Bmo Funds, Inc. – ‘N-30D’ for 8/31/94

On:  Friday, 10/28/94, at 9:28am ET   ·   For:  8/31/94   ·   Accession #:  889366-94-16   ·   File #s:  811-07047, 811-58433   ·   Correction:  This Filing’s “Filed as of” Date was Corrected and “Changed as of” 11/7/94 by the SEC on 4/15/04. ®

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Annual or Semi-Annual Report Mailed to Shareholders   —   Rule 30d-1
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: N-30D       Annual or Semi-Annual Report Mailed to               154±   697K 
                          Shareholders                                           


                                                                        Marshall
                                                                           Money
                                                                          Market
                                                                            Fund

                                             ANNUAL REPORT
                                               TO SHAREHOLDERS
                                                     Dated August 31, 1994

FEDERATED SECURITIES CORP.                                                      
Distributor                                                                     
A subsidiary of FEDERATED INVESTORS                                             
FEDERATED INVESTORS TOWER                                                       
PITTSBURGH, PA 15222-3779                                                       
3091409 (10/94)                                                                 

PRESIDENT'S MESSAGE                                                             
--------------------------------------------------------------------------------

Dear Shareholder:                                                               

I am pleased to present the Annual Report of the Marshall Money Market Fund for 
the fiscal year ended August 31, 1994. It provides you with complete financial  
information for the Fund, including the Investment Review by the portfolio      
manager, a complete list of investments, and the Financial Statements. In       
addition, Financial Highlights have been included for Investment Shares and     
Trust Shares.                                                                   

The Fund puts your cash to work by investing in a diversified portfolio of      
high-quality money market securities. Of course, the Fund also is managed to    
maintain a stable share price of $1.00.*                                        

Reflecting increased investor participation in the Fund, net assets climbed to  
more than $979 million at the end of the report period.                         

Thank you for your ongoing confidence in the Marshall Money Market Fund. As     
always, we welcome your questions or comments.                                  

Sincerely,                                                                      

James F. Duca, II                                                               
President                                                                       
Marshall Funds, Inc.                                                            
October 14, 1994                                                                

* Money market funds seek to maintain a stable net asset value of $1.00 per     
 share. There can be no assurance that they will be able to do so. Investments
in mutual funds are neither insured nor guaranteed by the U.S. government.  

INVESTMENT REVIEW                                                               
--------------------------------------------------------------------------------

A rising economy, rising fear of inflation, and rising interest rates           
characterized the recently completed fiscal year of the Marshall Funds. Gross   
Domestic Product advanced more than 3% for the period. Although consumer        
confidence declined in recent months, indications are positive for the important
Christmas selling season, and high business confidence suggests further capital 
spending gains. Continued economic expansion and corporate cost cutting are     
translating into sustained earnings gains for American industry.                

Inflation worries surfaced this year, but to date, scant evidence of            
acceleration at the retail level has materialized. Consumer prices edged up only
2.9% over the last 12 months. Nevertheless, clouds are gathering on the horizon,
with climbing commodity costs especially ominous. With the pricing power in the 
manufacturing sector having increased significantly, industrial prices are      
firming. Capacity utilization stands at a five-year high, and labor markets are 
tightening. Expect inflation to advance to the 3.5% area in 1995.               

Over the past year, investors have been reintroduced to the anguish of rapidly  
rising interest rates. From the lows last October, long-term Treasury yields    
jumped two percentage points. Starting in February, the Federal Reserve Board   
(the "Fed") pushed up short-term interest rates 1.75 percentage points in five  
incremental moves. The Fed is well aware that the economic cycle is past the    
point where inflation usually begins to pick up. Rising rates are now beginning 
to bite, with housing among the early victims. If the Fed is forced to move from
its present neutral policy to an even more restrictive one, the expansion could 
stall by 1996--but for now, enjoy the expansion.                                

MARSHALL MONEY MARKET FUND                                                      

For the fiscal year ended August 31, 1994, the Fund's Investment Shares and     
Trust Shares had total returns of 3.11% and 3.41%, respectively.* This compared 
to Donoghue's Taxable Money Market Fund Average total return of 3.11%.** The    
performance relative to Donoghue's index was the result of several different    
factors. First, throughout the year, the Fund had a shorter average maturity    
relative to Donoghue's. Second, the Fund has several high quality floating rate 
notes which have frequent reset dates. Finally, purchases of fixed rate         
commercial paper were timed to coincide with the Fed increases. Short-term rates
were relatively tranquil in the first half of the period, but that tranquility  
ended on February 4, 1994 when the Fed began what has become a series of        
interest rate increases. By August 31, 1994, the Fed had intervened five times, 
pushing the Fed Funds' rate from 3.25% to 4.75%.                                

Even though the Fed has raised interest rates 175 basis points since the start  
of the year, housing and auto sales have been remarkably strong. Given the level
of economic activity, the bond market's attention has focused on renewed fears  
of inflation. Commodity indexes such as the Commodity Research Bureau Raw Spot  
Price Index** and the Journal of Commerce 18 Industrial Materials Price Index** 
are both at new four-year highs. While commodities have hit new highs, wage     
inflation remains low, thus holding overall inflation down to 2.9% as measured  
by the Consumer Price Index. Going forward, it remains to be seen whether the   
Fed increases in the past year will be enough to control inflation or if further
tightening will be needed.                                                      

* Performance quoted represents past performance and is not indicative of     
future returns.                                                                 

** These indices are unmanaged.                                                 

MARSHALL MONEY MARKET FUND                                                      

PORTFOLIO OF INVESTMENTS                                                        
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                         
  AMOUNT                                                                                  VALUE    
-----------         -----------------------------------------------------------------  ------------
                                                                                                   
**COMMERCIAL PAPER--55.0%                                                                          
-------------------------------------------------------------------------------------              
                    ASSET-BACKED--17.0%                                                            
                    -----------------------------------------------------------------              
$ 8,000,000         Beta Finance, Inc., 4.83%, 11/23/94                                $  7,910,913
                    -----------------------------------------------------------------              
 44,600,000         CIESCO, Inc., 4.47%--4.625%, 9/6/94--9/19/94                         44,543,530
                    -----------------------------------------------------------------              
 40,000,000         Corporate Asset Funding Corp., 4.47%--4.625%, 9/6/94--9/14/94        39,959,427
                    -----------------------------------------------------------------              
 35,500,000         Corporate Receivables Corp., 4.49%--4.85%, 9/16/94--11/16/94         35,335,307
                    -----------------------------------------------------------------              
 39,125,000         PREFCO, 4.47%--4.70%, 9/7/94--9/20/94                                39,069,834
                    -----------------------------------------------------------------  ------------
                    Total                                                               166,819,011
                    -----------------------------------------------------------------  ------------
                    BANKING--2.5%                                                                  
                    -----------------------------------------------------------------              
 25,000,000         Abbey National N.A. Corp., 4.81%--4.83%, 11/21/94                    24,728,988
                    -----------------------------------------------------------------  ------------
                    FINANCE--AUTOMOTIVE--0.6%                                                      
                    -----------------------------------------------------------------              
  6,400,000         Ford Motor Credit Co., 4.83%, 11/16/94                                6,334,741
                    -----------------------------------------------------------------  ------------
                    FINANCE--COMMERCIAL--7.9%                                                      
                    -----------------------------------------------------------------              
 15,000,000         General Electric Credit Corp., 4.82%, 11/22/94                       14,835,317
                    -----------------------------------------------------------------              
 18,150,000         Hanson Finance PLC, 4.82%--4.83%, 11/2/94--11/28/94                  17,964,279
                    -----------------------------------------------------------------              
 45,000,000         Whirlpool Financial Corp., 4.45%--4.87%, 9/13/94--11/17/94           44,746,561
                    -----------------------------------------------------------------  ------------
                    Total                                                                77,546,157
                    -----------------------------------------------------------------  ------------
                    FOOD AND BEVERAGES--9.2%                                                       
                    -----------------------------------------------------------------              
 45,200,000         Coca-Cola Enterprises, Inc., 4.52%--4.87%, 9/1/94--11/8/94           44,969,168
                    -----------------------------------------------------------------              
 45,212,000         Seagram (Joseph E.) & Sons, Inc., 4.50%--4.85%, 9/13/94--11/14/94    44,947,429
                    -----------------------------------------------------------------  ------------
                    Total                                                                89,916,597
                    -----------------------------------------------------------------  ------------
                    HEALTHCARE--1.0%                                                               
                    -----------------------------------------------------------------              
 10,000,000         Smithkline Beecham Corp., 4.50%, 10/3/94                              9,960,000
                    -----------------------------------------------------------------  ------------
                    LEASING--5.1%                                                                  
                    -----------------------------------------------------------------              
 15,000,000         Concord Leasing, Inc., 4.70%, 9/21/94                                14,960,833
                    -----------------------------------------------------------------              
 35,000,000         International Lease Finance Corp., 4.80%--4.83%,                               
                    11/21/94--11/22/94                                                   34,618,321
                    -----------------------------------------------------------------  ------------
                    Total                                                                49,579,154
                    -----------------------------------------------------------------  ------------
                    MINING--9.1%                                                                   
                    -----------------------------------------------------------------              
 44,300,000         Arco Coal Australia, 4.63%--4.85%, 9/12/94--11/18/94                 43,972,446
                    -----------------------------------------------------------------              
 45,400,000         RTZ America, Inc., 4.76%--4.85%, 11/8/94--11/22/94                   44,951,408
                    -----------------------------------------------------------------  ------------
                    Total                                                                88,923,854
                    -----------------------------------------------------------------  ------------

MARSHALL MONEY MARKET FUND                                                      
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                         
  AMOUNT                                                                                  VALUE    
-----------         -----------------------------------------------------------------  ------------
                                                                                                   
**COMMERCIAL PAPER--CONTINUED                                                                      
-------------------------------------------------------------------------------------              
                    RAILWAYS--2.6%                                                                 
                    -----------------------------------------------------------------              
$15,737,000         Norfolk Southern Corp., 4.51%, 10/3/94                             $ 15,673,912
                    -----------------------------------------------------------------              
  9,500,000         Union Pacific Corp., 4.50%, 9/20/94                                   9,477,438
                    -----------------------------------------------------------------  ------------
                    Total                                                                25,151,350
                    -----------------------------------------------------------------  ------------
                    TOTAL COMMERCIAL PAPER                                              538,959,852
                    -----------------------------------------------------------------  ------------
CORPORATE BONDS--0.4%                                                                              
-------------------------------------------------------------------------------------              
  3,500,000         General Motors Acceptance Corp., 8.15%, 9/15/94                       3,505,254
                    -----------------------------------------------------------------  ------------
MEDIUM TERM NOTES--5.6%                                                                            
-------------------------------------------------------------------------------------              
                    ASSET-BACKED--0.5%                                                             
                    -----------------------------------------------------------------              
  4,974,666         Premier Auto Trust, 3.28%, 2/2/95                                     4,974,666
                    -----------------------------------------------------------------  ------------
                    BROKER/DEALER--1.9%                                                            
                    -----------------------------------------------------------------              
 19,000,000         Bear, Stearns & Co., Inc., 3.70%, 9/29/94                            18,999,510
                    -----------------------------------------------------------------  ------------
                    FINANCE--AUTOMOTIVE--2.9%                                                      
                    -----------------------------------------------------------------              
 27,900,000         Ford Motor Credit Co., 5.50%--5.70%, 12/5/94--12/23/94               28,043,287
                    -----------------------------------------------------------------  ------------
                    LEASING--0.3%                                                                  
                    -----------------------------------------------------------------              
  3,050,000         International Lease Finance Corp., 8.45%, 9/1/94                      3,050,000
                    -----------------------------------------------------------------  ------------
                    TOTAL MEDIUM TERM NOTES                                              55,067,463
                    -----------------------------------------------------------------  ------------
***VARIABLE RATE NOTES--35.0%                                                                      
-------------------------------------------------------------------------------------              
                    ASSET-BACKED--2.0%                                                             
                    -----------------------------------------------------------------              
 20,000,000         Beta Finance, Inc., 4.83%, 2/10/95                                   20,000,000
                    -----------------------------------------------------------------  ------------
                    BANKING--2.0%                                                                  
                    -----------------------------------------------------------------              
 20,000,000         Abbey National Trust Services, 4.855%, 4/27/95                       20,000,000
                    -----------------------------------------------------------------  ------------
                    BROKERS/DEALERS--17.5%                                                         
                    -----------------------------------------------------------------              
 15,000,000         Bear, Stearns & Co., Inc., 4.60%, 2/7/95                             15,000,000
                    -----------------------------------------------------------------              
 45,000,000         Donaldson, Lufkin, & Jenrette Securities Corp., 4.75%, 9/1/94        45,000,000
                    -----------------------------------------------------------------              
 20,000,000         Goldman, Sachs & Co., 4.938%, 1/13/95                                20,000,000
                    -----------------------------------------------------------------              
 36,000,000         J.P. Morgan Securities, Inc., 4.60%, 9/1/94                          36,000,000
                    -----------------------------------------------------------------              
 15,000,000         Shearson Lehman Brothers Holdings, Inc., 5.463%, 2/22/95             15,055,667
                    -----------------------------------------------------------------              
 20,000,000         Merrill Lynch & Co., Inc., 4.88%, 1/19/95                            19,997,462
                    -----------------------------------------------------------------              
 20,000,000         Salomon Brothers, Inc., 4.925%, 6/26/95                              20,000,000
                    -----------------------------------------------------------------  ------------
                    Total                                                               171,053,129
                    -----------------------------------------------------------------  ------------
                    FINANCE--AUTOMOTIVE--4.2%                                                      
                    -----------------------------------------------------------------              
 41,000,000         General Motors Acceptance Corp., 4.757%, 9/1/94                      41,000,000
                    -----------------------------------------------------------------  ------------
                    FOOD AND BEVERAGES--2.0%                                                       
                    -----------------------------------------------------------------              
 20,000,000         PepsiCo, Inc., 4.855%, 4/13/95                                       20,000,000
                    -----------------------------------------------------------------  ------------

MARSHALL MONEY MARKET FUND                                                      
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                          
  AMOUNT                                                                                  VALUE     
-----------         -----------------------------------------------------------------  ------------ 
                                                                                                    
                                                    ***VARIABLE RATE NOTES--CONTINUED               
-------------------------------------------------------------------------------------               
                    GOVERNMENT AGENCY--1.6%                                                         
                    -----------------------------------------------------------------               
$15,585,000         Student Loan Marketing Association, 4.88%, 9/7/94                  $ 15,588,407 
                    -----------------------------------------------------------------  ------------ 
                    INSURANCE--4.1%                                                                 
                    -----------------------------------------------------------------               
 40,000,000         Commonwealth Life Insurance Co., 4.77%, 9/2/94                       40,000,000 
                    -----------------------------------------------------------------  ------------ 
                    UTILITIES--1.6%                                                                 
                    -----------------------------------------------------------------               
  4,999,000         Wisconsin Gas Co., 4.75%, 9/6/94                                      4,999,000 
                    -----------------------------------------------------------------               
 10,000,000         Wisconsin Public Service Corp., 4.72%, 9/1/94                        10,000,000 
                    -----------------------------------------------------------------  ------------ 
                    Total                                                                14,999,000 
                    -----------------------------------------------------------------  ------------ 
                    TOTAL VARIABLE RATE NOTES                                           342,640,536 
    -----------------------------------------------------------------   ------------                
                            *REPURCHASE AGREEMENT--4.1%                                             
-------------------------------------------------------------------------------------               
 40,139,000         BZW Securities, Inc., 4.80%, dated 8/31/94, due 9/1/94                          
                    (at amortized cost)                                                  40,139,000 
                    -----------------------------------------------------------------  ------------ 
                    TOTAL INVESTMENTS, (AT AMORTIZED COST AND VALUE)                   $980,312,105+
                    -----------------------------------------------------------------  ------------ 

* The repurchase agreement is fully collateralized by U.S. Treasury         
obligations based on market prices at the date of the portfolio.        

** Each issue shows the rate of discount at the time of purchase.             

*** Current rate and next demand date shown.                                    

+ Also represents cost for federal tax purposes.                            

Note: The categories of investments are shown as a percentage of net assets     
($979,916,653) at August 31, 1994.                                  

(See Notes which are an integral part of the Financial Statements)              

MARSHALL MONEY MARKET FUND                                                      

STATEMENT OF ASSETS AND LIABILITIES                                             
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                              
ASSETS:                                                                                       
--------------------------------------------------------------------------------              
Investments in securities                                           $940,173,105              
-----------------------------------------------------------------                             
Investments in repurchase agreements                                  40,139,000              
-----------------------------------------------------------------   ------------              
     Total investments at amortized cost and value                                $980,312,105
--------------------------------------------------------------------------------              
Cash                                                                                   200,000
--------------------------------------------------------------------------------              
Interest receivable                                                                  2,953,632
--------------------------------------------------------------------------------              
Receivable for capital stock sold                                                       19,393
--------------------------------------------------------------------------------              
Deferred expenses                                                                      173,981
--------------------------------------------------------------------------------  ------------
     Total assets                                                                  983,659,111
--------------------------------------------------------------------------------              
LIABILITIES:                                                                                  
--------------------------------------------------------------------------------              
Dividends payable                                                      3,162,362              
-----------------------------------------------------------------                             
Payable for capital stock redeemed                                       199,171              
-----------------------------------------------------------------                             
Accrued expenses                                                         380,925              
-----------------------------------------------------------------   ------------              
     Total liabilities                                                               3,742,458
--------------------------------------------------------------------------------  ------------
NET ASSETS for 979,916,653 shares of capital stock outstanding                    $979,916,653
--------------------------------------------------------------------------------  ------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:                            
Trust Shares (net assets of $967,987,704 / 967,987,704 shares of                              
capital stock outstanding)                                                               $1.00
--------------------------------------------------------------------------------  ------------
Investment Shares (net assets of $11,928,949 / 11,928,949 shares of                           
capital stock outstanding)                                                               $1.00
--------------------------------------------------------------------------------  ------------

(See Notes which are an integral part of the Financial Statements)              

MARSHALL MONEY MARKET FUND                                                      

STATEMENT OF OPERATIONS                                                         
YEAR ENDED AUGUST 31, 1994                                                      
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                                
INVESTMENT INCOME:                                                                              
-----------------------------------------------------------------------------------             
Interest income                                                                      $35,176,906
-----------------------------------------------------------------------------------             
EXPENSES--                                                                                      
-----------------------------------------------------------------------------------             
Investment advisory fee                                                  $4,623,880             
---------------------------------------------------------------------                           
Directors' fees                                                               8,850             
---------------------------------------------------------------------                           
Administrative personnel and services fee                                   887,132             
---------------------------------------------------------------------                           
Custodian fees                                                              117,800             
---------------------------------------------------------------------                           
Transfer and dividend disbursing agent fees and expenses                     75,381             
---------------------------------------------------------------------                           
Fund share registration costs                                               210,069             
---------------------------------------------------------------------                           
Auditing fees                                                                15,382             
---------------------------------------------------------------------                           
Legal fees                                                                   16,251             
---------------------------------------------------------------------                           
Printing and postage                                                         15,311             
---------------------------------------------------------------------                           
Portfolio accounting fees                                                   185,198             
---------------------------------------------------------------------                           
Insurance premiums                                                           18,295             
---------------------------------------------------------------------                           
Taxes                                                                        87,200             
---------------------------------------------------------------------                           
Shareholder services fees                                                   138,716             
---------------------------------------------------------------------                           
Distribution services fees                                                   14,553             
---------------------------------------------------------------------                           
Miscellaneous                                                                32,145             
---------------------------------------------------------------------    ----------             
     Total expenses                                                       6,446,163             
---------------------------------------------------------------------                           
Deduct--                                                                                        
---------------------------------------------------------------------                           
  Waiver of investment advisory fee                        $2,639,185                           
--------------------------------------------------------                                        
  Waiver of custodian fees                                     48,321     2,687,506             
--------------------------------------------------------   ----------    ----------             
     Net expenses                                                                      3,758,657
-----------------------------------------------------------------------------------  -----------
          Net investment income                                                      $31,418,249
-----------------------------------------------------------------------------------  -----------

(See Notes which are an integral part of the Financial Statements)              

MARSHALL MONEY MARKET FUND                                                      

STATEMENT OF CHANGES IN NET ASSETS                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                              YEAR ENDED AUGUST 31,                                              
                                                             ----------------------------------- 
                                    1994                1993*                                    
                                                             ---------------     --------------- 
                                                                                                 
INCREASE (DECREASE) IN NET ASSETS:                                                               
-----------------------------------------------------------                                      
OPERATIONS--                                                                                     
-----------------------------------------------------------                                      
Net investment income                                        $    31,418,249     $    16,462,620 
-----------------------------------------------------------  ---------------     --------------- 
DISTRIBUTIONS TO SHAREHOLDERS--                                                                  
-----------------------------------------------------------                                      
Dividends to shareholders from net investment income:                                            
-----------------------------------------------------------                                      
  Trust Shares                         (31,253,782)        (16,431,216)                          
-----------------------------------------------------------                                      
  Investment Shares                     (164,467)            (31,404)                            
-----------------------------------------------------------  ---------------     --------------- 
     Change in net assets from distributions to                                                  
       shareholders                                              (31,418,249)        (16,462,620)
-----------------------------------------------------------  ---------------     --------------- 
CAPITAL STOCK TRANSACTIONS--                                                                     
-----------------------------------------------------------                                      
Proceeds from sale of shares                                   2,698,258,215       2,335,502,436 
-----------------------------------------------------------                                      
Net asset value of shares issued to shareholders in payment                                      
of dividends declared                                              3,620,348           2,389,738 
-----------------------------------------------------------                                      
Cost of shares redeemed                                       (2,499,832,541)     (1,560,121,643)
-----------------------------------------------------------  ---------------     --------------- 
     Change in net assets from capital stock transactions        202,046,022         777,770,531 
-----------------------------------------------------------  ---------------     --------------- 
          Change in net assets                                   202,046,022         777,770,531 
-----------------------------------------------------------                                      
NET ASSETS:                                                                                      
-----------------------------------------------------------                                      
Beginning of period                                              777,870,631             100,100 
-----------------------------------------------------------  ---------------     --------------- 
End of period                                                $   979,916,653     $   777,870,631 
-----------------------------------------------------------  ---------------     --------------- 

* For the period from September 23, 1992 (start of business) to August 31, 1993.

(See Notes which are an integral part of the Financial Statements)              

MARSHALL MONEY MARKET FUND--INVESTMENT SHARES                                   

FINANCIAL HIGHLIGHTS                                                            
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)                                

                                                        [Enlarge/Download Table]

                                                                 YEAR ENDED AUGUST 31,     
                                                                 ----------------------    
                                                                 1994             1993*    
                                                                 -----            -----    
                                                                                           
NET ASSET VALUE, BEGINNING OF PERIOD                             $1.00            $1.00    
---------------------------------------------------------------                            
INCOME FROM INVESTMENT OPERATIONS                                                          
---------------------------------------------------------------                            
  Net investment income                                           0.03             0.02    
---------------------------------------------------------------  -----            -----    
LESS DISTRIBUTIONS                                                                         
---------------------------------------------------------------                            
  Dividends to shareholders from net investment income           (0.03)           (0.02)   
---------------------------------------------------------------  -----            -----    
NET ASSET VALUE, END OF PERIOD                                   $1.00            $1.00    
---------------------------------------------------------------  -----            -----    
TOTAL RETURN**                                                    3.11%            1.89%   
---------------------------------------------------------------                            
RATIOS TO AVERAGE NET ASSETS                                                               
---------------------------------------------------------------                            
  Expenses                                                        0.70%            0.72%(b)
---------------------------------------------------------------                            
  Net investment income                                           3.39%            2.72%(b)
---------------------------------------------------------------                            
  Expense waiver (a)                                              0.29%            0.28%(b)
---------------------------------------------------------------                            
SUPPLEMENTAL DATA                                                                          
---------------------------------------------------------------                            
  Net assets, end of period (000 omitted)                        $11,929          $1,980   
---------------------------------------------------------------                            

* Reflects operations for the period from December 17, 1992 (date of initial
public investment) to August 31, 1993.                                  

** Based on net asset value.                                                  

(a) This voluntary expense decrease is reflected in both the expense and net    
investment income ratios shown above.                                   

(b) Computed on an annualized basis.                                            

(See Notes which are an integral part of the Financial Statements)              

MARSHALL MONEY MARKET FUND--TRUST SHARES                                        

FINANCIAL HIGHLIGHTS                                                            
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)                                

                                                        [Enlarge/Download Table]

                                                                 YEAR ENDED AUGUST 31,     
                                                                 ----------------------    
                                                                 1994             1993*    
                                                                 -----            -----    
                                                                                           
NET ASSET VALUE, BEGINNING OF PERIOD                             $1.00            $1.00    
---------------------------------------------------------------                            
INCOME FROM INVESTMENT OPERATIONS                                                          
---------------------------------------------------------------                            
  Net investment income                                           0.03            0.02     
---------------------------------------------------------------  -----            ----     
LESS DISTRIBUTIONS                                                                         
---------------------------------------------------------------                            
  Dividends to shareholders from net investment income           (0.03)           (0.02)   
---------------------------------------------------------------  -----            ----     
NET ASSET VALUE, END OF PERIOD                                   $1.00            $1.00    
---------------------------------------------------------------  -----            ----     
TOTAL RETURN**                                                    3.41%           2.33 %   
---------------------------------------------------------------                            
RATIOS TO AVERAGE NET ASSETS                                                               
---------------------------------------------------------------                            
  Expenses                                                        0.40%           0.40 %(b)
---------------------------------------------------------------                            
  Net investment income                                           3.40%           2.97 %(b)
---------------------------------------------------------------                            
  Expense waiver (a)                                              0.29%           0.28 %(b)
---------------------------------------------------------------                            
SUPPLEMENTAL DATA                                                                          
---------------------------------------------------------------                            
  Net assets, end of period (000 omitted)                        $967,988         $775,890 
---------------------------------------------------------------                            

* Reflects operations for the period from November 23, 1992 (date of initial
public investment) to August 31, 1993.                                  

** Based on net asset value.                                                  

(a) This voluntary expense decrease is reflected in both the expense and net    
investment income ratios shown above.                                   

(b) Computed on an annualized basis.                                            

(See Notes which are an integral part of the Financial Statements)              

MARSHALL MONEY MARKET FUND                                                      

NOTES TO FINANCIAL STATEMENTS                                                   
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------
(1) ORGANIZATION                                                                

Marshall Funds, Inc. (the "Corporation"), is an open-end, management investment 
company, established as a Wisconsin corporation under the Articles of           
Incorporation on July 31, 1992. The Corporation consists of eleven diversified  
portfolios: Marshall Balanced Fund, Marshall Equity Income Fund, Marshall       
Government Income Fund, Marshall Intermediate Bond Fund, Marshall Intermediate  
Tax-Free 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. Marshall Money Market Fund is offered in two    
classes of shares: Trust Shares and Investment Shares. The assets of each       
portfolio are segregated and a shareholder's interest is limited to the         
portfolio in which shares are held. The financial statements included herein are
only those of Marshall Money Market Fund (the "Fund"). The financial statements 
of the other portfolios are presented separately.                               

(2) SIGNIFICANT ACCOUNTING POLICIES                                             

The following is a summary of significant accounting policies consistently      
followed by the Fund in the preparation of its financial statements. These      
policies are in conformity with generally accepted accounting principles.       

                                                        [Enlarge/Download Table]
                                                                                            
A. INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value its portfolio
   securities is in accordance with Rule 2a-7 under the Investment Company Act of 1940, as  
   amended (the "Act").                                                                     
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian bank to take
   possession, to have legally segregated in the Federal Reserve Book Entry System, or to   
   have segregated within the custodian bank's vault, all securities held as collateral in  
   support of repurchase agreement investments. Additionally, procedures have been          
   established by the Fund to monitor, on a daily basis, the market value of each repurchase
   agreement's underlying collateral to ensure that the value of collateral at least equals 
   the principal amount of the repurchase agreement, including accrued interest.            
   The Fund will only enter into repurchase agreements with banks and other recognized      
   financial institutions, such as broker/dealers, which are deemed by the Fund's adviser to
   be creditworthy pursuant to the guidelines established by the Board of Directors (the    
   "Directors"). Risks may arise from the potential inability of counterparties to honor the
   terms of the repurchase agreement. Accordingly, the Fund could receive less than the     
   repurchase price on the sale of collateral securities.                                   
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued  
   daily. Bond premium and discount, if applicable, are amortized as required by the        
   Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are        
   recorded on the ex-dividend date.                                                        
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Code         
   applicable to regulated investment companies and to distribute to shareholders each year 
   substantially all of its taxable income. Accordingly, no provisions for federal tax are  
   necessary.                                                                               
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-issued or     
   delayed delivery transactions. The Fund records when-issued securities on the trade date 
   and maintains security positions such that sufficient liquid assets will be available to 
   make payment for the securities purchased. Securities purchased on a when-issued or      
   delayed delivery basis are marked to market daily and begin earning interest on the      
   settlement date.                                                                         

MARSHALL MONEY MARKET FUND                                                      
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                            
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to registration of its    
   shares in its first fiscal year, excluding the initial expense of registering its shares,
   have been deferred and are being amortized using the straight-line method not to exceed a
   period of five years from the Fund's commencement date.                                  
G. OTHER--Investment transactions are accounted for on the trade date.                      

(3) CAPITAL STOCK                                                               

The Articles of Incorporation of the Marshall Funds, Inc. permit the Directors  
to issue 50 billion full and fractional shares of common stock, par value       
$0.0001 per share. At August 31, 1994, the capital paid-in for the Fund was     
$979,916,653. Transactions in shares were as follows:                           

                                                        [Enlarge/Download Table]

                                                                    YEAR ENDED AUGUST 31,       
                                                              --------------------------------- 
TRUST SHARES                                                       1994              1993*      
                                                                                                
------------------------------------------------------------  --------------     -------------- 
Shares sold                                                    2,652,693,310      2,319,027,553 
------------------------------------------------------------                                    
Shares issued to shareholders in payment of dividends                                           
  declared                                                         3,467,566          2,358,435 
------------------------------------------------------------                                    
Shares redeemed                                               (2,464,063,526)    (1,545,595,634)
------------------------------------------------------------  --------------     -------------- 
Net change resulting from Trust share transactions               192,097,350        775,790,354 
------------------------------------------------------------  --------------     -------------- 

                                                        [Enlarge/Download Table]

                                                                      YEAR ENDED AUGUST 31,     
                                                                  ----------------------------- 
INVESTMENT SHARES                                                    1994              1993*    
                                                                                                
----------------------------------------------------------------  -----------       ----------- 
Shares sold                                                        45,564,905        16,474,883 
----------------------------------------------------------------                                
Shares issued to shareholders in payment of dividends declared        152,782            31,303 
----------------------------------------------------------------                                
Shares redeemed                                                   (35,769,015)      (14,526,009)
----------------------------------------------------------------  -----------       ----------- 
Net change resulting from Investment share transactions             9,948,672         1,980,177 
----------------------------------------------------------------  -----------       ----------- 
Net change resulting from Fund share transactions                 202,046,022       777,770,531 
----------------------------------------------------------------  -----------       ----------- 

* For the period from September 23, 1992 (start of business) to August 31, 1993.

(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES              

INVESTMENT ADVISORY FEE--M&I Investment Management Corp., the Fund's investment 
adviser (the "Adviser"), receives for its services an annual investment advisory
fee equal to 0.50 of 1% of the Fund's average daily net assets. The Adviser may 
voluntarily choose to waive a portion of its fee. The Adviser can modify or     
terminate this voluntary waiver at any time at its sole discretion.             

ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund 
with certain administrative personnel and services. The FAS fee is based on the 
level of average aggregate net assets of the Corporation for the period or a    
minimum annual fee of $50,000 per Fund. FAS may voluntarily choose to waive a   
portion of its fee.                                                             

DISTRIBUTION AND SHAREHOLDER SERVICES FEE--The Fund has adopted a Distribution  
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the  
Plan, the Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to  
result in the sale of the Fund's Investment Shares. The Plan provides that the  
Fund may incur distribution expenses up to 0.30 of 1% of the average daily net  
assets of the Investment Shares, annually, to compensate FSC.                   

MARSHALL MONEY MARKET FUND                                                      
--------------------------------------------------------------------------------

SHAREHOLDER SERVICES FEE--Marshall Funds Investors Services ("MFIS") is the     
Fund's shareholder servicing agent. Under the terms of a shareholder service    
agreement with MFIS, the Fund will pay MFIS a fee to obtain certain personal    
services for shareholders and the maintenance of shareholder accounts. The fee  
is based on the level of the Fund's average net assets for the period.          

TRANSFER AND DIVIDEND DISBURSING AGENT, ACCOUNTING AND CUSTODY FEES--Federated  
Services Company ("FServ") serves as transfer and dividend disbursing agent for 
the Fund. The FServ fee is based on the size, type, and number of accounts and  
transactions made by shareholders.                                              

FServ also maintains the Fund's accounting records. The fee is based on the     
level of the Fund's average net assets for the period, plus out-of-pocket       
expenses.                                                                       

Marshall and Ilsley Trust Company is the Fund's custodian. The fee is based on  
the level of the Fund's average net assets for the period.                      

ORGANIZATIONAL EXPENSES--Organizational expenses ($59,536) were borne initially 
by FAS. The Fund has agreed to reimburse FAS for the organizational expenses    
during the five year period following October 1, 1992 (date the Fund first      
became effective). For the year ended August 31, 1994, the Fund paid $7,372     
pursuant to this agreement.                                                     

Certain of the Officers and Directors of the Corporation are Officers and       
Directors or Trustees of the above companies.                                   

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                                        
--------------------------------------------------------------------------------

To the Shareholders and Board of Directors of                                   
MARSHALL MONEY MARKET FUND:                                                     

We have audited the accompanying statement of assets and liabilities, including 
the schedule of portfolio investments, of the Marshall Money Market Fund (one of
the portfolios constituting the Marshall Funds, Inc., a Wisconsin corporation)  
as of August 31, 1994, and the related statements of operations, changes in net 
assets, and financial highlights for the periods presented. These financial     
statements and financial highlights are the responsibility of the Company's     
management. Our responsibility is to express an opinion on these financial      
statements and financial highlights based on our audits.                        

We conducted our audits in accordance with generally accepted auditing          
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements and financial       
highlights are free of material misstatement. An audit includes examining, on a 
test basis, evidence supporting the amounts and disclosures in the financial    
statements. Our procedures included confirmation of securities owned as of      
August 31, 1994, by correspondence with the custodian. An audit also includes   
assessing the accounting principles used and significant estimates made by      
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.          

In our opinion, the financial statements and financial highlights referred to   
above present fairly, in all material respects, the financial position of the   
Marshall Money Market Fund (one of the portfolios constituting the Marshall     
Funds, Inc.) as of August 31, 1994, and the results of its operations, changes  
in its net assets and financial highlights for the periods presented, in        
conformity with generally accepted accounting principles.                       

                                                             ARTHUR ANDERSEN LLP

Pittsburgh, Pennsylvania                                                        
October 11, 1994                                                                

                                                                [Download Table]
                                                
DIRECTORS                               OFFICERS

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

                                                                [Download Table]
                                                                    
Ody J. Fish                             Edward C. Gonzales          
John DeVincentis                        Chairman and Treasurer      
Edward C. Gonzales                      James F. Duca, II           
Paul E. Hassett                         President                   
                                        Joseph S. Machi             
                                        Vice President and Assistant
                                        Treasurer                   
                                        Peter J. Germain            
                                        Secretary                   
                                        Victor R. Siclari           
                                        Assistant Secretary         

Mutual funds are not bank deposits or obligations, are not guaranteed by any    
bank, and are not insured or guaranteed by the FDIC, the Federal Reserve Board, 
or any other government agency. Investment in mutual funds involves risk,       
including possible loss of principal. Although money market funds seek to       
maintain a stable net asset value of $1.00 per share, there is no assurance that
they will be able to do so.                                                     

This report is authorized for distribution to prospective investors only when   
preceded or accompanied by the Fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.   

                  Marshall
                Equity
               Funds

                                Combined Annual Report
                         TO SHAREHOLDERS
                               Dated August 31, 1994
Federated Securities Corp.                                                      
Distributor                                                                     
A Subsidiary of Federated INVESTORS                                             
FEDERATED INVESTORS TOWER                                                       
Pittsburgh, PA  15222-3779                                                      
3091401 (10/94)                                                                 

PRESIDENT'S MESSAGE                                                             
--------------------------------------------------------------------------------
Dear Shareholder:                                                               

I am pleased to present the Annual Report of the Marshall Equity Funds for the  
fiscal year ended August 31, 1994. This report provides you with complete       
financial information for the Funds, including the Investment Reviews by the    
portfolio managers, a list of investments for each Fund, and the Financial      
Statements.                                                                     

Rising interest rates, which affected all financial markets, did impact the     
Marshall Equity Funds. However, despite the market's ups and downs, the share   
value of the Marshall Value Equity Fund increased during the reporting period.  
And, all funds rewarded shareholders with distributions during the period.      

Net assets in the Marshall Equity Funds totaled more than $593.6 million at the 
end of the period.                                                              

Net assets in the Marshall Balanced Fund, a portfolio of stocks and bonds, stood
at $21.7 million. During the reporting period, the Fund paid distributions of   
$0.21 per share.                                                                

The Marshall Equity Income Fund, an investment portfolio composed of stocks     
selected for their ability to pay regular dividends, grew in net assets to $49.4
million. The Fund paid distributions of $0.23 per share.                        

The Marshall Value Equity Fund net assets also grew to $218.7 million. Managed  
to help you pursue growth through investments in stocks selected for their      
ability to increase in value, the Fund paid distributions of $0.10 per share.   

Net assets in the Marshall Stock Fund, a fund that seeks long-term growth       
through common stocks, decreased to $250.2 million. The Fund paid distributions 
of $0.07 per share.                                                             

And the Marshall Mid-Cap Stock Fund, which strives for returns through stocks   
issued by mid-sized companies, reported net assets of $53.6 million.            
Distributions amounted to $0.04 per share.                                      

Thank you for pursuing growth through one or more of the Marshall Equity Funds. 
As always, we welcome your questions or comments.                               

Sincerely,                                                                      

James F. Duca, II                                                               
President                                                                       
Marshall Funds, Inc.                                                            
October 14, 1994                                                                

INVESTMENT REVIEW                                                               
--------------------------------------------------------------------------------
A rising economy, rising fear of inflation, and rising interest rates           
characterized the recently completed fiscal year of the Marshall Funds. Gross   
Domestic Product ("GDP") advanced more than 3% for the period. Although consumer
confidence declined in recent months, indications are positive for the important
Christmas selling season, and high business confidence suggests further capital 
spending gains. Continued economic expansion and corporate cost cutting are     
translating into sustained earnings gains for American industry.                

Inflation worries surfaced this year, but to date, scant evidence of            
acceleration at the retail level has materialized. Consumer prices edged up only
2.9% over the last 12 months. Nevertheless, clouds are gathering on the horizon,
with climbing commodity costs especially ominous. With the pricing power in the 
manufacturing sector having increased significantly, industrial prices are      
firming. Capacity utilization stands at a five-year high, and labor markets are 
tightening. Expect inflation to advance to the 3.5% area in 1995.               

Over the past year, investors have been reintroduced to the anguish of rapidly  
rising interest rates. From the lows last October, long-term Treasury yields    
jumped two percentage points. Starting in February, the Federal Reserve Board   
(the "Fed") pushed up short-term interest rates 1.75 percentage points in five  
incremental moves. The Fed is well aware that the economic cycle is past the    
point where inflation usually begins to pick up. Rising rates are now beginning 
to bite, with housing among the early victims. If the Fed is forced to move from
its present neutral policy to an even more restrictive one, the expansion could 
stall by 1996 -- but for now, enjoy the expansion.                              

MARSHALL BALANCED FUND                                                          

During the second half of the Fund's fiscal year, the financial markets were    
subjected to a myriad of stresses and strains primarily resulting from the Fed's
actions to increase interest rates. Their moves focused investor attention on   
inflationary expectations and possibly weaker economic growth next year. Despite
higher short-term rates, the dollar showed significant weakness, particularly   
against the Japanese yen. Also, unsettling to the market was the adverse        
leverage of interest rate hikes caused by widespread use of derivative          
instruments.                                                                    

Despite these concerns, the economic expansion continues with only modest       
upticks in inflation rates. GDP expanded at about a 3.5% pace during the first  
half of 1994, aided in the second quarter by inventory accumulation. The third  
quarter is likely to witness a winddown of excess inventories but a robust      
fourth quarter is forecast notwithstanding the high interest rate environment.  

Price increases did begin to appear in certain commodity areas, in particular in
certain types of paper and chemicals as capacity rates rose. Investors focused  
on these increases and drove stock prices higher in these areas. Also, on the   
positive side, health care issues rallied as prospects for the Administration's 
health plan dimmed. On the negative side, pressures on interest-rate related    
sectors, such as building and consumer durables, intensified as interest rates  
rose.                                                                           

The Fund underperformed the Standard & Poor's 500 Index ("S&P 500")* during the 
second half of fiscal 1994, primarily because of its holdings in interest       
sensitive securities. For this six-month period, the Marshall Balanced Fund     
declined 2.1%. For fiscal 1994, the Fund posted a decline of 0.2%. Going        
forward, the Marshall Balanced Fund will be focused on those stocks and sectors 
with clearly defined earnings growth. Earnings growth is likely to be rewarded  
in the period ahead as interest rate concerns cloud the overall market outlook. 

MARSHALL EQUITY INCOME FUND                                                     

The Fund, introduced on September 30, 1993, invests in a broadly diversified    
portfolio of common stocks with above average dividend yields. The portfolio is 
structured to equal or exceed a stated yield objective of 100 basis points (or  
1%) above the S&P 500. On August 31, 1994, the S&P 500 had a dividend yield of  
2.67%, while the Fund had a SEC 30-day yield of 3.30%** and a current portfolio 
yield of 4.28%.                                                                 

* This index is unmanaged.                                                    

** Performance quoted represents past performance. Investment return and        
  principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.                       

INVESTMENT REVIEW                                                               
--------------------------------------------------------------------------------

The Fund's emphasis on higher yielding common stocks makes the portfolio more   
interest rate sensitive than the general market. Since the Fund's date of       
inception, interest rates have risen sharply, creating a difficult period for   
income investors (stocks and bonds). During this time, the myth that utility    
stocks are conservative and safe investments into which widows, orphans, and    
retired persons should invest their savings has been dispelled. Unfortunately   
for some, it has been a very expensive lesson. For this time period, traditional
yield groups represented by the S&P Electric Utility Index and the S&P Telephone
Utility Index declined 22.01% and 7.86%, respectively.* Additionally, the energy
sector represented by the S&P Domestic Oil Index and the S&P International Oil  
Index declined 2.28% and 0.89%, respectively.*                                  

This eleven-month period is a classic example of the benefits of                
diversification. Thanks to the benefits of diversification, the Fund produced a 
total return of 2.02%.** The Fund currently holds overweighted positions in     
healthcare (12.9%), tobacco (5.1%), and banks (11.2%). As protection against    
another hike in interest rates by the Fed later this year and the weak stock    
market that we think would result, the Fund currently holds a 16% short-term    
investment reserve. We continue to underweight electric and telephone utilities 
and oil stocks.                                                                 

MARSHALL VALUE EQUITY FUND                                                      

The Fund, introduced on September 30, 1993, invests in value-oriented stocks    
which sell at discounts to their asset value and perceived business potential.  
These stocks are typically characterized as being undervalued, out-of-favor, or 
neglected. For the eleven months ended August 31, 1994, the Fund produced a     
total return of 10.59%.** This compares to total returns of 6.25% and 4.21% for 
the S&P 500 and the Barra Value Index, respectively.*                           

During this investment period, the stock market benefitted from a strengthening 
domestic economy, but was pressured by rising interest rates. Concerns of higher
inflation and more tightening measures by the Fed added to the market's         
volatility.                                                                     

Even though inflation concerns have undermined both stocks and bonds, the       
stronger economy has fueled overall business activity leading to rising         
corporate profitability and efficiency -- thus supporting higher stock prices.  
While this polarized investment environment has been negative for some stocks,  
others that have demonstrated earning improvement have been amply rewarded.     

