<PAGE>
PENN SERIES FUNDS, INC.
MANAGEMENT'S DISCUSSION OF THE FUND PERFORMANCE
- -----------------------------------------------
QUALITY BOND FUND
The continued interest rate increases in the second quarter contributed to a
general poor tone in bond performance for the period. In fact, the first six
months of 1999 return for the bond market is the worst since 1994. However on a
relative performance basis the Quality Bond Fund continued to shine. Performance
for the first six months was (0.87%) outperforming the average return by more
than 1 full percentage point. For the twelve month period, we rank #1 out of 157
funds, outperforming the average fund by 3.39%. Over the longer 5 year period
our ranking is #7 out of 88 funds. In addition, performance is strong relative
to the comparative Index (Salomon Bros. Broad Investment Grade Index),
outperforming in the first six months by 1.61%.
The Quality Bond fund outperformance vs. the Index for the first six months is
explained by both individual bond selection and successful interim duration
calls in the 2nd quarter. Additional relative performance vs. our competitors is
better explained by the fact that most bond funds were overly optimistic on the
potential for spread tightening in corporate and mortgage backed bonds (and thus
lost money when spreads widened). In addition, we suspect most were too long in
duration and thus lost more in market value when interest rates rose.
At the start of the third quarter the Quality bond fund is positioned long in
duration and about neutral in spread product. Near term we expect a "relief
rally" early in the third quarter as a result of the Federal Reserve's hints
that there would not be an aggressive tightening stance in conjunction with an
expected moderation in economic data and continued subdued inflation data. 30
year treasury rates could fall to 5.75% in this environment. In addition, long
term bond yields offer compelling value relative to inflation, foreign bond
yields and on an asset allocation basis, relative to common stocks.
However, we do not expect a sustainable rally to develop until the economy
demonstrates a significant slowdown. Any significant economic slowdown will have
to be precipitated by either an aggressive tightening mode by the Federal
Reserve, a sharp, sustained correction in the stock market or more likely, a
combination of the two. After the upcoming relief rally we expect a renewed test
of the recent bond price lows led by renewed concerns of Federal Reserve
tightening pressure. This renewed test of the lows will probably commence
sometime later in the third quarter or early in the fourth. We expect to put on
defensive positions prior to this event.
INDEPENDENCE CAPITAL MANAGEMENT, INC.
INVESTMENT ADVISER
<PAGE>
HIGH YIELD BOND FUND
The economy's continuing strength favored high-yield bonds during the six months
ended June 30, although they did not escape the negative effects of a general
rise in interest rates. High-quality bonds such as Treasuries fell sharply in
price, but declines were more muted for high-yield bonds, which typically are
more sensitive to the economic cycle than to interest rates.
As the new year got under way, high-yield bonds recovered much of the ground
lost during the second half of 1998, when a late-summer global financial crisis
sent investors all over the world fleeing higher-risk investments including
low-quality bonds. After the U.S. Federal Reserve cut key short-term rates three
times during the early fall and also engineered the rescue of a huge, highly
leveraged hedge fund, liquidity was sufficiently restored to revive investor
confidence. As it became apparent toward year-end that the U.S. economy was not
only withstanding global economic weakness but was growing strongly, demand for
high-yield bonds rebounded. Bonds in the telecommunications and media sectors
were particularly strong in the first quarter of this year, taking their cues
from surging stocks in those areas.
As spring wore on, however, the market's tone deteriorated. The economy's
amazing momentum, combined with rising commodity prices and very tight labor
markets, raised fears of an uptick in inflation and possible action by the Fed
to forestall it. Indeed, in May the Chairman of the Fed confirmed a "bias"
toward tightening. The markets generally expected a quarter-point increase in
the federal funds target rate at the end of June, but the possibility of a
larger increase - and even of a string of increases - cast a pall over fixed
income markets. Bond markets sold off in May and June; high-yield bonds held up
comparatively well, with their high income generally offsetting modest price
declines to provide flat or marginally positive returns.
The portfolio posted a respectable six-month return that was in line with or
somewhat better than major high-yield market benchmarks. Since the fund's
exposure to lower-rated bonds in the high-yield universe was (and is) moderate,
indices weighted toward such bonds - which were the best performers recently-
would provide difficult comparisons.
The portfolio benefited from our decision last September to increase exposure to
the telecommunications sector. This shift positioned the fund well for the
subsequent surge in that area, especially in April. Several portfolio companies
also announced mergers, which were profitable for the fund. In the early months
of 1999, we added further to our
<PAGE>
PENN SERIES FUNDS, INC.
MANAGEMENT'S DISCUSSION OF THE FUND PERFORMANCE
- -----------------------------------------------
HIGH YIELD BOND FUND
telecommunications holdings, bringing total exposure to about one-fifth of net
assets at the end of June. Around this time, we took advantage of the economy's
strength to purchase some bonds of cyclical companies. These bonds also
performed well, paralleling the greatly improved showing of cyclical stocks. The
quality of new issues coming to market declined steadily in recent months and we
were extremely selective in purchases of these securities. We were fortunate to
avoid credit problems in individual securities, which also contributed favorably
to relative performance.
Our outlook is generally cautious. If the economy continues to expand, the bull
market in stocks remains generally intact, and the telecommunications sector -
by far the largest source of high-yield bonds today - continues to consolidate
and prosper, we should see solid returns on high-yield bonds. On the other hand,
we cannot help but note the gradual rise in bond defaults (although none among
portfolio holdings), the relatively large calendar of offerings coming to market
relative to the flow of cash into the market, and the increasingly choppy
performance of stocks. Declining liquidity is also a concern because it may
foreshadow higher volatility. The Fed's return to a "neutral" bias, suggesting
at least a hiatus in further tightenings, should be constructive for the
high-yield market, given its sensitivity to fears that Fed action might derail
the economy.
We will continue to maintain our focus on B rated bonds, which should enable the
portfolio to perform relatively well if the economy slows. Our emphasis on
telecommunications should continue to prove beneficial. After double-digit
returns in 1996 and 1997, the high-yield market seems headed for a second year
of more modest returns, in which income plays the dominant role.
INDEPENDENCE CAPITAL MANAGEMENT, INC.
INVESTMENT ADVISER
T. ROWE PRICE ASSOCIATES, INC.
INVESTMENT SUB-ADVISER
GROWTH EQUITY FUND
Despite some recent rumblings and a few Y2K jitters, a healthy environment for
equity investing remains in place. Interest rates and inflation are expected to
remain in check, while a moderate pace to the economy's advance should help to
elongate the expansion. Corporate profits continue to grow and improve in
quality. Further boosting the case for equity investing is the combination of a
diminished supply of common shares, caused by continued merger and acquisition
activity and corporate share repurchase programs, coupled with the continued
rise of funds
<PAGE>
dedicated to common stock investing in various retirement funds. Additionally,
on a longer term basis, the enhanced competitiveness of U.S. corporations should
boost profitability and continue to attract both domestic and foreign
investment.
The Growth Equity Fund advanced 9.61% in the first half of 1999. This return
compares with the 12.31% return for the S&P 500, the 11.64% return of the Lipper
Growth Fund Average, and the 11.88% return of the Lipper Growth Index. Despite
this short-term under-performance, the twelve month returns for the Growth
Equity Fund were quite strong at 27.75%. The Fund's return outpaced those
generated by the S&P 500 (+22.76), the Lipper Growth Fund Average (+18.87%), and
the Lipper Growth Index (+21.69%). For the three year period ended June 30, 1999
the Penn Series Growth Equity Fund returned 29.37% on an annualized basis as
compared to the 29.11% annual gain for the S&P 500 and the 25.14% return for the
Lipper Growth Index.
The Growth Equity Fund continues to emphasize ownership of companies capable of
generating consistent and sustainable earnings growth. Growth in both earnings
and sales for companies held in the portfolio are well above those of the
general market. As a result of an analysis that focuses on the evaluation of
earnings trends for individual companies, we have been able to establish and
maintain a significant edge in identifying firms that can and do produce
positive earnings surprise and subsequently report growth at rates that betters
their historical trends. Growth continues to be found most consistently among
technology, consumer cyclical, health care and financial service companies.
Among the Fund's largest holdings as of June 30 were Microsoft, Texas
Instruments, Tyco International, Cisco Systems, MCI Worldcom, Citigroup, MBNA
and IBM. New additions to the portfolio thus far in 1999 year include Applied
Materials, Tyco International, IBM, Nokia, EMC Corp., Qwest Communications,
AT&T, and Best Buy Company.
OUTLOOK
Going forward we remain convinced that the U.S. and global economies will be
dominated by the ability of technology to unlock opportunities for new products
and services and increase productivity.
Coupled with a wide range of global events, the benefits of the investments made
in technology have been continued domestic economic growth and, most importantly
for the investment markets, little inflation. Economic growth remains on target
with real GDP likely expanding at a 3% to 4% annual rate and forecasts of
corporate profits continue to be raised as more and more companies' reports are
stronger than expected.
<PAGE>
PENN SERIES FUNDS, INC.
MANAGEMENT'S DISCUSSION OF THE FUND PERFORMANCE
- -----------------------------------------------
Our expectation is that the quarterly earnings reporting period beginning in
mid-July will build upon the first quarter's solid results. A benign inflation
environment and positive earnings momentum should position the stock market to
perform reasonably well as we enter the year's second half.
INDEPENDENCE CAPITAL MANAGEMENT, INC.
INVESTMENT ADVISER
VALUE EQUITY FUND
Value stocks came back to life in the 2nd quarter. After an extended period in
which stock market gains were driven by a limited number of technology and large
cap growth issues, market leadership broadened in the quarter to include
undervalued stocks with strong business fundamentals of the type owned in our
portfolios.
Value stocks include those judged to be trading at market prices well below the
inherent value of the business, while growth stocks include those believed to
have excellent long-term earnings growth prospects. The total return on the S&P
500 Index was 7.0% in the 2nd quarter. Within the S&P 500, however, the value
stock component exceeded the returns of the growth stock component by a wide
margin. In fact, value outperformed growth across the breadth of the market --
large cap, mid cap and small cap.
Periods of outperformance by growth or value, or by large cap or small cap, are
normal. Like a pendulum, when the market reaches one extreme or the other,
absent some unusual factor, it typically swings back. However, the degree of
outperformance by a narrow group of large cap growth and technology issues in
1997 and 1998 was exceptional by any standard, with many of these stocks being
bid up to unusually high price-earnings ratios.
We believe there are substantial economic reasons why growth outperformed value
in 1997 and 1998. The trends that drove the strong relative performance of large
cap growth stocks included large declines in interest rates over many years, and
the global economic weakness and commodity deflation of the past two years.
In the 2nd quarter, these trends showed clear signs of abating or reversing.
Since late 1998, for instance, interest rates have turned upward, and more
recently Asia has begun to emerge from its economic downturn.
Despite their gains in the 2nd quarter, the types of value stocks in which we
invest continue to trade at a significant discount to large cap growth stocks
and the market in general. We believe this bodes well for our value style in the
months ahead.
<PAGE>
ECONOMIC OUTLOOK -- FED WATCH
As the third quarter begins, a central issue facing investors is whether the
U.S. economy is likely to overheat, causing interest rates to rise further.
The debate surrounding this issue has resulted from warnings by Federal Reserve
Chairman Alan Greenspan in mid-June that the recent growth rate of the U.S.
economy is "unsustainable" and that the reservoir of available workers is drying
up. In late June, in a preemptive move to keep the economy in check, the Fed
raised its target short-term interest rate by one-quarter percentage point, the
first increase in more than two years.
The Fed's action is consistent with our expectation that the three one-quarter
point easings of 1998 are likely to require reversal during 1999. Our current
expectation is that the Fed will continue to retract the 1998 easings in order
to maintain economic balance. That behavior should be positive for our
investment style and central to the performance of the U.S. equity market as a
whole.
Our stock selection was quite strong during the second quarter as we identified
a number of attractive investment opportunities. A common theme among these
investment companies with short-term issues (causing their share prices to
decline to bargain levels) versus long-term promise (creating reward potential).
A company's short-term challenges create buying opportunities for us and allow
us to take advantage of a favorable valuation for a long-term investment.
We believe our long-term perspective and emphasis on buying superior undervalued
businesses provide a competitive advantage over time and will serve our clients
well as the market renews its focus on business fundamentals and inherent value.
INDEPENDENCE CAPITAL MANAGEMENT, INC.
INVESTMENT ADVISER
OPCAP ADVISORS
INVESTMENT SUB-ADVISER
FLEXIBLY MANAGED FUND
Stocks made further progress in the 2nd quarter, but bonds were weak. Stock
market participation broadened markedly, with large-cap cyclicals and small and
mid cap stocks supplanting large blue chip growth stocks as market leaders.
Technology
<PAGE>
PENN SERIES FUNDS, INC.
MANAGEMENT'S DISCUSSION OF THE FUND PERFORMANCE
- -----------------------------------------------
stocks extended their gains, although the frenetic rally in Internet stocks
paused in April. The U.S. economy's continued resilience encouraged investors to
look beyond the handful of large growth stock they had favored when global
growth prospects seemed more uncertain. Cyclical stocks reporting sizable
earnings increases did well, and income-oriented stock revived. Natural
resources stocks continued to be buoyed by commodity price increases.
On the fixed income side, interest rates rose in the face of strong economic
growth and the Federal Reserve's announcement in May that it was biased toward
tightening. Investors immediately assumed that the Fed would raise short-term
rates at its June 30 meeting (which it did), but uncertainty about the size of
the increase and possible future increases weighed heavily on the fixed income
market. Treasuries and other high-quality bonds posted negative returns for the
quarter, and lower-quality (high-yield) bonds eked out positive returns only
because their high income offset modest price declines.
With our substantial exposure to basic industry, natural resources, and energy
stocks, the portfolio benefited from the change in stock market sentiment
although our bond holdings were something of a drag on results. The portfolio's
8.85% year-to-date return was strong in absolute terms but lagged the broad
market as measured by the 12.38% S&P 500 Stock Index and the Lipper VA
Underlying Capital Appreciation Funds average of 13.75%.
