<PAGE> 1
ANNUAL REPORT
December 31, 1995
- ---------------------------------
PROVIDENTMUTUAL LIFE
AND ANNUITY COMPANY
OF AMERICA, A STOCK LIFE
INSURANCE COMPANY
PROVIDENTMUTUAL VARIABLE
LIFE SEPARATE ACCOUNT
MARKET STREET FUND, INC.
VARIABLE LIFE INSURANCE POLICIES
- ---------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
To Our Variable Life Policyowners:
- --------------------------------------------------------------------------------
February 23, 1996
As an owner of a Providentmutual variable life insurance policy, we are
pleased to send you the Annual Report for the Separate Account and its
subaccounts for our Variable Life Insurance Policies.
Attached to the Separate Account Annual Report is the Annual Report for the
Market Street Fund, Inc. Under separate cover, you will be receiving the Annual
Reports for the other Fund groups underlying the subaccounts to which you have
elected to allocate your premiums.
Thank you for your confidence in Providentmutual and your variable life
policy. Along with our parent company, Provident Mutual Life Insurance Company,
Providentmutual has continued its role as a leader in the variable insurance
products marketplace. We are obviously very pleased with this result and are
happy that you are a part of our success.
We're happy to be of service to you. If you have a question about your
policy, please contact your local agent or call Providentmutual's Customer
Service Center toll free at 1-800-262-9273.
Sincerely,
/s/ L.J. ROWELL, JR.
L.J. Rowell, Jr., CLU
President
<PAGE> 3
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Policyowners and
Board of Directors of
The Providentmutual Life and Annuity
Company of America
Newark, Delaware
We have audited the accompanying statements of assets and liabilities of the
Providentmutual Variable Life Separate Account (comprising the nineteen
subaccounts) as of December 31, 1995, and the related statements of operations
and changes in net assets for the period February 1, 1995 (Date of Inception) to
December 31, 1995. These financial statements are the responsibility of the
management of the Variable Life Separate Account. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards 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. Our procedures included
confirmation of securities owned as of December 31, 1995 by correspondence with
the transfer agents. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Providentmutual Variable
Life Separate Account as of December 31, 1995, and the results of its operations
and the changes in its net assets for the period February 1, 1995 (Date of
Inception) to December 31, 1995 in conformity with generally accepted accounting
principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The Supplementary Information is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has not been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
accordingly, we express no opinion on it.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 14, 1996
<PAGE> 4
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Assets and Liabilities, December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
ASSETS
Investment in the Market Street
Fund, Inc., at market value:
Growth Portfolio................. $151,294
Money Market Portfolio........... $265,823
Bond Portfolio................... $ 49,507
Managed Portfolio................ $ 38,625
Aggressive Growth Portfolio...... $151,008
International Portfolio.......... $98,465
Dividends receivable............... 1,059
Receivable from Providentmutual
Life and Annuity Company of
America.......................... 16,681
---------- ---------- ---------- ---------- ---------- -------------
Total Assets....................... 151,294 283,563 49,507 38,625 151,008 98,465
---------- ---------- ---------- ---------- ---------- -------------
LIABILITIES
Payable to Providentmutual Life and
Annuity Company of America....... 13
---------- ---------- ---------- ---------- ---------- -------------
NET ASSETS......................... $151,294 $283,563 $ 49,507 $ 38,625 $151,008 $98,452
=========== =========== =========== =========== =========== ============
Held for the benefit of
policyowners..................... $119,374 $257,251 $ 19,910 $ 8,069 $123,038 $69,123
Attributable to Providentmutual
Life and Annuity Company of
America.......................... 31,920 26,312 29,597 30,556 27,970 29,329
---------- ---------- ---------- ---------- ---------- -------------
$151,294 $283,563 $ 49,507 $ 38,625 $151,008 $98,452
=========== =========== =========== =========== =========== ============
</TABLE>
See accompanying notes to financial statements
3
<PAGE> 5
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Assets and Liabilities, December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY FIDELITY FIDELITY FIDELITY
EQUITY- FIDELITY HIGH FIDELITY ASSET FIDELITY INVESTMENT
INCOME GROWTH INCOME OVERSEAS MANAGER INDEX 500 GRADE BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
ASSETS
Investment in the Variable
Insurance Products Fund, at
market value:
Equity-Income Portfolio.... $465,836
Growth Portfolio........... $635,375
High Income Portfolio...... $145,774
Overseas Portfolio......... $212,684
Investment in the Variable
Insurance Products Fund II,
at market value:
Asset Manager Portfolio.... $ 71,829
Index 500 Portfolio........ $220,128
Investment Grade Bond
Portfolio................ $ 60,423
----------- ----------- -------- ---------- ----------- ---------- --------
NET ASSETS................... $465,836 $635,375 $145,774 $212,684 $ 71,829 $220,128 $ 60,423
=========== =========== ======== ========== =========== ========== ========
Held for the benefit of
policyowners............... $432,730 $601,163 $115,984 $184,088 $ 42,403 $186,727 $ 31,514
Attributable to
Providentmutual Life and
Annuity Company
of America................. 33,106 34,212 29,790 28,596 29,426 33,401 28,909
----------- ----------- -------- ---------- ----------- ---------- --------
$465,836 $635,375 $145,774 $212,684 $ 71,829 $220,128 $ 60,423
=========== =========== ======== ========== =========== ========== ========
</TABLE>
See accompanying notes to financial statements
4
<PAGE> 6
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Assets and Liabilities, December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEUBERGER NEUBERGER NEUBERGER VAN ECK VAN ECK
& BERMAN & BERMAN & BERMAN LIMITED TCI WORLDWIDE GOLD AND NATURAL
BALANCED GROWTH MATURITY BOND GROWTH BOND RESOURCES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
ASSETS
Investment in the Neuberger &
Berman Advisers Management
Trust, at market value:
Balanced Portfolio.......... $ 70,877
Growth Portfolio............ $214,176
Limited Maturity Bond
Portfolio................. $ 32,352
Investment in TCI Portfolios,
Inc., at market value:
TCI Growth Portfolio........ $180,497
Investment in the Van Eck
Worldwide Insurance Trust,
at market value:
Worldwide Bond Portfolio.... $ 55,505
Gold and Natural Resources
Portfolio................. $ 38,197
------- -------- ------- -------- ------- -------
NET ASSETS.................... $ 70,877 $214,176 $ 32,352 $180,497 $ 55,505 $ 38,197
======= ======== ======= ======== ======= =======
Held for the benefit of
policyowners................ $ 40,234 $181,496 $ 4,931 $147,018 $ 26,439 $ 7,681
Attributable to
Providentmutual Life and
Annuity Company of
America..................... 30,643 32,680 27,421 33,479 29,066 30,516
------- -------- ------- -------- ------- -------
$ 70,877 $214,176 $ 32,352 $180,497 $ 55,505 $ 38,197
======= ======== ======= ======== ======= =======
</TABLE>
See accompanying notes to financial statements
5
<PAGE> 7
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Period February 1, 1995 (Date of Inception)
to December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends................................ $ 1,144 $5,330 $1,517 $ 914
------- ------ ------ ------ ------ ------
EXPENSES
Mortality and expense risks.............. 190 500 42 9 $ 215 $ 73
------- ------ ------ ------ ------ ------
Net investment income (loss)............. 954 4,830 1,475 905 (215) (73)
------- ------ ------ ------ ------ ------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain from redemption of
investment shares...................... 1,386 134 40 481 266
------- ------ ------ ------ ------ ------
Net realized gain on investments......... 1,386 134 40 481 266
------- ------ ------ ------ ------ ------
Net unrealized appreciation of
investments:
Beginning of period
End of period.......................... 10,721 3,919 4,931 6,340 5,545
------- ------ ------ ------ ------ ------
Net unrealized appreciation of
investments during the period.......... 10,721 3,919 4,931 6,340 5,545
------- ------ ------ ------ ------ ------
Net realized and unrealized gain
on investments......................... 12,107 4,053 4,971 6,821 5,811
------- ------ ------ ------ ------ ------
Net increase in net assets resulting
from operations........................ $ 13,061 $4,830 $5,528 $5,876 $6,606 $ 5,738
======= ====== ====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements
6
<PAGE> 8
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Period February 1, 1995 (Date of Inception)
to December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY FIDELITY FIDELITY FIDELITY
EQUITY- FIDELITY HIGH FIDELITY ASSET FIDELITY INVESTMENT
INCOME GROWTH INCOME OVERSEAS MANAGER INDEX 500 GRADE BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends.................... $ 3,295 $ 141 $1,794 $ 100 $ 529 $ 412 $ 872
------- ------- ------ ------ ------ ------- ------
EXPENSES
Mortality and expense
risks...................... 581 774 114 250 82 259 80
------- ------- ------ ------ ------ ------- ------
Net investment income
(loss)..................... 2,714 (633) 1,680 (150) 447 153 792
------- ------- ------ ------ ------ ------- ------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Realized gain distributions
reinvested................. 1,251 100 56
Net realized gain from
redemption of investment
shares..................... 1,814 2,933 562 455 654 1,999 196
------- ------- ------ ------ ------ ------- ------
Net realized gain on
investments................ 3,065 2,933 562 555 654 2,055 196
------- ------- ------ ------ ------ ------- ------
Net unrealized appreciation
of investments:
Beginning of period
End of period.............. 26,993 10,036 4,518 6,809 5,339 16,619 4,575
------- ------- ------ ------ ------ ------- ------
Net unrealized appreciation
of investments during the
period..................... 26,993 10,036 4,518 6,809 5,339 16,619 4,575
------- ------- ------ ------ ------ ------- ------
Net realized and unrealized
gain on investments........ 30,058 12,969 5,080 7,364 5,993 18,674 4,771
------- ------- ------ ------ ------ ------- ------
Net increase in net assets
resulting from
operations................. $ 32,772 $ 12,336 $6,760 $7,214 $6,440 $ 18,827 $5,563
======= ======= ====== ====== ====== ======= ======
</TABLE>
See accompanying notes to financial statements
7
<PAGE> 9
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Period February 1, 1995 (Date of Inception)
to December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEUBERGER NEUBERGER NEUBERGER VAN ECK VAN ECK
& BERMAN & BERMAN & BERMAN LIMITED TCI WORLDWIDE GOLD AND NATURAL
BALANCED GROWTH MATURITY BOND GROWTH BOND RESOURCES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends..................... $ 478 $ 61 $1,375 $2,583 $ 294
------ ------ ------ ------ ------ ------
EXPENSES
Mortality and expense risks... 81 247 10 $ 123 67 11
------ ------ ------ ------ ------ ------
Net investment income
(loss)...................... 397 (186) 1,365 (123) 2,516 283
------ ------ ------ ------ ------ ------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Realized gain distributions
reinvested.................. 154 818
Net realized gain from
redemption of investment
shares...................... 172 1,767 6 1,594 201 197
------ ------ ------ ------ ------ ------
Net realized gain on
investments................. 326 2,585 6 1,594 201 197
------ ------ ------ ------ ------ ------
Net unrealized appreciation of
investments:
Beginning of period
End of period............... 5,547 5,688 1,194 7,429 1,924 5,371
------ ------ ------ ------ ------ ------
Net unrealized appreciation of
investments during the
period...................... 5,547 5,688 1,194 7,429 1,924 5,371
------ ------ ------ ------ ------ ------
Net realized and unrealized
gain on investments......... 5,873 8,273 1,200 9,023 2,125 5,568
------ ------ ------ ------ ------ ------
Net increase in net assets
resulting from operations... $6,270 $8,087 $2,565 $8,900 $4,641 $5,851
====== ====== ====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements
8
<PAGE> 10
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Period February 1, 1995 (Date of
Inception) to December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss)....... $ 954 $ 4,830 $ 1,475 $ 905 $ (215) $ (73)
Net realized gain on investments... 1,386 134 40 481 266
Net unrealized appreciation of
investments during the period.... 10,721 3,919 4,931 6,340 5,545
-------- ---------- ------- ------- -------- -------
Net increase in net assets
from operations.................. 13,061 4,830 5,528 5,876 6,606 5,738
-------- ---------- ------- ------- -------- -------
FROM VARIABLE LIFE POLICY
TRANSACTIONS
Policyowners' net premiums......... 82,812 1,226,779 16,686 6,530 89,173 60,462
Cost of insurance and
administrative charges........... (11,377) (64,764 ) (2,472) (722) (12,356) (6,573)
Surrenders and forfeitures......... (90) (16 ) (50) (118) (81)
Transfers between investment
portfolios....................... 41,888 (908,266 ) 4,815 1,941 42,703 13,906
-------- ---------- ------- ------- -------- -------
Net increase in net assets derived
from policy transactions......... 113,233 253,733 18,979 7,749 119,402 67,714
-------- ---------- ------- ------- -------- -------
Capital contribution from
Providentmutual Life and Annuity
Company of America............... 25,000 25,000 25,000 25,000 25,000 25,000
-------- ---------- ------- ------- -------- -------
Total increase in net assets....... 151,294 283,563 49,507 38,625 151,008 98,452
NET ASSETS
Beginning of period.............. -- -- -- -- -- --
-------- ---------- ------- ------- -------- -------
End of period.................... $151,294 $ 283,563 $ 49,507 $ 38,625 $151,008 $98,452
======== ========== ======= ======= ======== =======
</TABLE>
See accompanying notes to financial statements
9
<PAGE> 11
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Period February 1, 1995 (Date of
Inception) to December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY FIDELITY FIDELITY FIDELITY
EQUITY- FIDELITY HIGH FIDELITY ASSET FIDELITY INVESTMENT
INCOME GROWTH INCOME OVERSEAS MANAGER INDEX 500 GRADE BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income
(loss)..................... $ 2,714 $ (633) $ 1,680 $ (150) $ 447 $ 153 $ 792
Net realized gain on
investments................ 3,065 2,933 562 555 654 2,055 196
Net unrealized appreciation
investments during the
period..................... 26,993 10,036 4,518 6,809 5,339 16,619 4,575
-------- -------- -------- -------- ------- -------- -------
Net increase in net assets
from operations............ 32,772 12,336 6,760 7,214 6,440 18,827 5,563
-------- -------- -------- -------- ------- -------- -------
FROM VARIABLE LIFE POLICY
TRANSACTIONS
Policyowners' net premiums... 281,421 389,708 51,880 133,848 22,049 121,634 22,856
Cost of insurance and
administrative charges..... (31,287) (46,543) (7,891) (11,367) (4,044) (12,939) (3,801)
Surrenders and forfeitures... (362) (372) (18) (174) (48) (88) (28)
Transfers between investment
portfolios................. 158,292 255,246 70,043 58,163 22,432 67,694 10,833
-------- -------- -------- -------- ------- -------- -------
Net increase in net assets
derived from policy
transactions............... 408,064 598,039 114,014 180,470 40,389 176,301 29,860
-------- -------- -------- -------- ------- -------- -------
Capital contribution from
Providentmutual Life and
Annuity Company of
America.................... 25,000 25,000 25,000 25,000 25,000 25,000 25,000
-------- -------- -------- -------- ------- -------- -------
Total increase in net
assets..................... 465,836 635,375 145,774 212,684 71,829 220,128 60,423
NET ASSETS
Beginning of period........ -- -- -- -- -- -- --
-------- -------- -------- -------- ------- -------- -------
End of period.............. $465,836 $635,375 $145,774 $212,684 $ 71,829 $220,128 $ 60,423
======== ======== ======== ======== ======= ======== =======
</TABLE>
See accompanying notes to financial statements
10
<PAGE> 12
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Period February 1, 1995 (Date of
Inception) to December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEUBERGER VAN ECK
NEUBERGER NEUBERGER & BERMAN VAN ECK GOLD AND
& BERMAN & BERMAN LIMITED TCI WORLDWIDE NATURAL
BALANCED GROWTH MATURITY BOND GROWTH BOND RESOURCES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss)........... $ 397 $ (186) $ 1,365 $ (123) $ 2,516 $ 283
Net realized gain on investments....... 326 2,585 6 1,594 201 197
Net unrealized appreciation of
investments during the period........ 5,547 5,688 1,194 7,429 1,924 5,371
------- -------- ------- -------- ------- -------
Net increase in net assets from
operations........................... 6,270 8,087 2,565 8,900 4,641 5,851
------- -------- ------- -------- ------- -------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyowners' net premiums............. 31,568 106,593 1,457 94,924 27,665 9,441
Cost of insurance and administrative
charges.............................. (2,111) (11,044) (475) (9,264) (1,906) (2,639)
Surrenders and forfeitures............. (71) (11) (290) (4)
Transfers between investment
portfolios........................... 10,150 85,611 3,816 61,227 109 544
------- -------- ------- -------- ------- -------
Net increase in net assets derived from
policy transactions.................. 39,607 181,089 4,787 146,597 25,864 7,346
------- -------- ------- -------- ------- -------
Capital contribution from
Providentmutual Life and Annuity
Company of America................... 25,000 25,000 25,000 25,000 25,000 25,000
------- -------- ------- -------- ------- -------
Total increase in net assets........... 70,877 214,176 32,352 180,497 55,505 38,197
NET ASSETS
Beginning of period.................. -- -- -- -- -- --
------- -------- ------- -------- ------- -------
End of period........................ $ 70,877 $214,176 $32,352 $180,497 $ 55,505 $ 38,197
======= ======== ======= ======== ======= =======
</TABLE>
See accompanying notes to financial statements
11
<PAGE> 13
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. ORGANIZATION
The Providentmutual Variable Life Separate Account (Separate Account) was
established by Providentmutual Life and Annuity Company of America
(Providentmutual) under the provisions of Delaware law and commenced operations
on February 1, 1995. Providentmutual is a wholly-owned subsidiary of Provident
Mutual Life Insurance Company. The Separate Account is an investment account to
which assets are allocated to support the benefits payable under flexible
premium adjustable variable life insurance policies (the Policies).
