 126% over the last 12 months. As the market
rebounded off its low in April 1997, investors moved decidedly toward smaller
market capitalization issues. Even IBM's and Microsoft's substantial returns in
the second half of the fiscal year paled in comparison to those of small- and
mid-cap technology issues. With a moderate representation in aggressive
technology issues and an average market capitalization larger than that of the
Standard & Poor's 500 Index (S&P 500),** the Fund lost ground to the S&P 500
during the latter part of the fiscal year.
POSITIONED FOR '98.
Concerns about earnings growth, lofty price/earnings multiples and the effects
of a strong U.S. dollar discouraged the Fund from owning the larger
multinational consumer products companies, such as Gillette, Coca Cola and
Procter & Gamble. Unfortunately, the concern with these companies has spilled
over into other large capitalization stocks with continuing strong earnings
prospects such as General Electric, Boeing and Unilever.
As the market rotates through various sectors, we continue to stick to our
strategy of maintaining a broadly diversified portfolio of high quality, large
capitalization stocks with a strong focus on near-term earnings trends in this
rich price/earnings multiple environment.
Sincerely,
/s/ William J. O'Connor
William J. O'Connor
Manager, Marshall Large-Cap Growth & Income Fund
"Graphic representation 1B omitted. See Appendix."
Photo Appears Here
[_] MARSHALL LARGE-CAP GROWTH & INCOME FUND
"Graphic representation 2B omitted. See Appendix."
"Graphic representation 2C omitted. See Appendix."
This graph illustrates the hypothetical investment of
$10,000 in the Fund from its
inception on November 20, 1992 to August 31, 1997,
compared to the S&P 500 and the LGIFI.**
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*Performance quoted represents past performance and is not indicative of
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.
**The S&P 500 and LGIFI are not adjusted to reflect sales charges, 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. Lipper figures represent an
average of the total returns reported by all of the 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.
ANNUAL REPORT--COMMENTARY
[-]
MARSHALL MID-CAP VALUE FUND
(FORMERLY, MARSHALL VALUE EQUITY FUND)
The Marshall Mid-Cap Value Fund (the "Fund") uses a value-oriented approach to
purchasing common stocks predominantly within the mid-capitalization range. The
stocks purchased are typically characterized as being out-of-favor and
undervalued.
FUND PROVIDED SOLID RETURN.
For the 12 months ended August 31, 1997, the Fund provided a total return of
30.20%.* For the same period, the Lipper Mid-Cap Funds Index (LMCFI)** returned
24.61%.
MAINTAINING OUR VALUE APPROACH.
We use a pure stock-picking approach without emphasis on sector rotation or
group momentum. We buy out-of-favor, undervalued stocks and patiently wait for
the company to implement strategies aimed to enhance shareholder returns. The
Fund's investment style does not necessarily move with market momentum.
CONCENTRATING ON THREE VALUE SCENARIOS.
The Fund has experienced considerable success in focusing on three categories of
out-of-favor or undervalued stocks:
1. ASSET RECOGNITION. We look for stocks that have significant financial,
tangible or intangible assets that are not currently recognized in the market.
Up 72% over the last 12 months, Trizec Hahn (formerly Horsham) was recognized
for its asset value and management talent, something we identified more than a
year ago.
2. TURN-AROUNDS. Frequently, we find value opportunities when a company
implements more effective ways to conduct its core business. This year, new
management at Sunbeam-Oster Corp. concentrated on the company's most profitable
product lines, driving their shareholder return to 96.3%.
3. RESTRUCTURINGS. When companies change their business strategy or shift to a
different business segment, patient value investors can be rewarded. Imperial
Chemical Industries initiated a move from cyclical commodity chemicals to less
cyclical specialty chemicals, prompting a 36.7% return. We anticipate further
price appreciation as management uses this same skill set on additional business
lines.
MAINTAINING OUR PATIENT STANCE.
The Fund is positioned to benefit from the disciplined approach used to identify
strong opportunities in undervalued stocks. We thank you for your continued
commitment to the Marshall Mid-Cap Value Fund.
Sincerely,
/s/ Matthew B. Fahey
Matthew B. Fahey
Co-Manager, Marshall Mid-Cap Value Fund
/s/ John C. Potter
John C. Potter, C.F.A.
Co-Manager, Marshall Mid-Cap Value Fund
"Graphic representation 1C omitted. See Appendix."
Photo Appears Here
[_] MARSHALL MID-CAP VALUE 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 September 30, 1993 to August 31, 1997,
compared to the S&P 500, SPMC and the LMCFI.**
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*Performance quoted represents past performance and is not indicative of
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.
**The S&P 500, SPMC and the LMCFI are not adjusted to reflect sales charges,
expenses or other fees that the SEC requires to be reflected in the Fund's
performance. These indices are unmanaged. Actual investments may not be made
in an index. 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. SPMC is a
composite index of 400 common stocks with market capitalizations between $200
and $7.5 billion in industry, transportation, financial and public utility.
Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling
into the respective categories indicated. The investment adviser has elected
to change the benchmark of the Fund from the S&P 500 to the SPMC, since the
Fund's portfolio of primarily mid-cap stocks more clearly resembles the
stocks that comprise the SPMC.
***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, SPMC and LMCFI have been adjusted to reflect reinvestment of
dividends on securities in the indices.
ANNUAL REPORT--COMMENTARY
[-]
MARSHALL MID-CAP GROWTH FUND
(FORMERLY, MARSHALL MID-CAP
STOCK FUND)
The Marshall Mid-Cap Growth 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.
UPWARD MOMENTUM REFLECTED IN 12-MONTH FIGURES.
For the 12 months ended August 31, 1997, the Fund provided a total return of
19.14%,* compared to the Standard & Poor's Mid-Cap 400 Stock Price Index
(SPMC)** total return of 37.28% and the Lipper Mid-Cap Fund Index (LMCFI)**
return of 24.61%. For the three years ended August 31, 1997, the Fund provided
an annualized total return of 21.65%,* compared to the SPMC total return of
22.75% and the LMCFI return of 21.16%.
In the first half of the year, lack of dividend support and limited exposure to
utilities (in line with our aggressive growth strategy) adversely affected our
return in comparison to the SPMC and LMCFI. However, in the six months ended
August 31, 1997 the Fund has returned 17.06%, beating out the LMCFI (16.8%) and
closing ground on the SPMC (20.5%).
PATIENCE AND DISCIPLINE WERE REWARDED.
It is important to note that, although small- and mid-caps endured a difficult
period, the Fund did not experience style drift into larger capitalization
stocks. We stayed true to our discipline, seeking growth in attractively valued,
high quality mid-cap companies.
The Fund has been very successful in its exposure to broadcast stocks, a sector
we invested in because of recent FCC regulation changes. As we anticipated,
consolidations benefited share prices, and we benefited from growth at Clear
Channel, up 49%; and Westwood One, up 64%.
We have increased our exposure in oil services, given increased demand for
energy and opportunities for offshore drilling, in particular in the Gulf of
Mexico. Big players here have been EVI, up 37%; and ENSCO International, up 71%.
Finally, we have seen high employment and consumer confidence benefit our retail
investments, in particular Kohl's, Abercrombie & Fitch, and Bed, Bath and
Beyond.
OUTLOOK FOR MID-CAPS IS OPTIMISTIC.
We are entering what may be a very positive period for small- and mid-cap stocks
in relation to large caps. The market shift in 1996-1997 allowed us to take
advantage of tremendous values in the mid-cap arena. As the market begins to
recognize this value, we feel confident that we are well positioned to benefit
from this shift in momentum.
Sincerely,
/s/ Steve D. Hayward
Steve D. Hayward
Manager, Marshall Mid-Cap Growth Fund
"Graphic representation 1D omitted. See Appendix."
Photo Appears Here
[_] MARSHALL MID-CAP GROWTH 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 August 31, 1997,
compared to the SPMC and the LMCFI.**
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*Performance quoted represents past performance and is not indicative of
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.
**The SPMC and the LMCFI are not adjusted to reflect sales charges, 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 all of the 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.
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.+
THE FUND CONTINUED TO OUTPERFORM INDICES.
For the 12 months ended August 31, 1997, the Fund provided a total return of
22.73%,* compared to a total return of 9.4% by the Morgan Stanley Capital
International Europe, Australia and Far East Index (EAFE Index)** and 17.38%
provided by the Lipper International Funds Index (LIFI).** Also, as of 9/30/97,
the Fund was awarded a four-(out of five) star rating for its overall
performance among 601 international equity funds by Morningstar.+
EUROPE AND SOUTH AMERICA PROVIDED GROWTH PLAYERS.
Europe remained the single largest weighting in the Fund, as we continued to
find value there on a selective basis. We were net sellers of financial stocks
in Europe, and particularly decreased our exposure in Sweden, but careful
analysis turned up growth opportunities throughout the continent, especially in
the United Kingdom.
The largest single contributor to the Fund's outstanding performance was Philips
Electronics of the Netherlands, whose share price more than doubled due to a
restructuring program that is expected to continue well into 1998. The
restructuring program is expected to reduce headcount and streamline operations,
allowing Philips to compete successfully in the global electronics industry.
In Latin America, the Brazilian telephone company Telebras remained one of our
larger holdings and better performers. Throughout the region, however, we have
seen stronger economies reflected in strong share price performance.
Additionally, many Latin American countries plan to redeem their high cost Brady
Bonds, which will lower their cost of capital and provide the support for
further economic improvement.
BARGAINS AVAILABLE IN SELECTED FAR EAST MARKETS. Our low exposure in Japan once
again proved beneficial to the Fund's performance. We will continue to spend our
energies looking for Japanese companies that match our value discipline. On the
back of the currency crisis in Thailand, which spilled over to neighboring
countries, we are starting to find value opportunities in the bear markets of
southeast Asia, Indonesia and the Philippines. We are also favorably disposed to
China and Hong Kong.
"Selective stock picking" are the operative words for the next several months,
as we find certain markets and sectors fully valued. We will continue to search
for value opportunities in selected markets and invest in high-quality companies
with solid fundamentals as they appear on our bargain list.
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 August 31, 1997,
compared to the EAFE Index and the LIFI.**
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+Foreign investing involves special risks, including currency risk, increased
volatility of foreign securities and differences in auditing and other
financial standards.
*Performance quoted represents past performance and is not indicative of 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.
**The EAFE Index and the LIFI are not adjusted to reflect sales charges,
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 all of the mutual funds
designated by Lipper Analytical Services, Inc. as falling into the respective
categories indicated.
+Morningstar proprietary ratings reflect historical risk-adjusted performance
as of 9/30/97. 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 T-bill returns. The fund received 4 stars for the three-year
period and was rated among 601 international equity funds, respectively. Ten
percent of funds in a rating universe receive 5 stars, the next 22.5% receive
4 stars, the next 35% receive 3 stars.
ANNUAL REPORT--COMMENTARY
[-]
MARSHALL SMALL-CAP GROWTH FUND
(FORMERLY, MARSHALL SMALL-CAP
STOCK FUND)
The Marshall Small-Cap Growth Fund (the "Fund") seeks capital appreciation by
investing in stocks issued by high-growth companies with market capitalizations
as high as $1 billion and as low as $100 million.
FUND OUTPERFORMED INDUSTRY AVERAGE.
For the 12 months ended August 31, 1997, the Fund provided a total return of
21.22%,*+ compared to the Lipper Small-Cap Funds Index (LSCFI)** return of
18.81%.
BROADCASTING AND ENERGY REWARD AS ANTICIPATED.
For the first six months of the fiscal year, small caps struggled and
underperformed the market. In the last quarter, however, the tide turned and our
aggressive growth strategy was rewarded. We ended the year ahead of the LSCFI
and gaining ground on the Russell 2000 Index (Russell 2000).**
Throughout this 12-month period we adhered to our philosophy of investing in
high quality growth companies. Over the long run, we believe stock prices track
earnings growth. Despite our underperformance in the first six months of the
year, companies owned in the Fund continued to meet or exceed our earnings
expectations and our patience was rewarded as the year came to a close.
Of particular note were small-cap names in the broadcasting industry. We
anticipated consolidations in response to new FCC regulations and found
considerable success with Westwood One, up 64%; and Heftel Broadcasting, the
largest owner of radio stations for the Spanish-speaking market, up 64%.
We continue to look for growth companies with strong fundamentals within the
technology sector. With dramatic changes occurring in the telecommunications
industry, we were rewarded through investments in Powerwave Technologies, up
93%; McLeod USA, up 69%; and Computer Products, up 63%.
EARLY SIGNS FAVORABLE FOR SMALL CAPS.
We continue to believe that oil field service companies are well-positioned to
benefit from increased energy demand, tight supply/demand characteristics in
their markets, and new drilling opportunities in the deep water Gulf of Mexico.
Investments in this sector include Newpark Resources, BJ Services and Eagle
Geophysical. We have also increased exposure in the retail sector (Party City,
Abercrombie & Fitch) in response to high employment, increased consumer spending
and other indications of a strengthening holiday season.
With small-caps trading at a fraction of their growth rates and large-caps
trading as much as three times their growth rates, we feel the Fund is poised to
capitalize on this valuation disparity. Small-caps may be capable of offering
steadier (albeit more risky) earnings and higher, more sustainable growth rates
than large caps. We are optimistic that we will see the market respond with
additional price appreciation for small-caps over the next several months. 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 Growth Fund
/s/ David J. Lettenberger
David J. Lettenberger
Co-Manager, Marshall Small-Cap Growth Fund
"Graphic representation 1F omitted. See Appendix."
Photo Appears Here
[_] MARSHALL SMALL-CAP GROWTH 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 August 31, 1997,
compared to the Russell 2000 and the LSCFI.**
- --------------------------------------------------------------------
* Performance quoted represents past performance and is not indicative of
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.
** The Russell 2000 and LSCFI are not adjusted to reflect sales charges,
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 all of the 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 Growth 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.
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 OUTPERFORMED INDEX.
For the 12 months ended August 31, 1997, the Fund provided a total return of
7.20%,* compared to 5.02% by the IBC/Donoghue's Taxable Money Fund Average
(DMFA),** 7.05% provided by the Merrill Lynch 1-3 Year U.S. Treasury Index** and
6.8% compared to the Lipper Short-Term Investment Grade Bond Fund Index.** Also,
as of 9/30/97, the Fund was awarded a four-(out of five) star rating for its
overall performance among 1,309 taxable bond funds by Morningstar.+
MARKET REACTION PROVED DIFFERENT.
Interest rates fell throughout this fiscal year. Last fall, the market was
predicting a strong economy with inflation to follow. The economy did prove to
be strong, but the inflation fears did not play out. As a result, rates fell
about 50 to 60 basis points across the curve, and bond prices rose.
The labor market is the strongest it has been in over 20 years and the Gross
Domestic Product is well over its published "speed limit." Yet, instead of
rising inflation, we are seeing it slip to very low levels. The market has
started to get more comfortable with a "this time it's different scenario" and
has taken the inflation premium out of bond prices.
We feel that the only thing that is different this time is the market's
perception. History typically repeats, and it would be a mistake to assume that
inflation will not become a factor again--particularly since there are no signs
of the economy slowing down. Record productivity and global expansion have
prolonged the economic cycle and made inflation less noticeable, but at some
point the bond market will build in another inflation premium.
STRATEGY CONTINUED TO EMPHASIZE YIELD.
Despite considerable volatility, interest rates were relatively unchanged over
the last six months. Going forward, as this range-bound market prevails, we will
continue to stress yield. Shorter durations will be replaced by slightly longer
and neutral durations. And, since we feel the short end of the curve is
mispricing the Federal Reserve Board outlook, the Fund will own a larger
percentage of cash equivalents, mortgages, asset-backed and short floating-rate
securities.
We feel these strategies will help us seek our objective of maximizing total
return while minimizing share price volatility.
Sincerely,
/s/ Mark D. Pittman
Mark D. Pittman
Manager, Marshall Short-Term Income Fund
"Graphic representation 1G omitted. See Appendix."
Photo Appears Here
[_] 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 August 31, 1997,
compared to LSTIBI and DMFA.**
- --------------------------------------------------------------------------------
* Performance quoted represents past performance and is not indicative of
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.
** The LSTIBI and DMFA are not adjusted to reflect sales charges, 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. Lipper figures represent the average of the
total returns reported by all of the 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 and DMFA have been adjusted to reflect reinvestment of dividends on
securities in the indices.
+Morningstar proprietary ratings reflect historical risk-adjusted performance
as of 9/30/97. 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 T-bill returns. The fund received 4 stars for
the three-year period and was rated among 1,309 taxable bond funds,
respectively. Ten percent of funds in a rating universe receive 5 stars, the
next 22.5% receive 4 stars, the next 35% receive 3 stars.
++Duration is a commonly used measure of the potential volatility of the price
of a debt security, or the aggregate market value of a portfolio of debt
securities, prior to maturity. Securities with longer durations generally
have more volatile prices than securities of comparable quality with shorter
durations.
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 three to ten years.
FUND MATCHED BENCHMARK, EXCEEDED PEER INDEX.
For the 12 months ended August 31, 1997, the Fund provided a total return of
8.42%,* compared to a return of 8.4% by the Lehman Brothers Intermediate
Government/Corporate Bond Index (LGCI)** and 7.3% by the Lipper Intermediate
Investment Grade Bond Funds Index (LIBF).**
STRATEGY EMPHASIZED CORPORATE QUALITY.
Throughout the second half of the fiscal year, the Fund concentrated on
upgrading corporate quality and reducing some of its corporate bond exposure due
to corporates' very narrow spreads. At this point, we no longer see any reason
to lower corporate exposure further; however, the narrowness of corporate
spreads means credit quality has converged. There is no benefit to taking on
additional risk. We will stick with the good performers thus far, including the
bank and brokerage sector and mortgage securities.
In addition to concentrating on credit quality, we will continue our strategy of
enhancing yield wherever possible and emphasizing neutral duration in response
to high market volatility. In the last six months, we saw interest rates moving
up and down frequently, only to end up where they started. As we go forward, we
feel the market will continue to be range bound, as investors ponder the future
of this prolonged strong economy.
MARKET IGNORES HISTORIC CYCLES.
Historically, a long period of economic growth--as indicated by low
unemployment, strong Gross Domestic Product and record consumer confidence--is
followed by a period of inflation. Because global expansion and productivity
have overshadowed inflation, the market is romancing the idea that "this time
it's different." In fact, the bond market is not pricing in any more Federal
Reserve Board (the "Fed") tightening.
History typically repeats itself and at some point, the Fed may have to raise
rates in response to this rapidly growing economy. In preparation for that
scenario, the Fund is taking a protective stance: maintaining interest rate
exposure that's in line with the index and attempting to maximize yield wherever
possible.
Sincerely,
/s/ Mark D. Pittman
Mark D. Pittman
Manager, Marshall Intermediate Bond Fund
"Graphic representation 1H omitted. See Appendix."
Photo Appears Here
[_] 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 23, 1992 to August 31, 1997,
compared to the LGCI and the LSIBF.**
- --------------------------------------------------------------------------------
*Performance quoted represents past performance and is not indicative of
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.
**The LGCI and the LSIBF are not adjusted to reflect sales charges, 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 all of the 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 LSIBF have been adjusted to reflect reinvestment of dividends on
securities in the indices.
+Duration is a commonly used measure of the potential volatility of the price
of a debt security, or the aggregate market value of a portfolio of debt
securities, prior to maturity. Securities with longer durations generally
have more volatile prices than securities of comparable quality with shorter
durations.
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.
FUND OUTPERFORMED PEER.
For the 12 months ended August 31, 1997, the Fund provided a total return of
9.35%,* compared to a return of 9.23% provided by the Lipper U.S. Mortgage Funds
Index (LUSMI).** In fact, the Marshall Government Income Fund earned a three-
(out of five) star rating among 1,309 taxable bond funds from Morningstar as of
9/30/97.+
A BANNER YEAR FOR MORTGAGES.
Mortgages had one of the best years ever, outperforming duration-equal
Treasuries by more than one full point. Overall, mortgages were one of the best
performing fixed-income sectors, outperforming most investment-grade bonds.
This exceptional performance is attributable to three factors: 1) mortgages
were more attractive on a yield basis, 2) the market was range-bound, and 3)
market volatility declined and remained at a very low level.
So strong was the mortgage market in the first six months of the year that we
began to add structured bonds that would do better in a declining market. As the
market demanded liquidity and yield over structure, that strategy-- which should
prove advantageous in the long term--caused us to underperform the LUSMI
slightly in the short term.
NEW ADDITION TO THE STRATEGY.
We continue to think bonds look attractive over the next 6 to 12 months, and we
still hold a steady duration of 4.1-4.3 years. To help boost performance, we
have increased our allocations to dollar rolls, which are commitments to buy
mortgage issues for a future settlement, in exchange for a price concession. As
long as Wall Street's love affair with mortgages continue, the financing rate of
dollar rolls should remain attractive and provide the opportunity to boost the
returns of the mortgages being rolled, by 50 to 75 basis points over the course
of a year. Key to this strategy will be buying and rolling the mortgage issues
most in demand to create CMOs.
Similar to the rewards of good stock selection, identifying specific, "vintage"
mortgages has generated significant returns over the last two years. It is an
opportunistic strategy that requires sound analytical techniques and the ability
to recognize distinctive "vintage" characteristics. Mortgages exhibiting
"burn-out" or lack of refinancing activity usually are due to homeowners with
small remaining mortgage balances or loans on homes in areas of the country with
weak or declining home values. These "vintage" mortgages offer higher yields
with steady prepayments, consistent with our goal of generating a high current
income with limited volatility.
Sincerely,
/s/ Lawrence J. Pavelec
Lawrence J. Pavelec
Manager, Marshall Government Income Fund
"Graphic representation 1I omitted. See Appendix."
Photo Appears Here
[_] 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 August 31, 1997,
compared to the LMI and the LUSMI.**
- --------------------------------------------------------------------------------
*Performance quoted represents past performance and is not indicative of
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.
**The LMI and LUSMI are not adjusted to reflect sales charges, 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
all of the 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.
+Morningstar proprietary ratings reflect historical risk-adjusted performance
as of 9/30/97. 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 T-bill returns. The fund received 3 stars for the
three-year period and was rated among 1,309 taxable bond funds, respectively.
Ten percent of funds in a rating universe receive 5 stars, the next 22.5%
receive 4 stars, the next 35% receive 3 stars.
++Duration is a commonly used measure of the potential volatility of the price
of a debt security, or the aggregate market value of a portfolio of debt
securities, prior to maturity. Securities with longer durations generally
have more volatile prices than securities of comparable quality with shorter
durations.
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.+
FUND PERFORMANCE MIRRORED BENCHMARK.
For the 12 months ended August 31, 1997, the Fund provided a total return of
6.67%,* compared to a return of 6.69% for the Lehman Brothers 5-Year General
Obligations Index (L5GO)** and 6.9% for the Lipper Intermediate Municipal Funds
Index (LMI).** This return represents more than just income, as overall
performance benefited from the drop in interest rates over the fiscal year.
BOND MARKET REACTS TO STRONG ECONOMY.
The key issue for the bond market continues to be the lack of inflationary
pressure despite robust economic growth. While the Federal Reserve Board (the
"Fed") debates the need for another round of tighter monetary policy, bond
investors remain ever vigilant to any indication of increasing inflation. The
future positioning of the Fund will depend on the outlook for Fed policy and its
subsequent effect on market yields.
