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MARKET STREET FUND, INC.
SUPPLEMENT, DATED DECEMBER 1, 2000, TO THE PROSPECTUS, DATED MAY 1, 2000
Market Street Fund, Inc.'s Board of Directors (the "Board") has approved a plan
to reorganize and redomesticate Market Street Fund, Inc. (a Maryland
corporation) as a Delaware business trust to be named "Market Street Fund"
(together with Market Street Fund, Inc., the "Fund"). In connection with that
reorganization and redomestication plan (the "Reorganization"), the Fund's Board
of Directors has authorized a proxy solicitation to obtain shareholder approval
of a number of proposals described more fully below. Shareholders of record as
of the close of business on November 30, 2000, will be asked to vote on the
Reorganization and each of the following proposals:
1. change the investment approaches of and rename certain
Portfolios, and change Growth Portfolio's investment
objective;
2. approve a new investment advisory agreement between the Fund
and Market Street Investment Management Company ("MSIM") for
all Portfolios; and
3. permit MSIM to enter into and materially amend subadvisory
agreements for certain Portfolios without shareholder
approval.
Any investors who made their first investment in one or more of the Fund's
Portfolios after November 30, 2000 will not be offered the opportunity to vote
on these changes. This supplement briefly tells all shareholders and new
investors, however, about the changes that will be made for each of the Fund's
Portfolios if shareholders of record approve the proposed changes. The following
descriptions summarize information described more fully in the Fund's proxy
materials. If you wish information in greater detail on any of these proposals,
please call 1-800-523-4681 for more information.
WHY WE WANT TO REORGANIZE THE FUND?
- Delaware law is favorable to mutual funds, which are the underlying
investments for your variable contracts.
HOW THE REORGANIZATION WILL AFFECT THE FUND AND PORTFOLIOS?
- Your Portfolio's investment objective, policies, and investment advisers
will not change because of the Reorganization, although these changes
may occur pending shareholder approval of other proposals made within
the proxy statement.
- The Reorganization will not affect your Portfolio's share price as
Provident Mutual Life Insurance Company ("PMLIC") will bear all costs of
the Reorganization;
- You will own the same number of shares; and any declared, but
undistributed; dividends or capital gains for your Portfolio will carry
over after the Reorganization.
CHANGE INVESTMENT APPROACHES, NAMES OF GROWTH, MANAGED, AND AGGRESSIVE GROWTH
PORTFOLIOS, AND GROWTH PORTFOLIO'S INVESTMENT OBJECTIVE
1. CHANGE GROWTH PORTFOLIO'S INVESTMENT OBJECTIVE, INVESTMENT APPROACH,
AND NAME
- New name - ALL PRO BROAD EQUITY PORTFOLIO
- New investment objective -- to seek long-term capital appreciation
<PAGE> 2
- Shift from a totally value-oriented investment strategy to an
investment strategy that combines a growth-style with a value-style
of investing
- Assume an "all pro" multiple-manager approach
- Invest primarily in equity securities of both larger and smaller
companies included in the Wilshire 5000 Index that offer
above-average potential for growth in the future
- Broaden market sample by investing in four principal asset segments:
small cap growth, small cap value, large cap growth, and large cap
value
- New advisory role for MSIM - provide overall supervision of each
Portfolio as a whole, select "all pro" subadvisers, allocate
investment segments among the separate "all pro" subadvisers, and
monitor these subadvisers and the Portfolio
- Incur some costs in terms of brokerage commissions necessary to
implement the change in investment approach, to the extent the
change requires the sale of current securities and reinvestment of
the proceeds
2. CHANGE AGGRESSIVE GROWTH PORTFOLIO'S INVESTMENT APPROACH AND NAME
- New name - MID CAP GROWTH PORTFOLIO
- Shift from investments primarily in securities of small
capitalization companies and/or unseasoned companies to investments
primarily in securities of mid cap companies
- Broaden the available investment options offered by the Fund
- Incur some costs in terms of brokerage commissions necessary to
implement the change in investment approach, to the extent the
change requires the sale of current securities and reinvestment of
the proceeds
3. CHANGE MANAGED PORTFOLIO'S INVESTMENT APPROACH AND NAME
- New name -- BALANCED PORTFOLIO -- with two segments of assets: bond
and equity portions
- Equity portion will shift over the longer term to growth-oriented
investing
- Subadviser with a long-term, established growth-oriented track
record
- Incur some costs in terms of brokerage commissions necessary to
implement the change in investment approach, to the extent the
change requires the sale of current securities and reinvestment of
the proceeds
NEW INVESTMENT ADVISORY AGREEMENT WITH MSIM FOR ALL PORTFOLIOS AND SUBADVISERS
- MSIM will serve as the investment adviser to all eleven (11) Fund Portfolios
- MSIM, an experienced manager of managers (for four (4) of the Fund's current
Portfolios, namely, the All Pro Large Cap Growth, All Pro Large Cap Value,
All Pro Small Cap Growth, and All Pro Small Cap Value Portfolios, will have
the authority, now or in the future, to implement this "manager-of-managers"
approach for any or all Portfolios without another shareholder vote
- Use of a "manager-of-managers" approach allows a Portfolio to benefit from
the expertise of various subadvisers each of whom specializes in particular
investment strategies that are intended to assist the Portfolio in achieving
its investment goals
2
<PAGE> 3
- MSIM has retained Wilshire Associates, Incorporated ("Wilshire") as an
investment management consultant to assist MSIM in identifying and
evaluating the performance of subadvisers for the All Pro Portfolios, and
Wilshire's role is solely to assist MSIM in gathering data and performing
the quantitative analysis necessary to identify the styles and past
performance of potential subadvisers and in performing ongoing quantitative
analysis of the performance of a Portfolio's subadvisers and in determining
whether changes in a subadviser would be desirable for the Portfolio
- For the Money Market Portfolio, MSIM employs a team approach, headed by Ms.
