<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 21, 2000
REGISTRATION NOS. 2-98755
811-4350
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 25 [X]
AND/OR
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 26 [X]
MARKET STREET FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
103 BELLEVUE PARKWAY
WILMINGTON, DE 19809
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (302) 791-1700
------------------------
<TABLE>
<S> <C>
COPY TO:
JAMES G. POTTER, JR., ESQ. STEPHEN E. ROTH, ESQ.
MARKET STREET FUND, INC. SUTHERLAND ASBILL & BRENNAN LLP
1000 CHESTERBROOK BOULEVARD 1275 PENNSYLVANIA AVENUE, N.W.
BERWYN, PA 19312 WASHINGTON, DC 20004
(NAME AND ADDRESS OF AGENT FOR
SERVICE)
</TABLE>
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
[ ]IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b) OF RULE 485
[X]ON FEBRUARY 7, 2000 PURSUANT TO PARAGRAPH (b) OF RULE 485
[ ] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a) OF RULE 485
[ ] ON [DATE] PURSUANT TO PARAGRAPH (a) OF RULE 485
[ ] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(2) OF RULE 485
[ ] ON [DATE] PURSUANT TO PARAGRAPH (a)(2) OF RULE 485
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
[X]THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
TITLE OF SECURITIES: SHARES OF COMMON STOCK
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
MARKET STREET FUND, INC.
PROSPECTUS
February 7, 2000
[ ] The Money Market Portfolio
[ ] The Equity 500 Index Portfolio
[ ] The Growth Portfolio
[ ] The Bond Portfolio
[ ] The Managed Portfolio
[ ] The Aggressive Growth Portfolio
[ ] The International Portfolio
[ ] All Pro Large Cap Growth Portfolio
[ ] All Pro Small Cap Growth Portfolio
[ ] All Pro Large Cap Value Portfolio
[ ] All Pro Small Cap Value Portfolio
This prospectus provides essential information about these portfolios. For your
benefit and protection, please read it and keep it for future reference.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED SHARES OF
THE FUND OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW.................................................... 1
ABOUT THE PORTFOLIOS........................................ 4
The Money Market Portfolio................................ 4
The Equity 500 Index Portfolio............................ 6
The Growth Portfolio...................................... 8
The Bond Portfolio........................................ 10
The Managed Portfolio..................................... 12
The Aggressive Growth Portfolio........................... 14
The International Portfolio............................... 16
INTRODUCTION TO THE ALL PRO PORTFOLIOS...................... 18
All Pro Large Cap Growth Portfolio........................ 20
All Pro Small Cap Growth Portfolio........................ 21
All Pro Large Cap Value Portfolio......................... 22
All Pro Small Cap Value Portfolio......................... 23
RISKS OF INVESTING IN THE PORTFOLIOS........................ 24
INVESTMENT TECHNIQUES....................................... 27
MANAGEMENT.................................................. 34
DESCRIPTION OF THE FUND'S SHARES............................ 40
OTHER INFORMATION........................................... 42
APPENDIX A -- TERMS USED IN THIS PROSPECTUS................. A-1
APPENDIX B -- FINANCIAL HIGHLIGHTS.......................... B-1
</TABLE>
<PAGE> 4
OVERVIEW
This prospectus describes eleven Portfolios offered by the Fund. Each is a
separate investment portfolio with its own investment objective or objectives,
policies, restrictions and risks. An investor should consider each Portfolio
separately to determine if it is an appropriate investment. There is no
assurance that a Portfolio will achieve its investment objective or objectives,
and investors should not consider any one Portfolio alone to be a complete
investment program. As with all mutual funds, there is a risk that an investor
could lose money by investing in a Portfolio.
The different types of securities, investments, and investment techniques used
by each Portfolio all have attendant risks of varying degrees. For example, with
respect to equity securities, there can be no assurance of capital appreciation
and an investment in any stock is subject to the risk that the stock market as a
whole may decline, thereby depressing the stock's price (market risk), or the
risk that the price of a particular issuer's stock may decline due to its
financial results (financial risk). With respect to debt securities, there
exists the risk that the issuer of a security may not be able to meet its
obligations on interest or principal payments at the time required by the
instrument (credit risk, a type of financial risk). In addition, the value of
debt and other income bearing securities generally rises and falls inversely
with prevailing current interest rates (interest rate risk, a type of market
risk). As described below, an investment in certain of the Portfolios entails
special additional risks as a result of their ability to invest a substantial
portion of their assets in foreign investments, or securities of issuers in new
or emerging industries. See "Risks of Investing in the Portfolios," below.
The following chart provides a brief outline of the relative principal
characteristics of each Portfolio:
MARKET STREET FUND, INC.
<TABLE>
<CAPTION>
NAME OF GROWTH INCOME SHORT-TERM TYPICAL
PORTFOLIO POTENTIAL POTENTIAL RISK INVESTMENTS
- ---------------------- ------------- --------------- ------------- ----------------------
<S> <C> <C> <C> <C>
Money Market.......... None Low-to-Moderate Low Money Market
Instruments
Equity 500 Index...... High Low Moderate Equity Securities of
U.S. Companies
Growth................ High Moderate Moderate Equity Securities of
U.S. Companies
Bond.................. Moderate Moderate Moderate Income Bearing Debt
Securities
Managed............... Moderate-High Moderate Moderate Permissible
Investments for Other
Portfolios
Aggressive Growth..... High Low High Equity Securities of
U.S. Companies
International......... High Low High Securities of Foreign
Issuers
All Pro Large Cap High Low Moderate Equity Securities of
Growth................ Large U.S. Companies
All Pro Small Cap High Low Moderate-High Equity Securities of
Growth................ Small U.S. Companies
All Pro Large Cap High Low Moderate-High Equity Securities of
Value................. Large U.S. Companies
All Pro Small Cap High Low High Equity Securities of
Value................. Small U.S. Companies
</TABLE>
<PAGE> 5
The investment objective or objectives of each Portfolio are fundamental and may
not be changed unless authorized by the vote of a majority of the outstanding
voting shares of the Portfolio. The investment policies of each Portfolio are
not fundamental and may be changed by the Fund's board of directors without
shareholder approval, unless otherwise stated in this Prospectus or the
statement of additional information.
Notwithstanding their investment objective(s), each Portfolio may, in unusual
market conditions, for temporary defensive purposes, invest all or part of their
assets in cash and/or money market instruments of the type in which the Money
Market Portfolio may invest. To the extent that a Portfolio adopts a temporary
defensive position, it may not achieve its investment objective.
SHARES OF THE FUND AND THE PORTFOLIOS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN
INVESTMENT IN THE FUND AND THE PORTFOLIOS IS SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF MONEY INVESTED.
Shares of the Portfolios are only available through the purchase of certain
variable annuity and variable life insurance contracts (the "variable
contracts") issued by various life insurance companies, some of which may be
affiliated persons of the Portfolios. This prospectus should be read in
conjunction with the separate prospectus for each separate account and its
related policy and retained for future reference.
See "Appendix A -- Terms Used in This Prospectus" for more information about
some of the terms we use in this prospectus.
2
<PAGE> 6
[This page intentionally left blank]
<PAGE> 7
ABOUT THE PORTFOLIOS
[ ] THE MONEY MARKET PORTFOLIO
INVESTMENT OBJECTIVE
Maximum current income consistent with capital preservation and liquidity.
PRIMARY INVESTMENT STRATEGIES
The Money Market Portfolio invests exclusively in dollar-denominated money
market instruments that present minimal credit risks. These include U.S.
government securities, bank obligations, repurchase agreements, commercial
paper, and other corporate debt obligations. See Appendix A to the SAI for a
complete discussion of the money market instruments in which the Portfolio may
invest.
All of the Money Market Portfolio's money market instruments mature in 13 months
or less. The average maturity of such securities, based on their weighted dollar
value, does not exceed 90 days. The Portfolio intends to maintain a stable value
of $1.00 per share. All of the Portfolio's assets are rated in the two highest
short-term categories (or their unrated equivalents) by an NRSRO and 95% of its
assets are rated in the highest category (or its unrated equivalent) by an
NRSRO. A more detailed description of the rating categories is contained in the
SAI.
PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO
While the Money Market Portfolio only invests in high quality money market
instruments, these investments are not entirely without risk. High quality money
market instruments generally do not yield as high a level of income as
longer-term or lower-grade securities. In addition, the yield of the Portfolio
will vary with changes in interest rates. There is a remote possibility that the
Portfolio's share value could fall below $1.00, which could reduce the value of
an investment in the Portfolio.
To the extent that it invests in certain securities, the Money Market Portfolio
may be affected by additional risks relating to REPURCHASE AGREEMENTS (credit
risk) and WHEN-ISSUED SECURITIES (market, opportunity, and leverage risks).
However, such risks are lessened by the high quality of the securities in which
the Portfolio invests.
These risks are described in more detail later in this Prospectus. SHARES OF THE
PORTFOLIO ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY
FINANCIAL INSTITUTION, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY. Investors should carefully read
"Risks of Investing in the Portfolios" and "Investment Techniques" below before
investing in this Portfolio.
4
<PAGE> 8
THE PORTFOLIO PERFORMANCE
The bar chart and table shown below provide an indication of the risks of
investing in the Money Market Portfolio by showing changes in the Portfolio's
performance from year to year over a 10- year period and by showing the
Portfolio's average annual returns for one, five, and ten years. How the
Portfolio has performed in the past is not necessarily an indication of how the
Portfolio will perform in the future.
<TABLE>
<CAPTION>
MARKET STREET FUND BOND PORTFOLIO
---------------------------------
<S> <C>
'1989' 9.02%
'1990' 8.00%
'1991' 5.69%
'1992' 3.18%
'1993' 2.59%
'1994' 3.81%
'1995' 5.61%
'1996' 5.15%
'1997' 5.33%
'1998' 5.29%
</TABLE>
During the 10-year period shown in the bar chart, the highest return for a
quarter was 2.31% (quarter ended June 30, 1989) and the lowest return for a
quarter was 0.62% (quarter ended June 30, 1993). The Portfolio's seven day yield
was 4.85% as of December 31, 1998.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED DECEMBER 31, 1998) PAST ONE YEAR PAST 5 YEARS PAST 10 YEARS
----------------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
Money Market Portfolio......................... 5.29% 5.04% 5.35%
90 Day Treasury Bill Rate...................... 4.86% 4.96% 5.29%
</TABLE>
The performance information presented does not include the fees and charges
associated with the variable contracts, and returns would have been lower if
those fees and charges were included.
5
<PAGE> 9
[ ] THE EQUITY 500 INDEX PORTFOLIO
INVESTMENT OBJECTIVE
Long-term capital appreciation.
PRIMARY INVESTMENT STRATEGIES
The Equity 500 Index Portfolio invests primarily in common stocks included in
the S&P 500 Composite Stock Price Index (the "S&P 500 Index").* The S&P 500
Index consists of approximately 500 selected common stocks, most of which are
listed in the New York Stock Exchange. Standard & Poor's selects the stocks
included in the S&P 500 Index on a market capitalization basis, and the S&P 500
Index is heavily weighted toward stocks with large capitalizations.
The Portfolio employs a passive management strategy designed to track the
performance of the S&P 500 Index. The Adviser purchases and sells securities for
the Portfolio in an attempt to produce investment results that substantially
duplicate the performance of the common stocks represented in the S&P 500 Index.
The Portfolio expects to substantially replicate the composition of the S&P 500
Index.
PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO
The Equity 500 Index Portfolio is subject to MARKET RISK and FINANCIAL RISK. For
equity securities, market risk is the risk that the stock market as a whole may
decline, depressing the price of securities in which the Portfolio invests. For
equity securities, financial risk is the risk that the price of a particular
issuer's stock may decline because of its financial results.
In addition to these general risks, the Equity 500 Index Portfolio may be
subject to greater volatility over short periods of time because of its indexing
strategy and because of its long-term focus. Certain of its investments may rise
or fall based on investor perception and attitude rather than economic
valuations.
These risks, and the risks associated with other higher-risk securities and
practices that the Portfolio may utilize, are described in more detail later in
this Prospectus. Investors should carefully read "Risks of Investing in the
Portfolios" and "Investment Techniques" below before investing in this
Portfolio.
THE PORTFOLIO PERFORMANCE
The Equity 500 Index Portfolio commenced operations on as of the date of this
Prospectus. Accordingly, we did not include a bar chart and average annual
return information for the Portfolio.
- ---------------
* Standard & Poor's(R), S&P(R) and S&P 500(R) are trademarks of The McGraw-Hill
Companies, Inc. The Equity 500 Index Portfolio is not sponsored, endorsed,
sold or promoted by Standard & Poor's, and Standard & Poor's makes no
representation or warranty, express or implied, to the investors of the
Portfolio or any member of the public regarding the advisability of investing
in securities generally or in this Portfolio particularly or the ability of
the S&P 500 Index to track general stock market performance. Please see the
SAI for additional disclaimers and liabilities regarding Standard & Poor's.
6
<PAGE> 10
[This page intentionally left blank]
<PAGE> 11
[ ] THE GROWTH PORTFOLIO
INVESTMENT OBJECTIVES
Intermediate and long-term growth of capital. A reasonable level of income is an
important secondary objective.
PRIMARY INVESTMENT STRATEGIES
The Growth Portfolio invests primarily in common stocks of companies that the
Adviser believes offer above-average intermediate and long-term growth
potential. The Portfolio purchases securities only of companies that have:
- A minimum level of sales/revenue of $50 million per year in at least one
recent year
- Profitable operations (i.e., have some net income before non-recurring
gains or losses)
Generally, the Portfolio holds common stocks listed on national securities
exchanges but it can hold up to 20% of its total assets in stocks only traded
over-the-counter. The Portfolio also may invest in other equity securities and
nonconvertible debt obligations. Often, the Adviser follows a VALUE ORIENTED
investment strategy, which is discussed below on page 18.
PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO
The Growth Portfolio is subject to MARKET RISK and FINANCIAL RISK. For equity
securities, market risk is the risk that the stock market as a whole may
decline, depressing the price of securities in which the Portfolio invests. For
equity securities, financial risk is the risk that the price of a particular
issuer's stock may decline because of its financial results.
In addition to these general risks, the Growth Portfolio may be subject to
greater volatility over short periods of time because of its intermediate and
long-term focus. The value of certain of its investments may rise or fall based
on investor perception and attitude rather than economic valuations.
These risks, and the risks associated with other higher-risk securities and
practices that the Portfolio may utilize, are described in more detail later in
this Prospectus. Investors should carefully read "Risks of Investing in the
Portfolios" and "Investment Techniques" below before investing in this
Portfolio.
8
<PAGE> 12
THE PORTFOLIO PERFORMANCE
The bar chart and table shown below provide an indication of the risks of
investing in the Growth Portfolio by showing changes in the Portfolio's
performance from year to year over a 10-year period and by showing how the
Portfolio's average annual returns for one, five, and ten years compare to those
of the S&P 500. How the Portfolio has performed in the past is not necessarily
an indication of how the Portfolio will perform in the future.
<TABLE>
<CAPTION>
MARKET STREET FUND GROWTH PORTFOLIO
-----------------------------------
<S> <C>
1989 30.45%
1990 2.39%
1991 18.50%
1992 4.74%
1993 9.43%
1994 2.40%
1995 30.39%
1996 19.58%
1997 24.32%
1998 13.70%
</TABLE>
During the 10-year period shown in the bar chart, the highest return for a
quarter was 18.73% (quarter ended March 31, 1991) and the lowest return for a
quarter was -11.73% (quarter ended September 30, 1998).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED DECEMBER 31, 1998) PAST ONE YEAR PAST 5 YEARS PAST 10 YEARS
----------------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
Growth Portfolio............................... 13.70% 17.68% 15.47%
S&P 500 Index.................................. 28.72% 24.09% 19.22%
</TABLE>
The S&P 500 Index is a widely recognized, unmanaged index of 500 U.S. common
stocks.
The performance information presented does not include the fees and charges
associated with the variable contracts, and returns would have been lower if
those fees and charges were included.
9
<PAGE> 13
[ ] THE BOND PORTFOLIO
INVESTMENT OBJECTIVE
A high level of current income consistent with prudent investment risk.
PRIMARY INVESTMENT STRATEGIES
The Bond Portfolio invests in a diversified portfolio of marketable debt
securities of U.S. and foreign issuers. At least 75% of the value of the Bond
Portfolio's total investment in corporate debt securities (other than commercial
paper) consists of investment-grade securities, and the remaining 25% may be
invested in such securities rated one category below investment grade.
Securities of foreign issuers are purchased only if they are investment grade,
denominated in U.S. dollars, and pay any income in U.S. dollars.
The Bond Portfolio may purchase securities that carry certain equity features
such as conversion or exchange rights or warrants for the acquisition of stock
(of the same or of a different issuer) or participations based on revenues,
sales or profits.
PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO
The Bond Portfolio is subject to MARKET RISK, CREDIT RISK and INTEREST RATE
RISK. To the extent that it invests in certain securities, the Bond Portfolio
may assume additional risks relating to LOWER QUALITY DEBT INSTRUMENTS,
SHORT-TERM TRADING and SECURITIES OF FOREIGN ISSUERS. Lower quality debt
instruments are subject to above-average interest rate risk and credit risk,
tend to have a higher default rate, and are speculative with only an adequate
capacity to repay principal and interest. Short-term trading may result in
higher turnover and transaction expenses for the Portfolio. Securities of
foreign issuers entail risks not associated with domestic securities. For
example, foreign issuers often are subject to securities laws, and accounting
and reporting practices, less stringent than those in the U.S., and they may be
adversely impacted by political or economic instability or changes in currency
exchange rates.
These risks, and the risks associated other higher-risk securities and practices
that the Portfolio may utilize, are described in more detail later in this
Prospectus. Investors should carefully read "Risks of Investing in the
Portfolios" and "Investment Techniques" below before investing in this
Portfolio.
10
<PAGE> 14
THE PORTFOLIO PERFORMANCE
The bar chart and table shown below provide an indication of the risks of
investing in the Bond Portfolio by showing changes in the Portfolio's
performance from year to year over a 10-year period and by showing how the
Portfolio's average annual returns for one, five, and ten years compare to those
of the Lehman Aggregate Bond Index. How the Portfolio has performed in the past
is not necessarily an indication of how the Portfolio will perform in the
future.
<TABLE>
<CAPTION>
MARKET STREET FUND BOND PORTFOLIO
---------------------------------
<S> <C>
1989 10.57%
1990 7.70%
1991 13.93%
1992 5.95%
1993 10.32%
1994 -5.62%
1995 20.45%
1996 2.86%
1997 9.50%
1998 8.22%
</TABLE>
During the 10-year period shown in the bar chart, the highest return for a
quarter was 7.32% (quarter ended June 30, 1995) and the lowest return for a
quarter was -4.18% (quarter ended March 31, 1994).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED DECEMBER 31, 1998) PAST ONE YEAR PAST 5 YEARS PAST 10 YEARS
----------------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
Bond Portfolio................................. 8.22% 6.74% 8.41%
Lehman Aggregate Bond Index.................... 8.69% 7.27% 9.27%
</TABLE>
The Lehman Aggregate Bond Index is a widely recognized, unmanaged index of bonds
reflecting average prices in the bond market.
The performance information presented does not include the fees and charges
associated with the variable contracts, and returns would have been lower if
those fees and charges were included.
11
<PAGE> 15
[ ] THE MANAGED PORTFOLIO
INVESTMENT OBJECTIVE
As high a level of long-term total rate of return as is consistent with prudent
investment risk.
PRIMARY INVESTMENT STRATEGIES
The Managed Portfolio invests in securities that are permissible investments of
the Money Market, Growth, Bond, Aggressive Growth and International Portfolios.
The Adviser may invest the Managed Portfolio's assets solely in common stocks,
solely in debt securities, solely in money market instruments, or in a
combination of these types of investments. At least 75% of the value of the
Managed Portfolio's total investment in corporate debt securities (other than
commercial paper) consists of investment-grade securities, and the remaining 25%
may be invested in such securities rated one category below investment grade.
The Managed Portfolio also may invest in securities of issuers located in
countries with emerging economies and/or securities markets.
The Managed Portfolio's investment strategies may result in the Portfolio having
a higher than average portfolio turnover rate. Higher portfolio turnover results
in correspondingly increased brokerage expenses and other acquisition costs to
the Portfolio.
PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO
The Managed Portfolio is subject to MARKET RISK, FINANCIAL RISK, CREDIT RISK and
INTEREST RATE RISK. To the extent that it invests in certain securities, the
Portfolio may assume additional risks relating to LOWER QUALITY DEBT
INSTRUMENTS, SHORT-TERM TRADING, and SECURITIES OF FOREIGN ISSUERS AND
NON-DOLLAR SECURITIES. Lower quality debt instruments are subject to
above-average interest rate risk and credit risk, tend to have a higher default
rate, and are speculative with only an adequate capacity to repay principal and
interest. Short-term trading may result in higher turnover and transaction
expenses for the Portfolio. Securities of foreign issuers and non-dollar
securities entail risks not associated with domestic securities or
dollar-denominated securities. For example, foreign issuers often are subject to
securities laws, and accounting and reporting practices, less stringent than
those in the U.S., and they may be adversely impacted by political or economic
instability or changes in currency exchange rates.
In order to meet the Portfolio's investment objective, the adviser must
determine the proper mix of equity, debt and money market securities. It may not
properly ascertain the appropriate mix of securities for any particular economic
cycle. Also, the timing of movements from one type of security to another could
have a negative effect on the Portfolio's overall objective.
These risks, and the risks associated other higher-risk securities and practices
that the Portfolio may utilize, are described in more detail later in this
Prospectus. Investors should carefully read "Risks of Investing in the
Portfolios" and "Investment Techniques" below before investing in this
Portfolio.
12
<PAGE> 16
THE PORTFOLIO PERFORMANCE
The bar chart and table shown below provide an indication of the risks of
investing in the Managed Portfolio by showing changes in the Portfolio's
performance from year to year over a 10-year period and by showing how the
Portfolio's average annual returns for one, five, and ten years compare to those
of the S&P 500 Index and the Lehman Aggregate Bond Index. How the Portfolio has
performed in the past is not necessarily an indication of how the Portfolio will
perform in the future.
<TABLE>
<CAPTION>
MARKET STREET FUND MANAGED PORTFOLIO
------------------------------------
<S> <C>
'1989' 14.65%
'1990' -8.61%
'1991' 20.49%
'1992' 11.96%
'1993' 11.62%
'1994' -1.82%
'1995' 24.43%
'1996' 11.88%
'1997' 21.23%
'1998' 12.54%
</TABLE>
During the 10-year period shown in the bar chart, the highest return for a
quarter was 13.32% (quarter ended March 31, 1991) and the lowest return for a
quarter was -15.85% (quarter ended September 30, 1990).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED DECEMBER 31, 1998) PAST ONE YEAR PAST 5 YEARS PAST 10 YEARS
----------------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
Managed Portfolio.............................. 12.54% 13.27% 11.54%
S&P 500 Index.................................. 28.72% 24.09% 19.22%
Lehman Aggregate Bond Index.................... 8.69% 7.27% 9.27%
</TABLE>
The Portfolio's investments in equity securities are compared to the S&P 500
Index, a widely recognized, unmanaged index of 500 U.S. common stocks.
The Portfolio's investments in debt securities are compared to the Lehman
Aggregate Bond Index, a widely recognized, unmanaged index of bonds reflecting
average prices in the bond market.
The performance information presented does not include the fees and charges
associated with the variable contracts, and returns would have been lower if
those fees and charges were included.
13
<PAGE> 17
[ ] THE AGGRESSIVE GROWTH PORTFOLIO
INVESTMENT OBJECTIVE
A high level of long-term capital appreciation.
PRIMARY INVESTMENT STRATEGIES
The Aggressive Growth Portfolio invests primarily in:
- securities of companies in new or emerging industries
- securities of small capitalization companies and/or unseasoned companies
Substantially all of the Portfolio's assets consist of equity securities of
companies that the Adviser believes have better than average appreciation
potential. The Adviser selects such securities on the basis of their
appreciation potential without restriction as to their type.
PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO
The Aggressive Growth Portfolio invests in securities which generally entail
above-average MARKET RISK and FINANCIAL RISK. The Portfolio also is subject to
SMALL COMPANY RISK. Smaller companies may have limited product lines, markets or
financial resources and their securities may trade less frequently and in more
limited volume than the securities of larger or more established companies. The
prices of securities of smaller companies may fluctuate to a greater degree than
the prices of securities of other issuers. Loss of money is a significant risk
of investing in this Portfolio.
To the extent that it invests in certain securities, the Portfolio assume by
additional risks relating to ADRs, GDRs and EDRs (i.e., the risks of investing
in the securities of foreign issuers and non-dollar securities). Securities of
foreign issuers and non-dollar securities entail risks not associated with
domestic securities or dollar-denominated securities. For example, foreign
issuers often are subject to securities laws, and accounting and reporting
practices, less stringent than those in the U.S., and they may be adversely
impacted by political or economic instability or changes in currency exchange
rates.
These risks, and the risks associated other higher-risk securities and practices
that the Portfolio may utilize, are described in more detail later in this
Prospectus. Investors should carefully read "Risks of Investing in the
Portfolios" and "Investment Techniques" below before investing in this
Portfolio.
14
<PAGE> 18
THE PORTFOLIO PERFORMANCE
The bar chart and table shown below provide an indication of the risks of
investing in the Aggressive Growth Portfolio by showing changes in the
Portfolio's performance from year to year over a 9-year period and by showing
how the Portfolio's average annual returns for one and five years, and the
period since inception, compare to those of the Russell 2000 Index. How the
Portfolio has performed in the past is not necessarily an indication of how the
Portfolio will perform in the future.
<TABLE>
<CAPTION>
MARKET STREET FUND AGGRESSIVE GROWTH PORTFOLIO
----------------------------------------------
<S> <C>
1990 10.77%
1991 56.33%
1992 2.58%
1993 5.2%
1994 0%
1995 13.48%
1996 21%
1997 21.21%
1998 7.99%
</TABLE>
During the 9-year period shown in the bar chart, the highest return for a
quarter was 27.72% (quarter ended March 31, 1991) and the lowest return for a
quarter was -24.51% (quarter ended September 30, 1990).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED DECEMBER 31, 1998) PAST ONE YEAR PAST 5 YEARS FROM INCEPTION(1)
----------------------------------------- ------------- ------------ -----------------
<S> <C> <C> <C>
Aggressive Growth Portfolio................. 7.99% 12.44% 13.75%
Russell 2000 Index*......................... -3.45% 10.29% 10.21%
</TABLE>
- -------------------------
(1) The Portfolio commenced operations on May 1, 1989.
* Price appreciation only.
The Russell 2000 Index is a widely recognized, unmanaged index of small
capitalization companies.
The performance information presented does not include the fees and charges
associated with the variable contracts, and returns would have been lower if
those fees and charges were included.
15
<PAGE> 19
[ ] THE INTERNATIONAL PORTFOLIO
INVESTMENT OBJECTIVE
Long-term growth of capital primarily through investments in a diversified
portfolio of marketable equity securities of established foreign issuer
companies.
PRIMARY INVESTMENT STRATEGIES
The International Portfolio invests primarily in equity securities of
established foreign issuer companies and of companies organized in the United
States but having their principal activities and interests outside the United
States that the Adviser believes have potential for long-term capital growth.
Many such securities are non-dollar securities. The Portfolio also may invest in
other foreign issuer securities such as those of foreign governments or agencies
or instrumentalities of foreign governments.
Under normal market conditions, the Portfolio invests at least 75% of its total
assets in the securities of foreign issuers located (or, in the case of the
securities, traded) in at least five different countries other than the United
States. Nonetheless, under certain economic and business conditions the
Portfolio may invest up to 35% of its total assets in the securities of issuers
located (or, in the case of the securities, traded) in any one of the following
countries:
- Australia
- Canada
- France
- Japan
- The United Kingdom
- Germany
The International Portfolio also may invest in securities of foreign issuers in
the form of sponsored and unsponsored ADRs, EDRs and GDRs (see "Investment
Techniques"). The International Portfolio also may, under normal market
conditions, invest up to 35% of its total assets in investment-grade debt
securities of foreign issuers. See "Risks of Investing in the Portfolios,"
below. The Portfolio engages in a VALUE ORIENTED investing strategy, which is
discussed on page 17.
PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO
The International Portfolio is subject to MARKET RISK and FINANCIAL RISK. The
International Portfolio is subject to a significant degree of FOREIGN ISSUER AND
NON-DOLLAR SECURITIES RISK. Securities of foreign issuers and non-dollar
securities entail risks not associated with domestic securities or
dollar-denominated securities. For example, foreign issuers often are subject to
securities laws, and accounting and reporting practices, less stringent than
those in the U.S., and they may be adversely impacted by political or economic
instability or changes in currency exchange rates.
The Portfolio's investments in securities of issuers located in countries with
emerging economies or securities markets entail EMERGING MARKETS RISK. The risks
of investing in securities of foreign issuers and non-dollar securities are even
greater in emerging markets than in Japan or most Western European countries.
Emerging market countries are undergoing rapid development, and may lack the
social, political and economic stability characteristic of more developed
countries.
These risks, and the risks associated other higher-risk securities and practices
that the Portfolio may utilize, are described in more detail later in this
Prospectus. Investors should carefully read "Risks of Investing in the
Portfolios" and "Investment Techniques" below before investing in this
Portfolio.
16
<PAGE> 20
THE PORTFOLIO PERFORMANCE
The bar chart and table shown below provide an indication of the risks of
investing in the International Portfolio by showing changes in the Portfolio's
performance from year to year over a 7-year period and by showing how the
Portfolio's average annual returns for one and five years, and the period since
inception, compare to those of the Morgan Stanley Capital International Europe,
Australasia, Far East (EAFE) Index. How the Portfolio has performed in the past
is not necessarily an indication of how the Portfolio will perform in the
future.
<TABLE>
<CAPTION>
MARKET STREET FUND INTERNATIONAL PORTFOLIO
------------------------------------------
<S> <C>
1992 -7.30%
1993 36.11%
1994 0.26%
1995 14.31%
1996 10.89%
1997 9.66%
1998 10.13%
</TABLE>
During the 7-year period shown in the bar chart, the highest return for a
quarter was 15.71% (quarter ended December 31, 1998) and the lowest return for a
quarter was -16.25% (quarter ended September 30, 1998).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED DECEMBER 31, 1998) PAST ONE YEAR PAST 5 YEARS FROM INCEPTION(1)
----------------------------------------- ------------- ------------ -----------------
<S> <C> <C> <C>
International Portfolio..................... 10.13% 8.95% 9.22%
EAFE Index.................................. 20.00% 9.19% 8.65%
</TABLE>
- -------------------------
(1) The Portfolio commenced operations on November 1, 1991.
The EAFE Index is a widely recognized, unmanaged index of more than 900
companies from Europe, Australia, Asia and the Far East. The EAFE Index reflects
the prices of these common stocks translated into U.S. dollars with dividends
reinvested net of any foreign taxes.
The performance information presented does not include the fees and charges
associated with the variable contracts, and returns would have been lower if
those fees and charges were included.
17
<PAGE> 21
INTRODUCTION TO THE ALL PRO PORTFOLIOS
All four All Pro Portfolios seek long-term capital appreciation. They differ
from the other Portfolios in that PIMC has selected a unique team of investment
subadvisers for each All Pro Portfolio, and each such subadviser manages a
segment of the relevant All Pro Portfolio's assets.
The All Pro Portfolios differ from each other in that two Portfolios -- the All
Pro Large Cap Growth Portfolio and the All Pro Small Cap Growth
Portfolio -- pursue their investment objective through GROWTH ORIENTED
investing, and two Portfolios -- the All Pro Large Cap Value Portfolio and the
All Pro Small Cap Value Portfolio -- pursue their objective through VALUE
ORIENTED investing. Within each pair, one Portfolio principally invests in
securities with relatively large market capitalizations while the other
principally invests in securities with relatively small market capitalizations.
VALUE ORIENTED INVESTING: An investment strategy that involves seeking
securities that:
- Exhibit low financial ratios (particularly stock price-to-book value, but
also stock price-to-earnings and stock price-to-cash flow);
- Can be acquired for less than what a subadviser believes is the issuer's
intrinsic value; or
- Appear attractive on a dividend discount model.
Value oriented investing entails a strong "sell discipline" in that it generally
requires the sale of securities that have reached their intrinsic value or a
target financial ratio. Value oriented investments may include securities of
companies in cyclical industries during periods when such securities appear to a
subadviser to have strong potential for capital appreciation or securities of
"special situation" companies. A special situation company is one that a
subadviser believes has potential for significant future earnings growth but has
not performed well in the recent past. These situations include companies with
management changes, corporate or asset restructuring or significantly
undervalued assets. For most subadvisers, identifying special situation
companies and establishing an issuer's intrinsic value involves fundamental
research about such companies and issuers.
GROWTH ORIENTED INVESTING: An investment approach that involves seeking
securities of issuers with above average recent earnings growth rates and a
reasonable likelihood of maintaining such rates in the foreseeable future.
Generally such securities are those of well-established issuers with a strong
competitive position within their industry or a competitive position within a
very strong industry. One strategy for acquiring earnings growth potential is to
acquire securities of companies that are in the early stages of establishing a
competitive position within their industry. For some subadvisers, growth
oriented investing also may involve fundamental research about particular
companies in order to identify and take advantage of potential short-term
earnings increases that are not reflected in the current price of their
securities.
18
<PAGE> 22
Each All Pro Portfolio is designed to resemble a benchmark stock index created
by Wilshire Associates Incorporated. The indices are: Wilshire Large Growth
Benchmark, Wilshire Small Growth Benchmark, Wilshire Large Value Benchmark and
Wilshire Small Value Benchmark. The securities in each index, taken as a group,
reflect a particular equity investment style; with the styles being defined
according to both their growth orientation or value orientation and the range of
market capitalization represented in the group.
PIMC selects two or more subadvisers for each All Pro Portfolio that PIMC
believes can invest segments of the Portfolio in a manner such that the
Portfolio overall will have characteristics and performance dynamics similar to
its Wilshire Benchmark index. To this end, PIMC may select subadvisers that
specialize in one or more, but not all, of the types of securities comprising
the Benchmark index. By using several such subadvisers, PIMC can acquire the
expertise that it believes will result in optimal performance for the Portfolio.
PIMC has retained Wilshire Associates Incorporated to assist it in identifying
potential subadvisers and performing the quantitative analysis necessary to
assess such subadvisers' styles and performance.
19
<PAGE> 23
[ ] ALL PRO LARGE CAP GROWTH PORTFOLIO
INVESTMENT OBJECTIVE
Long-term capital appreciation.
PRIMARY INVESTMENT STRATEGIES
The Portfolio invests primarily in equity securities of companies among the 750
largest by market capitalization at the time of purchase, which the Advisers
believe show potential for growth in future earnings.
Currently, different segments of the Portfolio's assets are managed as follows:
- Approximately 50% of its assets are managed by an investment subadviser
that uses economic analysis, quantitative modeling, and securities
analysis to identify securities of companies with potential for future
earnings growth, and uses in-depth fundamental research to narrow this
list and determine which securities to purchase for the Portfolio.
- Approximately 50% of its assets are managed by an investment subadviser
that uses financial quality, sustainable growth, and downside volatility
screens to eliminate issuers from consideration and purchases securities
from the remaining issuers (which usually number between 200-300).
PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO
The All Pro Large Cap Growth Portfolio is subject to MARKET RISK and FINANCIAL
RISK. These risks, and the risks associated other higher-risk securities and
practices that the Portfolio may utilize, are described in more detail later in
this Prospectus. Investors should carefully read "Risks of Investing in the
Portfolios" and "Investment Techniques" below before investing in this
Portfolio.
THE PORTFOLIO PERFORMANCE
The All Pro Large Cap Growth Portfolio commenced operations in May 1998.
Accordingly, we did not include a bar chart and average annual return
information for the Portfolio. Please see "Appendix B -- Financial Highlights"
for performance information with respect to the Portfolio.
20
<PAGE> 24
[ ] ALL PRO SMALL CAP GROWTH PORTFOLIO
INVESTMENT OBJECTIVE
Long-term capital appreciation.
PRIMARY INVESTMENT STRATEGIES
The Portfolio invests primarily in equity securities of companies included in
the Wilshire 4500 Equity Index at the time of purchase, which the Advisers
believe show potential for growth in future earnings.
Currently, different segments of the Portfolio's assets are managed as follows:
- Approximately 40% of the Portfolio's assets are managed by an investment
subadviser that seeks securities of companies that have established
above-average growth, superior business positions and strong management.
This subadviser emphasizes high growth sectors such as healthcare,
technology and business services.
- Approximately 60% of the Portfolio's assets are managed by an investment
subadviser that seeks securities of companies with market capitalizations
below $1 billion by attempting to identify changes in companies or
industries that often signal earnings growth, and companies most likely
to benefit from those changes.
PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO
The All Pro Small Cap Growth Portfolio is subject to MARKET RISK and FINANCIAL
RISK. Investments held by this Portfolio entail a significant degree of SMALL
COMPANY RISK. Smaller companies may have limited product lines, markets or
financial resources and their securities may trade less frequently and in more
limited volume than the securities of larger or more established companies. The
prices of securities of smaller companies may fluctuate to a greater degree than
the prices of securities of other issuers.
These risks, and the risks associated other higher-risk securities and practices
that the Portfolio may utilize, are described in more detail later in this
Prospectus. Investors should carefully read "Risks of Investing in the
Portfolios" and "Investment Techniques" below before investing in this
Portfolio.
THE PORTFOLIO PERFORMANCE
The All Pro Small Cap Growth Portfolio commenced operations in May 1998.
Accordingly, we did not include a bar chart and average annual return
information for the Portfolio. Please see "Appendix B -- Financial Highlights"
for performance information with respect to the Portfolio.
21
<PAGE> 25
[ ] ALL PRO LARGE CAP VALUE PORTFOLIO
INVESTMENT OBJECTIVE
Long-term capital appreciation.
PRIMARY INVESTMENT STRATEGIES
The Portfolio invests primarily in undervalued equity securities of companies
among the 750 largest by market capitalization at the time of purchase that the
Advisers believe offer above-average potential for growth in future earnings.
Currently, different segments of the Portfolio's assets are managed as follows:
- Approximately 45% of this Portfolio's assets are managed by an investment
subadviser that seeks securities of companies with low risk and solid
long-term growth potential through an investment process that integrates
quantitative analysis and fundamental research.
- Approximately 45% of the Portfolio's assets are managed by an investment
subadviser that seeks securities of undervalued or overlooked companies
regardless of industry sector through a value oriented process.
- Approximately 10% of the Portfolio's assets are managed by an investment
subadviser that seeks securities of issuers within each market sector of
the Wilshire Large Value Benchmark, while maintaining beta and sector
weightings of that benchmark. This investment subadviser attempts to
identify the company characteristics currently being rewarded by the
market.
PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO
The All Pro Large Cap Value Portfolio is subject to MARKET RISK and FINANCIAL
RISK. These risks, and the risks associated other higher-risk securities and
practices that the Portfolio may utilize, are described in more detail later in
this Prospectus. Investors should carefully read "Risks of Investing in the
Portfolios" and "Investment Techniques" below before investing in this
Portfolio.
THE PORTFOLIO PERFORMANCE
The All Pro Large Cap Value Portfolio commenced operations in May 1998.
Accordingly, we did not include a bar chart and average annual return
information for the Portfolio. Please see "Appendix B -- Financial Highlights"
for performance information with respect to the Portfolio.
22
<PAGE> 26
[ ] ALL PRO SMALL CAP VALUE PORTFOLIO
INVESTMENT OBJECTIVE
Long-term capital appreciation.
PRIMARY INVESTMENT STRATEGIES
The Portfolio invests primarily in undervalued equity securities of companies
included in the Wilshire 4500 Equity Index at the time of purchase, which the
Advisers believe offer above-average potential for growth in future earnings.
Currently, different segments of the Portfolio's assets are managed as follows:
- Approximately 50% of the Portfolio's assets are managed by an investment
subadviser that uses fundamental research to seek securities of companies
and issuers trading at prices below their intrinsic value. This
subadviser analyzes an issuer's intrinsic value by evaluating the
issuer's normalized free cash flow and return on capital to supplement
its fundamental research.
- Approximately 50% of the Portfolio's assets are managed by an investment
subadviser that seeks securities of companies that have the potential of
high returns. This subadviser uses quantitative research analysis,
including probability-weighted scenario analysis, to supplement its
fundamental research about such companies.
PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO
The All Pro Small Cap Value Portfolio is subject to MARKET RISK and FINANCIAL
RISK. Investments held by the Portfolio entail a high degree of SMALL COMPANY
RISK. Smaller companies may have limited product lines, markets or financial
resources and their securities may trade less frequently and in more limited
volume than the securities of larger or more established companies. The prices
of securities of smaller companies may fluctuate to a greater degree than the
prices of securities of other issuers.
These risks, and the risks associated other higher-risk securities and practices
that the Portfolio may utilize, are described in more detail later in this
Prospectus. Investors should carefully read "Risks of Investing in the
Portfolios" and "Investment Techniques" below before investing in this
Portfolio.
THE PORTFOLIO PERFORMANCE
The All Pro Small Cap Value Portfolio commenced operations in May 1998.
Accordingly, we did not include a bar chart and average annual return
information for the Portfolio. Please see "Appendix B -- Financial Highlights"
for performance information with respect to the Portfolio.
23
<PAGE> 27
RISKS OF INVESTING IN THE PORTFOLIOS
Each Portfolio is subject to the risk that it may not achieve its investment
objective, and an investor may lose money (including the principal invested) by
investing in it. No one Portfolio alone should be considered a complete
investment program, and any Portfolio's performance could fall below that of
other possible investments.
Because each Portfolio invests in a different mix of securities and employs a
unique strategy for achieving its goals, the risks associated with each
Portfolio will vary. While the actual performance of any mutual fund cannot be
predicted, investors should consider the possible risks associated with a
Portfolio's investments. Such risks include:
CORRELATION RISK. The risk that changes in the value of a hedging instrument or
hedging technique will not match those of the asset being hedged (hedging is the
use of one investment to offset the possible adverse effects of another
investment).
CREDIT RISK. The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise not honor a financial obligation.
CURRENCY RISK. The risk that fluctuations in the exchange rates between the
U.S. dollar and foreign currencies may adversely affect the value of an
investment. Currency fluctuations may negatively impact a Portfolio's portfolio
even if the foreign stock has not declined in value in its own currency. For
example:
- A decline in the dollar value of other currencies would reduce the value
of certain portfolio investments denominated in such currencies
- A Portfolio may have to sell portfolio securities to pay dividends to
shareholders if the exchange rate for the currency in which a Portfolio
receives interest payments declines against the U.S. dollar before such
interest is paid to shareholders.
EXTENSION RISK. The risk that an unexpected rise in prevailing interest rates
will extend the life of an outstanding mortgage-backed security by reducing the
expected number of mortgage prepayments, typically reducing the security's
value.
FINANCIAL RISK. For debt securities, credit risk. For equity securities, the
risk that the issuer's earning prospects and overall financial position will
deteriorate, causing a decline in the security's value.
RISKS OF INVESTING IN SECURITIES OF FOREIGN ISSUERS AND NON-DOLLAR
SECURITIES. Investments in the securities of foreign issuers or investments in
non-dollar securities involve significant risks that are not typically
associated with investing in U.S. dollar-denominated securities or securities of
domestic issuers. Such investments may be affected by changes in currency
exchange rates, changes in foreign or U.S. laws or restrictions applicable to
such investments and in currency exchange control regulations. Some foreign
stock markets (and other securities markets) may have substantially less volume
than, for example, the New York Stock Exchange (or other domestic markets) and
securities of some foreign issuers may be less liquid than securities of
comparable domestic issuers. Commissions and dealer mark-ups on transactions in
securities of foreign issuers and non-dollar securities may be higher than for
similar transactions in the United States. In addition, clearance and settlement
procedures may be different in foreign countries and, in certain markets, on
certain occasions, such procedures have been unable to keep pace with the volume
of securities transactions, thus making it difficult to conduct such
transactions. The inability of a Portfolio to make intended investments due to
settlement problems could cause it to miss attractive investment opportunities.
Inability to dispose of portfolio securities or other investments due to
settlement problems could result either in losses to a Portfolio due to
subsequent declines in value of the portfolio investment or, if the Portfolio
has entered into a contract to sell the investment, could result in possible
liability to the purchaser.
24
<PAGE> 28
Foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to domestic
companies, and there may be less publicly available information about a foreign
issuer than about a domestic one. In addition, there is generally less
government regulation of stock exchanges, brokers, and listed and unlisted
issuers in foreign countries than in the United States. Furthermore, with
respect to certain foreign countries, there is a possibility of expropriation or
confiscatory taxation, imposition of withholding taxes on dividend or interest
payments, limitations on the removal of cash or other assets of the Portfolio,
or political or social instability or diplomatic developments which could affect
investments in those countries. Individual foreign economies also may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.
The INTERNATIONAL PORTFOLIO and the MANAGED PORTFOLIO may invest in securities
of issuers located in countries with emerging economies and/or securities
markets. These countries are located in the Asia-Pacific region, Eastern Europe,
Central and South America and Africa. Political and economic structures and
institutions in many of these countries are undergoing significant evolution and
rapid development, and such countries may lack the social, political and
economic stability characteristic of more developed countries. Certain of these
countries have in the past failed to recognize private property rights and have
at times nationalized or expropriated assets of private companies. In addition,
unanticipated political or social developments may affect the values of
investments in these countries and the ability of a Portfolio to make additional
investments in them. The small size, inexperience and limited trading volume of
the securities markets in certain of these countries may also make investments
in such countries more volatile and less liquid than investments in securities
traded in markets in Japan and Western European countries. As a result, these
Portfolios may be required to establish special custody or other arrangements
before making certain investments in these countries. There may be little
financial or accounting information available with respect to issuers located in
certain of these countries, and it may be difficult as a result to assess the
value or prospects of an investment in such issuers. The laws of some foreign
countries may limit the ability of these Portfolios to invest in securities of
certain issuers located or doing business in these countries.
HEDGING RISK. When a Portfolio hedges an asset it holds, any gain or loss
generated by the hedge should be substantially offset by losses or gains on the
hedged asset. Hedging is a useful way to reduce or eliminate risk of loss, but
it also reduces or eliminates the potential for investment gains.
INFORMATION RISK. The risk that key information about a security or market is
inaccurate or unavailable.
INTEREST RATE RISK. The risk that the market value of a debt or other
income-bearing security will decline because of changes in prevailing interest
rates. Generally, a rise in interest rates typically causes the market values of
such securities to decline, particularly fixed-rate securities.
RISKS OF INVESTING IN LOWER QUALITY DEBT INSTRUMENTS. Lower quality debt
instruments usually pay a higher interest rate than investment-grade bonds, but
with the higher interest rate comes higher risks. Lower quality debt instruments
have the following characteristics:
- Speculative with only an adequate capacity to pay principal and interest;
- Tend to react more to changes in interest rates than do higher-rated
securities;
- Have a higher risk of default, tend to be less liquid, and may be more
difficult to value;
- Are issued by entities whose ability to make principal and interest
payments is more likely to be affected by changes in economic conditions
or other circumstances;
- Have poor prospects for reaching investment-grade standing and may be in
default;
- May be more severely affected than some other financial instruments by
economic recession or substantial interest rate increases, by changing
public perceptions of the market, or by legislation
25
<PAGE> 29
that limits their use in connection with corporate reorganizations or
limits their tax or other advantages; and
- Are more likely to react to developments affecting market risk and
financial risk than are higher quality debt instruments, which react
primarily to movements in the general level of interest rates.
LEVERAGE RISK. The risks associated with securities or investment practices
that enhance return (or loss) without increasing the amount of investment, such
as buying securities on margin or using certain derivative contracts or
derivative securities. A Portfolio's gain or loss on a leveraged position may be
greater than the actual market gain or loss in the underlying security or
instrument. A Portfolio may also incur additional costs in taking a leveraged
position (such as interest on borrowings) that may not be incurred in taking a
non-leveraged position.
