MARKET STREET FUND INC, 485BPOS, 1997-04-30

MARKET STREET FUND INC
485BPOS, 1997-04-30

Previous: WESTWOOD ONE INC /DE/, DEF 14A, 1997-04-30

Next: EQUINOX SYSTEMS INC, DEF 14A, 1997-04-30

<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1997

REGISTRATION NO. 2-98755
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 16 [X]
AND/OR
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 17 [X]

MARKET STREET FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

103 BELLEVUE PARKWAY
WILMINGTON, DE 19809
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (302) 791-1700

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

<TABLE>
<S> <C>
M. DIANE KOKEN, ESQ. COPY TO:
MARKET STREET FUND, INC. STEPHEN E. ROTH, ESQ.
1050 WESTLAKES DRIVE SUTHERLAND, ASBILL & BRENNAN, L.L.P.
BERWYN, PA 19312 1275 PENNSYLVANIA AVENUE, N.W.
(NAME AND ADDRESS OF AGENT FOR WASHINGTON, DC 20004
SERVICE)
</TABLE>

IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
[ ] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B) OF RULE 485

[X] ON MAY 1, 1997 PURSUANT TO PARAGRAPH (B) OF RULE 485

[ ] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A) OF RULE 485

[ ] ON (DATE) PURSUANT TO PARAGRAPH (A) OF RULE 485

[ ] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(2) OF RULE 485
[ ] ON (DATE) PURSUANT TO PARAGRAPH (A)(2) OF RULE 485

PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT
HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES. THE REGISTRANT FILED THE
24F-2 NOTICE FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 ON FEBRUARY 28, 1997.

================================================================================
<PAGE> 2

CROSS REFERENCE SHEET SHOWING LOCATION OF
INFORMATION IN PROSPECTUS

(PART A AND PART B) REQUIRED BY FORM N-1A

PART A
<TABLE>
<CAPTION>
FORM N-1A ITEM PROSPECTUS CAPTION
----------------------------------------------- --------------------------------------------
<C> <S> <C>
1. Cover Page..................................... Cover Page
2. Synopsis....................................... Not Applicable
3. Financial Highlights........................... Financial Highlights
4. General Description of Registrant.............. General Description of the Fund; Investment
Objectives and Policies
5. Management of the Fund......................... Management of the Fund
6. Capital Stock and Other Securities............. Description of the Fund's Shares
7. Purchase of Securities Being Offered........... Description of the Fund's Shares
8. Redemption or Repurchase....................... Description of the Fund's Shares
9. Legal Proceedings.............................. Not Applicable
PART B

<CAPTION>
FORM N-1A ITEM STATEMENT OF ADDITIONAL INFORMATION
----------------------------------------------- --------------------------------------------
<C> <S> <C>
10. Cover Page..................................... Cover Page
11. Table of Contents.............................. Table of Contents
12. General Information and History................ General Information and History
13. Investment Objectives and Policies............. Investment Restrictions; Investment
Techniques and Risks
14. Management of the Registrant................... Management of the Fund
15. Control Persons and Principal Holders of General Information and History;
Securities................................... Management of the Fund
16. Investment Advisory and Other Services......... Investment Advisory and Other Services
17. Brokerage Allocation and Other Practices....... Portfolio Transactions and Brokerage
Allocation
18. Capital Stock and Other Securities............. Capital Stock
19. Purchase, Redemption and Pricing of Securities
Being Offered................................ Redemption of Shares
20. Tax Status..................................... Taxes
21. Underwriters................................... Other Services
22. Calculation of Yield Quotations of Money Market
Funds........................................ Not Applicable
23. Financial Statements........................... Financial Statements
</TABLE>
<PAGE> 3

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

MARKET STREET FUND, INC.

Prospectus
May 1, 1997

Market Street Fund, Inc. (the "Fund") is an open-end, diversified
management investment company consisting of eight separate investment portfolios
(each a "Portfolio," together, the "Portfolios"), each of which has a different
investment objective. This prospectus pertains only to the following Portfolios:

The Growth Portfolio seeks intermediate and long-term growth of
capital. A reasonable level of income is an important secondary objective.
This Portfolio pursues its objectives by investing primarily in common
stocks of companies believed to offer above-average growth potential over
both the intermediate and the long term.

The Money Market Portfolio seeks to provide maximum current income
consistent with capital preservation and liquidity. This Portfolio pursues
its objective by investing in high-quality money market instruments. AN
INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NOT INSURED OR GUARANTEED BY
THE U.S. GOVERNMENT AND THE FUND CANNOT ASSURE THAT IT WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.

The Bond Portfolio seeks to generate a high level of current income
consistent with prudent investment risk. This Portfolio pursues its
objective by investing in a diversified portfolio of marketable debt
securities.

The Managed Portfolio seeks to realize as high a level of long-term
total rate of return as is consistent with prudent investment risk. This
Portfolio pursues its objective by investing only in those types of
securities that are permissible investments of the other Portfolios.

The Aggressive Growth Portfolio seeks a high level of long-term
capital appreciation. This Portfolio pursues its objective by investing in
securities of new or unseasoned companies, or securities of companies in
new or emerging industries.

The International Portfolio seeks long-term growth of capital
principally through investments in a diversified portfolio of marketable
equity securities of established non-United States companies.

THERE CAN BE NO ASSURANCE THAT ANY PORTFOLIO WILL ACHIEVE ITS INVESTMENT
OBJECTIVE OR OBJECTIVES.

The Portfolios are available to the public only by purchasing certain
variable life insurance policies or variable annuity contracts issued by
separate accounts of Provident Mutual Life Insurance Company, Providentmutual
Life and Annuity Company of America, and National Life Insurance Company. This
Prospectus should be read in conjunction with the separate prospectus for each
separate account and its related policy or contract.

This prospectus briefly describes the information that investors should
know before investing in the Fund, including the risks of investing in each
Portfolio. A statement of additional information dated May 1, 1997, has been
filed with the Securities and Exchange Commission and contains further
information about the Fund. The statement of additional information is
incorporated by reference into this Prospectus and is available without charge
by writing or telephoning the Fund at 103 Bellevue Parkway, Wilmington, Delaware
19809, or (302) 791-1700.

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, NOR ARE SHARES OF THE FUND INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------

Form 15732A 5.97
<PAGE> 4

MARKET STREET FUND, INC.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction.......................................................................... 3
Financial Highlights.................................................................. 4
Investment Objectives and Policies.................................................... 10
The Growth Portfolio............................................................. 10
The Money Market Portfolio....................................................... 10
The Bond Portfolio............................................................... 11
The Managed Portfolio............................................................ 12
The Aggressive Growth Portfolio.................................................. 12
The International Portfolio...................................................... 13
Investment Techniques and Risks....................................................... 14
Temporary Defensive Positions.................................................... 14
Short-Term Trading............................................................... 14
Foreign Securities............................................................... 14
Lower Quality Debt Instruments................................................... 16
Repurchase Agreements............................................................ 16
When-Issued Securities and Delayed Delivery Securities........................... 16
Borrowing........................................................................ 17
Reverse Repurchase Agreements.................................................... 17
Covered Call Options............................................................. 17
Management............................................................................ 18
Directors........................................................................ 18
Advisers......................................................................... 18
Compensation of Advisers......................................................... 19
Portfolio Managers............................................................... 19
Expenses......................................................................... 19
Brokerage Allocation............................................................. 20
Administrative Services.......................................................... 20
Description of the Fund's Shares...................................................... 20
General.......................................................................... 20
Determination of Net Asset Value................................................. 21
Offer, Purchase and Redemption of Shares......................................... 21
Dividends, Distributions, and Taxes.............................................. 22
Other Information..................................................................... 22
Custodian, Transfer Agent and Dividend Disbursing Agent.......................... 22
</TABLE>

2
<PAGE> 5

INTRODUCTION

Market Street Fund, Inc., is an open-end, diversified management investment
company incorporated in the State of Maryland on March 21, 1985. The Fund
consists of eight separate investment portfolios, each of which is, in effect, a
separate mutual fund. The Fund issues a separate class (or series) of common
stock for each Portfolio representing fractional undivided interests in that
Portfolio. An investor in a Portfolio is entitled to a pro-rata share of all
dividends and distributions arising from the net income and capital gains on the
investments of that Portfolio. An investor also shares pro-rata in any losses of
that Portfolio.

Pursuant to separate investment advisory agreements with the Fund and
subject to the authority of the Fund's board of directors: Providentmutual
Investment Management Company ("PIMC") serves as investment adviser to the
International Portfolio; and Sentinel Advisors Company ("SAC") serves as
investment adviser to the Growth, Money Market, Bond, Managed, and Aggressive
Growth Portfolios. PIMC has engaged The Boston Company Asset Management, Inc.
("TBC") as the investment sub-adviser to provide day-to-day portfolio management
for the International Portfolio. PIMC, SAC, and TBC are each referred to herein
as the "Adviser" or together as the "Advisers," as appropriate.

The Fund currently offers its shares to separate accounts of Provident
Mutual Life Insurance Company ("Provident Mutual"), Providentmutual Life and
Annuity Company of America ("PLACA"), and National Life Insurance Company
("NLIC") as funding vehicles for certain variable life insurance policies and
variable annuity contracts. Each such separate account, like the Fund, is
registered as an investment company with the Securities and Exchange Commission
("SEC"), and a separate prospectus, which accompanies this prospectus, describes
each separate account and its related policy or contract. The Fund may, in the
future, offer its shares to separate accounts of other insurance companies to
fund variable life insurance policies and variable annuity contracts. The Fund
does not offer its shares directly to the general public.

Since shares of the Fund are sold to insurance company separate accounts to
fund variable annuity contracts and variable life insurance policies, and to
separate accounts of different insurance companies, it is possible that material
conflicts could arise between the interests of variable annuity contract owners
and variable life insurance policy owners, or between the interests of owners of
contracts or policies issued by different insurance companies. Such material
conflicts could include, for example, differences in the federal income tax
treatment of variable annuity contracts versus variable life insurance policies.
The Fund does not currently foresee any disadvantage to variable annuity
contract or variable life insurance policy owners arising from the fact that
shares of the Fund might support both types of contracts or contracts of
different insurance companies. However, the Fund's board of directors will
continually monitor events to identify any material irreconcilable conflicts
that may arise and to determine what action, if any, should be taken to resolve
such conflicts. Such action may include redeeming the shares of the Fund held by
separate accounts involved in any material irreconcilable conflict.

3
<PAGE> 6

FINANCIAL HIGHLIGHTS

The following tables give information regarding income, expenses and
capital changes in the Growth, Money Market, Bond, Managed, Aggressive Growth
and International Portfolios attributable to a Portfolio share outstanding
throughout the periods indicated. The Aggressive Growth Portfolio commenced
operations on May 1, 1989, and the International Portfolio commenced operations
on November 1, 1991. The information in the tables has been derived from the
financial statements which have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as stated in their report on the Financial Statements
of the Fund which are included in the Statement of Additional Information. The
information in the following tables should be read in conjunction with the
Financial Statements and related notes.
Selected data for a share of capital stock outstanding throughout the
periods:

<TABLE>
<CAPTION>
GROWTH PORTFOLIO
-----------------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89(A) 01/01/88 01/01/87(B)
TO TO TO TO TO TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87
-------- -------- -------- -------- -------- -------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset
value,
beginning of
period...... $ 16.36 $14.00 $14.09 $13.73 $13.88 $12.08 $13.16 $ 11.24 $ 9.99 $ 10.73
-------- -------- -------- -------- -------- -------- -------- ----------- -------- -----------
INCOME FROM
INVESTMENT
OPERATIONS:
Net
investment
income.... .46 .47 .43 .38 .46 .50 .55 .51 .46 .38
Net realized
and
unrealized
gain
(loss) on
investments.. 2.54 3.41 (.10) .94 .17 1.71 (.25) 2.87 1.36 (.13)
-------- -------- -------- -------- -------- -------- -------- ----------- -------- -----------
Total from
investment
operations... 3.00 3.88 .33 1.32 .63 2.21 .30 3.38 1.82 .25
-------- -------- -------- -------- -------- -------- -------- ----------- -------- -----------
LESS
DISTRIBUTIONS:
Dividends to
shareholders
from net
investment
income.... (.48) (.46) (.41) (.39) (.46) (.41) (.53) (.53) (.43) (.40)
Dividends to
shareholders
from net
capital
gains..... (.78) (1.06) (.01) (.35) (.32) (.00) (.85) (.93) (.14) (.59)
Dividends to
shareholders
in excess
of net
investment
income.... -- -- -- (.22) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- ----------- -------- -----------
Total
distributions... (1.26) (1.52) (.42) (.96) (.78) (.41) (1.38) (1.46) (.57) (.99)
-------- -------- -------- -------- -------- -------- -------- ----------- -------- -----------
Net asset
value, end
of period... $ 18.10 $16.36 $14.00 $14.09 $13.73 $13.88 $12.80 $ 13.16 $11.24 $ 9.99
======== ======= ======= ======= ====== ====== ====== ========= ====== =========
Total
Return... 19.58% 30.39% 2.40% 9.43% 4.74% 18.50% 2.39% 30.45% 18.50% 1.64%
RATIOS/SUPPLEMENTAL
DATA:
Net assets,
end of
period
$(000).... 198,948 161,899 115,191 109,534 82,881 55,357 35,658 25,954 14,287 7,326
Ratios of
expenses
to average
net
assets(c)... .50% .61% .63% .76% .79% .76% .75% .72% .65% .65%
Ratios of
net
investment
income to
average
net
assets.... 2.80% 3.20% 3.10% 2.86% 3.53% 3.91% 4.27% 4.26% 4.52% 3.79%
Portfolio
turnover
rate...... 72% 61% 63% 51% 35% 28% 47% 60% 32% 78%
Average
commission
rate(d)... $ 0.0600 N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>

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

(a) On May 1, 1989, the investment adviser was changed from Providentmutual
Investment Management Company to Newbold's Asset Management, Inc.
(b) On January 1, 1987, the sub-adviser was changed from Shearson Asset
Management to W.H. Newbold's Son & Co., Inc.

(c) Expense ratios before reimbursement of expenses by affiliated insurance
company for the years ended December 31, 1996, 1995, 1994, 1993, 1992, and
1991 were as follows: 0.50%, 0.61%, 0.67%, 0.76%, 0.82%, and 0.98%,
respectively.

(d) Computed by dividing the total amount of commission paid by the total number
of shares purchased and sold during the period for which there was a
commission. This disclosure is required by the S.E.C. for all financial
statements with fiscal years beginning after September 1, 1995.

See accompanying notes to financial statements.

4
<PAGE> 7

Selected data for a share of capital stock outstanding throughout the
periods:

<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
--------------------------------------------------------------------------------------------------------------
01/01/96(A) 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 01/01/87
TO TO TO TO TO TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87
----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM
INVESTMENT
OPERATIONS:
Net Investment
Income....... .05 .05 .04 .03 .03 .06 .07 .08 .07 .06
----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from
investment
operations... .05 .05 .04 .03 .03 .06 .07 .08 .07 .06
LESS
DISTRIBUTIONS:
Dividends to
shareholders
from net
investment
income....... (.05) (.05) (.04) (.03) (.03) (.06) (.07) (.08) (.07) (.06)
----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total
Distributions... (.05) (.05) (.04) (.03) (.03) (.06) (.07) (.08) (.07) (.06)
----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value,
end of
period......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total
return..... 5.15% 5.61% 3.81% 2.59% 3.18% 5.69% 8.00% 9.02% 7.19% 6.14%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end
of period
$(000)....... 54,197 34,615 21,040 12,506 8,138 7,047 5,411 4,632 4,219 2,914
Ratios of
expenses to
average net
assets(b).... .44% .50% .55% .65% .65% .53% .50% .55% .65% .65%
Ratios of net
investment
income to
average net
assets....... 5.03% 5.47% 3.86% 2.56% 3.12% 5.49% 7.72% 8.66% 7.03% 6.00%
</TABLE>

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

(a) On May 1, 1996 the investment adviser was changed from Providentmutual
Investment Management Company to Sentinel Advisors Company.

(b) Expense ratios before reimbursement of expenses by affiliated insurance
company for the years ended December 31, 1996, 1995, 1994, 1993, 1992 and
1991 were as follows: 0.44%, 0.50%, 0.59%, 0.65%, 0.73%, and 0.86%,
respectively.

See accompanying notes to financial statements.

5
<PAGE> 8

FINANCIAL HIGHLIGHTS -- CONTINUED

Selected data for a share of capital stock outstanding throughout the
periods:

<TABLE>
<CAPTION>
BOND PORTFOLIO
-----------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94(A) 01/01/93 01/01/92 01/01/91 01/01/90
TO TO TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90
-------- ----------- ----------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.............................. $11.00 $ 9.73 $ 11.21 $10.73 $10.80 $10.04 $ 10.09
-------- ----------- ----------- -------- -------- -------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............... .63 .65 .62 .60 .64 .77 .79
Net realized and unrealized gain
(loss) on investments............. (.34) 1.27 (1.23) .48 (.03) .57 (.05)
-------- ----------- ----------- -------- -------- -------- -----------
Total from investment
operations.................... .29 1.92 (.61) 1.08 .61 1.34 .74
-------- ----------- ----------- -------- -------- -------- -----------
LESS DISTRIBUTIONS:
Dividends to shareholders from net
investment income................. (.62) (.65) (.60) (.60) (.68) (.58) (.79)
Dividends to shareholders from net
capital gains..................... (.00) (.00) (.27) (.00) (.00) (.00) (.00)
-------- ----------- ----------- -------- -------- -------- -----------
Total distributions............. (.62) (.65) (.87) (.60) (.68) (.58) (.79)
-------- ----------- ----------- -------- -------- -------- -----------
Net asset value, end of period........ 10.67 $ 11.00 $ 9.73 $11.21 $10.73 $10.80 $ 10.04
====== ========= ========= ====== ====== ====== =========
Total return.................... 2.86% 20.45% (5.62)% 10.32% 5.95% 13.93% 7.70%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000).... 17,087 14,402 10,098 10,160 6,710 4,365 3,711
Ratios of expenses to average net
assets(c)......................... 56% .60% .68% .75% .75% .63% .60%
Ratios of net investment income to
average net assets................ 6.08% 6.36% 6.14% 5.53% 6.34% 7.58% 8.00%
Portfolio turnover rate............. 133% 206% 151% 71% 4% 32% 53%

01/01/89(B) 01/01/88 01/01/87
TO TO TO
12/31/89 12/31/88 12/31/87
----------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of
period.............................. $ 9.89 $10.02 $10.93
----------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............... .82 .76 .65
Net realized and unrealized gain
(loss) on investments............. .20 (.13) (.91)
----------- -------- --------
Total from investment
operations.................... 1.02 .63 (.26)
----------- -------- --------
LESS DISTRIBUTIONS:
Dividends to shareholders from net
investment income................. (.82) (.76) (.65)
Dividends to shareholders from net
capital gains..................... (.00) (.00) (.00)
----------- -------- --------
Total distributions............. (.82) (.76) (.65)
----------- -------- --------
Net asset value, end of period........ $ 10.09 $ 9.89 $10.02
========= ====== ======
Total return.................... 10.57% 6.45% (2.37)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000).... 3,311 2,473 1,869
Ratios of expenses to average net
assets(c)......................... .62% .65% .65%
Ratios of net investment income to
average net assets................ 8.28% 7.74% 6.99%
Portfolio turnover rate............. 9% .13% 1.64%
</TABLE>

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

(a) On March 1, 1993, the investment adviser was changed from ProvidentMutual
Management Company, Inc. to Sentinel Advisors Company.

(b) On May 1, 1989, the investment adviser was changed from Providentmutual
Investment Management Company to Sigma Asset Management, Inc. (renamed
ProvidentMutual Management Company, Inc.).

(c) Expense ratios before reimbursement of expenses by affiliated insurance
company for the years ended December 31, 1996, 1995, 1994, 1993, 1992 and
1991 were as follows: 0.56%, 0.60%, 0.70%, 0.75%, 0.81% and 0.93%,
respectively.

See accompanying notes to financial statements.

6
<PAGE> 9

Selected data for a share of capital stock outstanding throughout the
periods:

<TABLE>
<CAPTION>
MANAGED PORTFOLIO
-------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94(A) 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89(B)
TO TO TO TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89
-------- -------- ----------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................... $ 14.19 $11.94 $ 13.27 $12.25 $11.40 $ 9.81 $11.37 $ 10.63
-------- -------- ----------- -------- -------- -------- -------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............... .51 .55 .53 .40 .44 .51 .57 .59
Net realized and unrealized gain
(loss) on investments............. 1.07 2.28 (.77) 1.00 .88 1.47 (1.53) .89
-------- -------- ----------- -------- -------- -------- -------- -----------
Total from investment
operations...................... 1.58 2.83 (.24) 1.40 1.32 1.98 (.96) 1.48
-------- -------- ----------- -------- -------- -------- -------- -----------
LESS DISTRIBUTIONS:
Dividends to shareholders from net
investment income................. (.51) (.57) (.49) (.38) (.47) (.39) (.57) (.61)
Dividends to shareholders from net
capital gains..................... (.58) (.01) (.60) (.00) (.00) (.00) (.03) (.13)
-------- -------- ----------- -------- -------- -------- -------- -----------
Total distributions............... (1.09) (.58) (1.09) (.38) (.47) (.39) (.60) (.74)
-------- -------- ----------- -------- -------- -------- -------- -----------
Net asset value, end of period........ $ 14.68 $14.19 $ 11.94 $13.27 $12.25 $11.40 $ 9.81 $ 11.37
======= ====== ========= ====== ====== ====== ====== =========
Total return...................... 11.88% 24.43% (1.82)% 11.62% 11.96% 20.49% (8.61)% 14.65%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000).... 43,431 36,002 29,363 28,984 15,946 12,564 10,197 10,028
Ratios of expenses to average net
assets(c)......................... .60% .66% .67% .80% .80% .68% .65% .65%
Ratios of net investment income to
average net assets................ 3.68% 4.22% 4.34% 3.36% 3.88% 4.74% 5.48% 5.74%
Portfolio turnover rate............. 106% 130% 75% 89% 32% 51% 47% 23%
Average commission rate(d).......... $ 0.0600 N/A N/A N/A N/A N/A N/A N/A

01/01/88 01/01/87
TO TO
12/31/88 12/31/87
-------- --------
<S> <C> <C>
Net asset value, beginning of
period............................... $10.12 $10.68
-------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............... .50 .52
Net realized and unrealized gain
(loss) on investments............. .51 (.55)
-------- --------
Total from investment
operations...................... 1.01 (.03)
-------- --------
LESS DISTRIBUTIONS:
Dividends to shareholders from net
investment income................. (.50) (.52)
Dividends to shareholders from net
capital gains..................... (.00) (.01)
-------- --------
Total distributions............... (.50) (.53)
-------- --------
Net asset value, end of period........ $10.63 $10.12
====== ======
Total return...................... 10.60% (.54)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000).... 8,015 5,991
Ratios of expenses to average net
assets(c)......................... .65% .65%
Ratios of net investment income to
average net assets................ 4.89% 5.45%
Portfolio turnover rate............. 35% 47%
Average commission rate(d).......... N/A N/A
</TABLE>

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

(a) On March 1, 1993, the investment adviser was changed from ProvidentMutual
Management Company, Inc. to Sentinel Advisors Company.
(b) On May 1, 1989, the investment adviser was changed from Providentmutual
Investment Management Company to Sigma Asset Management, Inc. (renamed
ProvidentMutual Management Company, Inc.).

(c) Expense ratios before reimbursement of expenses by affiliated insurance
company for the years ended December 31, 1996, 1995, 1994, 1993, 1992 and
1991 were as follows: 0.60%, 0.66%, 0.73%, 0.80%, 0.84% and 0.95%,
respectively.

See accompanying notes to financial statements.

7
<PAGE> 10

FINANCIAL HIGHLIGHTS -- CONTINUED

Selected data for a share of capital stock outstanding throughout the
periods:

<TABLE>
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO
--------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94(A) 01/01/93(A) 01/01/92 01/01/91 01/01/90 05/01/89(B)
TO TO TO TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89
-------- ----------- ----------- -------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............... $ 17.38 $ 15.45 $ 15.45 $14.72 $ 16.68 $10.67 $ 9.87 $ 10.00
-------- ----------- ----------- -------- ----------- -------- -------- -----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment
income............. .17 .20 (.01) (.01) .03 .08 .03 .09
Net realized and
unrealized gain
(loss) on
investments........ 3.03 1.86 .01 .77 .38 5.93 1.04 .25
-------- ----------- ----------- -------- ----------- -------- -------- -----------
Total from
investment
operations....... 3.20 2.06 .00 .76 .41 6.01 1.07 .34
-------- ----------- ----------- -------- ----------- -------- -------- -----------
LESS DISTRIBUTIONS:
Dividends to
shareholders from
net investment
income............. (.19) (.00) (.00) (.03) (.07) (.00) (.03) (.09)
Dividends to
shareholders from
net capital
gains.............. (1.87) (.13) (.00) (.00) (2.30) (.00) (.24) (.38)
-------- ----------- ----------- -------- ----------- -------- -------- -----------
Total
distributions.... (2.06) (.13) (.00) (.03) (2.37) (.00) (.27) (.47)
-------- ----------- ----------- -------- ----------- -------- -------- -----------
Net asset value, end of
period............... $ 18.52 $ 17.38 $ 15.45 $15.45 $ 14.72 $16.68 $10.67 $ 9.87
======== =========== =========== ======== =========== ======== ======== ===========
Total return(c).... 21.00% 13.48% 0% 5.20% 2.58% 56.33% 10.77% 8.31%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period $(000)...... 34,098 23,822 15,430 12,223 8,029 2,751 772 568
Ratios of expenses to
average net assets
(annualized)(d).... .68% .76% .86% .90% .90% .79% .75% .50%
Ratios of net
investment income
to average net
assets
(annualized)....... 1.14% 1.32% (.10)% (.07)% .37% .80% .27% 1.00%
Portfolio turnover... 47% 89% 60% 60% 18% 95% 27% 32%
Average commission
rate(e)............ $0.0600 N/A N/A N/A N/A N/A N/A N/A
</TABLE>

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

(a) On March 31, 1993, the investment adviser was changed from ProvidentMutual
Management Company, Inc. to Sentinel Advisors Company.
(b) Commencement of operations.
(c) Total returns for periods less than one year are annualized.

(d) Annualized expense ratios before reimbursement of expenses by affiliated
insurance company and fee waivers by the administrator were as follows:
Aggressive Growth Portfolio for the years ended December 31, 1996, 1995,
1994, 1993, 1992 and 1991, 0.68%, 0.76%, 0.89%, 0.90%, 1.00% and 1.32%,
respectively.

(e) Computed by dividing the total amount of commission paid by the total number
of shares purchased and sold during the period for which there was a
commission. This disclosure is required by the S.E.C. for all financial
statements with fiscal years beginning after September 1, 1995.

See accompanying notes to financial statements.

8
<PAGE> 11

Selected data for a share of capital stock outstanding throughout the
periods:

<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO
--------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 11/01/91(A)
TO TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
----------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................. $ 12.86 $11.63 $11.87 $ 9.00 $9.74 $ 10.00
----------- -------- -------- -------- -------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.............................. .11 .16 .05 .06 .08 .01
Net realized and unrealized gain (loss) on
investments...................................... 1.23 1.45 (.02) 3.09 (.81) (.27)
----------- -------- -------- -------- -------- -----------
Total from investment operations................. 1.34 1.61 .03 3.15 (.73) (.26)
----------- -------- -------- -------- -------- -----------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment
income........................................... (.16) (.07) (.03) (.08) (.00) (.00)
Dividends to shareholders from net capital gains... (.63) (.31) (.24) (.20) (.01) (.00)
----------- -------- -------- -------- -------- -----------
Total distributions.............................. (.79) (.38) (.27) (.28) (.01) (.00)
----------- -------- -------- -------- -------- -----------
Net asset value, end of period....................... $ 13.41 $12.86 $11.63 $11.87 $9.00 $ 9.74
=========== ======== ======== ======== ======== ===========
Total return(b).................................. 10.89% 14.31% .26% 36.11% (7.30)% (2.80)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................... 50,955 36,642 26,212 13,682 6,727 4,979
Ratios of expenses to average net assets
(annualized)(c).................................. 1.05% 1.15% 1.32% 1.50% 1.50% 1.48%
Ratios of net investment income to average net
assets (annualized).............................. .98% 1.21% .72% .68% 1.05% .26%
Portfolio turnover................................. 35% 45% 32% 37% 35% 1%
Average commission rate(d)......................... $0.0376 N/A N/A N/A N/A N/A
</TABLE>

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

(a) Commencement of operations.
(b) Total returns for periods less than one year are annualized.

(c) Annualized expense ratios before reimbursement of expenses by affiliated
insurance company and fee waivers by the administrator were as follows:
International Portfolio for the years ended December 31, 1996, 1995, 1994,
1993, 1992 and the period ended December 31, 1991, 1.05%, 1.15%, 1.32%,
1.50%, 2.65% and 3.40%, respectively.

See accompanying notes to financial statements.

9
<PAGE> 12

INVESTMENT OBJECTIVES AND POLICIES

Each Portfolio has one or more investment objectives and related investment
policies and uses various investment techniques to pursue these objectives and
policies. THERE CAN BE NO ASSURANCE THAT ANY OF THE PORTFOLIOS WILL ACHIEVE ITS
INVESTMENT OBJECTIVE OR OBJECTIVES. Investors should not consider any one
Portfolio alone to be a complete investment program. Each of the Portfolios is
subject to the risk of changing economic conditions, as well as the risk
inherent in the ability of the Adviser to make changes in the portfolio
composition of the Portfolio in anticipation of changes in economic, business,
and financial conditions. As with any security, a risk of loss is inherent in an
investment in the shares of any of the Portfolios.

The different types of securities, investments, and investment techniques
used by each Portfolio all have attendant risks of varying degrees. For example,
with respect to equity securities, there can be no assurance of capital
appreciation and an investment in any stock is subject to the risk that the
stock market as a whole may decline, thereby depressing the stock's price
(market risk), or the risk that the price of a particular issuer's stock may
decline due to its financial results (financial risk). With respect to debt
securities, there exists the risk that the issuer of a security may not be able
to meet its obligations on interest or principal payments at the time required
by the instrument (financial risk). In addition, the value of debt instruments
generally rises and falls inversely with prevailing current interest rates
(market risk). As described below, an investment in certain of the Portfolios
entails special additional risks as a result of their ability to invest a
substantial portion of their assets in foreign investments, or issuers in new or
emerging industries.

Certain types of investments and investment techniques common to one or
more Portfolios are described in greater detail, including the risks of each,
under "Investment Techniques and Risks" and in the statement of additional
information ("SAI"). The Portfolios are also subject to certain investment
restrictions that are described under the caption "Investment Restrictions" in
the SAI.

The investment objective or objectives of each Portfolio are fundamental
and may not be changed unless authorized by the vote of a majority of the
outstanding voting shares of the affected Portfolio. The investment policies of
each Portfolio are not fundamental and may be changed by the Fund's board of
directors without shareholder approval, unless otherwise stated in this
Prospectus or the SAI.

THE GROWTH PORTFOLIO

The investment objective of the Growth Portfolio is intermediate and
long-term growth of capital. A reasonable level of income is an important
secondary objective. The Growth Portfolio pursues its objective by investing
primarily in common stocks of companies that the Adviser believes offer
above-average intermediate and long-term growth potential. The Portfolio
purchases securities only of companies that have a minimum level of
sales/revenue of $50 million per year in at least one recent year and have
profitable operations (as measured by having a net income before nonrecurring
gains or losses). Generally, the Portfolio holds common stocks traded on
national securities exchanges but it can hold up to 20% of its total assets in
stocks traded primarily over-the-counter. The Portfolio may invest in
convertible preferred stocks or convertible debt securities and nonconvertible
debt obligations.

THE MONEY MARKET PORTFOLIO

The investment objective of the Money Market Portfolio is to provide
maximum current income consistent with capital preservation and liquidity. The
Portfolio pursues this objective by investing in:

U.S. Government Securities: These are obligations issued by or
guaranteed as to interest and principal by the government of the United
States or any agency or instrumentality thereof. They may include
instruments that are supported by the full faith and credit of the United
States, such as Treasury Bills, Notes and Bonds; instruments that are
supported by the right of the issuer to borrow from the Treasury, such as
Home Loan Bank securities; and securities that are supported only by the
credit of the instrumentality, such as Federal National Mortgage
Association bonds.

10
<PAGE> 13

Bank Obligations: These are obligations (including certificates of
deposit, time deposits, and bankers' acceptances) of: (1) domestic banks
(including savings banks) and foreign branches of domestic banks that are
members of the Federal Reserve System or the Federal Deposit Insurance
Corporation ("FDIC") and have total assets of at least $1 billion; (2)
domestic banks and foreign branches thereof and savings and loan
associations that have less than $1 billion of total assets where the
principal amount of the obligation is insured in full by the FDIC. No more
than 10% of the Portfolio's assets may be invested in obligations of
institutions in category (2).

Repurchase Agreements: Repurchase agreements with (1) banks or (2)
government securities dealers recognized as primary dealers by the Federal
Reserve System, provided that:

(a) at the time the repurchase agreement is entered into, and
throughout the duration of the repurchase agreement, the collateral has
a market value at least equal to the value of the repurchase agreement;

(b) the collateral consists of government securities or instruments
rated in the highest rating category by at least two nationally
recognized statistical rating organizations; and

Commercial Paper : Commercial paper consists of unsecured promissory
notes issued by corporations to finance short-term credit needs.

Other Corporate Debt Obligations: These are outstanding nonconvertible
corporate debt obligations that were not issued as short-term obligations
but have thirteen months or less remaining until maturity and which, at the
date of investment, are rated AA or better by Standard & Poor's Corporation
("S&P") or Aa or better by Moody's Investors Service, Inc. ("Moody's").

The Money Market Portfolio will only invest in instruments denominated in
U.S. dollars that the Adviser, under the supervision of the board of directors
of the Fund, determines present minimal credit risks and are, at the time of
acquisition, either:

(1) rated in the two highest rating categories by at least two
nationally recognized statistical rating organizations as defined under
Rule 2a-7, as amended, under the Investment Company Act of 1940 (an
"NRSRO"), or by only one NRSRO if only one NRSRO has issued a rating with
respect to the instrument; or

(2) in the case of an unrated instrument, determined by the Adviser
under the supervision of the board of directors to be of comparable quality
to the above; or

(3) issued by an issuer that has received a rating of the type
described in (1) above on other securities that are comparable in priority
and security to the instrument.

All of the Money Market Portfolio money market instruments will mature in
13 months or less. The average maturity of the Portfolio's portfolio securities
based on their dollar value will not exceed 90 days at the time of each
investment. If the disposition of a portfolio security results in a
dollar-weighted average portfolio maturity in excess of 90 days, the Portfolio
will invest its available cash in such a manner as to reduce its dollar-weighted
average portfolio maturity to 90 days or less as soon as reasonably practicable.

THE BOND PORTFOLIO

The investment objective of the Bond Portfolio is to generate a high level
of current income consistent with prudent investment risk. The Bond Portfolio
pursues its investment objective by investing in a diversified portfolio of
marketable debt securities. Generally, with the exception of the gas, electric
and telephone utility industries, the Portfolio does not hold more than 25% of
its total assets in securities of companies in the same industry. When market
conditions warrant, the Portfolio may hold more than 25% (but not more than 75%)
of its total assets in securities of issuers in one or more of these three
industries provided that no one aspect of such industries is emphasized.

11
<PAGE> 14

The Portfolio only purchases securities issued by U.S. and Canadian
corporations and by U.S. and foreign governments and their agencies and
instrumentalities. With regard to such government obligations, the Portfolio
currently purchases principally those of the U.S. and Canadian governments and
their respective agencies and instrumentalities as well as securities issued by
Canadian municipalities. Securities of foreign issuers are only purchased if
income from such securities is paid in U.S. dollars. Investments in securities
of foreign issuers entail certain risks not found in securities of domestic
issuers. See "Foreign Securities."

The Bond Portfolio does not invest more than 5% of its total assets (taken
at cost) in securities of issuers having fewer than three years continuous
operations or in securities the purchase of which is based on the credit of a
company having fewer than three years continuous operations.

At least 75% of the value of the Bond Portfolio's total investment in
corporate debt securities (other than commercial paper) is represented by
securities rated, at the time of purchase, investment grade (Baa or higher by
Moody's or BBB or higher by S&P) or determined by the Adviser to be of
comparable quality to investment grade securities. (See Appendix A in the SAI
for an explanation of ratings.) Unrated securities of a quality comparable to
investment grade securities may nonetheless trade in the market at a discount
from the price of comparable investment grade securities. The Portfolio may
invest up to 25% of the value of its corporate debt securities (other than
commercial paper) in securities rated Ba by Moody's or BB by S&P. However, the
Bond Portfolio does not hold securities rated lower than Ba by Moody's or BB by
S&P. Such securities generally provide higher yields than investment grade
securities but entail greater market risk and financial risk. See "Investment
Techniques and Risks" in the SAI.

The Bond Portfolio may purchase corporate debt securities bearing fixed
interest as well as those that carry certain equity features such as conversion
or exchange rights or warrants for the acquisition of stock (of the same or of a
different issuer) or participations based on revenues, sales or profits. The
Portfolio will not, however, exercise any such conversion, exchange or purchase
right if, at the time, the value of all equity interests held by the Portfolio
would exceed 10% of its total assets.

THE MANAGED PORTFOLIO

The investment objective of the Managed Portfolio is to realize as high a
level of long-term total rate of return as is consistent with prudent investment
risk. The Managed Portfolio pursues its investment objective by investing only
in those types of securities that are permissible investments of the other
Portfolios. The Managed Portfolio may be invested solely in common stocks,
solely in bonds, solely in money market instruments, or in a combination of
these types of investments, in accordance with the complete, sole, and total
discretion of the Adviser and the Fund's board of directors. At least 75% of the
value of corporate debt securities (other than commercial paper) held in this
Portfolio will be rated Baa or higher by Moody's or BBB or higher by S&P, or, if
not rated, will be considered by the Adviser to be of comparable investment
quality. However, in no event will the Managed Portfolio hold securities rated
lower than Ba by Moody's or BB by S&P. Such lower quality debt instruments
generally provide higher yields but they involve greater risks. For a more
detailed discussion of these risks see "Investment Techniques and Risks" in the
SAI. This Portfolio will be subject to varying levels of market risk, financial
risk and current income volatility.

THE AGGRESSIVE GROWTH PORTFOLIO

The investment objective of the Aggressive Growth Portfolio is to achieve a
high level of long-term capital appreciation. The Aggressive Growth Portfolio
pursues its investment objective by investing in:

(1) securities being offered to the public for the first time (such
investments being made through primary or secondary offerings and in the
secondary market following the completion of such offerings);

(2) securities of companies in new or emerging industries; and

(3) securities of new or unseasoned companies that the Adviser
believes have better than average earnings and appreciation potential.

12
<PAGE> 15

Although the Portfolio emphasizes new securities issues, it does not invest
more than 5% of its total assets in securities of companies having less than
three years of operations. Substantially all of the Portfolio's assets consist
of common stock or securities convertible into common stock. The Adviser selects
such securities on the basis of their appreciation potential without restriction
as to their type.

Investments in securities with high capital growth potential, newly issued
securities and securities of companies in new or emerging industries, generally
entails above-average financial risk and market risk. In addition, pursuing an
aggressive growth portfolio strategy may often result in a higher than average
portfolio turnover rate. Higher portfolio turnover results in correspondingly
increased brokerage expenses and other acquisition costs to the Portfolio.

THE INTERNATIONAL PORTFOLIO

The investment objective of the International Portfolio is to achieve
long-term growth of capital primarily through investments in a diversified
portfolio of marketable equity securities of established non-United States
companies. The Portfolio pursues its objective by investing primarily in equity
and equity-related securities of companies that are organized outside the United
States or of companies whose securities are principally traded outside the
United States ("foreign issuers") and that the Adviser believes have potential
for long-term capital growth. The Portfolio also may invest in securities (1) of
companies organized in the United States but having their principal activities
and interests outside the United States, (2) denominated or quoted in foreign
currency ("non-dollar securities"), and (3) issued by foreign governments or
agencies or instrumentalities of foreign governments (also "foreign issuers").

The International Portfolio is intended for investors who can accept the
risks involved in investments in equity and equity-related securities of foreign
issuers and in non-dollar securities. See "Foreign Securities."

Under normal market conditions, the Portfolio invests at least 75% of its
total assets in the securities of foreign issuers located (or, in the case of
the securities, traded) in at least five different countries other than the
United States. Nonetheless, under certain economic and business conditions the
Portfolio may invest up to 35% of its total assets in the securities of issuers
located (or, in the case of the securities, traded) in any one of the following
countries: Australia, Canada, France, Japan, the United Kingdom or Germany.

Although it does not currently intend to do so, the International Portfolio
may borrow up to 20% of the market value of its total assets from banks as a
temporary measure for emergency purposes, such as to enable the Portfolio to
meet redemption requests or to settle transactions on different stock markets
where different settlement dates apply that might otherwise require the sale of
securities at a time when it would not be in the Portfolio's best interests to
do so.

The equity and equity-related securities in which the International
Portfolio invests are common stock, preferred stock, convertible debt
obligations, convertible preferred stock and warrants or other rights to acquire
stock. The Portfolio also may invest in securities of foreign issuers in the
form of sponsored and unsponsored American depository receipts ("ADRs"),
European depository receipts ("EDRs"), and global depository receipts ("GDRs").
ADRs are receipts typically issued by a U.S. bank or trust company that evidence
ownership of underlying securities of foreign corporate issuers. EDRs and GDRs
are receipts issued by non-U.S. financial institutions evidencing arrangements
similar to ADRs. Generally, ADRs are in registered form and are designed for
trading in U.S. markets while EDRs are in bearer form and are designed for
trading in European securities markets. GDRs are issued in either registered or
bearer form and are designed for trading on a global basis. See "Foreign
Securities."

The International Portfolio also may, under normal market conditions,
invest up to 35% of its total assets in dollar denominated and non-dollar
denominated debt securities of foreign issuers and may on occasion, for
temporary purposes to preserve capital, hold part or all of its assets in
foreign currency or in non-dollar short-term debt securities. The Portfolio only
invests in debt securities (including convertible debt securities) rated
investment grade (Baa or higher by Moody's or BBB or higher by S&P) or
determined by the Adviser to be of comparable quality to investment grade. (See
Appendix A in the SAI for an explanation of ratings.)

13
<PAGE> 16

The International Portfolio may invest in the securities of issuers located
in countries with emerging economies or securities markets. Investment in such
countries involves certain risks that are not present in investments in more
developed countries. See "Foreign Securities." The International Portfolio may
make investments or engage in investment practices that involve special risks.
These include: convertible securities, when-issued securities, delayed-delivery
securities, illiquid or restricted securities, and repurchase agreements. These
investment practices and attendant risks are described in "Investment Techniques
and Risks" below or "Investment Techniques and Risks" in the SAI.

The International Portfolio may purchase or sell foreign currency and
forward foreign currency exchange contracts to hedge against currency exchange
rate fluctuations and to expedite settlement of transactions. Such currency
management techniques involve risks different from those associated with
investing in dollar-denominated securities of U.S. issuers. To the extent that
the Portfolio is fully invested in securities of foreign issuers or non-dollar
securities while also maintaining currency positions, it may be exposed to
greater combined risk. The Portfolio's net currency positions may expose it to
risks independent of its securities positions. See "Investment Techniques and
Risks" in the SAI.

INVESTMENT TECHNIQUES AND RISKS

TEMPORARY DEFENSIVE POSITIONS

Notwithstanding their investment objective(s), each of the Portfolios may,
for temporary defensive purposes to preserve capital, invest all or part of
their assets in cash and/or money market instruments of the type that the Money
Market Portfolio may invest in.

SHORT-TERM TRADING

Except for the Bond Portfolio and the Managed Portfolio, the Portfolios do
not expect to trade in securities for short-term gains. Notwithstanding this, an
Adviser may, from time to time, make short-term investments when it believes
that such investments will benefit a Portfolio and may dispose of any investment
without regard to the length of time that the investment has been held.

FOREIGN SECURITIES

Foreign Securities Generally. Investments in the securities of foreign
issuers or investments in non-dollar securities may offer potential benefits not
available from investments solely in securities of domestic issuers or dollar
denominated securities. Such benefits may include the opportunity to invest in
foreign issuers that appear to offer better opportunity for long-term capital
appreciation or current earnings than investments in domestic issuers, the
opportunity to invest in foreign countries with economic policies or business
cycles different from those of the United States, and the opportunity to reduce
fluctuations in portfolio value by taking advantage of foreign securities
markets that do not necessarily move in a manner parallel to U.S. markets.

14
<PAGE> 17

foreign investments may be higher than for similar transactions in the United
States. In addition, clearance and settlement procedures may be different in
foreign countries and, in certain markets, on certain occasions, such procedures
have been unable to keep pace with the volume of securities transactions, thus
making it difficult to conduct such transactions. For example, delays in
settlement could result in temporary periods when a portion of the assets of a
Portfolio are uninvested and no return is earned thereon. The inability of a
Portfolio to make intended investments due to settlement problems could cause it
to miss attractive investment opportunities. Inability to dispose of portfolio
securities or other investments due to settlement problems could result either
in losses to a Portfolio due to subsequent declines in value of the portfolio
investment or, if the Portfolio has entered into a contract to sell the
investment, could result in possible liability to the purchaser.

Foreign issuers are not generally subject to uniform accounting, auditing
and financial reporting standards comparable to those applicable to domestic
companies. There may be less publicly available information about a foreign
issuer than about a domestic one. In addition, there is generally less
government regulation of stock exchanges, brokers, and listed and unlisted
issuers in foreign countries than in the United States. Furthermore, with
respect to certain foreign countries, there is a possibility of expropriation or
confiscatory taxation, imposition of withholding taxes on dividend or interest
payments, limitations on the removal of funds or other assets of the Portfolio,
or political or social instability or diplomatic developments that could affect
investments in those countries. Individual foreign economies also may differ
favorably or unfavorably from the United States economy in such respects as
growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position.

