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Filed with the Securities and Exchange Commission on May 31, 2007

1933 Act Registration File No. 033-48907

1940 Act File No. 811-58433

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

MARSHALL FUNDS, INC.

(Exact Name of Registrant as Specified in Charter)

111 East Kilbourn Avenue, Suite 200

Milwaukee, Wisconsin 53202

(Address of Principal Executive Offices, including Zip Code)

Registrant’s Telephone Number, including Area Code: (800) 236-3863

John M. Blaser

111 East Kilbourn Avenue, Suite 200

Milwaukee, Wisconsin 53202

(Name and Address of Agent for Service)

Copies of all communications to:

Cameron Avery, Esq.

Bell, Boyd & Lloyd

Three First National Plaza

70 West Madison Street, Suite 3300

Chicago, Illinois 60602-4207

It is proposed that this filing will become effective (check appropriate box)

If appropriate check the following box:

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The Marshall Funds Family

Prospectus

Advisor Class

(Class A)

JUNE 1, 2007

Investor Class

(Class Y)

Shares of the Marshall Funds are not bank deposits or other obligations of, or issued, endorsed or guaranteed by, M&I Marshall & Ilsley Bank or any of its affiliates. Shares of the Marshall Funds, like shares of all mutual funds, are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation (FDIC) or any other government agency, and may lose value.

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

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Risk/Return Summary

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

A complete description of these risks can be found in the “Main Risks of Investing in the Marshall Funds” section.

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Equity Funds

Marshall Large-Cap Value Fund

Fund Performance: The following return information shows historical performance of the Fund’s Advisor Class shares and provides some indication of the risks of investing in the Fund. The bar chart shows how the Fund’s total returns before taxes have varied from year to year, while the table compares the Fund’s average annual total returns to the returns of an index of funds with similar investment objectives and a broad measure of market performance. Indices are unmanaged and are not available for direct investment. Please keep in mind that past performance, before and after taxes, does not represent how the Fund will perform in the future. The information assumes that you reinvested all dividends and distributions.

Annual Total Returns (calendar years 1999-2006)*

* The bar chart does not reflect the payment of any sales charges. If these charges had been included, the returns shown would have been lower.

The Fund’s return from January 1, 2007 through March 31, 2007 was 0.36%.

Total Returns

Average Annual Total Returns (reduced to reflect sales charges) through 12/31/06

(1) After-tax returns are calculated using a standard set of assumptions. The stated returns assume the highest historical federal income and capital gains tax rates. Return After Taxes on Distributions assumes a continued investment in the Fund and shows the effect of taxes on Fund distributions. Return After Taxes on Distributions and Sale of Fund Shares assumes all shares were redeemed at the end of each measurement period and shows the effect of any taxable gain (or offsetting loss) on redemption, as well as the effects of taxes on Fund distributions. These after-tax returns do not reflect the effect of any applicable state and local taxes. Return After Taxes on Distributions and Sale of Fund Shares may be higher than Return Before Taxes when a net capital loss occurs upon the redemption of Fund shares. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors holding shares through tax-deferred programs, such as IRAs or 401(k) plans.

(2) The Lipper Large Cap Value Funds Index (LLCVFI) is an average of the 30 largest mutual funds in this Lipper category. The LLCVFI reflects the deduction of expenses associated with mutual funds, such as investment management fees, but is not adjusted to reflect sales charges or taxes.

(3) The Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. The index does not reflect the deduction of fees, expenses or taxes that mutual fund investors bear.

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Equity Funds (cont.)

Marshall Large-Cap Growth Fund

Strategy: The Fund invests at least 80% of its assets in common stocks of large-sized U.S. companies similar in size to those within the Russell 1000 Growth Index. The

Adviser looks for high quality companies with sustainable earnings growth that are available at reasonable prices.

Fund Performance: The following return information shows historical performance of the Fund’s Advisor Class shares and provides some indication of the risks of investing in the Fund. The bar chart shows how the Fund’s total returns before taxes have varied from year to year, while the table compares the Fund’s average annual total returns to the returns of an index of funds with similar investment objectives and a broad measure of market performance. Indices are unmanaged and are not available for direct investment. Please keep in mind that past performance, before and after taxes, does not represent how the Fund will perform in the future. The information assumes that you reinvested all dividends and distributions.

Annual Total Returns (calendar years 1999-2006)*

* The bar chart does not reflect the payment of any sales charges. If these charges had been included, the returns shown would have been lower.

The Fund’s return from January 1, 2007 through March 31, 2007 was 0.63%.

