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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Market Street Fund, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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MARKET STREET FUND, INC.
103 Bellevue Parkway
Wilmington, Delaware 19809
NOTICE OF A SPECIAL
MEETING OF SHAREHOLDERS OF THE
ALL PRO SMALL CAP VALUE PORTFOLIO
TO BE HELD ON
OCTOBER 30, 1998
To owners of variable life insurance policies and variable annuity contracts
issued by Provident Mutual Life Insurance Company ("PMLIC") or Providentmutual
Life and Annuity Company of America ("PLACA") entitled to give voting
instructions in connection with a separate account of PMLIC or PLACA.
Notice is hereby given that a Special Meeting of Shareholders (the "Meeting")
of the All Pro Small Cap Value Portfolio (the "Portfolio") of Market Street
Fund, Inc. (the "Fund") will be held on October 30, 1998 at 9:00 a.m., Eastern
Time, at the offices of Provident Mutual Life Insurance Company (in the third
floor Executive Conference Room) at 1050 Westlakes Drive, Berwyn, Pennsylvania
19312.
The Meeting will be held for the following purposes:
1. To approve or disapprove an Investment Sub-Advisory Agreement
between 1838 Investment Advisors, Inc. ("1838 Inc.") and
Providentmutual Investment Management Company ("PIMC"),
pursuant to which 1838 Inc. will serve as an investment
sub-adviser to the All Pro Small Cap Value Portfolio.
2. To transact such other business as may properly come before
the Meeting or any adjournment(s) thereof.
PMLIC itself and certain separate accounts supporting variable life
insurance policies and variable annuity contracts issued by PMLIC and PLACA,
respectively, are the only shareholders of the Portfolio. However, each of
PMLIC and PLACA hereby solicits and agrees to vote the shares of the Portfolio
at the Meeting in accordance with timely instructions received from owners of
variable life insurance policies and variable annuity contracts ("variable
contracts") having contract values allocated to separate accounts invested in
such shares.
As a variable contract owner of record at the close of business on
September 28, 1998, you have the right to instruct PMLIC or PLACA, as
applicable, as to the manner in which shares of the Portfolio attributable to
your variable contract should be voted. To assist you in giving your
instructions, a Voting Instruction Form is enclosed that reflects
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the number of shares of the Portfolio for which you are entitled to give voting
instructions. In addition, a Proxy Statement for the Fund is attached to this
Notice and describes the matters to be voted upon at the Meeting or any
adjournment(s) thereof. The Annual Report for the Fund for the fiscal year
ended December 31, 1997 previously has been mailed to all owners invested in
the Portfolio as of February 15, 1998.
Copies of the Fund's annual report and most recent semi-annual report
succeeding the annual report, if any, will be furnished without charge upon
request. Such request should be directed to Joseph Wilson at Provident Mutual
Life Insurance Company, 1050 Westlakes Drive, Berwyn, PA 19312, (800) 523-4681.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING,
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED VOTING INSTRUCTION FORM AND RETURN
IT PROMPTLY IN THE ENCLOSED POSTAGE PREPAID ENVELOPE.
By Order of the Board of Directors
Adam Scaramella
Secretary
Berwyn, Pennsylvania
October 16, 1998
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MARKET STREET FUND, INC.
103 Bellevue Parkway
Wilmington, Delaware 19809
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PROXY STATEMENT
OCTOBER 16, 1998
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This Proxy Statement is being furnished on behalf of the board of
directors of Market Street Fund, Inc. (the "Fund") by Provident Mutual Life
Insurance Company ("PMLIC") and Providentmutual Life and Annuity Company of
America ("PLACA") to owners of certain variable life insurance policies and
variable annuity contracts (collectively, the "variable contracts") issued by
PMLIC and PLACA, respectively. Each such variable contract has a contract
value on the record date allocated to a separate account of PMLIC or PLACA and
is invested in classes of shares of the Fund ("Shares") representing an
interest the All Pro Small Cap Value Portfolio (the "Portfolio"), an investment
portfolio of the Fund.
