<PAGE> 1
- --------------------------------------------------------------------------------
To Our Variable Life Policyowners:
- --------------------------------------------------------------------------------
February 24, 1997
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 are happy to be of service to you. If you have a question about your
policy, please contact your local agent or call our Service Center toll free at
1-800-688-5177.
Sincerely,
/s/ Robert W. Kloss
----------------------------------
Robert W. Kloss
President
1
<PAGE> 2
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Policyholders and
Board of Directors of
Providentmutual Life and Annuity
Company of America
We have audited the accompanying statements of assets and liabilities of the
Providentmutual Variable Life Separate Account (comprising twenty-two
subaccounts) as of December 31, 1996, and the related statements of operations
and changes in net assets for the year then ended and the statements of 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 Providentmutual Variable Life Separate Account. Our responsibility is to
express an opinion on these financial statements 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 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, 1996 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 audits provide 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, 1996, and the results of its operations
and the changes in its net assets for the year then ended and the changes in net
assets for the period February 1, 1995 (Date of Inception) to December 31, 1995
in conformity with generally accepted accounting principles.
Our audits were 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 10, 1997
2
<PAGE> 3
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The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Assets and Liabilities, December 31, 1996
- --------------------------------------------------------------------------------
<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................. $554,108
Money Market Portfolio........... $453,150
Bond Portfolio................... $132,364
Managed Portfolio................ $ 80,279
Aggressive Growth Portfolio...... $472,616
International Portfolio.......... $ 450,268
Dividends receivable............... 2,357
Receivable from Providentmutual
Life and Annuity Company of
America.......................... 72,830
---------- ---------- ---------- ---------- ---------- -------------
NET ASSETS......................... $554,108 $528,337 $132,364 $ 80,279 $472,616 $ 450,268
=========== =========== =========== =========== =========== ============
Held for the benefit of
policyholders.................... $515,996 $500,784 $101,940 $ 46,114 $438,694 $ 417,388
Attributable to Providentmutual
Life and Annuity Company of
America.......................... 38,112 27,553 30,424 34,165 33,922 32,880
---------- ---------- ---------- ---------- ---------- -------------
$554,108 $528,337 $132,364 $ 80,279 $472,616 $ 450,268
=========== =========== =========== =========== =========== ============
</TABLE>
See accompanying notes to financial statements
3
<PAGE> 4
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Assets and Liabilities, December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY FIDELITY
FIDELITY FIDELITY HIGH FIDELITY ASSET FIDELITY
EQUITY-INCOME GROWTH INCOME OVERSEAS MANAGER INDEX 500
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in the Variable Insurance
Products Fund, at market value:
Equity-Income Portfolio.............. $ 1,971,211
Growth Portfolio..................... $2,353,942
High Income Portfolio................ $374,493
Overseas Portfolio................... $564,930
Investment in the Variable Insurance
Products Fund II, at market value:
Asset Manager Portfolio.............. $741,077
Index 500 Portfolio.................. $1,479,534
----------- ----------- -------- ---------- ----------- ----------
NET ASSETS............................. $ 1,971,211 $2,353,942 $374,493 $564,930 $741,077 $1,479,534
=========== =========== ======== ========== =========== ==========
Held for the benefit of
policyholders........................ $ 1,934,104 $2,315,208 $340,543 $532,602 $707,382 $1,438,826
Attributable to Providentmutual Life
and Annuity Company of America....... 37,107 38,734 33,950 32,328 33,695 40,708
----------- ----------- -------- ---------- ----------- ----------
$ 1,971,211 $2,353,942 $374,493 $564,930 $741,077 $1,479,534
=========== =========== ======== ========== =========== ==========
</TABLE>
See accompanying notes to financial statements
4
<PAGE> 5
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Assets and Liabilities, December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY NEUBERGER NEUBERGER NEUBERGER
INVESTMENT FIDELITY & BERMAN & BERMAN & BERMAN LIMITED
GRADE BOND CONTRAFUND BALANCED GROWTH MATURITY BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in the Variable Insurance Products
Fund II, at market value:
Investment Grade Bond Portfolio.............. $155,521
Contrafund Portfolio......................... $268,955
Investment in the Neuberger & Berman Advisers
Management Trust, at market value:
Balanced Portfolio........................... $164,898
Growth Portfolio............................. $538,691
Limited Maturity Bond Portfolio.............. $ 49,741
-------- -------- -------- -------- -------
NET ASSETS..................................... $155,521 $268,955 $164,898 $538,691 $ 49,741
======== ======== ======== ======== =======
Held for the benefit of policyholders.......... $125,691 $240,887 $132,182 $503,312 $ 21,132
Attributable to Providentmutual Life and
Annuity Company of America................... 29,830 28,068 32,716 35,379 28,609
-------- -------- -------- -------- -------
$155,521 $268,955 $164,898 $538,691 $ 49,741
======== ======== ======== ======== =======
</TABLE>
See accompanying notes to financial statements
5
<PAGE> 6
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Assets and Liabilities, December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VAN ECK VAN ECK GOLD VAN ECK ALGER AMERICAN
WORLDWIDE AND NATURAL EMERGING SMALL
TCI GROWTH BOND RESOURCES MARKETS CAPITALIZATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in TCI Portfolios, Inc., at market
value:
Growth Portfolio.............................. $349,612
Investment in the Van Eck Worldwide Insurance
Trust, at market value:
Worldwide Bond Portfolio...................... $ 98,555
Gold and Natural Resources Portfolio.......... $149,546
Emerging Markets Portfolio.................... $ 78,266
Investment in the Alger American Fund, at market
value:
Small Capitalization Portfolio................ $367,085
-------- -------- -------- -------- --------
NET ASSETS...................................... $349,612 $ 98,555 $149,546 $ 78,266 $367,085
======== ======== ======== ======== ========
Held for the benefit of policyholders........... $317,606 $ 68,758 $113,538 $ 49,601 $343,952
Attributable to Providentmutual Life and Annuity
Company of America............................ 32,006 29,797 36,008 28,665 23,133
-------- -------- -------- -------- --------
$349,612 $ 98,555 $149,546 $ 78,266 $367,085
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements
6
<PAGE> 7
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<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................................ $ 7,629 $ 15,339 $4,534 $1,814 $ 1,617 $ 1,188
------- ------ ------ ------ ------ ------
EXPENSES
Mortality and expense risks.............. 1,837 1,825 383 139 1,734 1,421
------- ------ ------ ------ ------ ------
Net investment income (loss)............. 5,792 13,514 4,151 1,675 (117) (233)
------- ------ ------ ------ ------ ------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Realized gain distributions reinvested... 7,226 1,578 16,290 4,817
Net realized gain from redemption of
investment shares...................... 4,464 741 663 2,217 2,539
------- ------ ------ ------ ------ ------
Net realized gain on investments......... 11,690 741 2,241 18,507 7,356
------- ------ ------ ------ ------ ------
Net unrealized appreciation
(depreciation) of investments:
Beginning of year...................... 10,721 3,919 4,931 6,340 5,545
End of year............................ 53,902 2,198 6,860 42,267 24,229
------- ------ ------ ------ ------ ------
Net unrealized appreciation
(depreciation) of investments during
the year............................... 43,181 (1,721) 1,929 35,927 18,684
------- ------ ------ ------ ------ ------
Net realized and unrealized gains
(losses)
on investments......................... 54,871 (980) 4,170 54,434 26,040
------- ------ ------ ------ ------ ------
Net increase in net assets resulting
from operations........................ $ 60,663 $ 13,514 $3,171 $5,845 $ 54,317 $25,807
======= ====== ====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements
7
<PAGE> 8
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY FIDELITY
FIDELITY FIDELITY HIGH FIDELITY ASSET FIDELITY
EQUITY-INCOME GROWTH INCOME OVERSEAS MANAGER INDEX 500
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends.............................. $ 795 $ 2,013 $ 13,682 $ 2,659 $ 4,580 $ 2,651
-------- -------- ------- ------- ------- --------
EXPENSES
Mortality and expense risks............ 6,521 9,311 1,324 2,129 1,923 3,896
-------- -------- ------- ------- ------- --------
Net investment income (loss)........... (5,726) (7,298) 12,358 530 2,657 (1,245)
-------- -------- ------- ------- ------- --------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Realized gain distributions
reinvested........................... 22,764 50,823 2,677 2,926 3,777 6,818
Net realized gain from redemption of
investment shares.................... 12,493 14,571 1,337 3,493 4,586 17,448
-------- -------- ------- ------- ------- --------
Net realized gain on investments....... 35,257 65,394 4,014 6,419 8,363 24,266
-------- -------- ------- ------- ------- --------
Net unrealized appreciation
of investments:
Beginning of year.................... 26,993 10,036 4,518 6,809 5,339 16,619
End of year.......................... 140,032 120,385 17,486 44,125 42,785 130,599
-------- -------- ------- ------- ------- --------
Net unrealized appreciation of
investments during the year.......... 113,039 110,349 12,968 37,316 37,446 113,980
-------- -------- ------- ------- ------- --------
Net realized and unrealized
gain on investments.................. 148,296 175,743 16,982 43,735 45,809 138,246
-------- -------- ------- ------- ------- --------
Net increase in net assets
resulting from operations............ $ 142,570 $168,445 $ 29,340 $ 44,265 $ 48,466 $137,001
======== ======== ======= ======= ======= ========
</TABLE>
See accompanying notes to financial statements
8
<PAGE> 9
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY NEUBERGER NEUBERGER NEUBERGER
INVESTMENT FIDELITY & BERMAN & BERMAN & BERMAN LIMITED
GRADE BOND CONTRAFUND BALANCED GROWTH MATURITY BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends...................................... $3,435 $1,823 $ 91 $2,949
------ ------ ------ ------ ------
EXPENSES
Mortality and expense risks.................... 488 $ 337 477 2,041 83
------ ------ ------ ------ ------
Net investment income (loss)................... 2,947 (337) 1,346 (1,950) 2,866
------ ------ ------ ------ ------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Realized gain distributions reinvested......... 10,142 21,199
Net realized gain (loss) from redemption of
investment shares............................ 596 1,095 617 4,169 (74)
------ ------ ------ ------ ------
Net realized gain (loss) on investments........ 596 1,095 10,759 25,368 (74)
------ ------ ------ ------ ------
Net unrealized appreciation (depreciation) of
investments:
Beginning of year............................ 4,575 5,547 5,688 1,194
End of year.................................. 5,863 15,525 1,403 11,488 208
------ ------ ------ ------ ------
Net unrealized appreciation (depreciation) of
investments during the year.................. 1,288 15,525 (4,144) 5,800 (986)
------ ------ ------ ------ ------
Net realized and unrealized gain (loss) on
investments.................................. 1,884 16,620 6,615 31,168 (1,060)
------ ------ ------ ------ ------
Net increase in net assets resulting from
operations................................... $4,831 $ 16,283 $7,961 $ 29,218 $1,806
====== ====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements
9
<PAGE> 10
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VAN ECK VAN ECK GOLD VAN ECK ALGER AMERICAN
WORLDWIDE AND NATURAL EMERGING SMALL
TCI GROWTH BOND RESOURCES MARKETS CAPITALIZATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends....................................... $1,824 $ 600 $ 137
------ ------ ------ ------ ------
EXPENSES
Mortality and expense risks..................... $ 1,480 277 375 70 $ 374
------ ------ ------ ------ ------
Net investment income (loss).................... (1,480) 1,547 225 67 (374)
------ ------ ------ ------ ------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Realized gain distributions reinvested.......... 23,158 588
Net realized gain (loss) from redemption of
investment shares............................. 4,391 218 2,780 254 (72)
------ ------ ------ ------ ------
Net realized gain (loss) on investments......... 27,549 218 3,368 254 (72)
------ ------ ------ ------ ------
Net unrealized appreciation (depreciation) of
investments:
Beginning of year............................. 7,429 1,924 5,371
End of year................................... (33,973) 2,328 12,095 4,779 (4,261)
------ ------ ------ ------ ------
Net unrealized appreciation (depreciation) of
investments during the year................... (41,402) 404 6,724 4,779 (4,261)
------ ------ ------ ------ ------
Net realized and unrealized gain (loss) on
investments................................... (13,853) 622 10,092 5,033 (4,333)
------ ------ ------ ------ ------
Net increase (decrease) in net assets resulting
from operations............................... ($15,333) $2,169 $ 10,317 $5,100 ($ 4,707)
====== ====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements
10
<PAGE> 11
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<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)....... $ 5,792 $ 13,514 $ 4,151 $ 1,675 $ (117) $ (233)
Net realized gain on investments... 11,690 741 2,241 18,507 7,356
Net unrealized appreciation
(depreciation) of investments
during the year.................. 43,181 (1,721) 1,929 35,927 18,684
-------- ----------- -------- ------- -------- --------
Net increase in net assets from
operations....................... 60,663 13,514 3,171 5,845 54,317 25,807
-------- ----------- -------- ------- -------- --------
FROM VARIABLE LIFE POLICY
TRANSACTIONS
Policyholders' net premiums........ 200,633 3,426,014 62,154 30,006 253,610 181,285
Cost of insurance and
administrative charges........... (50,683) (139,681) (13,600) (6,124) (58,803) (40,512)
Surrenders and forfeitures......... (2,824) (1,748) (458) (269) (3,944) (2,321)
Net withdrawals due to policy
loans............................ (5,832) (10,177) (685) (4,282)
Transfers between investment
portfolios....................... 200,857 (3,043,148) 31,590 12,196 77,113 191,839
-------- ----------- -------- ------- -------- --------
Net increase in net assets derived
from policy transactions......... 342,151 231,260 79,686 35,809 267,291 326,009
-------- ----------- -------- ------- -------- --------
Total increase in net assets....... 402,814 244,774 82,857 41,654 321,608 351,816
NET ASSETS
Beginning of year................ 151,294 283,563 49,507 38,625 151,008 98,452
-------- ----------- -------- ------- -------- --------
End of year...................... $554,108 $ 528,337 $132,364 $ 80,279 $472,616 $ 450,268
======== =========== ======== ======= ======== ========
</TABLE>
See accompanying notes to financial statements
11
<PAGE> 12
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY FIDELITY FIDELITY
EQUITY- FIDELITY HIGH FIDELITY ASSET FIDELITY
INCOME GROWTH INCOME OVERSEAS MANAGER INDEX 500
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)............. $ (5,726) $ (7,298) $ 12,358 $ 530 $ 2,657 $ (1,245)
Net realized gain on investments......... 35,257 65,394 4,014 6,419 8,363 24,266
Net unrealized appreciation of
investments during the year............ 113,039 110,349 12,968 37,316 37,446 113,980
-------- -------- -------- -------- ------- --------
Net increase in net assets from
operations............................. 142,570 168,445 29,340 44,265 48,466 137,001
-------- -------- -------- -------- ------- --------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums.............. 1,064,311 1,228,372 182,867 303,606 504,956 682,499
Cost of insurance and administrative
charges................................ (172,223) (277,081) (33,017) (55,071) (41,734) (140,878)
Surrenders and forfeitures............... (10,460) (15,689) (1,416) (1,888) (141) (4,843)
Net withdrawals due to policy loans...... (8,344) (9,629) (352) (538) (107) (4,994)
Transfers between investment
portfolios............................. 489,521 624,149 51,297 61,872 157,808 590,621
-------- -------- -------- -------- ------- --------
Net increase in net assets derived from
policy transactions.................... 1,362,805 1,550,122 199,379 307,981 620,782 1,122,405
-------- -------- -------- -------- ------- --------
Total increase in net assets............. 1,505,375 1,718,567 228,719 352,246 669,248 1,259,406
NET ASSETS
Beginning of year...................... 465,836 635,375 145,774 212,684 71,829 220,128
-------- -------- -------- -------- ------- --------
End of year............................ $1,971,211 $2,353,942 $374,493 $564,930 $741,077 $1,479,534
======== ======== ======== ======== ======= ========
</TABLE>
See accompanying notes to financial statements
12
<PAGE> 13
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY NEUBERGER NEUBERGER NEUBERGER
INVESTMENT FIDELITY & BERMAN & BERMAN & BERMAN LIMITED
GRADE BOND CONTRAFUND BALANCED GROWTH MATURITY BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)................... $ 2,947 $ (337) $ 1,346 $ (1,950) $ 2,866
Net realized gain (loss) on investments........ 596 1,095 10,759 25,368 (74)
Net unrealized appreciation (depreciation) of
investments during the year.................. 1,288 15,525 (4,144) 5,800 (986)
-------- -------- -------- -------- -------
Net increase in net assets from operations..... 4,831 16,283 7,961 29,218 1,806
-------- -------- -------- -------- -------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums.................... 89,577 111,330 65,215 249,358 15,412
Cost of insurance and administrative charges... (17,945) (11,937) (14,582) (59,022) (3,100)
Surrenders and forfeitures..................... (765) (265) (619) (8)
Net withdrawals due to policy loans............ (102) (27)
Transfers between investment portfolios........ 19,502 128,279 35,692 105,607 3,279
-------- -------- -------- -------- -------
Net increase in net assets derived from policy
transactions................................. 90,267 227,672 86,060 295,297 15,583
-------- -------- -------- -------- -------
Capital contribution from Providentmutual Life
and Annuity Company of America............... 25,000
-------- -------- -------- -------- -------
Total increase in net assets................... 95,098 268,955 94,021 324,515 17,389
NET ASSETS
Beginning of year............................ 60,423 -- 70,877 214,176 32,352
-------- -------- -------- -------- -------
End of year.................................. $ 155,521 $268,955 $164,898 $538,691 $ 49,741
======== ======== ======== ======== =======
</TABLE>
See accompanying notes to financial statements
13
<PAGE> 14
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VAN ECK VAN ECK GOLD VAN ECK ALGER AMERICAN
WORLDWIDE AND NATURAL EMERGING SMALL
TCI GROWTH BOND RESOURCES MARKETS CAPITALIZATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss).................... $ (1,480) $ 1,547 $ 225 $ 67 $ (374)
Net realized gain (loss) on investments......... 27,549 218 3,368 254 (72)
Net unrealized appreciation (depreciation) of
investments during the year................... (41,402) 404 6,724 4,779 (4,261)
-------- ------- -------- ------- --------
Net increase (decrease) in net assets from
operations.................................... (15,333) 2,169 10,317 5,100 (4,707)
-------- ------- -------- ------- --------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums..................... 186,453 40,692 80,930 34,459 235,120
Cost of insurance and administrative charges.... (51,208) (8,055) (12,112) (5,698) (15,164)
Surrenders and forfeitures...................... (2,139) (163) (78) (57)
Net withdrawals due to policy loans............. (1,766)
Transfers between investment portfolios......... 53,108 8,407 32,292 19,405 126,893
-------- ------- -------- ------- --------
Net increase in net assets derived from policy
transactions.................................. 184,448 40,881 101,032 48,166 346,792
-------- ------- -------- ------- --------
Capital contribution from Providentmutual Life
and Annuity Company of America................ 25,000 25,000
-------- ------- -------- ------- --------
Total increase in net assets.................... 169,115 43,050 111,349 78,266 367,085
NET ASSETS
Beginning of year............................. 180,497 55,505 38,197 -- --
-------- ------- -------- ------- --------
End of year................................... $349,612 $ 98,555 $149,546 $ 78,266 $367,085
======== ======= ======== ======= ========
</TABLE>
See accompanying notes to financial statements
14
<PAGE> 15
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year 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 year...... 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
Policyholders' 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 year................ -- -- -- -- -- --
-------- ---------- ------- ------- -------- -------
End of year...................... $151,294 $ 283,563 $ 49,507 $ 38,625 $151,008 $98,452
======== ========== ======= ======= ======== =======
</TABLE>
See accompanying notes to financial statements
15
<PAGE> 16
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year 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
of investments during the
year....................... 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
Policyholders' 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 year.......... -- -- -- -- -- -- --
-------- -------- -------- -------- ------- -------- -------
End of year................ $465,836 $635,375 $145,774 $212,684 $ 71,829 $220,128 $ 60,423
======== ======== ======== ======== ======= ======== =======
</TABLE>
See accompanying notes to financial statements
16
<PAGE> 17
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year 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 year.......... 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
Policyholders' 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 year.................... -- -- -- -- -- --
------- -------- ------- -------- ------- -------
End of year.......................... $ 70,877 $214,176 $32,352 $180,497 $ 55,505 $ 38,197
======= ======== ======= ======== ======= =======
</TABLE>
See accompanying notes to financial statements
17
<PAGE> 18
- --------------------------------------------------------------------------------
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
twenty-two 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, Fidelity Investment Grade Bond and Fidelity
Contrafund 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.; the Van Eck Worldwide Bond, Van Eck Gold and Natural Resources
and Van Eck Emerging Markets Subaccounts invest in the corresponding portfolios
of the Van Eck Worldwide Insurance Trust; and the Alger American Small
Capitalization Subaccount invests in the corresponding portfolio of the Alger
American Fund.