Although stock selection in the Fund is done on a bottom-up basis, certain      
investment themes have emerged over the past year. One was to focus on companies
exhibiting pricing flexibility and rising sales. This is a result of increasing 
demand and limited supply for the company's products. These companies have been 
able to raise prices, thus improve profit margins. Stocks in the Fund           
experiencing this opportunity have been in the steel, copper, paper and chemical
businesses. The Fund made a significant commitment to these groups early in the 
year.                                                                           

Another theme has been to invest in companies involved in a major restructuring,
for the purpose of becoming more competitive. The Fund's largest stock position,
IBM, was based on this premise.                                                 

Also, the Fund took advantage of undervalued stocks within the health care group
as concerns over health care reform intensified. Subsequently, the stocks       
rebounded as reform measures moderated and industry consolidation actions       
increased. One such action was the tender offer at a 50% premium for the Fund's 
position in American Cyanamid.                                                  

* These indices are unmanaged.                                                

** Performance quoted represents past performance. Investment return and        
  principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.                       

INVESTMENT REVIEW                                                               
--------------------------------------------------------------------------------

MARSHALL STOCK FUND                                                             

During the second half of the Fund's fiscal year, the financial markets were    
subjected to a myriad of stresses and strains primarily resulting from the Fed's
actions to increase interest rates. Their moves focused investor attention on   
inflationary expectations and possibly weaker economic growth next year. Despite
higher short-term rates, the dollar showed significant weakness, particularly   
against the Japanese yen. Also, unsettling to the market was the adverse        
leverage of interest rate hikes caused by widespread use of derivative          
instruments.                                                                    

Despite these concerns, the economic expansion continues with only modest       
upticks in inflation rates. GDP expanded at about a 3.5% pace during the first  
half of 1994, aided in the second quarter by inventory accumulation. The third  
quarter is likely to witness a winddown of excess inventories but a robust      
fourth quarter is forecast notwithstanding the high interest rate environment.  

Price increases did begin to appear in certain commodity areas, in particular in
certain types of paper and chemicals as capacity rates rose. Investors focused  
on these increases and drove stock prices higher in these areas. Also, on the   
positive side, health care issues rallied as prospects for the Administration's 
health plan dimmed. On the negative side, pressures on interest-rate related    
sectors, such as building and consumer durables, intensified as interest rates  
rose.                                                                           

The Fund underperformed the S&P 500* during the second half of fiscal 1994,     
primarily because of its holdings in interest sensitive securities. For this    
six-month period, the Marshall Stock Fund declined 3.2% while the S&P 500 showed
an increase of 3.2%.* For fiscal 1994, the Fund posted a gain of 0.4% versus an 
increase of 5.4%* for the S&P 500. Going forward, the Marshall Stock Fund will  
be focused on those stocks and sectors with clearly defined earnings growth.    
Earnings growth is likely to be rewarded in the period ahead as interest rate   
concerns cloud the overall market outlook.                                      

MARSHALL MID-CAP STOCK FUND                                                     

Since its launch a short eleven months ago, the Marshall Mid-Cap Fund has grown 
to $53.6 million in net assets. During this time, the Fund has had to weather   
stormy investment waters as the favorable winds of declining interest rates     
changed abruptly in February 1994. The Fed dramatically altered the environment 
as it became convinced a strengthening economy would cause inflation to be a    
significant threat and proceeded to ratchet up the Fed Funds' rate several      
times. Mr. Clinton's attempt to restructure health care, 14% of the economy,    
caused moves in health care stocks as well as ripples in other industries which 
could be affected. The bond and stock market had to deal with major losses in   
both money funds and a multitude of corporations, as they fell victim to the    
"conservative" use of derivatives. Overall, the popular averages have masked    
significant turmoil in the market. Smith Barney reports that from its high, the 
average S&P 500 stock is down 18%, the average NYSE stock is down 21%, and the  
average NASDAQ stock is down over 30%. In the S&P Mid-Cap 400*, 50% of all      
stocks through September 1994 are off over 5% with 40% off in excess of 10%.    

In this climate, the Fund has produced a slight negative return of (2.74%)**    
versus a slight positive return of 3.5%* for the S&P Mid-Cap 400. However, as   
interest rates have stabilized, the Fund has rallied 11.1% from its lows of June
versus a 9.8%* gain in the S&P Mid-Cap 400.                                     

As the Fund enters its second year, we are staying consistent with our charter  
of selecting rapidly growing smaller stocks. The median market capitalization of
the Fund is $1.6 billion. Of 55 issues, 17 are less than $1 billion and 37 are  
less than $2 billion.                                                           

We expect the market in fiscal 1995 to be buffeted by continued concerns over   
the Fed's policy, uncertainty over the strength or weakness of the economy, and 
inflation. While the consensus views would emphasize higher rates for both bond 
yields and inflation, we believe the consensus will likely be in error and look 
for moderation in economic growth and level or declining bond yields. We will   
use this period to continue to acquire companies with higher growth rates at    
attractive prices.                                                              

* These indices are unmanaged.                                                

** Performance quoted represents past performance. Investment return and        
  principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.                       

MARSHALL BALANCED FUND                                                          
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GROWTH OF $10,000 INVESTED IN MARSHALL BALANCED FUND

   The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Balanced Fund (the "Fund") from September 30, 1993 (start of           
performance) to August 31, 1994 compared to the Standard & Poor's 500 ("S&P     
500") and the Lehman Brother's Government/Corporate Intermediate ("LGCI").*     

                                                                [Download Table]

                                                                    Lehman    
                                                                   Brothers   
                                                                    Govern-   
                                                                   ment/Corp  
                                                                 orate Inter- 
      Measurement Period         Marshall Bal-    Standard &      mediate in- 
    (Fiscal Year Covered)         anced Fund      Poor's 500          dex     
                                                                              
9/30/93                                  10000           10000           10000
8/31/94                                   9947           10630           10074
                    AVERAGE ANNUAL TOTAL RETURN FOR THE                       
                        PERIOD ENDED AUGUST 31, 1994                          
Start of Performance (September 30, 1993) (Cumulative)...........   (0.53%)   

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE     
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR   
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.                           

* The Fund's performance assumes the reinvestment of all dividends and          
distributions. The S&P 500 and the LGCI have been adjusted to reflect       
reinvestment of dividends on securities in the indices.                     

The S&P 500 and LGCI are not adjusted to reflect sales loads, expenses, or  
other fees that the SEC requires to be reflected in the Fund's performance. 

MARSHALL EQUITY INCOME FUND                                                     
--------------------------------------------------------------------------------

GROWTH OF $10,000 INVESTED IN MARSHALL EQUITY INCOME FUND 

   The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Equity Income Fund (the "Fund") from September 30, 1993 (start of      
performance) to August 31, 1994 compared to the Standard & Poor's 500 (S&P 500) 
and Standard & Poor's/BARRA Equity Income Index ("SPBEI").*                     

                                                                [Download Table]

                                                                  Standard &  
                                 Marshall Eq-                    Poor's Barra 
      Measurement Period          uity Income     Standard &      Eq uity In- 
    (Fiscal Year Covered)            Fund         Poor's 500      come Index  
                                                                              
9/30/93                                  10000           10000           10000
8/31/94                                  10202           10630           10486
                     AVERAGE ANNUAL TOTAL RETURN FOR THE                      
                        PERIOD ENDED AUGUST 31, 1994                          
 Start of Performance (September 30, 1993) (Cumulative)............    2.02%  

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE     
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR   
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.                           

* The Fund's performance assumes the reinvestment of all dividends and          
  distributions. The S&P 500 and SPBEI has been adjusted to reflect reinvestment
of dividends on securities in the indices.                                  

The S&P 500 and SPBEI are not adjusted to reflect sales loads, expenses, or 
other fees that the SEC requires to be reflected in the Fund's performance. 

MARSHALL VALUE EQUITY FUND                                                      
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GROWTH OF $10,000 INVESTED IN MARSHALL VALUE EQUITY FUND

   The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Value Equity Fund (the "Fund") from September 30, 1993 (start of       
performance) to August 31, 1994 compared to the Standard & Poor's 500 Index     
("S&P 500") and the Standard & Poor's/BARRA Value Index ("SPBV").*              

                                                                [Download Table]

                                   Marshall                       Standard &  
      Measurement Period         Value Equity     Standard &     Poor's Barra 
    (Fiscal Year Covered)            Fund         Poor's 500     Val ue Index 
                                                                              
9/30/93                                  10000           10000           10000
8/31/94                                  11059           10630           10421
                     AVERAGE ANNUAL TOTAL RETURN FOR THE                      
                        PERIOD ENDED AUGUST 31, 1994                          
  Start of Performance (September 30, 1993) (Cumulative)............   10.59% 

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE     
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR   
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.                           

* The Fund's performance assumes the reinvestment of all dividends and          
  distributions. The S&P 500 and SPBV have been adjusted to reflect reinvestment
of dividends on securities in the indices.                                  

The S&P 500 and SPBV are not adjusted to reflect sales loads, expenses, or  
other fees that the SEC requires to be reflected in the Fund's performance. 

MARSHALL STOCK FUND                                                             
--------------------------------------------------------------------------------

GROWTH OF $10,000 INVESTED IN MARSHALL STOCK FUND 

   The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Stock Fund (the "Fund") from November 20, 1992 (start of performance)  
to August 31, 1994 compared to the Standard & Poor's 500 Index ("SP500").*      

                                                                [Download Table]

                                                  Standard &                 
      Measurement Period           Marshall       Poor's 500                 
    (Fiscal Year Covered)         Stock Fund         Index                   
                                                                             
11/20/92                                 10000           10000               
8/31/93                                  10167           10977               
8/31/94                                  10212           11577               
                     AVERAGE ANNUAL TOTAL RETURN FOR THE                     
                        PERIOD ENDED AUGUST 31, 1994                         
  1 Year............................................................    0.44%
  Start of Performance (November 20, 1992)..........................    1.19%

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE     
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR   
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.                           

* The Fund's performance assumes the reinvestment of all dividends and          
distributions. The SP500 has been adjusted to reflect reinvestment of       
dividends on securities in the index.                                       

  The SP500 is not adjusted to reflect sales loads, expenses, or other fees that
the SEC requires to be reflected in the Fund's performance.                 

MARSHALL MID-CAP STOCK FUND                                                     
--------------------------------------------------------------------------------

GROWTH OF $10,000 INVESTED IN MARSHALL MID-CAP STOCK FUND 

   The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Mid-Cap Stock Fund (the "Fund") from September 30, 1993 (start of      
performance) to August 31, 1994 compared to the Standard & Poor's Mid-Cap 400   
Index ("SPMC").*                                                                

                                                                [Download Table]

                                   Marshall                                  
      Measurement Period         Mid-Cap Stock    S&P Mid-Cap                
    (Fiscal Year Covered)            Fund          400 Index                 
                                                                             
9/30/93                                  10000           10000               
8/31/94                                   9726           10354               
                     AVERAGE ANNUAL TOTAL RETURN FOR THE                     
                        PERIOD ENDED AUGUST 31, 1994                         
  Start of Performance (September 30, 1993) (Cumulative)............  (2.74%)

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE     
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR   
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.                           

* The Fund's performance assumes the reinvestments of all dividends and         
  distributions. The SPMC has been adjusted to reflect reinvestment of dividends
on securities in the index.                                                 

 The SPMC is not adjusted to reflect sales loads, expenses, or other fees that
the SEC requires to be reflected in the Fund's performance.                 

MARSHALL BALANCED FUND                                                          

PORTFOLIO OF INVESTMENTS                                                        
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

  SHARES                                                                                 VALUE   
-----------         ----------------------------------------------------------------  -----------
                                                                                                 
LONG-TERM INVESTMENTS--94.4%                                                                     
------------------------------------------------------------------------------------             
COMMON STOCKS--58.0%                                                                             
------------------------------------------------------------------------------------             
                    CAPITAL GOODS--17.3%                                                         
                    ----------------------------------------------------------------             
                    Electrical Equipment                                                         
                    ----------------------------------------------------------------             
      5,000         General Electric Co.                                              $   248,750
                    ----------------------------------------------------------------  -----------
                    Electronics                                                                  
                    ----------------------------------------------------------------             
      5,500         Harris Corp.                                                          266,063
                    ----------------------------------------------------------------             
      3,000         Intel Corp.                                                           197,250
                    ----------------------------------------------------------------             
      5,000      ** Litton Industries, Inc.                                               194,375
                    ----------------------------------------------------------------             
     10,000      ** Solectron Corp.                                                       305,000
                    ----------------------------------------------------------------             
      2,000         Texas Instruments, Inc.                                               155,750
                    ----------------------------------------------------------------  -----------
                    Total                                                               1,118,438
                    ----------------------------------------------------------------  -----------
                    Office Equipment                                                             
                    ----------------------------------------------------------------             
      9,000         Adobe Systems, Inc.                                                   285,750
                    ----------------------------------------------------------------             
     15,000      ** Indigo                                                                264,375
                    ----------------------------------------------------------------             
      4,500      ** Lotus Development Co.                                                 183,937
                    ----------------------------------------------------------------  -----------
                    Total                                                                 734,062
                    ----------------------------------------------------------------  -----------
                    Other Capital Goods                                                          
                    ----------------------------------------------------------------             
      5,000      ** ADC Telecommunications, Inc. ++                                       232,500
                    ----------------------------------------------------------------             
      4,000         Alco Standard Corp.                                                   261,000
                    ----------------------------------------------------------------             
     12,000      ** Computer Sciences Corp.                                               538,500
                    ----------------------------------------------------------------             
      4,500         Ericsson (LM) Telephone Co.                                           243,563
                    ----------------------------------------------------------------             
      3,000         Minnesota Mining & Mfg. Co.                                           165,375
                    ----------------------------------------------------------------             
      5,000         Parker Hannifin Corp.                                                 210,000
                    ----------------------------------------------------------------  -----------
                    Total                                                               1,650,938
                    ----------------------------------------------------------------  -----------
                    Total Capital Goods                                                 3,752,188
                    ----------------------------------------------------------------  -----------
                    CONSUMER DURABLES--4.3%                                                      
                    ----------------------------------------------------------------             
                    Automotive and Related                                                       
                    ----------------------------------------------------------------             
       7000         Federal Mogul Corp.                                                   200,375
                    ----------------------------------------------------------------             
      4,000         Hayes Wheels International, Inc.                                       98,000
                    ----------------------------------------------------------------  -----------
                    Total                                                                 298,375
                    ----------------------------------------------------------------  -----------
                    Other Consumer Durables                                                      
                    ----------------------------------------------------------------             
     15,000      ** American Homestar Corp.                                               138,750
                    ----------------------------------------------------------------             
      5,000         Masco Corp.                                                           138,750
                    ----------------------------------------------------------------             
      5,000         PPG Industries, Inc.                                                  208,125
                    ----------------------------------------------------------------             

MARSHALL BALANCED FUND                                                          
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

  SHARES                                                                                 VALUE   
-----------         ----------------------------------------------------------------  -----------
                                                                                                 
LONG-TERM INVESTMENTS--CONTINUED                                                                 
------------------------------------------------------------------------------------             
COMMON STOCKS--CONTINUED                                                                         
------------------------------------------------------------------------------------             
                    CONSUMER DURABLES--CONTINUED                                                 
                    ----------------------------------------------------------------             
                    Other Consumer Durables--Continued                                           
                    ----------------------------------------------------------------             
      8,000         Shaw Industries, Inc.                                             $   139,000
                    ----------------------------------------------------------------  -----------
                    Total                                                                 624,625
                    ----------------------------------------------------------------  -----------
                    Total Consumer Durables                                               923,000
                    ----------------------------------------------------------------  -----------
                    CONSUMER NON-DURABLES--23.4%                                                 
                    ----------------------------------------------------------------             
                    Beverage and Foods                                                           
                    ----------------------------------------------------------------             
      3,000         Kellogg Co.                                                           169,875
                    ----------------------------------------------------------------             
     10,000         McDonalds Corp.                                                       282,500
                    ----------------------------------------------------------------  -----------
                    Total                                                                 452,375
                    ----------------------------------------------------------------  -----------
                    Health Care                                                                  
                    ----------------------------------------------------------------             
      6,000      ** Amgen, Inc.                                                           316,500
                    ----------------------------------------------------------------             
      8,000         Cardinal Distribution, Inc.                                           310,000
                    ----------------------------------------------------------------             
     12,222      ** Coram Healthcare Corp.                                                189,441
                    ----------------------------------------------------------------             
     11,000         IVAX Corp. ++                                                         218,625
                    ----------------------------------------------------------------  -----------
                    Total                                                               1,034,566
                    ----------------------------------------------------------------  -----------
                    Photography                                                                  
                    ----------------------------------------------------------------             
      7,500         Eastman Kodak Co.                                                     373,125
                    ----------------------------------------------------------------  -----------
                    Media                                                                        
                    ----------------------------------------------------------------             
      5,500         Capital Cities/ABC, Inc.                                              461,313
                    ----------------------------------------------------------------             
        730         CBS, Inc.                                                             234,604
                    ----------------------------------------------------------------             
      5,000         McGraw-Hill, Inc.                                                     348,125
                    ----------------------------------------------------------------             
     12,600      ** Telecommunications, Inc.                                              284,287
                    ----------------------------------------------------------------  -----------
                    Total                                                               1,328,329
                    ----------------------------------------------------------------  -----------
                    Retail                                                                       
                    ----------------------------------------------------------------             
      5,000      ** Kohl's Corp.                                                          243,125
                    ----------------------------------------------------------------             
      9,000      ** Nine West Group, Inc.                                                 254,250
                    ----------------------------------------------------------------             
     10,000      ** Price Costco, Inc.                                                    156,875
                    ----------------------------------------------------------------  -----------
                    Total                                                                 654,250
                    ----------------------------------------------------------------  -----------
                    Services                                                                     
                    ----------------------------------------------------------------             
     12,000         Browning-Ferris Industries, Inc.                                      379,500
                    ----------------------------------------------------------------             
      4,500         Dun & Bradstreet Corp.                                                259,313
                    ----------------------------------------------------------------             
      3,000      ** Federal Express Corp.                                                 212,625
                    ----------------------------------------------------------------             
      9,000      ** GTECH Holdings Corp.                                                  209,250
                    ----------------------------------------------------------------  -----------
                    Total                                                               1,060,688
                    ----------------------------------------------------------------  -----------

MARSHALL BALANCED FUND                                                          
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

  SHARES                                                                                 VALUE   
-----------         ----------------------------------------------------------------  -----------
                                                                                                 
LONG-TERM INVESTMENTS--CONTINUED                                                                 
------------------------------------------------------------------------------------             
COMMON STOCKS--CONTINUED                                                                         
------------------------------------------------------------------------------------             
                    CONSUMER NON-DURABLES--CONTINUED                                             
                    ----------------------------------------------------------------             
                    Utilities--Telephone                                                         
                    ----------------------------------------------------------------             
      4,000         Southwestern Bell Corp.                                           $   165,500
                    ----------------------------------------------------------------  -----------
                    Total Consumer Non-Durables                                         5,068,833
                    ----------------------------------------------------------------  -----------
                    ENERGY--7.0%                                                                 
                    ----------------------------------------------------------------             
                    International Oil                                                            
                    ----------------------------------------------------------------             
      2,500         Mobil Corp.                                                           210,625
                    ----------------------------------------------------------------             
      4,200         Royal Dutch Petroleum Co. ++                                          473,025
                    ----------------------------------------------------------------  -----------
                    Total                                                                 683,650
                    ----------------------------------------------------------------  -----------
                    Oil & Gas Products                                                           
                    ----------------------------------------------------------------             
      3,000         Anadarko Petroleum Corp.                                              140,625
                    ----------------------------------------------------------------             
      7,100         Enron Corp.                                                           216,550
                    ----------------------------------------------------------------             
      6,000         Noble Affiliates, Inc.                                                154,500
                    ----------------------------------------------------------------  -----------
                    Total                                                                 511,675
                    ----------------------------------------------------------------  -----------
                    Oil Service                                                                  
                    ----------------------------------------------------------------             
      2,500         Schlumberger, Ltd.                                                    142,500
                    ----------------------------------------------------------------             
      4,000      ** Western Atlas, Inc.                                                   177,500
                    ----------------------------------------------------------------  -----------
                    Total                                                                 320,000
                    ----------------------------------------------------------------  -----------
                    Total Energy                                                        1,515,325
                    ----------------------------------------------------------------  -----------
                    FINANCIAL--6.0%                                                              
                    ----------------------------------------------------------------             
                    Insurance                                                                    
                    ----------------------------------------------------------------             
      1,700         American International Group, Inc.                                    159,800
                    ----------------------------------------------------------------             
      8,000         MGIC Investment Corp.                                                 246,000
                    ----------------------------------------------------------------  -----------
                    Total                                                                 405,800
                    ----------------------------------------------------------------  -----------
                    Other Financial                                                              
                    ----------------------------------------------------------------             
      7,500      ** Capstone Capital Trust, Inc.                                          132,188
                    ----------------------------------------------------------------             
      5,000         First Chicago Corp.                                                   260,000
                    ----------------------------------------------------------------             
      6,000         First Financial Management Corp.                                      364,500
                    ----------------------------------------------------------------             
      8,000         Regency Realty Corp.                                                  136,000
                    ----------------------------------------------------------------  -----------
                    Total                                                                 892,688
                    ----------------------------------------------------------------  -----------
                    Total Financial                                                     1,298,488
                    ----------------------------------------------------------------  -----------
                    TOTAL COMMON STOCKS (IDENTIFIED COST $12,467,354)                  12,557,834
                    ----------------------------------------------------------------  -----------

MARSHALL BALANCED FUND                                                          
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                       
  AMOUNT                                                                                 VALUE   
-----------         ----------------------------------------------------------------  -----------
                                                                                                 
LONG-TERM INVESTMENTS--CONTINUED                                                                 
------------------------------------------------------------------------------------             
U.S. TREASURY NOTES--25.5%                                                                       
------------------------------------------------------------------------------------             
$   830,000         5.50%, 4/30/96 ++                                                 $   824,032
                    ----------------------------------------------------------------             
    480,000         6.375%, 1/15/2000                                                     470,501
                    ----------------------------------------------------------------             
     75,000         6.50%, 5/15/97                                                         75,243
                    ----------------------------------------------------------------             
    545,000         6.75%, 2/28/97                                                        550,902
                    ----------------------------------------------------------------             
    705,000         6.75%, 6/30/99                                                        704,006
                    ----------------------------------------------------------------             
    550,000         7.25%, 8/15/2004 ++                                                   552,833
                    ----------------------------------------------------------------             
    700,000         7.625%, 4/30/96                                                       718,382
                    ----------------------------------------------------------------             
    175,000         7.875%, 1/15/98 ++                                                    182,095
                    ----------------------------------------------------------------             
    120,000         7.875%, 8/15/2001                                                     125,870
                    ----------------------------------------------------------------             
    400,000         8.25%, 7/15/98                                                        421,844
                    ----------------------------------------------------------------             
    250,000         8.625%, 10/15/95                                                      258,437
                    ----------------------------------------------------------------             
    610,000         9.25%, 1/15/96                                                        638,133
                    ----------------------------------------------------------------  -----------
                    TOTAL U.S. TREASURY NOTES (IDENTIFIED COST $5,711,323)              5,522,278
                    ----------------------------------------------------------------  -----------
CORPORATE BONDS--8.2%                                                                            
------------------------------------------------------------------------------------             
                    ASSET-BACKED SECURITIES--1.2%                                                
                    ----------------------------------------------------------------             
     90,000         American Express Master, 5.375%, 7/15/2001                             81,352
                    ----------------------------------------------------------------             
    180,000         First Chicago Master Trust, 7.15%, 4/15/2001                          180,000
                    ----------------------------------------------------------------  -----------
                    Total Asset-Backed Securities                                         261,352
                    ----------------------------------------------------------------  -----------
                    BANKING--1.6%                                                                
                    ----------------------------------------------------------------             
     75,000         First Bank N.A., 7.55%, 6/15/2004                                      73,257
                    ----------------------------------------------------------------             
    175,000         NBD Bank, 5.00%, 1/30/98                                              164,855
                    ----------------------------------------------------------------             
    100,000         Wachovia Bank, 5.50%, 6/29/98                                          94,922
                    ----------------------------------------------------------------  -----------
                    Total Banking                                                         333,034
                    ----------------------------------------------------------------  -----------
                    FINANCIALS--1.9%                                                             
                    ----------------------------------------------------------------             
     75,000         Associates Corp. of North America, 7.05%, 5/15/97                      75,275
                    ----------------------------------------------------------------             
    100,000         Associates Corp. of North America, 6.65%, 6/16/97                     100,012
                    ----------------------------------------------------------------             
    100,000         Chrysler Financial Corp., 9.50%, 12/15/99                             108,875
                    ----------------------------------------------------------------             
    135,000         Lehman Brothers, Inc., 7.00%, 5/15/97 ++                              134,243
                    ----------------------------------------------------------------  -----------
                    Total Financials                                                      418,405
                    ----------------------------------------------------------------  -----------
                    INDUSTRIALS--0.9%                                                            
                    ----------------------------------------------------------------             
    200,000         Burlington Resources, Inc., 7.15%, 5/1/99                             199,180
                    ----------------------------------------------------------------  -----------
                    MORTGAGE--1.0%                                                               
                    ----------------------------------------------------------------             
    225,000         Securitized Asset Sales, Inc., 7.00%, (Series 1994-5A3),                     
                    7/25/2024                                                             213,891
                    ----------------------------------------------------------------  -----------

MARSHALL BALANCED FUND                                                          
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                         
  AMOUNT                                                                                  VALUE    
-----------         ----------------------------------------------------------------   ----------- 
                                                                                                   
LONG-TERM INVESTMENTS--CONTINUED                                                                   
------------------------------------------------------------------------------------               
CORPORATE BONDS--CONTINUED                                                                         
------------------------------------------------------------------------------------               
                    YANKEE--1.6%                                                                   
                    ----------------------------------------------------------------               
$    15,000         African Development Bank, 13.25%, 12/1/94                          $    15,247 
                    ----------------------------------------------------------------               
    150,000         CRA Financial USA, Ltd., 6.50%, 12/1/2003                              136,463 
                    ----------------------------------------------------------------               
    200,000         Hanson Overseas BV Notes, 7.375%, 1/15/2003                            195,356 
                    ----------------------------------------------------------------   ----------- 
                    Total Yankee                                                           347,066 
                    ----------------------------------------------------------------   ----------- 
                    TOTAL CORPORATE BONDS (IDENTIFIED COST $1,819,337)                   1,772,928 
                    ----------------------------------------------------------------   ----------- 
U.S. GOVERNMENT OBLIGATIONS--2.7%                                                                  
------------------------------------------------------------------------------------               
                    FEDERAL HOME LOAN BANK--0.6%                                                   
                    ----------------------------------------------------------------               
    135,000         7.26%, 9/6/2001                                                        135,676 
                    ----------------------------------------------------------------   ----------- 
                    FEDERAL HOME LOAN MORTGAGE CORP.--1.0%                                         
                    ----------------------------------------------------------------               
    116,664         6.00%, 11/15/2019 (Series 1486-A)                                      112,174 
                    ----------------------------------------------------------------               
    100,000         7.00%, 11/15/2020 (Series 96-D)                                         95,533 
                    ----------------------------------------------------------------   ----------- 
                    Total Federal Home Loan Mortgage Corp.                                 207,707 
                    ----------------------------------------------------------------   ----------- 
                    GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--1.1%                                 
                    ----------------------------------------------------------------               
    242,753         7.50%, 3/15/2009                                                       242,145 
                    ----------------------------------------------------------------   ----------- 
                    TOTAL U.S. GOVERNMENT OBLIGATIONS (IDENTIFIED COST $599,668)           585,528 
                    ----------------------------------------------------------------   ----------- 
                    TOTAL LONG-TERM INVESTMENTS (IDENTIFIED COST $20,597,682)           20,438,568 
                    ----------------------------------------------------------------   ----------- 
*REPURCHASE AGREEMENT--3.3%                                                                        
------------------------------------------------------------------------------------               
    723,000         BZW Securities, Inc., 4.80%, dated 8/31/94, due 9/1/94                         
                    (at amortized cost)                                                    723,000 
                    ----------------------------------------------------------------   ----------- 
                    TOTAL INVESTMENTS (IDENTIFIED COST $21,320,682)                    $21,161,568+
                    ----------------------------------------------------------------   ----------- 
   * The repurchase agreement is fully collateralized by U.S. government and/or agency             
     obligations based on market prices at the date of the portfolio.                              
  ** Non-income producing.                                                                         
   + The cost of investments for federal tax purposes amounts to $21,341,204. The net              
     unrealized depreciation of investments on a federal tax basis amounts to $179,636, which      
     is comprised of $809,251 appreciation and $988,887 depreciation at August 31, 1994.           
  ++ Certain shares on loan to broker.                                                             

Note: The categories of investments are shown as a percentage of net assets     
($21,659,369) at August 31, 1994.                                   

(See Notes which are an integral part of the Financial Statements)              

MARSHALL BALANCED FUND                                                          

STATEMENT OF ASSETS AND LIABILITIES                                             
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                               
ASSETS:                                                                                        
---------------------------------------------------------------------------------              
Investments in securities                                             $20,438,568              
-------------------------------------------------------------------                            
Investments in repurchase agreements                                      723,000              
-------------------------------------------------------------------   -----------              
     Total investments, at value (identified cost $21,320,682, tax cost                        
     $21,341,204)                                                                  $21,161,568 
---------------------------------------------------------------------------------              
Cash                                                                                       503 
---------------------------------------------------------------------------------              
Interest receivable                                                                     99,013 
---------------------------------------------------------------------------------              
Receivable for investments sold                                                        954,420 
---------------------------------------------------------------------------------              
Collateral for security lending                                                      2,653,719 
---------------------------------------------------------------------------------              
Dividends receivable                                                                    26,655 
---------------------------------------------------------------------------------              
Deferred expenses                                                                       16,591 
---------------------------------------------------------------------------------  ----------- 
     Total assets                                                                   24,912,469 
---------------------------------------------------------------------------------              
LIABILITIES:                                                                                   
---------------------------------------------------------------------------------              
Security lending payable                                                2,653,719              
-------------------------------------------------------------------                            
Payable for investments purchased                                         542,218              
-------------------------------------------------------------------                            
Payable for capital stock redeemed                                         17,993              
-------------------------------------------------------------------                            
Accrued expenses                                                           39,170              
-------------------------------------------------------------------   -----------              
     Total liabilities                                                               3,253,100 
---------------------------------------------------------------------------------  ----------- 
NET ASSETS for 2,224,338 shares of capital stock outstanding                       $21,659,369 
---------------------------------------------------------------------------------  ----------- 
NET ASSETS CONSIST OF:                                                                         
---------------------------------------------------------------------------------              
Paid-in capital                                                                    $22,386,483 
---------------------------------------------------------------------------------              
Net unrealized depreciation of investments                                            (159,114)
---------------------------------------------------------------------------------              
Accumulated net realized loss on investments                                          (664,593)
---------------------------------------------------------------------------------              
Undistributed net investment income                                                     96,593 
---------------------------------------------------------------------------------  ----------- 
     Total Net Assets                                                              $21,659,369 
---------------------------------------------------------------------------------  ----------- 
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:                            
(net assets of $21,659,369 / 2,224,338 shares of capital stock outstanding)              $9.74 
---------------------------------------------------------------------------------  ----------- 

(See Notes which are an integral part of the Financial Statements)              

MARSHALL BALANCED FUND                                                          

STATEMENT OF OPERATIONS                                                         
PERIOD ENDED AUGUST 31, 1994*                                                   
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                                
INVESTMENT INCOME:                                                                              
------------------------------------------------------------------------------------            
Interest income (net of interest expense of $19,721)                                  $ 613,409 
------------------------------------------------------------------------------------            
Dividend income                                                                         178,674 
------------------------------------------------------------------------------------  --------- 
     Total investment income                                                            792,083 
------------------------------------------------------------------------------------            
EXPENSES--                                                                                      
------------------------------------------------------------------------------------            
Investment advisory fee                                                     $162,629            
------------------------------------------------------------------------                        
Directors' fees                                                                  180            
------------------------------------------------------------------------                        
Administrative personnel and services fee                                     45,479            
------------------------------------------------------------------------                        
Custodian fees                                                                 4,337            
------------------------------------------------------------------------                        
Transfer and dividend disbursing agent fees and expenses                      12,054            
------------------------------------------------------------------------                        
Legal fees                                                                     3,392            
------------------------------------------------------------------------                        
Printing and postage                                                          10,755            
------------------------------------------------------------------------                        
Portfolio accounting fees                                                     42,731            
------------------------------------------------------------------------                        
Taxes                                                                          2,201            
------------------------------------------------------------------------                        
Shareholder services fees                                                      3,253            
------------------------------------------------------------------------                        
Miscellaneous                                                                  3,868            
------------------------------------------------------------------------    --------            
     Total expenses                                                          290,879            
------------------------------------------------------------------------                        
Deduct--                                                                                        
------------------------------------------------------------------------                        
  Waiver of investment advisory fee                              $76,957                        
--------------------------------------------------------------                                  
  Waiver of administrative personnel and services fee             24,698                        
--------------------------------------------------------------                                  
  Waiver of custodian fees                                         2,710     104,365            
--------------------------------------------------------------   -------    --------            
     Net expenses                                                                       186,514 
------------------------------------------------------------------------------------  --------- 
          Net investment income                                                         605,569 
------------------------------------------------------------------------------------  --------- 
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:                                                    
------------------------------------------------------------------------------------            
Net realized loss on investments (identified cost basis)                               (664,593)
------------------------------------------------------------------------------------            
Net change in unrealized depreciation on investments                                   (159,114)
------------------------------------------------------------------------------------  --------- 
     Net realized and unrealized loss on investments                                   (823,707)
------------------------------------------------------------------------------------  --------- 
          Change in net assets resulting from operations                              $(218,138)
------------------------------------------------------------------------------------  --------- 

* For the period from October 1, 1993 (date of initial public investment) to    
August 31, 1994.                                                                
(See Notes which are an integral part of the Financial Statements)              

MARSHALL BALANCED FUND                                                          

STATEMENT OF CHANGES IN NET ASSETS                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                             PERIOD ENDED   
                                                                           AUGUST 31, 1994* 
                                                                           -----------------
                                                                                            
INCREASE (DECREASE) IN NET ASSETS:                                                          
-------------------------------------------------------------------------                   
OPERATIONS--                                                                                
-------------------------------------------------------------------------                   
Net investment income                                                        $     605,569  
-------------------------------------------------------------------------                   
Net realized loss on investments ($33,023 net loss, as computed for                         
federal tax purposes)                                                             (664,593) 
-------------------------------------------------------------------------                   
Net change in unrealized depreciation on investments                              (159,114) 
-------------------------------------------------------------------------  ---------------  
     Change in net assets resulting from operations                               (218,138) 
-------------------------------------------------------------------------  ---------------  
DISTRIBUTIONS TO SHAREHOLDERS--                                                             
-------------------------------------------------------------------------                   
Dividends to shareholders from net investment income                              (508,976) 
-------------------------------------------------------------------------  ---------------  
CAPITAL STOCK TRANSACTIONS--                                                                
-------------------------------------------------------------------------                   
Proceeds from sale of shares                                                    45,382,092  
-------------------------------------------------------------------------                   
Net asset value of shares issued to shareholders in payment of dividends                    
declared                                                                           507,095  
-------------------------------------------------------------------------                   
Cost of shares redeemed                                                        (23,502,704) 
-------------------------------------------------------------------------  ---------------  
     Change in net assets from capital stock transactions                       22,386,483  
-------------------------------------------------------------------------  ---------------  
          Change in net assets                                                  21,659,369  
-------------------------------------------------------------------------                   
NET ASSETS:                                                                                 
-------------------------------------------------------------------------                   
Beginning of period                                                                     --  
-------------------------------------------------------------------------  ---------------  
End of period (including undistributed net investment income of $96,593)     $  21,659,369  
-------------------------------------------------------------------------  ---------------  

* For the period from October 1, 1993 (date of initial public investment) to    
August 31, 1994.                                                                
(See Notes which are an integral part of the Financial Statements)              

MARSHALL BALANCED FUND                                                          

FINANCIAL HIGHLIGHTS                                                            
--------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)                                 

                                                        [Enlarge/Download Table]

                                                                           PERIOD ENDED   
                                                                         AUGUST 31, 1994* 
                                                                         -----------------
                                                                                          
NET ASSET VALUE, BEGINNING OF PERIOD                                           $10.00     
----------------------------------------------------------------------                    
INCOME FROM INVESTMENT OPERATIONS                                                         
----------------------------------------------------------------------                    
  Net investment income                                                          0.25     
----------------------------------------------------------------------                    
  Net realized and unrealized loss on investments                               (0.30)    
----------------------------------------------------------------------    -----------     
  Total from investment operations                                              (0.05)    
----------------------------------------------------------------------    -----------     
LESS DISTRIBUTIONS                                                                        
----------------------------------------------------------------------                    
  Dividends to shareholders from net investment income                          (0.21)    
----------------------------------------------------------------------    -----------     
NET ASSET VALUE, END OF PERIOD                                                $  9.74     
----------------------------------------------------------------------   -----------      
TOTAL RETURN**                                                                  (0.53%)   
----------------------------------------------------------------------                    
RATIOS TO AVERAGE NET ASSETS                                                              
----------------------------------------------------------------------                    
  Expenses                                                                       0.86%(b) 
----------------------------------------------------------------------                    
  Net investment income                                                          2.78%(b) 
----------------------------------------------------------------------                    
  Expense waiver (a)                                                             0.48%(b) 
----------------------------------------------------------------------                    
SUPPLEMENTAL DATA                                                                         
----------------------------------------------------------------------                    
  Net assets, end of period (000 omitted)                                     $21,659     
----------------------------------------------------------------------                    
  Portfolio turnover rate                                                         138%    
----------------------------------------------------------------------                    
   * Reflects operations for the period from October 1, 1993 (date of initial public      
     investment) to August 31, 1994.                                                      
  ** Based on net asset value.                                                            
 (a) This voluntary expense decrease is reflected in both the expense and net investment  
     income ratios shown above.                                                           
 (b) Computed on an annualized basis.                                                     

(See Notes which are an integral part of the Financial Statements)              

MARSHALL EQUITY INCOME FUND                                                     

PORTFOLIO OF INVESTMENTS                                                        
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

  SHARES                                                                                   VALUE   
----------         -------------------------------------------------------------------  -----------
                                                                                                   
COMMON STOCKS--81.9%                                                                               
--------------------------------------------------------------------------------------             
                   CAPITAL GOODS--8.8%                                                             
                   -------------------------------------------------------------------             
                   Electrical Equipment                                                            
                   -------------------------------------------------------------------             
    47,000         General Electric Co.                                                 $ 2,338,250
                   -------------------------------------------------------------------  -----------
                   Other Capital Goods                                                             
                   -------------------------------------------------------------------             
     3,300         Briggs & Stratton Corp.                                                  254,512
                   -------------------------------------------------------------------             
    13,000         Minnesota Mining & Mfg. Co. ++                                           716,625
                   -------------------------------------------------------------------             
    19,900         Ogden Corp.                                                              445,262
                   -------------------------------------------------------------------             
    12,300         Tenneco, Inc.                                                            605,775
                   -------------------------------------------------------------------  -----------
                   Total                                                                  2,022,174
                   -------------------------------------------------------------------  -----------
                   Total Capital Goods                                                    4,360,424
                   -------------------------------------------------------------------  -----------
                   CONSUMER DURABLES--3.2%                                                         
                   -------------------------------------------------------------------             
                   Appliances                                                                      
                   -------------------------------------------------------------------             
    18,200         Maytag Corp.                                                             332,150
                   -------------------------------------------------------------------  -----------
                   Automotive and Related                                                          
                   -------------------------------------------------------------------             
    27,600         Ford Motor Co. ++                                                        807,300
                   -------------------------------------------------------------------  -----------
                   Building and Forest Products                                                    
                   -------------------------------------------------------------------             
     9,400         Weyerhaeuser Co.                                                         431,225
                   -------------------------------------------------------------------  -----------
                   Total Consumer Durables                                                1,570,675
                   -------------------------------------------------------------------  -----------
                   CONSUMER NON-DURABLES--23.2%                                                    
                   -------------------------------------------------------------------             
                   Health Care                                                                     
                   -------------------------------------------------------------------             
    26,000         Abbott Labs                                                              780,000
                   -------------------------------------------------------------------             
     9,700         American Home Products Corp.                                             575,937
                   -------------------------------------------------------------------             
    15,000         Baxter International, Inc.                                               425,625
                   -------------------------------------------------------------------             
    20,800         Bristol Myers Squibb Co.                                               1,196,000
                   -------------------------------------------------------------------             
    43,100         Merck & Co., Inc.                                                      1,470,788
                   -------------------------------------------------------------------             
     9,200         Pfizer, Inc.                                                             627,900
                   -------------------------------------------------------------------             
     7,300         Schering Plough Corp.                                                    510,088
                   -------------------------------------------------------------------             
     6,600         Upjohn Co.                                                               238,425
                   -------------------------------------------------------------------             
     6,700         Warner Lambert Co.                                                       560,287
                   -------------------------------------------------------------------  -----------
                   Total                                                                  6,385,050
                   -------------------------------------------------------------------  -----------
                   Media                                                                           
                   -------------------------------------------------------------------             
     8,800         Gannett, Inc.                                                            440,000
                   -------------------------------------------------------------------             
     9,400         McGraw Hill, Inc.                                                        654,475
                   -------------------------------------------------------------------  -----------
                   Total                                                                  1,094,475
                   -------------------------------------------------------------------  -----------

MARSHALL EQUITY INCOME FUND                                                     
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

  SHARES                                                                                   VALUE   
----------         -------------------------------------------------------------------  -----------
                                                                                                   
COMMON STOCKS--CONTINUED                                                                           
--------------------------------------------------------------------------------------             
                   CONSUMER NON-DURABLES--CONTINUED                                                
                   -------------------------------------------------------------------             
                   Retail                                                                          
                   -------------------------------------------------------------------             
    10,000         Sears Roebuck & Co.                                                  $   473,750
                   -------------------------------------------------------------------  -----------
                   Services                                                                        
                   -------------------------------------------------------------------             
    12,500         De Luxe Corp.                                                            378,125
                   -------------------------------------------------------------------             
    10,100         Dun & Bradstreet Corp.                                                   582,012
                   -------------------------------------------------------------------  -----------
                   Total                                                                    960,137
                   -------------------------------------------------------------------  -----------
                   Tobacco                                                                         
                   -------------------------------------------------------------------             
    14,000         American Brands, Inc.                                                    504,000
                   -------------------------------------------------------------------             
    26,000         Philip Morris Cos., Inc.                                               1,586,000
                   -------------------------------------------------------------------             
    14,000         UST, Inc.                                                                437,500
                   -------------------------------------------------------------------  -----------
                   Total                                                                  2,527,500
                   -------------------------------------------------------------------  -----------
                   Total Consumer Non-Durables                                           11,440,912
                   -------------------------------------------------------------------  -----------
                   ENERGY--13.0%                                                                   
                   -------------------------------------------------------------------             
                   Domestic and International Oil                                                  
                   -------------------------------------------------------------------             
    13,400         Amoco Corp.                                                              775,525
                   -------------------------------------------------------------------             
    16,400         Chevron Corp. ++                                                         694,950
                   -------------------------------------------------------------------             
    35,600         Exxon Corp.                                                            2,118,200
                   -------------------------------------------------------------------             
    11,900         Mobil Corp.                                                            1,002,575
                   -------------------------------------------------------------------             
     6,200         Royal Dutch Petroleum Co. ++                                             698,275
                   -------------------------------------------------------------------             
     7,800         Texaco, Inc.                                                             481,650
                   -------------------------------------------------------------------             
    25,700         USX-Marathon Group                                                       443,325
                   -------------------------------------------------------------------  -----------
                   Total                                                                  6,214,500
                   -------------------------------------------------------------------  -----------
                   Oil Service                                                                     
                   -------------------------------------------------------------------             
    10,600         Dresser Industries, Inc.                                                 213,325
                   -------------------------------------------------------------------  -----------
                   Total Energy                                                           6,427,825
                   -------------------------------------------------------------------  -----------
                   FINANCIAL--15.7%                                                                
                   -------------------------------------------------------------------             
                   Banks                                                                           
                   -------------------------------------------------------------------             
    21,950         Banc One Corp.                                                           762,763
                   -------------------------------------------------------------------             
     7,300         Bankamerica Corp.                                                        360,437
                   -------------------------------------------------------------------             
    33,500         Chase Manhattan Corp.                                                  1,264,625
                   -------------------------------------------------------------------             
     5,200         Crestar Financial Corp.                                                  250,900
                   -------------------------------------------------------------------             
     7,200         Cullen Frost Bankers, Inc.                                               273,600
                   -------------------------------------------------------------------             
     8,950         First Security Corp.                                                     290,875
                   -------------------------------------------------------------------             
     5,300         Integra Financial Corp.                                                  259,038
                   -------------------------------------------------------------------             
    13,200         Magna Group, Inc.                                                        272,250
                   -------------------------------------------------------------------             