This Proxy Statement is being furnished in connection with the
solicitation of voting instructions as described herein from owners of variable
contracts for use at a special meeting (the "Meeting") of shareholders of the
Portfolio. The Meeting is to be held on October 30, 1998, at 9:00 a.m.,
Eastern Time, at the offices of Provident Mutual Life Insurance Company (in the
third floor Executive Conference Room), 1050 Westlakes Drive, Berwyn,
Pennsylvania for the purposes set forth below and in the accompanying Notice of
Special Meeting. The approximate mailing date of this Proxy Statement and the
Voting Instruction Form is October 16, 1998.
The costs of the Meeting, including the solicitation of voting
instructions from the respective owners, will be paid by PMLIC. The
solicitation of instructions will be made primarily by mail but may include
(without cost to the Fund or the Portfolio), telephone, telegraphic or oral
communications by employees of PMLIC or its affiliates, who will not be
separately compensated for such activities. PMLIC has engaged MIS Corporation
to assist in the solicitation.
At the Meeting, shareholders of the Portfolio will be asked:
1. To approve or disapprove an Investment Sub-Advisory Agreement
between 1838 Investment Advisors, Inc. ("1838 Inc.") and
Providentmutual Investment Management Company ("PIMC"),
pursuant to which 1838 Inc. will serve as an investment
sub-adviser to the All Pro Small Cap Value Portfolio.
2. To transact such other business as may properly come before
the Meeting or any adjournment(s) thereof.
<PAGE> 5
GENERAL VOTING INFORMATION
This Proxy Statement is being furnished to owners on behalf of the
board of directors of the Fund (the "Board") in connection with the
solicitation by PMLIC and PLACA of voting instructions from owners with regard
to the Meeting to be held on October 30, 1998. The Fund's Board has called the
Meeting to approve or disapprove an Investment Sub-Advisory Agreement between
1838 Inc. and PIMC, pursuant to which 1838 Inc. will serve as investment
sub-adviser to the Portfolio.
PMLIC itself and certain separate accounts supporting variable
contracts issued by PMLIC and PLACA, respectively, are the only shareholders of
the Portfolio. However, each of PMLIC and PLACA has agreed to vote the
applicable Shares at the Meeting in accordance with the timely instructions
received from owners (and in some case annuitants and/or beneficiaries)
("owners") of variable contracts having contract values allocated to the
following separate accounts: Providentmutual Variable Life Separate Account and
Providentmutual Variable Annuity Separate Account, each a separate account of
PLACA; and Provident Mutual Variable Annuity Separate Account and Provident
Mutual Variable Separate Account, each a separate account of PMLIC.
PMLIC and PLACA each will vote the Shares at the Meeting in accordance
with the timely instructions received from persons entitled to give voting
instructions under variable contracts funded through the separate accounts of
PMLIC and PLACA, as applicable. All properly executed Voting Instruction Forms
must be received by MIS Corporation by 12:00 p.m., Eastern time, October 28,
1998, at P.O. Box 9122, Hingham, MA 02043-9717. Each owner has the right to
instruct PMLIC or PLACA, as applicable, as to the number of Shares (and
fractional Shares) that, when added together, have an aggregate value on the
record date equal to the contract value on the record date under that owner's
contract allocated to each separate account holding Shares.
PMLIC and PLACA will vote Shares attributable to variable contracts as
to which no voting instructions are received in proportion (for, against or
abstain) to those for which timely instructions are received. PMLIC also will
vote Shares not attributable to variable contracts (i.e., representing seed
money investments in the Portfolio made by PMLIC) in proportion to those for
which instructions are received from owners of variable contracts. If a Voting
Instruction Form is received that does not specify a choice, PMLIC or PLACA, as
applicable, will consider its timely receipt as an instruction to vote in favor
of the proposal(s) to which it relates. In certain circumstances, PMLIC or
PLACA has the right to disregard voting instructions from certain owners. PMLIC
and PLACA do not believe that these circumstances exist with respect to matters
currently before shareholders. Owners may revoke previously submitted voting
instructions given to PMLIC or PLACA at any time prior to the Meeting by
notifying PMLIC or PLACA, as appropriate, or the Secretary of the Fund, in
writing.
The number of Shares of stock in the Portfolio for which an owner may
give voting instructions is equal to the number of Shares, or fraction of
Shares, held in the
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account attributable to such variable contract owner as of the record date.
Each Share of the Portfolio's outstanding capital stock is entitled to one vote
and fractional votes are counted. Approval of the Investment Sub-Advisory
Agreement requires the affirmative vote of the lesser of (1) more than 50% of
the Shares entitled to be cast, or (2) 67% or more of the Shares present (in
person or by proxy) at the Meeting, if the holders of more than 50% of the
Shares entitled to be cast for the Portfolio are present.