The credit quality of municipal bonds has generally improved in lockstep with
continued economic growth. State and local tax receipts have generally exceeded
both the budgeted expectation and need of municipalities. Healthier financial
profiles convinced rating agencies to upgrade numerous issuer credit ratings,
action justified only if politicians prudently manage their largesse. In the
past, such windfalls have served to trigger new spending programs of marginal
benefit to taxpayers, rather than tax cuts or the build-up of "rainy day" funds.
The proliferation of bond insurance in the municipal market has caused a drop in
the supply of lower-rated credits, forcing higher yield buyers to scramble for
extra yield. This phenomenon tends to further narrow the already modest yield
pick-up available in lower-rated credits. We continue to focus on upgrading
quality while giving up minimal yield by swapping out of bonds that offer little
reward of further improvement. When the economy slows, this strategy should
serve the portfolio well.
DISCIPLINED STRATEGY MAY CONTINUE TO REWARD.
Recent tax legislation will not significantly affect municipal bonds or the
Fund's portfolio. Income tax rates remain the same, and the newly created Roth
IRA does not favor the top bracket taxpayers. If the lower capital gains rate
entices stock sales, the municipal market may benefit from some increased demand
via re-allocations. We remain cognizant of our goal to provide sufficient
after-tax return and seek to minimize any taxable distribution from the Fund.
The assets of the Marshall Intermediate Tax-Free Fund have grown much faster
than the average municipal bond fund over the last 12 months. The fund is
approximately 33% larger than a year ago. We will strive to meet the ongoing
needs of our investors by seeking the best values available in the marketplace.
We look forward to providing a competitive return on investment for all of our
shareholders.
Sincerely,
/s/ John D. Boritzke
John D. Boritzke
Manager, Marshall Intermediate Tax-Free Fund
"Graphic representation 1J omitted. See Appendix."
Photo Appears Here
+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 August 31, 1997,
compared to the L5GO and the LIMI.**
- --------------------------------------------------------------------------------
*Performance quoted represents past performance and is not indicative of
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.
**The L5GO and LIMI are not adjusted to reflect sales charges, 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 all of the 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.
++Duration is a commonly used measure of the potential volatility of the price
of a debt security, or the aggregate market value of a portfolio of debt
securities, prior to maturity. Securities with longer durations generally
have more volatile prices than securities of comparable quality with shorter
durations.
ANNUAL REPORT--COMMENTARY
[-]
MARSHALL MONEY MARKET FUND
The Marshall Money Market Fund (the "Fund") seeks 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 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 CONTINUED TO IMPROVE ON BENCHMARK.
For the 12 months ended August 31, 1997, the Fund provided a total return of
5.35%** for Class A Shares, compared to a return of 5.02% for the IBC/Donoghue's
Taxable Money Fund Average (Donoghue).*** Class B shares provided a total return
of 5.04%.**
DOLLAR COST AVERAGING PAID OFF.
Class A Shares continued to beat the IBC benchmark by about 31 basis points,
while Class B Shares mirrored the Donoghue average very closely. Overall, our
exposure to commercial paper continued to shrink as a percentage of the
portfolio throughout the fiscal year. More attractive investments can be found
in floating rate notes, funding agreements and master notes. The Fund has also
added paper in the one-year range as well, averaging in at rates of 5.95% and
above.
Average maturity increased slightly from 45 out to 50 days as the Fund
concentrated on master notes and floating rate notes.
THE FEDERAL RESERVE BOARD HOLDS REINS TIGHTLY.
As our fiscal year ended, the economy was characterized by continued low
inflation, low unemployment and good corporate earnings. Home sales and consumer
confidence were at record levels. It all begs the question; how much growth can
we incur without prompting inflation?
Obviously, this cozy scenario cannot occur indefinitely. While the economy
should stay strong for the short-term, the long-term position depends on what
the Federal Reserve Board (the "Fed") does. Ultimately, short-term yields will
go wherever Fed Chairman Alan Greenspan wants to take them.
As this scenario plays out, we will continue to maintain our exposure to only
the highest quality corporate credits and actively manage the average maturity
in an attempt to maximize shareholder return.
Sincerely,
/s/ Richard M. Rokus
Richard M. Rokus Manager,
Marshall Money Market Fund
Photo Appears Here
"Graphic representation K omitted. See Appendix."
*Although money market funds seek to maintain a stable net asset value of $1
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.
+The 7-day net annualized yield is based on the average net income per share
for the 7 days ended on the date of calculation and the offering price on
that date. The 7-day effective yield is based on the 7-day net yield and is
then compounded and annualized.
August 31, 1997
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
EQUITY INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------------------------
Shares Description Value
------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 91.0%
CAPITAL GOODS -- 4.9%
AEROSPACE AND DEFENSE
26,500 Rockwell International Corp. $1,590,000
----------
ELECTRONICS
18,900 AMP, Inc. 945,000
21,000 General Signal Corp. 910,875
----------
Total 1,855,875
----------
OFFICE EQUIPMENT
96,800 Xerox Corp. 7,308,400
----------
OTHER CAPITAL GOODS
47,000 Browning-Ferris Industries, Inc. 1,642,063
47,100 Tenneco, Inc. 2,287,294
50,900 Waste Management, Inc. 1,628,800
----------
Total 5,558,157
----------
Total Capital Goods 16,312,432
----------
CONSUMER DURABLES -- 6.3%
APPLIANCE
93,300 Maytag Corp. 2,559,919
31,500 Whirlpool Corp. 1,803,375
----------
Total 4,363,294
----------
AUTOMOTIVE & RELATED
124,000 Chrysler Corp. 4,355,500
44,900 Echlin, Inc. 1,664,106
43,400 Ford Motor Co. 1,866,200
57,800 General Motors Corp. 3,626,950
----------
Total 11,512,756
----------
HOUSEHOLD PRODUCT/WARES
24,700 Fortune Brands, Inc. 849,063
70,800 Heinz (H.J.) Co. 2,947,050
37,100 Tupperware Corp. 1,245,169
----------
Total 5,041,282
----------
Total Consumer Durables 20,917,332
----------
CONSUMER NON-DURABLES -- 15.7%
COSMETICS/TOILETRIES
80,000 Dial Corp. 1,350,000
----------
HEALTH CARE
26,000 Abbott Laboratories 1,558,375
70,200 American Home Products Corp. 5,054,400
19,100 Bausch & Lomb, Inc. 784,294
62,300 Baxter International, Inc. 3,313,581
81,000 Bristol-Myers Squibb Co. 6,156,000
40,000 Glaxo Wellcome PLC , ADR 1,595,000
53,300 Merck & Co., Inc. 4,893,606
----------
Total 23,355,256
----------
PRINTING & PUBLISHING
22,000 McGraw-Hill Cos., Inc. 1,348,875
----------
RETAIL
74,000 Limited, Inc. 1,683,500
16,300 May Department Stores Co. 877,144
51,200 Penney JC, Inc. 3,072,000
----------
Total 5,632,644
----------
SERVICES
21,200 Ryder Systems, Inc. 756,575
----------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------
Shares Description Value
--------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
CONSUMER NON-DURABLES (continued)
TOBACCO
204,600 Philip Morris Cos., Inc. $8,925,675
150,000 RJR Nabisco Holdings 5,221,875
192,500 UST, Inc. 5,558,438
----------
Total 19,705,988
----------
Total Consumer Non-Durables 52,149,338
----------
ENERGY -- 16.2%
DOMESTIC & INTERNATIONAL OIL
41,400 Amoco Corp. 3,914,888
29,200 Atlantic Richfield Co. 2,190,000
103,700 Exxon Corp. 6,345,144
32,000 Kerr-McGee Corp. 1,988,000
77,800 Mobil Corp. 5,659,950
184,800 Occidental Petroleum Corp. 4,331,250
184,400 Royal Dutch Petroleum Co., ADR 9,358,300
48,900 Sun, Inc. 1,900,988
44,100 Texaco, Inc. 5,082,525
120,000 Unocal Corp. 4,687,500
139,300 USX Corp. 4,535,956
----------
Total 49,994,501
----------
OIL & GAS PRODUCTS
90,200 Dresser Industries, Inc. 3,765,850
----------
Total Energy 53,760,351
----------
FINANCIAL -- 27.6%
BANKS
69,100 Ahmanson (H.F.) & Co. 3,506,825
66,200 Banc One Corp. 3,549,975
99,300 Bank of New York Co., Inc. 4,431,263
78,800 Bankamerica Corp. 5,186,025
40,832 Chase Manhattan Corp. 4,540,008
35,400 First American Corp. 1,495,650
75,800 First Chicago NBD Corp. 5,438,650
62,300 First Commerce Corp. 3,325,263
37,800 Fleet Financial Group, Inc. 2,435,738
21,300 KeyCorp 1,291,313
48,400 Mellon Bank Corp. 2,329,250
75,100 Mercantile Bancorporation, Inc. 5,177,206
59,800 NationsBank Corp. 3,550,625
30,500 Summit Bancorp 1,810,938
29,700 Washington Mutual, Inc. 1,778,288
12,900 Wells Fargo & Co. 3,279,825
----------
Total 53,126,842
----------
INSURANCE
23,900 Cigna Corp. 4,382,663
36,200 Hartford Financial Services Group, Inc. 2,886,950
20,000 Safeco Corp. 982,500
----------
Total 8,252,113
----------
OTHER FINANCIAL
65,800 American General Hospitality Corp. 1,698,463
20,900 American Health Properties, Inc. 514,663
56,900 Apartment Investment & Management Co., Class A 1,845,694
51,500 Arden Realty Group, Inc. 1,487,063
68,500 Capstone Capital Trust, Inc. 1,626,875
8,000 Duke Realty Investments, Inc. 167,500
20,000 Equity Residential Properties Trust 973,750
60,000 Excel Realty Trust, Inc. 1,777,500
56,700 First Industrial Realty Trust 1,750,613
</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)
16,200 Franchise Finance Corporation of America $406,013
71,500 Glenborough Realty Trust, Inc. 1,845,594
64,600 Health & Rehabilitation Properties, Inc. 1,170,875
58,700 Healthcare Realty Trust, Inc. 1,669,281
118,600 IRT Property Co. 1,438,025
118,000 Innkeepers USA Trust 1,799,500
65,000 Liberty Property Trust 1,669,688
42,300 Meditrust, REIT 1,689,356
65,800 Prentiss Properties Trust 1,817,725
55,300 Public Storage, Inc. 1,551,856
53,100 Simon DeBartolo Group, Inc. 1,682,606
45,500 Trinet Corporate Realty Trust, Inc. 1,618,094
----------
Total 30,200,734
----------
Total Financial 91,579,689
----------
RAW MATERIALS/INTERMEDIATE GOODS -- 7.0%
CHEMICALS
17,400 Dow Chemical Co. 1,539,900
26,700 Eastman Chemical Co. 1,596,994
79,500 Goodrich B.F. Co. 3,348,938
27,500 Hercules, Inc. 1,421,406
29,000 Imperial Chemical Industries, PLC, ADR 1,903,125
24,100 Olin Corp. 1,072,450
----------
Total 10,882,813
----------
CONTAINERS & GLASS
32,500 Crown Cork & Seal Co., Inc. 1,653,438
----------
METALS
39,300 AK Steel Holding Corp. 1,778,325
18,500 USX-U.S. Steel Group, Inc. 649,813
----------
Total 2,428,138
----------
PAPERS
41,600 Kimberly-Clark Corp. 1,973,400
25,500 Mead Corp. 1,808,906
79,400 Weyerhaeuser Co. 4,585,350
----------
Total 8,367,656
----------
Total Raw Materials/Intermediate Goods 23,332,045
----------
TRANSPORTATION -- 0.4%
RAILROAD
19,600 Union Pacific Corp. 1,272,775
----------
UTILITIES -- 12.9%
ELECTRIC
87,000 Allegheny Power Systems, Inc. 2,528,438
29,100 Carolina Power & Light Co. 982,125
42,800 Duke Power Co. 2,073,125
38,100 Entergy Corp. 945,356
64,200 FPL Group, Inc. 2,985,300
42,400 Houston Industries, Inc. 858,600
60,200 Nipsco Industries, Inc. 2,456,913
100,800 Pinnacle West Capital Corp. 3,257,100
45,800 Texas Utilities Co. 1,597,275
----------
Total 17,684,232
----------
GAS DISTRIBUTION
80,000 Consolidated Natural Gas Co. 4,725,000
71,600 Enron Corp. 2,761,075
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Shares or
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
UTILITIES (continued)
49,800 MCN Corp. $1,528,238
24,000 Questar Corp. 960,000
82,100 Sonat, Inc. 4,089,606
23,000 Wicor, Inc. 909,938
------------
Total 14,973,857
------------
TELECOMMUNICATIONS
25,700 Ameritech Corp. 1,611,069
74,200 GTE Corp. 3,306,538
61,780 SBC Communications, Inc. 3,359,288
37,800 Sprint Corp. 1,776,600
------------
Total 10,053,495
------------
Total Utilities 42,711,584
------------
TOTAL COMMON STOCKS (identified cost $243,078,946) 302,035,546
------------
(B)REPURCHASE AGREEMENT -- 8.7%
$28,777,000 Credit Suisse First Boston, 5.53%, dated
8/29/1997, due 9/2/1997 (at amortized cost) 28,777,000
------------
TOTAL INVESTMENTS (identified cost $271,855,946) $330,812,546
============
- -------------------------------------------------------------------------------
</TABLE>
LARGE-CAP GROWTH & INCOME FUND
(FORMERLY, MARSHALL STOCK FUND)
<TABLE>
-----------------------------------------------------------
<CAPTION>
Shares Description Value
-----------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 97.7%
BASIC INDUSTRIES -- 7.7%
CHEMICALS
70,900 Air Products & Chemicals, Inc. $5,782,781
----------
INDUSTRIAL SERVICES
153,700 Waste Management, Inc. 4,918,400
----------
METALS
54,300 Aluminum Co. of America 4,466,175
----------
PAPER
117,000 Kimberly-Clark Corp. 5,550,187
----------
Total Basic Industries 20,717,543
----------
CAPITAL GOODS -- 19.2%
AEROSPACE AND RELATED
108,200 Boeing Co. 5,890,138
63,900 (d)General Dynamics Corp. 5,088,037
----------
Total 10,978,175
----------
COMPUTER SERVICES
99,100 First Data Corp. 4,069,294
72,400 International Business Machines Corp. 7,303,350
46,800 (c)Microsoft Corp. 6,186,375
115,000 (c)(d)Sun Microsystems, Inc. 5,520,000
----------
Total 23,079,019
----------
ELECTRICAL EQUIPMENT
69,200 Emerson Electric Co. 3,784,375
124,800 General Electric Co. 7,800,000
----------
Total 11,584,375
----------
</TABLE>
(See Notes to Portfolios of Investments)
August 31, 1997
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
LARGE-CAP GROWTH & INCOME FUND
(FORMERLY, MARSHALL STOCK FUND) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------------------------------------
Shares Description Value
-------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
CAPITAL GOODS (continued)
ELECTRONICS
38,800 Intel Corp. $3,574,450
----------
TECHNOLOGY SERVICES
50,000 Millipore Corp. 2,475,000
----------
Total Capital Goods 51,691,019
----------
CONSUMER DURABLES -- 1.3%
BUILDING & FOREST PRODUCTS
38,500 Georgia-Pacific Corp. 3,513,125
----------
CONSUMER NON-DURABLES -- 34.5%
BEVERAGES & FOODS
105,400 Anheuser-Busch Cos., Inc. 4,492,675
116,500 PepsiCo, Inc. 4,194,000
85,200 Quaker Oats Co. 4,004,400
21,900 Unilever N.V., ADR 4,407,375
----------
Total 17,098,450
----------
CONSUMER CYCLICAL
50,000 Nike, Inc., Class B 2,668,750
----------
DIVERSIFIED MANUFACTURING
150,000 Whitman Corp. 3,675,000
----------
ENTERTAINMENT
25,600 Disney (Walt) Co. 1,966,400
----------
HEALTH CARE
80,200 Abbott Laboratories 4,806,987
100,000 Columbia/HCA Healthcare Corp. 3,156,250
52,500 Merck & Co., Inc. 4,820,156
105,000 Schering Plough Corp. 5,040,000
----------
Total 17,823,393
----------
MEDIA
61,300 Gannett Co., Inc. 5,972,919
97,300 New York Times Co., Class A 4,597,425
79,300 (d)Time Warner, Inc. 4,083,950
----------
Total 14,654,294
----------
MEDICAL SUPPLIES
75,000 Johnson & Johnson 4,251,562
106,200 Smithkline Beecham Corp., ADR 4,599,787
----------
Total 8,851,349
----------
OTHER CONSUMER NON-DURABLES
30,000 Minnesota Mining & Manufacturing Co. 2,696,250
----------
RETAIL
146,500 (c)(d)Federated Department Stores, Inc. 6,153,000
70,700 (c)Kohl's Corp. 4,873,881
188,200 Walgreen Co. 5,069,637
----------
Total 16,096,518
----------
TOBACCO
171,800 Philip Morris Cos., Inc. 7,494,775
----------
Total Consumer Non-Durables 93,025,179
----------
ENERGY -- 7.9%
INTERNATIONAL OIL & GAS
37,500 Amerada-Hess Corp. 2,179,687
113,000 Exxon Corp. 6,914,187
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Shares or
Principal
Amount Description Value
----------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
ENERGY (continued)
143,000 Occidental Petroleum Corp. $3,351,563
90,800 (d)Royal Dutch Petroleum Co., ADR 4,608,100
36,900 Texaco, Inc. 4,252,725
-----------
Total Energy 21,306,262
-----------
FINANCIAL - 17.8%
BANKS
112,800 Bank of New York Co., Inc. 5,033,700
95,000 BankAmerica Corp. 6,252,188
43,700 Chase Manhattan Corp. 4,858,894
75,000 Mellon Bank Corp. 3,609,375
-----------
Total 19,754,157
-----------
INSURANCE
50,850 American International Group, Inc. 4,798,969
58,100 Hartford Financial Services Group, Inc. 4,633,475
89,200 Provident Cos., Inc. 5,809,150
-----------
Total 15,241,594
-----------
OTHER FINANCIAL
48,800 American Express Co. 3,794,200
142,800 Equifax, Inc. 4,203,675
150,200 Federal Home Loan Mortgage Corp. 4,890,888
-----------
Total 12,888,763
-----------
Total Financial 47,884,514
-----------
TRANSPORTATION -- 0.9%
RAILROAD
38,600 Union Pacific Corp. 2,506,588
-----------
UTILITIES -- 8.4%
ELECTRIC
39,100 Duke Energy Co. 1,893,906
-----------
GAS DISTRIBUTION
37,300 Consolidated Natural Gas Co. 2,203,031
-----------
TELECOMMUNICATIONS
56,500 Ameritech Corp. 3,541,844
70,500 (c)Ascend Communications 2,991,844
85,900 GTE Corp. 3,827,919
63,300 Motorola, Inc. 4,644,638
65,900 SBC Communications, Inc. 3,583,313
-----------
Total 18,589,558
-----------
Total Utilities 22,686,495
-----------
TOTAL COMMON STOCKS (identified cost $191,580,330) 263,330,725
-----------
(E)COLLATERAL FOR SECURITIES LENDING -- 6.5% $497,200 Dreyfus Cash
Management Plus (shares at net asset
value) 497,200
10,000,000 Credit Suisse First Boston, Repurchase Agreement,
5.808%, 9/2/1997 10,000,000
3,000,000 Lehman Brothers Corp., Repurchase Agreement,
5.650, 9/2/1997 3,000,000
</TABLE>
(See Notes to Portfolios of Investments)
[_] MARSHALL FUNDS
- --------------------------------------------------------------------------------
LARGE-CAP GROWTH & INCOME FUND
(FORMERLY, MARSHALL STOCK FUND) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
(E)COLLATERAL FOR SECURITIES LENDING (continued)
$4,000,000 Merrill Lynch Corp., Repurchase Agreement, 5.670,
9/2/1997 $4,000,000
------------
TOTAL COLLATERAL FOR SECURITIES LENDING (at
amortized cost) 17,497,200
------------
(G)U.S. TREASURY BILL -- 0.1%
185,000 9/25/1997 (identified cost $184,388) 184,556
------------
(B)REPURCHASE AGREEMENT -- 2.1% 5,740,000 Credit Suisse First
Boston, 5.53%, dated 8/29/1997,
due 9/2/1997 (at amortized cost) 5,740,000
------------
TOTAL INVESTMENTS (identified cost $215,001,918) $286,752,481
============
</TABLE>
- -------------------------------------------------------------------------------
MID-CAP VALUE FUND
(FORMERLY, MARSHALL VALUE EQUITY FUND)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------------------------------
Shares Description Value
-------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 96.2%
CAPITAL GOODS -- 8.0%
COMPUTERS
200,000 (c)Silicon Graphics, Inc. $5,487,500
----------
OTHER CAPITAL GOODS
84,400 (c)Acuson Corp. 2,273,525
123,500 ITT Industries, Inc. 3,890,250
----------
Total 6,163,775
----------
Total Capital Goods 11,651,275
----------
CONSUMER DURABLES -- 8.4%
AUTOMOTIVE & RELATED
209,000 Stewart & Stevenson Services 5,094,375
----------
HOUSEHOLD PRODUCT/WARES
97,500 (d)Rubbermaid, Inc. 2,437,500
91,600 (d)Singer Co., N.V. 1,723,225
34,600 Sunbeam Corp. 1,522,400
42,800 Tupperware Corp. 1,436,475
----------
Total 7,119,600
----------
Total Consumer Durables 12,213,975
----------
CONSUMER NON-DURABLES -- 27.4%
BEVERAGES & FOODS
408,000 Darden Restaurants, Inc. 4,105,500
86,200 Dean Foods Co. 3,825,125
58,200 International Multifoods Corp. 1,564,125
----------
Total 9,494,750
----------
CONSUMER STAPLES
80,000 American Greetings Corp., Class A 2,780,000
73,400 Houghton Mifflin Co. 2,546,062
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------
Shares Description Value
---------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
CONSUMER NON-DURABLES (continued)
37,900 (c)(d)Scholastic Corp. $1,298,075
----------
Total 6,624,137
----------
COSMETICS/TOILETRIES
136,000 Dial Corp. 2,295,000
----------
PHARMACEUTICALS & HEALTH CARE
151,600 (c)Perrigo Co. 2,169,775
71,200 (c)Tenet Healthcare Corp. 1,940,200
----------
Total 4,109,975
----------
RETAIL
52,500 Dillards, Inc., Class A 2,100,000
75,000 (c)(d)Federated Department Stores, Inc. 3,150,000
147,778 Limited, Inc. 3,361,950
----------
Total 8,611,950
----------
SERVICES
191,500 Viad Corp. 3,482,906
----------
TOBACCO
203,950 (c)Imperial Tobacco Group PLC, ADR 2,523,881
88,000 UST, Inc. 2,541,000
----------
Total 5,064,881
----------
Total Consumer Non-Durables 39,683,599
----------
ENERGY -- 5.1%
OIL & GAS PRODUCTS
41,500 (c)(d)Ente Nazionale Idrocarburi, ADR 2,303,250
43,400 Mobil Corp. 3,157,350
60,320 USX Marathon Corp. 1,964,170
----------
Total Energy 7,424,770
----------
FINANCIAL -- 6.3%
INSURANCE
63,000 Everest Reinsurance Holdings, Inc. 2,279,812
98,500 IPC Holdings Ltd. 2,893,438
37,000 Torchmark Corp. 1,394,438
----------
Total 6,567,688
----------
OTHER FINANCIAL
116,750 Trizec Hahn Corp. 2,634,172
----------
Total Financial 9,201,860
----------
RAW MATERIALS/INTERMEDIATE GOODS -- 23.5%
CHEMICALS
335,600 Calgon Carbon Corp. 4,614,500
43,975 Eastman Chemical Co. 2,630,255
70,250 (d)Imperial Chemical Industries, PLC, ADR 4,610,156
97,000 Lawter International, Inc. 1,273,125
206,800 Wellman, Inc. 4,704,700
----------
Total 17,832,736
----------
INTERMEDIATE GOODS
73,000 Canadian Pacific Ltd. 2,130,687
91,975 Hanson PLC, ADR 2,207,400
----------
Total 4,338,087
----------
METALS
123,200 LTV Corp. 1,601,600
----------