LIQUIDITY RISK. The risk that certain securities or other investments may be
difficult or impossible to sell at the time the Portfolio would like to sell
them or at the price the Portfolio values them.
MANAGEMENT RISK. The risk that a strategy used by a Portfolio's Adviser does
not produce the intended result. For example, the Adviser's judgment about the
value or potential appreciation of a particular stock may prove to be incorrect.
MARKET RISK. The risk that the market value of a security may increase or
decrease, sometimes rapidly and unpredictably, due to factors unrelated to the
issuer. This risk is common to all stocks and bonds and the mutual funds that
invest in them.
NATURAL EVENT RISK. The risk of losses attributable to natural disasters, crop
failures and similar events.
OPPORTUNITY RISK. The risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less advantageous
investments.
POLITICAL RISK. The risk of losses directly attributable to government actions
or political events of any sort. Foreign countries may experience political or
social instability or diplomatic developments that could affect investments in
those countries.
PREPAYMENT RISK. The risk that an unexpected fall in prevailing interest rates
will shorten the life of an outstanding mortgage-backed security by increasing
the expected number of mortgage prepayments, thereby reducing the security's
return.
SMALL COMPANY RISK. The risk of investing in securities of smaller companies.
Such smaller companies may have limited product lines, markets or financial
resources and their securities may trade less frequently and in more limited
volume than the securities of larger or more established companies. These
companies are typically subject to a greater degree of changes in earnings and
business prospects than are larger, more established issuers. As a result, the
prices of securities of smaller companies may fluctuate to a greater degree than
the prices of securities of other issuers. Although investing in securities of
smaller companies offers potential for above-average returns, the risk exists
that the companies will not succeed and the prices of the companies' shares
could significantly decline in value.
SPECULATION RISK. Speculation involves assuming a higher than average risk of
loss in anticipation of gain. If a Portfolio uses a derivative contract or
derivative security to speculate rather than hedge, it is directly exposed to
the risks of that derivative contract or security. Gains or losses from
speculative positions in a derivative contract or security may be substantially
greater than the derivative contract or security's original cost.
VALUATION RISK. The risk that the market value of an investment falls
substantially below the Portfolio's valuation of the investment.
26
<PAGE> 30
INVESTMENT TECHNIQUES
The Portfolios are permitted to use, within limits established by the Fund's
directors, certain other securities and investment practices that have higher
risks and opportunities associated with them. On the following pages are brief
descriptions of these securities and practices, along with certain of their
associated risks.
HIGHER-RISK SECURITIES AND PRACTICES
<TABLE>
<CAPTION>
SECURITY OR PRACTICE DESCRIPTION RELATED RISKS
- -----------------------------------------------------------------------------------------
<S> <C> <C>
American Depositary ADRs are receipts typically Market, currency,
Receipts (ADRs) issued by a U.S. financial information, natural event,
institution which evidence and political risks (i.e.,
ownership of underlying the risks of investing in
securities of foreign foreign issuers and non-
corporate issuers. dollar securities).
Generally, ADRs are in
registered form and are
designed for trading in
U.S. markets.
- -----------------------------------------------------------------------------------------
Borrowing The borrowing of money from Credit risk and interest
banks or through reverse rate risks.
repurchase agreements. No
Portfolio will borrow money
for leveraging purposes.
- -----------------------------------------------------------------------------------------
Writing Covered Call Option A call option is the right Interest rate, market,
Contracts on Securities to purchase a security for hedging, correlation,
an agreed-upon price at any liquidity, credit, and
time prior to an expiration opportunity risks.
date. By writing (selling)
a call option, a Portfolio
gives this right to a buyer
for a fee. A "covered" call
option contract is one
where the Portfolio owns
the securities subject to
the option so long as the
option is outstanding.
- -----------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 31
<TABLE>
<CAPTION>
SECURITY OR PRACTICE DESCRIPTION RELATED RISKS
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Writing and Purchasing Put Put and call options may be Market, hedging,
and Call Options on the S&P written (sold) or purchased correlation, liquidity, and
500 Index on the S&P 500 Index. opportunity.
Unlike options on
securities, options on
securities indices do not
involve the delivery of an
underlying security; the
option on a securities
index represents the
holder's right to receive
in cash a fixed multiple of
the amount by which the
exercise price exceeds or
is less than the closing
value of the underlying
securities index on the
exercise date.
- -----------------------------------------------------------------------------------------
Emerging Market Securities Any securities primarily Credit, market, currency,
traded on exchanges (or information, liquidity,
other markets) located in, interest rate, valuation,
or issued by companies natural event, political
organized or primarily risks and the risks of
operating in, countries investing in securities of
with emerging economies foreign issuers and
and/or securities markets non-dollar securities.
(typically located in Asia,
the Asia-Pacific region,
Eastern Europe, Central and
South America and Africa).
- -----------------------------------------------------------------------------------------
European and Global EDRs and GDRs are receipts Market, currency,
Depositary Receipts (EDRs evidencing an arrangement information, natural event,
and GDRs) with a non-U.S. financial and political risks (i.e.,
institution similar to that the risks of investing in
for ADRs and are designed securities of foreign
for use in non-U.S. issuers and non-dollar
securities markets. EDRs securities).
and GDRs are not
necessarily quoted in the
same currency as the
underlying security.
- -----------------------------------------------------------------------------------------
Securities of Foreign Securities of (1) companies Market, currency,
Issuers organized outside the information, interest rate,
United States, (2) natural event, and
companies whose securities political risks.
are principally traded
outside the United States,
and (3) foreign governments
or agencies and
instrumentalities of
foreign governments.
- -----------------------------------------------------------------------------------------
</TABLE>
28
<PAGE> 32
<TABLE>
<CAPTION>
SECURITY OR PRACTICE DESCRIPTION RELATED RISKS
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Foreign Money Market Short-term debt obligations Market, currency,
Securities issued either by foreign information, interest rate,
financial institutions or natural event and political
by foreign branches of U.S. risks.
financial institutions or
foreign issuers.
- -----------------------------------------------------------------------------------------
Forward Foreign Currency Contracts involving the Currency, liquidity, credit
Exchange Contracts right or obligation to buy and leverage risks. When
or sell a given amount of used for hedging, also has
foreign currency at a hedging, correlation, and
specified price and future opportunity risks.
date.
- -----------------------------------------------------------------------------------------
Illiquid Assets An investment that is Liquidity, valuation and
difficult or impossible to market risks.
sell at approximately the
time that a Portfolio would
like to sell it for the
price at which the
Portfolio values it.
- -----------------------------------------------------------------------------------------
Mortgage-Backed Securities Securities backed by pools Credit, extension,
of mortgages, including prepayment, and interest
pass-through certificates rate risk.
and collateralized mortgage
obligations (CMOs).
- -----------------------------------------------------------------------------------------
Mortgage Dollar Rolls A Portfolio sells Interest rate, prepayment.
securities for delivery in
the current month and
simultaneously contracts
with the same counterparty
to repurchase similar
securities on a specified
future date. The Portfolio
may benefit to the extent
of any difference between
the price received for
securities sold and the
lower forward price for the
future purchase or fee
income plus the interest
earned on the cash proceeds
of the securities sold
until the settlement date
of the forward purchase.
- -----------------------------------------------------------------------------------------
Non-Dollar Securities Securities issued, Currency and liquidity
denominated or quoted in risks.
foreign currencies.
- -----------------------------------------------------------------------------------------
Lower Quality Debt Debt securities rated BB by Credit, market, liquidity,
Instruments S&P or Ba by Moody's (or valuation, and information
comparable unrated risks, and risks of
securities). investing in lower-quality
debt instruments.
- -----------------------------------------------------------------------------------------
</TABLE>
29
<PAGE> 33
<TABLE>
<CAPTION>
SECURITY OR PRACTICE DESCRIPTION RELATED RISKS
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Equity Interests in Real Pooled investment vehicles Credit, market, financial,
Estate Investment Trusts that invest primarily in prepayment, extension and
(REITs) income producing real interest rate risks.
estate or real estate
related loans or interests.
REITs may include operating
companies that invest in
and manage income-producing
real estate or real
estate-related businesses.
- -----------------------------------------------------------------------------------------
Repurchase Agreements The purchase of a security Credit risk.
that the issuer agrees to
buy back later at the same
price plus interest.
- -----------------------------------------------------------------------------------------
Reverse Repurchase The lending of short-term Leverage and credit risks.
Agreements debt securities; often used
to facilitate borrowing.
- -----------------------------------------------------------------------------------------
Securities Lending The lending of securities Credit risk.
to financial institutions,
which provide cash or
government securities as
collateral.
- -----------------------------------------------------------------------------------------
Short-Term Trading Selling a security soon Market risk.
after purchase or
purchasing it soon after it
was sold (a Portfolio
engaging in short-term
trading will have higher
turnover and transaction
expenses).
- -----------------------------------------------------------------------------------------
Small Capitalization Companies included in the Market and small company
Companies Wilshire 4500 Equity Index risk.
at the time of purchase.
- -----------------------------------------------------------------------------------------
Standard & Poor's SPDRs are securities that Market, hedging or
Depositary Receipts represent ownership in a speculation, leverage,
("SPDRs") long-term unit investment correlation, liquidity, and
trust that holds a opportunity.
portfolio of common stocks
designed to track the
performance of the S&P 500
Index.
- -----------------------------------------------------------------------------------------
</TABLE>
30
<PAGE> 34
<TABLE>
<CAPTION>
SECURITY OR PRACTICE DESCRIPTION RELATED RISKS
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Stock Index Futures An agreement to buy or sell Market, hedging or
Contracts and Options on a specific amount of a speculation, leverage,
Futures Contracts stock index at a particular correlation, liquidity, and
price on a stipulated opportunity.
future date. Unlike an
option, a futures contract
obligates the buyer to buy
and the seller to sell the
underlying commodity or
financial instrument at the
agreed-upon price and date
or to pay or receive money
in an amount equal to such
price. An option on a
futures contract gives the
portfolio the right, for a
specified price, to sell or
to purchase the underlying
futures contract at any
time during the option
period.
- -----------------------------------------------------------------------------------------
When-Issued Securities and The purchase and sale of Market, opportunity,
Forward Commitments securities for delivery at interest rate, credit, and
a future date; market value leverage risks.
may change before delivery.
- -----------------------------------------------------------------------------------------
</TABLE>
31
<PAGE> 35
HIGHER RISK SECURITIES AND PRACTICES TABLE. The following table shows each
Portfolio's investment limitations with respect to certain higher risk
securities and practices as a percentage of portfolio assets.
<TABLE>
<CAPTION>
ALL
ALL PRO ALL PRO PRO
AGGRES- LARGE SMALL LARGE
MONEY EQUITY 500 SIVE INTER- CAP CAP CAP
MARKET INDEX GROWTH BOND MANAGED GROWTH NATIONAL GROWTH GROWTH VALUE
------ ---------- ------ ---- ------- ------- -------- ------- ------- -----
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT PRACTICES
- -----------------------------------------------------------------------------------------------------------------------------
Borrowing; Reverse Repurchase
Agreements................... 30 30 30 30 30 30 30 30 30 30
- -----------------------------------------------------------------------------------------------------------------------------
Mortgage Dollar Rolls........ x x x * * x x x x x
- -----------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements........ * * * * * * * * * *
- -----------------------------------------------------------------------------------------------------------------------------
REITs........................ -- * -- -- -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Securities Lending........... 30 30 30 30 30 30 30 30 30 30
- -----------------------------------------------------------------------------------------------------------------------------
Short-term Trading........... -- -- -- * * -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Smaller Capitalization
Companies.................... x * x x -- * -- x * x
- -----------------------------------------------------------------------------------------------------------------------------
When-Issued Securities;
Forward Commitments.......... 10 10 10 10 10 10 10 10 10 10
- -----------------------------------------------------------------------------------------------------------------------------
CONVENTIONAL SECURITIES
- -----------------------------------------------------------------------------------------------------------------------------
ADRs, EDRs and GDRs.......... x -- x * * * * * * *
- -----------------------------------------------------------------------------------------------------------------------------
Lower Quality Debt
Instruments.................. x x x 25(2) 25(2) x x x x x
- -----------------------------------------------------------------------------------------------------------------------------
Securities of Foreign Issuers
and Non-Dollar Securities.... 25 -- 25 -- 25 25 25 -- 25 * -- 25 -- 25 -- 25
- -----------------------------------------------------------------------------------------------------------------------------
Emerging Market Securities... x x x x * x * x x x
- -----------------------------------------------------------------------------------------------------------------------------
Illiquid Assets(1)........... 10 x 15 15 15 15 15 15 15 15
- -----------------------------------------------------------------------------------------------------------------------------
DERIVATIVE SECURITIES AND
CONTRACTS
- -----------------------------------------------------------------------------------------------------------------------------
Covered Call Options on
Securities Indices........... x * x x x x x x x x
- -----------------------------------------------------------------------------------------------------------------------------
Covered Call Options on
Securities................... x x * x * * x * * *
- -----------------------------------------------------------------------------------------------------------------------------
Forward Foreign Currency
Exchange Contracts........... * x -- * * -- * -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Mortgage-Backed Securities... x x x * * x x x x x
- -----------------------------------------------------------------------------------------------------------------------------
Standard & Poor's Depositary
Receipts..................... x x x x x x x x * x
- -----------------------------------------------------------------------------------------------------------------------------
Stock Index Futures Contracts
and Options.................. x * x x x x x x x x
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
ALL PRO
SMALL
CAP
VALUE
-------
<S> <C>
INVESTMENT PRACTICES
- ----------------------------------------------
Borrowing; Reverse Repurchase
Agreements................... 30
- ------------------------------------------------------
Mortgage Dollar Rolls........ x
- --------------------------------------------------------------
Repurchase Agreements........ *
- ----------------------------------------------------------------------
REITs........................ --
- ------------------------------------------------------------------------------
Securities Lending........... 30
- --------------------------------------------------------------------------------------
Short-term Trading........... --
- ----------------------------------------------------------------------------------------------
Smaller Capitalization
Companies.................... *
- ------------------------------------------------------------------------------------------------------
When-Issued Securities;
Forward Commitments.......... 10
- --------------------------------------------------------------------------------------------------------------
CONVENTIONAL SECURITIES
- ----------------------------------------------------------------------------------------------------------------------
ADRs, EDRs and GDRs.......... *
- -----------------------------------------------------------------------------------------------------------------------------
Lower Quality Debt
Instruments.................. x
- -----------------------------------------------------------------------------------------------------------------------------
Securities of Foreign Issuers
and Non-Dollar Securities.... -- 25
- -----------------------------------------------------------------------------------------------------------------------------
Emerging Market Securities... x
- -----------------------------------------------------------------------------------------------------------------------------
Illiquid Assets(1)........... 15
- -----------------------------------------------------------------------------------------------------------------------------
DERIVATIVE SECURITIES AND
CONTRACTS
- -----------------------------------------------------------------------------------------------------------------------------
Covered Call Options on
Securities Indices........... x
- -----------------------------------------------------------------------------------------------------------------------------
Covered Call Options on
Securities................... *
- -----------------------------------------------------------------------------------------------------------------------------
Forward Foreign Currency
Exchange Contracts........... --
- -----------------------------------------------------------------------------------------------------------------------------
Mortgage-Backed Securities... x
- -----------------------------------------------------------------------------------------------------------------------------
Standard & Poor's Depositary
Receipts..................... x
- -----------------------------------------------------------------------------------------------------------------------------
Stock Index Futures Contracts
and Options.................. x
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Numbers in this row refer to net, rather than total, assets.
(2) May only invest up to 25% of the value of its corporate debt securities
(other than commercial paper) in such securities.
32
<PAGE> 36
LEGEND
30 A number indicates the maximum percentage of total assets (but see note 1)
that the Portfolio is permitted to invest in that practice or type of
security. Numbers in this table show allowable usage only; for actual usage,
consult the Portfolio's annual and semi-annual reports.
* A bold check mark means that there is no policy limitation on the Portfolio's
usage of that practice or type of security, and that the Portfolio may be
currently using that practice or investing in that type of security.
- -- A thin check mark means that the Portfolio is permitted to use that practice
or invest in that type of security, but is not expected to do so on a regular
basis.
x An "x" mark means that the Portfolio is not permitted to use that practice or
invest in that type of security.
33
<PAGE> 37
MANAGEMENT
ADVISERS
Under the terms of each investment advisory agreement, the Advisers, at their
own expense and subject to the supervision of the Fund's board of directors,
provide the appropriate Portfolio(s) with investment advice and manage the
investment and reinvestment of a Portfolio's assets. The Advisers also perform
research services and evaluate statistical and financial data relevant to a
Portfolio's investment policies, and provide the Fund's directors with regular
reports as to a Portfolio's overall investment plan, schedule of investments and
other assets, and recent purchases and sales by a Portfolio. The compensation
(as a percentage of each Portfolio's average daily net assets) paid monthly by
the Fund to PIMC or SAC, as applicable, is described in the table below.
MONEY MARKET, GROWTH, BOND, MANAGED, AND AGGRESSIVE GROWTH PORTFOLIOS. Sentinel
Advisors Company serves as investment adviser for the Money Market, Growth,
Bond, Managed, and Aggressive Growth Portfolios. SAC is located at One National
Life Drive, Montpelier, Vermont 05604.
EQUITY 500 INDEX AND INTERNATIONAL PORTFOLIOS. Providentmutual Investment
Management Company serves as investment adviser for the Equity 500 Index and
International Portfolios. PIMC is located at 1000 Chesterbrook Boulevard,
Berwyn, Pennsylvania 19312. PIMC has engaged State Street Global Advisors
("SSgA") to manage the investment and reinvestment of the Equity 500 Index
Portfolio's assets, subject to monitoring by PIMC and supervision by the Fund's
board of directors. SSgA is located at One International Place, Boston, MA
02110. PIMC has engaged The Boston Company Asset Management, Inc. to manage the
investment and reinvestment of the International Portfolio's assets, subject to
monitoring by PIMC and supervision by the Fund's board of directors. TBC is
located at One Boston Place, Boston, MA 02108.
ALL PRO SMALL CAP GROWTH, ALL PRO LARGE CAP GROWTH, ALL PRO SMALL CAP VALUE, AND
ALL PRO LARGE CAP VALUE PORTFOLIOS. PIMC serves as investment adviser for the
All Pro Portfolios using a "manager of subadvisers" approach by which PIMC
allocates each All Pro Portfolio's assets among two or more "specialist"
investment subadvisers. PIMC selects investment subadvisers based on a
continuing quantitative and qualitative evaluation of their skills and proven
abilities in managing assets pursuant to a particular investment style.
Short-term performance is not by itself a significant factor in selecting or
terminating investment subadvisers, and therefore PIMC does not anticipate
frequent changes in investment subadvisers. Criteria for employment of
investment subadvisers includes, but is not limited to, proven discipline and
thoroughness in pursuit of stated investment objectives, consistently
above-average performance and an ability to preserve capital in declining
markets, and the expertise and level of service of the investment subadviser's
staff and organization. Investment subadvisers may have different investment
styles and security selection disciplines.
PIMC monitors the performance of each investment subadviser and of each All Pro
Portfolio and, to the extent it deems appropriate to achieve a Portfolio's
investment objective, reallocates Portfolio assets among individual subadvisers
or recommends to the Fund that a Portfolio employ or terminate particular
investment subadvisers. The Fund and PIMC may employ or terminate subadvisers
without shareholder approval. In the event that a new subadviser is employed for
a Portfolio, investors in that Portfolio will be sent additional information
about the subadviser.
PIMC has retained Wilshire Associates Incorporated ("Wilshire") as an investment
management consultant to assist it in identifying and evaluating the performance
of potential subadvisers for each of the All Pro Portfolios. Wilshire does not
participate in the selection of portfolio securities for any Portfolio or in any
way participate in the day-to-day management of the All Pro Portfolios or the
Fund. Wilshire assists PIMC in gathering data and performing the quantitative
analysis necessary to identify the styles and past performance of potential
subadvisers. Wilshire also assists PIMC in performing similar ongoing quantita-
34
<PAGE> 38
tive analysis of the performance of each All Pro Portfolio's subadvisers and in
determining whether changes in a subadviser would be desirable for a Portfolio.
Wilshire is located at 1299 Ocean Avenue, Suite 700, Santa Monica CA 90401.
On behalf of the All Pro Portfolios, and after consultation with Wilshire, PIMC
has selected each of the subadvisers listed below.
SUBADVISERS TO THE ALL PRO SMALL CAP GROWTH PORTFOLIO. The assets of the All
Pro Small Cap Growth Portfolio are managed in part by Standish, Ayer and Wood
("SAW") and in part by Husic Capital Management ("Husic").
SAW. SAW is located at One Financial Center, Boston, Massachusetts. It
emphasizes companies which have established a pattern of business success:
above average growth, superior financial characteristics, superior business
positions, and strong management. SAW has over $3.4 billion in equity
assets under management.
Husic. Husic, located at 555 California Street, Suite 2900, San Francisco,
California, offers products across the market capitalization spectrum and
is dedicated to growth style management. Husic manages more than $3.5
billion on behalf of institutions and individuals including nearly $400
million in its small-cap product.
SUBADVISERS TO THE ALL PRO LARGE CAP GROWTH PORTFOLIO. The assets of the All
Pro Large Cap Growth Portfolio are managed in part by Cohen, Klingenstein &
Marks, Inc. ("CKM") and in part by Geewax, Terker & Co. ("Geewax").
CKM. CKM is an expert in large-capitalization growth equity management.
CKM offers no other products. CKM, which is located at 2112 Broadway, Suite
417, New York, New York, currently manages approximately $2.9 billion in
assets.
Geewax. Geewax has expertise in large-capitalization growth equity
management. Geewax is located at 99 Starr St., Phoenixville, Pennsylvania
and provides portfolio management for $5.3 billion in assets.
SUBADVISERS TO THE ALL PRO SMALL CAP VALUE PORTFOLIO. As of the date of this
prospectus, the assets of the All Pro Small Cap Value Portfolio are managed in
part by Reams Asset Management Company, LLC ("Reams"), and in part by Sterling
Capital Management Company ("Sterling").
Reams. Reams, located at 227 Washington Street, Columbus, Indiana,
provides investment management services primarily to institutional clients.
Reams offers small-cap and small- to mid-cap value products as well as
fixed income products for its clients and has approximately $6 billion in
assets under management.
Sterling. Sterling, located at 301 South Cottage Street, Charlotte, North
Carolina, offers a small capitalization approach that focuses on the
intrinsic worth of companies based on their normalized free cash flow.
Sterling has total assets under management of approximately $3.5 billion,
including approximately $250 million in small capitalization equity
portfolios, for institutional and individual clients.
SUBADVISERS TO THE ALL PRO LARGE CAP VALUE PORTFOLIO. The assets of the All Pro
Large Cap Value Portfolio are managed in part by Equinox Capital Management,
Inc. ("Equinox"), in part by Harris Associates, Inc. ("Harris"), and in part by
Mellon Equity Associates, LLP ("Mellon Equity").
Equinox. Equinox is entirely dedicated to large-capitalization value style
management. Equinox, which is located at 590 Madison Ave., 41st Floor, New
York, New York, manages approximately $13 billion on behalf of institutions
and individuals.
35
<PAGE> 39
Harris. Harris has over 20 years of experience in managing money for
institutional clients and high net worth individuals. Harris, which is
located at 2 North LaSalle St., Suite 500, Chicago, Illinois, currently
manages over $17.7 billion in assets.
Mellon Equity. Mellon Equity, located at 500 Grant Street, Suite 4200,
Pittsburgh, Pennsylvania is a Pennsylvania limited liability partnership.
Mellon Bank, N.A. is the 99% limited partner and MMIP, Inc. is the 1%
general partner of Mellon Equity. MMIP, Inc. is a wholly owned subsidiary
of Mellon Bank, N.A. Mellon Equity manages all of its own research,
portfolio management, marketing and client contact. Mellon Equity manages
approximately $29 billion in assets.
COMPENSATION OF PIMC AND SAC
<TABLE>
<CAPTION>
MAXIMUM
FEE PAID IN 1998 ANNUAL RATE
(AS % OF AVERAGE (AS % OF AVERAGE
PORTFOLIO ADVISER DAILY NET ASSETS)* DAILY NET ASSETS)
--------- ------- ------------------ -----------------
<S> <C> <C> <C>
Money Market................................. SAC 0.25% 0.25%
Equity 500 Index............................. PIMC N/A 0.24%
Growth....................................... SAC 0.32% 0.50%
Bond......................................... SAC 0.35% 0.35%
Managed...................................... SAC 0.40% 0.40%
Aggressive Growth............................ SAC 0.44% 0.50%
International................................ PIMC 0.75% 0.75%
All Pro Small Cap Growth..................... PIMC 0.90% 0.90%
All Pro Large Cap Growth..................... PIMC 0.70% 0.70%
All Pro Small Cap Value...................... PIMC 0.90% 0.90%
All Pro Large Cap Value...................... PIMC 0.70% 0.70%
</TABLE>
- -------------------------
* With respect to each of the Portfolios (except the Money Market Portfolio and
the All Pro Portfolios) the fee payable by a Portfolio to PIMC or SAC is
graduated so that increases in the respective Portfolio's net assets may
result in a lower fee and decreases in the Portfolio's net assets may result
in a higher fee. The maximum annual rate payable to each Adviser is indicated
by the right-hand column above. See "Management of the Fund" in the SAI for
further information.
PORTFOLIO MANAGERS
MONEY MARKET, GROWTH, BOND, MANAGED, AND AGGRESSIVE GROWTH
PORTFOLIOS. Respecting the Money Market, Growth, Bond, Managed, and Aggressive
Growth Portfolios, SAC employs a team approach in managing the Portfolios. The
management teams are comprised of a lead portfolio manager, other portfolio
managers and research analysts. Each team includes members with one or more
areas of expertise and shares the responsibility for providing ideas,
information and knowledge in managing the Portfolios. Rodney A. Buck, Chief
Executive Officer of SAC, is also Chairman and Chief Executive Officer of
National Life Investment Management Company, Inc., and Senior Vice President and
Chief Investment Officer of NLIC. Mr. Buck has been employed by SAC or its
affiliates since 1972. There are three investment management teams: an Equity
Value Team, headed by Daniel J. Manion, Vice President of SAC; an Equity Growth
Team, headed by Robert L. Lee, Senior Vice President of SAC; and a Fixed Income
Team, headed by David M. Brownlee, Senior Vice President of SAC.
36
<PAGE> 40
Each of Messrs. Buck, Manion, Lee and Brownlee is a Chartered Financial Analyst.
Each of Messrs. Lee, Manion and Brownlee joined SAC in 1993.
EQUITY 500 INDEX PORTFOLIO. The Equity 500 Index Portfolio is managed with the
aid of a computer program.
GROWTH PORTFOLIO. The Growth Portfolio is managed by Mr. Manion. He has been a
member of the Growth Portfolio management team since 1997, when SAC began
managing the Portfolio.
MANAGED PORTFOLIO. The Managed Portfolio is managed by a team consisting of Mr.
Buck, Mr. Manion and Richard D. Temple, Vice President of SAC. Mr. Buck has been
the Portfolio's portfolio manager since 1993. Mr. Temple is a fixed income
portfolio manager who has been employed by SAC or its affiliates since 1969.
MONEY MARKET PORTFOLIO. The Money Market Portfolio is managed by Mr. Temple and
Darlene Coppola, Money Market Trader of SAC. Ms. Coppola has been employed by
SAC or its affiliates since 1974.
BOND PORTFOLIO. The Bond Portfolio is managed by Mr. Temple and William C.
Kane, Vice President of SAC. Mr. Temple has been the lead portfolio manager of
the Bond Portfolio since 1985. Mr. Kane is a Chartered Financial Analyst, and
has been employed by SAC or its affiliates since 1992. Prior to joining SAC, Mr.
Kane was employed by Chase Manhattan Bank.
AGGRESSIVE GROWTH PORTFOLIO. The Aggressive Growth Portfolio is managed by
Scott T. Brayman, Vice President of SAC, and Mr. Lee. Mr. Brayman and Mr. Lee
have been the lead portfolio managers of the Portfolio since 1997. Mr. Brayman
is a Chartered Financial Analyst, and has been with SAC since 1995. He has been
involved with the Aggressive Growth Portfolio since he joined SAC. Prior to
joining SAC, he was associated with Argyle Capital Management, Inc.
INTERNATIONAL PORTFOLIO. Sandor Cseh, Senior Vice President and Director of
International of TBC, and D. Kirk Henry, Senior Vice President of TBC, have been
the co-managers for the International Portfolio since 1991. Mr. Cseh has over 22
years experience in investment management. Mr. Henry has over 16 years
experience in investment management.
ALL PRO PORTFOLIOS. Assets of each of the All Pro Portfolios are managed by two
or more subadvisers that have contracted with PIMC to bring a specific asset
management strategy to the management of that Portfolio. Sarah Lange, Vice
President of PIMC, is the principal person responsible for evaluating the
performance of subadvisers and recommending their employment or termination. Ms.
Lange has a B.A. in Economics from Dickinson College and an M.B.A. from City
University of New York. Ms. Lange is a chartered financial analyst, and has been
with PIMC since 1983.
The table below summarizes the background data with respect to each subadviser's
portfolio managers that provide the day to day management of the All Pro
Portfolio's assets.
<TABLE>
<S> <C> <C>
ALL PRO SMALL CAP SAW: SAW's following investment professionals have
GROWTH PORTFOLIO: served as portfolio managers to the All Pro Small
Cap Growth Portfolio since May 1, 1998: (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.
</TABLE>
37
<PAGE> 41
<TABLE>
<S> <C> <C>
Husic: Husic's following investment professionals have served as
portfolio managers to the All Pro Small Cap Growth Portfolio
since May 1, 1998: Frank J. Husic, CFA: B.S. 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.
ALL PRO LARGE CAP CKM: CKM's following investment professionals have served as
GROWTH PORTFOLIO: portfolio managers to the All Pro Large Cap Growth Portfolio
since May 1, 1998: (1) George M. Cohen: B.S. in Mathematics,
Arizona State University; Joined CKM in 1981, began investment
experience in 1974; (2) Thomas D. Klingenstein: B.A. in History,
Williams College; and (3) Richard C. Marks: B.A. in Physics,
Adelphi University; Joined CKM in 1990, began investment
experience in 1979.
Geewax: Geewax's following investment professionals have served as
portfolio managers to the All Pro Large Cap Growth Portfolio
since May 1, 1998: (1) John J. Geewax: B.S., M.B.A., J.D., Ph.D.
(ABD), University of Pennsylvania; Joined Geewax in 1982, began
investment experience in 1980; and (2) Christopher P. Ouimet:
B.S., Albright College; M.B.A., St. Joseph's University; Joined
Geewax in 1994, began investment experience in 1998.
ALL PRO SMALL CAP VALUE Sterling: Sterling's following investment professionals have served as
PORTFOLIO: portfolio managers to the 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.
Reams: Reams' following investment professionals have served as
portfolio managers to the All Pro Small Cap Value Portfolio
since December 1999: (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.
</TABLE>
38
<PAGE> 42
<TABLE>
<S> <C> <C>
ALL PRO LARGE CAP VALUE Equinox: Equinox's following investment professionals have
PORTFOLIO served as portfolio managers to the All Pro Large
Cap Value Portfolio since May 1, 1998: (1) Ronald
J. Ulrich: Degrees in Engineering and Business
Administration, Lehigh University; M.B.A. in
Corporate Finance, New York University; Founded
Equinox in 1989, began investment experience in
1971; and (2) Wendy D. Lee, CFA: Summa Cum Laude
graduate from both Rutgers College and The
University of Chicago Graduate School of Business
with highest distinction in Economics, Finance
and Accounting; joined Equinox in 1992, began
investment experience in 1981.
Harris Associates: Harris Associates' following investment
professionals have served as portfolio managers
to the All Pro Large Cap Value Portfolio since
May 1, 1998: (1) Robert H. Harper, CFA: B.S.,
University of Illinois; M.B.A., Northwestern
University; Joined Harris Associates in 1978,
began investment experience in 1969; and (2)
Michael J. Mangan, CPA, CFA: B.B.A., University
of Iowa; M.B.A., Northwestern University; joined
Harris Associates in 1997, began investment
experience in 1988.
Mellon Equity: Mellon Equity's following investment
professionals have served as portfolio managers
to the All Pro Large Cap Value Portfolio since
May 1, 1998: (1) William P. Rydell, CFA: Degree
in Economics, Wabash College; M.B.A., University
of Michigan; Joined Mellon Equity in 1986, began
investment experience in 1973; (2) Robert A.
Wilk, CFA: B.S. in Management and Electrical
Engineering, M.I.T.; M.S. in Finance, M.I.T.;
Joined Mellon Equity in 1990, began investment
experience in 1971; (3) John R. O'Toole, CFA:
B.A. in Economics, University of Pennsylvania;
M.B.A. in Finance, University of Chicago; Joined
Mellon Equity in 1990, began investment
experience in 1979; (4) Ronald P. Gala, CFA:
Degree in Business Administration, Duquesne
University; M.B.A. in Finance, University of
Pittsburgh; Joined Mellon Equity in 1993, began
investment experience in 1984; and (5) Stephen A.
Falci, CFA: B.S. in Economics and M.B.A. in
Finance, New York University; Joined Mellon
Equity in 1994, began investment experience in
1981.
</TABLE>
39
<PAGE> 43
DESCRIPTION OF THE FUND'S SHARES
GENERAL
The Fund issues a separate class of shares of common stock for each Portfolio.
The Fund may establish additional portfolios in the future and additional
classes of shares for such new portfolios.
Based on current federal securities law requirements, the Fund expects that its
insurance company shareholders will offer owners of their variable life
insurance contracts and variable annuity contracts the opportunity to instruct
such shareholders as to how to vote shares allocable to their contracts
regarding certain matters, such as the approval of investment advisory
agreements. Fund shares not attributable to variable life insurance or annuity
contracts, or for which no timely instructions are received by insurance company
shareholders, are voted by each insurance company in the same proportion as the
voting instructions that are received by that company for all contracts of the
company participating in each Portfolio. The voting instructions received from
contract holders may be disregarded in certain circumstances that are described
in the prospectuses for the variable contracts.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each Portfolio (except the Money Market
Portfolio) is normally determined once daily as of the close of regular trading
on the New York Stock Exchange, currently 4:00 p.m. New York time, on each day
when the New York Stock Exchange is open for business. The net asset value of
the Money Market Portfolio is normally determined once daily on each day that
both the New York Stock Exchange and the Federal Reserve Bank are open for
business. The New York Stock Exchange and the Federal Reserve Bank each is
scheduled to be open Monday through Friday throughout the year, except for
certain respective federal and other holidays. The net asset value of each
Portfolio is computed by dividing the sum of the value of the Portfolio's
securities, cash, and other assets, minus all liabilities, by the total number
of outstanding shares of the Portfolio.
The value of each Portfolio's securities and assets, except those of the Money
Market Portfolio and certain short-term debt securities held by any of the other
Portfolios, is determined on the basis of their market values. All of the
securities and assets of the Money Market Portfolio and short-term debt
securities having remaining maturities of sixty days or less held by any of the
other Portfolios are valued by the amortized cost method, which approximates
market value. Investments for which market quotations are not readily available
are valued at their fair value as determined in good faith by, or under
authority delegated by, the Fund's board of directors. A Portfolio may invest in
securities primarily listed on foreign exchanges that trade on days when the
Portfolio does not price its shares. Therefore, the net asset value of the
Portfolio's shares may change on days when shareholders may not be able to
redeem Portfolio shares. See "Determination of Net Asset Value" in the SAI.
OFFER, PURCHASE AND REDEMPTION OF SHARES
Shares of the Fund are not available directly to the public. Currently, shares
of the Fund are sold, without sales charge, at each Portfolio's net asset value
per share, only to variable life insurance and variable annuity separate
accounts of Provident Mutual Life Insurance Company ("Provident Mutual") and
Providentmutual Life and Annuity Company of America ("PLACA"); and to variable
life insurance separate accounts of National Life Insurance Company ("NLIC"). In
the future, the Fund may offer shares of one or more of the Portfolios
(including new portfolios that might be added to the Fund) to other separate
accounts of Provident Mutual, PLACA or NLIC to support variable life insurance
policies or variable annuity contracts, or shares may also be sold to other
insurance company separate accounts to fund variable life insurance policies and
variable annuity contracts. The price per share is based on the next daily
calculation of net asset value after an order is placed.
Shares of the Portfolios are sold in a continuous offering and are authorized to
be offered to insurance company separate accounts to support variable life
insurance contracts and variable annuity contracts. Net
40
<PAGE> 44
premiums or net purchase payments under the respective contract or contracts are
placed in one or more subaccounts of a separate account and the assets of each
such separate account are invested in the shares of the Portfolio corresponding
to that subaccount. A separate account purchases and redeems shares of the
Portfolios for its subaccounts at net asset value without sales or redemption
charges.
On each day that a Portfolio's net asset value is calculated, a separate account
transmits to the Fund any orders to purchase or redeem shares of the
Portfolio(s) based on the premiums, purchase payments, redemption (surrender)
requests, and transfer requests from contract owners, annuitants, and
beneficiaries that have been processed on that day. A separate account purchases
and redeems shares of each Portfolio at the Portfolio's net asset value per
share calculated as of the same day, although such purchases and redemptions may
be executed the next morning. Money received by the Fund from a separate account
for the purchase of shares of the International Portfolio may not be invested by
that Portfolio until the day following the execution of such purchases.
Please refer to the separate prospectus for each separate account and its
related contract for a more detailed description of the procedures whereby a
contract owner, annuitant, or beneficiary may allocate his or her interest in a
separate account to a subaccount using the shares of one of the Portfolios as an
underlying investment medium.
DIVIDENDS, DISTRIBUTIONS, AND TAXES
The Fund intends that each of the Portfolios will continue to qualify as a
regulated investment company ("RIC") under the Internal Revenue Code of 1986, as
amended (the "Code"), and will meet certain diversification requirements
applicable to mutual funds underlying variable insurance products. For a
discussion regarding what it means to qualify as a RIC and a general discussion
concerning some of the possible tax consequences associated with the operation
of the Fund, please refer to the section entitled "Taxes" in the SAI.
Shares of the Portfolios are offered only to insurance company separate
accounts. Under the Code, no tax is imposed on an insurance company with respect
to income of a qualifying separate account properly allocable to the value of
eligible variable life insurance or variable annuity contracts. Accordingly, no
gain or loss should be recognized on account of ordinary income or capital gains
distributions to the Fund's insurance company shareholders or upon the sale or
redemption of shares of the Portfolios. Please refer to the appropriate tax
disclosure in the respective prospectuses for a separate account and its related
contract for more information on the taxation of life insurance companies,
separate accounts, as well as the tax treatment of variable life insurance and
variable annuity contracts and the holders thereof.
For more information about the tax status of the Fund, see "Taxes" in the SAI.
41
<PAGE> 45
OTHER INFORMATION
PREPARING FOR YEAR 2000
In providing investment advisory services to the Portfolios, each Adviser
utilizes systems that may be affected by Year 2000 transition issues. The
Advisers and the Portfolios also rely on service providers, including banks,
custodians, administrators, transfer agents and distributors, that also may be
affected. Each of the Advisers has developed, and is in the process of
implementing, a Year 2000 transition plan, and is confirming that its service
providers also are so engaged. The resources that are being devoted to this
effort are substantial. It is difficult to predict with precision whether the
amount of resources ultimately devoted, or the outcome of these efforts, will
have any negative impact on the Advisers or the Portfolios. As of the date of
this prospectus, it is not anticipated that a shareholder will experience
negative effects on the shareholder's investment, or on the services provided in
connection therewith, as a result of Year 2000 transition implementation.
However, there can be no assurance that the Advisers will be successful, or that
interaction with other service providers will not impair the Fund's or an
Adviser's services at that time.
EURO CONVERSION
On January 1, 1999, 11 participating countries in the European Economic Monetary
Union (Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg,
the Netherlands, Portugal, and Spain) adopted the Euro as their official
currency. As of January 1, 1999, governments in participating countries issued
new debt and redenominated existing debt in Euros, although corporations may
choose whether to issue stocks or bonds in Euros or the national currency. The
new European Central Bank (the "ECB") assumed responsibility for a uniform
monetary policy in participating countries. Currency conversion occurs through a
"triangulation" process whereby an amount denominated in one national currency
is converted into Euros, which are then converted into the second national
currency. The Euro conversion presents investors with unique risks and
uncertainties, including: (1) the readiness of Euro payment, clearing, and other
operational systems; (2) the legal treatment of debt instruments and financial
contracts denominated in or referring to existing national currencies rather
than the Euro; (3) exchange-rate fluctuations between the Euro and non-Euro
currencies during the transition period of January 1, 1999 through December 31,
2001 and beyond; (4) potential U.S. tax issues with respect to Portfolio
securities; and (5) the ECB's abilities to manage monetary policies among the
participating countries. Three other EU member countries (Denmark, Greece, and
the United Kingdom) may convert to the Euro at a later date. These and other
factors could adversely affect the value of or income from Portfolio securities.
42
<PAGE> 46
APPENDIX A -- TERMS USED IN THIS PROSPECTUS
ADVISER: Any of the investment advisers to the Portfolios.
- Providentmutual Investment Management Company ("PIMC") serves as
investment adviser to the International Portfolio and the All Pro
Portfolios
- The Boston Company Asset Management, Inc. ("TBC") serves as investment
subadviser to the International Portfolio
- State Street Global Advisors ("SSgA") serves as investment subadviser to
the Equity 500 Index Portfolio.
- Several investment subadvisers serve as portfolio managers for the All
Pro Portfolios
- Sentinel Advisors Company ("SAC") serves as investment adviser to the
Growth, Money Market, Bond, Managed, and Aggressive Growth Portfolios
- An investment management consultant, Wilshire Associates Incorporated,
assists PIMC in identifying and evaluating sub-advisers to the All Pro
Portfolios.
EQUITY SECURITIES: Equity securities include common stock, preferred stock,
securities convertible or exchangeable into common stock, including convertible
debt securities, convertible preferred stock and warrants or rights to acquire
common stock.
FOREIGN ISSUERS: (1) Companies organized outside the United States, (2)
companies whose securities are principally traded outside of the United States
and (3) foreign governments and agencies or instrumentalities of foreign
governments.
INVESTMENT-GRADE SECURITIES: Securities rated, at the time of purchase,
"investment grade" by a nationally-recognized statistical rating organization
(NRSRO) (e.g. Baa or higher by Moody's Investors Service ("Moody's") or BBB or
higher by Standard & Poor's ("S&P")) or unrated securities that the Adviser
determines to be of comparable quality. (See Appendix A to the statement of
additional information for an explanation of ratings.)
NON-DOLLAR SECURITIES: Securities denominated or quoted in a foreign currency.
PRIMARILY: Where the description of a Portfolio indicates that it invests
primarily in certain types of securities, this means that, under normal
circumstances, it invests at least 65% of its total assets in such securities.
SAI: The Fund's statement of additional information, or SAI, contains
additional information about the Fund and the Portfolios and has been filed with
the Securities and Exchange Commission. Investors may obtain a free copy of the
SAI by contacting the Fund at the toll-free number or address shown on the back
cover page of this prospectus.
A-1
<PAGE> 47
APPENDIX B -- FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each
Portfolio's (except the Equity 500 Index and All Pro Portfolios) financial
performance for the past 5 years and for each All Pro Portfolio's financial
performance for its period of operations (which commenced in 1998). Certain
information reflects financial results for a single Portfolio share. The total
returns in the table represent the rate that an investor would have earned on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). Information for each fiscal period (except the period ended June
30, 1999) has been audited by PricewaterhouseCoopers LLP, independent
accountants. Information for the fiscal period ended June 30, 1999 is unaudited.
The accountants' report, along with the Fund's financial statements, are
included in the SAI, which is available upon request.
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
01/01/99 TO (FOR YEAR ENDED)
06/30/99 -------------------------------------------------------------
(UNAUDITED) 1998 1997 1996(a) 1995 1994
-------------- -------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------- ------ ------ ------ ----------- -----------
INCOME FROM INVESTMENT
OPERATIONS:
Net Investment Income....... .02 .05 .05 .05 .05 .04
------- ------ ------ ------ ----------- -----------
Total from investment
operations............. .02 .05 .05 .05 .05 .04
------- ------ ------ ------ ----------- -----------
LESS DISTRIBUTIONS:
Dividends to shareholders
from net investment
income................... (.02) (.05) (.05) (.05) (.05) (.04)
------- ------ ------ ------ ----------- -----------
Total Distributions...... (.02) (.05) (.05) (.05) (.05) (.04)
------- ------ ------ ------ ----------- -----------
Net asset value, end of
period...................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ====== ====== ====== =========== ===========
Total return(c).......... 2.29% 5.29% 5.33% 5.15% 5.61% 3.81%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
$(000)................... 99,649 91,453 64,339 54,197 34,165 21,040
Ratios of expenses to
average net assets
(annualized)(b).......... 0.40% .40% .39% .44% .50% .55%
Ratios of net investment
income to average net
assets (annualized)...... 4.58% 5.15% 5.21% 5.03% 5.47% 3.86%
</TABLE>
- -------------------------
(a) On May 1, 1996 the investment adviser was changed from Providentmutual
Investment Management Company to Sentinel Advisors Company.
(b) Expense ratios before reimbursement of expenses by affiliated insurance
company for the six-month period ended June 30, 1999, and the years ended
December 31, 1998, 1997, 1996, 1995 and 1994 were as follows: 0.40%, 0.42%,
0.39%, 0.44%, 0.50% and 0.59%, respectively.
(c) Total returns for periods less than one year are not annualized.
B-1
<PAGE> 48
FINANCIAL HIGHLIGHTS -- CONTINUED
<TABLE>
<CAPTION>
GROWTH PORTFOLIO
01/01/99 TO (FOR YEAR ENDED)
06/30/99 -----------------------------------------------
(UNAUDITED) 1998 1997(a) 1996 1995 1994
-------------- ------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $18.82 $19.46 $18.10 $16.36 $14.00 $14.09
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................... .13 .27 .35 .46 .47 .43
Net realized and unrealized gain (loss)
on investments......................... 1.32 1.97 3.49 2.54 3.41 (.10)
------ ------ ------ ------ ------ ------
Total from investment operations....... 1.45 2.24 3.84 3.00 3.88 .33
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net
investment income...................... (.06) (.29) (.38) (.48) (.46) (.41)
Dividends to shareholders from net
capital gains.......................... (.37) (2.59) (2.10) (.78) (1.06) (.01)
Total distributions.................... .43 (2.88) (2.48) (1.26) (1.52) (.42)
------ ------ ------ ------ ------ ------
Net asset value, end of period............. $19.84 $18.82 $19.46 $18.10 $16.36 $14.00
====== ====== ====== ====== ====== ======
Total Return(c)........................ 7.88% 13.70% 24.32% 19.58% 30.39% 2.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)......... 332,596 315,299 267,389 198,948 161,899 115,191
Ratios of expenses to average net assets
(annualized)(b)........................ .47% .46% .43% .50% .61% .63%
Ratios of net investment income to
average net
assets (annualized).................... 1.34% 1.53% 2.01% 2.80% 3.20% 3.10%
Portfolio turnover rate.................. 10% 30% 108% 72% 61% 63%
</TABLE>
- -------------------------
(a) On May 1, 1997, the investment adviser was changed from Newbold's Asset
Management, Inc. to Sentinel Advisors Company.
(b) Expense ratios before reimbursement of expenses by affiliated insurance
company for the six-month period ended June 30, 1999, and the years ended
December 31, 1998, 1997, 1996, 1995 and 1994 were as follows: 0.47%, 0.47%,
0.43%, 0.50%, 0.61% and 0.67%, respectively.
(c) Total returns for periods less than one year are not annualized.