Dina Welch who will be assisted by Ms. Kathleen M. Larrabee, both of whom
have over fifteen years of money market instrument investment experience,
including previous management of the Money Market Portfolio
- In addition to the duties of the former investment adviser under the old
investment advisory agreement, MSIM duties will also include:
- Providing general oversight, supervision and monitoring of each
Portfolio and the compliance by the subadvisers with the investment
objective and policies of the Portfolio
- Reviewing on an ongoing basis the performance of the subadvisers
managing each Portfolio
- Determining when a current subadviser should be terminated and
selecting a successor subadviser
- Paying the subadvisers from MSIM's advisory fee
- Under the "manager-of-managers" approach in the new investment advisory
agreement, the Fund will compensate MSIM for its oversight services and
supervision and monitoring of the subadvisers who will be making the
day-to-day investment decisions
NEW SUBADVISERS
- For the ALL PRO BROAD EQUITY PORTFOLIO (formerly, the "Growth Portfolio") --
Alliance Capital Management Corp. ("Alliance"), Sanford C. Bernstein & Co.,
LLC ("Bernstein"), Husic Capital Management ("Husic"), and Reams Asset
Management Company, LLC ("Reams") will serve as subadvisers
- For the MID CAP GROWTH PORTFOLIO (formerly, the "Aggressive Growth
Portfolio") -- T. Rowe Price Associates, Inc. will serve as subadviser
- For the BALANCED PORTFOLIO (formerly, the "Managed Portfolio") -- Fred Alger
Management Inc. will serve as subadviser
- For the BOND PORTFOLIO -- Western Asset Management Company will serve as
subadviser
- For the MONEY MARKET PORTFOLIO, MSIM will manage the Portfolio without the
services of a subadviser
EXISTING SUBADVISERS
- For the ALL PRO LARGE CAP GROWTH PORTFOLIO - Alliance has joined Geewax
Terker & Co. to serve as subadvisers
- For the ALL PRO LARGE CAP VALUE PORTFOLIO - Bernstein and Mellon Equity
Associates, LLP serve as subadvisers
- For the ALL PRO SMALL CAP GROWTH PORTFOLIO - Lee Munder Investments Ltd. has
joined Husic to serve as subadvisers
- For the ALL PRO SMALL CAP VALUE PORTFOLIO - Reams and Sterling Capital
Management Company serve as subadvisers
3
<PAGE> 4
- For the EQUITY 500 INDEX PORTFOLIO -- State Street Global Advisors serves as
subadviser
- For INTERNATIONAL PORTFOLIO -- The Boston Company Asset Management, LLC
serves as subadviser
SUBADVISER AND PORTFOLIO MANAGER INFORMATION
- ALLIANCE CAPITAL MANAGEMENT L.P., located at 1345 Avenue of the Americas,
New York, New York, has expertise in large-cap growth management and
provides portfolio management for $388 billion in assets. Alliance's
following professionals have served as portfolio managers to Large Cap
Growth Portfolio since December 1, 2000 and will serve as portfolio managers
for All Pro Broad Equity Portfolio after the Reorganization: (1) Stephen W.
Pelensky, Penn State University; M.B.A., University of Pennsylvania; joined
Alliance in 1994, began investment experience in 1979; and (2) William D.
Baird, University of Michigan; M.B.A., New York University; joined Alliance
in 1994, began investment experience in 1992.