MARSHALL EQUITY INCOME FUND                                                     
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

  SHARES                                                                                   VALUE   
----------         -------------------------------------------------------------------  -----------
                                                                                                   
COMMON STOCKS--CONTINUED                                                                           
--------------------------------------------------------------------------------------             
                   FINANCIAL--CONTINUED                                                            
                   -------------------------------------------------------------------             
                   Banks--Continued                                                                
                   -------------------------------------------------------------------             
     6,800         Michigan National Corp.                                              $   530,400
                   -------------------------------------------------------------------             
     8,500         Nationsbank Corp. ++                                                     473,875
                   -------------------------------------------------------------------             
    14,100         PNC Bank Corp.                                                           394,800
                   -------------------------------------------------------------------             
    10,000         UJB Financial Corp.                                                      290,000
                   -------------------------------------------------------------------             
     5,000         Victoria Bankshares, Inc.                                                143,750
                   -------------------------------------------------------------------  -----------
                   Total                                                                  5,567,313
                   -------------------------------------------------------------------  -----------
                   Insurance                                                                       
                   -------------------------------------------------------------------             
     3,700         Aetna Life & Casualty Co.                                                182,688
                   -------------------------------------------------------------------             
    33,500         American General Corp.                                                 1,000,813
                   -------------------------------------------------------------------             
    11,900         Lincoln National Corp.                                                   458,150
                   -------------------------------------------------------------------             
    10,300         Transamerica Corp.                                                       549,762
                   -------------------------------------------------------------------  -----------
                   Total                                                                  2,191,413
                   -------------------------------------------------------------------  -----------
                   Total Financial                                                        7,758,726
                   -------------------------------------------------------------------  -----------
                   RAW MATERIALS/INTERMEDIATE GOODS--6.1%                                          
                   -------------------------------------------------------------------             
                   Chemicals                                                                       
                   -------------------------------------------------------------------             
     5,300         Dow Chemical Co.                                                         398,163
                   -------------------------------------------------------------------             
     9,700         Du Pont (E.I.) DeNemours                                                 586,850
                   -------------------------------------------------------------------             
    10,300         Goodrich B.F. Co.                                                        491,825
                   -------------------------------------------------------------------  -----------
                   Total                                                                  1,476,838
                   -------------------------------------------------------------------  -----------
                   Papers                                                                          
                   -------------------------------------------------------------------             
     8,500         Kimberly Clark Corp.                                                     504,687
                   -------------------------------------------------------------------             
     6,800         Union Camp Corp.                                                         342,550
                   -------------------------------------------------------------------  -----------
                   Total                                                                    847,237
                   -------------------------------------------------------------------  -----------
                   Other Raw Materials                                                             
                   -------------------------------------------------------------------             
    34,000         Hanson PLC ++                                                            675,750
                   -------------------------------------------------------------------  -----------
                   Total Raw Materials/Intermediate Goods                                 2,999,825
                   -------------------------------------------------------------------  -----------
                   UTILITIES--11.9%                                                                
                   -------------------------------------------------------------------             
                   Telecommunications                                                              
                   -------------------------------------------------------------------             
    19,200         Bell Atlantic Corp.                                                    1,051,200
                   -------------------------------------------------------------------             
    11,100         Bellsouth Corp.                                                          659,063
                   -------------------------------------------------------------------             
    17,100         GTE Corp.                                                                542,925
                   -------------------------------------------------------------------  -----------
                   Total                                                                  2,253,188
                   -------------------------------------------------------------------  -----------
                   Electric                                                                        
                   -------------------------------------------------------------------             
    10,300         Entergy Corp.                                                            256,212
                   -------------------------------------------------------------------             

MARSHALL EQUITY INCOME FUND                                                     
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

SHARES OR                                                                                           
PRINCIPAL                                                                                           
  AMOUNT                                                                                   VALUE    
----------         -------------------------------------------------------------------  ----------- 
                                                                                                    
COMMON STOCKS--CONTINUED                                                                            
--------------------------------------------------------------------------------------              
                   UTILITIES--CONTINUED                                                             
                   -------------------------------------------------------------------              
                   Electric--Continued                                                              
                   -------------------------------------------------------------------              
     8,000         New England Electric System                                          $   265,000 
                   -------------------------------------------------------------------              
    25,700         PSI Resources, Inc.                                                      575,038 
                   -------------------------------------------------------------------              
    22,400         SCE Corp.                                                                305,200 
                   -------------------------------------------------------------------              
    21,200         Texas Utilities Co.                                                      710,200 
                   -------------------------------------------------------------------              
    13,900         Wisconsin Energy Corp.                                                   361,400 
                   -------------------------------------------------------------------              
     9,100         Wisconsin Public Service Corp.                                           265,037 
                   -------------------------------------------------------------------  ----------- 
                   Total                                                                  2,738,087 
                   -------------------------------------------------------------------  ----------- 
                   Gas Distributors                                                                 
                   -------------------------------------------------------------------              
    23,000         Consolidated Natural Gas Co.                                             917,125 
                   -------------------------------------------------------------------  ----------- 
                   Total Utilities                                                        5,908,400 
                   -------------------------------------------------------------------  ----------- 
                   TOTAL COMMON STOCKS (IDENTIFIED COST $40,131,921)                     40,466,787 
                   -------------------------------------------------------------------  ----------- 
PREFERRED STOCKS--1.9%                                                                              
--------------------------------------------------------------------------------------              
                   CONVERTIBLE PREFERRED STOCKS                                                     
                   -------------------------------------------------------------------              
     4,000         General Motors Corp., Pfd C                                              229,500 
                   -------------------------------------------------------------------              
   100,000         RJR Nabisco Holdings, Pfd C                                              700,000 
                   -------------------------------------------------------------------  ----------- 
                   Total Convertible Preferred Stocks                                       929,500 
                   -------------------------------------------------------------------  ----------- 
                   TOTAL PREFERRED STOCKS (IDENTIFIED COST $877,780)                        929,500 
                   -------------------------------------------------------------------  ----------- 
                   TOTAL COMMON AND PREFERRED STOCKS (IDENTIFIED COST $41,009,701)       41,396,287 
                   -------------------------------------------------------------------  ----------- 
*REPURCHASE AGREEMENT--16.5%                                                                        
--------------------------------------------------------------------------------------              
$8,135,000         BZW Securities, Inc., 4.80%, dated 8/31/94, due 9/1/94                           
                   (at amortized cost)                                                    8,135,000 
                   -------------------------------------------------------------------  ----------- 
                   TOTAL INVESTMENTS (IDENTIFIED COST $49,144,701)                      $49,531,287+
                   -------------------------------------------------------------------  ----------- 

* The repurchase agreement is fully collateralized by U.S. government and/or  
agency obligations based on market prices at the date of the portfolio.   

+ The cost of investments for federal tax purposes amounts to $49,165,134. The
  net unrealized appreciation of investments on a federal tax basis amounts to
$366,153, which is comprised of $1,888,981 appreciation and $1,522,828    
depreciation at August 31, 1994.                                          

++ Certain shares on loan to broker.                                            

Note: The categories of investments are shown as a percentage of net assets     
($49,395,557) at August 31, 1994.                                   

(See Notes which are an integral part of the Financial Statements)              

MARSHALL EQUITY INCOME FUND                                                     

STATEMENT OF ASSETS AND LIABILITIES                                             
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                               
ASSETS:                                                                                        
---------------------------------------------------------------------------------              
Investments in securities                                             $41,396,287              
-------------------------------------------------------------------                            
Investments in repurchase agreements                                    8,135,000              
-------------------------------------------------------------------   -----------              
     Total investments, at value (identified cost $49,144,701,                                 
     tax cost $49,165,134)                                                         $49,531,287 
---------------------------------------------------------------------------------              
Cash                                                                                       674 
---------------------------------------------------------------------------------              
Collateral for security lending                                                      3,163,200 
---------------------------------------------------------------------------------              
Receivable for capital stock sold                                                      672,012 
---------------------------------------------------------------------------------              
Dividends receivable                                                                   182,372 
---------------------------------------------------------------------------------              
Interest receivable                                                                      1,353 
---------------------------------------------------------------------------------              
Deferred expenses                                                                       16,523 
---------------------------------------------------------------------------------  ----------- 
     Total assets                                                                   53,567,421 
---------------------------------------------------------------------------------              
LIABILITIES:                                                                                   
---------------------------------------------------------------------------------              
Security lending payable                                              $ 3,163,200              
-------------------------------------------------------------------                            
Payable for investments purchased                                         809,472              
-------------------------------------------------------------------                            
Payable for capital stock redeemed                                        125,746              
-------------------------------------------------------------------                            
Accrued expenses                                                           73,446              
-------------------------------------------------------------------   -----------              
     Total liabilities                                                               4,171,864 
---------------------------------------------------------------------------------  ----------- 
NET ASSETS for 4,959,920 shares of capital stock outstanding                       $49,395,557 
---------------------------------------------------------------------------------  ----------- 
NET ASSETS CONSIST OF:                                                                         
---------------------------------------------------------------------------------              
Paid-in capital                                                                    $49,170,485 
---------------------------------------------------------------------------------              
Net unrealized appreciation of investments                                             386,586 
---------------------------------------------------------------------------------              
Accumulated net realized loss on investments                                          (392,814)
---------------------------------------------------------------------------------              
Undistributed net investment income                                                    231,300 
---------------------------------------------------------------------------------  ----------- 
     Total Net Assets                                                              $49,395,557 
---------------------------------------------------------------------------------  ----------- 
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:                            
(net assets of $49,395,557 / 4,959,920 shares of capital stock outstanding)              $9.96 
---------------------------------------------------------------------------------  ----------- 

(See Notes which are an integral part of the Financial Statements)              

MARSHALL EQUITY INCOME FUND                                                     

STATEMENT OF OPERATIONS                                                         
PERIOD ENDED AUGUST 31, 1994*                                                   
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                                
INVESTMENT INCOME:                                                                              
-----------------------------------------------------------------------------------             
Interest income                                                                      $  187,859 
-----------------------------------------------------------------------------------             
Dividend income                                                                       1,220,912 
-----------------------------------------------------------------------------------  ---------- 
     Total investment income                                                          1,408,771 
-----------------------------------------------------------------------------------             
EXPENSES--                                                                                      
-----------------------------------------------------------------------------------             
Investment advisory fee                                                    $245,116             
-----------------------------------------------------------------------                         
Directors' fees                                                                 270             
-----------------------------------------------------------------------                         
Administrative personnel and services fee                                    45,481             
-----------------------------------------------------------------------                         
Custodian fees                                                                6,536             
-----------------------------------------------------------------------                         
Transfer and dividend disbursing agent fees and expenses                     14,070             
-----------------------------------------------------------------------                         
Legal fees                                                                    4,892             
-----------------------------------------------------------------------                         
Printing and postage                                                         13,604             
-----------------------------------------------------------------------                         
Portfolio accounting fees                                                    40,090             
-----------------------------------------------------------------------                         
Taxes                                                                         2,700             
-----------------------------------------------------------------------                         
Shareholder services fees                                                     4,902             
-----------------------------------------------------------------------                         
Miscellaneous                                                                 6,255             
-----------------------------------------------------------------------    --------             
     Total expenses                                                         383,916             
-----------------------------------------------------------------------                         
Deduct--                                                                                        
-----------------------------------------------------------------------                         
  Waiver of investment advisory fee                             $39,343                         
-------------------------------------------------------------                                   
  Waiver of administrative personnel and services fee            10,965                         
-------------------------------------------------------------                                   
  Waiver of custodian fees                                        4,085      54,393             
-------------------------------------------------------------   -------    --------             
     Net expenses                                                                       329,523 
-----------------------------------------------------------------------------------  ---------- 
          Net investment income                                                       1,079,248 
-----------------------------------------------------------------------------------  ---------- 
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:                                             
-----------------------------------------------------------------------------------             
Net realized loss on investments (identified cost basis)                               (392,814)
-----------------------------------------------------------------------------------             
Net change in unrealized appreciation on investments                                    386,586 
-----------------------------------------------------------------------------------  ---------- 
     Net realized and unrealized loss on investments                                     (6,228)
-----------------------------------------------------------------------------------  ---------- 
          Change in net assets resulting from operations                             $1,073,020 
-----------------------------------------------------------------------------------  ---------- 

* For the period from October 1, 1993 (date of initial public investment) to    
August 31, 1994.                                                                
(See Notes which are an integral part of the Financial Statements)              

MARSHALL EQUITY INCOME FUND                                                     

STATEMENT OF CHANGES IN NET ASSETS                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                             PERIOD ENDED   
                                                                           AUGUST 31, 1994* 
                                                                           -----------------
                                                                                            
INCREASE (DECREASE) IN NET ASSETS:                                                          
-------------------------------------------------------------------------                   
OPERATIONS--                                                                                
-------------------------------------------------------------------------                   
Net investment income                                                        $   1,079,248  
-------------------------------------------------------------------------                   
Net realized loss on investments ($41,996 net loss, as computed for                         
federal tax purposes)                                                             (392,814) 
-------------------------------------------------------------------------                   
Net change in unrealized appreciation on investments                               386,586  
-------------------------------------------------------------------------  ---------------  
     Change in net assets resulting from operations                              1,073,020  
-------------------------------------------------------------------------  ---------------  
DISTRIBUTIONS TO SHAREHOLDERS--                                                             
-------------------------------------------------------------------------                   
Dividends to shareholders from net investment income                              (847,948) 
-------------------------------------------------------------------------  ---------------  
CAPITAL STOCK TRANSACTIONS--                                                                
-------------------------------------------------------------------------                   
Net proceeds from sale of shares                                                61,917,199  
-------------------------------------------------------------------------                   
Net asset value of shares issued to shareholders in payment of dividends                    
declared                                                                           645,885  
-------------------------------------------------------------------------                   
Cost of shares redeemed                                                        (13,392,599) 
-------------------------------------------------------------------------  ---------------  
     Change in net assets from capital stock transactions                       49,170,485  
-------------------------------------------------------------------------  ---------------  
          Change in net assets                                                  49,395,557  
-------------------------------------------------------------------------                   
NET ASSETS:                                                                                 
-------------------------------------------------------------------------                   
Beginning of period                                                                     --  
-------------------------------------------------------------------------  ---------------  
End of period (including undistributed net investment income of $231,300)    $  49,395,557  
-------------------------------------------------------------------------  ---------------  

* For the period from October 1, 1993 (date of initial public investment) to    
August 31, 1994.                                                                
(See Notes which are an integral part of the Financial Statements)              

MARSHALL EQUITY INCOME FUND                                                     

FINANCIAL HIGHLIGHTS                                                            
--------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)                                 

                                                        [Enlarge/Download Table]

                                                                          PERIOD ENDED   
                                                                        AUGUST 31, 1994* 
                                                                        -----------------
                                                                                         
NET ASSET VALUE, BEGINNING OF PERIOD                                         $ 10.00     
----------------------------------------------------------------------                   
INCOME FROM INVESTMENT OPERATIONS                                                        
----------------------------------------------------------------------                   
  Net investment income                                                         0.28     
----------------------------------------------------------------------                   
  Net realized and unrealized loss on investments                              (0.09)    
----------------------------------------------------------------------   -----------     
  Total from investment operations                                              0.19     
----------------------------------------------------------------------   -----------     
LESS DISTRIBUTIONS                                                                       
----------------------------------------------------------------------                   
  Dividends to shareholders from net investment income                         (0.23)    
----------------------------------------------------------------------   -----------     
NET ASSET VALUE, END OF PERIOD                                               $  9.96     
----------------------------------------------------------------------   -----------     
TOTAL RETURN**                                                                  2.02%    
----------------------------------------------------------------------                   
RATIOS TO AVERAGE NET ASSETS                                                             
----------------------------------------------------------------------                   
  Expenses                                                                      1.01%(b) 
----------------------------------------------------------------------                   
  Net investment income                                                         3.30%(b) 
----------------------------------------------------------------------                   
  Expense waiver (a)                                                            0.16%(b) 
----------------------------------------------------------------------                   
SUPPLEMENTAL DATA                                                                        
----------------------------------------------------------------------                   
  Net assets, end of period (000 omitted)                                    $49,396     
----------------------------------------------------------------------                   
  Portfolio turnover rate                                                         44%    
----------------------------------------------------------------------                   

* Reflects operations for the period from October 1, 1993 (date of initial    
public investment) to                                                     
August 31, 1994.                                                          

** Based on net asset value.                                                    

(a) This voluntary expense decrease is reflected in both the expense and net    
investment income ratios shown above.                                   

(b) Computed on an annualized basis.                                            

(See Notes which are an integral part of the Financial Statements)              

MARSHALL VALUE EQUITY FUND                                                      

PORTFOLIO OF INVESTMENTS                                                        
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

   SHARES                                                                                VALUE    
------------         ---------------------------------------------------------------  ------------
                                                                                                  
COMMON STOCKS--86.8%                                                                              
------------------------------------------------------------------------------------              
                     CAPITAL GOODS--15.0%                                                         
                     ---------------------------------------------------------------              
                     Aerospace and Related                                                        
                     ---------------------------------------------------------------              
     47,550          Raytheon Co.                                                     $  3,215,569
                     ---------------------------------------------------------------              
     42,900          Rockwell International Corp.                                        1,549,763
                     ---------------------------------------------------------------  ------------
                     Total                                                               4,765,332
                     ---------------------------------------------------------------  ------------
                     Electronics                                                                  
                     ---------------------------------------------------------------              
    107,800          Avnet, Inc.                                                         4,002,075
                     ---------------------------------------------------------------              
    141,800       ** Borland International, Inc. ++                                      1,896,575
                     ---------------------------------------------------------------              
     27,600          General Electric Co.                                                1,373,100
                     ---------------------------------------------------------------              
     86,320          International Business Machines                                     5,923,710
                     ---------------------------------------------------------------              
     13,000          Litton Industries, Inc.                                               505,375
                     ---------------------------------------------------------------              
    158,450       ** Sun Microsystems, Inc. ++                                           4,198,925
                     ---------------------------------------------------------------              
     82,500          Tandy Corp.                                                         3,320,625
                     ---------------------------------------------------------------  ------------
                     Total                                                              21,220,385
                     ---------------------------------------------------------------  ------------
                     Machinery and Machine Tools                                                  
                     ---------------------------------------------------------------              
    155,650          Giddings & Lewis, Inc.                                              2,918,438
                     ---------------------------------------------------------------  ------------
                     Packaging and Containers                                                     
                     ---------------------------------------------------------------              
     93,000          Ball Corp. ++                                                       2,592,375
                     ---------------------------------------------------------------              
     27,100       ** Stone Container Corp.                                                 535,225
                     ---------------------------------------------------------------              
     13,500          Temple Inland, Inc.                                                   761,063
                     ---------------------------------------------------------------  ------------
                     Total                                                               3,888,663
                     ---------------------------------------------------------------  ------------
                     Total Capital Goods                                                32,792,818
                     ---------------------------------------------------------------  ------------
                     CONSUMER DURABLES--5.7%                                                      
                     ---------------------------------------------------------------              
                     Automotive and Related                                                       
                     ---------------------------------------------------------------              
     13,200          Ford Motor Co. ++                                                     386,100
                     ---------------------------------------------------------------              
     68,500          General Motors Corp.                                                3,442,125
                     ---------------------------------------------------------------  ------------
                     Total                                                               3,828,225
                     ---------------------------------------------------------------  ------------

MARSHALL VALUE EQUITY FUND                                                      
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

   SHARES                                                                                VALUE    
------------         ---------------------------------------------------------------  ------------
                                                                                                  
COMMON STOCKS--CONTINUED                                                                          
------------------------------------------------------------------------------------              
                     CONSUMER DURABLES--CONTINUED                                                 
                     ---------------------------------------------------------------              
                     Building and Forest Products                                                 
                     ---------------------------------------------------------------              
     21,000       ** Abitibi Price, Inc.                                              $    299,250
                     ---------------------------------------------------------------              
     12,000          Bowater, Inc.                                                         336,000
                     ---------------------------------------------------------------              
     13,000          Federal Paper Board, Inc.                                             394,875
                     ---------------------------------------------------------------              
     29,000          Georgia-Pacific Corp. ++                                            2,156,875
                     ---------------------------------------------------------------              
     14,500          James River Corp.                                                     338,937
                     ---------------------------------------------------------------              
     39,200          Willamette Industries, Inc.                                         2,018,800
                     ---------------------------------------------------------------  ------------
                     Total                                                               5,544,737
                     ---------------------------------------------------------------  ------------
                     Homebuilders                                                                 
                     ---------------------------------------------------------------              
    111,900          Standard Pacific Corp.                                                993,113
                     ---------------------------------------------------------------  ------------
                     Household Products/Wares                                                     
                     ---------------------------------------------------------------              
     44,000          Premark International, Inc.                                         1,991,000
                     ---------------------------------------------------------------  ------------
                     Total Consumer Durables                                            12,357,075
                     ---------------------------------------------------------------  ------------
                     CONSUMER NON-DURABLES--16.8%                                                 
                     ---------------------------------------------------------------              
                     Apparel and Textiles                                                         
                     ---------------------------------------------------------------              
     14,000          Russell Corp.                                                         453,250
                     ---------------------------------------------------------------  ------------
                     Beverages and Foods                                                          
                     ---------------------------------------------------------------              
     54,000          Archer-Daniels Midland Co.                                          1,390,500
                     ---------------------------------------------------------------              
     74,100          Hershey Foods Corp.                                                 3,556,800
                     ---------------------------------------------------------------              
     98,500          PepsiCo. Inc.                                                       3,262,813
                     ---------------------------------------------------------------  ------------
                     Total                                                               8,210,113
                     ---------------------------------------------------------------  ------------
                     Health Care                                                                  
                     ---------------------------------------------------------------              
     44,400       ** Amgen, Inc. ++                                                      2,342,100
                     ---------------------------------------------------------------              
    149,850          Caremark International, Inc. ++                                     3,633,862
                     ---------------------------------------------------------------              
    131,050          Mallinckrodt Group, Inc.                                            4,226,362
                     ---------------------------------------------------------------  ------------
                     Total                                                              10,202,324
                     ---------------------------------------------------------------  ------------
                     Photography                                                                  
                     ---------------------------------------------------------------              
     45,200          Eastman Kodak Co.                                                   2,248,700
                     ---------------------------------------------------------------  ------------
                     Retail                                                                       
                     ---------------------------------------------------------------              
     61,500       ** Federated Department Stores, Inc. ++                                1,299,187
                     ---------------------------------------------------------------              
    134,400          K Mart Corp.                                                        2,301,600
                     ---------------------------------------------------------------              
     16,000          Melville Corp.                                                        606,000
                     ---------------------------------------------------------------              
    181,300       ** Price Costco, Inc.                                                  2,844,144
                     ---------------------------------------------------------------              
    116,300          Sears, Roebuck & Co.                                                5,509,712
                     ---------------------------------------------------------------  ------------
                     Total                                                              12,560,643
                     ---------------------------------------------------------------  ------------

MARSHALL VALUE EQUITY FUND                                                      
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

   SHARES                                                                                VALUE    
------------         ---------------------------------------------------------------  ------------
                                                                                                  
COMMON STOCKS--CONTINUED                                                                          
------------------------------------------------------------------------------------              
                     CONSUMER NON-DURABLES--CONTINUED                                             
                     ---------------------------------------------------------------              
                     Services                                                                     
                     ---------------------------------------------------------------              
    104,550          WMX Technologies, Inc.                                           $  3,136,500
                     ---------------------------------------------------------------  ------------
                     Total Consumer Non-Durables                                        36,811,530
                     ---------------------------------------------------------------  ------------
                     ENERGY--10.6%                                                                
                     ---------------------------------------------------------------              
                     International Oil                                                            
                     ---------------------------------------------------------------              
     31,250          British Petroleum PLC                                               2,375,000
                     ---------------------------------------------------------------              
     24,200          Royal Dutch Petroleum Co. ++                                        2,725,525
                     ---------------------------------------------------------------  ------------
                     Total                                                               5,100,525
                     ---------------------------------------------------------------  ------------
                     Oil & Gas Equipment and Services                                             
                     ---------------------------------------------------------------              
    163,200          Baker Hughes, Inc.                                                  3,060,000
                     ---------------------------------------------------------------              
    145,500          Tidewater, Inc.                                                     3,291,937
                     ---------------------------------------------------------------  ------------
                     Total                                                               6,351,937
                     ---------------------------------------------------------------  ------------
                     Oil & Gas Products                                                           
                     ---------------------------------------------------------------              
     45,000          Exxon Corp.                                                         2,677,500
                     ---------------------------------------------------------------              
     33,100          Mobil Corp.                                                         2,788,675
                     ---------------------------------------------------------------              
     68,000          Occidental Petroleum Corp.                                          1,513,000
                     ---------------------------------------------------------------              
     21,600          Tenneco, Inc.                                                       1,063,800
                     ---------------------------------------------------------------              
    217,720          USX-Marathon Group                                                  3,755,670
                     ---------------------------------------------------------------  ------------
                     Total                                                              11,798,645
                     ---------------------------------------------------------------  ------------
                     Total Energy                                                       23,251,107
                     ---------------------------------------------------------------  ------------
                     FINANCIAL--14.1%                                                             
                     ---------------------------------------------------------------              
                     Banks                                                                        
                     ---------------------------------------------------------------              
     94,220          Banc One Corp.                                                      3,274,145
                     ---------------------------------------------------------------              
     51,800          Bancorp Hawaii, Inc.                                                1,677,025
                     ---------------------------------------------------------------              
     21,000          Bank of Boston Corp.                                                  551,250
                     ---------------------------------------------------------------              
     20,700          J.P. Morgan & Co.                                                   1,363,612
                     ---------------------------------------------------------------              
     86,900          PNC Bank Corp.                                                      2,433,200
                     ---------------------------------------------------------------  ------------
                     Total                                                               9,299,232
                     ---------------------------------------------------------------  ------------

MARSHALL VALUE EQUITY FUND                                                      
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

   SHARES                                                                                VALUE    
------------         ---------------------------------------------------------------  ------------
                                                                                                  
COMMON STOCKS--CONTINUED                                                                          
------------------------------------------------------------------------------------              
                     FINANCIAL--CONTINUED                                                         
                     ---------------------------------------------------------------              
                     Insurance                                                                    
                     ---------------------------------------------------------------              
     57,400          Aetna Life & Casualty Co.                                        $  2,834,125
                     ---------------------------------------------------------------              
     38,500          American General Corp.                                              1,150,187
                     ---------------------------------------------------------------              
     29,200          American International Group, Inc.                                  2,744,800
                     ---------------------------------------------------------------              
     49,550          Cigna Corp.                                                         3,319,850
                     ---------------------------------------------------------------              
     18,500          Lincoln National Corp.                                                712,250
                     ---------------------------------------------------------------              
     34,200          MBIA, Inc.                                                          2,094,750
                     ---------------------------------------------------------------  ------------
                     Total                                                              12,855,962
                     ---------------------------------------------------------------  ------------
                     Other Financial                                                              
                     ---------------------------------------------------------------              
    153,660          American Express Co.                                                4,321,688
                     ---------------------------------------------------------------              
     13,500          Dean Witter Discover & Co.                                            575,437
                     ---------------------------------------------------------------              
     31,200          ITT Corp.                                                           2,558,400
                     ---------------------------------------------------------------              
     34,000          Student Loan Marketing Assoc.                                       1,309,000
                     ---------------------------------------------------------------  ------------
                     Total                                                               8,764,525
                     ---------------------------------------------------------------  ------------
                     Total Financial                                                    30,919,719
                     ---------------------------------------------------------------  ------------
                     RAW MATERIALS/INTERMEDIATE GOODS--14.1%                                      
                     ---------------------------------------------------------------              
                     Chemicals                                                                    
                     ---------------------------------------------------------------              
    179,000          Calgon Carbon Corp.                                                 2,282,250
                     ---------------------------------------------------------------              
     50,875          Eastman Chemical Co.                                                2,683,656
                     ---------------------------------------------------------------              
     29,500          IMC Fertilizer Group, Inc.                                          1,183,687
                     ---------------------------------------------------------------              
     61,750          Imperial Chemical Industries PLC                                    3,149,250
                     ---------------------------------------------------------------  ------------
                     Total                                                               9,298,843
                     ---------------------------------------------------------------  ------------
                     Intermediate Goods                                                           
                     ---------------------------------------------------------------              
    163,100          Hanson PLC                                                          3,241,612
                     ---------------------------------------------------------------  ------------
                     Metals                                                                       
                     ---------------------------------------------------------------              
     27,000       ** AK Steel Holdings Corp.                                               850,500
                     ---------------------------------------------------------------              
    185,500          Bethlehem Steel Corp. ++                                            4,266,500
                     ---------------------------------------------------------------              
     13,000          British Steel PLC                                                     323,375
                     ---------------------------------------------------------------              
    357,950          Horsham Corp.                                                       5,279,763
                     ---------------------------------------------------------------              
    152,300       ** LTV Corp.                                                           2,912,738
                     ---------------------------------------------------------------  ------------
                     Total                                                              13,632,876
                     ---------------------------------------------------------------  ------------

MARSHALL VALUE EQUITY FUND                                                      
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

   SHARES                                                                                VALUE    
------------         ---------------------------------------------------------------  ------------
                                                                                                  
COMMON STOCKS--CONTINUED                                                                          
------------------------------------------------------------------------------------              
                     RAW MATERIALS/INTERMEDIATE GOODS--CONTINUED                                  
                     ---------------------------------------------------------------              
                     Papers                                                                       
                     ---------------------------------------------------------------              
     75,850          Champion International Corp.                                     $  2,730,600
                     ---------------------------------------------------------------              
     20,000          Louisiana Pacific Corp.                                               710,000
                     ---------------------------------------------------------------              
     24,300          Union Camp Corp.                                                    1,224,113
                     ---------------------------------------------------------------  ------------
                     Total                                                               4,664,713
                     ---------------------------------------------------------------  ------------
                     Total Raw Materials/Intermediate Goods                             30,838,044
                     ---------------------------------------------------------------  ------------
                     TRANSPORTATION--4.7%                                                         
                     ---------------------------------------------------------------              
                     Airlines                                                                     
                     ---------------------------------------------------------------              
     47,600       ** AMR Corp.                                                           2,867,900
                     ---------------------------------------------------------------              
     39,800          FlightSafety International, Inc.                                    1,557,175
                     ---------------------------------------------------------------  ------------
                     Total                                                               4,425,075
                     ---------------------------------------------------------------  ------------
                     Other Transportation                                                         
                     ---------------------------------------------------------------              
    107,250          Alexander & Baldwin, Inc. ++                                        2,681,250
                     ---------------------------------------------------------------              
     56,900          American President Cos., Ltd.                                       1,500,737
                     ---------------------------------------------------------------  ------------
                     Total                                                               4,181,987
                     ---------------------------------------------------------------  ------------
                     Railroads                                                                    
                     ---------------------------------------------------------------              
     93,000          Canadian Pacific, Ltd.                                              1,639,125
                     ---------------------------------------------------------------  ------------
                     Total Transportation                                               10,246,187
                     ---------------------------------------------------------------  ------------
                     UTILITIES--5.8%                                                              
                     ---------------------------------------------------------------              
                     Electric Distribution                                                        
                     ---------------------------------------------------------------              
     77,500          CMS Energy Corp.                                                    1,743,750
                     ---------------------------------------------------------------              
     32,500          Commonwealth Edison Co.                                               780,000
                     ---------------------------------------------------------------              
     87,700          Entergy Corp.                                                       2,181,537
                     ---------------------------------------------------------------              
     53,500          Illinova Corp.                                                      1,116,813
                     ---------------------------------------------------------------              
     30,000          Peco Energy Co.                                                       817,500
                     ---------------------------------------------------------------              
    108,900          PSI Resources, Inc.                                                 2,436,638
                     ---------------------------------------------------------------              
    123,300          Pacificorp.                                                         2,111,513
                     ---------------------------------------------------------------              
     84,500          Pinnacle West Capital Corp.                                         1,563,250
                     ---------------------------------------------------------------  ------------
                     Total Utilities                                                    12,751,001
                     ---------------------------------------------------------------  ------------
                     TOTAL COMMON STOCKS (IDENTIFIED COST $182,229,646)                189,967,481
                     ---------------------------------------------------------------  ------------

MARSHALL VALUE EQUITY FUND                                                      
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

 SHARES OR                                                                                         
 PRINCIPAL                                                                                         
   AMOUNT                                                                                VALUE     
------------         ---------------------------------------------------------------  ------------ 
                                                                                                   
PREFERRED STOCKS--0.8%                                                                             
------------------------------------------------------------------------------------               
                     CONVERTIBLE PREFERRED STOCK                                                   
                     ---------------------------------------------------------------               
     18,500          Ford Motor Co., Series A, Convertible, 12/31/2049                $  1,776,000 
                     ---------------------------------------------------------------  ------------ 
                     TOTAL PREFERRED STOCKS (IDENTIFIED COST $1,799,125)                 1,776,000 
                     ---------------------------------------------------------------  ------------ 
                     TOTAL COMMON AND PREFERRED STOCKS (IDENTIFIED COST                            
                     $184,028,771)                                                     191,743,481 
                     ---------------------------------------------------------------  ------------ 
*REPURCHASE AGREEMENT--13.9%                                                                       
------------------------------------------------------------------------------------               
$30,426,000          BZW Securities, Inc., 4.80%, dated 8/31/94, due 9/1/94                        
                     (at amortized cost)                                                30,426,000 
                     ---------------------------------------------------------------  ------------ 
                     TOTAL INVESTMENTS (IDENTIFIED COST $214,454,771)                 $222,169,481+
                     ---------------------------------------------------------------  ------------ 

* The repurchase agreement is fully collateralized by U.S. government and/or  
agency obligations based on market prices at the date of the portfolio.   

** Non-income producing.                                                        

 + The cost of investments for federal tax purposes amounts to $214,622,859. The
  net unrealized appreciation of investments on a federal tax basis amounts to
$7,546,622, which is comprised of $8,451,891 appreciation and $905,269    
depreciation at August 31, 1994.                                          

++ Certain shares on loan to broker.                                            

Note: The categories of investments are shown as a percentage of net assets     
($218,755,375) at                                                   
August 31, 1994.                                                    

(See Notes which are an integral part of the Financial Statements)              

MARSHALL VALUE EQUITY FUND                                                      

STATEMENT OF ASSETS AND LIABILITIES                                             
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                                
ASSETS:                                                                                         
----------------------------------------------------------------------------------              
Investments in securities                                             $191,743,481              
-------------------------------------------------------------------                             
Investments in repurchase agreements                                    30,426,000              
-------------------------------------------------------------------   ------------              
    Total investments, at value (identified cost $214,454,771,                                  
    tax cost $214,622,859)                                                          $222,169,481
----------------------------------------------------------------------------------              
Collateral for security lending                                                       12,379,700
----------------------------------------------------------------------------------              
Receivable for capital stock sold                                                      2,042,999
----------------------------------------------------------------------------------              
Dividends receivable                                                                     501,320
----------------------------------------------------------------------------------              
Receivable for investments sold                                                          233,329
----------------------------------------------------------------------------------              
Interest receivable                                                                        5,981
----------------------------------------------------------------------------------              
Deferred expenses                                                                         16,476
----------------------------------------------------------------------------------  ------------
    Total assets                                                                     237,349,286
----------------------------------------------------------------------------------              
LIABILITIES:                                                                                    
----------------------------------------------------------------------------------              
Security lending payable                                                12,379,700              
-------------------------------------------------------------------                             
Payable for capital stock redeemed                                       6,064,335              
-------------------------------------------------------------------                             
Payable for investments purchased                                            7,512              
-------------------------------------------------------------------                             
Accrued expenses                                                           142,364              
-------------------------------------------------------------------   ------------              
    Total liabilities                                                                 18,593,911
----------------------------------------------------------------------------------  ------------
NET ASSETS for 19,979,667 shares of capital stock outstanding                       $218,755,375
----------------------------------------------------------------------------------  ------------
NET ASSETS CONSIST OF:                                                                          
----------------------------------------------------------------------------------              
Paid-in capital                                                                     $209,055,936
----------------------------------------------------------------------------------              
Net unrealized appreciation of investments                                             7,714,710
----------------------------------------------------------------------------------              
Accumulated net realized gain on investments                                           1,666,910
----------------------------------------------------------------------------------              
Undistributed net investment income                                                      317,819
----------------------------------------------------------------------------------  ------------
    Total Net Assets                                                                $218,755,375
----------------------------------------------------------------------------------  ------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:                              
(net assets of $218,755,375 / 19,979,667 shares of capital stock outstanding)             $10.95
----------------------------------------------------------------------------------  ------------

(See Notes which are an integral part of the Financial Statements)              

MARSHALL VALUE EQUITY FUND                                                      

STATEMENT OF OPERATIONS                                                         
PERIOD ENDED AUGUST 31, 1994*                                                   
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                               
INVESTMENT INCOME:                                                                             
----------------------------------------------------------------------------------             
Interest income                                                                     $   290,475
----------------------------------------------------------------------------------             
Dividend income                                                                         879,733
----------------------------------------------------------------------------------  -----------
     Total investment income                                                          1,170,208
----------------------------------------------------------------------------------             
EXPENSES--                                                                                     
----------------------------------------------------------------------------------             
Investment advisory fee                                                   $310,939             
----------------------------------------------------------------------                         
Directors' fees                                                                180             
----------------------------------------------------------------------                         
Administrative personnel and services fee                                   54,953             
----------------------------------------------------------------------                         
Custodian fees                                                               8,292             
----------------------------------------------------------------------                         
Transfer and dividend disbursing agent fees and expenses                    18,892             
----------------------------------------------------------------------                         
Legal fees                                                                   6,892             
----------------------------------------------------------------------                         
Printing and postage                                                        17,677             
----------------------------------------------------------------------                         
Portfolio accounting fees                                                   42,434             
----------------------------------------------------------------------                         
Taxes                                                                        2,600             
----------------------------------------------------------------------                         
Shareholder services fees                                                    6,219             
----------------------------------------------------------------------                         
Miscellaneous                                                                7,503             
----------------------------------------------------------------------    --------             
     Total expenses                                                        476,581             
----------------------------------------------------------------------                         
Deduct--                                                                                       
----------------------------------------------------------------------                         
  Waiver of investment advisory fee                            $45,477                         
------------------------------------------------------------                                   
  Waiver of administrative personnel and services fees           9,451                         
------------------------------------------------------------                                   
  Waiver of custodian fees                                       4,467      59,395             
------------------------------------------------------------   -------    --------             
     Net expenses                                                                       417,186
----------------------------------------------------------------------------------  -----------
          Net investment income                                                         753,022
----------------------------------------------------------------------------------  -----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:                                                   
----------------------------------------------------------------------------------             
Net realized gain on investments (identified cost basis)                              1,666,910
----------------------------------------------------------------------------------             
Net change in unrealized appreciation on investments                                  7,714,710
----------------------------------------------------------------------------------  -----------
     Net realized and unrealized gain on investments                                  9,381,620
----------------------------------------------------------------------------------  -----------
          Change in net assets resulting from operations                            $10,134,642
----------------------------------------------------------------------------------  -----------

* For the period from October 1, 1993 (date of initial public investment) to    
August 31, 1994.                                                                
(See Notes which are an integral part of the Financial Statements)              

MARSHALL VALUE EQUITY FUND                                                      

STATEMENT OF CHANGES IN NET ASSETS                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                             PERIOD ENDED   
                                                                           AUGUST 31, 1994* 
                                                                           -----------------
                                                                                            
INCREASE (DECREASE) IN NET ASSETS:                                                          
-------------------------------------------------------------------------                   
OPERATIONS--                                                                                
-------------------------------------------------------------------------                   
Net investment income                                                        $     753,022  
-------------------------------------------------------------------------                   
Net realized gain on investments ($1,834,999 net gain, as computed                          
for federal tax purposes)                                                        1,666,910  
-------------------------------------------------------------------------                   
Net change in unrealized appreciation on investments                             7,714,710  
-------------------------------------------------------------------------  ---------------  
     Change in net assets resulting from operations                             10,134,642  
-------------------------------------------------------------------------  ---------------  
DISTRIBUTIONS TO SHAREHOLDERS--                                                             
-------------------------------------------------------------------------                   
Dividends to shareholders from net investment income                              (435,203) 
-------------------------------------------------------------------------  ---------------  
CAPITAL STOCK TRANSACTIONS--                                                                
-------------------------------------------------------------------------                   
Proceeds from sale of shares                                                   224,111,601  
-------------------------------------------------------------------------                   
Net asset value of shares issued to shareholders in payment of                              
dividends declared                                                                 223,675  
-------------------------------------------------------------------------                   
Cost of shares redeemed                                                        (15,279,340) 
-------------------------------------------------------------------------  ---------------  
     Change in net assets from capital stock transactions                      209,055,936  
-------------------------------------------------------------------------  ---------------  
          Change in net assets                                                 218,755,375  
-------------------------------------------------------------------------                   
NET ASSETS:                                                                                 
-------------------------------------------------------------------------                   
Beginning of period                                                                     --  
-------------------------------------------------------------------------  ---------------  
End of period (including undistributed net investment income of $317,819)    $ 218,755,375  
-------------------------------------------------------------------------  ---------------  

* For the period from October 1, 1993 (date of initial public investment) to    
August 31, 1994.                                                                
(See Notes which are an integral part of the Financial Statements)              

MARSHALL VALUE EQUITY FUND                                                      

FINANCIAL HIGHLIGHTS                                                            
--------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)                                 

                                                        [Enlarge/Download Table]

                                                                          PERIOD ENDED   
                                                                        AUGUST 31, 1994* 
                                                                        -----------------
                                                                                         
NET ASSET VALUE, BEGINNING OF PERIOD                                         $ 10.00     
----------------------------------------------------------------------                   
INCOME FROM INVESTMENT OPERATIONS                                                        
----------------------------------------------------------------------                   
  Net investment income                                                         0.12     
----------------------------------------------------------------------                   
  Net realized and unrealized gain on investments                               0.93     
----------------------------------------------------------------------   -----------     
  Total from investment operations                                              1.05     
----------------------------------------------------------------------                   
LESS DISTRIBUTIONS                                                                       
----------------------------------------------------------------------                   
  Dividends to shareholders from net investment income                         (0.10)    
----------------------------------------------------------------------   -----------     
NET ASSET VALUE, END OF PERIOD                                               $ 10.95     
----------------------------------------------------------------------   -----------     
TOTAL RETURN**                                                                 10.59%    
----------------------------------------------------------------------                   
RATIOS TO AVERAGE NET ASSETS                                                             
----------------------------------------------------------------------                   
  Expenses                                                                      1.00%(b) 
----------------------------------------------------------------------                   
  Net investment income                                                         1.82%(b) 
----------------------------------------------------------------------                   
  Expense waiver (a)                                                            0.15%(b) 
----------------------------------------------------------------------                   
SUPPLEMENTAL DATA                                                                        
----------------------------------------------------------------------                   
  Net assets, end of period (000 omitted)                                   $218,755     
----------------------------------------------------------------------                   
  Portfolio turnover rate                                                         39%    
----------------------------------------------------------------------                   

* Reflects operations for the period from October 1, 1993 (date of initial    
public investment) to August 31, 1994.                                    

