<PAGE> 1
[PROVIDENT MUTUAL LETTERHEAD]
Dear Policyholder:
We are pleased to send you the annual report for one of the fund groups from
your variable annuity contract or variable life insurance policy. In additional
mailings, you will also be receiving the annual reports for other fund groups in
which you have invested. The investments available through your variable
contract are managed by some of the best fund management companies in the
country.
Your variable insurance product is unique in that it combines the protection and
tax advantages of traditional insurance with the growth potential of equity
investments. A leader in the variable products marketplace, Provident Mutual
Life Insurance Company can trace its roots back more than two centuries, giving
us the distinction of serving America's life insurance needs longer than any
other company. Our financial strength enables us to continually offer a variety
of financial products and services to help you meet your changing needs as you
move through the various stages of your life.
We are proud to include you among our policyholders, and we appreciate your
business. If you have a question about your policy, or would like more
information about our products and services, please contact your local agent or
our Customer Service Center at 1-800-688-5177.
Sincerely,
/s/ Robert W. Kloss
- ---------------------
Robert W. Kloss
President
<PAGE> 2
- --------------------------------------------------------------------------------
To Our Variable Life Policyholders and Variable Annuity Contractholders:
- --------------------------------------------------------------------------------
We are pleased to send you the 1998 Annual Report for the Market Street Fund,
Inc., its Growth, Money Market, Bond, Managed, Aggressive Growth, International,
Sentinel Growth, Large Cap Growth, Large Cap Value, Small Cap Growth and Small
Cap Value Portfolios.
Economic Overview and Investment Perspective
Once again in 1998 the U.S. economy's strength and resiliency were impressive.
The economy kept rolling along despite international economic turmoil and
political distress at home. The U.S. economy expanded 3.9% in 1998 matching the
rate of 1997. Driving the economy forward was consumer spending which posted the
largest annual gain in 14 years and was fueled by a healthy job market and very
low inflation. At the end of December, the unemployment rate stood at 4.3% and
inflation as measured by the Consumer Price Index rose at an annual rate of
1.6%. In the financial markets, 1998 can only be described as the year of the
roller coaster ride. Both bond and equity markets participated in that ride.
Corporate bonds outperformed U.S. Treasuries through April. Then in late summer,
sparked by the devaluation of the Russian ruble and worries about a global
recession, Treasuries rallied as investors began the "flight to safety". The
situation for corporate bonds worsened as certain hedge funds neared collapse
and forced the dumping of mortgage-backed securities and high risk bonds. Thanks
to a string of three cuts in the Federal Funds rate in September, October and
November, corporate bonds began a late year rally. The Lehman Brothers Aggregate
Bond Index, a benchmark for bonds gained 8.69% for the year. However, U.S.
Treasuries were the big winners with the yield on the 30 year U.S. Treasury Bond
tumbling from 5.92% to 5.09% producing a total return of 17.1% for the year.
Despite the near bear market slump suffered in mid summer, the U.S. equity
market turned in a powerful performance in 1998. The domestic equity market as
measured by the Wilshire 5000 Equity Index gained 23.5% and the S&P 500 gained
28.6%. However, most of that return occurred in the large capitalization stocks,
especially large growth stocks. The Russell 2000 Index, a benchmark for small
capitalization stocks returned -2.6% for the year.
International equities as measured by the Morgan Stanley Capital International
EAFE Index returned 20% in 1998 due in large part to the European markets. The
Asian financial crisis which began in the second half of 1997 continued to rock
those markets. Latin American markets which stumbled from the beginning of the
year never recovered. Many major indexes in that region suffered losses of 20%
to 50% during 1998.
For 1999, the U.S. economy is expected to slow somewhat due to the continuing
difficulties in many of the foreign economies. This should bode well for U.S.
government bonds because it would increase the likelihood of further rate cuts
by the Federal Reserve and continue to keep inflation in check. Equity markets
will continue to be volatile because of expected lower profits and current
valuation levels. Volatility will also prevail in the international markets
fueled by Brazil's crisis, and the continuing economic weakness in Asia.
Review of Fund Portfolio Performance
The Annual reviews and performance charts* for each portfolio (other than the
Money Market Portfolio) contained in this Annual Report show the growth of
$10,000 over the period shown, assuming reinvestment of all dividends. The
performance is then compared to a relevant index. As always, it is important to
recall in interpreting these results that the advisers of the portfolios of the
Market Street Fund do not engage in market
1
<PAGE> 3
timing. That is to say that in all but times of great market turmoil, they
endeavor to keep the vast majority of portfolio assets fully invested. Thus,
they attempt to add value by security selection utilizing the methods and in the
markets specified in the Fund Prospectus. Their performance should be judged
according to how well they do relative to market indices measuring the same type
activity.
We appreciate the opportunity to have served you in the past and look forward to
serving you in 1999 and many years into the future.
/s/ Rosanne Gatta
- ------------------
Rosanne Gatta
President
The Market Street Fund, Inc.
*Past performance is not predictive of future results. Moreover, the
relationship between the performance of the Fund Portfolios and the actual
increases or decreases in a policy's cash value is not directly proportional
due to certain charges deducted from premiums and under the policies which are
not reflected in the returns shown. Please see the current prospectus for an
explanation of these charges and for illustrations that take such charges into
account in calculating cash values.
2
<PAGE> 4
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
Market Street Fund, Inc.:
In our opinion, the accompanying statements of net assets of the Growth, Money
Market, Bond, Managed, Aggressive Growth, International, Sentinel Growth, Large
Cap Growth, Large Cap Value, Small Cap Growth, and Small Cap Value Portfolios,
of Market Street Fund, Inc. (the "Fund") and the related statements of
operations, and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Growth, Money
Market, Bond, Managed, Aggressive Growth, International, Sentinel Growth, Large
Cap Growth, Large Cap Value, Small Cap Growth, and Small Cap Value Portfolios of
the Fund at December 31, 1998, the results of their operations, the changes in
their net assets and the financial highlights for each of the periods presented,
in conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities owned at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 5, 1999
3
<PAGE> 5
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio
1998 Annual Review
Sentinel Advisors Company
- --------------------------------------------------------------------------------
The Market Street Fund Growth Portfolio produced a total return of 13.7%
for the year ended December 31, 1998, ahead of the 12.3% return for the average
Morningstar Large Cap Value fund and below the 28.6% return of the S&P 500.
The year just completed was a particularly challenging one for value
investors. The significant gains in the broad market indices were influenced
tremendously by a relatively small group of very large capitalization, high
valuation stocks. This occurred with capitalization-weighted indices like the
Standard & Poor's 500, where the 50 largest stocks in the index accounted for
over 50% of the movement of the index. This influence of the largest
capitalization stocks was particularly vexing for value investors, as many of
the stocks in this group also happen to be among the most expensive on a
valuation basis, and therefore not typically found in investment portfolios that
seek to reduce risk by purchasing stocks trading at lower valuation levels.
This short period of wide swings in the broad stock market averages, and
the tremendous concentration in the stocks that drove those averages, presented
significant challenges to the management of the value-oriented Market Street
Fund Growth Portfolio this year. Our longstanding focus on investment quality
and attractive security valuation enabled us to ride out the summer swoon in the
stock market in better shape than the market indices and competitive mutual
funds. While adherence to our time-tested value philosophy kept us out of some
of those market leading higher capitalization stocks, and therefore behind the
S&P 500 for the full year, the Portfolio did achieve superior risk-adjusted
returns, finishing the year ahead of the Morningstar Large Cap Value category.
Longstanding commitments to the health care and consumer sectors were very
positive contributors to investment performance of the Portfolio during the
year. The overall market was led by the strong performance of the technology
sector during the year, and while the Portfolio's performance was hindered by an
underweighting in this group, those that we did own, all achieved very
significant gains. The Portfolio also benefited from the sale earlier in the
year of several financial stocks. This sector, after a number of years of very
strong performance, was negatively impacted by the financial turmoil in the
summer, and produced sub par returns. Our elimination of several large holdings
in this area prior to that decline preserved a significant amount of investor
capital.
For several years, the Portfolio has held a number of stocks in the energy
area. The steep decline in the price of oil in 1998 had a negative impact on
these holdings. Given the vital nature of this commodity, we believe that over a
reasonable investment horizon, supply and demand for oil will return to balance,
and the investment merits of these holdings will be more widely acknowledged.
The last four years have been an extraordinary period of stock market
returns. Including 1998, this is the first time in history that common stocks
have achieved returns in excess of 20% for four consecutive years. Given the
duration of the stock market advance, the high valuation levels currently
registered, the
4
<PAGE> 6
concentrated nature of the advance, and the strong probability that growth in
corporate earnings will be slower in 1999 than in recent years, we are
maintaining a cautious investment posture in the management of the Portfolio. We
believe it is a particularly important time to pay attention to company quality
and security valuation. As we have demonstrated in recent years, we strongly
believe that the Market Street Growth Portfolio's conservative, value-oriented
investment style will continue to serve our shareholders well both in strong
markets and in more difficult periods.
Richard A. Pender, CFA
Daniel J. Manion, CFA
[Market Street Fund]
[GROWTH PORTFOLIO PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
FUND INDEX+
---- ------
<S> <C> <C>
Start 10000.00 10000.00
'85' 10177.00 10077.00
'86' 11325.00 11941.00
'87' 11511.00 12540.00
'88' 13641.00 14580.00
'89' 17794.00 19131.00
'90' 18220.00 18485.00
'91' 21590.00 24115.00
'92' 22614.00 25948.00
'93' 24924.00 28558.00
'94' 25522.00 28933.00
'95' 33279.00 39811.00
'96' 39794.00 48928.00
'97' 49472.00 65260.00
'98' 56250.00 84003.00
Past performance is not predictive of future performance.
</TABLE>
+ The Index is the S&P 500, an unmanaged index of 500 U.S. common stocks that
includes reinvestment of dividends.
* Inception date was December 12, 1985.
5
<PAGE> 7
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio
Statement of Net Assets, December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 95.3%
Aerospace & Defense -- 3.2%
Goodrich (B.F.) Co. ..................................... 155,000 $ 5,560,625
*Raytheon Co. Class A..................................... 90,000 4,651,875
------------
10,212,500
------------
Automobiles -- 2.2%
Ford Motor Co. ........................................... 120,000 7,042,500
------------
Banks -- 7.1%
Bank America Corp. ....................................... 62,238 3,742,060
Bank of New York Co., Inc. ............................... 190,000 7,647,500
Chase Manhattan Corp. .................................... 80,000 5,445,000
First Union Corp. ........................................ 84,000 5,108,250
------------
21,942,810
------------
Beverages -- 1.7%
Pepsico, Inc. ............................................ 130,000 5,321,875
------------
Broadcasting & Publishing -- 3.6%
Gannett, Inc. ............................................ 90,000 5,956,875
McGraw-Hill, Inc. ........................................ 52,500 5,348,437
------------
11,305,312
------------
Building Materials -- 1.6%
Sherwin Williams Co. ..................................... 175,000 5,140,625
------------
Business & Consumer Services -- 4.0%
Automatic Data Processing, Inc. .......................... 57,500 4,610,781
Electronic Data Systems Corp. ............................ 37,500 1,884,375
Omnicom Group, Inc. ...................................... 105,000 6,090,000
------------
12,585,156
------------
Communications -- 4.1%
AT&T Corp. ............................................... 75,000 5,643,750
GTE Corp. ................................................ 110,000 7,418,125
------------
13,061,875
------------
Computers -- 4.9%
Compaq Computer Corp. .................................... 160,000 6,710,000
International Business Machines Corp. .................... 47,500 8,775,625
------------
15,485,625
------------
Consumer Products -- 4.3%
Fortune Brands, Inc. ..................................... 154,000 4,870,250
Kimberly-Clark Corp. ..................................... 160,000 8,720,000
------------
13,590,250
------------
Containers -- 0.8%
Bemis Co., Inc. .......................................... 68,800 2,610,100
------------
</TABLE>
6
<PAGE> 8
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Drugs & Health Care -- 10.8%
Abbott Laboratories....................................... 124,000 $ 6,076,000
American Home Products Corp. ............................. 137,500 7,742,969
Becton, Dickinson & Co. .................................. 92,000 3,927,250
*HCR Manor Care, Inc. .................................... 90,000 2,643,750
Johnson & Johnson......................................... 78,000 6,542,250
Pfizer, Inc. ............................................. 37,100 4,653,731
Schering Plough Corp. .................................... 44,000 2,431,000
------------
34,016,950
------------
Electrical Equipment -- 2.8%
Emerson Electric Co. ..................................... 83,400 5,217,712
General Electric Co. ..................................... 35,000 3,572,187
------------
8,789,899
------------
Energy -- 6.9%
Chevron Corp. ............................................ 43,500 3,607,781
Exxon Corp. .............................................. 49,000 3,583,125
FPL Group, Inc. .......................................... 45,000 2,773,125
Mobil Corp. .............................................. 73,700 6,421,112
Pacificorp................................................ 120,000 2,527,500
Royal Dutch Petroleum Co. ................................ 58,500 2,800,687
------------
21,713,330
------------
Finance -- 6.3%
American Express Co. ..................................... 66,500 6,799,625
Associates First Capital Corp. Class A.................... 60,278 2,554,280
Citigroup, Inc. .......................................... 125,000 6,187,500
Fannie Mae................................................ 56,400 4,173,600
------------
19,715,005
------------
Foods -- 6.3%
Bestfoods, Inc. .......................................... 106,800 5,687,100
Hershey Foods Corp. ...................................... 65,000 4,042,188
McCormick & Co., Inc. .................................... 98,300 3,323,769
Sara Lee Corp. ........................................... 240,000 6,765,000
------------
19,818,057
------------
Industrial Diversified -- 1.6%
Parker-Hannifin Corp. .................................... 150,000 4,912,500
------------
Insurance -- 6.8%
Allstate Corp. ........................................... 140,000 5,407,500
American General Corp. ................................... 85,000 6,630,000
American International Group, Inc. ....................... 46,500 4,493,063
Jefferson-Pilot Corp. .................................... 67,500 5,062,500
------------
21,593,063
------------
</TABLE>
7
<PAGE> 9
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY SHARES
DESCRIPTION AND PERCENTAGE OF PORTFOLIO DATE OR PAR VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Lodging -- 1.7%
Marriott International, Inc., Class A 190,000 $ 5,510,000
------------
Oil Field Equipment & Services -- 1.5%
Halliburton Co. ........................................................ 97,500 2,888,438
Schlumberger Ltd. ...................................................... 42,500 1,960,313
------------
4,848,751
------------
Railroads -- 1.4%
Union Pacific Corp., Series A........................................... 97,500 4,393,594
------------
Retail - Clothing and Apparel -- 1.5%
Gap, Inc. .............................................................. 85,000 4,781,250
------------
Retail Merchandising -- 3.7%
*Costco Companies, Inc. ................................................ 107,000 7,724,063
May Department Stores Co. .............................................. 63,000 3,803,625
------------
11,527,688
------------
Semiconductors -- 0.8%
Intel Corp.............................................................. 22,500 2,667,656
------------
Tobacco -- 1.2%
Philip Morris Cos., Inc................................................. 70,000 3,745,000
------------
Utilities -- 4.5%
Duke Power Co........................................................... 53,000 3,395,313
Enron Corp.............................................................. 100,000 5,706,250
Florida Progress Corp................................................... 76,000 3,405,750
Sonat, Inc. ............................................................ 62,500 1,691,406
------------
14,198,719
------------
TOTAL COMMON STOCK (COST $235,505,744)................................ 300,530,090
------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
COMMERCIAL PAPER -- 4.2%
American Express Credit Corp., 4.90%...................... 01/14/1999 $3,700,000 3,693,453
C.I.T. Group Holdings, Inc., 5.99%........................ 01/11/1999 5,500,000 5,490,849
Household Finance Corp., 5.79%............................ 01/06/1999 4,000,000 3,996,783
------------
TOTAL COMMERCIAL PAPER (COST $13,181,085)............... 13,181,085
------------
</TABLE>
8
<PAGE> 10
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio
Statement of Net Assets, December 31, 1998 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENTS -- 0.2%
Temporary Investment Fund, Inc. -- TempCash............. 619,344 $ 619,344
------------
TOTAL SHORT TERM INVESTMENTS (COST $619,344)............ 619,344
------------
TOTAL INVESTMENTS -- 99.7% (COST $249,306,173).......... 314,330,519
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.3%............... 968,002
------------
NET ASSETS -- 100.0%
(Equivalent to $18.82 per share based on 16,749,356 shares
of capital stock outstanding)........................... $315,298,521
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($315,298,521/16,749,356 shares outstanding).............. $ 18.82
============
</TABLE>
*Non-Income Producing
See accompanying notes to financial statements.
9
<PAGE> 11
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Money Market Portfolio
Statement of Net Assets, December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY
DESCRIPTION AND PERCENTAGE OF PORTFOLIO DATE PAR VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER -- 99.4%
Automobiles -- 13.9%
Chrysler Financial Corp., 5.15%........................... 02/08/1999 $4,250,000 $ 4,226,897
Ford Motor Credit Co., 5.21%.............................. 02/08/1999 4,500,000 4,475,252
General Motors Acceptance Corp., 5.19%.................... 01/13/1999 2,000,000 1,996,540
General Motors Acceptance Corp., 5.15%.................... 01/22/1999 2,000,000 1,993,992
-----------
12,692,681
-----------
Banking -- 21.7%
Bank of New York, 5.25%................................... 01/20/1999 4,000,000 3,988,917
Canadian Imperial Holdings, 5.40%......................... 01/06/1999 4,000,000 3,997,000
Mellon Financial Co., 5.07%............................... 03/24/1999 4,500,000 4,448,032
Morgan (J. P.) & Co., Inc., 5.12%......................... 02/26/1999 4,500,000 4,464,160
Northern Trust Corp., 4.89%............................... 02/17/1999 1,000,000 993,498
Northern Trust Corp., 5.30%............................... 01/05/1999 2,000,000 1,995,878
-----------
19,887,485
-----------
Brokerage -- 9.3%
Merrill Lynch & Co., Inc., 5.35%.......................... 01/07/1999 4,000,000 3,996,433
Salomon Smith Barney Holdings, Inc. 5.15%................. 02/09/1999 3,500,000 3,480,473
Salomon Smith Barney Holdings, Inc. 5.15%................. 03/11/1999 1,000,000 990,129
-----------
8,467,035
-----------
Communications -- 4.3%
GTE Funding, Inc., 5.15%.................................. 02/01/1999 4,000,000 3,982,261
-----------
Finance -- 30.3%
American General Finance Corp., 5.13%..................... 02/11/1999 3,900,000 3,877,214
Associates Corp. of North America, 5.28%.................. 01/11/1999 4,000,000 3,994,133
Commercial Credit Corp., 5.17%............................ 01/26/1999 4,400,000 4,384,203
General Electric Capital Corp., 4.87%..................... 01/29/1999 3,500,000 3,486,743
IBM Credit Corp., 5.19%................................... 01/12/1999 3,500,000 3,494,450
Norwest Financial, Inc., 5.33%............................ 01/21/1999 4,000,000 3,988,156
Transamerica Financial Corp., 5.15%....................... 02/24/1999 4,500,000 4,465,237
-----------
27,690,136
-----------
Industrial -- 2.0%
Avnet, Inc., 5.35%........................................ 01/14/1999 1,800,000 1,796,522
-----------
Insurance -- 4.9%
Prudential Funding Corp., 5.10%........................... 02/03/1999 4,500,000 4,478,963
-----------
Leasing -- 4.4%
International Leasing Finance Corp., 5.28%................ 01/15/1999 4,000,000 3,991,787
-----------
Oil -- 3.9%
Chevron Corp., 5.53%...................................... 01/04/1999 3,600,000 3,598,341
-----------
</TABLE>
10
<PAGE> 12
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Money Market Portfolio
Statement of Net Assets, December 31, 1998 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY SHARES
DESCRIPTION AND PERCENTAGE OF PORTFOLIO DATE OR PAR VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER (CONTINUED)
Utilities -- 4.7%
Virginia Electric., 5.30%................................. 01/13/1999 $2,000,000 $ 1,996,467
Virginia Electric., 5.17%................................. 01/27/1999 2,300,000 2,291,412
-----------
4,287,879
-----------
TOTAL COMMERCIAL PAPER (COST $90,873,090)............... 90,873,090
-----------
</TABLE>
<TABLE>
<S> <C> <C>
SHORT TERM INVESTMENTS -- 1.1%
Temporary Investment Fund, Inc. -- TempCash............... 1,000,038 1,000,038
-----------
TOTAL SHORT TERM INVESTMENTS (COST $1,000,038).......... 1,000,038
-----------
TOTAL INVESTMENTS -- 100.5% (COST $91,873,128).......... 91,873,128
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.5)%............. (420,207)
-----------
NET ASSETS -- 100.00%
(Equivalent to $1.00 per share based on 91,452,978 shares
of capital stock outstanding)........................... $91,452,921
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($91,452,921/91,452,978 shares outstanding)............... $ 1.00
===========
</TABLE>
See accompanying notes to financial statements.
11
<PAGE> 13
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Bond Portfolio
1998 Annual Review
Sentinel Advisors Company
- --------------------------------------------------------------------------------
The Market Street Fund Bond Portfolio's total return for the year 1998 was
8.22%. The Lehman Aggregate Bond Index, which is considered a good proxy for the
overall bond market, returned 8.69% for the same period.
U.S. Treasury yields fell sharply during the year, with the yield on the
30-year U.S. Treasury bond reaching a record low of 4.69%. The decline in yields
was triggered by a number of factors, including low inflation, moderate economic
growth and an accommodative Federal Reserve. Also contributing were the flight
to quality stemming from the Russian financial crisis which erupted in
mid-August and the headline-catching difficulties experienced by several hedge
funds towards the end of September and early October.
The Russian debt-restructuring announcement in August led to a complete
revaluation of credit risk worldwide, causing a substantial widening of
corporate bond spreads. This widening trend, and the resulting underperformance
of corporate bonds relative to Treasuries, continued into early November.
However, three 25-basis point reductions in the Fed funds rate have gone a long
way toward improving investor confidence, as the financial markets have not only
stabilized but rebounded significantly from the lows witnessed just a couple of
months ago.
During the course of the year, we lengthened the fund's duration, largely
by selling mortgage-backed bonds and buying intermediate and long maturity
corporate bonds and Treasuries. Late in the year, with corporate bond spreads
regaining some of the ground that they lost in late-summer and early fall, we
reduced the fund's exposure to the corporate bond sector as a defensive measure.
Nevertheless, despite their recent improvement, corporate bond spreads remain at
historically wide levels and appear to offer good relative value. As a
consequence, we expect to have ample opportunity to add corporate bonds to the
Portfolio at attractive valuations.