- SANFORD C. BERNSTEIN & CO., LLC, located at 767 Fifth Avenue, New York, New
York, has expertise in large-cap value management and provides portfolio
management for approximately $87 billion in assets. Bernstein's following
investment professionals have served as portfolio managers to All Pro Large
Cap Value Portfolio since April 13, 2000 and will serve as portfolio
managers for All Pro Broad Equity Portfolio after the Reorganization : (1)
Marilyn G. Fedak, Chief Investment Officer and Chairman of the U.S. Equity
Investment Policy Group at Bernstein since 1972; has managed portfolio
investments since 1976; joined Bernstein in 1984; B.A. Smith College;
M.B.A., Harvard Business School; and (2) Steven Pisarkiewicz, with Bernstein
since 1989; Senior Portfolio Manager since 1997; B.S., University of
Missouri; M.B.A., University of California at Berkeley.
- FRED ALGER MANAGEMENT INC., located at One World Trade Center, Suite 9333,
New York, New York, has expertise in growth-stock management and provides
portfolio management for approximately $21.2 billion in assets. Alger's
following investment professionals will serve as portfolio managers to the
Balanced Portfolio after the Reorganization: (1) David D. Alger: A.B.
Harvard University; M.B.A. University of Michigan; serves as President and
Chief Investment Officer, joined Alger in 1971; (2) Ron Tartaro: B.S. and
M.S. Columbia University; serves as Senior Vice President, joined Alger in
1990; (3) Steve Thumm: B.S. Hofstra University; serves as Vice President,
joined Alger in 1991.
- GEEWAX TERKER & CO., located at 99 Starr St., Phoenixville, Pennsylvania,
has expertise in large-capitalization growth equity management and provides
portfolio management for approximately $8 billion in assets. Geewax's
following investment professionals have served as portfolio managers to All
Pro Large Cap Growth Portfolio since May 1, 1998: (1) John J. Geewax: B.S.,
M.B.A., J.D., Ph.D. (ABD), University of Pennsylvania; joined Geewax in
1982, began investment experience in 1980; and (2) Christopher P. Ouimet:
B.S., Albright College; M.B.A., St. Joseph's University; joined Geewax in
1994.
- HUSIC CAPITAL MANAGEMENT, located at 555 California Street, Suite 2900, San
Francisco, California, has expertise in small-cap growth management and
provides portfolio management for more than $4 billion in assets, including
nearly $400 million in its small-cap growth product. Husic's following
investment professionals have served as portfolio managers to All Pro Small
Cap Growth Portfolio since May 1, 1998 and will serve as portfolio managers
for All Pro Broad Equity Portfolio after the Reorganization: Frank J. Husic,
CFA: B.S. Mathematics, Youngstown State University; M.S. in Industrial
Administration, Carnegie Mellon University; M.A. Economics, University of
Pennsylvania; founded Husic in 1986, began investment experience in 1971;
and Ronald J. Leong, CFA: B.S. with High Honors in Banking and Finance, San
Francisco State University; joined Husic in 1989, began investment
experience in 1989.
- LEE MUNDER INVESTMENTS LTD., located at 200 Clarendon Street, Boston,
Massachusetts, has expertise in small capitalization growth companies and
provides investment management for approximately $400 million in assets. Lee
Munder's following investment professionals have served as portfolio
managers to All Pro Small Cap Growth Portfolio since August 24, 2000; and
these same professionals, while employed for another investment adviser,
served as portfolio managers for the Portfolio from May 1, 1998 to August
24, 2000: (1) Nicholas S. Battelle, CFA: degrees from Duke University and
Columbia University Graduate School of Business; joined SAW in 1982 and
began investment experience in 1970; and (2) Jonathan F. Stone:
undergraduate degree from Brown University and M.B.A. Harvard University;
joined SAW in 1997, began investment experience in 1990.
4
<PAGE> 5
- MELLON EQUITY ASSOCIATES, LLP located at 500 Grant Street, Suite 4200,
Pittsburgh, Pennsylvania, has expertise in large cap stock management and
provides portfolio management for approximately $39 billion in assets.
Mellon Equity's following investment professionals have served as portfolio
managers to All Pro Large Cap Value Portfolio since May 1, 1998: (1) Robert
A. Wilk, CFA: B.S. in Management and Electrical Engineering, M.I.T.; M.S. in
Finance, M.I.T.; joined Mellon Equity in 1990, began investment experience
in 1971; (2) Jocelin A. Reed, CFA: B.S. in Finance, Pennsylvania State
University; M.B.A. in Finance, University of Pittsburgh; joined Mellon
Equity in 1996, began investment experience in 1991.
- REAMS ASSET MANAGEMENT COMPANY, LLC, located at 227 Washington Street,
Columbus, Indiana, has expertise in small and small to mid-cap value
management and provides portfolio management for approximately $8 billion in
assets under management. Reams' following investment professionals have
served as portfolio managers to All Pro Small Cap Value Portfolio since
December 1999 and will serve as portfolio managers for All Pro Broad Equity
Portfolio after the Reorganization: (1) David R. Milroy: B.B.A. and M.S.,
University of Wisconsin; joined Reams in 1990 and began investment
experience in 1986; (2) Fred W. Reams: B.A. and M.A., Western Michigan
University; joined Reams in 1981, and began investment experience in 1967.