Total Returns

Average Annual Total Returns (reduced to reflect sales charges) through 12/31/06

(1) After-tax returns are calculated using a standard set of assumptions. The stated returns assume the highest historical federal income and capital gains tax rates. Return After Taxes on Distributions assumes a continued investment in the Fund and shows the effect of taxes on Fund distributions. Return After Taxes on Distributions and Sale of Fund Shares assumes all shares were redeemed at the end of each measurement period and shows the effect of any taxable gain (or offsetting loss) on redemption, as well as the effects of taxes on Fund distributions. These after-tax returns do not reflect the effect of any applicable state and local taxes. Return After Taxes on Distributions and Sale of Fund Shares may be higher than Return Before Taxes when a net capital loss occurs upon the redemption of Fund shares. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors holding shares through tax-deferred programs, such as IRAs or 401(k) plans.

(2) The Lipper Large-Cap Growth Funds Index (LLCGFI) is an average of the 30 largest mutual funds in this Lipper category. The LLCGFI reflects the deduction of expenses associated with mutual funds, such as investment management fees, but is not adjusted to reflect sales charges or taxes.

(3) The Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The index does not reflect the deduction of fees, expenses or taxes that mutual fund investors bear.

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Equity Funds (cont.)

Marshall Mid-Cap Value Fund

Strategy : The Fund invests at least 80% of its assets in value-oriented common stocks of medium-sized U.S. companies similar in size to those within the Russell Midcap

Value Index. The Adviser selects companies that exhibit traditional value characteristics, such as a price-to-earnings ratio less than the Standard & Poor’s 400 ^® Index, higher-than-average dividend yields or a lower-than-average price-to-book value. In addition, these companies may have under-appreciated assets, or be involved in company turnarounds or corporate restructurings.

Fund Performance : The following return information shows historical performance of the Fund’s Advisor Class shares and provides some indication of the risks of investing in the Fund. The bar chart shows how the Fund’s total returns before taxes have varied from year to year, while the table compares the Fund’s average annual total returns to the returns of an index of funds with similar investment objectives and a broad measure of market performance. Indices are unmanaged and are not available for direct investment. Please keep in mind that past performance, before and after taxes, does not represent how the Fund will perform in the future. The information assumes that you reinvested all dividends and distributions.

Annual Total Returns (calendar years 1999-2006)*

* The bar chart does not reflect the payment of any sales charges. If these charges had been included, the returns shown would have been lower.

The Fund’s return from January 1, 2007 through March 31, 2007 was 3.62%.

Total Returns

Average Annual Total Returns (reduced to reflect sales charges) through 12/31/06

(1) After-tax returns are calculated using a standard set of assumptions. The stated returns assume the highest historical federal income and capital gains tax rates. Return After Taxes on Distributions assumes a continued investment in the Fund and shows the effect of taxes on Fund distributions. Return After Taxes on Distributions and Sale of Fund Shares assumes all shares were redeemed at the end of each measurement period and shows the effect of any taxable gain (or offsetting loss) on redemption, as well as the effects of taxes on Fund distributions. These after-tax returns do not reflect the effect of any applicable state and local taxes. Return After Taxes on Distributions and Sale of Fund Shares may be higher than Return Before Taxes when a net capital loss occurs upon the redemption of Fund shares. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors holding shares through tax-deferred programs, such as IRAs or 401(k) plans.

(2) The Lipper Mid-Cap Value Funds Index (LMCVFI) is an average of the 30 largest mutual funds in this Lipper category. The LMCVFI reflects the deduction of expenses associated with mutual funds, such as investment management fees, but is not adjusted to reflect sales charges or taxes.

(3) The Russell Midcap Value Index (RMCVI) measures the performance of those Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values. Those companies are also included in the Russell 1000 Value Index. The RMCVI does not reflect the deduction of fees, expenses or taxes that mutual fund investors bear.

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Equity Funds (cont.)

Marshall Mid-Cap Growth Fund

Midcap Growth Index. The Adviser selects stocks of companies with growth characteristics, including companies with above-average earnings growth potential and companies where significant changes are taking place, such as new products, services, or methods of distribution, or overall business restructuring.

Fund Performance: The following return information shows historical performance of the Fund’s Advisor Class shares and provides some indication of the risks of investing in the Fund. The bar chart shows how the Fund’s total returns before taxes have varied from year to year, while the table compares the Fund’s average annual total returns to the returns of an index of funds with similar investment objectives and a broad measure of market performance. Indices are unmanaged and are not available for direct investment. Please keep in mind that past performance, before and after taxes, does not represent how the Fund will perform in the future. The information assumes that you reinvested all dividends and distributions.

Annual Total Returns (calendar years 1999-2006)*

* The bar chart does not reflect the payment of any sales charges. If these charges had been included, the returns shown would have been lower.

