MARSHALL FUNDS INC, 485BPOS, 1999-10-29

MARSHALL FUNDS INC
485BPOS, 1999-10-29

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1933 Act File No. 33-48907
1940 Act File No. 811-7047

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
----

Pre-Effective Amendment No. ..............................

Post-Effective Amendment No. 29 ............................. X
-------- ----

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 29 ............................................ X
-------- ----

MARSHALL FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)

1000 North Water Street
Milwaukee, Wisconsin 53202

(Address of Principal Executive Offices)

(414) 287-8555

(Registrant's Telephone Number)

Michael A. Hatfield, Esquire
770 North Water Street

Milwaukee, Wisconsin 53202
(Name and Address of Agent for Service)

(Notice should be sent to the Agent for Service)

It is proposed that this filing will become effective:

__ immediately upon filing pursuant to paragraph (b)
X on OCTOBER 31, 1999 pursuant to paragraph (b)

60 days after filing pursuant to paragraph (a)(i)
on _________________ pursuant to paragraph (a)(i)

_ 75 days after filing pursuant to paragraph (a)(ii)
- ---
on _________________ pursuant to paragraph (a)(ii) of Rule 485
- ---

If appropriate, check the following box:

This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Copies to: Janet Olsen, Esquire
Bell, Boyd & Lloyd
Three First National Plaza

70 West Madison Street, Suite 3300
Chicago, Illinois 60602-4207

[Marshall Funds logo]

The Marshall Funds Family

Investment Information and Prospectus

Class Y Shares

October 1999

> Marshall Equity Income Fund

> Marshall Large-Cap Growth & Income Fund

> Marshall Mid-Cap Value Fund

> Marshall Mid-Cap Growth Fund

> Marshall Small-Cap Growth Fund

> Marshall International Stock Fund

> Marshall Government Income Fund

> Marshall Intermediate Bond Fund

> Marshall Intermediate Tax-Free Fund

> Marshall Short-Term Income Fund

> Marshall Money Market Fund

[Marshall Funds logo]

The Marshall Funds Story

The Marshall Funds offer a full line of investment choices, from money market
funds to bond funds to domestic and international equity funds. Backed by a long
history of investment management expertise and managed with uncommon discipline,
the Marshall Funds' story is a rich and substantial one. Here's why:

Experience: The Marshall Funds are backed by the solid reputation and recognized
experience of M&I Investment Management Corp., the adviser to the Funds.
Managing more than $10.5 billion for corporations, foundations, endowments and
individuals--including $4.7 billion of the Marshall Funds--M&I Investment
Management Corp. was one of the first bank-sponsored investment advisory firms
in the country, founded over 25 years ago. But M&I's roots go even deeper. In
fact, M&I Bank is the oldest financial institution in Wisconsin, celebrating 150
years in 1997.

Discipline: The Marshall Fund family's hallmark is its highly specialized,
style-specific investment approach. By staying "true to the style" of each
Fund's objectives, our experienced managers don't bend or compromise the rules.
That means each Marshall Fund adheres to the philosophy or "mission" of that
Fund. This positions the Marshall Funds as excellent components in an asset
allocation plan. In other words, if you buy a small-cap growth fund, it will
stay a small-cap growth fund. There will be no surprises.

Capability: More than 50 dedicated, experienced investment professionals back up
the Marshall Funds. With an average of more than 15 years of industry
experience, our portfolio managers have proven their abilities through good
markets and bad. To do their jobs, the entire staff leverages state of the art
technology, including the best in Portfolio Management Systems, Performance
Analysis Services, Trading Systems and Electronic Information Services.

Research: We believe in exhaustive and extensive research to inform investment
selections in the Marshall Funds. That's why M&I portfolio managers and analysts
spend a substantial amount of their time in face-to-face meetings with the top
management of firms they are analyzing, travelling to companies across the
country to evaluate management, operations, strategies and products first-hand.
Wall Street analysts' coverage is studied on a daily basis as well.

Efficiency: The Marshall Funds are managed to help keep costs as low as
possible, and the Funds' expense ratios have dropped below the industry averages
for their Fund peer groups as a result of our continued sales efforts and
effective expense management.

<S> <C> <C> <C>
Not part of the prospectus Not FDIC Insured No Bank Guarantee May Lose Value
</TABLE>

[Logo of Marshall Funds]

Class Y Shares

Table of Contents

Risk/Return Summary 2
.. Equity Funds

Marshall Equity Income Fund 3
Marshall Large-Cap Growth &Income Fund 3
Marshall Mid-Cap Value Fund 4
Marshall Mid-Cap Growth Fund 4
Marshall Small-Cap Growth Fund 5
Marshall International Stock Fund 6
.. Income Funds

Marshall Government Income Fund 7
Marshall Intermediate Bond Fund 7
Marshall Intermediate Tax-Free Fund 8
Marshall Short-Term Income Fund 8
.. Money Market Fund

Marshall Money Market Fund 9
Fees and Expenses of the Funds 10
Main Risks of Investing in the Marshall Funds 11
Securities Descriptions 14
How to Buy Shares 16
How to Redeem and Exchange Shares 19
Account and Share Information 22
Marshall Funds, Inc. Information 25
Financial Highlights 30

Shares of the Marshall Funds, like shares of all mutual funds, are not bank
deposits, federally insured, or guaranteed, and may lose value.

As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.

Prospectus
October 31, 1999

Risk/Return Summary

The Marshall Funds offer investment opportunities to a wide range of investors,
from investors with short-term goals who wish to take little investment risk to
investors with long-term goals willing to bear the risks of the stock market for
potentially greater rewards. The Marshall Funds are managed by the investment
professionals at M&I Investment Management Corp. (Adviser).

Risk Return Summary of Mutual Funds

[graphic]

Equity Funds

Marshall Equity Income Fund
Marshall Large-Cap Growth & Income Fund
Marshall Mid-Cap Value Fund
Marshall Mid-Cap Growth Fund
Marshall Small-Cap Growth Fund
Marshall International Stock Fund

Income Funds

Marshall Government Income Fund
Marshall Intermediate Bond Fund
Marshall Intermediate Tax-Free Fund
Marshall Short-Term Income Fund

Money Market Fund
Marshall Money Market Fund

Principal Risks of the Funds

Stock Foreign Debt Municipal Asset/Mortgage
Market Sector Style Securities Securities Securities Backed

Securities

Risks Risks Risks Risks Risks Risks Risks

Marshall Equity Income Fund X X X

<S> <C> <C> <C> <C> <C> <C> <C>
Marshall Large-Cap

Growth & Income Fund X X X
Marshall Mid-Cap Value Fund X X X
Marshall Mid-Cap Growth Fund X X X
Marshall Small-Cap Growth Fund X X X
Marshall International Stock Fund X X X X
Marshall Government Income Fund X X
Marshall Intermediate Bond Fund X X
Marshall Intermediate Tax-Free X X X

Fund

Marshall Short-Term Income Fund X X
Marshall Money Market Fund X X

</TABLE>

Acomplete description of these risks can be found in the "Main Risks of
Investing in the Marshall Funds" section.

An investment in any of the Marshall Funds is not a deposit of a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

Equity Funds

[graphic]

Marshall Equity Income Fund

[graphic]

Goal: To provide capital appreciation and above-average dividend income.

Strategy: Funds assets are invested in a broadly-diversified portfolio of common
stocks whose market capitalization typically exceeds eight billion dollars. In
order to provide both capital appreciation and income, the Adviser attempts to
structure the portfolio to pursue a yield at least 1% more than the income
earned on the stocks in the Standard & Poor's 500 Index (S&P 500). The Adviser
selects companies that exhibit traditional value characteristics, such as a
price-to-earnings ratio less than the S&P 500, higher-than-average dividend
yields or a lower-than-average price-to-book value.

Annual Total Return (calendar years 1994-1998)

The graphic presentation here displayed consists of a bar chart representing the
annual total returns of Marshall Equity Income Fund (Fund) as of the calendar
year-end for each of five years.

The "y" axis reflects the "% Total Return" beginning with "-5.00%" and
increasing in increments of 5.00% up to 35.00%.

The "x" axis represents calculation periods from the earliest calendar year end
of the Fund's start of business through the calendar year ended December 31,
1998. The light gray shaded chart features five distinct vertical bars, each
shaded in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The calculated
total return percentage for the Fund which appears directly above each
respective bar, for the calendar years 1994 through 1998, are: -1.63%, 34.22%,
21.18%, 27.53%, and 10.48%.

Total Return

<TABLE>

<S> <C> <C>
Best quarter (4Q98) 11.67%
Worst quarter (3Q98) (7.75%)
Most recent quarter (3Q99) (8.61%)

</TABLE>

Average Annual Total Return through 12/31/98*

Since 9/30/93

1 Year 5 Year inception
<S> <C> <C> <C>
Fund 10.48% 17.65% 16.93%
LEIFI 11.78% 16.62% 16.03%
S&P500 28.58% 24.06% 23.32%
</TABLE>

Marshall Large-Cap Growth &Income Fund

[graphic]

Goal: To provide capital appreciation and income.

Strategy: Fund assets are invested in a diversified portfolio of common stocks
of large-sized companies whose market capitalization typically exceeds $10
billion. The Adviser looks for companies that are leaders in their industry and
have records of above-average financial performance and proven superior
management. These types of companies typically offer opportunities for growth
and also provide dividend income.

Annual Total Return (calendar years 1993-1998)

The graphic presentation here displayed consists of a bar chart representing the
annual total returns of Marshall Large-Cap Growth & Income Fund (Fund) as of the
calendar year-end for each of six years.

The "y" axis reflects the "% Total Return" beginning with "-10.00%" and
increasing in increments of 5.00% up to 35.00%.

The "x" axis represents calculation periods from the earliest calendar year end
of the Fund's start of business through the calendar year ended December 31,
1998. The light gray shaded chart features six distinct vertical bars, each
shaded in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The calculated
total return percentage for the Fund which appears directly above each
respective bar, for the calendar years 1993 through 1998, are: 3.35%, -5.79%,
33.20%, 14.66%, 26.24% and 26.18%.

Total Return

<TABLE>

<S> <C> <C>
Best quarter (4Q98) 22.67%
Worst quarter (3Q98) (10.08%)
Most recent quarter (3Q99) (6.50%)

</TABLE>

Average Annual Total Return through 12/31/98*

Since 11/20/92

1 Year 5 Year inception
<S> <C> <C> <C>
Fund 26.18% 18.04% 15.43%
LGIFI 13.58% 17.83% 17.33%
S&P500 28.58% 24.06% 21.65%
</TABLE>

*The table shows each Fund's average annual total returns compared to a
broad-based market index over a period of time. In addition, the performance of
Equity Income Fund is compared to the Lipper Equity Income Funds Index (LEIFI),
and the performance of Large-Cap Growth & Income Fund is compared to the Lipper
Growth & Income Funds Index (LGIFI), which are indices of funds with similar
investment objectives.

As with all mutual funds, past performance does not necessarily predict future
performance. Shares of the Equity Income Fund and Large-Cap Growth & Income Fund
offered by this prospectus are not sold subject to a sales charge (load). The
total returns displayed are based on net asset value.

Marshall Mid-Cap Value Fund

[graphic]

Goal: To provide capital appreciation.

Strategy: Fund assets are invested in a diversified portfolio of common stocks
of companies similar in size to those within the S&P Mid-Cap 400 Index (S&P
400). As of August 31, 1999, the S&P 400's range was $243 million to $11.5
billion, but frequently changes as the market value of the stocks that comprise
the S&P 400 changes or as stocks are added or removed from the S&P 400. The
Adviser selects companies that exhibit traditional value characteristics, such
as a price-to-earnings ratio less than the S&P 500, higher-than-average dividend
yields or a lower-than-average price-to-book value. In addition, these companies
may have under-appreciated assets, or be involved in company turnarounds or
corporate restructurings.

Annual Total Return (calendar years 1994-1998)

The graphic presentation here displayed consists of a bar chart representing the
annual total returns of Marshall Mid-Cap Value Fund (Fund) as of the calendar
year-end for each of five years.

The "y" axis reflects the "% Total Return" beginning with "0.00%" and increasing
in increments of 5.00% up to 30.00%.

Total Return

<TABLE>

<S> <C> <C>
Best quarter (4Q98) 12.36%
Worst quarter (3Q98) (13.20%)
Most recent quarter (3Q99) (8.96%)

</TABLE>

Average Annual Total Return through 12/31/98*

Since 9/30/93

1 Year 5 Year inception
<S> <C> <C> <C>
Fund 5.15% 13.59% 13.37%
LMCVFI (1.72%) 12.03% 11.98%
S&P 400 19.09% 18.84% 18.45%
</TABLE>

Marshall Mid-Cap Growth Fund

[graphic]

Goal: To provide capital appreciation.

Strategy: Fund assets are invested in a diversified portfolio of common stocks
of companies similar in size to those within the S&P Mid-Cap 400 Index (S&P
400). As of August 31, 1999, the S&P 400's range was $243 million to $11.5
billion, but frequently changes as the market value of the stocks that comprise
the S&P 400 changes or as stocks are added or removed from the S&P 400. The
Adviser selects stocks of companies with growth characteristics, such as
above-average earnings growth potential or where significant changes are taking
place, such as new products, services, or methods of distribution, or overall
business restructuring.

Annual Total Return (calendar years 1994-1998)

The graphic presentation here displayed consists of a bar chart representing the
annual total returns of Marshall Mid-Cap Growth Fund (Fund) as of the calendar
year-end for each of five years.

The "y" axis reflects the "% Total Return" beginning with "-10.00%" and
increasing in increments of 5.00% up to 35.00%.

Total Return

Best quarter (4Q98) 30.61%
Worst quarter (3Q98) (22.90%)
Most recent quarter (3Q99) (1.12%)
</TABLE>

Average Annual Total Return through 12/31/98*

Since 9/30/93

1 Year 5 Year inception
<S> <C> <C> <C>
Fund 15.72% 16.67% 16.17%
LMCGFI 12.79% 14.68% 14.50%
S&P 400 19.09% 18.84% 18.45%
</TABLE>

*The table shows each Fund's average annual total returns compared to a
broad-based market index over a period of time. In addition, the performance of
Mid- Cap Value Fund is compared to the Lipper Mid-Cap Value Funds Index (LMCVFI)
and Mid-Cap Growth Fund is compared to the Lipper Mid-Cap Growth Funds Index
(LMCGFI), which are indices of funds with similar investment objectives.

As with all mutual funds, past performance does not necessarily predict future
performance. Shares of the Mid-Cap Value Fund and Mid-Cap Growth Fund offered by
this prospectus are not sold subject to a sales charge (load). The total returns
displayed are based on net asset value.

Marshall Small-Cap Growth Fund/1/

[graphic]

Goal: To provide capital appreciation.

Strategy: Fund assets are invested in a diversified portfolio of common stocks
of small-sized companies similar in size to those within the Russell 2000 Index
(Russell 2000). As of August 31, 1999, the Russell 2000's range was $32 million
to $3.28 billion, but frequently changes as the market value of the stocks that
comprise the Russell 2000 changes or as stocks are added or removed from the
Russell 2000. The Adviser selects stocks of companies with above-average
earnings growth potential or where significant changes are taking place, such as
new products, services or methods of distribution, as well as overall business
restructuring.

Annual Total Return (calendar years 1996-1998)

The graphic presentation here displayed consists of a bar chart representing the
annual total returns of Marshall Small-Cap Growth Fund (Fund) as of the calendar
year-end for each of three years.

The "y" axis reflects the "% Total Return" beginning with "0.00%" and increasing
in increments of 10.00% up to 60.00%.

The "x" axis represents calculation periods from the earliest calendar year end
of the Fund's start of business through the calendar year ended December 31,
1998. The light gray shaded chart features three distinct vertical bars, each
shaded in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The calculated
total return percentage for the Fund which appears directly above each
respective bar, for the calendar years 1996 through 1998, are: 50.39%, 23.18%,
and 3.41%.

Total Return

<TABLE>

<S> <C> <C>
Best quarter (4Q98) 30.28%
Worst quarter (3Q98) (27.56%)
Most recent quarter (3Q99) 0.47%

</TABLE>

Average Annual Total Return through 12/31/98*

Since 11/1/95

1 Year inception

<S> <C> <C>
Fund 3.41% 29.65%
LSCFI (0.85%) 10.30%
Russell 2000 (2.78%) 11.65%
</TABLE>

*The table shows the Fund's average annual total returns over a period of time
relative to the Russell 2000, a broad-based market index and the Lipper Small
Cap Funds Index (LSCFI), which is an index of funds with similar investment
objectives.

As with all mutual funds, past performance does not necessarily predict future
performance. Shares of the Small-Cap Growth Fund offered by this prospectus are
not sold subject to a sales charge (load). The total returns displayed are based
on net asset value.

Marshall International Stock Fund

[graphic]

Goal: To provide capital appreciation.

Strategy: Fund assets are invested in common stocks of companies located outside
the United States. BPI Global Asset Management LLP (BPI) is the sub-adviser of
the Fund. BPI uses a "bottom-up" approach to international investing within
overall portfolio management guidelines. The stock selection process begins with
identifying companies of any size within industry groups that have historically
been successful and have a competitive advantage as evidenced by above-average
profit margins, high returns on equity, low leverage and adequate cash flow. The
selection process seeks to identify quality companies with attractive returns on
equity, shareholder-oriented management, and a strong capital structure. Stocks
are selected and retained when they are attractively valued within their
industry by using traditional valuation measures such as price-to-book and
price-to-earnings ratios, resulting in an approach described as "quality
companies at a reasonable price." The portfolio management team closely monitors
the Fund's industry weightings and country weightings in relation to its
performance benchmark.

Annual Total Return (calendar years 1995-1998)

The graphic presentation here displayed consists of a bar chart representing the
annual total returns of Marshall International Stock Fund (Fund) as of the
calendar year-end for each of four years.

The "y" axis reflects the "% Total Return" beginning with "0.00%" and increasing
in increments of 5.00% up to 20.00%.

The "x" axis represents calculation periods from the earliest calendar year end
of the Fund's start of business through the calendar year ended December 31,
1998. The light gray shaded chart features four distinct vertical bars, each
shaded in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The calculated
total return percentage for the Fund which appears directly above each
respective bar, for the calendar years 1995 through 1998, are: 11.55%, 19.65%,
10.86%, and 3.26%.

Total Return

<TABLE>

<S> <C> <C>
Best quarter (4Q98) 16.30%
Worst quarter (3Q98) (19.06%)
Most recent quarter (3Q99) 4.09%

- -------------------------------------------------
</TABLE>

Average Annual Total Return through 12/31/98*

Since 9/1/94

- -------------------------------------------------------------------------------
1 Year inception

- -------------------------------------------------------------------------------
<S> <C> <C>
Fund 3.26% 8.65%
- -------------------------------------------------------------------------------
LIFI 12.66% 8.41%
- -------------------------------------------------------------------------------
EAFE Index 18.23% 6.09%
- -------------------------------------------------------------------------------
</TABLE>

*The table shows the Fund's average annual total returns over a period of time.
In addition, the performance of the International Stock Fund is compared to the
Morgan Stanley Capital International Europe, Australia, Far East Index (EAFE
Index), which is an index of international stocks, and the Lipper International
Funds Index (LIFI), which is an index of funds with similar investment
objectives.

As with all mutual funds, past performance does not necessarily predict future
performance. Shares of the International Stock Fund offered by this prospectus
are not sold subject to a sales charge (load). The total returns displayed are
based on net asset value.

Income Funds

[graphic]

Marshall Government Income Fund

[graphic]

Goal: To provide current income.

Strategy: Fund assets are invested in securities issued by the U.S. government
and its agencies and instrumentalities, particularly mortgage-backed securities.
The Fund will also invest in dollar roll transactions. The Adviser considers
macroeconomic conditions and uses credit and market analysis in developing the
overall portfolio strategy. Current and historical interest rate relationships
are used to evaluate market sectors and individual securities. The Fund
generally maintains an average dollar-weighted maturity of four to 12 years.

Annual Total Return (calendar years 1993-1998)

The graphic presentation here displayed consists of a bar chart representing the
annual total returns of Marshall Government Income Fund (Fund) as of the
calendar year-end for each of six years.

The "y" axis reflects the "% Total Return" beginning with "-5.00%" and
increasing in increments of 5.00% up to 20.00%.

The "x" axis represents calculation periods from the earliest calendar year end
of the Fund's start of business through the calendar year ended December 31,
1998. The light gray shaded chart features six distinct vertical bars, each
shaded in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The calculated
total return percentage for the Fund which appears directly above each
respective bar, for the calendar years 1993 through 1998, are: 5.99%, -2.74%,
16.97%, 3.04%, 8.43%, and 6.51%.

Total Return

<TABLE>

<S> <C> <C>
Best quarter (2Q95) 4.92%
Worst quarter (1Q94) (2.13%)
Most recent quarter (3Q99) 0.27%

</TABLE>

Average Annual Total Return through 12/31/98*

Since 12/13/92

1 Year 5 Year inception
<S> <C> <C> <C>
Fund 6.51% 6.24% 6.24%
LMI 6.95% 7.23% 7.29%
LUSMI 6.13% 5.70% 6.17%
</TABLE>

Marshall Intermediate Bond Fund

[graphic]

Goal: To maximize total return consistent with current income.

Strategy: Fund assets are invested in intermediate-term investment grade bonds
and notes, including corporate, asset-backed, mortgage-backed and U.S.
government securities. The Adviser's strategy to achieve total return is to
adjust the Fund's weightings in these sectors as it deems appropriate. The
Adviser uses macroeconomic, credit and market analysis to select portfolio
securities. The Fund maintains an average dollar-weighted maturity of three to
10 years.

Annual Total Return (calendar years 1993-1998)

The graphic presentation here displayed consists of a bar chart representing the
annual total returns of Marshall Intermediate Bond Fund (Fund) as of the
calendar year-end for each of six years.

The "y" axis reflects the "% Total Return" beginning with "-5.00%" and
increasing in increments of 5.00% up to 20.00%.

The "x" axis represents calculation periods from the earliest calendar year end
of the Fund's start of business through the calendar year ended December 31,
1998. The light gray shaded chart features six distinct vertical bars, each
shaded in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The calculated
total return percentage for the Fund which appears directly above each
respective bar, for the calendar years 1993 through 1998, are: 6.88%, -3.06%,
15.46%, 2.41%, 7.18%, and 6.33%.

Total Return

<TABLE>

<S> <C> <C>
Best quarter (2Q95) 4.68%
Worst quarter (1Q96) (2.03%)
Most recent quarter (3Q99) 0.72%

</TABLE>

Average Annual Total Return through 12/31/98**

Since 11/23/92

1 Year 5 Year inception
<S> <C> <C> <C>
Fund 6.33% 5.49% 5.78%
LGCI 8.44% 6.66% 7.10%
LSIBF 6.99% 5.96% 6.23%
</TABLE>

*The table shows the Fund's average annual total returns over a period of years
relative to the Lehman Brothers Mortgage-Backed Securities Index (LMI), a
broad-based market index and the Lipper U.S. Mortgage Funds Index (LUSMI), an
index of funds with similar investment objectives.

**The table shows the Fund's average annual total returns over a period of time
relative to the Lehman Brothers Government/Corporate Intermediate Index (LGCI),
a broad-based market index, and the Lipper Short/Intermediate Investment Grade
Bond Funds Index (LSIBF), an average of funds with similar investment
objectives.

As with all mutual funds, past performance does not necessarily predict future
performance. Shares of the Government Income Fund and Intermediate Bond Fund
offered by this prospectus are not sold subject to a sales charge (load). The
total returns displayed are based on net asset value.

Marshall Intermediate Tax-Free Fund

[graphic]

Goal: To provide a high level of current income that is exempt from federal
income tax and is consistent with preservation of capital.

Strategy: Fund assets are invested in investment-grade municipal securities,
which includes debt obligations of states, territories and possessions of the
U.S. and political subdivisions and financing authorities of these entities that
provide income exempt from federal income tax (including the federal alternative
minimum tax). The Adviser selects Fund investments after assessing factors such
as the cyclical trend in interest rates, the shape of the municipal yield curve,
tax rates, sector valuation and municipal bond supply factors. The Fund will
maintain an average dollar-weighted portfolio maturity of three to 10 years.

Annual Total Return (calendar years 1995-1998)

The graphic presentation here displayed consists of a bar chart representing the
annual total returns of Marshall Intermediate Tax-Free Fund (Fund) as of the
calendar year-end for each of four years.

The "y" axis reflects the "% Total Return" beginning with "0.00%" and increasing
in increments of 2.00% up to 12.00%.

The "x" axis represents calculation periods from the earliest calendar year end
of the Fund's start of business through the calendar year ended December 31,
1998. The light gray shaded chart features four distinct vertical bars, each
shaded in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The calculated
total return percentage for the Fund which appears directly above each
respective bar, for the calendar years 1995 through 1998, are: 11.54%, 3.84%,
6.79%, and 5.65%.

Total Return

<TABLE>

<S> <C> <C>
Best quarter (1Q95) 4.31%
Worst quarter (1Q96) (0.63%)
Most recent quarter (3Q99) 0.06%

</TABLE>

Average Annual Total Return through 12/31/98*

Since 2/2/94
1 Year inception

Marshall Short-Term Income Fund

[graphic]

Goal: To maximize total return consistent with current income.

Strategy: Fund assets are invested in short- to intermediate-term investment
grade bonds and notes, including corporate, asset-backed, mortgage-backed and
U.S. government securities. The Adviser changes the Fund's weightings in these
sectors as it deems appropriate and uses macroeconomic, credit and market
analysis to select portfolio securities. The Fund maintains an average dollar-
weighted maturity of six months to three years.

Annual Total Return (calendar years 1993-1998)

The graphic presentation here displayed consists of a bar chart representing the
annual total returns of Marshall Short-Term Income Fund (Fund) as of the
calendar year-end for each of six years.

The "y" axis reflects the "% Total Return" beginning with "0.00%" and increasing
in increments of 2.00% up to 10.00%.

The "x" axis represents calculation periods from the earliest calendar year end
of the Fund's start of business through the calendar year ended December 31,
1998. The light gray shaded chart features six distinct vertical bars, each
shaded in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The calculated
total return percentage for the Fund which appears directly above each
respective bar, for the calendar years 1993 through 1998, are: 3.70%, 1.83%,
8.97%, 4.97%, 6.40%, and 4.91%.

Total Return

<TABLE>

Best quarter (2Q95) 2.48%
Worst quarter (1Q94) 0.17%
Most recent quarter (3Q99) 1.10%
</TABLE>

Average Annual Total Return through 12/31/98**

Since 11/1/92

1 Year 5 Year inception
<S> <C> <C> <C>
Fund 4.91% 5.39% 5.05%
LSTIBI 5.73% 5.43% 5.43%
ML13 7.01% 6.04% 5.93%
DMFA 5.04% 4.86% 4.45%
</TABLE>

*The table shows the Fund's average annual total returns over a period of time
relative to the Lehman Brothers 7-Year General Obligations Bond Index (LB7GOBI),
a broad-based market index and the Lipper Intermediate Municipal Funds Index
(LIMI), an average of funds with similar investment objectives.

**The table shows the Fund's average annual total returns over a period of time
relative to the Lipper Short-Term Investment Grade Bond Index (LSTIBI), an
average of funds with similar investment objectives, the Merrill Lynch 1-3 Year
U.S. Government/Corporate Index (ML13), a broad-based market index, and
IBC/Donoghue's Taxable Money Fund Average (DMFA), an average of money funds. The
investment adviser has elected to change the benchmark of the Fund from the DMFA
to the ML13. The ML13 is more representative of the securities typically held by
the Fund.

As with all mutual funds, past performance does not necessarily predict future
performance. Shares of the Intermediate Tax-Free Fund and Short-Term Income Fund
offered by this prospectus are not sold subject to a sales charge (load). The
total returns displayed are based on net asset value.

[graphic]

Money Market Fund

Marshall Money Market Fund

[graphic]

Goal: To provide current income consistent with stability of principal.

Strategy: Fund assets are invested in high quality, short-term money market
instruments. In order to produce income which minimizes volatility, the Adviser
uses a "bottom-up" approach, which evaluates debt securities of individual
companies against the context of broader market factors such as the cyclical
trend in interest rates, the shape of the yield curve and debt security supply
factors.

Although the Fund seeks to preserve the value of your investment at $1 per
share, it is possible to lose money by investing in the Fund.

Annual Total Return (calendar years 1993-1998)

The graphic presentation here displayed consists of a bar chart representing the
annual total returns of Marshall Money Market Fund (Fund) as of the calendar
year-end for each of six years.

The "y" axis reflects the "% Total Return" beginning with "0.00%" and increasing
in increments of 1.00% up to 6.00%.

The "x" axis represents calculation periods from the earliest calendar year end
of the Fund's start of business through the calendar year ended December 31,
1998. The light gray shaded chart features six distinct vertical bars, each
shaded in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The calculated
total return percentage for the Fund which appears directly above each
respective bar, for the calendar years 1993 through 1998, are: 2.99%, 4.06%,
5.78%, 5.27%, 5.44%, and 5.42%.

Total Return

<TABLE>

<S> <C> <C>
Best quarter (2Q95) 1.45%
Worst quarter (2Q93) 0.72%
Most recent quarter (3Q99) 1.23%

</TABLE>

7-Day Net Yield

<S> <C>
7-Day Net Yield (as of 12/31/98)* 5.03%
</TABLE>

Average Annual Total Return through 12/31/98**

Since 11/23/92

1 Year 5 Year inception
<S> <C> <C> <C>
Fund 5.42% 5.19% 4.80%
DMFA 5.04% 4.86% 4.48%
</TABLE>

*Investors may call the Fund to learn the current 7-Day Net Yield at 1-800-236-
FUND (3863). **The table shows the Fund's average annual total returns over a
period of time relative to the IBC/Donoghue's Money Fund Average (DMFA), an
average of money

funds.

As with all mutual funds, past performance does not necessarily predict future
performance. Shares of the Money Market Fund offered by this prospectus are not
sold subject to a sales charge (load). The total returns displayed are based on
net asset value.

[graphic]

Fees and Expenses of the Funds

This table describes the fees and expenses that you may pay if you buy and hold
Class Y Shares.

Equity Large-Cap Mid-Cap Mid-Cap Small-Cap
Income Growth &Income Value Growth Growth

Fund Fund Fund Fund Fund

<S> <C> <C> <C> <C> <C>
Shareholder Fees (fees paid directly from your
investment)

None None None None None

Annual Fund Operating Expenses (expenses
deducted and expressed as a percentage of the
Fund's net assets)

Management Fee 0.75% 0.75% 0.75% 0.75% 1.00%
Shareholder Servicing Fee 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expense 0.17% 0.20% 0.25% 0.21% 0.34%
Total Annual Fund Operating Expenses(1) 1.17% 1.20% 1.25% 1.21% 1.59%
</TABLE>

International Government Intermediate Intermediate
Stock Income Bond Tax-Free
Fund Fund Fund Fund

<S> <C> <C> <C> <C>
Shareholder Fees (fees paid directly from your
investment)

None None None None

Annual Fund Operating Expenses (expenses
deducted and expressed as a percentage of the
Fund's net assets)

Management Fee 1.00%(2) 0.75%(2) 0.60%(2) 0.60%(2)
Shareholder Servicing Fee 0.25% 0.25%(3) 0.25%(3) 0.25%(3)
Other Expense 0.26% 0.19% 0.14% 0.24%
Total Annual Fund Operating Expenses(1) 1.51% 1.19% 0.99% 1.09%
</TABLE>

Short-Term Money
Income Market

Fund Fund

<S> <C> <C>
Shareholder Fees (fees paid directly from your

investment)

None None

Annual Fund Operating Expenses (expenses
deducted and expressed as a percentage of the
Fund's net assets)

Management Fee 0.60%(2) 0.50%(2)
Shareholder Servicing Fee 0.25%(3) 0.02%
Other Expense 0.22% 0.14%
Total Annual Fund Operating Expenses(1) 1.07% 0.66%
</TABLE>

(1) Although not contractually obligated to do so, the adviser and other service
providers waived certain amounts. The net expenses the Funds actually paid for
the fiscal period ended August 31, 1999 are shown below.

Total Annual Fund Operating Expenses

<S> <C> <C> <C> <C> <C>
(after waivers) 1.17% 1.20% 1.25% 1.21% 1.59%

</TABLE>

Total Annual Fund Operating Expenses

<S> <C> <C> <C> <C> <C> <C>
(after waivers) 1.50% 0.86% 0.71% 0.61% 0.51% 0.41%
</TABLE>

(2) The adviser voluntarily waived a portion of the management fee. The adviser
may terminate this voluntary waiver at any time. The management fees paid by the
International Stock Fund, Government Income Fund, Intermediate Bond Fund,
Intermediate Tax-Free Fund, Short-Term Income Fund and Money Market Fund (after
the voluntary waivers) were 0.99%, 0.65%, 0.55%, 0.35%, 0.27% and 0.25% for the
fiscal year ended August 31, 1999.

(3) The Shareholder Servicing Fee for Government Income Fund, Intermediate Bond
Fund, Intermediate Tax-Free Fund and Short-Term Income Fund has been voluntarily
reduced. The shareholder servicing agent may terminate this voluntary reduction
at any time. The Shareholder Servicing Fee (after the voluntary reduction) was
0.02% for Government Income Fund, Intermediate Bond Fund, Intermediate Tax-Free
Fund and Short-Term Income Fund for the fiscal year ended August 31, 1999.

The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of the Funds will bear either directly or
indirectly. Marshall & Ilsley Trust Company and its affiliates receive advisory,
custodial, shareholder services and administrative fees for the services they
provide to shareholders. For more complete descriptions of the various costs and
expenses, see "Marshall Funds, Inc. Information." Wire-transferred redemptions
may be subject to an additional fee.

Example

This example is intended to help you compare the cost of investing in the
Marshall Funds with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in each of the Funds for the time
periods indicated and then redeem all of your Shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that each of the Funds' operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be: <TABLE> <CAPTION>

Equity Large-Cap Mid-Cap Mid-Cap Small-Cap
Income Growth &Income Value Growth Growth

Fund Fund Fund Fund Fund

<S> <C> <C> <C> <C> <C>
1 Year $ 119 $ 122 $ 127 $ 123 $ 162
3 Years $ 372 $ 381 $ 397 $ 384 $ 502
5 Years $ 644 $ 660 $ 686 $ 665 $ 866
10 Years $1,420 $1,455 $1,511 $1,466 $1,889
</TABLE>

International Government Intermediate Intermediate Short-Term Money
Stock Income Bond Tax-Free Income Market
Fund Fund Fund Fund Fund Fund

<S> <C> <C> <C> <C> <C> <C>
1 Year $ 154 $ 121 $ 101 $ 111 $ 109 $ 67
3 Years $ 477 $ 378 $ 315 $ 347 $ 340 $211
5 Years $ 824 $ 654 $ 547 $ 601 $ 590 $368
10 Years $1,802 $1,443 $1,213 $1,329 $1,306 $822
</TABLE>

The above example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.

Main Risks of Investing in the Marshall Funds

[graphic]

Stock Market Risks. The EQUITY FUNDS are subject to fluctuations in the stock
markets, which have periods of increasing and decreasing values. Stocks are more
volatile than debt securities. Greater volatility increases risk, but offers the
potential for greater reward.

[graphic]

What About Portfolio Turnover?

Although the Funds do not intend to invest for the purpose of seeking short-term
profits, securities will be sold without regard to the length of time they have
been held when the Funds' Adviser or Sub-adviser believes it is appropriate to
do so in light of a Fund's investment goal. A higher portfolio turnover rate
increases transaction expenses that must be borne directly by a Fund (and thus,
indirectly by its shareholders), and affect Fund performance. In addition, a
high rate of portfolio turnover may result in the realization of larger amounts
of capital gains which, when distributed to shareholders, are taxable to them.

[graphic]

Stock market risk is also related to the size of the company issuing stock.
Companies may be categorized as having a small, medium or large capitalization
(market value). The potential risks are higher with small- and medium-
capitalization companies and lower with large-capitalization companies.
Therefore, you should expect that investments in the SMALL-CAP GROWTH FUND, the
MID-CAP GROWTH FUND and the MID-CAP VALUE FUND will be more volatile than broad
stock market indices such as the S&P 500 or funds that invest in large-
capitalization companies, such as the LARGE-CAP GROWTH & INCOME FUND and the
EQUITY INCOME FUND.

Style Risks. Due to their relatively high valuations, growth stocks are
typically more volatile than value stocks. For instance, the price of a growth
stock may experience a larger decline on a forecast of lower earnings, a
negative fundamental development, or an adverse market development. Further,
growth stocks may not pay dividends or may pay lower dividends than value
stocks. This means they depend more on price changes for returns and may be more
adversely affected in a down market compared to value stocks that pay higher
dividends.

Due to their relatively low valuations, value stocks are typically less volatile
than growth stocks. For instance, the price of a value stock may experience a
smaller increase on a forecast of higher earnings, a positive fundamental
development, or positive market development. Further, value stocks tend to have
higher dividends than growth stocks. This means they depend less on price
changes for returns and may lag behind growth stocks in an up market.

Foreign Securities Risks. Foreign securities pose additional risks over U.S.-
based securities for a number of reasons. Because the INTERNATIONAL STOCK FUND
invests primarily in foreign securities, you should expect that these factors
may adversely affect the value of an investment in the Fund. Foreign economic,
governmental and political systems may be less favorable than those of the
United States. Foreign governments may exercise greater control over their
economies, industries and citizens' rights. Specific risk factors related to
foreign securities include: inflation, taxation policies, currency exchange
rates and regulations and accounting standards. The INTERNATIONAL STOCK FUND may
incur higher costs and expenses when making foreign investments, which will
affect the Fund's total return.

Foreign securities may be denominated in foreign currencies. Therefore, the
value of a Fund's assets and income in U.S. dollars may be affected by changes
in exchange rates and regulations, since exchange rates for foreign currencies
change daily. The combination of currency risk and market risk tends to make
securities traded in foreign markets more volatile than securities traded
exclusively in the United States. Although the INTERNATIONAL STOCK FUND values
its assets daily in U.S. dollars, it will not convert its holdings of foreign
currencies to U.S. dollars daily. Therefore, the Fund may be exposed to currency
risks over an extended period of time.

Sector Risks. Companies with similar characteristics may be grouped together in
broad categories called sectors. Sector risk is the possibility that a certain
sector may underperform other sectors or the market as a whole. As the Adviser
allocates more of a Fund's portfolio holdings to a particular sector, a Fund's
performance will be more susceptible to any economic, business or other
developments which generally affect that sector.

Euro Risks. The INTERNATIONAL STOCK FUND makes significant investments in
securities denominated in the Euro, the new single currency of the European
Monetary Union (EMU). Therefore, the exchange rate between the Euro and the U.S.
dollar will have a significant impact on the value of the INTERNATIONAL STOCK
FUND'S investments.

[graphic]

What About Bond Ratings?

When the Funds invest in bonds and other debt securities and/or convertible
securities, some will be rated in the lowest investment grade category (e.g.,
BBB or Baa). Bonds rated BBB by Standard and Poor's or Baa by Moody's Investors
Services, Inc. have speculative characteristics. Unrated bonds will be
determined by the Adviser to be of like quality and may have greater risk (but a
potentially higher yield) than comparable rated bonds. If a bond is downgraded,
the Adviser will re-evaluate the bond and determine whether or not the bond is
an acceptable investment.

With the advent of the Euro, the participating countries in the EMU can no
longer follow independent monetary policies. This may limit these countries'
ability to respond to economic downturns or political upheavals.

Debt Securities Risks. Risks of debt securities will affect the INCOME FUNDS.

[graphic]

Prices of fixed-rate debt securities generally move in the opposite
direction of interest rates. The interest payments on fixed-rate debt
securities do not change when interest rates change. Therefore, since the
price of these securities can be expected to decrease when interest rates
increase, you can expect that the value of investments in a Fund may go
down. Although the Adviser attempts to anticipate interest rate movements,
there is no guarantee that it will be able to do so.

In addition, longer-term debt securities will experience greater price
volatility than debt securities with shorter maturities. You can expect
the net asset values of a Fund to fluctuate accordingly.

The credit quality of a debt security is based upon the issuer's ability
to repay the security. If payments on a debt security are not paid when
due, that may cause the net asset value of a Fund holding the security to
go down.

Debt securities may also be subject to call risk. If interest rates
decline, an issuer may repay (or "call") a debt security held by a Fund
prior to its maturity. If this occurs, the Adviser may have to reinvest
the proceeds in debt securities paying lower interest rates. If this
happens, a Fund may have a lower yield.

Municipal Securities Risks. An investment in the INTERMEDIATE TAX-FREE FUND will
be affected by municipal securities risks. Local political and economic
factors may adversely affect the value and liquidity of municipal
securities held by a Fund. The value of municipal securities also may be
affected more by supply and demand factors or the creditworthiness of the
issuer than by market interest rates. Repayment of municipal securities
depends on the ability of the issuer or project backing such securities to
generate taxes or revenues. There is a risk that the interest on an
otherwise tax-exempt municipal security may be subject to federal income
tax.

Asset-Backed/Mortgage-Backed Securities Risks. Asset-backed and mortgage-backed
securities are subject to risks of prepayment. This is more likely to
occur when interest rates fall because many borrowers refinance mortgages
to take advantage of more favorable rates. Prepayments on mortgage-backed
securities are also affected by other factors, such as the volume of home
sales. A Fund's yield will be reduced if cash from prepaid securities are
reinvested in securities with lower interest rates. The risk of prepayment
may also decrease the value of mortgage-backed securities.

Asset-backed securities may have a higher level of default and recovery
risk than mortgage-backed securities. However, both of these types of
securities may decline in value because of mortgage foreclosures or
defaults on the underlying obligations.

[graphic]

Securities Descriptions

[graphic]

Equity Securities. Equity securities represent a share of an issuer's earnings
and assets, after the issuer pays its liabilities. The EQUITYFUNDS cannot
predict the income they will receive from equity securities because issuers
generally have discretion as to the payment of any dividends or
distributions. However, equity securities offer greater potential for
appreciation than many other types of securities, because their value
increases directly with the value of the issuer's business.

Common Stocks. Common stocks are the most prevalent type of equity security.
Common stocks receive the issuer's earnings after the issuer pays its
creditors and any preferred stockholders. As a result, changes in an
issuer's earnings directly influence the value of its common stock.

[graphic]

FixedIncome Securities. Fixed income securities pay interest, dividends or
distributions at a specified rate. The rate may be a fixed percentage of
the principal or adjusted periodically. In addition, the issuer of a fixed
income security must repay the principal amount of the security, normally
within a specified time. Fixed income securities provide more regular
income than equity securities. However, the returns on fixed income
securities are limited and normally do not increase with the issuer's
earnings. This limits the potential appreciation of fixed income securities
as compared to equity securities.

A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease
depending upon whether it costs less (a discount) or more (a premium) than
the principal amount. If the issuer may redeem the security before its
scheduled maturity, the price and yield on a discount or premium security
may change based upon the probability of an early redemption. Securities
with higher risks generally have higher yields.

The following describes the types of fixed income securities in which the
Funds invest.

Treasury Securities. Treasury securities are direct obligations of the federal
government of the United States. Treasury securities are generally regarded
as having the lowest credit risks.

Agency Securities. Agency securities are issued or guaranteed by a federal
agency or other government sponsored entity acting under federal authority
(a GSE). The United States supports some GSEs with its full faith and
credit. Other GSEs receive support through federal subsidies, loans or
other benefits. A few GSEs have no explicit financial support, but are
regarded as having implied support because the federal government sponsors
their activities. Agency securities are generally regarded as having low
credit risks, but not as low as Treasury securities.

Corporate Debt Securities. Corporate debt securities are fixed income securities
issued by businesses. Notes, bonds, debentures and commercial paper are the
most prevalent types of corporate debt securities. The credit risks of
corporate debt securities vary widely among issuers.

Commercial Paper. Commercial paper is an issuer's obligation with a maturity of
less than nine months. Companies typically issue commercial paper to pay
for current expenditures. Most issuers constantly reissue their commercial
paper and use the proceeds (or bank loans) to repay maturing paper. If the
issuer cannot continue to obtain liquidity in this fashion, its commercial
paper may default. The short maturity of commercial paper reduces both the
market and credit risks as compared to other debt securities of the same
issuer.

Demand Instruments. Demand instruments are corporate debt securities that the
issuer must repay upon demand. Other demand instruments require a third
party, such as a dealer or bank, to repurchase the security for its face
value upon demand. The Funds treat demand instruments as short-term
securities, even though their stated maturity may extend beyond one year.

Municipal Securities. Municipal securities are issued by states, counties,
cities and other political subdivisions and authorities. Although many
municipal securities are exempt from federal income tax, the Funds may
invest in taxable municipal securities.

Mortgage Backed Securities. Mortgage backed securities represent interests in
pools of mortgages. The mortgages that comprise a pool normally have
similar interest rates, maturities and other terms.

Mortgages may have fixed or adjustable interest rates. Interests in pools
of adjustable rate mortgages are known as ARMs.

Mortgage backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage backed securities are
pass-through certificates. An issuer of pass-through certificates gathers
monthly payments from an underlying pool of mortgages. Then, the issuer
deducts its fees and expenses and passes the balance of the payments onto
the certificate holders once a month. Holders of pass-through certificates
receive a pro rata share of all payments and prepayments from the
underlying mortgages. As a result, the holders assume all the prepayment
risks of the underlying mortgages.

Dollar Rolls. Dollar rolls are transactions where a fund sells mortgage backed
securities with a commitment to buy similar, but not identical, mortgage
backed securities on a future date at a lower price. Normally, one or both
securities involved are "to be announced" mortgage backed securities or
"TBAs." Dollar rolls are subject to interest rate risks and credit risks.

These transactions may create leverage risks.

AssetBacked Securities. Asset backed securities are payable from pools of
obligations other than mortgages. Most asset backed securities involve
consumer or commercial debts with maturities of less than ten years.
However, almost any type of fixed income assets (including other fixed
income securities) may be used to create an asset backed security. Asset
backed securities may take the form of commercial paper, notes, or pass
through certificates. Asset backed securities have prepayment risks. Like
CMOs, asset backed securities may be structured like Floaters, Inverse
Floaters, IOs and POs.

Bank Instruments. Bank instruments are unsecured interest bearing deposits with
banks. Bank instruments include bank accounts, time deposits, certificates
of deposit and banker's acceptances. Yankee instruments are denominated in
U.S. dollars and issued by U.S. branches of foreign banks. Eurodollar
instruments are denominated in U.S. dollars and issued by non-U.S. branches
of U.S. or foreign banks.

Insurance Contracts. Insurance contracts include guaranteed investment
contracts, funding agreements and annuities.

Securities Lending. The Funds may lend portfolio securities to borrowers that
the Adviser deems creditworthy. In return, a Fund receives cash or liquid
securities from the borrower as collateral. The borrower must furnish
additional collateral if the market value of the loaned securities
increases. Also, the borrower must pay the Fund the equivalent of any
dividends or interest received on the loaned securities.

The Funds will reinvest cash collateral in securities that qualify as an
acceptable investment for the Fund. However, the Fund must pay interest to
the borrower for the use of cash collateral.

Loans are subject to termination at the option of the Fund or the borrower.
A Fund will not have the right to vote on securities while they are on
loan, but it will terminate a loan in anticipation of any important vote.
The Fund may pay administrative and custodial fees in connection with a
loan and may pay a negotiated portion of the interest earned on the cash
collateral to a securities lending agent or broker.

Securities lending activities are subject to interest rate risks and credit
risks.

Temporary Defensive Investments. To minimize potential losses and maintain
liquidity to meet shareholder redemptions during adverse market conditions,
each of the Marshall Funds (except MONEY MARKET FUND) may temporarily
depart from its principal investment strategy by investing up to 100% of
Fund assets in cash or short-term, high quality money market instruments
(for example, commercial paper, repurchase agreements, etc.). This may
cause a Fund to temporarily forego greater investment returns for the
safety of principal.

[graphic]

How to Buy Shares

What Do Shares Cost? You can buy shares of a Fund at net asset value (NAV),
without a sales charge, on any day the New York Stock Exchange (NYSE) is
open for business. When a Fund receives your transaction request in proper
form, it is processed at the next determined NAV. Each NAV is calculated
for each of the Funds (other than MONEY MARKET FUND) at the end of regular
trading (normally 3:00 p.m. Central Time) each day the NYSE is open. The
NAV for the MONEY MARKET FUND is determined twice daily at 12:00 Noon
(Central Time) and 3:00 p.m. (Central Time). In calculating NAV, a Fund's
portfolio is valued using market prices.

Securities held by the INTERNATIONAL STOCK FUND may trade on foreign
exchanges on days (such as weekends) when the INTERNATIONAL STOCK FUND does
not calculate NAV. As a result, the NAV of the INTERNATIONAL STOCK FUND's
shares may change on days when you cannot purchase or sell the Fund's
shares.

To open an account with the Marshall Funds, your first investment must be
at least $1,000. However, you can add to your existing Marshall Funds
account directly or through the Funds' Systematic Investment Program for as
little as $50. In special circumstances, these minimums may be waived or
lowered at the Funds' discretion. Keep in mind that Authorized Dealers may
charge you fees for their services in connection with your share
transactions.

How Do I Purchase Shares? You may purchase shares directly from the Funds by
completing and mailing the Account Application and sending your payment to
the Fund by check or wire.

Once you have opened an account with an Authorized Dealer, you
may purchase additional Fund shares by contacting Marshall Funds Investor
Services (MFIS) at 1-800-236-FUND (3863).

Trust customers of an M&I Trust Company may purchase shares by
contacting their trust account officer.

You may purchase shares through a broker-dealer, investment
professional, or financial institution (Authorized Dealers). Some
Authorized Dealers may charge a transaction fee for this service. If you
purchase shares of a Fund through a program of services offered or
administered by an Authorized Dealer or other service provider, you should
read the program materials, including information relating to fees, in
conjunction with the Funds' prospectus. Certain features of a Fund may not
be available or may be modified in connection with the program of services
provided.

Your purchase order must be received by the Funds by 12:00 Noon
(Central Time) for the MONEY MARKET FUND or 3:00 p.m. (Central Time) for
all other Funds to get that day's NAV. Each Fund reserves the right to
reject any purchase request. It is the responsibility of MFIS, any
Authorized Dealer or other service provider that has entered into an
agreement with the Funds, its distributor, or administrative or shareholder
services agent, to promptly submit purchase orders to the Funds. Orders
placed through one of these entities are considered received when the Funds
are notified of the purchase or redemption order. However, you are not the
owner of Fund shares (and therefore will not receive dividends) until
payment for the shares is received.

In order to purchase shares, you must reside in a jurisdiction
where Fund shares may lawfully be offered for sale. In addition, you must
have a Social Security or tax identification number.

