MARKET STREET FUND INC, 485APOS, 1999-02-23

MARKET STREET FUND INC
485APOS, 1999-02-23

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 23, 1999

REGISTRATION NOS. 2-98755
811-4350
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 20 [X]
AND/OR
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 21 [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>
COPY TO:
JAMES G. POTTER, JR., ESQ. STEPHEN E. ROTH, ESQ.
MARKET STREET FUND, INC. SUTHERLAND ASBILL & BRENNAN LLP
1050 WESTLAKES DRIVE 1275 PENNSYLVANIA AVENUE, N.W.
BERWYN, PA 19312 WASHINGTON, DC 20004
(NAME AND ADDRESS OF AGENT FOR
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 [DATE] PURSUANT TO PARAGRAPH (b) OF RULE 485

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

[X] ON MAY 1, 1999 PURSUANT TO PARAGRAPH (a) OF RULE 485

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

TITLE OF SECURITIES: SHARES OF COMMON STOCK
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

MARKET STREET FUND, INC.

PROSPECTUS

May 1, 1999

[ ] The Money Market Portfolio

[ ] The Growth Portfolio

[ ] The Bond Portfolio

[ ] The Managed Portfolio

[ ] The Aggressive Growth Portfolio

[ ] The Sentinel Growth Portfolio

[ ] The International Portfolio

This prospectus provides essential information about these portfolios. For your
benefit and protection, please read it and keep it for future reference.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED SHARES OF
THE FUND OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<S> <C>
OVERVIEW.................................................... 1
TERMS USED IN THIS PROSPECTUS............................... 3
ABOUT THE PORTFOLIOS........................................ 4
The Money Market Portfolio................................ 4
The Growth Portfolio...................................... 6
The Bond Portfolio........................................ 8
The Managed Portfolio..................................... 10
The Aggressive Growth Portfolio........................... 12
The Sentinel Growth Portfolio............................. 14
The International Portfolio............................... 16
RISKS OF INVESTING IN THE PORTFOLIOS........................ 18
INVESTMENT TECHNIQUES....................................... 21
Higher-Risk Securities and Practices...................... 25
MANAGEMENT.................................................. 26
DESCRIPTION OF THE FUND'S SHARES............................ 28
OTHER INFORMATION........................................... 30
APPENDIX.................................................... A-1
</TABLE>
<PAGE> 4

OVERVIEW

This prospectus describes seven Portfolios offered by the Fund. Each is a
separate investment portfolio with its own investment objective or objectives,
policies, restrictions and risks. An investor should consider each Portfolio
separately to determine if it is an appropriate investment. There is no
assurance that a Portfolio will achieve its investment objective or objectives,
and investors should not consider any one Portfolio alone to be a complete
investment program. As with all mutual funds, there is a risk that an investor
could lose money by investing in a Portfolio.

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 (credit risk, a type of financial risk). In addition, the value of
debt and other income bearing securities generally rises and falls inversely
with prevailing current interest rates (interest rate risk, a type of market
risk). As described below, an investment in certain of the Portfolios entails
special additional risks as a result of their ability to invest a substantial
portion of their assets in foreign investments, or securities of issuers in new
or emerging industries. See "Risks of Investing in the Portfolios," below.

The following chart provides a brief outline of the relative principal
characteristics of each Portfolio:

THE MARKET STREET FUND, INC.

<TABLE>
<CAPTION>
GROWTH SHORT-TERM
NAME OF PORTFOLIO POTENTIAL INCOME POTENTIAL RISK TYPICAL INVESTMENTS
- --------------------- ------------- ---------------- ---------- -------------------
<S> <C> <C> <C> <C>
Money Market......... None Low-to-Moderate Low Money Market
Instruments
Growth............... High Moderate Moderate Equity Securities
of U.S. Companies
Bond................. Moderate Moderate Moderate Income Bearing Debt
Securities
Managed.............. Moderate-High Moderate Moderate Permissible
Investments for
Other Portfolios
Aggressive Growth.... High Low High Equity Securities
of U.S. Companies
Sentinel Growth...... High Moderate Moderate Equity Securities
of U.S. Companies
International........ High Low High Securities of
Foreign Issuers
</TABLE>

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 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
statement of additional information.
<PAGE> 5

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

SHARES OF THE FUND AND THE PORTFOLIOS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN
INVESTMENT IN THE FUND AND THE PORTFOLIOS IS SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF MONEY INVESTED.
2
<PAGE> 6

TERMS USED IN THIS PROSPECTUS

ADVISER: Any of the investment advisers to the Portfolios.

- Providentmutual Investment Management Company (PIMC) serves as investment
adviser to the International Portfolio

- The Boston Company Asset Management, Inc. (TBC) serves as investment
subadviser to the International Portfolio

- Sentinel Advisors Company (SAC) serves as investment adviser to the Money
Market, Growth, Bond, Managed, Aggressive Growth and Sentinel Growth
Portfolios

EQUITY SECURITIES: Equity securities include 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.

FOREIGN ISSUERS: (1) Companies organized outside the United States, (2)
companies whose securities are principally traded outside of the United States
and (3) foreign governments and agencies or instrumentalities of foreign
governments.

INVESTMENT-GRADE SECURITIES: Securities rated, at the time of purchase,
"investment grade" by a nationally-recognized statistical rating organization
(NRSRO) (e.g. Baa or higher by Moody's Investors Service ("Moody's") or BBB or
higher by Standard & Poor's ("S&P")) or unrated securities that the Adviser
determines to be of comparable quality. (See Appendix A to the statement of
additional information for an explanation of ratings.)

NON-DOLLAR SECURITIES: Securities denominated or quoted in a foreign currency.

PRIMARILY: 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.

SAI: The Fund's statement of additional information, or SAI, contains
additional information about the Fund and the Portfolios and has been filed with
the Securities and Exchange Commission. Investors may obtain a free copy of the
SAI by contacting the Fund at the toll-free number or address shown on the back
cover page of this Prospectus.

VALUE ORIENTED INVESTING: An investment strategy that involves seeking
securities that:

- Have low financial ratios (particularly stock price-to-book value, but
also stock price-to-earnings and stock price-to-cash flow);

- Can be acquired for less than what a subadviser believes is the issuer's
intrinsic value; or

- 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
subadviser to have strong potential for capital appreciation or securities of
"special situation" companies. A special situation company is one that a
subadviser 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. For most subadvisers, identifying special situation
companies and establishing an issuer's intrinsic value involves fundamental
research about such companies and issuers.
3
<PAGE> 7

ABOUT THE PORTFOLIOS

[ ] THE MONEY MARKET PORTFOLIO

INVESTMENT OBJECTIVE

Maximum current income consistent with capital preservation and liquidity.

PRIMARY INVESTMENT STRATEGIES

The Money Market Portfolio invests exclusively in dollar-denominated money
market instruments that present minimal credit risks. These include U.S.
government securities, bank obligations, repurchase agreements, commercial
paper, and other corporate debt obligations. See Appendix A to the SAI for a
complete discussion of the money market instruments in which the Portfolio may
invest.

All of the Money Market Portfolio's money market instruments mature in 13 months
or less. The average maturity of such securities, based on their weighted dollar
value, does not exceed 90 days. The Portfolio intends to maintain a stable value
of $1.00 per share. All of the Portfolio's assets are rated in the two highest
short-term categories (or their unrated equivalents) by an NRSRO and 95% of its
assets are rated in the highest category (or its unrated equivalent) by an
NRSRO. A more detailed description of the rating categories is contained in the
SAI.

PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO

While the Money Market Portfolio only invests in high quality money market
instruments, these investments are not entirely without risk. High quality money
market instruments generally do not yield as high a level of income as
longer-term or lower-grade securities. In addition, the yield of the Portfolio
will vary with changes in interest rates. There is a remote possibility that the
Portfolio's share value could fall below $1.00, which could reduce the value of
an investment in the Portfolio.

To the extent that it invests in certain securities, the Money Market Portfolio
may be affected by additional risks relating to REPURCHASE AGREEMENTS (credit
risk) and WHEN-ISSUED SECURITIES (market, opportunity, and leverage risks).
However, such risks are lessened by the high quality of the securities in which
the Portfolio invests.

These risks are described in more detail later in this Prospectus. SHARES OF THE
PORTFOLIO ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY
FINANCIAL INSTITUTION, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY. Investors should carefully read
"Risks of Investing in the Portfolios" and "Investment Techniques" below before
investing in this Portfolio.
4
<PAGE> 8

THE PORTFOLIO PERFORMANCE

The bar chart and table shown below provide an indication of the risks of
investing in the Money Market Portfolio by showing changes in the Portfolio
performance from year to year over a 10-year period and by showing the
Portfolio's average annual returns for one, five, and ten years. How the
Portfolio has performed in the past is not necessarily an indication of how the
Portfolio will perform in the future.

[INSERT BAR CHART]

During the 10-year period shown in the bar chart, the highest return for a
quarter was [ %] (quarter ended [date]) and the lowest return for a quarter
was [ %] (quarter ended [date]).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED DECEMBER 31, 1998) PAST ONE YEAR PAST 5 YEARS PAST 10 YEARS
----------------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
Money Market Portfolio......................... [ ]% [ ]% [ ]%
90 Day T-Bill.................................. [ ]% [ ]% [ ]%
</TABLE>

5
<PAGE> 9

[ ] THE GROWTH PORTFOLIO

INVESTMENT OBJECTIVES

Intermediate and long-term growth of capital. A reasonable level of income is an
important secondary objective.

PRIMARY INVESTMENT STRATEGIES

The Growth Portfolio invests 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

- Profitable operations (i.e., have some net income before non-recurring
gains or losses)

Generally, the Portfolio holds common stocks listed on national securities
exchanges but it can hold up to 20% of its total assets in stocks only traded
over-the-counter. The Portfolio also may invest in other equity securities and
nonconvertible debt obligations.

PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO

The Growth Portfolio is subject to MARKET RISK and FINANCIAL RISK. These risks,
and the risks associated with other higher-risk securities and practices that
the Portfolio may utilize, are described in more detail later in this
Prospectus. Investors should carefully read "Risks of Investing in the
Portfolios" and "Investment Techniques" below before investing in this
Portfolio.
6
<PAGE> 10

THE PORTFOLIO PERFORMANCE

The bar chart and table shown below provide an indication of the risks of
investing in the Growth Portfolio by showing changes in the Portfolio
performance from year to year over a 10-year period and by showing how the
Portfolio's average annual returns for one, five, and ten years compare to those
of the S&P 500 Composite Stock Price Index (the "S&P 500 Index"). How the
Portfolio has performed in the past is not necessarily an indication of how the
Portfolio will perform in the future.

[INSERT BAR CHART]

During the 10-year period shown in the bar chart, the highest return for a
quarter was [ %] (quarter ended [date]) and the lowest return for a quarter
was [ %] (quarter ended [date]).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED DECEMBER 31, 1998) PAST ONE YEAR PAST 5 YEARS PAST 10 YEARS
----------------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
Growth Portfolio............................... [ ]% [ ]% [ ]%
S&P 500 Index.................................. [ ]% [ ]% [ ]%
</TABLE>

The S&P 500 Index is a widely recognized, unmanaged index of 500 U.S. common
stocks.
7
<PAGE> 11

[ ] THE BOND PORTFOLIO

INVESTMENT OBJECTIVE

A high level of current income consistent with prudent investment risk.

PRIMARY INVESTMENT STRATEGIES

The Bond Portfolio invests in a diversified portfolio of marketable debt
securities of U.S. and foreign issuers. At least 75% of the value of the Bond
Portfolio's total investment in corporate debt securities (other than commercial
paper) consists of investment-grade securities, and the remaining 25% may be
invested in such securities rated one category below investment grade.
Securities of foreign issuers are purchased only if they are investment grade,
denominated in U.S. dollars, and pay any income in U.S. dollars.

The Bond Portfolio may purchase securities 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.

PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO

The Bond Portfolio is subject to MARKET RISK, CREDIT RISK and INTEREST RATE
RISK. To the extent that it invests in certain securities, the Bond Portfolio
may assume additional risks relating to LOWER QUALITY DEBT INSTRUMENTS
(including above-average credit, market, and other risks), SHORT-TERM TRADING
(market risk) and SECURITIES OF FOREIGN ISSUERS (risks of investing in
securities of foreign issuers and information, natural event and political
risks).

These risks, and the risks associated other higher-risk securities and practices
that the Portfolio may utilize, are described in more detail later in this
Prospectus. Investors should carefully read "Risks of Investing in the
Portfolios" and "Investment Techniques" below before investing in this
Portfolio.
8
<PAGE> 12

THE PORTFOLIO PERFORMANCE

The bar chart and table shown below provide an indication of the risks of
investing in the Bond Portfolio by showing changes in the Portfolio performance
from year to year over a 10-year period and by showing how the Portfolio's
average annual returns for one, five, and ten years compare to those of the
Lehman Aggregate Bond Index. How the Portfolio has performed in the past is not
necessarily an indication of how the Portfolio will perform in the future.

[INSERT BAR CHART]

During the 10-year period shown in the bar chart, the highest return for a
quarter was [ %] (quarter ended [date]) and the lowest return for a quarter
was [ %] (quarter ended [date]).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED DECEMBER 31, 1998) PAST ONE YEAR PAST 5 YEARS PAST 10 YEARS
----------------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
Bond Portfolio................................. [ ]% [ ]% [ ]%
Lehman Aggregate Bond Index.................... [ ]% [ ]% [ ]%
</TABLE>

The Lehman Aggregate Bond Index is a widely recognized, unmanaged index of bonds
reflecting average prices in the bond market.
9
<PAGE> 13

[ ] THE MANAGED PORTFOLIO

INVESTMENT OBJECTIVE

As high a level of long-term total rate of return as is consistent with prudent
investment risk.

PRIMARY INVESTMENT STRATEGIES

The Managed Portfolio invests in securities that are permissible investments of
the Money Market, Growth, Bond, Aggressive Growth and International Portfolios.
The Adviser may invest the Managed Portfolio's assets solely in common stocks,
solely in debt securities, solely in money market instruments, or in a
combination of these types of investments. At least 75% of the value of the
Managed Portfolio's total investment in corporate debt securities (other than
commercial paper) consists of investment-grade securities, and the remaining 25%
may be invested in such securities rated one category below investment grade.
The Managed Portfolio also may invest in securities of issuers located in
countries with emerging economies and or securities markets.

The Managed Portfolio's investment strategies may result in the Portfolio having
a higher than average portfolio turnover rate. Higher portfolio turnover results
in correspondingly increased brokerage expenses and other acquisition costs to
the Portfolio.

PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO

The Managed Portfolio is subject to MARKET RISK, FINANCIAL RISK, CREDIT RISK and
INTEREST RATE RISK. To the extent that it invests in certain securities, the
Portfolio may assume additional risks relating to LOWER QUALITY DEBT INSTRUMENTS
(including above-average credit, market, and other risks), SHORT-TERM TRADING
(market risk), and SECURITIES OF FOREIGN ISSUERS AND NON-DOLLAR SECURITIES
(risks of investing in securities of foreign issuers and non-dollar securities,
currency, information, natural event, emerging markets and political risks).

In order to meet the Portfolio's investment objective, the adviser must
determine the proper mix of equity, debt and money market securities. It may not
properly ascertain the appropriate mix of securities for any particular economic
cycle. Also, the timing of movements from one type of security to another could
have a negative effect on the Portfolio's overall objective.

THE PORTFOLIO PERFORMANCE

The bar chart and table shown below provide an indication of the risks of
investing in the Managed Portfolio by showing changes in the Portfolio
performance from year to year over a 10-year period and by showing how the
Portfolio's average annual returns for one, five, and ten years compare to those
of the S&P 500 Index and the Lehman Aggregate Bond Index. How the Portfolio has
performed in the past is not necessarily an indication of how the Portfolio will
perform in the future.

[INSERT BAR CHART]

During the 10-year period shown in the bar chart, the highest return for a
quarter was [ %] (quarter ended [date]) and the lowest return for a quarter
was [ %] (quarter ended [date]).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED DECEMBER 31, 1998) PAST ONE YEAR PAST 5 YEARS PAST 10 YEARS
----------------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
Managed Portfolio............................ [ ]% [ ]% [ ]%
S&P 500 Index................................ [ ]% [ ]% [ ]%
Lehman Aggregate Bond Index.................. [ ]% [ ]% [ ]%
</TABLE>

The Portfolio's investments in equity securities are compared to the S&P 500
Index, a widely recognized, unmanaged index of 500 U.S. common stocks.

The Portfolio's investments in debt securities are compared to the Lehman
Aggregate Bond Index, a widely recognized, unmanaged index of bonds reflecting
average prices in the bond market.
11
<PAGE> 15

[ ] THE AGGRESSIVE GROWTH PORTFOLIO

INVESTMENT OBJECTIVE

A high level of long-term capital appreciation.

PRIMARY INVESTMENT STRATEGIES

The Aggressive Growth Portfolio invests primarily in:

- securities of companies in new or emerging industries

- securities of small capitalization companies and/or unseasoned companies

Substantially all of the Portfolio's assets consist of equity securities of
companies that the Adviser believes have better than average appreciation
potential. The Adviser selects such securities on the basis of their
appreciation potential without restriction as to their type.

PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO

The Aggressive Growth Portfolio invests in securities which generally entail
above-average MARKET RISK and FINANCIAL RISK. The Portfolio also is subject to
SMALL COMPANY RISK. Loss of money is a significant risk of investing in this
Portfolio.

To the extent that it invests in certain securities, the Portfolio may assume
additional risks relating to ADRs, GDRs and EDRs (i.e., the risks of investing
in the securities of foreign issuers and non-dollar securities).

THE PORTFOLIO PERFORMANCE

The bar chart and table shown below provide an indication of the risks of
investing in the Aggressive Growth Portfolio by showing changes in the Portfolio
performance from year to year over a 10-year period and by showing how the
Portfolio's average annual returns for one, five, and ten years compare to those
of the Russell 2000 Index. How the Portfolio has performed in the past is not
necessarily an indication of how the Portfolio will perform in the future.

[INSERT BAR CHART]

During the 10-year period shown in the bar chart, the highest return for a
quarter was [ %] (quarter ended [date]) and the lowest return for a quarter
was [ %] (quarter ended [date]).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS PAST ONE PAST 5 PAST 10
(FOR THE PERIODS ENDED DECEMBER 31, 1998) YEAR YEARS YEARS
----------------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
Aggressive Growth Portfolio........................ [ ]% [ ]% [ ]%
Russell 2000 Index................................. [ ]% [ ]% [ ]%
</TABLE>

The Russell 2000 Index is a widely recognized, unmanaged index of small
capitalization companies.
13
<PAGE> 17

[ ] THE SENTINEL GROWTH PORTFOLIO

INVESTMENT OBJECTIVE

Long-term growth of capital.

PRIMARY INVESTMENT STRATEGIES

The Sentinel Growth Portfolio invests in equity securities of well-established
companies that the Adviser believes have more favorable growth potential than
that of the U.S. economy as a whole. Such companies generally have favorable
growth potential and experienced managements. Under normal market conditions,
this Portfolio is fully invested in equity securities, however, the Portfolio
may temporarily invest in income-bearing 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, it may invest up to 25% of the Portfolio's total assets in
securities of companies within a single industry.

PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO

The Sentinel Growth Portfolio is subject to MARKET RISK and FINANCIAL RISK.
These risks, and the risks associated with other higher-risk securities and
practices that the Portfolio may utilize, are described in more detail later in
this Prospectus. Investors should carefully read "Risks of Investing in the
Portfolios" and "Investment Techniques" below before investing in this
Portfolio.
14
<PAGE> 18

THE PORTFOLIO PERFORMANCE

The bar chart and table shown below provide an indication of the risks of
investing in the Sentinel Growth Portfolio by showing changes in the Portfolio
performance from year to year over a 3-year period (from commencement of
operations) and by showing how the Portfolio's average annual returns for one,
two, and three years compare to those of the S&P 500 Index. How the Portfolio
has performed in the past is not necessarily an indication of how the Portfolio
will perform in the future.

[INSERT BAR CHART]

During the 3-year period shown in the bar chart, the highest return for a
quarter was [ %] (quarter ended [date]) and the lowest return for a quarter
was [ %] (quarter ended [date]).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED DECEMBER 31, 1998) PAST ONE YEAR PAST TWO YEARS PAST THREE YEARS
----------------------------------------- ------------- -------------- ----------------
<S> <C> <C> <C>
Sentinel Growth Portfolio.................. [ ]% [ ]% [ ]%
S&P 500 Index.............................. [ ]% [ ]% [ ]%
</TABLE>

The S&P 500 Index is a widely recognized, unmanaged index of 500 U.S. common
stocks.
15
<PAGE> 19

[ ] THE INTERNATIONAL PORTFOLIO

INVESTMENT OBJECTIVE

Long-term growth of capital primarily through investments in a diversified
portfolio of marketable equity securities of established foreign issuer
companies.

PRIMARY INVESTMENT STRATEGIES

The International Portfolio invests primarily in equity securities of
established foreign issuer companies and of companies organized in the United
States but having their principal activities and interests outside the United
States that the Adviser believes have potential for long-term capital growth.
Many such securities are non-dollar securities. The Portfolio also may invest in
other foreign issuer securities such as those of foreign governments or agencies
or instrumentalities of foreign governments.

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

- Germany

The International Portfolio also may invest in securities of foreign issuers in
the form of sponsored and unsponsored ADRs, EDRs and GDRs (see "Investment
Techniques"). The International Portfolio also may, under normal market
conditions, invest up to 35% of its total assets in investment-grade debt
securities of foreign issuers. See "Risks of Investing in the Portfolios,"
below. The Portfolio engages in a VALUE ORIENTED investing strategy.

PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO

The International Portfolio is subject to MARKET RISK and FINANCIAL RISK. The
International Portfolio is subject to a significant degree of FOREIGN ISSUER AND
NON-DOLLAR SECURITIES RISK. These risks include currency, information, natural
event and political risks. The Portfolio's investments in securities of issuers
located in countries with emerging economies or securities markets entail
EMERGING MARKETS RISK. The risks of investing in securities of foreign issuers
and non-dollar securities are even greater in emerging markets than in Japan or
most Western European countries.

THE PORTFOLIO PERFORMANCE

The bar chart and table shown below provide an indication of the risks of
investing in the International Portfolio by showing changes in the Portfolio
performance from year to year over a 7-year period (from commencement of
operations) and by showing how the Portfolio's average annual returns for one,
five, and seven years compare to those of the Morgan Stanley Capital
International Europe, Australia, Far East (EAFE) Index. How the Portfolio has
performed in the past is not necessarily an indication of how the Portfolio will
perform in the future.

[INSERT BAR CHART]

During the 7-year period shown in the bar chart, the highest return for a
quarter was [ %] (quarter ended [date]) and the lowest return for a quarter
was [ %] (quarter ended [date]).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED DECEMBER 31, 1998) PAST ONE YEAR PAST 5 YEARS PAST 7 YEARS*
----------------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
International Portfolio........................ [ ]% [ ]% [ ]%
EAFE Index..................................... [ ]% [ ]% [ ]%
</TABLE>

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

* The Portfolio commenced operations on November 11, 1991.

The EAFE Index is a widely recognized, unmanaged index of more than 900
companies from these regions. The EAFE Index reflects the prices of these common
stocks translated into U.S. dollars with dividends reinvested net of any foreign
taxes.
17
<PAGE> 21

RISKS OF INVESTING IN THE PORTFOLIOS

Each Portfolio is subject to the risk that it may not achieve its investment
objective, and an investor may lose money (including the principal invested) by
investing in it. No one Portfolio alone should be considered a complete
investment program, and any Portfolio performance could fall below that of other
possible investments.

Because each Portfolio invests in a different mix of securities and employs a
unique strategy for achieving its goals, the risks associated with each
Portfolio will vary. While the actual performance of any mutual fund cannot be
predicted, investors should consider the possible risks associated with a
Portfolio's investments. Such risks include:

CORRELATION RISK. The risk that changes in the value of a hedging instrument or
hedging technique will not match those of the asset being hedged (hedging is the
use of one investment to offset the possible adverse effects of another
investment).

CREDIT RISK. The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise not honor a financial obligation.

CURRENCY RISK. The risk that fluctuations in the exchange rates between the
U.S. dollar and foreign currencies may adversely affect the value of an
investment. Currency fluctuations may negatively impact a Portfolio's portfolio
even if the foreign stock has not declined in value in its own currency. For
example:

- A decline in the dollar value of other currencies would reduce the value
of certain portfolio investments denominated in such currencies

- A Portfolio may have to sell portfolio securities to pay dividends to
shareholders 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 to shareholders.

FINANCIAL RISK. For debt securities, credit risk. For equity securities, the
risk that the issuer's earning prospects and overall financial position will
deteriorate, causing a decline in the security's value.

RISKS OF INVESTING IN SECURITIES OF FOREIGN ISSUERS AND NON-DOLLAR
SECURITIES. Investments in the securities of foreign issuers or investments in
non-dollar securities involve significant risks that are not typically
associated with investing in U.S. dollar-denominated securities or securities of
domestic issuers. Such investments may be affected by changes in currency
exchange rates, changes in foreign or U.S. laws or restrictions applicable to
such investments and in currency exchange control regulations. Some foreign
stock markets (and other securities markets) may have substantially less volume
than, for example, the New York Stock Exchange (or other domestic markets) and
securities of some foreign issuers may be less liquid than securities of
comparable domestic issuers. Commissions and dealer mark-ups on transactions in
securities of foreign issuers and non-dollar securities 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. 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, and there may be less publicly

18
<PAGE> 22

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 cash or
other assets of the Portfolio, or political or social instability or diplomatic
developments which could affect investments in those countries. Individual
foreign economies also may differ favorably or unfavorably from the U.S. economy
in such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.

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 and
institutions in many of these countries are 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 have in the past failed to recognize private property rights and have
at times nationalized or expropriated assets of private companies. In addition,
unanticipated political or social developments may affect the values of
investments in these countries and the ability of a Portfolio to make additional
investments in them. The small size, inexperience and limited trading volume of
the securities markets in certain of these countries may also make investments
in such countries more volatile and less liquid than investments in securities
traded in markets in Japan and Western European countries. As a result, these
Portfolios may be required to establish special custody or other arrangements
before making certain investments in these countries. There may be little
financial or accounting information available with respect to issuers located in
certain of these 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 these Portfolios to invest in securities of
certain issuers located or doing business in these countries.

HEDGING RISK. When a Portfolio hedges an asset it holds, any gain or loss
generated by the hedge should be substantially offset by losses or gains on the
hedged asset. Hedging is a useful way to reduce or eliminate risk of loss, but
it also reduces or eliminates the potential for investment gains.

INFORMATION RISK. The risk that key information about a security or market is
inaccurate or unavailable.

INTEREST RATE RISK. The risk of that the market value of a debt or other
income-bearing security will decline because of changes in prevailing interest
rates. Generally, a rise in interest rates typically causes the market values of
such securities to decline, particularly fixed-rate securities.

RISKS OF INVESTING IN LOWER QUALITY DEBT INSTRUMENTS. Lower quality debt
instruments usually pay a higher interest rate than investment-grade bonds, but
with the higher interest comes higher risks. Lower quality debt instruments have
the following characteristics:

- Speculative with only an adequate capacity to pay principal and
interest;

- Tend to react more to changes in interest rates than do higher-rated
securities;

- Have a higher risk of default, tend to be less liquid, and may be more
difficult to value;

- Are issued by entities whose ability to make principal and interest
payments are more likely to be affected by changes in economics
conditions or other circumstances;

- Have poor prospects for reaching investment grade standing and may be in
default;

19
<PAGE> 23

- May be more severely affected than some other financial instruments by
economic recession or substantial interest rate increases, by changing
public perceptions of the market, or by legislation that limits their
use in connection with corporate reorganizations or limits their tax or
other advantages; and

- 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.

LEVERAGE RISK. The risks associated with securities or investment practices
that enhance return (or loss) without increasing the amount of investment, such
as buying securities on margin or using certain derivative contracts or
derivative securities. A Portfolio's gain or loss on a leveraged position may be
greater than the actual market gain or loss in the underlying security or
instrument. A Portfolio may also incur additional costs in taking a leveraged
position (such as interest on borrowings) that may not be incurred in taking a
non-leveraged position.

LIQUIDITY RISK. The risk that certain securities or other investments may be
difficult or impossible to sell at the time the Portfolio would like to sell
them or at the price the Portfolio values them.

MANAGEMENT RISK. The risk that a strategy used by a Portfolio's Adviser does
not produce the intended result. For example, the Adviser's judgment about the
value or potential appreciation of a particular stock may prove to be incorrect.

MARKET RISK. The risk that the market value of a security may increase or
decrease, sometimes rapidly and unpredictably, due to factors unrelated to the
issuer. This risk is common to all stocks and bonds and the mutual funds that
invest in them.

NATURAL EVENT RISK. The risk of losses attributable to natural disasters, crop
failures and similar events.

OPPORTUNITY RISK. The risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less advantageous
investments.

POLITICAL RISK. The risk of losses directly attributable to government actions
or political events of any sort. Foreign countries may experience political or
social instability or diplomatic developments that could affect investments in
those countries.

SMALL COMPANY RISK. The risk of investing in securities of smaller companies.
Such smaller companies may have limited product lines, markets or financial
resources and their securities may trade less frequently and in more limited
volume than the securities of larger or more established companies. These
companies are typically subject to a greater degree of changes in earnings and
business prospects than are larger, more established issuers. As a result, the
prices of securities of smaller companies may fluctuate to a greater degree than
the prices of securities of other issuers. Although investing in securities of
smaller companies offers potential for above-average returns, the risk exists
that the companies will not succeed and the prices of the companies' shares
could significantly decline in value.

SPECULATION RISK. Speculation involves assuming a higher than average risk of
loss in anticipation of gain. If a Portfolio uses a derivative contract or
derivative security to speculate rather than hedge, it is directly exposed to
the risks of that derivative contract or security. Gains or losses from
speculative positions in a derivative contract or security may be substantially
greater than the derivative contract or security's original cost.

VALUATION RISK. The risk that the market value of an investment falls
substantially below the Portfolio's valuation of the investment.

20
<PAGE> 24

INVESTMENT TECHNIQUES

The Portfolios are permitted to use, within limits established by the directors,
certain other securities and investment practices that have higher risks and
opportunities associated with them. On the following pages are brief
descriptions of these securities and practices, along with certain of their
associated risks.

HIGHER-RISK SECURITIES AND PRACTICES

<TABLE>
<CAPTION>
SECURITY OR PRACTICE DESCRIPTION RELATED RISKS
- -----------------------------------------------------------------------------------------
<S> <C> <C>
American Depositary ADRs are receipts typically Market, currency,
Receipts (ADRs) issued by a U.S. financial information, natural event,
institution which evidence and political risks (i.e.,
ownership of underlying the risks of investing in
securities of foreign foreign issuers and non-
corporate issuers. dollar securities).
Generally, ADRs are in
registered form and are
designed for trading in
U.S. markets.

- -----------------------------------------------------------------------------------------
Borrowing The borrowing of money from Credit risk and interest
banks or through reverse rate risk.
repurchase agreements. No
Portfolio will borrow money
for leveraging purposes.

- -----------------------------------------------------------------------------------------
Writing Covered Call Option A call option is the right Interest rate, market,
Contracts on Securities to purchase a security for hedging, correlation,
an agreed-upon price at any liquidity, credit, and
time prior to an expiration opportunity risks.
date. By writing (selling)
a call option, a Portfolio
gives this right to a buyer
for a fee. A "covered" call
option contracts is one
where the Portfolio owns
the securities subject to
the option so long as the
option is outstanding.

- -----------------------------------------------------------------------------------------
</TABLE>

21
<PAGE> 25

<TABLE>
<CAPTION>
SECURITY OR PRACTICE DESCRIPTION RELATED RISKS
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Emerging Market Securities Any securities primarily Credit, market, currency,
traded on exchanges (or information, liquidity,
other markets) located in, interest rate, valuation,
or issued by companies natural event, political
organized or primarily risks and the risks of
operating in, countries investing in foreign
with emerging economies securities and non-dollar
and/or securities markets securities.
(typically located in Asia,
the Asia-Pacific region,
Eastern Europe, Central and
South America and Africa).

- -----------------------------------------------------------------------------------------
European and Global EDRs and GDRs are receipts Market, currency,
Depositary Receipts (EDRs evidencing an arrangement information, natural event,
and GDRs) with a non-U.S. financial and political risks (i.e.,
institution similar to that the risks of investing in
for ADRs and are designed securities of issuers and
for use in non-U.S. non- dollar securities).
securities markets. EDRs
and GDRs are not
necessarily quoted in the
same currency as the
underlying security.

- -----------------------------------------------------------------------------------------
Securities of Foreign Securities of (1) companies Market, currency,
Issuers organized outside the information, interest rate,
United States, (2) natural event, and
companies whose securities political risks.
are principally traded
outside the United States,
and (3) foreign governments
or agencies and
instrumentalities of
foreign governments.

- -----------------------------------------------------------------------------------------
Foreign Money Market Short-term debt obligations Market, currency,
Securities issued either by foreign information, interest rate,
financial institutions or natural event and political
by foreign branches of U.S. risks.
financial institutions or
foreign issuers.

- -----------------------------------------------------------------------------------------
</TABLE>

22
<PAGE> 26

<TABLE>
<CAPTION>
SECURITY OR PRACTICE DESCRIPTION RELATED RISKS
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Forward Foreign Currency Contracts involving the Currency, liquidity, credit
Exchange Contracts right or obligation to buy and leverage risks. When
or sell a given amount of used for hedging, also has
foreign currency at a hedging, correlation, and
specified price and future opportunity risks.
date.

- -----------------------------------------------------------------------------------------
Illiquid Assets An investment that is Liquidity, valuation and
difficult or impossible to market risks.
sell at approximately the
time that a Portfolio would
like to sell it for the
price at which the
Portfolio values it.

- -----------------------------------------------------------------------------------------
Non-Dollar Securities Securities issued, Currency and liquidity
denominated or quoted in risks.
foreign currencies.

- -----------------------------------------------------------------------------------------
Lower Quality Debt Debt securities rated BB by Credit, market, debt
Instruments S&P or Ba by Moody's (or securities, liquidity,
comparable unrated valuation, and information
securities). risks, and risks of
investing in lower-quality
debt securities.

- -----------------------------------------------------------------------------------------
Equity Interests in Real Pooled investment vehicles Credit, market, financial,
Estate Investment Trusts that invest primarily in prepayment, extension and
(REITs) income producing real interest rate risks.
estate or real estate
related loans or interests.
REITs may include operating
companies that invest in
and manage income-producing
real estate or real
estate-related businesses.

- -----------------------------------------------------------------------------------------
Repurchase Agreements The purchase of a security Credit risk.
that the issuer agrees to
buy back later at the same
price plus interest.

- -----------------------------------------------------------------------------------------
Reverse Repurchase The lending of short-term Leverage and credit risks.
Agreements debt securities; often used
to facilitate borrowing.

- -----------------------------------------------------------------------------------------
</TABLE>

23
<PAGE> 27

<TABLE>
<CAPTION>
SECURITY OR PRACTICE DESCRIPTION RELATED RISKS
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Securities Lending The lending of securities Credit risk.
to financial institutions,
which provide cash or
government securities as
collateral.

- -----------------------------------------------------------------------------------------
Short-Term Trading Selling a security soon Market risk.
after purchase or
purchasing it soon after it
was sold (a Portfolio
engaging in short-term
trading will have higher
turnover and transaction
expenses).

- -----------------------------------------------------------------------------------------
Small Capitalization Companies with market Market and small company
Companies capitalization of less than risk.
$1 billion measured at the
time of purchase.

- -----------------------------------------------------------------------------------------
When-Issued Securities and The purchase and sale of Market, opportunity,
Forward Commitments securities for delivery at interest rate, credit and
a future date; market value leverage risks.
may change before delivery.

- -----------------------------------------------------------------------------------------
</TABLE>

24
<PAGE> 28

HIGHER RISK SECURITIES AND PRACTICES TABLE. The following table shows each
Portfolio's investment limitations with respect to certain higher risk
securities and practices as a percentage of portfolio assets.

<TABLE>
<CAPTION>
MONEY AGGRESSIVE SENTINEL
GROWTH MARKET BOND MANAGED GROWTH GROWTH INTERNATIONAL
------ ------ ---- ------- ---------- -------- -------------
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT PRACTICES
- -------------------------------------------------------------------------------------------------------
Borrowing; Reverse
Repurchase Agreements..... 30 30 30 30 30 30 30
- -------------------------------------------------------------------------------------------------------
Repurchase Agreements....... * * * * * * *
- -------------------------------------------------------------------------------------------------------
REITs....................... -- -- -- -- -- -- --
- -------------------------------------------------------------------------------------------------------
Securities Lending.......... 30 30 30 30 30 30 30
- -------------------------------------------------------------------------------------------------------
Short-term Trading.......... -- -- * * -- -- --
- -------------------------------------------------------------------------------------------------------
Smaller Capitalization
Companies................. X X X X * * X
- -------------------------------------------------------------------------------------------------------
When-Issued Securities;
Forward Commitments....... 10 10 10 10 10 X 10
- -------------------------------------------------------------------------------------------------------
CONVENTIONAL SECURITIES
- -------------------------------------------------------------------------------------------------------
ADRs, EDRs and GDRs......... X X * * X X *
- -------------------------------------------------------------------------------------------------------
Lower Quality Debt
Instruments............... X X 25(2) 25(2) X X X
- -------------------------------------------------------------------------------------------------------
Securities of Foreign
Issuers and Non-Dollar
Securities................ --25 25 25 25 --25 --25 *
- -------------------------------------------------------------------------------------------------------
Emerging Market
Securities................ X X X * X X *
- -------------------------------------------------------------------------------------------------------
Illiquid Assets(1).......... 10 15 15 15 15 15 15
- -------------------------------------------------------------------------------------------------------
DERIVATIVE SECURITIES AND CONTRACTS
- -------------------------------------------------------------------------------------------------------
Covered Call Options on
Securities................ * X X * * X X
- -------------------------------------------------------------------------------------------------------
Forward Foreign Currency
Exchange Contracts........ -- * * * -- -- *
- -------------------------------------------------------------------------------------------------------
</TABLE>

(1) Numbers in this row refer to net, rather than total, assets.

(2) May only invest up to 25% of the value of its corporate debt securities
(other than commercial paper) in such securities.

LEGEND

30 A number indicates the maximum percentage of total assets (but see note 1)
that the Portfolio is permitted to invest in that practice or type of
security. Numbers in this table show allowable usage only; for actual usage,
consult the Portfolio's annual and semi-annual reports.

* A bold check mark means that there is no policy limitation on the Portfolio's
usage of that practice or type of security, and that the Portfolio may be
currently using that practice or investing in that type of security.

- -- A thin check mark means that the Portfolio is permitted to use that practice
or invest in that type of security, but is not expected to do so on a regular
basis.

X An "x" mark means that the Portfolio is not permitted to use that practice or
invest in that type of security.

25
<PAGE> 29

MANAGEMENT

ADVISERS

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

GROWTH, MONEY MARKET, BOND, MANAGED, AND AGGRESSIVE GROWTH PORTFOLIOS. Sentinel
Advisors Company serves as investment adviser for the Growth, Sentinel Growth,
Money Market, Bond, Managed, and Aggressive Growth Portfolios. SAC is located at
National Life Drive, Montpelier, Vermont 05604.

INTERNATIONAL PORTFOLIO. Providentmutual Investment Management Company serves
as investment adviser for the International Portfolio. PIMC is located at 1050
Westlakes Drive, Berwyn, Pennsylvania 19312. PIMC has engaged The Boston Company
Asset Management, Inc. to manage the investment and reinvestment of the
International Portfolio's assets, subject to monitoring by PIMC and supervision
by the Fund's board of directors. TBC is located at One Boston Place, Boston, MA
02108.

COMPENSATION OF PIMC AND SAC

<TABLE>
<CAPTION>
MAXIMUM
FEE PAID IN 1998 ANNUAL RATE
(AS % OF AVERAGE (AS % OF AVERAGE
PORTFOLIO ADVISER DAILY NET ASSETS)* DAILY NET ASSETS)
--------- ------- ------------------- -------------------
<S> <C> <C> <C>
Growth................................. SAC [ ]% 0.50%
Money Market........................... SAC [ ]% 0.25%
Bond................................... SAC [ ]% 0.35%
Managed................................ SAC [ ]% 0.40%
Aggressive Growth...................... SAC [ ]% 0.50%
Sentinel Growth........................ SAC [ ]% 0.50%
International.......................... PIMC [ ]% 0.75%
</TABLE>

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

* With respect to each of the Portfolios (except the Money Market Portfolio) the
fee payable by a Portfolio to PIMC or SAC is graduated so that increases in
the respective Portfolio's net assets may result in a lower fee and decreases
in the Portfolio's net assets may result in a higher fee. The 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.

PORTFOLIO MANAGERS

GROWTH, MANAGED, MONEY MARKET, BOND AND AGGRESSIVE GROWTH
PORTFOLIOS. Respecting the Growth, Money Market, Bond, Managed, Aggressive
Growth and Sentinel 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

26
<PAGE> 30

areas of expertise and shares the responsibility for providing ideas,
information and knowledge in managing the Portfolios. Rodney A. Buck, Chief
Executive Officer of SAC, is also Chairman and Chief Executive Officer of
National Life Investment Management Company, Inc., and Senior Vice President and
Chief Investment Officer of NLIC. Mr. Buck has been employed by SAC or its
affiliates since 1972. There are three investment management teams: an Equity
Value Team, headed by Richard A. Pender, Senior Vice President of SAC; an Equity
Growth Team, headed by Robert L. Lee, Senior Vice President of SAC; and a Fixed
Income Team, headed by David M. Brownlee, Senior Vice President of SAC.

Each of Messrs. Buck, Pender, Lee and Brownlee is a Chartered Financial Analyst.
Mr. Pender has been associated with SAC or its affiliates since 1986. Mr. Lee
joined SAC in 1993. Prior to that time he was a Vice President at Shawmut
National Corporation. Mr. Brownlee also joined SAC in 1993; prior to that he was
a Managing Director at Aetna Life and Casualty.

GROWTH PORTFOLIO. The Growth Portfolio is managed by Mr. Pender and Daniel J.
Manion, Vice President of SAC. Mr. Pender and Mr. Manion have been members of
the Growth Portfolio management team since 1997, when SAC began managing the
Portfolio. Mr. Manion, a Chartered Financial Analyst, has been associated with
SAC since 1993; prior to that he was associated with Wright Investors' Service.

MANAGED PORTFOLIO. The Managed Portfolio is managed by a team consisting of Mr.
Buck, Mr. Pender and Richard D. Temple, Vice President of SAC. Mr. Buck has been
the Portfolio's portfolio manager since 1993. Mr. Temple is a fixed income
portfolio manager who has been employed by SAC or its affiliates since 1969.

