THE MARSHALL FAMILY OF FUNDS
SEMI-ANNUAL REPORT DATED FEBRUARY 28, 1998
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
MARSHALL FUNDS(R)
SMART FUNDS. SMART PEOPLE.SM
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.............................. 25
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...................................... 34
Marshall Government Income Fund...................................... 36
Marshall Intermediate Tax-Free Fund.................................. 37
Marshall Money Market Fund........................................... 40
Statements of Assets and Liabilities................................... 44
Statements of Operations............................................... 46
Statements of Changes in Net Assets.................................... 48
Financial Highlights................................................... 52
Notes to Financial Statements.......................................... 56
DIRECTORS & OFFICERS..................................................... 64
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[_] FUND PERFORMANCE
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AVERAGE ANNUAL TOTAL RETURNS
(3/31/98)/5/ MORNINGSTAR RATINGS/6/
SINCE INCEPTION AS OF 3/31/98
MARSHALL FUNDS 1-YEAR 3-YEAR 5-YEAR INCEPTION DATE OVERALL 3-YEAR 5-YEAR
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EQUITY FUNDS:
Equity Income
Fund/1/ 35.03% 27.39% n/a 19.53% 9/30/93 **** **** n/a
Large-Cap
Growth &
Income
Fund/1/ 37.64% 25.44% 15.64% 15.09% 11/20/92 ** *** **
Mid-Cap Value
Fund/1/ 35.45% 21.30% n/a 17.02% 9/30/93 *** *** n/a
Mid-Cap
Growth
Fund/1/ 51.61% 27.52% n/a 18.32% 9/30/93 ** ** n/a
International
Stock
Fund/2/ 19.94% 18.71% n/a 13.19% 9/1/94 **** **** n/a
Small-Cap
Growth
Fund/7/ 59.55% n/a n/a 46.58% 11/1/95 n/a n/a n/a
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INCOME FUNDS:
Short-Term
Income
Fund/3/ 6.82% 6.34% 5.08% 5.07% 11/1/92 **** **** ****
Intermediate
Bond Fund/3/ 8.74% 7.38% 5.20% 5.69% 11/23/92 *** *** ***
Government
Income
Fund/3/ 10.42% 8.15% 5.68% 6.20% 12/13/92 *** *** ***
Intermediate
Tax-Free
Fund/4/ 7.92% 6.14% n/a 4.80% 2/2/94 *** *** n/a
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Money Market
Fund
Class A
Shares 5.51% 5.47% 4.83% 4.71% 11/23/92 n/a n/a n/a
Class B
Shares 5.19% 5.16% 4.52% 4.42% 12/17/92 n/a n/a n/a
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1 There were 2,437 funds in Morningstar's domestic equity category for the
overall and 3-year periods and 1,383 funds for the 5-year period.
2 There were 722 funds in Morningstar's international equity category for the
overall and 3-year periods.
3 There were 1,403 funds in Morningstar's taxable bond category for the overall
and 3-year periods and 831 funds for the 5-year period.
4 There were 1,525 funds in Morningstar's municipal category for the overall and
3-year periods.
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. The top 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.
No Bank Guarantee Not FDIC Insured May Lose Value
SEMI-ANNUAL REPORT--COMMENTARY
MARSHALL EQUITY INCOME FUND
The Marshall Equity Income Fund (the "Fund") seeks capital appreciation and
current income through a disciplined approach of investing in a broadly
diversified portfolio of common stocks with above-average dividend yields. The
portfolio is structured to pursue a yield at least 100 basis points (1%) more
than the Standard & Poor's 500 Index ("S&P 500").*
FUND SURPASSED PEER INDEX.
For the six months ended February 28, 1998, the Fund provided a total return of
13.82%,** while the Lipper Equity Income Funds Index (LEIFI)* returned 13.48%.
Also, as of March 31, 1998, the Fund was awarded four stars for its overall
performance among 2,437 domestic equity funds by Morningstar.+
MARKET CHARACTERIZED BY RECORD HIGH VALUATIONS.
The U.S. economy's growth and inflation are currently better than most could
have imagined. The stock market as measured by the S&P 500, is at an all-time
high based on earnings (22x forward 12 months) and an all-time low based on
yield (dividend yield of 1.5%).
With stocks trading at all-time high valuations, we have found it difficult to
find attractive stocks that meet our value-oriented buy criterion. To reduce the
risk posture of the portfolio, however, we continue to hold a significant
investment in less volatile sectors such as REITs and electric utilities.
"Graphic representation "1A" omitted. See Appendix."
INTEREST RATES HELP UTILITY, BANK STOCKS.
Interest rates remained low for the last six months, and we continue to have a
favorable outlook on interest rates. We plan to maintain a significant weight in
financial stocks, which should continue to do well in this economic environment.
Falling oil prices hurt energy stocks in the fourth quarter. At current prices,
energy stocks are attractively valued on both relative and absolute earnings
ratios, as well as dividend yields. We plan to maintain our position in energy.
Health care stocks offer solid and steady fundamentals, which include good
pricing, volume growth and positive demographics. Their deserved high valuations
result in low dividend yields, therefore we are moderately underweighted in this
group.
DISCIPLINED APPROACH HELPS 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, up 34.22%; 1996,
up 21.18%; and 1997, up 27.53%.
Equally important, however, our investment style achieved these results with a
low-risk profile. Of course, any investment involves risk, including 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
[PHOTO APPEARS HERE]
[_] MARSHALL EQUITY INCOME FUND
"Graphic representations "2A" and "3A" omitted. See Appendix."
This graph illustrates the hypothetical investment of $10,000 in the Fund from
its
inception on September 30, 1993 to February 28, 1998, 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. 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. These figures do not reflect sales
charges.
**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 3/31/98. 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 return 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 2,437 domestic equity funds, respectively. The top
ten percent of funds in a rating universe receive 5 stars, the next 22.5%
receive 4 stars, the next 35% receive 3 stars.
SEMI-ANNUAL REPORT--COMMENTARY
MARSHALL LARGE-CAP GROWTH & INCOME FUND
The Marshall Large-Cap Growth & Income Fund (the "Fund") invests in large-
capitalization stocks with a growth and income orientation. The Fund holdings
are well diversified, with representation in the major sectors of the economy.
Companies held are typically leaders in their respective industries and have
records of above-average financial performance and proven superior management.
FUND OUTPERFORMED CATEGORY AVERAGE.
For the six months ended February 28, 1998, the Fund provided a total return of
13.90%,* outperforming the Lipper Growth and Income Funds Index (LGIFI)** return
of 12.94%.
SELECT LARGE-CAPS AND DOMESTIC EARNINGS DOMINATE.
The market became more narrow in its focus over the last six months. For
example, an unweighted S&P 500 gained 11.33% for this six-month period versus a
weighted S&P 500 return of 17.52%, demonstrating that an increasingly select
group of large stocks moved the index. Fortunately, General Electric (up 24%),
is the Fund's largest holding.
Asia was the other dominant theme for the last six months. The equity market
quickly migrated away from companies with Asian "exposure" toward companies with
strong domestic earnings sources. The Fund benefited from appreciation in
domestically-focused companies such as the regional bell operating companies,
entertainment, and drug stocks.
"Graphic representation "1B" omitted. See Appendix."
For example, the Fund enjoyed solid returns from the regional Bell telephone
companies such as Ameritech (up 33%) and SBC Communications (up 38%). In
publishing, Gannett gained 35% and The New York Times appreciated 36%. In
entertainment, Disney turned in a strong showing (up 44%) and Time Warner (up
31%).
Drug stocks also performed well given their domestic focus and strong relative
earnings gains. Fund holdings such as Schering Plough (up 60%), Smithkline
Beecham (up 44%), Merck (up 39%) and Johnson & Johnson (up 39%) were winners.
Walgreens (up 35%) and Safeway (up 34%) stood out in the retail area. The Fund
remains well represented in financial stocks, and was rewarded by the regional
banks and specialty finance companies such as Freddie Mac (up 44%).
Underperforming stocks in the Fund over the past six months were all again
related to expected problems in Asia such as Boeing (-1.5%), Alcoa (-1.3%), and
Georgia-Pacific (-15%).
EARNINGS ARE KEY.
A diversity of earnings sources in the large-cap area will be the key to their
continued success over the coming months. The American economy remains strong
and Europe is rebounding. The question remains whether this strength will be
enough to offset the slow down in Asia.
As overall corporate earnings continue to slow, the Fund continues to focus on
companies that demonstrate good relative earnings gains. While many of these
stocks are expensive as measured by historical measures, we expect the market to
continue to reward companies for predictable, consistent earnings reports. As
always, the Fund maintains a broadly diversified portfolio of quality large- cap
companies to maximize shareholder return.
Sincerely,
/s/ William J. O'Connor
William J. O'Connor
Manager, Marshall Large-Cap Growth & Income Fund
[PHOTO APPEARS HERE]
[_] MARSHALL LARGE-CAP GROWTH & INCOME FUND
"Graphic representations "2B" and "3B" omitted. See Appendix."
This graph illustrates the hypothetical investment of $10,000 in the Fund from
its
inception on November 20, 1992 to February 28, 1998, 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 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. These figures do not reflect sales charges.
***Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions. The
S&P 500 and LGIFI have been adjusted to reflect reinvestment of dividends on
securities in the indices.
SEMI-ANNUAL REPORT--COMMENTARY
MARSHALL MID-CAP VALUE 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 generally characterized as being out-of-favor and
undervalued.
FUND PERFORMANCE.
For the six months ended February 28, 1998, the Fund provided a total return of
9.67%.* For the same period, the Lipper Mid-Cap Funds Index (LMCFI)** returned
9.08% and the Standard & Poor's Mid-Cap 400 Index (SPMC)** returned 13.27%.
A STRICT VALUE DISCIPLINE.
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. For
example, as interest rates fell during the six-month period, the SPMC had the
advantage of a higher exposure to financials (up 27% as a group) and utilities
(up 17%). In keeping with our value philosophy, we will likely remain
underweighted in the interest sensitive financial sector due to valuation
concerns. In the utility sector, we are carefully observing the industries'
restructuring attempts during this period of deregulation.
CONCENTRATING ON THREE VALUE SCENARIOS.
The Fund continues to be rewarded by focusing on three categories of out-of-
favor or undervalued stocks:
"Graphic representation "1C" omitted. See Appendix."
1. ASSET RECOGNITION. We look for stocks that have significant financial,
tangible or intangible assets that are not currently recognized in the market.
Over a year ago, the market abandoned cable stocks in favor of satellite
networks. We recognized the in-ground assets of the cable industry and have been
rewarded by Telecommunications, Inc., up 66%, and U.S. West Media Group, up to
59%, over the last six months.
2. TURN-AROUNDS. Frequently, we find value opportunities when a company
implements more effective ways to conduct its core business. This year, Darden
Restaurants, Inc. refocused their energies on in-store management at their Olive
Garden and Red Lobster franchises. This focus is beginning to bear fruit with
higher guest counts and higher profitability trends, translating into a total
return of 32% for the last six months.
3. RESTRUCTURINGS. When companies change their business strategy or shift to a
different business segment, patient value investors can be rewarded. In mid-
1998, Dun & Bradstreet will complete its divestiture program in which management
has sold off all businesses not related to the company's core products. We
anticipate further price appreciation as management resumes its focus on
business rating and information systems.
MAINTAINING OUR PATIENT STANCE.
In an environment in which interest rates continue to fall and the market
continues to react to troubled Asian economies, we continue to identify value
opportunities. We are committed to our value approach and look forward to
enhancing shareholder return with our unwavering discipline. 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, C.F.A.
John C. Potter, C.F.A.
Co-Manager, Marshall Mid-Cap Value Fund
[PHOTO APPEARS HERE]
[_] MARSHALL MID-CAP VALUE FUND
"Graphic representations "2C" and "3C" omitted. See Appendix."
This graph illustrates the hypothetical investment of $10,000 in the Fund from
its inception
on September 30, 1993 to February 28, 1998,
compared to the SPMC, LMCFI and the S&P
500**.
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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. These figures do not reflect sales charges.
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.
SEMI-ANNUAL REPORT--COMMENTARY
MARSHALL MID-CAP GROWTH FUND
The Marshall Mid-Cap Growth Fund's (the "Fund's") 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.
STRONG STOCK SELECTION PROVIDED AMPLE REWARDS.
For the six months ended February 28, 1998, the Fund provided a total return of
14.67%,* compared to the Standard & Poor's Mid-Cap 400 Stock Price Index
(SPMC)** total return of 13.27% and the Lipper Mid-Cap Fund Index (LMCFI)**
return of 9.08%.
MARKET REWARDS COMMUNICATIONS AND TRAVEL.
We continued to have a significant representation in radio broadcasting and
outdoor advertising. Our philosophy is to own the consolidators--the engines of
change within the industry. We have been particularly rewarded by our holdings
in Clear Channel, up 35%, and Universal Outdoor, up 76%.
In telecommunications, both the service and equipment providers are benefiting
as deregulation and rapid technological changes make it more attractive to build
new networks. Appreciation was concentrated in service providers, with
Metromedia Fiber, up 59%, and Qwest Communications, up 64%.
"Graphic representation "1D" omitted. See Appendix."
In the leisure group, two names are reaping the rewards of changing public
perception. As cruising is increasingly perceived as being within the reach of
the average consumer, Royal Caribbean Cruises and Steiner Leisure provided a
total return of 34% and 97%, respectively. Royal Caribbean has succeeded in
broadening its appeal through bigger ships and more services while Steiner
Leisure has become the premier provider of spa services aboard ships.
RESPONDING TO SHIFTING FUNDAMENTALS.
We were fortunate to avoid the many land mines in the market, which has helped
our six-month performance considerably. We made the conscious decision in early
fall to minimize exposure to computer hardware and semiconductor companies,
which were subsequently severely impacted by the currency crisis in Asia. Also,
because they do not meet our growth criteria, we are significantly underweight
in utilities, which underperformed early in the year.
We anticipate that mid-caps will continue to gain favor with the investment
community for the next several months. First of all, in a steady economy
experiencing steady growth, investors typically move away from large-caps to
mid- and small-caps showing consistent growth. Second, mid-caps will continue to
be in demand due to a renewed interest in domestic companies with minimal Asian
exposure. As this market shift occurs, we are confident that shareholders will
be rewarded by our strategic position.
Sincerely,
/s/ Steve D. Hayward
Steve D. Hayward
Manager, Marshall Mid-Cap Growth Fund
[PHOTO APPEARS HERE]
[_] MARSHALL MID-CAP GROWTH FUND
"Graphic representations "2D" and "3D" omitted. See Appendix."
This graph illustrates the hypothetical investment of $10,000 in the Fund from
its
inception on September 30, 1993 to February 28, 1998, 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. These figures do not reflect sales charges.
***Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions. The
SPMC and LMCFI have been adjusted to reflect reinvestment of dividends on
securities in the indices.
SEMI-ANNUAL REPORT--COMMENTARY
MARSHALL INTERNATIONAL STOCK FUND
The Marshall International Stock Fund (the "Fund"), which is sub-advised by
Templeton Investment Counsel, Inc., seeks long-term capital appreciation through
a flexible policy of investing in stocks and debt obligations of companies and
governments outside the United States.+
FUND AWARDED FOUR-STAR RATING.
For the six-month period ended February 28, 1998, the Fund provided a total
return of 3.51%,* compared to a total return of 8.31% by the Morgan Stanley
Capital International Europe, Australia and Far East Index ("EAFE Index")** and
7.11% provided by the Lipper International Funds Index (LIFI).** As of March 31,
1998, the Fund was awarded a four- (out of five) star rating for its overall
performance among 722 international equity funds by Morningstar.++
LOW ASIAN EXPOSURE OFFERED PLUSES AND MINUSES.
The last six months were characterized by weak markets in Asia, due to currency
devaluations in a number of countries, including Indonesia, the Philippines,
Malaysia and Thailand. We benefited from a fairly low weight in that region,
with our exposure in the Philippines and Indonesia comprising just 0.9% of our
portfolio.
Japan, on the other hand, experienced a nice gain of 6.4% (10.2% in dollar
terms) for the first two months of this year. Our low Japanese exposure caused
us to lag the index, as we continued to seek value opportunities in that
country.
EXPOSURE IN EUROPE, SOUTH AMERICA & AUSTRALIA.
Europe continued to be our largest position and to provide our most beneficial
returns, such as financials Banque Nationale de Paris (up 19%) and Zurich
Versicherungsgesellschaft (up 24%). Also contributing meaningfully to the
portfolio's performance were two Spanish banks, Banco Bilbao Vizcaya (up 60%)
and Argenteria (up 40%), both of which enjoyed a lower interest rate
environment.
Detractors from the Fund's performance included British Steel, which was hurt by
global currency weaknesses and BTR, an industrial component manufacturer whose
restructuring tested investors' patience.
We have added positions to the Australian market, such as Mayne Nickless, a
health care company that owns a telecommunications firm. We feel the
telecommunications component is not being recognized. Our largest exposure in
Australia, News Corp., was a significant contributor to total return with an
appreciation of 45% over the last six months.
We have done well across the board in Latin America, where we have 9 1/2% of our
portfolio dedicated to Argentina, Brazil, Peru and Mexico.
BARGAINS AVAILABLE IN SELECTED FAR EAST MARKETS.
For the next six months, we anticipate a reduction in our European exposure,
particularly our holdings in the financial sector. These stocks have performed
very well, and we feel they have reached full value.
We also anticipate an increased exposure to Asia, where we are finding more
value opportunities. We continue to seek opportunities in Japan and will apply a
significant amount of due diligence in locating value in other parts of the
region.
Sincerely,
/s/ Gary R. Clemons
Gary R. Clemons
Manager, Marshall International Stock Fund
"Graphic representation "1E" omitted. See Appendix."
[_] MARSHALL INTERNATIONAL STOCK FUND
"Graphic representations "2E" and "3E" omitted. See Appendix."
This graph illustrates the hypothetical investment of $10,000 in the Fund from
its
inception on September 1, 1994 to February 28, 1998, 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 the mutual funds
designated by Lipper Analytical Services, Inc. as falling into the respective
categories indicated. These figures do not reflect sales charges.
***Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions. The
EAFE Index and LIFI have been adjusted to reflect reinvestment of dividends on
securities in the indices.
++Morningstar proprietary ratings reflect historical risk-adjusted performance
as of 3/31/98. 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 722 international equity funds, respectively. The
top ten percent of funds in a rating universe receive 5 stars, the next 22.5%
receive 4 stars, the next 35% receive 3 stars.
SEMI-ANNUAL REPORT--COMMENTARY
MARSHALL SMALL-CAP GROWTH 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.
TOTAL RETURN IS NEARLY DOUBLE THE INDUSTRY AVERAGE.
For the six months ended February 28, 1998, the Fund provided a total return of
14.7%,* compared to the Russell 2000 Index (Russell 2000)** total return of 9.6%
and the Lipper Small-Cap Funds Index (LSCFI)** return of 7.5%.
ELIMINATING ASIAN EXPOSURE A KEY STRATEGY.
Several factors contributed to our outperformance during the six-month period,
one of which was our response to the developments in Asia. Following the onset
of the Asian currency crisis, we immediately eliminated several of our
technology holdings due to significant revenue exposure to the affected regions.
This included sales of Powerwave Technologies and ACE*COMM, both of which derive
more than 50% of their revenues from Asia.
We continue to underweight the computer-related and semiconductor sectors of
technology as we anticipate further earnings disappointments due to Asia. We
have increased our weightings in the software and services sectors where growth
has continued unabated. Holdings such as Cambridge Technology Partners, Saville
Systems and Transaction Systems Architects have consistently grown earnings in
excess of 30%, and we expect this to continue.
In the consumer cyclical sector we continue to maintain a large exposure to both
the radio and outdoor advertising industries. Since the Telecommunications Act
was passed in
"Graphic representation "1F" omitted. See Appendix."
1996, massive consolidation has provided rapid growth for many radio and outdoor
advertising companies. While the feverish acquisition pace may not be
sustainable, we believe both industries have emerged from this consolidation
phase much stronger and should provide a solid backdrop for strong revenue and
earnings growth for many years to come. During the six-month period, returns in
these sectors included Heftel Broadcasting up 53%, Cox Radio up 61%, and Outdoor
Systems up 69%.
In the area of retailing, increased exposure to companies such as Party City up
70%, and Abercrombie & Fitch up 50% also contributed to the strong six-month
results.
OUTLOOK IS BRIGHT FOR SMALL-CAP STOCKS.
We are excited about the outlook for small-cap growth stocks in 1998. Earnings
growth rates for small-cap companies have exceeded those of large-cap companies
for the past three quarters, and the gap appears to be widening as large-cap
multinationals feel the effects of a strong dollar and weakened Asian economies.
The average projected 1998 earnings growth rate of companies owned in the Fund
is in excess of 32%, while many market strategists are now assuming single-digit
growth for S&P 500 earnings in 1998. We remain committed to our strategy of
investing in quality, rapidly growing companies, as we believe this will
continue to 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
[PHOTO APPEARS HERE]
[_] MARSHALL SMALL-CAP GROWTH FUND
"Graphic representations "2F" and "3F" omitted. See Appendix."
This graph illustrates the hypothetical investment of $10,000 in the Fund from
its
inception on November 1, 1995+ to February 28, 1998, 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. These
figures do not reflect sales charges. 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.
SEMI-ANNUAL REPORT--COMMENTARY
MARSHALL SHORT-TERM INCOME FUND
The Marshall Short-Term Income Fund (the "Fund") seeks to maximize total return
consistent with current income, while minimizing price fluctuation. The Fund
invests in a diversified portfolio of short- to intermediate-term high-grade
bonds and notes.
FUND OUTPERFORMS INDEX.
For the six months ended February 28, 1998, the Fund provided a total return of
2.93%,* compared to 2.54% for the IBC/Donoghue's Taxable Money Fund Average
(DMFA),** 3.53% provided by the Merrill Lynch 1-3 Year U.S. Treasury Index** and
3.05% compared to the Lipper Short-Term Investment Grade Bond Fund Index
(LSTIBI)**. Also, as of March 31, 1998, the Fund was awarded a four- (out of
five) star rating for its overall performance among 1,403 taxable bond funds by
Morningstar.+
FLATTER YIELD CURVE AHEAD.
The last six months have presented a surprisingly strong bond market,
precipitated by uneasy equity investors in the fallout or failing Asian
economies. While many are anticipating the U.S. economy will slow significantly
due to the Asian crisis, domestic strength will mitigate the impact. Asia will
have the greatest impact on prices and will serve as a force to hold inflation
in check.
The market has been building in a Federal Reserve Board (the "Fed") ease for the
last six months. We feel the short end of the yield curve is overly optimistic
in anticipating an easier Fed policy. Until the market eliminates this
differential, we will continue to own a larger percentage of cash equivalents,
asset-backed and short floating-rate securities.
"Graphic representation "1G" omitted. See Appendix."
CORPORATE AND MORTGAGES HAVE ROLE IN DEFENSIVE STANCE.
Following tradition, corporate bond prices lagged Treasuries, allowing us to
take advantage of opportunities to increase exposure to high quality issues. We
will continue to concentrate on higher credit quality and shorter or neutral
duration.
Mortgages will likely present a unique opportunity over the next several months.
We have been slightly negative on mortgages to date as the rapid interest rate
drop has spurred a refinancing boom and resulted in securities being called. As
mortgage securities continue to cheapen up, we will begin to add more to the
Fund mix.
We feel these strategies, along with our defensive posture on duration, will
help us seek our objective of maximizing total return consistent with current
income.
Sincerely,
/s/ Mark D. Pittman
Mark D. Pittman
Manager, Marshall Short-Term Income Fund
[PHOTO APPEARS HERE]
[_] MARSHALL SHORT-TERM INCOME FUND
"Graphic representations "2G" and "3G" omitted. See Appendix."
The graph illustrates the hypothetical investment of $10,000 in the Fund from
its
inception on November 1, 1992 to February 28, 1998, 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. These figures do not reflect sales charges.