Reflecting trends in the overall market several of our best contributors were in
the natural resources and energy areas. Our large holding in MacMillan Bloedel,
a Canadian forest products company, rose as improving lumber prices and
brightening prospects for global growth attracted investor interest. Positions
in Amerada Hess and other oil companies benefited from oil price increases.
Negative contributors included Tennessee Valley Authority bonds, which suffered
from rising interest rates. However, these bonds dell much less than Treasury
bonds of similar maturity because of their unique features. Financial stocks
were generally weak due to the rise in interest rates.
There was no significant change in our asset allocation. Equity exposure
increased a bit to about 54%, convertibles were approximately 26%, and bonds
about 15%. Major purchases included securities of Roche Holdings (convertibles),
Unionsource Energy, and Niagra Mohawk Holdings. Major sales included Atlantic
Richfield, which is involved in a merger, and Rouse convertible bonds which were
redeemed by the company.
<PAGE>
We remain cautious. The economy looks good, but market valuations
(price/earnings ratios, dividend yields) are expensive. We believe there is very
strong risk of higher interest rates in coming months, which historically have
hurt the financial markets before slowing the real economy.
Nevertheless, we continue to invest more than half of the fund in common stocks
because: 1) we hope our expertise enables us to benefit from specific company
situations or swings in investor enthusiasm and 2) the American economy is
strong and constantly creating new investment opportunities. We expect also to
continue holding significant nonequity assets to reduce the portfolio's overall
risk and enable investors to benefit from long-term advantages of common stocks,
but with less interim volatility.
INDEPENDENCE CAPITAL MANAGEMENT, INC.
INVESTMENT ADVISER
T. ROWE PRICE ASSOCIATES, INC.
INVESTMENT SUB-ADVISER
INTERNATIONAL EQUITY FUND
A favorable interest rate climate in most of Asia helped spur some economic
activity in markets which have been sluggish for the past several years. There
was an increase in Japanese economic expansion, beneficial for EPS growth.
Overall, increased liquidity helped to rerate the markets. Some companies seem
to be undertaking necessary restructurings: banks are beginning to deleverage
and many businesses are streamlining their operations to bring themselves more
in line with their Western counterparts in terms of profitability and
efficiency.
Foreign investor confidence in Japan was up over the quarter, with more
corporations willing to make large loans to Japanese businesses (Citibank made a
US $5 billion loan to Japanese Tobacco). Some sense of Japan regaining its lead
position in Asia was give when Prime Minister Keiso Obuchi deployed a
fact-finding mission to explore the dispensation of $30 billion in aid to
neighboring Asian economies. Real efforts to open the Japanese market to foreign
investors seem very promising.
Nonetheless, Japan's struggles continue. The Bank of Japan repeatedly sold Yen
for US Dollars during the quarter to prevent a rising Yen from stifling the
fragile economy. Massive losses continue to plague the banking sector, which
received major capital injections from the government. Unemployment remains
high, and market rumors still abound regarding Japan's Fiscal crisis and
continued recession. Many
<PAGE>
PENN SERIES FUNDS, INC.
MANAGEMENT'S DISCUSSION OF THE FUND PERFORMANCE
- -----------------------------------------------
believe the recent Asian rebound is cosmetic, rather than stemming organically
from required fundamental reforms.
We added Smartone Communication (Hong Kong), a dominant franchise in the
telecommunications industry, with a high ROE of 38%, no debt and high free cash
flow. Additionally, the regulatory environment places high barriers to entry for
any new companies in the marketplace. A successful hedge of approximately 30%
against the Yen was removed in the first days of June, on the rising strength of
the Japanese economy.
The portfolio's investments paid off well this quarter. With Vontobel's Japanese
holdings turning in performance that was 2 1/2 times better than the market. The
returns were supported by rising profitability, high free cash flow, and double
digit ROE and EPS. Some of the recent Asian restructuring successes were not
represented in the portfolio, along with deep cyclicals, which did well during
the quarter. This was due to our investment process, which requires a consistent
history of good financial results to receive investment consideration. China,
Indonesia, and Korea were three of the best performing Asian markets during the
quarter. Because our investment philosophy dictates that we invest in countries
outside the index only when we are unable to find adequate investments in the
countries of the EAFE, the portfolio did not benefit from the upswing in these
markets. Nonetheless, our exposure in Hong Kong and Singapore made a positive
contribution to performance.
Low rates across Europe are starting to stimulate economic growth, consumer
spending, and increases in industrial production. EU issues that arose during
the quarter included Italy's forcing the Union to relax the deficit target of 2%
GDP, in addition to some unrealized talk of nations defecting from the Union.
Economic growth in the Union was sluggish, with high unemployment, particularly
in Germany. The U.S. rate hike caused some inflation jitters, but the ECB strove
to leave rates unchanged. The Euro was down 11.28% against the Dollar year to
date. On the plus side, the currency was given a boost as companies around the
world issued Euro-denominated bonds to take advantage of a competing arena for
capital.
We took profits on Zurich Allied (Switzerland) and Bank of Ireland. The Novartis
position (Switzerland) was closed during the quarter due to deteriorating
fundamentals. Purchases include Hunter Douglas in the Netherlands, Swisscom, and
Diageo, Next, and Tomkins in the U.K. Hunter Douglas provides venetian blinds,
with a strong presence in Europe and a 40% market share in the U.S. Swisscom is
a dominant player in the telecommunications industry. Diageo, also purchased at
a discount, owns food production and
<PAGE>
distribution franchises in the U.S., UK, and Germany. Their affiliates include
Guiness and Burger King. Next is an extremely successful middle-market fashion
retailer with a good track record, and high sales growth and operating margins.
Tomkins has a diversified presence in several businesses, including leisure
products and food production; it offers a substantial market presence in the
U.S. A partial hedge against the Euro, present throughout the quarter, remains
as of June 30, 1999.
Our European holdings, most of which are multinational businesses, benefited
from the declining Euro and the Asian recovery which made exports more
attractive to buyers outside Europe. Although our European holdings performed
relatively well, the portfolio was overweight in Europe at the expense of Asia,
which returned higher profits than core Europe during the quarter. In the face
of the declining Euro, our 40% hedge had a positive impact on performance.
INDEPENDENCE CAPITAL MANAGEMENT, INC.
INVESTMENT ADVISER
VONTOBEL, USA
INVESTMENT SUB-ADVISER
SMALL CAPITALIZATION FUND
The Fund performed well in the second quarter, a period in which small cap
stocks sprang back to life. After an extended period in which stock market gains
were driven by a limited number of technology and large cap growth issues,
market leadership appears to be broadening to small cap issues and undervalued
stocks with strong business fundamentals of the type owned by the Fund.
The Fund provided a total return of 15.9% in the quarter, exceeding the 15.6%
return of its benchmark, the Russell 2000 Index. For the first half, the Fund's
total return of 3.8% compared with 9.3% for the Russell 2000. We trailed the
index in the half because of the significant underperformance of small cap value
stocks in the first quarter.
We remain disciplined in our philosophy of buying undervalued small caps with
strong business fundamentals, including high cash flow and favorable earnings
prospects. We believe business fundamentals determine share price in the long
run and that well-chosen small caps will deliver excellent investment returns
over time. Despite the second quarter's resurgence of undervalued stocks of the
type owned by the Fund, small cap issues have lagged so badly for so long that
they remain significantly underpriced relative to large cap stocks based on
historic norms. To us, this suggests excellent
<PAGE>
PENN SERIES FUNDS, INC.
MANAGEMENT'S DISCUSSION OF THE FUND PERFORMANCE
- -----------------------------------------------
opportunities in small caps and a reduced risk profile in a normally volatile
asset class.
During the first half of 1999, we established new positions in an eclectic group
of undervalued companies, including BMC Industries (aperture masks and eyewear
lenses), Eastern Enterprises (natural gas distribution and barge
transportation), HA-LO Industries (marketing and promotional services), Keystone
Automotive Industries (automotive parts), National Computer Systems (information
services), Performance Food Group (food and food-related products for
restaurants and other institutions), Pillowtex (textile products), Ruddick Corp.
(supermarkets, and thread and yarn), Shopko Stores (a discount retailed
health-related service), SPS Technologies (fasteners for aerospace and
automotive markets), Spartech (plastics), Staff Leasing (payroll administration
and other employer services) and Tetra Tech (management consulting and technical
services).
BCM Industries, one of our new positions, has two main business units -
Precision Imaged Products (aperture masks for computer and television monitors)
and Optical Products (ophthalmic lenses). Profitability of the Precision Imaged
Products unit should benefit form improved pricing, while the Optical Products
unit should benefit from the ongoing integration of the Orcolite acquisition,
which increased BMC's share of the rapidly growing polycarbonate lens market
from 22% to 50%. We believe BMC's longer-term earnings power is $1.60 per share,
compared with a consensus estimate of $0.52 per share for 1999.
Sales included Artesyn Technologies, Basin Exploration, Borg Warner Automotive,
Guilford Mills, KCS Energy, Lydall, Magellan Health, Nuevo Energy, Terra Nova
Holdings, United Wisconsin Services, West point Stevens and Volt Information
Sciences.
INDEPENDENCE CAPITAL MANAGEMENT, INC.
INVESTMENT ADVISER
OPCAP ADVISORS
INVESTMENT SUB-ADVISER
EMERGING GROWTH FUND
The Penn Mutual Emerging Growth Portfolio outperformed the Russell 2000 Growth
Index in the second quarter, gaining 21.91% vs. 14.75% respectively. Year to
date, the Penn Mutual Emerging Growth Portfolio is up 53.33%, while the Russell
2000 Growth Index is up 12.82%. Performance came in the beginning and at the end
of the quarter driven by Internet, Technology and Media stock price movements.
We have increased the number of holdings markedly due to new cash inflows and a
large volume of new stock issues. Relative
<PAGE>
to large cap stocks, we believe that we are still at the early stages of a small
cap growth stock rally. We believe that the portfolio is positioned to benefit
from continued stock market demand for the fastest growing smaller companies.
Our top investments remain those with strong revenue growth generated from
emerging industry segments. Each name has the qualifications we like to see:
secularly attractive industry category, accelerating revenue growth rate and a
demonstrated proprietary advantage with attendant barriers to entry and to
competition. Particularly attractive is the satellite broadcasting industry,
which is benefiting from growing consumer demand for high-quality video
entertainment delivered over the television. Satellite programming includes
extensive offerings of pay per view and premium television channels, which are
not readily available on cable. Moreover, the industry is benefiting from
government deregulation of local broadcasting, and satellite channel capacity is
already 10 times that of cable television. Interestingly enough, satellite
players may extend this video-oriented lead as cable companies invest in
providing Internet access, rather than in increased channel capacity. As such,
cable companies have left their core business vulnerable to attack from a
premium product.
The Internet firewall market is yet another emerging subsegment of the Internet.
Its unit volume should grow linearly with the sheer explosion of web and email
sites on the Internet. Currently, firewalls are by far the most important
security product used on the Internet. As corporations launch transaction and
interactive sites, firewalls block access by unauthorized users of a
corporation's most precious IT (Information Technology) assets. Firewalls
protect IT assets from points of connection to the Internet, and as the number
of these connections per organization rises, firewall demand reacts similarly.
We continue our strategy of searching for new investments that illustrate the
attractive characteristics of an emerging growth company. The common themes are
fast revenue growth, a recently emerged industry segment, proprietary advantage
that allows the firm to gain market share, and open-ended revenue potential
which will sustain 20% growth for at least 3-5 years. It is a strategy we adhere
to which has caused our small company portfolio to significantly outdistance the
stock market averages, despite the relative lackluster performance of small cap
stocks.
We want to thank you for your continuing support, and we look forward to what we
hope will be a prosperous second half of 1999 together.
<PAGE>
PENN SERIES FUNDS, INC.
MANAGEMENT'S DISCUSSION OF THE FUND PERFORMANCE
- -----------------------------------------------
INDEPENDENCE CAPITAL MANAGEMENT, INC. RS INVESTMENT MANAGEMENT, INC.
INVESTMENT ADVISER INVESTMENT SUB-ADVISER
<PAGE>
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999 (UNAUDITED)
THE MONEY MARKET FUND
PAR
(000) VALUE
- --------------------------------------------------------------------------------
COMMERCIAL PAPER--45.7%
- --------------------------------------------------------------------------------
New York, New York
4.850%, 07/07/99 1,600 $ 1,600,000
Alabama Power Co.
4.860%, 07/06/99 2,000 1,998,650
5.000%, 07/09/99 165 164,817
5.000%, 07/13/99 183 182,695
Albertson's, Inc.
4.850%, 07/06/99 2,500 2,498,316
Bell Atlantic Network Funding
4.950%, 07/07/99 400 399,670
BellSouth Telecommunications, Inc.
4.930%, 07/09/99 2,000 1,997,809
Daimlerchrysler NA Holdings Corp.
4.900%, 07/09/99 190 189,793
4.810%, 07/16/99 475 474,048
4.850%, 07/16/99 400 399,192
Duke Capital Corp.
4.930%, 07/06/99 1,920 1,918,685
5.020%, 07/06/99 400 399,721
4.970%, 07/08/99 400 399,613
5.050%, 07/08/99 299 298,706
Fleet Funding Corp.
4.910%, 07/01/99 1,800 1,800,000
Ford Motor Credit Corp.
5.500%, 07/01/99 800 800,000
4.950%, 07/09/99 459 458,495
4.980%, 07/09/99 400 399,557
General Electric Capital Corp.
4.880%, 07/06/99 300 299,797
4.950%, 07/06/99 484 483,667
4.950%, 07/07/99 400 399,670
4.980%, 07/07/99 200 199,834
5.070%, 07/14/99 800 798,535
Gillette Co.
5.650%, 07/01/99 1,271 1,271,000
GTE Funding, Inc.
5.000%, 07/16/99 1,000 997,917
Honeywell, Inc.
5.700%, 07/01/99 390 390,000
IBM Credit Corp.
5.030%, 07/06/99 3,000 2,997,904
Lucent Technologies
4.970%, 07/09/99 210 209,768
McDonald's Corp.