The Policies are distributed principally through personal producing general
agents and brokers.
Providentmutual has structured the Separate Account as a unit investment
trust registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended. The Separate Account is comprised of
nineteen subaccounts: the Growth, Money Market, Bond, Managed, Aggressive Growth
and International Subaccounts invest in the corresponding portfolios of the
Market Street Fund, Inc.; the Fidelity Equity-Income, Fidelity Growth, Fidelity
High Income and Fidelity Overseas Subaccounts invest in the corresponding
portfolios of the Variable Insurance Products Fund; the Fidelity Asset Manager,
Fidelity Index 500 and Fidelity Investment Grade Bond Subaccounts invest in the
corresponding portfolios of the Variable Insurance Products Fund II; the
Neuberger & Berman Balanced, Neuberger & Berman Growth and Neuberger & Berman
Limited Maturity Bond Subaccounts invest in the corresponding portfolios of the
Neuberger & Berman Advisers Management Trust; the TCI Growth Subaccount invests
in the corresponding portfolio of the TCI Portfolios, Inc.; and the Van Eck
Worldwide Bond and Van Eck Gold and Natural Resources Subaccounts invest in the
corresponding portfolios of the Van Eck Worldwide Insurance Trust.
Net premiums from in-force Policies are allocated to the Subaccounts in
accordance with policyowner instructions and are recorded as variable life
policy transactions in the statements of changes in net assets. Such amounts are
used to provide money to pay benefits under the Policies (Note 4). The Separate
Account's assets are the property of Providentmutual.
Transfers between investment portfolios include transfers between the
Subaccounts and the Guaranteed Account (not shown), which is part of
Providentmutual's General Account.
12
<PAGE> 14
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies followed
by the Separate Account in the financial statements.
Investment Valuation:
Investment shares are valued at the net asset values of the respective
Portfolios. Transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date.
Realized Gains and Losses:
Realized gains and losses on sales of investment shares are determined
using the specific identification basis for financial reporting and income tax
purposes.
Federal Income Taxes:
The operations of the Separate Account are included in the Federal income
tax return of Providentmutual. Under the provisions of the Policies,
Providentmutual has the right to charge the Separate Account for Federal income
tax attributable to the Separate Account. No charge is currently being made
against the Separate Account for such tax.
Estimates:
The preparation of the accompanying financial statements required
management to make estimates and assumptions that affect the reported values of
assets and liabilities as of December 31, 1995 and the reported amounts from
operations and policy transactions during 1995. Actual results could differ from
those estimates.
13
<PAGE> 15
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS
At December 31, 1995, the investments of the respective Subaccounts are as
follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES COST MARKET VALUE
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
Market Street Fund, Inc.:
Growth Portfolio.................................. 9,248 $140,573 $151,294
Money Market Portfolio............................ 265,823 $265,823 $265,823
Bond Portfolio.................................... 4,500 $45,588 $49,507
Managed Portfolio................................. 2,722 $33,694 $38,625
Aggressive Growth Portfolio....................... 8,689 $144,668 $151,008
International Portfolio........................... 7,657 $92,920 $98,465
Variable Insurance Products Fund:
Equity-Income Portfolio........................... 24,174 $438,843 $465,836
Growth Portfolio.................................. 21,759 $625,339 $635,375
High Income Portfolio............................. 12,097 $141,256 $145,774
Overseas Portfolio................................ 12,474 $205,875 $212,684
Variable Insurance Products Fund II:
Asset Manager Portfolio........................... 4,549 $66,490 $71,829
Index 500 Portfolio............................... 2,908 $203,509 $220,128
Investment Grade Bond Portfolio................... 4,842 $55,848 $60,423
Neuberger & Berman Advisers Management Trust:
Balanced Portfolio................................ 4,046 $65,330 $70,877
Growth Portfolio.................................. 8,282 $208,488 $214,176
Limited Maturity Bond Portfolio................... 2,199 $31,158 $32,352
TCI Portfolios, Inc.:
TCI Growth Portfolio.............................. 14,967 $173,068 $180,497
Van Eck Worldwide Insurance Trust:
Worldwide Bond Portfolio.......................... 4,982 $53,581 $55,505
Gold and Natural Resources Portfolio.............. 2,649 $32,826 $38,197
</TABLE>
14
<PAGE> 16
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
During the period February 1, 1995 to December 31, 1995, transactions in
investment shares were as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET STREET FUND, INC.
------------------------------------------------------------------------------------------------------------------
GROWTH MONEY MARKET BOND MANAGED INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO AGGRESSIVE PORTFOLIO
GROWTH
PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Shares purchased.......................... 9,742 874,800 4,493 2,676 9,089 7,846
Shares received from reinvestment of
dividends............................... 76 5,330 146 70
------- ------- ------ ------ ------- -------
Total shares acquired..................... 9,818 880,130 4,639 2,746 9,089 7,846
Total shares redeemed..................... (570) (614,307) (139) (24 ) (400) (189)
------- ------- ------ ------ ------- -------
Net increase in shares owned.............. 9,248 265,823 4,500 2,722 8,689 7,657
Shares owned, beginning of period.........
------- ------- ------ ------ ------- -------
Shares owned, end of period............... 9,248 265,823 4,500 2,722 8,689 7,657
======= ======= ====== ====== ======= =======
Cost of shares acquired................... $ 148,035 $880,130 $46,940 $33,984 $150,890 $94,994
======= ======= ====== ====== ======= =======
Cost of shares redeemed................... $ 7,462 $614,307 $ 1,352 $ 290 $ 6,222 $ 2,074
======= ======= ====== ====== ======= =======
</TABLE>
15
<PAGE> 17
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND VARIABLE INSURANCE PRODUCTS FUND II
- ------------------------------------------------------------------------------------------------------------------
FIDELITY FIDELITY FIDELITY FIDELITY FIDELITY
EQUITY-INCOME GROWTH HIGH INCOME OVERSEAS ASSET MANAGER INDEX 500
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO FIDELITY
INVESTMENT
GRADE BOND
PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Shares purchased....... 24,671 22,131 12,589 12,757 5,010 3,044 5,032
Shares received from
reinvestment of:
Dividends............ 179 6 177 7 39 7 80
Capital gain
distributions...... 83 7 1
-------- -------- -------- -------- ------- -------- -------
Total shares
acquired............. 24,933 22,137 12,766 12,771 5,049 3,052 5,112
Total shares
redeemed............. (759) (378) (669) (297 ) (500) (144 ) (270)
-------- -------- -------- -------- ------- -------- -------
Net increase in shares
owned................ 24,174 21,759 12,097 12,474 4,549 2,908 4,842
Shares owned, beginning
of period............
-------- -------- -------- -------- ------- -------- -------
Shares owned, end
of period............ 24,174 21,759 12,097 12,474 4,549 2,908 4,842
======== ======== ======== ======== ======= ======== =======
Cost of shares
acquired............. $ 450,678 $ 633,382 $ 148,527 $210,331 $73,342 $211,867 $ 58,875
======== ======== ======== ======== ======= ======== =======
Cost of shares redeemed... $ 11,835 $ 8,043 $ 7,271 $ 4,456 $ 6,852 $ 8,358 $ 3,027
======== ======== ======== ======== ======= ======== =======
</TABLE>
16
<PAGE> 18
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TCI PORT-
NEUBERGER & BERMAN ADVISERS FOLIOS, VAN ECK WORLDWIDE
MANAGEMENT TRUST INC. INSURANCE TRUST
- ------------------------------------------------------------------------------------------------------------------
NEUBERGER NEUBERGER NEUBERGER VAN ECK VAN ECK
& BERMAN & BERMAN & BERMAN WORLDWIDE GOLD & NATURAL
BALANCED GROWTH LIMITED MATURITY TCI GROWTH BOND RESOURCES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Shares purchased................. 4,065 8,555 2,127 15,511 4,991 2,712
Shares received from reinvestment
of:
Dividends...................... 32 3 101 234 22
Capital gain distributions..... 10 39
------- -------- ------- -------- ------- -------
Total shares acquired............ 4,107 8,597 2,228 15,511 5,225 2,734
Total shares redeemed............ (61) (315 ) (29) (544) (243) (85)
------- -------- ------- -------- ------- -------
Net increase in shares owned..... 4,046 8,282 2,199 14,967 4,982 2,649
Shares owned, beginning
of period......................
------- -------- ------- -------- ------- -------
Shares owned, end of period...... 4,046 8,282 2,199 14,967 4,982 2,649
======= ======== ======= ======== ======= =======
Cost of shares acquired.......... $66,229 $214,940 $ 31,573 $177,972 $56,085 $ 33,835
======= ======== ======= ======== ======= =======
Cost of shares redeemed.......... $ 899 $ 6,452 $ 415 $ 4,904 $ 2,504 $ 1,009
======= ======== ======= ======== ======= =======
</TABLE>
17
<PAGE> 19
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- concluded
- --------------------------------------------------------------------------------
4. RELATED PARTY TRANSACTIONS
Providentmutual makes certain deductions from premiums before amounts are
allocated to each Subaccount selected by the policyowner. The deductions may
include (1) state premium taxes, (2) sales charges and (3) Federal tax charges.
See original policy documents for specific charges assessed.
In addition to the aforementioned charges, a daily charge will be deducted
from the Separate Account for mortality and expense risks assumed by
Providentmutual. The charge is deducted at an annual rate of 0.65% of the
average daily net assets of the Separate Account. This charge may be increased,
but in no event will it be greater than 0.90% of the average daily net assets of
the Separate Account.
The Separate Account is also charged monthly by Providentmutual for the
cost of insurance protection. The amount of the charge is computed based upon
the amount of insurance provided during the year and the insured's attained age.
Additional monthly deductions may be made for (1) administrative charges, (2)
minimum death benefit charges, (3) first year policy charges and (4)
supplementary charges. See original policy documents for additional monthly
charges. These charges are included in the statements of changes in net assets.
During any given policy year, the first four transfers by a policyowner of
amounts in the Subaccounts are free of charge. A fee of $25 is assessed for each
additional transfer.
The Policies provide for an initial free-look period. If a policy is
cancelled within certain time constraints, the policyowner will receive a refund
equal to the policy account value plus certain deductions made under the policy.
Where state law requires a minimum refund equal to gross premiums paid, the
refund will instead equal the gross premiums paid on the policy and will not
reflect investment experience.
If a policy is surrendered or lapses within the first ten policy years, a
contingent deferred sales load charge and/or contingent deferred administrative
charge are assessed. A deferred sales charge will be imposed if a policy is
surrendered or lapses at any time within ten years after the effective date of
an increase in face amount. A portion of the deferred sales charge will be
deducted if the related increment of face amount is decreased within ten years
after such increase took effect. These charges are recorded as administrative
charges in the statements of changes in net assets.
18
<PAGE> 20
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 21
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Supplementary Information (unaudited)
- --------------------------------------------------------------------------------
The table below shows the net rates of return for the Subaccounts. The net
rate of return is applicable to net assets for a variable life policy whose
policy year commences with the beginning date of the year shown and is not based
on the average net assets in the Subaccounts during the year.
The performance for each Subaccount is shown as the net rate of return which
reflects the Subaccounts' investment income and capital gains and losses,
realized or unrealized, less charges against the Subaccounts' assets for the
period shown.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY
GROWTH MARKET BOND MANAGED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
For the year ended:
December 31, 1995... 23.66%(1) 4.28%(2) 13.42%(3) 14.12%(4)
<CAPTION>
FIDELITY- FIDELITY
AGGRESSIVE EQUITY FIDELITY HIGH
GROWTH INTERNATIONAL INCOME GROWTH INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the year ended
Deceember 31 1995... 7.98 %(1) 12.31%(5) 27.36%(1) 31.48%(1) 14.92%(6)
</TABLE>
The net rate of return was calculated from the date policyowner funds were
first allocated to the Subaccount referenced above as follows: (1) March 2,
1995, (2) February 15, 1995, (3) March 16, 1995, (4) April 24, 1995, (5) March
7, 1995, (6) March 6, 1995, (7) March 24, 1995, (8) March 21, 1995, (9) June 7,
1995 and (10) April 25, 1995.