The Board has fixed September 28, 1998 as the record date for the
determination of shareholders entitled to notice of and to vote at the Meeting.
All Shares for which PMLIC or PLACA, as applicable, timely receives properly
executed voting instructions, which are not subsequently revoked prior to the
Meeting, will be voted at the Meeting in accordance with such instructions. To
the best knowledge of the Board and PMLIC and PLACA, there are no owners, as of
September 28, 1998, who have the right to instruct PMLIC or PLACA, as
applicable, as to 5% or more of the stock of the Portfolio. The number of
Shares of capital stock in the Portfolio outstanding as of September 28, 1998
was 668,589.34 Shares.
APPROVAL OR DISAPPROVAL OF THE PROPOSED INVESTMENT SUB-
ADVISORY AGREEMENT BETWEEN PIMC AND 1838 INC.
BACKGROUND OF THE PROPOSAL
The Fund, a Maryland corporation organized on March 21, 1985, is
registered with the U.S. Securities and Exchange Commission as an open-end
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"). PIMC serves as the investment adviser to the Fund
and the Portfolio. PIMC has its principal offices at 1050 Westlakes Drive,
Berwyn, Pennsylvania 19312. PIMC was incorporated under the laws of the state
of Pennsylvania on May 9, 1983, and is an indirect, wholly-owned subsidiary of
PMLIC. PMLIC is an insurance company providing individual and group life
insurance, annuities, and accident and health insurance.
Through July 31, 1998, 1838 Investment Advisors, L.P. ("1838 L.P.")
provided sub-advisory services to PIMC and the Portfolio pursuant to a
sub-advisory agreement between PIMC and 1838 L.P. (the "Prior Sub-Advisory
Agreement") that became effective on May 1, 1998. Pursuant to the Prior
Sub-Advisory Agreement, 1838 L.P. managed a portion of the Portfolio's assets
(hereinafter, the "Portfolio Segment") as directed from time to time by PIMC.
1838 L.P. was organized as a Delaware limited partnership and was registered as
an investment adviser under the Investment Advisers Act of 1940, as amended
(the "Advisers Act"). 1838 Inc. owned a majority (99.33%) of the outstanding
partnership interests in 1838 L.P., and the remaining interests (0.67%) were
owned by W. Thacher Brown, the president of 1838 L.P. The address of the
principal offices of 1838 L.P. were located at Five Radnor Corporate Center,
Suite 320, 100 Matsonford Road, Radnor, Pennsylvania 19087.
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Effective July 31, 1998, pursuant to an Agreement and Plan of Merger
dated June 19, 1998, MBIA Inc. ("MBIA") acquired all of the outstanding shares
of 1838 Inc. through a stock exchange whereby MBIA issued shares of its common
stock in exchange for shares of 1838 Inc. (the "Acquisition"). Because 1838
Inc. was the controlling interest holder in 1838 L.P., the change of control of
1838 Inc. resulted in a change of control of 1838 L.P., constituting an
assignment of the Prior Sub-Advisory Agreement within the meaning of Section
2(a)(4) of the 1940 Act. By operation of law, and consistent with the express
terms of the Prior Sub-Advisory Agreement, this assignment resulted in an
immediate termination of such Agreement.
Following the consummation of the Acquisition, MBIA: (1) contributed
the shares it owned in 1838 Inc. to MBIA Asset Management Corporation, a
holding company and wholly owned subsidiary of MBIA which was established to
consolidate MBIA's investment management business by holding all of the asset
management subsidiaries of MBIA; and (2) consolidated the operations of 1838
L.P. into 1838 Inc., with 1838 Inc. succeeding to the business of 1838 L.P.
The Board approved a new sub-advisory agreement between PIMC and 1838
Inc. (the "New Sub-Advisory Agreement") at its September 24, 1998 Board
meeting. The Board believes that the New Sub-Advisory Agreement is in the best
interests of the Portfolio and its shareholders, and recommends that
shareholders vote to approve the New Sub-Advisory Agreement. If the New
Sub-Advisory Agreement is not approved by shareholders, the Board intends to
continue the interim relationship with 1838 Inc. until it is able to evaluate
and obtain necessary approval of alternative advisory arrangements.