The Fund’s return from January 1, 2007 through March 31, 2007 was 5.08%.

Total Returns

Average Annual Total Returns (reduced to reflect sales charges) through 12/31/06

(1) After-tax returns are calculated using a standard set of assumptions. The stated returns assume the highest historical federal income and capital gains tax rates. Return After Taxes on Distributions assumes a continued investment in the Fund and shows the effect of taxes on Fund distributions. Return After Taxes on Distributions and Sale of Fund Shares assumes all shares were redeemed at the end of each measurement period and shows the effect of any taxable gain (or offsetting loss) on redemption, as well as the effects of taxes on Fund distributions. These after-tax returns do not reflect the effect of any applicable state and local taxes. Return After Taxes on Distributions and Sale of Fund Shares may be higher than Return Before Taxes when a net capital loss occurs upon the redemption of Fund shares. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors holding shares through tax-deferred programs, such as IRAs or 401(k) plans.

(2) The Lipper Mid-Cap Growth Funds Index (LMCGFI) is an average of the 30 largest mutual funds in this Lipper category. The LMCGFI reflects the deduction of expenses associated with mutual funds, such as investment management fees, but is not adjusted to reflect sales charges or taxes.

(3) The Russell Midcap Growth Index (RMCGI) measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values. Those companies are also included in the Russell 1000 Growth Index. The RMCGI does not reflect the deduction of fees, expenses or taxes that mutual fund investors bear.

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Equity Funds (cont.)

Marshall Small-Cap Growth Fund

Strategy: The Fund invests at least 80% of its assets in common stocks of small-sized U.S. companies similar in size to those within the Russell 2000 Growth Index. The

Adviser selects stocks of companies with growth characteristics, including companies with above-average earnings growth potential and companies where significant changes are taking place, such as new products, services or methods of distribution, or overall business restructuring.

Fund Performance: The following return information shows historical performance of the Fund’s Advisor Class shares and provides some indication of the risks of investing in the Fund. The bar chart shows how the Fund’s total returns before taxes have varied from year to year, while the table compares the Fund’s average annual total returns to the returns of an index of funds with similar investment objectives and a broad measure of market performance. Indices are unmanaged and are not available for direct investment. Please keep in mind that past performance, before and after taxes, does not represent how the Fund will perform in the future. The information assumes that you reinvested all dividends and distributions.

Annual Total Returns (calendar years 1999-2006)*

* The bar chart does not reflect the payment of any sales charges. If these charges had been included, the returns shown would have been lower.

The Fund’s return from January 1, 2007 through March 31, 2007 was 6.08%.

Total Returns

Average Annual Total Returns (reduced to reflect sales charges) through 12/31/06

(1) After-tax returns are calculated using a standard set of assumptions. The stated returns assume the highest historical federal income and capital gains tax rates. Return After Taxes on Distributions assumes a continued investment in the Fund and shows the effect of taxes on Fund distributions. Return After Taxes on Distributions and Sale of Fund Shares assumes all shares were redeemed at the end of each measurement period and shows the effect of any taxable gain (or offsetting loss) on redemption, as well as the effects of taxes on Fund distributions. These after-tax returns do not reflect the effect of any applicable state and local taxes. Return After Taxes on Distributions and Sale of Fund Shares may be higher than Return Before Taxes when a net capital loss occurs upon the redemption of Fund shares. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors holding shares through tax-deferred programs, such as IRAs or 401(k) plans.

(2) The Lipper Small-Cap Growth Funds Index (LSCGI) is an average of the 30 largest mutual funds in this Lipper category. The LSCGI reflects the deduction of expenses associated with mutual funds, such as investment management fees, but is not adjusted to reflect sales charges or taxes.

(3) The Russell 2000 Growth Index (Russell 2000 GI) measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 GI does not reflect the deduction of fees, expenses or taxes that mutual fund investors bear.

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Equity Funds (cont.)

Marshall International Stock Fund

Strategy: The Fund invests at least 80% of its assets in common stocks of any sized companies located outside the United States. The Fund’s sub-advisers (the

Sub-Advisers), Trilogy Global Advisors, LLC, formerly BPI Global Asset Management LLC (Trilogy), and Acadian Asset Management, Inc. (Acadian), each manage approximately 50% of the Fund’s portfolio.

Trilogy uses a “bottom-up,” fundamental approach in selecting stocks for the Fund’s portfolio. Trilogy seeks to identify quality companies with attractive returns on equity, earnings growth and a strong capital structure.

Acadian uses a quantitative strategy with a focus on valuations to target attractively valued companies that also have positive earnings and price characteristics. Acadian selects stocks for the Fund’s portfolio using models that incorporate multiple factors designed to construct an optimal portfolio while keeping benchmark-relative risk to the desired level.