- STATE STREET GLOBAL ADVISORS, located at One International Place, Boston,
Massachusetts, has expertise in managing index funds and provides investment
management for approximately $738 billion in assets. Anne Eisenburg,
Portfolio Manager and Principal from State Street, uses a sophisticated
computer program.
- STERLING CAPITAL MANAGEMENT COMPANY, located at 301 South College Street,
Charlotte, North Carolina, has expertise in small capitalization value
stocks and provides investment management for approximately $3.4 billion.
Sterling's following investment professionals have served as portfolio
managers to All Pro Small Cap Value Portfolio since February 2000: (1) David
M. Ralston: B.S.B.A., Appalachian State University; joined Sterling in 1991;
(2) Brian R. Walton, CFA: B.S., Indiana University; M.B.A., University of
NC-Chapel Hill; joined Sterling in 1995; and (3) Eduardo A. Brea, CFA: B.S.
University of Florida; M.B.A., University of South Florida; joined Sterling
in 1995.
- T. ROWE PRICE ASSOCIATES, INC., located at 100 E. Pratt Street, Baltimore,
Maryland, has expertise in mid cap growth management and provides portfolio
management for approximately $179 billion in assets. Mid Cap Growth
Portfolio will be managed by an investment advisory committee chaired by
Brian Berghuis, Managing Director. Mr. Berghuis and Mr. John Wakeman will
serve as portfolio managers of the Portfolio after the Reorganization. Mr.
Berghuis is a Chartered Financial Analyst, and has been with T. Rowe Price
since 1985. Mr. Wakeman has been with T. Rowe Price since 1989.
- WESTERN ASSET MANAGEMENT COMPANY, located at 117 East Colorado Boulevard,
Pasadena, California, has expertise in bond and fixed-income management and
provides portfolio management for approximately $65.3 billion in assets.
Western Asset's following investment professionals will serve as portfolio
managers to the Bond Portfolio after the Reorganization: (1) S. Kenneth
Leech: B.A. University of Pennsylvania; M.B.A. Wharton School; serves as
Chief Investment Officer, joined the firm in 1991; (2) Stephen A. Walsh,
Deputy: B.A. Duke University; M.B.A. Dartmouth College; serves as Chief
Investment Officer, joined the firm in 1990.
MSIM is a registered investment adviser and is also an indirect wholly owned
subsidiary of PMLIC. MSIM's address is 1000 Chesterbrook Boulevard, Berwyn,
Pennsylvania. The investment advisory fees payable to MSIM for each Portfolio
under the new investment advisory agreement are listed below:
5
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<TABLE>
<CAPTION>
==========================================================================================
PORTFOLIOS NEW ADVISORY FEE(1)
==========================================================================================
<S> <C>
All Pro Large Cap Growth Portfolio 70
------------------------------------------------------------------------------------------
All Pro Large Cap Value Portfolio 70
------------------------------------------------------------------------------------------
All Pro Small Cap Growth Portfolio 90
------------------------------------------------------------------------------------------
All Pro Small Cap Value Portfolio 90
------------------------------------------------------------------------------------------
Growth Portfolio 75
------------------------------------------------------------------------------------------
Equity 500 Index Portfolio 24
------------------------------------------------------------------------------------------
International Portfolio 75
------------------------------------------------------------------------------------------
Aggressive Growth Portfolio 75
------------------------------------------------------------------------------------------
Managed Portfolio 55
------------------------------------------------------------------------------------------
Bond Portfolio 40
------------------------------------------------------------------------------------------
Money Market Portfolio 25
------------------------------------------------------------------------------------------
</TABLE>
1. Certain Portfolios have investment advisory fee breakpoints.
In those cases, the table above shows the fee prior to the
first breakpoint, if applicable.
PERMIT MSIM TO ENTER INTO AND TO AMEND MATERIALLY SUBADVISORY AGREEMENTS FOR
CERTAIN PORTFOLIOS WITHOUT SHAREHOLDER APPROVAL (THE ALL PRO BROAD EQUITY
(FORMERLY, "GROWTH"), THE EQUITY 500 INDEX, THE INTERNATIONAL, THE MID CAP
(FORMERLY, THE "AGGRESSIVE") THE GROWTH, THE BALANCED (FORMERLY, THE "MANAGED"),
THE BOND, AND THE MONEY MARKET PORTFOLIOS)
- In implementing the manager-of-managers approach, MSIM will be authorized,
subject to the Board's approval and certain other conditions, in the future
to enter into and/or to amend materially subadvisory agreements on behalf of
a Portfolio without obtaining shareholder approval
- This arrangement enables the Fund's Portfolios to operate more efficiently
as MSIM can make subadvisory changes without the expenses and delays
associated with obtaining shareholder approval
6
<PAGE> 7
MARKET STREET FUND, INC.