Investments in ADRs, EDRs and GDRs. Many securities of foreign issuers are
represented by ADRs, EDRs and GDRs. The International Portfolio and the Managed
Portfolio may invest in ADRs, EDRs and GDRs. ADRs represent the right to receive
securities of foreign issuers deposited in a domestic bank or a foreign
correspondent bank. Prices of ADRs are quoted in U.S. dollars, and ADRs are
traded in the United States on exchanges or over-the-counter and are sponsored
and issued by domestic banks. ADRs do not eliminate all the risk inherent in
investing in the securities of foreign issuers. To the extent that a Portfolio
acquires ADRs through banks that do not have a contractual relationship with the
foreign issuer of the security underlying the ADR to issue and service such
ADRs, there may be an increased possibility that the Portfolio would not become
aware of and be able to respond to corporate actions such as stock splits or
rights offerings involving the foreign issuer in a timely manner. In addition,
the lack of information may result in inefficiencies in the valuation of such
instruments. However, by investing in ADRs rather than directly in the stock of
foreign issuers, a Portfolio will avoid currency risks during the settlement
period for either purchases or sales. In general, there is a large, liquid
market in the United States for ADRs quoted on a national securities exchange or
the National Association of Securities Dealers national market system. The
information available for ADRs is subject to the accounting, auditing and
financial reporting standards of the domestic market or exchange on which they
are traded, which standards are more uniform and more exacting than those to
which many foreign issuers may be subject.

EDRs and GDRs are receipts evidencing an arrangement with a non-U.S. bank
similar to that for ADRs and are designed for use in non-U.S. securities
markets. EDRs and GDRs are not necessarily quoted in the same currency as the
underlying security.

Investments in Emerging Markets. The International Portfolio and the
Managed Portfolio may invest in securities of issuers located in countries with
emerging economies and or securities markets. These countries are located in the
Asia-Pacific region, Eastern Europe, Central and South America and Africa.
Political and economic structures in many of these countries may be undergoing
significant evolution and rapid development, and such countries may lack the
social, political and economic stability characteristic of more developed
countries. Certain of these countries may have in the past failed to recognize
private property rights and have at times nationalized or expropriated the
assets of private companies. As a result, the risks of foreign investment
generally including the risks of nationalization or expropriation of assets, may
be heightened. In addition, unanticipated political or social developments may
affect the values of the International Portfolio's investments in those
countries and the availability to the Portfolio of additional investments in
those countries.

15
<PAGE> 18

The small size and inexperience of the securities markets in certain of
these countries and the limited volume of trading in securities in those
countries may also make the International or Managed Portfolio's investments in
such countries illiquid and more volatile than investments in Japan or most
Western European countries, and a Portfolio may be required to establish special
custody or other arrangements before making certain investments in those
countries. There may be little financial or accounting information available
with respect to issuers located in certain of such countries, and it may be
difficult as a result to assess the value or prospects of an investment in such
issuers. The laws of some foreign countries may limit the ability of the
International or Managed Portfolio to invest in securities of certain issuers
located in those countries.

LOWER QUALITY DEBT INSTRUMENTS

The Bond and Managed Portfolios may invest up to 25% of the respective
Portfolio's total assets in lower quality debt instruments. These instruments
include bonds rated BB or lower by S&P or Ba or lower by Moody's (or comparable
unrated securities). Bonds with such ratings (or comparable unrated securities)
are commonly called "junk bonds," are subject to market risk, and are considered
speculative because of their financial risk. In some cases, such bonds may be
highly speculative, have poor prospects for reaching investment grade standing
and be in default. These bonds also may be more severely affected than some
other financial markets by economic recession or substantial interest rate
increases, by changing public perceptions of this market, or by legislation that
limits their use in connection with corporate reorganizations or limits their
tax or other advantages. In addition, lower quality debt instruments are more
likely to react to developments affecting market risk and financial risk than
are higher quality debt instruments, which react primarily to movements in the
general level of interest rates. As a result, investment in such bonds will
entail greater speculative risks than those associated with investment in
investment-grade bonds (i.e., bonds rated BBB or higher by S&P or Baa or higher
by Moody's). See the SAI for more information on the risks associated with these
securities.

REPURCHASE AGREEMENTS

All of the Portfolios may enter into repurchase agreements with member
banks of the Federal Reserve system or with dealers in U.S. Government
Securities under which a Portfolio purchases a security from a seller, with the
understanding that the seller will repurchase the security at a mutually agreed
upon price and date (ordinarily a week or less). The resale price generally
exceeds the purchase price by an amount that reflects an agreed upon market
interest rate for the term of the repurchase agreement. The primary risk is
that, if the seller defaults, a Portfolio might suffer a loss to the extent that
the proceeds from the sale of the underlying securities and other collateral
held by that Portfolio in connection with the related repurchase agreement are
less than the repurchase price. In addition, in the event of bankruptcy of the
seller or failure of the seller to repurchase the securities as agreed, that
Portfolio could suffer losses, including loss of interest on or principal of the
security and costs associated with delay and enforcement of the repurchase
agreement. The Portfolios have adopted standards for the parties with whom they
will enter into repurchase agreements that they believe are reasonably designed
to assure that the party presents no serious risk of becoming involved in
bankruptcy proceedings within the time frame contemplated by the repurchase
agreement. No Portfolio will enter into a repurchase agreement with Provident
Mutual, PLACA, NLIC or SAC.

WHEN-ISSUED SECURITIES AND DELAYED DELIVERY SECURITIES

Each Portfolio may purchase securities on a when-issued or delayed delivery
basis in an amount up to 10% of such Portfolio's net assets. When-issued
securities transactions arise when securities are purchased by a Portfolio with
payment and delivery taking place on a future date determined at the time of
entering into the transaction (transaction date) in order to secure what is
considered to be an advantageous price and yield to the Portfolio on the
transaction date. Once a Portfolio commits to purchase securities on a
when-issued or delayed delivery basis, it records the transaction and thereafter
reflects the daily value of such securities in determining its net asset value.
Although a Portfolio will generally purchase when-issued securities with the
intention of acquiring those securities for its portfolio, the Portfolio may
dispose of a when-issued security

16
<PAGE> 19

prior to settlement if the Adviser deems it advantageous to do so. For all
when-issued securities transactions, the Fund's custodian bank will hold and
maintain in a segregated account until the settlement date, cash or fully liquid
securities of the Portfolio with a market value, determined daily, equal to or
greater than such commitments. If a Portfolio elects to dispose of the right to
acquire a when-issued security prior to its acquisition, it could experience a
gain or loss on the security due to market fluctuation.

BORROWING

Each of the Portfolios may borrow money from banks as a temporary measure
for emergency purposes, or as necessary for clearance of securities
transactions, or to permit the transfer of funds for various purposes without
interfering with the orderly liquidation of securities in the Portfolio. For the
International Portfolio, such borrowing is limited to 20% of the market value of
that Portfolio's total assets at the time such borrowing is made. For the other
Portfolios, such borrowing is limited to 5% of the market value of the
respective Portfolio's total assets at the time such borrowing is made. No
Portfolio will borrow money for leveraging purposes, and no Portfolio will
purchase additional securities while its borrowings exceed the above specified
limits. As required by the Investment Company Act of 1940, each Portfolio will
maintain continuous asset coverage of at least 300% of the amount borrowed. In
the event that a Portfolio's asset coverage falls below 300%, the Portfolio may
be required to sell securities within three days to reduce the amount of its
borrowing and restore the 300% asset coverage. Such sales of securities may
occur at a time that is disadvantageous for a Portfolio.

REVERSE REPURCHASE AGREEMENTS

The Money Market and Managed Portfolios may enter into reverse repurchase
agreements with banks and broker-dealers. These agreements have the
characteristics of borrowing and involve the sale of securities held by a
Portfolio with an agreement to repurchase the securities at an agreed upon date
and price that reflects a rate of interest paid for the use of funds for the
period. Such transactions are advantageous only if the Portfolios have the
opportunity to earn a greater rate of interest on the cash derived from the
transaction than the interest cost of obtaining that cash. The Portfolios may be
unable to realize a rate of return from the use of the proceeds equal to or
greater than the interest expense of the repurchase agreement. Thus, the
Portfolios intend to enter into such agreements only when it appears
advantageous to do so. The use of reverse repurchase agreements may magnify any
increase or decrease in the value of the Portfolios' investments. The
Portfolios' custodian will maintain in a segregated account, fully liquid
securities of each Portfolio that have a value equal to or greater than the
respective Portfolio's commitments under reverse repurchase agreements. The
value of securities subject to reverse repurchase agreements will not exceed 10%
of the value of the respective Portfolio's total assets. Under no circumstances
will either Portfolio enter into a reverse repurchase agreement with Provident
Mutual, PLACA, NLIC or SAC.

COVERED CALL OPTIONS

The Growth, Aggressive Growth and Managed Portfolios may engage in writing
(selling) covered call option contracts. Covered call option contracts are
option contracts where the Portfolio owns the securities subject to the option
so long as the option is outstanding. Writing covered call options may generate
income for the Portfolios. To the extent income is generated, writing covered
call options generally will help to achieve the Growth Portfolio's secondary
objective of a reasonable level of income, but does not further that Portfolio's
primary objective of achieving intermediate and long-term growth of capital,
except to the extent that it "hedges" against capital losses. The investment
program for the Aggressive Growth Portfolio is expected to produce only modest
current income, if any, and such income will not be a basic part of the
Portfolio's objective but will be merely incidental. The Portfolios may close
out a position acquired through writing a call option by purchasing a call
option on the same security with the same exercise price and expiration date as
the call option previously written on the security. See the SAI for a further
description of the risks and features of these instruments.

17
<PAGE> 20

MANAGEMENT

DIRECTORS

The Fund's board of directors is responsible for the overall administration
of the Fund's affairs including deciding matters of general policy and reviewing
the actions of the Advisers, the custodian, and accounting and administrative
services providers. Information about the directors and officers of the Fund is
provided in the SAI.

ADVISERS

Under the terms of each investment advisory agreement, the Advisers, at
their own expense and subject to the supervision of the Fund's board of
directors, provides the appropriate Portfolio(s) with investment advice and
manages the investment and reinvestment of a Portfolio's assets. The Advisers
also perform research services and evaluate statistical and financial data
relevant to a Portfolio's investment policies, and provide the Fund's directors
with regular reports as to a Portfolio's overall investment plan, schedule of
investments and other assets, and recent purchases and sales by a Portfolio. The
compensation (as a percentage of each Portfolio's average daily net assets) paid
monthly by the Fund to the Advisers is described in the table below.

Growth Portfolio, Money Market, Bond, Managed, and Aggressive Growth
Portfolios. Sentinel Advisors Company serves as investment adviser for the
Money Market, Bond, Managed, and Aggressive Growth Portfolios pursuant to an
investment advisory agreement with the Fund that became effective on March 1,
1993 with respect to the Bond, Managed, and Aggressive Growth Portfolios, and on
April 25, 1996 with respect to the Money Market Portfolio. Respecting the Growth
Portfolio, SAC serves as investment adviser pursuant to an investment advisory
agreement with the Fund effective May 1, 1997. Prior to May 1, 1997, Newbold's
Asset Management, Inc., served as investment adviser for the Growth Portfolio.
SAC is a general partnership owned and controlled by Sentinel Advisors, Inc., an
indirectly wholly-owned subsidiary of National Life Insurance Company ("National
Life"); Providentmutual Management Co., Inc., an indirectly wholly-owned
subsidiary of Provident Mutual; HTK of Delaware, Inc., a wholly-owned subsidiary
of The Penn Mutual Life Insurance Company ("Penn Mutual"); and Sentinel
Management Company, a partnership of wholly-owned subsidiaries of National Life,
Provident Mutual and Penn Mutual, which is SAC's Managing General Partner. SAC
is located at National Life Drive, Montpelier, Vermont 05604.

International Portfolio. Providentmutual Investment Management Company
("PIMC") serves as investment adviser for the International Portfolio pursuant
to an investment advisory agreement with the Fund that became effective on
November 1, 1991. PIMC was incorporated in Pennsylvania on May 9, 1983 and is an
indirect, wholly-owned subsidiary of Provident Mutual, an insurance company
providing individual and group life insurance, annuities, and accident and
health insurance. PIMC is located at 1050 Westlakes Drive, Berwyn, Pennsylvania
19312.

Effective July 18, 1994, PIMC entered into an investment sub-advisory
agreement with The Boston Company Asset Management, Inc., One Boston Place,
Boston, MA 02108. Pursuant to the investment sub-advisory agreement, TBC,
subject to monitoring by PIMC and supervision by the Fund's board of directors,
manages the investment and reinvestment of the International Portfolio's assets.
TBC is a Massachusetts corporation and a wholly-owned subsidiary of The Boston
Company, Inc., which is a wholly-owned subsidiary of the Mellon Bank
Corporation. TBC is compensated monthly by PIMC for serving as investment sub-
adviser to the International Portfolio as indicated in the table below.

18
<PAGE> 21

COMPENSATION OF ADVISERS

<TABLE>
<CAPTION>
1996 ANNUAL RATE (AS % OF MAXIMUM ANNUAL RATE
AVERAGE DAILY NET (AS % OF AVERAGE
PORTFOLIO ADVISER ASSETS)* DAILY NET ASSETS)
---------------------- -------------- ------------------------- -------------------
<S> <C> <C> <C>
Growth................ NAM .33% 0.50%
Money Market.......... SAC 25%** 0.25%
Bond.................. SAC .35% 0.35%
Managed............... SAC .40% 0.40%
Aggressive Growth..... SAC .47% 0.50%
International......... PIMC .375% 0.75%
International......... TBC .375% 0.375%
(sub-adviser)
</TABLE>

- ---------------
* With respect to each of the Portfolios except the Money Market Portfolio, the
fee payable to the Adviser is graduated so that increases in the respective
Portfolio's net assets may result in a lower fee and decreases in the
Portfolio's net assets may result in a higher fee. The maximum annual rate
payable to each Adviser is indicated by the right-hand column above. See
"Management of the Fund" in the SAI for further information.

** During 1995 and through May 1, 1996, PIMC served as investment adviser for
the Money Market Portfolio and received compensation from the Fund at this
effective annual rate.

PORTFOLIO MANAGERS

The following persons serve as portfolio managers to the Growth, Bond,
Managed, Aggressive Growth, and International Portfolios, respectively.

Growth Portfolio. Portfolio management for the Growth Portfolio is
provided by Keniston P. Merrill. Mr. Merrill has been associated with SAC and
its predecessor since 1982, serving as Chief Executive Officer since 1986. He is
also Executive Vice President of National Life Insurance Company ("NLIC"). Mr.
Merrill has a total of over 38 years experience as an investment professional.

Money Market Portfolio. The Money Market Portfolio is managed by Richard
D. Temple and Darlene A. Coppola. Mr. Temple is Vice President of SAC and has
been employed by SAC or its affiliates since 1969. Ms. Coppola is Money Market
Trader at SAC and has been employed by SAC or its affiliates since 1973.

Bond Portfolio. The Bond Portfolio's portfolio manager is Richard D.
Temple, Vice President of SAC. He has been the portfolio manager of the Bond
Fund of the Sentinel Group of Funds since 1985, and has been employed by SAC or
its affiliates since 1969.

Managed Portfolio. The Managed Portfolio's portfolio manager is Rodney A.
Buck, Senior Vice President of SAC. Mr. Buck is a Chartered Financial Analyst,
and has been the portfolio manager of the Balanced Fund of the Sentinel Group of
Funds since 1982. Mr. Buck has been employed by SAC or its affiliates since
1972.

Aggressive Growth Portfolio. Portfolio management for the Aggressive
Growth Portfolio is provided by a team of investment professionals let by
Keniston P. Merrill. Mr. Merrill has been associated with SAC and its
predecessor since 1982, serving as Chief Executive Officer since 1986. He is
also Executive Vice President of NLIC. Mr. Merrill has a total of over 38 years
experience as in investment professional.

International Portfolio. Sandor Cseh, Senior Vice President and Director
of International of TBC, is the portfolio manager for the International
Portfolio. Sandor Cseh has over 21 years experience in investment management.

EXPENSES

19
<PAGE> 22

expenses, excluding investment advisory fees, in excess of an annual rate of
0.40% of the average daily net asset value of each of the Growth, Money Market,
Bond, Managed, and Aggressive Growth Portfolios, and in excess of an annual rate
of 0.75% of the average daily net asset value of the International Portfolio.
For fiscal year 1996, each Portfolio bore total expenses of the average daily
net assets of the Portfolio, net of the reimbursement by Provident Mutual (and
the fee waiver by the administrator for the International Portfolio), as
follows: Growth Portfolio 0.50%; Money Market Portfolio 0.44%; Bond Portfolio
0.56%; Managed Portfolio 0.60%; Aggressive Growth Portfolio 0.68%; and
International Portfolio 1.05%.

BROKERAGE ALLOCATION

The Advisers place all portfolio orders on behalf of each Portfolio that
they advise and attempt, in all cases, to obtain the most favorable prices and
executions. The Advisers may place orders with brokers that are affiliated
persons of the Fund pursuant to procedures established by the board of
directors. However, in no event will persons affiliated with the Fund deal with
the Fund as principal in the purchase and sale of the Fund's portfolio
securities.

ADMINISTRATIVE SERVICES

Provident Financial Processing Corporation ("PFPC") provides certain
administrative services to the Fund pursuant to an administration agreement
between PFPC and the Fund. Such services include maintaining the Portfolios'
books and records, preparing governmental filings, statements, returns, and
stockholder reports, and computing net asset value and daily dividends. For such
services, PFPC is paid a fee at an annual rate of 0.10% of each Portfolio's net
assets, computed daily and paid monthly, with a minimum aggregate annual fee
with respect to all eight Portfolios of $390,000. PFPC is a wholly-owned
subsidiary of PNC Bank.

DESCRIPTION OF THE FUND'S SHARES

GENERAL

Each of the Fund's eight Portfolios represents a separate class of shares
of the Fund's common stock. The Fund may establish additional portfolios in the
future and may allocate its shares to such new portfolios. Portfolio shares have
equal rights with respect to voting, redemptions, dividends, distributions, and
liquidations relating to that Portfolio. Portfolio shares, when issued, are
fully paid and nonassessable and have no preference, preemptive conversion,
exchange or similar rights. Fund shares have no cumulative voting rights.

Based on current federal securities law requirements, the Fund expects that
its insurance company shareholders will offer their life insurance policy owners
and annuity contract owners the opportunity to instruct such shareholders as to
how Fund shares allocable to their life insurance policies and annuity contracts
will be voted regarding certain matters, such as the approval of investment
advisory agreements. Fund shares not attributable to life insurance policies or
annuity contracts or for which no timely instructions are received by insurance
company shareholders, are voted in the same proportion as the voting
instructions that are received for all policies or contracts participating in
each Portfolio. The voting instructions received from policy or contract owners
may be disregarded in certain circumstances that are described in the
prospectuses for the separate accounts that invest in the Fund.

As a Maryland corporation, the Fund is not required to hold regular annual
shareholder meetings. The Fund is, however, required to hold shareholder
meetings for such purposes as, for example: (1) approving certain agreements as
required by the Act, (2) changing fundamental investment objectives and
investment restrictions of any Portfolio, and (3) filling vacancies on the board
of directors in the event that less than a majority of the directors were
elected by shareholders. The Fund has the obligation to assist in shareholder
communications.

20
<PAGE> 23

DETERMINATION OF NET ASSET VALUE

The net asset value per share of each Portfolio is normally determined once
daily as of the close of regular trading on the New York Stock Exchange,
currently 4:00 p.m. New York time, on each day when the New York Stock Exchange
is open for business, except as noted below. The New York Stock Exchange is
scheduled to be open Monday through Friday throughout the year, except for
certain federal and other holidays. The net asset value of each Portfolio is
computed by dividing the sum of the value of the Portfolio's securities, cash,
and other assets, minus all liabilities, by the total number of outstanding
shares of the Portfolio.

The value of each Portfolio's securities and assets, except those of the
Money Market Portfolio and certain short-term debt securities held by any of the
other Portfolios, is determined on the basis of their market values. All of the
securities and assets of the Money Market Portfolio and short-term debt
securities having remaining maturities of sixty days or less held by any of the
other Portfolios are valued by the amortized cost method, which approximates
market value. Investments for which market quotations are not readily available
are valued at their fair value as determined in good faith by, or under
authority delegated by, the Fund's board of directors. See "Determination of Net
Asset Value" in the SAI.

OFFER, PURCHASE AND REDEMPTION OF SHARES

Shares of the Fund are not available directly to the public. Currently,
shares of the Fund are sold, without sales charge, at each Portfolio's net asset
value per share, only to variable life insurance and variable annuity separate
accounts of Provident Mutual and PLACA, and to variable life insurance separate
accounts of NLIC. In the future, the Fund may offer shares of one or more of the
Portfolios (including new portfolios that might be added to the Fund) to other
separate accounts of Provident Mutual, PLACA or NLIC to support variable life
insurance policies or variable annuity contracts, or shares may also be sold to
other insurance company separate accounts to fund variable life insurance
policies and variable annuity contracts. The price per share is based on the
next daily calculation of net asset value after an order is placed.

Pursuant to a distribution agreement with the Fund, 1717 Capital Management
Company ("1717") (formerly PML Securities Company) serves as the principal
underwriter for the Fund's shares. 1717 is located at 220 Continental Drive,
Christiana Executive Campus, Newark, Delaware 19713.

Shares of the Portfolios are sold in a continuous offering and are
authorized to be offered to insurance company separate accounts to support
variable life insurance policies and variable annuity contracts. Net premiums or
net purchase payments under the respective policy or contract are placed in one
or more subaccounts of a separate account and the assets of each such separate
account are invested in the shares of the Portfolio corresponding to that
subaccount. A separate account purchases and redeems shares of the Portfolios
for its subaccounts at net asset value without sales or redemption charges.

On each day that a Portfolio's net asset value is calculated, a separate
account transmits to the Fund any orders to purchase or redeem shares of the
Portfolio(s) based on the premiums, purchase payments, redemption (surrender)
requests, and transfer requests from policy owners, contract owners, annuitants,
and beneficiaries that have been processed on that day. A separate account
purchases and redeems shares of each Portfolio at the Portfolio's net asset
value per share calculated as of the same day, although such purchases and
redemptions may be executed the next morning. Money received by the Fund from a
separate account for the purchase of shares of the International Portfolio may
not be invested by that Portfolio until the day following the execution of such
purchases.

Please refer to the separate prospectus for each separate account and its
related policy or contract for a more detailed description of the procedures
whereby a policy owner, contract owner, annuitant, or beneficiary may allocate
his or her interest in a separate account to a subaccount using the shares of
one of the Portfolios as an underlying investment medium.

21
<PAGE> 24

DIVIDENDS, DISTRIBUTIONS, AND TAXES

Each Portfolio intends to qualify and elect to be taxed as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). Under those provisions, each Portfolio will not be subject
to Federal income tax on that part of its investment company taxable income and
realized net capital gains that it distributes to its shareholders. Therefore,
the Fund intends to distribute substantially all of such income and gains to its
shareholders to avoid any Federal income tax liability.

Shares of the Portfolios are offered only to insurance company separate
accounts. Under the Code, no tax is imposed on an insurance company with respect
to income of a qualifying separate account properly allocable to the value of
eligible variable life insurance policies or variable annuity contracts. Please
refer to the appropriate tax disclosure in the respective prospectuses for a
separate account and its related policy or contract for more information on the
taxation of life insurance companies, separate accounts, as well as the tax
treatment of variable life insurance policies and variable annuity contracts and
the holders thereof.

Each Portfolio intends to comply with the diversification requirements
imposed by section 817(h) of the Code and the regulations thereunder. These
requirements are in addition to the diversification requirements imposed on each
Portfolio by Subchapter M and the Investment Company Act of 1940. These
requirements place certain limitations on the assets of each separate account
that may be invested in securities of a single issuer, and because section
817(h) and the regulations thereunder treat each Portfolio's assets as assets of
the related separate account, these limitations also apply to each Portfolio's
assets that may be invested in securities of a single issuer. Failure of a
Portfolio to satisfy the section 817(h) requirements would result in taxation of
the separate accounts, the insurance companies, the insurance policies and/or
the annuity contracts, and tax consequences to the holders thereof, other than
as described in the respective prospectuses for the policies and the annuity
contracts.

Dividends of investment income of the Growth, Bond, and Managed Portfolios
will be declared and paid quarterly, and dividends of capital gains for those
Portfolios will be declared and paid annually. For the Money Market Portfolio
dividends of both investment income and capital gains will be declared daily and
paid monthly. For the Aggressive Growth and International Portfolios, both
dividends will be declared and paid annually. All paid dividends will be
reinvested in full and fractional shares of the respective Portfolio unless the
shareholder(s) elects to receive such distribution in cash.

For more information about the tax status of the Fund, see "Taxes" in the
SAI.

OTHER INFORMATION

CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Pursuant to a custody agreement with the Fund, PNC Bank, located at Broad &
Chestnut Streets, Philadelphia, Pennsylvania 19101, serves as custodian of the
Fund's assets. Citibank, N.A., located at 111 Wall Street, New York, New York
10043, serves as custodian of the foreign assets of the International Portfolio.
Foreign securities acquired by the International Portfolio will be maintained in
the sub-custody or either foreign banks or trust companies that are members of
Citibank's Global Custody Network or foreign depositories used by such members.
Pursuant to a transfer agency agreement with the Fund, PFPC, which is located at
103 Bellevue Parkway, Wilmington, Delaware 19809, serves as the Fund's transfer
agent and dividend disbursing agent.

22
<PAGE> 25

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

MARKET STREET FUND, INC.
Prospectus
May 1, 1997

The International Portfolio seeks long-term growth of capital
principally through investments in a diversified portfolio of marketable
equity securities of established non-United States companies.

The Common Stock Portfolio seeks a combination of long-term growth of
capital and current income with relatively low risk. This Portfolio pursues
its objective by investing in common stocks of a diversified group of
well-established companies.

The Sentinel Growth Portfolio seeks long-term growth of capital. This
Portfolio pursues its objective by investing in equity securities of
companies having growth potential believed by its investment adviser to be
more favorable than that of the U.S. economy as a whole.

THERE CAN BE NO ASSURANCE THAT ANY PORTFOLIO WILL ACHIEVE ITS INVESTMENT
OBJECTIVE OR OBJECTIVES.

MARKET STREET FUND, INC.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction........................................................................... 3
Financial Highlights................................................................... 4
Investment Objectives and Policies..................................................... 11
The Money Market Portfolio........................................................ 11
The Bond Portfolio................................................................ 12
The Managed Portfolio............................................................. 13
The Aggressive Growth Portfolio................................................... 13
The International Portfolio....................................................... 14
The Common Stock Portfolio........................................................ 15
The Sentinel Growth Portfolio..................................................... 15
Investment Techniques and Risks........................................................ 15
Temporary Defensive Positions..................................................... 15
Short-Term Trading................................................................ 15
Foreign Securities................................................................ 15
Lower Quality Debt Instruments.................................................... 17
Repurchase Agreements............................................................. 17
When-Issued Securities and Delayed Delivery Securities............................ 18
Borrowing......................................................................... 18
Reverse Repurchase Agreements..................................................... 18
Covered Call Options.............................................................. 19
Management............................................................................. 19
Directors......................................................................... 19
Advisers.......................................................................... 19
Compensation of Advisers.......................................................... 20
Portfolio Managers................................................................ 20
Expenses.......................................................................... 21
Brokerage Allocation.............................................................. 21
Administrative Services........................................................... 21
Description of the Fund's Shares....................................................... 21
General........................................................................... 21
Determination of Net Asset Value.................................................. 22
Offer, Purchase and Redemption of Shares.......................................... 22
Dividends, Distributions, and Taxes............................................... 23
Other Information...................................................................... 24
Custodian, Transfer Agent and Dividend Disbursing Agent........................... 24
</TABLE>

2
<PAGE> 27

INTRODUCTION

Pursuant to separate investment advisory agreements with the Fund and
subject to the authority of the Fund's board of directors: Providentmutual
Investment Management Company ("PIMC") serves as investment adviser to the
International Portfolio; and Sentinel Advisors Company ("SAC") serves as
investment adviser to the Money Market, Bond, Managed, Aggressive Growth, Common
Stock, and Sentinel Growth Portfolios. PIMC has engaged The Boston Company Asset
Management, Inc. ("TBC") as the investment sub-adviser to provide day-to-day
portfolio management for the International Portfolio. PIMC, SAC, and TBC are
each referred to herein as the "Adviser" or together as the "Advisers," as
appropriate.

3
<PAGE> 28

FINANCIAL HIGHLIGHTS

The following tables give information regarding income, expenses and
capital changes in the Money Market, Bond, Managed, Aggressive Growth and
International Portfolios attributable to a Portfolio share outstanding
throughout the periods indicated. The Managed Portfolio commenced operations on
December 12, 1985; the Aggressive Growth Portfolio commenced operations on May
1, 1989; the International Portfolio commenced operations on November 1, 1991;
the Sentinel Growth and Common Stock Portfolios commenced operations on March
10, 1996. The information in the tables has been derived from the financial
statements which have been audited by Coopers & Lybrand L.L.P., independent
accountants, as stated in their report on the Financial Statements of the Fund
which are included in the Statement of Additional Information. The information
in the following tables should be read in conjunction with the Financial
Statements and related notes.

Selected data for a share of capital stock outstanding throughout the
periods:

<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
--------------------------------------------------------------------------------------------------------------
01/01/96(A) 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88 01/01/87
TO TO TO TO TO TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87
----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period......... $ 1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
INCOME FROM
INVESTMENT
OPERATIONS:
Net Investment
Income....... .05 .05 .04 .03 .03 .06 .07 .08 .07 .06
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from
investment
operations.. .05 .05 .04 .03 .03 .06 .07 .08 .07 .06
LESS
DISTRIBUTIONS:
Dividends to
shareholders
from net
investment
income....... (.05) (.05) (.04) (.03) (.03) (.06) (.07) (.08) (.07) (.06)
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
Total
Distributions... (.05) (.05) (.04) (.03) (.03) (.06) (.07) (.08) (.07) (.06)
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of
period......... $ 1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total
return..... 5.15% 5.61% 3.81% 2.59% 3.18% 5.69% 8.00% 9.02% 7.19% 6.14%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end
of period
$(000)....... 54,197 34,615 21,040 12,506 8,138 7,047 5,411 4,632 4,219 2,914
Ratios of
expenses to
average net
assets(b).... .44% .50% .55% .65% .65% .53% .50% .55% .65% .65%
Ratios of net
investment
income to
average net
assets....... 5.03% 5.47% 3.86% 2.56% 3.12% 5.49% 7.72% 8.66% 7.03% 6.00%
</TABLE>

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

(a) On May 1, 1996 the investment adviser was changed from Providentmutual
Investment Management Company to Sentinel Advisors Company.

See accompanying notes to financial statements.

4
<PAGE> 29

Selected data for a share of capital stock outstanding throughout the
periods:

<TABLE>
<CAPTION>
BOND PORTFOLIO
--------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94(A) 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89(B)
TO TO TO TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $11.00 $ 9.73 $11.21 $10.73 $10.80 $10.04 $10.09 $ 9.89
-------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income....... .63 .65 .62 .60 .64 .77 .79 .82
Net realized and unrealized
gain (loss) on
investments............... (.34) 1.27 (1.23) .48 (.03) .57 (.05) .20
-------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............ .29 1.92 (.61) 1.08 .61 1.34 .74 1.02
-------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends to shareholders
from net investment
income.................... (.62) (.65) (.60) (.60) (.68) (.58) (.79) (.82)
Dividends to shareholders
from net capital gains.... (.00) (.00) (.27) (.00) (.00) (.00) (.00) (.00)
-------- -------- -------- -------- -------- -------- -------- --------
Total distributions..... (.62) (.65) (.87) (.60) (.68) (.58) (.79) (.82)
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
period...................... $10.67 $11.00 $ 9.73 $11.21 $10.73 $10.80 $10.04 $10.09
====== ====== ====== ====== ====== ====== ====== ======
Total return............ 2.86% 20.45% (5.62)% 10.32% 5.95% 13.93% 7.70% 10.57%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
$(000).................... 17,087 14,402 10,098 10,160 6,710 4,365 3,711 3,311
Ratios of expenses to
average net assets(c)..... 56% .60% .68% .75% .75% .63% .60% .62%
Ratios of net investment
income to average net
assets.................... 6.08% 6.36% 6.14% 5.53% 6.34% 7.58% 8.00% 8.28%
Portfolio turnover rate..... 133% 206% 151% 71% 4% 32% 53% 9%

01/01/88 01/01/87
TO TO
12/31/88 12/31/87
-------- --------
<S> <C> <C>
Net asset value, beginning of
period...................... $10.02 $10.93
-------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income....... .76 .65
Net realized and unrealized
gain (loss) on
investments............... (.13) (.91)
-------- --------
Total from investment
operations............ .63 (.26)
-------- --------
LESS DISTRIBUTIONS:
Dividends to shareholders
from net investment
income.................... (.76) (.65)
Dividends to shareholders
from net capital gains.... (.00) (.00)
-------- --------
Total distributions..... (.76) (.65)
-------- --------
Net asset value, end of
period...................... $ 9.89 $10.02
====== ======
Total return............ 6.45% (2.37)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
$(000).................... 2,473 1,869
Ratios of expenses to
average net assets(c)..... .65% .65%
Ratios of net investment
income to average net
assets.................... 7.74% 6.99%
Portfolio turnover rate..... .13% 1.64%
</TABLE>

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

(a) On March 1, 1993, the investment adviser was changed from ProvidentMutual
Management Company, Inc. to Sentinel Advisors Company.

(b) On May 1, 1989, the investment adviser was changed from Providentmutual
Investment Management Company to Sigma Asset Management, Inc. (renamed
ProvidentMutual Management Company, Inc.).

See accompanying notes to financial statements.

5
<PAGE> 30

FINANCIAL HIGHLIGHTS -- CONTINUED

Selected data for a share of capital stock outstanding throughout the
periods:

<TABLE>
<CAPTION>
MANAGED PORTFOLIO
-----------------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94(A) 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89(B) 01/01/88 01/01/87
TO TO TO TO TO TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89 12/31/88 12/31/87
-------- -------- ----------- -------- -------- -------- -------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset
value,
beginning of
period...... $ 14.19 $11.94 $ 13.27 $12.25 $11.40 $ 9.81 $11.37 $ 10.63 $10.12 $10.68
-------- -------- ----------- -------- -------- -------- -------- ----------- -------- --------
INCOME FROM
INVESTMENT
OPERATIONS:
Net
investment
income.... .51 .55 .53 .40 .44 .51 .57 .59 .50 .52
Net realized
and
unrealized
gain
(loss) on
investments... 1.07 2.28 (.77) 1.00 .88 1.47 (1.53) .89 .51 (.55)
-------- -------- ----------- -------- -------- -------- -------- ----------- -------- --------
Total from
investment
operations.. 1.58 2.83 (.24) 1.40 1.32 1.98 (.96) 1.48 1.01 (.03)
-------- -------- ----------- -------- -------- -------- -------- ----------- -------- --------
LESS
DISTRIBUTIONS:
Dividends to
shareholders
from net
investment
income.... (.51) (.57) (.49) (.38) (.47) (.39) (.57) (.61) (.50) (.52)
Dividends to
shareholders
from net
capital
gains..... (.58) (.01) (.60) (.00) (.00) (.00) (.03) (.13) (.00) (.01)
-------- -------- ----------- -------- -------- -------- -------- ----------- -------- --------
Total
distributions..(1.09) (.58) (1.09) (.38) (.47) (.39) (.60) (.74) (.50) (.53)
-------- -------- ----------- -------- -------- -------- -------- ----------- -------- --------
Net asset
value, end
of period... $ 14.68 $14.19 $ 11.94 $13.27 $12.25 $11.40 $ 9.81 $ 11.37 $10.63 $10.12
======= ====== ======== ====== ====== ====== ====== ========= ====== ======
Total
return... 11.88% 24.43% (1.82)% 11.62% 11.96% 20.49% (8.61)% 14.65% 10.60% (0.54)%
RATIOS/SUPPLEMENTAL
DATA:
Net assets,
end of
period
$(000).... 43,431 36,002 29,363 28,984 15,946 12,564 10,197 10,028 8,015 5,991
Ratios of
expenses
to average
net
assets(c)... .60% .66% .67% .80% .80% .68% .65% .65% .65% .65%
Ratios of
net
investment
income to
average
net
assets.... 3.68% 4.22% 4.34% 3.36% 3.88% 4.74% 5.48% 5.74% 4.89% 5.45%
Portfolio
turnover
rate...... 106% 130% 75% 89% 32% 51% 47% 23% 35% 47%
Average
commission
rate(d)..... $ 0.0600 N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>

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

See accompanying notes to financial statements.

6
<PAGE> 31

Selected data for a share of capital stock outstanding throughout the
periods:

<TABLE>
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO
--------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94(A) 01/01/93(A) 01/01/92 01/01/91 01/01/90 05/01/89(B)
TO TO TO TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/31/89
-------- ----------- ----------- -------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............... $ 17.38 $ 15.45 $ 15.45 $14.72 $ 16.68 $10.67 $ 9.87 $ 10.00
-------- ----------- ----------- -------- ----------- -------- -------- -----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment
income............. .17 .20 (.01) (.01) .03 .08 .03 .09
Net realized and
unrealized gain
(loss) on
investments........ 3.03 1.86 .01 .77 .38 5.93 1.04 .25
-------- ----------- ----------- -------- ----------- -------- -------- -----------
Total from
investment
operations....... 3.20 2.06 .00 .76 .41 6.01 1.07 .34
-------- ----------- ----------- -------- ----------- -------- -------- -----------
LESS DISTRIBUTIONS:
Dividends to
shareholders from
net investment
income............. (.19) (.00) .00 (.03) (.07) (.00) (.03) (.09)
Dividends to
shareholders from
net capital
gains.............. (1.87) (.13) .00 (.00) (2.30) (.00) (.24) (.38)
-------- ----------- ----------- -------- ----------- -------- -------- -----------
Total
distributions.... (2.06) (.13) .00 (.03) (2.37) (.00) (.27) (.47)
-------- ----------- ----------- -------- ----------- -------- -------- -----------
Net asset value, end of
period............... $ 18.52 $ 17.38 $ 15.45 $15.45 $ 14.72 $16.68 $10.67 $ 9.87
======== =========== =========== ======== =========== ======== ======== ===========
Total return(c).... 21.00% 13.48% 0% 5.20% 2.58% 56.33% 10.77% 8.31%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period $(000)...... 34,098 23,822 15,430 12,223 8,029 2,751 772 568
Ratios of expenses to
average net assets
(annualized)(d).... .68% .76% .86% .90% .90% .79% .75% .50%
Ratios of net
investment income
to average net
assets
(annualized)....... 1.14% 1.32% (.10)% (.07)% .37% .80% .27% 1.00%
Portfolio turnover... 47% 89% 60% 60% 18% 95% 27% 32%
Average commission
rate(e)............ $0.0600 N/A N/A N/A N/A N/A N/A N/A
</TABLE>

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

See accompanying notes to financial statements.

7
<PAGE> 32

FINANCIAL HIGHLIGHTS -- CONTINUED

Selected data for a share of capital stock outstanding throughout the
periods:

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

(a) Commencement of operations.
(b) Total returns for periods less than one year are annualized.

See accompanying notes to financial statements.

8
<PAGE> 33

Selected data for a share of capital stock outstanding throughout the
periods:

<TABLE>
<CAPTION>
COMMON STOCK PORTFOLIO
----------------------------------------------------------------------------------------------------------------
03/18/96(A)
TO
12/31/96
-----------
<S> <C>
Net asset value,
beginning of
period........ $ 10.00
-----------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income...... .15
Net realized
and
unrealized
gain (loss)
on
investments... 1.26
-----------
Total from
investment
operations... 1.41
-----------
LESS
DISTRIBUTIONS:
Dividends to
shareholders
from net
investment
income...... (.10)
Dividends to
shareholders
from net
capital
gains....... (.00)
-----------
Total
distributions... (.10)
-----------
Net asset value,
end of
period........ $ 11.31
=========
Total
return.... 14.22%(c)
RATIOS/SUPPLEMENTAL
DATA:
Net assets,
end of
period
$(000)........... 6,565
Ratios of
expenses to
average net
assets
(annualized)(b).. .80%
Ratios of net
investment
income to
average net
assets
(annualized)... 1.82%
Portfolio
turnover....... 13%
Average
commission
rate(d).......... $0.0600
</TABLE>

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

(a) Commencement of operations.

(b) Expense ratio for the Common Stock Portfolio before reimbursement of
expenses by affiliated insurance company for the period ended December 31,
1996 was as follows: 1.43% (annualized).

(c) Total returns for periods less than one year are not annualized.
(d) Computed by dividing the total amount of commission paid by the total number
of shares purchased and sold during the period for which there was a
commission. This disclosure is required by the S.E.C. for all Financial
statements with fiscal years beginning after September 1, 1995.

See accompanying notes to financial statements.

9
<PAGE> 34

FINANCIAL HIGHLIGHTS -- CONTINUED

Selected data for a share of capital stock outstanding throughout the
periods:

<TABLE>
<CAPTION>
SENTINEL GROWTH PORTFOLIO
----------------------------------------------------------------------------------------------------------------
03/18/96(A)
TO
12/31/96
-----------
<S> <C>
Net asset value,
beginning of
period........ $ 10.00
-----------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income...... .05
Net realized
and
unrealized
gain (loss)
on
investments... 1.09
-----------
Total from
investment
operations... 1.14
-----------
LESS
DISTRIBUTIONS:
Dividends to
shareholders
from net
investment
income...... (.00)
Dividends to
shareholders
from net
capital
gains....... (.00)
-----------
Total
distributions... (.00)
-----------
Net asset value,
end of
period........ $ 11.14
=========
Total
return.... 11.40%(c)
RATIOS/SUPPLEMENTAL
DATA:
Net assets,
end of
period
$(000)...... 5,664
Ratios of
expenses to
average net
assets
(annualized)(a)... .90%
Ratios of net
investment
income to
average net
assets
(annualized)... .57%
Portfolio
turnover.... 75%
Average
commission
rate(d)....... $0.0594
</TABLE>

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

(a) Commencement of operations.

(b) Expense ratio for the Sentinel Growth Portfolio before reimbursement of
expenses by affiliated insurance company for the period ended December 31,
1996 was as follows: 1.51% (annualized).

See accompanying notes to financial statements.

10
<PAGE> 35

INVESTMENT OBJECTIVES AND POLICIES

THE MONEY MARKET PORTFOLIO

The investment objective of the Money Market Portfolio is to provide
maximum current income consistent with capital preservation and liquidity. The
Portfolio pursues this objective by investing in:

11
<PAGE> 36

Repurchase Agreements: Repurchase agreements with (1) banks or (2)
government securities dealers recognized as primary dealers by the Federal
Reserve System, provided that:

(b) the collateral consists of government securities or instruments
rated in the highest rating category by at least two nationally
recognized statistical rating organizations; and

Commercial Paper : Commercial paper consists of unsecured promissory
notes issued by corporations to finance short-term credit needs.

(2) in the case of an unrated instrument, determined by the Adviser
under the supervision of the board of directors to be of comparable quality
to the above; or

(3) issued by an issuer that has received a rating of the type
described in (1) above on other securities that are comparable in priority
and security to the instrument.

THE BOND PORTFOLIO

12
<PAGE> 37

THE MANAGED PORTFOLIO

THE AGGRESSIVE GROWTH PORTFOLIO

(2) securities of companies in new or emerging industries; and

(3) securities of new or unseasoned companies that the Adviser
believes have better than average earnings and appreciation potential.

13
<PAGE> 38

addition, pursuing an aggressive growth portfolio strategy may often result in a
higher than average portfolio turnover rate. Higher portfolio turnover results
in correspondingly increased brokerage expenses and other acquisition costs to
the Portfolio.

THE INTERNATIONAL PORTFOLIO

14
<PAGE> 39

These investment practices and attendant risks are described in "Investment
Techniques and Risks" below or "Investment Techniques and Risks" in the SAI.

THE COMMON STOCK PORTFOLIO

The investment objective of the Common Stock Portfolio is to seek a
combination of long-term growth of capital and current income with relatively
low risk. The Portfolio pursues its investment objective by investing in the
common stocks of a diversified group of well-established companies. The Adviser
selects portfolio securities based on the quality of the issuer and the
Adviser's appraisal of a stock's price in relation to its value. When
appropriate, the Portfolio also may invest in preferred stocks or debentures
convertible into common stocks.

THE SENTINEL GROWTH PORTFOLIO

The investment objective of the Sentinel Growth Portfolio is long-term
growth of capital. The Portfolio pursues its investment objective by investing
in equity securities of well-established companies having growth potential
believed by its Adviser to be more favorable than that of the U.S. economy as a
whole. In the Adviser's judgment, such companies generally have favorable growth
potential and experienced managements. Under normal market conditions, this
Portfolio will be fully invested in common stocks and securities convertible
into common stocks; however, the Portfolio may temporarily retain cash or invest
in fixed-income securities.

The Adviser favors growth potential rather than portfolio diversification
in selecting securities for the Portfolio. The Adviser does not use income as a
factor in selecting the Portfolio's investments. If the Adviser believes it to
be appropriate, up to 25% of the value of the Portfolio's total assets may be
invested in securities of companies within a single industry.

INVESTMENT TECHNIQUES AND RISKS

TEMPORARY DEFENSIVE POSITIONS

SHORT-TERM TRADING

FOREIGN SECURITIES

Foreign Securities Generally. Investments in the securities of foreign
issuers or investments in nondollar securities may offer potential benefits not
available from investments solely in securities of domestic issuers or dollar
denominated securities. Such benefits may include the opportunity to invest in
foreign issuers that

15
<PAGE> 40

appear to offer better opportunity for long-term capital appreciation or current
earnings than investments in domestic issuers, the opportunity to invest in
foreign countries with economic policies or business cycles different from those
of the United States, and the opportunity to reduce fluctuations in portfolio
value by taking advantage of foreign securities markets that do not necessarily
move in a manner parallel to U.S. markets.

Investing in non-dollar securities or in the securities of foreign issuers
involves significant risks that are not typically associated with investing in
U.S. dollar denominated securities or in securities of domestic issuers. Such
investments may be affected by changes in currency rates, changes in foreign or
U.S. laws, or restrictions applicable to such investments and in exchange
control regulations. For example, a decline in the currency exchange rate would
reduce the value of certain portfolio investments. In addition, if the exchange
rate for the currency in which a Portfolio receives interest payments declines
against the U.S. dollar before such interest is paid as dividends to
shareholders, the Portfolio may have to sell portfolio securities to obtain
sufficient cash to pay such dividends. As discussed in the SAI, the
International Portfolio may purchase or sell foreign currency and forward
foreign currency exchange contracts to hedge its foreign currency exposure;
however, such techniques also entail certain risks. Some foreign stock markets
may have substantially less volume than, for example, the New York Stock
Exchange and securities of some foreign issuers may be less liquid than
securities of comparable domestic issuers. Commissions and dealer mark-ups on
transactions in foreign investments may be higher than for similar transactions
in the United States. In addition, clearance and settlement procedures may be
different in foreign countries and, in certain markets, on certain occasions,
such procedures have been unable to keep pace with the volume of securities
transactions, thus making it difficult to conduct such transactions. For
example, delays in settlement could result in temporary periods when a portion
of the assets of a Portfolio are uninvested and no return is earned thereon. The
inability of a Portfolio to make intended investments due to settlement problems
could cause it to miss attractive investment opportunities. Inability to dispose
of portfolio securities or other investments due to settlement problems could
result either in losses to a Portfolio due to subsequent declines in value of
the portfolio investment or, if the Portfolio has entered into a contract to
sell the investment, could result in possible liability to the purchaser.