** Based on net asset value.                                                    

(a) This voluntary expense decrease is reflected in both the expense and net    
investment income ratios shown above.                                   

(b) Computed on an annualized basis.                                            

(See Notes which are an integral part of the Financial Statements)              

MARSHALL STOCK FUND                                                             

PORTFOLIO OF INVESTMENTS                                                        
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

  SHARES                                                                                VALUE    
-----------        ----------------------------------------------------------------  ------------
                                                                                                 
COMMON STOCKS--84.6%                                                                             
-----------------------------------------------------------------------------------              
                   CAPITAL GOODS--24.9%                                                          
                   ----------------------------------------------------------------              
                   Electronics                                                                   
                   ----------------------------------------------------------------              
     90,000        Harris Corp.                                                      $  4,353,750
                   ----------------------------------------------------------------              
     50,000        Intel Corp.                                                          3,287,500
                   ----------------------------------------------------------------              
     92,100     ** Litton Industries, Inc. ++                                           3,580,388
                   ----------------------------------------------------------------              
    190,000     ** Solectron Corp. ++                                                   5,795,000
                   ----------------------------------------------------------------              
     34,000        Texas Instruments, Inc.                                              2,647,750
                   ----------------------------------------------------------------  ------------
                   Total                                                               19,664,388
                   ----------------------------------------------------------------  ------------
                   Electrical Equipment                                                          
                   ----------------------------------------------------------------              
    110,000        General Electric Co.                                                 5,472,500
                   ----------------------------------------------------------------  ------------
                   Office Equipment                                                              
                   ----------------------------------------------------------------              
    160,000        Adobe System, Inc. ++                                                5,080,000
                   ----------------------------------------------------------------              
    200,000     ** Indigo                                                               3,525,000
                   ----------------------------------------------------------------              
     76,500     ** Lotus Development Corp.                                              3,126,937
                   ----------------------------------------------------------------  ------------
                   Total                                                               11,731,937
                   ----------------------------------------------------------------  ------------
                   Other Capital Goods                                                           
                   ----------------------------------------------------------------              
     80,000     ** ADC Telecommunications, Inc.                                         3,720,000
                   ----------------------------------------------------------------              
     72,400        Alco Standard Corp.                                                  4,724,100
                   ----------------------------------------------------------------              
    175,000     ** Computer Sciences Corp.                                              7,853,125
                   ----------------------------------------------------------------              
     55,000        Ericsson L.M. Telephone Co.                                          2,976,875
                   ----------------------------------------------------------------              
     52,300        Minnesota Mining & Manufacturing Co.                                 2,883,037
                   ----------------------------------------------------------------              
     75,000        Parker Hannifin Corp.                                                3,150,000
                   ----------------------------------------------------------------  ------------
                   Total                                                               25,307,137
                   ----------------------------------------------------------------  ------------
                   Total Capital Goods                                                 62,175,962
                   ----------------------------------------------------------------  ------------
                   CONSUMER DURABLES--8.8%                                                       
                   ----------------------------------------------------------------              
                   Automotive and Related                                                        
                   ----------------------------------------------------------------              
    150,000        Federal Mogul Corp. ++                                               4,293,750
                   ----------------------------------------------------------------              
    100,000        Hayes Wheels International, Inc.                                     2,450,000
                   ----------------------------------------------------------------              
    100,000        Mark IV Industries, Inc. ++                                          2,062,500
                   ----------------------------------------------------------------  ------------
                   Total                                                                8,806,250
                   ----------------------------------------------------------------  ------------
                   Other Consumer Durables                                                       
                   ----------------------------------------------------------------              
    157,500        American Homestar Corp.                                              1,456,875
                   ----------------------------------------------------------------              
    100,000        Masco Corp.                                                          2,775,000
                   ----------------------------------------------------------------              
    125,000        Kaufman & Broad Home Corp.                                           1,937,500
                   ----------------------------------------------------------------              

MARSHALL STOCK FUND                                                             
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

  SHARES                                                                                VALUE    
-----------        ----------------------------------------------------------------  ------------
                                                                                                 
COMMON STOCKS--CONTINUED                                                                         
-----------------------------------------------------------------------------------              
                   CONSUMER DURABLES--CONTINUED                                                  
                   ----------------------------------------------------------------              
     78,600        PPG Industries, Inc.                                              $  3,271,725
                   ----------------------------------------------------------------              
    215,000        Shaw Industries, Inc.                                                3,735,625
                   ----------------------------------------------------------------  ------------
                   Total                                                               13,176,725
                   ----------------------------------------------------------------  ------------
                   Total Consumer Durables                                             21,982,975
                   ----------------------------------------------------------------  ------------
                   CONSUMER NON-DURABLES--30.8%                                                  
                   ----------------------------------------------------------------              
                   Beverages and Foods                                                           
                   ----------------------------------------------------------------              
     53,000        Kellogg Co.                                                          3,001,125
                   ----------------------------------------------------------------              
    175,000        McDonalds Corp.                                                      4,943,750
                   ----------------------------------------------------------------  ------------
                   Total                                                                7,944,875
                   ----------------------------------------------------------------  ------------
                   Health Care                                                                   
                   ----------------------------------------------------------------              
    110,000     ** Amgen, Inc.                                                          5,802,500
                   ----------------------------------------------------------------              
    125,000        Cardinal Health, Inc.                                                4,843,750
                   ----------------------------------------------------------------              
    165,000     ** Coram Healthcare Corp.                                               2,557,500
                   ----------------------------------------------------------------              
    179,400        IVAX Corp. ++                                                        3,565,575
                   ----------------------------------------------------------------  ------------
                   Total                                                               16,769,325
                   ----------------------------------------------------------------  ------------
                   Photography                                                                   
                   ----------------------------------------------------------------              
    110,000        Eastman Kodak Co.                                                    5,472,500
                   ----------------------------------------------------------------  ------------
                   Media                                                                         
                   ----------------------------------------------------------------              
     93,150        Capital Cities/ABC, Inc.                                             7,812,956
                   ----------------------------------------------------------------              
      7,300        CBS, Inc.                                                            2,346,038
                   ----------------------------------------------------------------              
     75,000        McGraw-Hill, Inc.                                                    5,221,875
                   ----------------------------------------------------------------              
    230,900     ** Telecommunications, Inc.                                             5,209,681
                   ----------------------------------------------------------------  ------------
                   Total                                                               20,590,550
                   ----------------------------------------------------------------  ------------
                   Retail                                                                        
                   ----------------------------------------------------------------              
     75,400     ** Kohl's Corp.                                                         3,666,325
                   ----------------------------------------------------------------              
    133,500     ** Nine West Group, Inc. ++                                             3,771,375
                   ----------------------------------------------------------------              
    200,000     ** Price Costco, Inc.                                                   3,137,500
                   ----------------------------------------------------------------  ------------
                   Total                                                               10,575,200
                   ----------------------------------------------------------------  ------------
                   Services                                                                      
                   ----------------------------------------------------------------              
    175,000        Browning Ferris Industry, Inc.                                       5,534,375
                   ----------------------------------------------------------------              
     75,000        Dun & Bradstreet Corp.                                               4,321,875
                   ----------------------------------------------------------------              
     40,000     ** Federal Express Corp.                                                2,835,000
                   ----------------------------------------------------------------              
    130,000     ** GTECH Holdings, Inc. ++                                              3,022,500
                   ----------------------------------------------------------------  ------------
                   Total                                                               15,713,750
                   ----------------------------------------------------------------  ------------
                   Total Consumer Non-Durables                                         77,066,200
                   ----------------------------------------------------------------  ------------

MARSHALL STOCK FUND                                                             
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

  SHARES                                                                                VALUE    
-----------        ----------------------------------------------------------------  ------------
                                                                                                 
COMMON STOCKS--CONTINUED                                                                         
-----------------------------------------------------------------------------------              
                   ENERGY--9.8%                                                                  
                   ----------------------------------------------------------------              
                   Oil and Gas Products                                                          
                   ----------------------------------------------------------------              
     50,000        Anadarko Pete Corp.                                               $  2,343,750
                   ----------------------------------------------------------------              
    120,000        Enron Corp.                                                          3,660,000
                   ----------------------------------------------------------------              
    100,000        Noble Affiliates, Inc. ++                                            2,575,000
                   ----------------------------------------------------------------  ------------
                   Total                                                                8,578,750
                   ----------------------------------------------------------------  ------------
                   International Oil and Gas                                                     
                   ----------------------------------------------------------------              
     40,000        Mobil Corp.                                                          3,370,000
                   ----------------------------------------------------------------              
     71,700        Royal Dutch Petroleum Co. ++                                         8,075,213
                   ----------------------------------------------------------------  ------------
                   Total                                                               11,445,213
                   ----------------------------------------------------------------  ------------
                   Oil and Gas Service                                                           
                   ----------------------------------------------------------------              
     40,000        Schlumberger, Ltd.                                                   2,280,000
                   ----------------------------------------------------------------              
     50,000     ** Western Atlas, Inc.                                                  2,218,750
                   ----------------------------------------------------------------  ------------
                   Total                                                                4,498,750
                   ----------------------------------------------------------------  ------------
                   Total Energy                                                        24,522,713
                   ----------------------------------------------------------------  ------------
                   FINANCIAL--9.0%                                                               
                   ----------------------------------------------------------------              
                   Insurance                                                                     
                   ----------------------------------------------------------------              
     26,500        American International Group, Inc.                                   2,491,000
                   ----------------------------------------------------------------              
    156,200        MGIC Investment Corp. ++                                             4,803,150
                   ----------------------------------------------------------------  ------------
                   Total                                                                7,294,150
                   ----------------------------------------------------------------  ------------
                   Other Financial                                                               
                   ----------------------------------------------------------------              
     67,500     ** Capstone Capital Trading, Inc.                                       1,189,688
                   ----------------------------------------------------------------              
    103,800        First Chicago Corp.                                                  5,397,600
                   ----------------------------------------------------------------              
    110,000        First Financial Management Corp.                                     6,682,500
                   ----------------------------------------------------------------              
    120,000        Regency Realty Corp.                                                 2,040,000
                   ----------------------------------------------------------------  ------------
                   Total                                                               15,309,788
                   ----------------------------------------------------------------  ------------
                   Total Financial                                                     22,603,938
                   ----------------------------------------------------------------  ------------
                   UTILITIES--1.3%                                                               
                   ----------------------------------------------------------------              
                   Telephone                                                                     
                   ----------------------------------------------------------------              
     80,000        SouthWestern Bell Corp.                                              3,310,000
                   ----------------------------------------------------------------  ------------
                   Total Utilities                                                      3,310,000
                   ----------------------------------------------------------------  ------------
                   TOTAL COMMON STOCKS (IDENTIFIED COST $201,754,795)                 211,661,788
                   ----------------------------------------------------------------  ------------

MARSHALL STOCK FUND                                                             
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                        
  AMOUNT                                                                                VALUE     
-----------        ----------------------------------------------------------------  ------------ 
                                                                                                  
                                                       *REPURCHASE AGREEMENT--12.1%               
-----------------------------------------------------------------------------------               
$30,197,000        BZW Securities, Inc., 4.80%, dated 8/31/94, due 9/1/94                         
                   (at amortized cost)                                               $ 30,197,000 
                   ----------------------------------------------------------------  ------------ 
                   TOTAL INVESTMENTS (IDENTIFIED COST $231,951,795)                  $241,858,788+
                   ----------------------------------------------------------------  ------------ 

* The repurchase agreement is fully collateralized by U.S. government and/or  
agency obligations based on market prices at the date of the portfolio.   

** Non-income producing.                                                        

 + The cost of investments for federal tax purposes amounts to $231,986,150. The
  net unrealized appreciation of investments on a federal tax basis amounts to
$9,872,638, which is comprised of $19,383,249 appreciation and $9,510,611 
depreciation at August 31, 1994.                                          

++ Certain shares on loan to broker.                                            

Note: The categories of investments are shown as a percentage of net assets     
($250,154,936) at August 31, 1994.                                  

(See Notes which are an integral part of the Financial Statements)              

MARSHALL STOCK FUND                                                             

STATEMENT OF ASSETS AND LIABILITIES                                             
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                               
ASSETS:                                                                                        
--------------------------------------------------------------------------------               
Investments in securities                                           $211,661,788               
-----------------------------------------------------------------                              
Investments in repurchase agreements                                  30,197,000               
-----------------------------------------------------------------   ------------               
     Total investments, at value (identified cost $231,951,795,                                
     tax cost $231,986,150)                                                       $241,858,788 
--------------------------------------------------------------------------------               
Collateral for security lending                                                     36,891,700 
--------------------------------------------------------------------------------               
Receivable for capital stock sold                                                    8,989,820 
--------------------------------------------------------------------------------               
Receivable for investments sold                                                      6,110,256 
--------------------------------------------------------------------------------               
Dividends receivable                                                                   429,952 
--------------------------------------------------------------------------------               
Interest receivable                                                                     14,582 
--------------------------------------------------------------------------------               
Deferred expenses                                                                       68,856 
--------------------------------------------------------------------------------  ------------ 
     Total assets                                                                  294,363,954 
--------------------------------------------------------------------------------               
LIABILITIES:                                                                                   
--------------------------------------------------------------------------------               
Security lending payable                                              36,891,700               
-----------------------------------------------------------------                              
Payable for investments purchased                                      7,077,484               
-----------------------------------------------------------------                              
Payable for capital stock redeemed                                        18,400               
-----------------------------------------------------------------                              
Accrued expenses                                                         221,434               
-----------------------------------------------------------------   ------------               
     Total liabilities                                                              44,209,018 
--------------------------------------------------------------------------------  ------------ 
NET ASSETS for 24,897,891 shares of capital stock outstanding                     $250,154,936 
--------------------------------------------------------------------------------  ------------ 
NET ASSETS CONSIST OF:                                                                         
--------------------------------------------------------------------------------               
Paid-in capital                                                                   $243,328,148 
--------------------------------------------------------------------------------               
Net unrealized appreciation of investments                                           9,906,993 
--------------------------------------------------------------------------------               
Accumulated net realized loss on investments                                        (3,457,305)
--------------------------------------------------------------------------------               
Undistributed net investment income                                                    377,100 
--------------------------------------------------------------------------------  ------------ 
     Total Net Assets                                                             $250,154,936 
--------------------------------------------------------------------------------  ------------ 
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:                            
(net assets of $250,154,936 / 24,897,891 shares of capital stock outstanding)           $10.05 
--------------------------------------------------------------------------------  ------------ 

(See Notes which are an integral part of the Financial Statements)              

MARSHALL STOCK FUND                                                             

STATEMENT OF OPERATIONS                                                         
YEAR ENDED AUGUST 31, 1994                                                      
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                             
INVESTMENT INCOME:                                                                           
------------------------------------------------------------------------------               
Dividend income                                                                 $  3,746,045 
------------------------------------------------------------------------------               
Interest income                                                                      662,358 
------------------------------------------------------------------------------  ------------ 
     Total investment income                                                       4,408,403 
------------------------------------------------------------------------------               
EXPENSES--                                                                                   
------------------------------------------------------------------------------               
Investment advisory fee                                             $1,877,194               
-----------------------------------------------------------------                            
Directors' fees                                                          2,794               
-----------------------------------------------------------------                            
Administrative personnel and services fee                              241,079               
-----------------------------------------------------------------                            
Custodian fees                                                          48,888               
-----------------------------------------------------------------                            
Transfer and dividend disbursing agent fees and expenses                94,831               
-----------------------------------------------------------------                            
Fund share registration costs                                           44,161               
-----------------------------------------------------------------                            
Auditing fees                                                           15,150               
-----------------------------------------------------------------                            
Legal fees                                                              13,040               
-----------------------------------------------------------------                            
Printing and postage                                                    23,049               
-----------------------------------------------------------------                            
Portfolio accounting fees                                               66,027               
-----------------------------------------------------------------                            
Insurance premiums                                                      11,352               
-----------------------------------------------------------------                            
Taxes                                                                   32,921               
-----------------------------------------------------------------                            
Shareholder services fees                                               37,544               
-----------------------------------------------------------------                            
Miscellaneous                                                            3,916               
-----------------------------------------------------------------   ----------               
     Total expenses                                                  2,511,946               
-----------------------------------------------------------------                            
Deduct--Waiver of custodian fees                                        30,085               
-----------------------------------------------------------------   ----------               
     Net expenses                                                                  2,481,861 
------------------------------------------------------------------------------  ------------ 
       Net investment income                                                       1,926,542 
------------------------------------------------------------------------------  ------------ 
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:                                          
------------------------------------------------------------------------------               
Net realized gain on investments (identified cost basis)                          13,279,160 
------------------------------------------------------------------------------               
Net change in unrealized depreciation on investments                             (12,123,274)
------------------------------------------------------------------------------  ------------ 
     Net realized and unrealized gain on investments                               1,155,886 
------------------------------------------------------------------------------  ------------ 
          Change in net assets resulting from operations                        $  3,082,428 
------------------------------------------------------------------------------  ------------ 

(See Notes which are an integral part of the Financial Statements)              

MARSHALL STOCK FUND                                                             

STATEMENT OF CHANGES IN NET ASSETS                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                      YEAR ENDED AUGUST 31,     
                                                                   ---------------------------- 
                                                                       1994           1993*     
------------------------------------------------------------------ -------------   ------------ 
                                                                                                
INCREASE (DECREASE) IN NET ASSETS:                                                              
------------------------------------------------------------------                              
OPERATIONS--                                                                                    
------------------------------------------------------------------                              
Net investment income                                              $   1,926,542   $  2,924,758 
------------------------------------------------------------------                              
Net realized gain (loss) on investments ($3,422,951 net loss and                                
  $0, respectively, as computed for federal tax purposes)             13,279,160    (16,736,465)
------------------------------------------------------------------                              
Net change in unrealized appreciation (depreciation) on                                         
  investments                                                        (12,123,274)    22,030,267 
------------------------------------------------------------------ -------------   ------------ 
     Change in net assets resulting from operations                    3,082,428      8,218,560 
------------------------------------------------------------------ -------------   ------------ 
DISTRIBUTIONS TO SHAREHOLDERS--                                                                 
------------------------------------------------------------------                              
Dividends to shareholders from net investment income                  (1,993,902)    (2,480,298)
------------------------------------------------------------------ -------------   ------------ 
CAPITAL STOCK TRANSACTIONS--                                                                    
------------------------------------------------------------------                              
Proceeds from sale of shares                                          98,818,795    329,072,350 
------------------------------------------------------------------                              
Net asset value of shares issued to shareholders in payment of                                  
dividends declared                                                     1,882,088      2,446,695 
------------------------------------------------------------------                              
Cost of shares redeemed                                             (160,762,127)   (28,129,753)
------------------------------------------------------------------ -------------   ------------ 
     Change in net assets from capital stock transactions            (60,061,244)   303,389,292 
------------------------------------------------------------------ -------------   ------------ 
          Change in net assets                                       (58,972,718)   309,127,554 
------------------------------------------------------------------                              
NET ASSETS:                                                                                     
------------------------------------------------------------------                              
Beginning of period                                                  309,127,654            100 
------------------------------------------------------------------ -------------   ------------ 
End of period (including undistributed net investment                                           
income of $377,100 and $444,460, respectively)                     $ 250,154,936   $309,127,654 
------------------------------------------------------------------ -------------   ------------ 

* For the period from November 23, 1992 (date of initial public investment) to  
August 31, 1993.                                                            
(See Notes which are an integral part of the Financial Statements)              

MARSHALL STOCK FUND                                                             

FINANCIAL HIGHLIGHTS                                                            
--------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)                                

                                                        [Enlarge/Download Table]

                                                                 YEAR ENDED AUGUST 31,      
                                                               -------------------------    
                                                                1994              1993*     
                                                               ------             ------    
                                                                                            
NET ASSET VALUE, BEGINNING OF PERIOD                           $10.08             $10.00    
-------------------------------------------------------------                               
INCOME FROM INVESTMENT OPERATIONS                                                           
-------------------------------------------------------------                               
  Net investment income                                          0.07              0.10     
-------------------------------------------------------------                               
  Net realized and unrealized gain (loss) on investments        (0.03)             0.07     
-------------------------------------------------------------  ------             -----     
  Total from investment operations                               0.04              0.17     
-------------------------------------------------------------                               
LESS DISTRIBUTIONS                                                                          
-------------------------------------------------------------                               
  Dividends to shareholders from net investment income          (0.07)            (0.09 )   
-------------------------------------------------------------  ------             -----     
NET ASSET VALUE, END OF PERIOD                                 $10.05             $10.08    
-------------------------------------------------------------  ------             -----     
TOTAL RETURN**                                                   0.44%             1.67 %   
-------------------------------------------------------------                               
RATIOS TO AVERAGE NET ASSETS                                                                
-------------------------------------------------------------                               
  Expenses                                                       0.99%             0.94 %(b)
-------------------------------------------------------------                               
  Net investment income                                          0.77%             1.39 %(b)
-------------------------------------------------------------                               
  Expense waiver (a)                                             0.01%             0.03 %(b)
-------------------------------------------------------------                               
SUPPLEMENTAL DATA                                                                           
-------------------------------------------------------------                               
  Net assets, end of period (000 omitted)                      $250,155           $309,128  
-------------------------------------------------------------                               
  Portfolio turnover rate                                          86%               98 %   
-------------------------------------------------------------                               

* Reflects operations for the period from November 23, 1992 (date of initial  
public investment) to August 31, 1993.                                    

** Based on net asset value.                                                    

(a) This voluntary expense decrease is reflected in both the expense and net    
investment income ratios shown above.                                   

(b) Computed on an annualized basis.                                            

(See Notes which are an integral part of the Financial Statements)              

MARSHALL MID-CAP STOCK FUND                                                     

PORTFOLIO OF INVESTMENTS                                                        
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

  SHARES                                                                                   VALUE     
----------         ------------------------------------------------------------------   -----------  
                                                                                                     
COMMON STOCKS--91.9%                                                                                 
-------------------------------------------------------------------------------------                
                   BASIC INDUSTRIES--1.1%                                                            
                   ------------------------------------------------------------------                
                   Chemicals                                                                         
                   ------------------------------------------------------------------                
    20,000         Witco Corp.                                                          $   615,000  
                   ------------------------------------------------------------------   -----------  
                   CAPITAL GOODS--15.2%                                                              
                   ------------------------------------------------------------------                
                   Electronics                                                                       
                   ------------------------------------------------------------------                
    25,000      ** Applied Materials, Inc.                                                1,262,500  
                   ------------------------------------------------------------------                
    15,000      ** Cirrus Logic, Inc. ++                                                    414,375  
                   ------------------------------------------------------------------                
    50,000         Danka Business System ++                                               1,025,000  
                   ------------------------------------------------------------------                
    15,000         E Sys, Inc.                                                              645,000  
                   ------------------------------------------------------------------                
    25,000         Micron Technology, Inc.                                                1,006,250  
                   ------------------------------------------------------------------                
    25,000         Modine Manufacturing Co.                                                 706,250  
                   ------------------------------------------------------------------                
    30,000         Molex, Inc.                                                            1,185,000  
                   ------------------------------------------------------------------                
    15,000         Sensormatic Electronics Corp.                                            519,375  
                   ------------------------------------------------------------------                
    30,000      ** Silicon Graphics, Inc.                                                   787,500  
                   ------------------------------------------------------------------   -----------  
                   Total                                                                  7,551,250  
[A                   ------------------------------------------------------------------   -----------
                   Office Equipment                                                                  
                   ------------------------------------------------------------------                
    25,000      ** Office Depot, Inc.                                                       593,750  
                   ------------------------------------------------------------------   -----------  
                   Total Capital Goods                                                    8,145,000  
                   ------------------------------------------------------------------   -----------  
                   CONSUMER DURABLES--11.7%                                                          
                   ------------------------------------------------------------------                
                   Automotive and Related                                                            
                   ------------------------------------------------------------------                
    25,000         Exide Corp.                                                            1,303,125  
                   ------------------------------------------------------------------                
    30,000         General Motors Corp.                                                   1,091,250  
                   ------------------------------------------------------------------                
    30,000         Harley Davidson, Inc. ++                                               1,695,000  
                   ------------------------------------------------------------------                
    20,000         Magna International, Inc.                                                782,500  
                   ------------------------------------------------------------------                
    30,000      ** Top Source, Inc. ++                                                      195,000  
                   ------------------------------------------------------------------   -----------  
                   Total                                                                  5,066,875  
                   ------------------------------------------------------------------   -----------  
                   Household Products/Wares                                                          
                   ------------------------------------------------------------------                
    25,000         Newell Co.                                                             1,190,625  
                   ------------------------------------------------------------------   -----------  
                   Total Consumer Durables                                                6,257,500  
                   ------------------------------------------------------------------   -----------  
                   CONSUMER NON-DURABLES--35.9%                                                      
                   ------------------------------------------------------------------                
                   Apparel and Textiles                                                              
                   ------------------------------------------------------------------                
    35,000         Shaw Industries, Inc.                                                    608,125  
                   ------------------------------------------------------------------   -----------  
                   Beverage and Foods                                                                
                   ------------------------------------------------------------------                
    30,000      ** Brinker International, Inc.                                              727,500  
                   ------------------------------------------------------------------                

MARSHALL MID-CAP STOCK FUND                                                     
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

  SHARES                                                                                  VALUE   
----------         ------------------------------------------------------------------  -----------
                                                                                                  
COMMON STOCKS--CONTINUED                                                                          
-------------------------------------------------------------------------------------             
                   CONSUMER NON-DURABLES--CONTINUED                                               
                   ------------------------------------------------------------------             
                   Beverage and Foods--Continued                                                  
                   ------------------------------------------------------------------             
    20,000         Cracker Barrel Old Country Style, Inc.                              $   510,000
                   ------------------------------------------------------------------             
    30,000         Dean Foods Co.                                                          960,000
                   ------------------------------------------------------------------  -----------
                   Total                                                                 2,197,500
                   ------------------------------------------------------------------  -----------
                   Drugs                                                                          
                   ------------------------------------------------------------------             
    25,000         IVAX Corp. ++                                                           496,875
                   ------------------------------------------------------------------  -----------
                   Environmental                                                                  
                   ------------------------------------------------------------------             
    40,000      ** USA Waste Services, Inc.                                                585,000
                   ------------------------------------------------------------------  -----------
                   Health Care                                                                    
                   ------------------------------------------------------------------             
    20,000         Cardinal Health, Inc.                                                   775,000
                   ------------------------------------------------------------------             
    25,000      ** Healthsouth Rehabilitation                                              900,000
                   ------------------------------------------------------------------             
    25,000      ** Healthtrust, Inc.                                                       768,750
                   ------------------------------------------------------------------             
    55,000      ** North American Vaccine, Inc.                                            701,250
                   ------------------------------------------------------------------             
    25,000      ** Physician Corp. America                                                 525,000
                   ------------------------------------------------------------------  -----------
                   Total                                                                 3,670,000
                   ------------------------------------------------------------------  -----------
                   Leisure and Recreation                                                         
                   ------------------------------------------------------------------             
    50,000      ** Host Marriott Corp. ++                                                  556,250
                   ------------------------------------------------------------------             
    30,000      ** Mirage Resorts, Inc.                                                    633,750
                   ------------------------------------------------------------------  -----------
                   Total                                                                 1,190,000
                   ------------------------------------------------------------------  -----------
                   Retail                                                                         
                   ------------------------------------------------------------------             
    40,000      ** Bed, Bath & Beyond, Inc.                                              1,175,000
                   ------------------------------------------------------------------             
    40,000      ** Department 56, Inc.                                                   1,525,000
                   ------------------------------------------------------------------             
    20,000         Heilig Myers Co.                                                        537,500
                   ------------------------------------------------------------------             
    30,000      ** Kohl's Corp. ++                                                       1,458,750
                   ------------------------------------------------------------------             
    30,000      ** Tommy Hilfiger Corp. ++                                               1,256,250
                   ------------------------------------------------------------------  -----------
                   Total                                                                 5,952,500
                   ------------------------------------------------------------------  -----------
                   Services                                                                       
                   ------------------------------------------------------------------             
    30,000         Cintas Corp.                                                            952,500
                   ------------------------------------------------------------------             
    30,000         First Data Corp.                                                      1,462,500
                   ------------------------------------------------------------------             
    40,000      ** Franklin Quest Co.                                                    1,510,000
                   ------------------------------------------------------------------             
    25,000         Loewen Group, Inc.                                                      628,125
                   ------------------------------------------------------------------  -----------
                   Total                                                                 4,553,125
                   ------------------------------------------------------------------  -----------
                   Total Consumer Non-Durables                                          19,253,125
                   ------------------------------------------------------------------  -----------

MARSHALL MID-CAP STOCK FUND                                                     
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

  SHARES                                                                                  VALUE   
----------         ------------------------------------------------------------------  -----------
                                                                                                  
COMMON STOCKS--CONTINUED                                                                          
-------------------------------------------------------------------------------------             
                   CONSUMER NON-DURABLES--CONTINUED                                               
                   ------------------------------------------------------------------             
                   FINANCIAL--16.2%                                                               
                   ------------------------------------------------------------------             
                   Banks                                                                          
                   ------------------------------------------------------------------             
    30,000         Bancorp Hawaii, Inc. ++                                             $   971,250
                   ------------------------------------------------------------------             
    25,000         Bank of New York, Inc.                                                  812,500
                   ------------------------------------------------------------------             
    20,000         Crestar Financial Corp.                                                 965,000
                   ------------------------------------------------------------------             
    30,000         First Bank Systems, Inc.                                              1,110,000
                   ------------------------------------------------------------------             
    30,000         First Virginia Banks, Inc.                                            1,185,000
                   ------------------------------------------------------------------             
    30,000         UJB Financial Corp.                                                     870,000
                   ------------------------------------------------------------------  -----------
                   Total                                                                 5,913,750
                   ------------------------------------------------------------------  -----------
                   Other Financial                                                                
                   ------------------------------------------------------------------             
    25,000         Advanta Corp.                                                           737,500
                   ------------------------------------------------------------------             
    40,000         Mercury Finance Co.                                                     635,000
                   ------------------------------------------------------------------             
    20,000         Morgan Stanley Group, Inc.                                            1,395,000
                   ------------------------------------------------------------------  -----------
                   Total                                                                 2,767,500
                   ------------------------------------------------------------------  -----------
                   Total Financial                                                       8,681,250
                   ------------------------------------------------------------------  -----------
                   TRANSPORTATION--3.1%                                                           
                   ------------------------------------------------------------------             
                   Airlines                                                                       
                   ------------------------------------------------------------------             
    25,000         Southwest Airlines Co.                                                  662,500
                   ------------------------------------------------------------------  -----------
                   Railroads                                                                      
                   ------------------------------------------------------------------             
    25,000      ** Wisconsin Central Transportation Corp.                                1,000,000
                   ------------------------------------------------------------------  -----------
                   Total Transportation                                                  1,662,500
                   ------------------------------------------------------------------  -----------
                   UTILITIES--8.7%                                                                
                   ------------------------------------------------------------------             
                   Gas Distributions                                                              
                   ------------------------------------------------------------------             
    20,000         Anadarko Petroleum Corp.                                                937,500
                   ------------------------------------------------------------------  -----------
                   Telecommunications                                                             
                   ------------------------------------------------------------------             
    30,000      ** ADC Telecommunications, Inc. ++                                       1,395,000
                   ------------------------------------------------------------------             
    30,000      ** Bell Cablemedia PLC                                                     652,500
                   ------------------------------------------------------------------             

MARSHALL MID-CAP STOCK FUND                                                     
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

  SHARES                                                                                  VALUE   
----------         ------------------------------------------------------------------  -----------
                                                                                                  
COMMON STOCKS--CONTINUED                                                                          
-------------------------------------------------------------------------------------             
                   UTILITIES--CONTINUED                                                           
                   ------------------------------------------------------------------             
    40,000      ** Tellabs, Inc.                                                       $ 1,685,000
                   ------------------------------------------------------------------  -----------
                   Total                                                                 3,732,500
                   ------------------------------------------------------------------  -----------
                   Total Utilities                                                       4,670,000
                   ------------------------------------------------------------------  -----------
                   TOTAL COMMON STOCKS (IDENTIFIED COST $48,330,481)                    49,284,375
                   ------------------------------------------------------------------  -----------
PREFERRED STOCKS--2.7%                                                                            
-------------------------------------------------------------------------------------             
                   CAPITAL GOODS--2.7%                                                            
                   ------------------------------------------------------------------             
                   Electronics                                                                    
                   ------------------------------------------------------------------             
    10,000      ** Dell Computer Corp.                                                   1,463,750
                   ------------------------------------------------------------------  -----------
                   TOTAL PREFERRED STOCKS (IDENTIFIED COST $1,545,000)                   1,463,750
                   ------------------------------------------------------------------  -----------
                   TOTAL COMMON AND PREFERRED STOCKS (IDENTIFIED COST $49,875,481)      50,748,125
                   ------------------------------------------------------------------  -----------

                                                        [Enlarge/Download Table]

PRINCIPAL                                                                                          
  AMOUNT                                                                                           
----------         ------------------------------------------------------------------              
                                                                                                   
*REPURCHASE AGREEMENT--5.0%                                                                        
-------------------------------------------------------------------------------------              
$2,667,000         BZW Securities, Inc., 4.80%, dated 8/31/94, due 9/1/94                          
                   (at amortized cost)                                                   2,667,000 
                   ------------------------------------------------------------------  ----------- 
                   TOTAL INVESTMENTS (IDENTIFIED COST $52,542,481)                     $53,415,125+
                   ------------------------------------------------------------------  ----------- 

* The repurchase agreement is fully collateralized by U.S. government and/or  
agency obligations based on market prices at the date of the portfolio.   

** Non-income producing.                                                        

+ The cost of investments for federal tax purposes amounts to $52,542,481. The
  net unrealized appreciation of investments on a federal tax basis amounts to
$872,644, which is comprised of $3,003,589 appreciation and $2,130,945    
depreciation at August 31, 1994.                                          

++ Certain shares on loan to broker.                                            

Note: The categories of investments are shown as a percentage of net assets     
($53,641,925) at                                                    
August 31, 1994.                                                    

(See Notes which are an integral part of the Financial Statements)              

MARSHALL MID-CAP STOCK FUND                                                     

STATEMENT OF ASSETS AND LIABILITIES                                             
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                             
ASSETS:                                                                                      
-------------------------------------------------------------------------------              
Investments in securities                                           $50,748,125              
-----------------------------------------------------------------                            
Investments in repurchase agreements                                  2,667,000              
-----------------------------------------------------------------   -----------              
     Total investments, at value (identified and tax cost $52,542,481)           $53,415,125 
-------------------------------------------------------------------------------              
Cash                                                                                     594 
-------------------------------------------------------------------------------              
Interest receivable                                                                    1,119 
-------------------------------------------------------------------------------              
Receivable for capital stock sold                                                  3,409,827 
-------------------------------------------------------------------------------              
Collateral for security lending                                                    3,627,200 
-------------------------------------------------------------------------------              
Dividends receivable                                                                  51,400 
-------------------------------------------------------------------------------              
Deferred expenses                                                                     16,476 
-------------------------------------------------------------------------------  ----------- 
     Total assets                                                                 60,521,741 
-------------------------------------------------------------------------------              
LIABILITIES:                                                                                 
-------------------------------------------------------------------------------              
Security lending payable                                              3,627,200              
-----------------------------------------------------------------                            
Payable for Fund shares redeemed                                      1,734,114              
-----------------------------------------------------------------                            
Payable for investments purchased                                     1,446,968              
-----------------------------------------------------------------                            
Accrued expenses                                                         71,534              
-----------------------------------------------------------------   -----------              
     Total liabilities                                                             6,879,816 
-------------------------------------------------------------------------------  ----------- 
NET ASSETS for 5,536,038 shares of capital stock outstanding                     $53,641,925 
-------------------------------------------------------------------------------  ----------- 
NET ASSETS CONSIST OF:                                                                       
-------------------------------------------------------------------------------              
Paid-in capital                                                                  $54,224,427 
-------------------------------------------------------------------------------              
Net unrealized appreciation of investments                                           872,644 
-------------------------------------------------------------------------------              
Accumulated net realized loss on investments                                      (1,498,435)
-------------------------------------------------------------------------------              
Undistributed net investment income                                                   43,289 
-------------------------------------------------------------------------------  ----------- 
     Total Net Assets                                                            $53,641,925 
-------------------------------------------------------------------------------  ----------- 
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:                          
(net assets of $53,641,925 / 5,536,038 shares of capital stock outstanding)            $9.69 
-------------------------------------------------------------------------------  ----------- 

(See Notes which are an integral part of the Financial Statements)              

MARSHALL MID-CAP STOCK FUND                                                     

STATEMENT OF OPERATIONS                                                         
PERIOD ENDED AUGUST 31, 1994*                                                   
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                                
INVESTMENT INCOME:                                                                              
----------------------------------------------------------------------------------              
Interest income                                                                     $    94,609 
----------------------------------------------------------------------------------              
Dividend income                                                                         218,411 
----------------------------------------------------------------------------------  ----------- 
     Total investment income                                                            313,020 
----------------------------------------------------------------------------------              
EXPENSES--                                                                                      
----------------------------------------------------------------------------------              
Investment advisory fee                                                   $189,976              
----------------------------------------------------------------------                          
Directors' fees                                                                135              
----------------------------------------------------------------------                          
Administrative personnel and services fee                                   45,481              
----------------------------------------------------------------------                          
Custodian fees                                                               5,066              
----------------------------------------------------------------------                          
Transfer and dividend disbursing agent fees and expenses                    16,115              
----------------------------------------------------------------------                          
Legal fees                                                                   4,904              
----------------------------------------------------------------------                          
Printing and postage                                                        13,310              
----------------------------------------------------------------------                          
Portfolio accounting fees                                                   39,582              
----------------------------------------------------------------------                          
Taxes                                                                        2,200              
----------------------------------------------------------------------                          
Shareholder services fees                                                    3,800              
----------------------------------------------------------------------                          
Miscellaneous                                                                7,034              
----------------------------------------------------------------------    --------              
     Total expenses                                                        327,603              
----------------------------------------------------------------------                          
Deduct--                                                                                        
----------------------------------------------------------------------                          
  Waiver of investment advisory fee                            $56,834                          
------------------------------------------------------------                                    
  Waiver of administrative personnel and services fee           12,101                          
------------------------------------------------------------                                    
  Waiver of custodian fees                                       3,166      72,101              
------------------------------------------------------------   -------    --------              
     Net expenses                                                                       255,502 
----------------------------------------------------------------------------------  ----------- 
          Net investment income                                                          57,518 
----------------------------------------------------------------------------------  ----------- 
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:                                             
----------------------------------------------------------------------------------              
Net realized loss on investment transactions (identified cost basis)                 (1,460,302)
----------------------------------------------------------------------------------              
Net change in unrealized appreciation of investments                                    872,644 
----------------------------------------------------------------------------------  ----------- 
     Net realized and unrealized loss on investments                                   (587,658)
----------------------------------------------------------------------------------  ----------- 
          Change in net assets resulting from operations                            $  (530,140)
----------------------------------------------------------------------------------  ----------- 

* For the period from October 1, 1993 (date of initial public investment) to    
August 31, 1994.                                                            
(See Notes which are an integral part of the Financial Statements)              

MARSHALL MID-CAP STOCK FUND                                                     

STATEMENT OF CHANGES IN NET ASSETS                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                              PERIOD ENDED   
                                                                            AUGUST 31, 1994* 
                                                                            -----------------
                                                                                             
INCREASE (DECREASE) IN NET ASSETS:                                                           
-------------------------------------------------------------------------                    
OPERATIONS--                                                                                 
-------------------------------------------------------------------------                    
Net investment income                                                          $    57,518   
--[6~-----------------------------------------------------------------------                 
Net realized loss on investments ($38,184 net gain, as computed                              
for federal tax purposes)                                                       (1,460,302)  
-------------------------------------------------------------------------                    
Net change in unrealized appreciation on investments                               872,644   
-------------------------------------------------------------------------   ---------------  
     Change in net assets resulting from operations                               (530,140)  
-------------------------------------------------------------------------   ---------------  
DISTRIBUTIONS TO SHAREHOLDERS--                                                              
-------------------------------------------------------------------------                    
Dividends to shareholders from net investment income                               (14,229)  
-------------------------------------------------------------------------                    
Distributions to shareholders from net realized gain on investment                           
  transactions                                                                     (38,133)  
-------------------------------------------------------------------------   ---------------  
     Change in net assets from distributions to shareholders                       (52,362)  
-------------------------------------------------------------------------   ---------------  
CAPITAL STOCK TRANSACTIONS--                                                                 
-------------------------------------------------------------------------                    
Proceeds from sale of shares                                                    62,129,088   
-------------------------------------------------------------------------                    
Net asset value of shares issued to shareholders in payment of dividends                     
declared                                                                            31,053   
-------------------------------------------------------------------------                    
Cost of shares redeemed                                                         (7,935,714)  
-------------------------------------------------------------------------   ---------------  
     Change in net assets from capital stock transactions                       54,224,427   
-------------------------------------------------------------------------   ---------------  
          Change in net assets                                                  53,641,925   
-------------------------------------------------------------------------                    
NET ASSETS:                                                                                  
-------------------------------------------------------------------------                    
Beginning of period                                                                     --   
-------------------------------------------------------------------------   ---------------  
End of period (including undistributed net investment income of $43,289)       $53,641,925   
-------------------------------------------------------------------------   ---------------  

* For the period from October 1, 1993 (date of initial public investment) to    
August 31, 1994.                                                                
(See Notes which are an integral part of the Financial Statements)              

MARSHALL MID-CAP STOCK FUND                                                     

FINANCIAL HIGHLIGHTS                                                            
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)                                 

                                                        [Enlarge/Download Table]

                                                                          PERIOD ENDED   
                                                                        AUGUST 31, 1994* 
                                                                        -----------------
                                                                                         
NET ASSET VALUE, BEGINNING OF PERIOD                                         $10.00      
----------------------------------------------------------------------                   
INCOME FROM INVESTMENT OPERATIONS                                                        
----------------------------------------------------------------------                   
  Net investment income                                                         0.02     
----------------------------------------------------------------------                   
  Net realized and unrealized loss on investments                              (0.29)    
----------------------------------------------------------------------   -----------     
  Total from investment operations                                             (0.27)    
----------------------------------------------------------------------   -----------     
LESS DISTRIBUTIONS                                                                       
----------------------------------------------------------------------                   
  Dividends to shareholders from net investment income                         (0.01)    
----------------------------------------------------------------------                   
  Distributions to shareholders from net realized gain on investment                     
  transactions                                                                 (0.03)    
----------------------------------------------------------------------   -----------     
  Total distributions                                                          (0.04)    
----------------------------------------------------------------------   -----------     
NET ASSET VALUE, END OF PERIOD                                               $  9.69     
----------------------------------------------------------------------   -----------     
TOTAL RETURN**                                                                 (2.74%)   
----------------------------------------------------------------------                   
RATIOS TO AVERAGE NET ASSETS                                                             
----------------------------------------------------------------------                   
  Expenses                                                                      1.01%(b) 
----------------------------------------------------------------------                   
  Net investment income                                                         0.23%(b) 
----------------------------------------------------------------------                   
  Expense waiver (a)                                                            0.28%(b) 
----------------------------------------------------------------------                   
SUPPLEMENTAL DATA                                                                        
----------------------------------------------------------------------                   
  Net assets, end of period (000 omitted)                                    $53,642     
----------------------------------------------------------------------                   
  Portfolio turnover rate                                                        113%    
----------------------------------------------------------------------                   

* Reflects operations for the period from October 1, 1993 (date of initial    
public investment) to August 31, 1994.                                    

** Based on net asset value.                                                    

(a) This voluntary expense decrease is reflected in both the expense and net    
investment income ratios shown above.                                   