20
<PAGE> 22
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------
FIDELITY FIDELITY NEUBERGER
FIDELITY ASSET FIDELITY INVESTMENT & BERMAN
OVERSEAS MANAGER INDEX 500 GRADE BOND BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C>
----------------------------------------------------------------------
11.29%(5) 14.60%(7) 25.79%(3) 12.27%(8) 8.29%(9)
<CAPTION>
-----------------------------------------------------------------------
NEUBERGER VAN ECK
NEUBERGER & BERMAN GOLD AND
& BERMAN LIMITED TCI VAN ECK NATURAL
GROWTH MATURITY BOND GROWTH WORLDWIDE BOND RESOURCES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
22.72 %(1) 7.06%(3) 28.43%(1) 7.35%(3) 5.60%(10)
</TABLE>
21
<PAGE> 23
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 24
- --------------------------------------------------------------------------------
To Our Variable Life Policyowners and Variable Annuity Contractowners:
- --------------------------------------------------------------------------------
We are pleased to send you the 1995 Annual Report for Market Street Fund, Inc.,
its Growth, Money Market, Bond, Managed, Aggressive Growth and International
Portfolios.
Economic Overview and Investment Perspective
Writing in the 1994 Annual Report for the Market Street Fund, I began with the
obvious--that 1994 was a year that most investors would rather forget, with the
average stock down a bit and the average bond down a lot. I also prognosticated:
"Perhaps surprisingly, a breakout of positive performance in both the fixed
income and equity markets will probably have to await compelling signs of a
slowdown in the pace of U.S. economic activity. This will be the price the Fed
will require before it can move back from its policy of constantly increasing
interest rates. Such a scenario may hopefully unfold in late 1995 or early
1996."
In the 1995 Semi-Annual Report I asked for your forgiveness for the earlier than
forecasted revival of both the stock and bond markets with total returns over
the first six months of 1995 of 20.1% for the S&P 500 Index, 14.4% for the
Russell 2000 Index, 12.6% for the Lehman Aggregate Bond Index and 2.6% for the
EAFE Index.
The final six months of 1995 picked up where the first six left off with total
returns for the year of 37.6% for the S&P 500 Index, 28.5% for the Russell 2000
Index, 18.5% for the Lehman Aggregate Bond Index and 11.2% for the EAFE Index.
What will 1996 bring? With no hint of renewed inflation on the horizon and the
Federal Reserve Board leaning more towards easing than tightening in order to
avoid pushing an already weakening economy into recession, both bond and equity
markets should enjoy modestly positive rates of return in 1996. While budget
battles and the upcoming elections could produce short term volatility, long
term patient investors should have nothing to fear from maintaining their market
exposure. As to market timers, you are on your own as always.
Review of Fund Portfolio Performance
The Annual Reviews and performance charts* for each Portfolio (other than the
Money Market Portfolio) contained in this Annual Report show the growth of
$10,000 over the period shown, assuming reinvestment of all dividends. The
performance is then compared to a relevant index. As always, it is important to
recall in interpreting these results that the advisers of the equity portfolios
of Market Street Fund do not engage in market timing. That is to say that in all
but times of great market turmoil, they endeavor to keep the vast majority of
portfolio assets invested in common stocks. Thus they attempt to add value by
stock selection utilizing the methods and in the markets specified in the Fund
Prospectus. Their performance should be judged according to how well they do
relative to market indices measuring the same type of activity.
We appreciate the opportunity to have served you in the past and look forward to
serving you during 1996 and many years into the future.
/s/ STANLEY R. REBER
Stanley R. Reber
President
The Market Street Fund, Inc.
*Past performance is not predictive of future results. Moreover, the
relationship between the performance of the Fund Portfolios and the actual
increases or decreases in a policy's cash value is not directly proportional due
to certain charges deducted from premiums and under the policies which are not
reflected in the above figures. Please see the current prospectus for an
explanation of these charges and for illustrations which take such charges into
account in calculating cash values.
1
<PAGE> 25
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors
of Market Street Fund, Inc.:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Market Street Fund, Inc.,
(comprising, respectively, the Growth, Money Market, Bond, Managed, Aggressive
Growth, and International Portfolios) as of December 31, 1995, and the related
statements of operations for the year then ended, the statements of changes in
net assets for each of the two years in the periods then ended, and financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1995, by correspondence with the custodians and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective portfolios constituting the Market Street Fund, Inc. as
of December 31, 1995, the results of their operations for the year then ended,
the changes in their net assets for each of the two years in the periods then
ended, and the financial highlights for the periods presented, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
January 31, 1996
2
<PAGE> 26
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio
1995 Annual Review
Newbold's Asset Management, Inc.
- --------------------------------------------------------------------------------
Market returns were of record magnitude in 1995. The 1995 return for the
Market Street Fund Growth Portfolio was 30.4% compared to the Standard and
Poor's 500 Stock Index return of 37.6%, which represents its strongest year
since 1958, 37 years ago. The only other comparable year for the S&P since then
was 1975, a year in which the market rebounded from the 1973-74 decline of 37%.
Records were also achieved by the Dow Jones Industrials which rose to a new high
of 5117, up 36.7% and the NASDAQ which increased 39.9% to close at 1052.
Newbold's Asset Management is happy to report strong returns as well for this
period. Perhaps more importantly, we are pleased that these returns were earned
in a very prudent and risk averse manner consistent with Newbold's "Value"
approach and style.
1995 began with doom and gloom being widely forecast by market pundits.
After all, in 1994 the stock market had only increased a paltry 1.2% as interest
rates had risen throughout the year. Further, when fourth quarter 1994 real GDP
was reported at 4.5%, it appeared that additional rate increases would be
forthcoming in 1995 in a continued attempt to slow the economy. However, this
pessimism proved to be the "darkness before dawn" as the economy slowed
meaningfully early in the year rendering inflationary concerns moot. Over the
balance of the year, the Federal Reserve reversed course and reduced short term
interest rates twice. This set the stage for a dramatic decline in the yield on
the thirty year bond from near 8% at the start of the year to 6% at year end.
Finally, despite the economic softening, corporate profits rose around 18%. As
for inflation, the consumer price index is estimated to have increased a benign
2.5% for the year. This combination of falling interest rates, strong corporate
profits and anemic inflation made the 1995 environment one of the most
hospitable times for stocks in years.
In this environment, Newbold's portfolios participated nicely given our low
P/E discipline. Our overweighting in utilities in the latter half of 1995 proved
to be particularly timely. Both the telephone and electric utility stocks were
strong outperformers. In addition, our investments in healthcare and capital
goods did very well.
In contrast to 1995, 1996 begins with optimism being widely espoused by most
economists and strategists. While Newbold's claims no expertise in predicting
the vagaries of the market, we believe that it is incumbent upon us to counsel
caution given the exceptional returns just realized and given many of the
objective market valuation statistics available. In addition to data such as
this, we note that the economic expansion will be entering its sixth year in
1996 and, that over this period, the stock market has yet to experience even a
10% pullback. While both the economy and stock market could continue to
experience good news, we believe that there is already much good news in stock
prices. We further believe that Newbold's style of investing, with a process
that incurs less risk and volatility than the market as a whole, is appropriate
now as ever.
MARKET STREET FUND
Growth Portfolio
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Fund Index+
<S> <C> <C>
Start 10000 10000
85 10177 10077
86 11325 11941
87 11511 12540
88 13641 14580
89 17794 19131
90 18220 18485
91 21590 24115
92 22614 25948
93 24924 28558
94 25522 28933
95 33279 39811
</TABLE>
Average Annual Total Return
<TABLE>
<CAPTION>
Since
1 Year 5 Year Inception*
- ------ ------ ----------
<S> <C> <C>
30.39% 12.80% 12.70%
</TABLE>
Past performance is not predictive of future performance.
+ The Index is the Standard & Poor's 500 Index, an unmanaged index of 500
U.S. common stocks that includes reinvestment of dividends.
* Inception date was December 12, 1985.
3
<PAGE> 27
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio
Schedule of Investments, December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
COMMON STOCK (86.2%)
Aerospace & Defense................................................... 3.7%
Boeing Co. ......................................................... 32,300 $ 2,531,512
United Technologies Corp. .......................................... 35,400 3,358,574
-----------
5,890,086
-----------
Automotive & Equipment................................................ 1.0%
Genuine Parts Co. .................................................. 38,000 1,558,000
-----------
Beverages............................................................. 1.1%
Anheuser-Busch Companies, Inc. ..................................... 25,900 1,732,062
-----------
Building & Building Supplies.......................................... 1.6%
Masco Corp. ........................................................ 79,900 2,506,862
-----------
Business Services, Media, etc. ....................................... 3.1%
Dun & Bradstreet Corp. ............................................. 50,700 3,282,825
New York Times Co. ................................................. 59,200 1,753,800
-----------
5,036,625
-----------
Chemicals............................................................. 1.5%
Grace (W.R.) & Co. ................................................. 40,500 2,394,563
-----------
Chemicals & Allied Products........................................... 0.5%
Dow Chemical Co. ................................................... 11,100 781,162
-----------
Computers............................................................. 0.8%
Apple Computer, Inc. ............................................... 39,700 1,265,438
-----------
Diversified........................................................... 3.0%
Corning, Inc. ...................................................... 85,600 2,739,200
Hanson Trust Plc ADR................................................ 129,000 1,967,250
ITT Industries, Inc. ............................................... 6,300 151,200
-----------
4,857,650
-----------
Drugs and Health Care................................................. 8.4%
Baxter International, Inc. ......................................... 37,400 1,566,125
Bristol-Myers Squibb................................................ 43,800 3,761,325
Rhone Poulenc SA Sponsored ADR...................................... 60,600 1,295,325
U.S. Healthcare, Inc. .............................................. 56,200 2,613,300
Warner Lambert Co. ................................................. 43,700 4,244,362
-----------
13,480,437
-----------
Electronics........................................................... 1.0%
General Electric Co. ............................................... 23,300 1,677,600
-----------
</TABLE>
4
<PAGE> 28
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio
Schedule of Investments, December 31, 1995 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
Finance--Banks........................................................ 2.7%
Bankers Trust New York Corp. ....................................... 11,600 $ 771,400
Fleet Financial Group, Inc. ........................................ 61,000 2,485,750
Nations Bank Corp. ................................................. 15,300 1,065,262
-----------
4,322,412
-----------
Finance--Insurance.................................................... 5.3%
Aetna Life & Casualty Co. .......................................... 22,800 1,578,900
Chubb Corp. ........................................................ 24,000 2,322,000
Providian Corp. .................................................... 38,800 1,581,100
St. Paul Companies, Inc. ........................................... 56,000 3,115,000
-----------
8,597,000
-----------
Foods................................................................. 2.9%
Archer-Daniels Midland Co. ......................................... 89,865 1,617,570
Conagra, Inc. ...................................................... 2,200 90,750
Unilever N.V. ...................................................... 21,600 3,040,200
-----------
4,748,520
-----------
Insurance............................................................. 0.2%
ITT Hartford Group, Inc. ........................................... 6,300 304,762
-----------
Medical & Medical Services............................................ 0.1%
Mallinckrodt Group, Inc. ........................................... 4,500 163,688
-----------
Natural Gas........................................................... 3.4%
Pacific Enterprises, Inc. .......................................... 24,100 680,825
Panhandle Eastern Corp. ............................................ 89,300 2,489,238
TransCanada Pipelines Ltd. ......................................... 162,500 2,234,375
-----------
5,404,438
-----------
Non-Ferrous Metals & Mining........................................... 1.8%
Aluminum Co. of America............................................. 56,200 2,971,575
-----------
Office Equipment & Supplies........................................... 1.0%
Pitney Bowes, Inc. ................................................. 34,600 1,626,200
-----------
Oil................................................................... 1.5%
Mobil Corp. ........................................................ 14,500 1,624,000
Royal Dutch Petroleum Co. .......................................... 6,100 860,863
-----------
2,484,863
-----------
Oil Equipment & Services.............................................. 1.4%
Schlumberger Ltd. .................................................. 33,100 2,292,175
-----------
</TABLE>
5
<PAGE> 29
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio
Schedule of Investments, December 31, 1995 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
Oil & Other Energy Sources............................................ 8.1%
Amoco Corp. ........................................................ 23,400 $ 1,681,875
Atlantic Richfield Co. ............................................. 27,500 3,045,625
Chevron Corp. ...................................................... 75,700 3,974,250
Exxon Corp. ........................................................ 27,700 2,219,463
USX Marathon Group.................................................. 104,900 2,045,550
-----------
12,966,763
-----------
Paper & Forest Products............................................... 1.7%
International Paper Co. ............................................ 41,100 1,556,663
Mead Corp. ......................................................... 23,300 1,217,425
-----------
2,774,088
-----------
Pollution Control..................................................... 2.0%
WMX Technologies, Inc. ............................................. 106,600 3,184,675
-----------
Retail Food Chains.................................................... 1.3%
American Stores Co. ................................................ 78,200 2,091,850
-----------
Retail Merchandising.................................................. 0.2%
Reebok International, Ltd. ......................................... 12,000 339,000
-----------
Retail Stores......................................................... 1.9%
Dayton-Hudson Corp. ................................................ 9,800 735,000
Limited, Inc. ...................................................... 130,800 2,272,650
-----------
3,007,650
-----------
Telecommunications.................................................... 6.2%
AT&T Corp. ......................................................... 72,100 4,668,475
ITT Corp. .......................................................... 6,300 333,900
MCI Communications Corp. ........................................... 28,000 731,500
Sprint Corp. ....................................................... 106,900 4,262,638
-----------
9,996,513
-----------
Tobacco............................................................... 2.3%
RJR Nabisco Holdings Corp. ......................................... 118,240 3,650,660
-----------
Utilities--Combination................................................ 2.6%
Baltimore Gas & Electric Co. ....................................... 45,900 1,308,150
PECO Energy Co. .................................................... 27,100 816,388
SCE Corp. .......................................................... 69,600 1,235,400
Unicom Corp. ....................................................... 26,100 854,775
-----------
4,214,713
-----------
</TABLE>
6
<PAGE> 30
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio
Schedule of Investments, December 31, 1995 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
Utilities--Electric................................................... 7.3%
Entergy Corp. ...................................................... 120,900 $ 3,536,325
FPL Group, Inc. .................................................... 56,400 2,615,550
General Public Utilities Corp. ..................................... 69,000 2,346,000
Houston Industries, Inc. ........................................... 55,600 1,348,300
Pacificorp.......................................................... 41,700 886,125
Southern Co. ....................................................... 44,500 1,095,813
-----------
11,828,113
-----------
Utilities--Telephone.................................................. 5.6%
GTE Corp. .......................................................... 85,400 3,757,600
NYNEX Corp. ........................................................ 98,300 5,308,200
-----------
9,065,800
-----------
Waste Management...................................................... 1.0%
Browning-Ferris Industries, Inc. ................................... 52,500 1,548,750
-----------
TOTAL COMMON STOCK (COST $116,043,810)............................ 138,764,693
-----------
PREFERRED STOCK (0.4%)
RJR Nabisco Holdings Corp., 1/10 Convertible Series C, Preferred
(Cost $718,513)..................................................... 106,400 678,300
-----------
</TABLE>
7
<PAGE> 31
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio
Schedule of Investments, December 31, 1995 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
NUMBER
OF SHARES VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (13.4%)
BHP Finance, 5.68%, Due 02/12/96................................................... $1,475,000 $ 1,464,890
Chrysler Financial Corp., 5.8363%, Due 01/08/96.................................... 2,000,000 2,000,000
CS First Boston, Inc., 5.76%, Due 01/11/96......................................... 2,000,000 1,996,800
Ford Motor Credit Co., 5.7888%, Due 01/17/96....................................... 2,500,000 2,500,000
General Electric Co., 5.8227%, Due 01/22/96........................................ 2,500,000 2,500,000
General Motors Acceptance Corp., 5.90%, Due 01/04/96............................... 2,000,000 1,999,016
Laclede Gas Co., 5.90%, Due 01/05/96............................................... 1,500,000 1,499,017
Laclede Gas Co., 5.65%, Due 01/26/96............................................... 2,500,000 2,490,191
Sears Roebuck and Co., 5.8218%, Due 01/16/96....................................... 2,000,000 2,000,000
Sears Roebuck and Co., 5.674%, Due 01/24/96........................................ 2,500,000 2,500,000
Temporary Investment Fund, Inc.--TempCash.......................................... 680,142 680,142
------------
TOTAL SHORT-TERM INVESTMENTS (COST $21,630,392).................................. 21,630,056
-------
TOTAL INVESTMENTS (100.0%) (COST $138,392,715)................................... $161,073,049
============
</TABLE>
* Non-Income Producing
See accompanying notes to financial statements.