16
<PAGE> 41

securities exchange or the National Association of Securities Dealers national
market system. The information available for ADRs is subject to the accounting,
auditing and financial reporting standards of the domestic market or exchange on
which they are traded, which standards are more uniform and more exacting than
those to which many foreign issuers may be subject.

LOWER QUALITY DEBT INSTRUMENTS

REPURCHASE AGREEMENTS

17
<PAGE> 42

underlying securities and other collateral held by that Portfolio in connection
with the related repurchase agreement are less than the repurchase price. In
addition, in the event of bankruptcy of the seller or failure of the seller to
repurchase the securities as agreed, that Portfolio could suffer losses,
including loss of interest on or principal of the security and costs associated
with delay and enforcement of the repurchase agreement. The Portfolios have
adopted standards for the parties with whom they will enter into repurchase
agreements that they believe are reasonably designed to assure that the party
presents no serious risk of becoming involved in bankruptcy proceedings within
the time frame contemplated by the repurchase agreement. No Portfolio will enter
into a repurchase agreement with Provident Mutual, PLACA, NLIC or SAC.

WHEN-ISSUED SECURITIES AND DELAYED DELIVERY SECURITIES

Each Portfolio other than the Sentinel Growth and Common Stock Portfolios
may purchase securities on a when-issued or delayed delivery basis in an amount
up to 10% of such Portfolio's net assets. When-issued securities transactions
arise when securities are purchased by a Portfolio with payment and delivery
taking place on a future date determined at the time of entering into the
transaction (transaction date) in order to secure what is considered to be an
advantageous price and yield to the Portfolio on the transaction date. Once a
Portfolio commits to purchase securities on a when-issued or delayed delivery
basis, it records the transaction and thereafter reflects the daily value of
such securities in determining its net asset value. Although a Portfolio will
generally purchase when-issued securities with the intention of acquiring those
securities for its portfolio, the Portfolio may dispose of a when-issued
security prior to settlement if the Adviser deems it advantageous to do so. For
all when-issued securities transactions, the Fund's custodian bank will hold and
maintain in a segregated account until the settlement date, cash or fully liquid
securities of the Portfolio with a market value, determined daily, equal to or
greater than such commitments. If a Portfolio elects to dispose of the right to
acquire a when-issued security prior to its acquisition, it could experience a
gain or loss on the security due to market fluctuation.

BORROWING

REVERSE REPURCHASE AGREEMENTS

18
<PAGE> 43

value equal to or greater than the respective Portfolio's commitments under
reverse repurchase agreements. The value of securities subject to reverse
repurchase agreements will not exceed 10% of the value of the respective
Portfolio's total assets. Under no circumstances will either Portfolio enter
into a reverse repurchase agreement with Provident Mutual, PLACA, NLIC or SAC.

COVERED CALL OPTIONS

The Aggressive Growth and Managed Portfolios may engage in writing
(selling) covered call option contracts. Covered call option contracts are
option contracts where the Portfolio owns the securities subject to the option
so long as the option is outstanding. Writing covered call options may generate
income for the Portfolios. The investment program for the Aggressive Growth
Portfolio is expected to produce only modest current income, if any, and such
income will not be a basic part of the Portfolio's objective but will be merely
incidental. The Portfolios may close out a position acquired through writing a
call option by purchasing a call option on the same security with the same
exercise price and expiration date as the call option previously written on the
security. See the SAI for a further description of the risks and features of
these instruments.

MANAGEMENT

DIRECTORS

ADVISERS

Money Market, Bond, Managed, Aggressive Growth, Common Stock, and Sentinel
Growth Portfolios. Sentinel Advisors Company serves as investment adviser for
the Money Market, Bond, Managed, Aggressive Growth, Common Stock, and Sentinel
Growth Portfolios pursuant to an investment advisory agreement with the Fund
that became effective on March 1, 1993 with respect to the Bond, Managed, and
Aggressive Growth Portfolios, on March 18, 1996 with respect to the Common Stock
and Sentinel Growth Portfolios, and on April 25, 1996 with respect to the Money
Market Portfolio. Prior to April 25, 1996, PIMC served as investment adviser for
the Money Market Portfolio. SAC is a general partnership owned and controlled by
Sentinel Advisors, Inc., an indirectly wholly-owned subsidiary of National Life
Insurance Company ("National Life"); Providentmutual Management Co., Inc., an
indirectly wholly-owned subsidiary of Provident Mutual; HTK of Delaware, Inc., a
wholly-owned subsidiary of The Penn Mutual Life Insurance Company ("Penn
Mutual"); and Sentinel Management Company, a partnership of wholly-owned
subsidiaries of National Life, Provident Mutual and Penn Mutual, which is SAC's
Managing General Partner. SAC is located at National Life Drive, Montpelier,
Vermont 05604.

19
<PAGE> 44

group life insurance, annuities, and accident and health insurance. PIMC is
located at 1050 Westlakes Drive, Berwyn Pennsylvania 19312.

COMPENSATION OF ADVISERS

<TABLE>
<CAPTION>
1996 ANNUAL RATE (AS % OF MAXIMUM ANNUAL RATE
AVERAGE DAILY NET (AS % OF AVERAGE
PORTFOLIO ADVISER ASSETS)* DAILY NET ASSETS)
---------------------- -------------- ------------------------- -------------------
<S> <C> <C> <C>
Money Market.......... SAC 0.25%** 0.25%
Bond.................. SAC 0.35% 0.35%
Managed............... SAC 0.40% 0.40%
Aggressive Growth..... SAC 0.47% 0.50%
International......... PIMC 0.375% 0.75%
International......... TBC 0.375% 0.375%
(sub-adviser)
Common Stock.......... SAC 0.40%*** 0.40%
Sentinel Growth....... SAC 0.50%*** 0.50%
</TABLE>

- ---------------
* With respect to each of the Portfolios except the Money Market Portfolio,
the fee payable to the Adviser is graduated so that increases in the
respective Portfolio's net assets may result in a lower fee and decreases in
the Portfolio's net assets may result in a higher fee. The maximum annual
rate payable to each Adviser is indicated by the right-hand column above.
See "Management of the Fund" in the SAI for further information.

** During 1995 and through May 1, 1996, PIMC served as investment adviser for
the Money Market Portfolio and received compensation from the Fund at this
effective annual rate.

*** The Common Stock Portfolio and Sentinel Growth Portfolio did not commence
operations until March 11, 1996. For each of these Portfolios, the table
indicates the maximum percentage of the graduated fee that SAC receives for
providing advisory services to the respective Portfolio.

PORTFOLIO MANAGERS

The following persons serve as portfolio managers to the Bond, Managed,
Aggressive Growth, Common Stock, International, and Sentinel Growth Portfolios,
respectively.

Money Market Portfolio. The Money Market Portfolio is managed by Richard
D. Temple and Darlene A. Coppola. Mr. Temple is Vice President at SAC and has
been employed by SAC or its affiliates since 1969. Ms. Coppola is Money Market
Trader at SAC and has been employed by SAC or its affiliates since 1993.

20
<PAGE> 45

Aggressive Growth Portfolio and Common Stock Portfolio. Portfolio
management for the Aggressive Growth Portfolio and the Common Stock Portfolio is
provided by a team of investment professionals let by Keniston P. Merrill. Mr.
Merrill has been associated with SAC and its predecessor since 1982, serving as
Chief Executive Officer since 1986. He is also Executive Vice President of
National Life Insurance Company. Mr. Merrill has a total of over 38 years
experience as in investment professional.

Sentinel Growth Portfolio. The Sentinel Growth Portfolio's portfolio
manager is Robert L. Lee, a Chartered Financial Analyst and Vice President of
SAC. Prior to joining SAC in 1993, Mr. Lee was a Vice President at Shawmut
National Corporation.

EXPENSES

The Portfolios directly assume certain of their expenses and all expenses
borne by the Fund, including the fees payable to the Advisers, are accrued
daily. Provident Mutual reimburses the Fund for ordinary operating expenses,
excluding investment advisory fees, in excess of an annual rate of 0.40% of the
average daily net asset value of each of the Money Market, Bond, Managed, and
Aggressive Growth Portfolios, and in excess of an annual rate of 0.75% of the
average daily net asset value of the International Portfolio. For fiscal year
1996, each Portfolio bore total expenses of the average daily net assets of the
Portfolio, net of the reimbursement by Provident Mutual (and the fee waiver by
the administrator for the International Portfolio), as follows: Money Market
Portfolio 0.44%; Bond Portfolio 0.56%; Managed Portfolio 0.60%; Aggressive
Growth Portfolio 0.68%; International Portfolio 1.05%; Common Stock Portfolio
1.43% and Sentinel Growth Portfolio 1.51%.

BROKERAGE ALLOCATION

ADMINISTRATIVE SERVICES

DESCRIPTION OF THE FUND'S SHARES

GENERAL

21
<PAGE> 46

DETERMINATION OF NET ASSET VALUE

OFFER, PURCHASE AND REDEMPTION OF SHARES

22
<PAGE> 47

the Portfolio corresponding to that subaccount. A separate account purchases and
redeems shares of the Portfolios for its subaccounts at net asset value without
sales or redemption charges.

DIVIDENDS, DISTRIBUTIONS, AND TAXES

For the Money Market Portfolio, dividends of investment income and
dividends of capital gains will be declared daily and paid monthly. Dividends of
investment income of the Bond, Managed, and Common Stock Portfolios will be
declared and paid quarterly, and dividends of capital gains for those Portfolios
will be declared and paid annually. For the Aggressive Growth, International,
and Sentinel Growth Portfolios, both dividends will be declared and paid
annually. All paid dividends will be reinvested in full and fractional shares of
the respective Portfolio unless the shareholder(s) elects to receive such
distribution in cash.

For more information about the tax status of the Fund, see "Taxes" in the
SAI.

23
<PAGE> 48

OTHER INFORMATION

CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

24
<PAGE> 49

MARKET STREET FUND, INC.
103 BELLEVUE PARKWAY
WILMINGTON, DE 19809
302-791-1700

STATEMENT OF ADDITIONAL INFORMATION

MAY 1, 1997

This Statement of Additional Information is not a prospectus. It should be
read in conjunction with the Market Street Fund, Inc. Prospectus dated May 1,
1997, and retained for future reference.

A copy of the Prospectus to which this Statement of Additional Information
relates is available at no charge by writing to Market Street Fund, Inc. at the
above address or by calling the telephone number listed above.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information and History........................................................ 2
Investment Restrictions................................................................ 2
Investment Techniques and Risks........................................................ 4
Portfolio Turnover..................................................................... 8
Management of the Fund................................................................. 9
Investment Advisory and Other Services................................................. 10
Portfolio Transactions and Brokerage Allocation........................................ 13
Determination of Net Asset Value....................................................... 14
Redemption of Shares................................................................... 15
Taxes.................................................................................. 15
Capital Stock.......................................................................... 16
Code of Ethics......................................................................... 17
Other Services......................................................................... 18
Financial Statements................................................................... F-1
Appendix A--Description of Money Market Instruments and Commercial Paper and Bond
Ratings.............................................................................. A-1
</TABLE>

Form 15732B 5.96
<PAGE> 50

GENERAL INFORMATION AND HISTORY

THE FUND

The Market Street Fund, Inc. (the "Fund") was formed on March 21, 1985. The
Fund is an open-end diversified management investment company as such terms are
defined in the Investment Company Act of 1940, as amended (the "1940 Act"). As a
"series" type of mutual Fund, the Fund issues separate classes (or series) of
stock, and currently consists of eight separate investment portfolios (each a
"Portfolio," together, the "Portfolios"). This statement of additional
information ("SAI") pertains only to the following Portfolios: Growth Portfolio,
Money Market Portfolio, Bond Portfolio, Managed Portfolio, Aggressive Growth
Portfolio and International Portfolio.

The Fund serves as an investment medium for variable life insurance
policies issued by Provident Mutual Life Insurance Company of Philadelphia
("Provident Mutual"), variable life insurance policies issued by National Life
Insurance Company ("NLIC") of Montpelier, Vermont, and for variable annuity
contracts and variable life insurance policies issued by Providentmutual Life
and Annuity Company of America ("PLACA"). Other than the shares sold directly to
Provident Mutual to seed the Managed, Aggressive Growth and International
Portfolios, and to NLIC to seed two of the Fund's Portfolios not addressed in
this SAI, shares of the Fund currently are sold only to separate accounts of
Provident Mutual and PLACA and to variable life insurance separate accounts of
NLIC. In the future, shares of the Fund may also be sold to separate accounts of
other affiliated or unaffiliated insurance companies in order to fund variable
annuity contracts or variable life insurance policies.

As the primary shareholder of the Fund's shares, Provident Mutual currently
controls the Fund. Provident Mutual will continue to control the Fund until
other insurance companies, selling significant amounts of variable life
insurance and variable annuities have made substantial investments in Fund
shares.

As of December 31, 1996, no policyholder owned a policy or contract which
individually or in the aggregate had a total interest in any Portfolio of more
than 5%. As of December 31, 1996, the officers and directors of the Fund as a
group did not beneficially own as policyholders more than a 1% interest in any
Portfolio.

INVESTMENT RESTRICTIONS

The following specific restrictions supplement the Fund's "Investment
Objectives and Policies" set forth in the Prospectus.

The Fund has adopted the following fundamental restrictions relating to the
investment of assets of the eight Portfolios. These are fundamental policies and
may not be changed without the approval of holders of the majority of
outstanding voting shares of each Portfolio affected. A change in policy
affecting only one Portfolio may be effected with the approval of the majority
of the outstanding voting shares of that Portfolio only. The Fund's fundamental
investment restrictions provide that no Portfolio of the Fund is allowed to:

(1) Purchase real estate or any interest therein, except through the
purchase of corporate or certain government securities (including
securities secured by a mortgage or a leasehold interest or other interest
in real estate). A security issued by a real estate or mortgage investment
trust is not treated as an interest in real estate.

(2) Make loans, other than through the acquisition of obligations in
which the Portfolio may invest consistent with its objective and investment
policies.

(3) Invest in commodities or in commodity contracts, or in call
options, except that the Growth, Managed and Aggressive Growth Portfolios
may write covered call options and enter into closing transactions, as
permitted by their investment policies and the International Portfolio may
enter into forward currency exchange contracts as described herein.

(4) Engage in the underwriting of securities of other issuers, except
to the extent the Portfolio may be deemed an underwriter in selling as part
of an offering registered under the Securities Act of 1933, securities
which it has acquired.

(5) Borrow money, except from banks as a temporary measure for
emergency purposes or as necessary for clearance of securities transactions
or to permit the transfer of funds for various purposes without interfering
with the orderly liquidation of securities in its portfolio, where such
borrowings would

2
<PAGE> 51

not exceed 5% of the market value of total assets at the time each such
borrowing is made, except that this restriction does not apply to: the
International Portfolio which may borrow up to 20% of the market value of
its total assets from banks as a temporary measure, such as to enable it to
meet redemption requests or to settle transactions on different stock
markets where different settlement dates apply which might otherwise
require the sale of Portfolio securities at a time when it would not be in
the Portfolio's best interests to do so; and to reverse repurchase
agreements entered into in accordance with the Fund's investment policies.

(6) Purchase securities which are subject to legal or contractual
delays in or restrictions on resale (except for the International
Portfolio).

(7) Invest for the purpose of exercising control over or management of
any company.

(8) Issue senior securities, except to the extent that a Portfolio may
borrow money as permitted herein and that a Portfolio, in accordance with
its investment objectives and policies, may enter into reverse repurchase
agreements and purchase securities on a when-issued or a delayed delivery
basis.

(9) Unless received as a dividend or as a result of an offer of
exchange approved by the Securities and Exchange Commission or of a plan of
reorganization, purchase or otherwise acquire any security issued by a U.S.
or foreign investment company if the Portfolio would immediately thereafter
own (a) more than 3% of the outstanding voting stock of the investment
company, (b) securities of the investment company having an aggregate value
in excess of 5% of the Portfolio's total assets, (c) securities of
investment companies having an aggregate value in excess of 10% of the
Portfolio's total assets, or (d) together with investment companies having
the same investment adviser as the Portfolio (and companies controlled by
such investment companies), more than 10% of the outstanding voting stock
of any registered closed-end investment company.

(10) Purchase securities of any issuer, if

(a) with respect to 75% of the market value of its total assets,
more than 5% of the account's total assets taken at market value would
at the time be invested in the securities of such issuer, unless such
issuer is the U.S. Government or its agency or instrumentality, or

(b) such purchase would at the time result in more than 10% of the
outstanding voting securities of such issuer being held by the
Portfolio.

The Bond and Managed Portfolios will not purchase the securities of
issuers conducting their principal business activity in the same industry,
other than the electric, gas and telephone utility industries, if
immediately after such purchase the value of its investments in such
industry would exceed 25% of its total assets taken at market value; nor
will it purchase the securities of companies in the electric, gas or
telephone utility industries if, immediately after such purchase, the value
of its investments in all such industries would exceed 75% of its total
assets taken at market value.

The Growth, Money Market, Aggressive Growth and International
Portfolios will not make any investment in an industry if that investment
would make the Portfolio's holding in that industry exceed 25% of the
Portfolio's total assets. The International Portfolio will not invest more
than 5% of the market value of its total assets in companies with a record
of less than three years' operations or in securities which are not readily
marketable.

These restrictions on concentration do not apply to investments by the
Money Market and Managed Portfolios in obligations issued by or guaranteed
by the U.S. Government, its agencies or instrumentalities, or certificates
of deposit or securities issued or guaranteed by domestic banks. Also, for
these purposes, neither all finance companies as a group, nor all utility
companies as a group, will be considered a single industry.

3
<PAGE> 52

INVESTMENT TECHNIQUES AND RISKS

The following disclosure supplements the Fund's "Investment Objectives and
Policies" set forth in the Prospectus.

REPURCHASE AGREEMENTS

Each of the Portfolios may invest in repurchase agreements. A repurchase
agreement customarily obligates the seller at the time it sells securities to
the Portfolio to repurchase the securities at a mutually agreed upon time and
price. The total amount received on repurchase would be calculated to exceed the
price paid by the Portfolio, reflecting an agreed upon market rate of interest
for the period from the time of the repurchase agreement to the settlement date,
and would not necessarily be related to the interest rate on the underlying
securities. The underlying securities are ordinarily U.S. Government securities,
but may consist of other securities in which the respective Portfolios may
otherwise invest. A Portfolio will not invest more than 10% of its total assets
in repurchase agreements which have maturities of more than seven days and will
not invest in repurchase agreements with maturities of over 30 days. Repurchase
Agreements will be fully collateralized at all times and interest on the
underlying security will not be taken into account for valuation purposes. Under
no circumstances will a Portfolio enter into a repurchase agreement with
Provident Mutual, PLACA, NLIC or SAC.

To the extent that the proceeds from any sale upon a default in the
obligation to repurchase were less than the repurchase price, the Portfolio
would suffer a loss. The Portfolio might also incur disposition costs in
connection with liquidating its collateral and, if bankruptcy proceedings are
commenced with respect to the seller, realization upon the collateral by the
Portfolio may be delayed or limited and a loss may be incurred if the collateral
securing the repurchase agreement declines in value during the bankruptcy
proceedings. To minimize the possibility of losses due to the default or
bankruptcy of the seller, the Fund has adopted standards of credit worthiness
for all parties with which the Fund enters into repurchase agreements and will
review compliance by such parties periodically.

COVERED CALL OPTION CONTRACTS

The Growth, Managed and Aggressive Growth Portfolios may engage in certain
limited options strategies. These options strategies are limited to writing
covered call options which are traded on a domestic securities exchange with
respect to securities in the Portfolio and entering into "closing purchase
transactions" in order to terminate its obligation as a writer of a call option
prior to the expiration of the option. A Portfolio will not write a call option
if the securities covered by such options exceed 25% of the Portfolio's total
assets at that time. Moreover, in order to maintain qualification for treatment
as a regulated investment company for federal tax law purposes, the writing of
covered calls may be further limited.

A covered call option gives the purchaser of the option the right to
purchase the underlying security from the Portfolio at a fixed exercise price at
any time prior to the expiration of the option, regardless of the market price
of the security during the option period. As consideration for the option, the
purchaser pays the Portfolio a premium, which the Portfolio retains whether or
not the option is exercised. A covered call option will benefit a Portfolio if,
over the option period, the underlying security declines in value or does not
appreciate above the aggregate value of the exercise price plus the premium.
However, the Portfolio risks the loss of profits if the underlying security
appreciates above the aggregate value of the exercise price and premium.

So long as the Portfolio remains obligated as a writer of a call, it
forgoes the opportunity to profit from increases in the market price of the
underlying security above the call price. The Portfolio may close out a covered
call option position by purchasing on the same exchange a call option on the
same security, with the same exercise price and the same expiration date.
Although writing only call options which are traded on a national securities
exchange increases the likelihood of being able to make closing purchase
transactions, there is no assurance that the Portfolio will be able to do so at
any particular time or at an acceptable price. Depending upon the premium paid
for the option relative to the premium received on the option written, the
Portfolio may realize a profit or loss on a closing transaction. The writing of
call options could result in increases in the turnover rate of the Portfolio,
especially during periods when market prices of the underlying

4
<PAGE> 53

securities appreciate, which could result in higher brokerage costs. In
addition, brokerage commissions will be paid by the Portfolio on both the
establishment and closing out of an option position.

The Portfolio may write covered call options on particular Portfolio
securities when it believes that the market value of those securities will
either decline or will not increase over the period covered by the option. In
this manner, the Portfolio hopes that the option price received (net of
transaction costs) may offset any decline in the market value of the security or
otherwise generate income for the Portfolio. To the extent income is generated,
the writing of covered call options generally will help to achieve the Growth
Portfolio's secondary objective of a reasonable level of income, but does not
further the Portfolio's primary objective of achieving intermediate and
long-term growth of capital, except to the extent that it "hedges" against
capital losses.

In order to maintain its qualification as a regulated investment company
under Subchapter M of the Internal Revenue Code, the Fund intends to limit gains
from the sale of securities held for less than three months to less than 30% of
annual gross income of each Portfolio. Accordingly, the Fund may be restricted
in the writing of options on securities which have been held less than three
months, in the writing of options which expire in less than three months and in
purchasing options to terminate options which it wrote within the preceding
three months. In addition, since the Fund has no control over the timing of the
exercise of an option, compliance with the 30% rule will necessitate the Fund's
limiting its covered option writing program. For additional information about
the tax consequences of the Portfolios' option strategies, see "Taxes."

WARRANTS

The Growth, Managed and Aggressive Growth Portfolios may invest in
warrants. None of these Portfolios intends to invest more than 2% of its net
assets in warrants that are not listed on a national securities exchange. In no
event will a Portfolio's investment in warrants exceed 5% of its net assets. (A
warrant is a right to buy a certain security at a set price during a certain
time period.)

SHORT-TERM TRADING

The Growth, Money Market, Aggressive Growth and International Portfolios
generally will not engage in short-term trading. Other than the Bond Portfolio
and the Managed Portfolio, the Portfolios do not expect to trade in securities
for short-term gains. Notwithstanding this, an Adviser may, from time to time,
make short-term investments when it believes that such investments will benefit
a Portfolio and may dispose of any investment without regard to the length of
time that the investment has been held. The Bond Portfolio intends to use
short-term trading of securities if it believes the transactions net of costs
(including any commission) will benefit its portfolio for the purposes of:

(a) Avoiding potential depreciation in the value of a security held in
the Portfolio where the Portfolio anticipates that it may decline in market
value as a result of unfavorable earnings trends and/or unfavorable
investment environment; or

(b) Increasing the return by taking advantage of yield disparities
between various fixed-income securities in order to realize capital gains
or improved income on the portfolio.

ILLIQUID ASSETS

No Portfolio may invest more than 10% of the value of its net assets in
securities that are not readily marketable. The International Portfolio may not
invest more than 10% of the value of its net assets in securities that are not
readily marketable or that are restricted as to disposition under the U.S.
securities laws or otherwise. This limit shall not apply for the International
Portfolio as to securities purchased or sold pursuant to Rule 144A under the
Securities Act of 1933 which the Board of Directors has determined are liquid.
This restriction will apply to repurchase agreements maturing in more than seven
days. This restriction will also apply to securities received as a result of a
corporate reorganization or similar transaction affecting readily marketable
securities already held in the Fund's Portfolios. To the extent that securities
received under these circumstances, together with other securities considered
illiquid by the staff of the Securities and Exchange Commission ("SEC") or by
the Fund's Board, exceed 10% of the value of the Portfolio's total net

5
<PAGE> 54

assets, the Fund will attempt to dispose of them in an orderly fashion in order
to reduce its Portfolio's holdings in such securities to less than the 10%
threshold.

LOWER QUALITY DEBT INSTRUMENTS

Up to 25% of the total assets of the Bond and the Managed Portfolios may be
invested in lower quality debt instruments (i.e. BB or lower as rated by
Standard & Poors Corporation ("Standard & Poor's") or Ba or lower as rated by
Moody's Investors Service, Inc. ("Moody's")). Furthermore, debt instruments with
higher ratings, and especially those rated as investment grade but not high
quality (i.e., rated BBB by Standard & Poors or Baa by Moody's) may, after
purchase by either Portfolio, have their ratings lowered due to the
deterioration of the issuer's financial position. In the event that the rating
of a bond held by either Portfolio drops below BBB or Baa, the decision whether
to retain or dispose of the bond will be made on a case by case basis. However,
in no event will the amount of assets held in lower quality debt instruments be
greater than that set forth above.

Lower quality debt instruments entail certain risks. These lower-rated
fixed-income securities are considered, on balance, as predominantly speculative
with respect to capacity to pay interest and repay principal in accordance with
the terms of the obligation and will generally involve more credit risk than
securities in the higher rating categories. The market values of such securities
tend to reflect individual corporate developments to a greater extent than do
higher-rated securities, which react primarily to fluctuations in the general
level of interest rates. Such lower-rated securities also tend to be more
sensitive to economic conditions than higher-rated securities. Adverse publicity
and investor perceptions, whether or not based on fundamental analysis,
regarding lower-rated bonds may depress prices and liquidity for such
securities. To the extent a Portfolio invests in these securities, factors
adversely affecting the market value of high-yielding securities will adversely
affect a Portfolio's net asset value. Although some risk is inherent in all
securities ownership, holding fixed-income securities generally entails less
risk than an investment in common stock of the same issuer.

High-yielding securities may be issued by corporations in the growth stage
of their development. They may also be issued in connection with a corporate
reorganization or as part of a corporate takeover. Companies that issue such
high-yielding securities are often highly leveraged and may not have available
to them more traditional methods of financing. Therefore, the risk associated
with acquiring the securities of such issuers generally is greater than is the
case with higher-rated securities. For example, during an economic downturn or a
sustained period of rising interest rates, highly leveraged issuers of
high-yielding securities may experience financial stress. During such periods,
such issuers may not have sufficient revenues to meet their interest payment
obligations. The issuer's ability to service its debt obligations may also be
adversely affected by specific corporate developments, the issuer's inability to
meet specific projected business forecasts, or the unavailability of additional
financing. The risk of loss due to default by the issuer is significantly
greater for the holders of high-yielding securities because such securities are
generally unsecured and are often subordinated to other creditors of the
issuers.

A Portfolio may have difficulty disposing of certain high-yielding
securities for which there is a thin trading market. Because not all dealers
maintain markets in all high-yielding securities, there is no established retail
secondary market for many of these securities, and the Fund anticipates that
they could be sold only to a limited number of dealers or institutional
investors. To the extent there is a secondary trading market for high-yielding
securities, it is generally not as liquid as that for higher-rated securities.
The lack of a liquid secondary market for certain securities may make it more
difficult for the Fund and its Board of Directors to obtain accurate market
quotations for purposes of valuing a Portfolio's assets. Market quotations are
generally available on many high-yield issues only from a limited number of
dealers and may not necessarily represent firm bids of such dealers or prices
for actual sales.

The market for high-yielding securities has not weathered a major economic
recession, and it is not known how one might affect that market. It is likely,
however, that any such recession could severely affect the market for and the
values of such securities, as well as the ability of the issuers of such
securities to repay

6
<PAGE> 55

principal and pay interest thereon. Moreover, such a recession could also
increase the incidence of defaults of high-yielding securities.

A Portfolio may acquire high-yielding securities that are sold without
registration under the federal securities laws and therefore carry restrictions
on resale. A Portfolio may incur special costs in disposing of such securities,
but will generally incur no costs when the issuer is responsible for registering
the securities.

A Portfolio also may acquire high-yielding securities during an initial
underwriting. Such securities involve special risks because they are new issues.
The Fund has no arrangement with any person concerning the acquisition of such
securities, and the Adviser will carefully review the credit and other
characteristics pertinent to such new issues.

From time to time, there have been proposals for legislation designed to
limit the use of certain high-yielding securities in connection with leveraged
buy-outs, mergers and acquisitions, or to limit the deductibility of interest
payments on such securities. Such proposals, if enacted into law, could
generally reduce the market for such securities, could negatively affect the
financial condition of issuers of high-yielding securities by removing or
reducing a source of future financing, and could negatively affect the value of
specific high-yield issues. However, the likelihood of any such legislation or
the effect thereof is uncertain.

As savings and loan associations dispose of their portfolios of lower
quality debt instruments pursuant to the Financial Institutions Reform Recovery
and Enforcement Act of 1989, the general market and prices for such securities
should be adversely affected.

FOREIGN CURRENCY TRANSACTIONS

The value of the assets of the International Portfolio and the Managed
Portfolio as measured in United States dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange control
regulations, and these Portfolios may incur costs in connection with conversions
between various currencies.

These Portfolios will conduct foreign currency exchange transactions either
on a spot (i.e. cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through the use of forward contracts to purchase or sell
foreign currencies. A forward foreign currency exchange contract will involve an
obligation by the Fund to purchase or sell a specific amount of currency at a
future date, which may be any fixed number of days, from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are transferable in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers. A
forward contract generally has no deposit requirements, and no commissions are
charged at any stage for trades. Neither type of foreign currency transaction
will eliminate fluctuations in the prices of each Portfolio's securities or
prevent loss if the prices of such securities should decline.

These Portfolios may enter into forward foreign currency exchange contracts
only under two circumstances. First, when a Portfolio enters into a contract for
the purchase or sale of a security denominated in a foreign currency, it may
desire to "lock in" the U.S. dollar price of the security. A Portfolio will then
enter into a forward contract for the purchase or sale, for a fixed amount of
dollars, of the amount of foreign currency involved in the underlying securities
transactions. In this manner a Portfolio will be better able to protect itself
against a possible loss resulting from an adverse change in the relationship
between the U.S. dollar and the subject foreign currency during the period
between the date the securities are purchased or sold and the date on which
payment is made or received.

Second, when the Adviser believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. dollar, it may enter
into a forward contract to sell, for a fixed amount of dollars, the amount of
foreign currency approximating the value of some or all of a Portfolio's
securities denominated in such foreign currency. The precise matching of the
forward contract amounts and the value of the securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. The projection of short-term currency market

7
<PAGE> 56

movement is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. These Portfolios do not intend to enter
into such forward contracts under this second circumstance on a regular or
continuous basis. The Portfolios will also not enter into such forward contracts
or maintain a net exposure to such contracts when the consummation of the
contracts would obligate a Portfolio to deliver an amount of foreign currency in
excess of the value of the Portfolio's securities or other assets denominated in
that currency. The Adviser believes that it is important to have the flexibility
to enter into such forward contracts when it determines that to do so is in the
best interests of the respective Portfolio. The Portfolios' custodian bank
segregates cash or equity or debt securities in an amount not less than the
value of each Portfolio's total assets committed to forward foreign currency
exchange contracts entered into under this second type of transaction. If the
value of the securities segregated declines, additional cash or securities are
added so that the segregated amount is not less than the amount of the
respective Portfolio's commitments with respect to such contracts. Under normal
circumstances, these Portfolios expect that any appreciation (depreciation) on
such forward exchange contracts will be approximately offset by the
(depreciation) appreciation in translation of the underlying foreign investment
arising from fluctuations in foreign currency exchange rates.

These Portfolios will recognize the unrealized appreciation or depreciation
from the fluctuation in a foreign currency forward contract as an increase or
decrease in the respective Portfolio's net assets on a daily basis, thereby
providing an appropriate measure of each Portfolio's financial position and
changes in financial position.

PORTFOLIO TURNOVER

Each Portfolio has a different expected annual rate of portfolio turnover,
which is calculated by dividing the lesser of purchases or sales of Portfolio
securities during the fiscal year by the monthly average of the value of the
Portfolio's securities (excluding from the computation all securities, including
options, with maturities at the time of acquisition of one year or less).
Turnover rates may vary greatly from year to year as well as within a particular
year and may also be affected by cash requirements for redemptions of each
Portfolio's shares and by requirements which enable the Fund to receive certain
favorable tax treatments. The portfolio turnover rates will, of course, depend
in large part on the level of purchases and redemptions of shares of each
Portfolio. Higher portfolio turnover can result in corresponding increases in
brokerage costs to the Portfolios of the Fund and its shareholders. (See
"Portfolio Transactions and Brokerage Allocation.") However, because rate of
portfolio turnover is not a limiting factor, particular holdings may be sold at
any time, if investment judgment or Portfolio operations make a sale advisable.

No portfolio turnover rate can be calculated for the Money Market Portfolio
due to the short maturities of the instruments purchased. Portfolio turnover
should not affect the income or net asset value of the Money Market Portfolio
because brokerage commissions are not normally charged on the purchase or sale
of money market instruments.

8
<PAGE> 57

MANAGEMENT OF THE FUND

Directors and Officers

The directors and officers of the Fund and their principal occupations for
the last five years are set forth below. Unless otherwise noted, the address of
each director and officer is 103 Bellevue Parkway, Wilmington, DE 19809.

<TABLE>
<CAPTION>
NAME AND ADDRESSES OF AGGREGATE
DIRECTORS AND OFFICERS POSITION HELD PRINCIPAL OCCUPATION COMPENSATION
OF THE FUND WITH THE FUND DURING PAST 5 YEARS FROM THE FUND
- ------------------------ ---------------------- --------------------------------- -------------
<S> <C> <C> <C>
Stanley R. Reber*....... Chairman, President 1985-Present, Executive Vice 0
and Chief Executive President and Chief Investment
Officer Officer of Provident Mutual;
1975-1985, Executive Vice
President of Texas American Bank
Dr. Alan Gart........... Director 1982-Present, President of Alan $ 7,500
978 Warfield Lane Gart, Inc. (a consulting firm);
Huntingdon Valley, 1992-Present; Professor,
PA 19006 Southeastern Massachusetts
University; 1989-1992, Professor,
Nova Southeastern University;
1985-1989, Professor of Finance,
Lehman College of the City
University of New York
Dr. A. Gilbert Director 1987-Present, Distinguished $ 7,500
Heebner................. Professor of Economics, Eastern
2 Etienne, Arbordeau College; 1952- 1987, Executive
Devon, PA 19333 Vice President and Chief
Economist of CoreStates Finan-
cial Corp.
Edward S. Stouch........ Director 1983, Retired; 1969-1983, Vice $ 7,500
216 Grandview Rd. President and Head of Personal
Media, PA 19063 Trust Investment Department,
Trust Division of Provident
National Bank
Rosanne Gatta........... Treasurer and Vice President and Treasurer of 0
Comptroller Provident Mutual
Adam Scaramella......... Secretary and Legal 1995-Present, Counsel of 0
Officer Provident Mutual; 1994-1995,
Counsel of The PMA Group;
1991-1994, Deputy Attorney
General, Division of Law, New
Jersey Department of Law and
Public Safety
</TABLE>

- ---------------
* Directors identified with an asterisk are considered to be interested persons
of the Fund (within the meaning of the 1940 Act, as amended) because of their
affiliation with Provident Mutual or the Advisers.

As of the date of this Statement of Information, officers and directors of
the Fund do not own any of the outstanding shares of the Fund. Directors who are
not officers or employees of Provident Mutual or the Adviser are paid a fee plus
actual out of pocket expenses by the Fund for each meeting of the Board of
Directors attended. Total fees incurred for 1996 were $22,500. Directors and
officers of the Fund do not receive any benefits from the Fund upon retirement
nor does the Fund accrue any expense for pension or retirement benefits.

9
<PAGE> 58

INVESTMENT ADVISORY AND OTHER SERVICES

GENERAL INFORMATION AND HISTORY

The Fund's investment advisers are: for the International
Portfolio--Providentmutual Investment Management Company ("PIMC"); and for the
Growth, Money Market, Bond, Managed and Aggressive Growth Portfolios -- Sentinel
Advisers Company ("SAC"). Prior to May 1, 1997 the investment adviser for the
Growth Portfolio was Newbold's Asset Management, Inc. ("NAM"). PIMC has engaged
The Boston Company Asset Management, Inc. ("TBC") as the investment sub-adviser
for the International Portfolio. Together, PIMC, SAC and TBC are the "Advisers."

January 29, 1993, Provident Mutual and PLACA approved the Fund's investment
advisory agreements for the Bond, Managed, Aggressive Growth and International
Portfolios. On April 25, 1996 Provident Mutual and PLACA approved the Fund's
investment advisory agreement for the Money Market Portfolio. On April 24, 1997
Provident Mutual and PLACA approved the Fund's investment advisory agreement for
the Growth Portfolio. Provident Mutual and/or PLACA voted their Fund shares for
or against such approvals, or withheld their votes, in the same proportion as
Policyowners having an interest in the respective Portfolios, voted for, against
or withheld their votes with respect to the Agreement for that Portfolio.

PIMC and SAC provide investment advice to the Fund, pursuant to the Fund's
investment advisory agreements. Subject at all times to the supervision and
approval of the Fund's Board of Directors, the Advisers render investment
advisory services with respect to the Fund's Portfolios in a manner consistent
with their stated investment policies, objectives and restrictions. In
connection therewith, the Advisers advise the Fund as to what investments should
be purchased and sold and places orders for all such purchases and sales on
behalf of the Fund.

PIMC is a registered investment adviser and is also an indirect
wholly-owned subsidiary of Provident Mutual. Its address is 1050 Westlakes
Drive, Berwyn, Pennsylvania 19312. SAC is a registered investment adviser and is
a Vermont general partnership owned and controlled by Sigma American
Corporation, an indirect wholly-owned subsidiary of Provident Mutual and by
National Life Investment Management Company, Inc. ("NLIMC") a wholly-owned
subsidiary of NLIC. Its address is National Life Drive, Montpelier, Vermont.

ADVISORY AGREEMENTS

The investment advisory agreement between the Fund and SAC became effective
on March 1, 1993. The agreement was approved by the Fund's Board of Directors,
including a majority of the "non-interested" directors, on October 26, 1992, and
by shareholders of the Bond, Managed and Aggressive Growth Portfolios on January
29, 1993.

The investment advisory agreement between the Fund and PIMC with respect to
the International Portfolio was originally approved by the Board of Directors of
the Fund, including a majority of the "non-interested" directors on July 31,
1991. On October 26, 1992, the Fund's Board of Directors, including a majority
of the "non-interested" directors, approved continuation of the agreement. The
agreement was approved by shareholders of the International Portfolio on January
29, 1993 .

On February 26, 1996, the Fund's Board of Directors, including a majority
of the "non-interested" directors approved an amendment to the investment
advisory agreement between the Fund and SAC to include SAC providing investment
advisory services to the Money Market Portfolio effective April 25, 1996, and
unanimously voted to approve continuation of all the investment advisory
agreements with SAC and PIMC.

On February 27, 1997 the Fund's Board of Directors, including a majority of
the "non-interested" directors approved the investment advisory agreement
between the Fund and SAC respecting SAC providing advisory services for the
Growth Portfolio, which was effective May 1, 1997.

Each of the agreements terminates automatically in the event of its
assignment or, with respect to any Portfolio, upon 60 days' notice given by the
Fund's Board of Directors, by the Adviser or by majority vote (as

10
<PAGE> 59

defined in the Investment Company Act and the rules thereunder) of the
Portfolio's shares. Otherwise, the investment advisory agreements will continue
in force with respect to any Portfolio so long as their continuance is approved
at least annually by a majority of the "non-interest" members of the Fund's
Board of Directors, and by (i) a majority vote (as defined in the Investment
Company Act of 1940 and the rules thereunder) of the Portfolio's shareholders or
(ii) the Fund's Board of Directors.

The Advisers manage the investment operations of the Fund and the
composition of each Portfolio, including the purchase, retention and disposition
of the investments, securities and cash contained therein, in accordance with
each Portfolio's investment objectives and policies as stated in the Fund's
Articles of Incorporation, By-Laws, Prospectus and Statement of Additional
Information as from time to time in effect. In connection therewith, the
Advisers provide investment research and supervision of the Fund's investments
and conduct a continuous program of investment evaluation and, if appropriate,
sales and reinvestment of the Fund's assets. The Advisers furnish to the Fund
such statistical information, with respect to the investments which the Fund may
hold or contemplate purchasing, as the Fund may reasonably request. On the
Advisers' own initiatives, the Advisers apprise the Fund of important
developments materially affecting each Portfolio and furnish the Fund from time
to time such information as the Advisers may believe appropriate for this
purpose. The Advisers also implement all purchases and sales of investments for
each Portfolio in a manner consistent with such policies.

Money Market Portfolio. The investment advisory fee paid to SAC with
respect to the Money Market Portfolio is 0.25% of the average daily net assets
of the Portfolio.

Growth Portfolio. The investment advisory fee paid to SAC with respect to
the Growth Portfolio is 0.50% of the first $20 million of the average daily net
assets of the Portfolio, 0.40% of the next $20 million of the average daily net
assets of the Portfolio and 0.30% of the average daily net assets in excess of
$40 million.

Bond Portfolio. The investment advisory fee paid to SAC with respect to
the Bond Portfolio is 0.35% of the first $100 million of the average daily net
assets of the Portfolio and 0.30% of the average daily net assets in excess of
$100 million.

Managed Portfolio. The investment advisory fee paid to SAC with respect to
the Managed Portfolio is 0.40% of the first $100 million of the average daily
net assets of the Portfolio and 0.35% of the average daily net assets in excess
of $100 million.

Aggressive Growth Portfolio. The investment advisory fee paid to SAC with
respect to the Aggressive Growth Portfolio is 0.50% of the first $20 million of
the average daily net assets of the Portfolio, 0.40% of the next $20 million of
the average daily net assets of the Portfolio and 0.30% of the average daily net
assets in excess of $40 million.

International Portfolio. The investment advisory fee paid to PIMC with
respect to the International Portfolio is 0.75% of the first $500 million of the
average daily net assets of the Portfolio and 0.60% of the average daily net
assets in excess of $500 million (See "Investment Sub-Advisory Agreement for
International Portfolio", Page 12).

The investment advisory fee incurred for NAM during 1996 with respect to
the Growth Portfolio was $592,350. The total investment advisory fee incurred
for PIMC during 1996 was $357,635, allocated $31,471 and $326,164 to the Money
Market and International Portfolios, respectively. The total investment advisory
fee incurred for SAC during 1996 was $427,558, allocated $53,767; $157,156;
$134,923 and $81,712 for the Bond, Managed, Aggressive Growth and Money Market
Portfolios, respectively.

The investment advisory fee incurred for NAM during 1995 with respect to
the Growth Portfolio was $477,525. The total investment advisory fee incurred
for PIMC during 1995 was $305,977, allocated $67,727 and $238,250 to the Money
Market and International Portfolios, respectively. The total investment advisory
fee incurred for SAC during 1995 was $268,637, allocated $42,737, $130,149 and
$95,751 for the Bond, Managed and Aggressive Growth Portfolios, respectively.

The investment advisory fee incurred for NAM during 1994 with respect to
the Growth Portfolio was $391,249. The total investment advisory fee incurred
for PIMC during 1994 was $191,632, allocated $40,010

11
<PAGE> 60

and $151,622 to the Money Market and International Portfolios, respectively. The
total investment advisory fee incurred for SAC during 1994 was $212,836,
allocated $34,014, $115,614 and $63,208 to the Bond, Managed and Aggressive
Growth Portfolios, respectively.

Expenses that are borne directly by the Portfolios include redemption
expenses, expenses of the Portfolio transactions, shareholding servicing costs,
expenses of registering the shares under Federal and state securities laws,
interest, certain taxes, charges of the Custodian and Transfer Agent and other
expenses attributable to a particular Portfolio. Expenses which are allocated on
the basis of size of the respective Portfolios include directors' fees, legal
expenses, state franchise taxes, auditing services, costs of printing proxies,
stock certificates, Securities and Exchange Commission fees, accounting costs,
pricing costs including the daily calculation of net asset value), and other
expenses properly payable by the Fund and allocable on the basis of size of the
respective Portfolios. Depending upon the nature of a lawsuit, litigation costs
may be directly applicable to the Portfolios or allocated on the basis of the
size of the respective Portfolios. Effective November 1, 1991 Provident Mutual
agreed to reimburse the Fund for such expenses in excess of 0.40% of the average
daily net asset value of each of the Money Market, Growth, Bond, Managed and
Aggressive Growth Portfolios and 0.75% for the International Portfolio. During
1992, Provident Mutual reimbursed the Fund for $81,997 of expenses, allocated
$16,455 to the Growth Portfolio; $5,588 to the Money Market Portfolio; $3,173 to
the Bond Portfolio; $4,924 to the Managed Portfolio; $5,151 to the Aggressive
Growth Portfolio; and $46,706 to the International Portfolio. Expenses
reimbursed by Provident Mutual for 1991 were $175,500 and for 1990 $150,569.
There was no reimbursement in 1995, 1994 or 1993.

Certain administrative services are provided for the Fund by PFPC, Inc.
("PFPC") pursuant to an Administration Agreement, including maintenance of the
Portfolios' books and records, preparation of governmental filings, statements
and returns and stockholder reports, and computation of net asset value and
daily dividends. PFPC is a wholly owned subsidiary of PNC Bank.