</TABLE>
(See Notes to Portfolios of Investments)
August 31, 1997
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
MID-CAP VALUE FUND
(FORMERLY, MARSHALL 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. $2,662,875
63,659 Waste Management, Inc. 2,037,088
-----------
Total 4,699,963
-----------
PAPER & RELATED PRODUCTS
18,000 Champion International Corp. 1,065,375
42,000 (d)Fort James Corp. 1,764,000
56,000 Louisiana-Pacific Corp. 1,239,000
20,900 Mead Corp. 1,482,594
-----------
Total 5,550,969
-----------
Total Raw Materials/Intermediate Goods 34,023,355
-----------
TELECOMMUNICATIONS -- 7.4%
SERVICES
200,000 (c)(d)Tele-Communications, Inc., Class A 3,500,000
82,000 Telephone and Data System, Inc. 3,239,000
200,000 (c)(d)U.S. West Media Group 4,000,000
-----------
Total Telecommunications 10,739,000
-----------
TRANSPORTATION -- 4.7%
OTHER TRANSPORTATION
165,250 Alexander and Baldwin, Inc. 4,461,750
74,100 APL, Ltd. 2,371,200
-----------
Total Transportation 6,832,950
-----------
UTILITIES -- 5.4%
ELECTRIC
109,200 Entergy Corp. 2,709,525
85,700 Texas Utilities Co. 2,988,788
-----------
Total 5,698,313
-----------
ELECTRIC DISTRIBUTION
51,975 (c)Energy Group PLC, ADR 2,101,739
-----------
Total Utilities 7,800,052
-----------
TOTAL COMMON STOCKS (identified cost $118,560,267) 139,570,836
-----------
(E)COLLATERAL FOR SECURITIES LENDING -- 16.0% $175,150 Dreyfus Cash
Management Plus (shares at net asset
value) 175,150
10,000,000 (b)Credit Suisse First Boston Repurchase
Agreement, 5.808%, 9/2/1997 10,000,000
6,000,000 (b)Merrill Lynch Corp., Repurchase Agreement,
5.67%, 9/2/1997 6,000,000
2,000,000 (f)J.P. Morgan Securities, Master Note, 5.635%,
9/2/97 2,000,000
5,000,000 (b)Lehman Brothers Corp., Repurchase Agreement,
5.65%, 9/2/1997 5,000,000
-----------
TOTAL COLLATERAL FOR SECURITIES LENDING (at
amortized cost) 23,175,150
-----------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
Principal
Amount Description Value
-----------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
U.S. TREASURY SECURITIES -- 0.1%
$100,000 United States Treasury Bill, 10/30/1997 (identified
cost $99,141) $99,222
------------
(B)REPURCHASE AGREEMENT -- 1.9% 2,823,000 Credit Suisse First
Boston, 5.53%, dated 8/29/1997,
due 9/2/1997 (at amortized cost) 2,823,000
------------
TOTAL INVESTMENTS (identified cost $144,657,558) $165,668,208
============
</TABLE>
- ------------------------------------------------------------------------------
MID-CAP GROWTH FUND
(FORMERLY, MARSHALL MID-CAP STOCK FUND)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------
Shares Description Value
----------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 98.2%
CAPITAL GOODS -- 5.3%
ELECTRICAL EQUIPMENT
100,000 (c)Analog Devices, Inc. $3,312,500
60,000 (c)LSI Logic Corp. 1,931,250
50,000 Linear Technology Corp. 3,278,125
40,000 (c)Parametric Technology Corp. 1,857,500
----------
Total Capital Goods 10,379,375
----------
CONSUMER DURABLES -- 1.8%
AUTOMOTIVE AND RELATED
65,000 Harley-Davidson, Inc. 3,518,125
----------
CONSUMER NON-DURABLES -- 69.3%
BROADCASTING
65,000 (c)Clear Channel
Communications, Inc. 4,415,938
40,000 (c)Emmis Broadcasting Corp.,
Class A 1,970,000
70,000 (c)(d)Jacor Communications, Inc., Class A 3,080,000
80,000 (c)Westwood One, Inc. 2,250,000
----------
Total 11,715,938
----------
COMMERCIAL SERVICES
100,000 (c)MSC Industrial Direct Co. 4,062,500
100,000 (c)Steiner Leisure Ltd. 3,050,000
45,000 (c)(d)USA Waste Services, Inc. 1,890,000
100,000 (c)Universal Outdoor Holdings, Inc. 3,425,000
----------
Total 12,427,500
----------
COMPUTER SERVICES
30,000 (c)America Online, Inc. 1,935,000
75,000 (c)BMC Software, Inc. 4,696,875
60,000 (c)Cambridge Technology
Partners, Inc. 1,935,000
85,000 (c)Harbinger Corp. 2,975,000
50,000 (c)Iomega Corp. 1,281,250
70,000 (c)SunGuard Data Systems, Inc. 3,648,750
100,000 (c)Transaction Systems Architects, Inc., Class A 3,462,500
----------
Total 19,934,375
----------
</TABLE>
(See Notes to Portfolios of Investments)
[_] MARSHALL FUNDS
- --------------------------------------------------------------------------------
MID-CAP GROWTH FUND
(FORMERLY, MARSHALL MID-CAP STOCK FUND) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------
Shares Description Value
----------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
CONSUMER NON-DURABLES (continued)
DRUGS
75,000 (c)Alza Corp. $2,175,000
125,000 (c)North American Vaccine, Inc. 2,562,500
90,000 (c)Parexel International Corp. 3,183,750
-----------
Total 7,921,250
-----------
ENERGY
80,000 (c)(d)ENSCO International, Inc. 5,080,000
70,000 (c)EVI, Inc. 3,679,375
40,000 (c)Falcon Drilling Co., Inc. 1,260,000
-----------
Total 10,019,375
-----------
HEALTH CARE
125,000 (c)Health Management Association, Class A 3,695,313
125,000 (d)Omnicare, Inc. 3,617,188
50,000 (c)Oxford Health Plans, Inc. 3,656,250
-----------
Total 10,968,751
-----------
LEISURE AND RECREATION
75,000 Hilton Hotels Corp. 2,301,563
100,000 Mirage Resorts, Inc. 2,681,250
100,000 (c)Regal Cinemas, Inc. 2,837,500
100,000 (d)Royal Caribbean Cruises, Ltd. 4,087,500
-----------
Total 11,907,813
-----------
MANUFACTURING
70,000 (c)(d)CIENA Corp. 3,342,500
70,000 (c)KLA-Tencor Corp. 4,961,250
75,000 (c)(d)Novel Denim Holdings Ltd. 1,640,625
50,000 Perkin-Elmer Corp. 3,700,000
-----------
Total 13,644,375
-----------
MEDICAL SUPPLIES
30,000 (c)Centocor, Inc. 1,346,250
75,000 (c)(d)Henry Schein, Inc. 2,671,875
100,000 (c)Sofamor Danek Group, Inc. 4,793,750
-----------
Total 8,811,875
-----------
RESTAURANTS
75,000 (c)Landrys Seafood
Restaurants, Inc. 1,800,000
-----------
RETAIL
100,000 (c)(d)Abercrombie & Fitch Co., Class A 2,400,000
125,000 (c)(d)Bed Bath & Beyond, Inc. 3,875,000
100,000 (d)Callaway Golf Co. 3,368,750
100,000 (c)Kohl's Corp. 6,893,750
-----------
Total 16,537,500
-----------
SERVICES
100,000 (c)AccuStaff, Inc. 2,656,250
100,000 (c)(d)Apollo Group, Inc.,
Class A 3,568,750
30,000 (c)Staff Leasing, Inc. 592,500
100,000 Stewart Enterprises, Inc.,
Class A 3,950,000
-----------
Total 10,767,500
-----------
Total Consumer Non-Durables 136,456,252
-----------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Shares or
Principal
Amount Description Value
----------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
FINANCIAL -- 11.7%
65,000 First of America Bank Corp. $3,347,500
75,000 Firstar Corp. 2,526,563
60,000 Lehman Brothers Holdings,
Inc. 2,632,500
80,000 MGIC Investment Corp. 4,025,000
70,000 Mercantile Bancorporation,
Inc. 4,825,625
75,000 (d)Redwood Trust, Inc. 2,878,125
65,000 (d)Schwab (Charles) Corp. 2,758,437
-----------
Total 22,993,750
-----------
INSURANCE -- 2.1%
75,000 SunAmerica, Inc. 4,040,624
-----------
TELECOMMUNICATIONS -- 8.0%
70,000 (c)ADC Telecommunications, Inc. 2,598,750
60,000 (c)NEXTEL Communications, Inc. 1,503,750
50,000 (c)Newbridge Networks
Corp. 2,275,000
50,000 (c)Pairgain Technologies,
Inc. 1,287,500
65,000 (c)Qwest Communications International, Inc. 2,648,750
90,000 (c)Tellabs, Inc. 5,371,874
-----------
Total 15,685,624
-----------
TOTAL COMMON STOCKS (identified cost $163,497,368) 193,073,750
-----------
(G)U.S. TREASURY BILL -- 0.1%
$125,000 9/25/1997 (identified cost $124,587) 124,700
-----------
(E)COLLATERAL FOR SECURITIES LENDING -- 15.0%
728,100 Dreyfus Cash Management
Plus (shares at new asset value) 728,100
6,750,000 Federal Signal Corp., Master Note, 5.655%, 9/2/1997 6,750,000
6,000,000 Credit Suisse/First Boston Corporate Repurchase
Agreement, 5.81%, dated 8/29/1997, due 9/2/1997 6,000,000
7,000,000 General Motors Acceptance Corp., Master Note,
5.59%, 9/2/1997 7,000,000
3,000,000 J.P. Morgan Securities,
Master Note, 5.635%, 9/2/1997 3,000,000
3,000,000 Lehman Brothers Corp. Repurchase Agreement, 5.65%,
dated 8/29/1997, due 9/2/1997 3,000,000
3,000,000 Republic New York Acceptance Corp., Master Note,
5.725%, 9/2/1997 3,000,000
-----------
TOTAL COLLATERAL FOR SECURITIES LENDING (at
amortized cost) 29,478,100
-----------
</TABLE>
(See Notes to Portfolios of Investments)
August 31, 1997
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
MID-CAP GROWTH FUND
(FORMERLY, MARSHALL MID-CAP STOCK FUND) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
(B)REPURCHASE AGREEMENTS -- 2.2%
$4,401,000 Credit Suisse First Boston, 5.53%, dated 8/29/1997,
due 9/2/1997 (at amortized cost) $4,401,000
------------
TOTAL INVESTMENTS (identified cost $197,501,055) $227,077,550
============
</TABLE>
- --------------------------------------------------------------------------------
INTERNATIONAL STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------------------------------------------
Shares Description Value
---------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 78.2%
ARGENTINA -- 3.1%
OIL -- FOREIGN -- 2.1%
145,500 YPF Sociedad Anonima, ADR $4,737,844
----------
TELEPHONE -- 1.0%
65,750 (c)(d)(h)Telefonica de Argentina S.A., ADR 2,280,703
----------
Total Argentina 7,018,547
----------
AUSTRALIA -- 2.9%
AIR TRAVEL -- 0.5%
50,500 (c)(h)Qantas Airways, ADR 1,105,258
----------
BROADCASTING -- 0.1%
64,235 (a)News Corp., Ltd. 289,016
----------
CONSTRUCTION EQUIPMENT -- 0.7%
481,200 Pioneer International Ltd. 1,617,109
----------
INDUSTRIAL -- 0.1%
81,390 BTR PLC, Class A 271,726
----------
INSURANCE -- 1.2%
915,000 Gio Australia Holdings, Ltd. 2,685,525
----------
RETAIL TRADE -- 0.3%
489,500 David Jones Ltd 711,158
----------
Total Australia 6,679,792
----------
AUSTRIA -- 1.4%
ELECTRIC UTILITIES -- 0.5%
9,900 Evn Energie-Versorgung Niederoesterreich AG 1,181,961
----------
INDUSTRIAL MACHINERY -- 0.9%
11,000 VA Technologie AG 2,015,012
----------
Total Austria 3,196,973
----------
BELGIUM -- 1.1%
CHEMICALS -- 0.5%
22,000 Solvay S.A. 1,227,945
----------
NON-FERROUS METALS -- 0.6%
15,900 (c)NV Union Miniere S.A. 1,316,271
----------
Total Belgium 2,544,216
----------
BERMUDA -- 2.0%
HOLDING COS. -- DIVERSIFIED-- 0.5%
170,000 Jardine Matheson Holdings Ltd. 1,190,000
----------
INSURANCE -- 1.5%
83,000 PartnerRe Ltd. 3,299,250
----------
Total Bermuda 4,489,250
----------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Shares Description Value
------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
BRAZIL -- 3.3%
BROADCASTING -- 1.8%
34,150 Telecomunicacoes Brasileiras S.A., ADR $4,029,700
----------
MINING -- 0.9%
86,100 (d)Companhia Vale Do Rio Doce, ADR 2,034,233
----------
RETAIL TRADE -- 0.6%
105,700 (c)Lojas Americanas S.A., ADR 1,386,086
----------
Total Brazil 7,450,019
----------
CANADA -- 2.5%
BANKING -- 1.4%
120,000 Canadian Imperial Bank of Commerce 3,107,509
----------
ELECTRONICS -- 0.7%
37,000 (c)Newbridge Networks Corp. 1,685,755
----------
INSURANCE -- 0.4%
37,200 London Insurance Group, Inc. 900,356
----------
Total Canada 5,693,620
----------
CHINA -- 0.5%
ELECTRIC UTILITIES -- 0.5%
94,100 Shandong Huaneng Power Company Ltd., Class N, ADR 1,123,319
----------
CZECHOSLOVOKIA -- 0.5%
BANKING -- 0.1%
4,000 (c)(h)Komercni Banka A.S., GDR 221,119
----------
ELECTRIC UTILITIES -- 0.4%
28,315 (c)CEZ A.S. 880,242
----------
Total Czechoslovokia 1,101,361
----------
DENMARK -- 1.1%
TELEPHONE -- 1.1%
47,000 Tele Denmark A.S., Class B 2,461,449
----------
FINLAND -- 1.4%
CONGLOMERATES -- 0.4%
47,500 (c)Amer Group, Ltd., Class A 917,022
----------
FINANCIAL SERVICES -- 0.7%
425,000 (c)Merita Ltd., Class A 1,664,430
----------
PAPER -- 0.3%
73,500 Metsa-Serla Oy, Class B 608,130
----------
Total Finland 3,189,582
----------
FRANCE -- 7.0%
AUTOMOBILES -- 0.6%
53,218 (c)Renault S.A. 1,349,221
----------
BANKING -- 1.0%
50,581 Banque Nationale de Paris 2,156,706
----------
CHEMICALS -- 1.3%
82,332 Rhone-Poulenc, Class A 3,019,866
----------
CONSUMER ELECTRIC -- 0.2%
1,500 Compagnie Generale D'Industrie Et De Participation 419,801
----------
ELECTRICAL EQUIPMENT -- 1.0%
18,842 Alcatel Alsthom 2,307,829
----------
GAS EXPLORATION -- 1.3%
25,592 Elf Aquitaine S.A. 2,843,883
----------
</TABLE>
(See Notes to Portfolios of Investments)
[_] MARSHALL FUNDS
- --------------------------------------------------------------------------------
INTERNATIONAL STOCK FUND (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------------------------------------
Shares Description Value
------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
FRANCE (continued)
HOLDING COS. -- DIVERSIFIED-- 0.1%
1,766 Marine-Wendel S.A. $180,836
----------
INSURANCE -- 0.9%
32,819 AXA 2,090,933
----------
MINING -- 0.6%
29,000 Eramet SLN 1,398,844
----------
Total France 15,767,919
----------
GERMANY -- 1.8%
BANKING -- 0.9%
37,650 Deutsche Bank, AG 2,200,717
----------
CHEMICALS -- 0.9%
53,500 Bayer AG 1,968,494
----------
Total Germany 4,169,211
----------
GREAT BRITAIN -- 12.5%
ELECTRIC UTILITIES -- 1.1%
264,434 National Power Co. PLC 2,416,864
----------
ELECTRICAL EQUIPMENT -- 0.4%
345,694 The BICC Group 944,281
----------
FOOD & BEVERAGE -- 1.3%
2,211,306 Albert Fisher Group PLC 1,398,052
585,865 Hillsdown Holdings PLC 1,538,588
----------
Total 2,936,640
----------
GAS & PIPELINE UTILITIES -- 2.3%
880,800 British Gas PLC 3,848,096
880,800 (c)Centrica PLC 1,263,660
----------
Total 5,111,756
----------
HOLDING COS. -- DIVERSIFIED-- 3.0%
1,929,000 BTR PLC 6,817,082
----------
PHARMACEUTICALS & HEALTH CARE -- 0.7%
435,300 Medeva PLC 1,559,518
----------
POLLUTION CONTROL -- 0.2%
60,000 (c)Waste Management International PLC, ADR 487,500
----------
RETAIL TRADE -- 0.3%
146,100 Kwik Save Group PLC 757,897
----------
STEEL -- 2.4%
189,800 (d)British Steel PLC, ADR 5,421,162
----------
WATER UTILITIES -- 0.8%
125,166 Hyder PLC 1,694,270
----------
Total Great Britain 28,146,970
----------
HONG KONG -- 4.4%
BANKING -- 1.4%
104,807 HSBC Holdings PLC 3,191,748
----------
CONGLOMERATES -- 1.4%
210,000 Hutchison Whampoa 1,747,855
171,500 Swire Pacific, Ltd. 1,311,230
----------
Total 3,059,085
----------
ELECTRIC UTILITIES -- 0.4%
288,000 (c)Hong Kong Electric Holdings, Ltd. 1,007,136
----------
FINANCIAL SERVICES -- 0.8%
485,500 Jardine Strategic Holdings Ltd. 1,796,350
----------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Shares Description Value
-----------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
HONG KONG (continued)
SERVICES -- 0.4%
455,000 Hong Kong Ferry Holdings $892,444
----------
Total Hong Kong 9,946,763
----------
HUNGARY -- 0.8%
OIL & GAS -- 0.8%
88,814 (c)(h)MOL Magyar Olay, GDR 1,771,839
----------
INDONESIA -- 0.5%
BANKING -- 0.3%
1,161,500 Lippo Bank 452,788
630,000 PT Pan Indonesia Bank 192,203
90,000 (c)PT Pan Indonesia Bank, Warrants 6,559
----------
Total 651,550
----------
FOREST PRODUCTS -- 0.2%
599,500 (c)Barito Pacific Timber 360,716
----------
Total Indonesia 1,012,266
----------
ITALY -- 3.2%
AUTOMOTIVE -- 1.5%
1,120,900 (d)Fiat S.P.A. 3,440,817
----------
PAPER -- 0.4%
170,000 (d)Burgo (Cartiere) S.P.A. 964,744
----------
TELEPHONE -- 1.3%
825,000 Telecom Italia S.P.A. 2,910,967
----------
Total Italy 7,316,528
----------
JAPAN -- 2.0%
ELECTRICAL EQUIPMENT -- 0.7%
163,000 Hitachi, Ltd. 1,498,013
----------
ENGINEERING & CONSTRUCTION-- 0.3%
55,000 Daito Trust Construction 605,647
----------
HOUSEHOLD APPLIANCES & FURNISHINGS -- 1.0%
27,000 Sony Corp. 2,347,243
----------
Total Japan 4,450,903
----------
MEXICO -- 1.5%
CONTAINER & GLASS -- 0.3%
182,400 (d)Vitro SA 803,792
----------
HOLDING COS. -- DIVERSIFIED-- 1.2%
346,000 Alfa, S.A. de C.V., Class A 2,649,399
----------
Total Mexico 3,453,191
----------
NETHERLANDS -- 4.8%
CHEMICALS -- 1.0%
11,700 Akzo Nobel N.V. 1,814,435
20,000 European Vinyls Corp., International N.V. 457,564
----------
Total 2,271,999
----------
ELECTRONIC TECHNOLOGY -- 1.9%
62,000 Philips Electronics N.V. 4,413,973
----------
ENGINEERING & CONSTRUCTION-- 0.4%
18,135 Ballast Nedam N.V. 901,173
----------
FINANCIAL SERVICES -- 1.2%
63,750 ING Groep, N.V. 2,775,830
----------
RETAIL TRADE -- 0.3%
9,657 Koninklijke Bijenkorf Beheer 622,419
----------
Total Netherlands 10,985,394
----------
</TABLE>
(See Notes to Portfolios of Investments)
August 31, 1997
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
INTERNATIONAL STOCK FUND (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------
Shares Description Value
----------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
NEW ZEALAND -- 2.3%
AEROSPACE & RELATED -- 1.0%
802,000 Air New Zealand Ltd., Class B $2,167,272
----------
CONSTRUCTION MATERIALS -- 0.2%
22,000 Fletcher Challenge 25,861
137,500 (c)Fletcher Challenge Building 384,747
----------
Total 410,608
----------
INVESTMENT SERVICES -- 0.7%
1,853,300 Brierley Investments, Ltd. 1,586,532
----------
OIL -- 0.2%
137,500 (c)Fletcher Challenge Energy 484,887
----------
PAPER -- 0.2%
275,000 (c)Fletcher Challenge Paper 555,160
----------
Total New Zealand 5,204,459
----------
NORWAY -- 3.1%
COMMERCIAL SERVICES -- 0.2%
39,500 Unitor Ships Service 555,399
----------
DRUGS -- 0.5%
56,000 (c)Nycomed ASA, Class B 1,023,622
----------
ELECTRIC UTILITIES -- 0.1%
56,000 Hafslund Nycomed, Class B 284,964
----------
ENGINEERING & CONSTRUCTION-- 1.3%
61,800 (d)Kvaerner A.S., Class B 3,008,235
----------
NON-FERROUS METALS -- 0.4%
56,000 (c)Elkem A.S., Class A 997,375
----------
PROCESS INDUSTRIES -- 0.6%
60,500 Saga Petroleum A.S., Class A 1,280,063
----------
Total Norway 7,149,658
----------
PERU -- 0.5%
TELEPHONE -- 0.5%
43,700 (c)CPT Telefonica de Peru S.A., Class B, ADR 1,021,487
----------
PHILIPPINES -- 0.1%
TELEPHONE -- 0.1%
12,820 (h)Philippine Long Distance Telephone Co., GDR 352,550
----------
PORTUGAL -- 0.6%
BANKING -- 0.3%
32,700 Banco Totta & Acores Nationalisiert, Class B 587,692
----------
FINANCIAL SERVICES -- 0.3%
34,500 (c)BPI-SGPS S.A. 678,278
----------
Total Portugal 1,265,970
----------
SINGAPORE -- 0.2%
RETAIL TRADE -- 0.2%
588,229 Dairy Farm International Holdings, Ltd. 494,112
----------
SPAIN -- 6.0%
BANKING -- 1.9%
81,000 (c)(d)Banco Bilbao Vizcaya SA 2,128,991
91,500 Corporacion Bancaria de Espana SA, ADR 2,281,781
----------
Total 4,410,772
----------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Shares or
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
SPAIN (continued)
ELECTRIC UTILITIES -- 1.8%
98,000 Empresa Nacional de Electricidad SA $1,974,471
191,500 Iberdrola SA 2,149,073
-----------
Total 4,123,544
-----------
PETROLEUM SERVICES -- 0.9%
53,500 Repsol SA 2,113,667
-----------
TELEPHONE -- 1.4%
118,500 (d)Telefonica de Espana 3,071,862
-----------
Total Spain 13,719,845
-----------
SWEDEN -- 4.1%
AUTOMOBILES -- 0.9%
76,500 Volvo AB, Class B 1,962,335
-----------
BANKING -- 1.0%
75,000 Svenska Handelsbanken, Stockholm 2,304,820
-----------
DRUG & HEALTHCARE -- 0.6%
92,000 Astra AB, Class B 1,390,257
-----------
FOREST PRODUCTS -- 0.7%
98,000 Stora Kopparbergs, Class B 1,530,705
-----------
METALS -- 0.4%
59,100 (c)Granges AB 885,584
-----------
OFFICE & BUSINESS EQUIPMENT-- 0.5%
47,000 Esselte AB, Class A 1,163,839
-----------
Total Sweden 9,237,540
-----------
SWITZERLAND -- 3.0%
BANKING -- 0.7%
13,800 Credit Suisse Group 1,657,428
-----------
BUSINESS SERVICES -- 0.2%
300 Societe Generale de Surveillance Holding SA, Class B 542,229
-----------
INSURANCE -- 1.5%
9,500 Zurich Versicherungsgesellschaft 3,446,886
-----------
LEISURE -- 0.6%
350 Reiseburo Kuoni AG, Class B 1,440,402
-----------
Total Switzerland 7,086,945
-----------
TOTAL COMMON STOCKS
(identified cost $140,366,036) 177,501,678
-----------
(E)COLLATERAL FOR SECURITIES LENDING -- 16.3% 561,480 Dreyfus Cash
Management Plus (shares at net asset
value) 561,480
$3,000,000 (b)Federal Signal Corp., Master Note, 5.655%,
9/2/1997 3,000,000
10,000,000 (b)Credit Suisse/First Boston Repurchase Agreement,
5.808%, 9/2/1997 10,000,000
2,000,000 GMAC Master Note, 5.59%, 9/2/1997 2,000,000
3,000,000 (f)J.P. Morgan Securities Master Note, 5.635%,
9/2/1997 3,000,000
</TABLE>
(See Notes to Portfolios of Investments)
[_] MARSHALL FUNDS
- --------------------------------------------------------------------------------
INTERNATIONAL STOCK FUND (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Principal
Amount
or Shares Description Value
----------------------------------------------------------------------------
<C> <S> <C>
(E)COLLATERAL FOR SECURITIES LENDING (continued)
$7,500,000 (b)Lehman Brothers Corp., Repurchase Agreement,
5.65%, 9/2/1997 $7,500,000
7,000,000 (b)Merrill Lynch Corp., Repurchase Agreement,
5.67%, 9/2/1997 7,000,000
4,000,000 (b)Republic Master Note, 5.725%, 9/2/1997 4,000,000
----------
TOTAL COLLATERAL FOR SECURITIES LENDING (at
amortized cost and value) 37,061,480
----------
PREFERRED STOCKS -- 1.1%
AUSTRALIA -- 0.8%
BROADCASTING -- 0.8%
491,572 News Corp., Ltd., Pfd. 1,871,986
----------
ITALY -- 0.3%
ENGINEERING & CONSTRUCTION-- 0.3%
260,000 Autostrade Priv 616,996
----------
TOTAL PREFERRED STOCKS
(identified cost $2,470,088) 2,488,982
----------
CONVERTIBLE BONDS -- 0.7%
CAYMAN ISLANDS -- 0.7%
1,790,000 PIV Investment Finance, Company Guarantee, 4.50%,
12/1/2000 (identified cost $1,431,133) 1,615,475
----------
CONVERTIBLE PREFERRED STOCKS-- 2.9%
ARGENTINA -- 0.7%
24,080 (h)Cointel, Telefonica de Argentina SA, PRIDES,
$5.04 1,562,190
----------
AUSTRALIA -- 0.8%
66,614 National Australia Bank, Ltd., Melbourne,
Exchangeable Capital Unit, $1.97 1,902,662
----------
GREAT BRITAIN -- 0.1%
107,100 Hyder PLC, Pfd. 187,509
----------
MEXICO -- 0.9%
42,978 Nacional Financiera, SNC, PRIDES, $6.79 1,960,871
----------
PHILIPPINES -- 0.4%
29,000 (h)Philippine Long Distance Telephone Co., Conv.