*** 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 3/31/98. 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 1,403 taxable bond funds, respectively, and the Fund
received 4 stars for the five-year period and was rated among 831 taxable bond
funds, respectively. The top 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.
SEMI-ANNUAL REPORT--COMMENTARY
MARSHALL INTERMEDIATE BOND FUND
The objective 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 10 years.
FUND OUTPERFORMED PEER INDEX.
For the six months ended February 28, 1998, the Fund provided a total return of
3.96%,* compared to a return of 4.60% by the Lehman Brothers Intermediate
Government/ Corporate Bond Index (LGCI)** and 4.94% by the Lipper Intermediate
Investment Grade Bond Funds Index (LIBF).**
NERVOUS INVESTORS CREATED STRONG BOND MARKET.
Interest rates fell precipitously during this period in response to a bond rally
sparked by the Asian crisis. We anticipated market momentum throughout most of
this cycle, added duration and moved from a fairly defensive position to a more
neutral one. In the end, we were rewarded by outperforming our peers.
Corporate bond prices lagged Treasuries, giving us an opportunity to add to our
corporate allocation. We continued to concentrate on higher credit quality and a
neutral duration.
"Graphic representation "1H" omitted. See Appendix."
Recently we have been slightly negative on mortgage securities, given the rapid
decline in interest rates that invariably results in refinancing pressure. Now,
as mortgage securities look cheaper, we are positioned to take advantage of
lower priced opportunities in that sector.
UNPRECEDENTED STRONG ECONOMY PREVAILS.
The economy is very strong in terms of employment and consumer spending.
Typically, you would see the Federal Reserve Board tightening in this
environment, yet inflation and commodity prices have been held in check. The
Asian crisis has strengthened the dollar, making imports cheaper and placing
pricing pressure on domestic companies. The dichotomy of economic strength and
declining inflation has forced the yield curve to flatten.
The economy currently shows no signs of slowing, yet inflation appears ominously
in check. Asia is close to bottoming out, although it may be a long time before
it reverses its course and starts accelerating. Altogether it is not a bad
environment for bonds. Our strategy will be to maintain a neutral to slightly
defensive position and add yield through higher quality corporates and mortgage
opportunities, as they become available.
Sincerely,
/s/ Mark D. Pittman
Mark D. Pittman
Manager, Marshall Intermediate Bond Fund
[PHOTO APPEARS HERE]
[_] MARSHALL INTERMEDIATE BOND FUND
"Graphic representations "2H" and "3H" omitted. See Appendix."
This graph illustrates the hypothetical investment of $10,000 in the Fund from
its
inception on November 23, 1992 to February 28, 1998, compared to the LGCI and
the LIBF.**
- --------------------------------------------------------------------------------
*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 LIBF 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. These figures do not reflect sales charges.
***Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions. The
LGCI and the LIBF have been adjusted to reflect reinvestment of dividends on
securities in the indices.
+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.
SEMI-ANNUAL REPORT--COMMENTARY
MARSHALL GOVERNMENT INCOME FUND
The Marshall Government Income Fund (the "Fund") seeks to generate a high level
of current income while maximizing total return with moderate share-value
volatility. Strategies are focused on the investment opportunities within the
mortgage-backed securities market, in particular the government agency-backed,
whole loan and home equity loan sectors of the mortgage market.
FUND PERFORMANCE.
For the six months ended February 28, 1998, the Fund provided a total return of
4.62%,* compared to a return of 4.92% by the Lehman Mortgage-Backed Securities
Index (LMI)** and 5.06% provided by the Lipper U.S. Mortgage Funds Index
(LUSMI).**
REAPING BENEFITS FROM A LONG-TERM STRATEGY.
Overall, mortgages were the best performing among investment grade fixed income
securities sector in 1997. So far in 1998, however, all indicators point to the
mortgage sector underperforming. Interest rates have dropped, the housing market
is very strong and a prepayment explosion has begun. So far in January and
February of this year, the refinancing index has hit an all-time high--
surpassing the previous record set in 1993.
We anticipated this change in momentum, and moved into securities that would
protect us from prepayment risk. Being early in the cycle caused us to lag the
index slightly, but in the last two months of this period we started to reap the
benefits of our strategy. With the holdings we have, we are in a very good
position to generate strong performance during this cycle.
"Graphic representation "1I" omitted. See Appendix."
SOUND ANALYSIS AND SELECTIVITY PAY OFF.
We continued to identify and buy specific "vintage" mortgages that offer
protection against prepayment risk. Vintage mortgages are characterized by lack
of refinancing activity, often in markets where homeowners have small mortgage
balances, or home values are declining.
We have also purchased Treasuries and commercial mortgage-backed securities,
which are less callable, and we have moved our coupons to the 6 1/2% and 7%
levels. In moving out of higher coupon paper, we will forgo some yield in the
short run, but benefit meaningfully in the long run, as these securities are
highly susceptible to prepayment risk.
We have continued to allocate about 35% of the portfolio to dollar rolls, which
are commitments to buy mortgage issues for a future settlement in exchange for a
price concession. As mortgages continue to be in demand on Wall Street, we will
see returns boosted 35 to 50 basis points over the course of a year with this
strategy. We continue to see very good relative value in mortgages, especially
when compared to the highly-valued corporates. The recent volatility caused by
the refinancing boom should be viewed as an opportunity to add mortgage
exposure. With the market trapped in a trading range, yield maximization from
mortgages should benefit portfolios.
Sincerely,
/s/ Lawrence J. Pavelec
Lawrence J. Pavelec
Manager, Marshall Government Income Fund
[PHOTO APPEARS HERE]
[_] MARSHALL GOVERNMENT INCOME FUND
"Graphic representations "2I" and "3I" omitted. See Appendix."
This graph illustrates the hypothetical investment of $10,000 in the Fund from
its
inception on December 13, 1992 to February 28, 1998, 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. These figures do not reflect sales charges.
***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.
+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.
SEMI-ANNUAL REPORT--COMMENTARY
MARSHALL INTERMEDIATE TAX-FREE FUND
The primary goal of the Marshall Intermediate Tax-Free Fund (the "Fund") is to
generate income that is exempt from federal income tax.+
FUND OUTPERFORMS BENCHMARK AND MARKET.
For the six months ended February 28, 1998, the Fund provided a total return of
4.25%,* compared to a return of 3.79% for the Lehman Brothers 5-Year General
Obligations Index (L5GO)** and 4.01% for the Lipper Intermediate Municipal
Funds Index (LIMI).**
MARKET REWARDS LONGER DURATION.
A robust economy with inflation falling below expectations continued to be the
number one story affecting bond pricing over the last six months. In response,
we held the average duration of the Fund's portfolio to more than 1 1/2 years
longer than the index, and were rewarded accordingly.
Contrary to textbook theory about prolonged domestic economic growth, inflation
remains tame at this part of the economic cycle. This can be attributed to
productivity gains--largely because of technological innovation and
computerization--as well as pure competition from moderately priced imports.
INTEREST RATES EXPECTED TO REMAIN STABLE.
The expectation of the Federal Reserve Board (the "Fed") further tightening
interest rates was taken out of the market over the last six months, and the
expectation for subsequent easing was factored in. More realistically, Fed
policy will likely remain on hold in response to two cross currents: a weak Asia
and a strong domestic economy.
"Graphic representation "1J" omitted. See Appendix."
The Asian market woes did not have any direct effect on munis except to
temporarily boost demand. As stock volatility increased in the last calendar
quarter of 1997 many investors reallocated to bonds, creating high levels of
demand. This demand was met by increasing levels of both new issue and refunding
supply. Munis are particularly supply sensitive, and supply was high as
municipalities replaced old, higher-cost debt with newly refinanced debt at
lower interest rates.
CREDIT QUALITY STRONGER THAN EVER.
Another byproduct of the robust economy, credit quality upgrades continued to
outnumber downgrades by a wide margin over the last six months. Still, we saw
issuers continuing to flock to low-cost insurance and investors willing to pay
higher prices for bonds that are not that highly rated.
We feel this is not the time to sacrifice quality for the small amount of extra
yield pick-up available. We remain committed to our discipline of seeking high
credit quality issues to provide competitive returns for our shareholders.
Sincerely,
/s/ John D. Boritzke
John D. Boritzke
Manager, Marshall Intermediate Tax-Free Fund
[PHOTO APPEARS HERE]
+Income may be subject to the federal alternative minimum tax and state and
local taxes.
[_] MARSHALL INTERMEDIATE TAX-FREE FUND
"Graphic representations "2J" and "3J" omitted. See Appendix."
This graph illustrates the hypothetical investment of $10,000 in the Fund from
its inception on February 2, 1994 to February 28, 1998, compared to the L5GO,
LIMI and L7GO.**
- --------------------------------------------------------------------------------
*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, LIMI, and L7GO 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. L7GO is an index comprised
of general obligation bonds rated A or better with maturities between six and
eight 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. These figures do not
reflect sales charges.
***Represents a hypothetical investment of $10,000 in the Fund. The Fund's
performance assumes the reinvestment of all dividends and distributions. The
L5GO, LIMI and L7GO have been adjusted to reflect reinvestment of dividends on
securities in the indices.
++Duration is a commonly used measure of the potential volatility 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.
SEMI-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 OUTPERFORM BENCHMARK.
For the six months ended February 28, 1998, the Fund provided a total return of
2.71%,** for Class A Shares, compared to a return of 2.53% for the
IBC/Donoghue's Taxable Money Fund Average (Donoghue)*** and 2.47% for the Lipper
Money Market Funds Index.*** Class B shares provided a total return of
2.56%.**
EXTENDING A SUCCESSFUL STRATEGY.
For the last six months, we have continued to execute the strategy that has
rewarded us for more than a year. We persisted in limiting our exposure to
commercial paper, which is very expensive, in favor of floating rate notes,
master notes and funding agreements.
While the average maturity of the Fund began the period at 50 days, it ended at
37 days. Our allocation to floating rate notes resulted in the shorter maturity
date due to the nature of their reset frequency.
Over the last period, investors became increasingly worried about both the
current prolonged rally in the domestic equity market and the turmoil in the
economies of several Asian markets. As a result, the Fund received
"Graphic representation "K" omitted. See Appendix."
over $300 million in new purchases since the beginning of the calendar year.
THE FEDERAL RESERVE BOARD POLICY WILL SET THE COURSE.
Although fallout from the Asian crisis did not come to pass as anticipated, the
market remains quite volatile. Yet, all other economic measures point to a very
robust economy. Factory orders are up, housing starts are up 10%, consumer
confidence remains at a record high, and unemployment at a record low. Very
benign inflation may actually decline further as imports get cheaper with the
devaluation of Asian currencies.
Whether Asia will further impact our economy remains to be seen, and we
anticipate that the Federal Reserve Board (the "Fed") will take a "wait and see"
attitude for the next several months. Meanwhile, the real Fed Funds rate has
been creeping higher as inflation has been dropping--a policy that Fed Chairman
Alan Greenspan said "is not inadvertent." The question over the next several
months is will the combination of the current real Fed Funds rate and the Asian
economic problems cause our economy to slow or will the Fed need to take overt
action to achieve that result.
Sincerely,
/s/ Richard M. Rokus
Richard M. Rokus
Manager, Marshall Money Market Fund
[PHOTO APPEARS HERE]
*Although money market funds seek to maintain a stable net asset value of $1.00
per share, there is no assurance that they will be able to do so. An
investment in the Fund is neither insured nor guaranteed by the U.S.
government.
**Performance quoted represents past performance and is not indicative of future
results. Yields will vary. Yields quoted for money market funds most closely
reflect the Fund's current earnings.
***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. 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. These figures do not
reflect sales charges.
+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.
February 28, 1998 (unaudited)
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
EQUITY INCOME FUND
<TABLE>
-----------------------------------------------------
<CAPTION>
Shares Description Value
-----------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 85.0%
CAPITAL GOODS -- 4.7%
AEROSPACE & DEFENSE
42,000 Textron, Inc. $3,147,375
35,000 United Technologies Corp. 3,125,938
----------
Total 6,273,313
----------
ELECTRONICS
27,700 AMP, Inc. 1,223,994
31,300 General Signal Corp. 1,271,563
----------
Total 2,495,557
----------
MACHINERY & MACHINE TOOLS
40,000 Deere & Co. 2,245,000
----------
DIVERSIFIED MANUFACTURING
40,000 Corning, Inc. 1,625,000
42,000 PPG Industries, Inc. 2,722,125
----------
Total 4,347,125
----------
OFFICE EQUIPMENT
71,300 Xerox Corp. 6,323,419
----------
OTHER CAPITAL GOODS
95,200 Tenneco, Inc. 3,915,100
----------
Total Capital Goods 25,599,514
----------
CONSUMER DURABLES -- 4.7%
AUTOMOTIVE & RELATED
181,500 Chrysler Corp. 7,067,156
104,000 Ford Motor Co. 5,882,500
127,500 General Motors Corp. 8,789,531
22,000 TRW, Inc. 1,205,875
----------
Total 22,945,062
----------
HOUSEHOLD PRODUCT/WARES
36,100 Fortune Brands, Inc. 1,432,719
54,600 Tupperware Corp. 1,467,375
----------
Total 2,900,094
----------
Total Consumer Durables 25,845,156
----------
CONSUMER NON-DURABLES -- 16.6%
BEVERAGES & FOODS
102,000 ConAgra, Inc. 3,060,000
21,000 General Mills, Inc. 1,510,688
10,000 International Multifoods Corp. 279,375
----------
Total 4,850,063
----------
CLOTHING AND TEXTILE
50,000 Unifi, Inc. 1,837,500
----------
COSMETICS/TOILETRIES
90,000 Avon Products, Inc. 6,339,375
50,000 Dial Corp. 1,184,375
----------
Total 7,523,750
----------
HEALTH CARE
38,000 Abbott Laboratories 2,842,875
75,600 American Home Products Corp. 7,087,500
28,100 Bausch & Lomb, Inc. 1,259,231
137,500 Baxter International, Inc. 7,785,938
94,400 Bristol-Myers Squibb Co. 9,457,700
78,300 Merck & Co., Inc. 9,988,144
----------
Total 38,421,388
----------
</TABLE>
<TABLE>
-------------------------------------------------------
<CAPTION>
Shares Description Value
-------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
CONSUMER NON-DURABLES (continued)
RETAIL
54,500 Limited, Inc. $1,580,500
23,800 May Department Stores Co. 1,445,850
37,600 Penney (J.C.) Co., Inc. 2,657,850
80,000 Sears, Roebuck & Co. 4,245,000
----------
Total 9,929,200
----------
SERVICES
69,000 Browning-Ferris Industries, Inc. 2,298,563
75,300 Waste Management, Inc. 1,882,500
----------
Total 4,181,063
----------
TOBACCO
374,750 Philip Morris Cos., Inc. 16,278,203
212,000 UST, Inc. 7,512,750
----------
Total 23,790,953
----------
Total Consumer Non-Durables 90,533,917
----------
ENERGY -- 14.8%
DOMESTIC & INTERNATIONAL OIL
47,100 Amoco Corp. 4,003,500
68,000 Chevron Corp. 5,516,500
229,300 Exxon Corp. 14,646,538
72,800 Kerr-McGee Corp. 4,923,100
113,800 Mobil Corp. 8,243,388
270,800 Occidental Petroleum Corp. 6,922,325
219,600 Royal Dutch Petroleum Co., ADR 11,927,025
129,200 Texaco, Inc. 7,210,975
207,500 USX Corp. 7,171,719
178,800 Unocal Corp. 6,738,525
----------
Total 77,303,595
----------
OIL SERVICE
72,000 Dresser Industries, Inc. 3,217,500
----------
Total Energy 80,521,095
----------
FINANCIAL -- 22.3%
BANKS
36,300 Bank of New York Co., Inc. 2,125,819
86,500 BankAmerica Corp. 6,703,750
59,832 Chase Manhattan Corp. 7,422,908
21,000 Citicorp 2,782,500
52,000 First American Corp. 2,489,500
91,100 First Commerce Corp. 7,196,900
154,000 First Union Corp. 8,113,875
60,200 Fleet Financial Group, Inc. 4,744,513
31,000 KeyCorp 2,171,938
37,000 Mellon Bank Corp. 2,305,563
85,000 Mercantile Bancorporation, Inc. 4,728,125
87,400 NationsBank Corp. 5,986,900
32,000 Union Planters Corp. 1,978,000
86,000 Washington Mutual, Inc. 5,772,750
19,500 Wells Fargo & Co. 6,279,000
----------
Total 70,802,041
----------
</TABLE>
(See Notes to Portfolios of Investments)
[_] MARSHALL FUNDS
- --------------------------------------------------------------------------------
EQUITY INCOME FUND (continued)
<TABLE>
<CAPTION>
----------------------------------------------------------------
Shares Description Value
----------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
FINANCIAL (continued)
INSURANCE
35,100 CIGNA Corp. $6,704,100
26,400 Hartford Financial Services Group, Inc. 2,593,800
29,200 SAFECO Corp. 1,531,175
-----------
Total 10,829,075
-----------
OTHER FINANCIAL
96,500 American General Hospitality Corp. 2,605,500
100,100 Capstone Capital Trust, Inc. 2,414,913
70,000 Crescent Real Estate Equities, Inc. 2,384,375
70,000 Equity Office Properties Trust 2,065,000
53,000 Equity Residential Properties Trust 2,540,688
45,000 FelCor Suite Hotels, Inc. 1,614,375
23,600 Franchise Finance Corp. of America 631,300
104,500 Glenborough Realty Trust, Inc. 2,978,250
94,700 Health & Rehabilitation Properties, Inc. 1,894,000
86,000 Healthcare Realty Trust, Inc. 2,461,750
210,000 IRT Property Co. 2,441,250
137,900 Innkeepers USA Trust 2,042,644
95,000 Liberty Property Trust 2,523,438
96,300 Prentiss Properties Trust 2,570,006
159,000 Public Storage, Inc. 4,899,188
92,600 Simon DeBartolo Group, Inc. 2,859,025
42,000 Sovran Self Storage, Inc. 1,239,000
-----------
Total 40,164,702
-----------
Total Financial 121,795,818
-----------
RAW MATERIALS/INTERMEDIATE GOODS -- 8.2%
CHEMICALS
48,000 Du Pont (E.I.) de Nemours & Co. 2,943,000
39,200 Eastman Chemical Co. 2,567,600
116,300 Goodrich (B.F.) Co. 5,764,119
40,400 Hercules, Inc. 1,951,825
42,500 Imperial Chemical Industries, PLC, ADR 3,107,813
-----------
Total 16,334,357
-----------
CONTAINERS & GLASS
94,800 Crown Cork & Seal Co., Inc. 5,119,200
36,000 Sonoco Products Co. 1,392,750
-----------
Total 6,511,950
-----------
METALS
147,000 AK Steel Holding Corp. 2,747,063
100,000 Allegheny Teledyne, Inc. 2,712,500
26,000 Aluminum Co. of America 1,907,750
-----------
Total 7,367,313
-----------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Shares Description Value
------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
PAPERS
110,000 Kimberly-Clark Corp. 6,125,625
89,000 Mead Corp. 3,042,688
107,900 Weyerhaeuser Co. 5,388,256
------------
Total 14,556,569
------------
Total Raw Materials/ Intermediate Goods 44,770,189
------------
TRANSPORTATION -- 0.3%
RAILROAD
28,700 Union Pacific Corp. $1,463,700
------------
UTILITIES -- 13.4%
ELECTRIC
127,500 Allegheny Energy, Inc. 3,896,719
80,000 Cinergy Corp. 2,785,000
34,000 Consolidated Edison Co. 1,445,000
62,600 Duke Energy Corp. 3,478,213
61,900 Houston Industries, Inc. 1,601,663
90,000 NIPSCO Industries, Inc. 2,311,875
74,300 Pinnacle West Capital Corp. 3,032,369
53,000 Southern Co. 1,308,438
69,700 Texas Utilities Co. 2,818,494
------------
Total 22,677,771
------------
GAS DISTRIBUTION
117,200 Consolidated Natural Gas Co. 6,739,000
104,900 Enron Corp. 4,930,300
73,100 MCN Corp. 2,690,994
124,000 Sonat, Inc. 5,347,500
33,900 WICOR, Inc. 1,620,844
77,000 Williams Cos., Inc. 2,516,938
------------
Total 23,845,576
------------
TELECOMMUNICATIONS
63,000 Ameritech Corp. 2,626,300
60,000 Bell Atlantic Corp. 5,385,000
141,000 GTE Corp. 7,631,625
90,280 SBC Communications, Inc. 6,827,425
55,400 Sprint Corp. 3,656,400
------------
Total 26,126,750
------------
Total Utilities 72,650,097
------------
TOTAL COMMON STOCKS
(identified cost $357,552,467) 463,179,486
------------
(B)REPURCHASE AGREEMENT -- 15.0%
81,599,382 Lehman Brothers, Inc., 5.62%, dated 2/27/1998, due
3/2/1998 (at amortized cost) 81,599,382
------------
TOTAL INVESTMENTS
(identified cost $439,151,849) $544,778,868
============
</TABLE>
(See Notes to Portfolios of Investments)
February 28, 1998 (unaudited)
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
LARGE-CAP GROWTH & INCOME FUND
<TABLE>
<CAPTION>
--------------------------------------------------------------
Shares Description Value
--------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 98.8%
BASIC INDUSTRIES -- 6.3%
CHEMICALS
70,900 (d)Air Products & Chemicals, Inc. $5,951,169
----------
INDUSTRIAL SERVICES
113,700 Waste Management, Inc. 2,842,500
----------
METALS
54,300 (d)Aluminum Co. of America 3,984,262
----------
PAPERS
117,000 Kimberly-Clark Corp. 6,515,437
----------
TOTAL BASIC INDUSTRIES 19,293,368
----------
CAPITAL GOODS -- 18.8%
AEROSPACE & RELATED
108,200 (d)Boeing Co. 5,869,850
63,900 General Dynamics Corp. 5,543,325
----------
Total 11,413,175
----------
COMPUTER SERVICES
80,000 (d)Compaq Computer Corp. 2,565,000
57,400 (d)International Business Machines Corp. 5,994,712
78,600 (c)Microsoft Corp. 6,661,350
100,000 (d)(c)Quantum Corp. 2,512,500
135,000 (d)(c)Sun Microsystems, Inc. 6,429,375
125,000 (d)(c)Western Digital Corp. 2,281,250
----------
Total 26,444,187
----------
ELECTRICAL EQUIPMENT
69,200 Emerson Electric Co. 4,415,825
119,800 (d)General Electric Co. 9,314,450
----------
Total 13,730,275
----------
ELECTRONICS
38,800 (d)Intel Corp. 3,479,875
----------
TECHNOLOGY SERVICES
75,000 Millipore Corp. 2,835,938
----------
TOTAL CAPITAL GOODS 57,903,450
----------
CONSUMER DURABLES -- 1.8%
BUILDING & FOREST PRODUCTS
53,500 Georgia-Pacific Corp. 3,139,781
98,500 (d)(c)Georgia-Pacific Corp. 2,247,031
----------
TOTAL CONSUMER DURABLES 5,386,812
----------
CONSUMER NON-DURABLES -- 36.9%
BEVERAGES & FOODS
141,500 PepsiCo, Inc. 5,173,594
105,200 Quaker Oats Co. 5,667,650