Effective September 1, 2005, Acadian was added as an additional sub-adviser to the Fund to manage approximately 50% of the Fund’s portfolio. Trilogy was the sole sub-adviser to the Fund from March 29, 1999 to September 1, 2005. Prior thereto, the Fund was managed by another firm.

Fund Performance: The following return information shows historical performance of the Fund’s Advisor Class shares and provides some indication of the risks of investing in the Fund. The bar chart shows how the Fund’s total returns before taxes have varied from year to year, while the table compares the Fund’s average annual total returns to the returns of an index of funds with similar investment objectives and a broad measure of market performance. Indices are unmanaged and are not available for direct investment. Please keep in mind that past performance, before and after taxes, does not represent how the Fund will perform in the future. The information assumes that you reinvested all dividends and distributions.

Annual Total Returns (calendar years 1999-2006)*

* The bar chart does not reflect the payment of any sales charges. If these charges had been included, the returns shown would have been lower.

The Fund’s return from January 1, 2007 through March 31, 2007 was 3.91%.

Total Returns

Average Annual Total Returns (reduced to reflect sales charges) through 12/31/06

(1) After-tax returns are calculated using a standard set of assumptions. The stated returns assume the highest historical federal income and capital gains tax rates. Return After Taxes on Distributions assumes a continued investment in the Fund and shows the effect of taxes on Fund distributions. Return After Taxes on Distributions and Sale of Fund Shares assumes all shares were redeemed at the end of each measurement period and shows the effect of any taxable gain (or offsetting loss) on redemption, as well as the effects of taxes on Fund distributions. These after-tax returns do not reflect the effect of any applicable state and local taxes. Return After Taxes on Distributions and Sale of Fund Shares may be higher than Return Before Taxes when a net capital loss occurs upon the redemption of Fund shares. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors holding shares through tax-deferred programs, such as IRAs or 401(k) plans.

(2) The Lipper International Multi-Cap Growth Funds Index (LIMCGI) is an average of the 30 largest mutual funds in this Lipper category. The LIMCGI reflects the deduction of expenses associated with mutual funds, such as investment management fees, but is not adjusted to reflect sales charges or taxes.

(3) The Morgan Stanley Capital International Europe, Australasia, Far East Index (EAFE) is a market capitalization-weighted equity index of international stocks comprising 21 of the 50 countries in the Morgan Stanley Capital International universe and representing the developed world outside of North America. The EAFE does not reflect the deduction of fees, expenses or taxes that mutual fund investors bear.

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Income Funds

Marshall Aggregate Bond Fund

Strategy: The Fund invests at least 80% of its assets in bonds. Fund investments include corporate, asset-backed, mortgage-backed and U.S. government securities. The Adviser’s strategy for achieving total return is to adjust the Fund’s weightings in these sectors as it deems appropriate. The Adviser uses macroeconomic, credit and market analysis to select portfolio securities. The Fund maintains an average dollar-weighted maturity of three to ten years. At the time of purchase, each fixed income security will have an investment grade rating, defined as one of the four highest ratings from a nationally recognized statistical rating organization (NRSRO).

Fund Performance: Performance information for the Aggregate Bond Fund is not included because the Fund was not offered for sale until the date of this Prospectus.

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Income Funds (cont.)

Marshall Government Income Fund

Strategy: The Fund invests at least 80% of its assets in U.S. government securities. The Adviser considers macroeconomic conditions and uses credit and market analysis in developing the overall portfolio

strategy. Current and historical interest rate relationships are used to evaluate market sectors and individual securities. The Fund generally maintains an average dollar-weighted maturity of four to twelve years.

The Fund invests in the securities of U.S. government-sponsored entities, including the Federal Home Loan Mortgage Corporation (Freddie Mac), the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Banks (FHLBs). Not all U.S. government-sponsored entities are backed by the full faith and credit of the U.S. government. Examples of entities that are not backed by the full faith and credit of the U.S. government include Freddie Mac, Fannie Mae and FHLBs. These entities, however, are supported through federal subsidies, loans or other benefits. The Fund also may invest in U.S. government-sponsored entities that are supported by the full faith and credit of the U.S. government, such as the Government National Mortgage Association (Ginnie Mae). Finally, the Fund may invest in governmental entities that have no explicit financial support from the U.S. government, but are regarded as having implied support because the U.S. government sponsors their activities. Such entities include the Farm Credit Administration and the Financing Corporation.