B-2
<PAGE> 49
FINANCIAL HIGHLIGHTS -- CONTINUED
<TABLE>
<CAPTION>
BOND PORTFOLIO
01/01/99 TO (FOR YEAR ENDED)
06/30/99 --------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................. $ 11.22 $10.98 $10.67 $11.00 $ 9.73 $11.21
------- ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............ .31 .63 .64 .63 .65 .62
Net realized and unrealized gain
(loss) on investments......... (.72) .25 .33 (.34) 1.27 (1.23)
------- ------ ------ ------ ------ ------
Total from investment
operations............... (.41) .88 .97 .29 1.92 (.61)
------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income......... (.15) (.64) (.66) (.62) (.65) (.60)
Dividends to shareholders from
net capital gains............. (.12) (.00) (.00) (.00) (.00) (.27)
------- ------ ------ ------ ------ ------
Total distributions......... (.27) (.64) (.66) (.62) (.65) (.87)
------- ------ ------ ------ ------ ------
Net asset value, end of period..... $ 10.54 $11.22 $10.98 $10.67 $11.00 $ 9.73
======= ====== ====== ====== ====== ======
Total return(b)............. (3.67)% 8.22% 9.50% 2.86% 20.45% (5.62)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
$(000)........................ 35,539 36,846 23,350 17,087 14,402 10,098
Ratios of expenses to average net
assets (annualized)(a)........ .51% .53% .57% 56% .60% .68%
Ratios of net investment income
to average net assets
(annualized).................. 5.92% 6.03% 6.24% 6.08% 6.36% 6.14%
Portfolio turnover rate.......... 148% 163% 105% 133% 206% 151%
</TABLE>
- -------------------------
(a) Expense ratios before reimbursement of expenses by affiliated insurance
company for the six-month period ended June 30, 1999, and the years ended
December 31, 1998, 1997, 1996, 1995 and 1994 were as follows: 0.51%, 0.55%,
0.57%, 0.56%, 0.60% and 0.70%, respectively.
(b) Total returns for periods less than one year are not annualized.
B-3
<PAGE> 50
FINANCIAL HIGHLIGHTS -- CONTINUED
<TABLE>
<CAPTION>
MANAGED PORTFOLIO
01/01/99 TO (FOR YEAR ENDED)
06/30/99 --------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $17.68 $17.06 $14.68 $14.19 $11.94 $13.27
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............ .24 .54 .54 .51 .55 .53
Net realized and unrealized gain
(loss) on investments......... .40 1.45 2.49 1.07 2.28 (.77)
------ ------ ------ ------ ------ ------
Total from investment
operations.................. .64 1.99 3.03 1.58 2.83 (.24)
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income......... (.13) (.55) (.53) (.51) (.57) (.49)
Dividends to shareholders from
net capital gains............. (.89) (.82) (.12) (.58) (.01) (.60)
------ ------ ------ ------ ------ ------
Total distributions........... (1.02) (1.37) (.65) (1.09) (.58) (1.09)
------ ------ ------ ------ ------ ------
Net asset value, end of period..... $17.30 $17.68 $17.06 $14.68 $14.19 $11.94
====== ====== ====== ====== ====== ======
Total return(b)............... 3.81% 12.54% 21.23% 11.88% 24.43% (1.82)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
$(000)........................ 76,930 67,805 56,068 43,431 36,002 29,363
Ratios of expenses to average net
assets (annualized)(a)........ .56% .57% .58% .60% .66% .67%
Ratios of net investment income
to average net assets
(annualized).................. 3.05% 3.22% 3.47% 3.68% 4.22% 4.34%
Portfolio turnover rate.......... 87% 203% 99% 106% 130% 75%
</TABLE>
- -------------------------
(a) Expense ratios before reimbursement of expenses by affiliated insurance
company for the six-month period ended June 30, 1999, and the years ended
December 31, 1998, 1997, 1996, 1995 and 1994 were as follows: 0.56%, 0.58%,
0.58%, 0.60%, 0.66% and 0.73%, respectively.
(b) Total returns for periods less than one year are not annualized.
B-4
<PAGE> 51
FINANCIAL HIGHLIGHTS -- CONTINUED
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO
01/01/99 TO (FOR YEAR ENDED)
06/30/99 --------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
-------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................... $21.91 $22.19 $18.52 $17.38 $15.45 $15.45
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income..... .05 .11 .17 .17 .20 (.01)
Net realized and
unrealized gain (loss)
on investments......... 1.55 1.50 3.72 3.03 1.86 .01
------ ------ ------ ------ ------ ------
Total from investment
operations........... 1.60 1.61 3.89 3.20 2.06 .00
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders
from net investment
income................. (.11) (.18) (.18) (.19) (.00) (.00)
Dividends to shareholders
from net capital
gains.................. (2.83) (1.71) (.04) (1.87) (.13) (.00)
------ ------ ------ ------ ------ ------
Total distributions.... (2.94) (1.89) (.22) (2.06) (.13) (.00)
------ ------ ------ ------ ------ ------
Net asset value, end of
period.................... $20.57 $21.91 $22.19 $18.52 $17.38 $15.45
====== ====== ====== ====== ====== ======
Total return(b)........ 8.57% 7.99% 21.21% 21.00% 13.48% 0%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
$(000)................. 59,803 56,495 48,574 34,098 23,822 15,430
Ratios of expenses to
average net assets
(annualized)(a)........ .56% .61% .63% .68% .76% .86%
Ratios of net investment
income to average net
assets (annualized).... .59% .56% .95% 1.14% 1.32% (.10)%
Portfolio turnover........ 17% 41% 37% 47% 89% 60%
</TABLE>
- -------------------------
(a) Expense ratios before reimbursement of expenses by affiliated insurance
company and fee waivers by the administrator for the six-month period ended
June 30, 1999, and the years ended December 31, 1998, 1997, 1996, 1995 and
1994 were as follows: 0.57%, 0.62%, 0.63%, 0.68%, 0.76% and 0.89%,
respectively.
(b) Total returns for periods less than one year are not annualized.
B-5
<PAGE> 52
FINANCIAL HIGHLIGHTS -- CONTINUED
<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO
01/01/99 TO (FOR YEAR ENDED)
06/30/99 --------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................. $13.85 $13.61 $13.41 $12.86 $11.63 $11.87
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... .15 .15 .11 .11 .16 .05
Net realized and
unrealized gain
(loss) on
investments.......... 1.13 1.14 1.08 1.23 1.45 (.02)
------ ------ ------ ------ ------ ------
Total from investment
operations......... 1.28 1.29 1.19 1.34 1.61 .03
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to
shareholders from net
investment income.... (.16) (.10) (.11) (.16) (.07) (.03)
Dividends to
shareholders from net
capital gains........ (.81) (.95) (.88) (.63) (.31) (.24)
------ ------ ------ ------ ------ ------
Total
distributions...... (.97) (1.05) (.99) (.79) (.38) (.27)
------ ------ ------ ------ ------ ------
Net asset value, end of
period.................. $14.16 $13.85 $13.61 $13.41 $12.86 $11.63
====== ====== ====== ====== ====== ======
Total return(b)...... 9.79% 10.13% 9.66% 10.89% 14.31% .26%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period $(000)........ 74,755 71,363 62,513 50,955 36,642 26,212
Ratios of expenses to
average net assets
(annualized)(a)...... .97% 1.00% 1.02% 1.05% 1.15% 1.32%
Ratios of net investment
income to average net
assets
(annualized)......... 2.01% 1.18% 1.13% 1.08% 1.21% .76%
Portfolio turnover...... 18% 37% 37% 35% 45% 32%
</TABLE>
- -------------------------
(a) Expense ratios before reimbursement of expenses by affiliated insurance
company and fee waivers by the administrator for the six-month period ended
June 30, 1999, and the years ended December 31, 1998, 1997, 1996, 1995 and
1994 were as follows: 1.00%, 1.00%, 1.02%, 1.05%, 1.15% and 1.32%,
respectively.
(b) Total returns for periods less than one year are not annualized.
B-6
<PAGE> 53
FINANCIAL HIGHLIGHTS -- CONTINUED
<TABLE>
<CAPTION>
ALL PRO LARGE CAP
GROWTH PORTFOLIO
(FOR THE PERIOD ENDED)
----------------------------
01/01/99 TO 05/04/98(a)
06/30/99 TO
(UNAUDITED) 12/31/98
------------- -----------
<S> <C> <C>
Net asset value, beginning of period........................ $ 11.77 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................................... (.01) .00
Net realized and unrealized gain (loss) on investments.... 1.50 1.77
------- -------
Total from investment operations....................... 1.49 1.77
------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income...... (.00) (.00)
Dividends to shareholders from net capital gains.......... (.00) (.00)
------- -------
Total distributions.................................... (.00) (.00)
------- -------
Net asset value, end of period.............................. $ 13.26 $ 11.77
======= =======
Total return(b)........................................ 12.68% 17.70%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000).......................... 26,547 14,307
Ratios of expenses to average net assets(c)(annualized)... .87% .90%
Ratios of net investment income to average net assets
(annualized)........................................... .07% .04%
Portfolio turnover........................................ 47% 64%
</TABLE>
- -------------------------
(a) Commencement of operations.
(b) Total returns for periods less than one year are not annualized.
(c) Expense ratio before reimbursement of expenses by affiliated insurance
company for the six-month period ended June 30, 1999 and the period ended
December 31, 1998 were 0.89% and 0.92% (annualized), respectively.
B-7
<PAGE> 54
FINANCIAL HIGHLIGHTS -- CONTINUED
<TABLE>
<CAPTION>
ALL PRO SMALL CAP
GROWTH PORTFOLIO
(FOR THE PERIODS ENDED)
----------------------------
01/01/99 TO 05/04/98(a)
06/30/99 TO
(UNAUDITED) 12/31/98
------------- -----------
<S> <C> <C>
Net asset value, beginning of period........................ $ 9.80 $10.00
------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................................... (.02) (.01)
Net realized and unrealized gain (loss) on investments.... 2.62 (.19)
------- ------
Total from investment operations....................... 2.60 (.20)
------- ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income...... (.00) (.00)
Dividends to shareholders from net capital gains.......... (.00) (.00)
------- ------
Total distributions.................................... (.00) (.00)
------- ------
Net asset value, end of period.............................. $ 12.40 $ 9.80
======= ======
Total return(b)........................................ 26.63% (2.00)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000).......................... 19,046 9,685
Ratios of expenses to average net assets(c)
(annualized)........................................... 1.11% 1.24%
Ratios of net investment income to average net assets
(annualized)........................................... (.54)% (.14)%
Portfolio turnover........................................ .68% 82%
</TABLE>
- -------------------------
(a) Commencement of operations.
(b) Total returns for periods less than one year are not annualized.
(c) Expense ratio before reimbursement of expenses by affiliated insurance
company for the six-month period ended June 30, 1999 and the period ended
December 31, 1998 were 1.14% and 1.25% (annualized), respectively.
B-8
<PAGE> 55
FINANCIAL HIGHLIGHTS -- CONTINUED
<TABLE>
<CAPTION>
ALL PRO LARGE CAP
VALUE PORTFOLIO
(FOR THE PERIODS ENDED)
----------------------------
01/01/99 TO 05/04/98(a)
06/30/99 TO
(UNAUDITED) 12/31/98
------------- -----------
<S> <C> <C>
Net asset value, beginning of period........................ $ 9.90 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................................... .04 .07
Net realized and unrealized gain (loss) on investments.... .85 (.17)
------- -------
Total from investment operations....................... .89 (.10)
------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income...... (.07) (.00)
Dividends to shareholders from net capital gains.......... (.00) (.00)
------- -------
Total distributions.................................... (.07) (.00)
------- -------
Net asset value, end of period.............................. $ 10.72 $ 9.90
======= =======
Total return(b)........................................ 9.01% (1.00)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000).......................... 23,565 15,616
Ratios of expenses to average net assets(c)(annualized)... .89% .95%
Ratios of net investment income to average net assets
(annualized)........................................... 1.04% 1.31%
Portfolio turnover........................................ 27% 39%
</TABLE>
- -------------------------
(a) Commencement of operations.
(b) Total returns for periods less than one year are not annualized.
(c) Expense ratio before reimbursement of expenses by affiliated insurance
company for the six-month period ended June 30, 1999 and the period ended
December 31, 1998 were 0.93% and 0.97% (annualized), respectively.
B-9
<PAGE> 56
FINANCIAL HIGHLIGHTS -- CONTINUED
<TABLE>
<CAPTION>
ALL PRO SMALL CAP
VALUE PORTFOLIO
(FOR THE PERIODS ENDED)
----------------------------
01/01/99 TO 05/04/98(a)
06/30/99 TO
(UNAUDITED) 12/31/98
------------- -----------
<S> <C> <C>
Net asset value, beginning of period........................ $ 8.25 $10.00
------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................................... .01 .02
Net realized and unrealized gain (loss) on investments.... (.10) (1.77)
------- ------
Total from investment operations....................... (.09) (1.75)
------- ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income...... (.02) (.00)
Dividends to shareholders from net capital gains.......... (.00) (.00)
------- ------
Total distributions.................................... (.02) (.00)
------- ------
Net asset value, end of period.............................. $ 8.14 $ 8.25
======= ======
Total return(b)........................................ (1.12)% (17.50)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000).......................... 10,835 8,073
Ratios of expenses to average net assets(c)
(annualized)........................................... 1.22% 1.28%
Ratios of net investment income to average net assets
(annualized)........................................... .33% .48%
Portfolio turnover........................................ 46% 38%
</TABLE>
- -------------------------
(a) Commencement of operations.
(b) Total returns for periods less than one year are not annualized.
(c) Expense ratio before reimbursement of expenses by affiliated insurance
company for the six-month period ended June 30, 1999 and the period ended
December 31, 1998 were 1.25% and 1.36% (annualized), respectively.
B-10
<PAGE> 57
ADDITIONAL INFORMATION ABOUT THE FUND
ANNUAL/SEMI-ANNUAL REPORTS TO SHAREHOLDERS:
Additional information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders. In the Fund's annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"):
The SAI, which contains additional information about the Fund, has been filed
with the SEC and is incorporated herein by reference. Information about the Fund
(including the SAI) can be reviewed and copied at the SEC's Public Reference
Room in Washington, D.C. Information on the operation of the Public Reference
Room may be obtained by calling the SEC at 1-800-SEC-0330. Reports and other
information about the Fund are available on the SEC's Internet site at
http://www.sec.gov and copies of this information may be obtained, upon payment
of a duplicating fee, by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009.
A free copy of the Fund's SAI and annual and semi-annual reports may be obtained
and further inquiries can be made by calling the Fund at 1-800-688-5177 or by
writing to the Fund at 103 Bellevue Parkway, Wilmington, Delaware 19809.
Investment Company Act File No.: 811-4350
<PAGE> 58
MARKET STREET FUND, INC.
103 BELLEVUE PARKWAY
WILMINGTON, DE 19809
1-800-688-5177
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 7, 2000
This Statement of Additional Information ("SAI") is not a prospectus. It should
be read in conjunction with the Market Street Fund, Inc. prospectuses (each, a
"Prospectus") dated May 1, 1999 and February 7, 2000, respectively, and retained
for future reference.
A copy of each Prospectus to which this Statement of Additional Information
relates is available at no charge by writing to Market Street Fund, Inc. at the
above address or by calling the telephone number listed above. Terms not defined
in this SAI shall have the same meaning as given them in the Prospectuses.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information and History............................. 2
Control Persons............................................. 2
Investment Objectives of the Portfolios..................... 2
Investment Restrictions..................................... 3
Investment Techniques and Risks............................. 4
Portfolio Turnover.......................................... 17
Management of the Fund...................................... 18
Investment Advisory and Other Services...................... 19
Portfolio Transactions and Brokerage Allocation............. 26
Determination of Net Asset Value............................ 27
Redemption of Shares........................................ 29
Taxes....................................................... 29
Capital Stock............................................... 31
Code of Ethics.............................................. 31
Other Services.............................................. 32
Financial Statements........................................ F-1
Appendix A -- Description of Money Market Instruments and
Commercial Paper and Bond Ratings......................... A-1
</TABLE>
<PAGE> 59
GENERAL INFORMATION AND HISTORY
The Market Street Fund, Inc. (the "Fund") was incorporated in the state of
Maryland on March 21, 1985. Each Portfolio of the Fund is an open-end
diversified management investment company as such terms are defined in the
Investment Company Act of 1940, as amended (the "1940 Act"). As a "series" type
of mutual fund, the Fund issues separate classes (or series) of common stock for
each portfolio representing fractional undivided interests in that portfolio.
Currently there are twelve separate investment portfolios (each a "Portfolio,"
together, the "Portfolios"). An investor in a Portfolio is entitled to a
pro-rata share of all dividends and distributions arising from the net income
and capital gains on the investments of that Portfolio. An investor also shares
pro-rata in any losses of that Portfolio. The Portfolios do not intend to
concentrate their respective investments in a particular industry or group of
industries.
The Fund serves as an investment medium for variable life insurance contracts
and variable annuity contracts issued by Provident Mutual Life Insurance Company
("PMLIC"), Providentmutual Life and Annuity Company of America ("PLACA") and
National Life Insurance Company ("NLIC") of Montpelier, Vermont. NLIC is located
at One National Life Drive, Montpelier, Vermont 05604. Each of PMLIC and PLACA
is located at 1000 Chesterbrook Boulevard, Berwyn, PA 19312. Other than the
shares sold directly to PMLIC to seed the Managed, Aggressive Growth,
International, All Pro Large Cap Growth, All Pro Large Cap Value, All Pro Small
Cap Growth and All Pro Small Cap Value Portfolios, and to NLIC to seed the
Sentinel Growth Portfolio, shares of the Fund currently are sold only to
separate accounts of Provident Mutual and PLACA and to variable life insurance
separate accounts of NLIC. In the future, shares of the Fund may also be sold to
separate accounts of other affiliated or unaffiliated insurance companies in
order to fund variable annuity contracts or variable life insurance policies.
CONTROL PERSONS
As of the date of this SAI, NLIC and certain separate accounts supporting
variable contracts issued by PMLIC and PLACA, respectively, are the only
shareholders of the Portfolios. As the primary holders of the Portfolios'
shares, PMLIC, PLACA and NLIC together currently control the Fund. PMLIC and
PLACA will continue to control the Fund until other insurance companies, selling
significant amounts of variable life insurance and variable annuities, have made
substantial investments in Fund shares. For purposes of voting on matters
submitted to shareholders, any person who controls a mutual fund may be able to
significantly influence the outcome of any shareholder vote. However, each of
PMLIC, PLACA and NLIC generally votes the relevant shares at the shareholders'
meetings in accordance with the timely instructions received from owners of
variable contracts having contract values allocated to the relevant separate
accounts.
As of January 20, 2000, no policy holder owned a policy or contract which
individually or in the aggregate had a total interest in any Portfolio of more
than 5%. As of December 27, 1999, the officers and directors of the Fund as a
group did not beneficially own as policy holders more than a 1% interest in any
Portfolio.
INVESTMENT OBJECTIVES OF THE PORTFOLIOS
The investment objective or objectives of each Portfolio are set forth below.
They are fundamental and may not be changed unless authorized for each Portfolio
by the vote of a "1940 Act majority" of the outstanding voting shares of the
affected Portfolio, voting separately. Approval by a "1940 Act majority" of a
Portfolio's outstanding voting securities means the approval by the lesser of
(i) more than 50% of the Portfolio's outstanding voting securities, or (ii) 67%
or more of the Portfolio's outstanding voting securities present at a meeting if
the holders of more than 50% of the outstanding voting securities of the
Portfolio are present (in person or by proxy) (hereinafter referred to as a
"1940 Act Vote").
2
<PAGE> 60
<TABLE>
<CAPTION>
NAME OF PORTFOLIO INVESTMENT OBJECTIVE
- ----------------- --------------------
<S> <C>
Money Market Portfolio.................... Maximum current income consistent with capital
preservation and liquidity.
Equity 500 Index Portfolio................ Long-term capital appreciation.
Growth Portfolio.......................... Intermediate and long-term growth of capital. A
reasonable level of income is an important
secondary objective.
Bond Portfolio............................ A high level of current income consistent with
prudent investment risk.
Managed Portfolio......................... As high a level of long-term total rate of return
as is consistent with prudent investment risk.
Aggressive Growth Portfolio............... A high level of long-term capital appreciation.
Sentinel Growth Portfolio................. Long-term growth of capital.
International Portfolio................... Long-term growth of capital primarily through
investments in a diversified portfolio of
marketable equity securities of established foreign
issuer companies.
All Pro Large Cap Growth Portfolio........ Long-term capital appreciation.
All Pro Small Cap Growth Portfolio........ Long-term capital appreciation.
All Pro Large Cap Value Portfolio......... Long-term capital appreciation.
All Pro Small Cap Value Portfolio......... Long-term capital appreciation.
</TABLE>
INVESTMENT RESTRICTIONS
The following specific restrictions supplement the discussion of the Portfolios'
investment objectives and policies set forth in each Prospectus.
The Fund has adopted the following fundamental restrictions relating to the
investment of assets of the twelve Portfolios. These restrictions may not be
changed except by holders of a 1940 Act majority of outstanding voting shares of
each Portfolio affected. The Fund's fundamental investment restrictions provide
that no Portfolio of the Fund may:
(1) with respect to 75% of the Portfolio's total assets, purchase
securities of an issuer (other than the U.S. Government, its agencies or
instrumentalities), if (a) such purchase would cause more than 5% of the
Portfolio's total assets taken at market value to be invested in the
securities of such issuer, or (b) such purchase would at the time result in
more than 10% of the outstanding voting securities of such issuer being
held by the Portfolio;
(2) invest 25% or more of its total assets in the securities of one or
more issuers conducting their principal business activities in the same
industry (excluding the U.S. Government or any of its agencies or
instrumentalities);
(3) borrow money, except a Portfolio may (a) borrow from banks (as
defined in the 1940 Act) or through reverse repurchase agreements in
amounts up to 30% of its total assets (including the amount borrowed), (b)
to the extent permitted by applicable law, borrow up to an additional 5% of
its total assets for temporary purposes, (c) obtain such short-term credits
as may be necessary for the clearance of purchases and sales of portfolio
securities, and (d) purchase securities on margin to the extent permitted
by applicable law;
(4) make loans, except through (a) the purchase of debt obligations in
accordance with the Portfolio's investment objective and policies, (b)
repurchase agreements with banks, broker-dealers and other financial
institutions, and (c) loans of securities as permitted by applicable law;
(5) underwrite securities issued by others, except to the extent that
the sale of portfolio securities by the Portfolio may be considered an
underwriting;
3
<PAGE> 61
(6) purchase, hold or deal in real estate, although a Portfolio may
purchase and sell securities that are secured by real estate or interests
therein, securities of real estate investment trusts and mortgage-related
securities and may hold and sell real estate acquired by a Portfolio as a
result of the ownership of securities;
(7) invest in commodities or commodity contracts, except that the
Portfolio may invest in currency and financial instruments and contracts
that are commodities or commodity contracts; or
(8) issue senior securities to the extent such issuance would violate
applicable law.
The following restrictions are not fundamental policies and may be changed
without the approval of the outstanding voting shares of the affected Portfolio.
No Portfolio may:
(1) sell securities short or maintain a short position except for short
sales against the box; or
(2) invest more than 25% of the value of its total assets in the
securities of foreign issuers and non-dollar securities. This policy does
not apply to the International Portfolio; or
(3) acquire any security which is not readily marketable if more than
15% of the net assets of the Portfolio (other than the Money Market
Portfolio), and 10% of the net assets of the Money Market Portfolio, taken
at market value, would be invested in such securities; or
(4) enter into a stock index futures contract (by exercise of any option
or otherwise) or acquire any options thereon, if immediately thereafter,
the total of the initial margin deposits required with respect to all open
futures positions, at the time such positions were established, plus the
sum of the premiums paid for all unexpired options on stock index futures
contracts would exceed 5% of the value of its total assets.
Except for the limitations on borrowing from banks, if the above percentage
restrictions are adhered to at the time of investment, a later increase or
decrease in such percentage resulting from a change in values of securities or
amount of net assets will not be considered a violation of any of the foregoing
restrictions.
INVESTMENT TECHNIQUES AND RISKS
The following disclosure supplements the discussion of the Portfolios'
investment objectives and policies set forth in the Prospectus.
TEMPORARY DEFENSIVE POSITIONS
Notwithstanding their investment objective(s), each of the Portfolios may, for
temporary defensive purposes to preserve capital, invest all or part of its
assets in cash and/or money market instruments of the type in which the Money
Market Portfolio may invest. For temporary defensive purposes to preserve
capital, the International Portfolio may hold part or all of its assets in
foreign currency or in non-dollar short-term debt securities.
REPURCHASE AGREEMENTS
Each of the Portfolios may invest in repurchase agreements with member banks of
the Federal Reserve System or with dealers in U.S. Government securities. A
repurchase agreement customarily obligates the seller at the time it sells
securities to the Portfolio to repurchase the securities at a mutually agreed
upon price and date (ordinarily a week or less). The total amount received on
repurchase would be calculated to exceed the price paid by the Portfolio,
reflecting an agreed upon market rate of interest for the period from the time
of the repurchase agreement to the settlement date, and would not necessarily be
related to the interest rate on the underlying securities. The underlying
securities are ordinarily U.S. Government securities, but may consist of other
securities in which the respective Portfolios may otherwise invest. Each
Portfolio (except the Money Market Portfolio) will not invest more than 15%, and
the Money Market Portfolio will not invest more than 10%, of its net assets in
repurchase agreements which have maturities of more than seven days and will not
invest in repurchase agreements with maturities of over 30 days. Repurchase
agreements will be fully collateralized at all times and interest on the
underlying security will
4
<PAGE> 62
not be taken into account for valuation purposes. Under no circumstances will a
Portfolio enter into a repurchase agreement with an Adviser or an affiliate of
an Adviser.
The primary risk of investing in repurchase agreements is that, to the extent
that the proceeds from any sale of the underlying securities and other
collateral relating to a repurchase agreement upon a default in the obligation
to repurchase were less than the repurchase price, the Portfolio would suffer a
loss. The Portfolio might also incur disposition costs in connection with
liquidating its collateral and, if bankruptcy proceedings are commenced with
respect to the seller, realization upon the collateral by the Portfolio may be
delayed or limited and a loss (including loss of interest on or principal of the
security) may be incurred if the collateral securing the repurchase agreement
declines in value during the bankruptcy proceedings. To minimize the possibility
of losses due to the default or bankruptcy of the seller, the Fund has adopted
standards of credit worthiness for all parties with which the Fund enters into
repurchase agreements and will review compliance by such parties periodically.
BORROWING
Each of the Portfolios may borrow from banks or through reverse repurchase
agreements in amounts up to 30% of its total assets (including the amount
borrowed). Each Portfolio also may, to the extent permitted by applicable law,
borrow up to an additional 5% of its total assets for temporary purposes, and
may obtain such short-term credits as may be necessary for the clearance of
purchases and sales of portfolio securities and purchase securities on margin to
the extent permitted by applicable law. No Portfolio will borrow money for
leveraging purposes, and no Portfolio will purchase additional securities while
its borrowings exceed the above specified limits. As required by the Investment
Company Act of 1940, each Portfolio will maintain continuous asset coverage of
at least 300% of the amount borrowed. In the event that a Portfolio's asset
coverage falls below 300%, the Portfolio may be required to sell securities
within three days to reduce the amount of its borrowing and restore the 300%
asset coverage. Such sales of securities may occur at a time that is
disadvantageous for a Portfolio.
REVERSE REPURCHASE AGREEMENTS
The Portfolios may enter into reverse repurchase agreements with banks and
broker-dealers. These agreements have the characteristics of borrowing and
involve the sale of securities held by a Portfolio with an agreement to
repurchase the securities at an agreed upon date and price that reflects a rate
of interest paid for the use of funds for the period. Such transactions are
advantageous only if the Portfolios have the opportunity to earn a greater rate
of interest on the cash derived from the transaction than the interest cost of
obtaining that cash. The Portfolios may be unable to realize a rate of return
from the use of the proceeds equal to or greater than the interest expense of
the repurchase agreement. Thus, the Portfolios intend to enter into such
agreements only when it appears advantageous to do so. The use of reverse
repurchase agreements may magnify any increase or decrease in the value of the
Portfolios' investments. The Portfolios' custodian will maintain, in a
segregated account, fully liquid securities of each Portfolio that have a value
equal to or greater than the respective Portfolio's commitments under reverse
repurchase agreements. The value of securities subject to reverse repurchase
agreements will not exceed 30% of the value of the respective Portfolio's total
assets. Under no circumstances will a Portfolio enter into a reverse repurchase
agreement with an Adviser or any affiliate of an Adviser.
COVERED CALL OPTION CONTRACTS
The Growth, Managed, Aggressive Growth and All Pro Portfolios may engage in
certain limited options strategies. These options strategies are limited to
writing (selling) covered call options which are traded on a domestic securities
exchange with respect to securities in which a Portfolio may invest and entering
into "closing purchase transactions" in order to terminate its obligation as a
writer of a call option prior to the expiration of the option. A Portfolio will
not write a call option if the securities covered by such options exceed 25% of
the Portfolio's total assets at that time. Moreover, in order to maintain
qualification for
5
<PAGE> 63
treatment as a regulated investment company for federal income tax law purposes,
the writing of covered calls may be further limited.
A covered call option gives the purchaser of the option the right to purchase
the underlying security from a Portfolio at a fixed exercise price at any time
prior to the expiration of the option, regardless of the market price of the
security during the option period. As consideration for the option, the
purchaser pays the Portfolio a premium, which the Portfolio retains whether or
not the option is exercised. A covered call option will benefit a Portfolio if,
over the option period, the underlying security declines in value or does not
appreciate above the aggregate value of the exercise price plus the premium.
However, the Portfolio risks the loss of profits if the underlying security
appreciates above the aggregate value of the exercise price and premium.
So long as a Portfolio remains obligated as a writer of a call, it forgoes the
opportunity to profit from increases in the market price of the underlying
security above the call price. The Portfolio may close out a covered call option
position by purchasing on the same exchange a call option on the same security,
with the same exercise price and the same expiration date as the call previously
written on that security. Although writing only call options which are traded on
a national securities exchange increases the likelihood of being able to make
closing purchase transactions, there is no assurance that the Portfolio will be
able to do so at any particular time or at an acceptable price. Depending upon
the premium paid for the option relative to the premium received on the option
written, the Portfolio may realize a profit or loss on a closing transaction.
The writing of call options could result in increases in the turnover rate of
the Portfolio, especially during periods when market prices of the underlying
securities appreciate, which could result in higher brokerage costs. In
addition, brokerage commissions will be paid by the Portfolio on both the
establishment and closing out of an option position.
A Portfolio may write covered call options on particular portfolio securities
when it believes that the market value of those securities will either decline
or will not increase over the period covered by the option. In this manner, the
Portfolio hopes that the option price received (net of transaction costs) may
offset any decline in the market value of the security or otherwise generate
income for the Portfolio. To the extent income is generated, writing covered
call options generally will help to achieve the Growth Portfolio's secondary
objective of a reasonable level of income, but does not further the Portfolio's
primary objective of achieving intermediate and long-term growth of capital,
except to the extent that it "hedges" against capital losses. The investment
program for the Aggressive Growth Portfolio is expected to produce only modest
current income, if any, and such income will not be a basic part of the
Portfolio's objective but will be merely incidental.
SHORT-TERM TRADING
Other than the Bond Portfolio and the Managed Portfolio, the Portfolios do not
expect to trade in securities for short-term gains. Notwithstanding this, an
Adviser may, from time to time, make short-term investments when it believes
that such investments will benefit a Portfolio and may dispose of any investment
without regard to the length of time that the investment has been held. The Bond
Portfolio intends to use short-term trading of securities if it believes the
transactions net of costs (including any commission) will benefit its portfolio
for the purposes of:
(a) Avoiding potential depreciation in the value of a security held in
the portfolio where the Portfolio anticipates that it may decline in market
value as a result of unfavorable earnings trends and/ or unfavorable
investment environment; or
(b) Increasing the return by taking advantage of yield disparities
between various fixed-income securities in order to realize capital gains
or improved income on the portfolio.
ILLIQUID ASSETS
The Equity 500 Index Portfolio will not invest in Illiquid Assets. However, no
Portfolio (other than the Money Market Portfolio) may invest more than 15%, and
the Money Market Portfolio may not invest more
6
<PAGE> 64
than 10%, of the value of its net assets in securities that are not readily
marketable. This limit does not apply to a Portfolio's investment in securities
purchased or sold pursuant to Rule 144A under the Securities Act of 1933 which
the Board of Directors has determined are liquid. This restriction does apply to
repurchase agreements maturing in more than seven days. This restriction also
applies to securities received as a result of a corporate reorganization or
similar transaction affecting readily marketable securities already held by the
Fund's Portfolios.
INVESTMENT-GRADE SECURITIES
Investment-grade securities include securities rated, at the time of purchase,
"investment grade" by a nationally-recognized statistical rating organization
("NRSRO") (e.g., Baa or higher by Moody's Investors Service ("Moody's") or BBB
or higher by Standard & Poor's Corporation ("Standard & Poor's")) or unrated
securities that the Adviser determines to be of comparable quality. (See
Appendix A to this SAI for an explanation of ratings.) Unrated securities of a
quality comparable to rated securities may nonetheless trade in the market at a
discount from the price of comparable rated securities.
LOWER QUALITY DEBT INSTRUMENTS
Up to 25% of the total assets of each of the Bond and the Managed Portfolios may
be invested in lower quality debt instruments (rated BB by Standard & Poor's or
Ba by Moody's, or comparable unrated securities). Furthermore, debt instruments
with higher ratings, and especially those rated as investment-grade but not high
quality (i.e., rated BBB by Standard & Poors or Baa by Moody's) may, after
purchase by either Portfolio, have their ratings lowered due to the
deterioration of the issuer's financial position. In the event that the rating
of a bond held by either Portfolio drops below BBB or Baa, the decision whether
to retain or dispose of the bond will be made on a case by case basis. However,
in no event will the amount of assets held in lower quality debt instruments be
greater than that set forth above.
Lower quality debt instruments entail certain risks. Lower-rated debt
instruments are subject to market risk and are considered, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation and will generally
involve more credit risk than securities in the higher rating categories. In
some cases such securities may be highly speculative, have poor prospects for
reaching investment-grade standing and be in default. The market values of such
securities tend to reflect market risk and credit risk, as well as individual
corporate developments, to a greater extent than do higher-rated securities,
which react primarily to fluctuations in the general level of interest rates.
Such lower-rated securities also tend to be more sensitive to economic
conditions than higher-rated securities. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, regarding lower-rated
bonds may depress prices and liquidity for such securities. To the extent a
Portfolio invests in these securities, factors adversely affecting the market
value of lower-quality, high-yielding securities will adversely affect a
Portfolio's net asset value.
Lower-rated, high-yielding securities may be issued by corporations in the
growth stage of their development. They may also be issued in connection with a
corporate reorganization or as part of a corporate takeover. Companies that
issue such high-yielding securities are often highly leveraged and may not have
available to them more traditional methods of financing. Therefore, the risk
associated with acquiring the securities of such issuers generally is greater
than is the case with higher-rated securities. For example, during an economic
downturn or a sustained period of rising interest rates, highly leveraged
issuers of high-yielding securities may experience financial stress. During such
periods, such issuers may not have sufficient revenues to meet their interest
payment obligations. The issuer's ability to service its debt obligations may
also be adversely affected by specific corporate developments, the issuer's
inability to meet specific projected business forecasts, or the unavailability
of additional financing. The risk of loss due to default by the issuer is
significantly greater for the holders of high-yielding securities because such
securities are generally unsecured and are often subordinated to other creditors
of the issuers.
A Portfolio may have difficulty disposing of certain high-yielding securities
for which there is a thin trading market. Because not all dealers maintain
markets in all high-yielding securities, there is no established
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retail secondary market for many of these securities, and the Fund anticipates
that they could be sold only to a limited number of dealers or institutional
investors. To the extent there is a secondary trading market for high-yielding
securities, it is generally not as liquid as that for higher-rated securities.
The lack of a liquid secondary market for certain securities may make it more
difficult for the Fund and its Board of Directors to obtain accurate market
quotations for purposes of valuing a Portfolio's assets. Market quotations are
generally available on many high-yield issues only from a limited number of
dealers and may not necessarily represent firm bids of such dealers or prices
for actual sales.
The market for high-yielding securities has not weathered a major economic
recession, and it is not known how one might affect that market. It is likely,
however, that any such recession could severely affect the market for and the
values of such securities, as well as the ability of the issuers of such
securities to repay principal and pay interest thereon. Moreover, such a
recession could also increase the incidence of defaults of high-yielding
securities.
A Portfolio may acquire high-yielding securities that are sold without
registration under the federal securities laws and therefore carry restrictions
on resale. A Portfolio may incur special costs in disposing of such securities,
but will generally incur no costs when the issuer is responsible for registering
the securities.
A Portfolio also may acquire high-yielding securities during an initial
underwriting. Such securities involve special risks because they are new issues.
The Fund has no arrangement with any person concerning the acquisition of such
securities, and the Adviser will carefully review the credit and other
characteristics pertinent to such new issues.
From time to time, there have been proposals for legislation designed to limit
the use of certain high-yielding securities in connection with leveraged
buy-outs, mergers and acquisitions, or to limit the deductibility of interest
payments on such securities. Such proposals, if enacted into law, could
generally reduce the market for such securities, could negatively affect the
financial condition of issuers of high-yielding securities by removing or
reducing a source of future financing, and could negatively affect the value of
specific high-yield issues. However, the likelihood of any such legislation or
the effect thereof is uncertain.
As savings and loan associations dispose of their portfolios of lower quality
debt instruments pursuant to the Financial Institutions Reform Recovery and
Enforcement Act of 1989, the general market and prices for such securities
should be adversely affected.
SECURITIES INDEX OPTIONS
In seeking to hedge all or a portion of its investments, the Equity 500 Index
Portfolio may purchase and write put and call options on the S&P 500 Index. The
Portfolio may write only covered options. It may also use securities index
options as a means of participating in a securities market without making direct
purchases of securities.
A securities index measures the movement of a certain group of securities by
assigning relative values to the securities included in the index. Options on
securities indexes are generally similar to options on specific securities.
Unlike options on securities, however, options on securities indices do not
involve the delivery of an underlying security; the option in the case of an
option on a securities index represents the holder's right to obtain from the
writer in cash a fixed multiple of the amount by which the exercise price
exceeds (in the case of a call) or is less than (in the case of a put) the
closing value of the underlying securities index on the exercise date. The
Portfolio may enter into closing transactions with respect to those options to
terminate existing positions.
The delivery requirements of options on securities indices differ from options
on securities. Unlike a securities option, which contemplates the right to take
or make delivery of securities at a specified price, an option on a securities
index gives the holder the right to receive a cash "exercise settlement amount"
equal to (1) the amount, if any, by which the fixed exercise price of the option
exceeds (in the case of a call) or is less than (in the case of a put) the
closing value of the underlying index on the date of exercise, multiplied
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by (2) a fixed "index multiplier." The writer of the option is obligated, in
return for the premium received, to make delivery of this amount. The writer may
offset its position in securities index options prior to expiration by entering
into a closing transaction on an exchange or it may allow the option to expire
unexercised.
The Index 500 Fund may cover call options written on a securities index by
owning securities whose price changes are expected to be similar to those of the
S&P 500 Index, or by having an absolute and immediate right to acquire such
securities without additional cash consideration (or for additional cash
consideration segregated by the Fund) upon conversion or exchange of other
securities in its portfolio. The Fund may cover call and put options written on
the S&P 500 Index by segregating cash or liquid assets with a value equal to the
exercise price.
The Index 500 Fund may terminate its obligations under an exchange-traded call
or put options that it has written by purchasing an option identical to the one
it has written. It may terminate over-the-counter options that it has written
only by entering into an offsetting transaction with the counterparty to such
option. Such purchases are referred to as "closing purchase" transactions.
The S&P 500 Index fluctuates with changes in the market values of the securities
included in the index. The effectiveness of purchasing or writing securities
index options as a hedging technique will depend upon the extent to which price
movements in the portion of a securities portfolio being hedged correlate with
price movements of the securities index selected. Because the value of an index
option depends upon movements in the level of the index rather than the price of
a particular security, whether the Portfolio realizes a gain or loss from the
purchase or writing of options on an index depends upon movements in the level
of prices in the market generally or, in the case of the S&P 500 Index, in the
index, rather than movements in the price of a particular security. As a result,
successful use by a Portfolio of options on securities indices is subject to the
Sub-Adviser's ability to predict correctly movements in the direction of the
market. This ability contemplates different skills and techniques from those
used in predicting changes in the price of individual securities.
Index options are subject to position and exercise limits and other regulations
imposed by the exchange on which they are traded. The ability of the Portfolio
to engage in closing purchase transactions with respect to the S&P 500 Index
options depends on the existence of a liquid secondary market. Although the
Portfolio will generally purchase or write S&P 500 Index options only when a
liquid secondary market for the options exists, no such secondary market may
exist, or the market may cease to exist at some future date. No assurance can be
given that a closing purchase transaction can be effected when the Sub-Adviser
desires that the Portfolio engage in such a transaction.
STOCK INDEX FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
The Equity 500 Index Portfolio may purchase and sell futures contracts only on
the S&P 500 Index. The Portfolio may also purchase and write options on such
futures contracts. The Portfolio will engage in futures or related options
transactions only for bona fide hedging purposes or for purposes of seeking to
increase total returns to the extent permitted by regulations of the Commodity
Futures Trading Commission ("CFTC").
FUTURES CONTRACTS. A futures contract may generally be described as an
agreement between two parties to buy and sell particular financial instruments
for an agreed price during a designated month (or to deliver the final cash
settlement price, in the case of a contract relating to an index or otherwise
not calling for physical delivery at the end of trading in the contract).
When equity securities prices are falling, the Portfolio can seek through the
sale of futures contracts to offset a decline in the value of its current
portfolio securities. When the prices of securities comprising the S&P 500 Index
are rising, the Portfolio, through the purchase of futures contracts, can
attempt to secure better prices than might later be available in the market when
it effects anticipated purchases.
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Positions taken in the futures markets are not normally held to maturity, but
are instead liquidated through offsetting transactions which may result in a
profit or a loss. While the Portfolio's contracts on the S&P 500 Index will
almost always be liquidated in this manner, it may instead make or take delivery
of the underlying securities if it appears economically advantageous for the
Portfolio to do so. A clearing corporation associated with the exchange on which
the contracts are traded guarantees that, if still open, the sale or purchase
will be performed on the settlement date.
OPTIONS ON FUTURES CONTRACTS. An option on a futures contract, unlike a direct
investment in such a contract, gives the purchaser the right, in return for the
premium paid, to assume a position in the futures contract at a specified
exercise price at any time prior to the expiration date of the option. Upon
exercise of an option, the delivery of the futures position by the writer of the
option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account (which represents the
amount by which the market price of the futures contract exceeds, in the case of
a call, or is less than, in the case of a put, the exercise price of the option
on the futures contract). The potential loss related to the purchase of an
option on futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the price of the option to the purchaser is fixed at
the point of sale, no daily cash payments are made to reflect changes in the
value of the underlying contract. The value of the option, however, does change
daily and that change would be reflected in the net asset value of the Equity
500 Index Portfolio.
RISKS. The use of futures contracts and options on futures contracts as a
hedging device involves several risks. No assurance can be given that a
correlation will exist between price movements in the Index and price movements
in the securities that are the subject of the hedge. Positions in futures
contracts and options on futures contracts may be closed out only on the
exchange or board of trade on which they were entered, and no assurance can be
given that an active market will exist for a particular contract or option at
any particular time. Losses incurred in hedging transactions and the costs of
these transactions will affect the Portfolio's performance.
MORTGAGE-BACKED SECURITIES
The Bond and Managed Portfolios may invest in mortgage-backed securities, which
represent direct or indirect participation in, or are collateralized by and
payable from, mortgage loans secured by real property or instruments derived
from such loans. Mortgage-backed securities include various types of mortgage
related securities such as government stripped mortgage related securities,
adjustable rate mortgage related securities and collateralized mortgage
obligations. [These are described below.] Such assets are securitized through
the use of trusts and special purpose corporations. Payments or distributions of
principal and interest may be guaranteed up to certain amounts and for certain
time periods by letters of credit or pool insurance policies issued by a
financial institution unaffiliated with the trust or corporation. Other credit
enhancements also may exist.
Mortgage related securities represent pools of mortgage loans assembled for sale
to investors by various governmental agencies, such as GNMA, by government
related organizations, such as FNMA and FHLMC, as well as by private issuers,
such as commercial banks, savings and loan institutions, mortgage bankers and
private mortgage insurance companies.
The average maturity of pass-through pools of mortgage related securities in
which certain of the Portfolios may invest varies with the maturities of the
underlying mortgage instruments. In addition, a pool's stated maturity may be
shortened by unscheduled payments on the underlying mortgages. Factors affecting
mortgage prepayments include the level of interest rates, general economic and
social conditions, the location of the mortgaged property and age of the
mortgage. Because prepayment rates of individual mortgage pools vary widely, the
average life of a particular pool cannot be predicted accurately.
Mortgage related securities may be classified as private, governmental or
government-related, depending on the issuer or guarantor. Private mortgage
related securities represent pass-through pools consisting principally of
conventional residential mortgage loans created by non-governmental issuers,
such as
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commercial banks, savings and loan associations and private mortgage insurance
companies. Governmental mortgage related securities are backed by the full faith
and credit of the United States. GNMA, the principal U.S. guarantor of these
securities, is a wholly-owned U.S. government corporation within the Department
of Housing and Urban Development. Government-related mortgage related securities
are not backed by the full faith and credit of the United States. Issuers
include FNMA and FHLMC. FNMA is a government-sponsored corporation owned
entirely by private stockholders, which is subject to general regulation by the
Secretary of Housing and Urban Development. Pass-through securities issued by
FNMA are guaranteed as to timely payment of principal and interest by FNMA.
FHLMC is a corporate instrumentality of the United States, the stock of which is
owned by the Federal Home Loan Banks. Participation certificates representing
interests in mortgages from FHLMC's national portfolio are guaranteed as to the
timely payment of interest and ultimate collection of principal by FHLMC.
Private, governmental or government-related entities may create mortgage loan
pools offering pass-through investments in addition to those described above.
The mortgages underlying these securities may be alternative mortgage
instruments, that is, mortgage instruments whose principal or interest payments
may vary or whose terms to maturity may be shorter than previously customary.
The Investment Adviser assesses new types of mortgage related securities as they
are developed and offered to determine their appropriateness for investment by
the relevant Portfolio.
Mortgage-backed securities are often subject to more rapid repayment than their
stated maturity date would indicate as a result of the pass-through of
prepayments of principal on the underlying loans. Prepayments of principal by
mortgagors or mortgage foreclosures shorten the term of the mortgage pool
underlying the mortgage security. The occurrence of mortgage prepayments is a
function of several factors including the level of interest rates, general
economic conditions, the location and age of the mortgage and other social and
demographic conditions. A Portfolio's ability to maintain positions in such
securities is affected by the reductions in the principal amount of such
securities resulting from prepayments, and its ability to reinvest prepayments
of principal at comparable yield is subject to generally prevailing interest
rates at that time. The values of mortgage-backed securities varies with changes
in market interest rates generally and the differentials in yields among various
kinds of U.S. Government securities and other mortgage-backed securities. In
periods of rising interest rates, the rate of prepayment tends to decrease,
thereby lengthening the average life of a pool of mortgages supporting a
mortgage-backed security. Conversely, in periods of falling interest rates, the
rate of prepayment tends to increase thereby shortening the average life of such
a pool. Because prepayments of principal generally occur when interest rates are
declining, an investor, such as a Portfolio, generally has to reinvest the
proceeds of such prepayments at lower interest rates than those at which its
assets were previously invested. Therefore, mortgage-backed securities have less
potential for capital appreciation in periods of falling interest rates than
other income-bearing securities of comparable maturity, although such other
income-bearing securities may have a comparable risk of capital depreciation
during periods of rising interest rates.
GOVERNMENT STRIPPED MORTGAGE RELATED SECURITIES. The Bond and Managed
Portfolios may invest in government stripped mortgage related securities. These
securities represent beneficial ownership interests in either period principal
distributions ("principal-only") or interest distributions ("interest-only") on
mortgage-backed certificates issued by the Government National Mortgage
Association ("GNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC"), or
the Federal National Mortgage Association ("FNMA"). The certificates underlying
the government stripped mortgage related securities represent all or part of the
beneficial interest in pools of mortgage loans.
