<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 24, 1998
REGISTRATION NOS. 2-98755
811-4350
================================================================================
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. 19 [X]
AND/OR
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 20 [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>
ADAM SCARAMELLA, ESQ. COPY TO:
MARKET STREET FUND, INC. STEPHEN E. ROTH, ESQ.
1050 WESTLAKES DRIVE SUTHERLAND, ASBILL & BRENNAN LLP
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, 1998 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
TITLE OF SECURITIES: SHARES OF COMMON STOCK
================================================================================
<PAGE> 2
CROSS REFERENCE SHEET SHOWING LOCATION OF
INFORMATION IN PROSPECTUSES
(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.............. Introduction: Investment Objectives and
Policies
5. Management of the Fund......................... Management
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
FORM N-1A ITEM STATEMENT OF ADDITIONAL INFORMATION
----------------------------------------------- -------------------------------------------
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, 1998
Market Street Fund, Inc. (the "Fund") is an open-end, diversified management
investment company consisting of eleven separate investment portfolios (each a
"Portfolio," together, the "Portfolios"), each of which has a different
investment objective. This prospectus describes the following ten 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.
All Pro Large Cap Growth Portfolio seeks to achieve long-term capital
appreciation. The Portfolio pursues its objective by investing primarily in
common stock and other equity securities of companies among the 750 largest
by market capitalization at the time of purchase, which the Advisers believe
show potential for growth in future earnings.
All Pro Small Cap Growth Portfolio seeks to achieve long-term capital
appreciation. The Portfolio pursues its objective by investing primarily in
common stock and other equity securities of companies that rank between 751
and 1,750 in size measured by market capitalization at the time of purchase,
which the Advisers believe show potential for growth in future earnings.
All Pro Large Cap Value Portfolio seeks to provide long-term capital
appreciation. The Portfolio attempts to achieve this objective by investing
primarily in undervalued common stock and other equity securities of
companies among the 750 largest by market capitalizations at the time of
purchase that the Advisers believe offer above-average potential for growth
in future earnings.
All Pro Small Cap Value Portfolio seeks to provide long-term capital
appreciation. The Portfolio pursues this objective by investing primarily in
undervalued common stock and other equity securities of companies that rank
between 751 and 1,750 in size measured by market capitalization at the time
of purchase, which the Advisers believe offer above-average potential for
growth in future earnings.
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 and should be retained for
future reference.
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, 1998, has been
filed with the Securities and Exchange Commission and contains further
information about the Fund. The Securities and Exchange Commission maintains a
Web site (http://www.sec.gov) that contains the Statement of Additional
Information and other information regarding the Portfolios and 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.
- --------------------------------------------------------------------------------
<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
The All Pro Portfolios................................. 14
The All Pro Large Cap Growth Portfolio............ 14
The All Pro Small Cap Growth Portfolio............ 15
The All Pro Large Cap Value Portfolio............. 15
The All Pro Small Cap Value Portfolio............. 16
Investment Techniques and Risks............................. 16
Temporary Defensive Positions.......................... 16
Short-Term Trading..................................... 16
Foreign Securities..................................... 16
Lower Quality Debt Instruments......................... 18
Repurchase Agreements.................................. 18
When-Issued Securities and Delayed Delivery
Securities............................................ 18
Borrowing.............................................. 19
Reverse Repurchase Agreements.......................... 19
Covered Call Options................................... 19
Management.................................................. 20
Directors.............................................. 20
Advisers............................................... 20
Compensation of Advisers............................... 23
Portfolio Managers..................................... 24
Expenses............................................... 27
Brokerage Allocation................................... 27
Administrative Services................................ 27
Description of the Fund's Shares............................ 27
General................................................ 27
Determination of Net Asset Value....................... 28
Offer, Purchase and Redemption of Shares............... 28
Dividends, Distributions, and Taxes.................... 29
Other Information........................................... 30
Custodian, Transfer Agent and Dividend Disbursing
Agent................................................. 30
Preparing for Year 2000..................................... 30
</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 11 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. PIMC also serves as investment adviser to the All Pro
Small Cap Growth, All Pro Large Cap Growth, All Pro Small Cap Value, and All Pro
Large Cap Value Portfolios (together, the "All Pro Portfolios"). 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
also employs several investment sub-advisers to provide day-to-day portfolio
management for the All Pro Portfolios (See "Management--Advisers"). PIMC, SAC,
TBC and the investment sub-advisers, including the investment management
consultant, for the All Pro Portfolios 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 holders
and variable life insurance policy holders, or between the interests of holders
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 holders 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.
The Fund will provide annual and semi-annual reports to all investors. The
annual reports contain audited financial statements and other information about
the Portfolios, including additional information on performance. Investors may
request additional copies of any report, or make inquiries, by calling or
writing the Fund. The toll-free number and the address of the Fund are set forth
on the cover page of this prospectus.
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 share of the class representing
an interest in each Portfolio 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 thereon which is included in the Statement of Additional
Information. The Statement of Additional Information is available upon request.
The information in the following tables should be read in conjunction with the
financial statements and related notes. As of the date of this prospectus, the
All Pro Portfolio had no operations.
Selected data for a share of capital stock outstanding throughout the
periods:
<TABLE>
<CAPTION>
GROWTH PORTFOLIO
-------------------------------------------------------------------------------------------
01/01/97(a) 01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90
to to to to to to to to
12/31/97 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> <C>
Net asset value, beginning of
period........................ $18.10 $16.36 $14.00 $14.09 $13.73 $13.88 $12.08 $13.16
------ ------ ------- ------- ------- ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income......... .35 .46 .47 .43 .38 .46 .50 .55
Net realized and unrealized
gain (loss) on
investments................. 3.49 2.54 3.41 (.10) .94 .17 1.71 (.25)
------ ------ ------- ------- ------- ------ ------ ------
Total from investment
operations................ 3.84 3.00 3.88 .33 1.32 .63 2.21 .30
------ ------ ------- ------- ------- ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income....... (.38) (.48) (.46) (.41) (.39) (.46) (.41) (.53)
Dividends to shareholders from
net capital gains........... (2.10) (.78) (1.06) (.01) (.35) (.32) (.00) (.85)
Dividends to shareholders in
excess of net investment
income...................... -- -- -- -- (.22) -- -- --
------ ------ ------- ------- ------- ------ ------ ------
Total distributions......... (2.48) (1.26) (1.52) (.42) (.96) (.78) (.41) (1.38)
------ ------ ------- ------- ------- ------ ------ ------
Net asset value, end of
period........................ $19.46 $18.10 $16.36 $14.00 $14.09 $13.73 $13.88 $12.80
====== ====== ======= ======= ======= ====== ====== ======
Total Return................ 24.32% 19.58% 30.39% 2.40% 9.43% 4.74% 18.50% 2.39%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
$(000)...................... 267,389 198,948 161,899 115,191 109,534 82,881 55,357 35,658
Ratios of expenses to average
net assets(c)............... .43% .50% .61% .63% .76% .79% .76% .75%
Ratios of net investment
income to average net
assets...................... 2.01% 2.80% 3.20% 3.10% 2.86% 3.53% 3.91% 4.27%
Portfolio turnover rate....... 108% 72% 61% 63% 51% 35% 28% 47%
Average commission rate(d).... $0.0600 $0.0600 N/A N/A N/A N/A N/A N/A
<CAPTION>
GROWTH PORTFOLIO
----------------------
01/01/89(b) 01/01/88
to to
12/31/89 12/31/88
----------- --------
<S> <C> <C>
Net asset value, beginning of
period........................ $11.24 $ 9.99
------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income......... .51 .46
Net realized and unrealized
gain (loss) on
investments................. 2.87 1.36
------ ------
Total from investment
operations................ 3.38 1.82
------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income....... (.53) (.43)
Dividends to shareholders from
net capital gains........... (.93) (.14)
Dividends to shareholders in
excess of net investment
income...................... -- --
------ ------
Total distributions......... (1.46) (.57)
------ ------
Net asset value, end of
period........................ $13.16 $11.24
====== ======
Total Return................ 30.45% 18.50%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
$(000)...................... 25,954 14,287
Ratios of expenses to average
net assets(c)............... .72% .65%
Ratios of net investment
income to average net
assets...................... 4.26% 4.52%
Portfolio turnover rate....... 60% 32%
Average commission rate(d).... N/A N/A
</TABLE>
- ---------------
(a) On May 1, 1997, the investment adviser was changed from Newbold's Asset
Management, Inc. to Sentinel Advisors Company.
(b) On May 1, 1989, the investment adviser was changed from Providentmutual
Investment Management Company to Newbold's Asset Management, Inc.
(c) Expense ratios before reimbursement of expenses by affiliated insurance
company for the years ended December 31, 1997, 1996, 1995, 1994, 1993, 1992,
1991, 1990, 1989 and 1988 were as follows: 0.43%, 0.50%, 0.61%, 0.67%,
0.76%, 0.82%, 0.98%, 1.01%, 1.13% and 1.25%, 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 SEC for all financial
statements with fiscal years beginning after September 1, 1995.
See accompanying notes to financial statements.
4
<PAGE> 7
FINANCIAL HIGHLIGHTS -- CONTINUED
Selected data for a share of capital stock outstanding throughout the
periods:
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
------------------------------------------------------------------------------
01/01/97 01/01/96(A) 01/01/95 01/01/94 01/01/93 01/01/92
TO TO TO TO TO TO
12/31/97 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 $1.00
------ ------ ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income................. .05 .05 .05 .04 .03 .03
------ ------ ----------- ----------- ----------- -----------
Total from investment operations.... .05 .05 .05 .04 .03 .03
LESS DISTRIBUTIONS:
Dividends to shareholders from net
investment income................... (.05) (.05) (.05) (.04) (.03) (.03)
------ ------ ----------- ----------- ----------- -----------
Total Distributions................. (.05) (.05) (.05) (.04) (.03) (.03)
------ ------ ----------- ----------- ----------- -----------
Net asset value, end of period.......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== =========== =========== =========== ===========
Total return........................ 5.33% 5.15% 5.61% 3.81% 2.59% 3.18%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)...... 64,339 54,197 34,615 21,040 12,506 8,138
Ratios of expenses to average net
assets(b)........................... .39% .44% .50% .55% .65% .65%
Ratios of net investment income to
average net assets.................. 5.21% 5.03% 5.47% 3.86% 2.56% 3.12%
<CAPTION>
MONEY MARKET PORTFOLIO
-----------------------------------------------------
01/01/91 01/01/90 01/01/89 01/01/88
TO TO TO TO
12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $1.00 $1.00 $1.00 $1.00
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income................. .06 .07 .08 .07
----------- ----------- ----------- -----------
Total from investment operations.... .06 .07 .08 .07
LESS DISTRIBUTIONS:
Dividends to shareholders from net
investment income................... (.06) (.07) (.08) (.07)
----------- ----------- ----------- -----------
Total Distributions................. (.06) (.07) (.08) (.07)
----------- ----------- ----------- -----------
Net asset value, end of period.......... $1.00 $1.00 $1.00 $1.00
=========== =========== =========== ===========
Total return........................ 5.69% 8.00% 9.02% 7.19%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)...... 7,047 5,411 4,632 4,219
Ratios of expenses to average net
assets(b)........................... .53% .50% .55% .65%
Ratios of net investment income to
average net assets.................. 5.49% 7.72% 8.66% 7.03%
</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, 1997, 1996, 1995, 1994, 1993, 1992,
1991, 1990, 1989 and 1988 were as follows: 0.39%, 0.44%, 0.50%, 0.59%,
0.65%, 0.73%, 0.86%, 0.86%, 1.08% and 1.36%, 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
-----------------------------------------------------------------------------------
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93(A) 01/01/92
TO TO TO TO TO TO
12/31/97 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.............................. $ 10.67 $ 11.00 $ 9.73 $ 11.21 $ 10.73 $ 10.80
----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............... .64 .63 .65 .62 .60 .64
Net realized and unrealized gain
(loss) on investments............. .33 (.34) 1.27 (1.23) .48 (.03)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations.................... .97 .29 1.92 (.61) 1.08 .61
----------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
Dividends to shareholders from net
investment income................. (.66) (.62) (.65) (.60) (.60) (.68)
Dividends to shareholders from net
capital gains..................... (.00) (.00) (.00) (.27) (.00) (.00)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions............. (.66) (.62) (.65) (.87) (.60) (.68)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period........ $ 10.98 $ 10.67 $ 11.00 $ 9.73 $ 11.21 $ 10.73
=========== =========== =========== =========== =========== ===========
Total return.................... 9.50% 2.86% 20.45% (5.62)% 10.32% 5.95%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000).... 23,350 17,087 14,402 10,098 10,160 6,710
Ratios of expenses to average net
assets(c)......................... .57% 56% .60% .68% .75% .75%
Ratios of net investment income to
average net assets................ 6.24% 6.08% 6.36% 6.14% 5.53% 6.34%
Portfolio turnover rate............. 105% 133% 206% 151% 71% 4%
<CAPTION>
BOND PORTFOLIO
-----------------------------------------------------
01/01/91 01/01/90 01/01/89(B) 01/01/88
TO TO TO TO
12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period.............................. $ 10.04 $ 10.09 $ 9.89 $ 10.02
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............... .77 .79 .82 .76
Net realized and unrealized gain
(loss) on investments............. .57 (.05) .20 (.13)
----------- ----------- ----------- -----------
Total from investment
operations.................... 1.34 .74 1.02 .63
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
Dividends to shareholders from net
investment income................. (.58) (.79) (.82) (.76)
Dividends to shareholders from net
capital gains..................... (.00) (.00) (.00) (.00)
----------- ----------- ----------- -----------
Total distributions............. (.58) (.79) (.82) (.76)
----------- ----------- ----------- -----------
Net asset value, end of period........ $ 10.80 $ 10.04 $ 10.09 $ 9.89
=========== =========== =========== ===========
Total return.................... 13.93% 7.70% 10.57% 6.45%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000).... 4,365 3,711 3,311 2,473
Ratios of expenses to average net
assets(c)......................... .63% .60% .62% .65%
Ratios of net investment income to
average net assets................ 7.58% 8.00% 8.28% 7.74%
Portfolio turnover rate............. 32% 53% 9% .13%
</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, 1997, 1996, 1995, 1994, 1993, 1992,
1991, 1990, 1989 and 1988 were as follows: 0.57%, 0.56%, 0.60%, 0.70%,
0.75%, 0.81%, 0.93%, 0.96%, 1.16% and 1.36%, respectively.
See accompanying notes to financial statements.
6
<PAGE> 9
FINANCIAL HIGHLIGHTS -- CONTINUED
Selected data for a share of capital stock outstanding throughout the
periods:
<TABLE>
<CAPTION>
MANAGED PORTFOLIO
----------------------------------------------------------------------------------------
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93(A) 01/01/92 01/01/91 01/01/90
TO TO TO TO TO TO TO TO
12/31/97 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> <C>
Net asset value, beginning of
period........................... $14.68 $14.19 $11.94 $13.27 $12.25 $11.40 $ 9.81 $11.37
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............ .54 .51 .55 .53 .40 .44 .51 .57
Net realized and unrealized gain
(loss) on investments.......... 2.49 1.07 2.28 (.77) 1.00 .88 1.47 (1.53)
------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations................... 3.03 1.58 2.83 (.24) 1.40 1.32 1.98 (.96)
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income.......... (.53) (.51) (.57) (.49) (.38) (.47) (.39) (.57)
Dividends to shareholders from
net capital gains.............. (.12) (.58) (.01) (.60) (.00) (.00) (.00) (.03)
------ ------ ------ ------ ------ ------ ------ ------
Total distributions............ (.65) (1.09) (.58) (1.09) (.38) (.47) (.39) (.60)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period..... $17.06 $14.68 $14.19 $11.94 $13.27 $12.25 $11.40 $ 9.81
====== ====== ====== ====== ====== ====== ====== ======
Total return................... 21.23% 11.88% 24.43% (1.82)% 11.62% 11.96% 20.49% (8.61)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
$(000)......................... 56,068 43,431 36,002 29,363 28,984 15,946 12,564 10,197
Ratios of expenses to average net
assets(c)...................... .58% .60% .66% .67% .80% .80% .68% .65%
Ratios of net investment income
to average net assets.......... 3.47% 3.68% 4.22% 4.34% 3.36% 3.88% 4.74% 5.48%
Portfolio turnover rate.......... 99% 106% 130% 75% 89% 32% 51% 47%
Average commission rate(d)....... $0.0600 $0.0600 N/A N/A N/A N/A N/A N/A
<CAPTION>
MANAGED PORTFOLIO
----------------------
01/01/89(B) 01/01/88
TO TO
12/31/89 12/31/88
----------- --------
<S> <C> <C>
Net asset value, beginning of
period........................... $10.63 $10.12
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............ .59 .50
Net realized and unrealized gain
(loss) on investments.......... .89 .51
------ ------
Total from investment
operations................... 1.48 1.01
------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income.......... (.61) (.50)
Dividends to shareholders from
net capital gains.............. (.13) (.00)
------ ------
Total distributions............ (.74) (.50)
------ ------
Net asset value, end of period..... $11.37 $10.63
====== ======
Total return................... 14.65% 10.60%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
$(000)......................... 10,028 8,015
Ratios of expenses to average net
assets(c)...................... .65% .65%
Ratios of net investment income
to average net assets.......... 5.74% 4.89%
Portfolio turnover rate.......... 23% 35%
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, 1997, 1996, 1995, 1994, 1993, 1992,
1991, 1990, 1989 and 1988 were as follows: 0.58%, 0.60%, 0.66%, 0.73%,
0.80%, 0.84%, 0.95%, 0.98%, 1.11% and 1.24%, 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 SEC for all financial
statements with fiscal years beginning after September 1, 1995.
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
------------------------------------------------------------------
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93(A) 01/01/92
TO TO TO TO TO TO
12/31/97 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.............. $18.52 $17.38 $15.45 $15.45 $14.72 $16.68
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .17 .17 .20 (.01) (.01) .03
Net realized and unrealized gain (loss) on
investments................................... 3.72 3.03 1.86 .01 .77 .38
------ ------ ------ ------ ------ ------
Total from investment operations.............. 3.89 3.20 2.06 .00 .76 .41
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment
income........................................ (.18) (.19) (.00) (.00) (.03) (.07)
Dividends to shareholders from net capital
gains......................................... (.04) (1.87) (.13) (.00) (.00) (2.30)
------ ------ ------ ------ ------ ------
Total distributions........................... (.22) (2.06) (.13) (.00) (.03) (2.37)
------ ------ ------ ------ ------ ------
Net asset value, end of period.................... $22.19 $18.52 $17.38 $15.45 $15.45 $14.72
====== ====== ====== ====== ====== ======
Total return(c)............................... 21.21% 21.00% 13.48% 0% 5.20% 2.58%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 48,574 34,098 23,822 15,430 12,223 8,029
Ratios of expenses to average net assets
(annualized)(d)............................... .63% .68% .76% .86% .90% .90%
Ratios of net investment income to average net
assets (annualized)........................... .95% 1.14% 1.32% (.10)% (.07)% .37%
Portfolio turnover.............................. 37% 47% 89% 60% 60% 18%
Average commission rate(e)...................... $0.0600 $0.0600 N/A N/A N/A N/A
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO
---------------------------------
01/01/91 01/01/90 05/01/89(B)
TO TO TO
12/31/91 12/31/90 12/31/89
-------- -------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period.............. $10.67 $ 9.87 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .08 .03 .09
Net realized and unrealized gain (loss) on
investments................................... 5.93 1.04 .25
------ ------ ------
Total from investment operations.............. 6.01 1.07 .34
------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment
income........................................ (.00) (.03) (.09)
Dividends to shareholders from net capital
gains......................................... (.00) (.24) (.38)
------ ------ ------
Total distributions........................... (.00) (.27) (.47)
------ ------ ------
Net asset value, end of period.................... $16.68 $10.67 $ 9.87
====== ====== ======
Total return(c)............................... 56.33% 10.77% 8.31%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 2,751 772 568
Ratios of expenses to average net assets
(annualized)(d)............................... .79% .75% .50%
Ratios of net investment income to average net
assets (annualized)........................... .80% .27% 1.00%
Portfolio turnover.............................. 95% 27% 32%
Average commission rate(e)...................... 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 for the years ended
December 31, 1997, 1996, 1995, 1994, 1993, 1992, 1991 and 1990 and for the
period ended December 31, 1989, were as follows: 0.63%, 0.68%, 0.76%, 0.89%,
0.90%, 1.00%, 1.32%, 2.43% and 4.11%, 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 SEC for all financial
statements with fiscal years beginning after September 1, 1995.
See accompanying notes to financial statements.
8
<PAGE> 11
FINANCIAL HIGHLIGHTS -- CONTINUED
Selected data for a share of capital stock outstanding throughout the
periods:
<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO
-----------------------------------------------------------------------------
01/01/97 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 TO
12/31/97 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> <C>
Net asset value, beginning of period.............. $13.41 $12.86 $11.63 $11.87 $ 9.00 $9.74 $10.00
------ ------ ------ ------ ------ ----- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .11 .11 .16 .05 .06 .08 .01
Net realized and unrealized gain (loss) on
investments................................... 1.08 1.23 1.45 (.02) 3.09 (.81) (.27)
------ ------ ------ ------ ------ ----- ------
Total from investment operations.............. 1.19 1.34 1.61 .03 3.15 (.73) (.26)
------ ------ ------ ------ ------ ----- ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment
income........................................ (.11) (.16) (.07) (.03) (.08) (.00) (.00)
Dividends to shareholders from net capital
gains......................................... (.88) (.63) (.31) (.24) (.20) (.01) (.00)
------ ------ ------ ------ ------ ----- ------
Total distributions........................... (.99) (.79) (.38) (.27) (.28) (.01) (.00)
------ ------ ------ ------ ------ ----- ------
Net asset value, end of period.................... $13.61 $13.41 $12.86 $11.63 $11.87 $9.00 $ 9.74
====== ====== ====== ====== ====== ===== ======
Total return(b)............................... 9.66% 10.89% 14.31% .26% 36.11% (7.30)% (2.80)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 62,513 50,955 36,642 26,212 13,682 6,727 4,979
Ratios of expenses to average net assets(c)..... 1.02% 1.05% 1.15% 1.32% 1.50% 1.50% 1.48%
Ratios of net investment income to average net
assets........................................ 1.13% 1.08% 1.21% .76% .68% 1.05% .26%
Portfolio turnover.............................. 37% 35% 45% 32% 37% 35% 1%
Average commission rate(d)...................... $0.0234 $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 for the years ended
December 31, 1997, 1996, 1995, 1994, 1993, 1992 and the period ended
December 31, 1991, were as follows: 1.02%, 1.05%, 1.15%, 1.32%, 1.50%, 2.65%
and 3.40%, 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 SEC for all financial
statements with fiscal years beginning after September 1, 1995.
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 securities of
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. Where the description of a Portfolio indicates that it invests
primarily in certain types of securities, this means that under normal
circumstances it invests at least 65% of its total assets in such securities.
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
10
<PAGE> 13
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.
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
(c) the maturity of the repurchase agreement does not exceed 30
days.
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's money market instruments 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.
11
<PAGE> 14
The Portfolio purchases securities issued by U.S. and foreign corporations
and by U.S. and foreign governments and their agencies and instrumentalities.
Securities of foreign issuers are only purchased if they are investment grade
quality, denominated in U.S. dollars and income from such securities is paid in
U.S. dollars. Investment in securities of foreign issuers entail certain risks
not found in securities of domestic issuers. See "Foreign Securities."
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. 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 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 the Managed 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. 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 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.
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.
12
<PAGE> 15
Investment 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.
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 depositary receipts ("ADRs"),
European depositary receipts ("EDRs"), and global depositary 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.)
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 and in "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.
13
<PAGE> 16
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.
ALL PRO PORTFOLIOS
All four All Pro Portfolios seek capital growth. They differ from the other
Portfolios of the Fund in that they each have several investment sub-advisers,
selected by PIMC, that manage a portion of their respective assets. The All Pro
Portfolios differ from each other in that two pursue this investment objective
through "value oriented" investments while the other two pursue this objective
through "growth oriented" investments. Within each pair, one Portfolio
principally invests in securities with relatively large market capitalizations
while the other principally invests in securities with relatively small market
capitalizations.
Each All Pro Portfolio is designed to resemble a benchmark stock index
created by Wilshire Associates Incorporated. The indices are: Quantum Large
Growth Benchmark, Quantum Small Growth Benchmark, Quantum Large Value Benchmark
and Quantum Small Value Benchmark. The securities in each index, taken as group,
reflect a particular equity investment style; with the styles being defined
according to both their growth orientation or value orientation and the range of
market capitalization represented in the group.
Value oriented investing involves seeking securities that: (1) have low
financial ratios (particularly stock price-to-book value, but also stock
price-to-earnings and stock price-to-cash flow), (2) that can be acquired for
less than what a sub-adviser believes is the issuer's intrinsic value, or (3)
appear attractive on a dividend discount model. Value oriented investing entails
a strong "sell discipline" in that it generally requires the sale of securities
that have reached their intrinsic value or a target financial ratio. Value
oriented investments may include securities of companies in cyclical industries
during periods when such securities appear to a sub-adviser to have strong
potential for capital appreciation or securities of special situation companies.
A special situation company is one that a sub-adviser believes has potential for
significant future earnings growth but has not performed well in the recent
past. These situations include companies with management changes, corporate or
asset restructuring or significantly undervalued assets.
Growth oriented investing involves seeking securities of issuers with above
average recent earnings growth rates and a reasonable likelihood of maintaining
such rates in the foreseeable future. Generally, such securities are those of
well-established issuers with a strong competitive position within their
industry or a competitive position within a very strong industry. Because growth
oriented investing involves the search for securities that are likely to
increase in value, it entails identifying earnings growth potential that can be
acquired for a reasonable price. One strategy for acquiring earnings growth
potential is to acquire securities of companies that are in the early stages of
establishing a competitive position within their industry. For some
sub-advisers, growth oriented investing also may involve fundamental research
about particular companies in order to identify and take advantage of potential
short-term earnings increases that are not reflected in the current price of
their securities.
PIMC selects two or more sub-advisers for each Portfolio who it believes
can invest segments of the Portfolio in a manner such that the Portfolio will
have similar characteristics and performance dynamics as its Quantum Benchmark
index. To accomplish this, PIMC may select sub-advisers that specialize in one
or more, but not all, of the types of securities comprising the Benchmark index.
By using several such sub-advisers, PIMC can acquire the expertise that it
believes will result in optimal performance for the Portfolio. PIMC has retained
Wilshire Associates Incorporated to assist it in identifying potential
sub-advisers and performing the quantitative analysis necessary to assess such
sub-advisers' styles and performance.
ALL PRO LARGE CAP GROWTH PORTFOLIO
The investment objective of the All Pro Large Cap Growth Portfolio is to
achieve long-term capital appreciation. The Portfolio pursues its objective by
investing primarily in common stock and other equity
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securities of companies among the 750 largest by market capitalization at the
time of purchase, which the Advisers believe show potential for growth in future
earnings. Equity securities consist of common stock, preferred stock, securities
convertible or exchangeable into common stock, including convertible debt
securities, convertible preferred stock and warrants or rights to acquire common
stock.
At the current time, approximately 45% of the Portfolio's assets are
managed by an investment sub-adviser that uses economic analysis, quantitative
modeling, and securities analysis to identify securities of companies with
potential for future earnings growth, and uses in-depth fundamental research to
narrow this list and determine which securities will be purchased by the
Portfolio.
At the current time, approximately 45% of the Portfolio's assets are
managed by an investment sub-adviser who uses financial quality, sustainable
growth, and downside volatility screens to eliminate securities of issuers from
consideration. Securities of the remaining issuers, which may be between 200-300
issuers, are purchased.
At the current time, approximately 10% of the Portfolio's assets are
managed by an investment sub-adviser investing in securities of 20 or fewer
companies selected from industries that it believes will have earnings growth
over a complete market cycle.
ALL PRO SMALL CAP GROWTH PORTFOLIO
The investment objective of the All Pro Small Cap Growth Portfolio is to
achieve long-term capital appreciation. The Portfolio pursues its objective by
investing primarily in common stock and other equity securities of companies
that rank between 751 and 1,750 in size measured by market capitalization at the
time of purchase, which the Advisers believe show potential for growth in future
earnings. Equity securities consist of common stock, preferred stock, securities
convertible or exchangeable into common stock, including convertible debt
securities, convertible preferred stock and warrants or rights to acquire common
stock.
At the current time, approximately 40% of the Portfolio's assets are
managed by an investment sub-adviser that seeks securities of companies with
market capitalizations below $500 million that have established above average
growth, superior business positions and strong management.
At the current time, the remaining 60% of the Portfolio's assets are
managed by an investment sub-adviser that attempts to identify changes in
companies or industries that often signal earnings growth, and companies most
likely to benefit from those changes. This sub-adviser seeks securities of
companies with market capitalizations of less than $1 billion.
ALL PRO LARGE CAP VALUE PORTFOLIO
The All Pro Large Cap Value Portfolio seeks to provide long-term capital
appreciation. The Portfolio attempts to achieve this objective by investing
primarily in undervalued common stock and other equity securities of companies
among the 750 largest by market capitalization at the time of purchase that the
Advisers believe offer above-average potential for growth in future earnings.
Equity securities consist of common stock, preferred stock, securities
convertible or exchangeable into common stock, including convertible debt
securities, convertible preferred stock and warrants or rights to acquire common
stock.
At the current time, approximately 45% of this Portfolio's assets are
managed by an investment sub-adviser who attempts to identify and invest in
securities of companies with low risk and solid long-term potential through an
investment process that integrates quantitative analysis and fundamental
research.
At the current time, approximately 45% of the Portfolio's assets are
managed by an investment sub-adviser that seeks to invest in companies through a
value oriented process that targets undervalued or overlooked companies
regardless of industry sector.
At the current time, approximately 10% of the Portfolio's assets are
managed by an investment sub-adviser that seeks securities of issuers within
each market sector of the Quantum Large Value Benchmark,
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while maintaining beta and sector weightings of that benchmark. This investment
sub-adviser attempts to identify the company characteristics currently being
rewarded by the market.
ALL PRO SMALL CAP VALUE PORTFOLIO
The investment objective of this Portfolio is to provide long-term capital
appreciation. The Portfolio pursues this objective by investing primarily in
undervalued common stock and other equity securities of companies that rank
between 751 and 1,750 in size measured by market capitalization at the time of
purchase, which the Advisers believe offer above-average potential for growth in
future earnings. Equity securities consist of common stock, preferred stock,
securities convertible or exchangeable into common stock, including convertible
debt securities, convertible preferred stock and warrants or rights to acquire
common stock.
At the current time, approximately 40% of the Portfolio's assets are
managed by an investment sub-adviser that selects securities with low
price-to-operating earnings ratios that have strong prospect for future earnings
growth. This investment sub-adviser generally avoids securities of (1) companies
with price-to-operating earnings ratios less than the average ratio of
securities listed on the New York Stock Exchange, (2) companies with market
capitalizations of less than $25 million, and (3) companies with little or no
operating earnings.
At the current time, approximately 60% of the Portfolio's assets are
managed by an investment sub-adviser that selects small capitalization stocks
that have the potential for high returns.
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 in which the
Money Market Portfolio may invest.
SHORT-TERM TRADING
Except for the Bond and Managed Portfolios, 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.
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, a Portfolio may
purchase or sell foreign
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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.
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 a 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 Bond Portfolio, the International
Portfolio, the Managed Portfolio, and the All Pro Portfolios 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, the Managed
Portfolio and the All Pro Portfolios 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
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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 these
Portfolios' investments in those countries and the availability to the Portfolio
of additional investments in those countries.
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, Managed or an All Pro 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, SAC or the sub-advisers to the Portfolios.
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
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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
Each of the Portfolios may borrow from banks or through reverse repurchase
agreements in amounts up to 30% of its total assets (including the amount
borrowed). Each Portfolio also may, to the extent permitted by applicable law,
borrow up to an additional 5% of its total assets for temporary purposes, and
may obtain such short-term credits as may be necessary for the clearance of
purchases and sales of portfolio securities and purchase securities on margin to
the extent permitted by applicable law. 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 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 30% of the value of the respective Portfolio's total assets.
Under no circumstances will a Portfolio enter into a reverse repurchase
agreement with Provident Mutual, PLACA, NLIC or SAC or the sub-advisers to the
Portfolios.
COVERED CALL OPTIONS
The Growth, Aggressive Growth, Managed and All Pro 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
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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
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, provide the appropriate Portfolio(s) with investment advice and
manage 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, Money Market, Bond, Managed, and Aggressive Growth
Portfolios. Sentinel Advisors Company serves as investment adviser for the
Growth, 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, on
April 25, 1996, with respect to the Money Market Portfolio, on May 1, 1997 and
with respect to the Growth Portfolio. 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 NLIC; 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 NLIC, 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.
All Pro Small Cap Growth, All Pro Large Cap Growth, All Pro Small Cap
Value, and All Pro Large Cap Value Portfolios. PIMC serves as investment
adviser for the All Pro Portfolios pursuant to separate
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investment advisory agreements on behalf of each All Pro Portfolio with the Fund
effective May 1, 1998. PIMC uses a "manager of managers" approach for the All
Pro Portfolios by which PIMC allocates each Portfolio's assets among one or more
"specialist" investment sub-advisers. PIMC selects investment sub-advisers based
on a continuing quantitative and qualitative evaluation of their skills and
proven abilities in managing assets pursuant to a particular investment style.
Short-term performance is not by itself a significant factor in selecting or
terminating investment sub-advisers, and therefore PIMC does not anticipate
frequent changes in investment sub-advisers. Criteria for employment of
investment sub-advisers includes, but is not limited to, proven discipline and
thoroughness in pursuit of stated investment objectives, consistently above-
average performance and an ability to conserve values in declining markets, and
the expertise and level of service of the investment sub-adviser's staff and
organization. Investment sub-advisers may have different investment styles and
security selection disciplines.
PIMC monitors the performance of each investment sub-adviser and of each
All Pro Portfolio and, to the extent it deems appropriate to achieve a
Portfolio's investment objective, reallocates Portfolio assets among individual
sub-advisers or recommends that a Portfolio employ or terminate particular
investment sub-advisers. The Fund and PIMC have requested an order of the SEC
that would permit the Fund to employ particular investment sub-advisers without
shareholder approval. The Fund will not employ any sub-adviser, other than those
described herein, without shareholder approval unless such an order is granted.
PIMC has retained Wilshire Associates Incorporated ("Wilshire") as an
investment management consultant to assist it in identifying and evaluating the
performance of potential sub-advisers for each of the All Pro Portfolios.
Wilshire does not participate in the selection of portfolio securities for any
Portfolio or in any way participate in the day-to-day management of the All Pro
Portfolios or the Fund. Wilshire assists PIMC in gathering data and performing
the quantitative analysis necessary to identify the styles and past performance
of potential sub-advisers. Wilshire also assists PIMC in performing similar
ongoing quantitative analysis of the performance of each All Pro Portfolio's
sub-advisers and in determining whether changes in a sub-adviser would be
desirable for a Portfolio. As compensation for these services, PIMC pays
Wilshire from PIMC's advisory fees, .05% of the average daily net assets of the
All Pro Portfolios.
Wilshire is located at 1299 Ocean Avenue, Suite 700, Santa Monica CA 90401.
On behalf of the All Pro Portfolios, and after consultation with Wilshire,
PIMC has selected, and has entered into investment sub-advisory agreements with
each of the sub-advisers listed below. The table under "Compensation of
Advisers" sets forth the maximum rate of compensation that PIMC will pay monthly
to each sub-adviser pursuant to the relevant investment sub-advisory agreement.
SUB-ADVISERS TO THE ALL PRO SMALL CAP GROWTH PORTFOLIO.
The assets of the All Pro Small Cap Growth Portfolio are managed in part by
Standish, Ayer and Wood ("SAW") and in part by Husic Capital Management
("Husic").
SAW. SAW is located at One Financial Center, Boston, Massachusetts. It
emphasizes companies under $500 million in market capitalization which have
established a pattern of business success: above average growth, superior
financial characteristics, superior business positions, and strong
management. SAW has over $3.4 billion in equity assets under management.
Husic. Husic, located at 555 California Street, Suite 2900, San Francisco,
California, offers products across the market capitalization spectrum and
is dedicated to growth style management. Husic manages more than $3.5
billion on behalf of institutions and individuals including $600 million in
its small-cap product.
SUB-ADVISERS TO THE ALL PRO LARGE CAP GROWTH PORTFOLIO.
The assets of the All Pro Large Cap Growth Portfolio are managed in part by
Cohen, Klingenstein & Marks, Inc. ("CKM"), in part by Geewax, Terker & Co.
("Geewax"), and in part by Oak Associates, Ltd. ("Oak").
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CKM. CKM is an expert in large-capitalization growth equity management.
CKM offers no other products. CKM, which is located at 2112 Broadway, Suite
314, New York, New York, currently manages approximately $1.4 billion in
assets.
Geewax. Geewax has expertise in large-capitalization growth equity
management. Geewax is located at 99 Starr St., Phoenixville, Pennsylvania
and provides portfolio management for $2.6 billion in assets.
Oak. Oak, located at 3875 Embassy Pky., Suite 250, Akron, Ohio provides
portfolio management for over $8 billion in assets.
SUB-ADVISERS TO THE ALL PRO SMALL CAP VALUE PORTFOLIO.
As of the date of this prospectus, the assets of the All Pro Small Cap Value
Portfolio are managed in part by 1838 Investment Advisors ("1838"), and in part
by Denver Investment Advisors ("DIA").
1838. 1838, located at 100 Matsonford Rd., Suite 320, Radnor,
Pennsylvania, offers large core equity, fixed income, and international
equity products in addition to its small capitalization equity strategy.
The majority of 1838's clients are institutional, while others are high net
worth individuals.
DIA. DIA, located at 1225 17th Street, Denver, Colorado, offers a small
Capitalization Value approach that focuses on owning small capitalization
stocks that have the potential for high returns and on reducing risk in the
portfolio. DIA provides portfolio management for $11.1 billion in assets.
SUB-ADVISERS TO THE ALL PRO LARGE CAP VALUE PORTFOLIO.
The assets of the All Pro Large Cap Value Portfolio are managed in part by
Equinox Capital Management, Inc. ("Equinox"), in part by Harris Associates, Inc.
("Harris"), and in part by Mellon Equity Associates ("Mellon Equity").
Equinox. Equinox is entirely dedicated to large-capitalization value style
management. Equinox, which is located at 590 Madison Ave., 41st Floor, New
York, New York, manages approximately $7 billion on behalf of institutions
and individuals.
Harris. Harris has over 20 years of experience in managing money for
institutional clients and high net worth individuals. Harris, which is
located at 2 North LaSalle St., Suite 500, Chicago, Illinois, currently
manages over $17.7 billion in assets.
Mellon Equity. Mellon Equity, which is located at 500 Grant Street, Suite
3700, Pittsburgh, Pennsylvania, is a wholly owned subsidiary of Mellon Bank
and manages all of its research, portfolio management, marketing and client
contact. Mellon Equity currently manages approximately $17 billion in
assets.
22
<PAGE> 25
COMPENSATION OF ADVISERS
<TABLE>
<CAPTION>
MAXIMUM
1997 ANNUAL RATE ANNUAL RATE
(AS % OF AVERAGE (AS % OF AVERAGE
PORTFOLIO ADVISER DAILY NET ASSETS)* DAILY NET ASSETS)
--------- ------- ------------------ -----------------
<S> <C> <C> <C>
Growth............................. SAC .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%
TBC (sub-adviser) .375% 0.375%
All Pro Small Cap Growth***........ PIMC N/A 0.90%
Wilshire (investment
management consultant) N/A 0.05%
SAW (sub-adviser) N/A 0.50%
Husic (sub-adviser) N/A 0.50%
All Pro Large Cap Growth***........ PIMC N/A 0.70%
Wilshire (investment
management consultant) N/A 0.05%
CKM (sub-adviser) N/A 0.35%
Geewax (sub-adviser) N/A 0.30%
Oak (sub-adviser) N/A 0.35%
All Pro Small Cap Value***......... PIMC N/A 0.90%
Wilshire (investment
management consultant) N/A 0.05%
1838 (sub-adviser) N/A 0.55%
DIA (sub-adviser) N/A 0.75%
All Pro Large Cap Value***......... PIMC N/A 0.70%
Wilshire (investment
management consultant) N/A 0.05%
Equinox (sub-adviser) N/A 0.30%
Harris (sub-adviser) N/A 0.65%
Mellon (sub-adviser) N/A 0.30%
</TABLE>
- ---------------
* With respect to each of the Portfolios except the Money Market Portfolio and
the All Pro Portfolios, the fee payable by a Portfolio to PIMC or SAC 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 fee payable by PIMC to TBC, Equinox, Harris and DIA
also is graduated. 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.
** From January 1, 1997 to May 1, 1997, Newbold's Asset Management, Inc.
("NAM") served as investment adviser for the Growth Portfolio. From May 1,
1997 to December 31, 1997 SAC served as investment adviser for the Growth
Portfolio. Both NAM and SAC received the same percentage of average daily
net assets as compensation for these services.
*** The All Pro Portfolios had not yet commenced operations in 1997.
23
<PAGE> 26
PORTFOLIO MANAGERS
Growth, Managed, Money Market, Bond and Aggressive Growth Portfolios.
Respecting the Growth, Money Market, Bond, Managed, and Aggressive Growth
Portfolios, SAC employs a team approach in managing the Portfolios. The
management teams are comprised of a lead portfolio manager, other portfolio
managers and research analysts. Each team includes members with one or more
areas of expertise and shares the responsibility for providing ideas,
information and knowledge in managing the Portfolios. Rodney A. Buck, Chief
Executive Officer of SAC, is also Chairman and Chief Executive Officer of
National Life Investment Management Company, Inc., and Senior Vice President and
Chief Investment Officer of NLIC. Mr. Buck has been employed by SAC or its
affiliates since 1972. There are three investment management teams: an Equity
Value Team, headed by Richard A. Pender, Senior Vice President of SAC; an Equity
Growth Team, headed by Robert L. Lee, Senior Vice President of SAC; and a Fixed
Income Team, headed by David M. Brownlee, Senior Vice President of SAC.
Each of Messrs. Buck, Pender, Lee and Brownlee is a Chartered Financial
Analyst. Mr. Pender has been associated with SAC or its affiliates since 1986.
Mr. Lee joined SAC in 1993. Prior to that time he was a Vice President at
Shawmut National Corporation. Mr. Brownlee also joined SAC in 1993; prior to
that he was a Managing Director at Aetna Life and Casualty.
Growth Portfolio. The Growth Portfolio is managed by Mr. Pender and Daniel
J. Manion, Vice President of SAC. Mr. Pender and Mr. Manion have been members of
the Growth Portfolio management team since 1994, and have been the lead
portfolio managers of the Portfolio since 1997. Mr. Manion, a Chartered
Financial Analyst, has been associated with SAC since 1993; prior to that he was
associated with Wright Investors' Service.
Managed Portfolio. The Managed Portfolio is managed by a team consisting
of Mr. Buck, Mr. Pender and Richard D. Temple, Vice President of SAC. Mr. Buck
has been the Portfolio's portfolio manager since 1982. Mr. Temple is a fixed
income portfolio manager who has been employed by SAC or its affiliates since
1969.
Money Market Portfolio. The Money Market Portfolio is managed by Mr.
Temple and Darlene Coppola, Money Market Trader of SAC. Ms. Coppola has been
employed by SAC or its affiliates since 1974.
Bond Portfolio. The Bond Portfolio is managed by Mr. Temple and William C.
Kane, Vice President of SAC. Mr. Temple has been the lead portfolio manager of
the Bond Portfolio since 1985. Mr. Kane is a Chartered Financial Analyst, and
has been employed by SAC or its affiliates since 1992. Prior to joining SAC, Mr.
Kane was employed by Chase Manhattan Bank.
Aggressive Growth Portfolio. The Aggressive Growth Portfolio is managed by
Scott T. Brayman, Vice President of SAC, and Mr. Lee. Mr. Brayman and Mr. Lee
have been the lead portfolio managers of the Portfolio since 1997. Mr. Brayman
is a Chartered Financial Analyst, and has been with SAC since 1995. He has been
involved with the Aggressive Growth Portfolio since he joined SAC. Prior to
joining SAC, he was associated with Argyle Capital Management, Inc.
International Portfolio. Sandor Cseh, Senior Vice President and Director
of International of TBC, has been the portfolio manager for the International
Portfolio since 1991. Sandor Cseh has over 22 years experience in investment
management.
All Pro Portfolios.
Assets of each of the All Pro Portfolios are managed by two or more
sub-advisers that have contracted with PIMC to bring a specific asset management
strategy to the management of that Portfolio. The table below summarizes the
background data with respect to each sub-adviser's portfolio managers that
provide the day to day management of the All Pro Portfolio's assets.
24
<PAGE> 27
All Pro Small Cap
Growth Portfolio: SAW: Nicholas S. Battelle, CFA, has served as
portfolio manager to the All Pro Small Cap
Growth Portfolio since May 1, 1998. Mr.
Battelle graduated from Duke University,
Columbia University Graduate School of
Business, joined SAW in 1982 and began
investment experience in 1970.
Husic: Husic's following investment professionals have
served as portfolio managers to the All Pro
Small Cap Growth Portfolio since May 1, 1998:
Frank J. Husic, CFA: B.S. and M.S. in
Industrial Administration, Carnegie-Mellon
University; M.S. and Ph.D. in Economics,
University of Pennsylvania; Joined Husic in
1987, began investment experience in 1971; and
(2) Ronald J. Leong, CFA: B.S. with High Honors
in Banking and Finance (two degrees), San
Francisco State University; Joined Husic in
, began investment experience in
.
All Pro Large Cap
Growth Portfolio: CKM: CKM's following investment professionals have
served as portfolio managers to the All Pro
Large Cap Growth Portfolio since May 1, 1998:
(1) George M. Cohen: B.S. in Mathematics,
Arizona State University; Joined CKM in 1981,
began investment experience in 1974; (2) Thomas
D. Klingenstein: B.A. in History, Williams
College; and (3) Richard C. Marks: B.A. in
Physics, Adelphi University; Joined CKM in
1990, began investment experience in 1979.
Geewax: Geewax's following investment professionals
have served as portfolio managers to the All
Pro Large Cap Growth Portfolio since May 1,
1998: (1) John J. Geewax: B.S., M.B.A., J.D.,
Ph.D. (ABD), University of Pennsylvania; Joined
Geewax in 1982, began investment experience in
1980; and (2) Christopher P. Ouimet: B.S.,
Albright College; M.B.A., St. Joseph's
University; Joined Geewax in 1994, began
investment experience in 1998.
Oak: Oak's following investment professionals have
served as portfolio managers to the All Pro
Large Cap Growth Portfolio since May 1, 1998:
(1) James D. Oelschlager: B.A. in Economics,
Denison University; J.D. Northwestern
University, Post-graduate coursework,
University of Chicago; Joined Oak in 1984,
began investment experience in 1968; (2) Donna
L. Barton: B.S. in Finance, University of
Akron; Joined Oak in 1984, began investment
experience in 1978; (3) Margaret L. Ballinger:
Studies in the School of Education, University
of Akron; Joined Oak in 1984, began investment
experience in 1975; and (4) Douglas S. MacKay:
B.S. in Finance, Miami University (Ohio);
M.B.A., Case Western Reserve University; Joined
Oak in 1990, began investment experience in
1989.
25
<PAGE> 28
All Pro Small Cap
Value Portfolio: DIA: Christianna Wood, CFA, Vice President and
Portfolio Manager, has served as portfolio
manager to the All Pro Small Cap Value
Portfolio since May 1, 1998. Ms. Wood received
a B.A. Cum Laude, Vassar College, and an
M.B.A., New York University, joined DIA in
1995, began investment experience in 1981.
1838: 1838's following investment professionals have
served as portfolio managers to the All Pro
Small Cap Value Portfolio since May 1, 1998:
(1) Edwin B. Powell: B.S., University of
Illinois; Joined 1838 in 1994, began investment
experience in 1967; (2) Cynthia R. Axelrod:
B.S. and M.B.A., Drexel University; Joined 1838
in 1995, began investment experience in 1988;
and (3) J. Kelly Flynn: A.B., Harvard
University and M.B.A., Wharton School; joined
1838 in 1997, began investment experience in
1997.
All Pro Large Cap
Value Portfolio: Equinox: Equinox's following investment professionals
have served as portfolio managers to the All
Pro Large Cap Value Portfolio since May 1,
1998: (1) Ronald J. Ulrich: Degrees in
Engineering and Business Administration, Lehigh
University; M.B.A. in Corporate Finance, New
York University; Joined Equinox in , began
investment experience in ; and (2) Wendy
D. Lee, CFA: Summa Cum Laude graduate from both
Rutgers College and The University of Chicago
Graduate School of Business with highest
distinction in Economics, Finance and
Accounting; joined Equinox in , began
investment experience in .
Harris Associates: Harris Associate's following investment
professionals have served as portfolio managers
to the All Pro Large Cap Value Portfolio since
May 1, 1998: (1) Robert H. Harper, CFA: B.S.,
University of Illinois; M.B.A., Northwestern
University; Joined Harris Associates in 1978,
began investment experience in 1969; and (2)
Michael J. Mangan, CPA, CFA: B.B.A., University
of Iowa; M.B.A., Northwestern University;
joined Harris Associates in , began
investment experience in .
Mellon Equity: Mellon Equity's following investment
professionals have served as portfolio managers
to the All Pro Large Cap Value Portfolio since
May 1, 1998: (1) William P. Rydell, CFA: Degree
in Economics, Wabash College; M.B.A.,
University of Michigan; Joined Mellon Equity in
1986, began investment experience in 1972; (2)
Robert A. Wilk, CFA: B.S. in Management and
Electrical Engineering, M.I.T.; M.S. in
Finance, M.I.T.; Joined Mellon Equity in ,
began investment experience in ; (3) John
R. O'Toole, CFA: B.A. in Economics, University
of Pennsylvania; M.B.A. in Finance, University
of Chicago; Joined Mellon Equity in 1989, began
investment experience in 1978; (4) Ronald P.
Gala, CFA: Degree in Business Administration,
Duquesne University; M.B.A. in Finance,
University of Pittsburgh; Joined Mellon Equity
in , began investment experience in ;
and (5) Stephen A. Falci, CFA: B.S. in
Economics and M.B.A. in Finance, New York
University; joined Mellon Equity in ,
began investment experience in .
26
<PAGE> 29
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. Expenses that are borne directly by a Portfolio include redemption
expenses, expenses of portfolio transactions, shareholder servicing costs,
expenses of registering shares under Federal and state securities laws,
interest, certain taxes, charges of the Portfolios' 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, SEC 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 a Portfolio or allocated on the basis of the size
of the respective Portfolios. 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 Growth, Money
Market, Bond, Managed, Aggressive Growth, All Pro Large Cap Growth, All Pro
Large Cap Value, All Pro Small Cap Growth and All Pro Small Cap Value
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 1997, 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 0.43%; Money Market
Portfolio 0.39%; Bond Portfolio 0.57%; Managed Portfolio 0.58%; Aggressive
Growth Portfolio 0.63%; and International Portfolio 1.02%. The All Pro
Portfolios had not commenced operations in 1997, and therefore no data is
available with respect to the expenses actually incurred by such Portfolios in
1997.
BROKERAGE ALLOCATION
The Advisers other than Wilshire 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
PFPC Inc. ("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 0.10% on the first $175 million, 0.075% on the next $175 million, 0.05% on
the next $175 million, and 0.03% in excess of $525 million, of each Portfolio's
net assets, computed daily and paid monthly, with a minimum aggregate annual fee
with respect to all Market Street Portfolios totaling $543,000. PFPC is a
wholly-owned subsidiary of PNC Bank.
DESCRIPTION OF THE FUND'S SHARES
GENERAL
Each of the Fund's 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
holders and annuity contract holders the opportunity to instruct such
shareholders as to how Fund shares allocable to their life insurance policies
and annuity contracts
27
<PAGE> 30
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 holders
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.
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") serves as the principal underwriter for the Fund's shares. 1717
is located at 300 Continental Drive, 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.
28
<PAGE> 31
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.
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, International and the All Pro
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.
29
<PAGE> 32
OTHER INFORMATION
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Pursuant to a custody agreement with the Fund, PNC Bank, N.A., located at
200 Stevens Drive, Lester PA 19113, 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.
PREPARING FOR YEAR 2000
In providing investment advisory services to the Portfolios, each Adviser
utilizes systems that may be affected by Year 2000 transition issues. The
Advisers and the Portfolios also rely on service providers, including banks,
custodians, administrators, transfer agents and distributors, that also may be
affected. Each of the Advisers has developed, and is in the process of
implementing, a Year 2000 transition plan, and is confirming that its service
providers also are so engaged. The resources that are being devoted to this
effort are substantial. It is difficult to predict with precision whether the
amount of resources ultimately devoted, or the outcome of these efforts, will
have any negative impact on the Advisers or the Portfolios. As of the date of
this prospectus, it is not anticipated that a shareholder will experience
negative effects on the shareholder's investment, or on the services provided in
connection therewith, as a result of Year 2000 transition implementation.
However, there can be no assurance that the Advisers will be successful, or that
interaction with other service providers will not impair the Fund's or an
Adviser's services at that time.
30
<PAGE> 33
- --------------------------------------------------------------------------------
MARKET STREET FUND, INC.
Prospectus
May 1, 1998
Market Street Fund, Inc. (the "Fund") is an open-end, diversified
management investment company consisting of eleven separate investment
portfolios (each a "Portfolio," together, the "Portfolios"), each of which has a
different investment objective. This prospectus describes the following seven
Portfolios:
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.
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 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.
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 and should be retained for
future reference.
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, 1998, 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. The Securities and Exchange Commission maintains a Web
site (http://www.sec.gov) that contains the Statement of Additional Information
and other information regarding the Portfolios and the Fund.
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.
- --------------------------------------------------------------------------------
<PAGE> 34
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 Growth 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................................... 18
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............................ 22
General................................................ 22
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
Preparing for Year 2000..................................... 24
</TABLE>
2
<PAGE> 35
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 eleven 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 Money Market, Bond, Managed, Aggressive Growth,
Growth, 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.
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 holders
and variable life insurance policy holders, or between the interests of holders
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 holders 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.
The Fund will provide annual and semi-annual reports to all investors. The
annual reports contain audited financial statements and other information about
the Portfolios, including additional information on performance. Investors may
request additional copies of any report, or make inquiries, by calling or
writing the Fund. The toll-free number and the address of the Fund are set forth
on the cover page of this prospectus.
3
<PAGE> 36
FINANCIAL HIGHLIGHTS
The following tables give information regarding income, expenses and
capital changes in the Money Market, Bond, Managed, Aggressive Growth,
International, Growth and Sentinel Growth Portfolios attributable to a share of
the class representing an interest in each Portfolio outstanding throughout the
periods indicated. The Aggressive Growth Portfolio commenced operations on May
1, 1989; the International Portfolio commenced operations on November 1, 1991;
the Sentinel Growth Portfolio 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 thereon which is included in the Statement of Additional
Information. The Statement of Additional Information is available upon request.
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
----------------------------------------------------------------------------------------
01/01/97 01/01/96(A) 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91
TO TO TO TO TO TO TO
12/31/97 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> <C>
Net asset value, beginning of
period.......................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income........... .05 .05 .05 .04 .03 .03 .06
----- ----- ----- ----- ----- ----- -----
Total from investment
operations.................. .05 .05 .05 .04 .03 .03 .06
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income......... (.05) (.05) (.05) (.04) (.03) (.03) (.06)
----- ----- ----- ----- ----- ----- -----
Total Distributions........... (.05) (.05) (.05) (.04) (.03) (.03) (.06)
----- ----- ----- ----- ----- ----- -----
Net asset value, end of period.... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== ===== =====
Total return.................. 5.33% 5.15% 5.61% 3.81% 2.59% 3.18% 5.69%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
$(000)........................ 64,339 54,197 34,615 21,040 12,506 8,138 7,047
Ratios of expenses to average
net assets(b)................. .39% .44% .50% .55% .65% .65% .53%
Ratios of net investment income
to average net assets......... 5.21% 5.03% 5.47% 3.86% 2.56% 3.12% 5.49%
<CAPTION>
MONEY MARKET PORTFOLIO
------------------------------------
01/01/90 01/01/89 01/01/88
TO TO TO
12/31/90 12/31/89 12/31/88
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of
period.......................... $1.00 $1.00 $1.00
----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income........... .07 .08 .07
----- ----- -----
Total from investment
operations.................. .07 .08 .07
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income......... (.07) (.08) (.07)
----- ----- -----
Total Distributions........... (.07) (.08) (.07)
----- ----- -----
Net asset value, end of period.... $1.00 $1.00 $1.00
===== ===== =====
Total return.................. 8.00% 9.02% 7.19%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
$(000)........................ 5,411 4,632 4,219
Ratios of expenses to average
net assets(b)................. .50% .55% .65%
Ratios of net investment income
to average net assets......... 7.72% 8.66% 7.03%
</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, 1997, 1996, 1995, 1994, 1993, 1992,
1991, 1990, 1989 and 1988 were as follows: 0.39%, 0.44%, 0.50%, 0.59%,
0.65%, 0.73%, 0.86%, 0.86%, 1.08% and 1.36%, respectively.
See accompanying notes to financial statements.
4
<PAGE> 37
FINANCIAL HIGHLIGHTS -- CONTINUED
Selected data for a share of capital stock outstanding throughout the
periods:
<TABLE>
<CAPTION>
BOND PORTFOLIO
----------------------------------------------------------------
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93(a)
TO TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
-------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $10.67 $ 11.00 $ 9.73 $ 11.21 $ 10.73
------ ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income........ .64 .63 .65 .62 .60
Net realized and unrealized
gain (loss) on
investments................ .33 (.34) 1.27 (1.23) .48
------ ----------- ----------- ----------- -----------
Total from investment
operations............. .97 .29 1.92 (.61) 1.08
------ ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
Dividends to shareholders
from net investment
income..................... (.66) (.62) (.65) (.60) (.60)
Dividends to shareholders
from net capital gains..... (.00) (.00) (.00) (.27) (.00)
------ ----------- ----------- ----------- -----------
Total distributions...... (.66) (.62) (.65) (.87) (.60)
------ ----------- ----------- ----------- -----------
Net asset value, end of
period....................... $10.98 $ 10.67 $ 11.00 $ 9.73 $ 11.21
====== =========== =========== =========== ===========
Total return............. 9.50% 2.86% 20.45% (5.62)% 10.32%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
$(000)..................... 23,350 17,087 14,402 10,098 10,160
Ratios of expenses to average
net assets(c).............. .57% 56% .60% .68% .75%
Ratios of net investment
income to average net
assets..................... 6.24% 6.08% 6.36% 6.14% 5.53%
Portfolio turnover rate...... 105% 133% 206% 151% 71%
<CAPTION>
BOND PORTFOLIO
-------------------------------------------------------------------
01/01/92 01/01/91 01/01/90 01/01/89(b) 01/01/88
TO TO TO TO TO
12/31/92 12/31/91 12/31/90 12/31/89 12/31/88
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period....................... $ 10.80 $ 10.04 $ 10.09 $ 9.89 $ 10.02
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income........ .64 .77 .79 .82 .76
Net realized and unrealized
gain (loss) on
investments................ (.03) .57 (.05) .20 (.13)
----------- ----------- ----------- ----------- -----------
Total from investment
operations............. .61 1.34 .74 1.02 .63
----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
Dividends to shareholders
from net investment
income..................... (.68) (.58) (.79) (.82) (.76)
Dividends to shareholders
from net capital gains..... (.00) (.00) (.00) (.00) (.00)
----------- ----------- ----------- ----------- -----------
Total distributions...... (.68) (.58) (.79) (.82) (.76)
----------- ----------- ----------- ----------- -----------
Net asset value, end of
period....................... $ 10.73 $ 10.80 $ 10.04 $ 10.09 $ 9.89
=========== =========== =========== =========== ===========
Total return............. 5.95% 13.93% 7.70% 10.57% 6.45%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
$(000)..................... 6,710 4,365 3,711 3,311 2,473
Ratios of expenses to average
net assets(c).............. .75% .63% .60% .62% .65%
Ratios of net investment
income to average net
assets..................... 6.34% 7.58% 8.00% 8.28% 7.74%
Portfolio turnover rate...... 4% 32% 53% 9% .13%
</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, 1997, 1996, 1995, 1994, 1993, 1992,
1991, 1990, 1989 and 1988 were as follows: 0.57%, 0.56%, 0.60%, 0.70%,
0.75%, 0.81%, 0.93%, 0.96%, 1.16% and 1.36%, respectively.
See accompanying notes to financial statements.
5
<PAGE> 38
FINANCIAL HIGHLIGHTS -- CONTINUED
Selected data for a share of capital stock outstanding throughout the
periods:
<TABLE>
<CAPTION>
MANAGED PORTFOLIO
------------------------------------------------------------------------------------------
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93(a) 01/01/92 01/01/91
TO TO TO TO TO TO TO
12/31/97 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> <C>
Net asset value, beginning of
period.......................... $14.68 $14.19 $ 11.94 $ 13.27 $ 12.25 $ 11.40 $ 9.81
------- ------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........... .54 .51 .55 .53 .40 .44 .51
Net realized and unrealized gain
(loss) on investments......... 2.49 1.07 2.28 (.77) 1.00 .88 1.47
------- ------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations.................. 3.03 1.58 2.83 (.24) 1.40 1.32 1.98
------- ------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income......... (.53) (.51) (.57) (.49) (.38) (.47) (.39)
Dividends to shareholders from
net capital gains............. (.12) (.58) (.01) (.60) (.00) (.00) (.00)
------- ------- ----------- ----------- ----------- ----------- -----------
Total distributions........... (.65) (1.09) (.58) (1.09) (.38) (.47) (.39)
------- ------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period.... $17.06 $14.68 $ 14.19 $ 11.94 $ 13.27 $ 12.25 $ 11.40
======= ======= =========== =========== =========== =========== ===========
Total return.................. 21.23% 11.88% 24.43% (1.82)% 11.62% 11.96% 20.49%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
$(000)........................ 56,068 43,431 36,002 29,363 28,984 15,946 12,564
Ratios of expenses to average
net assets(c)................. .58 .60% .66% .67% .80% .80% .68%
Ratios of net investment income
to average net assets......... 3.47% 3.68% 4.22% 4.34% 3.36% 3.88% 4.74%
Portfolio turnover rate......... 99% 106% 130% 75% 89% 32% 51%
Average commission rate(d)........ $0.0600 $0.0600 N/A N/A N/A N/A N/A
<CAPTION>
MANAGED PORTFOLIO
---------------------------------------
01/01/90 01/01/89(b) 01/01/88
TO TO TO
12/31/90 12/31/89 12/31/88
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value, beginning of
period.......................... $ 11.37 $ 10.63 $ 10.12
----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........... .57 .59 .50
Net realized and unrealized gain
(loss) on investments......... (1.53) .89 .51
----------- ----------- -----------
Total from investment
operations.................. (.96) 1.48 1.01
----------- ----------- -----------
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income......... (.57) (.61) (.50)
Dividends to shareholders from
net capital gains............. (.03) (.13) (.00)
----------- ----------- -----------
Total distributions........... (.60) (.74) (.50)
----------- ----------- -----------
Net asset value, end of period.... $ 9.81 $ 11.37 $ 10.63
=========== =========== ===========
Total return.................. (8.61)% 14.65% 10.60%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
$(000)........................ 10,197 10,028 8,015
Ratios of expenses to average
net assets(c)................. .65% .65% .65%
Ratios of net investment income
to average net assets......... 5.48% 5.74% 4.89%
Portfolio turnover rate......... 47% 23% 35%
Average commission rate(d)........ N/A 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, 1997, 1996, 1995, 1994, 1993, 1992,
1991, 1990, 1989 and 1988 were as follows: 0.58%, 0.60%, 0.66%, 0.73%,
0.80%, 0.84%, 0.95%, 0.98%, 1.11% and 1.24%, 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 SEC for all financial
statements with fiscal years beginning after September 1, 1995.
See accompanying notes to financial statements.
6
<PAGE> 39
FINANCIAL HIGHLIGHTS -- CONTINUED
Selected data for a share of capital stock outstanding throughout the
periods:
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO
---------------------------------------------------------------------------
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93(a) 01/01/92
TO TO TO TO TO TO
12/31/97 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............. $18.52 $17.38 $ 15.45 $ 15.45 $ 14.72 $ 16.68
------- ------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.......................... .17 .17 .20 (.01) (.01) .03
Net realized and unrealized gain (loss) on
investments.................................. 3.72 3.03 1.86 .01 .77 .38
------- ------- ----------- ----------- ----------- -----------
Total from investment operations............. 3.89 3.20 2.06 .00 .76 .41
------- ------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment
income....................................... (.18) (.19) (.00) .00 (.03) (.07)
Dividends to shareholders from net capital
gains........................................ (.04) (1.87) (.13) .00 (.00) (2.30)
------- ------- ----------- ----------- ----------- -----------
Total distributions.......................... (.22) (2.06) (.13) .00 (.03) (2.37)
------- ------- ----------- ----------- ----------- -----------
Net asset value, end of period................... $22.19 $18.52 $ 17.38 $ 15.45 $ 15.45 $ 14.72
======= ======= =========== =========== =========== ===========
Total return(c).............................. 21.21% 21.00% 13.48% 0% 5.20% 2.58%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)............... 48,574 34,098 23,822 15,430 12,223 8,029
Ratios of expenses to average net assets
(annualized)(d).............................. .63 .68% .76% .86% .90% .90%
Ratios of net investment income to average net
assets (annualized).......................... .95% 1.14% 1.32% (.10)% (.07)% .37%
Portfolio turnover............................. 37% 47% 89% 60% 60% 18%
Average commission rate(e)..................... $0.0600 $0.0600 N/A N/A N/A N/A
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO
---------------------------------------
01/01/91 01/01/90 05/01/89(b)
TO TO TO
12/31/91 12/31/90 12/31/89
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period............. $ 10.67 $ 9.87 $ 10.00
----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.......................... .08 .03 .09
Net realized and unrealized gain (loss) on
investments.................................. 5.93 1.04 .25
----------- ----------- -----------
Total from investment operations............. 6.01 1.07 .34
----------- ----------- -----------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment
income....................................... (.00) (.03) (.09)
Dividends to shareholders from net capital
gains........................................ (.00) (.24) (.38)
----------- ----------- -----------
Total distributions.......................... (.00) (.27) (.47)
----------- ----------- -----------
Net asset value, end of period................... $ 16.68 $ 10.67 $ 9.87
=========== =========== ===========
Total return(c).............................. 56.33% 10.77% 8.31%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)............... 2,751 772 568
Ratios of expenses to average net assets
(annualized)(d).............................. .79% .75% .50%
Ratios of net investment income to average net
assets (annualized).......................... .80% .27% 1.00%
Portfolio turnover............................. 95% 27% 32%
Average commission rate(e)..................... 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 for the years ended
December 31, 1997, 1996, 1995, 1994, 1993, 1992, 1991, and 1990 and for the
period ended December 31, 1989, were as follows: 0.63%, 0.68%, 0.76%, 0.89%,
0.90%, 1.00%, 1.32%, 2.43% and 4.11%, 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 SEC for all financial
statements with fiscal years beginning after September 1, 1995.