Fund Performance: The following return information shows historical performance of the Fund’s Advisor Class shares and provides some indication of the risks of investing in the Fund. The bar chart shows how the Fund’s total returns before taxes have varied from year to year, while the table compares the Fund’s average annual total returns to the returns of an index of funds with similar investment objectives and a broad measure of market performance. Indices are unmanaged and are not available for direct investment. Please keep in mind that past performance, before and after taxes, does not represent how the Fund will perform in the future. The information assumes that you reinvested all dividends and distributions.

Annual Total Returns (calendar years 1999-2006)*

* The bar chart does not reflect the payment of any sales charges. If these charges had been included, the returns shown would have been lower.

The Fund’s return from January 1, 2007 through March 31, 2007 was 1.24%.

Total Returns

Average Annual Total Returns (reduced to reflect sales charges) through 12/31/06

(1) After-tax returns are calculated using a standard set of assumptions. The stated returns assume the highest historical federal income and capital gains tax rates. Return After Taxes on Distributions assumes a continued investment in the Fund and shows the effect of taxes on Fund distributions. Return After Taxes on Distributions and Sale of Fund Shares assumes all shares were redeemed at the end of each measurement period and shows the effect of any taxable gain (or offsetting loss) on redemption, as well as the effects of taxes on Fund distributions. These after-tax returns do not reflect the effect of any applicable state and local taxes. Return After Taxes on Distributions and Sale of Fund Shares may be higher than Return Before Taxes when a net capital loss occurs upon the redemption of Fund shares. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors holding shares through tax-deferred programs, such as IRAs or 401(k) plans.

(2) The Lipper U.S. Mortgage Funds Index (LUSMI) is an average of the 10 largest mutual funds in this Lipper category. The LUSMI reflects the deduction of expenses associated with mutual funds, such as investment management fees, but is not adjusted to reflect sales charges or taxes.

(3) The Lehman Brothers Mortgage-Backed Securities Index (LMI) is an index comprised of fixed rate securities backed by mortgage pools of Ginnie Mae, Freddie Mac and Fannie Mae. The LMI does not reflect the deduction of fees, expenses or taxes that mutual fund investors bear.

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Income Funds (cont.)

Marshall Short-Intermediate Bond Fund (formerly known as the Marshall Intermediate Bond Fund)*

Strategy: The Fund invests at least 80% of its assets in bonds. Fund investments include corporate, asset-backed, mortgage

-backed and U.S. government securities. The Adviser’s strategy for achieving total return is to adjust the Fund’s weightings in these sectors as it deems appropriate. The Adviser uses macroeconomic, credit and market analysis to select portfolio securities. The Fund maintains an average dollar-weighted maturity of three to ten years.

Fund Performance: The following return information shows historical performance of the Fund’s Advisor Class shares and provides some indication of the risks of investing in the Fund. The bar chart shows how the Fund’s total returns before taxes have varied from year to year, while the table compares the Fund’s average annual total returns to the returns of an index of funds with similar investment objectives and a broad measure of market performance. Indices are unmanaged and are not available for direct investment. Please keep in mind that past performance, before and after taxes, does not represent how the Fund will perform in the future. The information assumes that you reinvested all dividends and distributions.

Annual Total Returns (calendar years 1999-2006)*

* The bar chart does not reflect the payment of any sales charges. If these charges had been included, the returns shown would have been lower.

The Fund’s return from January 1, 2007 through March 31, 2007 was 1.31%.

Total Returns

Average Annual Total Returns (reduced to reflect sales charges) through 12/31/06

(1) After-tax returns are calculated using a standard set of assumptions. The stated returns assume the highest historical federal income and capital gains tax rates. Return After Taxes on Distributions assumes a continued investment in the Fund and shows the effect of taxes on Fund distributions. Return After Taxes on Distributions and Sale of Fund Shares assumes all shares were redeemed at the end of each measurement period and shows the effect of any taxable gain (or offsetting loss) on redemption, as well as the effects of taxes on Fund distributions. These after-tax returns do not reflect the effect of any applicable state and local taxes. Return After Taxes on Distributions and Sale of Fund Shares may be higher than Return Before Taxes when a net capital loss occurs upon the redemption of Fund shares. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors holding shares through tax-deferred programs, such as IRAs or 401(k) plans.

(2) The Lipper Short-Intermediate Investment Grade Debt Funds Index (LSIDF) is an average of the 30 largest mutual funds in this Lipper category. The LSIDF reflects the deduction of expenses associated with mutual funds, such as investment management fees, but is not adjusted to reflect sales charges or taxes.

(3) The Lehman Brothers Governmental/Credit Short-Intermediate Index (LGCI) is an index comprised of government and corporate bonds rated BBB or higher with maturities between one and ten years. The LGCI does not reflect the deduction of fees, expenses or taxes that mutual fund investors bear.