Richard D. Temple
William C. Kane, CFA
12
<PAGE> 14
[Market Street Fund]
[Bond Portfolio Performance Graph]
<TABLE>
<CAPTION>
FUND INDEX+
---- ------
<S> <C> <C>
Start 10000.00 10000.00
'85' 10225.00 10187.00
'86' 11864.00 11742.00
'87' 11583.00 12066.00
'88' 12330.00 13018.00
'89' 13633.00 14909.00
'90' 14683.00 16245.00
'91' 16728.00 18844.00
'92' 17724.00 20239.00
'93' 19553.00 22564.00
'94' 18454.00 21892.00
'95' 22228.00 25941.00
'96' 22863.00 26883.00
'97' 25036.00 29477.00
'98' 27093.00 32039.00
</TABLE>
Past performance is not predictive of future performance.
+ The index is the Lehman Aggregate Bond Index, an unmanaged index of bonds
reflecting average prices in the bond market.
* Inception date was December 12, 1985.
13
<PAGE> 15
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Bond Portfolio
Statement of Net Assets, December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY
DESCRIPTION AND PERCENTAGE OF PORTFOLIO DATE PAR VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. TREASURY BONDS -- 18.6%
U.S. Treasury Bonds, 4.75%................................ 11/15/2008 $ 500,000 $ 503,577
U.S. Treasury Bonds, 6.00%................................ 02/15/2026 4,950,000 5,411,764
U.S. Treasury Bonds, 5.50%................................ 02/15/2028 900,000 942,748
-----------
TOTAL U.S. TREASURY BONDS (COST $6,715,654)............. 6,858,089
-----------
U.S. TREASURY NOTES -- 23.6%
U.S. Treasury Notes, 6.25%................................ 01/31/2002 1,000,000 1,044,706
U.S. Treasury Notes, 4.25%................................ 11/15/2003 2,500,000 2,466,993
U.S. Treasury Notes, 7.25%................................ 08/15/2004 1,100,000 1,236,814
U.S. Treasury Notes, 7.50%................................ 02/15/2005 750,000 858,664
U.S. Treasury Notes, 6.875%............................... 05/15/2006 1,500,000 1,699,002
U.S. Treasury Notes, 7.00%................................ 07/15/2006 250,000 285,268
U.S. Treasury Notes, 6.125%............................... 08/15/2007 1,000,000 1,094,110
-----------
TOTAL U.S. TREASURY NOTES (COST $8,445,877)............. 8,685,557
-----------
AGENCY OBLIGATIONS -- 7.0%
Collateralized Mortgage Obligation Trust, 7.95%........... 05/01/2017 275,671 284,924
Federal Home Loan Mortgage Corp., 8.00%................... 11/01/2008 314,733 328,896
Federal Home Loan Mortgage Corp., 9.00%................... 11/01/2016 553 587
Federal Home Loan Mortgage Corp., 8.00%................... 03/01/2017 22,798 23,823
Federal National Mortgage Association, 7.00%.............. 07/25/2008 494,252 504,291
Federal National Mortgage Association, 6.00%.............. 04/01/2028 1,137,774 1,123,552
Federal National Mortgage Association, 7.00%.............. 11/01/2028 324,671 331,266
-----------
TOTAL AGENCY OBLIGATIONS (COST $2,560,736).............. 2,597,339
-----------
CORPORATE BONDS -- 41.9%
Communications -- 7.1%
Comsat Corp. Medium Term Note, 8.05%...................... 12/13/2006 500,000 580,769
Continental Cablevision, Inc. Senior Debentures, 9.50%.... 08/01/2013 850,000 1,001,937
Worldcom, Inc., 6.40%..................................... 08/15/2005 1,000,000 1,037,500
-----------
2,620,206
-----------
Entertainment -- 1.3%
Mirage Resorts, Inc., 6.625%.............................. 02/01/2005 500,000 490,000
-----------
Finance -- 10.3%
Bankers Trust Corp., 7.25%................................ 10/15/2011 1,000,000 1,075,000
First Union Corp., 6.824%................................. 08/01/2006 600,000 667,500
Household Finance Co., 5.875%............................. 08/01/2006 500,000 503,125
Providian National Bank, 6.70%............................ 03/15/2003 500,000 502,500
Simon Debartolo Group Note., 6.75%........................ 08/01/2006 600,000 595,500
Socgen Real Estate L.L.C., 7.64%.......................... 08/01/2006 500,000 468,125
-----------
3,811,750
-----------
</TABLE>
14
<PAGE> 16
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Bond Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY
DESCRIPTION AND PERCENTAGE OF PORTFOLIO DATE PAR VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
Financial Investment & Other -- 3.6%
Lehman Brothers Holdings, Inc., 8.50%..................... 08/01/2015 $ 500,000 $ 546,875
Salomon, Inc., 7.20%...................................... 02/01/2004 750,000 795,938
-----------
1,342,813
-----------
Foreign Financial Institutions -- 3.9%
Bank Austria, 7.25%....................................... 02/15/2017 500,000 525,625
Banque Nationale de Paris, 7.738%......................... 12/31/2049 500,000 488,750
Midland Bank Plc, 7.65%................................... 05/01/2025 500,000 550,625
-----------
1,565,000
-----------
Industrial -- 4.8%
IMC Global, Inc., 7.40%................................... 11/01/2002 500,000 508,125
Lubrizol Corp., 5.875%.................................... 12/01/2008 250,000 249,375
Owens Corning, 7.50%...................................... 05/01/2005 750,000 773,438
Tenet Healthcare Corp., 7.625%............................ 06/01/2008 250,000 255,313
-----------
1,786,251
-----------
Tobacco -- 1.1%
Dimon, Inc. Senior Notes, 8.875%.......................... 06/01/2006 400,000 390,000
-----------
Utilities -- 9.3%
Calenergy Co. Inc., 7.23%................................. 09/15/2005 750,000 774,375
Cleveland Electric Illuminating, 9.00%.................... 07/01/2023 500,000 550,625
U.S. West Capital Funding, Inc., 6.25%.................... 07/15/2005 1,000,000 1,041,250
Waterford 3 Funding, 8.09%................................ 01/02/2017 1,000,000 1,081,250
-----------
3,447,500
-----------
TOTAL CORPORATE BONDS (COST $15,105,631)................ 15,453,520
-----------
COMMERCIAL PAPER -- 15.1%
Federal Home Loan Mortgage Corp., 5.025%.................. 02/16/1999 2,000,000 1,986,944
Federal Home Loan Mortgage Corp., 5.03%................... 02/16/1999 1,600,000 1,589,545
Federal National Mortgage Association., 5.02%............. 02/02/1999 500,000 497,650
General Electric Capital Corp., 5.16%..................... 02/16/1999 500,000 496,703
Norwest Financial, Inc., 5.05%............................ 02/16/1999 1,000,000 993,277
-----------
TOTAL COMMERCIAL PAPER (COST $5,564,893)................ 5,564,119
-----------
</TABLE>
15
<PAGE> 17
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Bond Portfolio
Statement of Net Assets, December 31, 1998 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENTS -- 2.0%
Temporary Investment Fund, Inc. -- TempCash............... 816,640 $ 816,640
-----------
TOTAL SHORT TERM INVESTMENTS (COST $816,640)............ 816,640
-----------
TOTAL INVESTMENTS -- 108.2% (COST $39,209,431).......... 39,975,264
LIABILITIES IN EXCESS OF OTHER ASSETS -- (8.2%)............. (3,129,342)
-----------
NET ASSETS -- 100.0%
(Equivalent to $11.22 per share based on 3,284,815 shares
of capital stock outstanding)........................... $36,845,922
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($36,845,922/3,284,815 shares outstanding)................ $ 11.22
===========
</TABLE>
See accompanying notes to financial statements.
16
<PAGE> 18
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
1998 Annual Review
Sentinel Advisors Company
- --------------------------------------------------------------------------------
The Market Street Fund Managed Portfolio produced a total return of 12.54%
for the year ended December 31, 1998. The Portfolio's results slightly exceeded
the 12.39% return of the median balanced fund as measured by Lipper Analytical
Services. For the year, the S&P 500 returned 28.6% and the Lehman Aggregate Bond
Index returned 8.69%.
For both the stock and bond markets, the last twelve months can be
characterized as a period of very wide market swings, and one where a relatively
concentrated group of securities dominated the performance of the two sectors.
In the case of common stocks, a strong market rally in the early part of the
year abruptly ended due to a confluence of troubling economic, financial and
political events. The subsequent market correction, the first meaningful decline
in stock prices in the 1990s, likewise came to an abrupt end when the Federal
Reserve Board unexpectedly moved to lower interest rates in the fall. The
performance of the widely followed Standard & Poor's 500 was exceptionally
strong, but was in fact greatly influenced by the gains in the 50 largest
capitalization stocks in that index. The average stock was up only about half as
much as the index itself. On the fixed income side, a flight to quality during
the turmoil of the summer led to a tremendous rally in the U.S. Treasury market,
with the yield on the benchmark 30-year Treasury Bond reaching its lowest level
in recent history. Corporate bond spreads widened during the year, resulting in
significant underperformance relative to Treasuries.
The Portfolio began the fiscal year with a mix of 59% stocks, 34% bonds and
7% cash. After the stock market moved significantly higher early in the year, we
trimmed back the stock segment to maintain our planned 60% allocation. In late
summer, after a meaningful decline in the stock market, we sold some fixed
income investments and added to common stocks, this time building the stock
allocation back up to the 60% level. Once again in the fall, after the stock
market had recovered significantly, we trimmed positions. As of December 31,
1998, the Managed Portfolio's asset allocation was 61% stocks, 37% bonds and 2%
cash, little changed from the beginning of the year but actively managed to
maintain that balance. These asset allocation adjustments had a positive
influence on performance during a year of dramatic market shifts, as the effect
in each instance was to add to the asset class that was depressed in price and
trim back the highly appreciated asset class.
Within the equity asset class, the Portfolio benefited significantly from
its substantial holdings in the healthcare and consumer areas, particularly in
the pharmaceutical, medical supply and specialty retail industries. Technology
stock performance contributed positively, although an underweighting in this
sector relative to the broad market hurt returns. The Portfolio also benefited
from a timely move out of several large capitalization financial stocks early in
the year, avoiding some of the significant underperformance of that group during
the financial turmoil of the summer months. Finally, although the stock segment
did achieve strong risk-adjusted returns relative to other portfolios managed
with a value oriented investment approach, our unwillingness to risk investment
in certain of the very largest market capitalization stocks depressed
performance relative to the Standard & Poor's 500. This particular group of
large stocks can at times dominate the movement of the capitalization-weighted
S&P 500, and in 1998
17
<PAGE> 19
their influence was so strong that the return on the S&P 500 index was
approximately double the return of the typical stock that comprises that index.
Looking ahead to 1999, we anticipate continued low interest rates and
restrained inflation. It is our expectation, however, that corporate profit
growth may be somewhat slower than has been the case in recent years. In such an
environment, we expect to emphasize stocks of companies with a track record for
relatively consistent earnings growth. We will as always be particularly
vigilant with respect to valuation, investing in securities where expectations
are reasonable and valuation levels are low. In the fixed income segment, we
will continue to focus on quality investments in the government, corporate and
mortgage-backed sectors. At present, corporate bond spreads in particular remain
at historically wide levels, and appear to offer good relative value.
Richard A. Pender, CFA
David M. Brownlee, CFA
[Market Street Fund]
[MANAGED PORTFOLIO PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
FUND LA INDEX* S&P INDEX+
---- --------- ----------
<S> <C> <C> <C>
Start 10000.00 10000.00 10000.00
'85' 10299.00 10187.00 10077.00
'86' 11543.00 11742.00 11941.00
'87' 11481.00 12066.00 12540.00
'88' 12631.00 13018.00 14580.00
'89' 14482.00 14909.00 19131.00
'90' 13235.00 16245.00 18485.00
'91' 15947.00 18844.00 24115.00
'92' 17854.00 20239.00 25948.00
'93' 19928.00 22564.00 28558.00
'94' 19566.00 21892.00 28933.00
'95' 24346.00 25941.00 39811.00
'96' 27238.00 26883.00 48928.00
'97' 33020.00 29477.00 65260.00
'98' 37161.00 32039.00 84003.00
</TABLE>
Past performance is not predictive of future performance.
* The Index is the Lehman Aggregate Bond Index, an unmanaged index of bonds
reflecting average prices in the bond market.
+ The Index is the S&P 500 Index, an unmanaged index of 500 U.S. common stocks
that includes reinvestment of dividends.
** Inception date was December 12, 1985.
18
<PAGE> 20
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Statement of Net Assets, December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 61.0%
Aerospace & Defense -- 2.0%
Goodrich (B.F.) Co. ...................................... 20,400 $ 731,850
Raytheon Co. Class A...................................... 12,500 646,094
-----------
1,377,944
-----------
Automobiles -- 1.4%
Ford Motor Co. ........................................... 16,000 939,000
-----------
Banks -- 4.4%
Bank America Corp. ....................................... 9,052 544,251
Bank of New York Co., Inc. ............................... 26,500 1,066,625
Chase Manhattan Corp. .................................... 10,580 720,101
First Union Corp. ........................................ 11,000 668,937
-----------
2,999,914
-----------
Beverages -- 0.9%
Pepsico, Inc. ............................................ 15,000 614,062
-----------
Broadcasting & Publishing -- 3.1%
Gannett, Inc. ............................................ 14,000 926,625
McGraw-Hill, Inc. ........................................ 11,400 1,161,375
-----------
2,088,000
-----------
Building Materials -- 1.0%
Sherwin Williams Co. ..................................... 22,200 652,125
-----------
Business & Consumer Services -- 2.4%
Automatic Data Processing, Inc. .......................... 7,100 569,331
Electronic Data Systems Corp. ............................ 5,200 261,300
Omnicom Group, Inc. ...................................... 13,500 783,000
-----------
1,613,631
-----------
Communications -- 2.7%
AT&T Corp. ............................................... 10,500 790,125
GTE Corp. ................................................ 15,000 1,011,562
-----------
1,801,687
-----------
Computers -- 3.2%
Compaq Computer Corp. .................................... 21,300 893,269
International Business Machines Corp. .................... 6,900 1,274,775
-----------
2,168,044
-----------
Consumer Products -- 2.5%
Fortune Brands, Inc. ..................................... 20,000 632,500
Kimberly-Clark Corp. ..................................... 19,000 1,035,500
-----------
1,668,000
-----------
</TABLE>
19
<PAGE> 21
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Containers -- 0.6%
Bemis Co., Inc. .......................................... 11,200 $ 424,900
-----------
Drugs & Health Care -- 7.1%
Abbott Laboratories....................................... 18,000 882,000
American Home Products Corp. ............................. 18,000 1,013,625
Becton, Dickinson & Co. .................................. 13,000 554,937
*HCR Manor Care, Inc. ..................................... 15,000 440,625
Johnson & Johnson......................................... 10,000 838,750
Pfizer, Inc. ............................................. 4,500 564,469
Schering Plough Corp. .................................... 9,000 497,250
-----------
4,791,656
-----------
Electrical Equipment -- 1.9%
Emerson Electric Co. ..................................... 13,000 813,312
General Electric Co. ..................................... 4,700 479,694
-----------
1,293,006
-----------
Energy -- 3.6%
Chevron Corp. ............................................ 5,100 422,981
Exxon Corp. .............................................. 6,500 475,312
FPL Group, Inc. .......................................... 5,800 357,425
Mobil Corp. .............................................. 10,300 897,388
Royal Dutch Petroleum Co. ................................ 6,500 311,188
-----------
2,464,294
-----------
Finance -- 3.6%
American Express Co. ..................................... 8,000 818,000
Associates First Capital Corp. Class A.................... 7,548 319,847
Citigroup, Inc. .......................................... 14,550 720,225
Fannie Mae................................................ 8,200 606,800
-----------
2,464,872
-----------
Foods -- 4.3%
Bestfoods, Inc. .......................................... 15,500 825,375
Hershey Foods Corp. ...................................... 9,000 559,688
McCormick & Co., Inc. .................................... 16,600 561,288
Sara Lee Corp. ........................................... 33,200 935,825
-----------
2,882,176
-----------
Industrial Diversified -- 1.5%
Dover Corp. .............................................. 10,000 366,250
Parker-Hannifin Corp. .................................... 19,000 622,250
-----------
988,500
-----------
</TABLE>
20
<PAGE> 22
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Insurance -- 4.4%
Allstate Corp. ........................................... 20,500 $ 791,813
American General Corp. ................................... 11,200 873,600
American International Group, Inc. ....................... 6,050 584,581
Jefferson-Pilot Corp. .................................... 10,050 753,750
-----------
3,003,744
-----------
Lodging -- 1.3%
Marriott International, Inc., Class A..................... 29,400 852,600
-----------
Oil Field Equipment & Services -- 1.0%
Halliburton Co. .......................................... 15,000 444,375
Schlumberger Ltd. ........................................ 5,600 258,300
-----------
702,675
-----------
Railroads -- 1.0%
Union Pacific Corp., Series A............................. 15,000 675,938
-----------
Retail - Clothing and Apparel -- 0.6%
Gap, Inc. ................................................ 7,700 433,125
-----------
Retail Merchandising -- 2.5%
*Costco Companies, Inc. ................................... 15,500 1,118,906
May Department Stores Co. ................................ 9,500 573,563
-----------
1,692,469
-----------
Semiconductors -- 0.4%
Intel Corp. .............................................. 2,500 296,406
-----------
Tobacco -- 0.7%
Philip Morris Cos., Inc. ................................. 8,500 454,750
-----------
Utilities -- 3.0%
Duke Power Co. ........................................... 7,000 448,438
Enron Corp. .............................................. 16,500 941,531
Florida Progress Corp. ................................... 8,700 389,869
Sonat, Inc. .............................................. 10,000 270,625
-----------
2,050,463
-----------
TOTAL COMMON STOCK (COST $27,778,594)................... 41,393,981
-----------
</TABLE>
21
<PAGE> 23
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY
DESCRIPTION AND PERCENTAGE OF PORTFOLIO DATE PAR VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. TREASURY NOTES -- 6.2%
U.S. Treasury Notes, 4.25%................................ 11/15/2003 $3,966,406 $ 3,947,188
U.S. Treasury Notes, 7.00%................................ 07/15/2006 286,804 285,268
-----------
TOTAL U.S. TREASURY NOTES (COST $4,253,210)............. 4,232,456
-----------
U.S. TREASURY BONDS -- 9.9%
U.S. Treasury Bonds, 6.00%................................ 02/15/2026 2,162,439 2,186,571
U.S. Treasury Bonds, 4.75%................................ 11/15/2008 1,526,374 1,510,731
U.S. Treasury Bonds, 5.50%................................ 08/15/2028 3,010,328 3,011,557
-----------
TOTAL U.S. TREASURY BONDS (COST $6,699,141)............. 6,708,859
-----------
U.S. TREASURY STRIP NOTES -- 1.3%
U.S. Treasury Strip Notes................................. 05/15/2002 856,622 856,248
-----------
TOTAL U.S. TREASURY STRIP NOTES (COST $856,622)......... 856,248
-----------
AGENCY OBLIGATIONS -- 7.1%
Collateralized Mortgage Obligation Trust, 7.95%........... 05/01/2017 278,249 284,924
Federal Home Loan Mortgage Corp., 9.50%................... 03/01/2006 149,536 156,625
Federal Home Loan Mortgage Corp., 8.00%................... 11/01/2008 320,973 328,896
Federal National Mortgage Association, 7.50%.............. 10/01/2028 989,609 989,561
Federal National Mortgage Association, 7.00%.............. 03/01/2008 350,316 358,452
Federal National Mortgage Association, 7.75%.............. 03/01/2008 175,568 179,351
Federal National Mortgage Association, 7.75%.............. 05/01/2008 102,637 104,841
Federal National Mortgage Association, 6.00%.............. 09/01/2025 442,967 448,904
Government National Mortgage Association, 8.00%........... 03/15/2007 267,367 271,300
Government National Mortgage Association, 8.00%........... 08/15/2008 376,301 381,836
Government National Mortgage Association, 7.00%........... 02/15/2009 1,287,873 1,294,214
-----------
TOTAL AGENCY OBLIGATIONS (COST $4,741,396).............. 4,798,904
-----------
CORPORATE BONDS -- 11.7%
Communications -- 2.5%
Comsat Corp. Medium Term Note, 8.05%...................... 12/13/2006 519,123 580,769
Continental Cablevision, Inc. Senior Debentures, 9.50%.... 08/01/2013 576,603 589,375
Worldcom, Inc., 6.40%..................................... 08/15/2005 499,040 518,750
-----------
1,688,894
-----------
Entertainment -- 0.7%
Mirage Resorts, Inc., 6.625%.............................. 02/01/2005 495,450 490,000
-----------
Finance -- 1.6%
First Union Corp., 6.824%................................. 08/01/2006 594,026 667,500
Simon Debartolo Group Note, 6.75%......................... 06/15/2005 383,043 397,000
-----------
1,064,500
-----------
</TABLE>
22
<PAGE> 24
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY
DESCRIPTION AND PERCENTAGE OF PORTFOLIO DATE PAR VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
Finance - Investment & Other -- 1.6%
Lehman Brothers Holdings, Inc., 8.50%..................... 08/01/2015 $ 529,373 $ 546,875
Salomon, Inc., Senior Notes, 7.20%........................ 02/01/2004 529,741 530,625
-----------
1,077,500
-----------
Foreign Financial Institutions -- 2.0%
Bank Austria, 7.25%....................................... 02/15/2017 526,986 525,625
Banque Nationale de Paris, 7.738%......................... 12/31/2049 250,000 244,375
Midland Bank Plc, 7.65%................................... 05/01/2025 614,739 605,688
-----------
1,375,688
-----------
Industrial -- 1.9%
IMC Global, Inc., 7.40%................................... 11/01/2002 499,137 508,125
Lubrizol Corp., 5.875%.................................... 12/01/2008 246,994 249,375
Owens Corning, 7.50%...................................... 05/01/2005 505,245 515,625
-----------
1,273,125
-----------
Tobacco -- 0.6%
Dimon, Inc. Senior Notes, 8.875%.......................... 06/01/2006 408,000 390,000
-----------
Utilities -- 0.8%
Cleveland Electric Illuminating, 9.00%.................... 07/01/2023 547,377 550,625
-----------
TOTAL CORPORATE BONDS (COST $7,724,877)................. 7,910,332
-----------
COMMERCIAL PAPER -- 13.9%
C.I.T. Group Holdings, Inc., 5.60%........................ 01/05/1999 1,299,191 1,299,191
C.I.T. Group Holdings, Inc., 5.18%........................ 02/16/1999 993,381 993,381
Federal Home Loan Mortgage Corp., 5.03%................... 02/10/1999 1,789,940 1,789,772
Federal Home Loan Mortgage Corp., 5.04%................... 02/12/1999 1,595,563 1,595,106
Federal Home Loan Mortgage Corp., 5.025%.................. 02/16/1999 993,579 993,472
International Lease Finance Corp., 5.20%.................. 02/16/1999 2,781,396 2,781,176
-----------
TOTAL COMMERCIAL PAPER (COST $9,453,050)................ 9,452,098
-----------
</TABLE>
23
<PAGE> 25
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Statement of Net Assets, December 31, 1998 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENTS -- 0.7%
Temporary Investment Fund, Inc. -- TempCash................. 508,133 $ 508,133
-----------
TOTAL SHORT TERM INVESTMENTS (COST $508,133)............ 508,133
-----------
TOTAL INVESTMENTS -- 111.9% (COST $62,015,023).......... 75,861,011
LIABILITIES IN EXCESS OF OTHER ASSETS -- (11.9%)............ (8,055,700)
-----------
NET ASSETS -- 100.0%
(Equivalent to $17.68 per share based on 3,834,704 shares
of capital stock outstanding)........................... $67,805,311
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($67,805,311/3,834,704 shares outstanding)................ $ 17.68
===========
</TABLE>
*Non-Income Producing
See accompanying notes to financial statements.