INVESTMENT SUB-ADVISORY AGREEMENT FOR INTERNATIONAL PORTFOLIO

As stated in the Prospectus, PIMC has entered into an Investment
Sub-Advisory Agreement with The Boston Company Asset Management, Inc., under
which PIMC receives recommendations, research and other investment services upon
which it may base its investment recommendation to the Fund. For its services to
PIMC, TBC received compensation from PIMC equal to the great of: (i) a monthly
fee at an effective annual rate of 0.375% of the first $500 million of the
average daily net assets of the Portfolio and 0.30% of the average daily net
assets in excess of $500 million; or (ii) $20,000 per year.

The Investment Sub-Advisory Agreement was approved by a majority of the
Fund's Board of Directors, including a majority of its "non-interested"
directors, on July 14, 1994 and became effective on July 18, 1994. On February
26, 1996, the Fund's Board of Directors, including a majority of its
"non-interested" directors, unanimously voted to approve continuation of the
Investment Sub-Advisory Agreement with TBC. On November 15, 1994 the Investment
Sub-Advisory Agreement was approved by shareholders of the International
Portfolio. The Investment Sub-Advisory Agreement will continue in effect from
year to year as long as such continuance is approved at least annually by a
majority of the "non-interested" members of the Fund's Board of Directors and by
(i) a majority vote of the Portfolio's shareholders or (ii) the Fund's Board of
Directors. The Investment Sub-Advisory Agreement may be terminated without
penalty on 60 days' prior written notice by the Fund's Board of Directors, by
the Adviser or by TBC, as the case may be, and is terminated automatically in
the event of its assignment.

For 1996 PIMC incurred $163,082 for investment advisory services rendered
by TBC in connection with the International Portfolio.

12
<PAGE> 61

INFORMATION ABOUT ADVISERS

The principal officers of PIMC are:

<TABLE>
<CAPTION>
POSITION WITH POSITION WITH
NAME PIMC THE FUND
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Stanley R. Reber President Chairman, President and Chief
Executive Officer
Dina M. Welch Vice President None
Rosanne Gatta Treasurer Treasurer and Comptroller
William P. Loesche Legal Officer--Secretary Assistant Secretary
Eugene M. Twardowski Assistant Secretary None
Anthony T. Giampietro Assistant Treasurer None
</TABLE>

The principal officers of SAC are:

<TABLE>
<CAPTION>
POSITION WITH POSITION WITH
NAME SAC THE FUND
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Keniston P. Merrill Chairman and Chief Executive None
Officer
Rodney A. Buck Senior Vice President & Director
of
Marketable Fixed Income Securities
Robert L. Lee, Jr. Vice President & Director of None
Equity Research
D. Russell Morgan Counsel None
Dean R. Howe Treasurer None
</TABLE>

PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION

The Advisers to the Fund place all portfolio orders on behalf of each
Portfolio and attempt, in all cases, to obtain the most favorable prices and
executions.

Equity securities are customarily traded on the stock exchange, but may
also be traded over-the-counter. Bonds and debentures are customarily traded
over-the-counter but may be traded on the bond exchange. Money market
instruments are traded primarily in the over-the-counter market. Purchases and
sales on the stock exchanges are effected by brokers and normally involve the
payment of brokerage commissions. Over-the-counter securities are purchased
directly from the issuer or dealers who are usually acting as principals for
their own accounts. These securities are generally traded on a net basis and do
not involve either brokerage commissions or transfer taxes. Consequently, the
cost of executing such transactions consists primarily of mark-ups on the value
of the securities or dealer spreads and underwriting commissions.

The Advisers to the Fund determine the brokers to be used for purchases and
sales of each Portfolio's securities. There are no arrangements whatsoever,
written or oral, relating to the allocation to specific brokers of orders for
Portfolio transactions. Consideration is given to those firms providing
statistical and research services to the investment advisers, but it is
generally not the policy of any Portfolio to pay higher brokerage commissions to
a firm solely because it has provided such services. Statistical and research
services furnished by brokers typically include: analysts' reports on companies
and industries, market forecasts, economic analyses and the like. Such services
may tend to reduce the expenses of the Adviser and this has been considered in
setting the advisory fees paid by the Fund.

During the period from January 1, 1996 to December 31, 1996 the Fund paid
aggregate brokerage fees of $566,474.86, of which $387,963.30 was paid by the
Growth Portfolio, $12,598.14 was paid by the Managed Portfolio, $96,944.00 was
paid by the Aggressive Growth Portfolio and $118,969.42 was paid by the
International Portfolio. During the period from January 1, 1995 to December 31,
1995, the Fund paid aggregate brokerage fees of $398,248.95 of which $251,728.40
was paid by the Growth Portfolio, $15,503.30 was paid by the Managed Portfolio,
$29,763.20 was paid by the Aggressive Growth Portfolio and $101,254.05 was paid
by the International Portfolio. During the period from January 1, 1994 to
December 31, 1994, the

13
<PAGE> 62

Fund paid aggregate brokerage fees of $317,402.55 of which $203,912.94 was paid
by the Growth Portfolio, $15,232.26 by the Managed Portfolio, $18,858.00 by the
Aggressive Growth Portfolio and $79,399.35 by the International Portfolio.

DETERMINATION OF NET ASSET VALUE

As stated in the Prospectus, the Fund will offer and sell its shares at
each Portfolio's per share net asset value. The net asset value of the shares of
each Portfolio of the Fund is determined as of the close of the New York Stock
Exchange on each day when the New York Stock Exchange is open for business for
the day prior to the day on which a transaction is to be effected.

The Fund's Board of Directors has specifically approved the use of a
pricing service for debt securities with maturities generally exceeding one
year. Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices and may take into account appropriate factors such as
institution size, trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data.

Equity investments (including common stocks, preferred stocks, convertible
securities, and warrants) and call options written on all portfolio investments
listed or traded on a national exchange are valued at their last sale price on
that exchange prior to the time when such assets are valued. For days having no
exchange sales and for unlisted securities, such securities and call options
written on portfolio securities are valued at the last sale price on the NASDAQ
(National Association of Securities Dealers Automated Quotations) National
Market System. If no National Market System sales occur on that day, equity
securities are valued at the last reported "bid" price and call options written
on all portfolio securities for which other over-the-counter market quotations
are readily available are valued at the last reported "asked" price. Debt
securities with maturities exceeding one year are valued on the basis of
valuations furnished by a pricing service when such prices are believed to
reflect such securities' fair value.

The value of a foreign security held by the International Portfolio is
determined based upon its sale price on the foreign exchange or market on which
it is traded and in the currency of that market, as of the close of the
appropriate exchange or, if there have been no sales during the day, at the mean
of the closing bid and asked prices. Trading in securities on exchanges and
over-the-counter markets in Europe and the Far East is normally completed at
various times prior to the current closing time of the New York Stock Exchange.
Trading on foreign exchanges may not take place on every day the New York Stock
Exchange is open. Conversely, trading in various foreign markets may take place
on days when the New York Stock Exchange is not open. Consequently, the net
asset value calculation for the Portfolio may not occur contemporaneously with
the determination of the most current market prices of the securities included
in such calculation. In addition, the value of the net assets held by the
Portfolio may be significantly affected on days when shares are not available
for purchase or redemption.

Any assets that are denominated in a foreign currency are converted into
U.S. dollar equivalents at the prevailing market rates as quoted by generally
recognized reliable sources.

Money market instruments with a remaining maturity of 60 days or less held
by any Portfolio, and all instruments held by the Money Market Portfolio
(including master demand notes) will be valued on an amortized cost basis. Under
this method of valuation, the instrument is initially valued at cost (or in the
case of instruments purchased with more than 60 days remaining to maturity, the
market value on the 61st day prior to maturity); thereafter, the Fund assumes a
constant proportionate amortization in value until maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. For purposes of this method of valuation, the maturity
of a variable rate certificate of deposit is deemed to be the next coupon date
on which the interest rate is to be adjusted. While this method provides
certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price that would be
received upon sale of the instrument. During period of declining interest rates,
the daily yield on shares of the Money Market Portfolio may tend to be higher
than a like computation made by a fund with identical investments utilizing a
method of valuation based upon market prices and estimates of market prices for
all of its portfolio instruments. Thus, if the use of amortized cost resulted in
a

14
<PAGE> 63

lower aggregate portfolio value on a particular day, a prospective investor
would be able to obtain a somewhat higher yield than would result from
investment in a fund utilizing solely market values, and existing investors
would receive less investment income. The converse would apply in a period of
rising interest rates.

Use of the amortized cost valuation method by the Money Market Portfolio
requires that Portfolio to maintain a dollar-weighted average maturity of 90
days or less and to only purchase obligations having remaining maturities of 13
months or less. In addition, the Portfolio can invest only in obligations
determined by the Directors to present minimal credit risks. When an eligible
security (described on pages 10 and 11 of the Prospectus) goes into default or
has its rating downgraded thereby causing it to no longer be an eligible
security, the Directors must promptly reassess whether such security presents a
minimal credit risk and whether continuing to hold the security is in the
Portfolio's best interest. In addition, as to certain types of investments, the
Portfolio may only invest in obligations meeting the quality requirements
spelled out in the Prospectus. Furthermore, investments in the securities of any
one issuer may not exceed 5% of the Portfolio's total assets at the time of such
purchase, nor may investments in "second-tier securities" (eligible securities
which are not rated in the highest short term rating category by at least two
nationally recognized statistical rating organizations (NRSRO) or one NRSRO if
it is the only NRSRO rating that security or comparable unrated securities),
exceed 5% of the Portfolio's total assets nor may investments in any one issuer
exceed the greater of 1% of the Portfolio's total assets or $1 million. The
Directors have established procedures designed to stabilize, to the extent
reasonably possible, the Money Market Portfolio's price per share as computed
for the purpose of sales and redemptions at $1.00. Such procedures include
review of that Portfolio's investment holdings by the Directors, at such
intervals as they may deem appropriate, to determine whether the net asset value
calculated by using available market quotations or equivalents deviates from
$1.00 per share. If such deviation exceeds 1/2 of 1%, the Directors will
promptly consider what action, if any, will be initiated. In the event the
Directors determine that a deviation exists which may result in material
dilution or other unfair results to new or existing investors, the Directors
will take such corrective action as they regard as necessary and appropriate,
including: the sale of Portfolio instruments prior to maturity; the withholding
of dividends or payment of distributions from capital or capital gains;
redemptions of shares in kind or the establishment of a net asset value per
share based upon available market quotations.

The methods used to value other assets of each Portfolio are described more
fully in the Prospectus.

REDEMPTION OF SHARES

The Fund is required to redeem all full and fractional shares of the Fund
for cash at the net asset value per share. Payment for shares redeemed will
generally be made within seven days after receipt of a proper notice of
redemption. The right to redeem shares or to receive payment with respect to any
redemption may only be suspended for any period during which (a) trading on the
New York Stock Exchange is restricted or such exchange is closed for other than
weekends and holidays; (b) an emergency exists, as determined by the Securities
and Exchange Commission, as a result of which disposal of Portfolio securities
or determination of the net asset value of a Portfolio is not reasonably
practicable; and (c) the Securities and Exchange Commission by order permits
postponement for the protection of shareholders.

TAXES

Each Portfolio of the Fund is treated as a separate entity for federal
income tax purposes. Each Portfolio intends to elect and to qualify as a
"regulated investment company" under the provisions of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). To qualify for treatment
as a regulated investment company, a Portfolio must, among other things, derive
in each taxable year at least 90% of its gross income from dividends, interest,
payments with respect to securities loans and gains from the sale or other
disposition of stock or securities or foreign currencies (subject to the
authority of the Secretary of the Treasury to exclude foreign currency gains
which are ancillary to the Fund's principal business of investing in stock or
securities or options and futures with respect to such stock or securities),
other income (including, but not limited to, gains from options, futures, or
forward contracts) derived with respect to its investing in such stock,
securities or currencies. In addition, to qualify for treatment as a "regulated
investment company", each

15
<PAGE> 64

Portfolio must derive less than 30% of its gross income in each taxable year
from gains (without deduction for losses) from the sale or other disposition of
securities held for less than three months. Moreover, at the close of each
quarter of each Portfolio's taxable year, at least 50% of the value of its total
assets must be represented by cash and cash items, U.S. Government securities,
securities of other regulated investment companies, and other securities that,
with respect to any one issuer, do not exceed 5% of the value of the Portfolio's
total assets and that do not represent more than 10% of the outstanding
securities of the issuer. In addition, at the close of each quarter of each
Portfolio's taxable year, not more than 25% of the value of its total assets may
be invested in securities (other than U.S. Government securities or the
securities of other regulated investment companies) of any one issuer. If each
Portfolio qualifies as a "regulated investment company" and complies with the
relevant provisions of the Code, each Portfolio will be relieved of federal
income tax on the part of its net ordinary income and realized net capital gain
which it distributes to the separate accounts.

In order to meet the 30% restriction described above, each Portfolio of the
Fund may be limited in its ability to engage (consistent with its investment
objectives and policies) in certain types of investments or might be required to
continue holding an investment beyond the time it might otherwise consider
prudent.

Each Portfolio must, and intends to, comply with the diversification
requirements imposed by section 817(h) of the Code and the regulations
thereunder. These requirements, which are in addition to the diversification
requirements mentioned above, place certain limitations on the proportion of
each Portfolio's assets that may be represented by any single investment (which
includes all securities of the same issuer). For these purposes, each U.S.
Government agency or instrumentality is treated as a separate issuer, while a
particular foreign government and its agencies, instrumentalities, and political
subdivisions are all considered the same issuer. For information concerning the
consequences of failure to meet the requirements of section 817(h), see the
respective prospectuses for the policies or the contracts.

A Portfolio will not be subject to the 4% Federal excise tax imposed on
regulated investment companies that do not distribute substantially all their
income and gains each calendar year because the tax does not apply to a
regulated investment company whose only shareholders are segregated asset
accounts of life insurance companies held in connection with variable annuity
contracts and/or variable life insurance policies.

Foreign Taxes. Investment income received from sources within foreign
countries may be subject to foreign income taxes. In this regard, withholding
tax rates in countries with which the United States does not have a tax treaty
are often as high as 30% or more. The United States has entered into tax
treaties with many foreign countries which entitle certain investors (such as
the International Portfolio) to a reduced rate of tax (generally 10-15%) or to
certain exemptions from tax. The International Portfolio will operate so as to
qualify for such reduced tax rates or tax exemptions whenever possible. While
policyowners will bear the cost of any foreign tax withholding, they will not be
able to claim a foreign tax credit or deduction for taxes paid by the
International Portfolio.

The discussion of "Dividends, Distributions and Taxes" in the Prospectus,
in conjunction with the foregoing, is a general and abbreviated summary of the
applicable provisions of the Code and Treasury Regulations currently in effect
as interpreted by the Courts and the Internal Revenue Services. For further
information, consult the prospectuses and/or statements of additional
information for the respective policies and contracts, as well as your own tax
adviser.

CAPITAL STOCK

The Fund was incorporated in Maryland on March 21, 1985. The authorized
capital stock of the Fund consists of two hundred million shares of common stock
$.01 par value. The shares of common stock are divided into eight
classes--Growth Portfolio, Money Market Portfolio, Bond Portfolio, Managed
Portfolio, Aggressive Growth Portfolio, International Portfolio, Common Stock
Portfolio and Sentinel Growth Portfolio common stock. The Money Market Portfolio
currently consists of 75 million shares with the Growth Portfolio consisting of
15 million shares; each of the remaining classes currently consists of five
million shares. The Fund may establish additional portfolios and may allocate
its shares either to such new classes or to any of the eight existing classes.

16
<PAGE> 65

The balance of the shares may be issued to the existing Portfolios or to
new Portfolios having the number of shares and descriptions, powers, and rights,
and the qualifications, limitations, and restrictions as the Board of Directors
may determine. The Board of Directors also may change the designation of any
Portfolio and may increase or decrease the numbers of shares of any Portfolio,
but may not decrease the number of shares of any Portfolio below the number of
shares then outstanding.

Each issued and outstanding share is entitled to participate equally in
dividends and distributions declared by the respective Portfolio and, upon
liquidation or dissolution, in the net assets of such Portfolio remaining after
satisfaction of outstanding liabilities.

VOTING RIGHTS

The Fund does not hold routine annual shareholders' meetings. Shareholders'
meetings will be called whenever one or more of the following is required to be
acted on by shareholders pursuant to the Investment Company Act of 1940; (1)
election of directors; (2) approval of an investment advisory agreement; (3)
ratification of selection of independent auditors; or (4) approval of an
underwriting agreement.

All shares of common stock have equal voting rights (regardless of the net
value per share) except that on matters affecting only one Portfolio, only
shares of the respective Portfolio are entitled to vote. The shares do not have
cumulative voting rights. Accordingly, the holders of more than 50% of the
shares of the Fund voting for the election of directors can elect all of the
directors of the Fund if they choose to do so, and in such event the holders of
the remaining shares would not be able to elect any directors.

Matters in which the interests of all the Portfolios are substantially
identical (such as the election of Directors or the approval of independent
public accountants) will be voted on by all shareholders without regard to the
separate Portfolios. Matters that affect all the Portfolios but where the
interests of the Portfolios are not substantially identical (such as approval of
an Investment Advisory Agreement) would be voted on separately by each
Portfolio. Matters affecting only one Portfolio, such as a change in its
fundamental policies, are voted on separately by that Portfolio.

Matters requiring separate shareholder voting by a Portfolio shall have
been effectively acted upon with respect to any Portfolio if a majority of the
outstanding voting securities of that Portfolio votes for approval of the
matter, notwithstanding that: (1) the matter has not been approved by a majority
of the outstanding voting securities of any other Portfolios; or (2) the matter
has not been approved by a majority of the outstanding voting securities of the
Fund.

The phrase "a majority of the outstanding voting securities" of a Portfolio
(or of the Fund) means the vote of the lessor of: (1) 67% of the shares of a
Portfolio (or the Fund) present at a meeting if the holders of more than 50% of
the outstanding shares are present in person or by proxy; or (2) more than 50%
of the outstanding shares of a Portfolio (or the Fund).

CODE OF ETHICS

The Board of Directors of the Fund has adopted a Code of Ethics under Rule
17j-1 of the Investment Company Act of 1940 (the "Code of Ethics"). The Code of
Ethics covers the conduct (including the personal securities transactions) of
each officer and director of the Fund, as well as of any employees of the Fund
who participate in the selection of the Fund's portfolio securities or who have
access to information regarding the Fund's impending purchases and sales of
portfolio securities. The Code of Ethics also covers the general conduct and
personal securities transactions of (but does not impose securities transaction
reporting requirements on) any officer, director, and employee of either NAM,
PIMC, SAC, TBC, or 1717 Capital Management Company ("1717") (formerly PML
Securities Company) the principal underwriter of the Fund, who participates in
the selection of the Fund's portfolio securities or who has access to
information regarding the Fund's impending purchases and sales of portfolio
securities.

In general, the Code of Ethics restricts purchases or sales of securities
being purchased or sold or being considered for purchase or sale by the Fund in
which beneficial ownership is held by any of the directors, officers, or
employees of either the Fund, the Advisers, or 1717. Certain Fund employees and
directors,

17
<PAGE> 66

officers, or employees of either the Advisers, or 1717 (collectively referred to
as "Advisory Persons") are also prohibited from purchasing securities in an
initial public offering. Advisory Persons are also restricted in their purchases
of private offerings of securities. The Code of Ethics also describes certain
"blackout periods" during which: (1) no Advisory Person or no director, officer,
or employee of the Fund may acquire ownership of a security on a day during
which the Fund has a pending order to purchase or sell that same security; and
(2) no person responsible for day-to-day portfolio management of any Portfolio
shall purchase or sell any security within seven days before or after the Fund
trades in such security. Certain specified transactions are exempt from the
provisions of the Code of Ethics.

OTHER SERVICES

CUSTODIAN FOR INTERNATIONAL PORTFOLIO

The custodian for all foreign securities and assets of the International
Portfolio is Citibank, N.A. Securities purchased for the Portfolio outside of
the U.S. are maintained in the custody of foreign banks and trust companies
which are members of Citibank's Global Custody Network and foreign depositories
(foreign sub-custodians). Citibank and each of the foreign custodial
institutions holding securities of the Portfolio has been approved by the Board
in accordance with regulations under the 1940 Act.

The Board reviews, at least annually, whether it is in the best interest of
the Portfolio and its shareholders to maintain Portfolio assets in each
custodial institution. However, with respect to foreign sub-custodians, there
can be no assurance that the Portfolio and the value of its shares, will not be
adversely affected by acts of foreign governments, financial or operational
difficulties of the foreign sub-custodians, difficulties and costs of obtaining
jurisdiction over, or enforcing judgments against, the foreign sub-custodians,
or application of foreign law to the Portfolio's foreign sub-custodian
arrangements. Accordingly, an investor should recognize that the noninvestment
risks involved in holding assets abroad may be greater than those associated
with investing in the U.S.

INDEPENDENT ACCOUNTANTS

The firm of Coopers & Lybrand L.L.P., 2400 Eleven Penn Center,
Philadelphia, PA 19103, has been selected to serve as the Fund's independent
accountants.

The financial statements of the Growth, Money Market, Bond, Managed,
Aggressive Growth and International Portfolios in this Statement of Additional
Information and the Condensed Financial Information and ratios derived from such
financial statements included in the Prospectus have been audited by Coopers &
Lybrand L.L.P., Independent Accountants, and have been included in reliance upon
the report of such firm given on their authority as experts in accounting and
auditing.

LEGAL MATTERS

Adam Scaramella, Esquire, has provided advice on the legal validity of the
shares described in the Prospectus. Sutherland, Asbill & Brennan, L.L.P. of
Washington, D.C. has provided advice on certain legal matters pertaining to
federal securities laws applicable to the Fund.

UNDERWRITERS

1717 Capital Management Company ("1717") (formerly PML Securities Company)
will serve, without compensation from the Fund, as the principal underwriter of
the Fund, pursuant to an agreement with the Fund. Under the terms of the
agreement, PML will not be obligated to sell any specific number of shares. 1717
has authority, pursuant to the agreement to enter into similar contracts with
other insurance companies and with other entities registered as broker-dealers
under the Securities Exchange Act of 1934.

18
<PAGE> 67

ADDITIONAL INFORMATION

This Statement of Additional Information and the Prospectus do not contain
all the information set forth in the registration statement and exhibits
relating thereto, which the Fund has filed with the Securities and Exchange
Commission, Washington, D.C., under the Securities Act of 1933 and the
Investment Company Act of 1940, to which reference is hereby made.

19
<PAGE> 68

FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants.................................................... F-2
Schedule of Investments as of December 31, 1996...................................... F-3
Statements of Assets and Liabilities, December 31, 1996.............................. F-29
Statements of Operations for the Year Ended December 31, 1996........................ F-30
Statements of Changes in Net Assets for the Year Ended December 31, 1996............. F-31
Statements of Changes in Net Assets for the Year Ended December 31, 1995............. F-32
Financial Highlights................................................................. F-33
Notes to Financial Statements, December 31, 1996..................................... F-40
</TABLE>

F-1
<PAGE> 69

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Report of Independent Accountants

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

To the Shareholders and Board of Directors
of Market Street Fund, Inc.:

We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Market Street Fund, Inc.,
(comprising, respectively, the Growth, Money Market, Bond, Managed, Aggressive
Growth, International, Common Stock and Sentinel Growth Portfolios) as of
December 31, 1996, and the related statements of operations for the year or
period then ended, the statements of changes in net assets for each of the two
years or periods then ended, and financial highlights for each of the periods
presented. These financial statements and financial highlights are the
responsibility of the Fund'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 investments owned as of
December 31, 1996, by correspondence with the custodians 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 Market Street Fund, Inc. as
of December 31, 1996, the results of their operations for the year or period
then ended, the changes in their net assets for each of the two years or periods
then ended, and the financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

2400 Eleven Penn Center
Philadelphia, Pennsylvania
January 31, 1997

F-2
<PAGE> 70

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio

Schedule of Investments, December 31, 1996

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (96.2%)
Aerospace & Defense................................................... 3.2%
Boeing Co. ......................................................... 31,886 $ 3,391,873
United Technologies Corp. .......................................... 45,000 2,970,000
----------
6,361,873
----------
Automotive & Equipment................................................ 1.4%
Genuine Parts Co. .................................................. 61,800 2,750,100
----------
Building & Building Supplies.......................................... 1.7%
Masco Corp. ........................................................ 91,900 3,308,400
----------
Business Services, Media, etc. ....................................... 2.7%
Cognizant Corp. .................................................... 68,600 2,263,800
Dun & Bradstreet Corp. ............................................. 132,700 3,151,625
----------
5,415,425
----------
Chemicals............................................................. 3.0%
Grace (W.R.) & Co. ................................................. 67,400 3,487,950
Great Lakes Chemical Corp. ......................................... 52,600 2,459,050
----------
5,947,000
----------
Diversified........................................................... 1.4%
Black & Decker Corp................................................. 52,800 1,590,600
Canadian Pacific Ltd. .............................................. 41,500 1,099,750
----------
2,690,350
----------
Drugs and Health Care................................................. 8.0%
Aetna, Inc. ........................................................ 80,800 6,464,000
Bristol-Meyers Squibb Co............................................ 41,100 4,469,625
Mallinckrodt Group, Inc. ........................................... 113,400 5,003,775
----------
15,937,400
----------
Electronics........................................................... 1.9%
Cooper Industries, Inc. ............................................ 90,200 3,799,675
----------
Finance-Banks......................................................... 8.4%
Chase Manhattan Corp. .............................................. 34,000 3,034,500
Corestates Financial Corp. ......................................... 62,000 3,216,250
Fleet Financial Group, Inc. ........................................ 85,000 4,239,375
Mellon Bank Corp. .................................................. 43,400 3,081,400
Nations Bank Corp. ................................................. 31,300 3,059,575
----------
16,631,100
----------
</TABLE>

F-3
<PAGE> 71

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio

Schedule of Investments, December 31, 1996 -- Continued

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Finance-Insurance..................................................... 5.1%
General Re Corp. ................................................... 18,400 $ 2,902,600
ITT Hartford Group, Inc. ........................................... 51,000 3,442,500
St. Paul Companies, Inc. ........................................... 64,800 3,798,900
----------
10,144,000
----------
Financial Institutions................................................ 3.0%
First Union Corp. .................................................. 26,400 1,953,600
Travelers Group, Inc. .............................................. 89,633 4,067,097
----------
6,020,697
----------
Foods................................................................. 3.1%
Archer-Daniels Midland Co. ......................................... 278,653 6,130,366
----------
Machinery & Instrumentation........................................... 4.3%
Deere & Co. ........................................................ 96,600 3,924,375
Parker Hannifin Corp. .............................................. 119,300 4,622,875
----------
8,547,250
----------
Natural Gas........................................................... 1.7%
TransCanada Pipelines Ltd. ......................................... 197,900 3,463,250
----------
Non-Ferrous Metals & Mining........................................... 3.9%
Aluminum Co. of America............................................. 76,700 4,889,625
Reynolds Metals Co. ................................................ 49,600 2,796,200
----------
7,685,825
----------
Office Equipment & Supplies........................................... 5.8%
International Business Machines Corp. .............................. 36,300 5,481,300
Pitney Bowes, Inc. ................................................. 18,200 991,900
Xerox Corp. ........................................................ 93,900 4,941,488
----------
11,414,688
----------
Oil................................................................... 4.8%
Exxon Corp. ........................................................ 35,100 3,439,800
Mobil Corp. ........................................................ 33,000 4,034,251
Repsol ADR.......................................................... 53,400 2,035,875
----------
9,509,925
----------
Oil & Other Energy Sources............................................ 4.0%
Amoco Corp. ........................................................ 53,000 4,266,500
USX Marathon Group.................................................. 157,400 3,757,925
----------
8,024,425
----------
</TABLE>

F-4
<PAGE> 72

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio

Schedule of Investments, December 31, 1996 -- Concluded

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Paper & Forest Products............................................... 3.9%
James River Corp. .................................................. 142,500 $ 4,720,313
Mead Corp. ......................................................... 50,800 2,952,750
----------
7,673,063
----------
Pollution Control..................................................... 2.4%
WMX Technologies, Inc. ............................................. 143,800 4,691,475
----------
Retail-Department Stores.............................................. 0.9%
Dillard Dept. Stores, Class A....................................... 60,100 1,855,588
----------
Retail-Food Chains.................................................... 1.9%
American Stores Co. ................................................ 90,000 3,678,750
----------
Retail-Stores......................................................... 1.2%
Circuit City Store, Inc. ........................................... 80,500 2,425,062
----------
Telecommunications.................................................... 3.0%
AT&T Corp. ......................................................... 138,000 6,003,000
----------
Tobacco............................................................... 2.3%
RJR Nabisco Holdings Corp. ......................................... 135,140 4,594,760
----------
Transportation........................................................ 1.4%
Burlington Northern Santa Fe Corp. ................................. 32,600 2,815,825
----------
Utilities-Electric.................................................... 6.2%
Entergy Corp. ...................................................... 99,000 2,747,250
FPL Group, Inc. .................................................... 60,500 2,783,000
General Public Utilities Corp. ..................................... 85,400 2,871,575
PECO Energy Co. .................................................... 152,200 3,843,050
----------
12,244,875
----------
Utilities - Telephone................................................. 5.6%
GTE Corp. .......................................................... 87,000 3,958,500
NYNEX Corp. ........................................................ 149,000 7,170,625
----------
11,129,125
----------
TOTAL COMMON STOCK (COST $164,065,025)............................ 190,893,272
----------
SHORT-TERM INVESTMENTS (3.8%)
Temporary Investment Fund, Inc. - TempCash (Cost $7,579,202)........ 7,579,202 7,579,202
----------
TOTAL INVESTMENTS (100.0%) (COST $171,644,227).................... $198,472,474
==========
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE> 73

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Money Market Portfolio

Schedule of Investments, December 31, 1996

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

<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF PORTFOLIO MATURITY AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BANKERS' ACCEPTANCES (9.3%)
Wachovia Bank of Georgia, 5.38%.......................... 01/09/97 $2,500,000 $ 2,497,011
Mellon Bank, 5.36%....................................... 02/26/97 2,600,000 2,578,322
-----------
TOTAL BANKERS' ACCEPTANCES (COST $5,075,333)........... 5,075,333
-----------
COMMERCIAL PAPER (85.4%)
Agricultural............................................... 1.8%
Cargill, Inc., 5.35%..................................... 01/21/97 975,000 972,102
-----------
Consumer Finance........................................... 1.8%
Transamerica Corp., 5.50%................................ 01/28/97 1,000,000 995,875
-----------
Bank....................................................... 27.6%
Bank of New York, 5.28%.................................. 01/10/97 2,000,000 1,997,360
BankAmerica Corp., 5.34%................................. 01/24/97 2,550,000 2,541,300
Morgan (J.P.) & Co., Inc., 5.37%......................... 01/08/97 2,575,000 2,572,311
National City Credit Corp., 5.50%........................ 01/28/97 2,700,000 2,691,750
Norwest Financial, Inc., 5.42%........................... 02/14/97 2,645,000 2,627,478
Republic New York Corp., 5.37%........................... 01/14/97 2,600,000 2,594,958
-----------
15,025,157
-----------
Finance.................................................... 49.5%
American Express Credit Corp., 5.80%..................... 01/07/97 1,800,000 1,798,260
C.I.T. Group Holdings, Inc., 5.40%....................... 01/30/97 2,500,000 2,489,125
Cargill Financial Services Corp., 5.32%.................. 01/13/97 1,575,000 1,572,207
Chevron Oil Finance Co., 5.62%........................... 01/09/97 1,000,000 998,751
Commercial Credit Corp., 5.30%........................... 01/06/97 2,650,000 2,648,049
Deere (John) Credit Co., 5.31%........................... 01/17/97 1,235,000 1,232,085
Deere (John) Credit Co., 5.29%........................... 01/17/97 1,325,000 1,321,886
Ford Motor Credit Co., 5.38%............................. 01/16/97 2,000,000 1,995,518
General Electric Capital Corp., 5.42%.................... 01/27/97 2,500,000 2,490,214
Household Finance Corp., 5.42%........................... 01/15/97 2,550,000 2,544,625
IBM Credit Corp., 5.49%.................................. 01/31/97 2,670,000 2,657,785
Prudential Funding Corp., 5.32%.......................... 01/09/97 2,550,000 2,546,985
Union Bank, Los Angeles, CA., 5.30%...................... 01/22/97 2,600,000 2,600,000
-----------
26,895,490
-----------
Oil & Gas.................................................. 4.7%
Texaco, Inc., 5.48%...................................... 02/03/97 2,600,000 2,586,939
-----------
TOTAL COMMERCIAL PAPER (COST $46,475,563).............. 46,475,563
-----------
AGENCY OBLIGATIONS (3.5%)
Federal National Mortgage Discount Note, 5.32%
(Cost $1,889,611)...................................... 02/07/97 1,900,000 1,889,611
-----------
</TABLE>

F-6
<PAGE> 74

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Money Market Portfolio

Schedule of Investments, December 31, 1996 -- Concluded

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

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
PERCENTAGE NUMBER
OF PORTFOLIO MATURITY OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS (1.80%)
Temporary Investment Fund, Inc.-TempCash
(Cost $1,000,057)...................................... $1,000,057 $ 1,000,057
-----------
TOTAL INVESTMENTS (100.0%) (COST $54,440,564).......... $54,440,564
===========
</TABLE>

See accompanying notes to financial statements.

F-7
<PAGE> 75

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Bond Portfolio

Schedule of Investments, December 31, 1996

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

<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF PORTFOLIO MATURITY AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. TREASURY NOTES (17.4%)
U.S. Treasury Note, 6.00%................................. 12/31/00 $ 600,000 $ 601,758
U.S. Treasury Note, 5.00%................................. 08/31/97 250,000 245,463
U.S. Treasury Note, 6.375%................................ 01/15/00 250,000 252,282
U.S. Treasury Note, 5.50%................................. 01/15/00 250,000 244,230
U.S. Treasury Note, 6.375%................................ 08/15/02 500,000 503,500
U.S. Treasury Note, 7.50%................................. 05/15/05 1,000,000 1,068,730
----------
TOTAL U.S. TREASURY NOTES (COST $2,913,524)............. 2,915,963
----------
AGENCY OBLIGATIONS (22.2%)
Collateralized Mortgage Obligation Trust, 7.95%............. 2.8% 05/01/17 457,959 469,767
----------
Federal Home Loan Bank...................................... 5.9%
Federal Home Loan Bank, 6.65%............................. 11/13/01 1,000,000 993,320
----------
Federal Home Loan Mortgage Corporation...................... 6.9%
Federal Home Loan Mortgage Corp., 6.50%................... 05/01/08 587,994 577,521
Federal Home Loan Mortgage Corp., 8.00%................... 11/01/08 518,992 528,561
Federal Home Loan Mortgage Corp., 9.00%................... 11/01/16 6,718 7,094
Federal Home Loan Mortgage Corp., 8.00%................... 03/01/17 39,090 39,811
----------
1,152,987
----------
Federal Mortgage Corporation................................ 3.6%
Federal Mortgage Corp. Discount Note., 5.51%.............. 01/07/97 600,000 599,449
----------
Federal National Mortgage Association....................... 3.0%
Federal National Mortgage Association, 7.50%.............. 12/01/06 491,793 501,629
----------
TOTAL AGENCY OBLIGATIONS (COST $3,731,458).............. 3,717,152
----------
CORPORATE BONDS (55.5%)
Industrial & Commercial Services............................ 3.0%
News American Holdings, Inc., 8.00%....................... 10/17/16 500,000 499,375
Defense..................................................... 2.9%
Northrop Corp., 7.00%..................................... 03/01/06 500,000 491,875
</TABLE>

F-8
<PAGE> 76

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Bond Portfolio

Schedule of Investments, December 31, 1996 -- Concluded

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

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
PERCENTAGE NUMBER
OF PORTFOLIO MATURITY OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
Financial Institutions..................................... 16.6%
CS First Boston, 7.75%................................... 05/15/06 $600,000 $ 627,000
First Union National Bank, 6.824%........................ 08/01/26 600,000 601,500
Lehman Brothers Holdings, 8.80%.......................... 03/01/15 400,000 451,000
Midland Bank, 7.65%...................................... 05/01/25 500,000 526,250
Salomon Brothers, 6.875%................................. 12/15/03 600,000 587,250
-----------
2,793,000
-----------
Insurance.................................................. 9.5%
Farmers Insurance Exchange, 8.50%........................ 08/01/04 600,000 633,000
Integon Corp., 9.50%..................................... 10/15/01 400,000 428,500
Liberty Mutual Insurance Co., 8.20%...................... 05/04/07 500,000 531,875
-----------
1,593,375
-----------
Telecommunications......................................... 6.4%
Comsat Corp. Medium Term Note, 8.05%..................... 12/13/06 500,000 547,785
Continental Cablevision, 8.30%........................... 05/15/06 500,000 533,750
-----------
1,081,535
-----------
Tobacco.................................................... 2.5%
Dimon, Inc., Senior Notes, 8.875%...................... 06/01/06 400,000 418,500
-----------
Utilities-Electric......................................... 3.0%
Mississippi Power and Light Co., 8.80%................... 04/01/05 500,000 510,625
-----------
Utilities-Gas.............................................. 2.6%
Consolidated Natural Gas Co., 8.625%..................... 12/01/11 422,000 439,407
-----------
Foreign.................................................... 9.0%
Banque Paribas Subordinate Notes, 6.875%................. 03/01/09 500,000 476,875
BCH Cayman Islands Ltd., 7.70%........................... 07/15/06 600,000 516,250
Swedish Export Credit Corp., 9.875%...................... 03/15/38 475,000 514,187
-----------
1,507,312
-----------
TOTAL CORPORATE BONDS (COST $9,138,939)................ 9,335,004
-----------
SHORT-TERM INVESTMENTS (4.9%)
Prudential Funding Corp., 5.23%.......................... 600,000 599,913
Temporary Investment Fund, Inc., - TempCash.............. 212,180 212,180
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $812,093)........... 812,093
-----------
TOTAL INVESTMENTS (100.0%) (COST $16,596,014).......... $16,780,212
===========
</TABLE>

See accompanying notes to financial statements.

F-9
<PAGE> 77

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio

Schedule of Investments, December 31, 1996

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (53.9%)
Automobiles & Auto Parts............................................... 2.5%
Chrysler Corp. ...................................................... 9,100 $ 300,300
Echlin, Inc. ........................................................ 9,000 284,625
Ford Motor Co. ...................................................... 16,000 510,000
-----------
1,094,925
-----------
Banks.................................................................. 5.1%
BankAmerica.......................................................... 3,000 299,250
Bank of New York Co., Inc............................................ 16,000 540,000
Chase Manhattan Corp. ............................................... 3,640 324,870
Citicorp............................................................. 3,500 360,500
First Union Corp. ................................................... 5,500 407,000
Morgan (J.P.) & Co., Inc. ........................................... 2,500 244,062
-----------
2,175,682
-----------
Beverages.............................................................. 0.6%
Coca-Cola Co......................................................... 5,000 263,125
-----------
Building & Materials................................................... 1.0%
Sherwin Williams Co. ................................................ 8,000 448,000
-----------
Consumer & Business Services........................................... 2.1%
Electronic Data Systems Corp......................................... 10,035 434,014
Omnicom Group, Inc. ................................................. 10,000 457,500
-----------
891,514
-----------
Consumer Products...................................................... 2.4%
American Brands, Inc. ............................................... 6,000 297,750
Coleman Co., Inc. ................................................... 9,700 133,375
Kimberly-Clark Corp. ................................................ 4,000 381,000
Rubbermaid, Inc. .................................................... 10,500 283,875
-----------
1,051,000
-----------
Drugs.................................................................. 2.3%
American Homes Products Corp. ....................................... 8,000 469,000
Pfizer, Inc. ........................................................ 6,000 497,250
-----------
966,250
-----------
Electrical Equipment................................................... 3.4%
Emerson Electric Co. ................................................ 5,000 483,750
General Electric Co. ................................................ 6,000 593,250
Grainger (W.W.), Inc. ............................................... 5,000 401,250
-----------
1,478,250
-----------
</TABLE>

F-10
<PAGE> 78

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio

Schedule of Investments, December 31, 1996 -- Continued

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Energy................................................................. 6.0%
Amoco Corp........................................................... 5,700 $ 458,850
Atlantic Richfield Co. .............................................. 3,100 410,750
Chevron Corp. ....................................................... 4,500 292,500
Exxon Corp. ......................................................... 5,000 490,000
Mobil Corp. ......................................................... 3,500 427,875
Royal Dutch Petroleum Co. ........................................... 3,000 512,250
-----------
2,592,225
-----------
Financial.............................................................. 1.2%
American Express Co. ................................................ 9,500 536,750
-----------
Foods.................................................................. 2.7%
CPC International, Inc. ............................................. 6,000 465,000
Hannaford Bros. Co. ................................................. 7,000 238,000
Sara Lee Corp. ...................................................... 12,000 447,000
-----------
1,150,000
-----------
Healthcare Providers................................................... 1.2%
Columbia/HCA Healthcare Corp. ....................................... 12,750 519,562
-----------
Industrial Diversified................................................. 5.2%
Boeing Co. .......................................................... 336 35,742
Crown Cork & Seal Co., Inc. ......................................... 8,000 435,000
Dover Corp. ......................................................... 5,000 251,250
Grace (W.R.) & Co. .................................................. 4,000 207,000
Parker-Hannifin Corp. ............................................... 12,000 465,000
PPG Industries, Inc. ................................................ 6,500 364,812
*Rockwell International Corp. ....................................... 8,000 487,000
-----------
2,245,804
-----------
Insurance.............................................................. 4.7%
Allstate Corp. ...................................................... 10,562 611,276
American General Corp. .............................................. 11,000 449,625
American International Group, Inc. .................................. 4,500 487,125
Equitable of Iowa.................................................... 10,000 458,750
-----------
2,006,776
-----------
Medical - Equipment & Supplies......................................... 1.0%
Johnson & Johnson.................................................... 9,000 447,750
-----------
</TABLE>

F-11
<PAGE> 79

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio

Schedule of Investments, December 31, 1996 -- Continued

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Oil Field Equipment & Services......................................... 2.0%
Halliburton Co. ..................................................... 6,000 $ 361,500
Schlumberger Ltd..................................................... 5,000 499,375
-----------
860,875
-----------
Publishing............................................................. 1.7%
Gannett, Inc......................................................... 4,500 336,937
McGraw Hill, Inc..................................................... 8,000 369,000
-----------
705,937
-----------
Railroads.............................................................. 2.2%
Canadian Pacific Ltd. ............................................... 10,400 275,600
Illinois Central Corp. Common, Series A.............................. 11,250 360,000
Union Pacific Corp. ................................................. 5,000 300,625
-----------
936,225
-----------
Retail................................................................. 2.3%
May Department Stores Co. ........................................... 6,700 313,225
Nordstrom, Inc. ..................................................... 6,300 223,256
Sears, Roebuck and Co. .............................................. 10,000 461,250
-----------
997,731
-----------
Telecommunications..................................................... 0.3%
Lucent Technologies, Inc. ........................................... 2,868 132,645
-----------
Tobacco................................................................ 0.6%
Philip Morris Company, Inc. ......................................... 2,300 259,037
-----------
Utilities - Electric................................................... 0.8%
FPL Group, Inc. ..................................................... 7,000 322,000
-----------
Utilities - Gas........................................................ 1.7%
Enron Corp. ......................................................... 8,000 345,000
Sonat, Inc. ......................................................... 7,500 386,250
-----------
731,250
-----------
Utilities - Telephone.................................................. 0.9%
GTE Corp............................................................. 8,500 386,750
-----------
TOTAL COMMON STOCK (COST $16,255,599).............................. 23,200,064
-----------
CONVERTIBLE STOCK (0.4%)
*Microsoft Corp., Preferred Series A Convertible, 2.75%
(COST $167,738).................................................... 2,100 168,262
-----------
</TABLE>

F-12
<PAGE> 80

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio

Schedule of Investments, December 31, 1996 -- Continued

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

<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF PORTFOLIO AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS (16.1%)
Banks.................................................................. 1.2%
BCH Cayman Islands, 7.70%, Due 07/15/06.............................. $ 500,000 $ 516,250
-----------
Defense................................................................ 1.1%
Northrop-Grumman, 7.00%, Due 03/01/06................................ 500,000 491,875
-----------
Financial Institutions................................................. 6.1%
CS First Boston, 7.75%, Due 05/15/06................................. 500,000 522,500
First Union Corp., 6.824%, Due 08/01/06.............................. 600,000 601,500
Lehman Brothers Holdings, 8.80%, Due 03/01/15........................ 400,000 451,000
Midland Bank, 7.65%, Due 05/01/25.................................... 550,000 578,875
Salomon Brothers, 6.875%, Due 12/15/03............................... 500,000 489,375
-----------
2,643,250
-----------
Industrial............................................................. 1.1%
News American Holdings, 8.00%, Due 10/17/16.......................... 500,000 499,375
-----------
Insurance.............................................................. 3.0%
Farmers Insurance Exchange, 8.50%, Due 08/01/04...................... 700,000 738,500
Liberty Mutual Insurance Co., 8.20%, Due 05/04/07.................... 500,000 531,875
-----------
1,270,375
-----------
Telecommunications..................................................... 2.5%
Comsat Medium Term Note, 8.05%, Due 12/13/06......................... 500,000 547,785
Continental Cablevision, 8.30%, Due 05/15/06......................... 500,000 533,750
-----------
1,081,535
-----------
Tobacco................................................................ 1.0%
Dimon, Inc., 8.875%, Due 06/01/06.................................... 400,000 418,500
-----------
TOTAL CORPORATE BONDS (COST $6,859,440)............................ 6,921,160
-----------
U.S. TREASURY NOTES (9.3%)
U.S. Treasury Note, 6.00%, Due 08/31/97.............................. 500,000 501,465
U.S. Treasury Note, 6.375%, Due 01/15/00............................. 500,000 504,565
U.S. Treasury Note, 6.125%, Due 07/31/00............................. 1,000,000 1,000,090
U.S. Treasury Note, 6.25%, Due 08/31/00.............................. 2,000,000 2,006,900
-----------
TOTAL U.S. TREASURY NOTES (COST $4,013,117)........................ 4,013,020
-----------
</TABLE>

F-13
<PAGE> 81

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio

Schedule of Investments, December 31, 1996 -- Concluded

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

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AGENCY OBLIGATIONS (10.8%)
Collateralized Mortgage Obligation Trust............................... 1.1%
7.95%, Due 05/01/17.................................................. $ 458,000 $ 469,767
Government National Single Family...................................... 2.3%
7.50%, Due 12/15/26.................................................. 1,000,000 1,000,313
Farmers Mac Discount Note.............................................. 2.8%
5.32%, Due 01/02/97.................................................. 1,200,000 1,199,823
Federal Home Loan Bank Bonds........................................... 1.4%
6.65%, Due 11/13/01.................................................. 600,000 595,992
Federal Home Loan Mortgage Corp. ...................................... 3.2%
8.00%, Due 11/01/08.................................................. 519,000 528,561
6.50%, Due 01/01/11.................................................. 873,000 857,384
-----------
1,385,945
-----------
TOTAL AGENCY OBLIGATIONS (COST $4,688,086)......................... 4,651,840
-----------
SHORT-TERM INVESTMENTS (9.5%)
Norwest Financial, Inc., 5.55%, Due 01/14/97......................... 2,000,000 1,995,992
Prudential Funding Corp., 5.56%, Due 01/01/97........................ 500,000 499,537
Prudential Funding Corp., 5.56%, Due 01/10/97........................ 1,200,000 1,198,332
Temporary Investment Fund, Inc. - TempCash........................... 408,177 408,177
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $4,102,038)..................... 4,102,038
-----------
TOTAL INVESTMENTS (100.0%) (COST $36,086,018)...................... $43,056,384
===========
</TABLE>

* Non-income producing

See accompanying notes to financial statements.