SUPPLEMENT, DATED DECEMBER 1, 2000, TO THE PROSPECTUS, DATED MAY 1, 2000
Market Street Fund, Inc.'s Board of Directors (the "Board") has approved a plan
to reorganize and redomesticate Market Street Fund, Inc. (a Maryland
corporation) as a Delaware business trust to be named "Market Street Fund"
(together with Market Street Fund, Inc., the "Fund"). In connection with that
reorganization and redomestication plan (the "Reorganization"), the Fund's Board
of Directors has authorized a proxy solicitation to obtain shareholder approval
of a number of proposals described more fully below. Shareholders of record as
of the close of business on November 30, 2000, will be asked to vote on the
Reorganization and each of the following proposals:
1. change the investment approaches of and rename certain
Portfolios, and change Growth Portfolio's investment
objective;
2. approve a new investment advisory agreement between the Fund
and Market Street Investment Management Company ("MSIM") for
all Portfolios; and
3. permit MSIM to enter into and materially amend subadvisory
agreements for certain Portfolios without shareholder
approval.
Since you made your first investment in one or more of the Fund's Portfolios
after November 30, 2000, you will not be offered the opportunity to vote on
these changes. This supplement briefly tells you, however, about the changes
that will be made for each of the Fund's Portfolios if shareholders of record
approve the proposed changes. The following descriptions summarize information
described more fully in the Fund's proxy materials. If you wish information in
greater detail on any of these proposals, please call 1-800-523-4681 for more
information.
WHY WE WANT TO REORGANIZE THE FUND?
- Delaware law is favorable to mutual funds, which are the
underlying investments for your variable contracts.
HOW THE REORGANIZATION WILL AFFECT THE FUND AND PORTFOLIOS?
- Your Portfolio's investment objective, policies, and
investment advisers will not change because of the
Reorganization, although these changes may occur pending
shareholder approval of other proposals made within the proxy
statement.
- The Reorganization will not affect your Portfolio's share
price as Provident Mutual Life Insurance Company ("PMLIC")
will bear all costs of the Reorganization;
- You will own the same number of shares; and any declared, but
undistributed; dividends or capital gains for your Portfolio
will carry over after the Reorganization.
CHANGE INVESTMENT APPROACHES, NAMES OF GROWTH, MANAGED, AND AGGRESSIVE GROWTH
PORTFOLIOS, AND GROWTH PORTFOLIO'S INVESTMENT OBJECTIVE
1. CHANGE GROWTH PORTFOLIO'S INVESTMENT OBJECTIVE, INVESTMENT
APPROACH, AND NAME
- New name - ALL PRO BROAD EQUITY PORTFOLIO
- New investment objective -- to seek long-term capital
appreciation
<PAGE> 8
- Shift from a totally value-oriented investment strategy to an
investment strategy that combines a growth-style with a
value-style of investing
- Assume an "all pro" multiple-manager approach
- Invest primarily in equity securities of both larger and
smaller companies included in the Wilshire 5000 Index that
offer above-average potential for growth in the future
- Broaden market sample by investing in four principal asset
segments: small cap growth, small cap value, large cap growth,
and large cap value
- New advisory role for MSIM - provide overall supervision of
each Portfolio as a whole, select "all pro" subadvisers,
allocate investment segments among the separate "all pro"
subadvisers, and monitor these subadvisers and the Portfolio
- Incur some costs in terms of brokerage commissions necessary
to implement the change in investment approach, to the extent
the change requires the sale of current securities and
reinvestment of the proceeds
2. CHANGE AGGRESSIVE GROWTH PORTFOLIO'S INVESTMENT APPROACH AND
NAME
- New name - MID CAP GROWTH PORTFOLIO
- Shift from investments primarily in securities of small
capitalization companies and/or unseasoned companies to
investments primarily in securities of mid cap companies
- Broaden the available investment options offered by the Fund
- Incur some costs in terms of brokerage commissions necessary
to implement the change in investment approach, to the extent
the change requires the sale of current securities and
reinvestment of the proceeds
3. CHANGE MANAGED PORTFOLIO'S INVESTMENT APPROACH AND NAME
- New name -- BALANCED PORTFOLIO -- with two segments of assets:
bond and equity portions
- Equity portion will shift over the longer term to
growth-oriented investing
- Subadviser with a long-term, established growth-oriented track
record
- Incur some costs in terms of brokerage commissions necessary
to implement the change in investment approach, to the extent
the change requires the sale of current securities and
reinvestment of the proceeds