87,600 Unilever N.V., ADR 5,633,775
175,000 Whitman Corp. 3,117,188
----------
Total 19,592,207
----------
CONSUMER CYCLICAL
50,000 (d)Nike, Inc., Class B 2,193,750
----------
ENTERTAINMENT
25,600 Disney (Walt) Co. 2,865,600
----------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------
Shares Description Value
--------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
CONSUMER NON-DURABLES (continued)
HEALTH CARE
80,200 (d)Abbott Laboratories $5,999,962
150,000 (d)Columbia/HCA Healthcare Corp. 4,068,750
52,500 (d)Merck & Co., Inc. 6,697,031
85,000 Schering Plough Corp. 6,465,313
-----------
Total 23,231,056
-----------
MEDIA
97,600 Gannett Co., Inc. 6,301,300
87,300 New York Times Co., Class A 5,712,694
79,300 (d)Time Warner, Inc. 5,352,750
-----------
Total 17,366,744
-----------
MEDICAL SUPPLIES
75,000 Johnson & Johnson 5,662,500
86,200 (d)Smithkline Beecham Corp., ADR 5,333,625
-----------
Total 10,996,125
-----------
RETAIL
146,500 (d)(c)Federated Department Stores, Inc. 6,867,187
70,700 (c)Kohl's Corp. 5,669,256
50,000 (d)Nordstrom, Inc. 2,867,188
150,000 (c)Safeway, Inc. 5,231,250
188,200 Walgreen Co. 6,904,588
-----------
Total 27,539,469
-----------
SERVICES
50,000 Manpower, Inc. 2,109,375
1 (c)Midas, Inc. 18
-----------
Total 2,109,393
-----------
TOBACCO
171,800 Philip Morris Cos., Inc. 7,462,563
-----------
TOTAL CONSUMER NON-DURABLES 113,356,907
-----------
ENERGY -- 7.3%
INTERNATIONAL OIL & GAS
93,000 Exxon Corp. 5,940,375
143,000 (d)Occidental Petroleum Corp. 3,655,438
90,800 (d)Royal Dutch Petroleum Co., ADR 4,931,575
50,000 Schlumberger Ltd. 3,768,750
73,800 (d)Texaco, Inc. 4,118,963
-----------
TOTAL ENERGY 22,415,101
-----------
FINANCIAL -- 17.0%
BANKS
112,800 (d)Bank of New York Co., Inc. 6,605,850
95,000 BankAmerica Corp. 7,362,500
43,700 Chase Manhattan Corp. 5,421,531
50,000 First Chicago NBD Corp. 4,109,375
75,000 Mellon Bank Corp. 4,673,437
-----------
Total 28,172,693
-----------
INSURANCE
50,850 American International Group, Inc. 6,111,534
178,400 Provident Cos., Inc. 6,422,400
-----------
Total 12,533,934
-----------
</TABLE>
(See Notes to Portfolios of Investments)
[_] MARSHALL FUNDS
- --------------------------------------------------------------------------------
LARGE-CAP GROWTH & INCOME FUND (continued)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
Shares or
Principal
Amount Description Value
-----------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
FINANCIAL (continued)
OTHER FINANCIAL
48,800 American Express Co. $4,395,050
150,200 Federal Home Loan Mortgage Corp. 7,096,950
------------
Total 11,492,000
------------
TOTAL FINANCIAL 52,198,627
------------
TRANSPORTATION -- 1.3%
RAILROAD
78,600 UNION PACIFIC CORP. 4,008,600
------------
UTILITIES -- 9.4%
ELECTRIC
64,100 Duke Energy Corp. 3,561,556
------------
GAS DISTRIBUTION
37,300 Consolidated Natural Gas Co. 2,144,750
------------
TELECOMMUNICATIONS
113,000 (d)Ameritech Corp. 4,710,687
85,900 GTE Corp. 4,649,337
63,300 Motorola, Inc. 3,528,975
65,900 SBC Communications, Inc. 4,983,688
140,000 (d)(c)WorldCom, Inc. 5,346,250
------------
Total 23,218,937
------------
TOTAL UTILITIES 28,925,243
------------
TOTAL COMMON STOCKS
(identified cost $202,700,720) 303,488,108
------------
(E)COLLATERAL FOR SECURITIES LENDING -- 22.9% 48,000,000 (b)Morgan
Stanley Corp., Repurchase Agreement,
5.81%, 3/2/1998 48,000,000
22,000,000 (b)Lehman Brothers, Corp., Repurchase Agreement,
5.72%, 3/2/1998 22,000,000
273,900 Dreyfus Cash Management Plus (shares at net asset
value) 273,900
------------
TOTAL COLLATERAL FOR SECURITIES LENDING (at
amortized cost) 70,273,900
------------
(B)REPURCHASE AGREEMENT -- 1.8%
$5,654,717 Lehman Brothers, Inc., 5.62%, dated 2/27/1998, due
3/2/1998 (at amortized cost) 5,654,717
------------
TOTAL INVESTMENTS (identified cost $278,629,337) $379,416,725
============
</TABLE>
- --------------------------------------------------------------------------------
MID-CAP VALUE FUND
<TABLE>
<CAPTION>
-------------------------------------------------------------
Shares Description Value
-------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 94.8%
CAPITAL GOODS -- 8.3%
COMPUTERS
261,700 (c)Silicon Graphics, Inc. $3,941,856
----------
OTHER CAPITAL GOODS
102,300 (c)Acuson Corp. 1,879,762
160,000 ITT Industries, Inc. 5,480,000
155,500 Stewart & Stevenson Services 3,800,031
----------
Total 11,159,793
----------
Total Capital Goods 15,101,649
----------
CONSUMER DURABLES -- 5.3%
HOUSEHOLD PRODUCT/WARES
129,000 (d)Rubbermaid, Inc. 3,741,000
46,400 (d)Sunbeam Corp. 1,919,800
91,800 Tupperware Corp. 2,467,125
----------
Total 8,127,925
----------
MANUFACTURING
50,000 Flowserve Corp. 1,584,375
----------
Total Consumer Durables 9,712,300
----------
CONSUMER NON-DURABLES -- 32.4%
BEVERAGES & FOODS
516,900 Darden Restaurants, Inc. 6,978,150
200,000 Food Lion, Inc., Class A 2,018,750
234,000 Food Lion, Inc., Class B 2,310,750
129,000 International Multifoods Corp. 3,603,937
----------
Total 14,911,587
----------
COMMERCIAL STAPLES
105,000 American Greetings Corp., Class A 4,790,625
53,000 (c)Scholastic Corp. 2,100,125
----------
Total 6,890,750
----------
COSMETICS/TOILETRIES
225,000 (d)Dial Corp. 5,329,687
----------
PHARMACEUTICALS & HEALTH CARE
291,200 (c)Perrigo Co. 3,130,400
117,400 (c)Tenet Healthcare Corp. 4,380,488
----------
Total 7,510,888
----------
RETAIL
100,400 Dillards, Inc., Class A 3,576,750
79,500 (c)(d)Federated Department Stores, Inc. 3,726,562
114,778 Limited, Inc. 3,328,562
----------
Total 10,631,874
----------
SERVICES
105,600 Ikon Office Solutions, Inc. 3,451,800
252,000 Viad Corp. 6,095,250
----------
Total 9,547,050
----------
TOBACCO
116,000 (d)UST, Inc. 4,110,750
----------
Total Consumer Non-Durables 58,932,586
----------
ENERGY -- 4.4%
OIL & GAS PRODUCTS
108,320 (d)USX Corp. 3,743,810
114,500 Unocal Corp. 4,315,219
----------
Total Energy 8,059,029
----------
</TABLE>
(See Notes to Portfolios of Investments)
February 28, 1998 (unaudited)
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
MID-CAP VALUE FUND (continued)
<TABLE>
<CAPTION>
----------------------------------------------------------------
Shares Description Value
----------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
FINANCIAL -- 7.6%
INSURANCE
92,600 Everest Re Holdings, Inc. $3,414,625
134,500 IPC Holdings Ltd. 4,152,688
50,400 Torchmark Corp. 2,346,750
-----------
Total 9,914,063
-----------
OTHER FINANCIAL
50,000 Dun & Bradstreet Corp. 1,675,000
93,720 Trizec Hahn Corp. 2,301,998
-----------
Total 3,976,998
-----------
Total Financial 13,891,061
-----------
RAW MATERIALS/INTERMEDIATE GOODS -- 21.0%
CHEMICALS
366,050 Calgon Carbon Corp. 4,758,650
57,900 Eastman Chemical Co. 3,792,450
82,750 (d)Imperial Chemical Industries, PLC, ADR 6,051,094
131,800 Lawter International, Inc. 1,540,412
-----------
Total 16,142,606
-----------
CONTAINER & GLASS
60,000 Crown Cork & Seal Co., Inc. 3,240,000
-----------
INTERMEDIATE GOODS
133,900 Canadian Pacific Ltd. 3,824,519
175,127 Hanson PLC, ADR 4,432,902
-----------
Total 8,257,421
-----------
PAPERS & RELATED PRODUCTS
55,500 Consolidated Papers, Inc. 3,222,469
57,000 Fort James Corp. 2,586,375
56,800 Mead Corp. 1,941,850
-----------
Total 7,750,694
-----------
SERVICES
110,537 Waste Management, Inc. 2,763,425
-----------
Total Raw Materials/Intermediate Goods 38,154,146
-----------
TELECOMMUNICATIONS -- 4.9%
SERVICES
186,934 (c)TCI Ventures Group, Class A 2,885,788
97,033 (c)(d)Tele-Communications, Inc., Class A 2,820,027
98,300 (c)(d)U.S. West Media Group 3,164,031
-----------
Total 8,869,846
-----------
TRANSPORTATION -- 1.9%
OTHER TRANSPORTATION
120,180 Alexander and Baldwin, Inc. 3,395,085
-----------
UTILITIES -- 9.0%
ELECTRIC
146,620 Entergy Corp. 4,242,816
75,000 Pinnacle West Capital Corp. 3,060,938
107,600 Texas Utilities Co. 4,351,075
-----------
Total 11,654,829
-----------
ELECTRIC DISTRIBUTION
108,600 Telephone and Data System, Inc. 4,730,889
-----------
Total Utilities 16,385,718
-----------
TOTAL COMMON STOCKS
(identified cost $139,308,175) 172,501,420
-----------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
Shares or
Principal
Amount Description Value
-----------------------------------------------------------------------------
<C> <S> <C>
(E)COLLATERAL FOR SECURITIES LENDING -- 11.4%
$807,973 Dreyfus Cash Management Plus (shares at net asset
value) $807,973
2,000,000 Merrill Lynch & Co., Inc., Medium Term Notes,
5.81%, 3/2/1998 1,999,620
18,000,000 (b)Morgan Stanley Corp., Repurchase Agreement,
5.81%, 3/2/1998 18,000,000
------------
TOTAL COLLATERAL FOR SECURITIES LENDING (at
amortized cost) 20,807,593
------------
(B)REPURCHASE AGREEMENT -- 5.1%
9,225,718 Lehman Brothers, Inc., 5.62%, dated 2/27/1998, due
3/2/1998 (at amortized cost) 9,225,718
------------
TOTAL INVESTMENTS
(identified cost $169,341,486) $202,534,731
============
</TABLE>
- --------------------------------------------------------------------------------
MID-CAP GROWTH FUND
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Shares Description Value
---------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 98.2%
CAPITAL GOODS -- 16.3%
COMPUTER SERVICES
35,000 (c)America Online, Inc. $ 4,239,375
100,000 (c)Cambridge Technology Partners, Inc. 4,550,000
85,000 (c)Compuware Corp. 3,580,625
60,000 (c)Concord EFS, Inc. 1,867,500
85,000 (d)HBO & Co. 4,600,625
75,000 (c)Saville Systems Ireland PLC, ADR 3,515,625
70,000 (c)Security Dynamics Technologies, Inc. 2,493,750
140,000 (c)(d)Transaction Systems Architects, Inc., Class A 6,090,000
------------
Total 30,937,500
------------
COMPUTERS
70,000 (c)Lexmark Intl. Group, Class A 2,992,500
------------
ELECTRICAL EQUIPMENT
35,000 (c)Teradyne, Inc. 1,651,563
------------
Total Capital Goods 35,581,563
------------
CONSUMER DURABLES -- 1.3%
AUTOMOTIVE & RELATED
100,000 Harley Davidson, Inc. 2,900,000
------------
CONSUMER NON-DURABLES -- 57.6%
BEVERAGES & FOODS
75,000 (d)Coca Cola Enterprises, Inc. 2,479,687
20,000 (c)Whole Foods Market, Inc. 1,223,750
------------
Total 3,703,437
------------
BROADCASTING
70,000 (c)(d)Clear Channel Communications, Inc. 6,343,750
125,000 (c)Heftel Broadcasting Corp., Class A 5,921,875
80,000 (c)(d)Jacor Communications, Inc., Class A 4,630,000
</TABLE>
(See Notes to Portfolios of Investments)
[_] MARSHALL FUNDS
- --------------------------------------------------------------------------------
MID-CAP GROWTH FUND (continued)
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Shares Description Value
-----------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
CONSUMER NON-DURABLES (continued)
BROADCASTING (continued)
75,000 (c)Univision Communications, Inc., Class A $2,878,125
100,000 (c)Westwood One, Inc. 3,100,000
-----------
Total 22,873,750
-----------
COMMERCIAL SERVICES
70,000 (c)(d)Applied Graphics Technologies, Inc. 4,138,750
125,000 (c)MSC Industrial Direct Co. 5,976,563
100,000 (c)Rental Service Corp. 2,350,000
100,000 (c)(d)USA Waste Services, Inc. 4,162,500
25,000 (c)Universal Outdoor Holdings, Inc. 1,500,000
-----------
Total 18,127,813
-----------
DRUGS
100,000 (c)(d)Alza Corp. 3,737,500
130,000 (c)North American Vaccine, Inc. 2,632,500
110,000 (c)(d)Parexel International Corp. 4,152,500
55,000 (c)(d)Theragenics Corp. 3,265,625
-----------
Total 13,788,125
-----------
HEALTH CARE
150,000 (c)Health Management Association, Class A 4,171,875
125,000 (d)Omnicare, Inc. 4,625,000
100,000 (c)(d)Sunrise Assisted Living, Inc. 4,225,000
-----------
Total 13,021,875
-----------
LEISURE & RECREATION
100,000 (d)Royal Caribbean Cruises, Ltd. 5,475,000
110,000 (c)(d)Speedway Motorsports, Inc. 2,956,250
155,000 (c)Steiner Leisure Ltd. 6,200,000
-----------
Total 14,631,250
-----------
MANUFACTURING
105,000 (c)Novel Denim Holdings Ltd. 2,611,875
-----------
MEDIA
120,000 (c)Outdoor Systems, Inc. 3,577,500
-----------
MEDICAL SUPPLIES
100,000 (c)Biomet, Inc. 2,981,250
160,000 (c)Sybron International Corp. 4,370,000
-----------
Total 7,351,250
-----------
RESTAURANTS
125,000 (c)(d)Landrys Seafood Restaurants, Inc. 3,312,500
-----------
RETAIL
125,000 (c)(d)Bed Bath & Beyond, Inc. 5,398,437
100,000 (c)Kohl's Corp. 8,018,750
80,000 (c)Staples, Inc. 1,690,000
-----------
Total 15,107,187
-----------
SERVICES
50,000 (c)(d)Apollo Group, Inc., Class A 2,118,750
75,000 (c)(d)Corestaff, Inc. 2,339,062
75,000 (c)Metzler Group, Inc. 3,206,250
-----------
Total 7,664,062
-----------
Total Consumer Non-Durables 125,770,624
-----------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Shares or
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
ENERGY -- 5.4%
100,000 ENSCO International, Inc. $2,912,500
75,000 (c)EVI, Inc. 3,679,687
175,000 (c)Newpark Resources, Inc. 3,368,750
70,000 (c)R&B Falcon Corp. 1,855,000
------------
Total 11,815,937
------------
FINANCIAL -- 9.0%
50,000 Franklin Resources, Inc. 2,550,000
85,000 INMC Mortgage Holdings, Inc. 2,236,563
90,000 (d)MGIC Investment Corp. 6,631,875
100,000 Paychex, Inc. 5,162,500
75,000 SouthTrust Corp. 3,065,625
------------
Total 19,646,563
------------
TELECOMMUNICATIONS -- 8.6%
160,000 (c)Brightpoint, Inc. 3,280,000
90,000 (c)Electric Lightwave, Inc., Class A 1,338,750
125,000 (c)(d)NEXTEL Communications, Inc., Class A 3,695,313
100,000 (c)(d)Pacific Gateway Exchange, Inc. 4,331,250
100,000 (c)(d)Tellabs, Inc. 6,037,500
------------
Total 18,682,813
------------
TOTAL COMMON STOCKS
(identified cost $168,628,536) 214,397,500
------------
(G)U.S. TREASURY BILL -- 0.1%
$150,000 5/7/1998 (identified cost $148,596) 148,644
------------
(E)COLLATERAL FOR SECURITIES LENDING -- 29.3% 296,250 Dreyfus Cash
Management Plus (shares at net asset
value) 296,250
6,750,000 Federal Signal Corp., Master Note, 5.647%, 3/2/1998 6,750,000
7,000,000 General Motors Acceptance Corp., Master Note,
5.579%, 3/2/1998 7,000,000
3,000,000 J.P. Morgan Securities, Master Note, 5.635%,
3/2/1998 3,000,000
1,999,620 Merrill Lynch & Co., Inc., 5.810%, 3/2/1998 1,999,620
45,000,000 (b)Morgan Stanley Co., Inc., Repurchase Agreement,
5.813%, 3/2/1998 45,000,000
------------
TOTAL COLLATERAL FOR SECURITIES LENDING (at
amortized cost) 64,045,870
------------
(B)REPURCHASE AGREEMENT -- 2.1%
4,690,965 Lehman Brothers, Inc., 5.62%, dated 2/27/1998, due
3/2/1998 (at amortized cost) 4,690,965
------------
TOTAL INVESTMENTS
(identified cost $237,513,967) $283,282,979
============
</TABLE>
(See Notes to Portfolios of Investments)
February 28, 1998 (unaudited)
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
INTERNATIONAL STOCK FUND
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Shares Description Value
------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 83.1%
ARGENTINA -- 2.9%
65,750 (d)(h)Telefonica de Argentina S.A., ADR $2,367,000
145,500 (d)YPF Sociedad Anonima, ADR 4,601,438
----------
Total 6,968,438
----------
AUSTRALIA -- 3.5%
81,390 BTR PLC, Class A 207,194
489,500 David Jones Ltd. 548,290
915,000 Gio Australia Holdings Ltd. 2,587,702
460,700 Mayne Nickless Ltd. 2,533,245
64,235 News Corp., Ltd. 407,716
481,200 Pioneer International Ltd. 1,388,317
50,500 (c)(h)Qantas Airways, ADR 863,510
----------
Total 8,535,974
----------
AUSTRIA -- 1.2%
9,900 Evn Energie-Versorgung Niederoesterreich AG 1,397,427
11,000 VA Technologie AG 1,525,867
----------
Total 2,923,294
----------
BELGIUM -- 0.5%
15,900 (c)NV Union Miniere S.A. 1,176,676
----------
BERMUDA -- 2.0%
170,000 Jardine Matheson Holdings Ltd. 795,600
83,000 PartnerRe Ltd. 4,046,250
----------
Total 4,841,850
----------
BRAZIL -- 3.8%
86,100 (d)Companhia Vale Do Rio Doce, ADR 1,874,130
105,700 (d)Lojas Americanas S.A., ADR 664,039
111,200 (d)Petroleo Brasileiro S.A., ADR 2,518,869
34,150 (d)Telecomunicacoes Brasileiras S.A., ADR 4,181,241
----------
Total 9,238,279
----------
CANADA -- 1.9%
120,000 Canadian Imperial Bank of Commerce 3,797,548
37,000 (c)Newbridge Networks Corp. 866,812
----------
Total 4,664,360
----------
CHINA -- 0.3%
94,100 Shandong Huaneng Power Company Ltd., Class N, ADR 793,969
----------
CZECHOSLOVOKIA -- 0.3%
28,315 CEZ A.S. 811,555
----------
DENMARK -- 1.3%
47,000 (d)Tele Danmark A.S., Class B 3,045,591
----------
FINLAND -- 1.7%
47,500 (c)Amer Group, Ltd., Class A 949,008
425,000 (c)Merita Ltd, Class A 2,485,583
73,500 (d)Metsa-Serla Oy, Class B 654,134
----------
Total 4,088,725
----------
FRANCE -- 10.6%
70,319 AXA 6,810,473
18,842 Alcatel Alsthom 2,453,813
97,381 Banque Nationale de Paris 5,892,659
1,500 Compagnie Generale D'Industrie Et De Participation 645,975
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------
Shares Description Value
------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
FRANCE (continued)
25,592 Elf Aquitaine SA $2,916,263
29,000 Eramet SLN 1,220,275
1,766 Marine-Wendel SA 251,186
53,218 (c)Renault S.A. 1,855,170
82,332 Rhone-Poulenc, Class A 3,798,793
----------
Total 25,844,607
----------
GERMANY -- 2.0%
53,500 (d)Bayer AG 2,256,264
37,650 (d)Deutsche Bank, AG 2,587,212
----------
Total 4,843,476
----------
GREAT BRITAIN -- 12.2%
2,211,306 Albert Fisher Group PLC 1,038,292
777,176 BG PLC 3,902,015
1,929,000 BTR PLC 5,124,572
189,800 (d)British Steel PLC, ADR 4,685,688
880,800 (c)Centrica PLC 1,567,208
585,865 Hillsdown Holdings PLC 1,553,993
125,166 Hyder PLC 1,934,260
146,100 Kwik Save Group PLC 828,008
1,500,000 Medeva PLC 3,855,152
264,434 National Power Co. PLC 2,742,450
36,434 (c)Nycomed Amersham PLC 1,322,288
345,694 The BICC Group 757,476
60,000 (c)Waste Management International PLC, ADR 363,750
----------
Total 29,675,152
----------
HONG KONG -- 3.9%
73,307 HSBC Holdings PLC 2,120,861
628,000 Hong Kong Electric Holdings Ltd. 2,230,546
455,000 Hong Kong Ferry Holdings 470,132
210,000 Hutchison Whampoa 1,484,985
485,500 Jardine Strategic Holdings Ltd. 1,383,675
894,000 South China Morning Post Holdings Ltd. 646,613
171,500 Swire Pacific Ltd., Class A 1,032,212
----------
Total 9,369,024
----------
HUNGARY -- 1.0%
88,814 (c)(h)MOL Magyar Olay, GDR 2,353,571
----------
INDONESIA -- 0.4%
1,161,500 Lippo Bank 102,876
599,500 Barito Pacific Timber 137,029
51,600 (d)Indosat, ADR 774,000
630,000 PT Pan Indonesia Bank 43,200
90,000 PT Pan Indonesia Bank, Warrants 741
----------
Total 1,057,846
----------
ITALY -- 4.1%
260,000 Autostrade Spa 974,573
170,000 (d)Burgo (Cartiere) S.P.A. 1,156,032
1,120,900 (d)Fiat S.P.A. 3,944,424
825,000 Telecom Italia S.P.A. 4,008,574
----------
Total 10,083,603
----------
JAPAN -- 1.2%
55,000 Daito Trust Construction Co. 488,501
27,000 Sony Corp. 2,440,920
----------
Total 2,929,421
----------
</TABLE>
(See Notes to Portfolios of Investments)
[-] MARSHALL FUNDS
- --------------------------------------------------------------------------------
INTERNATIONAL STOCK FUND (continued)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
Shares Description Value
-----------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
LUXEMBOURG -- 0.8%
110,900 (d)Minorco S.A., ADR $1,940,750
----------
MEXICO -- 1.1%
346,000 Alfa, S.A. de C.V., Class A 1,967,753
182,400 (d)Vitro S.A. 688,705
----------
Total 2,656,458
----------
NETHERLANDS -- 5.2%
11,700 Akzo Nobel N.V. 2,376,683
18,135 Ballast Nedam N.V. 940,258
20,000 European Vinyls Corp., International N.V. 369,782
63,750 ING Groep, N.V. 3,377,008
9,657 Koninklijke Bijenkorf Beheer 668,378
62,000 Philips Electronics N.V. 4,821,835
----------
Total 12,553,944
----------
NEW ZEALAND -- 1.5%
802,000 Air New Zealand Ltd., Class B 1,195,668
1,853,300 Brierley Investments Ltd. 1,256,897
22,000 Fletcher Challenge 16,335
137,500 (c)(d)Fletcher Challenge Building 327,185
137,500 (c)(d)Fletcher Challenge Energy 502,434
275,000 (c)Fletcher Challenge Paper 369,791
----------
Total 3,668,310
----------
NORWAY -- 1.8%
56,000 (c)Elkem A.S., Class A 716,888
61,800 Kvaerner A.S., Class B 2,071,636
60,500 Saga Petroleum A.S., Class A 1,029,998
39,500 Unitor Ships Service 492,629
----------
Total 4,311,151
----------
PERU -- 0.3%
43,700 (c)(d)CPT Telefonica de Peru S.A., Class B, ADR 827,569
----------
PHILIPPINES -- 0.2%
14,778 Philippine Long Distance Telephone Co., GDR 389,760
----------
PORTUGAL -- 0.9%
34,500 BPI-SGPS S.A. 1,238,509
32,700 Banco Totta & Acores Nationalisiert, Class B 907,258
----------
Total 2,145,767
----------
RUSSIA -- 0.4%
49,200 (c)(d)(h)Gazprom, ADR 1,020,900
----------
SINGAPORE -- 0.3%
588,229 Dairy Farm International Holdings Ltd. 705,875
----------
SPAIN -- 6.1%
91,500 (d)Corporacion Bancaria de Espana SA, ADR 3,414,094
98,000 Endesa S.A. 2,167,296
191,500 Iberdrola S.A. 2,771,481
53,500 Repsol S.A. 2,387,212
118,500 Telefonica de Espana 4,077,436
----------
Total 14,817,519
----------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Shares or
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
SWEDEN -- 4.6%
92,000 Astra AB, Class B $1,800,088
28,600 Autoliv, Inc., ADR 874,251
47,000 Esselte AB, Class A 887,291
59,100 (c)Granges AB 1,019,666
98,000 (d)Stora Kopparbergs, Class B 1,415,140
75,000 (d)Svenska Handelsbanken, Stockholm 3,211,540
76,500 (d)Volvo AB, Class B 2,070,670
-----------
Total 11,278,646
-----------
SWITZERLAND -- 4.0%
13,800 Credit Suisse Group 2,493,692
350 Reiseburo Kuoni AG, Class B 1,429,594
300 Societe Generale de Surveillance Holding SA, Class B 552,335
9,500 Zurich Versicherungsgesellschaft 5,182,407
-----------
Total 9,658,028
-----------
UNITED STATES -- 1.1%
89,600 Autoliv, Inc. 2,766,400
-----------
TOTAL COMMON STOCKS
(identified cost $160,246,147) 201,986,488
-----------
(E)COLLATERAL FOR SECURITIES LENDING -- 21.2% $483,006 Dreyfus Cash
Management Plus (shares at net asset
value) 483,006
3,000,000 Federal Signal Corp., Master Note, 5.647%, 3/2/1998 3,000,000
2,000,000 GMAC Master Note, 5.579%, 3/2/1998 2,000,000
3,000,000 J.P. Morgan Securities Master Note, 5.635%, 3/2/1998 3,000,000
3,000,000 Merrill Lynch Corp., Floating Rate Note, 5.81%,
3/2/1998 3,000,000
40,000,000 (b)Morgan Stanley Corp., Repurchase Agreement,
5.813%, 3/2/1998 40,000,000
-----------
TOTAL COLLATERAL FOR SECURITIES LENDING (at
amortized cost and value) 51,483,006
-----------
PREFERRED STOCKS -- 1.1%
AUSTRALIA -- 1.1%
491,572 News Corp., Ltd., Pfd. (identified cost $2,138,225) 2,686,315
-----------
CONVERTIBLE BONDS -- 0.0%
CAYMAN ISLANDS -- 0.0%
1,790,000 PIV Investment Finance, Company Guarantee, 4.50%,
12/1/2000 (identified cost $1,431,133) 89,500
-----------
CONVERTIBLE PREFERRED STOCKS -- 2.8%
ARGENTINA -- 0.7%
24,080 (c)(h)Cointel, Telefonica de Argentina SA, PRIDES,
$5.04 1,790,950
-----------
AUSTRALIA -- 0.8%
66,614 National Australia Bank, Ltd., Melbourne,
Exchangeable Capital Unit, $1.97 1,890,172
-----------
</TABLE>
(See Notes to Portfolios of Investments)
February 28, 1998 (unaudited)
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
INTERNATIONAL STOCK FUND (continued)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
CONVERTIBLE PREFERRED STOCKS (Continued)
GREAT BRITAIN -- 0.1%
$107,100 Hyder PLC, Pfd. $210,855
------------
MEXICO -- 0.9%
42,978 Nacional Financiera, SNC, PRIDES, $6.79 2,095,178
------------
PHILIPPINES -- 0.3%
29,000 (c)(h)Philippine Long Distance Telephone Co., Conv.