(b) Computed on an annualized basis.                                            

(See Notes which are an integral part of the Financial Statements)              

MARSHALL FUNDS, INC.                                                            

EQUITY FUNDS                                                                    
NOTES TO FINANCIAL STATEMENTS                                                   
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------
(1) ORGANIZATION                                                                

Marshall Funds, Inc. (the "Corporation") is an open-end, management investment  
company, established as a Wisconsin corporation under the Articles of           
Incorporation on July 31, 1992. The Corporation consists of eleven diversified  
portfolios: Marshall Balanced Fund, Marshall Equity Income Fund, Marshall       
Government Income Fund, Marshall Intermediate Bond Fund, Marshall Intermediate  
Tax-Free 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. Marshall Money Market Fund is offered in two    
classes of shares: Trust Shares and Investment Shares. The assets of each       
portfolio are segregated and a shareholder's interest is limited to the         
portfolio in which shares are held. The financial statements included herein are
only those of Marshall Balanced Fund, Marshall Equity Income Fund, Marshall     
Value Equity Fund, Marshall Stock Fund, and Marshall Mid-Cap Stock Fund         
(individually referred to as the "Fund," or collectively as the "Funds"). The   
financial statements of the other portfolios are presented separately.          

(2) SIGNIFICANT ACCOUNTING POLICIES                                             

The following is a summary of significant accounting policies consistently      
followed by each Fund in the preparation of its financial statements. These     
policies are in conformity with generally accepted accounting principles.       

                                                        [Enlarge/Download Table]
                                                                                            
A. INVESTMENT VALUATIONS--Listed equity securities, corporate bonds and other fixed income  
   securities are valued at the last sale price reported on national securities exchanges.  
   Unlisted securities and bonds are generally valued at the price provided by an           
   independent pricing service. U.S. government obligations are generally valued at the mean
   between the over-the-counter bid and asked prices as furnished by an independent pricing 
   service. Short-term securities with remaining maturities of sixty days or less at the    
   time of purchase may be stated at amortized cost, which approximates value.              
B. REPURCHASE AGREEMENTS--It is the policy of the Funds to require the custodian bank to    
   take possession, to have legally segregated in the Federal Reserve Book Entry System, or 
   to have segregated within the custodian bank's vault, all securities held as collateral  
   in support of repurchase agreement investments. Additionally, procedures have been       
   established by the Funds to monitor, on a daily basis, the market value of each          
   repurchase agreement's underlying collateral to ensure that the value of collateral at   
   least equals the principal amount of the repurchase agreement, including accrued         
   interest.                                                                                
   The Funds will only enter into repurchase agreements with banks and other recognized     
   financial institutions, such as broker/dealers, which are deemed by the Funds' adviser to
   be creditworthy pursuant to the guidelines established by the Board of Directors (the    
   "Directors"). Risks may arise from the potential inability of counterparties to honor the
   terms of the repurchase agreement. Accordingly, the Funds could receive less than the    
   repurchase price on the sale of collateral securities.                                   
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Dividend income and distributions to      
   shareholders are recorded on the ex-dividend date. Interest income and expenses are      
   accrued daily. Bond premium and discount, if applicable, are amortized as required by the
   Internal Revenue Code, as amended (the "Code").                                          

MARSHALL FUNDS, INC.                                                            
EQUITY FUNDS                                                                    
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                            
D. FEDERAL TAXES--It is the Funds' policy to comply with the provisions of the Code         
   applicable to regulated investment companies and to distribute to shareholders each year 
   substantially all of their taxable income. Accordingly, no provisions for federal tax are
   necessary. At August 31, 1994, the Marshall Balanced Fund, Marshall Equity Income Fund   
   and Marshall Stock Fund, for federal tax purposes, had capital loss carryforwards of     
   $33,023, $41,996 and $3,422,951, respectively, which will reduce the Funds' taxable      
   income arising from future net realized gain on investments, if any, to the extent       
   permitted by the Code, and thus will reduce the amount of the distributions to           
   shareholders which would otherwise be necessary to relieve the Funds of any liability for
   federal tax. Pursuant to the Code, such capital loss carryforwards will expire in 2002.  
   Additionally, the Marshall Balanced Fund, Marshall Equity Income Fund and Marshall       
   Mid-Cap Stock Fund had net capital losses of $611,049, $330,385 and $1,498,486,          
   respectively, attributable to security transactions incurred after October 31, 1993 which
   are treated as arising on the first day of the Funds' next taxable year.                 
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Funds may engage in when-issued or    
   delayed delivery transactions. The Funds record when-issued securities on the trade date 
   and maintain security positions such that sufficient liquid assets will be available to  
   make payment for the securities purchased. Securities purchased on a when-issued or      
   delayed delivery basis are marked to market daily and begin earning interest on the      
   settlement date.                                                                         
F. DOLLAR ROLL TRANSACTIONS--The Funds enter into dollar roll transactions, with respect to 
   mortgage securities issued by GNMA, FNMA and FHLMC, in which the Funds agree to sell     
   securities that they hold to financial institutions and simultaneously agree to purchase 
   substantially similar (same type, coupon and maturity) securities at a later date at an  
   agreed upon price. Dollar roll transactions are treated for accounting and tax purposes  
   as short-term financing arrangements which will not exceed twelve months. The Funds will 
   use the proceeds generated from the transactions to invest in short-term investments,    
   which may enhance the Funds' current yields and total returns.                           
G. SECURITIES LENDING--The Funds participate in a securities lending program providing for  
   the lending of corporate bonds, equity and government securities to qualified brokers.   
   Collateral on all securities loaned is accepted in cash or government securities.        
   Collateral is maintained at a minimum level of 100% of the market value on investments   
   loaned, plus interest, if applicable. The custodian receives a fee for its services under
   the program according to agreed-upon rates. As of August 31,1994, the value of the       
   securities loaned and the value of the collateral were as follows:                       

                                                        [Enlarge/Download Table]

                                                                 MARKET                     
                                                                VALUE OF         MARKET     
                                                               SECURITIES       VALUE OF    
                                                                 LOANED        COLLATERAL   
   ---------------------------------------------------------   -----------     -----------  
                                                                                            
   Marshall Balanced Fund                                      $ 2,602,743     $ 2,653,719  
   ---------------------------------------------------------                                
   Marshall Equity Income Fund                                   3,067,220       3,163,200  
   ---------------------------------------------------------                                
   Marshall Value Equity Fund                                   11,975,634      12,379,700  
   ---------------------------------------------------------                                
   Marshall Stock Fund                                          35,377,737      36,891,700  
   ---------------------------------------------------------                                
   Marshall Mid-Cap Stock Fund                                   3,514,500       3,627,200  
   ---------------------------------------------------------                                
H.  DEFERRED EXPENSES--The costs incurred by the Funds with respect to registration of their
    shares in their first fiscal year, excluding the initial expense of registering their   
    shares, have been deferred and are being amortized using the straight-line method not to
    exceed a period of five years from each Fund's commencement date.                       
I.  OTHER--Investment transactions are accounted for on the trade date.                     

MARSHALL FUNDS, INC.                                                            
EQUITY FUNDS                                                                    
--------------------------------------------------------------------------------

(3) CAPITAL STOCK                                                               

The Articles of Incorporation of the Marshall Funds, Inc. permit the Directors  
to issue 50 billion full and fractional shares of common stock, par value       
$0.0001 per share. At August 31, 1994, the capital paid-in for Marshall Balanced
Fund, Marshall Equity Income Fund, Marshall Value Equity Fund, Marshall Stock   
Fund, and Marshall Mid-Cap Stock Fund was $22,386,483, $49,170,485,             
$209,055,936, $243,328,148 and $54,224,427, respectively. Transactions in shares
were as follows:                                                                

                                                        [Enlarge/Download Table]

                           MARSHALL BALANCED        MARSHALL EQUITY          MARSHALL VALUE    
                                  FUND                INCOME FUND             EQUITY FUND      
                         ----------------------  ----------------------  ----------------------
                          PERIOD ENDED AUGUST     PERIOD ENDED AUGUST     PERIOD ENDED AUGUST  
                                  31,                     31,                     31,          
                         ----------------------  ----------------------  ----------------------
                                 1994*                   1994*                   1994*         
-----------------------  ----------------------  ----------------------  ----------------------
                                                                                               
Shares sold                     4,548,366               6,256,917              21,409,502      
-----------------------                                                                        
Shares issued to                                                                               
shareholders in payment                                                                        
of dividends declared              52,159                  66,609                  22,375      
-----------------------                                                                        
Shares redeemed                (2,376,187)             (1,363,606)             (1,452,210)     
-----------------------  -----------------       -----------------       -----------------     
  Net change resulting                                                                         
  from Fund share                                                                              
  transactions                  2,224,338               4,959,920              19,979,667      
-----------------------  -----------------       -----------------       -----------------     

                                                        [Enlarge/Download Table]

                                                                              MARSHALL MID-CAP   
                                                                                 STOCK FUND      
                                                 MARSHALL STOCK FUND       ----------------------
                                              --------------------------    PERIOD ENDED AUGUST  
                                                YEAR ENDED AUGUST 31,               31,          
                                              --------------------------   ----------------------
                                                 1994           1993**             1994*         
--------------------------------------------  -----------     ----------   ----------------------
                                                                                                 
Shares sold                                     9,896,396     33,240,827          6,367,440      
--------------------------------------------                                                     
Shares issued to shareholders in payment of                                                      
dividends declared                                186,739        243,627              3,112      
--------------------------------------------                                                     
Shares redeemed                               (15,846,005)    (2,823,693)          (834,514)     
--------------------------------------------  -----------     ----------   ----------------      
  Net change resulting from Fund share                                                           
  transactions                                 (5,762,870)    30,660,761          5,536,038      
--------------------------------------------  -----------     ----------   ----------------      

* For the period from October 1, 1993 (date of initial public investment) to
August 31, 1994.                                                        
 ** For the period from November 23, 1992 (date of initial public investment) to
August 31, 1993.                                                        

MARSHALL FUNDS, INC.                                                            
EQUITY FUNDS                                                                    
--------------------------------------------------------------------------------

(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES              

INVESTMENT ADVISORY FEE--M&I Investment Management Corp., the Funds' investment 
adviser (the "Adviser"), receives for its services an annual investment advisory
fee equal to 0.75 of 1% of each Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee. The Adviser can modify or     
terminate this voluntary waiver at any time at its sole discretion.             

ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Funds
with certain administrative personnel and services. The FAS fee is based on the 
level of average aggregate net assets of the Corporation for the period. FAS may
voluntarily choose to waive a portion of its fee.                               

SHAREHOLDER SERVICES FEE--Marshall Funds Investors Services ("MFIS") is the     
Funds' shareholder servicing agent. Under the terms of a shareholder service    
agreement with MFIS, the Funds will pay MFIS a fee to obtain certain personal   
services for shareholders and the maintenance of shareholder accounts. The fee  
is based on the level of each Fund's average net assets for the period.         

TRANSFER AND DIVIDEND DISBURSING AGENT, ACCOUNTING AND CUSTODY FEES--Federated  
Services Company ("FServ") serves as transfer and dividend disbursing agent for 
the Funds. The FServ fee is based on the size, type, and number of accounts and 
transactions made by shareholders.                                              

FServ also maintains the Funds' accounting records. The fee is based on the     
level of each Fund's average net assets for the period, plus out-of-pocket      
expenses.                                                                       

Marshall and Ilsley Trust Company is the Funds' custodian. The fee is based on  
the level of each Fund's average net assets for the period.                     

ORGANIZATIONAL EXPENSES--Organizational expenses were borne initially by FAS.   
The Funds have agreed to reimburse FAS for the organizational expenses during   
the five year period following August 28, 1993 (date Marshall Balanced Fund,    
Marshall Equity Income Fund, Marshall Value Equity Fund, and Marshall Mid-Cap   
Stock Fund first became effective) and October 1, 1992 (date Marshall Stock Fund
first became effective). For the period ended August 31, 1994, the following    
amounts were paid to FAS pursuant to this agreement.                            

                                                        [Enlarge/Download Table]

                                                           ORGANIZATIONAL  ORGANIZATIONAL
                                                              EXPENSES     EXPENSES PAID 
---------------------------------------------------------  --------------  --------------
                                                                                         
Marshall Balanced Fund                                        $ 16,593         $1,291    
---------------------------------------------------------                                
Marshall Equity Income Fund                                     18,857          1,467    
---------------------------------------------------------                                
Marshall Value Equity Fund                                      18,485          1,438    
---------------------------------------------------------                                
Marshall Stock Fund                                             30,018          3,102    
---------------------------------------------------------                                
Marshall Mid-Cap Stock Fund                                     16,434          1,279    
---------------------------------------------------------                                

INTERFUND TRANSACTIONS--During the period ended August 31, 1994, the Marshall   
Balanced Fund, Marshall Equity Income Fund and Marshall Value Equity Fund       
engaged in purchase and sale transactions with other affiliated funds at current
value pursuant to Rule 17a-7 under the Investment Company Act of 1940 amounting 
to $10,981,536 and $0, $25,767,909 and $0 and $93,234,557 and $0, respectively. 

Certain of the Officers and Directors of the Corporation are Officers and       
Directors or Trustees of the above companies.                                   

MARSHALL FUNDS, INC.                                                            
EQUITY FUNDS                                                                    
--------------------------------------------------------------------------------

(5) INVESTMENT TRANSACTIONS                                                     

Purchases and sales of investments, excluding short-term securities, for the    
period ended August 31, 1994, were as follows:                                  

                                                        [Enlarge/Download Table]

                                                                    PURCHASES       SALES    
-----------------------------------------------------------------  ------------  ------------
                                                                                             
Marshall Balanced Fund                                             $ 51,415,594  $ 30,162,433
-----------------------------------------------------------------                            
Marshall Equity Income Fund                                          55,245,518    13,843,003
-----------------------------------------------------------------                            
Marshall Value Equity Fund                                          200,178,437    17,816,576
-----------------------------------------------------------------                            
Marshall Stock Fund                                                 203,191,094   286,413,031
-----------------------------------------------------------------                            
Marshall Mid-Cap Stock Fund                                          80,269,208    28,933,425
-----------------------------------------------------------------                            

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                                        
--------------------------------------------------------------------------------
To the Shareholders and Board of Directors of                                   
MARSHALL BALANCED FUND                                                          
MARSHALL EQUITY INCOME FUND                                                     
MARSHALL VALUE EQUITY FUND:                                                     
MARSHALL STOCK FUND                                                             
MARSHALL MID-CAP STOCK FUND:                                                    

We have audited the accompanying statements of assets and liabilities, including
the schedules of portfolio investments, of the Marshall Balanced Fund, the      
Marshall Equity Income Fund, Marshall Value Equity Fund, the Marshall Stock     
Fund, and the Marshall Mid-Cap Stock Fund, (five of the portfolios constituting 
the Marshall Funds, Inc., a Wisconsin corporation) as of August 31, 1994, and   
the related statements of operations, changes in net assets and financial       
highlights for the periods presented. These financial statements and financial  
highlights are the responsibility of the Company's management. Our              
responsibility is to express an opinion on these financial statements and       
financial highlights based on our audits.                                       

We conducted our audits in accordance with generally accepted auditing          
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements and financial       
highlights are free of material misstatement. An audit includes examining, on a 
test basis, evidence supporting the amounts and disclosures in the financial    
statements. Our procedures included confirmation of securities owned as of      
August 31, 1994, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement            
presentation. We believe that our audits provide a reasonable basis for our     
opinion.                                                                        

In our opinion, the financial statements and financial highlights referred to   
above present fairly, in all material respects, the financial position of each  
of the respective portfolios constituting the Marshall Funds, Inc., as          
identified above, as of August 31, 1994, the results of their operations, the   
changes in their net assets and the financial highlights for the periods        
presented, in conformity with generally accepted accounting principles.         

                                                             ARTHUR ANDERSEN LLP

Pittsburgh, Pennsylvania                                                        
October 11, 1994                                                                

                                                                [Download Table]

               DIRECTORS                              OFFICERS               
                                                                             
-----------------------------------------------------------------------------
Ody J. Fish                             Edward C. Gonzales                   
John DeVincentis                        Chairman and Treasurer               
Edward C. Gonzales                      James F. Duca, II                    
Paul E. Hassett                         President                            
                                        Joseph S. Machi                      
                                        Vice President and Assistant         
                                        Treasurer                            
                                        Peter J. Germain                     
                                        Secretary                            
                                        Victor R. Siclari                    
                                        Assistant Secretary                  

Mutual funds are not bank deposits or obligations, are not guaranteed by any    
bank, and are not insured or guaranteed by the FDIC, the Federal Reserve Board, 
or any other government agency. Investment in mutual funds involves risk,       
including possible loss of principal.                                           

This report is authorized for distribution to prospective investors only when   
preceded or accompanied by the Funds' prospectus which contains facts concerning
their objective and policies, management fees, expenses, and other information. 

                                                                        Marshall
                                                                          Income
                                                                           Funds

                                                  COMBINED ANNUAL REPORT
                                           TO SHAREHOLDERS
                                                 Dated August 31, 1994

FEDERATED SECURITIES CORP.                                                      
Distributor                                                                     
A subsidiary of FEDERATED INVESTORS                                             
FEDERATED INVESTORS TOWER                                                       
PITTSBURGH, PA 15222-3779                                                       
3091402 (10/94)                                                                 

PRESIDENT'S MESSAGE                                                             
--------------------------------------------------------------------------------

Dear Shareholder:                                                               

I am pleased to present the Annual Report of the Marshall Income Funds for the  
fiscal year ended August 31, 1994. This report provides you with complete       
financial information for the Funds, including the Investment Reviews by the    
portfolio managers, a list of investments for each Fund, and the Financial      
Statements.                                                                     

Rising interest rates, which affected all financial markets, had an impact on   
the Marshall Income Funds. As bond prices tend to fall in times of increasing   
interest rates, the Funds experienced declines in their share values. Of course,
the Funds continued to reward shareholders with a healthy income stream.        

Assets in the Marshall Income Funds totaled more than $521.8 million at the end 
of the period. The Marshall Government Income Fund net assets grew to $64.8     
million, and the Fund paid distributions of $0.82 per share to its shareholders.
Net assets in the Marshall Intermediate Bond Fund stood at $357 million, while  
the Fund paid distributions of $0.84 per share to its shareholders. Net assets  
in the Marshall Short Term Income Fund grew to $100 million, and the Fund paid  
distributions of $0.44 per share to its shareholders.                           

We appreciate your ongoing confidence in the Marshall Income Funds as a way to  
earn income. As always, we welcome your questions or comments.                  

Sincerely,                                                                      

James F. Duca, II                                                               
President                                                                       
Marshall Funds, Inc.                                                            
October 14, 1994                                                                

INVESTMENT REVIEW                                                               
--------------------------------------------------------------------------------

A rising economy, rising fear of inflation, and rising interest rates           
characterized the recently completed fiscal year of the Marshall Funds. Gross   
Domestic Product advanced more than 3% for the period. Although consumer        
confidence declined in recent months, indications are positive for the important
Christmas selling season, and high business confidence suggests further capital 
spending gains. Continued economic expansion and corporate cost cutting are     
translating into sustained earnings gains for American industry.                

Inflation worries surfaced this year, but to date, scant evidence of            
acceleration at the retail level has materialized. Consumer prices edged up only
2.9% over the last 12 months. Nevertheless, clouds are gathering on the horizon,
with climbing commodity costs especially ominous. With the pricing power in the 
manufacturing sector having increased significantly, industrial prices are      
firming. Capacity utilization stands at a five-year high, and labor markets are 
tightening. Expect inflation to advance to the 3.5% area in 1995.               

Over the past year, investors have been reintroduced to the anguish of rapidly  
rising interest rates. From the lows last October, long-term Treasury yields    
jumped two percentage points. Starting in February, the Federal Reserve Board   
(the "Fed") pushed up short-term interest rates 1.75 percentage points in five  
incremental moves. The Fed is well aware that the economic cycle is past the    
point where inflation usually begins to pick up. Rising rates are now beginning 
to bite, with housing among the early victims. If the Fed is forced to move from
its present neutral policy to an even more restrictive one, the expansion could 
stall by 1996--but for now, enjoy the expansion.                                

GOVERNMENT INCOME FUND                                                          

The investment objective of the Fund is to provide current income by investing  
primarily in a portfolio of securities issued or guaranteed as to payment of    
principal and interest by the U.S. government or U.S. government agencies and   
instrumentalities and certain mortgage-backed securities. The Fund experienced a
(1.34%)* total return for the fiscal year ended August 31, 1994, which compared 
to 0.37%** for the Lehman Mortgage Index. The Lehman Mortgage Index is a        
universe of mortgage securities. The Fund held positions in collateralized      
mortgage obligations (CMO's) that underperformed with rising interest rates,    
contributing to the Fund's return lagging the Lehman Index.                     

Interest rates rose significantly during the fiscal year. With stronger economic
growth raising inflation fears, the Fed moved to increase short-term rates. The 
shorter maturities experienced the largest yield increases, 2.28% for the 2-Year
Treasury while the 30-Year Treasury yield rose 1.35%. This had a tremendous     
impact on the mortgage market. It effectively eliminated the refinancing        
activity and slowed new issuance of mortgage securities. Focus moved to         
extension risk, as expectations of prepayment speeds moved lower and the        
duration of existing mortgages lengthened. The Fund's duration increased to 4.7 
years from 3.18 years on August 31, 1993. The adviser added 15-year and higher  
coupon, seasoned mortgages to limit the degree of extension risk to the Fund.   

The adviser actively manages the Fund to exploit opportunities in undervalued   
securities and trends in interest rates. In contrast to 1993, mortgage          
securities experienced extension risk, as the refinancing boom stopped with     
higher interest rates. The average life of a mortgage-backed security extends as
expected prepayment speeds slow. As changes in interest rates and lack of CMO   
creation made the returns unattractive, the dollar-roll strategy was eliminated.

Following difficult months in March and April, the mortgage market outperformed 
the government and corporate sectors for the balance of the fiscal year.        
Mortgages returned 2.5%, while governments and investment-grade corporates      
earned 1.49% and 2.01%, respectively+. The attractiveness of mortgages on a     
spread basis and the expectations of reduced supply resulted in the greater     
relative performance.                                                           

+ Returns from Lehman Brothers Indices August 31, 1994.                       
* Performance quoted represents past performance. Investment return and       
  principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.                       

** This index is unmanaged.                                                     

INVESTMENT REVIEW                                                               
--------------------------------------------------------------------------------

MARSHALL INTERMEDIATE BOND FUND                                                 

The investment objective of the Fund is to generate consistently high,          
risk-adjusted returns over interest rate cycles. Since February 1994, interest  
rates moved higher in response to stronger economic growth and inflationary     
fears. The Fed acted several times, raising short-term rates in an attempt to   
circumvent inflation pressures. The Fed's actions sent yields higher across the 
yield curve with shorter rates experiencing the largest increases, 2.28% for the
2-Year Treasury while the 30-Year Treasury rose 1.35%. This meant negative      
returns for maturities longer than three years. For the fiscal year ended August
31, 1994, the Fund, with an average weighted duration of 3.27 years, returned   
(2.02%).* Affecting the performance of the Fund were positions in collateralized
mortgage obligations (CMO's), which underperformed in the rising interest rate  
environment.                                                                    

While the market was biased toward higher rates, it experienced extreme         
volatility around Fed tightening acts. The bond market struggled with the impact
of higher rates on the economy and uncertainty when the next Fed action would   
take place. The corporate and mortgage market performed well during the fiscal  
year. A reduction in supply and need for extra yield caused spreads to tighten  
versus Treasuries. The Fund had a market weighting in investment grade          
corporates and has added mortgage-backed securities, while reducing the CMO     
positions.                                                                      

The strategy in the Fund has been to upgrade the quality of issues. Although    
corporates have narrowed significantly, there may be opportunities to add       
high-quality corporates in the near future should spreads widen. Mortgage-backed
securities with greater liquidity replaced the CMO position. The Fund's Treasury
allocation will be reduced to add yield to the portfolio.                       
MARSHALL SHORT-TERM INCOME FUND                                                 

The short end of the yield curve proved vulnerable to fears of accelerating     
inflation. During the twelve-month period ended August 31, 1994, yields on bonds
with maturities of one to three years rose approximately 2.25%--significantly   
more than any other area of the yield curve. In a rising interest rate          
environment, investments with shorter durations will generally perform the best.
Accordingly, bonds with maturities longer than five years suffered losses, while
shorter term bonds posted modest gains. Thirty-year bonds declined nearly 10%,  
while two-year notes gained approximately 1.75%.                                

The Marshall Short-Term Income Fund posted a total return of 2.05% for the      
fiscal year ended August 31, 1994.* Performance was achieved during market      
adversity by maintaining a defensive posture through a well diversified         
portfolio of high quality investments. The Fund held a relatively short duration
throughout the bond market decline, making it less sensitive to interest rate   
risk. Strategic positioning on the yield curve also played a key role in        
performance. As bond yields rose through March and April, the opportunity cost  
to holding cash increased. The short end of the yield curve steepened, taking   
the yield spread between cash securities and two-year bonds from less than 70   
basis points to more than 170 basis points. A steep yield curve provides        
investors opportunities to earn incremental return by allowing bonds to "roll   
down the curve." To take advantage of this phenomenon, the Fund positioned bonds
in the two-year area of the yield curve. Narrowing spreads on corporate and     
mortgage securities added to performance.                                       

The Marshall Short-Term Income Fund's maximum average maturity of three years   
and maximum duration of 1.5 years make it well suited to perform in a bear      
market versus its longer-term peers.                                            

* Performance quoted represents past performance. Investment return and         
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.                         

MARSHALL GOVERNMENT INCOME FUND                                                 
--------------------------------------------------------------------------------

GROWTH OF $10,000 INVESTED IN MARSHALL GOVERNMENT INCOME FUND 

   The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Government Income Fund (the "Fund") from December 13, 1992 (start of   
performance) to August 31, 1994 compared to the Lehman Brothers Mortgage-Backed 
Index ("LMI").*                                                                 

                                                                [Download Table]

                                                    Lehman                   
                                   Marshall        Brothers                  
      Measurement Period          Government       Mortgage                  
    (Fiscal Year Covered)         Income Fund    Backed Index                
                                                                             
12/13/92                                 10000           10000               
8/31/93                                  10640           10715               
8/31/94                                  10498           10756               
                     AVERAGE ANNUAL TOTAL RETURN FOR THE                     
                         PERIOD ENDED AUGUST 31, 1994                        
 1 Year.............................................................  (1.34%)
 Start of Performance (December 13, 1992)...........................   2.86% 

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE     
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR   
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.                           

* The Fund's performance assumes the reinvestment of all dividends and          
 distributions. The LMI has been adjusted to reflect reinvestment of dividends
on securities in the index.                                                 

The LMI is not adjusted to reflect sales loads, expenses, or other fees that
the SEC requires to be reflected in the Fund's performance.                 

MARSHALL INTERMEDIATE BOND FUND                                                 
--------------------------------------------------------------------------------

GROWTH OF $10,000 INVESTED IN MARSHALL INTERMEDIATE BOND FUND 

   The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Intermediate Bond Fund (the "Fund") from November 20, 1992 (start of   
performance) to August 31, 1994 compared to the Lehman Brothers                 
Government/Corporate Intermediate Bond Index ("LGCI").*                         

                                                                [Download Table]

                                                    Lehman                   
                                                   Brothers                  
                                                    Govern-                  
                                 Marshall In-    ment/Corporate              
      Measurement Period          termediate     Intermediate                
    (Fiscal Year Covered)          Bond Fund         Index                   
                                                                             
11/20/92                                 10000           10000               
8/31/93                                  10799           10961               
8/31/94                                  10581           10923               
                     AVERAGE ANNUAL TOTAL RETURN FOR THE                     
                         PERIOD ENDED AUGUST 31, 1994                        
 1 Year.............................................................  (2.02%)
 Start of Performance (November 20, 1992)...........................   3.23% 

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE     
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR   
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.                           

* The Fund's performance assumes the reinvestment of all dividends and          
  distributions. The LGCI has been adjusted to reflect reinvestment of dividends
on securities in the index.                                                 

 The LGCI is not adjusted to reflect sales loads, expenses, or other fees that
the SEC requires to be reflected in the Fund's performance.                 

MARSHALL SHORT-TERM INCOME FUND                                                 
--------------------------------------------------------------------------------

GROWTH OF $10,000 INVESTED IN MARSHALL SHORT-TERM INCOME FUND 

   The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Short-Term Income Fund (the "Fund") from November 1, 1992 (start of    
performance) to August 31, 1994 compared to the Merrill Lynch Corporate A Rated 
1-3 Year Bond Index ("MLBI") and the Donoghue's Money Fund Average ("DMFA").*   

                                                                [Download Table]

                                                 Merrill Lynch                
                                                  Corporate A                 
                                   Marshall        Rated 1-3      Donoghue's  
      Measurement Period          Short-Term       Year Bond      Money Fund  
    (Fiscal Year Covered)         Income Fund        Index         Averages   
                                                                              
11/1/92                                  10000           10000           10000
8/31/93                                  10400           10636           10200
8/31/94                                  10569           10897           10548
                     AVERAGE ANNUAL TOTAL RETURN FOR THE                      
                         PERIOD ENDED AUGUST 31, 1994                         
 1 Year.............................................................   2.05%  
 Start of Performance (November 1, 1992)............................   3.06%  

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE     
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR   
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.                           

* The Fund's performance assumes the reinvestment of all dividends and          
distributions. The MLBI and the DMFA have been adjusted to reflect          
reinvestment of dividends on securities in the indices.                     

 The MLBI and DMFA are not adjusted to reflect sales loads, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance.       

MARSHALL GOVERNMENT INCOME FUND                                                 

PORTFOLIO OF INVESTMENTS                                                        
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

PRINCIPAL                                                                                        
  AMOUNT                                                                                 VALUE   
----------         -----------------------------------------------------------------  -----------
                                                                                                 
LONG-TERM INVESTMENTS--95.8%                                                                     
------------------------------------------------------------------------------------             
                   FEDERAL HOME LOAN MORTGAGE CORP.--25.6%                                       
                   -----------------------------------------------------------------             
$  400,000         5.50%, 11/15/2012, REMIC (Series 1578-C)                           $   383,420
                   -----------------------------------------------------------------             
 1,476,854         6.00%, 4/1/2001, REMIC                                               1,414,546
                   -----------------------------------------------------------------             
   400,000         6.00%, 4/15/2019, REMIC (Series 1560-PG)                               360,276
                   -----------------------------------------------------------------             
   443,321         6.00%, 11/15/2019 (Series 1486-A)                                      426,262
                   -----------------------------------------------------------------             
 1,406,228         6.50%, 8/1/2008                                                      1,340,740
                   -----------------------------------------------------------------             
 1,542,845         7.00%, 2/1/2008                                                      1,505,231
                   -----------------------------------------------------------------             
   978,981         7.00%, 1/1/2009                                                        955,113
                   -----------------------------------------------------------------             
   900,000         7.00%, 11/15/2020, REMIC (Series 96-D)                                 859,797
                   -----------------------------------------------------------------             
 2,383,050         7.00%, 2/1/2024                                                      2,254,961
                   -----------------------------------------------------------------             
 1,700,242         7.50%, 4/1/2008                                                      1,693,866
                   -----------------------------------------------------------------             
   921,649         7.50%, 1/1/2020                                                        912,718
                   -----------------------------------------------------------------             
   608,448         8.00%, 7/1/2007                                                        616,815
                   -----------------------------------------------------------------             
 1,005,177         8.00%, 11/1/2007                                                     1,018,998
                   -----------------------------------------------------------------             
   112,076         8.00%, 3/1/2008                                                        113,618
                   -----------------------------------------------------------------             
   430,134         8.00%, 7/1/2022                                                        428,787
                   -----------------------------------------------------------------             
   930,942         8.50%, 2/1/2017                                                        956,832
                   -----------------------------------------------------------------             
   256,481         8.75%, 4/1/2001                                                        263,134
                   -----------------------------------------------------------------             
   969,800         9.00%, 5/1/2017                                                      1,005,255
                   -----------------------------------------------------------------             
    25,089         9.50%, 2/1/2001                                                         26,132
                   -----------------------------------------------------------------             
    45,494         10.50%, 10/1/2000                                                       47,783
                   -----------------------------------------------------------------  -----------
                   TOTAL FEDERAL HOME LOAN MORTGAGE CORP.                                        
                   (IDENTIFIED COST $17,349,533)                                       16,584,284
                   -----------------------------------------------------------------  -----------
                   FEDERAL NATIONAL MORTGAGE ASSOCIATION--34.4%                                  
                   -----------------------------------------------------------------             
   500,000         5.60%, 8/25/2012, REMIC (Series 1993-169-D)                            471,680
                   -----------------------------------------------------------------             
 2,000,000         6.25%, 2/25/2007, REMIC (Series 1993-129-E)                          1,839,740
                   -----------------------------------------------------------------             
 4,648,509         6.50%, 2/1/2024                                                      4,262,078
                   -----------------------------------------------------------------             
   685,962         7.00%, 6/1/2007                                                        668,813
                   -----------------------------------------------------------------             
 1,627,787         7.00%, 5/1/2008                                                      1,587,092
                   -----------------------------------------------------------------             
 1,315,144         7.50%, 5/1/2007                                                      1,308,976
                   -----------------------------------------------------------------             
 1,463,480         7.50%, 5/1/2023                                                      1,422,766
                   -----------------------------------------------------------------             
 1,954,861         7.50%, 5/1/2024                                                      1,900,476
                   -----------------------------------------------------------------             
 1,972,994         8.00%, 6/1/2014                                                      1,973,611
                   -----------------------------------------------------------------             

MARSHALL GOVERNMENT INCOME FUND                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

PRINCIPAL                                                                                        
  AMOUNT                                                                                 VALUE   
----------         -----------------------------------------------------------------  -----------
                                                                                                 
LONG-TERM INVESTMENTS--CONTINUED                                                                 
------------------------------------------------------------------------------------             
                   FEDERAL NATIONAL MORTGAGE ASSOCIATION--CONTINUED                              
                   -----------------------------------------------------------------             
$1,711,432         8.00%, 5/1/2023                                                    $ 1,705,014
                   -----------------------------------------------------------------             
   607,690         8.50%, 6/1/2021                                                        618,513
                   -----------------------------------------------------------------             
   873,580         9.00%, 2/1/2020                                                        906,610
                   -----------------------------------------------------------------             
 1,576,117         9.00%, 5/1/2022                                                      1,635,710
                   -----------------------------------------------------------------             
 1,910,682         9.50%, 1/1/2022                                                      2,019,935
                   -----------------------------------------------------------------  -----------
                   TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION                                   
                   (IDENTIFIED COST $22,831,259)                                       22,321,014
                   -----------------------------------------------------------------  -----------
                   GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--25.2%                               
                   -----------------------------------------------------------------             
 1,015,428         6.50%, 3/15/2024                                                       914,829
                   -----------------------------------------------------------------             
 2,035,490         7.00%, 3/15/2009                                                     1,984,603
                   -----------------------------------------------------------------             
 1,940,879         7.50%, 3/15/2009                                                     1,936,027
                   -----------------------------------------------------------------             
 2,334,821         7.50%, 11/15/2022                                                    2,254,550
                   -----------------------------------------------------------------             
   160,594         8.00%, 8/15/2018                                                       159,590
                   -----------------------------------------------------------------             
   157,952         8.00%, 12/15/2021                                                      156,965
                   -----------------------------------------------------------------             
   858,410         8.00%, 1/15/2022                                                       853,442
                   -----------------------------------------------------------------             
   701,605         8.00%, 6/15/2022                                                       697,219
                   -----------------------------------------------------------------             
   159,311         8.00%, 7/15/2022                                                       158,316
                   -----------------------------------------------------------------             
   872,027         8.00%, 5/15/2023                                                       866,578
                   -----------------------------------------------------------------             
   483,404         8.00%, 12/15/2023                                                      480,384
                   -----------------------------------------------------------------             
 2,018,680         8.00%, 7/15/2024                                                     2,006,064
                   -----------------------------------------------------------------             
   709,292         8.50%, 4/15/2021                                                       721,925
                   -----------------------------------------------------------------             
   127,606         9.00%, 5/15/2016                                                       133,906
                   -----------------------------------------------------------------             
   193,199         9.00%, 7/15/2016                                                       202,737
                   -----------------------------------------------------------------             
   261,973         9.00%, 8/15/2016                                                       274,907
                   -----------------------------------------------------------------             
   144,424         9.00%, 12/15/2016                                                      151,554
                   -----------------------------------------------------------------             
   157,584         9.00%, 1/15/2017                                                       165,364
                   -----------------------------------------------------------------             
   114,301         9.00%, 7/15/2017                                                       118,943
                   -----------------------------------------------------------------             
   740,028         9.50%, 7/15/2019                                                       784,422
                   -----------------------------------------------------------------             
 1,010,224         10.00%, 11/15/2020                                                   1,087,254
                   -----------------------------------------------------------------             
    98,839         10.50%, 10/15/2000                                                     105,387
                   -----------------------------------------------------------------             
    76,540         11.00%, 11/15/2000                                                      82,185
                   -----------------------------------------------------------------  -----------
                   TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION                                
                   (IDENTIFIED COST $16,846,759)                                       16,297,151
                   -----------------------------------------------------------------  -----------

MARSHALL GOVERNMENT INCOME FUND                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

PRINCIPAL                                                                                         
  AMOUNT                                                                                 VALUE    
----------         -----------------------------------------------------------------  ----------- 
                                                                                                  
LONG-TERM INVESTMENTS--CONTINUED                                                                  
------------------------------------------------------------------------------------              
U.S. TREASURY NOTES--10.6%                                                                        
------------------------------------------------------------------------------------              
$4,800,000         7.25%, 8/15/2004++                                                 $ 4,824,720 
                   -----------------------------------------------------------------              
 2,000,000         7.50%, 11/15/2001                                                    2,055,700 
                   -----------------------------------------------------------------  ----------- 
                   TOTAL U.S. TREASURY NOTES (IDENTIFIED COST $6,836,344)               6,880,420 
                   -----------------------------------------------------------------  ----------- 
                   TOTAL LONG-TERM INVESTMENTS (IDENTIFIED COST $63,863,895)           62,082,869 
                   -----------------------------------------------------------------  ----------- 
*REPURCHASE AGREEMENT--5.1%                                                                       
------------------------------------------------------------------------------------              
 3,286,000         BZW Securities, Inc., 4.80%, dated 8/31/94,                                    
                   due 9/1/94 (at amortized cost)                                       3,286,000 
                   -----------------------------------------------------------------  ----------- 
                   TOTAL INVESTMENTS (IDENTIFIED COST $67,149,895)                    $65,368,869+
                   -----------------------------------------------------------------  ----------- 

 * The repurchase agreement is fully collateralized by U.S. Treasury obligations
based on market prices at the date of the portfolio.                      

+ The cost of investments for federal tax purposes amounts to $67,149,895. The
  net unrealized depreciation of investments on a federal tax basis amounts to
$1,781,026, which is comprised of $88,141 appreciation and $1,869,167     
depreciation at August 31, 1994.                                          

++ Certain shares on loan to broker.                                            

Note: The categories of investments are shown as a percentage of net assets     
($64,823,046) at August 31, 1994.                                   

The following abbreviation is used in this portfolio:                           

REMIC--Real Estate Mortgage Investment Conduit                                  

(See Notes which are an integral part of the Financial Statements)              

MARSHALL GOVERNMENT INCOME FUND                                                 

STATEMENT OF ASSETS AND LIABILITIES                                             
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                               
ASSETS:                                                                                        
---------------------------------------------------------------------------------              
Investments in securities                                             $62,082,869              
-------------------------------------------------------------------                            
Investments in repurchase agreements                                    3,286,000              
-------------------------------------------------------------------   -----------              
     Total investments, at value (identified and tax cost $67,149,895)             $65,368,869 
---------------------------------------------------------------------------------              
Collateral for security lending                                                      4,884,000 
---------------------------------------------------------------------------------              
Receivable for capital stock sold                                                      551,428 
---------------------------------------------------------------------------------              
Interest receivable                                                                    418,660 
---------------------------------------------------------------------------------              
Deferred expenses                                                                       33,228 
---------------------------------------------------------------------------------  ----------- 
     Total assets                                                                   71,256,185 
---------------------------------------------------------------------------------              
LIABILITIES:                                                                                   
---------------------------------------------------------------------------------              
Security lending payable                                              $ 4,884,000              
-------------------------------------------------------------------                            
Payable for investments purchased                                       1,416,949              
-------------------------------------------------------------------                            
Payable for capital stock redeemed                                         60,231              
-------------------------------------------------------------------                            
Accrued expenses                                                           71,959              
-------------------------------------------------------------------   -----------              
     Total liabilities                                                               6,433,139 
---------------------------------------------------------------------------------  ----------- 
NET ASSETS for 7,001,696 shares of capital stock outstanding                       $64,823,046 
---------------------------------------------------------------------------------  ----------- 
NET ASSETS CONSIST OF:                                                                         
---------------------------------------------------------------------------------              
Paid-in capital                                                                    $69,655,072 
---------------------------------------------------------------------------------              
Net unrealized depreciation of investments                                          (1,781,026)
---------------------------------------------------------------------------------              
Accumulated net realized loss on investments                                        (3,163,142)
---------------------------------------------------------------------------------              
Undistributed net investment income                                                    112,142 
---------------------------------------------------------------------------------  ----------- 
     Total Net Assets                                                              $64,823,046 
---------------------------------------------------------------------------------  ----------- 
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:                             
(net assets of $64,823,046 / 7,001,696 shares of capital stock outstanding)              $9.26 
---------------------------------------------------------------------------------  ----------- 

(See Notes which are an integral part of the Financial Statements)              

MARSHALL GOVERNMENT INCOME FUND                                                 

STATEMENT OF OPERATIONS                                                         
YEAR ENDED AUGUST 31, 1994                                                      
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                                
INVESTMENT INCOME:                                                                              
----------------------------------------------------------------------------------              
Interest income (net of interest expense of $133,443)                               $ 4,327,226 
----------------------------------------------------------------------------------              
EXPENSES--                                                                                      
----------------------------------------------------------------------------------              
Investment advisory fee                                                   $436,508              
----------------------------------------------------------------------                          
Administrative personnel and services fee                                   55,895              
----------------------------------------------------------------------                          
Custodian fees                                                              11,646              
----------------------------------------------------------------------                          
Transfer and dividend disbursing agent fees and expenses                    73,988              
----------------------------------------------------------------------                          
Fund share registration costs                                               36,969              
----------------------------------------------------------------------                          
Auditing fees                                                               14,150              
----------------------------------------------------------------------                          
Legal fees                                                                   7,569              
----------------------------------------------------------------------                          
Printing and postage                                                        16,702              
----------------------------------------------------------------------                          
Portfolio accounting fees                                                   49,729              
----------------------------------------------------------------------                          
Insurance premiums                                                           5,847              
----------------------------------------------------------------------                          
Taxes                                                                        5,800              
----------------------------------------------------------------------                          
Shareholder services fees                                                    8,730              
----------------------------------------------------------------------                          
Miscellaneous                                                                5,489              
----------------------------------------------------------------------    --------              
     Total expenses                                                        729,022              
----------------------------------------------------------------------                          
Deduct--                                                                                        
-----------------------------------------------------------                                     
  Waiver of investment advisory fee                           $224,038                          
-----------------------------------------------------------                                     
  Waiver of custodian fees                                       7,275     231,313              
-----------------------------------------------------------   --------    --------              
    Net expenses                                                                        497,709 
----------------------------------------------------------------------------------  ----------- 
        Net investment income                                                         3,829,517 
----------------------------------------------------------------------------------  ----------- 
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:                                                    
----------------------------------------------------------------------------------              
Net realized loss on investments (identified cost basis)                             (3,162,878)
----------------------------------------------------------------------------------              
Net change in unrealized depreciation on investments                                 (1,676,516)
----------------------------------------------------------------------------------  ----------- 
     Net realized and unrealized loss on investments                                 (4,839,394)
----------------------------------------------------------------------------------  ----------- 
          Change in net assets resulting from operations                            $(1,009,877)
----------------------------------------------------------------------------------  ----------- 

(See Notes which are an integral part of the Financial Statements)              

MARSHALL GOVERNMENT INCOME FUND                                                 

STATEMENT OF CHANGES IN NET ASSETS                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                      YEAR ENDED AUGUST 31,    
                                                                    -------------------------- 
                                                                       1994           1993*    
                                                                    -----------    ----------- 
                                                                                               
INCREASE (DECREASE) IN NET ASSETS:                                                             
------------------------------------------------------------------                             
OPERATIONS--                                                                                   
------------------------------------------------------------------                             
Net investment income                                               $ 3,829,517    $ 2,344,420 
------------------------------------------------------------------                             
Net realized gain (loss) on investments ($521,493 net loss and                                 
  $733,258 net gain, respectively, as computed for federal tax                                 
  purposes)                                                          (3,162,878)       733,258 
------------------------------------------------------------------                             
Net change in unrealized depreciation on investments                 (1,676,516)      (104,510)
------------------------------------------------------------------  -----------    ----------- 
     Change in net assets resulting from operations                  (1,009,877)     2,973,168 
------------------------------------------------------------------  -----------    ----------- 
DISTRIBUTIONS TO SHAREHOLDERS--                                                                
------------------------------------------------------------------                             
Dividends to shareholders from net investment income                 (4,026,755)    (2,035,040)
------------------------------------------------------------------                             
Distributions to shareholders from net realized gain on investment                             
transactions                                                           (733,522)            -- 
------------------------------------------------------------------  -----------    ----------- 
     Change in net assets from distributions to shareholders         (4,760,277)    (2,035,040)
------------------------------------------------------------------  -----------    ----------- 
CAPITAL STOCK TRANSACTIONS--                                                                   
------------------------------------------------------------------                             
Proceeds from sale of shares                                         40,774,599    109,176,418 
------------------------------------------------------------------                             
Net asset value of shares issued to shareholders in payment                                    
of dividends declared                                                 3,961,419      1,779,788 
------------------------------------------------------------------                             
Cost of shares redeemed                                             (31,964,319)   (54,072,933)
------------------------------------------------------------------  -----------    ----------- 
     Change in net assets from capital stock transactions            12,771,699     56,883,273 
------------------------------------------------------------------  -----------    ----------- 
          Change in net assets                                        7,001,545     57,821,401 
------------------------------------------------------------------                             
NET ASSETS:                                                                                    
------------------------------------------------------------------                             
Beginning of period                                                  57,821,501            100 
------------------------------------------------------------------  -----------    ----------- 
End of period (including undistributed net investment income                                   
of $112,142 and $309,380, respectively)                             $64,823,046    $57,821,501 
------------------------------------------------------------------  -----------    ----------- 

* For the period from December 14, 1992 (date of initial public investment) to
August 31, 1993.                                                          

(See Notes which are an integral part of the Financial Statements)              

MARSHALL GOVERNMENT INCOME FUND                                                 

FINANCIAL HIGHLIGHTS                                                            
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)                                

                                                        [Enlarge/Download Table]

                                                                    YEAR ENDED AUGUST 31,     
                                                                  -----------------------     
                                                                    1994            1993*     
                                                                   -------         -------    
                                                                                              
NET ASSET VALUE, BEGINNING OF PERIOD                                $10.22          $10.00    
-----------------------------------------------------------------                             
INCOME FROM INVESTMENT OPERATIONS                                                             
-----------------------------------------------------------------                             
  Net investment income                                               0.64            0.47    
-----------------------------------------------------------------                             
  Net realized and unrealized gain (loss) on investments             (0.78)           0.16    
-----------------------------------------------------------------   ------          ------    
  Total from investment operations                                   (0.14)           0.63    
-----------------------------------------------------------------   ------          ------    
LESS DISTRIBUTIONS                                                                            
-----------------------------------------------------------------                             
  Dividends to shareholders from net investment income               (0.68)          (0.41)   
-----------------------------------------------------------------                             
  Distributions to shareholders from net realized gain on                                     
  investment transactions                                            (0.14)             --    
-----------------------------------------------------------------   ------          ------    
  Total distributions                                                (0.82)          (0.41)   
-----------------------------------------------------------------   ------          ------    
NET ASSET VALUE, END OF PERIOD                                      $ 9.26          $10.22    
-----------------------------------------------------------------   ------          ------    
TOTAL RETURN**                                                       (1.34)%          6.40%   
-----------------------------------------------------------------                             
RATIOS TO AVERAGE NET ASSETS                                                                  
-----------------------------------------------------------------                             
  Expenses                                                            0.86%           0.85%(b)
-----------------------------------------------------------------                             
  Net investment income                                               6.58%           6.56%(b)
-----------------------------------------------------------------                             
  Expense waiver (a)                                                  0.40%           0.33%(b)
-----------------------------------------------------------------                             
SUPPLEMENTAL DATA                                                                             
-----------------------------------------------------------------                             
  Net assets, end of period (000 omitted)                          $64,823         $57,822    
-----------------------------------------------------------------                             
  Portfolio turnover rate                                              175%            218%   
-----------------------------------------------------------------                             

* Reflects operations for the period from December 14, 1992 (date of initial
public investment) to August 31, 1993.                                  