Pfd., Series II, $1.44 797,500
----------
TOTAL CONVERTIBLE PREFERRED STOCKS (identified cost
$5,473,435) 6,410,732
----------
GOVERNMENT AGENCIES -- 8.7%
(I)FEDERAL HOME LOAN BANK DISCOUNT
NOTES -- 2.3%
3,950,000 5.44%, 9/17/1997 3,940,520
1,307,000 5.52%, 10/15/1997 1,298,204
----------
Total 5,238,724
----------
(I)FEDERAL HOME LOAN MORTGAGE CORPORATION DISCOUNT NOTES --
5.1%
2,150,000 5.61%, 9/3/1997 2,149,355
735,000 5.57%, 9/17/1997 733,207
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
Principal
Amount Description Value
--------------------------------------------------------------------------
<C> <S> <C>
GOVERNMENT AGENCIES (continued)
$963,000 5.54%, 9/19/1997 $960,361
1,845,000 6.20%, 9/24/1997 1,838,674
5,825,000 5.49%, 9/30/1997 5,799,708
------------
Total 11,481,305
------------
(I)FEDERAL NATIONAL MORTGAGE ASSOCIATION DISCOUNT NOTES--
1.3%
1,875,000 5.44%, 10/2/1997 1,866,265
1,000,000 5.46%, 10/7/1997 994,610
------------
Total 2,860,875
------------
TOTAL GOVERNMENT AGENCIES (identified cost
$19,581,144) 19,580,904
------------
U.S. TREASURY ISSUES -- 7.9%
U.S. TREASURY SECURITIES -- 7.9%
7,384,000 (d)Treasury Bill, 9/18/1997 7,366,738
8,908,000 (d)Treasury Bill, 10/16/1997 8,855,944
721,000 Treasury Bill, 10/23/1997 715,894
836,000 Treasury Note, 5.125%, 4/30/1998 833,601
------------
TOTAL U.S. TREASURY ISSUES (identified cost
$17,767,532) 17,772,177
------------
TOTAL INVESTMENTS (identified cost $224,150,848) $262,431,428
============
</TABLE>
- ---------------------------------------------------------------------------
SMALL-CAP GROWTH FUND
(FORMERLY, MARSHALL SMALL-CAP STOCK FUND)
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------------------------------------------
Shares Description Value
---------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 95.4%
CAPITAL GOODS -- 19.3%
COMPUTER SERVICES
35,000 (c)Cambridge Technology Partners, Inc. $1,128,750
50,000 (c)Computer Products, Inc. 1,518,750
25,000 (c)Harbinger Corp. 875,000
30,000 (c)PSW Technologies, Inc. 405,000
40,000 (c)Phoenix International Ltd. 940,000
30,000 (c)Radiant Systems, Inc. 618,750
5,000 (c)Saville Systems Ireland PLC, ADR 334,375
30,000 (c)Security Dynamics Technologies, Inc. 1,179,375
40,000 (c)Transaction Systems Architects, Inc., Class A 1,385,000
----------
Total 8,385,000
----------
ELECTRONICS
45,000 (c)Advanced Technology Materials, Inc. 1,327,500
25,000 (c)Vitesse Semiconductor Corp. 1,178,125
----------
Total 2,505,625
----------
Total Capital Goods 10,890,625
----------
CONSUMER NON-DURABLES -- 56.1%
BROADCASTING
50,000 (c)Cox Radio, Inc., Class A 1,337,500
20,000 (c)Emmis Broadcasting Corp.,
Class A 985,000
</TABLE>
(See Notes to Portfolios of Investments)
August 31, 1997
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
SMALL-CAP GROWTH FUND
(FORMERLY, MARSHALL SMALL-CAP STOCK FUND) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------------------------------
Shares Description Value
---------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
CONSUMER NON-DURABLES (continued)
20,000 (c)Heftel Broadcasting Corp.,
Class A $1,240,000
60,000 (c)Outdoor Systems, Inc. 1,586,250
30,000 (c)Universal Outdoor Holdings, Inc. 1,027,500
25,000 (c)Westwood One, Inc. 703,125
----------
Total 6,879,375
----------
COMMERCIAL SERVICES
40,000 (c)NOVA Corp. 1,015,000
50,000 (c)Steiner Leisure Ltd. 1,525,000
40,000 (c)SteriGenics International, Inc. 605,000
----------
Total 3,145,000
----------
DRUGS
35,000 (c)North American Vaccine, Inc. 717,500
25,000 (c)Parexel International Corp. 884,375
----------
Total 1,601,875
----------
LEISURE & RECREATION
30,000 (c)Regal Cinemas, Inc. 851,250
----------
MANUFACTURING
15,000 (c)Cymer, Inc. 1,363,125
30,000 (c)II-VI, Inc. 765,000
40,000 (c)Novel Denim Holdings Ltd. 875,000
55,000 Windmere Corp. 1,045,000
----------
Total 4,048,125
----------
MEDICAL SUPPLIES
40,000 (c)Henry Schein, Inc. 1,425,000
30,000 (c)Sterile Recoveries, Inc. 525,000
----------
Total 1,950,000
----------
RESTAURANTS
50,000 (c)Landrys Seafood Restaurants, Inc. 1,200,000
----------
RETAIL
40,000 (c)Abercrombie & Fitch Co., Class A 960,000
35,000 (c)MSC Industrial Direct Co. 1,421,875
45,000 (c)Party City Corp. 1,080,000
----------
Total 3,461,875
----------
SERVICES
50,000 (c)ACE*COMM Corp. 831,250
40,000 (c)Apollo Group, Inc., Class A 1,427,500
55,000 (c)Corestaff, Inc. 1,636,250
50,000 (c)Powerwave Technologies, Inc. 1,953,125
45,000 (c)Rental Service Corp. 1,063,125
40,000 Stewart Enterprises, Inc.,
Class A 1,580,000
----------
Total 8,491,250
----------
Total Consumer Non-Durables 31,628,750
----------
ENERGY -- 4.4%
OIL & GAS EQUIPMENT & SERVICES
30,000 (c)BJ Services Co., Warrants 1,410,000
20,000 (c)Eagle Geophysical, Inc. 410,000
20,000 (c)Newpark Resources, Inc. 677,500
----------
Total Energy 2,497,500
----------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Shares or
Principal
Amount Description Value
----------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
FINANCIAL -- 11.2%
35,000 Arm Financial Group, Inc, Class A $680,313
33,000 (c)Ocwen Financial Corp. 1,408,688
50,000 Raymond James Financial, Inc. 1,450,000
30,000 Redwood Trust, Inc. 1,151,250
30,000 (c)Silicon Valley Bancshares 1,612,500
-----------
Total Financial 6,302,751
-----------
TELECOMMUNICATIONS -- 4.4%
35,000 (c)Brightpoint, Inc. 1,312,500
35,000 (c)McLeod, Inc., Class A 1,185,624
-----------
Total Telecommunications 2,498,124
-----------
TOTAL COMMON STOCKS (identified cost $46,093,506) 53,817,750
-----------
(g)U.S. TREASURY -- 0.1%
$40,000 United States Treasury Bill, 9/25/1997 (identified
cost $39,867) 39,904
-----------
(B)REPURCHASE AGREEMENT -- 3.8% 2,168,000 Credit Suisse First
Boston, 5.53%, dated 8/29/1997,
due 9/2/1997 (at amortized cost) 2,168,000
-----------
TOTAL INVESTMENTS (identified cost $48,301,373)(c) $56,025,654
===========
</TABLE>
- -----------------------------------------------------------------------------
SHORT-TERM INCOME FUND
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
ASSET-BACKED SECURITIES -- 20.3%
$1,805,441 BCF LLC, Series 1996-C2, Class A, 7.615%, 11/16/2026 $1,813,909
1,464,621 CMC Securities Corp., Series 1994-E, Class A1, 6.00%,
3/25/2024 1,461,545
2,427,573 CPS Auto Grantor Trust, Series 1997-2, Class A,
6.65%, 10/15/2020 2,444,396
552,620 Contimortgage Home Equity Loan Trust, Series 1995-4,
Class A3, 6.20%, 10/15/2010 552,836
2,955,139 Contitrade Services Home Equity Loan Trust, Series
1991-1, Class A, 8.80%, 1/15/2006 2,965,837
2,570,665 Contitrade Services Home Equity Loan Trust, Series
1991-2, Class A, 7.70%, 9/15/2006 2,594,778
756,415 Equicon Home Equity Loan Trust, Series 1992-7, Class
A, 5.90%, 9/18/2005 750,841
70,861 Ford Credit Grantor Trust, Series 1993-B, Class A,
4.30%, 7/15/1998 70,880
3,000,000 Green Tree Home Equity Loan Trust, Series 96-C, Class
A2, 7.10%, 6/15/2026 3,040,650
</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)
$165,722 HFC Revolving Home Equity Loan Trust, Series 1992-
1, Class A, 6.1175%, 11/15/2017 $165,886
1,351,331 New York City Tax Lien, Class B, 6.56%, 5/25/2005 1,352,602
663,137 Olympic Automobile Receivables Trust, Series 1994-
A, 5.65%, 1/15/2001 663,740
1,004,495 Olympic Automobile Receivables Trust, Series 1995-
B, Class A2, 7.35%, 10/15/2001 1,022,445
248,747 Premier Auto Trust, Series 1993-4, Class A2,
4.65%, 2/2/1999 248,402
2,407,160 Residential Asset Securitization Trust 1996-A8,
Class A1, 8.00%, 12/25/2026 2,445,381
1,518,253 Structured Asset Securities Corp., Series 1995-C1,
Class A1A, 7.375%, 9/25/2024 1,528,699
1,925,501 The Money Store Home Equity Loan Trust, Series
1992-D2, Class A3, 7.55%, 1/15/2018 1,965,513
2,450,000 The Money Store Home Equity Loan Trust, Series
1995-C, Class A2, 6.25%, 8/15/2016 2,450,221
2,000,000 UCFC Home Equity Loan, Series 1996-A, Class A4,
6.30%, 5/15/2010 1,990,280
660,272 Western Financial Grantor Trust, Series 1994-2,
Class A1, 6.375%, 9/1/1999 662,886
----------
TOTAL ASSET-BACKED SECURITIES (identified cost
$30,134,027) 30,191,727
----------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 31.8%
FEDERAL HOME LOAN MORTGAGE
CORPORATION -- 6.1%
190,198 7.75%, 1/15/2018, Series 1259, Class H 190,759
432,295 10.00%, 7/15/2018, Series 10D 436,475
4,320,777 7.00%, 1/15/2020, Series 1834, Class A 4,354,220
4,203,951 6.05%, 9/15/2020, Series 1818, Class A 4,128,831
----------
Total 9,110,285
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 0.3%
431,918 7.50%, 4/25/2014, REMIC, Series 1991-06-K 432,548
----------
OTHER FINANCIAL -- 25.4%
4,000,000 Collateralized Mortgage Securities Corp., Series
1990-5, Class H, 9.25%, 7/20/2020 4,201,320
3,485,943 Countrywide Home Loans Inc., Series 1997-5, Class
A2, 9.00%, 9/25/2027 3,615,644
2,509,768 GE Capital Mortgage Services, Inc., Series 1995-8, Class A3, 7.00%,
10/25/2025 2,512,830
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Principal
Amount Description Value
----------------------------------------------------------------------------
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS
(continued)
OTHER FINANCIAL (continued)
$3,000,000 GE Capital Mortgage Services, Inc., Series 1994-28,
Class A3, 8.00%, 8/25/2024 $3,050,940
2,119,884 Independent National Mortgage Corp., Series 1995-R,
Class A1, 7.25%, 11/25/2010 2,138,051
3,749,712 Norwest Asset Securities Corp., Series 1996-9, Class A5, 10.00%,
1/25/2027 3,863,081
1,806,439 PNC Mortgage Securities Corp., Series 1994-1, Class
T7, 6.00%, 2/25/2024 1,737,614
3,774,325 PNC Mortgage Securities Corp., Series 1997-3, Class
2A3, 7.50%, 5/25/2027 3,811,200
184,924 Paine Webber CMO Trust , Series 0, Class 4, 9.50%,
6/1/2017 184,557
1,836,190 Prudential Home Mortgage Securities Co., Series
1992-32, Class A4, 7.15%, 10/25/2022 1,839,844
2,340,723 Prudential Home Mortgage Securities Co., Series
1993-54, Class A21, 5.50%, 1/25/2024 2,308,913
3,137,000 Residential Accredit Loans, Inc., Series 1996-QS5, Class AI5,
7.60%, 9/25/2026 3,170,572
1,391,779 Residential Funding Mortgage Securities I, Series 1993-S41, Class
A1, 6.85%, 9/25/2023 1,394,813
3,919,373 Securitized Asset Sales, Inc., Series 1995-4, Class
A5, 7.25%, 11/25/2025 3,962,878
----------
Total 37,792,257
----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(identified cost $47,268,480) 47,335,090
----------
CORPORATE BONDS -- 17.6%
FINANCE -- 2.0%
3,000,000 Lehman Brothers Holdings, Inc., 6.90%, 1/29/2001 3,024,720
----------
OTHER FINANCIAL -- 15.6%
4,000,000 (h)Corestates Capital Corp., Bank Guarantee, 6.32%, 2/15/2027
3,916,000
5,000,000 (h)Edison Funding Co., Sr. Note, 6.75%, 12/17/1999 5,038,600
3,250,000 (h)Florida Windstorm Under, 6.50%, 8/25/2002 3,208,628
4,000,000 (h)HSB Group, Inc., 6.66%, 7/15/2027 4,004,416
3,000,000 Old Kent Capital Trust I, Company Guarantee,
6.51875%, 2/1/2027 2,992,536
</TABLE>
(See Notes to Portfolios of Investments)
August 31, 1997
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
SHORT-TERM INCOME FUND (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Principal
Amount Description Value
----------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS (continued)
OTHER FINANCIAL (continued)
$4,000,000 Washington Water Power II, 6.6875%, 6/1/2037 $3,965,376
------------
Total 23,125,556
------------
TOTAL CORPORATE BONDS (identified cost
$26,039,274) 26,150,276
------------
MORTGAGE BACKED SECURITIES-- 16.7%
FEDERAL HOME LOAN MORTGAGE
CORPORATION -- 1.7%
2,368,270 11.00%, 8/1/2019 2,649,503
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 15.0%
1,158,374 8.00%, 8/1/2007 1,192,407
3,659,326 8.00%, 5/1/2008 3,806,833
2,637,462 11.00%, 12/1/2015 2,945,728
1,276,737 10.00%, 7/1/2020 1,389,243
2,121,471 9.50%, 12/1/2024 2,290,868
3,111,962 9.50%, 1/1/2025 3,359,391
2,400,488 9.50%, 1/1/2025 2,592,164
4,288,291 9.50%, 1/1/2025 4,630,706
------------
Total 22,207,340
------------
TOTAL MORTGAGE BACKED SECURITIES (identified cost
$24,688,919) 24,856,843
------------
(B)REPURCHASE AGREEMENT -- 13.1%
19,540,000 Credit Suisse First Boston, 5.53%, dated
8/29/1997, due 9/2/1997 (at amortized cost) 19,540,000
------------
TOTAL INVESTMENTS (identified cost $147,670,700) $148,073,936
============
</TABLE>
- -----------------------------------------------------------------------------
INTERMEDIATE BOND FUND
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
ASSET-BACKED SECURITIES -- 19.3%
$10,000,000 Bridgestone/Firestone Master Trust, Series 1996-1,
Class A, 6.17%, 7/1/2003 $9,974,900
5,000,000 Contimortgage Home Equity Loan Trust, Series 1995-4,
Class A5, 6.56%, 12/15/2010 5,014,800
4,325,000 Green Tree Financial Corp., Series 1994-7, Class A4,
8.35%, 3/15/2020 4,530,368
12,000,000 Green Tree Financial Corp., Series 1996-6, Class A3,
6.75%, 9/15/2027 12,098,640
10,000,000 Metris Master Trust, Series 1997-1, Class A, 6.87%,
11/20/2005 10,131,200
4,762,257 Mortgage Capital Funding, Inc., Series 1995-MC1,
Class A1A, 7.70%, 5/25/2027 4,845,596
5,840,000 Olympic Automobile Receivables Trust, Series 1995-D, Class A4,
6.05%, 11/15/2000 5,862,834
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
ASSET-BACKED SECURITIES (continued)
$12,000,000 Rasta, Series 1996-A, Class A2, 7.50%, 11/15/2011 $12,107,100
12,000,000 The Money Store, Series
1996-B, Class A7, 7.55%, 8/15/2020 12,321,720
-----------
TOTAL ASSET-BACKED SECURITIES (identified cost
$63,985,602) 76,887,158
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 17.0% 9,471,422 Countrywide
Home Loans Inc., Series 1997-5, Class
A2, 9.00%, 9/25/2027 9,823,825
8,380,592 Federal Home Loan Mortgage Association, Series
1829, Class H, 6.50%, 10/15/2021 8,312,793
6,049,088 Federal Home Loan Mortgage Association, Series
1834, Class A, 7.00%, 1/15/2020 6,095,908
10,000,000 Federal National Mortgage Association, Series 1997- 17, Class PD,
7.00%, 4/18/2021 10,044,270
11,249,135 Norwest Asset Securities Corp., Series 1996-9, Class A5, 10.00%,
1/25/2027 11,589,242
9,601,169 Prudential Home Mortgage Securities Corp., Series
1993-54, Class A21, 5.50%, 1/25/2024 9,470,689
7,000,000 (a)Residential Accredit Loans, Inc., Series 1996- QS5, Class AI5,
7.60%, 9/25/2026 7,074,914
5,060,843 Structured Asset Securities Corp., Series 1995-C1,
Class A1A, 7.375%, 9/25/2024 5,095,662
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(identified cost $70,966,955) 67,507,303
-----------
CORPORATE BONDS -- 52.7%
BANKING -- 13.4%
8,000,000 Fleet Financial Group, Inc., 8.125%, 7/1/2004 8,525,280
12,000,000 Mercantile Capital Trust I, 6.569%, 2/1/2027 11,927,220
6,350,000 NationsBank Corp., 6.94%, 4/12/2002 6,426,137
8,000,000 Provident Bank, 6.125%, 12/15/2000 7,898,880
12,500,000 (h)Starbank Capital Trust, Series 144A, 6.578%,
6/15/2027 12,442,587
6,000,000 Toronto-Dominion Bank, 7.875%, 8/15/2004 6,139,740
-----------
Total 53,359,844
-----------
BROKER -- 7.3%
8,000,000 Bear Stearns Cos., Inc., 7.00%, 1/15/2027 8,013,888
7,000,000 Donaldson, Lufkin and Jenrette Securities Corp.,
5.625%, 2/15/2016 6,805,680
9,000,000 Lehman Brothers Holdings, Inc., 6.90%, 1/29/2001 9,074,160
5,000,000 Lehman Brothers, Inc., 7.50%, 8/1/2026 5,224,250
-----------
Total 29,117,978
-----------
</TABLE>
(See Notes to Portfolios of Investments)
[_] MARSHALL FUNDS
- --------------------------------------------------------------------------------
INTERMEDIATE BOND FUND (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS (continued)
CONSUMER SERVICES -- 0.7%
$2,750,000 (d)Marriott International, Inc., Series C, 7.125%,
6/1/2007 $2,738,560
-----------
FINANCE -- 23.8%
4,000,000 Corestates Capital Corp., 6.40%, 1/15/2027 3,945,964
10,000,000 Credit Suisse, London, 7.90%, 5/1/2007 10,416,170
10,000,000 Edison Funding Co., 6.75%, 12/17/1999 10,077,200
12,000,000 Firstar Capital Trust I, 8.32%, 12/15/2026 12,387,720
10,000,000 Florida Windstorm Under, 6.50%, 8/25/2002 9,872,700
6,750,000 Ford Motor Credit Corp., 6.25%, 12/20/2002 6,610,613
5,000,000 Ford Motor Credit Corp., 8.24%, 1/15/2002 5,293,900
5,165,000 General Motors Acceptance Corp., 7.00%, 6/6/2003 5,226,205
6,700,000 General Motors Acceptance Corp., 7.50%, 6/9/2000 6,878,622
4,000,000 HSB Group, Inc., 6.66%, 7/15/2027 4,004,416
12,000,000 Old Kent Capital Trust I, 6.51875%, 2/1/2027 11,970,144
8,000,000 Sears Roebuck Acceptance Corp., Series III, 7.01%,
9/19/2002 8,112,080
-----------
Total 94,795,734
-----------
INDUSTRIAL SERVICES -- 4.5%
5,000,000 Dayton-Hudson Corp., 6.40%, 2/15/2003 4,904,150
7,000,000 Dayton-Hudson Corp., 9.75%, 7/1/2002 7,842,030
5,000,000 Waste Management, Inc., 6.625%, 7/15/2002 4,984,850
-----------
Total 17,731,030
-----------
UTILITIES-GAS -- 1.4%
5,590,000 Burlington Resources, Inc., 7.15%, 5/1/1999 5,680,111
-----------
UTILITIES-TELEPHONE -- 1.6%
6,070,000 NYNEX Capital Funding Co., Series B, 8.10%,
11/1/1999 6,256,592
-----------
TOTAL CORPORATE BONDS (identified cost $217,712,233) 209,679,849
-----------
CORPORATE NOTES -- 4.6%
BROKER/DEALERS -- 2.0%
8,000,000 Bear Stearns Cos., Inc., 6.75%, 5/1/2001 8,046,000
