Let S be a compact topological semigroup, and let be the collection of all normalized non-negative Borel measures on S. It is well-known that , under convolution and the topology induced by the weak-star topology on the dual of the Benach space C(S) of all complex valued continuous functions on S, forms a compact topological semigroup which is known as the convolution semigroup of measures (see for instance, Glicksberg [3], Collins [1], Schwarz [5] and the author [4]). [1], Schwarz [5] and the author [4]). Professor A. D. Wallace asked if the process of forming the convolution semigroup of measures might be generalized to a more general class of set functions, the so-called “modular functions.” The purpose of the present note is to settle this question in the affirmative under a slight restriction. Before we are able to state the Wallace problem precisely, some preliminaries are necessary.