** Based on net asset value.                                                  

(a) This voluntary expense decrease is reflected in both the expense and net    
investment income ratios shown above.                                   

(b) Computed on an annualized basis.                                            

(See Notes which are an integral part of the Financial Statements)              

MARSHALL INTERMEDIATE BOND FUND                                                 

PORTFOLIO OF INVESTMENTS                                                        
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                        
  AMOUNT                                                                                 VALUE    
-----------         ----------------------------------------------------------------  ------------
                                                                                                  
LONG-TERM INVESTMENTS--97.3%                                                                      
------------------------------------------------------------------------------------              
CORPORATE BONDS--17.5%                                                                            
------------------------------------------------------------------------------------              
                    ASSET-BACKED SECURITIES--3.2%                                                 
                    ----------------------------------------------------------------              
$ 4,645,000         American Express Master Trust, Series 1993, Class A, 5.375%,                  
                    7/15/2001                                                         $  4,198,662
                    ----------------------------------------------------------------              
  6,575,000         First Chicago Master Trust, Series 1994-L, 7.15%, 4/16/2001          6,575,000
                    ----------------------------------------------------------------              
     74,256         U.S. Auto Receivables Trust, Series 1991-2, 8.00%, 3/15/96              74,443
                    ----------------------------------------------------------------              
    504,018         Western Financial Grantor Trust, Series 1991-3, 6.75%, 1/1/97          505,056
                    ----------------------------------------------------------------  ------------
                    Total Asset-Backed Securities                                       11,353,161
                    ----------------------------------------------------------------  ------------
                    BANKING--3.7%                                                                 
                    ----------------------------------------------------------------              
  3,525,000         First Bank N.A., 7.55%, 6/15/2004                                    3,443,079
                    ----------------------------------------------------------------              
  5,200,000         NBD Bank N.A., 5.00%, 1/30/98                                        4,898,556
                    ----------------------------------------------------------------              
  5,115,000         Wachovia Bank, 5.50%, 6/29/98                                        4,855,260
                    ----------------------------------------------------------------  ------------
                    Total Banking                                                       13,196,895
                    ----------------------------------------------------------------  ------------
                    FINANCE--AUTOMOTIVE--3.9%                                                     
                    ----------------------------------------------------------------              
  3,400,000         Associates Corp. of North America, Tranche SR 00890, 7.05%,                   
                    5/15/97                                                              3,412,478
                    ----------------------------------------------------------------              
  5,975,000         Associates Corp. of North America, Tranche SR 00018, 6.65%,                   
                    6/16/97                                                              5,975,717
                    ----------------------------------------------------------------              
  4,200,000         Chrysler Financial Corp., 9.50%, 12/15/99                            4,572,750
                    ----------------------------------------------------------------  ------------
                    Total Finance                                                       13,960,945
                    ----------------------------------------------------------------  ------------
                    FINANCE--BROKERAGE--1.3%                                                      
                    ----------------------------------------------------------------              
  4,550,000         Lehman Brothers, Inc., 7.00%, 5/15/97++                              4,524,475
                    ----------------------------------------------------------------  ------------
                    INDUSTRIAL--1.5%                                                              
                    ----------------------------------------------------------------              
  5,300,000         Burlington Resources, 7.15%, 5/1/99                                  5,278,270
                    ----------------------------------------------------------------  ------------
                    YANKEE--3.9%                                                                  
                    ----------------------------------------------------------------              
    733,000         African Development Bank, 13.25%, 12/1/94                              745,094
                    ----------------------------------------------------------------              
  5,230,000         CRA Finance USA Ltd., 6.50%, 12/1/2003                               4,757,993
                    ----------------------------------------------------------------              
  8,940,000         Hanson PLC, 7.375%, 1/15/2003                                        8,732,413
                    ----------------------------------------------------------------  ------------
                    Total Yankee                                                        14,235,500
                    ----------------------------------------------------------------  ------------
                    TOTAL CORPORATE BONDS (IDENTIFIED COST $64,579,551)                 62,549,246
                    ----------------------------------------------------------------  ------------

MARSHALL INTERMEDIATE BOND FUND                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                        
  AMOUNT                                                                                 VALUE    
-----------         ----------------------------------------------------------------  ------------
                                                                                                  
LONG-TERM INVESTMENTS--CONTINUED                                                                  
------------------------------------------------------------------------------------              
MORTGAGE-BACKED SECURITIES--9.4%                                                                  
------------------------------------------------------------------------------------              
                    FEDERAL HOME LOAN MORTGAGE CORP.--4.6%                                        
                    ----------------------------------------------------------------              
$ 3,508,655         6.00%, 11/15/2019, REMIC (Series 1486-A)                          $  3,373,642
                    ----------------------------------------------------------------              
  3,650,000         7.00%, 11/15/2020, REMIC (Series 96-D)                               3,486,955
                    ----------------------------------------------------------------              
  9,500,000         8.00%, 11/15/2019, TBA (Gold)                                        9,470,265
                    ----------------------------------------------------------------              
     39,327         8.75%, 4/1/2001                                                         40,347
                    ----------------------------------------------------------------  ------------
                    Total Federal Home Loan Mortgage Corp.                              16,371,209
                    ----------------------------------------------------------------  ------------
                    FEDERAL HOME LOAN BANK--1.6%                                                  
                    ----------------------------------------------------------------              
  5,605,000         7.26%, 9/6/2001                                                      5,633,081
                    ----------------------------------------------------------------  ------------
                    GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--1.4%                                
                    ----------------------------------------------------------------              
  4,855,057         7.50%, 3/15/2009                                                     4,842,920
                    ----------------------------------------------------------------  ------------
                    OTHER--1.8%                                                                   
                    ----------------------------------------------------------------              
  7,000,000         Securitized Asset Sales, Series 1994-5, Class A3, 7.00%,                      
                    7/25/2024                                                            6,654,375
                    ----------------------------------------------------------------  ------------
                    TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $33,876,247)      33,501,585
                    ----------------------------------------------------------------  ------------
U.S. TREASURY NOTES--70.4%                                                                        
------------------------------------------------------------------------------------              
  9,655,000         5.25%, 7/31/98                                                       9,202,470
                    ----------------------------------------------------------------              
 23,655,000         5.50%, 4/30/96++                                                    23,484,921
                    ----------------------------------------------------------------              
 10,130,000         6.375%, 1/15/2000                                                    9,929,527
                    ----------------------------------------------------------------              
 48,950,000         6.50%, 5/15/97-8/15/97                                              49,057,848
                    ----------------------------------------------------------------              
 28,790,000         6.75%, 2/28/97-6/30/99                                              28,788,819
                    ----------------------------------------------------------------              
 39,850,000         7.25%, 8/31/96-8/15/2004++                                          40,309,823
                    ----------------------------------------------------------------              
 20,000,000         7.625%, 4/30/96                                                     20,525,200
                    ----------------------------------------------------------------              
 14,450,000         7.875%, 1/15/98++                                                   15,035,803
                    ----------------------------------------------------------------              
  9,255,000         8.125%, 2/15/98                                                      9,708,402
                    ----------------------------------------------------------------              
 14,015,000         8.25%, 7/15/98++                                                    14,780,359
                    ----------------------------------------------------------------              
 10,400,000         8.625%, 10/15/95                                                    10,751,000
                    ----------------------------------------------------------------              
 19,425,000         9.25%, 1/15/96                                                      20,320,881
                    ----------------------------------------------------------------  ------------
                    TOTAL U.S. TREASURY NOTES (IDENTIFIED COST $258,329,233)           251,895,053
                    ----------------------------------------------------------------  ------------
                    TOTAL LONG-TERM INVESTMENTS (IDENTIFIED COST $356,785,031)         347,945,884
                    ----------------------------------------------------------------  ------------

MARSHALL INTERMEDIATE BOND FUND                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                         
  AMOUNT                                                                                 VALUE     
-----------         ----------------------------------------------------------------  ------------ 
                                                                                                   
*REPURCHASE AGREEMENT--7.0%                                                                        
------------------------------------------------------------------------------------               
$25,169,000         BZW Securities, Inc., 4.80%, dated 8/31/94, due 9/1/94                         
                    (at amortized cost)                                               $ 25,169,000 
                    ----------------------------------------------------------------  ------------ 
                    TOTAL INVESTMENTS (IDENTIFIED COST $381,954,031)                  $373,114,884+
                    ----------------------------------------------------------------  ------------ 

 * The repurchase agreement is fully collateralized by U.S. Treasury obligations
based on market prices at the date of the portfolio.                      

 + The cost of investments for federal tax purposes amounts to $381,991,438. The
  net unrealized depreciation of investments on a federal tax basis amounts to
$8,876,554 which is comprised of $213,364 appreciation and $9,089,918     
depreciation at August 31, 1994.                                          

++ Certain shares on loan to broker.                                            

Note: The categories of investments are shown as a percentage of net assets     
($357,739,673) at August 31, 1994.                                  

(See Notes which are an integral part of the Financial Statements)              

MARSHALL INTERMEDIATE BOND FUND                                                 

STATEMENT OF ASSETS AND LIABILITIES                                             
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                               
ASSETS:                                                                                        
--------------------------------------------------------------------------------               
Investments in securities                                           $347,945,884               
-----------------------------------------------------------------                              
Investments in repurchase agreement                                   25,169,000               
-----------------------------------------------------------------   ------------               
     Total investments, at value                                                               
     (identified cost $381,954,031; tax cost $381,991,438)                        $373,114,884 
--------------------------------------------------------------------------------               
Collateral for security lending                                                     73,580,656 
--------------------------------------------------------------------------------               
Receivable for investments sold                                                     22,511,188 
--------------------------------------------------------------------------------               
Interest receivable                                                                  3,807,347 
--------------------------------------------------------------------------------               
Receivable for capital stock sold                                                    2,920,111 
--------------------------------------------------------------------------------               
Deferred expenses                                                                       72,603 
--------------------------------------------------------------------------------  ------------ 
     Total assets                                                                  476,006,789 
--------------------------------------------------------------------------------               
LIABILITIES:                                                                                   
--------------------------------------------------------------------------------               
Security lending payable                                            $ 73,580,656               
-----------------------------------------------------------------                              
Payable for investments purchased                                     44,153,334               
-----------------------------------------------------------------                              
Payable for capital stock redeemed                                       332,723               
-----------------------------------------------------------------                              
Accrued expenses                                                         200,403               
-----------------------------------------------------------------   ------------               
     Total liabilities                                                             118,267,116 
--------------------------------------------------------------------------------  ------------ 
NET ASSETS for 38,203,257 shares of capital stock outstanding                     $357,739,673 
--------------------------------------------------------------------------------  ------------ 
NET ASSETS CONSIST OF:                                                                         
--------------------------------------------------------------------------------               
Paid-in capital                                                                   $381,167,658 
--------------------------------------------------------------------------------               
Net unrealized depreciation of investments                                          (8,839,147)
--------------------------------------------------------------------------------               
Accumulated net realized loss on investments                                       (15,114,213)
--------------------------------------------------------------------------------               
Undistributed net investment income                                                    525,375 
--------------------------------------------------------------------------------  ------------ 
     Total Net Assets                                                             $357,739,673 
--------------------------------------------------------------------------------  ------------ 
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:                            
(net assets of $357,739,673 / 38,203,257 shares of capital stock outstanding)            $9.36 
--------------------------------------------------------------------------------  ------------ 

(See Notes which are an integral part of the Financial Statements)              

MARSHALL INTERMEDIATE BOND FUND                                                 

STATEMENT OF OPERATIONS                                                         
YEAR ENDED AUGUST 31, 1994                                                      
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                                 
INVESTMENT INCOME:                                                                               
----------------------------------------------------------------------------------               
Interest income (net of interest expense of $1,070,860)                             $ 21,744,806 
----------------------------------------------------------------------------------               
EXPENSES--                                                                                       
----------------------------------------------------------------------------------               
Investment advisory fee                                                 $1,873,380               
--------------------------------------------------------------------                             
Directors' fees                                                              3,444               
--------------------------------------------------------------------                             
Administrative personnel and services fee                                  300,278               
--------------------------------------------------------------------                             
Custodian fees                                                              56,251               
--------------------------------------------------------------------                             
Transfer and dividend disbursing agent fees and expenses                    37,851               
--------------------------------------------------------------------                             
Fund share registration costs                                               42,691               
--------------------------------------------------------------------                             
Auditing fees                                                               14,150               
--------------------------------------------------------------------                             
Legal fees                                                                  11,614               
--------------------------------------------------------------------                             
Printing and postage                                                        13,877               
--------------------------------------------------------------------                             
Portfolio accounting fees                                                   82,345               
--------------------------------------------------------------------                             
Insurance premiums                                                          10,197               
--------------------------------------------------------------------                             
Taxes                                                                       34,900               
--------------------------------------------------------------------                             
Shareholder services fees                                                   46,835               
--------------------------------------------------------------------                             
Miscellaneous                                                                5,528               
--------------------------------------------------------------------    ----------               
     Total expenses                                                      2,533,341               
--------------------------------------------------------------------                             
Deduct--                                                                                         
--------------------------------------------------------------------                             
 Waiver of investment advisory fee                          $296,925                             
---------------------------------------------------------                                        
 Waiver of custodian fees                                     32,806       329,731               
---------------------------------------------------------   --------    ----------               
     Net expenses                                                                      2,203,610 
----------------------------------------------------------------------------------  ------------ 
          Net investment income                                                       19,541,196 
----------------------------------------------------------------------------------  ------------ 
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:                                                     
----------------------------------------------------------------------------------               
Net realized loss on investments (identified cost basis)                             (13,957,495)
----------------------------------------------------------------------------------               
Net change in unrealized depreciation on investments                                 (12,033,595)
----------------------------------------------------------------------------------  ------------ 
     Net realized and unrealized loss on investments                                 (25,991,090)
----------------------------------------------------------------------------------  ------------ 
          Change in net assets resulting from operations                            $ (6,449,894)
----------------------------------------------------------------------------------  ------------ 

(See Notes which are an integral part of the Financial Statements)              

MARSHALL INTERMEDIATE BOND FUND                                                 

STATEMENT OF CHANGES IN NET ASSETS                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
[6~                                                                                              
                                                      YEAR ENDED AUGUST 31,                      
                                                                   ----------------------------- 
                                                                       1994            1993*     
                                                                   -------------    ------------ 
                                                                                                 
INCREASE (DECREASE) IN NET ASSETS:                                                               
----------------------------------------------------------------                                 
OPERATIONS--                                                                                     
----------------------------------------------------------------                                 
Net investment income                                              $  19,541,196    $ 13,043,460 
----------------------------------------------------------------                                 
Net realized gain (loss) on investments ($1,157,829 and                                          
  $4,036,087 net gains, respectively, as computed for federal                                    
  tax purposes)                                                      (13,957,495)      4,036,087 
----------------------------------------------------------------                                 
Net change in unrealized appreciation (depreciation) on                                          
  investments                                                        (12,033,595)      3,194,448 
----------------------------------------------------------------   -------------    ------------ 
     Change in net assets resulting from operations                   (6,449,894)     20,273,995 
----------------------------------------------------------------   -------------    ------------ 
DISTRIBUTIONS TO SHAREHOLDERS--                                                                  
----------------------------------------------------------------                                 
Dividends to shareholders from net investment income                 (21,460,493)    (10,598,788)
----------------------------------------------------------------                                 
Distributions to shareholders from net realized gain on                                          
  investment transactions                                             (5,192,805)             -- 
----------------------------------------------------------------   -------------    ------------ 
     Change in net assets from distributions to shareholders         (26,653,298)    (10,598,788)
----------------------------------------------------------------   -------------    ------------ 
CAPITAL STOCK TRANSACTIONS--                                                                     
----------------------------------------------------------------                                 
Proceeds from sale of shares                                         171,805,103     359,874,598 
----------------------------------------------------------------                                 
Net asset value of shares issued to shareholders in payment of                                   
dividends declared                                                    22,497,295      10,068,800 
----------------------------------------------------------------                                 
Cost of shares redeemed                                             (150,267,568)    (32,810,670)
----------------------------------------------------------------   -------------    ------------ 
     Change in net assets from capital stock transactions             44,034,830     337,132,728 
----------------------------------------------------------------   -------------    ------------ 
          Change in net assets                                        10,931,638     346,807,935 
----------------------------------------------------------------                                 
NET ASSETS:                                                                                      
----------------------------------------------------------------                                 
Beginning of period                                                  346,808,035             100 
----------------------------------------------------------------   -------------    ------------ 
End of period (including undistributed net investment income of                                  
$525,375 and $2,444,672, respectively)                             $ 357,739,673    $346,808,035 
----------------------------------------------------------------   -------------    ------------ 

* For the period from November 23, 1992 (date of initial public investment) to  
August 31, 1993.                                                            

(See Notes which are an integral part of the Financial Statements)              

MARSHALL INTERMEDIATE BOND FUND                                                 

FINANCIAL HIGHLIGHTS                                                            
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)                                

                                                        [Enlarge/Download Table]

                                                                   YEAR ENDED AUGUST 31,      
                                                                 -------------------------    
                                                                   1994            1993*      
                                                                 --------         --------    
                                                                                              
NET ASSET VALUE, BEGINNING OF PERIOD                               $10.40           $10.00    
---------------------------------------------------------------                               
INCOME FROM INVESTMENT OPERATIONS                                                             
---------------------------------------------------------------                               
  Net investment income                                              0.61             0.46    
---------------------------------------------------------------                               
  Net realized and unrealized gain (loss) on investments            (0.81)            0.33    
---------------------------------------------------------------    ------           ------    
  Total from investment operations                                  (0.20)            0.79    
---------------------------------------------------------------    ------           ------    
LESS DISTRIBUTIONS                                                                            
---------------------------------------------------------------                               
  Dividends to shareholders from net investment income              (0.67)           (0.39)   
---------------------------------------------------------------                               
  Distributions to shareholders from net realized gain on                                     
  investment transactions                                           (0.17)              --    
---------------------------------------------------------------    ------           ------    
  Total distributions                                               (0.84)           (0.39)   
---------------------------------------------------------------    ------           ------    
NET ASSET VALUE, END OF PERIOD                                      $9.36           $10.40    
---------------------------------------------------------------    ------           ------    
TOTAL RETURN**                                                      (2.02%)           7.99%   
---------------------------------------------------------------                               
RATIOS TO AVERAGE NET ASSETS                                                                  
---------------------------------------------------------------                               
  Expenses                                                           0.71%            0.70%(b)
---------------------------------------------------------------                               
  Net investment income                                              6.26%            6.08%(b)
---------------------------------------------------------------                               
  Expense waiver (a)                                                 0.11%            0.10%(b)
---------------------------------------------------------------                               
SUPPLEMENTAL DATA                                                                             
---------------------------------------------------------------                               
  Net assets, end of period (000 omitted)                        $357,740         $346,808    
---------------------------------------------------------------                               
  Portfolio turnover rate                                             228%             220%   
---------------------------------------------------------------                               

* Reflects operations for the period from November 23, 1992 (date of initial
public investment) to August 31, 1993.                                  

** Based on net asset value.                                                  

(a) This voluntary expense decrease is reflected in both the expense and net    
investment income ratios shown above.                                   

(b) Computed on an annualized basis.                                            

(See Notes which are an integral part of the Financial Statements).             

MARSHALL SHORT-TERM INCOME FUND                                                 

PORTFOLIO OF INVESTMENTS                                                        
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                       
  AMOUNT                                                                                VALUE    
-----------         ---------------------------------------------------------------  ------------
                                                                                                 
SHORT-TERM INVESTMENTS--9.0%                                                                     
-----------------------------------------------------------------------------------              
                    MASTER NOTES--9.0%                                                           
                    ---------------------------------------------------------------              
$ 4,500,000         Donaldson, Lufkin & Jenrette Securities Corp., 4.75%**, 9/1/94   $  4,500,000
                    ---------------------------------------------------------------              
  4,500,000         General Motors Acceptance Corp., 4.757**, 9/1/94                    4,500,000
                    ---------------------------------------------------------------  ------------
                    TOTAL SHORT-TERM INVESTMENTS (AT AMORTIZED COST)                    9,000,000
                    ---------------------------------------------------------------  ------------
LONG-TERM INVESTMENTS--92.4%                                                                     
-----------------------------------------------------------------------------------              
CORPORATE BONDS--24.1%                                                                           
-----------------------------------------------------------------------------------              
                    BANKING--5.7%                                                                
                    ---------------------------------------------------------------              
    900,000         Citicorp, 8.05%, 3/5/96                                               914,958
                    ---------------------------------------------------------------              
  3,250,000         NBD Bank N.A., 5.00%, 1/5/95                                        3,239,048
                    ---------------------------------------------------------------              
  1,600,000         Nationsbank Corp., 4.75%, 8/15/96                                   1,548,608
                    ---------------------------------------------------------------  ------------
                    Total                                                               5,702,614
                    ---------------------------------------------------------------  ------------
                    FINANCE--4.4%                                                                
                    ---------------------------------------------------------------              
  3,210,000         Dean Witter Discover & Co., 4.888%**, 1/28/97                       3,206,983
                    ---------------------------------------------------------------              
  1,200,150         Heller Financial Inc., 6.45%, 2/15/97                               1,199,550
                    ---------------------------------------------------------------  ------------
                    Total                                                               4,406,533
                    ---------------------------------------------------------------  ------------
                    FINANCE--AUTOMOTIVE--3.7%                                                    
                    ---------------------------------------------------------------              
  3,850,000         Ford Motor Credit Corp., 5.625%, 3/3/97                             3,739,890
                    ---------------------------------------------------------------  ------------
                    FINANCE--SECURITIES--6.9%                                                    
                    ---------------------------------------------------------------              
  2,585,000         Lehman Brothers, Inc., 7.00%, 5/15/97                               2,570,498
                    ---------------------------------------------------------------              
    550,000         Merrill Lynch & Co., 5.875%, 12/1/95                                  546,865
                    ---------------------------------------------------------------              
  3,875,000         Morgan Stanley Group, Inc., 4.95%**, 1/20/97                        3,861,902
                    ---------------------------------------------------------------  ------------
                    Total                                                               6,979,265
                    ---------------------------------------------------------------  ------------
                    RETAIL--1.6%                                                                 
                    ---------------------------------------------------------------              
  1,630,000         Dayton Hudson Corp., 4.65%, 3/11/96                                 1,588,728
                    ---------------------------------------------------------------  ------------
                    TELECOMMUNICATION--1.8%                                                      
                    ---------------------------------------------------------------              
  1,800,000         Northern Telecom, 8.25%, 6/13/96                                    1,853,064
                    ---------------------------------------------------------------  ------------
                    TOTAL CORPORATE BONDS (IDENTIFIED COST $24,469,545)                24,270,094
                    ---------------------------------------------------------------  ------------
ASSET-BACKED SECURITIES--15.4%                                                                   
-----------------------------------------------------------------------------------              
  3,005,000         First Deposit Master Trust, Series 1994--1, Class A, 6.90%,                  
                    8/15/2001                                                           3,015,097
                    ---------------------------------------------------------------              
  3,000,000      ++ Ford Credit Auto Loan Master Trust, Series 1994--1, Class A,                 
                    4.983%**, 7/15/2001                                                 3,001,875
                    ---------------------------------------------------------------              
  1,375,398      ++ Ford Credit Grantor Trust, Series 1993--B, Class A, 4.30%,                   
                    7/15/98                                                             1,342,320
                    ---------------------------------------------------------------              

MARSHALL SHORT-TERM INCOME FUND                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                       
  AMOUNT                                                                                VALUE    
-----------         ---------------------------------------------------------------  ------------
                                                                                                 
LONG-TERM INVESTMENTS--CONTINUED                                                                 
-----------------------------------------------------------------------------------              
ASSET-BACKED SECURITIES--CONTINUED                                                               
-----------------------------------------------------------------------------------              
$   793,354         Green Tree Acceptance Corp., Series 1993--1, Class A1, 4.90%,                
                    4/1/2018                                                         $    767,578
                    ---------------------------------------------------------------              
    974,249         Green Tree Acceptance Corp., Series 1993--3, Class A1, 4.60%,                
                    10/15/2018                                                            946,980
                    ---------------------------------------------------------------              
  2,471,235         Green Tree Acceptance Corp., Series 1994--4, Class A1, 6.55%,                
                    7/15/2019                                                           2,458,879
                    ---------------------------------------------------------------              
  2,165,169      ++ Premier Auto Trust, Series 1993--4, Class A2, 4.65%, 2/2/99         2,110,585
                    ---------------------------------------------------------------              
    363,401         Revolving Home Equity Loan Trust, Series 1992--1, Class A,                   
                    5.1175%, 11/15/2017                                                   361,242
                    ---------------------------------------------------------------              
  1,400,000         Sears Credit Account Trust, Series 1990--A, 8.75%, 1/15/95          1,435,182
                    ---------------------------------------------------------------  ------------
                    TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $15,601,998)        15,439,738
                    ---------------------------------------------------------------  ------------
MORTGAGE-BACKED SECURITIES--20.4%                                                                
-----------------------------------------------------------------------------------              
                    FEDERAL HOME LOAN MORTGAGE CORP.--3.0%                                       
                    ---------------------------------------------------------------              
    188,187         4.10%, 7/15/97 (Series 1393--A)                                       187,261
                    ---------------------------------------------------------------              
    800,000         6.00%, 7/15/2010 (Series 1468--C)                                     774,696
                    ---------------------------------------------------------------              
  1,515,164         7.75%, 1/15/2018 (Series 1259--H)                                   1,531,361
                    ---------------------------------------------------------------              
    583,318         6.00%, 11/15/2019 (Series 1486--A)                                    560,872
                    ---------------------------------------------------------------  ------------
                    Total                                                               3,054,190
                    ---------------------------------------------------------------  ------------
                    FEDERAL NATIONAL MORTGAGE ASSOCIATION--2.5%                                  
                    ---------------------------------------------------------------              
  2,522,661         6.00%, 7/25/2019, REMIC (Series 1992--009--G)                       2,500,083
                    ---------------------------------------------------------------  ------------
                    OTHER--14.9%                                                                 
                    ---------------------------------------------------------------              
  4,023,596         CMC Securities Corp., III, Series 1994--E, Class A1, 6.00%,                  
                    3/25/2024                                                           3,921,120
                    ---------------------------------------------------------------              
  4,002,249         Countrywide Funding Corp., Series 1994--13, Class A9, 6.50%,                 
                    6/25/2009                                                           3,862,170
                    ---------------------------------------------------------------              
  3,790,137         GE Capital Mortgage Services, INC., Series 1994--10, Class A1,               
                    5.00%, 3/25/2024                                                    3,728,547
                    ---------------------------------------------------------------              
  3,439,658         Prudential Home Mortgage Securities Co., Series 1993--53, Class              
                    A1, 6.00%, 1/25/2009                                                3,417,919
                    ---------------------------------------------------------------  ------------
                    Total                                                              14,929,756
                    ---------------------------------------------------------------  ------------
                    TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $20,915,849)     20,484,029
                    ---------------------------------------------------------------  ------------
U.S. GOVERNMENT AGENCIES--2.6%                                                                   
-----------------------------------------------------------------------------------              
  2,600,000         Student Loan Marketing Association, 4.88%**, 7/19/96                2,595,632
                    ---------------------------------------------------------------  ------------
                    TOTAL U.S. GOVERNMENT AGENCIES (IDENTIFIED COST $2,600,500)         2,595,632
                    ---------------------------------------------------------------  ------------

MARSHALL SHORT-TERM INCOME FUND                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                        
  AMOUNT                                                                                VALUE     
-----------         ---------------------------------------------------------------  ------------ 
                                                                                                  
LONG-TERM INVESTMENTS--CONTINUED                                                                  
-----------------------------------------------------------------------------------               
U.S. TREASURY NOTES--29.9%                                                                        
-----------------------------------------------------------------------------------               
$10,000,000      ++ 6.00%, 6/30/96                                                   $  9,990,400 
                    ---------------------------------------------------------------               
 11,000,000      ++ 6.125%, 7/31/96                                                    11,005,060 
                    ---------------------------------------------------------------               
  9,000,000      ++ 6.50%, 8/15/97                                                      9,016,110 
                    ---------------------------------------------------------------  ------------ 
                    TOTAL U.S. TREASURY NOTES (IDENTIFIED COST $29,979,922)            30,011,570 
                    ---------------------------------------------------------------  ------------ 
                    TOTAL LONG-TERM INVESTMENTS (IDENTIFIED COST $93,567,814)          92,801,063 
                    ---------------------------------------------------------------  ------------ 
*REPURCHASE AGREEMENT--2.7%                                                                       
-----------------------------------------------------------------------------------               
  2,721,000         BZW Securities, Inc., 4.80%, dated 8/31/94, due 9/1/94                        
                    (at amortized cost)                                                 2,721,000 
                    ---------------------------------------------------------------  ------------ 
                    TOTAL INVESTMENTS (IDENTIFIED COST $105,288,814)                 $104,522,063+
                    ---------------------------------------------------------------  ------------ 

 * The repurchase agreement is fully collateralized by U.S. Treasury obligations
based on market prices at the date of the portfolio.                      

** Each issue shows the rate of discount at the time of purchase.               

 + The cost of investments for federal tax purposes amounts to $105,288,814. The
net unrealized depreciation of investments on a federal tax cost basis    
  amounts to $766,751, which is comprised of $33,671 appreciation and $800,422
depreciation at August 31, 1994.                                          

++ Certain shares on loan to broker.                                            

Note: The categories of investments are shown as a percentage of net assets     
($100,452,145) at August 31, 1994.                                  

The following abbreviation is used in this portfolio:                           

REMIC--Real Estate Mortgage Investment Conduit                                  

(See Notes which are an integral part of the Financial Statements)              

MARSHALL SHORT-TERM INCOME FUND                                                 

STATEMENT OF ASSETS AND LIABILITIES                                             
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                               
ASSETS:                                                                                        
--------------------------------------------------------------------------------               
Investments in securities                                           $101,801,063               
-----------------------------------------------------------------                              
Investments in repurchase agreement                                    2,721,000               
-----------------------------------------------------------------   ------------               
     Total investments, at value                                                               
     (identified and tax cost $105,288,214)                                       $104,522,063 
--------------------------------------------------------------------------------               
Cash                                                                                       547 
--------------------------------------------------------------------------------               
Collateral for security lending                                                     27,062,500 
--------------------------------------------------------------------------------               
Interest receivable                                                                    681,034 
--------------------------------------------------------------------------------               
Receivable for capital stock sold                                                      581,750 
--------------------------------------------------------------------------------               
Deferred expenses                                                                       19,444 
--------------------------------------------------------------------------------  ------------ 
     Total assets                                                                  132,867,338 
--------------------------------------------------------------------------------               
LIABILITIES:                                                                                   
--------------------------------------------------------------------------------               
Security lending payable                                            $ 27,062,500               
-----------------------------------------------------------------                              
Payable for investments purchased                                      4,358,589               
-----------------------------------------------------------------                              
Payable for capital stock redeemed                                       932,872               
-----------------------------------------------------------------                              
Accrued expenses                                                          61,232               
-----------------------------------------------------------------   ------------               
     Total liabilities                                                              32,415,193 
--------------------------------------------------------------------------------  ------------ 
NET ASSETS for 10,339,999 shares of capital stock outstanding                     $100,452,145 
--------------------------------------------------------------------------------  ------------ 
NET ASSETS CONSIST OF:                                                                         
--------------------------------------------------------------------------------               
Paid-in capital                                                                   $103,097,584 
--------------------------------------------------------------------------------               
Net unrealized depreciation of investments                                            (766,751)
--------------------------------------------------------------------------------               
Accumulated net realized loss on investments                                        (2,004,333)
--------------------------------------------------------------------------------               
Undistributed net investment income                                                    125,645 
--------------------------------------------------------------------------------  ------------ 
     Total Net Assets                                                             $100,452,145 
--------------------------------------------------------------------------------  ------------ 
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:                            
(net assets of $100,452,145 / 10,339,999 shares of capital stock outstanding)            $9.71 
--------------------------------------------------------------------------------  ------------ 

(See Notes which are an integral part of the Financial Statements)              

MARSHALL SHORT-TERM INCOME FUND                                                 

STATEMENT OF OPERATIONS                                                         
YEAR ENDED AUGUST 31, 1994                                                      
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                                
INVESTMENT INCOME:                                                                              
----------------------------------------------------------------------------------              
Interest income (net of interest expense of $36,271)                                $ 4,869,016 
----------------------------------------------------------------------------------              
EXPENSES:                                                                                       
----------------------------------------------------------------------------------              
Investment advisory fee                                                   $575,101              
----------------------------------------------------------------------                          
Directors' fees                                                                923              
----------------------------------------------------------------------                          
Administrative personnel and services fee                                   91,808              
----------------------------------------------------------------------                          
Custodian fees                                                              19,170              
----------------------------------------------------------------------                          
Transfer and dividend disbursing agent fees and expenses                    29,235              
----------------------------------------------------------------------                          
Fund share registration costs                                               34,324              
----------------------------------------------------------------------                          
Auditing fees                                                               14,150              
----------------------------------------------------------------------                          
Legal fees                                                                   5,795              
----------------------------------------------------------------------                          
Printing and postage                                                        10,370              
----------------------------------------------------------------------                          
Portfolio accounting fees                                                   44,779              
----------------------------------------------------------------------                          
Insurance premiums                                                           5,917              
----------------------------------------------------------------------                          
Taxes                                                                        5,800              
----------------------------------------------------------------------                          
Shareholder services fees                                                   14,377              
----------------------------------------------------------------------                          
Miscellaneous                                                                3,566              
----------------------------------------------------------------------    --------              
     Total expenses                                                        855,315              
----------------------------------------------------------------------                          
Deduct--                                                                                        
----------------------------------------------------------------------                          
 Waiver of investment advisory fee                            $361,083                          
-----------------------------------------------------------                                     
 Waiver of custodian fees                                       11,981     373,064              
-----------------------------------------------------------   --------    --------              
     Net expenses                                                                       482,251 
----------------------------------------------------------------------------------  ----------- 
          Net investment income                                                       4,386,765 
----------------------------------------------------------------------------------  ----------- 
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:                                                    
----------------------------------------------------------------------------------              
Net realized loss on investments (identified cost basis)                             (1,938,737)
----------------------------------------------------------------------------------              
Net change in unrealized depreciation on investments                                   (590,561)
----------------------------------------------------------------------------------  ----------- 
     Net realized and unrealized loss on investments                                 (2,529,298)
----------------------------------------------------------------------------------  ----------- 
          Change in net assets resulting from operations                            $ 1,857,467 
----------------------------------------------------------------------------------  ----------- 

(See Notes which are an integral part of the Financial Statements)              

MARSHALL SHORT-TERM INCOME FUND                                                 

STATEMENT OF CHANGES IN NET ASSETS                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                     YEAR ENDED AUGUST 31,     
                                                                 ----------------------------- 
                                                                     1994            1993*     
                                                                 ------------     ------------ 
                                                                                               
INCREASE (DECREASE) IN NET ASSETS:                                                             
---------------------------------------------------------------                                
OPERATIONS--                                                                                   
---------------------------------------------------------------                                
Net investment income                                            $  4,386,765     $  1,640,833 
---------------------------------------------------------------                                
Net realized loss on investments ($302,405 and $65,596 net                                     
  losses, respectively, as computed for federal tax purposes)      (1,938,737)         (65,596)
---------------------------------------------------------------                                
Net change in unrealized depreciation on investments                 (590,561)        (176,190)
---------------------------------------------------------------  ------------     ------------ 
     Change in net assets resulting from operations                 1,857,467        1,399,047 
---------------------------------------------------------------  ------------     ------------ 
DISTRIBUTIONS TO SHAREHOLDERS--                                                                
---------------------------------------------------------------                                
Dividends to shareholders from net investment income               (4,283,842)      (1,618,111)
---------------------------------------------------------------  ------------     ------------ 
CAPITAL STOCK TRANSACTIONS--                                                                   
---------------------------------------------------------------                                
Proceeds from sale of shares                                      117,021,684       91,606,998 
---------------------------------------------------------------                                
Net asset value of shares issued to shareholders in payment                                    
of dividends declared                                               2,820,624        1,389,731 
---------------------------------------------------------------                                
Cost of shares redeemed                                           (91,705,600)     (18,035,953)
---------------------------------------------------------------  ------------     ------------ 
     Change in net assets from capital stock transactions          28,136,708       74,960,776 
---------------------------------------------------------------  ------------     ------------ 
          Change in net assets                                     25,710,333       74,741,712 
---------------------------------------------------------------                                
NET ASSETS:                                                                                    
---------------------------------------------------------------                                
Beginning of period                                                74,741,812              100 
---------------------------------------------------------------  ------------     ------------ 
End of period (including undistributed net investment income                                   
of $125,645 and $22,722, respectively)                           $100,452,145     $ 74,741,812 
---------------------------------------------------------------  ------------     ------------ 

* For the period from November 2, 1992 (date of initial public investment) to   
August 31, 1993.                                                            

(See Notes which are an integral part of the Financial Statements)              

MARSHALL SHORT-TERM INCOME FUND                                                 

FINANCIAL HIGHLIGHTS                                                            
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)                                

                                                        [Enlarge/Download Table]

                                                                   YEAR ENDED AUGUST 31,      
                                                                  ------------------------    
                                                                    1994            1993*     
                                                                  --------         -------    
                                                                                              
NET ASSET VALUE, BEGINNING OF PERIOD                                $ 9.95          $10.00    
----------------------------------------------------------------                              
INCOME FROM INVESTMENT OPERATIONS                                                             
----------------------------------------------------------------                              
  Net investment income                                               0.45            0.40    
----------------------------------------------------------------                              
  Net realized and unrealized loss on investments                    (0.25)          (0.05)   
----------------------------------------------------------------    ------          ------    
  Total from investment operations                                    0.20            0.35    
----------------------------------------------------------------    ------          ------    
LESS DISTRIBUTIONS                                                                            
----------------------------------------------------------------                              
  Dividends to shareholders from net investment income               (0.44)          (0.40)   
----------------------------------------------------------------    ------          ------    
NET ASSET VALUE, END OF PERIOD                                      $ 9.71          $ 9.95    
----------------------------------------------------------------    ------          ------    
TOTAL RETURN**                                                        2.05%           3.57%   
----------------------------------------------------------------                              
RATIOS TO AVERAGE NET ASSETS                                                                  
----------------------------------------------------------------                              
  Expenses                                                            0.50%           0.50%(b)
----------------------------------------------------------------                              
  Net investment income                                               4.58%           4.91%(b)
----------------------------------------------------------------                              
  Expense waiver (a)                                                  0.39%           0.51%(b)
----------------------------------------------------------------                              
SUPPLEMENTAL DATA                                                                             
----------------------------------------------------------------                              
  Net assets, end of period (000 omitted)                         $100,452         $74,742    
----------------------------------------------------------------                              
  Portfolio turnover rate                                              185%             79%   
----------------------------------------------------------------                              

* Reflects operations for the period from November 2, 1992 (date of initial 
public investment) to August 31, 1993.                                  

** Based on net asset value.                                                  

(a) This voluntary expense decrease is reflected in both the expense and net    
investment income ratios shown above.                                   