24
<PAGE> 26
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Growth Portfolio
1998 Annual Review
Sentinel Advisors Company
- --------------------------------------------------------------------------------
The Market Street Fund Aggressive Growth Portfolio achieved a return of
7.99% for the year ending December 31, 1998. This performance compares favorably
to the -2.84% median return of the Lipper Small Company fund category and was
better than the -2.6% returned by the Russell 2000 index.
Good stock selection and a lack of cyclical exposure were key factors
behind this year's favorable relative performance. The fact that we locked in
profits throughout the year in some of the Portfolio's biggest winners was
another reason.
Looking forward to 1999, we will continue to search for attractively valued
companies that are solving problems or creating competitive advantages for their
customers. Companies with products or services that provide real solutions to
customers' needs or problems should enjoy the increasingly rare ability to
increase unit volume and preserve pricing power. Of course, we also will
continue to seek exposure to those small companies that are poised to benefit
from important long-term trends. The pharmaceutical industry's incessant need to
develop new and better drugs and Corporate America's growing appetite for
specialized marketing services that are more effective than traditional mass
media advertising are two good examples of these sort of trends that we expect
to exploit with current holdings. As well, we continue to believe that
well-managed and financially sound small companies that have developed or are
developing strong brand names or attractive franchises are likely to be
rewarding long-term investments. Yet, as long as investors remain concerned that
the global economic turmoil might impact the US economy, it is unlikely
small-capitalization stocks will meaningfully outperform the shares of large
companies. Finally, while we do not want to predict when small company shares
might begin to outperform the large company shares, we feel strongly that many
small company stocks present compelling relative value and superior risk/reward
ratios when compared to most large capitalization stocks.
As we have done in the past, we will continue to manage the Portfolio with
a broadly diversified portfolio of high quality and attractively valued
companies that, for the most part, operate superior businesses. While our
investment approach should present less overall risk, we still expect it to
produce long-term returns that compare favorably to most other small company
funds. Avoiding companies prone to problems can be a particularly rewarding
investment strategy for small company investors. We hope that you will agree
that the Portfolio's strong relative returns this year, provide some evidence
that our approach is indeed sound and likely to produce long-term returns that
are superior to the returns of most other small company funds. Your continued
confidence in our efforts is appreciated.
Scott T. Brayman, CFA
Robert L. Lee, CFA
25
<PAGE> 27
[Market Street Fund]
[AGGRESSIVE GROWTH PORTFOLIO PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
FUND INDEX+
---- ------
<S> <C> <C>
Start 10000.00 10000.00
'89' 10558.00 10340.00
'90' 11695.00 8324.00
'91' 18283.00 12161.00
'92' 18755.00 14399.00
'93' 19730.00 17120.00
'94' 19730.00 16808.00
'95' 22389.00 21599.00
'96' 27091.00 25171.00
'97' 32837.00 30767.00
'98' 35461.00 30078.00
</TABLE>
Past performance is not predictive of future performance.
+ The Index is the Russell 2000 Index, an unmanaged stock index of small
capitalization companies which includes reinvestment of all income.
* Inception date was May 1, 1989.
26
<PAGE> 28
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Growth Portfolio
Statement of Net Assets, December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 91.5%
Banks -- 4.3%
Cullen Frost Bankers, Inc. ............................... 15,000 $ 823,125
Mercantile Bankshares Corp. .............................. 20,000 770,000
Wilmington Trust Corp. ................................... 14,000 862,750
-----------
2,455,875
-----------
Beverages -- 1.0%
*Robert Mondavi Corp., Class A............................ 14,000 572,250
-----------
Business & Consumer Services -- 18.2%
*Acxiom Corp. ............................................ 44,000 1,364,000
*Affiliated Computer Services, Inc. ...................... 54,000 2,430,000
Analysts International Corp. ............................. 57,000 1,097,250
*Caci International, Inc. ................................ 44,000 742,500
*Catalina Marketing Corp. ................................ 23,000 1,572,625
*Healthcare Services Group................................ 44,000 401,500
*Sterling Commerce, Inc. ................................. 36,000 1,620,000
Unifirst Corp. ........................................... 45,000 1,026,562
-----------
10,254,437
-----------
Chemicals - Specialty -- 5.6%
*Bush Boake Allen, Inc. .................................. 48,000 1,692,000
Cambrex Corp. ............................................ 62,000 1,488,000
-----------
3,180,000
-----------
Communications -- 2.1%
*Dynatech Corp. .......................................... 7,000 19,250
*True North Communications................................ 44,000 1,182,500
-----------
1,201,750
-----------
Containers -- 1.5%
Bemis Co., Inc. .......................................... 22,700 861,181
-----------
Cosmetics and Toiletries -- 2.1%
Alberto-Culver Co. Class A................................ 46,000 1,161,500
-----------
Drugs & Health Care -- 3.1%
*Covance,................................................. 44,000 1,281,500
*Genesis Health Ventures, Inc. ........................... 40,000 350,000
*Monarch Dental Corp. .................................... 26,000 104,812
-----------
1,736,312
-----------
</TABLE>
27
<PAGE> 29
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Growth Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Electronics -- 5.4%
Harman International Industries, Inc. .................... 22,000 $ 838,750
Methode Electronics, Inc. Class A......................... 87,000 1,359,375
*Photronics Labs, Inc. ................................... 36,000 862,875
-----------
3,061,000
-----------
Energy -- 2.1%
*Calenergy Company, Inc. ................................. 34,000 1,179,375
-----------
Environmental Control -- 2.9%
Donaldson Co., Inc. ...................................... 45,000 933,750
*Tetra Technologies, Inc. ................................ 66,000 721,875
-----------
1,655,625
-----------
Financial -- 4.6%
Duff & Phelps Credit Rating Co. .......................... 22,000 1,205,875
Waddell & Reed Financial, Inc. ........................... 45,000 1,065,937
*Waddell & Reed Financial, Inc. Class B................... 14,000 325,500
-----------
2,597,312
-----------
Food & Food Distributors -- 2.7%
ConAgra, Inc. ............................................ 13,000 409,500
Smart & Final, Inc. ...................................... 24,000 231,000
Tootsie Roll Industries, Inc. ............................ 14,000 547,750
Worthington Foods, Inc. .................................. 18,000 342,000
-----------
1,530,250
-----------
Healthcare Providers -- 0.7%
HealthPlan Services Corp. ................................ 36,000 414,000
-----------
Industrial Diversified -- 0.8%
Lawter International, Inc. ............................... 40,000 465,000
-----------
Insurance -- 5.1%
Enhance Financial Services Group, Inc. ................... 31,000 930,000
HCC Insurance Holdings, Inc. ............................. 53,900 949,987
Horace Mann Educators Corp. .............................. 34,800 991,800
-----------
2,871,787
-----------
Manufacturing -- 4.8%
AptarGroup, Inc. ......................................... 44,000 1,234,750
*Ocular Sciences, Inc. ................................... 14,000 374,500
Tyco International Ltd. .................................. 14,000 1,056,125
-----------
2,665,375
-----------
</TABLE>
28
<PAGE> 30
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Growth Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Medical Equipment & Supplies -- 5.4%
Ballard Medical Products.................................. 35,000 $ 850,938
Diagnostic Products Corp. ................................ 5,400 168,075
Hillenbrand Industries, Inc. ............................. 12,000 682,500
Mentor Corp. ............................................. 31,000 726,563
Minntech Corp. ........................................... 40,000 620,000
-----------
3,048,076
-----------
Oil Field Equipment & Services -- 0.8%
*Smith International, Inc. ............................... 18,000 453,375
-----------
Railroads -- 0.3%
*Railtex, Inc. ........................................... 14,000 158,375
-----------
Real Estate -- 2.5%
Chateau Communities, Inc. ................................ 48,000 1,407,000
-----------
Restaurants -- 5.0%
Applebee's International, Inc. ........................... 20,000 412,500
Ruby Tuesday, Inc. ....................................... 58,000 1,232,500
Sbarro, Inc. ............................................. 44,000 1,152,250
-----------
2,797,250
-----------
Retail - Clothing and Apparel -- 0.6%
*Lands' End, Inc. ........................................ 13,000 350,188
-----------
Retail Merchandising -- 4.5%
Casey General Stores, Inc. ............................... 22,000 286,688
Ethan Allen Interiors, Inc. .............................. 22,000 902,000
*The Wet Seal, Inc., Class A.............................. 44,000 1,328,250
-----------
2,516,938
-----------
Semiconductors -- 3.1%
Dallas Semiconductor Corp. ............................... 26,500 1,079,875
*Novellus Systems, Inc. .................................. 14,000 693,000
-----------
1,772,875
-----------
Software -- 1.3%
*Filenet Corp. ........................................... 66,000 756,938
-----------
Transportation -- 1.0%
C.H. Robinson Worldwide, Inc. ............................ 22,000 570,625
-----------
TOTAL COMMON STOCK (COST $45,287,758)................... 51,694,669
-----------
</TABLE>
29
<PAGE> 31
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Growth Portfolio
Statement of Net Assets, December 31, 1998 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY SHARES
DESCRIPTION AND PERCENTAGE OF PORTFOLIO DATE OR PAR VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BOND -- 0.1%
Phoenix Investment Partners Ltd., 6.00%................... 11/01/2015 $ 62,500 $ 71,440
-----------
TOTAL CORPORATE BOND (COST $68,859)..................... 71,440
-----------
COMMERCIAL PAPER -- 7.1%
American Express Credit Corp., 4.90%...................... 01/11/1999 2,600,000 2,596,461
C.I.T. Group Holdings, Inc., 5.99%........................ 01/06/1999 1,400,000 1,398,835
-----------
TOTAL COMMERCIAL PAPER (COST $3,995,296)................ 3,995,296
-----------
</TABLE>
<TABLE>
<S> <C> <C>
SHORT TERM INVESTMENTS -- 1.4%
Temporary Investment Fund, Inc. -- TempCash............... 763,468 763,468
-----------
TOTAL SHORT TERM INVESTMENTS (COST $763,468)............ 763,468
-----------
TOTAL INVESTMENTS -- 100.1% (COST $50,115,381).......... 56,524,873
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.1%)............. (29,558)
-----------
NET ASSETS -- 100.0%
(Equivalent to $21.91 per share based on 2,578,095 shares
of capital stock outstanding)........................... $56,495,315
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($56,495,315/2,578,095 shares outstanding)................ $ 21.91
===========
</TABLE>
* Non-income producing.
See accompanying notes to financial statements.
30
<PAGE> 32
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio
1998 Annual Review
The Boston Company Asset Management, Inc.
- --------------------------------------------------------------------------------
The Market Street Fund International Portfolio achieved a return of 10.13%
compared to the MSCI EAFE, which returned 20.00%. The portfolio lagged the
market as value stocks underperformed growth stocks in most of the markets
around the world, particularly in Europe.
The Japanese market posted mixed returns for the year, with the main index
declining about 7.5% in local terms. After effect of currency, which rose about
14.5%, the dollar-based return was 7%. The economy continued to contract
throughout the year with GDP falling an estimated 2.7% and the unemployment rate
hitting a post war high of 4.4%. Our Japanese stocks for the year outperformed
the index on average. Looking into 1999, there are significant signs that the
economy and the market are bottoming out due to the 16 trillion yen spending
package announced in the second quarter of 1998.
Elsewhere in the Pacific Rim, the portfolio benefited from a rebound in the
depressed Asian markets. While the recovery has a way to go, valuations
recovered somewhat in the latter portion of the year.
In Europe, the two driving forces in the market were and continue to be
strong underlying economic growth and the transition to the Euro. It remains to
be seen whether the Euro will be able to further stimulate growth or whether the
stresses associated with managing eleven economies in synch will prove elusive
and act as a constraint.
Sectors that continue to operate in a difficult environment albeit at
attractive valuations are commodities and cyclicals. Oils and paper stocks are
trading at valuations that presume that current low prices are the norm versus
their long-term average prices. The companies in our portfolio that fall into
these sectors are aggressively managing their cost structures and their physical
assets so that when world wide economic growth resumes, they will enjoy a leaner
cost structure and obtain better profitability.
Looking forward, the wide gap between value stocks and growth stocks should
narrow as investors rotate away from highly priced growth stocks. Further we
should see investors widen their investment horizon away from the top 100 large
cap names and into equally high quality mid cap and value names. The value these
stocks present is compelling. We continue to adhere to our value discipline and
we are confident that as the year unfolds, our strategy will pay off.
Sandor Cseh, CFA
31
<PAGE> 33
[Market Street Fund]
[International Portfolio Performance Graph]
<TABLE>
<CAPTION>
FUND INDEX+
---- ------
<S> <C> <C>
Start 10000.00 10000.00
'91' 9712.00 10030.00
'92' 9003.00 8806.00
'93' 12254.00 11677.00
'94' 12286.00 12585.00
'95' 14044.00 13994.00
'96' 15573.00 14834.00
'97' 17078.00 15101.00
'98' 18808.00 18121.00
Past performance is not predictive of future performance
</TABLE>
+ The Index is the Morgan Stanley Capital International Europe, Australia, Far
East (EAFE) Index, an 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.
* Inception date was November 1, 1991.
32
<PAGE> 34
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio
Statement of Net Assets, December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCK -- 96.0%
Argentina -- 0.8%
YPF Sociedad Anonima ADR.................................. 21,000 $ 586,687
-----------
Australia -- 2.1%
Australia & New Zealand Bank Group Ltd.................... 107,416 703,650
Boral Ltd................................................. 238,986 340,077
Pacific Dunlop Ltd........................................ 261,642 423,670
-----------
1,467,397
-----------
Denmark -- 0.6%
Jyske Bank................................................ 4,590 445,149
-----------
Finland -- 0.9%
Kesko Oyj................................................. 41,500 622,915
-----------
France -- 9.9%
*Alstom S.A............................................... 18,315 425,824
Bongrain.................................................. 1,227 549,140
Credit Local de France.................................... 4,400 678,194
Elf Aquitaine ADR......................................... 16,451 931,538
Guyenne Et Gascogne SA.................................... 1,500 672,931
L'Air Liquide............................................. 5,037 924,257
Michelin-(CGDE)........................................... 9,653 386,223
Pechiney SA............................................... 11,300 369,181
Societe Generale.......................................... 5,728 928,004
Thomson CSF............................................... 18,419 791,363
Usinor Sacilor............................................ 39,000 433,216
-----------
7,089,871
-----------
Germany -- 12.3%
Bayer AG.................................................. 26,000 1,085,727
Deutsche Bank AG.......................................... 11,500 677,011
Deutsche Lufthansa AG..................................... 28,800 636,342
GEA AG.................................................... 21,200 640,256
Hoechst AG................................................ 17,000 705,305
Hugo Boss AG.............................................. 100 192,132
Km Europa Metal AG........................................ 4,600 265,142
Merck KGAA................................................ 19,000 855,589
Rheinmetall AG............................................ 13,900 261,222
Siemens AG................................................ 18,000 1,161,799
Tarkett AG................................................ 11,000 134,072
Veba AG................................................... 22,600 1,352,863
Viag AG................................................... 400 234,641
Volkswagen................................................ 7,600 606,898
-----------
8,808,999
-----------
</TABLE>
33
<PAGE> 35
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCK (CONTINUED)
Greece -- 0.7%
Hellenic Telecommunications............................... 35,555 $ 466,659
-----------
Hong Kong -- 1.8%
Henderson Investment Ltd.................................. 705,000 414,062
Hong Kong Electric........................................ 225,000 682,520
HSBC Holdings Plc......................................... 7,332 182,660
-----------
1,279,242
-----------
Italy -- 4.0%
Ente Nazionale Idrocarburi SpA............................ 17,000 1,151,750
Istituto Bancario San Paolo di Torino ADR................. 11,756 420,277
Telecom Italia SpA........................................ 200,000 1,261,453
-----------
2,833,480
-----------
Japan -- 24.0%
Canon, Inc................................................ 39,000 834,998
Credit Saison Co.......................................... 39,500 975,273
Dai-Tokyo Fire and Marine Insurance....................... 143,000 507,107
Fuji Machine.............................................. 21,000 664,648
Hitachi Ltd............................................... 25,000 155,146
Honda Motor Co. Ltd....................................... 18,000 592,039
Ito Yokado Co. Ltd........................................ 14,000 980,526
Kao Corp.................................................. 42,000 949,497
Mabuchi Motors............................................ 14,000 1,073,614
Marubeni Corp............................................. 235,000 404,179
Matsumotokiyoshi.......................................... 17,500 677,990
Mineba Co. Ltd............................................ 87,000 998,062
Mitsubishi Heavy Industries Ltd........................... 110,000 429,091
Murata Manufacturing Co. Ltd.............................. 26,000 1,018,825
Namco Ltd................................................. 19,200 386,395
Nichiei................................................... 10,300 812,702
Nishimatsu Construction................................... 80,000 468,099
Rinnai Corp............................................... 37,000 648,175
Rohm Co. Ltd.............................................. 8,000 733,355
Sankyo Co. Ltd............................................ 19,000 318,361
Sekisui Chemical Co....................................... 75,000 505,334
Sony Corp................................................. 12,000 875,558
Toshiba Corp.............................................. 103,000 614,549
Toyota Motor Corp......................................... 21,000 571,560
Yamanouchi Pharmaceuticals................................ 32,000 1,032,655
-----------
17,227,738
-----------
</TABLE>
34
<PAGE> 36
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCK (CONTINUED)
Korea -- 0.0%
Kookmin Bank GDR.......................................... 1 $ 5
-----------
Netherlands -- 7.9%
ABN Amro Holding.......................................... 42,491 894,347
AKZO N.V. ADR............................................. 16,500 736,313
Buhrman N.V............................................... 28,020 501,672
Hollandsche Beton......................................... 35,782 442,346
Hunter Douglas N.V........................................ 21,693 718,985
KPN ADS................................................... 19,217 965,654
Philips Electronics N.V. ADR.............................. 9,700 656,569
Stork N.V................................................. 18,000 411,474
TNT Post Group N.V. ADR................................... 9,710 315,585
-----------
5,642,945
-----------
New Zealand -- 0.4%
Air New Zealand........................................... 14,936 23,512
Fletcher Challenge Paper.................................. 427,822 287,022
-----------
310,534
-----------
Norway -- 0.5%
Fred Olsen Energy ASA..................................... 19,750 121,837
Orkla..................................................... 16,000 208,958
-----------
330,795
-----------
Peru -- 0.5%
Telefonica del Peru S.A. ADR.............................. 27,000 342,563
-----------
Portugal -- 0.6%
Banco Pinto & Sotto Mayor SA.............................. 21,140 400,817
-----------
Singapore -- 1.3%
Development Bank.......................................... 69,000 623,106
Singapore Press Holdings.................................. 26,000 283,643
-----------
906,749
-----------
Spain -- 6.3%
Banco Popular Espanol SA.................................. 10,200 770,266
Corporacion Bancaria de Espanol ADR....................... 13,000 669,500
Endesa SA................................................. 36,300 963,277
Gas y Electricidad SA..................................... 8,591 854,908
Repsol ADR................................................ 23,000 1,256,375
-----------
4,514,326
-----------
</TABLE>
35
<PAGE> 37
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCK (CONTINUED)
Sweden -- 2.6%
Autoliv, Inc. SDR......................................... 26,700 $ 958,567
Pharmacia & Upjohn, Inc. - ADR............................ 11,200 634,200
Scania AB - Class A - ADR................................. 14,800 272,061
-----------
1,864,828
-----------
Switzerland -- 4.5%
Barry Callebaut AG - Registered Shares.................... 1,628 369,817
Forbo Holding AG - Registered Shares...................... 1,430 624,691
Sulzer AG - Registered Shares............................. 1,150 699,974
Swisscom AG - Registered Shares........................... 1,400 586,102
United Bank of Switzerland - Registered Shares............ 2,970 912,529
-----------
3,193,113
-----------
United Kingdom -- 14.3%
BOC Group Plc............................................. 52,008 743,738
British Airways Plc....................................... 18,384 123,956
British Airways Plc ADR................................... 4,000 271,250
Bunzl Plc................................................. 192,146 752,880
Laird Group Ordinary...................................... 116,000 317,488
Lucasvarity Plc........................................... 176,625 589,211
Medeva Plc................................................ 127,000 223,982
Morgan Crucible Co. Plc................................... 103,315 477,013
Powergen Plc.............................................. 85,000 1,117,243
Rio Tinto Plc............................................. 62,845 730,889
Royal & Sun Alliance Insurance Group Plc.................. 109,688 895,622
Safeway Plc............................................... 184,480 926,958
Stakis Plc................................................ 345,000 574,014
Standard Chartered Bank................................... 66,000 764,837
Storehouse Plc............................................ 254,389 579,859
Tomkins Plc............................................... 241,028 1,136,905
-----------
10,225,845
-----------
TOTAL COMMON AND PREFERRED STOCK (COST $63,584,016)..... 68,560,657
-----------
</TABLE>
36
<PAGE> 38
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio
Statement of Net Assets, December 31, 1998 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENTS -- 0.2%
Temporary Investment Fund, Inc. -- TempCash............... 114,778 $ 114,778
-----------
TOTAL SHORT TERM INVESTMENTS (COST $114,778)............ 114,778
-----------
TOTAL INVESTMENTS -- 96.2% (COST $63,698,794)........... 68,675,435
OTHER ASSETS IN EXCESS OF LIABILITIES -- 3.8%............... 2,687,774
-----------
NET ASSETS -- 100.0%
(Equivalent to $13.85 per share based on 5,151,410 shares
of capital stock outstanding)........................... $71,363,209
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($71,363,209/5,151,410 shares outstanding)................ $ 13.85
===========
</TABLE>
* Non-income producing
See accompanying notes to financial statements.
37
<PAGE> 39
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Sentinel Growth Portfolio
1998 Annual Review
Sentinel Advisors Company
- --------------------------------------------------------------------------------
The Market Street Fund Sentinel Growth Portfolio earned a total return of
15.98% during the year ended December 31, 1998. The median fund in the Lipper
Growth Fund universe earned a return of 24.00%, and the Standard & Poor's 500
produced a 28.6% return.
Large capitalization stocks, which dominate the return on the S&P 500,
outperformed medium and small cap stocks by a wide margin during the first half
of the year. The primary reasons for the strong performance of large cap stocks
were: 1) a preference among U.S. investors for companies with earnings
predictability and trading liquidity, and 2) a preference among foreign
investors for large, well-known companies. The Portfolio, which is comprised of
many medium-size and smaller stocks, underperformed during the first half of the
year but benefited from a recovery in mid-cap stocks and technology shares
during the second half of the year.