* Effective June 1, 2007, the Marshall Intermediate Bond Fund changed its name to the Marshall Short-Intermediate Bond Fund.

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Income Funds (cont.)

Marshall Short-Term Income Fund

Strategy: The Fund invests at least 80% of its assets in short- to intermediate-term investment grade fixed income securities.

Fund investments include corporate, asset-backed, mortgage-backed and U.S. government securities. The Adviser changes the Fund’s weightings in these sectors as it deems appropriate and uses macroeconomic, credit and market analysis to select portfolio securities. The Fund maintains an average dollar-weighted maturity of six months to three years.

Fund Performance: The following return information shows historical performance of the Fund’s Advisor Class shares and provides some indication of the risks of investing in the Fund. The bar chart shows how the Fund’s total returns before taxes have varied from year to year, while the table compares the Fund’s average annual total returns to the returns of an index of funds with similar investment objectives and a broad measure of market performance. Indices are unmanaged and are not available for direct investment. Please keep in mind that past performance, before and after taxes, does not represent how the Fund will perform in the future. The information assumes that you reinvested all dividends and distributions.

Annual Total Returns (calendar years 2001-2006)*

* The bar chart does not reflect the payment of any sales charges. If these charges had been included, the returns shown would have been lower.

The Fund’s return from January 1, 2007 through March 31, 2007 was 1.50%.

Total Returns

Average Annual Total Returns (reduced to reflect sales charges) through 12/31/06

(1) After-tax returns are calculated using a standard set of assumptions. The stated returns assume the highest historical federal income and capital gains tax rates. Return After Taxes on Distributions assumes a continued investment in the Fund and shows the effect of taxes on Fund distributions. Return After Taxes on Distributions and Sale of Fund Shares assumes all shares were redeemed at the end of each measurement period and shows the effect of any taxable gain (or offsetting loss) on redemption, as well as the effects of taxes on Fund distributions. These after-tax returns do not reflect the effect of any applicable state and local taxes. Return After Taxes on Distributions and Sale of Fund Shares may be higher than Return Before Taxes when a net capital loss occurs upon the redemption of Fund shares. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors holding shares through tax-deferred programs, such as IRAs or 401(k) plans.

(2) The Lipper Short-Term Investment Grade Debt Funds Index (LSTIDI) is an average of the 30 largest mutual funds in this Lipper category. The LSTIDI reflects the deduction of expenses associated with mutual funds, such as investment management fees, but is not adjusted to reflect sales charges or taxes.

(3) The Merrill Lynch 1-3 Year U.S. Government/Corporate Index (ML13) is an index tracking short-term U.S. government and corporate securities with maturities between 1 and 2.99 years. The index is produced by Merrill Lynch Pierce Fenner & Smith. The ML13 does not reflect the deduction of fees, expenses or taxes that mutual fund investors bear.

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Money Market Funds

Marshall Prime Money Market Fund

Strategy: Fund assets are invested in high quality, short-term money market instruments. In order to produce income

that minimizes volatility, the Adviser uses a “bottom-up” approach, which evaluates debt securities of individual companies against the context of broader market factors such as the cyclical trend in interest rates, the shape of the yield curve and debt security supply factors.

An investment in the Fund is not a deposit of M&I Marshall & Ilsley Bank or any of its affiliates and is not insured or guaranteed by the FDIC or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. In addition, the Fund is subject to credit risks, interest rate risks and liquidity risks.

Fund Performance: The following return information shows historical performance of the Fund’s Advisor Class shares and provides some indication of the risks of investing in the Fund. The bar chart shows how the Fund’s total returns have varied from year to year, while the table compares the Fund’s average annual total returns to the returns of an index of funds with similar investment objectives and an average of money funds with similar objectives. Indices and averages are unmanaged and are not available for direct investment. Please keep in mind that past performance does not represent how the Fund will perform in the future. The information assumes that you reinvested all dividends and distributions.

Annual Total Returns (calendar years 1997-2006)*

* Shares of the Fund are not sold subject to a sales charge (load). The total returns displayed are based upon net asset value.

The Fund’s return from January 1, 2007 through March 31, 2007 was 1.15%.

Average Annual Total Returns through 12/31/06

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

(2) The Lipper Money Market Funds Index (LMMFI) is an average of the 30 largest mutual funds in this Lipper category. The LMMFI reflects the deduction of expenses associated with mutual funds, such as investment management fees, but is not adjusted to reflect sales charges or taxes.

(3) The iMoneyNet, Inc. Money Fund Report Averages™ (MFRA) is an average of money funds with investment objectives similar to that of the Fund.

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Money Market Funds (cont.)