8
<PAGE> 32
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Money Market Portfolio
Schedule of Investments, December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF PORTFOLIO MATURITY AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER (98.7%)
Automobiles................................................ 8.6%
Daimler Benz, 5.72%...................................... 01/16/96 $1,500,000 $ 1,496,425
Ford Motor Credit Co., 5.7824%........................... 01/17/96 1,500,000 1,500,000
-----------
2,996,425
-----------
Chemicals.................................................. 2.9%
Dupont (E.I.) de Nemours & Co., 5.57%.................... 02/06/96 1,000,000 994,430
-----------
Electronics................................................ 1.2%
Siemens Corp., 5.73%..................................... 01/19/96 405,000 403,840
-----------
Energy & Resources......................................... 4.3%
Dresser Industries, 5.65%................................ 01/29/96 1,500,000 1,493,407
-----------
Finance.................................................... 70.6%
American General Finance Corp., 5.7435%.................. 02/15/96 1,500,000 1,500,000
ANZ (Delaware), Inc., 5.72%.............................. 01/24/96 1,400,000 1,394,884
Associates Corp. of North America, 5.74%................. 02/13/96 1,500,000 1,500,000
Beneficial Corp., 5.7491%................................ 01/22/96 1,400,000 1,400,000
BHP Finance, Inc., 5.68%................................. 02/12/96 1,000,000 993,373
C.I.T. Group Holdings, Inc., 5.75%....................... 01/19/96 1,500,000 1,495,688
Chevron Oil Finance Co., 5.65%........................... 01/26/96 1,500,000 1,494,115
Commercial Credit Corp., 5.73%........................... 01/17/96 1,400,000 1,396,435
CS First Boston, Inc., 5.73%............................. 01/22/96 1,500,000 1,494,986
General Electric Capital Corp., 5.7417%.................. 02/13/96 1,500,000 1,500,000
General Motors Acceptance Corp., 5.75%................... 01/08/96 1,500,000 1,498,323
Heller Financial, Inc., 5.7777%.......................... 01/16/96 1,400,000 1,400,000
Household Finance Corp., 5.7925%......................... 01/12/96 1,400,000 1,400,000
IBM Credit Corp., 5.80%.................................. 01/24/96 200,000 199,259
Norwest Financial, Inc., 5.80%........................... 01/24/96 1,500,000 1,500,000
Prudential Funding Corp., 5.7823%........................ 01/11/96 1,400,000 1,400,000
San Paolo US Financial Co., 5.65%........................ 02/06/96 1,500,000 1,491,525
Sears Roebuck Acceptance Corp., 5.8597%.................. 01/29/96 1,500,000 1,500,000
-----------
24,558,588
-----------
</TABLE>
9
<PAGE> 33
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Money Market Portfolio
Schedule of Investments, December 31, 1995 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
PERCENTAGE NUMBER
OF PORTFOLIO MATURITY OF SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER (CONTINUED)
Natural Gas................................................ 1.4%
Laclede Gas Co., 5.75%................................... 01/18/96 $ 500,000 $ 498,642
-----------
Oil Equipment & Services................................... 1.1%
Questar Corp., 6.00%..................................... 01/12/96 375,000 374,313
-----------
Pharmaceuticals............................................ 4.3%
Sandoz Corp., 5.68%...................................... 02/23/96 1,500,000 1,487,456
-----------
Utilities--Electric........................................ 4.3%
Massachusetts Electric Co., 5.90%........................ 01/03/96 495,000 494,838
New England Power Co., 5.85%............................. 01/11/96 1,000,000 998,375
-----------
1,493,213
-----------
TOTAL COMMERCIAL PAPER (COST $34,300,314).............. 34,300,314
-----------
SHORT-TERM INVESTMENTS (1.3%)
Temporary Investment Fund, Inc.--TempCash
(Cost $441,410)........................................ 441,410 441,410
-----------
TOTAL INVESTMENTS (100.0%) (COST $34,741,724).......... $34,741,724
===========
</TABLE>
See accompanying notes to financial statements.
10
<PAGE> 34
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Bond Portfolio
1995 Annual Review
Sentinel Advisors Company
- --------------------------------------------------------------------------------
For the fiscal year ended December 31, 1995, the Market Street Fund Bond
Portfolio produced a total return of 20.5%, compared to the Lehman Aggregate
Bond Index which returned 18.5%. The Lehman Aggregate Index is considered a good
proxy for the overall fixed income market.
At this time last year, interest rates were peaking, although the Federal
Reserve continued to tighten short-term credit well into 1995. The markets were
reacting to slower economic growth, subdued inflation and a Republican Congress
that rode into power on a balanced budget platform. Thirty-year U.S. Treasury
securities peaked at approximately 8% and closed on December 31, 1995, at
approximately 5.95%. Similarly, ten-year U.S. Treasury securities peaked at
approximately 7.90% and closed on December 31, 1995, at approximately 5.57%. As
a result of this market rally, long dated assets significantly outperformed
shorter dated assets. Mortgage-backed securities, with their short average
lives, generally underperformed most other fixed income assets. The magnitude of
the rally is best illustrated by total return performance along the U.S.
Treasury curve. Two-year securities returned 10.1% for this period, five-year
securities returned 16.4%, ten-year securities returned 22.5% and thirty-year
securities returned a stunning 32.2%.
During the 1995 fiscal year, the Market Street Fund Bond Portfolio
participated in the markets by extending the average maturity from 6.3 years on
December 30, 1994, to 8.2 years on March 31, 1995. Maturity was extended again
in early October 1995 when it reached 14.6 years. As of December 29, 1995, the
average maturity stood at 14.3 years. Our commitment to the U.S. Treasury Market
was reduced during the year and the proceeds of our sales were committed to the
corporate market. U.S. Treasury securities declined from 41% of assets to 16%,
while corporate securities increased from 47% to 75%. The most significant
contributions to 1995's relatively strong performance were the extension of
average maturity and the commitment to corporates, which added incremental
income.
The 1995 market rally was attributed to a slowing economy (worldwide as well
as in the United States), low inflation and a possible budget agreement. It is
our belief that in 1996 we could see more of the same economic results coupled
with low inflation.
Richard D. Temple
MARKET STREET FUND
Bond Portfolio
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Fund Index+
<S> <C> <C>
Start 10000 10000
85 10225 10187
86 11864 11742
87 11583 12066
88 12330 13018
89 13633 14909
90 14683 16245
91 16728 18844
92 17724 20239
93 19553 22564
94 18454 21892
95 22228 25941
</TABLE>
Average Annual Total Return
<TABLE>
<CAPTION>
Since
1 Year 5 Year Inception*
- ------ ------ ----------
<S> <C> <C>
20.45% 8.65% 8.27%
</TABLE>
Past performance is not predictive of future performance.
+ The Index is the Lehman Aggregate Bond Index, an unmanaged index of bonds
reflecting average prices in the bond market.
* Inception date was December 12, 1985.
11
<PAGE> 35
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Bond Portfolio
Schedule of Investments, December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF PORTFOLIO MATURITY AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. TREASURY NOTES (4.5%)
U.S. Treasury Note, 6.375% (Cost $619,799).................. 08/15/02 $600,000 $ 629,730
---------
AGENCY OBLIGATIONS (11.9%)
Federal Home Loan Bank........................................ 0.7%
Federal Home Loan Bank, 6.835%.............................. 04/20/99 98,684 98,935
---------
Federal Home Loan Mortgage Corporation........................ 0.4%
Federal Home Loan Mortgage Corp., 9.00%..................... 11/01/16 8,365 8,760
Federal Home Loan Mortgage Corp., 8.00%..................... 03/01/17 47,656 49,145
---------
57,905
---------
Federal National Mortgage Association......................... 10.8%
Federal National Mortgage Association
Principal Strip Callable 10-10-96 @100,
8.04% Coupon If Not Called................................ 10/10/01 925,000 886,307
Federal National Mortgage Association
Principal Strip Callable 11-01-96 @100,
7.99% Coupon If Not Called................................ 11/01/01 680,000 647,673
---------
1,533,980
---------
TOTAL AGENCY OBLIGATIONS (COST $1,628,650)................ 1,690,820
---------
CORPORATE BONDS (75.6%)
Broadcasting & Publishing..................................... 3.7%
Time Warner, Inc., 7.75%.................................... 06/15/05 500,000 521,250
---------
Consumer Staples.............................................. 3.7%
American Brands, Inc., 9.125%............................... 03/01/16 500,000 523,125
---------
Finance....................................................... 4.2%
General Electric Capital Corp., 8.30%....................... 09/20/09 500,000 596,875
---------
Financial Institutions........................................ 19.3%
Donaldson, Lufkin & Jenrette, 6.875%........................ 11/01/05 500,000 512,500
First Union Corp., 6.55%.................................... 10/15/35 600,000 615,750
Lehman Brothers Holdings, 8.80%............................. 03/01/15 400,000 455,000
Midland Bank, 7.65%......................................... 05/01/25 500,000 556,875
Salomon Brothers, 6.875%.................................... 12/15/03 600,000 591,000
---------
2,731,125
---------
</TABLE>
12
<PAGE> 36
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Bond Portfolio
Schedule of Investments, December 31, 1995 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
PERCENTAGE NUMBER
OF PORTFOLIO MATURITY OF SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
Foreign.................................................... 11.5%
Banque Paribas, 6.875%................................... 03/01/09 $500,000 $ 498,750
Skandinaviska Enskilda Banken, 6.875%.................... 02/15/09 600,000 603,000
Swedish Export Credit Corp., 9.875%...................... 03/15/38 475,000 531,406
-----------
1,633,156
-----------
Insurance.................................................. 14.3%
Integon Corp., 9.50%..................................... 10/15/01 400,000 437,500
John Hancock Mutual Insurance Co., Surplus Notes,
7.375%................................................. 02/15/24 500,000 499,375
Liberty Mutual Insurance Co., 8.20%...................... 05/04/07 500,000 555,625
Prudential Insurance Co. of America, 7.65%............... 07/01/07 500,000 530,000
-----------
2,022,500
-----------
Retail--Department Stores.................................. 3.7%
May Department Stores Co., 9.125%........................ 12/01/16 500,000 527,500
-----------
Telecommunications......................................... 4.1%
Comsat Medium Term Note, 8.05%........................... 12/13/06 500,000 579,375
-----------
Utilities--Electric........................................ 7.4%
Long Island Lighting Co., 9.625%......................... 07/01/24 500,000 521,250
Mississippi Power and Light Co., 8.80%................... 04/01/05 500,000 526,875
-----------
1,048,125
-----------
Utilities--Gas............................................. 3.7%
Consolidated Natural Gas Co., 8.625%..................... 12/01/11 500,000 527,500
-----------
TOTAL CORPORATE BONDS (COST $10,264,947)............... 10,710,531
-----------
SHORT-TERM INVESTMENTS (8.0%)
Temporary Investment Fund, Inc.--TempCash................ 584,313 584,313
Texaco, Inc., 5.92%...................................... 01/04/96 555,000 554,726
----------
TOTAL SHORT-TERM INVESTMENTS (COST $1,139,039)......... 1,139,039
-----------
TOTAL INVESTMENTS (100.0%) (COST $13,652,435).......... $14,170,120
===========
</TABLE>
See accompanying notes to financial statements.
13
<PAGE> 37
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
1995 Annual Review
Sentinel Advisors Company
- --------------------------------------------------------------------------------
The Managed Portfolio recorded a total return of 24.4% for the year ended
December 31, 1995. The Portfolio's results about matched the return for the
average Lipper balanced fund, and fell between the 37.5% return for the Standard
and Poor's 500 and the 18.5% return for the Lehman Aggregate Bond Index.
The past twelve months were a very favorable period for the economy and
financial markets. Although there were fears that the economy might overheat
early in the year, resulting in higher inflation and interest rates, these fears
were overcome in the spring as economic growth tapered off to a sustainable pace
and the rate of inflation slowed significantly. Interest rates declined across
the board, resulting in a dramatic rally in the bond market. Stocks, led by a
strong performance in the financial services and technology sectors, rallied
significantly.
The Managed Portfolio began the year with an asset mix of 38% stocks, 50%
bonds, and 12% cash. During the year, we increased the Portfolio's exposure to
equities and reduced the cash position. The added exposure to equities and the
reduction in the Portfolio's cash position helped the Portfolio's performance.
Also boosting performance was the Portfolio's substantial positions in banking
and insurance and, later in the period, the strong performance of the energy and
stable consumer stocks. Limited exposure to the faltering technology sector also
positively impacted performance late in the year. The duration and interest rate
sensitivity of the fixed income portion of the Portfolio was increased early in
the fiscal year, which improved bond performance as interest rates declined.
Exposure to mortgage-backed securities was reduced and the Portfolio's tradition
of owning high-quality bonds was maintained. At the end of the fiscal year, the
Managed Portfolio's asset allocation was 53% stocks, 41% bonds and 6% cash.