NEW INVESTMENT ADVISORY AGREEMENT WITH MSIM FOR ALL PORTFOLIOS AND SUBADVISERS
- MSIM will serve as the investment adviser to all eleven (11)
Fund Portfolios
- MSIM, an experienced manager of managers for four (4) of the
Fund's current Portfolios, namely, the All Pro Large Cap
Growth, All Pro Large Cap Value, All Pro Small Cap Growth, and
All Pro Small Cap Value Portfolios, will have the authority,
now or in the future, to implement this "manager-of-managers"
approach for any or all Portfolios without another shareholder
vote
- Use of a "manager-of-managers" approach allows a Portfolio to
benefit from the expertise of various subadvisers each of whom
specializes in particular investment strategies that are
intended to assist the Portfolio in achieving its investment
goals
2
<PAGE> 9
- MSIM has retained Wilshire Associates, Incorporated ("Wilshire") as an
investment management consultant to assist MSIM in identifying and
evaluating the performance of subadvisers for the All Pro Portfolios,
and Wilshire's role is solely to assist MSIM in gathering data and
performing the quantitative analysis necessary to identify the styles
and past performance of potential subadvisers and in performing ongoing
quantitative analysis of the performance of a Portfolio's subadvisers
and in determining whether changes in a subadviser would be desirable
for the Portfolio
- For the Money Market Portfolio, MSIM employs a team approach, headed by
Ms. Dina Welch who will be assisted by Ms. Kathleen M. Larrabee, both
of whom have over fifteen years of money market instrument investment
experience, including previous management of the Money Market Portfolio
- In addition to the duties of the former investment adviser under the
old investment advisory agreement, MSIM duties will also include:
- Providing general oversight, supervision and
monitoring of each Portfolio and the compliance by
the subadvisers with the investment objective and
policies of the Portfolio
- Reviewing on an ongoing basis the performance of the
subadvisers managing each Portfolio
- Determining when a current subadviser should be
terminated and selecting a successor subadviser
- Paying the subadvisers from MSIM's advisory fee
- Under the "manager-of-managers" approach in the new investment advisory
agreement, the Fund will compensate MSIM for its oversight services and
supervision and monitoring of the subadvisers who will be making the
day-to-day investment decisions
NEW SUBADVISERS
- For the ALL PRO BROAD EQUITY PORTFOLIO (formerly, the "Growth
Portfolio") -- Alliance Capital Management Corp. ("Alliance"), Sanford
C. Bernstein & Co., LLC ("Bernstein"), Husic Capital Management
("Husic"), and Reams Asset Management Company, LLC ("Reams") will serve
as subadvisers
- For the MID CAP GROWTH PORTFOLIO (formerly, the "Aggressive Growth
Portfolio") -- T. Rowe Price Associates, Inc. will serve as subadviser
- For the BALANCED PORTFOLIO (formerly, the "Managed Portfolio") -- Fred
Alger Management Inc. will serve as subadviser
- For the BOND PORTFOLIO -- Western Asset Management Company will serve
as subadviser
- For the MONEY MARKET PORTFOLIO, MSIM will manage the Portfolio without
the services of a subadviser
EXISTING SUBADVISERS
- For the ALL PRO LARGE CAP GROWTH PORTFOLIO - Alliance has joined Geewax
Terker & Co. to serve as subadvisers
- For the ALL PRO LARGE CAP VALUE PORTFOLIO - Bernstein and Mellon Equity
Associates, LLP serve as subadvisers
- For the ALL PRO SMALL CAP GROWTH PORTFOLIO - Lee Munder Investments
Ltd. has joined Husic to serve as subadvisers
- For the ALL PRO SMALL CAP VALUE PORTFOLIO - Reams and Sterling Capital
Management Company serve as subadvisers
3
<PAGE> 10
- For the EQUITY 500 INDEX PORTFOLIO -- State Street Global Advisors
serves as subadviser
- For INTERNATIONAL PORTFOLIO -- The Boston Company Asset Management, LLC
serves as subadviser
SUBADVISER AND PORTFOLIO MANAGER INFORMATION
- ALLIANCE CAPITAL MANAGEMENT L.P., located at 1345 Avenue of the
Americas, New York, New York, has expertise in large-cap growth
management and provides portfolio management for $388 billion in
assets. Alliance's following professionals have served as portfolio
managers to Large Cap Growth Portfolio since December 1, 2000 and will
serve as portfolio managers for All Pro Broad Equity Portfolio after
the Reorganization: (1) Stephen W. Pelensky, Penn State University;
M.B.A., University of Pennsylvania; joined Alliance in 1994, began
investment experience in 1979; and (2) William D. Baird, University of
Michigan; M.B.A., New York University; joined Alliance in 1994, began
investment experience in 1992.
- SANFORD C. BERNSTEIN & CO., LLC, located at 767 Fifth Avenue, New York,
New York, has expertise in large-cap value management and provides
portfolio management for approximately $87 billion in assets.