See accompanying notes to financial statements.
7
<PAGE> 40
FINANCIAL HIGHLIGHTS -- CONTINUED
Selected data for a share of capital stock outstanding throughout the
periods:
<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO
-----------------------------------------------------------------------------------------
01/01/97 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 TO
12/31/97 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> <C>
Net asset value, beginning of
period.............................. $13.41 $12.86 $ 11.63 $ 11.87 $ 9.00 $9.74 $ 10.00
------- ------- ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............... .11 .11 .16 .05 .06 .08 .01
Net realized and unrealized gain
(loss) on investments............. 1.08 1.23 1.45 (.02) 3.09 (.81) (.27)
------- ------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations...................... 1.19 1.34 1.61 .03 3.15 (.73) (.26)
------- ------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
Dividends to shareholders from net
investment income................. (.11) (.16) (.07) (.03) (.08) (.00) (.00)
Dividends to shareholders from net
capital gains..................... (.88) (.63) (.31) (.24) (.20) (.01) (.00)
------- ------- ----------- ----------- ----------- ----------- -----------
Total distributions............... (.99) (.79) (.38) (.27) (.28) (.01) (.00)
------- ------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period........ $13.61 $13.41 $ 12.86 $ 11.63 $ 11.87 $9.00 $ 9.74
======= ======= =========== =========== =========== =========== ===========
Total return(b)................... 9.66% 10.89% 14.31% .26% 36.11% (7.30)% (2.80)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000).... 62,513 50,955 36,642 26,212 13,682 6,727 4,979
Ratios of expenses to average net
assets(c)......................... 1.02% 1.05% 1.15% 1.32% 1.50% 1.50% 1.48%
Ratios of net investment income to
average net assets................ 1.13% 1.08% 1.21% .76% .68% 1.05% .26%
Portfolio turnover.................. 37% 35% 45% 32% 37% 35% 1%
Average commission rate(d).......... $0.0234 $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 for the years ended
December 31, 1997, 1996, 1995, 1994, 1993, 1992 and the period ended
December 31, 1991 were as follows: 1.02%, 1.05%, 1.15%, 1.32%, 1.50%, 2.65%
and 3.40%, 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 SEC for all financial
statements with fiscal years beginning after September 1, 1995.
See accompanying notes to financial statements.
8
<PAGE> 41
FINANCIAL HIGHLIGHTS -- CONTINUED
Selected data for a share of capital stock outstanding throughout the
periods:
<TABLE>
<CAPTION>
GROWTH PORTFOLIO
----------------------------------------------------------------------------------------
01/01/97(a) 01/01/96 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90
TO TO TO TO TO TO TO TO
12/31/97 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> <C>
Net asset value, beginning of
period............................ $18.10 $16.36 $14.00 $14.09 $13.73 $13.88 $12.08 $13.16
------- ------- ------- ------- ------- ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............. .35 .46 .47 .43 .38 .46 .50 .55
Net realized and unrealized gain
(loss) on investments........... 3.49 2.54 3.41 (.10) .94 .17 1.71 (.25)
------- ------- ------- ------- ------- ------ ------ ------
Total from investment
operations.................... 3.84 3.00 3.88 .33 1.32 .63 2.21 .30
------- ------- ------- ------- ------- ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net
investment income............... (.38) (.48) (.46) (.41) (.39) (.46) (.41) (.53)
Dividends to shareholders from net
capital gains................... (2.10) (.78) (1.06) (.01) (.35) (.32) (.00) (.85)
Dividends to shareholders in
excess of net investment
income.......................... -- -- -- -- (.22) -- -- --
------- ------- ------- ------- ------- ------ ------ ------
Total distributions............. (2.48) (1.26) (1.52) (.42) (.96) (.78) (.41) (1.38)
------- ------- ------- ------- ------- ------ ------ ------
Net asset value, end of period...... $19.46 $18.10 $16.36 $14.00 $14.09 $13.73 $13.88 $12.80
======= ======= ======= ======= ======= ====== ====== ======
Total Return.................... 24.32% 19.58% 30.39% 2.40% 9.43% 4.74% 18.50% 2.39%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
$(000).......................... 267,389 198,948 161,899 115,191 109,534 82,881 55,357 35,658
Ratios of expenses to average net
assets(c)....................... .43% .50% .61% .63% .76% .79% .76% .75%
Ratios of net investment income to
average net assets.............. 2.01% 2.80% 3.20% 3.10% 2.86% 3.53% 3.91% 4.27%
Portfolio turnover rate........... 108% 72% 61% 63% 51% 35% 28% 47%
Average commission rate(d)........ $0.0600 $0.0600 N/A N/A N/A N/A N/A N/A
<CAPTION>
GROWTH PORTFOLIO
----------------------
01/01/89(b) 01/01/88
TO TO
12/31/89 12/31/88
----------- --------
<S> <C> <C>
Net asset value, beginning of
period............................ $11.24 $ 9.99
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............. .51 .46
Net realized and unrealized gain
(loss) on investments........... 2.87 1.36
------ ------
Total from investment
operations.................... 3.38 1.82
------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net
investment income............... (.53) (.43)
Dividends to shareholders from net
capital gains................... (.93) (.14)
Dividends to shareholders in
excess of net investment
income.......................... -- --
------ ------
Total distributions............. (1.46) (.57)
------ ------
Net asset value, end of period...... $13.16 $11.24
====== ======
Total Return.................... 30.45% 18.50%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
$(000).......................... 25,954 14,287
Ratios of expenses to average net
assets(c)....................... .72% .65%
Ratios of net investment income to
average net assets.............. 4.26% 4.52%
Portfolio turnover rate........... 60% 32%
Average commission rate(d)........ N/A N/A
</TABLE>
- ---------------
(a) On May 1, 1997, the investment adviser was changed from Newbold's Asset
Management, Inc. to Sentinel Advisors Company.
(b) On May 1, 1989, the investment adviser was changed from Providentmutual
Investment Management Company to Newbold's Asset Management, Inc.
(c) Expense ratios before reimbursement of expenses by affiliated insurance
company for the years ended December 31, 1997, 1996, 1995, 1994, 1993, 1992,
1991, 1990, 1989 and 1988 were as follows: 0.43%, 0.50%, 0.61%, 0.67%,
0.76%, 0.82%, 0.98%, 1.01%, 1.13% and 1.25%, 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 SEC for all financial
statements with fiscal years beginning after September 1, 1995.
See accompanying notes to financial statements.
9
<PAGE> 42
FINANCIAL HIGHLIGHTS -- CONTINUED
Selected data for a share of capital stock outstanding throughout the
periods:
<TABLE>
<CAPTION>
SENTINEL GROWTH PORTFOLIO
--------------------------------------------------------------------------------------------------
01/01/97 03/18/96(a)
TO TO
12/31/97 12/31/96
-------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $11.14 $10.00
------- -------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income....... .04 .05
Net realized and unrealized
gain (loss) on
investments............... 3.47 1.09
------- -------------
Total from investment
operations.............. 3.51 1.14
------- -------------
LESS DISTRIBUTIONS:
Dividends to shareholders
from net investment
income.................... (.05) (.00)
Dividends to shareholders
from net capital gains.... (.01) (.00)
------- -------------
Total distributions....... (.06) (.00)
------- -------------
Net asset value, end of
period...................... $14.59 $11.14
======= =============
Total return.............. 31.58% 11.40%(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
$(000).................... 8,362 5,664
Ratios of expenses to
average net assets
(annualized)(b)........... .90% .90%
Ratios of net investment
income to average net
assets (annualized)....... .36% .57%
Portfolio turnover.......... 155% 75%
Average commission rate(d).... $0.0600 $ 0.0594
<CAPTION>
SENTINEL GROWTH PORTFOLIO
-----------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period......................
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.......
Net realized and unrealized
gain (loss) on
investments...............
Total from investment
operations..............
LESS DISTRIBUTIONS:
Dividends to shareholders
from net investment
income....................
Dividends to shareholders
from net capital gains....
Total distributions.......
Net asset value, end of
period......................
Total return..............
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
$(000)....................
Ratios of expenses to
average net assets
(annualized)(b)...........
Ratios of net investment
income to average net
assets (annualized).......
Portfolio turnover..........
Average commission rate(d)....
</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,
1997, 1996 was as follows: 1.35% and 1.51% (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 SEC for all Financial
statements with fiscal years beginning after September 1, 1995.
See accompanying notes to financial statements.
10
<PAGE> 43
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 securities of
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 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.
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).
11
<PAGE> 44
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
(c) the maturity of the repurchase agreement does not exceed 30
days.
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's money market instruments 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.
The Portfolio purchases securities issued by U.S. and foreign corporations
and by U.S. and foreign governments and their agencies and instrumentalities.
Securities of foreign issuers are only purchased if they are investment grade
quality, denominated in U.S. dollars and income from such securities is paid in
U.S. dollars. Investment in securities of foreign issuers entail certain risks
not found in securities of domestic issuers. See "Foreign Securities."
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
12
<PAGE> 45
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 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 the Managed 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. 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 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.
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.
13
<PAGE> 46
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.
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 depositary receipts ("ADRs"),
European depositary receipts ("EDRs"), and global depositary 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.)
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 and in "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.
14
<PAGE> 47
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 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
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 in which the
Money Market Portfolio may invest.
SHORT-TERM TRADING
Except for the Bond and Managed Portfolios, 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.
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
15
<PAGE> 48
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, a
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.
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 a 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 Bond Portfolio, 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.
16
<PAGE> 49
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 these Portfolios' investments in those countries and the
availability to the Portfolio of additional investments in those countries.
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 instruments by economic recession or substantial interest rate
increases, by changing public perceptions of the 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, SAC or TBC.
17
<PAGE> 50
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY SECURITIES
Each Portfolio other than the Sentinel Growth 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 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 from banks or through reverse repurchase
agreements in amounts up to 30% of its total assets (including the amount
borrowed). Each Portfolio also may, to the extent permitted by applicable law,
borrow up to an additional 5% of its total assets for temporary purposes, and
may obtain such short-term credits as may be necessary for the clearance of
purchases and sales of portfolio securities and purchase securities on margin to
the extent permitted by applicable law. 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 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 30% of the value of the respective Portfolio's total assets.
Under no circumstances will a Portfolio enter into a reverse repurchase
agreement with Provident Mutual, PLACA, NLIC, SAC or TBC.
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
18
<PAGE> 51
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
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, provide the appropriate Portfolio(s) with investment advice and
manage 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.
Money Market, Bond, Managed, Aggressive Growth, Growth, and Sentinel Growth
Portfolios. Sentinel Advisors Company serves as investment adviser for the
Money Market, Bond, Managed, Aggressive Growth, Growth, 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 Sentinel
Growth Portfolio; on April 25, 1996 with respect to the Money Market Portfolio
and on May 1, 1997 with respect to the Growth 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 NLIC; 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 NLIC, 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
19
<PAGE> 52
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.
COMPENSATION OF ADVISERS
<TABLE>
<CAPTION>
MAXIMUM ANNUAL RATE
1997 ANNUAL RATE (AS % OF (AS % OF AVERAGE
PORTFOLIO ADVISER AVERAGE DAILY NET 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%
......... TBC 0.375% 0.375%
(sub-adviser)
Growth................ SAC 0.33%** 0.50%
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 1996 and through May 1, 1997, Newbold's Asset Management, Inc. served
as investment adviser for the Growth Portfolio and received compensation
from the Fund at this effective annual rate.
PORTFOLIO MANAGERS
Growth, Managed, Money Market, Bond, Sentinel Growth and Aggressive Growth
Portfolios.
Respecting the Growth, Money Market, Bond, Managed, Sentinel Growth and
Aggressive Growth Portfolios, SAC employs a team approach in managing the
Portfolios. The management teams are comprised of a lead portfolio manager,
other portfolio managers and research analysts. Each team includes members with
one or more areas of expertise and shares the responsibility for providing
ideas, information and knowledge in managing the Portfolios. Rodney A. Buck,
Chief Executive Officer of SAC, is also Chairman and Chief Executive Officer of
National Life Investment Management Company, Inc., and Senior Vice President and
Chief Investment Officer of NLIC. Mr. Buck has been employed by SAC or its
affiliates since 1972. There are three investment management teams: an Equity
Value Team, headed by Richard A. Pender, Senior Vice President of SAC; an Equity
Growth Team, headed by Robert L. Lee, Senior Vice President of SAC; and a Fixed
Income Team, headed by David M. Brownlee, Senior Vice President of SAC.
Each of Messrs. Buck, Pender, Lee and Brownlee is a Chartered Financial
Analyst. Mr. Pender has been associated with SAC or its affiliates since 1986.
Mr. Lee joined SAC in 1993. Prior to that time he was a Vice President at
Shawmut National Corporation. Mr. Brownlee also joined SAC in 1993; prior to
that he was a Managing Director at Aetna Life and Casualty.
Growth Portfolio. The Growth Portfolio is managed by Mr. Pender and Daniel
J. Manion, Vice Presidents of SAC, and have been the lead portfolio managers of
the Growth Portfolio since 1997. Mr. Pender and Mr. Manion have been members of
the Growth Portfolio management team since 1994. Mr. Manion, a Chartered
Financial Analyst, has been associated with SAC since 1993; prior to that he was
associated with Wright Investors' Service.
Managed Portfolio. The Managed Portfolio is managed by a team consisting
of Mr. Buck, Mr. Pender and Richard D. Temple, Vice President of SAC. Mr. Buck
has been the Portfolio's portfolio manager since
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<PAGE> 53
1982. Mr. Temple is a fixed-income portfolio manager who has been employed by
SAC or its affiliates since 1969.
Money Market Portfolio. The Money Market Portfolio is managed by Mr.
Temple and Darlene Coppola, Money Market Trader of SAC. Ms. Coppola has been
employed by SAC or its affiliates since 1974.
Bond Portfolio. The Bond Portfolio is managed by Mr. Temple and William C.
Kane, Vice President of SAC. Mr. Temple has been the lead portfolio manager of
the Bond Portfolio since 1985. Mr. Kane is a Chartered Financial Analyst, and
has been employed by SAC or its affiliates since 1992. Prior to joining SAC, Mr.
Kane was employed by Chase Manhattan Bank.
Aggressive Growth Portfolio. The Aggressive Growth Portfolio is managed by
Scott T. Brayman, Vice President of SAC, and Mr. Lee. Mr. Brayman and Mr. Lee
have been the lead portfolio managers of the Portfolio since 1997. Mr. Brayman
is a Chartered Financial Analyst, and has been with SAC since 1995. He has been
involved with the Aggressive Growth Portfolio since he joined SAC. Prior to
joining SAC, he was associated with Argyle Capital Management, Inc.
Sentinel Growth Portfolio. The Sentinel Growth Portfolio is managed by Mr.
Lee, since November 1993.
International Portfolio. Sandor Cseh, Senior Vice President and Director
of International of TBC, has been the portfolio manager for the International
Portfolio since 1991. Sandor Cseh has over 21 years experience in investment
management.
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 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. NLIC
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 the Sentinel Growth Portfolio. In 1997 NLIC reimbursed $30,617 to
the Sentinel Growth Portfolio. For fiscal year 1997, each Portfolio bore total
expenses of the average daily net assets of the Portfolio, and net of the
reimbursement by Provident Mutual and NLIC, as follows: Growth 0.43% Money
Market Portfolio 0.39%; Bond Portfolio 0.57%; Managed Portfolio 0.58%;
Aggressive Growth Portfolio 0.63%; International Portfolio 1.02%; and Sentinel
Growth Portfolio 0.90%.
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
PFPC, Inc. ("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 0.10% on the first $175 million, 0.075% on the next $175 million, 0.05% on
the next $175 million, and 0.03% in excess of $525 million, of each Portfolio's
net assets, computed daily and paid monthly, with a minimum aggregate annual fee
with respect to all Market Street Portfolios totaling $543,000. PFPC is a
wholly-owned subsidiary of PNC Bank.
21
<PAGE> 54
DESCRIPTION OF THE FUND'S SHARES
GENERAL
Each of the Fund's 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
holders and annuity contract holders 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 holders 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.
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.
22
<PAGE> 55
Pursuant to a distribution agreement with the Fund, 1717 Capital Management
Company ("1717") serves as the principal underwriter for the Fund's shares. 1717
is located at 300 Continental Drive, 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.
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.
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 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 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.
23
<PAGE> 56
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, N.A., located at
200 Stevens Drive, Lester, Pennsylvania 19113, 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.
PREPARING FOR YEAR 2000
In providing investment advisory services to the Portfolios, each Adviser
utilizes systems that may be affected by Year 2000 transition issues. The
Advisers and the Portfolios also rely on service providers, including banks,
custodians, administrators, transfer agents, and distributors, that also may be
affected. Each of the Advisers has developed, and is in the process of
implementing, a Year 2000 transition plan, and is confirming that its service
providers also are so engaged. The resources that are being devoted to this
effort are substantial. It is difficult to predict with precision whether the
amount of resources ultimately devoted, or the outcome of these efforts, will
have any negative impact on the Advisers or the Portfolios. As of the date of
this prospectus, it is not anticipated that a shareholder will experience
negative effects on the shareholder's investment, or on the services provided in
connection therewith, as a result of Year 2000 transition implementation.
However, there can be no assurance that the Advisers will be successful, or that
interaction with other service providers will not impair the Fund's or an
Adviser's services at that time.
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MARKET STREET FUND, INC.
103 BELLEVUE PARKWAY
WILMINGTON, DE 19809
302-791-1700
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1998
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,
1998, 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............................. 3
Portfolio Turnover.......................................... 7
Management of the Fund...................................... 8
Investment Advisory and Other Services...................... 9
Portfolio Transactions and Brokerage Allocation............. 15
Determination of Net Asset Value............................ 15
Redemption of Shares........................................ 17
Taxes....................................................... 17
Capital Stock............................................... 18
Code of Ethics.............................................. 19
Other Services.............................................. 20
Financial Statements........................................ F-1
Appendix A--Description of Money Market Instruments and
Commercial Paper and Bond Ratings......................... A-1
</TABLE>
Form 15732B 5.97
<PAGE> 58
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 eleven separate investment portfolios (each a
"Portfolio," together, the "Portfolios"). The Portfolios do not intend to
concentrate their respective investments in a particular industry or group of
industries.
The Fund serves as an investment medium for variable life insurance
policies and variable annuity contracts issued by Provident Mutual Life
Insurance Company ("Provident Mutual"), Providentmutual Life and Annuity Company
of America ("PLACA") and National Life Insurance Company ("NLIC") of Montpelier,
Vermont. Other than the shares sold directly to Provident Mutual to seed the
Managed, Aggressive Growth, International, All Pro Large Cap Growth, All Pro
Large Cap Value, All Pro Small Cap Growth and All Pro Small Cap Value
Portfolios, and to NLIC to seed the Sentinel Growth Portfolio, 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 holders of the Fund's shares, Provident Mutual and PLACA
together currently control 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, 1997, no policy holder 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, 1997, the officers and directors of the Fund as a
group did not beneficially own as policy holders 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 eleven 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 may:
(1) with respect to 75% of the Portfolio's total assets, purchase
securities of an issuer (other than the U.S. Government, its agencies or
instrumentalities), if (a) such purchase would cause more than 5% of the
Portfolio's total assets taken at market value to be invested in the
securities of such issuer, 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;
(2) invest 25% or more of its total assets in the securities of one or
more issuers conducting their principal business activities in the same
industry (excluding the U.S. Government or any of its agencies or
instrumentalities);
(3) borrow money, except a Portfolio may (a) borrow from banks (as
defined in the 1940 Act) or through reverse repurchase agreements in
amounts up to 30% of its total assets (including the amount borrowed), (b)
to the extent permitted by applicable law, borrow up to an additional 5% of
its total assets for temporary purposes, (c) obtain such short-term credits
as may be necessary for the clearance of purchases and sales of portfolio
securities, and (d) purchase securities on margin to the extent permitted
by applicable law;
2
<PAGE> 59
(4) make loans, except through (a) the purchase of debt obligations in
accordance with the Portfolio's investment objective and policies, (b)
repurchase agreements with banks, broker-dealers and other financial
institutions, and (c) loans of securities as permitted by applicable law;
(5) underwrite securities issued by others, except to the extent that
the sale of portfolio securities by the Portfolio may be considered an
underwriting;
(6) purchase, hold or deal in real estate, although a Portfolio may
purchase and sell securities that are secured by real estate or interests
therein, securities of real estate investment trusts and mortgage-related
securities and may hold and sell real estate acquired by a Portfolio as a
result of the ownership of securities;
(7) invest in commodities or commodity contracts, except that the
Portfolio may invest in currency and financial instruments and contracts
that are commodities or commodity contracts; or
(8) issue senior securities to the extent such issuance would violate
applicable law.
The following restrictions are not fundamental policies and may be changed
without the approval of the outstanding voting shares of the affected Portfolio.
No Portfolio may:
(1) sell securities short or maintain a short position except for
short sales against the box; or
(2) invest more than 25% of the value of its total assets in the
securities of foreign issuers and non-dollar securities. This policy does
not apply to the International Portfolio.
(3) acquire any security which is not readily marketable if more than
15% of the net assets of the Portfolio (other than the Money Market
Portfolio), and 10% of the net assets of the Money Market Portfolio, taken
at market value, would be invested in such securities.
Except for the limitations on borrowing from banks, if the above percentage
restrictions are adhered to at the time of investment, a later increase or
decrease in such percentage resulting from a change in values of securities or
amount of net assets will not be considered a violation of any of the foregoing
restrictions.
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. Each Portfolio (except the Money Market Portfolio) will not
invest more than 15%, and the Money Market Portfolio will not invest more than
10%, of its net 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 or the investment
sub-advisers to the All Pro Portfolios.
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
3
<PAGE> 60
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, Aggressive Growth and All Pro 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 which a Portfolio may invest 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 a 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 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.
A 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.
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.
4
<PAGE> 61
ILLIQUID ASSETS
No Portfolio (other than the Money Market Portfolio) may invest more than
15%, and the Money Market Portfolio may not invest more than 10%, of the value
of its net assets in securities that are not readily marketable. This limit does
not apply to a Portfolio's investment in 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 does apply to repurchase agreements
maturing in more than seven days. This restriction also applies to securities
received as a result of a corporate reorganization or similar transaction
affecting readily marketable securities already held by the Fund's Portfolios.
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. rated BB or lower as rated by
Standard & Poors Corporation ("Standard & Poor's") or Ba or lower 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
5
<PAGE> 62
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 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
To the extent that a Portfolio invests in foreign securities, the value of
its assets as measured in United States dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange control
regulations, and the Portfolio may incur costs in connection with conversions
between various currencies.
The 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.
The 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
6
<PAGE> 63
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 movement is extremely difficult, and the successful execution of a
short-term hedging strategy is highly uncertain. The 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, the 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.
The 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.
REAL ESTATE INVESTMENT TRUSTS
The Portfolios may invest in shares of real estate investment trusts
("REITs"). REITs are pooled investment vehicles that invest primarily in income
producing real estate or real estate related loans or interests. REITs generally
are classified as equity REITs, mortgage REITs or a combination of equity and
mortgage REITs. Equity REITs invest the majority of their assets directly in
real property and derive income primarily from the collection of rents. Equity
REITs can also realize capital gains by selling properties that have appreciated
in value. Mortgage REITs invest the majority of their assets in real estate
mortgages and derive income from the collection of interest payments. REITs are
not taxed on income distributed to shareholders provided they comply with
several requirements of the Code. A Portfolio will indirectly bear its
proportionate share of any expenses paid by REITs in which it invests in
addition to the expenses paid by the Portfolio.
Investing in REITs involves certain unique risks. Equity REITs may be
affected by changes in the value of the underlying property owned by such REITs,
while mortgage REITs may be affected by the quality of any credit extended.
REITs are dependent upon management skills, are not diversified (except to the
extent the Code requires), and are subject to the risks of financing projects.
REITs are subject to heavy cash flow dependency, default by borrowers,
self-liquidation, and the possibilities of failing to qualify for the exemption
from tax for distributed income under the Code and failing to maintain their
exemptions from the 1940 Act. REITs (especially mortgage REITs) are also subject
to interest rate risks.
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
7
<PAGE> 64
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. If a Portfolio's portfolio turnover
rate exceeds 100%, it may result in correspondingly increased brokerage expenses
and other acquisition costs to that Portfolio. (See "Portfolio Transactions and
Brokerage Allocation.")
No portfolio turnover rate is 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.
The Fund cannot predict precisely the turnover rate for any Portfolio, but
expects that the annual turnover rate generally will not exceed 68% for the All
Pro Large Cap Growth Portfolio, 106% for the All Pro Small Cap Growth Portfolio,
70% for the All Pro Large Cap Value Portfolio, and 67% for the All Pro Small Cap
Value Portfolio.
The annual portfolio turnover rates for the Growth Portfolio for 1997,
1996, and 1995 were 108%, 72% and 61%, respectively. The annual portfolio
turnover rates for the Bond Portfolio for 1997, 1996, and 1995 were 105%, 133%,
and 206%, respectively. The annual portfolio turnover rates for the Managed
Portfolio for 1997, 1996, and 1995 were 99%, 106%, and 130%, respectively. The
annual portfolio turnover rates for the Aggressive Growth Portfolio for 1997,
1996, and 1995 were 37%, 47%, and 89%, respectively. The annual portfolio
turnover rates for the International Portfolio for 1997, 1996, and 1995 were
37%, 35%, and 45%, respectively. The annual portfolio turnover rates for the
Sentinel Growth Portfolio for 1997 and 1996 were 155% and 75%; no turnover rate
is supplied for the Sentinel Growth Portfolio for 1995 because this portfolio
did not commence operations until March 1, 1996.
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>
Mr. Robert W. Kloss*.............. Director Director since April 22, 1998;
Age 49 President and Chief Executive
1050 Westlakes Drive Officer ("CEO") of PMLIC since
Berwyn, Pennsylvania 19312 November 1, 1994; 1984- 1994,
President and CEO of Covenant Life
Insurance Company
Dr. Alan Gart..................... Director Director since March 21, 1985; $7,500
Age 57 1982- Present, President of Alan
978 Warfield Lane Gart, Inc. (a consulting firm);
Huntingdon Valley, 1992-Present; Professor, Nova
PA 19006 Southeastern University; 1989-1992,
Professor, Southeastern
Massachusetts University;
1985-1989, Professor of Finance,
Lehman College of the City
University of New York
Dr. A. Gilbert Heebner............ Director Director since May 12, 1989; 1987- $6,000
Age 71 Present, Distinguished Professor of
2 Etienne, Arbordeau Economics, Eastern College;
Devon, PA 19333 1952-1987, Executive Vice President
and Chief Economist of CoreStates
Financial Corp.
</TABLE>
8
<PAGE> 65
<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>
Mr. Leo Slack..................... Director Director since February 11, 1998; $
Age 63 1996 Retired, 1964-1996 Vice
4700 White Tail Lane President, Combustion Engineers
Sarasota, FL 34238 Corporation
Mr. Edward S. Stouch.............. Director Director since December 12, 1985; $7,500
Age 80 1983, Retired; 1969-1983, Vice
216 Grandview Rd. President and Head of Personal
Media, PA 19063 Trust Investment Department, Trust
Division of Provident National Bank
Ms. Rosanne Gatta................. President 1993-Present, Vice President and 0
Treasurer of Provident Mutual
Ms. Sarah C. Lange................ Vice President 1983-Present, Vice President 0
Investments of Provident Mutual
Mr. James D. Kestner.............. Vice President 1994-Present, Vice President 0
Investments of Provident Mutual;
1975-1994, Vice President,
Investments of Covenant Life
Insurance Company
James G. Potter, Jr., Esq......... Vice President 1997-Present, Executive Vice 0
President, General Counsel and
Secretary; 1989-1997 Chief Legal
Officer Prudential Banks
Mr. Anthony T. Giampietro......... Treasurer 1990-Present, Assistant Treasurer 0
of Provident Mutual
Adam Scaramella, Esq.............. Secretary and 1995-Present, Counsel of Provident 0
Legal Officer Mutual; 1994-1995, Counsel of The
PMA Group; 1991-1994, New Jersey
Deputy Attorney General
</TABLE>
* "interested person" of the Fund for 1940 Act purposes.
As of the date of this Statement of Information, officers and directors of
the Fund as a group own less than 1% of the outstanding shares of the Fund and
of each Portfolio. 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 1997 were $21,000. 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.
INVESTMENT ADVISORY AND OTHER SERVICES
GENERAL INFORMATION AND HISTORY
The Fund's investment advisers are: for the International, All Pro Large
Cap Growth, All Pro Large Cap Value, All Pro Small Cap Growth, and All Pro Small
Cap Value Portfolios -- Providentmutual Investment Management Company ("PIMC");
and for the Growth, Money Market, Bond, Managed, Sentinel Growth and Aggressive
Growth Portfolios -- Sentinel Advisors Company ("SAC"). Prior to May 1, 1997 the
investment adviser for the Growth Portfolio was Newbold's Asset Management, Inc.
("NAM").
On behalf of each Portfolio set forth below, PIMC has engaged one or more
respective investment advisers to serve as sub-adviser to such Portfolio. The
name of each sub-adviser to a Portfolio is set forth below opposite the relevant
Portfolio.
9
<PAGE> 66
<TABLE>
<CAPTION>
NAME OF PORTFOLIO NAME OF SUB-ADVISER
----------------- -------------------
<S> <C>
International Portfolio................. The Boston Company Asset Management, Inc. ("TBC")
All Pro Large Cap Growth Portfolio...... Cohen, Klingenstein & Marks, Inc. ("CKM")
Geewax, Terker & Co. ("Geewax")
Oak Associates, Ltd. ("Oak")
All Pro Small Cap Growth Portfolio...... Standish, Ayer and Wood ("SAW")
Husic Capital Management ("Husic")
All Pro Large Cap Value Portfolio....... Equinox Capital Management, Inc. ("Equinox")
Harris Associates, Inc. ("Harris")
Mellon Equity Associates ("Mellon Equity")
All Pro Small Cap Value Portfolio....... 1838 Investment Advisors ("1838")
Denver Investment Advisors ("DIA")
</TABLE>
Together, PIMC, SAC, TBC and the investment sub-advisers for the All Pro
Portfolios are the "Advisers."
PIMC has retained Wilshire Associates Incorporated as an investment
management consultant to assist it in identifying and evaluating the performance
of potential sub-advisers for each of the All Pro Portfolios.
On January 29, 1993, Provident Mutual and PLACA approved the Fund's
investment advisory agreements for the Bond, Managed, Aggressive Growth and
International Portfolios. On March 18, 1996 NLIC approved the Fund's investment
advisory agreement for the Sentinel Growth Portfolio. 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 place 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
10
<PAGE> 67
include SAC providing investment advisory services to the Money Market and
Sentinel Growth Portfolios, 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.
On April 29, 1998, the Fund's Board of Directors, including a majority of
the "non-interested" directors approved the investment advisory agreement
between the Fund and PIMC respecting PIMC providing investment advisory services
for the All Pro Large Cap Growth, All Pro Large Cap Value, All Pro Small Cap
Growth and All Pro Small Cap Value Portfolios, which was effective May 1, 1998.
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-interested" 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).
11
<PAGE> 68
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.
All Pro Large Cap Growth, All Pro Large Cap Value, All Pro Small Cap Growth
& All Pro Small Cap Value Portfolios. As an investment advisory fee, PIMC
receives .70% of the daily net assets of the All Pro Large Cap Growth and All
Pro Large Cap Value Portfolios, and .90% of the daily net assets of the All Pro
Small Cap Growth and All Pro Small Cap Value Portfolios.
The investment advisory fee incurred for NAM during 1997 with respect to
the Growth Portfolio was $223,312. The investment advisory fee incurred for PIMC
during 1997 with respect to the International Portfolio was $440,914. The total
investment advisory fee incurred for SAC during 1997 was $1,121,203, allocated
$67,663, $199,166, $185,551, $151,852 and $516,971 for the Bond, Managed,
Aggressive Growth, Money Market and Growth Portfolios, respectively.
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.
Expenses that are borne directly by the Portfolios include redemption
expenses, expenses of 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.
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
Portfolio. Provident Mutual has agreed to reimburse the Fund for such expenses
in excess of 0.40% of the average daily net asset value of each of the All Pro
Portfolios. 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. In 1996 and 1997
there were no reimbursements for the Growth, Money Market, Bond, Managed,
Aggressive Growth and International Portfolios. For the Sentinel Growth
Portfolio, the reimbursements made in 1996 and 1997 were $25,050 and $30,617,
respectively.
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.
12
<PAGE> 69
INVESTMENT SUB-ADVISORY AGREEMENTS
As stated in the Prospectus, PIMC has entered into an Investment
Sub-Advisory Agreement with TBC, 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
27, 1997, 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 1997 PIMC incurred $220,457 for investment advisory services rendered
by TBC in connection with the International Portfolio.
PIMC has retained Wilshire Associates Incorporated ("Wilshire") as an
investment management consultant to assist it in identifying and evaluating the
performance of potential sub-advisers for each of the All Pro Portfolios.
Wilshire does not participate in the selection of portfolio securities for any
Portfolio or in any way participate in the day-to-day management of the All Pro
Portfolios or the Fund. Wilshire assists PIMC in gathering data and performing
the quantitative analysis necessary to identify the styles and past performance
of potential sub-advisers. Wilshire also assists PIMC in performing similar
ongoing quantitative analysis of the performance of each All Pro Portfolio's
sub-advisers and in determining whether changes in a sub-adviser would be
desirable for a Portfolio. As compensation for such services, PIMC pays Wilshire
a sub-advisory fee equal to .05% of the average daily net assets of the All Pro
Portfolios.
On behalf of the All Pro Portfolios, and after consultation with Wilshire,
PIMC has selected, and has entered into Investment Sub-Advisory Agreements with,
the sub-advisers listed above under "Investment Advisory and Other Services."
The table below indicates the rate of compensation to be paid by PIMC to each
sub-adviser pursuant to the relevant Investment Sub-Advisory Agreement.
<TABLE>
<CAPTION>
RATE OF COMPENSATION
NAME OF PORTFOLIO SUB-ADVISER (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
----------------- ----------- ---------------------------------------------
<S> <C> <C>
All Pro Large Cap Growth Portfolio... CKM .35%
Geewax .30%
Oak .35%
All Pro Small Cap Growth Portfolio... SAW .50%
Husic .50%
All Pro Large Cap Value Portfolio.... Equinox .30% of the first $50 million in assets
.25% of assets above $50 million
Harris .65% of the first $50 million in assets
.60% of the next $50 million in assets
.55% of assets above $100 million
Mellon Equity .30%
All Pro Small Cap Value Portfolio.... 1838 .55%
DIA .75% of the first $25 million in assets
.65% of assets above $25 million
</TABLE>
13
<PAGE> 70
Each Investment Sub-Advisory Agreement entered into on behalf of an All-Pro
Portfolio was approved by a majority of the Fund's Board of Directors, including
a majority of its "non-interested" directors, at a meeting of the Board that
took place on April 29, 1998. Each Agreement became effective on May 1, 1998.
The initial term of each such Investment Sub-Advisory Agreement is two years,
and it will continue in effect from year to year thereafter 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
relevant All-Pro Portfolio's shareholders or (ii) the Fund's Board of Directors.
Each 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 the relevant sub-adviser, as the case may be, and is terminated automatically
in the event of its assignment.
INFORMATION ABOUT ADVISERS
The principal officers of PIMC are:
<TABLE>
<CAPTION>
POSITION WITH POSITION WITH
NAME PIMC THE FUND
---- ------------- -------------
<S> <C> <C>
Sarah Lange President none
James Benson Financial Officer none
Scott V. Carney Vice President none
Rosanne Gatta Vice President President
Daniel Hayes Vice President none
Timothy Henry Vice President none
James Kestner Vice President none
David Merkel Vice President none
Dean Miller Vice President none
William Rapp Vice President none
Richard J. Simon Vice President none
Steven Schweitzer Vice President none
Dina M. Welch Vice President None
Anthony T.
Gianpietro Treasurer Treasurer and Comptroller
William P. Loesche Legal Assistant Secretary
Officer--Secretary
Eugene M. Twardowski Assistant Secretary None
</TABLE>
The principal officers of SAC are:
<TABLE>
<CAPTION>
POSITION WITH POSITION WITH
NAME SAC THE FUND
---- ------------- -------------
<S> <C> <C>
Rodney A. Buck Chief Executive Officer None
Robert L. Lee,
Jr. Senior Vice President None
Richard A. Pender Senior Vice President None
David M. Brownlee Senior Vice President None
D. Russell Morgan Counsel None
Dean R. Howe Treasurer None
</TABLE>
14
<PAGE> 71
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
The Advisers other than Wilshire 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, other than the All Pro Portfolios, to
pay higher brokerage commissions to a firm solely because it has provided such
services. The sub-advisers to the All Pro Portfolios are authorized to consider,
in the selection of brokers and dealers to execute portfolio transactions, not
only the available prices and rates of brokerage commissions but also other
relevant factors which may include, without limitation, the execution
capabilities of such brokers and dealers, research, custody and other services
provided by such brokers and dealers which the sub-adviser believes will enhance
its general portfolio management capabilities, the size of the transaction, the
difficulty of execution, the operational facilities of such brokers and dealers,
the risk to such a broker or dealer of positioning a block of securities, and
the overall quality of brokerage and research services provided by such brokers
and dealers. In connection with the foregoing, a sub-adviser to an All Pro
Portfolio is specifically authorized to pay those brokers and dealers who
provide brokerage and research services to it, a higher commission than that
charged by other brokers and dealers if the sub-adviser determines in good faith
that the amount of such commission is reasonable in relation to the value of
such services in terms of either the particular transaction or in terms of the
sub-adviser's overall responsibilities with respect to the relevant Portfolio
segment and to any other client accounts or portfolios which the sub-adviser
advises. The execution of such transactions shall not be considered to represent
an unlawful breach of any duty created by a sub-advisory agreement or otherwise.
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, 1997 to December 31, 1997, the Fund paid
aggregate brokerage fees of $813,965, of which $585,281 was paid by the Growth
Portfolio, $22,837 was paid by the Managed Portfolio, $54,894 was paid by the
Aggressive Growth Portfolio, $19,172 was paid by the Sentinel Growth Portfolio,
and $131,781 was paid by the International Portfolio.
During the period from January 1, 1996 to December 31, 1996 the Fund paid
aggregate brokerage fees of $568,287, of which $383,187 was paid by the Growth
Portfolio, $12,001 was paid by the Managed Portfolio, $44,424 was paid by the
Aggressive Growth Portfolio, $12,441 was paid by the Sentinel Growth Portfolio
and $116,234 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.
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.
15
<PAGE> 72
The New York Stock Exchange currently is open each day, Monday through
Friday, except the following holidays: New Year's Day, Dr. Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas, and on the preceding Friday or subsequent
Monday when one of these holidays falls on a Saturday or Sunday, respectively.
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 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
16
<PAGE> 73
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 in 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"). As a regulated
investment company, each Portfolio is required to distribute to its shareholders
for each taxable year at least 90% of its investment company taxable income
(consisting generally of net investment income, net short-term capital gain, and
net gains from certain foreign currency transactions). 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. 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
17
<PAGE> 74
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.
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 eleven
classes--Growth Portfolio, Money Market Portfolio, Bond Portfolio, Managed
Portfolio, Aggressive Growth Portfolio, International Portfolio, Sentinel Growth
Portfolio, All Pro Large Cap Growth Portfolio, All Pro Large Cap Value
Portfolio, All Pro Small Cap Growth Portfolio and All Pro Small Cap Value
Portfolio common stock. The Money Market Portfolio currently consists of 150
million shares and the Growth Portfolio consists of 50 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 eleven existing classes.
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.
18
<PAGE> 75
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 pending purchases and sales of
portfolio securities (collectively referred to as "Advisory Persons"). 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, the sub-advisers
of the All Pro Portfolios or 1717 Capital Management Company ("1717"), 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 pending purchases and sales of portfolio securities (also "Advisory
Persons").
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 by
any of the directors, officers, or employees of any of the Fund, the Advisers,
or 1717. Advisory Persons are also prohibited from purchasing securities in an
initial public offering and 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.
19
<PAGE> 76
Certain specified transactions are exempt from the provisions of the Code of
Ethics. Each of the sub-advisers for the All Pro Portfolios has adopted a
similar code of ethics under Rule 17j-1, which codes impose substantially
identical restrictions on Advisory Persons of the Fund.
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, Sentinel Growth and International Portfolios in this
Statement of Additional Information and the financial highlights 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 LLP 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") serves, 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 is not 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.
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.
20
<PAGE> 77
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Statement of Net Assets as of December 31, 1997............. F-3
Statements of Operations for the Year Ended December 31,
1997...................................................... F-30
Statements of Changes in Net Assets for the Year Ended
December 31, 1997......................................... F-31
Statements of Changes in Net Assets for the Year Ended
December 31, 1997......................................... F-32
Financial Highlights........................................ F-33
Notes to Financial Statements, December 31, 1997............ F-40
</TABLE>
F-1
<PAGE> 78
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors
of the Market Street Fund, Inc.:
We have audited the accompanying statements of net assets 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, 1997, and the related statements of operations for the year
or period then ended and for the period ended December 12, 1997 for the Common
Stock Portfolio, the statements of changes in net assets for each of the two
years or periods then ended and the two periods in the period ended December 12,
1997 for the Common Stock Portfolio 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, 1997, 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, 1997, the results of their operations for the year or period then
ended and for the period ended December 12, 1997 for the Common Stock Portfolio,
the changes in their net assets for each of the two years or periods then ended
and the two periods in the period ended December 12, 1997 for the Common Stock
Portfolio 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
February 10, 1998
F-2
<PAGE> 79
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio
Statement of Net Assets, December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 95.0%
Aerospace -- 2.3%
Goodrich (B.F.) Co........................................ 118,500 $ 4,910,344
Boeing Co................................................. 25,392 1,242,621
------------
6,152,965
------------
Automobiles -- 2.0%
Ford Motor Co............................................. 111,000 5,404,312
------------
Banks -- 9.0%
Bank of New York Co., Inc................................. 81,400 4,705,937
BankAmerica Corp.......................................... 59,000 4,307,000
Chase Manhattan Corp...................................... 42,000 4,599,000
Citicorp.................................................. 28,300 3,578,181
First Union Corp.......................................... 89,500 4,586,875
Morgan (J.P.) & Co., Inc.................................. 20,000 2,257,500
------------
24,034,493
------------
Building Materials -- 1.7%
Sherwin Williams Co....................................... 165,000 4,578,750
------------
Business & Consumer Services -- 2.3%
Omnicom Group, Inc........................................ 145,600 6,169,800
------------
Computers Products -- 2.0%
Hewlett Packard Co........................................ 85,000 5,312,500
------------
Consumer Products -- 5.1%
Fortune Brands, Inc....................................... 154,000 5,707,625
Kimberly-Clark Corp....................................... 105,500 5,202,469
Rubbermaid, Inc........................................... 105,300 2,632,500
------------
13,542,594
------------
Containers -- 0.6%
*Bemis Co., Inc........................................... 38,900 1,714,031
------------
Drug -- 3.9%
American Home Products Corp............................... 68,700 5,255,550
Pfizer, Inc............................................... 68,600 5,114,987
------------
10,370,537
------------
Electrical Equipment -- 3.2%
Emerson Electric Co....................................... 78,400 4,424,700
General Electric Co....................................... 56,000 4,109,000
------------
8,533,700
------------
Electronic Instruments -- 1.7%
Avnet, Inc................................................ 67,000 4,422,000
------------
</TABLE>
F-3
<PAGE> 80
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio
Statement of Net Assets, December 31, 1997 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Energy -- 7.8%
Amoco Corp................................................ 38,000 $ 3,234,750
Chevron Corp.............................................. 37,000 2,849,000
Exxon Corp................................................ 78,000 4,772,625
Mobil Corp................................................ 73,700 5,320,219
Royal Dutch Petroleum Co.................................. 87,400 4,735,987
------------
20,912,581
------------
Finance -- 4.5%
American Express Co....................................... 66,300 5,917,275
Travelers Group, Inc...................................... 111,750 6,020,531
------------
11,937,806
------------
Foods -- 4.8%
CPC International, Inc.................................... 50,700 5,475,600
*McCormick & Co. Inc...................................... 25,800 722,400
Sara Lee Corp............................................. 115,500 6,504,094
------------
12,702,094
------------
Lodging -- 1.1%
Marriott International, Inc............................... 44,300 3,067,775
------------
Industrial Diversified -- 7.6%
Crown Cork & Seal Co., Inc................................ 103,400 5,182,925
Parker-Hannifin Corp...................................... 142,800 6,550,950
Rockwell International Corp............................... 63,400 3,312,650
Praxair, Inc.............................................. 117,000 5,265,000
------------
20,311,525
------------
Insurance -- 7.0%
Allstate Corp............................................. 63,300 5,752,387
American General Corp..................................... 92,500 5,000,781
American International Group, Inc......................... 47,300 5,143,875
Jefferson-Pilot Corp...................................... 37,000 2,881,375
------------
18,778,418
------------
Machinery & Instrumentation -- 1.8%
Deere & Co................................................ 85,000 4,956,562
------------
Medical Equipment & Supplies -- 1.9%
Johnson & Johnson......................................... 76,000 5,006,500
------------
Oil Field Equipment & Services -- 3.3%
Halliburton Co............................................ 88,500 4,596,469
Schlumberger Ltd.......................................... 52,700 4,242,350
------------
8,838,819
------------
</TABLE>
F-4
<PAGE> 81
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio
Statement of Net Assets, December 31, 1997 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Publishing -- 3.1%
Gannett, Inc.............................................. 78,000 $ 4,821,375
McGraw-Hill, Inc.......................................... 47,500 3,515,000
------------
8,336,375
------------
Railroads -- 3.3%
Canadian Pacific, Ltd..................................... 169,000 4,605,250
Union Pacific Corp........................................ 69,400 4,333,163
------------
8,938,413
------------
Retail -- 3.0%
May Department Stores Co.................................. 58,000 3,055,875
Sears, Roebuck & Co....................................... 110,000 4,977,500
------------
8,033,375
------------
Tobacco -- 1.0%
Philip Morris Cos., Inc................................... 57,500 2,605,469
------------
Utilities-Electric -- 7.1%
Duke Power Co............................................. 105,300 5,830,988
Florida Progress Crop..................................... 99,000 3,885,750
FPL Group, Inc............................................ 66,500 3,935,969
Pacificorp................................................ 193,000 5,271,313
------------
18,924,020
------------
Utilities-Gas -- 2.2%
Enron Corp................................................ 79,000 3,283,438
Sonat, Inc. .............................................. 58,100 2,658,075
------------
5,941,513
------------
Utilities-Telephone -- 1.7%
GTE Corp.................................................. 85,500 4,467,375
------------
TOTAL COMMON STOCK (COST $216,071,652).................. 253,994,302
------------
PREFERRED STOCK -- 0.7%
Microsoft Corp., Preferred Series A Convertible, 2.75%.... 22,000 1,977,250
------------
TOTAL PREFERRED STOCK (COST $1,874,124)................. 1,977,250
------------
</TABLE>
F-5
<PAGE> 82
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio
Statement of Net Assets, December 31, 1997 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
NUMBER
MATURITY OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER -- 4.4%
Merrill Lynch & Co., Inc., 5.90%.......................... 01/05/98 $1,700,000 $ 1,698,886
Merrill Lynch & Co., Inc., 6.00%.......................... 01/08/98 4,000,000 3,995,333
Associates Corp. of North America, 5.95%.................. 01/13/98 1,000,000 998,017
Pitney Bowes Credit Corp., 5.845%......................... 01/20/98 5,000,000 4,984,576
------------
TOTAL COMMERCIAL PAPER (COST $11,676,812)............... 11,676,812
------------
SHORT-TERM INVESTMENTS -- 0.3%
Temporary Investment Fund, Inc. -- TempCash.............. 883,397 883,397
------------
TOTAL SHORT-TERM INVESTMENTS (COST $883,397)............ 883,397
------------
TOTAL INVESTMENTS -- 100.4% (COST $230,505,985)......... 268,531,761
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.4)%............. (1,142,430)
------------
NET ASSETS -- 100.0%
(Equivalent to $19.46 per share based on 13,741,784 shares
of capital stock outstanding)........................... $267,389,331
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($267,389,331/13,741,784 shares outstanding).............. $ 19.46
============
</TABLE>
* Non-income producing.
See accompanying notes to financial statements.
F-6
<PAGE> 83
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Money Market Portfolio
Statement of Net Assets, December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CERTIFICATES OF DEPOSIT -- 2.3%
CoreStates Bank, N.A. 5.72%............................... 01/26/98 $1,500,000 $ 1,500,000
-----------
TOTAL CERTIFICATE OF DEPOSIT (COST $1,500,000).......... 1,500,000
-----------
COMMERCIAL PAPER -- 94.9%
Agriculture Production-Livestock & Animal Special -- 3.1%
Cargill, Inc., 5.58%...................................... 01/07/98 2,000,000 1,998,140
-----------
Bank -- 28.9%
BankAmerica Corp., 5.59%.................................. 01/08/98 1,000,000 998,913
BankAmerica Corp., 5.53%.................................. 01/20/98 2,000,000 1,994,163
Bank of New York, 5.80%................................... 01/16/98 1,500,000 1,496,375
CoreStates Capital Corp., 5.67%........................... 01/05/98 1,500,000 1,499,055
Morgan (J.P.) & Co., Inc., 5.60%.......................... 01/06/98 3,400,000 3,397,356
NationsBank Corp., 5.73%.................................. 02/19/98 3,000,000 2,976,602
National City Credit Corp., 5.75%......................... 02/05/98 3,000,000 2,983,229
Northern Trust Co. (Chicago), 5.68%....................... 01/22/98 1,250,000 1,245,858
Northern Trust Co. (Chicago), 5.73%....................... 02/17/98 2,000,000 1,985,038
-----------
18,576,589
-----------
Brokerage -- 5.3%
Merrill Lynch & Co., Inc., 5.65%.......................... 01/28/98 3,400,000 3,385,592
-----------
Finance -- 39.9%
Associates Corp. of North America, 5.69%.................. 02/02/98 3,000,000 2,984,827
Commercial Credit Corp., 5.77%............................ 02/06/98 2,500,000 2,485,575
Deere (John) Capital Corp., 5.53%......................... 01/14/98 2,250,000 2,245,507
Deere (John) Capital Corp., 5.60%......................... 01/14/98 500,000 498,989
General Electric Capital Corp., 5.82%..................... 01/16/98 1,500,000 1,496,362
General Electric Capital Corp., 5.72%..................... 02/09/98 1,500,000 1,490,705
GTE Finance Corp., 6.12%.................................. 01/20/98 3,300,000 3,289,341
Norwest Corp., 5.53%...................................... 01/15/98 3,300,000 3,292,903
Pitney Bowes Credit Corp., 5.845%......................... 01/22/98 3,150,000 3,139,260
Prudential Funding Corp., 5.55%........................... 01/09/98 2,250,000 2,247,225
Transamerica Financial Corp., 5.71%....................... 01/27/98 2,500,000 2,489,690
-----------
25,660,384
-----------
Consumer Finance -- 7.7%
Beneficial Corp., 6.06%................................... 01/12/98 2,000,000 1,996,297
Household Finance Corp., 5.55%............................ 01/23/98 3,000,000 2,989,825
-----------
4,986,122
-----------
Industrial -- 4.6%
Avnet, Inc., 5.85%........................................ 02/13/98 3,000,000 2,979,038
-----------
</TABLE>
F-7
<PAGE> 84
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Money Market Portfolio
Statement of Net Assets, December 31, 1997 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
NUMBER OF
MATURITY SHARES VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER (CONTINUED)
Oil -- 2.3% Texaco, Inc., 5.82%............................. 01/08/98 $1,500,000 $ 1,498,303
-----------
Utility - Electric -- 3.1%
Virginia Electric & Power, 5.77%.......................... 01/16/98 2,000,000 1,995,192
-----------
TOTAL COMMERCIAL PAPER (COST $59,581,057)............... 61,079,360
-----------
SHORT-TERM INVESTMENTS -- 3.3%
Temporary Investment Fund, Inc. -- TempCash............... 2,101,346 2,101,346
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $2,101,346).......... 2,101,346
-----------
TOTAL INVESTMENTS -- 100.5% (COST $64,680,706).......... 64,680,706
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.5)%............. (341,795)
-----------
NET ASSETS -- 100.0%
(Equivalent to $1.00 per share based on 64,338,969 shares
of capital stock outstanding)........................... $64,338,911
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($64,338,911/64,338,969 shares outstanding)............... $ 1.00
===========
</TABLE>
See accompanying notes to financial statements.
F-8
<PAGE> 85
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Bond Portfolio
Statement of Net Assets, December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. TREASURY BONDS -- 9.6%
U.S. Treasury Bonds, 6.00%................................ 02/15/26 $1,500,000 $ 1,496,910
U.S. Treasury Bonds, 6.375%............................... 08/15/27 700,000 738,668
-----------
TOTAL U.S. TREASURY BONDS (COST $2,213,204)............. 2,235,578
-----------
U.S. TREASURY NOTES -- 24.2%
U.S. Treasury Notes, 5.50%................................ 12/31/00 250,000 248,502
U.S. Treasury Notes, 7.50%................................ 02/15/05 2,000,000 2,198,240
U.S. Treasury Notes, 6.875%............................... 05/15/06 1,500,000 1,604,640
U.S. Treasury Notes, 6.125%............................... 08/15/07 500,000 513,720
U.S. Treasury Notes, 7.25%................................ 08/15/04 500,000 540,445
U.S. Treasury Notes, 7.00%................................ 07/15/06 500,000 539,615
-----------
TOTAL U.S. TREASURY NOTES (COST $5,455,883)............. 5,645,162
-----------
AGENCY OBLIGATIONS -- 19.3%
Collaterized Mortgage Obligation Trust, 7.95%............. 05/01/17 380,583 391,595
Federal Home Loan Mortgage Corp., 6.50%................... 05/01/08 466,599 467,474
Federal Home Loan Mortgage Corp., 8.00%................... 11/01/08 421,809 435,913
Federal Home Loan Mortgage Corp., 7.50%................... 12/01/11 469,293 481,612
Federal Home Loan Mortgage Corp., 9.00%................... 11/01/16 3,516 3,735
Federal Home Loan Mortgage Corp., 8.00%................... 03/01/17 32,330 33,411
Federal National Mortgage Association, 7.00%.............. 09/01/04 489,168 495,741
Federal National Mortgage Association, 7.50%.............. 12/01/06 366,263 375,305
Federal National Mortgage Association, 7.50%.............. 12/01/07 403,957 414,435
Federal National Mortgage Association, 7.00%.............. 09/01/12 968,432 982,656
Government National Mortgage Association, 8.50%........... 02/15/02 399,654 416,640
-----------
TOTAL AGENCY OBLIGATIONS (COST $4,466,230).............. 4,498,517
-----------
CORPORATE BONDS -- 41.5%
Broker -- 5.8%
Lehman Brothers Holdings, Inc., 8.50%..................... 08/01/15 500,000 578,125
Salomon, Inc., 6.88%...................................... 12/15/03 375,000 382,031
Salomon, Inc., Senior Notes, 7.20%........................ 02/01/04 375,000 389,531
-----------
1,349,687
-----------
Financial Institutions -- 5.0%
First Union Corp., 6.82%.................................. 08/01/06 600,000 631,500
Provident Capital Trust I, 8.60%.......................... 12/01/26 500,000 531,250
-----------
1,162,750
-----------
</TABLE>
F-9
<PAGE> 86
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Bond Portfolio
Statement of Net Assets, December 31, 1997 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
Foreign Financial Institutions -- 9.0%
Banque Nationale de Paris, 7.74%.......................... 12/05/07 $1,000,000 $ 1,015,000
BCH Cayman Islands Ltd., 7.70%............................ 07/15/06 500,000 530,000
Midland Bank Plc, 7.65%................................... 05/01/25 500,000 551,250
-----------
2,096,250
-----------
Industrial Diversified -- 1.8%
Dimon, Inc. Senior Notes, 8.86%........................... 06/01/06 400,000 432,000
-----------
Insurance -- 3.0%
Farmers Insurance Exchange, 8.63%......................... 05/01/24 600,000 695,250
-----------
Telecommunications -- 8.8%
Comcast Cable Communications, 8.34%....................... 05/01/07 500,000 556,875
Comsat Corp. Medium Term Note, 8.05%...................... 12/13/06 500,000 562,830
Continental Cablevision Senior Notes, 8.30%............... 05/15/06 850,000 932,875
-----------
2,052,580
-----------
Utilities -- 7.8%
New Orleans Public Service, Inc., 8.00%................... 03/01/06 500,000 532,500
Niagara Mohawk Power Corp., 8.50%......................... 07/01/23 500,000 521,875
Western Resources, Inc., 6.88%............................ 08/01/04 750,000 767,812
-----------
1,822,187
-----------
Utilities - Gas -- 0.3%
Consolidated Natural Gas Co., 8.63%....................... 12/01/11 77,000 80,657
-----------
TOTAL CORPORATE BONDS (COST $9,301,918)................. 9,691,361
-----------
COMMERCIAL PAPER -- 3.4%
Merrill Lynch & Co., Inc., 5.85%.......................... 01/30/98 800,000 796,230
-----------
TOTAL COMMERCIAL PAPER (COST $796,230).................. 796,230
-----------
</TABLE>
F-10
<PAGE> 87
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Bond Portfolio
Statement of Net Assets, December 31, 1997 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 3.1%
Temporary Investment Fund, Inc. -- TempCash............... 730,641 $ 730,641
-----------
TOTAL SHORT TERM INVESTMENTS (COST $730,641)............ 730,641
-----------
TOTAL INVESTMENTS -- 101.1% (COST $22,964,106).......... 23,597,489
-----------
LIABILITIES IN EXCESS OF OTHER ASSETS -- (1.1)%............. (247,119)
-----------
NET ASSETS -- 100.0%
(Equivalent to $10.59 per share based on 1,788,901 shares
of capital stock outstanding)........................... $23,350,370
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($23,350,370/2,126,639 shares outstanding)................ $ 10.98
===========
</TABLE>
See accompanying notes to financial statements.
F-11
<PAGE> 88
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Statement of Net Assets, December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 58.1%
Aerospace -- 1.4%
Boeing Co. ............................................... 3,572 $ 174,805
Goodrich (B.F.) Co. ...................................... 14,500 600,844
-----------
775,649
-----------
Automobiles -- 1.3%
Ford Motor Co. ........................................... 14,400 701,100
-----------
Banks -- 5.1%
Bank of New York Co., Inc. ............................... 11,000 635,937
BankAmerica Corp. ........................................ 7,200 525,600
Chase Manhattan Corp. .................................... 3,840 420,480
Citicorp.................................................. 3,600 455,175
First Union Corp. ........................................ 11,000 563,750
Morgan (J.P.) & Co., Inc. ................................ 2,500 282,187
-----------
2,883,129
-----------
Building Materials -- 0.9%
Sherwin Williams Co. ..................................... 19,000 527,250
-----------
Business & Consumer Services -- 1.7%
Omnicom Group, Inc. ...................................... 21,800 923,775
-----------
Computer Products -- 1.2%
Hewlett Packard Co. ...................................... 11,000 687,500
-----------
Consumer Products -- 3.0%
Fortune Brands, Inc. ..................................... 18,500 685,656
Kimberly-Clark Corp. ..................................... 13,000 641,062
Rubbermaid, Inc. ......................................... 15,000 375,000
-----------
1,701,718
-----------
Containers -- 0.4%
*Bemis Co., Inc. ......................................... 4,800 211,500
-----------
Drugs -- 2.7%
American Home Products Corp. ............................. 9,500 726,750
Pfizer, Inc. ............................................. 10,200 760,537
-----------
1,487,287
-----------
Electrical Equipment -- 3.0%
Emerson Electric Co. ..................................... 10,800 609,525
General Electric Co. ..................................... 6,900 506,287
Grainger (W.W.), Inc. .................................... 5,800 563,687
-----------
1,679,499
-----------
</TABLE>
F-12
<PAGE> 89
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Statement of Net Assets, December 31, 1997 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Energy -- 4.2%
Amoco Corp. .............................................. 6,400 $ 544,800
Exxon Corp. .............................................. 9,500 581,281
Mobil Corp. .............................................. 9,400 678,562
Royal Dutch Petroleum Co. ................................ 10,500 568,969
-----------
2,373,612
-----------
Financial -- 2.0%
American Express Co. ..................................... 6,500 580,125
Travelers Group, Inc. .................................... 9,750 525,281
-----------
1,105,406
-----------
Foods -- 2.8%
CPC International, Inc. .................................. 7,000 756,000
*McCormick & Co., Inc. ................................... 3,500 98,000
Sara Lee Corp. ........................................... 12,800 720,800
-----------
1,574,800
-----------
Industrial Diversified -- 5.1%
Crown Cork & Seal Co., Inc. .............................. 12,000 601,500
Dover Corp. .............................................. 10,000 361,250
Parker-Hannifin Corp. .................................... 17,500 802,812
Praxair, Inc. ............................................ 14,000 630,000
Rockwell International Corp. ............................. 9,400 491,150
-----------
2,886,712
-----------
Insurance -- 3.9%
Allstate Corp. ........................................... 6,500 590,687
American General Corp. ................................... 10,300 556,844
American International Group, Inc. ....................... 5,550 603,562
Equitable of Iowa......................................... 5,500 428,312
-----------
2,179,405
-----------
Lodging -- 0.7%
Marriott International, Inc. ............................. 6,000 415,500
-----------
Medical Equipment & Supplies -- 1.4%
Johnson & Johnson......................................... 11,600 764,150
-----------
Oil Field Equipment & Services -- 2.8%
Chevron Corp. ............................................ 5,100 392,700
Halliburton Co. .......................................... 11,000 571,313
Schlumberger Ltd. ........................................ 7,500 603,750
-----------
1,567,763
-----------
</TABLE>
F-13
<PAGE> 90
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Statement of Net Assets, December 31, 1997 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Publishing -- 2.3%
Gannett, Inc. ............................................ 10,200 $ 630,488
McGraw-Hill, Inc. ........................................ 8,700 643,800
-----------
1,274,288
-----------
Railroads -- 2.8%
Canadian Pacific Ltd. .................................... 22,000 599,500
Illinois Central Corp. ................................... 11,850 403,641
Union Pacific Corp. Series A.............................. 8,800 549,450
-----------
1,552,591
-----------
Retail -- 2.0%
May Department Stores Co. ................................ 8,000 421,500
Sears, Roebuck & Co. ..................................... 15,000 678,750
-----------
1,100,250
-----------
Tobacco -- 0.6%
Philip Morris Cos., Inc. ................................. 7,800 353,438
-----------
Utilities - Electric -- 4.3%
Duke Power Co. ........................................... 13,500 747,563
Florida Progress Corp. ................................... 13,000 510,250
FPL Group, Inc. .......................................... 8,700 514,931
Pacificorp................................................ 24,000 655,500
-----------
2,428,244
-----------
Utilities - Gas -- 1.5%
Enron Corp. .............................................. 11,000 457,188
Sonat, Inc. .............................................. 8,700 398,025
-----------
855,213
-----------
Utilities - Telephone -- 1.0%
GTE Corp. ................................................ 11,000 574,750
-----------
TOTAL COMMON STOCK (COST $21,091,702)................... 32,584,529
-----------
PREFERRED STOCK -- 0.4%
Microsoft Corp., Preferred Series A Convertible, 2.75%.... 2,700 242,663
-----------
TOTAL PREFERRED STOCK (COST $215,888)................... 242,663
-----------
</TABLE>
F-14
<PAGE> 91
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Statement of Net Assets, December 31, 1997 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. TREASURY BONDS -- 1.0%
U.S. Treasury Bonds, 6.25%................................ 08/15/27 $ 500,000 $ 527,620
-----------
TOTAL U.S. TREASURY BONDS (COST $496,053)............... 527,620
-----------
U.S. TREASURY NOTES -- 4.6%
U.S. Treasury Notes, 6.125%............................... 08/15/07 500,000 513,720
U.S. Treasury Notes, 6.50%................................ 05/31/02 500,000 514,485
U.S. Treasury Notes, 6.50%................................ 05/31/07 1,500,000 1,535,250
-----------
TOTAL U.S. TREASURY NOTES (COST $2,559,847)............. 2,563,455
-----------
AGENCY OBLIGATIONS -- 15.7%
Collateralized Mortgage Obligation Trust, 7.95%........... 05/01/17 380,583 391,595
Federal Home Loan Mortgage Corp., 9.50%................... 03/01/06 209,948 220,182
Federal Home Loan Mortgage Corp., 8.00%................... 11/01/08 421,809 435,913
Federal Home Loan Mortgage Corp., 6.50%................... 01/01/11 785,140 786,613
Federal Home Loan Mortgage Corp., 7.50%................... 12/01/11 469,293 481,612
Federal National Mortgage Association, 7.00%.............. 11/18/07 227,460 234,000
Federal National Mortgage Association, 7.50%.............. 12/01/07 131,073 134,841
Federal National Mortgage Association, 7.00%.............. 03/01/08 459,481 414,435
Federal National Mortgage Association, 7.75%.............. 03/01/08 459,481 466,230
Federal National Mortgage Association, 7.75%.............. 05/01/08 2,000,000 2,033,832
Government National Mortgage Association, 8.50%........... 02/15/02 480,704 501,134
Government National Mortgage Association, 8.00%........... 03/15/07 453,000 470,978
Government National Mortgage Association, 8.00%........... 08/15/08 471,647 490,366
Government National Mortgage Association, 7.75%........... 07/15/26 707,747 729,422
Government National Mortgage Association, 7.50%........... 10/15/27 998,373 1,023,020
-----------
TOTAL AGENCY OBLIGATIONS (COST $8,743,345).............. 8,814,173
-----------
CORPORATE BONDS -- 13.1%
Broker -- 2.0%
Lehman Brothers Holdings, Inc., 8.50%..................... 08/01/15 500,000 578,125
Salomon, Inc., Senior Notes, 7.20%........................ 02/01/04 250,000 259,688
Salomon, Inc., 6.875%..................................... 12/15/03 250,000 254,688
-----------
1,092,501
-----------
Financial Institutions -- 2.1%
First Union Corp., 6.824%................................. 08/01/06 600,000 631,500
Provident Capital Trust I, 8.60%.......................... 12/01/26 500,000 531,250
-----------
1,162,750
-----------
</TABLE>
F-15
<PAGE> 92
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Statement of Net Assets, December 31, 1997 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
MATURITY OR SHARES VALUE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
Foreign Financial Institutions -- 2.9%
Banque Nationale de Paris, 7.738%......................... 01/15/07 $ 500,000 $ 507,500
BCH Cayman Islands Ltd, 7.70%............................. 07/15/06 500,000 530,000
Midland Bank Plc, 7.650%.................................. 05/01/25 550,000 606,375
-----------
1,643,875
-----------
Industrial Diversified -- 0.8%
Dimon, Inc. Senior Notes, 8.875%.......................... 06/01/06 400,000 432,000
-----------
Insurance -- 1.4%
Farmers Insurance Exchange, 8.625%........................ 05/01/24 700,000 811,125
-----------
Telecommunications -- 3.0%
Comcast Cable Communications, 8.375%...................... 05/01/07 500,000 556,875
Comsat Corp. Medium Term Note, 8.05%...................... 12/13/06 500,000 562,830
Continental Cablevision Senior Notes, 8.30%............... 05/15/06 500,000 548,750
-----------
1,668,455
-----------
Utilities -- 0.9%
Niagara Mohawk Power Corp., 8.50%......................... 07/01/23 500,000 521,875
-----------
TOTAL CORPORATE BONDS (COST $7,037,274)................. 7,332,581
-----------
COMMERCIAL PAPER -- 7.1%
C.I.T. Financial Corp., 6.05%............................. 01/05/98 1,700,000 1,698,857
Merrill Lynch & Co., Inc., 5.58%.......................... 01/30/98 2,300,000 2,289,161
-----------
TOTAL COMMERCIAL PAPER (COST $3,988,018)................ 3,988,018
-----------
SHORT-TERM INVESTMENTS -- 0.6%
Temporary Investment Fund, Inc. -- TempCash............... 347,019 347,019
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $347,019)............ 347,019
-----------
TOTAL INVESTMENTS -- 100.6% (COST $44,479,146).......... 56,400,058
-----------
OTHER ASSETS IN EXCESS OF LIABILITIES -- (0.6)%............. (332,549)
-----------
NET ASSETS -- 100.0%
(Equivalent to $17.06 per share based on 3,286,248 shares
of capital stock outstanding)........................... $56,067,509
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($56,067,509/3,286,248 shares outstanding)................ $ 17.06
===========
</TABLE>
* Non-income producing.