MONEY MARKET PORTFOLIO. The Money Market Portfolio is managed by Mr. Temple and
Darlene Coppola, Money Market Trader of SAC. Ms. Coppola has been employed by
SAC or its affiliates since 1974.

BOND PORTFOLIO. The Bond Portfolio is managed by Mr. Temple and William C.
Kane, Vice President of SAC. Mr. Temple has been the lead portfolio manager of
the Bond Portfolio since 1985. Mr. Kane is a Chartered Financial Analyst, and
has been employed by SAC or its affiliates since 1992. Prior to joining SAC, Mr.
Kane was employed by Chase Manhattan Bank.

AGGRESSIVE GROWTH PORTFOLIO. The Aggressive Growth Portfolio is managed by
Scott T. Brayman, Vice President of SAC, and Mr. Lee. Mr. Brayman and Mr. Lee
have been the lead portfolio managers of the Portfolio since 1997. Mr. Brayman
is a Chartered Financial Analyst, and has been with SAC since 1995. He has been
involved with the Aggressive Growth Portfolio since he joined SAC. Prior to
joining SAC, he was associated with Argyle Capital Management, Inc.

SENTINEL GROWTH PORTFOLIO. The Sentinel Growth Portfolio has been managed by
Mr. Lee since its inception in 1996.

INTERNATIONAL PORTFOLIO. Sandor Cseh, Senior Vice President and Director of
International of TBC, has been the portfolio manager for the International
Portfolio since 1991. Sandor Cseh has over 22 years experience in investment
management.

27
<PAGE> 31

DESCRIPTION OF THE FUND'S SHARES

GENERAL

The Fund issues a separate class of shares of common stock for each Portfolio.
The Fund may establish additional portfolios in the future and additional
classes of shares for such new portfolios.

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

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. 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. A Portfolio may invest in
securities primarily listed on foreign exchanges that trade on days when the
Portfolio does not price its shares. Therefore, the net asset value of the
Portfolio's shares may change on days when shareholders may not be able to
redeem Portfolio shares. See "Determination of Net Asset Value" in the SAI.

OFFER, PURCHASE AND REDEMPTION OF SHARES

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

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 contracts and variable annuity contracts. Net premiums or net purchase
payments under the respective contract or contract are placed in one or
28
<PAGE> 32

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 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 contract for a more detailed description of the procedures whereby a
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

The Fund intends that each of the Portfolios will continue to qualify as a
regulated investment company ("RIC") under the Internal Revenue Code of 1986, as
amended (the "Code"), and will meet certain diversification requirements
applicable to mutual funds underlying variable insurance products. For a
discussion regarding what it means to qualify as a RIC and a general discussion
concerning some of the possible tax consequences associated with the operation
of the Fund, please refer to the section entitled "Taxes" in the SAI.

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 or variable annuity contracts. Accordingly, no
gain or loss should be recognized on account of ordinary income or capital gains
distributions to the Fund's insurance company shareholders or upon the sale or
redemption of shares of the Portfolios. Please refer to the appropriate tax
disclosure in the respective prospectuses for a separate account and its related
contract for more information on the taxation of life insurance companies,
separate accounts, as well as the tax treatment of variable life insurance and
variable annuity contracts and the holders thereof.

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

29
<PAGE> 33

OTHER INFORMATION

PREPARING FOR YEAR 2000

In providing investment advisory services to the Portfolios, each Adviser
utilizes systems that may be affected by Year 2000 transition issues. The
Advisers and the Portfolios also rely on service providers, including banks,
custodians, administrators, transfer agents and distributors, that also may be
affected. Each of the Advisers has developed, and is in the process of
implementing, a Year 2000 transition plan, and is confirming that its service
providers also are so engaged. The resources that are being devoted to this
effort are substantial. It is difficult to predict with precision whether the
amount of resources ultimately devoted, or the outcome of these efforts, will
have any negative impact on the Advisers or the Portfolios. As of the date of
this prospectus, it is not anticipated that a shareholder will experience
negative effects on the shareholder's investment, or on the services provided in
connection therewith, as a result of Year 2000 transition implementation.
However, there can be no assurance that the Advisers will be successful, or that
interaction with other service providers will not impair the Fund's or an
Adviser's services at that time.

EURO CONVERSION

On January 1, 1999, 11 participating countries in the European Economic Monetary
Union (Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg,
the Netherlands, Portugal, and Spain) adopted the Euro as their official
currency. As of January 1, 1999, governments in participating countries issued
new debt and redenominated existing debt in Euros, although corporations may
choose whether to issue stocks or bonds in Euros or the national currency. The
new European Central Bank (the "ECB") assumed responsibility for a uniform
monetary policy in participating countries. Currency conversion occurs through a
"triangulation" process whereby an amount denominated in one national currency
is converted into Euros, which are then converted into the second national
currency. The Euro conversion presents investors with unique risks and
uncertainties, including: (1) the readiness of Euro payment, clearing, and other
operational systems; (2) the legal treatment of debt instruments and financial
contracts denominated in or referring to existing national currencies rather
than the Euro; (3) exchange-rate fluctuations between the Euro and non-Euro
currencies during the transition period of January 1, 1999 through December 31,
2001 and beyond; (4) potential U.S. tax issues with respect to Portfolio
securities; and (5) the ECB's abilities to manage monetary policies among the
participating countries. Three other EU member countries (Denmark, Greece, and
the United Kingdom) may convert to the Euro at a later date. These and other
factors could adversely affect the value of or income from Portfolio securities.

30
<PAGE> 34

APPENDIX -- FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each
Portfolio's (except the All Pro Portfolios) financial performance for the past 5
years and for each All Pro Portfolio's financial performance for its period of
operations (which commenced in 1998). Certain information reflects financial
results for a single Portfolio share. The total returns in the table represent
the rate that an investor would have earned on an investment in the Fund
(assuming reinvestment of all dividends and distributions). This information has
been audited by PriceWaterhouseCoopers LLP, independent accountants, whose
report, along with the Fund's financial statements, are included in SAI, which
is available upon request.

<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
(FOR YEAR ENDED)
-------------------------------------------
1998 1997 1996(A) 1995 1994
----- ----- ------- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.......... $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income....................... .05 .05 .05 .04
----- ----- ----- ----- -----
Total from investment operations......... .05 .05 .05 .04
LESS DISTRIBUTIONS:
Dividends to shareholders from net
investment income........................ (.05) (.05) (.05) (.04)
----- ----- ----- ----- -----
Total Distributions...................... (.05) (.05) (.05) (.04)
----- ----- ----- ----- -----
Net asset value, end of period................ $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
Total return............................. 5.33% 5.15% 5.61% 3.81%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)............ 64,339 54,197 34,615 21,040
Ratios of expenses to average net
assets(b)................................ .39% .44% .50% .55%
Ratios of net investment income to average
net assets............................... 5.21% 5.03% 5.47% 3.86%
</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, 1998, 1997, 1996, 1995 and 1994
were as follows: [ ]%, 0.39%, 0.44%, 0.50% and 0.59%, respectively.

See accompanying notes to financial statements.
A-1
<PAGE> 35
FINANCIAL HIGHLIGHTS -- CONTINUED

<TABLE>
<CAPTION>
GROWTH PORTFOLIO
(FOR YEAR ENDED)
-----------------------------------------------
1998 1997(A) 1996 1995 1994
------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $18.10 $16.36 $14.00 $14.09
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................... .35 .46 .47 .43
Net realized and unrealized gain (loss)
on investments....................... 3.49 2.54 3.41 (.10)
------ ------ ------ ------ ------
Total from investment operations..... 3.84 3.00 3.88 .33
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net
investment income.................... (.38) (.48) (.46) (.41)
Dividends to shareholders from net
capital gains........................ (2.10) (.78) (1.06) (.01)
Dividends to shareholders in excess of
net investment income................ -- -- -- --
------ ------ ------ ------ ------
Total distributions.................. (2.48) (1.26) (1.52) (.42)
------ ------ ------ ------ ------
Net asset value, end of period............ $19.46 $18.10 $16.36 $14.00
====== ====== ====== ====== ======
Total Return......................... 24.32% 19.58% 30.39% 2.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)........ 267,389 198,948 161,899 115,191
Ratios of expenses to average net
assets(b)............................ .43% .50% .61% .63%
Ratios of net investment income to
average net assets................... 2.01% 2.80% 3.20% 3.10%
Portfolio turnover rate................. 108% 72% 61% 63%
</TABLE>

- -------------------------
(a) On May 1, 1997, the investment adviser was changed from Newbold's Asset
Management, Inc. to Sentinel Advisors Company.

(b) Expense ratios before reimbursement of expenses by affiliated insurance
company for the years ended December 31, 1998, 1997, 1996, 1995 and 1994
were as follows: [ %], 0.43%, 0.50%, 0.61% and 0.67%, respectively.

See accompanying notes to financial statements.
A-2
<PAGE> 36
FINANCIAL HIGHLIGHTS -- CONTINUED

<TABLE>
<CAPTION>
BOND PORTFOLIO
(FOR YEAR ENDED)
----------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $10.67 $11.00 $ 9.73 $11.21
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................... .64 .63 .65 .62
Net realized and unrealized gain (loss)
on investments....................... .33 (.34) 1.27 (1.23)
------ ------ ------ ------ ------
Total from investment operations... .97 .29 1.92 (.61)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net
investment income.................... (.66) (.62) (.65) (.60)
Dividends to shareholders from net
capital gains........................ (.00) (.00) (.00) (.27)
------ ------ ------ ------ ------
Total distributions................ (.66) (.62) (.65) (.87)
------ ------ ------ ------ ------
Net asset value, end of period............ $10.98 $10.67 $11.00 $ 9.73
====== ====== ====== ====== ======
Total return....................... 9.50% 2.86% 20.45% (5.62)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)........ 23,350 17,087 14,402 10,098
Ratios of expenses to average net
assets(a)............................ .57% 56% .60% .68%
Ratios of net investment income to
average net assets................... 6.24% 6.08% 6.36% 6.14%
Portfolio turnover rate................. 105% 133% 206% 151%
</TABLE>

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

(a) Expense ratios before reimbursement of expenses by affiliated insurance
company for the years ended December 31, 1998, 1997, 1996, 1995 and 1994
were as follows: [ ]%, 0.57%, 0.56%, 0.60% and 0.70%, respectively.

See accompanying notes to financial statements.
A-3
<PAGE> 37
FINANCIAL HIGHLIGHTS -- CONTINUED

<TABLE>
<CAPTION>
MANAGED PORTFOLIO
(FOR YEAR ENDED)
---------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................. $ 14.68 $ 14.19 $ 11.94 $ 13.27
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.............. .54 .51 .55 .53
Net realized and unrealized gain
(loss) on investments........... 2.49 1.07 2.28 (.77)
------- ------- ------- ------- -------
Total from investment
operations.................... 3.03 1.58 2.83 (.24)
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from net
investment income............... (.53) (.51) (.57) (.49)
Dividends to shareholders from net
capital gains................... (.12) (.58) (.01) (.60)
------- ------- ------- ------- -------
Total distributions............. (.65) (1.09) (.58) (1.09)
------- ------- ------- ------- -------
Net asset value, end of period....... $ 17.06 $ 14.68 $ 14.19 $ 11.94
======= ======= ======= ======= =======
Total return.................... 21.23% 11.88% 24.43% (1.82)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)... 56,068 43,431 36,002 29,363
Ratios of expenses to average net
assets(a)....................... .58% .60% .66% .67%
Ratios of net investment income to
average net assets.............. 3.47% 3.68% 4.22% 4.34%
Portfolio turnover rate............ 99% 106% 130% 75%
</TABLE>

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

(a) Expense ratios before reimbursement of expenses by affiliated insurance
company for the years ended December 31, 1998, 1997, 1996, 1995 and 1994
were as follows: [ ]%, 0.58%, 0.60%, 0.66% and 0.73%, respectively.

See accompanying notes to financial statements.
A-4
<PAGE> 38
FINANCIAL HIGHLIGHTS -- CONTINUED

<TABLE>
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO
(FOR YEAR ENDED)
------------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $18.52 $17.38 $ 15.45 $ 15.45
------ ------ ------ ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................. .17 .17 .20 (.01)
Net realized and unrealized gain
(loss) on investments.............. 3.72 3.03 1.86 .01
------ ------ ------ ------- -------
Total from investment operations... 3.89 3.20 2.06 .00
------ ------ ------ ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from net
investment income.................. (.18) (.19) (.00) (.00)
Dividends to shareholders from net
capital gains...................... (.04) (1.87) (.13) (.00)
------ ------ ------ ------- -------
Total distributions................ (.22) (2.06) (.13) (.00)
------ ------ ------ ------- -------
Net asset value, end of period.......... $22.19 $18.52 $ 17.38 $ 15.45
====== ====== ====== ======= =======
Total return....................... 21.21% 21.00% 13.48% 0%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)...... 48,574 34,098 23,822 15,430
Ratios of expenses to average net
assets (annualized)(a)............. .63% .68% .76% .86%
Ratios of net investment income to
average net assets (annualized).... .95% 1.14% 1.32% (.10)%
Portfolio turnover.................... 37% 47% 89% 60%
</TABLE>

- -------------------------
(a) Expense ratios before reimbursement of expenses by affiliated insurance
company and fee waivers by the administrator for the years ended December
31, 1998, 1997, 1996, 1995 and 1994 were as follows: [ ]%, 0.63%, 0.68%,
0.76% and 0.89%, respectively.

See accompanying notes to financial statements.
A-5
<PAGE> 39
FINANCIAL HIGHLIGHTS -- CONTINUED

<TABLE>
<CAPTION>
SENTINEL GROWTH PORTFOLIO
(FOR YEAR OR PERIOD ENDED)
---------------------------
1998 1997 1996(A)
------ ------ -------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $11.14 $10.00
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................................... .04 .05
Net realized and unrealized gain (loss) on investments.... 3.47 1.09
------ ------
Total from investment operations....................... 3.51 1.14
------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income...... (.05) (.00)
Dividends to shareholders from net capital gains.......... (.01) (.00)
------ ------
Total distributions.................................... (.06) (.00)
------ ------
Net asset value, end of period.............................. $14.59 $11.14
====== ======
Total return........................................... 31.58% 11.40%(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000).......................... 8,362 5,664
Ratios of expenses to average net assets
(annualized)(b)........................................ .90% .90%
Ratios of net investment income to average net assets
(annualized)........................................... .36% .57%
Portfolio turnover........................................ 155% 75%
</TABLE>

- -------------------------
(a) Commencement of operations (March 18, 1996).
(b) Expense ratio for the Sentinel Growth Portfolio before reimbursement of
expenses by affiliated insurance company for the period ended December 31,
[ ], 1997 and 1996 was as follows: [ ]%, 1.35% and 1.51%
(annualized), respectively.
(c) Total returns for periods less than one year are not annualized.

See accompanying notes to financial statements.
A-6
<PAGE> 40
FINANCIAL HIGHLIGHTS -- CONTINUED

<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO
(FOR YEAR ENDED)
--------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $13.41 $12.86 $11.63 $11.87
------ ------ ------ ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income......................... .11 .11 .16 .05
Net realized and unrealized gain (loss) on
investments................................ 1.08 1.23 1.45 (.02)
------ ------ ------ ------- -------
Total from investment operations........... 1.19 1.34 1.61 .03
------ ------ ------ ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment
income..................................... (.11) (.16) (.07) (.03)
Dividends to shareholders from net capital
gains...................................... (.88) (.63) (.31) (.24)
------ ------ ------ ------- -------
Total distributions........................ (.99) (.79) (.38) (.27)
------ ------ ------ ------- -------
Net asset value, end of period.................. $13.61 $13.41 $12.86 $11.63
====== ====== ====== ======= =======
Total return............................... 9.66% 10.89% 14.31% .26%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000).............. 62,513 50,955 36,642 26,212
Ratios of expenses to average net
assets(a).................................. 1.02% 1.05% 1.15% 1.32%
Ratios of net investment income to average
net assets................................. 1.13% 1.08% 1.21% .76%
Portfolio turnover............................ 37% 35% 45% 32%
</TABLE>

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

(a) Expense ratios before reimbursement of expenses by affiliated insurance
company and fee waivers by the administrator for the years ended December
31, 1998, 1997, 1996, 1995 and 1994 were as follows: [ ]%, 1.02%, 1.05%,
1.15% and 1.32%, respectively.

See accompanying notes to financial statements.
A-7
<PAGE> 41

ADDITIONAL INFORMATION ABOUT THE FUND

ANNUAL/SEMI-ANNUAL REPORTS TO SHAREHOLDERS:

Additional information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders. In the Fund's annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.

STATEMENT OF ADDITIONAL INFORMATION ("SAI"):

The SAI, which contains additional information about the Fund, has been filed
with the SEC and is incorporated herein by reference. Information about the Fund
(including the SAI) can be reviewed and copied at the SEC's Public Reference
Room in Washington, D.C. Information on the operation of the Public Reference
Room may be obtained by calling the SEC at 1-800-SEC-0330. Reports and other
information about the Fund are available on the SEC's Internet site at
http://www.sec.gov and copies of this information may be obtained, upon payment
of a duplicating fee, by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009.

A free copy of the Fund's SAI and annual report may be obtained and further
inquiries can be made by calling the Fund at 1-800-[ ] or by
writing to the Fund at 103 Bellevue Parkway, Wilmington, Delaware 19809. The
Fund's website is [ ].

Investment Company Act File No.: 811-4350
<PAGE> 42

MARKET STREET FUND, INC.

PROSPECTUS

May 1, 1999

[ ] The Money Market Portfolio

[ ] The Growth Portfolio

[ ] The Bond Portfolio

[ ] The Managed Portfolio

[ ] The Aggressive Growth Portfolio

[ ] The International Portfolio

[ ] All Pro Large Cap Growth Portfolio

[ ] All Pro Small Cap Growth Portfolio

[ ] All Pro Large Cap Value Portfolio

[ ] All Pro Small Cap Value Portfolio

This prospectus provides essential information about these portfolios. For your
benefit and protection, please read it and keep it for future reference.

TABLE OF CONTENTS

<TABLE>
<S> <C>
OVERVIEW.................................................... 1
TERMS USED IN THIS PROSPECTUS............................... 3
ABOUT THE PORTFOLIOS........................................ 4
The Money Market Portfolio................................ 4
The Growth Portfolio...................................... 6
The Bond Portfolio........................................ 8
The Managed Portfolio..................................... 10
The Aggressive Growth Portfolio........................... 12
The International Portfolio............................... 14
INTRODUCTION TO THE ALL PRO PORTFOLIOS...................... 16
All Pro Large Cap Growth Portfolio........................ 18
All Pro Small Cap Growth Portfolio........................ 20
All Pro Large Cap Value Portfolio......................... 22
All Pro Small Cap Value Portfolio......................... 24
RISKS OF INVESTING IN THE PORTFOLIOS........................ 26
INVESTMENT TECHNIQUES....................................... 29
Higher-Risk Securities and Practices...................... 29
MANAGEMENT.................................................. 33
DESCRIPTION OF THE FUND'S SHARES............................ 39
OTHER INFORMATION........................................... 41
ADDITIONAL INFORMATION ABOUT THE FUND....................... 42
APPENDIX.................................................... A-1
</TABLE>
<PAGE> 44

OVERVIEW

This prospectus describes ten Portfolios offered by the Fund. Each is a separate
investment portfolio with its own investment objective or objectives, policies,
restrictions and risks. An investor should consider each Portfolio separately to
determine if it is an appropriate investment. There is no assurance that a
Portfolio will achieve its investment objective or objectives, and investors
should not consider any one Portfolio alone to be a complete investment program.
As with all mutual funds, there is a risk that an investor could lose money by
investing in a Portfolio.

The following chart provides a brief outline of the relative principal
characteristics of each Portfolio:

THE MARKET STREET FUND, INC.

<TABLE>
<CAPTION>
NAME OF GROWTH INCOME SHORT-TERM TYPICAL
PORTFOLIO POTENTIAL POTENTIAL RISK INVESTMENTS
- ---------------------- ------------- --------------- ------------- ----------------------
<S> <C> <C> <C> <C>
Money Market.......... None Low-to-Moderate Low Money Market
Instruments
Growth................ High Moderate Moderate Equity Securities of
U.S. Companies
Bond.................. Moderate Moderate Moderate Income Bearing Debt
Securities
Managed............... Moderate-High Moderate Moderate Permissible
Investments for Other
Portfolios
Aggressive Growth..... High Low High Equity Securities of
U.S. Companies
International......... High Low High Securities of Foreign
Issuers
All Pro Large Cap High Low Moderate Common Stocks and
Growth................ Convertible Securities
of Large U.S.
Companies
All Pro Small Cap High Low Moderate-High Equity Securities of
Growth................ Small U.S. Companies
All Pro Large Cap High Low Moderate-High Equity Securities of
Value................. Large U.S. Companies
All Pro Small Cap High Low High Equity Securities of
Value................. Small U.S. Companies
</TABLE>
<PAGE> 45

Shares of the Fund and the Portfolios are not deposits or obligations of, or
guaranteed or endorsed by, any financial institution, and are not insured by the
Federal Deposit Insurance Corporation or any other government agency. An
investment in the Fund and the Portfolios is subject to investment risks,
including possible loss of money invested.
2
<PAGE> 46

TERMS USED IN THIS PROSPECTUS

ADVISER: Any of the investment advisers to the Portfolios.

