MARKET STREET FUND INC, 485APOS, 1998-02-13

MARKET STREET FUND INC
485APOS, 1998-02-13

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY , 1998

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 18 [X]
AND/OR
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 19 [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

[ ] 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

[X] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(2) OF RULE 485

[ ] ON (DATE) PURSUANT TO PARAGRAPH (a)(2) OF RULE 485

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

- --------------------------------------------------------------------------------
<PAGE> 2

CROSS REFERENCE SHEET SHOWING LOCATION OF
INFORMATION IN PROSPECTUS

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

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

<CAPTION>
FORM N-1A ITEM STATEMENT OF ADDITIONAL INFORMATION
----------------------------------------------- --------------------------------------------
<C> <S> <C>
10. Cover Page..................................... Cover Page
11. Table of Contents.............................. Table of Contents
12. General Information and History................ General Information and History
13. Investment Objectives and Policies............. Investment Restrictions; Investment
Techniques and Risks
14. Management of the Registrant................... Management of the Fund
15. Control Persons and Principal Holders of
Securities................................... General Information and History;
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 pertains only to the following Portfolios:

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

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

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

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

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

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

All Pro Large Cap Growth Portfolio seeks to achieve long-term growth of
capital. 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 growth of
capital. 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.

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.

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

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

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

Form 15732A 5.98

<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........................... 19
Borrowing........................................................................ 19
Reverse Repurchase Agreements.................................................... 19
Covered Call Options............................................................. 20
Management............................................................................ 20
Directors........................................................................ 20
Advisers......................................................................... 20
Compensation of Advisers......................................................... 23
Portfolio Managers............................................................... 23
Expenses......................................................................... 25
Brokerage Allocation............................................................. 25
Administrative Services.......................................................... 25
Description of the Fund's Shares...................................................... 26
General.......................................................................... 26
Determination of Net Asset Value................................................. 26
Offer, Purchase and Redemption of Shares......................................... 26
Dividends, Distributions, and Taxes.............................................. 27
Other Information..................................................................... 28
Custodian, Transfer Agent and Dividend Disbursing Agent.......................... 28
</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 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 owners
and variable life insurance policy owners, or between the interests of owners of
contracts or policies issued by different insurance companies. Such material
conflicts could include, for example, differences in the federal income tax
treatment of variable annuity contracts versus variable life insurance policies.
The Fund does not currently foresee any disadvantage to variable annuity
contract or variable life insurance policy owners arising from the fact that
shares of the Fund might support both types of contracts or contracts of
different insurance companies. However, the Fund's board of directors will
continually monitor events to identify any material irreconcilable conflicts
that may arise and to determine what action, if any, should be taken to resolve
such conflicts. Such action may include redeeming the shares of the Fund held by
separate accounts involved in any material irreconcilable conflict.

3
<PAGE> 6

FINANCIAL HIGHLIGHTS

The following tables give information regarding income, expenses and
capital changes in the Growth, Money Market, Bond, Managed, Aggressive Growth
and International Portfolios attributable to a Portfolio share outstanding
throughout the periods indicated. The Aggressive Growth Portfolio commenced
operations on May 1, 1989, and the International Portfolio commenced operations
on November 1, 1991. The information in the tables has been derived from the
financial statements which have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as stated in their report on the Financial Statements
of the Fund which are included in the Statement of Additional Information. The
information in the following tables should be read in conjunction with the
Financial Statements and related notes. No information is presented for the All
Pro Portfolios because these Portfolios commenced operations as of the date of
this prospectus.

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

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

(a) On May 1, 1997, the investment adviser was changed from Newbold's Asset
Management Company 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, and 1991 were as follows: %, 0.50%, 0.61%, 0.67%, 0.76%, 0.82%, and
0.98%, respectively.

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

See accompanying notes to financial statements.

4
<PAGE> 7

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

<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
--------------------------------------------------------------------------------------------------------------
01/01/97 01/01/96(a) 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88
TO TO 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 12/31/89 12/31/88
-------- ----------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period......... $-- $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- ----------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM
INVESTMENT
OPERATIONS:
Net Investment
Income....... -- .05 .05 .04 .03 .03 .06 .07 .08 .07
-------- ----------- -------- -------- -------- -------- -------- -------- -------- --------
Total from
investment
operations... -- .05 .05 .04 .03 .03 .06 .07 .08 .07
LESS
DISTRIBUTIONS:
Dividends to
shareholders
from net
investment
income....... -- (.05) (.05) (.04) (.03) (.03) (.06) (.07) (.08) (.07)
-------- ----------- -------- -------- -------- -------- -------- -------- -------- --------
Total
Distributions... -- (.05) (.05) (.04) (.03) (.03) (.06) (.07) (.08) (.07)
-------- ----------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value,
end of
period......... $-- $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ======== ====== ====== ====== ====== ====== ====== ====== ======
Total
return..... --% 5.15% 5.61% 3.81% 2.59% 3.18% 5.69% 8.00% 9.02% 7.19%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end
of period
$(000)....... -- 54,197 34,615 21,040 12,506 8,138 7,047 5,411 4,632 4,219
Ratios of
expenses to
average net
assets(b).... --% .44% .50% .55% .65% .65% .53% .50% .55% .65%
Ratios of net
investment
income to
average net
assets....... --% 5.03% 5.47% 3.86% 2.56% 3.12% 5.49% 7.72% 8.66% 7.03%
</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
and 1991 were as follows: %, 0.44%, 0.50%, 0.59%, 0.65%, 0.73%, and
0.86%, respectively.

See accompanying notes to financial statements.

5
<PAGE> 8

FINANCIAL HIGHLIGHTS -- CONTINUED

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

<TABLE>
<CAPTION>
BOND PORTFOLIO
--------------------------------------------------------------------------------
01/01/97 01/01/96 01/01/95 01/01/94(a) 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.............................. $ -- $11.00 $ 9.73 $ 11.21 $10.73 $10.80 $10.04
-------- -------- ----------- ----------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............... -- .63 .65 .62 .60 .64 .77
Net realized and unrealized gain
(loss) on investments............. -- (.34) 1.27 (1.23) .48 (.03) .57
-------- -------- ----------- ----------- -------- -------- --------
Total from investment
operations.................... -- .29 1.92 (.61) 1.08 .61 1.34
-------- -------- ----------- ----------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends to shareholders from net
investment income................. -- (.62) (.65) (.60) (.60) (.68) (.58)
Dividends to shareholders from net
capital gains..................... -- (.00) (.00) (.27) (.00) (.00) (.00)
-------- -------- ----------- ----------- -------- -------- --------
Total distributions............. -- (.62) (.65) (.87) (.60) (.68) (.58)
-------- -------- ----------- ----------- -------- -------- --------
Net asset value, end of period........ $ -- 10.67 $ 11.00 $ 9.73 $11.21 $10.73 $10.80
====== ====== ========= ========= ====== ====== ======
Total return.................... --% 2.86% 20.45% (5.62)% 10.32% 5.95% 13.93%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000).... -- 17,087 14,402 10,098 10,160 6,710 4,365
Ratios of expenses to average net
assets(c)......................... --% 56% .60% .68% .75% .75% .63%
Ratios of net investment income to
average net assets................ --% 6.08% 6.36% 6.14% 5.53% 6.34% 7.58%
Portfolio turnover rate............. --% 133% 206% 151% 71% 4% 32%

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.............................. $ 10.09 $ 9.89 $10.02
----------- ----------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............... .79 .82 .76
Net realized and unrealized gain
(loss) on investments............. (.05) .20 (.13)
----------- ----------- --------
Total from investment
operations.................... .74 1.02 .63
----------- ----------- --------
LESS DISTRIBUTIONS:
Dividends to shareholders from net
investment income................. (.79) (.82) (.76)
Dividends to shareholders from net
capital gains..................... (.00) (.00) (.00)
----------- ----------- --------
Total distributions............. (.79) (.82) (.76)
----------- ----------- --------
Net asset value, end of period........ $ 10.04 $ 10.09 $ 9.89
========= ========= ======
Total return.................... 7.70% 10.57% 6.45%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000).... 3,711 3,311 2,473
Ratios of expenses to average net
assets(c)......................... .60% .62% .65%
Ratios of net investment income to
average net assets................ 8.00% 8.28% 7.74%
Portfolio turnover rate............. 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
and 1991 were as follows: %, 0.56%, 0.60%, 0.70%, 0.75%, 0.81% and 0.93%,
respectively.