Marshall Government Money Market Fund

Strategy: Fund assets are invested in high quality, short-term money market instruments. The Fund invests at least 80% of its assets in obligations issued and/or

guaranteed by the U.S. government or by its agencies or instrumentalities, and in repurchase agreements secured by such obligations. In order to produce income that minimizes volatility, the Adviser uses a “bottom-up” approach, which evaluates debt securities against the context of broader market factors such as the cyclical trend in interest rates, the shape of the yield curve and debt security supply factors.

The Fund invests in the securities of U.S. government-sponsored entities, including Freddie Mac, Fannie Mae and FHLBs. Not all U.S. government-sponsored entities are backed by the full faith and credit of the U.S. government. Examples of entities that are not backed by the full faith and credit of the U.S. government include Freddie Mac, Fannie Mae and FHLBs. These entities, however, are supported through federal subsidies, loans or other benefits. The Fund also may invest in U.S. government-sponsored entities that are supported by the full faith and credit of the U.S. government, such as Ginnie Mae. Finally, the Fund may invest in governmental entities that have no explicit financial support from the U.S. government, but are regarded as having implied support because the U.S. government sponsors their activities. Such entities include the Farm Credit Administration and the Financing Corporation.

An investment in the Fund is not a deposit of M&I Marshall & Ilsley Bank or any of its affiliates and is not insured or guaranteed by the FDIC or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. In addition, the Fund is subject to credit risks, interest rate risks, call risks and liquidity risks.

Fund Performance: The following return information shows historical performance of the Fund’s Investor Class shares and provides some indication of the risks of investing in the Fund. The bar chart shows the Fund’s total returns for its first two full calendar years of operations, while the table compares the Fund’s average annual total returns to the returns of an index of funds with similar investment objectives and an average of money funds with similar objectives. Indices and averages are unmanaged and are not available for direct investment. Please keep in mind that past performance does not represent how the Fund will perform in the future. The information assumes that you reinvested all dividends and distributions.

Annual Total Returns (calendar years 2005-2006)

The Fund’s return from January 1, 2007 through March 31, 2007 was 1.21%.

Total Returns

Average Annual Total Returns through 12/31/06

(1) Investors may call the Fund to learn the current 7-Day Net Yield at 1-800-236-FUND (3863).

(2) The Lipper U.S. Government Money Market Funds Index (LUSGMMFI) is an average of the 30 largest mutual funds in this Lipper category. The LUSGMMFI reflects the deduction of expenses associated with mutual funds, such as investment management fees, but is not adjusted to reflect sales charges or taxes.

(3) The iMoneyNet, Inc. Government Money Market Index (INGMMI) is an average of money funds with investment objectives similar to that of the Fund.

Table of Contents

Money Market Fund (cont.)

Marshall Tax-Free Money Market Fund

Strategy: The Fund invests primarily in fixed and floating rate municipal bonds and notes, variable rate demand

instruments and other high-quality, short-term tax-exempt obligations maturing in 397 days or less. Under normal circumstances, the Fund invests its assets so that at least 80% of the annual interest income that the Fund distributes will be exempt from federal income tax, including federal alternative minimum tax (AMT).

To maintain principal preservation, the Adviser places a strict emphasis on credit research. Using fundamental analysis, the Adviser develops an approved list of issuers and securities that meet the Adviser’s standards for minimal credit risk. The Adviser continually monitors the credit risks of all portfolio securities on an ongoing basis by reviewing financial data and ratings of NRSROs. 

The Fund seeks to enhance yield by taking advantage of favorable changes in interest rates and reducing the effect of unfavorable changes in interest rates. In seeking to achieve this objective, the Adviser targets a dollar-weighted average portfolio maturity of 90 days or less based on its interest rate outlook. The interest rate outlook is developed by analyzing a variety of factors, such as current and expected U.S. economic growth; current and expected interest rates and inflation; and the Federal Reserve Board’s monetary policy. By developing an interest rate outlook and adjusting the portfolio’s maturity accordingly, the Adviser seeks to position the Fund to take advantage of yield enhancing opportunities.

An investment in the Fund is not a deposit of M&I Marshall & Ilsley Bank or any of its affiliates and is not insured or guaranteed by the FDIC or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. In addition, the Fund is subject to credit risks, interest rate risks, call risks and liquidity risks. In addition to credit and interest rate risk, certain types of municipal bonds are subject to other risks based on many factors, including economic and regulatory developments, changes or proposed changes in the federal and state tax structure, deregulation, court rulings and other factors.