Investing in government stripped mortgage related securities involves all of the
risks of investing in mortgage-backed securities and U.S. Government securities
generally. In addition, the yields on these instruments are extremely sensitive
to the prepayment experience of the mortgage loans making up the pool underlying
the certificates. If a decline in the level of prevailing current interest rates
results in a rate of principal prepayments that is higher than anticipated when
the certificate was created, then distributions of principal will accelerate
thereby reducing the yield to maturity of interest-only securities from that
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certificate and increasing the yield to maturity of principal-only securities
from that certificate. Sufficiently high prepayment rates could result in a
Portfolio not recovering its investment in interest-only securities. Where a
certificate represents only a part of the beneficial interest in a pool, the
sensitivity of an interest-only security of that certificate to interest rate
fluctuations, may be greater than of other interest-only securities derived from
other certificates supported by the same underlying pool because of the
particular character of the principal portion of the pool that the certificate
represents.
Government stripped mortgage related securities are currently traded over the
counter in a market maintained by several investment banking firms. No one can
be certain that a Portfolio will be able to purchase or sell a government
stripped mortgage related security at any time in the future. The Portfolios
only purchase such securities if a secondary market exists for the securities at
the time of purchase. Except for certain government stripped mortgage related
securities derived from fixed rate FHLMC and FNMA certificates meeting certain
liquidity requirements established by the Company's Board of Directors, the
Portfolios treat government stripped mortgage related securities as illiquid
investments.
ADJUSTABLE RATE MORTGAGE RELATED SECURITIES. The Bond and Managed Portfolios
may invest in adjustable rate mortgage related securities. Adjustable rate
mortgage related securities ("ARMs") have interest rates that reset at periodic
intervals. Acquiring ARMs permits a Portfolio to participate in increases in
prevailing current interest rates through periodic adjustments in the coupons of
mortgages underlying the pool on which certificates are based. Such certificates
generally have higher current yield and lower price fluctuation than is the case
with more traditional fixed-income debt securities of comparable rating and
maturity. In addition, when prepayments of principal are made on the underlying
mortgages during periods of rising interest rates, a Portfolio can reinvest the
proceeds of such prepayments at rates higher than that at which they were
previously invested. Mortgages underlying most ARMs, however, have limits on the
allowable annual or lifetime increases that can be made in the interest rate
that the mortgagor pays. Therefore, if current interest rates rise above such
limits over the period of the limitation, a Portfolio holding an ARM does not
benefit from further increases in interest rates. Moreover, when interest rates
are in excess of coupon rates (i.e., the rates being paid by mortgagors) of the
mortgages, ARMs behave more like fixed-income securities and less like
adjustable rate securities. In addition, during periods of rising interest
rates, increases in the coupon rate of adjustable rate mortgages generally lags
current market interest rates slightly, thereby creating the potential for
capital depreciation on such securities.
COLLATERALIZED MORTGAGE OBLIGATIONS. The Bond and Managed Portfolios may invest
in collateralized mortgage obligations ("CMOs"). CMOs are obligations fully
collateralized by a portfolio of mortgages or mortgage-backed securities.
Payments of principal and interest on the mortgages are passed through to the
holders of the CMOs on the same schedule as they are received, although certain
classes of CMOs have priority over other classes with respect to the receipt of
prepayments on the mortgages. Therefore, depending upon the type of CMO in which
a Portfolio invests, the investment is subject to a greater or lesser risk of
prepayment than other types of mortgage-backed securities.
GNMA CERTIFICATES. GNMA Certificates are securities representing part ownership
of a pool of mortgage loans. These loans, issued by lenders such as mortgage
bankers, commercial banks and savings and loan associations, are insured either
by the Federal Housing Administration or by the Veterans Administration. Each
pool of mortgage loans is assembled and, after being approved by GNMA, is sold
to investors through broker-dealers in the form of certificates representing
participations in the pool. GNMA guarantees the timely payment of principal and
interest of each mortgage in the pool and its guarantee is backed by the full
faith and credit of the U.S. Government. GNMA Certificates differ from bonds in
that a borrower pays the principal over the term of the loan rather than in a
lump sum at maturity. GNMA Certificates are called "pass-through" certificates
because both principal and interest payments on the mortgages (including
prepayments) are passed through to the holder of the certificate.
The average life of GNMA Certificates varies with the maturities of the
underlying mortgages. Prepayments of any mortgages in the pool will usually
result in the return of the greatest part of principal invested well
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before the maturity of the mortgages in the pool. The volume of such prepayments
of principal in a given pool of mortgages will influence the actual yield of the
GNMA Certificate.
MORTGAGE DOLLAR ROLLS
The Bond and Managed Portfolios may enter into mortgage "dollar rolls" in which
the Portfolio sells securities for delivery in the current month and
simultaneously contracts with the same counterparty to repurchase substantially
similar (same type, coupon and maturity) but not identical securities on a
specified future date. During the roll period, the Portfolio loses the right to
receive principal and interest paid on the securities sold. However, the
Portfolio would benefit to the extent of any difference between the price
received for the securities sold and the lower forward price for the future
purchase or fee income plus the interest earned on the cash proceeds of the
securities sold until the settlement date for the forward purchase. Unless such
benefits exceed the income, capital appreciation and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as
part of the mortgage dollar roll, the use of this technique will diminish the
investment performance of the Portfolio. Successful use of mortgage dollar rolls
depends upon the Investment Adviser's ability to predict correctly interest
rates and mortgage prepayments. There is no assurance that mortgage dollar rolls
can be successfully employed. The Portfolio will hold and maintain in a
segregated account until the settlement date cash or liquid assets in an amount
equal to the forward purchase price. For financial reporting and tax purposes,
the Portfolio treats mortgage dollar rolls as two separate transactions; one
involving the purchase of a security and a separate transaction involving a
sale. The Portfolio does not currently intend to enter into mortgage dollar
rolls that are accounted for as a financing.
SPDRS
The All Pro Small Cap Growth Portfolio may invest in Standard & Poor's
Depositary Receipts, or "SPDRs." SPDRs are securities that represent ownership
in a long-term unit investment trust that holds a portfolio of common stocks
designed to track the performance of the S&P 500 Index. A portfolio investing in
a SPDR would be entitled to receive proportionate quarterly cash distributions
corresponding to the dividends that accrue to the S&P 500 stocks in the
underlying portfolio, less trust expenses.
FOREIGN SECURITIES
FOREIGN SECURITIES GENERALLY. Investments in the securities of foreign issuers
or investments in non-dollar securities may offer potential benefits not
available from investments solely in securities of domestic issuers or dollar
denominated securities. Such benefits may include the opportunity to invest in
foreign issuers that appear to offer better opportunity for long-term capital
appreciation or current earnings than investments in domestic issuers, the
opportunity to invest in foreign countries with economic policies or business
cycles different from those of the United States, and the opportunity to reduce
fluctuations in portfolio value by taking advantage of foreign securities
markets that do not necessarily move in a manner parallel to U.S. markets.
Investing in non-dollar securities or in the securities of foreign issuers
involves significant risks that are not typically associated with investing in
U.S. dollar denominated securities or in securities of domestic issuers. Such
investments may be affected by changes in currency rates, changes in foreign or
U.S. laws, or restrictions applicable to such investments and in exchange
control regulations. For example, a decline in the currency exchange rate would
reduce the value of certain portfolio investments. In addition, if the exchange
rate for the currency in which a Portfolio receives interest payments declines
against the U.S. dollar before such interest is paid as dividends to
shareholders, the Portfolio may have to sell portfolio securities to obtain
sufficient cash to pay such dividends. A Portfolio may purchase or sell foreign
currency and forward foreign currency exchange contracts to hedge its foreign
currency exposure; however, such techniques also entail certain risks. Some
foreign stock markets may have substantially less volume than, for example, the
New York Stock Exchange and securities of some foreign issuers may be less
liquid than securities of comparable domestic issuers. Commissions and dealer
mark-ups on transactions in foreign
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investments may be higher than for similar transactions in the United States. In
addition, clearance and settlement procedures may be different in foreign
countries and, in certain markets, on certain occasions, such procedures have
been unable to keep pace with the volume of securities transactions, thus making
it difficult to conduct such transactions. For example, delays in settlement
could result in temporary periods when a portion of the assets of a Portfolio
are uninvested and no return is earned thereon. The inability of a Portfolio to
make intended investments due to settlement problems could cause it to miss
attractive investment opportunities. Inability to dispose of portfolio
securities or other investments due to settlement problems could result either
in losses to a Portfolio due to subsequent declines in value of the portfolio
investment or, if the Portfolio has entered into a contract to sell the
investment, could result in possible liability to the purchaser.
Foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to domestic
companies. There may be less publicly available information about a foreign
issuer than about a domestic one. In addition, there is generally less
government regulation of stock exchanges, brokers, and listed and unlisted
issuers in foreign countries than in the United States. Furthermore, with
respect to certain foreign countries, there is a possibility of expropriation or
confiscatory taxation, imposition of withholding taxes on dividend or interest
payments, limitations on the removal of funds or other assets of a Portfolio, or
political or social instability or diplomatic developments that could affect
investments in those countries. Individual foreign economies also may differ
favorably or unfavorably from the United States economy in such respects as
growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position.
INVESTMENTS IN ADRS, EDRS AND GDRS. Many securities of foreign issuers are
represented by ADRs, EDRs and GDRs. The Equity 500 Index Portfolio, Bond
Portfolio, the International Portfolio, the Managed Portfolio, the Aggressive
Growth Portfolio and the All Pro Portfolios may invest in ADRs, EDRs and GDRs.
ADRs represent the right to receive securities of foreign issuers deposited in a
domestic bank or a foreign correspondent bank. Prices of ADRs are quoted in U.S.
dollars, and ADRs are traded in the United States on exchanges or
over-the-counter and are sponsored and issued by domestic banks. ADRs do not
eliminate all the risk inherent in investing in the securities of foreign
issuers. To the extent that a Portfolio acquires ADRs through banks that do not
have a contractual relationship with the foreign issuer of the security
underlying the ADR to issue and service such ADRs, there may be an increased
possibility that the Portfolio would not become aware of and be able to respond
to corporate actions such as stock splits or rights offerings involving the
foreign issuer in a timely manner. In addition, the lack of information may
result in inefficiencies in the valuation of such instruments. However, by
investing in ADRs rather than directly in the stock of foreign issuers, a
Portfolio will avoid currency risks during the settlement period for either
purchases or sales. In general, there is a large, liquid market in the United
States for ADRs quoted on a national securities exchange or the National
Association of Securities Dealers national market system. The information
available for ADRs is subject to the accounting, auditing and financial
reporting standards of the domestic market or exchange on which they are traded,
which standards are more uniform and more exacting than those to which many
foreign issuers may be subject.
EDRs and GDRs are receipts evidencing an arrangement with a non-U.S. bank
similar to that for ADRs and are designed for use in non-U.S. securities
markets. EDRs and GDRs are not necessarily quoted in the same currency as the
underlying security.
INVESTMENTS IN EMERGING MARKETS. The International Portfolio and the Managed
Portfolio may invest in securities of issuers located in countries with emerging
economies and or securities markets. These countries are located in the
Asia-Pacific region, Eastern Europe, Central and South America and Africa.
Political and economic structures in many of these countries may be undergoing
significant evolution and rapid development, and such countries may lack the
social, political and economic stability characteristic of more developed
countries. Certain of these countries may have in the past failed to recognize
private property rights and have at times nationalized or expropriated the
assets of private companies. As a result, the risks of foreign investment,
generally including the risks of nationalization or expropriation of assets,
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may be heightened. In addition, unanticipated political or social developments
may affect the values of these Portfolios' investments in those countries and
the availability to the Portfolio of additional investments in those countries.
The small size and inexperience of the securities markets in certain of these
countries and the limited volume of trading in securities in those countries may
also make the International or Managed Portfolio's investments in such countries
illiquid and more volatile than investments in Japan or most Western European
countries, and a Portfolio may be required to establish special custody or other
arrangements before making certain investments in those countries. There may be
little financial or accounting information available with respect to issuers
located in certain of such countries, and it may be difficult as a result to
assess the value or prospects of an investment in such issuers. The laws of some
foreign countries may limit the ability of the International or Managed
Portfolio to invest in securities of certain issuers located in those countries.
FOREIGN CURRENCY TRANSACTIONS
The Equity 500 Index Portfolio will not conduct foreign currency exchange
transactions or enter into forward foreign currency exchange contracts.
To the extent that a Portfolio invests in foreign securities, the value of its
assets as measured in United States dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange control
regulations, and the Portfolio may incur costs in connection with conversions
between various currencies.
The Portfolios will conduct foreign currency exchange transactions either on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through the use of forward contracts to purchase or sell
foreign currencies. A forward foreign currency exchange contract will involve an
obligation by the Fund to purchase or sell a specific amount of currency at a
future date, which may be any fixed number of days, from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are transferable in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers. A
forward contract generally has no deposit requirements, and no commissions are
charged at any stage for trades. Neither type of foreign currency transaction
will eliminate fluctuations in the prices of each Portfolio's securities or
prevent loss if the prices of such securities should decline.
The Portfolios may enter into forward foreign currency exchange contracts only
under two circumstances. First, when a Portfolio enters into a contract for the
purchase or sale of a security denominated in a foreign currency, it may desire
to "lock in" the U.S. dollar price of the security. A Portfolio will then enter
into a forward contract for the purchase or sale, for a fixed amount of dollars,
of the amount of foreign currency involved in the underlying securities
transactions. In this manner a Portfolio will be better able to protect itself
against a possible loss resulting from an adverse change in the relationship
between the U.S. dollar and the subject foreign currency during the period
between the date the securities are purchased or sold and the date on which
payment is made or received.
Second, when the Adviser believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. dollar, it may enter
into a forward contract to sell, for a fixed amount of dollars, the amount of
foreign currency approximating the value of some or all of a Portfolio's
securities denominated in such foreign currency. The precise matching of the
forward contract amounts and the value of the securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. The projection of short-term currency market movement is
extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. The Portfolios do not intend to enter into such
forward contracts under this second circumstance on a regular or continuous
basis. The Portfolios will also not enter into such forward contracts or
maintain a net exposure to such contracts when the consummation of the contracts
would obligate a
15
<PAGE> 73
Portfolio to deliver an amount of foreign currency in excess of the value of the
Portfolio's securities or other assets denominated in that currency. The Adviser
believes that it is important to have the flexibility to enter into such forward
contracts when it determines that to do so is in the best interests of the
respective Portfolio. The Portfolios' custodian bank segregates cash or equity
or debt securities in an amount not less than the value of each Portfolio's
total assets committed to forward foreign currency exchange contracts entered
into under this second type of transaction. If the value of the securities
segregated declines, additional cash or securities are added so that the
segregated amount is not less than the amount of the respective Portfolio's
commitments with respect to such contracts. Under normal circumstances, the
Portfolios expect that any appreciation (depreciation) on such forward exchange
contracts will be approximately offset by the (depreciation) appreciation in
translation of the underlying foreign investment arising from fluctuations in
foreign currency exchange rates.
The Portfolios will recognize the unrealized appreciation or depreciation from
the fluctuation in a foreign currency forward contract as an increase or
decrease in the respective Portfolio's net assets on a daily basis, thereby
providing an appropriate measure of each Portfolio's financial position and
changes in financial position.
REAL ESTATE INVESTMENT TRUSTS
The Portfolios may invest in shares of real estate investment trusts ("REITs").
REITs are pooled investment vehicles that invest primarily in income producing
real estate or real estate related loans or interests. REITs generally are
classified as equity REITs, mortgage REITs or a combination of equity and
mortgage REITs. Equity REITs invest the majority of their assets directly in
real property and derive income primarily from the collection of rents. Equity
REITs can also realize capital gains by selling properties that have appreciated
in value. Mortgage REITs invest the majority of their assets in real estate
mortgages and derive income from the collection of interest payments. REITs are
not taxed on income distributed to shareholders provided they comply with
several requirements of the Code. A Portfolio will indirectly bear its
proportionate share of any expenses paid by REITs in which it invests in
addition to the expenses paid by the Portfolio.
Investing in REITs involves certain unique risks. Equity REITs may be affected
by changes in the value of the underlying property owned by such REITs, while
mortgage REITs may be affected by the quality of any credit extended. REITs are
dependent upon management skills, are not diversified (except to the extent the
Code requires), and are subject to the risks of financing projects. REITs are
subject to heavy cash flow dependency, default by borrowers, self-liquidation,
and the possibilities of failing to qualify for the exemption from tax for
distributed income under the Code and failing to maintain their exemptions from
the 1940 Act. REITs (especially mortgage REITs) are also subject to interest
rate risk.
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY SECURITIES
Each Portfolio, except the Sentinel Growth Portfolio, may purchase securities on
a when-issued or delayed delivery basis in an amount up to 10% of such
Portfolio's net assets. When-issued securities transactions arise when
securities are purchased by a Portfolio with payment and delivery taking place
on a future date determined at the time of entering into the transaction
(transaction date) in order to secure what is considered to be an advantageous
price and yield to the Portfolio on the transaction date. Once a Portfolio
commits to purchase securities on a when-issued or delayed delivery basis, it
records the transaction and thereafter reflects the daily value of such
securities in determining its net asset value. Although a Portfolio will
generally purchase when-issued securities with the intention of acquiring those
securities for its portfolio, the Portfolio may dispose of a when-issued
security prior to settlement if the Adviser deems it advantageous to do so. For
all when-issued securities transactions, the Fund's custodian bank will hold and
maintain in a segregated account until the settlement date, cash or fully liquid
securities of the Portfolio with a market value, determined daily, equal to or
greater than such commitments. If a Portfolio elects to dispose of the right to
acquire a when-issued security prior to its acquisition, it could experience a
gain or loss on the security due to market fluctuation.
16
<PAGE> 74
PORTFOLIO TURNOVER
Each Portfolio has a different expected annual rate of portfolio turnover, which
is calculated by dividing the lesser of purchases or sales of Portfolio
securities during the fiscal year by the monthly average of the value of the
Portfolio's securities (excluding from the computation all securities, including
options, with maturities at the time of acquisition of one year or less).
Turnover rates may vary greatly from year to year as well as within a particular
year and may also be affected by cash requirements for redemptions of each
Portfolio's shares and by requirements which enable the Fund to receive certain
favorable tax treatments. The portfolio turnover rates will, of course, depend
in large part on the level of purchases and redemptions of shares of each
Portfolio. If a Portfolio's portfolio turnover rate exceeds 100%, it may result
in correspondingly increased brokerage expenses and other acquisition costs to
that Portfolio (see "Portfolio Transactions and Brokerage Allocation.").
However, because rate of portfolio turnover is not a limiting factor, particular
holdings may be sold at any time, if investment judgment or Portfolio operations
make a sale advisable.
No portfolio turnover rate is calculated for the Money Market Portfolio due to
the short maturities of the instruments the Portfolio purchases. Portfolio
turnover should not affect the income or net asset value of the Money Market
Portfolio because brokerage commissions are not normally charged on the purchase
or sale of money market instruments.
The annual portfolio turnover rates for 1998, 1997, and 1996 (as applicable) for
each of the Portfolios (except the Money Market Portfolio) is set forth below.
There is no portfolio turnover data for 1997 and 1996 for the All Pro Portfolios
because each such Portfolio commenced operations only in 1998. There is no
Portfolio turnover data for the years 1996 through 1998 for the Equity 500 Index
Portfolio because the Portfolio commenced operations only in 1999.
<TABLE>
<CAPTION>
NAME OF PORTFOLIO 1998 1997 1996
- ----------------- ---- ---- ----
<S> <C> <C> <C>
Equity 500 Index Portfolio.................................. N/A N/A N/A
Growth Portfolio............................................ 30% 108% 72%
Bond Portfolio.............................................. 163% 105% 133%
Managed Portfolio........................................... 203% 99% 106%
Aggressive Growth Portfolio................................. 41% 37% 47%
Sentinel Growth Portfolio................................... 87% 155% 75%
International Portfolio..................................... 37% 37% 35%
All Pro Large Cap Growth Portfolio.......................... 64% N/A N/A
All Pro Small Cap Growth Portfolio.......................... 82% N/A N/A
All Pro Large Cap Value Portfolio........................... 39% N/A N/A
All Pro Small Cap Value Portfolio........................... 38% N/A N/A
</TABLE>
17
<PAGE> 75
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS
The Fund's board of directors is responsible for the overall administration of
the Fund's affairs including deciding matters of general policy and reviewing
the actions of the Advisers, the custodian, and accounting and administrative
services providers.
The directors and officers of the Fund, their principal occupations for the last
five years and compensation each director and officer received from the Fund in
1998 are set forth below. Unless otherwise noted, the address of each director
and officer is 103 Bellevue Parkway, Wilmington, DE 19809.
<TABLE>
<CAPTION>
NAME, AGE, AND ADDRESSES OF AGGREGATE
DIRECTORS AND OFFICERS POSITION HELD PRINCIPAL OCCUPATION COMPENSATION
OF THE FUND WITH THE FUND DURING PAST 5 YEARS FROM THE FUND
--------------------------- ------------- -------------------- -------------
<S> <C> <C> <C>
Mr. Robert W. Kloss*.............. Director Director since April 22, 1998; $ 0
Age 50 President and Chief Executive
1000 Chesterbrook Boulevard Officer ("CEO") of PMLIC since
Berwyn, Pennsylvania 19312 November 1, 1994; 1984-1994,
President and CEO of Covenant
Life Insurance Company
Dr. Alan Gart..................... Director Director since March 21, 1985; $11,000
Age 58 1982- Present, President of
978 Warfield Lane Alan Gart, Inc. (a consulting
Huntingdon Valley, firm); 1992-Present; Professor,
PA 19006 Nova Southeastern University;
1989-1992, Professor, South-
eastern Massachusetts
University; 1985-1989,
Professor of Finance, Lehman
College of the City Univer-
sity of New York
Dr. A. Gilbert Heebner............ Director Director since May 12, 1989; $11,000
Age 72 1987- Present, Distinguished
2 Etienne, Arbordeau Professor of Economics, Eastern
Devon, PA 19333 College; 1952- 1987, Executive
Vice President and Chief
Economist of CoreStates
Financial Corp.
Mr. Leo Slack..................... Director Director since February 11, $11,000
Age 64 1998; 1996 Retired, 1964-1996
4700 White Tail Lane Vice President, Combustion
Sarasota, FL 34238 Engineers Corporation
Mr. Edward S. Stouch.............. Director Director since December 12, $11,000
Age 81 1985; 1983, Retired; 1969-1983,
216 Grandview Rd. Vice President and Head of
Media, PA 19063 Personal Trust Investment
Department, Trust Division of
Provident National Bank
Ms. Rosanne Gatta................. President 1993-Present, Vice President $ 0
Age 43 and Treasurer of Provident
Mutual
Ms. Sarah C. Lange................ Vice President 1983-Present, Vice President $ 0
Age 43 Investments of Provident Mutual
</TABLE>
18
<PAGE> 76
<TABLE>
<CAPTION>
NAME, AGE, AND ADDRESSES OF AGGREGATE
DIRECTORS AND OFFICERS POSITION HELD PRINCIPAL OCCUPATION COMPENSATION
OF THE FUND WITH THE FUND DURING PAST 5 YEARS FROM THE FUND
--------------------------- ------------- -------------------- -------------
<S> <C> <C> <C>
Mr. James D. Kestner.............. Vice President 1994-Present, Vice President $ 0
Age 51 Investments of Provident
Mutual; 1975-1994, Vice
President, Investments of
Covenant Life Insurance Company
James G. Potter, Jr., Esq......... Vice President 1997-Present, Executive Vice $ 0
Age 41 President, General Counsel and
Secretary; 1989-1997 Chief
Legal Officer Prudential Banks
Mr. Anthony T. Giampietro......... Treasurer 1990-Present, Assistant $ 0
Age 39 Treasurer of Provident Mutual
</TABLE>
- -------------------------
* "interested person" of the Fund for 1940 Act purposes.
As of the date of this SAI, officers and directors of the Fund as a group own
less than 1% of the outstanding shares of the Fund and of each Portfolio.
Directors who are not officers or employees of PMLIC or the Adviser are paid a
fee plus actual out of pocket expenses by the Fund for each meeting of the Board
of Directors attended. Total fees incurred for 1998 were $44,000. Directors and
officers of the Fund do not receive any benefits from the Fund upon retirement
nor does the Fund accrue any expense for pension or retirement benefits.
INVESTMENT ADVISORY AND OTHER SERVICES
GENERAL INFORMATION AND HISTORY
The Fund's investment advisers are: for the Equity 500 Index, International, All
Pro Large Cap Growth, All Pro Large Cap Value, All Pro Small Cap Growth, and All
Pro Small Cap Value Portfolios -- Providentmutual Investment Management Company
("PIMC"); and for the Money Market, Growth, Bond, Managed, Sentinel Growth and
Aggressive Growth Portfolios -- Sentinel Advisors Company ("SAC"). Prior to May
1, 1997 the investment adviser for the Growth Portfolio was Newbold's Asset
Management, Inc. ("NAM").
On behalf of each Portfolio set forth below, PIMC has engaged one or more
respective investment advisers to serve as sub-adviser to such Portfolio. The
name of each sub-adviser to a Portfolio is set forth below opposite the relevant
Portfolio.
<TABLE>
<CAPTION>
NAME OF PORTFOLIO NAME OF SUB-ADVISER
----------------- -------------------
<S> <C>
Equity 500 Index Portfolio.............. State Street Global Advisors ("SSgA")
International Portfolio................. The Boston Company Asset Management, Inc. ("TBC")
All Pro Large Cap Growth Portfolio...... Cohen, Klingenstein & Marks, Inc. ("CKM")
Geewax, Terker & Co. ("Geewax")
All Pro Small Cap Growth Portfolio...... Standish, Ayer and Wood ("SAW")
Husic Capital Management ("Husic")
</TABLE>
19
<PAGE> 77
<TABLE>
<CAPTION>
NAME OF PORTFOLIO NAME OF SUB-ADVISER
----------------- -------------------
<S> <C>
All Pro Large Cap Value Portfolio....... Equinox Capital Management, Inc. ("Equinox")
Harris Associates, Inc. ("Harris")
Mellon Equity Associates ("Mellon Equity")
All Pro Small Cap Value Portfolio....... Reams Asset Management Company, LLC ("Reams")
Sterling Capital Management Company ("Sterling")
</TABLE>
Together, PIMC, SAC, SSgA, TBC and the investment sub-advisers for the All Pro
Portfolios are the "Advisers."
PIMC has retained Wilshire Associates Incorporated as an investment management
consultant to assist it in identifying and evaluating the performance of
potential sub-advisers for each of the All Pro Portfolios.
PIMC and SAC provide investment advice to the Fund, pursuant to the Fund's
investment advisory agreements. Subject at all times to the supervision and
approval of the Fund's Board of Directors, the Advisers render investment
advisory services with respect to the Fund's Portfolios in a manner consistent
with their stated investment policies, objectives and restrictions. In
connection therewith, the Advisers advise the Fund as to what investments should
be purchased and sold and place orders for all such purchases and sales on
behalf of the Fund.
SAC is a general partnership owned and controlled by Sentinel Advisors, Inc., an
indirectly wholly-owned subsidiary of NLIC; Providentmutual Management Co.,
Inc., an indirectly wholly-owned subsidiary of PMLIC; HTK of Delaware, Inc., a
wholly-owned subsidiary of The Penn Mutual Life Insurance Company ("Penn
Mutual"); and Sentinel Management Company, a partnership of wholly-owned
subsidiaries of NLIC, PMLIC and Penn Mutual, which is SAC's Managing General
Partner. SAC is located at National Life Drive, Montpelier, Vermont 05604.
PIMC is a registered investment adviser and is also an indirect wholly-owned
subsidiary of PMLIC. Its address is 1000 Chesterbrook Boulevard, Berwyn,
Pennsylvania 19312. SAC is a registered investment adviser and is a Vermont
general partnership owned and controlled by Sigma American Corporation, an
indirect wholly-owned subsidiary of PMLIC and by National Life Investment
Management Company, Inc. ("NLIMC") a wholly-owned subsidiary of NLIC. Its
address is One National Life Drive, Montpelier, Vermont.
SSgA is a wholly-owned subsidiary of State Street Corporation, a publicly held
bank holding company. SSgA is located at One International Place, Boston, MA
02110.
TBC is a Massachusetts corporation and a wholly-owned subsidiary of The Boston
Company, Inc., which is a wholly-owned subsidiary of the Mellon Bank
Corporation. TBC is located at One Boston Place, Boston, MA 02108.
ADVISORY AGREEMENTS
The investment advisory agreement between the Fund and SAC became effective on
March 1, 1993. The agreement was approved by the Fund's Board of Directors,
including a majority of the "non-interested" directors, on October 26, 1992, and
by the shareholders, PMLIC and PLACA, of the Bond, Managed and Aggressive Growth
Portfolios on January 29, 1993.
The investment advisory agreement between the Fund and PIMC with respect to the
International Portfolio was originally approved by the Board of Directors of the
Fund, including a majority of the "non-interested" directors on July 31, 1991.
On October 26, 1992, the Fund's Board of Directors, including a majority of the
"non-interested" directors, approved continuation of the agreement. The
agreement was approved by shareholders of the International Portfolio on January
29, 1993.
20
<PAGE> 78
On February 26, 1996, the Fund's Board of Directors, including a majority of the
"non-interested" directors approved an amendment to the investment advisory
agreement between the Fund and SAC to include SAC providing investment advisory
services to the Money Market and Sentinel Growth Portfolios, and unanimously
voted to approve continuation of all the investment advisory agreements with SAC
and PIMC. On March 18, 1996 NLIC approved the Fund's investment advisory
agreement for the Sentinel Growth Portfolio. On April 25, 1996 PMLIC and PLACA
approved the Fund's investment advisory agreement for the Money Market
Portfolio.
On February 27, 1997 the Fund's Board of Directors, including a majority of the
"non-interested" directors approved the investment advisory agreement between
the Fund and SAC respecting SAC providing advisory services for the Growth
Portfolio, which was effective May 1, 1997. On April 24, 1997 PMLIC and PLACA
approved the Fund's investment advisory agreement for the Growth Portfolio.
On April 29, 1998, the Fund's Board of Directors, including a majority of the
"non-interested" directors approved the investment advisory agreement between
the Fund and PIMC respecting PIMC providing investment advisory services for the
All Pro Large Cap Growth, All Pro Large Cap Value, All Pro Small Cap Growth and
All Pro Small Cap Value Portfolios, which was effective May 1, 1998.
On September 23, 1999, the Fund's Board of Directors, including a majority of
the "non-interested" directors approved the investment advisory agreement
between the Fund and PIMC respecting PIMC providing investment advisory services
for the Equity 500 Index Portfolio.
In voting to approve each of the foregoing advisory agreements PMLIC and/or
PLACA voted their Fund shares for or against such approvals, or withheld their
votes, in the same proportion as Policyholders having an interest in the
respective Portfolios, voted for, against or withheld their votes with respect
to the agreement for that Portfolio.
Each of the agreements terminates automatically in the event of its assignment
or, with respect to any Portfolio, upon 60 days' notice given by the Fund's
Board of Directors, by the Adviser or by majority vote (as defined in the 1940
Act and the rules thereunder) of the Portfolio's shares. Otherwise, the
investment advisory agreements will continue in force with respect to any
Portfolio so long as their continuance is approved at least annually by a
majority of the "non-interested" members of the Fund's Board of Directors, and
by (i) a 1940 Act vote of the Portfolio's shareholders or (ii) the Fund's Board
of Directors.
The Advisers manage the investment operations of the Fund and the composition of
each Portfolio, including the purchase, retention and disposition of the
investments, securities and cash contained therein, in accordance with each
Portfolio's investment objective(s) and policies as stated in the Fund's
Articles of Incorporation, By-Laws, Prospectus and SAI as from time to time in
effect. In connection therewith, the Advisers provide investment research and
supervision of the Fund's investments and conduct a continuous program of
investment evaluation and, if appropriate, sales and reinvestment of the Fund's
assets. The Advisers furnish to the Fund such statistical information, with
respect to the investments which the Fund may hold or contemplate purchasing, as
the Fund may reasonably request. On the Advisers' own initiatives, the Advisers
apprise the Fund of important developments materially affecting each Portfolio
and furnish the Fund from time to time such information as the Advisers may
believe appropriate for this purpose. The Advisers also implement all purchases
and sales of investments for each Portfolio in a manner consistent with such
policies.
MONEY MARKET PORTFOLIO. The investment advisory fee paid to SAC with respect to
the Money Market Portfolio is 0.25% of the average daily net assets of the
Portfolio.
EQUITY 500 INDEX PORTFOLIO. The investment advisory fee paid to PIMC with
respect to the Equity 500 Index Portfolio is 0.24% of the average daily net
assets of the Portfolio.
21
<PAGE> 79
GROWTH PORTFOLIO. The investment advisory fee paid to SAC with respect to the
Growth Portfolio is 0.50% of the first $20 million of the average daily net
assets of the Portfolio, 0.40% of the next $20 million of the average daily net
assets of the Portfolio and 0.30% of the average daily net assets in excess of
$40 million.
BOND PORTFOLIO. The investment advisory fee paid to SAC with respect to the
Bond Portfolio is 0.35% of the first $100 million of the average daily net
assets of the Portfolio and 0.30% of the average daily net assets in excess of
$100 million.
MANAGED PORTFOLIO. The investment advisory fee paid to SAC with respect to the
Managed Portfolio is 0.40% of the first $100 million of the average daily net
assets of the Portfolio and 0.35% of the average daily net assets in excess of
$100 million.
AGGRESSIVE GROWTH PORTFOLIO. The investment advisory fee paid to SAC with
respect to the Aggressive Growth Portfolio is 0.50% of the first $20 million of
the average daily net assets of the Portfolio, 0.40% of the next $20 million of
the average daily net assets of the Portfolio and 0.30% of the average daily net
assets in excess of $40 million.
INTERNATIONAL PORTFOLIO. The investment advisory fee paid to PIMC with respect
to the International Portfolio is 0.75% of the first $500 million of the average
daily net assets of the Portfolio and 0.60% of the average daily net assets in
excess of $500 million (See "Investment Sub-Advisory Agreement for International
Portfolio").
SENTINEL GROWTH PORTFOLIO. The investment advisory fee paid to SAC with respect
to the Sentinel Growth Portfolio is 0.50% of the first $20 million of the
average daily net assets of the Portfolio, 0.40% of the next $20 million of the
average daily net assets of the Portfolio and 0.30% of the average daily net
assets in excess of $40 million.
ALL PRO LARGE CAP GROWTH, ALL PRO LARGE CAP VALUE, ALL PRO SMALL CAP GROWTH &
ALL PRO SMALL CAP VALUE PORTFOLIOS. As an investment advisory fee, PIMC
receives .70% of the daily net assets of the All Pro Large Cap Growth and All
Pro Large Cap Value Portfolios, and .90% of the daily net assets of the All Pro
Small Cap Growth and All Pro Small Cap Value Portfolios.
The investment advisory fee incurred for PIMC during 1998 was $518,379, $55,054,
$33,737, $56,126 and $31,846 for the International, All Pro Large Cap Growth,
All Pro Small Cap Growth, All Pro Large Cap Value, and All Pro Small Cap Value
Portfolios, respectively. The investment advisory fee incurred for SAC during
1998 was $197,450, $928,340, $50,621, $100,348, $248,484 and $216,651 for the
Money Market, Growth, Sentinel Growth, Bond, Managed and Aggressive Growth
Portfolios, respectively. The Equity 500 Index Portfolio did not incur any
investment advisory fees during 1998 because the Portfolio did not commence
operations until 1999.
The investment advisory fee incurred for NAM during 1997 with respect to the
Growth Portfolio was $223,312. The investment advisory fee incurred for PIMC
during 1997 with respect to the International Portfolio was $440,914. The total
investment advisory fee incurred for SAC during 1997 was $1,121,203, allocated
$67,663, $199,166, $185,551, $151,852 and $516,971 for the Bond, Managed,
Aggressive Growth, Money Market and Growth Portfolios, respectively.
The investment advisory fee incurred for NAM during 1996 with respect to the
Growth Portfolio was $592,350. The total investment advisory fee incurred for
PIMC during 1996 was $357,635, allocated $31,471 and $326,164 to the Money
Market and International Portfolios, respectively. The total investment advisory
fee incurred for SAC during 1996 was $427,558, allocated $53,767, $157,156,
$134,923 and $81,712 for the Bond, Managed, Aggressive Growth and Money Market
Portfolios, respectively.
EXPENSES
The Portfolios directly assume certain of their expenses and all expenses borne
by the Fund, including the fees payable to the Advisers are accrued daily.
Expenses that are borne directly by the Portfolios include
22
<PAGE> 80
redemption expenses, expenses of portfolio transactions, shareholding servicing
costs, expenses of registering the shares under Federal and state securities
laws, interest, certain taxes, charges of the Custodian and Transfer Agent and
other expenses attributable to a particular Portfolio. Expenses which are
allocated on the basis of size of the respective Portfolios include directors'
fees, legal expenses, state franchise taxes, auditing services, costs of
printing proxies, stock certificates, Securities and Exchange Commission fees,
accounting costs, pricing costs (including the daily calculation of net asset
value), and other expenses properly payable by the Fund and allocable on the
basis of size of the respective Portfolios. Depending upon the nature of a
lawsuit, litigation costs may be directly applicable to the Portfolios or
allocated on the basis of the size of the respective Portfolios.
For the fiscal year ended December 31, 1998, each Portfolio bore total expenses,
computed as a percentage of the average daily net assets of that Portfolio, as
follows: Money Market Portfolio -- 0.42%; Growth Portfolio -- 0.47%; Sentinel
Growth Portfolio -- 0.83%; Bond Portfolio -- 0.55%; Managed Portfolio -- 0.58%;
Aggressive Growth Portfolio -- 0.62%; International Portfolio -- 1.00%; All Pro
Large Cap Growth Portfolio -- 0.92%; All Pro Small Cap Growth
Portfolio -- 1.25%; All Pro Large Cap Value Portfolio -- 0.97%; and All Pro
Small Cap Value Portfolio -- 1.36%. The Equity 500 Index Portfolio did not incur
any expenses during the fiscal year ended December 31, 1998 because the
Portfolio did not commence operations until 1999.
Effective November 1, 1991, PMLIC agreed to reimburse the Fund for such expenses
in excess of 0.40% of the average daily net asset value of each of the Money
Market, Growth, Bond, Managed and Aggressive Growth Portfolios and 0.75% for the
International Portfolio. Effective March 18, 1996, NLIC agreed to reimburse the
Fund for such expenses in excess of 0.40% of the average daily net asset value
of the Sentinel Growth Portfolio. PMLIC has agreed to reimburse the Fund for
such expenses in excess of 0.40% of the average daily net asset value of each of
the All Pro Portfolios.
During 1992, PMLIC reimbursed the Fund for $81,997 of expenses, allocated
$16,455 to the Growth Portfolio; $5,588 to the Money Market Portfolio; $3,173 to
the Bond Portfolio; $4,924 to the Managed Portfolio; $5,151 to the Aggressive
Growth Portfolio; and $46,706 to the International Portfolio. Expenses
reimbursed by Provident Mutual for 1991 were $175,500 and for 1990 $150,569.
There was no reimbursement in 1995, 1994 or 1993. In 1996 and 1997 there were no
reimbursements for the Growth, Money Market, Bond, Managed, Aggressive Growth
and International Portfolios. For the Sentinel Growth Portfolio, the
reimbursements made in 1996 and 1997 were $25,050 and $30,617, respectively.
ADMINISTRATIVE SERVICES
PFPC Inc. ("PFPC") provides certain administrative services to the Fund pursuant
to an administration agreement between PFPC and the Fund. Such services include
maintaining the Portfolios' books and records, preparing governmental filings,
statements, returns, and stockholder reports, and computing net asset value and
daily dividends. For such services, PFPC is paid a fee at an annual rate 0.10%
on the first $175 million, 0.075% on the next $175 million, 0.05% on the next
$175 million, and 0.03% in excess of $525 million, of each Portfolios' net
assets, computed daily and paid monthly, with a minimum aggregate annual fee
with respect to all Market Street Portfolios totaling $580,000. PFPC is a
wholly-owned subsidiary of PNC Bank.
INVESTMENT SUB-ADVISORY AGREEMENTS
As stated in the Prospectus, PIMC has entered into an Investment Sub-Advisory
Agreement with TBC whereby TBC provides subadvisory services to the
International Portfolio, under which PIMC receives recommendations, research and
other investment services upon which it may base its investment recommendation
to the Fund.
23
<PAGE> 81
For its services to PIMC, TBC received compensation from PIMC equal to the
greater of: (i) a monthly fee at an effective annual rate of 0.375% of the first
$500 million of the average daily net assets of the Portfolio and 0.30% of the
average daily net assets in excess of $500 million; or (ii) $20,000 per year.
The Investment Sub-Advisory Agreement was approved by a majority of the Fund's
Board of Directors, including a majority of its "non-interested" directors, on
July 14, 1994 and became effective on July 18, 1994. On February 27, 1997, the
Fund's Board of Directors, including a majority of its "non-interested"
directors, unanimously voted to approve continuation of the Investment
Sub-Advisory Agreement with TBC. On November 15, 1994 the Investment
Sub-Advisory Agreement was approved by shareholders of the International
Portfolio. The Investment Sub-Advisory Agreement will continue in effect from
year to year as long as such continuance is approved at least annually by a
majority of the "non-interested" members of the Fund's Board of Directors and by
(i) a 1940 Act vote of the Portfolio's shareholders or (ii) the Fund's Board of
Directors. The Investment Sub-Advisory Agreement may be terminated without
penalty on 60 days' prior written notice by the Fund's Board of Directors, by
PIMC or by TBC, as the case may be, and is terminated automatically in the event
of its assignment.
For 1998 and 1997 PIMC incurred $259,189 and $220,457, respectively for
investment advisory services rendered by TBC in connection with the
International Portfolio.
As stated in the Prospectus, PIMC has entered into an Investment Sub-Advisory
Agreement with SSgA whereby SSgA provides subadvisory services to the Equity 500
Index Portfolio, under which PIMC receives recommendations, research and other
investment services upon which it may base its investment recommendation to the
Fund.
For its services to PIMC, SSgA will receive compensation from PIMC equal to a
quarterly fee at an effective annual rate of 0.027%
The Investment Sub-Advisory Agreement was approved by a majority of the Fund's
Board of Directors, including a majority of its "non-interested" directors, on
September 23, 1999 and became effective on September , 1999. The initial term
of such Investment Sub-Advisory Agreement is two years, and it will continue in
effect from year to year thereafter as long as such continuance is approved at
least annually by a majority of the "non-interested" members of the Fund's Board
of Directors and by (i) a 1940 Act vote of the Portfolio's shareholders or (ii)
the Fund's Board of Directors. The Investment Sub-Advisory Agreement may be
terminated without penalty on 60 days' prior written notice by the Fund's Board
of Directors, by PIMC or by SSgA, as the case may be, and is terminated
automatically in the event of its assignment.
PIMC has retained Wilshire Associates Incorporated ("Wilshire") as an investment
management consultant to assist it in identifying and evaluating the performance
of potential sub-advisers for each of the All Pro Portfolios. Wilshire does not
participate in the selection of portfolio securities for any Portfolio or in any
way participate in the day-to-day management of the All Pro Portfolios or the
Fund. Wilshire assists PIMC in gathering data and performing the quantitative
analysis necessary to identify the styles and past performance of potential
sub-advisers. Wilshire also assists PIMC in performing similar ongoing
quantitative analysis of the performance of each All Pro Portfolio's
sub-advisers and in determining whether changes in a sub-adviser would be
desirable for a Portfolio. As compensation for such services, PIMC pays Wilshire
a sub-advisory fee equal to .05% of the average daily net assets of the All Pro
Portfolios.
24
<PAGE> 82
On behalf of the All Pro Portfolios, and after consultation with Wilshire, PIMC
has selected, and has entered into Investment Sub-Advisory Agreements with, the
sub-advisers listed above under "Investment Advisory and Other Services." The
table below indicates the rate of compensation to be paid by PIMC to each
sub-adviser pursuant to the relevant Investment Sub-Advisory Agreement and the
compensation paid to each such sub-adviser in 1998.
<TABLE>
<CAPTION>
COMPENSATION
NAME OF PORTFOLIO SUB-ADVISER RATE OF COMPENSATION(1) PAID IN 1998(1)
----------------- ----------- ----------------------- ---------------
<S> <C> <C> <C>
All Pro Large Cap Growth
Portfolio.................. CKM .35% .35%
Geewax .30% .30%
All Pro Small Cap Growth
Portfolio.................. SAW .50% .50%
Husic .50% .50%
All Pro Large Cap Value
Portfolio.................. Equinox .25% of the first $50 million .30%(2)
in assets
.23% of assets above $50
million
Harris .65% of the first $50 million .65%
in assets
.60% of the next $50 million
in assets
.55% of assets above $100
million
Mellon Equity .20% .30%(2)
All Pro Small Cap Value
Portfolio.................. Reams .50% N/A(3)
Sterling .70% N/A(3)
</TABLE>
- -------------------------
(1) As a percentage of average daily net assets.
(2) Each of Equinox and Mellon Equity reduced its highest rate to .25% and .20%,
respectively, as of March 1, 1999.
(3) Reams and Sterling each began managing the relevant segment of the
Portfolio's assets in December 1999 and February 2000, respectively, and
accordingly, did not receive compensation in 1998.
Each Investment Sub-Advisory Agreement entered into on behalf of an All-Pro
Portfolio (except the All Pro Small Cap Value Portfolio) was approved by a
majority of the Fund's Board of Directors, including a majority of its
"non-interested" directors, at a meeting of the Board that took place on April
29, 1998. The Board, including a majority of its "non-interested" directors,
approved the Sub-Advisory Agreements with Reams and Sterling at meetings of the
Board that took place on December 9, 1999 and February 7, 2000, respectively.
Each Agreement (except the Agreements for the All Pro Small Cap Value Portfolio)
became effective on May 1, 1998. The Reams Agreement became effective on
December 24, 1999 and the Sterling Agreement became effective on February 7,
2000. The initial term of each such Investment Sub-Advisory Agreement is two
years, and it will continue in effect from year to year thereafter as long as
such continuance is approved at least annually by a majority of the
"non-interested" members of the Fund's Board of Directors and by (i) a 1940 Act
vote of the relevant All-Pro Portfolio's shareholders or (ii) the Fund's Board
of Directors. Each Investment Sub-Advisory Agreement may be terminated without
penalty on 60 days' prior written notice by the Fund's Board of Directors, by
PIMC, or by the relevant sub-adviser, as the case may be, and is terminated
automatically in the event of its assignment.
25
<PAGE> 83
INFORMATION ABOUT ADVISERS
The principal officers of PIMC are:
<TABLE>
<CAPTION>
POSITION WITH POSITION WITH
NAME PIMC THE FUND
---- ------------- -------------
<S> <C> <C>
Sarah Lange President none
James Benson Financial Officer none
Scott V. Carney Vice President none
Rosanne Gatta Vice President President
Timothy Henry Vice President none
James Kestner Vice President none
Dean Miller Vice President none
William Rapp Vice President none
Richard J. Simon Vice President none
Steven Schweitzer Vice President none
Dina M. Welch Vice President none
Anthony T.
Giampietro Treasurer Treasurer and Comptroller
</TABLE>
The principal officers of SAC are:
<TABLE>
<CAPTION>
POSITION WITH POSITION WITH
NAME SAC THE FUND
---- ------------- -------------
<S> <C> <C>
Rodney A. Buck Chief Executive Officer None
Robert L. Lee,
Jr. Senior Vice President None
David M. Brownlee Senior Vice President None
D. Russell Morgan Counsel None
Dean R. Howe Treasurer None
</TABLE>
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
The Advisers, other than Wilshire, to the Fund place all portfolio orders on
behalf of each Portfolio and attempt, in all cases, to obtain the most favorable
prices and executions. The Advisers may place orders with brokers that are
affiliated persons of the Fund pursuant to procedures established by the Board
of Directors. However, in no event will persons affiliated with the Fund deal
with the Fund as principal in the purchase and sale of the Fund's portfolio
securities.