See accompanying notes to financial statements.

6
<PAGE> 9

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

<TABLE>
<CAPTION>
MANAGED PORTFOLIO
-----------------------------------------------------------------------------------------------
01/01/97 01/01/96 01/01/95 01/01/94(a) 01/01/93 01/01/92 01/01/91 01/01/90
TO TO TO TO TO TO TO 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........................... $ -- $ 14.19 $11.94 $ 13.27 $12.25 $11.40 $ 9.81 $11.37
-------- -------- -------- ----------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............ -- .51 .55 .53 .40 .44 .51 .57
Net realized and unrealized gain
(loss) on investments.......... -- 1.07 2.28 (.77) 1.00 .88 1.47 (1.53)
-------- -------- -------- ----------- -------- -------- -------- --------
Total from investment
operations................... -- 1.58 2.83 (.24) 1.40 1.32 1.98 (.96)
-------- -------- -------- ----------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income.......... -- (.51) (.57) (.49) (.38) (.47) (.39) (.57)
Dividends to shareholders from
net capital gains.............. -- (.58) (.01) (.60) (.00) (.00) (.00) (.03)
-------- -------- -------- ----------- -------- -------- -------- --------
Total distributions............ -- (1.09) (.58) (1.09) (.38) (.47) (.39) (.60)
-------- -------- -------- ----------- -------- -------- -------- --------
Net asset value, end of period..... $ -- $ 14.68 $14.19 $ 11.94 $13.27 $12.25 $11.40 $ 9.81
====== ======= ====== ======== ====== ====== ====== ======
Total return................... --% 11.88% 24.43% (1.82)% 11.62% 11.96% 20.49% (8.61)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
$(000)......................... -- 43,431 36,002 29,363 28,984 15,946 12,564 10,197
Ratios of expenses to average net
assets(c)...................... --% .60% .66% .67% .80% .80% .68% .65%
Ratios of net investment income
to average net assets.......... --% 3.68% 4.22% 4.34% 3.36% 3.88% 4.74% 5.48%
Portfolio turnover rate.......... --% 106% 130% 75% 89% 32% 51% 47%
Average commission rate(d)....... $ -- $ 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
and 1991 were as follows: %, 0.60%, 0.66%, 0.73%, 0.80%, 0.84% and 0.95%,
respectively.

See accompanying notes to financial statements.

7
<PAGE> 10

FINANCIAL HIGHLIGHTS -- CONTINUED

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

<TABLE>
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO
------------------------------------------------------------------------------------------------------
01/01/97 01/01/96 01/01/95 01/01/94 01/01/93(a) 01/01/92 01/01/91 01/01/90 05/01/89(b)
TO TO TO TO TO TO TO TO 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 12/31/89
-------- -------- -------- -------- -------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ -- $ 17.38 $15.45 $15.45 $14.72 $ 16.68 $10.67 $ 9.87 $ 10.00
------- ------- ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment
income............... -- .17 .20 (.01) (.01) .03 .08 .03 .09
Net realized and
unrealized gain
(loss) on
investments.......... -- 3.03 1.86 .01 .77 .38 5.93 1.04 .25
------- ------- ------ ------ ------ ------ ------ ------ ------
Total from investment
operations......... -- 3.20 2.06 .00 .76 .41 6.01 1.07 .34
------- ------- ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to
shareholders from net
investment income.... -- (.19) (.00) (.00) (.03) (.07) (.00) (.03) (.09)
Dividends to
shareholders from net
capital gains........ -- (1.87) (.13) (.00) (.00) (2.30) (.00) (.24) (.38)
------- ------- ------ ------ ------ ------ ------ ------ ------
Total
distributions...... -- (2.06) (.13) (.00) (.03) (2.37) (.00) (.27) (.47)
------- ------- ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $ -- $ 18.52 $17.38 $15.45 $15.45 $ 14.72 $16.68 $10.67 $ 9.87
======= ======= ====== ====== ====== ====== ====== ====== ======
Total return(c)...... --% 21.00% 13.48% 0% 5.20% 2.58% 56.33% 10.77% 8.31%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period $(000)........ -- 34,098 23,822 15,430 12,223 8,029 2,751 772 568
Ratios of expenses to
average net assets
(annualized)(d)...... --% .68% .76% .86% .90% .90% .79% .75% .50%
Ratios of net
investment income to
average net assets
(annualized)......... --% 1.14% 1.32% (.10)% (.07)% .37% .80% .27% 1.00%
Portfolio turnover..... --% 47% 89% 60% 60% 18% 95% 27% 32%
Average commission
rate(e).............. $ -- $ 0.0600 N/A N/A N/A N/A N/A N/A N/A
</TABLE>

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

(a) On March 31, 1993, the investment adviser was changed from ProvidentMutual
Management Company, Inc. to Sentinel Advisors Company.

(b) Commencement of operations.

(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 and 1991, were as follows:
%, 0.68%, 0.76%, 0.89%, 0.90%, 1.00% and 1.32%, respectively.

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

See accompanying notes to financial statements.

8
<PAGE> 11

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

<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO
-----------------------------------------------------------------------------------
01/01/97 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........ $ -- $ 12.86 $11.63 $11.87 $ 9.00 $9.74 $ 10.00
-------- -------- -------- -------- -------- -------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................... -- .11 .16 .05 .06 .08 .01
Net realized and unrealized gain (loss) on
investments............................. -- 1.23 1.45 (.02) 3.09 (.81) (.27)
-------- -------- -------- -------- -------- -------- -----------
Total from investment operations........ -- 1.34 1.61 .03 3.15 (.73) (.26)
-------- -------- -------- -------- -------- -------- -----------
LESS DISTRIBUTIONS:
Dividends to shareholders from net
investment income....................... -- (.16) (.07) (.03) (.08) (.00) (.00)
Dividends to shareholders from net capital
gains................................... -- (.63) (.31) (.24) (.20) (.01) (.00)
-------- -------- -------- -------- -------- -------- -----------
Total distributions..................... -- (.79) (.38) (.27) (.28) (.01) (.00)
-------- -------- -------- -------- -------- -------- -----------
Net asset value, end of period.............. $ -- $ 13.41 $12.86 $11.63 $11.87 $9.00 $ 9.74
======= ======= ====== ====== ====== ====== =========
Total return(b)......................... --% 10.89% 14.31% .26% 36.11% (7.30)% (2.80)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000).......... -- 50,955 36,642 26,212 13,682 6,727 4,979
Ratios of expenses to average net assets
(annualized)(c)......................... --% 1.05% 1.15% 1.32% 1.50% 1.50% 1.48%
Ratios of net investment income to average
net assets (annualized)................. --% .98% 1.21% .72% .68% 1.05% .26%
Portfolio turnover........................ --% 35% 45% 32% 37% 35% 1%
Average commission rate(d)................ --% $ 0.0376 N/A N/A N/A N/A N/A
</TABLE>

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

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

(c) Annualized expense ratios before reimbursement of expenses by affiliated
insurance company and fee waivers by the administrator for the years ended
December 31, 1997, 1996, 1995, 1994, 1993, 1992 and the period ended
December 31, 1991, were as follows: %, 1.05%, 1.15%, 1.32%, 1.50%,
2.65% and 3.40%, respectively.

See accompanying notes to financial statements.