(b) Computed on an annualized basis.                                            

(See Notes which are an integral part of the Financial Statements)              

MARSHALL FUNDS, INC.                                                            
INCOME FUNDS                                                                    

NOTES TO FINANCIAL STATEMENTS                                                   
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------
(1) ORGANIZATION                                                                

Marshall Funds, Inc. (the "Corporation") is an open-end, management investment  
company, established as a Wisconsin corporation under the Articles of           
Incorporation on July 31, 1992. The Corporation consists of eleven diversified  
portfolios: Marshall Balanced Fund, Marshall Equity Income Fund, Marshall       
Government Income Fund, Marshall Intermediate Bond Fund, Marshall Intermediate  
Tax-Free 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. Marshall Money Market Fund is offered in two    
classes of shares: Trust Shares and Investment Shares. The assets of each       
portfolio are segregated and a shareholder's interest is limited to the         
portfolio in which shares are held. The financial statements included herein are
only those of Marshall Government Income Fund, Marshall Intermediate Bond Fund, 
and Marshall Short-Term Income Fund (individually referred to as the "Fund," or 
collectively as the "Funds"). The financial statements of the other portfolios  
are presented separately.                                                       

(2) SIGNIFICANT ACCOUNTING POLICIES                                             

The following is a summary of significant accounting policies consistently      
followed by each Fund in the preparation of its financial statements. These     
policies are in conformity with generally accepted accounting principles.       

                                                        [Enlarge/Download Table]
                                                                                              
A.   INVESTMENT VALUATIONS--U.S. government obligations are generally valued at the mean      
     between the over-the-counter bid and asked prices as furnished by an independent pricing 
     service. Corporate bonds (and other fixed-income and asset-backed securities) are valued 
     at the last sale price reported on national securities exchanges on that day, if         
     available. Otherwise, corporate bonds (and other fixed-income and asset-backed           
     securities) and short-term obligations are valued at the prices provided by an           
     independent pricing service. Short-term securities with remaining maturities of sixty    
     days or less at the time of purchase may be stated at amortized cost, which approximates 
     value.                                                                                   
B.   REPURCHASE AGREEMENTS--It is the policy of the Funds to require the custodian bank to    
     take possession, to have legally segregated in the Federal Reserve Book Entry System, or 
     to have segregated within the custodian bank's vault, all securities held as collateral  
   [6~  in support of repurchase agreement investments. Additionally, procedures have been    
     established by the Funds to monitor, on a daily basis, the market value of each          
     repurchase agreement's underlying collateral to ensure that the value of collateral at   
     least equals the principal amount of the repurchase agreement, including accrued         
     interest.                                                                                
     The Funds will only enter into repurchase agreements with banks and other recognized     
     financial institutions, such as broker/dealers, which are deemed by the Funds' adviser to
     be creditworthy pursuant to the guidelines established by the Board of Directors (the    
     "Directors"). Risks may arise from the potential inability of counterparties to honor the
     terms of the repurchase agreement. Accordingly, the Funds could receive less than the    
     repurchase price on the sale of collateral securities.                                   
C.   INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued  
     daily. Bond premium and discount, if applicable, are amortized as required by the        
     Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are        
     recorded on the ex-dividend date.                                                        

MARSHALL FUNDS, INC.                                                            

INCOME FUNDS                                                                    
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                            
D. FEDERAL TAXES--It is the Funds' policy to comply with the provisions of the Code         
   applicable to regulated investment companies and to distribute to shareholders each year 
   substantially all of their taxable income. Accordingly, no provisions for federal tax are
   necessary. At August 31, 1994, the Marshall Government Income Fund and Marshall          
   Short-Term Income Fund, for federal tax purposes, had capital loss carryforwards of      
   $521,493 and $302,405, respectively, which will reduce the Funds' taxable income arising 
   from future net realized gain on investments, if any, to the extent permitted by the     
   Code, and thus will reduce the amount of the distributions to shareholders which would   
   otherwise be necessary to relieve the Funds of any liability for federal tax. Pursuant to
   the Code, such capital loss carryforwards will expire in 2002. Additionally, the Marshall
   Government Income Fund, Marshall Intermediate Bond Fund and Marshall Short-Term Income   
   Fund had net capital losses of $2,641,385, $15,077,549 and $1,701,928, respectively,     
   attributable to security transactions incurred after October 31, 1993 which are treated  
   as arising on the first day of the Funds' next taxable year.                             
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Funds may engage in when-issued or    
   delayed delivery transactions. The Funds record when-issued securities on the trade date 
   and maintain security positions such that sufficient liquid assets will be available to  
   make payment for the securities purchased. Securities purchased on a when-issued or      
   delayed delivery basis are marked to market daily and begin earning interest on the      
   settlement date.                                                                         
F. DOLLAR ROLL TRANSACTIONS--The Funds enter into dollar roll transactions, with respect to 
   mortgage securities issued by GNMA, FNMA and FHLMC, in which the Funds agree to sell     
   securities that they hold to financial institutions and simultaneously agree to purchase 
   substantially similar (same type, coupon and maturity) securities at a later date at an  
   agreed upon price. Dollar roll transactions are treated for accounting and tax purposes  
   as short-term financing arrangements which will not exceed twelve months. The Funds will 
   use the proceeds generated from the transactions to invest in short-term investments,    
   which may enhance the Funds' current yields and total returns.                           
G. SECURITIES LENDING--The Funds participate in a securities lending program providing for  
   the lending of corporate bonds, equity and government securities to qualified brokers.   
   Collateral on all securities loaned is accepted in cash or government securities.        
   Collateral is maintained at a minimum level of 100% of the market value on investments   
   loaned, plus interest, if applicable. The custodian receives a fee for its services under
   the program according to agreed-upon rates. As of August 31, 1994, the value of the      
   securities loaned and the value of the collateral were as follows:                       

                                                        [Enlarge/Download Table]

                                                                      MARKET                   
                                                                     VALUE OF         MARKET   
                                                                    SECURITIES       VALUE OF  
                                                                      LOANED        COLLATERAL 
-----------------------------------------------------------------   -----------     -----------
                                                                                               
Marshall Government Income Fund                                     $ 4,843,688     $ 4,884,000
-----------------------------------------------------------------                              
Marshall Intermediate Bond Fund                                      72,802,643      73,580,656
-----------------------------------------------------------------                              
Marshall Short-Term Income Fund                                      26,658,253      27,062,500
-----------------------------------------------------------------                              
H.   DEFERRED EXPENSES--The costs incurred by the Funds with respect to registration of their  
     shares in their first fiscal year, excluding the initial expense of registering their     
     shares, have been deferred and are being amortized using the straight-line method not to  
     exceed a period of five years from each Fund's commencement date.                         
I.   OTHER--Investment transactions are accounted for on the trade date.                       

MARSHALL FUNDS, INC.                                                            

INCOME FUNDS                                                                    
--------------------------------------------------------------------------------

(3) CAPITAL STOCK                                                               

The Articles of Incorporation of the Marshall Funds, Inc. permit the Directors  
to issue 50 billion full and fractional shares of common stock, par value       
$0.0001 per share. At August 31, 1994, the capital paid-in for Marshall         
Government Income Fund, Marshall Intermediate Bond Fund, and Marshall Short-Term
Income Fund was $69,655,072, $381,167,658, and $103,097,584, respectively.      
Transactions in shares were as follows:                                         

                                                        [Enlarge/Download Table]

                                                   MARSHALL                    MARSHALL          
                                                  GOVERNMENT                 INTERMEDIATE        
                                                  INCOME FUND                  BOND FUND         
                                           -------------------------   ------------------------- 
                                             YEAR ENDED AUGUST 31,       YEAR ENDED AUGUST 31,   
                                           -------------------------   ------------------------- 
                                              1994          1993*         1994         1993**    
-----------------------------------------  -----------   -----------   -----------   ----------- 
                                                                                                 
Shares sold                                  4,215,121     6,685,663    17,818,710    35,555,379 
-----------------------------------------                                                        
Shares issued to shareholders in payment                                                         
of dividends declared                          411,267       174,459     2,287,787       986,338 
-----------------------------------------                                                        
Shares redeemed                             (3,282,704)   (1,202,120)  (15,245,010)   (3,199,957)
-----------------------------------------  -----------   -----------   -----------   ----------- 
  Net change resulting from Fund share                                                           
  transactions                               1,343,684     5,658,002     4,861,487    33,341,760 
-----------------------------------------  -----------   -----------   -----------   ----------- 

                                                                [Download Table]

                                                MARSHALL SHORT-TERM    
                                                    INCOME FUND        
                                             ------------------------- 
                                               YEAR ENDED AUGUST 31,   
                                             ------------------------- 
                                                1994         1993***   
------------------------------------------   -----------   ----------- 
                                                                       
Shares sold                                   11,893,678     9,181,049 
------------------------------------------                             
Shares issued to shareholders in payment                               
of dividends declared                            287,651       139,547 
------------------------------------------                             
Shares redeemed                               (9,353,466)   (1,808,470)
------------------------------------------   -----------   ----------- 
  Net change resulting from Fund share                                 
  transactions                                 2,827,863     7,512,126 
------------------------------------------   -----------   ----------- 

  * For the period from December 14, 1992 (date of initial public investment) to
August 31, 1993.                                                        

 ** For the period from November 23, 1992 (date of initial public investment) to
August 31, 1993.                                                        

*** For the period from November 2, 1992 (date of initial public investment) to 
August 31, 1993.                                                        

(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES              

INVESTMENT ADVISORY FEE--M&I Investment Management Corp., the Funds' investment 
adviser (the "Adviser"), receives for its services an annual investment advisory
fee based on a percentage of each Fund's average daily net assets. The Adviser  
may voluntarily choose to waive a portion of its fee. The Adviser can modify or 
terminate this voluntary waiver at any time at its sole discretion.             

                                                        [Enlarge/Download Table]

                                                                                ANNUAL RATE 
------------------------------------------------------------------------------  ------------
                                                                                            
Marshall Government Income Fund                                                    0.75%    
------------------------------------------------------------------------------              
Marshall Intermediate Bond Fund                                                    0.60%    
------------------------------------------------------------------------------              
Marshall Short-Term Income Fund                                                    0.60%    
------------------------------------------------------------------------------              

MARSHALL FUNDS, INC.                                                            

INCOME FUNDS                                                                    
--------------------------------------------------------------------------------

ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Funds
with certain administrative personnel and services. The FAS fee is based on the 
level of average aggregate net assets of the Corporation for the period. FAS may
voluntarily choose to waive a portion of its fee.                               

SHAREHOLDER SERVICES FEE--Marshall Funds Investors Services ("MFIS") is the     
Funds' shareholder servicing agent. Under the terms of a shareholder service    
agreement with MFIS, the Funds will pay MFIS a fee to obtain certain personal   
services for shareholders and the maintenance of shareholder accounts. The fee  
is based on the level of each Fund's average net assets for the period.         

TRANSFER AND DIVIDEND DISBURSING AGENT, ACCOUNTING AND CUSTODY FEES--Federated  
Services Company ("FServ") serves as transfer and dividend disbursing agent for 
the Funds. The FServ fee is based on the size, type, and number of accounts and 
transactions made by shareholders.                                              

FServ also maintains the Funds' accounting records. The fee is based on the     
level of each Fund's average net assets for the period, plus out-of-pocket      
expenses.                                                                       

Marshall and Ilsley Trust Company is the Funds' custodian. The fee is based on  
the level of each Fund's average net assets for the period.                     

ORGANIZATIONAL EXPENSES--Organizational expenses were borne initially by FAS.   
The Funds have agreed to reimburse FAS for the organizational expenses during   
the five year period following October 2, 1992 (date the Funds first became     
effective). For the year ended August 31, 1994, the following amounts were paid 
to FAS pursuant to this agreement.                                              

                                                        [Enlarge/Download Table]

                                                             ORGANIZATIONAL  ORGANIZATIONAL
                                                                EXPENSES     EXPENSES PAID 
-----------------------------------------------------------  --------------  --------------
                                                                                           
Marshall Government Income Fund                                 $ 22,735         $2,521    
-----------------------------------------------------------                                
Marshall Intermediate Bond Fund                                   23,413          6,199    
-----------------------------------------------------------                                
Marshall Short-Term Income Fund                                   23,033          3,928    
-----------------------------------------------------------                                

Certain of the Officers and Directors of the Corporation are Officers and       
Directors or Trustees of the above companies.                                   

(5) INVESTMENT TRANSACTIONS                                                     

Purchases and sales of investments, excluding short-term securities, for the    
year ended August 31, 1994, were as follows:                                    

                                                        [Enlarge/Download Table]

                                                                  PURCHASES       SALES    
---------------------------------------------------------------  ------------  ------------
                                                                                           
Marshall Government Income Fund                                  $109,216,636  $103,588,161
---------------------------------------------------------------                            
Marshall Intermediate Bond Fund                                   776,309,833   803,567,715
---------------------------------------------------------------                            
Marshall Short-Term Income Fund                                   183,796,770   152,386,448
---------------------------------------------------------------                            

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                                        
--------------------------------------------------------------------------------

To the Shareholders and Board of Directors                                      
MARSHALL GOVERNMENT INCOME FUND                                                 
MARSHALL INTERMEDIATE BOND FUND                                                 
MARSHALL SHORT-TERM INCOME FUND:                                                

We have audited the accompanying statements of assets and liabilities, including
the schedules of portfolio investments, of the Marshall Government Income Fund, 
the Marshall Intermediate Bond Fund and the Marshall Short-Term Income Fund     
(three of the portfolios constituting the Marshall Funds, Inc., a Wisconsin     
corporation) as of August 31, 1994, and the related statements of operations,   
changes in net assets and financial highlights for the periods presented. These 
financial statements and financial highlights are the responsibility of the     
Company's management. Our responsibility is to express an opinion on these      
financial statements and financial highlights based on our audits.              

We conducted our audits in accordance with generally accepted auditing          
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements and financial       
highlights are free of material misstatement. An audit includes examining, on a 
test basis, evidence supporting the amounts and disclosures in the financial    
statements. Our procedures included confirmation of securities owned as of      
August 31, 1994, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement            
presentation. We believe that our audits provides a reasonable basis for our    
opinion.                                                                        

In our opinion, the financial statements and financial highlights referred to   
above present fairly, in all material respects, the financial position of each  
of the respective portfolios constituting the Marshall Funds, Inc., as          
identified above, as of August 31, 1994, the results of their operations, the   
changes in their net assets and the financial highlights for the periods        
presented, in conformity with generally accepted accounting principles.         

                                                             ARTHUR ANDERSEN LLP

Pittsburgh, Pennsylvania                                                        
October 11, 1994                                                                

                                                                [Download Table]
                                                
DIRECTORS                               OFFICERS

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

                                                                [Download Table]
                                                                    
Ody J. Fish                             Edward C. Gonzales          
John DeVincentis                        Chairman and Treasurer      
Edward C. Gonzales                      James F. Duca, II           
Paul E. Hassett                         President                   
                                        Joseph S. Machi             
                                        Vice President and Assistant
                                        Treasurer                   
                                        Peter J. Germain            
                                        Secretary                   
                                        Victor R. Siclari           
                                        Assistant Secretary         

Mutual funds are not bank deposits or obligations, are not guaranteed by any    
bank, and are not insured or guaranteed by the FDIC, the Federal Reserve Board, 
or any other government agency. Investment in mutual funds involves risk,       
including possible loss of principal.                                           

This report is authorized for distribution to prospective investors only when   
preceded or accompanied by the Funds' prospectus which contains facts concerning
their objective and policies, management fees, expenses, and other information. 

                                               MARSHALL TAX-FREE FUNDS
                                              COMBINED ANNUAL REPORT
                                       TO SHAREHOLDERS
                                             DATED August 31, 1994
                             ---------------------------------------------------
FEDERATED SECURITIES CORP.                                            
(LOGO)                                                                          
---------------------------------------------                                   
                             ---------------------------------------------------

Distributor                                                           

A subsidiary of FEDERATED INVESTORS                                   
                             ---------------------------------------------------
FEDERATED INVESTORS TOWER                                             

PITTSBURGH, PA 15222-3779                                             

3091408 (10/94)                                                       
                             ---------------------------------------------------

PRESIDENT'S MESSAGE                                                             
--------------------------------------------------------------------------------

Dear Shareholder:                                                               

I am pleased to present the Annual Report of the Marshall Tax-Free Funds for the
fiscal year ended August 31, 1994. This report provides you with complete       
financial information for the Funds, including the Investment Reviews by the    
portfolio managers, a list of investments for each Fund, and the Financial      
Statements.                                                                     

Tax planning is an important element of a sound investment program. The Funds   
strive to help you hold on to more of your hard-earned money by investing in    
tax-free securities. This advantage can make the Funds a vital part of your     
financial plans.                                                                

Net assets in the Marshall Short-Term Tax-Free Fund reached $24.9 million and   
paid distributions of $0.18 per share. Net assets in the Marshall Intermediate  
Tax-Free Fund--a more aggressive approach to tax-free income--grew to $35.2     
million and paid distributions of $0.19 per share.                              

Thank you for seeking tax-free income through the Marshall Tax-Free Funds. We   
will keep you informed about your progress as we strive to provide you with the 
highest level of service.                                                       

Sincerely,                                                                      

James F. Duca, II                                                               
President                                                                       
Marshall Funds, Inc.                                                            
October 14, 1994                                                                

INVESTMENT REVIEW                                                               
--------------------------------------------------------------------------------

A rising economy, rising fear of inflation, and rising interest rates           
characterized the recently completed fiscal year of the Marshall Funds. Gross   
Domestic Product advanced more than 3% for the period. Although consumer        
confidence declined in recent months, indications are positive for the important
Christmas selling season, and high business confidence suggests further capital 
spending gains. Continued economic expansion and corporate cost cutting are     
translating into sustained earnings gains for American industry.                

Inflation worries surfaced this year, but to date, scant evidence of            
acceleration at the retail level has materialized. Consumer prices edged up only
2.9% over the last 12 months. Nevertheless, clouds are gathering on the horizon,
with climbing commodity costs especially ominous. With the pricing power in the 
manufacturing sector having increased significantly, industrial prices are      
firming. Capacity utilization stands at a five-year high, and labor markets are 
tightening. Expect inflation to advance to the 3.5% area in 1995.               

Over the past year, investors have been reintroduced to the anguish of rapidly  
rising interest rates. From the lows last October, long-term Treasury yields    
jumped two percentage points. Starting in February, the Federal Reserve Board   
(the "Fed") pushed up short-term interest rates 1.75 percentage points in five  
incremental moves. The Fed is well aware that the economic cycle is past the    
point where inflation usually begins to pick up. Rising rates are now beginning 
to bite, with housing among the early victims. If the Fed is forced to move from
its present neutral policy to an even more restrictive one, the expansion could 
stall by 1996--but for now, enjoy the expansion.                                

MARSHALL SHORT-TERM TAX-FREE FUND                                               

The Marshall Short-Term Tax-Free Fund is managed to provide current income that 
is exempt from federal income tax.+ Under most market conditions, this objective
is attainable. However, since the inception of this Fund was February 1994, the 
fiscal year ended August 31, 1994 encompassed an extremely volatile seven-month 
period. Although we met the objective of providing income free from federal tax,
as managers, we needed to protect the Fund from the pressure of rising interest 
rates.                                                                          

On August 31, 1994, the net asset value (NAV) of the Fund was $9.92 per share.  
When the Fund began, the NAV price was $10.00. Therefore, without including the 
income collected, the value of the Fund dropped less than 1.0% in price. Adding 
back the income, the Fund experienced a total return of 0.98%* during the       
initial "short" fiscal year.                                                    

Looking ahead, we see a continuation of the trend toward higher short-term      
interest rates. The eyes of the market will focus closely on the pace of        
economic growth and subsequent inflationary expectations. The Fund will seek to 
take advantage of higher interest rates by gradually lengthening maturities     
closer to the allowable maximum of three years. For now, the strategy will be to
maintain flexibility by keeping current holdings relatively short (i.e. two     
years and less).                                                                

MARSHALL INTERMEDIATE TAX-FREE FUND                                             

The investment objective of the Fund is to provide income exempt from federal   
income tax, as is consistent with preservation of capital.+ Given the upward    
bias of interest rates since the February 1994 inception of this Fund,          
preservation of capital has been difficult. Faster than expected economic growth
has caused inflationary fears to increase, prompting the Fed to raise short-term
interest rates in several steps. Although intermediate and long-term interest   
rates are not necessarily tied to short-term interest rate changes, bond        
investors generally have demanded higher interest rates across the entire       
maturity spectrum.                                                              

* Performance quoted represents past performance. Investment return and         
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.                         

+ Income may be subject to the federal alternative minimum tax and state and    
local taxes.                                                                

INVESTMENT REVIEW                                                               
--------------------------------------------------------------------------------

As of August 31, 1994, the first fiscal year of the Fund concluded. The initial 
year only included seven months, as the Fund was launched in February. Over this
time period, the Fund fell in value by (0.94%).* While a negative return is     
never good news, the Fund has fared relatively well in comparison to other      
intermediate funds. Municipal bond new issue supply has tapered off as well,    
allowing tax-free securities to outperform comparable maturity taxable issues.  

Strategically, we are not yet ready to extend the average maturity of the       
portfolio. Quality spreads remain extremely narrow, so we continue to emphasize 
top-tier credits with any new purchases. There will be significant opportunities
to pick up yield and increase the return to shareholders when the economy cools 
down. Presently, maintaining liquidity to protect the NAV per share from any    
major decline remains the overriding goal.                                      

* Performance quoted represents past performance. Investment return and         
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.                         

MARSHALL SHORT-TERM TAX-FREE FUND                                               
--------------------------------------------------------------------------------

GROWTH OF $10,000 INVESTED IN MARSHALL SHORT-TERM TAX-FREE FUND 

   The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Short-Term Tax-Free Fund (the "Fund") from February 1, 1994 (start of  
performance) to August 31, 1994 compared to the Lehman Brothers 3 Year G.O.     
("L3GO").*                                                                      

                                                                [Download Table]

                                   Marshall         Lehman                   
      Measurement Period          Short-Term      Brothers 3                 
    (Fiscal Year Covered)        Tax-Free Fund     Year G.O.                 
                                                                             
2/1/94                                   10000           10000               
8/31/94                                  10098           10012               
                     AVERAGE ANNUAL TOTAL RETURN FOR THE                     
                         PERIOD ENDED AUGUST 31, 1994                        
   Start of Performance (February 1, 1994) (Cumulative)...............  0.98%

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE     
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR   
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.                           

* The Fund's performance assumes the reinvestment of all dividends and          
  distributions. The L3GO has been adjusted to reflect reinvestment of dividends
on securities in the index.                                                 

The L3GO is not adjusted to reflect sales loads, expenses, or other fees that   
the SEC requires to be reflected in the Fund's performance.                     

MARSHALL INTERMEDIATE TAX-FREE FUND                                             
--------------------------------------------------------------------------------

GROWTH OF $10,000 INVESTED IN MARSHALL INTERMEDIATE TAX-FREE FUND 

   The graph below illustrates the hypothetical investment of $10,000 in the
Marshall Intermediate Tax-Free Fund (the "Fund") from February 1, 1994 (start of
performance) to August 31, 1994 compared to the Lehman Brothers 5 Year G.O.     
("L5GO").*                                                                      

                                                                [Download Table]

                                 Marshall In-       Lehman                 
      Measurement Period          termediate      Brothers 5               
    (Fiscal Year Covered)        Tax-Free Fund     Year G.O.               
                                                                           
2/1/94                                   10000           10000             
8/31/94                                   9906            9876             
                     AVERAGE ANNUAL TOTAL RETURN FOR THE                   
                         PERIOD ENDED AUGUST 31, 1994                      
Start of Performance (February 1, 1994) (Cumulative)............... (0.94%)

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE     
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR   
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.                           

* The Fund's performance assumes the reinvestment of all dividends and          
  distributions. The L5GO has been adjusted to reflect reinvestment of dividends
on securities in the index.                                                 

The L5GO is not adjusted to reflect sales loads, expenses, or other fees that   
the SEC requires to be reflected in the Fund's performance.                     

MARSHALL SHORT-TERM TAX-FREE FUND                                               

PORTFOLIO OF INVESTMENTS                                                        
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                           CREDIT              
SHARES OR                                                                 RATING:              
PRINCIPAL                                                                 MOODY'S              
  AMOUNT                                                                  OR S&P*      VALUE   
----------    ----------------------------------------------------------  --------  -----------
                                                                                               
MUTUAL FUND SHARES--7.0%                                                                       
------------------------------------------------------------------------                       
  988,086     Fidelity Tax Exempt Money Market                                      $   988,086
              ----------------------------------------------------------                       
  750,000     Goldman Sachs Financial Square Tax Exempt Money Market                    750,000
              ----------------------------------------------------------            -----------
              TOTAL MUTUAL FUND SHARES (AT NET ASSET VALUE)                           1,738,086
              ----------------------------------------------------------            -----------
LONG-TERM MUNICIPAL SECURITIES--87.9%                                                          
------------------------------------------------------------------------                       
              ALASKA--4.4%                                                                     
              ----------------------------------------------------------                       
$ 800,000     Alaska Municipal Bond Bank Authority, 4.20%-6.75%,                               
              (MBIA Insured), 7/1/95-6/1/96                                  A          808,499
              ----------------------------------------------------------                       
  300,000     Fairbanks North Star Boro, AK, 4.00%, (MBIA Insured),                            
              3/1/96                                                        AAA         297,954
              ----------------------------------------------------------            -----------
              Total                                                                   1,106,453
              ----------------------------------------------------------            -----------
              ARIZONA--7.3%                                                                    
              ----------------------------------------------------------                       
  750,000     Arizona St. Transportation Board (Maricopa County), AZ,                          
              7.10%, Revenue Bonds, 7/1/96                                   A+         786,067
              ----------------------------------------------------------                       
  300,000     Mesa, AZ, 7.125%, UT GO Bonds, 7/1/99, Prerefunded                               
              7/1/96 @ 102                                                   A+         320,163
              ----------------------------------------------------------                       
  700,000     Scottsdale, AZ, 5.40%, Special Assessment Bonds, (No.                            
              I3704 Bell Road), 1/1/99                                       A          707,714
              ----------------------------------------------------------            -----------
              Total                                                                   1,813,944
              ----------------------------------------------------------            -----------
              CALIFORNIA--4.1%                                                                 
              ----------------------------------------------------------                       
1,000,000     California State, 5.75%, Warrants, (Series C), 4/25/96        Sp1       1,016,020
              ----------------------------------------------------------            -----------
              CONNECTICUT--4.9%                                                                
              ----------------------------------------------------------                       
  500,000     Connecticut State, 4.75%, Special Tax Obligation Revenue                         
              Bonds, (Transportation Infrastructure)/(Series A), 4/1/99     AA-         495,540
              ----------------------------------------------------------                       
  700,000     Enfield, CT, 5.25%, UT GO Bonds, 5/15/96                       AA         711,340
              ----------------------------------------------------------            -----------
              Total                                                                   1,206,880
              ----------------------------------------------------------            -----------
              DISTRICT OF COLUMBIA--0.8%                                                       
              ----------------------------------------------------------                       
  200,000     District of Columbia, 6.40%, (Series D)/(BIG Insured),                           
              6/1/95                                                        AAA         203,116
              ----------------------------------------------------------            -----------
              FLORIDA--5.1%                                                                    
              ----------------------------------------------------------                       
  750,000     Florida State Board of Education Capital Outlay, 5.10%, UT                       
              GO Bonds, (Series E), 6/1/97                                   AA         762,540
              ----------------------------------------------------------                       
  300,000     Polk County, FL, 4.20%, School Board, Certificates of                            
              Participation, (Series A)/(FSA Insured), 1/1/97               AAA         297,507
              ----------------------------------------------------------                       
  200,000     Tampa, FL, 6.70%, Water & Sewer Revenue Bonds, (Series B)/                       
              (AMBAC Insured), 10/1/94                                      AAA         200,358
              ----------------------------------------------------------            -----------
              Total                                                                   1,260,405
              ----------------------------------------------------------            -----------

MARSHALL SHORT-TERM TAX-FREE FUND                                               
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                           CREDIT              
                                                                          RATING:              
PRINCIPAL                                                                 MOODY'S              
  AMOUNT                                                                  OR S&P*      VALUE   
----------    ----------------------------------------------------------  --------  -----------
                                                                                               
LONG-TERM MUNICIPAL SECURITIES--CONTINUED                                                      
------------------------------------------------------------------------                       
              ILLINOIS--4.3%                                                                   
              ----------------------------------------------------------                       
$ 750,000     Cook County, IL, 5.60%, School District 205, (FGIC                               
              Insured), 6/1/98                                              AAA     $   764,820
              ----------------------------------------------------------                       
  300,000     Winnebago & Boone Counties, IL, 4.20%, School District,                          
              (FGIC Insured), 2/1/96                                        AAA         299,262
              ----------------------------------------------------------            -----------
              Total                                                                   1,064,082
              ----------------------------------------------------------            -----------
              IOWA--3.0%                                                                       
              ----------------------------------------------------------                       
  750,000     LeClaire, IA, 4.125%, Electric Revenue Bonds, 9/1/2026,                          
              Mandatory Put 9/1/96                                          Sp1+        743,317
              ----------------------------------------------------------            -----------
              MAINE--1.0%                                                                      
              ----------------------------------------------------------                       
  250,000     Maine Municipal Bond Bank, 5.00% (Series B), 11/1/96           AA         254,773
              ----------------------------------------------------------            -----------
              MARYLAND--2.1%                                                                   
              ----------------------------------------------------------                       
  500,000     Maryland State Department of Transportation, 6.60%,                              
              Revenue Bonds, 11/15/97                                        AA         530,040
              ----------------------------------------------------------            -----------
              NEBRASKA--4.0%                                                                   
              ----------------------------------------------------------                       
1,000,000     Nebraska Public Power District Revenue Bonds, 4.90%,                             
              (Nuclear Facility), 7/1/98                                     A+       1,003,370
              ----------------------------------------------------------            -----------
              NEVADA--4.1%                                                                     
              ----------------------------------------------------------                       
  750,000     Clark County, NV, 5.40%, LT GO Bonds, (Flood Control)/                           
              (AMBAC Insured), 11/1/96                                      AAA         765,930
              ----------------------------------------------------------                       
  250,000     Las Vegas, NV, 4.70%, LT GO Revenue Bonds, 10/1/94             A          250,295
              ----------------------------------------------------------            -----------
              Total                                                                   1,016,225
              ----------------------------------------------------------            -----------
              NEW JERSEY--4.2%                                                                 
              ----------------------------------------------------------                       
  300,000     New Jersey State Housing & Mortgage Finance, 3.40%,                              
              Revenue Bonds, (Series 1993 B-1), 4/1/2024, Mandatory Put                        
              3/29/95                                                        A+         299,430
              ----------------------------------------------------------                       
  750,000     New Jersey State Transportation Transit Authority, 4.50%,                        
              Revenue Bonds, (Series A), 12/15/95                            A+         758,265
              ----------------------------------------------------------            -----------
              Total                                                                   1,057,695
              ----------------------------------------------------------            -----------
              NEW YORK--4.0%                                                                   
              ----------------------------------------------------------                       
1,000,000     New York State Highway Authority Revenue Bonds, 4.20%                            
              (Series A), 4/1/96                                             A-         999,820
              ----------------------------------------------------------            -----------
              NORTH CAROLINA--4.0%                                                             
              ----------------------------------------------------------                       
1,000,000     North Carolina Municipal Power Agency, 4.50%, Catawba                            
              Electric Revenue Bonds, 1/1/96                                 A        1,000,820
              ----------------------------------------------------------            -----------

MARSHALL SHORT-TERM TAX-FREE FUND                                               
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                           CREDIT              
                                                                          RATING:              
PRINCIPAL                                                                 MOODY'S              
  AMOUNT                                                                  OR S&P*      VALUE   
----------    ----------------------------------------------------------  --------  -----------
                                                                                               
LONG-TERM MUNICIPAL SECURITIES--CONTINUED                                                      
------------------------------------------------------------------------                       
              SOUTH CAROLINA--2.1%                                                             
              ----------------------------------------------------------                       
$ 500,000     Charleston, SC, 6.10%, UT GO Bonds, 6/1/98                     AA     $   521,915
              ----------------------------------------------------------            -----------
              TENNESSEE--2.1%                                                                  
              ----------------------------------------------------------                       
  500,000     Metropolitan Govt. Nashville & Davidson County, TN, 7.00%,                       
              UT GO Bonds, 6/15/97                                           AA         528,640
              ----------------------------------------------------------            -----------
              TEXAS--7.1%                                                                      
              ----------------------------------------------------------                       
  200,000     Garland, TX, Independent School District, 7.40%, UT GO                           
              Bonds, (Series 1986), 2/15/2001, Prerefunded 2/15/96 @ 100    AAA         208,820
              ----------------------------------------------------------                       
  300,000     Port Houston Authority, TX, 3.20%, (Series 1993), 10/1/95      AA         298,257
              ----------------------------------------------------------                       
  200,000     San Antonio, TX, 4.30%, Electric & Gas Revenue, 2/1/96         AA         200,314
              ----------------------------------------------------------                       
  500,000     Tarrant County, TX, 7.625%, LT GO Bonds, 7/15/95, Escrowed                       
              to Maturity                                                   AA+         515,220
              ----------------------------------------------------------                       
  500,000     Texas State, 7.50%, UT GO Bonds, (Series B), 10/1/97           AA         541,715
              ----------------------------------------------------------            -----------
              Total                                                                   1,764,326
              ----------------------------------------------------------            -----------
              UTAH--5.0%                                                                       
              ----------------------------------------------------------                       
  500,000     Intermountain Power Agency, UT, 4.60%, Power Supply                              
              Revenue Refunding Bonds, (Series B), 7/1/95                    AA         501,555
              ----------------------------------------------------------                       
  750,000     Salt Lake City, UT, 4.40%, Granite School District, UT GO                        
              Refunding Bonds, 6/1/96                                       Aa1         751,687
              ----------------------------------------------------------            -----------
              Total                                                                   1,253,242
              ----------------------------------------------------------            -----------
              VERMONT--2.1%                                                                    
              ----------------------------------------------------------                       
  500,000     Vermont State, 6.70%, (Series A), 2/1/96                      AA-         516,690
              ----------------------------------------------------------            -----------
              WASHINGTON--3.2%                                                                 
              ----------------------------------------------------------                       
  300,000     King County, WA, 4.00% School District 210,                                      
              (FGIC Insured), 12/1/96                                       AAA         296,331
              ----------------------------------------------------------                       
  200,000     Marysville, WA, 4.20%, Water & Sewer Revenue Bonds,                              
              (MBIA Insured), 12/1/96                                       AAA         199,146
              ----------------------------------------------------------                       
  300,000     Washington State Refunding, 3.85%, (Series R), 10/1/96         AA         296,712
              ----------------------------------------------------------            -----------
              Total                                                                     792,189
              ----------------------------------------------------------            -----------
              WISCONSIN--9.0%                                                                  
              ----------------------------------------------------------                       
  720,000     West Bend, WI, 5.75%, UT GO Bonds, (School District No.                          
              1), 4/1/97                                                     A1         741,384
              ----------------------------------------------------------                       
  750,000     Wisconsin State, 4.50%, UT GO Bonds, (Series 1), 11/1/97       AA         750,390
              ----------------------------------------------------------                       

MARSHALL SHORT-TERM TAX-FREE FUND                                               
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                           CREDIT               
                                                                          RATING:               
PRINCIPAL                                                                 MOODY'S               
  AMOUNT                                                                  OR S&P*      VALUE    
----------    ----------------------------------------------------------  --------  ----------- 
                                                                                                
LONG-TERM MUNICIPAL SECURITIES--CONTINUED                                                       
------------------------------------------------------------------------                        
              WISCONSIN--CONTINUED                                                              
              ----------------------------------------------------------                        
$ 750,000     Wisconsin State Health & Educational Facilities, 4.25%,                           
              Revenue Bonds, (Froedtert Memorial Lutheran Hospital)/                            
              (Series A), 10/1/96                                           AAA     $   749,392 
              ----------------------------------------------------------            ----------- 
              Total                                                                   2,241,166 
              ----------------------------------------------------------            ----------- 
              TOTAL LONG-TERM MUNICIPAL SECURITIES                                              
              (IDENTIFIED COST $21,976,681)                                          21,895,128 
              ----------------------------------------------------------            ----------- 
              TOTAL INVESTMENTS (IDENTIFIED COST $23,714,767)                       $23,633,214+
              ----------------------------------------------------------            ----------- 

* Please refer to the Appendix to the Combined Statement of Additional          
Information for an explanation of the credit ratings. Current credit ratings
are unaudited.                                                              

+ The cost for federal tax purposes amounts to $23,714,767. The net unrealized  
depreciation of investments on a federal tax basis amounts to $81,553, which
is comprised of $13,985 appreciation and $95,538 depreciation at August 31, 
1994.                                                                       

Note: The categories of investments are shown as a percentage of net assets     
($24,903,023) at                                                                
August 31, 1994.                                                    

The following abbreviations are used in this portfolio:                         

                                                                [Download Table]
                                                     
AMBAC --American Municipal Bond Assurance Corporation
BIG   --Bond Investors Guaranty                      
FGIC  --Financial Guaranty Insurance Co.             
FSA   --Financial Security Assurance                 
GO    --General Obligation                           
LT    --Limited Tax                                  
MBIA  --Municipal Bond Investors Assurance           
UT    --Unlimited Tax                                

(See Notes which are an integral part of the Financial Statements)              

MARSHALL SHORT-TERM TAX-FREE FUND                                               

STATEMENT OF ASSETS AND LIABILITIES                                             
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                          
ASSETS:                                                                                   
----------------------------------------------------------------------------              
Investments in securities, at value (identified and tax cost $23,714,767)     $23,633,214 
----------------------------------------------------------------------------              
Receivable for capital stock sold                                               1,795,000 
----------------------------------------------------------------------------              
Interest receivable                                                               263,570 
----------------------------------------------------------------------------              
Deferred expenses                                                                  12,389 
----------------------------------------------------------------------------  ----------- 
     Total assets                                                              25,704,173 
----------------------------------------------------------------------------              
LIABILITIES:                                                                              
----------------------------------------------------------------------------              
Payable for investments purchased                                   $741,368              
----------------------------------------------------------------                          
Dividends payable                                                     31,683              
----------------------------------------------------------------                          
Accrued expenses                                                      28,099              
----------------------------------------------------------------    --------              
     Total liabilities                                                            801,150 
----------------------------------------------------------------------------  ----------- 
NET ASSETS for 2,510,903 shares of capital stock outstanding                  $24,903,023 
----------------------------------------------------------------------------  ----------- 
NET ASSETS CONSIST OF:                                                                    
----------------------------------------------------------------------------              
Paid-in capital                                                               $24,995,548 
----------------------------------------------------------------------------              
Net unrealized depreciation of investments                                        (81,553)
----------------------------------------------------------------------------              
Accumulated net realized loss on investments                                      (10,972)
----------------------------------------------------------------------------  ----------- 
     Total Net Assets                                                         $24,903,023 
----------------------------------------------------------------------------  ----------- 
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:                       
(net assets of $24,903,023 / 2,510,903 shares of capital stock outstanding)         $9.92 
----------------------------------------------------------------------------  ----------- 

(See Notes which are an integral part of the Financial Statements)              

MARSHALL SHORT-TERM TAX-FREE FUND                                               

STATEMENT OF OPERATIONS                                                         
PERIOD ENDED AUGUST 31, 1994*                                                   
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                                
INVESTMENT INCOME:                                                                              
-------------------------------------------------------------------------------------           
Interest income                                                                        $369,911 
-------------------------------------------------------------------------------------           
EXPENSES--                                                                                      
-------------------------------------------------------------------------------------           
Investment advisory fee                                                      $ 49,536           
-------------------------------------------------------------------------                       
Directors' fees                                                                    45           
-------------------------------------------------------------------------                       
Administrative personnel and services fee                                      28,767           
-------------------------------------------------------------------------                       
Custodian fees                                                                  1,982           
-------------------------------------------------------------------------                       
Transfer and dividend disbursing agent fees and expenses                        6,780           
-------------------------------------------------------------------------                       
Legal fees                                                                      1,011           
-------------------------------------------------------------------------                       
Printing and postage                                                            1,806           
-------------------------------------------------------------------------                       
Portfolio accounting fees                                                      25,915           
-------------------------------------------------------------------------                       
Taxes                                                                           1,501           
-------------------------------------------------------------------------                       
Shareholder services fees                                                       1,486           
-------------------------------------------------------------------------                       
Miscellaneous                                                                   2,375           
-------------------------------------------------------------------------    --------           
     Total expenses                                                           121,204           
-------------------------------------------------------------------------                       
Deduct--                                                                                        
-------------------------------------------------------------------------                       
  Waiver of investment advisory fee                               $49,536                       
---------------------------------------------------------------                                 
  Waiver of administrative personnel and services fee              19,393                       
---------------------------------------------------------------                                 
  Waiver of custodian fees                                          1,238      70,167           
---------------------------------------------------------------   -------    --------           
     Net expenses                                                                        51,037 
-------------------------------------------------------------------------------------  -------- 
          Net investment income                                                         318,874 
-------------------------------------------------------------------------------------  -------- 
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:                                                    
-------------------------------------------------------------------------------------           
Net realized loss on investments (identified cost basis)                                (10,972)
-------------------------------------------------------------------------------------           
Net change in unrealized depreciation on investments                                    (81,553)
-------------------------------------------------------------------------------------  -------- 
     Net realized and unrealized loss on investments                                    (92,525)
-------------------------------------------------------------------------------------  -------- 
          Change in net assets resulting from operations                               $226,349 
-------------------------------------------------------------------------------------  -------- 

* For the period from February 2, 1994 (date of initial public investment) to   
August 31, 1994.                                                                

(See Notes which are an integral part of the Financial Statements)              

MARSHALL SHORT-TERM TAX-FREE FUND                                               

STATEMENT OF CHANGES IN NET ASSETS                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                             PERIOD ENDED   
                                                                           AUGUST 31, 1994* 
                                                                           -----------------
                                                                                            
INCREASE (DECREASE) IN NET ASSETS:                                                          
-------------------------------------------------------------------------                   
OPERATIONS--                                                                                
-------------------------------------------------------------------------                   
Net investment income                                                         $   318,874   
-------------------------------------------------------------------------                   
Net realized loss on investments ($0 net loss as computed for federal tax                   
  purposes)                                                                       (10,972)  
-------------------------------------------------------------------------                   
Net change in unrealized depreciation on investments                              (81,553)  
-------------------------------------------------------------------------  ---------------  
     Change in net assets resulting from operations                               226,349   
-------------------------------------------------------------------------  ---------------  
DISTRIBUTIONS TO SHAREHOLDERS--                                                             
-------------------------------------------------------------------------                   
Dividends to shareholders from net investment income                             (318,874)  
-------------------------------------------------------------------------  ---------------  
CAPITAL STOCK TRANSACTIONS--                                                                
-------------------------------------------------------------------------                   
Proceeds from sale of shares                                                   29,765,118   
-------------------------------------------------------------------------                   
Net asset value of shares issued to shareholders in payment of dividends                    
declared                                                                          203,173   
-------------------------------------------------------------------------                   
Cost of shares redeemed                                                        (4,972,743)  
-------------------------------------------------------------------------  ---------------  
     Change in net assets from capital stock transactions                      24,995,548   
-------------------------------------------------------------------------  ---------------  
          Change in net assets                                                 24,903,023   
-------------------------------------------------------------------------                   
NET ASSETS:                                                                                 
-------------------------------------------------------------------------                   
Beginning of period                                                                    --   
-------------------------------------------------------------------------  ---------------  
End of period                                                                 $24,903,023   
-------------------------------------------------------------------------  ---------------  

* For the period from February 2, 1994 (date of initial public investment) to   
August 31, 1994.                                                            

(See Notes which are an integral part of the Financial Statements)              

MARSHALL SHORT-TERM TAX-FREE FUND                                               
FINANCIAL HIGHLIGHTS                                                            
--------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)                                 

                                                        [Enlarge/Download Table]

                                                                             PERIOD ENDED   
                                                                           AUGUST 31, 1994* 
                                                                           -----------------
                                                                                            
NET ASSET VALUE, BEGINNING OF PERIOD                                            $10.00      
-------------------------------------------------------------------------                   
INCOME FROM INVESTMENT OPERATIONS                                                           
-------------------------------------------------------------------------                   
  Net investment income                                                            0.18     
-------------------------------------------------------------------------                   
  Net realized and unrealized loss on investments                                 (0.08)    
-------------------------------------------------------------------------  -----------------
  Total from investment operations                                                 0.10     
-------------------------------------------------------------------------                   
LESS DISTRIBUTIONS                                                                          
-------------------------------------------------------------------------                   
  Dividends to shareholders from net investment income                            (0.18)    
-------------------------------------------------------------------------  -----------------
NET ASSET VALUE, END OF PERIOD                                                    $9.92     
-------------------------------------------------------------------------  -----------------
TOTAL RETURN**                                                                     0.98%    
-------------------------------------------------------------------------                   
RATIOS TO AVERAGE NET ASSETS                                                                
-------------------------------------------------------------------------                   
  Expenses                                                                         0.52%(b) 
-------------------------------------------------------------------------                   
  Net investment income                                                            3.22%(b) 
-------------------------------------------------------------------------                   
  Expense waiver (a)                                                               0.71%(b) 
-------------------------------------------------------------------------                   
SUPPLEMENTAL DATA                                                                           
-------------------------------------------------------------------------                   
  Net assets, end of period (000 omitted)                                       $24,903     
-------------------------------------------------------------------------                   
  Portfolio turnover rate                                                            37%    
-------------------------------------------------------------------------                   

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

** Based on net asset value.                                                    

(a) This voluntary expense decrease is reflected in both the expense and net    
investment income ratios shown above.                                   