5.600%, 07/01/99 2,239 2,239,000
Monsanto Co. New York
4.830%, 07/28/99 947 943,570
Procter & Gamble Co.
5.050%, 07/13/99 233 232,608
Sherwin-Williams Co.
4.980%, 07/01/99 1,000 1,000,000
5.020%, 07/06/99 1,000 999,303
----------
TOTAL COMMERCIAL PAPER
(COST $29,842,340) 29,842,340
----------
<PAGE>
PAR
(000) VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS--21.3%
- --------------------------------------------------------------------------------
Alabama Power Co.
6.000%, 03/01/00 200 $ 201,324
American General Finance Corp.
6.875%, 07/01/99 200 200,000
Associates Corp. NA
7.250%, 09/01/99 150 150,393
6.680%, 09/17/99 1,650 1,653,360
6.000%, 03/15/00 150 150,234
BellSouth Telecommunications
6.500%, 02/01/00 150 151,143
Carolina Power & Light Co.
6.125%, 02/01/00 350 352,222
Chesapeake & Potomac Telephone Co.
5.875%, 09/15/99 110 110,136
Chrysler Financial Co. LLC
6.375%, 01/28/00 200 201,359
Coca-Cola Enterprises Inc.
7.000%, 11/15/99 1,000 1,007,082
Fleet Financial Group
7.125%, 05/01/00 1,000 1,015,705
Fleet Mortgage Group, Inc.
6.500%, 09/15/99 125 125,355
6.500%, 06/15/00 300 301,851
Florida Power & Light
5.500%, 07/01/99 465 465,000
Ford Motor Credit Corp.
8.375%, 01/15/00 1,000 1,016,427
6.375%, 09/15/99 212 212,495
7.750%, 10/01/99 266 267,708
Geotors Acceptance Corp.
7.000%, 03/01/00 392 396,590
GTE Soutwest Inc.
5.820%, 12/01/99 200 200,619
International Lease Finance Corp.
6.125%, 11/01/99 250 250,717
6.200%, 05/01/00 210 210,756
Mellon Financial Co.
7.625%, 11/15/99 100 100,889
6.300%, 06/01/00 205 205,975
Morgan Stanley Dean Witter
7.500%, 09/01/99 235 235,886
6.250%, 03/15/00 865 870,998
Norwest Financial, Inc.
6.200%, 09/15/99 150 150,283
7.250%, 03/15/00 1,000 1,013,622
Sherwin-Williams Co.
6.250%, 02/01/00 450 452,874
Southwestern Bell Telephone Co.
6.125%, 03/01/00 100 100,547
Texas Instruments Inc.
6.750%, 07/15/99 1,550 1,550,593
Wells Fargo Co.
6.000%, 03/15/00 560 563,062
----------
TOTAL CORPORATE BONDS
(COST $13,885,205) 13,885,205
----------
1
<PAGE>
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999 (UNAUDITED)
THE MONEY MARKET FUND
PAR
(000) VALUE
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES **--17.2%
- --------------------------------------------------------------------------------
Alabama State Industrial Development Authority
5.150%, 07/07/99 500 $ 500,000
Barton Healthcare LLC
5.200%, 07/07/99 430 430,000
Berks County, Pennsylvania,
Industrial Development Authority
5.300%, 07/07/99 535 535,000
Bloomfield, New Mexico
5.200%, 07/07/99 600 600,000
Columbia County Georgia Development Authority
5.100%, 07/07/99 1,290 1,290,000
Community Health Systems, Inc.
5.300%, 07/07/99 1,065 1,065,000
5.300%, 07/07/99 295 295,000
Durham, North Carolina, Certificates of
Participation
5.210%, 07/07/99 500 500,000
Fairview Hospital & Healthcare Services
5.090%, 07/07/99 500 500,000
GMG Warehouse LLC
5.200%, 07/07/99 800 800,000
Health Insurance Plan of Greater NY
5.220%, 07/07/99 500 500,000
Illinois Development Finance Authority
5.200%, 07/07/99 600 600,000
Liliha Parking LP
5.300%, 07/07/99 1,755 1,755,000
Montgomery County, Pennsylvania,
Industrial Development Authority
5.300%, 07/07/99 775 775,000
St. Francis Healthcare Foundation
5.300%, 07/07/99 490 490,000
Silver City, New Mexico
5.200%, 07/07/99 600 600,000
----------
TOTAL VARIABLE RATE DEMAND NOTES
(COST $11,235,000) 11,235,000
----------
- --------------------------------------------------------------------------------
MEDIUM TERM NOTES--12.7%
- --------------------------------------------------------------------------------
Associates Corp. NA
7.750%, 03/14/00 50 50,897
Associates Corp. NA
6.125%, 11/12/99 1,000 1,003,885
Caterpillar Financial Services Corp.
6.780%, 08/05/99 250 250,263
Chase Manhattan Corp.
7.580%, 07/23/99 2,000 2,002,295
General Electric Capital Corp.
5.835%, 04/28/00 100 100,493
<PAGE>
PAR
(000) VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
General Motors Acceptance Corp.
5.750%, 01/05/00 200 $ 200,520
6.250%, 01/06/00 1,040 1,045,765
6.650%, 05/24/00 100 101,210
6.900%, 06/06/00 300 304,161
Honeywell, Inc.
7.350%, 06/01/00 360 366,284
International Lease Finance Corp.
6.050%, 02/01/00 150 150,703
Morgan (JP) & Co., Inc.
6.875%, 05/01/00 419 421,225
Norwest Financial, Inc.
6.680%, 09/15/99 1,000 1,002,160
NYNEX Capital Funding
7.600%, 07/19/99 1,000 1,001,129
7.610%, 07/19/99 200 200,235
Wells Fargo Co.
7.625%, 10/15/99 100 100,737
------------
TOTAL MEDIUM TERM NOTES
(COST $8,301,962) 8,301,962
------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--3.1%
- --------------------------------------------------------------------------------
Janus Money Market Fund, Inc. 2,045,010 2,045,010
Provident Institutional Fund, Inc. 197 197
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $2,045,207) 2,045,207
------------
TOTAL INVESTMENTS --100.0%
(COST $65,309,714) (a) $ 65,309,714
------------
- --------------------------------------------------------------------------------
(a) Cost for Federal income tax purposes
** The rate shown is the rate as of June 30, 1999, and the maturity
is the next interest readjustment date.
The Standard & Poor's Corporation, Moody's Investors Service,
Fitch Investors Service and Duff & Phelps Credit Rating Co. ratings
are the most recent ratings available at June 30, 1999.
Ratings are unaudited.
PERCENTAGE OF PORTFOLIO
MATURITY AMOUNT -----------------------
SCHEDULE PAR (CUM)
------------- ------------ -----
1 -7 $ 33,604,000 53.2% 53.2%
8 - 14 5,339,000 8.5% 61.7%
15 - 30 7,572,000 12.0% 73.7%
31 - 60 250,000 0.4% 74.1%
61 - 90 3,632,000 5.8% 79.9%
91 - 120 366,000 0.6% 80.5%
121 - 150 2,350,000 3.7% 84.2%
over 150 days 10,051,000 15.8% 100.0%
------------ ------
$ 63,164,000 100.0%
Average Weighted Maturity -- 55 days
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
2
<PAGE>
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS-- JUNE 30, 1999 (UNAUDITED)
THE QUALITY BOND FUND
PAR
(000) VALUE
- -------------------------------------------------------------------------------
CORPORATE BONDS--18.9%
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE--1.5%
Raytheon Co.
6.000%, 12/15/10 1,000 $ 921,250
-----------
CANADIAN GOVERNMENT AGENCY--2.0%
Hydro-Quebec
8.050%, 07/07/24 1,150 1,246,312
-----------
COMPUTERS--1.6%
IBM Corp.
6.220%, 08/01/27 1,000 995,000
-----------
DIVERSIFIED FINANCIAL SERVICES--2.4%
Associates Corp. N.A.
7.750%, 02/15/05 500 522,500
General Electric Capital Corp.
6.660%, 05/01/00 1,000 1,006,250
-----------
1,528,750
-----------
RETAIL--0.3%
Penney (J.C.) Co., Inc.
9.450%, 07/15/02 175 180,469
-----------
SERVICES-EQUIPMENT RENTING & LEASING--0.1%
Service Corp. International
7.000%, 06/01/15 100 99,500
-----------
SPECIFIED PURPOSE HOLDING COMPANIES--2.2%
U.S. West Capital Funding, Inc.
6.875%, 07/15/28 1,500 1,353,750
-----------
TELECOMMUNICATIONS--7.7%
MCI Worldcom, Inc.
7.750%, 04/01/27 1,750 1,855,000
Qwest Communications Intl., Inc.
7.500%, 11/01/08 3,000 2,985,000
-----------
4,840,000
-----------
TRANSPORTATION--1.1%
CSX Corp.
7.050%, 05/01/02 660 669,075
-----------
TOTAL CORPORATE BONDS
(COST $12,004,941) 11,834,106
-----------
- -------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS--41.2%
- -------------------------------------------------------------------------------
TREASURY BONDS--9.2%
7.500%, 11/15/16 1,475 1,661,826
6.125%, 11/15/27 725 719,631
5.250%, 11/15/28 1,650 1,461,364
5.250%, 02/15/29 2,100 1,885,568
-----------
5,728,389
-----------
<PAGE>
PAR
(000) VALUE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TREASURY NOTES--32.0%
5.375%, 07/31/00 1,500 $ 1,500,472
6.250%, 08/31/02 4,350 4,416,734
5.750%, 04/30/03 6,625 6,619,899
5.250%, 08/15/03 1,970 1,932,030
4.750%, 02/15/04 1,650 1,581,937
7.250%, 05/15/04 1,100 1,164,844
6.500%, 05/15/05 1,025 1,054,549
5.625%, 05/15/08 350 342,926
4.750%, 11/15/08 1,550 1,422,967
-----------
20,036,358
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $26,805,231) 25,764,747
-----------
- -------------------------------------------------------------------------------
AGENCY OBLIGATIONS--24.3%
- -------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK DISCOUNT NOTE--3.2%
4.470%, 07/01/99 2,000 2,000,000
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION BONDS--21.1%
5.625%, 03/15/01 3,100 3,094,980
6.825%, 09/01/07 2,681 2,725,101
6.500%, 12/01/26 1,500 1,452,660
6.000%, 11/30/28 1,550 1,462,813
7.000%, 05/01/29 4,500 4,464,855
-----------
13,200,409
-----------
TOTAL AGENCY OBLIGATIONS
(COST $15,166,900) 15,200,409
-----------
- -------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--1.5%
- -------------------------------------------------------------------------------
Morgan Stanley 144A
6.950%, 12/10/07 459 450,136
Sasco, Series 1996- CFL
6.303%, 02/25/28 500 499,242
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(COST $959,510) 949,378
-----------
- -------------------------------------------------------------------------------
COMMERCIAL ASSET BACKED SECURITIES--5.5%
- -------------------------------------------------------------------------------
Illinois Power Special Purpose Trust
5.380%, 06/25/07 2,500 2,389,950
Railcar Leasing, LLC 144A
7.125%, 01/15/13 1,000 1,016,250
-----------
TOTAL COMMERCIAL ASSET BACKED SECURITIES
(COST $3,429,609) 3,406,200
-----------
3
<PAGE>
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS-- JUNE 30, 1999 (UNAUDITED)
THE QUALITY BOND FUND
NUMBER
OF SHARES VALUE
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--8.6%
- -------------------------------------------------------------------------------
Janus Money Market Fund 2,765,732 $ 2,765,732
Provident Institutional Fund 2,608,059 2,608,059
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $5,373,791) 5,373,791
-----------
TOTAL INVESTMENTS--100.0%
(COST $63,739,982) (a) $62,528,631
===========
- ---------------------------------------
(a) At June 30, 1999, the cost for Federal income tax purposes was $63,777,341.
Net unrealized depreciation was $1,248,710. This consisted of aggregate gross
unrealized depreciation for all securities in which there was an excess of tax
cost over market value of $1,457,599 and aggregate gross unrealized appreciation
for all securities in which there was an excess of tax cost over market value of
$208,889.
The Standard & Poor's Corporation, Moody's Investors Service, Fitch Investors
Service and Duff & Phelps Credit Rating Co. ratings are the most recent ratings
available at June 30, 1999. Ratings are unaudited.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
<PAGE>
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1999 (UNAUDITED)
THE HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
PAR
(000) VALUE
- ------------------------------------------------------------------------------------
CORPORATE BONDS --72.3%
- ------------------------------------------------------------------------------------
<S> <C> <C>
AEROSPACE & DEFENSE --2.1%
Communications & Power Industries
12.000%, 08/01/05 750 $ 770,625
Dunlop Stand Aero Hldgs
11.875%, 05/15/09 175 177,625
Dyncorp, Inc.
9.500%, 03/01/07 425 421,812
IT Group Inc.
11.250%, 04/01/09 125 118,750
----------------------
1,488,812
----------------------
AUTOMOBILES & RELATED --0.7%
Advance Stores Co., Inc.
10.250%, 04/15/08 300 286,500
Hayes Lemmerz International, Inc.
8.250%, 12/15/08 200 191,000
----------------------
477,500
----------------------
BROADCAST/MEDIA --2.4%
Chancellor Media Corp.
8.750%, 06/15/07 150 149,250
8.125%, 12/15/07 100 97,500
8.000%, 11/01/08 450 438,750
Citadel Broadcasting Company
9.250%, 11/15/08 350 361,375
Cumulus Media Inc.
10.375%, 07/01/08 300 318,000
Jacor Communications Co.
8.000%, 02/15/10 375 377,812
----------------------
1,742,687
----------------------
BUILDING PRODUCTS --3.3%
American Builders & Contractors Supply Co., Inc.
10.625%, 05/15/07 500 470,000
Associated Materials, Inc.
9.250%, 03/01/08 600 600,000
Building Materials Corp.
7.750%, 07/15/05 250 233,125
8.000%, 10/15/07 50 46,625
ISG Resources, Inc.