-----------
TOBACCO -- 2.6%
10,000,000 (d)Philip Morris Cos., Inc., 7.25%, 9/15/2001 10,160,500
-----------
TOTAL CORPORATE NOTES (identified cost $17,934,420) 18,206,500
-----------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Shares or
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
MORTGAGE BACKED SECURITIES-- 0.0%
FEDERAL HOME LOAN MORTGAGE
ASSOCIATION -- 0.0%
$11,352 8.75%, 4/1/2001 (identified cost $11,891) $11,699
------------
U.S. TREASURY SECURITIES -- 5.0%
(D)U.S. TREASURY BONDS -- 1.9%
8,000,000 6.375%, 8/15/2027 7,757,280
------------
(D)U.S. TREASURY NOTES -- 3.1%
7,000,000 6.25%, 2/15/2003 7,003,080
5,000,000 7.875%, 8/15/2001 5,292,850
------------
Total 12,295,930
------------
TOTAL U.S. TREASURY SECURITIES (identified cost
$20,001,094) 20,053,210
------------
(E)COLLATERAL FOR SECURITIES LENDING -- 6.7%
5,000,000 Chrysler Financial Corp., 5.61%, 9/17/1997 4,992,380
449,283 Dreyfus Cash Management Plus (shares at net asset
value) 449,283
2,000,000 General Motors Acceptance Corp., Master Note, 5.96%,
9/2/1997 2,000,000
5,000,000 JP Morgan Securities, Inc., Master Note, 5.635%,
9/2/1997 5,000,000
1,000,000 (b)Merrill Lynch Corp., Repurchase Agreement, 5.67%,
9/2/1997 1,000,000
5,256,250 (b)Morgan Stanley & Co., Inc., Repurchase Agreement,
5.695%, 9/2/1997 5,256,250
5,000,000 National Bank, 5.715%, 9/24/1997 5,000,000
3,000,000 Republic New York Securities Corp., Master Note,
5.725%, 9/2/1997 3,000,000
------------
TOTAL COLLATERAL FOR SECURITIES LENDING (at
amortized cost) 26,697,913
------------
(B)REPURCHASE AGREEMENT -- 0.8% 3,317,000 Credit Suisse First
Boston, 5.53%, dated 8/29/1997,
due 9/2/1997 (at amortized cost) 3,317,000
------------
TOTAL INVESTMENTS (identified cost $420,627,108) $422,360,632
============
</TABLE>
- -------------------------------------------------------------------------------
GOVERNMENT INCOME FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
Principal
Amount Description Value
-------------------------------------------------------------------------
<C> <S> <C>
ASSET-BACKED SECURITIES -- 0.6%
1,283,055 Contitrade Services Home Equity Loan Trust, 7.70%,
9/15/2006, (Series 1991-2) (identified cost
$1,297,490) 1,295,090
---------
</TABLE>
(See Notes to Portfolios of Investments)
August 31, 1997
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
GOVERNMENT INCOME FUND (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Principal
Amount Description Value
----------------------------------------------------------------------------
<C> <S> <C>
COLLATERALIZED MORTGAGE
OBLIGATIONS -- 26.4%
$2,331,436 BCF LLC, 7.583%, 11/16/2026, (Series 1996-C2) $2,342,370
8,380,220 Bear Stearns Mortgage Securities, Inc., 9.85%,
9/25/2027, (Series 1996-4) 9,006,139
3,141,526 Chase Mortgage Finance Corp., 6.25%, 11/25/2009,
(Series 1993-M-CL-A6) 3,066,067
5,000,000 GE Capital Mortgage Services, Inc., 8.00%,
8/25/2024, (Series 1994-28-A3) 5,084,900
3,574,223 Independent National Mortgage Corp., 7.25%,
11/25/2010, (Series 1995-M-A2) 3,604,854
6,450,000 Independent National Mortgage Corp., 7.50%,
9/25/2025, (Series 1995-M-C) 6,525,259
6,401,785 Prudential Home Mortgage Securities, 7.40%,
5/25/2007, (Series 1992-B) 6,407,803
3,108,458 Residential Asset Securitization Trust, 8.00%,
12/25/2026, (Series 1996-A8) 3,157,814
10,000,000 Residential Funding Mortgage Securities, 7.50%,
5/25/2027, (Series 1997-S7-I) 10,104,100
4,654,048 Saxon Mortgage Securities Corp., 5.68%, 11/25/2023,
(Series 1993-10-CL-A2) 4,462,162
----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(identified cost ($53,420,997) 53,761,468
----------
MORTGAGE BACKED SECURITIES -- 92.0%
FEDERAL HOME LOAN MORTGAGE
CORPORATION -- 30.6%
8,600,553 7.00%, 11/1/2009 8,716,144
5,381,272 7.00%, 5/1/2027 5,325,791
15,000,000 (j)7.50%, TBA 15,168,750
5,430,249 7.50%, 5/1/2024 5,550,746
13,400,000 8.00%, 6/15/2023 14,318,034
960,858 8.50%, 2/1/2009 1,001,098
5,856,375 8.50%, 9/1/2024 6,127,232
74,034 8.75%, 4/1/2001 76,301
5,036,889 9.00%, TBA 5,385,034
551,969 9.00%, 5/1/2017 593,709
9,136 9.50%, 2/1/2001 9,490
15,677 10.50%, 10/1/2000 16,515
----------
Total 62,288,844
----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION -- 38.5%
10,034,450 6.90%, 5/25/2021 9,569,624
25,000,000 (j)7.00%, TBA 24,723,500
25,000,000 (j)7.50%, TBA 25,281,250
5,861,397 7.50%, 1/1/2024 5,945,684
2,012,856 7.95%, 11/25/2019 2,029,502
1,390,049 8.00%, 8/1/2007 1,430,889
4,895,410 11.00%, 12/1/2015 5,467,585
553,733 11.00%, 6/1/2020 621,066
1,286,217 11.50%, TBA 1,483,176
1,133,617 11.50%, 7/1/2006 1,235,993
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Principal
Amount Description Value
----------------------------------------------------------------------------
<C> <S> <C>
MORTGAGE BACKED SECURITIES (continued)
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (continued)
$543,604 11.50%, 10/1/2015 $617,442
------------
Total 78,405,711
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 22.9%
11,754,552 6.00%, 12/20/2026 11,920,644
9,653,685 6.50%, 2/15/2024 9,368,515
7,408,085 8.00%, 8/15/2024 7,639,587
11,897,927 8.495%, 6/16/2013 12,022,736
1,228,556 9.00%, 2/15/2020 1,319,936
425,749 9.50%, 7/15/2019 462,069
3,002,581 9.50%, 10/15/2024 3,261,553
452,005 10.00%, 11/15/2020 496,076
14,052 10.50%, 10/15/2000 14,629
7,175 10.50%, 10/15/2000 7,478
30,133 11.00%, 11/15/2000 31,461
------------
Total 46,544,684
------------
TOTAL MORTGAGE BACKED SECURITIES (identified cost
$186,348,464) 187,239,239
------------
CORPORATE BONDS -- 1.9%
4,000,000 (f)(h)HSB Group, Inc., Floating Rate Note, 6.66%,
10/15/1997 (identified cost $3,958,600) 4,004,416
------------
U.S. TREASURY -- 0.6%
5,000,000 United States Treasury Bond Strip, 8.875%,
2/15/2019 (identified cost $1,257,224) 1,182,250
------------
(B)REPURCHASE AGREEMENT -- 14.6%
29,649,000 Credit Suisse First Boston, 5.530%, dated
8/29/1997, due 9/2/1997 (at amortized cost) 29,649,000
------------
TOTAL INVESTMENTS (identified cost $275,931,775) $277,131,463
============
</TABLE>
- -----------------------------------------------------------------------------
INTERMEDIATE TAX-FREE FUND
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Principal Credit
Amount Description Rating(k) Value
----------------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPALS -- 96.5%
ARIZONA -- 7.7%
$2,500,000 Arizona Educational Loan Marketing Corp.,
Revenue Refunding Bonds, 6.85% (MBIA
INS)/(Original Issue Yield: 6.90%),
9/1/1999 AAA $2,618,475
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 1,070,480
</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)
ARIZONA (continued)
$1,000,000 Maricopa County, AZ School District No. 4,
GO UT Bonds, 5.375% (FGIC INS)/(Original
Issue Yield: 5.40%), 7/1/2009, Callable
7/1/2006 @ 101 AAA $1,038,610
2,000,000 Maricopa County, AZ Unified School District
No. 41, Certificate Participation, 5.00%
(FSA INS), 1/1/2002 AAA 2,049,820
----------
Total 6,777,385
----------
ARKANSAS -- 3.1%
2,815,000 Arkansas Development Finance Authority,
Revenue Bonds, 5.00% (AMBAC INS)/(Original
Issue Yield: 5.055%), 7/1/2020 AAA 2,773,338
----------
FLORIDA -- 2.4%
2,000,000 Reedy Creek, FL, Refunding Revenue Bonds,
5.25% (AMBAC INS), 10/1/2004 AAA 2,074,000
----------
HAWAII -- 1.2%
1,000,000 Hawaii State, GO UT Bonds (Series CA),
5.50% (Original Issue Yield: 6.00%),
1/1/2012 A+ 1,030,980
----------
ILLINOIS -- 10.8%
1,500,000 Arlington Heights, IL, GO UT Refunding
Bonds (Series B), 4.55%, 12/1/2001 NR 1,508,520
4,000,000 Chicago, IL Metropolitan Water Reclamation
District, GO UT Refunding Bonds, 5.50%,
12/1/2008 AA 4,212,280
2,500,000 Illinois State, GO UT Bonds, 5.25% (FGIC
INS), 9/1/2004 AAA 2,597,700
1,085,000 Waukegan, IL, GO UT Bonds, 6.40% (MBIA
INS)/(Original Issue Yield: 6.45%),
12/30/2004, Callable 12/30/2002 @ 100 AAA 1,186,339
----------
Total 9,504,839
----------
INDIANA -- 1.8%
1,500,000 Indiana Secondary Market For Education
Loans, Inc., Revenue Bonds, 7.00% (AMBAC
INS), 12/1/1999 AAA 1,582,905
----------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal Credit
Amount Description Rating(k) Value
------------------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPALS (continued)
IOWA -- 3.5%
$1,050,000 Cedar Rapids, IA, GO UT Bonds (Series B),
5.20% (Original Issue Yield: 5.25%),
6/1/2007, Callable 6/1/2004 @ 100 NR $1,073,867
2,000,000 Iowa Finance Authority, Revenue Bonds,
6.00% (Ipsco Inc.), 6/1/2027 NR 2,038,180
----------
Total 3,112,047
----------
LOUISIANA -- 1.2%
1,000,000 Louisiana PFA, Student Loan Refunding
Revenue Bonds (Series A-2), 6.75% (Student
Loans GTD), 9/1/2006, Callable 9/1/2002 @
102 AAA 1,066,000
----------
MARYLAND -- 1.2%
1,000,000 Maryland State, GO UT Bonds, 5.20%
(Original Issue Yield: 5.25%), 3/15/2003 AAA 1,038,380
----------
MASSACHUSETTS -- 1.2%
1,000,000 New England Educational Loan Marketing
Corp., Student Loan Revenue Bonds, 6.60%
(Student Loans GTD), 9/1/2002 NR 1,064,010
----------
MICHIGAN -- 3.8%
2,220,000 Michigan State Building Authority, Revenue
Refunding Bonds, 6.00% (Original Issue
Yield: 6.05%), 10/1/2000 AA- 2,326,871
1,000,000 Northville, MI Public School District, GO
UT Refunding Bonds, 5.00% (FGIC INS),
5/1/2008 AAA 1,008,320
----------
Total 3,335,191
----------
MINNESOTA -- 2.4%
2,050,000 Minneapolis Special School District No.
001, MN, GO UT Bonds, 5.00%, 2/1/2004 AA 2,101,824
----------
MISSOURI -- 1.3%
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 NR 1,134,120
----------
</TABLE>
(See Notes to Portfolios of Investments)
August 31, 1997
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)
NEBRASKA -- 1.2%
$1,000,000 Nebraska Higher Education Loan Program,
Inc., Senior Subordinated Lien Student
Loan Revenue Bonds (Series A-5), 6.65%
(Guaranteed Student Loans LOC),
6/1/2008, Mandatory Sinking Fund
6/1/2003 @ 100 NR $1,062,690
----------
NEVADA -- 1.7%
1,500,000 Las Vegas, NV, GO LT Sewer Refunding
Revenue Bonds (Series B), 4.875% (MBIA
INS)/(Original Issue Yield: 5.05%),
1/1/2006, Callable 1/1/2003 @ 101 AAA 1,515,075
----------
NEW YORK -- 5.2%
3,000,000 New York State Environmental Facilities
Corp., Revenue Bonds, 4.55% (General
Electric Capital Corp.), 12/1/2018
Mandatory Payment 11/30/2001
@ 100 AAA 3,019,350
1,500,000 New York State Environmental Facilities
Corp., Revenue Bonds, 5.70% (Original
Issue Yield: 5.75%), 6/15/2006, Callable
6/15/2004
@ 102 A- 1,591,260
----------
Total 4,610,610
----------
OHIO -- 7.0%
2,055,000 Cleveland, OH Parking Facilities, Revenue
Bonds, 7.60%, Due 9/15/2003, PRF to
9/15/2002 @102 NR 2,379,896
1,155,000 Ohio HFA, Revenue Refunding Bonds, 4.85%
(GNMA COL), 9/1/2000 AAA 1,168,444
1,130,000 Ohio HFA, Revenue Refunding Bonds, 5.05%
(GNMA COL), 9/1/2001 AAA 1,147,108
1,415,000 Ohio HFA, Revenue Refunding Bonds, 5.15%
(GNMA COL), 9/1/2002 AAA 1,441,135
----------
Total 6,136,583
----------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal Credit
Amount Description Rating(k) Value
------------------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPALS (continued)
OKLAHOMA -- 3.5%
$2,000,000 Oklahoma HFA, Refunding Revenue Bonds (Series A-3), 5.50% (FNMA
COL), 11/1/2005 @ 100, Callable 5/1/2005 @ 100, Mandatory
Put 11/1/2005 @ 100 AAA $2,055,140
1,000,000 Tulsa, OK, Public Improvements GO UT Bonds,
5.125%, 5/1/2001 AA 1,029,060
----------
Total 3,084,200
----------
PUERTO RICO -- 2.0%
1,500,000 Puerto Rico Municipal Finance Agency,
Revenue Bonds (Series A), 5.10% (FSA
INS)/(Original Issue Yield: 5.20%),
7/1/2000 AAA 1,537,530
250,000 Puerto Rico Public Building Authority,
Revenue Refunding Bonds (Series K), 6.10%
(FGIC INS)/(Original Issue Yield: 6.25%),
7/1/2002 AAA 269,965
----------
Total 1,807,495
----------
SOUTH CAROLINA -- 1.3% 1,055,000 South Carolina State, GO UT Bonds
(Series
B), 5.625%, 7/1/2011, Callable 7/1/2006
@ 102 AAA 1,105,028
----------
TENNESSEE -- 2.3%
2,000,000 Memphis, TN, GO UT Refunding Bonds (Series
A), 4.60% (Original Issue Yield: 4.65%),
8/1/2002 AA 2,013,020
----------
TEXAS -- 4.4%
1,000,000 Arlington, TX ISD, GO UT Refunding Bonds,
6.50% (PSF INS), 2/15/2002 NR 1,083,950
1,000,000 Brazosport, TX ISD, GO UT, 5.10% (PSF GTD),
2/15/2009, Callable 2/15/2007
@ 100 NR 1,013,440
700,000 El Paso, TX ISD, GO UT Bonds, 7.50% (PSF
LOC), 8/15/2000 AAA 763,385
</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)
TEXAS (continued)
$945,000 San Angelo, TX ISD, GO UT Bonds, 5.30% (PSF
GTD), 2/15/2007, Callable 2/15/2006 @ 100 AAA $982,790
---------
Total 3,843,565
---------
UTAH -- 8.1%
2,020,000 Jordan, UT School District, GO UT, 5.00%,
6/15/2003 AAA 2,072,823
3,000,000 Utah State, Series F, 5.00%, 7/1/2009 AAA 3,025,290
1,000,000 Washington County, UT School District, GO UT,
5.00%, 3/1/2007, Callable 3/1/2007
@ 100 AAA 1,019,680
1,000,000 Washington County, UT School District, GO UT,
5.00%, 3/1/2008 AAA 1,015,860
---------
Total 7,133,653
---------
VIRGINIA -- 5.0%
1,730,000 Chesapeake, VA, GO UT Bonds, 5.60% (State Aid Withholding
GTD)/(Original Issue Yield:
5.65%), 5/1/2006, Callable 5/1/2004 @ 101 AA 1,823,593
1,000,000 Fairfax County, VA, GO UT Refunding Bonds
(Series C), 4.60% (State Aid Withholding
LOC)/(Original Issue Yield: 4.70%), 5/1/2001 AAA 1,011,010
1,500,000 Virginia State Housing Development Authority,
Mortgage Revenue Bonds (Series A1), 6.40%,
7/1/2002 AA+ 1,590,225
---------
Total 4,424,828
---------
WASHINGTON -- 1.3%
1,000,000 Port Longview, WA Industrial Development
Corp., Solid Waste Disposal Revenue Bonds,
6.875% (Weyerhaeuser Co.), 10/1/2008 A 1,139,620
---------
WISCONSIN -- 11.9%
1,450,000 Appleton, WI Industrial Development, Revenue
Refunding Bonds, 5.125% (Appleton Center
Association), 12/15/2009 NR 1,450,000
1,000,000 Racine County, WI, GO UT Promissory Notes,
4.80% (Original Issue Yield: 4.85%),
6/1/2000 NR 1,014,800
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
Principal
Amount Credit
or Shares Description Rating(k) Value
-----------------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPALS (continued)
WISCONSIN (continued)
$1,650,000 Southeast WI, Professional Baseball Park
District, Sales Tax Revenue Bonds, 5.45%
(MBIA INS), 12/15/2012 AAA $1,685,772
1,000,000 Wausau, WI School District, GO UT
Promissary Notes, 4.40%, 3/1/2003 NR 994,210
1,240,000 Wisconsin Health and Educational
Facilities Authority, Revenue Refunding
Bonds, 5.30% (Medical College of
Wisconsin, Inc.), 12/1/2003 A 1,279,742
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 1,038,860
2,950,000 Wisconsin State, GO UT Bonds (Series C),
5.30% (Original Issue Yield: 5.40%),
5/1/2008, Callable 5/1/2007 @ 100 AA 3,051,185
-----------
Total 10,514,569
-----------
TOTAL LONG-TERM MUNICIPALS (identified cost
$83,369,918) 84,985,955
-----------
MUTUAL FUNDS -- 2.5%
2,038,637 Fidelity Institutional Tax Exempt Money
Market Fund 2,038,637
163,136 Goldman Sachs Financial Square Tax-Free
Money Market Fund 163,136
-----------
TOTAL MUTUAL FUND SHARES (at net asset
value) 2,201,773
-----------
(L)TOTAL INVESTMENTS (identified cost
$85,571,691) $87,187,728
===========
</TABLE>
(See Notes to Portfolios of Investments)
August 31, 1997
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
Principal
Amount Description Value
-----------------------------------------------------------------------------
<C> <S> <C>
CERTIFICATES OF DEPOSIT -- 4.7%
BANKING -- 4.7%
$50,000,000 Dauphin Deposit Bank and Trust, 5.614%, 9/2/1998 $49,973,375
15,000,000 Societe Generale, New York, 5.850%, 3/3/1998 14,997,122
-----------
TOTAL CERTIFICATES OF DEPOSIT 64,970,497
-----------
(I)COMMERCIAL PAPER -- 12.1%
ASSET-BACKED SECURITIES -- 2.1%
20,000,000 Banner Receivables Corp., 5.669%, 11/17/1997 19,760,872
10,000,000 Gotham Funding Corp., 5.668%, 11/17/1997 9,880,436
-----------
Total 29,641,308
-----------
BANKING -- 1.7%
23,200,000 Government Development Bank for Puerto Rico (GDB),
5.662%, 9/17/1997 23,142,464
-----------
CHEMICAL -- 2.5%
35,000,000 Arco Chemical Co., 5.658%-5.740%, 9/3/1997-
12/19/1997 34,741,194
-----------
SHORT-TERM BUSINESS CREDIT-- 5.8%
60,000,000 Heller Financial, Inc.,
5.741%, 11/12/1997 59,320,800
20,000,000 Sears Roebuck Acceptance Corp., 5.609%, 9/8/1997 19,978,222
-----------
Total 79,299,022
-----------
TOTAL COMMERCIAL PAPER 166,823,988
-----------
CORPORATE BONDS -- 1.8%
AUTOMOTIVE -- 0.9%
12,024,000 Ford Capital BV, 9.375%, 1/1/1998 12,163,181
-----------
BANKING -- 0.3%
4,625,000 NationsBank Corp., 6.625%, 1/15/1998 4,639,640
-----------
INSURANCE -- 0.2%
3,000,000 American General Finance Corp., 7.250%, 3/1/1998 3,019,170
-----------
PERSONAL CREDIT -- 0.4%
5,000,000 Associates Corp. of North America, 8.125%,
1/15/1998 5,041,168
-----------
TOTAL CORPORATE BONDS 24,863,159
-----------
CORPORATE NOTES -- 14.6%
AEROSPACE & DEFENSE -- 0.3%
4,000,000 Rockwell International Corp., 7.625%, 2/17/1998 4,033,235
-----------
ASSET-BACKED -- 1.1%
15,000,000 Sigma Finance, 6.200%, 6/5/1998 15,000,000
-----------
BROKER/DEALERS -- 4.3%
20,000,000 Bear Stearns Cos., Inc., 5.763%, 2/26/1998 20,000,000