See accompanying notes to financial statements.
F-16
<PAGE> 93
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Portfolio
Statement of Net Assets, December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 92.9%
Banks -- 7.1%
Cullen Frost Bankers, Inc. ............................... 15,000 $ 910,312
Mercantile Bankshares Corp. .............................. 36,500 1,428,062
Wilmington Trust Corp. ................................... 18,000 1,122,750
-----------
3,461,124
-----------
Beverages -- 1.4%
*Chalone Wine Group Ltd. ................................. 10,000 117,500
*Robert Mondavi Corp., Class A............................ 11,000 536,250
-----------
653,750
-----------
Business & Consumer Services -- 10.4%
*Affiliated Computer Services, Inc. ...................... 25,800 678,862
Analysts International Corp. ............................. 28,950 998,775
*Caci International, Inc. ................................ 26,000 515,125
*Healthcare Services Group................................ 48,500 612,312
*Sterling Commerce, Inc. ................................. 30,000 1,153,125
Tyco International Ltd. .................................. 24,000 1,081,500
-----------
5,039,699
-----------
Communications -- 1.4%
*Dynatech Corp. .......................................... 14,000 656,250
-----------
Cosmetics and Toiletries -- 3.0%
Alberto-Culver Co. Class A................................ 54,600 1,474,200
-----------
Drug Delivery -- 2.8%
*Scherer (R.P.) Corp. .................................... 22,000 1,342,000
-----------
Electronics -- 4.6%
Harman International Industries, Inc. .................... 26,800 1,137,325
Methode Electronics, Inc. Class A......................... 68,000 1,105,000
-----------
2,242,325
-----------
Energy -- 1.3%
*Calenergy Co., Inc. ..................................... 22,000 632,500
-----------
Environmental Control -- 5.9%
Calgon Carbon Corp. ...................................... 42,100 452,575
Donaldson Co., Inc. ...................................... 26,000 1,171,625
*Tetra Technologies, Inc. ................................ 58,000 1,221,625
-----------
2,845,825
-----------
Financial -- 1.4%
Duff & Phelps Credit Rating Co. .......................... 17,000 690,625
-----------
</TABLE>
F-17
<PAGE> 94
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Portfolio
Statement of Net Assets, December 31, 1997 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Food & Food Distributors -- 5.3%
Goodmark Foods, Inc. ..................................... 32,000 $ 592,000
Smart & Final, Inc. ...................................... 21,000 378,000
Tootsie Roll Industries, Inc. ............................ 26,000 1,625,000
-----------
2,595,000
-----------
Healthcare Providers -- 3.0%
*Genesis Health Ventures, Inc. ........................... 37,000 975,875
HealthPlan Services Corp. ................................ 24,000 504,000
-----------
1,479,875
-----------
Industrial Diversified -- 6.9%
*Bush Boake Allen, Inc. .................................. 40,000 1,047,500
Cambrex Corp. ............................................ 17,000 782,000
Computational Systems, Inc. .............................. 27,000 794,812
Lawter International, Inc. ............................... 35,500 386,063
*Material Sciences Corp. ................................. 28,300 344,906
-----------
3,355,281
-----------
Insurance -- 3.4%
Enhance Financial Services Group, Inc. ................... 9,500 565,250
Executive Risk, Inc. ..................................... 7,500 523,594
Life Re Corp. ............................................ 9,000 586,688
-----------
1,675,532
-----------
Manufacturing Diversified -- 2.7%
*AptarGroup, Inc. ........................................ 18,500 1,026,750
*Cannondale Corp. ........................................ 13,000 282,750
-----------
1,309,500
-----------
Medical Equipment & Supplies -- 6.9%
Ballard Medical Products.................................. 29,000 703,250
Hillenbrand Industries, Inc. ............................. 23,000 1,177,313
Life Technologies, Inc. .................................. 32,000 1,064,000
Minntech Corp. ........................................... 33,000 408,375
-----------
3,352,938
-----------
Oil Field Equipment & Services -- 4.2%
Halliburton Co. .......................................... 20,000 1,038,750
*Smith International, Inc. ............................... 16,000 982,000
-----------
2,020,750
-----------
Railroads -- 0.3%
*Railtex, Inc. ........................................... 11,000 157,438
-----------
</TABLE>
F-18
<PAGE> 95
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Portfolio
Statement of Net Assets, December 31, 1997 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Real Estate -- 2.3%
Chateau Communities, Inc. ................................ 36,000 $ 1,134,000
-----------
Restaurants -- 4.7%
*Applebee's International, Inc. .......................... 18,000 325,125
*Ruby Tuesday, Inc. ...................................... 38,800 999,100
Sbarro, Inc. ............................................. 36,000 947,250
-----------
2,271,475
-----------
Retail - Clothing and Apparel -- 6.2%
*Gymboree Corp. .......................................... 18,000 492,750
*Lands' End, Inc. ........................................ 35,000 1,227,188
*The Wet Seal, Inc., Class A.............................. 43,000 1,268,500
-----------
2,988,438
-----------
Retail Stores -- 5.1%
Casey General Stores, Inc. ............................... 34,000 862,750
Ethan Allen Interiors, Inc. .............................. 41,700 1,608,056
-----------
2,470,806
-----------
Software -- 2.6%
*Filenet Corp. ........................................... 42,000 1,265,250
-----------
TOTAL COMMON STOCK (COST $35,138,885)................... 45,114,581
-----------
PREFERRED STOCK -- 0.2%
Phoenix Duff & Phelps Preferred Convertible
Series A, $1.50......................................... 2,500 71,563
-----------
TOTAL PREFERRED STOCK (COST $71,441).................... 71,563
-----------
</TABLE>
F-19
<PAGE> 96
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Portfolio
Statement of Net Assets, December 31, 1997 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
NUMBER OF
MATURITY SHARES VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER -- 7.2%
American Express Credit Corp., 6.00%...................... 01/07/98 $2,300,000 $ 2,297,700
C.I.T. Group Holdings, Inc., 5.54%........................ 01/02/98 1,200,000 1,199,815
-----------
TOTAL COMMERCIAL PAPER (COST $3,497,515)................ 3,497,515
-----------
SHORT-TERM INVESTMENTS -- 1.3%
Temporary Investment Fund, Inc. -- TempCash............... 653,453 653,453
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $653,453)............ 653,453
-----------
TOTAL INVESTMENTS -- 101.6% (COST $39,361,294).......... 49,337,112
-----------
LIABILITIES IN EXCESS OF OTHER ASSETS -- (1.6)%............. (763,007)
-----------
NET ASSETS -- 100.0%
(Equivalent to $22.19 per share based on 2,188,797 shares
of capital stock outstanding)........................... $48,574,105
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($48,574,105/2,188,797 shares outstanding)................ $ 22.19
===========
</TABLE>
* Non-income producing.
See accompanying notes to financial statements.
F-20
<PAGE> 97
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio
Statement of Net Assets, December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCK -- 95.3%
Argentina -- 0.9%
YPF Sociedad Anonima ADR.................................. 17,000 $ 581,187
-----------
Australia -- 2.5%
Australia & New Zealand Bank Group Ltd.................... 107,363 709,594
Boral Ltd................................................. 227,175 574,523
ICI Australia Ltd......................................... 39,500 276,771
-----------
1,560,888
-----------
Austria -- 0.9%
*Bank Austria AG.......................................... 8,000 215,890
*Bank Austria AG -- Preferred........................... 8,400 380,030
-----------
595,920
-----------
Brazil -- 0.2%
Telecom Brasil Sp ADR..................................... 1,200 139,725
-----------
Denmark -- 0.9%
Tele Danmark ADR.......................................... 17,500 539,219
-----------
France -- 12.2%
Alcatel Alsthom ADR....................................... 32,016 810,405
AXA - UAP................................................. 7,000 544,587
Bongrain.................................................. 400 168,967
C.S.F. (Thomson-C.S.F.)................................... 14,419 453,936
CLF - Dexia France........................................ 5,000 582,904
Danone.................................................... 4,504 815,709
Elf Aquitaine ADR......................................... 17,751 1,040,652
Michelin (CGDE)........................................... 8,075 405,294
Pechinery SA.............................................. 9,000 355,929
Rhone Poulenc SA ADR...................................... 12,295 545,591
Societe Generale.......................................... 5,728 779,229
Television Franchise, Inc................................. 7,000 715,949
Usinor Sacilor............................................ 27,000 387,061
-----------
7,606,213
-----------
Germany -- 10.7%
Bayer AG.................................................. 19,900 743,967
Berliner Kraft-und Licht Aktiengesellschaft............... 7,750 234,548
Deutsche Bank AG.......................................... 11,500 812,517
Deutsche Lufthansa AG..................................... 24,000 460,640
GEA AG.................................................... 1,600 605,285
Hoechst AG................................................ 6,000 210,292
Hugo Boss AG.............................................. 230 294,298
</TABLE>
F-21
<PAGE> 98
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio
Statement of Net Assets, December 31, 1997 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCK (CONTINUED)
Germany (Continued)
Siemens AG................................................ 17,000 $ 1,007,232
Tarkett AG................................................ 15,000 346,314
Veba AG................................................... 13,250 902,990
Viag AG................................................... 1,200 646,898
Volkswagen................................................ 800 450,403
-----------
6,715,384
-----------
Greece -- 0.5%
*Hellenic Telecommunications.............................. 32,000 328,000
-----------
Hong Kong -- 1.9%
Guoco Group Ltd........................................... 76,000 185,868
Hong Kong Electric........................................ 110,000 418,081
HSBC Holdings Plc......................................... 14,390 354,736
Swire Pacific Ltd. B...................................... 200,000 202,620
-----------
1,161,305
-----------
Italy -- 4.5%
Ente Nazionale Idrocarburi SpA............................ 11,000 627,688
Fiat SpA.................................................. 115,500 336,427
Istituto Mobiliare Italiano ADR........................... 12,000 429,000
Mondadori (Arnoldo) Editore SpA........................... 21,000 165,256
Montedison SpA............................................ 425,000 381,125
Telecom Italia SpA........................................ 200,000 863,928
-----------
2,803,424
-----------
Japan -- 24.8%
Canon, Inc................................................ 38,000 885,550
Credit Saison Co.......................................... 36,500 900,958
Dai-Tokyo Fire and Marine Insurance....................... 117,000 401,809
Fuji Machine.............................................. 18,000 434,649
Hitachi Ltd............................................... 75,000 534,688
Honda Motor Co. Ltd....................................... 18,000 660,943
Ito-Yokado Co. Ltd........................................ 15,000 764,661
Kao Corp.................................................. 65,000 936,757
Mabuchi Motors............................................ 11,200 569,230
Matsumotokiyoshi.......................................... 9,000 344,960
Mikuni Coca-Cola Bottling Co. Ltd......................... 36,000 449,828
Mineba Co. Ltd............................................ 82,000 880,031
Mitsubishi Heavy industries Ltd........................... 110,000 458,720
Murata Manufacturing Co. Ltd.............................. 24,000 608,969
Namco Ltd................................................. 11,000 319,586
</TABLE>
F-22
<PAGE> 99
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio
Statement of Net Assets, December 31, 1997 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCK (CONTINUED)
Japan (Continued)
Nishimatsu Construction................................... 65,000 $ 204,293
Ono Pharmaceutical........................................ 8,000 148,409
Rinnai Corp............................................... 28,000 422,844
Rohm Co. Ltd.............................................. 5,000 502,108
Sankyo Co. Ltd............................................ 19,000 278,191
Sekisui Chemical Co....................................... 65,000 330,356
Sekisui House............................................. 48,000 308,716
Sony Corp................................................. 11,000 978,153
Toshiba Corp.............................................. 120,000 499,502
Toyota Motor Corp......................................... 21,000 602,070
Yamanouchi Pharmaceuticals................................ 29,000 622,461
Yamato Transportation..................................... 46,000 617,095
-----------
15,493,440
-----------
Korea -- 0.1%
*Kookmin Bank GDR......................................... 14,317 81,607
-----------
Netherlands -- 5.9%
ABN Amro Holding.......................................... 31,425 617,180
AKZO N.V. ADR............................................. 7,500 651,563
Hollandsche Beton......................................... 21,079 391,121
Hunter Douglas N.V........................................ 13,925 487,905
Koninklijke K.N.P......................................... 24,000 555,440
KPN ADS................................................... 13,090 543,235
Philips Electronics N.V. ADR.............................. 7,500 453,750
-----------
3,700,194
-----------
New Zealand -- 0.3%
Air New Zealand........................................... 101,091 203,504
-----------
Norway -- 0.5%
Orkla..................................................... 4,000 310,985
-----------
Peru -- 0.5%
Telefonica del Peru S.A. ADR.............................. 13,200 307,725
-----------
Portugal -- 0.6%
Banco Totta & Acores - Reg B.............................. 18,000 353,344
-----------
Singapore -- 1.3%
Development Bank.......................................... 60,000 515,821
Singapore Airlines........................................ 42,000 275,821
-----------
791,642
-----------
</TABLE>
F-23
<PAGE> 100
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio
Statement of Net Assets, December 31, 1997 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCK (CONTINUED)
Spain -- 4.6%
Corporacion Bancaria de Espanol ADR....................... 29,000 $ 886,313
Endesa SA................................................. 22,300 404,256
Gas y Electricidad, SA.................................... 8,591 620,696
Repsol ADR................................................ 22,000 936,375
-----------
2,847,640
-----------
Sweden -- 2.3%
Marieberg Tidnings AB..................................... 18,000 421,609
Pharmacia & Upjohn, Inc. ADR.............................. 21,400 783,775
Scania AB, Class A ADR.................................... 8,000 176,000
Scania AB, Class B ADR.................................... 3,000 66,000
-----------
1,447,384
-----------
Switzerland -- 3.7%
Forbo Holdings - Registered Shares........................ 700 286,527
Nestle SA - Registered Shares............................. 550 825,471
Sulzer AG - Registered Shares............................. 630 399,986
Union Bank Switzerland - Registered Shares................ 550 796,435
-----------
2,308,419
-----------
United Kingdom -- 15.5%
BTR Ordinary Plc.......................................... 240,823 729,145
Bunzl Plc................................................. 175,146 681,599
Cable & Wireless ADR...................................... 15,000 407,813
Laird Group Ordinary...................................... 82,000 600,443
Lucasvarity Plc........................................... 230,300 814,761
Medeva Plc................................................ 127,000 338,545
National Westminster Bank................................. 57,801 962,542
Powergen Plc.............................................. 73,443 957,136
Royal & Sun Alliance Insurance Group Plc.................. 110,106 1,110,634
RTZ Corp.................................................. 62,845 774,552
Safeway Plc............................................... 147,270 831,201
Stakis Plc................................................ 265,000 414,255
Tomkins Plc............................................... 230,277 1,091,292
-----------
9,713,918
-----------
TOTAL COMMON AND PREFERRED STOCK (COST $55,858,949)..... 59,591,067
-----------
</TABLE>
F-24
<PAGE> 101
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio
Statement of Net Assets, December 31, 1997 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 2.3%
Temporary Investment Fund, Inc.--TempCash................. 1,410,410 $ 1,410,410
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $1,410,410).......... 1,410,410
-----------
TOTAL INVESTMENTS -- 97.6% (COST $57,269,359)........... 61,001,477
-----------
OTHER ASSETS IN EXCESS OF LIABILITIES -- 2.4%............... 1,511,979
-----------
NET ASSETS -- 100.0%
(Equivalent to $13.61 per share based on 4,592,651 shares
of capital stock outstanding)........................... $62,513,456
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($62,513,456/4,592,651 shares outstanding)................ $ 13.61
===========
</TABLE>
* Non-income producing.
See accompanying financial statements.
F-25
<PAGE> 102
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Sentinel Growth Portfolio
Statement of Net Assets, December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 93.5%
Aerospace -- 2.1%
*Goodrich (B.F.) Co. ..................................... 4,300 $ 178,181
----------
Banks -- 9.9%
BankAmerica Corp. ........................................ 2,500 182,500
Citicorp.................................................. 1,400 177,012
Cullen Frost Bankers, Inc. ............................... 2,000 121,375
First Union Corp. ........................................ 1,600 82,000
Mercantile Bankshares Corp. .............................. 6,700 262,137
----------
825,024
----------
Biotechnology -- 1.6%
Amgen Corp. .............................................. 2,500 135,312
----------
Business & Consumer Services -- 5.4%
Analysts International Corp. ............................. 2,550 87,975
Omnicom Group, Inc. ...................................... 6,400 271,200
*Sterling Commerce, Inc. ................................. 2,400 92,250
----------
451,425
----------
Computer Products -- 0.6%
Hewlett Packard Co. ...................................... 800 50,000
----------
Drug Delivery -- 4.3%
*Scherer (R.P.) Corp. .................................... 1,400 85,400
Schering Plough Corp. .................................... 4,400 273,350
----------
358,750
----------
Electronics -- 0.6%
Methode Electronics, Inc. Class A......................... 1,800 29,250
Motorola, Inc. ........................................... 400 22,825
----------
52,075
----------
Energy -- 1.7%
Mobil Corp. .............................................. 2,000 144,375
----------
Finance -- 4.2%
American Express Co. ..................................... 2,800 249,900
SLM Holding............................................... 700 97,387
----------
347,287
----------
Healthcare Services -- 3.0%
Columbia/HCA Healthcare Corp. ............................ 8,450 250,331
----------
Lodging -- 1.7%
Marriott International, Inc............................... 2,100 145,425
----------
</TABLE>
F-26
<PAGE> 103
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Sentinel Growth Portfolio
Statement of Net Assets, December 31, 1997 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Industrial Diversified -- 2.6%
Crown Cork & Seal Co., Inc. .............................. 1,500 $ 75,187
Parker-Hannifin Corp. .................................... 3,100 142,212
----------
217,399
----------
Insurance -- 8.0%
Allstate Corp. ........................................... 2,800 254,450
Enhance Financial Services Group, Inc. ................... 1,300 77,350
Executive Risk, Inc. ..................................... 1,400 97,738
Jefferson-Pilot Corp. .................................... 1,900 147,963
Life Re Corp. ............................................ 1,400 91,263
----------
668,764
----------
Manufacturing -- 0.9%
AptarGroup, Inc. ......................................... 1,300 72,150
----------
Medical Equipment & Supplies -- 4.4%
Dentsply International, Inc. ............................. 6,200 189,100
Hillenbrand Industries, Inc. ............................. 3,500 179,156
----------
368,256
----------
Oil Field Equipment -- 7.8%
Chevron Corp. ............................................ 2,800 215,600
Halliburton Co. .......................................... 3,400 176,588
Schlumberger Ltd. ........................................ 3,200 257,600
----------
649,788
----------
Publishing -- 3.1%
McGraw-Hill, Inc. ........................................ 3,500 259,000
----------
Restaurants -- 4.9%
*Outback Steakhouse, Inc. ................................ 2,300 66,125
*Ruby Tuesday, Inc. ...................................... 6,800 175,100
Sbarro, Inc. ............................................. 6,400 168,400
----------
409,625
----------
Retail Stores -- 7.8%
CVS Corp. ................................................ 2,400 153,750
Ethan Allen Interiors, Inc. .............................. 5,000 192,813
Staples, Inc. ............................................ 5,300 147,075
TJX Companies, Inc. ...................................... 4,700 161,563
----------
655,201
----------
</TABLE>
F-27
<PAGE> 104
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Sentinel Growth Portfolio
Statement of Net Assets, December 31, 1997 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Retail Clothing and Apparel -- 2.5%
*Gymboree Corp. .......................................... 2,500 $ 68,438
*Lands' End, Inc. ........................................ 2,000 70,125
*The Wet Seal, Inc., Class A.............................. 2,500 73,750
----------
212,313
----------
Software -- 3.7%
*Microsoft Corp. ......................................... 2,400 310,200
----------
Semiconductors & Semiconductor Equipment -- 2.5%
*Applied Materials, Inc. ................................. 3,500 105,437
*KLA-Tencor Corp. ........................................ 2,700 104,287
----------
209,724
----------
Telecommunications -- 4.2%
*Airtouch Communications, Inc. ........................... 4,700 195,344
Lucent Technologies, Inc. ................................ 1,900 151,763
----------
347,107
----------
Tobacco -- 6.0%
Philip Morris Cos., Inc. ................................. 4,000 181,250
UST, Inc. ................................................ 8,600 317,663
----------
498,913
----------
TOTAL COMMON STOCK (COST $7,133,589).................... 7,816,625
----------
</TABLE>
F-28
<PAGE> 105
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Sentinel Growth Portfolio
Statement of Net Assets, December 31, 1997 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
NUMBER
MATURITY OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER -- 4.8%
Federal National Mortgage Association Discount Notes,
5.76%................................................... 01/05/98 $ 400,000 $ 399,744
-----------
TOTAL COMMERCIAL PAPER (COST $399,744).................. 399,744
-----------
SHORT-TERM INVESTMENTS -- 1.6%
Temporary Investment Fund, Inc. -- TempCash............... 138,970 138,970
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $138,970)............ 138,970
-----------
TOTAL INVESTMENTS -- 99.9% (COST $7,672,303)............ 8,355,339
-----------
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.1%........... 6,650
-----------
NET ASSETS -- 100.0%
(Equivalent to $14.59 per share based on 573,096 shares of
capital stock outstanding).............................. $ 8,361,989
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($8,361,989/573,096 shares outstanding)................... $ 14.59
===========
</TABLE>
* Non-income producing.
See accompanying notes to financial statements.
F-29
<PAGE> 106
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statements of Operations for the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.......................................... $ 4,811,595 $ -- $ -- $ 675,233 $ 341,732
Interest........................................... 823,766 3,402,299 1,316,924 1,321,545 310,481
Less: foreign taxes withheld..................... (39,820) -- -- (4,670) --
----------- ---------- ---------- ---------- ----------
Total Income..................................... 5,595,541 3,402,299 1,316,924 1,992,108 652,213
----------- ---------- ---------- ---------- ----------
EXPENSES:
Investment advisory fee............................ 740,283 151,852 67,663 199,166 185,551
Administration fee................................. 82,214 34,174 24,562 41,534 39,256
Directors' fee..................................... 10,865 2,453 965 2,287 1,903
Transfer agent fee................................. 6,801 3,241 2,181 1,628 2,791
Custodian fee...................................... 31,201 10,581 4,261 10,681 10,568
Legal fees......................................... 20,238 3,606 753 2,715 3,284
Audit fees......................................... 19,868 5,472 1,748 5,141 3,560
Printing........................................... 52,032 20,323 6,460 16,446 13,788
Miscellaneous...................................... 21,485 5,976 2,509 4,783 (277)
----------- ---------- ---------- ---------- ----------
984,987 237,678 111,102 284,381 260,424
Less: expenses reimbursed by affiliated insurance
company.......................................... -- -- -- -- --
----------- ---------- ---------- ---------- ----------
Total expenses................................... 984,987 237,678 111,102 284,381 260,424
----------- ---------- ---------- ---------- ----------
Net investment income (loss)..................... 4,610,554 3,164,621 1,205,822 1,707,727 391,789
----------- ---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) from:
Investments...................................... 35,634,593 (57) 177,501 2,699,617 3,740,193
Foreign currency related transactions............ (44,944) -- -- (2,008) --
----------- ---------- ---------- ---------- ----------
35,589,649 (57) 177,501 2,697,609 3,740,193
----------- ---------- ---------- ---------- ----------
Net change in unrealized appreciation
(depreciation) from:
Investments...................................... 9,025,359 -- 449,185 4,950,546 3,790,949
Foreign currency related translations............ -- -- -- -- --
----------- ---------- ---------- ---------- ----------
9,025,359 -- 449,185 4,950,546 3,790,949
----------- ---------- ---------- ---------- ----------
Net gain (loss) on investments and foreign
currency transactions........................... 44,615,008 (57) 626,686 7,648,155 7,531,142
----------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets resulting
from operations................................. $49,225,562 $3,164,564 $1,832,508 $9,355,882 $7,922,931
=========== ========== ========== ========== ==========
<CAPTION>
COMMON SENTINEL
INTERNATIONAL STOCK GROWTH
PORTFOLIO PORTFOLIO* PORTFOLIO
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.......................................... $1,276,041 $ 195,167 $ 67,641
Interest........................................... 155,142 40,472 19,340
Less: foreign taxes withheld..................... (167,716) (1,181) --
---------- ---------- ----------
Total Income..................................... 1,263,467 234,458 86,981
---------- ---------- ----------
EXPENSES:
Investment advisory fee............................ 440,914 35,969 34,396
Administration fee................................. 73,381 44,455 43,746
Directors' fee..................................... 2,628 498 407
Transfer agent fee................................. 1,727 1,464 1,476
Custodian fee...................................... 42,098 6,099 6,978
Legal fees......................................... 9,377 1,345 1,132
Audit fees......................................... 5,016 1,036 850
Printing........................................... 19,645 2,059 1,829
Miscellaneous...................................... 6,200 1,668 1,715
---------- ---------- ----------
600,986 94,593 92,529
Less: expenses reimbursed by affiliated insurance
company.......................................... -- (22,654) (30,617)
---------- ---------- ----------
Total expenses................................... 600,986 71,939 61,912
---------- ---------- ----------
Net investment income (loss)..................... 662,481 162,519 25,069
---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) from:
Investments...................................... 4,341,196 271,458 1,668,898
Foreign currency related transactions............ (173,948) (605) --
---------- ---------- ----------
4,167,248 270,853 1,668,898
---------- ---------- ----------
Net change in unrealized appreciation
(depreciation) from:
Investments...................................... 178,787 1,472,234 132,149
Foreign currency related translations............ (4) -- --
---------- ---------- ----------
178,783 1,472,234 132,149
---------- ---------- ----------
Net gain (loss) on investments and foreign
currency transactions........................... 4,346,031 1,743,087 1,801,047
---------- ---------- ----------
Net increase (decrease) in net assets resulting
from operations................................. $5,008,512 $1,905,606 $1,826,116
========== ========== ==========
</TABLE>
* Through the period ended December 12, 1997 (see note 1).
See accompanying notes to financial statements.
F-30
<PAGE> 107
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statements of Changes in Net Assets for the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<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).............. $ 4,610,554 $ 3,164,621 $ 1,205,822 $ 1,707,727 $ 391,789 $ 662,481
Net realized gain (loss) on investments
and foreign currency related
transactions............................. 35,589,649 (57) 177,501 2,697,609 3,740,193 4,167,248
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency translations.................... 9,025,359 -- 449,185 4,950,546 3,790,949 178,783
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations................ 49,225,562 3,164,564 1,832,508 9,355,882 7,922,931 5,008,512
Distributions:
From net investment income................ (4,690,830) (3,164,621) (1,143,012) (1,626,361) (326,522) (427,579)
From net realized gains................... (23,067,604) -- -- (344,551) (64,760) (3,347,494)
Capital share transactions:
Shares exchanged in acquisition of Common
Stock Portfolio.......................... 13,633,276 -- -- -- -- --
Net contributions from affiliated life
insurance companies...................... 33,340,861 10,142,244 5,573,996 5,251,369 6,944,174 10,324,894
------------ ----------- ----------- ----------- ----------- -----------
Total increase(decrease) in net assets... 68,441,265 10,142,187 6,263,492 12,636,339 14,475,823 11,558,333
NET ASSETS
Beginning of period......................... 198,948,066 54,196,724 17,086,878 43,431,170 34,098,282 50,955,123
------------ ----------- ----------- ----------- ----------- -----------
End of period............................... $267,389,331 $64,338,911 $23,350,370 $56,067,509 $48,574,105 $62,513,456
============ =========== =========== =========== =========== ===========
<CAPTION>
COMMON SENTINEL
STOCK GROWTH
PORTFOLIO* PORTFOLIO
- --------------------------------------------- -------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss).............. $ 162,519 $ 25,069
Net realized gain (loss) on investments
and foreign currency related
transactions............................. 270,853 1,668,898
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency translations.................... 1,472,234 132,149
------------ ----------
Net increase (decrease) in net assets
resulting from operations................ 1,905,606 1,826,116
Distributions:
From net investment income................ (187,958) (23,408)
From net realized gains................... (249,309) (3,259)
Capital share transactions:
Shares exchanged in acquisition of Common
Stock Portfolio.......................... (13,633,276) --
Net contributions from affiliated life
insurance companies...................... 5,600,313 898,951
------------ ----------
Total increase(decrease) in net assets... (6,564,624) 2,698,400
NET ASSETS
Beginning of period......................... 6,564,624 5,663,589
------------ ----------
End of period............................... $ 0 $8,361,989
============ ==========
</TABLE>
* Through the period ended December 12, 1997 (see note 1).
See accompanying notes to financial statements.
F-31
<PAGE> 108
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statements of Changes in Net Assets 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>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss)................... $ 5,018,462 $ 2,277,978 $ 934,224 $ 1,445,837 $ 326,522
Net realized gain (loss) on sale of
investments................................... 23,063,427 -- (125,017) 344,291 64,760
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency translations......................... 4,147,912 -- (333,487) 2,694,823 5,078,163
------------ ----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations............................... 32,229,801 2,277,978 475,720 4,484,951 5,469,445
Distributions:
From net investment income..................... (4,995,312) (2,277,978) (874,882) (1,390,871) (255,039)
From net realized gains........................ (7,732,422) -- -- (1,471,361) (2,569,743)
Capital share transactions:
Net contributions from affiliated life
insurance companies........................... 17,547,048 19,581,572 3,083,685 5,806,085 7,631,188
------------ ----------- ----------- ----------- -----------
Total increase in net assets.................. 37,049,115 19,581,572 2,684,523 7,428,804 10,275,851
NET ASSETS
Beginning of period.............................. 161,898,951 34,615,152 14,402,355 36,002,366 23,822,431
------------ ----------- ----------- ----------- -----------
End of period.................................... $198,948,066 $54,196,724 $17,086,878 $43,431,170 $34,098,282
============ =========== =========== =========== ===========
<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 sale of
investments................................... 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.................................... $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-32
<PAGE> 109
- --------------------------------------------------------------------------------
Market Street Funds, Inc.
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
TO TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $18.10 $16.36 $14.00 $14.09 $13.73
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................................... .35 .46 .47 .43 .38
Net realized and unrealized gain (loss) on investments...... 3.49 2.54 3.41 (.10) .94
------- ------- ------- ------- -------
Total from investment operations......................... 3.84 3.00 3.88 .33 1.32
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income........ (.38) (.48) (.46) (.41) (.39)
Dividends to shareholders from net capital gains............ (2.10) (.78) (1.06) (.01) (.35)
Dividends to shareholders in excess of net investment
income..................................................... (.00) (.00) (.00) (.00) (.22)
------- ------- ------- ------- -------
Total distributions...................................... (2.48) (1.26) (1.52) (.42) (.96)
------- ------- ------- ------- -------
Net asset value, end of period.............................. $19.46 $18.10 $16.36 $14.00 $14.09
======= ======= ======= ======= =======
Total return............................................. 24.32% 19.58% 30.39% 2.40% 9.43%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)............................ 267,389 198,948 161,899 115,191 109,534
Ratios of expenses to average net assets(1)................. .43% .50% .61% .63% .76%
Ratios of net investment income to average net assets....... 2.01% 2.80% 3.20% 3.10% 2.86%
Portfolio turnover.......................................... 108% 72% 61% 63% 51%
Average commission rate(2).................................. $0.0600 $0.0600 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, 1997, 1996,
1995, 1994, and 1993 were as follows: 0.43%, 0.50%, 0.61%, 0.67%, and
0.76%, 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> 110
- --------------------------------------------------------------------------------
Market Street Funds, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
TO TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
- ---------------------------------------------------------------------------------------------------------------------
<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 .05 .04 .03
------ ------ ------ ------ ------
Total from investment operations....................... .05 .05 .05 .04 .03
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income....... (.05) (.05) (.05) (.04) (.03)
------ ------ ------ ------ ------
Total distributions.................................... (.05) (.05) (.05) (.04) (.03)
------ ------ ------ ------ ------
Net asset value, end of period............................. $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total return........................................... 5.33% 5.15% 5.61% 3.81% 2.59%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)........................... 64,339 54,197 34,615 21,040 12,506
Ratios of expenses to average net assets(1)................ .39% .44% .50% .55% .65%
Ratios of net investment income to average net assets...... 5.21% 5.03% 5.47% 3.86% 2.56%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the Money Market Portfolio before reimbursement of
expenses by affiliated insurance company for the years ended December 31,
1997, 1996, 1995, 1994, and 1993 were as follows: 0.39%, 0.44%, 0.50%,
0.59%, and 0.65%, respectively.
See accompanying notes to financial statements.
F-34
<PAGE> 111
- --------------------------------------------------------------------------------
Market Street Funds, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
TO TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $10.67 $11.00 $ 9.73 $11.21 $10.73
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................................... .64 .63 .65 .62 .60
Net realized and unrealized gain (loss) on investments...... .33 (.34) 1.27 (1.23) .48
------ ------ ------ ------ ------
Total from investment operations......................... .97 .29 1.92 (.61) 1.08
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income........ (.66) (.62) (.65) (.60) (.60)
Dividends to shareholders from net capital gains............ (.00) (.00) (.00) (.27) (.00)
------ ------ ------ ------ ------
Total distributions...................................... (.66) (.62) (.65) (.87) (.60)
------ ------ ------ ------ ------
Net asset value, end of period.............................. $10.98 $10.67 $11.00 $ 9.73 $11.21
====== ====== ====== ====== ======
Total return............................................. 9.50% 2.86% 20.45% (5.62)% 10.32%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)............................ 23,350 17,087 14,402 10,098 10,160
Ratios of expenses to average net assets(1)................. .57% .56% .60% .68% .75%
Ratios of net investment income to average net assets....... 6.24% 6.08% 6.36% 6.14% 5.53%
Portfolio turnover.......................................... 105% 133% 206% 151% 71%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the Bond Portfolio before reimbursement of expenses by
affiliated insurance company for the years ended December 31, 1997, 1996,
1995, 1994, and 1993 were as follows: 0.57%, 0.56%, 0.60%, 0.70%, and
0.75%, respectively.
See accompanying notes to financial statements.
F-35
<PAGE> 112
- --------------------------------------------------------------------------------
Market Street Funds, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGED PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
TO TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $14.68 $ 14.19 $ 11.94 $ 13.27 $ 12.25
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................................... .54 .51 .55 .53 .40
Net realized and unrealized gain (loss) on investments...... 2.49 1.07 2.28 (.77) 1.00
------- ------- ------- ------- -------
Total from investment operations......................... 3.03 1.58 2.83 (.24) 1.40
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income........ (.53) (.51) (.57) (.49) (.38)
Dividends to shareholders from net capital gains............ (.12) (.58) (.01) (.60) (.00)
------- ------- ------- ------- -------
Total distributions...................................... (.65) (1.09) (.58) (1.09) (.38)
------- ------- ------- ------- -------
Net asset value, end of period.............................. $17.06 $ 14.68 $ 14.19 $ 11.94 $ 13.27
======= ======= ======= ======= =======
Total return............................................. 21.23%(2) 11.88% 24.43% (1.82)% 11.62%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)............................ 56,068 43,431 36,002 29,363 28,984
Ratios of expenses to average net assets(1)................. .58% .60% .66% .67% .80%
Ratios of net investment income to average net assets....... 3.47% 3.68% 4.22% 4.34% 3.36%
Portfolio turnover.......................................... 99% 106% 130% 75% 89%
Average commission rate(2).................................. $0.0600 $0.0600 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, 1997,
1996, 1995, 1994, and 1993 were as follows: 0.58%, 0.60%, 0.66%, 0.73%, and
0.80%, 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> 113
- --------------------------------------------------------------------------------
Market Street Funds, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
TO TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $18.52 $17.38 $15.45 $15.45 $14.72
------- ------- ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................................... .17 .17 .20 (.01) (.01)
Net realized and unrealized gain (loss) on investments...... 3.72 3.03 1.86 .01 .77
------- ------- ------ ------ ------
Total from investment operations......................... 3.89 3.20 2.06 .00 .76
------- ------- ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income........ (.18) (.19) (.00) (.00) (.03)
Dividends to shareholders from net capital gains............ (.04) (1.87) (.13) (.00) (.00)
------- ------- ------ ------ ------
Total distributions...................................... (.22) (2.06) (.13) (.00) (.03)
------- ------- ------ ------ ------
Net asset value, end of period.............................. $22.19 $18.52 $17.38 $15.45 $15.45
======= ======= ====== ====== ======
Total return............................................. 21.21% 21.00% 13.48% 0.00% 5.20%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)............................ 48,574 34,098 23,822 15,430 12,223
Ratios of expenses to average net assets(1)................. .63% .68% .76% .86% .90%
Ratios of net investment income to average net assets....... .95% 1.14% 1.32% (.10)% (.07)%
Portfolio turnover.......................................... 37% 47% 89% 60% 60%
Average commission rate(2).................................. $0.0600 $0.0600 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,
1997, 1996, 1995, 1994, and 1993 were as follows: 0.63%, 0.68%, 0.76%,
0.89%, and 0.90%, 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-37
<PAGE> 114
- --------------------------------------------------------------------------------
Market Street Funds, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------------
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93
TO TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $13.41 $12.86 $11.63 $11.87 $9.00
------- ------- ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................... .11 .11 .16 .05 .06
Net realized and unrealized gain (loss) on
investments............................................ 1.08 1.23 1.45 (.02) 3.09
------- ------- ------ ------ ------
Total from investment operations..................... 1.19 1.34 1.61 .03 3.15
------- ------- ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income.... (.11) (.16) (.07) (.03) (.08)
Dividends to shareholders from net capital gains........ (.88) (.63) (.31) (.24) (.20)
------- ------- ------ ------ ------
Total distributions.................................. (.99) (.79) (.38) (.27) (.28)
------- ------- ------ ------ ------
Net asset value, end of period.......................... $13.61 $13.41 $12.86 $11.63 $11.87
======= ======= ====== ====== ======
Total return......................................... 9.66% 10.89% 14.31% .26% 36.11%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)........................ 62,513 50,955 36,642 26,212 13,682
Ratios of expenses to average net assets(1)............. 1.02% 1.05% 1.15% 1.32% 1.50%
Ratios of net investment income to average net assets... 1.13% 1.08% 1.21% .76% .68%
Portfolio turnover...................................... 37% 35% 45% 32% 37%
Average commission rate(2).............................. $0.0234 $0.0376 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,
1997, 1996, 1995, 1994, and 1993 were as follows: 1.02%, 1.05%, 1.15%,
1.32%, and 1.50%, 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-38
<PAGE> 115
- --------------------------------------------------------------------------------
Market Street Funds, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK PORTFOLIO
- --------------------------------------------------------------------------------------------
01/01/97 03/18/96(2)
TO TO
12/12/97(3) 12/31/96
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $11.31 $10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................................... .20 .15
Net realized and unrealized gain (loss) on investments...... 2.56 1.26
------- -------
Total from investment operations........................ 2.76 1.41
------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income........ (.25) (.10)
Dividends to shareholders from net capital gains............ (.25) (.00)
------- -------
Total distributions..................................... (.50) (.10)
------- -------
Net asset value, end of period.............................. $13.57 $11.31
======= =======
Total return(4)......................................... 24.57% 14.22%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)............................ 0 6,565
Ratios of expenses to average net assets (annualized)(1).... .80% .80%
Ratios of net investment income to average net assets
(annualized).............................................. 1.81% 1.82%
Portfolio turnover.......................................... 22% 13%
Average commission rate(5).................................. $0.0600 $0.0600
- --------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the Common Stock Portfolio before reimbursement of
expenses by affiliated insurance company for the periods ended December 12,
1997 and December 31, 1996 were as follows: 1.05%, 1.43% (annualized).
(2.) Commencement of operations.
(3.) Portfolio was acquired by Growth Portfolio.
(4.) Total returns for periods less than one year are not annualized.
(5.) 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> 116
- --------------------------------------------------------------------------------
Market Street Funds, Inc.
Financial Highlights -- Concluded
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SENTINEL GROWTH PORTFOLIO
- ---------------------------------------------------------------------------------------------
01/01/97 03/18/96(2)
TO TO
12/31/97 12/31/96
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $11.14 $10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................................... .04 .05
Net realized and unrealized gain (loss) on investments...... 3.47 1.09
------- -------
Total from investment operations........................ 3.51 1.14
------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income........ (.05) (.00)
Dividends to shareholders from net capital gains............ (.01) (.00)
------- -------
Total distributions..................................... (.06) (.00)
------- -------
Net asset value, end of period.............................. $14.59 $11.14
======= =======
Total return............................................ 31.58% 11.40%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)............................ 8,362 5,664
Ratios of expenses to average net assets (annualized)(1).... .90% .90%
Ratios of net investment income to average net assets
(annualized).............................................. .36% .57%
Portfolio turnover.......................................... 155% 75%
Average commission rate(4).................................. $0.0600 $0.0594
- ---------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the Sentinel Growth Portfolio before reimbursement of
expenses by affiliated insurance company for the year ended December 31,
1997 and the period ended December 31, 1996 was as follows: 1.35%, 1.51%
(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-40
<PAGE> 117
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1997
- --------------------------------------------------------------------------------
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
policies issued by National Life Insurance Company of Vermont (NLICV). The Fund
also serves as the investment medium for single premium and scheduled premium
variable life insurance policies which are no longer being issued.
At the end of business on December 12, 1997, the Growth Portfolio acquired all
the net assets of the Common Stock Portfolio pursuant to a plan of
reorganization. The acquisition was accomplished by a tax-free exchange of
716,786 shares of the Growth Portfolio (valued at $13,633,276) for the 1,004,770
shares of the Common Stock Portfolio outstanding on December 12, 1997. The
Common Stock Portfolio's net assets of $13,633,276 at that date, including
$2,172,171 of net unrealized appreciation (depreciation), were combined with
those of the Growth Portfolio. The aggregate net assets of the Growth Portfolio
and the Common Stock Portfolio immediately before the acquisition were
$246,256,160 and $13,633,276, respectively and the combined net assets of the
Growth Portfolio immediately following the acquisition were $259,889,436.
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. Certain prior period amounts have been restated to conform with
current year presentation.
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.
F-41
<PAGE> 118
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1997 -- Continued
- --------------------------------------------------------------------------------
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.
Dollar Rolls
The Bond and Managed Portfolios may enter into dollar rolls in which the
Portfolio sells securities for delivery and simultaneously contracts to
repurchase the same security at a fixed price on a specified future date. During
the roll period the Portfolio forgoes accrued interest paid on the securities.
The Portfolio will be compensated by the interest earned on the cash proceeds of
the initial sale (which are invested in short-term investments) and by the lower
repurchase price at the future date (the "drop"). The drop, which is recorded as
deferred income, is amortized over the period between the trade date and the
settlement date. All realized gains are recorded at the beginning of each roll.
A portfolio engages in dollar rolls for the purpose of enhancing its yield.
Dollar Rolls involve a risk of loss if the value of the security to be
repurchased declines prior to settlement date, which risk is in addition to the
risk of decline in the value of a Portfolio's other assets. The balance of
dollar rolls outstanding during the year ended December 31, 1997 was $506,027 in
the Bond Portfolio and $2,024,107 in the Managed Portfolio.
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;
(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,
F-42
<PAGE> 119
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1997 -- Continued
- --------------------------------------------------------------------------------
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 Sentinel Advisers
Company (SAC), a Vermont General Partnership, is advisor for the Growth, Money
Market, Bond, Managed, Aggressive Growth, Common Stock Portfolio and Sentinel
Growth Portfolios. With respect to the Growth Portfolio, Newbold's Asset
Management for the period January 1, 1997 through April 30, 1997 and SAC for the
period May 1, 1997 through December 31, 1997 were both 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. SAC also served as investment advisor through the period ended
December 12, 1997 for the Common Stock Portfolio. With respect to the Common
Stock Portfolio, SAC was 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 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-adviser to the International Portfolio.
PMLIC agrees to reimburse the Growth, Money Market, Bond, Managed, and
Aggressive Growth
F-43
<PAGE> 120
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1997 -- Continued
- --------------------------------------------------------------------------------
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 for such expenses in excess of an annual rate of 0.75%
of the average daily net asset value. NLICV agrees to reimburse the Common Stock
portfolio, through the period ended December 12, 1997, and the 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, 1997, the Portfolios' net assets consisted of:
<TABLE>
<CAPTION>
MONEY AGGRESSIVE SENTINEL
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net contribution from
shareholders................. $192,623,030 $64,338,969 $22,382,865 $40,983,184 $34,466,305 $53,991,110 $5,984,986
Undistributed net investment
income....................... 1,105,932 -- 330,523 463,796 391,789 488,533 25,069
Undistributed net realized
gains........................ 35,634,593 -- 3,599 2,699,617 3,740,193 4,341,196 1,668,898
Accumulated loss on investment
transactions................. -- (58) -- -- -- -- --
Net unrealized appreciation
(depreciation) on investments
and foreign currency......... 38,025,776 -- 633,883 11,920,912 9,975,818 3,692,617 683,036
------------ ----------- ----------- ----------- ----------- ----------- ----------
$267,389,331 $64,338,911 $23,350,370 $56,067,509 $48,574,105 $62,513,456 $8,361,989
============ =========== =========== =========== =========== =========== ==========
</TABLE>
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, 1997, 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....................... $ -- $ -- $12,519,574 $35,816,107 $ -- $ --
Corporate Bonds.............................. -- -- 14,373,199 7,615,933 -- --
Common Stock................................. 239,781,119 -- -- 10,229,701 23,491,605 28,754,019
------------ ----------- ----------- ----------- ----------- -----------
Total Purchases.............................. $239,781,119 $ -- $26,892,773 $53,661,741 $24,491,605 $28,754,019
============ =========== =========== =========== =========== ===========
SALES
U.S. Gov't Obligations....................... $ -- $ -- $ 7,778,902 $30,221,084 $ -- $ --
Corporate Bonds.............................. -- -- 10,884,335 7,246,467 -- --
Common Stock................................. 231,298,182 -- -- 7,855,306 13,397,867 20,664,346
------------ ----------- ----------- ----------- ----------- -----------
Total Sales.................................. $231,298,182 $ -- $18,663,237 $45,322,859 $13,397,867 $20,664,346
============ =========== =========== =========== =========== ===========
<CAPTION>
COMMON SENTINEL
STOCK GROWTH
PORTFOLIO* PORTFOLIO
-------------------------------------
<S> <C> <C>
PURCHASES
U.S. Gov't Obligations....................... $ -- $ --
Corporate Bonds.............................. -- --
Common Stock................................. 6,180,508 10,892,861
---------- -----------
Total Purchases.............................. $6,180,508 $10,892,861
========== ===========
SALES
U.S. Gov't Obligations....................... $ -- $ --
Corporate Bonds.............................. -- --
Common Stock................................. 2,098,229 10,150,853
---------- -----------
Total Sales.................................. $2,098,229 $10,150,853
========== ===========
</TABLE>
* Through the period ended December 12, 1997.
F-44
<PAGE> 121
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1997 -- Continued
- --------------------------------------------------------------------------------
6. TAX BASIS OF INVESTMENTS
Investment information based on the cost of the securities for Federal income
tax purposes held at December 31, 1997 is as follows:
<TABLE>
<CAPTION>
MONEY AGGRESSIVE SENTINEL
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate gross unrealized
appreciation................. $ 41,273,495 $ -- $ 634,129 $12,016,698 $10,679,796 $ 9,653,370 $ 890,758
Aggregate gross unrealized
depreciation................. (3,247,719) -- (746) (95,786) (703,978) (5,956,365) (207,722)
------------ ----------- ----------- ----------- ----------- ----------- ----------
Net unrealized appreciation
(depreciation)............... $ 38,025,776 $ -- $ 633,383 $11,920,912 $ 9,975,818 $ 3,697,005 $ 683,036
============ =========== =========== =========== =========== =========== ==========
Aggregate cost of securities
for federal income tax
purposes..................... $230,505,985 $64,680,706 $22,964,106 $44,479,146 $39,361,294 $57,269,359 $7,672,303
============ =========== =========== =========== =========== =========== ==========
</TABLE>
7. AUTHORIZED CAPITAL STOCK AND CAPITAL STOCK TRANSACTIONS
On December 31, 1997, there were 1 billion 200 million shares of $0.01 par value
capital stock authorized for the Fund. The shares of capital stock are divided
into following 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
50 million shares, the Money Market Portfolio consists of 150 million shares;
each of the other series consists of 5 million shares.
Transactions in capital stock for the year ended December 31, 1997 were as
follows:
<TABLE>
<CAPTION>
MONEY MARKET
GROWTH PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold...................................... 1,328,421 $ 23,557,083 116,153,761 $ 116,153,761
Shares redeemed.................................. (1,033,097) (18,272,623) (109,109,613) (109,109,613)
Shares reinvested................................ 1,736,600 28,056,401 3,098,096 3,098,096
---------- ------------ ------------ -------------
Net contributions from affiliated insurance
companies....................................... 2,031,924 $ 33,340,861 10,142,244 $ 10,142,244
========== ============ ============ =============
Shares exchanged in acquisition of Common Stock
Portfolio....................................... 716,786 13,633,276 -- --
---------- ------------ ------------ -------------
<CAPTION>
BOND PORTFOLIO MANAGED PORTFOLIO
- ------------------------------------------------- -----------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C>
Shares sold...................................... 608,494 $ 6,478,790 538,094 $ 8,544,898
Shares redeemed.................................. (192,816) (2,047,805) (338,821) (5,264,441)
Shares reinvested................................ 108,875 1,143,011 129,171 1,970,912
-------- ----------- -------- -----------
Net contributions from affiliated insurance
companies....................................... 524,553 $ 5,573,996 328,444 $ 5,251,369
======== =========== ======== ===========
Shares exchanged in acquisition of Common Stock
Portfolio....................................... -- -- -- --
-------- ----------- -------- -----------
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH INTERNATIONAL COMMON STOCK SENTINEL GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO* PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold.................... 513,839 $10,376,849 970,932 $13,015,260 443,566 $ 5,866,422 69,861 $ 976,211
Shares redeemed................ (187,215) (3,823,958) (484,512) (6,465,439) (30,043) (405,410) (7,419) (103,927)
Shares reinvested.............. 21,347 391,283 305,922 3,775,073 10,980 139,301 2,383 26,667
-------- ----------- -------- ----------- ---------- ------------ ------ ---------
Net contributions from
affiliated insurance
companies..................... 347,971 $ 6,944,174 792,342 $10,324,894 424,503 $ 5,600,313 64,825 $ 898,951
======== =========== ======== =========== ========== ============ ====== =========
Shares exchanged in acquisition
of Common Stock Portfolio..... -- -- -- -- (1,004,770) (13,633,276) -- --
-------- ----------- -------- ----------- ---------- ------------ ------ ---------
</TABLE>
* Through the period ended December 12, 1997.
F-45
<PAGE> 122
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1997 -- Continued
- --------------------------------------------------------------------------------
Transactions in capital stock for the year ended December 31, 1996 were as
follows(1):
<TABLE>
<CAPTION>
MONEY MARKET
GROWTH PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold......................................... 1,276,805 $ 20,944,472 82,625,391 $ 82,625,391
Shares redeemed..................................... (981,738) (16,125,158) (65,247,831) (65,247,831)
Shares reinvested................................... 803,008 12,727,734 2,204,012 2,204,012
--------- ------------ ----------- ------------
Net contributions from affiliated insurance
companies.......................................... 1,098,075 $ 17,547,048 19,581,572 $ 19,581,572
========= ============ =========== ============
<CAPTION>
BOND PORTFOLIO MANAGED PORTFOLIO
- ---------------------------------------------------- -----------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C>
Shares sold......................................... 382,375 $ 4,040,320 506,385 $ 7,070,251
Shares redeemed..................................... (173,162) (1,831,517) (296,312) (4,126,398)
Shares reinvested................................... 83,086 874,882 209,781 2,862,232
-------- ----------- -------- -----------
Net contributions from affiliated insurance
companies.......................................... 292,299 $ 3,083,685 419,854 $ 5,806,085
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH INTERNATIONAL COMMON STOCK SENTINEL GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold....................... 441,008 $ 7,446,728 987,809 $12,532,647 577,728 $5,835,026 508,648 $5,090,047
Shares redeemed................... (156,497) (2,640,322) (218,584) (2,776,249) (2,588) (27,950) (377) (4,012)
Shares reinvested................. 185,719 2,824,782 180,866 2,235,504 5,127 53,716 -- --
-------- ----------- -------- ----------- ------- ---------- ------- ----------
Net contributions from affiliated
insurance companies.............. 470,230 $ 7,631,188 950,091 $11,991,902 580,267 $5,860,792 508,271 $5,086,035
======== =========== ======== =========== ======= ========== ======= ==========
</TABLE>
(1) The Common Stock and Sentinel Growth Portfolios commenced operations on
3/18/96.
F-46
<PAGE> 123
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1997 -- 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 31, 1997, the Board of Directors declared the following net
investment income and capital gain dividends to shareholders of record on
December 31, 1997, ex-dividend date January 5, 1998, payable on January 7, 1998
as follows:
<TABLE>
<CAPTION>
TOTAL PER SHARE
------------------------ --------------------
NET NET
INVESTMENT CAPITAL INVESTMENT CAPITAL
PORTFOLIO INCOME GAIN INCOME GAIN
- --------------------- ---------- ----------- ---------- -------
<S> <C> <C> <C> <C>
Growth............... $1,105,932 $35,634,593 $.0805 $2.5932
Bond................. 330,523 3,599 .1554 .0017
Managed.............. 463,796 2,699,617 .1411 .8215
Aggressive Growth.... 391,789 3,740,193 .1790 1.7088
International........ 278,162 4,341,196 .0606 .9452
Sentinel Growth...... 25,069 1,688,898 .0437 2.9121
</TABLE>
F-47
<PAGE> 124
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
A-1
<PAGE> 125
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.
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-2
<PAGE> 126
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 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> 127
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
Statement of Net Assets as of December 31, 1997
Statements of Operations for the Year Ended December 31, 1997
Statements of Changes in Net Assets for the Year Ended December 31, 1997
Statements of Changes in Net Assets for the Year Ended December 31, 1996
Notes to Financial Statements, December 31, 1995
(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.b. Articles Supplementary
1.c. Articles Supplementary
1.d. Articles Supplementary
2.a. By-Laws of the Fund
2.b. Amendment to By-Laws
3. Inapplicable
4 Form of Certificate for Shares of Common Stock of the Fund
5.a. Investment Advisory Agreement between the Fund and
Providentmutual Investment Management Company (PIMC)
5.b. Investment Advisory Agreement between the Fund and Sentinel
Advisors Company
5.b.i. Amendment to Investment Advisory Agreement between the Fund
and Sentinel Advisors Company(1)
5.b.ii. Amendment to Investment advisory Agreement Between the Fund
and Sentinel Advisors Company(2)
5.c. Investment Advisory Agreement between the Fund and Sentinel
Advisors Company with respect to the Growth Portfolio(3)
5.d. Investment Advisory agreement between the Fund and PIMC with
respect to the International Portfolio
5.e. Investment Sub-Advisory Agreement between PIMC and The
Boston Company Asset Management, Inc.
5.f. Investment Advisory Agreement between the Fund and PIMC
respecting All Pro Portfolios
5.g. Form of Agreement between PIMC and its Sub-Advisors
respecting All Pro Portfolios
5.h. Investment Management Consulting Agreement between PIMC and
Wilshire Associates Incorporated respecting All Pro
Portfolios
6.a. Underwriting Agreement between the Fund and PML Securities,
Inc.
6.b. Amendment to Underwriting Agreement between the Fund and PML
Securities, Inc.
6.c. Amendment to Underwriting Agreement between the Fund and PML
Securities, Inc.
6.d. Amendment to Underwriting Agreement between the Fund and PML
Securities, Inc.
6.e. Amendment to Underwriting Agreement between the Fund and PML
Securities, Inc.
7. Inapplicable
</TABLE>
C-1
<PAGE> 128
<TABLE>
<S> <C>
8.a. Custody Agreement between the Fund and Provident National
Bank
8.b. Amendment to Custody Agreement between the Fund and
Provident National Bank
8.c. Amendment to Custody Agreement between the Fund and
Provident National Bank
8.d. Amendment to Custody Agreement between the Fund and
Provident National Bank
8.e. Custodial Services Agreement between the Fund and Citibank,
N.A.
9.a. Agreement and Plan of Reorganization among Providentmutual
Variable Life Growth Account, Providentmutual Variable Life
Money Market Account, Providentmutual Variable Life Bond
Account and the Fund
9.b. Reimbursement agreement between Provident Mutual Life
Insurance Company of Philadelphia and the Fund
9.c. Administration Agreement between the Fund and Provident
Institutional Management Corporation
9.c.i. Amendment to Administration Agreement between the Fund and
Provident Financial Processing Corporation (PFPC)
9.c.ii. Amendment to Administration Agreement between the Fund and
PFPC
9.c.iii. Amendment to Administration Agreement between the Fund and
PFPC
9.d. Transfer Agency Agreement between the Fund and PFPC, as
amended
9.d.i. Amendment to Transfer Agency Agreement between the Fund and
PFPC
9.d.ii. Amendment to Transfer Agency Agreement between the Fund and
PFPC
9.e.i. Participation Agreement among the Fund, Provident Mutual
Life Insurance Company, and PML Securities, Inc.
9.e.ii. Participation Agreement among the Fund, Providentmutual Life
and Annuity Company of America, and PML Securities, Inc.
9.e.iii. Participation Agreement among the Fund, National Life
Insurance Company and PML Securities, Inc.(2)
9.e.iv. Amendment to Participation Agreement among the Fund,
National Life Insurance Company and PML Securities, Inc.
10. Opinion 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(2)
14. Inapplicable
15. Inapplicable
16. Inapplicable
17. Financial Data Schedules
18. Inapplicable
19. Powers of Attorney
</TABLE>
- ---------------
(1) Incorporated herein by reference to Post-Effective Amendment No. 13 filed on
February 28, 1996, File No. 2-98755.
(2) Incorporated herein by reference to Post-Effective Amendment No. 14 filed on
March 19, 1996, File No. 2-98755.
(3) Incorporated herein by reference to Post-Effective Amendment No. 16, filed
on February 21, 1997, File No. 2-98755.
C-2
<PAGE> 129
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.
Persons controlled by or under common control with the registrant follow:
<TABLE>
<CAPTION>
PERCENT OF VOTING
NAME JURISDICTION SECURITIES OWNED PRINCIPAL BUSINESS
---- ------------ ----------------- ------------------
<S> <C> <C> <C>
Provident Mutual Pennsylvania Mutual Company Life & Health Insurance
Life Insurance Company*
(Provident Mutual)
Providentmutual Life and Delaware Ownership of all Life & Health Insurance
Annuity Company voting securities
of America* by Provident Mutual
Provident Mutual Delaware Ownership of all voting Life & Health Insurance
International securities by
Life Insurance Company Provident Mutual
Providentmutual Pennsylvania Ownership of all Holding Company
Holding Company (PHC)* voting securities
by Provident Mutual
1717 Capital Management Pennsylvania Ownership of all voting Broker/Dealer
Company* securities by PHC
1717 Brokerage Services Inc. Pennsylvania Ownership of all voting Insurance Agency
securities by PHC
Providentmutual Investment Pennsylvania Ownership of all voting Investment Adviser
Management Company* securities by PHC
Washington Square Pennsylvania Ownership of all voting Administrative Services
Administrative Services, securities by PHC
Inc.*
Institutional Concepts, New York Ownership of all voting Insurance Agency
Inc.* securities by PHC
Provestco, Inc.* Delaware Ownership of all voting Real Estate Investment
securities by PHC
PNAM, Inc.* Delaware Ownership of all voting Holding Company
securities by PHC
Sigma American Delaware Ownership of 80.2% Investment Management
Corporation* voting securities by and Advisory Services
PHC and 19.8% by
Provident Mutual
</TABLE>
C-3
<PAGE> 130
<TABLE>
<CAPTION>
PERCENT OF VOTING
NAME JURISDICTION SECURITIES OWNED PRINCIPAL BUSINESS
---- ------------ ----------------- ------------------
<S> <C> <C> <C>
Provident Mutual Delaware Ownership of all voting Investment Management
Management Co., Inc.* securities by Sigma and Advisory Services
American Corporation
Software Development Pennsylvania Ownership of all Development and
Corporation* voting securities Marketing of Computer
by PHC Software
</TABLE>
- ---------------
* File Consolidated Financial Statements.
ITEM 26. Number of Holders of Securities
<TABLE>
<CAPTION>
NUMBER OF RECORD
TITLE OF CLASS HOLDERS AS OF APRIL 1, 1998
- ------------------------------------------------------------ ----------------------------
<S> <C>
Growth Portfolio............................................ 5
Money Market Portfolio...................................... 5
Bond Portfolio.............................................. 5
Managed Portfolio........................................... 5
Aggressive Growth Portfolio................................. 5
International Portfolio..................................... 5
Sentinel Growth Portfolio................................... 2
All Pro Large Cap Growth Portfolio.......................... None
All Pro Small Cap Growth Portfolio.......................... None
All Pro Large Cap Value Portfolio........................... None
All Pro Small Cap Value Portfolio........................... None
</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-4
<PAGE> 131
ITEM 29. Principal Underwriters
a. 1717 Capital Management 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 300
Continental Drive, Newark, Delaware 19713.
<TABLE>
<CAPTION>
(2) (3)
(1) POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
NAME PRINCIPAL UNDERWRITER WITH REGISTRANT
---- -------------------------- ---------------------
<S> <C> <C>
Mary Lynn Finelli*................... Director None
Alan F. Hinkle*...................... Director None
Robert W. Kloss*..................... Director None
J. Kevin McCarthy*................... Director None
James G. Potter, Jr.*................ Director Vice President
Joan C. Turnbull..................... Director None
Lance A. Reihl....................... President None
Rosanne Gatta**...................... Treasurer President
Linda M. Springer*................... Financial Reporting None
Officer
Adam Scaramella*..................... Legal Officer & Secretary Legal Officer & Secretary
</TABLE>
- ---------------
* 1050 Westlakes Drive, Berwyn, PA 19312
** 1205 Westlakes Drive, Berwyn, PA 19312
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 and 1050 Westlakes Drive, Berwyn, PA
19312, 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-5
<PAGE> 132
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
23RD DAY OF APRIL 1998.
MARKET STREET FUND, INC.
BY: /s/
------------------------------------
ROSANNE GATTA
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/ President April 23, 1998
- ----------------------------------------------------- (Principal Executive
ROSANNE GATTA Officer)
/s/ Treasurer April 23, 1998
- ----------------------------------------------------- (Principal Financial and
ANTHONEY T. GIAMPIETRO Accounting Officer)
/s/ Director April 23, 1998
- -----------------------------------------------------
ROBERT W. KLOSS
* Director April 23, 1998
- -----------------------------------------------------
ALAN GART
* Director April 23, 1998
- -----------------------------------------------------
A. GILBERT HEEBNER
* Director April 23, 1998
- -----------------------------------------------------
LEO SLACK
* Director April 23, 1998
- -----------------------------------------------------
EDWARD S. STOUCH
*By: /s/
------------------------------------------------
ADAM SCARAMELLA
Attorney-in-Fact,
Pursuant to Power of Attorney
</TABLE>
C-6
<PAGE> 133
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------------------ ------------
<S> <C> <C>
1.a. Articles of Incorporation of the Market Street Fund, Inc.