10.000%, 04/15/08 500 512,500
Koppers Industry, Inc.
9.875%, 12/01/07 500 487,500
----------------------
2,349,750
----------------------
CABLE OPERATORS --2.1%
Adelphia Communications Corp.
9.875%, 03/01/07 250 261,250
7.875%, 05/01/09 350 324,625
CSC Holdings, Inc.
7.625%, 07/15/18 425 400,171
Northland Cable Television
10.250%, 11/15/07 500 522,500
----------------------
1,508,546
----------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAR
(000) VALUE
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
<S> <C> <C>
CONGLOMERATES --0.6%
ICF Kaiser International Inc.
13.000%, 12/31/03 400 $ 390,000
CONSUMER PRODUCTS --0.5%
Revlon Consumer Products
8.625%, 02/01/08 400 378,000
--------------------------
CONTAINERS --5.2%
Anchor Advanced Products, Inc.
11.750%, 04/01/04 600 615,000
BWAY Corp.
10.250%, 04/15/07 850 884,000
Consolidated Container Co. L.L.C.
10.125%, 07/15/09 750 760,313
Plastic Containers, Inc.
10.000%, 12/15/06 1,000 1,128,050
U.S. Can Corp.
10.125%, 10/15/06 350 364,000
--------------------------
3,751,363
--------------------------
ELECTRONIC COMPONENTS --1.3%
Amkor Technologies Inc.
9.250%, 05/01/06 200 196,000
Fairchild Semiconductor Corp.
10.125%, 03/15/07 125 121,562
HCC Industries, Inc.
10.750%, 05/15/07 400 364,000
Viasystems, Inc.
9.750%, 06/01/07 300 262,500
--------------------------
944,062
--------------------------
ENERGY SERVICES --4.9%
Amerigas Partners L.P.
10.125%, 04/15/07 400 409,000
Canadian Forest Oil Ltd.
8.750%, 09/15/07 150 144,375
Comstock Resources, Inc.
11.250%, 05/01/07 475 482,125
Energy Corp. of America
9.500%, 05/15/07 600 547,500
Forest Oil Corp.
10.500%, 01/15/06 200 207,000
Lomak Petroleum, Inc.
8.750%, 01/15/07 100 89,000
Ocean Energy Inc.
9.750%, 10/01/06 275 283,938
Plains Resources, Inc.
10.250%, 03/15/06 550 558,250
Pride Petroleum Services, Inc.
9.375%, 05/01/07 425 420,750
YPF Sociedad Anonima
10.000%, 11/02/28 300 336,249
--------------------------
3,478,187
--------------------------
</TABLE>
5
<PAGE>
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1999 (UNAUDITED)
THE HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
PAR
(000) VALUE
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
<S> <C> <C>
ENTERTAINMENT & LEISURE --2.2%
Bally Total Fitness Holdings
9.875%, 10/15/07 500 $ 485,000
Premier Parks, Inc.
9.750%, 06/15/07 250 252,500
Six Flags Theme Parks
12.250%, 06/15/05 300 334,500
Speedway Motorsports, Inc.
8.500%, 08/15/07 500 505,000
----------------------
1,577,000
----------------------
FOODS --3.8%
AmeriServ Food Distribution, Inc.
8.875%, 10/15/06 150 138,000
B&G Foods Inc.
9.625%, 08/01/07 600 573,000
International Home Foods, Inc.
10.375%, 11/01/06 600 633,000
Luigino's, Inc.
10.000%, 02/01/06 200 197,500
Mrs. Fields Original Cookies Inc.
10.125%, 12/01/04 75 67,500
New World Pasta Company
9.250%, 02/15/09 500 485,000
Smithfield Foods, Inc.
7.625%, 02/15/08 125 113,125
Southern Foods, Inc.
9.875%, 09/01/07 500 510,000
----------------------
2,717,125
----------------------
HEALTHCARE --3.5%
Alliance Imaging
9.625%, 12/15/05 500 472,500
Hanger Othopedic Group, Inc.
11.250%, 06/15/09 150 152,250
Hudson Respiratory Care, Inc.
9.125%, 04/15/08 100 83,000
Kinetic Concepts, Inc.
9.625%, 11/01/07 200 176,000
King Pharmaceutical Inc.
10.750%, 02/15/09 500 515,000
Lifepoint Hospitals Holdings, Inc.
10.750%, 05/15/09 350 357,000
Quest Diagnostic, Inc.
10.750%, 12/15/06 100 113,250
9.875%, 07/01/09 250 253,750
Triad Hospitals Holdings, Inc.
11.000%, 05/15/09 350 356,125
----------------------
2,478,875
----------------------
HOTELS & GAMING --6.0%
Argosy Gaming Co.
12.000%, 06/01/01 150 153,000
10.750%, 06/01/09 250 255,000
Courtyard by Mariott II
10.750%, 02/01/08 600 612,000
Harrahs Operating Co. Inc.
7.875%, 12/15/05 250 241,875
Hollywood Park, Inc.
9.250%, 02/15/07 500 492,500
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAR
(000) VALUE
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Horseshoe Gaming L.L.C.
9.375%, 06/15/07 300 $ 305,250
8.625%, 05/15/09 350 338,625
Host Marriott Travel Plaza
9.500%, 05/15/05 600 618,000
Isle of Capri Casinos
8.750%, 04/15/09 500 470,000
Players International, Inc.
10.875%, 04/15/05 150 157,875
Red Roof Inns
9.625%, 12/15/03 500 495,000
Venetian Casino / LV Sands
10.000%, 11/15/05 200 185,000
--------------------------
4,324,125
--------------------------
INVESTMENT COMPANIES --0.3%
PDVSA Finance Ltd.
7.500%, 11/15/28 300 213,438
--------------------------
MANUFACTURING --2.8%
Hawk Corp.
10.250%, 12/01/03 500 515,000
International Wire Group, Inc.
11.750%, 06/01/05 600 624,000
Panolam Industries Intl
11.500%, 02/15/09 200 204,000
Paragon Corp. Holdings, Inc.
9.625%, 04/01/08 250 145,000
Precision Partners Inc.
12.000%, 03/15/09 50 47,500
Venture Holdings Trust
11.000%, 06/01/07 500 505,000
--------------------------
2,040,500
--------------------------
MISCELLANEOUS CONSUMER PRODUCTS --1.4%
Herff Jones, Inc.
11.000%, 08/15/05 500 532,500
Holmes Products Corp.
9.875%, 11/15/07 400 390,000
9.875%, 11/15/07 50 48,750
--------------------------
971,250
--------------------------
PAPER & PAPER PRODUCTS --2.6%
Packaging Corp. of America
9.625%, 04/01/09 600 609,000
Repap New Brunswick
9.000%, 06/01/04 125 117,813
11.500%, 06/01/04 375 374,063
10.625%, 04/15/05 250 200,625
Riverwood International Co.
10.250%, 04/01/06 125 126,250
10.625%, 08/01/07 125 127,500
10.875%, 04/01/08 300 291,000
--------------------------
1,846,251
--------------------------
PET FOOD AND SUPPLIES --1.5%
Doane Products Co.
9.750%, 05/15/07 600 615,000
Purina Mills, Inc.
9.000%, 03/15/10 575 442,750
--------------------------
1,057,750
--------------------------
</TABLE>
6
<PAGE>
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1999 (UNAUDITED)
THE HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
PAR
(000) VALUE
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
<S> <C> <C>
PUBLISHING --1.4%
Hollinger International Publishing Inc.
9.250%, 03/15/07 400 $ 410,000
Liberty Group Operating, Inc.
9.375%, 02/01/08 200 188,000
Sun Media Corp.
9.500%, 02/15/07 275 284,625
Transwestern Publishing
9.625%, 11/15/07 100 98,000
----------------------
980,625
----------------------
RETAIL --1.2%
Eye Care Centers of America
9.125%, 05/01/08 350 306,250
Safelite Glass Corp.
9.875%, 12/15/06 100 92,500
9.875%, 12/15/06 300 277,500
Sleepmaster, Inc.
11.000%, 05/15/09 200 205,000
----------------------
881,250
----------------------
SAVINGS & LOAN ASSOCIATIONS --0.7%
First Federal Financial
11.750%, 10/01/04 500 525,000
----------------------
SERVICES --4.4%
Apcoa Inc.
9.250%, 03/15/08 400 360,000
Coinmach Corp.
11.750%, 11/15/05 307 336,165
Global Imaging Systems
10.750%, 02/15/07 300 294,000
Group Maintenance America Corp.
9.750%, 01/15/09 400 392,000
Intertek Finance PLC
10.250%, 11/01/06 500 482,500
Iron Mountain, Inc.
8.750%, 09/30/09 500 490,000
Protection One Alarm
13.625%, 06/30/05 260 291,200
7.375%, 08/15/05 250 230,620
8.125%, 01/15/09 75 69,375
Sitel Corp.
9.250%, 03/15/06 200 170,000
----------------------
3,115,860
----------------------
SPECIALTY CHEMICALS --3.5%
American Pacific Corp.
9.250%, 03/01/05 500 510,625
ISP Holdings, Inc.
9.750%, 02/15/02 500 503,750
Lyondell Chemical Co.
10.875%, 05/01/09 350 360,500
Octel Developments PLC
10.000%, 05/01/06 750 770,625
Sovereign Specialty Chemicals
9.500%, 08/01/07 350 350,875
----------------------
2,496,375
----------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAR
(000) VALUE
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
<S> <C> <C>
SPECIFIED PURPOSE HOLDING COMPANIES --0.3%
Msx International, Inc.
11.375%, 01/15/08 250 $ 242,500
SUPERMARKETS --2.0%
Jitney-Jungle Stores of America, Inc.
12.000%, 03/01/06 250 200,000
10.375%, 09/15/07 250 87,500
Pantry, Inc.
10.250%, 10/15/07 500 502,500
Shoppers Food Warehouse Corp.
9.750%, 06/15/04 600 642,000
--------------------------
1,432,000
--------------------------
TELECOMMUNICATIONS --9.6%
Alaska Communications Systems
9.375%, 05/15/09 350 336,875
American Cellular Corp.
10.500%, 05/15/08 300 307,500
Centennial Cellular Corp.
10.750%, 12/15/08 500 518,750
Comcast Cellular Holdings
9.500%, 05/01/07 300 336,000
Energis PLC
9.750%, 06/15/09 200 202,500
Exodus Communications, Inc.
11.250%, 07/01/08 150 157,875
Intermedia Communications, Inc.
9.500%, 03/01/09 100 97,250
Mastec, Inc.
7.750%, 02/01/08 200 188,000
Metromedia Fiber Network, Inc.
10.000%, 11/15/08 300 308,250
Netia Holdings II B.V.
13.125%, 06/15/09 200 202,000
NEXTLINK Communications, Inc.
12.500%, 04/15/06 250 273,125
Orange PLC
9.000%, 06/01/09 300 301,500
Orbital Imaging Corp.
11.625%, 03/01/05 100 96,000
Pegasus Communications Corp.
9.625%, 10/15/05 200 198,000
9.750%, 12/01/06 100 98,000
Price Communications Wireless, Inc.
9.125%, 12/15/06 300 312,000
PSINet Inc.
10.000%, 02/15/05 150 149,250
11.500%, 11/01/08 450 472,500
Rhythms Netconnections
12.750%, 04/15/09 150 141,000
Rogers Cantel Inc.
9.375%, 06/01/08 250 259,375
9.750%, 06/01/16 350 380,625
RSL Communications PLC Co.
12.000%, 11/01/08 300 313,500
</TABLE>
7
<PAGE>
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1999 (UNAUDITED)
THE HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
PAR
(000) VALUE
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
<S> <C> <C>
Satelites Mexicanos SA
10.125%, 11/01/04 250 $ 201,250
Tele1 Europe BV
13.000%, 05/15/09 150 157,125
Teligent Inc.
11.500%, 12/01/07 225 225,000
Verio, Inc.
11.250%, 12/01/08 300 314,250
Viatel Inc.
11.500%, 03/15/09 300 309,000
----------------------
6,856,500
----------------------
TEXTILES & APPAREL --0.4%
Delta Mills, Inc.
9.625%, 09/01/07 200 190,000
Dyersburg Corp.
9.750%, 09/01/07 300 123,000
----------------------
313,000
----------------------
TRANSPORTATION --1.6%
Greyhound Lines
11.500%, 04/15/07 500 565,000
Travelcenters of America
10.250%, 04/01/07 600 600,000
----------------------
1,165,000
----------------------
TOTAL CORPORATE BONDS
(COST $52,944,755) 51,743,331
----------------------
- ------------------------------------------------------------------------------------
ZERO COUPON BONDS ** --13.8%
- ------------------------------------------------------------------------------------
BROADCAST/MEDIA --0.3%
Radio Unica Corp.
12.900%, 08/01/06 400 230,000
----------------------
CABLE OPERATORS --3.2%
Charter Communications Holdings L.L.C.
9.916%, 04/01/11 500 310,000
Falcon Holding Group L.P.
9.702%, 04/15/10 450 316,125
Frontiervision Holdings L.P.
10.515%, 09/15/07 400 346,000
International Cabletel, Inc.
14.680%, 02/01/06 200 174,500
NTL, Inc.
9.534%, 04/01/08 100 68,500
4.333%, 04/15/09 500 467,962
United International Holdings
11.532%, 02/15/08 900 598,500
----------------------
2,281,587
----------------------
DIVERSIFIED OPERATIONS --0.0%
Hedstrom Holdings, Inc.
14.305%, 06/01/09 50 21,938
----------------------
ENTERTAINMENT & LEISURE --0.6%
Premier Parks Inc.
9.568%, 04/01/08 600 398,250
----------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAR
(000) VALUE
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL --0.4% Coaxial L.L.C.
11.794%, 08/15/08 300 $ 201,000
Euronet Services Inc.
13.571%, 07/01/06 500 108,092
--------------------------
309,092
--------------------------
HEALTHCARE --0.1%
Mariner Post-Accute Network, Inc.