[graphic]

Will the Small-Cap Growth Fund Always be Open to New Investors? It is
anticipated that the SMALL-CAP GROWTH FUND will be closed to new investors
once its assets reach $500 million, subject to certain exceptions. However,
if you own shares of the Fund prior to the closing date, you will still be
able to reinvest dividends and add to your investment in the Fund.

[graphic]

Fund Purchase Easy Reference Table

[graphic]

Minimum Investments

$1,000 . To open an Account

$50 . To add to an Account (including through a Systematic Investment
Program)

[graphic]

Phone 1-800-236-FUND (3863)

. Contact Marshall Funds Investor Services (MFIS).

. Complete an application for a new account.

. If you authorized telephone privileges on your account application or by
subsequently completing an authorization form, you may purchase additional
shares or exchange shares from another Fund having an identical shareholder
registration.

[graphic]

Mail

. To open an account, send your completed account application and check
payable to

"Marshall Funds" to the following address:

Marshall Funds Investor Services
P.O. Box 1348
Milwaukee, WI 53201-1348

. To add to your existing Fund Account, send in your check, payable to
"Marshall Funds", to the same address. Indicate your Fund account number on the
check.

[graphic]

In Person

. Bring in your completed account application (for new accounts) (M-F 8-5
Central Time) and a check payable to "Marshall Funds" to:

Marshall Funds Investor Services
1000 N. Water Street, 13th Floor
Milwaukee, WI 53202

[graphic]

Wire

. Notify MFIS at 1-800-236-FUND (3863) by 12:00 Noon (Central Time) for the
MONEY MARKET FUND and 3:00 p.m. (Central Time) for the other Funds. If your
purchase order for the MONEY MARKET FUND is received by 12:00 Noon (Central
Time) and your wire is received by M&I Bank by 3:00 p.m. (Central Time), you
will begin receiving dividends on that day.

. Then wire the money to:

M&I Marshall & Ilsley Bank
ABA Number 075000051

Credit to: Marshall Funds, Deposit Account, Account Number 27480;

Further credit to: Class Y Shares [Identify name of Fund] Re: [Shareholder
name and account number]

. If a new Account, fax application to: Marshall Funds Investor Services
at 1-414-287-8511.

. Mail a completed account application to the Fund at the address above
under "Mail."

. Your bank may charge a fee for wiring funds. Wire orders are accepted
only on days when

the Funds and the Federal Reserve wire system are open for business.

[graphic]

Systematic Investment Program

. You can have money automatically withdrawn from your checking account
($50 minimum) on predetermined dates and invest it in a Fund at the next Fund
share price determined after MFIS receives the order.

. The $1,000 minimum investment requirement is waived for investors
purchasing shares through the Systematic Investment Program.

. Call MFIS at 1-800-236-FUND (3863) to apply for this program.

[graphic]

Marshall Funds OnLine/SM/

.. You may purchase Fund shares via the Internet through Marshall Funds
OnLine/SM/ at www.marshallfunds.com. See "Fund Transactions Through Marshall
Funds OnLine/SM/" in the Account and Share Information section.

[graphic]

Additional Information About Checks and Automated Clearing House (ACH)
Transactions Used to Purchase Shares

. If your check or ACH purchase does not clear, your purchase will be
canceled and you will be charged a $15 fee.

. If you purchase shares by check or ACH, you may not be able to receive
proceeds from a redemption for up to seven days.

. All checks should be made payable to the "Marshall Funds".

How to Redeem and Exchange Shares

[graphic]

How Do I Redeem Shares? You may redeem your Fund shares by several methods,
described below under the "Fund Redemption Easy Reference Table." You
should note that redemptions will be made only on days when a Fund computes
its NAV. When your redemption request is received in proper form, it is
processed at the next determined NAV.

Trust customers of M&I Trust Companies should contact their
account officer to make redemption requests.

Telephone or written requests for redemptions must be received in
proper form as described below and can be made through MFIS or any
Authorized Dealer. It is the responsibility of MFIS, and Authorized Dealer
or service provider to promptly submit redemption requests to a Fund.

Redemption requests for the Funds must be received by 12:00 Noon
(Central Time) for the MONEY MARKET FUND or 3:00 p.m. (Central Time) for
all other Funds in order for shares to be redeemed at that day's NAV.
Redemption proceeds will normally be mailed, or wired if by written
request, the following business day, but in no event more than seven days,
after the request is made.

Will I Be Charged a Fee for Redemptions? You will not be charged a fee by a Fund
for redeeming shares. However, you may be charged a transaction fee if you
redeem Fund shares through an Authorized Dealer or service provider (other
than MFIS or the M&I Trust Companies), or if you are redeeming by wire.
Consult your Authorized Dealer or service provider for more information,
including applicable fees.

Fund Redemption Easy Reference Table

[graphic]

Phone 1-800-236-FUND (3863) (Except Retirement Accounts, which must be done in
writing)

. If you have authorized the telephone redemption privilege in your
account application or by a subsequent authorization form, you may redeem shares
by telephone. If you are a customer of an authorized broker-dealer, you must
contact your account representative.

[graphic]

Mail

. Send in your written request to the following address, indicating your
name, the Fund name, your account number, and the number of shares or the dollar
amount you want to redeem to:

Marshall Funds Investor Services
P.O. Box 1348
Milwaukee, WI 53201-1348

. If you want to redeem shares held in certificate form, you must properly
endorse the share certificates and send them by registered or certified mail.
Additional documentation may be required from corporations, executors,
administrators, trustees or guardians.

. For additional assistance, call 1-800-236-FUND (3863).

[graphic]

In Person

. Bring in the written redemption request with the information described
in "Mail" above to Marshall Funds Investor Services, 1000 N. Water Street, 13th
Floor, Milwaukee, WI, 53202 (M-F 8-5 Central Time). The proceeds from the
redemptions will be sent to you in the form of a check or by wire.

[graphic]

Wire/Electronic Transfer

. Upon written request, redemption proceeds can be directly deposited by
Electronic Funds Transfer or wired directly to a domestic commercial bank
previously designated by you in your account application or by subsequent form.

. Wires of redemption proceeds will only be made on days on which the Funds
and the Federal Reserve wire system are open for business.

. Wire-transferred redemptions may be subject to an additional fee.

. Redemption requests for the MONEY MARKET FUND must be received by 12:00
Noon (Central Time) if you want the proceeds to be wired the same day.

[graphic]

Systematic Withdrawal Program

. If you have a Fund account balance of at least $10,000, you can have
predetermined amounts of at least $100 automatically redeemed from your Fund
account on predetermined dates on a monthly or quarterly basis.

. Contact MFIS to apply for this program.

[graphic]

Checkwriting (Money Market Fund Only)

. You can redeem shares of the MONEY MARKET FUND by writing a check in an
amount of at least $250. You must have completed the checkwriting section of
your account application and the attached signature card, or have completed a
subsequent application form. The Fund will then provide you with the checks.

. Your check is treated as a redemption order for Fund shares equal to the
amount of the check.

. A check for an amount in excess of your available Fund account balance
will be returned marked "insufficient funds."

. Checks cannot be used to close your Fund account balance.

. Checks deposited or cashed through foreign banks or financial
institutions may be subject to local bank charges.

[graphic]

Marshall Funds OnLine/SM/

.. You may redeem Fund shares via the Internet through Marshall Funds OnLine/SM/
at www.marshallfunds.com. See "Fund Transactions Through Marshall Funds
OnLine/SM/" in the Account and Share Information section.

Additional Conditions for Redemptions

[graphic]

Signature Guarantees. In the following instances, you must have a signature
guarantee on written redemption requests:

. when you want a redemption to be sent to an address other than the one
you have on record with a Fund;

. when you want the redemption payable to someone other than the
shareholder of record; or

. when your redemption is to be sent to an address of record that was
changed within the last 30 days.

Your signature can be guaranteed by any federally insured financial
institution (such as a bank or credit union) or a broker/dealer that is a
domestic stock exchange member, but not by a notary public.

Limitations on Redemption Proceeds. Redemption proceeds normally are wired or
mailed within one business day after receiving a request in proper form.
However, payment may be delayed up to seven days:

. to allow your purchase payment to clear;

. during periods of market volatility; or

. when a shareholder's trade activity or amount adversely impacts a
Fund's ability to manage its assets.

You will not accrue interest or dividends on uncashed checks from a Fund.
If those checks are undeliverable and returned to a Fund, the proceeds will
be reinvested in shares of the Funds that were redeemed.

Corporate Resolutions. Corporations, trusts and institutional organizations are
required to furnish evidence of the authority of persons designated on the
account application to effect transactions on behalf of the organization.

Exchange Privilege. You may exchange Class Y Shares of a Fund for Class Y Shares
of any of the other Marshall Funds free of charge, provided you meet the
investment minimum of the Fund. An exchange is treated as a redemption and
a subsequent purchase, and is therefore a taxable transaction. Signatures
must be guaranteed if you request and exchange into another fund with a
different shareholder registration. The exchange privilege may be modified
or terminated at any time.

Exchanges by Telephone. If you have completed the telephone authorization
section in your account application or an authorization form obtained
through MFIS, you may telephone instructions to MFIS to exchange between
Fund accounts that have identical shareholder registrations. Customers of
broker-dealers, financial institutions or service providers should contact
their account representative. Telephone exchange instructions must be
received before 3:00 p.m. (Central Time) for shares to be exchanged the
same day. However, you will not receive a dividend of the Fund into which
you exchange on the date of the exchange.

The Funds and their service providers will record your telephone
instructions. The Funds will not be liable for losses due to unauthorized
or fraudulent telephone instructions as long as reasonable security
procedures are followed. You will be notified of changes to telephone
transaction privileges.

Frequent Traders. The Funds' management or Adviser may determine from the
amount, frequency and pattern of exchanges that a shareholder is engaged in
excessive trading that is detrimental to a Fund and its other shareholders.
If this occurs, the Fund may terminate a shareholder's purchase and/or
exchange privileges.

[graphic]

Account and Share Information

Fund Transactions Through Marshall Funds OnLine/SM/. If you have previously
established an account with the Funds, and have signed an OnLine/SM/
Agreement, you may purchase, redeem or exchange shares through the Marshall
Funds Internet Site on the World Wide Web (http://www.marshallfunds.com)
(the Web Site). You may also check your Fund account balance(s) and
historical transactions through the Web Site. You cannot, however,
establish a new Fund account through the Web Site--you may only establish a
new Fund account under the methods described in the How to Buy Shares
section.

[graphic]

Trust customers of M&I Trust Companies should contact their account
officer for information on the availability of transactions over the
Internet.

You should contact MFIS at 1-800-236-FUND (3863) to get started. MFIS
will provide instructions on how to create and activate your Personal
Identification Number (PIN). If you forget or lose your PIN number, contact
MFIS.

Online Conditions. Because of security concerns and costs associated with
maintaining the Web Site, purchases, redemptions, and exchanges through the
Web Site are subject to the following daily minimum and maximum transaction
amounts:

Minimum Maximum

<S> <C> <C>
Purchases $50 $100,000
Redemptions By ACH: $50 By ACH: $50,000
By wire: $1,000 By wire: $50,000

Exchanges $50 $100,000
</TABLE>

Shares may be redeemed or exchanged based on either a dollar amount or
number of shares. If you are redeeming or exchanging based upon number of
Fund shares, you must redeem or exchange enough shares to meet the minimum
dollar amounts described above, but not so much as to exceed the maximum
dollar amounts.

Your transactions through the Web Site are effective at the time they are
received by a Fund, and are subject to all of the conditions and procedures
described in this prospectus.

You may not change your address of record, registration, or wiring
instructions through the Web Site. The Web Site privilege may be modified
at any time, but you will be notified in writing of any termination of the
privilege.

Online Risks. If you utilize the Web Site for account histories or transactions,
you should be aware that the Internet is an unsecured, unstable,
unregulated and unpredictable environment. Your ability to use the Web Site
for transactions is dependent upon the Internet and equipment, software,
systems, data and services provided by various vendors and third parties
(including telecommunications carriers, equipment manufacturers, firewall
providers and encryption system providers).

While the Funds and their service providers have established certain
security procedures, the Funds, their distributor and transfer agent cannot
assure you that inquiries or trading activity will be completely secure.
There may also be delays, malfunctions or other inconveniences generally
associated with this medium. There may be times when the Web Site is
unavailable for Fund transactions, which may be due to the Internet or the
actions or omissions of a third party--should this happen, you should
consider purchasing, redeeming or exchanging shares by another method. The
Marshall Funds, its transfer agent, distributor and MFIS are not
responsible for any such delays or malfunctions, and are not responsible
for wrongful acts by third parties, as long as reasonable security
procedures are followed.

Confirmations and Account Statements. You will receive confirmation of
purchases, redemptions and exchanges (except for systematic program
transactions). In addition, you will receive periodic statements reporting
all account activity, including systematic program transactions, dividends
and capital gains paid.

You may request photocopies of historical confirmations from prior years.
The Funds may charge a fee for this service.

Dividends and Capital Gains. Dividends of the INCOME FUNDS and MONEY MARKET FUND
are declared daily and paid monthly. You will receive dividends declared
subsequent to the issuance of your shares, through the day your shares are
redeemed.

Dividends of the EQUITY FUNDS are declared and paid quarterly, except for
the INTERNATIONAL STOCK FUND, which declares and pays dividends annually.
Dividends are paid to all shareholders invested in the EQUITY FUNDS on the
record date.

[graphic]

What is a Dividend and Capital Gain?

A dividend is the money paid to shareholders that a mutual fund has earned from
the income on its investments. A capital gain distribution is the money paid to
shareholders from a Fund's profit derived from the sale of an investment, such
as a stock or bond.

In addition, the Funds pay any capital gains at least annually. Your
dividends and capital gains distributions will be automatically reinvested
in additional shares, unless you elect cash payments. If you elect cash
payments and the payment is returned as undeliverable, your cash payment
will be reinvested in Fund shares and your distribution option will convert
to automatic reinvestment. If any distribution check remains uncashed for
six months, the check amount will be reinvested in shares and you will not
accrue any interest or dividends on this amount prior to the reinvestment.

If you purchase shares just before a Fund declares a dividend or capital
gain distribution, you will pay the full price for the shares and then
receive a portion of the price back in the form of a distribution, whether
or not you reinvest the distribution in shares. Therefore, you should
consider the tax implications of purchasing shares shortly before a Fund
declares a dividend or capital gain.

Accounts with Low Balances. Due to the high cost of maintaining accounts with
low balances, a Fund may redeem shares in your account and pay you the
proceeds if your account balance falls below the required minimum value of
$1,000.

Before shares are redeemed to close an account, you will be notified in
writing and allowed 30 days to purchase additional shares to meet the
minimum account balance requirement.

Multiple Classes. The Marshall Funds have adopted a plan that permits each Fund
to offer more than one class of shares. Currently, the Funds offer two
classes of shares. All shares of each Fund or class have equal voting
rights and will generally vote in the aggregate and not by Fund or class.
There may be circumstances, however, when shareholders of a particular Fund
or class are entitled to vote on matters affecting that Fund or class.
Share classes may have different sales charges and other expenses, which
will affect their performance.

Year 2000 Readiness

The "Year 2000" problem is the potential for computer errors or failures
because certain computer systems may be unable to interpret dates after
December 31, 1999 or experience other date-related problems. The Year 2000
problem may cause systems to process information incorrectly and could
disrupt businesses, such as the Funds, that rely on computers.

While it is impossible to determine in advance all of the risks to the
Funds, the Funds could experience interruptions in basic financial and
operational functions. The Funds' shareholders could experience errors or
disruptions in Fund share transactions or Fund communications.

The Funds' service providers are making changes to their computer systems
to fix any Year 2000 problems. In addition, they are working to gather
information from third-party providers to determine their Year 2000
readiness.

Year 2000 problems could also increase the risks of the Funds' investments.
To assess the potential effect of the Year 2000 problem, the Adviser is
reviewing information regarding the Year 2000 readiness of issuers of
securities the Funds may purchase. However, this may be difficult with
certain issuers. For example, funds dealing with foreign service providers
or investing in foreign securities will have difficulty determining the
Year 2000 readiness of those entities.

The financial impact of these issues for the Funds is still being
determined. There can be no assurance that potential Year 2000 problems
would not have a material adverse effect on the Funds.

Tax Information

Federal Income Tax. The Funds send you a statement of your account activity to
assist you in completing your federal, state and local tax returns. For
taxable investors, Fund distributions of dividends and capital gains are
taxable to you whether paid in cash or reinvested in the Fund. Dividends
are taxable as ordinary income; capital gains are taxable at different
rates depending upon the length of time a Fund holds its assets. Fund
distributions for the EQUITY INCOME FUND, MID-CAP VALUE FUND and LARGE-CAP
GROWTH & INCOME FUND are expected to be both dividends and capital gains.
Fund distributions for the other EQUITY FUNDS are expected to be primarily
capital gains, and fund distributions of the INCOME FUNDS and MONEY MARKET
FUND are expected to be primarily dividends.

It is anticipated that INTERMEDIATE TAX-FREE FUND'S distributions will be
primarily dividends that are exempt from federal income tax, although a
portion of that Fund's dividends may not be exempt. Even if dividends are
exempt from federal income tax, they may be subject to state and local
taxes. You may have to include certain dividends as taxable income if the
federal alternative minimum tax applies to you.

Please consult your tax adviser regarding your federal, state and local tax
liability. Redemptions and exchanges of Fund shares are taxable sales.

Marshall Funds, Inc. Information

[graphic]

Management of the Marshall Funds. The Board of Directors governs the Funds. The
Board selects and oversees the Adviser, M&I Investment Management Corp. The
Adviser manages each Fund's assets, including buying and selling portfolio
securities. The Adviser's address is 1000 North Water Street, Milwaukee,
Wisconsin, 53202. The Adviser has entered into a subadvisory contract with
BPI Global Asset Management LLP (BPI or Sub-Adviser), to manage the
INTERNATIONAL STOCK FUND, subject to oversight by the Adviser.

Adviser's Background. M&I Investment Management Corp. is a registered investment
adviser and a wholly owned subsidiary of Marshall & Ilsley Corp., a
registered bank holding company headquartered in Milwaukee, Wisconsin. As of
August 31, 1999, the Adviser had approximately $10.3 billion in assets under
management, of which $4.7 billion is in Marshall Funds assets, and has
managed investments for individuals and institutions since 1973. The Adviser
has managed the Funds since 1992 and managed the Newton Funds (predecessors
to some of the Funds) since 1985.

Sub-Adviser's Background. BPI Global Asset Management LLP is a registered
investment adviser and provides management for investment companies,
corporations, trusts, estates, pension and profit sharing plans, individuals
and other institutions located in both Canada and the United States. As of
August 31, 1999, BPI had approximately $2.3 billion in assets under
management. The Sub-Adviser's address is Tower Place at the Summit, 1900
Summit Tower Boulevard, Suite 450, Orlando, Florida 32810.

Portfolio Managers. The EQUITY INCOME FUND is managed by Bruce P. Hutson, who
has been a vice president of the Adviser since 1973 and a member of the
equity policy group since January 1990. Mr. Hutson holds a B.B.A. degree
from the University of Wisconsin-Whitewater.

The LARGE-CAP GROWTH & INCOME FUND is managed by William J. O'Connor. Mr.
O'Connor has been a vice president of the Adviser since February 1995 when
he rejoined the firm after serving as vice president and director of equity
research for Arnold Investment Counsel. Prior to joining Arnold, he had been
a vice president, portfolio manager, and research analyst with the Adviser
from 1979 to 1991. Mr. O'Connor is a Chartered Financial Analyst and holds a
bachelor's degree in Commerce from Santa Clara University and an M.B.A. in
Finance from the University of Wisconsin-Madison.

[graphic]

The MID-CAP VALUE FUND is co-managed by Matthew B. Fahey and John C.
Potter. Mr. Fahey has been a vice president of the Adviser since 1988. He
earned a B.A. degree in Business Administration from the University of
Wisconsin-Milwaukee and holds an M.B.A. degree from Marquette University.
Mr. Potter has been a vice president of the Adviser since 1997. From April
1994 to June 1997, Mr. Potter was a senior securities analyst for the EQUITY
INCOME FUND. Previously, from November 1991 to April 1994, he was a senior
auditor for Marshall & Ilsley Corporation. Mr. Potter is a Chartered
Financial Analyst and holds a B.B.A. degree in Finance from the University
of Wisconsin-Madison.

The MID-CAP GROWTH FUND and the SMALL-CAP GROWTH FUND are managed by Steve
D. Hayward. Prior to joining the Adviser as a vice president in December
1993, Mr. Hayward served as senior portfolio manager of AMOCO Corporation
and managed two aggressive growth-oriented mutual funds for American Asset
Capital Management. Mr. Hayward, who is a Chartered Financial Analyst,
received a B.A. in Economics from North Park College, and an M.B.A. in
Finance from Loyola University.

The INTERNATIONAL STOCK FUND is managed by Daniel R. Jaworski, founder,
Managing Director and Chief Investment Officer of the Sub-Adviser. Prior to
founding BPI in March 1997, Mr. Jaworski was a portfolio manager at Lazard
Freres & Co. LLC, from June 1993 to December 1994, and from January 1995 to
March 1997 was a portfolio manager at STI Capital Management. Mr. Jaworski
received a B.A. in Economics and Computer Science from Concordia College and
received his M.B.A. in Finance from the University of Minnesota.

[graphic]

The GOVERNMENT INCOME FUND is managed by Joseph M. Cullen. Mr. Cullen joined the
Adviser in January 1999 and has managed the Fund since that time. He was
formerly a portfolio manager at Lincoln Investment Management, Inc. from
1997 to 1998, and was a portfolio analyst from 1991 to 1994. From 1994 to
1997 he was a fixed income portfolio manager at The Boston Company Asset
Management, Inc. Mr. Cullen, who is a Chartered Financial Analyst, received
a B.A. in Economics with a Minor in Mathematics from Ripon College, and an
M.B.A. in Finance from Carnegie Mellon University.

The INTERMEDIATE BOND FUND and SHORT-TERM INCOME FUND are managed by Mark
Pittman. Mr. Pittman is a vice president of the Adviser, which he joined in
June 1994. Prior to that time, he spent five years with Valley Trust Company
managing fixed income portfolios and common trust funds. In addition, he was
a member of the Valley Trust Company Investment Committee and Asset
Allocation Committee. Mr. Pittman is a Chartered Financial Analyst and holds
M.B.A. and B.B.A. degrees in Finance from the University of Wisconsin-
Madison.

The INTERMEDIATE TAX-FREE FUND is managed by John D. Boritzke, who is a
vice president of the Adviser responsible for tax-exempt fixed income
portfolio management. He joined the Adviser in November 1983. Since 1985, he
has been managing tax-exempt fixed income portfolios and common trust funds
of Marshall & Ilsley Trust Company. Mr. Boritzke has been a member of the
Adviser's Fixed Income Policy Group since 1985 and has been the Director of
the Group since 1998. He is a Chartered Financial Analyst and holds M.B.A.

and B.S. degrees from Marquette University.

[graphic]

The MONEY MARKET FUND is managed by Richard M. Rokus, who is a vice
president of the Adviser. Mr. Rokus has managed the MONEY MARKET FUND since
January 1, 1994, and has been employed by the Adviser since January 1993.
Mr. Rokus is a Chartered Financial Analyst and holds a B.B.A. in Finance
from the University of Wisconsin-Whitewater.

Advisory Fees. The Adviser is entitled to receive an annual investment advisory
fee equal to a percentage of each Fund's average daily net assets as
follows:

Fund Advisory Fee
<S> <C>
Money Market Fund 0.50%
Short-Term Income Fund 0.60%
Intermediate Bond Fund 0.60%
Intermediate Tax-Free Fund 0.60%
Government Income Fund 0.75%
Large-Cap Growth & Income Fund 0.75%
Mid-Cap Value Fund 0.75%
Equity Income Fund 0.75%
Mid-Cap Growth Fund 0.75%
Small-Cap Growth Fund 1.00%
International Stock Fund 1.00%
</TABLE>

The Adviser has the discretion to voluntarily waive a portion of its fee.
However, any waivers by the Adviser are voluntary and may be terminated at
any time in its sole discretion.

Affiliate Services and Fees. Marshall & Ilsley Trust Company (M&I Trust), an
affiliate of the Adviser, provides services to the Funds as custodian of the
assets, shareholder services agent, sub-transfer agent and (effective
1/1/2000) administrator directly and through its division, Marshall Funds
Investor Services. For each domestic Fund, the annual custody fees are 0.02%
of the first $250 million of assets held plus 0.01% of assets exceeding $250
million, calculated on each Fund's average daily net assets. M&I Trust
Company is entitled to receive shareholder services fees directly from the
Funds in amounts up to a maximum annual percentage of the Funds' average
daily net assets (ADNA) as follows:

Shareholder Services Fee

<S> <C>

Equity Funds 0.25%
Income Funds 0.25%
Money Market Fund 0.02%
</TABLE>

As shareholder services agent, M&I Trust has the discretion to waive a
portion of its fees. However, any waivers of shareholder services fees are
voluntary and may be terminated at any time in its sole discretion.

Effective 1/1/2000, M&I Trust will be administrator of the Funds.
Federated Services Company will be sub-administrator. As administrator, M&I
Trust will be entitled to receive fees directly from the Funds in amounts up
to a maximum annual percentage of the aggregate Funds' ADNA as follows:

Maximum Fee* Funds' ADNA
<C> <S>

0.15% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% on assets over $750 million
</TABLE>

* The administrative services fee for the SMALL-CAP GROWTH FUND is 0.12%
of that Fund's ADNA. All fees of the sub-administrator will be paid by M&I
Trust. The overall administrative fee as stated in the SAI, is not expected
to change.

M&I Trust receives an annual per-account fee which differs among the Funds
for sub-transfer agency services to trust and institutional accounts
maintained on its trust accounting system. M&I Trust also, from time to
time, receives reimbursement from the Funds' distributor and its affiliates
for certain expenses incurred in marketing the Funds and for other
administrative services on behalf of shareholders.

Supplemental Performance Information of the Sub-Adviser to the Marshall
International Stock Fund

BPI Global Asset Management LLP (BPI) has served as sub-adviser for the
Marshall International Stock Fund ("the Fund") since March 29, 1999.
Since the Fund's inception on September 2, 1994 through March 29, 1999,
the Fund was sub-advised by another firm. Daniel R. Jaworski, BPI's
Managing Director, currently serves as the portfolio manager for the
Fund. Supplemental information is presented below to summarize BPI's
and Mr. Jaworski's historical performance results for various entities
other than the Marshall International Stock Fund. Historical
performance of these other accounts is not a substitute for and is not
indicative of future results of the Fund.

Mr. Jaworski was employed at STI Capital Management and managed the
SunTrust Commingled Fund (a commingled investment fund with similar
investment objectives, policies, strategies and risks to the Marshall
International Stock Fund) for the period from February 1, 1995 to
November 30, 1995. The following table summarizes the returns of the
SunTrust Commingled Fund for the entire period during which Mr.
Jaworski managed the fund, as compared to the Morgan Stanley Capital
International Europe, Australia, Far East Index (MSCI-EAFE).

Gross Net MSCI-EAFE
of Fees of Fees Performance

The commingled fund was not a mutual fund registered under the Investment
Company Act of 1940 (1940 Act) and therefore was not subject to certain
diversification and investment restrictions imposed by the 1940 Act. If the
commingled fund had been registered under the 1940 Act, the performance may have
been adversely affected.

(1) Not a full quarter -- excludes performance from 1/1/1995 to
1/31/1995. (2) Not a full quarter -- excludes performance from
12/1/1995 to 12/31/1995.

Mr. Jaworski was subsequently promoted to Director of International
Portfolio Management & Research and Senior Portfolio Manager for the
STI Classic International Equity Fund (a mutual fund with investment
objectives, policies, strategies and risks similar to those of the
Marshall International Stock Fund) from December 1, 1995 to March 31,
1997. The following table summarizes the returns of the STI Classic
International Equity Fund for the entire period during which Mr.
Jaworski managed the fund, as compared to the MSCI-EAFE Index:

Gross Net MSCI-EAFE
of Fees of Fees Performance

<S> <C> <C> <C>
12/1/95 - 12/31/95 4.02% 3.50% 4.03%
1Q1996 5.09 4.72 2.89
2Q1996 5.89 5.52 1.58
3Q1996 1.57 1.21 -0.13
4Q1996 9.54 9.16 1.59
Annual 1996 23.82 22.08 6.05
1Q1997 4.43 4.06 -1.57
</TABLE>

The average annual total return for the STI Classic International Fund for the
one-year period from 4/1/96 to 3/31/97 was 21.31% as compared to 1.44% for the
MSCI-Eafe for the same period. In additon, the fund's average annual total
return from its inception on 12/1/95 to 3/31/97 was 32.00%, compared to 6.39%
for the MSCI-EAFE for the same period.

Mr. Jaworski left STI Capital Management, along with several other
investment team members, to create BPI and serve as its Managing
Director and Chief Investment Officer. The following table sets forth
BPI's composite performance information relating to the performance of
institutional private accounts managed by BPI, during the periods
indicated, that have investment objectives, policies, strategies, and
risks substantially similar to those of the Marshall International
Stock Fund. The performance information is provided to illustrate BPI's
historical performance in managing similar accounts as measured against
the MSCI-EAFE Index.

Gross Net MSCI-EAFE
of Fees of Fees Performance

1Q1997 N/A N/A N/A
<S> <C> <C> <C>
2Q1997 16.96% 16.73% 12.98%
3Q1997 8.67 8.54 -0.70
4Q1997 -3.36 -3.48 -7.83
Annual 1997(1) 22.83 22.29 3.40
1Q1998 18.20 18.06 14.71
2Q1998 4.14 4.01 1.06
3Q1998 -12.38 -12.56 -14.21
4Q1998 14.84 14.62 20.66
Annual 1998 23.86 23.06 20.00
1Q1999 0.35 0.15 1.39
2Q1999 6.01 5.75 2.54
3Q1999 4.43 4.16 4.39
</TABLE>

The following accounts managed by BPI and Mr. Jaworski are not included in the
composite performance for the reasons noted: (1) three Canadian international
mutual funds, where "international" as defined by a Canadian investor includes
an allocation to the U.S. and no allocation to Canada; (2) Masters' Select
International Fund, a fund that uses multiple subadvisers, one of which is BPI;
and (3) one private account that only holds American Depositary Receipts (ADRs).

(1) Not a full year -- excludes performance from 1/1/1997 to 3/31/1997.

BPI represents that the composite performance information shown above
has been calculated in accordance with recommended standards of the
Association for Investment Management and Research ("AIMR"). AIMR is a
non-profit membership and education organization with more than 60,000
members worldwide that, among other things, has formulated a set of
performance presentation standards for investment advisers (such as
BPI). These AIMR performance presentation standards are intended to (1)
promote full and fair presentations by investment advisers of their
performance results, and (2) ensure uniformity in reporting so that
performance results of investment advisers are directly comparable.

The returns in each of the above tables are calculated on a total
return basis and include all dividends and interest, accrued income and
all realized and unrealized gains and losses. The "Net of Fees" figures
reflect the deduction of advisory and other fees paid by the accounts -
- "Gross of Fees" does not include these fees, but does include certain
trading costs and embedded fees (e.g., "wrap fees") that cannot be
unbundled and have been deducted. The investment results of BPI have
been audited up to March 31, 1999. Information from that date to May 1,
1999 has not been verified by the Marshall Funds or Federated
Securities Corp. and is unaudited.

The BPI performance composite includes all actual, fee-paying,
discretionary institutional accounts managed by BPI that have
investment objectives, policies, strategies, and risks similar to those
of the Marshall International Stock Fund. Mr. Jaworski is the portfolio
manager of each account included in the composite. However, the Sun
Trust Commingled Fund and BPI institutional accounts included in BPI's
composite differ from the Marshall International Stock Fund, in that
they are not subject to:

. the same types of expenses as the Marshall International Stock Fund;

. the investment limitations, diversification requirements, and other
restrictions imposed by the Investment Company Act of 1940; and

. the requirements of Subchapter M of the Internal Revenue Code.

As a result, the performance results for the SunTrust Commingled
Fund and BPI institutional accounts could have been adversely affected
if they had been regulated as investment companies under the
restrictions outlined above. In addition, the performance figures are
for a short period of time and should not be indicative of long-term
results.

Although the STI Classic International Equity Fund has objectives,
policies, strategies, and risks similar to those of the Marshall
International Stock Fund, it is a separate fund and its performance is
not indicative of the potential performance of the Marshall
International Stock Fund.

The MSCI-EAFE Index is a capitalization-weighted foreign securities
index, which is widely used to measure the performance of European,
Australian, New Zealand, and Far Eastern stock markets. The MSCI-EAFE
is unmanaged. Investments may not be made in an index. The Funds'
Statement of Additional Information contains further information on
calculation of average annual total returns.

[graphic]

Financial Highlights

The Financial Highlights will help you understand a Fund's financial performance
for its past five fiscal years or since inception, if the life of a Fund is
shorter. Some of the information is presented on a per share basis. Total
returns represent the rate an investor would have earned (or lost) on an
investment in a Fund, assuming reinvestment of any dividends and capital gains.

The following table has been audited by Ernst & Young LLP, the Funds'
independent auditors for the fiscal year ended August 31, 1999. Their report
dated October 15, 1999 is included in the Annual Report for the Funds, which is
incorporated by reference. Each of the previous four years were audited by other
auditors. This table should be read in conjunction with the Funds' financial
statements and notes thereto, which may be obtained free of charge from the
Funds.

Further information about the performance of the Funds is contained in the
Funds' Annual Report dated August 31, 1999, which may be obtained free of
charge. (For a share outstanding throughout each period)

Net Realized and
Unrealized

Net Gain/(Loss) Dividends to
Net Asset Investment on Investments, Shareholders
Value, Income/ Collateral, Futures Total from from Net
Beginning Operating Contracts, and Investment Investment

Period Ended August 31, of Period (Loss) Foreign Currency Operations Income
<S> <C> <C> <C> <C> <C>
Equity Income Fund
1995 $ 9.96 0.33 1.26 1.59 (0.33)
1996 $11.22 0.34 2.00 2.34 (0.35)
1997 $13.00 0.33 3.51 3.84 (0.34)
1998 $15.64 0.31 (0.19)(5) 0.12 (0.32)
1999 $14.17 0.28 3.59 3.87 (0.29)
Large-Cap Growth & Income
Fund

1995 $10.05 0.09 1.59 1.68 (0.09)
1996 $11.64 0.16 1.17 1.33 (0.15)
1997 $12.16 0.10 3.76 3.86 (0.12)
1998 $13.96 0.06 0.46 0.52 (0.06)
1999 $13.24 0.06 5.01 5.07 (0.06)
Mid-Cap Value Fund
1995 $10.95 0.22 1.22 1.44 (0.20)
1996 $12.08 0.21 0.78 0.99 (0.21)
1997 $11.98 0.15 3.05 3.20 (0.15)
1998 $13.14 0.10 (0.92) (0.82) (0.12)
1999 $10.25 0.11 2.10 2.21 (0.12)
Mid-Cap Growth Fund
1995 $ 9.69 (0.00) 2.62 2.62 (0.01)
1996 $12.30 (0.06) 2.24 2.18 --
1997 $13.56 (0.08) 2.56 2.48 --
1998 $14.82 (0.13) (0.93) (1.06) --
1999 $11.95 (0.11) 6.26 6.15 --
Small-Cap Growth Fund
1997(2) $10.00 (0.08) 2.27 2.19 --
1998 $12.19 (0.22) (1.66) (1.88) --
1999 $ 9.82 (0.11) 2.69 2.58 --

International Stock Fund

1995(1) $10.00 0.20 0.01 0.21 (0.05)
1996 $10.16 0.21 0.96 1.17 (0.22)
1997 $11.08 0.18 2.29 2.47 (0.26)
1998 $13.20 0.26 (1.42) (1.16) (0.21)
1999 $11.54 0.09 2.45 2.54 (0.25)
Government Income Fund
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 $ 9.49 0.61 0.21 0.82 (0.61)
1999 $ 9.70 0.54 (0.48) 0.06 (0.54)
Intermediate Bond Fund
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 $ 9.44 0.58 0.16 0.74 (0.58)
1999 $ 9.60 0.55 (0.43) 0.12 (0.55)
Intermediate Tax-Free Fund
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 $10.04 0.43 0.29 0.72 (0.43)
1999 $10.33 0.42 (0.41) 0.01 (0.42)
Short-Term Income Fund
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 $ 9.64 0.61 (0.03) 0.58 (0.61)
1999 $ 9.61 0.55 (0.21) 0.34 (0.55)
Money Market Fund(7)

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 $ 1.00 0.05 -- 0.05 (0.05)
1999 $ 1.00 0.05 -- 0.05 (0.05)
</TABLE>

Distributions to
Shareholders from
Net Realized Gain

on Investment
Transactions,

Futures
Contracts, and

Foreign Currency Total

Period Ended August 31, Transactions Distributions
<S> <C> <C>
Equity Income Fund
1995 -- (0.33)
1996 (0.21) (0.56)
1997 (0.86) (1.20)
1998 (1.27) (1.59)
1999 (1.04) (1.33)

Large-Cap Growth & Income
Fund

1995 -- (0.09)
1996 (0.66) (0.81)
1997 (1.94) (2.06)
1998 (1.18) (1.24)
1999 (0.77) (0.83)

Mid-Cap Value Fund

1995 (0.11) (0.31)
1996 (0.88) (1.09)
1997 (1.89) (2.04)
1998 (1.95) (2.07)
1999 (0.94) (1.06)

Mid-Cap Growth Fund

1995 -- (0.01)
1996 (0.92) (0.92)
1997 (1.22) (1.22)
1998 (1.81) (1.81)
1999 (0.82) (0.82)

Small-Cap Growth Fund

1997(2) -- --
1998 (0.49) (0.49)
1999 (0.02) (0.02)

International Stock Fund

1995(1) -- (0.05)
1996 (0.03) (0.25)
1997 (0.09) (0.35)
1998 (0.29) (0.50)
1999 -- (0.25)

Government Income Fund

1995 -- (0.62)
1996 -- (0.62)
1997 -- (0.62)
1998 -- (0.61)
1999 -- (0.54)

Intermediate Bond Fund

1995 -- (0.62)
1996 -- (0.58)
1997 -- (0.58)
1998 -- (0.58)
1999 -- (0.55)

Intermediate Tax-Free Fund

1995 -- (0.42)
1996 -- (0.43)
1997 -- (0.43)
1998 -- (0.43)
1999 (0.07) (0.49)

Short-Term Income Fund

1995 -- (0.58)
1996 -- (0.62)
1997 -- (0.62)
1998 -- (0.61)
1999 -- (0.55)

Money Market Fund(7)

1995 -- (0.05)
1996 -- (0.05)
1997 -- (0.05)
1998 -- (0.05)
1999 -- (0.05)
</TABLE>

Ratios to Average Net Assets

Net Asset Net Investment Net Assets,
Value, Net Expenses Income End of Period
End of Total Investment (after (after (000's
Period Ended Period Return(3) Expenses(6) Income(6) Waivers) Waivers) Omitted)
August 31,
<S> <C> <C> <C> <C> <C> <C> <C>
Equity
Income Fund
1995 $11.22 16.40% 1.10% 3.36% 1.01% 3.45% $ 107,499
1996 $13.00 21.20% 0.98% 2.83% 0.98% 2.83% $ 173,402
1997 $15.64 30.95% 1.22% 2.31% 1.22% 2.31% $ 331,730
1998 $14.17 0.04% 1.17% 2.01% 1.17% 2.01% $ 458,865
1999 $16.71 27.92% 1.17% 1.73% 1.17% 1.73% $ 537,295

Large-Cap
Growth &
Income Fund

1995 $11.64 16.85% 0.99% 0.87% 0.98% 0.88% $ 257,019
1996 $12.16 11.56% 0.97% 1.28% 0.97% 1.28% $ 251,583
1997 $13.96 34.50% 1.23% 0.78% 1.23% 0.78% $ 269,607
1998 $13.24 3.44% 1.21% 1.40% 1.21% 0.40% $ 274,821
1999 $17.48 38.98% 1.20% 0.32% 1.20% 0.32% $ 407,031

Mid-Cap
Value Fund

1995 $12.08 13.57% 0.96% 1.98% 0.96% 1.98% $ 220,436
1996 $11.98 8.53% 0.98% 1.68% 0.98% 1.68% $ 195,066
1997 $13.14 30.20% 1.23% 1.20% 1.23% 1.20% $ 145,143
1998 $10.25 (7.75%) 1.25% 0.96% 1.25% 0.96% $ 134,620
1999 $11.40 21.92% 1.25% 0.96% 1.25% 0.96% $ 128,575

Mid-Cap
Growth Fund

1995 $12.30 27.06% 1.09% (0.21%) 1.01% (0.13%) $ 108,256
1996 $13.56 18.92% 1.01% (0.47%) 1.01% (0.47%) $ 143,236
1997 $14.82 19.14% 1.24% (0.52%) 1.24% (0.52%) $ 196,983
1998 $11.95 (8.77%) 1.23% (0.79%) 1.23% (0.79%) $ 187,388
1999 $17.28 53.41% 1.21% (0.73%) 1.21% (0.73%) $ 297,249

Small-Cap
Growth Fund

1997(2) $12.19 21.90% 1.80%(4) (0.94%)(4) 1.80%(4) (0.94%)(4) $ 56,425
1998 $ 9.82 (16.25%) 1.60% (1.18%) 1.60% (1.18%) $ 79,858
1999 $12.38 26.30% 1.59% (0.90%) 1.59% (0.90%) $ 102,992

International
Stock Fund

1995(1) $10.16 2.11% 1.58%(4) 2.38%(4) 1.54%(4) 2.42%(4) $ 94,048
1996 $11.08 11.71% 1.35% 2.58% 1.35% 2.58% $ 143,783
1997 $13.20 22.73% 1.59% 1.80% 1.59% 1.80% $ 226,849
1998 $11.54 (9.09%) 1.49% 2.01% 1.49% 2.01% $ 225,248
1999 $13.83 22.20% 1.51% 0.78% 1.50% 0.79% $ 270,315

Government
Income Fund

1995 $ 9.51 9.78% 1.12% 6.28% 0.86% 6.54% $ 103,708
1996 $ 9.27 4.02% 1.05% 6.32% 0.86% 6.51% $ 138,458
1997 $ 9.49 9.35% 1.24% 6.24% 0.86% 6.62% $ 203,642
1998 $ 9.70 8.92% 1.21% 6.04% 0.87% 6.38% $ 280,313
1999 $ 9.22 0.62% 1.19% 5.36% 0.86% 5.69% $ 317,284

Intermediate
Bond Fund

1995 $ 9.51 8.58% 0.79% 6.42% 0.71% 6.50% $ 344,071
1996 $ 9.26 3.52% 0.81% 6.05% 0.72% 6.14% $ 403,657
1997 $ 9.44 8.42% 1.03% 5.86% 0.72% 6.17% $ 398,234
1998 $ 9.60 8.00% 1.00% 5.73% 0.71% 6.02% $ 589,669
1999 $ 9.17 1.28% 0.99% 5.57% 0.71% 5.85% $ 598,970

Intermediate
Tax-Free Fund

1995 $ 9.91 6.58% 1.08% 3.88% 0.61% 4.35% $ 46,051
1996 $ 9.83 3.57% 0.98% 3.97% 0.61% 4.34% $ 65,927
1997 $10.04 6.67% 1.15% 3.81% 0.61% 4.35% $ 88,108
1998 $10.33 7.31% 1.12% 3.71% 0.61% 4.22% $ 101,592
1999 $ 9.85 0.02% 1.09% 3.63% 0.61% 4.11% $ 108,732

Short-Term
Income Fund

1995 $ 9.74 6.47% 0.91% 5.38% 0.51% 5.78% $ 84,273
1996 $ 9.59 4.92% 0.91% 5.76% 0.51% 6.16% $ 100,846
1997 $ 9.64 7.20% 1.08% 5.87% 0.49% 6.46% $ 148,781
1998 $ 9.61 6.22% 1.05% 5.85% 0.50% 6.40% $ 133,186
1999 $ 9.40 3.59% 1.07% 5.18% 0.51% 5.74% $ 134,943

Money Market
Fund(7)

1995 $ 1.00 5.57% 0.67% 5.18% 0.41% 5.44% $1,128,623
1996 $ 1.00 5.39% 0.67% 5.03% 0.41% 5.29% $1,039,659
1997 $ 1.00 5.35% 0.67% 4.96% 0.41% 5.22% $1,290,659
1998 $ 1.00 5.51% 0.66% 5.12% 0.41% 5.37% $1,588,817
1999 $ 1.00 4.98% 0.66% 4.61% 0.41% 4.86% $1,663,740
</TABLE>

Portfolio
Turnover

Period Ended Rate
August 31,
<S> <C>
Equity
Income Fund
1995 43%
1996 60%
1997 61%
1998 69%
1999 72%

Large-Cap
Growth &
Income Fund

1995 79%
1996 147%
1997 43%
1998 33%
1999 32%

Mid-Cap
Value Fund

1995 78%
1996 67%
1997 55%
1998 59%
1999 90%

Mid-Cap
Growth Fund

1995 157%
1996 189%
1997 211%
1998 167%
1999 173%

Small-Cap
Growth Fund

1997(2) 183%
1998 139%
1999 219%

International Stock
Fund

1995(1) 61%
1996 26%
1997 26%
1998 24%
1999 182%

Government
Income Fund

1995 360%
1996 268%
1997 299%
1998 353%
1999 232%

Intermediate
Bond Fund

1995 232%
1996 201%
1997 144%
1998 148%
1999 181%

Intermediate
Tax-Free Fund

1995 105%
1996 41%
1997 53%
1998 68%
1999 53%

Short-Term
Income Fund

1995 194%
1996 144%
1997 101%
1998 90%
1999 163%

Money Market
Fund(7)

1995 --
1996 --
1997 --
1998 --
1999 --
</TABLE>

(1) Reflects operations for the period from September 2, 1994 (date of initial
public investment) to August 31, 1995.

(2) Reflects operations for the period from September 3, 1996 (date of initial
public investment) to August 31, 1997.

(3) Based on net asset value. (4) Computed on an annualized basis.

(5) The amount shown in this caption for a share outstanding does not
correspond with the aggregate net realized and unrealized gain (loss) on
investments, collateral, Futures Contracts and foreign currency for the
period ended due to the timing of sales and repurchases of Fund shares in
relation to fluctuating market values of the investments of the Fund.

(6) During the period, certain fees were voluntarily waived. If such waivers
had not occurred, the ratios would have been as indicated.

(7) Effective December 1998, Class A Shares changed its share class name to
Class Y Shares.

A Statement of Additional Information (SAI) dated October 31, 1999 is
incorporated by reference into this prospectus. Additional information about the
Funds' investments is contained in the Funds' SAI and Annual and Semi-Annual
Reports to shareholders as they become available. The Annual Report's Management
Discussions & Analyses discuss market conditions and investment strategies that
significantly affected each Fund's performance during their last fiscal year. To
obtain the SAI, Annual Report, Semi-Annual Report, and other information without
charge, and make inquiries, write to or call Marshall Funds Investor Services at
1-414-287-8555 or 1-800-236-FUND (3863).

You can obtain information about the Marshall Funds by writing to or visiting
the Public Reference Room in Washington, D.C. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected]. or by writing to the SEC's Public
Reference Section, Washington, D.C. 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.

Marshall Funds Investor Services
P.O. Box 1348
Milwaukee, Wisconsin 53201-1348
414-287-8555 or 800-236-FUND (3863)

Internet address: http://www.marshallfunds.com

TDD: Speech and Hearing Impaired Services
1-800-209-3520

Federated Securities G00714-01 (10/99)
Distributor SEC File No. 811-7047

[Marshal Funds logo]
Marshall Equity Funds

Fund name Fund manager Goal Invests in
<S> <C> <C> <C>

Marshall Equity Bruce P. Hutson Capital appreciation . Common stocks of companies paying above-average
Income Fund and above-average dividends

dividend income . Seeks to construct a diversified portfolio with a
yield at least 1% greater than the S&P 500 Index, an
unmanaged index of large-cap stocks

Marshall William J. O'Connor, Capital appreciation . Companies with market caps over $10 billion
Large-Cap Growth & CFA and income Income Fund
. Companies with a history of growing earnings and
growing dividends

Marshall Mid-Cap Matthew B. Fahey Capital appreciation . Medium-size companies with traditional value
Value Fund John C. Potter, CFA characteristics

. Seeks companies that have under appreciated assets or
are involved in company turnarounds or corporate
restructuring

Marshall Mid-Cap Steve D. Hayward, Capital appreciation . Medium-size companies with high potential growth rates
Growth Fund CFA . Seeks to invest in successful entrepreneurs

Marshall Steve D. Hayward, Capital appreciation . Small companies with high potential growth rates1
Small-Cap CFA . Seeks to invest in successful entrepreneurs
Growth Fund/1/

Marshall Dan Jaworski, CFA Capital appreciation . Targets companies outside the U.S. with strong
International BPI Global Asset competitive positions and high returns on capital
Stock Fund/2/ Management LLP . Investment discipline is a blend of growth and value
</TABLE>

[graphic]

Marshall Income Funds

Fund name Fund manager Goal Invests in
<S> <C> <C> <C>

Marshall Government Joseph M. Cullen, Current income . Securities of the U.S. government and its agencies
Income Fund CFA . Uses current and historical interest rate

relationships to evaluate market sectors and

individual securities

Marshall Mark Pittman, CFA To maximize total . Intermediate, investment-grade bonds and notes
Intermediate return consistent with . Selects portfolio securities using macro-
Bond Fund current income economic, credit and market analysis

Marshall John D. Boritzke, CFA High level of current . Investment grade municipal securities providing
Intermediate income exempt income exempt from federal income tax
Tax-Free Fund from federal income . Selects portfolio securities by evaluating
tax as is consistent cyclical trends in interest rates and municipal
with preservation bond supply factors
of capital . Income may be subject to state and local taxes

Marshall Mark Pittman, CFA To maximize total . Short- to intermediate-term investment grade
Short-Term return consistent with bonds and notes
Income Fund current income . Selects portfolio securities using macro-
economic, credit and market analysis

Marshall Money Richard Rokus, CFA Current income . High-quality money market securities maturing in
Market Fund/3/ consistent with 397 days or less
stability of principal . Seeks to preserve value of investment at $1.00
per share (although it's still possible to lose
money)

</TABLE>

[graphic]

/1/Small-cap stocks are less liquid and have historically experienced greater
volatility than average.

/2/Foreign investing involves special risks due to factors such as increased
volatility, currency fluctuation, and differences in auditing and other
financial standards.

/3/The Fund is not insured nor guaranteed by the FDIC or any other government
agency.