9
<PAGE> 12

INVESTMENT OBJECTIVES AND POLICIES

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

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

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

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

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

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

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

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

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

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

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

THE BOND PORTFOLIO

11
<PAGE> 14

industry. When market conditions warrant, the Portfolio may hold more than 25%
(but not more than 75%) of its total assets in securities of issuers in one or
more of these three industries provided that no one aspect of such industries is
emphasized.

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."

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

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

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

THE MANAGED PORTFOLIO

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

THE AGGRESSIVE GROWTH PORTFOLIO

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

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

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

12
<PAGE> 15

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

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

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

THE INTERNATIONAL PORTFOLIO

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

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

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

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

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

13
<PAGE> 16

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 or "Investment Techniques and Risks" in the SAI.

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

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 the their 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. For some sub-advisers, growth oriented
investing also may involve fundamental research

14
<PAGE> 17

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 growth of capital. 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. 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 % 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 % 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 % 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 growth of capital. 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 % of the Portfolio's assets are
managed by an investment sub-adviser that focuses on investments in securities
of issuers with emerging technologies and other companies that benefit from
technological advances. This investment sub-adviser selects stocks based upon
fundamental analysis of particular companies as well as examination of technical
market factors such as price momentum, and tends to buy and hold relatively few
such securities.

At the current time, the remaining % 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.

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

15
<PAGE> 18

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. 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 % 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 % 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 % of the Portfolio's assets are
managed by an investment sub-adviser that seeks securities of issuers within
each market sector of the index, 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. The investment sub-adviser 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.

INVESTMENT TECHNIQUES AND RISKS

TEMPORARY DEFENSIVE POSITIONS

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

SHORT-TERM TRADING

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

FOREIGN SECURITIES

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

16
<PAGE> 19

taking advantage of foreign securities markets that do not necessarily move in a
manner parallel to U.S. markets.

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

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

Investments in ADRs, EDRs and GDRs. Many securities of foreign issuers are
represented by ADRs, EDRs and GDRs. The International Portfolio, the Managed
Portfolio, the Small Cap Value Portfolio, and the Large Cap Value 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,

17
<PAGE> 20

auditing and financial reporting standards of the domestic market or exchange on
which they are traded, which standards are more uniform and more exacting than
those to which many foreign issuers may be subject.

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

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

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

LOWER QUALITY DEBT INSTRUMENTS

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

REPURCHASE AGREEMENTS

All of the Portfolios may enter into repurchase agreements with member
banks of the Federal Reserve system or with dealers in U.S. Government
Securities under which a Portfolio purchases a security from a seller, with the
understanding that the seller will repurchase the security at a mutually agreed
upon price and date (ordinarily a week or less). The resale price generally
exceeds the purchase price by an amount that reflects an agreed upon market
interest rate for the term of the repurchase agreement. The primary risk is
that, if the seller defaults, a Portfolio might suffer a loss to the extent that
the proceeds from the sale of the underlying securities and other collateral
held by that Portfolio in connection with the related repurchase agreement are
less than the repurchase price. In addition, in the event of bankruptcy of the
seller or failure of

18
<PAGE> 21

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

WHEN-ISSUED SECURITIES AND DELAYED DELIVERY SECURITIES

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

BORROWING

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

REVERSE REPURCHASE AGREEMENTS

The Money Market and Managed Portfolios may enter into reverse repurchase
agreements with banks and broker-dealers. These agreements have the
characteristics of borrowing and involve the sale of securities held by a
Portfolio with an agreement to repurchase the securities at an agreed upon date
and price that reflects a rate of interest paid for the use of funds for the
period. Such transactions are advantageous only if the Portfolios have the
opportunity to earn a greater rate of interest on the cash derived from the
transaction than the interest cost of obtaining that cash. The Portfolios may be
unable to realize a rate of return from the use of the proceeds equal to or
greater than the interest expense of the repurchase agreement. Thus, the
Portfolios intend to enter into such agreements only when it appears
advantageous to do so. The use of reverse repurchase agreements may magnify any
increase or decrease in the value of the Portfolios' investments. The
Portfolios' custodian will maintain in a segregated account, fully liquid
securities of each Portfolio that have a value equal to or greater than the
respective Portfolio's commitments under reverse repurchase agreements. The
value of securities subject to reverse repurchase agreements will not exceed 10%
of the value of the

19
<PAGE> 22

respective Portfolio's total assets. Under no circumstances will either
Portfolio enter into a reverse repurchase agreement with Provident Mutual,
PLACA, NLIC or SAC.

COVERED CALL OPTIONS

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

MANAGEMENT

DIRECTORS

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

ADVISERS

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

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

International Portfolio. Providentmutual Investment Management Company
("PIMC") serves as investment adviser for the International Portfolio pursuant
to an investment advisory agreement with the Fund

20
<PAGE> 23

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 investment advisory
agreements with the Fund dated , 1998 for the All Pro Small Cap
Growth Portfolio, , 1998 for the All Pro Large Cap Growth
Portfolio, , 1998 for the All Pro Small Cap Value Portfolio,
and , 1998 for the All Pro Large Cap Value Portfolio. PIMC uses
a "manager of managers" approach for certain of the All Pro Portfolios under
which PIMC allocated 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 be 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 be 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
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 and order of the Securities and
Exchange Commission 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 order is granted.

PIMC has retained Wilshire Associates Incorporated ("Wilshire") as a
sub-adviser to assist it in identifying and evaluating the performance of
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.

Wilshire is located at 1299 Ocean Avenue, Suite 700, Santa Monica CA 90401.

As of the date of this prospectus, the assets of the All Pro Small Cap
Growth Portfolio are managed in part by Amerindo Investment Advisors, Inc.
("Amerindo") and in part by Husic Capital Management ("Husic"), pursuant to
separate investment sub-advisory agreements which provide that Amerindo and
Husic are subject to monitoring by PIMC and supervision by the Fund's board of
directors.

21
<PAGE> 24

Amerindo, located at , currently serves U.S.-based
institutional investors and manages in excess of $2.5 billion in
small-capitalization growth portfolios. Amerindo is compensated monthly by PIMC
for serving as investment sub-adviser as indicated in the table below.

Husic, located at , offers products across the market
capitalization spectrum and is dedicated to growth style management. Husic
manages over $3.5 billion on behalf of institutions and individuals including
$0.5 billion in its small-capitalization product. Husic is compensated monthly
by PIMC for serving as investment sub-adviser as indicated in the table below.

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"), pursuant to separate
investment sub-advisory agreements.

CKM is an expert in large-capitalization growth equity management. CKM
offers no other products. CKM, which is located at ,
currently manages approximately $ in assets on behalf of
[institutional/individual] investors. CKM is compensated monthly by PIMC for
serving as investment sub-adviser as indicated in the table below.

Geewax has expertise in large-capitalization growth equity management.
Geewax is located at and provides portfolio management for
$ in assets. The table below also shows Geewax's monthly compensation
for serving as investment sub-adviser.

Oak, located at , Akron, Ohio provides portfolio
management for over $ in assets. For managing a portion of the Large
Cap Growth Portfolio's assets, Oak receives monthly compensation from PIMC as
indicated in the table below.

As of the date of this prospectus, the assets of the All Pro Small Cap
Value Portfolio are managed by 1838 Investment Advisors ("1838"), located at
, Radnor, Pennsylvania, pursuant to an investment
sub-advisory agreement. In additional to the small capitalization equity
strategy, 1838 offers large core equity, fixed income, and international equity
products. The majority of 1838's clients are institutional, while others are
high net worth individuals.

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") pursuant
to separate investment sub-advisory agreements and subject to monitoring by PIMC
and supervision by the Fund's board of directors.

Equinox is entirely dedicated to large-capitalization value style
management. Equinox, which is located at , manages
approximately $7 billion on behalf of institutions and individuals. Equinox'
monthly compensation for serving as investment sub-adviser is identified below.