18.953%, 11/01/07 650 68,250
--------------------------
PRINTING & PUBLISHING --0.2%
Transwestern Holding
12.993%, 11/15/08 250 170,000
--------------------------
SERVICES --0.2%
AP Holdings, Inc.
12.003%, 03/15/08 200 109,000
--------------------------
SUPERMARKETS --0.6%
Pathmark Stores
11.775%, 11/01/03 400 394,000
--------------------------
TELECOMMUNICATIONS --8.3%
21st Century Telecom Group
16.642%, 02/15/08 550 239,250
Clearnet Communications, Inc.
12.562%, 12/15/05 250 227,500
9.747%, 05/01/09 500 283,750
Colt Telecom Group PLC
12.263%, 12/15/06 750 622,500
Covad Communications Group
14.515%, 03/15/08 250 138,125
Dolphin Telecom PLC
13.486%, 06/01/08 100 51,000
E.Spire Communications, Inc.
12.788%, 07/01/08 200 76,000
GST Telecom
11.432%, 05/01/08 400 230,000
ICG Holdings, Inc.
12.535%, 09/15/05 100 87,273
Intercel, Inc.
11.578%, 02/01/06 500 432,390
Intermedia Communications, Inc.
10.776%, 07/15/07 200 144,000
11.097%, 03/01/09 250 141,875
KMC Telecom Holdings, Inc.
14.156%, 02/15/08 500 267,500
MetroNet Communications Corp.
12.007%, 11/01/07 50 39,750
8.545%, 06/15/08 1,000 740,000
Nextel Partners, Inc.
12.572%, 02/01/09 300 171,750
NEXTLINK Communications, Inc.
10.542%, 04/15/08 350 210,000
12.245%, 06/01/09 500 292,500
</TABLE>
8
<PAGE>
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1999 (UNAUDITED)
THE HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
PAR
(000) VALUE
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
<S> <C> <C>
Rhythms Netconnections
14.016%, 05/15/08 250 $ 132,500
Telecorp PCS, Inc.
11.618%, 04/15/09 300 166,500
Teligent Inc.
12.409%, 03/01/08 325 198,250
Triton PCS, Inc.
12.289%, 05/01/08 1,000 645,000
Tritel PCS, Inc.
13.048%, 05/15/09 200 109,000
Viatel, Inc.
12.932%, 04/15/08 400 256,000
----------------------
5,902,413
----------------------
TOTAL ZERO COUPON BONDS **
(COST $10,231,761) 9,884,530
----------------------
- ------------------------------------------------------------------------------------
COMMERCIAL PAPER --3.6%
- ------------------------------------------------------------------------------------
Gilfin BV
5.700% , 07/01/99
(COST $2,587,000) 2,587 2,587,000
----------------------
- ------------------------------------------------------------------------------------
NUMBER
COMMON STOCK --1.4% OF SHARES VALUE
- ------------------------------------------------------------------------------------
Dr. Pepper Bottling Holdings,Inc.* 14,800 444,000
Gaylord Containers Corp. * 7,500 59,531
Hedstrom Holdings, Inc. * 6,065 6,065
Isle of Capri Casinos * 25,000 171,094
Nextel Communications, Inc. * 232 11,651
Omnipoint Corp. * 3,000 86,813
Premier Parks, Inc. * 2,800 102,900
Protection One, Inc. * 8,400 45,150
Viatel, Inc. * 1,219 68,264
----------------------
TOTAL COMMON STOCK
(COST $504,573) 995,468
----------------------
- ------------------------------------------------------------------------------------
PREFERRED STOCK --8.2%
- ------------------------------------------------------------------------------------
BROADCAST/MEDIA --1.3%
Capstar Broadcasting Partners 3,803 441,180
Citadel Broadcasting Co. 2,579 299,197
Cumulus Media, Inc. 170 187,739
----------------------
928,116
----------------------
CABLE OPERATORS --1.8%
CSC Holdings, Inc. 11,524 1,255,353
----------------------
CONSTRUCTION --0.4%
International Utility Structures, Inc. * 259 248,640
----------------------
FINANCIAL --0.8%
Bankunited Capital Trust 250 240,000
Sinclair Capital 3,250 341,250
----------------------
581,250
----------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- ------------------------------------------------------------------------------------------
<S> <C> <C>
OIL & GAS --0.3%
Clarke USA, Inc. 2,952 $ 191,880
TELECOMMUNICATIONS --3.7%
Dobson Communications Corp. 280 259,000
E. Spire Communications Inc. 1,845 77,522
Global Crossing Holdings, LTD. 1,250 132,656
Intermedia Communications, Inc. 11,758 115,236
Nextel Communications, Inc. 6,497 1,207,795
Nextlink Communications 3,500 175,000
Pegasus Communications Corp. 122 126,000
PSINET, Inc. 4,000 193,500
Rural Cellular Corp. 330 331,650
--------------------------
2,618,359
--------------------------
TEXTILES & APPAREL --0.0%
Anvil Holdings, Inc.@ 4,844 19,376
--------------------------
TOTAL PREFERRED STOCK
(COST $6,112,331) 5,842,974
--------------------------
- ------------------------------------------------------------------------------------------
NUMBER
WARRANTS --0.7% OF WARRANTS VALUE
- ------------------------------------------------------------------------------------------
Allegiance Telecom, Inc. * 250 1,438
Colt Telecom * 700 438,235
Globalstar Inc * @ 350 19,250
ICF Kaiser International, Inc. *@ 1,575 16
Intermedia Communicatons, Inc. * 50 3,250
KMC Telecom Holdings, Inc. * 200 500
MetroNet Communications * 150 11,550
Microcell Telecom * @ 800 13,482
President Casinos, Inc. * @ 4,415 221
UIH Australia * 175 2
Wireless One, Inc.* 450 5
Wright Medical Technology, Inc. *@ 2,676 3
--------------------------
TOTAL WARRANTS (COST $44,612) 487,952
--------------------------
TOTAL INVESTMENTS --100.0%
(COST $72,425,032) (a) $ 71,541,255
==========================
</TABLE>
- -------------------------------------------
@ Restricted Security
* Non-income producing security
** Effective Yield
(a) At June 30, 1999, the cost for Federal income tax purposes was $72,459,046.
Net unrealized depreciation was $917,791. This consisted of aggregate gross
unrealized appreciation for all securities in which there was an excess of
market value over tax cost of $1,954,075 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost over
market value of $2,871,866.
The Standard & Poor's Corporation, Moody's Investors Service, Fitch
Investors Service and Duff & Phelps Credit Rating Co. ratings are the
most recent ratings available at June 30, 1999. Ratings are unaudited.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
9
<PAGE>
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999 (UNAUDITED)
THE GROWTH EQUITY FUND
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 98.1%
- --------------------------------------------------------------------------------
BROADCAST/MEDIA -- 1.6%
Comcast Corp.* 100,000 $ 3,843,750
------------
COMPUTER SERVICES & SOFTWARE -- 16.3%
Cisco Systems, Inc.* 170,000 10,949,062
EMC Corp.* 50,000 2,750,000
International Business
Machines Corp. 60,000 7,755,000
Microsoft Corp.* 150,000 13,518,750
Sun Microsystems, Inc.* 50,000 3,445,313
------------
38,418,125
------------
COSMETICS - TOILETRY -- 4.5%
Colgate-Palmolive Company 50,000 4,937,500
Kimberly-Clark Corp. 100,000 5,700,000
------------
10,637,500
------------
DIVERSIFIED OPERATIONS -- 8.6%
General Electric Co. 75,000 8,475,000
Tyco International Ltd. 125,000 11,843,750
------------
20,318,750
------------
ELECTRONICS -- 6.2%
Texas Instruments, Inc. 100,000 14,500,000
------------
FINANCIAL SERVICES -- 8.4%
Citigroup, Inc. 225,000 10,687,500
MBNA Corp. 300,000 9,187,500
------------
19,875,000
------------
INSURANCE -- 3.0%
American International Group, Inc. 60,000 7,023,750
------------
MACHINERY -- 2.5%
Applied Materials, Inc.* 80,000 5,907,500
------------
MEDICAL SUPPLIES AND EQUIPMENT -- 2.5%
Medtronic, Inc. 75,000 5,840,625
------------
PHARMACEUTICALS -- 9.0%
Bristol-Myers Squibb Co. 100,000 7,043,750
Johnson & Johnson 70,000 6,860,000
Merck & Co., Inc. 100,000 7,400,000
------------
21,303,750
------------
<PAGE>
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RAILROADS -- 2.7%
Kansas City Southern
Industries, Inc. 100,000 $ 6,381,250
------------
RETAIL -- 11.9%
Best Buy Co., Inc.* 75,000 5,062,500
CVS Corp. 175,000 8,946,875
Staples, Inc.* 200,000 6,181,250
The Home Depot, Inc. 120,000 7,732,500
------------
27,923,125
------------
TELECOMMUNICATIONS -- 18.6%
AT&T Corp. 100,000 5,581,250
General Instrument Corp.* 100,000 4,250,000
Lucent Technologies, Inc. 100,000 6,743,750
MCI WorldCom, Inc.* 120,000 10,323,750
Nokia Corp. ADR 60,000 5,493,750
Qwest Communications
International, Inc.* 120,000 3,971,250
Time Warner, Inc. 100,000 7,350,000
------------
43,713,750
------------
WASTE MANAGEMENT -- 2.3%
Waste Management, Inc.* 100,000 5,375,000
------------
TOTAL COMMON STOCK
(COST $180,601,865) 231,061,875
------------
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.9%
- --------------------------------------------------------------------------------
Temporary Cash Investment Fund, Inc. 2,257,525 2,257,525
Temporary Investment Fund, Inc. 2,257,525 2,257,525
------------
TOTAL SHORT-TERM INVESTMENTS ------------
(COST $4,515,050) 4,515,050
------------
TOTAL INVESTMENTS -- 100.0%
(COST $185,116,915) (a) $235,576,925
============
- ------------------------------------------
* Non-income producing security
(a) At June 30, 1999, the cost for Federal income tax purposes was $185,169,075.
Net unrealized appreciation was $50,407,850. This consisted of aggregate gross
unrealized appreciation for all securities in which there was an excess market
value over tax cost of $52,089,900 and aggregate gross unrealized depreciation
for all securities in which there was an excess of tax cost over market value of
$1,682,050.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
10
<PAGE>
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999 (UNAUDITED)
THE VALUE EQUITY FUND
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 92.7%
- --------------------------------------------------------------------------------
ADVERTISING -- 2.4%
Omnicom Group, Inc. 100,000 $ 8,000,000
------------
AEROSPACE & DEFENSE -- 3.3%
General Dynamics Corp. 80,000 5,480,000
Raytheon Co. 80,000 5,630,000
------------
11,110,000
------------
AIR TRANSPORTATION -- 2.8%
AMR Corp.* 139,000 9,486,750
------------
BROADCAST/MEDIA -- 1.3%
Chancellor Media Corp.* 80,000 4,407,500
------------
CHEMICALS -- 3.2%
Du Pont (E.I.) de Nemours and Co. 130,000 8,880,625
Hercules, Inc. 50,000 1,965,625
------------
10,846,250
------------
COMPUTER SERVICES & SOFTWARE -- 6.2%
Compaq Corp. 210,000 4,974,375
Computer Associates
International, Inc. 290,000 15,950,000
------------
20,924,375
------------
CONSUMER PRODUCTS -- 0.8%
Mattel, Inc. 105,000 2,775,937
------------
DIVERSIFIED OPERATIONS -- 7.3%
Canadian Pacific Ltd. 110,000 2,619,375
Minnesota Mining
& Manufacturing Co. (3M) 115,000 9,997,813
Textron, Inc. 145,000 11,935,313
------------
24,552,501
------------
ELECTRONIC SYSTEMS -- 3.3%
Emerson Electric Co. 70,000 4,401,250
Rockwell International Corp. 111,000 6,743,250
------------
11,144,500
------------
ELECTRONICS -- 2.8%
Avnet, Inc. 81,000 3,766,500
Motorola, Inc. 60,000 5,685,000
------------
9,451,500
------------
ENTERTAINMENT & LEISURE -- 2.5%
Carnival Corp. 100,000 4,850,000
The Walt Disney Co. 120,000 3,697,500
------------
8,547,500
------------
FINANCIAL SERVICES -- 15.4%
BankBoston Corp. 167,000 8,537,875
Citigroup, Inc. 206,250 9,796,875
<PAGE>
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Countrywide Credit Industries, Inc. 190,000 $ 8,122,500
Freddie Mac 169,000 9,802,000
Household International, Inc. 130,000 6,158,750
Wells Fargo Co. 228,330 9,761,108
------------
52,179,108
------------
FOOD AND BEVERAGES -- 0.6%
Diageo PLC (ADR) 50,000 2,150,000
------------
FOODS -- 2.2%
Heinz (H.J.) Co. 150,000 7,518,750
------------
INSURANCE -- 15.8%
Ace Limited 235,000 6,638,750
AFLAC, INCORPORTATED 164,750 7,887,406
American International Group, Inc. 45,375 5,311,711
Conseco, Inc. 311,610 9,484,629
Everest Reinsurance Holdings, Inc. 250,000 8,156,250
XL Capital Ltd. 283,196 16,000,574
------------
53,479,320
------------
MACHINERY-DIVERSIFIED -- 5.1%
Caterpillar, Inc. 137,000 8,220,000
Dover Corp. 256,000 8,960,000
------------
17,180,000
------------
MEDICAL SUPPLIES & EQUIPMENT -- 1.6%
Becton, Dickinson & Co. 178,000 5,340,000
------------
OFFICE SUPPLIES -- 2.0%
Avery Dennison Corp. 110,000 6,641,250
------------
PRINTING AND PUBLISHING -- 1.5%
Donnelley (R.R.) & Sons Co. 140,000 5,188,750
------------
RESTAURANTS -- 3.1%
McDonald's Corp. 252,000 10,410,750
------------
RETAIL -- 2.7%
The May Department Stores Co. 222,000 9,074,250
------------
TELECOMMUNICATIONS -- 2.3%
Sprint Corp. 144,500 7,631,406
------------
TRAVEL SERVICES -- 2.1%
Sabre Group Holdings Inc. 105,000 7,218,750
------------
WASTE MANAGEMENT -- 2.4%
Waste Management, Inc.* 149,000 8,008,750
------------
TOTAL COMMON STOCK
(COST $221,526,156) 313,267,897
------------
11
<PAGE>
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999 (UNAUDITED)
THE VALUE EQUITY FUND
PAR
(000) VALUE
- --------------------------------------------------------------------------------
COMMERCIAL PAPER -- 3.8%
- --------------------------------------------------------------------------------
American Express Credit Corp.