(the "Fund")................................................
1.b. Articles Supplementary......................................
1.c. Articles Supplementary......................................
1.d. Articles Supplementary......................................
2.a. By-Laws of the Fund.........................................
2.b. Amendment to By-Laws........................................
4 Form of Certificate for Shares of Common Stock of the
Fund........................................................
5.a. Investment Advisory Agreement between the Fund and
Providentmutual Investment Management Company (PIMC)........
5.b. Investment Advisory Agreement between the Fund and Sentinel
Advisors Company............................................
5.d. Investment Advisory agreement between the Fund and PIMC with
respect to the International Portfolio......................
5.e. Investment Sub-Advisory Agreement between PIMC and The
Boston Company Asset Management, Inc........................
5.f. Investment Advisory Agreement between the Fund and PIMC
respecting All Pro Portfolios...............................
5.g. Form of Agreement between PIMC and its Sub-Advisors
respecting All Pro Portfolios...............................
5.h. Investment Management Consulting Agreement between PIMC and
Wilshire Associates Incorporated respecting All Pro
Portfolios..................................................
6.a. Underwriting Agreement between the Fund and PML Securities,
Inc.........................................................
6.b. Amendment to Underwriting Agreement between the Fund and PML
Securities, Inc. ...........................................
6.c. Amendment to Underwriting Agreement between the Fund and PML
Securities, Inc. ...........................................
6.d. Amendment to Underwriting Agreement between the Fund and PML
Securities, Inc. ...........................................
6.e. Amendment to Underwriting Agreement between the Fund and PML
Securities, Inc. ...........................................
8.a. Custody Agreement between the Fund and Provident National
Bank........................................................
8.b. Amendment to Custody Agreement between the Fund and
Provident National Bank.....................................
8.c. Amendment to Custody Agreement between the Fund and
Provident National Bank.....................................
8.d. Amendment to Custody Agreement between the Fund and
Provident National Bank.....................................
8.e. Custodial Services Agreement between the Fund and Citibank,
N.A. .......................................................
9.a. Agreement and Plan of Reorganization among Providentmutual
Variable Life Growth Account, Providentmutual Variable Life
Money Market Account, Providentmutual Variable Life Bond
Account and the Fund........................................
9.b. Reimbursement agreement between Provident Mutual Life
Insurance Company of Philadelphia and the Fund..............
9.c. Administration Agreement between the Fund and Provident
Institutional Management Corporation........................
9.c.i. Amendment to Administration Agreement between the Fund and
Provident Financial Processing Corporation (PFPC)...........
9.c.ii. Amendment to Administration Agreement between the Fund and
PFPC........................................................
9.c.iii. Amendment to Administration Agreement between the Fund and
PFPC........................................................
9.d. Transfer Agency Agreement between the Fund and PFPC, as
amended.....................................................
9.d.i. Amendment to Transfer Agency Agreement between the Fund and
PFPC........................................................
9.d.ii. Amendment to Transfer Agency Agreement between the Fund and
PFPC........................................................
9.e.i. Participation Agreement among the Fund, Provident Mutual
Life Insurance Company, and PML Securities, Inc. ...........
</TABLE>
<PAGE> 134
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------------------ ------------
<S> <C> <C>
9.e.ii. Participation Agreement among the Fund, Providentmutual Life
and Annuity Company of America, and PML Securities, Inc. ...
9.e.iv. Amendment to Participation Agreement among the Fund,
National Life Insurance Company and PML Securities, Inc. ...
10. Opinion of Adam Scaramella, Esquire.........................
11.a. Consent of Sutherland, Asbill & Brennan, L.L.P. ............
11.b. Consent of Coopers & Lybrand, L.L.P. .......................
13.a. See Number 9.a. above.......................................
17. Financial Data Schedules....................................
19. Powers of Attorney..........................................
</TABLE>
<PAGE> 1
EXHIBIT 1(a)
ARTICLES OF INCORPORATION
OF
THE MARKET STREET FUND, INC.
The undersigned James S. Coale, II, whose office address is
Provident Mutual, 1600 Market Street, Philadelphia, Pennsylvania 19103, being
at least eighteen years of age, does hereby form a corporation under the
general laws of the State of Maryland.
ARTICLE I
NAME
The name of the corporation (hereinafter referred to as the
"Corporation") shall be the Market Street Fund, Inc.
ARTICLE II
DURATION
The period of its duration is perpetual.
ARTICLE III
PURPOSE
The purposes for which the Corporation is formed are:
(a) To operate and carry on the business of an open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"), and to exercise all powers necessary and
appropriate to the conduct of such business.
(b) To subscribe for, invest in, purchase or otherwise
acquire, to own, hold, sell, exchange or pledge or otherwise
<PAGE> 2
dispose of, securities of every nature and kind, whether now in existence or
hereafter created.
(c) To issue and sell shares of its own capital stock in such
amounts and on such terms and conditions, for such purposes and for such amount
or kind of consideration now or hereafter permitted by the laws of the State of
Maryland and by these Articles of Incorporation, as its Board of Directors may
determine, consistent with all applicable laws and regulations, including the
1940 Act.
(d) To redeem, retire, repurchase, or otherwise acquire,
hold, dispose of, resell, transfer, reissue or cancel (all without the vote of
consent of the shareholders of the Corporation) shares of its capital stock, in
any manner and to the extent now or hereafter permitted by the laws of the
State of Maryland and by these Articles of Incorporation.
(e) To engage in any lawful act or activity for which
corporations may be organized under the general corporation laws of Maryland,
and to have all the powers of a corporation under the applicable corporation
laws as in effect from time to time of the State of Maryland.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the principal office of the Corporation
in this State is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202. The name of
- 2 -
<PAGE> 3
the resident agent of the Corporation in this State is The Corporation Trust
Incorporated, a corporation of this State, and the post office address of the
resident agent is 32 South Street, Baltimore, Maryland 21202.
ARTICLE V
CAPITAL STOCK
Section 5.1. The Board of Directors of the Corporation is
empowered to authorize the issuance from time to time of shares of capital
stock, whether now or hereafter authorized (without the necessity of offering
the same in any part thereof to existing shareholders) for such consideration
as the Board of Directors may deem advisable, subject to such limitations as
may be set forth in these Articles of Incorporation or in the By-Laws of the
Corporation or in the General Laws of the State of Maryland.
Section 5.2. No holder of shares shall, as such holder, have
any right to purchase or subscribe for any shares of the capital stock of the
Corporation or any other security of the Corporation which it may issue or sell
(whether out of the number of shares authorized by these Articles of
Incorporation or out of any shares of the capital stock of the Corporation
acquired by it after the issue thereof, or otherwise) other than such right, if
any, as the Board of Directors in its discretion may determine.
Section 5.3. The total number of shares of capital stock of all
classes which the Corporation is authorized to issue is two hundred million
shares (200,000,000), par value of one cent
- 3 -
<PAGE> 4
($.01) per share, with an aggregate par value of two million dollars
($2,000,000). Twenty million (20,000,000) of such shares may be issued in the
following classes, each class comprising the number of shares and having the
designations indicated; subject, however, to the authority herein granted to
the Board of Directors to change the designation of any class and to increase
or decrease any such number of shares:
Growth Class . . . . . . . . .Five Million (5,000,000) shares
Money Market Class . . . . . .Five Million (5,000,000) shares
Bond Class . . . . . . . . . .Five Million (5,000,000) shares
Discretionary Class . . . . . .Five Million (5,000,000) shares
The Board of Directors of the Corporation is authorized, from time to time, by
resolution to classify or reclassify the balance of one hundred eighty million
(180,000,000) authorized shares, and any other unissued shares of stock of the
Corporation, into one or more classes that are or may be established or
designated from time to time, by setting or changing the preferences,
conversion, or other rights, voting powers, restrictions, limitations as to
dividends, qualifications or terms and condition of redemption of such stock,
and to increase or decrease the number of authorized shares of any class, but
the number of shares of any class shall not be reduced by the Board of
Directors below the number of shares thereof then outstanding, and the total
number of authorized shares shall not be increased above the number of shares
authorized in the Corporation's Articles of Incorporation except by amendment
thereto.
- 4 -
<PAGE> 5
Section 5.4. Without limiting the generality of the foregoing, (a)
the Corporation may hold as treasury shares, reissue for such consideration and
on such terms as the Board of Directors may determine, or cancel, at their
discretion from time to time, any shares of any class reacquired by the
Corporation; and (b) dividends and distributions of investment income and
capital gains with respect to the stock of the Corporation and with respect to
each class that may hereafter be created shall be in such amount as may be
declared from time to time by the Board of Directors, and such dividends and
distributions may vary from class to class to such extent and for such purposes
as the Board of Directors may deem appropriate, including but not limited to,
the purpose of complying with requirements of regulatory authorities.
Section 5.5. The establishment and designation of any class of
shares in addition to those established and designated in subsection 5.6 shall
be effective upon (a) the authorization of such class by vote of a majority of
the Board of Directors, including the establishment and designation of the
preferences, rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of such class and (b)
the filing for record of the articles supplementary required by Section 2-208
of the Maryland General Corporation Law with the State Department of
Assessments and Taxation of Maryland. At any time when there are no shares
outstanding or subscribed for
- 5 -
<PAGE> 6
a particular class previously established and designated by the Board of
Directors, the Class may be eliminated by similar means.
Section 5.6. Without limiting the authority set forth herein of
the Board of Directors to establish and designate any further classes, there
are hereby established and designated four classes of stock to be known as: the
Growth Class, the Money Market Class, the Bond Class, and the Discretionary
Class. The shares of said classes and any shares of any further class that may
from time to time be established and designated by the Board of Directors
(unless provided otherwise by the Board of Directors with respect to such
further classes at the time of establishing and designating such further
classes) shall have the following relative preferences, rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption.
(a) Assets Belonging to a Class. All consideration received by
the Corporation for the issue or sale of shares of a particular class,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestments of such proceeds in whatever form the
same may be, shall irrevocably belong to that class for all purposes, subject
only to the rights of creditors, and shall be so recorded upon the books and
accounts of the Corporation. Such consideration, assets, income, earnings,
- 6 -
<PAGE> 7
profits, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments derived from
any reinvestment of such proceeds, in whatever form the same may be, together
with any General Items allocated to that class as provided in the following
sentence, are herein referred to as "assets belonging to" that class. In the
event that there are any assets, income, earnings, profits, and proceeds
thereof, funds, or payments which are not readily identifiable as belonging to
any particular class (collectively "General Items"), such General Items shall
be allocated by or under the supervision of the Board of Directors, to and
among any one or more of the classes established and designated from time to
time in such manner and on such basis as the Board of Directors, in its sole
discretion, deems fair and equitable, and any General Items so allocated to a
particular class shall belong to that class. Each such allocation by the Board
of Directors shall be conclusive and binding for all purposes.
(b) Liabilities Belonging to a Class. The assets belonging to
each particular class shall be charged with the liabilities of the Corporation
in respect of that class and all expenses, costs, charges and reserves
attributable to that class, and any general liabilities, expenses, costs,
charges or reserves of the Corporation which are not readily identifiable as
belonging to any particular class shall be allocated and charged by or under
the supervision of the Board of Directors to and among any one or more of the
classes established and designated from time to time
- 7 -
<PAGE> 8
in such manner and on such basis as the Board of Directors, in its sole
discretion, deems fair and equitable. The liabilities, expenses, costs, charges
and reserves allocated and so charged to a class are herein referred to as
"liabilities belonging to" that class. Each allocation of liabilities,
expenses, costs, charges and reserves by the Board of Directors shall be
conclusive and binding for all purposes.
(c) Income Belonging to a Class. The Board of Directors shall
have full discretion to the extent not inconsistent with the Maryland General
Corporation Law and the 1940 Act to determine: (i) which items shall be treated
as income and which items as capital; and (ii) "income belonging to" a class
which shall include all income, earnings and profits derived from assets
belonging to that class, less any expenses, costs, charges or reserves
belonging to that class, for the relevant time period. Each such determination
and allocation shall be conclusive and binding.
(d) Dividends. Dividends and distributions on shares of a
particular class may be paid with such frequency, in such form and in such
amount as the Board of Directors may from time to time determine. Dividends may
be declared daily or otherwise, after providing for actual and accrued
liabilities belonging to that class, pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Board of Directors
may determine.
- 8 -
<PAGE> 9
All dividends on shares of a particular class shall be paid only out
of the income belonging to that class and capital gains distributions on shares
of a particular class shall be paid only out of the capital gains belonging to
that class. All dividends and distributions on shares of a particular class
shall be distributed pro rata to the holders of that class in proportion to the
number of shares of that class held by such holders at the date and time of
record established for the payment of such dividends or distributions, except
that in connection with any dividend or distribution program or procedure, the
Board of Directors may determine that no dividend or distribution shall be
payable on shares as to which the Shareholder's purchase order and/or payment
have not been received by the time or times established by the Board of
Directors under such program or procedure.
The Board of Directors shall have the power, in its sole discretion,
to distribute in any fiscal year as dividends, including dividends designated
in whole or in part as capital gains distributions, amounts sufficient, in the
opinion of the Board of Directors, to enable the Corporation to qualify as a
regulated investment company under the Internal Revenue Code of 1954, as
amended, or any successor or comparable statute thereto, and regulation
promulgated thereunder. However, nothing in the foregoing shall limit the
authority of the Board of Directors to make distributions greater than or less
than the amount necessary to qualify as a regulated investment company.
- 9 -
<PAGE> 10
Dividends and distributions may be paid in cash, property or shares,
including authorized but unissued shares, or treasury shares, or a combination
of any of the foregoing, as determined by the Board of Directors or pursuant to
any program that the Board of Directors may have in effect at the time. Any
such dividend or distribution paid in shares will be paid at the current net
asset value thereof as defined in subsection 5.3(h).
(e) Liquidation. In the event of the liquidation of the
Corporation or of a particular class, the shareholders of each class that has
been established and designated and is being liquidated shall be entitled to
receive, as a class, when and as declared by the Board of Directors, the excess
of the assets belonging to that class over the liabilities belonging to that
class. The holders of shares of any class shall not be entitled thereby to any
distribution upon liquidation of any other class. The assets so distributable
to the shareholders of any particular class shall be distributed among such
shareholders in proportion to the number of shares of that class held by them
and recorded on the books of the Corporation. The liquidation of any
particular class in which there are shares then outstanding may be authorized
by vote of a majority of the Board of Directors then in office, subject to the
approval of a majority of the outstanding securities of that class, as defined
in the 1940 Act. In the event that there are any general assets not belonging
to any particular class of stock and available for distributing such
distribution shall be made to holders of stock of various classes in such
proportion as
- 10 -
<PAGE> 11
the Board of Directors determines to be fair and equitable, and such
determination by the Board of Directors shall be final.
(f) Voting. On each matter submitted to a vote of the
shareholders, each holder of a share shall be entitled to one vote for each
share standing in his or her name on the books of the Corporation, irrespective
of the class thereof, and all outstanding shares of all classes shall vote as a
single class ("Single Class Voting"); provided, however, that (a) as to any
matter with respect to which a separate vote of any class is required by the
1940 Act or by the Maryland General Corporation Law, or as to any matter that
the Board of Directors determines, in its sole discretion, concerns only one or
more particular class, a separate vote by that class shall apply in lieu of
Single Class voting as described above; (b) in the event that the separate vote
requirements referred to in (a) above apply with respect to one or more
classes, then, subject to (c) below, the shares of all other classes shall vote
as a single class; and (c) as to any matter which does not affect the interest
of a particular class, only the holders of shares of the one or more affected
classes shall be entitled to vote.
(g) Redemption by Shareholder. Each holder of shares of a
particular class shall have the right at such times and on such terms and
conditions as may be permitted by the Corporation to require the Corporation
to redeem all or any part of the shares of that class standing in the name of
such holder on the books of the Corporation at a redemption price per share
equal to the net
- 11 -
<PAGE> 12
asset value per share of that class next determined in accordance with
subsection 5.3(h) after the shares are properly tendered for redemption.
Payment of the redemption price shall be in cash; provided, however, that if
the Board of Directors determines, which determination shall be conclusive,
that conditions exist which make payment wholly in cash unwise or undesirable,
the Corporation may make payment wholly or partly in securities or in other
assets belonging to the class of which the shares being redeemed are part at
the value of such securities or assets used in such determination of net asset
value.
Notwithstanding the foregoing, the Corporation may postpone payment of
the redemption price and may suspend the right of the holders of shares of any
class to require the Corporation to redeem shares of that class during any
period or at any time when and to the extent permissible under the 1940 Act.
(h) Net Asset Value per Share. The net asset value per Share of
any class shall be the quotient obtained by dividing the value of the net
assets of that class (being the value of the assets belonging to that class
less the liabilities belonging to that class) by the total number of shares of
that class outstanding.
The Board of Directors may determine to maintain the net asset value
per share of any class at a designated constant dollar amount. In connection
therewith, the Board of Directors may adopt procedures not inconsistent with
the 1940 Act for the continuing declarations of income attributable to that
class as dividends
- 12 -
<PAGE> 13
payable in additional shares of that class at the designated constant dollar
amount and for the redemption of shares as necessary to maintain a constant net
asset value in the event of any losses attributable to that class.
(i) Equality. All shares of each particular class shall represent
an equal proportionate interest in the assets belonging to that class (subject
to the liabilities belonging to that class), and each share of any particular
class shall be equal to each other share of that class. The Board of Directors
may from time to time divide or combine the shares of any particular class into
a greater or lesser number of shares of that class without thereby changing the
proportionate beneficial interest in the assets belonging to that class or in
any way affecting the rights of outstanding shares of any other class.
(j) Conversion or Exchange Rights. Subject to compliance with the
requirements of the 1940 Act, the Board of Directors shall have the authority
to provide that the holders of shares of any class shall have the right to
convert or exchange said shares into shares of one or more other classes or
shares in accordance with such requirements and procedures as may be
established by the Board of Directors.
(k) Fractional Shares. The Corporation may issue, sell redeem,
repurchase, and otherwise deal in and with shares of its capital stock of all
or any classes in fractional denominations to the same extent as its whole
shares, and shares in fractional denominations shall be shares of capital stock
of all and any
- 13 -
<PAGE> 14
classes having proportionately to the respective fractions represented thereby
all the rights of whole shares of all or any class including, without
limitation, the right to vote, the right to receive dividends, and
distributions, the right to participate upon liquidation of the Corporation,
provided that the issue of shares in fractional denominations or certificates
therefor of all or any class shall be limited to such transactions and be made
upon such terms as may be fixed by or under authority of the By Laws.
(l) Ownership Record. The corporation may issue shares in open
account form without issuance or delivery of certificate therefor, in which
case the ownership of such shares shall be reflected exclusively by entry in
the books of the corporation.
ARTICLE VI
DIRECTORS
Section 6.1. The initial number of directors of the corporation
shall be five (5), which number may be increased or decreased in accordance
with the By-Laws of the Corporation but shall never be less than three. The
names of the directors who shall act until the initial shareholders' meeting
and until their successors have been duly chosen and qualified are;
Dr. Alan Gart
John P. Lloyd
Leonard H. McCandless
James C. A. McClennen
Dr. James E. Walter
- 14 -
<PAGE> 15
Section 6.2. The business and affairs of the Corporation shall be
managed under the direction of the Board of Directors which shall have and may
exercise all powers of the Corporation except those powers which are by law, by
these Articles of Incorporation or by the By-Laws conferred upon or reserved to
the shareholders.
Section 6.3. The following additional provisions not inconsistent
with law are hereby established for the management, conduct and regulation of
the business and affairs of the Corporation and of its Directors and
shareholders:
(a) Assets of this Corporation may be held by or
deposited with a custodian as prescribed from time to time by the Board of
Directors or the By-Laws.
(b) The By-Laws of this Corporation, as from time to time
amended, may prescribe limitations upon the borrowing of money and pledging of
assets by the Corporation.
Section 6.4. Any determination made in good faith and, so far as
accounting matters are involved, in accordance with generally accepted
accounting principles, by or pursuant to the direction of the Board of
Directors, as to the amount of the assets, debts, obligations or liabilities of
the Corporation, as to the amount of any reserves or charges set up and the
propriety thereof, as to the time or purpose for creating such reserves or
charges, as to the use, alteration or cancellation of any reserves or charges
(whether or not any debt, obligation or liability for which such reserves or
charges shall have been created, shall have
- 15 -
<PAGE> 16
been paid or discharged or shall be then or thereafter required to be paid or
discharged), as to the establishment or designation of procedures or methods to
be employed for valuing any asset of the Corporation and as to the value of any
asset, as to the allocation of any asset of the Corporation to a particular
class or classes of shares, as to the funds available for the declaration of
dividends, and as to the declaration of dividends, as to the charging of any
liability of the Corporation to a particular class or classes of shares, as to
the number of outstanding shares of any class or classes, as to the estimated
expense to the Corporation in connection with purchases or redemptions of its
shares, as to the ability to liquidate investments in orderly fashion, or as to
any other matters relating to the issue, sale, purchase or redemption or other
acquisition or disposition of investments of shares, or the determination of
the net asset value per share of any class, shall be final and conclusive.
Section 6.5. Specifically and without limitation of subsection (4)
of this Article but subject to the exception therein prescribed, the
Corporation may enter into management or advisory, underwriting, distribution
and administration contracts and other contracts, and may otherwise do
business, with The Provident Mutual Life Insurance Company of Philadelphia, and
any parent, subsidiary or affiliate of such firm or any affiliate of any such
affiliate, or the stockholders, directors, officers and employees thereof, and
may deal freely with one another notwithstanding that the Board of Directors of
the Corporation may be
- 16 -
<PAGE> 17
composed in part of directors, officers or employees of such firm and/or its
parents, subsidiaries or affiliates and that officers of the Corporation may
have been, are or become directors, officers, or employees of such firm and/or
its parents, subsidiaries or affiliates, and neither such management or
advisory, underwriting, distribution or administration contracts nor any other
contract or transaction between the Corporation and such firm and/or its
parents, subsidiaries or affiliates shall be invalidated or in any way affected
thereby, nor shall any director or officer of the Corporation be liable to the
Corporation or to any stockholder or creditor thereof or to any person for any
loss incurred by it or him under or by reason of such contract or transaction;
provided that nothing herein shall protect any director or officer of the
Corporation against any liability to the Corporation or to its security holders
to which he would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office; and provided always that such contract or transaction
shall have been on terms that were not unfair to the corporation at the time at
which it was entered into.
ARTICLE VII
INDEMNIFICATION
The Corporation shall indemnify its directors and officers to the
maximum extent required, and may indemnify such directors and officers to the
maximum extent permitted by the
- 17 -
<PAGE> 18
General Corporation Law of the State of Maryland as from time to time amended,
subject to the limitations set forth in these Articles of Incorporation.
No provision of these Articles of Incorporation shall be effective (a)
to require a waiver of compliance with any provision of the Securities Act of
1933, as amended, or the 1940 Act, or of any valid rule, regulation or order of
the Securities and Exchange Commission thereunder or (b) to protect or purport
to protect any director or officer of the Corporation or its security holders
to which he would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office.
ARTICLE VIII
SHAREHOLDER MEETINGS
Meetings of shareholders may be held inside or outside the State of
Maryland, if the By-Laws so provide. The books of the Corporation may be kept
(subject to any provisions of law) inside or outside the State of Maryland at
such place or places as may be designated from time to time by the Board of
Directors or in the By-Laws of the Corporation. Election of Directors need not
be by ballot unless the By-Laws of the Corporation shall so provide.
- 18 -
<PAGE> 19
ARTICLE IX
VOTING REQUIREMENTS
Section 9.1. Notwithstanding any provision of law requiring a greater
proportion than a majority of the votes of all classes (or of any class
entitled to vote thereon as a separate class) to take or authorize any action,
in accordance with the authority granted by Section 2-104 of the Maryland
General Corporation Law, the Corporation is hereby authorized to take such
action upon the concurrence of a majority of the aggregate number of shares (or
a majority of the aggregate number of shares of a class entitled to vote
thereon as a separate class) entitled to vote thereon.
Section 9.2. The right to cumulate votes in the election of directors
is expressly prohibited.
ARTICLE X
AMENDMENT
The Corporation reserves the right to alter, amend or repeal any
provisions contained in these Articles of Incorporation, in the manner now or
hereafter prescribed by law, and all rights conferred herein upon the
Corporation's shareholders, directors and officers are granted subject to such
reservation.
ARTICLE XI
BY-LAWS
The original By-Laws of the Corporation shall be adopted by the
initial Directors named herein. Thereafter the Board of
- 19 -
<PAGE> 20
Directors shall have the power to make, alter or repeal the By-Laws except as
the By-Laws from time to time in effect may require shareholder action for
adoption, alteration or repeal of particular By-Law provisions.
In Witness Whereof, the undersigned incorporator of the Market Street
Fund, Inc., who executed the foregoing Articles of Incorporation hereby
acknowledges the same to be his act.
Dated the 19th day of March, 1985
/s/ James S. Coale, II
--------------------------------------
James S. Coale, II
1600 Market Street
Philadelphia, Pennsylvania 19103
COMMONWEALTH OF PENNSYLVANIA)
) SS.S
COUNTY OF PHILADELPHIA )
SUBSCRIBED AND SWORN to before me this 19th day of March, 1985.
/s/ John C. Kendall
---------------------------
Notary Public
My commission expires March 6, 1988
-----------------------------------
- 20 -
<PAGE> 1
EXHIBIT 1(b)
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
THE MARKET STREET FUND, INC.
The Market Street Fund, Inc., a Maryland corporation having its
principal office in Maryland at 32 South Street, Baltimore, Maryland 21202
(hereinafter referred to as the "Corporation"), hereby certifies to the
Maryland State Department of Assessments and Taxation that:
FIRST: Pursuant to the authority and powers contained in Article V
of the Corporation's Articles of Incorporation, the Corporation's Board of
Directors, at a meeting duly convened and held on March 20, 1989, adopted a
resolution classifying five million (5,000,000) of the shares of the
Corporation's common stock, par value one cent ($0.01) per share, authorized by
Article V but not classified thereby or prior hereto, as shares of a class of
the Corporation's common stock, designated by such resolution as the Aggressive
Growth Class.
SECOND: The shares of said Aggressive Growth Class shall have the
powers, preferences and rights, and be subject to the qualifications,
limitations and restrictions set forth in Section 5.6 of the Articles of
Incorporation.
IN WITNESS WHEREOF, The Market Street Fund, Inc. has caused these
presents to be signed in its name and on its behalf by its President and
attested by its Secretary on the 20th day of March, 1989.
<PAGE> 2
The Market Street Fund, Inc.
By: /s/ Stanley R. Reber
---------------------------
Stanley R. Reber
President
[ Seal ]
/s/ Linda E. Senker
- -----------------------------------
Linda E. Senker
Secretary
THE UNDERSIGNED, President of The Market Street Fund, Inc., who
executed on behalf of said corporation the foregoing Articles Supplementary to
said corporation's Articles of Incorporation, of which this certificate is made
a part, hereby acknowledges, in the name and on behalf of said corporation,
that the foregoing Articles Supplementary are the corporate act of said
corporation and further certified that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects, under the penalty of
perjury.
/s/ Stanley R. Reber
------------------------------------
Stanley R. Reber
President
<PAGE> 1
EXHIBIT 1(c)
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
THE MARKET STREET FUND, INC.
The Market Street Fund, Inc., a Maryland corporation having its
principal office in Maryland at 32 South Street, Baltimore, Maryland 21202
(hereinafter referred to as the "Corporation"), hereby certifies to the
Maryland State Department of Assessments and Taxation that:
FIRST: Pursuant to the authority and powers contained in Article V
of the Corporation's Articles of Incorporation, the Corporation's Board of
Directors, at a meeting duly convened and held on May 3, 1991, adopted a
resolution classifying five million (5,000,000) of the shares of the
Corporation's common stock, par value one cent ($0.01) per share, authorized by
Article V but not classified thereby or prior hereto, as shares of a class of
the Corporation's common stock, designated by such resolution as the
International Class.
SECOND: The shares of said International Class shall have the powers,
preferences and rights, and be subject to the qualifications, limitations and
restrictions set forth in Section 5.6 of the Articles of Incorporation.
IN WITNESS WHEREOF, The Market Street Fund, Inc. has caused these
presents to be signed in its name and on its behalf by its President and
attested by its Secretary on the 31st day of July, 1991.
[ Seal ]
The Market Street Fund, Inc.
/s/ LINDA E. SENKER By: /s/ STANLEY R. REBER
----------------------------------- ---------------------------
Linda E. Senker Stanley R. Reber
Secretary President
THE UNDERSIGNED, President of The Market Street Fund, Inc., who
executed on behalf of said corporation the foregoing Articles Supplementary to
said corporation's Articles of Incorporation, of which this certificate is made
a part, hereby acknowledges, in the name and on behalf of said corporation,
that the foregoing Articles Supplementary are the corporate act of said
corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects, under the penalty of
perjury.
/s/ STANLEY R. REBER
----------------------------------------
Stanley R. Reber
President
<PAGE> 1
Exhibit 1.d.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
MARKET STREET FUND, INC.
The Market Street Fund, Inc., a Maryland corporation having its principal office
in Maryland at 32 South Street, Baltimore, Maryland 21202 (hereinafter referred
to as the "Corporation"), hereby certifies to the Maryland State Department of
Assessments and Taxation that:
FIRST: Pursuant to the authority and powers contained in Article V of the
Corporation's Articles of Incorporation, the Corporation's Board of Directors,
at a meeting duly convened and held on February 26, 1996 adopted a resolution
classifying five million (5,000,000) of the shares of the Corporation's common
stock, par value one cent ($0.01) per share, authorized by Article V, but not
classified thereby or prior hereto, as shares of a class of the Corporation's
common stock, designated by such resolution as the Sentinel Growth Class and
classifying five million (5,000,000) of the shares of the Corporation's common
stock, par value one cent ($0.01) per share, authorized by Article V, but not
classified thereby or prior hereto, as shares of a class of the Corporation's
common stock, designated by such resolution as the Common Stock Class.
SECOND: The shares of said Sentinel Growth class and Common Stock class
shall have the powers, preferences and rights, and be subject to the
qualifications, limitations and restrictions set forth in Section 5.6 of the
Articles of Incorporation.
IN WITNESS WHEREOF, the Market Street Fund, Inc. has caused these presents
to be signed in its name and on its behalf by its President and attested by its
Secretary on the 29th day of August, 1996.
Market Street Fund, Inc.
Attest: /s/ Linda E. Smith By: /s/ Stanley R. Reber
-------------------------- --------------------------
Secretary President
The undersigned President of Market Street Fund, Inc., who executed on behalf of
said corporation the foregoing Articles Supplementary to said corporation's
Articles of Incorporation, of which this certificate is made a part, hereby
acknowledges, in the name and on behalf of said corporation, that the foregoing
Articles Supplementary are the corporate act of said corporation and further
certifies that, to the best of his knowledge, information and belief, the
matters and facts set forth therein with respect to the approval thereof are
true in all material respects, under the penalty of perjury.
By: /s/ Stanley R. Reber
--------------------------
President
<PAGE> 1
EXHIBIT 2(a)
BYLAWS
OF
MARKET STREET FUND, INC.
ARTICLE I
SHAREHOLDERS
SECTION 1.1 Place of Meetings. Meetings of shareholders shall be
held in the City of Philadelphia, Pennsylvania, or at any other place within
the United States as shall be designated from time to time by the Board of
Directors and stated in the notice of said meeting.
SECTION 1.2 Annual Meeting. The annual meeting of shareholders
shall be held at such date and time as the Board of Directors shall determine
and as stated in the notice of the said meeting. At such meeting, the
shareholders shall elect a Board of Directors and ratify or reject the
independent public accountants selected for the current year and may transact
any other business as may properly be brought before the meeting. Any business
of the Corporation may be transacted at the annual meeting without being
specially designated in the notice, except such business as is specifically
required by statute to be stated in the notice.
SECTION 1.3 Special Meetings. Special meetings of the
shareholders may be called by the Board of Directors or by the President.
Special meetings of shareholders shall be called by the Secretary upon the
written request of holders of shares entitled to cast not less than twenty-five
percent of all the votes entitled to be cast at such meeting. Such request
shall state the purpose or purposes of such meeting and the matters proposed to
be acted on thereat. The Secretary shall inform such requesting shareholders
of the reasonable estimated cost of preparing and mailing such notice of the
meeting, and, upon payment to the Corporation of such costs, the Secretary
shall give notice stating the purpose or purposes of the meeting to all
shareholders entitled to notice of such meeting. Business transacted at any
<PAGE> 2
special meeting shall be limited to the purposes stated in the notice. No
special meeting need be called to consider any matter which is substantially
the same as a matter voted upon at any special meeting of the shareholders held
during the preceding twelve months unless requested by the holders of shares
entitled to cast a majority of all votes entitled to be cast at such meeting.
SECTION 1.4 Notice and Purpose. Not less than ten (10) nor more
than ninety (90) days before the date of every shareholders' meeting, the
Secretary shall give to each shareholder entitled to vote at such meeting and
to each shareholder entitled to notice, written or printed notice stating the
time and place of the meeting and the purpose or purposes for which the meeting
is called. Such notice shall be given to each shareholder by mail or by
presenting it to him or her personally or by leaving it at his or her residence
or usual place of business. If mailed, such notice shall be deemed to be given
when deposited in the United States mail addressed to the shareholder at his or
her post-office address as it appears on the records of the Corporation, with
postage thereon prepaid. Any meeting at which all shareholders entitled to
vote are present either in person or by proxy, or notice of which has been
waived in writing by those not present, shall be a legal meeting for the
transaction of business notwithstanding that notice as herein provided has not
been given.
SECTION 1.5 Record Date. The Board of Directors may fix, in
advance, a date as the record date for the purpose of determining shareholders
entitled to notice of, or to vote at, any meeting of shareholders or any
adjournment thereof, or entitled to receive payment of any dividend or the
allotment of any rights, or in order to make a determination of shareholders
for any other proper purpose. Such date in any case shall be not more than
ninety (90) days, and in case of a meeting of shareholders, not less than ten
(10) days, prior to the date on which the particular
- 2 -
<PAGE> 3
action requiring such determination of shareholders is to be taken.
SECTION 1.6 Quorum. The holders of a majority of the outstanding
shares entitled to vote, present in person or represented by proxy, shall
constitute a quorum at all meetings of the shareholders for the transaction of
business, except as otherwise required by law, these By-Laws or the Articles of
Incorporation. When a quorum is present at any meeting, a majority of the
shares represented thereat shall decide any question brought before such
meeting unless the question is one upon which, by express provision of law or
of these By-Laws or the Articles of Incorporation, a different vote is
required, in which case such express provision shall control. If such quorum
shall not be present or represented at any meeting of the shareholders, the
shareholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time (provided no
adjournment shall be for more than three (3) months) without notice other than
announcement at the meeting, until a quorum shall be present or represented.
At such adjourned meeting at which a quorum shall be present or represented,
any business may be transacted which might have been transacted at the meeting
as originally notified.
SECTION 1.7 Voting. Any holder on the record of the shareholders
of the Corporation as of the record date determined pursuant to Section 1.5
herein shall be entitled to vote at any meeting to the extent provided in the
Articles of Incorporation, as they may be amended from time to time, either in
person or by proxy executed in writing by him or her or by his or her duly
authorized attorney-in-fact. Shares of all classes shall vote as a single
class except where the separate vote of a particular class is required by the
Investment Company Act of 1940, as amended (the "1940 Act"), or the law of
Maryland, or the Articles of Incorporation. Any holder of fractional shares of
the Corporation shall have proportionally the same voting rights as are
- 3 -
<PAGE> 4
provided for a full share. No proxy shall be valid after eleven months from
the date of execution, unless otherwise provided in the proxy. Proxies shall
be delivered to the Secretary of the Corporation before or at the time of such
meeting.
SECTION 1.8 Written Consent. Except as otherwise provided by law
or the Articles of Incorporation, any action required or permitted to be taken
at any annual or special meeting of shareholders may be taken without a
meeting, without prior notice and without a vote, if the following are filed
with the records of shareholders' meetings: (1) a unanimous written consent
that sets forth the action so taken and that is signed by each shareholder
entitled to vote on the matter and (2) a written waiver of any right to dissent
signed by each shareholder entitled to notice of the meeting but not entitled
to vote thereat.
SECTION 1.9 The Chairman of the Board and the Secretary. The
Chairman of the Board shall preside at and the Secretary shall keep the records
of each meeting of shareholders, and in the absence of either individual, his
or her duties shall be performed by some person appointed at the meeting.
SECTION 1.10 Order of Business. The business shall be transacted
in such order as the Chairman of the Board shall determine.
SECTION 1.11 Conduct of Meetings. At all meetings of the
shareholders, all proxies shall be received and taken in charge of and all
ballots shall be received and canvassed by the Secretary of the meeting, who
shall decide all questions concerning the qualification of voters, the validity
of the proxies, and the acceptance or rejection of votes, unless Inspectors of
Election shall have been appointed as follows, in which event, such Inspectors
of Election shall decide all such questions.
At any meeting of shareholders at which Directors are to be elected,
the Board of Directors prior thereto may, or, if they have not so acted, the
Chairman of the meeting may, and upon the request of the holders of ten
percent (10%) of the stock entitled
- 4 -
<PAGE> 5
to vote at such meeting shall, appoint two Inspectors of Election who shall
first subscribe an oath or affirmation to execute faithfully the duties of
Inspectors at such election with strict impartiality and according to the best
of their ability, and shall after the election make a certificate of the result
of the vote taken. No candidate for the office of Director shall be appointed
as such Inspector.
The Chairman of the meeting may cause a vote by ballot to be taken
upon any election or matter, and such vote shall be taken upon the request of
the holders of ten percent (10%) of the stock entitled to vote on such election
or matter.
ARTICLE II
DIRECTORS
SECTION 2.1 General Powers. The business and affairs of the
Corporation shall be managed under the direction of its Board of Directors, and
subject to the restrictions imposed by law, by the Articles of Incorporation or
by these By-Laws, they shall exercise all the powers of the Corporation.
SECTION 2.2 Delegation. The Board of Directors may elect from
its members an executive committee of not less than two (2) which may exercise
all the powers of the Board of Directors that may be delegated by the Board of
Directors by law, these By-Laws or the Articles of Incorporation when the Board
is not in session. The executive committee may make rules for the holding and
conduct of its meetings and keeping the records thereof, and shall report its
action to the Board of Directors.
The Board of Directors may elect from its members such other
committees from time to time as it may desire. The number composing such
committees and the powers conferred upon them shall be determined by the Board
of Directors at its own discretion.
SECTION 2.3 Number. The Board of Directors shall consist of five
(5) directors, but the number of directors may be increased or decreased
(provided such decrease does not shorten the term of any incumbent director)
from time to time by the Board
- 5 -
<PAGE> 6
of Directors by amendment of the By-Laws, provided that the number of directors
shall not be more than twenty-one (21) nor less than three (3).
SECTION 2.4 Election, Resignations, Term of Office, and
Vacancies. Until the first meeting of shareholders or until their successors
are duly elected and qualified, the Board of Directors shall consist of the
persons named as such in the Articles of incorporation. Successor directors
shall be elected at each annual meeting of shareholders, or at any meeting held
in lieu thereof, or at any special meeting of shareholders called for the
purpose of electing directors. Cumulative voting is not permitted. Directors
need not be residents of the State of Maryland or shareholders of the
Corporation. Each director, unless he or she sooner resigns, dies or is
removed, shall hold office until the next annual meeting and until the
successor is duly elected and duly qualified. Any director may resign his or
her office at any time by delivering the resignation in writing to the
Corporation. The acceptance of such resignation, unless required by the terms
thereof, shall not be necessary to make such resignation effective. Subject to
compliance with Sections 10 (e) and 16 (a) of the 1940 Act, any vacancies
occurring in the Board of Directors, whether by death, resignation, removal, an
increase or any other cause, within 30 days, may be filled by the affirmative
vote of a majority of the remaining directors, even though such majority is
less than a quorum. A director elected by the Board of Directors to fill a
vacancy shall be elected for the unexpired term of his or her predecessor in
office. If a special meeting of shareholders is required to fill a vacancy,
the meeting shall be held within sixty (60) days or such longer period as may
be permitted by the Securities and Exchange Commission.
SECTION 2.5 Meetings. Regular meetings of the Board of Directors
may be held within or without the State of Maryland, and at such times as the
Board may from time to time determine, and if so determined, notices thereof
need not be given. Special meet-
- 6 -
<PAGE> 7
ings of the Board of Directors may be held at any time or place whenever called
by the Chairman of the Board, the President or a majority of the Directors,
notice thereof being given by the Secretary, the Chairman of the Board, the
President, or the Directors calling the meeting, to each Director. Special
meetings of the Board of Directors may be held upon three days notice or
without formal notice provided all Directors are present or those not present
have waived notice thereof. Except as otherwise herein provided, neither the
business to be transacted at, nor the purpose of, any regular or special
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting.
Subject to any limitations of the 1940 Act, members of the Board of
Directors or a committee of the Board may participate in a meeting by means of
a conference telephone or similar communications equipment provided that all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means shall constitute presence at the
meeting.
SECTION 2.6 Chairman of the Board. The Chairman of the Board
shall be a member of the Board of Directors, and shall be chosen annually by
the Board of Directors at its first meeting after each annual meeting of the
shareholders.
The Chairman of the Board shall preside at meetings of the Board of
Directors. He or she shall have such other powers as are usually incident to
the position of Chairman of the Board and shall exercise such other specific
powers as the Board of Directors may from time to time assign him or her.
SECTION 2.7 Quorum and Manner of Acting. A majority of the
number of directors fixed by these By-Laws as from time to time amended shall
constitute a quorum for the transaction of business, but a smaller number may
adjourn from time to time until they can secure the attendance of a quorum.
- 7 -
<PAGE> 8
The act of a majority of the directors present at any meeting at which
a quorum is present shall be the act of the Board of Directors, except as
otherwise expressly required under the provisions of the 1940 Act, or where a
larger vote is required by law, the Articles of Incorporation or these By-Laws.
Any regular or special meeting of the Board of Directors may be adjourned from
time to time by those present, whether a quorum is present or not.
SECTION 2.8 Removal of Directors. Any director may be removed
from office, either for or without cause, at any annual or special meeting of
shareholders by the affirmative vote of a majority of the outstanding shares
entitled to vote for the election of directors. The notice calling such
meeting shall give notice of the intention to act upon such matter, and if the
notice so provides, the vacancy caused by such removal may be filled at such
meeting by vote of a majority of the shares represented at such meeting and
entitled to vote for the election of directors.
SECTION 2.9 Informal Action by Directors. Subject to the
provisions of the 1940 Act, any action permitted or required by law, these
By-Laws or by the Articles of Incorporation to be taken at a meeting of the
Board of Directors or at a meeting of any committee may be taken without a
meeting if a consent in writing, setting forth the action so taken, is signed
by all the members of the Board of Directors or of such committee, as the case
may be. Such consent shall have the same force and effect as a unanimous vote
at a meeting, and may be stated as such in any document or instrument.
SECTION 2.10 Compensation of Directors. The Board of Directors
may authorize reasonable compensation to Directors for their services as
Directors and as members of committees of the Board of Directors and may
authorize the reimbursement of reasonable expenses incurred by directors in
connection with rendering those services.
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<PAGE> 9
ARTICLE III
OFFICERS, AGENTS AND EMPLOYEES
SECTION 3.1 Number. The officers of the Corporation shall be
chosen by the Board of Directors and shall be a President, Vice President, a
Secretary and a Treasurer. The Board of Directors may also choose additional
Vice Presidents, Assistant Vice Presidents, Assistant Secretaries or Assistant
Treasurers.
SECTION 3.2 Selection. All officers shall be appointed by the
Board of Directors and shall serve at the pleasure of the Board. Any two or
more offices, except the offices of President and Vice President, may be held
by the same person, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity if such instrument is required by law, the
Articles of Incorporation or these By-Laws to be executed, acknowledged or
verified by two or more officers.
SECTION 3.3 Selection of Other officers and Agents. The Board of
Directors may appoint such other officers and agents as it shall deem
necessary, who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors. If they so deem, the Board of Directors may delegate this
power to appoint other officers and agents to the President.
SECTION 3.4 Salaries. The salaries, if any, of all officers and
agents of the Corporation shall be fixed by the Board of Directors. If they so
deem, the Board of Directors may delegate this power to set salary levels of
all officers and agents to the President.
SECTION 3.5 Removal. Any officer, agent or employee of the
Corporation may be removed from office at any time with or without cause by the
vote of a majority of the entire Board of Directors. If they so deem, the
Board of Directors may delegate this power to remove agents and employees under
their control to the President of the Corporation. Such removal shall be
without prejudice to such person's contract rights, if any, but the
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<PAGE> 10
appointment of any person or an officer, agent or employee of the Corporation
shall not of itself create contract rights.
SECTION 3.6 President. The President shall be the chief
executive and operating officer of the Corporation. Subject to the control of
the Board of Directors, the President shall assume general and active
management of the business affairs and property of the Corporation and shall
see that all orders and resolutions of the Board of Directors are carried into
effect. In the absence of the Chairman of the Board of Directors, the
President shall preside at all meetings of shareholders and the Board of
Directors.
The President, either alone or (if so required by law, these By-Laws,
or the Board of Directors) with the Secretary or any other officer of the
Corporation so authorized by the Board of Directors, may sign certificates of
shares of the Corporation or any deeds, mortgages, bonds, contracts or other
instruments that the Board of Directors has authorized for execution, except
when the signing and execution thereof shall be expressly delegated by the
Board of Directors or by these By-Laws to some other officer or agent of the
Corporation.
The President, in conjunction with the Secretary, may duly
authenticate the Corporation's records or copies thereof for use as evidence in
any action or proceeding to which the Corporation may be a party.
In general, the President shall perform all duties incident to the
office of President and such other duties as may be prescribed by the Board of
Directors from time to time.
SECTION 3.7 The Vice Presidents. The Vice President, or if there
shall be more than one, the Vice Presidents in the order determined by the
Board of Directors, shall be vested with all the powers and required to perform
all the duties of the President in his absence or disability or refusal to act,
and when so acting shall have all the powers of and be subject to all the
restrictions upon the President. Each Vice President shall perform such other
duties and have such other powers as the President or the Board of Directors
may from time to time prescribe.
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<PAGE> 11
SECTION 3.8 The Secretary and Assistant Secretaries. Except as
may otherwise be provided by the Board of Directors, the Secretary of the
Corporation shall have the following powers and duties:
a. to keep the minutes of the meetings of shareholders, of the
Board of Directors, and of any committee thereof in one or
more books provided for that purpose;
b. to see that all notices are duly given, in accordance with
these By-Laws or as required by law;
C. to be custodian of the corporate records and the seal of the
Corporation;
d. to see that the seal of the Corporation is affixed to all
documents duly authorized for execution under seal on behalf
of the Corporation;
e. to keep or cause to be kept for the Corporation the stock
ledger described in Section 7.2 of these By-Laws:
f. to countersign certificates for shares of the Corporation,
the issuance of which have been authorized by resolution of
the Board of Directors;
g. to have general charge of the stock transfer books of the
Corporation;
h. to duly authenticate, in conjunction with the President, the
Corporation's records or copies thereof to be used as
evidence in any action of proceedings to which the
Corporation may be a party; and
i. to perform all duties incidental to the office of Secretary
and such other duties as, from time to time, may be assigned
to the Secretary by the President or Board of Directors.
The Assistant Secretary, or if there are more than one, the Assistant
Secretaries in the order determined by the Board of Directors, shall, in the
absence or refusal to act or disability
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<PAGE> 12
of the Secretary, perform the duties and exercise the powers of the Secretary
and shall perform such other duties as, from time to time, may be assigned by
the President, the Secretary or the Board of Directors.
SECTION 3.9 The Treasurer and Assistant Treasurers. The Treasurer
shall be the Chief Financial Officer of the Corporation and except as may
otherwise be provided by the Board of Directors shall:
a. have charge and custody of, and be responsible for, all the
funds and securities of the Corporation, except those which
the Corporation has placed in the custody of a bank or company
pursuant to a written agreement designating such bank or
company as custodian of the property of the Corporation;
b. keep full and accurate accounts of the receipts and
disbursements in books belonging to the Corporation;
c. cause all monies and other valuables to be deposited to the
credit of the Corporation;
d. receive, and give receipts for, monies due and payable to the
Corporation from any source whatsoever;
e. disburse the funds of the Corporation and supervise the
investment of its funds as ordered or authorized by the Board,
taking proper vouchers therefore; and
f. in general, perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be
assigned to him by the President, or the Board of Directors.
The Assistant Treasurer, of if there are more than one, the
Assistant Treasurers in the order determined by the Board of Directors, shall,
in the absence or refusal to act or disability of the Treasurer, perform the
duties and exercise the powers of
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<PAGE> 13
the Treasurer and shall perform such other duties as, from time to time, may be
assigned by the President, the Treasurer, or the Board of Directors.
SECTION 3.10 Bonding. The Board of Directors may require any
officer, agent or employee to give bond for the faithful discharge of his or
her duties and for the protection of the Corporation in such sum and with such
surety or sureties as the Board may deem available.
ARTICLE IV
TRANSACTIONS WITH RELATED PARTIES
SECTION 4.1 To the extent permitted by law and by the provisions
of this Article IV, any director, officer or employee, individually, or any
partnership of which any director, officer or employee may be a member, or any
corporation or association of which any director, officer of employee may be an
officer, director, trustee, employee or shareholder, may be a party to, or may
be pecuniarily or otherwise interested in, any contract or transaction of the
Corporation, and in the absence of fraud no contract or other transaction shall
be thereby affected or invalidated; provided that in case a director, or a
partnership, corporation or association of which a director is a member,
officer, director, trustee, employee or shareholder is so interested, such fact
shall be disclosed or shall have been known to the Board of Directors or a
majority thereof; and any director of the Corporation who is so interested or
who is also a director, officer, trustee, employee or shareholder of such other
corporation or association, or a member of such partnership which is so
interested, may be counted in determining the existence of a quorum at any
meeting of the Board of Directors of the Corporation which shall authorize any
such contract or transaction with like force and effect as if he or she were
not such director, officer, trustee, employee or shareholder of such
corporation or association, or not so interested or a member of a partnership
so interested, or so interested individually.
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<PAGE> 14
SECTION 4.2 Nothing herein contained shall protect or purport to
protect any director or officer of the Corporation against any liability to the
Corporation or its security holders to which he or she would otherwise be
subject by reason of his or her willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
or her office.
ARTICLE V
INDEMNIFICATION
SECTION 5.1 Non-Derivative Actions. The Corporation may indemnify
any person who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation), by reason of the fact that he or she is or was a
director, officer, agent or employee of the Corporation, or is or was serving
at the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines, penalties and amounts
paid in settlement actually and reasonably incurred by him or her in connection
with such action, suit or proceeding not arising by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of duties
("disabling conduct").
SECTION 5.2 Derivative Actions. The Corporation may indemnify any
person who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding by or in the right
of the Corporation to procure a judgment in its favor by reason of the fact
that he or she is or was a director, officer, agent or employee of the
Corporation, or is or was serving at the request of the Corporation as a
director or officer of another corporation, partnership, joint venture, trust
or other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection
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<PAGE> 15
with the defense or settlement of such action or suit not arising by reason of
disabling conduct.
SECTION 5.3 Required Indemnification. To the extent that a
person who is or was a director, officer, agent or employee of the Corporation
has been successful on the merits or otherwise in defense of any claim of
liability by reason of disabling conduct, he or she shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred
by him or her in connection therewith.
SECTION 5.4 Directors' Standards of Conduct. No person who is or
was a Director shall be indemnified under this Article IV for any liabilities
or expenses incurred by reason of service in that capacity unless such person
(a) acted in good faith; and (b) reasonably believed, in the case of conduct in
the Director's official capacity with the Corporation, that the conduct was in
the best interests of the Corporation, and in all other cases, reasonably
believed that the conduct was at least not opposed to the best interests of the
Corporation; and (c) in the case of any criminal proceeding, had no reasonable
cause to believe that the conduct was unlawful; provided that a court of
appropriate jurisdiction may order indemnification in accordance with Section
2-418 of the Maryland General Corporation Law, whether or not the Director has
met these standards of conduct.
SECTION 5.5 Determination. An indemnification under Sections 5.1
and 5.2 (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination, based on a review of the
facts, that indemnification of the director, officer, agent or employee is
proper in the circumstances because he or she has met the applicable standard
of conduct as set forth in this Article V. Such determination shall be made (a)
by a final decision on the merits (including, but not limited to, a dismissal
for insufficient evidence of any disabling conduct) by a court or other body
before whom the proceeding was brought that the person to be indemnified was
not liable by reason
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<PAGE> 16
of disabling conduct or (b) in the absence of such a decision, by a reasonable
determination, based upon a review of the facts, that such person was not
liable by reason of disabling conduct (i) by the vote of a majority of a quorum
of directors who are neither interested persons of the Corporation as that term
is defined in the 1940 Act, nor parties to such action, suit or proceeding
("disinterested non-party directors"), or (ii) if such a quorum is not
obtainable or, even if obtainable, a quorum of disinterested non-party
directors so directs, by independent legal counsel in a written opinion; or
(iii) by majority vote of the shareholders or (iv) by any other reasonable and
fair means not inconsistent with any of the above.
The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that any liability or
expense arose by reason of disabling conduct.
SECTION 5.6 Advance Payment. Any expenses of the type described
in this Article V may be paid by the Corporation in advance of the final
disposition of any action, suit or proceeding as authorized by the Board of
Directors in the specific case (a) upon receipt of an undertaking by or on
behalf of the director, officer, agent or employee to repay such amount unless
it shall ultimately be determined that he or she is entitled to be indemnified
by the Corporation as authorized in this Article V; and (b) in the case of the
expenses incurred by a director of the Corporation upon a determination that
the facts then known would not preclude indemnification and receipt of a
written affirmation by the director of the director's good faith belief that
the standards of conduct set forth in Section 5.4 have been met; and (c)
provided that (i) the person to be indemnified provides a security for his or
her undertaking; or (ii) the Corporation is insured against losses arising by
reason of any such lawful advances; or (3) a majority of a quorum of the
disinterested non-party direc-
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<PAGE> 17
tors, or an independent legal counsel in a written opinion, determines, based
on a review of readily-available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the person to be indemnified
ultimately will be found entitled to indemnification. Any determination or
authorization of payment pursuant to this Section 5.6 shall be made in the
manner specified in Section 2-418 of the Maryland General Corporation Law, as
may be amended from time to time.
SECTION 5.7 Shareholder Notification. Any indemnification of, or
advances of expenses to, a director in accordance with this Article, if arising
out of a proceeding by or in the right of the Corporation, shall be reported in
writing to the shareholders with the notice of the next shareholders' meeting
or prior to the meeting.
SECTION 5.8 Non-Exclusive Right. The indemnification provided by
this Article V shall not be deemed exclusive of any other rights to which a
person seeking indemnification may be entitled under any agreement, vote of
shareholders or disinterested directors, or otherwise.
SECTION 5.9 Insurance. The Corporation may purchase and maintain
insurance on its behalf and on behalf of any person who is or was a director,
officer, agent or employee of the Corporation, or is or was serving at the
request of the Corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him or her and incurred by him or her in any such capacity, or
arising out of his or her status as such, but not arising by reason of
disabling conduct.
SECTION 5.10 General. No indemnification provided by this Article
shall be inconsistent with the 1940 Act, the Securities Act of 1933, or the
Maryland General Corporation Law.
Any indemnification provided by this Article shall continue as to a
person who has ceased to be director, officer, or
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<PAGE> 18
employee, and shall inure to the benefit of the heirs, executors and
administrators of such person.
ARTICLE VI
WAIVERS OF NOTICE
Whenever, under the provisions of any law, the Articles of
Incorporation or amendments thereto, or these By-Laws, any notice is required
to be given to any shareholder, director or committee member, a waiver thereof
in writing signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent thereto.
Attendance at any meeting where notice is required, shall be deemed waiver of
the requirement for such notice, except where attendance is for the announced
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened. Waivers given by telegram,
radiogram, cablegram or other such form of rapid transmission shall be deemed
waivers in writing within the meaning of these By-Laws.
ARTICLE VII
CAPITAL STOCK
SECTION 7.1 Certificates. Each shareholder shall be entitled to a
certificate or certificates representing shares of the Corporation of the class
of shares owned by such shareholder, in such form as shall, in conformity to
law, be prescribed from time to time by the Board of Directors. Such
certificates shall be signed by the President or a Vice President and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary.
If such certificates are counter-signed by a transfer agent or registrar other
than the Corporation or an employee of the Corporation, the signatures of the
aforementioned officers upon such certificates may be facsimile. In case any
officer or officers who have signed, or whose facsimile signature or signatures
have been used on, any such certificate or certificates shall cease to be such
officer or officers of the Corporation, such certificates may be issued and
delivered as though the person
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<PAGE> 19
or persons who signed such certificate or certificates or whose facsimile
signature or signatures have been used thereon had not ceased to be such
officer or officers of the Corporation. All certificates for shares of a class
shall be consecutively numbered or otherwise identified.
SECTION 7.2 Stock Ledger and Record of Shareholders. The
Corporation shall maintain at its offices, or at the offices of a transfer
agent, if one is appointed, an original or duplicate stock ledger containing
the names and addresses of all shareholders and the number of shares of each
class held by each shareholder, and, if a certificate has been issued, the
certificate number, date of issue and whether it was by original issue or by
transfer. The Board of Directors of the Corporation may appoint one or more
transfer agents of the stock of the Corporation. Unless and until such
appointment is made, the Secretary of the Corporation shall maintain the stock
ledger. The names of shareholders as they appear on the stock ledger shall be
the official list of shareholders of record of the Corporation for all
purposes. The Corporation shall be entitled to treat the holder of record of
any shares of the Corporation as the owner thereof for all purposes, and shall
not be bound to recognize any equitable or other claim to, or interest in, such
shares or any rights deriving from such shares, on the part of any other
person, including (but without limitation) a purchaser, assignee or
transferee, unless and until such other person becomes the holder of record of
such shares, whether or not the Corporation shall have either actual or
constructive notice of the interest of such other person, except as otherwise
provided by the federal securities laws or the laws of Maryland.
SECTION 7.3 Shareholder Open Accounts. The Corporation may
maintain or cause to be maintained for each shareholder a shareholder open
account in which shall be recorded such shareholder's ownership of shares and
all changes therein. Any certif-
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<PAGE> 20
icates need not be issued for shares so recorded in a shareholder open account
unless requested by such shareholder.
SECTION 7.4 Transfers of Shares. The shares of the Corporation
shall be transferable on the stock certificate books of the Corporation upon
appropriate authorization in person by the holder of record thereof, or his or
her duly authorized attorney or legal representative, and, if a certificate was
issued, upon endorsement and surrender for cancellation of the certificate for
such shares. All certificates surrendered for transfer shall be cancelled, and
no new certificates shall be issued to the transferee until a formal
certificate or certificates for a like number of shares shall have been
surrendered and cancelled, except that in the case of a lost, destroyed or
mutilated certificate, a new certificate may be issued therefor upon such
conditions for the protection of the Corporation and any transfer agent of the
Corporation as the Board of Directors may prescribe.
ARTICLE VIII
CUSTODIAN
SECTION 8.1 Employment of Custodian. All funds, securities and
other investments of the Corporation shall be deposited in the safe keeping of
such banks or other companies as the Board of Directors may from time to time
determine. Every arrangement entered into with any bank or other company for
the safe keeping of the securities and investment of the Corporation shall
contain provisions complying with the 1940 Act and the general rules and
regulations thereunder.
Subject to such rules, regulations and orders as the Securities and
Exchange Commission may adopt, the Corporation may direct a custodian to
deposit all or any part of the securities owned by the Corporation in a system
for the central handling of securities established by a national securities
exchange or a national securities association registered with the Securities
and Exchange Commission, or otherwise in accordance with the 1940 Act,
pursuant to which system all securities of any particular class of
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<PAGE> 21
any issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Corporation or a custodian.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Fiscal Year. Unless otherwise determined by the
Board of Directors, the fiscal year of the Corporation shall begin on January 1
and end on December 31 in each year.
SECTION 9.2 Seal. The corporate seal shall be in such form as
the Board of Directors may from time to time determine. The seal may be used
by causing it or a facsimile thereof to be impressed or affixed or reproduced
or otherwise. In the event it is inconvenient to use such seal at any time,
the signature of the Corporation following the word "seal" shall be deemed the
seal of the Corporation.
SECTION 9.3 Annual Report. The President or a Vice President or
the Treasurer shall prepare or cause to be prepared annually a full and correct
statement of affairs of the Corporation for the preceding fiscal year, which
shall be submitted at the annual meeting and shall be filed within twenty (20)
days thereafter at the principal office of the Corporation in the State of
Maryland.
SECTION 9.4 Voting Shares of Other Corporations. Unless
otherwise ordered by the board of directors, the President or any
Vice-President or the Treasurer or any Assistant Treasurer shall have full
power and authority to attend and act and vote at any meeting of security
holders of any corporation, partnership, trust or similar entity, any
securities of which are owned by this Corporation, and at any such meeting may
exercise any and all the rights and powers incident to the ownership of such
securities. The President or any Vice-President or the Treasurer or any
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<PAGE> 22
Assistant Treasurer of the Corporation may execute proxies to vote any such
securities standing in the name of this corporation.
ARTICLE X
AMENDMENT
SECTION 10.1 By Shareholders. These By-Laws may be amended,
altered, repealed or added to at any regular meeting of the shareholders or at
any special meeting called for that purpose, by the affirmative vote of a
majority of the shares entitled to vote and represented at such meeting.
SECTION 10.2 By Directors. The Board of Directors may alter and
amend, adopt, replace or add to these By-Laws at any regular meeting of the
Board, or at any special meeting of the Board called for that purpose, by the
affirmative vote of a majority of such Board, except where a vote of
shareholders is required by law, the Articles of Incorporation, or these
By-Laws.
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<PAGE> 1
EXHIBIT 2(b)
BYLAWS
OF
MARKET STREET FUND, INC.
ARTICLE I
SHAREHOLDERS
SECTION 1.1 Place of Meetings. Meetings of shareholders shall be
held in the City of Philadelphia, Pennsylvania, or at any other place within
the United States as shall be designated from time to time by the Board of
Directors and stated in the notice of said meeting.
SECTION 1.2 Annual Meeting. Unless otherwise required by law, an
annual meeting of shareholders will be held at the discretion of Directors. In
the event an annual meeting is held, it shall be held at such date and time as
the Board of Directors shall determine and as stated in the Notice of said
meeting. Any business of the Corporation may be transacted at the annual
meeting without being specially designated in the Notice, except such business
as is specifically required by statute to be stated in the Notice.
SECTION 1.3 Special Meetings. Special meetings of the
shareholders may be called by the Board of Directors or by the President.
Special meetings of shareholders shall be called by the Secretary upon the
written request of holders of shares entitled to cast not less than twenty-five
percent of all the votes entitled to be cast at such meeting. Such request
shall state the purpose or purposes of such meeting and the matters proposed to
be acted on thereat. The Secretary shall inform such requesting shareholders
of the reasonable estimated cost of preparing and mailing such notice of the
meeting, and, upon payment to the Corporation of such costs, the Secretary
shall give notice stating the purpose or purposes of the meeting to all
shareholders entitled to notice of such meeting. Business transacted at any
<PAGE> 2
of Directors by amendment of the By-laws, provided that the number of directors
shall not be more than twenty-one (21) nor less than three (3).
SECTION 2.4 Election, Resignations, Term of Office, and
Vacancies. Until the first meeting of shareholders and until their successors
are duly elected and qualified, the Board of Directors shall consist of the
persons named as such in the Articles of Incorporation. Each Director, unless
he or she resigns, dies or is removed, shall hold office indefinitely or until
the successor is duly elected or duly qualified. Successor Directors shall be
elected at each annual meeting if annual shareholders meetings are held, or at
any special meeting of shareholders called for the purpose of electing
Directors. Cumulative voting is not permitted. Directors need not be residents
of the State of Maryland or shareholders of the Corporation. Any Director may
resign his or her office at any time by delivering the resignation in writing to
the Corporation. The acceptance of such resignation, unless required by the
terms thereof, shall not be necessary to make the resignations effective.
Subject to compliance with Sections (10)(e) or (16)(a) of the 1940 Act, any
vacancies occurring on the Board of Directors, whether by death, resignation,
removal, an increase or any other cause, within 30 days may be filled by the
affirmative vote of a majority of the remaining Directors even though such a
majority is less than a quorum. Any Director elected to fill a vacancy shall
be elected for an indefinite period. If a special meeting of shareholders is
required to fill a vacancy, the meeting shall be held within (60) days or such
longer period as may be permitted by the Securities and Exchange Commission.
SECTION 2.5 Meetings. Regular meetings of the Board of Directors
may be held within or without the State of Maryland, and at such times as the
Board may from time to time determine, and if so determined, notices thereof
need not be given. Special meet-
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<PAGE> 1
EXHIBIT 4
NUMBER SHARES
M
MARKET STREET FUND, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
AUTHORIZED SHARES 200,000,000
<TABLE>
<S> <C> <C> <C>
GROWTH PORTFOLIO BOND PORTFOLIO MONEY MARKET PORTFOLIO MANAGED PORTFOLIO
Par Value $.01 Each Par Value $.01 Each Par Value $.01 Each Par Value $.01 Each
</TABLE>
THIS CERTIFIES THAT___________________________________________________is the
owner of___________________________________shares of the MANAGED PORTFOLIO of
MARKET STREET FUND, INC., fully paid and non-assessable, transferable only on
the books of the Corporation in person or by Attorney upon surrender of this
Certificate properly endorsed.