Harris has over 20 years of managing money for institutional clients and
high net worth individuals. Harris, which is located at ,
currently manages over in assets. The table below indicates the
compensation Harris receives for serving as investment sub-adviser.

Mellon Equity, which is located at , 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
in assets. Mellon Equity's monthly compensation for serving as
investment sub-adviser is identified below.

Harris has over 20 years of managing money for institutional clients and
high net worth individuals. Harris, which is located at , currently
manages over in assets. The table below indicates the compensation
Harris receives for serving as investment sub-adviser.

22
<PAGE> 25

COMPENSATION OF ADVISERS

<TABLE>
<CAPTION>
1997 ANNUAL RATE MAXIMUM
(AS % OF AVERAGE ANNUAL RATE
DAILY NET (AS % OF AVERAGE
PORTFOLIO ADVISER 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
All Pro Small Cap Growth........... Amerindo
(sub-adviser)
All Pro Small Cap Growth........... Husic (Sub-adviser)
All Pro Large Cap Growth........... PIMC
All Pro Large Cap Growth........... CKM (sub-adviser)
All Pro Large Cap Growth........... Geewax (sub-adviser)
All Pro Large Cap Growth........... Oak (sub-adviser)
All Pro Small Cap Value............ PIMC
All Pro Small Cap Value............ 1838 (sub-adviser)
All Pro Large Cap Value............ PIMC
All Pro Large Cap Value............ Equinox (sub-adviser)
All Pro Large Cap Value............ Harris (sub-adviser)
All Pro Large Cap Value............ Mellon (sub-adviser)
</TABLE>

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

* With respect to each of the Portfolios except the Money Market Portfolio and
the All Pro Portfolios, 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, Newbolds Asset Management Company 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, Aggressive Growth, and Aggressive Growth
Portfolios.

Respecting the Growth, Money Market, Bond, Managed, Aggressive Growth,
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 National Life. 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.

23
<PAGE> 26

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. 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 manger 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 is a Charter
Financial Analyst, and has been with SAC since 1995. He has been involved with
the Aggressive Growth Portfolio since he join SAC. Prior to joining SAC, he was
associate with Argyle Capital Management, Inc.

International Portfolio.

International Portfolio. Sandor Cseh, Senior Vice President and Director
of International of TBC, is the portfolio manager for the International
Portfolio. Sandor Cseh has over 22 years experience in investment management.

All Pro Portfolios.

All Pro Small Cap Growth Portfolio. Portfolio management for the All Pro
Small Cap Growth Portfolio on behalf of Amerindo is provided by: (1) Gary A.
Tanaka, Ph.D., B.A. in Mathematics, MIT; Ph.D. in Applied Mathematics, Imperial
College -- University of London.; (2) Alberto W. Vilar, CFA: B.A., Washington &
Jefferson College; M.B.A., Iona College; Doctoral Studies Program, New York
University; (3) Ralph H. Cechettini: B.S. in Business, University of San
Francisco; and (4) Sarah Gordon-Wild: B.Sc. in Zoology, Aberdeen University,
M.Sc. in Social and Economic Aspects of Science and Technology in Industry,
Imperial College -- University of London.

Portfolio management for the All Pro Small Cap Growth Portfolio on behalf
of Husic is provided by: (1) 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; (2) Edward R. Gomoll, CFA: B.A. in Economics,
Colgate University; M.B.A. in Finance, New York University; and (3) Ronald J.
Leong, CFA: B.S. with High Honors in Banking and Finance (two degrees), San
Francisco State University.

All Pro Large Cap Growth Portfolio. Portfolio management for the All Pro
Large Cap Growth Portfolio on behalf of CKM is provided by: (1) George M. Cohen:
B.S. in Mathematics, Arizona State University; (2) Thomas D. Klingenstein: B.A.
in History, Williams College; and (3) Richard C. Marks: B.A. in Physics, Adelphi
University.

Portfolio management for the All Pro Large Cap Growth Portfolio on behalf
of Geewax is provided by: (1) John J. Geewax: B.S., M.B.A., J.D., Ph.D. (ABD),
University of Pennsylvania; and (2) Christopher P. Ouimet: B.S., Albright
College; M.B.A., St. Joseph's University.

Portfolio management for the All Pro Large Cap Growth Portfolio on behalf
of Oak is provided by: (1) James D. Oelschlager: B.A. in economics, Denison
University; J.D. Northwestern University, Post-graduate coursework, University
of Chicago; (2) Donna L. Barton: B.S. in Finance, University of Akron; (3)
Margaret L. Ballinger: Studies in the School of Education, University of Akron;
and (4) Douglas S. MacKay: B.S. in Finance, Miami University (Ohio); M.B.A.,
Case Western Reserve University.

24
<PAGE> 27

All Pro Small Cap Value Portfolio. Portfolio management for the All Pro
Small Cap Value Portfolio on behalf of 1838 is provided by: (1) Edwin B. Powell:
B.S., University of Illinois; (2) Cynthia R. Axelrod: B.S. and M.B.A., Drexel
University; and (3) J. Kelly Flynn: A.B., Harvard University and M.B.A., Wharton
School.

All Pro Large Cap Value Portfolio. Portfolio management for the All Pro
Large Cap Value Portfolio on behalf of Equinox is provided by: (1) Ronald J.
Ulrich: Degrees in Engineering and Business Administration, Lehigh University;
M.B.A. in Corporate Finance, New York University; 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.

Portfolio management for the All Pro Large Cap Value Portfolio on behalf of
Harris Associates is provided by: (1) Robert H. Harper, CFA: B.S., University of
Illinois; M.B.A., Northwestern University; and (2) Michael J. Mangan, CPA, CFA:
B.B.A., University of Iowa; M.B.A., Northwestern University.

Portfolio management for the All Pro Large Cap Value Portfolio on behalf of
Mellon Equity is provided by: (1) William P. Rydell, CFA: Degree in Economics,
Wabash College; M.B.A., University of Michigan; (2) Robert A. Wilk, CFA: B.S. in
Management and Electrical Engineering, M.I.T.; M.S. in Finance, M.I.T; (3) John
R. O'Toole, CFA: B.A. in Economics, University of Pennsylvania; M.B.A. in
Finance, University of Chicago; (4) Ronald P. Gala, CFA: Degree in Business
Administration, Duquesne University; M.B.A. in Finance, University of
Pittsburgh; and (5) Stephen A. Falci, CFA: B.S. in Economics and M.B.A. in
Finance, New York University.

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. 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 %; Money Market Portfolio %; Bond Portfolio %;
Managed Portfolio %; Aggressive Growth Portfolio %; and International
Portfolio %.

BROKERAGE ALLOCATION

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

ADMINISTRATIVE SERVICES

Provident Financial Processing Corporation ("PFPC") provides certain
administrative services to the Fund pursuant to an administration agreement
between PFPC and the Fund. Such services include maintaining the Portfolios'
books and records, preparing governmental filings, statements, returns, and
stockholder reports, and computing net asset value and daily dividends. For such
services, PFPC is paid a fee at an annual rate 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.

25
<PAGE> 28

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

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

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, PLACA 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.

26
<PAGE> 29

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.

Dividends of investment income of the Growth, Bond, and Managed Portfolios
will be declared and paid quarterly, and dividends of capital gains for those
Portfolios will be declared and paid annually. For the Money Market Portfolio
dividends of both investment income and capital gains will be declared daily and
paid monthly. For the Aggressive Growth and International Portfolios, both
dividends will be declared and paid

27
<PAGE> 30

annually. All paid dividends will be reinvested in full and fractional shares of
the respective Portfolio unless the shareholder(s) elects to receive such
distribution in cash.

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

OTHER INFORMATION

CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

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

28
<PAGE> 31

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

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 pertains only to the following
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 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.

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.