Equity securities are customarily traded on the stock exchange, but may also be
traded over-the-counter. Bonds and debentures are customarily traded
over-the-counter but may be traded on the bond exchange. Money market
instruments are traded primarily in the over-the-counter market. Purchases and
sales on the stock exchanges are effected by brokers and normally involve the
payment of brokerage commissions. Over-the-counter securities are purchased
directly from the issuer or dealers who are usually acting as principals for
their own accounts. These securities are generally traded on a net basis and do
not involve either brokerage commissions or transfer taxes. Consequently, the
cost of executing such transactions consists primarily of mark-ups on the value
of the securities or dealer spreads and underwriting commissions.
The Advisers to the Fund determine the brokers to be used for purchases and
sales of each Portfolio's securities. There are no arrangements whatsoever,
written or oral, relating to the allocation to specific brokers of orders for
portfolio transactions. Consideration is given to those firms providing
statistical and research services to the investment advisers, but it is
generally not the policy of any Portfolio, other than
26
<PAGE> 84
the All Pro Portfolios, to pay higher brokerage commissions to a firm solely
because it has provided such services. The sub-advisers to the All Pro
Portfolios are authorized to consider, in the selection of brokers and dealers
to execute portfolio transactions, not only the available prices and rates of
brokerage commissions but also other relevant factors which may include, without
limitation, the execution capabilities of such brokers and dealers, research,
custody and other services provided by such brokers and dealers which the
sub-adviser believes will enhance its general portfolio management capabilities,
the size of the transaction, the difficulty of execution, the operational
facilities of such brokers and dealers, the risk to such a broker or dealer of
positioning a block of securities, and the overall quality of brokerage and
research services provided by such brokers and dealers. In connection with the
foregoing, a sub-adviser to an All Pro Portfolio is specifically authorized to
pay those brokers and dealers who provide brokerage and research services to it,
a higher commission than that charged by other brokers and dealers if the sub-
adviser determines in good faith that the amount of such commission is
reasonable in relation to the value of such services in terms of either the
particular transaction or in terms of the sub-adviser's overall responsibilities
with respect to the relevant Portfolio segment and to any other client accounts
or portfolios which the sub-adviser advises. The execution of such transactions
shall not be considered to represent an unlawful breach of any duty created by a
sub-advisory agreement or otherwise. Statistical and research services furnished
by brokers typically include: analysts' reports on companies and industries,
market forecasts, economic analyses and the like. Such services may tend to
reduce the expenses of the Adviser and this has been considered in setting the
advisory fees paid by the Fund.
During the period from January 1, 1998 to December 31, 1998, the Fund paid
aggregate brokerage fees of $522,878 of which $214,842 was paid by the Growth
Portfolio, $33,237 was paid by the Managed Portfolio, $59,955 was paid by the
Aggressive Growth Portfolio, $19,438 was paid by the Sentinel Growth Portfolio,
$128,845 was paid by the International Portfolio, $11,433 was paid by the All
Pro Large Cap Growth Portfolio, $11,485 was paid by the All Pro Small Cap Growth
Portfolio, $23,232 was paid by the All Pro Large Cap Value Portfolio, and
$20,411 was paid by the All Pro Small Cap Value Portfolio.
During the period from January 1, 1997 to December 31, 1997, the Fund paid
aggregate brokerage fees of $813,965, of which $585,281 was paid by the Growth
Portfolio, $22,837 was paid by the Managed Portfolio, $54,894 was paid by the
Aggressive Growth Portfolio, $19,172 was paid by the Sentinel Growth Portfolio,
and $131,781 was paid by the International Portfolio.
During the period from January 1, 1996 to December 31, 1996 the Fund paid
aggregate brokerage fees of $568,287, of which $383,187 was paid by the Growth
Portfolio, $12,001 was paid by the Managed Portfolio, $44,424 was paid by the
Aggressive Growth Portfolio, $12,441 was paid by the Sentinel Growth Portfolio
and $116,234 was paid by the International Portfolio.
The Equity 500 Index Portfolio did not pay any brokerage fees during 1996, 1997
or 1998 because the Portfolio did not commence operations during 1999.
DETERMINATION OF NET ASSET VALUE
As stated in the Prospectus, the Fund will offer and sell its shares at each
Portfolio's per share net asset value. The net asset value of the shares of each
Portfolio (except the Money Market Portfolio) of the Fund is determined as of
the close of the New York Stock Exchange on each day when the New York Stock
Exchange is open for business for the day prior to the day on which a
transaction is to be effected. The net asset value of the Money Market Portfolio
is determined once daily on each day the New York Stock Exchange and the Federal
Reserve Bank both are open for business.
The New York Stock Exchange currently is open each day, Monday through Friday,
except the following holidays: New Year's Day, Dr. Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas, and on the preceding Friday or subsequent Monday
when one of these holidays falls on a Saturday or Sunday, respectively.
27
<PAGE> 85
The Federal Reserve Bank is open each day, Monday through Friday, except the
following holidays: New Year's Day, Dr. Martin Luther King, Jr. Day, Presidents'
Day, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans' Day,
Thanksgiving Day and Christmas, and the preceding Friday or subsequent Monday
when one of these days follow on a Saturday or Sunday, respectively.
The Fund's Board of Directors has specifically approved the use of a pricing
service for debt securities with maturities generally exceeding one year. Prices
provided by the pricing service may be determined without exclusive reliance on
quoted prices and may take into account appropriate factors such as institution
size, trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics and other market data.
Equity investments (including common stocks, preferred stocks, convertible
securities, and warrants) and call options written on all portfolio investments
listed or traded on a national exchange are valued at their last sale price on
that exchange prior to the time when such assets are valued. For days having no
exchange sales and for unlisted securities, such securities and call options
written on portfolio securities are valued at the last sale price on the NASDAQ
(National Association of Securities Dealers Automated Quotations) National
Market System. If no National Market System sales occur on that day, equity
securities are valued at the last reported "bid" price and call options written
on all portfolio securities for which other over-the-counter market quotations
are readily available are valued at the last reported "asked" price. Debt
securities with maturities exceeding one year are valued on the basis of
valuations furnished by a pricing service when such prices are believed to
reflect such securities' fair value.
The value of a foreign security held by the International Portfolio is
determined based upon its sale price on the foreign exchange or market on which
it is traded and in the currency of that market, as of the close of the
appropriate exchange or, if there have been no sales during the day, at the mean
of the closing bid and asked prices. Trading in securities on exchanges and
over-the-counter markets in Europe and the Far East is normally completed at
various times prior to the current closing time of the New York Stock Exchange.
Trading on foreign exchanges may not take place on every day the New York Stock
Exchange is open. Conversely, trading in various foreign markets may take place
on days when the New York Stock Exchange is not open. Consequently, the net
asset value calculation for the Portfolio may not occur contemporaneously with
the determination of the most current market prices of the securities included
in such calculation. In addition, the value of the net assets held by the
Portfolio may be significantly affected on days when shares are not available
for purchase or redemption.
Any assets that are denominated in a foreign currency are converted into U.S.
dollar equivalents at the prevailing market rates as quoted by generally
recognized reliable sources.
Money market instruments with a remaining maturity of 60 days or less held by
any Portfolio, and all instruments held by the Money Market Portfolio (including
master demand notes) will be valued on an amortized cost basis. Under this
method of valuation, the instrument is initially valued at cost (or in the case
of instruments purchased with more than 60 days remaining to maturity, the
market value on the 61st day prior to maturity); thereafter, the Fund assumes a
constant proportionate amortization in value until maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. For purposes of this method of valuation, the maturity
of a variable rate certificate of deposit is deemed to be the next coupon date
on which the interest rate is to be adjusted. While this method provides
certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price that would be
received upon sale of the instrument. During period of declining interest rates,
the daily yield on shares of the Money Market Portfolio may tend to be higher
than a like computation made by a fund with identical investments utilizing a
method of valuation based upon market prices and estimates of market prices for
all of its portfolio instruments. Thus, if the use of amortized cost resulted in
a lower aggregate portfolio value on a particular day, a prospective investor
would be able to obtain a somewhat higher yield than would result from
investment in a fund utilizing
28
<PAGE> 86
solely market values, and existing investors would receive less investment
income. The converse would apply in a period of rising interest rates.
Use of the amortized cost valuation method by the Money Market Portfolio
requires that Portfolio to maintain a dollar-weighted average maturity of 90
days or less and to only purchase obligations having remaining maturities of 13
months or less. In addition, the Portfolio can invest only in obligations
determined by the Directors to present minimal credit risks. When an eligible
security (described in the Prospectus) goes into default or has its rating
downgraded thereby causing it to no longer be an eligible security, the
Directors must promptly reassess whether such security presents a minimal credit
risk and whether continuing to hold the security is in the Portfolio's best
interest. In addition, as to certain types of investments, the Portfolio may
only invest in obligations meeting the quality requirements spelled out in the
Prospectus. Furthermore, investments in the securities of any one issuer may not
exceed 5% of the Portfolio's total assets at the time of such purchase, nor may
investments in "second-tier securities" (eligible securities which are not rated
in the highest short term rating category by at least two nationally recognized
statistical rating organizations (NRSRO) or one NRSRO if it is the only NRSRO
rating that security or comparable unrated securities), exceed 5% of the
Portfolio's total assets nor may investments in any one issuer exceed the
greater of 1% of the Portfolio's total assets or $1 million. The Directors have
established procedures designed to stabilize, to the extent reasonably possible,
the Money Market Portfolio's price per share as computed for the purpose of
sales and redemptions at $1.00. Such procedures include review of that
Portfolio's investment holdings by the Directors, at such intervals as they may
deem appropriate, to determine whether the net asset value calculated by using
available market quotations or equivalents deviates from $1.00 per share. If
such deviation exceeds 1/2 of 1%, the Directors will promptly consider what
action, if any, will be initiated. In the event the Directors determine that a
deviation exists which may result in material dilution or other unfair results
to new or existing investors, the Directors will take such corrective action as
they regard as necessary and appropriate, including: the sale of Portfolio
instruments prior to maturity; the withholding of dividends or payment of
distributions from capital or capital gains; redemptions of shares in kind or
the establishment of a net asset value per share based upon available market
quotations.
The methods used to value other assets of each Portfolio are described more
fully in the Prospectus.
REDEMPTION OF SHARES
The Fund is required to redeem all full and fractional shares of the Fund for
cash at the net asset value per share. Payment for shares redeemed will
generally be made within seven days after receipt of a proper notice of
redemption. The right to redeem shares or to receive payment with respect to any
redemption may only be suspended for any period during which (a) trading on the
New York Stock Exchange is restricted or such exchange is closed for other than
weekends and holidays; (b) an emergency exists, as determined by the Securities
and Exchange Commission, as a result of which disposal of Portfolio securities
or determination of the net asset value of a Portfolio is not reasonably
practicable; and (c) the Securities and Exchange Commission by order permits
postponement for the protection of shareholders.
TAXES
Each Portfolio of the Fund is treated as a separate entity for federal income
tax purposes. Each Portfolio intends to elect and to qualify as a "regulated
investment company" under the provisions of Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). As a regulated investment company, each
Portfolio is required to distribute to its shareholders for each taxable year at
least 90% of its investment company taxable income (consisting generally of net
investment income, net short-term capital gain, and net gains from certain
foreign currency transactions). To qualify for treatment as a regulated
investment company, a Portfolio must, among other things, derive in each taxable
year at least 90% of its gross income
29
<PAGE> 87
from dividends, interest, payments with respect to securities loans and gains
from the sale or other disposition of stock or securities or foreign currencies
(subject to the authority of the Secretary of the Treasury to exclude foreign
currency gains which are ancillary to the Fund's principal business of investing
in stock or securities or options and futures with respect to such stock or
securities), other income (including, but not limited to, gains from options,
futures, or forward contracts) derived with respect to its investing in such
stock, securities or currencies. Moreover, at the close of each quarter of each
Portfolio's taxable year, at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. Government securities, securities of
other regulated investment companies, and other securities that, with respect to
any one issuer, do not exceed 5% of the value of the Portfolio's total assets
and that do not represent more than 10% of the outstanding securities of the
issuer. In addition, at the close of each quarter of each Portfolio's taxable
year, not more than 25% of the value of its total assets may be invested in
securities (other than U.S. Government securities or the securities of other
regulated investment companies) of any one issuer. If each Portfolio qualifies
as a "regulated investment company" and complies with the relevant provisions of
the Code, each Portfolio will be relieved of federal income tax on the part of
its net ordinary income and realized net capital gain which it distributes to
the separate accounts. If a Portfolio fails to qualify as a regulated investment
company, the Portfolio will be subject to federal, and possibly state, corporate
taxes on its taxable income and gains and distributions to its shareholders will
constitute ordinary dividend income to the extent of such Portfolio's available
earnings and profits, and policyholders could be subject to current tax on
distributions received with respect to Portfolio shares.
Each Portfolio must, and intends to, comply with the diversification
requirements imposed by section 817(h) of the Code and the regulations
thereunder. These requirements, which are in addition to the diversification
requirements mentioned above, place certain limitations on the proportion of
each Portfolio's assets that may be represented by any single investment (which
includes all securities of the same issuer). For these purposes, each U.S.
Government agency or instrumentality is treated as a separate issuer, while a
particular foreign government and its agencies, instrumentalities, and political
subdivisions are all considered the same issuer. For information concerning the
consequences of failure to meet the requirements of section 817(h), see the
respective prospectuses for the policies or the contracts.
A Portfolio will not be subject to the 4% Federal excise tax imposed on
regulated investment companies that do not distribute substantially all their
income and gains each calendar year because the tax does not apply to a
regulated investment company whose only shareholders are segregated asset
accounts of life insurance companies held in connection with variable annuity
contracts and/or variable life insurance policies.
FOREIGN TAXES. Investment income received from sources within foreign countries
may be subject to foreign income taxes. In this regard, withholding tax rates in
countries with which the United States does not have a tax treaty are often as
high as 30% or more. The United States has entered into tax treaties with many
foreign countries which entitle certain investors (such as the International
Portfolio) to a reduced rate of tax (generally 10-15%) or to certain exemptions
from tax. The International Portfolio will operate so as to qualify for such
reduced tax rates or tax exemptions whenever possible. While policyholder will
bear the cost of any foreign tax withholding, they will not be able to claim a
foreign tax credit or deduction for taxes paid by the International Portfolio.
The discussion of "Dividends, Distributions and Taxes" in the Prospectus, in
conjunction with the foregoing, is a general and abbreviated summary of the
applicable provisions of the Code and Treasury Regulations currently in effect
as interpreted by the Courts and the Internal Revenue Service. For further
information, consult the prospectuses and/or statements of additional
information for the respective policies and contracts, as well as your own tax
adviser.
30
<PAGE> 88
CAPITAL STOCK
The Fund was incorporated in Maryland on March 21, 1985. The authorized capital
stock of the Fund consists of 1.2 billion shares of common stock $.01 par value.
The shares of common stock are divided into twelve series -- Money Market
Portfolio, Equity 500 Index Portfolio, Growth Portfolio, Bond Portfolio, Managed
Portfolio, Aggressive Growth Portfolio, International Portfolio, Sentinel Growth
Portfolio, All Pro Large Cap Growth Portfolio, All Pro Large Cap Value
Portfolio, All Pro Small Cap Growth Portfolio and All Pro Small Cap Value
Portfolio common stock. The Growth Portfolio consists of 75 million shares, the
Equity 500 Index Portfolio consists of million shares, the Money
Market Portfolio consists of 150 million shares and each of the All Pro
Portfolios consists of 50 million shares; each of the remaining series consists
of five million shares. The Fund may establish additional portfolios and may
allocate its shares either to such new classes or to any of the twelve existing
classes.
The balance of the shares may be issued to the existing Portfolios or to new
Portfolios having the number of shares and descriptions, powers, and rights, and
the qualifications, limitations, and restrictions as the Board of Directors may
determine. The Board of Directors also may change the designation of any
Portfolio and may increase or decrease the numbers of shares of any Portfolio,
but may not decrease the number of shares of any Portfolio below the number of
shares then outstanding.
Each issued and outstanding share is entitled to participate equally in
dividends and distributions declared by the respective Portfolio and, upon
liquidation or dissolution, in the net assets of such Portfolio remaining after
satisfaction of outstanding liabilities.
VOTING RIGHTS
As an investment company incorporated in Maryland, the Fund is not required to
hold routine annual shareholders' meetings. Shareholders' meetings will be
called whenever one or more of the following is required to be acted on by
shareholders pursuant to the Investment Company Act of 1940: (1) election of
directors; (2) approval of an investment advisory agreement; (3) ratification of
selection of independent accountants; or (4) approval of an underwriting
agreement.
All shares of common stock have equal voting rights (regardless of the net value
per share) except that on matters affecting only one Portfolio, only shares of
the respective Portfolio are entitled to vote. The shares do not have cumulative
voting rights. Accordingly, the holders of more than 50% of the shares of the
Fund voting for the election of directors can elect all of the directors of the
Fund if they choose to do so, and in such event the holders of the remaining
shares would not be able to elect any directors.
Matters in which the interests of all the Portfolios are substantially identical
(such as the election of directors or the approval of independent public
accountants) will be voted on by all shareholders without regard to the separate
Portfolios. Matters that affect all the Portfolios but where the interests of
the Portfolios are not substantially identical (such as approval of an
Investment Advisory Agreement) would be voted on separately by each Portfolio.
Matters affecting only one Portfolio, such as a change in its fundamental
policies, are voted on separately by that Portfolio.
Matters requiring separate shareholder voting by a Portfolio shall have been
effectively acted upon with respect to any Portfolio if a majority of the
outstanding voting securities of that Portfolio votes for approval of the
matter, notwithstanding that: (1) the matter has not been approved by a majority
of the outstanding voting securities of any other Portfolios; or (2) the matter
has not been approved by a 1940 Act majority of the outstanding voting
securities of the Fund.
CODE OF ETHICS
The Board of Directors of the Fund has adopted a Code of Ethics under Rule 17j-1
of the 1940 Act (the "Code of Ethics"). The Code of Ethics covers the conduct
(including the personal securities transactions)
31
<PAGE> 89
of each officer and director of the Fund, as well as of any employees of the
Fund who participate in the selection of the Fund's Portfolio securities or who
have access to information regarding the Fund's pending purchases and sales of
Portfolio securities (collectively referred to as "Advisory Persons"). The Code
of Ethics also covers the general conduct and personal securities transactions
of (but does not impose securities transaction reporting requirements on) any
officer, director, and employee of either NAM, PIMC, SAC, TBC, the sub-advisers
of the All Pro Portfolios or 1717 Capital Management Company ("1717"), the
principal underwriter of the Fund, who participates in the selection of the
Fund's portfolio securities or who has access to information regarding the
Fund's pending purchases and sales of portfolio securities (also "Advisory
Persons").
In general, the Code of Ethics restricts purchases or sales of securities being
purchased or sold or being considered for purchase or sale by the Fund by any of
the directors, officers, or employees of any of the Fund, the Advisers, or 1717.
Advisory Persons are also prohibited from purchasing securities in an initial
public offering and are also restricted in their purchases of private offerings
of securities. The Code of Ethics also describes certain "blackout periods"
during which: (1) no Advisory Person or no director, officer, or employee of the
Fund may acquire ownership of a security on a day during which the Fund has a
pending order to purchase or sell that same security; and (2) no person
responsible for day-to-day portfolio management of any Portfolio shall purchase
or sell any security within seven days before or after the Fund trades in such
security. Certain specified transactions are exempt from the provisions of the
Code of Ethics. Each of the sub-advisers for the Equity 500 Index, International
and All Pro Portfolios has adopted a similar code of ethics under Rule 17j-1,
which codes impose substantially identical restrictions on Advisory Persons of
the Fund.
OTHER SERVICES
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Pursuant to a custody agreement with the Fund, PFPC Trust Company, located at
200 Stevens Drive, Lester, Pennsylvania 19113, serves as custodian of the Fund's
assets. Pursuant to a transfer agency agreement with the Fund, PFPC, which is
located at 103 Bellevue Parkway, Wilmington, Delaware 19809, serves as the
Fund's transfer agent and dividend disbursing agent.
CUSTODIAN FOR INTERNATIONAL PORTFOLIO
The custodian for all foreign securities and assets of the International
Portfolio is Citibank, N.A., located at 111 Wall Street, New York, NY 10043.
Securities purchased for the Portfolio outside of the U.S. are maintained in the
custody of foreign banks and trust companies which are members of Citibank's
Global Custody Network and foreign depositories (foreign sub-custodians).
Citibank and each of the foreign custodial institutions holding securities of
the Portfolio has been approved by the Board in accordance with regulations
under the 1940 Act.
The Board reviews, at least annually, whether it is in the best interest of the
Portfolio and its shareholders to maintain Portfolio assets in each custodial
institution. However, with respect to foreign sub-custodians, there can be no
assurance that the Portfolio and the value of its shares will not be adversely
affected by acts of foreign governments, financial or operational difficulties
of the foreign sub-custodians, difficulties and costs of obtaining jurisdiction
over, or enforcing judgments against, the foreign sub-custodians, or application
of foreign law to the Portfolio's foreign sub-custodian arrangements.
Accordingly, an investor should recognize that the noninvestment risks involved
in holding assets abroad may be greater than those associated with investing in
the U.S.
32
<PAGE> 90
INDEPENDENT ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP, 2400 Eleven Penn Center, Philadelphia,
PA 19103, has been selected to serve as the Fund's independent accountants.
The audited financial statements of the Money Market, Growth, Bond, Managed,
Aggressive Growth, Sentinel Growth, International and All Pro Portfolios in this
SAI and the financial highlights included in the Prospectuses have been audited
by PricewaterhouseCoopers LLP, Independent Accountants, and have been included
in reliance upon the report of such firm given on their authority as experts in
accounting and auditing. The semi-annual financial statements have not been
audited.
LEGAL MATTERS
Sutherland Asbill & Brennan LLP of Washington, D.C. has provided advice on
certain legal matters pertaining to federal securities laws applicable to the
Fund.
UNDERWRITERS
1717 Capital Management Company ("1717") serves, without compensation from the
Fund, as the principal underwriter of the Fund, pursuant to an agreement with
the Fund. Under the terms of the agreement, 1717 is not obligated to sell any
specific number of shares. 1717 has authority, pursuant to the agreement to
enter into similar contracts with other insurance companies and with other
entities registered as broker-dealers under the Securities Exchange Act of 1934.
ADDITIONAL INFORMATION
This Statement of Additional Information and the Prospectuses do not contain all
the information set forth in the registration statement and exhibits relating
thereto, which the Fund has filed with the Securities and Exchange Commission,
Washington, D.C., under the Securities Act of 1933 and the 1940 Act, to which
reference is hereby made.
33
<PAGE> 91
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Accountants........................... F-2
Statement of Net Assets as of December 31, 1998............. F-3
Statements of Operations for the Year Ended December 31,
1998...................................................... F-50
Statements of Changes in Net Assets for the Year Ended
December 31, 1998......................................... F-52
Notes to Financial Statements, December 31, 1998............ F-54
Statement of Net Assets as of June 30, 1999................. F-61
Statement of Operations for Six Months Ended June 30,
1999...................................................... F-104
Statements of Changes in Net Assets for the Six Months Ended
June 30, 1999............................................. F-106
Financial Highlights........................................ F-108
Notes to Financial Statements, June 30, 1999................ F-117
</TABLE>
F-1
<PAGE> 92
- --------------------------------------------------------------------------------
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
F-2
<PAGE> 93
- --------------------------------------------------------------------------------
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>
F-3
<PAGE> 94
- --------------------------------------------------------------------------------
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>
F-4
<PAGE> 95
- --------------------------------------------------------------------------------
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>
F-5
<PAGE> 96
- --------------------------------------------------------------------------------
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.
F-6
<PAGE> 97
- --------------------------------------------------------------------------------
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
-----------
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>
F-7
<PAGE> 98
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Money Market Portfolio
Statement of Net Assets, December 31, 1998 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
DESCRIPTION AND PERCENTAGE OF PORTFOLIO OR PAR VALUE
- ---------------------------------------------------------------------------------------
<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.
F-8
<PAGE> 99
- --------------------------------------------------------------------------------
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
-----------
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
-----------
</TABLE>
F-9
<PAGE> 100
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Bond 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 BONDS (CONTINUED)
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
-----------
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.
F-10
<PAGE> 101
- --------------------------------------------------------------------------------
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
-----------
Containers -- 0.6%
Bemis Co., Inc. .......................................... 11,200 424,900
-----------
</TABLE>
F-11
<PAGE> 102
- --------------------------------------------------------------------------------
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)
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
-----------
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
-----------
</TABLE>
F-12
<PAGE> 103
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Statement of Net Assets, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY SHARES
DATE OR PAR VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
-----------
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
-----------
</TABLE>
F-13
<PAGE> 104
- --------------------------------------------------------------------------------
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>
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
-----------
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
-----------
</TABLE>
F-14
<PAGE> 105
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed 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 -- 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>
<TABLE>
<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.
F-15
<PAGE> 106
- --------------------------------------------------------------------------------
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
-----------
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
-----------
</TABLE>
F-16
<PAGE> 107
- --------------------------------------------------------------------------------
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)
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
-----------
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
-----------
</TABLE>
F-17
<PAGE> 108
- --------------------------------------------------------------------------------
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>
COMMON STOCK (CONTINUED)
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
-----------
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.
F-18
<PAGE> 109
- --------------------------------------------------------------------------------
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
-----------
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
-----------
</TABLE>
F-19
<PAGE> 110
- --------------------------------------------------------------------------------
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)
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
-----------
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
-----------
</TABLE>
F-20
<PAGE> 111
- --------------------------------------------------------------------------------
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)
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
-----------
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
-----------
</TABLE>
F-21
<PAGE> 112
- --------------------------------------------------------------------------------
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>
COMMON AND PREFERRED STOCK (CONTINUED)
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
-----------
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.
F-22
<PAGE> 113
- --------------------------------------------------------------------------------
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
-----------
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
-----------
</TABLE>
F-23
<PAGE> 114
- --------------------------------------------------------------------------------
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)
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
-----------
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
-----------
</TABLE>
F-24
<PAGE> 115
- --------------------------------------------------------------------------------
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>
COMMON STOCK (CONTINUED)
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>
<TABLE>
<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.
F-25
<PAGE> 116
- --------------------------------------------------------------------------------
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
-----------
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
-----------
</TABLE>
F-26
<PAGE> 117
- --------------------------------------------------------------------------------
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)
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
-----------
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
-----------
</TABLE>
F-27
<PAGE> 118
- --------------------------------------------------------------------------------
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)
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
-----------
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
-----------
</TABLE>
F-28
<PAGE> 119
- --------------------------------------------------------------------------------
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)
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
-----------
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
-----------
</TABLE>
F-29
<PAGE> 120
- --------------------------------------------------------------------------------
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)
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
-----------
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.
F-30
<PAGE> 121
- --------------------------------------------------------------------------------
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
-----------
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
-----------
</TABLE>
F-31
<PAGE> 122
- --------------------------------------------------------------------------------
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)
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
-----------
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
-----------
</TABLE>
F-32
<PAGE> 123
- --------------------------------------------------------------------------------
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)
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
-----------
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>
F-33
<PAGE> 124
- --------------------------------------------------------------------------------
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
-----------
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
-----------
</TABLE>
F-34
<PAGE> 125
- --------------------------------------------------------------------------------
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)
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
-----------
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
-----------
</TABLE>
F-35
<PAGE> 126
- --------------------------------------------------------------------------------
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>
COMMON STOCK (CONTINUED)
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
-----------
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.
F-36
<PAGE> 127
- --------------------------------------------------------------------------------
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
----------
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
----------
</TABLE>
F-37
<PAGE> 128
- --------------------------------------------------------------------------------
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)
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
----------
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
----------
</TABLE>
F-38
<PAGE> 129
- --------------------------------------------------------------------------------
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)
Electrical Equipment -- 0.7%
*AFC Cable Systems, Inc. ................................. 800 $ 26,900
*Micrel, Inc. ............................................ 800 44,000
----------
70,900
----------
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
----------
Leasing -- 0.2%
*Indigo Aviation AB ADR................................... 2,700 22,275
----------
</TABLE>
F-39
<PAGE> 130
- --------------------------------------------------------------------------------
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)
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
----------
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
----------
</TABLE>
F-40
<PAGE> 131
- --------------------------------------------------------------------------------
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)
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.
F-41
<PAGE> 132
- --------------------------------------------------------------------------------
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
----------
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
----------
</TABLE>
F-42
<PAGE> 133
- --------------------------------------------------------------------------------
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)
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
----------
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
----------
</TABLE>
F-43
<PAGE> 134
- --------------------------------------------------------------------------------
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)
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
----------
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
----------
</TABLE>
F-44
<PAGE> 135
- --------------------------------------------------------------------------------
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)
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
----------
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>
F-45
<PAGE> 136
- --------------------------------------------------------------------------------
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
----------
Paper & Forest Products -- 0.4%
Chesapeake Corp. ......................................... 900 33,188
----------
</TABLE>
F-46
<PAGE> 137
- --------------------------------------------------------------------------------
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)
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
----------
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
----------
</TABLE>
F-47
<PAGE> 138
- --------------------------------------------------------------------------------
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)
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
----------
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.
F-48
<PAGE> 139
[This page intentionally left blank]
F-49
<PAGE> 140
- --------------------------------------------------------------------------------
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.
F-50
<PAGE> 141
- --------------------------------------------------------------------------------
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>
F-51
<PAGE> 142
- --------------------------------------------------------------------------------
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.
F-52
<PAGE> 143
- --------------------------------------------------------------------------------
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.
F-53
<PAGE> 144
- --------------------------------------------------------------------------------
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 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.
F-54
<PAGE> 145
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
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 respect 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
F-55
<PAGE> 146
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
$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.
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>
F-56
<PAGE> 147
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1998 -- Continued
- --------------------------------------------------------------------------------
<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>
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>
F-57
<PAGE> 148
- --------------------------------------------------------------------------------
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>
F-58
<PAGE> 149
- --------------------------------------------------------------------------------
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 MANAGED PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold.......... 1,837,947 $ 32,406,592 165,155,447 $ 165,155,447 1,435,423 $15,864,807 623,703 $10,481,421
Shares redeemed...... (1,249,358) (22,097,256) (142,035,980) (142,035,980) (417,928) (4,628,289) (360,939) (6,051,923)
Shares reinvested.... 2,418,983 40,098,617 3,994,543 3,994,543 140,681 1,555,386 285,692 4,640,106
---------- ------------ ------------ ------------- --------- ----------- -------- -----------
Net contributions
from affiliated
insurance
companies.......... 3,007,572 $ 50,407,953 27,114,010 $ 27,114,010 1,158,176 $12,791,904 548,456 $ 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>
F-59
<PAGE> 150
- --------------------------------------------------------------------------------
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 MANAGED PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold.......... 1,328,421 $ 23,557,083 116,153,761 $ 116,153,761 608,494 $ 6,478,790 538,094 $ 8,544,898
Shares redeemed...... (1,033,097) (18,272,623) (109,109,613) (109,109,613) (192,816) (2,047,805) (338,821) (5,264,441)
Shares reinvested.... 1,736,600 28,056,401 3,098,096 3,098,096 108,875 1,143,011 129,171 1,970,912
---------- ------------ ------------ ------------- -------- ----------- -------- -----------
Net contributions
from affiliated
insurance
companies.......... 2,031,924 $ 33,340,861 10,142,244 $ 10,142,244 524,553 $ 5,573,996 328,444 $ 5,251,369
========== ============ ============ ============= ======== =========== ======== ===========
Shares exchanged in
acquisition of
Common Stock
Portfolios......... 716,786 13,633,276 -- -- -- -- -- --
---------- ------------ ------------ ------------- -------- ----------- -------- -----------
</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>
F-60
<PAGE> 151
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio
Statement of Net Assets, June 30, 1999
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 96.2%
Aerospace & Defense -- 3.8%
Goodrich (B.F.) Co. ...................................... 155,000 $ 6,587,500
Raytheon Co., Class A..................................... 90,000 6,198,750
------------
12,786,250
------------
Automobiles -- 2.2%
Ford Motor Co. ........................................... 130,000 7,336,875
------------
Banks -- 5.6%
Bank of America Corp. .................................... 62,238 4,562,823
Bank of New York Co., Inc. ............................... 163,600 6,002,075
Chase Manhattan Corp. .................................... 50,000 4,331,250
First Union Corp. ........................................ 80,000 3,760,000
------------
18,656,148
------------
Beverages -- 2.0%
Pepsico, Inc. ............................................ 170,000 6,576,875
------------
Broadcasting & Publishing -- 3.7%
Gannett, Inc. ............................................ 90,000 6,423,750
McGraw-Hill, Inc. ........................................ 105,000 5,663,437
Time Warner, Inc. ........................................ 5,000 367,500
------------
12,454,687
------------
Building & Building Supplies -- 1.3%
Sherwin Williams Co. ..................................... 153,000 4,245,750
------------
Business & Consumer Services -- 5.2%
Automatic Data Processing, Inc. .......................... 115,000 5,060,000
Electronic Data Systems Corp. ............................ 65,000 3,676,562
Omnicom Group, Inc. ...................................... 105,000 8,400,000
------------
17,136,562
------------
Chemicals & Allied Products -- 1.4%
Du Pont (E.I.) de Nemours & Co. .......................... 70,000 4,781,875
------------
Communications -- 5.8%
Ameritech Corp. .......................................... 20,000 1,470,000
AT&T Corp. ............................................... 112,500 6,278,906
Comcast Corp., Class A.................................... 15,000 537,187
Comcast Corp., Special Class A Non-Voting................. 45,000 1,729,687
*General Instrument Corp. ................................ 20,500 871,250
GTE Corp. ................................................ 110,000 8,332,500
------------
19,219,530
------------
</TABLE>
F-61
<PAGE> 152
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Computers -- 4.1%
Compaq Computer Corp. .................................... 133,500 $ 3,162,281
International Business Machines Corp. .................... 80,000 10,340,000
------------
13,502,281
------------
Consumer Products -- 4.4%
Fortune Brands, Inc. ..................................... 154,000 6,371,750
Kimberly-Clark Corp. ..................................... 144,000 8,208,000
------------
14,579,750
------------
Containers -- 0.8%
Bemis Co., Inc. .......................................... 68,800 2,734,800
------------
Drugs & Health Care -- 9.7%
Abbott Laboratories....................................... 124,000 5,642,000
American Home Products Corp. ............................. 137,500 7,906,250
Becton, Dickinson & Co. .................................. 92,000 2,760,000
*HCR Manor Care, Inc. .................................... 90,000 2,176,875
Johnson & Johnson......................................... 78,000 7,644,000
Pfizer, Inc. ............................................. 35,400 3,885,150
Schering Plough Corp. .................................... 44,000 2,332,000
------------
32,346,275
------------
Electrical Equipment -- 2.9%
Emerson Electric Co. ..................................... 93,000 5,847,375
General Electric Co. ..................................... 35,000 3,955,000
------------
9,802,375
------------
Energy -- 6.0%
Chevron Corp. ............................................ 43,500 4,140,656
Exxon Corp. .............................................. 37,500 2,892,188
FPL Group, Inc. .......................................... 45,000 2,458,125
Mobil Corp. .............................................. 64,000 6,336,000
Pacificorp................................................ 38,800 712,950
Royal Dutch Petroleum Co. ................................ 58,500 3,524,625
------------
20,064,544
------------
Entertainment -- 0.5%
Walt Disney Co. .......................................... 57,000 1,756,313
------------
Finance -- 6.1%
American Express Co. ..................................... 55,000 7,156,875
Associates First Capital Corp., Class A................... 70,000 3,101,875
Citigroup, Inc. .......................................... 127,500 6,056,250
Fannie Mae................................................ 56,400 3,856,350
------------
20,171,350
------------
</TABLE>
F-62
<PAGE> 153
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Food & Food Distributors -- 4.3%
Bestfoods, Inc. .......................................... 70,000 $ 3,465,000
Hershey Foods Corp. ...................................... 64,800 3,847,500
McCormick & Co., Inc. .................................... 109,200 3,446,625
Sara Lee Corp. ........................................... 160,000 3,630,000
------------
14,389,125
------------
Industrial Diversified -- 2.3%
Parker-Hannifin Corp. .................................... 139,800 6,395,850
Praxair, Inc. ............................................ 25,000 1,223,438
------------
7,619,288
------------
Insurance -- 6.5%
Allstate Corp. ........................................... 115,000 4,125,625
American General Corp. ................................... 90,000 6,783,750
American International Group, Inc. ....................... 46,500 5,443,406
Jefferson-Pilot Corp. .................................... 73,000 4,831,688
------------
21,184,469
------------
Lodging -- 2.0%
Marriott International, Inc., Class A..................... 175,000 6,540,625
------------
Oil Field Equipment & Services -- 2.4%
Halliburton Co. .......................................... 97,500 4,411,875
Schlumberger Ltd. ........................................ 55,000 3,502,813
------------
7,914,688
------------
Paper & Forest Products -- 0.7%
International Paper Co. .................................. 48,000 2,424,000
------------
Railroads -- 1.7%
Union Pacific Corp., Series A............................. 97,500 5,685,469
------------
Real Estate -- 1.3%
Weyerhaeuser Co. ......................................... 62,500 4,296,875
------------
Retail Merchandising -- 3.7%
*Costco Companies, Inc. .................................. 72,000 5,764,500
Dayton Hudson Corp. ...................................... 39,900 2,593,500
May Department Stores Co. ................................ 94,500 3,862,688
------------
12,220,688
------------
</TABLE>
F-63
<PAGE> 154
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio
Statement of Net Assets, June 30, 1999 -- Concluded
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY SHARES
DESCRIPTION AND PERCENTAGE OF PORTFOLIO DATE OR PAR VALUE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Semiconductors -- 0.8%
Intel Corp. ............................................................ $ 45,000
------------
Tobacco -- 0.8%
Philip Morris Cos., Inc. ............................................... 70,000
------------
Utilities -- 4.3%
Duke Power Co. ......................................................... 53,000
Enron Corp. ............................................................ 100,000
Florida Progress Corp. ................................................. 76,000
------------
14,196,625
------------
TOTAL COMMON STOCK ($241,584,296)..................................... 320,114,717
------------
COMMERCIAL PAPER -- 4.2%
Commercial Credit Corp., 4.95%............................ 07/02/1999 $6,000,000 5,999,175
Prudential Funding Corp., 5.11%........................... 07/07/1999 8,000,000 7,993,187
------------
TOTAL COMMERCIAL PAPER ($13,992,362).................... 13,992,362
------------
SHORT TERM INVESTMENTS -- 0.0%
Temporary Investment Fund, Inc. -- TempCash............................. 97,771 97,771
------------
TOTAL SHORT TERM INVESTMENTS ($97,771)................................ 97,771
------------
TOTAL INVESTMENTS -- 100.5% ($255,674,429)............................ 334,204,850
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.5)%........................... (1,609,102)
------------
NET ASSETS -- 100.0%
(Equivalent to $19.84 per share based on 16,764,024 shares of capital
stock outstanding).................................................... $332,595,748
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($332,595,748/16,764,024 shares outstanding)............................ $ 19.84
============
</TABLE>
*Non-income producing
See accompanying notes to financial statements.
F-64
<PAGE> 155
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Money Market Portfolio
Statement of Net Assets, June 30, 1999
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY
DESCRIPTION AND PERCENTAGE OF PORTFOLIO DATE PAR VALUE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER -- 100.8%
Agricultural Services -- 6.8%
Deere (John) Capital Corp., 5.00%......................... 07/29/1999 $1,800,000 $ 1,793,000
Monsanto Co., 4.87%....................................... 08/23/1999 5,000,000 4,964,151
------------
6,757,151
------------
Automobiles -- 11.2%
DaimlerChrysler North America Holding Corp., 4.85%........ 07/28/1999 2,200,000 2,191,998
Ford Motor Credit Co., 4.80%.............................. 07/08/1999 4,500,000 4,495,800
General Motors Acceptance Corp., 5.12%.................... 08/11/1999 4,500,000 4,473,760
------------
11,161,558
------------
Banking -- 14.1%
Morgan (J.P.) & Co., Inc., 5.20%.......................... 07/22/1999 5,000,000 4,984,833
National City Credit Corp., 5.18%......................... 08/13/1999 4,900,000 4,869,683
Northern Trust Co. (Chicago), 5.13%....................... 08/10/1999 4,200,000 4,176,060
------------
14,030,576
------------
Brokerage -- 7.7%
Merrill Lynch & Co., Inc., 4.78%.......................... 07/07/1999 3,700,000 3,697,052
Salomon Smith Barney Holdings, Inc., 4.81%................ 07/23/1999 4,000,000 3,988,242
------------
7,685,294
------------
Communications -- 3.0%
Bell Atlantic Network Funding, 4.96%...................... 07/20/1999 3,000,000 2,992,147
------------
Finance -- 40.5%
American Express Credit Corp., 5.06%...................... 07/21/1999 5,000,000 4,985,944
Associates Corp. of North America, 4.80%.................. 07/16/1999 4,000,000 3,992,000
C.I.T. Group Holdings, Inc., 5.00%........................ 08/02/1999 4,500,000 4,480,000
Caterpillar Financial Services, 4.80%..................... 07/19/1999 4,000,000 3,990,400
Commercial Credit Corp., 4.95%............................ 07/02/1999 4,500,000 4,499,381
Household Finance Corp., 5.02%............................ 08/16/1999 5,000,000 4,967,928
IBM Credit Corp., 4.98%................................... 07/20/1999 2,000,000 1,994,743
Met Life Funding Corp., 4.87%............................. 07/14/1999 4,000,000 3,992,966
Norwest Financial, Inc., 4.79%............................ 07/09/1999 4,000,000 3,995,742
Transamerica Financial Corp., 4.85%....................... 07/22/1999 3,500,000 3,490,098
------------
40,389,202
------------
Industrial -- 4.5%
Avnet, Inc., 4.90%........................................ 07/27/1999 4,500,000 4,484,075
------------
Leasing -- 4.0%
International Lease Financial Corp., 4.78%................ 07/06/1999 4,000,000 3,997,345
------------
</TABLE>
F-65
<PAGE> 156
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Money Market Portfolio
Statement of Net Assets, June 30, 1999 -- Concluded
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY
DESCRIPTION AND PERCENTAGE OF PORTFOLIO DATE PAR VALUE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER (CONTINUED)
Utilities -- 9.0%
General Electric Capital Corp., 4.81%..................... 07/30/1999 $2,850,000 $ 2,838,957
General Electric Capital Corp., 5.02%..................... 07/30/1999 1,300,000 1,294,743
Virginia Electric, 4.80%.................................. 07/13/1999 4,800,000 4,792,320
------------
8,926,020
------------
TOTAL COMMERCIAL PAPER (COST $100,423,368)............................ 100,423,368
------------
TOTAL INVESTMENTS -- 100.8% (COST $100,423,368)....................... 100,423,368
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.8%)........................... (774,010)
------------
NET ASSETS -- 100.0%
(Equivalent to $1.00 per share based on 99,649,459 shares of capital
stock outstanding).................................................... $ 99,649,358
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($99,649,358/99,649,459 shares outstanding)............................. $ 1.00
============
</TABLE>
See accompanying notes to financial statements.
F-66
<PAGE> 157
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Bond Portfolio
Statement of Net Assets, June 30, 1999
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY
DESCRIPTION AND PERCENTAGE OF PORTFOLIO DATE PAR VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. TREASURY BONDS -- 13.7%
U.S. Treasury Bonds, 7.25%................................ 05/15/2016 $1,000,000 $ 1,099,307
U.S. Treasury Bonds, 6.00%................................ 02/15/2026 2,500,000 2,436,614
U.S. Treasury Bonds, 5.25%................................ 02/15/2029 1,500,000 1,345,889
-----------
TOTAL U.S. TREASURY BONDS (COST $5,234,079)............. 4,881,810
-----------
U.S. TREASURY NOTES -- 22.0%
U.S. Treasury Notes, 5.25%................................ 05/15/2004 2,000,000 1,966,606
U.S. Treasury Notes, 7.00%................................ 07/15/2006 250,000 264,751
U.S. Treasury Notes, 4.75%................................ 11/15/2008 4,500,000 4,128,359
U.S. Treasury Notes, 5.50%................................ 05/15/2009 1,500,000 1,467,681
-----------
TOTAL U.S. TREASURY NOTES (COST $8,063,576)............. 7,827,397
-----------
AGENCY OBLIGATIONS -- 17.4%
Federal Home Loan Mortgage Corp., 8.00%................... 11/01/2008 274,338 284,197
Federal Home Loan Mortgage Corp., 8.00%................... 08/01/2010 996,262 1,026,150
Federal Home Loan Mortgage Corp., 8.00%................... 03/01/2017 18,996 19,679
Federal National Mortgage Association, 10.5%.............. 11/01/2017 502,811 540,679
Federal National Mortgage Association, 8.50%.............. 09/01/2026 954,440 995,899
Federal National Mortgage Association, 6.00%.............. 04/01/2028 1,073,447 1,008,370
Federal National Mortgage Association, 8.50%.............. 04/01/2028 982,715 1,025,402
Federal National Mortgage Association, 7.00%.............. 09/01/2028 964,017 953,172
Federal National Mortgage Association, 7.00%.............. 11/01/2028 316,255 312,697
-----------
TOTAL AGENCY OBLIGATIONS (COST $6,232,377).............. 6,166,245
-----------
CORPORATE BONDS -- 40.2%
Automobiles -- 2.4%
Ford Motor Co., 6.375%.................................... 02/01/2029 1,000,000 870,000
-----------
Automotive & Equipment -- 0.7%
Lear Corp., 7.96%......................................... 05/15/2005 250,000 241,875
-----------
Chemicals & Allied Products -- 0.7%
Rohm and Haas Co., 7.40%.................................. 07/15/2009 250,000 249,940
-----------
Communications -- 6.8%
AT&T Corp., 6.50%......................................... 03/15/2029 1,000,000 902,500
Comsat Corp. Medium Term Note, 8.05%...................... 12/13/2006 500,000 537,549
Worldcom, Inc., 6.40%..................................... 08/15/2005 1,000,000 976,250
-----------
2,416,299
-----------
Finance -- 9.2%
Ahold Finance USA, Inc., 6.25%............................ 05/01/2009 500,000 471,875
Countrywide Home Loan, 6.85%.............................. 06/15/2004 1,000,000 988,750
ERAC USA Finance Co., 6.625%.............................. 05/15/2006 750,000 721,875
First Union Corp., 6.824%................................. 08/01/2006 600,000 603,000
Socgen Real Estate L.L.C., 7.64%.......................... 12/29/2049 500,000 469,375
-----------
3,254,875
-----------
Foreign Financial Institutions -- 1.3%
Banque Nationale de Paris, 7.738%......................... 12/31/2049 500,000 479,375
-----------
</TABLE>
F-67
<PAGE> 158
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Bond Portfolio
Statement of Net Assets, June 30, 1999 -- Concluded
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY
DESCRIPTION AND PERCENTAGE OF PORTFOLIO DATE PAR VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
Industrial -- 5.6%
CMS Energy, 6.75%......................................... 01/15/2004 $ 250,000 $ 237,812
IMC Global, Inc., 7.40%................................... 11/01/2002 500,000 504,375
Nabors Industrial, 6.80%.................................. 04/15/2004 500,000 493,750
Owens Corning, 7.50%...................................... 05/01/2005 750,000 742,500
-----------
1,978,437
-----------
Oil -- 1.4%
Union Pacific Resources Group, 7.30%...................... 04/15/2009 500,000 482,500
-----------
Tobacco -- 1.0%
Dimon, Inc. Senior Notes, 8.875%.......................... 06/01/2006 400,000 365,500
-----------
Transportation -- 1.6%
Laidlaw, Inc., 7.65%...................................... 05/15/2006 600,000 585,000
-----------
Utilities -- 9.5%
Calenergy Co., Inc. Senior Notes, 7.52%................... 09/15/2008 750,000 752,813
Cleveland Electric Toledo Edison, 7.67%................... 07/01/2004 250,000 254,688
Israel Electric Corp. Ltd., 7.75%......................... 03/01/2009 500,000 493,125
Sprint Capital Corp., 6.875%.............................. 11/15/2028 1,000,000 913,750
US West Capital Funding, 6.25%............................ 07/15/2005 1,000,000 950,000
-----------
3,364,376
TOTAL CORPORATE BONDS (COST $14,835,825)................ 14,288,177
-----------
COMMERCIAL PAPER -- 13.7%
American Express Credit Corp., 5.25%...................... 07/06/1999 1,500,000 1,498,906
CIT Group, Inc., 4.84%.................................... 08/17/1999 1,400,000 1,391,006
FMC Discount Note, 4.79%.................................. 08/02/1999 2,000,000 1,991,343
-----------
TOTAL COMMERCIAL PAPER (COST $4,881,544)................ 4,881,255
-----------
SHORT TERM INVESTMENTS -- 0.9%
Temporary Investment Fund, Inc. -- TempCash............................ 309,089 309,089
-----------
TOTAL SHORT TERM INVESTMENTS (COST $309,089)......................... 309,089
-----------
TOTAL INVESTMENTS -- 107.9% (COST $39,556,490)....................... 38,353,973
LIABILITIES IN EXCESS OF OTHER ASSETS -- (7.9%).......................... (2,814,838)
-----------
NET ASSETS -- 100.0%
(Equivalent to $10.54 per share based on 3,373,095 shares of capital
stock outstanding)................................................... $35,539,135
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($35,539,135/3,373,095 shares outstanding)............................. $ 10.54
===========
</TABLE>
See accompanying notes to financial statements.