F-14
<PAGE> 82

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Growth Portfolio

Schedule of Investments, December 31, 1996

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (80.6%)
Auto Parts & Repair.................................................... 1.6%
Pep Boys-Manny, Moe & Jack........................................... 17,800 $ 547,350
-----------
Beverages.............................................................. 1.2%
*Robert Mondavi Corp., Class A....................................... 11,000 401,500
-----------
Communications......................................................... 3.0%
*Dynatech Corp....................................................... 13,500 597,375
*Verifone, Inc....................................................... 14,000 413,000
-----------
1,010,375
-----------
Drugs-Drug Delivery.................................................... 2.7%
*Scherer (R.P.) Corp................................................. 18,500 929,625
-----------
Electronics............................................................ 4.2%
Harman International Industries, Inc................................. 11,860 659,712
Methode Electronics, Inc. Class A.................................... 38,000 769,500
-----------
1,429,212
-----------
Energy................................................................. 6.6%
*Calenergy Co., Inc.................................................. 22,000 739,750
*Smith International, Inc............................................ 34,000 1,525,750
-----------
2,265,500
-----------
Environmental Control.................................................. 3.7%
*USA Waste Services, Inc............................................. 22,650 721,969
*Waste Management International Plc-ADR.............................. 70,000 551,250
-----------
1,273,219
-----------
Finance................................................................ 7.1%
Duff & Phelps Credit Rating Co....................................... 12,500 301,562
First Commerce Corp.................................................. 6,000 233,250
Mercantile Bankshares Corp........................................... 12,000 384,000
ROC Communities...................................................... 27,300 757,575
Wilmington Trust Corp................................................ 18,800 742,600
-----------
2,418,987
-----------
Food & Food Distributors............................................... 6.6%
Goodmark Foods, Inc.................................................. 25,700 424,050
Hannaford Bros. Co................................................... 15,100 513,400
Smart & Final, Inc................................................... 28,000 605,500
Tootsie Roll Industries, Inc......................................... 17,455 691,654
-----------
2,234,604
-----------
</TABLE>

F-15
<PAGE> 83

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Growth Portfolio

Schedule of Investments, December 31, 1996 -- Continued

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Healthcare Providers................................................... 2.5%
*Alpha Beta Technology, Inc........................................... 17,000 $ 179,563
*Genesis Health Ventures.............................................. 21,450 667,631
-----------
847,194
-----------
Insurance.............................................................. 3.4%
Conseco, Inc......................................................... 18,091 1,153,301
-----------
Industrial & Commercial Services....................................... 5.0%
Analysts International Corp.......................................... 16,000 452,000
*Healthcare Services Group............................................ 48,500 485,000
Kelly Services, Inc.................................................. 15,600 421,200
Olsten Corp.......................................................... 22,000 332,750
-----------
1,690,950
-----------
Industrial Diversified................................................. 8.8%
Donaldson, Inc....................................................... 22,000 737,000
Lawter International, Inc............................................ 51,500 650,188
*Material Sciences Corp............................................... 40,800 734,400
*Bush Boake Allen, Inc................................................ 33,500 891,938
-----------
3,013,526
-----------
Manufacturing.......................................................... 2.4%
Calgon Carbon Corp. ................................................. 66,000 808,500
-----------
Medical-Equipment & Supplies........................................... 7.9%
Allergan, Inc........................................................ 20,000 712,500
Ballard Medical Products............................................. 18,000 335,250
Hillenbrand Industries, Inc.......................................... 19,000 688,750
Minntech Corp........................................................ 28,100 323,150
*Research Medical, Inc................................................ 26,800 616,400
-----------
2,676,050
-----------
Oil Equipment & Services............................................... 2.4%
Halliburton Co....................................................... 13,776 830,004
-----------
Restaurants............................................................ 1.8%
Sbarro, Inc.......................................................... 24,700 629,850
-----------
</TABLE>

F-16
<PAGE> 84

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Growth Portfolio

Schedule of Investments, December 31, 1996 -- Concluded

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

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Retail-Department Stores............................................... 4.4%
Ethan Allen Industries, Inc.......................................... 22,500 $ 866,250
Talbots, Inc......................................................... 23,000 658,375
-----------
1,524,625
-----------
Security Services...................................................... 2.9%
*ADT Ltd.............................................................. 43,000 983,625
-----------
Software............................................................... 2.4%
*Filenet Corp......................................................... 13,000 416,000
*Sterling Commerce.................................................... 12,000 423,000
-----------
839,000
-----------
TOTAL COMMON STOCK (COST $21,313,188).............................. 27,506,997
-----------
PREFERRED STOCK (0.2%)
Phoenix Duff & Phelps Preferred Convertible Series A, $1.50, (Cost
$71,441)........................................................... 2,500 62,500
-----------
SHORT-TERM INVESTMENTS (19.2%)
Beneficial Corp., 5.52%, Due 01/15/97................................ $1,600,000 1,596,566
Federal Agricultural Mortgage Corp., 5.32%, Due 01/02/97............. 1,500,000 1,499,778
General Electric Capital Corp., 5.35%, Due 01/22/97.................. 950,000 947,035
National City Credit Corp., 5.46%, Due 01/08/97...................... 1,000,000 998,938
Prudential Funding Corp., 5.60%, Due 01/10/97........................ 1,500,000 1,497,900
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $6,540,217)..................... 6,540,217
-----------
TOTAL INVESTMENTS (100.0%) (COST $27,924,846)...................... $34,109,714
===========
</TABLE>

* Non-income producing.

See accompanying notes to financial statements.

F-17
<PAGE> 85

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio

Schedule of Investments, December 31, 1996

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK AND PREFERRED STOCK (96.2%)
Austria.................................................................. 0.3%
Creditanstalt PS....................................................... 1,200 $ 155,024
-----------
Australia................................................................ 3.2%
Amcor Ltd. ............................................................ 45,000 289,330
Australia & New Zealand Bank Group Ltd. ............................... 50,000 315,120
Boral Ltd. ............................................................ 204,724 582,485
Commonwealth Installment Receipt Trustee Ltd. ......................... 43,004 267,611
Goodman Fielder........................................................ 112,993 140,091
-----------
1,594,637
-----------
France................................................................... 4.4%
C.S.F. (Thomson-C.S.F.)................................................ 14,419 469,005
CLF - Dexia France..................................................... 5,000 429,724
Danone................................................................. 3,704 516,341
Societe Generale....................................................... 6,748 724,296
-----------
2,139,366
-----------
Germany.................................................................. 9.5%
Bayer AG............................................................... 13,000 530,130
Bayer Motoren AG....................................................... 800 557,403
Deutsche Bank AG....................................................... 15,000 700,325
GEA AG................................................................. 1,600 489,351
Henkel KGAA............................................................ 1,000 47,727
Henkel KGAA - Vorzug Preferred......................................... 11,000 552,143
Siemens AG............................................................. 11,500 541,396
Tarkett................................................................ 15,000 299,026
Veba AG................................................................ 8,500 491,234
Viag AG................................................................ 1,200 470,649
-----------
4,679,384
-----------
Hong Kong................................................................ 3.2%
Cheung Kong Holdings................................................... 57,000 506,527
Hong Kong Electric..................................................... 145,000 481,678
HSBC Holdings Plc...................................................... 13,418 287,038
Yue Yuen Industrial.................................................... 750,000 285,982
-----------
1,561,225
-----------
Italy.................................................................... 2.3%
Fiat SpA............................................................... 105,000 316,552
STET Di Risp........................................................... 250,000 840,722
-----------
1,157,274
-----------
</TABLE>

F-18
<PAGE> 86

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio

Schedule of Investments, December 31, 1996 -- Continued

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK AND PREFERRED STOCK (CONTINUED)
Japan.................................................................... 27.9%
Canon, Inc. ........................................................... 38,000 $ 840,795
Chudenko Corp. ........................................................ 7,000 202,074
Credit Saison Co. ..................................................... 37,000 828,263
Dai-Tokyo Fire and Marine Insurance.................................... 117,000 621,910
Hitachi Koki Co. ...................................................... 55,000 394,080
Hitachi Ltd. .......................................................... 65,000 606,742
Honda Motor Co. Ltd. .................................................. 17,000 486,344
Ito-Yokado Co. Ltd. ................................................... 13,000 566,292
Kao Corp. ............................................................. 60,000 700,086
Mabuchi Motors......................................................... 11,200 564,356
Mikuni Coca-Cola Bottling Co. Ltd. .................................... 40,000 518,583
Mineba Company Ltd. ................................................... 65,000 543,820
Mitsubishi Heavy Industries Ltd. ...................................... 90,000 715,644
Murata Manufacturing Co. Ltd. ......................................... 22,000 722,558
Nichiei................................................................ 6,500 478,090
Nishimatsu Construction................................................ 55,000 480,121
Ono Pharmaceutical..................................................... 8,000 235,091
Sankyo Co. Ltd. ....................................................... 15,000 439,499
Sekisui Chemical Co.................................................... 27,000 273,034
Sekisui House.......................................................... 48,000 489,542
Sony Corp. ............................................................ 9,000 590,406
Toshiba Corp. ......................................................... 100,000 629,213
Toyota Motor Corp. .................................................... 28,000 805,877
Yamanouchi Pharmaceuticals............................................. 22,000 452,550
Yamato Transportation.................................................. 55,000 570,441
-----------
13,755,411
-----------
Malaysia................................................................. 1.2%
Affin Holdings......................................................... 160,000 440,222
IOI Properties Berhad.................................................. 43,000 139,588
-----------
579,810
-----------
Netherlands.............................................................. 4.4%
ABN Amro Holding....................................................... 8,156 528,778
Hollandsche Beton...................................................... 2,050 423,196
Hunter Douglas N.V..................................................... 7,956 534,621
International Nederlanden Group........................................ 6,666 239,156
Koninklijke K.N.P. .................................................... 20,000 436,062
-----------
2,161,813
-----------
</TABLE>

F-19
<PAGE> 87

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio

Schedule of Investments, December 31, 1996 -- Continued

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK AND PREFERRED STOCK (CONTINUED)
New Zealand.............................................................. 1.2%
Air New Zealand........................................................ 61,091 $ 166,089
Fletcher Energy........................................................ 150,000 435,420
-----------
601,509
-----------
Norway................................................................... 1.3%
Christiana Bank........................................................ 90,000 284,485
Orkla.................................................................. 5,500 348,564
-----------
633,049
-----------
Portugal................................................................. 0.5%
Banco Comercial Portugues.............................................. 20,000 262,938
-----------
Singapore................................................................ 1.4%
Development Bank....................................................... 30,000 405,289
Far East Levingston.................................................... 53,000 276,555
-----------
681,844
-----------
Spain.................................................................... 1.1%
Gas y Electricidad SA Gesa............................................. 8,591 546,550
-----------
Sweden................................................................... 0.7%
Marieberg Tidnings AB.................................................. 14,000 343,910
-----------
Switzerland.............................................................. 4.7%
Magazine Zum Globus.................................................... 100 51,788
Magazine Zum Globus Participating Certificates, Zurich................. 550 253,279
Nestle SA.............................................................. 300 321,237
Schweizerischer Bankverein............................................. 3,350 635,302
Sulzer AG-Registered Shares............................................ 830 478,085
Zurich Versicherungs................................................... 2,000 554,396
-----------
2,294,087
-----------
United Kingdom........................................................... 11.6%
Abbey National Plc..................................................... 50,000 655,796
BTR Ordinary Plc....................................................... 158,823 773,336
Bunzel Plc............................................................. 125,000 499,348
D.S. Smith............................................................. 71,178 380,749
Devro Plc.............................................................. 60,000 276,720
Laird Group Ordinary................................................... 65,000 443,541
</TABLE>

F-20
<PAGE> 88

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio

Schedule of Investments, December 31, 1996 -- Concluded

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK AND PREFERRED STOCK (CONTINUED)
National Westminster Bank.............................................. 75,183 $ 884,266
Powergen Plc........................................................... 84,443 828,123
RTZ Corp............................................................... 41,351 665,007
Scapa Group............................................................ 70,603 297,175
-----------
5,704,061
-----------
United States............................................................ 17.3%
AKZO N.V. Sponsored ADR................................................ 3,500 236,250
Alcatel Alsthom ADR.................................................... 28,516 456,256
Cable and Wireless ADR................................................. 22,000 541,750
Corporacion Bancaria de Espanol ADR.................................... 29,000 652,500
Elf Aquitaine ADR...................................................... 18,751 848,483
Ente Nazionale Idrocarburi SpA-ADR..................................... 10,000 516,250
Hanson Trust Plc ADR................................................... 33,000 222,750
*Imperial Tobacco Group ADR............................................ 8,250 106,450
Istituto Mobiliare Italiano ADR........................................ 19,000 491,625
KPN ADS................................................................ 8,863 335,686
Philips N.V. ADR....................................................... 10,000 400,000
Repsol ADR............................................................. 22,000 838,750
Rhone Poulenc S.A. Sponsored ADR....................................... 14,295 484,243
Scania AB Class A-ADR.................................................. 8,000 193,000
Scania AB Class B-ADR.................................................. 3,000 72,375
Tele Danmark ADR....................................................... 17,500 476,875
Telefonos De Mexico S.A.-ADR........................................... 9,500 313,500
Unilever N.V-ADR....................................................... 3,000 525,750
Volvo AB-ADR........................................................... 15,000 326,250
YPF Sociedad Anonima ADR............................................... 20,000 505,000
-----------
8,543,741
-----------
TOTAL COMMON STOCK AND PREFERRED STOCK (COST $43,890,604)............ 47,395,633
-----------
SHORT-TERM INVESTMENTS (3.8%)
Temporary Investment Fund, Inc.-TempCash
(Cost $1,881,582).................................................... 1,881,582 1,881,582
-----------
TOTAL INVESTMENTS (100.0%) (COST $45,772,186)........................ $49,277,215
===========
</TABLE>

* Non-Income Producing.

See accompanying notes to financial statements.

F-21
<PAGE> 89

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Common Stock Portfolio

Schedule of Investments, December 31, 1996

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (92.6%)
Automobiles........................................................... 4.5%
Chrysler Corp....................................................... 2,600 $ 85,800
Echlin, Inc......................................................... 2,500 79,062
Ford Motor Co....................................................... 4,000 127,500
-----------
292,362
-----------
Banks................................................................. 11.0%
Bank of New York Co., Inc........................................... 4,500 151,875
BankAmerica Corp.................................................... 1,000 99,750
Chase Manhattan Corp................................................ 1,300 116,025
Citicorp............................................................ 1,300 133,900
First Union Corp.................................................... 1,400 103,600
Morgan (J.P.) & Co., Inc............................................ 1,200 117,150
-----------
722,300
-----------
Beverages............................................................. 1.9%
Coca-Cola Co........................................................ 2,400 126,300
-----------
Building Materials.................................................... 1.6%
Sherwin Williams Co................................................. 1,900 106,400
-----------
Business & Consumer Services.......................................... 3.4%
Electronic Data Systems Corp........................................ 2,800 121,100
Omnicom Group, Inc.................................................. 2,200 100,650
-----------
221,750
-----------
Consumer Products..................................................... 6.3%
American Brands, Inc................................................ 2,000 99,250
Gillette Co......................................................... 1,600 124,400
Kimberly-Clark Corp................................................. 1,300 123,825
Rubbermaid, Inc..................................................... 2,800 63,700
-----------
411,175
-----------
Drugs................................................................. 3.9%
American Home Products Corp......................................... 2,200 128,975
Pfizer, Inc......................................................... 1,500 124,313
-----------
253,288
-----------
Electrical Equipment.................................................. 5.4%
Emerson Electric Co................................................. 1,800 174,150
General Electric Co................................................. 1,800 177,975
-----------
352,125
-----------
</TABLE>

F-22
<PAGE> 90

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Common Stock Portfolio

Schedule of Investments, December 31, 1996 -- Continued

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Energy................................................................ 10.5%
Amoco Corp.......................................................... 1,300 $ 104,650
Atlantic Richfield Co............................................... 500 66,250
Chevron Corp........................................................ 1,200 78,000
Exxon Corp.......................................................... 1,500 147,000
Mobil Corp.......................................................... 1,000 122,250
Royal Dutch Petroleum Co............................................ 1,000 170,750
-----------
688,900
-----------
Financial............................................................. 2.6%
American Express Co................................................. 3,000 169,500
*Echelon International Corp.......................................... 133 2,083
-----------
171,583
-----------
Foods................................................................. 3.3%
CPC International, Inc.............................................. 1,100 85,250
Sara Lee Corp....................................................... 3,500 130,375
-----------
215,625
-----------
Healthcare Providers.................................................. 2.1%
Columbia Healthcare Corp............................................ 3,300 134,475
-----------
Industrial - Diversified.............................................. 8.3%
Boeing Co........................................................... 96 10,212
Crown Cork & Seal Co., Inc.......................................... 2,000 108,750
Grace (W.R.) & Co................................................... 1,300 67,275
Parker Hannifin Corp................................................ 3,300 127,875
PPG Industries, Inc................................................. 1,600 89,800
*Rockwell International Corp......................................... 2,300 140,013
-----------
543,925
-----------
Insurance............................................................. 6.1%
Allstate Corp....................................................... 2,400 138,900
American General Corp............................................... 3,200 130,800
American International Group, Inc................................... 1,200 129,900
-----------
399,600
-----------
Medical - Equipment & Supplies........................................ 1.8%
Johnson & Johnson................................................... 2,400 119,400
-----------
</TABLE>

F-23
<PAGE> 91

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Common Stock Portfolio

Schedule of Investments, December 31, 1996 -- Continued

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

F-24
<PAGE> 92

- --------------------------------------------------------------------------------
Market Street Fund, Inc.

The Common Stock Portfolio

Schedule of Investments, December 31, 1996 -- Concluded

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

See accompanying notes to financial statements.

F-25
<PAGE> 93

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Sentinel Growth Portfolio

Schedule of Investments, December 31, 1996

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (93.3%)
Automobiles & Auto Parts................................................ 1.6%
Pep Boys-Manny Moe & Jack............................................. 3,000 $ 92,250
----------
Banks................................................................... 1.4%
First Union Corp. .................................................... 1,100 81,400
----------
Financial............................................................... 5.7%
American Express Co. ................................................. 2,200 124,300
Student Loan Marketing Association.................................... 2,100 195,562
----------
319,862
----------
Biotechnology........................................................... 8.2%
*Amgen, Inc. ......................................................... 2,100 114,188
Biogen, Inc. ......................................................... 1,200 46,500
*Centocor, Inc. ...................................................... 1,600 57,200
*Chiron Corp. ........................................................ 2,800 52,150
Pfizer, Inc. ......................................................... 1,100 91,163
Schering Plough Corp. ................................................ 1,600 103,600
----------
464,801
----------
Building Materials...................................................... 1.9%
Sherwin Williams Co. ................................................. 1,900 106,400
----------
Business Services....................................................... 6.1%
Electronic Data Systems............................................... 2,400 103,800
First Data Corp. ..................................................... 2,000 73,000
Omnicom Group, Inc. .................................................. 3,700 169,275
----------
346,075
----------
Computers............................................................... 1.7%
Hewlett Packard Co. .................................................. 1,000 50,250
Novellus System, Inc. ................................................ 800 43,350
----------
93,600
----------
Consumer Services....................................................... 0.9%
Hillenbrand Industries, Inc. ......................................... 1,400 50,750
----------
Electronics............................................................. 6.8%
*Applied Materials, Inc. ............................................. 4,100 147,343
*KLA Instruments Corp. ............................................... 1,700 60,350
Methode Electronics, Inc. ............................................ 1,900 38,475
Motorola, Inc. ....................................................... 1,300 79,788
Tencor Instruments.................................................... 2,200 58,025
----------
383,981
----------
</TABLE>

F-26
<PAGE> 94

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Sentinel Growth Portfolio

Schedule of Investments, December 31, 1996 -- Continued

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Environmental Control................................................... 0.9%
*United States Filter Corp. .......................................... 1,500 $ 47,625
----------
Energy.................................................................. 0.9%
Enron Corp. .......................................................... 1,200 51,750
----------
Health.................................................................. 1.8%
American Home Products................................................ 1,700 99,662
----------
Healthcare Services..................................................... 8.5%
Columbia/HCA Healthcare............................................... 2,550 103,912
Genzyme Corp. ........................................................ 2,200 47,850
Integrated Health Services, Inc. ..................................... 4,000 97,500
Medpartners, Inc. .................................................... 5,847 115,227
Renal Treatment Centers, Inc. ........................................ 1,100 28,050
United Healthcare Corp. .............................................. 1,900 85,500
----------
478,039
----------
Industrial.............................................................. 5.0%
Donaldson Co.......................................................... 4,400 147,400
Crown Cork & Seal Co., Inc. .......................................... 1,100 59,812
Grace (W.R.) & Co..................................................... 1,400 72,450
----------
279,662
----------
Insurance............................................................... 1.1%
Equitable of Iowa..................................................... 1,400 64,225
----------
Medical-Equipment & Supplies............................................ 4.0%
Dentsply International................................................ 2,300 109,250
Johnson & Johnson..................................................... 1,600 79,600
*LAM Research Corp. .................................................. 1,400 39,375
----------
228,225
----------
Office Equipment........................................................ 1.2%
Staples, Inc. ........................................................ 3,800 68,637
----------
Oil Field Equipment..................................................... 7.6%
Halliburton Co. ...................................................... 1,000 60,250
Schlumberger Ltd. .................................................... 1,500 149,813
*Smith International, Inc. .......................................... 3,700 166,038
Union Pacific Resources Group......................................... 1,746 51,071
----------
427,172
----------
Restaurants............................................................. 0.9%
Outback Steakhouse, Inc. ............................................. 2,000 53,500
----------
</TABLE>

F-27
<PAGE> 95

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Sentinel Growth Portfolio

Schedule of Investments, December 31, 1996 -- Concluded

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

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Retail................................................................. 12.7%
Ethan Allen Interiors, Inc. ......................................... 5,200 $ 200,200
Home Depot, Inc. .................................................... 2,800 140,350
Nordstrom, Inc. ..................................................... 1,400 49,613
Sears, Roebuck & Co. ................................................ 2,000 92,250
TJX Companies........................................................ 5,100 241,613
-----------
724,026
-----------
Semiconductors......................................................... 6.2%
Intel Corp. ......................................................... 1,300 170,218
*Microsoft Corp. .................................................... 2,200 181,775
-----------
351,993
-----------
Technology............................................................. 1.0%
*Sterling Commerce, Inc. ............................................ 1,600 56,400
-----------
Telecommunications..................................................... 3.2%
*Airtouch Communications............................................. 1,900 47,975
*Worldcom, Inc. ..................................................... 5,000 130,313
-----------
178,288
-----------
Tobacco................................................................ 4.0%
Philip Morris Cos., Inc. ............................................ 2,000 225,250
-----------
TOTAL COMMON STOCK (COST $4,722,686)............................... 5,273,573
-----------
SHORT-TERM INVESTMENTS (6.7%)
Prudential Funding Corp., 5.90%, Due 01/02/97........................ $ 280,000 279,954
Temporary Investment Fund, Inc.-TempCash............................. 99,478 99,478
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $379,432)....................... 379,432
-----------
TOTAL INVESTMENTS (100.0%) (COST $5,102,118)....................... $ 5,653,005
===========
</TABLE>

* Non-Income Producing

See accompanying notes to financial statements.

F-28
<PAGE> 96

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statements of Assets and Liabilities, December 31, 1996

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

<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at value (cost $171,644,227,
$54,440,564, $16,596,014, $36,086,018,
$27,924,846, $45,772,186, $5,845,287,
$5,102,118 respectively) (see accompanying
schedules)................................. $198,472,474 $54,440,564 $16,780,212 $43,056,384 $34,109,714 $49,277,215
Foreign currency, at value (Cost
$2,369,564)................................ -- -- -- -- -- 2,378,359
Interest receivable.......................... 33,078 18,919 265,016 248,986 2,496 7,386
Dividends and tax reclaim receivable......... 544,187 -- -- 37,813 29,114 95,513
Receivable from affiliated insurance
company.................................... -- -- -- -- -- --
Receivable for fund shares sold.............. 13,437 -- 53,529 117,153 5,951 48,061
------------ ----------- ----------- ----------- ----------- -----------
Total assets............................... 199,063,176 54,459,483 17,098,757 43,460,336 34,147,275 51,806,534
------------ ----------- ----------- ----------- ----------- -----------
LIABILITIES
Accrued expenses............................. 114,998 32,866 11,877 29,105 28,212 51,241
Dividend payable............................. -- 229,893 -- -- -- --
Payable for investments purchased............ -- -- -- -- -- 800,170
Payable for fund shares redeemed............. 112 -- 2 61 20,781 --
------------ ----------- ----------- ----------- ----------- -----------
Total liabilities.......................... 115,110 262,759 11,879 29,166 48,993 851,411
------------ ----------- ----------- ----------- ----------- -----------
Net assets................................. $198,948,066 $54,196,724 $17,086,878 $43,431,170 $34,098,282 $50,955,123
============ =========== =========== =========== =========== ===========
Number of shares of $.01 par value common
stock, issued and outstanding.............. 10,993,074 54,196,724 1,602,086 2,957,804 1,840,827 3,800,309
============ =========== =========== =========== =========== ===========
Net asset value, offering and redemption
price per share............................ $18.10 $1.00 $10.67 $14.68 $18.52 $13.41
============ =========== =========== =========== =========== ===========

<CAPTION>
COMMON SENTINEL
STOCK GROWTH
PORTFOLIO PORTFOLIO
- ----------------------------------------------
<S> <C> <C>
ASSETS
Investments, at value (cost $171,644,227,
$54,440,564, $16,596,014, $36,086,018,
$27,924,846, $45,772,186, $5,845,287,
$5,102,118 respectively) (see accompanying
schedules)................................. $ 6,545,224 $5,653,005
Foreign currency, at value (Cost
$2,369,564)................................ -- --
Interest receivable.......................... 662 858
Dividends and tax reclaim receivable......... 9,430 5,353
Receivable from affiliated insurance
company.................................... 11,085 9,914
Receivable for fund shares sold.............. 4,824 --
----------- ----------
Total assets............................... 6,571,225 5,669,130
----------- ----------
LIABILITIES
Accrued expenses............................. 6,601 5,507
Dividend payable............................. -- --
Payable for investments purchased............ -- --
Payable for fund shares redeemed............. -- 34
----------- ----------
Total liabilities.......................... 6,601 5,541
----------- ----------
Net assets................................. $ 6,564,624 $5,663,589
=========== ==========
Number of shares of $.01 par value common
stock, issued and outstanding.............. 580,267 508,271
=========== ==========
Net asset value, offering and redemption
price per share............................ $11.31 $11.14
=========== ==========
</TABLE>

See accompanying notes to financial statements.

F-29
<PAGE> 97

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statements of Operations for the Year Ended December 31, 1996

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

<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............................................. $ 5,324,989 $ -- $ -- $ 510,234 $ 229,723
Interest............................................... 490,581 2,467,400 1,012,370 1,147,909 284,384
Other income........................................... 117,880 11,129 7,814 24,548 8,639
Less: foreign taxes withheld......................... (24,858) -- -- (2,730) --
----------- ---------- ---------- ---------- ----------
Total Income......................................... 5,908,592 2,478,529 1,020,184 1,679,961 522,746
----------- ---------- ---------- ---------- ----------
EXPENSES:
Investment advisory fee................................ 592,350 113,183 53,767 157,156 134,923
Administration fee..................................... 137,181 34,820 11,880 30,374 22,147
Directors' fee......................................... 11,174 2,834 968 2,474 1,803
Transfer agent fee..................................... 6,177 2,689 1,748 3,439 1,825
Custodian fee.......................................... 33,140 10,945 3,889 10,400 11,034
Legal fees............................................. 16,261 3,149 1,075 2,749 2,664
Audit fees............................................. 20,696 4,880 1,756 4,558 3,391
Printing............................................... 50,789 20,321 6,773 17,614 13,092
Miscellaneous.......................................... 22,362 7,730 4,104 5,360 5,345
----------- ---------- ---------- ---------- ----------
890,130 200,551 85,960 234,124 196,224
Less: expenses reimbursed by affiliated insurance
company.............................................. -- -- -- -- --
----------- ---------- ---------- ---------- ----------
Total expenses....................................... 890,130 200,551 85,960 234,124 196,224
----------- ---------- ---------- ---------- ----------
Net investment income (loss)......................... 5,018,462 2,277,978 934,224 1,445,837 326,522
----------- ---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY
Net realized gain (loss) from:
Investments......................................... 23,119,178 -- (125,017) 344,584 64,760
Foreign currency related transactions............... (55,751) -- -- (293) --
----------- ---------- ---------- ---------- ----------
23,063,427 -- (125,017) 344,291 64,760
----------- ---------- ---------- ---------- ----------
Net change in unrealized appreciation (depreciation)
from:
Investments......................................... 4,147,912 -- (333,487) 2,694,823 5,078,163
Foreign currency related translations............... -- -- -- -- --
----------- ---------- ---------- ---------- ----------
4,147,912 -- (333,487) 2,694,823 5,078,163
----------- ---------- ---------- ---------- ----------
Net gain (loss) on investments and foreign currency.... 27,211,339 -- (458,504) 3,039,114 5,142,923
----------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets resulting from
operations.......................................... $32,229,801 $2,277,978 $ 475,720 $4,484,951 $5,469,445
=========== ========== ========== ========== ==========

<CAPTION>
COMMON SENTINEL
INTERNATIONAL STOCK GROWTH
PORTFOLIO PORTFOLIO* PORTFOLIO*
- --------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............................................. $ 948,132 $ 97,348 $ 48,959
Interest............................................... 129,585 17,277 11,218
Other income........................................... 18,197 -- --
Less: foreign taxes withheld......................... (165,850) -- --
---------- -------- --------
Total Income......................................... 930,064 114,625 60,177
---------- -------- --------
EXPENSES:
Investment advisory fee................................ 326,164 17,385 20,371
Administration fee..................................... 63,701 36,498 34,321
Directors' fee......................................... 2,736 264 248
Transfer agent fee..................................... 1,988 1,294 1,288
Custodian fee.......................................... 37,887 3,911 2,836
Legal fees............................................. 3,940 294 276
Audit fees............................................. 5,085 376 353
Printing............................................... 11,743 690 649
Miscellaneous.......................................... 4,414 1,477 1,477
---------- -------- --------
457,658 62,189 61,819
Less: expenses reimbursed by affiliated insurance
company.............................................. -- (27,324) (25,050)
---------- -------- --------
Total expenses....................................... 457,658 34,865 36,769
---------- -------- --------
Net investment income (loss)......................... 472,406 79,759 23,408
---------- -------- --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY
Net realized gain (loss) from:
Investments......................................... 3,347,494 (22,148) 3,259
Foreign currency related transactions............... (44,827) -- --
---------- -------- --------
3,302,667 (22,148) 3,259
---------- -------- --------
Net change in unrealized appreciation (depreciation)
from:
Investments......................................... 782,845 699,937 550,887
Foreign currency related translations............... (1,275) -- --
---------- -------- --------
781,570 699,937 550,887
---------- -------- --------
Net gain (loss) on investments and foreign currency.... 4,084,237 677,789 554,146
---------- -------- --------
Net increase (decrease) in net assets resulting from
operations.......................................... $ 4,556,643 $757,548 $577,554
========== ======== ========
</TABLE>

* The Common Stock and Sentinel Growth Portfolios commenced operations on
03/18/96.

See accompanying notes to financial statements.

F-30
<PAGE> 98

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statements of Changes in Net Assets for the Year Ended December 31, 1996

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

<CAPTION>
COMMON SENTINEL
INTERNATIONAL STOCK GROWTH
PORTFOLIO PORTFOLIO* PORTFOLIO*
- --------------------------------------------------
<S> <<C> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss)................... $ 472,406 $ 79,759 $ 23,408
Net realized gain (loss) on investments and
foreign currency related transactions......... 3,302,667 (22,148) 3,259
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency translations......................... 781,570 699,937 550,887
----------- ---------- ----------
Net increase (decrease) in net assets resulting
from operations............................... 4,556,643 757,548 577,554
Distributions:
From net investment income..................... (442,343) (53,716) --
From net realized gains........................ (1,793,161) -- --
Capital share transactions:
Net contributions from affiliated life
insurance companies........................... 11,991,902 5,860,792 5,086,035
----------- ---------- ----------
Total increase in net assets.................. 14,313,041 6,564,624 5,663,589
NET ASSETS
Beginning of period.............................. 36,642,082 -- --
----------- ---------- ----------
End of period (including undistributed net
investment income in the Growth Portfolio
$1,231,153; Bond Portfolio $267,713; Managed
Portfolio $384,437; Aggressive Growth Portfolio
$326,522; International Portfolio $427,579;
Common Stock Portfolio $26,043 and Sentinel
Growth Portfolio $23,408)...................... $50,955,123 $6,564,624 $5,663,589
=========== ========== ==========
</TABLE>

* The Common Stock and Sentinel Growth Portfolios commenced operations on
03/18/96.

See accompanying notes to financial statements.

F-31
<PAGE> 99

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statements of Changes in Net Assets for the Year Ended December 31, 1995

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

<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income
(loss)...................... $4,474,620 $ 1,481,782 $ 776,497 $ 1,374,276 $ 255,039 $ 385,788
Net realized gain (loss) on
sale of investments......... 7,728,282 -- 503,141 1,471,361 2,569,743 1,849,716
Net change in unrealized
appreciation (depreciation)
on investments and foreign
currency translations....... 24,145,662 -- 950,760 4,221,556 (406,827) 2,023,172
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net
assets resulting from
operations.................. 36,348,564 1,481,782 2,230,398 7,067,193 2,417,955 4,258,676
Distributions:
From net investment income.... (4,157,531) (1,481,782) (736,126) (1,414,623) -- (148,141)
From net realized gains....... (8,715,516) -- -- (33,117) (131,841) (699,972)
Capital share transactions:
Net contributions from
affiliated life insurance
companies................... 23,232,447 13,575,595 2,810,449 1,019,709 6,106,674 7,019,658
------------ ----------- ----------- ----------- ----------- -----------
Total increase in net
assets.................... 46,707,964 13,575,595 4,304,721 6,639,162 8,392,788 10,430,221
NET ASSETS
Beginning of period............. 115,190,987 21,039,557 10,097,634 29,363,204 15,429,643 26,211,861
------------ ----------- ----------- ----------- ----------- -----------
End of period (including
undistributed net investment
income in the Growth Portfolio
$1,263,754; Bond Portfolio
$208,370; Managed Portfolio
$329,730; Aggressive Growth
Portfolio $255,039; and
International Portfolio
$442,343)..................... $161,898,951 $34,615,152 $14,402,355 $36,002,366 $23,822,431 $36,642,082
============ =========== =========== =========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-32
<PAGE> 100

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights

- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:

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

<TABLE>
<CAPTION>
GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92
TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $16.36 $14.00 $14.09 $13.73 $13.88
-------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .46 .47 .43 .38 .46
Net realized and unrealized gain (loss)
on investments................................ 2.54 3.41 (.10) .94 .17
-------- -------- -------- ------- -------
Total from investment operations............ 3.00 3.88 .33 1.32 .63
-------- -------- -------- ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income......................... (.48) (.46) (.41) (.39) (.46)
Dividends to shareholders from net capital
gains......................................... (.78) (1.06) (.01) (.35) (.32)
Dividends to shareholders in excess of net
investment income............................. -- -- -- (.22) --
-------- -------- -------- ------- -------
Total distributions......................... (1.26) (1.52) (.42) (.96) (.78)
-------- -------- -------- ------- -------
Net asset value, end of period.................. $18.10 $16.36 $14.00 $14.09 $13.73
======== ======== ======== ======= =======
Total return.................................... 19.58% 30.39% 2.40% 9.43% 4.74%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 198,948 161,899 115,191 109,534 82,881
Ratios of expenses to average net assets
(annualized)1................................. .50% .61% .63% .76% .79%
Ratios of net investment income to average net
assets (annualized)........................... 2.80% 3.20% 3.10% 2.86% 3.53%
Portfolio turnover.............................. 72% 61% 63% 51% 35%
Average commission rate2........................ $0.0600 N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

(1.) Expense ratios for the Growth Portfolio before reimbursement of expenses by
affiliated insurance company for the years ended December 31, 1996, 1995,
1994, 1993 and 1992 were as follows: 0.50%, 0.61%, 0.67%, 0.76% and 0.82%,
respectively.

(2.) Computed by dividing the total amount of commission paid by the total
number of shares purchased and sold during the period for which there was a
commission. This disclosure is required by the S.E.C. for all financial
statements with fiscal years beginning after September 1, 1995.

See accompanying notes to financial statements.

F-33
<PAGE> 101

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued

- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:

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

<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92
TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .05 .05 .04 .03 .03
------ ------ ------ ------ -----
Total from investment operations............ .05 .05 .04 .03 .03
------ ------ ------ ------ -----
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment
income........................................ (.05) (.05) (.04) (.03) (.03)
------ ------ ------ ------ -----
Total distributions............................. (.05) (.05) (.04) (.03) (.03)
------ ------ ------ ------ -----
Net asset value, end of period.................. $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== =====
Total return.................................... 5.15% 5.61% 3.81% 2.59% 3.18%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 54,197 34,615 21,040 12,506 8,138
Ratios of expenses to average net assets
(annualized)1................................. .44% .50% .55% .65% .65%
Ratios of net investment income to average net
assets (annualized)........................... 5.03% 5.47% 3.86% 2.56% 3.12%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

1. Expense ratios for the Money Market Portfolio before reimbursement of
expenses by affiliated insurance company for the years ended December 31,
1996, 1995, 1994, 1993 and 1992 were as follows: 0.44%, 0.50%, 0.59%, 0.65%
and 0.73%, respectively.

See accompanying notes to financial statements.

F-34
<PAGE> 102

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued

- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:

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

<TABLE>
<CAPTION>
BOND PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92
TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 11.00 $9.73 $11.21 $10.73 $10.80
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .63 .65 .62 .60 .64
Net realized and unrealized gain (loss)
on investments................................ (.34) 1.27 (1.23) .48 (.03)
------- ------- ------- ------- -------
Total from investment operations............ .29 1.92 (.61) 1.08 .61
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income......................... (.62) (.65) (.60) (.60) (.68)
Dividends to shareholders from net capital
gains......................................... (.00) (.00) (.27) (.00) (.00)
------- ------- ------- ------- -------
Total distributions......................... (.62) (.65) (.87) (.60) (.68)
------- ------- ------- ------- -------
Net asset value, end of period.................. $10.67 $11.00 $9.73 $11.21 $10.73
======= ======= ======= ======= =======
Total return.................................... 2.86% 20.45% (5.62)% 10.32% 5.95%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 17,087 14,402 10,098 10,160 6,710
Ratios of expenses to average net assets
(annualized)1................................. .56% .60% .68% .75% .75%
Ratios of net investment income to average net
assets (annualized)........................... 6.08% 6.36% 6.14% 5.53% 6.34%
Portfolio turnover.............................. 133% 206% 151% 71% 4%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

1. Expense ratios for the Bond Portfolio before reimbursement of expenses by
affiliated insurance company for the years ended December 31, 1996, 1995,
1994, 1993 and 1992 were as follows: 0.56%, 0.60%, 0.70%, 0.75% and 0.81%,
respectively.

See accompanying notes to financial statements.

F-35
<PAGE> 103

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued

- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:

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

<TABLE>
<CAPTION>
MANAGED PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92
TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 14.19 $11.94 $13.27 $12.25 $11.40
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .51 .55 .53 .40 .44
Net realized and unrealized gain (loss) on
investments................................... 1.07 2.28 (.77) 1.00 .88
------- ------- ------- ------- -------
Total from investment operations............ 1.58 2.83 (.24) 1.40 1.32
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment
income........................................ (.51) (.57) (.49) (.38) (.47)
Dividends to shareholders from net capital
gains......................................... (.58) (.01) (.60) (.00) (.00)
------- ------- ------- ------- -------
Total distributions......................... (1.09) (.58) (1.09) (.38) (.47)
------- ------- ------- ------- -------
Net asset value, end of period.................. $ 14.68 $14.19 $11.94 $13.27 $12.25
======= ======= ======= ======= =======
Total return................................ 11.88% 24.43% (1.82)% 11.62% 11.96%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 43,431 36,002 29,363 28,984 15,946
Ratios of expenses to average net assets
(annualized)1................................. .60% .66% .67% .80% .80%
Ratios of net investment income to average
net assets (annualized)....................... 3.68% 4.22% 4.34% 3.36% 3.88%
Portfolio turnover.............................. 106% 130% 75% 89% 32%
Average commission rate2........................ $0.0600 N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

1. Expense ratios for the Managed Portfolio before reimbursement of expenses by
affiliated insurance company for the years ended December 31, 1996, 1995,
1994, 1993 and 1992 were as follows: 0.60%, 0.66%, 0.73%, 0.80% and 0.84%,
respectively.

2. Computed by dividing the total amount of commission paid by the total number
of shares purchased and sold during the period for which there was a
commission. This disclosure is required by the S.E.C. for all financial
statements with fiscal years beginning after September 1, 1995.

See accompanying notes to financial statements.

F-36
<PAGE> 104

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued

- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:

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

<TABLE>
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92
TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $17.38 $15.45 $15.45 $14.72 $16.68
----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .17 .20 (.01) (.01) .03
Net realized and unrealized gain (loss) on
investments................................... 3.03 1.86 .01 .77 .38
----- ----- ----- ----- -----
Total from investment operations............ 3.20 2.06 .00 .76 .41
----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment
income........................................ (.19) (.00) (.00) (.03) (.07)
Dividends to shareholders from net capital
gains......................................... (1.87) (.13) (.00) (.00) (2.30)
----- ----- ----- ----- -----
Total distributions......................... (2.06) (.13) (.00) (.03) (2.37)
----- ----- ----- ----- -----
Net asset value, end of period.................. $18.52 $17.38 $15.45 $15.45 $14.72
===== ===== ===== ===== =====
Total return.................................... 21.00% 13.48% 0.00% 5.20% 2.58%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 34,098 23,822 15,430 12,223 8,029
Ratios of expenses to average net assets
(annualized)1................................. .68% .76% .86% .90% .90%
Ratios of net investment income to average net
assets (annualized)........................... 1.14% 1.32% (.10)% (.07)% .37%
Portfolio turnover.............................. 47% 89% 60% 60% 18%
Average commission rate2........................ $0.0600 N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

1. Expense ratios for the Aggressive Growth Portfolio before reimbursement of
expenses by affiliated insurance company for the years ended December 31,
1996, 1995, 1994, 1993 and 1992 were as follows: 0.68%, 0.76%, 0.89%, 0.90%
and 1.00%, respectively.

See accompanying notes to financial statements.

F-37
<PAGE> 105

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued

- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:

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

<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92
TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 12.86 $11.63 $11.87 $ 9.00 $ 9.74
------- ------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .11 .16 .05 .06 .08
Net realized and unrealized gain (loss) on
investments................................... 1.23 1.45 (.02) 3.09 (.81)
------- ------- ------- ------ ------
Total from investment operations............ 1.34 1.61 .03 3.15 (.73)
------- ------- ------- ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment
income........................................ (.16) (.07) (.03) (.08) (.00)
Dividends to shareholders from net capital
gains......................................... (.63) (.31) (.24) (.20) (.01)
------- ------- ------- ------ ------
Total distributions......................... (.79) (.38) (.27) (.28) (.01)
------- ------- ------- ------ ------
Net asset value, end of period.................. $ 13.41 $12.86 $11.63 $11.87 $ 9.00
======= ======= ======= ====== ======
Total return.................................... 10.89% 14.31% .26% 36.11% (7.30)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 50,955 36,642 26,212 13,682 6,727
Ratios of expenses to average net assets
(annualized)1................................. 1.05% 1.15% 1.32% 1.50% 1.50%
Ratios of net investment income to average net
assets (annualized)........................... .98% 1.21% .72% .68% 1.05%
Portfolio turnover.............................. 35% 45% 32% 37% 35%
Average commission rate2........................ $0.0376 N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

1. Expense ratios for the International Portfolio before reimbursement of
expenses by affiliated insurance company for the years ended December 31,
1996, 1995, 1994, 1993 and 1992 were as follows: 1.05%, 1.15%, 1.32%, 1.50%
and 2.65%, respectively.

See accompanying notes to financial statements.

F-38
<PAGE> 106

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued

- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:

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

<TABLE>
<CAPTION>
COMMON STOCK
PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
03/18/962
TO
12/31/96
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period............................................................... $10.00
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.............................................................................. .15
Net realized and unrealized gain (loss) on investments............................................. 1.26
--------
Total from investment operations............................................................... 1.41
--------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income............................................... (.10)
Dividends to shareholders from net capital gains................................................... (.00)
--------
Total distributions............................................................................ (.10)
--------
Net asset value, end of period..................................................................... $11.31
========
Total return....................................................................................... 14.22%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................................................................... 6,565
Ratios of expenses to average net assets (annualized)1............................................. .80%
Ratios of net investment income to average net assets (annualized)................................. 1.82%
Portfolio turnover................................................................................. 13%
Average commission rate4........................................................................... $0.0600
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

1. Expense ratio for the Common Stock Portfolio before reimbursement of expenses
by affiliated insurance company for the period ended December 31, 1996 was as
follows: 1.43% (annualized).
2. Commencement of operations.