Fund Performance: The following return information shows historical performance of the Fund’s Investor Class shares and provides some indication of the risks of investing in the Fund. The bar chart shows the Fund’s total returns for its first two full calendar years of operations, while the table compares the Fund’s average annual total returns to the returns of an index of funds with similar investment objectives and an average of money funds with similar objectives. Indices and averages are unmanaged and are not available for direct investment. Please keep in mind that past performance does not represent how the Fund will perform in the future. The information assumes that you reinvested all dividends and distributions.

Annual Total Returns (calendar years 2005-2006)

The Fund’s return from January 1, 2007 through March 31, 2007 was 0.80%.

Total Returns

Average Annual Total Returns through 12/31/06

(1) Investors may call the Fund to learn the current 7-Day Net Yield at 1-800-236-FUND (3863).

(2) The Lipper Tax Exempt Money Market Funds Index (LTEMMFI) is an average of the 30 largest mutual funds in this Lipper category. The LTEMMFI reflects the deduction of expenses associated with mutual funds, such as investment management fees, but is not adjusted to reflect sales charges or taxes.

(3) The iMoney Net Money Fund Report Tax-Free National Retail (IMNTFNR) is an average of money funds with investment objectives similar to that of the Fund.

* A contingent deferred sales charge (“CDSC”) of 1% will be imposed on redemptions of certain Advisor Class shares which were purchased without a sales charge and redeemed within 12 months of purchase. See “Will I Be Charged a Fee for Redemptions?”

(1) A redemption fee of 2% of the then current value of the shares redeemed may be imposed on certain redemptions of shares made within 30 days of purchase. The fee is retained by the Fund and generally withheld from the redemption proceeds. See “What Do Shares Cost?” and “Will I Be Charged a Fee for Redemptions?”

(2) On June 1, 2007, the Adviser reduced its management fee from 0.75% to 0.40% for the GOVERNMENT INCOME FUND, from 0.60% to 0.40% for the SHORT-INTERMEDIATE BOND FUND, and from 0.60% to 0.20% for the SHORT-TERM INCOME FUND. The table has been restated to reflect the current lower management fee for these Funds. The Adviser voluntarily waived a portion of the management fee for certain Funds in fiscal 2006. As a result, the management fees paid by the INTERNATIONAL STOCK FUND, GOVERNMENT INCOME FUND, SHORT-INTERMEDIATE BOND FUND, SHORT-TERM INCOME FUND and PRIME MONEY MARKET FUND (after the voluntary waivers) were 0.98%, 0.65%, 0.54%, 0.26% and 0.11%, respectively, for the fiscal year ended August 31, 2006. The Adviser may terminate voluntary waivers at any time.

(3) Includes shareholder servicing fee of 0.25%. “Other Expenses” for the AGGREGATE BOND FUND are based on estimated amounts for the current fiscal period and include a shareholder servicing fee of 0.25%.

(4) Acquired Fund Fees and Expenses represent the pro rata expense indirectly incurred by a Fund as a result of its investment in other investment companies (each, an “Acquired Fund”). Total Annual Fund Operating Expenses shown will not correlate to each Fund’s ratios of expenses to average net assets appearing in the Financial Highlights tables, which do not include Acquired Fund Fees and Expenses. Amounts less than 0.01%, if applicable, are shown as dashes (—) in the above table but are included in Other Expenses.

(5) Although not contractually obligated to do so, the Adviser and other service providers waived certain amounts for the existing Funds and may waive certain amounts in the future. The net expenses the Funds (except the AGGREGATE BOND FUND, GOVERNMENT INCOME FUND, SHORT-INTERMEDIATE BOND FUND and SHORT-TERM INCOME FUND) actually paid for the fiscal year ended August 31, 2006 are shown below. The net expenses the AGGREGATE BOND FUND expects to pay during its first full fiscal year (after anticipated voluntary waivers) are shown below. The net expenses the GOVERNMENT INCOME FUND, SHORT-INTERMEDIATE BOND FUND and SHORT-TERM INCOME FUND paid for fiscal 2006 shown below have been restated to reflect the lower management fee for each Fund effective June 1, 2007. They also have been restated to reflect the changes to voluntary waivers for these Funds effective June 1, 2007. The Adviser may terminate voluntary waivers at any time.

(6) Total Annual Fund Operating Expenses are based on amounts incurred during each Fund’s most recent fiscal year except that they have been restated to reflect the elimination of the Rule 12b-1 fee with respect to the Advisor Class shares of all Funds other than the PRIME MONEY MARKET FUND effective November 1, 2005.

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

Example

This example is intended to help you compare the cost of investing in a Fund with the cost of investing in other funds. The example assumes that you invest $10,000 in one of the Funds for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses are before waivers as shown in the table and remain the same. Although your actual costs and returns may be higher or lower, based on these assumptions your costs would be:

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