14,500,000 Merrill Lynch & Co., Inc., 5.875%, 7/22/1998 14,500,000
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
CORPORATE NOTES (continued)
BROKER/DEALERS (continued)
$25,000,000 (f)(h)Republic National Bank of New York, 5.725%,
9/2/97 $25,000,000
-----------
Total 59,500,000
-----------
COMPUTER SERVICES -- 1.1%
15,000,000 International Business Machines Corp., 5.650%,
1/22/1998 14,997,248
-----------
FOREST PRODUCTS -- 1.4%
20,000,000 (f)(h)Willamette Industries, Inc., 5.718%, 10/1/97 20,000,000
-----------
LEASING -- 1.5%
5,000,000 International Lease Finance Corp., 6.190%,
4/15/1998 4,997,190
10,000,000 International Lease Finance Corp., 8.050%, 2/3/1998 10,087,042
5,000,000 USL Capital Corp., 5.799%, 10/3/1997 5,000,208
-----------
Total 20,084,440
-----------
PERSONAL CREDIT -- 3.1%
5,100,000 Beneficial Corp., 9.125%, 2/15/1998 5,174,343
17,805,000 Ford Motor Credit Corp., 5.899%, 11/3/1997 17,812,291
7,359,000 Ford Motor Credit Corp., 9.250%, 6/15/1998 7,543,346 12,000,000
General Motors Acceptance Corp., 7.850%, 11/17/1997 12,054,218
-----------
Total 42,584,198
-----------
SHORT-TERM BUSINESS CREDIT-- 1.8%
25,000,000 IBM Credit Corp., 5.540%, 12/9/1997 24,992,292
-----------
TOTAL CORPORATE NOTES 201,191,413
-----------
(F)VARIABLE RATE NOTES -- 59.9%
ASSET-BACKED -- 1.8%
25,000,000 Asset Backed Capital Financial Corp., 5.753%,
9/16/1997 24,998,696
-----------
BANKING -- 7.0%
45,900,000 Bankers Trust Co., New York, 5.650%, 9/5/1997 45,889,837
7,000,000 First Union Corp., 5.906%, 11/24/1997 7,007,361
5,000,000 Fleet Financial Group, Inc., Series H, 5.850%,
11/13/1997 5,003,222
14,000,000 MBNA America Bank, NA, 5.879%, 11/9/1997 14,009,458
25,000,000 Norwest Corp., Series E, 5.799%, 10/26/1997 25,015,934
-----------
Total 96,925,812
-----------
BROKER/DEALERS -- 15.4%
30,000,000 Bear Stearns Cos., Inc., Series B, 5.689%,
11/12/1997 30,000,000
50,000,000 (h)Donaldson, Lufkin and Jenrette Securities Corp.,
Master Note, 5.655%, 9/1/1997 50,000,000
</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)
BROKER/DEALERS (continued)
60,000,000 (h)Goldman Sachs Group, LP, Master Note, 5.750%,
10/7/1997 60,000,000
52,200,000 (h)J.P. Morgan & Co., Inc., 5.635%, 9/1/1997 52,200,000
20,000,000 Morgan Stanley, Dean Witter, Discover & Co., Series
I, 6.001%, 10/6/1997 20,004,746
-----------
Total 212,204,746
-----------
CONSTRUCTION EQUIPMENT -- 2.9%
40,000,000 Caterpillar Financial Services Corp., 5.700%-5.786%,
10/11/1997-1/9/1998 40,000,000
-----------
DIVERSIFIED MANUFACTURING -- 0.7%
10,000,000 (h)Danaher Corp., 5.625%, 9/1/1997 10,000,000
-----------
INSURANCE -- 21.0%
20,000,000 (h)Combined Insurance Corp. of America, 5.799%,
11/3/1997 20,000,000
50,000,000 (h)Commonwealth Life Insurance, 5.840%, 9/1/1997 50,000,000
55,000,000 (h)General American Life Insurance Co., 5.870%,
9/1/1997 55,000,000
50,000,000 (h)Jackson National Life Insurance Company, 5.730%,
11/1/1997 50,000,000
40,000,000 (h)Transamerica Life Insurance and Annuity Co.,
5.809%, 10/6/1997 40,000,000
50,000,000 (h)Travelers Insurance Company, 5.831%, 10/1/1997 50,000,000
25,000,000 USAA Capital Corp., Series B, 5.792%, 11/17/1997 25,004,760
-----------
Total 290,004,760
-----------
LEASING -- 2.5%
25,000,000 PHH Corp., 5.647%, 11/4/1997 24,993,260
10,000,000 U.S. Leasing Capital Corp., 5.821%, 9/17/1997 9,999,854
-----------
Total 34,993,114
-----------
PERSONAL CREDIT -- 7.9%
50,000,000 American Honda Finance Corp., 5.791%, 10/6/1997 49,994,265
20,000,000 Avco Financial Services, Inc., 5.710%, 11/17/1997 20,000,000
25,000,000 General Motors Acceptance Corp., 5.539%, 11/11/1997 24,984,392
8,000,000 General Motors Acceptance Corp., 5.794%, 11/7/1997 8,001,198
5,000,000 Household Finance Corp., 5.938%, 9/15/1997 5,000,267
-----------
Total 107,980,122
-----------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Principal
Amount Description Value
---------------------------------------------------------------------------
<C> <S> <C>
VARIABLE RATE NOTES (continued)
UTILITIES -- 0.7%
$10,000,000 (h)Wisconsin Public Service, 5.490%, 9/5/1997 $10,000,000
--------------
TOTAL VARIABLE RATE NOTES 827,107,250
--------------
(B)REPURCHASE AGREEMENT -- 10.2%
140,546,000 Credit Suisse First Boston, 5.530%, dated
8/29/1997, due 9/2/1997 140,546,000
--------------
TOTAL INVESTMENTS (at amortized cost) $1,425,502,307
--------------
</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 $8,091,159, $16,167,644, $12,442,587,
$4,004,116 and $492,200,000 which represents 3.6%, 10.9%, 3.1%, 2.0% and
35.7% of Marshall International Stock Fund's, Marshall Short-Term Income
Fund's, Marshall Intermediate Bond Fund, Marshall Government Income Fund 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 16.9% of
Intermediate Tax-Free Fund's portfolio as calculated based upon total
portfolio market value.
The following abbreviations are used in these portfolios:
- --------------------------------------------------------------------------------
ADR--American Depositary Receipt LLC--Limited Liability Corporation
AMBAC--American Municipal Bond LOC--Letter of Credit
Assurance Corporation LP--Limited Partnership
BIGI--Bond Investors Guaranty Insurance MBIA--Municipal Bond Investors Insurance
CMO--Collateralized Mortgage Obligation PLC--Public Limited Company
COL--Collateralized PRF--Pre-Refunded
ETM--Escrowed to Maturity PRIDES--Preferred Redeemable Increased
FGIC--Financial Guaranty Insurance Dividend Equity Securities
Company PSF--Permanent School Fund
FNMA--Federal National Mortgage REIT--Real Estate Investment Trust
Association REMIC--Real Estate Mortgage Investment
FSA--Financial Security Assurance Conduit
GNMA--Government National Mortgage TBA--To Be Announced
Association TRANs--Tax Revenue Anticipation Notes
GO--General Obligation UT--Unlimited Tax
GDR--Global Depositary Receipt
GTD--Guaranteed
HFA--Housing Finance Authority/Agency
INS--Insured
ISD--Independent School District
- --------------------------------------------------------------------------------
<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 $ 271,855,946 $58,956,600 $61,079,084 $2,122,484 $ 331,729,502
Large-Cap Growth &
Income Fund 215,098,431 71,654,050 73,416,692 1,762,642 269,607,297
Mid-Cap Value Fund 144,679,853 20,988,355 24,520,917 3,532,562 145,143,436
Mid-Cap Growth Fund 197,975,286 29,102,264 31,128,080 2,025,816 196,983,454
International Stock Fund 224,174,487 38,256,941 44,388,408 6,131,467 226,849,492
Small-Cap Growth Fund 48,682,199 7,343,455 7,850,979 507,524 56,424,593
Short-Term Income Fund 147,670,700 403,236 782,904 379,668 148,780,691
Intermediate Bond Fund 420,685,316 1,675,316 3,487,192 1,811,876 398,234,287
Government Income Fund 275,931,775 1,199,688 1,625,033 425,345 203,642,447
Intermediate Tax-Free
Fund 85,571,691 1,616,037 1,668,976 52,939 88,107,958
Money Market Fund 1,425,502,307* -- -- -- 1,380,143,588
</TABLE>
*At amortized cost.
**The categories of investments are shown as a percentage of net assets at
August 31, 1997.
(See Notes which are an integral part of the Financial Statements)
August 31, 1997
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
------ ------- ------- ------- -------
MID-CAP
LARGE-CAP MID-CAP GROWTH
GROWTH & VALUE FUND
EQUITY INCOME FUND FUND (FORMERLY, INTERNATIONAL
INCOME (FORMERLY, STOCK (FORMERLY, VALUE MID-CAP STOCK
FUND FUND) EQUITY FUND) STOCK FUND) FUND
------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in
securities, at value $302,035,546 $264,012,481 $141,845,208 $213,676,550 $228,931,428
Investments in
repurchase agreements 28,777,000 5,740,000 2,823,000 4,401,000 --
Repurchase agreements
held as collateral
for securities
lending -- 17,000,000 21,000,000 9,000,000 33,500,000
Cash 311 265 936 164,439 --
Cash denominated in
foreign currencies
(at cost, $497,748) -- -- -- -- 483,028
Income receivable 789,488 392,331 331,069 43,211 665,105
Receivable for
investments sold 283,083 -- 2,185,030 2,550,493 --
Receivable for capital
stock sold 658,295 352,591 266,652 616,569 1,954,077
Net Receivable for
forward foreign
currency exchange
contracts -- -- -- -- 159
Receivable for daily
variation margin -- 26,500 -- 8,250 --
Deferred expenses 5,914 1,830 18,507 6,397 12,968
------------ ------------ ------------ ------------ ------------
Total assets 332,549,637 287,525,998 168,470,402 230,466,909 265,546,765
------------ ------------ ------------ ------------ ------------
LIABILITIES:
Payable to Bank -- -- -- -- 133,196
Income distribution
payable -- -- -- -- --
Payable for
investments purchased -- -- -- 3,742,420 1,033,006
Payable for capital
stock redeemed 463,384 161,947 32,846 76,132 92,367
Payable on collateral
due to broker -- 17,497,200 23,175,150 29,478,100 37,061,480
Payable for daily
variation margin -- 10,000 -- -- --
Payable for dollar
roll transactions -- -- -- -- --
Taxes payable -- -- -- -- 53,979
Accrued expenses 356,751 249,554 118,970 186,803 323,245
------------ ------------ ------------ ------------ ------------
Total liabilities 820,135 17,918,701 23,326,966 33,483,455 38,697,273
------------ ------------ ------------ ------------ ------------
NET ASSETS CONSIST OF:
Paid-in-capital 252,222,946 178,102,257 102,911,705 146,530,183 180,856,289
Net unrealized
appreciation
(depreciation) on
investments,
collateral, futures
contracts and foreign
currency translation 58,956,600 71,761,837 21,010,650 29,533,557 38,243,712
Accumulated net
realized gain (loss)
on investments,
futures contracts and
foreign currency
transactions 19,841,809 19,598,049 20,731,357 20,919,714 4,284,674
Undistributed net
investment income 708,147 145,154 489,724 -- 3,464,817
------------ ------------ ------------ ------------ ------------
Total Net Assets $331,729,502 $269,607,297 $145,143,436 $196,983,454 $226,849,492
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE,
Offering Price, and
Redemption Proceeds Per
Share:
Class A Shares $15.64 $13.96 $13.14 $14.82 $13.20
Class B Shares -- -- -- -- --
------------ ------------ ------------ ------------ ------------
SHARES OUTSTANDING:
Class A Shares 21,208,899 19,312,289 11,043,194 13,289,267 17,181,836
Class B Shares -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Total shares
outstanding ($0.0001
par value) 21,208,899 19,312,289 11,043,194 13,289,267 17,181,836
============ ============ ============ ============ ============
Investments, at
identified cost $271,855,946 $215,001,918 $144,657,558 $197,501,055 $224,150,848
============ ============ ============ ============ ============
Investments, at tax cost $271,855,946 $215,098,431 $144,679,853 $197,975,286 $224,174,487
============ ============ ============ ============ ============
</TABLE>
(See Notes which are an integral part of the Financial Statements)
[_] MARSHALL FUNDS
<TABLE>
<CAPTION>
------------ ------- ------- ------- ------- -------
SMALL-CAP
GROWTH
FUND
(FORMERLY, SHORT-TERM INTERMEDIATE GOVERNMENT INTERMEDIATE MONEY
SMALL-CAP INCOME BOND INCOME TAX-FREE MARKET
STOCK FUND) FUND FUND FUND FUND FUND
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$53,857,654 $128,533,936 $412,787,382 $247,482,463 $87,187,728 $1,284,956,307
2,168,000 19,540,000 3,317,000 29,649,000 -- 140,546,000
-- -- 6,256,250 -- -- --
649 765 446 811 -- 941
-- -- -- -- -- --
1,699 890,716 4,494,010 1,591,192 1,238,984 8,990,655
168,744 -- -- 50,368,038 -- --
326,229 353,687 300,822 295,546 15,000 556,636
-- -- -- -- -- --
9,400 -- -- -- -- --
-- 516 1,931 884 7,058 204,630
----------- ------------ ------------ ------------ ----------- --------------
56,532,375 149,319,620 427,157,841 329,387,934 88,448,770 1,435,255,169
----------- ------------ ------------ ------------ ----------- --------------
-- -- -- -- -- --
-- 409,955 948,022 542,186 285,283 4,569,123
-- -- -- 89,928,109 -- 49,973,375
400 50,000 1,015,841 145,625 -- 137,145
-- -- 26,697,913 -- -- --
-- -- -- -- -- --
-- -- -- 34,949,165 -- --
-- -- -- -- -- --
107,382 78,974 261,778 180,402 55,529 431,938
----------- ------------ ------------ ------------ ----------- --------------
107,782 538,929 28,923,554 125,745,487 340,812 55,111,581
----------- ------------ ------------ ------------ ----------- --------------
48,365,623 152,070,092 419,982,656 205,911,882 86,826,601 1,380,143,588
7,824,580 403,236 1,733,524 1,199,688 1,616,037 --
234,390 (3,692,637) (23,481,893) (3,469,123) (334,680) --
-- -- -- -- -- --
----------- ------------ ------------ ------------ ----------- --------------
$56,424,593 $148,780,691 $398,234,287 $203,642,447 $88,107,958 $1,380,143,588
----------- ------------ ------------ ------------ ----------- --------------
$12.19 $9.64 $9.44 $9.49 $10.04 $1.00
-- -- -- -- -- $1.00
----------- ------------ ------------ ------------ ----------- --------------
4,628,566 15,426,624 42,202,436 21,448,639 8,774,802 1,290,658,706
-- -- -- -- -- 89,484,882
----------- ------------ ------------ ------------ ----------- --------------
4,628,566 15,426,624 42,202,436 21,448,639 8,774,802 1,380,143,588
=========== ============ ============ ============ =========== ==============
$48,301,373 $147,670,700 $420,627,108 $275,931,775 $85,571,691 $1,425,502,307
=========== ============ ============ ============ =========== ==============
$48,682,199 $147,670,700 $420,685,316 $275,931,775 $85,571,691 $1,425,502,307
=========== ============ ============ ============ =========== ==============
</TABLE>
Year Ended August 31, 1997
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
------- ------- ------- ------- --------
MID-CAP
LARGE-CAP GROWTH
GROWTH & MID-CAP FUND
INCOME FUND VALUE FUND (FORMERLY,
EQUITY (FORMERLY, (FORMERLY, MID-CAP INTERNATIONAL
INCOME STOCK VALUE EQUITY STOCK STOCK
FUND FUND) FUND) FUND) FUND
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 1,936,551 $ 306,326 $ 827,952 $ 589,065 $ 1,684,713
Dividend income 7,324,268 4,721,449 3,214,291 646,202 4,613,569(b)
----------- ----------- ----------- ----------- -----------
Total income 9,260,819 5,027,775 4,042,243 1,235,267 6,298,282
----------- ----------- ----------- ----------- -----------
EXPENSES:
Investment advisory fee 1,964,826 1,877,032 1,245,668 1,288,819 1,857,261
Directors' fees 3,347 2,854 3,726 3,202 4,088
Administrative
personnel and services
fees 227,695 217,817 144,711 149,489 161,481
Custodian fees 53,256 53,009 36,818 41,288 188,669
Portfolio accounting
fees 70,246 61,707 46,108 40,756 72,830
Transfer and dividend
disbursing agent fees
and expenses 96,461 140,727 76,613 80,105 87,020
Shareholder services
fees 649,476 617,730 409,065 425,100 459,801
Capital stock
registration costs 65,672 34,995 17,168 26,167 52,141
Auditing fees 13,075 15,239 12,410 13,140 16,924
Legal fees 4,765 4,378 3,760 5,475 5,705
Printing and postage 8,471 6,793 9,046 8,131 10,430
Insurance premiums 3,464 3,213 2,540 2,730 4,053
Distribution services
fees -- -- -- -- --
Taxes 27,003 18,992 12,914 13,140 8,965
Miscellaneous 12,793 17,345 26,661 29,318 21,266
----------- ----------- ----------- ----------- -----------
Total expenses 3,200,550 3,071,831 2,047,208 2,126,860 2,950,634
----------- ----------- ----------- ----------- -----------
DEDUCT--
Waiver of investment
advisory fee -- -- -- -- --
Waiver of shareholder
services fees -- -- -- -- --
Waiver of portfolio
accounting fees -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total Waivers -- -- -- -- --
----------- ----------- ----------- ----------- -----------
NET EXPENSES 3,200,550 3,071,831 2,047,208 2,126,860 2,950,634
----------- ----------- ----------- ----------- -----------
NET INVESTMENT INCOME
OPERATING (LOSS) 6,060,269 1,955,944 1,995,035 (891,593) 3,347,648
----------- ----------- ----------- ----------- -----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS,
COLLATERAL, FOREIGN
CURRENCY AND FUTURES
CONTRACTS:
Net realized gain
(loss) on investment
transactions
(identified cost
basis) 21,575,654 19,212,749 23,414,759 22,473,728 4,406,045
Net realized gain on
foreign currency
transactions -- -- -- -- 718,647
Net realized gain on
futures contracts
(identified cost
basis) -- 439,089 61,447 636,447 --
Net change in
unrealized
appreciation
(depreciation) on
investments,
collateral, futures
contracts and foreign
currency translation 39,482,101 52,299,522 18,167,215 8,132,461 27,902,734
----------- ----------- ----------- ----------- -----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS
COLLATERAL, FOREIGN
CURRENCY AND FUTURES
CONTRACTS 61,057,755 71,951,360 41,643,421 31,242,636 33,027,426
----------- ----------- ----------- ----------- -----------
CHANGE IN NET ASSETS
RESULTING FROM
OPERATIONS $67,118,024 $73,907,304 $43,638,456 $30,351,043 $36,375,074
=========== =========== =========== =========== ===========
</TABLE>
(a)For the period from September 3, 1996 (date of intial public investment)
to August 31, 1997.
(b)Net of Foreign taxes withheld of $573,582 (c)Net of dollar roll interest
expense of $965,069 (d)Net of dollar roll interest expense of $727,107.