3. Total returns for periods less than one year are not annualized.

4. Computed by dividing the total amount of commission paid by the total number
of shares purchased and sold during the period for which there was a
commission. This disclosure is required by the S.E.C. for all financial
statements with fiscal years beginning after September 1, 1995.

See accompanying notes to financial statements.

F-39
<PAGE> 107

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Concluded

- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:

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

<TABLE>
<CAPTION>
SENTINEL
GROWTH
PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
03/18/962
TO
12/31/96
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period.............................................................. $10.00
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................................................................. .05
Net realized and unrealized gain (loss) on investments............................................ 1.09
------
Total from investment operations.............................................................. 1.14
------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income.............................................. (.00)
Dividends to shareholders from net capital gains.................................................. (.00)
------
Total distributions........................................................................... (.00)
------
Net asset value, end of period.................................................................... $ 11.14
======
Total return...................................................................................... 11.40%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000).................................................................. 5,664
Ratios of expenses to average net assets (annualized)(1).......................................... .90%
Ratios of net investment income to average net assets (annualized)................................ .57%
Portfolio turnover................................................................................ 75%
Average commission rate4.......................................................................... $0.0594
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

1. Expense ratio for the Sentinel Growth Portfolio before reimbursement of
expenses by affiliated insurance company for the period ended December 31,
1996 was as follows: 1.51% (annualized).
2. Commencement of operations.

3. Total returns for periods less than one year are not annualized.

See accompanying notes to financial statements.

F-40
<PAGE> 108

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1996

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

1. ORGANIZATION

The Market Street Fund, Inc. (Fund) is registered as an open-end diversified
management company under the Investment Company Act of 1940, as amended. As a
"series" type of mutual fund, the Fund issues separate classes (or series) of
stock currently consisting of the Growth Portfolio, Money Market Portfolio, Bond
Portfolio, Managed Portfolio, Aggressive Growth Portfolio, International
Portfolio, Common Stock Portfolio and Sentinel Growth Portfolio. The Fund serves
as an investment medium for modified premium and flexible premium adjustable
variable life insurance policies and individual flexible premium deferred
variable annuity contracts (Policies) issued by Provident Mutual Life Insurance
Company (PMLIC) and for flexible premium deferred variable annuity contracts
issued by Providentmutual Life and Annuity Company of America (PLACA) and
flexible premium adjustable variable life insurance policies issued by National
Life Insurance Company of Vermont (NLIC). The Fund also serves as the investment
medium for single premium and scheduled premium variable life insurance policies
which are no longer being issued.

All shares of the series are held by the separate accounts of the previously
listed insurance companies.

2. ACCOUNTING POLICIES

The following is a summary of significant accounting policies followed by each
Fund in preparation of its financial statements. The preparation of financial
statements in accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.

Valuation of Investments

Bonds are carried at market value based on the last bid price on a national
securities exchange or on quoted prices from a third-party pricing service.
Investments in common and preferred stocks primarily traded on recognized U.S.
or foreign securities exchanges are valued at the last sale price on exchanges
on the last business day of the period, or, if there was no sale, at the last
bid price on that day. Short-term investments with maturities of less than 60
days and Money Market Portfolio investments are valued at amortized cost which
approximates market value.

Investments

Security transactions are accounted for on the trade date. The cost of
investment securities sold is determined by use of the specific identification
method for both financial reporting and income tax purposes. Interest income is
recorded on the accrual basis; dividend income is recorded on the ex-dividend
date.

Foreign Currency Translations

Foreign currency amounts are translated into U.S. Dollars on the following
bases:

(i) Market value of investment securities, assets and liabilities, at the
daily rate of exchange;

(ii) Purchases and sales of investment securities, at the rate of exchange
prevailing on the respective dates of such transactions. Exchange gains or
losses are recognized upon settlement;

F-41
<PAGE> 109

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1996 -- Continued

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

(iii) Income and expenses, at the rate of exchange prevailing on the
respective dates of such transactions. Exchange gains or losses are
recognized upon ultimate receipt or disbursement.

Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. dollar denominated
transactions as a result of, among other factors, the lack of governmental
supervision and regulation of foreign securities markets and the possibility of
political or economic instability.

The Fund does not isolate that portion of the results of operations derived from
changes in foreign exchange rates on investments from the fluctuations arising
from changes in market prices of securities held. Such fluctuations are included
with the net realized and unrealized gain or loss from investments.

Dividends to Shareholders

Dividends of investment income of the Money Market Portfolio are declared daily
and paid monthly. The Growth Portfolio, Bond Portfolio, Managed Portfolio, and
Common Stock Portfolio declare and pay dividends of investment income quarterly.
The Aggressive Growth Portfolio, International Portfolio, and Sentinel Growth
Portfolio declare and pay dividends of investment income annually. For all
Portfolios, distributions of capital gains are declared and paid annually.

Federal Income Taxes

No provision is made for Federal taxes as it is the Fund's intention to have
each Portfolio continue to qualify as a regulated investment company and to make
the requisite distributions to its shareholders which will be sufficient to
relieve it from Federal income taxes.

3. INVESTMENT ADVISORY FEES AND RELATED PARTY TRANSACTIONS

Investment advisory agreements have been approved, whereby Newbold's Asset
Management, Inc. (NAM) is adviser for the Growth Portfolio, Sentinel Advisors
Company (SAC), a Vermont General Partnership, for the Money Market, Bond,
Managed, Aggressive Growth, Common Stock and Sentinel Growth Portfolios. With
respect to the Growth Portfolio, NAM is compensated monthly at an effective
annual rate of 0.50% of the first $20 million of the average daily net assets of
the portfolio, 0.40% of the next $20 million and 0.30% of net assets in excess
of $40 million. SAC is compensated monthly at an effective annual rate of 0.25%
of the average daily net assets of the Money Market Portfolio. With respect to
the Bond Portfolio, SAC is compensated monthly at the effective annual rate of
0.35% of the first $100 million of the average daily net assets of the portfolio
and 0.30% of net assets in excess of $100 million. With respect to the Managed
Portfolio, SAC is compensated monthly at the effective annual rate of 0.40% of
the first $100 million of the average daily net assets of the portfolio and
0.35% of net assets in excess of $100 million. With respect to the Aggressive
Growth Portfolio, SAC is compensated monthly at the effective annual rate of
0.50% of the first $20 million of the average daily net assets of the portfolio,
0.40% of the next $20 million and 0.30% of net assets in excess of $40 million.
With respect to the Common Stock Portfolio, SAC is compensated monthly at the
effective annual rate of 0.40% of the first $100 million of the average

F-42
<PAGE> 110

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1996 -- Continued

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

daily net assets of the portfolio and 0.35% of net assets in excess of $100
million. With respect to the Sentinel Growth Portfolio, SAC is compensated
monthly at an effective annual rate of 0.50% of the first $20 million of the
average daily net assets of the portfolio, 0.40% of the next $20 million and
0.30% of the net assets in excess of $40 million. Provident Mutual Investment
Management Co. (PIMC) is the adviser for the International Portfolio and is
compensated monthly at an effective annual rate of 0.75% of the first $500
million of the average daily net assets of the portfolio and 0.60% of assets in
excess of $500 million. The Boston Company Asset Management, Inc. ("TBC") is
sub-advisor to the International Portfolio.

PMLIC agrees to reimburse the Growth Portfolio and PMLIC and NLIC agree to
reimburse the Money Market, Bond, Managed, and Aggressive Growth Portfolios for
operating expenses, excluding investment advisory fees, and costs of litigation
and indemnification not covered by insurance, in excess of an annual rate of
0.40% of the average daily net asset values. The International Portfolio is
reimbursed by PMLIC and NLIC for such expenses in excess of an annual rate of
0.75% of the average daily net asset value. NLIC agrees to reimburse the Common
Stock and Sentinel Growth Portfolio for operating expenses, excluding investment
advisory fees and costs of litigation and indemnification not covered by
insurance, in excess of an annual rate of .40% of the average net asset values.

4. NET ASSETS

At December 31, 1996, the Portfolios' net assets consisted of:

<CAPTION>
COMMON SENTINEL
STOCK GROWTH
PORTFOLIO PORTFOLIO
--------------------------------------
<S> <C> <C>
Net contribution from shareholders.............. $5,860,792 $5,086,035
Undistributed net investment income............. 26,043 23,408
Undistributed net realized gain................. -- 3,259
Accumulated loss on investment transactions..... (22,148) --
Net unrealized appreciation (depreciation) on
investments and foreign currencies............. 699,937 550,887
---------- ----------
$6,564,624 $5,663,589
========== ==========
</TABLE>

F-43
<PAGE> 111

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1996 -- Continued

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

5. PURCHASES AND SALES OF INVESTMENTS (EXCLUDING SHORT-TERM SECURITIES)

Purchases and proceeds on sales of investments for the portfolios, for the year
ended December 31, 1996, were as follows:
<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PURCHASES
U.S. Gov't Obligations.......................... $ -- $ -- $ 9,780,303 $21,429,591 $ -- $ --
Corporate Bonds................................. -- -- 12,202,946 12,716,773 -- --
Common Stock.................................... 145,646,451 -- -- 4,716,407 15,535,506 23,195,109
------------ ----------- ----------- ----------- ----------- -----------
Total Purchases................................. $145,646,451 $ -- $21,983,249 $38,862,771 $15,535,506 $23,195,109
============ =========== =========== =========== =========== ===========
SALES
U.S. Gov't Obligations.......................... $ -- $ -- $ 6,002,543 $22,513,655 $ -- $ --
Corporate Bonds................................. -- -- 13,102,207 11,189,673 -- --
Common Stock.................................... 121,462,900 -- -- 3,965,454 11,011,877 14,179,229
------------ ----------- ----------- ----------- ----------- -----------
Total Sales..................................... $121,462,900 $ -- $19,104,750 $37,668,782 $11,011,877 $14,179,229
============ =========== =========== =========== =========== ===========

<CAPTION>
COMMON SENTINEL
STOCK GROWTH
PORTFOLIO PORTFOLIO
---------------------------------------
<S> <C> <C>
PURCHASES
U.S. Gov't Obligations.......................... $ -- $ --
Corporate Bonds................................. --
Common Stock.................................... 6,057,409 8,111,802
---------- ----------
Total Purchases................................. $6,057,409 $8,111,802
========== ==========
SALES
U.S. Gov't Obligations.......................... $ -- $ --
Corporate Bonds................................. -- --
Common Stock.................................... 625,876 3,392,375
---------- ----------
Total Sales..................................... $ 625,876 $3,392,375
========== ==========
</TABLE>

6. TAX BASIS OF INVESTMENTS

Investment information based on the cost of the securities for Federal income
tax purposes held at December 31, 1996 is as follows:

<CAPTION>
COMMON SENTINEL
INTERNATIONAL STOCK GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------
<S> <C> <C> <C>
Aggregate gross unrealized appreciation........ $ 5,977,111 $ 781,212 $ 711,518
Aggregate gross unrealized depreciation........ (2,463,287) (81,275) (160,631)
----------- ---------- ----------
Net unrealized appreciation (depreciation)..... $ 3,513,824 $ 699,937 $ 550,887
=========== ========== ==========
Aggregate cost of securities for federal income
tax purposes.................................. $45,772,186 $5,845,287 $5,102,118
=========== ========== ==========
Capital loss carryover (available to offset
possible future capital gains.) The carryover
expires as follows: Bond Portfolio--$48,885 in
2002; $125,017 in 2004; Common Stock Portfolio
$22,148 in 2004............................... $ -- $ (22,148) $ --
=========== ========== ==========
</TABLE>

F-44
<PAGE> 112

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1996 -- Continued

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

7. AUTHORIZED CAPITAL STOCK AND CAPITAL STOCK TRANSACTIONS

On December 31, 1996, there were 200 million shares of $0.01 par value capital
stock authorized for the Fund. The shares of capital stock are divided into
eight series: Growth Portfolio, Money Market Portfolio, Bond Portfolio, Managed
Portfolio, Aggressive Growth Portfolio, International Portfolio, Common Stock
Portfolio and Sentinel Growth Portfolio. The Growth Portfolio consists of 15
million shares, the Money Market Portfolio consists of 75 million shares; each
of the other series consists of 5 million shares.

Transactions in capital stock for the year ended December 31, 1996 were as
follows:(1)
<TABLE>
<CAPTION>
GROWTH PORTFOLIO MONEY MARKET BOND PORTFOLIO
PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold......................................... 1,276,805 $ 20,944,472 82,625,391 $ 82,625,391 382,375 $ 4,040,320
Shares redeemed..................................... (981,738) (16,125,158) (65,247,831) (65,247,831) (173,162) (1,831,517)
Shares reinvested................................... 803,008 12,727,734 2,204,012 2,204,012 83,086 874,882
--------- ----------- ----------- ----------- -------- -----------
Net contributions from affiliated insurance
companies.......................................... 1,098,075 $ 17,547,048 19,581,572 $ 19,581,572 292,299 $ 3,083,685
========= =========== =========== =========== ======== ===========

<CAPTION>
MANAGED PORTFOLIO

- ----------------------------------------------------
SHARES AMOUNT
- ----------------------------------------------------
<S> <C> <C>
Shares sold......................................... 506,385 $ 7,070,251
Shares redeemed..................................... (296,312) (4,126,398)
Shares reinvested................................... 209,781 2,862,232
-------- ----------
Net contributions from affiliated insurance
companies.......................................... 419,854 $ 5,806,085
======== ==========
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE INTERNATIONAL COMMON
GROWTH PORTFOLIO STOCK
PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Shares sold.................................................. 441,008 $ 7,446,728 987,809 $12,532,647 577,728
Shares redeemed.............................................. (156,497) (2,640,322) (218,584) (2,776,249) (2,588)
Shares reinvested............................................ 185,719 2,824,782 180,866 2,235,504 5,127
--------- ----------- ---------- ----------- -------

Net contributions from affiliated insurance companies........ 470,230 $ 7,631,188 950,091 $11,991,902 580,267
========= =========== =========== =========== ========

<CAPTION>
SENTINEL GROWTH
PORTFOLIO

- -------------------------------------------------------------
AMOUNT SHARES AMOUNT
- -------------------------------------------------------------
<S> <C> <C> <C>
Shares sold.................................................. $ 5,835,026 508,648 $5,090,047
Shares redeemed.............................................. (27,950) (377) (4,012)
Shares reinvested............................................ 53,716 -- --
----------- -------- ----------
Net contributions from affiliated insurance companies........ $ 5,860,792 508,271 $5,086,035
=========== ======== ==========
</TABLE>

Transactions in capital stock for the year ended December 31, 1995 were as
follows:

<TABLE>
<CAPTION>
GROWTH PORTFOLIO MONEY MARKET BOND PORTFOLIO MANAGED
PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares sold............. 1,376,728 $20,320,117 52,460,129 $52,460,129 305,883 $3,174,938 340,442
Shares redeemed......... (672,833) (9,960,717) (40,303,780) (40,303,780) (106,040) (1,100,615) (375,720)
Shares reinvested....... 961,190 12,873,047 1,419,246 1,419,246 72,305 736,126 114,456
--------- ------------ ----------- ------------ -------- ----------- -------
Net contributions from
affiliated insurance
companies.............. 1,665,085 $23,232,447 13,575,595 $13,575,595 272,148 $2,810,449 79,178
========= ============ =========== ============ ======== =========== =======

<CAPTION>
AGGRESSIVE INTERNATIONAL
GROWTH PORTFOLIO
- ------------------------
AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------
<S> <C> <C> <C> <C> <C>
Shares sold............. $4,456,504 489,394 $8,017,391 861,466 $10,317,408
Shares redeemed......... (4,884,534) (125,984) (2,042,558) (341,090) (4,145,863)
Shares reinvested....... 1,447,739 8,772 131,841 76,064 848,113
----------- ------- ----------- -------- -----------
Net contributions from
affiliated insurance
companies.............. $1,019,709 372,182 $6,106,674 596,440 $ 7,019,658
=========== ======= =========== ======== ===========
</TABLE>

(1) The Common Stock and Sentinel Growth Portfolios commenced operations on
03/18/96.

F-45
<PAGE> 113

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1996 -- Concluded

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

8. PRINCIPAL UNDERWRITER

1717 Capital Management Company serves, without compensation, as the principal
underwriter for sale of the Fund shares to the Accounts. 1717 Capital Management
Company is an indirect wholly-owned subsidiary of PMLIC.

9. SUBSEQUENT DIVIDEND

On December 30, 1996 the Board of Directors declared the following net
investment income and capital gain dividends to shareholders of record on
December 31, 1996, ex-dividend date January 3, 1997, payable on January 6, 1997
as follows:

<TABLE>
<CAPTION>
TOTAL PER SHARE
------------------------- ---------------------
NET NET
INVESTMENT CAPITAL INVESTMENT CAPITAL
PORTFOLIO INCOME GAIN INCOME GAIN
- -------------- ---------- ----------- ---------- -------
<S> <C> <C> <C> <C>
Growth........ $1,231,153 $23,067,603 $.1120 $2.0984
Bond.......... 267,713 -- .1671 --
Managed....... 384,437 344,551 .1300 .1165
Aggressive
Growth....... 326,522 64,760 .1774 .0352
International... 427,579 3,347,494 .1125 .8808
Common Stock.. 26,043 -- .0449 --
Sentinel
Growth....... 23,408 3,259 .0461 .0064
</TABLE>

F-46
<PAGE> 114

APPENDIX A

DESCRIPTION OF MONEY MARKET INSTRUMENTS AND
COMMERCIAL PAPER AND BOND RATINGS

PERMITTED INVESTMENTS OF THE MONEY MARKET ACCOUNT

U.S. Government Obligations--are bills, certificates of indebtedness, notes
and bonds issued or guaranteed as to principal or interest by the United States
or by agencies or authorities controlled or supervised by and acting as
instrumentalities of the U.S. Government established under the authority granted
by Congress, including, but not limited to, the Government National Mortgage
Association, the Tennessee Valley Authority, the Bank of Cooperatives, the
Farmers Home Administration, Federal Home Loan Banks, Federal Intermediate
Credit Banks, Federal Land Banks, Farm Credit Banks, and the Federal National
Mortgage Association. Some obligations of U.S. Government agencies, authorities
and other instrumentalities are supported by the full faith and credit of the
U.S. Treasury; others by the right of the issuer to borrow from the Treasury;
and others only by the credit of the issuing agency, authority or other
instrumentality.

Repurchase Agreements--are agreements by which the Fund purchases a
security and obtains a simultaneous commitment from the seller (a member bank of
the Federal Reserve System or a recognized securities dealer) to repurchase the
security at an agreed upon price and date. The resale price is in excess of the
purchase price and reflects an agreed upon market rate unrelated to the coupon
rate on the purchased security. Such transactions afford an opportunity for the
Fund to earn a return on temporarily available cash at no market risk except the
risk that the seller will be unable to pay the agreed upon sum upon the delivery
date and, in the event of default by the seller because of bankruptcy or
otherwise, the Fund may suffer time delays and incur costs or losses in
connection with the disposition of the collateral.

Certificates of Deposit--are generally certificates issued against funds
deposited in a bank, are for a definite period of time, earn a specified rate of
return, and are normally negotiable. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity, usually at 30, 90 or 180 day intervals ("coupon
dates") based upon a specified market rate. As a result of these adjustments,
the interest rate on these obligations may be increased or decreased
periodically. Typically, dealers selling variable rate certificates of deposit
agree to repurchase such instruments, at the purchaser's option, at par on the
coupon dates. The dealers' obligations to repurchase these instruments are
subject to conditions imposed by the various dealers. Such conditions typically
are the continued credit standing of the issuer and the existence of reasonably
orderly market conditions. Variable rate certificates of deposit may be sold in
the secondary market. Variable rate certificates of deposit normally carry a
higher interest rate at the time of issue than comparable fixed rate
certificates of deposit.

Bankers' Acceptance--are short-term credit instruments issued by
corporations to finance the import, export, transfer or storage of goods. They
are termed "accepted" when a bank guarantees their payment at maturity. These
instruments reflect the obligation of both the bank and drawer to pay the face
amount of the instrument at maturity.

Commercial Paper--refers to promissory notes issued by corporations to
finance their short-term credit needs.

Corporate Obligations--include bonds and notes issued by corporations in
order to finance longer term credit needs.

COMMERCIAL PAPER RATINGS

The rating A-1 is the highest rating assigned by Standard & Poor's
Corporation ("S&P") to commercial paper which is considered by S&P to have the
following characteristics: liquidity ratios of the issuer are adequate to meet
cash requirements; long-term senior debt is rated "A" or better; the issuer has
access to at least two additional channels of borrowing; basic earnings and cash
flow have an upward trend with allowance made for unusual circumstances;
typically, the issuer's industry is well established and the issuer has a strong
position within the industry; the reliability and quality of management are
unquestioned.

A-1
<PAGE> 115

The rating A-2 is the second highest rating assigned by Standard & Poor's
Corporation. Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as overwhelming as for
issues designated "A-1".

The rating P-1 is the highest commercial paper rating assigned by Moody's
Investors Service, Inc. ("Moody's"). Issuers rated P-1 have a superior capacity
for repayment of short-term promissory obligations. P-1 repayment capacity will
normally be evidenced by the following characteristics; leading market positions
in well-established industries; high rates of return on funds employed;
conservative capitalization structures with moderate reliance on debt and ample
asset protection; broad margins in earnings coverage of fixed financial charges
and high internal cash generation; and well established access to a range of
financial markets and assured sources of alternate liquidity.

The rating P-2 is the second highest commercial paper rating assigned by
Moody's. Issuers rated P-2 have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.

CORPORATE BOND RATINGS

Moody's Investors Service, Inc. describes its five highest ratings for
corporate bonds as follows:

Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
'gilt edge'. Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.

A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment some time in the future.

Baa--Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well as assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

Standard & Poor's Corporation describes its ratings for corporate bonds as
follows:

AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.

AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.

A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances

A-2
<PAGE> 116

are more likely to lead to a weakened capacity to pay principal and interest for
bonds in this category than for bonds in the A category.

BB, B, CCC, C--Bonds rated BB, B, CCC, C are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighted by large uncertainties or major risk exposures to adverse
conditions.

A-3
<PAGE> 117

MARKET STREET FUND, INC.
103 BELLEVUE PARKWAY
WILMINGTON, DE 19809
302-791-1700

STATEMENT OF ADDITIONAL INFORMATION

MAY 1, 1997

This Statement of Additional Information is not a prospectus. It should be
read in conjunction with the Market Street Fund, Inc. Prospectus dated May 1,
1997, and retained for future reference.

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

TABLE OF CONTENTS

Form 15732B 2.97
<PAGE> 118

GENERAL INFORMATION AND HISTORY

THE FUND

The Market Street Fund, Inc. (the "Fund") was formed on March 21, 1985. The
Fund is an open-end diversified management investment company as such terms are
defined in the Investment Company Act of 1940, as amended (the "1940 Act"). As a
"series" type of mutual Fund, the Fund issues separate classes (or series) of
stock, and currently consists of eight separate investment portfolios (each a
"Portfolio," together the "Portfolios"). This statement of additional
information ("SAI") pertains only to the following Portfolios: Money Market
Portfolio, Bond Portfolio, Managed Portfolio, Aggressive Growth Portfolio,
International Portfolio, Common Stock Portfolio and Sentinel Growth Portfolio.

The Fund serves as an investment medium for the variable life insurance
policies issued by Provident Mutual Life Insurance Company of Philadelphia
("Provident Mutual"), variable life insurance policies issued by National Life
Insurance Company ("NLIC") of Montpelier, Vermont, and for variable annuity
contracts and variable life insurance policies issued by Providentmutual Life
and Annuity Company of America ("PLACA"). Other than the shares sold directly to
Provident Mutual to seed the Managed, Aggressive Growth and International
Portfolios, and to NLIC to seed the Sentinel Growth and Common Stock Portfolios,
shares of the Fund currently are sold only to separate accounts of Provident
Mutual and PLACA and to variable life insurance separate accounts of NLIC. In
the future, shares of the Fund may also be sold to separate accounts of other
affiliated or unaffiliated insurance companies in order to fund variable annuity
contracts or variable life insurance policies.

INVESTMENT RESTRICTIONS

The following specific restrictions supplement the Fund's "Investment
Objectives and Policies" set forth in the Prospectus.

(2) Make loans, other than through the acquisition of obligations in
which the Portfolio may invest consistent with its objective and investment
policies.

(3) Invest in commodities or in commodity contracts, or in call
options, except that the Managed and Aggressive Growth Portfolios may write
covered call options and enter into closing transactions, as permitted by
their investment policies and the International Portfolio may enter into
forward currency exchange contracts as described herein.

2
<PAGE> 119

(6) Purchase securities which are subject to legal or contractual
delays in or restrictions on resale (except for the International
Portfolio).

(7) Invest for the purpose of exercising control over or management of
any company.

(10) Purchase securities of any issuer, if

(b) such purchase would at the time result in more than 10% of the
outstanding voting securities of such issuer being held by the
Portfolio.

The Money Market, Aggressive Growth, International, Common Stock and
Sentinel Growth Portfolios will not make any investment in an industry if
that investment would make the Portfolio's holding in that industry exceed
25% of the Portfolio's total assets. The International Portfolio will not
invest more than 5% of the market value of its total assets in companies
with a record of less than three years' operations or in securities which
are not readily marketable.

3
<PAGE> 120

INVESTMENT TECHNIQUES AND RISKS

The following disclosure supplements the Fund's "Investment Objectives and
Policies" set forth in the Prospectus.

REPURCHASE AGREEMENTS

COVERED CALL OPTION CONTRACTS

The Aggressive Growth and Managed Portfolios may engage in certain limited
options strategies. These options strategies are limited to writing covered call
options which are traded on a domestic securities exchange with respect to
securities in the Portfolio and entering into "closing purchase transactions" in
order to terminate its obligation as a writer of a call option prior to the
expiration of the option. A Portfolio will not write a call option if the
securities covered by such options exceed 25% of the Portfolio's total assets at
that time. Moreover, in order to maintain qualification for treatment as a
regulated investment company for federal tax law purposes, the writing of
covered calls may be further limited.

4
<PAGE> 121

securities appreciate, which could result in higher brokerage costs. In
addition, brokerage commissions will be paid by the Portfolio on both the
establishment and closing out of an option position.

WARRANTS

The Managed, Aggressive Growth, Common Stock and Sentinel Growth Portfolios
may invest in warrants. None of these Portfolios intends to invest more than 2%
of its net assets in warrants that are not listed on a national securities
exchange. In no event will a Portfolio's investment in warrants exceed 5% of its
net assets. (A warrant is a right to buy a certain security at a set price
during a certain time period.)

SHORT-TERM TRADING

The Money Market, Aggressive Growth and International Portfolios generally
will not engage in short-term trading. Other than the Bond Portfolio and the
Managed Portfolio, the Portfolios do not expect to trade in securities for
short-term gains. Notwithstanding this, an Adviser may, from time to time, make
short-term investments when it believes that such investments will benefit a
Portfolio and may dispose of any investment without regard to the length of time
that the investment has been held. The Bond Portfolio intends to use short-term
trading of securities if it believes the transactions net of costs (including
any commission) will benefit its portfolio for the purposes of:

(b) Increasing the return by taking advantage of yield disparities
between various fixed-income securities in order to realize capital gains
or improved income on the portfolio.

ILLIQUID ASSETS

5
<PAGE> 122

them in an orderly fashion in order to reduce its Portfolio's holdings in such
securities to less than the 10% threshold.

LOWER QUALITY DEBT INSTRUMENTS

6
<PAGE> 123

principal and pay interest thereon. Moreover, such a recession could also
increase the incidence of defaults of high-yielding securities.

FOREIGN CURRENCY TRANSACTIONS

7
<PAGE> 124

uncertain. These Portfolios do not intend to enter into such forward contracts
under this second circumstance on a regular or continuous basis. The Portfolios
will also not enter into such forward contracts or maintain a net exposure to
such contracts when the consummation of the contracts would obligate a Portfolio
to deliver an amount of foreign currency in excess of the value of the
Portfolio's securities or other assets denominated in that currency. The Adviser
believes that it is important to have the flexibility to enter into such forward
contracts when it determines that to do so is in the best interests of the
respective Portfolio. The Portfolios' custodian bank segregates cash or equity
or debt securities in an amount not less than the value of each Portfolio's
total assets committed to forward foreign currency exchange contracts entered
into under this second type of transaction. If the value of the securities
segregated declines, additional cash or securities are added so that the
segregated amount is not less than the amount of the respective Portfolio's
commitments with respect to such contracts. Under normal circumstances, these
Portfolios expect that any appreciation (depreciation) on such forward exchange
contracts will be approximately offset by the (depreciation) appreciation in
translation of the underlying foreign investment arising from fluctuations in
foreign currency exchange rates.

These Portfolios will recognize the unrealized appreciation or depreciation
from the fluctuation in foreign currency forward contract as an increase or
decrease in the respective Portfolio's net assets on a daily basis, thereby
providing an appropriate measure of each Portfolio's financial position and
changes in financial position.

PORTFOLIO TURNOVER

The annual portfolio turnover rates for the Growth Portfolio for 1996, 1995
and 1994 were 72%, 61% and 63%, respectively. The annual portfolio turnover
rates for the Bond Portfolio for 1996, 1995 and 1994 were 133%, 206% and 151%,
respectively. The annual portfolio turnover rates for the Managed Portfolio for
1996, 1995 and 1994 were 106%, 130% and 75%, respectively. The annual portfolio
turnover rates for the Aggressive Growth Portfolio for 1996, 1995 and 1994 were
47%, 89% and 60%, respectively. The annual portfolio turnover rates for the
International Portfolio for 1996, 1995 and 1994 were 35%, 45% and 32%,
respectively. The annual portfolio turnover rate for the Common Stock Portfolio
for 1996 was 13%. The annual portfolio turnover rate for the Sentinel Growth
Portfolio for 1996 was 75%. No annual portfolio turnover rates for 1995 and 1994
are provided for the Sentinel Growth and Common Stock Portfolios because these
Portfolios did not commence operations until March 18, 1996.

8
<PAGE> 125

MANAGEMENT OF THE FUND

Directors and Officers

9
<PAGE> 126

INVESTMENT ADVISORY AND OTHER SERVICES

GENERAL INFORMATION AND HISTORY

The Fund's investment advisers are: for the Money Market, Bond, Managed,
Aggressive Growth, Common Stock and Sentinel Growth Portfolios--Sentinel
Advisers Company ("SAC"); and for the International Portfolio--Providentmutual
Investment Management Company ("PIMC"). PIMC has engaged The Boston Asset
Management, Inc. ("TBC") as the investment sub-adviser for the International
Portfolio. SAC, PIMC and TBC are each referred to as an "Adviser" and, together,
as the "Advisers."

On April 20, 1989, Provident Mutual, as the sole shareholder of the Fund,
approved the Fund's investment advisory agreement for the Money Market
Portfolio. On January 29, 1993, Provident Mutual and PLACA approved the Fund's
investment advisory agreements for the Bond, Managed, Aggressive Growth, and
International Portfolios. Provident Mutual and/or PLACA voted their Fund shares
for or against such approvals, or withheld their votes, in the same proportion
as Policyowners having an interest in the respective Portfolios, voted for,
against or withheld their votes with respect to the Agreement for that
Portfolio.

ADVISORY AGREEMENTS

The investment advisory agreement between the Fund and SAC became effective
on March 1, 1993. The agreement was approved by the Board of Directors of the
Fund, including a majority of the "non-interested" directors, on October 26,
1992, and by shareholders of the Bond, Managed and Aggressive Growth Portfolios
on January 29, 1993.

The investment advisory agreement between the Fund and PIMC with respect to
the International Portfolio was originally approved by the Board of Directors of
the Fund, including a majority of the "non-interested" directors on July 31,
1991. On October 26, 1992, the Board of Directors of the Fund, including a
majority of the "non-interested" directors, approved continuation of the
agreement. The agreement was approved by shareholders of the International
Portfolio on January 29, 1993.

On February 26, 1996, the Fund's Board of Directors, including a majority
of its "non-interested" directors, unanimously voted to approve continuation of
all of the investment advisory agreements with SAC and PIMC. On February 26,
1996, the Board of Directors of the Fund, including a majority of the "non-
interested" directors approved an amendment to the investment advisory agreement
between the Fund and SAC to include SAC providing investment advisory services
to the Money Market, Sentinel Growth and Common Stock Portfolios. The amended
investment advisory agreement was approved by NLIC, the initial shareholder of
both the Sentinel Growth and Common Stock Portfolios, on March 18, 1996, and
became effective with regard to each of these Portfolios on March 18, 1996. Each
of the agreements terminates automatically in the event of its assignment or,
with respect to any Portfolio, upon 60 days' notice given by the Fund's Board of
Directors, by the Adviser or by majority vote (as defined in the Investment
Company Act and the rules thereunder) of the Portfolio's shares. Otherwise, the
investment advisory agreements will continue in force with respect to any
Portfolio so long as their continuance is approved at least annually by a
majority of the "non-interest" members of the Fund's Board of Directors, and by
(i) a majority vote (as defined in the Investment Company Act of 1940 and the
rules thereunder) of the Portfolio's shareholders or (ii) the Fund's Board of
Directors.

10
<PAGE> 127

In connection therewith, the Advisers provide investment research and
supervision of the Fund's investments and conduct a continuous program of
investment evaluation and, if appropriate, sales and reinvestment of the Fund's
assets. The Advisers furnish to the Fund such statistical information, with
respect to the investments which the Fund may hold or contemplate purchasing, as
the Fund may reasonably request. On the Advisers' own initiatives, the Advisers
apprise the Fund of important developments materially affecting each Portfolio
and furnish the Fund from time to time such information as the Advisers may
believe appropriate for this purpose. The Advisers also implement all purchases
and sales of investments for each Portfolio in a manner consistent with such
policies.

Money Market Portfolio. The investment advisory fee paid to SAC with
respect to the Money Market Portfolio is 0.25% of the average daily net assets
of the Portfolio.

Common Stock Portfolio. The investment advisory fee paid to SAC with
respect to the Sentinel Common Stock Portfolio is 0.40% of the first $100
million of the average daily net assets of the Portfolio and 0.35% of the
average daily net assets in excess of $100 million.

Sentinel Growth Portfolio. The investment advisory fee paid to SAC with
respect to the Sentinel Growth Portfolio is 0.50% of the first $20 million of
the average daily net assets of the Portfolio, 0.40% of the next $20 million of
the average daily net assets of the Portfolio and 0.30% of the average daily net
assets in excess of $40 million.

The total investment advisory fee incurred for PIMC during 1996 was
$357,635 allocated $31,471 and $326,164 to the Money Market and International
Portfolios, respectively. The total investment advisory fee incurred for SAC
during 1996 was $465,314 allocated $53,767, $157,156, $134,923, $17,385,
$20,371, and $81,712 for the Bond, Managed, Aggressive Growth, Common Stock,
Sentinel Growth and Money Market Portfolios, respectively.

The total investment advisory fee incurred for PIMC during 1995 was
$305,977, allocated $67,727 and $238,250 to the Money Market and International
Portfolios, respectively. The total investment advisory fee incurred for SAC
during 1995 was $268,637, allocated $42,737; $130,149; and $95,751 for the Bond,
Managed and Aggressive Growth Portfolios, respectively.

The total investment advisory fee incurred for PIMC during 1994 was
$191,632, allocated $40,010 and $151,622 to the Money Market and International
Portfolios, respectively. The total investment advisory fee incurred for SAC
during 1994 was $212,836, allocated $34,014, $115,614 and $63,208 to the Bond,
Managed and Aggressive Growth Portfolios, respectively.

11
<PAGE> 128

certificates, Securities and Exchange Commission fees, accounting costs, pricing
costs including the daily calculation of net asset value), and other expenses
properly payable by the Fund and allocable on the basis of size of the
respective Portfolios. Depending upon the nature of a lawsuit, litigation costs
may be directly applicable to the Portfolios or allocated on the basis of the
size of the respective Portfolios. Effective November 1, 1991 Provident Mutual
agreed to reimburse the Fund for such expenses in excess of 0.40% of the average
daily net asset value of each of the Money Market, Bond, Managed and Aggressive
Growth Portfolios and 0.75% for the International Portfolio. Effective March 18,
1996, NLIC agreed to reimburse the Fund for such expenses in excess of 0.40% of
the average daily net asset value of the Sentinel Growth and Common Stock
Portfolios. During 1992, Provident Mutual reimbursed the Fund for $81,997 of
expenses, allocated $5,588 to the Money Market Portfolio; $3,173 to the Bond
Portfolio; $4,924 to the Managed Portfolio; $5,151 to the Aggressive Growth
Portfolio; $46,706 to the International Portfolio; and $16,455 to the Fund's
Growth Portfolio (not discussed in this SAI). Expenses reimbursed by Provident
Mutual for 1991 were $175,500 and for 1990 $150,569. In 1996 there were no
reimbursements for the Money Market, Bond, Managed, Aggressive Growth and
International Portfolios. In 1996 the reimbursement for the Common Stock
Portfolio was $27,324.00 and $25,050.00 for the Sentinel Growth Portfolio. There
was no reimbursement in 1995, 1994 or 1993.

INVESTMENT SUB-ADVISORY AGREEMENT FOR INTERNATIONAL PORTFOLIO

For 1996 PIMC incurred $163,086 for investment advisory services rendered
by TBC in connection with the International Portfolio.

12
<PAGE> 129

INFORMATION ABOUT ADVISERS

The principal officers of PIMC are:

The principal officers of SAC are:

PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION

The Advisers to the Fund place all portfolio orders on behalf of each
Portfolio and attempt, in all cases, to obtain the most favorable prices and
executions.

During the period from January 1, 1996 to December 31, 1996 the Fund paid
aggregate brokerage fees of $198,679.36, of which $12,598.14 was paid by the
Managed Portfolio; $46,944.00 was paid by the Aggressive Growth Portfolio;
$118,969.42 was paid by the International Portfolio; $7,727.24 was paid by the
Common Stock Portfolio; and $12,440.56 was paid by the Sentinel Growth
Portfolio. During the period from January 1, 1995 to December 31, 1995, the Fund
paid aggregate brokerage fees of $398,248.95 of which $15,503.30 was paid by the
Managed Portfolio, $29,763.20 was paid by the Aggressive Growth Portfolio,
$101,254.05 was paid by the International Portfolio, and $251,728.40 was paid by
the Fund's Growth Portfolio. During the period from January 1, 1994 to December
31, 1994, the Fund paid aggregate brokerage fees of $317,402.55 of which

13
<PAGE> 130

$15,232.26 was paid by the Managed Portfolio, $18,858.00 was paid by the
Aggressive Growth Portfolio, $79,399.35 was paid by the International Portfolio,
and $203,912.94 was paid by the Fund's Growth Portfolio.

DETERMINATION OF NET ASSET VALUE

Any assets that are denominated in a foreign currency are converted into
U.S. dollar equivalents at the prevailing market rates as quoted by generally
recognized reliable sources.

14
<PAGE> 131

The methods used to value other assets of each Portfolio are described more
fully in the Prospectus.

REDEMPTION OF SHARES

TAXES

15
<PAGE> 132

CAPITAL STOCK

16
<PAGE> 133

VOTING RIGHTS

CODE OF ETHICS

The Board of Directors of the Fund has adopted a Code of Ethics under Rule
17j-1 of the Investment Company Act of 1940 (the "Code of Ethics"). The Code of
Ethics covers the conduct (including the personal securities transactions) of
each officer and director of the Fund, as well as of any employees of the Fund
who participate in the selection of the Fund's portfolio securities or who have
access to information regarding the Fund's impending purchases and sales of
portfolio securities. The Code of Ethics also covers the general conduct and
personal securities transactions of (but does not impose securities transaction
reporting requirements on) any officer, director, and employee of either PIMC,
SAC, TBC, or 1717 Capital Management Company ("1717") (formerly PML Securities
Company)") the principal underwriter of the Fund, who participates in the
selection of the Fund's portfolio securities or who has access to information
regarding the Fund's impending purchases and sales of portfolio securities.

17
<PAGE> 134

officers, or employees of either the Advisers, or PML (collectively referred to
as "Advisory Persons") are also prohibited from purchasing securities in an
initial public offering. Advisory Persons are also restricted in their purchases
of private offerings of securities. The Code of Ethics also describes certain
"blackout periods" during which: (1) no Advisory Person or no director, officer,
or employee of the Fund may acquire ownership of a security on a day during
which the Fund has a pending order to purchase or sell that same security; and
(2) no person responsible for day-to-day portfolio management of any Portfolio
shall purchase or sell any security within seven days before or after the Fund
trades in such security. Certain specified transactions are exempt from the
provisions of the Code of Ethics.

OTHER SERVICES

CUSTODIAN FOR INTERNATIONAL PORTFOLIO

INDEPENDENT ACCOUNTANTS

The firm of Coopers & Lybrand L.L.P., 2400 Eleven Penn Center,
Philadelphia, PA 19103, has been selected to serve as the Fund's independent
accountants.

The financial statements of the Money Market, Bond, Managed, Aggressive
Growth and International Portfolios in this Statement of Additional Information
and the Condensed Financial Information and ratios derived from such financial
statements included in the Prospectus have been audited by Coopers & Lybrand
L.L.P., Independent Accountants, and have been included in reliance upon the
report of such firm given on their authority as experts in accounting and
auditing. No financial information related to the Sentinel Growth and Common
Stock Portfolios is presented because these Portfolios commenced operations on
March 11, 1996.

LEGAL MATTERS

UNDERWRITERS

1717 Capital Management Company ("1717") (formerly PML Securities Company)
will serve, without compensation from the Fund, as the principal underwriter of
the Fund, pursuant to an agreement with the Fund. Under the terms of the
agreement, 1717 will not be obligated to sell any specific number of shares.
1717 has authority, pursuant to the agreement to enter into similar contracts
with other insurance companies and with other entities registered as
broker-dealers under the Securities Exchange Act of 1934.

18
<PAGE> 135

ADDITIONAL INFORMATION

19
<PAGE> 136

FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants..................................................... F-2
Schedule of Investments as of December 31, 1996....................................... F-3
Statements of Assets and Liabilities, December 31, 1996............................... F-29
Statements of Operations for the Year Ended December 31, 1996......................... F-30
Statements of Changes in Net Assets for the Year Ended December 31, 1996.............. F-31
Statements of Changes in Net Assets for the Year Ended December 31, 1995.............. F-32
Financial Highlights.................................................................. F-33
Notes to Financial Statements, December 31, 1996...................................... F-41
</TABLE>

F-1
<PAGE> 137

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Report of Independent Accountants

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

To the Shareholders and Board of Directors
of Market Street Fund, Inc.:

COOPERS & LYBRAND L.L.P.

2400 Eleven Penn Center
Philadelphia, Pennsylvania
January 31, 1997

F-2
<PAGE> 138

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio

Schedule of Investments, December 31, 1996

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

F-3
<PAGE> 139

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio

Schedule of Investments, December 31, 1996 -- Continued

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Finance-Insurance..................................................... 5.1%
General Re Corp. ................................................... 18,400 $ 2,902,600
ITT Hartford Group, Inc. ........................................... 51,000 3,442,500
St. Paul Companies, Inc. ........................................... 64,800 3,798,900
----------
10,144,000
----------
Financial Institutions................................................ 3.0%
First Union Corp. .................................................. 26,400 1,953,600
Travelers Group, Inc. .............................................. 89,633 4,067,097
----------
6,020,697
----------
Foods................................................................. 3.1%
Archer-Daniels Midland Co. ......................................... 278,653 6,130,366
----------
Machinery & Instrumentation........................................... 4.3%
Deere & Co. ........................................................ 96,600 3,924,375
Parker Hannifin Corp. .............................................. 119,300 4,622,875
----------
8,547,250
----------
Natural Gas........................................................... 1.7%
TransCanada Pipelines Ltd. ......................................... 197,900 3,463,250
----------
Non-Ferrous Metals & Mining........................................... 3.9%
Aluminum Co. of America............................................. 76,700 4,889,625
Reynolds Metals Co. ................................................ 49,600 2,796,200
----------
7,685,825
----------
Office Equipment & Supplies........................................... 5.8%
International Business Machines Corp. .............................. 36,300 5,481,300
Pitney Bowes, Inc. ................................................. 18,200 991,900
Xerox Corp. ........................................................ 93,900 4,941,488
----------
11,414,688
----------
Oil................................................................... 4.8%
Exxon Corp. ........................................................ 35,100 3,439,800
Mobil Corp. ........................................................ 33,000 4,034,251
Repsol ADR.......................................................... 53,400 2,035,875
----------
9,509,925
----------
Oil & Other Energy Sources............................................ 4.0%
Amoco Corp. ........................................................ 53,000 4,266,500
USX Marathon Group.................................................. 157,400 3,757,925
----------
8,024,425
----------
</TABLE>

F-4
<PAGE> 140

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio

Schedule of Investments, December 31, 1996 -- Concluded

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Paper & Forest Products............................................... 3.9%
James River Corp. .................................................. 142,500 $ 4,720,313
Mead Corp. ......................................................... 50,800 2,952,750
----------
7,673,063
----------
Pollution Control..................................................... 2.4%
WMX Technologies, Inc. ............................................. 143,800 4,691,475
----------
Retail-Department Stores.............................................. 0.9%
Dillard Dept. Stores, Class A....................................... 60,100 1,855,588
----------
Retail-Food Chains.................................................... 1.9%
American Stores Co. ................................................ 90,000 3,678,750
----------
Retail-Stores......................................................... 1.2%
Circuit City Store, Inc. ........................................... 80,500 2,425,062
----------
Telecommunications.................................................... 3.0%
AT&T Corp. ......................................................... 138,000 6,003,000
----------
Tobacco............................................................... 2.3%
RJR Nabisco Holdings Corp. ......................................... 135,140 4,594,760
----------
Transportation........................................................ 1.4%
Burlington Northern Santa Fe Corp. ................................. 32,600 2,815,825
----------
Utilities-Electric.................................................... 6.2%
Entergy Corp. ...................................................... 99,000 2,747,250
FPL Group, Inc. .................................................... 60,500 2,783,000
General Public Utilities Corp. ..................................... 85,400 2,871,575
PECO Energy Co. .................................................... 152,200 3,843,050
----------
12,244,875
----------
Utilities - Telephone................................................. 5.6%
GTE Corp. .......................................................... 87,000 3,958,500
NYNEX Corp. ........................................................ 149,000 7,170,625
----------
11,129,125
----------
TOTAL COMMON STOCK (COST $164,065,025)............................ 190,893,272
----------
SHORT-TERM INVESTMENTS (3.8%)
Temporary Investment Fund, Inc. - TempCash (Cost $7,579,202)........ 7,579,202 7,579,202
----------
TOTAL INVESTMENTS (100.0%) (COST $171,644,227).................... $198,472,474
==========
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE> 141

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Money Market Portfolio

Schedule of Investments, December 31, 1996

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

F-6
<PAGE> 142

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Money Market Portfolio

Schedule of Investments, December 31, 1996 -- Concluded

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

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
PERCENTAGE NUMBER
OF PORTFOLIO MATURITY OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS (1.80%)
Temporary Investment Fund, Inc.-TempCash
(Cost $1,000,057)...................................... $1,000,057 $ 1,000,057
-----------
TOTAL INVESTMENTS (100.0%) (COST $54,440,564).......... $54,440,564
===========
</TABLE>

See accompanying notes to financial statements.