MATERIAL TERMS OF THE PRIOR SUB-ADVISORY AGREEMENT
The Prior Sub-Advisory Agreement was approved by the Board, including
a majority of the directors who are not parties to the Prior Sub-Advisory
Agreement or interested persons of such parties ("independent directors"), at a
meeting held for that purpose on April 29, 1998, and by the initial shareholder
of the Portfolio on May 7, 1998. Pursuant to the Prior Sub-Advisory Agreement,
1838 L.P. was engaged as sub-adviser to the Portfolio to manage the investment
and reinvestment of the Portfolio Segment, subject to the oversight and
supervision by PIMC and the officers and the Board of the Fund. Under the
terms of the Prior Sub-Advisory Agreement, 1838 L.P. was engaged to furnish
continuously an investment program for the Portfolio Segment and to 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
should be held in various securities, cash or other investments. In this
connection, 1838 L.P. was to provide PIMC and the officers and directors of the
Fund with such reports and documentation as the latter should reasonably
request regarding 1838 L.P.'s management of the Portfolio Segment assets.
1838 L.P. was required, at its own expense, to render the services set forth in
the Prior Sub-Advisory Agreement 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 such Agreement.
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The Prior Sub-Advisory Agreement provided that to the extent permitted
by the policy guidelines set forth in the Fund's current registration
statement, 1838 L.P. was 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 1838 L.P. believed would 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. Pursuant
to the Prior Sub-Advisory Agreement, 1838 L.P. was 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 1838 L.P. Moreover, 1838 L.P.'s services
under the Prior Sub-Advisory Agreement were not exclusive, and 1838 L.P. was
permitted under the Agreement to provide the same or similar services to other
clients.
The Prior Sub-Advisory Agreement provided that 1838 L.P. would not be
liable to PIMC, 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
thereunder or for any losses that may be sustained in the purchase, holding or
sale of any security, except (1) for willful misfeasance, bad faith or gross
negligence on the part of 1838 L.P. or its officers, directors or employees,
or reckless disregard by 1838 L.P. of its duties under the Prior Sub-Advisory
Agreement, and (2) 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.
The Prior Sub-Advisory Agreement stated that it could be terminated at
any time without the payment of any penalty, by the Board, 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 PIMC and 1838 L.P.,
or by PIMC, or by 1838 L.P., on sixty days written notice to the other. The
Prior Sub-Advisory Agreement would automatically terminate in the event of its
assignment or in the event of the termination of an the investment advisory
agreement between PIMC and the Fund regarding PIMC's management of the
Portfolio, which became effective on May 1, 1998.
The Prior Sub-Advisory Agreement provided that for the services
rendered, the facilities furnished and the expenses assumed by 1838 L.P., PIMC
would pay 1838 L.P. a monthly fee based on the average daily net assets of the
Portfolio Segment at the annual rate of 0.55% on all assets. Such sub-advisory
fee was to be accrued daily and paid to 1838 L.P. monthly. The Prior
Sub-Advisory Agreement contained no provisions prescribing limits on the
operating expenses of the Fund or the Portfolio.
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For the period from May 1, 1998 to July 31, 1998, pursuant to the
previous sub-advisory arrangements, 1838 L.P. received $2,542.12 for
sub-advisory services to the Portfolio.
REASONS FOR PROPOSING THE NEW INVESTMENT SUB-ADVISER
As discussed above, the Acquisition resulted in a change of "control"
of 1838 Inc. and, in turn, 1838 L.P., within the meaning of the 1940 Act.
Under the 1940 Act, a change in control of an investment sub-adviser, such as
1838 L.P., results in the assignment of any agreement that the sub-adviser may
have with respect to providing investment advice to an investment company such
as the Portfolio. By operation of law and consistent with the express terms of
the Prior Sub-Advisory Agreement, the Acquisition (and resultant change of
control of 1838 Inc.) caused the Agreement to terminate automatically on July
31, 1998.
Following the termination of the Prior Sub-Advisory Agreement, 1838
Inc., as the corporate successor to 1838 L.P., continued to serve as investment
sub-adviser to the Portfolio Segment. For its services as sub-adviser to the
Portfolio Segment during the interim period from July 31, 1998 until the
approval and effectiveness of the New Sub-Advisory Agreement, 1838 Inc. would
receive its costs for providing such services or the 0.55% sub-advisory fee
permitted under the Prior Sub-Advisory Agreement, whichever is less. The
Board has determined, and PIMC has agreed, that it is in the best interests of
the Fund and its shareholders for 1838 Inc. to continue to serve as the
investment sub-adviser for the Portfolio Segment pursuant to the New
Sub-Advisory Agreement.