Bernstein's following investment professionals have served as portfolio
managers to All Pro Large Cap Value Portfolio since April 13, 2000 and
will serve as portfolio managers for All Pro Broad Equity Portfolio
after the Reorganization : (1) Marilyn G. Fedak, Chief Investment
Officer and Chairman of the U.S. Equity Investment Policy Group at
Bernstein since 1972; has managed portfolio investments since 1976;
joined Bernstein in 1984; B.A. Smith College; M.B.A., Harvard Business
School; and (2) Steven Pisarkiewicz, with Bernstein since 1989; Senior
Portfolio Manager since 1997; B.S., University of Missouri; M.B.A.,
University of California at Berkeley.
- FRED ALGER MANAGEMENT INC., located at One World Trade Center, Suite
9333, New York, New York, has expertise in growth-stock management and
provides portfolio management for approximately $21.2 billion in
assets. Alger's following investment professionals will serve as
portfolio managers to the Balanced Portfolio after the Reorganization:
(1) David D. Alger: A.B. Harvard University; M.B.A. University of
Michigan; serves as President and Chief Investment Officer, joined
Alger in 1971; (2) Ron Tartaro: B.S. and M.S. Columbia University;
serves as Senior Vice President, joined Alger in 1990; (3) Steve Thumm:
B.S. Hofstra University; serves as Vice President, joined Alger in
1991.
- GEEWAX TERKER & CO., located at 99 Starr St., Phoenixville,
Pennsylvania, has expertise in large-capitalization growth equity
management and provides portfolio management for approximately $8
billion in assets. Geewax's following investment professionals have
served as portfolio managers to All Pro Large Cap Growth Portfolio
since May 1, 1998: (1) John J. Geewax: B.S., M.B.A., J.D., Ph.D. (ABD),
University of Pennsylvania; joined Geewax in 1982, began investment
experience in 1980; and (2) Christopher P. Ouimet: B.S., Albright
College; M.B.A., St. Joseph's University; joined Geewax in 1994.
- HUSIC CAPITAL MANAGEMENT, located at 555 California Street, Suite 2900,
San Francisco, California, has expertise in small-cap growth management
and provides portfolio management for more than $4 billion in assets,
including nearly $400 million in its small-cap growth product. Husic's
following investment professionals have served as portfolio managers to
All Pro Small Cap Growth Portfolio since May 1, 1998 and will serve as
portfolio managers for All Pro Broad Equity Portfolio after the
Reorganization: Frank J. Husic, CFA: B.S. Mathematics, Youngstown State
University; M.S. in Industrial Administration, Carnegie Mellon
University; M.A. Economics, University of Pennsylvania; founded Husic
in 1986, began investment experience in 1971; and Ronald J. Leong, CFA:
B.S. with High Honors in Banking and Finance, San Francisco State
University; joined Husic in 1989, began investment experience in 1989.
- LEE MUNDER INVESTMENTS LTD., located at 200 Clarendon Street, Boston,
Massachusetts, has expertise in small capitalization growth companies
and provides investment management for approximately $400 million in
assets. Lee Munder's following investment professionals have served as
portfolio managers to All Pro Small Cap Growth Portfolio since August
24, 2000; and these same professionals, while employed for another
investment adviser, served as portfolio managers for the Portfolio from
May 1, 1998 to August 24, 2000: (1) Nicholas S. Battelle, CFA: degrees
from Duke University and Columbia University Graduate School of
Business; joined SAW in 1982 and began investment experience in 1970;
and (2) Jonathan F. Stone: undergraduate degree from Brown University
and M.B.A. Harvard University; joined SAW in 1997, began investment
experience in 1990.
4
<PAGE> 11
- MELLON EQUITY ASSOCIATES, LLP located at 500 Grant Street, Suite 4200,
Pittsburgh, Pennsylvania, has expertise in large cap stock management
and provides portfolio management for approximately $39 billion in
assets. Mellon Equity's following investment professionals have served
as portfolio managers to All Pro Large Cap Value Portfolio since May 1,
1998: (1) Robert A. Wilk, CFA: B.S. in Management and Electrical
Engineering, M.I.T.; M.S. in Finance, M.I.T.; joined Mellon Equity in
1990, began investment experience in 1971; (2) Jocelin A. Reed, CFA:
B.S. in Finance, Pennsylvania State University; M.B.A. in Finance,
University of Pittsburgh; joined Mellon Equity in 1996, began
investment experience in 1991.
- REAMS ASSET MANAGEMENT COMPANY, LLC, located at 227 Washington Street,
Columbus, Indiana, has expertise in small and small to mid-cap value
management and provides portfolio management for approximately $8
billion in assets under management. Reams' following investment
professionals have served as portfolio managers to All Pro Small Cap
Value Portfolio since December 1999 and will serve as portfolio
managers for All Pro Broad Equity Portfolio after the Reorganization:
(1) David R. Milroy: B.B.A. and M.S., University of Wisconsin; joined
Reams in 1990 and began investment experience in 1986; (2) Fred W.