- Providentmutual Investment Management Company (PIMC) serves as investment
adviser to the International Portfolio and the All Pro Portfolios

- The Boston Company Asset Management, Inc. (TBC) serves as investment
subadviser to the International Portfolio

- Several investment subadvisers (including a management consultant) serve
as portfolio managers for the All Pro Portfolios

- Sentinel Advisors Company (SAC) serves as investment adviser to the
Growth, Money Market, Bond, Managed, and Aggressive Growth Portfolios

NON-DOLLAR SECURITIES: Securities denominated or quoted in a foreign currency.

ABOUT THE PORTFOLIOS

[ ] THE MONEY MARKET PORTFOLIO

INVESTMENT OBJECTIVE

Maximum current income consistent with capital preservation and liquidity.

PRIMARY INVESTMENT STRATEGIES

PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO

THE PORTFOLIO PERFORMANCE

The bar chart and table shown below provide an indication of the risks of
investing in the Money Market Portfolio by showing changes in the Portfolio
performance from year to year over a 10- year period and by showing the
Portfolio's average annual returns for one, five, and ten years. How the
Portfolio has performed in the past is not necessarily an indication of how the
Portfolio will perform in the future.

[INSERT BAR CHART]

During the 10-year period shown in the bar chart, the highest return for a
quarter was [ %] (quarter ended [date]) and the lowest return for a quarter
was [ %] (quarter ended [date]).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998) PAST ONE YEAR PAST 5 YEARS PAST 10 YEARS
----------------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
Money Market Portfolio......................... [ ]% [ ]% [ ]%
90 Day T-Bill.................................. [ ]% [ ]% [ ]%
</TABLE>

5
<PAGE> 49

[ ] THE GROWTH PORTFOLIO

INVESTMENT OBJECTIVES

Intermediate and long-term growth of capital. A reasonable level of income is an
important secondary objective.

PRIMARY INVESTMENT STRATEGIES

- A minimum level of sales/revenue of $50 million per year in at least one
recent year

- Profitable operations (i.e., have some net income before non-recurring
gains or losses)

PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO

THE PORTFOLIO PERFORMANCE

[INSERT BAR CHART]

During the 10-year period shown in the bar chart, the highest return for a
quarter was [ %] (quarter ended [date]) and the lowest return for a quarter
was [ %] (quarter ended [date]).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998) PAST ONE YEAR PAST 5 YEARS PAST 10 YEARS
----------------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
Growth Portfolio............................... [ ]% [ ]% [ ]%
S&P 500 Index.................................. [ ]% [ ]% [ ]%
</TABLE>

The S&P 500 Index is a widely recognized, unmanaged index of 500 U.S. common
stocks.
7
<PAGE> 51

[ ] THE BOND PORTFOLIO

INVESTMENT OBJECTIVE

A high level of current income consistent with prudent investment risk.

PRIMARY INVESTMENT STRATEGIES

PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO

THE PORTFOLIO PERFORMANCE

[INSERT BAR CHART]

During the 10-year period shown in the bar chart, the highest return for a
quarter was [ %] (quarter ended [date]) and the lowest return for a quarter
was [ %] (quarter ended [date]).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998) PAST ONE YEAR PAST 5 YEARS PAST 10 YEARS
----------------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
Bond Portfolio................................. [ ]% [ ]% [ ]%
Lehman Aggregate Bond Index.................... [ ]% [ ]% [ ]%
</TABLE>

The Lehman Aggregate Bond Index is a widely recognized, unmanaged index of bonds
reflecting average prices in the bond market.
9
<PAGE> 53

[ ] THE MANAGED PORTFOLIO

INVESTMENT OBJECTIVE

As high a level of long-term total rate of return as is consistent with prudent
investment risk.

PRIMARY INVESTMENT STRATEGIES

PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO

THE PORTFOLIO PERFORMANCE

[INSERT BAR CHART]

During the 10-year period shown in the bar chart, the highest return for a
quarter was [ %] (quarter ended [date]) and the lowest return for a quarter
was [ %] (quarter ended [date]).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998) PAST ONE YEAR PAST 5 YEARS PAST 10 YEARS
----------------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
Managed Portfolio.............................. [ ]% [ ]% [ ]%
S&P 500 Index.................................. [ ]% [ ]% [ ]%
Lehman Aggregate Bond Index.................... [ ]% [ ]% [ ]%
</TABLE>

The Portfolio's investments in equity securities are compared to the S&P 500
Index, a widely recognized, unmanaged index of 500 U.S. common stocks.

[ ] THE AGGRESSIVE GROWTH PORTFOLIO

INVESTMENT OBJECTIVE

A high level of long-term capital appreciation.

PRIMARY INVESTMENT STRATEGIES

The Aggressive Growth Portfolio invests primarily in:

- securities of companies in new or emerging industries

- securities of small capitalization companies and/or unseasoned companies

PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO

To the extent that it invests in certain securities, the Portfolio assume by
additional risks relating to ADRs, GDRs and EDRs (i.e., the risks of investing
in the securities of foreign issuers and non-dollar securities).

THE PORTFOLIO PERFORMANCE

[INSERT BAR CHART]

During the 10-year period shown in the bar chart, the highest return for a
quarter was [ %] (quarter ended [date]) and the lowest return for a quarter
was [ %] (quarter ended [date]).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998) PAST ONE YEAR PAST 5 YEARS PAST 10 YEARS
----------------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
Aggressive Growth Portfolio.................... [ ]% [ ]% [ ]%
Russell 2000 Index............................. [ ]% [ ]% [ ]%
</TABLE>

The Russell 2000 Index is a widely recognized, unmanaged index of small
capitalization companies.
13
<PAGE> 57

[ ] THE INTERNATIONAL PORTFOLIO

INVESTMENT OBJECTIVE

Long-term growth of capital primarily through investments in a diversified
portfolio of marketable equity securities of established foreign issuer
companies.

PRIMARY INVESTMENT STRATEGIES

- Australia

- Canada

- France

- Japan

- The United Kingdom

- Germany

PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO

THE PORTFOLIO PERFORMANCE

[INSERT BAR CHART]

During the 7-year period shown in the bar chart, the highest return for a
quarter was [ %] (quarter ended [date]) and the lowest return for a quarter
was [ %] (quarter ended [date]).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998) PAST ONE YEAR PAST 5 YEARS PAST 7 YEARS*
----------------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
International Portfolio........................ [ ]% [ ]% [ ]%
EAFE Index..................................... [ ]% [ ]% [ ]%
</TABLE>

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

* The Portfolio commenced operations on November 11, 1991.

INTRODUCTION TO THE ALL PRO PORTFOLIOS

All four All Pro Portfolios seek long-term capital appreciation. They differ
from the other Portfolios in that PIMC has selected a unique team of investment
subadvisers for each All Pro Portfolio, and each such subadviser manages a
segment of the relevant All Pro Portfolio's assets.

The All Pro Portfolios differ from each other in that two Portfolios -- the All
Pro Large Cap Growth Portfolio and the All Pro Small Cap Growth
Portfolio -- pursue their investment objective through GROWTH ORIENTED
investing, and two Portfolios -- the All Pro Large Cap Value Portfolio and the
All Pro Small Cap Value Portfolio -- pursue their objective through VALUE
ORIENTED investing. 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.

VALUE ORIENTED INVESTING: An investment strategy that involves seeking
securities that:

- Have low financial ratios (particularly stock price-to-book value, but
also stock price-to-earnings and stock price-to-cash flow);

- Can be acquired for less than what a subadviser believes is the issuer's
intrinsic value; or

- Appear attractive on a dividend discount model.

GROWTH ORIENTED INVESTING: An investment strategy that 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 likely to increase in value, it entails identifying earnings growth
potential that can be acquired for a reasonable price. One strategy for
acquiring earnings growth potential is to acquire securities of companies that
are in the early stages of establishing a competitive position within their
industry. For some subadvisers, growth oriented investing also may involve
fundamental research about particular companies in order to identify and take
advantage of potential short-term earnings increases that are not reflected in
the current price of their securities.
16
<PAGE> 60

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 a 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.

PIMC selects two or more subadvisers for each All Pro Portfolio that PIMC
believes can invest segments of the Portfolio in a manner such that the
Portfolio will have characteristics and performance dynamics similar to its
Quantum Benchmark index. To this end, PIMC may select subadvisers that
specialize in one or more, but not all, of the types of securities comprising
the Benchmark index. By using several such subadvisers, 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 subadvisers and performing the quantitative analysis necessary to
assess such subadvisers' styles and performance.
17
<PAGE> 61

[ ] ALL PRO LARGE CAP GROWTH PORTFOLIO

INVESTMENT OBJECTIVE

Long-term capital appreciation.

PRIMARY INVESTMENT STRATEGIES

The Portfolio invests primarily in 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.

Currently, different segments of the Portfolio's assets are managed as follows:

- Approximately 50% of its assets are managed by an investment subadviser
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 to purchase for the Portfolio.

- Approximately 50% of its assets are managed by an investment subadviser
that uses financial quality, sustainable growth, and downside volatility
screens to eliminate issuers from consideration and purchases securities
from the remaining issuers (which usually number between 200-300).

PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO

The All Pro Large Cap Growth Portfolio is subject to MARKET RISK and FINANCIAL
RISK. These risks, and the risks associated other higher-risk securities and
practices that the Portfolio may utilize, are described in more detail later in
this Prospectus. Investors should carefully read "Risks of Investing in the
Portfolios" and "Investment Techniques" below before investing in this
Portfolio.
18
<PAGE> 62

THE PORTFOLIO PERFORMANCE

The bar chart and table shown below provide an indication of the risks of
investing in the All Pro Large Cap Growth Portfolio by showing changes in the
Portfolio performance since commencement of operations and by showing how the
Portfolio's average annual returns compare to those of the Quantum Large Growth
Benchmark. How the Portfolio has performed in the past is not necessarily an
indication of how the Portfolio will perform in the future.

[INSERT BAR CHART]

During the one-year period shown in the bar chart, the highest return for a
quarter was [ %] (quarter ended [date]) and the lowest return for a quarter
was [ %] (quarter ended [date]).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(for the period ended December 31, 1998) PAST ONE YEAR
---------------------------------------- -------------
<S> <C>
All Pro Large Cap Growth Portfolio.......................... [ ]%
Quantum Large Growth Benchmark.............................. [ ]%
</TABLE>

The Quantum Large Growth Benchmark is a widely recognized index of common stocks
of growth oriented companies selected from the largest 750 companies in the
Wilshire 5000 Equity Stock Index.
19
<PAGE> 63

[ ] ALL PRO SMALL CAP GROWTH PORTFOLIO

INVESTMENT OBJECTIVE

Long-term capital appreciation.

PRIMARY INVESTMENT STRATEGIES

The Portfolio invests primarily in equity securities of companies included in
the Wilshire 4500 Index at the time of purchase, which the Advisers believe show
potential for growth in future earnings.

Currently, different segments of the Portfolio's assets are managed as follows:

- Approximately 40% of the Portfolio's assets are managed by an investment
subadviser that seeks securities of companies with market capitalizations
below $500 million that have established above-average growth, superior
business positions and strong management.

- Approximately 60% of the Portfolio's assets are managed by an investment
subadviser that seeks securities of companies with market capitalizations
below $1 billion by attempting to identify changes in companies or
industries that often signal earnings growth, and companies most likely
to benefit from those changes.

PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO

The All Pro Small Cap Growth Portfolio is subject to MARKET RISK and FINANCIAL
RISK. Investments held by this Portfolio entail a significant degree of SMALL
COMPANY RISK.

THE PORTFOLIO PERFORMANCE

The bar chart and table shown below provide an indication of the risks of
investing in the All Pro Small Cap Growth Portfolio by showing changes in the
Portfolio performance since commencement of operations and by showing how the
Portfolio's average annual returns compare to those of the Quantum Small Growth
Benchmark. How the Portfolio has performed in the past is not necessarily an
indication of how the Portfolio will perform in the future.

[INSERT BAR CHART]

During the one-year period shown in the bar chart, the highest return for a
quarter was [ %] (quarter ended [date]) and the lowest return for a quarter
was [ %] (quarter ended [date]).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(for the period ended December 31, 1998) PAST ONE YEAR
---------------------------------------- -------------
<S> <C>
All Pro Small Cap Growth Portfolio.......................... [ ]%
Quantum Small Growth Benchmark.............................. [ ]%
</TABLE>

The Quantum Small Growth Benchmark is a widely recognized index of common stocks
of growth oriented companies selected from the remaining 1,750 companies after
the largest 750 companies in the Wilshire 5000 Equity Stock Index.
21
<PAGE> 65

[ ] ALL PRO LARGE CAP VALUE PORTFOLIO

INVESTMENT OBJECTIVE

Long-term capital appreciation.

PRIMARY INVESTMENT STRATEGIES

The Portfolio invests primarily in undervalued equity securities of companies
among the 750 largest by market capitalization at the time of purchase that the
Advisers believe offer above-average potential for growth in future earnings.

Currently, different segments of the Portfolio's assets are managed as follows:

- Approximately 50% of this Portfolio's assets are managed by an investment
subadviser that seeks securities of companies with low risk and solid
long-term growth potential through an investment process that integrates
quantitative analysis and fundamental research.

- Approximately 50% of the Portfolio's assets are managed by an investment
subadviser that seeks securities of undervalued or overlooked companies
regardless of industry sector through a value oriented process.

PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO

The All Pro Large Cap Value Portfolio is subject to MARKET RISK and FINANCIAL
RISK. These risks, and the risks associated other higher-risk securities and
practices that the Portfolio may utilize, are described in more detail later in
this Prospectus. Investors should carefully read "Risks of Investing in the
Portfolios" and "Investment Techniques" below before investing in this
Portfolio.
22
<PAGE> 66

THE PORTFOLIO PERFORMANCE

The bar chart and table shown below provide an indication of the risks of
investing in the All Pro Large Cap Value Portfolio by showing changes in the
Portfolio performance since commencement of operations and by showing how the
Portfolio's average annual returns compare to those of the Quantum Large Value
Benchmark. How the Portfolio has performed in the past is not necessarily an
indication of how the Portfolio will perform in the future.

[INSERT BAR CHART]

During the one-year period shown in the bar chart, the highest return for a
quarter was [ %] (quarter ended [date]) and the lowest return for a quarter
was [ %] (quarter ended [date]).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(for the period ended December 31, 1998) PAST ONE YEAR
---------------------------------------- -------------
<S> <C>
All Pro Large Cap Value Portfolio........................... [ ]%
Quantum Large Value Benchmark............................... [ ]%
</TABLE>

The Quantum Large Value Benchmark is a widely recognized index of common stocks
of value-oriented companies selected from the largest 750 companies in the
Wilshire 5000 Equity Stock Index.
23
<PAGE> 67

[ ] ALL PRO SMALL CAP VALUE PORTFOLIO

INVESTMENT OBJECTIVE

Long-term capital appreciation.

PRIMARY INVESTMENT STRATEGIES

The Portfolio invests primarily in undervalued equity securities of companies
included in the Wilshire 4500 Index at the time of purchase, which the Advisers
believe offer above-average potential for growth in future earnings.

Currently, different segments of the Portfolio's assets are managed as follows:

- Approximately 40% of the Portfolio's assets are managed by an investment
subadviser that seeks securities of companies that have low
price-to-operating earnings ratios that have strong prospect for future
earnings growth. This subadviser generally avoids securities of companies
with market capitalizations of less than $50 million or with little or no
operating earnings.

- Approximately 60% of the Portfolio's assets are managed by an investment
subadviser that seeks securities of companies that have the potential for
high returns.

PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO

The All Pro Small Cap Value Portfolio is subject to MARKET RISK and FINANCIAL
RISK. Investments held by the Portfolio entail a high degree of SMALL COMPANY
RISK (including a higher credit risk).

THE PORTFOLIO PERFORMANCE

The bar chart and table shown below provide an indication of the risks of
investing in the All Pro Small Cap Value Portfolio by showing changes in the
Portfolio performance since commencement of operations and by showing how the
Portfolio's average annual returns compare to those of the Quantum Small Value
Benchmark. How the Portfolio has performed in the past is not necessarily an
indication of how the Portfolio will perform in the future.

[INSERT BAR CHART]

During the one-year period shown in the bar chart, the highest return for a
quarter was [ %] (quarter ended [date]) and the lowest return for a quarter
was [ %] (quarter ended [date]).

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(for the period ended December 31, 1998) PAST ONE YEAR
---------------------------------------- -------------
<S> <C>
All Pro Small Cap Value Portfolio........................... [ ]%
Quantum Small Value Benchmark............................... [ ]%
</TABLE>

The Quantum Small Value Benchmark is a widely recognized index of common stocks
of value-oriented companies selected from the remaining 1,750 companies after
the largest 750 companies in the Wilshire 5000 Equity Stock Index.
25
<PAGE> 69

RISKS OF INVESTING IN THE PORTFOLIOS

CREDIT RISK. The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise not honor a financial obligation.

- A decline in the dollar value of other currencies would reduce the value
of certain portfolio investments denominated in such currencies

Foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to domestic
companies, and 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

26
<PAGE> 70

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 cash or other assets of the Portfolio, or political or social instability or
diplomatic developments which could affect investments in those countries.
Individual foreign economies also may differ favorably or unfavorably from the
U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position.

INFORMATION RISK. The risk that key information about a security or market is
inaccurate or unavailable.

- Speculative with only an adequate capacity to pay principal and interest;

- Tend to react more to changes in interest rates than do higher-rated
securities;

- Have a higher risk of default, tend to be less liquid, and may be more
difficult to value;

- Are issued by entities whose ability to make principal and interest
payments are more likely to be affected by changes in economics
conditions or other circumstances;

- Have poor prospects for reaching investment grade standing and may be in
default;

- May be more severely affected than some other financial instruments by
economic recession or substantial interest rate increases, by changing
public perceptions of the market, or by legislation that limits their use
in connection with corporate reorganizations or limits their tax or other
advantages; and

NATURAL EVENT RISK. The risk of losses attributable to natural disasters, crop
failures and similar events.

OPPORTUNITY RISK. The risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less advantageous
investments.

VALUATION RISK. The risk that the market value of an investment falls
substantially below the Portfolio's valuation of the investment.

INVESTMENT TECHNIQUES

28
<PAGE> 72

HIGHER-RISK SECURITIES AND PRACTICES

29
<PAGE> 73

<TABLE>
<CAPTION>
SECURITY OR PRACTICE DESCRIPTION RELATED RISKS
- -----------------------------------------------------------------------------------------
<S> <C> <C>
European and Global EDRs and GDRs are receipts Market, currency,
Depositary Receipts (EDRs evidencing an arrangement information, natural event,
and GDRs) with a non-U.S. financial and political risks (i.e.,
institution similar to that the risks of investing in
for ADRs and are designed securities of issuers and
for use in non-U.S. non- dollar securities).
securities markets. EDRs
and GDRs are not
necessarily quoted in the
same currency as the
underlying security.
- -----------------------------------------------------------------------------------------
Securities of Foreign Securities of (1) companies Market, currency,
Issuers organized outside the information, interest rate,
United States, (2) natural event, and
companies whose securities political risks.
are principally traded
outside the United States,
and (3) foreign governments
or agencies and
instrumentalities of
foreign governments.
- -----------------------------------------------------------------------------------------
Foreign Money Market Short-term debt obligations Market, currency,
Securities issued either by foreign information, interest rate,
financial institutions or natural event and political
by foreign branches of U.S. risks.
financial institutions or
foreign issuers.
- -----------------------------------------------------------------------------------------
Forward Foreign Currency Contracts involving the Currency, liquidity, credit
Exchange Contracts right or obligation to buy and leverage risks. When
or sell a given amount of used for hedging, also has
foreign currency at a hedging, correlation, and
specified price and future opportunity risks.
date.
- -----------------------------------------------------------------------------------------
Illiquid Assets An investment that is Liquidity, valuation and
difficult or impossible to market risks.
sell at approximately the
time that a Portfolio would
like to sell it for the
price at which the
Portfolio values it.
- -----------------------------------------------------------------------------------------
Non-Dollar Securities Securities issued, Currency and liquidity
denominated or quoted in risks.
foreign currencies.
- -----------------------------------------------------------------------------------------
Lower Quality Debt Debt securities rated BB by Credit, market, debt
Instruments S&P or Ba by Moody's (or securities, liquidity,
comparable unrated valuation, and information
securities). risks, and risks of
investing in lower-quality
debt securities.
- -----------------------------------------------------------------------------------------
</TABLE>

30
<PAGE> 74

<TABLE>
<CAPTION>
SECURITY OR PRACTICE DESCRIPTION RELATED RISKS
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Equity Interests in Real Pooled investment vehicles Credit, market, financial,
Estate Investment Trusts that invest primarily in prepayment, extension and
(REITs) income producing real interest rate risks.
estate or real estate
related loans or interests.
REITs may include operating
companies that invest in
and manage income-producing
real estate or real
estate-related businesses.
- -----------------------------------------------------------------------------------------
Repurchase Agreements The purchase of a security Credit risk.
that the issuer agrees to
buy back later at the same
price plus interest.
- -----------------------------------------------------------------------------------------
Reverse Repurchase The lending of short-term Leverage and credit risks.
Agreements debt securities; often used
to facilitate borrowing.
- -----------------------------------------------------------------------------------------
Securities Lending The lending of securities Credit risk.
to financial institutions,
which provide cash or
government securities as
collateral.
- -----------------------------------------------------------------------------------------
Short-Term Trading Selling a security soon Market Risk.
after purchase or Market
risk. purchasing it soon
after it was sold (a
Portfolio engaging in
short-term trading will
have higher turnover and
transaction expenses).
- -----------------------------------------------------------------------------------------
Small Capitalization Companies included in the Market and small company
Companies Wilshire 4500 Index at the risk.
time of purchase.
- -----------------------------------------------------------------------------------------
When-Issued Securities and The purchase and sale of Market, opportunity,
Forward Commitments securities for delivery at interest rate, credit, and
a future date; market value leverage risks.
may change before delivery.
- -----------------------------------------------------------------------------------------
</TABLE>

31
<PAGE> 75

<TABLE>
<CAPTION>
ALL
ALL PRO ALL PRO PRO ALL PRO
AGGRES- LARGE SMALL LARGE SMALL
MONEY SIVE INTER- CAP CAP CAP CAP
GROWTH MARKET BOND MANAGED GROWTH NATIONAL GROWTH GROWTH VALUE VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT PRACTICES
- ---------------------------------------------------------------------------------------------------------------------------------
Borrowing; Reverse Repurchase
Agreements.......................... 30 30 30 30 30 30 30 30 30 30
- ---------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements............... * * * * * * * * * *
- ---------------------------------------------------------------------------------------------------------------------------------
REITs............................... -- -- -- -- -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Securities Lending.................. 30 30 30 30 30 30 30 30 30 30
- ---------------------------------------------------------------------------------------------------------------------------------
Short-term Trading.................. -- -- * * -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Smaller Capitalization Companies.... X X X X * X X * X *
- ---------------------------------------------------------------------------------------------------------------------------------
When-Issued Securities; Forward
Commitments......................... 10 10 10 10 10 10 10 10 10 10
- ---------------------------------------------------------------------------------------------------------------------------------
CONVENTIONAL SECURITIES
- ---------------------------------------------------------------------------------------------------------------------------------
ADRs, EDRs and GDRs................. X X * * X * * * * *
- ---------------------------------------------------------------------------------------------------------------------------------
Lower Quality Debt Instruments...... X X 25(2) 25(2) X X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Securities of Foreign Issuers and
Non-Dollar Securities............... --25 25 25 25 --25 * --25 --25 --25 --25
- ---------------------------------------------------------------------------------------------------------------------------------
Emerging Market Securities.......... X X X * X * X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Illiquid Assets(1).................. 15 10 15 15 15 15 15 15 15 15
- ---------------------------------------------------------------------------------------------------------------------------------
DERIVATIVE SECURITIES AND CONTRACTS
- ---------------------------------------------------------------------------------------------------------------------------------
Covered Call Options on
Securities.......................... * X X * * X * * * *
- ---------------------------------------------------------------------------------------------------------------------------------
Forward Foreign Currency Exchange
Contracts........................... -- * * * -- * -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Numbers in this row refer to net, rather than total, assets.