During the first half of the year, the Portfolio's overweighted position in
health care, along with strong stock selection in that sector, contributed
positively to the portfolio. Stock selection in the consumer sector was hurt by
an underweighting in large capitalization retail companies and an overweighting
in tobacco stocks. An overweighted position in technology, particularly
semiconductor-related stocks, also hurt performance.
Most of these factors reversed themselves in the second half of the year as
performance was helped by our overweighted positions in tobacco and technology
stocks. An overweight position in financial stocks, along with above average
stock selection in that sector, also contributed positively to performance. The
only significant negative impact on the portfolio was the poor performance of
the health care sector, particularly stocks in the long-term care industry.
Looking forward, we envision an environment of relatively slow economic
growth, low inflation, and low interest rates. With the S&P 500 now having
outperformed mid-cap and small-cap stocks for several years in a row, we would
expect investors to once again focus on the superior earnings growth and
superior relative values of companies in the small and mid-cap sectors. The fund
is well-positioned for such an environment with a significant weighting in
attractively valued medium sized companies in growth industries.
38
<PAGE> 40
We appreciate your continued support and look forward to helping you
achieve your goal of long-term capital appreciation.
Robert L. Lee, CFA
[Market Street Fund]
[Sentinel Growth Portfolio Performance Graph]
<TABLE>
<CAPTION>
Fund Index+
<S> <C> <C>
Start 10000 10000
96 11140 11760
97 14658 15685
98 17000 20190
Past performance is not predictive of future performance.
</TABLE>
+ The Index is the S&P 500, an unmanaged index of 500 U.S. common stocks that
includes reinvestment of dividends.
* Inception date was March 18, 1996.
39
<PAGE> 41
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Sentinel Growth Portfolio
Statement of Net Assets, December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 95%
Aerospace -- 1.1%
Goodrich (B.F.) Co. ...................................... 3,800 $ 136,325
-----------
Banks -- 2.8%
Cullen Frost Bankers, Inc. ............................... 3,700 203,037
Mercantile Bankshares Corp. .............................. 3,400 130,900
-----------
333,937
-----------
Beverages -- 2.4%
Pepsico, Inc. ............................................ 7,000 286,562
-----------
Business & Consumer Services -- 13%
*Acxiom Corp. ............................................ 8,900 275,900
*Affiliated Computer Services, Inc. ...................... 10,400 468,000
Automatic Data Processing, Inc. .......................... 800 64,150
*Catalina Marketing Corp. ................................ 3,500 239,312
Electronic Data Systems Corp. ............................ 4,000 201,000
Omnicom Group, Inc. ...................................... 2,900 168,200
*Sodexho Marriot Services, Inc. .......................... 6,000 166,125
-----------
1,582,687
-----------
Chemicals - Specialty -- 2.1%
*Bush Boake Allen, Inc. .................................. 3,300 116,325
Cambrex Corp. ............................................ 6,000 144,000
-----------
260,325
-----------
Communications -- 11.6%
*Airtouch Communications, Inc. ........................... 1,600 115,400
*Applied Materials, Inc. ................................. 4,500 192,094
AT&T Corp................................................. 2,200 165,550
*Cox Communications, Inc. ................................ 5,000 345,625
*KLA-Tenor Corp. ......................................... 4,700 203,862
*MCI Worldcom, Inc. ...................................... 5,500 394,625
-----------
1,417,156
-----------
Computer Peripherals -- 0.9%
*Cisco Systems, Inc. ..................................... 1,100 102,094
-----------
Computers -- 4.1%
Compaq Computer Corp. .................................... 8,000 335,500
Hewlett Packard Co. ...................................... 2,400 163,950
-----------
499,450
-----------
Containers -- 0.6%
Bemis Co., Inc. .......................................... 2,000 75,875
-----------
</TABLE>
40
<PAGE> 42
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Sentinel Growth Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Drug & Health Care -- 6.4%
Abbott Laboratories....................................... 1,300 $ 63,700
American Home Products Corp. ............................. 1,800 101,362
Becton Dickinson & Co. ................................... 2,200 93,912
*Covance, Inc. ........................................... 11,300 329,112
*Genesis Health Ventures, Inc. ........................... 12,200 106,750
Merck & Co., Inc. ........................................ 600 88,613
-----------
783,449
-----------
Electronics -- 2.2%
Motorola, Inc. ........................................... 2,400 146,550
*Photronics, Inc. ........................................ 5,000 119,844
-----------
266,394
-----------
Energy -- 2.0%
*Calenergy Company, Inc. ................................. 7,100 246,281
-----------
Finance -- 1.7%
American Express Co. ..................................... 1,300 132,925
SLM Holding Corp. ........................................ 1,450 69,600
-----------
202,525
-----------
Foods -- 3.0%
Hershey Foods Corp. ...................................... 1,000 62,188
McCormick & Co., Inc. .................................... 5,600 189,350
Sara Lee Corp. ........................................... 4,000 112,750
-----------
364,288
-----------
Insurance -- 1.6%
Enhance Financial Services Group, Inc. ................... 6,600 198,000
-----------
Lodging -- 0.7%
Marriott International, Inc., Class A..................... 3,000 87,000
-----------
Medical Equipment & Supplies -- 4.3%
Hillenbrand Industries, Inc. ............................. 5,500 312,813
Medtronic, Inc. .......................................... 2,800 207,900
-----------
520,713
-----------
Oil Equipment & Services -- 2.1%
*Smith International, Inc. ............................... 10,000 251,875
-----------
</TABLE>
41
<PAGE> 43
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Sentinel Growth Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Restaurants -- 6.5%
*Outback Steakhouse, Inc. ................................ 6,800 $ 271,150
Ruby Tuesday, Inc. ....................................... 16,800 357,000
*Sbarro, Inc. ............................................ 6,400 167,600
-----------
795,750
-----------
Retail - Clothing and Apparel -- 2.2%
Gap, Inc. ................................................ 2,550 143,438
*Lands' End, Inc. ........................................ 4,400 118,525
-----------
261,963
-----------
Retail Merchandising -- 9.0%
*Costco Companies, Inc. .................................. 1,600 115,500
Ethan Allen Interiors, Inc. .............................. 2,700 110,700
Home Depot, Inc. ......................................... 2,100 128,494
*The Wet Seal, Inc., Class A.............................. 9,500 286,781
TJX Companies, Inc. ...................................... 4,200 121,800
Wal-Mart Stores, Inc. .................................... 4,100 333,894
-----------
1,097,169
-----------
Semiconductors -- 5.1%
Dallas Semiconductor Corp. ............................... 4,100 167,075
Intel Corp. .............................................. 2,100 248,981
*Novellus Systems, Inc. .................................. 4,200 207,900
-----------
623,956
-----------
Software -- 5.4%
*Filenet Corp. ........................................... 5,500 63,078
*Microsoft Corp. ......................................... 1,800 249,638
*Novell, Inc. ............................................ 19,000 344,375
-----------
657,091
-----------
Tobacco -- 4.2%
Philip Morris Cos., Inc. ................................. 6,800 363,800
UST, Inc. ................................................ 4,100 142,988
-----------
506,788
-----------
TOTAL COMMON STOCK (COST $9,873,224).................... 11,557,653
-----------
</TABLE>
42
<PAGE> 44
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Sentinel Growth Portfolio
Statement of Net Assets, December 31, 1998 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY SHARES
DESCRIPTION AND PERCENTAGE OF PORTFOLIO DATE OR PAR VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER -- 4.1%
Ford Motor Credit Corp. .................................. 01/05/1999 $ 500,000 $ 499,680
-----------
TOTAL COMMERCIAL PAPER (COST $499,680).................. 499,680
-----------
</TABLE>
<TABLE>
<S> <C> <C>
SHORT TERM INVESTMENTS -- 1.0%
Temporary Investment Fund, Inc. -- TempCash............... 122,743 122,743
-----------
TOTAL SHORT TERM INVESTMENTS (COST $122,743)............ 122,743
-----------
TOTAL INVESTMENTS -- 100.1% (COST $10,495,647).......... 12,180,076
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.1%)............. (13,097)
-----------
NET ASSETS -- 100%
(Equivalent to $13.43 per share based on 906,004 shares of
capital stock outstanding).............................. $12,166,979
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($12,166,979 / 906,004 shares outstanding)................ $ 13.43
===========
</TABLE>
* Non-Income Producing
See accompanying notes to financial statements.
43
<PAGE> 45
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Growth Portfolio
1998 Annual Review
Providentmutual Investment Management Company
- --------------------------------------------------------------------------------
The total return for the Market Street Fund Large Cap Growth Portfolio
since inception on May 4, 1998 through December 31, 1998 was 17.7%. This
performance compares to the portfolio's large cap growth benchmark for the same
period of 20.73%. The Wilshire series of style indices referred to as the
"Quantum" indices are the style benchmarks with which we compare the portfolio's
performance.
Providentmutual Investment Management Company has selected the following
sub-advisers to perform the day-to-day management of the portfolio. The three
firms possess a large cap growth orientation and discipline.
<TABLE>
<CAPTION>
MANAGER APPROXIMATE PORTFOLIO %
- ------- -----------------------
<S> <C>
Geewax Terker & Co. 45%
Cohen, Klingenstein & Marks 45%
Oak Associates 10%
Total Fund 100%
</TABLE>
The U.S. stock market finished 1998 with a strong advance that began in
October. With this recovery the market overall as measured by the S&P 500 Index
rose 21.3% in the fourth quarter and 28.6% for a year filled with uncertainty
and crises. This was the fourth consecutive year of 20% plus annual returns. The
out-performance was not broad-based but was dominated by the largest cap names.
The 10 largest stocks in the S& P 500 accounted for 11.7 percentage points (or
41%) of the entire year's gain. The average stock in the S&P 500 Index on an
equally weighted basis rose only 3.7%.
Looking more closely at 1998, volatility increased significantly. The
market advanced steadily up to July, but then suffered a severe correction due
to Asian concerns and erased its earlier gains. Beginning in September, the
Federal Reserve made three swift cuts in interest rates. In doing so, world
financial market tensions were eased. The Fed changed the market's perception of
risk and lowered it. In addition, there were strong signs that the U.S. economy
had not been derailed by international events. GDP growth for the year was 3.9%,
with CPI of only 1.6%. Much of the year's return was achieved in the fourth
quarter.
In 1998, large cap stocks significantly outperformed the medium and smaller
stock composites. The return of small cap stocks in particular was negative. In
addition, growth indices topped the returns of value indices by 20%. The market
was, in fact, led by the drug and technology sectors, both sectors in which the
fund has significant sector weightings. Many names with Internet involvement in
particular were the highest return investments for the year.
44
<PAGE> 46
The largest sector holdings of the portfolio include:
<TABLE>
<CAPTION>
SECTOR %
- ------ ----
<S> <C>
Drugs and Health Care 18.8%
Computer-Related 10.0%
Communications 9.4%
Software 8.8%
Retail Merchandising 7.9%
</TABLE>
The portfolio is positioned to continue to be the beneficiary of investors'
preference for large cap growth names. Looking ahead to 1999, we believe that
our positioning in high growth industries will serve the portfolio well. Clearly
a potential slowdown in world growth and its impact on earnings may weigh on the
market in 1999, but we look to long-term performance in what may be another
volatile year. 1998 is proof that it pays to be patient during corrections and
not to loose sight of our long-term investment horizon.
We look forward to your support and our long-term goal of capital
appreciation.
Sarah C. Lange, CFA
[Market Street Fund]
[Large Cap Growth Portfolio Performance Graph]
<TABLE>
<CAPTION>
FUND INDEX+
---- ------
<S> <C> <C>
Start 10000.00 10000.00
'98' 11770.00 12073.00
</TABLE>
Past performance is not predictive of future performance.
+ The Index is the Wilshire Quantum Large Cap Growth Index, an unmanaged index
of common stocks that includes reinvestment of dividends.
* Inception date was May 4, 1998.
45
<PAGE> 47
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Growth Portfolio
Statement of Net Assets, December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 100.5%
Aerospace and Defense -- 0.2%
United Technologies Corp. ................................ 300 $ 32,625
-----------
Airlines -- 0.1%
Southwest Airlines Co..................................... 450 10,097
-----------
Banks -- 2.5%
Bank America Corp. ....................................... 1,100 66,137
Fifth Third Bancorp....................................... 400 28,525
First Tennessee National Corp. ........................... 400 15,225
National Community Bancorp................................ 875 16,461
Northern Trust Corp. ..................................... 500 43,656
U.S. Bancorp.............................................. 5,000 177,500
Zions Bancorp............................................. 200 12,475
-----------
359,979
-----------
Beverages -- 2.9%
Anheuser-Busch Companies, Inc. ........................... 1,100 72,187
Coca Cola Co. ............................................ 5,100 341,062
-----------
413,249
-----------
Broadcasting & Publishing -- 0.3%
Gannett, Inc. ............................................ 400 26,475
Times Mirror Co. ......................................... 100 5,600
Tribune Co. .............................................. 200 13,200
-----------
45,275
-----------
Building Materials -- 0.3%
Ecolab, Inc. ............................................. 600 21,712
Lowe's Cos., Inc. ........................................ 400 20,475
-----------
42,187
-----------
</TABLE>
46
<PAGE> 48
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Growth Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Business & Consumer Services -- 5.3%
*3Com Corp. .............................................. 6,000 $ 268,875
America Online, Inc. ..................................... 1,520 220,020
Automatic Data Processing, Inc. .......................... 700 56,131
*Fiserv, Inc. ............................................ 300 15,431
Interpublic Group of Cos., Inc. .......................... 400 31,900
*Lycos, Inc. ............................................. 200 11,112
Nielsen Media Research, Inc. ............................. 66 1,188
Omnicom Group, Inc. ...................................... 300 17,400
*Quintiles Transnational Corp. ........................... 100 5,338
Service Corp. International............................... 400 15,225
*Yahoo!, Inc. ............................................ 505 118,707
-----------
761,327
-----------
Business Equipment -- 0.1%
*Lexmark International Group, Inc., Class A............... 200 20,100
-----------
Chemicals -- 1.3%
Union Carbide Corp. ...................................... 4,500 191,250
-----------
Communications -- 9.4%
*Airtouch Communications, Inc. .......................... 300 21,637
Ameritech Corp. .......................................... 1,000 63,375
*Applied Materials, Inc. ................................. 2,810 119,952
*Ascend Communications, Inc. ............................. 1,700 111,775
*At Home Corp. Series A................................... 470 34,897
AT&T Corp. ............................................... 855 64,339
*CIENA, Corp. ............................................ 3,600 52,650
Comcast Corp. Special Class A Non-Voting.................. 500 29,344
Lucent Technologies, Inc. ................................ 1,300 143,000
*MCI Worldcom, Inc........................................ 4,610 330,767
SBC Communications, Inc. ................................. 1,600 85,800
Sprint Corp. ............................................. 2,050 172,456
*Sprint Corp. (PCS Group)................................. 1,025 23,703
*Tellabs, Inc. ........................................... 1,300 89,131
-----------
1,342,826
-----------
Computer Peripherals -- 4.8%
*Cisco Systems, Inc. ..................................... 7,440 690,525
-----------
</TABLE>
47
<PAGE> 49
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Growth Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Computers -- 5.2%
Compaq Computer Corp. .................................... 7,650 $ 320,822
*Compuware Corp. ......................................... 300 23,437
*Dell Computer Corp. ..................................... 1,800 131,737
International Business Machines Corp. .................... 375 69,281
*Seagate Technology, Inc. ................................ 6,300 190,575
*SunGard Data Systems, Inc. .............................. 300 11,906
-----------
747,758
-----------
Cosmetics and Toiletries -- 1.5%
Avon Products, Inc. ...................................... 4,900 216,825
-----------
Consumer Products -- 0.4%
Clorox Co. ............................................... 520 60,742
-----------
Diversified -- 0.8%
Standard & Poor's Depositary Receipts..................... 905 111,315
-----------
Drugs & Health Care -- 18.8%
Abbott Laboratories....................................... 6,960 341,040
American Home Products Corp. ............................. 4,100 230,881
*Amgen Corp. ............................................. 2,400 250,950
Becton, Dickinson & Co. .................................. 4,400 187,825
Bristol-Myers Squibb Co. ................................. 3,500 468,344
Cardinal Health, Inc. .................................... 667 50,609
Colgate-Palmolive Co. .................................... 350 32,506
CVS Corp. ................................................ 400 22,000
*Genetech, Inc. .......................................... 200 15,937
Health Management Associates, Inc. Class A................ 850 18,381
Johnson & Johnson......................................... 1,300 109,037
Lilly (Eli) & Co. ........................................ 600 53,325
Merck & Co., Inc. ........................................ 2,100 310,143
Omnicare, Inc. ........................................... 100 3,475
Pfizer, Inc. ............................................. 2,045 256,519
Schering Plough Corp. .................................... 2,400 132,600
Walgreen Co. ............................................. 600 35,137
Warner-Lambert Co. ....................................... 2,200 165,413
-----------
2,684,122
-----------
Electrical Equipment -- 3.1%
*American Power Conversion Corp. ......................... 300 14,531
General Electric Co. ..................................... 4,160 424,580
-----------
439,111
-----------
</TABLE>
48
<PAGE> 50
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Growth Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Electronic Instruments -- 0.5%
*Xilinx, Inc. ............................................ 1,100 $ 71,637
-----------
Electronics -- 2.1%
Linear Technology Corp. .................................. 1,000 89,563
*Maxim Integrated Products, Inc. ......................... 1,700 74,269
Tandy Corp. .............................................. 3,400 140,038
-----------
303,870
-----------
Entertainment -- 0.4%
Harley-Davidson, Inc. .................................... 200 9,475
Walt Disney Co. .......................................... 1,800 54,000
-----------
63,475
-----------
Finance -- 7.0%
Associates First Capital Corp. Class A.................... 400 16,950
Citigroup, Inc. .......................................... 3,900 193,050
Finova Group, Inc. ....................................... 200 10,788
MBNA Corp. ............................................... 9,000 224,438
Paychex, Inc. ............................................ 1,150 59,153
Providian Financial Corp. ................................ 4,125 309,375
SunAmerica, Inc. ......................................... 2,400 194,700
-----------
1,008,454
-----------
Finance - Investment & Other -- 1.2%
Capital One Financial Corp. .............................. 325 37,375
Franklin Resources, Inc. ................................. 4,400 140,800
-----------
178,175
-----------
Food & Food Distributors -- 0.2%
Heinz (H.J.) Co. ......................................... 300 16,988
Quaker Oats Co. .......................................... 100 5,950
-----------
22,938
-----------
Industrial -- 0.3%
Crane Co. ................................................ 150 4,528
Danaher Corp. ............................................ 700 38,019
-----------
42,547
-----------
Insurance -- 0.7%
American International Group, Inc. ....................... 500 48,313
General Reinsurance Corp. ................................ 150 37,013
MGIC Investment Corp. .................................... 200 7,963
-----------
93,289
-----------
</TABLE>
49
<PAGE> 51
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Growth Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Leisure & Amusements -- 0.7%
Mattel, Inc. ............................................. 4,500 $ 102,656
-----------
Machinery (Electric) -- 0.1%
Illinois Tool Works, Inc. ................................ 300 17,400
-----------
Manufacturing -- 0.1%
Honeywell, Inc. .......................................... 200 15,063
-----------
Medical Equipment & Supplies -- 0.6%
Hillenbrand Industries, Inc. ............................. 100 5,688
Medtronic, Inc. .......................................... 1,000 74,250
-----------
79,938
-----------
Medical Instruments -- 2.0%
*Boston Scientific Corp. ................................. 8,000 214,500
Guidant Corp. ............................................ 600 66,150
Stryker Corp. ............................................ 200 11,013
-----------
291,663
-----------
Office Equipment & Supplies -- 2.6%
*Office Depot, Inc. ...................................... 400 14,775
Pitney Bowes, Inc. ....................................... 700 46,244
*Staples, Inc. ........................................... 2,000 87,375
Xerox Corp. .............................................. 1,900 224,200
-----------
372,594
-----------
Retail - Clothing and Apparel -- 1.8%
Gap, Inc. ................................................ 4,462 250,988
-----------
Retail Food Chains -- 2.0%
McDonald's Corp. ......................................... 3,000 229,875
*Safeway, Inc. ........................................... 1,000 60,938
-----------
290,813
-----------
Retail Merchandising -- 7.9%
*Amazon.com, Inc. ........................................ 175 56,219
*Bed, Bath & Beyond, Inc. ................................ 7,600 259,350
*Costco Companies, Inc. .................................. 775 55,945
Dollar General Corp. ..................................... 7,600 179,550
*Dollar Tree Stores, Inc. ................................ 600 26,213
Home Depot, Inc. ......................................... 3,200 195,800
*Kohls Corp. ............................................. 300 18,431
TJX Companies, Inc. ...................................... 600 17,400
Wal-Mart Stores, Inc. .................................... 3,900 317,606
-----------
1,126,514
-----------
</TABLE>
50
<PAGE> 52
- --------------------------------------------------------------------------------
The Market Street Fund, Inc.
The Large Cap Growth Portfolio
Schedule of Net Assets, December 31, 1998 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Semiconductors -- 4.3%
Intel Corp. .............................................. 5,150 $ 610,598
-----------
Software -- 8.8%
Computer Associates International, Inc. .................. 5,000 213,125
*Microsoft Corp. ......................................... 3,600 499,275
*Oracle Corp. ............................................ 5,200 224,250
*Parametric Technology Corp. ............................. 15,300 250,539
*Synopsys, Inc. .......................................... 1,400 75,950
-----------
1,263,139
-----------
TOTAL COMMON STOCK (COST $11,657,717)................... 14,375,064
-----------
SHORT TERM INVESTMENTS -- 0.9%
Temporary Investment Fund, Inc. -- TempCash............... 134,485 134,485
-----------
TOTAL SHORT TERM INVESTMENTS (COST $134,458)............ 134,485
-----------
TOTAL INVESTMENTS -- 101.4% (COST $11,792,175).......... 14,509,549
LIABILITIES IN EXCESS OF OTHER ASSETS -- (1.4%)............. (202,894)
-----------
NET ASSETS -- 100.0%
(Equivalent to $11.77 per share based on 1,215,389 shares
of capital stock outstanding)........................... $14,306,655
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($14,306,655/1,215,389 shares outstanding)................ $ 11.77
===========
</TABLE>
* Non-Income Producing
See accompanying notes to financial statements.
51
<PAGE> 53
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Value Portfolio
1998 Annual Review
Providentmutual Investment Management Company
- --------------------------------------------------------------------------------
The total return for the Market Street Fund Large Cap Value Portfolio since
inception on May 4, 1998 through December 31 was -1.00%. This performance was
slightly worse than the 0.65% reported for the portfolio's large cap value
benchmark for the same period of time. The Wilshire series of style indices
referred to as the "Quantum" indices are the style benchmarks with which we
compare the portfolio's performance.
Providentmutual Investment Management Company has selected the following
sub-advisers to perform the day-to-day management of the portfolio. The three
firms possess a large cap value orientation and discipline.