At a meeting of the Board held on September 24, 1998, the directors,
including all of the independent directors present, unanimously approved and
voted to recommend to the shareholders of the Portfolio they approve the New
Sub-Advisory Agreement by and between PIMC and 1838 Inc. A copy of the New
Sub-Advisory Agreement is attached as Exhibit A.
Approval of the New Sub-Advisory Agreement will not result in an
increase in any fees payable by the Portfolio. PIMC will be solely responsible
for paying the sub-advisory fee to 1838 Inc. under the New Sub-Advisory
Agreement. If approved by the shareholders of the Portfolio, the New
Sub-Advisory Agreement will continue in effect for an initial term of two
years, and will continue from year to year thereafter, subject to approval
annually by (a) a vote of "a majority of the outstanding voting securities" of
the Portfolio or by the Board, and (b) in either event, by the vote of a
majority of the directors who are not parties to the New Sub-Advisory Agreement
or interested persons of any such party, cast in person at a meeting called for
such purpose.
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INFORMATION ABOUT 1838 INC.
1838 Inc., a subsidiary of MBIA, is a Delaware corporation located at
Five Radnor Corporate Center, Suite 320, 100 Matsonford Road, Radnor,
Pennsylvania 19087. 1838 Inc. is registered as an investment adviser under the
Advisers Act. As corporate successor to 1838 L.P., 1838 Inc. continues to
operate as 1838 L.P. has operated historically. 1838 Inc. offers large core
equity, fixed income, and international equity products in addition to its
small capitalization equity strategy. 1838 Inc. serves as an investment
adviser to several mutual funds, including the Portfolio. The majority of its
clients are institutional, while others are high net worth individuals. The
investment philosophy and procedures of 1838 Inc. remains the same as that of
1838 L.P., and the same portfolio managers who managed the Portfolio Segment
prior to the Acquisition would manage the Portfolio Segment as employees of
1838 Inc. Appendix A lists information about certain management personnel of
1838 Inc. Appendix B lists information about other investment companies or
portfolios for which 1838 Inc. serves as investment adviser that have an
investment objective similar to that of the Portfolio.
MBIA is a Connecticut corporation with principal offices at 113 King
Street, Armonk, New York 10504. MBIA, through its wholly-owned subsidiary,
MBIA Insurance Corporation, is an insurer of municipal bonds and structured
finance transactions. MBIA also is a provider of investment management
services to the public sector. MBIA's common stock is listed on the New York
Stock Exchange under the symbol "MBI."
INFORMATION CONCERNING THE NEW SUB-ADVISORY AGREEMENT
The New Sub-Advisory Agreement is virtually identical to the Prior
Sub-Advisory Agreement, except for a change in the effective and termination
dates and change of corporate structure and name of 1838 L.P. The duties that
1838 Inc. is required to perform under the New Sub-Advisory Agreement are
essentially the same as those provided by 1838 L.P. under the Prior
Sub-Advisory Agreement. In addition, there were no material changes in the
personnel who provide services under the New Sub-Advisory Agreement.
Accordingly, the Portfolio would receive the same sub-advisory services,
provided in the same manner and at the same fee levels, as it received under
the Prior Sub-Advisory Agreement. The New Sub-Advisory Agreement would become
effective upon shareholder approval. The following discussion of the New
Sub-Advisory Agreement is qualified in its entirety by reference to the
Agreement, a form of which is attached hereto as Exhibit A.
Pursuant to the New Sub-Advisory Agreement, 1838 Inc. would manage
the investment and reinvestment of the Portfolio Segment, subject to the
oversight and supervision by PIMC and the officers and the Board of the Fund.
Under the terms of the New Sub-Advisory Agreement, 1838 Inc. would furnish
continuously an investment program for the Portfolio Segment and determine,
from time to time in its discretion, the securities and other investments to be
purchased or sold or exchanged and what portions
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of the Portfolio Segment should be held in various securities, cash or other
investments. In this connection, 1838 Inc. would provide PIMC and the officers
and directors of the Fund with such reports and documentation as the latter
should reasonably request regarding 1838 Inc.'s management of the Portfolio
Segment assets. 1838 Inc. would be required, at its own expense, to render the
services set forth in the New Sub-Advisory Agreement 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 such Agreement.