Net premiums from in-force Policies are allocated to the Subaccounts in
accordance with policyholder 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.
18
<PAGE> 19
- --------------------------------------------------------------------------------
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 and the reported amounts from operations and policy
transactions during the period. Actual results could differ from those
estimates.
19
<PAGE> 20
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS
At December 31, 1996, 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.................................. 30,614 $500,206 $554,108
Money Market Portfolio............................ 453,150 $453,150 $453,150
Bond Portfolio.................................... 12,405 $130,166 $132,364
Managed Portfolio................................. 5,468 $73,419 $80,279
Aggressive Growth Portfolio....................... 25,519 $430,349 $472,616
International Portfolio........................... 33,577 $426,039 $450,268
Variable Insurance Products Fund:
Equity-Income Portfolio........................... 93,733 $1,831,179 $1,971,211
Growth Portfolio.................................. 75,592 $2,233,557 $2,353,942
High Income Portfolio............................. 29,911 $357,007 $374,493
Overseas Portfolio................................ 29,986 $520,805 $564,930
Variable Insurance Products Fund II:
Asset Manager Portfolio........................... 43,773 $698,292 $741,077
Index 500 Portfolio............................... 16,600 $1,348,935 $1,479,534
Investment Grade Bond Portfolio................... 12,706 $149,658 $155,521
Contrafund Portfolio.............................. 16,241 $253,430 $268,955
Neuberger & Berman Advisers Management Trust:
Balanced Portfolio................................ 10,358 $163,495 $164,898
Growth Portfolio.................................. 20,896 $527,203 $538,691
Limited Maturity Bond Portfolio................... 3,540 $49,533 $49,741
TCI Portfolios, Inc.:
TCI Growth Portfolio.............................. 34,142 $383,585 $349,612
Van Eck Worldwide Insurance Trust:
Worldwide Bond Portfolio.......................... 8,879 $96,227 $98,555
Gold and Natural Resources Portfolio.............. 8,944 $137,451 $149,546
Emerging Markets Portfolio........................ 6,266 $73,487 $78,266
Alger American Fund:
Small Capitalization Portfolio.................... 8,973 $371,346 $367,085
</TABLE>
20
<PAGE> 21
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
During the years ended December 31, 1996 and 1995, transactions in investment
shares were as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET STREET FUND, INC.
------------------------------------------------------------------------------------------------------------------
MONEY MARKET
GROWTH PORTFOLIO PORTFOLIO BOND PORTFOLIO
------------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995 1996 1995
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased..................................... 22,000 9,742 2,343,055 874,800 8,375 4,493
Shares received from reinvestment of:
Dividends.......................................... 464 76 15,339 5,330 433 146
Capital gain distributions......................... 464
-------- -------- ---------- -------- ------- -------
Total shares acquired................................ 22,928 9,818 2,358,394 880,130 8,808 4,639
Total shares redeemed................................ (1,562) (570) (2,171,067) (614,307) (903) (139)
-------- -------- ---------- -------- ------- -------
Net increase in shares owned......................... 21,366 9,248 187,327 265,823 7,905 4,500
Shares owned, beginning of year...................... 9,248 265,823 4,500
-------- -------- ---------- -------- ------- -------
Shares owned, end of year............................ 30,614 9,248 453,150 265,823 12,405 4,500
======== ======== ========== ======== ======= =======
Cost of shares acquired.............................. $380,965 $148,035 $2,358,394 $880,130 $93,373 $46,940
======== ======== ========== ======== ======= =======
Cost of shares redeemed.............................. $ 21,332 $ 7,462 $2,171,067 $614,307 $ 8,795 $ 1,352
======== ======== ========== ======== ======= =======
</TABLE>
21
<PAGE> 22
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET STREET FUND, INC.
------------------------------------------------------------------------------------------------------------------
MANAGED PORTFOLIO INTERNATIONAL
AGGRESSIVE GROWTH PORTFOLIO
PORTFOLIO
------------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995 1996 1995
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased...................................... 2,833 2,676 17,269 9,089 26,818 7,846
Shares received from reinvestment of:
Dividends........................................... 131 70 105 95
Capital gain distributions.......................... 117 1,071 390
------- ------- -------- -------- -------- -------
Total shares acquired................................. 3,081 2,746 18,445 9,089 27,303 7,846
Total shares redeemed................................. (335) (24) (1,615) (400) (1,383) (189)
------- ------- -------- -------- -------- -------
Net increase in shares owned.......................... 2,746 2,722 16,830 8,689 25,920 7,657
Shares owned, beginning of year....................... 2,722 8,689 7,657
------- ------- -------- -------- -------- -------
Shares owned, end of year............................. 5,468 2,722 25,519 8,689 33,577 7,657
======= ======= ======== ======== ======== =======
Cost of shares acquired............................... $43,739 $33,984 $310,897 $150,890 $348,283 $ 94,994
======= ======= ======== ======== ======== =======
Cost of shares redeemed............................... $ 4,014 $ 290 $ 25,216 $ 6,222 $ 15,164 $ 2,074
======= ======= ======== ======== ======== =======
</TABLE>
22
<PAGE> 23
- --------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------------------------------------
GROWTH PORTFOLIO HIGH INCOME OVERSEAS PORTFOLIO
EQUITY-INCOME PORTFOLIO
PORTFOLIO
------------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995 1996 1995 1996 1995
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares purchased............. 72,214 24,671 53,882 22,131 17,623 12,589 18,466 12,757
Shares received from
reinvestment of:
Dividends.................. 42 179 73 6 1,213 177 157 7
Capital gain
distributions............ 1,207 83 1,829 237 171 7
---------- -------- ---------- -------- -------- -------- -------- --------
Total shares acquired........ 73,463 24,933 55,784 22,137 19,073 12,766 18,794 12,771
Total shares redeemed........ (3,904) (759) (1,951) (378) (1,259) (669) (1,282) (297)
---------- -------- ---------- -------- -------- -------- -------- --------
Net increase in shares
owned...................... 69,559 24,174 53,833 21,759 17,814 12,097 17,512 12,474
Shares owned, beginning of
year....................... 24,174 21,759 12,097 12,474
---------- -------- ---------- -------- -------- -------- -------- --------
Shares owned, end of year.... 93,733 24,174 75,592 21,759 29,911 12,097 29,986 12,474
========== ======== ========== ======== ======== ======== ======== ========
Cost of shares acquired...... $1,456,815 $450,678 $1,652,672 $633,382 $229,442 $148,527 $334,188 $210,331
========== ======== ========== ======== ======== ======== ======== ========
Cost of shares redeemed...... $ 64,479 $ 11,835 $ 44,454 $ 8,043 $ 13,691 $ 7,271 $ 19,258 $ 4,456
========== ======== ========== ======== ======== ======== ======== ========
</TABLE>
23
<PAGE> 24
- --------------------------------------------------------------------------------
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 II
------------------------------------------------------------------------------------------------------------------
INDEX 500 PORTFOLIO INVESTMENT GRADE CONTRAFUND
ASSET MANAGER BOND PORTFOLIO PORTFOLIO
PORTFOLIO
------------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995 1996 1995 1996
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares purchased......................... 40,738 5,010 15,023 3,044 8,553 5,032 17,029
Shares received from reinvestment of:
Dividends.............................. 303 39 35 7 288 80
Capital gain distributions............. 251 91 1
-------- -------- -------- -------- ------- -------- -------
Total shares acquired.................... 41,292 5,049 15,149 3,052 8,841 5,112 17,029
Total shares redeemed.................... (2,068) (500) (1,457) (144) (977) (270) (788)
-------- -------- -------- -------- ------- -------- -------
Net increase in shares owned............. 39,224 4,549 13,692 2,908 7,864 4,842 16,241
Shares owned, beginning of year.......... 4,549 2,908 4,842
-------- -------- -------- -------- ------- -------- -------
Shares owned, end of year................ 43,773 4,549 16,600 2,908 12,706 4,842 16,241
======== ======== ======== ======== ======= ======== =======
Cost of shares acquired.................. $660,528 $73,342 $1,241,314 $211,867 $104,740 $58,875 $265,037
======== ======== ======== ======== ======= ======== =======
Cost of shares redeemed.................. $ 28,726 $ 6,852 $ 95,888 $ 8,358 $ 10,930 $ 3,027 $ 11,607
======== ======== ======== ======== ======= ======== =======
</TABLE>
24
<PAGE> 25
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST TCI PORTFOLIOS,
INC.
------------------------------------------------------------------------------------------------------------------
BALANCED PORTFOLIO GROWTH PORTFOLIO LIMITED MATURITY TCI GROWTH
BOND PORTFOLIO PORTFOLIO
------------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995 1996 1995 1996 1995
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares purchased.................... 6,369 4,065 12,912 8,555 1,441 2,127 20,034 15,511
Shares received from reinvestment
of:
Dividends......................... 119 32 4 3 219 101
Capital gain distributions........ 665 10 855 39 2,166
--------- -------- --------- --------- -------- -------- --------- ---------
Total shares acquired............... 7,153 4,107 13,771 8,597 1,660 2,228 22,200 15,511
Total shares redeemed............... (841) (61) (1,157) (315) (319) (29) (3,025) (544)
--------- -------- --------- --------- -------- -------- --------- ---------
Net increase in shares owned........ 6,312 4,046 12,614 8,282 1,341 2,199 19,175 14,967
Shares owned, beginning of year..... 4,046 8,282 2,199 14,967
--------- -------- --------- --------- -------- -------- --------- ---------
Shares owned, end of year........... 10,358 4,046 20,896 8,282 3,540 2,199 34,142 14,967
========= ======== ========= ========= ======== ======== ========= =========
Cost of shares acquired............. $110,480 $66,229 $342,933 $214,940 $22,893 $31,573 $239,141 $177,972
========= ======== ========= ========= ======== ======== ========= =========
Cost of shares redeemed............. $ 12,315 $ 899 $ 24,218 $ 6,452 $ 4,518 $ 415 $ 28,624 $ 4,904
========= ======== ========= ========= ======== ======== ========= =========
</TABLE>
25
<PAGE> 26
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VAN ECK WORLDWIDE INSURANCE TRUST ALGER AMERICAN
FUND
------------------------------------------------------------------------------------------------------------------
WORLDWIDE BOND GOLD AND NATURAL EMERGING SMALL
PORTFOLIO RESOURCES MARKETS CAPITALIZATION
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995 1996 1996
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased................................... 4,129 4,991 6,863 2,712 6,457 9,023
Shares received from reinvestment of:
Dividends........................................ 174 234 35 22 11
Capital gain distributions....................... 35
-------- -------- -------- -------- ------- --------
Total shares acquired.............................. 4,303 5,225 6,933 2,734 6,468 9,023
Total shares redeemed.............................. (406) (243) (638) (85) (202) (50)
-------- -------- -------- -------- ------- --------
Net increase in shares owned....................... 3,897 4,982 6,295 2,649 6,266 8,973
Shares owned, beginning of year.................... 4,982 2,649
-------- -------- -------- -------- ------- --------
Shares owned, end of year.......................... 8,879 4,982 8,944 2,649 6,266 8,973
======== ======== ======== ======== ======= ========
Cost of shares acquired............................ $46,831 $56,085 $112,234 $33,835 $75,703 $373,537
======== ======== ======== ======== ======= ========
Cost of shares redeemed............................ $ 4,185 $ 2,504 $ 7,609 $ 1,009 $ 2,216 $ 2,191
======== ======== ======== ======== ======= ========
</TABLE>
26
<PAGE> 27
- --------------------------------------------------------------------------------
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 policyholder. The deductions may
include (1) state premium taxes, (2) sales charges and (3) Federal tax charges.
Premiums adjusted for these deductions are recorded as net premiums in the
statement of changes in net assets. 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 policyholder of
amounts in the Subaccounts are free of charge. A fee of $25 is assessed for each
additional transfer. No transfer fees were incurred during the year ended
December 31, 1996 or the period February 1, 1995 (date of inception) to December
31, 1995.
The Policies provide for an initial free-look period. If a policy is
cancelled within certain time constraints, the policyholder 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.
27
<PAGE> 28
- --------------------------------------------------------------------------------
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
year shown.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY
MONEY AGGRESSIVE EQUITY- FIDELITY
GROWTH MARKET BOND MANAGED GROWTH INTERNATIONAL INCOME GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the year ended:
December 31, 1996..... 18.79% 4.51% 2.28% 11.22% 20.13% 10.17% 13.54% 13.96%
December 31, 1995..... 23.66%(3) 4.28%(4) 13.42%(5) 14.12%(6) 7.98%(3) 12.31%(7) 27.36%(3) 31.48%(3)
<CAPTION>
HIGH FIDELITY
INCOME OVERSEAS
SUBACCOUNT SUBACCOUNT
- -----------------------
<S> <C> <C>
For the year ended:
December 31, 1996..... 13.29% 12.48%
December 31, 1995..... 14.92%(8) 11.29%(7)
</TABLE>
The net rate of return was calculated from the date contractholder funds
were first allocated to the Subaccount referenced above as follows: (1) May 23,
1996, (2) June 20, 1996, (3) March 2, 1995, (4) February 15, 1995, (5) March 16,
1995, (6) April 24, 1995, (7) March 7, 1995, (8) March 6, 1995, (9) March 24,
1995, (10) March 21, 1995, (11) June 7, 1995 and (12) April 25, 1995.
28
<PAGE> 29
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
FIDELITY FIDELITY NEUBERGER
ASSET FIDELITY INVESTMENT FIDELITY & BERMAN
MANAGER INDEX 500 GRADE BOND CONTRAFUND BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the year ended:
December 31, 1996..... 13.86% 22.02% 2.51% 9.53%(1) 6 .19%
December 31, 1996..... 14.60%(9) 25.79%(5) 12.27%(10) -- 8.29%(11)
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
NEUBERGER VAN ECK ALGER
NEUBERGER & BERMAN GOLD AND VAN ECK AMERICAN
& BERMAN LIMITED TCI VAN ECK NATURAL EMERGING SMALL
GROWTH MATURITY BOND GROWTH WORLDWIDE BOND RESOURCES MARKETS CAPITALIZATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the year ended:
December 31, 1996..... 8.43% 3.62% (4.95%) 1.86% 17.27% 8.61%(2) (10.72%)(1)
December 31, 1996..... 22.72%(3) 7.06%(5) 28.43%(3) 7.35%(5) 5.60%(12) -- --
</TABLE>
29
<PAGE> 30
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 31
- --------------------------------------------------------------------------------
To Our Variable Life Policyowners and Variable Annuity Contractowners:
- --------------------------------------------------------------------------------
We are pleased to send you the 1996 Annual Report for Market Street Fund, Inc.,
its Growth, Money Market, Bond, Managed, Aggressive Growth, International,
Common Stock and Sentinel Growth Portfolios.
Economic Overview and Investment Perspective
Sometimes listening to a broken record is not such a bad experience; especially
if the tune is pleasing.
Writing a year ago in the 1995 Annual Report for the Market Street Fund, I said
in part, "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."
Writing to you in June of 1996 I summarized the first six months of 1996 as
follows. "First the facts. Through the first six months of 1996, the equity
markets responded strongly to a growing, nearly inflation free economy. Rising
profits were sufficient to offset fears of rising interest rates. Total returns
were slightly above 10% for both the S&P 500 and the Russell 2000. For the fixed
income markets, the results were not as pleasant, with the Lehman Aggregate Bond
Index turning in a -1.2% total return and the 30 year U.S. Treasury Bond rate
averaging 6.06%, 6.60%, and 7.06% for the fourth quarter of 1995 and the first
two quarters of 1996, respectively. While the Federal Reserve did not tighten,
the combination of a growing economy, persistent inflation fears, and the
failure of the new Congress and the President to make any progress on
fundamental budget reform were sufficient to cause the back-up in rates."
The outlook for the rest of 1996 was presented as follows. "The outlook for the
remainder of 1996 is cautiously optimistic for both the equity and fixed income
markets. July has already seen increased volatility in both markets as equities
sold off strongly, particularly technology issues, only to bounce right back, at
least partially; while 30 year Treasuries rallied strongly to the 6.75% level.
Markets will likely stabilize until the November election, so long as inflation
fears do not force the Fed's hand. December should be exciting."
The second half of 1996 turned out just fine for both equity and fixed income
investors. So long as the economy remains on its current course of modest growth
and low inflation and policymakers keep their hands off the economic engine that
is the envy of the world, the outlook for all markets--especially the equity
market--remains positive. But stay cautious, and remember that to be a market
timer is to engage in the least cautious strategy of all.