<TABLE>
<CAPTION>
MANAGER APPROXIMATE PORTFOLIO %
- ------- -----------------------
<S> <C>
Mellon Equity Advisors 45%
Equinox Capital 45%
Harris Associates 10%
Total Fund 100%
</TABLE>
The U.S. stock market finished 1998 with a strong advance that began in
October. The strong results were narrowly realized. While the S&P returned
28.6%, only a few very large cap growth stocks dominated this result as the
average stock in the index on an equally weighted basis rose only 3.7%. Growth
indices outperformed value indices by over 20%! The growth style won out over
value in all cap areas continuing a trend that held true for 1998 and for the
past five years!
Looking more closely at 1998, volatility increased significantly. The
market advanced steadily up to July, but then suffered a severe correction due
to Asian concerns and erased its earlier gains. Beginning in September, the
Federal Reserve made three swift cuts in interest rates. In so doing, world
financial market tensions were eased. The Fed changed the market's perception of
risk and lowered it. In addition, there were strong signs that the U.S. economy
had not been derailed by international events. GDP growth for the year was 3.9%,
with inflation as measured by CPI of only 1.6%.
The largest sector holdings of the portfolio include:
<TABLE>
<CAPTION>
SECTOR %
- ------ -
<S> <C>
Finance 12.2%
Communications 11.4%
Banks 9.7%
Energy 7.0%
</TABLE>
How long the striking performance difference lasts between growth and value
styles remains to be seen. Currently the stock market is not recognizing value.
We believe that our disciplined strategy of
52
<PAGE> 54
diversification and focus on cheaply valued investments with sustainable
earnings momentum will be rewarded over the long-term. This portfolio is well
positioned to take advantage of this shift in sentiment when it occurs. Clearly
a potential slowdown in world growth and its impact on earnings may weigh on the
market in 1999, but we look to long-term performance in what may be another
volatile year.
We look forward to your support and to our long-term goal of capital
appreciation.
Sarah C. Lange, CFA
[Market Street Fund]
[Large Cap Value Portfolio Graph]
<TABLE>
<CAPTION>
FUND INDEX+
---- ------
<S> <C> <C>
Start 10000.00 10000.00
'98' 9900.00 10065.00
</TABLE>
Past performance is not predictive of future performance.
+ The Index is the Wilshire Quantum Large Cap Value Index, an unmanaged index of
common stocks that includes reinvestment of dividends.
* Inception date was May 4, 1998.
53
<PAGE> 55
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Value Portfolio
Statement of Net Assets, December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 95.9%
Aerospace & Defense -- 1.9%
Allied Signal, Inc. ...................................... 500 $ 22,156
Boeing Co. ............................................... 1,200 39,150
Lockheed Martin Corp. .................................... 2,000 169,500
United Technologies Corp. ................................ 600 65,250
-----------
296,056
-----------
Airlines -- 1.7%
*AMR Corp. ............................................... 2,100 124,687
Delta Air Lines, Inc. .................................... 2,600 135,200
-----------
259,887
-----------
Appliances -- 1.2%
Black & Decker Corp. ..................................... 900 50,456
Maytag Corp. ............................................. 400 24,900
Whirlpool Corp. .......................................... 1,800 99,675
-----------
175,031
-----------
Auto Manufacturers -- 0.7%
*DaimlerChrysler AG ADR................................... 1,146 110,087
-----------
Automobiles -- 2.3%
Ford Motor Co. ........................................... 4,500 264,094
General Motors Corp. ..................................... 1,300 93,031
-----------
357,125
-----------
Automotive & Equipment -- 0.6%
Dana Corp. ............................................... 1,100 44,962
*Lear Corp. .............................................. 1,200 46,200
-----------
91,162
-----------
</TABLE>
54
<PAGE> 56
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Value Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Banks -- 9.7%
Banc One Corp. ........................................... 3,230 $ 164,932
BankAmerica Corp. ........................................ 4,523 271,945
Bank of New York Co., Inc. ............................... 1,800 72,450
Chase Manhattan Corp. .................................... 5,000 340,313
Firstar Corp. ............................................ 1,300 121,225
KeyCorp. ................................................. 2,800 89,600
PNC Bank Corp. ........................................... 3,200 173,200
Scana Corp. .............................................. 1,500 48,375
Southtrust Corp. ......................................... 600 22,162
Suntrust Banks, Inc. ..................................... 900 68,850
U.S. Bancorp.............................................. 800 28,400
Wells Fargo Co. .......................................... 3,300 131,794
-----------
1,533,246
-----------
Beverages -- 0.7%
Anheuser-Busch Companies, Inc. ........................... 500 32,813
Pepsico, Inc. ............................................ 1,900 77,781
-----------
110,594
-----------
Broadcasting & Publishing -- 2.4%
Gannett, Inc. ............................................ 1,000 66,187
Knight-Ridder, Inc. ...................................... 900 46,012
McGraw-Hill, Inc. ........................................ 500 50,937
Time Warner, Inc. ........................................ 2,000 124,124
Tribune Co. .............................................. 1,300 85,800
-----------
373,060
-----------
Building & Building Supplies -- 0.7%
Armstrong World Industries, Inc. ......................... 600 36,187
Foster Wheeler Corp. ..................................... 2,100 27,694
Lafarge Corp. ............................................ 1,300 52,650
-----------
116,531
-----------
Business & Consumer Services -- 2.4%
Dun & Bradstreet Corp. ................................... 1,500 47,344
Electronic Data Systems Corp. ............................ 4,600 231,150
Excel Ltd. ............................................... 1,300 97,500
-----------
375,994
-----------
Business Equipment -- 0.5%
*Lexmark International Group, Inc., Class A............... 700 70,350
-----------
</TABLE>
55
<PAGE> 57
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Value Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Cable TV Systems -- 0.8%
Tele-Communications, Inc., Class A........................ 400 $ 22,125
Unicom Corp. ............................................. 2,500 96,406
-----------
118,531
-----------
Chemicals & Allied Products -- 0.5%
Dow Chemical Co. ......................................... 600 54,562
Rohm & Haas Co. .......................................... 900 27,113
-----------
81,675
-----------
Communications -- 11.4%
ALLTEL Corp. ............................................. 700 41,869
Ameritech Corp. .......................................... 3,300 209,137
AT&T Corp. ............................................... 5,000 376,250
Bell Atlantic Corp. ...................................... 6,500 369,281
BellSouth Corp. .......................................... 4,200 209,475
GTE Corp. ................................................ 1,000 67,437
*MCI Worldcom, Inc. ...................................... 4,500 322,875
SBC Communications, Inc. ................................. 3,800 203,774
-----------
1,800,098
-----------
Computers -- 4.2%
*Apple Computer, Inc. .................................... 1,200 49,125
Compaq Computer Corp. .................................... 1,800 75,487
*Dell Computer Corp. ..................................... 300 21,956
*EMC Corp. ............................................... 500 42,500
International Business Machines Corp. .................... 2,500 461,875
-----------
650,943
-----------
Consumer Products -- 0.3%
Fortune Brands, Inc. ..................................... 1,600 50,600
-----------
Diversified -- 0.4%
General Mills, Inc. ...................................... 800 62,200
-----------
Drug & Healthcare -- 2.4%
Abbott Laboratories....................................... 500 24,500
Baxter International, Inc. ............................... 1,700 109,331
Bristol-Myers Squibb Co. ................................. 900 120,431
Lilly (Eli) & Co. ........................................ 400 35,550
Schering Plough Corp. .................................... 1,600 88,400
-----------
378,212
-----------
</TABLE>
56
<PAGE> 58
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Value Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Electric Power -- 1.2%
Pacific Gas & Electric Co. ............................... 3,800 $ 119,700
Southern Co. ............................................. 2,500 72,656
-----------
192,356
-----------
Energy -- 7.0%
Ashland, Inc. ............................................ 500 24,187
Consolidated Edison, Inc. ................................ 3,000 158,625
Exxon Corp. .............................................. 6,000 438,750
FPL Group, Inc. .......................................... 2,000 123,249
Mobil Corp. .............................................. 2,000 174,250
Pacificorp................................................ 4,600 96,888
PECO Energy Co. .......................................... 1,700 70,763
-----------
1,086,712
-----------
Finance -- 12.2%
American Express Co. ..................................... 400 40,900
Associates First Capital Corp. Class A.................... 1,400 59,325
Comerica, Inc. ........................................... 1,900 129,556
Conseco, Inc. ............................................ 2,400 73,350
Countrywide Credit Industries, Inc. ...................... 400 20,075
Edwards (A.G.), Inc. ..................................... 1,200 44,700
Fannie Mae................................................ 3,300 244,200
Financial Security Assurance Holdings Ltd. ............... 400 21,700
First Data Corp. ......................................... 1,800 57,038
Fleet Financial Group, Inc. .............................. 5,600 250,250
Golden West Financial Corp. .............................. 400 36,675
H & R Block, Inc. ........................................ 900 40,500
Hartford Financial Services, Inc. ........................ 2,000 109,750
MBNA Corp. ............................................... 2,400 59,850
Morgan Stanley, Dean Witter, & Co. ....................... 4,000 284,000
SLM Holding Corp. ........................................ 2,100 100,800
SunAmerica, Inc. ......................................... 600 48,675
Transamerica Corp. ....................................... 1,300 150,150
Washington Mutual, Inc. .................................. 3,866 147,633
-----------
1,919,127
-----------
</TABLE>
57
<PAGE> 59
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Value Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Food & Food Distributors -- 1.7%
Conagra, Inc. ............................................ 3,000 $ 94,500
Nabisco Holdings Corp., Class A........................... 1,300 53,950
Quaker Oats Co. .......................................... 300 17,850
Ralston Purina Group...................................... 3,400 110,076
*Safeway, Inc. ........................................... 1,200 73,125
-----------
349,501
-----------
Freight and Shipping -- 0.4%
*FDX Corp. ............................................... 700 62,300
-----------
Healthcare Services -- 1.2%
Columbia/HCA Healthcare Corp. ............................ 7,700 190,575
-----------
Hotel/Restaurants -- 0.6%
*Crestline Capital Corp. ................................. 330 4,826
*Host Marriott Corp. ..................................... 3,300 45,581
*Promus Hotel Corp. ...................................... 1,200 38,850
-----------
89,257
-----------
Housewares -- 0.2%
Premark International, Inc. .............................. 1,100 38,088
-----------
Insurance -- 3.9%
Aetna, Inc. .............................................. 1,600 125,800
Allstate Corp. ........................................... 5,600 216,300
Ambac Financial Group, Inc. .............................. 2,000 120,375
Old Republic International Corp. ......................... 4,550 102,375
Partner Re Ltd. .......................................... 800 36,600
-----------
601,450
-----------
Leisure & Amusements -- 0.6%
Brunswick Corp. .......................................... 1,900 47,025
Mattel, Inc. ............................................. 2,100 47,906
-----------
94,931
-----------
Machinery & Heavy Equipment -- 0.1%
Sundstrand Corp. ......................................... 300 15,563
-----------
</TABLE>
58
<PAGE> 60
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Value Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Manufacturing -- 2.0%
Eaton Corp. .............................................. 600 $ 42,413
*F.M.C. Corp. ............................................ 600 33,600
Hasbro, Inc. ............................................. 1,700 61,413
PPG Industries, Inc. ..................................... 900 52,425
Tyco International Ltd. .................................. 1,100 82,981
U.S. Industries, Inc. .................................... 2,100 39,113
-----------
311,945
-----------
Manufacturing Equipment -- 0.7%
Ingersoll Rand Co. ....................................... 2,200 103,263
-----------
Materials & Processing -- 0.4%
Vulcan Materials Co. ..................................... 500 65,781
-----------
Metals - Iron & Steel -- 1.0%
AK Steel Holding Corp. ................................... 1,100 25,850
Reynolds Metals Co. ...................................... 2,400 126,450
-----------
152,300
-----------
Multimedia -- 0.7%
*Viacom, Inc. Class B..................................... 1,400 103,600
-----------
Office Equipment & Supplies -- 1.1%
Xerox Corp. .............................................. 1,500 177,000
-----------
Oil & Gas -- 3.8%
Amerada Hess Corp. ....................................... 2,400 119,400
Atlantic Richfield Co. ................................... 800 52,200
Coastal Corp. ............................................ 3,600 125,776
*Conoco, Inc. ............................................ 4,500 93,938
Eron Oil & Gas............................................ 1,700 29,325
Helmerich & Payne, Inc. .................................. 800 15,500
Texaco, Inc. ............................................. 2,900 153,338
-----------
589,477
-----------
Oil Equipment & Services -- 0.7%
National Fuel Gas Co. .................................... 800 36,150
Phillips Petroleum Co. ................................... 1,600 68,200
-----------
104,350
-----------
Paper & Forest Products -- 2.0%
Fort James Corp. ......................................... 5,400 216,000
International Paper Co. .................................. 2,200 98,588
-----------
314,588
-----------
</TABLE>
59
<PAGE> 61
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Value Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Photography Equipment & Supplies -- 1.0%
Eastman Kodak Co. ........................................ 2,100 $ 151,200
-----------
Real Estate -- 0.3%
*Catellus Development Corp. .............................. 2,800 40,075
-----------
Retail - Clothing and Apparel -- 0.7%
Gucci Group N.V........................................... 1,000 48,625
Limited, Inc. ............................................ 2,300 66,988
-----------
115,613
-----------
Retail Merchandising -- 1.8%
*K-Mart Corp. ............................................ 4,500 68,906
Penney (J.C.) Co., Inc. .................................. 1,900 89,063
Sears, Roebuck & Co. ..................................... 1,900 80,750
TJX Companies, Inc. ...................................... 1,400 40,600
-----------
279,319
-----------
Semiconductors -- 0.8%
Intel Corp. .............................................. 1,000 118,563
-----------
Software -- 0.8%
*Oracle Corp. ............................................ 2,800 120,750
-----------
Tobacco -- 1.1%
Philip Morris Cos., Inc. ................................. 3,300 176,550
-----------
Transportation -- 0.5%
Burlington Northern Santa Fe Corp. ....................... 2,100 70,875
-----------
Utilities -- 1.9%
Baltimore Gas & Electric Co. ............................. 1,900 58,663
Consolidated Natural Gas Co. ............................. 800 43,200
DTE Energy Co. ........................................... 1,100 47,163
El Paso Energy Corp. ..................................... 1,200 41,775
Enron Corp. .............................................. 600 34,238
Pinnacle West Capital Corp. .............................. 1,700 72,038
-----------
297,077
-----------
Waste Management -- 0.2%
Waste Management, Inc. ................................... 800 37,300
-----------
TOTAL COMMON STOCK (COST $14,270,872)................... 14,980,868
-----------
</TABLE>
60
<PAGE> 62
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Value Portfolio
Statement of Net Assets, December 31, 1998 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENTS -- 4.4%
Temporary Investment Fund, Inc. -- TempCash............... 680,030 $ 680,030
-----------
TOTAL SHORT TERM INVESTMENTS (COST $680,030)............ 680,030
-----------
TOTAL INVESTMENTS -- 100.3% (COST $14,950,902).......... 15,660,898
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.3%)............. (44,997)
-----------
NET ASSETS -- 100.0%
(Equivalent to $9.90 per share based on 1,576,738 shares
of capital stock outstanding)............................. $15,615,901
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($15,615,901/1,576,738 shares outstanding)................ $ 9.90
===========
</TABLE>
* Non-Income Producing
See accompanying notes to financial statements.
61
<PAGE> 63
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Growth Portfolio
1998 Annual Review
Providentmutual Investment Management Company
- --------------------------------------------------------------------------------
The total return for the Market Street Fund Small Cap Growth Portfolio
since inception on May 4, 1998 through December 31 was -2.00%. This return
compares very favorably to the portfolio's style benchmark for the same period
of -6.85%. The Wilshire series of style indices referred to as the "Quantum"
indices are the style benchmarks with which we compare the portfolio's
performance.
Providentmutual Investment Management Company has selected the following
two sub-advisers to perform the day-to-day management of the portfolio. The two
firms possess a small cap growth orientation and discipline.
<TABLE>
<CAPTION>
MANAGER APPROXIMATE PORTFOLIO %
- ------- -----------------------
<S> <C>
Husic Capital Management 60%
Standish, Ayer & Wood 40%
Total Fund 100%
</TABLE>
In 1998 small cap stocks significantly underperformed the large and medium
stock composites. During the fourth quarter small cap stocks recovered nicely
after re-testing yearly lows in early October. While small caps kept pace with
large caps during the quarter, the rally was unimpressive considering the depth
of their decline in July and August. The market was, in fact, led by the
technology, consumer, health care, and cable sectors, sectors in which the
portfolio has significant weightings. Many names with Internet involvement, in
particular, had particularly strong results.
The largest sector holdings of the portfolio include:
<TABLE>
<CAPTION>
SECTOR %
- ------ -
<S> <C>
Computers 11.2%
Retail Merchandising 9.5%
Business & Consumer Services 8.1%
Drugs and Health Care 6.9%
Cable TV Systems 6.4%
</TABLE>
Small cap stocks are still experiencing the same general lack of investor
respect compared to the largest cap stocks. We believe the persistence of the
large cap stock preference is not sustainable for the long-term. The investment
process used for the portfolio positions it in dynamic growth sectors of the
economy with investments in innovative, aggressive companies. The earnings
prospects for small cap growth stocks, in general, are less dependent on broad
macroeconomic factors and more affected by innovation and market share gains.
Small cap valuations appear very attractive!
62
<PAGE> 64
We look forward to your support and to our long-term goal of capital
appreciation.
Sarah C. Lange, CFA
[Market Street Fund Small Cap Growth Portfolio Performance Graph]
<TABLE>
<CAPTION>
FUND INDEX+
---- ------
<S> <C> <C>
Start 10000.00 10000.00
'98' 9800.00 9315.00
</TABLE>
Past performance is not predictive of future performance.
+ The Index is the Wilshire Quantum Small Cap Growth Index, an unmanaged index
of common stocks that includes reinvestment of dividends.
* Inception date was May 4, 1998.