For more complete information on the Marshall Funds, contact your investment
representative for a prospectus. Read it carefully before investing.

M&I Investment Management Corp. is the investment adviser to the Marshall Funds.
BPI Global Asset Management LLP is the sub-adviser for the Marshall
International Stock Fund. Federated Securities Corp. is the distributor. The
Marshall Funds are available through M&I Brokerage Services, authorized broker-
dealers and, for certain accounts, Marshall & Ilsley Trust Companies.

[Marshall Funds logo]

Marshall Funds Investor Services
P.O. Box 1348

Milwaukee, Wisconsin 53201-1348

800-236-FUND(3863)

TDD: Speech and Hearing Impaired Services
800-209-3520

www.marshallfunds.com
Federated Securities Corp., Distributor G00714-01(10/99)

M&I Investment Management Corp., Investment Adviser

953-294Y

MARSHALL FUNDS, INC.

STATEMENT OF ADDITIONAL INFORMATION

CLASS Y SHARES

October 31, 1999

EQUITY FUNDS INCOME FUNDS

O MARSHALL EQUITY INCOME FUND O MARSHALL GOVERNMENT INCOME FUND O
MARSHALL LARGE-CAP GROWTH & INCOME FUND O MARSHALL INTERMEDIATE BOND
FUND O MARSHALL MID-CAP VALUE FUND O MARSHALL INTERMEDIATE TAX-FREE
FUND O MARSHALL MID-CAP GROWTH FUND O MARSHALL SHORT-TERM INCOME FUND
O MARSHALL SMALL-CAP GROWTH FUND O MARSHALL INTERNATIONAL STOCK FUND
MONEY MARKET FUND

O MARSHALL MONEY MARKET FUND

This Statement of Additional Information (SAI) is not a Prospectus. Read
this SAI in conjunction with the Class Y Shares Prospectus for the Marshall
Funds listed above, dated October 31, 1999. This SAI incorporates by
reference the financial statements from the Funds' Annual Report. You may
obtain the Prospectus or Annual Report without charge by calling Marshall
Funds Investor Services at 1-414-287-8555 or 1-800-236-FUND (3863), or you
can visit the Marshall Funds' Internet site on the World Wide Web at
http://www.marshallfunds.com.

P.O. BOX 1348

MILWAUKEE, WISCONSIN 53201-1348

G00714-02(10/99)

FEDERATED SECURITIES CORP.

Distributor

A subsidiary of FEDERATED INVESTORS, INC.

<PAGE>

TABLE OF CONTENTS

HOW ARE THE FUNDS ORGANIZED? 1

SECURITIES IN WHICH THE FUNDS INVEST 1

SECURITIES DESCRIPTIONS, TECHNIQUES AND RISKS 3

INVESTMENT LIMITATIONS 14

DETERMINING MARKET VALUE OF SECURITIES 16

WHAT DO SHARES COST? 18

HOW ARE THE FUND SHARES SOLD? 18

HOW TO BUY SHARES 18

ACCOUNT AND SHARE INFORMATION 19

WHAT ARE THE TAX CONSEQUENCES? 20

WHO MANAGES THE FUNDS? 21

HOW DO THE FUNDS MEASURE PERFORMANCE? 26

PERFORMANCE COMPARISONS 29

ECONOMIC AND MARKET INFORMATION 32

FINANCIAL STATEMENTS 32

APPENDIX 33

ADDRESSES 36

<PAGE>

HOW ARE THE FUNDS ORGANIZED?

Marshall Funds, Inc. (Corporation) is an open-end, management investment
company that was established as a Wisconsin corporation on July 31, 1992.

The Funds are diversified portfolios of the Corporation. The Corporation may
offer separate series of shares representing interests in separate portfolios of
securities, and the shares in any one portfolio may be offered in separate
classes. This Statement contains additional information about the Corporation
and its eleven investment portfolios. This Statement uses the same terms as
defined in the Prospectus. The definitions of the terms series and class in the
Wisconsin Business Corporation Law, Chapter 180 of the Wisconsin Statutes (WBCL)
differ from the meanings assigned to those terms in the Prospectus and this
Statement of Additional Information. The Articles of Incorporation of the
Corporation reconcile this inconsistency in terminology, and provide that the
Prospectus and Statement of Additional Information may define these terms
consistently with the use of those terms under the WBCL and the Internal Revenue
Code. SECURITIES IN WHICH THE FUNDS INVEST

Under normal market conditions, the INTERNATIONAL STOCK FUND will invest at
least 65% of its assets in equity securities of companies located in at least
three

different countries outside the United States. Following is a table that
indicates which types of securities are a(n):

o P = PRINCIPAl investment of a Fund; (shaded in chart) o A = ACCEPTABLe (but
not principal) investment of a Fund; or o N = NOT AN ACCEPTABLe investment of a
Fund.

EQUITY FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
SECURITIES EQUITY LARGE-CAP MID-CAP MID-CAP SMALL-CAP INTERNATIONAL
INCOME GROWTH & VALUE GROWTH GROWTH STOCK
INCOME

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AMERICAN DEPOSITARY RECEIPTS1 A A A A A A
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ASSET-BACKED SECURITIES2 A A A A A A
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BANK INSTRUMENTS3 A A A A A A
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BORROWING4 A A A A A A
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COMMON STOCK P P P P P P
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COMMON STOCK OF FOREIGN COMPANIES A A A A A P
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CONVERTIBLE SECURITIES A A A A A A
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DEBT OBLIGATIONS A A A A A A5
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DERIVATIVE CONTRACTS AND SECURITIES A A A A A A
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EUROPEAN DEPOSITARY RECEIPTS N N N N N A
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FIXED RATE DEBT OBLIGATIONS A A A A A A
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FLOATING RATE DEBT OBLIGATIONS A A A A A A
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FOREIGN CURRENCY HEDGING TRANSACTIONS N N N N N A
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FOREIGN CURRENCY TRANSACTIONS N N N N N A
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FOREIGN SECURITIES6 A A A A A P
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FORWARD COMMITMENTS, WHEN-ISSUED AND A A A A A A
DELAYED DELIVERY TRANSACTIONS

INCOME FUNDS AND MONEY MARKET FUND

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SECURITIES GOVERNMENT INTERMEDIATE INTERMEDIATE SHORT-TERM MONEY
INCOME BOND TAX-FREE INCOME MARKET

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DEBT OBLIGATIONS P P P P P

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DEMAND MASTER NOTES N A N A P

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DOLLAR ROLLS A A A A N

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FIXED RATE DEBT OBLIGATIONS P P P P P

DELAYED DELIVERY TRANSACTIONS

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FUNDING AGREEMENTS A A A A P

COMPANIES

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</TABLE>

1. ALL FUNDS may invest up to 20% of their respective assets, however, the
INTERNATIONAL STOCK FUND has no limit.

2. The EQUITY FUNDS and INCOME FUNDS may invest in Asset-Backed Securities
rated, at the time of purchase, in the top four rating categories by a
nationally recognized statistical rating organization (NRSRO) (securities rated
AAA, AA, A or BBB by Standard & Poor's (S&P) and Fitch IBCA, Inc. (Fitch) and
Aaa, Aa, A or Baa by Moody's Investors Service, Inc. (Moody's)), or if unrated,
determined by the Adviser to be of comparable quality. The MONEY MARKET FUND
will invest in only the short-term tranches, which will generally have a
maturity not exceeding 397 days. Only the INCOME FUNDS expect that they might
exceed 5% of their respective net assets in these securities. 3. The EQUITY
FUNDS and MONEY MARKET FUND may purchase foreign Bank Instruments. The EQUITY
FUNDS (except INTERNATIONAL STOCK FUND) are limited to 5% of total assets. THE
INCOME FUNDS may invest in foreign Bank Instruments, although they do not
presently intend to do so.

4. The INTERNATIONAL STOCK FUND may borrow money to purchase securities, a
strategy that involves purchasing securities in amounts that exceed the amount
it has invested in the underlying securities. The excess exposure increases the
risks associated with the underlying securities and tends to exaggerate the
effect of changes in the value of its portfolio securities and consequently on
the Fund's net asset value. The Fund may pledge more than 5% of its total assets
to secure such borrowings. 5. Must be issued by U.S. corporations and rated
in the top four categories by an NRSRO or, if unrated, determined by the Adviser
to be of comparable quality. 6. The EQUITY FUNDS, except INTERNATIONAL STOCK
FUND may only invest up to 5% of their respective net assets in foreign
securities other than American Depositary Receipts. 7. ALL FUNDS may invest
up to 15% of their respective assets in illiquid securities except for the MONEY
MARKET FUND which is limited to 10%. 8. THE SMALL-CAP GROWTH FUND may
purchase commercial paper rated investment grade by an NRSRO or, if unrated,
determined by the Adviser to be of comparable quality. The OTHER FUNDS may
purchase commercial paper rated in the two highest rating categories by an NRSRO
or, if unrated, determined by the Adviser to be of comparable quality. 9.
During the period any reverse repurchase agreements are outstanding, but only to
the extent necessary to assure completion of the reverse repurchase agreements,
the MONEY MARKET FUND will restrict the purchase of portfolio instruments to
money market instruments maturing on or before the expiration date of the
reverse repurchase agreement. SECURITIES DESCRIPTIONS, TECHNIQUES AND RISKS
As used in this section, the term Adviser means Adviser or Sub-Adviser, as
applicable. AGENCY SECURITIES are issued or guaranteed by a federal agency or
other government sponsored entity acting under federal authority. Some
government entities are supported by the full faith and credit of the United
States. Other government entities receive support through federal subsidies,
loans or other benefits. A few government entities have no explicit financial
support, but are regarded as having implied support because the federal
government sponsors their activities. Investors regard agency securities as
having low credit risks, but not as low as Treasury securities. A Fund treats
mortgage-backed securities guaranteed by a government sponsored entity as if
issued or guaranteed by a federal agency. Although such a guarantee protects
against credit risks, it does not reduce the market and prepayment risks.
ASSET-BACKED SECURITIES are issued by non-governmental entities and carry no
direct or indirect government guarantee. Asset-Backed Securities represent an
interest in a pool of assets such as car loans and credit card receivables.
Almost any type of fixed income assets (including other fixed income securities)
may be used to create an asset backed security. However, most asset-backed
securities involve consumer or commercial debts with maturities of less than ten
years. Asset-backed securities may take the form of commercial paper or notes,
in addition to pass through certificates or asset-backed bonds. Asset backed
securities may also resemble some types of CMOs. Payments on asset-backed
securities depend upon assets held by the issuer and collections of the
underlying loans. The value of these securities depends on many factors,
including changing interest rates, the availability of information about the
pool and its structure, the credit quality of the underlying assets, the
market's perception of the servicer of the pool, and any credit enhancement
provided. Also, these securities may be subject to prepayment risk.

<PAGE>

BANK INSTRUMENTS. Bank Instruments are unsecured interest bearing deposits
with banks. Bank Instruments include bank accounts, time deposits, certificates
of deposit and banker's acceptances. Instruments denominated in U.S. dollars and
issued by non-U.S. branches of U.S. or foreign banks are commonly referred to as
Eurodollar instruments. Instruments denominated in U.S. dollars and issued by
U.S. branches of foreign banks are referred to as Yankee dollar instruments.

The Funds will invest in bank instruments that have been issued by banks and
savings and loans that have capital, surplus and undivided profits of over $100
million or whose principal amount is insured by the Bank Insurance Fund or the
Savings Association Insurance Fund, which are administered by the Federal
Deposit Insurance Corporation. Securities that are credit-enhanced with a bank's
irrevocable letter of credit or unconditional guaranty will also be treated as
Bank Instruments.

BORROWING. The Funds may borrow money from banks or through reverse
repurchase agreements in amounts up to one-third of total assets (net assets for
the MONEY MARKET FUND, SHORT-TERM INCOME FUND AND INTERMEDIATE BOND FUND), and
pledge some assets as collateral. A Fund that borrows will pay interest on
borrowed money and may incur other transaction costs. These expenses could
exceed the income received or capital appreciation realized by a Fund from any
securities purchased with borrowed money. With respect to borrowings, the Funds
are required to maintain continuous asset coverage equal to 300% of the amount
borrowed. If the coverage declines to less than 300%, a Fund must sell
sufficient portfolio securities to restore the coverage even if it must sell the
securities at a loss.

CORPORATE DEBT SECURITIES are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most common types of
corporate debt securities. The credit risks of corporate debt securities vary
widely among issuers.

CONVERTIBLE SECURITIES. Convertible securities are fixed income securities that
a Fund has the option to exchange for equity securities at a specified
conversion price. The option allows a Fund to realize additional returns if the
market price of the equity securities exceeds the conversion price. For example,
if a Fund holds fixed income securities convertible into shares of common stock
at a conversion price of $10 per share, and the shares have a market value of
$12, a Fund could realize an additional $2 per share by converting the fixed
income securities.

To compensate for the value of the conversion option, convertible securities
have lower yields than comparable fixed income securities. In addition, the
conversion price exceeds the market value of the underlying equity securities at
the time a convertible security is issued. Thus, convertible securities may
provide lower returns than non-convertible fixed income securities or equity
securities depending upon changes in the price of the underlying equity
securities. However, convertible securities permit a Fund to realize some of the
potential appreciation of the underlying equity securities with less risk of
losing its initial investment.

A Fund treats convertible securities as both fixed income and equity securities
for purposes of its investment policies and limitations, because of their unique
characteristics.

CREDIT ENHANCEMENT. Certain acceptable investments may be credit-enhanced by a
guaranty, letter of credit, or insurance. The Adviser may evaluate a security
based, in whole or in part, upon the financial condition of the party providing
the credit enhancement (the credit enhancer). The bankruptcy, receivership or
default of the credit enhancer will adversely affect the quality and
marketability of the underlying security.

For diversification purposes, credit-enhanced securities will not be treated
as having been issued by the credit enhancer, unless a Fund has invested more
than 10% of its assets in securities issued, guaranteed or otherwise
credit-enhanced by the credit enhancer. In such cases, the securities will be
treated as having been issued both by the issuer and the credit enhancer.

CREDIT QUALITY. The fixed income securities in which a Fund invests will be
rated at least investment grade by a nationally recognized statistical ratings
organization (NRSRO). Investment grade securities have received one of an
NRSRO's four highest ratings. Securities receiving the fourth highest rating
(Baa by Moody's or BBB by S&P or Fitch) have speculative characteristics and
changes in the market or the economy are more likely to affect the ability of
the issuer to repay its obligations when due. The Adviser will evaluate
downgraded securities and will sell any security determined not to be an
acceptable investment. The MONEY MARKET FUND is subject to Rule 2a-7 under the
Investment Company Act of 1940, and will follow the credit quality requirements
of the Rule.

COMMERCIAL PAPER AND RESTRICTED AND ILLIQUID SECURITIES. Commercial paper is an
issuer's draft or note with a maturity of less than nine months. Companies
typically issue commercial paper to fund current expenditures. Most issuers
constantly reissue their commercial paper and use the proceeds (or bank loans)
to repay maturing paper. Commercial paper may default if the issuer cannot
continue to obtain financing in this fashion. The short maturity of commercial
paper reduces both the market and credit risk as compared to other debt
securities of the same issuer. The Funds may invest in commercial paper issued
under Section 4(2) of the Securities Act of 1933. By law, the sale of Section
4(2) commercial paper is restricted and is generally sold only to institutional
investors, such as a Fund. A Fund purchasing Section 4(2) commercial paper must
agree to purchase the paper for investment purposes only and not with a view to
public distribution. Section 4(2) commercial paper is normally resold to other
institutional investors through investment dealers who make a market in Section
4(2) commercial paper, thus providing liquidity. The Funds believe that
Section 4(2) commercial paper and certain other restricted securities which meet
the Directors' criteria for liquidity are quite liquid. Section 4(2) commercial
paper and restricted securities which are deemed liquid, will not be subject to
the investment limitation. In addition, because Section 4(2) commercial paper is
liquid, the Funds intend to not subject such paper to the limitation applicable
to restricted securities. DEMAND FEATURES. The Funds may purchase securities
subject to a demand feature, which may take the form of a put or standby
commitment. Demand features permit a Fund to demand payment of the value of the
security (plus an accrued interest) from either the issuer of the security or a
third-party. Demand features help make a security more liquid, although an
adverse change in the financial health of the provider of a demand feature (such
as bankruptcy), will negatively affect the liquidity of the security. Other
events may also terminate a demand feature, in which case liquidity is also
affected.

DEMAND MASTER NOTES. Demand master notes are short-term borrowing arrangements
between a corporation or government agency and an institutional lender (such as
a Fund) payable upon demand by either party. A party may demand full or partial
payment and the notice period for demand typically ranges from one to seven
days. Many master notes give a Fund the option of increasing or decreasing the
principal amount of the master note on a daily or weekly basis within certain
limits. Demand master notes usually provide for floating or variable rates of
interest.

DEPOSITARY RECEIPTS. American Depositary Receipts (ADRs) are receipts, issued by
a U.S. bank, that represent an interest in shares of a foreign-based
corporation. ADRs provide a way to buy shares of foreign-based companies in the
U.S. rather than in overseas markets. European Depositary Receipts (EDRs) and
Global Depositary Receipts (GDRs) are receipts, issued by foreign banks or trust
companies, or foreign branches of U.S. banks, that represent an interest in
shares of either a foreign or U.S. corporation. Depositary Receipts may not be
denominated in the same currency as the underlying securities into which they
may be converted, and are subject to currency risks. Depositary Receipts involve
many of the same risks of investing directly in foreign securities.

DERIVATIVE CONTRACTS. Derivative contracts are financial instruments that
require payments based upon changes in the values of designated (or underlying)
securities, currencies, commodities, financial indices or other assets. Some
derivative contracts (such as futures, forwards and options) require payments
relating to a future trade involving the underlying asset. Other derivative
contracts (such as swaps) require payments relating to the income or returns
from the underlying asset. The other party to a derivative contract is referred
to as a counterparty. Many derivative contracts are traded on securities or
commodities exchanges. In this case, the exchange sets all the terms of the
contract except for the price. Investors make payments due under their contracts
through the exchange. Most exchanges require investors to maintain margin
accounts through their brokers to cover their potential obligations to the
exchange. Parties to the contract make (or collect) daily payments to the margin
accounts to reflect losses (or gains) in the value of their contracts. This
protects investors against potential defaults by the counterparty. Trading
contracts on an exchange also allows investors to close out their contracts by
entering into offsetting contracts. For example, a Fund could close out an open
contract to buy an asset at a future date by entering into an offsetting
contract to sell the same asset on the same date. If the offsetting sale price
is more than the original purchase price, a Fund realizes a gain; if it is less,
a Fund realizes a loss. Exchanges may limit the amount of open contracts
permitted at any one time. Such limits may prevent a Fund from closing out a
position. If this happens, a Fund will be required to keep the contract open
(even if it is losing money on the contract), and to make any payments required
under the contract (even if it has to sell portfolio securities at unfavorable
prices to do so). Inability to close out a contract could also harm a Fund by
preventing it from disposing of or trading any assets it has been using to
secure its obligations under the contract. A Fund may also trade derivative
contracts over-the-counter (OTC) in transactions negotiated directly between a
Fund and the counterparty. OTC contracts do not necessarily have standard terms,
so they cannot be directly offset with other OTC contracts. In addition, OTC
contracts with more specialized terms may be more difficult to price than
exchange traded contracts. Depending upon how a Fund uses derivative contracts
and the relationships between the market value of a derivative contract and the
underlying asset, derivative contracts may increase or decrease a Fund's
exposure to market and currency risks, and may also expose a Fund to liquidity
and leverage risks. OTC contracts also expose a Fund to credit risks in the
event that a counterparty defaults on the contract. DOLLAR ROLLS are
transactions where a Fund sells mortgage-backed securities with a commitment to
buy similar, but not identical, mortgage-backed securities on a future date at a
lower price. Normally, one or both securities involved are to be announced
mortgage-backed securities. Dollar rolls are subject to interest rate risks and
credit risks. These transactions may create leverage risks. DURATION.
Duration is a measure of volatility in the price of a bond prior to maturity.
Volatility is the magnitude of the change in the price of a bond relative to a
change in the market interest rate. Volatility is based upon a bond's coupon
rate; maturity date; and the level of market yields of similar bonds. Generally,
bonds with lower coupons or longer maturities will be more volatile than bonds
with higher coupons or shorter maturities. Duration combines these variables
into a single measure. EQUITY SECURITIES are the fundamental unit of ownership
in a company. They represent a share of the issuer's earnings and assets, after
the issuer pays its liabilities. Generally, issuers have discretion as to the
payment of any dividends or distributions. As a result, investors cannot predict
the income they will receive from equity securities. However, equity securities
offer greater potential for appreciation than many other types of securities,
because their value increases directly with the value of the issuer's business.
The following describes the types of equity securities in which the EQUITY FUNDS
invest.

COMMON STOCKS are the most prevalent type of equity security. Common
stockholders are entitled to the net value of the issuer's earnings and
assets after the issuer pays its creditors and any preferred stockholders.
As a result, changes in an issuer's earnings directly influence the value of
its common stock. PREFERRED STOCKS have the right to receive specified
dividends or distributions before the payment of dividends or distributions
on common stock. Some preferred stocks also participate in dividends and
distributions paid on common stock. Preferred stocks may provide for the
issuer to redeem the stock on a specified date. A Fund holding redeemable
preferred stock may treat it as a fixed income security. WARRANTS provide an
option to buy the issuer's stock or other equity securities at a specified
price. A Fund holding a warrant may buy the designated shares by paying the
exercise price before the warrant expires. Warrants may become worthless if
the price of the stock does not rise above the exercise price by the stated
expiration date. Rights are the same as warrants, except they are typically
issued to existing stockholders.

FIXED INCOME SECURITIES. Fixed income securities generally pay interest at
either a fixed or floating rate and provide more regular income than equity
securities. However, the returns on fixed income securities are limited and
normally do not increase with the issuer's earnings. This limits the potential
appreciation of fixed income securities as compared to equity securities. Fixed
rate securities and floating rate securities react differently as prevailing
interest rates change.

FIXED RATE DEBT SECURITIES. Debt securities that pay a fixed interest rate
over the life of the security and have a long-term maturity may have many
characteristics of short-term debt. For example, the market may treat
fixed rate/long-term securities as short-term debt when a security's
market price is close to the call or redemption price, or if the security
is approaching its maturity date when the issuer is more likely to call or
redeem the debt.

As interest rates change, the market prices of fixed rate debt securities
are generally more volatile than the prices of floating rate debt
securities. As interest rates rise, the prices of fixed rate debt
securities fall, and as interest rates fall, the prices of fixed rate debt
securities rise. For example, a bond that pays a fixed interest rate of
10% is more valuable to investors when prevailing interest rates are
lower; therefore, this value is reflected in higher price, or a premium.
Conversely, if interest rates are over 10%, the bond is less attractive to
investors, and sells at a lower price, or a discount.

FLOATING RATE DEBT SECURITIES. The interest rate paid on floating rate
debt securities is reset periodically (e.g., every 90 days) to a
predetermined index rate. Commonly used indices include: 90-day or 180-day
Treasury bill rate; one month or three month London Interbank Offered Rate
(LIBOR); commercial paper rates; or the prime rate of interest of a bank.
The prices of floating rate debt securities are not as sensitive to
changes in interest rates as fixed rate debt securities because they
behave like shorter-term securities and their interest rate is reset
periodically.

FOREIGN CURRENCY TRANSACTIONS. Foreign currency transactions are generally
used to obtain foreign currencies to settle securities transactions. They can
also be used as a hedge to protect assets against adverse changes in foreign
currency exchange rates or regulations. When a Fund uses foreign currency
exchanges as a hedge, it may also limit potential gain that could result from an
increase in the value of such currencies. A Fund may be affected either
favorably or unfavorably by fluctuations in the relative rates of exchange
between the currencies of different nations.

FOREIGN CURRENCY HEDGING TRANSACTIONS. Foreign currency hedging
transactions are used to protect against foreign currency exchange rate
risks. These transactions include: forward foreign currency exchange
contracts, foreign currency futures contracts, and purchasing put or call
options on foreign currencies. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
(Forward Contracts) are used to minimize the risks associated with changes
in the relationship between the U.S. dollar and foreign currencies. They
are used to lock in the U.S. dollar price of a foreign security. A Forward
Contract is a commitment to purchase or sell a specific currency for an
agreed price at a future date. If the Adviser believes a foreign currency
will decline against the U.S. dollar, a Forward Contract may be used to
sell an amount of the foreign currency approximating the value of a Fund's
security that is denominated in the foreign currency. The success of this
hedging strategy is highly uncertain due to the difficulties of predicting
the values of foreign currencies, of precisely matching Forward Contract
amounts, and because the constantly changing value of the securities
involved. The Fund will not enter into Forward Contracts for hedging
purposes in a particular currency in an amount in excess of the Fund's
assets denominated in that currency. Conversely, if the Adviser believes
that the U.S. dollar will decline against a foreign currency, a Forward
Contract may be used to buy that foreign currency for a fixed dollar
amount, otherwise known as cross-hedging. In these transactions, the Fund
will segregate assets with a market value equal to the amount of the
foreign currency purchased. Therefore, the Fund will always have cash,
cash equivalents or high quality debt securities available to cover
Forward Contracts or to limit any potential risk. The segregated assets
will be priced daily. Forward Contracts may limit potential gain from a
positive change in the relationship between the U.S. dollar and foreign
currencies. Unanticipated changes in currency prices may result in poorer
overall performance for a Fund than if it had not engaged in such
contracts. PURCHASING AND WRITING PUT AND CALL OPTIONS on foreign
currencies are used to protect the Fund's portfolio against declines in
the U.S. dollar value of foreign portfolio securities and against
increases in the dollar cost of foreign securities to be acquired. Writing
an option on foreign currency constitutes only a partial hedge, up to the
amount of the premium received. The Fund could lose money if it is
required to purchase or sell foreign currencies at disadvantageous
exchange rates. If exchange rate movements are adverse to the Fund's
position, the Fund may forfeit the entire amount of the premium plus
related transaction costs. These options are traded on U.S. and foreign
exchanges or over-the-counter. EXCHANGE-TRADED FUTURES CONTRACTS are used
for the purchase or sale of foreign currencies (Foreign Currency Futures)
AND will be used to hedge against anticipated changes in exchange rates
that might adversely affect the value of a Fund's portfolio securities or
the prices of securities that a Fund intends to purchase in the future.
The successful use of Foreign Currency Futures depends on the ability to
forecast currency exchange rate movements correctly. Should exchange rates
move in an unexpected manner, a Fund may not achieve the anticipated
benefits of Foreign Currency Futures or may realize losses.

FOREIGN MONEY MARKET INSTRUMENTS. Eurodollar Certificates of Deposit
(ECDs), Yankee dollar Certificates of Deposit (YCDs) and Eurodollar Time
Deposits (ETDs) are all U.S. dollar denominated certificates of deposit. ECDs
are issued by, and ETDs are deposits of, foreign banks or foreign branches of
U.S. banks. YCDs are issued in the U.S. by branches and agencies of foreign
banks. Europaper is dollar-denominated commercial paper and other short-term
notes issued in the U.S. by foreign issuers.

ECDs, ETDs, YCDs, and Europaper have many of the same risks as other foreign
securities. Examples of these risks include economic and political developments,
that may adversely affect the payment of principal or interest, foreign
withholding or other taxes on interest income, difficulties in obtaining or
enforcing a judgment against the issuing bank and the possible impact of
interruptions in the flow of international currency transactions. Also, the
issuing banks or their branches are not necessarily subject to the same
regulatory requirements that apply to domestic banks, such as reserve
requirements, loan limitations, examinations, accounting, auditing, and
recordkeeping and the public availability of information. These factors will be
carefully considered by the Adviser in selecting these investments.

FUNDING AGREEMENTS (Agreements), are investment instruments issued by U.S.
insurance companies. Pursuant to such Agreements, a Fund may make cash
contributions to a deposit fund of the insurance company's general or separate
accounts. The insurance company then credits guaranteed interest to a Fund. The
insurance company may assess periodic charges against an Agreement for expense
and service costs allocable to it, and the charges will be deducted from the
value of the deposit fund. The purchase price paid for an Agreement becomes part
of the general assets of the issuer, and the Agreement is paid from the general
assets of the issuer. The MONEY MARKET FUND will only purchase Agreements from
issuers that meet quality and credit standards established by the Adviser.
Generally, Agreements are not assignable or transferable without the permission
of the issuing insurance companies, and an active secondary market in Agreements
does not currently exist. Also, the MONEY MARKET FUND may not have the right to
receive the principal amount of an Agreement from the insurance company on seven
days' notice or less. Therefore, Agreements are typically considered to be
illiquid investments. FUTURES AND OPTIONS TRANSACTIONS. As a means of reducing
fluctuations in its net asset value, a Fund may buy and sell futures contracts
and options on futures contracts, and buy put and call options on portfolio
securities and securities indices to hedge its portfolio. A Fund may also write
covered put and call options on portfolio securities to attempt to increase its
current income or to hedge its portfolio. There is no assurance that a liquid
secondary market will exist for any particular futures contract or option at any
particular time. A Fund's ability to establish and close out futures and options
positions depends on this secondary market.

FUTURES CONTRACTS. A futures contract is a commitment by two parties under
which one party agrees to make delivery of an asset (seller) and another
party agrees to take delivery of the asset at a certain time in the
future. A futures contract may involve a variety of assets including
commodities (such as oil, wheat, or corn) or a financial asset (such as a
security). A Fund may purchase and sell financial futures contracts to
hedge against anticipated changes in the value of its portfolio without
necessarily buying or selling the securities. Although some financial
futures contracts call for making or taking delivery of the underlying
securities, in most cases these obligations are closed out before the
settlement date. The closing of a futures contract is accomplished by
purchasing or selling an identical offsetting futures contract. Other
financial futures contracts call for cash settlements. A Fund may purchase
and sell stock index futures contracts to hedge against anticipated price
changes with respect to any stock index traded on a recognized stock
exchange or board of trade. A stock index futures contract is an agreement
in which two parties agree to take or make delivery of an amount of cash
equal to the difference between the price of the original contract and the
value of the index at the close of the last trading day of the contract.
No physical delivery of the underlying securities in the index is made.
Settlement is made in cash upon termination of the contract. MARGIN IN
FUTURES TRANSACTIONS. Since a Fund does not pay or receive money upon the
purchase or sale of a futures contract, it is required to deposit an
amount of initial margin in cash, U.S. government securities or
highly-liquid debt securities as a good faith deposit. The margin is
returned to a Fund upon termination of the contract. Initial margin in
futures transactions does not involve borrowing to finance the
transactions. As the value of the underlying futures contract changes
daily, a Fund pays or receives cash, called variation margin, equal to the
daily change in value of the futures contract. This process is known as
marking to market. Variation margin does not represent a borrowing or loan
by a Fund. It may be viewed as settlement between the Fund and the broker
of the amount one would owe the other if the futures contract expired.
When the Fund purchases futures contracts, an amount of cash and/or cash
equivalents, equal to the underlying commodity value of the futures
contracts (less any related margin deposits), will be deposited in a
segregated account with a Fund's custodian to collateralize the position
and insure that the use of futures contracts is unleveraged. A Fund is
also required to deposit and maintain margin when it writes call options
on futures contracts. A Fund will not enter into a futures contract or
purchase an option thereon for other than hedging purposes if immediately
thereafter the initial margin deposits for futures contracts held by it,
plus premiums paid by it for open options on futures contracts, would
exceed 5% of the market value of its net assets, after taking into account
the unrealized profits and losses on those contracts it has entered into.
However, in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in computing such 5%.
PUT OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS. A Fund may
purchase listed put options on financial and stock index futures contracts
to protect portfolio securities against decreases in value. Unlike
entering directly into a futures contract, which requires the purchaser to
buy a financial instrument on a set date at a specified price, the
purchase of a put option on a futures contract entitles (but does not
obligate) its purchaser to decide on or before a future date whether to
assume a short position at the specified price. Generally, if the
hedged portfolio securities decrease in value during the term of an
option, the related futures contracts will also decrease in value and the
option will increase in value. In such an event, a Fund will normally
close out its option by selling an identical option. If the hedge is
successful, the proceeds received by a Fund upon the sale of the second
option will be large enough to offset both the premium paid by a Fund for
the original option plus the decrease in value of the hedged securities.
Alternatively, a Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures contract
of the type underlying the option (for a price less than the strike price
of the option) and exercise the option. A Fund would then deliver the
futures contract in return for payment of the strike price. If a Fund
neither closes out nor exercises an option, the option will expire on the
date provided in the option contract, and only the premium paid for the
contract will be lost. A Fund may also write (sell) listed put options on
financial or stock index futures contracts to hedge its portfolio against
a decrease in market interest rates or an increase in stock prices. A Fund
will use these transactions to purchase portfolio securities in the future
at price levels existing at the time it enters into the transaction. When
a Fund sells a put on a futures contract, it receives a cash premium in
exchange for granting to the buyer of the put the right to receive from a
Fund, at the strike price, a short position in such futures contract. This
is so even though the strike price upon exercise of the option is greater
than the value of the futures position received by such holder. As market
interest rates decrease or stock prices increase, the market price of the
underlying futures contract normally increases. When the underlying
futures contract increases, the buyer of the put option has less reason to
exercise the put because the buyer can sell the same futures contract at a
higher price in the market. If the value of the underlying futures
position is not such that exercise of the option would be profitable to
the option holder, the option will generally expire without being
exercised. The premium received by a Fund can then be used to offset the
higher prices of portfolio securities to be purchased in the future. In
order to avoid the exercise of an option sold by it, generally a Fund will
cancel its obligation under the option by entering into a closing purchase
transaction, unless it is determined to be in a Fund's interest to deliver
the underlying futures position. A closing purchase transaction consists
of the purchase by a Fund of an option having the same term as the option
sold by a Fund, and has the effect of canceling a Fund's position as a
seller. The premium which a Fund will pay in executing a closing purchase
transaction may be higher than the premium received when the option was
sold, depending in large part upon the relative price of the underlying
futures position at the time of each transaction. If the hedge is
successful, the cost of buying the second option will be less than the
premium received by a Fund for the initial option. CALL OPTIONS ON
FINANCIAL AND STOCK INDEX FUTURES CONTRACTS. A Fund may write (sell)
listed and over-the-counter call options on financial and stock index
futures contracts to hedge its portfolio. When a Fund writes a call option
on a futures contract, it undertakes to sell a futures contract at the
fixed price at any time during the life of the option. As stock prices
fall or market interest rates rise, causing the prices of futures to go
down, a Fund's obligation to sell a futures contract costs less to
fulfill, causing the value of a Fund's call option position to increase.
In other words, as the underlying futures price goes down below the strike
price, the buyer of the option has no reason to exercise the call, so that
a Fund keeps the premium received for the option. This premium can
substantially offset the drop in value of a Fund's portfolio securities.
Prior to the expiration of a call written by a Fund, or exercise of it by
the buyer, a Fund may close out the option by buying an identical option.
If the hedge is successful, the cost of the second option will be less
than the premium received by the Fund for the initial option. The net
premium income of a Fund will then substantially offset the decrease in
value of the hedged securities. A Fund may buy a listed call option on a
financial or stock index futures contract to hedge against decreases in
market interest rates or increases in stock price. A Fund will use these
transactions to purchase portfolio securities in the future at price
levels existing at the time it enters into the transaction. When a Fund
purchases a call on a financial futures contract, it receives in exchange
for the payment of a cash premium the right, but not the obligation, to
enter into the underlying futures contract at a strike price determined at
the time the call was purchased, regardless of the comparative market
value of such futures position at the time the option is exercised. The
holder of a call option has the right to receive a long (or buyer's)
position in the underlying futures contract. As market interest rates fall
or stock prices increase, the value of the underlying futures contract
will normally increase, resulting in an increase in value of a Fund's
option position. When the market price of the underlying futures contract
increases above the strike price plus premium paid, a Fund could exercise
its option and buy the futures contract below market price. Prior to the
exercise or expiration of the call option, a Fund could sell an identical
call option and close out its position. If the premium received upon
selling the offsetting call is greater than the premium originally paid, a
Fund has completed a successful hedge. LIMITATION ON OPEN FUTURES
POSITIONS. A Fund will not maintain open positions in futures contracts it
has sold or call options it has written on futures contracts if together
the value of the open positions exceeds the current market value of a
Fund's portfolio plus or minus the unrealized gain or loss on those open
positions, adjusted for the correlation of volatility between the hedged
securities and the futures contracts. If this limitation is exceeded at
any time, a Fund will take prompt action to close out a sufficient number
of open contracts to bring its open futures and options positions within
this limitation. PURCHASING PUT AND CALL OPTIONS ON SECURITIES. A Fund may
purchase put options on portfolio securities to protect against price
movements in a Fund's portfolio. A put option gives a Fund, in return for
a premium, the right to sell the underlying security to the writer
(seller) at a specified price during the term of the option. A Fund may
purchase call options on securities acceptable for purchase to protect
against price movements by locking in on a purchase price for the
underlying security. A call option gives a Fund, in return for a premium,
the right to buy the underlying security from the seller at a specified
price during the term of the option. WRITING COVERED CALL AND PUT
OPTIONS ON SECURITIES. A Fund may write covered call and put options to
generate income and thereby protect against price movements in the Fund's
portfolio securities. As writer of a call option, the Fund has the
obligation, upon exercise of the option during the option period, to
deliver the underlying security upon payment of the exercise price. The
Fund may only sell call options either on securities held in its portfolio
or on securities which it has the right to obtain without payment of
further consideration (or has segregated cash or U.S. government
securities in the amount of any additional consideration). As a writer of
a put option, the Fund has the obligation to purchase a security from the
purchaser of the option upon the exercise of the option. In the case of
put options, the Fund will segregate cash or U.S. Treasury obligations
with a value equal to or greater than the exercise price of the underlying
securities. STOCK INDEX OPTIONS. A Fund may purchase or sell put or
call options on stock indices listed on national securities exchanges or
traded in the over-the-counter market. A stock index fluctuates with
changes in the market values of the stocks included in the index. Upon the
exercise of the option, the holder of a call option has the right to
receive, and the writer of a put option has the obligation to deliver, a
cash payment equal to the difference between the closing price of the
index and the exercise price of the option. The effectiveness of
purchasing stock index options will depend upon the extent to which price
movements in a Fund's portfolio correlate with price movements of the
stock index selected. The value of an index option depends upon movements
in the level of the index rather than the price of a particular stock.
Accordingly, successful use by a Fund of options on stock indices will be
subject to the Adviser correctly predicting movements in the directions of
the stock market generally or of a particular industry. This requires
different skills and techniques than predicting changes in the price of
individual stocks. OVER-THE-COUNTER OPTIONS. Over-the-counter options are
two-party contracts with price and other terms negotiated between buyer
and seller. In contrast, exchange-traded options are third-party contracts
with standardized strike prices and expiration dates and are purchased
from a clearing corporation. Exchange-traded options have a continuous
liquid market while over-the-counter options may not. A Fund may generally
purchase and write over-the-counter options on portfolio securities or
securities indices in negotiated transactions with the buyers or writers
of the options when options on a Fund's portfolio securities or securities
indices are not traded on an exchange. A Fund purchases and writes options
only with investment dealers and other financial institutions deemed
creditworthy by the Adviser. RISKS. When a Fund uses futures and options
on futures as hedging devices, there is a risk that the prices of the
securities or foreign currency subject to the futures contracts may not
correlate perfectly with the prices of the securities or currency in a
Fund's portfolio. This may cause the futures contract and any related
options to react differently to market changes than the portfolio
securities or foreign currency. In addition, the Adviser could be
incorrect in its expectations about the direction or extent of market
factors such as stock price movements or foreign currency exchange rate
fluctuations. In these events, a Fund may lose money on the futures
contract or option. When a Fund purchases futures contracts, an amount of
cash and cash equivalents, equal to the underlying commodity value of the
futures contracts (less any related margin deposits), will be deposited in
a segregated account with a Fund's custodian or the broker, to
collateralize the position and thereby insure that the use of such futures
contract is unleveraged. When a Fund sells futures contracts, it will
either own or have the right to receive the underlying future or security,
or will make deposits to collateralize the position as discussed above.

LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, a Fund
may lend portfolio securities. When a Fund lends portfolio securities, it will
receive either cash or liquid securities as collateral from the borrower. A Fund
will reinvest cash collateral in short-term liquid securities that qualify as an
otherwise acceptable investment for a Fund. If the market value of the loaned
securities increases, the borrower must furnish additional collateral to a Fund.
During the time portfolio securities are on loan, the borrower pays a Fund any
dividends or interest paid on such securities. Loans are subject to termination
at the option of a Fund or the borrower. A Fund may pay reasonable
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash or equivalent collateral
to a securities lending agent or broker. The Funds currently lend their
portfolio securities through Marshall & Ilsley Trust Company (M&I Trust
Company), as agent, and reimburse M&I Trust Company for its costs. The Funds and
M&I Trust Company have applied to the Securities and Exchange Commission for an
order that would permit M&I Trust to charge, and the Funds to pay, market-based
compensation for M&I Trust Company's services as securities lending agent.
SECURITIES LENDING RISKS. When a Fund lends its portfolio securities, it may not
be able to get them back from the borrower on a timely basis. If this occurs, a
Fund may lose certain investment opportunities. A Fund is also subject to the
risks associated with the investments of cash collateral, usually fixed-income
securities risk. MORTGAGE-BACKED SECURITIES represent interests in pools of
mortgages. The underlying mortgages normally have similar interest rates,
maturities and other terms. Mortgages may have fixed or adjustable interest
rates. Interests in pools of adjustable rate mortgages are known as ARMs.
Mortgage-backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage-backed securities is a
"pass-through certificate." Holders of pass-through certificates receive a pro
rata share of the payments from the underlying mortgages. Holders also receive a
pro rata share of any prepayments, so they assume all the prepayment risk of the
underlying mortgages. Collateralized mortgage obligations (CMOs) are complicated
instruments that allocate payments and prepayments from an underlying
pass-through certificate among holders of different classes of mortgage-backed
securities. This creates different prepayment and market risks for each CMO
class. In addition, CMOs may allocate interest payments to one class (IOs) and
principal payments to another class (POs). POs increase in value when prepayment
rates increase. In contrast, IOs decrease in value when prepayments increase,
because the underlying mortgages generate less interest payments. However, IO
prices tend to increase when interest rates rise (and prepayments fall), making
IOs a useful hedge against market risk. Generally, homeowners have the option to
prepay their mortgages at any time without penalty. Homeowners frequently
refinance higher rate mortgages when mortgage rates fall. This results in the
prepayment of mortgage-backed securities, which deprives holders of the
securities of the higher yields. Conversely, when mortgage rates increase,
prepayments due to refinancings decline. This extends the life of
mortgage-backed securities with lower yields. As a result, increases in
prepayments of premium mortgage-backed securities, or decreases in prepayments
of discount mortgage-backed securities, may reduce their yield and price. This
relationship between interest rates and mortgage prepayments makes the price of
mortgage-backed securities more volatile than most other types of fixed income
securities with comparable credit risks. Mortgage-backed securities tend to pay
higher yields to compensate for this volatility. CMOs may include planned
amortization classes (PACs) and targeted amortization classes (TACs). PACs and
TACs are issued with companion classes. PACs and TACs receive principal payments
and prepayments at a specified rate. The companion classes receive principal
payments and any prepayments in excess of this rate. In addition, PACs will
receive the companion classes' share of principal payments if necessary to cover
a shortfall in the prepayment rate. This helps PACs and TACs to control
prepayment risk by increasing the risk to their companion classes. Another
variant allocates interest payments between two classes of CMOs. One class
(Floaters) receives a share of interest payments based upon a market index such
as LIBOR. The other class (Inverse Floaters) receives any remaining interest
payments from the underlying mortgages. Floater classes receive more interest
(and Inverse Floater classes receive correspondingly less interest) as interest
rates rise. This shifts prepayment and market risks from the Floater to the
Inverse Floater class, reducing the price volatility of Floater class and
increasing the price volatility of the Inverse Floater class. CMOs must allocate
all payments received from the underlying mortgages to some class. To capture
any unallocated payments, CMOs generally have an accrual (Z) class. Z classes do
not receive any payments from the underlying mortgages until all other CMO
classes have been paid off. Once this happens, holders of Z class CMOs receive
all payments and prepayments. Similarly, real estate mortgage investment
conduits (REMICs) (offerings of multiple class mortgage backed securities which
qualify and elect treatment as such under provisions of the Internal Revenue
Code) have residual interests that receive any mortgage payments not allocated
to another REMIC class. The degree of increased or decreased prepayment risk
depends upon the structure of the CMOs. Z classes, IOs, POs, and Inverse
Floaters are among the most volatile investment grade fixed income securities
currently traded in the United States. However, the actual returns on any type
of mortgage backed security depends upon the performance of the underlying pool
of mortgages, which no one can predict and will vary among pools. MUNICIPAL
SECURITIES are fixed income securities issued by states, counties, cities and
other political subdivisions and authorities. Although most municipal securities
are exempt from federal income tax, municipalities may also issue taxable
securities. Tax-exempt securities are generally classified by their source of
payment.

GENERAL OBLIGATION BONDS are supported by the issuer's full faith and
credit. The issuer must levy and collect taxes sufficient to pay principal
and interest on the bonds. However, the issuer's authority to levy
additional taxes may be limited by its charter or state law. SPECIAL
REVENUE BONDS are payable solely from specific revenues received by the
issuer. The revenues may consist of specific taxes, assessments, tolls,
fees or other types of municipal revenues. For example, a municipality may
issue bonds to build a toll road, and pledge the tolls to repay the bonds.
Bondholders may not collect from the municipality's general taxes or
revenues. Therefore, any shortfall in the tolls normally would result in a
default on the bonds. PRIVATE ACTIVITY BONDS are special revenue bonds used
to finance private entities. For example, a municipality may issue bonds to
finance a new factory to improve its local economy. The municipality would
lend the proceeds to the company using the factory, and the company would
agree make loan payments sufficient to repay the bonds. The bonds would be
payable solely from the company's loan payments, not from any other
revenues of the municipality. Therefore, any default on the loan normally
would result in a default on the bonds. The interest on many types of
private activity bonds is subject to the federal alternative minimum tax.
The Funds may invest in bonds subject to the federal alternative minimum
tax. ANTICIPATION NOTES are securities issued in anticipation of the
receipt of taxes, grants, bond proceeds or other municipal revenues. For
example, many municipalities collect property taxes once a year. Such
municipalities may issue tax anticipation notes to fund their operations
prior collecting these taxes. The issuers then repay the tax anticipation
notes at the end of their fiscal year, either with collected taxes or
proceeds from newly issued notes or bonds. TAX INCREMENT FINANCING BONDS
are payable from increases in taxes or other revenues attributable to
projects financed by the bonds. For example, a municipality may issue these
bonds to redevelop a commercial area. The tax increment financing bonds
would be payable solely from any increase in sales taxes collected from
merchants in the area. The bonds could default if merchants' sales, and
related tax collections, failed to increase as anticipated.

Municipal Securities include:

|X|TRANs: tax and revenue anticipation notes issued to finance working capital
needs in anticipation of receiving taxes or other revenues; |X|TANs: tax
anticipation notes issued to finance working capital needs in anticipation of
receiving taxes |X|RANs: revenue anticipation notes issued to finance working
capital needs in anticipation of receiving revenues |X|BANs: bond anticipation
notes that are intended to be refinanced through a later issuance of longer-term
bonds |X|municipal commercial paper and other short-term notes |X|variable rate
demand notes |X|industrial development bonds |X|municipal bonds (including bonds
having serial maturities and pre-refunded bonds) and leases |X|construction loan
notes insured by the Federal Housing Administration and financed by Fannie Mae
or Ginnie Mae; and |X|participation, trust and partnership interests in any of
the foregoing obligations. Diversification of the Intermediate Tax-Free Fund's
investments is obtained geographically by purchasing issues of Municipal
Securities representative of various areas of the U.S. and general obligations
of states, cities and school districts as well as some revenue issues which meet
the Funds' acceptable quality criteria.

MUNICIPAL LEASES. A Fund may purchase participation interests that
represent an undivided proportional interest in lease payments by a
governmental or nonprofit entity. The lease payments and other rights
under the lease provide for and secure payments on the certificates. Lease
obligations may be limited by municipal charter or the nature of the
appropriation for the lease. In particular, lease obligations may be
subject to periodic appropriation. If the entity does not appropriate
funds for future lease payments, the entity cannot be compelled to make
such payments. Furthermore, a lease may provide that the participants
cannot accelerate lease obligations upon default. The participants would
only be able to enforce lease payments as they became due. In the event of
a default or failure of appropriation, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment unless the participation interests are credit enhanced. The
Adviser must consider the following factors in determining the liquidity
of municipal lease securities: (1) the frequency of trades and quotes for
the security; (2) the volatility of quotations and trade prices for the
security; (3) the number of dealers willing to purchase or sell the
security and the number of potential purchasers; (4) dealer undertakings
to make a market in the security; (5) the nature of the security and the
nature of the marketplace trades; (6) the rating of the security and the
financial condition and prospects of the issuer of the security; (7) such
other factors as may be relevant to the Funds' ability to dispose of the
security; (8) whether the lease can be terminated by the lessee; (9) the
potential recovery, if any, from a sale of the leased property upon
termination of the lease; (10) the lessee's general credit strength; (11)
the likelihood that the lessee will discontinue appropriating funding for
the leased property because the property is no longer deemed essential to
its operations; and (12) any credit enhancement or legal recourse provided
upon an event of non-appropriation or other termination of the lease.
VARIABLE RATE MUNICIPAL SECURITIES. Variable interest rates generally
reduce changes in the market value of Municipal Securities from their
original purchase prices. Accordingly, as interest rates decrease or
increase, the potential for capital appreciation or depreciation is less
for variable rate Municipal Securities than for fixed rate obligations.
Many Municipal Securities with variable interest rates purchased by a Fund
are subject to repayment of principal (usually within seven days) on the
Fund's demand. For purposes of determining the Funds' average maturity,
the maturities of these variable rate demand Municipal Securities
(including participation interests) are the longer of the periods
remaining until the next readjustment of their interest rates or the
periods remaining until their principal amounts can be recovered by
exercising the right to demand payment. The terms of these variable rate
demand instruments require payment of principal and accrued interest from
the issuer of the municipal obligations, the issuer of the participation
interests, or a guarantor of either issuer.

REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS. A repurchase
agreement is a transaction in which a Fund buys a security from a dealer or bank
and agrees to sell the security back at a mutually agreed upon time and price.
The repurchase price exceeds the sale price, reflecting an agreed upon interest
rate effective for the period the buyer owns the security subject to repurchase.
The agreed upon interest rate is unrelated to the interest rate on that
security. The Adviser will continually monitor the value of the underlying
security to ensure that the value of the security always equals or exceeds the
repurchase price. A Fund's custodian is required to take possession of the
securities subject to repurchase agreements. These securities are marked to
market daily. To the extent that the original seller defaults and does not
repurchase the securities from a Fund, a Fund could receive less than the
repurchase price on any sale of such securities. In the event that such a
defaulting seller files for bankruptcy or becomes insolvent, disposition of such
securities by a Fund might be delayed pending court action. The Funds believe
that, under the procedures normally in effect for custody of the portfolio
securities subject to repurchase agreements, a court of competent jurisdiction
would rule in favor of the Funds and allow retention or disposition of such
securities. The Funds will only enter into repurchase agreements with banks and
other recognized financial institutions, such as broker/dealers, which are
deemed by the Adviser to be creditworthy. Reverse repurchase agreement
transactions are similar to borrowing cash. In a reverse repurchase agreement, a
Fund sells a portfolio security to another person, such as a financial
institution, broker, or dealer, in return for a percentage of the instrument's
market value in cash, and agrees that on a stipulated date in the future a Fund
will repurchase the portfolio at a price equal to the original sale price plus
interest. A Fund may use reverse repurchase agreements for liquidity and may
enable a Fund to avoid selling portfolio instruments at a time when a sale may
be deemed to be disadvantageous. When effecting reverse repurchase agreements,
liquid assets of a Fund, in a dollar amount sufficient to make payment for the
obligations to be purchased, are segregated at the trade date. These securities
are marked to market daily and maintained until the transaction is settled.

<PAGE>

SWAP TRANSACTIONS. In a standard swap transaction, two parties agree to exchange
(swap) the returns (or differentials in rates of return) on particular
securities, which may be adjusted for an interest factor. The returns to be
swapped are generally calculated with respect to a return on a notional dollar
amount invested at a particular interest rate, or in a basket of securities
representing a particular index. For example, a $10 million LIBOR swap would
require one party to pay the equivalent of the London Interbank Offer Rate on
$10 million principal amount in exchange for the right to receive the equivalent
of a fixed rate of interest on $10 million principal amount. Neither party to
the swap would actually advance $10 million to the other. The Funds will usually
enter into swaps on a net basis (i.e., the two payment streams are netted out),
with a Fund receiving or paying, as the case may be, only the net amount of the
two payments. The net amount of the excess, if any, of the Funds' obligations
over its entitlements with respect to each interest rate swap will be accrued on
a daily basis, and the Funds will segregate liquid assets in an aggregate net
asset value at least equal to the accrued excess, if any, on each business day.
If a Fund enters into a swap on other than a net basis, a Fund will segregate
liquid assets in the full amount accrued on a daily basis of a Fund's
obligations with respect to the swap. If there is a default by the other party
to such a transaction, the Funds will have contractual remedies pursuant to the
agreements related to the transaction. The Funds expect to enter into swap
transactions primarily to hedge against changes in the price of other portfolio
securities. For example, a Fund may hedge against changes in the market value of
a fixed rate security by entering into a swap that requires a Fund to pay the
same or a lower fixed rate of interest on a notional principal amount equal to
the principal amount of the security in exchange for a variable rate of interest
based on a market index. Interest accrued on the hedged note would then equal or
exceed the Funds' obligations under the swap, while changes in the market value
of the swap would largely offset any changes in the market value of the note.
The Funds may also enter into swaps to preserve or enhance a return or spread on
a portfolio security. The Funds do not intend to use these transactions in a
speculative manner. The swap market has grown substantially in recent years
with a large number of banks and investment banking firms acting both as
principals and agents utilizing standardized swap documentation. The Adviser has
determined that, as a result, the swap market has become relatively liquid.
Interest rate caps and floors are more recent innovations for which standardized
documentation has not yet been developed and, accordingly, they are less liquid
than other swaps. To the extent swaps, caps or floors are determined by the
Adviser to be illiquid, they will be included in a Fund's limitation on
investments in illiquid securities. To the extent a Fund sells caps and floors,
it will maintain in a segregated account cash and/or U.S. government securities
having an aggregate net asset value at least equal to the full amount, accrued
on a daily basis, of a Fund's obligations with respect to caps and floors. The
use of swaps is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
securities transactions. If the Adviser is incorrect in its forecasts of market
values, interest rates and other applicable factors, the investment performance
of a Fund would diminish compared with what it would have been if these
investment techniques were not utilized. Moreover, even if the Adviser is
correct in its forecasts, there is a risk that the swap position may correlate
imperfectly with the price of the portfolio security being hedged. Swap
transactions do not involve the delivery of securities or other underlying
assets or principal. Accordingly, the risk of loss with respect to a default on
an interest rate swap is limited to the net asset value of the swap together
with the net amount of interest payments owed to a Fund by the defaulting party.
A default on a portfolio security hedged by an interest rate swap would also
expose a Fund to the risk of having to cover its net obligations under the swap
with income from other portfolio securities. TEMPORARY INVESTMENTS. There may be
times when market conditions warrant a defensive position (this rarely applies
to the MONEY MARKET FUND). During these market conditions each of the Funds may
temporarily invest without limit in short-term debt obligations (money market
instruments). These investments include commercial paper, bank instruments, U.S.
government obligations, repurchase agreements, securities of other investment
companies investing in short-term debt securities, taxable or tax-free Municipal
Securities (for the INTERMEDIATE TAX-FREE FUND) and foreign short-term debt
securities (for the INTERNATIONAL STOCK FUND). The INTERMEDIATE TAX-FREE FUND
does not currently intend to make any taxable investments although they are
permitted to do so. Each Fund's temporary investments must be of comparable
quality to its primary investments. TREASURY SECURITIES are direct obligations
of the federal government of the United States. Investors regard treasury
securities as having the lowest credit risk. WARRANTS give a Fund the option
to buy the issuer's stock or other equity securities at a specified price. A
Fund may buy the designated shares by paying the exercise price before the
warrant expires. Warrants may become worthless if the price of the stock does
not rise above the exercise price by the expiration date. Rights are the same as
warrants, except they are typically issued to existing stockholders.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. These transactions are made to
secure what is considered to be an advantageous price or yield. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices. Other than
normal transaction costs, no fees or expenses are incurred. However, liquid
assets of a Fund are segregated on a Fund's records at the trade date in an
amount sufficient to make payment for the securities to be purchased. These
assets are marked to market daily and are maintained until the transaction has
been settled.

INVESTMENT LIMITATIONS

FUNDAMENTAL LIMITATIONS

The following investment limitations are fundamental and cannot be changed
for a Fund unless authorized by the "majority of the outstanding voting
securities" of that Fund, as defined by the Investment Company Act.

SELLING SHORT AND BUYING ON MARGIN

The Funds will not sell any securities short or purchase any securities on
margin, but may obtain such short-term credits as may be necessary for clearance
of purchases and sales of portfolio securities. A deposit or payment by a Fund
of initial or variation margin in connection with futures contracts, forward
contracts or related options transactions is not considered the purchase of a
security on margin. ISSUING SENIOR SECURITIES AND BORROWING MONEY

The Funds will not issue senior securities except that each Fund may borrow
money, directly or through reverse repurchase agreements, in amounts up to
one-third of the value of its total assets (net assets in the case of the MONEY
MARKET FUND, SHORT-TERM INCOME FUND, and INTERMEDIATE BOND FUND) including the
amounts borrowed; and except to the extent that a Fund is permitted to enter
into futures contracts, options or forward contracts. Except for the
INTERNATIONAL STOCK FUND, a Fund will not borrow money or engage in reverse
repurchase agreements for investment leverage, but rather as a temporary,
extraordinary, or emergency measure or to facilitate management of its portfolio
by enabling the Fund to meet redemption requests when the liquidation of
portfolio securities is deemed to be inconvenient or disadvantageous. Except for
the INTERNATIONAL STOCK FUND, a Fund will not purchase any securities while any
borrowings in excess of 5% of its total assets are outstanding. PLEDGING ASSETS

The Funds will not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. In those cases, each Fund may pledge assets having a
market value not exceeding the lesser of the dollar amounts borrowed or 15% of
the value of its total assets at the time of the pledge. For purposes of this
limitation, the following are not deemed to be pledges: margin deposits for the
purchase and sale of futures contracts and related options; and segregation of
collateral arrangements made in connection with options activities, forward
contracts or the purchase of securities on a when-issued basis. LENDING CASH OR
SECURITIES

The Funds will not lend any of their assets except portfolio securities.
Except for the INTERNATIONAL STOCK FUND, loans may not exceed one-third of the
value of a Fund's total assets. This shall not prevent a Fund from purchasing or
holding U.S. government obligations, money market instruments, variable rate
demand notes, bonds, debentures, notes, certificates of indebtedness, or other
debt securities, entering into repurchase agreements, or engaging in other
transactions where permitted by the Fund's investment goal, policies, and
limitations. INVESTING IN COMMODITIES

The Funds will not purchase or sell commodities, commodity contracts, or
commodity futures contracts. However, except for the the INTERMEDIATE BOND FUND,
the SHORT-TERM INCOME FUND, and the MONEY MARKET FUND, a Fund may purchase and
sell futures contracts and related options, and the INTERNATIONAL STOCK FUND may
also enter into forward contracts and related options. INVESTING IN REAL ESTATE

The Funds will not purchase or sell real estate, including limited partnership
interests, although a Fund may invest in the securities of companies whose
business involves the purchase or sale of real estate or in securities which are
secured by real estate or which represent interests in real estate.
DIVERSIFICATION OF INVESTMENTS

With respect to securities comprising 75% of the value of its total assets, a
Fund will not purchase securities issued by any one issuer (other than cash,
cash items or securities issued or guaranteed by the government of the United
States or its agencies or instrumentalities and repurchase agreements
collateralized by such securities) if as a result more than 5% of the value of
its total assets would be invested in the securities of that issuer or if it
would own more than 10% of the outstanding voting securities of such issuer.
Under this limitation, the INTERMEDIATE TAX FREE FUND will consider each
governmental subdivision, including states and the District of Columbia,
territories, possessions of the United States, or their political subdivisions,
agencies, authorities, instrumentalities, or similar entities, a separate issuer
if its assets and revenues are separate from those of the governmental body
creating it and the security is backed only by its own assets and revenues.
Industrial development bonds backed only by the assets and revenues of a
non-governmental user are considered to be issued solely by that user. If in the
case of an industrial development bond or government-issued security, a
governmental or some other entity guarantees the security, such guarantee would
be considered a separate security issued by the guarantor, subject to a limit on
investments in the guarantor of 10% of total assets. CONCENTRATION OF
INVESTMENTS

(INTERMEDIATE TAX-FREE FUND ONLY)

The INTERMEDIATE TAX-FREE FUND will not invest 25% or more of the value of its
total assets in any one industry, except for temporary defensive purposes, the
Fund may invest 25% or more of the value of its total assets in cash or cash
items, securities issued or guaranteed by the U.S. government, its agencies, or
instrumentalities, and repurchase agreements collateralized by such securities.
In addition, the INTERMEDIATE TAX-FREE FUND may invest more than 25% of the
value of its total assets in obligations issued by any state, territory, or
possession of the United States, the District of Columbia or any of their
authorities, agencies, instrumentalities or political subdivisions, including
tax-exempt project notes guaranteed by the U.S. government, regardless of the
location of the issuing municipality. This policy applies to securities which
are related in such a way that an economic, business, or political development
affecting one security would also affect the other securities (such as
securities paid from revenues from selected projects in transportation, public
works, education, or housing).

(ALL OTHER FUNDS)

A Fund will not invest 25% or more of its total assets in any one industry.
However, investing in U.S. government securities (and domestic bank instruments
for the MONEY MARKET FUND) shall not be considered investments in any one
industry.

UNDERWRITING

A Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection with
the sale of restricted (the term restricted does not apply to the INTERMEDIATE
TAX-FREE FUND) securities which the Fund may purchase pursuant to its investment
goal, policies and limitations.

NON-FUNDAMENTAL LIMITATIONS

The following investment limitations are non-fundamental and, therefore,
may be changed by the Directors without shareholder approval. Shareholders will
be notified before any material change in these limitations becomes effective.

INVESTING IN ILLIQUID AND RESTRICTED SECURITIES

The Funds will not invest more than 15% (10% for the MONEY MARKET FUND) of the
value of their net assets in illiquid securities, including repurchase
agreements providing for settlement in more than seven days after notice,
non-negotiable fixed time deposits with maturities over seven days,
over-the-counter options, guaranteed investment contracts, and certain
restricted securities not determined by the Directors to be liquid (including
certain municipal leases). PURCHASING SECURITIES TO EXERCISE CONTROL

The Funds will not purchase securities of a company for the purpose of
exercising control or management.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

Each Fund will limit its investment in other investment companies to no more
than 3% of the total outstanding voting stock of any investment company, will
invest no more than 5% of total assets in any one investment company, and will
invest no more than 10% of its total assets in investment companies in general,
unless permitted to exceed these limits by an exemptive order of the SEC. The
Funds will purchase securities of closed-end investment companies only in open
market transactions involving only customary broker's commissions. However,
these limitations are not applicable if the securities are acquired in a merger,
consolidation, reorganization, or acquisition of assets. The MONEY MARKET FUND
will limit its investments in other investment companies to those of money
market funds having investment objectives and policies similar to its own.

INVESTING IN OPTIONS

REGULATORY COMPLIANCE.
The MONEY MARKET FUND may follow non-fundamental
operational policies that are more restrictive than its fundamental investment
limitations, as set forth in the Prospectus and this statement of additional
information, in order to comply with applicable laws and regulations, including
the provisions of and regulations under the Investment Company Act of 1940. In
particular, the MONEY MARKET FUND will comply with the various requirements of
Rule 2a-7 under the Act, which regulates money market mutual funds. For example,
Rule 2a-7 generally prohibits the investment of more than 5% of the MONEY MARKET
FUND'S total assets in the securities of any one issuer, although the MONEY
MARKET FUND'S fundamental investment limitation only requires such 5%
diversification with respect to 75% of its assets. The MONEY MARKET FUND will
also determine the effective maturity of its investments, as well as its ability
to consider a security as having received the requisite short-term ratings by
NRSROs, according to Rule 2a-7. The MONEY MARKET FUND may change these
operational policies to reflect changes in the laws and regulations without
shareholder approval. OTHER INVESTMENT POLICIES

The following Funds have an investment policy which requires that a Fund invest,
under normal market conditions, at least 65% of its total assets (80% of net
assets for INTERMEDIATE TAX-FREE FUND) in a particular type of security that is
consistent with a Fund's goals and investment strategies. EQUITY INCOME FUND
intends to invest at least 65% of its total assets in equity securities that
generate dividend income. LARGE-CAP GROWTH & INCOME FUND intends to invest at
least 65% of its total assets in common stocks and preferred stocks of
large-sized companies whose market capitalizations generally exceed $10 billion.
MID-CAP VALUE FUND intends to invest at least 65% of its total assets in
value-oriented common and preferred stocks of medium-sized companies similar in
size to those within the S&P Mid-Cap 400 Index. MID-CAP GROWTH FUND intends to
invest at least 65% of its total assets in growth-oriented common stocks of
medium-sized companies similar in size to those within the S&P Mid-Cap 400
Index. SMALL-CAP GROWTH FUND intends to invest at least 65% of its total assets
in common and preferred stocks issued by small-sized companies similar in size
to those within the Russell 2000 Index. INTERNATIONAL STOCK FUND intends to
invest at least 65% of its total assets in securities of issuers domiciled in at
least three different nations outside the United States, and intends to invest
at least 65% of the Fund's total assets in common stocks, preferred stocks and
other equity securities. GOVERNMENT INCOME FUND intends to invest at least 65%
of its total assets in U.S. government securities (not including privately
issued mortgage-related securities). INTERMEDIATE BOND FUND intends to invest at
least 65% of its total assets in bonds. INTERMEDIATE TAX-FREE FUND will invest
at least 80% of its net assets in municipal securities, the income from which is
exempt from federal income tax (including the federal alternative minimum tax).
SHORT-TERM INCOME FUND intends to invest at least 65% of its total assets in
short- to intermediate-term investment grade bonds and notes. DETERMINING
MARKET VALUE OF SECURITIES

USE OF THE AMORTIZED COST METHOD (MONEY MARKET FUND ONLY)

The Directors have decided that the best method for determining the value of
portfolio instruments for the MONEY MARKET FUND is amortized cost. Under this
method, portfolio instruments are valued at the acquisition cost as adjusted for
amortization of premium or accumulation of discount rather than at current
market value. The MONEY MARKET FUND'S use of the amortized cost method of
valuing portfolio instruments depends on its compliance with the provisions of
Rule 2a-7 (the Rule) promulgated by the Securities and Exchange Commission under
the Act. Under the Rule, the Directors must establish procedures reasonably
designed to stabilize the net asset value per share, as computed for purposes of
distribution and redemption, at $1.00 per share, taking into account current
market conditions and the Fund's investment goal. Under the Rule, the MONEY
MARKET FUND is permitted to purchase instruments which are subject to demand
features or standby commitments. As defined by the Rule, a demand feature
entitles the Fund to receive the principal amount of the instrument from the
issuer or a third party on (1) no more than 30 days' notice or (2) at specified
intervals not exceeding 397 days on no more than 30 days' notice. A standby
commitment entitles the Fund to achieve same-day settlement and to receive an
exercise price equal to the amortized cost of the underlying instrument plus
accrued interest at the time of exercise. The MONEY MARKET FUND acquires
instruments subject to demand features and standby commitments to enhance the
instrument's liquidity. The Fund treats demand features and standby commitments
as part of the underlying instruments, because the Fund does not acquire them
for speculative purposes and cannot transfer them separately from the underlying
instruments. Therefore, although the Fund defines demand features and standby
commitments as puts, the Fund does not consider them to be corporate investments
for purposes of its investment policies. MONITORING PROCEDURES. The Directors'
procedures include monitoring the relationship between the amortized cost value
per share and the net asset value per share based upon available indications of
market value. The Directors will decide what, if any, steps should be taken if
there is a difference of more than 0.5 of 1% between the two values. The
Directors will take any steps they consider appropriate (such as redemption in
kind or shortening the average portfolio maturity) to minimize any material
dilution or other unfair results arising from differences between the two
methods of determining net asset value. INVESTMENT RESTRICTIONS. The Rule
requires that the MONEY MARKET FUND limit its investments to instruments that,
in the opinion of the Directors, present minimal credit risks and have received
the requisite rating from one or more NRSROs. If the instruments are not rated,
the Directors must determine that they are of comparable quality. The Rule also
requires the Fund to maintain a dollar-weighted average portfolio maturity (not
more than 90 days) appropriate to the objective of maintaining a stable net
asset value of $1.00 per share. In addition, no instrument with a remaining
maturity of more than 397 days can be purchased by the Fund. Should the
disposition of a portfolio security result in a dollar-weighted average
portfolio maturity of more than 90 days, the MONEY MARKET FUND will invest its
available cash to reduce the average maturity to 90 days or less as soon as
possible. Shares of investment companies purchased by the Fund will meet these
same criteria and will have investment policies consistent with Rule 2a-7. Under
the amortized cost method of valuation, neither the amount of daily income nor
the net asset value is affected by any unrealized appreciation or depreciation
of the portfolio. In periods of declining interest rates, the indicated daily
yield on shares of the MONEY MARKET FUND, computed based upon amortized cost
valuation, may tend to be higher than a similar computation made by using a
method of valuation based upon market prices and estimates. In periods of rising
interest rates, the indicated daily yield on shares of the Fund computed the
same way may tend to be lower than a similar computation made by using a method
of calculation based upon market prices and estimates. MARKET VALUES (ALL OTHER
FUNDS)

Market values of portfolio securities are determined as follows:

o for equity securities, according to the last sale price in the market in
which they are primarily traded (either a national securities exchange or
the over-the-counter market), if available;

o in the absence of recorded sales for equity securities, according to the
mean between the last closing bid and asked prices;

o for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available, otherwise, as determined by an
independent pricing service;

o for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service, except that
short-term obligations with remaining maturities of less than 60 days at
the time of purchase may be valued at amortized cost or at fair market
value as determined in good faith by the Board; and

o for all other securities, at a fair value as determined in good faith by
the Board.

The Funds may value securities at prices provided by independent pricing
services that may not rely exclusively on quoted prices and may consider:
institutional trading in similar groups of securities, yield, quality,
stability, risk, coupon rate, maturity, type of issue, trading characteristics,
and other market data or factors.

A Fund values futures contracts and options at their market values established
by the exchanges on which they are traded at the close of trading on such
exchanges. Options traded in the over-the-counter market are valued according to
the mean between the last bid and the last asked price for the option as
provided by an investment dealer or other financial institution that deals in
the option. The Board may determine in good faith that another method of valuing
such investments is necessary to appraise their fair market value.

<PAGE>

TRADING IN FOREIGN SECURITIES

Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange (NYSE). In computing its net asset value,
the INTERNATIONAL STOCK FUND values foreign securities at the latest closing
price on the exchange on which they are traded immediately prior to the closing
of the NYSE. Certain foreign currency exchange rates may also be determined at
the latest rate prior to the closing of the NYSE. Foreign securities quoted in
foreign currencies are translated into U.S. dollars at current rates.
Occasionally, events that affect these values and exchange rates may occur
between the times at which they are determined and the closing of the NYSE. If
such events materially affect the value of portfolio securities, these
securities may be valued at their fair value as determined in good faith by the
Directors, although the actual calculation may be done by others. WHAT DO SHARES
COST?

Except under certain circumstances described in the Prospectus, shares are
sold at their net asset value on days the New York Stock Exchange is open for
business. The procedure for purchasing shares is explained in the Prospectus
under "How to Buy Shares" and "What Do Shares Cost?" HOW ARE THE FUND SHARES
SOLD?

SHAREHOLDER SERVICES

Marshall & Ilsley Trust Company, through MFIS, is the shareholder servicing
agent for the Funds. As such, MFIS provides shareholder services which include,
but are not limited to, distributing Prospectuses and other information,
providing shareholder assistance, and communicating or facilitating purchases
and redemption of shares. The Funds may pay M&I Trust Company for providing
shareholder services and maintaining shareholder accounts. M&I Trust Company may
select others (including Federated Shareholder Services, a subsidiary of
Federated Investors, Inc.) to perform these services for their customers and may
pay them fees.

SUPPLEMENTAL PAYMENTS

Investment professionals may be paid fees out of the assets of the
Distributor and/or M&I Trust Company (but not out of Fund assets). The
Distributor and/or M&I Trust Company may be reimbursed by the Adviser or its
affiliates.

Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, Authorized Dealers may be paid
cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of shares the Authorized Dealer or
financial institution sells or may sell and/or upon the type and nature of sales
or marketing support furnished by the Authorized Dealer or financial
institution.

HOW TO BUY SHARES
EXCHANGING SECURITIES FOR SHARES

You may contact the Distributor to request a purchase of shares in an
exchange for securities you own. The Fund reserves the right to determine
whether to accept your securities and the minimum market value to accept. The
Fund will value your securities in the same manner as it values its assets. This
exchange is treated as a sale of your securities for federal tax purposes.

REDEMPTION IN KIND

ACCOUNT AND
SHARE INFORMATION VOTING RIGHTS Shareholders of each Fund are entitled: (i) to
one vote per full share of Common Stock; (ii) to distributions declared by
Directors; and (iii) upon liquidation of the Corporation, to participate ratably
in the assets of the Fund available for distribution. Each share of the Fund
gives the shareholder one vote in the election of Directors and other matters
submitted to shareholders for vote. All shares of each portfolio or class in the
Corporation have equal voting rights, except that only shares of a particular
portfolio or class are entitled to vote on matters affecting that portfolio or
class. Consequently, the holders of more than 50% of the Corporation's shares of
common stock voting for the election of Directors can elect the entire Board of
Directors, and, in such event, the holders of the Corporation's remaining shares
voting for the election of Directors will not be able to elect any person or
persons to the Board of Directors. The Wisconsin Business Corporation Law (the
WBCL) permits registered investment companies, such as the Corporation, to
operate without an annual meeting of shareholders under specified circumstances
if an annual meeting is not required by the Act. The Corporation has adopted the
appropriate provisions in its By-laws and does not anticipate holding an annual
meeting of shareholders to elect Directors unless otherwise required by the Act.
Directors may be removed by the shareholders at a special meeting. A special
meeting of the shareholders may be called by the Directors upon written request
of shareholders owning at least 10% of the Corporation's outstanding voting
shares. The shares are redeemable and are transferable. All shares issued and
sold by the Corporation will be fully paid and nonassessable except as provided
in WBCL Section 180.0622(2)(b). Fractional shares of common stock entitle the
holder to the same rights as whole shares of common stock except the right to
receive a certificate evidencing such fractional shares. As of October 4,
1999, the following shareholders of each Fund owned of record 5% or more of a
Fund's outstanding Class Y Shares: EQUITY INCOME FUND Vallee, Marshall & Ilsley
Trust Operations, Milwaukee, Wisconsin, owned approximately 19,884,494 shares
(61.74%); and Mitra & Co., Marshall & Ilsley Trust Operations, Milwaukee,
Wisconsin, owned approximately 10,418,640 shares (32.35%). LARGE-CAP GROWTH &
INCOME FUND Mitra & Co., Marshall & Ilsley Trust Operations, Milwaukee,
Wisconsin, owned approximately 12,653,688 shares (52.97%); and Vallee, Marshall
& Ilsley Trust Operations, Milwaukee, Wisconsin, owned approximately 7,439,198
shares (31.14%). MID-CAP VALUE FUND Vallee, Marshall & Ilsley Trust Operations,
Milwaukee, Wisconsin, owned approximately 5,984,963 shares (53.74%); and Mitra &
Co., Marshall & Ilsley Trust Operations, Milwaukee, Wisconsin, owned
approximately 4,642,849 shares (41.69%). MID-CAP GROWTH FUND Vallee, Marshall &
Ilsley Trust Operations, Milwaukee, Wisconsin, owned approximately 7,151,401
shares (42.38%); and Mitra & Co., Marshall & Ilsley Trust Operations, Milwaukee,
Wisconsin, owned approximately 8,755,206 shares (51.89%). SMALL-CAP GROWTH FUND
Mitra & Co., Marshall & Ilsley Trust Operations, Milwaukee, Wisconsin, owned
approximately 4,236,969 shares (51.14%); Vallee, Marshall & Ilsley Trust
Operations, Milwaukee, Wisconsin, owned approximately 2,816,230 shares (33.99%);
and Capinco, c/o Firstar Trust Company, Milwaukee, Wisconsin, owned
approximately 703,331 shares (8.49%). INTERNATIONAL STOCK FUND Mitra & Co.,
Marshall & Ilsley Trust Operations, Milwaukee, Wisconsin, owned approximately
10,161,346 shares (48.22%); and Vallee, Marshall & Ilsley Trust Operations,
Milwaukee, Wisconsin, owned approximately 7,076,376 shares (33.58%). GOVERNMENT
INCOME FUND Mitra & Co., Marshall & Ilsley Trust Operations, Milwaukee,
Wisconsin, owned approximately 18,462,689 shares (54.23%); and Vallee, Marshall
& Ilsley Trust Operations, Milwaukee, Wisconsin, owned approximately 13,105,952
shares (38.49%). INTERMEDIATE BOND FUND Vallee, Marshall & Ilsley Trust
Operations, Milwaukee, Wisconsin, owned approximately 37,727,800 shares
(57.85%); and Mitra & Co., Marshall & Ilsley Trust Operations, Milwaukee,
Wisconsin, owned approximately 25,826,316 shares (39.60%). INTERMEDIATE TAX-FREE
FUND Vallee, Marshall & Ilsley Trust Operations, Milwaukee, Wisconsin, owned
approximately 9,801,536 shares (89.38%); and Mitra & Co., Marshall & Ilsley
Trust Operations, Milwaukee, Wisconsin, owned approximately 730,431 shares
(6.66%). SHORT-TERM INCOME FUND Mitra & Co., Marshall & Ilsley Trust Operations,
Milwaukee, Wisconsin, owned approximately 7,726,426 shares (50.89%); and Vallee,
Marshall & Ilsley Trust Operations, Milwaukee, Wisconsin, owned approximately
5,719,096 shares (37.67%). MONEY MARKET FUND Maril & Co., Milwaukee, Wisconsin,
owned approximately 1,110,263,114 shares (65.52%). Shareholders owning 25% or
more of the outstanding shares of a Fund may be in control and be able to affect
the outcome of certain matters presented for a vote of shareholders. WHAT
ARE THE TAX CONSEQUENCES?

FEDERAL INCOME TAX

The Funds will pay no federal income tax because each Fund expects to meet the
requirements of Subchapter M of the Internal Revenue Code (Code) applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. If these requirements are not met, it will not receive
special tax treatment and will pay federal income tax. Each Fund will be treated
as a single, separate entity for federal income tax purposes so that income
earned and capital gains and losses realized by the Corporation's other
portfolios will be separate from those realized by each Fund. Each Fund is
entitled to a loss carry-forward, which may reduce the taxable income or gain
that each Fund would realize, and to which the shareholder would be subject, in
the future. The dividends received deduction for corporations will apply to
ordinary income distributions to the extent the distribution represents amounts
that would qualify for the dividends received deduction to the EQUITY FUNDS if
the EQUITY FUNDS were a regular corporation, and to the extent designated by the
EQUITY FUNDS as so qualifying. Otherwise, these dividends and any short-term
capital gains are taxable as ordinary income. No portion of any income dividends
paid by the other Funds is eligible for the dividends received deduction
available to corporations. These dividends, and any short-term capital gains,
are taxable as ordinary income. Under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" municipal bonds
may be included in calculating the federal individual alternative minimum tax or
the federal alternative minimum tax for corporations. Dividends of the
INTERMEDIATE TAX-FREE FUND representing net interest income earned on some
temporary investments and any realized net short-term gains are taxed as
ordinary income. FOREIGN INVESTMENTS

Investment income on certain foreign securities purchased by the Funds may be
subject to foreign withholding or other taxes that could reduce the return on
these securities. Tax treaties between the United States and foreign countries,
however, may reduce or eliminate the amount of foreign taxes to which the Funds
would be subject. The effective rate of foreign tax cannot be predicted since
the amount of the Funds' assets to be invested within various countries is
uncertain. However, the Funds intend to operate so as to qualify for
treaty-reduced tax rates when applicable.

Distributions from the Funds may be based on estimates of book income for the
year. Book income generally consists solely of the coupon income generated by
the portfolio, whereas tax basis income includes gains or losses attributable to
currency fluctuation. Due to differences in the book and tax treatment of fixed
income securities denominated in foreign currencies, it is difficult to project
currency effects on an interim basis. Therefore, to the extent that currency
fluctuations cannot be anticipated, a portion of distributions to shareholders
could later be designated as a return of capital, rather than income, for income
tax purposes, which may be of particular concern to simple trusts.

The Funds may invest in the stock of certain foreign corporations which are
classified as Passive Foreign Investment Companies (PFIC). The Funds may be
subject to Federal income taxes upon disposition of PFIC investments.

If more than 50% of the value of a Fund's assets at the end of the tax year is
represented by stock or securities of foreign corporations, the Fund intend to
qualify for certain Code provisions that would allow shareholders to claim a
foreign tax credit or deduction on their U.S. income tax returns. Shareholders
must hold Fund shares for a specified period of time to claim a foreign tax
credit. The Code may limit a shareholder's ability to claim a foreign tax
credit. Shareholders who elect to deduct their portion of a Fund's foreign taxes
rather than take the foreign tax credit must itemize deductions on their income
tax returns. The Funds expect that only INTERNATIONAL STOCK FUND will qualify
for these Code provisions.

STATE AND LOCAL TAXES

Distributions representing net interest received on tax-exempt municipal
securities are not necessarily free from income taxes of any state or local
taxing authority. State laws differ on this issue, and you should consult your
tax adviser for specific details regarding the status of your account under
state and local tax laws, including treatment of distributions as income or
return of capital. CAPITAL GAINS

Capital gains, when realized by the Funds, could result in an increase in
distributions. Capital losses could result in a decrease in distributions. When
a Fund realizes net long-term capital gains, it will distribute them at least
once every 12 months.

WHO MANAGES THE FUNDS?

OFFICERS AND DIRECTORS

The Board is responsible for managing the Corporation's business affairs and for
exercising all the Corporation's powers except those reserved for the
shareholders. Information about each Board member is provided below and includes
each person's: name, address, birthdate, present position(s) held with the
Corporation, principal occupations for the past five years, and total
compensation received as a Director from the Corporation for its most recent
fiscal year. The Corporation is comprised of eleven funds and is the only
investment company in the Fund Complex. As of October 4, 1999, the Funds'
Board and Officers as a group owned less than 1% of a Fund's outstanding shares.

A plus sign (+) denotes a Director who is deemed to be an interested person as
defined in the Investment Company Act of 1940.

NAME AGGREGATE
BIRTHDATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS FROM
POSITION WITH FOR PAST 5 YEARS CORPORATION
CORPORATION

JOHN DEVINCENTIS Independent Financial Consultant; Retired, $15,000
Age: 65 formerly, Senior Vice President of Finance,
c/o Marshall Funds In-Sink-Erator Division of Emerson Electric.
1000 North Water Street
Milwaukee, WI

DIRECTOR

JAMES MITCHELL** Group Vice President, Citation Corporation; $15,000
Age: 52 President and Chief Executive Officer,
c/o Marshall Funds Interstate Forging Industries; Chairman,
1000 North Water Street Ayrshire Precision Engineering.
Milwaukee, WI

DIRECTOR

DUANE E. DINGMANN** Retired; formerly President and owner, $15,000
Age: 68 Trubilt Auto Body, Inc. and Telephone
c/o Marshall Funds Specialists, Inc.; formerly Class B
1000 North Water Street (nonbanking) Director, Ninth Federal
Milwaukee, WI Reserve District, Minneapolis, MN.

DIRECTOR

BARBARA J. POPE** President, Barbara J. Pope, P.C., a $15,000
Age: 51 financial consulting firm; President,
c/o Marshall Funds Sedgwick Street Partners LLC; general
1000 North Water Street partner of a private investment partnership.

Milwaukee, WI

DIRECTOR

<PAGE>

NAME AGGREGATE
BIRTHDATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS FROM
POSITION WITH FOR PAST 5 YEARS CORPORATION
CORPORATION
JOHN M. BLASER**+ Vice President, M&I Trust Company; $0
Age: 42 formerly, Partner and Chief Financial
1000 North Water Street Officer, Artisan Partners Limited
Milwaukee, WI Partnership; formerly, Chief Financial
PRESIDENT and DIRECTOR Officer and Principal Administrative and
Finance Officer, Artisan Funds, Inc.;
formerly, Senior Vice President, Kemper

Securities.

DAVID W. SCHULZ**+ President and Director, M&I Investment $0
Age: 41 Management Corp.; Vice President, M&I Trust
1000 North Water Street Company.

Milwaukee, WI 53202

DIRECTOR

JO A. DALES Vice President, M&I Trust Company; $0
Age: 38 formerly, Senior Audit Manager of Marshall
1000 North Water Street & Ilsley Corporation and Operations
Milwaukee, WI Specialist for Firstar Trust Company.

VICE PRESIDENT

ANN K. PEIRICK Assistant Vice President, M&I Trust $0
Age: 45 Company; formerly, Senior Financial Analyst
1000 North Water Street - Community Bank Finance and Manager of
Milwaukee, WI Corporate Financial Analysis, Bank One,

TREASURER Wisconsin.

BROOKE J. BILLICK Vice President and Securities Counsel, M&I $0
Age: 45 Trust Company, M&I Investment Management
1000 North Water Street Corp.; formerly, shareholder, Gibbs, Roper,

Milwaukee, WI Loots & Williams SC.
</TABLE>

SECRETARY

** Elected as a Director on May 24, 1999.

ADVISER TO THE FUNDS

The Adviser conducts investment research and makes investment decisions for the
Fund. The Funds' investment adviser is M&I Investment Management Corp.
(Adviser), a wholly owned subsidiary of Marshall & Ilsley Corporation. The
Adviser shall not be liable to the Corporation, the Funds or any shareholder of
the Funds for any losses that may be sustained in the purchase, holding, or sale
of any security, or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Corporation.
Because of the internal controls maintained by the Adviser's affiliates to
restrict the flow of non-public information, Fund investments are typically made
without any knowledge of the lending relationships affiliates of the Adviser
with an issuer. SUB-ADVISER TO INTERNATIONAL STOCK FUND

BPI Global Asset Management LLP (BPI) is the Sub-Adviser to the INTERNATIONAL
STOCK FUND. It is the Adviser's responsibility to select a Sub-Adviser for the
INTERNATIONAL STOCK FUND that has distinguished itself in its area of expertise
in asset management and to review the Sub-Adviser's performance. The Adviser
provides investment management evaluation services by performing initial due
diligence on BPI and thereafter monitoring BPI's performance through
quantitative and qualitative analysis, as well as periodic in-person, telephonic
and written consultations with BPI. In evaluating BPI, the Adviser considers,
among other factors, BPI's level of expertise; relative performance and
consistency of performance over a minimum period of time; level of adherence to
investment discipline or philosophy; personnel, facilities and financial
strength; and quality of service and client communications. The Adviser has
responsibility for communicating performance expectations and evaluations to BPI
and ultimately recommending to the Corporation's Directors whether BPI's
contract should be renewed, modified or terminated. The Adviser provides written
reports to the Directors regarding the results of its evaluation and monitoring
functions. The Adviser is also responsible for conducting all operations of the
INTERNATIONAL STOCK FUND, except those operations contracted to BPI, the
custodian, the transfer agent, and the administrator. Although BPI's activities
are subject to oversight by the Directors and officers of the Corporation,
neither the Directors, the officers, nor the Adviser evaluates the investment
merits of BPI's individual security selections. BPI has complete discretion to
purchase, manage and sell portfolio securities for the INTERNATIONAL STOCK FUND,
subject to the INTERNATIONAL STOCK FUND'S investment goal, policies and
limitations. For its services under the Sub-advisory Agreement, the Sub-Adviser
receives a fee at the annual rate of 0.40% of the INTERNATIONAL STOCK FUND'S
average daily net assets. The Sub-Adviser is paid by the Adviser and not by the
INTERNATIONAL STOCK FUND. However, BPI will furnish to the Adviser such
investment advice, statistical and other factual information as requested by the
Adviser. BPI, headquartered in Orlando, Florida, provides portfolio management
services for investment companies, corporations, trusts, estates, pension and
profit sharing plans, individuals, and other institutions located in both Canada
and the United States, and is an investment adviser registered with the U.S.
Securities and Exchange Commission. BPI was formed in March 1997 as a Delaware
limited liability partnership between BPI Global Holdings USA, Inc. (BPI
Holdings USA) as a 51% partner, and JBS Advisors, Inc. (JBS) as a 49% partner.
BPI Holdings USA is a wholly-owned subsidiary of BPI Global Holdings, Inc.,
which is a wholly-owned subsidiary of BPI Financial Corporation. Effective
August 1999, BPI Financial Corporation became a wholly-owned subsidiary of C.I.
Fund Management, Inc., a publicly-traded company located in Toronto, Ontario,
Canada. JBS is owned by BPI's portfolio managers and its President. For the
period from May 1, 1999 to August 31, 1999, the Adviser paid BPI $366,413. BPI
became Sub-Adviser on March 29, 1999, but was compensated for advisory services
beginning May 1, 1999. Prior to March 26, 1999, Templeton Investment Counsel,
Inc. (TICI) served as the INTERNATIONAL STOCK FUND'S former Sub-Adviser. For the
period from September 1, 1998 to May 1, 1999 (the effective date of termination
of TICI's sub-advisory contract), the Adviser paid TICI $645,806. For the fiscal
years ended August 31, 1998 and 1997, the Adviser paid TICI $1,072,613 and
$816,182, respectively. BANKING LAWS

Banking laws and regulations presently prohibit a bank holding company
registered under the federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing, controlling or
distributing the shares of a registered, open-end management investment company
continuously engaged in the issuance of its shares, and prohibit banks generally
from issuing, underwriting, or distributing securities. However, such banking
laws and regulations do not prohibit such a holding company, affiliate, or banks
generally from acting as investment adviser, transfer agent or custodian to such
an investment company or from purchasing shares of such a company as agent for
and upon the order of such a customer. M&I Corp. is subject to such banking laws
and regulations. M&I Corp. believes, based on the advice of its counsel, that
M&I Investment Management Corp. may perform the services contemplated by the
investment advisory agreement with the Corporation without violation of the
Glass-Steagall Act or other applicable banking laws or regulations. Changes in
either federal or state statutes and regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, as well as further
judicial or administrative decisions or interpretations of such present or
future statutes and regulations, could prevent M&I Investment Management Corp.
or M&I Corp. from continuing to perform all or a part of the services described
in the Prospectus for its customers and/or the Fund. If M&I Investment
Management Corp. and M&I Corp. were prohibited from engaging in these
activities, the Directors would consider alternative advisers and means of
continuing available investment services. In such event, changes in the
operation of the Fund may occur, including possible termination of any automatic
or other Fund share investment and redemption services then being provided by
M&I Investment Management Corp. and M&I Brokerage Services or MFIS. It is not
expected that existing shareholders would suffer any adverse financial
consequences if another adviser with equivalent abilities to M&I Investment
Management Corp. is found as a result of any of these occurrences. BROKERAGE
TRANSACTIONS

The Adviser and/or BPI may select brokers and dealers who offer brokerage and
research services. These services may be furnished directly to a Fund, the
Adviser, or BPI and may include: advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry studies;
receipt of quotations for portfolio evaluations; and similar services. The
Adviser, BPI, and their affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided. Research services provided by brokers and dealers
may be used by the Adviser and BPI in advising the Funds and other accounts. To
the extent that receipt of these services may supplant services for which the
Adviser, BPI, or their affiliates might otherwise have paid, it would tend to
reduce their expenses. Aggregate total commissions with brokers that provided
research were $845,012 on transactions with an aggregate principal value of
$542,732,676.

<PAGE>

ADMINISTRATOR

The Administrator of the Fund is Federated Administrative Services, a
subsidiary of Federated Investors, Inc. Effective January 1, 2000, Marshall &
Ilsley Trust Company will be the Administrator of the Funds and Federated
Services Company will be the Sub-Administrator. The Administrator provides
administrative personnel and services to the Funds for a fee at an annual rate
as specified below (except SMALL-CAP GROWTH FUND):

AVERAGE AGGREGATE DAILY NET

ADMINISTRATIVE FEE ASSETS OF THE CORPORATION
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million

The Administrator provides these services for an annual fee equal to 0.12% of
the SMALL-CAP GROWTH FUND'S average daily net assets.

The administrative fee received during any fiscal year shall be at least $50,000
per Fund. The Administrator may choose voluntarily to reimburse a portion of its
fee at any time. Effective January 1, 2000, all fees of the Sub-Administrator
will be paid by the Administrator.

The functions performed by the Administrator include, but are not limited
to the following:

o preparation, filing and maintenance of the Corporation's governing
documents, minutes of Directors' meetings and shareholder meetings;

o preparation and filing with the SEC and state regulatory authorities the
Corporation's registration statement and all amendments, and any other
documents required for the Funds to make a continuous offering of their
shares;

o prepare, negotiate and administer contracts on behalf of the Fund;

o supervision of the preparation of financial reports;

o preparation and filing of federal and state tax returns;

o assistance with the design, development and operation of a Fund; and

o providing advice to the Funds and Corporation's Directors.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Services Company, Pittsburgh, Pennsylvania, through its registered
transfer agent, Federated Shareholder Services Company, maintains all necessary
shareholder records. For its services, the transfer agent receives a fee based
on the size, type and number of accounts and transactions made by shareholders.
The fee is based on the level of the Funds' average net assets for the period
plus out-of-pocket expenses. The transfer agent may employ third parties,
including M&I Trust Company, to provide sub-accounting and sub-transfer agency
services. In exchange for these services, the transfer agent may pay such
third-party providers a per account fee and out-of-pocket expenses.
CUSTODIAN

M&I Trust Company, Milwaukee, Wisconsin, a subsidiary of M&I Corp., is
custodian for the securities and cash of the Fund. For its services as
custodian, M&I Trust Company receives an annual fee, payable monthly, based on a
percentage of a Fund's average aggregate daily net assets. SUB-CUSTODIAN

State Street Bank and Trust Company, Boston, Massachusetts, the INTERNATIONAL
STOCK FUND'S sub-custodian, has entered into agreements with foreign
subcustodians approved by the Directors pursuant to Rule 17f-5 under the Act.
The foreign subcustodians may not hold certificates for the securities in their
custody, but instead have book records with domestic and foreign securities
depositories, which in turn have book records with the transfer agents of the
issuers of the securities. Compensation for the services of the foreign
subcustodians is based on a schedule of charges agreed on from time to time.
INDEPENDENT AUDITORS

<PAGE>

FEES PAID BY THE FUNDS FOR SERVICES
<S> <C> <C> <C>
- ------------------- --------------------------------- ---------------------------- -------------------------------
FUND NAME ADVISORY FEE PAID/ BROKERAGE COMMISSIONS PAID ADMINISTRATIVE FEE PAID
ADVISORY FEE WAIVED

- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
SMALL-CAP GROWTH $997,009 $857,023 $368,209 $226,345 $142,276 $117,618 $123,840 $102,843 $44,185
FUND $0 $0 $0
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
INTERNATIONAL $2,416,970 $2,504,141 $1,857,261 $1,744,043 $265,289 $340,030 $205,307 $211,050 $161,481
STOCK FUND $23,525 $0 $0
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
GOVERNMENT INCOME $2,245,727 $1,833,350 $1,304,960 N/A N/A N/A $253,421 $205,934 $151,306
FUND $291,548 $272,859 $272,824
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
INTERMEDIATE BOND $3,565,324 $3,105,550 $2,440,381 N/A N/A N/A $498,835 $435,828 $354,123
FUND $356,532 $333,362 $346,194

- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
INTERMEDIATE $658,570 $570,658 $463,700 N/A N/A N/A $91,361 $80,183 $67,231
TAX-FREE FUND $277,085 $266,927 $238,359
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
SHORT-TERM INCOME $810,216 $846,144 $736,245 N/A N/A N/A $112,112 $118,980 $106,697
FUND $445,583 $451,276 $429,010
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND $8,873,537 $7,729,527 $6,354,005 N/A N/A N/A $1,477,382 $1,302,763$1,105,666
$4,436,304 $3,846,385 $3,304,082
- ------------------------------------------------------------------------------------------------------------------
N/A - NOT APPLICABLE

</TABLE>

<PAGE>

FOR THE FISCAL YEAR ENDED AUGUST 31,1999

- --------------------------------- -------------------------
FUND SHAREHOLDER SERVICES
FEE/

SHAREHOLDER SERVICES
FEE WAIVED

- --------------------------------- -------------------------
- --------------------------------- -------------------------
EQUITY INCOME FUND $1,335,022
$0

- --------------------------------- -------------------------
- --------------------------------- -------------------------
LARGE-CAP GROWTH & INCOME FUND $920,954
$0

- --------------------------------- -------------------------
- --------------------------------- -------------------------
MID-CAP VALUE FUND $344,176
$0

- --------------------------------- -------------------------
- --------------------------------- -------------------------
MID-CAP GROWTH FUND $644,251
$0

- --------------------------------- -------------------------
- --------------------------------- -------------------------
SMALL-CAP GROWTH FUND $249,070
$0

- --------------------------------- -------------------------
- --------------------------------- -------------------------
INTERNATIONAL STOCK FUND $604,066
$0

- --------------------------------- -------------------------
- --------------------------------- -------------------------
GOVERNMENT INCOME FUND $684,008
$624,141

- --------------------------------- -------------------------
- --------------------------------- -------------------------
INTERMEDIATE BOND FUND $1,353,842
$1,235,035

- --------------------------------- -------------------------
- --------------------------------- -------------------------
INTERMEDIATE TAX-FREE FUND $274,404
$252,452

- --------------------------------- -------------------------
- --------------------------------- -------------------------
SHORT-TERM INCOME FUND $337,590
$310,583

- --------------------------------- -------------------------
- --------------------------------- -------------------------
MONEY MARKET FUND $332,8140

- --------------------------------- -------------------------

HOW DO THE FUNDS MEASURE PERFORMANCE?

The Funds may advertise each Fund's share performance by using the Securities
and Exchange Commission's (SEC) standard method for calculating performance
applicable to all mutual funds. The SEC also permits this standard performance
information to be accompanied by non-standard performance information.

Unless otherwise stated, any quoted share performance reflects the effect of
non-recurring charges, such as maximum sales charges, which, if excluded, would
increase the total return and yield. The performance of shares depends upon such
variables as: portfolio quality; average portfolio maturity; type and value of
portfolio securities; changes in interest rates; changes or differences in a
Fund's or any class of shares' expenses; and various other factors.

Share performance fluctuates on a daily basis largely because net earnings and
offering price per share fluctuate daily. Both net earnings and offering price
per share are factors in the computation of yield and total return.

<PAGE>

TOTAL RETURN

Total return represents the change (expressed as a percentage) in the value of
shares over a specific period of time, and includes the investment of income and
capital gains distributions. The average annual total return for a Fund shares
is the average compounded rate of return for a given period that would equate a
$1,000 initial investment to the ending redeemable value of that investment. The
ending redeemable value is computed by multiplying the number of shares owned at
the end of the period by the net asset value per share at the end of the period.
The number of shares owned at the end of the period is based on the number of
shares purchased at the beginning of the period with $1,000, adjusted over the
period by any additional shares, assuming the quarterly reinvestment of any
dividends and distributions. The quoted performance data for the SMALL-CAP
GROWTH FUND includes the performance of a predecessor collective trust fund for
periods before the Fund's registration statement became effective on August 30,
1996, as adjusted to reflect the Fund's 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 that are imposed by the 1940
Act. If the collective trust fund had been registered under the 1940 Act, the
performance may have been adversely affected. YIELD (ALL FUNDS) AND
TAX-EQUIVALENT YIELD (INTERMEDIATE TAX-FREE FUND ONLY)

The MONEY MARKET FUND calculates the yield for Class Y Shares daily, based upon
the seven days ending on the day of the calculation, called the base period.
This yield is computed by:

o determining the net change in the value of a hypothetical account with
a balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any
additional shares purchased with dividends earned from the original one
share and all dividends declared on the original and any purchased
shares;

o dividing the net change in the account's value by the value of the account
at the beginning of the base period to determine the base period return;
and

o multiplying the base period return by 365/7.

The MONEY MARKET FUND's yield for Class Y Shares (formerly, Class A Shares)
for the seven-day period ended August 31, 1999, was 4.92%.