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.
1
<PAGE> 32
We appreciate the opportunity to have served you in the past and look forward to
serving you during the remainder of 1997 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.
2
<PAGE> 33
- --------------------------------------------------------------------------------
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, International, Common Stock and Sentinel Growth Portfolios) as of
December 31, 1996, and the related statements of operations for the year or
period then ended, the statements of changes in net assets for each of the two
years or periods then ended, and financial highlights for each of 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, 1996, 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, 1996, the results of their operations for the year or period
then ended, the changes in their net assets for each of the two years or periods
then ended, and the financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
January 31, 1997
3
<PAGE> 34
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio
1996 Annual Review
Newbold's Asset Management, Inc.
- --------------------------------------------------------------------------------
The 1996 return for the Market Street Fund Growth Portfolio was 19.6%,
compared to the Standard and Poor's 500 Stock Index return of 22.9%. Equity
markets extended their winning streak in 1996 by posting strong returns and
their sixth consecutive up year. The Dow Jones Industrials rose 28.7%; and the
NASDAQ was up 22.7%.
The equity markets jumped out of the blocks as 1996 began with a bevy of
weak economic statistics and prospects for a Federal Reserve reduction in short
term interest rates. Both the federal funds and discount rates were reduced by
one quarter percent to 5.25% and 5.0% respectively. Although this was the only
action taken by the Federal Reserve for all of 1996, the market responded and
increased 5.4% in the first quarter.
In the second and third quarters, job creation numbers in April and early
July substantially exceeded expectations resulting in some market turbulence in
the second quarter and the apparent beginning of a correction in July. A
correction seemed in order at this juncture as the market had increased all year
in spite of rising long term interest rates and a strengthening economy.
However, the only correction to materialize was for the technology laden NASDAQ
which at one point was off about 14% from its high earlier in the year. The S&P
500 and Dow Jones Industrials only fell to levels 6-7% below their highs. All
three indices turned around and surged to record levels by the end of September
as the core rate of inflation continued to run at an anemic annual rate of 2.6%,
a thirty year low.
The fourth quarter proved to be the best of the year for the overall market
driven by softening economic news and declining interest rates. Factory orders,
retail sales and job creation were weak, enabling the Federal Reserve to
continue to leave short term interest rates unchanged. The yield on the long
bond declined from 6.9% in early October to near 6.4% at the end of November. To
summarize, in 1996, good news continued to roll -- modest economic growth, good
corporate earnings, benign inflation and relatively low interest rates.
As 1997 begins, the good economic news alluded to earlier appears to be on
track. While not totally devoid of skepticism, we claim no real insight into
what may derail the attractive concensus outlook for modest GDP growth, low
inflation and interest rates and reasonably good prospects for corporate
profits. Our primary focus continues to be individual stock selection from those
issues in our value universe where we believe positive catalysts or corporate
actions will develop in order to ensure participation in rising markets. We
believe that this, along with with continued adherence to our low P/E, higher
yielding process, will produce superior results over the long term.
LOGO
<TABLE>
<CAPTION>
- -------------------------------------------------------------
GROWTH
- -------------------------------------------------------------
DOLLARS
-----------------------------
FUND INDEX
--------- --------
<S> <C> <C>
Start 10,000 10,000
85 10,177 10,077
86 11,325 11,941
87 11,511 12,540
88 13,641 14,580
89 17,794 19,131
90 18,220 18,485
91 21,590 24,115
92 22,614 25,948
93 24,924 28,558
94 25,522 28,933
95 33,279 39,811
96 39,794 48,928
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------
Average Annual Total Return
- ----------------------------------------
<S> <C>
1 Year 19.58%
5 year 13.01%
Since Inception* 13.30%
- ----------------------------------------
</TABLE>
Past performance is not predictive of future performance.
+ The Index is the S&P 500 Index, an unmanaged index of 500 U.S. common
stocks that includes reinvestment of dividends.
* Inception date was December 12, 1985.
4
<PAGE> 35
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio
Schedule of Investments, December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (96.2%)
Aerospace & Defense................................................... 3.2%
Boeing Co. ......................................................... 31,886 $ 3,391,873
United Technologies Corp. .......................................... 45,000 2,970,000
----------
6,361,873
----------
Automotive & Equipment................................................ 1.4%
Genuine Parts Co. .................................................. 61,800 2,750,100
----------
Building & Building Supplies.......................................... 1.7%
Masco Corp. ........................................................ 91,900 3,308,400
----------
Business Services, Media, etc. ....................................... 2.7%
Cognizant Corp. .................................................... 68,600 2,263,800
Dun & Bradstreet Corp. ............................................. 132,700 3,151,625
----------
5,415,425
----------
Chemicals............................................................. 3.0%
Grace (W.R.) & Co. ................................................. 67,400 3,487,950
Great Lakes Chemical Corp. ......................................... 52,600 2,459,050
----------
5,947,000
----------
Diversified........................................................... 1.4%
Black & Decker Corp................................................. 52,800 1,590,600
Canadian Pacific Ltd. .............................................. 41,500 1,099,750
----------
2,690,350
----------
Drugs and Health Care................................................. 8.0%
Aetna, Inc. ........................................................ 80,800 6,464,000
Bristol-Meyers Squibb Co............................................ 41,100 4,469,625
Mallinckrodt Group, Inc. ........................................... 113,400 5,003,775
----------
15,937,400
----------
Electronics........................................................... 1.9%
Cooper Industries, Inc. ............................................ 90,200 3,799,675
----------
Finance-Banks......................................................... 8.4%
Chase Manhattan Corp. .............................................. 34,000 3,034,500
Corestates Financial Corp. ......................................... 62,000 3,216,250
Fleet Financial Group, Inc. ........................................ 85,000 4,239,375
Mellon Bank Corp. .................................................. 43,400 3,081,400
Nations Bank Corp. ................................................. 31,300 3,059,575
----------
16,631,100
----------
</TABLE>
5
<PAGE> 36
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio
Schedule of Investments, December 31, 1996 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Finance-Insurance..................................................... 5.1%
General Re Corp. ................................................... 18,400 $ 2,902,600
ITT Hartford Group, Inc. ........................................... 51,000 3,442,500
St. Paul Companies, Inc. ........................................... 64,800 3,798,900
----------
10,144,000
----------
Financial Institutions................................................ 3.0%
First Union Corp. .................................................. 26,400 1,953,600
Travelers Group, Inc. .............................................. 89,633 4,067,097
----------
6,020,697
----------
Foods................................................................. 3.1%
Archer-Daniels Midland Co. ......................................... 278,653 6,130,366
----------
Machinery & Instrumentation........................................... 4.3%
Deere & Co. ........................................................ 96,600 3,924,375
Parker Hannifin Corp. .............................................. 119,300 4,622,875
----------
8,547,250
----------
Natural Gas........................................................... 1.7%
TransCanada Pipelines Ltd. ......................................... 197,900 3,463,250
----------
Non-Ferrous Metals & Mining........................................... 3.9%
Aluminum Co. of America............................................. 76,700 4,889,625
Reynolds Metals Co. ................................................ 49,600 2,796,200
----------
7,685,825
----------
Office Equipment & Supplies........................................... 5.8%
International Business Machines Corp. .............................. 36,300 5,481,300
Pitney Bowes, Inc. ................................................. 18,200 991,900
Xerox Corp. ........................................................ 93,900 4,941,488
----------
11,414,688
----------
Oil................................................................... 4.8%
Exxon Corp. ........................................................ 35,100 3,439,800
Mobil Corp. ........................................................ 33,000 4,034,251
Repsol ADR.......................................................... 53,400 2,035,875
----------
9,509,925
----------
Oil & Other Energy Sources............................................ 4.0%
Amoco Corp. ........................................................ 53,000 4,266,500
USX Marathon Group.................................................. 157,400 3,757,925
----------
8,024,425
----------
</TABLE>
6
<PAGE> 37
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Growth Portfolio
Schedule of Investments, December 31, 1996 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Paper & Forest Products............................................... 3.9%
James River Corp. .................................................. 142,500 $ 4,720,313
Mead Corp. ......................................................... 50,800 2,952,750
----------
7,673,063
----------
Pollution Control..................................................... 2.4%
WMX Technologies, Inc. ............................................. 143,800 4,691,475
----------
Retail-Department Stores.............................................. 0.9%
Dillard Dept. Stores, Class A....................................... 60,100 1,855,588
----------
Retail-Food Chains.................................................... 1.9%
American Stores Co. ................................................ 90,000 3,678,750
----------
Retail-Stores......................................................... 1.2%
Circuit City Store, Inc. ........................................... 80,500 2,425,062
----------
Telecommunications.................................................... 3.0%
AT&T Corp. ......................................................... 138,000 6,003,000
----------
Tobacco............................................................... 2.3%
RJR Nabisco Holdings Corp. ......................................... 135,140 4,594,760
----------
Transportation........................................................ 1.4%
Burlington Northern Santa Fe Corp. ................................. 32,600 2,815,825
----------
Utilities-Electric.................................................... 6.2%
Entergy Corp. ...................................................... 99,000 2,747,250
FPL Group, Inc. .................................................... 60,500 2,783,000
General Public Utilities Corp. ..................................... 85,400 2,871,575
PECO Energy Co. .................................................... 152,200 3,843,050
----------
12,244,875
----------
Utilities - Telephone................................................. 5.6%
GTE Corp. .......................................................... 87,000 3,958,500
NYNEX Corp. ........................................................ 149,000 7,170,625
----------
11,129,125
----------
TOTAL COMMON STOCK (COST $164,065,025)............................ 190,893,272
----------
SHORT-TERM INVESTMENTS (3.8%)
Temporary Investment Fund, Inc. - TempCash (Cost $7,579,202)........ 7,579,202 7,579,202
----------
TOTAL INVESTMENTS (100.0%) (COST $171,644,227).................... $198,472,474
==========
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 38
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Money Market Portfolio
Schedule of Investments, December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF PORTFOLIO MATURITY AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BANKERS' ACCEPTANCES (9.3%)
Wachovia Bank of Georgia, 5.38%.......................... 01/09/97 $2,500,000 $ 2,497,011
Mellon Bank, 5.36%....................................... 02/26/97 2,600,000 2,578,322
-----------
TOTAL BANKERS' ACCEPTANCES (COST $5,075,333)........... 5,075,333
-----------
COMMERCIAL PAPER (85.4%)
Agricultural............................................... 1.8%
Cargill, Inc., 5.35%..................................... 01/21/97 975,000 972,102
-----------
Consumer Finance........................................... 1.8%
Transamerica Corp., 5.50%................................ 01/28/97 1,000,000 995,875
-----------
Bank....................................................... 27.6%
Bank of New York, 5.28%.................................. 01/10/97 2,000,000 1,997,360
BankAmerica Corp., 5.34%................................. 01/24/97 2,550,000 2,541,300
Morgan (J.P.) & Co., Inc., 5.37%......................... 01/08/97 2,575,000 2,572,311
National City Credit Corp., 5.50%........................ 01/28/97 2,700,000 2,691,750
Norwest Financial, Inc., 5.42%........................... 02/14/97 2,645,000 2,627,478
Republic New York Corp., 5.37%........................... 01/14/97 2,600,000 2,594,958
-----------
15,025,157
-----------
Finance.................................................... 49.5%
American Express Credit Corp., 5.80%..................... 01/07/97 1,800,000 1,798,260
C.I.T. Group Holdings, Inc., 5.40%....................... 01/30/97 2,500,000 2,489,125
Cargill Financial Services Corp., 5.32%.................. 01/13/97 1,575,000 1,572,207
Chevron Oil Finance Co., 5.62%........................... 01/09/97 1,000,000 998,751
Commercial Credit Corp., 5.30%........................... 01/06/97 2,650,000 2,648,049
Deere (John) Credit Co., 5.31%........................... 01/17/97 1,235,000 1,232,085
Deere (John) Credit Co., 5.29%........................... 01/17/97 1,325,000 1,321,886
Ford Motor Credit Co., 5.38%............................. 01/16/97 2,000,000 1,995,518
General Electric Capital Corp., 5.42%.................... 01/27/97 2,500,000 2,490,214
Household Finance Corp., 5.42%........................... 01/15/97 2,550,000 2,544,625
IBM Credit Corp., 5.49%.................................. 01/31/97 2,670,000 2,657,785
Prudential Funding Corp., 5.32%.......................... 01/09/97 2,550,000 2,546,985
Union Bank, Los Angeles, CA., 5.30%...................... 01/22/97 2,600,000 2,600,000
-----------
26,895,490
-----------
Oil & Gas.................................................. 4.7%
Texaco, Inc., 5.48%...................................... 02/03/97 2,600,000 2,586,939
-----------
TOTAL COMMERCIAL PAPER (COST $46,475,563).............. 46,475,563
-----------
AGENCY OBLIGATIONS (3.5%)
Federal National Mortgage Discount Note, 5.32%
(Cost $1,889,611)...................................... 02/07/97 1,900,000 1,889,611
-----------
</TABLE>
8
<PAGE> 39
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Money Market Portfolio
Schedule of Investments, December 31, 1996 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
PERCENTAGE NUMBER
OF PORTFOLIO MATURITY OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS (1.80%)
Temporary Investment Fund, Inc.-TempCash
(Cost $1,000,057)...................................... $1,000,057 $ 1,000,057
-----------
TOTAL INVESTMENTS (100.0%) (COST $54,440,564).......... $54,440,564
===========
</TABLE>
See accompanying notes to financial statements.
9
<PAGE> 40
- --------------------------------------------------------------------------------
THE MARKET STREET FUND, INC.
THE BOND PORTFOLIO
1996 Annual Review
Sentinel Advisors Company
- --------------------------------------------------------------------------------
For the fiscal year ended December 31, 1996, the Market Street Fund Bond
Portfolio produced a total return of 2.9%, compared to the Lehman Aggregate Bond
Index which returned 3.6%. The Lehman Aggregate Index is considered a good proxy
for the overall fixed income market. During the same period, the average Lipper
A-rated Corporate Bond Fund returned 2.5%.
On December 31, 1995, the 10-year U.S. Treasury Index (Index) yielded 5.57%.
The 1995 bull market in bonds finally fizzled in early 1996 when the Index set a
low of 5.52% in January. Market participants realizing that the promised
balanced budget was a long way from reality, that inflationary pressure
continued to cast a long dark shadow, and that the economy was showing amazing
resilience, abandoned the fixed income market, sending interest rates up
sharply. The 10-year U.S. Treasury Index reached the high for the year on June
12, 1996 at 7.06%. The fixed income markets consolidated in a trading range
until September. Investor sentiment once again began to change as the economy
sputtered along without generating enough growth to ignite inflation or cause
the Federal Reserve to tighten credit. The market did an "about-face" and
rallied to the 6.04% level on November 29, 1996. On a price basis, the 10-year
U.S. Treasury Index experienced a 10% price decline from January to June, only
to recapture a 7% price increase from September to November. The Index closed
the year at 6.42%.
While the 10-year U.S. Treasury Index was experiencing this price
volatility, corporate securities were going through the same gyrations, tempered
slightly by their increased yield and the continued narrowing of yield spreads
between corporates and Treasury securities. Mortgage securities also did well as
a result of their shorter average maturities and their monthly income stream.
During the year, the Portfolio shortened average maturity from 10.4 years to
8.4 years. On December 31, 1995, the Portfolio's assets were 75% invested in
corporate securities. During the period, in response to the continued narrowing
of yield spreads between corporates and Treasury, this position was reduced to
56% of assets. Finally, in recognition of the need for income, some of the funds
generated from the sale of corporate securities were redeployed to the mortgage
market where the Portfolio hopes to garner the added income and the reduce price
volatility.
The 1996 market performance was the result of having too long an average
maturity in a bear market for bonds. In recognition of the longevity of the
current economic expansion, we plan to maintain a relatively short average
maturity until stronger signals are sent by the Federal Reserve as to the
direction of interest rates or the likely pace of economic expansion.
Richard D. Temple
BOND
<TABLE>
<CAPTION>
---------------------
Dollars
---------------------
Fund Index
---- -----
<S> <C>
10,000 10,000
10,225 10,187
11,864 11,742
11,583 12,066
12,330 13,018
13,633 14,909
14,683 16,245
16,728 18,844
17,724 20,239
19,553 22,564
18,454 21,892
22,228 25,941
22,863 26,883
</TABLE>
<TABLE>
<CAPTION>
---------------------------
AVERAGE ANNUAL TOTAL RETURN
---------------------------
Since
1 Year 5 Year Inception*
------ ------ ---------
<S> <C> <C>
2.88% 6.45% 7.76%
</TABLE>
LOGO
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.