F-7
<PAGE> 143

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Bond Portfolio

Schedule of Investments, December 31, 1996

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

<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF PORTFOLIO MATURITY AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. TREASURY NOTES (17.4%)
U.S. Treasury Note, 6.00%................................. 12/31/00 $ 600,000 $ 601,758
U.S. Treasury Note, 5.00%................................. 08/31/97 250,000 245,463
U.S. Treasury Note, 6.375%................................ 01/15/00 250,000 252,282
U.S. Treasury Note, 5.50%................................. 01/15/00 250,000 244,230
U.S. Treasury Note, 6.375%................................ 08/15/02 500,000 503,500
U.S. Treasury Note, 7.50%................................. 05/15/05 1,000,000 1,068,730
----------
TOTAL U.S. TREASURY NOTES (COST $2,913,524)............. 2,915,963
----------
AGENCY OBLIGATIONS (22.2%)
Collateralized Mortgage Obligation Trust, 7.95%............. 2.8% 05/01/17 457,959 469,767
----------
Federal Home Loan Bank...................................... 5.9%
Federal Home Loan Bank, 6.65%............................. 11/13/01 1,000,000 993,320
----------
Federal Home Loan Mortgage Corporation...................... 6.9%
Federal Home Loan Mortgage Corp., 6.50%................... 05/01/08 587,994 577,521
Federal Home Loan Mortgage Corp., 8.00%................... 11/01/08 518,992 528,561
Federal Home Loan Mortgage Corp., 9.00%................... 11/01/16 6,718 7,094
Federal Home Loan Mortgage Corp., 8.00%................... 03/01/17 39,090 39,811
----------
1,152,987
----------
Federal Mortgage Corporation................................ 3.6%
Federal Mortgage Corp. Discount Note., 5.51%.............. 01/07/97 600,000 599,449
----------
Federal National Mortgage Association....................... 3.0%
Federal National Mortgage Association, 7.50%.............. 12/01/06 491,793 501,629
----------
TOTAL AGENCY OBLIGATIONS (COST $3,731,458).............. 3,717,152
----------
CORPORATE BONDS (55.5%)
Industrial & Commercial Services............................ 3.0%
News American Holdings, Inc., 8.00%....................... 10/17/16 500,000 499,375
Defense..................................................... 2.9%
Northrop Corp., 7.00%..................................... 03/01/06 500,000 491,875
</TABLE>

F-8
<PAGE> 144

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Bond Portfolio

Schedule of Investments, December 31, 1996 -- Concluded

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

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
PERCENTAGE NUMBER
OF PORTFOLIO MATURITY OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
Financial Institutions..................................... 16.6%
CS First Boston, 7.75%................................... 05/15/06 $600,000 $ 627,000
First Union National Bank, 6.824%........................ 08/01/26 600,000 601,500
Lehman Brothers Holdings, 8.80%.......................... 03/01/15 400,000 451,000
Midland Bank, 7.65%...................................... 05/01/25 500,000 526,250
Salomon Brothers, 6.875%................................. 12/15/03 600,000 587,250
-----------
2,793,000
-----------
Insurance.................................................. 9.5%
Farmers Insurance Exchange, 8.50%........................ 08/01/04 600,000 633,000
Integon Corp., 9.50%..................................... 10/15/01 400,000 428,500
Liberty Mutual Insurance Co., 8.20%...................... 05/04/07 500,000 531,875
-----------
1,593,375
-----------
Telecommunications......................................... 6.4%
Comsat Corp. Medium Term Note, 8.05%..................... 12/13/06 500,000 547,785
Continental Cablevision, 8.30%........................... 05/15/06 500,000 533,750
-----------
1,081,535
-----------
Tobacco.................................................... 2.5%
Dimon, Inc., Senior Notes, 8.875%...................... 06/01/06 400,000 418,500
-----------
Utilities-Electric......................................... 3.0%
Mississippi Power and Light Co., 8.80%................... 04/01/05 500,000 510,625
-----------
Utilities-Gas.............................................. 2.6%
Consolidated Natural Gas Co., 8.625%..................... 12/01/11 422,000 439,407
-----------
Foreign.................................................... 9.0%
Banque Paribas Subordinate Notes, 6.875%................. 03/01/09 500,000 476,875
BCH Cayman Islands Ltd., 7.70%........................... 07/15/06 600,000 516,250
Swedish Export Credit Corp., 9.875%...................... 03/15/38 475,000 514,187
-----------
1,507,312
-----------
TOTAL CORPORATE BONDS (COST $9,138,939)................ 9,335,004
-----------
SHORT-TERM INVESTMENTS (4.9%)
Prudential Funding Corp., 5.23%.......................... 600,000 599,913
Temporary Investment Fund, Inc., - TempCash.............. 212,180 212,180
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $812,093)........... 812,093
-----------
TOTAL INVESTMENTS (100.0%) (COST $16,596,014).......... $16,780,212
===========
</TABLE>

See accompanying notes to financial statements.

F-9
<PAGE> 145

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio

Schedule of Investments, December 31, 1996

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (53.9%)
Automobiles & Auto Parts............................................... 2.5%
Chrysler Corp. ...................................................... 9,100 $ 300,300
Echlin, Inc. ........................................................ 9,000 284,625
Ford Motor Co. ...................................................... 16,000 510,000
-----------
1,094,925
-----------
Banks.................................................................. 5.1%
BankAmerica.......................................................... 3,000 299,250
Bank of New York Co., Inc............................................ 16,000 540,000
Chase Manhattan Corp. ............................................... 3,640 324,870
Citicorp............................................................. 3,500 360,500
First Union Corp. ................................................... 5,500 407,000
Morgan (J.P.) & Co., Inc. ........................................... 2,500 244,062
-----------
2,175,682
-----------
Beverages.............................................................. 0.6%
Coca-Cola Co......................................................... 5,000 263,125
-----------
Building & Materials................................................... 1.0%
Sherwin Williams Co. ................................................ 8,000 448,000
-----------
Consumer & Business Services........................................... 2.1%
Electronic Data Systems Corp......................................... 10,035 434,014
Omnicom Group, Inc. ................................................. 10,000 457,500
-----------
891,514
-----------
Consumer Products...................................................... 2.4%
American Brands, Inc. ............................................... 6,000 297,750
Coleman Co., Inc. ................................................... 9,700 133,375
Kimberly-Clark Corp. ................................................ 4,000 381,000
Rubbermaid, Inc. .................................................... 10,500 283,875
-----------
1,051,000
-----------
Drugs.................................................................. 2.3%
American Homes Products Corp. ....................................... 8,000 469,000
Pfizer, Inc. ........................................................ 6,000 497,250
-----------
966,250
-----------
Electrical Equipment................................................... 3.4%
Emerson Electric Co. ................................................ 5,000 483,750
General Electric Co. ................................................ 6,000 593,250
Grainger (W.W.), Inc. ............................................... 5,000 401,250
-----------
1,478,250
-----------
</TABLE>

F-10
<PAGE> 146

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio

Schedule of Investments, December 31, 1996 -- Continued

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Energy................................................................. 6.0%
Amoco Corp........................................................... 5,700 $ 458,850
Atlantic Richfield Co. .............................................. 3,100 410,750
Chevron Corp. ....................................................... 4,500 292,500
Exxon Corp. ......................................................... 5,000 490,000
Mobil Corp. ......................................................... 3,500 427,875
Royal Dutch Petroleum Co. ........................................... 3,000 512,250
-----------
2,592,225
-----------
Financial.............................................................. 1.2%
American Express Co. ................................................ 9,500 536,750
-----------
Foods.................................................................. 2.7%
CPC International, Inc. ............................................. 6,000 465,000
Hannaford Bros. Co. ................................................. 7,000 238,000
Sara Lee Corp. ...................................................... 12,000 447,000
-----------
1,150,000
-----------
Healthcare Providers................................................... 1.2%
Columbia/HCA Healthcare Corp. ....................................... 12,750 519,562
-----------
Industrial Diversified................................................. 5.2%
Boeing Co. .......................................................... 336 35,742
Crown Cork & Seal Co., Inc. ......................................... 8,000 435,000
Dover Corp. ......................................................... 5,000 251,250
Grace (W.R.) & Co. .................................................. 4,000 207,000
Parker-Hannifin Corp. ............................................... 12,000 465,000
PPG Industries, Inc. ................................................ 6,500 364,812
*Rockwell International Corp. ....................................... 8,000 487,000
-----------
2,245,804
-----------
Insurance.............................................................. 4.7%
Allstate Corp. ...................................................... 10,562 611,276
American General Corp. .............................................. 11,000 449,625
American International Group, Inc. .................................. 4,500 487,125
Equitable of Iowa.................................................... 10,000 458,750
-----------
2,006,776
-----------
Medical - Equipment & Supplies......................................... 1.0%
Johnson & Johnson.................................................... 9,000 447,750
-----------
</TABLE>

F-11
<PAGE> 147

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio

Schedule of Investments, December 31, 1996 -- Continued

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Oil Field Equipment & Services......................................... 2.0%
Halliburton Co. ..................................................... 6,000 $ 361,500
Schlumberger Ltd..................................................... 5,000 499,375
-----------
860,875
-----------
Publishing............................................................. 1.7%
Gannett, Inc......................................................... 4,500 336,937
McGraw Hill, Inc..................................................... 8,000 369,000
-----------
705,937
-----------
Railroads.............................................................. 2.2%
Canadian Pacific Ltd. ............................................... 10,400 275,600
Illinois Central Corp. Common, Series A.............................. 11,250 360,000
Union Pacific Corp. ................................................. 5,000 300,625
-----------
936,225
-----------
Retail................................................................. 2.3%
May Department Stores Co. ........................................... 6,700 313,225
Nordstrom, Inc. ..................................................... 6,300 223,256
Sears, Roebuck and Co. .............................................. 10,000 461,250
-----------
997,731
-----------
Telecommunications..................................................... 0.3%
Lucent Technologies, Inc. ........................................... 2,868 132,645
-----------
Tobacco................................................................ 0.6%
Philip Morris Company, Inc. ......................................... 2,300 259,037
-----------
Utilities - Electric................................................... 0.8%
FPL Group, Inc. ..................................................... 7,000 322,000
-----------
Utilities - Gas........................................................ 1.7%
Enron Corp. ......................................................... 8,000 345,000
Sonat, Inc. ......................................................... 7,500 386,250
-----------
731,250
-----------
Utilities - Telephone.................................................. 0.9%
GTE Corp............................................................. 8,500 386,750
-----------
TOTAL COMMON STOCK (COST $16,255,599).............................. 23,200,064
-----------
CONVERTIBLE STOCK (0.4%)
*Microsoft Corp., Preferred Series A Convertible, 2.75%
(COST $167,738).................................................... 2,100 168,262
-----------
</TABLE>

F-12
<PAGE> 148

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio

Schedule of Investments, December 31, 1996 -- Continued

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

F-13
<PAGE> 149

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio

Schedule of Investments, December 31, 1996 -- Concluded

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

* Non-income producing

See accompanying notes to financial statements.

F-14
<PAGE> 150

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Growth Portfolio

Schedule of Investments, December 31, 1996

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (80.6%)
Auto Parts & Repair.................................................... 1.6%
Pep Boys-Manny, Moe & Jack........................................... 17,800 $ 547,350
-----------
Beverages.............................................................. 1.2%
*Robert Mondavi Corp., Class A....................................... 11,000 401,500
-----------
Communications......................................................... 3.0%
*Dynatech Corp....................................................... 13,500 597,375
*Verifone, Inc....................................................... 14,000 413,000
-----------
1,010,375
-----------
Drugs-Drug Delivery.................................................... 2.7%
*Scherer (R.P.) Corp................................................. 18,500 929,625
-----------
Electronics............................................................ 4.2%
Harman International Industries, Inc................................. 11,860 659,712
Methode Electronics, Inc. Class A.................................... 38,000 769,500
-----------
1,429,212
-----------
Energy................................................................. 6.6%
*Calenergy Co., Inc.................................................. 22,000 739,750
*Smith International, Inc............................................ 34,000 1,525,750
-----------
2,265,500
-----------
Environmental Control.................................................. 3.7%
*USA Waste Services, Inc............................................. 22,650 721,969
*Waste Management International Plc-ADR.............................. 70,000 551,250
-----------
1,273,219
-----------
Finance................................................................ 7.1%
Duff & Phelps Credit Rating Co....................................... 12,500 301,562
First Commerce Corp.................................................. 6,000 233,250
Mercantile Bankshares Corp........................................... 12,000 384,000
ROC Communities...................................................... 27,300 757,575
Wilmington Trust Corp................................................ 18,800 742,600
-----------
2,418,987
-----------
Food & Food Distributors............................................... 6.6%
Goodmark Foods, Inc.................................................. 25,700 424,050
Hannaford Bros. Co................................................... 15,100 513,400
Smart & Final, Inc................................................... 28,000 605,500
Tootsie Roll Industries, Inc......................................... 17,455 691,654
-----------
2,234,604
-----------
</TABLE>

F-15
<PAGE> 151

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Growth Portfolio

Schedule of Investments, December 31, 1996 -- Continued

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Healthcare Providers................................................... 2.5%
*Alpha Beta Technology, Inc........................................... 17,000 $ 179,563
*Genesis Health Ventures.............................................. 21,450 667,631
-----------
847,194
-----------
Insurance.............................................................. 3.4%
Conseco, Inc......................................................... 18,091 1,153,301
-----------
Industrial & Commercial Services....................................... 5.0%
Analysts International Corp.......................................... 16,000 452,000
*Healthcare Services Group............................................ 48,500 485,000
Kelly Services, Inc.................................................. 15,600 421,200
Olsten Corp.......................................................... 22,000 332,750
-----------
1,690,950
-----------
Industrial Diversified................................................. 8.8%
Donaldson, Inc....................................................... 22,000 737,000
Lawter International, Inc............................................ 51,500 650,188
*Material Sciences Corp............................................... 40,800 734,400
*Bush Boake Allen, Inc................................................ 33,500 891,938
-----------
3,013,526
-----------
Manufacturing.......................................................... 2.4%
Calgon Carbon Corp. ................................................. 66,000 808,500
-----------
Medical-Equipment & Supplies........................................... 7.9%
Allergan, Inc........................................................ 20,000 712,500
Ballard Medical Products............................................. 18,000 335,250
Hillenbrand Industries, Inc.......................................... 19,000 688,750
Minntech Corp........................................................ 28,100 323,150
*Research Medical, Inc................................................ 26,800 616,400
-----------
2,676,050
-----------
Oil Equipment & Services............................................... 2.4%
Halliburton Co....................................................... 13,776 830,004
-----------
Restaurants............................................................ 1.8%
Sbarro, Inc.......................................................... 24,700 629,850
-----------
</TABLE>

F-16
<PAGE> 152

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Growth Portfolio

Schedule of Investments, December 31, 1996 -- Concluded

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

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Retail-Department Stores............................................... 4.4%
Ethan Allen Industries, Inc.......................................... 22,500 $ 866,250
Talbots, Inc......................................................... 23,000 658,375
-----------
1,524,625
-----------
Security Services...................................................... 2.9%
*ADT Ltd.............................................................. 43,000 983,625
-----------
Software............................................................... 2.4%
*Filenet Corp......................................................... 13,000 416,000
*Sterling Commerce.................................................... 12,000 423,000
-----------
839,000
-----------
TOTAL COMMON STOCK (COST $21,313,188).............................. 27,506,997
-----------
PREFERRED STOCK (0.2%)
Phoenix Duff & Phelps Preferred Convertible Series A, $1.50, (Cost
$71,441)........................................................... 2,500 62,500
-----------
SHORT-TERM INVESTMENTS (19.2%)
Beneficial Corp., 5.52%, Due 01/15/97................................ $1,600,000 1,596,566
Federal Agricultural Mortgage Corp., 5.32%, Due 01/02/97............. 1,500,000 1,499,778
General Electric Capital Corp., 5.35%, Due 01/22/97.................. 950,000 947,035
National City Credit Corp., 5.46%, Due 01/08/97...................... 1,000,000 998,938
Prudential Funding Corp., 5.60%, Due 01/10/97........................ 1,500,000 1,497,900
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $6,540,217)..................... 6,540,217
-----------
TOTAL INVESTMENTS (100.0%) (COST $27,924,846)...................... $34,109,714
===========
</TABLE>

* Non-income producing.

See accompanying notes to financial statements.

F-17
<PAGE> 153

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio

Schedule of Investments, December 31, 1996

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK AND PREFERRED STOCK (96.2%)
Austria.................................................................. 0.3%
Creditanstalt PS....................................................... 1,200 $ 155,024
-----------
Australia................................................................ 3.2%
Amcor Ltd. ............................................................ 45,000 289,330
Australia & New Zealand Bank Group Ltd. ............................... 50,000 315,120
Boral Ltd. ............................................................ 204,724 582,485
Commonwealth Installment Receipt Trustee Ltd. ......................... 43,004 267,611
Goodman Fielder........................................................ 112,993 140,091
-----------
1,594,637
-----------
France................................................................... 4.4%
C.S.F. (Thomson-C.S.F.)................................................ 14,419 469,005
CLF - Dexia France..................................................... 5,000 429,724
Danone................................................................. 3,704 516,341
Societe Generale....................................................... 6,748 724,296
-----------
2,139,366
-----------
Germany.................................................................. 9.5%
Bayer AG............................................................... 13,000 530,130
Bayer Motoren AG....................................................... 800 557,403
Deutsche Bank AG....................................................... 15,000 700,325
GEA AG................................................................. 1,600 489,351
Henkel KGAA............................................................ 1,000 47,727
Henkel KGAA - Vorzug Preferred......................................... 11,000 552,143
Siemens AG............................................................. 11,500 541,396
Tarkett................................................................ 15,000 299,026
Veba AG................................................................ 8,500 491,234
Viag AG................................................................ 1,200 470,649
-----------
4,679,384
-----------
Hong Kong................................................................ 3.2%
Cheung Kong Holdings................................................... 57,000 506,527
Hong Kong Electric..................................................... 145,000 481,678
HSBC Holdings Plc...................................................... 13,418 287,038
Yue Yuen Industrial.................................................... 750,000 285,982
-----------
1,561,225
-----------
Italy.................................................................... 2.3%
Fiat SpA............................................................... 105,000 316,552
STET Di Risp........................................................... 250,000 840,722
-----------
1,157,274
-----------
</TABLE>

F-18
<PAGE> 154

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio

Schedule of Investments, December 31, 1996 -- Continued

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK AND PREFERRED STOCK (CONTINUED)
Japan.................................................................... 27.9%
Canon, Inc. ........................................................... 38,000 $ 840,795
Chudenko Corp. ........................................................ 7,000 202,074
Credit Saison Co. ..................................................... 37,000 828,263
Dai-Tokyo Fire and Marine Insurance.................................... 117,000 621,910
Hitachi Koki Co. ...................................................... 55,000 394,080
Hitachi Ltd. .......................................................... 65,000 606,742
Honda Motor Co. Ltd. .................................................. 17,000 486,344
Ito-Yokado Co. Ltd. ................................................... 13,000 566,292
Kao Corp. ............................................................. 60,000 700,086
Mabuchi Motors......................................................... 11,200 564,356
Mikuni Coca-Cola Bottling Co. Ltd. .................................... 40,000 518,583
Mineba Company Ltd. ................................................... 65,000 543,820
Mitsubishi Heavy Industries Ltd. ...................................... 90,000 715,644
Murata Manufacturing Co. Ltd. ......................................... 22,000 722,558
Nichiei................................................................ 6,500 478,090
Nishimatsu Construction................................................ 55,000 480,121
Ono Pharmaceutical..................................................... 8,000 235,091
Sankyo Co. Ltd. ....................................................... 15,000 439,499
Sekisui Chemical Co.................................................... 27,000 273,034
Sekisui House.......................................................... 48,000 489,542
Sony Corp. ............................................................ 9,000 590,406
Toshiba Corp. ......................................................... 100,000 629,213
Toyota Motor Corp. .................................................... 28,000 805,877
Yamanouchi Pharmaceuticals............................................. 22,000 452,550
Yamato Transportation.................................................. 55,000 570,441
-----------
13,755,411
-----------
Malaysia................................................................. 1.2%
Affin Holdings......................................................... 160,000 440,222
IOI Properties Berhad.................................................. 43,000 139,588
-----------
579,810
-----------
Netherlands.............................................................. 4.4%
ABN Amro Holding....................................................... 8,156 528,778
Hollandsche Beton...................................................... 2,050 423,196
Hunter Douglas N.V..................................................... 7,956 534,621
International Nederlanden Group........................................ 6,666 239,156
Koninklijke K.N.P. .................................................... 20,000 436,062
-----------
2,161,813
-----------
</TABLE>

F-19
<PAGE> 155

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio

Schedule of Investments, December 31, 1996 -- Continued

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK AND PREFERRED STOCK (CONTINUED)
New Zealand.............................................................. 1.2%
Air New Zealand........................................................ 61,091 $ 166,089
Fletcher Energy........................................................ 150,000 435,420
-----------
601,509
-----------
Norway................................................................... 1.3%
Christiana Bank........................................................ 90,000 284,485
Orkla.................................................................. 5,500 348,564
-----------
633,049
-----------
Portugal................................................................. 0.5%
Banco Comercial Portugues.............................................. 20,000 262,938
-----------
Singapore................................................................ 1.4%
Development Bank....................................................... 30,000 405,289
Far East Levingston.................................................... 53,000 276,555
-----------
681,844
-----------
Spain.................................................................... 1.1%
Gas y Electricidad SA Gesa............................................. 8,591 546,550
-----------
Sweden................................................................... 0.7%
Marieberg Tidnings AB.................................................. 14,000 343,910
-----------
Switzerland.............................................................. 4.7%
Magazine Zum Globus.................................................... 100 51,788
Magazine Zum Globus Participating Certificates, Zurich................. 550 253,279
Nestle SA.............................................................. 300 321,237
Schweizerischer Bankverein............................................. 3,350 635,302
Sulzer AG-Registered Shares............................................ 830 478,085
Zurich Versicherungs................................................... 2,000 554,396
-----------
2,294,087
-----------
United Kingdom........................................................... 11.6%
Abbey National Plc..................................................... 50,000 655,796
BTR Ordinary Plc....................................................... 158,823 773,336
Bunzel Plc............................................................. 125,000 499,348
D.S. Smith............................................................. 71,178 380,749
Devro Plc.............................................................. 60,000 276,720
Laird Group Ordinary................................................... 65,000 443,541
</TABLE>

F-20
<PAGE> 156

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio

Schedule of Investments, December 31, 1996 -- Concluded

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK AND PREFERRED STOCK (CONTINUED)
National Westminster Bank.............................................. 75,183 $ 884,266
Powergen Plc........................................................... 84,443 828,123
RTZ Corp............................................................... 41,351 665,007
Scapa Group............................................................ 70,603 297,175
-----------
5,704,061
-----------
United States............................................................ 17.3%
AKZO N.V. Sponsored ADR................................................ 3,500 236,250
Alcatel Alsthom ADR.................................................... 28,516 456,256
Cable and Wireless ADR................................................. 22,000 541,750
Corporacion Bancaria de Espanol ADR.................................... 29,000 652,500
Elf Aquitaine ADR...................................................... 18,751 848,483
Ente Nazionale Idrocarburi SpA-ADR..................................... 10,000 516,250
Hanson Trust Plc ADR................................................... 33,000 222,750
*Imperial Tobacco Group ADR............................................ 8,250 106,450
Istituto Mobiliare Italiano ADR........................................ 19,000 491,625
KPN ADS................................................................ 8,863 335,686
Philips N.V. ADR....................................................... 10,000 400,000
Repsol ADR............................................................. 22,000 838,750
Rhone Poulenc S.A. Sponsored ADR....................................... 14,295 484,243
Scania AB Class A-ADR.................................................. 8,000 193,000
Scania AB Class B-ADR.................................................. 3,000 72,375
Tele Danmark ADR....................................................... 17,500 476,875
Telefonos De Mexico S.A.-ADR........................................... 9,500 313,500
Unilever N.V-ADR....................................................... 3,000 525,750
Volvo AB-ADR........................................................... 15,000 326,250
YPF Sociedad Anonima ADR............................................... 20,000 505,000
-----------
8,543,741
-----------
TOTAL COMMON STOCK AND PREFERRED STOCK (COST $43,890,604)............ 47,395,633
-----------
SHORT-TERM INVESTMENTS (3.8%)
Temporary Investment Fund, Inc.-TempCash
(Cost $1,881,582).................................................... 1,881,582 1,881,582
-----------
TOTAL INVESTMENTS (100.0%) (COST $45,772,186)........................ $49,277,215
===========
</TABLE>

* Non-Income Producing.

See accompanying notes to financial statements.

F-21
<PAGE> 157

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Common Stock Portfolio

Schedule of Investments, December 31, 1996

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (92.6%)
Automobiles........................................................... 4.5%
Chrysler Corp....................................................... 2,600 $ 85,800
Echlin, Inc......................................................... 2,500 79,062
Ford Motor Co....................................................... 4,000 127,500
-----------
292,362
-----------
Banks................................................................. 11.0%
Bank of New York Co., Inc........................................... 4,500 151,875
BankAmerica Corp.................................................... 1,000 99,750
Chase Manhattan Corp................................................ 1,300 116,025
Citicorp............................................................ 1,300 133,900
First Union Corp.................................................... 1,400 103,600
Morgan (J.P.) & Co., Inc............................................ 1,200 117,150
-----------
722,300
-----------
Beverages............................................................. 1.9%
Coca-Cola Co........................................................ 2,400 126,300
-----------
Building Materials.................................................... 1.6%
Sherwin Williams Co................................................. 1,900 106,400
-----------
Business & Consumer Services.......................................... 3.4%
Electronic Data Systems Corp........................................ 2,800 121,100
Omnicom Group, Inc.................................................. 2,200 100,650
-----------
221,750
-----------
Consumer Products..................................................... 6.3%
American Brands, Inc................................................ 2,000 99,250
Gillette Co......................................................... 1,600 124,400
Kimberly-Clark Corp................................................. 1,300 123,825
Rubbermaid, Inc..................................................... 2,800 63,700
-----------
411,175
-----------
Drugs................................................................. 3.9%
American Home Products Corp......................................... 2,200 128,975
Pfizer, Inc......................................................... 1,500 124,313
-----------
253,288
-----------
Electrical Equipment.................................................. 5.4%
Emerson Electric Co................................................. 1,800 174,150
General Electric Co................................................. 1,800 177,975
-----------
352,125
-----------
</TABLE>

F-22
<PAGE> 158

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Common Stock Portfolio

Schedule of Investments, December 31, 1996 -- Continued

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Energy................................................................ 10.5%
Amoco Corp.......................................................... 1,300 $ 104,650
Atlantic Richfield Co............................................... 500 66,250
Chevron Corp........................................................ 1,200 78,000
Exxon Corp.......................................................... 1,500 147,000
Mobil Corp.......................................................... 1,000 122,250
Royal Dutch Petroleum Co............................................ 1,000 170,750
-----------
688,900
-----------
Financial............................................................. 2.6%
American Express Co................................................. 3,000 169,500
*Echelon International Corp.......................................... 133 2,083
-----------
171,583
-----------
Foods................................................................. 3.3%
CPC International, Inc.............................................. 1,100 85,250
Sara Lee Corp....................................................... 3,500 130,375
-----------
215,625
-----------
Healthcare Providers.................................................. 2.1%
Columbia Healthcare Corp............................................ 3,300 134,475
-----------
Industrial - Diversified.............................................. 8.3%
Boeing Co........................................................... 96 10,212
Crown Cork & Seal Co., Inc.......................................... 2,000 108,750
Grace (W.R.) & Co................................................... 1,300 67,275
Parker Hannifin Corp................................................ 3,300 127,875
PPG Industries, Inc................................................. 1,600 89,800
*Rockwell International Corp......................................... 2,300 140,013
-----------
543,925
-----------
Insurance............................................................. 6.1%
Allstate Corp....................................................... 2,400 138,900
American General Corp............................................... 3,200 130,800
American International Group, Inc................................... 1,200 129,900
-----------
399,600
-----------
Medical - Equipment & Supplies........................................ 1.8%
Johnson & Johnson................................................... 2,400 119,400
-----------
</TABLE>

F-23
<PAGE> 159

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Common Stock Portfolio

Schedule of Investments, December 31, 1996 -- Continued

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

F-24
<PAGE> 160

- --------------------------------------------------------------------------------
Market Street Fund, Inc.

The Common Stock Portfolio

Schedule of Investments, December 31, 1996 -- Concluded

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

See accompanying notes to financial statements.

F-25
<PAGE> 161

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Sentinel Growth Portfolio

Schedule of Investments, December 31, 1996

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (93.3%)
Automobiles & Auto Parts................................................ 1.6%
Pep Boys-Manny Moe & Jack............................................. 3,000 $ 92,250
----------
Banks................................................................... 1.4%
First Union Corp. .................................................... 1,100 81,400
----------
Financial............................................................... 5.7%
American Express Co. ................................................. 2,200 124,300
Student Loan Marketing Association.................................... 2,100 195,562
----------
319,862
----------
Biotechnology........................................................... 8.2%
*Amgen, Inc. ......................................................... 2,100 114,188
Biogen, Inc. ......................................................... 1,200 46,500
*Centocor, Inc. ...................................................... 1,600 57,200
*Chiron Corp. ........................................................ 2,800 52,150
Pfizer, Inc. ......................................................... 1,100 91,163
Schering Plough Corp. ................................................ 1,600 103,600
----------
464,801
----------
Building Materials...................................................... 1.9%
Sherwin Williams Co. ................................................. 1,900 106,400
----------
Business Services....................................................... 6.1%
Electronic Data Systems............................................... 2,400 103,800
First Data Corp. ..................................................... 2,000 73,000
Omnicom Group, Inc. .................................................. 3,700 169,275
----------
346,075
----------
Computers............................................................... 1.7%
Hewlett Packard Co. .................................................. 1,000 50,250
Novellus System, Inc. ................................................ 800 43,350
----------
93,600
----------
Consumer Services....................................................... 0.9%
Hillenbrand Industries, Inc. ......................................... 1,400 50,750
----------
Electronics............................................................. 6.8%
*Applied Materials, Inc. ............................................. 4,100 147,343
*KLA Instruments Corp. ............................................... 1,700 60,350
Methode Electronics, Inc. ............................................ 1,900 38,475
Motorola, Inc. ....................................................... 1,300 79,788
Tencor Instruments.................................................... 2,200 58,025
----------
383,981
----------
</TABLE>

F-26
<PAGE> 162

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Sentinel Growth Portfolio

Schedule of Investments, December 31, 1996 -- Continued

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

<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Environmental Control................................................... 0.9%
*United States Filter Corp. .......................................... 1,500 $ 47,625
----------
Energy.................................................................. 0.9%
Enron Corp. .......................................................... 1,200 51,750
----------
Health.................................................................. 1.8%
American Home Products................................................ 1,700 99,662
----------
Healthcare Services..................................................... 8.5%
Columbia/HCA Healthcare............................................... 2,550 103,912
Genzyme Corp. ........................................................ 2,200 47,850
Integrated Health Services, Inc. ..................................... 4,000 97,500
Medpartners, Inc. .................................................... 5,847 115,227
Renal Treatment Centers, Inc. ........................................ 1,100 28,050
United Healthcare Corp. .............................................. 1,900 85,500
----------
478,039
----------
Industrial.............................................................. 5.0%
Donaldson Co.......................................................... 4,400 147,400
Crown Cork & Seal Co., Inc. .......................................... 1,100 59,812
Grace (W.R.) & Co..................................................... 1,400 72,450
----------
279,662
----------
Insurance............................................................... 1.1%
Equitable of Iowa..................................................... 1,400 64,225
----------
Medical-Equipment & Supplies............................................ 4.0%
Dentsply International................................................ 2,300 109,250
Johnson & Johnson..................................................... 1,600 79,600
*LAM Research Corp. .................................................. 1,400 39,375
----------
228,225
----------
Office Equipment........................................................ 1.2%
Staples, Inc. ........................................................ 3,800 68,637
----------
Oil Field Equipment..................................................... 7.6%
Halliburton Co. ...................................................... 1,000 60,250
Schlumberger Ltd. .................................................... 1,500 149,813
*Smith International, Inc. .......................................... 3,700 166,038
Union Pacific Resources Group......................................... 1,746 51,071
----------
427,172
----------
Restaurants............................................................. 0.9%
Outback Steakhouse, Inc. ............................................. 2,000 53,500
----------
</TABLE>

F-27
<PAGE> 163

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Sentinel Growth Portfolio

Schedule of Investments, December 31, 1996 -- Concluded

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

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Retail................................................................. 12.7%
Ethan Allen Interiors, Inc. ......................................... 5,200 $ 200,200
Home Depot, Inc. .................................................... 2,800 140,350
Nordstrom, Inc. ..................................................... 1,400 49,613
Sears, Roebuck & Co. ................................................ 2,000 92,250
TJX Companies........................................................ 5,100 241,613
-----------
724,026
-----------
Semiconductors......................................................... 6.2%
Intel Corp. ......................................................... 1,300 170,218
*Microsoft Corp. .................................................... 2,200 181,775
-----------
351,993
-----------
Technology............................................................. 1.0%
*Sterling Commerce, Inc. ............................................ 1,600 56,400
-----------
Telecommunications..................................................... 3.2%
*Airtouch Communications............................................. 1,900 47,975
*Worldcom, Inc. ..................................................... 5,000 130,313
-----------
178,288
-----------
Tobacco................................................................ 4.0%
Philip Morris Cos., Inc. ............................................ 2,000 225,250
-----------
TOTAL COMMON STOCK (COST $4,722,686)............................... 5,273,573
-----------
SHORT-TERM INVESTMENTS (6.7%)
Prudential Funding Corp., 5.90%, Due 01/02/97........................ $ 280,000 279,954
Temporary Investment Fund, Inc.-TempCash............................. 99,478 99,478
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $379,432)....................... 379,432
-----------
TOTAL INVESTMENTS (100.0%) (COST $5,102,118)....................... $ 5,653,005
===========
</TABLE>

* Non-Income Producing

See accompanying notes to financial statements.

F-28
<PAGE> 164

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statements of Assets and Liabilities, December 31, 1996

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

See accompanying notes to financial statements.

F-29
<PAGE> 165

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statements of Operations for the Year Ended December 31, 1996

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

* The Common Stock and Sentinel Growth Portfolios commenced operations on
03/18/96.

See accompanying notes to financial statements.

F-30
<PAGE> 166

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statements of Changes in Net Assets for the Year Ended December 31, 1996

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

* The Common Stock and Sentinel Growth Portfolios commenced operations on
03/18/96.

See accompanying notes to financial statements.

F-31
<PAGE> 167

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statements of Changes in Net Assets for the Year Ended December 31, 1995

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

<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income
(loss)...................... $4,474,620... $ 1,481,782 $ 776,497 $ 1,374,276 $ 255,039 $ 385,788
Net realized gain (loss) on
sale of investments......... 7,728,282 -- 503,141 1,471,361 2,569,743 1,849,716
Net change in unrealized
appreciation (depreciation)
on investments and foreign
currency translations....... 24,145,662 -- 950,760 4,221,556 (406,827) 2,023,172
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net
assets resulting from
operations.................. 36,348,564 1,481,782 2,230,398 7,067,193 2,417,955 4,258,676
Distributions:
From net investment income.... (4,157,531) (1,481,782) (736,126) (1,414,623) -- (148,141)
From net realized gains....... (8,715,516) -- -- (33,117) (131,841) (699,972)
Capital share transactions:
Net contributions from
affiliated life insurance
companies................... 23,232,447 13,575,595 2,810,449 1,019,709 6,106,674 7,019,658
------------ ----------- ----------- ----------- ----------- -----------
Total increase in net
assets.................... 46,707,964.. 13,575,595 4,304,721 6,639,162 8,392,788 10,430,221
NET ASSETS
Beginning of period............. 115,190,987 21,039,557 10,097,634 29,363,204 15,429,643 26,211,861
------------ ----------- ----------- ----------- ----------- -----------
End of period (including
undistributed net investment
income in the Growth Portfolio
$1,263,754; Bond Portfolio
$208,370; Managed Portfolio
$329,730; Aggressive Growth
Portfolio $255,039; and
International Portfolio
$442,343)..................... $161,898,951 $34,615,152 $14,402,355 $36,002,366 $23,822,431 $36,642,082
============ =========== =========== =========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-32
<PAGE> 168

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights

- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:

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

<TABLE>
<CAPTION>
GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92
TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $16.36 $14.00 $14.09 $13.73 $13.88
-------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .46 .47 .43 .38 .46
Net realized and unrealized gain (loss)
on investments................................ 2.54 3.41 (.10) .94 .17
-------- -------- -------- ------- -------
Total from investment operations............ 3.00 3.88 .33 1.32 .63
-------- -------- -------- ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income......................... (.48) (.46) (.41) (.39) (.46)
Dividends to shareholders from net capital
gains......................................... (.78) (1.06) (.01) (.35) (.32)
Dividends to shareholders in excess of net
investment income............................. -- -- -- (.22) --
-------- -------- -------- ------- -------
Total distributions......................... (1.26) (1.52) (.42) (.96) (.78)
-------- -------- -------- ------- -------
Net asset value, end of period.................. $18.10 $16.36 $14.00 $14.09 $13.73
======== ======== ======== ======= =======
Total return.................................... 19.58% 30.39% 2.40% 9.43% 4.74%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 198,948 161,899 115,191 109,534 82,881
Ratios of expenses to average net assets
(annualized)(1)............................... .50% .61% .63% .76% .79%
Ratios of net investment income to average net
assets (annualized)........................... 2.80% 3.20% 3.10% 2.86% 3.53%
Portfolio turnover.............................. 72% 61% 63% 51% 35%
Average commission rate(2)...................... $0.0600 N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to financial statements.

F-33
<PAGE> 169

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued

- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:

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

<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92
TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .05 .05 .04 .03 .03
------ ------ ------ ------ -----
Total from investment operations............ .05 .05 .04 .03 .03
------ ------ ------ ------ -----
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment
income........................................ (.05) (.05) (.04) (.03) (.03)
------ ------ ------ ------ -----
Total distributions............................. (.05) (.05) (.04) (.03) (.03)
------ ------ ------ ------ -----
Net asset value, end of period.................. $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== =====
Total return.................................... 5.15% 5.61% 3.81% 2.59% 3.18%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 54,197 34,615 21,040 12,506 8,138
Ratios of expenses to average net assets
(annualized)(1)............................... .44% .50% .55% .65% .65%
Ratios of net investment income to average net
assets (annualized)........................... 5.03% 5.47% 3.86% 2.56% 3.12%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to financial statements.

F-34
<PAGE> 170

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued

- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:

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

<TABLE>
<CAPTION>
BOND PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92
TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 11.00 $9.73 $11.21 $10.73 $10.80
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .63 .65 .62 .60 .64
Net realized and unrealized gain (loss)
on investments................................ (.34) 1.27 (1.23) .48 (.03)
------- ------- ------- ------- -------
Total from investment operations............ .29 1.92 (.61) 1.08 .61
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income......................... (.62) (.65) (.60) (.60) (.68)
Dividends to shareholders from net capital
gains......................................... (.00) (.00) (.27) (.00) (.00)
------- ------- ------- ------- -------
Total distributions......................... (.62) (.65) (.87) (.60) (.68)
------- ------- ------- ------- -------
Net asset value, end of period.................. $10.67 $11.00 $9.73 $11.21 $10.73
======= ======= ======= ======= =======
Total return.................................... 2.86% 20.45% (5.62)% 10.32% 5.95%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 17,087 14,402 10,098 10,160 6,710
Ratios of expenses to average net assets
(annualized)(1)............................... .56% .60% .68% .75% .75%
Ratios of net investment income to average net
assets (annualized)........................... 6.08% 6.36% 6.14% 5.53% 6.34%
Portfolio turnover.............................. 133% 206% 151% 71% 4%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to financial statements.

F-35
<PAGE> 171

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued

- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:

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

<TABLE>
<CAPTION>
MANAGED PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92
TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 14.19 $11.94 $13.27 $12.25 $11.40
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .51 .55 .53 .40 .44
Net realized and unrealized gain (loss) on
investments................................... 1.07 2.28 (.77) 1.00 .88
------- ------- ------- ------- -------
Total from investment operations............ 1.58 2.83 (.24) 1.40 1.32
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment
income........................................ (.51) (.57) (.49) (.38) (.47)
Dividends to shareholders from net capital
gains......................................... (.58) (.01) (.60) (.00) (.00)
------- ------- ------- ------- -------
Total distributions......................... (1.09) (.58) (1.09) (.38) (.47)
------- ------- ------- ------- -------
Net asset value, end of period.................. $ 14.68 $14.19 $11.94 $13.27 $12.25
======= ======= ======= ======= =======
Total return................................ 11.88% 24.43% (1.82)% 11.62% 11.96%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 43,431 36,002 29,363 28,984 15,946
Ratios of expenses to average net assets
(annualized)(1)............................... .60% .66% .67% .80% .80%
Ratios of net investment income to average
net assets (annualized)....................... 3.68% 4.22% 4.34% 3.36% 3.88%
Portfolio turnover.............................. 106% 130% 75% 89% 32%
Average commission rate(2)...................... $0.0600 N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to financial statements.

F-36
<PAGE> 172

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued

- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:

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

<TABLE>
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92
TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $17.38 $15.45 $15.45 $14.72 $16.68
----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .17 .20 (.01) (.01) .03
Net realized and unrealized gain (loss) on
investments................................... 3.03 1.86 .01 .77 .38
----- ----- ----- ----- -----
Total from investment operations............ 3.20 2.06 .00 .76 .41
----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment
income........................................ (.19) (.00) (.00) (.03) (.07)
Dividends to shareholders from net capital
gains......................................... (1.87) (.13) (.00) (.00) (2.30)
----- ----- ----- ----- -----
Total distributions......................... (2.06) (.13) (.00) (.03) (2.37)
----- ----- ----- ----- -----
Net asset value, end of period.................. $18.52 $17.38 $15.45 $15.45 $14.72
===== ===== ===== ===== =====
Total return.................................... 21.00% 13.48% 0.00% 5.20% 2.58%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 34,098 23,822 15,430 12,223 8,029
Ratios of expenses to average net assets
(annualized)(1)............................... .68% .76% .86% .90% .90%
Ratios of net investment income to average net
assets (annualized)........................... 1.14% 1.32% (.10)% (.07)% .37%
Portfolio turnover.............................. 47% 89% 60% 60% 18%
Average commission rate(2)...................... $0.0600 N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to financial statements.

F-37
<PAGE> 173

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued

- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:

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

<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92
TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 12.86 $11.63 $11.87 $ 9.00 $ 9.74
------- ------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .11 .16 .05 .06 .08
Net realized and unrealized gain (loss) on
investments................................... 1.23 1.45 (.02) 3.09 (.81)
------- ------- ------- ------ ------
Total from investment operations............ 1.34 1.61 .03 3.15 (.73)
------- ------- ------- ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment
income........................................ (.16) (.07) (.03) (.08) (.00)
Dividends to shareholders from net capital
gains......................................... (.63) (.31) (.24) (.20) (.01)
------- ------- ------- ------ ------
Total distributions......................... (.79) (.38) (.27) (.28) (.01)
------- ------- ------- ------ ------
Net asset value, end of period.................. $ 13.41 $12.86 $11.63 $11.87 $ 9.00
======= ======= ======= ====== ======
Total return.................................... 10.89% 14.31% .26% 36.11% (7.30)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 50,955 36,642 26,212 13,682 6,727
Ratios of expenses to average net assets
(annualized)(1)............................... 1.05% 1.15% 1.32% 1.50% 1.50%
Ratios of net investment income to average net
assets (annualized)........................... .98% 1.21% .72% .68% 1.05%
Portfolio turnover.............................. 35% 45% 32% 37% 35%
Average commission rate(2)...................... $0.0376 N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to financial statements.

F-38
<PAGE> 174

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued

- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:

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

<TABLE>
<CAPTION>
COMMON STOCK
PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
03/18/96(2)
TO
12/31/96
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period............................................................... $10.00
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.............................................................................. .15
Net realized and unrealized gain (loss) on investments............................................. 1.26
--------
Total from investment operations............................................................... 1.41
--------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income............................................... (.10)
Dividends to shareholders from net capital gains................................................... (.00)
--------
Total distributions............................................................................ (.10)
--------
Net asset value, end of period..................................................................... $11.31
========
Total return....................................................................................... 14.22%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................................................................... 6,565
Ratios of expenses to average net assets (annualized)(1)........................................... .80%
Ratios of net investment income to average net assets (annualized)................................. 1.82%
Portfolio turnover................................................................................. 13%
Average commission rate(4)......................................................................... $0.0600
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

3. Total returns for periods less than one year are not annualized.

See accompanying notes to financial statements.

F-39
<PAGE> 175

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Concluded

- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:

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

<TABLE>
<CAPTION>
SENTINEL
GROWTH
PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
03/18/96(2)
TO
12/31/96
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period.............................................................. $10.00
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................................................................. .05
Net realized and unrealized gain (loss) on investments............................................ 1.09
------
Total from investment operations.............................................................. 1.14
------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income.............................................. (.00)
Dividends to shareholders from net capital gains.................................................. (.00)
------
Total distributions........................................................................... (.00)
------
Net asset value, end of period.................................................................... $ 11.14
======
Total return...................................................................................... 11.40%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000).................................................................. 5,664
Ratios of expenses to average net assets (annualized)(1).......................................... .90%
Ratios of net investment income to average net assets (annualized)................................ .57%
Portfolio turnover................................................................................ 75%
Average commission rate(4)........................................................................ $0.0594
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

3. Total returns for periods less than one year are not annualized.

See accompanying notes to financial statements.