The yield for the other Funds' shares is calculated by dividing: (i)the net
investment income per share earned by a Fund's shares over a thirty-day period;
by (ii) the maximum offering price per share of the Fund on the last day of the
period. This number is then annualized using semi-annual compounding. This means
that the amount of income generated during the thirty-day period is assumed to
be generated each month over a 12-month period and is reinvested every six
months. The tax equivalent yield for INTERMEDIATE TAX-FREE FUND shares is
calculated similarly to the yield, but is adjusted to reflect the taxable yield
that shares would have had to earn to equal the actual yield, assuming a
specific tax rate. The yield for the Funds and in the case of the INTERMEDIATE
TAX-FREE FUND, the tax-equivalent yield do not necessarily reflect income
actually earned by the Fund because of certain adjustments required by the SEC
and, therefore, may not correlate to the dividends or other distributions paid
to shareholders. The INTERMEDIATE TAX-FREE FUND'S tax-equivalent yield for
the 30-day period ended August 31, 1999 was 7.24%. To the extent that
financial institutions and broker/dealers charge fees in connection with
services provided in conjunction with an investment in a Fund's shares, the
Fund's shares performance is lower for shareholders paying those fees. EFFECTIVE
YIELD (MONEY MARKET FUND ONLY)

The MONEY MARKET FUND's effective yield for Class Y Shares is computed by
compounding the unannualized base period return by: adding 1 to the base period
return; raising the sum to the 365/7th power; and subtracting 1 from the result.
The MONEY MARKET FUND's effective yield for Class Y Shares (formerly, Class A
Shares) for the seven-day period ended August 31, 1999, was 5.04%.

<PAGE>

------------------------ ----------------------- -----------------------
FUND AVERAGE ANNUAL TOTAL YIELD
RETURN for the 30-day period

for the following ended August 31, 1999

periods ended August
31, 1999

----------------------- -----------------------
----------------------- -----------------------
CLASS Y SHARES CLASS Y SHARES

One Year
Five Year

Since Inception

------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
Equity Income Fund 27.92% 1.45%
18.78%
16.03%(a)

------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
Large-Cap Growth & 38.98% 0.29%
Income Fund 20.31%
14.96%(b)

------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
Mid-Cap Value Fund 21.92% 0.51%
12.53%
12.38%(a)

------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
Mid-Cap Growth Fund 53.41% 0.00%
20.30%
16.34%(a)

------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
Small-Cap Growth Fund 26.30% 0.00%
N/A
21.97%(c)

------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
International Stock 22.20% N/A
Fund 9.23%

9.23%(d)

------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
Government Income Fund 0.62% 5.55%
6.47%
5.54%(e)

------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
Intermediate Bond Fund 1.28% 5.93%
5.92%
5.20%(f)

------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
Intermediate Tax-Free 0.02% 4.37%
Fund 4.79
4.11%(g)

------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
Short-Term Income Fund 3.59% 5.74%
5.67%
4.97%(h)

------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
Money Market Fund 4.98% 4.85%
5.36%
4.80%(f)

------------------------ ----------------------- -----------------------
A) September 30, 1993
B) November 20, 1992

C) November 1, 1995
D) September 1, 1994
E) December 13, 1992
F) November 23, 1992
G) February 2, 1994
H) November 1, 1992

<PAGE>

TAX-EQUIVALENCY TABLE

Set forth below is a sample tax-equivalency table that the INTERMEDIATE TAX-FREE
FUND may use in advertising and sales literature. This table is for illustrative
purposes only and is not representative of past or future performance of the
Fund. The interest earned by the municipal securities owned by the Fund
generally remains free from federal regular income tax* and is often free from
state and local taxes as well. However, some of the Fund's income may be subject
to the federal alternative minimum tax and state and/or local taxes.

TAXABLE YIELD EQUIVALENT FOR 1999

MULTISTATE MUNICIPAL FUND

FEDERAL INCOME TAX BRACKET:

15.00% 28.00% 31.00% 36.00% 39.60%

JOINT $1- $43,051- $104,051- $158,551- OVER
RETURN 42,050 104,050 158,550 283,150 $283,150

SINGLE $1- $25,751- $62,451- $130,251- OVER
RETURN 25,750 62,450 130,250 283,150 $283,150

Tax-Exempt

Yield Taxable Yield Equivalent

1.00% 1.18% 1.39% 1.45% 1.56% 1.66%
1.50% 1.76% 2.08% 2.17% 2.34% 2.48%
2.00% 2.35% 2.78% 2.90% 3.13% 3.31%
2.50% 2.94% 3.47% 3.62% 3.91% 4.14%
3.00% 3.53% 4.17% 4.35% 4.69% 4.97%
3.50% 4.12% 4.86% 5.07% 5.47% 5.79%
4.00% 4.71% 5.56% 5.80% 6.25% 6.62%
4.50% 5.29% 6.25% 6.52% 7.03% 7.45%
5.00% 5.88% 6.94% 7.25% 7.81% 8.28%
5.50% 6.47% 7.64% 7.97% 8.59% 9.11%
6.00% 7.06% 8.33% 8.70% 9.38% 9.93%
6.50% 7.65% 9.03% 9.42% 10.16% 10.76%
7.00% 8.24% 9.72% 10.14% 10.94% 11.59%
7.50% 8.82% 10.42% 10.87% 11.72% 12.42%
8.00% 9.41% 11.11% 11.59% 12.50% 13.25%

Note: The maximum marginal tax rate for each bracket was used in calculating the
taxable yield equivalent. The chart above is for illustrative purposes only. It
is not an indicator of past or future performance of Fund shares. *Some portion
of the INTERMEDIATE TAX-FREE FUND'S income may be subject to the federal
alternative minimum tax and state and local income taxes.

PERFORMANCE COMPARISONS

Advertising and sales literature may include:

o references to ratings, rankings, and financial publications and/or
performance comparisons of the Funds' shares to certain indices;

o charts, graphs and illustrations using the Funds' returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;

o discussions of economic, financial and political developments and their impact
on the securities market, including the portfolio manager's views on how such
developments could impact the Funds; and

o information about the mutual fund industry from sources such as the Investment
Company Institute.

The Funds may compare their performance, or performance for the types of
securities in which it invests, to a variety of other investments, including
federally insured bank products such as bank savings accounts, certificates of
deposit, and Treasury bills.

The Funds may quote information from sources the Funds believe are reliable
regarding individual countries and regions, world stock exchanges, and economic
and demographic statistics.

You may use financial publications and/or indices to obtain a more complete view
of share performance. When comparing performance, you should consider all
relevant factors such as the composition of the index used, prevailing market
conditions, portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial publications
and/or indices which the Funds' use in advertising may include:

o MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALIA, FAR EAST INDEX
(EAFE) is a market capitalization weighted foreign securities index, which is
widely used to measure the performance of European, Australian and New
Zealand and Far Eastern stock markets. The index covers approximately 1,020
companies drawn from 18 countries in the above regions. The index values
its securities daily in both U.S. dollars and local currency and calculates
total returns monthly. EAFE U.S. dollar total return is a net dividend
figure less Luxembourg withholding tax. The EAFE is monitored by Capital
International, S.A., Geneva, Switzerland.

o LIPPER, INC. ranks funds in various fund categories by making comparative
calculations using total return. Total return assumes the reinvestment of
all capital gains distributions and income dividends and takes into account
any change in net asset value over a specific period of time. From time to
time, a Fund will quote its Lipper ranking in advertising and sales
literature.

o CONSUMER PRICE INDEX is generally considered to be a measure of inflation.

o DOW JONES INDUSTRIAL AVERAGE (DJIA) is an unmanaged index representing
share prices of major industrial corporations, public utilities, and
transportation companies. Produced by Dow Jones & Company, it is cited as a
principal indicator of market conditions.

o STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a composite
index of common stocks in industry, transportation, financial, and public
utility companies. The Standard & Poor's index assumes reinvestment of all
dividends paid by stocks listed on the index. Taxes due on any of these
distributions are not included, nor are brokerage or other fees calculated
in the Standard & Poor's figures.

o RUSSELL 1000 GROWTH INDEX consists of those Russell 2000 securities with a
greater-than-average growth orientation. Securities in this index tend to
exhibit higher price-to-book and price-earnings ratios, lower dividend
yields and higher forecasted growth rates.

o RUSSELL 2000 INDEX is a broadly diversified index consisting of
approximately 2,000 small capitalization common stocks that can be used to
compare to the total returns of funds whose portfolios are invested
primarily in small capitalization common stocks.

o STANDARD & POOR'S RATINGS GROUP SMALL STOCK INDEX is a broadly diversified
index consisting of approximately 600 small capitalization common stocks
that can be used to compare to the total returns of funds whose portfolios
are invested primarily in small capitalization common stocks.

o MORNINGSTAR, INC., an independent rating service, is the publisher of
the bi-weekly MUTUAL FUND VALUES. MUTUAL FUND VALUES rates more than
1,000 NASDAQ-listed mutual funds of all types, according to their
risk-adjusted returns. The maximum rating is five stars, and ratings are
effective for two weeks.

o BANK RATE MONITOR NATIONAL INDEX, Miami Beach, Florida, is a financial
reporting service which publishes weekly average rates of 50 leading
bank and thrift institution money market deposit accounts. The rates
published in the index are an average of the personal account rates
offered on the Wednesday prior to the date of publication by ten of the
largest banks and thrifts in each of the five largest Standard
Metropolitan Statistical Areas. Account minimums range upward from
$2,500 in each institution and compounding methods vary. If more than
one rate is offered, the lowest rate is used. Rates are subject to
change at any time specified by the institution.

o DONOGHUE'S MONEY FUND REPORT publishes annualized yields of over 300
taxable money market funds on a weekly basis and through its MONEY
MARKET INSIGHT publication reports monthly and 12 month-to-date
investment results for the same money funds.

o THE S&P/BARRA VALUE INDEX AND THE S&P/BARRA GROWTH INDEX are constructed
by Standard & Poor's and BARRA, Inc., an investment technology and
consulting company, by separating the S&P 500 Index into value stocks
and growth stocks. The S&P/BARRA Growth and S&P/BARRA Value Indices are
constructed by dividing the stocks in the S&P 500 Index according to
their price-to-book ratios. The S&P/BARRA Growth Index, contains
companies with higher price-to-earnings ratios, low dividends yields,
and high earnings growth (concentrated in electronics, computers, health
care, and drugs). The Value Index contains companies with lower
price-to-book ratios and has 50% of the capitalization of the S&P 500
Index. These stocks tend to have lower price-to-earnings ratios, high
dividend yields, and low historical and predicted earnings growth
(concentrated in energy, utility and financial sectors). The S&P/BARRA
Value and S&P/BARRA Growth Indices are capitalization-weighted and
rebalanced semi-annually. Standard & Poor's/BARRA calculates these total
return indices with dividends reinvested.

o STANDARD & POOR'S MIDCAP 400 STOCK PRICE INDEX, a composite index of 400
common stocks with market capitalizations between $200 million and $7.5
billion in industry, transportation, financial, and public utility
companies. The Standard & Poor's index assumes reinvestment of all
dividends paid by stocks listed on the index. Taxes due on any of these
distributions are not included, nor are brokerage or other fees
calculated in the Standard & Poor's figures.

o MERRILL LYNCH 1-3 YEAR TREASURY INDEX is an unmanaged 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.

o MERRILL LYNCH CORPORATE MASTER is an unmanaged index comprised of
approximately 4,356 corporate debt obligations rated BBB or better.
These quality parameters are based on the composites of ratings assigned
by Standard & Poor's Corporation and Moody's Investors Service, Inc.
Only bonds with a minimum maturity of one year are included.

o MERRILL LYNCH 1-YEAR TREASURY BILL INDEX is comprised of the most
recently issued one-year U.S. Treasury bills. Index returns are
calculated as total returns for periods of one, three, six and twelve
months as well as year-to-date.

o MERRILL LYNCH CORPORATE A-RATED (1-3 YEAR) BOND INDEX is a universe of
corporate bonds and notes with maturities between 1-3 years and rated A3 or
higher.

o LEHMAN BROTHERS GOVERNMENT/CORPORATE (TOTAL) INDEX is comprised of
approximately 5,000 issues which include: non-convertible bonds publicly
issued by the U.S. government or its agencies; corporate bonds
guaranteed by the U.S. government and quasi-federal corporation; and
publicly issued, fixed rate, non-convertible domestic bonds of companies
in industry, public utilities, and finance. The average maturity of
these bonds approximates nine years. Traced by Lehman Brothers, Inc.,
the index calculates total return for one-month, three-month,
twelve-month, and ten-year periods and year-to-date.

o LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX is a
universe of government and corporate bonds rated BBB or higher with maturities
between 1-10 years.

o THE SALOMON BROTHERS TOTAL RATE-OF-RETURN INDEX for mortgage pass
through securities reflects the entire mortgage pass through market and
reflects their special characteristics. The index represents data
aggregated by mortgage pool and coupon within a given sector. A market
weighted portfolio is constructed considering all newly created pools
and coupons.

o THE MERRILL LYNCH TAXABLE BOND INDICES include U.S. Treasury and agency
issues and were designed to keep pace with structural changes in the
fixed income market. The performance indicators capture all rating
changes, new issues, and any structural changes of the entire market.

o LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX is a universe 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).

o LEHMAN BROTHERS FIVE-YEAR STATE GENERAL OBLIGATIONS BONDS is an index
comprised of all state general obligation debt issues with maturities
between four and six years. These bonds are rated A or better and
represent a variety of coupon ranges. Index figures are total returns
calculated for one, three, and twelve month periods as well as
year-to-date. Total returns are also calculated as of the index
inception, December 31, 1979.

Investors may also consult the fund evaluation consulting universes listed
below. Consulting universes may be composed of pension, profit sharing,
commingled, endowment/foundation, and mutual funds.

o FIDUCIARY CONSULTING GRID UNIVERSE, for example, is composed of over
1,000 funds, representing 350 different investment managers, divided
into subcategories based on asset mix. The funds are ranked quarterly
based on performance and risk characteristics.

o SEI DATABASE for equity funds includes approximately 900 funds,
representing 361 money managers, divided into fund types based on
investor groups and asset mix. The funds are ranked every three, six,
and twelve months.

o MERCER MEIDINGER, INC. compiles a universe of approximately 600 equity
funds, representing about 500 investment managers, and updates their
rankings each calendar quarter as well as on a one, three, and five year
basis.

ECONOMIC AND MARKET INFORMATION

Advertising and sales literature for a Fund may include discussions of economic,
financial and political developments and their effect on the securities market.
Such discussions may take the form of commentary on these developments by Fund
portfolio managers and their views and analysis on how such developments could
affect a Fund. In addition, advertising and sales literature may quote
statistics and give general information about mutual fund industry, including
the growth of the industry, from sources such as the Investment Company
Institute (ICI). For example, according to the ICI, thirty-seven percent of
American households are pursuing their financial goals through mutual funds.
These investors, as well as businesses and institutions, have entrusted over $5
trillion to the more than 7,300 mutual funds available.

FINANCIAL STATEMENTS

The financial statements for the fiscal year ended August 31, 1999, are
incorporated herein by reference from the Funds' Annual Report dated August 31,
1999 (File Nos. 33-48907 and 811-58433). A copy of the Annual Report may be
obtained without charge by contacting Marshall Funds Investor Services at the
address located on the back cover of the SAI or by calling Marshall Funds
Investor Services at 1-414-287-8555 or 1-800-FUND (3863).

<PAGE>

APPENDIX

STANDARD AND POOR'S BOND RATINGS

AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong. AA--Debt rated
AA has a very strong capacity to pay interest and repay principal and differs
from the higher rated issues only in small degree. A--Debt rated A has a strong
capacity to pay interest and repay principal although it is somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories. BBB--Debt rated BBB is regarded
as having an adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories. NR--Indicates that no public rating has been requested, that there
is insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy. PLUS (+) OR
MINUS (-):--The ratings from AA to BBB may be modified by the addition of a plus
or minus sign to show relative standing within the major rating categories.
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS AAA--Bonds which are
rated Aaa are judged to be of the best quality. They carry the smallest degree
of investment risk and are generally referred to as gilt edge. Interest payments
are protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues. AA--Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group, they comprise what are
generally known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long term risks appear somewhat larger
than in Aaa securities. A--Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper medium-grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future. BAA--Bonds which are rated Baa are considered
as medium-grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and, in fact, have speculative
characteristics as well. NR--Not rated by Moody's. FITCH IBCA, INC. LONG-TERM
DEBT RATINGS AAA--Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events. AA--Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds rated in
the AAA and AA categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated F-1+. A--Bonds
considered to be investment grade and of high credit quality. The obligor's
ability to pay interest and repay principal is considered to be strong, but may
be more vulnerable to adverse changes in economic conditions and circumstances
than bonds with higher ratings. BBB--Bonds considered to be investment grade and
of satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have adverse impact on these
bonds, and therefore, impair timely payment. NR--NR indicates that Fitch does
not rate the specific issue.

<PAGE>

STANDARD AND POOR'S COMMERCIAL PAPER RATINGS

A-1--This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. The issues determined to possess
overwhelming safety characteristics are denoted with a plus (+) sign
designation. A-2--Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.

MOODY'S INVESTORS SERVICES, INC. COMMERCIAL PAPER RATINGS

P-1--Issuers rated PRIME-1 (for related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. PRIME-1 repayment
capacity will normally be evidenced by the following characteristics:
conservative capitalization structures with moderate reliance on debt and ample
asset protection; broad margins in earning coverage of fixed financial charges
and high internal cash generation; and well-established access to a range of
financial markets and assured sources of alternate liquidity. P-2--Issuers rated
PRIME-2 (for related supporting institutions) have a strong capacity for
repayment of short-term promissory obligations. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained. FITCH IBCA, INC.
SHORT-TERM RATINGS F-1+--(Exceptionally Strong Credit Quality). Issues assigned
this rating are regarded as having the strongest degree of assurance for timely
payment. F-1--(Very Strong Credit Quality). Issues assigned to this rating
reflect an assurance of timely payment only slightly less in degree than issues
rated F-1+. F-2--(Good Credit Quality). Issues carrying this rating have a
satisfactory degree of assurance for timely payment but the margin of safety is
not as great as the F-1+ and F-1 categories. STANDARD AND POOR'S MUNICIPAL BOND
RATINGS AAA -- Debt rated AAA has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong. AA --
Debt rated AA has a very strong capacity to pay interest and repay principal and
differs from the higher rated issues only in small degree. A -- Debt rated A has
a strong capacity to pay interest and repay principal although it is somewhat
more susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories. BBB- Debt rated BBB is regarded
as having an adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher-rated
categories. NR -- NR indicates that no public rating has been requested, that
there is insufficient information on which to base a rating, or that Standard &
Poor's does not rate a particular type of obligation as a matter of policy. Plus
(+) or minus (-): The ratings AA and A may be modified by the addition of a plus
or minus sign to show relative standing within the major rating categories.
MOODY'S INVESTORS SERVICE, INC. MUNICIPAL BOND RATINGS AAA -- Bonds which are
rated Aaa are judged to be of the best quality. They carry the smallest degree
of investment risk and are generally referred to as gilt edge. Interest payments
are protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues. AA -- Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long term risks appear somewhat larger
than in Aaa securities. A -- Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment some time in the future. BAA- Bonds which are rated Baa are
considered as medium-grade obligations (i.e., they are neither highly protected
nor poorly secured). Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and, in fact, have speculative
characteristics as well. NR -- Not rated by Moody's. Moody's applies numerical
modifiers, 1, 2 and 3 in the generic rating classification of Aa and A in its
corporate or municipal bond rating system. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks
in the lower end of its generic rating category. STANDARD AND POOR'S MUNICIPAL
NOTE RATINGS SP-1 -- Very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety characteristics
will be given a plus (+) designation. SP-2 -- Satisfactory capacity to pay
principal and interest. MOODY'S INVESTORS SERVICE, INC. SHORT-TERM DEBT RATINGS
MIG1/VMIG1 -- This designation denotes best quality. There is a present strong
protection by established cash flows, superior liquidity support or demonstrated
broad based access to the market for refinancing. MIG2/VMIG2 -- This designation
denotes high quality. Margins of protection are ample although not so large as
in the preceding group.

<PAGE>

ADDRESSES

MARSHALL EQUITY INCOME FUND MARSHALL LARGE-CAP GROWTH & INCOME FUND MARSHALL
MID-CAP VALUE FUND MARSHALL MID-CAP GROWTH FUND MARSHALL SMALL-CAP GROWTH FUND
MARSHALL INTERNATIONAL STOCK FUND MARSHALL GOVERNMENT INCOME FUND MARSHALL
INTERMEDIATE BOND FUND MARSHALL INTERMEDIATE TAX-FREE FUND MARSHALL SHORT-TERM
INCOME FUND MARSHALL MONEY MARKET FUND

<TABLE>
<CAPTION>
<S> <C> <C>
P.O. Box 1348
Milwaukee, Wisconsin 53201-1348

Distributor

Federated Securities Corp. Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Adviser to all Funds

M&I Investment Management Corp. 1000 North Water Street
Milwaukee, Wisconsin 53202

Sub-Adviser to MARSHALL INTERNATIONAL STOCK FUND

BPI Global Asset Management LLP 1900 Summit Tower Boulevard
Suite 450 Orlando, Florida 32810

Custodian

Marshall & Ilsley Trust Company 1000 North Water Street
Milwaukee, Wisconsin 53202

Transfer Agent, Dividend Disbursing Agent and
Portfolio Accounting Services

Federated Services Company Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Shareholder Servicing Agent Marshall Funds Investor Services, a division of
P.O. Box 1348
Marshall & Ilsley Trust Company Milwaukee, Wisconsin 53201-1348

Legal Counsel Bell, Boyd & Lloyd
Three First National Plaza 70 West Madison Street, Suite 3300
Chicago, IL 60602-4207

Independent Auditors

Ernst & Young LLP 200 Clarendon Street
Boston, MA 02116-5072
</TABLE>

Marshall Funds Investor Services
1000 North Water Street

Milwaukee, Wisconsin 53202

414-287-8555 or 800-236-FUND (3863)

TDD: Speech and Hearing Impaired Services
1-800-236-209-3520
Internet address: http://www.marshallfunds.com

[Marshall Funds logo]

The Marshall Funds Family

Investment Information and Prospectus

Class A Shares

October 1999

> Marshall Equity Income Fund

> Marshall Large-Cap Growth & Income Fund

> Marshall Mid-Cap Value Fund

> Marshall Mid-Cap Growth Fund

> Marshall Small-Cap Growth Fund

> Marshall International Stock Fund

> Marshall Government Income Fund

> Marshall Intermediate Bond Fund

> Marshall Money Market Fund

[Marshall Funds logo]

The Marshall Funds Story

Experience: The Marshall Funds are backed by the solid reputation and recognized
experience of M&I Investment Management Corp., the adviser to the Funds.
Managing more than $10.5 billion for corporations, foundations, endowments
and individuals--including $4.7 billion of the Marshall Funds--M&I
Investment Management Corp. was one of the first bank-sponsored investment
advisory firms in the country, founded over 25 years ago. But M&I's roots
go even deeper. In fact, M&I Bank is the oldest financial institution in
Wisconsin, celebrating 150 years in 1997.

Discipline: The Marshall Fund family's hallmark is its highly specialized,
style-specific investment approach. By staying "true to the style" of each
Fund's objectives, our experienced managers don't bend or compromise the
rules. That means each Marshall Fund adheres to the philosophy or
"mission" of that Fund. This positions the Marshall Funds as excellent
components in an asset allocation plan. In other words, if you buy a
small-cap growth fund, it will stay a small-cap growth fund. There will be
no surprises.

Capability: More than 50 dedicated, experienced investment professionals back up
the Marshall Funds. With an average of more than 15 years of industry
experience, our portfolio managers have proven their abilities through
good markets and bad. To do their jobs, the entire staff leverages state
of the art technology, including the best in Portfolio Management Systems,
Performance Analysis Services, Trading Systems and Electronic Information
Services.

Research: We believe in exhaustive and extensive research to inform investment
selections in the Marshall Funds. That's why M&I portfolio managers and
analysts spend a substantial amount of their time in face-to-face meetings
with the top management of firms they are analyzing, travelling to
companies across the country to evaluate management, operations,
strategies and products first-hand. Wall Street analysts' coverage is
studied on a daily basis as well.

Efficiency: The Marshall Funds are managed to help keep costs as low as
possible, and the Funds' expense ratios have dropped below the industry
averages for their Fund peer groups as a result of our continued sales
efforts and effective expense management.

Not FDIC Insured No Bank Guarantee May Lose Value
<S> <C> <C>

Not part of the prospectus

[Logo of Marshall Funds]

Class A Shares
Table of Contents

Risk/Return Summary 2
.. Equity Funds

Marshall Government Income Fund 7
Marshall Intermediate Bond Fund 7

.. Money Market Fund

Marshall Money Market Fund 8
Fees and Expenses of the Funds 9
Main Risks of Investing in the Marshall Funds 10
Securities Descriptions 12
How to Buy Shares 14
How to Redeem and Exchange Shares 16
Account and Share Information 18
Marshall Funds, Inc. Information 20
Financial Highlights 25

</TABLE>

Shares of the Marshall Funds, like shares of all mutual funds, are not bank
deposits, federally insured, or guaranteed, and may lose value.

Prospectus
October 31, 1999

Risk/Return Summary

Risk/Return Summary of Mutual Funds

[graphic]

Equity Funds
Marshall Equity Income Fund

Marshall Large-Cap Growth & Income Fund
Marshall Mid-Cap Value Fund
Marshall Mid-Cap Growth Fund
Marshall Small-Cap Growth Fund
Marshall International Stock Fund

Income Funds
Marshall Government Income Fund
Marshall Intermediate Bond Fund

Money Market Fund
Marshall Money Market Fund

Principal Risks of the Funds

Stock Foreign Debt Asset/Mortgage
Market Sector Style Securities Securities Backed Securities

Risks Risks Risks Risks Risks Risks

Marshall Equity Income Fund X X X

<S> <C> <C> <C> <C> <C> <C>
Marshall Large-Cap

</TABLE>

Acomplete description of these risks can be found in the "Main Risks of
Investing in the Marshall Funds" section.

An investment in any of the Marshall Funds is not a deposit of a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other

government agency.

Equity Funds

[graphic]

Marshall Equity Income Fund

[graphic]

Goal: To provide capital appreciation and above-average dividend income.

Strategy: Fund assets are invested in a broadly-diversified portfolio of common
stocks whose market capitalization typically exceeds eight billion dollars. In
order to provide both capital appreciation and income, the Adviser attempts to
structure the portfolio to pursue a yield at least 1% more than the income
earned on the stocks in the Standard & Poor's 500 Index (S&P 500). The Adviser
selects companies that exhibit traditional value characteristics, such as a
price-to-earnings ratio less than the S&P 500, higher-than-average dividend
yields or a lower-than-average price-to-book value.

Annual Total Return (calendar years 1994-1998)

The graphic presentation here displayed consists of a bar chart representing the
annual total returns of Marshall Equity Income Fund (Fund) as of the calendar
year-end for each of five years.

The "y" axis reflects the "% Total Return" beginning with "-5.00%" and
increasing in increments of 5.00% up to 35.00%.

Total Return

<TABLE>

<S> <C> <C>
Best quarter (4Q98) 11.67%
Worst quarter (3Q98) (7.75%)
Most recent quarter (3Q99) (8.61%)

</TABLE>

Average Annual Total Return through 12/31/98

Since 9/30/93

1 Year 5 Year inception
<S> <C> <C> <C>
Fund 10.48% 17.65% 16.93%
LEIFI 11.78% 16.62% 16.03%
S&P 500 28.58% 24.06% 23.32%
</TABLE>

Marshall Large-Cap Growth & Income Fund

[graphic]

Goal: To provide capital appreciation and income.

Annual Total Return (calendar years 1993-1998)

The "y" axis reflects the "% Total Return" beginning with "-10.00%" and
increasing in increments of 5.00% up to 35.00%.

The "x" axis represents calculation periods from the earliest calendar year end
of the Fund's start of business through the calendar year ended December 31,
1998. The light gray shaded chart features six distinct vertical bars, each
shaded in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The calculated
total return percentage for the Fund which appears directly above each
respective bar, for the calendar years 1993 through 1998, are: 3.35%, -5.79%,
33.20%, 14.66%, 26.24% and 26.18%.

Total Return

<TABLE>

<S> <C> <C>
Best quarter (4Q98) 22.67%
Worst quarter (3Q98) (10.08%)
Most recent quarter (3Q99) (6.50%)

</TABLE>

Average Annual Total Return through 12/31/98

Since 11/20/92

1 Year 5 Year inception
<S> <C> <C> <C>
Fund 26.18% 18.04% 15.43%
LGIFI 13.58% 17.83% 17.33%
S&P 500 28.58% 24.06% 21.65%
</TABLE>

As with all mutual funds, past performance does not necessarily predict future
performance. The table, bar chart and total return information are for the Class
Y Shares of the Equity Income Fund and Large-Cap Growth & Income Fund which are
not offered in this prospectus, are not sold subject to a sales charge, (load),
and have returns based on net asset value. The returns for Class A Shares are
not presented because they are for a period of less than one year. Class A Share
returns would be substantially similar because the classes are invested in the
same portfolio of securities and the returns would differ only to extent that
the classes do not have the same expenses. The average annual total returns
above are compared to a broad-based market index over a period of time. In
addition, the performance of the Equity Income Fund is compared to the Lipper
Equity Income Funds Index (LEIFI), and the performance of the Large-Cap Growth &
Income Fund is compared to the Lipper Growth & Income Funds Index (LGIFI), which
are indices of funds with similar investment objectives.

Marshall Mid-Cap Value Fund

[graphic]

Goal: To provide capital appreciation.

Annual Total Return (calendar years 1994-1998)

The graphic presentation here displayed consists of a bar chart representing the
annual total returns of Marshall Mid-Cap Value Fund (Fund) as of the calendar
year-end for each of five years.

The "y" axis reflects the "% Total Return" beginning with "0.00%" and increasing
in increments of 5.00% up to 30.00%.

Total Return

<TABLE>

<S> <C> <C>
Best quarter (4Q98) 12.36%
Worst quarter (3Q98) (13.20%)
Most recent quarter (3Q99) (8.96%)

</TABLE>

Average Annual Total Return through 12/31/98

Since 9/30/93

1 Year 5 Year inception
<S> <C> <C> <C>
Fund 5.15% 13.59% 13.37%
LMCVFI (1.72%) 12.03% 11.98%
S&P 400 19.09% 18.84% 18.45%
</TABLE>

Marshall Mid-Cap Growth Fund

[graphic]

Goal: To provide capital appreciation.

Strategy: Fund assets are invested in a diversified portfolio of common stocks
of companies similar in size to those within the S&P Mid-Cap 400 Index (S&P
400). As of August 31, 1999, the S&P 400's range was $243 million to $11.5
billion, but frequently changes as the market value of the stocks that comprise
the S&P 400 changes or as stocks are added or removed from the S&P 400. The
Adviser selects stocks of companies with growth characteristics, such as
above-average earnings growth potential or where significant changes are taking
place, such as new products, services, or methods of distribution, or overall
business restructuring.

Annual Total Return (calendar years 1994-1998)

The graphic presentation here displayed consists of a bar chart representing the
annual total returns of Marshall Mid-Cap Growth Fund (Fund) as of the calendar
year-end for each of five years.

The "y" axis reflects the "% Total Return" beginning with "-10.00%" and
increasing in increments of 5.00% up to 35.00%.

Total Return

<TABLE>

<S> <C> <C>
Best quarter (4Q98) 30.61%
Worst quarter (3Q98) (22.90%)
Most recent quarter (3Q99) (1.12%)

</TABLE>

Average Annual Total Return through 12/31/98

Since 9/30/93

1 Year 5 Year inception
<S> <C> <C> <C>
Fund 15.72% 16.67% 16.17%
LMCGFI 12.79% 14.68% 14.50%
S&P 400 19.09% 18.84% 18.45%
</TABLE>

As with all mutual funds, past performance does not necessarily predict future
performance. The table, bar chart and total return information are for the Class
Y Shares of the Mid-Cap Value Fund and Mid-Cap Growth Fund which are not offered
in this prospectus, are not sold subject to a sales charge, (load), and have
returns based on net asset value. The returns for Class A Shares are not
presented because they are for a period of less than one year. Class A Share
returns would be substantially similar because the classes are invested in the
same portfolio of securities and the returns would differ only to extent that
the classes do not have the same expenses. The average annual total returns
above are compared to a broad-based market index over a period of time. In
addition, the performance of the Mid-Cap Value Fund is compared to the Lipper
Mid-Cap Value Funds Index (LMCVFI), and the performance of the Mid-Cap Growth
Fund is compared to the Lipper Mid-Cap Growth Funds Index (LMCGFI), which are
indices of funds with similar investment objectives.

Marshall Small-Cap Growth Fund/1/

[graphic]

Goal: To provide capital appreciation.

Annual Total Return (calendar years 1996-1998)

The graphic presentation here displayed consists of a bar chart representing the
annual total returns of Marshall Small-Cap Growth Fund (Fund) as of the calendar
year-end for each of three years.

The "y" axis reflects the "% Total Return" beginning with "0.00%" and increasing
in increments of 10.00% up to 60.00%.

The "x" axis represents calculation periods from the earliest calendar year end
of the Fund's start of business through the calendar year ended December 31,
1998. The light gray shaded chart features three distinct vertical bars, each
shaded in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The calculated
total return percentage for the Fund which appears directly above each
respective bar, for the calendar years 1996 through 1998, are: 50.39%, 23.18%,
and 3.41%.

Total Return

<TABLE>

<S> <C> <C>
Best quarter (4Q98) 30.28%
Worst quarter (3Q98) (27.56%)
Most recent quarter (3Q99) 0.47%

</TABLE>

Average Annual Total Return through 12/31/98

Since 11/1/95

1 Year inception

<S> <C> <C>
Fund 3.41% 29.65%
LSCFI (0.85%) 10.30%
Russell 2000 (2.78%) 11.65%
</TABLE>

/1/The SMALL-CAP GROWTH FUND is the successor to the portfolio of a collective
trust fund managed by the Adviser. At the Fund's commencement of operations, the
assets from the collective trust fund were transferred to the Fund in exchange
for Fund shares. The Fund's average annual total return since inception
(11/1/95) is 29.65% through 12/31/98. The quoted performance data includes the
performance of the collective trust fund for periods before the SMALL-CAP GROWTH
FUND'S registration statement became effective on August 30, 1996, adjusted to
reflect the SMALL-CAP GROWTH FUND'S expenses. The collective trust fund was not
registered under the Investment Company Act of 1940 ("1940 Act") and was not
subject to certain diversification and investment restrictions that are imposed
by the 1940 Act and the tax laws applicable to mutual funds. If the collective
trust fund had been subject to those requirements and restrictions, the
performance may have been adversely affected. As with all mutual funds,
past performance does not necessarily predict future performance. The table, bar
chart and total return information are for the Class Y Shares of the Small-Cap
Growth Fund which are not offered in this prospectus, are not sold subject to a
sales charge, (load), and have returns based on net asset value. The returns for
Class A Shares are not presented because they are for a period of less than one
year. Class A Share returns would be substantially similar because the classes
are invested in the same portfolio of securities and the returns would differ
only to extent that the classes do not have the same expenses. The average
annual total returns above are compared to a broad-based market index over a
period of time. In addition, the performance of the Small- Cap Growth Fund is
compared to the Lipper Small Cap Funds Index (LSCFI), which is an index of funds
with similar investment objectives.

Marshall International Stock Fund

[graphic]

Goal: To provide capital appreciation.

Annual Total Return (calendar years 1995-1998)

The graphic presentation here displayed consists of a bar chart representing the
annual total returns of Marshall International Stock Fund (Fund) as of the
calendar year-end for each of four years.

The "y" axis reflects the "% Total Return" beginning with "0.00%" and increasing
in increments of 5.00% up to 20.00%.

The "x" axis represents calculation periods from the earliest calendar year end
of the Fund's start of business through the calendar year ended December 31,
1998. The light gray shaded chart features four distinct vertical bars, each
shaded in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The calculated
total return percentage for the Fund which appears directly above each
respective bar, for the calendar years 1995 through 1998, are: 11.55%, 19.65%,
10.86%, and 3.26%.

Total Return

<TABLE>

<S> <C> <C>
Best quarter (4Q98) 16.30%
Worst quarter (3Q98) (19.06%)
Most recent quarter (3Q99) 4.09%

</TABLE>

Average Annual Total Return through 12/31/98

Since 9/1/94

1 Year inception

<S> <C> <C>
Fund 3.26% 8.65%
LIFI 12.66% 8.41%
EAFE Index 18.23% 6.09%
</TABLE>

As with all mutual funds, past performance does not necessarily predict future
performance. The table, bar chart and total return information are for the Class
Y Shares of the International Stock Fund which are not offered in this
prospectus, are not sold subject to a sales charge, (load), and have returns
based on net asset value. The returns for Class A Shares are not presented
because they are for a period of less than one year. Class A Share returns would
be substantially similar because the classes are invested in the same portfolio
of securities and the returns would differ only to extent that the classes do
not have the same expenses. The average annual total returns above are compared
to a broad-based market index over a period of time. In addition, the
performance of the International Stock Fund is compared to the Morgan Stanley
Capital International Europe, Australia, Far East Index (EAFE Index) which is an
index of funds with similar investment objectives.

Income Funds

[graphic]

Marshall Government Income Fund

[graphic]

Goal: To provide current income.

Strategy: Fund assets are invested in securities issued by the U.S. government
and its agencies and instrumentalities, particularly mortgage-backed securities.
The Fund will also invest in dollar roll transactions. The Adviser considers
macroeconomic conditions and uses credit and market analysis in developing the
general portfolio strategy. Current and historical interest rate relationships
are used to evaluate market sectors and individual securities. The Fund
generally maintains an average dollar-weighted maturity of four to 12 years.

Annual Total Return (calendar years 1993-1998)

The graphic presentation here displayed consists of a bar chart representing the
annual total returns of Marshall Government Income Fund (Fund) as of the
calendar year-end for each of six years.

The "y" axis reflects the "% Total Return" beginning with "-5.00%" and
increasing in increments of 5.00% up to 20.00%.

The "x" axis represents calculation periods from the earliest calendar year end
of the Fund's start of business through the calendar year ended December 31,
1998. The light gray shaded chart features six distinct vertical bars, each
shaded in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The calculated
total return percentage for the Fund which appears directly above each
respective bar, for the calendar years 1993 through 1998, are: 5.99%, -2.74%,
16.97%, 3.04%, 8.43%, and 6.51%.

Total Return

<TABLE>

<S> <C> <C>
Best quarter (2Q95) 4.92%
Worst quarter (1Q94) (2.13%)
Most recent quarter (3Q99) 0.27%

</TABLE>

Average Annual Total Return through 12/31/98

Since 12/13/92

1 Year 5 Year inception
<S> <C> <C> <C>
Fund 6.51% 6.24% 6.24%
LMI 6.95% 7.23% 7.29%
LUSMI 6.13% 5.70% 6.17%
</TABLE>

Marshall Intermediate Bond Fund

[graphic]

Goal: To maximize total return consistent with current income.

The graphic presentation here displayed consists of a bar chart representing the
annual total returns of Marshall Intermediate Bond Fund (Fund) as of the
calendar year-end for each of six years.

The "y" axis reflects the "% Total Return" beginning with "-5.00%" and
increasing in increments of 5.00% up to 20.00%.

The "x" axis represents calculation periods from the earliest calendar year end
of the Fund's start of business through the calendar year ended December 31,
1998. The light gray shaded chart features six distinct vertical bars, each
shaded in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The calculated
total return percentage for the Fund which appears directly above each
respective bar, for the calendar years 1993 through 1998, are: 6.88%, -3.06%,
15.46%, 2.41%, 7.18%, and 6.33%.

Total Return

<TABLE>

<S> <C> <C>
Best quarter (2Q95) 4.68%
Worst quarter (1Q96) (2.03%)
Most recent quarter (3Q99) 0.72%

</TABLE>

Average Annual Total Return through 12/31/98

Since 11/23/92

1 Year 5 Year inception
<S> <C> <C> <C>
Fund 6.33% 5.49% 5.78%
LGCI 8.44% 6.66% 7.10%
LSIBF 6.99% 5.96% 6.23%
</TABLE>

As with all mutual funds, past performance does not necessarily predict future
performance. The table, bar chart and total return information are for the Class
Y Shares of the Government Income Fund and Intermediate Bond Fund which are not
offered in this prospectus, are not sold subject to a sales charge, (load), and
have returns based on net asset value. The returns for Class A Shares are not
presented because they are for a period of less than one year. Class A Share
returns would be substantially similar because the classes are invested in the
same portfolio of securities and the returns would differ only to extent that
the classes do not have the same expenses. The average annual total returns
above are compared to a broad-based market index over a period of time. In
addition, the performance of the Government Income Fund is compared to the
Lipper U.S. Mortgage Funds Index (LUSMI), and the performance of the
Intermediate Bond Fund is compared to the Lipper Short/Intermediate Investment
Grade Bond Funds Index (LSIBF), which are indices of funds with similar
investment objectives.

[graphic]

Money Market Fund

Marshall Money Market Fund

[graphic]

Goal: To provide current income consistent with stability of principal.

Strategy: Fund assets are invested in high quality, short-term money market
instruments. In order to produce income which minimizes volatility, the Adviser
uses a "bottom-up" approach which evaluates debt securities of individual
companies against the context of broader market factors such as the cyclical
trend in interest rates, the shape of the yield curve and debt security supply
factors.

Although the Fund seeks to preserve the value of your investment at $1 per
share, it is possible to lose money by investing in the Fund.

Annual Total Return (calendar years 1993-1998)

The graphic presentation here displayed consists of a bar chart representing the
annual total returns of Marshall Money Market Fund (Fund) as of the calendar
year-end for each of six years.

The "y" axis reflects the "% Total Return" beginning with "0.00%" and increasing
in increments of 1.00% up to 6.00%.

The "x" axis represents calculation periods from the earliest calendar year end
of the Fund's start of business through the calendar year ended December 31,
1998. The light gray shaded chart features six distinct vertical bars, each
shaded in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The calculated
total return percentage for the Fund which appears directly above each
respective bar, for the calendar years 1993 through 1998, are: 2.68%, 3.75%,
5.47%, 4.95%, 5.13%, and 5.11%.

Total Return

<TABLE>

<S> <C> <C>
Best quarter (2Q95) 1.38%
Worst quarter (2Q93) 0.64%
Most recent quarter (3Q99) 1.16%

</TABLE>

7-Day Net Yield

<S> <C>
7-Day Net Yield (as of 12/31/98)* 4.73%
</TABLE>

Average Annual Total Return through 12/31/98**

Since 12/17/92

1 Year 5 Year inception
<S> <C> <C> <C>
Fund 5.11% 4.88% 4.50%
DMFA 5.04% 4.86% 4.48%
</TABLE>

*Investors may call the Fund to learn the current 7-Day Net Yield at 1-800-580-
FUND (3863).

**The table shows the Fund's average annual total returns over a period of time
relative to the IBC/Donoghue's Money Fund Average (DMFA), an average of money
funds with similar objectives.

[graphic]

Fees and Expenses of the Funds

This table describes the fees and expenses that you may pay if you buy and hold
Class A Shares.

Equity Large-Cap Mid-Cap Mid-Cap Small-Cap
Income Growth &Income Value Growth Growth

Fund Fund Fund Fund Fund

<S> <C> <C> <C> <C> <C>
Shareholder Fees (fees paid directly from your
investment)

Maximum Sales Charge (Load) Imposed (as a
percentage of offering prices)

5.75% 5.75% 5.75% 5.75% 5.75%
Annual Fund Operating Expenses (expenses
deducted and expressed as a percentage of the
Fund's net assets)

Management Fee 0.75% 0.75% 0.75% 0.75% 1.00%
Distribution (12b-1) Fee 0.25% 0.25% 0.25% 0.25% 0.25%
Shareholder Servicing Fee 0.25%(3) 0.25%(3) 0.25%(3) 0.25%(3) 0.25%(3)
Other Expenses 0.17% 0.20% 0.26% 0.21% 0.34%
Total Annual Fund Operating Expenses(1) 1.42% 1.45% 1.51% 1.46% 1.84%
</TABLE>

International Government Intermediate Money
Stock Income Bond Market
Fund Fund Fund Fund

<S> <C> <C> <C> <C>
Shareholder Fees (fees paid directly from your
investment)

Maximum Sales Charge (Load) Imposed (as a
percentage of offering prices)

5.75% 4.75% 4.75% None
Annual Fund Operating Expenses (expenses
deducted and expressed as a percentage of the
Fund's net assets)

Management Fee 1.00%(2) 0.75%(2) 0.60%(2) 0.50%(2)
Distribution (12b-1) Fee 0.25% 0.25% 0.25% 0.30%
Shareholder Servicing Fee 0.25%(3) 0.25%(3) 0.25%(3) 0.02%
Other Expenses 0.27% 0.20% 0.15% 0.14%
Total Annual Fund Operating Expenses(1) 1.77% 1.45% 1.25% 0.96%
</TABLE>

Total Annual Fund Operating Expenses

(after waivers) 1.17% 1.20% 1.26% 1.21% 1.59%
</TABLE>

Total Annual Fund Operating Expenses

(after waivers) 1.50% 1.09% 0.94% 0.71%
</TABLE>

(2) The adviser voluntarily waived a portion of the management fee. The adviser
may terminate this voluntary waiver at any time. The management fee paid by the
International Stock Fund, Government Income Fund, Intermediate Bond Fund, and
Money Market Fund (after the voluntary waivers) were 0.98%, 0.64%, 0.54%, and

0.25% for the period ended August 31, 1999.

(3) The Shareholder Servicing Fee for each of the Funds (except Money Market
Fund) has been voluntarily reduced. The shareholder servicing agent may
terminate this voluntary reduction at any time. The Shareholder Servicing Fee
(after the voluntary reduction) was 0.00% for these Funds for the period ending
August 31, 1999.

The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of the Funds will bear either directly or
indirectly. Marshall & Ilsley Trust Company and its affiliates receive fees for
advisory and custodial services, and may receive fees for administrative and
shareholder services they provide to shareholders. For more complete
descriptions of the various costs and expenses, see "Marshall Funds, Inc.
Information" Wire-transferred redemptions may be subject to an additional fee.
Example This example is intended to help you compare the cost of investing in
the Marshall Funds with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Funds for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that
each of the Funds' operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

Equity Large-Cap Mid-Cap Mid-Cap Small-Cap
Income Growth &Income Value Growth Growth

Fund Fund Fund Fund Fund

<S> <C> <C> <C> <C> <C>
1 Year $ 711 $ 714 $ 729 $ 715 $ 751
3 Years $ 999 $1,007 $1,052 $1,010 $1,120
5 Years $1,307 $1,322 $1,399 $1,327 $1,513
10 Years $2,179 $2,210 $2,377 $2,221 $2,609
</TABLE>

International Government Intermediate Money
Stock Income Bond Market
Fund Fund Fund Fund

<S> <C> <C> <C> <C>
1 Year $ 755 $ 623 $ 602 $ 98
3 Years $1,132 $ 934 $ 872 $ 306
5 Years $1,534 $1,267 $1,161 $ 531
10 Years $2,659 $2,210 $1,986 $1,178
</TABLE>

The above example should not be considered a representation of past or future
expenses. Your expenses will be less if you qualify to purchase shares at a
reduced or no sales charge. Actual expenses may be greater or less than those
shown.

[graphic]

Main Risks of Investing in the Marshall Funds

Stock Market Risks. The EQUITY FUNDS are subject to fluctuations in the stock
markets, which have periods of increasing and decreasing values. Stocks
are more volatile than debt securities. Greater volatility increases risk,
but offers the potential for greater reward.

[graphic]

What About Portfolio Turnover?

Stock market risk is also related to the size of the company
issuing stock. Companies may be categorized as having a small, medium or
large capitalization (market value). The potential risks are higher with
small- and medium-capitalization companies and lower with large-
capitalization companies. Therefore, you should expect that investments in
the SMALL-CAP GROWTH FUND, the MID-CAP GROWTH FUND and the MID-CAP VALUE
FUND will be more volatile than broad stock market indices such as the S&P
500 or funds that invest in large-capitalization companies, such as the
LARGE-CAP GROWTH & INCOME FUND and the EQUITY INCOME FUND.

Style Risks. Due to their relatively high valuations, growth stocks are
typically more volatile than value stocks. For instance, the price of a
growth stock may experience a larger decline on a forecast of lower
earnings, a negative fundamental development, or an adverse market
development. Further, growth stocks may not pay dividends or may pay lower
dividends than value stocks. This means they depend more on price changes
for returns and may be more adversely affected in a down market compared
to value stocks that pay higher dividends.

Due to their relatively low valuations, value stocks are
typically less volatile than growth stocks. For instance, the price of a
value stock may experience a smaller increase on a forecast of higher
earnings, a positive fundamental development, or positive market
development. Further, value stocks tend to have higher dividends than
growth stocks. This means they depend less on price changes for returns
and may lag behind growth stocks in an up market.

Foreign Securities Risks. Foreign securities pose additional risks over U.S.-
based securities for a number of reasons. Because the INTERNATIONAL STOCK
FUND invests primarily in foreign securities, you should expect that these
factors may adversely affect the value of an investment in the Fund.
Foreign economic, governmental and political systems may be less favorable
than those of the United States. Foreign governments may exercise greater
control over their economies, industries and citizens' rights. Specific
risk factors related to foreign securities include: inflation, taxation
policies, currency exchange rates and regulations and accounting
standards. The INTERNATIONAL STOCK FUND may incur higher costs and
expenses when making foreign investments, which will affect the Fund's
total return.

Foreign securities may be denominated in foreign currencies.
Therefore, the value of a Fund's assets and income in U.S. dollars may be
affected by changes in exchange rates and regulations, since exchange
rates for foreign currencies change daily. The combination of currency
risk and market risk tends to make securities traded in foreign markets
more volatile than securities traded exclusively in the United States.
Although the INTERNATIONAL STOCK FUND values its assets daily in U.S.
dollars, it will not convert its holdings of foreign currencies to U.S.
dollars daily. Therefore, the Fund may be exposed to currency risks over
an extended period of time.

SectorRisks. Companies with similar characteristics may be grouped together in
broad categories called sectors. Sector risk is the possibility that a
certain sector may underperform other sectors or the market as a whole. As
the Adviser allocates more of a Fund's portfolio holdings to a particular
sector, a Fund's performance will be more susceptible to any economic,
business or other developments which generally affect that sector.

Euro Risks. The INTERNATIONAL STOCK FUND makes significant investments in
securities denominated in the Euro, the new single currency of the European
Monetary Union (EMU). Therefore, the exchange rate between the Euro and the
U.S. dollar will have a significant impact on the value of the
INTERNATIONAL STOCK FUND'S investments.