(See Notes which are an integral part of the Financial Statements)
[_] MARSHALL FUNDS
<TABLE>
<CAPTION>
- ---------- ------- ------- ------- ------- -------
SMALL-CAP
GROWTH
FUND
(FORMERLY,
SMALL-CAP SHORT-TERM INTERMEDIATE GOVERNMENT INTERMEDIATE MONEY
STOCK INCOME BOND INCOME TAX-FREE MARKET
FUND) (A) FUND FUND FUND FUND FUND
- ---------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$ 229,080 $8,530,492 $28,028,199(c) $13,006,605(d) $3,831,927 $71,720,527
86,947 -- -- -- -- --
- ---------- ---------- ----------- ----------- ---------- -----------
316,027 8,530,492 28,028,199 13,006,605 3,831,927 71,720,527
- ---------- ---------- ----------- ----------- ---------- -----------
368,209 736,245 2,440,381 1,304,960 463,700 6,354,005
3,000 3,216 3,159 2,460 2,555 3,350
44,185 106,697 354,123 151,306 67,231 1,105,666
10,964 24,542 65,673 34,799 15,457 152,080
47,330 49,518 87,787 55,875 52,243 146,127
42,764 37,718 52,587 88,594 35,548 222,351
91,950 303,595 1,004,126 430,633 191,129 254,160
30,869 24,520 65,294 31,327 17,756 104,746
-- 13,975 14,427 15,026 13,140 15,988
6,042 4,577 3,528 4,015 4,745 --
10,041 4,100 9,329 10,935 6,570 7,043
-- 1,735 4,374 2,837 1,817 10,590
-- -- -- -- -- 306,798
3,107 6,309 24,171 12,695 7,300 80,464
5,367 11,162 53,643 11,016 5,840 23,505
- ---------- ---------- ----------- ----------- ---------- -----------
663,828 1,327,909 4,182,602 2,156,478 885,031 8,786,873
- ---------- ---------- ----------- ----------- ---------- -----------
-- 429,010 346,194 272,824 238,359 3,304,082
-- 279,053 922,780 395,834 175,672 --
-- 19,536 -- -- -- --
- ---------- ---------- ----------- ----------- ---------- -----------
-- 727,599 1,268,974 668,658 414,031 3,304,082
- ---------- ---------- ----------- ----------- ---------- -----------
663,828 600,310 2,913,628 1,487,820 471,000 5,482,791
- ---------- ---------- ----------- ----------- ---------- -----------
(347,801) 7,930,182 25,114,571 11,518,785 3,360,927 66,237,736
- ---------- ---------- ----------- ----------- ---------- -----------
487,900 (434,668) (851,277) (523,651) 167,317 --
-- -- -- -- -- --
94,291 -- -- -- -- --
7,824,580 1,053,138 8,464,908 4,021,921 1,370,043 --
- ---------- ---------- ----------- ----------- ---------- -----------
8,406,771 618,470 7,613,631 3,498,270 1,537,360 --
- ---------- ---------- ----------- ----------- ---------- -----------
$8,058,970 $8,548,652 $32,728,202 $15,017,055 $4,898,287 $66,237,736
========== ========== =========== =========== ========== ===========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
-------------------------- -------------------------- ------------------------------
LARGE-CAP
EQUITY GROWTH & INCOME MID-CAP
INCOME FUND VALUE FUND
FUND (FORMERLY, STOCK FUND) (FORMERLY, VALUE EQUITY FUND)
-------------------------- -------------------------- ------------------------------
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
August 31, August 31, August 31, August 31, August 31, August 31,
1997 1996 1997 1996 1997 1996
------------ ------------ ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS--
Net investment
income/operating (loss) $ 6,060,269 $ 4,155,674 $ 1,955,944 $ 3,401,365 $ 1,995,035 $ 3,485,946
Net realized gain (loss)
on investment
transactions 21,575,654 13,207,077 19,212,749 38,737,034 23,414,759 27,219,156
Net realized gain (loss)
on foreign currency
transactions -- -- -- -- -- --
Net realized gain on
futures contracts -- -- 439,089 -- 61,447 --
Net change in unrealized
appreciation/depreciation
of investments,
collateral, futures
contracts and foreign
currency translation 39,482,101 8,421,937 52,299,522 (12,626,510) 18,167,215 (13,487,233)
------------ ------------ ------------ ------------ -------------- --------------
Change in net assets
resulting from
operations 67,118,024 25,784,688 73,907,304 29,511,889 43,638,456 17,217,869
------------ ------------ ------------ ------------ -------------- --------------
DISTRIBUTIONS TO
SHAREHOLDERS--
Dividends to shareholders
from net investment
income (5,919,458) (4,048,209) (2,297,758) (3,254,360) (2,184,196) (3,546,870)
Distributions to
shareholders from net
realized gain on
investments (13,127,663) (2,218,321) (35,001,329) (14,368,059) (28,282,066) (14,826,135)
------------ ------------ ------------ ------------ -------------- --------------
Change in net assets
from distributions to
shareholders (19,047,121) (6,266,530) (37,299,087) (17,622,419) (30,466,262) (18,373,005)
------------ ------------ ------------ ------------ -------------- --------------
CAPITAL STOCK
TRANSACTIONS--
Proceeds from sale of
shares 146,405,603 78,109,568 40,678,770 52,242,455 27,454,375 43,778,924
Net asset value of shares
issued to shareholders
in payment of
distributions declared 8,266,120 2,944,867 28,520,410 13,817,438 17,779,222 10,799,787
Cost of shares redeemed (44,415,622) (34,668,773) (87,783,174) (83,385,728) (108,327,995) (78,793,963)
------------ ------------ ------------ ------------ -------------- --------------
Change in net assets
from capital stock
transactions 110,256,101 46,385,662 (18,583,994) (17,325,835) (63,094,398) (24,215,252)
------------ ------------ ------------ ------------ -------------- --------------
Change in net assets 158,327,004 65,903,820 18,024,223 (5,436,365) (49,922,204) (25,370,388)
NET ASSETS:
Beginning of period 173,402,498 107,498,678 251,583,074 257,019,439 195,065,640 220,436,028
------------ ------------ ------------ ------------ -------------- --------------
End of period $331,729,502 $173,402,498 $269,607,297 $251,583,074 $145,143,436 $195,065,640
============ ============ ============ ============ ============== ==============
Undistributed net
investment income
included in net assets at
end of period $ 708,147 $ 567,336 $ 145,154 $ 486,968 $ 489,724 $ 678,885
============ ============ ============ ============ ============== ==============
Net gain (loss) as
computed for federal tax
purposes $ 21,559,963 $ 13,112,886 $ 19,705,533 $ 38,743,777 $ 23,476,206 $ 27,161,725
============ ============ ============ ============ ============== ==============
</TABLE>
*For the period from September 3, 1996 (date of initial public investment) to
August 31, 1997.
(See Notes which are an integral part of the Financial Statements)
[_] MARSHALL FUNDS
<TABLE>
<CAPTION>
-------------------------- -------------------------- ----------------- --------------------------
MID-CAP SMALL-CAP
GROWTH FUND GROWTH FUND SHORT-TERM
(FORMERLY, MID- INTERNATIONAL (FORMERLY, SMALL- INCOME
CAP STOCK FUND) STOCK FUND CAP STOCK FUND) FUND
-------------------------- -------------------------- ----------------- --------------------------
Year Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended Ended
August 31, August 31, August 31, August 31, August 31, August 31, August 31,
1997 1996 1997 1996 1997* 1997 1996
------------ ------------ ------------ ------------ ----------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
$ (891,593) $ (577,882) $ 3,347,648 $ 3,036,590 $ (347,801) $ 7,930,182 $ 5,545,327
22,473,728 16,139,633 4,406,045 1,683,883 487,900 (434,668) (479,042)
-- -- 718,647 262,327 -- -- --
636,447 344,671 -- -- 94,291 -- --
8,132,461 3,869,291 27,902,734 7,673,848 7,824,580 1,053,138 (793,668)
------------ ------------ ------------ ------------ ----------- ------------ ------------
30,351,043 19,775,713 36,375,074 12,656,648 8,058,970 8,548,652 4,272,617
------------ ------------ ------------ ------------ ----------- ------------ ------------
-- -- (3,691,414) (2,228,753) -- (7,930,182) (5,545,327)
(13,454,023) (8,032,341) (1,303,354) (281,633) -- -- --
------------ ------------ ------------ ------------ ----------- ------------ ------------
(13,454,023) (8,032,341) (4,994,768) (2,510,386) -- (7,930,182) (5,545,327)
------------ ------------ ------------ ------------ ----------- ------------ ------------
81,363,769 64,585,992 97,240,204 62,521,333 58,053,558 89,532,721 69,199,369
7,216,847 4,740,168 2,303,869 1,224,349 -- 3,439,474 3,021,176
(51,730,069) (46,089,710) (47,857,918) (24,156,467) (9,687,935) (45,656,058) (54,374,917)
------------ ------------ ------------ ------------ ----------- ------------ ------------
36,850,547 23,236,450 51,686,155 39,589,215 48,365,623 47,316,137 17,845,628
------------ ------------ ------------ ------------ ----------- ------------ ------------
53,747,567 34,979,822 83,066,461 49,735,477 56,424,593 47,934,607 16,572,918
143,235,887 108,256,065 143,783,031 94,047,554 -- 100,846,084 84,273,166
------------ ------------ ------------ ------------ ----------- ------------ ------------
$196,983,454 $143,235,887 $226,849,492 $143,783,031 $56,424,593 $148,780,691 $100,846,084
============ ============ ============ ============ =========== ============ ============
-- -- $ 3,464,817 $ 2,995,403 -- -- --
============ ============ ============ ============ =========== ============ ============
$ 23,469,546 $ 16,225,854 $ 4,285,886 $ 1,584,255 $ 1,063,315 $ (545,815) $ (556,158)
============ ============ ============ ============ =========== ============ ============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
--------------------------
INTERMEDIATE
BOND FUND
--------------------------
Year Year
Ended Ended
August 31, August 31,
1997 1996
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS--
Net investment income $ 25,114,571 $ 23,026,563
Net realized gain (loss) on investments (851,277) 2,488,022
Net change in unrealized appreciation/depreciation
of investments, collateral, futures contracts,
and foreign currency transactions 8,464,908 (13,320,804)
------------ ------------
Change in net assets resulting from operations 32,728,202 12,193,781
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS--
Dividends to shareholders from net investment
income:
Class A Shares (25,114,571) (23,026,563)
Class B Shares -- --
------------ ------------
Change in net assets from distributions to
shareholders (25,114,571) (23,026,563)
------------ ------------
CAPITAL STOCK TRANSACTIONS--
Proceeds from sale of shares 100,375,816 152,140,924
Net asset value of shares issued to shareholders
in payment of dividends declared 14,243,926 14,029,528
Cost of shares redeemed (127,655,812) (95,751,626)
------------ ------------
Change in net assets from capital stock
transactions (13,036,070) 70,418,826
------------ ------------
Change in net assets (5,422,439) 59,586,044
NET ASSETS:
Beginning of period 403,656,726 344,070,682
------------ ------------
End of period $398,234,287 $403,656,726
============ ============
Undistributed net investment income included in net
assets at end of period -- --
============ ============
Net gain (loss) as computed for federal tax
purposes $ 128,681 $ (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
-------------------------- ------------------------ ------------------------------
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
August 31, August 31, August 31, August 31, August 31, August 31,
1997 1996 1997 1996 1997 1996
------------ ------------ ----------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C>
$ 11,518,785 $ 8,145,710 $ 3,360,927 $ 2,275,789 $ 66,237,736 $ 59,009,479
(523,651) (620,860) 167,317 148,532 -- --
4,021,921 (3,330,343) 1,370,043 (698,763) -- --
------------ ------------ ----------- ----------- -------------- --------------
15,017,055 4,194,507 4,898,287 1,725,558 66,237,736 59,009,479
------------ ------------ ----------- ----------- -------------- --------------
(11,518,785) (8,145,710) (3,360,927) (2,275,789) (61,191,127) (55,633,616)
-- -- -- -- (5,046,609) (3,375,863)
------------ ------------ ----------- ----------- -------------- --------------
(11,518,785) (8,145,710) (3,360,927) (2,275,789) (66,237,736) (59,009,479)
------------ ------------ ----------- ----------- -------------- --------------
83,480,146 55,044,557 29,527,383 28,270,867 4,388,043,812 3,908,130,179
6,106,482 4,687,901 316,077 249,701 17,152,907 13,501,781
(27,900,306) (21,030,976) (9,200,113) (8,093,895) (4,149,423,646) (3,956,214,914)
------------ ------------ ----------- ----------- -------------- --------------
61,686,322 38,701,482 20,643,347 20,426,673 255,773,073 (34,582,954)
------------ ------------ ----------- ----------- -------------- --------------
65,184,592 34,750,279 22,180,707 19,876,442 255,773,073 (34,582,954)
138,457,855 103,707,576 65,927,251 46,050,809 1,124,370,515 1,158,953,469
------------ ------------ ----------- ----------- -------------- --------------
$203,642,447 $138,457,855 $88,107,958 $65,927,251 $1,380,143,588 $1,124,370,515
============ ============ =========== =========== ============== ==============
-- -- -- -- -- --
============ ============ =========== =========== ============== ==============
$ (1,184,492) $ (983,300) $ 167,317 $ (247,302) -- --
============ ============ =========== =========== ============== ==============
</TABLE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Distributions to
Shareholders from
Net Realized and Net Realized Gain
Unrealized on Investment Distributions
Gain/(Loss) on Dividends to Transactions, to
Net Asset Net Investments, Shareholders Futures Shareholders in
Value, Investment Collateral, Futures Total from from Net Contracts, and Excess of
beginning Income/ Contracts, and Investment Investment Foreign Currency Net Investment
Period Ended August 31, of period Operating (Loss) Foreign Currency Operations Income Transactions Income
- ----------------------- --------- ---------------- ------------------- ---------- ------------ ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
EQUITY INCOME FUND
1994(a) $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 $13.00 0.33 3.51 3.84 (0.34) (0.86)
LARGE-CAP GROWTH & INCOME FUND (FORMERLY, 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 $12.16 0.10 3.76 3.86 (0.12) (1.94) --
MID-CAP VALUE FUND (FORMERLY, VALUE EQUITY FUND)
1994(a) $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 $11.98 0.15 3.05 3.20 (0.15) (1.89) --
MID-CAP GROWTH FUND (FORMERLY, MID-CAP STOCK FUND)
1994(a) $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 $13.56 (0.08) 2.56 2.48 -- (1.22) --
INTERNATIONAL STOCK FUND
1995(c) $10.00 0.20 0.01 0.21 (0.05) -- --
1996 $10.16 0.21 0.96 1.17 (0.22) (0.03) --
1997 $11.08 0.18 2.29 2.47 (0.26) (0.09) --
SMALL-CAP GROWTH FUND (FORMERLY, SMALL-CAP STOCK FUND)
1997(d) $10.00 (0.08) 2.27 2.19 -- -- --
SHORT-TERM INCOME FUND
1993(e) $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 $ 9.59 0.63 0.04 0.67 (0.62) -- --
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 $ 9.26 0.58 0.18 0.76 (0.58) -- --
GOVERNMENT INCOME FUND
1993(f) $10.00 0.47 0.16 0.63 (0.41) -- --
1994 $10.22 0.64 (0.78) (0.14) (0.68) (0.14) --
1995 $ 9.26 0.60 0.26 0.86 (0.62) -- --
1996 $ 9.51 0.62 (0.24) 0.38 (0.62) -- --
1997 $ 9.27 0.62 0.22 0.84 (0.62) -- --
INTERMEDIATE TAX-FREE FUND
1994(g) $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 $ 9.83 0.43 0.21 0.64 (0.43) -- --
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 $ 1.00 0.05 -- 0.05 (0.05) -- --
MONEY MARKET FUND--CLASS B SHARES
1993(h) $ 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 $ 1.00 0.05 -- 0.05 (0.05) -- --
</TABLE>
(a) Reflects operations for the period from October 1, 1993 (date of initial
public investment) to August 31, 1994.
(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 September 2, 1994 (date of initial
public investment) to August 31, 1995.
(d) Reflects operations for the period from September 3, 1996 (date of initial
public investment) to August 31, 1997.
(e) Reflects operations for the period from November 2, 1992 (date of initial
public investment) to August 31, 1993.
(f) Reflects operations for the period from December 14, 1992 (date of initial
public investment) to August 31, 1993.
(g) Reflects operations for the period from February 2, 1994 (date of initial
public investment) to August 31, 1994.
(h) Reflects operations for the period from December 17, 1992 (date of initial
public investment) to August 31, 1993.
(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) 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 Commission Portfolio
Total Value, end Total Investment Expense of period Rate Turnover
Distributions of period Return(i) Expenses Income Waiver(k) (000 omitted) Paid(l) 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%
(1.20) $15.64 30.95% 1.22% 2.31% -- $ 331,730 $0.0598 61%
(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%
(2.06) $13.96 34.50% 1.23% 0.78% -- $ 269,607 $0.0612 43%
(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 $0.0591 67%
(2.04) $13.14 30.20% 1.23% 1.20% -- $ 145,143 $0.0593 55%
(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) $14.82 19.14% 1.24% (0.52%) -- $ 196,983 $0.0600 211%
(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) $13.20 22.73% 1.59% 1.80% -- $ 226,849 $0.0216 26%
-- $12.19 21.90% 1.80%(j) (0.94%)(j) -- $ 56,425 $0.0600 183%
(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%
(0.62) $ 9.64 7.20% 0.49% 6.46% 0.59% $ 148,781 -- 101%
(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% $ 403,657 -- 201%
(0.58) $ 9.44 8.42% 0.72% 6.17% 0.31% $ 398,234 -- 144%
(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%
(0.62) $ 9.49 9.35% 0.86% 6.62% 0.38% $ 203,642 -- 299%
(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%
(0.43) $10.04 6.67% 0.61% 4.35% 0.54% $ 88,108 -- 53%
(0.02) $ 1.00 2.33% 0.40%(j) 2.97%(j) 0.28%(j) $ 7775,890 -- --
(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 -- --
(0.05) $ 1.00 5.35% 0.41% 5.22% 0.26% $1,290,659 -- --
(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 -- --
(0.05) $ 1.00 5.04% 0.71% 4.93% 0.26% $ 89,485 -- --
</TABLE>
August 31, 1997
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 Large-Cap Growth & Income Fund ("Large-Cap Growth & Growth of capital and income.
Income Fund") (formerly, Marshall Stock Fund)
Marshall Mid-Cap Value Fund ("Mid-Cap Value Fund") Long-term capital growth and income.
(formerly, Marshall Value Equity Fund)
Marshall Mid-Cap Growth Fund ("Mid-Cap Growth Fund") Appreciation of capital.
(formerly, Marshall Mid-Cap Stock Fund)
Marshall International Stock Fund ("International Stock Fund") Long-term capital growth.
Marshall Small-Cap Growth Fund ("Small-Cap Growth Fund") Appreciation of capital.
(formerly, Marshall Small-Cap Stock Fund)
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.
Effective June 1, 1997, Marshall Stock Fund, Marshall Value Equity Fund,
Marshall Mid-Cap Stock Fund, and Marshall Small-Cap Stock Fund, were renamed the
Marshall Large-Cap Growth & Income Fund, Marshall Mid-Cap Value Fund, Marshall
Mid-Cap Growth Fund, and Marshall Small-Cap Growth Fund, respectively.
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's use of the amortized cost method to value portfolio securities is in
accordance with Rule 2a-7 under the Act. For fluctuating net asset value 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.
[_] MARSHALL FUNDS
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 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.
However, federal taxes may be imposed on 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, 1997, 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 CAPITAL LOSS
CARRYFORWARD CARRYFORWARD CARRYFORWARD CARRYFORWARD TOTAL CAPITAL
TO EXPIRE IN TO EXPIRE IN TO EXPIRE IN TO EXPIRE IN LOSS
FUND 2002 2003 2004 2005 CARRYFORWARD
- ---- ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Short-Term Income Fund $302,405 $ 1,898,650 $ 556,158 $ 545,815 $ 3,303,028
Intermediate Bond Fund -- $16,402,553 $6,100,494 -- $22,503,047
Government Income Fund $155,781 $ 1,806,126 -- $1,184,492 $ 3,146,399
Intermediate Tax-Free
Fund -- $ 87,377 $ 247,302 -- $ 334,679
</TABLE>
- --------------------------------------------------------------------------------
Net realized capital losses on Short-Term Income Fund, Intermediate Bond Fund
and Government Income Fund of $389,609, $921,750 and $322,458, respectively,
attributable to security transactions incurred after October 31, 1996, were
treated as arising on the first day of each Fund's next taxable year (September
1, 1997).
Net realized losses on International Stock Fund of $223,360, attributable to
foreign currency transactions incurred after October 31, 1996, were treated as
arising on the first day of International Stock Fund's next taxable year
(September 1, 1997).
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--Large-Cap Growth & Income Fund, Mid-Cap Value Fund, Mid-
Cap Growth Fund and Small-Cap Growth 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.
NOTES TO FINANCIAL STATEMENTS (continued)
At August 31, 1997 the Funds had outstanding futures contracts as set forth
below:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION/
FUND EXPIRATION DATE CONTRACTS TO RECEIVE POSITION (DEPRECIATION)
- ---- --------------- -------------------- -------- --------------
<S> <C> <C> <C> <C>
Large-Cap Growth & Income Fund September 1997 10 S&P 500 Futures Long $ 11,274
Mid-Cap Growth Fund September 1997 5 S&P 500 Futures Long ($42,938)
Small-Cap Growth Fund September 1997 8 Russell 2000 Long $100,299
</TABLE>
- --------------------------------------------------------------------------------
As of August 31, 1997, Mid-Cap Value Fund had no outstanding futures
contracts.
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 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 August 31, 1997, International Stock Fund had outstanding foreign
exchange contracts as set forth below:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN CURRENCY UNITS CONTRACTS AT UNREALIZED
SETTLEMENT DATE TO DELIVER/RECEIVE IN EXCHANGE FOR VALUE APPRECIATION
- --------------- ---------------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
Contracts Purchased:
September 2, 1997 34,652 Pound Sterling $56,014 $56,173 $159
</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 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 fee.
[_] MARSHALL FUNDS
As of August 31,1997, collateral held for securities loaned was as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET VALUE OF MARKET VALUE
FUND SECURITIES LOANED OF COLLATERAL
- ---- ----------------- -------------
<S> <C> <C>
Large-Cap Growth & Income Fund $16,873,800 $17,497,200
Mid-Cap Value Fund $21,225,756 $23,175,150
Mid-Cap Growth Fund $28,508,169 $29,478,100
International Stock Fund $35,138,582 $37,061,480
Intermediate Bond Fund $25,753,472 $26,697,913
</TABLE>
- --------------------------------------------------------------------------------
Reclassification--Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are attributed to differing book/tax
treatments for net operating losses, marked to market of Passive Foreign
Investment Companies, and foreign currency transactions. Amount as of August 31,
1997, have been reclassified to reflect the following:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCREASE (DECREASE)
---------------------------------------
UNDISTRIBUTED NET
INVESTMENT
ACCUMULATED INCOME/ACCUMULATED
NET REALIZED DISTRIBUTIONS IN EXCESS OF
FUND NAME GAIN/LOSS NET INVESTMENT INCOME
- --------- ------------ --------------------------
<S> <C> <C>
Mid-Cap Growth Fund ($891,593) $891,593
Small-Cap Growth Fund ($347,801) $347,801
International Stock Fund ($813,180) $813,180
</TABLE>
- --------------------------------------------------------------------------------
Net investment income, net realized gains/losses, and net assets were not
affected by this change.
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 Fund
will not incur any registration costs upon such resales. International Stock
Fund's and Short-Term Income Fund's restricted securities are valued at the
price provided by dealers in the secondary market or, if no market 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 Act.
Additional information on each restricted security held by International Stock
Fund at August 31, 1997, is as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
- -------- ---------------- ----------------
<S> <C> <C>
Telefonica De Argentina S.A., ADR 9/7/94-8/21/96 $1,557,970
Qantas Airways Ltd., ADR 7/31/95-3/7/96 $ 832,512
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 August 31, 1997, is as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
- -------- ---------------- ----------------
<S> <C> <C>
Corestates Capital Corp., Bank Guarantee,
6.1325%, 2/15/2027 2/25/97 $3,916,040
Edison Funding Co., Sr. Note, 6.75%,
12/17/1999 6/4/97 $4,996,300
Florida Windstorm Under, 6.50%, 8/25/2002 7/31/97 $3,244,995
HSB Group, Inc. 6.66%, 7/15/2027 7/10/97 $3,958,600
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
Additional information on the restricted security held by Intermediate Bond
Fund at August 31, 1997, is as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACQUISITION DATE ACQUISITION COST
---------------- ----------------
<S> <C> <C>
Starbank Capital Trust Series 144A, 6.578%,
6/15/2027 6/5/97 $12,379,500
</TABLE>
- --------------------------------------------------------------------------------
Additional information on the restricted security held by Government Income
Fund at August 31, 1997, is as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACQUISITION DATE ACQUISITION COST
---------------- ----------------
<S> <C> <C>
HSB Group, Inc., Floating Rate Note, 6.66%,
10/15/1997 7/10/97 $3,958,600
</TABLE>
- --------------------------------------------------------------------------------
Additional information on each restricted security held by Money Market Fund
at August 31, 1997, is as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
- -------- ---------------- ----------------
<S> <C> <C>
Combined Insurance Corp. of America, 5.799%,
11/3/1997 5/7/97 $20,000,000
Commonwealth Life Insurance, 5.840%,
9/1/1997 8/2/93-10/15/96 $50,000,000
Danaher Corp., 5.625%, 9/1/1997 4/9/97 $10,000,000
Donaldson, Lufkin and Jenrette Securities
Corp., Master Note, 5.655%, 9/1/1997 7/23/97 $50,000,000
General American Life Insurance Co., 5.870%,
9/1/1997 9/3/96-2/27/97 $55,000,000
Goldman Sachs Group, LP, Master Note,
5.750%, 10/7/1997 4/10/97-7/21/97 $60,000,000
Jackson National Life Insurance Company,
5.730%, 11/1/1997 4/8/96 $50,000,000
J.P. Morgan & Co., Inc., 5.635%, 9/1/1997 4/4/94-1/15/97 $52,200,000
Republic National Bank of New York, 5.725%,
1/1/2020 2/28/97-3/17/97 $25,000,000
Transamerica Life Insurance and Annuity Co.,
5.809%, 10/6/1997 1/6/97 $40,000,000
Travelers Insurance Company, 5.831%,
10/1/1997 1/20/97 $50,000,000
Willamette Industries, Inc., 5.718%,
1/1/2020 7/1/97-7/8/97 $20,000,000
Wisconsin Public Service, 5.490%, 9/5/1997 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.