The New Sub-Advisory Agreement provides that to the extent permitted
by the policy guidelines set forth in the Fund's current registration
statement, 1838 Inc. is authorized under the Agreement 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 1838 Inc. 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. 1838 Inc. 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 1838 Inc. 1838 Inc.'s services under the New Sub-Advisory Agreement
would not be exclusive, and it would be permitted to provide the same or
similar services to other clients.
The New Sub-Advisory Agreement provides that 1838 Inc. would not be
liable to PIMC, 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
thereunder or for any losses that may be sustained in the purchase, holding or
sale of any security, except (1) for willful misfeasance, bad faith or gross
negligence on the part of 1838 Inc. or its officers, directors or employees, or
reckless disregard by 1838 Inc. of its duties under the Agreement, and (2) 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.
The New Sub-Advisory Agreement may be terminated at any time without
the payment of any penalty, by the Board, 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 PIMC and 1838 Inc., or by PIMC, or by
1838 Inc., on sixty days written notice to the other. The New Sub-Advisory
Agreement automatically terminates in the event of its assignment or in the
event of the termination of the investment advisory agreement between PIMC and
the Fund regarding PIMC's management of the Portfolio, which became effective
on May 1, 1998.
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The New Sub-Advisory Agreement provides that for the services
rendered, the facilities furnished and the expenses assumed by 1838 Inc., PIMC
will pay 1838 Inc. a monthly fee based on the average daily net assets of the
Portfolio Segment at the annual rate of 0.55% on all assets. Such sub-advisory
fee would be accrued daily and paid to 1838 Inc. monthly. The New Sub-Advisory
Agreement contains no provisions prescribing limits on the operating expenses
of the Fund or the Portfolio.
DIRECTOR'S RECOMMENDATION
In determining whether it was appropriate to approve the New
Sub-Advisory Agreement and to recommend approval to shareholders, the Board,
including the independent directors, considered, among other things,
information about the following: (1) the sub-advisory fee to be received by
1838 Inc. from PIMC for services to the Portfolio and the fact that this fee is
identical to the sub-advisory fee received by 1838 L.P. from PIMC under the
Prior Sub-Advisory Agreement; (2) the continuity of senior management and
day-to-day control at 1838 Inc. after the Acquisition and internal
reorganization of 1838 L.P.; (3) the nature and quality of the services
required to be performed by 1838 Inc.; (4) the results achieved by 1838 L.P.
for the Portfolio in the past; (5) the personnel and research capabilities of
1838 Inc.; (6) the fact that the Board and the initial shareholder recently
approved the Prior Sub-Advisory Agreement; and (7) any significant regulatory
or compliance issues that might affect 1838 Inc.
In their deliberations regarding approval of the New Sub-Advisory
Agreement, the directors addressed most of their analysis to items (1), (2),
and (4) above. In connection with item (2) above, the directors carefully
considered the nature of the Acquisition and internal reorganization of 1838
L.P. and the possible changes in the operations and management that could
result therefrom. In particular, the Board made inquiries of a representative
of 1838 Inc. to determine whether the Acquisition and consolidating 1838 L.P.
into 1838 Inc. resulted in material changes in operations and/or management
that could affect the nature and quality of the services that 1838 Inc. would
provide to the Portfolio. The Board concluded that the Acquisition and
internal reorganization of 1838 Inc. did not result in operational or
management changes that would have a material adverse impact on the services
1838 Inc. would provide to the Portfolio. The directors also carefully
considered: (1) 1838 L.P.'s past performance for the Portfolio as compared with
that of similar mutual funds and appropriate indices; (2) the fact that the
persons making the investment decisions on behalf of the Portfolio under the
Prior Sub-Advisory Agreement would continue to do so under the New Sub-Advisory
Agreement; and (3) the fact that the fees proposed to be paid by PIMC to 1838
Inc. under the New Sub-Advisory Agreement were identical to those under the
Prior Sub-Advisory Agreement. The Board also considered that, as a subsidiary
of MBIA, 1838 Inc. would have access to personnel and resources of MBIA, which
should benefit the Portfolio. The directors determined that the proposed new
arrangements between PIMC and 1838 Inc. were reasonable.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF THE PORTFOLIO
VOTE "FOR" THE APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT WITH 1838 INC.