Pfd., Series II, $1.44 761,250
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(identified cost $5,473,435) 6,748,405
------------
GOVERNMENT AGENCIES -- 8.5%
10,840,000 Federal Farm Credit Bank, 5.62%, 4/1/1998 10,845,962
590,000 (i)Federal Home Loan Bank, Discount Notes, 5.45%,
3/18/1998 588,560
161,000 (i)Federal Home Loan Mortgage Corp., Discount
Notes, 5.42%, 3/12/1998 160,733
926,000 (i)Federal Home Loan Mortgage Corp., Discount
Notes, 5.40%, 3/18/1998 923,639
850,000 (i)Federal Home Loan Mortgage Corp., Discount
Notes, 5.42%, 4/10/1998 844,968
2,700,000 (i)Federal National Mortgage Association, Discount
Notes, 5.45%, 3/24/1998 2,690,928
1,060,000 (i)Federal National Mortgage Association, Discount
Notes, 5.50%, 3/30/1998 1,055,372
1,380,000 (i)Federal National Mortgage Association, Discount
Notes, 5.36%, 4/29/1998 1,367,856
2,245,000 (i)Federal National Mortgage Association, Discount
Notes, 5.48%, 3/17/1998 2,239,612
------------
TOTAL GOVERNMENT AGENCIES (identified cost
$20,711,560) 20,717,630
------------
U.S. TREASURY ISSUES -- 4.4%
125,000 Treasury Bill, 3/26/1998 124,644
204,000 Treasury Bill, 4/2/1998 203,176
275,000 Treasury Bill, 4/9/1998 273,609
1,145,000 Treasury Bill, 4/23/1998 1,136,129
4,355,000 (d)Treasury Bill, 4/30/1998 4,319,115
100,000 Treasury Bill, 5/7/1998 99,096
3,635,000 (d)Treasury Bill, 5/28/1998 3,590,689
836,000 Treasury Note, 5.125%, 4/30/1998 835,794
------------
TOTAL U.S. TREASURY ISSUES (identified cost
$10,578,844) 10,582,252
------------
TOTAL INVESTMENTS
(identified cost $252,062,350) $294,293,596
============
</TABLE>
INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
Percentage of
Net Assets
--------------------------------------------------
<S> <C>
Banking 10.9%
Government Agencies 8.5%
Insurance 7.7%
Telephone 7.4%
Electric Utilities 5.3%
U.S. Treasury Securities 4.4%
Chemicals 3.7%
Financial Services 3.5%
Gas & Pipeline Utilities 3.4%
Broadcasting 3.3%
Holding Cos.-Diversified 3.3%
Automotive 3.1%
Pharmaceuticals & Health Care 2.8%
Oil & Gas 2.4%
Oil 2.1%
Electronic Technology 2.0%
Steel 1.9%
Engineering & Construction 1.8%
Automobile 1.7%
Conglomerates 1.4%
Retail Trade 1.4%
Electrical Equipment 1.3%
Mining 1.3%
Metals 1.2%
Services 1.2%
Food & Beverage 1.1%
Household Appliances & Furnishings 1.0%
Petroleum Services 1.0%
Paper 0.9%
Finance 0.9%
Water Utilities 0.9%
Non-Ferrous Metals 0.8%
Construction Equipment 0.6%
Forest Products 0.6%
Industrial Machinery 0.6%
Leisure 0.6%
Aerospace & Related 0.5%
Investment Services 0.5%
Air Travel 0.4%
Electronics 0.4%
Office & Business Equipment 0.4%
Process Industries 0.4%
Container & Glass 0.3%
Consumer Electric 0.3%
Business Services 0.2%
Commercial Services 0.2%
Construction Materials 0.1%
Industrial 0.1%
Pollution Control 0.1%
Other Assets and Liabilities, Net 0.1%
-------
Total 100.00%
=======
</TABLE>
(See Notes to Portfolios of Investments)
[_] MARSHALL FUNDS
- --------------------------------------------------------------------------------
SMALL-CAP GROWTH FUND
<TABLE>
<CAPTION>
---------------------------------------------------------------------
Shares Description Value
---------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 95.2%
CAPITAL GOODS -- 16.7%
COMPUTER SERVICES
40,000 (c)Cambridge Technology Partners, Inc. $1,820,000
10,000 (c)SPR, Inc. 255,000
50,000 (c)Saville Systems Ireland PLC, ADR 2,343,750
40,000 (c)Security Dynamics Technologies, Inc. 1,425,000
50,000 (c)Transaction Systems Architects, Inc., Class A 2,175,000
----------
Total 8,018,750
----------
ELECTRONICS
25,000 (c)ATMI, Inc. 693,750
15,000 (c)Aavid Thermal Technologies 515,625
60,000 (c)Transcrypt International, Inc. 1,005,000
50,000 (c)Triumph Group, Inc. 2,150,000
50,000 (c)Uniphase Corp. 2,003,125
----------
Total 6,367,500
----------
Total Capital Goods 14,386,250
----------
CONSUMER NON-DURABLES -- 64.5%
BEVERAGES & FOODS
60,000 (c)American Italian Pasta Co., Class A 1,796,250
60,000 (c)AquaPenn Spring Water Co., Inc. 772,500
----------
Total 2,568,750
----------
BROADCASTING
50,000 (c)Cox Radio, Inc., Class A 2,150,000
50,000 (c)Heftel Broadcasting Corp., Class A 2,368,750
75,000 (c)Outdoor Systems, Inc. 2,235,938
45,000 (c)Westwood One, Inc. 1,395,000
----------
Total 8,149,688
----------
COMMERCIAL SERVICES
60,000 (c)NOVA Corp. 1,620,000
41,600 Schawk, Inc. 481,000
50,000 (c)SteriGenics International, Inc. 925,000
----------
Total 3,026,000
----------
DRUGS
40,000 (c)NBTY, Inc. 1,862,500
50,000 (c)North American Vaccine, Inc. 1,012,500
25,000 (c)Nutraceutical International Corp. 543,750
50,000 (c)Parexel International Corp. 1,887,500
----------
Total 5,306,250
----------
HEALTH CARE
70,000 (c)Alternative Living Services, Inc. 2,397,500
55,000 (c)Province Heathcare Co. 1,141,250
----------
Total 3,538,750
----------
LEISURE AND RECREATION
75,000 (c)Steiner Leisure Ltd. 3,000,000
----------
MANUFACTURING
70,000 (c)Novel Denim Holdings Ltd. 1,741,250
70,000 (c)Rayovac Corp. 1,299,375
75,000 Windmere Corp. 2,062,500
----------
Total 5,103,125
----------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Shares Description Value
----------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
CONSUMER NON-DURABLES (continued)
MEDICAL SUPPLIES
60,000 (c)Henry Schein, Inc. $2,445,000
30,000 (c)Milestone Scientific, Inc. 682,500
50,000 (c)Trex Medical Corp. 778,125
----------
Total 3,905,625
----------
RESTAURANTS
60,000 (c)Landrys Seafood Restaurants, Inc. 1,590,000
75,000 (c)Rainforest Cafe Inc. 1,237,500
----------
Total 2,827,500
----------
RETAIL
120,000 Casey's General Stores, Inc. 1,807,500
85,000 (c)Party City Corp. 2,316,250
----------
Total 4,123,750
----------
SERVICES
35,000 (c)ABR Information Services, Inc. 993,125
20,000 (c)Apollo Group, Inc., Class A 847,500
55,000 (c)Brightpoint, Inc. 1,127,500
60,000 (c)Casella Waste Systems, Inc. 1,462,500
50,000 (c)Coast Dental Services, Inc. 1,237,500
50,000 (c)Corestaff, Inc. 1,559,375
60,000 (c)EduTrek International, Inc., Class A 1,320,000
50,000 (c)MSC Industrial Direct Co. 2,390,625
40,000 (c)Metzler Group, Inc. 1,710,000
70,000 (c)Rental Service Corp. 1,645,000
----------
Total 14,293,125
----------
Total Consumer Non-Durables 55,842,563
----------
ENERGY -- 4.4%
OIL & GAS EQUIPMENT & SERVICES
35,000 (c)BJ Services Co., Warrants 1,461,250
60,000 (c)Eagle Geophysical, Inc. 817,500
80,000 (c)Newpark Resources, Inc. 1,540,000
----------
Total Energy 3,818,750
----------
FINANCIAL -- 4.6%
30,000 CMAC Investment Corp. 2,010,000
65,000 (c)Ocwen Financial Corp. 1,950,000
----------
Total Financial 3,960,000
----------
TELECOMMUNICATIONS -- 5.0%
30,000 (c)Electric Lightwave, Inc., Class A 446,250
50,000 (c)McLeod, Inc., Class A 1,948,437
45,000 (c)Pacific Gateway Exchange, Inc. 1,949,063
----------
Total Telecommunications 4,343,750
----------
TOTAL COMMON STOCKS
(identified cost $66,861,415) 82,351,313
----------
(G)U.S. TREASURY -- 0.1%
125,000 United States Treasury Bill, 5/7/1998 (identified cost
$123,841) 123,870
----------
</TABLE>
(See Notes to Portfolios of Investments)
February 28, 1998 (unaudited)
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
SMALL-CAP GROWTH FUND (continued)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Principal
Amount Description Value
----------------------------------------------------------------------------
<C> <S> <C>
(B)REPURCHASE AGREEMENT -- 7.9%
$6,858,176 Lehman Brothers, Inc., 5.62%, dated 2/27/1998, due
3/2/1998 (at amortized cost) $6,858,176
-----------
TOTAL INVESTMENTS
(identified cost $73,843,432) $89,333,359
===========
- -----------------------------------------------------------------------------
</TABLE>
SHORT-TERM INCOME FUND
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
ASSET-BACKED SECURITIES -- 21.2%
$792,174 BCF LLC., Series 1996-C2, Class A, 7.615%, 4/15/1999 $792,174
4,000,000 Capital Asset Research Funding, Series 1997, Class A,
6.46%, 12/15/2004 4,002,520
2,156,281 CPS Auto Grantor Trust, Series 1997-2, Class A, 6.65%,
8/15/2002 2,174,318
2,477,204 Contitrade Services Home Equity Loan Trust, Series
1991-1, Class A, 8.80%, 1/15/2006 2,492,191
2,190,731 Contitrade Services Home Equity Loan Trust, Series
1991-2, Class A, 7.70%, 9/15/2006 2,211,334
521,581 Equicon Home Equity Loan Trust, Series 1992-7, Class A,
5.90%, 9/18/2005 519,980
4,738,743 Green Tree Home Equity Loan, Series 96-C, Class A2,
7.10%, 6/15/2026 4,789,543
136,070 HFC Revolving Home Equity Loan Trust, Series 1992-1, Class A,
6.055%, 11/15/2017 136,614
1,131,902 New York City Tax Lien, Class B, 6.56%, 5/5/2025 1,136,860
469,440 Olympic Automobile Receivables Trust, Series 1994-A,
5.65%, 1/15/2001 469,013
771,787 Olympic Automobile Receivables Trust, Series 1995-B,
Class A2, 7.35%, 10/15/2001 784,621
112,384 Premier Auto Tr, Series 1993-4, Class A2, 4.65%,
2/2/1999 112,174
3,886 Structured Asset Securities Corp., Series 1995-C1,
Class A1A, 7.375%, 9/25/2024 3,886
1,667,253 The Money Store Home Equity Loan Trust, Series 1992-D2,
Class A3, 7.55%, 1/15/2018 1,729,708
2,254,008 The Money Store Home Equity Loan Trust, Series 1995-C,
Class A2, 6.25%, 8/15/2016 2,254,019
3,730,900 UCFC Home Equity Loan, Series 1995-A1, Class A5, 8.55%,
1/10/2020 3,957,328
2,000,000 UCFC Home Equity Loan, Series 1996-A, Class A4, 6.30%,
12/31/2099 2,001,440
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Principal
Amount Description Value
----------------------------------------------------------------------------
<C> <S> <C>
ASSET-BACKED SECURITIES (continued)
$401,529 Western Financial Grantor Trust, Series 1994-2,
Class A1, 6.375%, 9/1/1999 $402,288
----------
TOTAL ASSET-BACKED SECURITIES
(identified cost $29,858,552) 29,970,011
----------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 27.5%
FEDERAL HOME LOAN MORTGAGE
CORPORATION -- 5.6%
111,400 10.00%, 7/15/2018, Series 10D 111,303
3,874,704 7.00%, 1/15/2020, Series 1834, Class A 3,914,427
3,856,521 6.05%, 9/15/2020, Series 1818, Class A 3,837,412
----------
Total 7,863,142
----------
OTHER FINANCIAL -- 21.9%
850,472 CMC Securities Corp., Series 1994-E, Class A1,
6.00%, 3/25/2024 848,061
3,479,105 Collateralized Mortgage Securities Corp., Series
1990-5, Class H, 9.25%, 7/20/2020 3,647,842
3,280,615 Countrywide Home Loans, Inc., Series 1997-5, Class
A2, 9.00%, 9/25/2027 3,367,554
2,419,473 GE Capital Mortgage Services, Inc., Series 1997-6, Class A18,
9.00%, 7/25/2027 2,498,880
1,209,384 GE Capital Mortgage Services, Inc., Series 1995-8, Class A3, 7.00%,
10/25/2025 1,209,397
1,907,918 GE Capital Mortgage Services, Inc. 1994-28, Class
A3, 8.00%, 8/25/2024 1,928,409
1,696,606 Independent National Mortgage Corp., Series 1995-R,
Class A1, 7.25%, 11/25/2010 1,713,445
1,232,571 Norwest Asset Securities Corp., Series 1996-9, Class
A5, 10.00%, 1/25/2027 1,255,449
1,634,656 PNC Mortgage Securities Corp., Series 1994-1, Class
T7, 6.00%, 2/25/2024 1,602,878
2,408,267 PNC Mortgage Securities Corp., Series 1997-3, Class 2A3, 7.50%,
5/25/2027 2,428,894
939,145 Prudential Home Mortgage Securities Co., Series
1992-32, Class A4, 7.15%, 10/25/2022 941,155
54,400 Prudential Home Mortgage Securities Co., Series
1993-54, Class A21, 5.50%, 1/25/2024 53,585
3,137,000 Residential Accredit Loans, Inc., Series 1996-QS5,
Class AI5, 7.60%, 9/25/2026 3,162,927
1,795,550 Residential Asset Securitization Trust, Series 1996- A8, Class A1,
8.00%, 12/25/2026 1,816,479
1,012,443 Residential Funding Mortgage Securities I, Series 1993-S41, Class
A1, 6.85%, 9/25/2023 1,012,812
</TABLE>
(See Notes to Portfolios of Investments)
[_] MARSHALL FUNDS
- --------------------------------------------------------------------------------
SHORT-TERM INCOME FUND (continued)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
Principal
Amount Description Value
-------------------------------------------------------------------------
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS (continued)
OTHER FINANCIAL (continued)
$3,426,549 Securitized Asset Sales, Inc., Series 1995-4,
Class A5, 7.25%, 11/25/2025 $3,451,220
----------
Total 30,938,987
----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(identified cost $38,804,859) 38,802,129
----------
CORPORATE BONDS -- 22.0%
BANKS -- 4.8%
4,000,000 (h)Corestates Capital Corp., Bank Guarantee,
6.195%, 2/15/2027 3,852,180
3,000,000 Old Kent Capital Trust I, 6.45%, 2/1/2027 2,936,028
----------
Total 6,788,208
----------
FINANCE -- 2.2%
3,000,000 Lehman Brothers Holdings, Inc., 6.90%, 1/29/2001 3,049,830
----------
OTHER FINANCIAL -- 15.0%
5,000,000 (h)Edison Funding Co., Sr. Note, 6.75%,
12/17/1999 5,075,000
3,250,000 (h)Florida Windstorm Under, 6.50%, 8/25/2002 3,286,530
4,000,000 HSB Group, Inc., Company Guarantee, 6.50%,
7/15/2027 3,944,728
5,000,000 (h)Household Capital Trust III, Company
Guarantee, 6.26%, 6/26/2004 4,993,795
4,000,000 Washington Water Power II, Bond, 6.75%, 6/1/2037 3,926,940
----------
Total 21,226,993
----------
TOTAL CORPORATE BONDS
(identified cost $31,014,474) 31,065,031
----------
CORPORATE NOTES -- 2.1%
OTHER FINANCIAL -- 2.1%
3,000,000 (h)EOP Operating LP, Sr. Note, 6.375%, 2/15/2003
(identified cost $2,996,100) 2,994,120
----------
MORTGAGE BACKED SECURITIES -- 13.2%
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 1.7%
2,126,151 11.00%, 8/1/2019 2,388,603
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 11.5%
999,637 8.00%, 8/1/2007 1,030,566
3,297,721 8.00%, 5/1/2008 3,412,119
2,393,767 11.00%, 12/1/2015 2,684,011
952,191 10.00%, 7/1/2020 1,046,515
1,367,006 9.50%, 12/1/2024 1,487,070
2,799,138 9.50%, 1/1/2025 3,044,986
1,762,957 9.50%, 1/1/2025 1,916,175
1,519,677 9.50%, 1/1/2025 1,653,150
----------
Total 16,274,592
----------
TOTAL MORTGAGE BACKED SECURITIES
(identified cost $18,476,274) 18,663,195
----------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
Principal
Amount Description Value
-----------------------------------------------------------------------------
<C> <S> <C>
(F)VARIABLE RATE NOTES -- 2.1%
$3,000,000 Lehman Brothers Holdings, Inc., 6.21%, 9/3/2002
(identified cost $2,970,450) $2,996,208
------------
U.S. TREASURY SECURITIES -- 5.3%
U.S. TREASURY NOTES -- 5.3%
5,000,000 5.50%, 1/31/2003 4,979,750
2,500,000 5.625%, 12/31/2002 2,502,150
------------
TOTAL U.S. TREASURY SECURITIES (identified cost
$7,543,164) 7,481,900
------------
(B)REPURCHASE AGREEMENT -- 6.5%
9,183,799 Lehman Brothers, Inc., 5.62%, dated 2/27/1998, due
3/2/1998 (at amortized cost) 9,183,799
------------
TOTAL INVESTMENTS
(identified cost $140,847,672) $141,156,393
============
- ------------------------------------------------------------------------------
</TABLE>
INTERMEDIATE BOND FUND
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
ASSET-BACKED SECURITIES -- 16.9%
$10,000,000 Bridgestone/Firestone Master Trust 1996-1, Class A,
6.17%, 7/1/2003 $10,057,250
7,735,000 Contimortgage Home Equity Loan Trust 1995-4, Class
A5, 6.56%, 12/15/2010 7,766,675
9,000,000 DLJ Mortgage Acceptance Corp. 1998-CF1, Series
1998-CF1, Class A1B, 6.41%, 2/15/2008 9,016,920