3. CAPITAL STOCK
The Articles of Incorporation permit the Directors to issue 50 billion full
and fractional shares of common stock, par value $0.0001 per share. At August
31, 1997, the capital paid-in was as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND CAPITAL PAID-
- ---- IN
--------------
<S> <C>
Equity Income Fund $ 252,222,946
Large-Cap Growth & Income Fund $ 178,102,257
Mid-Cap Value Fund $ 102,911,705
Mid-Cap Growth Fund $ 146,530,183
International Stock Fund $ 180,856,289
Small-Cap Growth Fund $ 48,365,623
Short-Term Income Fund $ 152,070,092
Intermediate Bond Fund $ 419,982,656
Government Income Fund $ 205,911,882
Intermediate Tax-Free Fund $ 86,826,601
Money Market Fund $1,380,143,588
</TABLE>
- --------------------------------------------------------------------------------
[_] MARSHALL FUNDS
Transactions in capital stock were as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------- ---------------------- ----------------------
LARGE-CAP GROWTH &
EQUITY INCOME FUND INCOME FUND MID-CAP VALUE FUND
---------------------- ---------------------- ----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1997 1996 1997 1996 1997 1996
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 10,346,734 6,255,226 3,109,742 4,298,980 2,321,462 3,603,620
Shares issued to
shareholders in payment
of distributions
declared 598,334 238,663 2,355,870 1,144,142 1,614,014 930,711
Shares redeemed (3,074,398) (2,740,860) (6,850,139) (6,826,659) (9,178,441) (6,491,712)
---------- ---------- ---------- ---------- ---------- ----------
Net change resulting
from share transactions 7,870,670 3,753,029 (1,384,527) (1,383,537) (5,242,965) (1,957,381)
========== ========== ========== ========== ========== ==========
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------- ---------------------- ----------------
INTERNATIONAL SMALL-CAP GROWTH
MID-CAP GROWTH FUND STOCK FUND FUND
---------------------- ---------------------- ----------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1997 1996 1997 1996 1997*
---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 6,045,656 4,934,068 7,818,946 5,874,333 5,546,179
Shares issued to
shareholders in payment
of distributions
declared 534,978 406,183 197,927 120,388 --
Shares redeemed (3,856,291) (3,579,779) (3,814,168) (2,273,523) (917,613)
---------- ---------- ---------- ---------- ---------
Net change resulting
from share transactions 2,724,343 1,760,472 4,202,705 3,721,198 4,628,566
========== ========== ========== ========== =========
</TABLE>
- --------------------------------------------------------------------------------
*For the period from September 3, 1996 (date of initial public investment) to
August 31, 1997.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------- ------------------------ ----------------------
SHORT-TERM GOVERNMENT
INCOME FUND INTERMEDIATE BOND FUND INCOME FUND
---------------------- ------------------------ ----------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1997 1996 1997 1996 1997 1996
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 9,291,644 7,157,123 10,675,888 15,992,321 8,834,407 5,753,556
Shares issued to
shareholders in payment
of distributions
declared 356,927 311,379 1,513,322 1,476,468 646,704 494,460
Shares redeemed (4,738,729) (5,605,778) (13,568,319) (10,085,356) (2,966,414) (2,222,851)
---------- ---------- ----------- ----------- ---------- ----------
Net change resulting
from share transactions 4,909,842 1,862,724 (1,379,109) 7,383,433 6,514,697 4,025,165
========== ========== =========== =========== ========== ==========
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------
INTERMEDIATE
TAX-FREE FUND
----------------------
YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31,
1997 1996
---------- ----------
<S> <C> <C>
Shares sold 2,962,645 2,848,116
Shares issued to shareholders in payment of 31,656 25,159
distributions declared
Shares redeemed (923,630) (816,031)
--------- ---------
Net change resulting from share transactions 2,070,671 2,057,244
========= =========
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------
MONEY MARKET FUND
------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31,
1997 1996
-------------- --------------
<S> <C> <C>
CLASS A SHARES
Shares sold 3,774,164,146 3,347,680,311
Shares issued to shareholders in payment of
distributions declared 12,155,219 10,071,706
Shares redeemed (3,535,320,070) (3,446,715,442)
-------------- --------------
Net change resulting from Class A Share
transactions 250,999,295 (88,963,425)
============== ==============
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------
MONEY MARKET FUND
--------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, AUGUST 31,
1997 1996
------------ ------------
<S> <C> <C>
CLASS B SHARES
Shares sold 613,879,666 560,449,868
Shares issued to shareholders in payment of
distributions declared 4,997,688 3,430,075
Shares redeemed (614,103,576) (509,499,472)
------------ ------------
Net change resulting from Class B Share
transactions 4,773,778 54,380,471
------------ ------------
Net change resulting from Fund Share
transactions 255,773,073 (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.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND ANNUAL RATE
- ---- -----------
<S> <C>
Equity Income Fund 0.75%
Large-Cap Growth & Income Fund 0.75%
Mid-Cap Value Fund 0.75%
Mid-Cap Growth Fund 0.75%
International Stock Fund 1.00%
Small-Cap Growth 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 Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Funds with administrative
personnel and services. The fee paid to FAS is based on the level of average
aggregate daily net assets of the Corporation for the period except for the
Small-Cap Growth Fund which is based on the Fund's average daily net assets.
Distribution Services Fee--International Stock Fund, Small-Cap Growth 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 Funds' 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 Growth Fund and Money
[_] MARSHALL FUNDS
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 Growth Fund and Money
Market Fund's Class B Shares annually, to compensate FSC. The International
Stock Fund and Small-Cap Growth 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
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. Marshall Funds Investor
Services ("MFIS") is the shareholder servicing agent for the Money Market Fund.
The Money Market Fund may pay MFIS a fee equal to approximately 0.02% of the
average daily net assets for the period of the Fund for which MFIS provides
shareholder services. MFIS may voluntarily choose to waive any portion of its
fee. MFIS can modify or terminate this voluntary waiver at any time at its sole
discretion.
Transfer and Dividend Disbursing Agent Fees and Expenses--Federated Services
Company ("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. FServ may
voluntarily choose to waive any portion of its fee.
Custodian Fees--Marshall & Ilsley Trust Co. is the Funds' custodian. Marshall
& Ilsley Trust Co. 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 FAS.
The Funds have agreed to reimburse FAS for the organizational expenses during
the five year period following each Fund's effective date. For the period ended
August 31, 1997, the following amounts were paid pursuant to this agreement:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ORGANIZATIONAL ORGANIZATIONAL
FUND EXPENSES EXPENSES PAID
- ---- -------------- --------------
<S> <C> <C>
Equity Income Fund $18,857 $ 4,609
Large-Cap Growth & Income Fund $30,018 $12,611
Mid-Cap Value Fund $18,485 $ 4,518
Mid-Cap Growth Fund $16,434 $ 4,017
International Stock Fund $18,401 $ 3,809
Small-Cap Growth Fund $35,592 $ 6,723
Short-Term Income Fund $23,033 $ 7,778
Intermediate Bond Fund $23,413 $ 9,750
Government Income Fund $22,735 $ 9,475
Intermediate Tax-Free Fund $16,416 $ 3,187
Money Market Fund $59,536 $24,429
</TABLE>
- --------------------------------------------------------------------------------
General--Certain of the Officers and Directors of the Corporation are Officers
and Directors of the above companies.
NOTES TO FINANCIAL STATEMENTS (continued)
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended August 31, 1997, were as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND PURCHASES SALES
- ---- ------------ ------------
<S> <C> <C>
Equity Income Fund $228,621,571 $137,423,624
Large-Cap Growth & Income Fund $104,257,030 $159,789,936
Mid-Cap Value Fund $ 82,062,627 $145,772,153
Mid-Cap Growth Fund $363,222,604 $338,949,459
International Stock Fund $ 67,054,122 $ 41,229,105
Small-Cap Growth Fund $110,612,865 $ 64,483,516
Short-Term Income Fund $143,329,174 $109,823,574
Intermediate Bond Fund $582,970,627 $613,758,082
Government Income Fund $678,989,835 $572,939,816
Intermediate Tax-Free Fund $ 60,268,158 $ 38,913,954
</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.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
MARSHALL EQUITY INCOME FUND
MARSHALL LARGE-CAP GROWTH & INCOME FUND
MARSHALL MID-CAP VALUE FUND MARSHALL MID-CAP GROWTH FUND MARSHALL INTERNATIONAL
STOCK FUND MARSHALL SMALL-CAP GROWTH FUND MARSHALL SHORT-TERM INCOME FUND
MARSHALL INTERMEDIATE BOND FUND MARSHALL GOVERNMENT INCOME FUND MARSHALL
INTERMEDIATE TAX-FREE FUND MARSHALL MONEY MARKET FUND
We have audited the accompanying statements of assets and liabilities, including
the schedules of portfolio of investments of the Marshall Equity Income Fund,
the Marshall Large-Cap Growth & Income Fund, the Marshall Mid-Cap Value Fund,
the Marshall Mid-Cap Growth Fund, the Marshall International Stock Fund, the
Marshall Small-Cap Growth Fund, the Marshall Short-Term Income Fund, the
Marshall Intermediate Bond Fund, the Marshall Government Income Fund, the
Marshall Intermediate Tax-Free Fund, and the Marshall Money Market Fund (the
eleven portfolios constituting the Marshall Funds, Inc., a Wisconsin
corporation), as of August 31, 1997, and the related statements of operations,
changes in net assets and the financial highlights for the periods presented.
These financial statements and financial highlights are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1997, by correspondence with the custodian and brokers. As to
securities purchased but not received, we requested confirmation from brokers
and, when replies were not received, we carried out other alternative auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting the Marshall Funds, Inc., as
identified above, the results of their operations, the changes in their net
assets and their financial highlights for the periods presented, in conformity
with generally accepted accounting principles.
Arthur Andersen LLP
Pittsburgh, Pennsylvania,
October 17, 1997
DIRECTORS OFFICERS
Ody J. Fish Edward C. Gonzales
Chairman and Treasurer
John DeVincentis
Joseph S. Machi
Edward C. Gonzales Vice President and Assistant Treasurer
Paul E. Hassett Peter J. Germain
Secretary
Brooke J. Billick
Assistant 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.
Thisreport is authorized for distribution to prospective investors only when
preceded or accompanied by the Funds' prospectus, which contains facts
concerning each Fund's objective and policies, management
fees, expenses, and other information.
[LOGO]
Marshall Funds Investor Services
1000 North Water Street
P.O. Box 1348
Milwaukee, Wisconsin 53201-1348
800-236-FUND (3863) or 414-287-8595
TDD: Speech and Hearing Impaired Services
800-209-3520
www.marshallfunds.com
Federated Securities Corp., Distributor G00406-02 (10/97)
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
August 31, 1997. The information is as follows: Financial, 27.6%; Energy, 16.2%;
Consumer Non-Durables, 15.7%; Utilities, 12.9%; Raw Materials/Intermediate
Goods, 7.0%. The second chart outlines the Equity Income Fund's five largest
stock holdings and its percentage of net assets as of August 31, 1997. The
information is as follows: Royal Dutch Petroleum Co., 2.8%; Philip Morris
Companies, Inc., 2.7%; Xerox Corporation, 2.2%; Exxon Corp., 1.9%; Bristol-Myers
Squibb Co., 1.9%.
2A. The graphic representation here displayed consists of one chart outlining
the average annual total returns for the Equity Income Fund as of August 31,
1997 for the 1-year, 3-year, and since inception (9/30/93) periods. The returns
are as follows: 30.95%; 20.14%; and 17.54%, respectively.
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 representation 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 August 31, 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 $18,847; $21,557; and
$18,194, respectively.
1B. The graphic representation here displayed consists of two charts. One chart
outlines the top five business sectors that the Marshall Large-Cap Growth &
Income Fund ("Large-Cap Growth & Income Fund") invests in as well as its
percentage of net assets as of August 31, 1997. The information is as follows:
Consumer Non-Durables, 34.5%; Capital Goods, 19.2%; Financial, 17.8%; Utilities,
8.4%; Energy, 7.9%. The second chart outlines the Large-Cap Growth & Income
Fund's five largest stock holdings and its percentage of net assets as of August
31, 1997. The information is as follows: General Electric Company, 2.9%; Philip
Morris Companies, Inc., 2.8%; International Business Machines Corp., 2.7%; Exxon
Corp., 2.6%; and Bank America Corporation, 2.3%.
2B. The graphic representation here displayed consists of one chart outlining
the average annual total returns for the Large-Cap Growth & Income Fund as of
August 31, 1997 for the 1-year, 3-year, and since inception (11/20/92) periods.
The returns are as follows: 34.50%; 20.58%; and 12.95%, respectively.
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 Large-Cap Growth & 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 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 Large-Cap Growth
& Income Fund and S&P 500 and LGIF from its inception on November 20, 1992 to
August 31, 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 Large-Cap Growth & Income Fund as compared to S&P 500 and
LGIF; the ending values are $15,410; $19,489; and $18,499, respectively.
1C. The graphic representation here displayed consists of two charts. One chart
outlines the top five business sectors that the Marshall Mid-Cap Value Fund
("Mid-Cap Value Fund") invests in as well as its percentage of net assets as of
August 31, 1997. The information is as follows: Consumer Non-Durables, 27.4%;
Raw Materials/Intermediate Goods, 23.5%; Consumer Durables, 8.4%; Capital Goods,
8.0%; and Telecommunications, 7.4%. The second chart outlines the Mid-Cap Value
Fund's five largest stock holdings and its percentage of net assets as of August
31, 1997. The information is as follows: Silicon Graphics, Inc., 3.8%; Stewart &
Stevenson Services, 3.5%; Wellman, Inc., 3.2%; Calgon Carbon Corp., 3.2%; and
Imperial Chemical Industries, PLC, ADR, 3.2%.
2C. The graphic representation here displayed consists of one chart outlining
the average annual total returns for the Mid-Cap Value Fund as of August 31,
1997 for the 1-year, 3-year, and since inception (9/30/93) periods. The returns
are as follows: 30.20%; 17.07%; and 15.75%, respectively.
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 Mid-Cap Value Fund is represented by a solid line, whereas
Standard & Poor's Mid-Cap 400 Index ("S&P 400") is represented by a broken line,
Lipper Mid-Cap Funds Index ("LMCFI") is represented by a broken dotted line, and
Standard & Poor's 500 Index ("S&P 500") 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 Value Fund, S&P 400, LMCFI,
and S&P 500 from its inception on September 30, 1993 to August 31, 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
Value Fund as compared to S&P 400, LMCFI, and S&P 500; the ending values are
$17,746, $19,164, $17,872, and $21,557, respectively.
1D. The graphic representation here displayed consists of two charts. One chart
outlines the top five business sectors that the Marshall Mid-Cap Growth Fund
("Mid-Cap Growth Fund") invests in as well as its percentage of net assets as of
August 31, 1997. The information is as follows: Consumer Non-Durables, 69.3%;
Financial, 11.7%; Telecommunications, 8.0%; Capital Goods, 5.3%; and Insurance,
2.1%. The second chart outlines the Mid-Cap Growth Fund's five largest stock
holdings and its percentage of net assets as of August 31, 1997. The information
is as follows: Kohl's Corp., 3.5%; Tellabs, Inc., 2.7%; ENSCO International,
Inc., 2.6%; KLA-Tencor Corp., 2.5%; Mercantile Bancorporation, Inc., 2.5%.
2D. The graphic representation here displayed consists of one chart outlining
the average annual total returns for the Mid-Cap Growth Fund as of August 31,
1997 for the 1-year, 3-year, and since inception (9/30/93) periods. The returns
are as follows: 19.14%; 21.65%; and 15.35%, respectively.
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 Growth 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 Fund 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 Growth Fund and
SPMC and LMCFI from its inception on September 30, 1993 to August 31, 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
Growth Fund as compared to SPMC and LMCFI; the ending values are $17,508;
$19,164; and $17,872, 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 August 31, 1997. The information is as follows: Banking, 9.1%;
Telephone, 5.5%; Insurance, 5.5%; Electric Utilities, 4.8%; Chemicals, 3.7%. The
second chart outlines the International Stock Fund's five largest stock holdings
and its percentage of net assets as of August 31, 1997. The information is as
follows: BTR Plc, 3.0%; British Steel PLC ADR, 2.4%; YPF Sociedad Anonima ADR,
2.1%; Philips Electronics N.V., 2.0%; and Telecommunicacoes Brasileiras S.A.,
ADR, 1.8%.The third chart outlines the International Stock Fund's regional
exposure and its percentage of net assets as of August 31, 1997. The information
is as follows: Europe, 52.4%; Pacific Rim, 13.7%; Latin America, 8.3%; North
America, 7.0%; Japan, 2.0%. The fourth chart outlines the International Stock
Fund's country allocations and its percentage of net assets as of August 31,
1997. The information is as follows: Great Britain, 12.4%; France, 7.0%; Spain,
6.0%; Netherlands, 4.9%; and Australia, 4.6%.
2E. The graphic representation here displayed consists of one chart outlining
the average annual total returns for the International Stock Fund as of August
31, 1997 for the 1-year, 3-year, and since inception (9/1/94) periods. The
returns are as follows: 22.73%, 11.87%, and 11.87%, respectively.
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") is
represented by a broken dotted line 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 $14,003; $11,823; and $12,693, respectively.
1F. The graphic representation here displayed consists of two charts. One chart
outlines the top five business sectors that the Marshall Small-Cap Growth Fund
("Small-Cap Growth Fund") invests in as well as its percentage of net assets as
of August 31, 1997. The information is as follows: Consumer Non-Durables, 56.0%;
Capital Goods, 19.3%; Financial, 11.2%; Energy, 4.4%; Telecommunications, 4.4.
The second chart outlines the Small-Cap Growth Fund's five largest stock
holdings and its percentage of net assets as of August 31, 1997. The information
is as follows: Powerhouse Technologies, Inc., 3.5%; Corestaff, Inc., 2.9%;
Silicon Valley Bancshares, 2.9%; Outdoor Systems, Inc., 2.8%; Stewart
Enterprises, Inc. Class A, 2.8%.
2F. The graphic representation here displayed consists of one chart outlining
the average annual total returns for the Small-Cap Growth Fund as of August 31,
1997 for the 1-year and since inception (11/1/95) periods. The returns are as
follows: 21.22% and 46.92%, respectively.
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 Growth 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 Growth 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 $20,240;
$14,697; and $13,485, 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 August
31, 1997. The information is as follows: AAA Rated Corporate Bonds, 48.5%;
Government Agency, 23.1%; A Rated Corporate Bonds, 13.9%; Cash & Cash
Equivalents, 13.1%; AA Rated Corporate Bonds, 0.9%. The second chart outlines
the Short-Term Income Fund's fund statistics as of August 31, 1997. The
information is as follows: SEC 30-day yield, 6.43%; Dollar-weighted average
maturity, 2.70 years; Duration, 1.22 years.
2G. The graphic representation here displayed consists of one chart outlining
the average annual total returns for the Short-Term Income Fund as of August 31,
1997 for the 1-year, 3-year, and since inception (11/1/92) periods. The returns
are as follows: 7.20%; 6.19%; and 4.99%, respectively.
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 and
whereas the Lipper Short-Term Investment Grade Bond Funds Index ("LSTIBI") is
represented by a broken line, and IBC/Donoghue's Taxable Money Fund Average
("DMFA") 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 Short-Term Income Fund and LSTIBI and DMFA from its inception
on November 1, 1992 to August 31, 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 Short-Term Income Fund as compared to LSTIBI
and DMFA; the ending values are $12,655; $12,858; $12,261, 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 August
31, 1997. The information is as follows: A Rated Corporate Bonds, 53.1%; AAA
Rated Corporate Bonds, 30.2%, Government Agency, 6.1%; U.S. Treasury, 5.1%, BBB
Rated Corporate Bonds, 3.2%; AA Rated Corporate Bonds, 1.5%; Cash & Cash
Equivalents, 0.8%. The second chart outlines the Intermediate Bond Fund's fund
statistics as of August 31, 1997. The information is as follows: SEC 30-day
yield, 6.08%; Dollar-weighted average maturity, 4.91 years; Duration, 3.05years.
2H. The graphic representation here displayed consists of one chart outlining
the average annual total returns for the Intermediate Bond Fund as of August 31,
1997 for the 1-year, 3-year, and since inception (11/23/92) periods. The returns
are as follows: 8.42%; 6.81%; and 5.46%, respectively.
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 Short/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 23, 1992 to August 31, 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 $12,895; $13,593; and $13,629, 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 August
31, 1997. The information is as follows: FNMA/MBS, 38.5%; FHLMC/MBS, 30.6%;
CMO/ABS, 27.0%; GNMA/MBS, 22.9%; Corporate, 1.9%. The second chart outlines the
Government Income Fund's fund statistics as of August 31, 1997. The information
is as follows: SEC 30-day yield, 6.20%; Dollar-weighted average maturity, 8.41
years; Duration, 4.28 years.
2I. The graphic representation here displayed consists of one chart outlining
the average annual total returns for the Government Income Fund as of August 31,
1997 for the 1-year, 3-year, and since inception (12/13/92) periods. The returns
are as follows: 9.35%; 7.68%; and 5.90%, respectively.
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 Mortgage 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 August 31, 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 $13,109; $13,840; and
$13,055, 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 August 31, 1997. The information is as follows: Wisconsin, 11.9%; Illinois,
10.8%; Utah, 8.1%; Arizona, 7.7%; Ohio, 7.0%. The second chart outlines the
Intermediate Tax-Free Fund's fund statistics as of August 31, 1997. The
information is as follows: SEC 30-day yield, 3.98%; Dollar-weighted average
maturity, 6.97 years; Duration, 5.52 years.
2J. The graphic representation here displayed consists of one chart outlining
the average annual total returns for the Intermediate Tax-Free Fund as of August
31, 1997 for the 1-year, 3-year, and since inception (2/2/94) periods. The
returns are as follows: 6.67%; 5.60%; and 4.39%, respectively.
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 August 31, 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 $11,665; $11,815; and $11,652, respectively.
K. The graphic representation here displayed consists of one chart which
outlines the Marshall Money Market Fund's fund statistics as of August 31, 1997.
The information is as follows: 7-day Current Yield, Class A Shares--5.38%; Class
B Shares--5.08%; 7-day Effective Yield, Class A Shares--5.53%; Class B
Shares--5.21%. Dollar-Weighted Avg. Maturity, 50 days.