10
<PAGE> 41
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Bond Portfolio
Schedule of Investments, December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF PORTFOLIO MATURITY AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. TREASURY NOTES (17.4%)
U.S. Treasury Note, 6.00%................................. 12/31/00 $ 600,000 $ 601,758
U.S. Treasury Note, 5.00%................................. 08/31/97 250,000 245,463
U.S. Treasury Note, 6.375%................................ 01/15/00 250,000 252,282
U.S. Treasury Note, 5.50%................................. 01/15/00 250,000 244,230
U.S. Treasury Note, 6.375%................................ 08/15/02 500,000 503,500
U.S. Treasury Note, 7.50%................................. 05/15/05 1,000,000 1,068,730
----------
TOTAL U.S. TREASURY NOTES (COST $2,913,524)............. 2,915,963
----------
AGENCY OBLIGATIONS (22.2%)
Collateralized Mortgage Obligation Trust, 7.95%............. 2.8% 05/01/17 457,959 469,767
----------
Federal Home Loan Bank...................................... 5.9%
Federal Home Loan Bank, 6.65%............................. 11/13/01 1,000,000 993,320
----------
Federal Home Loan Mortgage Corporation...................... 6.9%
Federal Home Loan Mortgage Corp., 6.50%................... 05/01/08 587,994 577,521
Federal Home Loan Mortgage Corp., 8.00%................... 11/01/08 518,992 528,561
Federal Home Loan Mortgage Corp., 9.00%................... 11/01/16 6,718 7,094
Federal Home Loan Mortgage Corp., 8.00%................... 03/01/17 39,090 39,811
----------
1,152,987
----------
Federal Mortgage Corporation................................ 3.6%
Federal Mortgage Corp. Discount Note., 5.51%.............. 01/07/97 600,000 599,449
----------
Federal National Mortgage Association....................... 3.0%
Federal National Mortgage Association, 7.50%.............. 12/01/06 491,793 501,629
----------
TOTAL AGENCY OBLIGATIONS (COST $3,731,458).............. 3,717,152
----------
CORPORATE BONDS (55.5%)
Industrial & Commercial Services............................ 3.0%
News American Holdings, Inc., 8.00%....................... 10/17/16 500,000 499,375
Defense..................................................... 2.9%
Northrop Corp., 7.00%..................................... 03/01/06 500,000 491,875
</TABLE>
11
<PAGE> 42
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Bond Portfolio
Schedule of Investments, December 31, 1996 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
PERCENTAGE NUMBER
OF PORTFOLIO MATURITY OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
Financial Institutions..................................... 16.6%
CS First Boston, 7.75%................................... 05/15/06 $600,000 $ 627,000
First Union National Bank, 6.824%........................ 08/01/26 600,000 601,500
Lehman Brothers Holdings, 8.80%.......................... 03/01/15 400,000 451,000
Midland Bank, 7.65%...................................... 05/01/25 500,000 526,250
Salomon Brothers, 6.875%................................. 12/15/03 600,000 587,250
-----------
2,793,000
-----------
Insurance.................................................. 9.5%
Farmers Insurance Exchange, 8.50%........................ 08/01/04 600,000 633,000
Integon Corp., 9.50%..................................... 10/15/01 400,000 428,500
Liberty Mutual Insurance Co., 8.20%...................... 05/04/07 500,000 531,875
-----------
1,593,375
-----------
Telecommunications......................................... 6.4%
Comsat Corp. Medium Term Note, 8.05%..................... 12/13/06 500,000 547,785
Continental Cablevision, 8.30%........................... 05/15/06 500,000 533,750
-----------
1,081,535
-----------
Tobacco.................................................... 2.5%
Dimon, Inc., Senior Notes, 8.875%...................... 06/01/06 400,000 418,500
-----------
Utilities-Electric......................................... 3.0%
Mississippi Power and Light Co., 8.80%................... 04/01/05 500,000 510,625
-----------
Utilities-Gas.............................................. 2.6%
Consolidated Natural Gas Co., 8.625%..................... 12/01/11 422,000 439,407
-----------
Foreign.................................................... 9.0%
Banque Paribas Subordinate Notes, 6.875%................. 03/01/09 500,000 476,875
BCH Cayman Islands Ltd., 7.70%........................... 07/15/06 600,000 516,250
Swedish Export Credit Corp., 9.875%...................... 03/15/38 475,000 514,187
-----------
1,507,312
-----------
TOTAL CORPORATE BONDS (COST $9,138,939)................ 9,335,004
-----------
SHORT-TERM INVESTMENTS (4.9%)
Prudential Funding Corp., 5.23%.......................... 600,000 599,913
Temporary Investment Fund, Inc., - TempCash.............. 212,180 212,180
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $812,093)........... 812,093
-----------
TOTAL INVESTMENTS (100.0%) (COST $16,596,014).......... $16,780,212
===========
</TABLE>
See accompanying notes to financial statements.
12
<PAGE> 43
- --------------------------------------------------------------------------------
MARKET STREET FUND, INC.
THE MANAGED PORTFOLIO
1996 Annual Review
Sentinel Advisors Company
- --------------------------------------------------------------------------------
The Market Street Managed Portfolio recorded a total return of 11.9% for the
year ended December 31, 1996. The Portfolio's results were modestly behind the
return for the median Lipper balanced fund, and fell between the 22.9% return
for the Standard & Poor's 500 and the 3.6% return for the Lehman Aggregate Bond
Index.
The past twelve months was a volatile period for the financial markets. The
stock market rallied strongly early in the year, as economic growth appeared
much stronger than anticipated. Stocks corrected sharply in the summer, as
economic indicators began to show signs of slowing, but rallied to all-time
highs in the fall, as a consensus began to build for moderate economic growth,
restrained inflation and relatively low interest rates. Meanwhile, fixed income
securities also experienced considerable volatility. The bond market as measured
by the 10-year US Treasury Index started the year at 5.57%. The Index declined
to a low of 5.52% on January 18, and then rose almost uninterrupted until a high
was set on June 12 at 7.05%. The Index then slowly declined over the remaining
months and ended the year at 6.42%.
The Managed Portfolio began the year with a mix of 53% stocks, 41% bonds and
6% cash. During the year, we decreased the Portfolio's exposure to the bond
market and increased cash. The Portfolio benefited from its long-standing
positions in the financial services sector, as well as significant holdings in
consumer growth stocks (especially the pharmaceutical companies) and in the
energy sector. As well, the Managed Portfolio has recently been underweighting
the utilities sector, due to concern over the increasing competition in both the
electrical and telephone groups. The Portfolio's de-emphasis of these groups
also impacted performance positively, as these were the worst performance
sectors of the stock market. At the end of the year, the Managed Portfolio's
asset allocation was 54% stocks, 36% bonds and 10% cash.
Looking ahead to 1997, we continue to expect that the economy will grow at a
more moderate rate than has been the case in the last few years, and that
inflation should remain restrained. Corporate earnings are likely to grow at a
much slower rate than in the past several years, and in such an environment, we
believe our commitments to stable financial, energy, consumer products and
healthcare stocks are very appropriate. The recent national elections have again
given us a Democratic Administration and a Republican Congress, which hopefully
will be able to compromise on some of the important economic matters of the day,
namely the budget defect and the future health of entitlement programs such as
Social Security and Medicare. Any progress along these lines would, we believe,
be regarded positively by the financial markets.
Rodney A. Buck, CFA
Richard A. Pender, CFA
David M. Brownlee, CFA
LOGO
<TABLE>
<CAPTION>
- --------------------------------------------------
MANAGED
- --------------------------------------------------
DOLLARS
------------------------------
DOLLARS
FUND LA INDEX S&P INDEX
------------------------------
<S> <C> <C> <C> <C>
START 84 10,000 10,000 10,000
85 10,299 10,167 10,077
86 11,543 11,742 11,941
87 11,481 12,066 12,540
88 12,631 13,018 14,580
89 14,482 14,909 19,131
90 13,235 16,245 18,485
91 15,947 16,844 24,115
92 17,854 20,239 25,948
93 19,928 22,564 28,558
94 19,566 21,692 28,933
95 24,346 25,941 39,811
96 27,238 31,882 41,256
- --------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------------
<S> <C>
1 Year 11.88%
5 Year 11.30%
Since Inception* 9.48%
- -------------------------------------------------
</TABLE>
Past performance is not predictive of future performance.
# The Index is the Lehman Aggregate Bond Index, an unmanaged index of bonds
reflecting average prices in the bond market.
+ The Index is the S&P 500 Index, an unmanaged index of 500 U.S. common
stocks that includes reinvestment of dividends.
* Inception date was December 12, 1985.
13
<PAGE> 44
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Schedule of Investments, December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (53.9%)
Automobiles & Auto Parts............................................... 2.5%
Chrysler Corp. ...................................................... 9,100 $ 300,300
Echlin, Inc. ........................................................ 9,000 284,625
Ford Motor Co. ...................................................... 16,000 510,000
-----------
1,094,925
-----------
Banks.................................................................. 5.1%
BankAmerica.......................................................... 3,000 299,250
Bank of New York Co., Inc............................................ 16,000 540,000
Chase Manhattan Corp. ............................................... 3,640 324,870
Citicorp............................................................. 3,500 360,500
First Union Corp. ................................................... 5,500 407,000
Morgan (J.P.) & Co., Inc. ........................................... 2,500 244,062
-----------
2,175,682
-----------
Beverages.............................................................. 0.6%
Coca-Cola Co......................................................... 5,000 263,125
-----------
Building & Materials................................................... 1.0%
Sherwin Williams Co. ................................................ 8,000 448,000
-----------
Consumer & Business Services........................................... 2.1%
Electronic Data Systems Corp......................................... 10,035 434,014
Omnicom Group, Inc. ................................................. 10,000 457,500
-----------
891,514
-----------
Consumer Products...................................................... 2.4%
American Brands, Inc. ............................................... 6,000 297,750
Coleman Co., Inc. ................................................... 9,700 133,375
Kimberly-Clark Corp. ................................................ 4,000 381,000
Rubbermaid, Inc. .................................................... 10,500 283,875
-----------
1,051,000
-----------
Drugs.................................................................. 2.3%
American Homes Products Corp. ....................................... 8,000 469,000
Pfizer, Inc. ........................................................ 6,000 497,250
-----------
966,250
-----------
Electrical Equipment................................................... 3.4%
Emerson Electric Co. ................................................ 5,000 483,750
General Electric Co. ................................................ 6,000 593,250
Grainger (W.W.), Inc. ............................................... 5,000 401,250
-----------
1,478,250
-----------
</TABLE>
14
<PAGE> 45
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Schedule of Investments, December 31, 1996 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Energy................................................................. 6.0%
Amoco Corp........................................................... 5,700 $ 458,850
Atlantic Richfield Co. .............................................. 3,100 410,750
Chevron Corp. ....................................................... 4,500 292,500
Exxon Corp. ......................................................... 5,000 490,000
Mobil Corp. ......................................................... 3,500 427,875
Royal Dutch Petroleum Co. ........................................... 3,000 512,250
-----------
2,592,225
-----------
Financial.............................................................. 1.2%
American Express Co. ................................................ 9,500 536,750
-----------
Foods.................................................................. 2.7%
CPC International, Inc. ............................................. 6,000 465,000
Hannaford Bros. Co. ................................................. 7,000 238,000
Sara Lee Corp. ...................................................... 12,000 447,000
-----------
1,150,000
-----------
Healthcare Providers................................................... 1.2%
Columbia/HCA Healthcare Corp. ....................................... 12,750 519,562
-----------
Industrial Diversified................................................. 5.2%
Boeing Co. .......................................................... 336 35,742
Crown Cork & Seal Co., Inc. ......................................... 8,000 435,000
Dover Corp. ......................................................... 5,000 251,250
Grace (W.R.) & Co. .................................................. 4,000 207,000
Parker-Hannifin Corp. ............................................... 12,000 465,000
PPG Industries, Inc. ................................................ 6,500 364,812
*Rockwell International Corp. ....................................... 8,000 487,000
-----------
2,245,804
-----------
Insurance.............................................................. 4.7%
Allstate Corp. ...................................................... 10,562 611,276
American General Corp. .............................................. 11,000 449,625
American International Group, Inc. .................................. 4,500 487,125
Equitable of Iowa.................................................... 10,000 458,750
-----------
2,006,776
-----------
Medical - Equipment & Supplies......................................... 1.0%
Johnson & Johnson.................................................... 9,000 447,750
-----------
</TABLE>
15
<PAGE> 46
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Schedule of Investments, December 31, 1996 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Oil Field Equipment & Services......................................... 2.0%
Halliburton Co. ..................................................... 6,000 $ 361,500
Schlumberger Ltd..................................................... 5,000 499,375
-----------
860,875
-----------
Publishing............................................................. 1.7%
Gannett, Inc......................................................... 4,500 336,937
McGraw Hill, Inc..................................................... 8,000 369,000
-----------
705,937
-----------
Railroads.............................................................. 2.2%
Canadian Pacific Ltd. ............................................... 10,400 275,600
Illinois Central Corp. Common, Series A.............................. 11,250 360,000
Union Pacific Corp. ................................................. 5,000 300,625
-----------
936,225
-----------
Retail................................................................. 2.3%
May Department Stores Co. ........................................... 6,700 313,225
Nordstrom, Inc. ..................................................... 6,300 223,256
Sears, Roebuck and Co. .............................................. 10,000 461,250
-----------
997,731
-----------
Telecommunications..................................................... 0.3%
Lucent Technologies, Inc. ........................................... 2,868 132,645
-----------
Tobacco................................................................ 0.6%
Philip Morris Company, Inc. ......................................... 2,300 259,037
-----------
Utilities - Electric................................................... 0.8%
FPL Group, Inc. ..................................................... 7,000 322,000
-----------
Utilities - Gas........................................................ 1.7%
Enron Corp. ......................................................... 8,000 345,000
Sonat, Inc. ......................................................... 7,500 386,250
-----------
731,250
-----------
Utilities - Telephone.................................................. 0.9%
GTE Corp............................................................. 8,500 386,750
-----------
TOTAL COMMON STOCK (COST $16,255,599).............................. 23,200,064
-----------
CONVERTIBLE STOCK (0.4%)
*Microsoft Corp., Preferred Series A Convertible, 2.75%
(COST $167,738).................................................... 2,100 168,262
-----------
</TABLE>
16
<PAGE> 47
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Schedule of Investments, December 31, 1996 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE PRINCIPAL
OF PORTFOLIO AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS (16.1%)
Banks.................................................................. 1.2%
BCH Cayman Islands, 7.70%, Due 07/15/06.............................. $ 500,000 $ 516,250
-----------
Defense................................................................ 1.1%
Northrop-Grumman, 7.00%, Due 03/01/06................................ 500,000 491,875
-----------
Financial Institutions................................................. 6.1%
CS First Boston, 7.75%, Due 05/15/06................................. 500,000 522,500
First Union Corp., 6.824%, Due 08/01/06.............................. 600,000 601,500
Lehman Brothers Holdings, 8.80%, Due 03/01/15........................ 400,000 451,000
Midland Bank, 7.65%, Due 05/01/25.................................... 550,000 578,875
Salomon Brothers, 6.875%, Due 12/15/03............................... 500,000 489,375
-----------
2,643,250
-----------
Industrial............................................................. 1.1%
News American Holdings, 8.00%, Due 10/17/16.......................... 500,000 499,375
-----------
Insurance.............................................................. 3.0%
Farmers Insurance Exchange, 8.50%, Due 08/01/04...................... 700,000 738,500
Liberty Mutual Insurance Co., 8.20%, Due 05/04/07.................... 500,000 531,875
-----------
1,270,375
-----------
Telecommunications..................................................... 2.5%
Comsat Medium Term Note, 8.05%, Due 12/13/06......................... 500,000 547,785
Continental Cablevision, 8.30%, Due 05/15/06......................... 500,000 533,750
-----------
1,081,535
-----------
Tobacco................................................................ 1.0%
Dimon, Inc., 8.875%, Due 06/01/06.................................... 400,000 418,500
-----------
TOTAL CORPORATE BONDS (COST $6,859,440)............................ 6,921,160
-----------
U.S. TREASURY NOTES (9.3%)
U.S. Treasury Note, 6.00%, Due 08/31/97.............................. 500,000 501,465
U.S. Treasury Note, 6.375%, Due 01/15/00............................. 500,000 504,565
U.S. Treasury Note, 6.125%, Due 07/31/00............................. 1,000,000 1,000,090
U.S. Treasury Note, 6.25%, Due 08/31/00.............................. 2,000,000 2,006,900
-----------
TOTAL U.S. TREASURY NOTES (COST $4,013,117)........................ 4,013,020
-----------
</TABLE>
17
<PAGE> 48
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Managed Portfolio
Schedule of Investments, December 31, 1996 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AGENCY OBLIGATIONS (10.8%)
Collateralized Mortgage Obligation Trust............................... 1.1%
7.95%, Due 05/01/17.................................................. $ 458,000 $ 469,767
Government National Single Family...................................... 2.3%
7.50%, Due 12/15/26.................................................. 1,000,000 1,000,313
Farmers Mac Discount Note.............................................. 2.8%
5.32%, Due 01/02/97.................................................. 1,200,000 1,199,823
Federal Home Loan Bank Bonds........................................... 1.4%
6.65%, Due 11/13/01.................................................. 600,000 595,992
Federal Home Loan Mortgage Corp. ...................................... 3.2%
8.00%, Due 11/01/08.................................................. 519,000 528,561
6.50%, Due 01/01/11.................................................. 873,000 857,384
-----------
1,385,945
-----------
TOTAL AGENCY OBLIGATIONS (COST $4,688,086)......................... 4,651,840
-----------
SHORT-TERM INVESTMENTS (9.5%)
Norwest Financial, Inc., 5.55%, Due 01/14/97......................... 2,000,000 1,995,992
Prudential Funding Corp., 5.56%, Due 01/01/97........................ 500,000 499,537
Prudential Funding Corp., 5.56%, Due 01/10/97........................ 1,200,000 1,198,332
Temporary Investment Fund, Inc. - TempCash........................... 408,177 408,177
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $4,102,038)..................... 4,102,038
-----------
TOTAL INVESTMENTS (100.0%) (COST $36,086,018)...................... $43,056,384
===========
</TABLE>
* Non-income producing
See accompanying notes to financial statements.
18
<PAGE> 49
- --------------------------------------------------------------------------------
MARKET STREET FUND, INC.
THE AGGRESSIVE GROWTH PORTFOLIO
1996 Annual Review
Sentinel Advisors Company
- --------------------------------------------------------------------------------
This past year was a relatively good one for the Market Street Aggressive
Growth Portfolio. We are pleased to report that your portfolio outperformed both
the Russell 2000 Index (a proxy for small company stocks) and most small company
mutual funds. For the twelve month period ending December 31, 1996, the Market
Street Aggressive Growth Portfolio returned 21.0% as compared to 16.5% for the
Russell 2000 and 19.1% for the median Lipper small company mutual fund.
Some notable positive events this year with respect to the Portfolio's
holdings included USA Waste's acquisition of Western Waste, Conseco's
acquisition of American Travellers, and Halliburton's acquisition of Landmark
Graphics. The Portfolio's exposure to the energy services industry via Smith
International, test equipment for communication systems via Dynatech, fiber
optic and network connection systems via Methode Electronics, and the growing
demand for security services via ADT, Ltd. also contributed to this year's
favorable results. The Portfolio benefited from its exposure to affluent baby
boomers, and its investment in Ethan Allen Interiors was particularly rewarding.
Looking forward to 1997, we continue to envisage relatively strong prices
for oil and gas. Accordingly, we still favor the energy services industry. We
are also quite optimistic about prospects for various health care sectors, such
as drug delivery systems. We believe that our preference for shares of small
companies that have developed, or are developing, strong brand names and
attractive franchises will prove to be a successful investment strategy.