Looking ahead toward 1996, we expect that the economy will continue to grow
at a pace close to its long-term average, and that inflation will remain well
under control. Corporate earnings are likely to increase at a much slower rate
than in the past two years and this should give some pause to the stock market.
While the prospects that Congress and the administration will compromise on a
budget deficit reduction package are beginning to look more remote, the failure
to reach an agreement may not have a significant impact on financial markets.
While this past year was a favorable one for your Portfolio, we would
caution against expectations for a repeat in 1996 of the spectacular performance
of both the stock and bond markets. We strongly believe that the balanced,
risk-averse investment program that has been the hallmark of the Managed
Portfolio should continue to serve shareholders well in the future.
Rodney A. Buck, CFA
Richard A. Pender, CFA
MARKET STREET FUND
Managed Portfolio
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Fund LA Index+ S&P Index#
<S> <C> <C> <C>
Start 10000 10000 10000
85 10299 10187 10077
86 11543 11742 11941
87 11481 12066 12540
88 12631 13018 14580
89 14482 14909 19131
90 13235 16245 18485
91 15947 18844 24115
92 17854 20239 25948
93 19928 22564 28558
94 19566 21892 28933
95 24346 25941 39811
</TABLE>
Average Annual Total Return
<TABLE>
<CAPTION>
Since
1 Year 5 Year Inception*
- ------ ------ ----------
<S> <C> <C>
24.43% 12.96% 9.25%
</TABLE>
Past performance is not predictive of future performance.
+ The Index is the Lehman Aggregate Bond Index, an unmanaged index of bonds
reflecting average prices in the bond market.
# The Index is the Standard & Poor's 500 Index, an unmanaged index of 500
U.S. common stocks that includes reinvestment of dividends.
* Inception date was December 12, 1985.
14
<PAGE> 38
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Schedule of Investments, December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (52.2%)
Consumer Discretionary................................................. 4.8%
*Coleman Co., Inc. .................................................. 5,000 $ 175,625
Ford Motor Co. ...................................................... 9,000 261,000
May Department Stores Co. ........................................... 6,700 283,075
Nordstrom, Inc. ..................................................... 4,500 182,250
Penney (J.C.) Co., Inc. ............................................. 6,900 328,612
*Schweitzer Manduit International, Inc. ............................. 400 9,250
Sears, Roebuck and Co. .............................................. 12,000 468,000
----------
1,707,812
----------
Consumer Staples....................................................... 7.7%
American Brands, Inc. ............................................... 5,500 245,438
Coca-Cola Company.................................................... 2,500 185,625
CPC International, Inc. ............................................. 5,000 343,125
Donnelley (R.R.) & Sons Co. ......................................... 7,500 295,313
Echlin, Inc. ........................................................ 9,000 328,500
Gannett, Inc. ....................................................... 2,900 177,987
Hannaford Bros. Co. ................................................. 7,000 172,375
McGraw Hill, Inc. ................................................... 3,500 304,938
Philip Morris Company, Inc. ......................................... 3,500 316,750
Sara Lee Corp. ...................................................... 12,000 382,500
----------
2,752,551
----------
Energy................................................................. 8.4%
Amoco Corp. ......................................................... 5,700 409,688
Atlantic Richfield Co. .............................................. 3,100 343,325
Chevron Corp. ....................................................... 4,000 210,000
Exxon Corp. ......................................................... 4,000 320,500
Grace (W.R.) & Co. .................................................. 3,000 177,375
Halliburton Co. ..................................................... 4,600 232,875
Mobil Corp. ......................................................... 3,000 336,000
Royal Dutch Petroleum Co. ........................................... 2,500 352,812
Schlumberger Ltd. ................................................... 5,000 346,250
Tenneco, Inc. ....................................................... 5,600 277,900
----------
3,006,725
----------
</TABLE>
15
<PAGE> 39
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Schedule of Investments, December 31, 1995 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Finance................................................................ 8.9%
Allstate Corp. ...................................................... 10,562 $ 434,362
American Express Co. ................................................ 7,500 310,313
American General Corp. .............................................. 6,000 209,250
American International Group, Inc. .................................. 4,000 370,000
Banc One Corp. ...................................................... 6,825 257,644
Bank America......................................................... 5,000 323,750
Chase Manhattan Corp. ............................................... 3,500 212,188
Citicorp............................................................. 3,500 235,375
Equitable of Iowa.................................................... 10,000 321,250
First Union Corp. ................................................... 5,500 305,938
Morgan (J.P.) & Co., Inc. ........................................... 2,500 200,624
----------
3,180,694
----------
Health................................................................. 4.7%
Abbott Laboratories.................................................. 6,000 250,500
American Homes Products Corp. ....................................... 4,000 388,000
Columbia/HCA Healthcare Corp. ....................................... 7,000 355,250
Johnson & Johnson.................................................... 4,500 385,313
Pfizer, Inc. ........................................................ 4,500 283,500
----------
1,662,563
----------
Insurance.............................................................. 0.3%
*ITT Hartford Group, Inc. ........................................... 2,200 106,425
----------
Materials & Processing................................................. 4.0%
*Crown Cork & Seal Co., Inc. ........................................ 8,000 334,000
Kimberly-Clark Corp. ................................................ 4,000 331,000
PPG Industries, Inc. ................................................ 6,000 274,500
Sherwin Williams Co. ................................................ 7,000 285,250
Witco Corp. ......................................................... 7,000 204,750
----------
1,429,500
----------
Producer Durables...................................................... 4.1%
Emerson Electric Co. ................................................ 5,000 408,750
General Electric Co. ................................................ 6,000 432,000
Grainger (W.W.), Inc. ............................................... 3,500 231,875
ITT Industries, Inc. ................................................ 2,200 52,800
Rockwell International Corp. ........................................ 6,300 333,112
----------
1,458,537
----------
Services............................................................... 1.1%
Omnicom Group, Inc. ................................................. 10,200 379,949
----------
</TABLE>
16
<PAGE> 40
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Schedule of Investments, December 31, 1995 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Technology............................................................. 0.6%
AMP, Inc. ........................................................... 6,000 $ 230,250
----------
Telecommunications..................................................... 0.3%
ITT Corp. ........................................................... 2,200 116,600
----------
Transportation......................................................... 1.5%
Illinois Central Corp. Common Series A............................... 5,500 211,063
Union Pacific Corp. ................................................. 5,000 330,000
----------
541,063
----------
Utilities.............................................................. 5.8%
AT&T Corp. .......................................................... 7,000 453,250
Enron Corp. ......................................................... 8,000 305,000
FPL Group, Inc. ..................................................... 7,000 324,625
GTE Corp. ........................................................... 8,500 374,000
Sonat, Inc. ......................................................... 6,300 224,438
U.S. West Communications Group....................................... 6,500 232,374
*U.S. West Media Group............................................... 6,500 123,500
----------
2,037,187
----------
TOTAL COMMON STOCK (COST $14,813,172).............................. 18,609,856
----------
PREFERRED STOCK (0.9%)
General Motors 1/10 Convertible Class E,
Series C, Preferred, $3.25 (Cost $258,533)......................... 4,500 329,625
----------
CORPORATE BONDS (16.1%)
Broadcasting........................................................... 2.9%
Time Warner, Inc., 7.75%, Due 06/15/05............................... $1,000,000 1,042,500
----------
Consumer Staples....................................................... 1.5%
American Brands, Inc., 9.125%, Due 03/01/16.......................... 500,000 523,125
----------
Finance................................................................ 2.9%
General Electric Capital Corp., 8.30%, Due 09/20/98.................. 500,000 596,875
Lehman Brothers Holdings, 8.80%, Due 03/01/15........................ 400,000 455,000
----------
1,051,875
----------
Financial Institutions................................................. 2.8%
Donaldson, Lufkin, Jenrette, 6.875%, Due 11/01/05.................... 500,000 512,500
Salomon Brothers, 6.875%, Due 12/15/03............................... 500,000 492,500
----------
1,005,000
----------
</TABLE>
17
<PAGE> 41
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Schedule of Investments, December 31, 1995 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
Insurance.............................................................. 1.4%
John Hancock Mutual Insurance Co., Surplus Notes,
7.375%, Due 02/15/24............................................... $ 500,000 $ 499,375
-----------
Retail Merchandising................................................... 1.5%
May Department Stores Co., 9.125%, Due 12/01/16...................... 500,000 527,500
-----------
Telecommunications..................................................... 1.6%
Comsat Medium Term Note, 8.05%, Due 12/13/06......................... 500,000 579,375
-----------
Utilities.............................................................. 1.5%
Long Island Lighting Debentures, 9.625%, Due 07/01/24................ 500,000 521,250
-----------
TOTAL CORPORATE BONDS (COST $5,583,025)............................ 5,750,000
-----------
U.S TREASURY BONDS (7.8%)
U.S. Treasury Bond, 5.875%, Due 11/15/05............................. 1,000,000 1,022,220
U.S. Treasury Bond, 7.625%, Due 02/15/25............................. 800,000 977,344
U.S. Treasury Bond, 6.875%, Due 08/15/25............................. 700,000 789,159
-----------
TOTAL U.S. TREASURY BONDS (COST $2,645,294)........................ 2,788,723
-----------
U.S. TREASURY NOTES (15.8%)
U.S. Treasury Note, 5.125%, Due 03/31/98............................. 1,000,000 998,550
U.S. Treasury Note, 5.125%, Due 04/30/98............................. 1,000,000 997,860
U.S. Treasury Note, 6.25%, Due 08/31/00.............................. 3,500,000 3,621,590
-----------
TOTAL U.S. TREASURY NOTES (COST $5,545,358)........................ 5,618,000
-----------
AGENCY OBLIGATIONS (1.8%)
Federal National Mortgage Association
Principal Strip Callable 10/10/96 @ 100,
8.04% Coupon If Not Called, Due 10/10/01........................... 380,000 364,104
Federal National Mortgage Association
Principal Strip Callable 11/01/96 @ 100,
7.99% Coupon If Not Called, Due 11/01/01........................... 280,000 266,689
-----------
TOTAL AGENCY OBLIGATIONS (COST $606,071)........................... 630,793
-----------
SHORT-TERM INVESTMENTS (5.4%)
Temporary Investment Fund, Inc.--TempCash............................ 723,249 723,249
Texaco, Inc., 5.92%, Due 01/04/96.................................... 1,200,000 1,199,408
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $1,922,657)..................... 1,922,657
-----------
TOTAL INVESTMENTS (100.0%) (COST $31,374,110)...................... $35,649,654
===========
</TABLE>
* Non-Income Producing
See accompanying notes to financial statements.
18
<PAGE> 42
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Growth Portfolio
1995 Annual Review
Sentinel Advisors Company
- --------------------------------------------------------------------------------
Despite investors' low expectations for equities in December 1994, the broad
stock market averages produced exceptional returns this year. The decline in
long-term interest rates was a key factor contributing to higher overall stock
prices. To be sure, above average growth of corporate profits was an important
contributing factor. Investors witnessed exceptional relative strength in the
shares of technology stocks. Surging demand for PCs, software, and wireless
communication products together with fascination over prospects for the Internet
were some of the primary reasons for the popularity of this group.
While the Aggressive Growth Portfolio was exposed to the above trends, our
risk averse investment approach prevented your portfolio from participating
fully in some of the more speculative segments of the market that provided much
of the leadership for this year's stock market rally. For the year, the
Aggressive Growth Portfolio produced a total return of 13.5%. This does not
compare favorably to the 31.5% gain for the comparable Lipper small company
growth fund universe or the 28.5% gain for the Russell 2000 Index of smaller
capitalization equities.
Looking forward to 1996, we believe that investors' current high
expectations and an almost universal enthusiasm for equities could lead to a
measure of disappointment. It is unlikely that 1995's surging corporate profits
and markedly declining interest rates will be repeated this year. While equity
investors may not witness an overall market decline in 1996, we would not be
surprised to see some rougher seas or increased volatility. However, we continue
to believe that the shares of many smaller capitalized companies remain
relatively attractive longer-term investments. Importantly, many of these
smaller companies, including selected technology firms, are very well-positioned
to benefit from the strong capital flows and dominant commercial trends within
the U.S. and international economies.
Effective December 31, 1995, Louis E. Conrad II, the manager of your
Portfolio, resigned from Sentinel Advisors Company. The Aggressive Growth
Portfolio is now managed by a team of professionals including Keniston P.
Merrill, the current Chairman and Chief Executive Officer of Sentinel Advisors
Company, Richard A. Pender, CFA, and Scott T. Brayman, CFA. Combined, the team
now managing your Portfolio has an average of 20 years of investment experience.
We remain dedicated to our mission of maintaining a realistic balance
between opportunities for capital appreciation and capital preservation. We will
endeavor to identify and invest in the shares of well-managed and financially
strong smaller capitalized companies that are positioned for superior long-term
capital appreciation. We fully expect that your new investment team's efforts
will prove worthy of your continued confidence and investment.
Keniston P. Merrill
Richard A. Pender, CFA
Scott T. Brayman, CFA
MARKET STREET FUND
Aggressive Growth Portfolio
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Fund Index+
<S> <C> <C>
Start 10000 10000
89 10558 10340
90 11695 8324
91 18283 12161
92 18755 14399
93 19730 17120
94 19730 16808
95 22389 21599
</TABLE>
Average Annual Total Return
<TABLE>
<CAPTION>
Since
1 Year 5 Year Inception*
- ------ ------ ----------
<S> <C> <C>
13.48% 13.87% 12.84%
</TABLE>
Past performance is not predictive of future performance.
+ The Index is the Russell 2000 Index, an unmanaged stock index of small
capitalization companies which includes reinvestment of all income.
* Inception date was May 1, 1989.