F-40
<PAGE> 176

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1996

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

1. ORGANIZATION

All shares of the series are held by the separate accounts of the previously
listed insurance companies.

2. ACCOUNTING POLICIES

Valuation of Investments

Investments

Foreign Currency Translations

Foreign currency amounts are translated into U.S. Dollars on the following
bases:

(i) Market value of investment securities, assets and liabilities, at the
daily rate of exchange;

(ii) Purchases and sales of investment securities, at the rate of exchange
prevailing on the respective dates of such transactions. Exchange gains or
losses are recognized upon settlement;

F-41
<PAGE> 177

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1996 -- Continued

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

(iii) Income and expenses, at the rate of exchange prevailing on the
respective dates of such transactions. Exchange gains or losses are
recognized upon ultimate receipt or disbursement.

Dividends to Shareholders

Federal Income Taxes

3. INVESTMENT ADVISORY FEES AND RELATED PARTY TRANSACTIONS

F-42
<PAGE> 178

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1996 -- Continued

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

4. NET ASSETS

At December 31, 1996, the Portfolios' net assets consisted of:

<TABLE>
<CAPTION>
MONEY
GROWTH MARKET BOND MANAGED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net contribution from shareholders...................................... $147,821,063 $54,196,724 $16,808,869 $35,731,816
Undistributed net investment income..................................... 1,231,153 -- 267,713 384,437
Undistributed net realized gain......................................... 23,067,603 -- -- 344,551
Accumulated loss on investment transactions............................. -- -- (173,902) --
Net unrealized appreciation (depreciation) on investments and foreign
currencies............................................................. 26,828,247 -- 184,198 6,970,366
------------ ----------- ----------- -----------
$198,948,066 $54,196,724 $17,086,878 $43,431,170
============ =========== =========== ===========

<CAPTION>
AGGRESSIVE
GROWTH INTERNATIONAL
PORTFOLIO PORTFOLIO
-----------------------------------------------------------------
<S> <C> <C>
Net contribution from shareholders...................................... $27,522,132 $43,666,216
Undistributed net investment income..................................... 326,522 427,579
Undistributed net realized gain......................................... 64,760 3,347,494
Accumulated loss on investment transactions............................. -- --
Net unrealized appreciation (depreciation) on investments and foreign
currencies............................................................. 6,184,868 3,513,834
----------- -----------
$34,098,282 $50,955,123
=========== ===========
</TABLE>

F-43
<PAGE> 179

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1996 -- Continued

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

5. PURCHASES AND SALES OF INVESTMENTS (EXCLUDING SHORT-TERM SECURITIES)

Purchases and proceeds on sales of investments for the portfolios, for the year
ended December 31, 1996, were as follows:

<TABLE>
<CAPTION>
MONEY
GROWTH MARKET BOND MANAGED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PURCHASES
U.S. Gov't Obligations.................................................. $ -- $ -- $ 9,780,303 $21,429,591
Corporate Bonds......................................................... -- -- 12,202,946 12,716,773
Common Stock............................................................ 145,646,451 -- -- 4,716,407
------------ ----------- ----------- -----------
Total Purchases......................................................... $145,646,451 $ -- $21,983,249 $38,862,771
============ =========== =========== ===========
SALES
U.S. Gov't Obligations.................................................. $ -- $ -- $ 6,002,543 $22,513,655
Corporate Bonds......................................................... -- -- 13,102,207 11,189,673
Common Stock............................................................ 121,462,900 -- -- 3,965,454
------------ ----------- ----------- -----------
Total Sales............................................................. $121,462,900 $ -- $19,104,750 $37,668,782
============ =========== =========== ===========

<CAPTION>
AGGRESSIVE
GROWTH INTERNATIONAL
PORTFOLIO PORTFOLIO
-----------------------------------------------------------------
<S> <C> <C>
PURCHASES
U.S. Gov't Obligations.................................................. $ -- $ --
Corporate Bonds......................................................... --
Common Stock............................................................ 15,535,506 23,195,109
----------- -----------
Total Purchases......................................................... $15,535,506 $23,195,109
=========== ===========
SALES
U.S. Gov't Obligations.................................................. $ -- $ --
Corporate Bonds......................................................... -- --
Common Stock............................................................ 11,011,877 14,179,229
----------- -----------
Total Sales............................................................. $11,011,877 $14,179,229
=========== ===========
</TABLE>

6. TAX BASIS OF INVESTMENTS

Investment information based on the cost of the securities for Federal income
tax purposes held at December 31, 1996 is as follows:

<TABLE>
<CAPTION>
MONEY
GROWTH MARKET BOND MANAGED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate gross unrealized appreciation................................. $ 28,595,431 $ -- $ 229,836 $ 7,236,888
Aggregate gross unrealized depreciation................................. (1,767,184) -- (45,638) (266,522)
------------ ----------- ----------- -----------
Net unrealized appreciation (depreciation).............................. $ 26,828,247 $ -- $ 184,198 $ 6,970,366
============ =========== =========== ===========
Aggregate cost of securities for federal income tax purposes............ $171,644,227.. $54,440,564 $16,596,014 $36,086,018
============ =========== =========== ===========
Capital loss carryover (available to offset possible future capital
gains.) The carryover expires as follows: Bond Portfolio--$48,885 in
2002; $125,017 in 2004; Common Stock Portfolio $22,148 in 2004......... $ -- $ -- $ (173,902) $ --
============ =========== =========== ===========

<CAPTION>
AGGRESSIVE
GROWTH INTERNATIONAL
PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------
<S> <C> <C>
Aggregate gross unrealized appreciation................................. $ 6,801,232 $ 5,977,111
Aggregate gross unrealized depreciation................................. (616,364) (2,463,287)
----------- -----------
Net unrealized appreciation (depreciation).............................. $ 6,184,868 $ 3,513,824
=========== ===========
Aggregate cost of securities for federal income tax purposes............ $27,924,846 $45,772,186
=========== ===========
Capital loss carryover (available to offset possible future capital
gains.) The carryover expires as follows: Bond Portfolio--$48,885 in
2002; $125,017 in 2004; Common Stock Portfolio $22,148 in 2004......... $ -- $ --
=========== ===========
</TABLE>

F-44
<PAGE> 180

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1996 -- Continued

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

7. AUTHORIZED CAPITAL STOCK AND CAPITAL STOCK TRANSACTIONS

<CAPTION>
MANAGED PORTFOLIO

Net contributions from affiliated insurance companies........ 470,230 $ 7,631,188 950,091 $11,991,902 580,267
========= =========== =========== =========== ========

<CAPTION>
SENTINEL GROWTH
PORTFOLIO

Transactions in capital stock for the year ended December 31, 1995 were as
follows:

(1) The Common Stock and Sentinel Growth Portfolios commenced operations on
03/18/96.

F-45
<PAGE> 181

- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1996 -- Concluded

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

8. PRINCIPAL UNDERWRITER

9. SUBSEQUENT DIVIDEND

F-46
<PAGE> 182

APPENDIX A

DESCRIPTION OF MONEY MARKET INSTRUMENTS AND
COMMERCIAL PAPER AND BOND RATINGS

PERMITTED INVESTMENTS OF THE MONEY MARKET ACCOUNT

Commercial Paper--refers to promissory notes issued by corporations to
finance their short-term credit needs.

Corporate Obligations--include bonds and notes issued by corporations in
order to finance longer term credit needs.

COMMERCIAL PAPER RATINGS

A-1
<PAGE> 183

CORPORATE BOND RATINGS

Moody's Investors Service, Inc. describes its five highest ratings for
corporate bonds as follows:

Standard & Poor's Corporation describes its ratings for corporate bonds as
follows:

AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.

A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

A-2
<PAGE> 184

are more likely to lead to a weakened capacity to pay principal and interest for
bonds in this category than for bonds in the A category.

A-3
<PAGE> 185

PART C. OTHER INFORMATION

ITEM 24. Financial Statements and Exhibits

(a) Financial Statements.

The following financial statements are filed as part of this Registration
Statement:

Included in Part A--Prospectus of the Registration Statement:

Financial Highlights

Included in Part B--Statement of Additional Information of the Registration
Statement:

Report of Independent Accountants
Schedule of Investments as of December 31, 1996
Statements of Assets and Liabilities, December 31, 1996
Statements of Operations for the Year Ended December 31, 1996
Statements of Changes in Net Assets for the Year Ended December 31, 1996
Statements of Changes in Net Assets for the Year Ended December 31, 1995
Notes to Financial Statements, December 31, 1996

(b) Exhibits

The following exhibits are filed herewith:

<TABLE>
<S> <C>
1.a. Articles of Incorporation of the Market Street Fund, Inc. (the "Fund")(1)
1.b. Articles Supplementary(2)
1.c. Articles Supplementary(3)
2.a. By-Laws of the Fund(1)
2.b. Amendment to By-Laws(2)
3. Inapplicable
4. Form of Certificate for Shares of Common Stock of the Fund(4)
5.a. Investment Advisory Agreement between the Fund and Newbold's Asset Management,
Inc.(5)
5.b. Investment Advisory Agreement between the Fund and Providentmutual Investment
Management Company(2)
5.c. Investment Advisory Agreement between the Fund and Sentinel Advisors Company(10)
5.d. Investment Advisory Agreement between the Fund and Providentmutual Investment
Management Company (PIMC) with respect to International Portfolio(3)
5.e. Investment Sub-Advisory Agreement between PIMC and The Boston Company Asset
Management, Inc.(10)
5.f. Amendment to Investment Advisory Agreement between the Fund and Sentinel Advisors
Company(11)
5.g. Amendment to Investment Advisory Agreement between the Fund and Sentinel Advisors
Company(12)
5.h. Investment Advisory Agreement between the Fund and Sentinel Advisors Company
respecting the Growth Portfolio.
6.a. Distribution Agreement between the Fund and PML Securities Company(6)
6.b. Amendments to Distribution Agreement between the Fund and PML Securities Company(2)
6.c. Amendment to Distribution Agreement between the Fund and PML Securities Company(3)
7. Inapplicable
8.a. Custodian Agreement between the Fund and Provident National Bank(7)
8.b. Amendment to Custodian Agreement between the Fund and Provident National Bank(2)
8.c. Amendment to Custodian Agreement between the Fund and Provident National Bank(3)
8.d. Amendment to Custodian Agreement between the Fund and Provident National Bank(11)
9.a. Agreement and Plan of Reorganization among PVLICO, Providentmutual Variable Life
Growth Account, Providentmutual Variable Life Money Market Account, Providentmutual
Variable Life Bond Account and the Fund(1)
</TABLE>

C-1
<PAGE> 186

<TABLE>
<S> <C>
9.b. Reimbursement Agreement between Provident Mutual Life Insurance Company of
Philadelphia and the Fund(3)
9.c. Administration Agreement between the Fund and Provident Institutional Management
Corporation(7)
9.d. Amendment to Administration Agreement between the Fund and Provident Financial
Processing Corporation (PFPC)(2)
9.e. Amendment to Administration Agreement between the Fund and PFPC(2)
9.f. Amendment to Administration Agreement between the Fund and PFPC(11)
9.g. Transfer Agency Agreement between the Fund and PFPC, as amended(2)
9.h. Amendment to Transfer Agency Agreement between the Fund and PFPC(11)
9.i.(1) Participation Agreement among Market Street Fund, Inc. Provident Mutual Life
Insurance Company and PML Securities Company(9)
9.i.(2) Participation Agreement among Market Street Fund, Inc., Providentmutual Life and
Annuity Company of America and PML Securities Company (8)
9.i.(3) Participation Agreement among Market Street Fund, Inc., National Life Insurance
Company and PML Securities Company(11)
10. Opinion and Consent of Adam Scaramella, Esquire
11.a. Consent of Sutherland, Asbill & Brennan, L.L.P.
11.b. Consent of Coopers & Lybrand, L.L.P.
12. Inapplicable
13.a. See Number 9.a. above
13.b. Investment Letter from National Life Insurance Company(12)
14. Inapplicable
15. Inapplicable
16. Inapplicable
17. Financial Data Schedule
18. Inapplicable
</TABLE>

- ---------------
(1) Incorporated herein by reference to the initial Form N-1A Registration
Statement of the Market Street Fund, Inc., File No. 2-98755, filed on July
1, 1985.
(2) Incorporated herein by reference to Post-Effective Amendment No. 4 filed on
March 2, 1989, File No. 2-98755.
(3) Incorporated herein by reference to Post-Effective Amendment No. 7 filed on
August 30, 1991, File No. 2-98755.
(4) Incorporated herein by reference to Pre-Effective Amendment No. 2 filed on
December 16, 1985, File No. 2-98755.
(5) Incorporated herein by reference to Post-Effective Amendment No. 6 filed on
May 1, 1991, File No. 2-98755.
(6) Incorporated herein by reference to Pre-Effective Amendment No. 1 filed on
November 19, 1985, File No. 2-98755.
(7) Incorporated herein by reference to Post-Effective Amendment No. 1 filed on
May 1, 1986, File No. 2-98755.
(8) Incorporated herein by reference to Post-Effective Amendment No. 8 filed on
May 1, 1992, File No. 2-98755.
(9) Incorporated herein by reference to Post-Effective Amendment No. 8 to Form
S-6 Registration Statement filed on May 1, 1992, File No. 33-2625.
(10) Incorporated herein by reference to Post-Effective Amendment No. 11 filed
on April 28, 1995, File No. 2-98755.
(11) Incorporated herein by reference to Post-Effective Amendment No. 13 filed
on February 28, 1996, File No. 2-98755.

(12) Incorporated herein by reference to Post-Effective Amendment No. 14 filed
on March 19, 1996, File No. 2-98755.

C-2
<PAGE> 187

ITEM 25. Persons Controlled by or Under Common Control with Registrant

Currently, shares of the Fund are sold to separate accounts of Provident
Mutual Life Insurance Company ("Provident Mutual"), Providentmutual Life and
Annuity Company of America ("PLACA") and National Life Insurance Company
("NLIC") to fund the benefits under certain variable life insurance policies and
variable annuity contracts issued or assumed by Provident Mutual or PLACA and
variable life insurance policies issued by NLIC.

No person has the direct or indirect power to control Provident Mutual or
NLIC except insofar as he or she may have such power by virtue of his or her
capacity as a director or executive officer thereof. As mutual life insurance
companies, Provident Mutual and NLIC have no stockholders. Their Boards of
Directors are elected by the Policyholders. PLACA is a wholly-owned subsidiary
of Provident Mutual.

Set forth below is a diagram of persons controlled by or under common
control with the Registrant.*

ITEM 26. Number of Holders of Securities

<TABLE>
<CAPTION>
NUMBER OF RECORD
TITLE OF CLASS HOLDERS AS OF DECEMBER 31, 1995
------------------------------ -------------------------------
<S> <C>
Growth Portfolio............................................ 4
Money Market Portfolio...................................... 5
Bond Portfolio.............................................. 5
Managed Portfolio........................................... 5
Aggressive Growth Portfolio................................. 5
International Portfolio..................................... 5
Sentinel Growth Portfolio................................... 2
Common Stock Portfolio...................................... 2
</TABLE>

ITEM 27. Indemnification

Under Section 2-418 of the Maryland General Corporation Law, with respect
to any proceedings against a present or former director, officer, agent or
employee ("corporate representative") of the registrant, except a proceeding
brought by or on behalf of the registrant, the registrant may indemnify the
corporate representative against expenses, including attorneys' fees and
judgments, fines, and amounts paid in settlement actually and reasonably
incurred by the corporate representative in connection with the proceeding, if:
(i) he acted in good faith and in a manner he reasonably believed to be in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the registrant; and (ii) with respect to any criminal proceeding,
he had no reasonable cause to believe his conduct was unlawful. The registrant
is also authorized under section 2-418 of the Maryland General Corporation Law
to indemnify a corporate representative under certain circumstances against
expenses incurred in connection with the defense of a suit or action by or in
the right of the registrant.

The By-laws of the Fund (Exhibit (2) of this Registration Statement)
provide that the Fund may indemnify its corporate representatives in a manner
that is consistent with the laws of the State of Maryland. The By-laws preclude
indemnification for "disabling conduct" (willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of
office) and sets forth reasonable and fair means for determining whether
indemnification shall be made.

See item 32(c) for information regarding indemnification for liabilities
arising under the Securities Act of 1933.

ITEM 28. Business and Other Connections of Investment Adviser

The directors and officers of Providentmutual Investment Management Company
(PIMC) also serve as officers of Provident Mutual.

C-3
<PAGE> 188

ITEM 29. Principal Underwriters

a. 1717 Capital Management Company (formerly PML Securities Company) is
principal underwriter for the Fund.

b. Set forth below is certain information regarding the directors and
officers of 1717, the principal underwriter to the Fund. Unless otherwise
stated, the business address of the persons whose names appear below is
Christiana Executive Campus, P.O. Box 15626, Wilmington, Delaware 19850.

<TABLE>
<CAPTION>
(2) (3)
(1) POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
NAME PRINCIPAL UNDERWRITER WITH REGISTRANT
- ------------------------------ -------------------------- ---------------------------------
<S> <C> <C>
Stanley R. Reber*............. Director Chairman, President and Chief
Executive Officer
Alan F. Hinkle*............... Director None
Robert W. Kloss*.............. Director None
J. Keven McCarthy*............ Director None
Joan C. Turnbull**............ Director None
Lance A. Reihl***............. President None
Anthony G. Mastrangelo*....... Financial Officer None
Adam Scaramella*.............. Legal Officer & Secretary Secretary
Rosanne Gatta*................ Treasurer Treasurer and Comptroller
William P. Loesche*........... Assistant Secretary None
</TABLE>

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

* 1050 Westlakes Drive, Berwyn, PA 19312
** 300 Continental Drive, Newark, DE 19713
*** 220 Continental Drive, Newark, DE 19713.

ITEM 30. Location of Accounts and Records

The records required to be maintained by Section 31(a) of the Investment
Company Act of 1940 and Rules 31a-1 to 31a-3 promulgated thereunder, are
maintained by the Fund and Providentmutual Investment Management Company at 103
Bellevue Parkway, Wilmington, DE 19809, by Newbold's Asset Management, Inc. at
937 Haverford Road, Bryn Mawr, Pennsylvania 19010, by Sentinel Advisors Company
at National Life Drive, Montpelier, Vermont 05604, by Provident National Bank at
Broad & Chestnut Streets, Philadelphia, Pennsylvania 19101, or by PFPC at 103
Bellevue Parkway, Wilmington, Delaware 19809, or for the International Portfolio
by Citibank, N.A. 111 Wall Street, New York, New York 10043.

ITEM 31. Management Services

Inapplicable.

ITEM 32. Undertakings

a. Inapplicable.

b. Inapplicable.

c. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any such action, suit or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

d. Insofar as any information required to be provided is contained in the
Fund's latest annual report, the Fund hereby undertakes to furnish each person
to whom a prospectus is delivered with a copy of such annual report, upon
request and without charge.

C-4
<PAGE> 189

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT IT MEETS ALL OF
THE REQUIREMENTS FOR EFFECTIVENESS OF THIS REGISTRATION STATEMENT PURSUANT TO
RULE 485(B) UNDER THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF BERWYN, COMMONWEALTH OF PENNSYLVANIA ON THIS
TH DAY OF APRIL 1997.

MARKET STREET FUND, INC.

BY: /S/ STANLEY R. REBER

--------------------------------------
STANLEY R. REBER
PRESIDENT

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------------------------------
<C> <S> <C>
/s/ STANLEY R. REBER Chairman and President April , 1997
- --------------------------------------------- (Principal Executive
STANLEY R. REBER Officer)

/s/ ROSANNE GATTA Treasurer and Comptroller April , 1997
- --------------------------------------------- (Principal Financial and
ROSANNE GATTA Accounting Officer)

/s/ ALAN GART Director April , 1997
- ---------------------------------------------
ALAN GART

/s/ A. GILBERT HEEBNER Director April , 1997
- ---------------------------------------------
A. GILBERT HEEBNER

/s/ EDWARD S. STOUCH Director April , 1997
- ---------------------------------------------
EDWARD S. STOUCH
</TABLE>

C-5
<PAGE> 190

EXHIBIT INDEX

<TABLE>
<S> <C>
5.h. Investment Advisory Agreement between the Fund and Sentinel Advisors Company
respecting the Growth Portfolio
10. Opinion and Consent of Adam Scaramella, Esquire
11.a. Consent of Sutherland, Asbill & Brennan, L.L.P.
11.b. Consent of Coopers & Lybrand, L.L.P.
17. Financial Data Schedule
</TABLE>

<PAGE> 1

EXHIBIT 5H
INVESTMENT ADVISORY AGREEMENT

AGREEMENT, dated as of May 1, 1997, between Market Street Fund, Inc. (the
"Fund"), a corporation organized under the laws of the State of Maryland, and
Sentinel Advisors Company (the "Adviser"), a Vermont general partnership.

WHEREAS, the Fund is a registered investment company under the Investment
Company Act of 1940 ("Investment Company Act") and maintains several investment
portfolios for the use of the Fund's shareholders which are separate accounts
established and maintained by insurance companies;

WHEREAS, the Growth Portfolio of the Fund has the current objective of
achieving intermediate and long-term growth of capital; with a reasonable level
of income being an important objective but not the primary objective;

WHEREAS, the Fund desires that Sentinel Advisors Company act as investment
adviser with respect to the Growth Portfolio;

WHEREAS, the Investment Company Act prohibits any person from acting as an
investment advisor to an investment company except pursuant to a written
agreement;

WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act");

NOW, THEREFORE, the Fund and the Adviser hereby agree as follows:

1. At its own expense and subject to supervision of the Board of
Directors of the Fund (the "Directors"), the Adviser will provide
investment advisory services with respect to the Fund's Growth Portfolio
(the "Portfolio") in accordance with the Portfolio's investment
objectives, policies and restrictions as stated in the Fund's
Prospectus, as from time to time in effect, the Articles of
Incorporation and By-laws of the Fund, and the Investment Company Act
and appropriate State Insurance Laws, each as amended from time to time.
The Adviser agrees to furnish the services described below for the
compensation provided by this Agreement. The Adviser shall for all
purposes herein be deemed to be an independent contractor and shall,
unless otherwise expressly provided or authorized, have no authority to
act for or represent the Fund in any way, or otherwise be deemed an
agent of the Fund.

2. In connection with its obligations hereunder, the Adviser shall,
subject to supervision by the Directors, manage the investment and
reinvestment of the assets of the Portfolio. Subject to the limitations
set forth in Paragraph 1 above, the Adviser shall:

(a) perform research and obtain and evaluate pertinent economic,
statistical, and financial data relevant to the investment policies
of the Portfolio as set forth in the Fund's prospectus, as amended
from time to time;

(b) consult with the Directors and furnish to the Directors
recommendations with respect to an overall investment plan and any
changes thereto for the Portfolio for approval, modification, or
rejection by the Directors;

(d) take such steps as are necessary to implement any overall
investment plan approved by the Directors, including making and
carrying out decisions to acquire or dispose of permissible
investments, management of investments and any other property of the
Portfolio, and providing or obtaining such services as may be
necessary in managing, acquiring or disposing of investments; and

(e) determine the composition of the assets of the Portfolio, including
the purchase, retention or sale of the securities and cash contained
in the Portfolio.

1
<PAGE> 2

3. The Adviser shall effect all purchases and sales of investments for
the Portfolio in a manner consistent with the limitations set forth in
Paragraph 1 above.

4. The Adviser shall regularly report to the Directors with respect to
the implementation of any approved overall investment plan and any other
activities in connection with management of the assets of the Portfolio.
The Adviser, either through persons employed by it or at its own
expense, shall furnish to the Directors, at least once every three
months, a schedule of the investments and other assets held in each
Portfolio and a statement of all purchases and sales for each Portfolio
made since the last report.

5. The Adviser shall maintain all accounts, records, memoranda,
instructions, or authorizations relating to the acquisition or
disposition of investments for the Portfolio as required by law.

The Adviser agrees that all accounts and records which it maintains for
the Fund's Portfolio shall be the property of the Fund and that it will
surrender promptly to the designated officers of the Fund, or to the
Directors, any or all such accounts and records upon request. The Fund
or its authorized representative shall have the right to copy any
records in the possession of the Adviser which pertain to the Portfolio.
The Adviser further agrees to preserve for the period prescribed by the
rules and regulations of the Securities and Exchange Commission all such
records as are required to be maintained pursuant to said rules. The
Adviser also agrees that it will maintain all records and accounts
regarding the investment activities of the Portfolios in a confidential
manner. All such accounts or records shall be made available, within
five (5) business days of a written request, to the Fund's accountants
or auditors during regular business hours at the Adviser's offices. In
addition, the Adviser will provide any materials, reasonably related to
the investment advisory services provided hereunder, as may be
reasonably requested in writing by the Directors, or as may be required
by any governmental agency having jurisdiction over the Fund or any
insurance companies investing in the Fund.

6. (a) For the services provided to the Portfolio, the Adviser will be
compensated monthly in arrears at the effective annual rate of 0.50%
of the first $20 million of the average daily net assets of the
Portfolio, 0.40% of the next $20 million of the average daily net
assets of the Portfolio, and 0.30% of the average daily net assets
of the Portfolio in excess of $40 million.

(b) If this Agreement is terminated at any time, any compensation owed
the Adviser pursuant to subparagraph (a) above shall be payable upon
the date of termination of this Agreement.

7. The Adviser shall be responsible for all expenses incurred in
performing the investment advisory services herein set forth, including
costs of compensating and furnishing office space for officers and
employees of the Adviser connected with investment and economic
research, trading and investment management of the Portfolio. All
brokers' commissions, transfer taxes and other fees relating to
purchases and sales of investments shall be paid out of assets allocated
to the Portfolio.

8. The Adviser shall, subject to the supervision of the Directors,
arrange for the placement of orders for the Portfolio, either directly
with the issuer, with any broker-dealer or underwriter that specializes
in the securities for which the order is made, or with any other broker
or dealer selected by the Adviser, subject to the following limitation;
the Adviser shall use its best judgment to choose brokers who will
obtain the best prices and executions and securities transactions and
whose commissions are most reasonable. In addition to seeking the best
price and execution, the Adviser may also take into consideration
research and statistical information and wire and other quotation
services provided to the Adviser. However, the Adviser shall select only
brokers whose commissions it believes are reasonable. The Adviser will
periodically evaluate the statistical data, research and other
investment services provided by brokers and dealers to it. Such services
may be used by the Adviser in connection with the performance of its
obligations under this Agreement or in connection with other advisory or
investment operations.

2
<PAGE> 3

9. The Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Portfolio in connection with the
subject matter of this Agreement unless such loss arises from willful
misfeasance on its part in the performance of its obligations and duties
or by reason of its reckless disregard of its obligations and duties
under this Agreement.

10. The Adviser and any affiliate of the Adviser may engage in any other
business or act as adviser to or investment manager of any other person,
even though the Adviser, any affiliate of the Adviser, or any such other
person has or may have investment policies similar to those for the
Portfolio, so long as the Adviser's services under this Agreement are
not impaired. It is understood that directors, officers, employees and
shareholders of the Fund are or may become interested in the Adviser, as
directors, officers, employees, shareholders or otherwise and that
directors, officers, employees and shareholders of the Adviser are or
may become similarly interested in the Fund, and that the Adviser may
become interested in the Fund; and that the existence of any such dual
interest shall not affect the validity hereof or any transaction
hereunder except as otherwise provided in the Articles of Incorporation
or By-laws of the Fund and the Adviser, respectively, or by specific
provisions of applicable law.

It is agreed that the Adviser or its affiliates may use any investment
research obtained for the benefit of the Portfolio in providing
investment advice to its other investment advisory accounts or for use
in managing their own accounts. Conversely, such supplemental
information obtained by the placement of business for the Adviser or the
entities advised by the Adviser may be considered by and may be useful
to the Adviser in carrying out its obligations to the Portfolio.

Nothing herein contained shall prevent the Adviser or any affiliate of
the Adviser from buying or selling, or from recommending or directing
any other person to buy or sell, at any time, securities of the same
kind or class recommended by the Adviser to be purchased or sold for the
Portfolio. When the Adviser deems the purchase or sale of a security to
be in the best interests of any of the Portfolio as well as other
accounts or companies, it may, to the extent permitted by applicable
laws and regulations, but will not be obligated to, aggregate the
securities to be sold or purchased for such Portfolio with those to be
sold or purchased for other accounts or companies in order to obtain
favorable execution and low brokerage commissions. In that event,
allocation of the securities purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Adviser in the manner
it considers to be most equitable and consistent with its fiduciary
obligations to the Portfolio and to such other accounts or companies.
The Fund recognizes that in some cases this procedure may adversely
affect the size of the position obtainable for the Portfolio.

11. This Agreement shall not be effective unless and until it is approved
by the Directors, including a majority of the Directors who are not
"interested persons" (as defined in the Investment Company Act), by vote
cast in person at a meeting called for the purpose of voting such
approval and by the parties to this Agreement. This Agreement shall come
into full force and effect on May 1, 1997, or upon the effectiveness of
the amendment to the Fund's Registration Statement reflecting this
Agreement filed with the Securities and Exchange Commission under the
Securities Act of 1933, whichever is later, provided this Agreement
shall have been approved by a vote of the "majority" (as defined in the
Investment Company Act) of the outstanding shares of the Portfolio.

12. This Agreement shall continue until December 31, 1998 and thereafter
for successive annual periods ending December 31, of each year, provided
such continuance is specifically approved at least annually by (i) the
Directors or (ii) by the vote of a "majority" of the shareholders of the
Portfolio as set forth in paragraph 11 above, provided that in either
event the continuance is also approved by a majority of the Directors
who are not "interested persons" (as defined in the Investment Company
Act) of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting such approval. The Fund agrees that it
will notify the Adviser in writing each year of such annual approval.

13. (a) This Agreement shall terminate automatically in the event of its
assignment.

3
<PAGE> 4

(b) This Agreement may be terminated at any time without the payment of
any penalty, (i) by a majority of the Directors for cause or upon
sixty days written notice addressed to the Adviser or (ii) by a vote
of a "majority" of the shareholders as set forth in paragraph 11
above, or (iii) by the Adviser on sixty days written notice
addressed to the Fund at its principal place of business. Cause is
defined and limited for this purpose to mean willful misfeasance by
the Adviser in the performance of its duties or reckless disregard
by the Adviser of its obligations and duties under this agreement.

14. This Agreement shall be construed in accordance with Pennsylvania law.

15. The Fund understands that the Adviser now acts, will continue to act,
or may act in the future, as investment adviser to fiduciary and other
managed accounts including other investment companies, and the Fund has
no objection to the Adviser's so acting, provided that the Adviser duly
performs all obligations under this Agreement.

16. The Fund understands that the persons employed by the Adviser to assist
in the performance of its duties hereunder will not devote their full
time to such service and nothing contained herein shall be deemed to
limit or restrict the right of the Adviser or any of its affiliates to
engage in and devote time and attention to other businesses or to render
services of whatever kind or nature, provided that the Adviser duly
performs all obligations under this Agreement.

17. This Agreement shall be subject to the provisions of the Investment
Company Act and the Investment Advisers Act and the rules, regulations,
and rulings thereunder, as from time to time in effect, including such
exemptions therefrom as the Securities and Exchange Commission may
grant. The terms used in this Investment Advisory Agreement, and any
amendment thereof, shall be interpreted and construed in accordance
therewith. Without limiting the generality of the foregoing, the term
"assignment" shall not include any transaction exempted from section
15(a)(4) of the Investment Company Act by an order of the Securities and
Exchange Commission.

18. The Adviser shall submit to all regulatory and administrative bodies
having jurisdiction over the operations of Provident Mutual Life
Insurance Company of Philadelphia, Providentmutual Life and Annuity
Company of America, National Life Insurance Company or the Fund, present
or future, any materials reasonably related to the investment advisory
services provided hereunder, as may be

<PAGE> 1
- --------------------------------------------------------------------------------
MARKET STREET FUND, INC.
1050 Westlakes Drive, Berwyn, PA 19312-2419
Telephone (610) 407-1717, Fax (610) 407-1438
- --------------------------------------------------------------------------------

EXHIBIT 10

April 15, 1997

Market Street Fund, Inc.
1050 Westlakes Drive
Berwyn, PA 19312

Re: Market Street Fund, Inc., Post-Effective
Amendment No. 16, File No. 2-98755

Dear Sirs/Madames:

This opinion is furnished in connection with the filing of Post-Effective
Amendment No. 16 to the Registration Statement on Form N-1A ("Registration
Statement"), File No. 2-98755, under the Securities Act of 1933, as amended.

I have served as counsel to the Market Street Fund, Inc., a Maryland
corporation, (the "Company") in connection with the Registration Statement with
respect to the registration of an indefinite number of its shares of capital
stock, par value $0.01 per share (the "Shares"), to be offered as set forth in
the Prospectus contained therein. In such connection I have reviewed originals
or copies, certified or otherwise identified to my satisfaction, of the
appropriate minutes of the meetings of the Board of Directors of the Company,
the Articles of Incorporation and By-Laws and any amendments thereto, and
pertinent agreements of the Company and such the documents and records as I
deem appropriate or necessary.

In my opinion, the Company is a corporation duly and validly organized under
the laws of Maryland, and the Shares will, when issued pursuant to the
Prospectus, be legally issued, fully paid and non-assessable.

I consent to the reference to my name under the caption "Legal Matters" in the
Statement of Additional Information filed as part of the Post-Effective
Amendment and to the filing of this opinion as an exhibit thereto.

Very truly yours,

Adam Scaramella
Legal Officer
AS/ja

<PAGE> 1

[LETTERHEAD OF]

[SUTHERLAND, ASBILL & BRENNAN, L.L.P.]

April 24, 1997

Market Street Fund, Inc.

103 Bellevue Parkway

Wilmington, DE 19809

Gentlemen:

We hereby consent to the reference to our name under the caption "Legal
Matters" in the Statement of Additional Information filed as part of the
Post-Effective Amendment No. 16 to Form N-1A for Market Street Fund, Inc. (File
No. 2-98755). In giving this consent, we do not admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933.

Sincerely,

SUTHERLAND, ASBILL & BRENNAN, L.L.P.

By: /s/ Stephen E. Roth

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

Stephen E. Roth, Esq.

<PAGE> 1

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the following with respect to Post-Effective Amendment No. 16
to the Registration Statement (No. 2-98755) on Form N-1A under the Securities
Act of 1933, as amended and Amendment No. 17 under the Investment Company Act of
1940, as amended, respectively, of Market Street Fund, Inc.:

- The inclusion of our report dated January 31, 1997 on our audit of the
financial statements and financial highlights of Market Street Funds,
Inc. in the Statement of Additional Information.

- The incorporation by reference of our report dated January 31, 1997 into
the Prospectus.

- The reference to our Firm under the heading "Financial Highlights" in the
Prospectus and under the heading "Other Services-Independent Accountants"
in the Statement of Additional Information.

COOPERS & LYBRAND L.L.P.

2400 Eleven Penn Center
Philadelphia, Pennsylvania
April 24, 1997

<ARTICLE> 6
<CIK> 0000772034
<NAME> MARKET STREET FUND, INC.
<SERIES>
<NUMBER> 01
<NAME> THE GROWTH PORTFOLIO

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 171644227
<INVESTMENTS-AT-VALUE> 198472474
<RECEIVABLES> 590702
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 199063176
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 115110
<TOTAL-LIABILITIES> 115110
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 147821063
<SHARES-COMMON-STOCK> 10993074
<SHARES-COMMON-PRIOR> 9894999
<ACCUMULATED-NII-CURRENT> 1231153
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 23067603
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 26828247
<NET-ASSETS> 198948066
<DIVIDEND-INCOME> 5300131
<INTEREST-INCOME> 490581
<OTHER-INCOME> 0
<EXPENSES-NET> 772250
<NET-INVESTMENT-INCOME> 5018462
<REALIZED-GAINS-CURRENT> 23063427
<APPREC-INCREASE-CURRENT> 4147912
<NET-CHANGE-FROM-OPS> 32229801
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4995312
<DISTRIBUTIONS-OF-GAINS> 7732422
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1276805
<NUMBER-OF-SHARES-REDEEMED> 981738
<SHARES-REINVESTED> 803008
<NET-CHANGE-IN-ASSETS> 37049115
<ACCUMULATED-NII-PRIOR> 4474620
<ACCUMULATED-GAINS-PRIOR> 31873944
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 592350
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 775138
<AVERAGE-NET-ASSETS> 177450278
<PER-SHARE-NAV-BEGIN> 16.36
<PER-SHARE-NII> .46
<PER-SHARE-GAIN-APPREC> 2.54
<PER-SHARE-DIVIDEND> .48
<PER-SHARE-DISTRIBUTIONS> .78
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.10
<EXPENSE-RATIO> .44
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000772034
<NAME> MARKET STREET FUND, INC.
<SERIES>
<NUMBER> 02
<NAME> THE MONEY MARKET PORTFOLIO

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 54440564
<INVESTMENTS-AT-VALUE> 54440564
<RECEIVABLES> 18919
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 54459483
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 262759
<TOTAL-LIABILITIES> 262759
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 54196724
<SHARES-COMMON-STOCK> 54196724
<SHARES-COMMON-PRIOR> 34615152
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 54196724
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2467400
<OTHER-INCOME> 0
<EXPENSES-NET> 189422
<NET-INVESTMENT-INCOME> 2277978
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2277978
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2277978
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 82625391
<NUMBER-OF-SHARES-REDEEMED> 65247831
<SHARES-REINVESTED> 2204012
<NET-CHANGE-IN-ASSETS> 19581572
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 113183
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 189422
<AVERAGE-NET-ASSETS> 45273450
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .05
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .42
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000772034
<NAME> MARKET STREET FUND, INC.
<SERIES>
<NUMBER> 03
<NAME> THE BOND PORTFOLIO

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 16596014
<INVESTMENTS-AT-VALUE> 16780212
<RECEIVABLES> 318545
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 17098757
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11879
<TOTAL-LIABILITIES> 11879
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16808869
<SHARES-COMMON-STOCK> 1602086
<SHARES-COMMON-PRIOR> 1309787
<ACCUMULATED-NII-CURRENT> 267713
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (173902)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 184198
<NET-ASSETS> 17086878
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1012370
<OTHER-INCOME> 0
<EXPENSES-NET> 78146
<NET-INVESTMENT-INCOME> 934224
<REALIZED-GAINS-CURRENT> (125017)
<APPREC-INCREASE-CURRENT> (333487)
<NET-CHANGE-FROM-OPS> 475720
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 874882
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 382375
<NUMBER-OF-SHARES-REDEEMED> 173162
<SHARES-REINVESTED> 83086
<NET-CHANGE-IN-ASSETS> 2684523
<ACCUMULATED-NII-PRIOR> 776497
<ACCUMULATED-GAINS-PRIOR> (48885)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 54702
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 78146
<AVERAGE-NET-ASSETS> 15362019
<PER-SHARE-NAV-BEGIN> 11.00
<PER-SHARE-NII> .63
<PER-SHARE-GAIN-APPREC> (.34)
<PER-SHARE-DIVIDEND> .62
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.67
<EXPENSE-RATIO> .51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000772034
<NAME> MARKET STREET FUND INC.
<SERIES>
<NUMBER> 04
<NAME> THE MANAGED PORTFOLIO

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 36086018
<INVESTMENTS-AT-VALUE> 43056384
<RECEIVABLES> 403951
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 43460336
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29166
<TOTAL-LIABILITIES> 29166
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 35731816
<SHARES-COMMON-STOCK> 2957804
<SHARES-COMMON-PRIOR> 2537951
<ACCUMULATED-NII-CURRENT> 384437
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 344291
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6970366
<NET-ASSETS> 43413170
<DIVIDEND-INCOME> 507504
<INTEREST-INCOME> 1147909
<OTHER-INCOME> 0
<EXPENSES-NET> 209576
<NET-INVESTMENT-INCOME> 1445837
<REALIZED-GAINS-CURRENT> 344291
<APPREC-INCREASE-CURRENT> 2694823
<NET-CHANGE-FROM-OPS> 4484951
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1390871
<DISTRIBUTIONS-OF-GAINS> 1471361
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 506385
<NUMBER-OF-SHARES-REDEEMED> 296312
<SHARES-REINVESTED> 209781
<NET-CHANGE-IN-ASSETS> 7428804
<ACCUMULATED-NII-PRIOR> 1374276
<ACCUMULATED-GAINS-PRIOR> 5692917
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 157156
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 210725
<AVERAGE-NET-ASSETS> 39289015
<PER-SHARE-NAV-BEGIN> 14.19
<PER-SHARE-NII> .51
<PER-SHARE-GAIN-APPREC> 1.07
<PER-SHARE-DIVIDEND> .51
<PER-SHARE-DISTRIBUTIONS> .58
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.68
<EXPENSE-RATIO> .53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000772034
<NAME> MARKET STREET FUND, INC.
<SERIES>
<NUMBER> 05
<NAME> THE AGGRESSIVE GROWTH PORTFOLIO

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 27924846
<INVESTMENTS-AT-VALUE> 34109714
<RECEIVABLES> 37561
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 34147275
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 48993
<TOTAL-LIABILITIES> 48993
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 27522132
<SHARES-COMMON-STOCK> 10993074
<SHARES-COMMON-PRIOR> 1370597
<ACCUMULATED-NII-CURRENT> 326522
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 64760
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6184868
<NET-ASSETS> 34098282
<DIVIDEND-INCOME> 229723
<INTEREST-INCOME> 284384
<OTHER-INCOME> 0
<EXPENSES-NET> 187585
<NET-INVESTMENT-INCOME> 326522
<REALIZED-GAINS-CURRENT> 64760
<APPREC-INCREASE-CURRENT> 5078163
<NET-CHANGE-FROM-OPS> 5469445
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 255039
<DISTRIBUTIONS-OF-GAINS> 2569743
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 441008
<NUMBER-OF-SHARES-REDEEMED> 156497
<SHARES-REINVESTED> 185719
<NET-CHANGE-IN-ASSETS> 10275851
<ACCUMULATED-NII-PRIOR> 255039
<ACCUMULATED-GAINS-PRIOR> 2162916
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 134923
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 187585
<AVERAGE-NET-ASSETS> 28731060
<PER-SHARE-NAV-BEGIN> 17.38
<PER-SHARE-NII> .17
<PER-SHARE-GAIN-APPREC> 3.03
<PER-SHARE-DIVIDEND> .19
<PER-SHARE-DISTRIBUTIONS> 1.87
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.52
<EXPENSE-RATIO> .65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000772034
<NAME> MARKET STREET FUND, INC.
<SERIES>
<NUMBER> 06
<NAME> THE INTERNATIONAL PORTFOLIO

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 45772186
<INVESTMENTS-AT-VALUE> 49277215
<RECEIVABLES> 151529
<ASSETS-OTHER> 2378372
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 51807115
<PAYABLE-FOR-SECURITIES> 800751
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 51241
<TOTAL-LIABILITIES> 851992
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 43666216
<SHARES-COMMON-STOCK> 3800309
<SHARES-COMMON-PRIOR> 2850218
<ACCUMULATED-NII-CURRENT> 427579
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3347494
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3513834
<NET-ASSETS> 50955123
<DIVIDEND-INCOME> 782282
<INTEREST-INCOME> 129585
<OTHER-INCOME> 0
<EXPENSES-NET> 439461
<NET-INVESTMENT-INCOME> 427579
<REALIZED-GAINS-CURRENT> 3302667
<APPREC-INCREASE-CURRENT> 781570
<NET-CHANGE-FROM-OPS> 4556643
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 442343
<DISTRIBUTIONS-OF-GAINS> 1793161
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 987809
<NUMBER-OF-SHARES-REDEEMED> 218584
<SHARES-REINVESTED> 180866
<NET-CHANGE-IN-ASSETS> 14313041
<ACCUMULATED-NII-PRIOR> 385788
<ACCUMULATED-GAINS-PRIOR> 3872888
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 326164
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 451362
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 12.86
<PER-SHARE-NII> .11
<PER-SHARE-GAIN-APPREC> 1.23
<PER-SHARE-DIVIDEND> .16
<PER-SHARE-DISTRIBUTIONS> .63
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.41
<EXPENSE-RATIO> 1.01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000772034
<NAME> MARKET STREET FUND, INC.
<SERIES>
<NUMBER> 07
<NAME> THE COMMON STOCK PORTFOLIO

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 5845287
<INVESTMENTS-AT-VALUE> 6545224
<RECEIVABLES> 26001
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6571225
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6601
<TOTAL-LIABILITIES> 6601
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5860792
<SHARES-COMMON-STOCK> 580267
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 26043
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (22148)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 699937
<NET-ASSETS> 6564624
<DIVIDEND-INCOME> 97348
<INTEREST-INCOME> 17277
<OTHER-INCOME> 0
<EXPENSES-NET> 34865
<NET-INVESTMENT-INCOME> 79759
<REALIZED-GAINS-CURRENT> (22148)
<APPREC-INCREASE-CURRENT> 699937
<NET-CHANGE-FROM-OPS> 757548
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 53716
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 506385
<NUMBER-OF-SHARES-REDEEMED> 296312
<SHARES-REINVESTED> 209781
<NET-CHANGE-IN-ASSETS> 6564624
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 17385
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 62189
<AVERAGE-NET-ASSETS> 5521566
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .15
<PER-SHARE-GAIN-APPREC> 1.26
<PER-SHARE-DIVIDEND> .10
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.31
<EXPENSE-RATIO> .80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000772034
<NAME> MARKET STREET FUND, INC.
<SERIES>
<NUMBER> 08
<NAME> THE SENTINEL GROWTH PORTFOLIO

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 5102118
<INVESTMENTS-AT-VALUE> 5653005
<RECEIVABLES> 16125
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5669130
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5541
<TOTAL-LIABILITIES> 5541
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5086035
<SHARES-COMMON-STOCK> 508271
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 23408
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3259
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 550887
<NET-ASSETS> 5663589
<DIVIDEND-INCOME> 48959
<INTEREST-INCOME> 11218
<OTHER-INCOME> 0
<EXPENSES-NET> 36769
<NET-INVESTMENT-INCOME> 23408
<REALIZED-GAINS-CURRENT> 3259
<APPREC-INCREASE-CURRENT> 550887
<NET-CHANGE-FROM-OPS> 577554
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 508648
<NUMBER-OF-SHARES-REDEEMED> 377
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 5663589
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 20371
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 61819
<AVERAGE-NET-ASSETS> 5177031
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 1.09
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.14
<EXPENSE-RATIO> .90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>