7,185,000 Green Tree Financial Corp. 1994-7, Series 1994-7,
Class A4, 8.35%, 3/15/2020 7,472,472
17,370,000 Green Tree Financial Corp. 1996-6, Series 1996-6,
Class A3, 6.75%, 8/15/2015 17,518,687
12,000,000 J.P. Morgan Commercial Mortgage Finance Corp. 1997-
C5, Class A2, 7.069%, 9/15/2029 12,453,720
10,000,000 Metris Master Trust 1997-1, Class A, 6.87%,
11/20/2005 10,281,200
1,697,495 Mortgage Capital Funding 1995-MC1, Class A1A,
7.75%, 5/25/2027 1,708,631
5,649,519 Olympic Automobile Receivables Trust 1995-D, Class
A4, 6.05%, 11/15/2000 5,658,756
12,000,000 TMS Home Equity Trust 1996-B, Class A7, 7.55%,
2/15/2020 12,403,440
-----------
TOTAL ASSET-BACKED SECURITIES
(identified cost $93,045,375) 94,337,751
-----------
</TABLE>
(See Notes to Portfolios of Investments)
February 28, 1998 (unaudited)
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
INTERMEDIATE BOND FUND (continued)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS -- 14.6%
$10,094,199 Countrywide Home Loans, Inc., Series 1997-5, Class
A2, 9.00%, 9/25/2027 $10,361,705
10,839,248 Federal Home Loan Mortgage Corp., Series 1829,
Class H, 6.50%, 10/15/2021 10,873,012
9,299,288 Federal Home Loan Mortgage Corp., Series 1834,
Class A, 7.00%, 1/15/2020 9,394,624
15,000,000 Federal National Mortgage Association, Series 1997- 17, Class PD,
7.00%, 4/18/2021 15,225,930
9,385,088 GE Capital Mortgage Services, Inc. 1997-6, Series
1997-6, Class A18, 9.00%, 7/25/2027 9,693,107
4,475,773 Norwest Asset Securities Corp. 1996-9, Series 1996-
9, Class A5, 10.00%, 1/25/2027 4,558,848
331,722 Prudential Home Mortgage Securities 1993-54, Series 1993-54,
Class A21, 5.50%, 1/25/2024 326,753
14,000,000 Rasta 1996-A, Class A2, 7.50%, 11/11/2025 14,081,130
7,000,000 Residential Accredit Loans, Inc. 1996-QS5, Series
1996-QS5, Class AI5, 7.60%, 9/25/2026 7,057,855
16,216 Structured Asset Securities Corp. 1995-C1, Series
1995-C1, Class A1A, 7.375%, 9/25/2024 16,216
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(identified cost $81,409,857) 81,589,180
-----------
CORPORATE BONDS -- 37.3%
AEROSPACE & RELATED -- 0.9%
5,000,000 Continental Airlines, Inc., Pass Thru Cert.,
6.541%, 3/15/2008 4,995,700
-----------
BANKING -- 8.4%
12,550,000 Firstar Capital Trust I, Company Guarantee, 8.32%,
12/15/2026 13,566,425
9,950,000 NationsBank Corp., Medium Term Note, 6.94%,
4/12/2002 10,261,734
12,390,000 Provident Bank, Sub. Note, 7.125%, 3/15/2003 12,763,063
10,000,000 Toronto-Dominion Bank, Sub. Note, 7.875%, 8/15/2004 10,248,600
-----------
Total 46,839,822
-----------
BEVERAGES & FOODS -- 1.8%
10,000,000 Coca-Cola Amatil Ltd., Sr. Unsub., 6.50%, 9/4/2003 10,086,300
-----------
BROKER/DEALERS -- 6.3%
8,000,000 Bear Stearns Cos., Inc., 7.00%, 1/15/2027 8,139,320
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal
Amount
or Shares Description Value
------------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS (continued)
BROKER/DEALERS (continued)
$12,500,000 Donaldson, Lufkin and Jenrette Securities Corp.,
Medium Term Note, 5.625%, 2/15/2016 $12,358,875
9,000,000 Lehman Brothers Holdings, Inc., Note, 6.90%,
1/29/2001 9,149,490
5,000,000 Lehman Brothers, Inc., Sr. Sub. Note, 7.50%,
8/1/2026 5,369,850
-----------
Total 35,017,535
-----------
FINANCE -- 14.8%
10,000,000 Aristar, Inc., Note, 6.30%, 10/1/2002 10,014,500
12,000,000 (h)Credit Suisse, London, Sub. Note, 7.90%,
5/1/2007 12,628,620
10,000,000 (h)Edison Funding Co., Sr. Note, 6.75%, 12/17/1999 10,150,000
10,000,000 (h)Florida Windstorm Under, 6.50%, 8/25/2002 10,112,400
8,165,000 General Motors Acceptance Corp., Unsecd. Note,
7.00%, 6/6/2003 8,458,532
6,700,000 General Motors Acceptance Corp., Unsecd. Note,
7.50%, 6/9/2000 6,910,715
4,000,000 HSB Group, Inc., Company Guarantee, 6.50%,
7/15/2027 3,944,727
8,000,000 (d)(h)IBJ Preferred Capital Co., LLC, Bond, 8.79%,
12/29/2049 7,795,520
12,000,000 Sears Roebuck Acceptance Corp., Note, Series III,
7.01%, 9/19/2002 12,374,040
-----------
Total 82,389,054
-----------
INDUSTRIAL SERVICES -- 3.8%
5,000,000 Dayton-Hudson Corp., Unsecd. Note, 6.40%, 2/15/2003 5,024,800
10,000,000 Dayton-Hudson Corp., Unsecd. Note, 9.75%, 7/1/2002 11,311,900
5,000,000 (d)Waste Management, Inc., Note, 6.625%, 7/15/2002 5,010,350
-----------
Total 21,347,050
-----------
POLLUTION CONTROL -- 1.3%
7,000,000 WMX Technologies, Inc., Unsecd. Note 6.25%,
10/1/2002 7,271,460
-----------
TOTAL CORPORATE BONDS
(identified cost $206,051,095) 207,946,921
-----------
</TABLE>
(See Notes to Portfolios of Investments)
[_] MARSHALL FUNDS
- --------------------------------------------------------------------------------
INTERMEDIATE BOND FUND (continued)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal
Amount
or Shares Description Value
------------------------------------------------------------------------------
<C> <S> <C>
CORPORATE NOTES -- 4.0%
BROKER/DEALERS -- 2.2%
$12,000,000 Bear Stearns Cos., Inc., Sr. Note, 6.75%, 5/1/2001 $12,214,080
------------
TOBACCO -- 1.8%
10,000,000 (d)Philip Morris Cos., Inc., Note, 7.25%,
9/15/2001 10,296,000
------------
TOTAL CORPORATE NOTES
(identified cost $21,921,780) 22,510,080
------------
MORTGAGE BACKED SECURITIES -- 0.1%
FEDERAL HOME LOAN MORTGAGE
CORPORATION -- 0.1%
308,147 8.75%, 4/1/2001
(identified cost $223,352) 316,430
------------
VARIABLE RATE NOTES -- 7.2%
BANKING -- 7.2%
4,000,000 (h)Corestates Capital Corp., Bank Guarantee,
6.195%, 1/15/2027 3,927,760
12,000,000 Mercantile Capital Trust I, Company Guarantee,
6.60%, 2/1/2027 11,999,868
12,000,000 Old Kent Capital Trust I, 6.45%, 2/1/2027 11,744,111
12,500,000 Starbank Capital Trust, 6.70%, 6/15/2027 12,365,013
------------
TOTAL VARIABLE RATE NOTES (identified cost
$40,056,056) 40,036,752
------------
U.S. TREASURY SECURITIES -- 10.8%
(D)U.S. TREASURY NOTES -- 10.8%
5,000,000 6.125%, 8/15/2007 5,158,500
12,000,000 6.25%, 2/15/2003 12,325,080
5,000,000 6.50%, 10/15/2006 5,266,850
15,000,000 6.625%, 5/15/2007 15,986,100
20,000,000 7.875%, 8/15/2001 21,413,800
------------
TOTAL U.S. TREASURY SECURITIES (identified cost
$59,913,711) 60,150,330
------------
(E)COLLATERAL FOR SECURITIES LENDING -- 12.8% 4,992,380 Chrysler
Financial Corp., 5.60%, 3/18/1998 4,992,380 1,123,353 Dreyfus Cash
Management Plus (shares at net asset
value) 1,123,353
2,999,429 (b)Merrill Lynch Corp., Repurchase Agreement,
5.810%, 3/2/1998 2,999,429
57,000,000 (b)Morgan Stanley & Co., Inc., Repurchase
Agreement, 5.813%, 3/2/1998 57,000,000
5,000,000 National Bank, 5.72%, 3/24/1998 5,000,000
------------
TOTAL COLLATERAL FOR SECURITIES LENDING (at
amortized cost) 71,115,162
------------
(B)REPURCHASE AGREEMENT -- 10.3%
57,650,279 Lehman Brothers, Inc., 5.62%, dated 2/27/1998, due
3/2/1998 (at amortized cost) 57,650,279
------------
TOTAL INVESTMENTS
(identified cost $631,386,667) $635,652,885
============
</TABLE>
- --------------------------------------------------------------------------------
GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
ASSET-BACKED SECURITIES -- 6.6%
$1,093,425 Contitrade Services Home Equity Loan Trust, 7.70%,
9/15/2006, (Series 1991-2) $1,103,708
1,195,000 Green Tree Financial Corp. 1996-6, 6.750%, 8/15/2015 1,203,281
8,000,000 Green Tree Home Improvement Loan Trust, 7.28%,
1/15/2029, (Series 1997-E) 8,045,040
4,250,085 (h)Nationscredit Home Equity Loan Trust, 6.50%,
10/15/2028 4,250,085
2,318,663 Residential Asset Securitization Trust, 8.00%,
12/25/2026, (Series 1996-A8) 2,345,689
----------
TOTAL ASSET-BACKED SECURITIES (identified cost
$16,887,519) 16,947,803
----------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 32.4%
1,022,964 BCF L.L.C., 7.615%, 11/16/2026, (Series 1996-C2) 1,022,964
7,452,840 Bear Stearns Mortgage Securities, Inc., 9.851%,
9/25/2027, (Series 1996-4) 8,060,694
3,104,146 Chase Mortgage Finance Corp., 6.25%, 11/25/2009,
(Series 1993-M-CL-A6) 3,089,262
13,400,000 Federal Home Loan Mortgage Corp., 8.00%, 6/15/2023,
REMIC (Series 1748-B) 14,518,766
4,997,283 Federal National Mortgage Association, 6.100%,
9/25/2004, REMIC (Series 1992-179-E) 4,991,636
987,431 Federal National Mortgage Association, 7.950%,
11/25/2019, REMIC (Series 1995-35-G) 989,693
3,179,863 GE Capital Mortgage Services, Inc., 8.00%, 8/25/2024,
(Series 1994-28) 3,214,014
4,032,454 GE Capital Mortgage Services, Inc. 1997-6, 9.00%,
7/25/2027 4,164,799
6,701,164 IMC Excess Cashflow Securities Trust 1997-A, 7.410%,
11/26/2028 6,705,385
2,860,557 Independent National Mortgage Corp., 7.250%,
11/25/2010, (Series 1995-M-A2) 2,888,948
6,450,000 Independent National Mortgage Corp., 7.500%,
9/25/2025, (Series 1995-M-C) 6,564,900
6,051,510 Norwest Asset Securities Corp. 1997-12, 7.100%,
7/25/2005 6,102,585
5,842,941 Prudential Home Mortgage Securities 1992-B, 7.400%,
5/25/2007 5,848,433
10,000,000 Residential Funding Mortgage Securities I 1997-S7,
7.500%, 5/25/2027 10,223,210
4,351,176 Saxon Mortgage Securities Corp. 1993-10, 5.680%,
11/25/2023 4,244,202
----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (identified
cost $81,480,101) 82,629,491
----------
</TABLE>
(See Notes to Portfolios of Investments)
February 28, 1998 (unaudited)
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
GOVERNMENT INCOME FUND (continued)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
COMMERCIAL MORTGAGE BACKED SECURITIES -- 6.0%
$1,658,000 Chase Commercial Mortgage Securities Corp., 6.60%,
11/19/2007, (Series 1997-2) $1,686,236
5,500,000 GMAC Commercial Mortgage Securities, Inc., 6.566%,
11/15/2007, (Series 1997-C2) 5,705,810
8,000,000 Nomura Depositor Trust Commercial Mortgage Pass-Thru
1998-ST I Floating Rate Note, 6.018%, 2/17/1998 8,006,240
-----------
TOTAL COMMERCIAL MORTGAGE BACKED SECURITIES
(identified cost $15,226,950) 15,398,286
-----------
MORTGAGE BACKED SECURITIES -- 59.3%
FEDERAL HOME LOAN MORTGAGE
CORPORATION -- 12.9%
8,001,003 7.00%, 11/1/2009 8,168,544
5,326,075 7.00%, 5/1/2027 5,393,663
5,123,159 7.50%, 5/1/2024 5,312,101
1,038,970 8.00%, 8/1/2025 1,079,490
833,736 8.50%, 2/1/2009 867,343
5,093,515 8.50%, 9/1/2024 5,337,036
44,746 8.75%, 4/1/2001 45,949
5,740,987 9.00%, TBA 6,111,109
500,582 9.00%, 5/1/2017 538,907
7,182 9.50%, 2/1/2001 7,415
12,481 10.50%, 10/1/2000 13,070
-----------
Total 32,874,627
-----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION -- 39.7%
30,000,000 (j)6.00%, TBA 29,071,800
5,300,000 6.34%, 2/1/2008 5,418,243
8,200,000 6.375%, 12/1/2017 8,371,708
30,000,000 (j)6.50%, TBA 29,700,000
20,000,000 (j)7.00%, TBA 20,228,800
1,199,564 8.00%, 8/1/2007 1,236,679
2,741,169 8.00%, 5/1/2025 2,858,519
1,016,149 8.50%, 3/1/2023 1,070,615
480,226 11.00%, 6/1/2020 537,781
1,145,155 11.50%, TBA 1,329,422
953,863 11.50%, 7/1/2006 1,050,356
312,979 11.50%, 10/1/2015 353,312
-----------
Total 101,227,235
-----------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 6.7%
2,733,210 7.500%, 6/15/2023 2,776,777
1,031,484 8.000%, 6/15/2022 1,066,947
654,206 8.000%, 7/15/2022 676,698
732,266 8.000%, 8/15/2022 757,441
6,752,328 8.000%, 8/15/2024 7,030,861
1,026,755 9.000%, 2/15/2020 1,110,497
382,861 9.500%, 7/15/2019 418,754
2,614,013 9.500%, 10/15/2024 2,859,077
357,259 10.000%, 11/15/2020 396,001
11,464 10.500%, 10/15/2000 11,886
6,137 10.500%, 10/15/2000 6,363
21,592 11.000%, 11/15/2000 22,472
-----------
Total 17,133,774
-----------
TOTAL MORTGAGE BACKED SECURITIES
(identified cost $150,418,722) 151,235,636
-----------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS -- 1.5%
$4,000,000 (f)HSB Group, Inc. Floating Rate Note, 6.504%,
4/15/1998 (identified cost $3,958,600) $3,944,728
------------
CORPORATE NOTES -- 2.0%
5,000,000 Donaldson, Lufkin and Jenrette Securities Corp.,
5.98%, 9/18/2002 (identified cost $4,977,750) 4,993,115
------------
(F)VARIABLE RATE NOTES -- 4.9%
5,000,000 (h)American Honda Finance Corp., 5.719%, 4/9/1998 5,000,285
7,500,000 Lehman Brothers Holdings, Inc. Floating Rate Note,
6.206%, 9/3/2002 7,490,520
------------
TOTAL VARIABLE RATE NOTES
(identified cost $12,425,930) 12,490,805
------------
(B)REPURCHASE AGREEMENT -- 21.4%
54,650,418 Lehman Brothers, Inc., 5.620%, dated 2/27/1998, due
3/2/1998 (at amortized cost) 54,650,418
------------
TOTAL INVESTMENTS (identified cost $340,025,990) $342,290,282
============
</TABLE>
- --------------------------------------------------------------------------------
INTERMEDIATE TAX-FREE FUND
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal Credit
Amount Description Rating(k) Value
------------------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPALS -- 101.4%
ARIZONA -- 4.4%
$1,000,000 Maricopa County, AZ Community College
District, GO UT Bonds (Series A), 6.00%,
7/1/2006 AA $1,090,530
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 AAA 1,066,310
2,000,000 Maricopa County, AZ Unified School District
No. 41, Certificate Participation, 5.00%
(FSA INS), 1/1/2002 AAA 2,073,040
----------
Total 4,229,880
----------
ARKANSAS -- 4.1%
2,755,000 Arkansas Development Finance Authority,
Revenue Bonds, 5.00% (AMBAC INS)/(Original
Issue Yield: 5.055%), 7/1/2020 AAA 2,838,972
1,070,000 University of Arkansas, Revenue Refunding
Bonds, 4.60%, 9/15/2004 NR 1,091,999
----------
Total 3,930,971
----------
</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)
CALIFORNIA -- 2.2%
$2,000,000 California State Department of Water
Resources, Refunding Revenue Bonds, 5.00%
(Central Valley Project), 12/1/2009 AA $2,088,440
----------
FLORIDA -- 2.1%
2,000,000 Tampa, FL, Refunding Revenue Bonds, 4.70%
(Original Issue Yield: 4.75%), 11/15/2010 AAA 1,990,400
----------
HAWAII -- 1.1%
1,000,000 Hawaii State, GO UT Bonds (Series CA),
5.50% (Original Issue Yield: 6.00%),
1/1/2012 A+ 1,082,710
----------
ILLINOIS -- 10.1%
1,500,000 Arlington Heights, IL, GO UT Refunding
Bonds (Series B), 4.55%, 12/1/2001 Aa2 1,526,220
4,000,000 Chicago, IL Metropolitan Water Reclamation
District, GO UT Refunding Bonds, 5.50%,
12/1/2008 AA 4,351,680
2,500,000 Illinois State, GO UT Bonds, 5.25% (FGIC
INS), 9/1/2004 AAA 2,644,875
1,085,000 Waukegan, IL, GO UT Bonds, 6.40% (MBIA
INS)/(Original Issue Yield: 6.45%),
12/30/2004 AAA 1,198,100
----------
Total 9,720,875
----------
IOWA -- 4.5%
1,050,000 Cedar Rapids, IA, GO UT Bonds (Series B),
5.20% (Original Issue Yield: 5.25%),
6/1/2007 NR 1,093,586
3,000,000 Iowa Finance Authority, Revenue Bonds,
6.00% (Ipsco Inc.), 6/1/2027 NR 3,171,780
----------
Total 4,265,366
----------
MARYLAND -- 2.4%
2,190,000 Washington Suburban Sanitation District,
MD, Refunding Bonds GO UT, 5.00%, 6/1/2007 AA 2,298,931
----------
MICHIGAN -- 4.0%
2,220,000 Michigan State Building Authority, Revenue
Refunding Bonds, 6.00% (Original Issue
Yield: 6.05%), 10/1/2000 AA 2,329,735
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal Credit
Amount Description Rating(k) Value
------------------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPALS (continued)
MICHIGAN (continued)
$1,500,000 Wayland, MI University School District, GO
UT, 5.125% (FGIC INS), 5/1/2017 AAA $1,505,880
----------
Total 3,835,615
----------
MINNESOTA -- 2.2%
2,050,000 Minneapolis Special School District No.