19
<PAGE> 43
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Growth Portfolio
Schedule of Investments, December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
COMMON STOCK (75.8%)
Consumer Discretionary................................................. 10.7%
*Ethan Allen Industries, Inc. ....................................... 11,200 $ 228,200
Harman International Industries, Inc. ............................... 7,760 311,370
*IHOP Corp. ......................................................... 16,600 431,600
Monro Muffler Brake, Inc. ........................................... 22,050 305,944
Pep Boys-Manny, Moe & Jack........................................... 21,000 538,125
*Stein Mart, Inc. ................................................... 29,800 327,800
*Strouds, Inc. ...................................................... 25,500 105,187
Talbots, Inc. ....................................................... 6,000 172,500
*Urban Outfitters, Inc. ............................................. 4,600 106,950
-----------
2,527,676
-----------
Consumer Staples....................................................... 3.9%
*American Safety Razor Co. .......................................... 20,400 160,650
Goodmark Foods, Inc. ................................................ 14,900 264,475
Smart & Final, Inc. ................................................. 21,700 461,125
Tootsie Roll Industries, Inc. ....................................... 900 35,663
-----------
921,913
-----------
Energy................................................................. 2.6%
*California Energy Co., Inc. ........................................ 31,000 604,500
-----------
Environmental Services................................................. 0.6%
*Waste Management International Plc ADR.............................. 12,500 134,375
-----------
Financial.............................................................. 6.8%
BHC Financial, Inc. ................................................. 12,000 216,000
Cash America International, Inc. .................................... 27,400 150,700
Duff & Phelps Credit Rating Co. ..................................... 6,000 86,250
*DVI Financial Corp. ................................................ 29,000 406,000
First Commerce Corp. ................................................ 5,000 160,000
Litchfield Financial Corp. .......................................... 25,615 332,995
Phoenix Duff & Phelps Corp. ......................................... 25,000 171,875
Wilmington Trust Corp. .............................................. 2,500 77,188
-----------
1,601,008
-----------
</TABLE>
20
<PAGE> 44
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Growth Portfolio
Schedule of Investments, December 31, 1995 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
Health................................................................. 0.1%
Hillenbrand Industries, Inc. ........................................ 800 $ 27,100
-----------
Healthcare & Medical Equipment......................................... 5.6%
Allergan, Inc. ...................................................... 10,500 341,250
Minntech Corp. ...................................................... 24,100 474,469
*Respironics, Inc. .................................................. 4,600 96,600
*Sunrise Medical, Inc. .............................................. 21,500 397,750
-----------
1,310,069
-----------
Healthcare Services.................................................... 10.4%
*Advocate, Inc. ..................................................... 26,000 289,250
*Apria Healthcare Group, Inc. ....................................... 11,400 322,050
*Genesis Health Ventures............................................. 11,000 401,500
*Living Centers of America........................................... 17,000 595,000
*Renal Treatment Centers, Inc. ...................................... 9,700 426,800
*Res-Care, Inc. ..................................................... 24,400 408,700
-----------
2,443,300
-----------
Insurance.............................................................. 3.0%
*American Travellers Corp. .......................................... 18,500 520,312
*Exstar Financial Corp. ............................................. 8,200 9,225
*Penn Treaty American Corp. ......................................... 10,100 166,650
-----------
696,187
-----------
Machinery (Electric)................................................... 1.4%
Stewart & Stevenson Services, Inc. .................................. 13,000 328,250
-----------
Materials & Processing................................................. 3.5%
J & L Specialty Steel, Inc. ......................................... 19,200 360,000
*Material Sciences Corp. ............................................ 31,100 462,612
-----------
822,612
-----------
Oil Equipment & Services............................................... 3.0%
*Smith International, Inc. .......................................... 29,900 702,650
-----------
Producer Durables...................................................... 1.4%
*United States Filter Corp. ......................................... 12,000 319,500
-----------
Real Estate Investment Trust........................................... 2.1%
ROC Communities...................................................... 20,900 501,600
-----------
</TABLE>
21
<PAGE> 45
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Growth Portfolio
Schedule of Investments, December 31, 1995 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
Services............................................................... 3.4%
*ADT Ltd. ........................................................... 25,100 $ 376,500
*Healthcare Services Group........................................... 35,500 332,812
Kelly Services, Inc. ................................................ 3,100 86,025
-----------
795,337
-----------
Technology............................................................. 14.1%
*Amphenol Corp. ..................................................... 24,000 582,000
*California Microwave, Inc. ......................................... 25,000 415,625
*Dynatech Corp. ..................................................... 37,500 637,500
*Filenet Corp. ...................................................... 12,500 587,500
*Landmark Graphics Corp. ............................................ 21,000 488,250
*Microtouch Systems, Inc. ........................................... 3,800 46,075
*Sterling Software, Inc. ............................................ 800 49,900
*Verifone, Inc. ..................................................... 18,500 529,563
-----------
3,336,413
-----------
Transportation......................................................... 1.0%
Frozen Food Express Industries, Inc. ................................ 26,375 230,781
-----------
Waste Management....................................................... 2.2%
*Western Waste Industries............................................ 19,600 536,550
-----------
TOTAL COMMON STOCK (COST $16,724,800).............................. 17,839,821
-----------
PREFERRED STOCK (0.3%)
Phoenix Duff & Phelps Preferred Convertible
Series A $1.50, (Cost $71,441)..................................... 2,500 63,125
-----------
SHORT-TERM INVESTMENTS (23.9%)
Beneficial Corp., 5.77%, Due 01/08/96................................................ $1,000,000 998,878
Ford Motor Credit Co., 5.71%, Due 01/03/96........................................... 1,000,000 999,683
Norwest Financial Corp., 5.84%, Due 01/11/96......................................... 1,000,000 998,378
Prudential Funding Corp., 5.63%, Due 01/17/96........................................ 1,000,000 997,497
Texaco, Inc., 5.63%, Due 01/22/96.................................................... 1,000,000 996,716
Temporary Investment Fund, Inc.--TempCash............................................ 637,920 637,920
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $5,629,072)..................................... 5,629,072
-----------
TOTAL INVESTMENTS (100.0%) (COST $22,425,313)...................................... $23,532,018
===========
</TABLE>
* Non-Income Producing
See accompanying notes to financial statements.
22
<PAGE> 46
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio
1995 Annual Review
The Boston Company Asset Management, Inc.
- --------------------------------------------------------------------------------
The 1995 return for the Market Street Fund International Portfolio was
14.3%, compared to the EAFE Index return of 11.2% and the Lipper International
Fund Returns of 9.3%. International markets lagged the U.S. stock market quite
considerably. Weak corporate profit growth in Continental Europe and Japan along
with uncertainties in the emerging markets which affected the returns of the
Southeast Asian markets led to moderate stock returns. The best markets of the
year in U.S. dollars were Switzerland (+44%) and Sweden (+33%). Spain (+30%),
Netherlands (+28%), the UK (+21%) and Hong Kong (+23%) rose strongly as well.
The lagging returns came from Italy (+1.0%), Japan (+0.7%), Singapore (+6.5%),
Malaysia (+5.2%) and Austria (-4.7%).
Our outperformance for the year resulted from an overweighted position in
Europe (55.6% versus the EAFE's 49.7%) which returned 21.6%, and an underweight
position in Japan (28.3% versus 40.9%) which delivered a return of 0.7%. More
importantly, the stock selection across most of the markets added to our
outperformance.
For the fourth quarter, your returns were 3.2% compared to the EAFE Index of
4.0% and the Lipper International Fund Index of 1.1%. One of the best performing
major markets was Japan which rose 5.1%. Signs of a recovering economy and an
improving banking industry outlook translated into a strong stock market. Japan
is now up 37% in local terms from its lows in early July. The worst market
during the quarter was Finland, declining -29.1% due to the profits waning from
Nokia, the telecommunication equipment company, which makes up a large percent
of the Finnish market but not a part of our portfolio.
Looking forward into 1996 our focus will continue to be on stock selection.
Although studies show that market timing, if correct, can have a positive impact
on performance in the short term, most investors are not consistently successful
in market timing one country not to mention two dozen over the long term. Our
excess returns over time have resulted from positive stock selection as
evidenced by attribution analysis. By continuing to concentrate on finding value
securities with good business fundamentals and earnings growth, we expect that
we will be able to add value to our clients' portfolios.
MARKET STREET FUND
International Portfolio
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Fund Index+
<S> <C> <C>
Start 10000 10000
91 9712 10030
92 9003 8806
93 12254 11677
94 12286 12585
95 14044 13994
</TABLE>
Average Annual Total Return
<TABLE>
<CAPTION>
Since
1 Year Inception*
- ------ ----------
<S> <C>
14.31% 8.49%
</TABLE>
Past performance is not predictive of future performance.
+ The Index is the Morgan Stanley Capital International Europe, Australia,
Far East (EAFE) Index, an unmanaged index of more than 900 companies from
these regions. The EAFE Index reflects the prices of these common stocks
translated into U.S. dollars with dividends reinvested net of any foreign
taxes.
* Inception date was November 1, 1991.
23
<PAGE> 47
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio
Schedule of Investments, December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK AND PREFERRED STOCK (98.4%)
Austria.................................................................. 0.5%
Creditanstalt PS....................................................... 1,200 $ 171,684
-----------
Australia................................................................ 3.9%
Amcor Ltd. ............................................................ 45,000 317,742
Boral Ltd. ............................................................ 104,386 263,791
*Goodman Fielder....................................................... 146,000 146,496
Southcorp Holdings..................................................... 110,000 255,903
Westpac Banking Corp. ................................................. 80,498 356,591
-----------
1,340,523
-----------
Belgium.................................................................. 0.6%
Electrabel............................................................. 800 190,153
-----------
France................................................................... 5.5%
Alcatel Alsthom Cie Generale D'electrisite SA.......................... 539 46,489
C.S.F. (Thomson-C.S.F.)................................................ 11,162 247,639
*Chargeurs............................................................. 1,650 326,966
Danone................................................................. 2,241 368,998
Guyenne Et Gascogne SA................................................. 1,400 377,528
Renault................................................................ 3,000 87,028
Societe Generale....................................................... 3,871 475,275
-----------
1,929,923
-----------
Germany.................................................................. 8.5%
Adidas AG.............................................................. 7,500 397,382
Bayer AG............................................................... 2,000 528,447
Deutsche Bank AG....................................................... 10,000 474,485
R.W.E. Deag AG Preferred............................................... 1,500 418,848
*SGL Carbon............................................................ 5,000 387,435
Siemens AG............................................................. 650 356,195
Veba AG................................................................ 9,000 382,618
-----------
2,945,410
-----------
Hong Kong................................................................ 2.5%
Cheung Kong Holdings................................................... 65,000 396,182
HSBC Holdings Plc...................................................... 19,884 301,058
Yue Yuen Industrial.................................................... 650,000 172,436
-----------
869,676
-----------
</TABLE>
24
<PAGE> 48
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio
Schedule of Investments, December 31, 1995 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK AND PREFERRED STOCK (CONTINUED)
Italy.................................................................... 1.6%
Fiat SPA............................................................... 50,000 $ 162,571
STET Di Risp........................................................... 200,000 408,318
-----------
570,889
-----------
Japan.................................................................... 29.5%
Canon, Inc. ........................................................... 18,000 326,321
Chudenko Corp. ........................................................ 7,000 240,233
Dai-Tokyo Fire and Marine Insurance.................................... 85,000 649,346
Fuji Photo Film Co. ................................................... 7,000 202,230
Hitachi Koki Co. ...................................................... 50,000 453,708
Hitachi Ltd. .......................................................... 45,000 453,708
Honda Motor Co. Ltd. .................................................. 20,000 412,991
Ito-Yokado Co. Ltd. ................................................... 11,000 678,235
Kao Corp. ............................................................. 45,000 558,410
Kyushu Electric Power Co., Inc. ....................................... 7,600 179,777
Mabuchi Motors......................................................... 9,000 560,155
Mikuni Coca-Cola Bottling Co., Ltd. ................................... 35,000 478,429
Mitsubishi Heavy Industries, Ltd. ..................................... 80,000 638,294
Murata Manufacturing Co., Ltd. ........................................ 15,000 545,322
Nishimatsu Construction................................................ 40,000 469,220
*Ono Pharmaceutical.................................................... 15,000 574,406
Sekisui House.......................................................... 50,000 639,845
Sumitomo Corp. ........................................................ 35,000 356,277
Toshiba Corp. ......................................................... 65,000 509,792
Toyota Motor Corp. .................................................... 22,000 467,087
Yamanouchi Pharmaceuticals............................................. 17,000 365,875
Yamato Transportation.................................................. 43,000 512,748
-----------
10,272,409
-----------
Malaysia................................................................. 0.5%
*Affin Holdings........................................................ 88,000 170,166
-----------
Netherlands.............................................................. 5.3%
ABN--AMRO Holding...................................................... 13,022 586,331
Hollandsche Beton...................................................... 2,050 309,362
International Nederlanden Group........................................ 6,545 432,168
*Koninklijke K.N.P. ................................................... 11,000 279,150
Stad Rotterdam......................................................... 8,376 246,611
-----------
1,853,622
-----------
</TABLE>
25
<PAGE> 49
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio
Schedule of Investments, December 31, 1995 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK AND PREFERRED STOCK (CONTINUED)
New Zealand.............................................................. 0.9%
Air New Zealand........................................................ 48,000 $ 163,488
Brierley Investments................................................... 210,000 166,436
-----------
329,924
-----------
Norway................................................................... 0.8%
*Christiana Bank....................................................... 72,000 168,474
*Orkla................................................................. 2,000 95,494
-----------
263,968
-----------
Singapore................................................................ 1.2%
*Far East Levingston................................................... 38,000 179,283
Malaysian International Shipping....................................... 78,000 229,103
-----------
408,386
-----------
Spain.................................................................... 1.1%
Iberdrola I............................................................ 43,000 393,487
-----------
Sweden................................................................... 1.0%
AGA B Free............................................................. 25,000 344,763
-----------
Switzerland.............................................................. 6.3%
Ciba-Geigy AG.......................................................... 600 529,335
Magazine Zum Globus.................................................... 100 61,712
Magazine Zum Globus Participating Certificates, Zurich................. 400 229,465
Nestle SA.............................................................. 500 554,542
Schweizerischer Bankverein............................................. 1,275 521,969
Zurich Versicherungs................................................... 1,000 299,870
-----------
2,196,893
-----------
United Kingdom........................................................... 11.5%
Boots Ordinary Plc..................................................... 72,046 655,449
British Airways........................................................ 15,123 109,410
BTR Ordinary Plc....................................................... 124,312 634,952
Laird Group Ordinary................................................... 95,000 570,039
National Westminster Bank.............................................. 66,968 674,751
Powergen Plc........................................................... 85,903 710,165
RTZ Corp. ............................................................. 25,000 363,285
Scapa Group............................................................ 85,603 295,035
-----------
4,013,086
-----------
</TABLE>
26
<PAGE> 50
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio
Schedule of Investments, December 31, 1995 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK AND PREFERRED STOCK (CONTINUED)
United States............................................................ 17.2%
Alcatel Alsthom ADR.................................................... 19,092 $ 334,110
British Airways Plc ADR................................................ 4,000 291,000
British Gas Plc ADR.................................................... 12,000 469,500
Corporacion Bancaria De Espanol ADR.................................... 17,000 342,125
Elf Aquitaine ADR...................................................... 15,751 578,849
Espirito Santo ADR..................................................... 9,000 106,875
Hanson Trust Plc ADR................................................... 38,000 579,500
Instituto Mobiliare Italiano ADR....................................... 14,000 264,250
Philips N.V. ADR....................................................... 9,500 340,813
Repsol ADR............................................................. 17,000 558,875
*Royal PTT Nederland N.V. ADR.......................................... 5,500 199,375
Tele Danmark ADR....................................................... 14,000 386,750
*Telecom Portugal S.A. ADR............................................. 12,000 228,000
Telefonos De Mexico S.A.-ADR........................................... 7,500 239,063
Toyota Motor Corp. ADR................................................. 1,500 63,375
Unilever N.V.--New York Shares......................................... 3,000 422,250
*Volvo AB 'B' ADR...................................................... 10,000 205,938
YPF Sociedad Anonima ADR............................................... 18,000 389,250
-----------
5,999,898
-----------
TOTAL COMMON STOCK AND PREFERRED STOCK (COST $31,529,266)............ 34,264,860
-----------
SHORT-TERM INVESTMENTS (1.6%)
Temporary Investment Fund, Inc.--TempCash
(Cost $567,744)...................................................... 567,744 567,744
TOTAL INVESTMENTS (100.0%) (COST $32,097,010)........................ $34,832,604
</TABLE>
* Non-Income Producing
See accompanying notes to financial statements.