63
<PAGE> 65
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Growth Portfolio
Statement of Net Assets, December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 95.3%
Aerospace & Defense -- 0.6%
*Kellstrom Industries, Inc. .............................. 1,900 $ 54,625
----------
Airlines -- 4.8%
*Atlantic Coast Airlines, Inc. ........................... 1,400 35,000
*Mesa Airlines, Inc. ..................................... 13,800 107,812
*Midwest Express Holdings, Inc. .......................... 750 19,734
*Ryanair Holdings Plc..................................... 3,200 120,800
*SkyWest, Inc. ........................................... 1,200 39,225
*US Airways Group, Inc. .................................. 2,800 145,600
----------
468,171
----------
Automotive & Equipment -- 0.5%
*Excelsior-Henderson Motorcycle........................... 4,700 43,475
Rental Service Corp. ..................................... 100 1,569
----------
45,044
----------
Banks -- 2.4%
*First Republic Bank, Inc. ............................... 2,600 65,162
West Coast Bank, Inc. .................................... 2,100 44,100
Westamerica Bancorporation................................ 3,400 124,950
----------
234,212
----------
Broadcasting -- 4.0%
*Emmis Broadcasting Corp. Class A......................... 900 39,037
*Metro Networks, Inc. .................................... 1,900 80,987
Scandinavian Broadcasting S.A. ........................... 4,500 121,500
*Sinclair Broadcast Group, Inc. -A........................ 7,700 150,631
----------
392,155
----------
</TABLE>
64
<PAGE> 66
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Growth Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Business & Consumer Services -- 8.1%
*Abacus Direct Corp. ..................................... 400 $ 18,200
*Charles River Associates, Inc. .......................... 1,600 35,000
*Data Processing Resources Corp. ......................... 1,300 38,025
*Education Management Corp. .............................. 2,600 61,425
*F.Y.I., Inc. ............................................ 2,500 80,000
*First Consulting Group................................... 2,200 45,100
*Getty Images, Inc. ...................................... 1,500 25,781
*Inspire Insurance Solutions, Inc. ....................... 2,400 44,100
*Intelligroup, Inc. ...................................... 2,900 51,837
*MAXIMUS, Inc. ........................................... 1,900 70,300
*Metzler Group, Inc. ..................................... 900 43,819
*On Assignment, Inc. ..................................... 1,200 41,400
*Parexel International Corp. ............................. 1,400 35,000
*Secure Computing Corp. .................................. 5,300 101,031
*Unitrode Corp. .......................................... 2,000 35,000
*USWeb Corp. ............................................. 2,050 54,069
----------
780,087
----------
Cable TV Systems -- 6.4%
*Adelphia Communications Corp. Class A.................... 5,200 237,900
*Cablevision Systems Corp. ............................... 4,600 230,862
*USA Networks, Inc. ...................................... 4,600 152,375
----------
621,137
----------
Communications -- 1.2%
Gray Communications....................................... 1,050 14,372
IXC Communication, Inc. .................................. 1,800 60,525
*Western Wireless Corp. Class A........................... 1,900 41,800
----------
116,697
----------
</TABLE>
65
<PAGE> 67
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Growth Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Computers -- 11.2%
*24 / 7 Media, Inc. ...................................... 900 $ 25,200
*Applied Micro Circuits Corp. ............................ 1,800 61,144
*AXENT Technologies, Inc. ................................ 900 27,506
*CMG Information.......................................... 1,600 170,400
*Digital River, Inc. ..................................... 2,100 74,550
*Excite, Inc. ............................................ 1,800 75,713
*Infinium Software, Inc. ................................. 1,600 10,000
*Insight Enterprises, Inc. ............................... 900 45,787
Internet Content.......................................... 800 30,500
*Mercury Interactive Corp. ............................... 600 37,950
*NeoMagic Corp. .......................................... 6,800 150,450
*Pixar, Inc. ............................................. 1,400 49,000
*QuadraMed Corp. ......................................... 1,000 20,500
*SBS Technologies......................................... 1,400 25,900
*Security Dynamics Technologies, Inc. .................... 800 18,400
*Siebel Systems, Inc. .................................... 3,200 108,600
*SPR, Inc. ............................................... 1,950 33,637
*Western Digital Corp. ................................... 7,900 118,994
----------
1,084,231
----------
Drugs & Health Care -- 6.9%
Bindley Western Industries, Inc. ......................... 4,500 221,625
*ChiRex, Inc. ............................................ 2,300 49,162
*Coulter Pharmaceutical, Inc. ............................ 1,100 33,000
*Cytyc Corp. ............................................. 1,400 36,050
*Guilford Pharmaceuticals, Inc. .......................... 2,300 32,775
*IMPATH, Inc. ............................................ 1,900 50,350
*Inhale Therapeutic Systems............................... 1,000 33,000
*Leukosite, Inc. ......................................... 2,900 29,181
*Ligand Pharmaceuticals, Inc. Class B..................... 3,400 39,525
*Neurogen Corp. .......................................... 2,400 42,000
*Novoste Corp. ........................................... 1,200 34,050
*Pharmaceutical Product Development, Inc. ................ 1,200 36,075
*Vical, Inc. ............................................. 2,300 32,631
----------
669,424
----------
Electrical Equipment -- 0.7%
*AFC Cable Systems, Inc. ................................. 800 26,900
*Micrel, Inc. ............................................ 800 44,000
----------
70,900
----------
</TABLE>
66
<PAGE> 68
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Growth Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Electronic Instruments -- 1.3%
*ATMI, Inc. .............................................. 2,800 $ 70,700
*Lecroy Corp. ............................................ 3,400 56,100
----------
126,800
----------
Electronics -- 2.8%
*Benchmark Electronics, Inc. ............................. 500 18,312
*Cree Research, Inc. ..................................... 700 33,512
*DSP Group, Inc. ......................................... 1,900 39,663
*LAM Research Corp. ...................................... 5,100 90,844
*Photronics, Inc. ........................................ 1,100 26,366
*Semtech Corp. ........................................... 1,200 43,050
*Triumph Group, Inc. ..................................... 500 16,000
----------
267,747
----------
Entertainment -- 0.8%
*Cinar Films, Inc. ....................................... 2,000 50,750
*Paxson Communications Corp. ............................. 2,500 22,969
----------
73,719
----------
Finance -- 4.1%
*First Sierra Financial, Inc. ............................ 2,900 35,525
*Golden State Bancorp, Inc. .............................. 7,100 118,038
*NCO Group, Inc. ......................................... 1,400 63,000
S & P 400 Mid-Cap Depositary Receipts..................... 2,500 182,188
----------
398,751
----------
Finance - Investment & Other -- 1.7%
Jefferies Group, Inc. .................................... 3,400 168,725
----------
Food & Food Distributors -- 1.5%
TCBY Enterprises, Inc. ................................... 14,400 100,800
*United Natural Foods, Inc. .............................. 2,100 50,663
----------
151,463
----------
Healthcare Services -- 0.4%
*Brookdale Living Communities, Inc. ...................... 2,100 40,950
----------
Industrial & Commercial Services -- 1.4%
*Access Worldwide Communications, Inc. ................... 3,800 31,825
*Aviation Sales Co. ...................................... 1,300 52,813
*Eagle USA Airfreight, Inc. .............................. 2,100 51,450
----------
136,088
----------
Insurance -- 0.9%
*FPIC Insurance Group, Inc. .............................. 1,800 86,063
----------
</TABLE>
67
<PAGE> 69
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Growth Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Leasing -- 0.2%
*Indigo Aviation AB ADR................................... 2,700 $ 22,275
----------
Leisure & Amusements -- 6.2%
*Bally Total Fitness Holding Corp. ....................... 5,800 144,275
*Hibbett Sporting Goods, Inc. ............................ 1,500 36,375
*Preview Travel, Inc. .................................... 18,100 333,719
*Steiner Leisure Ltd. .................................... 1,800 57,600
*Tweeter Home Entertainment Group, Inc. .................. 900 25,875
----------
597,844
----------
Manufacturing -- 0.6%
Westinghouse Air Brake, Inc. ............................. 2,300 56,206
----------
Metals - Iron & Steel -- 0.6%
*Mueller Industries, Inc. ................................ 2,700 54,844
----------
Oil & Gas -- 0.4%
*Cal Dive International, Inc. ............................ 1,900 39,425
----------
Oil Equipment & Services -- 2.7%
*BJ Services Co. ......................................... 5,000 78,125
*Core Laboratories N.V. .................................. 1,200 22,950
Daniel Industries, Inc. .................................. 3,500 42,438
*Smith International, Inc. ............................... 4,800 120,900
----------
264,413
----------
Personal Services -- 0.5%
*Res-Care, Inc. .......................................... 1,800 44,438
----------
Retail - Clothing and Apparel -- 1.3%
*Buckle, Inc. ............................................ 5,072 121,728
----------
Retail Merchandising -- 9.5%
*Amazon.com, Inc. ........................................ 1,500 481,875
*Bebe Stores, Inc. ....................................... 6,400 226,400
*Hollywood Entertainment Corp. ........................... 4,100 111,725
*Stein Mart Inc. ......................................... 2,300 16,028
*The Wet Seal, Inc., Class A.............................. 1,200 36,225
*Wilmar Industries, Inc. ................................. 2,400 48,750
----------
921,003
----------
Security Services -- 0.9%
*Kroll-O'Gara Co. ........................................ 2,100 82,819
----------
</TABLE>
68
<PAGE> 70
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Growth Portfolio
Statement of Net Assets, December 31, 1998 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Software -- 5.7%
*Abovenet Communications, Inc. ........................... 2,000 $ 42,000
*Acclaim Entertainment, Inc. ............................. 9,500 116,375
*Best Software, Inc. ..................................... 800 19,000
*Concentric Networking Corp. ............................. 800 26,600
*Inter-Tel, Inc. ......................................... 1,800 42,075
*Landmark Systems Corp. .................................. 2,800 31,150
*Macromedia, Inc. ........................................ 4,400 148,225
*Pervasive Software, Inc. ................................ 3,600 69,300
*Security First Technologies.............................. 500 15,250
*TSI International Software Ltd. ......................... 800 38,300
----------
548,275
----------
Technology -- 2.8%
*C/Net, Inc. ............................................. 500 27,406
*Meta Group, Inc. ........................................ 1,200 35,700
*MindSpring Enterprises, Inc. ............................ 800 48,850
TMP Worldwide, Inc. ...................................... 3,900 163,800
----------
275,756
----------
Transportation -- 2.2%
*Atlas Air, Inc. ......................................... 2,200 107,663
*MotivePower Industries, Inc. ............................ 3,300 106,219
----------
213,882
----------
TOTAL COMMON STOCK (COST $7,952,118).................... 9,229,897
----------
SHORT TERM INVESTMENTS -- 6.9%
Temporary Investment Fund, Inc. -- TempCash............... 670,254 670,254
----------
TOTAL SHORT TERM INVESTMENTS (COST $670,254)............ 670,254
----------
TOTAL INVESTMENTS -- 102.2% (COST $8,622,372)........... 9,900,151
LIABILITIES IN EXCESS OF OTHER ASSETS -- (2.2%)............. (214,886)
----------
NET ASSETS -- 100.0%
(Equivalent to $9.80 per share based on 988,155 shares of
capital stock outstanding).............................. $9,685,265
==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($9,685,265/988,155 shares outstanding)................... $ 9.80
==========
</TABLE>
* Non-Income Producing
See accompanying notes to financial statements.
69
<PAGE> 71
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Value Portfolio
1998 Annual Review
Providentmutual Investment Management Company
- --------------------------------------------------------------------------------
The total return for the Market Street Fund Small Cap Value Portfolio since
inception on May 4, 1998 through December 31 was -17.5%. This return compares to
the portfolio's style benchmark for the same period of -16.38%. The Wilshire
series of style indices referred to as the "Quantum" indices are the style
benchmarks with which we compare the portfolio's performance.
Providentmutual Investment Management Company has selected the following
two sub-advisers to perform the day-to-day management of the portfolio. The two
firms possess a small cap value orientation and discipline.
<TABLE>
<CAPTION>
MANAGER APPROXIMATE PORTFOLIO %
- ------- -----------------------
<S> <C>
Denver Investment Advisors 60%
1838 Investment Advisors 40%
Total Fund 100%
</TABLE>
In 1998, small cap stocks significantly under-performed the medium and
smaller stock composites. In addition, value indices under-performed the returns
of growth indices by 20%. Small cap value stocks are still experiencing the same
general lack of investor respect compared to the large growth stocks. Money flow
into the U.S. equity markets has typically found its way into the well-known
large cap names. The popularity of indexing and the desire for liquidity also
has benefited large cap names. Investors have paid a substantial premium for the
liquidity of large cap names.
The largest sector holdings of the portfolio include:
<TABLE>
<CAPTION>
SECTOR %
- ------ ----
<S> <C>
Insurance 10.0%
Computers 8.3%
Retail Merchandising 8.0%
Manufacturing 6.7%
</TABLE>
The portfolio targets stable or improving businesses at low multiples of
price to earnings, price to book value, and price to cash flow. We believe that
valuation is extremely important in making investment judgments. Today,
valuation inefficiencies appear to be extreme, and many stocks appear to be
priced based on their liquidity rather than their potential investment return.
The investment discipline we use prohibits paying up for expensive stocks and
targets inexpensive stocks relative to their fundamentals. We think the
persistence of the large cap stock preference is not sustainable for the long
term. In this environment the valuations of small cap stocks appear increasingly
compelling.
70
<PAGE> 72
We look forward to your support and to our long-term goal of capital
appreciation.
Sarah C. Lange, CFA
[Market Street Fund]
[Small Cap Value Portfolio Performance Graph]
<TABLE>
<CAPTION>
FUND INDEX+
---- ------
<S> <C> <C>
Start 10000.00 10000.00
'98' 8250.00 8362.00
</TABLE>
Past performance is not predictive of future performance.
+ The Index is the Wilshire Quantum Small Cap Value, an unmanaged index of
common stocks that includes reinvestment of dividends.
* Inception date was May 4, 1998.
71
<PAGE> 73
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Value Portfolio
Statement of Net Assets, December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- ----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 93.1%
Aerospace & Defense -- 3.2%
Alliant Techsystems, Inc. ................................ 300 $ 24,731
*Ducommun, Inc. .......................................... 2,300 31,769
Kaman Corp. Class A....................................... 400 6,425
*Kellstrom Industries, Inc. .............................. 2,400 69,000
Primex Technologies, Inc. ................................ 300 12,750
*REMEC, Inc. ............................................. 1,200 21,600
Thiokol Corp. ............................................ 2,500 93,750
----------
260,025
----------
Airlines -- 0.6%
*Alaska Air Group, Inc. .................................. 600 26,550
*America West Airlines, Inc. ............................. 1,200 20,400
----------
46,950
----------
Automobiles -- 0.2%
*Copart, Inc. ............................................ 500 16,187
----------
Automotive Equipment & Services -- 1.1%
Arvin Industries, Inc. ................................... 700 29,181
*Delco Remy International, Inc. .......................... 1,150 11,284
*Tower Automotive, Inc. .................................. 1,900 47,381
----------
87,846
----------
Banks -- 1.1%
Andover Bancorp, Inc. .................................... 500 17,312
Dime Community Bancorp, Inc. ............................. 1,600 33,000
Riggs National Corp. ..................................... 1,900 38,712
----------
89,024
----------
Broadcasting & Publishing -- 2.5%
*Journal Register Co. .................................... 1,200 18,000
McClatchy Newspapers, Inc. ............................... 300 10,612
*Valassis Communications, Inc. ........................... 1,400 72,275
*World Color Press, Inc. ................................. 3,400 103,487
----------
204,374
----------
</TABLE>
72
<PAGE> 74
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Value Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- ----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Building & Building Supplies -- 4.1%
BMC West Corp. ........................................... 2,400 $ 29,100
Coachmen Industries, Inc. ................................ 1,600 42,000
Engle Homes, Inc. ........................................ 1,300 19,906
*Holophane Corp. ......................................... 1,100 28,256
Lafarge Corp. ............................................ 1,700 68,850
Lone Star Industries, Inc. ............................... 1,600 58,900
M/I Schottenstein Homes, Inc. ............................ 500 11,000
Texas Industries, Inc. ................................... 1,200 32,325
*Toll Brothers, Inc. ..................................... 1,700 38,356
*Willbros Group, Inc. .................................... 900 5,006
----------
333,699
----------
Business & Consumer Services -- 0.7%
*Personnel Group of America, Inc. ........................ 3,300 57,750
----------
Chemicals -- 0.9%
General Cable Corp. ...................................... 1,700 34,850
General Chemical Group, Inc. ............................. 1,400 19,425
Wellman, Inc. ............................................ 2,200 22,412
----------
76,687
----------
Communications -- 0.4%
*Periphonics Corp. ....................................... 1,500 19,781
*Teltrend, Inc. .......................................... 700 13,388
----------
33,169
----------
Computers -- 8.3%
*Bel Fuse, Inc. Class B................................... 1,100 37,812
*Brooktrout Technology, Inc. ............................. 900 15,412
*CHS Electronics.......................................... 3,700 62,669
*HMT Technology Corp. .................................... 1,700 21,781
*In Focus Systems, Inc. .................................. 1,700 15,087
*NeoMagic Corp. .......................................... 1,400 30,975
*Pomeroy Computer Resources, Inc. ........................ 1,400 31,500
*Read-Rite Corp. ......................................... 4,000 59,125
*Software Spectrum, Inc. ................................. 1,200 19,050
*Sterling Software, Inc. ................................. 3,900 105,544
*Symantec Corp. .......................................... 3,600 78,300
*Tech Data Corp. ......................................... 1,600 64,400
*The Learning Company, Inc. .............................. 2,500 64,844
*Wall Data, Inc. ......................................... 700 16,800
*Wang Labs, Inc. ......................................... 1,400 38,850
----------
662,149
----------
</TABLE>
73
<PAGE> 75
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Value Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- ----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Construction -- 0.8%
M.D.C. Holdings, Inc. .................................... 1,700 $ 36,337
*Morrison Knudsen Corp. .................................. 3,000 29,250
----------
65,587
----------
Containers -- 1.2%
Ivex Packaging Corp. ..................................... 1,100 25,575
Shorewood Packaging....................................... 2,200 45,100
*US Can Corp. ............................................ 1,600 28,600
----------
99,275
----------
Cosmetics and Toiletries -- 0.2%
*French Fragrances, Inc. ................................. 2,400 17,400
----------
Drugs & Healthcare -- 2.2%
Bindley Western Industries, Inc. ......................... 1,800 88,650
*Genesis Health Ventures, Inc. ........................... 1,500 13,125
*Roberts Pharmaceutical Corp. ............................ 3,600 78,300
----------
180,075
----------
Electrical Equipment -- 0.3%
*AFC Cable Systems, Inc. ................................. 400 13,450
*Cable Design Technologies, Inc. ......................... 800 14,800
----------
28,250
----------
Electronics -- 3.9%
AVX Corp. ................................................ 2,650 44,884
BEC Energy................................................ 1,500 61,781
*Burr-Brown Corp. ........................................ 1,300 30,469
Eastern Utilities Associates.............................. 1,100 31,075
Esco Electronics Corp. ................................... 700 6,344
*Lattice Semiconductor Corp. ............................. 800 36,725
*Marshall Industries, Inc. ............................... 1,500 36,750
*Oak Industries, Inc. .................................... 1,400 49,000
TNP Enterprises, Inc...................................... 500 18,969
----------
315,997
----------
Engineering -- 0.3%
*URS Corp................................................. 1,000 23,375
----------
Entertainment -- 0.9%
*Harrah's Entertainment, Inc.............................. 2,300 36,081
*Primadonna Resorts, Inc.................................. 3,700 32,606
----------
68,687
----------
</TABLE>
74
<PAGE> 76
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Value Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- ----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Finance -- 4.6%
Advest Group, Inc......................................... 1,100 $ 20,350
Astoria Financial Corp.................................... 1,400 64,050
Downey Financial Corp..................................... 1,900 48,331
Everen Capital Corp....................................... 1,600 36,400
Golden State Bancorp...................................... 3,500 58,187
Heller Financial, Inc..................................... 4,400 129,249
MAF Bancorp, Inc.......................................... 700 18,550
----------
375,117
----------
Food & Food Distributors -- 4.1%
*Ben & Jerry's Homemade, Inc. Class A..................... 1,400 31,325
*Chock Full O'Nuts Corp................................... 3,300 20,625
Earthgrains Co............................................ 3,000 92,812
*Merkert American Corp.................................... 1,400 21,175
Michael Foods, Inc........................................ 2,100 63,000
*Ralcorp Holdings, Inc.................................... 4,400 80,300
*Smithfield Foods, Inc.................................... 2,500 84,687
Smucker (J.M.) Co. Class A................................ 600 14,850
*Suiza Foods Corp......................................... 500 25,469
*Sylvan, Inc.............................................. 1,700 25,287
----------
459,530
----------
Healthcare Services -- 2.2%
Physician Reliance Network................................ 900 11,812
*Sun Healthcare Group, Inc................................ 2,458 16,131
*Trigon Healthcare, Inc................................... 4,000 149,250
----------
177,193
----------
Home Furnishings -- 1.0%
American Woodmark Corp.................................... 700 23,975
*Furniture Brands International, Inc...................... 1,500 40,875
*LADD Furniture, Inc...................................... 1,000 16,188
----------
81,038
----------
Hotel/Restaurants -- 0.5%
Innkeepers USA Trust, Inc................................. 2,900 34,256
*Lodgian, Inc............................................. 1,800 8,775
----------
43,031
----------
Household Products -- 0.5%
*American Safety Razor Corp............................... 2,300 27,600
*Ekco Group, Inc.......................................... 2,500 9,375
----------
36,975
----------
</TABLE>
75
<PAGE> 77
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Value Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- ----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Insurance -- 10.0%
Allmerica Financial Group................................. 500 $ 28,937
ARM Financial Group, Inc. Class A......................... 1,400 31,062
Blanch (E.W.) Holdings.................................... 1,200 56,925
Chicago Title Corp. ...................................... 900 42,244
CNA Surety Corp. ......................................... 1,700 26,775
*Delphi Financial Group, Inc. Class A..................... 1,114 58,415
Enhance Financial Services Group, Inc. ................... 2,200 66,000
Everest Re Holdings, Inc. ................................ 1,300 50,619
FBL Financial Group, Inc. ................................ 1,000 24,250
*FPIC Insurance Group, Inc. .............................. 1,200 57,375
Fremont General Corp. .................................... 3,100 76,725
Harleysville Group, Inc. ................................. 1,500 38,719
HCC Insurance Holdings, Inc. ............................. 1,400 24,675
LandAmerica Financial Group, Inc. ........................ 1,400 78,138
*Penn Treaty American Corp. .............................. 500 13,469
*Reliance Group Holdings, Inc. ........................... 5,000 64,375
State Auto Financial...................................... 1,500 18,563
Stirling Cooke Brown Holding Ltd. ........................ 800 13,900
*The MONY Group, Inc. .................................... 900 28,181
----------
799,347
----------
Leasing -- 3.7%
*Avis Rent A Car, Inc. ................................... 3,800 91,913
*Indigo Aviation AB ADR................................... 1,600 13,200
*Rent Way, Inc. .......................................... 2,500 60,781
Rollins Truck Leasing..................................... 4,900 72,275
Varlen Corp. ............................................. 2,600 59,963
----------
298,132
----------
Machinery & Heavy Equipment -- 0.2%
*Mac-Gray Corp. .......................................... 1,500 17,063
----------
</TABLE>
76
<PAGE> 78
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Value Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- ----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Manufacturing -- 6.7%
*Anixter International, Inc. ............................. 2,700 $ 54,844
*Avondale Industries, Inc. ............................... 1,300 37,700
Block Drug Co., Class A................................... 409 17,740
*Buckeye Technologies, Inc. .............................. 2,700 40,331
Fedders Corp. Class A..................................... 2,700 14,175
Jostens, Inc. ............................................ 1,200 31,425
*Koala Corp. ............................................. 1,100 19,113
*M & F Worldwide Corp. ................................... 1,900 19,119
*Monaco Coach Corp. ...................................... 1,550 41,075
*Moog, Inc. Class A....................................... 400 15,650
Oxford Industries, Inc. .................................. 1,000 28,250
*Pameco Corp. ............................................ 800 9,250
Quanex Corp. ............................................. 1,000 22,563
*Quicksilver, Inc. ....................................... 1,100 33,000
Ruddick Corp. ............................................ 2,500 57,500
*Silgan Holdings, Inc. ................................... 900 25,017
Velcro Industries N.V..................................... 300 44,700
*Wolverine Tube, Inc. .................................... 900 18,900
----------
530,352
----------
Medical & Medical Services -- 0.7%
*Bio-Rad Labs, Inc. Class A............................... 300 6,300
*Mariner Post Acute Network............................... 5,700 26,006
*Medco Research, Inc. .................................... 500 13,000
*Polymedia Corp. ......................................... 1,300 12,025
----------
57,331
----------
Medical Equipment & Supplies -- 0.3%
*Del Global Technologies Corp. ........................... 2,400 27,600
----------
Office Equipment & Supplies -- 1.1%
*Day Runner, Inc. ........................................ 700 10,150
*SEACOR SMIT, Inc. ....................................... 900 44,494
*United Stationers, Inc. ................................. 1,200 31,200
----------
85,844
----------
Oil & Gas -- 1.0%
*Cal Dive International, Inc. ............................ 1,000 20,750
Southwest Gas Corp. ...................................... 1,300 34,938
*Tesoro Petroleum Corp. .................................. 2,100 25,463
----------
81,151
----------
</TABLE>
77
<PAGE> 79
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Value Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- ----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Paper & Forest Products -- 0.4%
Chesapeake Corp. ......................................... 900 $ 33,188
----------
Real Estate -- 4.6%
Annaly Mortgage Management Inc. .......................... 1,500 12,375
Avalonbay Communities, Inc. .............................. 1,600 54,800
Bradley Real Estate, Inc. ................................ 1,200 24,600
Brandywine Realty Trust................................... 1,200 21,450
Burnham Pacific Properties, Inc. ......................... 1,800 21,713
Eastgroup Properties...................................... 1,900 35,031
Healthcare Realty Trust................................... 850 18,966
Health Care REIT, Inc. ................................... 2,000 51,750
Liberty Property Trust.................................... 2,300 56,638
Pacific Gulf Properties, Inc. ............................ 1,100 22,069
Parkway Properties, Inc. ................................. 1,700 53,125
----------
372,517
----------
Restaurants -- 0.8%
*O'Charleys, Inc. ........................................ 1,750 24,719
*RARE Hospitality International, Inc. .................... 3,100 43,400
----------
68,119
----------
Retail - Clothing & Apparel -- 2.2%
Blair Corp. .............................................. 700 15,531
*Bon Ton Stores, Inc. .................................... 1,700 12,963
Cato Corp. Class A........................................ 3,200 31,500
*Gerber Childrenswear, Inc. .............................. 1,400 12,163
*Maxwell Shoe Co., Inc. Class A........................... 2,500 27,344
*Tropical Sportswear International Corp. ................. 2,150 77,131
----------
176,632
----------
</TABLE>
78
<PAGE> 80
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Value Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- ----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Retail Merchandising -- 8.0%
*Ames Department Stores, Inc. ............................ 3,000 $ 81,000
*BJ's Wholesale Club, Inc. ............................... 1,400 64,838
Claire's Stores, Inc. .................................... 1,100 22,550
*Cole National Corp. Class A.............................. 1,300 22,263
*Elder-Beerman Stores Corp. .............................. 3,000 34,688
Fred's, Inc. Class A...................................... 2,400 36,000
Hastings Entertainment, Inc. ............................. 1,200 16,800
Huffy Corporation......................................... 800 13,200
*Jan Bell Marketing, Inc. ................................ 6,800 43,775
*Rex Stores Corp. ........................................ 1,000 13,500
*ShopKo Stores, Inc. ..................................... 3,100 103,075
*Value City Department Stores, Inc. ...................... 1,600 22,300
*Zale Corp. .............................................. 5,200 167,700
----------
641,689
----------
Security Services -- 0.3%
*American Bank Note Holographics, Inc. ................... 1,350 23,625
----------
Semiconductors -- 0.4%
Belden, Inc. ............................................. 800 16,950
Integrated Device Technology, Inc. ....................... 2,900 17,763
----------
34,713
----------
Software -- 0.2%
*GT Interactive Software Corp. ........................... 3,400 17,000
----------
Steel -- 0.2%
*Citation Corp. .......................................... 1,100 13,888
----------
Textiles -- 0.8%
*Dan River, Inc. Class A.................................. 1,900 22,325
*Galey & Lord, Inc. ...................................... 2,600 22,425
Guilford Mills, Inc. ..................................... 1,400 23,363
----------
68,113
----------
Transportation -- 1.2%
M.S. Carriers, Inc. ...................................... 700 23,056
*Offshore Logistics, Inc. ................................ 2,000 23,750
Sea Containers, Ltd. ..................................... 1,650 49,397
----------
96,203
----------
</TABLE>
79
<PAGE> 81
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Value Portfolio
Statement of Net Assets, December 31, 1998 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- ----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Utilities -- 2.3%
Central Hudson Gas & Electric Corp. ...................... 800 $ 35,800
Cleco Corp. .............................................. 1,800 61,763
Rochester Gas and Electric Corp. ......................... 1,800 56,250
United Illuminating Co. .................................. 600 30,900
----------
184,713
----------
Waste Management -- 0.6%
*Safety-Kleen Corp. ...................................... 3,575 50,497
----------
TOTAL COMMON STOCK (COST $7,632,056))................... 7,517,107
----------
SHORT-TERM INVESTMENTS -- 10.8%
Temporary Investment Fund, Inc. -- Temp Cash.............. 869,746 869,746
----------
TOTAL SHORT TERM INVESTMENTS (COST $869,746)............ 869,746
----------
TOTAL INVESTMENTS -- 103.9% (COST $8,501,802)........... 8,386,853
LIABILITIES IN EXCESS OF OTHER ASSETS -- (3.9%)............. (313,594)
----------
NET ASSETS -- 100.0%
(Equivalent to $8.25 per share based on 978,971 shares of
capital stock outstanding).............................. $8,073,259
==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($8,073,259/978,971 shares outstanding)................... $ 8.25
==========
</TABLE>
* Non-Income Producing.