001, MN, GO UT Bonds, 5.00%, 2/1/2004 AA+ 2,134,932
----------
MISSOURI -- 1.2%
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 NR 1,151,960
----------
NEVADA -- 1.6%
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 AAA 1,550,670
----------
NEW YORK -- 7.6%
3,000,000 New York State Environmental Facilities
Corp., Revenue Bonds, 4.55% (General
Electric Capital Corp.), 12/1/2018 AAA 3,062,850
1,500,000 New York State Environmental Facilities
Corp., Revenue Bonds, 5.70% (Original
Issue Yield: 5.75%), 6/15/2006 A- 1,626,975
1,100,000 Oswego County, NY, GO UT , 6.70% (Original
Issue Yield: 6.80%), 6/15/2010 NR 1,313,642
1,100,000 Oswego County, NY, GO UT, 6.70% (Original
Issue Yield: 6.80%), 6/15/2011 NR 1,319,032
----------
Total 7,322,499
----------
OHIO -- 7.4%
2,055,000 Cleveland, OH Parking Facilities, Revenue
Bonds, 7.60% (United States Treasury PRF),
9/15/2002 (@102) NR 2,383,779
1,130,000 Ohio HFA, Revenue Refunding Bonds, 5.05%
(GNMA COL), 9/1/2001 AAA 1,157,199
</TABLE>
(See Notes to Portfolios of Investments)
February 28, 1998 (unaudited)
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
INTERMEDIATE TAX-FREE FUND (continued)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal Credit
Amount Description Rating(k) Value
------------------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPALS (continued)
OHIO (continued)
$1,415,000 Ohio HFA, Revenue Refunding Bonds, 5.15%
(GNMA COL), 9/1/2002 AAA $1,457,818
2,000,000 Ohio State Water Development Authority,
Revenue Bonds, 5.00% (MBIA INS), 6/1/2009 AAA 2,069,460
----------
Total 7,068,256
----------
OKLAHOMA -- 3.3%
2,000,000 Oklahoma HFA, Refunding Revenue Bonds
(Series A-3), 5.50% (Federal National
Mortgage Association COL), 11/1/2005 (@100) AAA 2,092,440
1,000,000 Tulsa, OK, Public Improvements GO Unltd
Bonds, 5.125%, 5/1/2001 AA 1,034,110
----------
Total 3,126,550
----------
OREGON -- 2.5%
2,315,000 Clackamas & Washington County, OR School
District No. 3, GO UT, 4.55% (FGIC
INS)/(Original Issue Yield: 4.60%),
6/1/2005 AAA 2,372,273
----------
PUERTO RICO -- 1.6%
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 1,542,570
----------
SOUTH CAROLINA -- 1.2% 1,055,000 South Carolina State, GO UT Bonds
(Series
B), 5.625%, 7/1/2011 AAA 1,136,710
----------
TENNESSEE -- 2.1%
2,000,000 Memphis, TN, GO UT Refunding Bonds (Series
A), 4.60% (Original Issue Yield: 4.65%),
8/1/2002 AA 2,051,240
----------
TEXAS -- 13.5%
1,000,000 Brazosport, TX Independent School District,
GO UT, 5.10% (PSFG GTD), 2/15/2009 NR 1,041,520
2,000,000 Garland, TX, GO LT, 4.50%, 2/15/2010 AA 1,954,760
3,445,000 Houston, TX, GO UT Refunding Bonds, 5.50%,
4/1/2001 AA- 3,601,127
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal Credit
Amount Description Rating(k) Value
------------------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPALS (continued)
TEXAS (continued)
$945,000 San Angelo, TX Independent School District,
GO UT Bonds, 5.30% (PSFG GTD), 2/15/2007 AAA $1,002,796
2,000,000 Tarrant County, TX Health Facilities
Development Corp., Revenue Bonds, 5.75%
(Texas Health Resources System)/(MBIA INS),
2/15/2009 AAA 2,185,220
3,000,000 Texas Municipal Power Agency, Refunding
Revenue Bonds, 5.25% (Original Issue Yield:
5.65%), 9/1/2009 AAA 3,186,300
----------
Total 12,971,723
----------
UTAH -- 9.8%
1,965,000 Intermountain Power Agency, UT, Revenue
Bonds, 6.00% (Original Issue Yield:
6.393%), 7/1/2012 A+ 2,094,317
2,020,000 Jordan, UT School District, GO UT, 5.00%,
6/15/2003 AAA 2,104,436
3,000,000 Utah State, Series F, 5.00%, 7/1/2009 AAA 3,103,770
1,000,000 Washington County, UT School District, GO
UT, 5.00%, 3/1/2007 AAA 1,046,420
1,000,000 Washington County, UT School District, GO
UT, 5.00%, 3/1/2008 AAA 1,040,380
----------
Total 9,389,323
----------
VIRGINIA -- 2.7%
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 1,019,070
1,500,000 Virginia State Housing Development
Authority, Mortgage Revenue Bonds (Series
A1), 6.40%, 7/1/2002 AA+ 1,601,640
----------
Total 2,620,710
----------
WASHINGTON -- 1.2%
1,000,000 Port Longview, WA Industrial Development
Corp., Solid Waste Disposal Revenue Bonds,
6.875% (Weyerhaeuser Co.), 10/1/2008 A 1,171,360
----------
</TABLE>
(See Notes to Portfolios of Investments)
<PAGE>
[_] MARSHALL FUNDS
- --------------------------------------------------------------------------------
INTERMEDIATE TAX-FREE FUND (continued)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
Principal
Amount Credit
or Shares Description Rating(k) Value
-----------------------------------------------------------------------------
<C> <S> <C> <C>
LONG-TERM MUNICIPALS (continued)
WISCONSIN -- 8.6%
$1,650,000 Southeast WI, Professional Baseball Park
District, Sales Tax Revenue Bonds, 5.45%
(MBIA INS), 12/15/2012 AAA $1,726,527
1,000,000 Wausau, WI School District, GO UT
Promissory Notes, 4.40%, 3/1/2003 NR 1,012,960
1,240,000 Wisconsin Health and Educational
Facilities Authority, Revenue Refunding
Bonds, 5.30% (Medical College of
Wisconsin, Inc.), 12/1/2003 A 1,303,699
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 1,041,440
2,950,000 Wisconsin State, GO UT Bonds (Series C),
5.30% (Original Issue Yield: 5.40%),
5/1/2008 AA 3,120,805
-----------
Total 8,205,431
-----------
TOTAL LONG-TERM MUNICIPALS (identified cost
$94,298,097) 97,259,395
-----------
MUTUAL FUND SHARES -- 1.9%
432,564 Federated Tax-Free Obligations Fund 432,564
1,360,981 Fidelity Tax Exempt Money Market 1,360,981
-----------
TOTAL MUTUAL FUND SHARES (at net asset value) 1,793,545
-----------
(A)TOTAL INVESTMENTS (identified cost $96,091,642) $99,052,940
===========
</TABLE>
- --------------------------------------------------------------------------------
MONEY MARKET FUND
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
CERTIFICATES OF DEPOSIT -- 11.0%
BANKING -- 11.0%
$75,000,000 Bank of Tokyo-Mitsubishi Ltd., 5.940%-5.970%,
4/13/1998-5/29/1998 $75,002,552
25,000,000 Bankers Trust Co., New York, 6.000%, 12/10/1998 25,000,000
50,000,000 Dauphin Deposit Bank and Trust, 5.769%, 9/2/1998 49,986,505
7,000,000 Deutsche Bank, AG, 6.000%, 10/22/1998 6,997,416
35,000,000 Societe Generale, New York, 5.890%-6.030%,
3/3/1998-10/27/1998 34,993,604
-----------
TOTAL CERTIFICATES OF DEPOSIT 191,980,077
-----------
CORPORATE BONDS -- 1.1%
INSURANCE -- 0.2%
3,000,000 American General Finance Corp., 7.250%, 3/1/1998 3,000,000
-----------
SHORT-TERM BUSINESS CREDIT -- 0.9%
8,000,000 Sears Roebuck Acceptance Corp., 5.600%, 11/30/1998 7,979,533
8,785,000 Sears, Roebuck & Co., 8.450%, 11/1/1998 8,967,464
-----------
Total 16,946,997
-----------
TOTAL CORPORATE BONDS 19,946,997
-----------
CORPORATE NOTES -- 6.7%
ASSET-BACKED -- 0.9%
15,000,000 Sigma Finance, 6.200%, 6/5/1998 15,000,000
-----------
BROKER/DEALERS -- 1.4%
14,500,000 Merrill Lynch & Co., Inc., 5.875%, 7/22/1998 14,500,000
10,000,000 Republic National Bank of New York, 5.717%,
3/1/1998 10,000,000
-----------
Total 24,500,000
-----------
FOREST PRODUCTS -- 1.1%
20,000,000 Willamette Industries, Inc., 5.647%, 4/1/1998 20,000,000
-----------
LEASING -- 0.3%
5,000,000 International Lease Finance Corp., 6.190%,
4/15/1998 4,999,441
-----------
PERSONAL CREDIT -- 1.6%
7,359,000 Ford Motor Credit Corp., 9.250%, 6/15/1998 7,427,086
5,800,000 General Motors Acceptance Corp., 5.650%, 10/13/1998 5,788,520
15,000,000 General Motors Acceptance Corp., 5.786%, 9/21/1998 14,994,206
-----------
Total 28,209,812
-----------
SHORT-TERM BUSINESS CREDIT -- 1.4%
25,000,000 CIT Group Holdings, Inc., 5.560%, 2/22/1999 24,985,680
-----------
TOTAL CORPORATE NOTES 117,694,933
-----------
</TABLE>
(See Notes to Portfolios of Investments)
February 28, 1998 (unaudited)
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
MONEY MARKET FUND (continued)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
(F)VARIABLE RATE NOTES -- 69.1%
ASSET-BACKED -- 4.3%
$25,000,000 Asset Backed Capital Financial Corp., 5.878%,
3/16/1998 $24,999,900
50,000,000 Triangle Funding Ltd., 5.625%, 5/15/1998 50,000,000
-----------
Total 74,999,900
-----------
BANKING -- 9.6%
25,000,000 Bankers Trust Co., New York, 5.605%, 5/19/1998 24,996,353
25,000,000 Bankers Trust Co., New York, 5.650%, 3/3/1998 24,996,778
20,000,000 Branch Banking & Trust Co, Wilson, 5.688%, 4/1/1998 19,996,002
20,000,000 First USA Bank, 5.875%, 4/22/1998 20,024,585
8,000,000 First USA Bank, 5.919%, 4/30/1998 8,017,784
45,000,000 NationsBank Corp., 5.888%, 3/12/1998 45,000,000
25,000,000 PNC Bank Corp., 5.650%, 3/3/1998 24,990,093
-----------
Total 168,021,595
-----------
BROKER/DEALERS -- 19.7%
30,000,000 Bear Stearns Cos., Inc., Series B, 5.579%,
5/12/1998 30,000,000
20,000,000 Bear Stearns Cos., Inc., 5.612%, 5/26/1998 20,000,000
5,000,000 (h)Donaldson, Lufkin and Jenrette Securities Corp.,
Master Note, 5.647%, 3/2/1998 5,000,000
70,150,000 (h)Goldman Sachs Group, LP, 5.813%, 3/31/1998 70,150,000
75,000,000 (h)J.P. Morgan & Co., Inc., 5.635%, 3/2/1998 75,000,000
30,000,000 Merrill Lynch & Co., Inc., Series B, 5.710%,
4/11/1998 30,000,000
15,000,000 Merrill Lynch & Co., Inc., Series B, 5.729%,
3/10/1998 15,007,485
35,000,000 Morgan Stanley, Dean Witter, Discover & Co., Series
C, 5.544%, 4/15/1998 35,000,000
25,000,000 Morgan Stanley, Dean Witter, Discover & Co.,
6.156%, 3/31/1998 25,029,543
40,000,000 Salomon Brothers, Inc., 5.665%, 4/21/1998 40,000,000
-----------
Total 345,187,028
-----------
CONSTRUCTION EQUIPMENT -- 0.6%
10,000,000 Caterpillar Financial Services Corp., 5.641%,
4/13/1998 10,000,000
-----------
DIVERSIFIED MANUFACTURING -- 0.6%
10,000,000 (h)Danaher Corp., 5.617%, 3/2/1998 10,000,000
-----------
INSURANCE -- 19.7%
20,000,000 (h)Combined Insurance Corp. of America, 5.732%,
5/1/1998 20,000,000
40,000,000 (h)Commonwealth Life Insurance, 5.780%, 3/2/1998 40,000,000
10,000,000 (h)Commonwealth Life Insurance, 5.970%, 3/2/1998 10,000,000
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Principal
Amount Description Value
------------------------------------------------------------------------------
<C> <S> <C>
(F)VARIABLE RATE NOTES (continued)
INSURANCE (continued)
$60,000,000 (h)General American Life Insurance Co., 5.820%,
3/2/1998 $60,000,000
50,000,000 (h)Jackson National Life Insurance Co., 5.660%,
5/1/1998 50,000,000
60,000,000 (h)Transamerica Life Insurance and Annuity Co.,
5.809%, 4/4/1998 60,000,000
15,000,000 Transamerica Occidental Life Insurance Co.,
5.615%, 5/5/1998 15,000,000
50,000,000 (h)Travelers Insurance Company, 5.655%, 3/2/1998 50,000,000
40,000,000 Western National Life Insurance Co., 5.625%,
5/18/1998 40,000,000
--------------
Total 345,000,000
--------------
LEASING -- 4.6%
10,000,000 General Electric Capital Corp., 5.668%, 4/9/1998 10,000,677
25,000,000 PHH Corp., 5.565%, 5/4/1998 24,996,880
30,000,000 PHH Corp., 5.590%, 5/10/1998 29,986,165
15,000,000 PHH Corp., 5.838%, 3/10/1998 14,994,286
--------------
Total 79,978,008
--------------
PERSONAL CREDIT -- 5.1%
20,000,000 American Honda Finance Corp., 5.620%, 4/19/1998 20,000,000
50,000,000 American Honda Finance Corp., 5.625%, 4/20/1998 50,000,000
5,000,000 Ford Motor Credit Corp., 5.902%, 5/1/1998 5,004,193
15,000,000 General Motors Acceptance Corp., 5.750%,
5/6/1998 15,016,607
--------------
Total 90,020,800
--------------
SHORT-TERM BUSINESS CREDIT -- 4.3%
70,000,000 Heller Financial, Inc., 5.988%, 6/1/1998 70,000,000
5,000,000 John Deere Capital Corp., Series C, 5.719%,
4/8/1998 5,001,278
--------------
Total 75,001,278
--------------
UTILITIES -- 0.6%
10,000,000 (h)Wisconsin Public Service, 5.567%, 3/3/1998 10,000,000
--------------
TOTAL VARIABLE RATE NOTES 1,208,208,609
--------------
(B)REPURCHASE AGREEMENT -- 13.1%
228,812,083 Lehman Brothers, Inc., 5.620%, dated 2/27/1998,
due 3/2/1998 228,812,083
--------------
TOTAL INVESTMENTS (at amortized cost) $1,766,642,699
==============
</TABLE>
(See Notes to Portfolios of Investments)
NOTES TO PORTFOLIOS OF INVESTMENTS
(a) Securities that are subject to alternative minimum tax represent 11.7% of
Intermediate Tax-Free Fund's portfolio as calculated based upon total
portfolio market value.
(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 the 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 $9,157,181, $20,201,625, $44,614,300,
$9,250,370, and $460,150,000, which represents 3.8%, 14.3%, 8.0%, 3.6%, and
26.3% 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. The
following abbreviations are used in these portfolios:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ACES--Adjustable Convertible Extendable Securities LLC--Limited Liability Corporation
ADR--American Depositary Receipt LOC--Letter of Credit
AMBAC--American Municipal Bond Assurance Corporation LP--Limited Partnership
COL--Collateralized LT--Limited Tax
FGIC--Financial Guaranty Insurance Company MBIA--Municipal Bond Investors Insurance
FSA--Financial Security Assurance PLC--Public Limited Company
GNMA--Government National Mortgage Association PRF--Pre-Refunded
GO--General Obligation PRIDES--Preferred Redeemable Increased
GDR--Global Depositary Receipt Dividend Equity Securities
GTD--Guaranteed PSFG--Permanent School Fund Guarantee
HFA--Housing Finance Authority/Agency REIT--Real Estate Investment Trust
INS--Insured REMIC--Real Estate Mortgage Investment Conduit
TBA--To Be Announced
UT--Unlimited Tax
</TABLE>
- --------------------------------------------------------------------------------
<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 $439,151,849 $105,627,019 $108,012,119 $2,385,100 $544,728,770
Large-Cap Growth & In-
come Fund 278,629,337 100,787,388 104,321,836 3,534,448 307,211,930
Mid-Cap Value Fund 169,341,486 33,193,245 36,494,470 3,301,225 181,898,825
Mid-Cap Growth Fund 237,513,967 45,769,012 47,376,408 1,607,396 218,275,356
International Stock Fund 252,062,350 42,231,246 54,619,162 12,387,916 243,165,808
Small-Cap Growth Fund 73,843,432 15,489,927 16,624,352 1,134,425 86,523,018
Short-Term Income Fund 140,847,672 308,721 785,556 476,835 141,204,020
Intermediate Bond Fund 631,386,667 4,266,218 6,366,791 2,100,573 557,744,013
Government Income Fund 340,025,990 2,264,292 2,474,280 209,988 255,176,728
Intermediate Tax-Free
Fund 96,091,642 2,961,298 3,015,574 54,276 95,906,095
Money Market Fund* 1,766,642,699 -- -- -- 1,747,479,264
</TABLE>
*At amortized cost.
**The categories of investments are shown as a percentage of net assets at
February 28, 1998.
(See Notes which are an integral part of the Financial Statements)
NOTES TO PORTFOLIOS OF INVESTMENTS
[THIS PAGE INTENTIONALLY LEFT BLANK]
February 28, 1998 (unaudited)
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
------- ------- ------- ------- -------
LARGE-CAP
EQUITY GROWTH & MID-CAP MID-CAP INTERNATIONAL
INCOME INCOME VALUE GROWTH STOCK
FUND FUND FUND FUND FUND
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in
securities, at value $463,179,486 $303,762,008 $175,309,013 $233,592,014 $254,293,596
Investments in
repurchase agreements 81,599,382 5,654,717 9,225,718 4,690,965 --
Repurchase agreements
held as collateral
for securities
lending -- 70,000,000 18,000,000 45,000,000 40,000,000
Cash 6,817 5,585 3,689 4,462 --
Cash denominated in
foreign currencies
(at cost, $74,129) -- -- -- -- 72,462
Income receivable 1,167,416 343,372 285,070 99,572 687,307
Receivable for
investments sold 3,808,862 1,416,620 -- 4,651,421 --
Deferred expenses 2,983 -- 9,328 5,010 9,836
Deferred
organizational costs 3,515 -- 3,446 3,064 9,006
------------ ------------ ------------ ------------ ------------
Total assets 549,768,461 381,182,302 202,836,264 288,046,508 295,072,207
------------ ------------ ------------ ------------ ------------
LIABILITIES:
Payable to Bank -- -- -- -- 86,715
Income distribution
payable -- -- -- 124 --
Payable for
investments purchased 4,541,397 3,419,020 -- 5,535,770 --
Payable on collateral
due to broker -- 70,273,900 20,807,593 64,045,870 51,483,006
Payable for daily
variation margin -- -- -- 4,000 --
Payable for Dollar
Roll Transactions -- -- -- -- --
Taxes payable -- -- -- -- 26,053
Accrued expenses 498,294 277,452 129,846 185,388 310,625
------------ ------------ ------------ ------------ ------------
Total liabilities 5,039,691 73,970,372 20,937,439 69,771,152 51,906,399
------------ ------------ ------------ ------------ ------------
NET ASSETS CONSIST OF:
Paid-in-capital 407,324,297 202,283,182 139,080,440 162,936,525 197,630,208
Net unrealized
appreciation
(depreciation) on
investments,
collateral, futures
contracts and foreign
currency translation 105,627,019 100,787,388 33,193,245 45,990,687 42,224,582
Accumulated net realized
gain (loss) on
investments, futures
contracts and foreign
currency transactions 31,078,942 4,174,838 9,310,797 10,086,091 2,300,666
Undistributed net
investment income/(net
operating loss) 698,512 (33,478)(a) 314,343 (737,947) 1,010,352
------------ ------------ ------------ ------------ ------------
Total Net Assets $544,728,770 $307,211,930 $181,898,825 $218,275,356 $243,165,808
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE,
Offering Price, and
Redemption Proceeds Per
Share:
Class A Shares $ 16.28 $ 14.59 $ 12.25 $ 15.02 $ 13.14
Class B Shares -- -- -- -- --
------------ ------------ ------------ ------------ ------------
SHARES OUTSTANDING:
Class A Shares 33,455,028 21,057,723 14,842,967 14,534,195 18,502,405
Class B Shares -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Total shares
outstanding ($0.0001
par value) 33,455,028 21,057,723 14,842,967 14,534,195 18,502,405
============ ============ ============ ============ ============
Investments, at $439,151,849 $278,629,337 $169,341,486 $237,513,967 $252,062,350
identified cost
============ ============ ============ ============ ============
Investments, at tax cost $439,151,849 $278,629,337 $169,341,486 $237,513,967 $252,062,350
============ ============ ============ ============ ============
</TABLE>
(a) Represents distributions in excess of net investment income.
(See Notes which are an integral part of the Financial Statements)
[_] MARSHALL FUNDS
<TABLE>
<CAPTION>
- ----------- ------- ------- ------- ------- -------
SMALL-CAP SHORT-TERM INTERMEDIATE GOVERNMENT INTERMEDIATE MONEY
GROWTH INCOME BOND INCOME TAX-FREE MARKET
FUND FUND FUND FUND FUND FUND
- ----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$82,475,183 $131,972,594 $518,003,177 $287,639,864 $99,052,940 $1,537,830,616
6,858,176 9,183,799 57,650,279 54,650,418 -- 228,812,083
-- -- 59,999,429 -- -- --
2,370 -- -- -- -- --
-- -- -- -- -- --
3,041 948,156 5,633,900 1,646,395 1,296,642 14,125,476
-- -- -- 55,422,813 1,001,138 --
-- -- -- -- 4,433 200,000
26,279 -- -- -- 4,880 --
- ----------- ------------ ------------ ------------ ----------- --------------
89,365,049 142,104,549 641,286,785 399,359,490 101,360,033 1,780,968,175
- ----------- ------------ ------------ ------------ ----------- --------------
-- -- 421,996 27,499 -- 830,180
-- 768,096 2,589,743 1,208,001 303,905 7,150,888
2,703,950 -- 9,092,813 103,113,832 5,081,561 25,000,893
-- -- 71,115,162 -- -- --
13,125 -- -- -- -- --
-- -- -- 39,637,863 -- --
-- -- -- -- -- --
124,956 132,433 323,058 195,567 68,472 506,950
- ----------- ------------ ------------ ------------ ----------- --------------
2,842,031 900,529 83,542,772 144,182,762 5,453,938 33,488,911
- ----------- ------------ ------------ ------------ ----------- --------------
71,095,141 145,052,617 574,837,696 255,003,346 92,729,219 1,747,479,264
15,745,213 308,721 4,266,218 2,264,292 2,961,298 --
94,984 (4,157,318) (21,359,901) (2,090,910) 215,578 --
(412,320) -- -- -- -- --
- ----------- ------------ ------------ ------------ ----------- --------------
$86,523,018 $141,204,020 $557,744,013 $255,176,728 $95,906,095 $1,747,479,264
- ----------- ------------ ------------ ------------ ----------- --------------
$13.45 $9.61 $9.52 $9.61 $10.25 $1.00
-- -- -- -- -- $1.00
- ----------- ------------ ------------ ------------ ----------- --------------
6,432,842 14,699,662 58,556,670 26,549,581 9,356,904 1,649,287,875
-- -- -- -- -- 98,191,389
- ----------- ------------ ------------ ------------ ----------- --------------
6,432,842 14,699,662 58,556,670 26,549,581 9,356,904 1,747,479,264
=========== ============ ============ ============ =========== ==============
$73,843,432 $140,847,672 $631,386,667 $340,025,990 $96,091,642 $1,766,642,699
=========== ============ ============ ============ =========== ==============
$73,843,432 $140,847,672 $631,386,667 $340,025,990 $96,091,642 $1,766,642,699
=========== ============ ============ ============ =========== ==============
</TABLE>
Six Months Ended February 28, 1998 (unaudited)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
------- ------- ------- ------- --------
LARGE-CAP
EQUITY GROWTH & MID-CAP MID-CAP INTERNATIONAL
INCOME FUND INCOME FUND VALUE FUND GROWTH FUND STOCK FUND
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 1,334,636 $ 351,104 $ 288,512 $ 234,286 $ 724,164
Dividend income 5,403,862 2,075,252 1,297,339 284,360 2,231,833(a)
----------- ----------- ----------- ----------- ----------
Total income 6,738,498 2,426,356 1,585,851 518,646 2,955,997
----------- ----------- ----------- ----------- ----------
EXPENSES:
Investment advisory fee 1,534,688 1,060,747 587,588 768,085 1,151,040
Directors' fees 1,086 1,267 1,448 1,448 1,736
Administrative
personnel and services
fees 215,326 140,307 42,284 81,851 90,569
Custodian fees 35,756 28,894 18,565 22,292 67,361
Portfolio accounting
fees 44,077 38,603 28,303 30,572 34,768
Transfer and dividend
disbursing agent fees
and expenses 43,020 57,618 36,562 44,004 40,383
Shareholder services
fees 511,563 353,582 195,863 256,028 287,760
Capital stock
registration costs 27,446 12,155 27,966 14,987 14,701
Auditing fees 5,249 7,240 6,516 6,335 8,616
Legal fees 2,254 3,077 2,534 2,896 2,860
Printing and postage 4,525 4,887 4,887 5,249 7,935
Insurance premiums 1,810 2,172 1,631 1,810 1,861
Distribution services
fees -- -- -- -- --
Taxes 14,516 11,222 8,717 7,602 9,445
Miscellaneous 3,438 9,379 8,695 13,434 15,817
----------- ----------- ----------- ----------- ----------
Total expenses 2,444,754 1,731,150 971,559 1,256,593 1,734,852
----------- ----------- ----------- ----------- ----------
DEDUCT--
Waiver of investment
advisory fee -- -- -- -- --
Waiver of shareholder
services fees -- -- -- -- --
----------- ----------- ----------- ----------- ----------
TOTAL WAIVERS -- -- -- -- --
----------- ----------- ----------- ----------- ----------
NET EXPENSES 2,444,754 1,731,150 971,559 1,256,593 1,734,852
----------- ----------- ----------- ----------- ----------
NET INVESTMENT INCOME
(NET OPERATING LOSS) 4,293,744 695,206 614,292 (737,947) 1,221,145
----------- ----------- ----------- ----------- ----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS,
COLLATERAL, FOREIGN
CURRENCY AND FUTURES
CONTRACTS:
Net realized gain
(loss) on investment
transactions
(identified cost
basis) 38,239,770 8,036,023 9,724,061 13,076,238 3,001,905
Net realized gain on
foreign currency
transactions -- -- -- -- (26,179)
Net realized gain on
futures contracts
(identified cost
basis) -- (403,979) (112,981) 42,931 --
Net change in
unrealized
appreciation
(depreciation) on
investments,
collateral, futures
contracts and foreign
currency translation 46,670,419 29,025,551 12,182,595 16,457,130 3,980,870
----------- ----------- ----------- ----------- ----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS
COLLATERAL, FOREIGN
CURRENCY AND FUTURES
CONTRACTS 84,910,189 36,657,595 21,793,675 29,576,299 6,956,596
----------- ----------- ----------- ----------- ----------
CHANGE IN NET ASSETS
RESULTING FROM
OPERATIONS $89,203,933 $37,352,801 $22,407,967 $28,838,352 $8,177,741
=========== =========== =========== =========== ==========
</TABLE>
(a) Net of Foreign taxes withheld of $136,046.
(b) Net of dollar roll interest expense of $963,206.