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................................................................ 16
Lower Quality Debt Instruments.................................................... 17
Repurchase Agreements............................................................. 17
When-Issued Securities and Delayed Delivery Securities............................ 18
Borrowing......................................................................... 18
Reverse Repurchase Agreements..................................................... 18
Covered Call Options.............................................................. 19
Management............................................................................. 19
Directors......................................................................... 19
Advisers.......................................................................... 19
Compensation of Advisers.......................................................... 20
Portfolio Managers................................................................ 20
Expenses.......................................................................... 21
Brokerage Allocation.............................................................. 21
Administrative Services........................................................... 22
Description of the Fund's Shares....................................................... 22
General........................................................................... 22
Determination of Net Asset Value.................................................. 22
Offer, Purchase and Redemption of Shares.......................................... 23
Dividends, Distributions, and Taxes............................................... 23
Other Information...................................................................... 24
Custodian, Transfer Agent and Dividend Disbursing Agent........................... 24
</TABLE>

2
<PAGE> 33

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.

3
<PAGE> 34

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 Portfolio
share 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 on the
Financial Statements of the Fund which are included in the Statement of
Additional Information. The information in the following tables should be read
in conjunction with the Financial Statements and related notes.

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

<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
--------------------------------------------------------------------------------------------------------------
01/01/97 01/01/96(a) 01/01/95 01/01/94 01/01/93 01/01/92 01/01/91 01/01/90 01/01/89 01/01/88
TO TO 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 12/31/89 12/31/88
-------- ----------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period......... $ -- $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ------ ----- ----- ----- ----- ----- ----- ----- -----
INCOME FROM
INVESTMENT
OPERATIONS:
Net Investment
Income....... -- .05 .05 .04 .03 .03 .06 .07 .08 .07
----- ------ ----- ----- ----- ----- ----- ----- ----- -----
Total from
investment
operations.. -- .05 .05 .04 .03 .03 .06 .07 .08 .07
LESS
DISTRIBUTIONS:
Dividends to
shareholders
from net
investment
income....... -- (.05) (.05) (.04) (.03) (.03) (.06) (.07) (.08) (.07)
----- ------ ----- ----- ----- ----- ----- ----- ----- -----
Total
Distributions... -- (.05) (.05) (.04) (.03) (.03) (.06) (.07) (.08) (.07)
----- ------ ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of
period......... $ -- $ 1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ====== ===== ===== ===== ===== ===== ===== ===== =====
Total
return..... --% 5.15% 5.61% 3.81% 2.59% 3.18% 5.69% 8.00% 9.02% 7.19%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end
of period
$(000)....... -- 54,197 34,615 21,040 12,506 8,138 7,047 5,411 4,632 4,219
Ratios of
expenses to
average net
assets(b).... --% .44% .50% .55% .65% .65% .53% .50% .55% .65%
Ratios of net
investment
income to
average net
assets....... --% 5.03% 5.47% 3.86% 2.56% 3.12% 5.49% 7.72% 8.66% 7.03%
</TABLE>

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

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

See accompanying notes to financial statements.

4
<PAGE> 35

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

<CAPTION>
BOND 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...................... $ 9.89 $10.02
-------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income....... .82 .76
Net realized and unrealized
gain (loss) on
investments............... .20 (.13)
-------- --------
Total from investment
operations............ 1.02 .63
-------- --------
LESS DISTRIBUTIONS:
Dividends to shareholders
from net investment
income.................... (.82) (.76)
Dividends to shareholders
from net capital gains.... (.00) (.00)
-------- --------
Total distributions..... (.82) (.76)
-------- --------
Net asset value, end of
period...................... $10.09 $ 9.89
====== ======
Total return............ 10.57% 6.45%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
$(000).................... 3,311 2,473
Ratios of expenses to
average net assets(c)..... .62% .65%
Ratios of net investment
income to average net
assets.................... 8.28% 7.74%
Portfolio turnover rate..... 9% .13%
</TABLE>

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

See accompanying notes to financial statements.

5
<PAGE> 36

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

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

(c) Expense ratios before reimbursement of expenses by affiliated insurance
company for the years ended December 31, 1997, 1996, 1995, 1994, 1993, 1992
and 1991 were as follows: %, 0.60%, 0.66%, 0.73%, 0.80%, 0.84% and 0.95%,
respectively.

See accompanying notes to financial statements.

6
<PAGE> 37

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

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

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

See accompanying notes to financial statements.

7
<PAGE> 38

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

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

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

(c) Annualized expense ratios before reimbursement of expenses by affiliated
insurance company and fee waivers by the administrator for the years ended
December 31, 1997, 1996, 1995, 1994, 1993, 1992 and the period ended
December 31, 1991 were as follows: %, 1.05%, 1.15%, 1.32%, 1.50%, 2.65%
and 3.40%, respectively.

See accompanying notes to financial statements.

8
<PAGE> 39

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

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

(a) On May 1, 1997, the investment adviser was changed from Newbold's Asset
Management Company 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,
and 1991 were as follows: %, 0.50%, 0.61%, 0.67%, 0.76%, 0.82%, and 0.98%,
respectively.

See accompanying notes to financial statements.

9
<PAGE> 40

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

</TABLE>

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

(a) Commencement of operations.

(b) Expense ratio for the Sentinel Growth Portfolio before reimbursement of
expenses by affiliated insurance company for the period ended December 31,
1997, 1996 was as follows: % 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 S.E.C. for all Financial
statements with fiscal years beginning after September 1, 1995.

See accompanying notes to financial statements.

10
<PAGE> 41

INVESTMENT OBJECTIVES AND POLICIES

THE MONEY MARKET PORTFOLIO

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

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.

11
<PAGE> 42

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

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

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

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

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

THE BOND PORTFOLIO

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

12
<PAGE> 43

THE MANAGED PORTFOLIO

THE AGGRESSIVE GROWTH PORTFOLIO

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

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

13
<PAGE> 44

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 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.)

14
<PAGE> 45

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

THE GROWTH PORTFOLIO

THE SENTINEL GROWTH PORTFOLIO

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

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

INVESTMENT TECHNIQUES AND RISKS

TEMPORARY DEFENSIVE POSITIONS

SHORT-TERM TRADING

15
<PAGE> 46

FOREIGN SECURITIES

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

Investments in ADRs, EDRs and GDRs. Many securities of foreign issuers are
represented by ADRs, EDRs and GDRs. The International Portfolio and the Managed
Portfolio may invest in ADRs, EDRs and GDRs. ADRs represent the right to receive
securities of foreign issuers deposited in a domestic bank or a foreign
correspondent bank. Prices of ADRs are quoted in U.S. dollars, and ADRs are
traded in the United States on exchanges or over-the-counter and are sponsored
and issued by domestic banks. ADRs do not eliminate all the risk inherent in
investing in the securities of foreign issuers. To the extent that a Portfolio
acquires ADRs through banks that do not have a contractual relationship with the
foreign issuer of the security underlying the ADR to issue and service such
ADRs, there may be an increased possibility that the Portfolio would not become
aware of and be able to respond to corporate actions such as stock splits or
rights

16
<PAGE> 47

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.

LOWER QUALITY DEBT INSTRUMENTS

REPURCHASE AGREEMENTS

17
<PAGE> 48

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

WHEN-ISSUED SECURITIES AND DELAYED DELIVERY SECURITIES

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

BORROWING

REVERSE REPURCHASE AGREEMENTS

18
<PAGE> 49

the proceeds equal to or greater than the interest expense of the repurchase
agreement. Thus, the Portfolios intend to enter into such agreements only when
it appears advantageous to do so. The use of reverse repurchase agreements may
magnify any increase or decrease in the value of the Portfolios' investments.
The Portfolios' custodian will maintain in a segregated account, fully liquid
securities of each Portfolio that have a value equal to or greater than the
respective Portfolio's commitments under reverse repurchase agreements. The
value of securities subject to reverse repurchase agreements will not exceed 10%
of the value of the respective Portfolio's total assets. Under no circumstances
will either Portfolio enter into a reverse repurchase agreement with Provident
Mutual, PLACA, NLIC or SAC.