See accompanying notes to financial statements.
80
<PAGE> 82
(This page intentionally left blank)
<PAGE> 83
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statement of Operations for the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY
GROWTH MARKET BOND
PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends................................................. $ 5,109,177 $ -- $ --
Interest.................................................. 700,374 4,387,104 1,881,562
Less: foreign taxes withheld............................ (30,906) -- --
----------- ---------- ----------
Total Income............................................ 5,778,645 4,387,104 1,881,562
----------- ---------- ----------
EXPENSES:
Investment advisory fee................................... 928,340 197,450 100,348
Administration fee........................................ 192,987 60,522 28,147
Directors' fee............................................ 23,536 6,463 2,342
Transfer agent fee........................................ 5,001 2,452 1,845
Custodian fee............................................. 34,147 11,156 4,786
Legal fees................................................ 46,700 13,055 4,720
Audit fees................................................ 32,768 9,115 3,297
Printing.................................................. 69,153 21,574 7,961
Insurance................................................. 20,426 5,121 1,737
Miscellaneous............................................. 2,466 1,357 1,134
----------- ---------- ----------
1,355,524 328,265 156,317
Less: expenses waived by Administrator and/or reimbursed
by affiliated insurance company......................... (29,874) (8,524) (3,001)
----------- ---------- ----------
Total expenses.......................................... 1,325,650 319,741 153,316
----------- ---------- ----------
Net investment income (loss)............................ 4,452,995 4,067,363 1,728,246
----------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) from:
Investments............................................. 6,184,504 -- 398,338
Foreign currency related transactions................... (36,215) -- --
----------- ---------- ----------
6,148,289 -- 398,338
----------- ---------- ----------
Net change in unrealized appreciation (depreciation) from:
Investments............................................. 26,998,570 -- 132,450
Foreign currency related transactions................... -- -- --
----------- ---------- ----------
26,998,570 -- 132,450
----------- ---------- ----------
Net gain (loss) on investments and foreign currency
transactions.......................................... 33,146,859 -- 530,788
----------- ---------- ----------
Net increase (decrease) in net assets resulting from
operations............................................ $37,599,854 $4,067,363 $2,259,034
=========== ========== ==========
</TABLE>
* Commencement of operations was May 4, 1998
See accompanying notes to financial statements.
82
<PAGE> 84
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statement of Operations for the Year Ended December 31, 1998 -- (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE SENTINEL LARGE LARGE SMALL SMALL
MANAGED GROWTH INTERNATIONAL GROWTH CAP CAP CAP CAP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO GROWTH* VALUE* GROWTH* VALUE*
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 675,111 $ 369,364 $1,393.343 $ 73,545 $ 56,750 $ 156,004 $ 5,505 $ 36,656
1,661,011 244,092 157,926 32,651 17,384 26,005 35,838 25,695
(3,029) -- (123,563) -- -- (363) -- (8)
---------- ----------- ---------- ---------- ---------- --------- ---------- ---------
2,333,093 613,456 1,427,706 106,196 74,134 181,646 41,343 62,343
---------- ----------- ---------- ---------- ---------- --------- ---------- ---------
248,484 216,651 518,379 50,621 55,054 56,126 33,737 31,846
52,788 46,657 78,859 21,121 6,458 6,580 3,062 2,899
4,984 5,090 5,620 827 675 688 321 303
2,241 2,132 2,337 1,622 1,081 1,083 1,034 1,031
10,621 10,539 42,105 4,350 3,908 8,130 6,024 9,452
9,932 8,734 11,149 1,646 1,500 1,529 712 674
6,963 7,389 7,824 1,152 1,017 1,036 482 457
16,767 17,597 18,733 680 1,779 1,846 938 842
4,446 4,024 4,931 591 -- -- -- --
1,300 6,277 1,351 1,068 699 699 677 677
---------- ----------- ---------- ---------- ---------- --------- ---------- ---------
358,526 325,090 691,288 83,678 72,171 77,717 46,987 48,181
(6,366) (5,358) -- (1,057) (1,139) (1,151) (502) (2,918)
---------- ----------- ---------- ---------- ---------- --------- ---------- ---------
352,160 319,732 691,288 82,621 71,032 76,566 46,485 45,263
---------- ----------- ---------- ---------- ---------- --------- ---------- ---------
1,980,933 293,724 736,418 23,575 3,102 105,080 (5,142) 17,080
---------- ----------- ---------- ---------- ---------- --------- ---------- ---------
3,406,936 7,283,996 4,101,949 537,394 (331,257) (614,547) (783,976) (649,770)
(4,642) -- 76,911 -- -- -- -- (25)
---------- ----------- ---------- ---------- ---------- --------- ---------- ---------
3,402,294 7,283,996 4,178,860 537,394 (331,257) (614,547) (783,976) (649,795)
---------- ----------- ---------- ---------- ---------- --------- ---------- ---------
1,925,076 (3,566,325) 1,373,699 1,001,393 2,717,374 709,996 1,277,778 (114,950)
-- -- 10,635 -- -- -- -- --
---------- ----------- ---------- ---------- ---------- --------- ---------- ---------
1,925,076 (3,566,325) 1,384,334 1,001,393 2,717,374 709,996 1,277,778 (114,950)
---------- ----------- ---------- ---------- ---------- --------- ---------- ---------
5,327,370 3,717,671 5,563,194 1,538,787 2,386,117 95,449 493,802 (764,745)
---------- ----------- ---------- ---------- ---------- --------- ---------- ---------
$7,308,303 $ 4,011,395 $6,299,612 $1,562,362 $2,389,219 $ 200,529 $ 488,660 $(747,665)
========== =========== ========== ========== ========== ========= ========== =========
</TABLE>
83
<PAGE> 85
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1998
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss)............ $ 4,452,995 $ 4,067,363 $ 1,728,246 $ 1,980,933 $ 293,724 $ 736,418
Net realized gain (loss) on investments
and foreign currency related
transactions........................... 6,148,289 0 398,338 3,402,294 7,283,996 4,178,860
Net change in unrealized appreciation
(depreciation) on investments and
foreign currency translations.......... 26,998,570 0 132,450 1,925,076 (3,566,325) 1,384,334
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations.............. 37,599,854 4,067,363 2,259,034 7,308,303 4,011,395 6,299,612
Distributions:
From net investment income.............. (4,464,024) (4,067,363) (1,551,787) (1,940,488) (391,790) (478,318)
From net realized gains................. (35,634,593) 0 (3,599) (2,699,617) (3,740,193) (4,341,196)
Capital share transactions:
Net contributions from affiliated life
insurance companies.................... 50,407,953 27,114,010 12,791,904 9,069,604 8,041,798 7,369,655
------------ ----------- ----------- ----------- ----------- -----------
Total increase in net assets........... 47,909,190 27,114,010 13,495,552 11,737,802 7,921,210 8,849,753
NET ASSETS
Beginning of period....................... 267,389,331 64,338,911 23,350,370 56,067,509 48,574,105 62,513,456
------------ ----------- ----------- ----------- ----------- -----------
End of Period............................. $315,298,521 $91,452,921 $36,845,922 $67,805,311 $56,495,315 $71,363,209
============ =========== =========== =========== =========== ===========
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss)............ $ 4,610,554 $ 3,164,621 $ 1,205,822 $ 1,707,727 $ 391,789 $ 662,481
Net realized gain (loss) on investments
and foreign currency related
transactions........................... 35,589,649 (57) 177,501 2,697,609 3,740,193 4,167,248
Net change in unrealized appreciation
(depreciation) on investments and
foreign currency translations.......... 9,025,359 -- 449,185 4,950,546 3,790,949 178,783
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations.............. 49,225,562 3,164,564 1,832,508 9,355,882 7,922,931 5,008,512
Distributions:
From net investment income.............. (4,690,830) (3,164,621) (1,143,012) (1,626,361) (326,522) (427,579)
From net realized gains................. (23,067,604) -- -- (344,551) (64,760) (3,347,494)
Capital share transactions:
Shares exchanged in acquisition of
Common Stock Portfolio................. 13,633,276 -- -- -- -- --
Net contributions from affiliated life
insurance companies.................... 33,340,861 10,142,244 5,573,996 5,251,369 6,944,174 10,324,894
------------ ----------- ----------- ----------- ----------- -----------
Total increase in net assets........... 68,441,265 10,142,187 6,263,492 12,636,339 14,475,823 11,558,333
NET ASSETS
Beginning of period....................... 198,948,066 54,196,724 17,086,878 43,431,170 34,098,282 50,955,123
------------ ----------- ----------- ----------- ----------- -----------
End of period............................. $267,389,331 $64,338,911 $23,350,370 $56,067,509 $48,574,105 $62,513,456
============ =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
84
<PAGE> 86
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statements of Changes in Net Assets -- (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1998
SENTINEL LARGE LARGE SMALL SMALL
GROWTH CAP CAP CAP CAP
PORTFOLIO GROWTH* VALUE* GROWTH* VALUE*
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss)............................. $ 23,575 $ 3,102 $ 105,080 $ (5,142) $ 17,080
Net realized gain (loss) on investments and foreign
currency related transactions........................... 537,394 (331,257) (614,547) (783,976) (649,795)
Net change in unrealized appreciation (depreciation) on
investments and foreign currency translations........... 1,001,393 2,717,374 709,996 1,277,778 (114,950)
----------- ----------- ----------- ---------- ----------
Net increase (decrease) in net assets resulting from
operations.............................................. 1,562,362 2,389,219 200,529 488,660 (747,665)
Distributions:
From net investment income............................... (25,069) -- -- -- --
From net realized gains.................................. (1,668,898) -- -- -- --
Capital share transactions:
Net contributions from affiliated life insurance
companies............................................... 3,936,595 11,917,436 15,415,372 9,196,605 8,820,924
----------- ----------- ----------- ---------- ----------
Total increase in net assets............................ 3,804,990 14,306,655 15,615,901 9,685,265 8,073,259
NET ASSETS
Beginning of period........................................ 8,361,989 -- -- -- --
----------- ----------- ----------- ---------- ----------
End of Period.............................................. $12,166,979 $14,306,655 $15,615,901 $9,685,265 $8,073,259
=========== =========== =========== ========== ==========
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
SENTINEL
GROWTH
PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss)............................. $ 25,069
Net realized gain (loss) on investments and foreign
currency related transactions........................... 1,668,898
Net change in unrealized appreciation (depreciation) on
investments and foreign currency translations........... 132,149
-----------
Net increase (decrease) in net assets resulting from
operations.............................................. 1,826,116
Distributions:
From net investment income............................... (23,408)
From net realized gains.................................. (3,259)
Capital share transactions:
Net contributions from affiliated life insurance
companies............................................... 898,951
-----------
Total increase in net assets............................ 2,698,400
NET ASSETS
Beginning of period........................................ 5,663,589
-----------
End of period.............................................. $ 8,361,989
===========
</TABLE>
* Commencement of operations was May 4, 1998
See accompanying notes to financial statements.
85
<PAGE> 87
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------
01/01/98 01/01/97 01/01/96 01/01/95 01/01/94
TO TO TO TO TO
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $19.46 $18.10 $16.36 $14.00 $14.09
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................................... .27 .35 .46 .47 .43
Net realized and unrealized gain (loss) on investments...... 1.97 3.49 2.54 3.41 (.10)
------- ------- ------- ------- -------
Total from investment operations......................... 2.24 3.84 3.00 3.88 .33
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income........ (.29) (.38) (.48) (.46) (.41)
Dividends to shareholders from net capital gains............ (2.59) (2.10) (.78) (1.06) (.01)
------- ------- ------- ------- -------
Total Distributions...................................... (2.88) (2.48) (1.26) (1.52) (.42)
------- ------- ------- ------- -------
Net asset value, end of period.............................. $18.82 $19.46 $18.10 $16.36 $14.00
======= ======= ======= ======= =======
Total return............................................. 13.70% 24.32% 19.58% 30.39% 2.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)............................ 315,299 267,389 198,948 161,899 115,191
Ratios of expenses to average net assets(1)................. .46% .43% .50% .61% .63%
Ratios of net investment income to average net assets....... 1.53% 2.01% 2.80% 3.20% 3.10%
Portfolio turnover.......................................... 30% 108% 72% 61% 63%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the Growth Portfolio before reimbursement of expense by
affiliated insurance company for the years ended December 31, 1998, 1997,
1996, 1995 and 1994 were as follows: 0.47%, 0.43%, 0.50%, 0.61% and 0.67%
respectively.
See accompanying notes to financial statements.
86
<PAGE> 88
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------
01/01/98 01/01/97 01/01/96 01/01/95 01/01/94
TO TO TO TO TO
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................................... .05 .05 .05 .05 .04
------ ------ ------ ------ ------
Total from investment operations......................... .05 .05 .05 .05 .04
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income........ (.05) (.05) (.05) (.05) (.04)
------ ------ ------ ------ ------
Total Distributions...................................... (.05) (.05) (.05) (.05) (.04)
------ ------ ------ ------ ------
Net asset value, end of period.............................. $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ======
Total return............................................. 5.29% 5.33% 5.15% 5.61% 3.81%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)............................ 91,453 64,339 54,197 34,165 21,040
Ratios of expenses to average net assets(1)................. .40% .39% .44% .50% .55%
Ratios of net investment income to average net assets....... 5.15% 5.21% 5.03% 5.47% 3.86%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the Money Market Portfolio before reimbursement of
expense by affiliated insurance company for the years ended December 31,
1998, 1997, 1996, 1995 and 1994 were as follows: 0.42%, 0.39%, 0.44%, 0.50%
and 0.59% respectively.
See accompanying notes to financial statements.
87
<PAGE> 89
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------
01/01/98 01/01/97 01/01/96 01/01/95 01/01/94
TO TO TO TO TO
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $10.98 $10.67 $11.00 $9.73 $11.21
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................................... .63 .64 .63 .65 .62
Net realized and unrealized gain (loss) on investments...... .25 .33 (.34) 1.27 (1.23)
------ ------ ------ ------ ------
Total from investment operations......................... .88 .97 .29 1.92 (.61)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income........ (.64) (.66) (.62) (.65) (.60)
Dividends to shareholders from net capital gains............ (.00) (.00) (.00) (.00) (.27)
------ ------ ------ ------ ------
Total Distributions...................................... (.64) (.66) (.62) (.65) (.87)
------ ------ ------ ------ ------
Net asset value, end of period.............................. $11.22 $10.98 $10.67 $11.00 $9.73
====== ====== ====== ====== ======
Total return............................................. 8.22% 9.50% 2.86% 20.45% (5.62)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)............................ 36,846 23,350 17,087 14,402 10,098
Ratios of expenses to average net assets(1)................. .53% .57% .56% .60% .68%
Ratios of net investment income to average net assets....... 6.03% 6.24% 6.08% 6.36% 6.14%
Portfolio turnover.......................................... 163% 105% 133% 206% 151%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the Bond Portfolio before reimbursement of expense by
affiliated insurance company for the years ended December 31, 1998, 1997,
1996, 1995 and 1994 were as follows: 0.55%, 0.57%, 0.56%, 0.60% and 0.70%
respectively.
See accompanying financial statements.
88
<PAGE> 90
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGED PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------
01/01/98 01/01/97 01/01/96 01/01/95 01/01/94
TO TO TO TO TO
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $17.06 $14.68 $14.19 $11.94 $13.27
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................................... .54 .54 .51 .55 .53
Net realized and unrealized gain (loss) on investments...... 1.45 2.49 1.07 2.28 (.77)
------ ------ ------ ------ ------
Total from investment operations......................... 1.99 3.03 1.58 2.83 (.24)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income........ (.55) (.53) (.51) (.57) (.49)
Dividends to shareholders from net capital gains............ (.82) (.12) (.58) (.01) (.60)
------ ------ ------ ------ ------
Total Distributions...................................... (1.37) (.65) (1.09) (.58) (1.09)
------ ------ ------ ------ ------
Net asset value, end of period.............................. $17.68 $17.06 $14.68 $14.19 $11.94
====== ====== ====== ====== ======
Total return............................................. 12.54% 21.23% 11.88% 24.43% (1.82)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)............................ 67,805 56,068 43,431 36,002 29,363
Ratios of expenses to average net assets(1)................. .57% .58% .60% .66% .67%
Ratios of net investment income to average net assets....... 3.22% 3.47% 3.68% 4.22% 4.34%
Portfolio turnover.......................................... 203% 99% 106% 130% 75%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the Managed Portfolio before reimbursement of expense by
affiliated insurance company for the years ended December 31, 1998, 1997,
1996, 1995 and 1994 were as follows: 0.58%, 0.58%, 0.60%, 0.66% and 0.73%
respectively.
See accompanying financial statements.
\
89
<PAGE> 91
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------
01/01/98 01/01/97 01/01/96 01/01/95 01/01/94
TO TO TO TO TO
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $22.19 $18.52 $17.38 $15.45 $15.45
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................................... .11 .17 .17 .20 (.01)
Net realized and unrealized gain (loss) on investments...... 1.50 3.72 3.03 1.86 .01
------ ------ ------ ------ ------
Total from investment operations......................... 1.61 3.89 3.20 2.06 .00
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income........ (.18) (.18) (.19) (.00) (.00)
Dividends to shareholders from net capital gains............ (1.71) (.04) (1.87) (.13) (.00)
------ ------ ------ ------ ------
Total Distributions...................................... (1.89) (.22) (2.06) (.13) (.00)
------ ------ ------ ------ ------
Net asset value, end of period.............................. $21.91 $22.19 $18.52 $17.38 $15.45
====== ====== ====== ====== ======
Total return............................................. 7.99% 21.21% 21.00% 13.48% 0.00%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)............................ 56,495 48,574 34,098 23,822 15,430
Ratios of expenses to average net assets(1.)................ .61% .63% .68% .76% .86%
Ratios of net investment income to average net assets....... .56% .95% 1.14% 1.32% (.10)%
Portfolio turnover.......................................... 41% 37% 47% 89% 60%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the Growth Portfolio before reimbursement of expense by
affiliated insurance company for the years ended December 31, 1998, 1997,
1996, 1995 and 1994 were as follows: 0.62%, 0.63%, 0.68%, 0.76% and 0.89%,
respectively.
See accompanying notes to financial statements.
90
<PAGE> 92
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------
01/01/98 01/01/97 01/01/96 01/01/95 01/01/94
TO TO TO TO TO
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $13.61 $13.41 $12.86 $11.63 $11.87
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................................... .15 .11 .11 .16 .05
Net realized and unrealized gain (loss) on investments...... 1.14 1.08 1.23 1.45 (.02)
------ ------ ------ ------ ------
Total from investment operations......................... 1.29 1.19 1.34 1.61 .03
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income........ (.10) (.11) (.16) (.07) (.03)
Dividends to shareholders from net capital gains............ (.95) (.88) (.63) (.31) (.24)
------ ------ ------ ------ ------
Total Distributions...................................... (1.05) (.99) (.79) (.38) (.27)
------ ------ ------ ------ ------
Net asset value, end of period.............................. $13.85 $13.61 $13.41 $12.86 $11.63
====== ====== ====== ====== ======
Total return............................................. 10.13% 9.66% 10.89% 14.31% .26%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)............................ 71,363 62,513 50,955 36,642 26,212
Ratios of expenses to average net assets(1)................. 1.00% 1.02% 1.05% 1.15% 1.32%
Ratios of net investment income to average net assets....... 1.18% 1.13% 1.08% 1.21% .76%
Portfolio turnover.......................................... 37% 37% 35% 45% 32%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the International Portfolio before reimbursement of
expense by affiliated insurance company for the years ended December 31,
1998, 1997, 1996, 1995 and 1994 were as follows: 1.00%, 1.02%, 1.05%, 1.15%
and 1.32% respectively.
See accompanying notes to financial statements.
91
<PAGE> 93
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SENTINEL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------------------------
01/01/98 01/01/97 03/18/96(2)
TO TO TO
12/31/98 12/31/97 12/31/96
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $14.59 $11.14 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................................... .03 .04 .05
Net realized and unrealized gain (loss) on investments...... 1.76 3.47 1.09
------ ------ ------
Total from investment operations......................... 1.79 3.51 1.14
------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income........ (.04) (.05) (.00)
Dividends to shareholders from net capital gains............ (2.91) (.01) (.00)
------ ------ ------
Total Distributions...................................... (2.95) (.06) (.00)
------ ------ ------
Net asset value, end of period.............................. $13.43 $14.59 $11.14
====== ====== ======
Total return............................................. 15.98% 31.58% 11.40%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)............................ 12,167 8,362 5,664
Ratios of expenses to average net assets(1) (annualized).... .82% .90% .90%
Ratios of net investment income to average net assets
(annualized)............................................... .23% .36% .57%
Portfolio turnover.......................................... 87% 155% 75%
- --------------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the Sentinel Growth Portfolio before reimbursement of
expense by affiliated insurance company for the years ended December 31,
1998, 1997 and 1996 were as follows: 0.83%, 1.35% and 1.51%, respectively.
(2.) Commencement of operations.
(3.) Total returns for periods less than one year are not annualized.
See accompanying notes to financial statements.