(See Notes which are an integral part of the Financial Statements)
[_] MARSHALL FUNDS
<TABLE>
<CAPTION>
- ----------- ------- ------- ------- ------- -------
INTERMEDIATE MONEY
SMALL-CAP SHORT-TERM INTERMEDIATE GOVERNMENT TAX-FREE MARKET
GROWTH FUND INCOME FUND BOND FUND INCOME FUND FUND FUND
- ----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$ 119,782 $5,170,768 $15,589,800 $8,128,047(b) $2,244,394 $43,321,731
11,560 -- -- -- -- --
- ----------- ---------- ----------- ---------- ---------- -----------
131,342 5,170,768 15,589,800 8,128,047 2,244,394 43,321,731
- ----------- ---------- ----------- ---------- ---------- -----------
335,879 444,933 1,368,414 817,478 278,012 3,720,741
724 1,267 1,448 1,810 1,861 1,448
34,077 59,721 194,816 99,987 41,112 669,513
8,528 14,831 35,204 21,785 9,267 86,812
22,806 12,179 51,074 29,835 26,288 84,704
27,031 20,365 22,263 35,265 17,383 92,071
83,970 185,389 570,172 272,493 115,839 148,830
7,859 10,003 16,665 10,695 9,577 41,357
6,154 6,120 7,421 7,240 6,482 7,964
1,448 3,077 1,629 1,991 2,961 6,335
4,163 5,430 5,973 5,249 3,763 11,222
1,448 1,690 2,896 1,810 1,531 5,792
-- -- -- -- -- 139,485
2,896 7,783 20,717 8,688 3,025 56,472
6,679 724 10,143 2,327 4,145 7,337
- ----------- ---------- ----------- ---------- ---------- -----------
543,662 773,512 2,308,835 1,316,653 521,246 5,080,083
- ----------- ---------- ----------- ---------- ---------- -----------
-- (237,298) (159,648) (130,796) (133,637) (1,907,533)
-- (170,558) (524,559) (250,693) (106,571) --
- ----------- ---------- ----------- ---------- ---------- -----------
-- (407,856) (684,207) (381,489) (240,208) (1,907,533)
- ----------- ---------- ----------- ---------- ---------- -----------
543,662 365,656 1,624,628 935,164 281,038 3,172,550
- ----------- ---------- ----------- ---------- ---------- -----------
(412,320) 4,805,112 13,965,172 7,192,883 1,963,356 40,149,181
- ----------- ---------- ----------- ---------- ---------- -----------
2,208,748 (464,681) 2,121,992 1,378,213 550,258 --
-- -- -- -- -- --
137,521 -- -- -- -- --
7,920,633 (94,515) 2,532,694 1,064,604 1,345,261 --
- ----------- ---------- ----------- ---------- ---------- -----------
10,266,902 (559,196) 4,654,686 2,442,817 1,895,519 --
- ----------- ---------- ----------- ---------- ---------- -----------
$ 9,854,582 $4,245,916 $18,619,858 $9,635,700 $3,858,875 $40,149,181
=========== ========== =========== ========== ========== ===========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
-------------------------- --------------------------
EQUITY LARGE-CAP
INCOME GROWTH &
FUND INCOME FUND
-------------------------- --------------------------
Six Months Six Months
Ended Year Ended Year
February 28, Ended February 28, Ended
1998 August 31, 1998 August 31,
(unaudited) 1997 (unaudited) 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
OPERATIONS--
Net investment income $ 6,060,269 $ 1,955,944
(net operating loss) $ 4,293,744 $ 695,206
Net realized gain
(loss) on investment
transactions 38,239,770 21,575,654 8,036,023 19,212,749
Net realized gain
(loss) on foreign
currency transactions -- -- -- --
Net realized gain on
futures contracts -- -- (403,979) 439,089
Net change in
unrealized
appreciation
(depreciation) of
investments,
collateral, futures
contracts and foreign
currency translation 46,670,419 39,482,101 29,025,551 52,299,522
------------ ------------ ------------ ------------
Change in net assets
resulting from
operations 89,203,933 67,118,024 37,352,801 73,907,304
------------ ------------ ------------ ------------
DISTRIBUTIONS TO
SHAREHOLDERS--
Dividends to
shareholders from net
investment income (4,303,379) (5,919,458) (873,838) (2,297,758)
Distributions to
shareholders from net
realized gain on
investments (27,002,637) (13,127,663) (23,055,255) (35,001,329)
------------ ------------ ------------ ------------
Change in net assets
from distributions to
shareholders (31,306,016) (19,047,121) (23,929,093) (37,299,087)
------------ ------------ ------------ ------------
CAPITAL STOCK
TRANSACTIONS--
Proceeds from sale of
shares 179,831,328 146,405,603 29,008,821 40,678,770
Net asset value of
shares issued to
shareholders in
payment of
distributions declared 28,285,043 8,266,120 23,422,319 28,520,410
Cost of shares redeemed (53,015,020) (44,415,622) (28,250,215) (87,783,174)
------------ ------------ ------------ ------------
Change in net assets
from capital stock
transactions 155,101,351 110,256,101 24,180,925 (18,583,994)
------------ ------------ ------------ ------------
Change in net assets 212,999,268 158,327,004 37,604,633 18,024,223
NET ASSETS:
Beginning of period 331,729,502 173,402,498 269,607,297 251,583,074
------------ ------------ ------------ ------------
End of period $544,728,770 $331,729,502 $307,211,930 $269,607,297
============ ============ ============ ============
Undistributed net
investment income
included in net assets
at end of period $ 698,512 $ 708,147 $ (33,478) $ 145,154
============ ============ ============ ============
Net gain (loss) as
computed for federal
tax purposes $ 38,239,770 $ 21,559,963 $ 7,632,044 $ 19,705,533
============ ============ ============ ============
</TABLE>
*For the period from September 3, 1996 (date of intial public investment) to
August 31, 1997.
(See Notes which are an integral part of the Financial Statements)
[_] MARSHALL FUNDS
<TABLE>
<CAPTION>
- --------------------------- -------------------------- -------------------------- -------------------------
SMALL-CAP
MID-CAP MID-CAP INTERNATIONAL GROWTH
VALUE FUND GROWTH FUND STOCK FUND FUND
- --------------------------- -------------------------- -------------------------- -------------------------
Six Months Six Months Six Months Six Months
Ended Year Ended Year Ended Year Ended Period
February 28, Ended February 28, Ended February 28, Ended February 28, Ended
1998 August 31, 1998 August 31, 1998 August 31, 1998 August 31,
(unaudited) 1997 (unaudited) 1997 (unaudited) 1997 (unaudited) 1997*
- ------------ ------------- ------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 614,292 $ 1,995,035 $ (737,947) $ (891,593) $ 1,221,145 $ 3,347,648 $ (412,320) $ (347,801)
9,724,061 23,414,759 13,076,238 22,473,728 3,001,905 4,406,045 2,208,748 487,900
-- -- -- -- (26,179) 718,647 -- --
(112,981) 61,447 42,931 636,447 -- -- 137,521 94,291
12,182,595 18,167,215 16,457,130 8,132,461 3,980,870 27,902,734 7,920,633 7,824,580
- ------------ ------------- ------------ ------------ ------------ ------------ ------------ -----------
22,407,967 43,638,456 28,838,352 30,351,043 8,177,741 36,375,074 9,854,582 8,058,970
- ------------ ------------- ------------ ------------ ------------ ------------ ------------ -----------
(789,673) (2,184,196) -- -- (3,675,610) (3,691,414) -- --
(21,031,640) (28,282,066) (23,952,792) (13,454,023) (4,959,734) (1,303,354) (2,485,675) --
- ------------ ------------- ------------ ------------ ------------ ------------ ------------ -----------
(21,821,313) (30,466,262) (23,952,792) (13,454,023) (8,635,344) (4,994,768) (2,485,675) --
- ------------ ------------- ------------ ------------ ------------ ------------ ------------ -----------
47,795,201 27,454,375 42,890,913 81,363,769 60,764,324 97,240,204 34,982,364 58,053,558
20,978,923 17,779,222 23,567,471 7,216,847 6,828,038 2,303,869 2,464,966 --
(32,605,389) (108,327,995) (50,052,042) (51,730,069) (50,818,443) (47,857,918) (14,717,812) (9,687,935)
- ------------ ------------- ------------ ------------ ------------ ------------ ------------ -----------
36,168,735 (63,094,398) 16,406,342 36,850,547 16,773,919 51,686,155 22,729,518 48,365,623
- ------------ ------------- ------------ ------------ ------------ ------------ ------------ -----------
36,755,389 (49,922,204) 21,291,902 53,747,567 16,316,316 83,066,461 30,098,425 56,424,593
145,143,436 195,065,640 196,983,454 143,235,887 226,849,492 143,783,031 56,424,593 --
- ------------ ------------- ------------ ------------ ------------ ------------ ------------ -----------
$181,898,825 $ 145,143,436 $218,275,356 $196,983,454 $243,165,808 $226,849,492 $ 86,523,018 $56,424,593
============ ============= ============ ============ ============ ============ ============ ===========
$ 314,343 $ 489,724 -- -- $ 1,010,352 $ 3,464,817 -- --
============ ============= ============ ============ ============ ============ ============ ===========
$ 9,611,080 $ 23,476,206 $ 13,119,169 $ 23,469,546 $ 2,975,726 $ 4,285,886 $ 2,346,269 $ 1,063,315
============ ============= ============ ============ ============ ============ ============ ===========
<CAPTION>
- ---------------------------
SHORT-TERM
INCOME
FUND
- ---------------------------
Six Months
Ended Year
February 28, Ended
1998 August 31,
(unaudited) 1997
- ------------- -------------
<C> <C>
$ 4,805,112 $ 7,930,182
(464,681) (434,668)
-- --
-- --
(94,515) 1,053,138
- ------------- -------------
4,245,916 8,548,652
- ------------- -------------
(4,805,112) (7,930,182)
-- --
- ------------- -------------
(4,805,112) (7,930,182)
- ------------- -------------
48,877,952 89,532,721
1,906,036 3,439,474
(57,801,463) (45,656,058)
- ------------- -------------
(7,017,475) 47,316,137
- ------------- -------------
(7,576,671) 47,934,607
148,780,691 100,846,084
- ------------- -------------
$141,204,020 $148,780,691
============= =============
-- --
============= =============
$ (464,681) $ (545,815)
============= =============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
---------------------------
INTERMEDIATE
BOND FUND
---------------------------
Six Months
Ended Year
February 28, Ended
1998 August 31,
(unaudited) 1997
------------ -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS--
Net investment income $ 13,965,172 $ 25,114,571
Net realized gain (loss) on investments 2,121,992 (851,277)
Net change in unrealized appreciation
(depreciation) of investments, collateral,
futures contracts, and foreign currency
transactions 2,532,694 8,464,908
------------ -------------
Change in net assets resulting from operations 18,619,858 32,728,202
------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS--
Dividends to shareholders from net investment
income:
Class A Shares (13,965,172) (25,114,571)
Class B Shares -- --
------------ -------------
Change in net assets from distributions to
shareholders (13,965,172) (25,114,571)
------------ -------------
CAPITAL STOCK TRANSACTIONS--
Proceeds from sale of shares 199,041,962 100,375,816
Net asset value of shares issued to shareholders
in payment of dividends declared 5,580,292 14,243,926
Cost of shares redeemed (49,767,214) (127,655,812)
------------ -------------
Change in net assets from capital stock
transactions 154,855,040 (13,036,070)
------------ -------------
Change in net assets 159,509,726 (5,422,439)
NET ASSETS:
Beginning of period 398,234,287 403,656,726
------------ -------------
End of period $557,744,013 $ 398,234,287
============ =============
Undistributed net investment income included in
net assets at end of period -- --
============ =============
Net gain (loss) as computed for federal tax
purposes $ 2,121,992 $ 128,681
============ =============
</TABLE>
(See Notes which are an integral part of the Financial Statements)
[_] MARSHALL FUNDS
<TABLE>
<CAPTION>
-------------------------- ------------------------- --------------------------------
GOVERNMENT INTERMEDIATE MONEY
INCOME TAX-FREE MARKET
FUND FUND FUND
-------------------------- ------------------------- --------------------------------
Six Months Six Months Six Months
Ended Year Ended Year Ended Year
February 28, Ended February 28, Ended February 28, Ended
1998 August 31, 1998 August 31, 1998 August 31,
(unaudited) 1997 (unaudited) 1997 (unaudited) 1997
------------ ------------ ------------ ----------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$ 7,192,883 $ 11,518,785 $ 1,963,356 $ 3,360,927 $ 40,149,181 $ 66,237,736
1,378,213 (523,651) 550,258 167,317 -- --
1,064,604 4,021,921 1,345,261 1,370,043 -- --
------------ ------------ ----------- ----------- --------------- ---------------
9,635,700 15,017,055 3,858,875 4,898,287 40,149,181 66,237,736
------------ ------------ ----------- ----------- --------------- ---------------
(7,192,883) (11,518,785) (1,963,356) (3,360,927) (37,751,025) (61,191,127)
-- -- -- -- (2,398,156) (5,046,609)
------------ ------------ ----------- ----------- --------------- ---------------
(7,192,883) (11,518,785) (1,963,356) (3,360,927) (40,149,181) (66,237,736)
------------ ------------ ----------- ----------- --------------- ---------------
60,944,249 83,480,146 14,029,232 29,527,383 2,754,289,406 4,388,043,812
3,208,877 6,106,482 177,968 316,077 8,027,944 17,152,907
(15,061,662) (27,900,306) (8,304,582) (9,200,113) (2,394,981,674) (4,149,423,646)
------------ ------------ ----------- ----------- --------------- ---------------
49,091,464 61,686,322 5,902,618 20,643,347 367,335,676 255,773,073
------------ ------------ ----------- ----------- --------------- ---------------
51,534,281 65,184,592 7,798,137 22,180,707 367,335,676 255,773,073
203,642,447 138,457,855 88,107,958 65,927,251 1,380,143,588 1,124,370,515
------------ ------------ ----------- ----------- --------------- ---------------
$255,176,728 $203,642,447 $95,906,095 $88,107,958 $ 1,747,479,264 $ 1,380,143,588
============ ============ =========== =========== =============== ===============
$ -- -- -- -- -- --
============ ============ =========== =========== =============== ===============
$ 1,378,213 $ (1,184,492) $ 550,258 $ 167,317 -- --
============ ============ =========== =========== =============== ===============
</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
gain/(loss) on Dividends to transactions, Distributions 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 (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)
1998(m) $15.64 0.15 1.92 2.07 (0.16) (1.27)
LARGE-CAP GROWTH & INCOME 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) --
1998(m) $13.96 0.03 1.82 1.85 (0.04) (1.18) --
MID-CAP VALUE 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) --
1998(m) $13.14 0.04 1.08 1.12 (0.06) (1.95) --
MID-CAP GROWTH 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) --
1998(m) $14.82 (0.05) 2.06 2.01 -- (1.81) --
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) --
1998(m) $13.20 0.06 0.38 0.44 (0.21) (0.29) --
SMALL-CAP GROWTH FUND
1997(d) $10.00 (0.08) 2.27 2.19 -- -- --
1998(m) $12.19 (0.06) 1.81 1.75 -- (0.49) --
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) -- --
1998(m) $ 9.64 0.31 (0.03) 0.28 (0.31)
INTERMEDIATE BOND FUND
1993(b) $10.00 0.46 0.33 0.79 (0.39) -- --
1994 $10.40 0.61 (0.81) (0.20) (0.67) (0.17) --
1995 $ 9.36 0.61 0.16 0.77 (0.62) -- --
1996 $ 9.51 0.58 (0.25) 0.33 (0.58) -- --
1997 $ 9.26 0.58 0.18 0.76 (0.58) -- --
1998(m) $ 9.44 0.29 0.08 0.37 (0.29) -- --
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 0.27 0.87 (0.62) -- --
1996 $ 9.51 0.62 (0.24) 0.38 (0.62) -- --
1997 $ 9.27 0.62 0.22 0.84 (0.62) -- --
1998(m) $ 9.49 0.31 0.12 0.43 (0.31) -- --
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) -- --
1998(m) $10.04 0.21 0.21 0.42 (0.21) -- --
</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.
(m) Six months ended February 28, 1998 (unaudited).
(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%
(1.43) $16.28 13.82% 1.19%(j) 2.10%(j) -- $544,729 $0.0368 44%
(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%
(1.22) $14.59 13.90% 1.22%(j) 0.49%(j) -- $307,212 $0.0500 14%
(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%
(2.01) $12.25 9.67% 1.24%(j) 0.78%(j) -- $181,899 $0.0600 30%
(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%
(1.81) $15.02 14.67% 1.23%(j) (0.72%)(j) -- $218,275 $0.0605 96%
(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%
(0.50) $13.14 3.51% 1.51%(j) 1.06%(j) -- $243,166 $0.0190 15%
-- $12.19 21.90% 1.80%(j) (0.94%)(j) -- $ 56,425 $0.0600 183%
(0.49) $13.45 14.70% 1.62%(j) (1.23%)(j) -- $ 86,523 $0.0620 66%
(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%
(0.31) $ 9.61 2.93% 0.57%(j) 7.45%(j) 0.63%(j) $141,204 -- 43%
(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%
(0.29) $ 9.52 3.96% 0.71%(j) 6.12%(j) 0.30%(j) $557,744 -- 64%
(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%
(0.31) $ 9.61 4.62% 0.86%(j) 6.60%(j) 0.35%(j) $255,177 -- 133%
(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%
(0.21) $10.25 4.25% 0.61%(j) 4.24%(j) 0.52%(j) $ 95,906 -- 26%
</TABLE>
FINANCIAL HIGHLIGHTS (CONTINUED)
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Distributions to
shareholders from
Net realized and net realized gain
unrealized on investment
gain/(loss) on Dividends to transactions, Distributions 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 (loss) foreign currency operations income transactions income
- ----------------------- --------- ---------- ------------------- ---------- ------------ ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
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) -- --
1998(m) $1.00 0.03 -- 0.03 (0.03) -- --
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) -- --
1998(m) $1.00 0.03 -- 0.03 (0.03) -- --
</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.
(m) Six months ended February 28, 1998 (unaudited).
(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>
(0.02) $1.00 2.33% 0.40%(j) 2.97%(j) 0.28%(j) $ 775,890 -- --
(0.03) $1.00 3.41% 0.40% 3.40% 0.29% $ 967,988 -- --
(0.05) $1.00 5.57% 0.41% 5.44% 0.26% $1,128,623 -- --
(0.05) $1.00 5.39% 0.41% 5.29% 0.26% $1,039,659 -- --
(0.05) $1.00 5.35% 0.41% 5.22% 0.26% $1,290,659 -- --
(0.03) $1.00 2.71% 0.41%(j) 5.41%(j) 0.26%(j) $1,649,288 -- --
(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 -- --
(0.03) $1.00 2.56% 0.71%(j) 5.16%(j) 0.26%(j) $ 98,191 -- --
</TABLE>
February 28, 1998 (unaudited)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Marshall Funds, Inc. (the "Corporation") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end management investment
company. The Corporation consists of eleven diversified portfolios (individually
referred to as the "Fund", or collectively as the "Funds") which are presented
herein:
<TABLE>
<CAPTION>
PORTFOLIO NAME INVESTMENT OBJECTIVE
-------------- --------------------
<S> <C>
Marshall Equity Income Fund ("Equity Income Fund") Above-average dividend income with appreciation of capital.
Marshall Large-Cap Growth & Income Fund Growth of capital and income.
("Large-Cap Growth & Income Fund")
Marshall Mid-Cap Value Fund ("Mid-Cap Value Fund") Long-term capital growth and income.
Marshall Mid-Cap Growth Fund ("Mid-Cap Growth Fund") Appreciation of capital.
Marshall International Stock Fund ("International Stock Fund") Long-term capital growth.
Marshall Small-Cap Growth Fund ("Small-Cap Growth Fund") Appreciation of capital.
Marshall Short-Term Income Fund ("Short-Term Income Fund") Maximize total return consistent with current income.
Marshall Intermediate Bond Fund ("Intermediate Bond Fund") Maximize total return consistent with current income.
Marshall Government Income Fund ("Government Income Fund") Current income.
Marshall Intermediate Tax-Free Fund ("Intermediate Tax-Free Fund") Provide as high a level of income that is exempt from federal
income tax as is consistent with preservation of capital.
Marshall Money Market Fund ("Money Market Fund") Current income consistent with
stability of principal.
</TABLE>
Money Market Fund is offered in two classes of shares: Class A Shares and
Class B Shares. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles.
Investment Valuations--Municipal bonds are valued by an independent pricing
service, taking into consideration yield, liquidity, risk, credit quality,
coupon, maturity, type of issue, and any other factors or market data the
pricing service deems relevant. U.S. government securities, listed corporate
bonds, other fixed income and asset-backed securities, and unlisted securities
and private placement securities are generally valued at the mean of the latest
bid and asked price as furnished by an independent pricing service. Listed
equity securities and investments in closed end investment companies are valued
at the last sale price reported on a national securities exchange. Money Market
Fund'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.
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.
[_] MARSHALL FUNDS
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
TO EXPIRE IN TO EXPIRE IN TO EXPIRE IN TO EXPIRE IN CAPITAL 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.
At February 28, 1998, the Large-Cap Growth & Income Fund and Mid-Cap Value
Fund had no outstanding futures contracts.
At February 28, 1998, the Mid-Cap Growth Fund had outstanding futures
contracts as set forth below:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EXPIRATION DATE CONTRACTS TO RECEIVE POSITION UNREALIZED APPRECIATION
- --------------- -------------------- -------- -----------------------
<S> <C> <C> <C>
March 1998 10 S&P 500 Futures Long $221,675
</TABLE>
- --------------------------------------------------------------------------------
At February 28, 1998, the Small-Cap Growth Fund had outstanding futures
contracts as set forth below:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EXPIRATION DATE CONTRACTS TO RECEIVE POSITION UNREALIZED APPRECIATION
- --------------- ----------------------- -------- -----------------------
<S> <C> <C> <C>
March 1998 15 Russell 2000 Futures Long $255,286
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
As of February 28, 1998, International Stock Fund had no outstanding foreign
exchange contracts.
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.
As of February 28, 1998, 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 $65,793,919 $70,273,900
Mid-Cap Value Fund $20,130,568 $20,807,593
Mid-Cap Growth Fund $61,903,114 $64,045,870
International Stock Fund $49,543,184 $51,483,006
Intermediate Bond Fund $69,016,193 $71,115,162
</TABLE>
- --------------------------------------------------------------------------------
Restricted Securities--Restricted securities are securities that may only be
resold upon registration under federal securities laws or in transactions exempt
from such registration. In some cases, the issuer of restricted securities has
agreed to register such securities for resale, at the issuer's expense either
upon demand by the Fund or in connection with another registered offering of the
securities. Many restricted securities may be resold in the secondary market in
transactions exempt from registration. Such restricted securities may be
determined to be liquid under criteria established by the Directors. The 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.