The Corporation will furnish to any stockholder, on request and without
charge, a full statement of the designations and any preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the stock of each
class which the Corporation is authorized to issue.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this_________________day of________________A.D. 19____
- -------------------------- --------------------------
SECRETARY-TREASURER PRESIDENT
<PAGE> 2
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM-as tenants in common UNIF GIFT MIN ACT- Custodian under
TEN ENT-as tenants by the entireties (Cust) (Minor)
JT TEN -as joint tenants with right of survivorship Uniform Gifts to Minors Act
and not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
</TABLE>
For Value Received,___hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint__________________ Attorney to transfer the said Shares
on the books of the within named Corporation with full power of substitution in
the premises.
Dated_________________ 19__
In presence of
----------------------------------------
- ----------------------------------------
NOTICE THE SIGNATURE OF THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE> 3
NUMBER SHARES
MM
MARKET STREET FUND, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
AUTHORIZED SHARES 200,000,000
<TABLE>
<S> <C> <C> <C>
GROWTH PORTFOLIO BOND PORTFOLIO MONEY MARKET PORTFOLIO MANAGED PORTFOLIO
Par Value $.01 Each Par Value $.01 Each Par Value $.01 Each Par Value $.01 Each
</TABLE>
THIS CERTIFIES THAT____________________________________________________is the
owner of____________________________________________shares of the MONEY MARKET
PORTFOLIO of MARKET STREET FUND, INC., fully paid and non-assessable,
transferable only on the books of the Corporation in person or by Attorney
upon surrender of this Certificate properly endorsed.
The Corporation will furnish to any stockholder, on request and without
charge, a full statement of the designations and any preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the stock of each
class which the Corporation is authorized to issue.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this_________________day of________________A.D. 19____
- -------------------------- --------------------------
SECRETARY-TREASURER PRESIDENT
<PAGE> 4
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM-as tenants in common UNIF GIFT MIN ACT- Custodian under
TEN ENT-as tenants by the entireties (Cust) (Minor)
JT TEN -as joint tenants with right of survivorship Uniform Gifts to Minors Act
and not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
</TABLE>
For Value Received,___hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint__________________ Attorney to transfer the said Shares
on the books of the within named Corporation with full power of substitution in
the premises.
Dated_________________ 19__
In presence of
----------------------------------------
- ----------------------------------------
NOTICE THE SIGNATURE OF THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE> 5
NUMBER SHARES
B
MARKET STREET FUND, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
AUTHORIZED SHARES 200,000,000
<TABLE>
<S> <C> <C> <C>
GROWTH PORTFOLIO BOND PORTFOLIO MONEY MARKET PORTFOLIO MANAGED PORTFOLIO
Par Value $.01 Each Par Value $.01 Each Par Value $.01 Each Par Value $.01 Each
</TABLE>
THIS CERTIFIES THAT___________________________________________________is the
owner of ____________________________________________shares of the BOND
PORTFOLIO of MARKET STREET FUND, INC., fully paid and non-assessable,
transferable only on the books of the Corporation in person or by Attorney
upon surrender of this Certificate properly endorsed.
The Corporation will furnish to any stockholder, on request and without
charge, a full statement of the designations and any preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the stock of each
class which the Corporation is authorized to issue.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this_________________day of________________A.D. 19____
- -------------------------- --------------------------
SECRETARY-TREASURER PRESIDENT
<PAGE> 6
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM-as tenants in common UNIF GIFT MIN ACT- Custodian under
TEN ENT-as tenants by the entireties (Cust) (Minor)
JT TEN -as joint tenants with right of survivorship Uniform Gifts to Minors Act
and not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
</TABLE>
For Value Received,___hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint__________________ Attorney to transfer the said Shares
on the books of the within named Corporation with full power of substitution in
the premises.
Dated_________________ 19__
In presence of
----------------------------------------
- ----------------------------------------
NOTICE THE SIGNATURE OF THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE> 7
NUMBER SHARES
G
MARKET STREET FUND, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
AUTHORIZED SHARES 200,000,000
<TABLE>
<S> <C> <C> <C>
GROWTH PORTFOLIO BOND PORTFOLIO MONEY MARKET PORTFOLIO MANAGED PORTFOLIO
Par Value $.01 Each Par Value $.01 Each Par Value $.01 Each Par Value $.01 Each
</TABLE>
THIS CERTIFIES THAT____________________________________________________is the
owner of_______________________________________________shares of the GROWTH
PORTFOLIO of MARKET STREET FUND, INC., fully paid and non-assessable,
transferable only on the books of the Corporation in person or by Attorney
upon surrender of this Certificate properly endorsed.
The Corporation will furnish to any stockholder, on request and without
charge, a full statement of the designations and any preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the stock of each
class which the Corporation is authorized to issue.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this_________________day of________________A.D. 19____
- -------------------------- --------------------------
SECRETARY-TREASURER PRESIDENT
<PAGE> 8
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM-as tenants in common UNIF GIFT MIN ACT- Custodian under
TEN ENT-as tenants by the entireties (Cust) (Minor)
JT TEN -as joint tenants with right of survivorship Uniform Gifts to Minors Act
and not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
</TABLE>
For Value Received,___hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint__________________ Attorney to transfer the said Shares
on the books of the within named Corporation with full power of substitution in
the premises.
Dated_________________ 19__
In presence of
----------------------------------------
- ----------------------------------------
NOTICE THE SIGNATURE OF THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE> 1
EXHIBIT 5(a)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, dated November 1, 1991, between Market Street Fund, Inc. (the
"Fund"), a corporation organized under the laws of the State of Maryland, and
Providentmutual Investment Management Company (the "Adviser"), a corporation
organized under the laws of the Commonwealth of Pennsylvania.
WHEREAS, the Fund is a registered investment company under the
Investment Company Act of 1940 ("Investment Company Act") which maintains
several investment portfolios for the use of the Fund's shareholders which
are separate accounts established and maintained by insurance companies;
WHEREAS, one of the Fund's portfolios, the International Portfolio, has
the current objective of achieving long-term capital growth by investing in a
diversified portfolio of marketable equity securities of established non-United
States companies;
WHEREAS, the Fund desires that Providentmutual Investment Management
Company act as investment adviser with respect to the International
Portfolio;
WHEREAS, the Investment Company Act prohibits any person from acting
as investment adviser of a registered investment company except pursuant
to a written agreement;
<PAGE> 2
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 International Portfolio ("International
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 International Portfolio. Subject to the limitations set
forth in Paragraph I above, the Adviser shall:
(a) perform research and obtain and evaluate pertinent economic,
statistical, and financial data relevant to the investment policies of the
International Portfolio as set forth in the Fund's Prospectus, as amended from
time to time;
- 2 -
<PAGE> 3
(b) consult with the Directors and furnish to the Directors
recommendations with respect to an overall investment plan and any changes
thereto for the International Portfolio for approval, modification, or rejection
by the Directors;
(c) seek out, present, and recommend specific investment opportunities,
consistent with any overall investment plan approved 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 International 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 International
Portfolio, including the purchase, retention or sale of the securities and cash
contained in that Portfolio.
3. The Adviser shall effect all purchases and sales of investments for the
International 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 International 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 scheduled of the
investments and other assets held in the International
- 3 -
<PAGE> 4
Portfolio and a statement of all purchases and sales for the 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 International Portfolio as required by law.
The Adviser agrees that all accounts and records which it maintains for
the Fund's International 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 International Portfolio of the
Fund. 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 Portfolio 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) In consideration of the services rendered pursuant to this
Agreement, the Fund shall pay the Adviser monthly compensation at an effective
annual rate of 0.75% of the first $500 million of the average daily net assets
- 4 -
<PAGE> 5
of the Portfolio and 0.60% of the average daily net-assets of the Portfolio in
excess of $500 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 International Portfolio. All brokers' commissions, transfer
taxes and other fees relating to purchases and sales of investments for the
Portfolio shall be paid out of the assets allocated to the Portfolio.
8. The Adviser shall, subject to the supervision of the Directors, arrange
for the placement of orders for the International 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 on 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
- 5 -
<PAGE> 6
used by the Adviser in connection with the performance of its obligations
under this Agreement or in connection with other advisory or investment
operations.
9. The Adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the International Portfolio in connection with
the subject matter of this Agreement unless such loss arises from willful
misfeasance, bad faith or gross negligence 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 International 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
- 6 -
<PAGE> 7
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 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 recommend by the Adviser to be purchased or
sold for the International Portfolio. When the Adviser deems the purchase or
sale of a security to be in the best interests 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 the 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 International 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 the
later of the date on which it is so approved and November 1, 1991.
12. This Agreement shall continue until December 31, 1991 and thereafter
for successive annual periods ending December 31, of each year, provided such
- 7 -
<PAGE> 8
continuance is specifically approved at least annually by (i) the Directors or
(ii) by a vote of a majority of the shareholders of the International Portfolio,
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.
(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 12 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, bad faith, or gross negligence 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
- 8 -
<PAGE> 9
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 amendments 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, or
the Fund, present or future, 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 governmental agency having
jurisdiction.
19. In the event of termination for any reason, all records shall promptly
be returned to the Fund free from any claim or retention of rights by the
Adviser.
20. The Adviser shall not disclose or use any records or information
obtained pursuant to this Agreement in any manner whatsoever except as expressly
- 9 -
<PAGE> 10
authorized herein and, further, the Adviser will keep confidential any
information pursuant to the service relationship set forth herein and disclose
such information only if the Fund has authorized such disclosure or such
disclosure is expressly required by applicable federal or state regulatory
authorities.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers on the date and year first above
written.
THE MARKET STREET FUND, INC.
WITNESS:
[sig]
- --------------------- BY: /s/ STANLEY R. REBER
----------------------
Providentmutual Investment
Management Company
WITNESS:
[sig]
- --------------------- BY: /s/ JOHN P. LLOYD
----------------------
- 10 -
<PAGE> 1
EXHIBIT 5(b)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, dated March 1 , 1993, 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 Bond Portfolio of the Fund has the current objective of
generating a high level of current income, as is consistent with prudent
investment risk, by investing in a diversified portfolio of freely marketable
debt securities;
WHEREAS, the Managed Portfolio of the Fund has the current objective of
realizing as high a level of long-term total rate of return, as is consistent
with prudent investment risk, by investing in stocks, bonds, money market
instruments or a combination thereof;
WHEREAS, the Agressive Growth Portfolio of the Fund has the current
objective of achieving a high level of long-term capital appreciation by
investing in securities of a diverse group of smaller emerging growth companies;
WHEREAS, the Fund desires that Sentinel Advisors Company act as investment
adviser with respect to the Bond, Managed and Aggressive Growth Portfolios;
<PAGE> 2
WHEREAS, the Fund desires that Sentinel Advisors Company act as investment
adviser with respect to the Bond, Managed and Aggressive Growth Portfolios;
WHEREAS, the Investment Company Act prohibits any person from acting as
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 Bond, Managed and Aggressive Growth
Portfolios (the "Portfolios") in accordance with the Portfolios' 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 Portfolios. Subject to the limitations set forth in
Paragraph I above, the Adviser shall:
- 2 -
<PAGE> 3
(a) perform research and obtain and evaluate pertinent economic,
statistical, and financial data relevant to the investment policies of the
Portfolios 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 Portfolios for approval, modification, or rejection by the
Directors;
(c) seek out, present, and recommend specific investment opportunities,
consistent with any overall investment plan approved 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 Portfolios, 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 each Portfolio,
including the purchase, retention or sale of the securities and cash contained
in each Portfolio.
3. The Adviser shall effect all purchases and sales of investments for the
Portfolios in a manner consistent with the limitations set forth in Paragraph I
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 Portfolios. The Adviser,
either through
- 3 -
<PAGE> 4
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 Portfolios as required by law.
The Adviser agrees that all accounts and records which it maintains for
the Fund's Portfolios 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 Portfolios. 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.
- 4 -
<PAGE> 5
6. (a) For the services provided to the Portfolios, the Adviser will be
compensated monthly at the effective annual rates set forth below:
Bond Portfolio -- 0.35% of the first $100 million of the average daily net
assets of the Bond Portfolio and 0.30% of the average daily net assets of the
Bond Portfolio in excess of $100 million.
Managed Portfolio -- 0.40% of the first $100 million of the average daily
net assets of the Managed Portfolio and 0.35% of the average daily net assets of
the Managed Portfolio in excess of $100 million.
Aggressive Growth Portfolio -- 0.50% of the first $20 million of the
average daily net assets of the Aggressive Growth Portfolio, 0.40% of the next
$20 million of the average daily net assets of the Aggressive Growth Portfolio,
and 0.30% of the average daily net assets of the Aggressive Growth 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 Portfolios. All brokers' commissions, transfer taxes and other
fees relating to purchases and sales of investments for each Portfolio shall be
paid out of assets allocated to that Portfolio.
- 5 -
<PAGE> 6
8. The Adviser shall, subject to the supervision of the Directors, arrange
for the placement of orders for the Portfolios, 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.
9. The Adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Portfolios in connection with the subject
matter of this Agreement unless such loss arises from willful misfeasance, bad
faith or gross negligence 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
- 6 -
<PAGE> 7
policies similar to those for the Portfolios, 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 Portfolios 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 Portfolios.
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 any of the Portfolios.
When the Adviser deems the purchase or sale of a security to be in the best
interests of any of the Portfolios as well as other accounts or companies, it
may, to the extent permitted by applicable laws and regulations, but will not be
- 7 -
<PAGE> 8
obligated to, aggregate the securities to be sold or purchased for such
Portfolios 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 Portfolios 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 Portfolios.
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 March 1,
1993, 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 applicable
Portfolio.
12. This Agreement shall continue until December 31, 1993 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 applicable
Portfolio as set forth in paragraph II above, provided that in either event the
continuance is also approved by a majority of the Directors
- 8 -
<PAGE> 9
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.
(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, bad faith, or gross negligence 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.
- 9 -
<PAGE> 10
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 amendments 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 or Providentmutual Life and Annuity Company of America
or the Fund, present or future, 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.
- 10 -
<PAGE> 11
19. In the event of termination for any reason all records shall promptly
be returned to the Fund free from any claim or retention of rights by the
Adviser.
20. The Adviser shall not disclose or use any records or information
obtained pursuant to this agreement in any manner whatsoever except as expressly
authorized herein and further the Adviser will keep confidential any information
pursuant to the service relationship set forth herein and disclose such
information only if the Fund has authorized such disclosure or such disclosure
is expressly required by applicable federal or state regulatory authorities.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers on the date and year first above
written.
MARKET STREET FUND, INC.
Witness:
[sig]
- -------------------------- By: /s/ STANLEY R REBER
----------------------
SENTINEL ADVISORS COMPANY
Witness:
- -------------------------- By:
----------------------
- 11 -
<PAGE> 12
19. In the event of termination for any reason all records shall promptly
be returned to the Fund free from any claim or retention of right by the
Adviser.
20. The Adviser shall not disclose or use any records or information
obtained pursuant to this agreement in any manner whatsoever except as expressly
authorized herein and further the Adviser will keep confidential any information
pursuant to the service relaltionship set forth herein and disclose such
information only if the Fund has authorized such disclosure or such disclosure
is expressly required by applicable federal or state regulatory authorities.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers on the date and year first above
written.
MARKET STREET FUND, INC.
Witness:
- --------------------- By
-----------------------------
SENTINEL ADVISORS COMPANY
Witness:
/s/ KAREN C. SLEEPER
- --------------------- By /s/ KENISTON P. MERRILL
-----------------------------
Keniston P. Merrill, Chairman
- 12 -
<PAGE> 13
EXHIBIT 5(b)
Amendment No. 1 to Investment Advisory Agreement
This is Amendment No. 1, dated as of March 11, 1996, to the Investment
Advisory Agreement (the "Agreement") dated March 1, 1993, 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; and
WHEREAS, the Adviser currently provides investment advisory services in
accordance with the Agreement for the Fund's Bond, Managed and Aggressive Growth
Portfolios; and
WHEREAS, the Fund has created two new portfolios, the Common Stock
Portfolio and the Sentinel Growth Portfolio, for which the Fund desires that the
Adviser act as investment adviser; and
WHEREAS, the Common Stock Portfolio of the Fund has the current investment
objective of seeking a combination of long-term growth of capital and current
income with relatively low risk by investing in common stocks of many
well-established companies; and
WHEREAS, the Sentinel Growth Portfolio has the current investment
objective of seeking long-term growth of capital through equity participation in
companies having growth potential believed by the Adviser to be more favorable
than the U.S. economy as a whole, with a focus on relatively well-established
companies; and
WHEREAS, the Adviser desires to act as investment adviser to the Common
Stock and Sentinel Growth Portfolios under the terms hereof; and
WHEREAS, the Adviser is registered as an investment adviser under the
Investment advisers Act of 1940, as amended (the "Advisers Act"); and
WHEREAS, the Investment Company Act prohibits any person from acting as an
adviser to an investment company except pursuant to a written agreement;
NOW, THEREFORE, the Fund and the Adviser hereby agree as follows:
1. The Agreement shall continue in full force and effect as to the Fund's
Bond, Managed and Aggressive Growth Portfolios, without change.
2. 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
<PAGE> 14
with respect to the Fund's Common Stock and Sentinel Growth Portfolios
(the "Portfolios"), in accordance with the Portfolios' investment
objectives, policies and restrictions as stated in the Fund's prospectus,
as from time to time in effect, the Articles of Incorporation and Bylaws
of the Fund, 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 in this
Amendment No. 1. 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.
3. 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 Portfolios, and in so doing, shall provide the same
services as set forth in paragraphs 2, 3, 4 and 5 of the Agreement with respect
to the Bond, Managed and Aggressive Growth Portfolios.
4. (a) For the services provided to the Portfolios, the Adviser will be
compensated monthly at the effective annual rates set forth below:
Common Stock Portfolio -- 0.40% of the first $100 million of the average
daily net assets of the Common Stock Portfolio and 0.35% of the average daily
net assets of the Common Stock Portfolio in excess of $100 million.
Sentinel Growth Portfolio -- 0.50% of the first $20 million of the average
daily net assets of the Sentinel Growth Portfolio, 0.40% of the next $20
million of the average daily net assets of the Sentinel Growth Portfolio, and
0.30% of the average daily net assets of the Sentinel Growth Portfolio in excess
of $40 million.
(b) If this Amendment No. 1 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.
5. The provisions of paragraphs 7, 8, 9, 10, 13, 14, 15, 16, 17, 19 and 20
of the Agreement shall apply to the provision of investment advisory services to
the Common Stock and Sentinel Growth Portfolios under this Amendment No. 1 in
the same way that such provisions apply to the provision of investment advisory
services to the Bond, Managed and Aggressive Growth Portfolios pursuant to the
Agreement.
6. This Amendment No. 1 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 Amendment No. 1. This Amendment No. 1 shall come into full force
and effect on March 11, 1996, or upon effectiveness of the amendment to the
Fund's registration statement reflecting this Amendment No. 1 filed with the
Securities and Exchange Commission under the Securities Act of 1933, whichever
is later, provided this Amendment No. 1 shall have been approved by a vote of
the "majority" (as defined in the Investment Company Act) of the outstanding
shares of the applicable Portfolio.
7. This Amendment No. 1 shall continue until December 31, 1997 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
applicable Portfolio set forth in
<PAGE> 15
paragraph 6 above, provided that in either event the continuance is also
approved by a a majority of the Directors who are not "interested persons"
(as defined in the Investment Company Act) of any party to this Amendment
No. 1, 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.
8. The Adviser shall submit to all regulatory and administrative bodies
having Jurisdiction over the operations of any insurance company whose separate
accounts have any interest in the Portfolios, or in any of the other portfolios
of the Fund, present or future, any materials reasonably related to the
investment advisory services provided hereunder or in the Agreement, as may be
reasonably requested in writing by the Directors or as may be required by any
governmental agency having jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
be executed by their duly authorized officers on the date and year first above
written.
MARKET STREET FUND, INC
by /s/ STANLEY R. REBER
---------------------------
Stanley R. Reber
President
SENTINEL ADVISORS COMPANY
by /s/ KENISTON P. MERRILL
---------------------------
Keniston P. Merrill
Chairman and Chief Executive
Officer
<PAGE> 16
Market Street Fund, Inc.
Common Stock Portfolio
As sole shareholder of the Common Stock Portfolio of Market Street Fund,
Inc., the undersigned hereby approves Amendment No. 1 dated as of March 11, 1996
to the Investment Advisory Agreement dated March 1, 1993, between Market Street
Fund, Inc., and Sentinel Advisors Company.
Dated: March 18, 1996
NATIONAL LIFE INSURANCE COMPANY
By /s/ RODNEY A. BUCK
-------------------------
Rodney A. Buck
Senior Vice President and Chief
Investment Officer
<PAGE> 1
EXHIBIT 5(e)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, dated November 1, 1991, between Market Street Fund, Inc. (the
"Fund"), a corporation organized under the laws of the State of Maryland, and
Providentmutual Investment Management Company (the "Adviser"), a corporation
organized under the laws of the Commonwealth of Pennsylvania.
WHEREAS, the Fund is a registered investment company under the Investment
Company Act of 1940 ("Investment Company Act") which maintains several
investment portfolios for the use of the Fund's shareholders which are separate
accounts established and maintained by insurance companies;
WHEREAS, one of the Fund's portfolios, the International Portfolio, has
the current objective of achieving long-term capital growth by investing in a
diversified portfolio of marketable equity securities of established non-United
States companies;
WHEREAS, the Fund desires that Providentmutual Investment Management
Company act as investment adviser with respect to the International Portfolio;
WHEREAS, the Investment Company Act prohibits any person from acting as
investment adviser of a registered investment company except pursuant to a
written agreement;
<PAGE> 2
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 International Portfolio ("International
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 International 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
International Portfolio as set forth in the Fund's Prospectus, as amended from
time to time;
- 2 -
<PAGE> 3
(b) consult with the Directors and furnish to the Directors
recommendations with respect to an overall investment plan and any changes
thereto for the International Portfolio for approval, modification, or rejection
by the Directors;
(c) seek out, present, and recommend specific investment opportunities,
consistent with any overall investment plan approved 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 International 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 International
Portfolio, including the purchase, retention or sale of the securities and cash
contained in that Portfolio.
3. The Adviser shall effect all purchases and sales of investments for the
International 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 International 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 scheduled of the
investments and other assets held in the International
- 3 -
<PAGE> 4
Portfolio and a statement of all purchases and sales for the 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 International Portfolio as required by law.
The Adviser agrees that all accounts and records which it maintains for
the Fund's International 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 International Portfolio of the
Fund. 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 Portfolio 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) In consideration of the services rendered pursuant to this
Agreement, the Fund shall pay the Adviser monthly compensation at an effective
annual rate of 0.75% of the first $500 million of the average daily net assets
- 4 -
<PAGE> 5
of the Portfolio and 0.60% of the average daily net assets of the Portfolio in
excess of $500 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 International Portfolio. All brokers' commissions, transfer
taxes and other fees relating to purchases and sales of investments for the
Portfolio shall be paid out of the assets allocated to the Portfolio.
8. The Adviser shall, subject to the supervision of the Directors, arrange
for the placement of orders for the International 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 on 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
- 5 -
<PAGE> 6
used by the Adviser in connection with the performance of its obligations under
this Agreement or in connection with other advisory or investment operations.
9. The Adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the International Portfolio in connection with
the subject matter of this Agreement unless such loss arises from willful
misfeasance, bad faith or gross negligence 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 International 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
- 6 -
<PAGE> 7
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 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 recommend by the Adviser to be purchased or
sold for the International Portfolio. When the Adviser deems the purchase or
sale of a security to be in the best interests 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 the 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 International 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 the
later of the date on which it is so approved and November 1, 1991.
12. This Agreement shall continue until December 31, 1991 and thereafter
for successive annual periods ending December 31, of each year, provided such
- 7 -
<PAGE> 8
continuance is specifically approved at least annually by (i) the
Directors or (ii) by a vote of a majority of the shareholders of the
International Portfolio, 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.
(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 12 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, bad faith, or gross negligence 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
- 8 -
<PAGE> 9
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 amendments 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, or
the Fund, present or future, 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 governmental agency having
jurisdiction.
19. In the event of termination for any reason, all records shall promptly
be returned to the Fund free from any claim or retention of rights by the
Adviser.
20. The Adviser shall not disclose or use any records or information
obtained pursuant to this Agreement in any manner whatsoever except as
expressly
- 9 -
<PAGE> 10
authorized herein and, further, the Adviser will keep confidential any
information pursuant to the service relationship set forth herein and disclose
such information only if the Fund has authorized such disclosure or such
disclosure is expressly required by applicable federal or state regulatory
authorities.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers on the date and year first
above written.
THE MARKET STREET FUND, INC.
WITNESS:
[sig]
- ---------------------- BY:/s/ STANLEY R REBER
-----------------------
Providentmutual Investment
Management Company
WITNESS:
[sig]
- ---------------------- BY:/s/ JOHN P. LLOYD
-----------------------
- 10 -
<PAGE> 1
EXHIBIT 5(f)
SUB-INVESTMENT ADVISORY AGREEMENT
AGREEMENT, dated July 18 1994, between Providentmutual Investment
Management Company, (the "Adviser"), a corporation organized under the laws of
the Commonwealth of Pennsylvania and The Boston Company Asset Management, Inc.
("Sub-adviser") a corporation organized under the laws of the Commonwealth of
Massachusetts.
WHEREAS, The Market Street Fund, Inc. ("the Fund") is a registered
investment company under the Investment Company Act of 1940 ("Investment Company
Act") which currently maintains six investment portfolios for the use of the
Fund's shareholders which are separate accounts established and maintained by
insurance companies;
WHEREAS, one of the Fund's portfolios, the International Portfolio, has
the current objective of achieving long-term capital growth by investing in a
diversified portfolio of marketable equity securities of established non-United
States companies;
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act");
WHEREAS, the Adviser is party to an Investment Advisory Agreement dated
November 1, 1991 with the Fund pursuant to which the Adviser provides investment
advice and other services to the Fund;
WHEREAS, Sub-adviser is registered as an investment adviser under the
Advisers Act; and
WHEREAS, the Adviser desires to employ Sub-adviser to act as
sub-investment adviser with respect to the International Portfolio;
<PAGE> 2
\
NOW, THEREFORE, the Adviser and Sub-adviser hereby agree as follows:
1. Subject to monitoring by the Adviser and supervision of the Board of
Directors of the Fund ("the Directors"), Sub-adviser will provide investment
advisory services with respect to the Fund's International Portfolio
("International 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 Bylaws of the
Fund, and the Investment Company Act and appropriate State Insurance Laws, each
as amended from time to time. Sub-adviser agrees to furnish the services
described below for the compensation provided by this Agreement.
2. In connection with its obligations hereunder, Sub-adviser shall,
subject to monitoring by the Adviser and supervision by the Board of Directors,
manage the investment and reinvestment of the assets of the International
Portfolio. Subject to the limitations set forth in Paragraph 1 above,
Sub-adviser shall:
(a) perform research and obtain and evaluate pertinent economic,
statistical, and financial data relevant to the investment policies of the
International 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 and the
Adviser recommendations with respect to an overall investment plan and any
changes thereto for the International Portfolio for approval, modification, or
rejection by the Directors;
(c) seek out, present, and recommend specific investment opportunities,
consistent with any overall investment plan approved by the Directors;
- 2 -
<PAGE> 3
(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 International 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 International
Portfolio, including the purchase, retention or sale of the securities and cash
contained in that Portfolio.
3. Sub-adviser shall effect all purchases and sales of investments for the
International Portfolio in a manner consistent with the limitations set forth in
Paragraph 1 above.
4. Sub-adviser shall regularly report to the Directors and to the Adviser
with respect to the implementation of any approved overall investment plan and
any other activities in connection with management of the assets of the
International Portfolio. Sub-adviser, either through persons employed by it or
at its own expense, shall furnish to the Directors and to the Adviser, at least
once every three months, a schedule of the investments and other assets held in
the Portfolio and a statement of all purchases and sales for the Portfolio made
since the last report.
5. Sub-adviser shall maintain all accounts, records, memoranda,
instructions, or authorizations relating to the acquisition or disposition of
investments for the International Portfolio as required by law.
Sub-adviser agrees that all accounts and records which it maintains for
the Fund's International Portfolio shall be the property of the Fund and that it
will surrender promptly to the designated officers of the Adviser or to the
Directors, any or all such accounts and records
- 3 -
<PAGE> 4
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
International Portfolio of the Fund. Sub-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. Sub-adviser also agrees that it will maintain all records and
accounts regarding the investment activities of the International Portfolio 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 Sub-adviser's offices. In
addition, Sub-adviser will provide any materials, reasonably related to the
investment advisory services provided hereunder, as may be reasonably requested
in writing by the Adviser, the Directors, or as may be required by any
governmental agency having jurisdiction over the Adviser, the Fund or any
insurance companies investing in the Fund.
6. (a) In consideration of the services rendered pursuant to this
Agreement, the Adviser shall pay Sub-adviser compensation equal to the greater
of: (i) a monthly fee equal to an effective 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 of the Portfolio in excess of $500 million; or (ii)
$20,000 per year.
(b) If this Agreement is terminated at any time, any compensation owed
Sub-adviser pursuant to subparagraph (a) above shall be payable upon the date of
termination of this Agreement.
7. Sub-adviser shall be responsible for all expenses incurred in
performing the investment advisory services herein set forth, including costs of
compensating and furnishing
- 4 -
<PAGE> 5
office space for officers and employees of Sub-adviser connected with investment
and economic research, trading and investment management of the International
Portfolio. All brokers' commissions, transfer taxes and other fees relating to
purchases and sales of investments for the Portfolio shall be paid out of assets
allocated to the International Portfolio.
8. Sub-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
Sub-adviser, subject to the following limitation: Sub-adviser shall use its best
judgment to choose brokers who will obtain the best prices and executions on
securities transactions and whose commissions are most reasonable. In addition
to seeking the best price and execution, Sub-adviser may also take into
consideration research and statistical information and wire and other quotation
services provided to Sub-adviser. However, Sub-adviser shall select only brokers
whose commissions it believes are reasonable. Sub-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 Sub-adviser in
connection with the performance of its obligations under this Agreement or in
connection with other advisory or investment operations.
9. Sub-adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Adviser or the International Portfolio in
connection with the subject matter of this Agreement unless such loss arises
from willful misfeasance, bad faith or gross negligence on its part in the
performance of Sub-adviser's obligations and duties or by reason of
Sub-adviser's reckless disregard of its obligations and duties under this
Agreement. Nothing
- 5 -
<PAGE> 6
herein shall be construed to be a waiver of any rights which Company may have
under any federal or state securities laws.
10. Sub-adviser and any affiliate of Sub-adviser may engage in any other
business or act as adviser to or investment manager of any other person, even
though Sub-adviser, any affiliate of Sub-adviser, or any such other person has
or may have investment policies similar to those for the Portfolio, so long as
Sub-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 Sub-adviser, as directors, officers, employees,
shareholders or otherwise and that directors, officers, employees and
shareholders of Sub-adviser are or may become similarly interested in the Fund,
and that Sub-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 Bylaws of the Fund and the Adviser, respectively, or by
specific provisions of applicable law.
It is agreed that Sub-adviser or its affiliates may use any investment
research obtained for the benefit of the International 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 Sub-adviser or the entities advised by
Sub-adviser may be considered by and may be useful to Sub-adviser in carrying
out its obligations to the Portfolio.
Nothing herein contained shall prevent Sub-adviser or any affiliate
of Sub-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 Sub-adviser to be purchased or
- 6 -
<PAGE> 7
sold for the International Portfolio. When Sub-adviser deems the purchase or
sale of a security to be in the best interests 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 the 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 Sub-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 International 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 the
later of the date on which it is so approved and July 25, 1994.
12. This Agreement shall continue until December 31, 1994 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 a vote of a "majority" (as defined in the Investment Company Act) of the
shareholders of the Portfolio, 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,
- 7 -
<PAGE> 8
by vote cast in person at a meeting called for the purpose of voting such
approval. The Adviser agrees that it will notify Sub-adviser in writing each
year of such annual approval.
13. (a) This Agreement shall terminate automatically in the event of its
assignment or upon termination of the abovementioned Investment Advisory
Agreement between the Fund and the Adviser.
(b) This Agreement may be terminated at any time without the payment
of any penalty, (i) by a majority of the Directors or by the Adviser for cause
or upon sixty days written notice addressed to Sub-adviser; or (ii) by a vote of
a "majority" of the shareholders as set forth in paragraph 12 above; or (iii) by
Sub-adviser on sixty days written notice addressed to the Fund and the Adviser
at their principal place of business. Cause is defined and limited for this
purpose to mean willful misfeasance, bad faith or gross negligence by
Sub-adviser in the performance of its duties or reckless disregard by
Sub-adviser of its obligations and duties under this Agreement.
14. This Agreement shall be construed in accordance with Pennsylvania law.
15. The Adviser understands that Sub-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 Adviser has no
objection to Sub-adviser so acting, provided that Sub-adviser duly performs all
obligations under this Agreement.
16. The Adviser understands that the persons employed by Sub-adviser to
assist in the performance of Sub-adviser's 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 Sub-adviser or any affiliate of Sub-adviser to
engage in and devote time and attention to other businesses or to
- 8 -
<PAGE> 9
render services of whatever kind of nature, provided that Sub-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 amendments 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. Sub-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 or
the Fund, present or future, 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.
19. In the event of termination for any reason, all records shall promptly
be returned to the Fund free from any claim or retention of rights by
Sub-adviser, except that Advisor shall keep copies of any records which it is
required to keep to comply with the Investment Advisor's Act of 1940 and any
other federal or state securities laws.
20. Sub-adviser shall not disclose or use any records or information
obtained pursuant to this Agreement in any manner whatsoever except as expressly
authorized herein and, further,
- 9 -
<PAGE> 10
will keep confidential any information pursuant to the service relationship set
forth herein and disclose such information only if the Fund has authorized such
disclosure or such disclosure is expressly required by applicable federal or
state regulatory authorities.
IN WITNESS WHEREOF, the parties hereto have cause this agreement to be
executed by their duly authorized officers on the date and year first above
written.
PROVIDENTMUTUALINVESTMENT
MANAGEMENT COMPANY
Witness:
[sig]
- ---------------------- By:/s/ STANLEY R REBER
-------------------------
THE BOSTON COMPANY
ASSET MANAGEMENT, INC.
Witness:
[sig]
- ---------------------- By:/s/ MICHAEL A JONES
-------------------------
- 10 -
<PAGE> 1
EXHIBIT 5.f
MARKET STREET FUND, INC.
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT ("Agreement") is made this ____ day of April,
1998 and will be effective as of May 1, 1998, by and between Market Street Fund,
Inc., a corporation organized and existing under the laws of the State of
Maryland (the "Fund"), and Providentmutual Investment Management Company (the
"Manager"), a corporation organized and existing under the laws of the state of
Pennsylvania.
RECITALS
1. The Fund is a series-type, open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), that
currently consists of eleven investment portfolios (each, a "Portfolio"), each
such Portfolio having its own investment objective(s).
2. The Fund issues a separate series of shares of stock for each Portfolio,
which shares represent fractional undivided interests in the Portfolio.
3. The Manager is engaged principally in rendering investment advisory services
and is registered as an investment adviser under the Investment Advisers Act of
1940, as amended (the "Advisers Act").
4. The Fund desires to retain the Manager to provide or to arrange to provide
overall management of the Fund in connection with four Portfolios, including,
but not limited to, investment advisory, accounting, and administrative
services, in the manner and on the terms and conditions set forth in this
Agreement. The four Portfolios are: Allpro Large Cap Growth Portfolio, Allpro
Small Cap Growth Portfolio, Allpro Large Cap Value Portfolio and Allpro Small
Cap Value Portfolio (together, the "Allpro Portfolios").
5. The Manager is willing to provide or to arrange to provide, investment
advisory, accounting, and administrative services to the Fund and each of the
foregoing Portfolios on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Fund and the Manager hereby agree as follows:
<PAGE> 2
ARTICLE I
Duties of the Manager
The Fund hereby engages the Manager to act as the Fund's manager to
provide or to arrange to provide directly or through third parties, investment
advisory, accounting, and administrative services to each Allpro Portfolio and
to any additional similar portfolios that the Fund may establish in the future;
and to provide or to arrange to provide the above services subject to the
supervision of the board of directors of the Fund (the "Board"), for the period
and on the terms and conditions set forth in this Agreement. The Manager hereby
accepts such engagement and agrees during such period, at its own expense, to
provide or to arrange to provide, such investment advisory and management
services, and to assume the obligations set forth in this Agreement for the
compensation provided for herein. Subject to the provisions of the 1940 Act and
the Advisers Act, the Manager may retain any affiliated or unaffiliated parties
including, but not limited to, investment adviser(s) and/or investment
sub-adviser(s), administrators, and accountant(s) to perform any or all of the
services set forth in this Agreement.
The Manager, its affiliates and any investment adviser(s),
sub-adviser(s), administrator(s), accountant(s), or other parties performing
services for the Manager shall for all purposes herein be deemed to be
independent contractors and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Fund or an Allpro
Portfolio in any way or otherwise be deemed agents of the Fund or an Allpro
Portfolio.
The Manager shall, for purposes of this Agreement, have and exercise
full investment discretion and authority to act as agent for the Fund in buying,
selling or otherwise disposing of or managing the Allpro Portfolios'
investments, directly or through sub-advisers, subject to supervision by the
Board.
The Manager and any other party performing services covered by this
Agreement (each such party is hereafter referred to as a "Service Provider")
shall be subject to: (1) the restrictions of the articles of incorporation and
bylaws of the Fund, as amended from time to time; (2) the provisions of the 1940
Act and the Advisers Act; (3) the statements relating to the Allpro Portfolios'
investment objectives, investment policies and investment restrictions as set
forth in the currently effective (and as amended from time to time) registration
statement of the Fund (the "registration statement") under the Securities Act of
1933, as amended (the "1933 Act"); and (4) any applicable provisions of the
Internal Revenue Code of 1986, as amended (the "Code").
(a) Investment Advisory Services. The Manager shall provide the Allpro
Portfolios directly or through sub-advisers with such investment research,
advice and supervision as the Fund may from time to time consider necessary for
the proper management of the assets of each Allpro Portfolio, shall furnish
continuously an investment program for each Allpro Portfolio, shall determine
from time to time which securities or other investments shall be purchased, sold
or exchanged and what portions of each Allpro Portfolio shall be held in the
various securities or other investments or cash, and shall take such steps as
are necessary to implement an overall
-2-
<PAGE> 3
investment plan for each Allpro Portfolio, including providing or obtaining such
services as may be necessary in managing, acquiring or disposing of securities,
cash or other investments.
The Fund has furnished or will furnish the Manager (who is authorized
to furnish any Service Provider) with copies of the Fund's registration
statement, the Fund's articles of incorporation and bylaws as currently in
effect and agrees during the continuance of this Agreement to furnish the
Manager with copies of any amendments or supplements thereto before or at the
time the amendments or supplements become effective. The Manager and any Service
Providers will be entitled to rely on all documents furnished by the Fund.
The Manager represents that in performing investment advisory services
for each Allpro Portfolio, the Manager shall make every effort to ensure that:
(1) each Allpro Portfolio continuously qualifies as a regulated investment
company under Subchapter M of the Code or any successor provision; and (2) each
Allpro Portfolio meets the requirements of Section 817(h) of the Code or any
successor provision. Except as instructed by the Board, the Manager shall also
make decisions for the Fund as to the manner in which voting rights, rights to
consent to corporate action, and any other rights pertaining to the Fund's
securities shall be exercised. If the Board at any time makes any determination
as to investment policy and notifies the Manager of such determination, the
Manager shall be bound by such determination for the period, if any, specified
in the notice or until similarly notified that such determination has been
revoked.
The Manager shall take, on behalf of each Allpro Portfolio, all actions
which it deems necessary to implement the investment policies of such Portfolio,
and in particular, to place all orders for the purchase or sale of portfolio
investments for the account of each such Portfolio with brokers, dealers,
futures commission merchants or banks selected by the Manager. The Manager also
is authorized as the agent of the Fund to give instructions to any Service
Provider serving as custodian of the Fund as to deliveries of securities and
payments of cash for the account of each Allpro Portfolio. In selecting brokers
or dealers and placing purchase and sale orders with respect to assets of the
Allpro Portfolios, the Manager is directed at all times to seek to obtain best
execution and price within the policy guidelines determined by the Board and set
forth in the current registration statement. Subject to this requirement and the
provisions of the Act, the Advisers Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and other applicable provisions of law, the Manager
may select brokers or dealers that are affiliated with the Manager or the Fund.
In addition to seeking the best price and execution, the Manager may
also take into consideration research and statistical information, wire,
quotation and other services provided by brokers and dealers to the Manager. The
Manager is also authorized to effect individual securities transactions at
commission rates in excess of the minimum commission rates available, if the
Manager determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage, research and other services provided by
such broker or dealer, viewed in terms of either that particular transaction or
the Manager's overall responsibilities with respect to each Allpro Portfolio.
The policies with respect to brokerage allocation, determined
-3-
<PAGE> 4
from time to time by the Board are those disclosed in the currently effective
registration statement. The execution of such transactions shall not be deemed
to represent an unlawful act or breach of any duty created by this Agreement or
otherwise. The Manager will periodically evaluate the statistical data, research
and other investment services provided to it by brokers and dealers. Such
services may be used by the Manager in connection with the performance of its
obligations under this Agreement or in connection with other advisory or
investment operations including using such information in managing its own
accounts.
As part of carrying out its obligations to manage the investment and
reinvestment of the assets of each Allpro Portfolio consistent with the
requirements under the 1940 Act, the Manager shall:
(1) Perform research and obtain and analyze pertinent economic,
statistical, and financial data relevant to the investment
policies of each Allpro Portfolio as set forth in the Fund's
registration statement;
(2) Consult with the Board and furnish to the Board
recommendations with respect to an overall investment strategy
for each Allpro Portfolio for approval, modification, or
rejection by the Board;
(3) Seek out and implement specific investment opportunities,
consistent with any investment strategies approved by the
Board;
(4) Take such steps as are necessary to implement any overall
investment strategies approved by the Board for each Allpro
Portfolio, including making and carrying out day-to-day
decisions to acquire or dispose of permissible investments,
managing 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;
(5) Regularly report to the Board with respect to the
implementation of any approved overall investment strategy and
any other activities in connection with management of the
assets of each Allpro Portfolio including furnishing, within
60 days after the end of each calendar quarter, a statement of
investment performance for the period since the last report
and a schedule of investments and other assets of each Allpro
Portfolio as of the end of the quarter;
(6) Maintain all required accounts, records, memoranda,
instructions or authorizations relating to the acquisition or
disposition of investments for each Allpro Portfolio;
-4-
<PAGE> 5
(7) Furnish any personnel, office space, equipment and other
facilities necessary for the operation of each Allpro
Portfolio as contemplated in this Agreement;
(8) Provide the Fund with such accounting or other data concerning
the Fund's investment activities as shall be necessary or
required to prepare and to file all periodic financial reports
or other documents required to be filed with the Securities
and Exchange Commission ("SEC") and any other regulatory
entity;
(9) Assist in determining each business day the net asset value of
the shares of each Allpro Portfolio in accordance with
applicable law; and
(10) Enter into any written investment advisory or investment
sub-advisory contract with another affiliated or unaffiliated
party, subject to any approvals required by Section 15 of the
1940 Act, pursuant to which such party will carry out some or
all of the Manager's responsibilities (as specified in such
investment advisory or investment sub-advisory contract)
listed above.
(b) General Management Services. The Manager shall provide or arrange
to provide all accounting, and administrative services necessary for the
operation of the Fund. The Manager shall provide office space, equipment,
facilities, and such other services as it, subject to review by the Board, shall
from time to time determine to be necessary or useful to perform its obligations
under this Agreement. The Manager shall also be responsible for performance of
various administrative functions of the Fund including:
(1) The calculation of the net asset value and daily income of
each Allpro Portfolio and the net asset value per share at
such times and in such manner as specified in the Fund's
current registration statement and at such other times upon
which the parties hereto may from time to time agree;
(2) Computation of each Allpro Portfolio's yields and total
returns;
(3) Schedule, plan agendas for and conduct meetings of the Board
and shareholders;
(4) Coordinate the efforts of the Fund's counsel and auditors;
(5) Prepare and distribute all required reports, proxy materials
and other communications with shareholders;
-5-
<PAGE> 6
(6) Prepare and file tax returns, reports, registration statements
and other required documents with the Internal Revenue Service
and the SEC and other appropriate government agencies;
(7) The creation and maintenance of such records relating to the
business of the Fund as the Fund may from time to time
reasonably request not otherwise maintained by the Fund's
custodian, transfer agent, accounting services agent or
sub-advisers;.
(8) Provide clerical, secretarial and bookkeeping services, office
supplies, office space, and related services (including
telephone and other utility services); and
(9) Monitor state and federal law as it may apply to the Fund or
the Allpro Portfolios.
The Manager may contract with qualified Service Providers for the
provision of any of the services necessary for the operation of the Fund as
described in this Section (b). Where the Manager engages separate Service
Providers, the Manager shall also, on behalf of the Fund, coordinate the
activities of such Service Providers, as well as other agents, attorneys,
brokers and dealers, insurers, sub-advisers and such other persons in any such
other capacity deemed to be necessary or desirable. The Manager shall make
reports to the Board of its performance hereunder and shall furnish advice and
recommendations with respect to such other aspects of the business and affairs
of the Fund as the Board or the Manager shall consider desirable.
ARTICLE II
Allocation of Charges and Expenses
(a) The Manager. The Manager assumes the expense of and shall pay for
maintaining the staff and personnel necessary to perform its obligations under
this Agreement, and shall at its own expense provide the office space, equipment
and facilities that it is obligated to provide under this Agreement, and shall
pay all compensation of officers of the Fund and all directors of the Fund who
are affiliated persons of the Manager, except as otherwise specified in this
Agreement.
(b) The Fund. The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation: taxes, expenses for
legal and auditing services, costs of printing proxy materials, shareholder
reports and prospectuses (except to the extent that such prospectuses and
shareholder reports are used in connection with the sale and distribution of the
Fund's shares), custody and transfer agency fees, expenses of redeeming shares,
SEC fees, expenses of registering the Fund's shares under state of federal laws,
fees and actual out-of-pocket expenses of directors who are not interested
persons of the Fund, accounting and pricing costs (including the daily
calculation of the net asset value), insurance, interest, brokerage
-6-
<PAGE> 7
expenses, litigation and other extraordinary or nonrecurring expenses, and other
expenses properly payable by an Allpro Portfolio or the Fund.
ARTICLE III
Compensation of the Manager
For the services rendered, the facilities furnished and expenses
assumed by the Manager, the Fund shall pay to the Manager at the end of each
calendar month a fee calculated as a percentage of the average value of the net
assets each day for each Allpro Portfolio during that month at the following
annual rates:
<TABLE>
<S> <C>
Allpro Large Cap Growth Portfolio 0.__%
Allpro Small Cap Growth Portfolio 0.__%
Allpro Large Cap Value Portfolio 0.__%
Allpro Small Cap Value Portfolio 0.__%
</TABLE>
The Manager's fee shall be accrued daily at 1/365th of the applicable
annual rate set forth above. For the purpose of accruing compensation, the net
assets of each Allpro Portfolio shall be determined in the manner and on the
dates set forth in the articles of incorporation of the Fund or the current
registration statement of the Fund and, on days on which the net assets are not
so determined, the net asset value computation to be used shall be as determined
on the immediately preceding day on which the net assets were determined.
In the event of termination of this Agreement, all compensation due
through the date of termination will be calculated on a pro-rated basis through
the date of termination and paid within fifteen business days of the date of
termination.
During any period when the determination of net asset value is
suspended, the net asset value of a Allpro Portfolio as of the last business day
prior to such suspension shall for this purpose be deemed to be the net asset
value at the close of each succeeding business day until it is again determined.
ARTICLE IV
Limitation of Liability of the Manager
The Manager shall not be liable for any error of judgment or mistake of
law or for any loss arising out of any investment or for any act or omission in
the management of the Fund, except for (a) willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of reckless
disregard of its obligations and duties hereunder, and (b) to the extent
specified in section 36(b) of the 1940 Act concerning loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation.
-7-
<PAGE> 8
ARTICLE V
Activities of the Manager
The services of the Manager are not deemed to be exclusive, and the
Manager is free to render services to others, so long as the Manager'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
persons of the Manager, as directors, officers, employees and shareholders or
otherwise, and that directors, officers, employees and shareholders of the
Manager are or may become similarly interested persons of the Fund, and that the
Manager may become interested in the Fund as a shareholder or otherwise.
It is agreed that the Manager may use any supplemental investment
research obtained for the benefit of the Fund in providing investment advice to
its other investment advisory accounts. The Manager or its affiliates may use
such information in managing their own accounts. Conversely, such supplemental
information obtained by the placement of business for the Manager or other
entities advised by the Manager will be considered by and may be useful to the
Manager in carrying out its obligations to the Fund.
Securities or other investments held by an Allpro Portfolio of the Fund
may also be held by separate investment accounts or other mutual funds for which
the Manager may act as an investment adviser or by the Manager or its
affiliates. Because of different investment objectives or other factors, a
particular security may be bought by the Manager or its affiliates for one or
more clients when one or more clients are selling the same security. If
purchases or sales of securities for an Allpro Portfolio or other entities for
which the Manager or its affiliates act as investment adviser or for their
advisory clients arise for consideration at or about the same time, the Fund
agrees that the Manager may make transactions in such securities, insofar as
feasible, for the respective entities and clients in a manner deemed equitable
to all. To the extent that transactions on behalf of more than one client of the
Manager during the same period may increase the demand for securities being
purchased or the supply of securities being sold, the Fund recognizes that there
may be an adverse effect on price.
It is agreed that, on occasions when the Manager deems the purchase or
sale of a security to be in the best interest of an Allpro Portfolio as well as
other accounts or mutual funds, it may, to the extent permitted by applicable
laws or regulations, but will not be obligated to, aggregate the securities to
be sold or purchased for other accounts or companies in order to obtain
favorable execution and lower brokerage commissions or prices. In that event,
allocation of the securities purchased or sold, as well as the expenses incurred
in the transaction, will be made by the Manager in accordance with any written
procedures maintained by the Manager or, if there are no such written
procedures, in the manner it considers to be most equitable and consistent with
its fiduciary obligations to the Fund 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 an Allpro Portfolio.
-8-
<PAGE> 9
ARTICLE VI
Books and Records
The Manager hereby undertakes and agrees to maintain, in the form and
for the period required by Rule 31a-2 and Rule 2a-7 under the 1940 Act, all
records relating to the an Allpro Portfolio's investments that are required to
be maintained by the Fund pursuant to the requirements of Rule 31a-1 and Rule
2a-7 of the 1940 Act.
The Manager agrees that all books and records which it or any other
Service Provider maintains for the Fund are the property of the Fund and further
agrees to surrender promptly to the Fund any such books, records or information
upon the Fund's request. All such books and records shall be made available,
within five business days of a written request, to the Fund's accountants or
auditors during regular business hours at the Manager's offices. The Fund or its
authorized representative shall have the right to copy any records in the
possession of the Manager or a Service Provider that pertain to the Fund. Such
books, records, information or reports shall be made available to properly
authorized government representatives consistent with state and federal law
and/or regulations. In the event of the termination of this Agreement, all such
books, records or other information shall be returned to the Fund free from any
claim or assertion of rights by the Manager.
The Manager further agrees that it will not disclose or use any records
or information obtained pursuant to this Agreement in any manner whatsoever
except as authorized in this Agreement and that it will keep confidential any
information obtained pursuant to this Agreement and disclose such information
only if the Fund has authorized such disclosure, or if such disclosure is
required by federal or state regulatory authorities.
ARTICLE VII
Duration and Termination of this Agreement
This Agreement shall not become effective unless and until it is
approved by the Board, including a majority of directors who are not parties to
this Agreement or interested persons of any such party, and by the vote of a
majority of the outstanding voting shares of each Allpro Portfolio of the Fund.
This Agreement shall come into full force and effect on the date which it is so
approved, provided that it shall not become effective as to any subsequently
created similar Portfolio until it has been approved by the Board specifically
for such Portfolio. As to each Allpro Portfolio, the Agreement shall continue in
effect for two years and shall thereafter continue in effect from year to year
so long as such continuance is specifically approved for each Allpro Portfolio
at least annually by (1) the Board, or by the vote of a majority of the
outstanding shares of the series representing an interest in the Portfolio; and
(2) a majority of those directors who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting called for the
purpose of voting on such approval.
-9-
<PAGE> 10
This Agreement may be terminated at any time as to any Allpro Portfolio
or to all the Allpro Portfolios, without the payment of any penalty, by the
Board, or by vote of a majority of the outstanding series of shares representing
an interest in the applicable Allpro Portfolio, or by the Manager, on 60 days
written notice to the other party. If this Agreement is terminated only with
respect to one or more, but less than all, of the Allpro Portfolios, or if a
different adviser is appointed with respect to a new Allpro Portfolio, the
Agreement shall remain in effect with respect to the remaining Allpro
Portfolios. This Agreement shall automatically terminate in the event of its
assignment.
ARTICLE VIII
Amendments of this Agreement
This Agreement may be amended as to each Allpro Portfolio by the
parties only if such amendment is specifically approved by (a) the vote of a
majority of the outstanding shares of the Portfolio, and (b) a majority of those
directors who are not parties to this Agreement or interested persons of any
such party cast in person at a meeting called for the purpose of voting on such
approval.
ARTICLE IX
Definitions of Certain Terms
The terms "assignment," "affiliated person," and "interested person,"
when used in this Agreement, shall have the respective meanings specified in the
1940 Act. The term "majority of the outstanding shares" an Allpro Portfolio
means the lesser of (a) 67% or more of the shares of the class representing an
interest in the Portfolio present at a meeting if the holders of more than 50%
of such shares are present or represented by proxy, or (b) more than 50% of the
shares of the class representing an interest in the Portfolio.
ARTICLE X
Governing Law
This Agreement shall be construed in accordance with laws of the State
of Maryland, and applicable provisions of the 1940 Act, the Advisers Act, and
the 1934 Act.
-10-
<PAGE> 11
ARTICLE XI
Severability
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
Market Street Fund, Inc.
By: _________________________________
Title: ______________________________
ATTEST:
________________________________________
PIMC
By: _________________________________
Title: ______________________________
ATTEST:
_________________________________________
-11-
<PAGE> 1
EXHIBIT 5.g
INVESTMENT SUB-ADVISORY AGREEMENT
THIS INVESTMENT SUB-ADVISORY AGREEMENT ("Agreement"), made this __ day
of April, 1998 by and between PROVIDENTMUTUAL INVESTMENT MANAGEMENT COMPANY, a
Pennsylvania corporation (the "Adviser"), and 1838 INVESTMENT ADVISORS, a
Pennsylvania limited partnership (the "Sub-Adviser").
Adviser and Sub-Adviser agree as follows:
1. Adviser hereby engages the services of Sub-Adviser in connection with
Adviser's management of the Small Cap Value Portfolio (the "Portfolio") of
Market Street Fund, Inc. (the "Fund"). Pursuant to this Agreement and subject to
the oversight and supervision by Adviser and the officers and the board of
directors of the Fund, Sub-Adviser shall manage the investment and reinvestment
of that portion of the assets of the Portfolio (hereinafter, the "Portfolio
Segment") that the Adviser shall, from time to time, direct.
2. Sub-Adviser hereby accepts appointment by Adviser in the foregoing capacity
and agrees, at its own expense, to render the services set forth herein and to
provide the office space, furnishings, equipment and personnel required by it to
perform such services on the terms and for the compensation provided in this
Agreement.
3. In particular, Sub-Adviser shall furnish continuously an investment program
for the Portfolio Segment and shall determine from time to time in its
discretion the securities and other investments to be purchased or sold or
exchanged and what portions of the Portfolio Segment shall be held in various
securities, cash or other investments. In this connection, Sub-Adviser shall
provide Adviser and the officers and directors of the Fund with such reports and
documentation as the latter shall reasonably request regarding Sub-Adviser's
management of the Portfolio Segment assets.
4. Sub-Adviser shall carry out its responsibilities under this Agreement in
compliance with: (a) the Portfolio's investment objective, policies and
restrictions as set forth in the Fund's current registration statement, (b) such
policies or directives as the Fund's directors may from time to time establish
or issue and communicate to the Sub-Adviser in writing, and (C) applicable law
and related regulations. Adviser shall promptly notify Sub-Adviser in writing of
changes to (a) or (b) above and shall notify Sub-Adviser in writing of changes
to (C) above promptly after it becomes aware of such changes.
5. Sub-Adviser shall take all actions which it considers necessary to implement
the investment policies of the Portfolio as these relate to the Portfolio
Segment, and in particular, to place all orders for the purchase or sale of
securities or other investments for the Portfolio Segment with brokers or
dealers selected by it, and to that end, Sub-Adviser is authorized as the agent
of the Fund to give instructions to the Fund's custodian as to deliveries of
securities or other investments and payments of cash for the account of the
Portfolio. In connection with the selection of brokers or dealers and the
placing of purchase and sale orders with respect to
<PAGE> 2
investments of the Portfolio, Sub-Adviser is directed at all times to seek to
obtain best execution and price within the policy guidelines determined by the
Fund's board of directors and set forth in the Fund's current registration
statement.
To the extent permitted by the policy guidelines set forth in the
Fund's current registration statement, Sub-Adviser is authorized to consider, in
the selection of brokers and dealers to execute portfolio transactions, not only
the available prices and rates of brokerage commissions but also other relevant
factors which may include, without limitation, the execution capabilities of
such brokers and dealers, research, custody and other services provided by such
brokers and dealers which the Sub-Adviser believes will enhance its general
portfolio management capabilities, the size of the transaction, the difficulty
of execution, the operational facilities of such brokers and dealers, the risk
to such a broker or dealer of positioning a block of securities, and the overall
quality of brokerage and research services provided by such brokers and dealers.
In connection with the foregoing, Sub-Adviser is specifically authorized to pay
those brokers and dealers who provide brokerage and research services to it, a
higher commission than that charged by other brokers and dealers if the
Sub-Adviser determines in good faith that the amount of such commission is
reasonable in relation to the value of such services in terms of either the
particular transaction or in terms of Sub-Adviser's overall responsibilities
with respect to the Portfolio Segment and to any other client accounts or
portfolios which Sub-Adviser advises. The execution of such transactions shall
not be considered to represent an unlawful breach of any duty created by this
Agreement or otherwise.
Sub-Adviser also is authorized to aggregate purchase and sale orders
for securities held (or to be held) in the Portfolio Segment with similar orders
being made on the same day for other client accounts or portfolios managed by
Sub-Adviser. When an order is so aggregated: (a) the actual prices applicable to
the aggregated transaction will be averaged and the Portfolio Segment and each
other account or portfolio participating in the aggregated transaction shall be
treated as having purchased or sold its portion of the securities at such
average price, and (b) all transaction costs incurred in effecting the
aggregated transaction shall be shared on a pro-rata basis among the accounts or
portfolios (including the Portfolio Segment) participating in the transaction.
Adviser recognizes that in some cases this procedure may adversely affect the
size of the position obtainable for the Portfolio Segment.
When recommending or effecting a transaction in a particular security
or investment for more than one client account or portfolio (including the
Portfolio Segment), Sub-Adviser may allocate such recommendations or
transactions among all accounts and portfolios for whom the recommendation is
made or transaction is effected on a basis that Sub-Adviser considers equitable.
6. Sub-Adviser's services under this Agreement are not exclusive. Sub-Adviser
may provide the same or similar services to other clients. Adviser acknowledges
that, except when transactions for multiple clients are aggregated, transactions
in a specific security or other investment may not be recommended or executed at
the same time or price for all client accounts
2
<PAGE> 3
or portfolios (including the Portfolio Segment) for which that security or
investment is recommended or executed. This Agreement does not require
Sub-Adviser to give priority to the Portfolio Segment over other client accounts
or portfolios. Sub-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 Adviser, the Fund or
the Portfolio or otherwise be deemed agents of the Adviser, the Fund or the
Portfolio.
7. Sub-Adviser or an affiliated person of Sub-Adviser may act as broker for the
Portfolio in connection with the purchase or sale of securities or other
investments for the Portfolio, subject to: (a) the requirement that Sub-Adviser
seek to obtain best execution and price within the policy guidelines determined
by the Fund's board of directors and set forth in the Fund's current
registration statement; (b) the provisions of the Advisers Act; (c) the
provisions of the Securities Exchange Act of 1934, as amended; and (d) other
applicable provisions of law. Such brokerage services are not within the scope
of the duties of Sub-Adviser under this Agreement. Subject to the requirements
of applicable law and any procedures adopted by Fund's board of directors,
Sub-Adviser or its affiliated persons may receive brokerage commissions, fees or
other remuneration from the Portfolio or the Fund for such services in addition
to Sub-Adviser's fees for services under this Agreement.
8. Nothing in this Agreement shall require Sub-Adviser to take or receive
physical possession of cash, securities or other investments of the Portfolio
Segment.
9. Sub-Adviser is registered with the U.S. Securities and Exchange Commission
under the Investment Advisers Act of 1940, as amended (the "Advisers Act").
Sub-Adviser shall remain so registered throughout the term of this Agreement and
shall notify Adviser immediately if Sub-Adviser ceases to be so registered as an
investment adviser.
10. Sub-Adviser: (a) is duly organized and validly existing under the laws of
the state of Pennsylvania with the power to own and possess its assets and carry
on its business as it is now being conducted, (b) has the authority to enter
into and perform the services contemplated by this Agreement, (c) is not
prohibited by the Investment Company Act of 1940 (the "1940 Act") or the
Advisers Act from performing the services contemplated by this Agreement, (d)
has met, and will continue to seek to meet for the duration of this Agreement,
any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary to
be met in order to perform the services this Agreement, and (e) will promptly
notify Adviser of the occurrence of any event that would disqualify it from
serving as an investment adviser to an investment company pursuant to Section
9(a) of the 1940 Act.
11. Adviser: (a) is duly organized and validly existing under the laws of the
State of
3
<PAGE> 4
Delaware with the power to own and possess its assets and carry on its business
as it is now being conducted, (b) has the authority to enter into and perform
the services contemplated by this Agreement, (c) is not prohibited by the 1940
Act or the Advisers Act from performing the services contemplated by this
Agreement, (d) has met, and will continue to seek to meet for the duration of
this Agreement, any other applicable federal or state requirements, or the
applicable requirements of any regulatory or industry self-regulatory agency,
necessary to be met in order to perform the services this Agreement, and (e)
will promptly notify Sub-Adviser of the occurrence of any event that would
disqualify it from serving as an investment adviser to an investment company
pursuant to Section 9(a) of the 1940 Act. Adviser represents that the Fund is
(and during the term of this Agreement, will remain) registered as an open-end
management investment company under the 1940 Act and that the shares of the
Fund's stock representing an interest in the Portfolio are (and during the term
of this Agreement will remain) registered under the Securities Act of 1933 and
under any applicable state securities laws.
12. Sub-Adviser has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and will provide Adviser and the
Fund with a copy of that code, together with evidence of its adoption. Within 20
days of the end of each calendar quarter during which this Agreement remains in
effect, the president or a vice president of Sub-Adviser shall certify to
Adviser or the Fund that Sub-Adviser has complied with the requirements of Rule
17j-1 during the previous quarter and that there have been no violations of
Sub-Adviser's code of ethics or, if such a violation has occurred, that
appropriate action has been taken in response to such violation. Upon written
request of Adviser or the Fund, Sub-Adviser shall permit representatives of
Adviser or the Fund to examine the reports (or summaries of the reports)
required to be made to Sub-Adviser by Rule 17j-1(c)(1) and other records
evidencing enforcement of the code of ethics.
13. For the services rendered, the facilities furnished and the expenses assumed
by Sub-Adviser, Adviser shall pay Sub-Adviser at the end of each month a fee
based on the average daily net assets of the Portfolio Segment at the following
annual rates:
0.55% on all assets
Sub-Adviser's fee shall be accrued daily at 1/365th of the applicable annual
rate set forth above. For the purpose of accruing compensation, the net assets
of the Portfolio Segment shall be determined in the manner and on the dates set
forth in the current prospectus of the Fund, and, on days on which the net
assets are not so determined, the net asset value computation to be used shall
be as determined on the immediately preceding day on which the net assets were
determined. In the event of termination of this Agreement, all compensation due
through the date of termination will be calculated on a pro-rated basis through
the date of termination and paid within thirty business days of the date of
termination.
During any period when the determination of net asset value is
suspended, the net asset value of the Portfolio as of the last business day
prior to such suspension shall for this purpose be
4
<PAGE> 5
deemed to be the net asset value at the close of each succeeding business day
until it is again determined.
14. Sub-Adviser hereby undertakes and agrees to maintain, in the form and for
the period required by Rule 31a-2 under the Investment Company Act of 1940, as
amended, all records relating to the Portfolio Segment's investments that are
required to be maintained by the Fund pursuant to the requirements of paragraphs
(b)(5), (b)(6), (b)(7), (b)(9), (b)(10) and (f) of Rule 31a-1 under the 1940
Act.
Sub-Adviser agrees that all books and records which it maintains for
the Portfolio or the Fund are the property of the Fund and further agrees to
surrender promptly to the Adviser or the Fund any such books, records or
information upon the Adviser's or the Fund's request (provided, however, that
Sub-Adviser may retain copies of such records). All such books and records shall
be made available, within five business days of a written request, to the Fund's
accountants or auditors during regular business hours at Sub-Adviser's offices.
Adviser and the Fund or either of their authorized representative shall have the
right to copy any records in the possession of Sub-Adviser which pertain to the
Portfolio or the Fund. Such books, records, information or reports shall be made
available to properly authorized government representatives consistent with
state and federal law and/or regulations. In the event of the termination of
this Agreement, all such books, records or other information shall be returned
to Adviser or the Fund.
15. Sub-Adviser agrees that it will not disclose or use any records or
confidential information obtained pursuant to this Agreement in any manner
whatsoever except as authorized in this Agreement or specifically by Adviser or
the Fund, or if such disclosure is required by federal or state regulatory
authorities.
Sub-Adviser may disclose the investment performance of the Portfolio
and the Portfolio Segment, provided that such disclosure does not reveal the
identity of the Adviser, the Portfolio or the Fund. Sub-Adviser may, however,
disclose that Adviser, the Fund and the Portfolio are its clients, provided that
such disclosure does not reveal the investment performance or the composition of
the Portfolio Segment.