4.940%, 07/15/99 7,787 $ 7,772,040
Ford Motor Credit Co.
4.920%, 07/07/99 5,000 4,995,900
------------
TOTAL COMMERCIAL PAPER
(COST $12,767,940) 12,767,940
------------
- --------------------------------------------------------------------------------
AGENCY OBLIGATIONS -- 2.0%
- --------------------------------------------------------------------------------
Federal National Mortgage Association
Discount Note (Cost $6,791,727)
4.830%, 07/21/99 6,810 6,791,727
------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.5%
- --------------------------------------------------------------------------------
Temporary Cash Investment Fund, Inc. 2,567,361 2,567,361
Temporary Investment Fund, Inc. 2,567,361 2,567,361
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $5,134,722) 5,134,722
------------
TOTAL INVESTMENTS --100.0%
(COST $246,220,545) (a) $337,962,286
============
- ---------------------------------------
* Non-income producing security
(a) At June 30, 1999, the cost for Federal income tax purposes was $246,251,597.
Net unrealized appreciation was $91,710,689. This consisted of aggregate
gross unrealized appreciation for all securities in which there was an
excess of market value over tax cost of $99,162,191 and aggregate gross
unrealized depreciation for all securities in which there was an excess of
tax cost over market value of $7,451,502.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
12
<PAGE>
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999 (UNAUDITED)
THE FLEXIBLY MANAGED FUND
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
COMMON STOCK--53.8%
- ----------------------------------------------------------------------------
BANKING--0.2%
Bank Fuer International Zahlungs 165 $ 892,084
-----------
BUILDING & BUILDING SUPPLIES--3.8%
Johns Manville Corp. 139,000 1,807,000
MacMillan Bloedel Ltd. 962,000 17,406,187
-----------
19,213,187
-----------
BUILDING & REAL ESTATE--0.6%
Rouse Company 122,000 3,095,750
-----------
CHEMICALS--3.7%
Cabot Corp. 59,000 1,427,062
Great Lakes Chemical Corp. 168,000 7,738,500
Imperial Chemical Industries PLC-ADR 120,000 4,770,000
Octel Corp. * 409,000 5,112,500
-----------
19,048,062
-----------
CONSUMER NON-DURABLE--0.9%
Reebok International, Ltd. * 232,000 4,321,000
-----------
ELECTRIC UTILITIES--6.8%
FirstEnergy Corp. 281,000 8,711,000
Kansas City Power & Light Co. 222,000 5,661,000
Nevada Power Co. 42,000 1,050,000
Niagara Mohawk Holdings, Inc. * 1,016,000 16,319,500
UniSource Energy Corp. * 254,000 3,032,125
-----------
34,773,625
-----------
EXPLORATION & PRODUCTION--1.5%
Mitchell Energy & Development Corp. 428,200 7,872,113
-----------
FOOD PROCESSING--0.5%
McCormick & Co., Inc. 76,500 2,414,531
-----------
HOLDINGS COMPANY DIVERSIFIED--4.2%
Loews Corp. 267,500 21,165,937
Lonrho Africa PLC 305,000 230,769
-----------
21,396,706
-----------
HOTELS AND GAMING--1.3%
Mandalay Resort Group * 301,000 6,358,625
-----------
INSURANCE--3.1%
Aetna, Inc. 21,000 1,878,187
Berkley (W.R.) Corp. 35,000 876,094
Leucadia National Corp. 206,000 5,227,250
Unitrin, Inc. 77,000 3,140,156
White Mountains Insurance Group 32,300 4,554,300
-----------
15,675,987
-----------
MEDIA AND COMMUNICATIONS--2.5%
Chris-Craft Industries, Inc. * 218,000 10,273,250
Meredith Corp. 75,000 2,596,875
-----------
12,870,125
-----------
MEDICAL--1.0%
Smith and Nephew PLC 1,690,000 5,134,734
-----------
MINING - GOLD--2.6%
Homestake Mining Co. 422,000 3,455,125
Newmont Mining Corp. 500,000 9,937,500
-----------
13,392,625
-----------
<PAGE>
NUMBER
OF SHARES VALUE
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
OIL & GAS--9.3%
Amerada Hess Corp. 406,000 $ 24,157,000
Kerr-McGee Corp. 88,500 4,441,594
Murphy Oil Corp. 183,500 8,957,094
Texaco, Inc. 155,500 9,718,750
------------
47,274,438
------------
PAPER & FOREST PRODUCTS--1.1%
Domtar, Inc. 612,000 5,814,000
------------
PHARMACEUTICALS--0.2%
Schering-Plough Corp. 17,000 901,000
------------
PHOTOGRAPHY EQUIPMENT & SUPPLIES--0.7%
Polaroid Corp. 133,000 3,674,125
------------
PUBLISHING - NEWSPAPERS--4.5%
New York Times Co. 259,000 9,534,437
Washington Post Company 25,200 13,551,300
------------
23,085,737
------------
PUBLISHING - PERIODICALS--0.2%
Readers Digest Assn., Inc. 31,000 1,162,500
------------
RAILROADS--0.8%
Canadian Pacific, Ltd. 171,000 4,071,938
------------
RETAIL--2.2%
J.C. Penney Company, Inc. 67,500 3,277,969
Petrie Stores Corp. * 1,373,000 3,604,125
Toys R Us, Inc. * 201,000 4,158,187
------------
11,040,281
------------
TOBACCO--1.5%
Philip Morris Co., Inc. 187,000 7,515,063
------------
TRANSPORTATION-SEA FREIGHT--0.6%
Overseas Shipholding Group Inc. 243,000 3,128,625
------------
TOTAL COMMON STOCK
(COST $226,204,159) 274,126,861
------------
- --------------------------------------------------------------------------
PREFERRED STOCK--5.9%
- --------------------------------------------------------------------------
Cleveland Electric Illum. 19,000 1,904,750
Cyprus AMAX Minerals 29,500 1,342,250
Entergy Gulf States Utilities Inc. 12,965 656,353
Kemper Corp. Series E 5.75% 144A 79,000 4,177,125
Niagara Mohawk Power Corp. 6.50% 16,000 408,500
Niagara Mohawk Power Corp. 7.50% 6,800 172,975
Niagara Mohawk Power Corp. 7.20% 5,500 137,844
Reckson Associates Realty Corp. 7.625% 20,500 467,656
Rouse Co. $3 286,000 11,475,750
Union Pacific Capital Trust 6.25% 176,000 9,350,000
------------
TOTAL PREFERRED STOCK
(COST $29,858,577) 30,093,203
------------
NUMBER OF
CONTRACTS VALUE
- ----------------------------------------------------------------------------
OPTIONS--0.1%
- ----------------------------------------------------------------------------
Motorola, Inc. $90, 10/16/99 * 130 84,500
Motorola, Inc. $95, 01/22/00 * 130 131,625
Schering-Plough Corp. $60, 8/21/99 * 170 140,250
Weyerhaeuser $65, Call 01/22/00 * (135) (126,563)
Weyerhaeuser $75, 01/22/00 * 130 131,625
------------
TOTAL OPTIONS (COST $595,213) 361,437
------------
13
<PAGE>
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999 (UNAUDITED)
THE FLEXIBLY MANAGED FUND
PAR
(000) VALUE
- ----------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS--4.6%
- ----------------------------------------------------------------------------
U.S. Treasury Note
5.875%, 02/15/00 12,900 $ 12,959,340
6.125%, 07/31/00 1,250 1,260,400
6.250%, 04/30/01 2,500 2,532,175
6.250%, 10/31/01 2,500 2,535,925
5.875%, 09/30/02 4,275 4,302,104
------------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $23,636,398) 23,589,944
------------
- ---------------------------------------------------------------------------
AGENCY OBLIGATIONS--7.5%
- ---------------------------------------------------------------------------
California State
5.250%, 10/01/11 2,925 3,000,611
FNMA
6.375%, 01/16/02 3,200 3,229,088
Tennessee Valley Authority
5.880%, 04/01/36 17,900 17,402,380
5.980%, 04/01/36 4,600 4,497,006
6.235%, 07/15/45 9,950 9,944,826
------------
TOTAL AGENCY OBLIGATIONS
(COST $39,505,303) 38,073,911
------------
- ---------------------------------------------------------------------------
MEDIUM TERM NOTES--0.3%
- ---------------------------------------------------------------------------
FNMA
5.370%, 02/07/01
(COST $1,576,000) 1,600 1,590,368
------------
PAR
(000) VALUE
- ---------------------------------------------------------------------------
CORPORATE BONDS--0.7%
- ---------------------------------------------------------------------------
BellSouth Telecommunications Debentures
5.850%, 11/15/45
(COST $3,776,250) 3,800 3,807,182
------------
- ---------------------------------------------------------------------------
CONVERTIBLE BONDS--15.4%
- ---------------------------------------------------------------------------
Arbor Software
4.500%, 03/15/05 1,605 1,177,669
Chiron Corp.
1.900%, 11/17/00 6,940 6,925,218
Ciba Spec Chemicals
1.250%, 07/24/03 1,470 1,199,888
Exide Corp. 144A @
2.900%, 12/15/05 1,363 823,770
Healthsouth Corp.
3.250%, 04/01/03 5,900 4,981,842
Hilton Hotels Corp.
5.000%, 05/15/06 5,900 5,398,500
Homestake Mining Co.
5.500%, 06/23/00 7,325 7,114,406
5.500%, 06/23/00 2,385 2,316,431
Inco Ltd.
5.750%, 07/01/04 10,800 9,895,500
7.750%, 03/15/16 835 755,675
Kerr-McGee Corp.
7.500%, 05/15/14 540 536,625
Loews Corp.
3.125%, 09/15/07 8,050 6,474,454
<PAGE>
PAR
(000) VALUE
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Lonmin Finance PLC
6.000%, 02/27/04 4,300 $ 6,617,418
McKesson Corp.
4.500%, 03/01/04 1,500 1,327,500
National Semiconductor Corp.
6.500%, 10/01/02 5,800 5,525,080
Nedlloyd Group
4.250%, 03/15/01 1,040 543,095
Nine West Group, Inc.
5.500%, 07/15/03 3,340 3,356,700
Ogden Corp.
5.750%, 10/20/02 250 232,813
Pep Boys, Inc.
4.000%, 09/01/99 2,650 2,652,226
Phycor, Inc.
4.500%, 02/15/03 3,500 2,660,000
Potomac Electric Power Co.
5.000%, 09/01/02 2,700 2,646,000
Sepracor, Inc.
7.000%, 12/15/05 1,350 1,349,338
Teck Corp.
3.750%, 07/15/06 5,750 4,161,562
TOTAL CONVERTIBLE BONDS
------------
(COST $77,360,436) 78,671,710
------------
- ---------------------------------------------------------------------------
ZERO COUPON BONDS **--6.4%
- ---------------------------------------------------------------------------
Lennar Corp.
4.338%, 07/29/18 3,350 1,502,777
Motorola, Inc.
2.245%, 09/27/13 2,600 2,769,000
Pep Boys, Inc.
4.928%, 09/20/11 5,650 3,093,375
Roche Holdings, Inc. 144A
5.489%, 05/06/12 9,400 4,523,750
Times Mirror Co.
4.460%, 04/15/02 24,100 11,403,638
U.S. Cellular, Corp.
6.055%, 06/15/15 11,750 6,162,640
Wellpoint Health Wlp
2.000%, 07/02/19 4,275 3,013,875
------------
TOTAL ZERO COUPON BONDS **
(COST $29,574,612) 32,469,055
------------
- -----------------------------------------------------------------------------
COMMERCIAL PAPER--5.0%
- -----------------------------------------------------------------------------
Ameritech Corp.
4.840%, 07/06/99 5,000 4,996,639
New York State Power Authority
5.750%, 07/01/99 10,630 10,630,000
New York Times Co.
4.870%, 07/19/99 5,000 4,987,825
Paccar Financial Corp.
5.020%, 07/15/99 5,000 4,990,239
------------
TOTAL COMMERCIAL PAPER
(COST $25,604,703) 25,604,703
------------
NUMBER
OF RIGHTS VALUE
- -----------------------------------------------------------------------------
RIGHTS--0.0%
- -----------------------------------------------------------------------------
Hills Stores * (COST $0) 93,000 -
------------
14
<PAGE>
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999 (UNAUDITED)
THE FLEXIBLY MANAGED FUND
NUMBER
OF SHARES VALUE
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--0.3%
- -----------------------------------------------------------------------------
Provident Institutional Fund
(COST $1,533,918) 1,533,918 $ 1,533,918
-------------
TOTAL INVESTMENTS--100.0%
(COST $459,225,569) (a) -------------
$ 509,922,292
=============
- ---------------------------------------------
* Non-income producing security
** Effective Yield
ADR - American Depository Receipt
(a) At June 30, 1999, the cost for Federal income tax purposes was $459,415,171.
Net unrealized appreciation was $50,507,121. This consisted of aggregated gross
unrealized appreciation for all securities in which there was an excess of
market value over tax cost of $68,969,688 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost over
market value of $18,462,567.