Keniston P. Merrill
Richard A. Pender, CFA
Scott T. Brayman, CFA
AGGRESSIVE GROWTH
<TABLE>
<CAPTION>
-------------------------
Dollars
-------------------------
Fund Index
- ---------------------------------------------------------------
<S> <C> <C> <C>
Start 10,000 10,000
89 10,558 10,340
90 11,695 8,324
91 18,283 12,161
92 18,755 14,399
93 19,730 17,120
94 19,730 16,808
95 22,389 21,599
96 27,091 25,171
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
---------------------------
Since
1 Year 5 Year Inception*
------ ------ ---------
<S> <C> <C>
21.00% 5.18% 13.87%
</TABLE>
LOGO
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> 50
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Growth Portfolio
Schedule of Investments, December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (80.6%)
Auto Parts & Repair.................................................... 1.6%
Pep Boys-Manny, Moe & Jack........................................... 17,800 $ 547,350
-----------
Beverages.............................................................. 1.2%
*Robert Mondavi Corp., Class A....................................... 11,000 401,500
-----------
Communications......................................................... 3.0%
*Dynatech Corp....................................................... 13,500 597,375
*Verifone, Inc....................................................... 14,000 413,000
-----------
1,010,375
-----------
Drugs-Drug Delivery.................................................... 2.7%
*Scherer (R.P.) Corp................................................. 18,500 929,625
-----------
Electronics............................................................ 4.2%
Harman International Industries, Inc................................. 11,860 659,712
Methode Electronics, Inc. Class A.................................... 38,000 769,500
-----------
1,429,212
-----------
Energy................................................................. 6.6%
*Calenergy Co., Inc.................................................. 22,000 739,750
*Smith International, Inc............................................ 34,000 1,525,750
-----------
2,265,500
-----------
Environmental Control.................................................. 3.7%
*USA Waste Services, Inc............................................. 22,650 721,969
*Waste Management International Plc-ADR.............................. 70,000 551,250
-----------
1,273,219
-----------
Finance................................................................ 7.1%
Duff & Phelps Credit Rating Co....................................... 12,500 301,562
First Commerce Corp.................................................. 6,000 233,250
Mercantile Bankshares Corp........................................... 12,000 384,000
ROC Communities...................................................... 27,300 757,575
Wilmington Trust Corp................................................ 18,800 742,600
-----------
2,418,987
-----------
Food & Food Distributors............................................... 6.6%
Goodmark Foods, Inc.................................................. 25,700 424,050
Hannaford Bros. Co................................................... 15,100 513,400
Smart & Final, Inc................................................... 28,000 605,500
Tootsie Roll Industries, Inc......................................... 17,455 691,654
-----------
2,234,604
-----------
</TABLE>
20
<PAGE> 51
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Growth Portfolio
Schedule of Investments, December 31, 1996 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Healthcare Providers................................................... 2.5%
*Alpha Beta Technology, Inc........................................... 17,000 $ 179,563
*Genesis Health Ventures.............................................. 21,450 667,631
-----------
847,194
-----------
Insurance.............................................................. 3.4%
Conseco, Inc......................................................... 18,091 1,153,301
-----------
Industrial & Commercial Services....................................... 5.0%
Analysts International Corp.......................................... 16,000 452,000
*Healthcare Services Group............................................ 48,500 485,000
Kelly Services, Inc.................................................. 15,600 421,200
Olsten Corp.......................................................... 22,000 332,750
-----------
1,690,950
-----------
Industrial Diversified................................................. 8.8%
Donaldson, Inc....................................................... 22,000 737,000
Lawter International, Inc............................................ 51,500 650,188
*Material Sciences Corp............................................... 40,800 734,400
*Bush Boake Allen, Inc................................................ 33,500 891,938
-----------
3,013,526
-----------
Manufacturing.......................................................... 2.4%
Calgon Carbon Corp. ................................................. 66,000 808,500
-----------
Medical-Equipment & Supplies........................................... 7.9%
Allergan, Inc........................................................ 20,000 712,500
Ballard Medical Products............................................. 18,000 335,250
Hillenbrand Industries, Inc.......................................... 19,000 688,750
Minntech Corp........................................................ 28,100 323,150
*Research Medical, Inc................................................ 26,800 616,400
-----------
2,676,050
-----------
Oil Equipment & Services............................................... 2.4%
Halliburton Co....................................................... 13,776 830,004
-----------
Restaurants............................................................ 1.8%
Sbarro, Inc.......................................................... 24,700 629,850
-----------
</TABLE>
21
<PAGE> 52
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Aggressive Growth Portfolio
Schedule of Investments, December 31, 1996 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Retail-Department Stores............................................... 4.4%
Ethan Allen Industries, Inc.......................................... 22,500 $ 866,250
Talbots, Inc......................................................... 23,000 658,375
-----------
1,524,625
-----------
Security Services...................................................... 2.9%
*ADT Ltd.............................................................. 43,000 983,625
-----------
Software............................................................... 2.4%
*Filenet Corp......................................................... 13,000 416,000
*Sterling Commerce.................................................... 12,000 423,000
-----------
839,000
-----------
TOTAL COMMON STOCK (COST $21,313,188).............................. 27,506,997
-----------
PREFERRED STOCK (0.2%)
Phoenix Duff & Phelps Preferred Convertible Series A, $1.50, (Cost
$71,441)........................................................... 2,500 62,500
-----------
SHORT-TERM INVESTMENTS (19.2%)
Beneficial Corp., 5.52%, Due 01/15/97................................ $1,600,000 1,596,566
Federal Agricultural Mortgage Corp., 5.32%, Due 01/02/97............. 1,500,000 1,499,778
General Electric Capital Corp., 5.35%, Due 01/22/97.................. 950,000 947,035
National City Credit Corp., 5.46%, Due 01/08/97...................... 1,000,000 998,938
Prudential Funding Corp., 5.60%, Due 01/10/97........................ 1,500,000 1,497,900
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $6,540,217)..................... 6,540,217
-----------
TOTAL INVESTMENTS (100.0%) (COST $27,924,846)...................... $34,109,714
===========
</TABLE>
* Non-income producing.
See accompanying notes to financial statements.
22
<PAGE> 53
- --------------------------------------------------------------------------------
MARKET STREET FUND, INC.
THE INTERNATIONAL PORTFOLIO
1996 Annual Review
The Boston Company Asset Management, Inc.
- --------------------------------------------------------------------------------
In 1996 the Market Street Fund International Portfolio outperformed the EAFE
Index. Your portfolio returned 10.9% versus EAFE, net of dividends, which
returned 6.0%. A strong U.S. dollar generally reduced local returns in nearly
all of the major markets. The major exceptions were Australia, New Zealand, the
United Kingdom and Italy.
The most significant factor influencing performance this year was Japan.
Despite a mildly improving economy, low interest rates and a slightly weaker
currency (thereby supporting exports), Japanese investors seemingly shunned the
equity market and invested their money elsewhere. Poor local returns in both the
equity and bond markets in recent years have driven Japanese institutional
investors to seek the higher returns available in the U.S. and elsewhere. As a
result, the Nikkei 225 lost 2.55% in local currency and lost nearly 13% in
dollar terms.
A cursory view of the European markets showed that they, in aggregate,
returned nearly 23% in local currency and 21% in dollar terms. Driving the
strong returns in Europe were two related factors, declining interest rates and
fiscal and political preparation for the European Monetary Union. Those
countries that are viewed as the most likely participants in the new single
currency garnered some of the best returns. Germany, France, and Ireland are all
likely to meet the convergence criteria.
The two countries most likely not to join the single currency at its outset
were coincidentally two of the three weakest performers for the year. They are
Switzerland and the United Kingdom. The Swiss market closed up 19.5%. The Swiss
are reluctant to surrender their neutrality and so are not likely to join the
EMU in 1999.
In the UK, the FTSE 100 closed up only 11.6% in local terms. The two issues
that drove 1996 performance and more importantly, set the tone for 1997, are the
upcoming election and the hotly debated issue of joining the single currency.
The election must be held by May at the latest and while the consensus projects
a Labor party victory, no one expects that basic fiscal and monetary policies
will change under a new administration. The question of Britain's joining the
single currency is not an easy one to judge. Economic and fiscal policies appear
to be working towards meeting the convergence criteria. The underlying theory is
that should the UK decide not to join, it should be for reasons of its own
choosing and not because it failed to meet the convergence criteria. Either way,
fiscal and economic policies of both the Labor and Tory parties are moving
positively towards low inflation, slow growth and a declining fiscal deficit.
As we look into 1997, we are actively examining the market's perception of
value. We believe that a critical review of value will continue to help your
portfolio achieve a positive risk reward profile.
LOGO
<TABLE>
<CAPTION>
- ------------------------------------------------
INTERNATIONAL
- ------------------------------------------------
Dollars
----------------------
Fund Index
----------------------
<S> <C> <C> <C>
Start 10,000 10,000
91 9,712 10,030
92 9,003 6,806
93 12,254 11,677
94 12,286 12,585
95 14,044 13,994
96 15,573 14,634
- ------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- ------------------------------------------------
<S> <C>
1 Year 10.59%
5 Year 9.90%
Since Inception* 5.95%
- ------------------------------------------------
</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> 54
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio
Schedule of Investments, December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK AND PREFERRED STOCK (96.2%)
Austria.................................................................. 0.3%
Creditanstalt PS....................................................... 1,200 $ 155,024
-----------
Australia................................................................ 3.2%
Amcor Ltd. ............................................................ 45,000 289,330
Australia & New Zealand Bank Group Ltd. ............................... 50,000 315,120
Boral Ltd. ............................................................ 204,724 582,485
Commonwealth Installment Receipt Trustee Ltd. ......................... 43,004 267,611
Goodman Fielder........................................................ 112,993 140,091
-----------
1,594,637
-----------
France................................................................... 4.4%
C.S.F. (Thomson-C.S.F.)................................................ 14,419 469,005
CLF - Dexia France..................................................... 5,000 429,724
Danone................................................................. 3,704 516,341
Societe Generale....................................................... 6,748 724,296
-----------
2,139,366
-----------
Germany.................................................................. 9.5%
Bayer AG............................................................... 13,000 530,130
Bayer Motoren AG....................................................... 800 557,403
Deutsche Bank AG....................................................... 15,000 700,325
GEA AG................................................................. 1,600 489,351
Henkel KGAA............................................................ 1,000 47,727
Henkel KGAA - Vorzug Preferred......................................... 11,000 552,143
Siemens AG............................................................. 11,500 541,396
Tarkett................................................................ 15,000 299,026
Veba AG................................................................ 8,500 491,234
Viag AG................................................................ 1,200 470,649
-----------
4,679,384
-----------
Hong Kong................................................................ 3.2%
Cheung Kong Holdings................................................... 57,000 506,527
Hong Kong Electric..................................................... 145,000 481,678
HSBC Holdings Plc...................................................... 13,418 287,038
Yue Yuen Industrial.................................................... 750,000 285,982
-----------
1,561,225
-----------
Italy.................................................................... 2.3%
Fiat SpA............................................................... 105,000 316,552
STET Di Risp........................................................... 250,000 840,722
-----------
1,157,274
-----------
</TABLE>
24
<PAGE> 55
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio
Schedule of Investments, December 31, 1996 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK AND PREFERRED STOCK (CONTINUED)
Japan.................................................................... 27.9%
Canon, Inc. ........................................................... 38,000 $ 840,795
Chudenko Corp. ........................................................ 7,000 202,074
Credit Saison Co. ..................................................... 37,000 828,263
Dai-Tokyo Fire and Marine Insurance.................................... 117,000 621,910
Hitachi Koki Co. ...................................................... 55,000 394,080
Hitachi Ltd. .......................................................... 65,000 606,742
Honda Motor Co. Ltd. .................................................. 17,000 486,344
Ito-Yokado Co. Ltd. ................................................... 13,000 566,292
Kao Corp. ............................................................. 60,000 700,086
Mabuchi Motors......................................................... 11,200 564,356
Mikuni Coca-Cola Bottling Co. Ltd. .................................... 40,000 518,583
Mineba Company Ltd. ................................................... 65,000 543,820
Mitsubishi Heavy Industries Ltd. ...................................... 90,000 715,644
Murata Manufacturing Co. Ltd. ......................................... 22,000 722,558
Nichiei................................................................ 6,500 478,090
Nishimatsu Construction................................................ 55,000 480,121
Ono Pharmaceutical..................................................... 8,000 235,091
Sankyo Co. Ltd. ....................................................... 15,000 439,499
Sekisui Chemical Co.................................................... 27,000 273,034
Sekisui House.......................................................... 48,000 489,542
Sony Corp. ............................................................ 9,000 590,406
Toshiba Corp. ......................................................... 100,000 629,213
Toyota Motor Corp. .................................................... 28,000 805,877
Yamanouchi Pharmaceuticals............................................. 22,000 452,550
Yamato Transportation.................................................. 55,000 570,441
-----------
13,755,411
-----------
Malaysia................................................................. 1.2%
Affin Holdings......................................................... 160,000 440,222
IOI Properties Berhad.................................................. 43,000 139,588
-----------
579,810
-----------
Netherlands.............................................................. 4.4%
ABN Amro Holding....................................................... 8,156 528,778
Hollandsche Beton...................................................... 2,050 423,196
Hunter Douglas N.V..................................................... 7,956 534,621
International Nederlanden Group........................................ 6,666 239,156
Koninklijke K.N.P. .................................................... 20,000 436,062
-----------
2,161,813
-----------
</TABLE>
25
<PAGE> 56
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio
Schedule of Investments, December 31, 1996 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK AND PREFERRED STOCK (CONTINUED)
New Zealand.............................................................. 1.2%
Air New Zealand........................................................ 61,091 $ 166,089
Fletcher Energy........................................................ 150,000 435,420
-----------
601,509
-----------
Norway................................................................... 1.3%
Christiana Bank........................................................ 90,000 284,485
Orkla.................................................................. 5,500 348,564
-----------
633,049
-----------
Portugal................................................................. 0.5%
Banco Comercial Portugues.............................................. 20,000 262,938
-----------
Singapore................................................................ 1.4%
Development Bank....................................................... 30,000 405,289
Far East Levingston.................................................... 53,000 276,555
-----------
681,844
-----------
Spain.................................................................... 1.1%
Gas y Electricidad SA Gesa............................................. 8,591 546,550
-----------
Sweden................................................................... 0.7%
Marieberg Tidnings AB.................................................. 14,000 343,910
-----------
Switzerland.............................................................. 4.7%
Magazine Zum Globus.................................................... 100 51,788
Magazine Zum Globus Participating Certificates, Zurich................. 550 253,279
Nestle SA.............................................................. 300 321,237
Schweizerischer Bankverein............................................. 3,350 635,302
Sulzer AG-Registered Shares............................................ 830 478,085
Zurich Versicherungs................................................... 2,000 554,396
-----------
2,294,087
-----------
United Kingdom........................................................... 11.6%
Abbey National Plc..................................................... 50,000 655,796
BTR Ordinary Plc....................................................... 158,823 773,336
Bunzel Plc............................................................. 125,000 499,348
D.S. Smith............................................................. 71,178 380,749
Devro Plc.............................................................. 60,000 276,720
Laird Group Ordinary................................................... 65,000 443,541
</TABLE>
26
<PAGE> 57
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The International Portfolio
Schedule of Investments, December 31, 1996 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK AND PREFERRED STOCK (CONTINUED)
National Westminster Bank.............................................. 75,183 $ 884,266
Powergen Plc........................................................... 84,443 828,123
RTZ Corp............................................................... 41,351 665,007
Scapa Group............................................................ 70,603 297,175
-----------
5,704,061
-----------
United States............................................................ 17.3%
AKZO N.V. Sponsored ADR................................................ 3,500 236,250
Alcatel Alsthom ADR.................................................... 28,516 456,256
Cable and Wireless ADR................................................. 22,000 541,750
Corporacion Bancaria de Espanol ADR.................................... 29,000 652,500
Elf Aquitaine ADR...................................................... 18,751 848,483
Ente Nazionale Idrocarburi SpA-ADR..................................... 10,000 516,250
Hanson Trust Plc ADR................................................... 33,000 222,750
*Imperial Tobacco Group ADR............................................ 8,250 106,450
Istituto Mobiliare Italiano ADR........................................ 19,000 491,625
KPN ADS................................................................ 8,863 335,686
Philips N.V. ADR....................................................... 10,000 400,000
Repsol ADR............................................................. 22,000 838,750
Rhone Poulenc S.A. Sponsored ADR....................................... 14,295 484,243
Scania AB Class A-ADR.................................................. 8,000 193,000
Scania AB Class B-ADR.................................................. 3,000 72,375
Tele Danmark ADR....................................................... 17,500 476,875
Telefonos De Mexico S.A.-ADR........................................... 9,500 313,500
Unilever N.V-ADR....................................................... 3,000 525,750
Volvo AB-ADR........................................................... 15,000 326,250
YPF Sociedad Anonima ADR............................................... 20,000 505,000
-----------
8,543,741
-----------
TOTAL COMMON STOCK AND PREFERRED STOCK (COST $43,890,604)............ 47,395,633
-----------
SHORT-TERM INVESTMENTS (3.8%)
Temporary Investment Fund, Inc.-TempCash
(Cost $1,881,582).................................................... 1,881,582 1,881,582
-----------
TOTAL INVESTMENTS (100.0%) (COST $45,772,186)........................ $49,277,215
===========
</TABLE>
* Non-Income Producing.
See accompanying notes to financial statements.
27
<PAGE> 58
- --------------------------------------------------------------------------------
MARKET STREET FUND, INC.
THE COMMON STOCK PORTFOLIO
1996 Annual Review
Sentinel Advisors Company
- --------------------------------------------------------------------------------
The Common Stock Portfolio produced a total return of 14.2% for the period
from inception (March 18) until December 31, 1996. This figure was below the
17.6% return for the Standard & Poor's 500, but modestly ahead of the 14.0%
return for the Lipper Growth & Income Fund Index.
While the stock market appreciated strongly during the year, the ride was
far from smooth. Vigorous economic growth early in the year propelled the market
higher, leading to some speculative excesses, particularly among the small
capitalization issues, in early spring. When economic activity began to show
signs of slowing, the market suffered a minor correction in July. Since that
time, however, with the consensus shifting back to a forecast of moderate
growth, restrained inflation and relatively low interest rates, the market has
again rallied strongly, and ended the year near its all-time high. Also
contributing to the year-end strength were the results of the national election,
which again elected a balanced government, with the Republicans controlling the
United States Congress, and the Democrats the White House.
For the second year in a row, one of the strongest sectors in the stock
market was the financial services group. The Common Stock Portfolio benefited
from this trend, with significant holdings in both banking and insurance
companies. Also very positively impacting performance of the Portfolio were
substantial holdings in consumer growth stocks (particularly pharmaceutical
companies) and our investments in the energy sector (especially our holdings in
oilfield service companies and diversified natural gas companies). The weakest
sector in the stock market has been the electrical and telephone utilities.
Although traditionally a strong source of dividend income for our growth &
income portfolios, we have de-emphasized these groups recently due to concerns
about competitive pressures, retaining holdings in only a very few, better
positioned companies. Our underweighting of the utilities groups has also
contributed very positively to the performance of the Portfolio.
Looking forward, we anticipate that 1997 will bring a continuation of the
trend of modest economic growth and restrained inflation. We believe that, in
such a moderate growth, stable interest rate environment, the market will
continue to favor the stocks of companies with consistent earnings records. The
Common Stock Portfolio continues to maintain sizable commitments to the
financial, energy, consumer products and healthcare areas, all of which should
benefit in the anticipated economic environment.