(2) May only invest up to 25% of the value of its corporate debt securities
(other than commercial paper) in such securities.

LEGEND

- --A thin check mark means that the Portfolio is permitted to use that practice
or invest in that type of security, but is not expected to do so on a regular
basis.

X An "x" mark means that the Portfolio is not permitted to use that practice or
invest in that type of security.

32
<PAGE> 76

MANAGEMENT

ADVISERS

GROWTH, MONEY MARKET, BOND, MANAGED, AND AGGRESSIVE GROWTH PORTFOLIOS. Sentinel
Advisors Company serves as investment adviser for the Growth, Money Market,
Bond, Managed, and Aggressive Growth Portfolios. SAC is located at National Life
Drive, Montpelier, Vermont 05604.

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 using a "manager of subadvisers" approach by which PIMC
allocates each All Pro Portfolio's assets among one or more "specialist"
investment subadvisers. PIMC selects investment subadvisers based on a
continuing quantitative and qualitative evaluation of their skills and proven
abilities in managing assets pursuant to a particular investment style.
Short-term performance is not by itself a significant factor in selecting or
terminating investment subadvisers, and therefore PIMC does not anticipate
frequent changes in investment subadvisers. Criteria for employment of
investment subadvisers includes, but is not limited to, proven discipline and
thoroughness in pursuit of stated investment objectives, consistently
above-average performance and an ability to conserve values in declining
markets, and the expertise and level of service of the investment subadviser's
staff and organization. Investment subadvisers may have different investment
styles and security selection disciplines.

PIMC monitors the performance of each investment subadviser and of each All Pro
Portfolio and, to the extent it deems appropriate to achieve a Portfolio's
investment objective, reallocates Portfolio assets among individual subadvisers
or recommends that a Portfolio employ or terminate particular investment
subadvisers. The Fund and PIMC have requested an order of the SEC that would
permit the Fund to employ particular investment subadvisers without shareholder
approval. The Fund will not employ any subadviser, other than those described
herein, without shareholder approval unless such an order is granted.

PIMC has retained Wilshire Associates Incorporated ("Wilshire") as an investment
management consultant to assist it in identifying and evaluating the performance
of potential subadvisers 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
subadvisers. Wilshire also assists PIMC in performing similar ongoing
quantitative analysis of the performance of each All Pro Portfolio's subadvisers
and in determining whether changes in a subadviser would be desirable for a
Portfolio. Wilshire is located at 1299 Ocean Avenue, Suite 700, Santa Monica CA
90401.

33
<PAGE> 77

On behalf of the All Pro Portfolios, and after consultation with Wilshire, PIMC
has selected each of the subadvisers listed below.

SUBADVISERS TO THE ALL PRO SMALL CAP GROWTH PORTFOLIO. The assets of the All
Pro Small Cap Growth Portfolio are managed in part by Standish, Ayer and Wood
("SAW") and in part by Husic Capital Management ("Husic").

SAW. SAW is located at One Financial Center, Boston, Massachusetts. It
emphasizes companies under $500 million in market capitalization which have
established a pattern of business success: above average growth, superior
financial characteristics, superior business positions, and strong
management. SAW has over $3.4 billion in equity assets under management.

Husic. Husic, located at 555 California Street, Suite 2900, San Francisco,
California, offers products across the market capitalization spectrum and
is dedicated to growth style management. Husic manages more than $3.5
billion on behalf of institutions and individuals including $600 million in
its small-cap product.

SUBADVISERS TO THE ALL PRO LARGE CAP GROWTH PORTFOLIO. The assets of the All
Pro Large Cap Growth Portfolio are managed in part by Cohen, Klingenstein &
Marks, Inc. ("CKM") and in part by Geewax, Terker & Co. ("Geewax").

CKM. CKM is an expert in large-capitalization growth equity management.
CKM offers no other products. CKM, which is located at 2112 Broadway, Suite
314, New York, New York, currently manages approximately $1.4 billion in
assets.

Geewax. Geewax has expertise in large-capitalization growth equity
management. Geewax is located at 99 Starr St., Phoenixville, Pennsylvania
and provides portfolio management for $2.6 billion in assets.

SUBADVISERS TO THE ALL PRO SMALL CAP VALUE PORTFOLIO. As of the date of this
prospectus, the assets of the All Pro Small Cap Value Portfolio are managed in
part by 1838 Investment Advisors ("1838"), and in part by Denver Investment
Advisors ("DIA").

1838. 1838, located at 100 Matsonford Rd., Suite 320, Radnor,
Pennsylvania, offers large core equity, fixed income, and international
equity products in addition to its small capitalization equity strategy.
The majority of 1838's clients are institutional, while others are high net
worth individuals.

DIA. DIA, located at 1225 17th Street, Denver, Colorado, offers a small
Capitalization Value approach that focuses on owning small capitalization
stocks that have the potential for high returns and on reducing risk in the
portfolio. DIA provides portfolio management for $11.1 billion in assets.

SUBADVISERS TO THE ALL PRO LARGE CAP VALUE PORTFOLIO. The assets of the All Pro
Large Cap Value Portfolio are managed in part by Equinox Capital Management,
Inc. ("Equinox"), in part by Harris Associates, Inc. ("Harris"), and in part by
Mellon Equity Associates ("Mellon Equity").

Equinox. Equinox is entirely dedicated to large-capitalization value style
management. Equinox, which is located at 590 Madison Ave., 41st Floor, New
York, New York, manages approximately $7 billion on behalf of institutions
and individuals.

Harris. Harris has over 20 years of experience in managing money for
institutional clients and high net worth individuals. Harris, which is
located at 2 North LaSalle St., Suite 500, Chicago, Illinois, currently
manages over $17.7 billion in assets.

Mellon Equity. Mellon Equity, which is located at 500 Grant Street, Suite
3700, Pittsburgh, Pennsylvania, is a wholly owned subsidiary of Mellon Bank
and manages all of its research, portfolio management, marketing and client
contact. Mellon Equity currently manages approximately $17 billion in
assets.

34
<PAGE> 78

COMPENSATION OF PIMC AND SAC

<TABLE>
<CAPTION>
MAXIMUM
FEE PAID IN 1998 ANNUAL RATE
(AS % OF AVERAGE (AS % OF AVERAGE
PORTFOLIO ADVISER DAILY NET ASSETS)* DAILY NET ASSETS)
--------- ------- ------------------ -----------------
<S> <C> <C> <C>
Growth....................................... SAC [ ]% 0.50%
Money Market................................. SAC [ ]% 0.25%
Bond......................................... SAC [ ]% 0.35%
Managed...................................... SAC [ ]% 0.40%
Aggressive Growth............................ SAC [ ]% 0.50%
International................................ PIMC [ ]% 0.75%
All Pro Small Cap Growth..................... PIMC [ ]% 0.90%
All Pro Large Cap Growth..................... PIMC [ ]% 0.70%
All Pro Small Cap Value...................... PIMC [ ]% 0.90%
All Pro Large Cap Value...................... PIMC [ ]% 0.70%
</TABLE>

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

* With respect to each of the Portfolios (except the Money Market Portfolio and
the All Pro Portfolios) the fee payable by a Portfolio to PIMC or SAC is
graduated so that increases in the respective Portfolio's net assets may
result in a lower fee and decreases in the Portfolio's net assets may result
in a higher fee. The 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.

PORTFOLIO MANAGERS

GROWTH, MANAGED, MONEY MARKET, BOND AND AGGRESSIVE GROWTH PORTFOLIOS.
Respecting the Growth, Money Market, Bond, Managed, and Aggressive Growth
Portfolios, SAC employs a team approach in managing the Portfolios. The
management teams are comprised of a lead portfolio manager, other portfolio
managers and research analysts. Each team includes members with one or more
areas of expertise and shares the responsibility for providing ideas,
information and knowledge in managing the Portfolios. Rodney A. Buck, Chief
Executive Officer of SAC, is also Chairman and Chief Executive Officer of
National Life Investment Management Company, Inc., and Senior Vice President and
Chief Investment Officer of NLIC. Mr. Buck has been employed by SAC or its
affiliates since 1972. There are three investment management teams: an Equity
Value Team, headed by Richard A. Pender, Senior Vice President of SAC; an Equity
Growth Team, headed by Robert L. Lee, Senior Vice President of SAC; and a Fixed
Income Team, headed by David M. Brownlee, Senior Vice President of SAC.

35
<PAGE> 79

1993. 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.

ALL PRO PORTFOLIOS. Assets of each of the All Pro Portfolios are managed by two
or more subadvisers that have contracted with PIMC to bring a specific asset
management strategy to the management of that Portfolio. The table below
summarizes the background data with respect to each subadviser's portfolio
managers that provide the day to day management of the All Pro Portfolio's
assets.

<TABLE>
<S> <C> <C>
ALL PRO SMALL CAP SAW: Nicholas S. Battelle, CFA, has served as
GROWTH PORTFOLIO: portfolio manager to the All Pro Small Cap Growth
Portfolio since May 1, 1998. Mr. Battelle
graduated from Duke University, Columbia
University Graduate School of Business, joined
SAW in 1982 and began investment experience in
1970.
Husic: Husic's following investment professionals have
served as portfolio managers to the All Pro Small
Cap Growth Portfolio since May 1, 1998: Frank J.
Husic, CFA: B.S. and M.S. in Industrial
Administration, Carnegie-Mellon University; M.S.
and Ph.D. in Economics, University of
Pennsylvania; Joined Husic in 1987, began
investment experience in 1971; and (2) Ronald J.
Leong, CFA: B.S. with High Honors in Banking and
Finance (two degrees), San Francisco State
University; Joined Husic in 1989, began
investment experience in 1989.
ALL PRO LARGE CAP CKM: CKM's following investment professionals have
GROWTH PORTFOLIO: served as portfolio managers to the All Pro Large
Cap Growth Portfolio since May 1, 1998: (1)
George M. Cohen: B.S. in Mathematics, Arizona
State University; Joined CKM in 1981, began
investment experience in 1974; (2) Thomas D.
Klingenstein: B.A. in History, Williams College;
and (3) Richard C. Marks: B.A. in Physics,
Adelphi University; Joined CKM in 1990, began
investment experience in 1979.
</TABLE>

36
<PAGE> 80
<TABLE>
<S> <C> <C>
Geewax: Geewax's following investment professionals have
served as portfolio managers to the All Pro Large
Cap Growth Portfolio since May 1, 1998: (1) John
J. Geewax: B.S., M.B.A., J.D., Ph.D. (ABD),
University of Pennsylvania; Joined Geewax in
1982, began investment experience in 1980; and
(2) Christopher P. Ouimet: B.S., Albright
College; M.B.A., St. Joseph's University; Joined
Geewax in 1994, began investment experience in
1998.
ALL PRO SMALL CAP VALUE DIA: Christianna Wood, CFA, Vice President and
PORTFOLIO: Portfolio Manager, has served as portfolio
manager to the All Pro Small Cap Value Portfolio
since May 1, 1998. Ms. Wood received a B.A. Cum
Laude, Vassar College, and an M.B.A., New York
University, joined DIA in 1995, began investment
experience in 1981.
1838: 1838's following investment professionals have
served as portfolio managers to the All Pro Small
Cap Value Portfolio since May 1, 1998: (1) Edwin
B. Powell: B.S., University of Illinois; Joined
1838 in 1994, began investment experience in
1967; (2) Cynthia R. Axelrod: B.S. and M.B.A.,
Drexel University; Joined 1838 in 1995, began
investment experience in 1988; and (3) J. Kelly
Flynn: A.B., Harvard University and M.B.A.,
Wharton School; joined 1838 in 1997, began
investment experience in 1997.
ALL PRO LARGE CAP VALUE Equinox: Equinox's following investment professionals have
PORTFOLIO served as portfolio managers to the All Pro Large
Cap Value Portfolio since May 1, 1998: (1) Ronald
J. Ulrich: Degrees in Engineering and Business
Administration, Lehigh University; M.B.A. in
Corporate Finance, New York University; Joined
Equinox in 1989, began investment experience in
1971; and (2) Wendy D. Lee, CFA: Summa Cum Laude
graduate from both Rutgers College and The
University of Chicago Graduate School of Business
with highest distinction in Economics, Finance
and Accounting; joined Equinox in 1992, began
investment experience in 1981.
Harris Associates: Harris Associate's following investment
professionals have served as portfolio managers
to the All Pro Large Cap Value Portfolio since
May 1, 1998: (1) Robert H. Harper, CFA: B.S.,
University of Illinois; M.B.A., Northwestern
University; Joined Harris Associates in 1978,
began investment experience in 1969; and (2)
Michael J. Mangan, CPA, CFA: B.B.A., University
of Iowa; M.B.A., Northwestern University; joined
Harris Associates in 1997, began investment
experience in 1988.
</TABLE>

37
<PAGE> 81
<TABLE>
<S> <C> <C>
Mellon Equity: Mellon Equity's following investment
professionals have served as portfolio managers
to the All Pro Large Cap Value Portfolio since
May 1, 1998: (1) William P. Rydell, CFA: Degree
in Economics, Wabash College; M.B.A., University
of Michigan; Joined Mellon Equity in 1986, began
investment experience in 1972; (2) Robert A.
Wilk, CFA: B.S. in Management and Electrical
Engineering, M.I.T.; M.S. in Finance, M.I.T.;
Joined Mellon Equity in 1986, began investment
experience in 1971; (3) John R. O'Toole, CFA:
B.A. in Economics, University of Pennsylvania;
M.B.A. in Finance, University of Chicago; Joined
Mellon Equity in 1989, began investment
experience in 1978; (4) Ronald P. Gala, CFA:
Degree in Business Administration, Duquesne
University; M.B.A. in Finance, University of
Pittsburgh; Joined Mellon Equity in 1993, began
investment experience in 1984; and (5) Stephen A.
Falci, CFA: B.S. in Economics and M.B.A. in
Finance, New York University; joined Mellon
Equity in 1994, began investment experience in
1981.
</TABLE>

38
<PAGE> 82

DESCRIPTION OF THE FUND'S SHARES

GENERAL

The Fund issues a separate class of shares of common stock for each Portfolio.
The Fund may establish additional portfolios in the future and additional
classes of shares for such new portfolios.

DETERMINATION OF NET ASSET VALUE

OFFER, PURCHASE AND REDEMPTION OF SHARES

39
<PAGE> 83

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

DIVIDENDS, DISTRIBUTIONS, AND TAXES

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

40
<PAGE> 84

OTHER INFORMATION

PREPARING FOR YEAR 2000

EURO CONVERSION

41
<PAGE> 85

APPENDIX -- FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each
Portfolio's (except the All Pro Portfolios) financial performance for the past 5
years and for each All Pro Portfolio's financial performance for its period of
operations (which commenced in 1998). Certain information reflects financial
results for a single Portfolio share. The total returns in the table represent
the rate that an investor would have earned on an investment in the Fund
(assuming reinvestment of all dividends and distributions). This information has
been audited by PricewaterhouseCoopers LLP, independent accountants, whose
report, along with the Fund's financial statements, are included in SAI, which
is available upon request.

<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
(FOR YEAR ENDED)
-------------------------------------------------------------
1998 1997 1996(a) 1995 1994
-------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $1.00 $1.00 $1.00 $1.00
------ ------ ------ ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................... .05 .05 .05 .04
------ ------ ------ ----------- -----------
Total from investment operations....... .05 .05 .05 .04
LESS DISTRIBUTIONS:
Dividends to shareholders from net
investment income...................... (.05) (.05) (.05) (.04)
------ ------ ------ ----------- -----------
Total Distributions.................... (.05) (.05) (.05) (.04)
------ ------ ------ ----------- -----------
Net asset value, end of period.............. $1.00 $1.00 $1.00 $1.00
====== ====== ====== =========== ===========
Total return........................... 5.33% 5.15% 5.61% 3.81%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000).......... 64,339 54,197 34,615 21,040
Ratios of expenses to average net
assets(b).............................. .39% .44% .50% .55%
Ratios of net investment income to average
net assets............................. 5.21% 5.03% 5.47% 3.86%
</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.
A-1
<PAGE> 86
APPENDIX -- FINANCIAL HIGHLIGHTS -- CONTINUED

<TABLE>
<CAPTION>
GROWTH PORTFOLIO
(FOR YEAR ENDED)
-------------------------------------------------------------
1998 1997(a) 1996 1995 1994
----------- ----------- ----------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $18.10 $16.36 $14.00 $14.09
------ ------ ------ ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................. .35 .46 .47 .43
Net realized and unrealized gain
(loss) on investments.............. 3.49 2.54 3.41 (.10)
------ ------ ------ ------- -------
Total from investment operations... 3.84 3.00 3.88 .33
------ ------ ------ ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from net
investment income.................. (.38) (.48) (.46) (.41)
Dividends to shareholders from net
capital gains...................... (2.10) (.78) (1.06) (.01)
Dividends to shareholders in excess of
net investment income.............. -- -- -- --
------ ------ ------ ------- -------
Total distributions................ (2.48) (1.26) (1.52) (.42)
------ ------ ------ ------- -------
Net asset value, end of period.......... $19.46 $18.10 $16.36 $14.00
====== ====== ====== ======= =======
Total Return....................... 24.32% 19.58% 30.39% 2.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)...... 267,389 198,948 161,899 115,191
Ratios of expenses to average net
assets(b).......................... .43% .50% .61% .63%
Ratios of net investment income to
average net assets................. 2.01% 2.80% 3.20% 3.10%
Portfolio turnover rate............... 108% 72% 61% 63%
</TABLE>

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

(a) On May 1, 1997, the investment adviser was changed from Newbold's Asset
Management, Inc. to Sentinel Advisors Company.