With the advent of the Euro, the participating countries in the
EMU can no longer follow independent monetary policies. This may limit
these countries' ability to respond to economic downturns or political
upheavals.

Debt Securities Risks. Risks of debt securities will affect the INCOME FUNDS.

[graphic]

What About Bond Ratings?

Prices of fixed-rate debt securities generally move in the
opposite direction of interest rates. The interest payments on fixed-rate
debt securities do not change when interest rates change. Therefore, since
the price of these securities can be expected to decrease when interest
rates increase, you can expect that the value of investments in a Fund may
go down. Although the Adviser attempts to anticipate interest rate
movements, there is no guarantee that it will be able to do so.

[graphic]

In addition, longer-term debt securities will experience greater
price volatility than debt securities with shorter maturities. You can
expect the net asset values of a Fund to fluctuate accordingly.

The credit quality of a debt security is based upon the issuer's
ability to repay the security. If payments on a debt security are not paid
when due, that may cause the net asset value of a Fund holding the security
to go down.

Debt securities may also be subject to call risk. If interest
rates decline, an issuer may repay (or "call") a debt security held by a
Fund prior to its maturity. If this occurs, the Adviser may have to
reinvest the proceeds in debt securities paying lower interest rates. If
this happens, a Fund may have a lower yield.

Asset-Backed/Mortgage-Backed Securities Risks. Asset-backed and mortgage-backed
securities are subject to risks of prepayment. This is more likely to occur
when interest rates fall because many borrowers refinance mortgages to take
advantage of more favorable rates. Prepayments on mortgage-backed
securities are also affected by other factors, such as the volume of home
sales. A Fund's yield will be reduced if cash from prepaid securities are
reinvested in securities with lower interest rates. The risk of prepayment
may also decrease the value of mortgage-backed securities.

Asset-backed securities may have a higher level of default and
recovery risk than mortgage-backed securities. However, both of these types
of securities may decline in value because of mortgage foreclosures or
defaults on the underlying obligations.

[graphic]

Securities Descriptions

[graphic]

Equity Securities. Equity securities represent a share of an issuer's earnings
and assets, after the issuer pays its liabilities. The EQUITY FUNDS cannot
predict the income they will receive from equity securities because issuers
generally have discretion as to the payment of any dividends or
distributions. However, equity securities offer greater potential for
appreciation than many other types of securities, because their value
increases directly with the value of the issuer's business.

[graphic]

The following describes the types of fixed income securities in which the
Funds invest.

Treasury Securities. Treasury securities are direct obligations of the federal
government of the United States. Treasury securities are generally regarded
as having the lowest credit risks.

Mortgage Backed Securities. Mortgage backed securities represent interests in
pools of mortgages. The mortgages that comprise a pool normally have
similar interest rates, maturities and other terms. Mortgages may have
fixed or adjustable interest rates. Interests in pools of adjustable rate
mortgages are known as ARMs.

Mortgage backed securities come in a variety of forms. Many have
extremely complicated terms. The simplest form of mortgage backed
securities are pass-through certificates. An issuer of pass-through
certificates gathers monthly payments from an underlying pool of mortgages.
Then, the issuer deducts its fees and expenses and passes the balance of
the payments onto the certificate holders once a month. Holders of
pass-through certificates receive a pro rata share of all payments and
prepayments from the underlying mortgages. As a result, the holders assume
all the prepayment risks of the underlying mortgages.

These transactions may create leverage risks.

Insurance Contracts. Insurance contracts include guaranteed investment
contracts, funding agreements and annuities. The Fund treats these
contracts as fixed income securities.

The Funds will reinvest cash collateral in securities that qualify as an
acceptable investment for the Fund. However, the Fund must pay interest to
the borrower for the use of cash collateral.

Loansare subject to termination at the option of the Fund or the borrower. A
Fund will not have the right to vote on securities while they are on loan,
but it will terminate a loan in anticipation of any important vote. The
Fund may pay administrative and custodial fees in connection with a loan
and may pay a negotiated portion of the interest earned on the cash
collateral to a securities lending agent or broker.

Securities lending activities are subject to interest rate risks and credit
risks.

[graphic]

How to Buy Shares

What Do Shares Cost? You can buy shares of a Fund on any day the New York Stock
Exchange (NYSE) is open for business. When a Fund receives your transaction
request in proper form, it is processed at the next determined public
offering price. The public offering price is the net asset value (NAV) plus
any applicable sales charge. Each NAV is calculated for each of the Funds
(other than MONEY MARKET FUND) at the end of regular trading (normally 3:00
p.m. Central Time) each day the NYSE is open. The NAV for the MONEY MARKET
FUND is determined twice daily at 12:00 Noon (Central Time) and 3:00 p.m.
(Central Time). In calculating NAV, a Fund's portfolio is valued using
market prices.

If your investment representative opens an account in your name with
the Marshall Funds, your first investment must be at least $1,000. However,
you can add to your existing Marshall Funds account directly or through the
Funds' Systematic Investment Program for as little as $50. In special
circumstances, these minimums may be waived or lowered at the Funds'
discretion. Call your Authorized Dealer for any additional limitations.
Keep in mind that Authorized Dealers may charge you fees for their services
in connection with your share transactions.

The sales charge when you purchase Class A Shares of the EQUITY FUNDS
is as follows:

EQUITY FUNDS--Class A Shares
Sales Charge

as a % of Sales Charge
Public as a % of

Purchase Amount Offering Price NAV
<S> <C> <C>
Up to $49,999 5.75% 6.10%
$50,000 -- $99,999 4.50% 4.71%
$100,000 -- $249,999 3.50% 3.63%
$250,000 -- $499,999 2.50% 2.56%
$500,000 -- $999,999 2.00% 2.04%
$1 million or greater* None None
</TABLE>

The sales charge when you purchase Class A Shares of the INCOME FUNDS
is as follows:

INCOME FUNDS--Class A Shares
Sales Charge

as a % of Sales Charge
Public as a % of

Purchase Amount Offering Price NAV
<S> <C> <C>
Less than $24,999 4.75% 4.99%
$25,000 -- $49,999 4.50% 4.71%
$50,000 -- $99,999 4.00% 4.17%
$100,000 -- $249,999 3.50% 3.63%
$250,000 -- $499,999 2.50% 2.56%
$500,000 -- $999,999 2.00% 2.04%
$1 million or greater* None None
</TABLE>

* A contingent deferred sales charge of 1.00% applies to Class A Shares
redeemed up to 12 months after purchase of $1 million or more.

When the Funds' distributor receives sales charges and marketing fees, it
may pay some or all of them to Authorized Dealers. The distributor and its
affiliates may pay out of their own assets amounts (including items of
material value) to Authorized Dealers or other service providers for
marketing and/or servicing shareholders.

The sales charge at purchase may be reduced or eliminated by:
. sales in excess of $1,000,000;*

. quantity purchases of Class A Shares;
. combining concurrent purchases of:

- Shares by you, your spouse, and your children under age 21; or
- Class A Shares of two or more Marshall Funds;

. accumulating purchases (in calculating the sales charge on an additional
purchase, you may count the current value of previous Class A Share
purchases still invested in the Fund);

. signing a letter of intent to purchase a specific dollar amount of Class
A Shares within 13 months (call your investment representative for an
application and more information); or

. using the reinvestment privilege within 90 days of redeeming Class A
Shares of an equal or lesser amount.

If your investment qualifies, you or your investment representative must
notify the Funds' distributor at the time of purchase to reduce or
eliminate the sales charge. You will receive the reduced sales charge only
on the additional purchases, and not retroactively on previous purchases.
You should contact your investment professional for more information on
reducing or eliminating the sales charge.

In addition, no sales charge is imposed on:

. Trustees or other fiduciaries purchasing Class A Shares for employee
benefit plans of employers with ten or more employees, or

. reinvested dividends and capital gains.

A Fund may also permit purchases without a sales charge from time to
time, at its own discretion.

How Do I Purchase Shares? You may purchase shares through a broker-dealer,
investment professional, or financial institution (Authorized Dealers).
Some Authorized Dealers may charge a transaction fee for this service. If
you purchase shares of a Fund through a program of services offered or
administered by an Authorized Dealer or other service provider, you should
read the program materials, including information relating to fees, in
conjunction with the Funds' prospectus. Certain features of a Fund may not
be available or may be modified in connection with the program of services
provided.

Once you have opened an account with an Authorized Dealer, you may purchase
additional Fund shares by contacting Marshall Funds Investor Services
(MFIS) at 1-800-580-FUND (3863), if you have pre-authorized the telephone
purchase privilege.

Your purchase order must be received by the Funds by 12:00 Noon (Central
Time) for the MONEY MARKET FUND or 3:00 p.m. (Central Time) for all other
Funds to get that day's NAV. Each Fund reserves the right to reject any
purchase request. It is the responsibility of any Authorized Dealer or
other service provider that has entered into an agreement with the Funds,
its distributor, or administrative or shareholder services agent, to
promptly submit purchase orders to the Funds. Orders placed through one of
these entities are considered received when the Funds are notified of the
purchase or redemption order. However, you are not the owner of Fund shares
(and therefore will not receive dividends) until payment for the shares is
received.

In order to purchase shares, you must reside in a jurisdiction where
Fund shares may lawfully be offered for sale. In addition, you must have a
Social Security or tax identification number. Checks sent to the Marshall
Funds to purchase shares must be made payable to "Marshall Funds."

[graphic]

Systematic Investment Program

. You can have money automatically withdrawn from your checking account
($50 minimum) on a periodic basis.

. Call your Authorized Dealer to apply for this program.

[graphic]

Additional Information About Checks and Automated Clearing House (ACH)

Transactions Used to Purchase Shares

. If your check or ACH purchase does not clear, your purchase will be
canceled and you will be charged a $15 fee.

. If you purchase shares by check or ACH, you may not be able to receive
proceeds from a redemption for up to seven days.

[graphic]

How to Redeem and Exchange Shares

How Do I Redeem Shares? You may redeem your Fund shares by contacting your
Authorized Dealer. You should note that redemptions will be made only on
days when a Fund computes its NAV. When your redemption request is received
in proper form, it is processed at the next determined NAV.

Telephone or written requests for redemptions must be received in proper
form and can be made through any Authorized Dealer. It is the
responsibility of the Authorized Dealer or service provider to promptly
submit redemption requests to a Fund. You may redeem shares by contacting
MFIS at 1-800-580-FUND (3863), if you have pre-authorized the telephone
redemption privilege.

Redemption requests for the Funds must be received by the Funds by 12:00
Noon (Central Time) for the MONEY MARKET FUND or 3:00 p.m. (Central Time)
for all other Funds in order for shares to be redeemed at that day's NAV.
Redemption proceeds will normally be mailed, or wired if by written
request, the following business day, but in no event more than seven days,
after the request is made.

Will I Be Charged a Fee for Redemptions? You will not be charged a fee by a Fund
for redeeming shares. However, a contingent deferred sales charge of 1%
applies to Class A Shares redeemed up to 12 months after purchases of $1
million or more that did not initially pay a sales charge. You may be
charged a transaction fee if you redeem Fund shares through an Authorized
Dealer or service provider, or if you are redeeming by wire. Consult your
Authorized Dealer or service provider for more information, including
applicable fees.

[graphic]

Systematic Withdrawal Program

. If you have a Fund account balance of at least $10,000, you can redeem
shares (at least $100) on a periodic basis.

. Contact your Authorized Dealer to apply for this program.

[graphic]

Checkwriting (Money Market Fund Only)

. You can redeem shares of the MONEY MARKET FUND by writing a check in an
amount of at least $250. You must have completed the checkwriting section
of your account application and the attached signature card, or have
completed a subsequent application form. The Fund will then provide you
with the checks.

. Your check is treated as a redemption order for Fund shares equal to the
amount of the check.

. A check for an amount in excess of your available Fund account balance
will be returned marked "insufficient funds."

. Checks cannot be used to close your Fund account balance.

. Checks deposited or cashed through foreign banks or financial institutions
may be subject to local bank charges.

Additional Conditions for Redemptions

[graphic]

Signature Guarantees. In the following instances, you must have a signature
guarantee on written redemption requests:

. when you want a redemption to be sent to an address other than the one
you have on record with a Fund;

. when you want the redemption payable to someone other than the
shareholder of record; or

. when your redemption is to be sent to an address of record that was
changed within the last 30 days.

. to allow your purchase payment to clear;

. during periods of market volatility; or

. when a shareholder's trade activity or amount adversely impacts a
Fund's ability to manage its assets.

You will not accrue interest or dividends on uncashed checks from a
Fund. If those checks are undeliverable and returned to a Fund, the
proceeds will be reinvested in shares of the Funds that were redeemed.

Exchange Privilege. You may exchange Class A Shares of a Fund for Class A Shares
of any of the other Marshall Funds free of charge, if you have previously
paid a sales charge. An exchange is treated as a redemption and a
subsequent purchase, and is therefore a taxable transaction. Signatures
must be guaranteed if you request and exchange into another fund with a
different shareholder registration. The exchange privilege may be modified
or terminated at any time.

Exchanges by Telephone. If you have completed the telephone authorization
section in your account application or an authorization form obtained
through your Authorized Dealer, you may telephone instructions to your
Authorized Dealer to exchange between Fund accounts that have identical
shareholder registrations. Telephone exchange instructions must be received
by the Funds before 3:00 p.m. (Central Time) for shares to be exchanged the
same day. However, you will not receive a dividend of the Fund into which
you exchange on the date of the exchange. You may also exchange Shares by
contacting Marshall Funds Investor Services at 1-800-580 (3863), if you
pre-authorized the telephone exchange privilege.

[graphic]

Account and Share Information

You may request photocopies of historical confirmations from prior
years. The Funds may charge a fee for this service.

Dividends of the EQUITY FUNDS are declared and paid quarterly,
except for the INTERNATIONAL STOCK FUND, which declares and pays dividends
annually. Dividends are paid to all shareholders invested in the EQUITY
FUNDS on the record date.

[graphic]

What is a Dividend and Capital Gain?

A dividend is the money paid to shareholders that a mutual fund has earned
from the income on its investments. A capital gain distribution is the money
paid to shareholders from a Fund's profit derived from the sale of an
investment, such as a stock or bond.

If you purchase shares just before a Fund declares a dividend or
capital gain distribution, you will pay the full price for the shares and
then receive a portion of the price back in the form of a distribution,
whether or not you reinvest the distribution in shares. Therefore, you
should consider the tax implications of purchasing shares shortly before a
Fund declares a dividend or capital gain.

Before shares are redeemed to close an account, you will be notified
in writing and allowed 30 days to purchase additional shares to meet the
minimum account balance requirement.

Rule 12b-1 Plan. Each Marshall Fund has a Rule 12b-1 Plan which allows it to pay
a fee equal to a maximum of 0.25% for the EQUITY FUNDS and INCOME FUNDS and
0.30% for the MONEY MARKET FUND'S Class A Shares assets to the Distributor
and financial intermediaries for the sale, distribution and customer
servicing of that Fund's Class A Shares. Because these shares pay marketing
fees on an ongoing basis, your investment cost may be higher over time than
shares with different sales charges and marketing fees.

Year 2000 Readiness

The "Year 2000" problem is the potential for computer errors or
failures because certain computer systems may be unable to interpret dates
after December 31, 1999 or experience other date-related problems. The Year
2000 problem may cause systems to process information incorrectly and could
disrupt businesses, such as the Funds, that rely on computers.

While it is impossible to determine in advance all of the risks to
the Funds, the Funds could experience interruptions in basic financial and
operational functions. The Funds' shareholders could experience errors or
disruptions in Fund share transactions or Fund communications.

The Funds' service providers are making changes to their computer
systems to fix any Year 2000 problems. In addition, they are working to
gather information from third-party providers to determine their Year 2000
readiness.

Year 2000 problems could also increase the risks of the Funds'
investments. To assess the potential effect of the Year 2000 problem, the
Adviser is reviewing information regarding the Year 2000 readiness of
issuers of securities the Funds may purchase. However, this may be
difficult with certain issuers. For example, funds dealing with foreign
service providers or investing in foreign securities will have difficulty
determining the Year 2000 readiness of those entities. This is especially
true of entities or issuers in emerging markets.

The financial impact of these issues for the Funds is still being
determined. There can be no assurance that potential Year 2000 problems
would not have a material adverse effect on the Funds.

Tax Information

Please consult your tax adviser regarding your federal, state and
local tax liability. Redemptions and exchanges of Fund shares are taxable
sales.

[graphic]

Marshall Funds, Inc. Information

The LARGE-CAP GROWTH & INCOME FUND is managed by William J.
O'Connor. Mr. O'Connor has been a vice president of the Adviser since
February 1995 when he rejoined the firm after serving as vice president and
director of equity research for Arnold Investment Counsel. Prior to joining
Arnold, he had been a vice president, portfolio manager, and research
analyst with the Adviser from 1979 to 1991. Mr. O'Connor is a Chartered
Financial Analyst and holds a bachelor's degree in Commerce from Santa Clara
University and an M.B.A. in Finance from the University of Wisconsin-
Madison.

[graphic]

The MID-CAP GROWTH FUND and the SMALL CAP GROWTH FUND are managed by
Steve D. Hayward. Prior to joining the Adviser as a vice president in
December 1993, Mr. Hayward served as senior portfolio manager of AMOCO
Corporation and managed two aggressive growth-oriented mutual funds for
American Asset Capital Management. Mr. Hayward, who is a Chartered Financial
Analyst, received a B.A. in Economics from North Park College, and an M.B.A.

in Finance from Loyola University.

The INTERNATIONAL STOCK FUND is managed by Daniel R. Jaworski,
founder, Managing Director and Chief Investment Officer of the Sub-Adviser.
Prior to founding BPI in March 1997, Mr. Jaworski was a portfolio manager at
Lazard Freres & Co. LLC, from June 1993 to December 1994, and from January
1995 to March 1997 was a portfolio manager at STI Capital Management. Mr.
Jaworski received a B.A. in Economics and Computer Science from Concordia
College and received his M.B.A. in Finance from the University of Minnesota.

[graphic]

The GOVERNMENT INCOME FUND is managed by Joseph M. Cullen. Mr.
Cullen joined the Adviser in January 1999 and has managed the Fund since
that time. He was formerly a portfolio manager at Lincoln Investment
Management, Inc. from 1997 to 1998, and was a portfolio analyst from 1991 to
1994. From 1994 to 1997 he was a fixed income portfolio manager at the
Boston Company Asset Management, Inc. Mr. Cullen, who is a Chartered
Financial Analyst, received a B.A. in Economics with a Minor in Mathematics
from Ripon College, and an M.B.A. in Finance from Carnegie Mellon
University.

[graphic]

The INTERMEDIATE BOND FUND is managed by Mark Pittman. Mr. Pittman
is a vice president of the Adviser, which he joined in June 1994. Prior to
that time, he spent five years with Valley Trust Company managing fixed
income portfolios and common trust funds. In addition, he was a member of
the Valley Trust Company Investment Committee and Asset Allocation
Committee. Mr. Pittman is a Chartered Financial Analyst and holds M.B.A. and
B.B.A. degrees in Finance from the University of Wisconsin-Madison.

[graphic]

Advisory Fees. The Adviser is entitled to receive an annual investment advisory
fee equal to a percentage of each Fund's average daily net assets as
follows:

Fund Advisory Fee
<S> <C>
Money Market Fund 0.50%
Intermediate Bond Fund 0.60%
Government Income Fund 0.75%
Large-Cap Growth & Income Fund 0.75%
Mid-Cap Value Fund 0.75%
Equity Income Fund 0.75%
Mid-Cap Growth Fund 0.75%
Small-Cap Growth Fund 1.00%
International Stock Fund 1.00%
</TABLE>

The Adviser has the discretion to voluntarily waive a portion of its fee.
However, any waivers by the Adviser are voluntary and may be terminated at
any time in its sole discretion.

Affiliate Services and Fees. Marshall & Ilsley Trust Company (M&I Trust), an
affiliate of the Adviser, provides services to the Funds as custodian of the
assets, shareholder services agent, and (effective 1/1/2000) administrator
directly and through its division, Marshall Funds Investor Services. For
each domestic Fund, the annual custody fees are 0.02% of the first $250
million of assets held plus 0.01% of assets exceeding $250 million,
calculated on each Fund's average daily net assets. M&I Trust is entitled to
receive shareholder services fees directly from the Funds in amounts equal
to a maximum annual percentage of the Funds' average daily net assets (ADNA)
as follows:

Shareholder Services Fee

<S> <C>
Equity Funds 0.25%
Income Funds 0.25%
Money Market Fund 0.02%
</TABLE>

M&I Trust may also, from time to time, receive reimbursement of expenses
from the Funds' distributor and its affiliates for certain administrative
services on behalf of shareholders.

Effective 1/1/2000, M&I Trust will be administrator of the Funds.
Federated Services Company will be the sub-administrator. As administrator,
M&I Trust will be entitled to receive fees directly from the Funds in
amounts up to a maximum annual percentage of the aggregate Funds' ADNA as
follows:

Maximum Fee* Funds' ADNA
<C> <S>
0.15% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% on assets over $750 million

</TABLE>

Supplemental Performance Information of the Sub-Adviser to the Marshall
International Stock Fund

Gross Net MSCI-EAFE
of Fees of Fees Performance

(1) Not a full quarter--excludes performance from 1/1/1995 to
1/31/1995. (2) Not a full quarter--excludes performance from 12/1/1995
to 12/31/1995.

Gross Net MSCI-EAFE
of Fees of Fees Performance

The average annual total return for the STI Classic International Fund for the
one-year period from 4/1/96 to 3/31/97 was 21.31% as compared to 1.44% for the
MSCI-EAFE for the same period. In addition, the fund's average annual total
return from its inception on 12/1/95 to 3/31/97 was 32.00%, compared to 6.39%
for the MSCI-EAFE for the same period.

Gross Net MSCI-EAFE
of Fees of Fees Performance

<S> <C> <C> <C>
1Q1997 N/A N/A N/A
2Q1997 16.96% 16.73% 12.98%
3Q1997 8.67 8.54 -0.70
4Q1997 -3.36 -3.48 -7.83
Annual 1997(1) 22.83 22.29 3.40
1Q1998 18.20 18.06 14.71
2Q1998 4.14 4.01 1.06
3Q1998 -12.38 -12.56 -14.21
4Q1998 14.84 14.62 20.66
Annual 1998 23.86 23.06 20.00
1Q1999 0.35 0.15 1.39
2Q1999 6.01 5.75 2.54
3Q1999 4.43 4.16 4.39
</TABLE>

(1) Not a full year--excludes performance from 1/1/1997 to 3/31/1997.

The returns in each of the above tables are calculated on a total
return basis and include all dividends and interest, accrued income and
all realized and unrealized gains and losses. The "Net of Fees" figures
reflect the deduction of advisory and other fees paid by the accounts -
-"Gross of Fees" does not include these fees, but does include certain
trading costs and embedded fees (e.g., "wrap fees") that cannot be
unbundled and have been deducted. The investment results of BPI have
been audited up to March 31, 1999. Information from that date to May 1,
1999 has not been verified by the Marshall Funds or Federated
Securities Corp. and is unaudited.

. the same types of expenses as the Marshall International Stock
Fund;

. the investment limitations, diversification requirements, and

other restrictions imposed by the Investment Company Act of 1940;

and

. the requirements of Subchapter M of the Internal Revenue Code.

As a result, the performance results for the SunTrust Commingled Fund
and BPI institutional accounts could have been adversely affected if
they had been regulated as investment companies under the restrictions
outlined above. In addition, the performance figures are for a short
period of time and should not be indicative of long-term results.

[graphic]

Financial Highlights

The Financial Highlights will help you understand a Fund's financial performance
for its past five fiscal years or since inception, if a life of the Fund is
shorter. Some of the information is presented on a per share basis. Total
returns represent the rate an investor would have earned (or lost) on an
investment in a Fund, assuming reinvestment of any dividends and capital gains.

Further information about the performance of the Funds is contained in the
Funds' Annual Report dated August 31, 1999, which may be obtained free of
charge.

(For a share outstanding throughout each period)

Distributions to

Shareholders from

Net Realized and Net Realized Gain
Unrealized on Investment

Net Gain/(Loss) Dividends to Transactions Distributions to
Net Asset Investment on Investment Shareholders Futures Shareholders in

Value, Income/ Collateral, Futures Total from from Net Contracts, and Excess of
Beginning Operating Contracts, and Investment Investment Foreign Currency Net Investment Total

Period Ended of Period (Loss) Foreign Currency Operations Income Transactions Income Distributions(1)
August 31,

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equity
Income Fund

1999 (1) $15.88 0.16 0.81 0.97 (0.14) -- -- (0.14)
Large-Cap
Growth &

Income Fund

1999 (1) $16.34 0.02 1.14 1.16 (0.02) -- -- (0.02)
Mid-Cap
Value Fund

1999 (1) $10.77 0.05 0.62 0.67 (0.04) -- -- (0.04)
Mid-Cap
Growth Fund

1999 (1) $15.13 (0.02) 2.17 2.15 -- -- -- --
Small-Cap
Growth Fund

1999 (1) $12.73 (0.02) (0.33) (0.35) -- -- -- --
International
Stock Fund

1999 (1) $12.69 (0.00) 1.14 1.14 -- -- -- --
Government
Income Fund

1999 (1) $ 9.61 0.34 (0.39) (0.05) (0.34) -- -- (0.34)
Intermediate
Bond Fund

1999 (1) $ 9.53 0.35 (0.36) (0.01) (0.35) -- -- (0.35)
Money Market
Fund (5)

1995 $ 1.00 0.05 -- 0.05 (0.05) -- -- (0.05)
1996 $ 1.00 0.05 -- 0.05 (0.05) -- -- (0.05)
1997 $ 1.00 0.05 -- 0.05 (0.05) -- -- (0.05)
1998 $ 1.00 0.05 -- 0.05 (0.05) -- -- (0.05)
1999 $ 1.00 0.05 -- 0.05 (0.05) -- -- (0.05)
</TABLE>

Ratios to Average Net Assets

Net Investment Net Assets,

Net Asset Net Expenses Income End of Period Portfolio
Value, End Total Investment (after (after (000's Turnover
Period Ended of Period Return(2) Expenses(4) Income(4) Waivers) waivers) Omitted) Rate
August 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equity
Income Fund

1999 (1) $16.71 6.13% 1.42%(3) 1.43%(3) 1.17%(3) 1.68%(3) $ 755 72%
Large-Cap
Growth &

Income Fund

1999 (1) $17.48 7.08% 1.45% (0.10%) 1.20%(3) 0.15%(3) $ 912 32%
Mid-Cap
Value Fund

1999 (1) $11.40 6.22% 1.50% 0.46% 1.26%(3) 0.71%(3) $ 356 90%
Mid-Cap
Growth Fund

1999 (1) $17.28 14.21% 1.46% (0.99%) 1.21%(3) (0.74%)(3) $ 278 173%
Small-Cap
Growth Fund

1999 (1) $12.38 (2.75%) 1.84% (1.28%) 1.59%(3) (1.03%)(3) $ 394 219%
International
Stock Fund

1999 (1) $13.83 8.98% 1.77% (0.14%) 1.50%(3) 0.13%(3) $ 429 182%
Government
Income Fund

1999 (1) $ 9.22 (0.56%) 1.45% 5.19% 1.09%(3) 5.55%(3) $ 754 232%
Intermediate
Bond Fund

1999 (1) $ 9.17 (0.09%) 1.25% 5.48% 0.94%(3) 5.79%(3) $ 953 181%
Money Market
Fund (5)

1995 $ 1.00 5.25% 0.97% 4.95% 0.71% 5.21% $ 30,331 --
1996 $ 1.00 5.07% 0.97% 4.66% 0.71% 4.92% $ 84,711 --
1997 $ 1.00 5.04% 0.97% 4.67% 0.71% 4.93% $ 89,485 --
1998 $ 1.00 5.19% 0.96% 4.87% 0.71% 5.12% $105,125 --
1999 $ 1.00 4.67% 0.96% 4.32% 0.71% 4.57% $118,352 --
</TABLE>

(1) Reflects operations for the period from December 31, 1998 (date of initial
public investment) to August 31, 1999.

(2) Based on net asset value. (3) Computed on an annualized basis.

(4) During the period, certain fees were voluntarily waived. If such waivers had
not occurred, the ratios would have been as indicated.

(5) Effective December 1998, Class B Shares changed its share class name to
Class A Shares.

A Statement of Additional Information (SAI) dated October 31, 1999 is
incorporated by reference into this prospectus. Additional information about the
Funds' investments is contained in the Funds' SAI and Annual and Semi-Annual
Reports to shareholders as they become available. The Annual Report's Management
Discussions & Analyses discuss market conditions and investment strategies that
significantly affected each Fund's performance during their last fiscal year. To
obtain the SAI, Annual Report, Semi-Annual Report, and other information without
charge, and make inquiries, write to or call your Authorized Dealer or call
Marshall Funds Investor Services at 1-800-580-FUND (3863).

Marshall Funds Investor Services
P.O. Box 1348
Milwaukee, WI 53201-1348

1-800-580-FUND (3863)

TDD: Speech and Hearing Impaired Services
1-800-209-3520

Federated Securities Corp. G00714-03
SEC File No. 811-7047

Marshall Equity Funds

Fund name Fund manager Goal Invests in
<S> <C> <C> <C>

Marshall Equity Bruce P. Hutson Capital appreciation . Common stocks of companies paying above-average
Income Fund and above-average dividends
dividend income . Seeks to construct a diversified portfolio with
a yield at least 1% greater than the S&P 500
Index/3/

Marshall William J. O'Connor, Capital appreciation . Companies with market caps over $10 billion
Large-Cap Growth & CFA and income . Companies with a history of growing earnings and
Income Fund growing dividends

Marshall Mid-Cap Matthew B. Fahey Capital appreciation . Medium-size companies with traditional value
Value Fund John C. Potter, CFA characteristics

. Seeks companies that have underappreciated assets
or are involved in company turnarounds or
corporate restructuring

Marshall Mid-Cap Steve D. Hayward, Capital appreciation . Medium-size companies with high potential growth
Growth Fund CFA rates

. Seeks to invest in successful entrepreneurs

Marshall Steve D. Hayward, Capital appreciation . Small companies with high potential growth rates/1/
Small-Cap CFA . Seeks to invest in successful entrepreneurs

Growth Fund/1/

value

</TABLE>

[graphic]

Marshall Income Funds

Fund name Fund manager Goal Invests in
<S> <C> <C> <C>

Marshall Joseph M. Cullen, CFA Current income . Securities of the U.S. government and its agencies
Government . Uses current and historical interest rate
Income Fund relationships to evaluate market sectors and
individual securities

Marshall Mark Pittman, CFA To maximize total . Intermediate, investment-grade bonds and notes
Intermediate return consistent . Selects portfolio securities using macro-economic,
Bond Fund with current income credit and market analysis

Marshall Money Richard Rokus, CFA Current income . High-quality money market securities maturing in
Market Fund/4/ consistent with 397 days or less
stability of principal . Seeks to preserve value of investment at $1.00 per

</TABLE>

[graphic]

/1/Small-cap stocks are less liquid and have historically experienced greater
volatility than average.

/2/Foreign investing involves special risks due to factors such as increased
volatility, currency fluctuation, and differences in auditing and other
financial standards.

/3/The S&P 500 is an unmanaged index of large capitalization common stocks.

/4/An investment in the Fund is neither insured nor guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.

For more complete information on the Marshall Funds, contact your investment
representative for a prospectus. Read it carefully before investing.

Not part of the prospectus

[Marshall Funds logo]

Marshall Funds Investor Services
P.O. Box 1348

Milwaukee, Wisconsin 53201-1348
800-580-FUND(3863)

TDD: Speech and Hearing Impaired Services
800-209-3520

www.marshallfunds.com
Federated Securities Corp., Distributor G00714-03(10/99)

M&I Investment Management Corp., Investment Adviser
(C)1999 Marshall Funds, Inc.

953-294A

MARSHALL FUNDS, INC.

STATEMENT OF ADDITIONAL INFORMATION

CLASS A SHARES

October 31, 1999

EQUITY FUNDS INCOME FUNDS

O MARSHALL EQUITY INCOME FUND O MARSHALL GOVERNMENT INCOME FUND O
MARSHALL LARGE-CAP GROWTH & INCOME FUND O MARSHALL INTERMEDIATE BOND
FUND O MARSHALL MID-CAP VALUE FUND O MARSHALL MID-CAP GROWTH FUND O
MARSHALL SMALL CAP GROWTH FUND O MARSHALL INTERNATIONAL STOCK FUND
MONEY MARKET FUND

O MARSHALL MONEY MARKET FUND

This Statement of Additional Information (SAI) is not a Prospectus. Read
this SAI in conjunction with the Class A Shares Prospectus for the Marshall
Funds listed above, dated October 31, 1999. This SAI incorporates by
reference the financial statements from the Funds' Annual Report. You may
obtain the Prospectus or Annual Report without charge by calling M&I
Brokerage Services at 1-800-580-FUND (3863), or you can visit the Marshall
Funds' Internet site on the WorldWide Web at http://www.marshallfunds.com.

P.O. BOX 1348

MILWAUKEE, WISCONSIN 53201-1348

G00714-04(10/99)

FEDERATED SECURITIES CORP.

Distributor

A subsidiary of FEDERATED INVESTORS, INC.

<PAGE>

TABLE OF CONTENTS

HOW ARE THE FUNDS ORGANIZED? 1

SECURITIES IN WHICH THE FUNDS INVEST 1

SECURITIES DESCRIPTIONS, TECHNIQUES AND RISKS 3

INVESTMENT LIMITATIONS 12

DETERMINING MARKET VALUE OF SECURITIES 15

WHAT DO SHARES COST? 16

HOW ARE THE FUND SHARES SOLD? 16

HOW TO BUY SHARES 17

ACCOUNT AND SHARE INFORMATION 18

WHAT ARE THE TAX CONSEQUENCES? 19

WHO MANAGES THE FUNDS? 20

HOW DO THE FUNDS MEASURE PERFORMANCE? 25

PERFORMANCE COMPARISONS 27

ECONOMIC AND MARKET INFORMATION 30

FINANCIAL STATEMENTS 30

APPENDIX 31

ADDRESSES 34

<PAGE>

HOW ARE THE FUNDS ORGANIZED?

Marshall Funds, Inc. (Corporation) is an open-end, management investment
company that was established as a Wisconsin corporation on July 31, 1992.

Under normal market conditions, the INTERNATIONAL STOCK FUND will invest
at least 65% of its assets in equity securities of companies located in at least
three different countries outside the United States. Following is a table that
indicates which types of securities are a(n):

o P = PRINCIPAl investment of a Fund; (shaded in chart) o A = ACCEPTABLe (but
not principal) investment of a Fund; or o N = NOt An ACCEPTABLe investment of a
Fund.
<TABLE>
<CAPTION>

EQUITY FUNDS

- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
SECURITIES EQUITY LARGE-CAP MID-CAP MID-CAP SMALL-CAP INTERNATIONAL
INCOME GROWTH & VALUE GROWTH GROWTH STOCK
INCOME
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
AMERICAN DEPOSITARY RECEIPTS1 A A A A A A
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
ASSET-BACKED SECURITIES2 A A A A A A
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
BANK INSTRUMENTS3 A A A A A A
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
BORROWING4 A A A A A A
- ---------------------------------------
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
COMMON STOCK P P P P P P
- --------------------------------------- ---------- ----------- ----------- ----------
- --------------------------------------- ----------- -----------
COMMON STOCK OF FOREIGN COMPANIES A A A A A P
- --------------------------------------- ----------- ---------- ----------- -----------
- --------------------------------------- ---------- ----------- ----------- ----------
CONVERTIBLE SECURITIES A A A A A A
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
- --------------------------------------- ----------- ---------- ----------- -----------
DEBT OBLIGATIONS A A A A A A5
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
DERIVATIVE CONTRACTS AND SECURITIES A A A A A A
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
EUROPEAN DEPOSITARY RECEIPTS N N N N N A
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
FIXED RATE DEBT OBLIGATIONS A A A A A A
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
FLOATING RATE DEBT OBLIGATIONS A A A A A A
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
FOREIGN CURRENCY HEDGING TRANSACTIONS N N N N N A
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
FOREIGN CURRENCY TRANSACTIONS N N N N N A
- --------------------------------------- ---------- ----------- ----------- ----------
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
FOREIGN SECURITIES6 A A A A A P
- --------------------------------------- ---------- ----------- ----------- ---------- ----------- -----------
- --------------------------------------- ---------- ----------- ----------- ----------
FORWARD COMMITMENTS, WHEN-ISSUED AND A A A A A A
DELAYED DELIVERY TRANSACTIONS

INCOME FUNDS AND MONEY MARKET FUND

- --------------------------------------- ------------- -------------- -----------
SECURITIES GOVERNMENT INTERMEDIATE MONEY
INCOME BOND MARKET

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ASSET-BACKED SECURITIES2 P A A

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BANK INSTRUMENTS3 A A P

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BORROWING4 A A A

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DEBT OBLIGATIONS P P P

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DEMAND MASTER NOTES N A P

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DERIVATIVE CONTRACTS AND SECURITIES A A A

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DOLLAR ROLLS A A N

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FIXED RATE DEBT OBLIGATIONS P P P

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FLOATING RATE DEBT OBLIGATIONS A A P

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FOREIGN MONEY MARKET INSTRUMENTS A A A

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FOREIGN SECURITIES6 A A N

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FUNDING AGREEMENTS A A P

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FUTURES AND OPTIONS TRANSACTIONS A A N

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MORTGAGE-BACKED SECURITIES P A A

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MUNICIPAL LEASES A A N

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MUNICIPAL SECURITIES A A N

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PARTICIPATION INTERESTS N N A

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PRIME COMMERCIAL PAPER8 A A P

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REPURCHASE AGREEMENTS A A P

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REVERSE REPURCHASE AGREEMENTS9 A A A

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SECURITIES OF OTHER INVESTMENT A A A
COMPANIES

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SWAP TRANSACTIONS A A N

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U.S. GOVERNMENT SECURITIES P A A

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VARIABLE RATE DEMAND NOTES A A A

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</TABLE>

1. ALL FUNDS may invest up to 20% of their respective assets, however, the
INTERNATIONAL STOCK FUND has no limit.

BORROWING. The Funds may borrow money from banks or through reverse repurchase
agreements in amounts up to one-third of total assets (net assets for the MONEY
MARKET FUND AND INTERMEDIATE BOND FUND), and pledge some assets as collateral. A
Fund that borrows will pay interest on borrowed money and may incur other
transaction costs. These expenses could exceed the income received or capital
appreciation realized by a Fund from any securities purchased with borrowed
money. With respect to borrowings, the Funds are required to maintain continuous
asset coverage equal to 300% of the amount borrowed. If the coverage declines to
less than 300%, a Fund must sell sufficient portfolio securities to restore the
coverage even if it must sell the securities at a loss.

CONVERTIBLE SECURITIES. Convertible securities are fixed income securities
that a Fund has the option to exchange for equity securities at a specified
conversion price. The option allows a Fund to realize additional returns if the
market price of the equity securities exceeds the conversion price. For example,
if a Fund holds fixed income securities convertible into shares of common stock
at a conversion price of $10 per share, and the shares have a market value of
$12, a Fund could realize an additional $2 per share by converting the fixed
income securities.

A Fund treats convertible securities as both fixed income and equity securities
for purposes of its investment policies and limitations, because of their unique
characteristics.

COMMERCIAL PAPER AND RESTRICTED AND ILLIQUID SECURITIES. Commercial paper is an
issuer's draft or note with a maturity of less than nine months. Companies
typically issue commercial paper to fund current expenditures. Most issuers
constantly reissue their commercial paper and use the proceeds (or bank loans)
to repay maturing paper. Commercial paper may default if the issuer cannot
continue to obtain financing in this fashion. The short maturity of commercial
paper reduces both the market and credit risk as compared to other debt
securities of the same issuer. The Funds may invest in commercial paper issued
under Section 4(2) of the Securities Act of 1933. By law, the sale of Section
4(2) commercial paper is restricted and is generally sold only to institutional
investors, such as a Fund. A Fund purchasing Section 4(2) commercial paper must
agree to purchase the paper for investment purposes only and not with a view to
public distribution. Section 4(2) commercial paper is normally resold to other
institutional investors through investment dealers who make a market in Section
4(2) commercial paper, thus providing liquidity. The Funds believe that
Section 4(2) commercial paper and certain other restricted securities which meet
the Directors' criteria for liquidity are quite liquid. Section 4(2) commercial
paper and restricted securities which are deemed liquid, will not be subject to
the investment limitation. In addition, because Section 4(2) commercial paper is
liquid, the Funds intend to not subject such paper to the limitation applicable
to restricted securities. DEMAND FEATURES. The Funds may purchase
securities subject to a demand feature, which may take the form of a put or
standby commitment. Demand features permit a Fund to demand payment of the value
of the security (plus an accrued interest) from either the issuer of the
security or a third-party. Demand features help make a security more liquid,
although an adverse change in the financial health of the provider of a demand
feature (such as bankruptcy), will negatively affect the liquidity of the
security. Other events may also terminate a demand feature, in which case
liquidity is also affected.

FOREIGN CURRENCY TRANSACTIONS. Foreign currency transactions are generally used
to obtain foreign currencies to settle securities transactions. They can also be
used as a hedge to protect assets against adverse changes in foreign currency
exchange rates or regulations. When a Fund uses foreign currency exchanges as a
hedge, it may also limit potential gain that could result from an increase in
the value of such currencies. A Fund may be affected either favorably or
unfavorably by fluctuations in the relative rates of exchange between the
currencies of different nations.

FOREIGN CURRENCY HEDGING TRANSACTIONS. Foreign currency hedging
transactions are used to protect against foreign currency exchange rate
risks. These transactions include: forward foreign currency exchange
contracts, foreign currency futures contracts, and purchasing put or call
options on foreign currencies. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
(Forward Contracts) are used to minimize the risks associated with changes
in the relationship between the U.S. dollar and foreign currencies. They
are used to lock in the U.S. dollar price of a foreign security. A Forward
Contract is a commitment to purchase or sell a specific currency for an
agreed price at a future date. If the Adviser believes a foreign currency
will decline against the U.S. dollar, a Forward Contract may be used to
sell an amount of the foreign currency approximating the value of a Fund's
security that is denominated in the foreign currency. The success of this
hedging strategy is highly uncertain due to the difficulties of predicting
the values of foreign currencies, of precisely matching Forward Contract
amounts, and because the constantly changing value of the securities
involved. The Fund will not enter into Forward Contracts for hedging
purposes in a particular currency in an amount in excess of the Fund's
assets denominated in that currency. Conversely, if the Adviser believes
that the U.S. dollar will decline against a foreign currency, a Forward
Contract may be used to buy that foreign currency for a fixed dollar
amount, otherwise known as cross-hedging. In these transactions, the Fund
will segregate assets with a market value equal to the amount of the
foreign currency purchased. Therefore, the Fund will always have cash,
cash equivalents or high quality debt securities available to cover
Forward Contracts or to limit any potential risk. The segregated assets
will be priced daily. Forward Contracts may limit potential gain from a
positive change in the relationship between the U.S. dollar and foreign
currencies. Unanticipated changes in currency prices may result in poorer
overall performance for a Fund than if it had not engaged in such
contracts. PURCHASING AND WRITING PUT AND CALL OPTIONS on foreign
currencies are used to protect the Fund's portfolio against declines in
the U.S. dollar value of foreign portfolio securities and against
increases in the dollar cost of foreign securities to be acquired. Writing
an option on foreign currency constitutes only a partial hedge, up to the
amount of the premium received. The Fund could lose money if it is
required to purchase or sell foreign currencies at disadvantageous
exchange rates. If exchange rate movements are adverse to the Fund's
position, the Fund may forfeit the entire amount of the premium plus
related transaction costs. These options are traded on U.S. and foreign
exchanges or over-the-counter. EXCHANGE-TRADED FUTURES CONTRACTS are used
for the purchase or sale of foreign currencies (Foreign Currency Futures)
and will be used to hedge against anticipated changes in exchange rates
that might adversely affect the value of a Fund's portfolio securities or
the prices of securities that a Fund intends to purchase in the future.
The successful use of Foreign Currency Futures depends on the ability to
forecast currency exchange rate movements correctly. Should exchange rates
move in an unexpected manner, a Fund may not achieve the anticipated
benefits of Foreign Currency Futures or may realize losses.

ECDs, ETDs, YCDs, and Europaper have many of the same risks as other foreign
securities. Examples of these risks include economic and political developments,
that may adversely affect the payment of principal or interest, foreign
withholding or other taxes on interest income, difficulties in obtaining or
enforcing a judgment against the issuing bank and the possible impact of
interruptions in the flow of international currency transactions. Also, the
issuing banks or their branches are not necessarily subject to the same
regulatory requirements that apply to domestic banks, such as reserve
requirements, loan limitations, examinations, accounting, auditing,
recordkeeping and the public availability of information. These factors will be
carefully considered by the Adviser in selecting these investments.

FUNDING AGREEMENTS (Agreements), are investment instruments issued by U.S.
insurance companies. Pursuant to such Agreements, a Fund may make cash
contributions to a deposit fund of the insurance company's general or separate
accounts. The insurance company then credits guaranteed interest to a Fund. The
insurance company may assess periodic charges against an Agreement for expense
and service costs allocable to it, and the charges will be deducted from the
value of the deposit fund. The purchase price paid for an Agreement becomes part
of the general assets of the issuer, and the Agreement is paid from the general
assets of the issuer. The MONEY MARKET FUND will only purchase Agreements from
issuers that meet quality and credit standards established by the Adviser.
Generally, Agreements are not assignable or transferable without the permission
of the issuing insurance companies, and an active secondary market in Agreements
does not currently exist. Also, the MONEY MARKET FUND may not have the right to
receive the principal amount of an Agreement from the insurance company on seven
days' notice or less. Therefore, Agreements are typically considered to be
illiquid investments. FUTURES AND OPTIONS TRANSACTIONS. As a means of
reducing fluctuations in its net asset value, a Fund may buy and sell futures
contracts and options on futures contracts, and buy put and call options on
portfolio securities and securities indices to hedge its portfolio. A Fund may
also write covered put and call options on portfolio securities to attempt to
increase its current income or to hedge its portfolio. There is no assurance
that a liquid secondary market will exist for any particular futures contract or
option at any particular time. A Fund's ability to establish and close out
futures and options positions depends on this secondary market.

PUT OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS. A Fund may
purchase listed put options on financial and stock index futures contracts
to protect portfolio securities against decreases in value. Unlike
entering directly into a futures contract, which requires the purchaser to
buy a financial instrument on a set date at a specified price, the
purchase of a put option on a futures contract entitles (but does not
obligate) its purchaser to decide on or before a future date whether to
assume a short position at the specified price. Generally, if the
hedged portfolio securities decrease in value during the term of an
option, the related futures contracts will also decrease in value and the
option will increase in value. In such an event, a Fund will normally
close out its option by selling an identical option. If the hedge is
successful, the proceeds received by a Fund upon the sale of the second
option will be large enough to offset both the premium paid by a Fund for
the original option plus the decrease in value of the hedged securities.
Alternatively, a Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures contract
of the type underlying the option (for a price less than the strike price
of the option) and exercise the option. A Fund would then deliver the
futures contract in return for payment of the strike price. If a Fund
neither closes out nor exercises an option, the option will expire on the
date provided in the option contract, and only the premium paid for the
contract will be lost. A Fund may also write (sell) listed put options on
financial or stock index futures contracts to hedge its portfolio against
a decrease in market interest rates or an increase in stock prices. A Fund
will use these transactions to purchase portfolio securities in the future
at price levels existing at the time it enters into the transaction. When
a Fund sells a put on a futures contract, it receives a cash premium in
exchange for granting to the buyer of the put the right to receive from a
Fund, at the strike price, a short position in such futures contract. This
is so even though the strike price upon exercise of the option is greater
than the value of the futures position received by such holder. As market
interest rates decrease or stock prices increase, the market price of the
underlying futures contract normally increases. When the underlying
futures contract increases, the buyer of the put option has less reason to
exercise the put because the buyer can sell the same futures contract at a
higher price in the market. If the value of the underlying futures
position is not such that exercise of the option would be profitable to
the option holder, the option will generally expire without being
exercised. The premium received by a Fund can then be used to offset the
higher prices of portfolio securities to be purchased in the future. In
order to avoid the exercise of an option sold by it, generally a Fund will
cancel its obligation under the option by entering into a closing purchase
transaction, unless it is determined to be in a Fund's interest to deliver
the underlying futures position. A closing purchase transaction consists
of the purchase by a Fund of an option having the same term as the option
sold by a Fund, and has the effect of canceling a Fund's position as a
seller. The premium which a Fund will pay in executing a closing purchase
transaction may be higher than the premium received when the option was
sold, depending in large part upon the relative price of the underlying
futures position at the time of each transaction. If the hedge is
successful, the cost of buying the second option will be less than the
premium received by a Fund for the initial option.

<PAGE>

CALL OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS. A Fund may
write (sell) listed and over-the-counter call options on financial and
stock index futures contracts to hedge its portfolio. When a Fund writes a
call option on a futures contract, it undertakes to sell a futures
contract at the fixed price at any time during the life of the option. As
stock prices fall or market interest rates rise, causing the prices of
futures to go down, a Fund's obligation to sell a futures contract costs
less to fulfill, causing the value of the Fund's call option position to
increase. In other words, as the underlying futures price goes down below
the strike price, the buyer of the option has no reason to exercise the
call, so that a Fund keeps the premium received for the option. This
premium can substantially offset the drop in value of a Fund's portfolio
securities. Prior to the expiration of a call written by a Fund, or
exercise of it by the buyer, a Fund may close out the option by buying an
identical option. If the hedge is successful, the cost of the second
option will be less than the premium received by a Fund for the initial
option. The net premium income of a Fund will then substantially offset
the decrease in value of the hedged securities. A Fund may buy a listed
call option on a financial or stock index futures contract to hedge
against decreases in market interest rates or increases in stock price. A
Fund will use these transactions to purchase portfolio securities in the
future at price levels existing at the time it enters into the
transaction. When a Fund purchases a call on a financial futures contract,
it receives in exchange for the payment of a cash premium the right, but
not the obligation, to enter into the underlying futures contract at a
strike price determined at the time the call was purchased, regardless of
the comparative market value of such futures position at the time the
option is exercised. The holder of a call option has the right to receive
a long (or buyer's) position in the underlying futures contract. As market
interest rates fall or stock prices increase, the value of the underlying
futures contract will normally increase, resulting in an increase in value
of a Fund's option position. When the market price of the underlying
futures contract increases above the strike price plus premium paid, a
Fund could exercise its option and buy the futures contract below market
price. Prior to the exercise or expiration of the call option, a Fund
could sell an identical call option and close out its position. If the
premium received upon selling the offsetting call is greater than the
premium originally paid, a Fund has completed a successful hedge.