Keniston P. Merrill
Richard A. Pender, CFA
Daniel J. Manion
<TABLE>
<CAPTION>
- -----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- -----------------------------------------------------
<S> <C>
Since Inception* 14.22%
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------
COMMON STOCK
- -----------------------------------------------------
Dollars
---------------------
Fund Index
---------------------
<S> <C> <C> <C>
Start 10,000 10,000
96 11,422 11,760
- -----------------------------------------------------
</TABLE>
LOGO
Past performance is not predictive of future performance.
+ The Index is the S&P 500 Index, an unmanaged index of 500 U.S. common
stocks that include reinvestment of dividends.
* Inception date was March 18, 1996.
28
<PAGE> 59
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Common Stock Portfolio
Schedule of Investments, December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (92.6%)
Automobiles........................................................... 4.5%
Chrysler Corp....................................................... 2,600 $ 85,800
Echlin, Inc......................................................... 2,500 79,062
Ford Motor Co....................................................... 4,000 127,500
-----------
292,362
-----------
Banks................................................................. 11.0%
Bank of New York Co., Inc........................................... 4,500 151,875
BankAmerica Corp.................................................... 1,000 99,750
Chase Manhattan Corp................................................ 1,300 116,025
Citicorp............................................................ 1,300 133,900
First Union Corp.................................................... 1,400 103,600
Morgan (J.P.) & Co., Inc............................................ 1,200 117,150
-----------
722,300
-----------
Beverages............................................................. 1.9%
Coca-Cola Co........................................................ 2,400 126,300
-----------
Building Materials.................................................... 1.6%
Sherwin Williams Co................................................. 1,900 106,400
-----------
Business & Consumer Services.......................................... 3.4%
Electronic Data Systems Corp........................................ 2,800 121,100
Omnicom Group, Inc.................................................. 2,200 100,650
-----------
221,750
-----------
Consumer Products..................................................... 6.3%
American Brands, Inc................................................ 2,000 99,250
Gillette Co......................................................... 1,600 124,400
Kimberly-Clark Corp................................................. 1,300 123,825
Rubbermaid, Inc..................................................... 2,800 63,700
-----------
411,175
-----------
Drugs................................................................. 3.9%
American Home Products Corp......................................... 2,200 128,975
Pfizer, Inc......................................................... 1,500 124,313
-----------
253,288
-----------
Electrical Equipment.................................................. 5.4%
Emerson Electric Co................................................. 1,800 174,150
General Electric Co................................................. 1,800 177,975
-----------
352,125
-----------
</TABLE>
29
<PAGE> 60
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Common Stock Portfolio
Schedule of Investments, December 31, 1996 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Energy................................................................ 10.5%
Amoco Corp.......................................................... 1,300 $ 104,650
Atlantic Richfield Co............................................... 500 66,250
Chevron Corp........................................................ 1,200 78,000
Exxon Corp.......................................................... 1,500 147,000
Mobil Corp.......................................................... 1,000 122,250
Royal Dutch Petroleum Co............................................ 1,000 170,750
-----------
688,900
-----------
Financial............................................................. 2.6%
American Express Co................................................. 3,000 169,500
*Echelon International Corp.......................................... 133 2,083
-----------
171,583
-----------
Foods................................................................. 3.3%
CPC International, Inc.............................................. 1,100 85,250
Sara Lee Corp....................................................... 3,500 130,375
-----------
215,625
-----------
Healthcare Providers.................................................. 2.1%
Columbia Healthcare Corp............................................ 3,300 134,475
-----------
Industrial - Diversified.............................................. 8.3%
Boeing Co........................................................... 96 10,212
Crown Cork & Seal Co., Inc.......................................... 2,000 108,750
Grace (W.R.) & Co................................................... 1,300 67,275
Parker Hannifin Corp................................................ 3,300 127,875
PPG Industries, Inc................................................. 1,600 89,800
*Rockwell International Corp......................................... 2,300 140,013
-----------
543,925
-----------
Insurance............................................................. 6.1%
Allstate Corp....................................................... 2,400 138,900
American General Corp............................................... 3,200 130,800
American International Group, Inc................................... 1,200 129,900
-----------
399,600
-----------
Medical - Equipment & Supplies........................................ 1.8%
Johnson & Johnson................................................... 2,400 119,400
-----------
</TABLE>
30
<PAGE> 61
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Common Stock Portfolio
Schedule of Investments, December 31, 1996 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Oil Field Equipment & Services........................................ 3.3%
Halliburton Co...................................................... 1,600 $ 96,400
Schlumberger Ltd.................................................... 1,200 119,850
-----------
216,250
-----------
Publishing............................................................ 2.4%
Gannett, Inc........................................................ 1,200 89,850
McGraw-Hill, Inc.................................................... 1,500 69,187
-----------
159,037
-----------
Railroads............................................................. 2.5%
Canadian Pacific Ltd................................................ 2,800 74,200
Union Pacific Corp.................................................. 1,500 90,188
-----------
164,388
-----------
Retail................................................................ 3.8%
May Department Stores Co............................................ 1,700 79,475
Nordstrom, Inc...................................................... 1,500 53,156
Sears, Roebuck and Co............................................... 2,500 115,313
-----------
247,944
-----------
Telecommunications.................................................... 0.6%
Lucent Technologies, Inc............................................ 848 39,220
-----------
Tobacco............................................................... 1.0%
Philip Morris, Inc.................................................. 600 67,575
-----------
Utilities - Electric.................................................. 2.2%
Florida Progress Corp............................................... 2,000 64,500
FPL Group, Inc...................................................... 1,700 78,200
-----------
142,700
-----------
Utilities - Gas....................................................... 2.9%
Enron Corp.......................................................... 2,200 94,875
Sonat, Inc.......................................................... 1,800 92,700
-----------
187,575
-----------
</TABLE>
31
<PAGE> 62
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Common Stock Portfolio
Schedule of Investments, December 31, 1996 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Utilities - Telephone................................................... 1.2%
GTE Corp.............................................................. 1,700 $ 77,350
-----------
TOTAL COMMON STOCK (COST $5,361,460)................................ 6,061,247
-----------
CONVERTIBLE STOCK (0.7%)
*Microsoft Corp., Preferred Series A Convertible, 2.75%
(Cost $47,925)...................................................... 600 48,075
-----------
AGENCY OBLIGATIONS (4.6%)
Federal National Mortgage Discount Notes, 5.51%, Due 01/03/97
(Cost $299,908)..................................................... $300,000 299,908
-----------
SHORT-TERM INVESTMENTS (2.1%)
Temporary Investment Fund, Inc. - TempCash
(Cost $135,994)..................................................... 135,994 135,994
-----------
TOTAL INVESTMENTS (100.0%) (COST $5,845,287)............................ $6,545,224
===========
*Non-Income Producing
</TABLE>
See accompanying notes to financial statements.
32
<PAGE> 63
- --------------------------------------------------------------------------------
MARKET STREET FUND, INC.
THE SENTINEL GROWTH PORTFOLIO
1996 Annual Review
Sentinel Advisory Company
- --------------------------------------------------------------------------------
The Sentinel Growth Portfolio earned a total return of 11.4% from its
inception on March 18, 1996, through December 31, 1996. This return was below
the 17.6% return earned by the S&P 500, but was in line with the 11.8% return
for the Lipper Growth Fund Index.
Large capitalization stocks, which dominate the return on the S&P 500,
outperformed medium and small cap stocks by a wide margin during the March to
December period. The strong performance of large cap stocks accelerated
following the minor market correction in July. From that point through the end
of November, investors favored large cap stocks as they sought out investments
offering a high degree of liquidity and earnings predictability. The Sentinel
Growth Portfolio, which is comprised mainly of medium size stocks, benefited
from the strong surge in selected large cap holdings such as Intel, Microsoft,
Schlumberger, Pfizer, and First Union Corporation.
Stocks in the financial, retail, energy service, and technology sectors were
the strongest contributors to performance during the March-December time frame.
The Portfolio benefited from good stock selection in all four of these sectors.
Overweighted positions in the consumer and healthcare sectors hindered
performance as a small number of companies in those sectors reported
disappointing earnings growth.
The investment strategy of the Sentinel Growth Portfolio emphasizes taking
major positions in market-leading companies capable of earning high returns on
capital in growth industries such as biotechnology, energy services, pollution
control and semiconductors.
While the overall stock market can no longer be described as inexpensive, an
environment of slow economic growth and low interest rates is generally positive
for growth stocks. Slow growth favors companies that are able to deliver
predictable earnings growth, and low interest rates limit the risk of a decline
in price-earnings ratios. The Portfolio is well-positioned for such an
environment with a significant weighting in market leading companies that we
believe will deliver predictable, above-average growth. Risk is limited by the
Portfolio's broad diversification across all major sectors and an aggregate
price/earnings multiple that is close to that of the overall market.
Robert L. Lee, CFA
LOGO
<TABLE>
<CAPTION>
- ------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- ------------------------------------------------------
<S> <C>
Since Inception * 11.40%
- ------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------
SENTINEL GROWTH
- ------------------------------------------------------
Dollars
-------------------
Fund Index
-------------------
<S> <C> <C>
Start 10,000 10,000
96 11,140 11,760
- ------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance.
+ The Index is the S&P 500 Index, an unmanaged index of 500 U.S. common
stocks that include reinvestment of dividends.
* Inception date was March 18, 1996.
33
<PAGE> 64
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Sentinel Growth Portfolio
Schedule of Investments, December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (93.3%)
Automobiles & Auto Parts................................................ 1.6%
Pep Boys-Manny Moe & Jack............................................. 3,000 $ 92,250
----------
Banks................................................................... 1.4%
First Union Corp. .................................................... 1,100 81,400
----------
Financial............................................................... 5.7%
American Express Co. ................................................. 2,200 124,300
Student Loan Marketing Association.................................... 2,100 195,562
----------
319,862
----------
Biotechnology........................................................... 8.2%
*Amgen, Inc. ......................................................... 2,100 114,188
Biogen, Inc. ......................................................... 1,200 46,500
*Centocor, Inc. ...................................................... 1,600 57,200
*Chiron Corp. ........................................................ 2,800 52,150
Pfizer, Inc. ......................................................... 1,100 91,163
Schering Plough Corp. ................................................ 1,600 103,600
----------
464,801
----------
Building Materials...................................................... 1.9%
Sherwin Williams Co. ................................................. 1,900 106,400
----------
Business Services....................................................... 6.1%
Electronic Data Systems............................................... 2,400 103,800
First Data Corp. ..................................................... 2,000 73,000
Omnicom Group, Inc. .................................................. 3,700 169,275
----------
346,075
----------
Computers............................................................... 1.7%
Hewlett Packard Co. .................................................. 1,000 50,250
Novellus System, Inc. ................................................ 800 43,350
----------
93,600
----------
Consumer Services....................................................... 0.9%
Hillenbrand Industries, Inc. ......................................... 1,400 50,750
----------
Electronics............................................................. 6.8%
*Applied Materials, Inc. ............................................. 4,100 147,343
*KLA Instruments Corp. ............................................... 1,700 60,350
Methode Electronics, Inc. ............................................ 1,900 38,475
Motorola, Inc. ....................................................... 1,300 79,788
Tencor Instruments.................................................... 2,200 58,025
----------
383,981
----------
</TABLE>
34
<PAGE> 65
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Sentinel Growth Portfolio
Schedule of Investments, December 31, 1996 -- Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Environmental Control................................................... 0.9%
*United States Filter Corp. .......................................... 1,500 $ 47,625
----------
Energy.................................................................. 0.9%
Enron Corp. .......................................................... 1,200 51,750
----------
Health.................................................................. 1.8%
American Home Products................................................ 1,700 99,662
----------
Healthcare Services..................................................... 8.5%
Columbia/HCA Healthcare............................................... 2,550 103,912
Genzyme Corp. ........................................................ 2,200 47,850
Integrated Health Services, Inc. ..................................... 4,000 97,500
Medpartners, Inc. .................................................... 5,847 115,227
Renal Treatment Centers, Inc. ........................................ 1,100 28,050
United Healthcare Corp. .............................................. 1,900 85,500
----------
478,039
----------
Industrial.............................................................. 5.0%
Donaldson Co.......................................................... 4,400 147,400
Crown Cork & Seal Co., Inc. .......................................... 1,100 59,812
Grace (W.R.) & Co..................................................... 1,400 72,450
----------
279,662
----------
Insurance............................................................... 1.1%
Equitable of Iowa..................................................... 1,400 64,225
----------
Medical-Equipment & Supplies............................................ 4.0%
Dentsply International................................................ 2,300 109,250
Johnson & Johnson..................................................... 1,600 79,600
*LAM Research Corp. .................................................. 1,400 39,375
----------
228,225
----------
Office Equipment........................................................ 1.2%
Staples, Inc. ........................................................ 3,800 68,637
----------
Oil Field Equipment..................................................... 7.6%
Halliburton Co. ...................................................... 1,000 60,250
Schlumberger Ltd. .................................................... 1,500 149,813
*Smith International, Inc. .......................................... 3,700 166,038
Union Pacific Resources Group......................................... 1,746 51,071
----------
427,172
----------
Restaurants............................................................. 0.9%
Outback Steakhouse, Inc. ............................................. 2,000 53,500
----------
</TABLE>
35
<PAGE> 66
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
The Sentinel Growth Portfolio
Schedule of Investments, December 31, 1996 -- Concluded
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
PERCENTAGE NUMBER
OF PORTFOLIO OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (CONTINUED)
Retail................................................................. 12.7%
Ethan Allen Interiors, Inc. ......................................... 5,200 $ 200,200
Home Depot, Inc. .................................................... 2,800 140,350
Nordstrom, Inc. ..................................................... 1,400 49,613
Sears, Roebuck & Co. ................................................ 2,000 92,250
TJX Companies........................................................ 5,100 241,613
-----------
724,026
-----------
Semiconductors......................................................... 6.2%
Intel Corp. ......................................................... 1,300 170,218
*Microsoft Corp. .................................................... 2,200 181,775
-----------
351,993
-----------
Technology............................................................. 1.0%
*Sterling Commerce, Inc. ............................................ 1,600 56,400
-----------
Telecommunications..................................................... 3.2%
*Airtouch Communications............................................. 1,900 47,975
*Worldcom, Inc. ..................................................... 5,000 130,313
-----------
178,288
-----------
Tobacco................................................................ 4.0%
Philip Morris Cos., Inc. ............................................ 2,000 225,250
-----------
TOTAL COMMON STOCK (COST $4,722,686)............................... 5,273,573
-----------
SHORT-TERM INVESTMENTS (6.7%)
Prudential Funding Corp., 5.90%, Due 01/02/97........................ $ 280,000 279,954
Temporary Investment Fund, Inc.-TempCash............................. 99,478 99,478
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $379,432)....................... 379,432
-----------
TOTAL INVESTMENTS (100.0%) (COST $5,102,118)....................... $ 5,653,005
===========
</TABLE>
* Non-Income Producing
See accompanying notes to financial statements.
36
<PAGE> 67
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statements of Assets and Liabilities, December 31, 1996
- --------------------------------------------------------------------------------
<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 $171,644,227,
$54,440,564, $16,596,014, $36,086,018,
$27,924,846, $45,772,186, $5,845,287,
$5,102,118 respectively) (see accompanying
schedules)................................. $198,472,474 $54,440,564 $16,780,212 $43,056,384 $34,109,714 $49,277,215
Foreign currency, at value (Cost
$2,369,564)................................ -- -- -- -- -- 2,378,359
Interest receivable.......................... 33,078 18,919 265,016 248,986 2,496 7,386
Dividends and tax reclaim receivable......... 544,187 -- -- 37,813 29,114 95,513
Receivable from affiliated insurance
company.................................... -- -- -- -- -- --
Receivable for fund shares sold.............. 13,437 -- 53,529 117,153 5,951 48,061
------------ ----------- ----------- ----------- ----------- -----------
Total assets............................... 199,063,176 54,459,483 17,098,757 43,460,336 34,147,275 51,806,534
------------ ----------- ----------- ----------- ----------- -----------
LIABILITIES
Accrued expenses............................. 114,998 32,866 11,877 29,105 28,212 51,241
Dividend payable............................. -- 229,893 -- -- -- --
Payable for investments purchased............ -- -- -- -- -- 800,170
Payable for fund shares redeemed............. 112 -- 2 61 20,781 --
------------ ----------- ----------- ----------- ----------- -----------
Total liabilities.......................... 115,110 262,759 11,879 29,166 48,993 851,411
------------ ----------- ----------- ----------- ----------- -----------
Net assets................................. $198,948,066 $54,196,724 $17,086,878 $43,431,170 $34,098,282 $50,955,123
============ =========== =========== =========== =========== ===========
Number of shares of $.01 par value common
stock, issued and outstanding.............. 10,993,074 54,196,724 1,602,086 2,957,804 1,840,827 3,800,309
============ =========== =========== =========== =========== ===========
Net asset value, offering and redemption
price per share............................ $18.10 $1.00 $10.67 $14.68 $18.52 $13.41
============ =========== =========== =========== =========== ===========
<CAPTION>
COMMON SENTINEL
STOCK GROWTH
PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at value (cost $171,644,227,
$54,440,564, $16,596,014, $36,086,018,
$27,924,846, $45,772,186, $5,845,287,
$5,102,118 respectively) (see accompanying
schedules)................................. $ 6,545,224 $5,653,005
Foreign currency, at value (Cost
$2,369,564)................................ -- --
Interest receivable.......................... 662 858
Dividends and tax reclaim receivable......... 9,430 5,353
Receivable from affiliated insurance
company.................................... 11,085 9,914
Receivable for fund shares sold.............. 4,824 --
----------- ----------
Total assets............................... 6,571,225 5,669,130
----------- ----------
LIABILITIES
Accrued expenses............................. 6,601 5,507
Dividend payable............................. -- --
Payable for investments purchased............ -- --
Payable for fund shares redeemed............. -- 34
----------- ----------
Total liabilities.......................... 6,601 5,541
----------- ----------
Net assets................................. $ 6,564,624 $5,663,589
=========== ==========
Number of shares of $.01 par value common
stock, issued and outstanding.............. 580,267 508,271
=========== ==========
Net asset value, offering and redemption
price per share............................ $11.31 $11.14
=========== ==========
</TABLE>
See accompanying notes to financial statements.