27
<PAGE> 51
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statements of Assets and Liabilities, December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at value (cost
$138,392,715, $34,741,724,
$13,652,435, $31,374,110,
$22,425,313, $32,097,010,
respectively) (see
accompanying schedules)....... $161,073,049 $34,741,724 $14,170,120 $35,649,654 $23,532,018 $34,832,604
Cash............................ 1 1 1 1 1 1,792,690*
Interest receivable............. 42,266 59,788 216,368 241,636 3,009 3,652
Dividends receivable............ 373,206 -- -- 39,667 12,541 81,851
Foreign taxes receivable........ -- -- -- -- -- 6,432
Receivable from affiliated
insurance company............. -- 26 -- -- -- 9
Prepaid expenses................ -- -- -- -- -- 1,659
Receivable for investments
sold.......................... 925,136 -- -- 45,634 658,451 --
Receivable for fund shares
sold.......................... 65,575 -- 32,030 66,271 54,613 67,034
------------ ----------- ----------- ----------- ----------- -----------
Total assets.................. 162,479,233 34,801,539 14,418,519 36,042,863 24,260,633 36,785,931
------------ ----------- ----------- ----------- ----------- -----------
LIABILITIES
Accrued expenses................ 201,189 30,461 15,595 40,497 24,313 37,406
Dividend payable................ -- 155,926 -- -- -- --
Payable for investments
purchased..................... 379,093 -- -- -- 413,664 106,435
Payable for fund shares
redeemed...................... -- -- 569 -- 225 8
------------ ----------- ----------- ----------- ----------- -----------
Total liabilities............. 580,282 186,387 16,164 40,497 438,202 143,849
------------ ----------- ----------- ----------- ----------- -----------
Net assets.................... $161,898,951 $34,615,152 $14,402,355 $36,002,366 $23,822,431 $36,642,082
============ =========== =========== =========== =========== ===========
Number of shares of $.01 par
value common stock, issued and
outstanding................... 9,894,999 34,615,152 1,309,787 2,537,951 1,370,597 2,850,218
============ =========== =========== =========== =========== ===========
Net asset value, offering and
redemption price per share.... $16.36 $1.00 $11.00 $14.19 $17.38 $12.86
============ =========== =========== =========== =========== ===========
</TABLE>
* Includes foreign currency with a cost of $1,797,306 and a value of
$1,792,690.
See accompanying notes to financial statements.
28
<PAGE> 52
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statements of Operations for the Year Ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends...................... $ 4,425,229 $ -- $ -- $ 461,865 $ 122,149 $ 720,153
Interest....................... 933,531 1,616,475 849,828 1,130,233 280,390 113,341
Less: foreign taxes
withheld................... (38,026) -- -- (2,049) -- (83,101)
----------- ---------- ---------- ---------- ---------- ----------
Total Income................. 5,320,734 1,616,475 849,828 1,590,049 402,539 750,393
----------- ---------- ---------- ---------- ---------- ----------
EXPENSES:
Investment advisory fee........ 477,525 67,727 42,737 130,149 95,751 238,250
Administration fee............. 143,377 27,831 12,582 33,660 19,833 62,717
Directors' fee................. 11,952 2,333 1,048 2,782 1,662 2,724
Transfer agent fee............. 6,483 2,467 1,937 2,670 2,189 2,637
Custodian fee.................. 28,031 8,519 3,491 10,343 9,099 20,011
Legal fees..................... 9,553 1,882 840 2,226 1,326 2,175
Audit fees..................... 16,993 3,302 1,491 3,981 2,352 3,880
Printing....................... 52,152 9,690 4,552 12,508 7,130 11,968
Taxes.......................... 87,188 6,920 3,823 14,902 5,878 12,607
Miscellaneous.................. 12,934 4,074 830 2,552 2,295 7,645
----------- ---------- ---------- ---------- ---------- ----------
846,188 134,745 73,331 215,773 147,515 364,614
Less: expenses reimbursed by
affiliated insurance
company...................... (74) (52) -- -- (15) (9)
----------- ---------- ---------- ---------- ---------- ----------
Total expenses............... 846,114 134,693 73,331 215,773 147,500 364,605
----------- ---------- ---------- ---------- ---------- ----------
Net investment income
(loss)..................... 4,474,620 1,481,782 776,497 1,374,276 255,039 385,788
----------- ---------- ---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss)
from:
Investments................ 7,744,759 -- 503,141 1,471,361 2,569,743 1,793,161
Foreign currency related
translations............. (16,477) -- -- -- -- 56,555
----------- ---------- ---------- ---------- ---------- ----------
7,728,282 -- 503,141 1,471,361 2,569,743 1,849,716
----------- ---------- ---------- ---------- ---------- ----------
Net change in unrealized
appreciation (depreciation)
from:
Investments................ 24,145,662 -- 950,760 4,221,556 (406,827) 2,022,420
Foreign currency related
translations............. -- -- -- -- -- 752
----------- ---------- ---------- ---------- ---------- ----------
24,145,662 -- 950,760 4,221,556 (406,827) 2,023,172
----------- ---------- ---------- ---------- ---------- ----------
Net gain (loss) on investments
and foreign currency
transactions................. 31,873,944 -- 1,453,901 5,692,917 2,162,916 3,872,888
----------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in
net assets resulting from
operations................... $36,348,564 $1,481,782 $2,230,398 $7,067,193 $2,417,955 $ 4,258,676
=========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
29
<PAGE> 53
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statements of Changes in Net Assets for the Year Ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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)...................... $ 4,474,620 $ 1,481,782 $ 776,497 $ 1,374,276 $ 255,039 $ 385,788
Net realized gain (loss) on
investments and foreign
currency related
transactions................ 7,728,282 -- 503,141 1,471,361 2,569,743 1,849,716
Net change in unrealized
appreciation (depreciation)
on investments and foreign
currency translations....... 24,145,662 -- 950,760 4,221,556 (406,827) 2,023,172
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net
assets resulting from
operations.................. 36,348,564 1,481,782 2,230,398 7,067,193 2,417,955 4,258,676
Distributions:
From net investment income.... (4,157,531) (1,481,782) (736,126) (1,414,623) -- (148,141)
From net realized gains....... (8,715,516) -- -- (33,117) (131,841) (699,972)
Capital share transactions:
Net contributions from
affiliated life insurance
companies................... 23,232,447 13,575,595 2,810,449 1,019,709 6,106,674 7,019,658
------------ ----------- ----------- ----------- ----------- -----------
Total increase in net
assets.................... 46,707,964 13,575,595 4,304,721 6,639,162 8,392,788 10,430,221
NET ASSETS
Beginning of period............. 115,190,987 21,039,557 10,097,634 29,363,204 15,429,643 26,211,861
------------ ----------- ----------- ----------- ----------- -----------
End of period (including
undistributed net investment
income in the Growth Portfolio
of $1,263,754; Bond Portfolio
$208,370; Managed Portfolio
$329,730; Aggressive Portfolio
$255,039 and International
Portfolio $442,343)........... $161,898,951 $34,615,152 $14,402,355 $36,002,366 $23,822,431 $36,642,082
============ =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
30
<PAGE> 54
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statements of Changes in Net Assets for the Year Ended December 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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)...................... $ 3,450,005 $ 618,397 $ 596,527 $ 1,255,185 $ (12,513) $ 153,148
Net realized gain (loss) on
sale of investments......... 8,710,006 -- (552,026) 33,117 200,840 699,972
Net change in unrealized
appreciation (depreciation)
on investments and foreign
currency translations....... (9,654,782) -- (622,045) (1,801,984) (43,061) (1,112,364)
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net
assets resulting from
operations.................. 2,505,229 618,397 (577,544) (513,682) 145,266 (259,244)
Distributions:
From net investment income.... (3,183,250) (618,397) (561,072) (1,136,418) -- (273,923)
From net realized gains....... (79,165) -- (246,014) (1,318,716) -- (39,209)
Capital share transactions:
Net contributions from
affiliated life insurance
companies................... 6,414,227 8,533,612 1,322,599 3,348,235 3,061,801 13,102,202
------------ ----------- ----------- ----------- ----------- -----------
Total increase in net
assets.................... 5,657,041 8,533,612 (62,031) 379,419 3,207,067 12,529,826
NET ASSETS
Beginning of period............. 109,533,946 12,505,945 10,159,665 28,983,785 12,222,576 13,682,035
------------ ----------- ----------- ----------- ----------- -----------
End of period (including
undistributed net investment
income in the Growth Portfolio
of $963,142; Bond Portfolio
$168,000; Managed Portfolio
$370,077 and International
Portfolio $148,141)........... $115,190,987 $21,039,557 $10,097,634 $29,363,204 $15,429,643 $26,211,861
============ =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
31
<PAGE> 55
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH PORTFOLIO
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
01/01/95 01/01/94 01/01/93 01/01/92 01/01/91
TO TO TO TO TO
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period............ $14.00 $14.09 $13.73 $13.88 $12.08
-------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .47 .43 .38 .46 .50
Net realized and unrealized gain (loss)
on investments................................ 3.41 (.10) .94 .17 1.71
-------- -------- -------- ------- -------
Total from investment operations............ 3.88 .33 1.32 .63 2.21
-------- -------- -------- ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income......................... (.46) (.41) (.39) (.46) (.41)
Dividends to shareholders from net capital
gains......................................... (1.06) (.01) (.35) (.32) (.00)
Dividends to shareholders in excess of net
investment income............................. -- -- (.22) -- --
-------- -------- -------- ------- -------
Total distributions......................... (1.52) (.42) (.96) (.78) (.41)
-------- -------- -------- ------- -------
Net asset value, end of period.................. $16.36 $14.00 $14.09 $13.73 $13.88
======== ======== ======== ======= =======
Total return.................................... 30.39% 2.40% 9.43% 4.74% 18.50%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 161,899 115,191 109,534 82,881 55,357
Ratios of expenses to average net assets(1)..... .61% .63% .76% .79% .76%
Ratios of net investment income to average net
assets........................................ 3.20% 3.10% 2.86% 3.53% 3.91%
Portfolio turnover.............................. 61% 63% 51% 35% 28%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the Growth Portfolio before reimbursement of expenses
by affiliated insurance company for the years ended December 31, 1995,
1994, 1993, 1992 and 1991 were as follows: 0.61%, 0.67%, 0.76%, 0.82% and
0.98%, respectively.
See accompanying notes to financial statements.
32
<PAGE> 56
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
01/01/95 01/01/94 01/01/93 01/01/92 01/01/91
TO TO TO TO TO
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period............ $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .05 .04 .03 .03 .06
-------- -------- -------- ------- -------
Total from investment operations............ .05 .04 .03 .03 .06
-------- -------- -------- ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income......................... (.05) (.04) (.03) (.03) (.06)
-------- -------- -------- ------- -------
Total distributions......................... (.05) (.04) (.03) (.03) (.06)
-------- -------- -------- ------- -------
Net asset value, end of period.................. $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======= =======
Total return.................................... 5.61% 3.81% 2.59% 3.18% 5.69%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 34,615 21,040 12,506 8,138 7,047
Ratios of expenses to average net assets(1)..... .50% .55% .65% .65% .53%
Ratios of net investment income to average
net assets.................................... 5.47% 3.86% 2.56% 3.12% 5.49%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Expense ratios for the Money Market Portfolio before reimbursement of
expenses by affiliated insurance company for the years ended December 31,
1995, 1994, 1993, 1992 and 1991 were as follows: 0.50%, 0.59%, 0.65%, 0.73%
and 0.86%, respectively.
See accompanying notes to financial statements.
33
<PAGE> 57
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND PORTFOLIO
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
01/01/95 01/01/94 01/01/93 01/01/92 01/01/91
TO TO TO TO TO
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period............ $ 9.73 $11.21 $10.73 $10.80 $10.04
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .65 .62 .60 .64 .77
Net realized and unrealized gain (loss)
on investments................................ 1.27 (1.23) .48 (.03) .57
------- ------- ------- ------- -------
Total from investment operations............ 1.92 (.61) 1.08 .61 1.34
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income......................... (.65) (.60) (.60) (.68) (.58)
Dividends to shareholders from net capital
gains......................................... (.00) (.27) (.00) (.00) (.00)
------- ------- ------- ------- -------
Total distributions......................... (.65) (.87) (.60) (.68) (.58)
------- ------- ------- ------- -------
Net asset value, end of period.................. $11.00 $9.73 $11.21 $10.73 $10.80
======= ======= ======= ======= =======
Total return.................................... 20.45% (5.62)% 10.32% 5.95% 13.93%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 14,402 10,098 10,160 6,710 4,365
Ratios of expenses to average net assets(1)..... .60% .68% .75% .75% .63%
Ratios of net investment income to average net
assets........................................ 6.36% 6.14% 5.53% 6.34% 7.58%
Portfolio turnover.............................. 206% 151% 71% 4% 32%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the Bond Portfolio before reimbursement of expenses by
affiliated insurance company for the years ended December 31, 1995, 1994,
1993, 1992 and 1991 were as follows: 0.60%, 0.70%, 0.75%, 0.81% and 0.93%,
respectively.
See accompanying notes to financial statements.
34
<PAGE> 58
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGED PORTFOLIO
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
01/01/95 01/01/94 01/01/93 01/01/92 01/01/91
TO TO TO TO TO
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period............ $11.94 $13.27 $12.25 $11.40 $ 9.81
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .55 .53 .40 .44 .51
Net realized and unrealized gain (loss)
on investments................................ 2.28 (.77) 1.00 .88 1.47
------- ------- ------- ------- -------
Total from investment operations............ 2.83 (.24) 1.40 1.32 1.98
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income......................... (.57) (.49) (.38) (.47) (.39)
Dividends to shareholders from net capital
gains......................................... (.01) (.60) (.00) (.00) (.00)
------- ------- ------- ------- -------
Total distributions......................... (.58) (1.09) (.38) (.47) (.39)
------- ------- ------- ------- -------
Net asset value, end of period.................. $14.19 $11.94 $13.27 $12.25 $11.40
======= ======= ======= ======= =======
Total return.................................... 24.43% (1.82)% 11.62% 11.96% 20.49%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 36,002 29,363 28,984 15,946 12,564
Ratios of expenses to average net assets(1).... .66% .67% .80% .80% .68%
Ratios of net investment income to average
net assets.................................... 4.22% 4.34% 3.36% 3.88% 4.74%
Portfolio turnover.............................. 130% 75% 89% 32% 51%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the Managed Portfolio before reimbursement of expenses
by affiliated insurance company for the years ended December 31, 1995,
1994, 1993, 1992 and 1991 were as follows: 0.66%, 0.73%, 0.80%, 0.84% and
0.95%, respectively.