[_] MARSHALL FUNDS
Additional information on each restricted security held by International Stock
Fund at February 28, 1998, is as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE(S) ACQUISITION COST
- -------- ------------------- ----------------
<S> <C> <C>
Telefonica de Argentina S.A., ADR 9/7/94-8/21/96 $1,557,970
Qantas Airways, ADR 7/31/95-3/7/96 $ 832,512
Cointel, Telefonica de Argentia SA,
PRIDES, $5.04 3/24/95-6/10/96 $1,234,906
Gazprom, ADR 10/27/97-11/14/97 $1,030,584
MOL Magyar Olay, GDR 11/22/95-5/7/96 $ 806,418
Philippine Long Distance Telephone Co. 9/29/95 $ 499,980
</TABLE>
- --------------------------------------------------------------------------------
Additional information on each restricted security held by Short-Term Income
Fund at February 28, 1998, is as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
- -------- ---------------- ----------------
<S> <C> <C>
Corestates Capital Corp., Bank Guarantee,
6.195%, 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
Household Capital Trust III, Company
Guarantee, 6.26%, 6/26/2004 12/30/97 $4,975,200
EOP Operating LP, Sr. Note, 6.375%,
2/15/2003 2/18/98 $2,996,100
</TABLE>
- --------------------------------------------------------------------------------
Additional information on each restricted security held by Intermediate Bond
Fund at February 28, 1998, is as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DATE ACQUISITION COST
- -------- ---- ----------------
<S> <C> <C>
Edison Funding Co., Sr. Note 4/6/97 $ 9,992,600
Corestates Capital Corp., Bank Guarantee 1/9/97 $ 3,919,520
Florida Windstorm Under, Bond 7/31/97 $ 9,984,600
IBJ Preferred Capital Co., LLC, Bond 2/11/98 $ 8,000,000
Credit Suisse, London, Sub. Note 08/04/97-10/28/97 $12,592,000
</TABLE>
- --------------------------------------------------------------------------------
Additional information on each restricted security held by Government Income
Fund at February 28, 1998, is as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE(S) ACQUISITION COST
- -------- ------------------- ----------------
<S> <C> <C>
Nations Credit Home Equity Loan Trust 10/31/97 $4,248,540
American Honda Finance Corp. 10/29/97 $4,999,645
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Additional information on each restricted security held by Money Market Fund
at February 28, 1998, is as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
- -------- ---------------- ----------------
<S> <C> <C>
Combined Insurance Corp. of America,
5.732%, 5/1/1998 5/7/1997 $20,000,000
Commonwealth Life Insurance, 5.780%--
5.970%, 3/2/1998 9/2/1994-10/16/1997 $50,000,000
Danaher Corp., 5.617%, 3/2/1998 11/12/1997 $10,000,000
Donaldson, Lufkin and Jenrette Securities
Corp., Master Note, 5.647%, 3/2/1998 11/17/1997 $ 5,000,000
General American Life Insurance Co.,
5.820%, 3/2/1998 9/3/1997-10/9/1997 $60,000,000
Goldman Sachs Group, LP, 5.813%,
3/31/1998 10/7/1997-2/17/1998 $70,150,000
Jackson National Life Insurance Co.,
5.660%, 5/1/1998 4/8/1996 $50,000,000
J.P. Morgan & Co., Inc., 5.635%, 3/2/1998 4/4/1994-2/3/1998 $75,000,000
Transamerica Life Insurance and Annuity
Co., 5.809%, 4/4/1998 10/1/1997 $60,000,000
Travelers Insurance Company, 5.655%,
3/2/1998 1/20/1998 $50,000,000
Wisconsin Public Service, 5.567%,
3/3/1998 11/17/1997 $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 February
28, 1998, the capital paid-in was as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL PAID-
FUND IN
- ---- -------------
<S> <C>
Equity Income Fund $ 407,324,297
Large-Cap Growth & Income Fund $ 202,283,182
Mid-Cap Value Fund $ 139,080,440
Mid-Cap Growth Fund $ 162,936,525
International Stock Fund $ 197,630,208
Small-Cap Growth Fund $ 71,095,141
Short-Term Income Fund $ 145,052,617
Intermediate Bond Fund $ 574,837,696
Government Income Fund $ 255,003,346
Intermediate Tax-Free Fund $ 92,729,219
Money Market Fund $1,747,479,264
</TABLE>
- --------------------------------------------------------------------------------
Transactions in capital stock were as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------- ----------------------- -----------------------
LARGE-CAP GROWTH & MID-CAP
EQUITY INCOME FUND INCOME FUND VALUE FUND
----------------------- ----------------------- -----------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31, FEBRUARY 28, AUGUST 31, FEBRUARY 28, AUGUST 31,
1998 1997 1998 1997 1998 1997
------------ ---------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 13,773,228 10,346,734 2,057,825 3,109,742 4,676,923 2,321,462
Shares issued to 1,835,906 598,334 1,713,951 2,355,870 1,838,188 1,614,014
shareholders in payment
of distributions
declared
Shares redeemed (3,363,005) (3,074,398) (2,026,342) (6,850,139) (2,715,338) (9,178,441)
---------- ---------- ---------- ---------- ---------- ----------
Net change resulting 12,246,129 7,870,670 1,745,434 (1,384,527) 3,799,773 (5,242,965)
from share transactions
========== ========== ========== ========== ========== ==========
</TABLE>
- --------------------------------------------------------------------------------
[_] MARSHALL FUNDS
<TABLE>
<CAPTION>
----------------------- ----------------------- -----------------------
INTERNATIONAL SMALL-CAP
MID-CAP GROWTH FUND STOCK FUND GROWTH FUND
----------------------- ----------------------- -----------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31, FEBRUARY 28, AUGUST 31, FEBRUARY 28, AUGUST 31,
1998 1997 1998 1997 1998 1997*
------------ ---------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 2,959,562 6,045,656 4,675,695 7,818,946 2,757,434 5,546,179
Shares issued to 1,710,266 534,978 545,806 197,927 199,270 --
shareholders in payment
of distributions
declared
Shares redeemed (3,424,900) (3,856,291) (3,900,932) (3,814,168) (1,152,428) (917,613)
---------- ---------- ---------- ---------- ---------- ---------
Net change resulting 1,244,928 2,724,343 1,320,569 4,202,705 1,804,276 4,628,566
from share transactions
========== ========== ========== ========== ========== =========
</TABLE>
- --------------------------------------------------------------------------------
*For the period from September 3, 1996 (date of initial public investment) to
August 31, 1997.
<TABLE>
<CAPTION>
----------------------- ------------------------ -----------------------
SHORT-TERM INTERMEDIATE GOVERNMENT
INCOME FUND BOND FUND INCOME FUND
----------------------- ------------------------ -----------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31, FEBRUARY 28, AUGUST 31, FEBRUARY 28, AUGUST 31,
1998 1997 1998 1997 1998 1997
------------ ---------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 5,068,705 9,291,644 20,993,051 10,675,888 6,336,425 8,834,407
Shares issued to 197,638 356,927 586,185 1,513,322 334,466 646,704
shareholders in payment
of distributions
declared
Shares redeemed (5,993,305) (4,738,729) (5,225,002) (13,568,319) (1,569,949) (2,966,414)
---------- ---------- ---------- ----------- ---------- ----------
Net change resulting (726,962) 4,909,842 16,354,234 (1,379,109) 5,100,942 6,514,697
from share transactions
========== ========== ========== =========== ========== ==========
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-----------------------
INTERMEDIATE
TAX-FREE FUND
-----------------------
SIX MONTHS
ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31,
1998 1997
------------ ----------
<S> <C> <C>
Shares sold 1,379,684 2,962,645
Shares issued to shareholders in payment of 17,478 31,656
distributions declared
Shares redeemed (815,060) (923,630)
--------- ---------
Net change resulting from share transactions 582,102 2,070,671
========= =========
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------
MONEY MARKET FUND
------------------------------
SIX MONTHS
ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31,
1998 1997
------------ ----------
<S> <C> <C>
CLASS A SHARES
Shares sold 2,480,732,629 3,774,164,146
Shares issued to shareholders in payment of 6,047,935 12,155,219
distributions declared
Shares redeemed (2,128,151,395) (3,535,320,070)
-------------- --------------
Net change resulting from Class A Share 358,629,169 250,999,295
transactions
============== ==============
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
--------------------------
MONEY MARKET FUND
--------------------------
SIX MONTHS
ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31,
1998 1997
------------ ----------
<S> <C> <C>
CLASS B SHARES
Shares sold 273,556,777 613,879,666
Shares issued to shareholders in payment of 1,980,009 4,997,688
distributions declared
Shares redeemed (266,830,279) (614,103,576)
------------ ------------
Net change resulting from Class B Share 8,706,507 4,773,778
transactions
============ ============
Net change resulting from Fund Share 367,335,676 255,773,073
transactions
============ ============
</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 Fund's 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 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.
[_] MARSHALL FUNDS
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 is also reimbursed for the costs
in connection with securities lending activities of the Funds.
Organizational Expenses--Organizational expenses were borne initially by FAS.
The Funds have reimbursed FAS for these expenses. The remaining unamortized
balance of these expenses have been deferred and will be amortized to expense
over a period not to exceed five years from the Fund's effective date.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ORGANIZATIONAL
ORGANIZATIONAL EXPENSES
FUND EXPENSES PAID
- ---- -------------- --------------
<S> <C> <C>
Equity Income Fund $18,857 $2,771
Mid-Cap Value Fund $18,485 $2,716
Mid-Cap Growth Fund $16,434 $2,414
International Stock Fund $18,401 $2,035
Small-Cap Growth Fund $35,592 $2,977
Intermediate Tax-Free Fund $16,416 $2,572
</TABLE>
- --------------------------------------------------------------------------------
General--Certain of the Officers and Directors of the Corporation are Officers
and Directors of the above companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended February 28, 1998, were as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND PURCHASES SALES
- ---- ------------ ------------
<S> <C> <C>
Equity Income Fund $230,939,593 $153,634,191
Large-Cap Growth & Income Fund 40,869,458 37,570,762
Mid-Cap Value Fund 66,600,022 44,975,870
Mid-Cap Growth Fund 192,713,766 200,682,180
International Stock Fund 61,675,995 34,152,742
Small-Cap Growth Fund 61,288,486 42,784,970
Short-Term Income Fund 59,536,887 56,570,435
Intermediate Bond Fund 394,233,215 284,348,206
Government Income Fund 398,182,098 360,492,777
Intermediate Tax-Free Fund 34,384,707 23,890,637
</TABLE>
- --------------------------------------------------------------------------------
6. CONCENTRATION OF CREDIT RISK
International Stock Fund invests in equity and fixed income securities of
non-U.S. issuers. Although the Fund maintains a diversified investment
portfolio, the political or economic developments within a particular country or
region may have an adverse effect on the ability of domiciled issuers to meet
their obligations. Additionally, political or economic developments may have an
effect on the liquidity and volatility of portfolio securities and currency
holdings.
DIRECTORS OFFICERS
Ody J. Fish Edward C. Gonzales
John DeVincentis Chairman, President and Treasurer
Edward C. Gonzales
Paul E. Hassett Joseph S. Machi
Vice President and Assistant Treasurer
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.
MARSHALL FUNDS(R)
SMART FUNDS. SMART PEOPLE.SM
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 (4/98)
1A. The graphic representation here displayed consists of two charts. One chart
outlines the top five business sectors that the Marshall Equity Income Fund
("Equity Income Fund") invests in as well as its percentage of net assets as of
February 28, 1998. The information is as follows: Financial, 22.3%; Consumer
Non-Durables, 16.6%; Energy, 14.8%; Utilities, 13.4%; Raw Materials/Intermediate
Goods, 8.2%. The second chart outlines the Equity Income Fund's five largest
stock holdings and its percentage of net assets as of February 28, 1998. The
information is as follows: Philip Morris Cos., Inc., 3.0%; Exxon Corp., 2.7%;
Royal Dutch Petrolieum Co., ADR, 2.2%; Merck and Co., Inc., 1.8%; Bristol-Myers
Squibb Co., 1.7%.
2A. The graphic representation here displayed consists of two charts. One chart
outlines the average annual total returns for the Equity Income Fund as of
February 28, 1998 for the 1-year, 3-year, and since inception (9/30/93) periods.
The returns are as follows: 25.25%; 26.78%; and 18.86%, respectively. The second
chart outlines the Equity Income Fund's six-month total return as of February
28, 1998. The six-month return is 13.82%.
3A. The graphic presentation here displayed consists of a line graph. The
corrresponding components of the line graph are listed beneath the graphic
presentation. The Equity Income Fund is represented by a solid line, whereas
Standard & Poor's 500 Index ("S&P 500") is represented by a broken dotted line
and Lipper Equity Income Funds Index ("LEIFI") is represented by a dotted line.
The line graph is a visual representatin of a comparison of change in value of a
hypothetical investment of $10,000 in the Equity Income Fund and S&P 500 and
LEIFI from its inception on September 30, 1993 to February 28, 1998. 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 $21,452;
$25,354; and $20,643, 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 February 28, 1998. The information is as follows:
Consumer Non-Durables, 36.9%; Capital Goods, 18.8%; Financial, 17.0%; Utilities,
9.4%; and Energy, 7.3%. The second chart outlines the Large-Cap Growth & Income
Fund's five largest stock holdings and its percentage of net assets as of
February 28, 1998. The information is as follows: General Electric Company,
3.0%; Philip Morris Cos., Inc., 2.4%; Bank America Corporation, 2.4%; Federal
Home Loan Mortgage Corp., 2.3%; and Walgren Company, 2.2%.
2B. The graphic representation here displayed consists of two charts. One chart
outlines the average annual total returns for the Large-Cap Growth & Income Fund
as of February 28, 1998 for the 1-year, 3-year, 5-year and since inception
(9/30/93) periods. The returns are as follows: 26.56%, 24.79%; 15.21%; and
14.45%, respectively. The second chart outlines the Large-Cap Growth & Income
Fund's six-month total return as of February 28, 1998. The six-month return is
13.90%.
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 ("LGIFI") is represented by
a dotted line. The line graph is a visual representation of a comparison of
change in value of a hypothetical investment of $10,000 in the Large-Cap Growth
& Income Fund and S&P 500 and LGIFI from its inception on November 20, 1992 to
February 28, 1998. 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
LGIFI; the ending values are $20,391; $27,617; and $24,767, 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
February 28, 1998. The information is as follows: Consumer Non-Durables, 32.4%;
Intermediate Goods, 21.0%; Utilities, 9.0%; Capital Goods, 8.3%; and Financial,
7.6%. The second chart outlines the Mid-Cap Value Fund's five largest stock
holdings and its percentage of net assets as of February 28, 1998. The
information is as follows: Darden Restaurants, 3.8%; Viad Corp., 3.4%; Imperial
Chemical Industries, 3.3%; ITT Industries, Inc., 3.0%; and Dial Corp., 2.9%.
2C. The graphic representation here displayed consists of two charts. One chart
outlines the average annual total returns for the Mid-Cap Value Fund as of
February 28, 1998 for the 1-year, 3-year, and since inception (9/30/93) periods.
The returns are as follows: 26.85%; 21.15%; and 16.28%, respectively. The second
chart outlines the Mid-Cap Value Fund's six-month total return as of February
28, 1998. The six-month return is 9.67%.
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 ("SPMC") is represented by a broken dotted
line, Lipper Mid-Cap Funds Index ("LMCFI") is represented by a dotted line, and
Standard & Poor's 500 Index ("S&P 500") is represented by a broken 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 and SPMC, LMCFI,
and S&P 500 from its inception on September 30, 1993 to February 28, 1998. 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 SPMC,LMCFI, and S&P 500; the ending values are
$19,462; $21,704; and $19,491, and $25,354, 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
February 28, 1998. The information is as follows: Consumer Non-Durables, 57.6%;
Capital Goods, 16.3%; Financial, 9.0%; Telecommunications, 8.6%; Energy, 5.4%.
The second chart outlines the Mid-Cap Growth Fund's five largest stock holdings
and its percentage of net assets as of February 28, 1998. The information is as
follows: Kohl's Corp., 3.7%; MGIC Investment Corp., 3.0%; Clear Channel
Communications, Inc., 2.9%;Steiner Leisure, Ltd., 2.8%; Tellabs, Inc., 2.8%.
2D. The graphic representation here displayed consists of two charts. One chart
outlines the average annual total returns for the Mid-Cap Growth Fund as of
February 28, 1998 for the 1-year, 3-year, and since inception (9/30/93) periods.
The returns are as follows: 34.23%; 25.83%; and 17.09%, respectively. The second
chart outlines the Mid-Cap Growth Fund's six-month total return as of February
28, 1998. The six-month return is 14.67%.
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 Funds Index ("LMCFI") is represented by a dotted
line. The line graph is a visual representation of a comparison of change in
value of a hypothetical investment of $10,000 in the Mid-Cap Growth Fund and
SPMC and LMCFI from its inception on September 30, 1993 to February 28, 1998.
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
$20,077; $21,704; and $19,491, respectively.
1E. The graphic presentation here displayed consists of four charts. One chart
outlines the top five industries that the Marshall International Stock Fund
("International Stock Fund") invests in as well as its percentage of net assets
as of February 28, 1998. The information is as follows: Banking, 10.9%;
Government Agencies, 8.5%; Insurance, 7.7%; Telephone, 7.4%; Electric Utilities,
5.3%. The second chart outlines the International Stock Fund's five largest
stock holdings and its percentage of net assets as of February 28, 1998. The
information is as follows: AXA, 2.8%; Banque Nationale de Paris, 2.4%; Zurich
Versicherungsgesellschaft, 2.1%; BTR, PLC, 2.1%; Philips Electronics NV, 2.0%.
The third chart outlines the International Stock Fund's regional exposure and
its percentage of net assets as of February 28, 1998. The information is as
follows: Europe, 58.8%; South America, 11.7%; Australia, 6.9%; Pacific Rim,
5.4%; North America, 3.0%. The fourth chart outlines the International Stock
Fund's country allocations and its percentage of net assets as of February 28,
1998. The information is as follows: Great Britain, 12.3%; France, 10.6%;
Australia/New Zealand, 6.9%; Spain, 6.1%; Hong Kong, Netherlands, 5.2%.
2E. The graphic representation here displayed consists of two charts. One chart
outlines the average annual total returns for the International Stock Fund as of
February 28, 1998 for the 1-year, 3-year and since inception (9/1/94) periods.
The returns are as follows: 12.73%, 15.99% and 11.19%, respectively. The second
chart outlines the International Stock Fund's six-month total return as of
February 28, 1998. The six-month return is 3.51%.
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 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, 1998. 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 $14,495; $12,805; and $13,595, 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 February 28, 1998. The information is as follows: Consumer Non-Durables,
64.5%; Capital Goods, 16.7%; Telecommunications, 5.0%; Financial, 4.6%; Energy,
4.4%. The second chart outlines the Small-Cap Growth Fund's five largest stock
holdings and its percentage of net assets as of February 28, 1998. The
information is as follows: Steiner Leisure Ltd., 3.5%; Henry Schein, Inc., 2.8%;
Alternative Living Services, Inc., 2.8%; MSC Industrial Direct Co., 2.8%; Heftel
Broadcasting Corp., Class A, 2.8%.
2F. The graphic representation here displayed consists of two charts. One chart
outlines the average annual total returns for the Small-Cap Growth Fund as of
February 28, 1998 for the 1-year and since inception (11/1/95) periods. The
returns are as follows: 38.85% and 43.58%, respectively. The second chart
outlines the Small-Cap Stock Fund's six-month total return as of February 28,
1998. The six-month return is 14.70%.
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, 1998. 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
Growth Fund as compared to Russell 2000 and LSCFI; the ending values are
$23,217; $16,113; and $14,494, respectively.
1G. The graphic representation here displayed consists of two charts. One chart
outlines the portfolio diversification of the Marshall Short-Term Income Fund
("Short-Term Income Fund") as well as its percentage of net assets as of
February 28, 1998. The information is as follows: AAA Rated Corporate Bonds,
37.1%; Government Agency, 18.8%; A Rated Corporate Bonds, 18.5%; Cash & Cash
Equivalents, 6.5%; U.S. Treasury, 5.3%; BBB Rated Corporate Bonds, 2.1%; AA
Rated Corporate Bonds, 0.8%. The second chart outlines the Short-Term Income
Fund's fund statistics as of February 28, 1998. The information is as follows:
SEC 30-day yield, 5.46%; Dollar-weighted average maturity, 2.18 years; Duration,
1.22 years.
2G. The graphic representation here displayed consists of two charts. One chart
outlines the average annual total returns for the Short-Term Income Fund as of
February 28, 1998 for the 1-year, 3-year, 5-year and since inception (11/1/92)
periods. The returns are as follows: 6.49%; 6.40%; 5.06%; and 5.08%,
respectively. The second chart outlines the Short-Term Income Fund's six-month
total return as of February 28, 1998. The six-month return is 2.93%.
3G. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed beneath the graphic
presentation. The Short-Term Income Fund is represented by a solid line, whereas
the Lipper Short-Term Investment Grade Bond Fund Index ("LSTIBI") is represented
by a broken line 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 February 28, 1998. 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 $13,026; $13,251; and $12,572, respectively.
1H. The graphic representation here displayed consists of two charts. One chart
outlines the portfolio diversification of the Marshall Intermediate Bond Fund
("Intermediate Bond Fund") as well as its percentage of net assets as of
February 28, 1998. The information is as follows: A Rated Corporate Bonds,
27.0%; AAA Rated Corporate Bonds, 25.2%, BBB Rated Corporate Bonds, 17.9%, U.S.
Treasury, 10.8%, Cash and Cash Equivalents, 10.3%, Government Agency, 6.4%; AA
Rated Corporate Bonds, 1.2%. The second chart outlines the Intermediate Bond
Fund's fund statistics as of February 28, 1998. The information is as follows:
SEC 30-day yield, 5.65%; Dollar-weighted average maturity, 4.28 years; Duration,
2.84 years.
2H. The graphic representation here displayed consists of two charts. One chart
outlines the average annual total returns for the Intermediate Bond Fund as of
February 28, 1998 for the 1-year, 3-year, 5-year and since inception (11/20/92)
periods. The returns are as follows: 7.73%; 7.39%; 5.16%; and 5.71%,
respectively. The second chart outlines the Intermediate Bond Fund's six-month
total return as of February 28, 1998. The six-month return is 3.96%.
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 Bond Index ("LGCI") is represented by a
broken dotted line and Lipper Intermediate Investment Grade Bond Funds Index
("LIBF") is represented by a dotted line. The line graph is a visual
representation of a comparison of change in value of a hypothetical investment
of $10,000 in the Intermediate Bond Fund and LGCI and LIBF from its inception on
November 23, 1992 to February 28, 1997. The "y" axis reflects the cost of the
investment. The "x" axis reflects computation periods from the ending value of
the hypothetical investment in the Intermediate Bond Fund as compared to LGCI
and LIBF; the ending values are $13,406; $14,161; and $14,302, respectively.
1I. The graphic representation here displayed consists of two charts. One chart
outlines the portfolio diversification of the Marshall Government Income Fund
("Government Income Fund") as well as its percentage of net assets as of
February 28, 1998. The information is as follows: FNMA/MBS, 39.7%; CMO/ABS,
39.0%;FHLMC/MBS, 12.9%; Corporate,8.4%; GNMA/MBS, 6.7%; Cmbs, 6.0%. The second
chart outlines the Government Income Fund's fund statistics as of February 28,
1998. The information is as follows: SEC 30-day yield, 5.91%; Dollar-weighted
average maturity, 6.18 years; Duration, 3.13 years.
2I. The graphic representation here displayed consists of two charts. One chart
outlines the average annual total returns for the Government Income Fund as of
February 28, 1998 for the 1-year, 3-year, 5-year and since inception (12/13/92)
periods. The returns are as follows: 8.94%; 8.17%; 5.67%; and 6.24%,
respectively. The second chart outlines the Government Income Fund's six-month
total return as of February 28, 1998. The six-month return is 4.62%.
3I. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed beneath the graphic
presentation. The Government Income Fund is represented by a solid line, whereas
Lehman Brothers Mortgage-Backed Securities Index ("LMI") is represented by a
broken dotted line and Lipper U.S. Mortgage Funds Index ("LUSMI") is represented
by a dotted line. The line graph is a visual representation of a comparison of
change in value of a hypothetical investment of $10,000 in the Government Income
Fund and LMI and LUSMI from its inception on December 13, 1992 to February 28,
1998. 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
$13,715; $14,519; and $13,716, respectively.
1J. The graphic representation here displayed consists of two charts. One chart
outlines the portfolio diversification of the Marshall Intermediate Tax-Free
Fund ("Intermediate Tax-Free Fund") as well as its percentage of net assets as
of February 28, 1998. The information is as follows: Texas, 13.5%; Illinois,
10.1%; Utah, 9.8%; Wisconsin, 8.6%; New York, 7.6%. The second chart outlines
the Intermediate Tax-Free Fund's fund statistics as of February 28, 1998. The
information is as follows: SEC 30-day yield, 3.79%; Dollar-weighted average
maturity, 7.50 years; Duration, 6.03 years.
2J. The graphic representation here displayed consists of two charts. One chart
outlines the average annual total returns for the Intermediate Tax-Free Fund as
of February 28, 1998 for the 1-year, 3-year, and since inception (2/2/94)
periods. The returns are as follows: 6.54%; 6.43%; and 4.91%, respectively. The
second chart outlines the Intermediate Tax-Free Fund's six-month total return as
of February 28, 1998. The six-month return is 4.25%.
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
line, Lipper Intermediate Municipal Funds Index ("LIMI") is represented by a
dotted line, and Lehman Brothers 7 Year G.O. ("L7GO") is represented by a broken
dotted line. The line graph is a visual representation of a comparison of change
in value of a hypothetical investment of $10,000 in the Intermediate Tax-Free
Fund and L5GO, LIMI and L7GO from its inception on February 2, 1994 to February
28, 1998. 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, LIMI and L7GO;
the ending values are $12,162; $12,262; $12,118; and $12,840, respectively.
K. The graphic representation here displayed consists of one chart which
outlines the Marshall Money Market Fund's fund statistics as of February 28,
1998. The information is as follows: Current Yield, Class A Shares--5.40%; Class
B Shares--5.10%; Effective Yield, Class A Shares--5.54%; Class B Shares, 5.23%;
Dollar-Weighted Avg. Maturity, 37 days.