37
<PAGE> 68
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statements of Operations for the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............................................. $ 5,324,989 $ -- $ -- $ 510,234 $ 229,723
Interest............................................... 490,581 2,467,400 1,012,370 1,147,909 284,384
Other income........................................... 117,880 11,129 7,814 24,548 8,639
Less: foreign taxes withheld......................... (24,858) -- -- (2,730) --
----------- ---------- ---------- ---------- ----------
Total Income......................................... 5,908,592 2,478,529 1,020,184 1,679,961 522,746
----------- ---------- ---------- ---------- ----------
EXPENSES:
Investment advisory fee................................ 592,350 113,183 53,767 157,156 134,923
Administration fee..................................... 137,181 34,820 11,880 30,374 22,147
Directors' fee......................................... 11,174 2,834 968 2,474 1,803
Transfer agent fee..................................... 6,177 2,689 1,748 3,439 1,825
Custodian fee.......................................... 33,140 10,945 3,889 10,400 11,034
Legal fees............................................. 16,261 3,149 1,075 2,749 2,664
Audit fees............................................. 20,696 4,880 1,756 4,558 3,391
Printing............................................... 50,789 20,321 6,773 17,614 13,092
Miscellaneous.......................................... 22,362 7,730 4,104 5,360 5,345
----------- ---------- ---------- ---------- ----------
890,130 200,551 85,960 234,124 196,224
Less: expenses reimbursed by affiliated insurance
company.............................................. -- -- -- -- --
----------- ---------- ---------- ---------- ----------
Total expenses....................................... 890,130 200,551 85,960 234,124 196,224
----------- ---------- ---------- ---------- ----------
Net investment income (loss)......................... 5,018,462 2,277,978 934,224 1,445,837 326,522
----------- ---------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY
Net realized gain (loss) from:
Investments......................................... 23,119,178 -- (125,017) 344,584 64,760
Foreign currency related transactions............... (55,751) -- -- (293) --
----------- ---------- ---------- ---------- ----------
23,063,427 -- (125,017) 344,291 64,760
----------- ---------- ---------- ---------- ----------
Net change in unrealized appreciation (depreciation)
from:
Investments......................................... 4,147,912 -- (333,487) 2,694,823 5,078,163
Foreign currency related translations............... -- -- -- -- --
----------- ---------- ---------- ---------- ----------
4,147,912 -- (333,487) 2,694,823 5,078,163
----------- ---------- ---------- ---------- ----------
Net gain (loss) on investments and foreign currency.... 27,211,339 -- (458,504) 3,039,114 5,142,923
----------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets resulting from
operations.......................................... $32,229,801 $2,277,978 $ 475,720 $4,484,951 $5,469,445
=========== ========== ========== ========== ==========
<CAPTION>
COMMON SENTINEL
INTERNATIONAL STOCK GROWTH
PORTFOLIO PORTFOLIO* PORTFOLIO*
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............................................. $ 948,132 $ 97,348 $ 48,959
Interest............................................... 129,585 17,277 11,218
Other income........................................... 18,197 -- --
Less: foreign taxes withheld......................... (165,850) -- --
---------- -------- --------
Total Income......................................... 930,064 114,625 60,177
---------- -------- --------
EXPENSES:
Investment advisory fee................................ 326,164 17,385 20,371
Administration fee..................................... 63,701 36,498 34,321
Directors' fee......................................... 2,736 264 248
Transfer agent fee..................................... 1,988 1,294 1,288
Custodian fee.......................................... 37,887 3,911 2,836
Legal fees............................................. 3,940 294 276
Audit fees............................................. 5,085 376 353
Printing............................................... 11,743 690 649
Miscellaneous.......................................... 4,414 1,477 1,477
---------- -------- --------
457,658 62,189 61,819
Less: expenses reimbursed by affiliated insurance
company.............................................. -- (27,324) (25,050)
---------- -------- --------
Total expenses....................................... 457,658 34,865 36,769
---------- -------- --------
Net investment income (loss)......................... 472,406 79,759 23,408
---------- -------- --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY
Net realized gain (loss) from:
Investments......................................... 3,347,494 (22,148) 3,259
Foreign currency related transactions............... (44,827) -- --
---------- -------- --------
3,302,667 (22,148) 3,259
---------- -------- --------
Net change in unrealized appreciation (depreciation)
from:
Investments......................................... 782,845 699,937 550,887
Foreign currency related translations............... (1,275) -- --
---------- -------- --------
781,570 699,937 550,887
---------- -------- --------
Net gain (loss) on investments and foreign currency.... 4,084,237 677,789 554,146
---------- -------- --------
Net increase (decrease) in net assets resulting from
operations.......................................... $ 4,556,643 $757,548 $577,554
========== ======== ========
</TABLE>
* The Common Stock and Sentinel Growth Portfolios commenced operations on
03/18/96.
See accompanying notes to financial statements.
38
<PAGE> 69
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Statements of Changes in Net Assets for the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss)................... $ 5,018,462 $ 2,277,978 $ 934,224 $ 1,445,837 $ 326,522
Net realized gain (loss) on investments and
foreign currency related transactions......... 23,063,427 -- (125,017) 344,291 64,760
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency translations......................... 4,147,912 -- (333,487) 2,694,823 5,078,163
------------ ----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations............................... 32,229,801 2,277,978 475,720 4,484,951 5,469,445
Distributions:
From net investment income..................... (4,995,312) (2,277,978) (874,882) (1,390,871) (255,039)
From net realized gains........................ (7,732,422) -- -- (1,471,361) (2,569,743)
Capital share transactions:
Net contributions from affiliated life
insurance companies........................... 17,547,048 19,581,572 3,083,685 5,806,085 7,631,188
------------ ----------- ----------- ----------- -----------
Total increase in net assets.................. 37,049,115 19,581,572 2,684,523 7,428,804 10,275,851
NET ASSETS
Beginning of period.............................. 161,898,951 34,615,152 14,402,355 36,002,366 23,822,431
------------ ----------- ----------- ----------- -----------
End of period (including undistributed net
investment income in the Growth Portfolio
$1,231,153; Bond Portfolio $267,713; Managed
Portfolio $384,437; Aggressive Growth Portfolio
$326,522; International Portfolio $427,579;
Common Stock Portfolio $26,043 and Sentinel
Growth Portfolio $23,408)...................... $198,948,066 $54,196,724 $17,086,878 $43,431,170 $34,098,282
============ =========== =========== =========== ===========
<CAPTION>
COMMON SENTINEL
INTERNATIONAL STOCK GROWTH
PORTFOLIO PORTFOLIO* PORTFOLIO*
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss)................... $ 472,406 $ 79,759 $ 23,408
Net realized gain (loss) on investments and
foreign currency related transactions......... 3,302,667 (22,148) 3,259
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency translations......................... 781,570 699,937 550,887
----------- ---------- ----------
Net increase (decrease) in net assets resulting
from operations............................... 4,556,643 757,548 577,554
Distributions:
From net investment income..................... (442,343) (53,716) --
From net realized gains........................ (1,793,161) -- --
Capital share transactions:
Net contributions from affiliated life
insurance companies........................... 11,991,902 5,860,792 5,086,035
----------- ---------- ----------
Total increase in net assets.................. 14,313,041 6,564,624 5,663,589
NET ASSETS
Beginning of period.............................. 36,642,082 -- --
----------- ---------- ----------
End of period (including undistributed net
investment income in the Growth Portfolio
$1,231,153; Bond Portfolio $267,713; Managed
Portfolio $384,437; Aggressive Growth Portfolio
$326,522; International Portfolio $427,579;
Common Stock Portfolio $26,043 and Sentinel
Growth Portfolio $23,408)...................... $50,955,123 $6,564,624 $5,663,589
=========== ========== ==========
</TABLE>
* The Common Stock and Sentinel Growth Portfolios commenced operations on
03/18/96.
See accompanying notes to financial statements.
39
<PAGE> 70
- --------------------------------------------------------------------------------
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
sale of investments......... 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
$1,263,754; Bond Portfolio
$208,370; Managed Portfolio
$329,730; Aggressive Growth
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.
40
<PAGE> 71
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92
TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $16.36 $14.00 $14.09 $13.73 $13.88
-------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .46 .47 .43 .38 .46
Net realized and unrealized gain (loss)
on investments................................ 2.54 3.41 (.10) .94 .17
-------- -------- -------- ------- -------
Total from investment operations............ 3.00 3.88 .33 1.32 .63
-------- -------- -------- ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income......................... (.48) (.46) (.41) (.39) (.46)
Dividends to shareholders from net capital
gains......................................... (.78) (1.06) (.01) (.35) (.32)
Dividends to shareholders in excess of net
investment income............................. -- -- -- (.22) --
-------- -------- -------- ------- -------
Total distributions......................... (1.26) (1.52) (.42) (.96) (.78)
-------- -------- -------- ------- -------
Net asset value, end of period.................. $18.10 $16.36 $14.00 $14.09 $13.73
======== ======== ======== ======= =======
Total return.................................... 19.58% 30.39% 2.40% 9.43% 4.74%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 198,948 161,899 115,191 109,534 82,881
Ratios of expenses to average net assets
(annualized)(1)............................... .50% .61% .63% .76% .79%
Ratios of net investment income to average net
assets (annualized)........................... 2.80% 3.20% 3.10% 2.86% 3.53%
Portfolio turnover.............................. 72% 61% 63% 51% 35%
Average commission rate(2)...................... $0.0600 N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Expense ratios for the Growth Portfolio before reimbursement of expenses by
affiliated insurance company for the years ended December 31, 1996, 1995,
1994, 1993 and 1992 were as follows: 0.50%, 0.61%, 0.67%, 0.76% and 0.82%,
respectively.
(2.) Computed by dividing the total amount of commission paid by the total
number of shares purchased and sold during the period for which there was a
commission. This disclosure is required by the S.E.C. for all financial
statements with fiscal years beginning after September 1, 1995.
See accompanying notes to financial statements.
41
<PAGE> 72
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92
TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .05 .05 .04 .03 .03
------ ------ ------ ------ -----
Total from investment operations............ .05 .05 .04 .03 .03
------ ------ ------ ------ -----
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment
income........................................ (.05) (.05) (.04) (.03) (.03)
------ ------ ------ ------ -----
Total distributions............................. (.05) (.05) (.04) (.03) (.03)
------ ------ ------ ------ -----
Net asset value, end of period.................. $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== =====
Total return.................................... 5.15% 5.61% 3.81% 2.59% 3.18%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 54,197 34,615 21,040 12,506 8,138
Ratios of expenses to average net assets
(annualized)(1)............................... .44% .50% .55% .65% .65%
Ratios of net investment income to average net
assets (annualized)........................... 5.03% 5.47% 3.86% 2.56% 3.12%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1). Expense ratios for the Money Market Portfolio before reimbursement of
expenses by affiliated insurance company for the years ended December 31,
1996, 1995, 1994, 1993 and 1992 were as follows: 0.44%, 0.50%, 0.59%, 0.65%
and 0.73%, respectively.
See accompanying notes to financial statements.
42
<PAGE> 73
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92
TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 11.00 $9.73 $11.21 $10.73 $10.80
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .63 .65 .62 .60 .64
Net realized and unrealized gain (loss)
on investments................................ (.34) 1.27 (1.23) .48 (.03)
------- ------- ------- ------- -------
Total from investment operations............ .29 1.92 (.61) 1.08 .61
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from
net investment income......................... (.62) (.65) (.60) (.60) (.68)
Dividends to shareholders from net capital
gains......................................... (.00) (.00) (.27) (.00) (.00)
------- ------- ------- ------- -------
Total distributions......................... (.62) (.65) (.87) (.60) (.68)
------- ------- ------- ------- -------
Net asset value, end of period.................. $10.67 $11.00 $9.73 $11.21 $10.73
======= ======= ======= ======= =======
Total return.................................... 2.86% 20.45% (5.62)% 10.32% 5.95%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 17,087 14,402 10,098 10,160 6,710
Ratios of expenses to average net assets
(annualized)(1)............................... .56% .60% .68% .75% .75%
Ratios of net investment income to average net
assets (annualized)........................... 6.08% 6.36% 6.14% 5.53% 6.34%
Portfolio turnover.............................. 133% 206% 151% 71% 4%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1). Expense ratios for the Bond Portfolio before reimbursement of expenses by
affiliated insurance company for the years ended December 31, 1996, 1995,
1994, 1993 and 1992 were as follows: 0.56%, 0.60%, 0.70%, 0.75% and 0.81%,
respectively.
See accompanying notes to financial statements.
43
<PAGE> 74
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGED PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92
TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 14.19 $11.94 $13.27 $12.25 $11.40
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .51 .55 .53 .40 .44
Net realized and unrealized gain (loss) on
investments................................... 1.07 2.28 (.77) 1.00 .88
------- ------- ------- ------- -------
Total from investment operations............ 1.58 2.83 (.24) 1.40 1.32
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment
income........................................ (.51) (.57) (.49) (.38) (.47)
Dividends to shareholders from net capital
gains......................................... (.58) (.01) (.60) (.00) (.00)
------- ------- ------- ------- -------
Total distributions......................... (1.09) (.58) (1.09) (.38) (.47)
------- ------- ------- ------- -------
Net asset value, end of period.................. $ 14.68 $14.19 $11.94 $13.27 $12.25
======= ======= ======= ======= =======
Total return................................ 11.88% 24.43% (1.82)% 11.62% 11.96%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 43,431 36,002 29,363 28,984 15,946
Ratios of expenses to average net assets
(annualized)(1)............................... .60% .66% .67% .80% .80%
Ratios of net investment income to average
net assets (annualized)....................... 3.68% 4.22% 4.34% 3.36% 3.88%
Portfolio turnover.............................. 106% 130% 75% 89% 32%
Average commission rate(2)...................... $0.0600 N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1). Expense ratios for the Managed Portfolio before reimbursement of expenses
by affiliated insurance company for the years ended December 31, 1996,
1995, 1994, 1993 and 1992 were as follows: 0.60%, 0.66%, 0.73%, 0.80% and
0.84%, respectively.
(2). Computed by dividing the total amount of commission paid by the total
number of shares purchased and sold during the period for which there was a
commission. This disclosure is required by the S.E.C. for all financial
statements with fiscal years beginning after September 1, 1995.
See accompanying notes to financial statements.
44
<PAGE> 75
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92
TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $17.38 $15.45 $15.45 $14.72 $16.68
----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .17 .20 (.01) (.01) .03
Net realized and unrealized gain (loss) on
investments................................... 3.03 1.86 .01 .77 .38
----- ----- ----- ----- -----
Total from investment operations............ 3.20 2.06 .00 .76 .41
----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment
income........................................ (.19) (.00) (.00) (.03) (.07)
Dividends to shareholders from net capital
gains......................................... (1.87) (.13) (.00) (.00) (2.30)
----- ----- ----- ----- -----
Total distributions......................... (2.06) (.13) (.00) (.03) (2.37)
----- ----- ----- ----- -----
Net asset value, end of period.................. $18.52 $17.38 $15.45 $15.45 $14.72
===== ===== ===== ===== =====
Total return.................................... 21.00% 13.48% 0.00% 5.20% 2.58%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 34,098 23,822 15,430 12,223 8,029
Ratios of expenses to average net assets
(annualized)(1)............................... .68% .76% .86% .90% .90%
Ratios of net investment income to average net
assets (annualized)........................... 1.14% 1.32% (.10)% (.07)% .37%
Portfolio turnover.............................. 47% 89% 60% 60% 18%
Average commission rate(2)...................... $0.0600 N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1). Expense ratios for the Aggressive Growth Portfolio before reimbursement of
expenses by affiliated insurance company for the years ended December 31,
1996, 1995, 1994, 1993 and 1992 were as follows: 0.68%, 0.76%, 0.89%, 0.90%
and 1.00%, respectively.
(2). Computed by dividing the total amount of commission paid by the total
number of shares purchased and sold during the period for which there was a
commission. This disclosure is required by the S.E.C. for all financial
statements with fiscal years beginning after September 1, 1995.
See accompanying notes to financial statements.
45
<PAGE> 76
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
01/01/96 01/01/95 01/01/94 01/01/93 01/01/92
TO TO TO TO TO
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 12.86 $11.63 $11.87 $ 9.00 $ 9.74
------- ------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .11 .16 .05 .06 .08
Net realized and unrealized gain (loss) on
investments................................... 1.23 1.45 (.02) 3.09 (.81)
------- ------- ------- ------ ------
Total from investment operations............ 1.34 1.61 .03 3.15 (.73)
------- ------- ------- ------ ------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment
income........................................ (.16) (.07) (.03) (.08) (.00)
Dividends to shareholders from net capital
gains......................................... (.63) (.31) (.24) (.20) (.01)
------- ------- ------- ------ ------
Total distributions......................... (.79) (.38) (.27) (.28) (.01)
------- ------- ------- ------ ------
Net asset value, end of period.................. $ 13.41 $12.86 $11.63 $11.87 $ 9.00
======= ======= ======= ====== ======
Total return.................................... 10.89% 14.31% .26% 36.11% (7.30)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................ 50,955 36,642 26,212 13,682 6,727
Ratios of expenses to average net assets
(annualized)(1)............................... 1.05% 1.15% 1.32% 1.50% 1.50%
Ratios of net investment income to average net
assets (annualized)........................... .98% 1.21% .72% .68% 1.05%
Portfolio turnover.............................. 35% 45% 32% 37% 35%
Average commission rate(2)...................... $0.0376 N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1). Expense ratios for the International Portfolio before reimbursement of
expenses by affiliated insurance company for the years ended December 31,
1996, 1995, 1994, 1993 and 1992 were as follows: 1.05%, 1.15%, 1.32%, 1.50%
and 2.65%, respectively.
(2). Computed by dividing the total amount of commission paid by the total
number of shares purchased and sold during the period for which there was a
commission. This disclosure is required by the S.E.C. for all financial
statements with fiscal years beginning after September 1, 1995.
See accompanying notes to financial statements.
46
<PAGE> 77
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Continued
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK
PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
03/18/96(2)
TO
12/31/96
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period............................................................... $10.00
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.............................................................................. .15
Net realized and unrealized gain (loss) on investments............................................. 1.26
--------
Total from investment operations............................................................... 1.41
--------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income............................................... (.10)
Dividends to shareholders from net capital gains................................................... (.00)
--------
Total distributions............................................................................ (.10)
--------
Net asset value, end of period..................................................................... $11.31
========
Total return....................................................................................... 14.22%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000)................................................................... 6,565
Ratios of expenses to average net assets (annualized)(1)........................................... .80%
Ratios of net investment income to average net assets (annualized)................................. 1.82%
Portfolio turnover................................................................................. 13%
Average commission rate(4)......................................................................... $0.0600
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1). Expense ratio for the Common Stock Portfolio before reimbursement of
expenses by affiliated insurance company for the period ended December 31,
1996 was as follows: 1.43% (annualized).
(2). Commencement of operations.
(3). Total returns for periods less than one year are not annualized.
(4). Computed by dividing the total amount of commission paid by the total
number of shares purchased and sold during the period for which there was a
commission. This disclosure is required by the S.E.C. for all financial
statements with fiscal years beginning after September 1, 1995.