LIMITATION ON OPEN FUTURES POSITIONS. A Fund will not maintain open
positions in futures contracts it has sold or call options it has written
on futures contracts if together the value of the open positions exceeds
the current market value of aFund's portfolio plus or minus the unrealized
gain or loss on those open positions, adjusted for the correlation of
volatility between the hedged securities and the futures contracts. If
this limitation is exceeded at any time, a Fund will take prompt action to
close out a sufficient number of open contracts to bring its open futures
and options positions within this limitation.

PURCHASING PUT AND CALL
OPTIONS ON SECURITIES. A Fund may purchase put options on portfolio
securities to protect against price movements in a Fund's portfolio. A put
option gives a Fund, in return for a premium, the right to sell the
underlying security to the writer (seller) at a specified price during the
term of the option. A Fund may purchase call options on securities
acceptable for purchase to protect against price movements by locking in
on a purchase price for the underlying security. A call option gives a
Fund, in return for a premium, the right to buy the underlying security
from the seller at a specified price during the term of the option.

WRITING COVERED CALL AND PUT OPTIONS ON SECURITIES. A Fund may write
covered call and put options to generate income and thereby protect
against price movements in a Fund's portfolio securities. As writer of a
call option, a Fund has the obligation, upon exercise of the option during
the option period, to deliver the underlying security upon payment of the
exercise price. The Fund may only sell call options either on securities
held in its portfolio or on securities which it has the right to obtain
without payment of further consideration (or has segregated cash or U.S.
government securities in the amount of any additional consideration). As a
writer of a put option, a Fund has the obligation to purchase a security
from the purchaser of the option upon the exercise of the option. In the
case of put options, a Fund will segregate cash or U.S. Treasury
obligations with a value equal to or greater than the exercise price of
the underlying securities.

STOCK INDEX OPTIONS. A Fund may purchase or
sell put or call options on stock indices listed on national securities
exchanges or traded in the over-the-counter market. A stock index
fluctuates with changes in the market values of the stocks included in the
index. Upon the exercise of the option, the holder of a call option has
the right to receive, and the writer of a put option has the obligation to
deliver, a cash payment equal to the difference between the closing price
of the index and the exercise price of the option. The effectiveness of
purchasing stock index options will depend upon the extent to which price
movements in a Fund's portfolio correlate with price movements of the
stock index selected. The value of an index option depends upon movements
in the level of the index rather than the price of a particular stock.
Accordingly, successful use by a Fund of options on stock indices will be
subject to the Adviser correctly predicting movements in the directions of
the stock market generally or of a particular industry. This requires
different skills and techniques than predicting changes in the price of
individual stocks.

OVER-THE-COUNTER OPTIONS. Over-the-counter
options are two-party contracts with price and other terms negotiated
between buyer and seller. In contrast, exchange-traded options are
third-party contracts with standardized strike prices and expiration dates
and are purchased from a clearing corporation. Exchange-traded options
have a continuous liquid market while over-the-counter options may not. A
Fund may generally purchase and write over-the-counter options on
portfolio securities or securities indices in negotiated transactions with
the buyers or writers of the options when options on a Fund's portfolio
securities or securities indices are not traded on an exchange. A Fund
purchases and writes options only with investment dealers and other
financial institutions deemed creditworthy by the Adviser.

RISKS. When a
Fund uses futures and options on futures as hedging devices, there is a
risk that the prices of the securities or foreign currency subject to the
futures contracts may not correlate perfectly with the prices of the
securities or currency in a Fund's portfolio. This may cause the futures
contract and any related options to react differently to market changes
than the portfolio securities or foreign currency. In addition, the
Adviser could be incorrect in its expectations about the direction or
extent of market factors such as stock price movements or foreign currency
exchange rate fluctuations. In these events, a Fund may lose money on the
futures contract or option. When a Fund purchases futures contracts, an
amount of cash and cash equivalents, equal to the underlying commodity
value of the futures contracts (less any related margin deposits), will be
deposited in a segregated account with a Fund's custodian or the broker,
to collateralize the position and thereby insure that the use of such
futures contract is unleveraged. When a Fund sells futures contracts, it
will either own or have the right to receive the underlying future or
security, or will make deposits to collateralize the position as discussed
above.

SECURITIES LENDING RISKS. When a Fund lends its portfolio securities, it
may not be able to get them back from the borrower on a timely basis. If this
occurs, a Fund may lose certain investment opportunities. A Fund is also subject
to the risks associated with the investments of cash collateral, usually
fixed-income securities risk.

MORTGAGE-BACKED SECURITIES represent interests
in pools of mortgages. The underlying mortgages normally have similar interest
rates, maturities and other terms. Mortgages may have fixed or adjustable
interest rates. Interests in pools of adjustable rate mortgages are known as
ARMs. Mortgage-backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage-backed securities is a
"pass-through certificate." Holders of pass-through certificates receive a pro
rata share of the payments from the underlying mortgages. Holders also receive a
pro rata share of any prepayments, so they assume all the prepayment risk of the
underlying mortgages. Collateralized mortgage obligations (CMOs) are complicated
instruments that allocate payments and prepayments from an underlying
pass-through certificate among holders of different classes of mortgage-backed
securities. This creates different prepayment and market risks for each CMO
class. In addition, CMOs may allocate interest payments to one class (IOs) and
principal payments to another class (POs). POs increase in value when prepayment
rates increase. In contrast, IOs decrease in value when prepayments increase,
because the underlying mortgages generate less interest payments. However, IO
prices tend to increase when interest rates rise (and prepayments fall), making
IOs a useful hedge against market risk. Generally, homeowners have the option to
prepay their mortgages at any time without penalty. Homeowners frequently
refinance higher rate mortgages when mortgage rates fall. This results in the
prepayment of mortgage-backed securities, which deprives holders of the
securities of the higher yields. Conversely, when mortgage rates increase,
prepayments due to refinancings decline. This extends the life of
mortgage-backed securities with lower yields. As a result, increases in
prepayments of premium mortgage-backed securities, or decreases in prepayments
of discount mortgage-backed securities, may reduce their yield and price. This
relationship between interest rates and mortgage prepayments makes the price of
mortgage-backed securities more volatile than most other types of fixed income
securities with comparable credit risks. Mortgage-backed securities tend to pay
higher yields to compensate for this volatility. CMOs may include planned
amortization classes (PACs) and targeted amortization classes (TACs). PACs and
TACs are issued with companion classes. PACs and TACs receive principal payments
and prepayments at a specified rate. The companion classes receive principal
payments and any prepayments in excess of this rate. In addition, PACs will
receive the companion classes' share of principal payments if necessary to cover
a shortfall in the prepayment rate. This helps PACs and TACs to control
prepayment risk by increasing the risk to their companion classes. Another
variant allocates interest payments between two classes of CMOs. One class
(Floaters) receives a share of interest payments based upon a market index such
as LIBOR. The other class (Inverse Floaters) receives any remaining interest
payments from the underlying mortgages. Floater classes receive more interest
(and Inverse Floater classes receive correspondingly less interest) as interest
rates rise. This shifts prepayment and market risks from the Floater to the
Inverse Floater class, reducing the price volatility of Floater class and
increasing the price volatility of the Inverse Floater class. CMOs must allocate
all payments received from the underlying mortgages to some class. To capture
any unallocated payments, CMOs generally have an accrual (Z) class. Z classes do
not receive any payments from the underlying mortgages until all other CMO
classes have been paid off. Once this happens, holders of Z class CMOs receive
all payments and prepayments. Similarly, real estate mortgage investment
conduits (REMICs) (offerings of multiple class mortgage backed securities which
qualify and elect treatment as such under provisions of the Internal Revenue
Code) have residual interests that receive any mortgage payments not allocated
to another REMIC class. The degree of increased or decreased prepayment risk
depends upon the structure of the CMOs. Z classes, IOs, POs, and Inverse
Floaters are among the most volatile investment grade fixed income securities
currently traded in the United States. However, the actual returns on any type
of mortgage backed security depends upon the performance of the underlying pool
of mortgages, which no one can predict and will vary among pools.

REPURCHASEAGREEMENTS AND REVERSE REPURCHASE AGREEMENTS. A repurchase
agreement is a transaction in which a Fund buys a security from a dealer or bank
and agrees to sell the security back at a mutually agreed upon time and price.
The repurchase price exceeds the sale price, reflecting an agreed upon interest
rate effective for the period the buyer owns the security subject to repurchase.
The agreed upon interest rate is unrelated to the interest rate on that
security. The Adviser will continually monitor the value of the underlying
security to ensure that the value of the security always equals or exceeds the
repurchase price. A Fund's custodian is required to take possession of the
securities subject to repurchase agreements. These securities are marked to
market daily. To the extent that the original seller defaults and does not
repurchase the securities from a Fund, a Fund could receive less than the
repurchase price on any sale of such securities. In the event that such a
defaulting seller files for bankruptcy or becomes insolvent, disposition of such
securities by a Fund might be delayed pending court action. The Funds believe
that, under the procedures normally in effect for custody of the portfolio
securities subject to repurchase agreements, a court of competent jurisdiction
would rule in favor of the Funds and allow retention or disposition of such
securities. The Funds will only enter into repurchase agreements with banks and
other recognized financial institutions, such as broker/dealers, which are
deemed by the Adviser to be creditworthy. Reverse repurchase agreement
transactions are similar to borrowing cash. In a reverse repurchase agreement, a
Fund sells a portfolio security to another person, such as a financial
institution, broker, or dealer, in return for a percentage of the instrument's
market value in cash, and agrees that on a stipulated date in the future a Fund
will repurchase the portfolio at a price equal to the original sale price plus
interest. A Fund may use reverse repurchase agreements for liquidity and may
enable a Fund to avoid selling portfolio instruments at a time when a sale may
be deemed to be disadvantageous. When effecting reverse repurchase agreements,
liquid assets of a Fund, in a dollar amount sufficient to make payment for the
obligations to be purchased, are segregated at the trade date. These securities
are marked to market daily and maintained until the transaction is settled.

The Funds expect to enter into swap transactions primarily to hedge against
changes in the price of other portfolio securities. For example, a Fund may
hedge against changes in the market value of a fixed rate security by entering
into a swap that requires a Fund to pay the same or a lower fixed rate of
interest on a notional principal amount equal to the principal amount of the
security in exchange for a variable rate of interest based on a market index.
Interest accrued on the hedged note would then equal or exceed the Funds'
obligations under the swap, while changes in the market value of the swap would
largely offset any changes in the market value of the note. The Funds may also
enter into swaps to preserve or enhance a return or spread on a portfolio
security. The Funds do not intend to use these transactions in a speculative
manner. The swap market has grown substantially in recent years with a large
number of banks and investment banking firms acting both as principals and
agents utilizing standardized swap documentation. The Adviser has determined
that, as a result, the swap market has become relatively liquid. Interest rate
caps and floors are more recent innovations for which standardized documentation
has not yet been developed and, accordingly, they are less liquid than other
swaps. To the extent swaps, caps or floors are determined by the Adviser to be
illiquid, they will be included in a Fund's limitation on investments in
illiquid securities. To the extent a Fund sells caps and floors, it will
maintain in a segregated account cash and/or U.S. government securities having
an aggregate net asset value at least equal to the full amount, accrued on a
daily basis, of a Fund's obligations with respect to caps and floors. The use of
swaps is a highly specialized activity which involves investment techniques and
risks different from those associated with ordinary portfolio securities
transactions. If the Adviser is incorrect in its forecasts of market values,
interest rates and other applicable factors, the investment performance of a
Fund would diminish compared with what it would have been if these investment
techniques were not utilized. Moreover, even if the Adviser is correct in its
forecasts, there is a risk that the swap position may correlate imperfectly with
the price of the portfolio security being hedged. Swap transactions do not
involve the delivery of securities or other underlying assets or principal.
Accordingly, the risk of loss with respect to a default on an interest rate swap
is limited to the net asset value of the swap together with the net amount of
interest payments owed to a Fund by the defaulting party. A default on a
portfolio security hedged by an interest rate swap would also expose a Fund to
the risk of having to cover its net obligations under the swap with income from
other portfolio securities.

TEMPORARY INVESTMENTS. There may be times when
market conditions warrant a defensive position (this rarely applies to the MONEY
MARKET FUND). During these market conditions each of the Funds may temporarily
invest without limit in short-term debt obligations (money market instruments).
These investments include commercial paper, bank instruments, U.S. government
obligations, repurchase agreements, securities of other investment companies
investing in short-term debt securities, and foreign short-term debt securities
(for the INTERNATIONAL STOCK FUND). TREASURY SECURITIES are direct obligations
of the federal government of the United States. Investors regard treasury
securities as having the lowest credit risk.

WARRANTS give a Fund the option
to buy the issuer's stock or other equity securities at a specified price. A
Fund may buy the designated shares by paying the exercise price before the
warrant expires. Warrants may become worthless if the price of the stock does
not rise above the exercise price by the expiration date. Rights are the same as
warrants, except they are typically issued to existing stockholders.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. These transactions are made to
secure what is considered to be an advantageous price or yield. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices. Other than
normal transaction costs, no fees or expenses are incurred. However, liquid
assets of a Fund are segregated on a Fund's records at the trade date in an
amount sufficient to make payment for the securities to be purchased. These
assets are marked to market daily and are maintained until the transaction has
been settled.

INVESTMENT LIMITATIONS

FUNDAMENTAL LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN

ISSUING SENIOR SECURITIES AND BORROWING MONEY

The Funds will not issue senior securities except that each Fund may borrow
money, directly or through reverse repurchase agreements, in amounts up to
one-third of the value of its total assets (net assets in the case of the MONEY
MARKET FUND and INTERMEDIATE BOND FUND) including the amounts borrowed; and
except to the extent that a Fund is permitted to enter into futures contracts,
options or forward contracts. Except for the INTERNATIONAL STOCK FUND, a Fund
will not borrow money or engage in reverse repurchase agreements for investment
leverage, but rather as a temporary, extraordinary, or emergency measure or to
facilitate management of its portfolio by enabling the Fund to meet redemption
requests when the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. Except for the INTERNATIONAL STOCK FUND, a Fund
will not purchase any securities while any borrowings in excess of 5% of its
total assets are outstanding.

PLEDGING ASSETS

LENDING CASH OR SECURITIES

INVESTING IN COMMODITIES

The Funds will not purchase or sell commodities, commodity contracts, or
commodity futures contracts. However, except for the INTERMEDIATE BOND FUND and
the MONEY MARKET FUND, a Fund may purchase and sell futures contracts and
related options, and the INTERNATIONAL STOCK FUND may also enter into forward
contracts and related options. INVESTING IN REAL ESTATE

DIVERSIFICATION OF INVESTMENTS

A Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection with
the sale of restricted securities which the Fund may purchase pursuant to its
investment goal, policies and limitations.

NON-FUNDAMENTAL LIMITATIONS

INVESTING IN ILLIQUID AND RESTRICTED SECURITIES

The Funds will not purchase securities of a company for the purpose of
exercising control or management.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

INVESTING IN OPTIONS

Except for bona fide hedging purposes, a Fund may not invest more than 5% of the
value of its net assets in the sum of (a) premiums on open option positions on
futures contracts, plus (b) initial margin deposits on futures contracts. A Fund
will not purchase put options or write call options on securities unless the
securities are held in the Fund's portfolio or unless the Fund is entitled to
them in deliverable form without further payment or has segregated liquid assets
in the amount of any further payment. A Fund will not write call options in
excess of 25% of the value of its total assets. Except with respect to borrowing
money, if a percentage limitation is adhered to at the time of investment, a
later increase or decrease in percentage resulting from any change in value or
net assets will not result in a violation of such restriction. For purposes of
its policies and limitations, the Fund considers instruments (such as
certificates of deposit and demand and time deposits) issued by a U.S. branch of
a domestic bank or savings and loan having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment to be cash items.
REGULATORY COMPLIANCE. The MONEY MARKET FUND may follow non-fundamental
operational policies that are more restrictive than its fundamental investment
limitations, as set forth in the Prospectus and this statement of additional
information, in order to comply with applicable laws and regulations, including
the provisions of and regulations under the Investment Company Act of 1940. In
particular, the MONEY MARKET FUND will comply with the various requirements of
Rule 2a-7 under the Act, which regulates money market mutual funds. For example,
Rule 2a-7 generally prohibits the investment of more than 5% of the MONEY MARKET
FUND'S total assets in the securities of any one issuer, although the MONEY
MARKET FUND'S fundamental investment limitation only requires such 5%
diversification with respect to 75% of its assets. The MONEY MARKET FUND will
also determine the effective maturity of its investments, as well as its ability
to consider a security as having received the requisite short-term ratings by
NRSROs, according to Rule 2a-7. The MONEY MARKET FUND may change these
operational policies to reflect changes in the laws and regulations without
shareholder approval. OTHER INVESTMENT POLICIES

The following Funds have an investment policy which requires that a Fund
invest, under normal market conditions, at least 65% of its total assets in a
particular type of security that is consistent with a Fund's goals and
investment strategies. EQUITY INCOME FUND intends to invest at least 65% of its
total assets in equity securities that generate dividend income. LARGE-CAP
GROWTH & INCOME FUND intends to invest at least 65% of its total assets in
common stocks and preferred stocks of large-sized companies whose market
capitalizations generally exceed $10 billion. MID-CAP VALUE FUND intends to
invest at least 65% of its total assets in value-oriented common and preferred
stocks of medium-sized companies similar in size to those within the S&P Mid-Cap
400 Index. MID-CAP GROWTH FUND intends to invest at least 65% of its total
assets in growth-oriented common stocks of medium-sized companies similar in
size to those within the S&P Mid-Cap 400 Index. SMALL-CAP GROWTH FUND intends to
invest at least 65% of its total assets in common and preferred stocks issued by
small-sized companies similar in size to those within the Russell 2000 Index.
INTERNATIONAL STOCK FUND intends to invest at least 65% of its total assets in
securities of issuers domiciled in at least three different nations outside the
United States, and intends to invest at least 65% of the Fund's total assets in
common stocks, preferred stocks and other equity securities. GOVERNMENT INCOME
FUND intends to invest at least 65% of its total assets in U.S. government
securities (not including privately issued mortgage-related securities).
INTERMEDIATE BOND FUND intends to invest at least 65% of its total assets in
bonds. DETERMINING MARKET VALUE OF SECURITIES

USE OF THE AMORTIZED COST METHOD (MONEY MARKET FUND ONLY)

MONITORING PROCEDURES. The Directors' procedures include monitoring the
relationship between the amortized cost value per share and the net asset value
per share based upon available indications of market value. The Directors will
decide what, if any, steps should be taken if there is a difference of more than
0.5 of 1% between the two values. The Directors will take any steps they
consider appropriate (such as redemption in kind or shortening the average
portfolio maturity) to minimize any material dilution or other unfair results
arising from differences between the two methods of determining net asset value.

INVESTMENT RESTRICTIONS. The Rule requires that the MONEY MARKET FUND limit
its investments to instruments that, in the opinion of the Directors, present
minimal credit risks and have received the requisite rating from one or more
NRSROs. If the instruments are not rated, the Directors must determine that they
are of comparable quality. The Rule also requires the Fund to maintain a
dollar-weighted average portfolio maturity (not more than 90 days) appropriate
to the objective of maintaining a stable net asset value of $1.00 per share. In
addition, no instrument with a remaining maturity of more than 397 days can be
purchased by the Fund. Should the disposition of a portfolio security result in
a dollar-weighted average portfolio maturity of more than 90 days, the MONEY
MARKET FUND will invest its available cash to reduce the average maturity to 90
days or less as soon as possible. Shares of investment companies purchased by
the Fund will meet these same criteria and will have investment policies
consistent with Rule 2a-7. Under the amortized cost method of valuation, neither
the amount of daily income nor the net asset value is affected by any unrealized
appreciation or depreciation of the portfolio. In periods of declining interest
rates, the indicated daily yield on shares of the MONEY MARKET FUND, computed
based upon amortized cost valuation, may tend to be higher than a similar
computation made by using a method of valuation based upon market prices and
estimates. In periods of rising interest rates, the indicated daily yield on
shares of the Fund computed the same way may tend to be lower than a similar
computation made by using a method of calculation based upon market prices and
estimates.

MARKET VALUES (ALL OTHER FUNDS)

Market values of portfolio securities are determined as follows:

o for equity securities, according to the last sale price in the market
in which they are primarily traded (either a national securities
exchange or the over-the-counter market), if available;

o in the absence of recorded sales for equity securities, according to
the mean between the last closing bid and asked prices;

o for bonds and other fixed income securities, at the last sale price on
a national securities exchange, if available, otherwise, as determined
by an independent pricing service;

o for short-term obligations, according to the mean between bid and
asked prices as furnished by an independent pricing service, except
that short-term obligations with remaining maturities of less than 60
days at the time of purchase may be valued at amortized cost or at
fair market value as determined in good faith by the Board; and

o for all other securities, at a fair value as determined in good faith
by the Board.

TRADING IN FOREIGN SECURITIES

Except under certain circumstances described in the Prospectus, shares are
sold at their net asset value (plus a sales charge) on days the New York Stock
Exchange is open for business. The procedure for purchasing shares is explained
in the Prospectus under "How to Buy Shares" and "What Do Shares Cost." HOW
ARE THE FUND SHARES SOLD?

Under the Distributor's Contract with the Funds, the Distributor (Federated
Securities Corp.), located at Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, PA 15222-3779, offers shares on a continuous, best-efforts basis.
Texas residents must purchase shares of the Funds through M&I Brokerage
Services, Inc. at 1-800-580-FUND (3863), or through any authorized
broker-dealer. FRONT-END SALES CHARGE REALLOWANCE The distributor receives a
front-end sales charge on certain Share sales. The Distributor generally pays up
to 90% (and as much as 100%) of this charge to a broker-dealer, investment
professional, or financial institution (Authorized Dealers) for sales and/or
administrative services. Any payments to an Authorized Dealer in excess of 90%
of the front-end sales charge are considered supplemental payments. The
distributor retains any portion not paid to an Authorized Dealer. 12B-1 PLAN

The Corporation has adopted a compensation-type plan for Class A Shares of the
Funds (Plan Shares) pursuant to Rule 12b-1 (the Plan) which was promulgated by
the Securities and Exchange Commission pursuant to the Act. The Plan provides
that the Funds' Distributor shall act as the distributor of Plan Shares, and it
permits the payment of fees to brokers, dealers and administrators for
distribution and/or administrative services. The Plan is designed to stimulate
brokers, dealers and administrators to provide distribution and/or
administrative support services to the Funds and holders of Plan Shares. These
services are to be provided by a representative who has knowledge of the
shareholder's particular circumstances and goals, and include, but are not
limited to: providing office space, equipment, telephone facilities, and various
personnel, including clerical, supervisory, and computer, as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investment of
client account cash balances; answering routine client inquiries regarding the
Plan Shares; assisting clients in changing dividend options, account
designations, and addresses; and providing such other services as the Funds
reasonably request. Other benefits which the Funds hope to achieve through the
Plan include, but are not limited to, the following: (1) an efficient and
effective administrative system; (2) a more efficient use of assets of holders
of Plan Shares by having them rapidly invested in the Funds with a minimum of
delay and administrative detail; and (3) an efficient and reliable records
system for holders of Plan Shares and prompt responses to shareholder requests
and inquiries concerning their accounts. By adopting the Plan, the Directors
expect that the Funds will be able to achieve a more predictable flow of cash
for investment purposes and to meet redemptions. This will facilitate more
efficient portfolio management and assist the Funds in seeking to achieve their
investment objectives. By identifying potential investors in Plan Shares whose
needs are served by the Funds' objectives and properly servicing these accounts,
the Funds may be able to lessen fluctuations in rates of redemptions and sales.
SHAREHOLDER SERVICES

M&I Trust Company, through MFIS, is the shareholder servicing agent for the
Funds. As such, MFIS provides shareholder services which include, but are not
limited to, distributing Prospectuses and other information, providing
shareholder assistance, and communicating or facilitating purchases and
redemption of shares. The Funds may pay M&I Trust Company for providing
shareholder services and maintaining shareholder accounts. M&I Trust Company may
select others (including Federated Shareholder Services, a subsidiary of
Federated Investors, Inc.) to perform these services for their customers and may
pay them fees.

SUPPLEMENTAL PAYMENTS

HOW TO BUY SHARES

QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES

As described in the Prospectus, larger purchases of the same Share class
reduce or eliminate the sales charge paid. For example, the Funds will combine
all Class A Share purchases made on the same day by the investor, the investor's
spouse, and the investor's children under age 21 when it calculates the sales
charge. In addition, the sales charge, if applicable, is reduced for purchases
made at one time by a trustee or fiduciary for a single trust estate or a single
fiduciary account. If an additional purchase into the same Share class is
made, the Funds will consider the previous purchases still invested in the
Funds. For example, if a shareholder already owns Class A Shares having a
current value at the public offering price of $40,000 and he purchases $10,000
more at the current public offering price, the sales charge on the additional
purchase according to the schedule now in effect would be 4.5%, not 5.75%. To
receive the sales charge reduction, M&I Brokerage Services must be notified by
the shareholder in writing or by his investment professional or financial
institution at the time the purchase is made that Class A Shares are already
owned or that purchases are being combined. The Funds will reduce or eliminate
the sales charge after it confirms the purchases.

CONCURRENT PURCHASES

Shareholders have the privilege of combining concurrent purchases of the same
Share class of two or more Marshall Funds in calculating the applicable sales
charge. To receive a sales charge reduction or elimination, M&I Brokerage
Services must be notified by the shareholder in writing or by his investment
professional or financial institution at the time the concurrent purchases are
made. The Funds will reduce or eliminate the sales charge after it confirms the
purchases.

LETTER OF INTENT

A shareholder can sign a letter of intent committing to purchase a certain
amount of the same Share class within a 13-month period in order to combine such
purchases in calculating the applicable sales charge. The Funds' custodian will
hold shares in escrow equal to the maximum applicable sales charge. If the
shareholder completes the commitment, the escrowed shares will be released to
their account. If the commitment is not completed within 13 months, the
custodian will redeem an appropriate number of escrowed shares to pay for the
applicable sales charge. While this letter of intent will not obligate the
shareholder to purchase Class A Shares, each purchase during the period will be
at the sales charge applicable to the total amount intended to be purchased. At
the time a letter of intent is established, current balances in accounts in any
Class A Shares of any Marshall Fund, excluding money market accounts, will be
aggregated to provide a purchase credit towards fulfillment of the letter of
intent. The letter may be dated as of a prior date to include any purchase made
within the past 90 days. Prior trade prices will not be adjusted.

REINVESTMENT PRIVILEGE

The reinvestment privilege is available for all shares of the Fund
within the same share class.

Class A shareholders who redeem from the Fund may reinvest the redemption
proceeds back into the same Share class at the next determined net asset value
without any sales charge. The original shares must have been subject to a sales
charge and the reinvestment must be within 90 days. In addition, if shares were
reinvested through an investment professional or financial institution, the
investment professional or financial institution would not be entitled to an
advanced payment from M&I Brokerage Services on the reinvested shares, if
otherwise applicable. M&I Brokerage Services must be notified by the shareholder
in writing or by his investment professional or financial institution of the
reinvestment in order to eliminate a sales charge or a contingent deferred sales
charge. If the shareholder redeems shares in the Fund, there may be tax
consequences.

EXCHANGING SECURITIES FOR SHARES

REDEMPTION IN KIND

Although the Funds intend to pay share redemptions in cash, the Funds reserve
the right, as described below, to pay the redemption price in whole or in part
by a distribution of the Fund's portfolio securities. Because the Corporation
has elected to be governed by Rule 18f-1 under the Investment Company Act of
1940, the Funds are obligated to pay share redemptions to any one shareholder in
cash only up to the lesser of $250,000 or 1% of a Fund's net assets represented
by such share class during any 90-day period. Any share redemption payment
greater than this amount will also be in cash unless the Funds' Directors
determine that payment should be in kind. In such a case, a Fund will pay all or
a portion of the remainder of the redemption in portfolio securities, valued in
the same way as the Fund determines its net asset value. The portfolio
securities will be selected in a manner that the Funds' Directors deems fair and
equitable and, to the extent available, such securities will be readily
marketable. Redemption in kind is not as liquid as a cash redemption. If
redemption is made in kind, shareholders would incur transaction costs in
selling the portfolio securities received, and the proceeds of such sales, when
made, may be more or less than the value on the redemption date. ACCOUNT AND
SHARE INFORMATION VOTING RIGHTS Shareholders of each Fund are entitled: (i) to
one vote per full share of Common Stock; (ii) to distributions declared by
Directors; and (iii) upon liquidation of the Corporation, to participate ratably
in the assets of the Fund available for distribution. Each share of the Fund
gives the shareholder one vote in the election of Directors and other matters
submitted to shareholders for vote. All shares of each portfolio or class in the
Corporation have equal voting rights, except that only shares of a particular
portfolio or class are entitled to vote on matters affecting that portfolio or
class. Consequently, the holders of more than 50% of the Corporation's shares of
common stock voting for the election of Directors can elect the entire Board of
Directors, and, in such event, the holders of the Corporation's remaining shares
voting for the election of Directors will not be able to elect any person or
persons to the Board of Directors. The Wisconsin Business Corporation Law (the
WBCL) permits registered investment companies, such as the Corporation, to
operate without an annual meeting of shareholders under specified circumstances
if an annual meeting is not required by the Act. The Corporation has adopted the
appropriate provisions in its By-laws and does not anticipate holding an annual
meeting of shareholders to elect Directors unless otherwise required by the Act.
Directors may be removed by the shareholders at a special meeting. A special
meeting of the shareholders may be called by the Directors upon written request
of shareholders owning at least 10% of the Corporation's outstanding voting
shares. The shares are redeemable and are transferable. All shares issued and
sold by the Corporation will be fully paid and nonassessable except as provided
in WBCL Section 180.0622(2)(b). Fractional shares of common stock entitle the
holder to the same rights as whole shares of common stock except the right to
receive a certificate evidencing such fractional shares.

<PAGE>

As of October 4, 1999, the following shareholders, each having as their
address of record, c/o Marshall & Ilsley Trust Company, 1000 North Water Street,
Milwaukee, Wisconsin 53202, owned 5% or more of a Fund's outstanding Class A
Shares: Equity Income Fund - Marshall & Ilsley Trust Company, IRA Donald A
Becker, owned approximately 7,618 shares (12.39%); and Robert Sawyers & Marjorie
Sawyers, owned approximately 3,931 shares (6.39%); Large-Cap Growth & Income
Fund - Denise A Fitzgerald & Daniel J. Fitzgerald, owned approximately 4,848
shares (6.98%); Mid-Cap Value Fund - Marshall & Ilsley Trust Company, IRA Donald
A. Becker, owned approximately 4,270 shares (9.95%); Robert Sawyers & Marjorie
Sawyers, owned approximately 3,368 shares (7.85%); Marshall & Ilsley Trust
Company, IRA Charles L. Nichols, owned approximately 3,309 shares (7.71%);
Donaldson Lufkin Jenrette Securities Corporation, Inc., Jersey City, New Jersey,
owned approximately 2,375 shares (5.54%); Mid-Cap Growth Fund - Denise A.
Fitzgerald & Daniel J. Fitzgerald, owned approximately 1,621 shares (8.01%); and
Marshall & Ilsley Trust Company, IRA Holly L. Cremer, owned approximately 1,608
shares (7.94%); Small-Cap Growth Fund - Denise J. Porcaro, owned approximately
5,187 shares (13.56%); and Marshall & Ilsley Trust Company, IRA Charles L.
Nichols, owned approximately 3,057 shares (7.99%); International Stock Fund -
Dennis J. Porcaro, owned approximately 4,510 shares (11.92%); Robert Sawyers &
Marjorie Sawyers, owned approximately 3,111 shares (8.22%); and Marshall &
Ilsley Trust Company, IRA Russell J. Scharrer, owned approximately 2,164 shares
(5.72%); Government Income Fund - Gladys M. Deuster, owned approximately 20,703
shares (23.38%); Marshall & Ilsley Trust Company, IRA Robert G. Kissinger, owned
approximately 9,365 shares (10.53%); Louis P. Hofkens & Gilberte Hofkens, owned
approximately 6,379 shares (7.17%); Donaldson Lufkin Jenrette Securities
Corporation, Inc., Jersey City, New Jersey, owned approximately 5,232 shares
(5.88%); Rosette Yonke, Jeffrey Yonke, Adele E. Anderson, Linda K. Leith
equally, owned approximately 5,210 shares (5.86%); and Marshall & Ilsley Trust
Company, IRA Leo G. Schickert, owned approximately 5,110 shares (5.75%);
Intermediate Bond Fund - Marshall & Ilsley Trust Company, IRA Robert G.
Kissinger, owned approximately 13,152 shares (10.22%); Marshall & Ilsley Trust
Company, IRA Donald A. Becker, owned approximately 8,587 shares (6.67%); and
Robert Sawyers & Marjorie Sawyers, owned approximately 7,652 shares (5.95%);
Money Market Fund - M&I BSS Janesville, Omnibus Sweep Account, Appleton,
Wisconsin, owned approximately 34,366,619 shares (27.34%); M&I BSS Madison,
Omnibus Sweep Account, Appleton, Wisconsin, owned approximately 11,552,306
shares (9.19%); M&I BSS Appleton, Omnibus Sweep Account, Appleton, Wisconsin,
owned approximately 7,671,226 shares (6.10%). Shareholders owning 25% or more of
the outstanding shares of a Fund may be in control and be able to affect the
outcome of certain matters presented for a vote of shareholders. WHAT ARE
THE TAX CONSEQUENCES?

FEDERAL INCOME TAX

If more than 50% of the value of a Fund's assets at the end of the tax year is
represented by stock or securities of foreign corporations, the Fund intends to
qualify for certain Code provisions that would allow shareholders to claim a
foreign tax credit or deduction on their U.S. income tax returns. Shareholders
must hold Fund shares for a specified period of time to claim a foreign tax
credit. The Code may limit a shareholder's ability to claim a foreign tax
credit. Shareholders who elect to deduct their portion of a Fund's foreign taxes
rather than take the foreign tax credit must itemize deductions on their income
tax returns. The Funds expect that only INTERNATIONAL STOCK FUND will qualify
for these Code provisions.

STATE AND LOCAL TAXES

WHO MANAGES THE FUNDS?

OFFICERS AND DIRECTORS

A plus sign (+) denotes a Director who is deemed to be an interested person as
defined in the Investment Company Act of 1940.

NAME AGGREGATE
BIRTHDATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS FROM
POSITION WITH FOR PAST 5 YEARS CORPORATION
CORPORATION

DIRECTOR

<PAGE>

NAME AGGREGATE
BIRTHDATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS FROM
POSITION WITH FOR PAST 5 YEARS CORPORATION
CORPORATION
BARBARA J. POPE** President, Barbara J. Pope, P.C., a $15,000
Age: 51 financial consulting firm; President,
c/o Marshall Funds Sedgwick Street Partners LLC; general
1000 North Water Street partner of a private investment partnership.
Milwaukee, WI

DIRECTOR

JOHN M. BLASER**+ Vice President, M&I Trust Company; $0
Age: 42 formerly, Partner and Chief Financial
1000 North Water Street Officer, Artisan Partners Limited
Milwaukee, WI Partnership; formerly, Chief Financial
PRESIDENT and DIRECTOR Officer and Principal Administrative and

Finance Officer, Artisan Funds, Inc.;
formerly, Senior Vice President, Kemper

Securities.

DAVID W. SCHULZ**+ President and Director, M&I Investment $0
Age: 41 Management Corp.; Vice President, M&I Trust
1000 North Water Street Company.

Milwaukee, WI 53202

DIRECTOR

JO A. DALES Vice President, M&I Trust Company; $0
Age: 38 formerly, Senior Audit Manager of Marshall
1000 North Water Street & Ilsley Corporation and Operations
Milwaukee, WI 53202 Specialist for Firstar Trust Company.

VICE PRESIDENT

ANN K. PEIRICK Assistant Vice President, M&I Trust $0
Age: 45 Company; formerly, Senior Financial
1000 North Water Street Analyst - Community Bank Finance and
Milwaukee, WI Manager of Corporate Financial Analysis,
TREASURER Bank One, Wisconsin.

BROOKE J. BILLICK Vice President and Securities Counsel, M&I $0
Age: 45 Trust Company, M&I Investment Management
1000 North Water Street Corp.; formerly, shareholder, Gibbs, Roper,

Milwaukee, WI Loots & Williams SC.
</TABLE>

SECRETARY

** Elected as a Director on May 24, 1999.

ADVISER TO THE FUNDS

SUB-ADVISER TO INTERNATIONAL STOCK FUND

BPI Global Asset Management LLP (BPI) is the Sub-Adviser to the INTERNATIONAL
STOCK FUND. It is the Adviser's responsibility to select a Sub-Adviser for the
INTERNATIONAL STOCK FUND that has distinguished itself in its area of expertise
in asset management and to review the Sub-Adviser's performance. The Adviser
provides investment management evaluation services by performing initial due
diligence on BPI and thereafter monitoring BPI's performance through
quantitative and qualitative analysis, as well as periodic in-person, telephonic
and written consultations with BPI. In evaluating BPI, the Adviser considers,
among other factors, BPI's level of expertise; relative performance and
consistency of performance over a minimum period of time; level of adherence to
investment discipline or philosophy; personnel, facilities and financial
strength; and quality of service and client communications. The Adviser has
responsibility for communicating performance expectations and evaluations to BPI
and ultimately recommending to the Corporation's Directors whether BPI's
contract should be renewed, modified or terminated. The Adviser provides written
reports to the Directors regarding the results of its evaluation and monitoring
functions. The Adviser is also responsible for conducting all operations of the
INTERNATIONAL STOCK FUND, except those operations contracted to BPI, the
custodian, the transfer agent, and the administrator. Although BPI's activities
are subject to oversight by the Directors and officers of the Corporation,
neither the Directors, the officers, nor the Adviser evaluates the investment
merits of BPI's individual security selections. BPI has complete discretion to
purchase, manage and sell portfolio securities for the INTERNATIONAL STOCK FUND,
subject to the INTERNATIONAL STOCK FUND'S investment goal, policies and
limitations. For its services under the Sub-advisory Agreement, the Sub-Adviser
receives a fee at the annual rate of 0.40% of the INTERNATIONAL STOCK FUND'S
average daily net assets. The Sub-Adviser is paid by the Adviser and not by the
INTERNATIONAL STOCK FUND. However, BPI will furnish to the Adviser such
investment advice, statistical and other factual information as requested by the
Adviser. BPI, headquartered in Orlando, Florida, provides portfolio management
services for investment companies, corporations, trusts, estates, pension and
profit sharing plans, individuals, and other institutions located in both Canada
and the United States, and is an investment adviser registered with the U.S.
Securities and Exchange Commission. BPI was formed in March 1997 as a Delaware
limited liability partnership between BPI Global Holdings USA, Inc. (BPI
Holdings USA) as a 51% partner, and JBS Advisors, Inc. (JBS) as a 49% partner.
BPI Holdings USA is a wholly-owned subsidiary of BPI Global Holdings, Inc.,
which is awholly-owned subsidiary of BPI Financial Corporation. Effective August
1999, BPI Financial Corporation became a wholly-owned subsidiary of C.I. Fund
Management, Inc., a publicly-traded company located in Toronto, Ontario, Canada.
JBS is owned by BPI's portfolio managers and its President. For the period from
May 1, 1999 to August 31, 1999, the Adviser paid BPI $366,413. BPI became
Sub-Adviser on March 29, 1999, but was compensated for advisory services
beginning May 1, 1999. Prior to March 26, 1999, Templeton Investment Counsel,
Inc. (TICI) served as the INTERNATIONAL STOCK FUND'S former Sub-Adviser. For the
period from September 1, 1998 to May 1, 1999 (the effective date of termination
of TICI's sub-advisory contract), the Adviser paid TICI $645,806. For the fiscal
years ended August 31, 1998 and 1997, the Adviser paid TICI $1,072,613 and
$816,182, respectively. BANKING LAWS

The Administrator of the Funds is Federated Administrative Services (FAS), a
subsidiary of Federated Investors, Inc. Effective January 1, 2000 Marshall &
Ilsley Trust Company will be the Administrator of the Funds and Federated
Services Company will be the Sub-Administrator. The Administrator provides
administrative personnel and services to the Funds for a fee at an annual rate
as specified below (except SMALL-CAP GROWTH FUND):

AVERAGE AGGREGATE DAILY NET

ADMINISTRATIVE FEE ASSETS OF THE CORPORATION
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million

The Administrator provides these services for an annual fee equal to 0.12% of
the SMALL-CAP GROWTH FUND'S average daily net assets.

The functions performed by the Administrator include, but are not limited to the
following:

o preparation, filing and maintenance of the Corporation's governing
documents, minutes of Directors' meetings and shareholder meetings;

o preparation, negotiation and administration of contracts on behalf of a Fund;

o supervision of the preparation of financial reports;

o preparation and filing of federal and state tax returns;

o assistance with the design, development and operation of a Fund; and

o providing advice to the Funds and Corporation's Directors.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

The independent auditor for the Funds, Ernst & Young LLP, plans and performs its
audit so that it may provide an opinion as to whether the Funds' financial
statements and financial highlights are free of material misstatement.
FEES PAID BY THE FUNDS FOR SERVICES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- --------------------- ------------------------------- ----------------------------- -------------------------------
FUND NAME ADVISORY FEE PAID/ BROKERAGE COMMISSIONS PAID ADMINISTRATIVE FEE PAID
ADVISORY FEE WAIVED

AUGUST 31 AUGUST 31 AUGUST 31
------------------------------- ----------------------------- -------------------------------
----------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ---------------------
----------------------------------------------------------------------------------------------
EQUITY INCOME FUND $4,006,158$3,596,326 $1,964,826 $950,099 $861,077 $468,108 $448,829 $403,594 $227,695
$0 $0 $0
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
LARGE-CAP GROWTH & $2,763,976$2,284,566 $1,877,032 $283,032 $216,531 $309,709 $310,828 $256,720 $217,817
INCOME FUND $0 $0 $0
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
MID-CAP VALUE FUND $1,033,112$1,245,164 $1,245,668 $488,948 $444,003 $364,246 $118,865 $139,888 $144,711
$0 $0 $0
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
MID-CAP GROWTH FUND $1,933,093$1,676,595 $1,288,819 $566,593 $481,875 $580,150 $218,644 $188,403 $149,489
$0 $0 $0
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
SMALL-CAP GROWTH $997,009 $857,023 $368,209 $226,345 $142,276 $117,618 $123,840 $102,843 $44,185
FUND $0 $0 $0
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
INTERNATIONAL STOCK $2,416,970$2,504,141 $1,857,261 $1,744,043 $265,289 $340,030 $205,307 $211,050 $161,481
FUND $23,525 $0 $0
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
GOVERNMENT INCOME $2,245,727$1,833,350 $1,304,960 N/A N/A N/A $253,421 $205,934 $151,306
FUND $291,548 $272,859 $272,824

- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
INTERMEDIATE BOND $3,565,324$3,105,550 $2,440,381 N/A N/A N/A $498,835 $435,828 $354,123
FUND $356,532 $333,362 $346,194

- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND $8,873,537$7,729,527 $6,354,005 N/A N/A N/A $1,477,382$1,302,763 $1,105,666
$4,436,304$3,846,385 $3,304,082
- -------------------------------------------------------------------------------------------------------------------
N/A - Not applicable

</TABLE>

<PAGE>

---------------------------------------
FOR THE FISCAL YEAR ENDED AUGUST 31,
1999

- --------------------------------- ---------------------------------------
- --------------------------------- ------------- -------------------------
FUND 12B-1 FEE SHAREHOLDER SERVICES
FEE/

SHAREHOLDER SERVICES FEE
WAIVED

- --------------------------------- ------------- -------------------------
- --------------------------------- ------------- -------------------------
EQUITY INCOME FUND $364 $363
$363
- --------------------------------- ------------- -------------------------
- --------------------------------- ------------- -------------------------
LARGE-CAP GROWTH & INCOME FUND $371 $362
$362
- --------------------------------- ------------- -------------------------
- --------------------------------- ------------- -------------------------
MID-CAP VALUE FUND $194 $188
$188
- --------------------------------- ------------- -------------------------
- --------------------------------- ------------- -------------------------
MID-CAP GROWTH FUND $114 $114
$114
- --------------------------------- ------------- -------------------------
- --------------------------------- ------------- -------------------------
SMALL-CAP GROWTH FUND $182 $176
$176
- --------------------------------- ------------- -------------------------
- --------------------------------- ------------- -------------------------
INTERNATIONAL STOCK FUND $176 $176
$176
- --------------------------------- ------------- -------------------------
- --------------------------------- ------------- -------------------------
GOVERNMENT INCOME FUND $233 $229
$229
- --------------------------------- ------------- -------------------------
- --------------------------------- ------------- -------------------------
INTERMEDIATE BOND FUND $463 $461
$461
- --------------------------------- ------------- -------------------------
- --------------------------------- ------------- -------------------------
MONEY MARKET FUND $331,903 $22,127
$0

- --------------------------------- ------------- -------------------------

HOW DO THE FUNDS MEASURE PERFORMANCE?

<PAGE>

TOTAL RETURN

Total return represents the change (expressed as a percentage) in the value of
shares over a specific period of time, and includes the investment of income and
capital gains distributions. The average annual total return for a Fund shares
is the average compounded rate of return for a given period that would equate a
$1,000 initial investment to the ending redeemable value of that investment. The
ending redeemable value is computed by multiplying the number of shares owned at
the end of the period by the net asset value per share at the end of the period.
The number of shares owned at the end of the period is based on the number of
shares purchased at the beginning of the period with $1,000, adjusted over the
period by any additional shares, assuming the quarterly reinvestment of any
dividends and distributions. The quoted performance data for the SMALL-CAP
GROWTH FUND includes the performance of a predecessor collective trust fund for
periods before the Fund's registration statement became effective on August 30,
1996, as adjusted to reflect the Fund's 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 that are imposed by the 1940
Act. If the collective trust fund had been registered under the 1940 Act, the
performance may have been adversely affected. Class A Shares for the EQUITY
FUNDS and INCOME FUNDS were not offered until December 1998. YIELD

The MONEY MARKET FUND calculates the yield for Class A Shares daily, based upon
the seven days ending on the day of the calculation, called the base period.
This yield is computed by:

o determining the net change in the value of a hypothetical account with
a balance of one share at the beginning of the base period, with the
net change excluding capital changes but including the value of any
additional shares purchased with dividends earned from the original
one share and all dividends declared on the original and any purchased
shares;

o dividing the net change in the account's value by the value of the
account at the beginning of the base period to determine the base
period return; and

o multiplying the base period return by 365/7.

The MONEY MARKET FUND's yield for Class A Shares (formerly, Class B Shares)
for the seven-day period ended August 31, 1999, was 4.62%.

The MONEY MARKET FUND's effective yield for Class A Shares is computed by
compounding the unannualized base period return by: adding 1 to the base period
return; raising the sum to the 365/7th power; and subtracting 1 from the result.
The MONEY MARKET FUND's effective yield for Class A Shares (formerly, Class B
Shares) for the seven-day period ended August 31, 1999, was 4.73%.

<PAGE>

------------------------ ----------------------- -----------------------
FUND AVERAGE ANNUAL TOTAL YIELD
RETURN for the 30-day period

for the following ended August 31, 1999

periods ended August
31, 1999

----------------------- -----------------------
----------------------- -----------------------
CLASS A SHARES CLASS A SHARES

One Year
Five Year

Since Inception

------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
Equity Income Fund N/A 1.37%

N/A
0.02%(a)

------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
Large-Cap Growth & N/A 0.28%
Income Fund N/A

0.90%(a)

------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
Mid-Cap Value Fund N/A 0.48%

N/A
0.09%(a)

------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
Mid-Cap Growth Fund N/A N/A

N/A
7.66%(a)

------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
Small-Cap Growth Fund N/A N/A

N/A

(8.36%)(a)

------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
International Stock N/A N/A
Fund N/A

2.75%(a)

------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
Government Income Fund N/A 5.06%

N/A

(5.29%)(a)

------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
Intermediate Bond Fund N/A 5.42%

N/A

(4.88%)(a)

------------------------ ----------------------- -----------------------
------------------------ ----------------------- -----------------------
Money Market Fund 4.67% 4.55%
5.05%
4.50%(b)

------------------------ ----------------------- -----------------------
A) Reflects period from December 31, 1998 (start of performance) to
August 31, 1999.
B) December 17, 1992

PERFORMANCE COMPARISONS

Advertising and sales literature may include:

o references to ratings, rankings, and financial publications and/or performance
comparisons of the Funds' shares to certain indices;

o discussions of economic, financial and political developments and their impact
on the securities market, including the portfolio manager's views on how such
developments could impact the Funds; and

o information about the mutual fund industry from sources such as the Investment
Company Institute.

The Funds may quote information from sources the Funds believe are reliable
regarding individual countries and regions, world stock exchanges, and economic
and demographic statistics.

o MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALIA, FAR EAST INDEX
(EAFE) is a market capitalization weighted foreign securities index,
which is widely used to measure the performance of European, Australian
and New Zealand and Far Eastern stock markets. The index covers
approximately 1,020 companies drawn from 18 countries in the above
regions. The index values its securities daily in both U.S. dollars and
local currency and calculates total returns monthly. EAFE U.S. dollar
total return is a net dividend figure less Luxembourg withholding tax.
The EAFE is monitored by Capital International, S.A., Geneva,
Switzerland.

o LIPPER, INC. ranks funds in various fund categories by making
comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and
takes into account any change in net asset value over a specific period
of time. From time to time, a Fund will quote its Lipper ranking in
advertising and sales literature.

o CONSUMER PRICE INDEX is generally considered to be a measure of
inflation.

o STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a
composite index of common stocks in industry, transportation, financial,
and public utility companies. The Standard & Poor's index assumes
reinvestment of all dividends paid by stocks listed on the index. Taxes
due on any of these distributions are not included, nor are brokerage or
other fees calculated in the Standard & Poor's figures.

o RUSSELL 1000 GROWTH INDEX consists of those Russell 2000 securities with
a greater-than-average growth orientation. Securities in this index tend
to exhibit higher price-to-book and price-earnings ratios, lower
dividend yields and higher forecasted growth rates.

o RUSSELL 2000 INDEX is a broadly diversified index consisting of
approximately 2,000 small capitalization common stocks that can be used
to compare to the total returns of funds whose portfolios are invested
primarily in small capitalization common stocks.

o STANDARD & POOR'S RATINGS GROUP SMALL STOCK INDEX is a broadly
diversified index consisting of approximately 600 small capitalization
common stocks that can be used to compare to the total returns of funds
whose portfolios are invested primarily in small capitalization common
stocks.

o MERRILL LYNCH 1-3 YEAR TREASURY INDEX is an unmanaged 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.

o MERRILL LYNCH CORPORATE A-RATED (1-3 YEAR) BOND INDEX is a universe of
corporate bonds and notes with maturities between 1-3 years and rated
A3 or higher.

o LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX is a
universe of government and corporate bonds rated BBB or higher with maturities
between 1-10 years.