See accompanying notes to financial statements.
35
<PAGE> 59
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
01/01/95 01/01/94 01/01/93 01/01/92 01/01/91
TO TO TO TO TO
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period............ $15.45 $15.45 $14.72 $16.68 $10.67
------- ------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .20 (.01) (.01) .03 .08
Net realized and unrealized gain (loss)
on investments................................ 1.86 .01 .77 .38 5.93
------- ------- ------- ------ ------
Total from investment operations............ 2.06 .00 .76 .41 6.01
------- ------- ------- ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income......................... (.00) (.00) (.03) (.07) (.00)
Dividends to shareholders from net capital
gains......................................... (.13) (.00) (.00) (2.30) (.00)
------- ------- ------- ------ ------
Total distributions......................... (.13) (.00) (.03) (2.37) (.00)
------- ------- ------- ------ ------
Net asset value, end of period.................. $17.38 $15.45 $15.45 $14.72 $16.68
======= ======= ======= ====== ======
Total return.................................... 13.48% 0.00% 5.20% 2.58% 56.33%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 23,822 15,430 12,223 8,029 2,751
Ratios of expenses to average net assets(1)..... .76% .86% .90% .90% .79%
Ratios of net investment income to average
net assets.................................... 1.32% (.10)% (.07)% .37% .80%
Portfolio turnover.............................. 89% 60% 60% 18% 95%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the Aggressive Growth Portfolio before reimbursement of
expenses by affiliated insurance company for the years ended December 31,
1995, 1994, 1993, 1992 and 1991 were as follows: 0.76%, 0.89%, 0.90%, 1.00%
and 1.32%, respectively.
See accompanying notes to financial statements.
36
<PAGE> 60
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Concluded
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
01/01/95 01/01/94 01/01/93 01/01/92 11/01/91(2)
TO TO TO TO TO
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period........... $11.63 $11.87 $ 9.00 $ 9.74 $ 10.00
------- ------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.......................... .16 .05 .06 .08 .01
Net realized and unrealized gain (loss)
on investments............................... 1.45 (.02) 3.09 (.81) (.27)
------- ------- ------- ------ ------
Total from investment operations........... 1.61 .03 3.15 (.73) (.26)
------- ------- ------- ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income........................ (.07) (.03) (.08) (.00) (.00)
Dividends to shareholders from net capital
gains........................................ (.31) (.24) (.20) (.01) (.00)
------- ------- ------- ------ ------
Total distributions........................ (.38) (.27) (.28) (.01) (.00)
------- ------- ------- ------ ------
Net asset value, end of period................. $12.86 $11.63 $11.87 $ 9.00 $ 9.74
======= ======= ======= ====== ======
Total return................................... 14.31% .26% 36.11% (7.30)% (2.88)%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)............... 36,642 26,212 13,682 6,727 4,979
Ratios of expenses to average net assets(1).... 1.15% 1.32% 1.50% 1.50% 1.48%
Ratios of net investment income to average
net assets................................... 1.21% .72% .68% 1.05% .26%
Portfolio turnover............................. 45% 32% 37% 35% 1%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the International Portfolio before reimbursement of
expenses by affiliated insurance company for the years ended December 31,
1995, 1994, 1993 and 1992 and the period ended December 31, 1991 were as
follows: 1.15%, 1.32%, 1.50%, 2.65% and 3.40%, respectively.
(2.) Commencement of operations.
(3.) Total returns for periods less than one year are not annualized.
See accompanying notes to financial statements.
37
<PAGE> 61
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1995
- --------------------------------------------------------------------------------
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 and International
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
Providentmutual Life Insurance Company (PMLIC) and for flexible premium deferred
variable annuity contracts issued by Provident Mutual Life and Annuity Company
of America (PLACA). 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
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.
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.
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.
38
<PAGE> 62
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1995 -- Continued
- --------------------------------------------------------------------------------
The Fund does not isolate that portion of the results of operations resulting
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 and International 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.
Management Estimates
The preparation of financial statements requires the use of management
estimates.
3. INVESTMENT ADVISORY FEES AND RELATED PARTY TRANSACTIONS
Investment advisory agreements have been approved, whereby Newbold's Asset
Management, Inc. (NAM) is adviser for the Growth Portfolio, Providentmutual
Investment Management Company (PIMC) for the Money Market Portfolio and Sentinel
Advisors Company (SAC), a Vermont General Partnership, for the Bond, Managed,
and Aggressive Growth Portfolios. With respect to the Growth Portfolio, NAM 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. PIMC 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. PIMC is the adviser
for the International Portfolio and 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. The Boston
Company Asset Management, Inc. ("TBC") is sub-advisor to the International
Portfolio.
PMLIC agreed to reimburse the Growth, Money Market, Bond, Managed and Aggressive
Growth Portfolios for operating expenses, excluding investment advisory fees,
and costs of litigation
39
<PAGE> 63
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1995 -- Continued
- --------------------------------------------------------------------------------
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.
4. NET ASSETS
At December 31, 1995, the Portfolio's net assets consisted of:
<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net contribution from
shareholders.................... $130,274,015 $34,615,152 $13,725,185 $29,925,731 $19,890,944 $31,674,314
Undistributed net investment
income.......................... 1,263,754 -- 208,370 329,730 255,039 442,343
Undistributed net realized gain... 7,680,848 -- -- 1,471,361 2,569,743 1,793,161
Accumulated loss on investment
transactions.................... -- -- (48,885) -- -- --
Net unrealized appreciation
(depreciation) on investments... 22,680,334 -- 517,685 4,275,544 1,106,705 2,732,264
------------ ---------- ---------- ---------- ---------- ----------
$161,898,951 $34,615,152 $14,402,355 $36,002,366 $23,822,431 $36,642,082
============ ========== ========== ========== ========== ==========
</TABLE>
5. PURCHASES AND SALES OF INVESTMENTS (EXCLUDING SHORT-TERM SECURITIES)
Purchases and proceeds on sales of investments for the portfolios, for the year
ended December 31, 1995, 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............. $ -- $ -- $ 5,091,528 $21,761,900 $ -- $ --
Corporate Bonds.................... -- -- 21,399,106 11,373,955 -- --
Common Stock....................... 80,188,987 -- -- 8,189,887 14,720,880 19,795,880
----------- ----------- ----------- ----------- ----------- -----------
Total Purchases.................... $80,188,987 $ -- $26,490,634 $41,325,742 $14,720,880 $19,795,880
=========== =========== =========== =========== =========== ===========
SALES
U.S. Gov't Obligations............. $ -- $ -- $ 7,063,742 $26,818,351 $ -- $ --
Corporate Bonds.................... -- -- 16,249,607 7,563,343 -- --
Common Stock....................... 75,356,540 -- -- 4,411,699 13,064,205 13,162,970
----------- ----------- ----------- ----------- ----------- -----------
Total Sales........................ $75,356,540 $ -- $23,313,349 $38,793,393 $13,064,205 $13,162,970
=========== =========== =========== =========== =========== ===========
</TABLE>
40
<PAGE> 64
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1995 -- Continued
- --------------------------------------------------------------------------------
6. TAX BASIS OF INVESTMENTS
Investment information based on the cost of the securities for Federal income
tax purposes held at December 31, 1995 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.................... $ 23,460,993 $ -- $ 518,002 $ 4,368,834 $ 2,486,072 $ 3,758,326
Aggregate gross unrealized
depreciation.................... (832,232) -- (317) (93,290) (1,379,367) (1,022,732)
------------ ---------- ---------- ---------- ---------- ----------
Net unrealized appreciation
(depreciation).................. $ 22,628,761 $ -- $ 517,685 $ 4,275,544 $ 1,106,705 $ 2,735,594
============ ========== ========== ========== ========== ==========
Aggregate cost of securities for
federal income tax purposes..... $138,444,288 $34,741,724 $13,652,435 $31,374,110 $22,425,313 $32,097,010
============ ========== ========== ========== ========== ==========
Capital loss carryover (available
to offset possible future
capital gains.) The carryover
expires as follows: Bond
Portfolio -- $48,885 in 2002.... $ -- $ -- $ (48,885) $ -- $ -- $ --
============ ========== ========== ========== ========== ==========
</TABLE>
7. AUTHORIZED CAPITAL STOCK AND CAPITAL STOCK TRANSACTIONS
On December 31, 1995, there were 200 million shares of $0.01 par value capital
stock authorized for the Fund. The shares of capital stock are divided into six
series: Growth Portfolio, Money Market Portfolio, Bond Portfolio, Managed
Portfolio, Aggressive Growth Portfolio and International Portfolio. The Money
Market Portfolio consists of 10 million shares; each of the other series
consists of 5 million shares.
Transactions in capital stock for the year ended December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
GROWTH PORTFOLIO MONEY MARKET BOND PORTFOLIO
PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold.................. 1,376,728 $20,320,117 52,460,129 $52,460,129 305,883 $3,174,938
Shares redeemed.............. (672,833) (9,960,717) (40,303,780) (40,303,780) (106,040) (1,100,615)
Shares reinvested............ 961,190 12,873,047 1,419,246 1,419,246 72,305 736,126
--------- ------------ ----------- ------------ -------- -----------
Net contributions from
affiliated insurance
companies................... 1,665,085 $23,232,447 13,575,595 $13,575,595 272,148 $2,810,449
========= ============ =========== ============ ======== ===========
<CAPTION>
MANAGED AGGRESSIVE INTERNATIONAL
PORTFOLIO GROWTH PORTFOLIO
- -----------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold.................. 340,442 $4,456,504 489,394 $8,017,391 861,466 $10,317,408
Shares redeemed.............. (375,720) 4,884,534) (125,984) (2,042,558) (341,090) (4,145,863)
Shares reinvested............ 114,456 1,447,739 8,772 131,841 76,064 848,113
-------- ---------- ----------- -------- --------- -----------
Net contributions from
affiliated insurance
companies................... 79,178 $1,019,709 372,182 $6,106,674 596,440 $ 7,019,658
======== ========== ======= =========== ======== ===========
</TABLE>
41
<PAGE> 65
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1995 -- Continued
- --------------------------------------------------------------------------------
7. AUTHORIZED CAPITAL STOCK AND CAPITAL STOCK TRANSACTIONS -- (CONTINUED)
Transactions in capital stock for the year ended December 31, 1994 were as
follows:
<TABLE>
<CAPTION>
GROWTH PORTFOLIO MONEY MARKET BOND PORTFOLIO
PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold................. 1,491,546 $20,978,587 48,697,173 $48,697,173 384,884 $3,957,726
Shares redeemed............. (1,272,051) (17,826,775) (40,713,247) (40,713,247) (331,715) (3,442,212)
Shares reinvested........... 236,046 3,262,415 549,686 549,686 78,517 807,085
--------- ------------ ----------- ------------ -------- -----------
Net contributions from
affiliated insurance
companies.................. 455,541 $ 6,414,227 8,533,612 $ 8,533,612 131,686 $1,322,599
========= ============ =========== ============ ======== ===========
<CAPTION>
AGGRESSIVE
MANAGED GROWTH INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold................. 719,391 $8,834,655 385,809 $5,787,860 1,457,272 $17,327,844
Shares redeemed............. (643,917) (7,941,554) (178,715) (2,726,059) (382,445) (4,538,774)
Shares reinvested........... 198,986 2,455,134 -- -- 26,855 313,132
------- ----------- ------- ----------- -------- -----------
Net contributions from
affiliated insurance
companies.................. 274,460 $3,348,235 207,094 $3,061,801 1,101,682 $13,102,202
======= ========== ======= =========== ======== ===========
</TABLE>
Shares of the Fund are held by Provident Mutual Life Insurance Company's
Variable Life and Variable Annuity Separate Accounts and by Providentmutual
Variable Life and Variable Annuity Separate Accounts. At December 31, 1995,
shares were owned by:
<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Growth Separate
Account......................... 8,701,018 -- -- -- -- --
Money Market Separate
Account......................... -- 16,709,104 -- -- -- --
Bond Separate Account............. -- -- 949,265 -- -- --
Managed Separate
Account......................... -- -- -- 1,902,109 -- --
Aggressive Growth
Separate Account................ -- -- -- -- 1,109,778 --
International Separate
Account......................... -- -- -- -- -- 1,863,636
Providentmutual Variable
Annuity Separate
Account......................... 1,119,627 15,728,500 332,031 612,839 237,352 908,987
Provident Mutual
Variable Annuity
Separate Account................ 65,106 1,911,725 23,991 20,281 14,778 69,938
Providentmutual Variable Life
Separate Account................ 9,248 265,823 4,500 2,722 8,689 7,657
--------- ---------- --------- --------- --------- ---------
Total......................... 9,894,999 34,615,152 1,309,787 2,537,951 1,370,597 2,850,218
========= ========== ========= ========= ========= =========
</TABLE>
42
<PAGE> 66
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1995 -- Concluded
- --------------------------------------------------------------------------------
8. PRINCIPAL UNDERWRITER
PML Securities Company serves, without compensation, as the principal
underwriter for sale of the Fund shares to the Accounts. PML Securities Company
is an indirect wholly-owned subsidiary of PMLIC.
9. SUBSEQUENT DIVIDEND
On December 27, 1995 the Board of Directors declared the following net
investment income and capital gain dividends to shareholders of record on
December 29, 1995, ex-dividend date January 4, 1996, payable on January 5, 1996
as follows:
<TABLE>
<CAPTION>
TOTAL PER SHARE
------------------------ ---------------------
NET NET
INVESTMENT CAPITAL INVESTMENT CAPITAL
PORTFOLIO INCOME GAIN INCOME GAIN
- ---------------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Growth.......... $1,263,754 $7,732,422 $.1277 $ .7814
Bond............ 208,370 -- .1591 --
Managed......... 329,718 1,471,361 .1299 .5797
Aggressive
Growth......... 255,039 2,569,743 .1861 1.8749
International... 442,343 1,793,161 .1552 .6291
</TABLE>
43
<PAGE> 67
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<PAGE> 68
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<PAGE> 69
[LOGO] [U.S. POSTAGE PAID]
A STOCK LIFE INSURANCE COMPANY
300 CONTINENTAL DRIVE, NEWARK, DE 19713
1-800-654-7796
Variable Life Insurance policies issued by
Providentmutual are distributed by PML
Securities Company, Wilmington, DE, a
registered broker-dealer.
This Report has been prepared for
policyowners. It is not authorized for other
distribution unless preceded or
accompanied by an effective prospectus.
Form 16083 12.95