The Standard & Poor's Corporation, Moody's Investors Service,
Fitch Investors Service and Duff & Phelps Credit Rating Co. ratings are
the most recent ratings available at June 30, 1999. Ratings are unaudited.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
15
<PAGE>
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999 (UNAUDITED)
THE INTERNATIONAL EQUITY FUND
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK--94.6%
- --------------------------------------------------------------------------------
BELGIUM--0.6%
Barco N.V. 6,000 $ 965,886
-----------
DENMARK--0.6%
Bang & Olufsen Holding-B 14,000 889,685
-----------
FINLAND--2.2%
Nokia Corp. ADR 23,400 2,142,563
Pohjola Group Insurance Co.-B* 4,000 205,222
Sampo Insurance Co. PLC-A* 37,000 1,072,209
-----------
3,419,994
-----------
FRANCE--12.3%
Altran Technologies SA 6,500 1,716,030
AXA 20,500 2,500,980
Compagnie Generale D'Industrie
Et de Participations 32,000 1,547,727
Dassault Systemes SA 39,000 1,289,033
L'OREAL 2,400 1,622,391
LVMH (Louis Vuitton Moet Hennessy) 7,200 2,107,994
Scor SA 44,000 2,182,576
Societe Generale Paris-A 10,500 1,850,559
Total Fina SA-B 18,285 2,358,978
Vivendi SA 24,545 1,988,295
-----------
19,164,563
-----------
GERMANY--3.8%
Allianz AG 4,508 1,259,867
Bayerische Motoren
Werke (BMW) AG 1,600 1,112,120
Mannesmann AG 20,000 2,990,677
Muenchener Rueckversicherungs
Gesellschaft AG * 3,204 598,057
-----------
5,960,721
-----------
GREECE--0.5%
Alpha Credit Bank 11,250 725,207
-----------
HONG KONG--3.2%
Dah Sing Financial Group 172,100 655,472
Jardine Strategic Holdings Ltd. 575,000 1,495,000
Smartone Telecommunications
Holdings Ltd. 315,000 1,120,562
Sun Hung Kai Properties Ltd. 195,000 1,778,186
-----------
5,049,220
-----------
IRELAND--2.8%
Allied Irish Banks PLC 130,290 1,712,829
CRH PLC 49,021 866,599
Elan Corp. PLC ADR * 50,000 1,387,500
Greencore Group PLC 112,027 368,184
-----------
4,335,112
-----------
ITALY--0.7%
Telecom Italia SpA 100,000 1,039,518
-----------
JAPAN--20.2%
Bridgestone Corp. 72,000 2,177,201
Fuji Photo Film Co. 44,000 1,664,957
<PAGE>
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Honda Motor Co., Ltd. 38,000 $ 1,610,592
Hoya Corp. 30,000 1,692,883
Mikuni Coca-Cola Bottling Co., Ltd. 28,000 569,086
Murata Manufacturing Co., Ltd. 28,000 1,841,433
Nintendo Co., Ltd. 17,000 2,389,121
NTT Data Corp. 230,000 1,828,049
NTT Mobile Communications
Network, Inc. 280,000 3,793,908
Rohm Co. Ltd. 26,000 4,070,684
Sony Corp. 22,000 2,372,018
Takeda Chemical Industries 75,000 3,476,234
Tokyo Broadcasting System, Inc. 50,000 722,924
Tokyo Electronics, Ltd. 36,000 2,441,915
Yasuda Fire & Marine
Insurance Co. Ltd. 145,000 767,911
-----------
31,418,916
-----------
MALAYSIA--0.3%
Malayan Banking Berhad 160,000 432,240
-----------
NETHERLANDS--9.1%
Aegon N.V. 32,840 2,382,532
Aegon N.V. ADR 21,000 1,554,000
ASM Lithography Holding N.V. * 39,500 2,285,238
Getronics N.V. 28,000 1,077,056
Heineken N.V. 32,000 1,638,479
Hunter Douglas N.V. 28,463 977,469
Kempen & Co. N.V. 23,000 1,150,380
Philips Electronics N.V. 19,780 1,951,115
Vendex N.V. (Non-Foods) 46,933 1,253,573
-----------
14,269,842
-----------
SINGAPORE--1.4%
Singapore Press Holdings Ltd. 125,000 2,129,259
-----------
SPAIN--0.8%
Banco Popular Espanol SA 18,000 1,294,757
-----------
SWEDEN--4.9%
ABB AB - B Shares 145,000 1,918,725
Assa Abloy AB-B New 25,080 271,398
Assa Abloy AB-B 250,800 2,713,986
Hennes & Mauritz AB - B 88,000 2,173,673
Investment AB Bure 20,000 105,861
Om Gruppen AB 47,100 531,844
-----------
7,715,487
-----------
SWITZERLAND--9.3%
Credit Suisse Group 20,000 3,460,720
Nestle SA 1,250 2,252,202
Pharma Vision 2000 AG * 1,000 630,391
Roche Holding AG 70 1,152,715
Roche Holding AG - Genusschein 370 3,803,318
Schweizerische Rueckversicherungs
Gesellschaft 900 1,713,635
Swisscom AG * 4,000 1,505,220
-----------
14,518,201
-----------
16
<PAGE>
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999 (UNAUDITED)
THE INTERNATIONAL EQUITY FUND
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
United Kingdom--21.9%
AstraZeneca Group PLC 35,315 $ 1,374,926
BP Amoco PLC ADR 13,467 1,461,170
Capita Group PLC 107,000 1,107,275
CGU PLC 85,941 1,241,566
Compass Group PLC 272,000 2,696,847
Diageo PLC 76,000 793,663
Dixons Group PLC 128,000 2,390,921
Hays PLC 150,000 1,580,627
HSBC Holdings PLC 71,000 2,514,770
Lloyds TSB Group PLC 125,000 1,694,515
Misys PLC 190,640 1,631,739
Next PLC 93,000 1,130,249
Provident Financial PLC 81,334 1,125,650
Rentokil Initial PLC 570,000 2,223,755
Schroders PLC 65,000 1,327,869
Securicor PLC 190,000 1,666,693
Invensys PLC 296,360 1,402,618
Smithkline Beecham PLC 100,000 1,299,653
Tomkins PLC 305,000 1,322,115
Viridian Group PLC 19,000 194,223
Vodafone Group PLC 110,000 2,167,402
WPP Group PLC 220,000 1,860,498
-----------
34,208,744
-----------
TOTAL COMMON STOCK
(COST $112,247,738) 147,537,352
-----------
<PAGE>
- --------------------------------------------------------------------------------
PREFERRED STOCK--1.9%
- --------------------------------------------------------------------------------
SAP AG (Cost $1,874,933) 7,350 2,922,021
-----------
PAR
(000) VALUE
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS--0.5%
- --------------------------------------------------------------------------------
Salomon Smith Barney
0.00%, 05/09/00
(Cost $770,000) 770 770,000
-----------
NUMBER
OF WARRANTS VALUE
- --------------------------------------------------------------------------------
WARRANTS--0.2%
- --------------------------------------------------------------------------------
Kantonalbank Credit Suisse 12/17/99 * 500,000 331,277
Muenchener Rueckversicherungs * 104 3,325
-----------
TOTAL WARRANTS (COST $297,170) 334,602
-----------
NUMBER
OF RIGHTS VALUE
- --------------------------------------------------------------------------------
RIGHTS--0.1%
- --------------------------------------------------------------------------------
LVMH (Louis Vuitton Moet
Hennessy) * (Cost $0) 7,200 210,502
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--2.7%
- --------------------------------------------------------------------------------
Temporary Cash Investment Fund, Inc. 2,082,419 $ 2,082,419
Temporary Investment Fund, Inc. 2,082,360 2,082,360
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $4,164,779) 4,164,779
-----------
TOTAL INVESTMENTS--100.0%
(COST $119,354,620) (A) $155,939,256
============
ADR - American Depository Receipt
* - Non-Income Producing
(a) At June 30, 1999, the cost for Federal income tax purposes was $119,354,620.
Net unrealized appreciation was $36,584,636. This consisted of aggregate gross
unrealized appreciation for all securities in which there was an excess of
market value over tax cost of $40,820,639 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost over
market value of $4,236,003.
% OF MARKET VALUE
VALUE (000'S)
- --------------------------------------------------------------------------------
COMMON AND PREFERRED STOCK
SECTOR DIVERSIFICATION
- --------------------------------------------------------------------------------
Financial Services 12.3% $ 18,477
Insurance 10.3% 15,479
Telecommunications 9.0% 13,597
Electronics 9.0% 13,567
Pharmaceuticals 8.3% 12,494
Diversified Operations 4.8% 7,174
Retail Diversified 4.6% 6,948
Diversified Commercial Services 3.6% 5,471
Beverages 3.4% 5,109
Computer Services 3.3% 4,994
Metal Processors & Fabricators 3.0% 4,533
Computer Software 2.8% 4,211
Oil 2.5% 3,820
Engineering Services 2.4% 3,635
Machinery - General Industry 2.0% 2,991
Automobile Manufacturing 1.8% 2,723
Catering Services 1.8% 2,697
Diversified Food Products 1.8% 2,620
Toys 1.6% 2,389
Tire & Rubber 1.5% 2,177
Publishing 1.4% 2,129
Advertising 1.2% 1,861
Real Estate Development 1.2% 1,778
Optical Equipment 1.1% 1,693
Photographic Equipment 1.1% 1,665
Cosmetics 1.1% 1,622
Human Resources 0.7% 1,107
Household & Industrial 0.7% 978
Building Materials 0.6% 867
Investment Companies 0.5% 736
Media Communications 0.5% 723
Electrical Services 0.1% 194
------ ---------
100.0% $ 150,459
====== =========
17
<PAGE>
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999 (UNAUDITED)
THE SMALL CAPITALIZATION FUND
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK--88.5%
- --------------------------------------------------------------------------------
AUTOMOTIVE PARTS - EQUIPMENT--0.4%
Keystone Automotive Industries, Inc. * 9,700 $ 167,931
----------
CHEMICALS--6.0%
Cambrex Corp. 47,900 1,257,375
M.A. Hanna Co. 13,600 223,550
McWhorter Technologies, Inc. * 17,000 245,437
Schulman (A.), Inc. 12,700 217,091
Spartech Corp. 13,100 414,287
Tetra Technologies, Inc. * 42,200 387,712
----------
2,745,452
----------
COMPUTER SERVICES & SOFTWARE--7.3%
BancTec, Inc.* 11,900 213,456
National Computer Systems, Inc. 13,400 451,831
Policy Management Systems Corp. * 38,400 1,152,000
Shared Medical Systems Corp. 19,800 1,291,950
Systems & Computer
Technology Corp. * 15,900 229,059
----------
3,338,296
----------
CONSTRUCTION--1.7%
Ha-Lo Industries, Inc.* 80,600 795,925
----------
DIVERSIFIED OPERATIONS--0.8%
GP Strategies Corp. * 20,600 180,250
Ruddick Corp. 9,400 188,000
----------
368,250
----------
ELECTRICAL EQUIPMENT--1.6%
Baldor Electric Co. 37,500 745,312
----------
ELECTRONIC COMPONENTS--9.4%
CTS Corp. 1,700 119,000
Exar Corp. * 64,100 1,606,506
General Semiconductor, Inc. * 169,000 1,542,125
Kemet Corp. * 24,100 552,041
Technitrol, Inc. 15,200 490,200
----------
4,309,872
----------
ELECTRONIC SYSTEMS--2.6%
Paxar Corp. * 129,650 1,166,850
----------
ELECTRONICS--4.9%
Harman International Industries, Inc. 30,600 1,346,400
L-3 Communications Holdings, Inc. * 18,200 879,287
----------
2,225,687
----------
FOOD PROCESSING--2.0%
Del Monte Foods Co. * 47,200 790,600
Performance Food Group Co. 4,500 123,047
----------
913,647
----------
GAS TRANSMISSION--0.3%
Eastern Enterprises 3,300 131,175
----------
GLASS PRODUCTS--2.4%
BMC Industries, Inc. 107,900 1,112,719
----------
HEALTHCARE--3.5%
Corvel Corp. * 40,200 859,275
First Health Group Corp. * 12,800 275,600
Trigon Healthcare, Inc. * 13,100 476,513
----------
1,611,388
----------
<PAGE>
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HOME FURNISHINGS/HOUSEWARES--1.4%
Pillowtex Corp. 38,200 $ 623,138
----------
HUMAN RESOURCES--0.7%
Staff Leasing, Inc. * 25,700 330,084
----------
INSURANCE--7.2%
Chartwell Re Corp. 34,400 640,700
CNA Surety Corp. 7,700 117,906
E. W. Blanch Holdings, Inc. 8,400 572,775
Horace Mann Educators Corp. 19,100 519,281
RenaissanceRe Holdings Ltd. 38,900 1,439,300
----------
3,289,962
----------
INSURANCE - LIFE--3.2%
American Medical
Security Group, Inc. * 75,800 653,775
Annuity and Life Re (Holdings), Ltd. 37,000 831,344
----------
1,485,119
----------
MACHINERY--2.5%
Albany International Corp. * 36,805 763,704
Graco, Inc. 2,400 70,500
Lindsay Manufacturing Co. 18,000 316,125
----------
1,150,329
----------
MACHINERY TOOLS--2.1%
Baldwin Technology Company, Inc.* 59,800 175,663
SPS Technologies, Inc.* 20,600 772,500
----------
948,163
----------
MANUFACTURING--3.9%
Carlisle Companies Inc. 13,600 654,500
Flowserve Corp. 60,400 1,143,825
----------
1,798,325
----------
MEDICAL SUPPLIES AND EQUIPMENT--2.1%
DENTSPLY International, Inc. 18,800 544,025
Vital Signs, Inc. 20,900 416,694
----------
960,719
----------
METALS--2.3%
Precision Castparts Corp. 24,800 1,054,000
----------
OFFICE EQUIPMENT & SERVICES--2.7%
Wallace Computer Services, Inc. 50,400 1,260,000
----------
OIL & GAS--3.6%
Cabot Oil & Gas Corp. 42,500 791,563
St. Mary Land & Exploration Co. 41,200 848,463
----------
1,640,026
----------
PUBLISHING--1.9%
Hollinger International, Inc. 74,300 882,313
----------
RETAIL--4.3%
MSC Industrial Direct Co. Inc. * 86,700 888,675
ShopKo Stores, Inc. * 30,000 1,087,500
----------
1,976,175
----------
SERVICES--4.5%
Nichols Research Corp.* 69,200 1,509,425
Tetra Tech, Inc. * 34,125 567,328
----------
2,076,753
----------
18
<PAGE>
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999 (UNAUDITED)
THE SMALL CAPITALIZATION FUND
- --------------------------------------------------------------------------------
PAR
(000) VALUE
- --------------------------------------------------------------------------------
TRANSPORTATION--1.4%
Interpool, Inc. 48,700 $ 633,100
-----------
TRANSPORTATION SERVICES--1.8%
Air Express International Corp. 33,500 845,875
-----------
TOTAL COMMON STOCK
(COST $38,143,808) 40,586,585
-----------
- --------------------------------------------------------------------------------
AGENCY OBLIGATIONS--10.2%
- --------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--10.2%
4.770%, 07/07/99 1,805 1,803,565
4.770%, 07/08/99 1,120 1,118,961
4.830%, 07/19/99 1,735 1,730,810
-----------
TOTAL AGENCY OBLIGATIONS
(COST $4,653,336) 4,653,336
-----------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--1.3%
- --------------------------------------------------------------------------------
Temporary Investment Fund
(Cost $598,805) 598,805 598,805
-----------
TOTAL INVESTMENTS--100.0%
(COST $43,395,949) (A) $ 45,838,726
============
- --------------------------------------------------------------------------------
* Non-Income Producing
(a) At June 30, 1999, the cost for Federal income tax purposes was $43,395,949.