16. In the absence of willful misfeasance, bad faith or gross negligence on the
part of Sub-Adviser or its officers, directors or employees, or reckless
disregard by Sub-Adviser of its duties under this Agreement (together,
"disabling conduct"), Sub-Adviser shall not be liable to Adviser, the Portfolio,
the Fund or to any shareholder of the Portfolio for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security, except
to the extent otherwise provided in Section 36(b) of the 1940 Act concerning
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services.
17. Sub-Adviser agrees to indemnify and defend Adviser, its officers, directors,
partners, employees and any person who controls Adviser for any loss or expense
(including attorney's
5
<PAGE> 6
fees) arising out of any claim, demand, action, suit or proceeding arising out
of any actual or alleged material misstatement or omission in the Fund's
registration statement, any proxy statement, or communication to current or
prospective investors in the Portfolio relating to disclosure about Sub-Adviser
provided to Adviser by Sub-Adviser.
18. Adviser agrees to indemnify and defend Sub-Adviser, its officers, directors,
partners, employees and any person who controls Adviser for any loss or expense
(including attorney's fees) arising out of any claim, demand, action, suit or
proceeding arising out of any actual or alleged material misstatement or
omission in the Fund's registration statement, any proxy statement, or other
communication to current or prospective investors in the Portfolio (other than a
misstatement or omission relating to disclosure about Sub-Adviser provided to
Adviser or the Fund by Sub-Adviser).
19. This Agreement shall not become effective unless and until it is approved by
the board of directors of the Fund, including a majority of directors who are
not parties to this Agreement or interested persons of any such party to this
Agreement, and, to the extent required by law, a majority of the outstanding
shares of the class of the Fund's stock representing an interest in the
Portfolio. This Agreement shall come into full force and effect on the date
which it is so approved. This Agreement shall continue in effect for two years
and shall thereafter continue in effect from year to year so long as such
continuance is specifically approved at least annually by (a) the board of
directors of the Fund, or by the vote of a majority of the outstanding shares of
the class of stock representing an interest in the Portfolio, and (b) a majority
of those directors who are not parties to this Agreement or interested persons
of any such party cast in person at a meeting called for the purpose of voting
on such approval.
20. This Agreement may be terminated at any time without the payment of any
penalty, by the Fund's board of directors, or by vote of a majority of the
outstanding shares of the class of stock representing an interest in the
Portfolio on sixty days written notice to the Adviser and Sub-Adviser, or by the
Adviser, or by the Sub-Adviser, on sixty days written notice to the other. This
Agreement shall automatically terminate in the event of its assignment or in the
event of the termination of the investment advisory agreement between the
Adviser and the Fund regarding the Adviser's management of the Portfolio.
21. This Agreement may be amended by the parties only if such amendment is
specifically approved by (a) a majority of those directors who are not parties
to this Agreement or interested persons of any such party cast in person at a
meeting called for the purpose of voting on such approval, and, if required by
applicable law, (b) the vote of a majority of outstanding shares of the class of
the Fund's stock representing an interest in the Portfolio.
22. The terms "assignment", "affiliated person" and "interested person", when
used in this Agreement, shall have the respective meanings specified in the 1940
Act. The term "majority of the outstanding shares of the class" means the lesser
of (a) 67% or more of the shares of such class present at a meeting if more than
50% of such shares are present or represented by proxy or
6
<PAGE> 7
(b) more than 50% of the shares of such class.
23. This Agreement shall be construed in accordance with laws of the
Commonwealth of Pennsylvania, and applicable provisions of the Advisers Act and
1940 Act.
24. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
Providentmutual Investment Management Company
By:_______________________________________
Name: Steven Schweitzer
Title: Vice President
ATTEST:
__________________________
1838 Investment Advisors
By: ________________________________
Name:_______________________________
Title: _____________________________
ATTEST:
__________________________
7
<PAGE> 1
EXHIBIT 5.h
INVESTMENT MANAGEMENT CONSULTING AGREEMENT
THIS INVESTMENT MANAGEMENT CONSULTING AGREEMENT ("Agreement"), made
this __ day of April, 1998 by and between Providentmutual Investment Management
Company, a Pennsylvania corporation ("Adviser"), and Wilshire Associates
Incorporated, a California corporation ("Advisory Consultant").
Adviser and Advisory Consultant agree as follows:
1. Adviser hereby engages the Advisory Consultant to provide non-discretionary
investment advisory services, as described herein, in connection with Adviser's
management of the Large Cap Growth Portfolio, Small Cap Growth Portfolio, Large
Cap Value Portfolio and Small Cap Value Portfolio (the "Portfolios") of Market
Street Fund, Inc. (the "Fund"). Pursuant to this Agreement and subject to the
oversight and supervision by the officers and the board of directors of the
Fund, Advisory Consultant shall, from time to time, assist Adviser in developing
proposals for the board of directors as to establishing and revising the
investment objective(s), policies and restrictions of the Portfolios and
identifying, selecting and evaluating other Advisory Consultants to invest and
reinvest the assets of the Portfolios, or portions of the assets of the
Portfolios.
2. Advisory Consultant hereby accepts engagement by Adviser in the foregoing
capacity and agrees, at its own expense, to render the services set forth herein
and to provide the office space, furnishings, equipment and personnel required
by it to perform such services on the terms and for the compensation provided in
this Agreement. Advisory Consultant acknowledges that this Agreement is an
investment advisory contract of the type referenced in Section 15(a) of
Investment Company Act of 1940 (the "1940 Act").
3. In particular, Advisory Consultant shall assist Adviser gathering data and
performing the quantitative analysis necessary to identify the styles and past
performance of other potential new Advisory Consultants as well as performing
similar ongoing quantitative analysis of the performance of each other Advisory
Consultant. Advisory Consultant also shall assist Adviser to perform a
continuing quantitative and qualitative evaluation of the skills and abilities
of such other Advisory Consultants in managing assets pursuant to a particular
management style. In this connection, Advisory Consultant shall provide Adviser
and the officers and directors of the Fund with such reports and documentation
as the latter shall reasonably request regarding Advisory Consultant's
activities for the Adviser.
4. Advisory Consultant shall carry out its responsibilities under this Agreement
in compliance with: (a) each Portfolio's investment objective, policies and
restrictions as set forth in the Fund's then current registration statement, (b)
such policies or directives as the Fund's directors from time to time may
establish or issue, and (c) applicable law and related regulations. Adviser
shall promptly notify Advisory Consultant in writing of changes to (a) or (b)
above and shall notify Advisory Consultant in writing of changes to (c) above
promptly after it becomes
<PAGE> 2
aware of such changes. Advisory Consultant shall promptly notify Adviser in
writing in the event that Advisory Consultant becomes aware that any other
Advisory Consultant does not, or cannot, perform its responsibilities under its
sub-advisory agreement with Adviser.
5. Advisory Consultant is not responsible for implementing the investment
objective(s) or policies of the Portfolios. In particular, Advisory Consultant
is not responsible to place orders for the purchase or sale of securities or
other investments for a Portfolio with brokers or dealers. In this connection,
Advisory Consultant is not authorized to give instructions to the Fund's
custodian as to deliveries of securities or other investments and payments of
cash for the account of the Portfolios.
6. Advisory Consultant 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 Adviser, the Fund or
the Portfolios or otherwise be deemed agents of Adviser, the Fund or the
Portfolios.
7. Advisory Consultant is registered with the U.S. Securities and Exchange
Commission under the Investment Advisers Act of 1940, as amended (the "Advisers
Act"). Advisory Consultant shall remain so registered throughout the term of
this Agreement and shall notify Adviser immediately if Advisory Consultant
ceases to be so registered as an investment adviser.
8. Advisory Consultant: (a) is duly organized and validly existing under the
laws of the State of California with the power to own and possess its assets and
carry on its business as it is now being conducted, (b) has the authority to
enter into and perform the services contemplated by this Agreement, (c) is not
prohibited by the 1940 Act or the Advisers Act from performing the services
contemplated by this Agreement, (d) has met, and will continue to seek to meet
for the duration of this Agreement, any other applicable federal or state
requirements, or the applicable requirements of any regulatory or industry
self-regulatory agency, necessary to be met in order to perform the services
this Agreement, and (e) will promptly notify Adviser of the occurrence of any
event that would disqualify it from serving as an investment adviser to an
investment company pursuant to Section 9(a) of the 1940 Act.
9. Adviser: (a) is duly organized and validly existing under the laws of the
State of Delaware with the power to own and possess its assets and carry on its
business as it is now being conducted, (b) has the authority to enter into and
perform the services contemplated by this Agreement, (c) is not prohibited by
the 1940 Act or the Advisers Act from performing the services contemplated by
this Agreement, (d) has met, and will continue to seek to meet for the duration
of this Agreement, any other applicable federal or state requirements, or the
applicable requirements of any regulatory or industry self-regulatory agency,
necessary to be met in order to perform the services this Agreement, and (e)
will promptly notify Advisory Consultant of the occurance of any event that
would disqualify it from serving as an investment adviser to an investment
company pursuant to Section 9(a) of the 1940 Act. Adviser represents that the
Fund is (and during the term of this Agreement, will remain) registered as an
open-end management
2
<PAGE> 3
investment company under the 1940 Act and that the shares of the Fund's stock
representing an interest in the Portfolio are (and during the term of this
Agreement will remain) registered under the Securities Act of 1933 and under any
applicable state securities laws.
10. Advisory Consultant has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and will provide Adviser and the
Fund with a copy of that code, together with evidence of its adoption. Within 45
days of the end of each calendar quarter during which this Agreement remains in
effect, the president or a vice president of Advisory Consultant shall certify
to Adviser or the Fund that, in connection with the services that it has
provided under this Agreement, it has complied with the requirements of Rule
17j-1 during the previous quarter and that there have been no violations of its
code of ethics or, if such a violation has occurred, that appropriate action has
been taken in response to such violation.
11. Advisory Consultant or an affiliated person of Advisory Consultant may act
as broker for the Portfolios in connection with the purchase or sale of
securities or other investments for the Portfolios, subject to: (a) the
requirement that the Advisory Consultant (who is not Advisory Consultant or an
affiliated person of Advisory Consultant) having investment discretion with
regard to the Portfolio for which the purchase or sale is being executed, seeks
to obtain best execution and price within the policy guidelines determined by
the Fund's board of directors and set forth in the Fund's current registration
statement; (b) the provisions of the Advisers Act; (c) the provisions of the
Securities Exchange Act of 1934, as amended; and (d) other applicable provisions
of law. Such brokerage services are not within the scope of the duties of
Advisory Consultant under this Agreement. Subject to the requirements of
applicable law and any procedures adopted by Fund's board of directors, Advisory
Consultant or its affiliated persons may receive brokerage commissions, fees or
other remuneration from the Portfolios or the Fund for such services in addition
to Advisory Consultant's fees for services under this Agreement.
12. For the services rendered, the facilities furnished and the expenses assumed
by Advisory Consultant, Adviser shall pay Advisory Consultant at the end of each
month a fee based on the average daily net assets of the Portfolios at the
following annual rates:
0.5%
Advisory Consultant's fee shall be accrued daily at 1/365th of the applicable
annual rate set forth above. For the purpose of accruing compensation, the net
assets of the Portfolios shall be determined in the manner and on the dates set
forth in the current prospectus of the Fund, and, on days on which the net
assets are not so determined, the net asset value computation to be used shall
be as determined on the immediately preceding day on which the net assets were
determined. In the event of termination of this Agreement, all compensation due
through the date of termination will be calculated on a pro-rated basis through
the date of termination and paid within thirty business days of the date of
termination.
3
<PAGE> 4
During any period when the determination of net asset value is
suspended, the net asset value of a Portfolio as of the last business day prior
to such suspension shall for this purpose be deemed to be the net asset value at
the close of each succeeding business day until it is again determined.
13. Advisory Consultant hereby undertakes and agrees to provide, or assist the
Adviser to create, in the form and for the period required by Rule 31a-2 under
the 1940 Act, appropriate records relating to the information that it provides
to Adviser under this Agreement about the Portfolios' investment sub-advisers
that are required to be maintained by the Fund or Adviser pursuant to the
requirements of paragraphs (b)(11) and (f) of Rule 31a-1 under the 1940 Act and
such additional records as the Adviser may be required to create and maintain in
connection with an order of the Securities and Exchange Commission exempting it
and the Fund from the otherwise applicable shareholder approval requirements of
Section 15(a) of the 1940 Act in connection with the hiring of certain other
sub-advisers for the Portfolios.
14. Advisory Consultant agrees that it will not disclose or use any records or
confidential information obtained pursuant to this Agreement in any manner
whatsoever except as authorized in this Agreement, or specifically by Adviser or
the Fund, or if such disclosure is required by federal or state regulatory
authorities.
15. In the absence of willful misfeasance, bad faith or gross negligence on the
part of Advisory Consultant or its officers, directors or employees, or reckless
disregard by Advisory Consultant of its duties under this Agreement, Advisory
Consultant shall not be liable to Adviser, the Portfolios, the Fund or to any
shareholder of the Portfolios for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security, except to the extent
specified in Section 36(b) of the 1940 Act concerning loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services.
16. This Agreement shall not become effective for any Portfolio unless and until
it is approved by the board of directors of the Fund, including a majority of
directors who are not parties to this Agreement or interested persons of any
such party to this Agreement and a majority of the outstanding shares of the
class of the Fund's stock representing an interest in the Portfolio. This
Agreement shall come into full force and effect on the date which it is so
approved for each Portfolio. This Agreement shall continue in effect for two
years and shall thereafter continue in effect from year to year so long as such
continuance is specifically approved at least annually by (a) the board of
directors of the Fund, or by the vote of a majority of the outstanding shares of
the class of stock representing an interest in the Portfolio to which it
relates; and (b) a majority of those directors who are not parties to this
Agreement or interested persons of any such party cast in person at a meeting
called for the purpose of voting on such approval.
4
<PAGE> 5
17. This Agreement may be terminated (or terminated for any Portfolio) at any
time without the payment of any penalty, by the Fund's board of directors, or by
vote of a majority of the outstanding shares of the class of stock representing
an interest in the Portfolio on sixty days written notice to the Adviser and
Advisory Consultant, or by the Adviser, or by the Advisory Consultant, on sixty
days written notice to the other. This Agreement shall automatically terminate
in the event of its assignment or in the event of the termination of the
investment advisory agreement between the Adviser and the Fund regarding the
Adviser's management of the Portfolios.
18. This Agreement may be amended by the parties only if such amendment is
specifically approved by (a) a majority of those directors who are not parties
to this Agreement or interested persons of any such party cast in person at a
meeting called for the purpose of voting on such approval, and, if required by
applicable law, (b) the vote of a majority of the outstanding shares of the
class of the Fund's stock representing an interest in each Portfolio to which
the amendment applies.
19. The terms "assignment", "affiliated person" and "interested person", when
used in this Agreement, shall have the respective meanings specified in the 1940
Act. The term "majority of the outstanding shares of the class" means the lesser
of (a) 67% or more of the shares of such class present at a meeting if more than
50% of such shares are present or represented by proxy or (b) more than 50% of
the shares of such class.
20. This Agreement shall be construed in accordance with laws of the
Commonwealth of Pennsylvania, and applicable provisions of the Advisers Act and
1940 Act.
21. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
ATTEST: Providentmutual Investment Management Company
__________________________ By:_______________________________________
Title: President
ATTEST: Wilshire Associates Incorporated
__________________________ By: ______________________________
5
<PAGE> 6
Title: ___________________________
6
<PAGE> 1
EXHIBIT 6(a)
UNDERWRITING AGREEMENT
AGREEMENT made November ll, 1985, by and between the Market Street Fund,
Inc. (the "Fund"), a Maryland corporation, and PML Securities Company ("PML"), a
Pennsylvania corporation.
WITNESSETH:
WHEREAS, the Fund is registered under the Investment Company Act of 1940
as a diversified open-end investment company and proposes to offer its shares
continuously to the Separate Accounts of Provident Mutual Variable Life
Insurance Company and Provident Mutual Life Insurance Company of Philadelphia to
("Accounts") fund the benefits under Variable Life Insurance Contracts (the
"Contracts") issued by the above-mentioned companies;
WHEREAS, the Fund currently is comprised of four separate Portfolios, each
of which pursues its investment objective through separate investment policies;
WHEREAS, PML is registered under the Securities Exchange Act of 1934 and
is a member of the National Association of Securities Dealers, Inc.; and
WHEREAS, the Fund and PML wish to enter into an agreement to have PML act
as the Fund's principal underwriter for the sale of the Fund's shares to the
Accounts;
NOW, THEREFORE, the parties agree as follows:
<PAGE> 2
- 2 -
1. Appointment of the Underwriter
The Fund hereby appoints PML as the principal underwriter of the Fund to
sell its shares to the Accounts and PML hereby accepts such appointment.
2. Exclusive Nature of Duties
PML shall be the exclusive representative of the Fund to act as principal
underwriter.
3. Purchase of Shares from the Fund
(a) The Fund will offer, and PML shall have the right to buy, the Fund
shares needed to fill unconditional orders for shares of the Fund placed with
PML by the Accounts. The price which PML shall pay for the shares of each
Portfolio so purchased shall be the net asset value per share of such Portfolio,
as determined on the basis set forth in Section 3(c) of this Agreement.
(b) The shares of each Portfolio are to be resold by PML to the
Accounts at the net asset value per share of such Portfolio.
(c) On each day in which the net asset value of the shares of any
Portfolio is determined, the Fund shall provide PML with the net asset value of
such shares by 5:30 p.m. New York City time or at such later time as shall be
agreed to by the parties. The net asset value of such shares shall be determined
in accordance with the method set forth in the Registration Statement of the
Fund.
<PAGE> 3
- 3-
(d) The Fund shall have the right to suspend the sale of shares of any
of its Portfolios at times when redemption of any such shares is suspended
pursuant to the conditions set forth in Section 4(b) of this Agreement. The Fund
shall also have the right to suspend the sale of shares of any or all of its
Portfolios if trading on the New York Stock Exchange shall have been suspended,
if a banking moratorium shall have been declared, or if there shall have been
some other extraordinary event that, in the judgment of the Fund, makes it
impracticable to sell any such shares.
4. Redemption of Shares by the Fund
(a) Any of the outstanding shares of each Portfolio may be tendered for
redemption at any time, and the Fund agrees to redeem any such shares so
tendered in accordance with the applicable provisions of the Prospectus and
Article V of the Fund's Articles of Incorporation. The redemption price is the
net asset value per share next determined after the initial receipt of proper
notice of redemption.
(b) The right to redeem shares or to receive payment with respect to
any redemption may be suspended only for any period during which trading on the
New York Stock Exchange is restricted as determined by the Securities and
Exchange Commission as a result of which disposal of a Portfolio's securities or
determination of the net asset value of each Portfolio is not reasonably
practicable, and for such other periods as the Securities and Exchange
Commission may by order permit for the protection of shareholders of each
Portfolio.
<PAGE> 4
- 4 -
5. Interests in and of PML
It is understood that any of the shareholders, directors, officers,
employees and agents of the Fund may be a shareholder, director, trustee,
officer, employee or agent of, or be otherwise interested in, PML, any
affiliated person of PML, any organization in which PML may have an interest or
any organization which may have an interest in PML; that PML, any such
affiliated person or any such organization may have an interest 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 PML, respectively, or by specific
provisions of applicable law.
6. Duties of the Fund
(a) The Fund shall furnish to PML copies of all information, financial
statements and other papers which PML may reasonably request for use in
connection with the distribution of the shares of the Fund.
(b) The Fund shall take, from time to time, subject to the necessary
approval of its shareholders, all necessary action to fix the number of its
authorized shares and to register shares under the Securities Act of 1933, in
order that there will be available for sale such number of shares as investors
may reasonably be expected to purchase.
<PAGE> 5
- 5 -
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of shares of each of its Portfolios for
sale under the securities laws of such states as PML and the Fund may approve,
if such qualification is required by such securities laws. Any such
qualification may be withheld, terminated or withdrawn by the Fund at any time
in its discretion.
7. Duties of PML
In selling the shares of the Fund, PML shall use its best efforts to
conform with the requirements of all federal and state laws and regulations, and
the regulations of the National Association of Securities Dealers, Inc.,
relating to the sale of such securities. PML is not authorized by the Fund to
give any information or make any representations, other than those contained in
the registration statement for the Fund and its shares, the Prospectus, and any
sales literature specifically approved by the Fund. Nothing contained in this
Agreement shall prevent PML from entering into underwriting arrangements with
other investment companies.
8. Duration and Termination of this Agreement
This Agreement shall become effective as of the date first written
above and shall remain in force thereafter so long as it is approved at least
annually by (i) a majority of the noninterested members of the Fund's Board of
Directors; and (ii) a majority of the entire Board of Directors or a majority
vote of the shares of each Portfolio.
<PAGE> 6
- 6 -
This Agreement may be terminated at any time without penalty on at
least sixty days notice by the Fund's Board of Directors or by a majority vote
of its shareholders, with respect to any Portfolio by a majority vote of the
shareholders of the capital stock of such Portfolio, or by PML on sixty days
notice.
This Agreement shall terminate automatically in the event of its
assignment.
THE MARKET STREET FUND, INC.
By /s/ STANLEY R. REBER
-------------------------
President
PML SECURITIES COMPANY
By [sig]
-------------------------
President
<PAGE> 1
EXHIBIT 6(b)
AMENDMENT TO UNDERWRITING AGREEMENT
THIS AMENDMENT to the Underwriting Agreement by and between Market Street
Fund, Inc. (the "Fund"), and PML Securities Company ("PML") is made this 9th
day of September, 1988.
WITNESSETH:
WHEREAS, the Fund and PML entered into an Underwriting Agreement on
November 11, 1985; and
WHEREAS, it is the desire of the parties thereto amend said Agreement;
NOW THEREFORE, it is agreed between the parties thereto to amend said
Agreement as follows:
1. Add the following paragraph at the end of item 7:
PML agrees that all accounts and records which it maintains
for the Fund shall be the property of the Fund and that it will
surrender promptly to the designated officers of the Fund any or such
accounts and records upon request. The Fund shall own and control all
pertinent records relating to its operations and shall have the right
to copy any such records in the possession of PML.
2. Add the following at the end of the second paragraph of item 8:
This Agreement may be terminated for "cause" at any time by
the Board of Directors of the Fund. "Cause is defined and limited for
this purpose to mean willful misfeasance, bad faith or gross negligence
by PML in the performance of its duties or reckless disregard by it of
its obligations and duties under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the
Underwriting Agreement to be duly executed as of the day and year first
above written.
(SEAL] MARKET STREET FUND, INC.
Attest: [sig] By:/s/ STANLEY R REBER
-------------------- -------------------------
[SEAL] PML SECURITIES COMPANY
Attest: [sig] By: [sig]
-------------------- -----------------------
<PAGE> 1
EXHIBIT 6(c)
AMENDMENT TO UNDERWRITING AGREEMENT
THIS AMENDMENT to the Underwriting Agreement between Market Street Fund,
Inc. (the "Fund"), and PML Securities Company ("PML") is made this 21st day of
March, 1989.
WITNESSETH:
WHEREAS, the Fund and PML entered into an Underwriting Agreement on
November 11, 1985, as amended on September 9, 1988;
WHEREAS the Fund established an Aggressive Growth Portfolio on March 20,
1989;
WHEREAS, it is the desire of the parties to amend the Underwriting
Agreement to include the Aggressive Growth Portfolio;
NOW THEREFORE, it is agreed between the parties that said Agreement is
hereby amended to include the Aggressive Growth Portfolio of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the
Underwriting Agreement to be duly executed as of the day and year first
above written.
[SEAL] MARKET STREET FUND, INC.
Attest: [sig] By:/s/ STANLEY R REBER
-------------------- ------------------------
[SEAL] PML SECURITIES COMPANY
Attest: [sig] By: [sig]
-------------------- ------------------------
<PAGE> 1
EXHIBIT 6(d)
AMENDMENT TO UNDERWRITING AGREEMENT
THIS AMENDMENT to the Underwriting Agreement between The Market Street
Fund, Inc. (the "Fund"), and PML Securities Company ("PML") is made this 1st
day of November, 1991.
WITNESSETH:
WHEREAS, the Fund and PML entered into an Underwriting Agreement on
November 11, 1985, as amended on September 9, 1988 and March 21, 1989; and
WHEREAS the Fund established an International Portfolio on May 3, 1991; and
WHEREAS, it is the desire of the parties to amend the Underwriting
Agreement to include the International Portfolio;
NOW THEREFORE, it is agreed between the parties that said Agreement is
hereby amended to include the International Portfolio of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the
Underwriting Agreement to be duly executed as of the day and year first
above written.
[SEAL] THE MARKET STREET FUND, INC.
Attest: [sig] By:/s/ STANLEY R. REBER
-------------------- -----------------------------
[SEAL] PML SECURITIES COMPANY
Attest: [sig] By: [sig]
-------------------- -----------------------------
<PAGE> 1
EXHIBIT 6(e)
AMENDMENT TO UNDERWRITING AGREEMENT
THIS AMENDMENT to the Underwriting Agreement between The Market Street Fund,
Inc. (the "Fund") and PML Securities Company ("PML") is made this 26th day of
February, 1996.
WITNESSETH:
WHEREAS, the Fund and PML entered into an Underwriting Agreement on
November 11, 1985, as amended on September 9, 1988, March 21, 1989,
November 1, 1991 and May 12, 1992; and
WHEREAS, the Fund established the Sentinel Growth Portfolio and the
Sentinel Common Stock Portfolio on February 26, 1996; and
WHEREAS, it is the desire of the parties to amend the Underwriting
Agreement to include the Sentinel Growth and Sentinel Common Stock
Portfolios;
NOW THEREFORE, it is agreed between the parties that said Agreement is
hereby amended to include the Sentinel Growth and Sentinel Common Stock
Portfolios of the Fund.
IN WITNESS WHEREOF, the parties have caused this Amendment to the
Underwriting Agreement to be duly executed as of the day and year first above
written
(SEAL) THE MARKET STREET FUND, INC.
Attest: [sig] By:/s/ STANLEY R. REBER
------------------- -------------------------
(SEAL) PML SECURITIES COMPANY
Attest: [sig] By: [sig]
-------------------- -------------------------
<PAGE> 1
EXHIBIT 8(a)
CUSTODY AGREEMENT
THIS AGREEMENT is made as of this 12th day of December, 1985 by and
between Market Street Fund, Inc. (the "Fund"), a Maryland corporation, and
PROVIDENT NATIONAL BANK ("Provident"), a national banking association.
W I T N E S S E T H :
WHEREAS, the Fund is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended ("the 1940 Act"), and is offering four units of beneficial interest,
$.01 par value per share ("Shares") known as the Class of Money Market
Portfolio shares, the Class of Bond Portfolio Shares, the Class of Growth
Portfolio shares and the Class of Managed Portfolio shares, collectively the
"Portfolios"; and
WHEREAS, the Fund desires to retain Provident to serve as the Fund's
custodian and Provident is willing to serve as the Fund's custodian;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints Provident to act as
custodian of the portfolio securities, cash and other property of the Fund for
the period and on the terms set forth in this Agreement. Provident accepts
such appointment and agrees to furnish the services herein set forth in return
for the compensation as provided in Paragraph 22 of this Agreement. Provident
agrees to comply with all relevant provisions of the 1940 Act and applicable
rules and regulations thereunder.
2. Delivery of Documents. The Fund will furnish Provident with
copies properly certified or authenticated of each of the following:
-1-
<PAGE> 2
(a) Resolutions of the Fund's Board of Directors authorizing
the appointment of Provident as custodian of the portfolio securities, cash
and other property of each of the Fund's portfolios and approving this
Agreement;
(b) Incumbency and signature certificates identifying and
containing the signatures of the Fund's officers and/or other persons
authorized to sign Written Instructions, as hereinafter defined, on behalf
of the Fund;
(c) The Fund's Articles of Incorporation filed with the State
Secretary of the State of Maryland on March 21, 1985 and all amendments
thereto (such Articles of Incorporation, as currently in effect and as it
shall from time to time be amended, is herein called the "Articles");
(d) The Fund's Code of Regulations and all amendments thereto
(such Code of Regulations, as currently in effect and as it shall from time
to time be amended, is herein called the "Code");
(e) Resolutions of the Fund's Board of Directors appointing
Providentmutual Investment Management Company (the "Adviser") as the
investment adviser to the Fund and resolutions of the Fund's Board of
Directors and holders of shares of the Fund ("Shareholders") approving a
proposed Advisory Agreement between the Adviser and the Fund (the "Advisory
Agreement");
(f) Resolutions of the Fund's Board of Directors appointing
Provident Institutional Management Corporation ("PIMC") as the administrator
to the Fund for each portfolio and resolutions of the Fund's Board of
Directors and Shareholders of the Fund approving a proposed Administration
Agreement between the Fund and PIMC (the "Administration Agreement");
(g) Resolutions of the Fund's Board of Directors appointing PML
-2-
<PAGE> 3
Securities Inc. ("PML") as the distributor of the Fund's shares and
approving a proposed Distribution Agreement between PML and the Fund (the
"Distribution Agreement");
(h) Resolutions of the Fund's Board of Directors appointing
Provident Financial Processing Corporation ("PFPC") as the Fund's transfer
agent and approving a proposed Transfer Agency Agreement between the Fund
and PFPC (the "Transfer Agency Agreement");
(i) The Advisory Agreement, the Sub-Advisory Agreement, the
Distribution Agreement, the Administration Agreement, and the Transfer
Agency Agreement;
(j) The Fund's Notification of Registration filed pursuant to
Section 8(a) of the 1940 Act on Form N-8A with the Securities and Exchange
Commission ("SEC") on June 27, 1985;
(k) The Fund's Registration Statement on Form N-1A under the
1940 Act and the Securities Act of 1933, as amended ("the 1933 Act"), as
filed with the SEC on December 16, 1985 (File No. 2-98755) relating to the
Fund's shares, and all amendments thereto; and
(l) The Fund's most recent prospectus for the Fund (such
prospectus as presently in effect and all amendments and supplements
thereto are herein called the "Prospectus").
The Fund will furnish Provident from time to time with copies of all
amendments of or supplements to the foregoing, if any.
3. Definitions.
(a) "Authorized Persons." As used in this Agreement, the term
"Authorized Person" means the Fund's President, Treasurer, and any other
person, whether or not any such person is an officer or employee of the
Fund, duly authorized by the Board of Directors of the Fund to give Oral and
-3-
<PAGE> 4
Written Instructions on behalf of the Fund and listed on the Certificate
annexed hereto as Appendix A or such other Certificate listing persons duly
authorized to give Oral and Written Instructions on behalf of the Fund as
may be received by Provident from time to time.
(b) "Book-Entry System." As used in this Agreement, the term
"Book-Entry System" means the Federal Reserve Treasury book-entry system for
United States and federal agency securities, its successor or successors and
its nominee or nominees, and any book-entry system maintained by a clearing
agency registered under Section 17A of the Securities Exchange Act of 1934.
(c) "Oral Instructions." As used in this Agreement, the term
"Oral Instructions" means oral instructions actually received by Provident
from an Authorized Person or from a person reasonably believed by Provident
to be an Authorized Person. The Fund agrees to deliver to Provident, at the
time and in the manner specified in Paragraph 8(b) of this Agreement,
Written Instructions confirming Oral Instructions.
(d) "Property." The term "Property," as used in this Agreement,
means:
(i) any and all securities and other property which
the Fund may from time to time deposit, or cause to be deposited, with
Provident with respect to the Fund or which Provident may from time to
time hold for the Fund with respect to each of the Fund's four
portfolios;
(ii) all income in respect of any of such securities or
other property;
(iii) all proceeds of the sale of any of such securities
or other property; and
-4-
<PAGE> 5
(iv) all proceeds of the sale of securities issued by
the Fund with respect to the portfolios which are received by
Provident from time to time from or on behalf of the fund.
(e) "Written Instructions." As used in this Agreement, the term
"Written Instructions" means written instructions delivered by mail, tested
telegram, cable, telex or facsimile sending device, and received by
Provident, signed by one Authorized Person except in the case of receipt and
disbursement of money pursuant to Paragraph 5(a)(iii) for which purpose
written instructions shall be signed by two Authorized Persons.
4. Delivery and Registration of the Property. The Fund will deliver
or cause to be delivered to Provident all securities and all monies with
respect to the portfolios owned by it, including cash received for the issuance
of Shares, at any time during the period of this Agreement. Provident will not
be responsible for such securities and such monies until actually received by
it. All securities delivered to Provident (other than in bearer form) shall be
registered in the name of the Fund or in the name of a nominee of the Fund or
in the name of Provident or any nominee of Provident, or in the name of any
subcustodian or any nominee of any such subcustodian appointed pursuant to
Paragraph 6 hereof, or shall be properly endorsed and in form for transfer
satisfactory to Provident.
5. Receipt and Disbursement of Money.
(a) Provident shall open and maintain a separate custodial
account or accounts for each portfolio in the name of the Fund, subject only
to draft or order by Provident acting pursuant to the terms of this
Agreement, and shall hold in such account or accounts, subject to the
provisions hereof, all cash received by it from or for the account of each
of the Portfolios. Provident shall make payments of cash to, or for the
account of, the Fund from such cash only (i) for the purchase of securities
as provided in Paragraph 12 hereof; (ii) for the redemption of Shares as
-5-
<PAGE> 6
provided in subparagraph (b) of Paragraph 9 hereof; (iii) upon receipt of
Written Instructions, for the payment of interest, dividends, taxes, or
custodial, transfer agency, administration, distribution or advisory fees or
expenses which are to be borne by the Fund under the terms of this
Agreement, the Transfer Agency Agreement, the Advisory Agreement, the
Sub-Advisory Agreement, the Administration Agreement and the Distribution
Agreement; (iv) upon receipt of Written Instructions, for payments in
connection with the conversion, exchange or surrender of securities owned or
subscribed to by the Fund and held by or to be delivered to Provident; (v)
to a subcustodian pursuant to Paragraph 6 hereof; or (vi) upon receipt of
Written Instructions, for other proper Fund purposes.
(b) Provident is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received as
custodian for the account of each of the Portfolios.
6. Receipt of Securities.
(a) Provident shall hold and physically segregate in a separate
account identifiable at all times from those of any other persons, firms, or
corporations, all securities and non-cash property received by it for the
account of each of the Portfolios. All such securities and non-cash
property are to be held or disposed of by Provident for each of the
Portfolios pursuant to the terms of this Agreement. In the absence of
Written Instructions accompanied by a certified resolution of the Fund's
Board of Directors authorizing the specific transaction, Provident shall
have no power or authority to withdraw, deliver, assign, hypothecate, pledge
or otherwise dispose of any such securities and investments except in
accordance with the express terms provided for in this Agreement. In no
case may any trustee, officer, employee or agent of the Fund withdraw any
-6-
<PAGE> 7
securities. In connection with its duties under this Paragraph 6, Provident
may, at its own expense, enter into subcustodian agreements with other banks
or trust companies for the receipt of certain securities and cash to be held
by Provident for the account of each of the Portfolios pursuant to this
Agreement; provided that each such bank or trust company has an aggregate
capital, surplus and undivided profits, as shown by its last published
report, of not less than 500,000 dollars ($500,000) and that such bank or
trust company agrees with Provident to comply with all relevant provisions
of the 1940 Act and applicable rules and regulations thereunder. Provident
shall remain responsible for the performance of all of its duties under this
Agreement and shall hold the Fund harmless from the acts and omissions of
any bank, or trust company, that it might choose pursuant to this Paragraph
6 except that Provident shall not be liable for any loss resulting from or
caused by direction of the Fund to maintain Custody of any Property in a
foreign country, including losses resulting from nationalization,
expropriation, currency restrictions or acts of war or terrorism.
(b) Promptly after the close of business each day, Provident
shall furnish the Fund with confirmation and a summary of all transfers to
or from the accounts of each of the Portfolios during said day. At least
monthly and from time to time, Provident shall furnish the Fund with a
detailed statement of the Property held for each of the Portfolios under
this Agreement.
7. Use of Book-Entry System. The Fund shall deliver to Provident a
certified resolution of the Board of Directors of the Fund approving,
authorizing and instructing Provident on a continuous and on-going basis until
instructed to the contrary by Oral or Written Instructions actually received by
Provident (i) to deposit in the Book-Entry System all securities of each
Portfolio eligible for
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<PAGE> 8
deposit therein and (ii) to utilize the Book-Entry System to the extent
possible in connection with settlements of purchases and sales of securities by
each Portfolio of the Fund, and deliveries and returns of securities collateral
in connection with borrowings. Without limiting the generality of such use, it
is agreed that the following provisions shall apply thereto:
(a) Securities and any cash of each Portfolio of the
Fund deposited in the Book-Entry System will at all times be
segregated from any assets and cash controlled by Provident in other
than a fiduciary or custodian capacity but may be commingled with
other assets held in such capacities. Provident will pay out money
only upon receipt of securities and will deliver securities only upon
the receipt of money.
(b) All books and records maintained by Provident
which relate to the Fund's participation in the Book-Entry System will
at all times during Provident's regular business hours be open to the
inspection of the Fund's duly authorized employees or agents, and the
Fund will be furnished with all information in respect of the services
rendered to it as it may require.
(c) Provident will provide the Fund with copies of any
report obtained by Provident on the system of internal accounting
control of the Book-Entry System within ten days after receipt of such
a report by Provident. Provident will also provide the Fund with such
reports on its own system of internal control as the Fund may
reasonably request from time to time.
8. Instructions Consistent with Charter, etc.
(a) Unless otherwise provided in this Agreement,
Provident shall act only upon Oral and Written Instructions. Although
Provident may take cognizance of the provisions of the Articles and
Code of the Fund, Provident
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<PAGE> 9
may assume that any Oral and Written Instructions received hereunder
are not in any way inconsistent with any provisions of such Articles
or Code or any vote, resolution or proceeding of the Shareholders, or
of the Board of Directors, or of any committee thereof.
(b) Provident shall be entitled to rely upon any Oral
Instructions and any Written Instructions actually received by
Provident pursuant to this Agreement. The Fund agrees to forward to
Provident Written Instructions confirming Oral Instructions in such
manner that the Written Instructions are received by Provident,
whether by hand delivery, telex, facsimile sending device or
otherwise, by the close of business of the same day that such Oral
Instructions are given to Provident. The Fund agrees that the fact
that such confirming Written Instructions are not received by
Provident shall in no way affect the validity of the transactions or
enforceability of the transactions authorized by the Fund by giving
Oral Instructions. The Fund agrees that Provident shall incur no
liability to the Fund in acting upon Oral Instructions given to
Provident hereunder concerning such transactions provided such
instructions reasonably appear to have been received from an
Authorized Person.
9. Transactions Not Requiring Instructions. Provident is
authorized to take the following action without Oral or Written
Instructions:
(a) Deposits of Proceeds of Issuance of Shares. Provident
shall collect and receive for the account of each of the Portfolios
all payments received in payment for Shares of such Portfolios issued
by the Fund.
(b) Redemptions. Upon receipt of notice by the Fund's
transfer agent stating that such transfer agent is required to redeem
Shares and specifying the number and class of Shares which such
transfer agent is required to redeem and the date and time the request
or requests for
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<PAGE> 10
redemption were received by the Fund's distributor, Provident shall
either (i) pay to such transfer agent, for distribution to the
redeeming Shareholder, the amount payable to such Shareholder upon the
redemption of such Shares as determined in the manner described in the
then current Prospectus, or (ii) arrange for the direct payment of
such redemption proceeds by Provident to the redeeming Shareholder in
accordance with such procedures and controls as are mutually agreed
upon from time to time by and among Provident, the Fund and the Fund's
transfer agent.
(c) Collection of Income and Other Payments.
Provident shall:
(i) collect and receive for the account of each
Portfolio, all income and other payments and distributions,
including (without limitation) stock dividends, rights, warrants
and similar items, included or to be included in the Property of
such Portfolios, and shall promptly advise the Fund of such
receipt and shall credit such income, as collected, to the Fund's
custodian account for each Portfolio,
(ii) endorse and deposit for collection, in the
name of the Fund, checks, drafts, or other orders for the payment
of money on the same day as received;
(iii) receive and hold for the account of each
Portfolio securities received as a distribution on the portfolio
securities of such Portfolio as a result of a stock dividend,
share split-up or reorganization, recapitalization, readjustment
or other rearrangement or distribution of rights or similar
securities issued with respect to any portfolio securities of such
Portfolio held by Provident hereunder;
(iv) present for payment and collect the amount
payable upon
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<PAGE> 11
all securities which may mature or be called, redeemed, or
retired, or otherwise become payable on the date such securities
become payable; and
(v) take any action which may be necessary and
proper in connection with the collection and receipt of such
income, payments and other Property and the endorsement for
collection of checks, drafts, and other negotiable instruments.
(d) Miscellaneous Transactions. Provident is
authorized to deliver or cause to be delivered Property against
payment or other consideration or written receipt therefor in the
following cases:
(i) for examination by a broker selling for the
account of each Fund in accordance with street delivery custom;
(ii) for the exchange of interim receipts or
temporary securities for definitive securities; and
(iii) for transfer of securities into the name of
the Fund or Provident or a nominee of either, or for exchange
of securities for a different number of bonds, certificates, or
other evidence, representing the same aggregate face amount or
number of units bearing the same interest rate, maturity date and
call provisions, if any; provided that, in any such case, the new
securities are to be delivered to Provident.
10. Transactions Requiring Instructions. Upon receipt of Oral
or Written Instructions and not otherwise, Provident shall:
(a) execute and deliver to such persons as may be
designated in such Oral or Written Instructions, proxies, consents,
authorizations, and other instructions whereby the authority of the
Fund as owner of any securities may be exercised;
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<PAGE> 12
(b) deliver any securities held for the Fund in
exchange for other securities or cash issued or paid in connection
with the liquidation, reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any corporation,
or the exercise of any conversion privilege;
(c) deliver any securities held for the Fund to any
protective committee, reorganization committee or other person in
connection with the liquidation, reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any corporation,
and receive and hold under the terms of this Agreement such
certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery;
(d) make such transfers or exchanges of the assets of
the Fund and take such other steps as shall be stated in said Oral or
Written Instructions to be for the purpose of effectuating any duly
authorized plan of liquidation, reorganization, merger, consolidation,
recapitalization or sale of assets of the Fund; and
(e) release securities belonging to the Fund to any
bank or trust company for the purpose of pledge or hypothecation to
secure any loan incurred by the Fund; provided, however, that
securities shall be released only upon payment to Provident of the
monies borrowed, except that in cases where additional collateral is
required to secure a borrowing already made, subject to proper prior
authorization, further securities may be released for that purpose;
and pay such loan upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or notes
evidencing the loan.
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<PAGE> 13
11. Dividends and Distributions. The Fund shall furnish Provident
with appropriate evidence of action by the Fund's Board of Directors declaring
and authorizing the payment of any dividends and distributions to the
Shareholders of a Portfolio. Upon receipt by Provident of Written Instructions
with respect to dividends and distributions declared by the Fund's Board of
Directors and payable to the Shareholders of a Portfolio who have elected in
the proper manner to receive their distributions and/or dividends in cash, and
in conformance with procedures mutually agreed upon by Provident, the Fund, and
the Fund's transfer agent, Provident shall pay to the Fund's transfer agent, as
agent for the Shareholders, an amount equal to the amount indicated in said
Written Instructions as payable by the Fund to such Shareholders for
distribution in cash by the transfer agent to such Shareholders. In lieu of
paying the Fund's transfer agent cash dividends and distributions, Provident
may arrange for the direct payment of cash dividends and distributions to
Shareholders by Provident in accordance with such procedures and controls as
are mutually agreed upon from time to time by and among the Fund, Provident and
the Fund's transfer agent.
12. Purchase of Securities. Promptly after each decision to purchase
securities for the Fund, the Fund, through the Adviser, shall deliver to
Provident Oral Instructions specifying with respect to each such purchase: (a)
the name of the issuer and the title of the securities; (b) the number of
shares or the principal amount purchased and accrued interest, if any; (c) the
date of purchase and settlement; (d) the purchase price per unit; (e) the total
amount payable upon such purchase; (f) the name of the person from whom or the
broker through whom the purchase was made; and (g) the Portfolio for which the
purchase was made. Provident shall, upon receipt of securities purchased by or
for a Portfolio, pay out of the monies held for the account of such Portfolio
the total amount payable to the person from whom or the broker through whom the
purchase was
-13-
<PAGE> 14
made, provided that the same conforms to the total amount payable as set forth
in such Oral Instructions.
13. Sales of Securities. Promptly after each decision to sell
securities for the Fund, the Fund, through the Adviser, shall deliver to
Provident Oral Instructions, specifying with respect to each such sale: (a) the
name of the issuer and the title of the security; (b) the number of shares or
principal amount sold, and accrued interest, if any; (c) the date of sale; (d)
the sale price per unit; (e) the total amount payable to the Fund upon such
sale; (f) the name of the broker through whom or the person to whom the sale
was made; and (g) the Portfolio for which the sale was made. Provident shall
deliver the securities upon receipt of the total amount payable to the Fund
upon such sale, provided that the same conforms to the total amount payable as
set forth in such Oral Instructions. Subject to the foregoing, Provident may
accept payment in such form as shall be satisfactory to it, and may deliver
securities and arrange for payment in accordance with the customs prevailing
among dealers in securities.
14. Correspondence. Provident shall answer correspondence from
securities brokers and others relating to its duties hereunder and such other
correspondence as may from time to time be mutually agreed upon between
Provident and the Fund.
15. Records. Provident shall keep and maintain appropriate financial
books and records with respect to its duties hereunder for the Fund. The books
and records pertaining to the Fund which are in the possession of Provident
shall be the property of the Fund. Such books and records shall be prepared
and maintained as required by the 1940 Act and other applicable securities laws
and rules and regulations. The Fund, or the Fund's authorized representatives,
shall have access to such books and records at all times during Provident's
normal
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<PAGE> 15
business hours: Upon the reasonable request of the Fund, copies of any such
books and records shall be provided by Provident to the Fund or the Fund's
authorized representative at the Fund's expense.
16. Reports. Provident shall furnish the Fund with the following
reports: (a) such periodic and special reports as the Fund may reasonably
request; (b) a monthly statement summarizing all transactions and entries for
the account of each Portfolio; (c) a monthly report of portfolio securities
belonging to each Portfolio showing the adjusted average cost of each issue and
the market value at the end of such month; (d) a monthly report of the cash
account of each Portfolio showing disbursements; and (e) such other information
as may be agreed upon from time to time between the Fund and Provident.
17. Cooperation with Accountants. Provident shall cooperate with the
Fund's independent certified public accountants and shall take all reasonable
action in the performance of its obligations under this Agreement to assure
that the necessary information is made available to such accountants for the
expression of their unqualified opinion, as such may be required by the Fund
from time to time.
18. Confidentiality. Provident agrees on behalf of itself and its
employees to treat confidentially and as the proprietary information of the
Fund all records and other information relative to the Fund and its prior,
present or potential Shareholders and relative to PML and its prior, present or
potential customers, and not to use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Fund, which
approval shall not unreasonably be withheld and may not be withheld where
Provident may be exposed to civil or criminal contempt proceedings for failure
to comply, when requested to divulge this information by duly constituted
authorities, or when so requested by the Fund.
-15-
<PAGE> 16
19. Equipment Failure. In the event of equipment failures,
Provident shall, at no additional expense to the Fund, use its best efforts and
take reasonable steps to minimize service interruptions. Provident shall enter
into and shall maintain in effect with appropriate parties one or more
agreements making reasonable provision for emergency use of electronic data
processing equipment to the extent appropriate equipment is available.
20. Right to Receive Advice.
(a) Advice of Company. If Provident shall be in doubt
as to any action to be taken or omitted by it, it may request, and
shall receive, from the Fund directions or advice, including Oral or
Written Instructions where appropriate.
(b) Advice of Counsel. If Provident shall be in doubt
as to any question of law involved in any action to be taken or
omitted by Provident, it may request advice at its own cost from
counsel of its own choosing (who may be counsel for the Adviser, PIMC,
PFPC, PML, the Fund, or Provident, at the option of Provident).
(c) Conflicting Advice. In case of conflict between
directions or advice (including Oral or Written Instructions) received
by Provident pursuant to subparagraph (a) of this paragraph and advice
received by Provident pursuant to subparagraph (b) of this paragraph,
Provident shall be entitled to rely on and follow the advice received
pursuant to the latter provision alone.
(d) Protection of Provident. Provident shall be
protected in any action or inaction which it takes in reliance on any
directions or advice (including Oral and Written Instructions)
received pursuant to subparagraphs (a) or (b) of this paragraph which
Provident, after receipt of such directions or advice, reasonably and
in good faith believes to be
-16-
<PAGE> 17
consistent with such directions or advice, as the case may be.
However, nothing in this paragraph shall be construed as imposing upon
Provident any obligation (i) to seek such directions or advice
(including Oral or written Instructions), or (ii) to act in accordance
with such directions or advice when received, unless, under the terms
of another provision of this Agreement, the same is a condition to
Provident's properly taking or omitting to take such action. Nothing
in this subsection shall excuse Provident when an action or omission
on the part of Provident constitutes willful misfeasance, bad faith,
gross negligence or reckless disregard by Provident of its duties
under this Agreement.
21. Compliance with Governmental Rules and Regulations. The
Fund assumes full responsibility for insuring that the contents of each
prospectus of the Fund complies with all applicable requirements of the 1933
Act, the 1940 Act, and any laws, rules and regulations of governmental
authorities having jurisdiction.
22. Compensation. As sole compensation for the services
rendered by Provident during the term of this Agreement, the Fund will pay to
Provident such monthly fees as the parties may agree upon from time to time in
writing.
23. Indemnification. The Fund, as sole owner of the Property,
agrees to indemnify and hold harmless Provident and its nominees from all
taxes, charges, expenses, assessments, claims and liabilities (including,
without limitation, liabilities arising under the 1933 Act, the Securities
Exchange Act of 1934, the 1940 Act, and any state and foreign securities and
blue sky laws, all as or to be amended from time to time) and expenses,
including (without limitation) attorneys' fees and disbursements, arising
directly or indirectly (a) from the fact that securities included in the
Property are registered in the name of any such nominee or (b) without limiting
the generality of the foregoing
-17-
<PAGE> 18
clause (a) from any action or thing which Provident takes or does or omits to
take or do (i) at the request or on the direction of or in reliance on the
advice of the Fund (ii) upon Oral or Written Instructions, provided, that
neither Provident nor any of its nominees shall be indemnified against any
liability to the Fund or to its Shareholders (or any expenses incident to such
liability) arising out of (x) Provident's or such nominee's own willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties
under this Agreement or (y) Provident's own negligent failure to perform its
duties under this Agreement.
24. Responsibility of Provident. Provident shall be under no
duty to take any action on behalf of the Fund except as specifically set forth
herein or as may be specifically agreed to by Provident in writing. In the
performance of its duties hereunder, Provident shall be obligated to exercise
care and diligence and to act in good faith and to use its best efforts within
reasonable limits to ensure the accuracy of all services performed under this
Agreement. Provident shall not be liable for any act or omission which does
not constitute willful misfeasance, bad faith or gross negligence on the part
of Provident provided that such act or omission is not done in performance of
specific requirements of this Agreement. Provident shall be responsible for its
own negligent failure to perform its duties under this Agreement. Without
limiting the generality of the foregoing or of any other provision of this
Agreement, Provident, in connection with its duties under this Agreement, shall
not be under any duty or obligation to inquire into and shall not be liable for
or in respect of (a) the validity or invalidity or authority or lack thereof of
any Oral or Written Instruction, notice or other instrument which conforms to
the applicable requirements of this Agreement, if any, and which Provident
reasonably believes to be genuine; (b) the validity or invalidity of the
issuance of any securities included or to be included in the Property, the
legality or illegality of the purchase of such
-18-
<PAGE> 19
securities, or the propriety or impropriety of the amount paid therefor; (c)
the legality or illegality of the sale (or exchange) of any Property or the
propriety or impropriety of the amount for which such Property is sold (or
exchanged); or (d) delays or errors or loss of data occurring by reason of
circumstances such as acts of civil or military authority, national
emergencies, labor difficulties, fire, flood or catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation, communication
or power supply, nor shall Provident be under any duty or obligation to
ascertain whether any Property at any time delivered to or held by Provident
may properly be held by or for the Fund.
25. Collections. All collections of monies or other property in
respect, or which are to become part, of the Property (but not the safekeeping
thereof upon receipt by Provident) shall be at the sole risk of the Fund. In
any case in which Provident does not receive any payment due the Fund within a
reasonable time after Provident has made proper demands for the same, it shall
so notify the Fund in writing, including copies of all demand letters, any
written responses thereto, and memoranda of all oral responses thereto and to
telephonic demands, and await instructions from the Fund. Provident shall not
be obliged to take legal action for collection unless and until reasonably
indemnified to its satisfaction. Provident shall also notify the Fund as soon
as reasonably practicable whenever income due on securities is not collected in
due course.
26. Duration and Termination. This Agreement shall continue until
termination by the Fund or Provident on sixty (60) days written notice. Upon
any termination of this Agreement, pending appointment by the Fund of a
successor to Provident or vote of the Shareholders of the Portfolios to
dissolve or to function without a custodian of its cash, securities or other
property, Provident shall not deliver cash, securities or other property of the
Fund to the Fund, but may deliver them to a bank or trust company of its own
selection, having an
-19-
<PAGE> 20
aggregate capital, surplus and undivided profits, as shown by its last
published report of not less than twenty million dollars ($20,000,000) as a
custodian for the Fund to be held under terms similar to those of this
Agreement. Provident acknowledges that this Agreement does not constitute a
charge on or against the properties of the Fund then held by Provident.
27. Notices. All notices and other communications, including
Written Instructions (collectively referred to as "Notice" or "Notices" in this
paragraph), hereunder shall be in writing or by confirming telegram, cable,
telex or facsimile sending device. Notices shall be addressed (a) if to
Provident at Provident's address, 17th & Chestnut Streets, Philadelphia,
Pennsylvania 19103, marked for the attention of the Custodian Services
Department (or its successor); (b) if to the Fund, at the address of the Fund;
or (c) if to neither of the foregoing, at such other address as shall have been
notified to the sender of any such Notice or other communication. If the
location of the sender of a Notice and the address of the addressee thereof
are, at the time of sending, more than 100 miles apart, the Notice may be sent
by first-class mail, in which case it shall be deemed to have been given three
days after it is sent, or if sent by confirming telegram, cable, telex or
facsimilar sending device, it shall be deemed to have been given immediately,
and if the location of the sender of a Notice and the address of the addressee
thereof are, at the time of sending, not more than 100 miles apart, the Notice
may be sent by first-class mail, in which case it shall be deemed to have been
given two days after it is sent, or if sent by messenger, it shall be deemed to
have been given on the day it is delivered, or if sent by confirming telegram,
cable, telex or facsimile sending device, it shall be deemed to have been given
immediately. All postage, cable, telegram, telex and facsimile sending device
charges arising from the sending of a Notice hereunder shall be paid by the
sender.
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<PAGE> 21
28. Further Actions. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
29. Amendments. This Agreement or any part hereof may be changed or
waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
30. Delegation. On thirty (30) days' prior written notice to the
Fund, Provident may assign its rights and delegate its duties hereunder to any
wholly-owned subsidiary of it or PNC Financial Corp, provided that Provident
may delegate its duties only to a bank having the qualifications provided in
Section 17(f) of the 1940 Act, and further provided that Provident and its
delegate shall promptly provide such information as the Fund may request and
respond to such questions as the Fund may ask relative to the delegation,
including (without limitation) the capabilities of the delegate.
31. The names "Market Street Fund, Inc." and "Directors of Market
Street Fund, Inc." refer respectively to the Fund created and the Directors, as
directors but not individually or personally, acting from time to time under
the Articles of Incorporation dated March 21, 1985 which is hereby referred to
and a copy of which is on file at the office of the State Secretary of the
State of Maryland and at the principal office of the Fund. The obligations of
"Market Street Fund Inc." entered into in the name or on behalf thereof by any
of the Directors, representatives or agents are made not individually, but in
such capacities, and are not binding upon any of the Directors, Shareholders,
or representatives of the Fund personally, but bind only the Fund Property, and
all persons dealing with any class of shares of the Fund must look solely to
the Fund Property belonging to such class for the enforcement of any claims
against the Fund.
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<PAGE> 22
32. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof, provided that the
parties hereto may embody in one or more separate documents their agreement, if
any, with respect to delegated and/or Oral or Written Instructions. The
captions in this Agreement are included for convenience of reference only and
in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement shall be deemed to be a contract
made in Pennsylvania and governed by Pennsylvania law. If any provision of
this Agreement shall be held or made invalid by a court decision, statute, rule
or otherwise, the remainder of this Agreement shall not be affected thereby.
This Agreement shall be binding and shall inure to the benefit of the parties
hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers designated below as of the day and year first
above written.
[Seal] MARKET STREET FUND, INC.
Attest: [sig] By: [sig]
--------------------------- -----------------------------
[Seal] PROVIDENT NATIONAL BANK
Attest: /s/JOHN D. SILCOX, JR. By: [sig]
--------------------------- -----------------------------
JOHN D. SILCOX, JR.
VICE PRESIDENT & SECRETARY
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<PAGE> 1
EXHIBIT 8(b)
DECEMBER 12, 1985
Gentlemen:
Pursuant to Paragraph 22 of the Custodian Agreement dated December 12, 1985
between Provident National Bank ("Provident") and Market Street Fund, Inc. (the
"Fund"), we have agreed that the Fund will pay Provident a fee computed daily
and paid monthly, equal to .025% per year of the first $10 million of the
combined average net assets of the average daily net assets of each Portfolio;
plus .020% per year of the average net assets of the next $30 million; plus
.015% per year of the average net assets of the next $60 million and .012% per
year of the average net assets in excess of $100 million with a minimum annual
fee of $2,500 for the Fund. Notwithstanding the prior sentence Provident has
agreed that during the first twelve months of the Fund's operations, Provident
will waive its fee in the following manner:
100% of Provident's fee will be waived for the first two months of Fund
operations; thereafter, Provident will reduce its fee waiver by 10% per
month until the twelfth month of Fund operations at which time Provident
will begin to charge its full fee as stated above.
In addition, a $10.00 fee per transaction will be charged. Investments in
GNMA's or other types of monthly interest payment items will be charged $25.00
per transaction.
Provident has further agreed that the fee it will receive from the Fund as
stated above, shall be effective for the first two years of the Fund's
operations; thereafter the Fund shall pay such fees as the parties may agree to
in writing.
If the foregoing accords with your understanding of our agreement, please
evidence your concurrence by signing and dating this letter at the place
indicated below and returning this letter to Provident.
Sincerely,
Provident National Bank
BY: /s/ JOHN W. MCLAUGHLIN
--------------------------
Date: 4/7/86
------------------------
MARKET STREET FUND, INC.
By: [sig]
------------------------------
Date: DECEMBER 12, 1985
----------------------------
<PAGE> 1
EXHIBIT 8(c)
AMENDMENT TO CUSTODY AGREEMENT
THIS AMENDMENT to the Custody Agreement between MARKET STREET FUND, INC.
(the "Fund"), PROVIDENT NATIONAL BANK ("Provident") is made as of this 9th
day of September, 1988.
WITNESSETH:
WHEREAS, the Fund and Provident entered into a CUSTODY AGREEMENT on December
12, 1985; and
WHEREAS, it is the desire of the parties thereto to amend said Agreement;
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto to amend said Custody
Agreement as follows:
1. The first sentence under item 26 Duration and Termination is
amended as follows:
26. This Agreement, unless otherwise terminated as provided
herein, shall continue until termination by the Fund or Provident
on sixty (60) days written notice. This Agreement may be
terminated for "cause" at any time by the Board of Directors of
the Fund. "Cause" is defined and limited for this purpose to mean
willful misfeasance, bad faith or gross negligence by Provident in
the performance of its duties or reckless disregard by it of its
obligations and duties under this Agreement.
2. Add the following at the end of item 15, Records:
The Fund or its authorized representative shall have the right to
copy any records in the possession of Provident which pertain to
the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
the Custody Agreement between the parties to be executed by their
officers designated below as of the date first above written.
[SEAL] MARKET STREET FUND, INC.
Attest: [sig] By: [sig]
----------------------- -------------------------
[SEAL] PROVIDENT NATIONAL BANK
Attest: [sig] By: [sig]
----------------------- -------------------------
<PAGE> 2
AMENDMENT TO CUSTODY AGREEMENT
THIS AMENDMENT to the Custody Agreement between Market Street Fund, Inc. (the
"Fund") and Provident National Bank ("Provident") is made this ______ day of
_____________, 1989.
WITNESSETH:
WHEREAS, the Fund and Provident entered into a Custody Agreement on December
12, 1985, as amended on September 9, 1988; and
WHEREAS, the Fund established an Aggressive Growth Class of shares on
___________; and
WHEREAS, it is the desire of the Fund and Provident to amend the Custody
Agreement to include the Aggressive Growth Class;
NOW THEREFORE, it is agreed between the parties that said Agreement is hereby
amended to include the Aggressive Growth Class of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the
Custody Agreement to be duly executed as of the day and year first above
written.
[SEAL] MARKET STREET FUND, INC.
Attest: By:
---------------------- -----------------------
[SEAL] PROVIDENT NATIONAL BANK
Attest: By:
---------------------- -----------------------
<PAGE> 1
EXHIBIT 8(d)
AMENDMENT NO. 2 TO CUSTODIAN AGREEMENT
This Amendment, dated the 31st day of July 1991, is entered into
between MARKET STREET FUND, INC. (the "Fund"), a Maryland corporation, and
PROVIDENT NATIONAL BANK ("Provident"), a national banking association.
WHEREAS, the Fund and Provident have entered into a Custodian
Agreement dated as of December 12, 1985, and amended on September 9, 1988 (the
"Custodian Agreement"), pursuant to which the Fund appointed Provident to act
as custodian for its investment portfolios; and
WHEREAS, the Fund's Board of Directors has approved this Amendment;
and
WHEREAS, the Fund has established additional classes of Fund shares,
International Equity Portfolio shares and Aggressive Growth Portfolio shares,
with respect to which it wants to appoint Provident to act as custodian under
the Custodian Agreement; and
WHEREAS, Provident has notified the Fund that it wants to serve as
custodian for the Aggressive Growth Portfolio and custodian for certain
domestically held securities as designated by the Fund or its agent, the
adviser, for the International Equity Portfolio;
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Appointment. The Fund hereby appoints Provident to act as
custodian for the certain domestic property of the International Equity
Portfolio and custodian for the Aggressive Growth Portfolio for the period and
on the terms set forth in the Custodian Agreement. Provident hereby accepts
such appointment and agrees to render the services set forth in the Custodian
Agreement, for the compensation as agreed to between the Fund and Provident
from time to time.
2. Capitalized Terms. From and after the date hereof, the following
terms as used in the Custodian Agreement shall be deemed to include also the
meaning specified herein: "Shares" shall be deemed to include the classes of
International Equity Portfolio shares and Aggressive Growth Portfolio shares;
and "Portfolios" shall be deemed to include the International Equity Portfolio
shares and Aggressive Growth Portfolio shares.
<PAGE> 2
3. Miscellaneous. Except to the extent amended and supplemented
hereby, the Custodian Agreement shall remain unchanged and in full force and
effect and is hereby ratified and confirmed in all respects as amended and
supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date and year first above written.
MARKET STREET FUND, INC.
[SEAL] By: [sig]
--------------------------
Title: TREASURER
PROVIDENT NATIONAL BANK
[SEAL] By: [sig]
--------------------------
Title: VICE PRESIDENT
<PAGE> 3
November 1, 1991
Market Street Fund, Inc.: International Equity Portfolio
RE: CUSTODIAN SERVICES FEES
Madam/Sir:
This letter constitutes our agreement with respect to compensation to
be paid to Provident National Bank ("Provident") under the terms of a Custodian
Agreement dated December 12, 1985, between you (the "Fund") on behalf of the
International Equity Portfolio and Provident. Pursuant to Paragraph 11 of that
Agreement, and in consideration of the services to be provided to the
International Equity Portfolio, the fees shall be as follows:
1. A transaction charge of $10.00 for each purchase or sale of
a security, delivery of a security upon its maturity date
or delivery of a security for reissuance, $15.00 for each
repurchase trade with an institution other than Provident
and $7.50 for each repurchase trade with Provident.
2. Provident's charge for Federal Reserve wire fees will be
$5.00 per wire.
The fee for the period from the day of the year this agreement is
entered into until the end of that year shall be pro-rated according to the
proportion which such period bears to the full annual period.
If the foregoing accurately sets forth our agreement and you intend to
be legally bound thereby, please execute a copy of this letter and return it to
us.
Very truly yours,
PROVIDENT NATIONAL BANK
By: [sig]
----------------------
Accepted: MARKET STREET FUND, INC.
By: [sig]
----------------------------------------
<PAGE> 4
AMENDMENT TO CUSTODY AGREEMENT
THIS AMENDMENT to the Custody Agreement between The Market Street Fund, Inc.
(the ___, "Fund") and Provident National Bank ("Provident") is made this _____,
day of 1991.
WITNESSETH:
WHEREAS, the Fund and Provident entered into a Custody Agreement on December
12, 1985, as amended on September 9, 1988 and ___________; and
WHEREAS, the Fund established an International Class of shares on May 3, 1991;
and
WHEREAS, it is the desire of the Fund and Provident to amend the Custody
Agreement to include the International Class;
NOW THEREFORE, it is agreed between the parties that said Agreement is hereby
amended to include the International Class of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the
Custody Agreement to be duly executed as of the day and year first above
written.
[SEAL] THE MARKET STREET FUND, INC.
Attest: By:
------------------------- ------------------------------
[SEAL] PROVIDENT NATIONAL BANK
Attest: By:
------------------------- ------------------------------
<PAGE> 1
EXHIBIT 8(e)
CUSTODIAL SERVICES AGREEMENT
AGREEMENT dated as of October 31, 1991, between CITIBANK, N.A., a
national banking association, having an office at 111 Wall Street, New York,
New York 10043 (the "Bank"), and The Market Street Fund a corporation organized
under the laws of the State of Maryland having an office at P.O. Box 7378
PHILA, PA 19101 (the "Company").