(b) Computed on an annualized basis.                                            

(See Notes which are an integral part of the Financial Statements)              

MARSHALL INTERMEDIATE TAX-FREE FUND                                             

PORTFOLIO OF INVESTMENTS                                                        
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                           CREDIT              
SHARES OR                                                                 RATING:              
PRINCIPAL                                                                 MOODY'S              
  AMOUNT                                                                  OR S&P*      VALUE   
----------    ----------------------------------------------------------  --------  -----------
                                                                                               
MUTUAL FUND SHARES--1.9%                                                                       
------------------------------------------------------------------------                       
  387,584     Fidelity Tax Exempt Money Market                                      $   387,584
              ----------------------------------------------------------                       
  272,276     Goldman Sachs Financial Square Tax Exempt Money Market                    272,276
              ----------------------------------------------------------            -----------
              TOTAL MUTUAL FUND SHARES (AT NET ASSET VALUE)                             659,860
              ----------------------------------------------------------            -----------
SHORT-TERM MUNICIPAL SECURITIES--1.4%                                                          
------------------------------------------------------------------------                       
              GEORGIA--1.1%                                                                    
              ----------------------------------------------------------                       
$ 400,000     Georgia State, 3.10%, Refunding UT GO Bond, (Series E),                          
              7/1/95                                                        AAA         398,108
              ----------------------------------------------------------            -----------
              MINNESOTA--0.2%                                                                  
              ----------------------------------------------------------                       
   60,000     Roseville, MN, 5.10%, (Tax Increment), 2/1/95                 AA-          60,393
              ----------------------------------------------------------            -----------
              PENNSYLVANIA--0.1%                                                               
              ----------------------------------------------------------                       
   45,000     Washington County, PA, Industrial Development, 4.08%,                            
              (Fltg, Hercules, Inc. Proj.), 8/9/95                           NR          45,000
              ----------------------------------------------------------            -----------
              TOTAL SHORT-TERM MUNICIPAL SECURITIES                                            
              (IDENTIFIED COST $505,892)                                                503,501
              ----------------------------------------------------------            -----------
LONG-TERM MUNICIPAL SECURITIES--96.5%                                                          
------------------------------------------------------------------------                       
              ARIZONA--7.3%                                                                    
              ----------------------------------------------------------                       
1,000,000     Arizona State Wastewater Management Authority, 5.60%,                            
              7/1/97                                                        AA+       1,031,360
              ----------------------------------------------------------                       
1,000,000     City of Scottsdale, AZ, 5.40%, (Bell Road Improvement                            
              District), 1/1/2003                                            A-         992,650
              ----------------------------------------------------------                       
  500,000     Maricopa County, AZ, School District, 6.75%, (District No.                       
              48 Scottsdale Improvement), 7/1/2010, Prerefunded 7/1/2001                       
              @ 101                                                          NR         550,485
              ----------------------------------------------------------            -----------
              Total                                                                   2,574,495
              ----------------------------------------------------------            -----------
              ARKANSAS--0.1%                                                                   
              ----------------------------------------------------------                       
   50,000     North Slope Boro, AK, 7.50%, (Series C)/(AMBAC Insured),                         
              6/30/97                                                       AAA          53,492
              ----------------------------------------------------------            -----------
              CALIFORNIA--7.8%                                                                 
              ----------------------------------------------------------                       
   75,000     Arroyo Grande, CA, 10.375%, ETM, Certificates of                                 
              Participation, (Series A), 11/1/2000, Subject to Mandatory                       
              Sinking Fund 11/1/95                                          AAA          88,780
              ----------------------------------------------------------                       
1,000,000     California State, 6.20%, 9/1/2005                              AA       1,039,550
              ----------------------------------------------------------                       

MARSHALL INTERMEDIATE TAX-FREE FUND                                             
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                           CREDIT              
                                                                          RATING:              
PRINCIPAL                                                                 MOODY'S              
  AMOUNT                                                                  OR S&P*      VALUE   
----------    ----------------------------------------------------------  --------  -----------
                                                                                               
LONG-TERM MUNICIPAL SECURITIES--CONTINUED                                                      
------------------------------------------------------------------------                       
              CALIFORNIA--CONTINUED                                                            
              ----------------------------------------------------------                       
 $ 105,000    Corona, CA, 10.375%, ETM, Certificates of Participation,                         
              (Series B), 11/1/2000, Subject to Mandatory Sinking                              
              Fund 11/1/95                                                  AAA     $   124,293
              ----------------------------------------------------------                       
1,500,000     Sacramento, CA, School Insurance Authority, 5.70%, Revenue                       
              Bonds, (Liability Program)/(Series D), 6/1/2003                A-       1,504,965
              ----------------------------------------------------------            -----------
              Total                                                                   2,757,588
              ----------------------------------------------------------            -----------
              COLORADO--1.8%                                                                   
              ----------------------------------------------------------                       
  125,000     Denver, CO, City & County, 5.10%, (Series D), 8/1/99           AA         126,450
              ----------------------------------------------------------                       
  250,000     Jefferson County, CO, School District, 4.10%, (Series A),                        
              12/15/99                                                       AA         237,007
              ----------------------------------------------------------                       
  250,000     Thornton, CO, 5.65%, (FGIC Insured), 12/1/2003, Callable                         
              12/1/2002 @ 101                                               AAA         256,665
              ----------------------------------------------------------            -----------
              Total                                                                     620,122
              ----------------------------------------------------------            -----------
              CONNECTICUT--7.1%                                                                
              ----------------------------------------------------------                       
  750,000     Connecticut State, 5.80%, (Series B), 11/15/99                AA-         779,820
              ----------------------------------------------------------                       
  150,000     Connecticut State, 6.00%, (Series B), 11/15/2001              AA-         157,471
              ----------------------------------------------------------                       
  250,000     Connecticut State, 5.00%, (Special Tax Obligation),                              
              9/1/2003                                                      AA-         243,300
              ----------------------------------------------------------                       
1,000,000     Enfield, CT, 5.25% UT GO Bonds, 5/15/96                        AA       1,016,200
              ----------------------------------------------------------                       
  300,000     South Central, CT, Regional Water Authority, 5.40%,                              
              (Water System)/(FGIC Insured), 8/1/2002                       AAA         304,992
              ----------------------------------------------------------            -----------
              Total                                                                   2,501,783
              ----------------------------------------------------------            -----------
              DELAWARE--0.2%                                                                   
              ----------------------------------------------------------                       
   50,000     Delaware State, 6.85%, 5/1/2000                               AA+          54,268
              ----------------------------------------------------------            -----------
              DISTRICT OF COLUMBIA--1.4%                                                       
              ----------------------------------------------------------                       
  200,000     District of Columbia, 7.75%, 6/1/2004, Prerefunded 6/1/96                        
              @ 102                                                          A-         214,562
              ----------------------------------------------------------                       
  175,000     District of Columbia, 7.00%, (BIG Insured), 6/1/98,                              
              Callable 6/1/96 @102                                          AAA         184,018
              ----------------------------------------------------------                       
   75,000     District of Columbia, 7.70%, Refunding Revenue Bonds,                            
              (Series A)/(BIG Insured), 6/1/98, Callable 6/1/96 @ 102       AAA          79,801
              ----------------------------------------------------------            -----------
              Total                                                                     478,381
              ----------------------------------------------------------            -----------
              FLORIDA--1.4%                                                                    
              ----------------------------------------------------------                       
  500,000     Hillsborough County, FL, 5.00%, Solid Waste & Resources                          
              Recovery Revenue Bonds, (MBIA Insured), 10/1/99               AAA-        501,755
              ----------------------------------------------------------            -----------

MARSHALL INTERMEDIATE TAX-FREE FUND                                             
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                           CREDIT              
                                                                          RATING:              
PRINCIPAL                                                                 MOODY'S              
  AMOUNT                                                                  OR S&P*      VALUE   
----------    ----------------------------------------------------------  --------  -----------
                                                                                               
LONG-TERM MUNICIPAL SECURITIES--CONTINUED                                                      
------------------------------------------------------------------------                       
              GEORGIA--1.2%                                                                    
              ----------------------------------------------------------                       
$ 450,000     Georgia State, 4.50%, UT GO Bonds, (Series E), 7/1/2002       AA+     $   427,176
              ----------------------------------------------------------            -----------
              HAWAII--2.2%                                                                     
              ----------------------------------------------------------                       
  750,000     Hawaii State, 5.25%, (Series BZ), 10/1/2000                    AA         760,845
              ----------------------------------------------------------            -----------
              ILLINOIS--0.5%                                                                   
              ----------------------------------------------------------                       
   65,000     Illinois Development Financing Authority, 5.35%, Sinking                         
              Fund Bonds, 9/1/2000, Callable 6/1/95 @ 102                    NR          65,933
              ----------------------------------------------------------                       
  100,000     Illinois State Sales Tax Revenue, 5.30%, 6/15/96              AAA         101,491
              ----------------------------------------------------------            -----------
              Total                                                                     167,424
              ----------------------------------------------------------            -----------
              LOUISIANA--0.1%                                                                  
              ----------------------------------------------------------                       
   50,000     Louisiana Public Facility Revenue Authority, 7.30%,                              
              12/1/2015, Mandatory Put 6/1/97                                A-          52,961
              ----------------------------------------------------------            -----------
              MAINE--0.2%                                                                      
              ----------------------------------------------------------                       
   75,000     Maine Municipal Bond Bank, 7.10%, (Series B), 11/1/99          A+          82,312
              ----------------------------------------------------------            -----------
              MARYLAND--1.7%                                                                   
              ----------------------------------------------------------                       
  250,000     Maryland State, 4.90%, (State & Local Loan Facilities                            
              Second Series), 10/15/2003                                    AAA         242,837
              ----------------------------------------------------------                       
  375,000     Maryland State Department of Transportation Cons., 4.20%,                        
              (Series 1993 Second Issue), 12/15/2001                         AA         347,359
              ----------------------------------------------------------            -----------
              Total                                                                     590,196
              ----------------------------------------------------------            -----------
              MASSACHUSETTS--8.8%                                                              
              ----------------------------------------------------------                       
   50,000     Massachusetts State, 7.10%, (Cons. Ln. Series A)/(MBIA                           
              Insured), 2/1/97                                              AAA          52,745
              ----------------------------------------------------------                       
   50,000     Massachusetts State, 7.10%, (Series A)/(FGIC Insured),                           
              2/1/98                                                        AAA          53,320
              ----------------------------------------------------------                       
1,500,000     Massachusetts State, 5.50%, (FGIC Insured), 8/1/2005,                            
              Callable 8/1/2004 @ 102                                       AAA       1,493,835
              ----------------------------------------------------------                       
1,500,000     Massachusetts State Health and Educational Facilities                            
              Authority, 6.00%, Revenue Bonds, (Daughters of Charity                           
              National Health System for the Carney Hospital)/(Series                          
              D), 7/1/2009                                                  AA-       1,494,015
              ----------------------------------------------------------            -----------
              Total                                                                   3,093,915
              ----------------------------------------------------------            -----------
              MINNESOTA--2.9%                                                                  
              ----------------------------------------------------------                       
1,000,000     Metropolitan Council, MN, 5.40%, Refunding Bonds,                                
              (Series A), 12/1/98                                           AAA       1,036,970
              ----------------------------------------------------------            -----------
              MISSISSIPPI--2.9%                                                                
              ----------------------------------------------------------                       
1,000,000     Mississippi State Capital Improvement, 5.75%, (Series A),                        
              6/1/2008, Callable 6/1/2004 @ 100                             AA-       1,004,330
              ----------------------------------------------------------            -----------

MARSHALL INTERMEDIATE TAX-FREE FUND                                             
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                           CREDIT              
                                                                          RATING:              
PRINCIPAL                                                                 MOODY'S              
  AMOUNT                                                                  OR S&P*      VALUE   
----------    ----------------------------------------------------------  --------  -----------
                                                                                               
LONG-TERM MUNICIPAL SECURITIES--CONTINUED                                                      
------------------------------------------------------------------------                       
              NEBRASKA--2.8%                                                                   
              ----------------------------------------------------------                       
$1,000,000    Nebraska Public Power District Revenue Bonds, 4.90%,                             
              (Nuclear Facility), 7/1/98                                     A+     $ 1,003,370
              ----------------------------------------------------------            -----------
              NEVADA--3.1%                                                                     
              ----------------------------------------------------------                       
  150,000     Clark County, NV, 5.20% (AMBAC Insured), 11/1/95              AAA         151,990
              ----------------------------------------------------------                       
  200,000     Clark County, NV, Highway Improvement Revenue, 5.625%,                           
              (Motor Vehicle Fuel Tax)/(AMBAC Insured), 7/1/2002            AAA         203,840
              ----------------------------------------------------------                       
  750,000     Clark County, NV, School District, 5.00%, (FGIC Insured),                        
              5/1/2001                                                      AAA         739,538
              ----------------------------------------------------------            -----------
              Total                                                                   1,095,368
              ----------------------------------------------------------            -----------
              NEW JERSEY--4.6%                                                                 
              ----------------------------------------------------------                       
  150,000     Burlington County, NJ, 4.50% Refunding Revenue Bonds,                            
              (Series A), 3/15/2002                                          AA         141,301
              ----------------------------------------------------------                       
  200,000     Burlington County, NJ, 4.60% Refunding Revenue Bonds,                            
              (Series A), 3/15/2003                                          AA         187,236
              ----------------------------------------------------------                       
  250,000     New Jersey State, 6.25%, 9/15/2000                            AA+         266,067
              ----------------------------------------------------------                       
1,000,000     New Jersey State Transportation Transit Authority, 4.50%,                        
              Revenue Bonds, (Series A), 12/15/95                            A+       1,011,020
              ----------------------------------------------------------            -----------
              Total                                                                   1,605,624
              ----------------------------------------------------------            -----------
              NORTH CAROLINA--2.3%                                                             
              ----------------------------------------------------------                       
  750,000     North Carolina Eastern Municipal Power Authority, 7.40%                          
              (Series A), 1/1/99 (Callable 1/1/96 @ 103)                     A-         795,405
              ----------------------------------------------------------            -----------
              OHIO--10.4%                                                                      
              ----------------------------------------------------------                       
1,000,000     Columbus, OH, 4.90%, GO Bonds, 9/15/2001                      AA+         991,210
              ----------------------------------------------------------                       
1,000,000     Franklin County, OH, 7.60%, Hospital Revenue Bonds,                              
              5/15/2020, Prerefunded 5/15/2000 @ 102                        AAA       1,142,300
              ----------------------------------------------------------                       
1,500,000     Mahoning County, OH, 5.70%, (MBIA Insured), 12/1/2005         AAA       1,527,255
              ----------------------------------------------------------            -----------
              Total                                                                   3,660,765
              ----------------------------------------------------------            -----------
              PENNSYLVANIA--1.1%                                                               
              ----------------------------------------------------------                       
  350,000     Pennsylvania State Turnpike Commission, 7.50%, Turnpike                          
              Revenue, (Series K), 12/1/2019, Prerefunded 12/1/99 @ 102     AAA         397,806
              ----------------------------------------------------------            -----------
              PUERTO RICO--1.1%                                                                
              ----------------------------------------------------------                       
  250,000     Puerto Rico Public Building Authority, 6.10%, Refunding                          
              Revenue Bonds, (Series K), 7/1/2002                           AAA         264,110
              ----------------------------------------------------------                       

MARSHALL INTERMEDIATE TAX-FREE FUND                                             
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                           CREDIT              
                                                                          RATING:              
PRINCIPAL                                                                 MOODY'S              
  AMOUNT                                                                  OR S&P*      VALUE   
----------    ----------------------------------------------------------  --------  -----------
                                                                                               
LONG-TERM MUNICIPAL SECURITIES--CONTINUED                                                      
------------------------------------------------------------------------                       
              PUERTO RICO--CONTINUED                                                           
              ----------------------------------------------------------                       
$ 100,000     Puerto Rico Public Building Authority, 6.90%, Refunding                          
              Revenue Bonds, (Series I)/(FGIC Insured), 7/1/2000            AAA     $   109,421
              ----------------------------------------------------------            -----------
              Total                                                                     373,531
              ----------------------------------------------------------            -----------
              TEXAS--6.8%                                                                      
              ----------------------------------------------------------                       
  200,000     Austin, TX, Utilities System Revenue, 7.30%, (Series A)/                         
              (FGIC Insured), 11/15/97                                      AAA         215,814
              ----------------------------------------------------------                       
  100,000     Dallas/Ft. Worth, TX, Regional Airport, 5.875% (Long Opt.                        
              Period)/(Series A CR 104), 11/1/2006, Optional Put 5/1/98                        
              @ 100                                                         AAA         102,629
              ----------------------------------------------------------                       
  700,000     El Paso, TX, ISD, 7.50%, PSF Gtd., 8/15/2000                  AAA         789,656
              ----------------------------------------------------------                       
1,300,000     Granbury, TX, ISD, 5.70%, PSF Gtd., 8/1/2007                  AAA       1,296,386
              ----------------------------------------------------------            -----------
              Total                                                                   2,404,485
              ----------------------------------------------------------            -----------
              VIRGIN ISLANDS--0.4%                                                             
              ----------------------------------------------------------                       
  125,000     Virgin Islands Public Finance Authority, 7.30% ,(Revenue                         
              Series A), 10/1/2018, Prerefunded 10/1/2000 @ 101             AAA         141,851
              ----------------------------------------------------------            -----------
              VIRGINIA--4.5%                                                                   
              ----------------------------------------------------------                       
  600,000     Fairfax County, VA, 4.70%, GO Bonds, 6/1/99                   AAA         598,446
              ----------------------------------------------------------                       
  500,000     Virginia Beach, VA, 4.30%, 11/1/97                             AA         499,245
              ----------------------------------------------------------                       
  500,000     Virginia Beach, VA, 4.00%, Refunding Public Improvement                          
              Bonds, 11/1/96                                                 AA         498,245
              ----------------------------------------------------------            -----------
              Total                                                                   1,595,936
              ----------------------------------------------------------            -----------
              WASHINGTON--1.2%                                                                 
              ----------------------------------------------------------                       
   50,000     Spokane, WA, 6.70% UT Bonds, 1/1/99, Callable 1/1/98 @ 100     AA          52,499
              ----------------------------------------------------------                       
   60,000     Washington State, 8.00%, 10/1/95                               AA          62,620
              ----------------------------------------------------------                       
  160,000     Washington State, 4.75%, Refunding Bonds, (Series R92C),                         
              9/1/96                                                         AA         161,078
              ----------------------------------------------------------                       
  100,000     Washington State Public Power Supply, 7.10% (Series B),                          
              7/1/2000                                                       AA         108,323
              ----------------------------------------------------------                       
   50,000     Washington State Public Power Supply, 7.00%, Refunding                           
              Revenue Bonds, (Series B)/(FGIC Insured), 7/1/99              AAA          54,071
              ----------------------------------------------------------            -----------
              Total                                                                     438,591
              ----------------------------------------------------------            -----------
              WEST VIRGINIA--0.2%                                                              
              ----------------------------------------------------------                       
   50,000     Monongalia County, WV, Education Board, 6.80%,                                   
              (MBIA Insured), 4/1/99                                        AAA          53,714
              ----------------------------------------------------------            -----------

MARSHALL INTERMEDIATE TAX-FREE FUND                                             
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                           CREDIT               
                                                                          RATING:               
PRINCIPAL                                                                 MOODY'S               
  AMOUNT                                                                  OR S&P*      VALUE    
----------    ----------------------------------------------------------  --------  ----------- 
                                                                                                
LONG-TERM MUNICIPAL SECURITIES--CONTINUED                                                       
------------------------------------------------------------------------                        
              WISCONSIN--10.4%                                                                  
              ----------------------------------------------------------                        
$ 170,000     Appleton, WI, Sewer Revenue Bonds, 3.95%, BAN, 10/1/95        MIG1    $   169,351 
              ----------------------------------------------------------                        
  225,000     Wisconsin State, 6.00%, 5/1/2002                               AA         236,221 
              ----------------------------------------------------------                        
1,000,000     Wisconsin State, 4.75%, Clean Water Revenue Bonds,                                
              (Series Z), 6/1/2005                                          AA-         917,650 
              ----------------------------------------------------------                        
   50,000     Wisconsin State Health & Education Authority, 7.20%                               
              (Authority Revenue)/(FGIC Insured), 8/1/97                    AAA          53,290 
              ----------------------------------------------------------                        
   50,000     Wisconsin State Health & Education Authority, 7.20%,                              
              Community Provider Program, (Series A)/(FGIC Insured),                            
              1/15/2001                                                     AAA          53,955 
              ----------------------------------------------------------                        
1,500,000     Wisconsin State Health & Educational Facilities Authority,                        
              5.10%, Revenue Bonds, (Froedtert Memorial Lutheran                                
              Hospital)/(Series A)/(MBIA Insured), 10/1/2002                AAA       1,471,786 
              ----------------------------------------------------------                        
  750,000     Wisconsin State Transportation Revenue Bonds, 5.00%,                              
              (Series B), 7/1/2000                                           A1         745,463 
              ----------------------------------------------------------            ----------- 
              Total                                                                   3,647,716 
              ----------------------------------------------------------            ----------- 
              TOTAL LONG-TERM MUNICIPAL SECURITIES                                              
              (IDENTIFIED COST $34,379,979)                                          33,972,175 
              ----------------------------------------------------------            ----------- 
              TOTAL INVESTMENTS (IDENTIFIED COST $35,545,731)                       $35,135,536+
              ----------------------------------------------------------            ----------- 

* Please refer to the Appendix to the Combined Statement of Additional          
Information for an explanation of the credit ratings. Current credit ratings
are unaudited.                                                              

+ The cost for federal tax purposes amounts to $35,545,731. The net unrealized  
 depreciation of investments on a federal tax basis amounts to $410,195, which
is comprised of $54,945 appreciation and $465,140 depreciation at August 31,
1994.                                                                       

Note: The categories of investments are shown as a percentage of net assets     
($35,211,938) at August 31, 1994.                                   

The following abbreviations are used in this portfolio:                         

                                                                [Download Table]
                                                     
AMBAC --American Municipal Bond Assurance Corporation
BAN   --Bond Anticipation Note                       
BIG   --Bond Investors Guaranty                      
ETM   --Escrowed to Maturity                         
FGIC  --Financial Guaranty Insurance Co.             
GO    --General Obligation                           
ISD   --Independent School District                  
MBIA  --Municipal Bond Investors Assurance           
PSF   --Permanent School Fund                        
UT    --Unlimited Tax                                

(See Notes which are an integral part of the Financial Statements)              

MARSHALL INTERMEDIATE TAX-FREE FUND                                             

STATEMENT OF ASSETS AND LIABILITIES                                             
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                               
ASSETS:                                                                                        
---------------------------------------------------------------------------------              
Investments in securities, at value (identified and tax cost $35,545,731)          $35,135,536 
---------------------------------------------------------------------------------              
Receivable for investments sold                                                        762,571 
---------------------------------------------------------------------------------              
Interest receivable                                                                    487,315 
---------------------------------------------------------------------------------              
Receivable for capital stock sold                                                       21,000 
---------------------------------------------------------------------------------              
Deferred expenses                                                                       13,693 
---------------------------------------------------------------------------------  ----------- 
     Total assets                                                                   36,420,115 
---------------------------------------------------------------------------------              
LIABILITIES:                                                                                   
---------------------------------------------------------------------------------              
Payable for investments purchased                                      $1,042,040              
--------------------------------------------------------------------                           
Dividends payable                                                         111,639              
--------------------------------------------------------------------                           
Accrued expenses                                                           54,498              
--------------------------------------------------------------------   ----------              
     Total liabilities                                                               1,208,177 
---------------------------------------------------------------------------------  ----------- 
NET ASSETS for 3,626,914 shares of capital stock outstanding                       $35,211,938 
---------------------------------------------------------------------------------  ----------- 
NET ASSETS CONSIST OF:                                                                         
---------------------------------------------------------------------------------              
Paid-in capital                                                                    $35,832,029 
---------------------------------------------------------------------------------              
Net unrealized depreciation of investments                                            (410,195)
---------------------------------------------------------------------------------              
Accumulated net realized loss on investments                                          (209,896)
---------------------------------------------------------------------------------  ----------- 
     Total Net Assets                                                              $35,211,938 
---------------------------------------------------------------------------------  ----------- 
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:                            
(net assets of $35,211,938 / 3,626,914 shares of capital stock outstanding)              $9.71 
---------------------------------------------------------------------------------  ----------- 

(See Notes which are an integral part of the Financial Statements)              

MARSHALL INTERMEDIATE TAX-FREE FUND                                             

STATEMENT OF OPERATIONS                                                         
PERIOD ENDED AUGUST 31, 1994*                                                   
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                                
INVESTMENT INCOME:                                                                              
------------------------------------------------------------------------------------            
Interest income                                                                       $ 670,038 
------------------------------------------------------------------------------------            
EXPENSES--                                                                                      
------------------------------------------------------------------------------------            
Investment advisory fee                                                     $ 95,876            
------------------------------------------------------------------------                        
Directors' fees                                                                  581            
------------------------------------------------------------------------                        
Administrative personnel and services fee                                     28,767            
------------------------------------------------------------------------                        
Custodian fees                                                                 3,196            
------------------------------------------------------------------------                        
Transfer and dividend disbursing agent fees and expenses                      10,116            
------------------------------------------------------------------------                        
Legal fees                                                                     4,361            
------------------------------------------------------------------------                        
Printing and postage                                                           7,601            
------------------------------------------------------------------------                        
Portfolio accounting fees                                                     31,781            
------------------------------------------------------------------------                        
Taxes                                                                          2,400            
------------------------------------------------------------------------                        
Shareholder services fee                                                       2,397            
------------------------------------------------------------------------                        
Miscellaneous                                                                  4,057            
------------------------------------------------------------------------    --------            
     Total expenses                                                          191,133            
------------------------------------------------------------------------                        
Deduct--                                                                                        
------------------------------------------------------------------------                        
  Waiver of investment advisory fee                              $77,214                        
--------------------------------------------------------------                                  
  Waiver of administrative personnel and services fee             13,646                        
--------------------------------------------------------------                                  
  Waiver of custodian fees                                         1,997      92,857            
--------------------------------------------------------------   -------    --------            
     Net expenses                                                                        98,276 
------------------------------------------------------------------------------------  --------- 
          Net investment income                                                         571,762 
------------------------------------------------------------------------------------  --------- 
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:                                                    
------------------------------------------------------------------------------------            
Net realized loss on investments (identified cost basis)                               (209,896)
------------------------------------------------------------------------------------            
Net change in unrealized depreciation on investments                                   (410,195)
------------------------------------------------------------------------------------  --------- 
     Net realized and unrealized loss on investments                                   (620,091)
------------------------------------------------------------------------------------  --------- 
          Change in net assets resulting from operations                              $ (48,329)
------------------------------------------------------------------------------------  --------- 

* For the period from February 2, 1994 (date of initial public investment) to   
August 31, 1994.                                                                

(See Notes which are an integral part of the Financial Statements)              

MARSHALL INTERMEDIATE TAX-FREE FUND                                             

STATEMENT OF CHANGES IN NET ASSETS                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                             PERIOD ENDED   
                                                                           AUGUST 31, 1994* 
                                                                           -----------------
                                                                                            
INCREASE (DECREASE) IN NET ASSETS:                                                          
-------------------------------------------------------------------------                   
OPERATIONS--                                                                                
-------------------------------------------------------------------------                   
Net investment income                                                         $   571,762   
-------------------------------------------------------------------------                   
Net realized loss on investments ($0 net loss as computed                                   
for federal tax purposes)                                                        (209,896)  
-------------------------------------------------------------------------                   
Net change in unrealized depreciation on investments                             (410,195)  
-------------------------------------------------------------------------  ---------------  
     Change in net assets resulting from operations                               (48,329)  
-------------------------------------------------------------------------  ---------------  
DISTRIBUTIONS TO SHAREHOLDERS--                                                             
-------------------------------------------------------------------------                   
Dividends to shareholders from net investment income                             (571,762)  
-------------------------------------------------------------------------  ---------------  
CAPITAL STOCK TRANSACTIONS--                                                                
-------------------------------------------------------------------------                   
Proceeds from sale of shares                                                   39,630,036   
-------------------------------------------------------------------------                   
Net asset value of shares issued to shareholders in payment                                 
of dividends declared                                                              88,011   
-------------------------------------------------------------------------                   
Cost of shares redeemed                                                        (3,886,018)  
-------------------------------------------------------------------------  ---------------  
     Change in net assets from capital stock transactions                      35,832,029   
-------------------------------------------------------------------------  ---------------  
          Change in net assets                                                 35,211,938   
-------------------------------------------------------------------------                   
NET ASSETS:                                                                                 
-------------------------------------------------------------------------                   
Beginning of period                                                                    --   
-------------------------------------------------------------------------  ---------------  
End of period                                                                 $35,211,938   
-------------------------------------------------------------------------  ---------------  

* For the period from February 2, 1994 (date of initial public investment) to   
August 31, 1994.                                                            

(See Notes which are an integral part of the Financial Statements)              

MARSHALL INTERMEDIATE TAX-FREE FUND                                             
FINANCIAL HIGHLIGHTS                                                            
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)                                 

                                                        [Enlarge/Download Table]

                                                                             PERIOD ENDED   
                                                                           AUGUST 31, 1994* 
                                                                           -----------------
                                                                                            
NET ASSET VALUE, BEGINNING OF PERIOD                                            $10.00      
-------------------------------------------------------------------------                   
INCOME FROM INVESTMENT OPERATIONS                                                           
-------------------------------------------------------------------------                   
  Net investment income                                                            0.19     
-------------------------------------------------------------------------                   
  Net realized and unrealized loss on investments                                 (0.29)    
-------------------------------------------------------------------------  -----------------
  Total from investment operations                                                (0.10)    
-------------------------------------------------------------------------                   
LESS DISTRIBUTIONS                                                                          
-------------------------------------------------------------------------                   
  Dividends to shareholders from net investment income                            (0.19)    
-------------------------------------------------------------------------  -----------------
NET ASSET VALUE, END OF PERIOD                                                    $9.71     
-------------------------------------------------------------------------  -----------------
TOTAL RETURN**                                                                    (0.94)%   
-------------------------------------------------------------------------                   
RATIOS TO AVERAGE NET ASSETS                                                                
-------------------------------------------------------------------------                   
  Expenses                                                                         0.62%(b) 
-------------------------------------------------------------------------                   
  Net investment income                                                            3.58%(b) 
-------------------------------------------------------------------------                   
  Expense waiver (a)                                                               0.59%(b) 
-------------------------------------------------------------------------                   
SUPPLEMENTAL DATA                                                                           
-------------------------------------------------------------------------                   
  Net assets, end of period (000 omitted)                                       $35,212     
-------------------------------------------------------------------------                   
  Portfolio turnover rate                                                            45%    
-------------------------------------------------------------------------                   

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

** Based on net asset value.                                                  

(a) This voluntary expense decrease is reflected in both the expense and net    
investment income ratios shown above.                                   

(b) Computed on an annualized basis.                                            

(See Notes which are an integral part of the Financial Statements)              

MARSHALL FUNDS, INC.                                                            
TAX-FREE FUNDS                                                                  
NOTES TO FINANCIAL STATEMENTS                                                   
AUGUST 31, 1994                                                                 
--------------------------------------------------------------------------------
(1) ORGANIZATION                                                                

Marshall Funds, Inc. (the "Corporation") is an open-end, management investment  
company established as a Wisconsin corporation under the Articles of            
Incorporation on July 31, 1992. The Corporation consists of eleven diversified  
portfolios: Marshall Balanced Fund, Marshall Equity Income Fund, Marshall       
Government Income Fund, Marshall Intermediate Bond Fund, Marshall Intermediate  
Tax-Free 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. Marshall Money Market Fund is offered in two    
classes: Trust Shares and Investment Shares. The assets of each portfolio are   
segregated and a shareholder's interest is limited to the portfolio in which    
shares are held. The financial statements included herein are only those of     
Marshall Short-Term Tax-Free Fund and Marshall Intermediate Tax-Free Fund       
(individually referred to as the "Fund," or collectively as the "Funds"). The   
financial statements of the other portfolios are presented separately.          

(2) SIGNIFICANT ACCOUNTING POLICIES                                             

The following is a summary of significant accounting policies consistently      
followed by each Fund in the preparation of its financial statements. These     
policies are in conformity with generally accepted accounting principles.       

                                                        [Enlarge/Download Table]
                                                                                            
A. INVESTMENT VALUATIONS--Municipal bonds are valued by an independent pricing service      
   taking into consideration yield, liquidity, risk, credit, quality, coupon, maturity, type
   of issue, and any other factors or market data it deems relevant in determining          
   valuations for normal institutional size trading units of debt securities. The           
   independent pricing service does not rely exclusively on quoted prices. Short-term       
   securities with remaining maturities of sixty days or less at the time of purchase may be
   stated at amortized cost, which approximates value. Investments in other regulated       
   investment companies are valued at net asset value.                                      
B. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued  
   daily. Bond premium and discount, if applicable, are amortized as required by the        
   Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are        
   recorded on the ex-dividend date.                                                        
C. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Code         
   applicable to regulated investment companies and to distribute to shareholders each year 
   substantially all of their tax-exempt income. Accordingly, no provisions for federal tax 
   is necessary. Additionally, the Marshall Short-Term Tax-Free Fund and Marshall           
   Intermediate Tax-Free Fund had net capital losses of $10,972 and $209,896, respectively, 
   attributable to security transactions incurred after October 31, 1993 which are treated  
   as arising on the first day of the Funds' next taxable year.                             
D. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Funds may engage in when-issued or    
   delayed delivery transactions. The Funds record when-issued securities on the trade date 
   and maintain security positions such that sufficient liquid assets will be available to  
   make payment for the securities purchased. Securities purchased on a when-issued or      
   delayed delivery basis are marked to market daily and begin earning interest on the      
   settlement date.                                                                         
E. DEFERRED EXPENSES--The costs incurred by the Funds with respect to registration of their 
   shares in its first fiscal year, excluding the initial expense of registering their      
   shares, have been deferred and                                                           

MARSHALL FUNDS, INC.                                                            

TAX-FREE FUNDS                                                                  
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]
                                                                                          
   are being amortized using the straight-line method not to exceed a period of five years
   from each Fund's commencement date.                                                    
F. OTHER--Investment transactions are accounted for on the trade date.                    

(3) CAPITAL STOCK                                                               

The Articles of Incorporation of the Marshall Funds, Inc. permit the Directors  
to issue 50 billion full and fractional shares of common stock, par value       
$0.0001 per share. At August 31, 1994, the capital paid-in for Marshall         
Short-Term Tax-Free Fund and Marshall Intermediate Tax-Free Fund was $24,995,548
and $35,832,029, respectively. Transactions in shares were as follows:          

                                                        [Enlarge/Download Table]

                                              MARSHALL SHORT-TERM    MARSHALL INTERMEDIATE 
                                                 TAX-FREE FUND           TAX-FREE FUND     
                                                  PERIOD ENDED           PERIOD ENDED      
                                                AUGUST 31, 1994*       AUGUST 31, 1994*    
--------------------------------------------  --------------------  -----------------------
                                                                                           
Shares sold                                         2,991,957              4,020,183       
--------------------------------------------                                               
Shares issued to shareholders in payment of                                                
dividends declared                                     20,492                  9,030       
--------------------------------------------                                               
Shares redeemed                                      (501,546)              (402,299)      
--------------------------------------------  ---------------       -----------------      
  Net change resulting from Fund share                                                     
  transactions                                      2,510,903              3,626,914       
--------------------------------------------  ---------------       -----------------      

* For the period from February 2, 1994 (date of initial public investment) to   
August 31, 1994.                                                            

(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES              

INVESTMENT ADVISORY FEE--M&I Investment Management Corp., the Funds' investment 
adviser                                                                         
(the "Adviser"), receives for its services an annual investment advisory fee    
based on a percentage of each Fund's average daily net assets. The Adviser may  
voluntarily choose to waive a portion of its fee. The Adviser can modify or     
terminate this voluntary waiver at any time at its sole discretion.             

                                                                [Download Table]

                                                         ANNUAL RATE
------------------------------------------------------   -----------
                                                                    
Marshall Short-Term Tax-Free Fund                           0.50%   
------------------------------------------------------              
Marshall Intermediate Tax-Free Fund                         0.60%   
------------------------------------------------------              

ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Funds
with certain administrative personnel and services. The FAS fee is based on the 
level of average aggregate net assets of the Corporation for the period. FAS may
voluntarily choose to waive a portion of its fee.                               

SHAREHOLDER SERVICES FEE--Marshall Funds Investors Services ("MFIS") is the     
Funds' shareholder servicing agent. Under the terms of a shareholder service    
agreement with MFIS, the Funds will pay MFIS a fee to obtain certain personal   
services for shareholders and the maintenance of shareholder accounts. The fee  
is based on the level of each Fund's average net assets for the period.         

TRANSFER AND DIVIDEND DISBURSING AGENT, ACCOUNTING AND CUSTODY FEES--Federated  
Services Company ("FServ") serves as transfer and dividend disbursing agent for 
the Funds. The FServ fee is based on the size, type, and number of accounts and 
transactions made by shareholders.                                              

MARSHALL FUNDS, INC.                                                            

TAX-FREE FUNDS                                                                  
--------------------------------------------------------------------------------

FServ also maintains the Funds' accounting records. The fee is based on the     
level of each Fund's average net assets for the period, plus out-of-pocket      
expenses.                                                                       

Marshall and Ilsley Trust Company is the Funds' custodian. The fee is based on  
the level of each Fund's average net assets for the period.                     

ORGANIZATIONAL EXPENSES--Organizational expenses were borne initially by FAS.   
The Funds have agreed to reimburse FAS for the organizational expenses during   
the five year period following December 28, 1993 (date the Funds first became   
effective). For the period ended August 31, 1994, the following amounts were    
paid to FAS pursuant to this agreement.                                         

                                                        [Enlarge/Download Table]

                                                           ORGANIZATIONAL   ORGANIZATIONAL 
                                                              EXPENSES      EXPENSES PAID  
---------------------------------------------------------  --------------  ----------------
                                                                                           
Marshall Short-Term Tax-Free Fund                             $ 17,646           $838      
---------------------------------------------------------  -----------     -----------     
Marshall Intermediate Tax-Free Fund                             17,384            829      
---------------------------------------------------------  -----------     -----------     

INTERFUND TRANSACTIONS--During the period ended August 31, 1994, the Marshall   
Intermediate Tax-Free Fund engaged in purchase and sale transactions with other 
affiliated funds at current value pursuant to Rule 17a-7 under the Investment   
Company Act of 1940 amounting to $12,377,757 and $0, respectively.              

Certain of the Officers and Directors of the Corporation are Officers and       
Directors or Trustees of the above companies.                                   

(5) INVESTMENT TRANSACTIONS                                                     

Purchases and sales of investments, excluding short-term securities, for the    
period ended August 31, 1994, were as follows:                                  

                                                        [Enlarge/Download Table]

                                                                    PURCHASES      SALES   
-----------------------------------------------------------------  -----------  -----------
                                                                                           
Marshall Short-Term Tax-Free Fund                                  $26,983,361   $5,459,828
-----------------------------------------------------------------  -----------  -----------
Marshall Intermediate Tax-Free Fund                                 46,630,500   11,474,264
-----------------------------------------------------------------  -----------  -----------

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                                        
--------------------------------------------------------------------------------

To the Shareholders and Board of Directors                                      
MARSHALL SHORT-TERM TAX-FREE FUND                                               
MARSHALL INTERMEDIATE TAX-FREE FUND                                             

We have audited the accompanying statements of assets and liabilities, including
the schedules of portfolio investments, of the Marshall Short-Term Tax-Free Fund
and the Marshall Intermediate Tax-Free Fund (two of the portfolios constituting 
the Marshall Funds, Inc., a Wisconsin corporation) as of August 31, 1994, and   
the related statements of operations, changes in net assets and financial       
highlights for the periods presented. These financial statements and financial  
highlights are the responsibility of the Company's management. Our              
responsibility is to express an opinion on these financial statements and       
financial highlights based on our audits.                                       

We conducted our audits in accordance with generally accepted auditing          
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements and financial       
highlights are free of material misstatement. An audit includes examining, on a 
test basis, evidence supporting the amounts and disclosures in the financial    
statements. Our procedures included confirmation of securities owned as of      
August 31, 1994, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement            
presentation. We believe that our audits provide a reasonable basis for our     
opinion.                                                                        

In our opinion, the financial statements and financial highlights referred to   
above present fairly, in all material respects, the financial position of each  
of the respective portfolios constituting the Marshall Funds, Inc., as          
identified above, as of August 31, 1994, the results of their operations, the   
changes in their net assets and the financial highlights for the periods        
presented, in conformity with generally accepted accounting principles.         

                                                             ARTHUR ANDERSEN LLP

Pittsburgh, Pennsylvania                                                        
October 11, 1994                                                                

                                                                [Download Table]
                                                
DIRECTORS                               OFFICERS

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

                                                                [Download Table]
                                                                    
Ody J. Fish                             Edward C. Gonzales          
John DeVincentis                        Chairman and Treasurer      
Edward C. Gonzales                      James F. Duca, II           
Paul E. Hassett                         President                   
                                        Joseph S. Machi             
                                        Vice President and Assistant
                                        Treasurer                   
                                        Peter J. Germain            
                                        Secretary                   
                                        Victor R. Siclari           
                                        Assistant Secretary         

Mutual funds are not bank deposits or obligations, are not guaranteed by any    
bank, and are not insured or guaranteed by the FDIC, the Federal Reserve Board, 
or any other government agency. Investment in mutual funds involves risk,       
including possible loss of principal.                                           

This report is authorized for distribution to prospective investors only when   
preceded or accompanied by the Funds' prospectus which contains facts concerning
their objective and policies, management fees, expenses, and other information. 

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘N-30D’ Filing		Date		Other Filings
Corrected on:		4/15/04
Changed as of:		11/7/94
Filed on:		10/28/94		NSAR-A
		10/14/94
		10/11/94
For Period End:		8/31/94		24F-2NT
		2/4/94
		2/2/94
		2/1/94
		12/28/93
		10/31/93
		10/1/93
		9/30/93
		8/31/93		NSAR-B/A
		8/28/93
		12/17/92
		12/14/92
		12/13/92
		11/23/92
		11/20/92
		11/2/92
		11/1/92
		10/2/92
		10/1/92
		9/23/92
		7/31/92
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