92
<PAGE> 94
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Concluded
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP SMALL CAP SMALL CAP
GROWTH VALUE GROWTH VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------
05/04/98(2) 05/04/98(2) 05/04/98(2) 05/04/98(2)
TO TO TO TO
12/31/98 12/31/98 12/31/98 12/31/98
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $10.00 $10.00 $10.00 $10.00
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................ .00 .07 (.01) .02
Net realized and unrealized gain (loss) on investments...... 1.77 (.17) (.19) (1.77)
------ ------ ------ ------
Total from investment operations......................... 1.77 (.10) (.20) (1.75)
------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income........ (.00) (.00) (.00) (.00)
Dividends to shareholders from net capital gains............ (.00) (.00) (.00) (.00)
------ ------ ------ ------
Total Distributions...................................... (.00) (.00) (.00) (.00)
------ ------ ------ ------
Net asset value, end of period.............................. $11.77 $9.90 $9.80 $8.25
====== ====== ====== ======
Total return............................................. 17.70%(3) (1.00)%(3) (2.00)%(3) (17.50)%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)............................ 14,307 15,616 9,685 8,073
Ratios of expenses to average net assets(1) (annualized).... .90% .95% 1.24% 1.28%
Ratios of net investment income to average net assets
(annualized)............................................... .04% 1.31% (.14)% .48%
Portfolio turnover.......................................... 64% 39% 82% 38%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the Large Cap Growth Portfolio, Large Cap Value
Portfolio, Small Cap Growth Portfolio and Small Cap Value Portfolio before
reimbursement of expense by affiliated insurance company for the period
ended December 31, 1998 were as follows: 0.92%, .97%, 1.25% and 1.36%
(annualized), respectively.
(2.) Commencement of operations.
(3.) Total returns for periods less than one year are not annualized.
See accompanying notes to financial statements.
93
<PAGE> 95
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1998
- --------------------------------------------------------------------------------
1. ORGANIZATION
The Market Street Fund, Inc. (Fund) is registered as an open-end diversified
management company under the Investment Company Act of 1940, as amended. As a
"series" type of mutual fund, the Fund issues separate classes (or series) of
stock currently consisting of the Growth Portfolio, Money Market Portfolio, Bond
Portfolio, Managed Portfolio, Aggressive Growth Portfolio, International
Portfolio, Sentinel Growth Portfolio, Large Cap Growth Portfolio, Large Cap
Value Portfolio, Small Cap Growth Portfolio, and Small Cap Value Portfolio. The
Fund serves as an investment medium for modified premium and flexible premium
adjustable variable life insurance policies and individual flexible premium
deferred variable annuity contracts (Policies) issued by Provident Mutual Life
Insurance Company (PMLIC) and for flexible premium deferred variable annuity
contracts issued by Providentmutual Life and Annuity Company of America (PLACA)
and policies issued by National Life Insurance Company of Vermont (NLICV). The
Fund also serves as the investment medium for single premium and scheduled
premium variable life insurance policies which are no longer being issued.
2. ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by each
Fund in preparation of its financial statements. The preparation of financial
statements in accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.
Valuation of Investments
Bonds are carried at market value based on the last bid price on a national
securities exchange or on quoted prices from a third-party pricing service.
Investments in common and preferred stocks primarily traded on recognized U.S.
or foreign securities exchanges are valued at the close of regular trading on
the New York Stock Exchange, currently 4:00 p.m. New York time on the last
business day of the period, or, if there was no sale, at the last bid price on
that day. Short-term investments with maturities of less than 90 days and Money
Market Portfolio investments are valued at amortized cost which approximates
market value.
Investments
Security transactions are accounted for on the trade date. The cost of
investment securities sold is determined by use of the specific identification
method for both financial reporting and income tax purposes. Interest income is
recorded on the accrual basis; dividend income is recorded on the ex-dividend
date.
Dollar Rolls
The Bond and Managed Portfolios may enter into dollar rolls in which the
Portfolio sells securities for delivery and simultaneously contracts to
repurchase the same security at a fixed price on a specified future date. During
the roll period the Portfolio forgoes accrued interest paid on the securities.
The Portfolio will be compensated by the interest earned on the cash proceeds of
the initial sale (which are invested in short-term investments) and by the lower
repurchase price at the future date (the "drop"). The drop, which is recorded as
deferred income, is amortized over the period between the trade date and the
settlement date. All realized gains are recorded at the
94
<PAGE> 96
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
beginning of each roll. A portfolio engages in dollar rolls for the purpose of
enhancing its yield. Dollar Rolls involve a risk of loss if the value of the
security to be repurchased declines prior to settlement date, which risk is in
addition to the risk of decline in the value of a Portfolio's other assets. The
balance of dollar rolls outstanding at December 31, 1998 was $3,965,702 in the
Bond Portfolio and $9,312,628 in the Managed Portfolio.
Foreign Currency Translations
Foreign currency amounts are translated into U.S. Dollars on the following
bases:
(i) Market value of investment securities, assets and liabilities, at the
daily rate of exchange;
(ii) Purchases and sales of investment securities, at the rate of exchange
prevailing on the respective dates of such transactions. Exchange gains or
losses are recognized upon settlement;
(iii) Income and expenses, at the rate of exchange prevailing on the
respective dates of such transactions. Exchange gains or losses are
recognized upon ultimate receipt or disbursement.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. dollar denominated
transactions as a result of, among other factors, the lack of governmental
supervision and regulation of foreign securities markets and the possibility of
political or economic instability.
The Fund does not isolate that portion of the results of operations derived from
changes in foreign exchange rates on investments from the fluctuations arising
from changes in market prices of securities held. Such fluctuations are included
with the net realized and unrealized gain or loss from investments.
Dividends to Shareholders
Dividends of investment income of the Money Market Portfolio are declared daily
and paid monthly. The Growth Portfolio, Bond Portfolio, and Managed Portfolio
declare and pay dividends of investment income quarterly. The Aggressive Growth
Portfolio, International Portfolio, Sentinel Growth Portfolio, Large Cap Growth
Portfolio, Large Cap Value Portfolio, Small Cap Growth Portfolio, and Small Cap
Value Portfolio declare and pay dividends of investment income annually. For all
Portfolios, distributions of capital gains are declared and paid annually.
Federal Income Taxes
No provision is made for Federal taxes as it is the Fund's intention to have
each Portfolio continue to qualify as a regulated investment company and to make
the requisite distributions to its shareholders which will be sufficient to
relieve it from Federal income taxes.
3. INVESTMENT ADVISORY FEES AND RELATED PARTY TRANSACTIONS
Sentinel Advisors Company (SAC), a Vermont General Partnership, is adviser for
the Growth, Money Market, Bond, Managed, Aggressive Growth and Sentinel Growth
Portfolios. With respect to the Growth Portfolio, SAC is compensated monthly at
an effective annual rate of 0.50% of the first $20 million of the average daily
net assets of the portfolio, 0.40% of the next $20 million and 0.30% of net
assets in excess of $40 million. SAC is compensated monthly at an effective
annual rate of 0.25% of the average daily net assets of the Money Market
Portfolio. With re-
95
<PAGE> 97
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
spect to the Bond Portfolio, SAC is compensated monthly at the effective annual
rate of 0.35% of the first $100 million of the average daily net assets of the
portfolio and 0.30% of net assets in excess of $100 million. With respect to the
Managed Portfolio, SAC is compensated monthly at the effective annual rate of
0.40% of the first $100 million of the average daily net assets of the portfolio
and 0.35% of net assets in excess of $100 million. With respect to the
Aggressive Growth Portfolio, SAC is compensated monthly at the effective annual
rate of 0.50% of the first $20 million of the average daily net assets of the
portfolio, 0.40% of the next $20 million and 0.30% of net assets in excess of
$40 million. With respect to the Sentinel Growth Portfolio, SAC is compensated
monthly at an effective annual rate of 0.50% of the first $20 million of the
average daily net assets of the portfolio, 0.40% of the next $20 million and
0.30% of the net assets in excess of $40 million. Providentmutual Investment
Management Co. (PIMC) is the adviser for the International, Large Cap Growth,
Large Cap Value, Small Cap Growth, and Small Cap Value Portfolios. With respect
to the Large Cap Growth Portfolio and the Large Cap Value Portfolio, PIMC is
compensated monthly at an effective annual rate of 0.70% of the average daily
net assets. With respect to the Small Cap Growth Portfolio and the Small Cap
Value Portfolio, PIMC is compensated monthly at an effective annual rate of
0.90% of the average daily net assets. With respect to the International
Portfolio, PIMC is compensated monthly at an effective annual rate of 0.75% of
the first $500 million of the average daily net assets of the portfolio and
0.60% of assets in excess of $500 million.
PMLIC agrees to reimburse the Growth, Money Market, Bond, Managed, Aggressive
Growth, Large Cap Growth, Large Cap Value, Small Cap Growth, and Small Cap Value
Portfolios for operating expenses, excluding investment advisory fees, and costs
of litigation and indemnification not covered by insurance, in excess of an
annual rate of 0.40% of the average daily net asset values. The International
Portfolio is reimbursed for such expenses in excess of an annual rate of 0.75%
of the average daily net asset value. NLICV agrees to reimburse Sentinel Growth
Portfolio for operating expenses, excluding investment advisory fees and costs
of litigation and indemnification not covered by insurance, in excess of an
annual rate of .40% of the average net asset values.
96
<PAGE> 98
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
4. NET ASSETS
At December 31, 1998, the Portfolios' net assets consisted of:
<TABLE>
<CAPTION>
MONEY
GROWTH MARKET BOND MANAGED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net contribution from shareholders.......................... $245,203,154 $91,452,978 $35,174,769 $50,052,789
Undistributed net investment income......................... 1,058,688 -- 506,982 499,598
Undistributed net realized gain............................. 6,184,504 -- 398,338 3,406,936
Accumulated loss on investment transactions................. -- (57) -- --
Net unrealized appreciation (depreciation) on investments
and foreign currency....................................... 62,852,175 -- 765,833 13,845,988
------------ ----------- ----------- -----------
$315,298,521 $91,452,921 $36,845,922 $67,805,311
============ =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE SENTINEL
GROWTH INTERNATIONAL GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net contribution from shareholders.......................... $42,508,103 $61,459,537 $ 9,921,581
Undistributed net investment income......................... 293,724 813,330 23,575
Undistributed net realized gain............................. 7,283,996 4,101,948 537,394
Accumulated loss on investment transactions................. -- -- --
Net unrealized appreciation (depreciation) on investments
and foreign currency....................................... 6,409,492 4,988,398 1,684,429
----------- ----------- -----------
$56,495,315 $71,363,209 $12,166,979
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
LARGE LARGE SMALL SMALL
CAP CAP CAP CAP
GROWTH VALUE GROWTH VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net contribution from shareholders.......................... $11,917,436 $15,415,372 $9,191,463 $8,820,924
Undistributed net investment income......................... 3,102 105,080 -- 17,055
Undistributed net realized gain............................. -- -- -- --
Accumulated loss on investment transactions................. (331,257) (614,547) (783,976) (649,770)
Net unrealized appreciation (depreciation) on investments
and foreign currency....................................... 2,717,374 709,996 1,277,778 (114,950)
----------- ----------- ---------- ----------
$14,306,655 $15,615,901 $9,685,265 $8,073,259
=========== =========== ========== ==========
</TABLE>
97
<PAGE> 99
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
5. PURCHASES AND SALES OF INVESTMENTS (EXCLUDING SHORT-TERM SECURITIES)
Purchases and proceeds on sales of investments for the portfolios, for the
period ended December 31, 1998, were as follows:
<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PURCHASES
U.S. Gov't Obligations..................... $ -- $ -- $36,550,258 $105,628,443 $ -- $ --
Corporate Bonds............................ -- -- 19,695,300 8,137,793 -- --
Common and Preferred Stock................. 96,049,721 -- -- 15,484,082 25,248,892 27,444,152
----------- ----------- ----------- ------------ ----------- -----------
Total Purchases............................ $96,049,721 -- $56,245,558 $129,250,318 $25,248,892 $27,444,152
=========== =========== =========== ============ =========== ===========
SALES
U.S. Gov't Obligations..................... $ -- $ -- $30,401,620 $ 99,929,159 $ -- $ --
Corporate Bonds............................ -- -- 13,980,495 7,580,458 -- --
Common and Preferred Stock................. 82,556,949 -- -- 11,847,797 19,719,566 24,038,097
----------- ----------- ----------- ------------ ----------- -----------
Total Sales................................ $82,556,949 -- $44,382,115 $119,357,414 $19,719,566 $24,038,097
=========== =========== =========== ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
LARGE LARGE SMALL SMALL
SENTINEL CAP CAP CAP CAP
GROWTH GROWTH VALUE GROWTH VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PURCHASES
U.S. Gov't Obligations...................................... $ -- $ -- $ -- $ -- $ --
Corporate Bonds............................................. -- -- -- -- --
Common and Preferred Stock.................................. 10,590,648 19,516,660 19,561,434 13,000,678 10,163,856
----------- ----------- ----------- ----------- -----------
Total Purchases............................................. $10,590,648 $19,516,660 $19,561,434 $13,000,678 $10,163,856
=========== =========== =========== =========== ===========
SALES
U.S. Gov't Obligations...................................... $ -- $ -- $ -- $ -- $ --
Corporate Bonds............................................. -- -- -- -- --
Common and Preferred Stock.................................. 8,255,405 7,527,713 4,680,799 4,264,592 1,882,030
----------- ----------- ----------- ----------- -----------
Total Sales................................................. $ 8,255,405 $ 7,527,713 $ 4,680,799 $ 4,264,592 $ 1,882,030
=========== =========== =========== =========== ===========
</TABLE>
98
<PAGE> 100
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
6. TAX BASIS OF INVESTMENTS
Investment information based on the cost of the securities for Federal income
tax purposes held at December 31, 1998 is as follows:
<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aggregate gross unrealized appreciation.... $ 70,477,751 $ -- $ 873,512 $14,307,955 $ 9,655,009 $11,491,580
Aggregate gross unrealized depreciation.... (7,625,576) -- (107,679) (461,967) (3,245,517) (6,585,929)
------------ ----------- ----------- ----------- ----------- -----------
Net unrealized appreciation
(depreciation)............................ $ 62,852,175 $ -- $ 765,833 $13,845,988 $ 6,409,492 $ 4,905,651
============ =========== =========== =========== =========== ===========
Aggregate cost of securities for federal
income tax purposes....................... $249,306,173 $91,873,128 $39,209,431 $62,015,023 $50,115,381 $63,769,784
============ =========== =========== =========== =========== ===========
Capital loss carryover (available to offset
possible future gains.) The carryover
expires as follows: Money Market
Portfolio -- $57 in 2005.................. $ -- $ 57 $ -- $ -- $ -- $ --
============ =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
LARGE LARGE SMALL SMALL
SENTINEL CAP CAP CAP CAP
GROWTH GROWTH VALUE GROWTH VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aggregate gross unrealized appreciation...... $ 2,123,721 $ 3,198,111 $ 1,421,027 $1,662,516 $ 552,294
Aggregate gross unrealized depreciation...... (439,292) (480,737) (711,031) (455,419) (717,897)
----------- ----------- ----------- ---------- ----------
Net unrealized appreciation (depreciation)... $ 1,684,429 $ 2,717,374 $ 709,996 $1,207,097 $ (165,603)
----------- ----------- ----------- ---------- ----------
Aggregate cost of securities for federal
income tax purposes......................... $10,495,647 $11,792,175 $14,958,592 $8,693,053 $8,552,455
=========== =========== =========== ========== ==========
Capital loss carryover (available to offset
possible future gains.) The carryover
expires as follows: Large Cap
Growth -- $331,257 in 2006; Large Cap
Value -- $606,858 in 2006; Small Cap
Growth -- $713,295 in 2006; Small Cap
Value -- $599,117 in 2006................... $ -- $ 331,257 $ 606,858 $ 713,295 $ 599,117
=========== =========== =========== ========== ==========
</TABLE>
99
<PAGE> 101
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
7. AUTHORIZED CAPITAL STOCK AND CAPITAL STOCK TRANSACTIONS
On December 31, 1998, there were 1.2 billion shares of $0.01 par value capital
stock authorized for the Fund. The shares of capital stock are divided into
eleven series: Growth Portfolio, Money Market Portfolio, Bond Portfolio, Managed
Portfolio, Aggressive Growth Portfolio, International Portfolio, Sentinel Growth
Portfolio, Large Cap Growth Portfolio, Large Cap Value Portfolio, Small Cap
Growth Portfolio and Small Cap Value Portfolio. The Growth Portfolio consists of
75 million shares, the Money Market Portfolio consists of 150 million shares;
for the Large Cap Growth, Large Cap Value, Small Cap Growth and Small Cap Value
Portfolios consist of 50 million shares and each of the other series consists of
5 million shares.
On December 31, 1998, Provident Mutual Life Insurance Company owned 633,521
shares of Large Cap Growth, 986,029 shares of Large Cap Value, 400,000 shares of
Small Cap Growth and 400,000 shares of Small Cap Value.
Transactions in capital stock for the period ended December 31, 1998 were as
follows:
<TABLE>
<CAPTION>
MONEY MARKET
GROWTH PORTFOLIO PORTFOLIO BOND PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold................ 1,837,947 $ 32,406,592 165,155,447 $ 165,155,447 1,435,423 $15,864,807
Shares redeemed............ (1,249,358) (22,097,256) (142,035,980) (142,035,980) (417,928) (4,628,289)
Shares reinvested.......... 2,418,983 40,098,617 3,994,543 3,994,543 140,681 1,555,386
---------- ------------ ------------ ------------- --------- -----------
Net contributions from
affiliated insurance
companies................. 3,007,572 $ 50,407,953 27,114,010 $ 27,114,010 1,158,176 $12,791,904
========== ============ ============ ============= ========= ===========
<CAPTION>
MANAGED PORTFOLIO
- --------------------------- ----------------------
SHARES AMOUNT
- --------------------------- ----------------------
<S> <C> <C>
Shares sold................ 623,703 $10,481,421
Shares redeemed............ (360,939) (6,051,923)
Shares reinvested.......... 285,692 4,640,106
-------- -----------
Net contributions from
affiliated insurance
companies................. 548,456 $ 9,069,604
======== ===========
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH INTERNATIONAL SENTINEL GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold.............................................. 493,256 $10,260,111 796,247 $10,834,572 240,467 $2,911,418
Shares redeemed.......................................... (309,019) (6,350,296) (615,500) (8,284,431) (56,545) (668,790)
Shares reinvested........................................ 205,061 4,131,983 378,012 4,819,514 148,986 1,693,967
-------- ----------- -------- ----------- ------- ----------
Net contributions from affiliated insurance companies.... 389,298 $ 8,041,798 558,759 $ 7,369,655 332,908 $3,936,595
======== =========== ======== =========== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP SMALL CAP SMALL CAP
GROWTH PORTFOLIO VALUE PORTFOLIO GROWTH PORTFOLIO VALUE PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold................ 1,711,101 $17,230,972 1,685,241 $16,459,222 1,153,905 $10,747,921 1,084,795 $9,720,129
Shares redeemed............ (495,712) (5,313,536) (108,503) (1,043,850) (165,750) (1,551,316) (105,824) (899,205)
Shares reinvested.......... 0 0 0 0 0 0 0 0
--------- ----------- --------- ----------- --------- ----------- --------- ----------
Net contributions from
affiliated insurance
companies................. 1,215,389 $11,917,436 1,576,738 $15,415,372 988,155 $ 9,196,605 978,971 $8,820,924
========= =========== ========= =========== ========= =========== ========= ==========
</TABLE>
100
<PAGE> 102
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1998 -- Concluded
- --------------------------------------------------------------------------------
Transactions in capital stock for the year ended December 31, 1997 were as
follows:
<TABLE>
<CAPTION>
MONEY MARKET
GROWTH PORTFOLIO PORTFOLIO BOND PORTFOLIO
- --------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold................ 1,328,421 $ 23,557,083 116,153,761 $ 116,153,761 608,494 $ 6,478,790
Shares redeemed............ (1,033,097) (18,272,623) (109,109,613) (109,109,613) (192,816) (2,047,805)
Shares reinvested.......... 1,736,600 28,056,401 3,098,096 3,098,096 108,875 1,143,011
---------- ------------ ------------ ------------- -------- -----------
Net contributions from
affiliated insurance
companies................. 2,031,924 $ 33,340,861 10,142,244 $ 10,142,244 524,553 $ 5,573,996
========== ============ ============ ============= ======== ===========
Shares exchanged in
acquisition of Common
Stock Portfolios.......... 716,786 13,633,276 -- -- -- --
---------- ------------ ------------ ------------- -------- -----------
<CAPTION>
MANAGED PORTFOLIO
- --------------------------- ----------------------
SHARES AMOUNT
- --------------------------- ----------------------
<S> <C> <C>
Shares sold................ 538,094 $ 8,544,898
Shares redeemed............ (338,821) (5,264,441)
Shares reinvested.......... 129,171 1,970,912
-------- -----------
Net contributions from
affiliated insurance
companies................. 328,444 $ 5,251,369
======== ===========
Shares exchanged in
acquisition of Common
Stock Portfolios.......... -- --
-------- -----------
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE
GROWTH INTERNATIONAL SENTINEL GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold................................................ 513,839 $10,376,849 970,932 $13,015,260 69,861 $ 976,211
Shares redeemed............................................ (187,215) (3,823,958) (484,512) (6,465,439) (7,419) (103,927)
Shares reinvested.......................................... 21,347 391,283 305,922 3,775,073 2,383 26,667
-------- ----------- -------- ----------- ------ ---------
Net contributions from affiliated insurance companies...... 347,971 $ 6,944,174 792,342 $10,324,894 64,825 $ 898,951
======== =========== ======== =========== ====== =========
</TABLE>
8. PRINCIPAL UNDERWRITER
1717 Capital Management Company serves, without compensation, as the principal
underwriter for sale of the Fund shares to the Accounts. 1717 Capital Management
Company is an indirect wholly-owned subsidiary of PMLIC.
9. SUBSEQUENT DIVIDEND
On December 31, 1998, the Board of Directors declared the following net
investment income and capital gain dividends to shareholders of record on
December 31, 1998, ex-dividend date January 5, 1999, payable on January 6, 1999
as follows:
<TABLE>
<CAPTION>
TOTAL PER SHARE
----------------------- --------------------
NET NET
INVESTMENT CAPITAL INVESTMENT CAPITAL
PORTFOLIO INCOME GAIN INCOME GAIN
- --------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Growth............... $1,058,688 $6,184,504 $.0632 $ .3692
Bond................. 506,982 398,338 .1543 .1213
Managed.............. 499,598 3,406,936 .1303 .8884
Aggressive Growth.... 293,724 7,283,996 .1139 2.8253
International........ 813,330 4,172,939 .1579 .8101
Sentinel Growth...... 23,574 537,394 .0260 .5931
Large Cap Growth..... 3,102 -- .0026 --
Large Cap Value...... 105,080 -- .0666 --
Small Cap Growth..... -- -- -- --
Small Cap Value...... 17,055 -- .0174 --
</TABLE>
101
<PAGE> 103
Form 16169 12.98
[provident mutual logo]
[Bulk Rate U.S. Postage Paid Graphic]