W I T N E S S E T H :
THAT WHEREAS, the Board of Directors of the Company, at a meeting held
October 25, 1991 has adopted resolutions, copies of which are attached hereto
as Exhibit A, which, in part, authorize the Company to open and maintain a
custody account (the "Custody Account") with the Bank to hold certain property
of the International Portfolio of the Market Street Fund ("Property") including
but not limited to stocks, bonds, or other securities ("Securities"), funds and
other property owned or held by the Company and authorize the Company's entry
into this Agreement;
NOW, THEREFORE, in consideration of the premises and of the agreements
hereinafter set forth, the parties hereby agree as follows:
1. APPOINTMENT AND ACCEPTANCE
The Company hereby appoints the Bank as custodian of the Property,
and the Bank agrees to act as such upon the terms and conditions
hereinafter provided.
2. DELIVERY; SAFEKEEPING
The Company has heretofore delivered or will deliver Property to
the Bank, and will deliver or cause to be delivered to the Bank,
Property hereafter acquired, which Property the Bank agrees to
keep safely as custodian for the Company. The Bank shall not
surrender possession of Property except upon properly authorized
instructions of the Company.
<PAGE> 2
3. IDENTIFICATION AND SEGREGATION OF ASSETS
With respect to Property in the Custody Account:
(a) The Bank will segregate and identify on its books as
belonging to the Company all Property held by the Bank or
any other entity authorized to hold Property in accordance
with Section 6 or 7 hereof.
(b) The Bank shall supply to the Company from time to time as
mutually agreed upon a written statement with respect to
all of the Property in the Custody Account. In the event
that the Company does not inform the Bank in writing of any
exceptions or objections within a reasonable time after
receipt of such statement, the Company shall be deemed to
have approved such statement.
4. STANDARD OF CARE
The Bank assumes full responsibility to exercise the same standard
of care that it exercises over its own assets in the safekeeping,
handling, servicing and disposition of the Property, in
accordance with this Agreement. The Bank will exercise the due
care expected of a professional custodian for hire with respect to
the Property in its possession or control and shall assume the
burden of proving that it exercised such care in the event of any
loss of such Property.
The Bank is not under any duty to supervise the investments of the
Company, or to advise or make any recommendation to the Company
with respect to the purchase or sale of any of the Securities or
the investment of any funds.
5. PERFORMANCE BY THE BANK
(a) RECEIPT, DELIVERY AND DISPOSAL OF SECURITIES.
The Bank shall, or shall instruct any other entity
authorized to hold Property in accordance with Section 6 or
7 hereof, to receive or deliver Securities and credit or
debit the Company's account, in accordance with properly
authorized instructions from the Company. The Bank or such
entity shall also receive in custody
2
<PAGE> 3
all stock dividends, rights and similar securities issued
in connection with Securities held hereunder, shall
surrender for payment, in a timely manner, all items
maturing or called for redemption and shall take such other
action as the Company may direct in properly authorized
instructions.
(b) TRADE EXECUTION.
The Company may from time to time place orders with the
Bank to buy or sell Securities. The Bank or any entity
authorized to hold Property in accordance with Section 7
hereof may, unless otherwise specified, refer each such
order to any broker or sub-agent of its choice, including an
affiliate of the Bank, and shall have no liability or
responsibility whatsoever for any error, neglect or default
of any such broker or sub-agent or for mutilations,
interruptions, omissions, errors or delays occurring in the
mails, or on the part of any telegraph, cable or wireless
company, or any employee of such company, or by reason of
any cause beyond its control. In placing such orders, the
Company may from time to time place special orders with the
Bank which will, as agent, undertake the purchase or sale
of the Securities as set out above; provided that if the
order is for the purchase or sale of obligations of the
United States Government or its agencies, or state or
municipal bonds, the Bank may act as principal. The Company
hereby agrees, with respect to all purchases, that funds
for settlement will be on deposit by the settlement date.
Further, the Company agrees to provide specific
instructions regarding the deposit or delivery of all such
Securities to the Custody Account.
(c) REGISTRATION.
Securities held hereunder may be registered in the name of
the Bank, any entity authorized to hold Property in
accordance with Section 6 or 7 hereof, or a nominee of the
Bank or any such authorized entity, and the Company shall
be informed upon request of all such registrations. The
Securities in registered form will be transferred upon
request of the Company into such names
3
<PAGE> 4
or registrations as it may specify in properly authorized
instructions.
(d) CASH ACCOUNTS.
All cash received or held by the Bank or by any entity
authorized to hold Property in accordance with Section 7
hereof as interest, dividends, proceeds from transfer, and
other payments for or with respect to the Securities shall
be (i) held in a cash account in accordance with properly
authorized instructions received by the Bank, or (ii)
converted and remitted to the Company at the Company's
risk. In effecting any currency conversions hereunder, the
Bank or such entity may use such methods or agencies as it
may see fit including the Bank's facilities at customary
rates.
(e) REPORTS, RECORDS, AFFIDAVITS AND ACCESS.
If the Bank has in place a system for providing
telecommunication access or other means of direct access by
customers to the Bank's reporting system for Property in
the Custody Account, then, at the Company's election, the
Bank shall provide the Company with such instructions and
passwords as may be necessary in order for the Company to
have such direct access through the Company's terminal
device. Such direct access shall be restricted to
information relating to the Custody Account. Where direct
access to such reporting system is requested by the
Company, the Company agrees to assume full responsibility
for the use, including any misuse or unauthorized use of
the terminal device that is caused by the Company and not
an unrelated third party, instructions or passwords
referred to above and agrees to defend and indemnify the
Bank and hold the Bank harmless from and against any and
all liabilities, losses, damages, costs, counsel fees, and
other expenses suffered or incurred by the Bank by reason
of or in connection with such use by the Company of such
terminal device, unless such liabilities, losses, damages,
costs, counsel fees and other expenses can be shown to be
the result of negligent or wrongful acts of the Bank, the
Bank's employees or the Bank's agents. Further, where the
Company elects to have
4
<PAGE> 5
direct access, the Bank shall provide the Company on each
business day a report of the preceding business day's
transactions relating to such accounts and of the closing
or net balances of each business day. If the Company
should not choose to have direct access, the Bank shall
provide the Company with such reports of transactions in
the Custody Account by such means as may be mutually agreed
upon.
During the Bank's regular banking hours and upon receipt of
reasonable notice from the Company, any officer or employee
of the Company, any independent accountant(s) selected by
the Company and any person designated by any regulatory
authority having jurisdiction over the Company shall be
entitled to examine on the Bank's premises, Property held
by the Bank on its premises and the Bank's records
regarding Property held hereunder deposited with entities
authorized to hold Property in accordance with Section 6 or
7 hereof, but only upon the Company's furnishing the Bank
with properly authorized instructions to that effect,
provided, such examination shall be consistent with the
Bank's obligations of confidentiality to other parties.
The Bank's costs and expenses in facilitating such
examinations and providing such reports and documents,
including but not limited to the cost to the Bank of
providing personnel in connection with examinations shall
be borne by the persons or agencies making such
examinations or receiving such reports or documents,
provided that such costs and expenses shall not be deemed
to include the Bank's costs in providing to the Company:
(i) the "single audit report" of the independent certified
public accountants engaged by the Bank; and (ii) such
reports and documents as this Agreement contemplates that
the Bank shall furnish routinely to the Company.
The Bank shall also seek to obtain from any entity with
which the Bank maintains the physical possession of any of
the Property in the Custody Account such records of such
entity relating to the Custody Account as may be required
by the Company or its
5
<PAGE> 6
agents in connection with an internal examination by the
Company of its own affairs. Upon a reasonable request from
the Company, the Bank shall use its best efforts to furnish
to the Company such reports (or portions thereof) of the
external auditors of each such entity as relate directly to
such entity's system of internal accounting controls
applicable to its duties under its agreement with the Bank.
The Bank shall supply to the Corporation from time to time,
written operational procedures which shall govern the day
to day operations of the account. Such operating
procedures are hereby incorporated herein by reference.
(f) VOTING AND OTHER ACTION.
The Bank will transmit to the Company upon receipt, and
will instruct any entities authorized to hold Property in
accordance with Section 6 or 7 hereof to transmit to the
Company upon receipt, all financial reports, stockholder
communications, notices, proxies and proxy soliciting
materials received from issuers of the Securities, and all
information relating to exchange or tender offers received
from offerors with respect to the Securities. Such proxies
will be executed by the registered holder if the registered
holder is other than the Company, but the manner in which
the Securities are to be voted will not be indicated.
Specific instructions regarding proxies will be provided
when necessary. Neither the Bank nor any such entity shall
vote any of the Securities or authorize the voting of any
Securities or give any consent or take any other action
with respect thereto, except as otherwise provided herein.
In the event of tender offers, the Company will mail
instructions to the Bank as to the action to be taken with
respect thereto or telephone such instructions to its
Citibank account administrator at the Bank, designating
such instructions as being related to a tender offer. The
Company shall deliver to the Bank, by 5:00 P.M.,
6
<PAGE> 7
New York time on the following calendar day, written
confirmation of telephonic instructions.
The Company agrees that if it gives an instruction and such
instruction is not received by the Bank for the performance
of an act on the last permissible date of a period
established by the tender offer or for the performance of
such act or that if it fails to provide next day written
confirmation of an oral instruction, the Company shall hold
the Bank harmless from any adverse consequences of failing
to follow said instructions.
The Bank is authorized to accept and open in the Company's
behalf all mail or communications received by it or
directed in its care.
6. AUTHORIZED USE OF U.S. DEPOSITORIES
The Company authorizes the Bank, for any Securities held
hereunder, to use the services of any United States
securities depository permitted to perform such services
for registered investment companies and their custodians
under Rule 17f-4 under the Investment Company Act of 1940
(the "Act"), including but not limited to, the Depository
Trust Company and the Federal Reserve Book Entry System.
7. USE OF FOREIGN CUSTODIANS
(a) AUTHORIZATION.
The Bank may cause Securities which are foreign
securities within the meaning of Rule 17f-5(c)(1)
under the Act ("Foreign Securities") and amounts
of cash and cash equivalents reasonably required
to effect the Company's Foreign Securities
transactions ("Cash") in the Custody Account to be
held in such country or other jurisdiction as the
Company shall direct in properly authorized
instructions.
The Bank may hold such Foreign Securities and Cash
in subcustody accounts, which shall be deemed part
of the Custody Account and which have been
established by the Bank with (i)
7
<PAGE> 8
branches of "Qualified U.S. Banks", as defined in
Rule 17f-5(c)(3) under the Act ("Branches"), or
(ii) foreign custodians which satisfy the
provisions of Rule 17f-5(c)(2)(i) or (ii) under
the Act, or which are exempt from such provisions
under an order or release issued by the Securities
and Exchange Commission, and which the Company has
approved in accordance with the following
procedure ("Eligible Foreign Custodians"). In
order to approve a foreign custodian, the Company
shall approve both the use of and the Bank's
contract with the foreign custodian by resolution
and shall present a certified copy of such
resolution to the Bank.
The Bank, a Branch or an Eligible Foreign
Custodian is authorized to hold such Foreign
Securities in an account with any foreign
securities depository or foreign clearing agency
which satisfies the provisions of Rule
17f-5(c)(iii) or (iv) under the Act, or which is
exempt from such provisions under an order or
release issued by the Securities and Exchange
Commission, and which the Company has approved in
accordance with the following procedure ("Eligible
Foreign Securities Depository"). In order to
approve a foreign securities depository, the
Company shall approve the use of such foreign
securities depository and a written description of
the names in which such depository will maintain
the Company's assets by resolution and shall
present a certified copy of such resolution to the
Bank.
(b) PROVISION OF INFORMATION REGARDING FOREIGN
CUSTODIANS AND SECURITIES DEPOSITORIES.
(1) The Bank shall use its best efforts to
assist the Company in obtaining the
following:
(A) Information concerning whether,
and to what extent, applicable
foreign law would restrict the
access afforded the Company's
independent public accountants to
books and records kept by a
foreign custodian or foreign
securities depository used in
that country;
8
<PAGE> 9
(B) Information concerning whether,
and to what extent, applicable
foreign law would restrict the
Company's ability to recover its
assets in the event of the
bankruptcy of a foreign custodian
or foreign securities depository
used in that country;
(C) Information concerning whether,
and to what extent, applicable
foreign law would restrict the
Company's ability to recover
assets that are lost while under
the control of a foreign
custodian or foreign securities
depository used in that country;
and
(D) Information concerning whether
under applicable foreign currency
exchange regulations, the
Company's cash and cash
equivalents held in that country
are readily convertible to U.S.
dollars.
(E) Information relating to whether
each foreign custodian or foreign
securities depository used would
provide a level of safeguards for
maintaining the Company's assets
not materially different from
that provided by the Bank in
maintaining the Securities in the
United States;
(F) Information concerning whether
each foreign custodian or foreign
securities depository used has
offices in the United States in
order to facilitate the assertion
of jurisdiction over and
enforcement of judgments against
such custodian or depository; and
(G) As to each foreign securities
depository used, information
concerning the number of
participants in, and operating
history of, such depository.
9
<PAGE> 10
(2) During the term of this Agreement, the
Bank shall use its best efforts to
provide the Company with prompt notice
of any material changes in the facts
or circumstances upon which any of the
foregoing information or statements
were based.
(3) Notwithstanding any of the foregoing
provisions of this subsection (b) of
this Section 7, the Bank's undertaking
to assist the Company in obtaining the
information referred to in this
subsection (b) of this Section 7 shall
neither increase the Bank's duty of
care nor reduce the Company's
responsibility to determine for itself
the prudence of entrusting its assets
to any particular foreign custodian or
foreign securities depository.
(c) SEGREGATION AND IDENTIFICATION OF ASSETS.
The Bank will deposit Property of the
Company with a Branch or an Eligible
Foreign Custodian only in an account which
holds exclusively the assets of the Bank as
custodian for its customers. In the event
that a Branch or an Eligible Foreign
Custodian is authorized to hold any of the
Foreign Securities placed in its care in an
Eligible Foreign Securities Depository
pursuant to the provisions of subsection
(a) of this Section 7, the Bank will
direct such Branch or Eligible Foreign
Custodian to identify on its books such
Foreign Securities as being held for the
account of the Bank as custodian for its
customers.
(d) INSTRUCTIONS TO BRANCHES AND ELIGIBLE
FOREIGN CUSTODIANS.
Any Property in the Custody Account held by
a Branch or Eligible Foreign Custodian will
be subject only to the instructions of the
Bank or its agents; and any Foreign
Securities held in an Eligible Foreign
Securities Depository for the account of a
Branch or an Eligible Foreign Custodian
will be subject only to the instructions of
such Branch or Eligible Foreign Custodian
as subcustodian for the Bank.
10
<PAGE> 11
8. AUTHORIZATIONS
The Bank is authorized to rely and act upon
written, signed instructions of those persons as
are named in a list provided to the Bank from time
to time and certified by the Company's Secretary
or Assistant Secretary. Such list shall
separately designate those persons who may
authorize the withdrawal of the Securities free of
payment. The Company will provide the Bank with
authenticated specimen signatures of the persons
so authorized.
The Bank is further authorized to rely upon any
instructions received by any other means and
identified as having been given or authorized by
any person named to the Bank as authorized to give
written instructions, regardless of whether such
instructions shall in fact have been authorized or
given by any of such persons, provided that the
Bank and the Company shall have agreed upon the
means of transmission and the method of
identification for such instructions.
Instructions received by any other means shall
include verbal instructions, provided that any
verbal instructions shall be promptly confirmed in
writing. In the event verbal instructions are not
subsequently confirmed in writing, as provided
above, the Company agrees to hold the Bank
harmless and without liability for any claims or
losses in connection with such verbal
instructions.
The Company may appoint one or more investment
managers ("Investment Managers") with respect to
the Custody Account. The Bank is authorized to
act upon instructions received from any Investment
Manager to the same extent that the Bank would act
upon the instructions of persons named in the
abovementioned certificate or separate list,
provided that the Bank has received copies of the
instruments appointing the Investment Manager and
written confirmation from the Investment Manager
evidencing his acceptance of such appointment. It
is expressly understood that any Investment
Manager appointed by the Company shall either be
registered as an investment adviser under the
Investment Advisers Act of 1940, be a bank as
defined in that Act, or be an insurance
11
<PAGE> 12
company qualified to perform investment management
services under the laws of more than one state.
If the Company should choose to have
telecommunication or other means of direct access
to the Bank's reporting system for Property in the
Custody Account, pursuant to paragraph (e) of
Section 5, the Bank is also authorized to rely and
act upon any instructions received by it through a
terminal device, provided that such instructions
are accompanied by code words which the Bank has
furnished to the Company, or its delegated
personnel, by any method mutually agreed to by the
Bank and the Company, and which the Bank shall not
have then been notified by the Company or any such
delegate to cease to recognize, regardless whether
such instructions shall in fact have been given or
authorized by the Company or any such person. The
Company's delegates shall be named by a
certificate provided to the Bank from time to time
by the Company's Secretary or an Assistant
Secretary.
9. FEES AND EXPENSES
Fees and expenses for the services rendered under
this Agreement shall be mutually agreed upon by
the parties in writing and the Bank shall have a
lien on the Property in the Custody Account to
secure payment of such fees and expenses. In
addition, if the Company requires the Bank to
advance cash or securities for any purpose or in
the event that the Bank or its nominee shall incur
or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection
with the performance of its duties hereunder,
except such as may arise for its or its nominee's
negligent action, negligent failure to act, or
willful misconduct, any Property at any time held
for the Custody Account shall be security therefor
and should the Company fail to reimburse the Bank
promptly after request for payment, the Bank shall
be entitled to dispose of such Property to the
extent necessary to obtain reimbursement.
10. TAX STATUS
The Company's Tax Identification Number is:
23-261457
12
<PAGE> 13
11. TERMINATION
Either party may terminate this Agreement upon
sixty (60) days written notice to the other.
12. CONFIDENTIALITY
Subject to the foregoing provisions of this
Agreement and subject to any applicable law, the
Company and the Bank shall each use best efforts
to maintain the confidentiality of matters
concerning Property in the Custody Account.
13. NOTICES AND MISCELLANEOUS
All notices and other communications hereunder,
except for instructions and reports relating to
the Property which are transmitted through the
Bank's reporting system for Property in the
Custody Account, shall be in writing, telex or
telecopy or, if verbal, shall be promptly
confirmed in writing, and shall be hand-delivered,
telexed, telecopied or mailed by prepaid first
class mail (except that notice of termination, if
mailed, shall be by prepaid registered or
certified mail) to each party at its address set
forth above, if to the Company, marked "Attention"
ROSANNE GATTA and if to the Bank, marked
"Citibank as Custodian for MARKET STREET FUND INC.
INTL. PORT", or at such other address as each
party may give notice of to the other. This
Agreement may not be amended except by writing
signed by the party against whom enforcement is
sought. This Agreement shall not be assignable by
either party without the written consent of the
other. This Agreement may be executed in several
counterparts, each of which shall be an original,
but all of which shall constitute one and the same
instrument. This Agreement contains the entire
agreement between the Company and the Bank
relating to custody of Property and supersedes all
prior agreements on this subject.
The captions of the various sections and
subsections of this Agreement have been inserted
only for the purposes of convenience, and shall
not be deemed in any manner to modify, explain,
enlarge or restrict any of the provisions of this
Agreement.
13
<PAGE> 14
This Agreement shall be governed by and construed
according to the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized.
CITIBANK, N,A. THE MARKET STREET FUND
By: [sig] By: [sig]
--------------------------- ------------------------
Title: VICE PRESIDENT Title: TREASURER
------------------------ ---------------------
Attest: [sig] Attest: [sig]
----------------------- --------------------
REGINALD MONACHINO
Vice President
14
<PAGE> 1
EXHIBIT 9(a)
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement"), entered
into this 27th day of June 1985, by and among Providentmutual Variable Life
Insurance Company ("PVLICO"), a stock life insurance company organized and
existing under the laws of the Commonwealth of Pennsylvania, Providentmutual
Variable Life Growth Account ("Growth Account"), organized under the insurance
laws of the Commonwealth of Pennsylvania, Providentmutual Variable Life Money
Market Account ("Money Market Account"), organized under the insurance laws of
the Commonwealth of Pennsylvania, Providentmutual Variable Life Bond Account
("Bond Account") (collectively, the "Separate Accounts"), organized under the
insurance laws of the Commonwealth of Pennsylvania and the Market Street Fund,
Inc. (the "Fund"), a corporation organized and existing under the laws of the
State of Maryland.
WHEREAS, the Fund is a series-type mutual fund currently consisting of
a Growth Portfolio, a Money Market Portfolio, a Bond Portfolio and a
Discretionary Portfolio and is expected to be registered with the Securities
and Exchange Commission (the "Commission") as an open-end, diversified
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act");
WHEREAS, the Fund may in the future add or delete portfolios from time
to time;
<PAGE> 2
WHEREAS, the Growth Account is registered with the Commission as an
open-end, diversified management investment company under the 1940 Act and
invests primarily in common stocks of carefully selected companies in order to
achieve intermediate and long-term capital growth, with a reasonable level of
income as an important, although not the primary objective;
WHEREAS, the Money Market Account is registered with the Commission as
an open-end, diversified management investment company under the 1940 Act and
invests primarily in money market instruments meeting specified quality
standards in order to generate maximum current income consistent with the
preservation of capital and the maintenance of liquidity;
WHEREAS, the Bond Account is registered with the Commission as an
open-end, diversified management investment company under the 1940 Act and
invests in a diversified portfolio of freely marketable debt securities in
order to generate a high level of current income, consistent with prudent
investment risk;
WHEREAS, the Committees of the Growth Account, Money Market Account
and Bond Account have each approved the reorganization of their respective
Separate Accounts into unit investment trusts, which trusts shall be registered
collectively with the Commission under the 1940 Act as a single unit investment
trust ("UIT");
WHEREAS, each Separate Account that is part of the UIT will invest
exclusively in shares of a corresponding portfolio of the Fund;
- 2 -
<PAGE> 3
WHEREAS, the respective Committees have further determined that the
registration statement of the Growth Account shall be amended to reflect the
reorganization contemplated by this Agreement and the individual registration
statements of the Money Market Account and Bond Account with the Commission
shall be terminated;
WHEREAS, additional Separate Accounts organized as unit investment
trusts may be added to or deleted from the UIT;
WHEREAS, the Fund may in the future, to the extent permitted by the
1940 Act, serve as an investment vehicle for variable life insurance policies,
variable annuities or other insurance products issued by PVLICO, or affiliated
or unaffiliated insurance companies;
WHEREAS, the Boards of Directors of PVLICO and the Fund have each
considered and approved the actions contemplated by this Agreement; and
WHEREAS, this Agreement is conditioned upon approval of the
reorganization by majority vote, as defined in the 1940 Act and rules
thereunder, of the policyowners of the Growth Account, Money Market Account and
Bond Account voting separately, at meetings called for that purpose, or any
adjournments thereof.
NOW THEREFORE, in consideration of the mutual promises made herein,
the parties hereto agree as follows:
- 3 -
<PAGE> 4
ARTICLE I
CLOSING DATE
SECTION 1.01. The reorganization contemplated by this Agreement shall
be effective on October 31, 1985, or at such other date as may be mutually
agreed upon by all parties to this Agreement (the "Closing Date"). The time on
the Closing Date as of which the reorganization is consummated is referred to
hereinafter as the "Effective Time."
SECTION 1.02. The parties agree to use their best efforts to obtain
all regulatory and policyowner approvals and perform all other acts necessary
or desirable to complete the reorganization as of the Closing Date.
ARTICLE II
REORGANIZATION TRANSACTIONS
SECTION 2.01. As of the Effective Time, PVLICO, on behalf of the
Growth Account, Money Market Account and Bond Account, will sell, assign and
transfer all cash, securities and other investments held or in transit,
receivables for sold investments, and dividends and interest receivables
("portfolio assets") of each Separate Account to the Fund, the portfolio assets
of the Growth Account to be held as the property of the Fund's Growth
Portfolio, the portfolio assets of the Money Market Account to be held as the
property of the Fund's Money Market Portfolio, and the portfolio assets of the
Bond Account to be held as the property of the Fund's Bond Portfolio.
- 4 -
<PAGE> 5
SECTION 2.02. In exchange for the portfolio assets of the Growth
Account, the Fund will issue shares of its Growth Portfolio and will assume any
unsatisfied liability incurred by the Growth Account before the Effective Time
to pay for securities or other investments purchased and to pay accrued
advisory fees. The number of shares of the Fund's Growth Portfolio to be
issued in the exchange shall be determined by dividing the value of the net
assets of the Growth Account to be transferred, as of the close of trading on
the first business day preceding the Closing Date, by ten dollars ($10), which
shall be the initial per share value of the Growth Portfolio shares.
SECTION 2.03. In exchange for the portfolio assets of the Money Market
Account, the Fund will issue shares of its Money Market Portfolio and will
assume any unsatisfied liability incurred by the Money Market Account before
the Effective Time to pay for securities or other investments purchased and to
pay accrued advisory fees. The number of shares of the Fund's Money Market
Portfolio to be issued in the exchange shall be determined by dividing the
value of the net assets of the Money Market Account to be transferred, as of
the close of trading on the first business day preceding the Closing Date, by
one dollar ($1.00), which shall be the initial per share value of the Money
Market Portfolio shares.
SECTION 2.04. In exchange for the portfolio assets of the Bond
Account, the Fund will issue shares of its Bond Portfolio and will assume any
unsatisfied liability incurred by the Bond
- 5 -
<PAGE> 6
Account before the Effective Time to pay for securities or other investments
purchased and to pay accrued advisory fees. The number of shares of the Fund's
Bond Portfolio to be issued in the exchange shall be determined by dividing the
value of the net assets of the Bond Account to be transferred, as of the close
of trading on the first business day preceding the Closing Date, by ten dollars
($10), which shall be the initial per share value of the Bond Portfolio shares.
SECTION 2.05. As of the Effective Time, PVLICO shall cause the shares
it receives from the Fund pursuant to Section 2.02 above to be duly and validly
recorded and held on its records as assets of the Growth Account, such that the
policyowners' interests in the Growth Account after the Closing Date will then
be equivalent to their former interests in the Growth Account. PVLICO shall
take all action necessary to ensure that such interests in the Growth Account,
immediately following the Effective Time, are duly and validly recorded on the
policyowners' individual account records.
SECTION 2.06. As of the Effective Time, PVLICO shall cause the shares
it receives from the Fund pursuant to Section 2.03 above to be duly and validly
recorded and held on its records as assets of the Money Market Account, such
that the policyowners' interests in the Money Market Account after the Closing
Date will then be equivalent to their former interests in the Money Market
Account. PVLICO shall take all action necessary to ensure that such interests
in the Money Market Account, immediately following
- 6 -
<PAGE> 7
the Effective Time, are duly and validly recorded on the policyowners'
individual account records.
SECTION 2.07. As of the Effective Time, PVLICO shall cause the shares
it receives from the Fund pursuant to Section 2.04 above to be duly and validly
recorded and held on its records as assets of the Bond Account, such that the
policyowners' interests in the Bond Account after the Closing Date will then be
equivalent to their former interests in the Bond Account. PVLICO shall take
all action necessary to ensure that such interests in the Bond Account,
immediately following the Effective Time, are duly and validly recorded on the
policyowners' individual account records.
SECTION 2.08. The Fund shares to be issued hereunder shall be issued
in open account form by book entry without the issuance of certificates. Each
Fund share that is issued pursuant to Sections 2.02, 2.03 and 2.04 above will
be deemed to have been issued for a consideration equal to the initial per
share value of the applicable portfolio.
SECTION 2.09. If, at any time after the Closing Date, the Growth
Account, Money Market Account, Bond Account, the Fund or PVLICO shall determine
that any further conveyance, assignment, documentation or action is necessary
or desirable to complete the reorganization contemplated by this Agreement or
confirm full title to the assets transferred, the appropriate party or parties
shall execute and deliver all such instruments and take all such actions.
- 7 -
<PAGE> 8
SECTION 2.10. Following the Closing Date, PVLICO shall cease to charge
the Separate Accounts for investment advisory services, and, with respect to
policies issued prior to the Effective Time, or those issued subsequently but
on the same policy form, no investment advisory or other expenses shall be
charged against the Growth Portfolio, Money Market Portfolio or Bond Portfolio
of the Fund of a type or in an amount which would not have been charged against
the Growth Account, Money Market Account, or Bond Account, respectively, had
the reorganization not occurred unless such expenses are reimbursed with
respect to such policies by PVLICO. Such reimbursement shall not apply to any
federal income tax if the Fund fails to qualify as a "regulated investment
company" under the applicable provisions of the Internal Revenue Code, as
amended from time to time, or to any charge for PVLICO federal income taxes
attributable to the policies, for which PVLICO had reserved the right to charge
against the Growth Account, the Money Market Account and the Bond Account.
SECTION 2.11. Following the Closing Date, the Money Market Account and
the Bond Account shall file with the Commission applications under Section 8(f)
of the 1940 Act to deregister as individual investment companies.
ARTICLE III
WARRANTIES AND CONDITIONS
SECTION 3.01. The Growth Account, Money Market Account, Bond Account,
PVLICO and the Fund, as appropriate, make the fol-
- 8 -
<PAGE> 9
lowing representations and warranties, which shall survive the Closing Date:
(a) There are no suits, actions or proceedings pending or
threatened against any party to this Agreement which, to its knowledge, if
adversely determined, would materially and adversely affect its financial
condition, the conduct of its business or its ability to carry out its
obligations hereunder;
(b) There are no investigations or administrative proceedings by
the Commission or by any insurance or securities regulatory body of any state,
territory or the District of Columbia pending against any party to this
Agreement which, to its knowledge, would lead to any suit, action or proceeding
that would materially and adversely affect its financial condition, the conduct
of its business or its ability to carry out is obligations hereunder;
(c) Should any party to this Agreement become aware, prior to the
Effective Time, of any suit, action or proceeding, of the types described in
paragraphs (a) or (b) above, instituted or commenced against it, such party
shall immediately notify and advise ALL other parties to this Agreement;
(d) Immediately prior to the Effective Time, PVLICO shall have
valid and unencumbered title to the portfolio assets of the Growth Account,
Money Market Account and Bond Account, except with respect to those assets for
which payment has not yet been made; and
- 9 -
<PAGE> 10
(e) Each party shall make available all information concerning
itself which may be required in any application, registration statement or
other filing with a governmental body to be made by the Fund, by PVLICO or by
the Growth Account, Money Market Account, or Bond Account or any or all of
them, in connection with any of the transactions contemplated by this Agreement
and shall join in all such applications or filings, subject to reasonable
approval by their counsel. Each party represents and warrants that all of such
information so furnished shall be correct in all material respects and that it
shall not omit any material fact required to be stated therein or necessary in
order to make the statements therein not misleading.
SECTION 3.02. The obligations of the parties hereunder shall be
subject to satisfaction of each of the following conditions:
(a) The representations contained herein shall be true as of and
at the Effective Time with the same effect as though made at such time, and
such parties shall have performed all obligations required by this Agreement to
be performed by each of them prior to such time;
(b) The Commission shall not have issued an unfavorable advisory
report under Section 25(b) of the 1940 Act nor instituted any proceeding
seeking to enjoin consummation of the reorganization contemplated hereby;
(c) The appropriate parties shall have received orders from the
Commission providing such exemptions and approvals as
- 10 -
<PAGE> 11
they and their counsel reasonably deem necessary, including from Sections 17(a)
and 17(d) of the 1940 Act and Rule 17d-1 thereunder and shall have made all
necessary filings, if any, with, and received all necessary approvals from,
state securities or insurance authorities;
(d) PVLICO and the Growth Account shall have filed with the
Commission one or more post-effective amendments to their registration
statement under the Securities Act of 1933 (the "1933 Act") as are necessary or
desirable in connection with the reorganization contemplated by this Agreement;
the Fund shall have filed a notification of registration under the 1940 Act, a
registration statement under the 1933 Act and the 1940 Act, and such
pre-effective amendments thereto as may be necessary or desirable to effect the
purposes of the reorganization; and the registration statement for the Fund
under the 1933 Act and the 1940 Act and an amendment to the registration
statement under the 1933 Act of the Growth Account reflecting the
reorganization shall have been declared effective as of the Closing Date;
(e) At policyowners' meetings called for such purposes (or any
adjournments thereof), a majority of the outstanding voting securities (as
defined in the 1940 Act and the rules thereunder) of the Growth Account, Money
Market Account and Bond Account, respectively (except as to clauses (e)(1) and
(e)(4) where the outstanding voting securities of the Separate Accounts will be
treated as one class), shall have voted in favor of approving this Agreement,
the reorganization contemplated hereby,
- 11 -
<PAGE> 12
and shall have voted to direct PVLICO to vote the initial Fund shares held by
it to:
(1) elect a Board of Directors of the Fund;
(2) approve an investment advisory agreement between the
Fund and Providentmutual Investment Management Company ("PIMC") with
substantially the same terms and fees as the corresponding agreements currently
in use by the Growth Account, Money Market Account and Bond Account, subject to
appropriate modifications to reflect the different parties and investment
objectives and policies and such other modifications as the Fund and PIMC may
reasonably deem appropriate; and
(3) approve a sub-investment advisory agreement between
PIMC and Shearson/American Express Asset Management, Inc. ("Asset Management")
with substantially the same terms and fees as the corresponding agreement
currently used in connection with the Growth Account, subject to appropriate
modifications to reflect the different parties and different investment
objectives and policies and such other modifications as the Adviser and Asset
Management may reasonably deem appropriate;
(4) select Coopers & Lybrand as the Fund's independent
public accountants for the fiscal year ending December 31, 1985;
(f) The Board of Directors of the Fund shall have taken the
following action at a meeting duly called for such purposes:
(1) approve this Agreement and adopt it as a valid
obligation of the Fund and legally binding upon it;
- 12 -
<PAGE> 13
(2) approve an investment advisory agreement with
substantially the same terms and fees as the corresponding agreements currently
in use by the Growth Account, Money Market Account and Bond Account, subject to
appropriate modifications to reflect the different parties and different
investment objectives and policies and such other modifications as the Fund and
PIMC may reasonably deem appropriate;
(3) approve a sub-investment advisory agreement between
PIMC and Asset Management with substantially the same terms and fees as the
corresponding agreement currently used in connection with the Growth Account,
subject to appropriate modifications to reflect the different parties and
different investment objectives and policies and such other modifications as
the Adviser and Asset Management may reasonably deem appropriate;
(4) select Coopers & Lybrand as the Fund's independent
public accountants for the fiscal year ending December 31, 1985;
(5) approve an underwriting contract between the Fund and
PML Securities Company ("PML") with the terms and conditions as the Fund and
PML may reasonably deem appropriate;
(6) approve investment objectives, policies and
restrictions for the Growth Portfolio, the Money Market Portfolio and the Bond
Portfolio that are substantially identical to the investment objectives,
policies and restrictions of the Growth Account, Money Market Account and Bond
Account, respectively, as in effect immediately prior to the reorganization
(which may in-
- 13 -
<PAGE> 14
clude changes approved at the policyowners' meetings referred to above) and
approve the investment objectives, policies and restrictions for the
Discretionary Portfolio;
(7) authorize the issuance by the Fund of Growth, Money
Market and Bond Portfolio shares at their initial per share values on the
Closing Date in exchange for the portfolio assets of the Growth Account, Money
Market Account and Bond Account, as contemplated by this Agreement; and
(8) authorize the issuance by the Fund of Discretionary
Portfolio shares at their net asset value to PVLICO for purposes of seeding the
portfolio;
(g) PVLICO, the Growth Account, Money Market Account and Bond
Account shall have received an opinion of counsel to the Fund in form and
substance reasonably satisfactory to them to the effect that, as of the Closing
Date:
(1) the Fund has been duly organized, is existing in good
standing and is authorized to issue shares of its Growth Portfolio, Money
Market Portfolio, Bond Portfolio and Discretionary Portfolio for the purposes
contemplated by this Agreement and is duly registered and in good standing as
an investment company under the 1940 Act;
(2) the shares of the Growth Portfolio, Money Market
Portfolio, Bond Portfolio and Discretionary Portfolio to be issued pursuant to
the terms of this Agreement have been duly authorized and, when issued and
delivered as provided herein, will be validly issued, fully paid and
non-assessable:
- 14 -
<PAGE> 15
(3) all corporate and other proceedings required to be
taken by or on the part of the Fund to authorize and carry out this Agreement
and effect the reorganization have been duly and properly taken;
(4) this Agreement is a valid obligation of the Fund and
legally binding upon it in accordance with its terms.
(h) The Fund and the Growth Account, Money Market Account and Bond
Account shall have received an opinion from counsel to PVLICO (who may be the
same as counsel to the Fund) in form and substance reasonably satisfactory to
them to the effect that, as of the Closing Date:
(1) PVLICO and the Growth Account, Money Market Account
and Bond Account are validly organized and in good standing under the laws of
the Commonwealth of Pennsylvania and are fully empowered and qualified to carry
out their business in all jurisdictions where they do so, including to enter
into this Agreement and effect the transactions contemplated hereby;
(2) all corporate and other proceedings necessary and
required to be taken by or on the part of the Growth Account, Money Market
Account, Bond Account and PVLICO to authorize and carry out this Agreement and
to effect the reorganization have been duly and properly taken;
(3) this Agreement is a valid obligation of the Growth
Account, Money Market Account, Bond Account and PVLICO and legally binding upon
them in accordance with its terms.
- 15 -
<PAGE> 16
(i) Each party shall have furnished, as reasonably requested by
any other party, other legal opinions, officers' certificates, incumbency
certificates, certified copies of board and committee resolutions, good
standing certificates, and other closing documentation as may be appropriate
for a transaction of this type.
ARTICLE IV
COSTS
SECTION 4.01. PVLICO shall bear all expenses in connection with
effecting the reorganization contemplated by this Agreement including, without
limitation, any expenses in connection with actions taken pursuant to Section
2.09 herein, preparation and filing of registration statements and applications
and amendments on behalf of any and all parties hereto, organizational expenses
of the Fund, and all legal, accounting and data processing services necessary
to effect the reorganization.
ARTICLE V
TERMINATION
SECTION 5.01. This Agreement may be terminated and the reorganization
abandoned at any time prior to the Effective Time, notwithstanding approval by
policyowners,
(a) By mutual consent of the parties hereto;
(2) By any of the parties if any condition set forth in Section
3.02 has not been fulfilled by the other parties;
- 16 -
<PAGE> 17
(c) By any of the parties if the reorganization does not occur as
of December 31, 1985, and no subsequent date can be mutally agreed upon.
SECTION 5.02. At any time prior to the Effective Time, any of the
terms or conditions of this Agreement may be waived by the party or parties
entitled to the benefit thereof if such waiver will not have a material adverse
effect on the interests of policyowners.
- 17 -
<PAGE> 18
ARTICLE VI
GENERAL
SECTION 6.01. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, as of the day and year first above written, each
of the parties has caused this Agreement to be executed on its behalf by its
President or a Vice President or Chairman and attested by its Secretary or
Assistant Secretary, all thereunto duly authorized.
ATTEST: PROVIDENTMUTUAL VARIABLE LIFE
INSURANCE COMPANY
[sig] By: [sig]
- ------------------------------------ --------------------------------
Title: Assistant Secretary Title: President
ATTEST: PROVIDENTMUTUAL VARIABLE LIFE
GROWTH ACCOUNT
[sig] [sig]
- ------------------------------------ --------------------------------
Title: Secretary Title: President PVLICO
ATTEST: PROVIDENTMUTUAL VARIABLE LIFE
MONEY MARKET ACCOUNT
[sig]
- ------------------------------------ By: [sig]
Title: Secretary --------------------------------
Title: President PVLICO
ATTEST: PROVIDENTMUTUAL VARIABLE LIFE
BOND ACCOUNT
[sig]
- ------------------------------------ By: [sig]
Title: Secretary --------------------------------
Title: President PVLICO
ATTEST: MARKET STREET FUND, INC.
[sig]
- ------------------------------------ By: [sig]
Title: Secretary --------------------------------
Title: Vice President
- 18 -
<PAGE> 1
EXHIBIT 9(b)
REIMBURSEMENT AGREEMENT
This Reimbursement Agreement, made this 1st day of November, 1991, by and
between Provident Mutual Life Insurance Company of Philadelphia (PMLIC), a
Pennsylvania corporation, and The Market Street Fund, Inc. (the Fund), a
Maryland corporation:
WITNESSETH:
WHEREAS, PMLIC offers and sells to the public variable life insurance
policies and the Separate Accounts established for such policies are
continuously investing in shares of the respective Portfolios of the Fund as
the investment vehicle for such Separate Accounts and the policies; and
WHEREAS, the Fund pays its own expenses, generally, including
brokerage costs, administrative costs, custodian costs and legal, accounting
and printing costs; and
WHEREAS, PMLIC has agreed to undertake the payment of a portion of
these costs to avoid any potential detriment to the policyholders of such
policies arising from the impact of such costs on the Fund's assets;
NOW THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
1. The Reimbursement Agreement dated November, 1985 is hereby
terminated;
2. If the total ordinary operating expenses of the Growth, Money
Market, Bond, Managed or Aggressive Growth Portfolios of the
Fund, excluding advisory fees, and exclusive of attorney's
fees, court judgments, decrees or awards, or any other
litigation costs in legal actions involving the Fund, or costs
relating to indemnification of directors, officers or
employees of the Fund where such costs are not covered by
director and officer liability insurance, for any year are in
excess of an annual rate of 0.40% of the average daily net
assets of such Portfolio, PMLIC shall reimburse the Fund for
such expenses of the applicable Portfolio in excess of such
limit.
3. If the total ordinary operating expenses of the International
Portfolio of the Fund, as described in item 2 above, are in
excess of an annual rate of 0.75% of the average daily net
assets of such Portfolio, PMLIC shall reimburse the Fund for
the Portfolio's expenses in excess of such limit.
4. The reimbursable amount, if any, shall be calculated daily and
credited to the Fund on a monthly basis.
5. This Reimbursement Agreement shall come into full force and
effect on the later of the date on which it is approved by the
Directors of the Fund (including a majority of the Directors
who are not "interested persons") and November 1, 1991.
6. This Agreement shall continue until December 31, 1991 and
thereafter for successive annual periods ending December 31 of
each year provided such continuance is specifically approved
at least annually, by the Directors of the Fund, including a
majority who are not "interested persons" and by PMLIC.
<PAGE> 2
IN WITNESS WHEREOF, the parties have caused this Reimbursement
Agreement to be signed by their respective officials, duly authorized, as of
the day and year first above written.
PROVIDENT MUTUAL INSURANCE COMPANY
OF PHILADELPHIA
Witness:
[sig] By: [sig]
- ------------------------------ --------------------------------------
THE MARKET STREET FUND, INC.
Witness:
[sig] By: [sig]
- ------------------------------ --------------------------------------
<PAGE> 1
EXHIBIT 9(c)
ADMINISTRATION AGREEMENT
AGREEMENT made as of December 12, 1985, between Market Street Fund,
Inc., a Maryland corporation (herein called the "Fund"), and PROVIDENT
INSTITUTIONAL MANAGEMENT CORPORATION, a Delaware corporation (herein called
"PIMC"),
WHEREAS, the Fund is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Fund desires to retain PIMC to render administrative
services to the following investment portfolios of the Fund: the Growth
Portfolio, the Money Market Portfolio, the Bond Portfolio, and the Managed
Portfolio, collectively, the "Portfolios," and PIMC is willing to so render
such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints PIMC to act as an
administrator to the Fund for the period and on the terms set forth in this
Agreement. PIMC accepts such appointment and agrees to render the services
herein set forth, for certain compensation as agreed upon between the Fund and
PIMC.
2. Delivery of Documents. The Fund will furnish PIMC with copies
properly certified or authenticated of each of the following:
(a) Articles of Incorporation of the Fund, filed with the
Secretary of the State of Maryland on March 21, 1985, as amended (such
Articles of Incorporation, as presently in effect and as they shall
from time to time be amended, herein called the "Articles of
Incorporation");
(b) Code of Regulations of the Fund, as amended (such
Code of Regulations, as presently in effect and as they shall from
time to time be amended, herein called the "Code of Regulations");
- 1 -
<PAGE> 2
(c) Resolutions of the Fund's Board of Directors
authorizing the appointment of PIMC and resolutions of the Fund's
Board of Directors and Shareholders approving this Agreement;
(d) Resolutions of the Fund's Board of Directors
authorizing the appointment of Providentmutual Investment Management
Company (the "adviser") and of the Fund's Board of Directors and
Shareholders approving the Advisory Agreement between the adviser and
the Fund dated as of October 2, 1985 (the "Advisory Agreement");
(e) Resolutions of the Fund's Board of Directors
authorizing the appointment of PML Securities Company ("PML") as the
Fund's distributor and approving the Distribution Agreement between
PML and the Fund dated as of October 2, 1985 (the "Distribution
Agreement");
(f) The Fund's Registration Statement on Form N-1A under
the 1940 Act and the Securities Act of 1933, as amended (the "1933
Act"), as filed with the Securities and Exchange Commission ("SEC") on
December 16, 1985 (File No. 2-98755) relating to units of beneficial
interest of the Fund, $.01 par value (herein called "Shares") and all
amendments thereto;
(g) The Fund's Notification of Registration filed
pursuant to Section 8(a) of the 1940 Act on Form N-8A with the SEC on
June 27, 1985 and all amendments thereto; and
(h) The most recent prospectus with respect to the Fund.
The Fund will furnish PIMC from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing, if any.
3. Administration. Subject to the supervision of the Board of
Directors of the Fund and the Fund's investment adviser, PIMC WILL provide the
Fund with the following administrative services in accordance with the Fund's
- 2 -
<PAGE> 3
investment objective and policies as stated in its Prospectus and resolutions
of the Fund's Board of Directors.
PIMC will perform the following services with respect to each
portfolio:
(i) Reconcile each portfolio's daily cash and investment
balances with its custodian and provide to the adviser the beginning
cash balance available each day for investment;
(ii) Update the cash availability throughout the day as
required by the adviser;
(iii) Verify investment buy/sell trade tickets when
received from the adviser, maintain historical tax lots for each
security, calculate capital gains and losses and transmit trades to
the custodian for proper settlement;
(iv) Maintain daily journals with respect to each
portfolio's investments, capital share, income and expenses;
(v) Otherwise maintain all books and records with respect
to each portfolio's securities transactions, keep the portfolio's
books of account and compute the net asset value, and net income of
each portfolio;
(vi) Monitor the Fund's expense accruals and pay all
expenses on written authorization from the Fund's Treasurer;
(vii) Monitor adequacy of the Fund's internal financial
control with respect to the Portfolios;
(viii) Transmit or mail a copy of the daily portfolio
valuation (amortized cost and marked to market) to the adviser;
(ix) Supply the Fund and its Board of Directors with
reports and statistical data as requested with respect to the
Portfolios;
(x) Prepare monthly unaudited financial statements for
the Fund with respect to each portfolio , including:
- 3 -
<PAGE> 4
Schedule of Investments
Statements of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses
(xi) Act as liaison between the Fund and the independent
certified public accountants with respect to the Portfolios and
provide them with detailed account analyses, fiscal year summaries and
other audit-related schedules as requested;
(xii) Calculate the market value of the investment
portfolios;
(xiii) Prepare a monthly broker security transaction summary
and monthly security transaction listing;
(xiv) Prepare and file the Fund's Semi-Annual Reports to
the SEC on Form N-SAR with respect to the Portfolios;
(xv) Compile data for, prepare for execution by the Fund,
and file all of the Fund's Federal and state tax returns and required
tax filings with respect to the Portfolios;
(xvi) Assist with the preparation of the Fund's annual and
quarterly reports to stockholders and its registration statement on
Form N-1A with respect to the Portfolios;
(xvii) Compile data for, prepare and file timely notices to
the SEC required pursuant to Rule 24f-2 under the 1940 Act;
(xviii) Monitor the Fund's status as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1954;
(xviv) Maintain the Fund's fidelity bond required by the
1940 Act; and
(xix) Monitor compliance with certain of the Fund's
policies and limitations as set forth in the Fund's prospectus, Codes
of Regulations and Articles of Incorporation.
- 4 -
<PAGE> 5
4. Services Not Exclusive. The administration services rendered
by PIMC hereunder are not to be deemed exclusive, and PIMC shall be free to
render similar services to others so long as its services under this Agreement
are not impaired thereby.
5. Books and Records. In compliance with the requirements of
Rule 31a-3 of the Rules, PIMC hereby agrees that all records which it maintains
for the Fund are the property of the Fund and further agrees to surrender
promptly to the Fund any of such records upon the Fund's request. PIMC further
agrees to preserve for the periods prescribed by Rule 31a-2 the records
required to be maintained by Rule 31a-1 of the Rules.
6. Expenses. PIMC will pay all expenses incurred by it in
connection with its services under this Agreement.
7. Compensation. As sole compensation for the services provided
and the expenses assumed pursuant to this Agreement, the Fund will pay PIMC
such fees as the parties may from time to time agree in writing.
8. Limitation of Liability of the Administrator. PIMC shall not
be liable for any error of judgment or mistake of law or for any loss suffered
by the Fund in connection with the matters to which this Agreement relates,
except a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of PIMC in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
9. Duration and Termination. This Agreement, unless sooner
terminated as provided herein, shall have an initial term of one year provided,
however, that this Agreement may be terminated by PIMC or by the Fund at any
time, without the payment of any penalty, by the Board of Directors of the Fund
or by a vote of a majority of the outstanding voting securities and the Fund,
on 60 days
- 5 -
<PAGE> 6
written notice to the other party, any may be terminated for "cause" at any
time by the Board of Directors of the Fund. "Cause" is defined and limited for
this purpose to mean willful misfeasance, bad faith or gross negligence by PIMC
in the performance of its duties or reckless disregard by it of its obligations
and duties under this Agreement.
10. Amendment of this Agreement. No provision of this Agreement
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge, or termination is sought.
11. Miscellaneous. The captions in this Agreement are included
for convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by Delaware law.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
Attest: MARKET STREET FUND, INC.
/s/ LINDA E. SENHER By: [sig]
- ------------------------------- -----------------------------------
[Seal]
Attest: PROVIDENT INSTITUTIONAL
MANAGEMENT CORPORATION
By: [sig]
- ------------------------------- -----------------------------------
[Seal]
- 6 -
<PAGE> 7
December 12, 1985
Gentlemen:
Pursuant to Paragraph 7 of the Administration Agreement dated December
12, 1985 between Provident Institutional Management Corporation ("PIMC") and
Market Street Fund, Inc. (the "Fund"), we have agreed that the Fund will pay
PIMC a fee computed daily and paid monthly, at an annual rate of .10% per annum
of each Portfolio's net assets with a minimum aggregate annual fee with respect
to all four portfolios of $110,000. Notwithstanding the prior sentence PIMC
has agreed that during the first twelve months of the Fund's operations, PIMC
will waive its fee in the following manner:
100% of PIMC's fee will be waived for the first two months of Fund
operations; thereafter, PIMC will reduce its fee waiver by 10% per
month until the twelfth month of Fund operations at which time PIMC
will begin to charge its full fee as stated above.
PIMC has further agreed that the fee it will receive from the Fund as
stated above, shall be effective for the first two years of the Fund's
operations; thereafter the Fund shall pay PIMC such fees as the parties may
agree to in writing.
If the foregoing accords with your understanding of our agreement,
please evidence your concurrence by signing and dating this letter at the place
indicated below and returning this letter to PIMC.
Sincerely,
Provident Institutional
Management Corporation
By: [sig]
-----------------------------------------
Date:
---------------------------------------
Market Street Fund, Inc.
By: [sig]
------------------------------
Date: December 12, 1985
----------------------------
<PAGE> 1
EXHIBIT 9(c)(i)
AMENDMENT TO ADMINISTRATION AGREEMENT
THIS AMENDMENT to the Administration Agreement between MARKET STREET FUND, INC.
(the "Fund") and PROVIDENT FINANCIAL PROCESSING CORPORATION ("PFPC") is made
this 9th day of September , 1988.
WHEREAS, the Fund and Provident Institutional Management Corporation ("PIMC")
entered into an Administration Agreement on December 12,1985; and
WHEREAS, PIMC assigned said agreement to PFPC; and
WHEREAS, it is the desire of the Fund and PFPC to amend said Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto to amend said Administration
Agreement as follows:
1. The administrative services to be provided by PIMC pursuant to the
Administration Agreement between the Fund and PIMC dated December 12,
1985 will be provided by PFPC.
2. Add the following after the first sentence of item 5:
The Fund or its authorized representative shall have the right to copy
any records in the possession of PFPC which pertain to the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the
Administration Agreement between the parties to be executed by their officers
designated below as of the date first above written.
[SEAL] MARKET STREET FUND, INC.
Attest: [sig] By: [sig]
------------------------ ----------------------------
[SEAL] PROVIDENT FINANCIAL
PROCESSING CORPORATION
Attest: [sig] By: [sig]
------------------------ ----------------------------
<PAGE> 1
EXHIBIT 9(c)(ii)
AMENDMENT TO ADMINISTRATION AGREEMENT
THIS AMENDMENT to the Administration Agreement between Market Street Fund, Inc.
(the "Fund") and Provident Financial Processing Corporation ("PFPC") is made
this___________________ day of ________________ 1989.
WITNESSETH:
WHEREAS, the Fund and Provident Institutional Management Corporation ("PIMC")
entered into an Administration Agreement on December 12, 1985, as amended on
September 9, 1988; and
WHEREAS, PIMC assigned said agreement to PFPC; and
WHEREAS, the Fund established an Aggressive Growth Portfolio on and
WHEREAS, it is the desire of the Fund and PFPC to amend the Administration
Agreement to include the Aggressive Growth Portfolio;
NOW THEREFORE, it is agreed between the parties that said Agreement is hereby
amended to include the Aggressive Growth Portfolio of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the
Administration Agreement to be duly executed as of the day and year first above
written.
[SEAL] MARKET STREET FUND, INC.
Attest: By:
------------------------ ----------------------------
[SEAL] PROVIDENT FINANCIAL PROCESSING
CORPORATION
Attest: By:
------------------------ ----------------------------
<PAGE> 1
EXHIBIT 9(c)(iii)
AMENDMENT NO. 2 TO ADMINISTRATION AGREEMENT
This Amendment, dated the 31st day of July 1991, is entered into
between MARKET STREET FUND, INC. (the "Fund"), a Maryland corporation, and
PROVIDENT FINANCIAL PROCESSING CORPORATION ("PFPC"), a Delaware corporation
which is an indirect wholly-owned subsidiary of PNC Financial Corp.
WHEREAS, the Fund and PFPC have entered into an Administration
Agreement dated as of December 12, 1985, and amended on September 9, 1988 (the
"Administration Agreement"), pursuant to which the Fund appointed PFPC to act
as administrator for its investment portfolios; and
WHEREAS, the Fund's Board of Directors has approved the Amendment; and
WHEREAS, the Fund has established additional Portfolios, Aggressive
Growth Portfolio and International Equity Portfolio, with respect to which it
wants to retain PFPC to act as administrator under the Administration
Agreement; and
WHEREAS, PFPC has notified the Fund that it wants to serve as
administrator for the Aggressive Growth Portfolio and the International Equity
Portfolio;
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Appointment. The Fund hereby appoints PFPC to act as
administrator to the Fund for the Aggressive Growth Portfolio and the
International Equity Portfolio for the period and on the terms set forth in the
Administration Agreement. PFPC hereby accepts such appointment and agrees to
render the services set forth in the Administration Agreement, for the
compensation as agreed to between the Fund and PFPC from time to time.
2. Capitalized Terms. From and after the date hereof, the
following terms as used in the Administration Agreement shall be deemed to
include also the meaning specified herein: "Portfolio(s)" shall be deemed to
include the Aggressive Growth Portfolio and the International Equity Portfolio
shares.
<PAGE> 2
3. Miscellaneous. Except to the extent amended and supplemented
hereby, the Administration Agreement shall remain unchanged and in full force
and effect and is hereby ratified and confirmed in all respects as amended and
supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date and year first above written.
MARKET STREET FUND, INC.
(SEAL) By: [sig]
---------------------------------
Title: TREASURER
PROVIDENT FINANCIAL
PROCESSING CORPORATION
(SEAL) By: [sig]
---------------------------------
Title: Vice President
<PAGE> 1
EXHIBIT 9(d)
TRANSFER AGENCY AGREEMENT
THIS AGREEMENT is made as of this 12th day of December, 1985 by and
between Market Street Fund, Inc. (the "Fund"), a Maryland corporation, and
PROVIDENT FINANCIAL PROCESSING CORPORATION ("PFPC"), a Delaware corporation,
which is an indirect, wholly-owned subsidiary of PNC Financial Corp.
R E C I T A L
WHEREAS, the Fund is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940 ("the
1940 Act"), as amended and is offering four units of beneficial interest, $.01
par value per share known as the Class of Money Market Portfolio shares, the
Class of Bond Portfolio shares, the Class of Growth Portfolio shares, and the
Class of Managed Portfolio shares, collectively ("Shares"); and
WHEREAS, the Fund desires to retain PFPC to serve as the Fund's
transfer agent, registrar and dividend disbursing agent, and PFPC is willing to
furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints PFPC to serve as
transfer agent, registrar and dividend disbursing agent for the Fund with
respect to the following of its investment portfolios: the Growth Portfolio,
the Money Market Portfolio, the Bond Portfolio, and the Managed Portfolio,
collectively, the "Portfolios," for the period and on the terms set forth in
this Agreement. PFPC accepts such appointment and agrees to furnish the
services herein set forth in return for the compensation as provided in
Paragraph 14 of this Agreement.
2. Delivery of Documents. The Fund will furnish PFPC with copies
properly certified or authenticated of each of the following:
- 1 -
<PAGE> 2
(a) Resolutions of the Fund's Board of Directors
authorizing the appointment of PFPC as transfer agent, registrar and
dividend disbursing agent for the Fund and approving this Agreement;
(b) The Fund's Articles of Incorporation filed with the
State Secretary of the State of Maryland on March 21, 1985 and all
amendments thereto (such Articles of Incorporation, as currently in
effect and as it shall from time to time be amended, is herein called
the "Articles");
(c) The Fund's Code of Regulations and all amendments
thereto (such Code of Regulations, as currently in effect and as it
shall from time to time be amended, is herein called the "Code");
(d) Resolutions of the Fund's Board of Directors
appointing Providentmutual Investment Management Company (the
"Adviser") as the investment adviser to the Fund and resolutions of
the Fund's Board of Directors and holders of units of beneficial
interest of the Fund ("Shareholders") approving a proposed Investment
Advisory Agreement between the Adviser and the Fund dated as of
October 2, 1985 (the "Advisory Agreement");
(e) Resolutions of the Fund's Board of Directors
appointing Provident Institutional Management Corporation ("PIMC") as
the administrator to the Fund for each portfolio of the Fund and
resolutions of the Fund's Board of Directors and Shareholders of the
Fund approving a proposed Administration Agreement between the Fund
and PIMC dated as of November 4, 1985 (the "Administration
Agreement");
(f) Resolutions of the Fund's Board of Directors
appointing PML Securities Company ("PML") as the Fund's distributor
for the Fund and approving a proposed Distribution Agreement between
PML and the Fund dated as of October 2, 1985 (the "Distribution
Agreement");
- 2 -
<PAGE> 3
(g) The Advisory Agreement, the Distribution Agreement
and the Administration Agreement;
(h) The Fund's Notification of Registration filed
pursuant to Section 8(a) of the 1940 Act on Form N-8A with the
Securities and Exchange Commission ("SEC") on June 27 , 1985;
(i) The Fund's Registration Statement on Form N-IA under
the 1940 Act and the Securities Act of 1933, as amended ("the 1933
Act") as filed with the SEC on December 16, 1985 (File No. 2-98755)
relating to shares of the Growth Portfolio, the Money Market
Portfolio, the Bond Portfolio, and the Managed Portfolio, and units of
beneficial interests $.01 par value per share which represents
interest in the Fund (hereinafter known as "Shares"), and all
amendments thereto; and
(j) The most recent prospectus for the Fund (such
prospectus, as currently in effect, and all amendments and supplements
thereto are herein called the ("Prospectus").
The Fund will furnish PFPC from time to time with copies of all
amendments of or supplements to the foregoing, if any.
3. Issuance and Redemption of Shares.
(a) Issuance of Shares. Upon receipt of a purchase order
for the purchase of Shares and sufficient information to enable PFPC
to establish a Shareholder account, and after confirmation of receipt
or crediting of Federal funds for the order from the Fund's Custodian,
PFPC shall issue and credit the account of the Shareholder with Shares
in the manner described in the Prospectus.
(b) Redemption of Shares. Upon receipt of a redemption
order from PML or the Adviser, PFPC shall redeem the number and class
of Shares indicated thereon from the redeeming Shareholder's account
and receive from
- 3 -
<PAGE> 4
the Fund's Custodian and disburse to the redeeming Shareholder the
redemption proceeds therefor, or arrange for direct payment of
redemption proceeds to such Shareholder by the Fund's Custodian, in
accordance with such procedures and controls as are mutually agreed
upon from time to time by and among the Fund, PFPC, and the Fund's
Custodian.
4. Authorized Shares. The Fund's authorized capital
stock consists of a total of 200,000,000 authorized shares. The Fund agrees to
notify PFPC promptly of any change in the number of authorized Shares and of
any change in the number of Shares registered under the 1933 Act.
5. Dividends and Distributions. The Fund shall furnish
PFPC with appropriate evidence of action taken by the Fund's Board of Directors
authorizing the declaration and payment of dividends and distributions to the
Fund's Shareholders. After deducting any amount required to be withheld by any
applicable laws, rules and regulations, PFPC shall, as agent for each
Shareholder and in accordance with the provisions of the Fund's Articles and
Prospectus, reinvest such dividends and distributions for the Shareholder in
additional full and fractional Shares of the same class as the Shares upon
which such dividends and distributions were declared and paid, or, with respect
to any Shareholder who has elected in the proper manner, receive from the
Fund's Custodian and pay such Shareholder such dividends and/or distributions
in cash. In lieu of receiving from the Fund's Custodian and paying to
Shareholders cash dividends and/or distributions, PFPC may arrange for the
direct payment of cash dividends and distributions to Shareholders by the
Fund's Custodian, in accordance with such procedures and controls as are
mutually agreed upon from time to time by and among the Fund, PFPC, and the
Fund's Custodian.
PFPC shall prepare and file with the Internal Revenue Service
and/or other appropriate taxing authorities, and address and mail to
Shareholders or
- 4 -
<PAGE> 5
their authorized representatives such returns and information relating to
dividends and distributions paid by the Fund as are required to be so prepared,
filed and mailed by applicable laws, rules and regulations, or such substitute
form of notice as may from time to time be permitted or required by the
Internal Revenue Service and/or other appropriate taxing authorities. On
behalf of the Fund, PFPC shall pay on a timely basis to the appropriate
Federal authorities any taxes required by applicable Federal tax laws to be
withheld by the Fund on dividends and distributions paid by the Fund.
6. Communications with Shareholders.
(a) Communications to Shareholders. PFPC will
address and mail all communications by the Fund to its Shareholders or their
authorized representatives, including reports to Shareholders, dividend and
distribution notices and proxy material for its meetings of Shareholders. PFPC
will receive and tabulate the proxy cards for the meetings of the Fund's
Shareholders.
(b) Correspondence. PFPC will answer such
correspondence from Shareholders, securities brokers and others
relating to its duties hereunder and such other correspondence as may
from time to time be mutually agreed upon between PFPC and the Fund.
7. Records. PFPC shall keep accounts for each
Shareholder showing the following information:
(a) name, address and United States Tax
Identification or Social Security number;
(b) number and class of Shares held and number of
Shares for which certificates, if any, have been issued, including
certificate numbers and denominations;
(c) historical information regarding the account
of each Share-
- 5 -
<PAGE> 6
holder, including dividends and distributions paid and the date and
price for all transactions on a Shareholder's account;
(d) any stop or restraining order placed against
a Shareholder's account;
(e) any correspondence relating to the current
maintenance of a Shareholder's account;
(f) information with respect to withholdings; and
(g) any information required in order for PFPC to
perform any calculations contemplated or required by this Agreement.
The books and records pertaining to the Fund which are in the
possession of PFPC shall be prepared and maintained as required by the 1940
Act, as amended, and other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized representatives, shall have
access to such books and records at all times during PFPC's normal business
hours, and such books and records shall be surrendered to the Fund promptly
upon request. Upon the reasonable request of the Fund, copies of any such
books and records shall be provided by PFPC to the Fund or the Fund's
authorized representative at the Fund's expense.
8. Reports. PFPC shall furnish the Fund state by state
registration reports, such periodic and special reports as the Fund may
reasonably request, and such other information, including Shareholder lists and
statistical information concerning accounts, as may be agreed upon from time to
time between the Fund and PFPC.
9. Cooperation with Accountants. PFPC shall cooperate
with the Fund's independent certified public accountants and shall take all
reasonable action in the performance of its obligations under this Agreement to
assure that the necessary information is made available to such accountants for
the
- 6 -
<PAGE> 7
expression of their unqualified opinion, as such as may be required by the Fund
from time to time.
10. Confidentiality. PFPC agrees on behalf of itself and
its employees to treat confidentially and as the proprietary information of the
Fund all records and other information relative to the Fund and its prior,
present or potential Shareholders and relative to PML and its prior, present or
potential customers, and not to use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Fund, which
approval shall not be unreasonably withheld and may not be withheld where PFPC
may be exposed to civil or criminal contempt proceedings for failure to comply,
when requested to divulge such information by duly constituted authorities, or
when so requested by the Fund.
11. Equipment Failure. In the event of equipment
failures, PFPC shall, at no additional expense to the Fund, use its best
efforts to and take reasonable steps to minimize service interruptions. PFPC
shall enter into and shall maintain in effect with appropriate parties one or
more agreements making reasonable provision for emergency use of electronic
data processing equipment to the extent appropriate equipment is available.
12. Right to Receive Advice.
(a) Advice of Fund. If PFPC shall be in doubt as
to any action to be taken or omitted by it, it may request, and shall
receive, from the Fund directions or advice.
(b) Advice of Counsel . If PFPC shall be in doubt
as to any question of law involved in any action to be taken or
omitted by PFPC, if may request advice at its own cost from counsel of
its own choosing (who may be counsel for the Adviser, PIMC, PML, the
Fund, or PFPC, at the option of PFPC).