Investors may also consult the fund evaluation consulting universes listed
below. Consulting universes may be composed of pension, profit sharing,
commingled, endowment/foundation, and mutual funds.

o SEI DATABASE for equity funds includes approximately 900 funds,
representing 361 money managers, divided into fund types based on investor
groups and asset mix. The funds are ranked every three, six, and
twelve months.

<PAGE>

ECONOMIC AND MARKET INFORMATION

FINANCIAL STATEMENTS

The financial statements for the fiscal year ended August 31, 1999, are
incorporated herein by reference from the Funds' Annual Report dated August 31,
1999 (File Nos. 33-48907 and 811-58433). A copy of the Annual Report for a Fund
may be obtained without charge by contacting Marshall Funds Investor Services at
the address located on the back cover of the SAI or by calling Marshall Funds
Investor Services at 1-414-287-8555 or 1-800-580-FUND (3863).

<PAGE>

APPENDIX

STANDARD AND POOR'S BOND RATINGS

<PAGE>

STANDARD AND POOR'S COMMERCIAL PAPER RATINGS

MOODY'S INVESTORS SERVICES, INC. COMMERCIAL PAPER RATINGS

MOODY'S INVESTORS SERVICE, INC. MUNICIPAL BOND RATINGS AAA -- Bonds which are
rated Aaa are judged to be of the best quality. They carry the smallest degree
of investment risk and are generally referred to as gilt edge. Interest payments
are protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues. AA -- Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long term risks appear somewhat larger
than in Aaa securities. A -- Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment some time in the future. BAA- Bonds which are rated Baa are
considered as medium-grade obligations (i.e., they are neither highly protected
nor poorly secured). Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and, in fact, have speculative
characteristics as well. NR -- Not rated by Moody's. Moody's applies numerical
modifiers, 1, 2 and 3 in the generic rating classification of Aa and A in its
corporate or municipal bond rating system. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks
in the lower end of its generic rating category.

STANDARD AND POOR'S MUNICIPAL NOTE RATINGS SP-1 -- Very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a plus (+) designation. SP-2
- -- Satisfactory capacity to pay principal and interest.

MOODY'S INVESTORS SERVICE, INC. SHORT-TERM DEBT RATINGS MIG1/VMIG1 -- This
designation denotes best quality. There is a present strong protection by
established cash flows, superior liquidity support or demonstrated broad based
access to the market for refinancing. MIG2/VMIG2 -- This designation denotes
high quality. Margins of protection are ample although not so large as in the
preceding group.

<PAGE>

ADDRESSES

<TABLE>
<CAPTION>
<S> <C>
P.O. Box 1348
Milwaukee, Wisconsin 53201-1348

Distributor

Federated Securities Corp. Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Adviser to all Funds

M&I Investment Management Corp. 1000 North Water Street
Milwaukee, Wisconsin 53202

Sub-Adviser to MARSHALL INTERNATIONAL STOCK FUND

BPI Global Asset Management LLP 1900 Summit Tower Boulevard
. Suite 450

Orlando, Florida 32810

Custodian

Marshall & Ilsley Trust Company 1000 North Water Street
Milwaukee, Wisconsin 53202

Transfer Agent, Dividend Disbursing Agent and
Portfolio Accounting Services

Federated Services Company Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Shareholder Servicing Agent Marshall Funds Investor Services, a division of P.O. Box 1348
Marshall & Ilsley Trust Company Milwaukee, Wisconsin 53201-1348

Legal Counsel Bell, Boyd & Lloyd
Three First National Plaza 70 West Madison Street, Suite 3300
Chicago, IL 60602-4207

Independent Auditors

Ernst & Young LLP 200 Clarendon Street
Boston, MA 02116-5072
</TABLE>

PART C. OTHER INFORMATION.

Item 23. EXHIBITS:

(a) (i) Conformed copy of Articles of Incorporation of the Registrant; (8)
(ii) Conformed copy of Amendment No. 1 to the Articles of Incorporation; (8)
(iii) Conformed copy of Amendment No. 2 to the Articles of Incorporation; (8)
(iv) Conformed copy of Amendment No. 3 to the Articles of Incorporation; (8)
(v) Conformed copy of Amendment No. 4 to the Articles of Incorporation; (6)
(vi) Conformed copy of Amendment No. 5 to the Articles of Incorporation; (8)
(vii) Conformed copy of Amendment No. 6 to the Articles of Incorporation; (12)
(viii) Conformed copy of Amendment No. 7 to the Articles of Incorporation; (14)
(ix) Conformed copy of Amendment No. 8 to the Articles of Incorporation; (18)
(x) Conformed copy of Amendment No. 9 to the Articles of Incorporation; (21)
(xi) Conformed copy of Amendment No. 10 to the Articles of Incorporation; +
(b) (i) Copy of By-Laws of the Registrant; (8)

(ii) Copy of Amendment No. 1 to the By-Laws of the Registrant; (19)
(iii) Copy of Amendment No. 2 to the By-Laws of the Registrant; (19)
(c) Copy of Specimen Certificates for Shares of Capital
Stock of the Marshall Mid-Cap Growth Fund, Marshall
Large-Cap Growth & Income Fund, Marshall Mid-Cap
Value Fund, and Marshall Small-Cap Growth Fund;
(16)

- ------------------------

6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 8 on Form N-1A filed December 28, 1993. (File Nos. 33-48907
and 811-7047).

8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 11 on Form N-1A filed October 21, 1994. (File Nos. 33-48907
and 811-7047).

12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 15 on Form N-1A filed June 17, 1996. (File Nos. 33-48907 and
811-7047).

14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 17 on Form N-1A filed August 30, 1996. (File Nos. 33-48907
and 811-7047).

16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 on Form N-1A filed August 26, 1997. (File Nos. 33-48907
and 811-7047).

18. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 22 on Form N-1A filed October 21, 1998. (File Nos. 33-48907
and 811-7047).

19. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 26 on Form N-1A filed August 19, 1999. (File Nos. 33-48907
and 811-7047).

21. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 27 on Form N-1A filed August 27, 1999. (File Nos. 33-48907
and 811-7047).

<PAGE>

(d) (i) Conformed copy of Investment Advisory Contract of the
Registrant; (4)

(ii) Conformed copy of Exhibit G of the Investment Advisory Contract
of the Registrant; (5)

(iii)Conformed copy of Exhibit H of the Investment Advisory Contract
of the Registrant; (5)

(iv) Conformed copy of Exhibit I of the Investment Advisory Contract
of the Registrant; (5)

(v) Conformed copy of Exhibit J of the Investment Advisory Contract
of the Registrant; (5)

(vi) Conformed copy of Exhibit K of the Investment Advisory Contract
of the Registrant; (7)

(vii)Conformed copy of Exhibit L of the Investment Advisory Contract
of the Registrant; (7)

(viii) Conformed copy of Exhibit M of the Investment Advisory Contract
of the Registrant; (12)

(ix) Conformed copy of Federated Management Sub-Advisory Agreement
with the Registrant; (7)

(x) Conformed copy of Templeton Investment Counsel, Inc.,
Sub-Advisory Agreement with the M & I Investment Management,
Inc.; (9)

(xi) Conformed copy of Exhibit N to the Investment Advisory Contract
of the Registrant; (14)

(xii)Conformed copy of Subadvisory Contract between M&I Investment
Management Corp. and BPI Global Asset Management LLP dated March
29, 1999 (20)

(e) (i) Conformed copy of Distributor's Contract of the Registrant,
including conformed copies of Exhibits A through J; (12)

(ii) Conformed copy of Exhibit K of the Distributor's Contract of the
Registrant; (15)

(iii)Conformed copy of Exhibit L of the Distributor's Contract of the
Registrant; (21)

- ------------------------

4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed April 23, 1993. (File Nos. 33-48907 and
811-7047).

5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 on Form N-1A filed October 29, 1993. (File Nos. 33-48907
and 811-7047).

7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed July 1, 1994. (File Nos. 33-48907 and
811-7047).

9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 on Form N-1A filed December 21, 1994. (File Nos. 33-48907
and 811-7047).

12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 15 on Form N-1A filed June 17, 1996. (File Nos. 33- 48907 and
811-7047).

14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 17 on Form N-1A filed August 30, 1996. (File Nos. 33-48907
and 811-7047).

15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed December 18, 1996. (File Nos. 33-48907
and 811-7047).

20. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 25 on Form N-1A filed July 23, 1999. (File Nos. 33-48907 and
811-7047).

21. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 27 on Form N-1A filed August 27, 1999. (File Nos. 33-48907
and 811-7047).

(iv) Conformed copy of Exhibit M of the Distributor's Contract of the
Registrant; (19)

(v) Conformed copy of Exhibit N to the Distributor's Contract; +

(f) Not applicable;

(g) (i) Conformed copy of Custodian Contract of the Registrant; (7)

(ii) Copy of Amendment No. 1 to Schedule A of the Sub-Custodian Agreement
of the Registrant; (16)

(iii)Copy of Amendment No. 2 to Schedule A of the Sub-Custodian Agreement
of the Registrant; (16)

(iv) Copy of Amendment No. 3 to Schedule A of the Sub-Custodian Agreement
of the Registrant; (17)

(v) Conformed copy of Sub-Transfer Agency and Services Agreement of the
Registrant; (10)

(h) (i) Conformed copy of Fund Accounting and Shareholder Recordkeeping
Agreement of the Registrant; (11)

(ii) Conformed copy of Amendment No. 1 to Schedule A of the Fund Accounting
and Shareholder Recordkeeping Agreement of the Registrant; (15)

(iii)Conformed copy of Amendment No. 2 to Schedule A of the Fund
Accounting and Shareholder Recordkeeping Agreement of the Registrant;
(16)

(iv) Conformed copy of Amendment No. 1 to Schedule C of the Fund Accounting
and Shareholder Recordkeeping Agreement of the Registrant; (15) (v)
Conformed copy of Annex 1 to Amendment No. 2 to Schedule C of the Fund
Accounting and Shareholder Recordkeeping Agreement of the Registrant;
(16)

(vi) Conformed copy of Administrative Services Agreement of the Registrant;
(7)

(vii)Conformed copy of Amendment No. 1 to the Administrative Services
Agreement of the Registrant; (15)

(viii) Conformed copy of Amendment No. 2 to the Administrative Services
Agreement of the Registrant; (16)

- ------------------------

7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed July 1, 1994. (File Nos. 33-48907 and
811-7047).

10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed April 3, 1995. (File Nos. 33-48907 and
811-7047).

11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed December 26, 1995. (File Nos. 33-48907
and 811-7047).

15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed December 18, 1996. (File Nos. 33-48907
and 811-7047).

16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 on Form N-1A filed August 26, 1997. (File Nos. 33-48907
and 811-7047).

17. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 21 on Form N-1A filed October 24, 1997. (File Nos. 33-48907
and 811-7047).

19. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 26 on Form N-1A filed August 19, 1999. (File Nos. 33-48907
and 811-7047).

(ix) Conformed copy of Shareholder Services Agreement of the Registrant on
behalf of Marshall Equity Income Fund, Marshall Government Income
Fund, Marshall Intermediate Bond Fund, Marshall Intermediate Tax-Free
Fund, Marshall International Stock Fund, Marshall Mid-Cap Stock Fund,
Marshall Money Market Fund, Marshall Short-Term Income Fund, Marshall
Short-Term Tax-Free Fund, Marshall Stock Fund, and Marshall Value
Equity Fund; (4)

(x) Conformed copy of Amendment No. 1 to Schedule A of the Shareholder
Services Agreement of the Registrant; (6)

(xi) Conformed copy of Amendment No. 2 to Schedule A of the Shareholder
Services Agreement of the Registrant; (7)

(xii)Conformed copy of Amendment No. 3 to Schedule A of the Shareholder
Services Agreement of the Registrant; (12) (xiii) Copy of Amendment
No. 1 to Schedule B of the Shareholder Services Agreement of the
Registrant; (11)

(xiv)Conformed copy of Marshall Funds, Inc. Multiple Class Plan (Marshall
Money Market Fund Class A Shares and Class B Shares); (11)
(xv)..Conformed copy of new Shareholder Services Agreement between the
Registrant and Marshall & Ilsley Trust Company on behalf of Marshall
Equity Income Fund, Marshall Government Income Fund, Marshall
Intermediate Bond Fund, Marshall Intermediate Tax-Free Fund, Marshall
International Stock Fund, Marshall Mid-Cap Stock Fund, Marshall
Short-Term Income Fund, Marshall Small-Cap Stock Fund, Marshall Stock
Fund, and Marshall Value Equity Fund; (15)

(xvi)Conformed copy of Amendment No.1 to Exhibit 1 of Shareholder Services
Agreement of the Registrant; (21)

- -------------------

4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed April 23, 1993. (File Nos. 33-48907 and
811-7047).

6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 8 on Form N-1A filed December 28, 1993. (File Nos.33-48907
and 811-7047).

7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed July 1, 1994. (File Nos. 33-48907 and
811-7047).

11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed December 26, 1995. (File Nos. 33-48907
and 811-7047).

12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 15 on Form N-1A filed June 17, 1996. (File Nos. 33-48907 and
811-7047).

15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed December 18, 1996. (File Nos. 33-48907
and 811-7047).

21. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 27 on Form N-1A filed August 27, 1999. (File Nos. 33-48907
and 811-7047).

<PAGE>

(xvii) Conformed copy of new Shareholder Services
Agreement between the Registrant and
Marshall & Ilsley Trust Company on behalf
of Marshall Short-Term Income Fund,
Marshall Government Income Fund, Marshall
Intermediate Bond Fund, Marshall
Intermediate Tax-Free Fund, Marshall Equity
Income Fund, Marshall Large-Cap Growth &
Income Fund, Marshall Mid-Cap Growth Fund,
Marshall Mid-Cap Value Fund, Marshall
International Stock Fund, Marshall
Small-Cap Growth Fund, and Marshall Money
Market Fund; +

(xviii)Conformed copy of Sub-Shareholder Services
Agreement of the Registrant; + (xix) Conformed copy
of Mutual Funds Service Agreement of the
Registrant; (19)

(i) Conformed copy of Opinion and Consent of Counsel
as to legality of shares being registered; (4)
(j) Conformed Copy of Consent of Independent
Auditors; +
(k) Not applicable;
(l) Conformed copy of Initial Capital
Understanding; (11)

(m) (i) Conformed copy of Distribution Plan of the
Registrant; (4) (ii) Conformed copy of Exhibit A
of the Distribution Plan of the Registrant; (11)

(iii) Conformed copy of Exhibit B of the
Distribution Plan of the Registrant; (9) (iv)
Conformed copy of Exhibit C to the Distribution
Plan of the Registrant; (15)

(v) Conformed copy of Exhibit D of the
Distribution Plan of the Registrant; (21) (vi)
Form of 12b-1 Agreement of the Registrant; +

(vii) Copy of Exhibit A to the 12b-1 Agreement of
the Registrant; (19) (viii) Copy of Exhibit B to
the 12b-1 Agreement of the Registrant; (11)

(ix) Copy of Exhibit C to the Rule 12b-1
Agreement of the Registrant; (13) (x) Copy of
Exhibit D to the 12b-1 Agreement of the
Registrant; (21)

- -------------------
+ All exhibits filed electronically.

4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed April 23, 1993. (File Nos. 33-48907 and
811-7047).

9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 on Form N-1A filed December 21, 1994. (File Nos. 33-48907
and 811-7047).

11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed December 26, 1995. (File Nos. 33-48907
and 811-7047).

13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 on Form N-1A filed July 9, 1996. (File Nos. 33-48907 and
811-7047).

15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed December 18, 1996. (File Nos. 33-48907
and 811-7047).

19. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 26 on Form N-1A filed August 19, 1999. (File Nos. 33-48907
and 811-7047).

21. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 27 on Form N-1A filed August 27, 1999. (File Nos. 33-48907
and 811-7047).

<PAGE>

(n) Conformed copy of Multiple Class Plan of the
Registrant including Exhibits A through D; (19) (o) (i)
Conformed copy of Power of Attorney; (11)

(ii) Conformed copy of Power of Attorney dated
December 27, 1993 with respect to James F. Duca, II,
President of the Corporation; (6) (iii) Conformed copy of
Power of Attorney; (22)

Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND:

None

Item 25. INDEMNIFICATION: (5)

Item 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER:

M&I INVESTMENT MANAGEMENT CORP.

(a) M&I Investment Management Corp. is a registered investment
adviser and wholly-owned subsidiary of Marshall & Ilsley
Corporation, a registered bank holding company headquartered
in Milwaukee, Wisconsin. As of August 31, 1999, M&I
Investment Management Corp. had approximately $10.3 billion
in assets under management, of which $4.7 billion is in
Marshall Funds assets, and has managed investments for
individuals and institutions since its inception in 1973.
M&I Investment Management Corp. served as investment adviser
to Newton Money Fund, Newton Income Fund and Newton Growth
Fund.

For further information about M & I Investment Mangagement
Corp., its officers and directors, response is incorporated
by reference to M & I Investment Management Corp.'s Form
ADV, File No. 801-9118, dated March 4, 1996 as amended.

BPI Global Asset Management, LLP

(b) BPI Global Asset Management, LLP ("BPI") is a registered
investment adviser and provides management services for
investment companies, corporations, trusts, estates, pension
and profit sharing plans, individuals and other institutions
located in both Canada and the United States. As of August
31, 1999, BPI had approximately $2.3 billion of total assets
under management. BPI's address is Tower Place at the
Summit, 1900 Summit Tower Boulevard, Suite 450, Orlando,
Florida 32810.

- -------------------
+ All Exhibits filed electronically.

5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 on Form N-1A filed October 29, 1993. (File Nos. 33-48907
and 811-7047).

6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 8 on Form N-1A filed December 28, 1993. (File Nos.33-48907
and 811-7047).

11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed December 26, 1995. (File Nos. 33-48907
and 811-7047).

19. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 26 on Form N-1A filed August 19, 1999. (File Nos. 33-48907
and 811-7047).

22. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 28 on Form N-1A filed September 2, 1999. (File Nos. 33-48907
and 811-7047).

<PAGE>

For a list of the officers and directors of BPI and for
further information about BPI, any other business, vocation
or employment of a substantial nature in which a director or
officer of BPI is, or at any time in the past two fiscal
years has been, engaged for his or her own account or in the
capacity of director, officer, employee, partner or trustee,
response is incorporated by reference to BPI's Form ADV,
File No. 801-53972, dated ___________________.

Item 27. PRINCIPAL UNDERWRITERS:

(a)....Federated Securities Corp. the Distributor for shares of the Registrant,
acts as principal underwriter for the following open-end investment
companies, including the Registrant:

Cash Trust Series II; Cash Trust Series, Inc.; CCB Funds; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Core
Trust; Federated Equity Funds; Federated Equity Income Fund, Inc.; Federated
Fund for U.S. Government Securities, Inc.; Federated GNMA Trust; Federated
Government Income Securities, Inc.; Federated Government Trust; Federated High
Income Bond Fund, Inc.; Federated High Yield Trust; Federated Income Securities
Trust; Federated Income Trust; Federated Index Trust; Federated Institutional
Trust; Federated Insurance Series; Federated Municipal Opportunities Fund, Inc.;
Federated Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated
Short-Term Municipal Trust; Federated Stock and Bond Fund, Inc.; Federated Stock
Trust; Federated Tax-Free Trust; Federated Total Return Series, Inc.; Federated
U.S. Government Bond Fund; Federated U.S. Government Securities Fund: 1-3 Years;
Federated U.S. Government Securities Fund: 2-5 Years; Federated U.S. Government
Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; Fixed Income
Securities, Inc.; ; Hibernia Funds; Independence One Mutual Funds; Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds, Inc.;
Managed Series Trust; Marshall Funds, Inc.; Money Market Management, Inc.; Money
Market Obligations Trust; Money Market Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; Regions Funds; RIGGS Funds;
SouthTrust Funds; Tax-Free Instruments Trust; The Planters Funds; The Wachovia
Funds; The Wachovia Municipal Funds; Vision Group of Funds, Inc.; World
Investment Series, Inc.; Blanchard Funds; Blanchard Precious Metals Fund, Inc.;
DG Investor Series; High Yield Cash Trust; Investment Series Trust; Star Funds;
Targeted Duration Trust; The Virtus Funds; Trust for Financial Institutions;

Federated Securities Corp. also acts as principal underwriter for the
following closed-end investment company: Liberty Term Trust, Inc.- 1999.

(b)

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
<S> <C> <C>
Richard B. Fisher Chairman, Chief Executive --
Federated Investors Tower Officer, Chief Operating
1001 Liberty Avenue Officer
Pittsburgh, PA 15222-3779 Federated Securities Corp.

Arthur L. Cherry Director, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

John B. Fisher President-Institutional Sales --
Federated Investors Tower and Director,
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas R. Donahue Director, Assistant Secretary --
Federated Investors Tower and Treasurer,
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779

James F. Getz President-Broker/Dealer and --
Federated Investors Tower Director,
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779

David M. Taylor Executive Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Ronald M. Petnuch Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Matthew W. Brown Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark Carroll Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Steven R. Cohen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert J. Deuberry Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark A. Gessner Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

G. Tad Gullickson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Dayna C. Haferkamp Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Christopher A. Layton Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael H. Liss Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Amy Michalisyn Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Larry Sebbens Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward J. Segura Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert W. Bauman Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John T. Glickson Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Timothy S. Johnson Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Dennis McAuley Assistant Treasurer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
</TABLE>

Item 28. LOCATION OF ACCOUNTS AND RECORDS:

MARSHALL FUNDS, INC................. 770 North Water Street
--------------------
Milwaukee, Wisconsin 53202
(Notices should be sent to
the Agent for Service at the
address above)

1000 North Water Street
Milwaukee, WI 53202

FEDERATED SHAREHOLDER SERVICES Federated Investors Tower

COMPANY 1001 Liberty Avenue
("Transfer Agent, Dividend Pittsburgh, PA 15222-3779
Disbursing Agent, and Portfolio

Accounting Services")

FEDERATED ADMINISTRATIVE SERVICES Federated Investors Tower

("Administrator") 1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

M & I INVESTMENT MANAGEMENT CORP. 1000 North Water Street
("Adviser") Milwaukee, WI 53202

MARSHALL & ILSLEY TRUST COMPANY 1000 North Water Street
("Custodian") Milwaukee, WI 53202

BPI GLOBAL ASSET MANAGEMENT, LLP 1900 Summit Tower Blvd.
("Sub-Adviser") Suite 450

Orlando, Florida 32810

Item 29. MANAGEMENT SERVICES: Not applicable.

Item 30. UNDERTAKINGS:

Registrant hereby undertakes to comply with the provisions of Section 16(c)
of the 1940 Act with respect to the removal of Trustees and the calling of
special shareholders meetings by shareholders.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, MARSHALL FUNDS, INC. certifies
that it meets all of the requirements for effectiveness of this Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Amendment to its Registration Statement to be signed on
its behalf by the undersigned, thereto duly authorized, in the City of
Pittsburgh and Commonwealth of Pennsylvania, on the 29th day of October, 1999.

MARSHALL FUNDS, INC.

BY: /s/ Brooke J. Billick
Secretary
Attorney in Fact for John M. Blaser
October 29, 1999

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:

NAME TITLE DATE

By: /s/ Brooke J. Billick
Brooke J. Billick Attorney In Fact October 29, 1999
SECRETARY For the Persons
Listed Below

NAME TITLE

John M. Blaser* President and Director

Ann K. Peirick* Treasurer (Principal
Financial and
Accounting Officer)

John DeVincentis* Director

Duane E. Dingmann* Director

James Mitchell* Director

Barbara J. Pope* Director

David W. Schulz* Director

* By Power of Attorney

Exhibit (a)(xi) under Form N-1A
Exhibit 3(a) under Item 601/Reg. S-K

MARSHALL FUNDS, INC.

Amendment No. 10
to

ARTICLES OF INCORPORATION
Dated July 30, 1992

THESE Articles of Incorporation are amended as follows:

Delete Section (a) of Article IV and substitute in its place the
following:

" (a) The Corporation is authorized to issue an indefinite number of shares
of common stock, par value $.0001 per share. Subject to the following paragraph,
the
authorized shares are classified as follows:

Authorized Number of

CLASS SERIES SHARES
----- ------ ------
Marshall Equity Income Fund Series A Indefinite
Marshall Equity Income Fund Series Y Indefinite
Marshall Government Income Fund Series A Indefinite
Marshall Government Income Fund Series Y Indefinite
Marshall Intermediate Bond Fund Series A Indefinite
Marshall Intermediate Bond Fund Series Y Indefinite
Marshall Mid-Cap Growth Fund Series A Indefinite
Marshall Mid-Cap Growth Fund Series Y Indefinite
Marshall Money Market Fund Series A Indefinite
Marshall Money Market Fund Series B Indefinite
Marshall Short-Term Income Fund Series Y Indefinite
Marshall Large-Cap Growth & Income Fund Series A Indefinite
Marshall Large-Cap Growth & Income Fund Series Y Indefinite
Marshall Mid-Cap Value Fund Series A Indefinite
Marshall Mid-Cap Value Fund Series Y Indefinite
Marshall Short-Term Tax-Free Fund Series Y Indefinite
Marshall Intermediate Tax-Free Fund Series Y Indefinite
Marshall International Stock Fund Series A Indefinite
Marshall International Stock Fund Series Y Indefinite
Marshall International Stock Fund Series I Indefinite
Marshall Small-Cap Growth Fund Series A Indefinite
Marshall Small-Cap Growth Fund Series Y Indefinite

The undersigned Secretary of Marshall Funds, Inc. certifies that the
above stated amendment is a true and correct Amendment to the Articles of
Incorporation, as adopted by the Directors of the Corporation as of the 24th day
of May, 1999, and that shareholder action is not required, all in accordance
with Section 180.1002 of the Wisconsin Business Corporation Law.

WITNESS the due execution hereof this 7th day of June, 1999.

/S/ BROOKE J. BILLICK

Brooke J. Billick
Secretary

Prepared by: C. Todd Gibson
Federated Administrative Services
Federated Investors Tower
Pittsburgh, PA 15222-3779

Exhibit (e)(v) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K

Exhibit N
to the

Distributor's Contract

MARSHALL FUNDS, INC.

MARSHALL INTERNATIONAL STOCK FUND

CLASS I SHARES

In consideration of the mutual covenants set forth in the Distributor's
Contract dated October 1, 1992 between Marshall Funds, Inc. and Federated
Securities Corp., Marshall Funds, Inc. executes and delivers this Exhibit on
behalf of the Portfolios, and with respect to the separate Classes of Shares
thereof, first set forth in this Exhibit.

Witness the due execution hereof this 20th day of August, 1999.

MARSHALL FUNDS, INC.

By: /S/ BROOKE J. BILLICK

Name: Brooke J. Billick
Title: Secretary

FEDERATED SECURITIES CORP.

By:/S/ DAVID M. TAYLOR

Name: David M. Taylor
Title: Executive Vice President

Exhibit (h)(xvii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K

SHAREHOLDER SERVICES AGREEMENT

AGREEMENT made as of the 1st day of September, 1999, by and between the
MARSHALL FUNDS, INC., and those portfolios of the Fund (collectively the
"Funds") listed on Exhibit 1, as may be amended from time to time, having their
principal office and place of business at 1000 North Water Street, Milwaukee,
Wisconsin 53202 and who have approved this form of Agreement (individually
referred to herein as a "Fund" and collectively as "Funds") and MARSHALL &
ILSLEY TRUST COMPANY (including its division Marshall Funds Investor Services),
a Wisconsin trust company bank, having its principal office and place of
business at 1000 North Water Street, Milwaukee, Wisconsin 53202 ("MFIS").

1. The Funds hereby appoint MFIS to render or cause to be rendered personal
services to shareholders of the Funds and/or the maintenance of accounts of
shareholders of the Funds ("Services"). In addition to providing Services
directly to shareholders of the Funds, MFIS is hereby appointed the Funds' agent
to select, negotiate and subcontract for the performance of Services. MFIS
hereby accepts such appointments. MFIS agrees to provide or cause to be provided
Services that, in its best judgment (subject to supervision and control of the
Funds' Board of Trustees or Directors, as applicable), are necessary or
desirable for shareholders of the Funds. Such Services shall include, but not be
limited to the following: establishing new accounts; processing transactions
including purchases, redemptions, and exchanges; maintaining files, i.e.,
processing change of addresses, adding/changing wiring instructions or
systematic investment/withdrawal plans; reviewing the activity in applicable
accounts; providing training and supervision of its personnel; maintaining and
distributing current copies of prospectuses and shareholder reports to current
shareholders; serving as liaison between MFIS and its affiliates, Transfer Agent
(or Sub-Transfer Agent), Portfolio Recordkeepers and Legal Counsel in connection
with shareholder matters; responding to customers' questions about the Funds and
Classes; maintaining files of shareholder inquiries and correspondence;
verifying shareholder signatures in conjunction with redemptions or changes in
account classifications; and surveying shareholders for information concerning
satisfaction with mutual fund products and services.

Nothing contained herein shall be construed to authorize MFIS to act as
Transfer Agent of the Funds and/or Classes (it being understood that Federated
Services Company or its designee provides such services) or to perform any
services hereunder primarily intended to result in the sale of shares of the
Corporation, the Funds or the Classes. MFIS further agrees to provide the Funds,
upon request, a written description of any other shareholder services that MFIS
is providing hereunder.

2. During the term of this Agreement, each Fund will pay MFIS and MFIS agrees to
accept as full compensation for its services rendered hereunder a fee as set
forth in Exhibit 1 hereto.

For the payment period in which this Agreement becomes effective or
terminates with respect to any Fund, there shall be an appropriate proration of
the monthly fee on the basis of the number of days that this Agreement is in
effect with respect to such Fund during the month.

3. This Agreement may be terminated as follows:

(a) at any time, without the payment of any penalty, by the vote of a
majority of the Independent Board Members of any Fund or by a vote of a majority
of the outstanding voting securities of any Fund as defined in the Investment
Company Act of 1940 on sixty (60) days' written notice to the parties to this
Agreement.

(b) automatically in the event of the Agreement's assignment as defined in
the Investment Company Act of 1940; and

(c) by any party to the Agreement without cause by giving the other party
at least sixty (60) days' written notice of its intent to terminate.

4. MFIS agrees to obtain a taxpayer identification number certification from
each shareholder of the Funds to which it provides Services that it is required
under Section 3406 of the Internal Revenue Code, and any applicable Treasury
regulations, and to provide each Fund or its designee with timely written notice
of any failure to obtain such taxpayer identification number certification to
enable the implementation of any required backup withholding.

5. MFIS shall not be liable for any error of judgment or mistake of law or for
any loss suffered by any Fund in connection with the matters to which this
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement.
MFIS shall be entitled to rely on and may act upon advice of counsel (who may be
counsel for such Fund) on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice. Any person, even
though also an officer, trustee, partner, employee or agent of MFIS, who may be
or become a member of such Fund's Board, officer, employee or agent of any Fund,
shall be deemed, when rendering serfices to such Fund or acting on any business
of such Fund (other than services or business in connection with the duties of
MFIS hereunder) to be rendering such services to or acting solely for such Fund
and not as an officer, trustee, partner, employee or agent or one under the
control or direction of MFIS even though paid by MFIS. This Section 6 shall
survive termination of this Agreement.

6. No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which an enforcement of the change, waiver, discharge or termination is
sought.

7. MFIS acknowledges and agrees that: (1) The Marshall Funds, Inc. is a "series
company" as defined in Rule 18f-2(a) under the Investment Company Act of 1940,
as amended, and each Fund is a portfolio of assets specifically allocated to a
series of shares of the Marshall Funds as contemplated by such rule; (2) all
persons extending credit to, contracting with or having any claim against any
Fund (including any claims arising hereunder) shall look only to the assets
specifically allocated to such Fund for payment under such credit, contract or
claim and not to any assets specifically allocated to another series of shares
of the Funds or to any other assets of the Funds; and (3) neither the
shareholders nor the Board of Directors of the Funds, nor any of the Funds'
officers, employees or agents, whether past, present or future, shall be liable
for such credit, contract or claim.

8. Notices of any kind to be given hereunder shall be in writing (including a
facsimile communication) and shall be duly given if delivered to any Fund and to
such Fund at the following address: Marshall Funds, Inc., 1000 North Water
Street, Milwaukee, Wisconsin, 53202, Attention: President, and if delivered to
MFIS at 1000 North Water Street, Milwaukee, Wisconsin 53202, Attention:
President.

9. This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof whether
oral or written. If any provision of this Agreement shall be held or made
invalid by a court or regulatory agency decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby. Subject to the
provisions of Sections 3, hereof, this Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
shall be governed by Wisconsin law; provided, however, that nothing herein shall
be construed in a manner inconsistent with the Investment Company Act of 1940 or
any rule or regulation promulgated by the Securities and Exchange Commission
thereunder.

10. This Agreement may be executed by different parties on separate
counterparts, each of which, when so executed and delivered, shall be an
original, and all such counterparts shall together constitute one and the same
instrument.

11. This Agreement shall not be assigned by any party without the prior written
consent of MFIS in the case of assignment by any Fund, or of the Funds in the
case of assignment by MFIS, except that any party may assign to a successor all
or a substantial portion of its business to a party controlling, controlled by,
or under common control with such party. Nothing in this Section 11 shall
prevent MFIS from delegating its responsibilities to another entity to the
extent provided herein.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designed below as of the day and year first above
written.

MARSHALL FUNDS, INC., on behalf of
its portfolios as listed on
Exhibit 1 hereto

By: /S/ JOHN M. BLASER

John M. Blaser
Title: President

MARSHALL & ILSLEY TRUST COMPANY, on
behalf of its division, Marshall
Funds Investor Services

By: /S/ BROOKE J. BILLICK

Title: Vice President

<PAGE>

EXHIBIT 1

SHAREHOLDER SERVICES AGREEMENT

Pursuant to Section 2 of this Agreement, MFIS agrees to accept as full
compensation for its services rendered hereunder a fee at an annual rate,
calculated daily and payable monthly, equal to an amount up to the percentage of
average net assets of each Fund, as set forth below:
<TABLE>
<CAPTION>

Fund/Class Shareholder Services Effective Date
<S> <C> <C>
Marshall Short-Term Income Fund - Class A Shares 0.25% September 1, 1999
Marshall Short-Term Income Fund - Class Y Shares 0.25% September 1, 1999
Marshall Government Income Fund - Class A Shares 0.25% September 1, 1999
Marshall Government Income Fund - Class Y Shares 0.25% September 1, 1999
Marshall Intermediate Bond Fund - Class A Shares 0.25% September 1, 1999
Marshall Intermediate Bond Fund - Class Y Shares 0.25% September 1, 1999
Marshall Intermediate Tax-Free Fund - Class A Shares 0.25% September 1, 1999
Marshall Intermediate Tax-Free Fund - Class Y Shares 0.25% September 1, 1999
Marshall Equity Income Fund - Class A Shares 0.25% September 1, 1999
Marshall Equity Income Fund - Class Y Shares 0.25% September 1, 1999
Marshall Large Cap Growth & Income Fund - Class A Shares 0.25%September 1, 1999
Marshall Large Cap Growth & Income Fund - Class Y Shares 0.25%September 1, 1999
Marshall Mid-Cap Growth Fund - Class A Shares 0.25% September 1, 1999
Marshall Mid-Cap Growth Fund - Class Y Shares 0.25% September 1, 1999
Marshall Mid-Cap Value Fund - Class A Shares 0.25% September 1, 1999
Marshall Mid-Cap Value Fund - Class Y Shares 0.25% September 1, 1999
Marshall International Stock Fund - Class A Shares 0.25% September 1, 1999
Marshall International Stock Fund - Class Y Shares 0.25% September 1, 1999
Marshall Small-Cap Growth Fund - Class A Shares 0.25% September 1, 1999
Marshall Small-Cap Growth Fund - Class Y Shares 0.25% September 1, 1999
Marshall Money Market Fund - Class A Shares 0.02% September 1, 1999
Marshall Money Market Fund - Class Y Shares 0.02% September 1, 1999
</TABLE>

Exhibit (h)(xviii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K

SUB-SHAREHOLDER SERVICES AGREEMENT

AGREEMENT made as of the 1st day of September, 1999, by and between
Marshall & Ilsley Trust Company, a Wisconsin trust company bank, having its
principal office and place of business at 1000 North Water Street, Milwaukee,
Wisconsin, 53202, through its division Marshall Funds Investor Services
("MFIS"), and Federated Shareholder Services Company, a Delaware business trust,
having its principal office and place of business at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779 ("FSS").

WHEREAS, MFIS has entered into a Shareholder Services Agreement ("SSA")
dated September 1, 1999 with the Marshall Funds, Inc., a Wisconsin corporation
and registered, open-end investment company (the "Corporation");

WHEREAS, pursuant to the SSA, MFIS provides certain shareholder services
to shareholders of the series portfolios of the Corporation (each portfolio
referred to herein collectively as the "Funds" and individually as a "Fund");

WHEREAS, as the shareholder servicing agent prior to September 1, 1999,
FSS entered into agreement with third parties to provide shareholder services,
including agreements to provide such services through mutual fund "supermarkets"
and "no transaction fee" programs (collectively, "Third Party Agents"); and

WHEREAS, MFIS desires that FSS continue to administer and support such
arrangements with Third Party Agents.

NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereto agree as follows:

1. MFIS hereby appoint FSS to render or cause to be rendered personal services
to shareholders of the Funds and/or the maintenance of accounts of shareholders
of the Funds by administering and supporting arrangements with Third Party
Agents ("Services") in existence on the date hereof. Such Services shall include
coordinating payments to such Third Party Agents. FSS will also provide support
and assistance to MFIS in the selection, negotiation and administration for the
performance of Services with Third Party Agents designated by MFIS. FSS's
obligation to perform Services shall exist only as long as both the SSA, and the
Sub-Administration Agreement between Federated Services Company and Marshall &
Ilsley Trust Company ("Sub-Administration Agreement") is in effect. Upon
discontinuation or termination of this Agreement, the SSA, and/or the Sub-
Administration Agreement, the parties agree that FSS will terminate all existing
agreements between FSS and Third Party Agents.

2. During the term of this Agreement, MFIS will pay FSS and FSS agrees to accept
as full compensation for the Services rendered hereunder a fee, payable monthly,
in an amount equal to the total amounts due to Third Party Agents. Such
obligation to make payment shall be unconditional and in no way shall be
effected even if the amounts due to such Third Party Agents exceeds the
shareholder services fees available to MFIS under the SSA with the Funds.

<PAGE>

This Agreement shall continue in effect for one year from the date of
its execution. Thereafter, this Agreement shall be automatically renewed each
year for an additional term of one year, unless notice of termination has been
delivered by either party to the other no less than sixty (60) days before the
beginning of any such additional term.

4. Notwithstanding paragraph 3, this Agreement may be terminated as follows:

(a) at any time, without the payment of any penalty, by the vote of a
majority of the Independent Board Members of any Fund or by a
vote of a majority of the outstanding voting securities of any
Fund as defined in the Investment Company Act of 1940 on sixty
(60) days' written notice to the parties to this Agreement;

(b) automatically in the event of the Agreement's assignment as defined in
the Investment Company Act of 1940; and

(c) by any party to the Agreement without cause by giving the other party
at least sixty (60) days' written notice of its intention to terminate.

5. FSS shall not be liable for any error of judgment or mistake of law or for
any loss suffered by any Fund in connection with the matters to which this
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement. FSS
shall be entitled to rely on and may act upon advice of counsel (who may be
counsel for such Fund) on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice. Any person, even
though also an officer, trustee, partner, employee or agent of FSS, who may be
or become a member of such Fund's Board, officer, employee or agent of any Fund,
shall be deemed, when rendering services to such Fund or acting on any business
of such Fund (other than services or business in connection with the duties of
FSS hereunder) to be rendering such services to or acting solely for such Fund
and not as an officer, trustee, partner, employee or agent or one under the
control or direction of FSS even though paid by FSS. This Section 5 shall
survive termination of this Agreement.

7. The execution and delivery of this Agreement have been authorized by the
Trustees of FSS and signed by an authorized officer of FSS, acting as such, and
neither such authorization by such Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, and the obligations of this
Agreement are not binding upon any of the Trustees or shareholders of FSS, but
bond only the trust property of FSS as provided in the Declaration of Trust of
FSS.

8. Notices of any kind to be given hereunder shall be in writing (including
facsimile communication) and shall be duly given if delivered to any Fund and to
such Fund at the following address: Marshall & Ilsley Trust Company, 1000 North
Water Street, Milwaukee, Wisconsin 53202, Attn.: John M. Blaser and if delivered
to FSS at Federated Investors Tower, Pittsburgh, PA 15222- 3779, Attention:
President.

9. This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof whether or
oral or written. If any provision of this Agreement shall be held or made
invalid by a court or regulatory agency decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby. Subject to the
provisions of Sections 3 and 4, hereof, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto, that nothing herein shall be
construed in a manner inconsistent with the Investment Company Act of 1940 or
any rule or regulation promulgated by the Securities and Exchange Commission
thereunder.

11. This Agreement shall not be assigned by any party without the prior written
consent of FSS in the case of assignment by any Fund or MFIS, or of the Funds or
MFIS in the case of assignment by FSS, except that any party may assign to a
successor all or of a substantial portion of its business to a party
controlling, controlled by, or under common control with such party. Nothing in
this Section 11 shall prevent FSS from delegating its responsibilities to
another entity to the extent provided herein.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.

MARSHALL & ILSLEY TRUST COMPANY

By: /S/ BROOKE J. BILLICK

Title: Vice President

FEDERATED SHAREHOLDER SERVICES COMPANY

By: /S/ THOMAS P. SHOLES

Title: Vice President

Exhibit (j) under Form N-1A
Exhibit 23 under Item 601/Reg. S-K

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the references to our firm under the captions "Financial
Highlights" in the Class A and the Class Y Shares Prospectuses, "Independent
Auditors" in the Class A and the Class Y Shares Statements of Additional
Information, and to the use of our report dated October 15, 1999, in
Post-Effective Amendment Number 29 to the Registration Statement (Form N-1A No.
33-48907) of the Marshall Funds, Inc. dated October 31, 1999.

By: ERNST & YOUNG LLP

Ernst & Young LLP
Boston, Massachusetts
October 27, 1999

Exhibit (m)(vi) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K

RULE 12B-1 AGREEMENT

This Agreement is made between the Institution executing this Agreement
("Administrator") and Federated Securities Corp. ("FSC") for the mutual funds
(referred to individually as the "Fund" and collectively as the "Funds") for
which FSC serves as Distributor of shares of beneficial interest or capital
stock ("Shares") and which have adopted a Rule 12b-1 Plan ("Plan") and approved
this form of agreement pursuant to Rule 12b-1 under the Investment Company Act
of 1940. In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:

1. FSC hereby appoints Administrator to render or cause to be rendered
sales and/or administrative support services to the Funds and their
shareholders.

2. The services to be provided under Paragraph 1 may include, but are not
limited to, the following:

(a) communicating account openings through computer terminals located
on the Administrator's premises ("computer terminals"), through a
toll-free telephone number or otherwise;

(b) communicating account closings via the computer terminals, through
a toll-free telephone number or otherwise;

(d) entering redemption transactions through the computer terminals,
through a toll-free telephone number or otherwise;

(e) electronically transferring and receiving funds for Fund Share
purchases and redemptions, and confirming and reconciling all such transactions;

(f) reviewing the activity in Fund accounts;

(g) providing training and supervision of its personnel;

(h) maintaining and distributing current copies of prospectuses and
shareholder reports;

(i) advertising the availability of its services and products;

(j) providing assistance and review in designing materials to send to
customers and potential customers and developing methods of making
such materials accessible to customers and potential customers; and

(k) responding to customers' and potential customers' questions about
the Funds.

The services listed above are illustrative. The Administrator is not
required to perform each service and may at any time perform either more or
fewer services than described above.

3. During the term of this Agreement, FSC will pay the Administrator fees
for each Fund as set forth in a written schedule delivered to the Administrator
pursuant to this Agreement. FSC's fee schedule for Administrator may be changed
by FSC sending a new fee schedule to Administrator pursuant to Paragraph 12 of
this Agreement. For the payment period in which this Agreement becomes effective
or terminates, there shall be an appropriate proration of the fee on the basis
of the number of days that the Rule 12b-1 Agreement is in effect during the
quarter.

4. The Administrator will not perform or provide any duties which would
cause it to be a fiduciary under Section 4975 of the Internal Revenue Code, as
amended. For purposes of that Section, the Administrator understands that any
person who exercises any discretionary authority or discretionary control with
respect to any individual retirement account or its assets, or who renders
investment advice for a fee, or has any authority or responsibility to do so, or
has any discretionary authority or discretionary responsibility in the
administration of such an account, is a fiduciary.

5. The Administrator understands that the Department of Labor views ERISA
as prohibiting fiduciaries of discretionary ERISA assets from receiving
administrative service fees or other compensation from funds in which the
fiduciary's discretionary ERISA assets are invested. To date, the Department of
Labor has not issued any exemptive order or advisory opinion that would exempt
fiduciaries from this interpretation. Without specific authorization from the
Department of Labor, fiduciaries should carefully avoid investing discretionary
assets in any fund pursuant to an arrangement where the fiduciary is to be
compensated by the fund for such investment. Receipt of such compensation could
violate ERISA provisions against fiduciary self-dealing and conflict of interest
and could subject the fiduciary to substantial penalties.

6. The Administrator agrees not to solicit or cause to be solicited
directly, or indirectly at any time in the future, any proxies from the
shareholders of any or all of the Funds in opposition to proxies solicited by
management of the Fund or Funds, unless a court of competent jurisdiction shall
have determined that the conduct of a majority of the Board of Directors of the
Fund or Funds constitutes willful misfeasance, bad faith, gross negligence or
reckless disregard of their duties. This paragraph 6 will survive the term of
this Agreement.

7. With respect to each Fund, this Agreement shall continue in effect for
one year from the date of its execution, and thereafter for successive periods
of one year if the form of this Agreement is approved at least annually by the
Directors of the Fund, including a majority of the members of the Board of
Directors of the Fund who are not interested persons of the Fund and have no
direct or indirect financial interest in the operation of the Fund's Plan or in
any related documents to the Plan ("Disinterested Directors ") cast in person at
a meeting called for that purpose.

8. Notwithstanding paragraph 7, this Agreement may be terminated as
follows:

(a) at any time, without the payment of any penalty, by the vote of a
majority of the Disinterested Directors of the Fund or by a vote of a
majority of the outstanding voting securities of the Fund as defined
in the Investment Company Act of 1940 on not more than sixty (60)
days' written notice to the parties to this Agreement;

(b) automatically in the event of the Agreement's assignment as defined
in the Investment Company Act of 1940 or upon the termination of the
"Administrative Support and Distributor's Contract" or "Distributor's
Contract" between the Fund and FSC; and

(c) by either party to the Agreement without cause by giving the other
party at least sixty (60) days' written notice of its intention to terminate.

9. The termination of this Agreement with respect to any one Fund will not
cause the Agreement's termination with respect to any other Fund.

10. The Administrator agrees to obtain any taxpayer identification number
certification from its customers required under Section 3406 of the Internal
Revenue Code, and any applicable Treasury regulations, and to provide FSC or its
designee with timely written notice of any failure to obtain such taxpayer
identification number certification in order to enable the implementation of any
required backup withholding.

11. This Agreement supersedes any prior service agreements between the
parties for the Funds.

12. This Agreement may be amended by FSC from time to time by the following
procedure. FSC will mail a copy of the amendment to the Administrator's address,
as shown below. If the Administrator does not object to the amendment within
thirty (30) days after its receipt, the amendment will become part of the
Agreement. The Administrator's objection must be in writing and be received by
FSC within such thirty days.

13. This Agreement shall be construed in accordance with the Laws of the
Commonwealth of Pennsylvania.

----------------------------------
[ADMINISTRATOR]

---------------------------------
Address

---------------------------------
City State Zip Code

Dated:_______________________ By:______________________________
Authorized Signature

----------------------------------
Title

----------------------------------
Print Name of Authorized Signature

FEDERATED SECURITIES CORP.

Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

By:_________________________________
Richard B. Fisher, President

<PAGE>

MARSHALL FUNDS, INC.

EXHIBIT A to 12b-1 Agreement with
Federated Securities Corp. ("FSC")

PORTFOLIOS

FSC will pay Administrator fees for the following portfolios (the
"Funds") effective as of the dates set forth below:

NAME DATE

MARSHALL MONEY MARKET FUND OCTOBER 1, 1992
INVESTMENT SHARES

ADMINISTRATIVE FEES

1. During the term of this Agreement, FSC will pay Administrator a
quarterly fee in respect of each Fund. This fee will be computed at the annual
rate of .30% of the average net asset value of Shares held during the quarter in
accounts for which the Administrator provides services under this Agreement, so
long as the average net asset value of Shares in each Fund during the quarter
equals or exceeds such minimum amount as FSC shall from time to time determine
and communicate in writing to the Administrator.

2. For the quarterly period in which the Agreement becomes effective or
terminates, there shall be an appropriate proration of any fee payable on the
basis of the number of days that the Agreement is in effect during the quarter.

<PAGE>

MARSHALL FUNDS, INC.

EXHIBIT B to 12b-1 Agreement with
Federated Securities Corp. ("FSC")

PORTFOLIOS

FSC will pay Administrator fees for the following portfolio (the "Fund")
effective as of the dates set forth below:

NAME DATE

MARSHALL INTERNATIONAL STOCK FUND AUGUST 1, 1994

ADMINISTRATIVE FEES

1. During the term of this Agreement, FSC will pay Administrator a
quarterly fee in respect of the Fund. This fee will be computed at the annual
rate of .25% of the average net asset value of Shares held during the quarter in
accounts for which the Administrator provides services under this Agreement, so
long as the average net asset value of Shares in the Fund during the quarter
equals or exceeds such minimum amount as FSC shall from time to time determine
and communicate in writing to the Administrator.

<PAGE>

MARSHALL FUNDS, INC.

EXHIBIT A to 12b-1 Agreement with
Federated Securities Corp. ("FSC")

PORTFOLIOS

FSC will pay Administrator fees for the following portfolios (the
"Funds") effective as of the dates set forth below:

NAME DATE

MARSHALL MONEY MARKET FUND OCTOBER 1, 1992
CLASS B SHARES

(formerly Investment Shares prior to January 1, 1995)

ADMINISTRATIVE FEES