Reams: B.A. and M.A., Western Michigan University; joined Reams in
1981, and began investment experience in 1967.
- STATE STREET GLOBAL ADVISORS, located at One International Place,
Boston, Massachusetts, has expertise in managing index funds and
provides investment management for approximately $738 billion in
assets. Anne Eisenburg, Portfolio Manager and Principal from State
Street, uses a sophisticated computer program.
- STERLING CAPITAL MANAGEMENT COMPANY, located at 301 South College
Street, Charlotte, North Carolina, has expertise in small
capitalization value stocks and provides investment management for
approximately $3.4 billion. Sterling's following investment
professionals have served as portfolio managers to All Pro Small Cap
Value Portfolio since February 2000: (1) David M. Ralston: B.S.B.A.,
Appalachian State University; joined Sterling in 1991; (2) Brian R.
Walton, CFA: B.S., Indiana University; M.B.A., University of NC-Chapel
Hill; joined Sterling in 1995; and (3) Eduardo A. Brea, CFA: B.S.
University of Florida; M.B.A., University of South Florida; joined
Sterling in 1995.
- T. ROWE PRICE ASSOCIATES, INC., located at 100 E. Pratt Street,
Baltimore, Maryland, has expertise in mid cap growth management and
provides portfolio management for approximately $179 billion in assets.
Mid Cap Growth Portfolio will be managed by an investment advisory
committee chaired by Brian Berghuis, Managing Director. Mr. Berghuis
and Mr. John Wakeman will serve as portfolio managers of the Portfolio
after the Reorganization. Mr. Berghuis is a Chartered Financial
Analyst, and has been with T. Rowe Price since 1985. Mr. Wakeman has
been with T. Rowe Price since 1989.
- WESTERN ASSET MANAGEMENT COMPANY, located at 117 East Colorado
Boulevard, Pasadena, California, has expertise in bond and fixed-income
management and provides portfolio management for approximately $65.3
billion in assets. Western Asset's following investment professionals
will serve as portfolio managers to the Bond Portfolio after the
Reorganization: (1) S. Kenneth Leech: B.A. University of Pennsylvania;
M.B.A. Wharton School; serves as Chief Investment Officer, joined the
firm in 1991; (2) Stephen A. Walsh, Deputy: B.A. Duke University;
M.B.A. Dartmouth College; serves as Chief Investment Officer, joined
the firm in 1990.
MSIM is a registered investment adviser and is also an indirect wholly owned
subsidiary of PMLIC. MSIM's address is 1000 Chesterbrook Boulevard, Berwyn,
Pennsylvania. The investment advisory fees payable to MSIM for each Portfolio
under the new investment advisory agreement are listed below:
5
<PAGE> 12
<TABLE>
<CAPTION>
PORTFOLIOS NEW ADVISORY FEE(1)
---------- -------------------
<S> <C>
All Pro Large Cap Growth Portfolio 70
All Pro Large Cap Value Portfolio 70
All Pro Small Cap Growth Portfolio 90
All Pro Small Cap Value Portfolio 90
Growth Portfolio 75
Equity 500 Index Portfolio 24
International Portfolio 75
Aggressive Growth Portfolio 75
Managed Portfolio 55
Bond Portfolio 40
Money Market Portfolio 25
</TABLE>
1. Certain Portfolios have investment advisory fee breakpoints. In those
cases, the table above shows the fee prior to the first breakpoint, if
applicable.
PERMIT MSIM TO ENTER INTO AND TO AMEND MATERIALLY SUBADVISORY AGREEMENTS FOR
CERTAIN PORTFOLIOS WITHOUT SHAREHOLDER APPROVAL (THE ALL PRO BROAD EQUITY
(FORMERLY, "GROWTH"), THE EQUITY 500 INDEX, THE INTERNATIONAL, THE MID CAP
(FORMERLY, THE "AGGRESSIVE") THE GROWTH, THE BALANCED (FORMERLY, THE "MANAGED"),
THE BOND, AND THE MONEY MARKET PORTFOLIOS)
- In implementing the manager-of-managers approach, MSIM will be
authorized, subject to the Board's approval and certain other
conditions, in the future to enter into and/or to amend materially
subadvisory agreements on behalf of a Portfolio without obtaining
shareholder approval
- This arrangement enables the Fund's Portfolios to operate more
efficiently as MSIM can make subadvisory changes without the expenses
and delays associated with obtaining shareholder approval
MSF REORGANIZATION PROXY STATEMENT/PROSPECTUS STICKER.002.DOC
6