F-68
<PAGE> 159
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Statement of Net Assets, June 30, 1999
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- ------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 60.7%
Aerospace & Defense -- 2.2%
Goodrich (B.F.) Co. ...................................... 20,400 $ 867,000
Raytheon Co., Class A..................................... 12,500 860,937
------------
1,727,937
------------
Automobiles -- 1.2%
Ford Motor Co. ........................................... 16,000 903,000
------------
Banks -- 3.3%
Bank of America Corp. .................................... 9,052 663,625
Bank of New York Co., Inc. ............................... 20,900 766,769
Chase Manhattan Corp. .................................... 7,500 649,687
First Union Corp. ........................................ 9,900 465,300
------------
2,545,381
------------
Beverages -- 1.6%
Pepsico, Inc. ............................................ 32,000 1,238,000
------------
Broadcasting & Publishing -- 3.1%
Gannett, Inc. ............................................ 14,000 999,250
McGraw-Hill, Inc. ........................................ 22,800 1,229,775
Time Warner, Inc. ........................................ 1,000 73,500
------------
2,302,525
------------
Building & Building Supplies -- 0.9%
Sherwin Williams Co. ..................................... 25,000 693,750
------------
Business & Consumer Services -- 2.9%
Automatic Data Processing, Inc. .......................... 14,200 624,800
Electronic Data Systems Corp. ............................ 9,000 509,062
Omnicom Group, Inc. ...................................... 13,500 1,080,000
------------
2,213,862
------------
Chemicals & Allied Products -- 1.1%
Du Pont (E.I.) de Nemours & Co. .......................... 12,000 819,750
------------
Communications -- 3.6%
Ameritech Corp. .......................................... 2,800 205,800
AT&T Corp. ............................................... 15,750 879,047
Comcast Corp., Class A.................................... 3,000 107,437
Comcast Corp., Special Class A Non-Voting................. 9,000 345,937
*General Instrument Corp. ................................ 2,900 123,250
GTE Corp. ................................................ 15,000 1,136,250
------------
2,797,721
------------
Computers -- 2.4%
Compaq Computer Corp. .................................... 17,800 421,637
International Business Machines Corp. .................... 11,000 1,421,750
------------
1,843,387
------------
Consumer Products -- 2.6%
Fortune Brands, Inc. ..................................... 20,000 827,500
Kimberly-Clark Corp. ..................................... 20,000 1,140,000
------------
1,967,500
------------
</TABLE>
F-69
<PAGE> 160
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- ------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Containers -- 0.8%
Bemis Co., Inc. .......................................... 15,000 $ 596,250
------------
Drugs & Health Care -- 6.1%
Abbott Laboratories....................................... 18,000 819,000
American Home Products Corp. ............................. 18,000 1,035,000
Becton, Dickinson & Co. .................................. 15,000 450,000
*HCR Manor Care, Inc. .................................... 15,000 362,812
Johnson & Johnson......................................... 10,000 980,000
Pfizer, Inc. ............................................. 4,300 471,925
Schering Plough Corp. .................................... 11,000 583,000
------------
4,701,737
------------
Electrical Equipment -- 1.8%
Emerson Electric Co. ..................................... 13,000 817,375
General Electric Co. ..................................... 4,700 531,100
------------
1,348,475
------------
Energy -- 3.3%
Chevron Corp. ............................................ 5,100 485,456
Exxon Corp. .............................................. 4,900 377,912
FPL Group, Inc. .......................................... 5,800 316,825
Mobil Corp. .............................................. 9,000 891,000
Royal Dutch Petroleum Co. ................................ 8,000 482,000
------------
2,553,193
------------
Entertainment -- 0.3%
*Walt Disney Co. ......................................... 8,000 246,500
------------
Finance -- 3.2%
American Express Co. ..................................... 6,700 871,837
Associates First Capital Corp., Class A................... 7,548 334,471
Citigroup, Inc. .......................................... 15,000 712,500
Fannie Mae................................................ 8,200 560,675
------------
2,479,483
------------
Food & Food Distributors -- 2.9%
Bestfoods, Inc. .......................................... 10,000 495,000
Hershey Foods Corp. ...................................... 9,000 534,375
McCormick & Co., Inc. .................................... 25,100 792,219
Sara Lee Corp. ........................................... 17,000 385,687
------------
2,207,281
------------
Industrial Diversified -- 1.7%
Parker-Hannifin Corp. .................................... 17,700 809,775
Praxair, Inc. ............................................ 10,000 489,375
------------
1,299,150
------------
</TABLE>
F-70
<PAGE> 161
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY SHARES
DESCRIPTION AND PERCENTAGE OF PORTFOLIO DATE OR PAR VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Insurance -- 3.6%
Allstate Corp. ......................................................... 15,000 $ 538,125
American General Corp. ................................................. 11,200 844,200
American International Group, Inc. ..................................... 6,050 708,228
Jefferson-Pilot Corp. .................................................. 10,050 665,184
-----------
2,755,737
-----------
Lodging -- 1.2%
Marriott International, Inc., Class A................................... 25,000 934,375
-----------
Oil Field Equipment & Services -- 1.5%
Halliburton Co. ........................................................ 15,000 678,750
Schlumberger Ltd. ...................................................... 8,000 509,500
-----------
1,188,250
-----------
Paper & Forest Products -- 0.5%
International Paper Co. ................................................ 7,000 353,500
-----------
Railroads -- 1.1%
Union Pacific Corp., Series A........................................... 15,000 874,688
-----------
Real Estate -- 1.1%
Weyerhaeuser Co. ....................................................... 12,500 859,375
-----------
Retail Merchandising -- 2.6%
*Costco Companies, Inc. ................................................ 10,000 800,625
Dayton Hudson Corp. .................................................... 10,000 650,000
May Department Stores Co. .............................................. 14,250 582,469
-----------
2,033,094
-----------
Semiconductors -- 0.8%
Intel Corp. ............................................................ 10,000 595,000
-----------
Tobacco -- 0.4%
Philip Morris Cos., Inc. ............................................... 8,500 341,594
-----------
Utilities -- 2.9%
Duke Power Co. ......................................................... 10,000 543,750
Enron Corp. ............................................................ 16,500 1,348,875
Florida Progress Corp. ................................................. 8,700 359,419
-----------
2,252,044
-----------
TOTAL COMMON STOCK (COST $32,074,863)................................. 46,672,539
-----------
U.S. TREASURY NOTES -- 4.8%
U.S. Treasury Notes, 5.50%................................ 05/15/2009 $3,750,000 3,669,202
-----------
TOTAL U.S. TREASURY NOTES (COST $3,608,438)............. 3,669,202
-----------
U.S. TREASURY BONDS -- 5.5%
U.S. Treasury Bonds, 7.25%................................ 05/15/2016 1,000,000 1,099,307
U.S. Treasury Bonds, 5.25%................................ 02/15/2029 3,500,000 3,140,409
-----------
TOTAL U.S. TREASURY BONDS (COST $4,222,958)............. 4,239,716
-----------
</TABLE>
F-71
<PAGE> 162
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY SHARES
DESCRIPTION AND PERCENTAGE OF PORTFOLIO DATE OR PAR VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AGENCY OBLIGATIONS -- 14.0%
Federal Home Loan Mortgage Corp., 9.00%................... 08/01/2004 $ 719,081 $ 744,698
Federal Home Loan Mortgage Corp., 9.00%................... 12/01/2004 627,836 650,203
Federal Home Loan Mortgage Corp., 9.50%................... 03/01/2006 118,986 124,675
Federal Home Loan Mortgage Corp., 8.00%................... 11/01/2008 274,338 284,197
Federal Home Loan Mortgage Corp., 8.00%................... 06/01/2010 925,678 953,448
Federal National Mortgage Association, 7.00%.............. 03/01/2008 263,472 264,378
Federal National Mortgage Association, 7.75%.............. 03/01/2008 147,891 150,526
Federal National Mortgage Association, 7.75%.............. 05/01/2008 94,607 96,292
Federal National Mortgage Association, 8.00%.............. 12/01/2009 1,396,009 1,437,890
Federal National Mortgage Association, 10.50%............. 03/01/2018 455,505 489,810
Federal National Mortgage Association, 8.50%.............. 09/01/2026 954,440 995,899
Federal National Mortgage Association, 8.50%.............. 10/01/2026 1,197,616 1,249,637
Federal National Mortgage Association, 8.00%.............. 10/01/2027 734,425 753,015
Federal National Mortgage Association, 8.00%.............. 01/01/2028 937,149 960,871
Federal National Mortgage Association, 7.50%.............. 05/01/2028 505,997 511,215
Government National Mortgage Association, 8.00%........... 03/15/2007 197,582 204,806
Government National Mortgage Association, 8.00%........... 08/15/2008 341,795 354,292
Government National Mortgage Association, 6.50%........... 01/15/2026 548,216 527,658
-----------
TOTAL AGENCY OBLIGATIONS (COST $10,795,534)............. 10,753,510
-----------
CORPORATE BONDS -- 11.3%
Automobiles -- 0.6%
Ford Motor Co., 6.375%.................................... 02/01/2029 500,000 435,000
-----------
Automotive & Equipment -- 0.9%
Lear Corp., 7.96%......................................... 05/15/2005 250,000 241,875
TRW, Inc., 7.125%......................................... 06/01/2009 500,000 488,125
-----------
730,000
-----------
Communications -- 1.9%
AT&T Corp., 6.50%......................................... 03/15/2029 500,000 451,250
Comsat Corp. Medium Term Note, 8.05%...................... 12/13/2006 500,000 537,549
Worldcom, Inc., 6.40%..................................... 08/15/2005 500,000 488,125
-----------
1,476,924
-----------
Finance -- 1.4%
ERAC USA Finance Co., 6.625%.............................. 05/15/2006 500,000 481,250
First Union Corp., 6.824%................................. 08/01/2006 600,000 603,000
-----------
1,084,250
-----------
Food & Food Distributors -- 0.6%
Archer Daniels Midland, 6.625%............................ 05/01/2029 500,000 458,750
-----------
Foreign Financial Institutions -- 0.3%
Banque Nationale de Paris, 7.738%......................... 12/31/2049 250,000 239,688
-----------
Industrial -- 2.3%
CMS Energy, 6.75%......................................... 01/15/2004 250,000 237,813
IMC Global, Inc., 7.40%................................... 11/01/2002 500,000 504,375
Nabors Industrial, 6.80%.................................. 04/15/2004 500,000 493,750
Owens Corning, 7.50%...................................... 05/01/2005 500,000 495,000
-----------
1,730,938
-----------
</TABLE>
F-72
<PAGE> 163
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Statement of Net Assets, June 30, 1999 -- Concluded
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY SHARES
DESCRIPTION AND PERCENTAGE OF PORTFOLIO DATE OR PAR VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
Oil -- 0.6%
Union Pacific Resources Group, 7.30%...................... 04/15/2009 $ 500,000 $ 482,500
-----------
Tobacco -- 0.5%
Dimon, Inc. Senior Notes, 8.875%.......................... 06/01/2006 400,000 365,500
-----------
Transportation -- 0.6%
Laidlaw, Inc., 7.65%...................................... 05/15/2006 500,000 487,500
-----------
Utilities -- 1.6%
Cleveland Electric Toledo Edison, 7.67%................... 07/01/2004 250,000 254,688
Israel Electric Corp. Ltd., 7.75%......................... 03/01/2009 500,000 493,125
Sprint Capital Corp., 6.875%.............................. 11/15/2028 500,000 456,875
-----------
1,204,688
-----------
TOTAL CORPORATE BONDS (COST $8,973,454)................. 8,695,738
-----------
COMMERCIAL PAPER -- 11.8%
Commercial Credit Corp., 5.05%............................ 07/02/1999 3,100,000 3,099,565
Merrill Lynch & Co., Inc., 4.81%.......................... 07/23/1999 2,500,000 2,492,533
Prudential Funding Corp., 5.25%........................... 07/06/1999 3,500,000 3,497,448
-----------
TOTAL COMMERCIAL PAPER (COST $9,089,664)................ 9,089,546
-----------
SHORT TERM INVESTMENTS -- 0.4%
Temporary Investment Fund, Inc. -- TempCash............... 320,601 320,601
-----------
TOTAL SHORT TERM INVESTMENTS (COST $320,601)............ 320,601
-----------
TOTAL INVESTMENTS -- 108.5% (COST $69,085,512).......... 83,440,852
LIABILITIES IN EXCESS OF OTHER ASSETS -- (8.5%)............. (6,511,339)
-----------
NET ASSETS -- 100.0%
(Equivalent to $17.30 per share based on 4,446,346 shares
of capital stock outstanding)........................... $76,929,513
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($76,929,513/4,446,346 shares outstanding)................ $ 17.30
===========
</TABLE>
*Non-Income producing
See accompanying notes to financial statements.
F-73
<PAGE> 164
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Growth Portfolio
Statement of Net Assets, June 30, 1999
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 91.8%
Aerospace & Defense -- 0.6%
Goodrich (B.F.) Co. ...................................... 8,000 $ 340,000
-----------
Banks -- 1.4%
Cullen Frost Bankers, Inc. ............................... 10,000 275,625
Mercantile Bankshares Corp. .............................. 8,000 283,000
Wilmington Trust Corp. ................................... 5,000 286,875
-----------
845,500
-----------
Beverages -- 0.9%
*Robert Mondavi Corp., Class A............................. 14,000 509,250
-----------
Broadcasting & Publishing -- 0.5%
Meredith Corp. ........................................... 9,000 311,625
-----------
Building - Maintenance & Service -- 0.4%
American Building Maintenance Industries.................. 7,000 214,813
-----------
Business & Consumer Services -- 14.6%
*Acxiom Corp. ............................................. 45,000 1,122,187
*Administaff, Inc. ........................................ 15,000 240,000
*Affiliated Computer Services, Inc. ....................... 41,000 2,075,625
Analysts International Corp. ............................. 51,700 743,187
*Caci International, Inc. ................................. 34,000 765,000
*Catalina Marketing Corp. ................................. 11,600 1,067,200
*Healthcare Services Group................................. 41,700 406,575
*Sterling Commerce, Inc. .................................. 41,000 1,496,500
Unifirst Corp. ........................................... 45,000 826,875
-----------
8,743,149
-----------
Chemicals & Allied Products -- 4.9%
*Bush Boake Allen, Inc. ................................... 44,000 1,287,000
Cambrex Corp. ............................................ 62,000 1,627,500
-----------
2,914,500
-----------
Communications -- 2.3%
*Dynatech Corp. ........................................... 7,000 24,062
True North Communications................................. 45,000 1,350,000
-----------
1,374,062
-----------
Computers -- 0.3%
*Ciber, Inc. .............................................. 9,000 172,125
-----------
Containers -- 1.6%
Bemis Co., Inc. .......................................... 24,000 954,000
-----------
Cosmetics and Toiletries -- 1.7%
Alberto-Culver Co., Class A............................... 45,000 1,026,562
-----------
</TABLE>
F-74
<PAGE> 165
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Growth Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Drugs & Health Care -- 4.0%
*Barr Laboratories, Inc. .................................. 5,000 $ 199,375
*Covance, Inc. ............................................ 69,000 1,651,687
Jones Pharma, Inc. ....................................... 7,000 275,625
*Monarch Dental Corp. ..................................... 26,000 82,063
*Roberts Pharmaceutical Corp. ............................. 8,000 194,000
-----------
2,402,750
-----------
Electrical Equipment -- 1.4%
*Sawtek, Inc. ............................................. 18,000 825,750
-----------
Electronics -- 8.2%
*C-COR Electronics, Inc. .................................. 9,000 250,875
*C-Cube Microsystems, Inc. ................................ 12,000 380,250
CTS Corp. ................................................ 5,000 350,000
Harman International Industries, Inc. .................... 22,000 968,000
Methode Electronics, Inc., Class A........................ 90,000 2,058,750
*Photronics, Inc. ......................................... 27,000 661,500
*Unitrode Corp. ........................................... 9,000 258,188
-----------
4,927,563
-----------
Energy -- 2.0%
*MidAmerican Energy Holdings Co. .......................... 34,000 1,177,250
-----------
Environmental Control -- 2.9%
Donaldson Co., Inc. ...................................... 45,000 1,102,500
*Tetra Technologies, Inc. ................................. 66,000 606,375
-----------
1,708,875
-----------
Financial -- 4.6%
Duff & Phelps Credit Rating Co. .......................... 23,000 1,538,125
Waddell & Reed Financial, Inc. ........................... 30,000 823,125
Waddell & Reed Financial, Inc., Class B................... 14,000 378,000
-----------
2,739,250
-----------
Food & Food Distributors -- 3.6%
Smart & Final, Inc. ...................................... 24,000 252,000
*Smart & Final Rights...................................... 24,000
*Whole Foods Market, Inc. ................................. 32,000 1,538,000
Worthington Foods, Inc. .................................. 23,000 379,500
-----------
2,169,500
-----------
Health Care Providers -- 0.4%
HealthPlan Services Corp. ................................ 36,000 245,250
-----------
Insurance -- 4.5%
Enhance Financial Services Group, Inc. ................... 32,000 632,000
HCC Insurance Holdings, Inc. ............................. 68,000 1,542,750
Horace Mann Educators Corp. .............................. 20,000 543,750
-----------
2,718,500
-----------
</TABLE>
F-75
<PAGE> 166
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Growth Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Manufacturing -- 4.6%
AptarGroup, Inc. ......................................... 45,000 $ 1,350,000
*Plexus Corp. ............................................. 8,000 241,000
Robbins & Myers, Inc. .................................... 10,000 223,125
Tyco International Ltd. .................................. 10,000 947,500
-----------
2,761,625
-----------
Medical Equipment & Supplies -- 5.7%
Ballard Medical Products.................................. 35,000 815,938
Diagnostic Products Corp. ................................ 5,400 149,175
Hillenbrand Industries, Inc. ............................. 12,000 519,000
Mentor Corp. ............................................. 71,000 1,322,375
Minntech Corp. ........................................... 40,000 590,000
-----------
3,396,488
-----------
Oil & Gas -- 0.4%
*Cal Dive International, Inc. ............................. 9,000 268,875
-----------
Oil Equipment & Services -- 2.1%
CARBO Ceramics, Inc. ..................................... 10,000 304,375
*Oceaneering International, Inc. .......................... 9,000 145,125
*Smith International, Inc. ................................ 18,000 781,875
-----------
1,231,375
-----------
Personal Services -- 0.2%
Strayer Education, Inc. .................................. 4,800 147,300
-----------
Railroads -- 0.4%
*Railtex, Inc. ............................................ 18,000 249,750
-----------
Real Estate -- 2.3%
Chateau Communities, Inc. ................................ 45,000 1,347,188
-----------
</TABLE>
<TABLE>
<S> <C> <C> <C>
Restaurants -- 5.0%
Applebee's International, Inc. ......................................... 24,000 723,000
Ruby Tuesday, Inc. ..................................................... 58,000 1,102,000
*Sbarro, Inc. ........................................................... 44,000 1,190,750
-----------
3,015,750
-----------
Retail Merchandising -- 3.3%
Casey General Stores, Inc. ............................................. 22,000 330,000
Ethan Allen Interiors, Inc. ............................................ 33,000 1,245,750
*The Wet Seal, Inc., Class A............................................. 14,000 400,750
-----------
1,976,500
-----------
Semiconductors -- 3.1%
Dallas Semiconductor Corp. ............................................. 26,400 1,333,200
*Novellus Systems, Inc. ................................................. 8,000 546,000
-----------
1,879,200
-----------
Software -- 1.3%
*Filenet Corp. .......................................................... 66,000 754,875
-----------
</TABLE>
F-76
<PAGE> 167
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Growth Portfolio
Statement of Net Assets, June 30, 1999 -- Concluded
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY SHARES
DESCRIPTION AND PERCENTAGE OF PORTFOLIO DATE OR PAR VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Transportation -- 2.6%
*Eagle USA Airfreight, Inc. ............................................. 6,000 $ 254,625
Robinson (C.H.) Worldwide, Inc. ........................................ 36,000 1,323,000
-----------
1,577,625
-----------
TOTAL COMMON STOCK ($45,845,713)...................................... 54,926,825
-----------
CORPORATE BONDS -- 0.1%
Phoenix Investment Partners Ltd., 6.00%................... 11/01/2015 $ 62,500 71,440
-----------
TOTAL CORPORATE BONDS ($67,141)......................... 71,440
-----------
COMMERCIAL PAPER -- 7.4%
Ford Motor Credit Corp., 5.22%............................ 07/09/1999 2,700,000 2,696,868
General Electric Capital Corp., 5.11%..................... 07/06/1999 1,700,000 1,698,793
-----------
TOTAL COMMERCIAL PAPER ($4,395,661)................................... 4,395,661
-----------
SHORT TERM INVESTMENTS -- 0.4%
Temporary Investment Fund, Inc. -- TempCash............................. 232,633 232,633
-----------
TOTAL SHORT TERM INVESTMENTS ($232,633)............................... 232,633
-----------
TOTAL INVESTMENTS -- 99.7% ($50,541,148).............................. 59,626,559
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.3%............................. 176,017
-----------
NET ASSETS -- 100.0%
(Equivalent to $20.57 per share bases on 2,907,961 shares of capital
stock outstanding).................................................... $59,802,576
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($59,802,576/2,907,961 shares outstanding).............................. $ 20.57
===========
</TABLE>
* Non-income producing
See accompanying notes to financial statements.
F-77
<PAGE> 168
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio
Statement of Net Assets, June 30, 1999
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCK -- 97.7%
Australia -- 2.4%
Australia & New Zealand Bank Group Ltd. .................. 138,916 $ 1,021,491
Boral Ltd. ............................................... 1 2
Goodman Fielder Ltd. ..................................... 385,000 343,270
Pacific Dunlop Ltd. ...................................... 301,642 435,267
-----------
1,800,030
-----------
Austria -- 0.3%
EVN AG.................................................... 1,300 190,104
-----------
Brazil -- 0.2%
Telecomunicacoes Brasileiras SA ADR....................... 1,811 163,330
-----------
Denmark -- 0.8%
Jyske Bank................................................ 6,290 599,108
-----------
Finland -- 0.8%
Kesko Oyj................................................. 42,600 573,313
-----------
France -- 10.6%
*Alstom S.A............................................... 12,315 394,080
Assurances Generales de France............................ 9,680 466,191
Bongrain.................................................. 1,227 463,124
*CNP Assurances........................................... 7,100 193,960
Credit Local de France.................................... 4,400 588,978
Elf Aquitaine ADR......................................... 10,551 776,158
L'Air Liquide............................................. 6,436 1,012,334
Michelin-(CGDE)........................................... 9,653 394,908
Pechiney SA............................................... 11,300 485,711
PSA Peugeot Citroen....................................... 4,900 773,142
Societe Generale.......................................... 5,728 1,009,524
*Thomson CSF.............................................. 22,419 779,144
*Usinor Sacilor........................................... 39,000 581,171
-----------
7,918,425
-----------
Germany -- 11.6%
Bayer AG.................................................. 26,000 1,083,244
Deutsche Bank AG.......................................... 12,777 779,391
Deutsche Lufthansa AG..................................... 28,800 522,135
*GEA AG................................................... 21,200 638,396
Hoechst AG................................................ 13,500 611,181
Hugo Boss AG.............................................. 230 308,349
Km Europa Metal AG........................................ 4,600 239,564
Merck KGAA................................................ 25,789 838,818
Rheinmetall AG............................................ 13,900 249,422
Siemens AG................................................ 14,700 1,133,941
Tarkett AG................................................ 11,000 98,125
Veba AG................................................... 17,200 1,011,055
Viag AG................................................... 1,460 689,588
Volkswagen................................................ 7,600 486,717
-----------
8,689,926
-----------
</TABLE>
F-78
<PAGE> 169
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCK (CONTINUED)
Greece -- 0.7%
Hellenic Telecommunications............................... 46,855 $ 518,333
-----------
Hong Kong -- 2.2%
Henderson Investment Ltd. ................................ 705,000 490,681
Hong Kong Electric........................................ 264,864 853,452
HSBC Holdings Plc......................................... 7,463 272,216
-----------
1,616,349
-----------
Italy -- 3.6%
Banca Popolare di Bergamo Credito Varesino SpA............ 21,400 470,073
Ente Nazionale Idrocarburi SpA............................ 17,000 1,020,000
Istituto Bancario San Paolo di Torino ADR................. 11,756 323,290
*Telecom Italia SpA....................................... 158,300 858,694
-----------
2,672,057
-----------
Japan -- 25.7%
Aiful Corp. .............................................. 3,500 428,550
Canon, Inc. .............................................. 39,000 1,121,318
Credit Saison Co. ........................................ 39,500 825,662
Dai-Tokyo Fire and Marine Insurance....................... 143,000 513,937
Fuji Machine.............................................. 21,000 647,162
Honda Motor Co. Ltd. ..................................... 18,000 762,912
Ito Yokado Co. Ltd. ...................................... 4,000 267,689
Mabuchi Motors............................................ 14,000 1,301,264
Marubeni Corp. ........................................... 270,000 564,377
Matsumotokiyoshi.......................................... 17,500 1,048,240
Mineba Co. Ltd. .......................................... 87,000 970,371
Mitsubishi Heavy Industries Ltd. ......................... 110,000 446,230
Murata Manufacturing Co. Ltd. ............................ 21,000 1,360,255
Namco Ltd. ............................................... 21,500 577,307
Nichiei................................................... 11,100 981,277
Nishimatsu Construction................................... 80,000 458,706
Rinnai Corp. ............................................. 32,000 734,987
Rohm Co. Ltd. ............................................ 8,000 1,243,926
Sankyo Co. Ltd. .......................................... 19,000 908,902
Sankyo Company Ltd. ...................................... 25,000 629,977
Sekisui Chemical Co. ..................................... 75,000 434,994
Sony Corp. ............................................... 12,000 1,293,828
Toyota Motor Corp. ....................................... 21,000 664,512
Yamanouchi Pharmaceuticals................................ 29,000 1,109,338
-----------
19,295,721
-----------
Korea -- 1.1%
*Korea Electric Power ADR................................. 24,200 496,100
*Pohang Iron & Steel Co., Ltd. ADR........................ 8,600 289,175
-----------
785,275
-----------
Mexico -- 0.3%
Telefonos de Mexico SA ADR................................ 3,208 259,246
-----------
</TABLE>
F-79
<PAGE> 170
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCK (CONTINUED)
Netherlands -- 7.5%
ABN Amro Holding.......................................... 43,089 $ 933,162
AKZO N.V. ADR............................................. 15,500 656,812
Buhrmann N.V. ............................................ 28,985 467,799
Hollandsche Beton......................................... 37,826 483,708
Hunter Douglas N.V. ...................................... 26,319 903,827
Koninklijke (Royal) Philips Electronics N.V. ADR.......... 6,328 638,337
KPN ADS................................................... 18,508 888,384
Stork N.V. ............................................... 26,853 612,007
-----------
5,584,036
-----------
New Zealand -- 1.1%
Fletcher Challenge Paper.................................. 427,822 319,663
Telecom Corporation of New Zealand Ltd. .................. 114,600 491,904
-----------
811,567
-----------
Norway -- 0.5%
Orkla..................................................... 26,000 353,394
-----------
Peru -- 0.5%
Telefonica del Peru S.A. ADR.............................. 27,000 408,375
-----------
Portugal -- 1.3%
Banco Pinto & Sotto Mayor SA.............................. 21,140 375,413
Portugal Telecom SA....................................... 13,774 560,375
Portugal Telecom SA Right................................. 13,774 142
-----------
935,930
-----------
Singapore -- 1.5%
Development Bank.......................................... 81,000 989,621
United Overseas Bank, Ltd. ............................... 20,000 139,797
-----------
1,129,418
-----------
Spain -- 4.5%
Argentaria Caja Postal y Banco Hipotecario SA ADR......... 13,000 598,000
Banco Popular Espanol SA.................................. 10,200 733,696
Endesa SA................................................. 25,300 539,564
Gas y Electricidad SA..................................... 8,591 675,546
Repsol ADR................................................ 40,600 824,687
-----------
3,371,493
-----------
Sweden -- 0.8%
Autoliv, Inc. SDR......................................... 18,500 563,590
-----------
Switzerland -- 3.9%
*Barry Callebaut AG -- Registered Shares.................. 4,018 615,136
Forbo Holding AG -- Registered Shares..................... 1,430 568,471
Sulzer AG -- Registered Shares............................ 1,150 699,059
Swisscom AG -- Registered Shares.......................... 400 150,522
United Bank of Switzerland -- Registered Shares........... 2,970 886,459
-----------
2,919,647
-----------
</TABLE>
F-80
<PAGE> 171
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio
Statement of Net Assets, June 30, 1999 -- Concluded
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCK (CONTINUED)
United Kingdom -- 15.8%
Barclays Plc.............................................. 21,137 $ 615,051
BOC Group Plc............................................. 45,060 880,743
British Airways Plc....................................... 33,622 231,999
British Airways Plc ADR................................... 3,000 214,312
Bunzl Plc................................................. 210,146 1,041,784
Laird Group Ordinary...................................... 116,000 482,723
Medeva Plc................................................ 151,752 248,773
Morgan Crucible Co. Plc................................... 160,315 683,561
Powergen UK Plc........................................... 91,000 981,146
Rexam Plc................................................. 185,000 746,531
Rio Tinto Plc............................................. 51,845 869,121
Royal & Sun Alliance Insurance Group...................... 108,868 976,447
Royal Bank of Scotland Group Plc.......................... 36,000 733,164
Safeway Plc............................................... 220,244 882,676
Storehouse Plc............................................ 261,395 562,427
Tomkins Plc............................................... 241,028 1,044,808
Wolseley Plc.............................................. 90,000 677,411
-----------
11,872,677
-----------
TOTAL COMMON AND PREFERRED STOCK (COST $65,666,445)..... 73,031,344
-----------
SHORT TERM INVESTMENTS -- 1.4%
Temporary Investment Fund, Inc. -- TempCash............... 1,041,221 1,041,221
-----------
TOTAL SHORT TERM INVESTMENTS (COST $1,041,221).......... 1,041,221
-----------
TOTAL INVESTMENTS -- 99.1% (COST $66,707,666)........... 74,072,565
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.9%............... 682,836
-----------
NET ASSETS -- 100.0%
(Equivalent to $14.16 per share based on 5,279,355 shares
of capital stock outstanding)........................... $74,755,401
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($74,755,401/5,279,355 shares outstanding)................ $ 14.16
===========
</TABLE>
* Non-income producing
See accompanying notes to financial statements.
F-81
<PAGE> 172
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Sentinel Growth Portfolio
Statement of Net Assets, June 30, 1999
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 97.6%
Aerospace & Defense -- 4.9%
Goodrich (B.F.) Co. ...................................... 14,400 $ 612,000
Raytheon Co., Class A..................................... 2,000 137,750
-----------
749,750
-----------
Banks -- 3.3%
Cullen Frost Bankers, Inc. ............................... 7,400 203,962
Mercantile Bankshares Corp. .............................. 8,600 304,225
-----------
508,187
-----------
Building & Building Supplies -- 0.5%
Sherwin Williams Co. ..................................... 2,500 69,375
-----------
Business & Consumer Services -- 12.2%
*Acxiom Corp. ............................................ 14,500 361,594
*Affiliated Computer Services, Inc. ...................... 7,200 364,500
*Catalina Marketing Corp. ................................ 3,500 322,000
Electronic Data Systems Corp. ............................ 2,000 113,125
*Sodexho Marriott Services, Inc. ......................... 17,500 335,781
Sterling Commerce, Inc. .................................. 9,800 357,700
-----------
1,854,700
-----------
Business Equipment -- 2.6%
*Lexmark International Group, Inc., Class A............... 6,000 396,375
-----------
Chemicals & Allied Products -- 2.5%
*Bush Boake Allen, Inc. .................................. 2,000 58,500
Cambrex Corp. ............................................ 7,300 191,625
Du Pont (E.I.) de Nemours & Co. .......................... 2,000 136,625
-----------
386,750
-----------
Communications -- 2.0%
AT&T Corp. ............................................... 2,100 117,206
True North Communications................................. 6,500 195,000
-----------
312,206
-----------
Consumer Products -- 1.0%
Fortune Brands, Inc. ..................................... 3,500 144,812
-----------
Containers -- 3.8%
Bemis Co., Inc. .......................................... 14,600 580,350
-----------
Drugs & Health Care -- 3.6%
*Covance, Inc. ........................................... 17,800 426,087
HCR Manor Care, Inc. ..................................... 5,000 120,937
-----------
547,024
-----------
Electrical Equipment -- 4.1%
*Sawtek, Inc. ............................................ 13,700 628,487
-----------
</TABLE>
F-82
<PAGE> 173
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Sentinel Growth Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Electronics -- 4.2%
*C-Cube Microsystems, Inc. ............................... 3,500 $ 110,906
CTS Corp. ................................................ 1,500 105,000
Motorola, Inc. ........................................... 3,800 360,050
*Photronics, Inc. ........................................ 2,700 66,150
-----------
642,106
-----------
Energy -- 2.7%
MidAmerican Energy Holdings Co. .......................... 12,100 418,962
-----------
Environmental Control -- 0.6%
Donaldson Co., Inc. ...................................... 4,000 98,000
-----------
Food & Food Distributors -- 4.8%
McCormick & Co., Inc. .................................... 12,600 397,687
*Whole Foods Market, Inc. ................................ 7,000 336,438
-----------
734,125
-----------
Insurance -- 2.1%
Aflac, Inc. .............................................. 4,000 191,500
Enhance Financial Services Group, Inc. ................... 6,600 130,350
-----------
321,850
-----------
Lodging -- 2.3%
Marriott International, Inc., Class A..................... 9,300 347,588
-----------
Medical Equipment & Supplies -- 5.2%
*Biomet, Inc. ............................................ 9,000 357,750
Hillenbrand Industries, Inc. ............................. 10,000 432,500
-----------
790,250
-----------
Oil & Gas -- 1.1%
*Cal Dive International, Inc. ............................ 5,500 164,313
-----------
Oil Equipment & Services -- 4.0%
*Smith International, Inc. ............................... 14,000 608,125
-----------
Restaurants -- 9.0%
*Applebee's International, Inc. .......................... 15,700 472,963
*Outback Steakhouse, Inc. ................................ 14,700 577,894
Ruby Tuesday, Inc. ....................................... 16,800 319,200
-----------
1,370,057
-----------
Retail - Clothing and Apparel -- 4.1%
*Lands' End, Inc. ........................................ 12,800 620,800
-----------
Retail Merchandising -- 5.7%
Ethan Allen Interiors, Inc. .............................. 14,250 537,938
*The Wet Seal, Inc., Class A.............................. 11,500 329,188
-----------
867,126
-----------
Semiconductors -- 3.3%
Dallas Semiconductor Corp. ............................... 8,300 419,150
*Novellus Systems, Inc. .................................. 1,200 81,900
-----------
501,050
-----------
</TABLE>
F-83
<PAGE> 174
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Sentinel Growth Portfolio
Statement of Net Assets, June 30, 1999 -- Concluded
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Software -- 3.2%
*Filenet Corp. ........................................... 11,000 $ 125,813
*Novell, Inc. ............................................ 13,500 357,750
-----------
483,563
-----------
Tobacco -- 0.8%
UST, Inc. ................................................ 4,100 119,925
-----------
Transportation -- 4.0%
*Eagle USA Airfreight, Inc. .............................. 4,500 190,969
Robinson (C.H.) Worldwide, Inc. .......................... 11,400 418,950
-----------
609,919
-----------
TOTAL COMMON STOCK (COST $12,707,895)................... 14,875,775
-----------
SHORT TERM INVESTMENTS -- 2.2%
Temporary Investment Fund, Inc. -- TempCash............... 331,129 331,129
-----------
TOTAL SHORT TERM INVESTMENTS (COST $331,129)............ 331,129
-----------
TOTAL INVESTMENTS -- 99.8% (COST $13,039,024)........... 15,206,904
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.2%............... 32,141
-----------
NET ASSETS -- 100.0%
(Equivalent to $14.84 per share based on 1,027,043 shares
of capital stock outstanding)........................... $15,239,045
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($15,239,045/1,027,043 shares outstanding)................ $ 14.84
===========
</TABLE>
*Non-Income producing
See accompanying notes to financial statements.
F-84
<PAGE> 175
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Growth Portfolio
Statement of Net Assets, June 30, 1999
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 97.6%
Airlines -- 0.3%
*Midwest Express Holdings, Inc. .......................... 200 $ 6,800
Southwest Airlines Co. ................................... 2,450 76,256
-----------
83,056
-----------
Banks -- 2.4%
Fifth Third Bancorp....................................... 800 53,250
First Tennessee National Corp. ........................... 700 26,819
Firstar Corp. ............................................ 3,250 91,000
National Community Bancorp................................ 575 12,578
Northern Trust Corp. ..................................... 800 77,600
U.S. Bancorp.............................................. 10,500 357,000
Zions Bancorp............................................. 200 12,700
-----------
630,947
-----------
Beverages -- 2.8%
Anheuser-Busch Companies, Inc. ........................... 2,000 141,875
Coca Cola Co. ............................................ 9,700 606,250
-----------
748,125
-----------
Broadcasting & Publishing -- 0.7%
Gannett, Inc. ............................................ 300 21,412
McGraw-Hill, Inc. ........................................ 900 48,544
Time Warner, Inc. ........................................ 1,100 80,850
Tribune Co. .............................................. 300 26,137
-----------
176,943
-----------
Building & Building Supplies -- 0.4%
Ecolab, Inc. ............................................. 2,000 87,250
Lowe's Cos., Inc. ........................................ 400 22,675
-----------
109,925
-----------
Business & Consumer Services -- 5.3%
*3Com Corp. .............................................. 14,025 374,292
*America Online, Inc. .................................... 5,190 573,495
Cintas Corp. ............................................. 700 47,031
*Fiserv, Inc. ............................................ 500 15,656
Interpublic Group of Cos., Inc. .......................... 700 60,637
*Lycos, Inc. ............................................. 400 36,750
Omnicom Group, Inc. ...................................... 300 24,000
Viad Corp. ............................................... 200 6,187
*Yahoo!, Inc. ............................................ 1,610 277,322
-----------
1,415,370
-----------
Business Equipment -- 0.2%
*Lexmark International Group, Inc., Class A............... 1,000 66,062
-----------
Cable TV Systems -- 0.1%
*Cablevision Systems Corp. ............................... 500 35,000
-----------
</TABLE>
F-85
<PAGE> 176
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Growth Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Communications -- 8.2%
*ADC Telecommunications, Inc. ............................ 900 $ 41,006
*Adelphia Communications Corp., Class A................... 200 12,725
ALLTEL Corp. ............................................. 900 64,350
Ameritech Corp. .......................................... 1,200 88,200
*Applied Materials, Inc. ................................. 1,260 93,082
*At Home Corp., Series A.................................. 1,740 93,851
AT&T Corp................................................. 3,132 174,805
Comcast Corp., Special Class A Non-Voting................. 3,800 146,062
*Cox Communications, Inc.................................. 1,400 51,537
*MCI WorldCom, Inc........................................ 8,035 693,018
SBC Communications, Inc................................... 3,200 185,600
*Sprint Corp. (PCS Group)................................. 8,775 501,272
*Western Wireless Corp., Class A.......................... 900 24,300
-----------
2,169,808
-----------
Computers -- 9.0%
*Cisco Systems, Inc....................................... 17,780 1,146,810
Compaq Computer Corp...................................... 14,275 338,139
*Comverse Technology, Inc................................. 600 45,300
*EMC Corp................................................. 3,350 184,250
International Business Machines Corp...................... 1,750 226,188
*Intuit, Inc.............................................. 300 27,038
*Seagate Technology, Inc.................................. 12,900 330,562
*SunGard Data Systems, Inc................................ 1,000 34,500
*Veritas Software Corp.................................... 500 47,469
-----------
2,380,256
-----------
Consumer Products -- 0.1%
Clorox Co................................................. 220 23,499
-----------
Cosmetics and Toiletries -- 1.4%
Avon Products, Inc........................................ 6,800 377,400
-----------
</TABLE>
F-86
<PAGE> 177
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Growth Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Drugs & Health Care -- 17.7%
Abbott Laboratories....................................... 12,335 $ 561,243
American Home Products Corp............................... 7,400 425,500
*Amgen Corp............................................... 7,100 432,213
*Biogen, Inc.............................................. 600 38,588
Becton, Dickinson & Co.................................... 13,000 390,000
Bristol-Myers Squibb Co................................... 12,110 852,998
Cardinal Health, Inc...................................... 1,267 81,246
CVS Corp.................................................. 1,000 51,125
Gillette Co............................................... 1,360 55,760
Johnson & Johnson......................................... 1,500 147,000
Lilly (Eli) & Co.......................................... 700 50,138
McKesson HBOC, Inc........................................ 11,675 375,059
*Medimmune, Inc........................................... 50 3,388
Merck & Co., Inc.......................................... 12,310 910,940
Schering Plough Corp...................................... 5,600 296,800
-----------
4,671,998
-----------
Electrical Equipment -- 3.6%
*American Power Conversion Corp........................... 1,400 28,175
General Electric Co....................................... 8,210 927,730
-----------
955,905
-----------
Electronics -- 1.8%
Tandy Corp................................................ 10,000 488,750
-----------
Finance -- 7.8%
American Express Co....................................... 100 13,013
Associates First Capital Corp., Class A................... 1,200 53,175
*Berkshire Hathaway, Inc., Class B........................ 85 191,165
Capital One Financial Corp................................ 1,875 104,414
Citigroup, Inc............................................ 4,575 217,313
Franklin Resources, Inc................................... 10,350 420,469
MBNA Corp................................................. 13,900 425,688
Paychex, Inc.............................................. 3,525 112,359
Providian Financial Corp.................................. 5,625 525,938
-----------
2,063,534
-----------
Finance - Investment & Other -- 2.0%
Standard & Poor's Depositary Receipts..................... 3,950 540,965
-----------
Food & Food Distributors -- 0.3%
*Kroger Co................................................ 2,000 55,875
Quaker Oats Co............................................ 100 6,638
Sysco Corp................................................ 700 20,869
-----------
83,382
-----------
</TABLE>
F-87
<PAGE> 178
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Growth Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Industrial -- 0.3%
Danaher Corp.............................................. 1,300 $ 75,563
-----------
Insurance -- 1.9%
American International Group, Inc......................... 1,100 128,769
Conseco, Inc.............................................. 12,500 380,469
-----------
509,238
-----------
Leisure & Amusements -- 1.7%
Harley-Davidson, Inc...................................... 1,200 65,250
Mattel, Inc............................................... 14,375 380,039
-----------
445,289
-----------
Medical Instruments -- 1.9%
*Boston Scientific Corp................................... 9,200 404,225
*Guidant Corp............................................. 1,300 66,869
Stryker Corp.............................................. 500 30,063
-----------
501,157
-----------
Office Equipment & Supplies -- 2.3%
Pitney Bowes, Inc......................................... 2,400 154,200
*Staples, Inc............................................. 3,500 108,281
Xerox Corp................................................ 6,100 360,281
-----------
622,762
-----------
Restaurants -- 1.6%
McDonald's Corp........................................... 10,000 413,125
-----------
Retail - Clothing and Apparel -- 2.0%
Gap, Inc.................................................. 10,575 532,715
-----------
Retail Food Chains -- 0.4%
*Safeway, Inc............................................. 2,300 113,850
-----------
Retail Merchandising -- 9.0%
*Abercrombie & Fitch Co., Class A......................... 900 43,200
*Amazon.com, Inc.......................................... 625 78,203
*Bed, Bath & Beyond, Inc.................................. 11,200 431,200
*BJ's Wholesale Club, Inc................................. 1,300 39,081
*Costco Companies, Inc.................................... 1,775 142,111
Dollar General Corp....................................... 13,250 384,250
*Dollar Tree Stores, Inc.................................. 900 39,600
Family Dollar Stores, Inc................................. 600 14,400
Home Depot, Inc........................................... 5,600 360,850
*Kohls Corp............................................... 700 54,031
TJX Companies, Inc........................................ 1,200 39,975
Wal-Mart Stores, Inc...................................... 15,900 767,175
-----------
2,394,076
-----------
Semiconductors -- 3.5%
Intel Corp................................................ 15,700 934,150
-----------
</TABLE>
F-88
<PAGE> 179
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Growth Portfolio
Schedule of Net Assets, June 30, 1999 -- Concluded
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Software -- 8.9%
Computer Associates International, Inc.................... 7,400 $ 407,000
*DoubleClick, Inc......................................... 340 31,195
*Microsoft Corp........................................... 11,400 1,028,138
*Oracle Corp.............................................. 14,800 549,450
*Parametric Technology Corp............................... 25,600 355,200
-----------
2,370,983
-----------
TOTAL COMMON STOCK (COST $22,371,394)................... 25,933,833
-----------
SHORT TERM INVESTMENTS -- 3.0%
Temporary Investment Fund, Inc. -- TempCash............. 785,252 785,252
-----------
TOTAL SHORT TERM INVESTMENTS ($785,252)................. 785,252
-----------
TOTAL INVESTMENTS -- 100.6% (COST $23,156,646).......... 26,719,085
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.6%)............. (172,503)
-----------
NET ASSETS -- 100.0%
(Equivalent to $13.26 per share based on 2,002,107 shares
of capital stock outstanding)........................... $26,546,582
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($26,546,582/2,002,107 shares outstanding)................ $ 13.26
===========
</TABLE>
* Non-Income producing
See accompanying notes to financial statements.