See accompanying notes to financial statements.
A-2
<PAGE> 87
APPENDIX -- FINANCIAL HIGHLIGHTS -- CONTINUED

<TABLE>
<CAPTION>
BOND PORTFOLIO
(FOR YEAR ENDED)
-------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.............................. $ 10.67 $ 11.00 $ 9.73 $ 11.21
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............... .64 .63 .65 .62
Net realized and unrealized gain
(loss) on investments............ .33 (.34) 1.27 (1.23)
----------- ----------- ----------- ----------- -----------
Total from investment
operations.................. .97 .29 1.92 (.61)
----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
Dividends to shareholders from net
investment income................ (.66) (.62) (.65) (.60)
Dividends to shareholders from net
capital gains.................... (.00) (.00) (.00) (.27)
----------- ----------- ----------- ----------- -----------
Total distributions............ (.66) (.62) (.65) (.87)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period........ $ 10.98 $ 10.67 $ 11.00 $ 9.73
=========== =========== =========== =========== ===========
Total return................... 9.50% 2.86% 20.45% (5.62)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000).... 23,350 17,087 14,402 10,098
Ratios of expenses to average net
assets(a)........................ .57% 56% .60% .68%
Ratios of net investment income to
average net assets............... 6.24% 6.08% 6.36% 6.14%
Portfolio turnover rate............. 105% 133% 206% 151%
</TABLE>

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

See accompanying notes to financial statements.
A-3
<PAGE> 88
APPENDIX -- FINANCIAL HIGHLIGHTS -- CONTINUED

<TABLE>
<CAPTION>
MANAGED PORTFOLIO
(FOR YEAR ENDED)
----------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $14.68 $14.19 $11.94 $13.27
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............ .54 .51 .55 .53
Net realized and unrealized gain
(loss) on investments......... 2.49 1.07 2.28 (.77)
------ ------ ------ ------ ------
Total from investment
operations.................. 3.03 1.58 2.83 (.24)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income......... (.53) (.51) (.57) (.49)
Dividends to shareholders from
net capital gains............. (.12) (.58) (.01) (.60)
------ ------ ------ ------ ------
Total distributions........... (.65) (1.09) (.58) (1.09)
------ ------ ------ ------ ------
Net asset value, end of period..... $17.06 $14.68 $14.19 $11.94
====== ====== ====== ====== ======
Total return.................. 21.23% 11.88% 24.43% (1.82)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
$(000)........................ 56,068 43,431 36,002 29,363
Ratios of expenses to average net
assets(a)..................... .58% .60% .66% .67%
Ratios of net investment income
to average net assets......... 3.47% 3.68% 4.22% 4.34%
Portfolio turnover rate.......... 99% 106% 130% 75%
</TABLE>

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

See accompanying notes to financial statements.
A-4
<PAGE> 89
APPENDIX -- FINANCIAL HIGHLIGHTS -- CONTINUED

<TABLE>
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO
(FOR YEAR ENDED)
----------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $18.52 $17.38 $15.45 $15.45
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .17 .17 .20 (.01)
Net realized and unrealized gain (loss) on
investments.................................. 3.72 3.03 1.86 .01
------ ------ ------ ------ ------
Total from investment operations............. 3.89 3.20 2.06 .00
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment
income....................................... (.18) (.19) (.00) (.00)
Dividends to shareholders from net capital
gains........................................ (.04) (1.87) (.13) (.00)
------ ------ ------ ------ ------
Total distributions.......................... (.22) (2.06) (.13) (.00)
------ ------ ------ ------ ------
Net asset value, end of period.................... $22.19 $18.52 $17.38 $15.45
====== ====== ====== ====== ======
Total return................................. 21.21% 21.00% 13.48% 0%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 48,574 34,098 23,822 15,430
Ratios of expenses to average net assets
(annualized)(a).............................. .63% .68% .76% .86%
Ratios of net investment income to average net
assets (annualized).......................... .95% 1.14% 1.32% (.10)%
Portfolio turnover.............................. 37% 47% 89% 60%
</TABLE>

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

See accompanying notes to financial statements.
A-5
<PAGE> 90
APPENDIX -- FINANCIAL HIGHLIGHTS -- CONTINUED

<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO
(FOR YEAR ENDED)
----------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $13.41 $12.86 $11.63 $11.87
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income...................... .11 .11 .16 .05
Net realized and unrealized gain (loss) on
investments............................. 1.08 1.23 1.45 (.02)
------ ------ ------ ------ ------
Total from investment operations........ 1.19 1.34 1.61 .03
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net
investment income....................... (.11) (.16) (.07) (.03)
Dividends to shareholders from net capital
gains................................... (.88) (.63) (.31) (.24)
------ ------ ------ ------ ------
Total distributions..................... (.99) (.79) (.38) (.27)
------ ------ ------ ------ ------
Net asset value, end of period............... $13.61 $13.41 $12.86 $11.63
====== ====== ====== ====== ======
Total return............................ 9.66% 10.89% 14.31% .26%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)........... 62,513 50,955 36,642 26,212
Ratios of expenses to average net
assets(a)............................... 1.02% 1.05% 1.15% 1.32%
Ratios of net investment income to average
net assets.............................. 1.13% 1.08% 1.21% .76%
Portfolio turnover......................... 37% 35% 45% 32%
</TABLE>

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

See accompanying notes to financial statements.
A-6
<PAGE> 91
APPENDIX -- FINANCIAL HIGHLIGHTS -- CONTINUED

<TABLE>
<CAPTION>
ALL PRO LARGE CAP
GROWTH PORTFOLIO
(FOR THE PERIOD ENDED)
----------------------
05/01/98(A)
TO
12/31/98
----------------------
<S> <C>
Net asset value, beginning of period........................
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.....................................
Net realized and unrealized gain (loss) on investments....
------
Total from investment operations.......................
------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income......
Dividends to shareholders from net capital gains..........
------
Total distributions....................................
------
Net asset value, end of period..............................
======
Total return...........................................
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)..........................
Ratios of expenses to average net assets..................
Ratios of net investment income to average net assets.....
Portfolio turnover........................................
</TABLE>

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

(a) Commencement of operations.

See accompanying notes to financial statements.

A-7
<PAGE> 92
APPENDIX -- FINANCIAL HIGHLIGHTS -- CONTINUED

<TABLE>
<CAPTION>
ALL PRO SMALL CAP
GROWTH PORTFOLIO
(FOR THE PERIOD ENDED)
----------------------
05/01/98(a)
TO
12/31/98
----------------------
<S> <C>
Net asset value, beginning of period........................
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.....................................
Net realized and unrealized gain (loss) on investments....
------
Total from investment operations.......................
------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income......
Dividends to shareholders from net capital gains..........
------
Total distributions....................................
------
Net asset value, end of period..............................
======
Total return...........................................
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)..........................
Ratios of expenses to average net assets..................
Ratios of net investment income to average net assets.....
Portfolio turnover........................................
</TABLE>

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

(a) Commencement of operations.

See accompanying notes to financial statements.

A-8
<PAGE> 93
APPENDIX -- FINANCIAL HIGHLIGHTS -- CONTINUED

<TABLE>
<CAPTION>
ALL PRO LARGE CAP
VALUE PORTFOLIO
(FOR THE PERIOD ENDED)
----------------------
05/01/98(a)
TO
12/31/98
----------------------
<S> <C>
Net asset value, beginning of period........................
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.....................................
Net realized and unrealized gain (loss) on investments....
------
Total from investment operations.......................
------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income......
Dividends to shareholders from net capital gains..........
------
Total distributions....................................
------
Net asset value, end of period..............................
======
Total return...........................................
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)..........................
Ratios of expenses to average net assets..................
Ratios of net investment income to average net assets.....
Portfolio turnover........................................
</TABLE>

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

(a) Commencement of operations.

See accompanying notes to financial statements.
A-9
<PAGE> 94
APPENDIX -- FINANCIAL HIGHLIGHTS -- CONTINUED

<TABLE>
<CAPTION>
ALL PRO SMALL CAP
VALUE PORTFOLIO
(FOR THE PERIOD ENDED)
----------------------
05/01/98(a)
TO
12/31/98
----------------------
<S> <C>
Net asset value, beginning of period........................
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.....................................
Net realized and unrealized gain (loss) on investments....
------
Total from investment operations.......................
------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income......
Dividends to shareholders from net capital gains..........
------
Total distributions....................................
------
Net asset value, end of period..............................
======
Total return...........................................
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)..........................
Ratios of expenses to average net assets..................
Ratios of net investment income to average net assets.....
Portfolio turnover........................................
</TABLE>

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

(a) Commencement of operations.

See accompanying notes to financial statements.
A-10
<PAGE> 95

ADDITIONAL INFORMATION ABOUT THE FUND

ANNUAL/SEMI-ANNUAL REPORTS TO SHAREHOLDERS:

STATEMENT OF ADDITIONAL INFORMATION ("SAI"):

A free copy of the Fund's SAI and annual report may be obtained and further
inquiries can be made by calling the Fund at 1-800-[ ] or by writing to
the Fund at 103 Bellevue Parkway, Wilmington, Delaware 19809. The Fund's website
is [ ].

Investment Company Act File No.: 811-4350
<PAGE> 96

MARKET STREET FUND, INC.
103 BELLEVUE PARKWAY
WILMINGTON, DE 19809
1-800-[ ]

STATEMENT OF ADDITIONAL INFORMATION

MAY 1, 1999

This Statement of Additional Information ("SAI") is not a prospectus. It should
be read in conjunction with the Market Street Fund, Inc. Prospectus dated May 1,
1999, 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. Terms not defined
in this SAI shall have the same meaning as given them in the Prospectus.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information and History............................. 2
Control Persons............................................. 2
Investment Objectives of the Portfolios..................... 2
Investment Restrictions..................................... 3
Investment Techniques and Risks............................. 4
Portfolio Turnover.......................................... 11
Management of the Fund...................................... 12
Investment Advisory and Other Services...................... 13
Portfolio Transactions and Brokerage Allocation............. 19
Determination of Net Asset Value............................ 20
Redemption of Shares........................................ 22
Taxes....................................................... 22
Capital Stock............................................... 23
Code of Ethics.............................................. 24
Other Services.............................................. 24
Financial Statements........................................ F-1
Appendix A -- Description of Money Market Instruments and
Commercial Paper and Bond Ratings......................... A-1
</TABLE>

<PAGE> 97

GENERAL INFORMATION AND HISTORY

THE FUND

The Market Street Fund, Inc. (the "Fund") was incorporated in the state of
Maryland on March 21, 1985. Each Portfolio of 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 common stock,
for each Portfolio representing fractional undivided interests in that
Portfolio. Currently there are eleven separate investment portfolios (each a
"Portfolio," together, the "Portfolios"). 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. The Portfolios do not intend to
concentrate their respective investments in a particular industry or group of
industries.

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

CONTROL PERSONS

As of the date of this SAI, NLIC and certain separate accounts supporting
variable contracts issued by PMLIC and PLACA, respectively, are the only
shareholders of the Portfolios. As the primary holders of the Portfolios'
shares, PMLIC, PLACA and NLIC together currently control the Fund. PMLIC and
PLACA 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. For purposes of voting on matters
submitted to shareholders, any person who controls a mutual fund may be able to
significantly influence the outcome of any shareholder vote. However, each of
PMLIC, PLACA and NLIC generally votes the relevant shares at the shareholders'
meetings in accordance with the timely instructions received from owners of
variable contracts having contract values allocated to the relevant separate
accounts.

As of December 31, 1998, no policy holder owned a policy or contract which
individually or in the aggregate had a total interest in any Portfolio of more
than 5%. As of December 31, 1998, the officers and directors of the Fund as a
group did not beneficially own as policy holders more than a 1% interest in any
Portfolio.

INVESTMENT OBJECTIVES OF THE PORTFOLIOS

The investment objective or objectives of each Portfolio are set forth below.
They are fundamental and may not be changed unless authorized for each Portfolio
by the vote of a "1940 Act majority" of the outstanding voting shares of the
affected Portfolio, voting separately. Approval by a "1940 Act majority" of a
Portfolio's outstanding voting securities means the approval by the lesser of
(i) more than 50% of the Portfolio's outstanding voting securities, or (ii) 67%
or more of the Portfolio's outstanding voting securities present at a meeting if
the holders of more than 50% of the outstanding voting securities of the
Portfolio are present (in person or by proxy) (hereinafter referred to as a
"1940 Act Vote").

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<TABLE>
<CAPTION>
NAME OF PORTFOLIO INVESTMENT OBJECTIVE
- ----------------- --------------------
<S> <C>
Money Market Portfolio.................... Maximum current income consistent with capital
preservation and liquidity.
Growth Portfolio.......................... Intermediate and long-term growth of capital. A
reasonable level of income is an important
secondary objective.
Bond Portfolio............................ A high level of current income consistent with
prudent investment risk.
Managed Portfolio......................... As high a level of long-term total rate of return
as is consistent with prudent investment risk.
Aggressive Growth Portfolio............... A high level of long-term capital appreciation.
Sentinel Growth Portfolio................. Long-term growth of capital.
International Portfolio................... Long-term growth of capital primarily through
investments in a diversified portfolio of
marketable equity securities of established foreign
issuer companies.
All Pro Large Cap Growth Portfolio........ Long-term capital appreciation.
All Pro Small Cap Growth Portfolio........ Long-term capital appreciation.
All Pro Large Cap Value Portfolio......... Long-term capital appreciation.
All Pro Small Cap Value Portfolio......... Long-term capital appreciation.
</TABLE>

INVESTMENT RESTRICTIONS

The following specific restrictions supplement the discussion of the Portfolios'
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 restrictions may not be
changed except by holders of a 1940 Act majority of outstanding voting shares of
each Portfolio affected. The Fund's fundamental investment restrictions provide
that no Portfolio of the Fund may:

(1) with respect to 75% of the Portfolio's total assets, purchase
securities of an issuer (other than the U.S. Government, its agencies or
instrumentalities), if (a) such purchase would cause more than 5% of the
Portfolio's total assets taken at market value to be invested in the
securities of such issuer, or (b) such purchase would at the time result in
more than 10% of the outstanding voting securities of such issuer being
held by the Portfolio;

(2) invest 25% or more of its total assets in the securities of one or
more issuers conducting their principal business activities in the same
industry (excluding the U.S. Government or any of its agencies or
instrumentalities);

(3) borrow money, except a Portfolio may (a) borrow from banks (as
defined in the 1940 Act) or through reverse repurchase agreements in
amounts up to 30% of its total assets (including the amount borrowed), (b)
to the extent permitted by applicable law, borrow up to an additional 5% of
its total assets for temporary purposes, (c) obtain such short-term credits
as may be necessary for the clearance of purchases and sales of portfolio
securities, and (d) purchase securities on margin to the extent permitted
by applicable law;

(4) make loans, except through (a) the purchase of debt obligations in
accordance with the Portfolio's investment objective and policies, (b)
repurchase agreements with banks, broker-dealers and other financial
institutions, and (c) loans of securities as permitted by applicable law;

(5) underwrite securities issued by others, except to the extent that
the sale of portfolio securities by the Portfolio may be considered an
underwriting;

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(6) purchase, hold or deal in real estate, although a Portfolio may
purchase and sell securities that are secured by real estate or interests
therein, securities of real estate investment trusts and mortgage-related
securities and may hold and sell real estate acquired by a Portfolio as a
result of the ownership of securities;

(7) invest in commodities or commodity contracts, except that the
Portfolio may invest in currency and financial instruments and contracts
that are commodities or commodity contracts; or

(8) issue senior securities to the extent such issuance would violate
applicable law.

The following restrictions are not fundamental policies and may be changed
without the approval of the outstanding voting shares of the affected Portfolio.
No Portfolio may:

(1) sell securities short or maintain a short position except for short
sales against the box; or

(2) invest more than 25% of the value of its total assets in the
securities of foreign issuers and non-dollar securities. This policy does
not apply to the International Portfolio.

(3) acquire any security which is not readily marketable if more than
15% of the net assets of the Portfolio (other than the Money Market
Portfolio), and 10% of the net assets of the Money Market Portfolio, taken
at market value, would be invested in such securities.

Except for the limitations on borrowing from banks, if the above percentage
restrictions are adhered to at the time of investment, a later increase or
decrease in such percentage resulting from a change in values of securities or
amount of net assets will not be considered a violation of any of the foregoing
restrictions.

INVESTMENT TECHNIQUES AND RISKS

The following disclosure supplements the discussion of the Portfolios'
investment objectives and policies set forth in the Prospectus.

TEMPORARY DEFENSIVE POSITIONS

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

REPURCHASE AGREEMENTS

Each of the Portfolios may invest in repurchase agreements with member banks of
the Federal Reserve System or with dealers in U.S. Government securities. 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 price and date (ordinarily a week or less). The total amount received on
repurchase would be calculated to exceed the price paid by the Portfolio,
reflecting an agreed upon market rate of interest for the period from the time
of the repurchase agreement to the settlement date, and would not necessarily be
related to the interest rate on the underlying securities. The underlying
securities are ordinarily U.S. Government securities, but may consist of other
securities in which the respective Portfolios may otherwise invest. Each
Portfolio (except the Money Market Portfolio) will not invest more than 15%, and
the Money Market Portfolio will not invest more than 10%, of its net assets in
repurchase agreements which have maturities of more than seven days and will not
invest in repurchase agreements with maturities of over 30 days. Repurchase
Agreements will be fully collateralized at all times and interest on the
underlying security will not be taken into account for valuation purposes. Under
no circumstances will a Portfolio enter into a repurchase agreement with an
Adviser or an affiliate of an Adviser.

The primary risk of investing in repurchase agreements is that, to the extent
that the proceeds from any sale of the underlying securities and other
collateral relating to a repurchase agreement 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

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be delayed or limited and a loss (including loss of interest on or principal of
the security) 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.

BORROWING

Each of the Portfolios may borrow from banks or through reverse repurchase
agreements in amounts up to 30% of its total assets (including the amount
borrowed). Each Portfolio also may, to the extent permitted by applicable law,
borrow up to an additional 5% of its total assets for temporary purposes, and
may obtain such short-term credits as may be necessary for the clearance of
purchases and sales of portfolio securities and purchase securities on margin to
the extent permitted by applicable law. No Portfolio will borrow money for
leveraging purposes, and no Portfolio will purchase additional securities while
its borrowings exceed the above specified limits. As required by the Investment
Company Act of 1940, each Portfolio will maintain continuous asset coverage of
at least 300% of the amount borrowed. In the event that a Portfolio's asset
coverage falls below 300%, the Portfolio may be required to sell securities
within three days to reduce the amount of its borrowing and restore the 300%
asset coverage. Such sales of securities may occur at a time that is
disadvantageous for a Portfolio.

REVERSE REPURCHASE AGREEMENTS

The Portfolios may enter into reverse repurchase agreements with banks and
broker-dealers. These agreements have the characteristics of borrowing and
involve the sale of securities held by a Portfolio with an agreement to
repurchase the securities at an agreed upon date and price that reflects a rate
of interest paid for the use of funds for the period. Such transactions are
advantageous only if the Portfolios have the opportunity to earn a greater rate
of interest on the cash derived from the transaction than the interest cost of
obtaining that cash. The Portfolios may be unable to realize a rate of return
from the use of the proceeds equal to or greater than the interest expense of
the repurchase agreement. Thus, the Portfolios intend to enter into such
agreements only when it appears advantageous to do so. The use of reverse
repurchase agreements may magnify any increase or decrease in the value of the
Portfolios' investments. The Portfolios' custodian will maintain in a segregated
account, fully liquid securities of each Portfolio that have a value equal to or
greater than the respective Portfolio's commitments under reverse repurchase
agreements. The value of securities subject to reverse repurchase agreements
will not exceed 30% of the value of the respective Portfolio's total assets.
Under no circumstances will a Portfolio enter into a reverse repurchase
agreement with an Adviser or any affiliate of an Adviser.

COVERED CALL OPTION CONTRACTS

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

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

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the loss of profits if the underlying security appreciates above the aggregate
value of the exercise price and premium.

So long as a 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 as the call previously
written on that security. Although writing only call options which are traded on
a national securities exchange increases the likelihood of being able to make
closing purchase transactions, there is no assurance that the Portfolio will be
able to do so at any particular time or at an acceptable price. Depending upon
the premium paid for the option relative to the premium received on the option
written, the Portfolio may realize a profit or loss on a closing transaction.
The writing of call options could result in increases in the turnover rate of
the Portfolio, especially during periods when market prices of the underlying
securities appreciate, which could result in higher brokerage costs. In
addition, brokerage commissions will be paid by the Portfolio on both the
establishment and closing out of an option position.

A Portfolio may write covered call options on particular Portfolio securities
when it believes that the market value of those securities will either decline
or will not increase over the period covered by the option. In this manner, the
Portfolio hopes that the option price received (net of transaction costs) may
offset any decline in the market value of the security or otherwise generate
income for the Portfolio. To the extent income is generated, 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 the 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.

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 (other than the Money Market Portfolio) may invest more than 15%,
and the Money Market Portfolio may not invest more than 10%, of the value of its
net assets in securities that are not readily marketable. This limit does not
apply to a Portfolio's investment in securities purchased or sold pursuant to
Rule 144A under the Securities Act of 1933 which the Board of Directors has
determined are liquid. This restriction does apply to repurchase agreements
maturing in more than seven days. This restriction also applies to securities
received as a result of a corporate reorganization or similar transaction
affecting readily marketable securities already held by the Fund's Portfolios.

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INVESTMENT-GRADE SECURITIES

Investment-grade securities include securities rated, at the time of purchase,
"investment grade" by a nationally-recognized statistical rating organization
("NRSRO") (e.g., Baa or higher by Moody's Investors Service ("Moody's") or BBB
or higher by Standard & Poor's Corporation ("Standard & Poor's")) or unrated
securities that the Adviser determines to be of comparable quality. (See
Appendix A to this SAI for an explanation of ratings.) Unrated securities of a
quality comparable to rated securities may nonetheless trade in the market at a
discount from the price of comparable rated securities.

LOWER QUALITY DEBT INSTRUMENTS

Up to 25% of the total assets of each of the Bond and the Managed Portfolios may
be invested in lower quality debt instruments (rated BB by Standard & Poor's) or
Ba by Moody's or comparable unrated securities. 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. Lower-rated debt
instruments are subject to market risk and 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. In
some cases such securities may be highly speculative, have poor prospects for
reaching investment grade standing and be in default. The market values of such
securities tend to reflect market risk and credit risk, as well as 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.

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

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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 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 SECURITIES

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

Investing in non-dollar securities or in the securities of foreign issuers
involves significant risks that are not typically associated with investing in
U.S. dollar denominated securities or in securities of domestic issuers. Such
investments may be affected by changes in currency rates, changes in foreign or
U.S. laws, or restrictions applicable to such investments and in exchange
control regulations. For example, a decline in the currency exchange rate would
reduce the value of certain portfolio investments. In addition, if the exchange
rate for the currency in which a Portfolio receives interest payments declines
against the U.S. dollar before such interest is paid as dividends to
shareholders, the Portfolio may have to sell portfolio securities to obtain
sufficient cash to pay such dividends. As discussed in the SAI, a Portfolio may
purchase or sell foreign 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

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

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

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

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

INVESTMENTS IN EMERGING MARKETS. The International Portfolio, the Managed
Portfolio and the All Pro Portfolios may invest in securities of issuers located
in countries with emerging economies and or securities markets. These countries
are located in the Asia-Pacific region, Eastern Europe, Central and South
America and Africa. Political and economic structures in many of these countries
may be undergoing significant evolution and rapid development, and such
countries may lack the social, political and economic stability characteristic
of more developed countries. Certain of these countries may have in the past
failed to recognize private property rights and have at times nationalized or
expropriated the assets of private companies. As a 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

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affect the values of these Portfolios' investments in those countries and the
availability to the Portfolio of additional investments in those countries.