COVERED CALL OPTIONS

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

MANAGEMENT

DIRECTORS

ADVISERS

Money Market, Bond, Managed, Aggressive Growth, 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 Common Stock
and Sentinel Growth Portfolios; 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 National Life Insurance
Company ("National Life"); Providentmutual Management Co., Inc., an indirectly
wholly-owned subsidiary of Provident Mutual; HTK of Delaware, Inc., a
wholly-owned subsidiary of The Penn Mutual Life Insurance Company ("Penn
Mutual"); and Sentinel Management Company, a partnership of wholly-owned
subsidiaries of National Life, Provident Mutual and Penn Mutual, which is SAC's
Managing General Partner. SAC is located at National Life Drive, Montpelier,
Vermont 05604.

19
<PAGE> 50

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.

COMPENSATION OF ADVISERS

<TABLE>
<CAPTION>
1997 ANNUAL RATE (AS % OF MAXIMUM ANNUAL RATE
AVERAGE DAILY NET (AS % OF AVERAGE
PORTFOLIO ADVISER ASSETS)* DAILY NET ASSETS)
---------------------- -------------- ------------------------- -------------------
<S> <C> <C> <C>
Money Market.......... SAC 0.25%** 0.25%
Bond.................. SAC 0.35% 0.35%
Managed............... SAC 0.40% 0.40%
Aggressive Growth..... SAC 0.47% 0.50%
International......... PIMC 0.375% 0.75%
......... 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, Newbolds Asset Management Company
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, Aggressive Growth, Sentinel Growth and
Aggressive Growth Portfolios.

20
<PAGE> 51

Vice President of SAC; and a Fixed Income Team, headed by David M. Brownlee,
Senior Vice President of SAC.

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 manger 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.

Sentinel Growth Portfolio. The Sentinel Growth Portfolio is managed by Mr.
Lee since November 1993.

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. For fiscal
year 1996, each Portfolio bore total expenses of the average daily net assets of
the Portfolio, net of the reimbursement by Provident Mutual (and the fee waiver
by the administrator for the International Portfolio), as follows: Growth %
Money Market Portfolio %; Bond Portfolio %; Managed Portfolio %;
Aggressive Growth Portfolio %; International Portfolio %; and Sentinel
Growth Portfolio 1.51%.

BROKERAGE ALLOCATION

21
<PAGE> 52

ADMINISTRATIVE SERVICES

DESCRIPTION OF THE FUND'S SHARES

GENERAL

DETERMINATION OF NET ASSET VALUE

22
<PAGE> 53

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.

DIVIDENDS, DISTRIBUTIONS, AND TAXES

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<PAGE> 54

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

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

OTHER INFORMATION

CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

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<PAGE> 55

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........................................................ 5
Portfolio Turnover..................................................................... 9
Management of the Fund................................................................. 10
Investment Advisory and Other Services................................................. 11
Portfolio Transactions and Brokerage Allocation........................................ 14
Determination of Net Asset Value....................................................... 15
Redemption of Shares................................................................... 16
Taxes.................................................................................. 17
Capital Stock.......................................................................... 18
Code of Ethics......................................................................... 18
Other Services......................................................................... 19
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> 56

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

As of December 31, 1997, no policyholder owned a policy or contract which
individually or in the aggregate had a total interest in any Portfolio of more
than 5%. As of December 31, 1997, the officers and directors of the Fund as a
group did not beneficially own as policyholders more than a 1% interest in any
Portfolio.

INVESTMENT RESTRICTIONS

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

The Fund has adopted the following fundamental restrictions relating to the
investment of assets of the 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 is allowed to:

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

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

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

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

(5) Borrow money, except from banks as a temporary measure for
emergency purposes or as necessary for clearance of securities transactions
or to permit the transfer of funds for various purposes

2
<PAGE> 57

without interfering with the orderly liquidation of securities in its
portfolio, where such borrowings would not exceed 5% of the market value of
total assets at the time each such borrowing is made, except that this
restriction does not apply to: the International Portfolio which may borrow
up to 20% of the market value of its total assets from banks as a temporary
measure, such as to enable it to meet redemption requests or to settle
transactions on different stock markets where different settlement dates
apply which might otherwise require the sale of Portfolio securities at a
time when it would not be in the Portfolio's best interests to do so; and
to reverse repurchase agreements entered into in accordance with the Fund's
investment policies.

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

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

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

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

(10) Purchase securities of any issuer, if

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

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

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

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

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

3
<PAGE> 58

The Fund has adopted the following fundamental restrictions relating to the
investment of assets of the All Pro Portfolios. No All Pro Portfolio 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) the Portfolio may borrow from banks (as
defined in the 1940 Act) as through reverse repurchase agreements in
amounts up to 30% of its total assets (including the amount borrowed), (b)
the fund may, to the extent permitted by applicable law, borrow up to an
additional 5% of its total assets for temporary purposes, (c) the Portfolio
may obtain such short-term credits as may be necessary for the clearance of
purchases and sales of portfolio securities, and (d) the Portfolio may
purchase securities on margin to the extent permitted by applicable law;

(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, brokers, 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 deemed to be 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.

(3) acquire any security which is not readily marketable if more than
15% of the net assets of the 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.

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<PAGE> 59

INVESTMENT TECHNIQUES AND RISKS

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

REPURCHASE AGREEMENTS

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

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

COVERED CALL OPTION CONTRACTS

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

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

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

5
<PAGE> 60

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

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

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

WARRANTS

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

SHORT-TERM TRADING

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

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

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

ILLIQUID ASSETS

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

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<PAGE> 61

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

LOWER QUALITY DEBT INSTRUMENTS

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

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

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

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

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

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<PAGE> 62

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

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

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

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

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

FOREIGN CURRENCY TRANSACTIONS

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

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

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

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

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<PAGE> 63

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

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

PORTFOLIO TURNOVER

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

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

The annual portfolio turnover rates for the Growth Portfolio for 1997,
1996, and 1995 were %, 72% and 61%, respectively. The annual portfolio
turnover rates for the Bond Portfolio for 1997, 1996, and 1995 were %, 133%,
and 206%, respectively. The annual portfolio turnover rates for the Managed
Portfolio for 1997, 1996, and 1995 were %, 106%, and 130%, respectively. The
annual portfolio turnover rates for the Aggressive Growth Portfolio for 1997,
1996, and 1995 were %, 47%, and 89%, respectively. The annual portfolio
turnover rates for the International Portfolio for 1997, 1996, and 1995 were
%, 35%, and 45%, respectively. The annual portfolio turnover rates for the
Sentinel Growth Portfolio for 1997 and 1996 were % and %; no turnover
rate is supplied for the Sentinel Growth Portfolio for 1995 because this
portfolio did not commence operations until March 1, 1996.

9
<PAGE> 64

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>
Dr. Alan Gart................ Director 1982-Present, President of Alan $ 7,500
978 Warfield Lane Gart, Inc. (a consulting firm);
Huntingdon Valley, 1992-Present; Professor,
PA 19006 Southeastern Massachusetts
University; 1989-1992, Professor,
Nova Southeastern University;
1985-1989, Professor of Finance,
Lehman College of the City
University of New York
Dr. A. Gilbert Heebner....... Director 1987-Present, Distinguished $ 7,500
2 Etienne, Arbordeau Professor of Economics, Eastern
Devon, PA 19333 College; 1952-1987, Executive Vice
President and Chief Economist of
CoreStates Financial Corp.
Mr. Leo Slack................ Director 1996 Retired, 1964-1996 Vice $
4700 White Tail Lane President, Combustion Engineers
Sarasota, FL 34238 Corporation
Mr. Edward S. Stouch......... Director 1983, Retired; 1969-1983, Vice $ 7,500
216 Grandview Rd. President and Head of Personal
Media, PA 19063 Trust Investment Department, Trust
Division of Provident National Bank
Ms. Rosanne Gatta............ President Vice President and Treasurer of 0
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
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. Gianpietro.... 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>

As of the date of this Statement of Information, officers and directors of
the Fund do not own any of the outstanding shares of the Fund. Directors who are
not officers or employees of Provident Mutual or the Adviser are paid a fee plus
actual out of pocket expenses by the Fund for each meeting of the Board of
Directors attended. Total fees incurred for 1997 were $ . 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.