9
<PAGE> 13
REPORTS AVAILABLE
Copies of the Fund's annual report and most recent semi-annual report
succeeding the annual report, if any, will be furnished without charge upon
request. Such request should be directed to Joseph Wilson, Provident Mutual
Life Insurance Company, 1050 Westlakes Drive, Berwyn, PA 19312, (800) 523-4681.
SHAREHOLDER PROPOSALS
As a general matter, the Fund does not hold annual meetings of
shareholders, and, therefore, the anticipated date of the next special meeting
of shareholders of the Portfolio cannot be provided. Any shareholder proposal
that properly may be included in proxy solicitation materials for a special
meeting of shareholders must be received by the Fund a reasonable time prior to
the date voting instructions or proxy materials are mailed to shareholders.
INQUIRIES
Shareholders or owners may make inquiries by contacting their
registered sales representative or by writing or calling the Fund, PMLIC or
PLACA.
OTHER INFORMATION
Provident Financial Processing Corporation ("PFPC") provides certain
administrative services to the Fund pursuant to an administration agreement
between PFPC and the Fund. PFPC, located at 103 Bellevue Parkway, Wilmington,
Delaware 19809, is a wholly-owned subsidiary of PNC Bank.
1717 Capital Management Company ("1717") serves, without compensation
from the Fund, as principal underwriter to the Fund pursuant to an agreement
between 1717 and the Fund. 1717 is located at 300 Continental Drive, Newark,
Delaware 19713 and is a wholly-owned subsidiary of Provident Mutual Holding
Company.
OTHER BUSINESS
PMLIC, PLACA and the Fund know of no other matters to be brought
before the Meeting other than the matters set forth in this Proxy Statement,
but should any other matter requiring the vote of shareholders arise, the
persons named in the enclosed Voting Instruction Form or other substitute will
vote thereon according to their best judgment in the interest of the Fund.
10
<PAGE> 14
APPENDIX A
PRINCIPAL OFFICERS AND DIRECTORS OF 1838 INC.
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION
---- --------------------
<S> <C>
William Thacher Brown President and Director of 1838 Inc.
Gary C. Dunton Secretary and Director of 1838 Inc.
Margaret D. Garfunkel Treasurer and Director of 1838 Inc.
</TABLE>
- ------------------------------------
The address of each of the above-named individuals is Five Radnor Corporate
Center, Suite 320, 100 Matsonford Road, Radnor, Pennsylvania 19087.
OTHER OFFICERS OF 1838 INC. WHO ARE EXPECTED
TO MANAGE THE PORTFOLIO
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION
---- --------------------
<S> <C>
Edwin B. Powell Portfolio Manager
Cynthia R. Axelrod Portfolio Manager
J. Kelly Flynn Portfolio Manager
</TABLE>
- -----------------------------------
The address of each of the above-named individuals is Five Radnor Corporate
Center, Suite 320, 100 Matsonford Road, Radnor, Pennsylvania 19087.
<PAGE> 15
APPENDIX B
The table below provides information about other companies or
portfolios advised by 1838 Inc. that have a similar investment objective to
that of the All Pro Small Cap Value Portfolio.
<TABLE>
<CAPTION>
RATE OF SUBJECT TO VOLUNTARY
NAME OF COMPANY OR FUND SIZE COMPENSATION(1) EXPENSE LIMITATION
----------------------- ---- --------------- ------------------
<S> <C> <C> <C>
1838 Small Cap Equity Fund $33,980,928 0.75%(2) Yes
SIMT Small Cap Value Fund $ 147,117 0.50%(2) No
</TABLE>
- -------------------------------------
(1) As a percent of average daily net assets.
(2) As of September 30, 1998
<PAGE> 16
VOTING INSTRUCTION FORM
ALL PRO SMALL CAP VALUE PORTFOLIO OF
MARKET STREET FUND, INC.
VOTING INSTRUCTIONS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PROVIDENT
MUTUAL LIFE INSURANCE COMPANY OR PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF
AMERICA FOR A SPECIAL MEETING OF SHAREHOLDERS OF THE ALL PRO SMALL CAP
VALUE PORTFOLIO OF MARKET STREET FUND, INC. TO BE HELD ON
OCTOBER 30, 1998.