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

FOREIGN CURRENCY TRANSACTIONS

To the extent that a Portfolio invests in foreign securities, the value of its
assets as measured in United States dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange control
regulations, and the Portfolio may incur costs in connection with conversions
between various currencies.

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

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

Second, when the Adviser believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. dollar, it may enter
into a forward contract to sell, for a fixed amount of dollars, the amount of
foreign currency approximating the value of some or all of a Portfolio's
securities denominated in such foreign currency. The precise matching of the
forward contract amounts and the value of the securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. The projection of short-term currency market movement is
extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. The Portfolios do not intend to enter into such
forward contracts under this second circumstance on a regular or continuous
basis. The Portfolios will also not enter into such forward contracts or
maintain a net exposure to such contracts when the consummation of the contracts
would obligate a Portfolio to deliver an amount of foreign currency in excess of
the value of the Portfolio's securities or other assets denominated in that
currency. The Adviser believes that it is important to have the flexibility to
enter into such forward contracts when it determines that to do so is in the
best interests of the respective

10
<PAGE> 106
Portfolio. The Portfolios' custodian bank segregates cash or equity or debt
securities in an amount not less than the value of each Portfolio's total assets
committed to forward foreign currency exchange contracts entered into under this
second type of transaction. If the value of the securities segregated declines,
additional cash or securities are added so that the segregated amount is not
less than the amount of the respective Portfolio's commitments with respect to
such contracts. Under normal circumstances, the Portfolios expect that any
appreciation (depreciation) on such forward exchange contracts will be
approximately offset by the (depreciation) appreciation in translation of the
underlying foreign investment arising from fluctuations in foreign currency
exchange rates.

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

REAL ESTATE INVESTMENT TRUSTS

The Portfolios may invest in shares of real estate investment trusts ("REITs").
REITs are pooled investment vehicles that invest primarily in income producing
real estate or real estate related loans or interests. REITs generally are
classified as equity REITs, mortgage REITs or a combination of equity and
mortgage REITs. Equity REITs invest the majority of their assets directly in
real property and derive income primarily from the collection of rents. Equity
REITs can also realize capital gains by selling properties that have appreciated
in value. Mortgage REITs invest the majority of their assets in real estate
mortgages and derive income from the collection of interest payments. REITs are
not taxed on income distributed to shareholders provided they comply with
several requirements of the Code. A Portfolio will indirectly bear its
proportionate share of any expenses paid by REITs in which it invests in
addition to the expenses paid by the Portfolio.

Investing in REITs involves certain unique risks. Equity REITs may be affected
by changes in the value of the underlying property owned by such REITs, while
mortgage REITs may be affected by the quality of any credit extended. REITs are
dependent upon management skills, are not diversified (except to the extent the
Code requires), and are subject to the risks of financing projects. REITs are
subject to heavy cash flow dependency, default by borrowers, self-liquidation,
and the possibilities of failing to qualify for the exemption from tax for
distributed income under the Code and failing to maintain their exemptions from
the 1940 Act. REITs (especially mortgage REITs) are also subject to interest
rate risk.

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.

11
<PAGE> 107

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. If a Portfolio's portfolio turnover rate exceeds 100%, it may result
in correspondingly increased brokerage expenses and other acquisition costs to
that Portfolio (see "Portfolio Transactions and Brokerage Allocation.").
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 is calculated for the Money Market Portfolio due to
the short maturities of the instruments the Portfolio purchases. 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 1998, 1997, and 1996 (as applicable) for
each of the Portfolios (except the Money Market Portfolio) is set forth below.
There is no portfolio turnover data for 1997 and 1996 for the All Pro Portfolios
because each such Portfolio commenced operations only in 1998.

<TABLE>
<CAPTION>
NAME OF PORTFOLIO 1998 1997 1996
- ----------------- ---- ---- ----
<S> <C> <C> <C>
Growth Portfolio............................................ [ ]% 108% 72%
Bond Portfolio.............................................. [ ]% 105% 133%
Managed Portfolio........................................... [ ]% 99% 106%
Aggressive Growth Portfolio................................. [ ]% 37% 47%
Sentinel Growth Portfolio................................... [ ]% 155% 75%
International Portfolio..................................... [ ]% 37% 35%
All Pro Large Cap Growth Portfolio.......................... [ ]% N/A N/A
All Pro Small Cap Growth Portfolio.......................... [ ]% N/A N/A
All Pro Large Cap Value Portfolio........................... [ ]% N/A N/A
All Pro Small Cap Value Portfolio........................... [ ]% N/A N/A
</TABLE>

12
<PAGE> 108

MANAGEMENT OF THE FUND

DIRECTORS AND OFFICERS

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.

The directors and officers of the Fund, their principal occupations for the last
five years and compensation each director and officer received from the Fund in
1998 are set forth below. Unless otherwise noted, the address of each director
and officer is 103 Bellevue Parkway, Wilmington, DE 19809.

<TABLE>
<CAPTION>
NAME AND ADDRESSES OF AGGREGATE
DIRECTORS AND OFFICERS POSITION HELD PRINCIPAL OCCUPATION COMPENSATION
OF THE FUND WITH THE FUND DURING PAST 5 YEARS FROM THE FUND
---------------------- ------------- -------------------- -------------
<S> <C> <C> <C>
Mr. Robert W. Kloss*.............. Director Director since April 22, 1998; $ 0
Age 50 President and Chief Executive
1050 Westlakes Drive Officer ("CEO") of PMLIC since
Berwyn, Pennsylvania 19312 November 1, 1994; 1984-1994,
President and CEO of Covenant
Life Insurance Company
Dr. Alan Gart..................... Director Director since March 21, 1985; $ []
Age 58 1982- Present, President of
978 Warfield Lane Alan Gart, Inc. (a consulting
Huntingdon Valley, firm); 1992-Present; Professor,
PA 19006 Nova Southeastern University;
1989-1992, Professor, South-
eastern Massachusetts
University; 1985-1989,
Professor of Finance, Lehman
College of the City Univer-
sity of New York
Dr. A. Gilbert Heebner............ Director Director since May 12, 1989; $ []
Age 72 1987- Present, Distinguished
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 Director since February 11, $ []
Age 64 1998; 1996 Retired, 1964-1996
4700 White Tail Lane Vice President, Combustion
Sarasota, FL 34238 Engineers Corporation
Mr. Edward S. Stouch.............. Director Director since December 12, $ []
Age 81 1985; 1983, Retired; 1969-1983,
216 Grandview Rd. Vice President and Head of
Media, PA 19063 Personal Trust Investment
Department, Trust Division of
Provident National Bank
Ms. Rosanne Gatta................. President 1993-Present, Vice President $ 0
Age 44 and Treasurer of Provident
Mutual
Ms. Sarah C. Lange................ Vice President 1983-Present, Vice President $ 0
Age 43 Investments of Provident Mutual
</TABLE>

13
<PAGE> 109

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

* "interested person" of the Fund for 1940 Act purposes.

As of the date of this SAI, officers and directors of the Fund as a group own
less than 1% of the outstanding shares of the Fund and of each Portfolio.
Directors who are not officers or employees of PMLIC 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 1998 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.

INVESTMENT ADVISORY AND OTHER SERVICES

GENERAL INFORMATION AND HISTORY

The Fund's investment advisers are: for the International, All Pro Large Cap
Growth, All Pro Large Cap Value, All Pro Small Cap Growth, and All Pro Small Cap
Value Portfolios -- Providentmutual Investment Management Company ("PIMC"); and
for the Growth, Money Market, Bond, Managed, Sentinel Growth and Aggressive
Growth Portfolios -- Sentinel Advisors Company ("SAC"). Prior to May 1, 1997 the
investment adviser for the Growth Portfolio was Newbold's Asset Management, Inc.
("NAM").

On behalf of each Portfolio set forth below, PIMC has engaged one or more
respective investment advisers to serve as sub-adviser to such Portfolio. The
name of each sub-adviser to a Portfolio is set forth below opposite the relevant
Portfolio.

<TABLE>
<CAPTION>
NAME OF PORTFOLIO NAME OF SUB-ADVISER
----------------- -------------------
<S> <C>
International Portfolio................. The Boston Company Asset Management, Inc. ("TBC")
All Pro Large Cap Growth Portfolio...... Cohen, Klingenstein & Marks, Inc. ("CKM")
Geewax, Terker & Co. ("Geewax")
All Pro Small Cap Growth Portfolio...... Standish, Ayer and Wood ("SAW")
Husic Capital Management ("Husic")
</TABLE>

14
<PAGE> 110

<TABLE>
<CAPTION>
NAME OF PORTFOLIO NAME OF SUB-ADVISER
----------------- -------------------
<S> <C>
All Pro Large Cap Value Portfolio....... Equinox Capital Management, Inc. ("Equinox")
Harris Associates, Inc. ("Harris")
Mellon Equity Associates ("Mellon Equity")
All Pro Small Cap Value Portfolio....... 1838 Investment Advisors ("1838")
Denver Investment Advisors ("DIA")
</TABLE>

Together, PIMC, SAC, TBC and the investment sub-advisers for the All Pro
Portfolios are the "Advisers."

PIMC has retained Wilshire Associates Incorporated as an investment management
consultant to assist it in identifying and evaluating the performance of
potential sub-advisers for each of the All Pro Portfolios.

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

SAC is a general partnership owned and controlled by Sentinel Advisors, Inc., an
indirectly wholly-owned subsidiary of NLIC; Providentmutual Management Co.,
Inc., an indirectly wholly-owned subsidiary of PMLIC; HTK of Delaware, Inc., a
wholly-owned subsidiary of The Penn Mutual Life Insurance Company ("Penn
Mutual"); and Sentinel Management Company, a partnership of wholly-owned
subsidiaries of NLIC, PMLIC and Penn Mutual, which is SAC's Managing General
Partner. SAC is located at National Life Drive, Montpelier, Vermont 05604.

PIMC is a registered investment adviser and is also an indirect wholly-owned
subsidiary of PMLIC. 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 PMLIC and by National Life Investment Management
Company, Inc. ("NLIMC") a wholly-owned subsidiary of NLIC. Its address is
National Life Drive, Montpelier, Vermont.

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.

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 the shareholders, PMLIC and PLACA, 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 March 18, 1996 NLIC approved the Fund's investment advisory
agreement for the Sentinel Growth

15
<PAGE> 111

Portfolio. On April 25, 1996 PMLIC and PLACA approved the Fund's investment
advisory agreement for the Money Market Portfolio.

On February 27, 1997 the Fund's Board of Directors, including a majority of the
"non-interested" directors approved the investment advisory agreement between
the Fund and SAC respecting SAC providing advisory services for the Growth
Portfolio, which was effective May 1, 1997. On April 24, 1997 PMLIC and PLACA
approved the Fund's investment advisory agreement for the Growth Portfolio.

On April 29, 1998, the Fund's Board of Directors, including a majority of the
"non-interested" directors approved the investment advisory agreement between
the Fund and PIMC respecting PIMC providing investment advisory services for the
All Pro Large Cap Growth, All Pro Large Cap Value, All Pro Small Cap Growth and
All Pro Small Cap Value Portfolios, which was effective May 1, 1998.

In voting to approve each of the foregoing advisory agreements PMLIC and/or
PLACA voted their Fund shares for or against such approvals, or withheld their
votes, in the same proportion as Policyholders having an interest in the
respective Portfolios, voted for, against or withheld their votes with respect
to the agreement for that Portfolio.

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 1940
Act and the rules thereunder) of the Portfolio's shares. Otherwise, the
investment advisory agreements will continue in force with respect to any
Portfolio so long as their continuance is approved at least annually by a
majority of the "non-interested" members of the Fund's Board of Directors, and
by (i) a 1940 Act vote 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 objective(s) and policies as stated in the Fund's
Articles of Incorporation, By-Laws, Prospectus and SAI 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

16
<PAGE> 112

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").

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

ALL PRO LARGE CAP GROWTH, ALL PRO LARGE CAP VALUE, ALL PRO SMALL CAP GROWTH &
ALL PRO SMALL CAP VALUE PORTFOLIOS. As an investment advisory fee, PIMC
receives .70% of the daily net assets of the All Pro Large Cap Growth and All
Pro Large Cap Value Portfolios, and .90% of the daily net assets of the All Pro
Small Cap Growth and All Pro Small Cap Value Portfolios.

The investment advisory fee incurred for PIMC during 1997 was
$[ ], $[ ], $[ ], $[ ]
and $[ ] for the International, All Pro Large Cap Growth, All Pro
Small Cap Growth, All Pro Large Cap Value, and All Pro Small Cap Value
Portfolios, respectively. The investment advisory fee incurred for SAC during
1997 was $[ ], $[ ], $[ ],
$[ ], $[ ] and $[ ] for the Money
Market, Growth, Sentinel Growth, Bond, Managed and Aggressive Growth Portfolios,
respectively.

The investment advisory fee incurred for NAM during 1997 with respect to the
Growth Portfolio was $223,312. The investment advisory fee incurred for PIMC
during 1997 with respect to the International Portfolio was $440,914. The total
investment advisory fee incurred for SAC during 1997 was $1,121,203, allocated
$67,663, $199,166, $185,551, $151,852 and $516,971 for the Bond, Managed,
Aggressive Growth, Money Market and Growth Portfolios, respectively.

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

EXPENSES

The Portfolios directly assume certain of their expenses and all expenses borne
by the Fund, including the fees payable to the Advisers are accrued daily.
Expenses that are borne directly by the Portfolios include redemption expenses,
expenses of portfolio transactions, shareholding servicing costs, expenses of
registering the shares under Federal and state securities laws, interest,
certain taxes, charges of the Custodian and Transfer Agent and other expenses
attributable to a particular Portfolio. Expenses which are allocated on the
basis of size of the respective Portfolios include directors' fees, legal
expenses, state franchise taxes, auditing services, costs of printing proxies,
stock certificates, Securities and Exchange Commission fees, accounting costs,
pricing costs (including the daily calculation of net asset value), and other
expenses properly payable by the Fund and allocable on the basis of size of the
respective Portfolios. Depending upon the nature of a lawsuit, litigation costs
may be directly applicable to the Portfolios or allocated on the basis of the
size of the respective Portfolios.

For the fiscal year ended December 31, 1998, each Portfolio bore total expenses,
computed as a percentage of the average daily net assets of that Portfolio, as
follows: Money Market Portfolio -- [ ]%; Growth Portfolio -- [ ]%;
Sentinel Growth Portfolio -- [ ]%; Bond Portfolio -- [ ]%; Managed
Portfolio -- [ ]%; Aggressive Growth Portfolio -- [ ]%; International
Portfolio -- [ ]%; All Pro

17
<PAGE> 113

Large Cap Growth Portfolio -- [ ]%; All Pro Small Cap Growth
Portfolio -- [ ]%; All Pro Large Cap Value Portfolio -- [ ]%; and All
Pro Small Cap Value Portfolio -- [ ]%.

Effective November 1, 1991, PMLIC 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. PMLIC has agreed to reimburse the Fund for
such expenses in excess of 0.40% of the average daily net asset value of each of
the All Pro Portfolios.

During 1992, PMLIC reimbursed the Fund for $81,997 of expenses, allocated
$16,455 to the Growth Portfolio; $5,588 to the Money Market Portfolio; $3,173 to
the Bond Portfolio; $4,924 to the Managed Portfolio; $5,151 to the Aggressive
Growth Portfolio; and $46,706 to the International Portfolio. Expenses
reimbursed by Provident Mutual for 1991 were $175,500 and for 1990 $150,569.
There was no reimbursement in 1995, 1994 or 1993. In 1996 and 1997 there were no
reimbursements for the Growth, Money Market, Bond, Managed, Aggressive Growth
and International Portfolios. For the Sentinel Growth Portfolio, the
reimbursements made in 1996 and 1997 were $25,050 and $30,617, respectively.

ADMINISTRATIVE SERVICES

PFPC Inc. ("PFPC") provides certain administrative services to the Fund pursuant
to an administration agreement between PFPC and the Fund. Such services include
maintaining the Portfolios' books and records, preparing governmental filings,
statements, returns, and stockholder reports, and computing net asset value and
daily dividends. For such services, PFPC is paid a fee at an annual rate 0.10%
on the first $175 million, 0.075% on the next $175 million, 0.05% on the next
$175 million, and 0.03% in excess of $525 million, of each Portfolios' 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.

INVESTMENT SUB-ADVISORY AGREEMENTS

As stated in the Prospectus, PIMC has entered into an Investment Sub-Advisory
Agreement with TBC whereby TBC provides subadvisory services to the
International Portfolio, 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
greater 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 1940 Act vote of the Portfolio's shareholders or (ii) the Fund's Board of
Directors. The Investment Sub-Advisory Agreement may be terminated without
penalty on 60 days' prior written notice by the Fund's Board of Directors, by
PIMC or by TBC, as the case may be, and is terminated automatically in the event
of its assignment.

For 1998 and 1997 PIMC incurred $[ ] and $220,457, respectively for
investment advisory services rendered by TBC in connection with the
International Portfolio.

18
<PAGE> 114

PIMC has retained Wilshire Associates Incorporated ("Wilshire") as an investment
management consultant to assist it in identifying and evaluating the performance
of potential sub-advisers for each of the All Pro Portfolios. Wilshire does not
participate in the selection of portfolio securities for any Portfolio or in any
way participate in the day-to-day management of the All Pro Portfolios or the
Fund. Wilshire assists PIMC in gathering data and performing the quantitative
analysis necessary to identify the styles and past performance of potential
sub-advisers. Wilshire also assists PIMC in performing similar ongoing
quantitative analysis of the performance of each All Pro Portfolio's
sub-advisers and in determining whether changes in a sub-adviser would be
desirable for a Portfolio. As compensation for such services, PIMC pays Wilshire
a sub-advisory fee equal to .05% of the average daily net assets of the All Pro
Portfolios.

On behalf of the All Pro Portfolios, and after consultation with Wilshire, PIMC
has selected, and has entered into Investment Sub-Advisory Agreements with, the
sub-advisers listed above under "Investment Advisory and Other Services." The
table below indicates the rate of compensation to be paid by PIMC to each
sub-adviser pursuant to the relevant Investment Sub-Advisory Agreement and the
compensation paid to each such sub-adviser in 1998.

<TABLE>
<CAPTION>
COMPENSATION
NAME OF PORTFOLIO SUB-ADVISER RATE OF COMPENSATION* PAID IN 1998*
----------------- ----------- --------------------- -------------
<S> <C> <C> <C>
All Pro Large Cap Growth
Portfolio................... CKM .35%
Geewax .30%
All Pro Small Cap Growth
Portfolio................... SAW .50%
Husic .50%
All Pro Large Cap Value
Portfolio................... Equinox .25% of the first $50 million
in assets
.23% of assets above $50
million
Harris .65% of the first $50 million
in assets
.60% of the next $50 million
in assets
.55% of assets above $100
million
Mellon Equity .20%
All Pro Small Cap Value
Portfolio................... 1838 .55%
DIA .75% of the first $25 million
in assets
.65% of assets above $25
million
</TABLE>

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

* As a percentage of average daily net assets.

Each Investment Sub-Advisory Agreement entered into on behalf of an All-Pro
Portfolio was approved by a majority of the Fund's Board of Directors, including
a majority of its "non-interested" directors, at a meeting of the Board that
took place on April 29, 1998. Each Agreement became effective on May 1, 1998.
The initial term of each such Investment Sub-Advisory Agreement is two years,
and it will continue in effect from year to year thereafter as long as such
continuance is approved at least annually by a majority of the "non-interested"
members of the Fund's Board of Directors and by (i) a 1940 Act vote of the
relevant All-Pro Portfolio's shareholders or (ii) the Fund's Board of Directors.
Each Investment Sub-Advisory Agreement may be terminated without penalty on 60
days' prior written notice by the Fund's Board of

19
<PAGE> 115

Directors, by PIMC, or by the relevant sub-adviser, as the case may be, and is
terminated automatically in the event of its assignment.

INFORMATION ABOUT ADVISERS

The principal officers of PIMC are:

<TABLE>
<CAPTION>
POSITION WITH POSITION WITH
NAME PIMC THE FUND
---- ------------- -------------
<S> <C> <C>
Sarah Lange President none
James Benson Financial Officer none
Scott V. Carney Vice President none
Rosanne Gatta Vice President President
Timothy Henry Vice President none
James Kestner Vice President none
David Merkel Vice President none
Dean Miller Vice President none
William Rapp Vice President none
Richard J. Simon Vice President none
Steven Schweitzer Vice President none
Dina M. Welch Vice President none
Anthony T.
Gianpietro Treasurer Treasurer and Comptroller
</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, other than Wilshire, to the Fund place all portfolio orders on
behalf of each Portfolio and attempt, in all cases, to obtain the most favorable
prices and executions. 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.

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.