F-89
<PAGE> 180
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Value Portfolio
Statement of Net Assets, June 30, 1999
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 95.9%
Aerospace & Defense -- 2.2%
Allied Signal, Inc. ...................................... 1,600 $ 100,800
Boeing Co. ............................................... 1,600 70,700
Lockheed Martin Corp. .................................... 5,300 197,425
United Technologies Corp. ................................ 1,923 137,855
-----------
506,780
-----------
Airlines -- 1.4%
*Alaska Air Group, Inc. .................................. 900 37,575
*AMR Corp. ............................................... 1,700 116,025
Delta Air Lines, Inc. .................................... 3,200 184,400
-----------
338,000
-----------
Apparel -- 0.3%
Nike, Inc., Class B....................................... 1,300 82,306
-----------
Appliances -- 1.1%
Black & Decker Corp. ..................................... 1,300 82,062
Maytag Corp. ............................................. 500 34,844
Whirlpool Corp. .......................................... 2,000 148,000
-----------
264,906
-----------
Automobiles -- 2.1%
Ford Motor Co. ........................................... 6,400 361,200
General Motors Corp. ..................................... 1,900 125,400
-----------
486,600
-----------
Automotive & Equipment -- 0.6%
Dana Corp. ............................................... 2,000 92,125
*Lear Corp. .............................................. 1,200 59,700
-----------
151,825
-----------
Banks -- 9.1%
Banc One Corp. ........................................... 3,430 204,299
Bank of America Corp. .................................... 8,123 595,518
Chase Manhattan Corp. .................................... 7,200 623,700
Firstar Corp. ............................................ 3,500 98,000
Morgan (J.P.) & Co., Inc. ................................ 600 84,300
National City Corp. ...................................... 700 45,850
PNC Bank Corp. ........................................... 3,700 213,212
Southtrust Corp. ......................................... 2,400 92,100
Wells Fargo Co. .......................................... 4,200 179,550
-----------
2,136,529
-----------
Beverages -- 0.6%
Anheuser-Busch Companies, Inc. ........................... 700 49,656
Pepsico, Inc. ............................................ 2,200 85,112
-----------
134,768
-----------
</TABLE>
F-90
<PAGE> 181
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Value Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Broadcasting & Publishing -- 3.7%
*Fox Entertainment Group, Inc. ........................... 1,900 $ 51,181
Gannett, Inc. ............................................ 1,400 99,925
Knight-Ridder, Inc. ...................................... 1,400 76,912
McGraw-Hill, Inc. ........................................ 1,500 80,906
*MediaOne Group, Inc. .................................... 2,000 148,750
Time Warner, Inc. ........................................ 1,000 73,500
Tribune Co. .............................................. 3,300 287,512
*Viacom, Inc., Class B.................................... 1,400 61,600
-----------
880,286
-----------
Building & Building Supplies -- 0.7%
Armstrong World Industries, Inc. ......................... 600 34,687
Lafarge Corp. ............................................ 1,400 49,612
Masco Corp. .............................................. 2,700 77,963
-----------
162,262
-----------
Business & Consumer Services -- 2.0%
Dun & Bradstreet Corp. ................................... 2,300 81,506
Electronic Data Systems Corp. ............................ 5,200 294,125
XL Capital Ltd. .......................................... 1,800 101,700
-----------
477,331
-----------
Business Equipment -- 0.3%
*Lexmark International Group, Inc., Class A............... 1,000 66,062
-----------
Cable TV Systems -- 0.5%
Unicom Corp. ............................................. 3,300 127,256
-----------
Chemicals & Allied Products -- 2.2%
Dow Chemical Co. ......................................... 2,300 291,812
Du Pont (E.I.) de Nemours & Co. .......................... 2,700 184,443
Union Carbide Corp. ...................................... 900 43,875
-----------
520,130
-----------
Communications -- 11.3%
ALLTEL Corp. ............................................. 1,000 71,500
Ameritech Corp. .......................................... 4,400 323,400
AT&T Corp. ............................................... 7,850 438,128
Bell Atlantic Corp. ...................................... 9,000 588,374
BellSouth Corp. .......................................... 5,700 267,187
Lucent Technologies, Inc. ................................ 1,800 121,387
*MCI WorldCom, Inc. ...................................... 6,400 552,000
SBC Communications, Inc. ................................. 5,400 313,200
-----------
2,675,176
-----------
Computers -- 3.3%
*Compuware Corp. ......................................... 1,400 44,537
*EMC Corp. ............................................... 1,200 66,000
International Business Machines Corp. .................... 4,300 555,775
*Siebel Systems, Inc. .................................... 1,800 119,475
-----------
785,787
-----------
</TABLE>
F-91
<PAGE> 182
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Value Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Consumer Products -- 0.5%
Fortune Brands, Inc. ..................................... 2,800 $ 115,850
-----------
Drugs & Health Care -- 2.6%
Abbott Laboratories....................................... 1,800 81,900
Baxter International, Inc. ............................... 2,800 169,750
Bristol-Myers Squibb Co. ................................. 2,200 154,962
McKesson HBOC, Inc. ...................................... 2,800 89,950
Schering Plough Corp. .................................... 2,100 111,300
-----------
607,862
-----------
Electric Utilities -- 0.2%
Texas Utilities Co. ...................................... 1,200 49,500
-----------
Electronics -- 0.5%
*LAM Research Corp. ...................................... 2,400 112,050
-----------
Energy -- 6.5%
Ashland, Inc. ............................................ 600 24,075
Chevron Corp. ............................................ 1,100 104,706
Consolidated Edison, Inc. ................................ 4,100 185,525
Energy East Corp. ........................................ 2,400 62,400
Exxon Corp. .............................................. 7,700 593,863
FPL Group, Inc. .......................................... 1,700 92,862
Mobil Corp. .............................................. 2,800 277,200
PECO Energy Co. .......................................... 2,200 92,125
Southern Co. ............................................. 3,400 90,100
-----------
1,522,856
-----------
Finance -- 11.1%
American Express Co. ..................................... 600 78,075
Associates First Capital Corp., Class A................... 1,300 57,606
Citigroup, Inc. .......................................... 6,500 308,750
Comerica, Inc. ........................................... 2,600 154,538
Edwards (A.G.), Inc. ..................................... 2,000 64,500
Fannie Mae................................................ 4,500 307,688
Financial Security Assurance Holdings Ltd. ............... 900 46,800
First Data Corp. ......................................... 1,800 88,088
Fleet Financial Group, Inc. .............................. 8,500 377,187
Golden West Financial Corp. .............................. 600 58,800
H & R Block, Inc. ........................................ 1,200 60,000
Hartford Financial Services, Inc. ........................ 3,300 192,431
MBNA Corp. ............................................... 1,900 58,188
Morgan Stanley Dean Witter & Co. ......................... 4,000 410,000
SLM Holding Corp. ........................................ 1,700 77,881
Transamerica Corp. ....................................... 1,100 82,500
Washington Mutual, Inc. .................................. 5,566 196,897
-----------
2,619,929
-----------
</TABLE>
F-92
<PAGE> 183
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Value Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Food & Food Distributors -- 2.1%
ConAgra, Inc. ............................................ 3,200 $ 85,200
Heinz (H.J.) Co. ......................................... 1,700 85,213
IBP, Inc. ................................................ 900 21,375
Nabisco Holdings Corp., Class A........................... 1,900 82,175
Quaker Oats Co. .......................................... 700 46,463
Ralston Purina Group...................................... 4,200 127,838
Sara Lee Corp. ........................................... 1,700 38,569
-----------
486,833
-----------
Healthcare Services -- 1.2%
Columbia/HCA Healthcare Corp. ............................ 12,200 278,313
-----------
Hotel/Restaurants -- 0.7%
Host Marriott Corp. ...................................... 5,687 67,533
*Promus Hotel Corp. ...................................... 2,800 86,800
-----------
154,333
-----------
Housewares -- 0.2%
Premark International, Inc. .............................. 1,200 45,000
-----------
Insurance -- 4.3%
Aetna, Inc. .............................................. 1,800 160,988
Allstate Corp. ........................................... 11,000 394,626
Ambac Financial Group, Inc. .............................. 2,200 125,675
Conseco, Inc. ............................................ 4,900 149,144
Jefferson-Pilot Corp. .................................... 700 46,331
Lincoln National Corp. ................................... 600 31,388
Marsh & McLennan Cos., Inc. .............................. 600 45,300
Old Republic International Corp. ......................... 2,100 36,356
Partner Re Ltd. .......................................... 800 29,900
-----------
1,019,708
-----------
Leisure & Amusements -- 0.6%
Brunswick Corp. .......................................... 1,600 44,600
Mattel, Inc. ............................................. 3,400 89,888
-----------
134,488
-----------
Machinery & Heavy Equipment -- 1.3%
Caterpillar, Inc. ........................................ 5,200 312,000
-----------
Manufacturing -- 2.8%
Alcoa, Inc. .............................................. 1,600 99,000
Deere & Co. .............................................. 5,500 217,938
Eaton Corp. .............................................. 700 64,400
Hasbro, Inc. ............................................. 1,650 46,097
Textron, Inc. ............................................ 1,300 107,006
Tyco International Ltd. .................................. 900 85,275
U.S. Industries, Inc. .................................... 2,100 35,700
-----------
655,416
-----------
</TABLE>
F-93
<PAGE> 184
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Value Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Manufacturing Equipment -- 1.0%
Illinois Tool Works, Inc. ................................ 600 $ 49,200
Ingersoll Rand Co. ....................................... 2,900 187,413
-----------
236,613
-----------
Materials & Processing -- 0.4%
Vulcan Materials Co. ..................................... 1,800 86,850
-----------
Metals -- Iron & Steel -- 0.9%
AK Steel Holding Corp. ................................... 2,100 47,250
Alcan Aluminium, Ltd. .................................... 1,300 41,519
Reynolds Metals Co. ...................................... 2,000 118,000
-----------
206,769
-----------
Office Equipment & Supplies -- .7%
Xerox Corp. .............................................. 3,000 177,188
-----------
Oil & Gas -- 4.2%
Amerada Hess Corp. ....................................... 3,300 196,350
Coastal Corp. ............................................ 6,000 240,000
Conoco, Inc. ............................................. 6,400 178,400
Enron Oil & Gas........................................... 2,300 46,575
Texaco, Inc. ............................................. 2,500 156,250
Unocal Corp. ............................................. 3,600 142,650
USX-Marathon Group........................................ 1,300 42,331
-----------
1,002,556
-----------
Oil Equipment & Services -- 0.3%
Diamond Offshore Drilling, Inc. .......................... 700 19,863
National Fuel Gas Co. .................................... 900 43,650
-----------
63,513
-----------
Paper & Forest Products -- 2.8%
Boise Cascade Corp. ...................................... 900 38,700
Champion International Corp. ............................. 1,300 62,238
Fort James Corp. ......................................... 5,900 223,463
International Paper Co. .................................. 5,100 257,550
Louisiana-Pacific Corp. .................................. 2,500 59,375
Temple Inland, Inc. ...................................... 400 27,300
-----------
668,626
-----------
Photography Equipment & Supplies -- 0.9%
Eastman Kodak Co. ........................................ 3,100 210,025
-----------
Railroads -- 1.1%
Union Pacific Corp., Series A............................. 4,400 256,576
-----------
Real Estate -- 0.2%
*Catellus Development Corp. .............................. 2,800 43,400
-----------
Retail -- Clothing and Apparel -- 0.6%
Limited, Inc. ............................................ 3,100 140,663
-----------
</TABLE>
F-94
<PAGE> 185
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Large Cap Value Portfolio
Statement of Net Assets, June 30, 1999 -- Concluded
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Retail Food Chains -- 0.7%
Albertson's, Inc. ........................................ 1,890 $ 97,453
*Safeway, Inc. ........................................... 1,600 79,200
-----------
176,653
-----------
Retail Merchandising -- 1.9%
*Abercrombie & Fitch Co., Class A......................... 1,200 57,600
*Kmart Corp. ............................................. 9,530 156,649
Sears, Roebuck & Co. ..................................... 3,400 151,513
TJX Companies, Inc. ...................................... 2,800 93,275
-----------
459,037
-----------
Semiconductors -- 1.5%
Intel Corp. .............................................. 5,864 348,908
-----------
Software -- 0.3%
*Oracle Corp. ............................................ 1,700 63,113
-----------
Tobacco -- 0.4%
Philip Morris Cos., Inc. ................................. 1,800 72,337
UST, Inc. ................................................ 700 20,475
-----------
92,812
-----------
Utilities -- 2.0%
Baltimore Gas & Electric Co. ............................. 2,600 77,025
Consolidated Natural Gas Co. ............................. 600 36,450
DTE Energy Co. ........................................... 1,500 60,000
El Paso Energy Corp. ..................................... 2,300 80,931
Enron Corp. .............................................. 800 65,400
Pinnacle West Capital Corp. .............................. 1,800 72,450
Public Service Enterprise Group, Inc. .................... 2,000 81,750
-----------
474,006
-----------
TOTAL COMMON STOCK (COST $20,734,348).............. 22,617,450
-----------
SHORT TERM INVESTMENTS -- 4.0%
Temporary Investment Fund, Inc. -- TempCash............... 935,845 935,845
-----------
TOTAL SHORT TERM INVESTMENTS (COST $935,845)............ 935,845
-----------
TOTAL INVESTMENTS -- 99.9% (COST $21,670,193)........... 23,553,295
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.1%............... 11,931
-----------
NET ASSETS -- 100.0%
(Equivalent to $10.72 per share based on 2,198,751 shares
of capital stock outstanding)............................. $23,565,226
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($23,565,226/2,198,751 shares outstanding)................ $ 10.72
===========
</TABLE>
* Non-Income producing
See accompanying notes to financial statements.
F-95
<PAGE> 186
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Growth Portfolio
Statement of Net Assets, June 30, 1999
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 93.0%
Airlines -- 2.5%
*Atlantic Coast Airlines, Inc. ........................... 4,900 $ 93,100
*Mesa Airlines, Inc. ..................................... 13,800 103,716
*Ryanair Holdings Plc..................................... 5,100 270,300
-----------
467,116
-----------
Apparel -- 0.3%
*Skechers USA, Inc., Class A.............................. 5,300 55,650
-----------
Automotive & Equipment -- 0.9%
*Excelsior-Henderson Motorcycle........................... 4,700 28,200
Exide Corp................................................ 10,100 148,975
-----------
177,175
-----------
Banks -- 2.3%
*First Republic Bank, Inc. ............................... 10,600 306,737
Westamerica Bancorporation................................ 3,800 138,700
-----------
445,437
-----------
Broadcasting & Publishing -- 8.1%
*Ascent Entertainment Group............................... 19,400 274,025
*Citadel Communications Corp. ............................ 3,600 130,275
*Emmis Broadcasting Corp., Class A........................ 2,300 113,562
*Metro Networks, Inc. .................................... 3,200 170,800
Scandinavian Broadcasting S.A. ........................... 5,500 177,375
*TCI Music, Inc., Class A................................. 10,200 360,825
*USA Networks, Inc........................................ 8,100 325,012
-----------
1,551,874
-----------
Business & Consumer Services -- 7.8%
*AdForce, Inc. ........................................... 1,400 32,900
*AHL Services, Inc. ...................................... 4,500 112,219
*CBT Group Plc ADR........................................ 5,100 84,150
*Charles River Associates, Inc. .......................... 4,200 105,262
*Corporate Executive Board Co. ........................... 3,500 124,469
*Education Management Corp. .............................. 7,000 145,250
*F.Y.I., Inc. ............................................ 2,500 78,437
*First Consulting Group................................... 4,200 44,625
*Flycast Communications Corp. ............................ 2,000 38,250
*Getty Images, Inc. ...................................... 1,500 28,312
IT Group, Inc. ........................................... 13,800 221,662
*MAXIMUS, Inc. ........................................... 3,600 103,500
*Sportsline USA, Inc. .................................... 2,400 86,100
*TMP Worldwide, Inc. ..................................... 4,200 266,700
-----------
1,471,836
-----------
Cable TV Systems -- 1.7%
*Cablevision Systems Corp. ............................... 4,600 322,000
-----------
</TABLE>
F-96
<PAGE> 187
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Growth Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Chemicals & Allied Products -- 1.0%
Geon Co. ................................................. 6,200 $ 199,950
-----------
Communications -- 7.7%
*Adelphia Communications Corp., Class A................... 5,200 330,850
Gray Communications....................................... 1,050 14,831
*GST Telecommunications, Inc. ............................ 4,400 58,025
*Harmonic Lightwaves, Inc. ............................... 4,300 246,981
*ICG Communications, Inc. ................................ 10,500 224,438
*Pinnacle Holdings, Inc. ................................. 7,200 176,400
*Voicestream Wireless Corp. .............................. 8,000 227,500
*Western Wireless Corp., Class A.......................... 7,200 194,400
-----------
1,473,425
-----------
Computers -- 8.3%
*Applied Micro Circuits Corp. ............................ 1,900 156,275
*Computer Network Technology Corp. ....................... 7,400 160,025
*Cybex Computer Products Corp. ........................... 2,900 80,837
*Digital Island........................................... 4,700 84,306
*Digital River, Inc. ..................................... 2,200 73,150
*Emulex Corp. ............................................ 700 77,831
*Excalibur Technologies Corp. ............................ 5,400 76,950
*Globespan, Inc. ......................................... 1,400 55,650
*Infospace.Com, Inc. ..................................... 1,600 75,200
*Mercury Interactive Corp. ............................... 3,200 113,200
*QLogic Corp. ............................................ 1,200 158,400
*SBS Technologies......................................... 1,400 28,350
*Siebel Systems, Inc. .................................... 5,000 331,875
*WorldGate Communications, Inc. .......................... 1,700 87,125
-----------
1,559,174
-----------
Drugs & Health Care -- 7.3%
Bindley Western Industries, Inc. ......................... 13,200 304,425
*ChiRex, Inc. ............................................ 2,300 73,887
*Coulter Pharmaceutical, Inc. ............................ 3,600 81,225
*Cytyc Corp. ............................................. 3,200 62,400
*Emisphere Technologies, Inc. ............................ 2,500 17,656
*IMPATH, Inc. ............................................ 1,200 32,400
*Inhale Therapeutic Systems............................... 3,100 73,819
*Ligand Pharmaceuticals, Inc., Class B.................... 3,400 37,825
*MedQuist, Inc. .......................................... 2,200 96,250
*Novoste Corp. ........................................... 1,200 25,200
*Oxford Health Plans, Inc. ............................... 15,500 241,219
*Pharmaceutical Product Development, Inc. ................ 2,300 62,962
*Priority Healthcare Corp., Class B....................... 6,774 233,703
*Vical, Inc. ............................................. 3,000 36,375
-----------
1,379,346
-----------
</TABLE>
F-97
<PAGE> 188
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Growth Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Electrical Equipment -- 1.5%
*Micrel, Inc. ............................................ 1,600 $ 118,400
*Quanta Services, Inc. ................................... 3,900 171,600
-----------
290,000
-----------
Electronic Instruments -- 1.3%
*ATMI, Inc. .............................................. 5,400 160,650
*Veeco Instruments, Inc. ................................. 2,500 85,000
-----------
245,650
-----------
Electronics -- 10.2%
*Cree Research, Inc. ..................................... 1,200 92,325
*LAM Research Corp. ...................................... 6,100 284,794
*Photronics, Inc. ........................................ 4,500 110,250
*PLX Technology, Inc. .................................... 12,800 606,400
*SDL, Inc. ............................................... 5,900 301,269
*Semtech Corp. ........................................... 3,700 192,862
*Triquint Semiconductor, Inc. ............................ 3,600 204,525
*Unitrode Corp. .......................................... 5,500 157,781
-----------
1,950,206
-----------
Entertainment -- 0.5%
*Cinar Films, Inc. ....................................... 4,200 102,900
-----------
Finance -- 4.0%
*Golden State Bancorp, Inc. .............................. 7,600 167,200
Investment Technology Group, Inc. ........................ 3,400 110,075
Jefferies Group, Inc. .................................... 3,400 102,000
*Nextcard, Inc. .......................................... 7,300 247,744
*NCO Group, Inc. ......................................... 1,600 60,800
*Net.B@nk, Inc. .......................................... 1,800 68,400
-----------
756,219
-----------
Finance - Investment & Other -- 1.3%
*Nasdaq-100 Shares........................................ 1,000 115,063
S & P 400 Mid-Cap Depositary Receipts..................... 1,800 141,075
-----------
256,138
-----------
Food & Food Distributors -- 0.5%
*United Natural Foods, Inc. .............................. 4,200 103,950
-----------
Hotel/Restaurants -- 1.5%
*Mandalay Resort Group.................................... 13,400 283,075
-----------
Industrial & Commercial Services -- 0.1%
*Access Worldwide Communications, Inc. ................... 3,800 23,750
-----------
Insurance -- 0.5%
*FPIC Insurance Group, Inc. .............................. 2,000 97,000
-----------
Leasing -- 0.2%
*Indigo Aviation AB ADR................................... 7,000 46,375
-----------
</TABLE>
F-98
<PAGE> 189
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Growth Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Leisure & Amusements -- 3.9%
*Bally Total Fitness Holding Corp. ....................... 11,300 $ 320,638
*Hibbett Sporting Goods, Inc. ............................ 2,600 57,200
*Racing Champions Corp. .................................. 3,000 21,375
*Preview Travel, Inc. .................................... 5,900 129,431
*Steiner Leisure Ltd. .................................... 4,300 130,344
*Tweeter Home Entertainment Group, Inc. .................. 2,300 90,275
-----------
749,263
-----------
Manufacturing -- 2.1%
Kennametal, Inc. ......................................... 8,200 254,200
*MotivePower Industries, Inc. ............................ 4,650 82,538
*Westinghouse Air Brake, Inc. ............................ 2,300 59,656
-----------
396,394
-----------
Medical & Medical Services -- 0.7%
*Closure Medical Corp. ................................... 4,300 129,000
-----------
Metals - Iron & Steel -- 0.2%
*Mueller Industries, Inc. ................................ 1,300 44,119
-----------
Oil & Gas -- 0.3%
*Cal Dive International, Inc. ............................ 1,900 56,763
-----------
Oil Equipment & Services -- 5.8%
*BJ Services Co. ......................................... 10,700 314,981
*Core Laboratories N.V. .................................. 1,700 23,694
*Marine Drilling.......................................... 18,700 255,956
*Rowan Cos., Inc. ........................................ 16,700 307,906
*Smith International, Inc. ............................... 4,800 208,500
-----------
1,111,037
-----------
Real Estate -- 0.5%
*Realty Information Group, Inc. .......................... 2,200 95,700
-----------
Restaurants -- 1.0%
Applebee's International, Inc. ........................... 4,000 120,500
*Buca, Inc. .............................................. 4,000 66,000
-----------
186,500
-----------
Retail - Clothing and Apparel -- 1.2%
*Buckle, Inc. ............................................ 3,772 108,445
*The Finish Line, Inc., Class A........................... 10,500 118,125
-----------
226,570
-----------
Retail Food Chains -- 0.5%
TCBY Enterprises, Inc. ................................... 14,400 87,300
-----------
Retail Merchandising -- 1.2%
*Bebe Stores, Inc. ....................................... 2,800 95,200
*The Wet Seal, Inc., Class A.............................. 4,500 128,813
-----------
224,013
-----------
</TABLE>
F-99
<PAGE> 190
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Growth Portfolio
Statement of Net Assets, June 30, 1999 -- Concluded
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Security Services -- 0.5%
*Kroll-O'Gara Co. ........................................ 4,200 $ 92,663
-----------
Software -- 2.8%
Abovenet Communications, Inc. ............................ 3,200 129,200
*Concentric Networking Corp. ............................. 2,200 87,450
*Landmark Systems Corp. .................................. 2,800 29,050
*Pervasive Software, Inc. ................................ 5,800 144,275
*Security First Technologies.............................. 1,900 85,738
*TSI International Software Ltd. ......................... 2,000 56,750
-----------
532,463
-----------
Technology -- 0.1%
Diamond Technology Partners, Inc. ........................ 500 11,188
-----------
Transportation -- 2.3%
*Atlas Air, Inc. ......................................... 6,900 222,525
*Eagle USA Airfreight, Inc. .............................. 3,400 144,288
*Forward Air Corp. ....................................... 2,700 75,938
-----------
442,751
-----------
Waste Management -- 0.4%
*Waste Connections, Inc. ................................. 2,300 70,150
-----------
TOTAL COMMON STOCK (COST $14,782,456)................... 17,714,120
-----------
SHORT TERM INVESTMENTS -- 9.3%
Temporary Investment Fund, Inc. -- TempCash............... 1,775,452 1,775,452
-----------
TOTAL SHORT TERM INVESTMENTS (COST $1,775,452).......... 1,775,452
-----------
TOTAL INVESTMENTS -- 102.3% (COST $16,557,908).......... 19,489,572
LIABILITIES IN EXCESS OF OTHER ASSETS -- (2.3%)............. (443,728)
-----------
NET ASSETS -- 100.0%
(Equivalent to $12.40 per share based on 1,536,063 shares
of capital stock outstanding)........................... $19,045,844
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($19,045,844/1,536,063 shares outstanding)................ $ 12.40
===========
</TABLE>
* Non-Income producing
See accompanying notes to financial statements.
F-100
<PAGE> 191
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Value Portfolio
Statement of Net Assets, June 30, 1999
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 96.1%
Aerospace & Defense -- 3.2%
AAR Corp. ................................................ 1,400 $ 31,762
*Alliant Techsystems, Inc. ............................... 1,100 95,150
Ducommun, Inc. ........................................... 2,200 26,262
Kellstrom Industries, Inc. ............................... 3,500 63,875
Primex Technologies, Inc. ................................ 600 12,937
*Remec, Inc. ............................................. 1,500 24,187
Thiokol Corp. ............................................ 2,000 90,375
-----------
344,548
-----------
Airlines -- 1.0%
*Alaska Air Group, Inc. .................................. 800 33,400
*America West Airlines, Inc. ............................. 4,150 78,331
-----------
111,731
-----------
Auto Manufacturers -- 0.3%
Winnebago Industries, Inc. ............................... 1,600 36,000
-----------
Automobiles -- 1.1%
*Dura Automotive Systems, Inc. ........................... 1,800 59,850
Terex Corp. .............................................. 1,900 57,831
-----------
117,681
-----------
Automotive Equipment -- 1.3%
Arvin Industries, Inc. ................................... 1,100 41,662
*Delco Remy International, Inc. .......................... 410 4,510
*Tower Automotive, Inc. .................................. 3,900 99,206
-----------
145,378
-----------
Banks -- 1.9%
Andover Bancorp, Inc. .................................... 800 25,100
Chittenden Corp. ......................................... 1,807 56,469
Colonial BancGroup, Inc. ................................. 2,000 27,875
Dime Community Bancorp, Inc. ............................. 2,150 49,987
Riggs National Corp. ..................................... 2,000 41,125
-----------
200,556
-----------
Beverages -- 0.9%
*Canandaigua Brands, Inc., Class A........................ 1,300 68,169
Coors (Adolph) Co., Class B............................... 600 29,700
-----------
97,869
-----------
Broadcasting & Publishing -- 1.5%
*World Color Press, Inc. ................................. 4,500 123,750
Valassis Communications, Inc. ............................ 1,050 38,456
-----------
162,206
-----------
</TABLE>
F-101
<PAGE> 192
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Value Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Building & Building Supplies -- 5.2%
BMC West Corp. ........................................... 3,320 $ 38,180
Coachmen Industries, Inc. ................................ 2,250 52,312
Engle Homes, Inc. ........................................ 1,260 17,325
Florida Rock Industries, Inc. ............................ 500 22,750
Holophane Corp. .......................................... 1,460 55,662
Horton (D.R.), Inc. ...................................... 3,320 55,195
Lafarge Corp. ............................................ 2,300 81,506
Lone Star Industries, Inc. ............................... 1,950 144,616
M/I Schottenstein Homes, Inc. ............................ 500 9,219
Texas Industries, Inc. ................................... 1,000 38,750
*Toll Brothers, Inc. ..................................... 2,150 46,091
-----------
561,606
-----------
Business & Consumer Services -- 2.8%
ADVO, Inc. ............................................... 2,630 54,572
*Personnel Group of America, Inc. ........................ 4,100 41,000
*Seitel, Inc. ............................................ 4,000 64,750
Sterling Software, Inc. .................................. 5,300 141,443
-----------
301,765
-----------
Chemicals & Allied Products -- 0.5%
General Cable Corp. ...................................... 3,710 59,360
-----------
Communications -- 0.6%
CommScope, Inc. .......................................... 1,300 39,975
*Teltrend, Inc. .......................................... 1,000 21,250
-----------
61,225
-----------
Computers -- 3.4%
Bel Fuse, Inc., Class B................................... 900 23,400
*Black Box Corp. ......................................... 1,350 67,669
*Brooktrout Technology, Inc. ............................. 1,500 24,094
*In Focus Systems, Inc. .................................. 2,800 42,000
*InterVoice, Inc. ........................................ 4,600 66,413
*Pomeroy Computer Resources, Inc. ........................ 2,300 32,056
Software Spectrum, Inc. .................................. 1,200 19,500
*Symantec Corp. .......................................... 3,500 89,250
-----------
364,382
-----------
Construction -- 1.1%
M.D.C. Holdings, Inc. .................................... 2,400 51,600
Morrison Knudsen Corp. ................................... 6,600 68,062
-----------
119,662
-----------
Consumer Products -- 0.3%
Central Garden & Pet Co. ................................. 2,910 29,827
-----------
</TABLE>
F-102
<PAGE> 193
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Value Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Containers -- 1.1%
*Ivex Packaging Corp. .................................... 2,640 $ 58,080
*Shorewood Packaging...................................... 500 9,219
*US Can Corp. ............................................ 2,150 47,837
-----------
115,136
-----------
Cosmetics & Toiletries -- 0.1%
Helen of Troy Ltd. ....................................... 600 10,763
-----------
Drugs & Health Care -- 2.2%
Bindley Western Industries, Inc. ......................... 4,933 113,775
Roberts Pharmaceutical Corp. ............................. 5,000 121,250
-----------
235,025
-----------
Electrical Equipment -- 0.7%
Cable Design Technologies, Inc. .......................... 1,400 21,612
UCAR International, Inc. ................................. 2,240 56,560
-----------
78,172
-----------
Electronics -- 4.4%
*Aeroflex, Inc. .......................................... 2,300 45,425
AVX Corp. ................................................ 3,750 91,406
BEC Energy................................................ 2,100 86,625
*Benchmark Electronics, Inc. ............................. 1,400 50,312
Burr-Brown Corp. ......................................... 1,760 64,460
*DII Group, Inc. ......................................... 1,160 43,282
*Oak Industries, Inc. .................................... 1,370 59,852
*Stoneridge, Inc. ........................................ 1,300 17,550
TNP Enterprises, Inc. .................................... 600 21,750
-----------
480,662
-----------
Energy -- 0.6%
*Calpine Corp. ........................................... 900 48,600
Dynegy, Inc. ............................................. 900 18,337
-----------
66,937
-----------
Engineering -- 0.5%
URS Corp. ................................................ 1,700 49,831
-----------
Entertainment -- 0.7%
*Harrah's Entertainment, Inc. ............................ 3,310 72,820
-----------
Finance -- 4.5%
Advest Group, Inc. ....................................... 1,400 27,912
Astoria Financial Corp. .................................. 2,000 87,875
Dain Rauscher Corp. ...................................... 800 43,300
Downey Financial Corp. ................................... 1,800 39,487
*Golden State Bancorp, Inc. .............................. 4,900 107,800
Heller Financial, Inc. ................................... 5,830 162,147
MAF Bancorp, Inc. ........................................ 700 16,975
-----------
485,496
-----------
</TABLE>
F-103
<PAGE> 194
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Value Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Finance - Investment & Other -- 0.3%
Southwest Securities Group, Inc. ......................... 500 $ 35,875
-----------
Food & Food Distributors -- 5.3%
*Ben & Jerry's Homemade, Inc., Class A.................... 1,400 38,850
Earthgrains Co. .......................................... 4,200 108,412
Fresh Del Monte Produce, Inc. ............................ 2,420 34,182
Great Atlantic & Pacific Tea Co., Inc. ................... 1,600 54,100
Pilgrim's Pride Corp., Class B............................ 900 27,000
*Ralcorp Holdings, Inc. .................................. 6,100 97,981
*Smithfield Foods, Inc. .................................. 4,820 161,169
*Suiza Foods Corp. ....................................... 800 33,500
*Sylvan, Inc. ............................................ 1,940 22,553
-----------
577,747
-----------
Healthcare Services -- 2.3%
Conventry Health Care, Inc. .............................. 4,090 44,734
*Trigon Healthcare, Inc. ................................. 5,570 202,609
-----------
247,343
-----------
Home Furnishings -- 1.3%
American Woodmark Corp. .................................. 1,070 37,718
*Furniture Brands International, Inc. .................... 2,830 78,886
*LADD Furniture, Inc. .................................... 1,000 21,000
-----------
137,604
-----------
Hotel/Restaurants -- 0.9%
Innkeepers USA Trust, Inc. ............................... 4,000 40,000
Sun International Hotels Ltd. ............................ 1,370 61,308
-----------
101,308
-----------
Industrial -- 0.8%
*UNIFI, Inc. ............................................. 4,100 87,125
-----------
Insurance -- 6.5%
Allmerica Financial Corp. ................................ 880 53,515
Chicago Title Corp. ...................................... 1,300 46,394
*CNA Surety Corp. ........................................ 3,710 56,809
Delphi Financial Group, Inc., Class A..................... 1,238 44,413
Enhance Financial Services Group, Inc. ................... 1,200 23,700
Everest Re Holdings, Inc. ................................ 2,240 73,080
FBL Financial Group, Inc. ................................ 1,000 19,500
*FPIC Insurance Group, Inc. .............................. 1,170 56,745
Fremont General Corp. .................................... 2,900 54,738
Harleysville Group, Inc. ................................. 2,140 43,870
HCC Insurance Holdings, Inc. ............................. 3,320 75,323
LandAmerica Financial Group, Inc. ........................ 2,000 57,500
LaSalle Re Holdings Ltd. ................................. 2,000 34,000
*Penn Treaty American Corp. .............................. 1,160 27,913
State Auto Financial...................................... 2,340 31,590
-----------
699,090
-----------
</TABLE>
F-104
<PAGE> 195
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Value Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Leasing -- 3.9%
*Avis Rent A Car, Inc. ................................... 5,400 $ 157,275
Dollar Thrifty Automotive Group, Inc. .................... 2,300 53,475
*Indigo Aviation AB ADR................................... 1,650 10,931
Rent Way, Inc. ........................................... 3,300 81,263
Rollins Truck Leasing..................................... 5,250 58,406
Varlen Corp. ............................................. 1,500 60,750
-----------
422,100
-----------
Machinery & Heavy Equipment -- 0.7%
Oshkosh Truck Corp. ...................................... 800 40,250
Tecumseh Products Co., Class A............................ 500 30,281
-----------
70,531
-----------
Manufacturing -- 4.4%
AptarGroup, Inc. ......................................... 2,600 78,000
*Buckeye Technologies, Inc. .............................. 2,620 39,791
Fedders Corp., Class A.................................... 3,910 23,949
Koala Corp. .............................................. 300 8,025
*Monaco Coach Corp. ...................................... 1,350 57,122
Moog, Inc., Class A....................................... 800 27,500
Oxford Industries, Inc. .................................. 1,000 28,313
Quanex Corp. ............................................. 2,050 58,425
Ruddick Corp. ............................................ 3,700 74,000
*Velcro Industries N.V.................................... 2,910 35,284
*Wolverine Tube, Inc. .................................... 1,850 46,481
-----------
476,890
-----------
Manufacturing Equipment -- 0.3%
Transportation Technologies Industries.................... 2,300 30,475
-----------
Medical Equipment & Supplies -- 0.3%
*Del Global Technologies Corp. ........................... 3,620 35,295
-----------
Medical & Medical Services -- 2.3%
Bard (C.R.), Inc. ........................................ 800 38,250
CONMED Corp. ............................................. 1,800 55,125
*Dura Pharmaceuticals, Inc. .............................. 3,300 39,394
*Medco Research, Inc. .................................... 1,000 26,250
*Medicis Pharmaceutical Corp., Class A.................... 800 20,300
*Polymedica Corp. ........................................ 1,800 18,000
US Oncology, Inc. ........................................ 4,042 48,504
-----------
245,823
-----------
Metals - Iron & Steel -- 0.5%
AK Steel Holding Corp. ................................... 1,000 22,500
Ryerson Tull, Inc. ....................................... 1,500 33,844
-----------
56,344
-----------
Office Equipment & Supplies -- 0.4%
United Stationers, Inc. .................................. 1,850 40,700
-----------
</TABLE>
F-105
<PAGE> 196
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Value Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Oil & Gas -- 2.5%
*Cal Dive International, Inc. ............................ 1,270 $ 37,941
Louis Dreyfus Natural Gas Co. ............................ 1,800 38,812
Pennzoil-Quaker State Co. ................................ 2,700 40,500
Southwest Gas Corp. ...................................... 1,900 54,388
*Tesoro Petroleum Corp. .................................. 5,900 94,031
-----------
265,672
-----------
Oil Equipment & Services -- 0.8%
*SEACOR SMIT, Inc. ....................................... 1,670 89,345
-----------
Paper & Forest Products -- 1.1%
Boise Cascade Corp. ...................................... 1,300 55,900
Chesapeake Corp. ......................................... 1,700 63,644
-----------
119,544
-----------
Real Estate -- 6.2%
Annaly Mortgage Management, Inc. ......................... 1,300 14,625
Bradley Real Estate, Inc. ................................ 1,200 24,900
Brandywine Realty Trust................................... 4,260 84,402
Chelsea GCA Realty, Inc. ................................. 1,370 50,861
Eastgroup Properties...................................... 1,800 36,113
Essex Property Trust, Inc. ............................... 1,600 56,600
Healthcare Realty Trust................................... 1,320 27,720
Health Care REIT, Inc. ................................... 2,700 62,775
Liberty Property Trust.................................... 3,200 79,600
Mack-Cali Realty Corp. ................................... 1,600 49,500
Mills Corp. .............................................. 1,400 30,363
Pacific Gulf Properties, Inc. ............................ 1,560 35,295
Parkway Properties, Inc. ................................. 1,500 49,688
Prentiss Properties Trust................................. 3,000 70,500
-----------
672,942
-----------
Restaurants -- 1.2%
*O'Charleys, Inc. ........................................ 2,380 38,080
*RARE Hospitality International, Inc. .................... 3,430 87,465
-----------
125,545
-----------
Retail - Clothing and Apparel -- 1.8%
Blair Corp. .............................................. 1,000 26,938
Cato Corp., Class A....................................... 3,100 36,038
*The Finish Line, Inc., Class A........................... 3,220 36,225
Tropical Sportswear International Corp. .................. 2,970 94,669
-----------
193,870
-----------
</TABLE>
F-106
<PAGE> 197
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Value Portfolio
Statement of Net Assets, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
Retail Merchandising -- 7.0%
*Ames Department Stores, Inc. ............................ 1,250 $ 57,031
BJ's Wholesale Club, Inc. ................................ 2,920 87,783
Claire's Stores, Inc. .................................... 1,750 44,844
*Elder-Beerman Stores Corp. .............................. 4,100 29,981
Haverty Furniture Companies, Inc. ........................ 900 31,669
Pier 1 Imports, Inc. ..................................... 6,410 72,113
*Rex Stores Corp. ........................................ 1,000 29,813
ShopKo Stores, Inc. ...................................... 4,400 159,500
*Zale Corp. .............................................. 6,750 270,000
-----------
782,734
-----------
Semiconductors -- 0.3%
*Integrated Device Technology, Inc. ...................... 3,200 34,800
-----------
Software -- 0.6%
*Best Software, Inc. ..................................... 2,400 38,700
*GT Interactive Software Corp. ........................... 3,780 13,230
Progress Software Corp. .................................. 400 11,300
-----------
63,230
-----------
Transportation -- 1.7%
Arkansas Best Corp. ...................................... 2,800 27,825
*Consolidated Freightways Corp. .......................... 1,400 17,981
Roadway Express, Inc. .................................... 1,300 25,188
Sea Containers Ltd., Class A.............................. 2,200 73,838
USFreightways Corp. ...................................... 900 41,681
-----------
186,513
-----------
Utilities -- 2.0%
Central Hudson Gas & Electric Corp. ...................... 1,400 58,800
Cleco Corp. .............................................. 1,600 48,600
Rochester Gas and Electric Corp. ......................... 2,600 69,063
United Illuminating Co. .................................. 900 38,194
-----------
214,657
-----------
Waste Management -- 0.8%
*Safety-Kleen Corp. ...................................... 4,975 90,172
-----------
TOTAL COMMON STOCK (COST $9,793,602).................... 10,411,912
-----------
</TABLE>
F-107
<PAGE> 198
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Small Cap Value Portfolio
Statement of Net Assets, June 30, 1999 -- Concluded
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION AND PERCENTAGE OF PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENTS -- 6.5%
Temporary Investment Fund, Inc. -- TempCash............... 706,996 $ 706,996
-----------
TOTAL SHORT TERM INVESTMENTS (COST $706,996)............ 706,996
-----------
TOTAL INVESTMENTS -- 102.6% (COST $10,500,598).......... 11,118,908
LIABILITIES IN EXCESS OF OTHER ASSETS -- (2.6)%............. (284,200)
-----------
NET ASSETS -- 100.0%
(Equivalent to $8.14 per share based on 1,331,688 shares
of capital stock outstanding)........................... $10,834,708
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($10,834,708/1,331,688 shares outstanding)................ $ 8.14
===========
</TABLE>
* Non-Income producing
See accompanying notes to financial statements.
F-108
<PAGE> 199
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statement of Operations for the Six Months Ended June 30, 1999
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY
GROWTH MARKET BOND
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends................................................... $ 2,554,570 $ -- $ --
Interest.................................................. 341,731 2,418,045 1,139,600
Less: foreign taxes withheld............................ (7,821) -- --
----------- ---------- -----------
Total Income............................................ 2,888,480 2,418,045 1,139,600
----------- ---------- -----------
EXPENSES:
Investment advisory fee................................... 508,438 121,628 62,025
Administration fee........................................ 114,537 34,926 12,737
Directors' fee............................................ 12,713 3,756 1,378
Transfer agent fee........................................ 3,391 1,551 1,038
Custodian fee............................................. 16,132 6,158 3,619
Legal fees................................................ 27,085 7,615 2,949
Audit fees................................................ 19,036 5,305 1,924
Printing.................................................. 41,360 10,424 3,801
Insurance................................................. 8,644 2,345 843
Miscellaneous............................................. 2,356 754 597
----------- ---------- -----------
753,692 194,462 90,911
Less: expenses waived by Administrator and/or reimbursed
by affiliated insurance company......................... (6,384) (2,750) (1,067)
----------- ---------- -----------
Total expenses.......................................... 747,308 191,712 89,844
----------- ---------- -----------
Net investment income (loss)............................ 2,141,172 2,226,333 1,049,756
----------- ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) from:
Investments:............................................ 8,764,510 (43) (411,978)
Foreign Currency related translations................... -- -- --
----------- ---------- -----------
8,764,510 (43) (411,978)
----------- ---------- -----------
Net change in unrealized appreciation (depreciation) from:
Investments............................................. 13,506,076 -- (1,968,350)
Foreign currency related translations................... -- -- --
----------- ---------- -----------
13,506,076 -- (1,968,350)
----------- ---------- -----------
Net gain (loss) on investments and foreign currency
transactions.......................................... 22,270,586 (43) (2,380,328)
----------- ---------- -----------
Net increase (decrease) in net assets resulting from
operations............................................ $24,411,758 $2,226,290 $(1,330,572)
=========== ========== ===========
</TABLE>
See accompanying notes to financial statements.
F-109
<PAGE> 200
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statement of Operations for the Six Months Ended June 30, 1999 -- (Concluded)
(Unaudited)
- --------------------------------------------------------------------------------
<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>
$ 344,871 $ 211,475 $1,215,573 $ 40,233 $ 56,994 $ 151,166 $ 5,834 $ 48,273
922,749 98,140 36,629 15,919 17,963 21,196 31,483 15,550
(869) -- (75,688) -- -- (25) -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
1,266,751 309,615 1,176,514 56,152 74,957 172,337 37,317 63,823
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
143,193 110,148 266,011 33,050 66,319 62,699 58,260 36,943
25,198 19,237 37,192 4,736 6,755 6,401 4,611 2,938
2,790 1,813 2,823 498 608 575 428 265
1,326 1,188 1,332 853 900 892 850 812
3,830 4,249 23,102 2,471 4,686 7,552 5,829 7,847
5,856 4,558 5,923 1,113 1,167 1,112 844 523
4,119 2,583 4,307 727 1,019 970 663 441
7,521 5,741 7,598 2,331 2,017 1,911 1,376 877
1,828 1,564 2,073 301 349 354 160 154
699 510 968 430 587 585 576 566
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
196,360 151,591 351,329 46,510 84,407 83,051 73,597 51,366
(298) (240) (8,117) 568 (2,411) (3,532) (1,580) (1,091)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
196,062 151,351 343,212 47,078 81,996 79,519 72,017 50,275
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
1,070,689 158,264 833,302 9,074 (7,039) 92,818 (34,700) 13,548
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
991,385 1,729,499 3,646,507 1,512,242 1,297,679 347,826 1,390,904 (634,314)
-- -- (120,897) -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
991,385 1,729,499 3,525,610 1,512,242 1,297,679 347,826 1,390,904 (634,314)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
509,352 2,675,919 2,378,550 483,451 845,065 1,173,106 1,653,886 733,260
-- -- (12,965) -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
509,352 2,675,919 2,365,585 483,451 845,065 1,173,106 1,653,886 733,260
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
1,500,737 4,405,418 5,891,195 1,995,693 2,142,744 1,520,932 3,044,790 98,946
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
$2,571,426 $4,563,682 $6,724,497 $2,004,767 $2,135,705 $1,613,750 $3,010,090 $ 112,494
========== ========== ========== ========== ========== ========== ========== =========
</TABLE>
F-110
<PAGE> 201
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
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)............ $ 2,141,172 $ 2,226,333 $ 1,049,756 $ 1,070,689 $ 158,264 $ 833,302
Net realized gain (loss) on investments
and foreign currency related
transactions........................... 8,764,510 (43) (411,978) 991,385 1,729,499 3,525,610
Net change in unrealized appreciation
(depreciation) on investments and
foreign currency translations.......... 13,506,076 -- (1,968,350) 509,352 2,675,919 2,365,585
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations.............. 24,411,758 2,226,290 (1,330,572) 2,571,426 4,563,682 6,724,497
Distributions:
From net investment income.............. (1,058,688) (2,226,333) (506,981) (499,598) (293,724) (813,330)
From net realized gains................. (6,184,504) -- (398,338) (3,406,936) (7,283,996) (4,172,939)
Capital share transactions:
Net contributions from affiliated life
insurance companies.................... 128,661 8,196,480 929,104 10,459,310 6,321,299 1,653,964
------------ ----------- ----------- ----------- ----------- -----------
Total increase in net assets........... 17,297,227 8,196,437 (1,306,787) 9,124,202 3,307,261 3,392,192
NET ASSETS
Beginning of period....................... 315,298,521 91,452,921 36,845,922 67,805,311 56,495,315 71,363,209
------------ ----------- ----------- ----------- ----------- -----------
End of Period............................. $332,595,748 $99,649,358 $35,539,135 $76,929,513 $59,802,576 $74,755,401
============ =========== =========== =========== =========== ===========
</TABLE>
- --------------------------------------------------------------------------------
<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 $ 1,035,342
Net realized gain (loss) on investments
and foreign currency related
transactions........................... 6,148,289 -- 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 -- 132,450 1,925,076 (3,566,325) 1,085,410
------------ ----------- ----------- ----------- ----------- -----------
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) -- (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>
See accompanying notes to financial statements.
F-111
<PAGE> 202
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statements of Changes in Net Assets -- (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
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)............................. $ 9,074 ($ 7,039) $ 92,818 ($ 34,700) $ 13,548
Net realized gain (loss) on investments and foreign
currency related transactions........................... 1,512,242 1,297,679 347,826 1,390,904 (634,314)
Net change in unrealized appreciation (depreciation) on
investments and foreign currency translations........... 483,451 845,065 1,173,106 1,653,886 733,260
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from
operations.............................................. 2,004,767 2,135,705 1,613,750 3,010,090 112,494
Distributions:
From net investment income............................... (23,574) (3,102) (105,080) -- (17,055)
From net realized gains.................................. (537,394) -- -- -- --
Capital share transactions:
Net contributions from affiliated life insurance
companies............................................... 1,628,267 10,107,324 6,440,655 6,350,489 2,666,010
----------- ----------- ----------- ----------- -----------
Total increase in net assets............................ 3,072,066 12,239,927 7,949,325 9,360,579 2,761,449
NET ASSETS
Beginning of period........................................ 12,166,979 14,306,655 15,615,901 9,685,265 8,073,259
----------- ----------- ----------- ----------- -----------
End of Period.............................................. $15,239,045 $26,546,582 $23,565,226 $19,045,844 $10,834,708
=========== =========== =========== =========== ===========
</TABLE>
- --------------------------------------------------------------------------------
<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>
* Commencement of operations was May 4, 1998.