See accompanying notes to financial statements.
47
<PAGE> 78
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Financial Highlights -- Concluded
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the periods:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SENTINEL
GROWTH
PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
03/18/96(2)
TO
12/31/96
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period.............................................................. $10.00
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................................................................. .05
Net realized and unrealized gain (loss) on investments............................................ 1.09
------
Total from investment operations.............................................................. 1.14
------
LESS DISTRIBUTIONS:
Dividends to shareholders from net investment income.............................................. (.00)
Dividends to shareholders from net capital gains.................................................. (.00)
------
Total distributions........................................................................... (.00)
------
Net asset value, end of period.................................................................... $ 11.14
======
Total return...................................................................................... 11.40%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $(000).................................................................. 5,664
Ratios of expenses to average net assets (annualized)(1).......................................... .90%
Ratios of net investment income to average net assets (annualized)................................ .57%
Portfolio turnover................................................................................ 75%
Average commission rate(4)........................................................................ $0.0594
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1). Expense ratio for the Sentinel Growth Portfolio before reimbursement of
expenses by affiliated insurance company for the period ended December 31,
1996 was as follows: 1.51% (annualized).
(2). Commencement of operations.
(3). Total returns for periods less than one year are not annualized.
(4). Computed by dividing the total amount of commission paid by the total
number of shares purchased and sold during the period for which there was a
commission. This disclosure is required by the S.E.C. for all financial
statements with fiscal years beginning after September 1, 1995.
See accompanying notes to financial statements.
48
<PAGE> 79
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1996
- --------------------------------------------------------------------------------
1. ORGANIZATION
The Market Street Fund, Inc. (Fund) is registered as an open-end diversified
management company under the Investment Company Act of 1940, as amended. As a
"series" type of mutual fund, the Fund issues separate classes (or series) of
stock currently consisting of the Growth Portfolio, Money Market Portfolio, Bond
Portfolio, Managed Portfolio, Aggressive Growth Portfolio, International
Portfolio, Common Stock Portfolio and Sentinel Growth Portfolio. The Fund serves
as an investment medium for modified premium and flexible premium adjustable
variable life insurance policies and individual flexible premium deferred
variable annuity contracts (Policies) issued by Provident Mutual Life Insurance
Company (PMLIC) and for flexible premium deferred variable annuity contracts
issued by Providentmutual Life and Annuity Company of America (PLACA) and
flexible premium adjustable variable life insurance policies issued by National
Life Insurance Company of Vermont (NLIC). The Fund also serves as the investment
medium for single premium and scheduled premium variable life insurance policies
which are no longer being issued.
All shares of the series are held by the separate accounts of the previously
listed insurance companies.
2. ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by each
Fund in preparation of its financial statements. The preparation of financial
statements in accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.
Valuation of Investments
Bonds are carried at market value based on the last bid price on a national
securities exchange or on quoted prices from a third-party pricing service.
Investments in common and preferred stocks primarily traded on recognized U.S.
or foreign securities exchanges are valued at the last sale price on exchanges
on the last business day of the period, or, if there was no sale, at the last
bid price on that day. Short-term investments with maturities of less than 60
days and Money Market Portfolio investments are valued at amortized cost which
approximates market value.
Investments
Security transactions are accounted for on the trade date. The cost of
investment securities sold is determined by use of the specific identification
method for both financial reporting and income tax purposes. Interest income is
recorded on the accrual basis; dividend income is recorded on the ex-dividend
date.
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;
49
<PAGE> 80
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1996 -- Continued
- --------------------------------------------------------------------------------
(iii) Income and expenses, at the rate of exchange prevailing on the
respective dates of such transactions. Exchange gains or losses are
recognized upon ultimate receipt or disbursement.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. dollar denominated
transactions as a result of, among other factors, the lack of governmental
supervision and regulation of foreign securities markets and the possibility of
political or economic instability.
The Fund does not isolate that portion of the results of operations derived from
changes in foreign exchange rates on investments from the fluctuations arising
from changes in market prices of securities held. Such fluctuations are included
with the net realized and unrealized gain or loss from investments.
Dividends to Shareholders
Dividends of investment income of the Money Market Portfolio are declared daily
and paid monthly. The Growth Portfolio, Bond Portfolio, Managed Portfolio, and
Common Stock Portfolio declare and pay dividends of investment income quarterly.
The Aggressive Growth Portfolio, International Portfolio, and Sentinel Growth
Portfolio declare and pay dividends of investment income annually. For all
Portfolios, distributions of capital gains are declared and paid annually.
Federal Income Taxes
No provision is made for Federal taxes as it is the Fund's intention to have
each Portfolio continue to qualify as a regulated investment company and to make
the requisite distributions to its shareholders which will be sufficient to
relieve it from Federal income taxes.
3. INVESTMENT ADVISORY FEES AND RELATED PARTY TRANSACTIONS
Investment advisory agreements have been approved, whereby Newbold's Asset
Management, Inc. (NAM) is adviser for the Growth Portfolio, Sentinel Advisors
Company (SAC), a Vermont General Partnership, for the Money Market, Bond,
Managed, Aggressive Growth, Common Stock and Sentinel 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. SAC is compensated monthly at an effective annual rate of 0.25%
of the average daily net assets of the Money Market Portfolio. With respect to
the Bond Portfolio, SAC is compensated monthly at the effective annual rate of
0.35% of the first $100 million of the average daily net assets of the portfolio
and 0.30% of net assets in excess of $100 million. With respect to the Managed
Portfolio, SAC is compensated monthly at the effective annual rate of 0.40% of
the first $100 million of the average daily net assets of the portfolio and
0.35% of net assets in excess of $100 million. With respect to the Aggressive
Growth Portfolio, SAC is compensated monthly at the effective annual rate of
0.50% of the first $20 million of the average daily net assets of the portfolio,
0.40% of the next $20 million and 0.30% of net assets in excess of $40 million.
With respect to the Common Stock Portfolio, SAC is compensated monthly at the
effective annual rate of 0.40% of the first $100 million of the average
50
<PAGE> 81
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1996 -- Continued
- --------------------------------------------------------------------------------
daily net assets of the portfolio and 0.35% of net assets in excess of $100
million. With respect to the Sentinel Growth Portfolio, SAC is compensated
monthly at an effective annual rate of 0.50% of the first $20 million of the
average daily net assets of the portfolio, 0.40% of the next $20 million and
0.30% of the net assets in excess of $40 million. Provident Mutual Investment
Management Co. (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 agrees to reimburse the Growth Portfolio and PMLIC and NLIC agree to
reimburse the Money Market, Bond, Managed, and Aggressive Growth Portfolios for
operating expenses, excluding investment advisory fees, and costs of litigation
and indemnification not covered by insurance, in excess of an annual rate of
0.40% of the average daily net asset values. The International Portfolio is
reimbursed by PMLIC and NLIC for such expenses in excess of an annual rate of
0.75% of the average daily net asset value. NLIC agrees to reimburse the Common
Stock and Sentinel Growth Portfolio for operating expenses, excluding investment
advisory fees and costs of litigation and indemnification not covered by
insurance, in excess of an annual rate of .40% of the average net asset values.
4. NET ASSETS
At December 31, 1996, the Portfolios' 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............. $147,821,063 $54,196,724 $16,808,869 $35,731,816 $27,522,132 $43,666,216
Undistributed net investment income............ 1,231,153 -- 267,713 384,437 326,522 427,579
Undistributed net realized gain................ 23,067,603 -- -- 344,551 64,760 3,347,494
Accumulated loss on investment transactions.... -- -- (173,902) -- -- --
Net unrealized appreciation (depreciation) on
investments and foreign currencies............ 26,828,247 -- 184,198 6,970,366 6,184,868 3,513,834
------------ ----------- ----------- ----------- ----------- -----------
$198,948,066 $54,196,724 $17,086,878 $43,431,170 $34,098,282 $50,955,123
============ =========== =========== =========== =========== ===========
<CAPTION>
COMMON SENTINEL
STOCK GROWTH
PORTFOLIO PORTFOLIO
----------------------------------------------------------------
<S> <C> <C>
Net contribution from shareholders............. $5,860,792 $5,086,035
Undistributed net investment income............ 26,043 23,408
Undistributed net realized gain................ -- 3,259
Accumulated loss on investment transactions.... (22,148) --
Net unrealized appreciation (depreciation) on
investments and foreign currencies............ 699,937 550,887
---------- ----------
$6,564,624 $5,663,589
========== ==========
</TABLE>
51
<PAGE> 82
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1996 -- Continued
- --------------------------------------------------------------------------------
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, 1996, 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.......................... $ -- $ -- $ 9,780,303 $21,429,591 $ -- $ --
Corporate Bonds................................. -- -- 12,202,946 12,716,773 -- --
Common Stock.................................... 145,646,451 -- -- 4,716,407 15,535,506 23,195,109
------------ ----------- ----------- ----------- ----------- -----------
Total Purchases................................. $145,646,451 $ -- $21,983,249 $38,862,771 $15,535,506 $23,195,109
============ =========== =========== =========== =========== ===========
SALES
U.S. Gov't Obligations.......................... $ -- $ -- $ 6,002,543 $22,513,655 $ -- $ --
Corporate Bonds................................. -- -- 13,102,207 11,189,673 -- --
Common Stock.................................... 121,462,900 -- -- 3,965,454 11,011,877 14,179,229
------------ ----------- ----------- ----------- ----------- -----------
Total Sales..................................... $121,462,900 $ -- $19,104,750 $37,668,782 $11,011,877 $14,179,229
============ =========== =========== =========== =========== ===========
<CAPTION>
COMMON SENTINEL
STOCK GROWTH
PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------
<S> <C> <C>
PURCHASES
U.S. Gov't Obligations.......................... $ -- $ --
Corporate Bonds................................. --
Common Stock.................................... 6,057,409 8,111,802
---------- ----------
Total Purchases................................. $6,057,409 $8,111,802
========== ==========
SALES
U.S. Gov't Obligations.......................... $ -- $ --
Corporate Bonds................................. -- --
Common Stock.................................... 625,876 3,392,375
---------- ----------
Total Sales..................................... $ 625,876 $3,392,375
========== ==========
</TABLE>
6. TAX BASIS OF INVESTMENTS
Investment information based on the cost of the securities for Federal income
tax purposes held at December 31, 1996 is as follows:
<TABLE>
<CAPTION>
MONEY AGGRESSIVE
GROWTH MARKET BOND MANAGED GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aggregate gross unrealized appreciation........ $ 28,595,431 $ -- $ 229,836 $ 7,236,888 $ 6,801,232
Aggregate gross unrealized depreciation........ (1,767,184) -- (45,638) (266,522) (616,364)
------------ ----------- ----------- ----------- -----------
Net unrealized appreciation (depreciation)..... $ 26,828,247 $ -- $ 184,198 $ 6,970,366 $ 6,184,868
============ =========== =========== =========== ===========
Aggregate cost of securities for federal income
tax purposes.................................. $171,644,227.. $54,440,564 $16,596,014 $36,086,018 $27,924,846
============ =========== =========== =========== ===========
Capital loss carryover (available to offset
possible future capital gains.) The carryover
expires as follows: Bond Portfolio--$48,885 in
2002; $125,017 in 2004; Common Stock Portfolio
$22,148 in 2004............................... $ -- $ -- $ (173,902) $ -- $ --
============ =========== =========== =========== ===========
<CAPTION>
COMMON SENTINEL
INTERNATIONAL STOCK GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggregate gross unrealized appreciation........ $ 5,977,111 $ 781,212 $ 711,518
Aggregate gross unrealized depreciation........ (2,463,287) (81,275) (160,631)
----------- ---------- ----------
Net unrealized appreciation (depreciation)..... $ 3,513,824 $ 699,937 $ 550,887
=========== ========== ==========
Aggregate cost of securities for federal income
tax purposes.................................. $45,772,186 $5,845,287 $5,102,118
=========== ========== ==========
Capital loss carryover (available to offset
possible future capital gains.) The carryover
expires as follows: Bond Portfolio--$48,885 in
2002; $125,017 in 2004; Common Stock Portfolio
$22,148 in 2004............................... $ -- $ (22,148) $ --
=========== ========== ==========
</TABLE>
52
<PAGE> 83
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1996 -- Continued
- --------------------------------------------------------------------------------
7. AUTHORIZED CAPITAL STOCK AND CAPITAL STOCK TRANSACTIONS
On December 31, 1996, there were 200 million shares of $0.01 par value capital
stock authorized for the Fund. The shares of capital stock are divided into
eight series: Growth Portfolio, Money Market Portfolio, Bond Portfolio, Managed
Portfolio, Aggressive Growth Portfolio, International Portfolio, Common Stock
Portfolio and Sentinel Growth Portfolio. The Growth Portfolio consists of 15
million shares, the Money Market Portfolio consists of 75 million shares; each
of the other series consists of 5 million shares.
Transactions in capital stock for the year ended December 31, 1996 were as
follows:(1)
<TABLE>
<CAPTION>
GROWTH PORTFOLIO MONEY MARKET BOND PORTFOLIO
PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold......................................... 1,276,805 $ 20,944,472 82,625,391 $ 82,625,391 382,375 $ 4,040,320
Shares redeemed..................................... (981,738) (16,125,158) (65,247,831) (65,247,831) (173,162) (1,831,517)
Shares reinvested................................... 803,008 12,727,734 2,204,012 2,204,012 83,086 874,882
--------- ----------- ----------- ----------- -------- -----------
Net contributions from affiliated insurance
companies.......................................... 1,098,075 $ 17,547,048 19,581,572 $ 19,581,572 292,299 $ 3,083,685
========= =========== =========== =========== ======== ===========
<CAPTION>
MANAGED PORTFOLIO
- ---------------------------------------------------------------------------
SHARES AMOUNT
- ---------------------------------------------------------------------------
<S> <C> <C>
Shares sold......................................... 506,385 $ 7,070,251
Shares redeemed..................................... (296,312) (4,126,398)
Shares reinvested................................... 209,781 2,862,232
-------- ----------
Net contributions from affiliated insurance
companies.......................................... 419,854 $ 5,806,085
======== ==========
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE INTERNATIONAL COMMON
GROWTH PORTFOLIO STOCK
PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Shares sold.................................................. 441,008 $ 7,446,728 987,809 $12,532,647 577,728
Shares redeemed.............................................. (156,497) (2,640,322) (218,584) (2,776,249) (2,588)
Shares reinvested............................................ 185,719 2,824,782 180,866 2,235,504 5,127
--------- ----------- ---------- ----------- --------
Net contributions from affiliated insurance companies........ 470,230 $ 7,631,188 950,091 $11,991,902 580,267
========= =========== =========== =========== ========
<CAPTION>
SENTINEL GROWTH
PORTFOLIO
- ------------------------------------------------------------------------------------------------
AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares sold.................................................. $ 5,835,026 508,648 $5,090,047
Shares redeemed.............................................. (27,950) (377) (4,012)
Shares reinvested............................................ 53,716 -- --
----------- -------- ----------
Net contributions from affiliated insurance companies........ $ 5,860,792 508,271 $5,086,035
=========== ======== ==========
</TABLE>
Transactions in capital stock for the year ended December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
GROWTH PORTFOLIO MONEY MARKET BOND PORTFOLIO MANAGED
PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares sold............. 1,376,728 $20,320,117 52,460,129 $52,460,129 305,883 $3,174,938 340,442
Shares redeemed......... (672,833) (9,960,717) (40,303,780) (40,303,780) (106,040) (1,100,615) (375,720)
Shares reinvested....... 961,190 12,873,047 1,419,246 1,419,246 72,305 736,126 114,456
--------- ------------ ----------- ------------ -------- ----------- -------
Net contributions from
affiliated insurance
companies.............. 1,665,085 $23,232,447 13,575,595 $13,575,595 272,148 $2,810,449 79,178
========= ============ =========== ============ ======== =========== =======
<CAPTION>
AGGRESSIVE INTERNATIONAL
GROWTH PORTFOLIO
- -----------------------------------------------------------------------------------------
AMOUNT SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Shares sold............. $4,456,504 489,394 $8,017,391 861,466 $10,317,408
Shares redeemed......... (4,884,534) (125,984) (2,042,558) (341,090) (4,145,863)
Shares reinvested....... 1,447,739 8,772 131,841 76,064 848,113
----------- ------- ----------- -------- -----------
Net contributions from
affiliated insurance
companies.............. $1,019,709 372,182 $6,106,674 596,440 $ 7,019,658
=========== ======= =========== ======== ===========
</TABLE>
(1) The Common Stock and Sentinel Growth Portfolios commenced operations on
03/18/96.
53
<PAGE> 84
- --------------------------------------------------------------------------------
Market Street Fund, Inc.
Notes to Financial Statements, December 31, 1996 -- Concluded
- --------------------------------------------------------------------------------
8. PRINCIPAL UNDERWRITER
1717 Capital Management Company serves, without compensation, as the principal
underwriter for sale of the Fund shares to the Accounts. 1717 Capital Management
Company is an indirect wholly-owned subsidiary of PMLIC.
9. SUBSEQUENT DIVIDEND
On December 30, 1996 the Board of Directors declared the following net
investment income and capital gain dividends to shareholders of record on
December 31, 1996, ex-dividend date January 3, 1997, payable on January 6, 1997
as follows:
<TABLE>
<CAPTION>
TOTAL PER SHARE
------------------------- ---------------------
NET NET
INVESTMENT CAPITAL INVESTMENT CAPITAL
PORTFOLIO INCOME GAIN INCOME GAIN
- -------------- ---------- ----------- ---------- -------
<S> <C> <C> <C> <C>
Growth........ $1,231,153 $23,067,603 $.1120 $2.0984
Bond.......... 267,713 -- .1671 --
Managed....... 384,437 344,551 .1300 .1165
Aggressive
Growth....... 326,522 64,760 .1774 .0352
International... 427,579 3,347,494 .1125 .8808
Common Stock.. 26,043 -- .0449 --
Sentinel
Growth....... 23,408 3,259 .0461 .0064
</TABLE>
54
<PAGE> 85
[Providentmutual logo]
Providentmutual Life and Annuity Company of America
A STOCK LIFE INSURANCE COMPANY
300 CONTINENTAL DRIVE, NEWARK, DE 19713
1-800-688-5177
Variable Annuity contracts issued by Providentmutual are distributed by 1717
Capital Management Company, Wilmington, DE, a registered broker-dealer.
This report has been prepared for contractowners. It is not authorized for
other distribution unless preceded or accompanied by an effective prospectus.
FORM 16083 12.96
BULK RATE
U.S. POSTAGE
PAID
PHILADELPHIA, PA
PERMIT NO. 1
ANNUAL REPORT
DECEMBER 31, 1996
-----------------
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
------------------------