10
<PAGE> 65

INVESTMENT ADVISORY AND OTHER SERVICES

GENERAL INFORMATION AND HISTORY

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

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 places orders for all such purchases and sales on
behalf of the Fund.

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

ADVISORY AGREEMENTS

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

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

On February 26, 1996, the Fund's Board of Directors, including a majority
of the "non-interested" directors approved an amendment to the investment
advisory agreement between the Fund and SAC to include SAC providing investment
advisory services to the Money Market 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.

11
<PAGE> 66

Each of the agreements terminates automatically in the event of its
assignment or, with respect to any Portfolio, upon 60 days' notice given by the
Fund's Board of Directors, by the Adviser or by majority vote (as defined in the
Investment Company Act and the rules thereunder) of the Portfolio's shares.
Otherwise, the investment advisory agreements will continue in force with
respect to any Portfolio so long as their continuance is approved at least
annually by a majority of the "non-interest" members of the Fund's Board of
Directors, and by (i) a majority vote (as defined in the Investment Company Act
of 1940 and the rules thereunder) of the Portfolio's shareholders or (ii) the
Fund's Board of Directors.

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).

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

The investment advisory fee incurred for NAB during 1997 with respect to
the Growth Portfolio was $ . The investment advisory fee incurred for PIMC
during 1997 with respect to the International Portfolio was $ . The total
investment advisory fee incurred for SAC during 1997 was $ , allocated
$ , $ , $ , $ and $ for the Bond, Managed, Aggressive
Growth, Money Market and Growth Portfolios, respectively.

12
<PAGE> 67

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 the Portfolio transactions, shareholding servicing costs,
expenses of registering the shares under Federal and state securities laws,
interest, certain taxes, charges of the Custodian and Transfer Agent and other
expenses attributable to a particular Portfolio. Expenses which are allocated on
the basis of size of the respective Portfolios include directors' fees, legal
expenses, state franchise taxes, auditing services, costs of printing proxies,
stock certificates, Securities and Exchange Commission fees, accounting costs,
pricing costs including the daily calculation of net asset value), and other
expenses properly payable by the Fund and allocable on the basis of size of the
respective Portfolios. Depending upon the nature of a lawsuit, litigation costs
may be directly applicable to the Portfolios or allocated on the basis of the
size of the respective Portfolios. Effective November 1, 1991 Provident Mutual
agreed to reimburse the Fund for such expenses in excess of 0.40% of the average
daily net asset value of each of the Money Market, Growth, Bond, Managed and
Aggressive Growth Portfolios and 0.75% for the International Portfolio.
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. 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 there were
no reimbursements for the Money Market, Bond, Managed, Aggressive Growth and
International Portfolios. In 1996 the reimbursement for the Sentinel Growth
Portfolio was $25,050.00. For 1997 the following reimbursements were made
$ .

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

INVESTMENT SUB-ADVISORY AGREEMENT FOR INTERNATIONAL PORTFOLIO

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

The Investment Sub-Advisory Agreement was approved by a majority of the
Fund's Board of Directors, including a majority of its "non-interested"
directors, on July 14, 1994 and became effective on July 18, 1994. On February
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

13
<PAGE> 68

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 $ for investment advisory services rendered by
TBC in connection with the International Portfolio.

INFORMATION ABOUT ADVISERS

The principal officers of PIMC are:

<TABLE>
<CAPTION>
POSITION WITH POSITION WITH
NAME PIMC THE FUND
- --------------------- ------------------------ --------------------------
<S> <C> <C>
Rosanne Gatta President President
Scott V. Carney Vice President none
Daniel Hayes Vice President none
Timothy Henry Vice President none
David Merkel Vice President none
Dean Miller 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 Officer--Secretary Assistant 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>

PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION

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

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

The Advisers to the Fund determine the brokers to be used for purchases and
sales of each Portfolio's securities. There are no arrangements whatsoever,
written or oral, relating to the allocation to specific brokers of orders for
Portfolio transactions. Consideration is given to those firms providing
statistical and research services to the investment advisers, but it is
generally not the policy of any Portfolio to pay higher brokerage commissions to
a firm solely because it has provided such services. Statistical and research
services furnished

14
<PAGE> 69

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 $ , of which $ was paid by the Growth
Portfolio, $ was paid by the Managed Portfolio, $ was paid by the
Aggressive Growth Portfolio, $ was paid by the Sentinel Growth Portfolio,
and $ was paid by the International Portfolio.

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

DETERMINATION OF NET ASSET VALUE

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

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

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

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

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

15
<PAGE> 70

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

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

REDEMPTION OF SHARES

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

16
<PAGE> 71

TAXES

Each Portfolio of the Fund is treated as a separate entity for federal
income tax purposes. Each Portfolio intends to elect and to qualify as a
"regulated investment company" under the provisions of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). To qualify for treatment
as a regulated investment company, a Portfolio must, among other things, derive
in each taxable year at least 90% of its gross income from dividends, interest,
payments with respect to securities loans and gains from the sale or other
disposition of stock or securities or foreign currencies (subject to the
authority of the Secretary of the Treasury to exclude foreign currency gains
which are ancillary to the Fund's principal business of investing in stock or
securities or options and futures with respect to such stock or securities),
other income (including, but not limited to, gains from options, futures, or
forward contracts) derived with respect to its investing in such stock,
securities or currencies. In addition, to qualify for treatment as a "regulated
investment company", each Portfolio must derive less than 30% of its gross
income in each taxable year from gains (without deduction for losses) from the
sale or other disposition of securities held for less than three months.
Moreover, at the close of each quarter of each Portfolio's taxable year, at
least 50% of the value of its total assets must be represented by cash and cash
items, U.S. Government securities, securities of other regulated investment
companies, and other securities that, with respect to any one issuer, do not
exceed 5% of the value of the Portfolio's total assets and that do not represent
more than 10% of the outstanding securities of the issuer. In addition, at the
close of each quarter of each Portfolio's taxable year, not more than 25% of the
value of its total assets may be invested in securities (other than U.S.
Government securities or the securities of other regulated investment companies)
of any one issuer. If each Portfolio qualifies as a "regulated investment
company" and complies with the relevant provisions of the Code, each Portfolio
will be relieved of federal income tax on the part of its net ordinary income
and realized net capital gain which it distributes to the separate accounts.

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

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

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

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

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

17
<PAGE> 72

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 with the Growth Portfolio consisting 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.

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

18
<PAGE> 73

participate in the selection of the Fund's portfolio securities or who have
access to information regarding the Fund's impending purchases and sales of
portfolio securities. The Code of Ethics also covers the general conduct and
personal securities transactions of (but does not impose securities transaction
reporting requirements on) any officer, director, and employee of either NAM,
PIMC, SAC, TBC, or 1717 Capital Management Company ("1717") the principal
underwriter of the Fund, who participates in the selection of the Fund's
portfolio securities or who has access to information regarding the Fund's
impending purchases and sales of portfolio securities.

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

OTHER SERVICES

CUSTODIAN FOR INTERNATIONAL PORTFOLIO

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

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

INDEPENDENT ACCOUNTANTS

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

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

LEGAL MATTERS

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

19
<PAGE> 74

UNDERWRITERS

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

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> 75

FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants.................................................... F-2
Schedule of Investments as of December 31, 1997...................................... F-3
Statements of Assets and Liabilities, December 31, 1997.............................. F-29
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> 76

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> 77

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> 78

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> 79

PART C. OTHER INFORMATION

ITEM 24. Financial Statements and Exhibits

(a) Financial Statements.