- 7 -
<PAGE> 8
(c) Conflicting Advice. In case of conflict
between directions or advice received by PFPC pursuant to subparagraph
(a) of this paragraph and advice received by PFPC pursuant to
subparagraph (b) of this paragraph, PFPC shall be entitled to rely on
and follow the advice received pursuant to the latter provision alone.
(d) Protection of PFPC. PFPC shall be protected
in any action or inaction which it takes in reliance on any directions
or advice received pursuant to subparagraphs (a) or (b) of this
paragraph which PFPC, after receipt of any such directions or advice,
reasonably and in good faith believes to be consistent with such
directions or advice. However, nothing in this paragraph shall be
construed as imposing upon PFPC any obligation (i) to seek such
directions or advice, or (ii) to act in accordance with such
directions or advice when received, unless, under the terms of another
provision of this Agreement, the same is a condition to PFPC's
properly taking or omitting to take such action. Nothing in this
subparagraph shall excuse PFPC when an action or omission on the part
of PFPC constitutes willful misfeasance, bad faith, gross negligenct
or reckless disregard by PFPC of its duties under this Agreement.
13. Compliance with Governmental Rules and Regulations.
The Fund assumes full responsibility for insuring that the contents of each
prospectus of the Fund complies with all applicable requirements of the 1933
Act, the 1940 Act, and any laws, rules and regulations of governmental
authorities having jurisdiction.
14. Compensation. As sole compensation for the services
rendered by PFPC during the term of this Agreement, the Fund will pay to PFPC
such monthly fees as the parties may agree from time to time in writing.
15. Indemnification. The Fund agrees to indemnify and
hold PFPC
- 8 -
<PAGE> 9
harmless from all taxes, charges, expenses, assessments, claims and
liabilities (including, without limitation, liabilities arising under the 1933
Act, the Securities Exchange Act of 1934, the 1940 Act, and any state and
foreign securities and blue sky laws, all as or to be amended from time to
time) and expenses, including (without limitation) attorneys' fees and
disbursements, arising directly or indirectly from any action or thing which
PFPC takes or does or omits to take or do at the request or on the direction of
or in reliance on the advice of the Fund, provided that PFPC shall not be
indemnified against any liability to the Fund or to its Shareholders (or any
expenses incident to such liability) arising out of PFPC's negligent failure to
perform its duties under this Agreement.
16. Responsibility to PFPC. PFPC shall be under no duty
to take any action on behalf of the Fund except as specifically set forth
herein or as may be specifically agreed to by PFPC in writing. In the
performance of its duties hereunder, PFPC shall be obligated to exercise care
and diligence and to act in good faith and use its best efforts within
reasonable limits to insure the accuracy of all services performed under this
Agreement. PFPC shall be responsible for its own negligent failure to perform
its duties under this Agreement, but to the extent that duties, obligations and
responsibilities are not expressly set forth in this Agreement, PFPC shall not
be liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of PFPC or reckless
disregard of such duties, obligations and responsibilities. Without limiting
the generality of the foregoing or of any other provision of this Agreement,
PFPC in connection with its duties under this Agreement shall not be under any
duty or obligation to inquire into and shall not be liable for or in respect of
(a) the validity or invalidity or authority or lack thereof of any advice,
direction, notice or other instrument which conforms to
- 9 -
<PAGE> 10
the applicable requirements of this Agreement, if any, and which PFPC
reasonably believes to be genuine, or (b) delays or errors or loss of data
occurring by reason of circumstances such as acts of civil or military
authority, national emergencies, labor difficulties, fire, flood or
catastrophe, acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply.
17. Registration as Transfer Agent. PFPC represents that
it has and is currently registered as a transfer agent with the SEC and has
complied with the SEC's regulations for registered transfer agents. PFPC
agrees that it will continue to be registered as a transfer agent with the SEC
for the duration of this Agreement. Should PFPC fail to be registered with the
SEC as a transfer agent at any time during this Agreement, the Fund may, on
written notice to PFPC, immediately terminate this Agreement.
18. Duration and Termination. This Agreement shall
continue until termination by PFPC or the Fund on six (60) days written notice.
19. Notices. All notices and other communications
(collectively referred to as "Notice" or "Notices" in this paragraph) hereunder
shall be in writing or by confirming telegram, cable, telex or facsimile
sending device. Notices shall be addressed (a) if to PFPC at PFPC's address,
P.0. Box 8950, Wilmington, Delaware 19899; (b) if the the Fund, at the address
of the Fund; or (c) if to neither of the foregoing, at such other address as
shall have been notified to the sender of any such Notice or other
communication. If the location of the sender of a Notice and the address of
the addressee thereof are, at the time of sending, more than 100 miles apart,
the Notice may be sent by first-class mail, in which case it shall be deemed to
have been given three days after it is sent, or if sent by confirming telegram,
cable, telex or facsimile sending device, it shall be deemed to have been given
immediately, and, if the location of the sender of a Notice and the address of
the addressee thereof are, at the
- 10 -
<PAGE> 11
time of sending, not more than 100 miles apart, the Notice may be sent by
first-class mail, in which case it shall be deemed to have been given two days
after it is sent, or if sent by messenger, it shall be deemed to have been
given on the day it is delivered, or if sent by confirming telegram, cable,
telex or facsimile sending device, it shall be deemed to have been given
immediately. All postage, cable, telegram, telex and facsimile sending device
charges arising from the sending of a Notice hereunder shall be paid by the
sender.
20. Further Actions. Each party agrees to perform such
further acts and execute such further documents as are necessary to effectuate
the purposes hereof.
21. Amendments. This Agreement or any part hereof may be
changed or waived only by an instrument in writing signed by the part against
which enforcement of such change or waiver is sought.
22. Delegation. On thirty (30) days prior written notice
to the Fund, PFPC may assign its rights and delegate its duties hereunder to
any wholly-owned direct or indirect subsidiary of Provident National Bank of
PNC Financial Corp, provided that PFPC may delegate its duties only to a
transfer agent registered and qualified under the Securities and Exchange Act
of 1934 and other applicable law, and further provided that PFPC and such
delegate shall promptly provide such information as the Fund may request, and
respond to such questions as the Fund may ask, relative to the delegation,
including (without limitation) the capabilities of the delegate.
23. The names "Market Street Fund, Inc." and the "Board
of Directors of Market Street Fund, Inc." refer respectively to the Fund
created and the Directors, as directors but not individually or personally,
acting from time to time under the Articles of Incorporation dated March 21 ,
1985 which is hereby referred to and a copy of which is on file at the office
of the State Secretary of the State of Maryland and at the principal office of
the Fund. The obligations
- 11 -
<PAGE> 12
of Market Street Fund, Inc. entered into in the name or on behalf thereof by
any of the Directors, representatives or agents are made not individually, but
in such capacities, and are not binding upon any of the Directors,
Shareholders, or representatives or the Fund personally, but bind only the Fund
Property, and all persons dealing with any class of Shares of the Fund must
look solely to the Fund Property belonging to such class for the enforcement of
any claims against the Fund.
24. Miscellaneous. This Agreement embodies the entire
agreement and understanding between the parties hereto, and supersedes all
prior agreements and understandings relating to the subject matter hereof. The
captions in this Agreement are included for convenience of reference only and
in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement shall be deemed to be a contract
made in Delaware and governed by Delaware law. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding and shall inure to the benefit of the parties hereto
and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers designated below as of the day and
year first above written.
[Seal] MARKET STREET FUND, INC.
Attest: [sig] By: [sig]
------------------------ --------------------------
PROVIDENT FINANCIAL
PROCESSING CORPORATION
Attest: /s/ JOHN D. SILCOX, JR., By: /s/ JOHN W. MCLAUGHLIN
------------------------ --------------------------
John D. Silcox, Jr.,
Secretary
- 12 -
<PAGE> 13
December 12, 1985
Gentlemen:
Pursuant to Paragraph 14 of the Transfer Agency Agreement dated
December 12, 1985 between Provident Financial Processing Corporation ("PFPC")
and Market Street Fund, Inc. (the "Fund"), we have agreed that each portfolio
of the Fund will pay PFPC a fee equal to $1,500 per year. Notwithstanding the
prior sentence PFPC has agreed that during the first twelve months of the
Fund's operations, PFPC will waive its fee in the following manner:
100% of PFPC's fee will be waived for the first two months of Fund
operations; thereafter, PFPC will reduce its fee waiver by 10% per
month until the twelfth month of Fund operations at which time PFPC
will begin to charge its full fee as stated above.
In addition, a $1.00 fee per transaction will be charged plus
out-of-pocket expenses including, but not limited to, postage, telephone,
remote terminal rental and data line charges, forms and envelopes, and proxy
forms and tabulation.
PFPC has further agreed that the fee it will receive from the Fund as
stated above, shall be effective for the first two years of the Fund's
operations; thereafter the Fund shall pay PIMC such fees as the parties may
agree to in writing.
If the foregoing accords with your understanding of our agreement,
please evidence your concurrence by signing and dating this letter at the place
indicated below and returning this letter to PFPC.
Sincerely,
Provident Financial Processing
Corporation
By: /s/ JOHN W. MCLAUGHLIN
---------------------------
Date: 4/7/86
-------------------------
Market Street Fund, Inc.
By: [sig]
--------------------------
Date: December 12, 1985
------------------------
<PAGE> 1
EXHIBIT 9(d)(i)
TRANSFER AGENCY AGREEMENT
THIS AMENDMENT to the Transfer Agency Agreement by and between Market Street
Fund , Inc. (the "Fund") and Provident Financial Processing Corporation
("PFPC") is made this 9th day of September, 1988.
WITNESSETH:
WHEREAS, the Fund and PFPC entered into a Transfer Agency Agreement on December
12, 1985; and
WHEREAS, it is the desire of the parties thereto to amend said Agreement;
NOW THEREFORE, it is agreed between the parties to amend said Agreement as
follows:
Add the following to item 18 of the Transfer Agency Agreement:
This Agreement may be terminated for "cause" at any time by the Board
of Directors of the Fund. "Cause" is defined and limited for this
purpose to mean willful misfeasance, bad faith or gross negligence by
PFPC in the performance of its duties or reckless disregard by it of
its obligations and duties under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the
Transfer Agency Agreement to be duly executed as of the day and year first
above written.
[SEAL] MARKET STREET FUND, INC.
Attest: [sig] By: [sig]
------------------------ ----------------------------
[SEAL] PROVIDENT FINANCIAL
PROCESSING CORPORATION
Attest: /s/ JOHN D. SILCOX, JR. By: [sig]
------------------------ ----------------------------
JOHN D. SILCOX, JR.,
VICE PRESIDENT AND SECRETARY
<PAGE> 1
EXHIBIT 9(d)(ii)
AMENDMENT NO. 2 TO TRANSFER AGENCY AGREEMENT
This Amendment, dated the 31st day of July 1991, is entered into
between MARKET STREET FUND, INC. (the "Fund"), a Maryland corporation, and
PROVIDENT FINANCIAL PROCESSING CORPORATION ("PFPC") , a Delaware corporation
which is an indirect wholly-owned subsidiary PNC Financial Corp.
WHEREAS, the Fund and PFPC have entered into a Transfer Agency
Agreement dated as of December 12, 1985, and amended on September 9, 1988 (the
"Transfer Agency Agreement"), pursuant to which the Fund appointed PFPC to act
as transfer agent for its investment portfolios; and
WHEREAS, the Fund's Board of Directors has approved this Amendment; and
WHEREAS, the Fund has established additional classes of shares,
Aggressive Growth Portfolio shares and International Equity Portfolio shares,
with respect to which it wants to appoint PFPC to act as transfer agent under
the Transfer Agency Agreement; and
WHEREAS, PFPC has notified the Fund that it wants to serve as transfer
agent for the Aggressive Growth Portfolio and International Equity Portfolio;
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Appointment. The Fund hereby appoints PFPC to act as transfer
agent, registrar and dividend disbursing agent to the Fund for the Aggressive
Growth Portfolio and International Equity Portfolio for the period and on the
terms set forth in the Transfer Agency Agreement. PFPC hereby accepts such
appointment and agrees to render the services set forth in the Transfer Agency
Agreement, for the compensation as agreed to between the Fund and PFPC from
time to time.
2. Capitalized Terms. From and after the date hereof, the
following terms as used in the Transfer Agency Agreement shall be deemed to
include also the meaning specified herein: "Shares" shall be deemed to include
the class of Aggressive Growth Portfolio shares and the class of International
Equity Portfolio shares; and "Portfolios" shall be deemed to include the
Aggressive Growth Portfolio shares and the International Equity Portfolio
shares.
<PAGE> 2
3. Miscellaneous. Except to the extent amended and supplemented
hereby, the Transfer Agency Agreement shall remain unchanged and in full force
and effect and is hereby ratified and confirmed in all respects as amended and
supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date and year first above written.
MARKET STREET FUND, INC.
(SEAL) By: [sig]
---------------------------------
Title: TREASURER
PROVIDENT FINANCIAL PROCESSING
CORPORATION
(SEAL) By: [sig]
---------------------------------
Title: Vice President
2
<PAGE> 1
Exhibit 10(a)
PARTICIPATION AGREEMENT
By and Among
MARKET STREET FUND, INC.
And
PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA
And
PML SECURITIES COMPANY
THIS AGREEMENT, made and entered into this _______ day of
______________ 1992 by and among PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF
PHILADELPHIA, a Pennsylvania corporation (hereinafter the "Company"), on its
own behalf and on behalf of PROVIDENT MUTUAL VARIABLE GROWTH SEPARATE ACCOUNT,
PROVIDENT MUTUAL VARIABLE MONEY MARKET SEPARATE ACCOUNT, PROVIDENT MUTUAL
VARIABLE BOND SEPARATE ACCOUNT, PROVIDENT MUTUAL VARIABLE MANAGED SEPARATE
ACCOUNT, PROVIDENT MUTUAL VARIABLE AGGRESSIVE GROWTH SEPARATE ACCOUNT, and
PROVIDENT MUTUAL VARIABLE INTERNATIONAL SEPARATE ACCOUNT (hereinafter, each
individually the "Account," or collectively, the "Accounts"), segregated asset
accounts of the Company, the MARKET STREET FUND, INC., an open-end diversified
management investment company organized under the laws of the State of Maryland
(hereinafter the "Fund") and PML SECURITIES COMPANY, a Pennsylvania Corporation
(hereinafter the "Underwriter").
WHEREAS, the Fund engages in business as an open-end diversified,
management investment company and is available to act as the investment vehicle
for separate accounts established for variable life insurance policies and
variable annuity contracts to be offered by insurance companies which have
entered
<PAGE> 2
into participation agreements substantially identical to this Agreement
(hereinafter "Participating Insurance Companies"); and
WHEREAS, beneficial interests in the Fund are divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission (the "SEC"), dated October 3, 1985 (File No. 812-6143),
granting Participating insurance companies and variable life insurance separate
accounts exemptions from the provisions of sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended, (hereinafter the "1940
Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Mixed and Shared Funding
Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Company has registered or will register certain variable
life policies (the "Policies") under the 1933 Act; and
- 2 -
<PAGE> 3
WHEREAS, the Accounts are duly organized, validly existing segregated
asset accounts, established by resolution of the Board of Directors of the
Company under the insurance laws of Pennsylvania, to set aside and invest assets
attributable to the policies; and
WHEREAS, the Company has registered the Accounts as a unit investment
trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of the Accounts to fund the Policies and the Underwriter is authorized to sell
such shares to unit investment trusts such as the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Underwriter agrees to sell to the Company those shares of the
Fund which the Company orders on behalf of the Accounts, executing such orders
on a daily basis at the net
- 3 -
<PAGE> 4
asset value next computed after receipt and acceptance by the Fund or its agent
of the order for the shares of the Fund.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by Participating Insurance
Companies and their separate accounts on those days on which the Fund calculates
its net asset value pursuant to rules of the SEC; provided, however, that the
Board of Directors of the Fund (hereinafter the "Directors") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Directors,
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of any Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, and VII of this Agreement is in
effect to govern such sales.
1.5. The Fund agrees to redeem for cash, upon the Company's request,
any full or fractional shares of the Fund held by
- 4 -
<PAGE> 5
the Company, executing such requests on a daily basis at the net asset value
next computed after receipt and acceptance by the Fund or its agent of the
request for redemption.
1.6. The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund in accordance with
the provisions of such prospectus. The Company agrees that all net amounts
available under the Policies shall be invested in the Fund, or in the Company's
general account; provided that such amounts may also be invested in an
investment company other than the Fund if (a) such other investment company, or
series thereof, has investment objectives or policies that are substantially
different from the investment objectives and policies of all the Portfolios of
the Fund; or (b) the Company gives the Fund and the Underwriter 45 days written
notice of its intention to make such other investment company available as a
funding vehicle for the Policies; or (c) such other investment company was
available as a funding vehicle for the Policies prior to the date of this
Agreement and the Company so informs the Fund and Underwriter prior to their
signing this Agreement; or (d) the Fund or Underwriter consents to the use of
such other investment company.
1.7. The Company shall pay for Fund shares on the same day that it
places an order to purchase Fund shares. Payment shall be in federal funds
transmitted by wire.
1.8. Issuance and transfer of the Funds, shares will be by book entry
only. Stock certificates will not be issued to
- 5 -
<PAGE> 6
the Company or any of the Accounts. Shares ordered from the Fund will be
recorded in an appropriate title for the applicable Account or the appropriate
subaccount of the applicable Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income dividends or
capital gain distributions payable on the Funds' shares. The Company hereby
elects to receive all such dividends and distributions as are payable on the
Portfolio shares in additional shares of that Portfolio. The Company reserves
the right to revoke this election and to receive all such dividends and
distributions in cash. The Fund shall notify the Company of the number of shares
so issued as payment of such dividends and distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Policies are or will
be registered under the 1933 Act and that the Policies will be issued and sold
in compliance with all applicable federal and state laws. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established the Accounts as segregated asset accounts
- 6 -
<PAGE> 7
under Section 40-37-109 of the Pennsylvania Insurance Code and has registered
the Accounts as a unit investment trust in accordance with the provisions of the
1940 Act to serve as segregated investment accounts for the Policies, and that
it will maintain such registration for so long as any Policies are outstanding.
The Company shall amend the registration statement under the 1933 Act for the
Policies and the registration statement under the 1940 Act for the Accounts from
time to time as required in order to effect the continuous offering of the
Policies or as may otherwise be required by applicable law. The Company shall
register and qualify the Policies for sale in accordance with the securities
laws of the various states only if and to the extent deemed necessary by the
Company.
2.2. The Company represents that it believes, in good faith, that the
Policies are currently and at the time of issuance will be treated as life
insurance contracts under applicable provisions of the Internal Revenue Code of
1986, and that it will. make every effort to maintain such treatment and that it
will notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing that the Policies have ceased to be so treated or that they
might not be so treated in the future.
2.3. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund is and shall remain
registered under the 1940 Act for as long as the Fund shares are sold. The
- 7 -
<PAGE> 8
Fund shall amend the registration statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Underwriter.
2.4. The Fund represents that it believes, in good faith, that it is
currently qualified as a Regulated Investment Company under Subchapter M of the
Internal Revenue Code of 1986, and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.
2.5. The Fund represents that its investment objectives, policies and
restrictions comply with the Pennsylvania Insurance Code as it applies to the
Fund. To the extent feasible and consistent with market conditions, the Fund
will adjust its investments to comply with requirements of the Company's
domiciliary state upon written notice from the Company of such requirements and
proposed adjustments, it being agreed and understood that in any such case the
Fund shall be allowed a reasonable period of time under the circumstances after
receipt of such notice to make any such adjustment.
2.6. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1
- 8 -
<PAGE> 9
under the 1940 Act or otherwise, although it may make such payments in the
future. To the extent that it decides to finance distribution expenses pursuant
to Rule 12b-1, the Fund undertakes to have a board of directors, a majority of
whom are not interested persons of the Fund, formulate and approve any plan
under Rule 12b-1 to finance distribution expenses.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the 1933 Act, the 1934 Act, and the 1940 Act.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company, at the Company's
expense, with as many copies of the Fund's current prospectus as the Company may
reasonably request for use with prospective Policy owners and applicants. The
Underwriter shall print and distribute, at the Fund's expense, as many copies as
necessary for distribution to existing Policy owners or participants. If
requested by the Company in lieu thereof, the Fund shall provide such
documentation and other assistance as is reasonably necessary in order for the
Company to have the new prospectus for the Policies and the Fund's new
prospectus printed together in one document, in such case the Fund shall bear
its share of expenses as described above.
- 9 -
<PAGE> 10
3.2. The Fund's prospectus shall state that the Statement of
Additional information for the Fund is available from the Underwriter (or, in
the Fund's discretion, the Prospectus shall state that such Statement is
available from the Fund), and the Underwriter (or the Fund) shall provide such
Statement, at its expense, to the Company and to any owner of or participant
under a Policy who requests such Statement or, at the Company's expense, to
any prospective Policy owner and applicant who requests such statement.
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy material, reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably require and shall
bear the costs of distributing them to existing Policy owners or participants.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Policy owners or
participants;
(ii) vote the Fund shares held in the Accounts in accordance with
instructions received from Policy owners or participants; and
(iii) vote Fund shares held in the Accounts for which no timely
instructions have been received, and any Fund shares held in
the Company's general account, in the same proportion as Fund
shares of such Portfolio for which instructions have been
received;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require passthrough voting privileges for variable policy owners. The Company
reserves the right to vote Fund
- 10 -
<PAGE> 11
shares held in any segregated asset account or in its general account in its own
right, to the extent permitted by law. Participating Insurance Companies shall
be responsible for assuring that each of their separate accounts participating
in the Fund calculates voting privileges in a manner consistent with other
Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the SEC interpretation of the requirements of Section 16(a) with
respect to periodic elections of directors and with whatever rules the
Commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or the Underwriter, each piece of sales literature or other promotional
material in which the Fund or the Underwriter is named, at least fifteen
business days prior to its use. No such material shall be used if the Fund or
the Underwriter objects to such use within fifteen business days after receipt
of such material.
- 11 -
<PAGE> 12
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Policies other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or by
the Underwriter, except with the permission of the Fund or the Underwriter. The
Fund and the Underwriter agree to respond to any request for approval on a
prompt and timely basis.
4.3. The Fund or the Underwriter shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company or its separate account(s) is
named, at least fifteen business days prior to its use. No such material shall
be used if the Company objects to such use within fifteen business days after
receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company, the
Accounts, or the Policies other than the information or representations
contained in a registration statement or prospectus for the Policies, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for the Accounts which are
- 12 -
<PAGE> 13
in the public domain or approved by the Company for distribution to Policy
owners or participants, or in sales literature or other promotional material
approved by the Company, except with the permission of the Company. The Company
agrees to respond to any request for approval on a prompt and timely basis.
4.5. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under NASD rules, the 1940 Act or the 1933 Act.
- 13 -
<PAGE> 14
ARTICLE V. Fees and Expenses
5.1. The Fund and Underwriter shall pay no fee or other compensation to
the Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then, subject to obtaining any required exemptive orders or other
regulatory approvals, the Underwriter may make payments to the Company or to the
underwriter for the Policies if and in amounts agreed to by the Underwriter in
writing. Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund of this Agreement
shall be paid by the Fund to the extent permitted by law. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's shares
under federal law, and, if applicable, under any state securities law,
preparation and filing of the Fund's prospectus and registration statement,
proxy materials and reports, setting in type, printing and distributing the
prospectuses, the proxy materials and reports to existing shareholders and
Policy owners, the preparation of all statements and notices required by any
federal or state law, all taxes on the issuance or transfer of the Fund's
shares, and any expenses permitted to be paid or assumed by the Fund pursuant to
a plan, if any, under Rule 12b-1 under the 1940 Act.
-14-
<PAGE> 15
ARTICLE VI. Diversification
6.1. The Fund will comply with Section 817(h) of the Internal Revenue
Code of 1986, and all regulations issued thereunder, relating to the
diversification requirements for variable annuity, endowment, and life insurance
contracts.
ARTICLE VII. Potential Conflicts
7.1. The Board of Directors of the Fund (the "Board") will monitor the
Fund for the existence of any material irreconcilable conflict between the
interests of the policy owners of all separate accounts investing in the Fund.
An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by
Participating Insurance Companies or by variable annuity contract and variable
life insurance policy owners; or (f) a decision by an insurer to disregard the
voting instructions of policy owners. The Board shall promptly inform the
Company if it determines that an irreconcilable material conflict exists and the
implications
-15-
<PAGE> 16
thereof. A majority of the Board shall consist of persons who are not
"interested" persons of the Fund.
7.2. The Company has reviewed a copy of the Mixed and Shared Funding
Exemptive Order, and in particular, has reviewed the conditions to the requested
relief set forth therein. As set forth in the Mixed and Shared Funding Exemptive
Order, the Company will report any potential or existing conflicts of which it
is aware to the Board. The Company agrees to assist the Board in carrying out
its responsibilities under the Mixed and Shared Funding Exemptive Order, by
providing the Board with all information reasonably necessary for the Board to
consider any issues raised. This includes, but is not limited to, an obligation
by the Company to inform the Board whenever policy owner voting instructions are
disregarded. The Board shall record in its minutes or other appropriate records,
all reports received by it and all action with regard to a conflict.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested Directors, that an irreconcilable material conflict exists,
the Company and other Participating Insurance Companies shall, at their expense
and to the extent reasonably practicable (as determined by a majority of the
disinterested Directors), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including
-16-
<PAGE> 17
(but not limited to) another Portfolio of the Fund, or submitting the question
whether such segregation should be implemented to a vote of all affected policy
owners and, as appropriate, segregating the assets of any appropriate group
(i.e., variable annuity policy owners or variable life insurance policy owners,
of one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected policy owners the option of making such
a change; and (2) establishing a new registered management investment company or
managed separate account.
7.4. If the Company's disregard of voting instructions could conflict
with the majority of Policy owner voting instructions, and the Company's
judgment represents a minority position or would preclude a majority vote, the
Company is permitted to withdraw each affected Account's investment in the Fund.
The Underwriter and Fund shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Fund until the
Company notifies the Underwriter and the Fund that it is withdrawing each
affected Account's investment in the Fund pursuant to this Section 7.4.
7.5. If a particular state insurance regulator's decision applicable to
the Company conflicts with the majority of other state insurance regulators,
then the Company is permitted to withdraw each affected Account's investment in
the Fund. The Underwriter and Fund shall continue to accept and implement orders
by the Company for the purchase (and redemption) of shares
-17-
<PAGE> 18
of the Fund until the Company notifies the Underwriter and the Fund that it is
withdrawing each affected Account's investment in the Fund pursuant to this
Section 7.5.
7.6. For purposes of Section 7.3 of this Agreement, the Board shall
determine whether any proposed action adequately remedies any irreconcilable
material conflict, but in no event will the Fund be required to establish a new
funding medium for the Policies. The Company shall not be required by Section
7.3 to establish a new funding medium for the Policies if an offer to do so has
been declined by vote of a majority of Policy owners materially adversely
affected by the irreconcilable material conflict.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Mixed and Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Mixed and Shared
Funding Exemptive Order, then (a) the Fund and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
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<PAGE> 19
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund,
the Underwriter, and each of the Fund's or the Underwriter's directors,
officers, employees or agents and each person, if any, who controls or is
associated with the Fund or the Underwriter within the meaning of such terms
under the federal securities laws (collectively, the "indemnified parties" for
purposes of this Section 8.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company) or litigation (including legal and other expenses), to which the
indemnified parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of the Fund's shares and:
(i) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact
contained in the registration statement or
prospectus for the Policies or contained in the
Policies or sales literature for the Policies (or
any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading in light of
the circumstances in which they were made; provided
that this agreement to indemnify shall not apply as
to any indemnified party if such statement or
omission or such alleged statement or omission was
made in reliance upon and in conformity with
information furnished to the Company by or on behalf
of the Fund for use in the registration statement or
prospectus
-19-
<PAGE> 20
for the Policies or in the Policies or sales
literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Policies or Fund shares; or
(ii) arise out of or as a result of statements or
representations by or on behalf of the Company
(other than statements or representations contained
in the Policy or Fund registration statement, the
Policy or Fund prospectus or sales literature for
the Policies or the Fund not supplied by the Company
or persons under its control) or wrongful conduct
of the Company or persons under its control, with
respect to the sale or distribution of the Policies
or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
registration statement, prospectus, or sales
literature of the Fund or any amendment thereof or
supplement thereto or the omission or alleged
omission to state therein a material fact required
to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made, if such a
statement or omission was made in reliance upon and
in conformity with information furnished to the Fund
by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials or to
make any payments under the terms of this Agreement;
or
(v) arise out of any material breach by the Company of
this Agreement;
except to the extent provided in Sections 8.1(b) and 8.4 hereof. This
indemnification shall be in addition to any liability which the Company may
otherwise have.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an indemnified party would otherwise be subject by reason of
willful misfeasance, bad
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<PAGE> 21
faith, or gross negligence in the performance of his or her duties or by reason
of his or her reckless disregard of obligations or duties under this Agreement
or to the Fund.
8.1(c). The indemnified parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund shares or the Policies or the operation of
the Fund.
8.2. Indemnification By the Underwriter
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors, officers, employees or agents and each
person, if any, who controls or is associated with the Company within the
meaning of such terms under the federal securities laws (collectively, the
"indemnified parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of the Underwriter) or litigation (including legal and
other expenses) to which the indemnified parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares and:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement or prospectus
or sales literature of the Fund (or any amendment or
supplement to any of the foregoing), or arise out of
or are based upon the omission or the alleged
omission to state therein a material fact
-21-
<PAGE> 1
Exhibit 8(a)
PARTICIPATION AGREEMENT
-----------------------
By and Among
MARKET STREET FUND, INC.
-----------------------
And
PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA
---------------------------------------------------
And
PML SECURITIES COMPANY
----------------------
THIS AGREEMENT, made and entered into this ____ day of _________ 1993 by
and among PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA, a Delaware
Corporation (hereinafter the "Company"), on its own behalf and on behalf of
PROVIDENTMUTUAL VARIABLE ANNUITY SEPARATE ACCOUNT and PROVIDENTMUTUAL VARIABLE
LIFE SEPARATE ACCOUNT (hereinafter, the "Accounts"), segregated asset accounts
of the Company, the MARKET STREET FUND, INC., an open-end diversified management
investment company organized under the laws of the State of Maryland
(hereinafter the "Fund") and PML SECURITIES COMPANY, a Pennsylvania Corporation
(hereinafter the "Underwriter ") .
WHEREAS, the Fund engages in business as an open-end diversified,
management investment company and is available to act as the investment vehicle
for separate accounts established for variable life insurance contracts and
variable annuity contracts to be offered by insurance companies which have
entered into participation agreements substantially identical to this Agreement
(hereinafter "Participating Insurance Companies"); and
WHEREAS, beneficial interests in the Fund are divided into several
series of shares, each representing the interest in a
<PAGE> 2
particular managed portfolio of securities and other assets (the "Portfolios");
and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission (the "SEC"), dated October 3, 1985 (File No. 812-6143), granting
Participating Insurance Companies and variable life insurance separate accounts
exemptions from the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the
Investment Company Act of 1940, as amended, (hereinafter the "1940 Act") and
Rules 6e-2(b) (15) and 6e-3(T) (b) (15) thereunder, to the extent necessary to
permit shares of the Fund to be sold to and held by variable annuity and
variable life insurance separate accounts of both affiliated and unaffiliated
life insurance companies (hereinafter the "Mixed and Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Company has registered or will register certain variable
annuity and variable life contracts (the "Contracts") under the 1933 Act; and
WHEREAS, the Accounts are duly organized, validly existing segregated
asset accounts, established by resolution of the Board of Directors of the
Company under the insurance laws of Pennsylvania and Delaware, to set aside and
invest assets attributable to the Contracts; and
WHEREAS, the Company has registered the Accounts as unit
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<PAGE> 3
investment trusts under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of the Accounts to fund the Contracts and the Underwriter is authorized to sell
such shares to unit investment trusts such as the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promise, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares of the
Fund which the Company orders on behalf of the Accounts, executing such orders
on a daily basis at the net asset value next computed after receipt and
acceptance by the Fund or its agent of the order for the shares of the Fund.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by Participating Insurance
Companies and their separate accounts on those days on which the Fund calculates
its net asset value pursuant to rules of the SEC; provided, however, that the
Board of Directors of the Fund (hereinafter the "Directors") may
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<PAGE> 4
refuse to sell shares of any Portfolio to any person, or suspend or terminate
the offering of shares of any Portfolio if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of the
Directors, acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, necessary in the best interests of the
shareholders of any Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, and VII of this Agreement is in
effect to govern such sales.
1.5. The Fund agrees to redeem for cash, upon the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt and
acceptance by the Fund or its agent of the request for redemption.
1.6. The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund in accordance with
the provisions of such prospectus. The Company agrees that all net amounts
available under the Contracts shall be invested in the Fund, or in the Company's
general account;
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<PAGE> 5
provided that such amounts may also be invested in an investment company other
than the Fund if (a) such other investment company, or series thereof, has
investment objectives or policies that are substantially different from the
investment objectives and policies of all the Portfolios of the Fund; or (b) the
Company gives the Fund and the Underwriter 45 days written notice of its
intention to make such other investment company available as a funding vehicle
for the Contracts; or (c) such other investment company was available as a
funding vehicle for the Contracts prior to the date of this Agreement and the
Company so informs the Fund and Underwriter prior to their signing this
Agreement; or (d) the Fund or Underwriter consents to the use of such other
investment company.
1.7. The Company shall pay for Fund shares on the same day that it
places an order to purchase Fund shares. Payment shall be in federal funds
transmitted by wire.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Fund will be recorded in an appropriate title for the
Account or the appropriate subaccount of the Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such dividends and distributions as are payable on the
Portfolio shares in
-5-
<PAGE> 6
additional shares of that Portfolio. The Company reserves the right to revoke
this election and to receive all such dividends and distributions in cash. The
Fund shall notify the Company of the number of shares so issued as payment of
such dividends and distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act and that the Contracts will be issued and sold
in compliance with all applicable federal and state laws. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established the Accounts as segregated asset accounts under Section 40-37-109 of
the Pennsylvania Insurance Code Title 18, Section 2932 of the Delaware Insurance
Code and has registered the Accounts as unit investment trusts in accordance
with the provisions of the 1940 Act to serve as segregated investment accounts
for the Contracts, and that it will maintain such registrations for so long as
any Contracts are outstanding. The Company shall amend the registration
statement under the 1933 Act for the Contracts and the registration statements
under the 1940
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<PAGE> 7
Act for the Accounts from time to time as required in order to effect the
continuous offering of the Contracts or as may otherwise be required by
applicable law. The Company shall register and qualify the Contracts for sale in
accordance with the securities laws of the various states only if and to the
extent deemed necessary by the Company.
2.2. The Company represents that it believes, in good faith, that the
Contracts are currently and at the time of issuance will be treated as annuity
contracts or life insurance policies under applicable provisions of the Internal
Revenue Code of 1986, and that it will make every effort to maintain such
treatment and that it will notify the Fund and the Underwriter immediately upon
having a reasonable basis for believing that the Contracts have ceased to be so
treated or that they might not be so treated in the future.
2.3. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund is and shall remain
registered under the 1940 Act for as long as the Fund shares are sold. The Fund
shall amend the registration statement for its shares under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Underwriter.
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<PAGE> 8
2.4. The Fund represents that it believes, in good faith, that it is
currently qualified as a Regulated Investment Company under Subchapter M of the
Internal Revenue Code of 1986, and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.
2.5. The Fund represents that its investment objectives, policies and
restrictions comply with the Delaware Insurance Code as it applies to the Fund.
To the extent feasible and consistent with market conditions, the Fund will
adjust its investments to comply with requirements of the Company's domiciliary
state upon written notice from the Company of such requirements and proposed
adjustments, it being agreed and understood that in any such case the Fund shall
be allowed a reasonable period of time under the circumstances after receipt of
such notice to make any such adjustment.
2.6. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. To the extent that it decides
to finance distribution expenses pursuant to Rule 12b-l, the Fund undertakes to
have a board of directors, a majority of whom are not interested persons of the
Fund, formulate and approve any plan under Rule 12b-l to finance distribution
expenses.
-8-
<PAGE> 9
2.7. The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the 1933 Act, the 1934 Act, and the 1940 Act.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company, at the Company's
expense, with as many copies of the Fund's current prospectus as the Company may
reasonably request for use with prospective Contract owners and applicants. The
Underwriter shall print and distribute, at the Fund's expense, as many copies as
necessary for distribution to existing Contract owners or participants. If
requested by the Company in lieu thereof, the Fund shall provide such
documentation and other assistance as is reasonably necessary in order for the
Company to have the new prospectus for the Contracts and the Fund's new
prospectus printed together in one document, in such case the Fund shall bear
its share of expenses as described above.
3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter (or, in the Fund's
discretion, the Prospectus shall state that such Statement is available from the
Fund), and the Underwriter (or the Fund) shall provide such Statement, at its
expense, to the Company and to any owner of or participant under a Contract who
requests such Statement or, at the Company's expense,
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<PAGE> 10
to any prospective Contract owner and applicant who requests such
statement.
3.3. The Fund, at its expense, shall provide the Company with copies of
its proxy material, reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably require and shall
bear the costs of distributing them to existing Contract owners or participants.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners or
participants;
(ii) vote the Fund shares held in the Accounts in accordance
with instructions received from Contract owners or
participants; and
(iii) vote Fund shares held in the Account for which no timely
instructions have been received, and any Fund shares
held in the Company's general account, in the same
proportion as Fund shares of such Portfolio for which
instructions have been received;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require passthrough voting privileges for variable contract owners. The Company
reserves the right to vote Fund shares held in any segregated asset account or
in its general account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that each of
their separate accounts participating in the Fund calculates voting privileges
in a manner consistent with other Participating Insurance Companies .
3.5. The Fund will comply with all provisions of the
- 10 -
<PAGE> 11
1940 Act requiring voting by shareholders, and in particular the Fund will
either provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b). Further,
the Fund will act in accordance with the SEC interpretation of the requirements
of Section 16(a) with respect to periodic elections of directors and with
whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or the Underwriter, each piece of sales literature or other promotional
material in which the Fund or the Underwriter is named, at least fifteen
business days prior to its use. No such material shall be used if the Fund or
the Underwriter objects to such use within fifteen business days after receipt
of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved
- 11 -
<PAGE> 12
by the Fund or by the Underwriter, except with the permission of the Fund or the
Underwriter. The Fund and the Underwriter agree to respond to any request for
approval on a prompt and timely basis.
4.3. The Fund or the Underwriter shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company or its separate account(s) is
named, at least fifteen business days prior to its use. No such material shall
be used if the Company objects to such use within fifteen business days after
receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, the
Accounts, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for the Accounts which are in the public domain
or approved by the Company for distribution to Contract owners or participants,
or in sales literature or other promotional material approved by the Company,
except with the permission of the Company. The Company agrees to respond to any
request for approval on a prompt and timely basis.
4.5. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio,
- 12 -
<PAGE> 13
television, telephone or tape recording, videotape display, signs or billboards,
motion pictures, or other public media), sales literature (i.e., any written
communication distributed or made generally available to customers or the
public, including brochures, circulars, research reports, market letters, form
letters, seminar texts, reprints or excerpts of any other advertisement, sales
literature, or published article) , educational or training materials or other
communications distributed or made generally available to some or all agents or
employees, registration statements, prospectuses, statements of additional
information, shareholder reports, and proxy materials and any other material
constituting sales literature or advertising under NASD rules, the 1940 Act or
the 1933 Act.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Underwriter shall pay no fee or other compensation to
the Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-l to finance distribution
expenses, then, subject to obtaining any required exemptive orders or other
regulatory approvals, the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing. Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund of this Agreement
shall be paid by the Fund to the extent permitted by
- 13 -
<PAGE> 14
law. The Fund shall bear the expenses for the cost of registration and
qualification of the Fund's shares under federal law, and, if applicable, under
any state securities law, preparation and filing of the Fund's prospectus and
registration statement, proxy materials and reports, setting in type, printing
and distributing the prospectuses, the proxy materials and reports to existing
shareholders and Contract owners, the preparation of all statements and notices
required by any federal or state law, all taxes on the issuance or transfer of
the Fund's shares, and any expenses permitted to be paid or assumed by the Fund
pursuant to a plan, if any, under Rule 12b-l under the 1940 Act.
ARTICLE VI. DIVERSIFICATION
6.1. The Fund will comply with Section 817(h) of the Internal Revenue
Code of 1986, and all regulations issued thereunder, relating to the
diversification requirements for variable annuity, endowment, and life insurance
contracts.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board of Directors of the Fund (the "Board") will monitor the
Fund for the existence of any material irreconcilable conflict between the
interests of the contract owners of all separate accounts investing in the Fund.
An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities
- 14 -
<PAGE> 15
laws or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by
Participating Insurance Companies or by variable annuity contract and variable
life insurance contract owners; or (f) a decision by an insurer to disregard the
voting instructions of contract owners. The Board shall promptly inform the
Company if it determines that an irreconcilable material conflict exists and the
implications thereof. A majority of the Board shall consist of persons who are
not "interested" persons of the Fund.
7.2. The Company has reviewed a copy of the Mixed and Shared Funding
Exemptive Order, and in particular, has reviewed the conditions to the requested
relief set forth therein. As set forth in the Mixed and Shared Funding Exemptive
Order, the Company will report any potential or existing conflicts of which it
is aware to the Board. The Company agrees to assist the Board in carrying out
its responsibilities under the Mixed and Shared Funding Exemptive Order, by
providing the Board with all information reasonably necessary for the Board to
consider any issues raised. This includes, but is not limited to, an obligation
by the Company to inform the Board whenever contract owner voting instructions
are disregarded. The Board shall record in its minutes or other appropriate
records, all reports received by it and all action with
- 15 -
<PAGE> 16
regard to a conflict.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested Directors, that an irreconcilable material conflict exists,
the Company and other Participating Insurance Companies shall, at their expense
and to the extent reasonably practicable (as determined by a majority of the
disinterested Directors), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., variable annuity contract owners or variable life
insurance contract owners, of one or more Participating Insurance Companies)
that votes in favor of such segregation, or offering to the affected contract
owners the option of making such a change; and (2) establishing a new registered
management investment company or managed separate account.
7.4. If the Company's disregard of voting instructions could conflict
with the majority of Contract owner voting instructions, and the Company's
judgment represents a minority position or would preclude a majority vote, the
Company is permitted to withdraw an Account's or the Accounts' investment in the
Fund. The Underwriter and Fund shall continue to accept and implement orders
- 16 -
<PAGE> 17
by the Company for the purchase (and redemption) of shares of the Fund until the
Company notifies the Underwriter and the Fund that it is withdrawing an
Account's or the Accounts' investment in the Fund pursuant to this Section 7.4.
7.5. If a particular state insurance regulator's decision applicable to
the Company conflicts with the majority of other state insurance regulators,
then the Company is permitted to withdraw the Accounts' investment in the Fund.
The Underwriter and Fund shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Fund until the
Company notifies the Underwriter and the Fund that it is withdrawing the
Accounts' investment in the Fund pursuant to this Section 7.5.
7.6. For purposes of Section 7.3 of this Agreement, the Board shall
determine whether any proposed action adequately remedies any irreconcilable
material conflict, but in no event will the Fund be required to establish a new
funding medium for the Contracts. The Company shall not be required by Section
7.3 to establish a new funding medium for the Contracts if an offer to do so has
been declined by vote of a majority of Contract owners materially adversely
affected by the irreconcilable material conflict.
7.7. If and to the extent that Rule 6e-2 and Rule 6e3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Mixed
- 17 -
<PAGE> 18
and Shared Funding Exemptive Order) on terms and conditions materially different
from those contained in the Mixed and Shared Funding Exemptive Order, then (a)
the Fund and/or the Participating Insurance Companies, as appropriate, shall
take such steps as may be necessary to comply with Rules 6e-2 and 6e-3 (T), as
amended, and Rule 6e-3, as adopted, to the extent such rules are applicable; and
(b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BV THE COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the Fund, the
Underwriter, and each of the Fund's or the Underwriter's directors, officers,
employees or agents and each person, if any, who controls or is associated with
the Fund or the Underwriter within the meaning of such terms under the federal
securities laws (collectively, the "indemnified parties" for purposes of this
Section 8.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or
litigation (including legal and other expenses), to which the indemnified
parties may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the
- 18 -
<PAGE> 19
sale or acquisition of the Fund's shares and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in the registration statement or prospectus for the
Contracts or contained in the Contracts or sales
literature for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading in light of the circumstances in which they
were made; provided that this agreement to indemnify
shall not apply as to any indemnified party if such
statement or omission or such alleged statement or
omission was made in reliance upon and in conformity
with information furnished to the Company by or on
behalf of the Fund for use in the registration statement
or prospectus for the Contracts or in the Contracts or
sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations by or on behalf of the Company (other
than statements or representations contained in the
Contract or Fund registration statement, the Contract or
Fund prospectus or sales literature for the Contracts or
the Fund not supplied by the Company or persons under
its control) or wrongful conduct of the Company or
persons under its control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature of the Fund
or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make
the statements therein not misleading in light of the
circumstances in which they were made, if such a
statement or omission was made in reliance upon and in
conformity with information furnished to the Fund by or
on behalf of the Company; or
- 19 -
<PAGE> 20
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials or to
make any payments under the terms of this Agreement; or
(v) arise out of any material breach by the Company of this
Agreement,
except to the extent provided in Sections 8.1(b) and 8.4 hereof. This
indemnification shall be in addition to any liability which the Company may
otherwise have.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an indemnified party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his or her
duties or by reason of his or her reckless disregard of obligations or duties
under this Agreement or to the Fund.
8.1(c). The indemnified parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Contracts or the operation of the
Fund.
8.2. INDEMNIFICATION BY THE UNDERWRITER
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors, officers, employees or agents and each
person, if any, who controls or is associated with the Company within the
meaning of such terms under the federal securities laws (collectively, the
"indemnified parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the
- 20 -
<PAGE> 21
written consent of the Underwriter) or litigation (including legal and other
expenses) to which the indemnified parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of the Fund's shares and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained
in the registration statement or prospectus or sales
literature of the Fund (or any amendment or supplement
to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading
in light of the circumstances in which they were made;
provided that this agreement to indemnify shall not
apply as to any indemnified party if such statement or
omission or such alleged statement or omission was made
in reliance upon and in conformity with information
furnished to the Underwriter or Fund by or on behalf of
the Company for use in the registration statement or
prospectus for the Fund or in sales literature for the
Fund (or any amendment or supplement thereto) or
otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Contracts or in the
Contract or Fund registration statement, the Contract or
Fund prospectus or sales literature for the Contracts or
the Fund not supplied by the Underwriter or persons
under its control) or wrongful conduct of the
Underwriter or persons under its control, with respect
to the sale or distribution of the Contracts or Fund
shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the
Contracts (or
- 21 -
<PAGE> 22
any amendment thereof or supplement thereto), or the
omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make
the statement or statements therein not misleading in
light of the circumstances in which they were made, if
such statement or omission was made in reliance upon and
in conformity with information furnished to the Company
by or on behalf of the Underwriter; or
(iv) arise out of any material breach by the Underwriter of this
Agreement; except to the extent provided in Sections 8.2(b) and 8.4 hereof. This
indemnification shall be in addition to any liability which the Underwriter may
otherwise have.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an indemnified party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his or her
duties or by reason of his or her reckless disregard of obligations and duties
under this Agreement or to the Company or the Accounts.
8.2(c). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Accounts.
8.3. INDEMNIFICATION BY THE FUND
8.3(a). The Fund agrees to indemnify and hold harmless the Company and
each of its directors, officers, employees or agents and each person, if any,
who controls or is associated with the Company within the meaning of such terms
under the federal
- 22 -
<PAGE> 23
securities laws (collectively, the "indemnified parties" for the purpose of this
Section 8.3) against any and all losses, claims, damages or liabilities
(including amounts paid in settlement with the written consent of the Fund) or
litigation (including legal and other expenses) to which they or any of them may
become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained
in the registration statement or prospectus for the Fund
or sales literature of the Fund (or any amendment or
supplement thereto), or arise out of or are based upon
the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary
to make the statements therein not misleading in light
of the circumstances in which they were made; provided
that this agreement to indemnify shall not apply if such
statement or omission or alleged statement or alleged
omission was made in reliance upon and in conformity
with information furnished to the Fund by or on behalf
of the Company for use in the registration statement or
prospectus for the Fund or sales literature for the Fund
(or any amendment or supplement thereto) or otherwise
for use in connection with the sale or distribution of
the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Contracts or the
Contract or Fund registration statement or the Contract
or Fund prospectus or sales literature for the Contract
or the Fund not supplied by the Fund or persons under
its control) or wrongful conduct of the Fund or the
Fund's investment adviser or persons under their
control, with respect to the sale or
- 23 -
<PAGE> 24
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in
the registration statement or prospectus or
sales literature covering the Contracts (or any
amendment or supplement thereto), or the
omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading in light of the circumstances in
which they were made, if such statement or
omission was made in reliance upon and in
conformity with information furnished by or on
behalf of the Fund to the Company; or
(iv) arise as a result of any failure by the Fund to
provide the services and furnish the materials
under the terms of this Agreement (including a
failure, whether unintentional or in good faith
or otherwise, to comply with the diversification
requirements specified in Article VI of this
Agreement); or
(v) arise out of any material breach by the Fund of
this Agreement;
except to the extent provided in Section 8.3(b) and 8.4 hereof. This
indemnification shall be in addition to any liability which the Fund may
otherwise have.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an indemnified party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his or her
duties or by reason of his or her reckless disregard of obligations or duties
under this Agreement or to the Company or the Accounts.
8.3(c). The indemnified parties will promptly notify the
Fund of the commencement of any litigation or proceedings against
- 24 -
<PAGE> 25
them in connection with the issuance or sale of the Fund Shares or the Contracts
or the operation of the Fund.
8.4. INDEMNIFICATION PROCEDURE
Any person obligated to provide indemnification under this Article VIII
("indemnifying party" for the purpose of this Section 8.4) shall not be liable
under the indemnification provisions of this Article VIII with respect to any
claim made against a party entitled to indemnification under this Article VIII
("indemnified party" for the purpose of this Section 8.4) unless such
indemnified party shall have notified the indemnifying party in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
indemnified party (or after such party shall have received notice of such
service on any designated agent), but failure to notify the indemnifying party
of any such claim shall not relieve the indemnifying party from any liability
which it may have to the indemnified party against whom such action is brought
under the indemnification provision of this Article VIII, except to the extent
that the failure to notify results in the failure of actual notice to the
indemnifying party and such indemnifying party is damaged solely as a result of
failure to give such notice. In case any such action is brought against the
indemnified party, the indemnifying party will be entitled to participate, at
its own expense, in the defense thereof. The indemnifying party also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the
- 25 -
<PAGE> 26
action. After notice from the indemnifying party to the indemnified party of
the indemnifying party's election to assume the defense thereof, the indemnified
party shall bear the fees and expenses of any additional counsel retained by it,
and the indemnifying party will not be liable to such party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation, unless (i) the indemnifying party and the indemnified party
shall have mutually agreed to the retention of such counsel or (ii) the named
parties to any such proceeding (including any impleaded parties) include both
the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. The indemnifying party shall not be liable for
any settlement of any proceeding effected without its written consent but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled to
the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
- 26 -
<PAGE> 27
ARTICLE IX. APPLICABLE LAW.
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Delaware.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC grant
(including, but not limited to, the Mixed and Shared Funding Exemptive Order)
and the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon one-year advance
written notice to the other parties; or
(b) at the option of the Company if shares of all Portfolios are not
reasonably available to meet the requirements of the Contracts as determined by
the Company. Prompt notice of the election to terminate for such cause shall be
furnished by the Company; or
(c) at the option of the Fund upon institution of formal proceedings
against the Company by the NASD, the SEC, the -Pennsylvania Insurance
Commissioner or any other regulatory body regarding the Company's duties under
this Agreement or related to the sale of the Contracts, the operation of the
Accounts, or the purchase of the Fund shares; or
- 27 -
<PAGE> 28
(d) at the option of the Company upon institution of formal proceedings
against the Fund by the NASD, the SEC, or any state securities or insurance
department or any other regulatory body; or
(e) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals and/or the vote of the Contract owners having an
interest in the Account (or any sub-account) to substitute the shares of another
investment company for the corresponding Portfolio shares of the Fund in
accordance with the terms of the Contracts for which those Portfolio shares had
been selected to serve as the underlying investment media. The Company will give
30 days' prior written notice to the Fund of the date of any proposed vote or
other action taken to replace the Fund's shares; or
(f) at the option of the Company or the Fund upon a determination by a
majority of the Directors of the Fund, or a majority of its disinterested
Directors, that an irreconcilable material conflict exists among the interests
of (i) all contract owners of variable insurance products of all separate
accounts or (ii) the interests of the Participating Insurance Companies
investing in the Fund; or
(g) at the option of the Company if the Company has withdrawn the
Account's investment in the Fund because the Company's disregard of voting
instructions could conflict with the majority of contract owner voting
instructions and if the Company's judgment represents a minority position or
would preclude a
- 28 -
<PAGE> 29
majority vote; or
(h) at the option of the Company if the Company has withdrawn the
Account or Accounts investment in the Fund because a particular state insurance
regulator's decision applicable to the Company conflicts with the majority of
other state insurance regulators;
(i) at the option of the Company if the Fund ceases to qualify as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, or under any successor or similar provision, or if the Company reasonably
believes that the Fund may fail to so qualify; or
(j) at the option of the Company if the Fund fails
to meet the diversification requirements specified in Article VI
hereof; or
(k) at the option of any party to this Agreement, upon another party's
material breach of any provision of this Agreement.
10.2. It is understood and agreed that the right to terminate this
Agreement pursuant to Section 10.1(a) may be exercised for any reason or for no
reason.
10.3. Except as necessary to implement Contract owner initiated
transactions, or as required by state insurance laws or regulations, the Company
shall not redeem Fund shares attributable to the Contracts (as opposed to Fund
shares attributable to the Company's assets held in the Account), and the
Company shall not prevent Contract owners from allocating payments to a
Portfolio
- 29 -
<PAGE> 30
that was otherwise available under the Contracts, until 90 days after the
Company shall have notified the Fund or Underwriter of its intention to do so.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund;
Mr. Stanley R. Reber
President
Market Street Fund, Inc.
1600 Market Street
Philadelphia, PA 19103
If to the Company:
Ms. Linda E. Senker
Legal Officer
Providentmutual Life and Annuity Company of America
1600 Market Street
Philadelphia, PA 19103
If to the Underwriter:
Mr. Lance Reihl
President
PML Securities Company
Christiana Executive Campus
P.O. Box 15626
Wilmington, DE 19850
ARTICLE XII. MISCELLANEOUS
12.1. All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Directors, officers, agents or
- 30 -
<PAGE> 31
shareholders assume any personal liability for obligations entered
into on behalf of the Fund.
12.2. Subject to law and regulatory authority, each party hereto shall
treat as confidential all information reasonably identified as such in writing
by any other party hereto (including without limitation the names and addresses
of the owners of the Contracts) and, except as contemplated by this Agreement,
shall not disclose, disseminate or utilize such confidential information until
such time as it may come into the public domain without the express prior
written consent of the affected party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6. This Agreement shall not be assigned by any party hereto without
the prior written consent of all the parties.
12.7. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its
- 31 -
<PAGE> 32
books and records in connection with any investigation or inquiry relating to
this Agreement or the transactions contemplated hereby.
12.8. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate action, as applicable, by such party
and when so executed and delivered this Agreement will be the valid and binding
obligation of such party enforceable in accordance with its terms.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed hereto as of the date specified below.
Company:
PROVIDENTMUTUAL LIFE AND ANNUITY
COMPANY OF AMERICA
SEAL By: _______________________________________
Date: _____________________________________
Fund:
MARKET STREET FUND, INC.
SEAL By: _______________________________________
Date: _____________________________________
Underwriter:
PML SECURITIES COMPANY
SEAL By: _______________________________________
Date: _____________________________________
- 32 -
<PAGE> 1
EXHIBIT 9(e)(iv)
Amendment No. 1, dated June 30, 1997,
to the
Participation Agreement
dated January 30, 1996
By and Among
MARKET STREET FUND, INC.
and
NATIONAL LIFE INSURANCE COMPANY
and
1717 CAPITAL MANAGEMENT COMPANY
(formerly PML SECURITIES COMPANY)
This Amendment No. 1, dated as of June 30, 1997, to the Participation
Agreement dated January 30, 1996 (the "Participation Agreement"), by and among
NATIONAL LIFE INSURANCE COMPANY, a Vermont insurance company (the "Company"),
the MARKET STREET FUND, INC., an open-end diversified investment company
organized under the laws of the State of Maryland (the "Fund") and 1717 CAPITAL
MANAGEMENT COMPANY (formerly PML SECURITIES COMPANY), a Delaware corporation
(the "Underwriter"), is made and entered into as of June 30, 1997.
WHEREAS, the Company has formed a new separate account which is to
offer variable annuity contracts, such separate account being known as
"National Variable Annuity Account II" (the "New Separate Account"); and
WHEREAS, the Company desires to purchase shares of the Portfolios on
behalf of the New Separate Account to fund variable annuity contracts, an the
Fund and the Underwriter are willing to to sell such shares to the Company for
such purpose;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree to amend the Participation
Agreement as follows:
1. Definitions. Unless otherwise specifically provided for
herein, all capitalized terms defined in the Participation Agreement shall have
the same meanings when used herein as in the Participation Agreement. The
definition of the term "Policy" is hereby broadened to include the variable
annuity contracts to be offered by the New Separate Account, as well as the
flexible premium adjustable benefit variable life insurance policies offered by
National Variable Life Insurance Account, and the definition of the term
"Account" shall mean, collectively, National Variable Life Insurance Account
and the New Separate Account.
2. Sale of Fund Shares. The Underwriter agrees to sell shares of
the Fund, and the Fund agrees to make available its shares for such sale, to
the Company on behalf of the New Separate Account, on the same terms and
conditions as the Underwriter currently sells shares of the Fund, and the Fund
currently makes its shares available for such sale to the Company on behalf of
the National Variable Life Insurance Account.
<PAGE> 2
3. Section 2.2 is hereby amended to add the words "or annuity
contracts" after the word "policies" in the first sentence thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment No. 1 to the Participation Agreement to be executed in its name and
behalf by its duly authorized representative as of the date set forth above.
NATIONAL LIFE INSURANCE COMPANY
/s/ MARGARET K. ARTHUR
-------------------------------------------
by: Margaret K. Arthur, Senior Vice President
MARKET STREET FUND, INC.
[sig]
-------------------------------------------
by:
1717 CAPITAL MANAGEMENT COMPANY
[sig]
-------------------------------------------
by:
<PAGE> 1
EXHIBIT 10
- --------------------------------------------------------------------------------
MARKET STREET FUND, INC.
1050 Westlakes Drive, Berwyn, PA 19312-2419
Telephone (610) 407-1717, Fax (610) 407-1438
- --------------------------------------------------------------------------------
April 23, 1998
Market Street Fund, Inc.
1050 Westlakes Drive
Berwyn, PA 19312
Re: Market Street Fund, Inc., Post-Effective
Amendment No. 19, File No. 2-98755
Dear Sirs/Madames:
This opinion is furnished in connection with the filing of Post-Effective
Amendment No. 19 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 Prospectuses 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
Prospectuses, 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,
/s/ Adam Scaramella
Adam Scaramella
Legal Officer
AS/ja
<PAGE> 1
EXHIBIT 11.a
[Sutherland, Asbill & Brennan LLP Letterhead]
April 22, 1997
Market Street Fund, Inc.
103 Bellevue Parkway
Wilmington, DE 19809
Directors:
We hereby consent to the reference to our name under the caption "Other
Services -- Legal Matters" in the Statement of Additional Information filed as
part of the Post-Effective Amendment No. 19 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 LLP
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. 19 to
the Registration Statement (No. 2-98755) on Form N-1A under the Securities Act
of 1933, as amended and Amendment No. 20 under the Investment Company Act of
1940, as amended, respectively, of Market Street Fund, Inc.
- The inclusion of our report dated February 10, 1998 on our audit of
the financial statements and financial highlights of Market Street
Fund, Inc. for the year ended December 31, 1997 in the Statement of
Additional Information.
- The incorporation by references of our report dated February 10, 1998
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 23, 1998
<PAGE> 1
EXHIBIT 19
POWER OF ATTORNEY
Know all men by these presents:
That I, LEO SLACK, a member of the Board of Directors of MARKET STREET FUND,
INC., do hereby make constitute and appoint as my true and lawful attorneys in
fact, ADAM SCARAMELLA and WILLIAM P. LOESCHE, or either of them severally for
me and in my name, place and stead to sign the following registration
statements and any and all amendments thereto on behalf of MARKET STREET FUND,
INC. and file with the Securities and Exchange Commission:
Registration Statements under the Securities Act of 1933 and/or the
Investment Company Act of 1940.
Such appointment shall remain valid and in effect for so long as I shall be a
member of the Board of Directors of MARKET STREET FUND, INC. and for so long as
either ADAM SCARAMELLA and/or WILLIAM P. LOESCHE shall be employees of PROVIDENT
MUTUAL LIFE INSURANCE COMPANY.
IN WITNESS WHEREOF, I have hereunto set my hand this 25 day of February, 1998.
/s/ LEO SLACK
------------------------
LEO SLACK
State of Pennsylvania
:ss
County of Chester
On this 25 day of Feb, 1998, before me personally appeared LEO SLACK, to
me known and known to me to be the person mentioned and described in and who
executed the foregoing instrument and he duly acknowledged to me that he
executed the same.
My commission expires: /s/ [sig]
-------------------------
Sept. 26, 2000 Notary Public
<PAGE> 2
POWER OF ATTORNEY
Know all men by these presents:
That I, A. Gilbert Heebner, a member of the Board of Directors of MARKET STREET
FUND, INC., do hereby make constitute and appoint as my true and lawful
attorneys in fact, ADAM SCARAMELLA and WILLIAM P. LOESCHE, or either of them
severally for me and in my name, place and stead to sign the following
registration statements and any and all amendments thereto on behalf of MARKET
STREET FUND, INC. and file with the Securities and Exchange Commission:
Registration Statements under the Securities Act of 1933 and/or the
Investment Company Act of 1940.
Such appointment shall remain valid and in effect for so long as I shall be a
member of the Board of Directors of MARKET STREET FUND, INC. and for so long as
either ADAM SCARAMELLA and/or WILLIAM P. LOESCHE shall be employees of
PROVIDENT MUTUAL LIFE INSURANCE COMPANY.
IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of October, 1997.
/s/ A. GILBERT HEEBNER
------------------------
A. Gilbert Heebner
Commonwealth of PENNSYLVANIA
:ss
County of CHESTER
On this 23rd day of October, 1997, before me personally appeared A. Gilbert
Heebner, to me known and known to me to be the person mentioned and described
in and who executed the foregoing instrument and he duly acknowledged to me
that he executed the same.
My commission expires: /s/ JENNIFER J. AVILES
-------------------------
Notary Public
NOTARIAL SEAL
JENNIFER J. AVILES, Notary Public
Tredyffrin Twp., Chester County
My Commission Expires July 24, 2000
<PAGE> 3
POWER OF ATTORNEY
Know all men by these presents:
That I, Edward Stouch, a member of the Board of Directors of MARKET STREET
FUND, INC., do hereby make constitute and appoint as my true and lawful
attorneys in fact, ADAM SCARAMELLA and WILLIAM P. LOESCHE, or either of them
severally for me and in my name, place and stead to sign the following
registration statements and any and all amendments thereto on behalf of MARKET
STREET FUND, INC. and file with the Securities and Exchange Commission:
Registration Statements under the Securities Act of 1933 and/or the
Investment Company Act of 1940.
Such appointment shall remain valid and in effect for so long as I shall be a
member of the Board of Directors of MARKET STREET FUND, INC. and for so long as
either ADAM SCARAMELLA and/or WILLIAM P. LOESCHE shall be employees of
PROVIDENT MUTUAL LIFE INSURANCE COMPANY.
IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of October, 1997.
/s/ EDWARD STOUCH
------------------------
Edward Stouch
Commonwealth of PENNSYLVANIA
:ss
County of CHESTER
On this 23rd day of October 1997, before me personally appeared Edward Stouch,
to me known and known to me to be the person mentioned and described
in and who executed the foregoing instrument and he duly acknowledged to me
that he executed the same.
My commission expires: /s/ JENNIFER J. AVILES
-------------------------
Notary Public
NOTARIAL SEAL
JENNIFER J. AVILES, Notary Public
Tredyffrin Twp., Chester County
My Commission Expires July 24, 2000
<PAGE> 4
POWER OF ATTORNEY
Know all men by these presents:
That I, Alan Gart, a member of the Board of Directors of MARKET STREET
FUND, INC., do hereby make constitute and appoint as my true and lawful
attorneys in fact, ADAM SCARAMELLA and WILLIAM P. LOESCHE, or either of them
severally for me and in my name, place and stead to sign the following
registration statements and any and all amendments thereto on behalf of MARKET
STREET FUND, INC. and file with the Securities and Exchange Commission:
Registration Statements under the Securities Act of 1933 and/or the
Investment Company Act of 1940.
Such appointment shall remain valid and in effect for so long as I shall be a
member of the Board of Directors of MARKET STREET FUND, INC. and for so long as
either ADAM SCARAMELLA and/or WILLIAM P. LOESCHE shall be employees of
PROVIDENT MUTUAL LIFE INSURANCE COMPANY.
IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of October, 1997.
/s/ ALAN GART
------------------------
ALAN GART
Commonwealth of PENNSYLVANIA
:SS
County of CHESTER
On this 23rd day of October 1997, before me personally appeared Alan Gart,
to me known and known to me to be the person mentioned and described
in and who executed the foregoing instrument and he duly acknowledged to me
that he executed the same.
My commission expires: /s/ JENNIFER J. AVILES
-------------------------
Notary Public
NOTARIAL SEAL
JENNIFER J. AVILES, Notary Public
Tredyffrin Twp., Chester County
My Commission Expires July 24, 2000
<TABLE> <S> <C>
<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-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 210344965
<INVESTMENTS-AT-VALUE> 228109281
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