20
<PAGE> 116

The Advisers to the Fund determine the brokers to be used for purchases and
sales of each Portfolio's securities. There are no arrangements whatsoever,
written or oral, relating to the allocation to specific brokers of orders for
portfolio transactions. Consideration is given to those firms providing
statistical and research services to the investment advisers, but it is
generally not the policy of any Portfolio, other than the All Pro Portfolios, to
pay higher brokerage commissions to a firm solely because it has provided such
services. The sub-advisers to the All Pro Portfolios are authorized to consider,
in the selection of brokers and dealers to execute portfolio transactions, not
only the available prices and rates of brokerage commissions but also other
relevant factors which may include, without limitation, the execution
capabilities of such brokers and dealers, research, custody and other services
provided by such brokers and dealers which the sub-adviser believes will enhance
its general portfolio management capabilities, the size of the transaction, the
difficulty of execution, the operational facilities of such brokers and dealers,
the risk to such a broker or dealer of positioning a block of securities, and
the overall quality of brokerage and research services provided by such brokers
and dealers. In connection with the foregoing, a sub-adviser to an All Pro
Portfolio is specifically authorized to pay those brokers and dealers who
provide brokerage and research services to it, a higher commission than that
charged by other brokers and dealers if the sub-adviser determines in good faith
that the amount of such commission is reasonable in relation to the value of
such services in terms of either the particular transaction or in terms of the
sub-adviser's overall responsibilities with respect to the relevant Portfolio
segment and to any other client accounts or portfolios which the sub-adviser
advises. The execution of such transactions shall not be considered to represent
an unlawful breach of any duty created by a sub-advisory agreement or otherwise.
Statistical and research services furnished by brokers typically include:
analysts' reports on companies and industries, market forecasts, economic
analyses and the like. Such services may tend to reduce the expenses of the
Adviser and this has been considered in setting the advisory fees paid by the
Fund.

During the period from January 1, 1998 to December 31, 1998, the Fund paid
aggregate brokerage fees of $[ ] of which $[ ] was paid by the
Growth Portfolio, $[ ] was paid by the Bond Portfolio; $[ ]
was paid by the Managed Portfolio, $[ ] was paid by the Aggressive
Growth Portfolio, $[ ] was paid by the Sentinel Growth Portfolio,
$[ ] was paid by the International Portfolio, $[ ] was paid by
the All Pro Large Cap Growth Portfolio, $[ ] was paid by the All Pro
Small Cap Growth Portfolio, $[ ] was paid by the All Pro Large Cap
Value Portfolio, and $[ ] was paid by the All Pro Small Cap Value
Portfolio.

During the period from January 1, 1997 to December 31, 1997, the Fund paid
aggregate brokerage fees of $813,965, of which $585,281 was paid by the Growth
Portfolio, $22,837 was paid by the Managed Portfolio, $54,894 was paid by the
Aggressive Growth Portfolio, $19,172 was paid by the Sentinel Growth Portfolio,
and $131,781 was paid by the International Portfolio.

During the period from January 1, 1996 to December 31, 1996 the Fund paid
aggregate brokerage fees of $568,287, of which $383,187 was paid by the Growth
Portfolio, $12,001 was paid by the Managed Portfolio, $44,424 was paid by the
Aggressive Growth Portfolio, $12,441 was paid by the Sentinel Growth Portfolio
and $116,234 was paid by the International Portfolio.

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 New York Stock Exchange currently is open each day, Monday through Friday,
except the following holidays: New Year's Day, Dr. Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day,

<PAGE> 117

Independence Day, Labor Day, Thanksgiving and Christmas, and on the preceding
Friday or subsequent Monday when one of these holidays falls on a Saturday or
Sunday, respectively.

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

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

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

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

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

22
<PAGE> 118

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

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

REDEMPTION OF SHARES

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

TAXES

Each Portfolio of the Fund is treated as a separate entity for federal income
tax purposes. Each Portfolio intends to elect and to qualify as a "regulated
investment company" under the provisions of Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). As a regulated investment company, each
Portfolio is required to distribute to its shareholders for each taxable year at
least 90% of its investment company taxable income (consisting generally of net
investment income, net short-term capital gain, and net gains from certain
foreign currency transactions). To qualify for treatment as a regulated
investment company, a Portfolio must, among other things, derive in each taxable
year at least 90% of its gross income from dividends, interest, payments with
respect to securities loans and gains from the sale or other disposition of
stock or securities or foreign currencies (subject to the authority of the
Secretary of the Treasury to exclude foreign currency gains which are ancillary
to the Fund's principal business of investing

23
<PAGE> 119

in stock or securities or options and futures with respect to such stock or
securities), other income (including, but not limited to, gains from options,
futures, or forward contracts) derived with respect to its investing in such
stock, securities or currencies. Moreover, at the close of each quarter of each
Portfolio's taxable year, at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. Government securities, securities of
other regulated investment companies, and other securities that, with respect to
any one issuer, do not exceed 5% of the value of the Portfolio's total assets
and that do not represent more than 10% of the outstanding securities of 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. If a Portfolio fails to qualify as a regulated investment
company, the Portfolio will be subject to federal, and possibly state, corporate
taxes on its taxable income and gains and distributions to its shareholders will
constitute ordinary dividend income to the extent of such Portfolio's available
earnings and profits, and policyholders could be subject to current tax on
distributions received with respect to Portfolio shares.

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 policyholder 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 Service. For further
information, consult the prospectuses and/or statements of additional
information for the respective policies and contracts, as well as your own tax
adviser.

CAPITAL STOCK

The Fund was incorporated in Maryland on March 21, 1985. The authorized capital
stock of the Fund consists of two hundred million shares of common stock $.01
par value. The shares of common stock are divided into eleven classes -- Growth
Portfolio, Money Market Portfolio, Bond Portfolio, Managed Portfolio, Aggressive
Growth Portfolio, International Portfolio, Sentinel Growth Portfolio, All Pro
Large

24
<PAGE> 120

Cap Growth Portfolio, All Pro Large Cap Value Portfolio, All Pro Small Cap
Growth Portfolio and All Pro Small Cap Value Portfolio common stock. The Money
Market Portfolio currently consists of 150 million shares and the Growth
Portfolio consists of 50 million shares; each of the remaining classes currently
consists of five million shares. The Fund may establish additional portfolios
and may allocate its shares either to such new classes or to any of the eleven
existing classes.

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

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

As an investment company incorporated in Maryland, the Fund is not required to
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 1940 Act majority of the outstanding voting
securities of the Fund.

CODE OF ETHICS

The Board of Directors of the Fund has adopted a Code of Ethics under Rule 17j-1
of the 1940 Act (the "Code of Ethics"). The Code of Ethics covers the conduct
(including the personal securities transactions) of each officer and director of
the Fund, as well as of any employees of the Fund who participate in the
selection of the Fund's Portfolio securities or who have access to information
regarding the Fund's pending purchases and sales of Portfolio securities
(collectively referred to as "Advisory Persons"). The Code of Ethics also covers
the general conduct and personal securities transactions of (but does not impose
securities transaction reporting requirements on) any officer, director, and
employee of either NAM, PIMC, SAC, TBC, the sub-advisers of the All Pro
Portfolios or 1717 Capital Management Company ("1717"), the

25
<PAGE> 121

principal underwriter of the Fund, who participates in the selection of the
Fund's portfolio securities or who has access to information regarding the
Fund's pending purchases and sales of portfolio securities (also "Advisory
Persons").

In general, the Code of Ethics restricts purchases or sales of securities being
purchased or sold or being considered for purchase or sale by the Fund by any of
the directors, officers, or employees of any of the Fund, the Advisers, or 1717.
Advisory Persons are also prohibited from purchasing securities in an initial
public offering and are also restricted in their purchases of private offerings
of securities. The Code of Ethics also describes certain "blackout periods"
during which: (1) no Advisory Person or no director, officer, or employee of the
Fund may acquire ownership of a security on a day during which the Fund has a
pending order to purchase or sell that same security; and (2) no person
responsible for day-to-day portfolio management of any Portfolio shall purchase
or sell any security within seven days before or after the Fund trades in such
security. Certain specified transactions are exempt from the provisions of the
Code of Ethics. Each of the sub-advisers for the All Pro Portfolios has adopted
a similar code of ethics under Rule 17j-1, which codes impose substantially
identical restrictions on Advisory Persons of the Fund.

OTHER SERVICES

CUSTODIAN FOR INTERNATIONAL PORTFOLIO

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

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

INDEPENDENT ACCOUNTANTS

The firm of PricewaterhouseCoopers LLP, 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 SAI and the
financial highlights included in the Prospectus have been audited by
PricewaterhouseCoopers LLP, 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

Sutherland Asbill & Brennan LLP of Washington, D.C. has provided advice on
certain legal matters pertaining to federal securities laws applicable to the
Fund.

UNDERWRITERS

1717 Capital Management Company ("1717") serves, without compensation from the
Fund, as the principal underwriter of the Fund, pursuant to an agreement with
the Fund. Under the terms of the

26
<PAGE> 122

agreement, 1717 is not obligated to sell any specific number of shares. 1717 has
authority, pursuant to the agreement to enter into similar contracts with other
insurance companies and with other entities registered as broker-dealers under
the Securities Exchange Act of 1934.

ADDITIONAL INFORMATION

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

27
<PAGE> 123

FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Report of Independent Accountants........................... F-2
Statement of Net Assets as of December 31, 1998............. F-3
Statements of Operations for the Year Ended December 31,
1998...................................................... F-[ ]
Statements of Changes in Net Assets for the Year Ended
December 31, 1998......................................... F-[ ]
Statements of Changes in Net Assets for the Year Ended
December 31, 1998......................................... F-[ ]
Financial Highlights........................................ F-[ ]
Notes to Financial Statements, December 31, 1998............ F-[ ]
</TABLE>

F-1
<PAGE> 124

APPENDIX A

DESCRIPTION OF MONEY MARKET INSTRUMENTS AND
COMMERCIAL PAPER AND BOND RATINGS

PERMITTED INVESTMENTS OF THE MONEY MARKET PORTFOLIO

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

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

Certificates of Deposit generally are 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' Acceptances 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.

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.

A-1
<PAGE> 125

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 S&P or Aa or better by 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 NRSROs,
or by only one NRSRO if only one NRSRO has issued a rating with respect to
the instrument; or

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

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

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

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-2

<PAGE> 126

PART C. OTHER INFORMATION

ITEM 23. Financial Statements and Exhibits

(a) Financial Statements.

The following financial statements are filed as part of this Registration
Statement(1):

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

Financial Highlights

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

Report of Independent Accountants
Statement of Net Assets as of December 31, 1998
Statements of Operations for the Year Ended December 31, 1998
Statements of Changes in Net Assets for the Year Ended December 31,
1998
Statements of Changes in Net Assets for the Year Ended December 31,
1997
Notes to Financial Statements, December 31, 1998

(1) To be filed by amendment

(b) Exhibits

The following exhibits are filed herewith:

<TABLE>
<S> <C>
(a)(1) Articles of Incorporation of the Market Street Fund, Inc.
(the "Fund")(1)
(a)(2) Articles Supplementary(1)
(a)(3) Articles Supplementary(1)
(a)(4) Articles Supplementary(1)
(b)(1) By-Laws of the Fund(1)
(b)(2) Amendment to By-Laws(1)
(c) Form of Certificate for Shares of Common Stock of the
Fund(1)
(d)(1) Investment Advisory Agreement between the Fund and
Providentmutual Investment Management Company (PIMC)(1)
(d)(2) Investment Advisory Agreement between the Fund and Sentinel
Advisors Company(1)
(d)(3) Amendment to Investment Advisory Agreement between the Fund
and Sentinel Advisors Company(2)
(d)(4) Amendment to Investment Advisory Agreement Between the Fund
and Sentinel Advisors Company(3)
(d)(5) Investment Advisory Agreement between the Fund and Sentinel
Advisors Company with respect to the Growth Portfolio(4)
(d)(6) Investment Advisory agreement between the Fund and PIMC with
respect to the International Portfolio(1)
(d)(7) Investment Sub-Advisory Agreement between PIMC and The
Boston Company Asset Management, Inc.(1)
(d)(8) Investment Advisory Agreement between the Fund and PIMC
respecting All Pro Portfolios(1)
(d)(9) Form of Agreement between PIMC and its Sub-Advisers
respecting All Pro Portfolios(1)
(d)(10) Investment Management Consulting Agreement between PIMC and
Wilshire Associates Incorporated respecting All Pro
Portfolios(1)
(e)(1) Underwriting Agreement between the Fund and PML Securities,
Inc.(1)
(e)(2) Amendment to Underwriting Agreement between the Fund and PML
Securities, Inc.(1)
(e)(3) Amendment to Underwriting Agreement between the Fund and PML
Securities, Inc.(1)
</TABLE>

C-1
<PAGE> 127

<TABLE>
<S> <C>
(e)(4) Amendment to Underwriting Agreement between the Fund and PML
Securities, Inc.(1)
(e)(5) Amendment to Underwriting Agreement between the Fund and PML
Securities, Inc.(1)
(f) Inapplicable
(g)(1) Custody Agreement between the Fund and Provident National
Bank(1)
(g)(2) Amendment to Custody Agreement between the Fund and
Provident National Bank(1)
(g)(3) Amendment to Custody Agreement between the Fund and
Provident National Bank(1)
(g)(4) Amendment to Custody Agreement between the Fund and
Provident National Bank(1)
(g)(5) Custodial Services Agreement between the Fund and Citibank,
N.A.(1)
(h)(1) Agreement and Plan of Reorganization among Providentmutual
Variable Life Growth Account, Providentmutual Variable Life
Money Market Account, Providentmutual Variable Life Bond
Account and the Fund(1)
(h)(2) Reimbursement agreement between Provident Mutual Life
Insurance Company of Philadelphia and the Fund(1)
(h)(3) Administration Agreement between the Fund and Provident
Institutional Management Corporation(1)
(h)(4) Amendment to Administration Agreement between the Fund and
Provident Financial Processing Corporation (PFPC)(1)
(h)(5) Amendment to Administration Agreement between the Fund and
PFPC(1)
(h)(6) Amendment to Administration Agreement between the Fund and
PFPC(1)
(h)(7) Transfer Agency Agreement between the Fund and PFPC, as
amended(1)
(h)(8) Amendment to Transfer Agency Agreement between the Fund and
PFPC(1)
(h)(9) Amendment to Transfer Agency Agreement between the Fund and
PFPC(1)
(h)(10) Participation Agreement among the Fund, Provident Mutual
Life Insurance Company, and PML Securities, Inc.(1)
(h)(11) Participation Agreement among the Fund, Providentmutual Life
and Annuity Company of America, and PML Securities, Inc.(1)
(h)(12) Participation Agreement among the Fund, National Life
Insurance Company and PML Securities, Inc.(3)
(h)(13) Amendment to Participation Agreement among the Fund,
National Life Insurance Company and PML Securities, Inc.(1)
(i) Opinion and consent of Adam Scaramella, Esq.(1)
(j)(1) Consent of Sutherland Asbill & Brennan LLP (to be filed by
amendment)
(j)(2) Consent of PricewaterhouseCoopers LLP (to be filed by
amendment)
(k) Inapplicable
(l)(1) See Number (h)(1) above(1)
(l)(2) Investment Letter from National Life Insurance Company(3)
(m) Inapplicable
(n) Financial Data Schedules (to be filed by amendment)
(o) Inapplicable
</TABLE>

- -------------------------
(1) Incorporated herein by reference to Post-Effective Amendment No. 19 filed
with the Securities and Exchange Commission on April 24, 1998, File No.
2-98755.
(2) Incorporated herein by reference to Post-Effective Amendment No. 13 filed
with Securities and Exchange Commission on February 28, 1996, File No.
2-98755.
(3) Incorporated herein by reference to Post-Effective Amendment No. 14 filed
with Securities and Exchange Commission on March 19, 1996, File No. 2-98755.
(4) Incorporated herein by reference to Post-Effective Amendment No. 16, filed
with Securities and Exchange Commission on February 21, 1997, File No.
2-98755.

C-2
<PAGE> 128

ITEM 24. Persons Controlled by or Under Common Control with Registrant

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

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

Persons controlled by or under common control with the registrant follow:

<TABLE>
<CAPTION>
PERCENT OF VOTING
NAME JURISDICTION SECURITIES OWNED PRINCIPAL BUSINESS
---- ------------ ----------------- ------------------
<S> <C> <C> <C>
Provident Mutual Pennsylvania Mutual Company Life & Health Insurance
Life Insurance Company*
(Provident Mutual)
Providentmutual Life and Delaware Ownership of all Life & Health Insurance
Annuity Company voting securities
of America* by Provident Mutual
Provident Mutual Delaware Ownership of all voting Life & Health Insurance
International securities by
Life Insurance Company Provident Mutual
Providentmutual Pennsylvania Ownership of all Holding Company
Holding Company (PHC)* voting securities
by Provident Mutual
1717 Capital Management Pennsylvania Ownership of all voting Broker/Dealer
Company* securities by PHC
1717 Brokerage Services Pennsylvania Ownership of all voting Insurance Agency
Inc. securities by PHC
Providentmutual Pennsylvania Ownership of all voting Investment Adviser
Investment securities by PHC
Management Company*
Washington Square Pennsylvania Ownership of all voting Administrative Services
Administrative securities by PHC
Services, Inc.*
Institutional Concepts, New York Ownership of all voting Insurance Agency
Inc.* securities by PHC
Provestco, Inc.* Delaware Ownership of all voting Real Estate Investment
securities by PHC
PNAM, Inc.* Delaware Ownership of all voting Holding Company
securities by PHC
Sigma American Delaware Ownership of 80.2% Investment Management
Corporation* voting securities by and Advisory Services
PHC and 19.8% by
Provident Mutual
</TABLE>

C-3
<PAGE> 129

<TABLE>
<CAPTION>
PERCENT OF VOTING
NAME JURISDICTION SECURITIES OWNED PRINCIPAL BUSINESS
---- ------------ ----------------- ------------------
<S> <C> <C> <C>
Provident Mutual Delaware Ownership of all voting Investment Management
Management Co., Inc.* securities by Sigma and Advisory Services
American Corporation
Software Development Pennsylvania Ownership of all Development and
Corporation* voting securities Marketing of Computer
by PHC Software
</TABLE>

- -------------------------
* File Consolidated Financial Statements.

ITEM 25. Indemnification

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

The By-laws of the Fund (Exhibit (b) 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.

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.

ITEM 26. Business and Other Connections of Investment Adviser

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

C-4
<PAGE> 130

ITEM 27. Principal Underwriters

a. 1717 Capital Management Company is principal underwriter for the Fund.

b. Set forth below is certain information regarding the directors and officers
of 1717, the principal underwriter to the Fund. Unless otherwise stated, the
business address of the persons whose names appear below is 300 Continental
Drive, Newark, Delaware 19713.

<TABLE>
<CAPTION>
(2) (3)
(1) POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
NAME PRINCIPAL UNDERWRITER WITH REGISTRANT
---- -------------------------- ---------------------
<S> <C> <C>
Mary Lynn Finelli*................... Director None
Alan F. Hinkle*...................... Director None
Robert W. Kloss*..................... Director None
J. Kevin McCarthy*................... Director None
James G. Potter, Jr.*................ Director Vice President
Joan C. Tucker....................... Director None
Lance A. Reihl....................... President None
Rosanne Gatta**...................... Treasurer President
Linda M. Springer*................... Financial Reporting None
Officer
</TABLE>

- -------------------------
* 1050 Westlakes Drive, Berwyn, PA 19312
** 1205 Westlakes Drive, Berwyn, PA 19312

ITEM 28. Location of Accounts and Records

The records required to be maintained by Section 31(a) of the Investment Company
Act of 1940 and Rules 31a-1 to 31a-3 promulgated thereunder, are maintained by
the Fund and Providentmutual Investment Management Company at 103 Bellevue
Parkway, Wilmington, DE 19809 and 1050 Westlakes Drive, Berwyn, PA 19312, by
Newbold's Asset Management, Inc. at 937 Haverford Road, Bryn Mawr, Pennsylvania
19010, by Sentinel Advisors Company at National Life Drive, Montpelier, Vermont
05604, by Provident National Bank at Broad & Chestnut Streets, Philadelphia,
Pennsylvania 19101, or by PFPC at 103 Bellevue Parkway, Wilmington, Delaware
19809, or for the International Portfolio by Citibank, N.A. 111 Wall Street, New
York, New York 10043.

ITEM 29. Management Services

Inapplicable.

ITEM 30. Undertakings

Inapplicable.

C-5
<PAGE> 131

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF BERWYN, COMMONWEALTH OF PENNSYLVANIA ON THIS 23RD DAY OF FEBRUARY 1999.

MARKET STREET FUND, INC.

BY: /s/ ROSANNE GATTA

------------------------------------
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/ ROSANNE GATTA President February 23, 1999
- ----------------------------------------------------- (Principal Executive
ROSANNE GATTA Officer)

/s/ ANTHONEY T. GIAMPIETRO Treasurer February 23, 1999
- ----------------------------------------------------- (Principal Financial and
ANTHONEY T. GIAMPIETRO Accounting Officer)

/s/ ROBERT W. KLOSS Director February 23, 1999
- -----------------------------------------------------
ROBERT W. KLOSS

* Director February 23, 1999
- -----------------------------------------------------
ALAN GART

* Director February 23, 1999
- -----------------------------------------------------
A. GILBERT HEEBNER

* Director February 23, 1999
- -----------------------------------------------------
LEO SLACK

* Director February 23, 1999
- -----------------------------------------------------
EDWARD S. STOUCH

*By: /s/ JAMES G. POTTER, JR.
-----------------------------------------------
JAMES G. POTTER, JR.
Attorney-in-Fact,
Pursuant to Power of Attorney
</TABLE>