I hereby instruct Provident Mutual Life Insurance Company ("PMLIC") or
Providentmutual Life and Annuity Company of America ("PLACA"), as appropriate,
to vote the shares of the All Pro Small Cap Value Portfolio (the "Portfolio") of
Market Street Fund, Inc. (the "Fund") as to which I am entitled to give
instructions at the Special Meeting of Shareholders of the Portfolio (the
"Meeting") to be held on October 30, 1998, at 9:00 a.m. Eastern Time, at 1050
Westlakes Drive, Berwyn, Pennsylvania 19312, or any adjournment(s) thereof, as
follows:
PLEASE VOTE BY FILLING IN THE APPROPRIATE BOXES BELOW.
<TABLE>
<CAPTION>
Approve Disapprove Abstain
<S> <C> <C> <C>
1. To approve or disapprove an Investment Sub-Advisory Agreement between [ ] [ ] [ ]
1838 Investment Advisors, Inc. ("1838 Inc.") and Providentmutual
Investment Management Company, pursuant to which 1838 Inc. will serve
as an investment sub-adviser to the All Pro Small Cap Value
Portfolio.
2. In each such entity's discretion, PMLIC or PLACA, as applicable, is
authorized to vote upon such other business as may properly come
before the Meeting or any adjournment(s) thereof.
</TABLE>
PLEASE RETURN THIS VOTING INSTRUCTION FORM PROMPTLY
(Over)
<PAGE> 17
ALL PRO SMALL CAP VALUE PORTFOLIO VOTING INSTRUCTION FORM
OF MARKET STREET FUND, INC.
I hereby revoke any and all voting instructions with respect to such
shares heretofore given by me. I acknowledge receipt of the Proxy Statement
dated October 16, 1998. I REALIZE IF I SIGN THIS FORM WITHOUT CHECKING A BLOCK
WITH RESPECT TO ANY PROPOSAL LISTED, MY TIMELY RETURNING OF THIS FORM WILL BE
DEEMED TO BE AN INSTRUCTION TO VOTE IN FAVOR OF THE PROPOSAL.
THESE VOTING INSTRUCTIONS MAY BE REVOKED AT ANY TIME PRIOR TO THE MEETING BY
NOTIFYING THE SECRETARY OF PMLIC OR PLACA, AS APPROPRIATE, OR THE SECRETARY OF
THE FUND, IN WRITING.
<TABLE>
<S> <C>
Date: _____________ ___, 1998
-------------------------------------------------------------
Signature(s) - Please sign exactly as your name appears at left.
Please sign, date and return this Form promptly. Signature
should be exactly as name or names appear on this Voting
Instruction Form. If the individual signing the form is a
fiduciary (e.g., attorney, executor, trustee, guardian, etc.)
the individual's signature must be followed by his or her
full title.
</TABLE>
<PAGE> 18
EXHIBIT A
PROPOSED SUB-ADVISORY AGREEMENT FOR THE ALL PRO SMALL CAP VALUE PORTFOLIO
<PAGE> 19
INVESTMENT SUB-ADVISORY AGREEMENT
THIS INVESTMENT SUB-ADVISORY AGREEMENT ("Agreement"), made this ____
day of November, 1998 by and between PROVIDENTMUTUAL INVESTMENT MANAGEMENT
COMPANY, a Pennsylvania corporation (the "Adviser"), and 1838 INVESTMENT
ADVISORS, INC., a Delaware corporation (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 All Pro 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
A-1
<PAGE> 20
Portfolio. In connection with the selection of brokers or dealers and the
placing of purchase and sale orders with respect to 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
A-2
<PAGE> 21
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 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 Investment
Advisers Act of 1940, as amended (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 the 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 or authorize 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 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 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 Investment Company Act of 1940, as amended (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.
A-3
<PAGE> 22
11. 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 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
under 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 rate:
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.
A-4
<PAGE> 23
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 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 1940 Act, 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.
A-5
<PAGE> 24
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 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.
A-6
<PAGE> 25
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 (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:
Title:
ATTEST:
- --------------------------
1838 Investment Advisors, Inc.
By:
-------------------------------------
Name:
Title:
ATTEST:
- --------------------------
A-7