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

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

Financial Highlights

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

Report of Independent Accountants

Schedule of Investments as of December 31, 1997

Statements of Assets and Liabilities, 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)
1.b. Articles Supplementary(2)
1.c. Articles Supplementary(3)
2.a. By-Laws of the Fund(1)
2.b. Amendment to By-Laws(2)
3. Inapplicable
4. Form of Certificate for Shares of Common Stock of the Fund(4)
5.a. Investment Advisory Agreement between the Fund and Newbold's Asset Management,
Inc.(5)
5.b. Investment Advisory Agreement between the Fund and Providentmutual Investment
Management Company(2)
5.c. Investment Advisory Agreement between the Fund and Sentinel Advisors Company(10)
5.d. Investment Advisory Agreement between the Fund and Providentmutual Investment
Management Company (PIMC) with respect to International Portfolio(3)
5.e. Investment Sub-Advisory Agreement between PIMC and The Boston Company Asset
Management, Inc.(10)
5.f. Amendment to Investment Advisory Agreement between the Fund and Sentinel Advisors
Company(11)
5.g. Amendment to Investment Advisory Agreement between the Fund and Sentinel Advisors
Company(12)
5.h. Investment Advisory Agreement between the Fund and Sentinel Advisors Company
respecting the Growth Portfolio.
5.i. Investment Advisory Agreement between the Fund and PIMC respecting the All Pro Large
Cap Growth, All Pro Large Cap Value, All Pro Small Cap Growth, and All Pro Small Cap
Value Portfolios.
6.a. Distribution Agreement between the Fund and PML Securities Company(6)
6.b. Amendments to Distribution Agreement between the Fund and PML Securities Company(2)
6.c. Amendment to Distribution Agreement between the Fund and PML Securities Company(3)
7. Inapplicable
8.a. Custodian Agreement between the Fund and Provident National Bank(7)
8.b. Amendment to Custodian Agreement between the Fund and Provident National Bank(2)
</TABLE>

C-1
<PAGE> 80

<TABLE>
<S> <C>
8.c. Amendment to Custodian Agreement between the Fund and Provident National Bank(3)
8.d. Amendment to Custodian Agreement between the Fund and Provident National Bank(11)
9.a. Agreement and Plan of Reorganization among PVLICO, Providentmutual Variable Life
Growth Account, Providentmutual Variable Life Money Market Account, Providentmutual
Variable Life Bond Account and the Fund(1)
9.b. Reimbursement Agreement between Provident Mutual Life Insurance Company of
Philadelphia and the Fund(3)
9.c. Administration Agreement between the Fund and Provident Institutional Management
Corporation(7)
9.d. Amendment to Administration Agreement between the Fund and Provident Financial
Processing Corporation (PFPC)(2)
9.e. Amendment to Administration Agreement between the Fund and PFPC(2)
9.f. Amendment to Administration Agreement between the Fund and PFPC(11)
9.g. Transfer Agency Agreement between the Fund and PFPC, as amended(2)
9.h. Amendment to Transfer Agency Agreement between the Fund and PFPC(11)
9.i.(1) Participation Agreement among Market Street Fund, Inc. Provident Mutual Life
Insurance Company and PML Securities Company(9)
9.i.(2) Participation Agreement among Market Street Fund, Inc., Providentmutual Life and
Annuity Company of America and PML Securities Company (8)
9.i.(3) Participation Agreement among Market Street Fund, Inc., National Life Insurance
Company and PML Securities Company(11)
10. Opinion of Adam Scaramella, Esquire
11.a. Consent of Sutherland, Asbill & Brennan LLP
11.b. Consent of Coopers & Lybrand, L.L.P.
12. Inapplicable
13.a. See Number 9.a. above
13.b. Investment Letter from National Life Insurance Company(12)
14. Inapplicable
15. Inapplicable
16. Inapplicable
17. Financial Data Schedule
18. Inapplicable
19. Power of Attorney(1) and (4)
</TABLE>

C-2
<PAGE> 81

- ---------------
(1) Incorporated herein by reference to the initial Form N-1A Registration
Statement of the Market Street Fund, Inc., File No. 2-98755, filed on July
1, 1985.
(2) Incorporated herein by reference to Post-Effective Amendment No. 4 filed on
March 2, 1989, File No. 2-98755.
(3) Incorporated herein by reference to Post-Effective Amendment No. 7 filed on
August 30, 1991, File No. 2-98755.
(4) Incorporated herein by reference to Pre-Effective Amendment No. 2 filed on
December 16, 1985, File No. 2-98755.
(5) Incorporated herein by reference to Post-Effective Amendment No. 6 filed on
May 1, 1991, File No. 2-98755.
(6) Incorporated herein by reference to Pre-Effective Amendment No. 1 filed on
November 19, 1985, File No. 2-98755.
(7) Incorporated herein by reference to Post-Effective Amendment No. 1 filed on
May 1, 1986, File No. 2-98755.
(8) Incorporated herein by reference to Post-Effective Amendment No. 8 filed on
May 1, 1992, File No. 2-98755.
(9) Incorporated herein by reference to Post-Effective Amendment No. 8 to Form
S-6 Registration Statement filed on May 1, 1992, File No. 33-2625.
(10) Incorporated herein by reference to Post-Effective Amendment No. 11 filed
on April 28, 1995, File No. 2-98755.
(11) Incorporated herein by reference to Post-Effective Amendment No. 13 filed
on February 28, 1996, File No. 2-98755.
(12) Incorporated herein by reference to Post-Effective Amendment No. 14 filed
on March 19, 1996, File No. 2-98755.

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

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

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

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

ITEM 26. Number of Holders of Securities

<TABLE>
<CAPTION>
NUMBER OF RECORD
TITLE OF CLASS HOLDERS AS OF DECEMBER 31, 1997
------------------------------ -------------------------------
<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
</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

C-3
<PAGE> 82

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.

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
Christiana Executive Campus, P.O. Box 15626, Wilmington, Delaware 19850.

<TABLE>
<CAPTION>
(2) (3)
(1) POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
NAME PRINCIPAL UNDERWRITER WITH REGISTRANT
- ------------------------------ -------------------------- --------------------------
<S> <C> <C>
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
** 300 Continental Drive, Newark, DE 19713

*** 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, 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,

C-4
<PAGE> 83

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> 84

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT IT MEETS ALL OF
THE REQUIREMENTS FOR EFFECTIVENESS OF THIS REGISTRATION STATEMENT PURSUANT TO
RULE 485(B) UNDER THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF BERWYN, COMMONWEALTH OF PENNSYLVANIA ON THIS
TH DAY OF APRIL 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 , 1998
- --------------------------------------------- (Principal Executive
ROSANNE GATTA Officer)

/s/ Treasurer April , 1998
- --------------------------------------------- (Principal Financial and
ANTHONEY T. GIAMPIETRO Accounting Officer)

* Director April , 1998
- ---------------------------------------------
ALAN GART

* Director April , 1998
- ---------------------------------------------
A. GILBERT HEEBNER

* Director April , 1998
- ---------------------------------------------
LEO SLOCK

* Director April , 1998
- ---------------------------------------------
EDWARD S. STOUCH

*By: /s/
- ---------------------------------------------
ADAM SCARAMELLA
Attorney-in-Fact,
Pursuant to Power of Attorney
</TABLE>

C-6
<PAGE> 85

EXHIBIT INDEX

<TABLE>
<S> <C>
5.h. Investment Advisory Agreement between the Fund and Sentinel Advisors Company
respecting the Growth Portfolio
10. Opinion of Adam Scaramella, Esquire
11.a. Consent of Sutherland, Asbill & Brennan LLP
11.b. Consent of Coopers & Lybrand, L.L.P.
17. Financial Data Schedule
Powers of Attorney
</TABLE>