See accompanying notes to financial statements.
F-112
<PAGE> 203
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------------
01/01/99
TO 01/01/98 01/01/97 01/01/96 01/01/95 01/01/94
06/30/99 TO TO TO TO TO
(UNAUDITED) 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $18.82 $19.46 $18.10 $16.36 $14.00 $14.09
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................................. .13 .27 .35 .46 .47 .43
Net realized and unrealized gain (loss) on
investments........................................... 1.32 1.97 3.49 2.54 3.41 (.10)
------- ------- ------- ------- ------- -------
Total from investment operations.................... 1.45 2.24 3.84 3.00 3.88 .33
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income... (.06) (.29) (.38) (.48) (.46) (.41)
Dividends to shareholders from net capital gains....... (.37) (2.59) (2.10) (.78) (1.06) (.01)
------- ------- ------- ------- ------- -------
Total distributions................................. (.43) (2.88) (2.48) (1.26) (1.52) (.42)
------- ------- ------- ------- ------- -------
Net asset value, end of period......................... $19.84 $18.82 $19.46 $18.10 $16.36 $14.00
======= ======= ======= ======= ======= =======
Total return........................................ 7.88%(2) 13.70% 24.32% 19.58% 30.39% 2.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)....................... 332,596 315,299 267,389 198,948 161,899 115,191
Ratios of expenses to average net assets(1)
(annualized).......................................... .47% .46% .43% .50% .61% .63%
Ratios of net investment income to average net
assets(annualized).................................... 1.34% 1.53% 2.01% 2.80% 3.20% 3.10%
Portfolio turnover..................................... 10% 30% 108% 72% 61% 63%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the Growth Portfolio before reimbursement of expense by
affiliated insurance company for the period ended June 30, 1999, and the
years ended December 31, 1998, 1997, 1996, 1995, and 1994 were as follows:
0.47%, 0.47%, 0.43%, 0.50%, 0.61% and 0.67% respectively.
(2.) Total returns for periods less than one year are not annualized.
See accompanying notes to financial statements.
F-113
<PAGE> 204
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------------
01/01/99
TO 01/01/98 01/01/97 01/01/96 01/01/95 01/01/94
06/30/99 TO TO TO TO TO
(UNAUDITED) 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................................. .02 .05 .05 .05 .05 .04
------ ------ ------ ------ ------ ------
Total from investment operations................... .02 .05 .05 .05 .05 .04
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income... (.02) (.05) (.05) (.05) (.05) (.04)
------ ------ ------ ------ ------ ------
Total distributions................................ (.02) (.05) (.05) (.05) (.05) (.04)
------ ------ ------ ------ ------ ------
Net asset value, end of period......................... $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ======
Total return....................................... 2.29%(2) 5.29% 5.33% 5.15% 5.61% 3.81%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)....................... 99,649 91,453 64,339 54,197 34,165 21,040
Ratios of expenses to average net assets(1)
(annualized)......................................... 0.40% .40% .39% .44% .50% .55%
Ratios of net investment income to average net assets
(annualized)......................................... 4.58% 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 period ended June 30, 1999,
and the years ended December 31, 1998, 1997, 1996, 1995 and 1994 were as
follows: 0.40%, 0.42%, 0.39%, 0.44%, 0.50% and 0.59% respectively.
(2.) Total returns for periods less than one year are not annualized.
See accompanying notes to financial statements.
F-114
<PAGE> 205
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
01/01/99
TO 01/01/98 01/01/97 01/01/96 01/01/95 01/01/94
06/30/99 TO TO TO TO TO
(UNAUDITED) 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..................... $11.22 $10.98 $10.67 $11.00 $ 9.73 $11.21
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................................... .31 .63 .64 .63 .65 .62
Net realized and unrealized gain (loss) on investments... (.72) .25 .33 (.34) 1.27 (1.23)
------ ------ ------ ------ ------ ------
Total from investment operations...................... (.41) .88 .97 .29 1.92 (.61)
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income..... (.15) (.64) (.66) (.62) (.65) (.60)
Dividends to shareholders from net capital gains......... (.12) (.00) (.00) (.00) (.00) (.27)
------ ------ ------ ------ ------ ------
Total distributions................................... (.27) (.64) (.66) (.62) (.65) (.87)
------ ------ ------ ------ ------ ------
Net asset value, end of period........................... $10.54 $11.22 $10.98 $10.67 $11.00 $ 9.73
====== ====== ====== ====== ====== ======
Total return.......................................... (3.67)%(2) 8.22% 9.50% 2.86% 20.45% (5.62)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)......................... 35,539 36,846 23,350 17,087 14,402 10,098
Ratios of expenses to average net assets(1)
(annualized)............................................ .51% .53% .57% .56% .60% .68%
Ratios of net investment income to average net assets
(annualized)............................................ 5.92% 6.03% 6.24% 6.08% 6.36% 6.14%
Portfolio turnover....................................... 148% 163% 105% 133% 206% 151%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the Bond Portfolio before reimbursement of expense by
affiliated insurance company for the period ended June 30, 1999, and the
years ended December 31, 1998, 1997, 1996, 1995 and 1994 were as follows:
0.51%, 0.55%, 0.57%, 0.56%, 0.60% and 0.70% respectively.
(2.) Total returns for periods less than one year are not annualized.
See accompanying financial statements.
F-115
<PAGE> 206
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGED PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
01/01/99
TO 01/01/98 01/01/97 01/01/96 01/01/95 01/01/94
06/30/99 TO TO TO TO TO
(UNAUDITED) 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..................... $17.68 $ 17.06 $ 14.68 $ 14.19 $ 11.94 $ 13.27
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................................... .24 .54 .54 .51 .55 .53
Net realized and unrealized gain (loss) on investments... .40 1.45 2.49 1.07 2.28 (.77)
------- ------- ------- ------- ------- -------
Total from investment operations...................... .64 1.99 3.03 1.58 2.83 (.24)
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income..... (.13) (.55) (.53) (.51) (.57) (.49)
Dividends to shareholders from net capital gains......... (.89) (.82) (.12) (.58) (.01) (.60)
------- ------- ------- ------- ------- -------
Total distributions................................... (1.02) (1.37) (.65) (1.09) (.58) (1.09)
------- ------- ------- ------- ------- -------
Net asset value, end of period........................... $ 17.30 $17.68 $ 17.06 $ 14.68 $ 14.19 $ 11.94
======= ======= ======= ======= ======= =======
Total return.......................................... 3.81%(2) 12.54% 21.23% 11.88% 24.43% (1.82)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)......................... 76,930 67,805 56,068 43,431 36,002 29,363
Ratios of expenses to average net assets(1)
(annualized)............................................ .56% .57% .58% .60% .66% .67%
Ratios of net investment income to average net assets
(annualized)............................................ 3.05% 3.22% 3.47% 3.68% 4.22% 4.34%
Portfolio turnover....................................... 87% 203% 99% 106% 130% 75%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the Managed Portfolio before reimbursement of expense by
affiliated insurance company for the period ended June 30, 1999, and the
years ended December 31, 1998, 1997, 1996, 1995 and 1994 were as follows:
0.56%, 0.58%, 0.58%, 0.60%, 0.66% and 0.73% respectively.
(2.) Total returns for periods less than one year are not annualized.
See accompanying financial statements.
F-116
<PAGE> 207
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
01/01/99
TO 01/01/98 01/01/97 01/01/96 01/01/95 01/01/94
06/30/99 TO TO TO TO TO
(UNAUDITED) 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..................... $21.91 $22.19 $18.52 $17.38 $15.45 $15.45
------- ------- ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................................... .05 .11 .17 .17 .20 (.01)
Net realized and unrealized gain (loss) on investments... 1.55 1.50 3.72 3.03 1.86 .01
------- ------- ------ ------ ------ ------
Total from investment operations...................... 1.60 1.61 3.89 3.20 2.06 .00
------- ------- ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income..... (.11) (.18) (.18) (.19) (.00) (.00)
Dividends to shareholders from net capital gains......... (2.83) (1.71) (.04) (1.87) (.13) (.00)
------- ------- ------ ------ ------ ------
Total distributions................................... (2.94) (1.89) (.22) (2.06) (.13) (.00)
------- ------- ------ ------ ------ ------
Net asset value, end of period........................... $20.57 $21.91 $22.19 $18.52 $17.38 $15.45
======= ======= ====== ====== ====== ======
Total return.......................................... 8.57%(2) 7.99% 21.21% 21.00% 13.48% 0.00%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)......................... 59,803 56,495 48,574 34,098 23,822 15,430
Ratios of expenses to average net assets(1)
(annualized)............................................ .56% .61% .63% .68% .76% .86%
Ratios of net investment income to average net assets
(annualized)............................................ .59% .56% .95% 1.14% 1.32% (.10)%
Portfolio turnover....................................... 17% 41% 37% 47% 89% 60%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the Growth Portfolio before reimbursement of expense by
affiliated insurance company for the period ended June 30, 1999, and the
years ended December 31, 1998, 1997, 1996, 1995 and 1994 were as follows:
0.57%, 0.62%, 0.63%, 0.68%, .76% and 0.89%, respectively.
(2.) Total returns for periods less than one year are not annualized.
See accompanying notes to financial statements.
F-117
<PAGE> 208
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
01/01/99
TO 01/01/98 01/01/97 01/01/96 01/01/95 01/01/94
06/30/99 TO TO TO TO TO
(UNAUDITED) 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..................... $13.85 $13.61 $13.41 $12.86 $11.63 $11.87
------- ------- ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................................... .15 .15 .11 .11 .16 .05
Net realized and unrealized gain (loss) on investments... 1.13 1.14 1.08 1.23 1.45 (.02)
------- ------- ------ ------ ------ ------
Total from investment operations...................... 1.28 1.29 1.19 1.34 1.61 .03
------- ------- ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income..... (.16) (.10) (.11) (.16) (.07) (.03)
Dividends to shareholders from net capital gains......... (.81) (.95) (.88) (.63) (.31) (.24)
------- ------- ------ ------ ------ ------
Total distributions................................... (.97) (1.05) (.99) (.79) (.38) (.27)
------- ------- ------ ------ ------ ------
Net asset value, end of period........................... $14.16 $13.85 $13.61 $13.41 $12.86 $11.63
======= ======= ====== ====== ====== ======
Total return.......................................... 9.79%(2) 10.13% 9.66% 10.89% 14.31% .26%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)......................... 74,755 71,363 62,513 50,955 36,642 26,212
Ratios of expenses to average net assets(1)
(annualized)............................................ .97% 1.00% 1.02% 1.05% 1.15% 1.32%
Ratios of net investment income to average net assets
(annualized)............................................ 2.01% 1.18% 1.13% 1.08% 1.21% .76%
Portfolio turnover....................................... 18% 37% 37% 35% 45% 32%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the International Portfolio before reimbursement of
expense by affiliated insurance company for the period ended June 30, 1999,
and the years ended December 31, 1998, 1997, 1996, 1995 and 1994 were as
follows: 1.00%, 1.00%, 1.02%, 1.05%, 1.15% and 1.32% respectively.
(2.) Total returns for periods less than one year are not annualized.
See accompanying notes to financial statements.
F-118
<PAGE> 209
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SENTINEL GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
01/01/99
TO 01/01/98 01/01/97 03/18/96(2)
06/30/99 TO TO TO
(UNAUDITED) 12/31/98 12/31/97 12/31/96
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $13.43 $14.59 $11.14 $10.00
-------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................................... .01 .03 .04 .05
Net realized and unrealized gain (loss) on investments...... 2.02 1.76 3.47 1.09
-------- ------- ------- -------
Total from investment operations........................ 2.03 1.79 3.51 1.14
-------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income........ (.03) (.04) (.05) (.00)
Dividends to shareholders from net capital gains............ (.59) (2.91) (.01) (.00)
-------- ------- ------- -------
Total distributions..................................... (.62) (2.95) (.06) (.00)
-------- ------- ------- -------
Net asset value, end of period.............................. $14.84 $13.43 $14.59 $11.14
======== ======= ======= =======
Total return............................................ 15.79%(3) 15.98% 31.58% 11.40%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)............................ 15,239 12,167 8,362 5,664
Ratios of expenses to average net assets(1) (annualized).... .71% .82% .90% .90%
Ratios of net investment income to average net assets
(annualized).............................................. .14% .23% .36% .57%
Portfolio turnover.......................................... 56% 87% 155% 75%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the Sentinel Growth Portfolio before reimbursement of
expense by affiliated insurance company for the period ended June 30, 1999,
and the years ended December 31, 1998, 1997 and 1996 were as follows:
0.70%, 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.
F-119
<PAGE> 210
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP
GROWTH VALUE
PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------
01/01/99 01/01/99(2)
TO 05/04/98(2) TO 05/04/98(2)
06/30/99 TO 06/30/99 TO
(UNAUDITED) 12/31/98 (UNAUDITED) 12/31/98
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $11.77 $10.00 $9.90 $10.00
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............................ (.01) .00 .04 .07
Net realized and unrealized gain (loss) on
investments........................................... 1.50 1.77 .85 (0.17)
------- ------- ------- -------
Total from investment operations.................... 1.49 1.77 .89 (.10)
------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income.... (.00) (.00) (.07) (.00)
Dividends to shareholders from net capital gains........ (.00) (.00) (.00) (.00)
------- ------- ------- -------
Total distributions................................. (.00) (.00) (.07) (.00)
------- ------- ------- -------
Net asset value, end of period.......................... $13.26 $11.77 $10.72 $9.90
======= ======= ======= =======
Total return........................................ 12.68%(3) 17.70%(3) 9.01%(3) (1.00)%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)........................ 26,547 14,307 23,565 15,616
Ratios of expenses to average net assets(1)
(annualized).......................................... 0.87% .90% 0.89% 0.95%
Ratios of net investment income to average net assets
(annualized).......................................... .07% .04% 1.04% 1.31%
Portfolio turnover...................................... 47% 64% 27% 39%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the Large Cap Growth Portfolio and the Large Cap Value
Portfolio before reimbursement of expense by affiliated insurance company
for the periods ended June 30, 1999 and December 31, 1998 were as follows:
0.89%, 0.92%, 0.93%, 0.97%, (annualized), respectively.
(2.) Commencement of operations.
(3.) Total returns for periods less than one year are not annualized.
See accompanying notes to financial statements.
F-120
<PAGE> 211
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Concluded
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAP SMALL CAP
GROWTH VALUE
PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------
01/01/99 01/01/99
TO 05/04/98(2) TO 05/04/98(2)
06/30/99 TO 06/30/99 TO
(UNAUDITED) 12/31/98 (UNAUDITED) 12/31/98
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $9.80 $10.00 $8.25 $10.00
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............................ (.02) (.01) .01 .02
Net realized and unrealized gain (loss) on
investments........................................... 2.62 (.19) (.10) (1.77)
------- ------- ------- -------
Total from investment operations.................... 2.60 (.20) (.09 (1.75)
------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income.... (.00) (.00) (.02) (.00)
Dividends to shareholders from net capital gains........ (.00) (.00) (.00) (.00)
------- ------- ------- -------
Total distributions................................. (.00) (.00) (.02) (.00)
------- ------- ------- -------
Net asset value, end of period.......................... $12.46 $9.80 $8.14 $8.25
======= ======= ======= =======
Total return........................................ 26.63%(3) (2.00)%(3) (1.12)%(3) (17.50)%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)........................ 19,046 9,685 10,835 8,073
Ratios of expenses to average net assets(1)
(annualized).......................................... 1.11% 1.24% 1.22% 1.28%
Ratios of net investment income to average net assets
(annualized).......................................... (0.54)% (.14)% 0.33% 0.48%
Portfolio turnover...................................... .68% 82% 46% 38%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the Small Cap Growth Portfolio and the Small Cap Value
Portfolio before reimbursement of expense by affiliated insurance company
for the periods ended June 30, 1999 and December 31, 1998 were as follows:
1.14%, 1.25%, 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.
F-121
<PAGE> 212
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, June 30, 1999
(Unaudited)
- --------------------------------------------------------------------------------
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 last sale price on exchanges
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 60
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 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 during the period ended June 30, 1999 was $3,440,747 in
the Bond Portfolio and $6,651,486 in the Managed Portfolio.
F-122
<PAGE> 213
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
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, 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 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
Investment advisory agreements have been approved, whereby Sentinel Advisors
Company (SAC), a Vermont General Partnership, is adviser for the Growth, Money
Market, Bond, Managed, Aggressive Growth, Common Stock 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 respect 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
F-123
<PAGE> 214
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
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. Provident Mutual 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.
F-124
<PAGE> 215
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
4. NET ASSETS
At June 30, 1999, 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........... $245,331,815 $99,649,459 $36,103,874 $60,512,099
Undistributed net investment income.......... 2,141,172 -- 1,049,756 1,070,689
Undistributed net realized gain.............. 8,764,510 -- -- 991,385
Accumulated loss on investment
transactions................................ -- (101) (411,978) --
Net unrealized appreciation (depreciation) on
investments and foreign currency............ 76,358,251 -- (1,202,517) 14,355,340
------------ ----------- ----------- -----------
$332,595,748 $99,649,358 $35,539,135 $76,929,513
============ =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE SENTINEL
GROWTH INTERNATIONAL GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net contribution from shareholders........... $48,829,401 $63,113,497 $11,549,849
Undistributed net investment income.......... 158,264 712,404 9,074
Undistributed net realized gain.............. 1,729,499 3,575,516 1,512,242
Accumulated loss on investment
transactions................................ -- -- --
Net unrealized appreciation (depreciation) on
investments and foreign currency............ 9,085,412 7,353,984 2,167,880
----------- ----------- -----------
$59,802,576 $74,755,401 $15,239,045
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP SMALL CAP SMALL CAP
GROWTH VALUE GROWTH VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net contribution from shareholders........... $22,024,760 $21,856,027 $15,541,952 $11,486,934
Undistributed net investment income (loss)... (7,039) 92,818 (34,700) 13,548
Undistributed net realized gain.............. 966,422 -- 606,928 --
Accumulated loss on investment
transactions................................ -- (266,722) -- (1,284,084)
Net unrealized appreciation (depreciation) on
investments and foreign currency............ 3,562,439 1,883,103 2,931,664 618,310
----------- ----------- ----------- -----------
$26,546,582 $23,565,226 $19,045,844 $10,834,708
=========== =========== =========== ===========
</TABLE>
F-125
<PAGE> 216
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
5. PURCHASES AND SALES OF INVESTMENTS (EXCLUDING SHORT-TERM SECURITIES)
Purchases and proceeds on sales of investments for the portfolios, for the
period ended June 30, 1999, 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....................... $ -- $ -- $27,733,192 $51,517,940 $ -- $ --
Corporate Bonds.............................. -- -- 24,719,974 8,567,095 -- --
Common and Preferred Stock................... 30,944,998 -- -- 7,086,988 8,692,119 12,607,776
----------- ----------- ----------- ----------- ---------- -----------
Total Purchases.............................. $30,944,998 -- $52,453,166 $67,172,023 $8,692,119 $12,607,776
=========== =========== =========== =========== ========== ===========
SALES
U.S. Gov't Obligations....................... $ -- $ -- $28,870,394 $47,549,896 $ -- $ --
Corporate Bonds.............................. -- -- 21,074,129 7,225,370 -- --
Common and Preferred Stock................... 33,630,956 -- -- 4,915,355 9,373,664 13,768,875
----------- ----------- ----------- ----------- ---------- -----------
Total Sales.................................. $33,630,956 -- $49,944,523 $59,690,621 $9,373,664 $13,768,875
=========== =========== =========== =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
SENTINEL LARGE CAP LARGE CAP SMALL CAP SMALL 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................... 8,450,704 18,048,919 10,905,698 13,597,033 6,438,251
---------- ----------- ----------- ----------- ----------
Total Purchases.............................. $8,450,704 $18,048,919 $10,905,698 $13,597,033 $6,438,251
========== =========== =========== =========== ==========
SALES
U.S. Gov't Obligations....................... $ -- $ -- $ -- $ -- $ --
Corporate Bonds.............................. -- -- -- -- --
Common and Preferred Stock................... 7,128,275 8,680,001 4,779,421 8,264,738 3,603,425
---------- ----------- ----------- ----------- ----------
Total Sales.................................. $7,128,275 $ 8,680,001 $ 4,779,421 $ 8,264,738 $3,603,425
========== =========== =========== =========== ==========
</TABLE>
6. TAX BASIS OF INVESTMENTS
Investment information based on the cost of the securities for Federal income
tax purposes held at June 30, 1999 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... $ 79,827,003 $ -- $ 70,555 $15,114,780 $11,998,814 $12,702,128
Aggregate gross unrealized depreciation... (3,468,752) -- (1,273,072) (759,440) (2,913,403) (5,412,417)
------------ ------------ ----------- ----------- ----------- -----------
Net unrealized appreciation
(depreciation)........................... $ 76,358,251 $ -- $(1,202,517) $14,355,340 $ 9,085,411 $ 7,289,711
============ ============ =========== =========== =========== ===========
Aggregate cost of securities for federal
income tax purposes...................... $255,674,429 $100,423,368 $39,556,490 $69,085,512 $50,541,148 $66,778,656
============ ============ =========== =========== =========== ===========
Capital loss carryover (available to
offset possible future gains.)
The carryover expires as follows Money
Market Portfolio -- $57 in 2005.......... $ -- $ 57 $ -- $ -- $ -- $ --
============ ============ =========== =========== =========== ===========
</TABLE>
F-126
<PAGE> 217
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, June 30, 1999 -- Continued
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SENTINEL LARGE CAP LARGE CAP SMALL CAP SMALL CAP
GROWTH GROWTH VALUE GROWTH VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aggregate gross unrealized appreciation...... $ 2,511,123 $ 4,128,762 $ 2,415,055 $ 3,433,193 $ 1,063,388
Aggregate gross unrealized depreciation...... (343,243) (566,323) (539,643) (572,210) (495,731)
----------- ----------- ----------- ----------- -----------
Net unrealized appreciation (depreciation)... $ 2,167,880 $ 3,562,439 $ 1,875,412 $ 2,860,983 $ 567,657
----------- ----------- ----------- ----------- -----------
Aggregate cost of securities for federal
income tax purposes......................... $13,039,024 $23,156,646 $21,677,883 $16,628,588 $10,551,251
=========== =========== =========== =========== ===========
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>
7. AUTHORIZED CAPITAL STOCK AND CAPITAL STOCK TRANSACTIONS
On June 30, 1999, 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;
each of the four All Pro Series Portfolios consist of 50 million shares and each
of the other series consists of 5 million shares.
On June 30, 1999, Provident Mutual Life Insurance Company owned 0 shares of
Large Cap Growth, 976,130 shares of Large Cap Value, 244,088 shares of Small Cap
Growth and 400,853 shares of Small Cap Value.
Transactions in capital stock for the period ended June 30, 1999 were as
follows:
<TABLE>
<CAPTION>
GROWTH PORTFOLIO MONEY MARKET PORTFOLIO BOND PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold............................ 675,518 $ 12,888,624 107,144,602 $ 107,144,602 526,181 $ 5,652,994
Shares redeemed........................ (1,051,529) (20,003,155) (101,164,077) (101,164,077) (521,110) (5,629,209)
Shares reinvested...................... 390,679 7,243,192 2,215,955 2,215,955 83,209 905,319
---------- ------------ ------------ ------------- -------- -----------
Net contributions from affiliated
insurance companies................... 14,668 $ 128,661 8,196,480 $ 8,196,480 88,280 $ 929,104
========== ============ ============ ============= ======== ===========
<CAPTION>
MANAGED PORTFOLIO
- --------------------------------------- ----------------------
SHARES AMOUNT
- --------------------------------------- ----------------------
<S> <C> <C>
Shares sold............................ 791,591 $13,558,308
Shares redeemed........................ (413,594) (7,005,532)
Shares reinvested...................... 233,644 3,906,534
-------- -----------
Net contributions from affiliated
insurance companies................... 611,641 $10,459,310
======== ===========
</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.............................................. 273,632 $ 5,116,868 271,926 $ 3,585,611 93,933 $1,293,763
Shares redeemed.......................................... (347,050) (6,373,289) (524,611) (6,917,916) (16,246) (226,464)
Shares reinvested........................................ 403,285 7,577,720 380,631 4,986,269 43,352 560,968
-------- ----------- -------- ----------- ------- ----------
Net contributions from affiliated insurance companies.... 329,867 $ 6,321,299 127,946 $ 1,653,964 121,039 $1,628,267
======== =========== ======== =========== ======= ==========
</TABLE>
F-127
<PAGE> 218
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, June 30, 1999 -- Concluded
(Unaudited)
- --------------------------------------------------------------------------------
<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................. 1,747,006 $ 22,340,293 768,257 $ 7,908,736 765,798 $ 8,723,565 628,139 $ 4,794,585
Shares redeemed............. (960,546) (12,236,071) (156,846) (1,573,161) (217,889) (2,373,076) (277,509) (2,145,630)
Shares reinvested........... 258 3,102 10,603 105,080 0 0 2,087 17,055
--------- ------------ -------- ----------- -------- ----------- -------- -----------
Net contributions from
affiliated insurance
companies.................. 786,718 $ 10,107,324 622,014 $ 6,440,655 547,909 $ 6,350,489 352,717 $ 2,666,010
========= ============ ======== =========== ======== =========== ======== ===========
</TABLE>
Transactions in capital stock for the year ended December 31, 1998 were as
follows:
<TABLE>
<CAPTION>
GROWTH PORTFOLIO MONEY MARKET 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 4,181,983 378,012 4,819,514 148,986 1,693,967
-------- ----------- -------- ----------- ------- ----------
Net contributions from affiliated insurance companies.... 389,298 $ 8,041,798 558,760 $ 7,369,655 332,909 $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 $16,459,223 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>
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.
F-128
<PAGE> 219
APPENDIX A
DESCRIPTION OF MONEY MARKET INSTRUMENTS AND
COMMERCIAL PAPER AND BOND RATINGS
PERMITTED INVESTMENTS OF THE MONEY MARKET PORTFOLIO
U.S. GOVERNMENT SECURITIES: These are obligations issued by or guaranteed as to
interest and principal by the government of the United States or any agency or
instrumentality thereof. They may include instruments that are supported by the
full faith and credit of the United States, such as Treasury Bills, Notes and
Bonds; instruments that are supported by the right of the issuer to borrow from
the Treasury, such as Home Loan Bank securities; and securities that are
supported only by the credit of the instrumentality, such as Federal National
Mortgage Association bonds.
BANK OBLIGATIONS: These are obligations (including certificates of deposit, time
deposits, and bankers' acceptances) of: (1) domestic banks (including savings
banks) and foreign branches of domestic banks that are members of the Federal
Reserve System or the Federal Deposit Insurance Corporation ("FDIC") and have
total assets of at least $1 billion; (2) domestic banks and foreign branches
thereof and savings and loan associations that have less than $1 billion of
total assets where the principal amount of the obligation is insured in full by
the FDIC. No more than 10% of the Portfolio's assets may be invested in
obligations of institutions in category (2).
Certificates of Deposit generally are certificates issued against funds
deposited in a bank, are for a definite period of time, earn a specified rate of
return, and are normally negotiable. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity, usually at 30, 90 or 180 day intervals ("coupon
dates") based upon a specified market rate. As a result of these adjustments,
the interest rate on these obligations may be increased or decreased
periodically. Typically, dealers selling variable rate certificates of deposit
agree to repurchase such instruments, at the purchaser's option, at par on the
coupon dates. The dealers' obligations to repurchase these instruments are
subject to conditions imposed by the various dealers. Such conditions typically
are the continued credit standing of the issuer and the existence of reasonably
orderly market conditions. Variable rate certificates of deposit may be sold in
the secondary market. Variable rate certificates of deposit normally carry a
higher interest rate at the time of issue than comparable fixed rate
certificates of deposit.
Bankers' Acceptances are short-term credit instruments issued by corporations to
finance the import, export, transfer or storage of goods. They are termed
"accepted" when a bank guarantees their payment at maturity. These instruments
reflect the obligation of both the bank and drawer to pay the face amount of the
instrument at maturity.
REPURCHASE AGREEMENTS: Repurchase agreements with (1) banks or (2) government
securities dealers recognized as primary dealers by the Federal Reserve System,
provided that:
(a) at the time the repurchase agreement is entered into, and throughout
the duration of the repurchase agreement, the collateral has a market value
at least equal to the value of the repurchase agreement;
(b) the collateral consists of government securities or instruments
rated in the highest rating category by at least two nationally recognized
statistical rating organizations; and
(c) the maturity of the repurchase agreement does not exceed 30 days.
COMMERCIAL PAPER: Commercial paper consists of unsecured promissory notes issued
by corporations to finance short-term credit needs.
A-1
<PAGE> 220
OTHER CORPORATE DEBT OBLIGATIONS: These are outstanding nonconvertible corporate
debt obligations that were not issued as short-term obligations but have
thirteen months or less remaining until maturity and which, at the date of
investment, are rated AA or better by S&P or Aa or better by Moody's.
The Money Market Portfolio will only invest in instruments denominated in U.S.
dollars that the Adviser, under the supervision of the board of directors of the
Fund, determines present minimal credit risks and are, at the time of
acquisition, either:
(1) rated in the two highest rating categories by at least two NRSROs,
or by only one NRSRO if only one NRSRO has issued a rating with respect to
the instrument; or
(2) in the case of an unrated instrument, determined by the Adviser
under the supervision of the board of directors to be of comparable quality
to the above; or
(3) issued by an issuer that has received a rating of the type described
in (1) above on other securities that are comparable in priority and
security to the instrument.
All of the Money Market Portfolio's money market instruments mature in 13 months
or less. The average maturity of the Portfolio's portfolio securities based on
their dollar value will not exceed 90 days at the time of each investment. If
the disposition of a portfolio security results in a dollar-weighted average
portfolio maturity in excess of 90 days, the Portfolio will invest its available
cash in such a manner as to reduce its dollar-weighted average portfolio
maturity to 90 days or less as soon as reasonably practicable.
COMMERCIAL PAPER RATINGS
The rating A-1 is the highest rating assigned by Standard & Poor's Corporation
("S&P") to commercial paper which is considered by S&P to have the following
characteristics: liquidity ratios of the issuer are adequate to meet cash
requirements; long-term senior debt is rated "A" or better; the issuer has
access to at least two additional channels of borrowing; basic earnings and cash
flow have an upward trend with allowance made for unusual circumstances;
typically, the issuer's industry is well established and the issuer has a strong
position within the industry; the reliability and quality of management are
unquestioned.
The rating A-2 is the second highest rating assigned by Standard & Poor's
Corporation. Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as overwhelming as for
issues designated "A-1."
The rating P-1 is the highest commercial paper rating assigned by Moody's
Investors Service, Inc. ("Moody's"). Issuers rated P-1 have a superior capacity
for repayment of short-term promissory obligations. P-1 repayment capacity will
normally be evidenced by the following characteristics; leading market positions
in well-established industries; high rates of return on funds employed;
conservative capitalization structures with moderate reliance on debt and ample
asset protection; broad margins in earnings coverage of fixed financial charges
and high internal cash generation; and well established access to a range of
financial markets and assured sources of alternate liquidity.
The rating P-2 is the second highest commercial paper rating assigned by
Moody's. Issuers rated P-2 have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
CORPORATE BOND RATINGS
Moody's Investors Service, Inc. describes its five highest ratings for corporate
bonds as follows:
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as 'gilt
edge'. Interest payments are protected by a large or by
A-2
<PAGE> 221
an exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the future.
Baa--Bonds which are rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well as assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
Standard & Poor's Corporation describes its ratings for corporate bonds as
follows:
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
BB, B, CCC, C--Bonds rated BB, B, CCC, C are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighted by large uncertainties or major risk exposures to adverse
conditions.
A-3
<PAGE> 222
ITEM 22. FINANCIAL STATEMENTS
The Financial Statements included in Part B are incorporated herein by
reference.
<PAGE> 223
PART C. OTHER INFORMATION
ITEM 23. Exhibits
(a) Financial Statements.
The following financial statements are filed as part of this Registration
Statement:
Included in Part A--Prospectus of the Registration Statement:
Financial Highlights
Included in Part B--Statement of Additional Information of the Registration
Statement:
Report of Independent Accountants
Statement of Net Assets as of December 31, 1998
Statements of Operations for the Year Ended December 31, 1998
Statements of Changes in Net Assets for the Year Ended December 31,
1998
Statements of Changes in Net Assets for the Year Ended December 31,
1997
Notes to Financial Statements, December 31, 1998
Statement of Net Assets as of June 30, 1999 (Unaudited)
Statement of Operations for the Six Months Ended June 30, 1999
(Unaudited)
Statements of Changes in Net Assets for the Period Ended June 30, 1999
(Unaudited)
Financial Highlights
Notes to Financial Statements for the Six Months Ended June 30, 1999
(Unaudited)
(b) Exhibits
The following exhibits are filed herewith:
<TABLE>
<S> <C>
(a)(1) Articles of Incorporation of Market Street Fund, Inc. (the
"Fund")(1)
(a)(2) Articles Supplementary(1)
(a)(3) Articles Supplementary(1)
(a)(4) Articles Supplementary(1)
(b)(1) By-Laws of the Fund(1)
(b)(2) Amendment to By-Laws(1)
(c) Form of Certificate for Shares of Common Stock of the
Fund(1)
(d)(1) Investment Advisory Agreement between the Fund and
Providentmutual Investment Management Company (PIMC)(1)
(d)(2) Investment Advisory Agreement between the Fund and Sentinel
Advisors Company(1)
(d)(3) Amendment to Investment Advisory Agreement between the Fund
and Sentinel Advisors Company(2)
(d)(4) Amendment to Investment Advisory Agreement Between the Fund
and Sentinel Advisors Company(3)
(d)(5) Investment Advisory Agreement between the Fund and Sentinel
Advisors Company with respect to the Growth Portfolio(4)
(d)(6) Investment Advisory Agreement between the Fund and PIMC with
respect to the International Portfolio(1)
(d)(7) Investment Sub-Advisory Agreement between PIMC and The
Boston Company Asset Management, Inc.(1)
(d)(8) Investment Advisory Agreement between the Fund and PIMC
respecting All Pro Portfolios(1)
(d)(9) Form of Agreement between PIMC and its Sub-Advisers
respecting All Pro Portfolios(1)
(d)(10) Investment Management Consulting Agreement between PIMC and
Wilshire Associates Incorporated respecting All Pro
Portfolios(1)
(d)(11) Form of Investment Sub-Advisory Agreement between PIMC and
State Street Global Advisors(5)
</TABLE>
C-1
<PAGE> 224
<TABLE>
<S> <C>
(e)(1) Underwriting Agreement between the Fund and PML Securities,
Inc.(1)
(e)(2) Amendment to Underwriting Agreement between the Fund and PML
Securities, Inc.(1)
(e)(3) Amendment to Underwriting Agreement between the Fund and PML
Securities, Inc.(1)
(e)(4) Amendment to Underwriting Agreement between the Fund and PML
Securities, Inc.(1)
(e)(5) Amendment to Underwriting Agreement between the Fund and PML
Securities, Inc.(1)
(f) Inapplicable
(g)(1) Custody Agreement between the Fund and Provident National
Bank(1)
(g)(2) Amendment to Custody Agreement between the Fund and
Provident National Bank(1)
(g)(3) Amendment to Custody Agreement between the Fund and
Provident National Bank(1)
(g)(4) Amendment to Custody Agreement between the Fund and
Provident National Bank(1)
(g)(5) Custodial Services Agreement between the Fund and Citibank,
N.A.(1)
(h)(1) Agreement and Plan of Reorganization among Providentmutual
Variable Life Growth Account, Providentmutual Variable Life
Money Market Account, Providentmutual Variable Life Bond
Account and the Fund(1)
(h)(2) Reimbursement Agreement between Provident Mutual Life
Insurance Company of Philadelphia and the Fund(1)
(h)(3) Administration Agreement between the Fund and Provident
Institutional Management Corporation(1)
(h)(4) Amendment to Administration Agreement between the Fund and
Provident Financial Processing Corporation (PFPC)(1)
(h)(5) Amendment to Administration Agreement between the Fund and
PFPC(1)
(h)(6) Amendment to Administration Agreement between the Fund and
PFPC(1)
(h)(7) Transfer Agency Agreement between the Fund and PFPC, as
amended(1)
(h)(8) Amendment to Transfer Agency Agreement between the Fund and
PFPC(1)
(h)(9) Amendment to Transfer Agency Agreement between the Fund and
PFPC(1)
(h)(10) Participation Agreement among the Fund, Provident Mutual
Life Insurance Company, and PML Securities, Inc.(1)
(h)(11) Participation Agreement among the Fund, Providentmutual Life
and Annuity Company of America and PML Securities, Inc.(1)
(h)(12) Participation Agreement among the Fund, National Life
Insurance Company and PML Securities, Inc.(3)
(h)(13) Amendment to Participation Agreement among the Fund,
National Life Insurance Company and PML Securities, Inc.(1)
(i)(1) Opinion and Consent of Adam Scaramella, Esq.(1)
(i)(2) Opinion of James G. Potter, Jr., Esq.(5)
(j)(1) Consent of Sutherland Asbill & Brennan LLP is filed
herewith.
(j)(2) Consent of PricewaterhouseCoopers LLP is filed herewith.
(k) Inapplicable
(l)(1) See Number (h)(1) above(1)
(l)(2) Investment Letter from National Life Insurance Company(3)
(m) Inapplicable
</TABLE>
C-2
<PAGE> 225
<TABLE>
<S> <C>
(n) Inapplicable
(o) Powers of Attorney
</TABLE>
- -------------------------
(1) Incorporated herein by reference to Post-Effective Amendment No. 19 filed
with the Securities and Exchange Commission on April 24, 1998, File No.
2-98755.
(2) Incorporated herein by reference to Post-Effective Amendment No. 13 filed
with Securities and Exchange Commission on February 28, 1996, File No.
2-98755.
(3) Incorporated herein by reference to Post-Effective Amendment No. 14 filed
with Securities and Exchange Commission on March 19, 1996, File No. 2-98755.
(4) Incorporated herein by reference to Post-Effective Amendment No. 16, filed
with Securities and Exchange Commission on February 21, 1997, File No.
2-98755.
(5) Incorporated herein by reference to Post-Effective Amendment No. 22 filed
with Securities and Exchange Commission on August 3, 1999, File No. 2-98755.
ITEM 24. Persons Controlled by or Under Common Control with Registrant
Currently, shares of the Fund are sold to separate accounts of Provident Mutual
Life Insurance Company ("Provident Mutual"), Providentmutual Life and Annuity
Company of America ("PLACA") and National Life Insurance Company ("NLIC") to
fund the benefits under certain variable life insurance policies and variable
annuity contracts issued or assumed by Provident Mutual or PLACA and variable
life insurance policies issued by NLIC.
No person has the direct or indirect power to control Provident Mutual or NLIC
except insofar as he or she may have such power by virtue of his or her capacity
as a director or executive officer thereof. As mutual life insurance companies,
Provident Mutual and NLIC have no stockholders. Their Boards of Directors are
elected by the Policyholders. PLACA is a wholly-owned subsidiary of Provident
Mutual.
Persons controlled by or under common control with the registrant follow:
<TABLE>
<CAPTION>
PERCENT OF VOTING
NAME JURISDICTION SECURITIES OWNED PRINCIPAL BUSINESS
---- ------------ ----------------- ------------------
<S> <C> <C> <C>
Provident Mutual Pennsylvania Mutual Company Life & Health Insurance
Life Insurance Company*
(Provident Mutual)
Providentmutual Life and Delaware Ownership of all Life & Health Insurance
Annuity Company voting securities
of America* by Provident Mutual
Provident Mutual Delaware Ownership of all voting Life & Health Insurance
International securities by
Life Insurance Company Provident Mutual
Providentmutual Pennsylvania Ownership of all Holding Company
Holding Company (PHC)* voting securities
by Provident Mutual
1717 Capital Management Pennsylvania Ownership of all voting Broker/Dealer
Company* securities by PHC
1717 Brokerage Services Pennsylvania Ownership of all voting Insurance Agency
Inc. securities by PHC
Providentmutual Pennsylvania Ownership of all voting Investment Adviser
Investment securities by PHC
Management Company*
</TABLE>
C-3
<PAGE> 226
<TABLE>
<CAPTION>
PERCENT OF VOTING
NAME JURISDICTION SECURITIES OWNED PRINCIPAL BUSINESS
---- ------------ ----------------- ------------------
<S> <C> <C> <C>
Washington Square Pennsylvania Ownership of all voting Administrative Services
Administrative securities by PHC
Services, Inc.*
Institutional Concepts, New York Ownership of all voting Insurance Agency
Inc.* securities by PHC
Provestco, Inc.* Delaware Ownership of all voting Real Estate Investment
securities by PHC
PNAM, Inc.* Delaware Ownership of all voting Holding Company
securities by PHC
Sigma American Delaware Ownership of 80.2% Investment Management
Corporation* voting securities by and Advisory Services
PHC and 19.8% by
Provident Mutual
Provident Mutual Delaware Ownership of all voting Investment Management
Management Co., Inc.* securities by Sigma and Advisory Services
American Corporation
Software Development Pennsylvania Ownership of all Development and
Corporation* voting securities Marketing of Computer
by PHC Software
</TABLE>
- -------------------------
* File Consolidated Financial Statements.
ITEM 25. Indemnification
Under Section 2-418 of the Maryland General Corporation Law, with respect to any
proceedings against a present or former director, officer, agent or employee
("corporate representative") of the registrant, except a proceeding brought by
or on behalf of the registrant, the registrant may indemnify the corporate
representative against expenses, including attorneys' fees and judgments, fines,
and amounts paid in settlement actually and reasonably incurred by the corporate
representative in connection with the proceeding, if: (i) he acted in good faith
and in a manner he reasonably believed to be in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
registrant; and (ii) with respect to any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful. The registrant is also
authorized under section 2-418 of the Maryland General Corporation Law to
indemnify a corporate representative under certain circumstances against
expenses incurred in connection with the defense of a suit or action by or in
the right of the registrant.
The By-laws of the Fund (Exhibit (b) of this Registration Statement) provide
that the Fund may indemnify its corporate representatives in a manner that is
consistent with the laws of the State of Maryland. The By-laws preclude
indemnification for "disabling conduct" (willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of
office) and sets forth reasonable and fair means for determining whether
indemnification shall be made.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful
C-4
<PAGE> 227
defense of any such action, suit or proceeding) is asserted by such director,
officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 26. Business and Other Connections of Investment Adviser
The directors and officers of Providentmutual Investment Management Company
(PIMC) also serve as officers of Provident Mutual.
ITEM 27. Principal Underwriters
a. 1717 Capital Management Company is principal underwriter for the Fund.
b. Set forth below is certain information regarding the directors and officers
of 1717, the principal underwriter to the Fund. Unless otherwise stated, the
business address of the persons whose names appear below is 300 Continental
Drive, Newark, Delaware 19713.
<TABLE>
<CAPTION>
(2) (3)
(1) POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
NAME PRINCIPAL UNDERWRITER WITH REGISTRANT
---- -------------------------- ---------------------
<S> <C> <C>
Mary Lynn Finelli*................... Director None
Alan F. Hinkle*...................... Director None
Robert W. Kloss*..................... Director None
James G. Potter, Jr.*................ Director Vice President
Joan C. Tucker....................... Director None
Lance A. Reihl....................... President None
Rosanne Gatta*....................... Treasurer President
Linda M. Springer*................... Financial Reporting None
Officer
</TABLE>
- -------------------------
* 1000 Chesterbrook Boulevard, Berwyn, PA 19312
ITEM 28. Location of Accounts and Records
The records required to be maintained by Section 31(a) of the Investment Company
Act of 1940 and Rules 31a-1 to 31a-3 promulgated thereunder, are maintained by
the Fund and Providentmutual Investment Management Company at 103 Bellevue
Parkway, Wilmington, DE 19809 and 1000 Chesterbrook Boulevard, Berwyn, PA 19312,
by Newbold's Asset Management, Inc. at 937 Haverford Road, Bryn Mawr,
Pennsylvania 19010, by Sentinel Advisors Company at National Life Drive,
Montpelier, Vermont 05604, by Provident National Bank at Broad & Chestnut
Streets, Philadelphia, Pennsylvania 19101, or by PFPC at 103 Bellevue Parkway,
Wilmington, Delaware 19809, or for the International Portfolio by Citibank, N.A.
111 Wall Street, New York, New York 10043.
ITEM 29. Management Services
Inapplicable.
ITEM 30. Undertakings
Inapplicable.
C-5
<PAGE> 228
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT IT MEETS ALL OF THE
REQUIREMENTS FOR EFFECTIVENESS OF THIS REGISTRATION STATEMENT UNDER RULE 485(B)
UNDER THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF BERWYN, COMMONWEALTH OF PENNSYLVANIA ON THIS 21ST DAY OF JANUARY, 2000.
MARKET STREET FUND, INC.
BY: /s/ ROSANNE GATTA
------------------------------------
ROSANNE GATTA
PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ROSANNE GATTA President January 21, 2000
- ----------------------------------------------------- (Principal Executive
ROSANNE GATTA Officer)
/s/ ANTHONY T. GIAMPIETRO Treasurer January 21, 2000
- ----------------------------------------------------- (Principal Financial and
ANTHONY T. GIAMPIETRO Accounting Officer)
/s/ ROBERT W. KLOSS Director January 21, 2000
- -----------------------------------------------------
ROBERT W. KLOSS
* Director January 21, 2000
- -----------------------------------------------------
ALAN GART
* Director January 21, 2000
- -----------------------------------------------------
A. GILBERT HEEBNER
* Director January 21, 2000
- -----------------------------------------------------
LEO SLACK
* Director January 21, 2000
- -----------------------------------------------------
EDWARD S. STOUCH
*By: /s/ JAMES G. POTTER, JR.
-----------------------------------------------
JAMES G. POTTER, JR.
Attorney-in-Fact,
Pursuant to Power of Attorney
</TABLE>
<PAGE> 229
EXHIBIT INDEX
<TABLE>
<S> <C>
EX-99.(j)(1) Consent of Sutherland Asbill & Brennan LLP
EX-99.(j)(2) Consent of PricewaterhouseCoopers LLP
</TABLE>
<PAGE> 1
Exhibit 99 (j)(1)
[SUTHERLAND ASBILL & BRENNAN LLP]
January 21, 2000
Market Street Fund, Inc.
103 Bellevue Parkway
Wilmington, DE 19809
RE: MARKET STREET FUND, INC.
FILE NO. 2-98755
Directors:
We hereby consent to the reference to our name under the caption "Other
Services -- Legal Matters" in the Statement of Additional Information filed as
part of the Post-Effective Amendment No. 25 to Form N-1A for Market Street Fund,
Inc. (File No. 2-98755). In giving this consent, we do not admit that we are in
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933.
Very truly yours,
SUTHERLAND ASBILL & BRENNAN LLP
By: /s/ Steven B. Boehm
----------------------------------
Steven B. Boehm
<PAGE> 1
EXHIBIT 99(j)(2)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Post-Effective
Amendment No. 25 to the Registration Statement under the Securities Act of 1933
and Amendment No. 26 to the Registration Statement under the Investment Company
Act of 1940 (File Nos. 2-98755 and 811-4350, respectively) of our report dated
February 5, 1999 on our audit of the financial statements and financial
highlights of Market Street Fund, Inc., which report is included in the Annual
Report to Shareholders for the year ended December 31, 1998 and for the
respective periods then ended. We also consent to the reference to our Firm
under the caption "Financial Highlights" in the Prospectus and under the
captions "Independent Accountants" and "Financial Statements" in the Statement
of Additional Information.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, PA
January 21, 2000