Net unrealized appreciation was $2,442,777. This consisted of aggregate gross
unrealized appreciation for all securities in which there was an excess of
market value over tax cost of $5,133,693 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost over
market value of $2,690,916.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
19
<PAGE>
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999 (UNAUDITED)
THE EMERGING GROWTH FUND
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK--94.9%
- --------------------------------------------------------------------------------
ADVERTISING--2.0%
Lamar Advertising Co. * 9,700 $ 396,791
TMP Worldwide, Inc. * 8,700 554,081
Outdoor Systems, Inc.TMP * 18,800 686,200
----------
1,637,072
----------
AIR TRANSPORATION--0.4%
SkyWest, Inc. 13,000 322,969
----------
BROADCAST/MEDIA--3.0%
ACTV, Inc. * 11,000 152,281
Citadel Communications Corp. * 18,200 659,181
Cox Radio, Inc. * 2,900 157,325
Emmis Communications Corp.* 7,400 364,219
Hispanic Broadcasting Corp. * 1,700 128,934
Radio One, Inc. * 2,700 125,212
Univision Communications, Inc.* 11,800 778,800
----------
2,365,952
----------
BROKERAGE--2.1%
Donaldson, Lufkin & Jenrette, Inc.
-- DLJdirect * 1,350 39,825
Knight/Trimark Group, Inc. * 21,200 1,292,537
Investment Technology Group, Inc. 9,977 323,005
----------
1,655,367
----------
COMMUNICATIONS SERVICES--1.1%
American Tower Corp. * 18,500 444,000
Metromedia Fiber Network, Inc.* 11,400 410,044
----------
854,044
----------
COMPUTER - INTERNET - CONTENT SERVICE--4.3%
24/7 Media, Inc. * 2,600 100,263
About.com, Inc. * 6,100 315,294
DoubleClick, Inc. * 7,500 686,484
drkoop.com, Inc. * 1,600 25,550
E - Loan, Inc. * 1,650 63,680
EDGAR Online, Inc. * 25,000 198,438
MarketWatch.com, Inc. * 6,700 388,181
Media Metrix, Inc. * 15,250 810,156
SportsLine USA, Inc. * 18,600 668,437
Towne Services, Inc. * 12,100 94,153
VerticalNet, Inc. * 700 73,609
----------
3,424,245
----------
COMPUTER - INTERNET - SERVICES &
SOFTWARE--11.1%
Allaire Corp. * 8,300 565,697
Ariba, Inc. * 450 43,959
BackWeb Technologies Ltd. * 150 4,087
CAIS Internet, Inc. * 10,700 196,947
Concentric Network Corp. * 26,700 1,060,491
Covad Communications Group, Inc. * 1,500 79,922
CyberSource Corp. * 2,000 29,375
EarthLink Network, Inc. * 8,800 540,925
F5 Networks, Inc. * 8,600 351,794
High Speed Access Corp. * 1,450 37,156
Inktomi Corp. * 4,100 539,278
Juno Online Services, Inc. * 10,200 233,325
Mpath Interactive, Inc. * 10,800 238,275
Netopia, Inc. * 9,700 230,678
Network Solutions, Inc. * 3,200 253,100
nFront, Inc. * 5,750 87,508
NorthPoint Communications Group, Inc. * 9,300 338,869
Phone.com, Inc. * 1,350 75,263
<PAGE>
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PSINet, Inc. * 29,600 $ 1,293,150
Ramp Networks, Inc. * 3,150 45,183
RealNetworks, Inc. * 5,600 385,875
Scient Corp. * 8,000 380,750
Software.com, Inc.* 1,350 31,345
USinternetworking, Inc. * 7,100 297,978
Verio, Inc. * 16,100 1,118,447
Viant Corp. * 850 29,591
Vignette Corp. 4,900 372,706
-----------
8,861,674
-----------
COMPUTER - NETWORK SERVICES &
SOFTWARE--2.1%
BindView Development Corp. * 9,900 234,816
International Network Services * 4,950 198,773
Network Appliance, Inc. * 15,500 866,547
Novell, Inc. * 14,800 392,200
-----------
1,692,336
-----------
COMPUTER SERVICES & SOFTWARE--15.3%
Advent Software, Inc. * 4,250 284,617
AnswerThink Consulting Group, Inc. * 20,600 518,862
BEA Systems, Inc. * 23,100 660,516
Business Objects S.A. ADR * 20,000 733,750
Check Point Software Technologies, Ltd. * 9,200 493,062
CyBear, Inc. * 17,600 245,300
DSET Corp. * 22,000 306,625
ECsoft Group plc ADR* 20,000 306,875
ESPS, Inc. * 25,600 189,600
Intuit, Inc. * 5,500 496,031
ISS Group, Inc. * 10,000 376,875
Macromedia, Inc. * 34,900 1,240,041
Mastech Corp. * 20,500 380,531
Mercury Interactive Corp. * 19,400 687,487
Micromuse, Inc. * 1,000 49,812
MindSpring Enterprises, Inc. * 28,500 1,262,906
Netegrity, Inc. * 10,000 164,688
Peregrine Systems, Inc. * 35,900 921,059
Pervasive Software, Inc. * 21,700 533,684
Rational Software Corp. * 20,300 669,266
Research in Motion Ltd. * 20,500 416,406
Sagent Technology, Inc. * 4,300 37,625
TSI International Software Ltd. * 23,100 654,019
VERITAS Software Corp. * 4,300 408,366
Verity, Inc. * 2,700 146,222
-----------
12,184,225
-----------
ELECTRONIC COMPONENTS--15.0%
Alpha Industries, Inc. * 27,800 1,323,975
Applied Micro Circuits Corp. * 6,700 556,519
Conexant Systems, Inc. * 11,900 690,572
Cree Research, Inc. * 17,100 1,316,166
Exodus Communications, Inc. * 12,800 1,535,600
Gemstar International Group, Ltd. * 36,800 2,403,500
Genesis Microchip, Inc. * 16,800 393,750
GlobeSpan, Inc. * 500 19,672
Macrovision Corp. * 7,900 592,006
Power Integrations, Inc. * 13,400 979,037
RF Micro Devices, Inc. * 11,600 866,012
Sawtek, Inc. * 9,800 449,575
TranSwitch Corp. * 18,700 885,328
-----------
12,011,712
-----------
20
<PAGE>
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999 (UNAUDITED)
THE EMERGING GROWTH FUND
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL SERVICES--2.8%
Doral Financial Corp. 20,000 $ 344,375
Financial Federal Corp. * 20,800 457,600
MBNA Corp. 14,300 437,938
MicroFinancial, Inc. 14,100 201,806
Nationwide Financial Services, Inc. 9,700 438,925
NextCard, Inc. * 5,300 179,703
Wit Capital Group, Inc. * 4,950 168,145
-----------
2,228,492
-----------
HOTELS & MOTELS--1.5%
Extended Stay America, Inc. * 38,700 464,400
Four Seasons Hotels, Inc. 17,100 753,469
-----------
1,217,869
-----------
HUMAN RESOURCES--1.2%
Careerbuilder, Inc. * 2,000 26,188
Labor Ready, Inc. * 17,200 559,000
On Assignment, Inc. * 14,400 375,300
-----------
960,488
-----------
INSURANCE--0.1%
MBIA, Inc. 1,500 97,125
-----------
MANUFACTURING--1.8%
JAKKS Pacific, Inc. * 5,800 172,369
Quicksilver, Inc. * 18,300 476,944
SurModics, Inc. * 47,400 770,250
-----------
1,419,563
-----------
MEDICAL SUPPLIES & EQUIPMENT--1.7%
Cytyc Corp. * 13,400 260,881
Incyte Pharmaceuticals, Inc. * 7,500 198,047
MedImmune, Inc. * 8,500 577,203
Xomed Surgical Products, Inc. * 6,700 324,531
-----------
1,360,662
-----------
MEDICAL SERVICES--2.8%
Eclipse Surgical Technologies, Inc. * 20,600 223,381
Laser Vision Centers, Inc. * 14,800 931,475
Summit Technology, Inc. * 20,400 449,438
VISIX, Inc. * 8,000 634,250
-----------
2,238,544
-----------
PUBLISHING--0.2%
Playboy Enterprises, Inc.* 6,250 166,016
-----------
166,016
-----------
REAL ESTATE--1.5%
CB Richard Ellis Services, Inc. * 11,000 273,625
Pinnacle Holdings, Inc. * 28,900 706,244
Trammell Crow Co. * 15,400 253,138
-----------
1,233,007
-----------
RESTAURANTS--1.8%
Consolidated Products, Inc. * 38,400 691,200
Garden Fresh Restaurant Corp. * 40,800 770,100
-----------
1,461,300
-----------
RETAIL--4.1%
Abercrombie & Fitch Co.* 19,800 950,400
bebe stores, inc. * 24,800 846,300
J. Jill Group, Inc. * 27,200 395,250
<PAGE>
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Pacific Sunwear of California, Inc. * 31,500 $ 768,797
The Wet Seal, Inc. * 9,500 270,156
ValueVision International, Inc. * 600 11,906
-----------
3,242,809
-----------
RETAIL - INTERNET--1.9%
Alloy Online, Inc. * 700 8,028
Amazon.com, Inc. * 3,000 375,281
Beyond.com Corp. * 18,200 520,406
GoTo.com, Inc. * 20,650 575,619
Stamps.com, Inc. * 750 13,172
-----------
1,492,506
-----------
SERVICE - CONSULTING--0.8%
Nextera Enterprises, Inc. * 19,600 126,788
Professional Detailing, Inc. * 13,200 310,612
USWeb Corp. * 8,500 188,859
-----------
626,259
-----------
SERVICE - COMMERCIAL--1.7%
Coinstar, Inc. * 24,200 696,506
Student Advantage Inc. * 35,700 334,688
@plan, Inc. * 22,750 338,406
-----------
1,369,600
-----------
SERVICE - EDUCATIONAL--1.0%
Education Management Corp. * 27,200 563,550
ITT Educational Services, Inc. * 9,000 234,563
-----------
798,113
-----------
TELECOMMUNICATIONS--12.7%
Allegiance Telecom, Inc. * 40,000 2,198,750
CapRock Communications Corp. * 16,100 651,547
Copper Mountain Networks, Inc. * 500 38,563
Destia Communications, Inc. * 14,650 180,836
Ditech Communications Corp. * 6,100 122,381
EchoStar Communications Corp. * 12,900 1,979,747
Electric Lightwave, Inc. * 48,900 634,172
ICG Communications, Inc. * 25,400 540,544
ITC /\ DeltaCom, Inc. * 10,200 285,281
McLeodUSA, Inc.* 16,600 911,963
PanAmSat Corp. * 17,000 660,875
Primus Telecommunications Group, Inc. * 35,800 802,144
Teligent, Inc.* 6,400 383,200
Time Warner Telecom, Inc.* 3,600 104,287
Viatel, Inc. * 11,300 632,800
-----------
10,127,090
-----------
TELECOMMUNICATIONS - WIRELESS--0.0%
P-Com, Inc. * 2,000 10,469
-----------
THERAPEUTICS--0.3%
Biomatrix, Inc. * 10,000 216,250
-----------
WASTE MANAGEMENT--0.6%
Superior Services, Inc. * 9,400 250,569
U S Liquids, Inc. * 12,500 260,938
-----------
511,507
-----------
TOTAL COMMON STOCK
(COST $52,854,399) 75,787,265
-----------
21
<PAGE>
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS -- JUNE 30, 1999 (UNAUDITED)
THE EMERGING GROWTH FUND
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--5.1%
- --------------------------------------------------------------------------------
Temporary Cash Investment Fund, Inc. 2,020,143 $ 2,020,143
Temporary Investment Fund, Inc. 2,020,142 2,020,142
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $4,040,285) 4,040,285
------------
TOTAL INVESTMENTS--100.0%
(COST $56,894,684) (A) $ 79,827,550
============
- -----------------------------
* Non-income producing security
ADR - American Depository Receipt
(a) At June 30, 1999, the cost for Federal income tax purposes was $57,220,310.
Net unrealized appreciation was $22,607,240. This consisted of aggregate gross
unrealized appreciation for all securities in which there was an excess of
market value over tax cost of $24,188,254 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost over
market value of $1,581,014.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
22
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
23
<PAGE>
PENN SERIES FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
MONEY QUALITY
MARKET FUND BOND FUND
----------------------- ------------------------
ASSETS:
<S> <C> <C>
Investments at value (1)................................................. $65,309,714 $62,528,631
Cash..................................................................... - -
Interest, dividends and reclaims receivable ............................. 495,770 721,326
Receivable for investment securities sold................................ - 8,130,923
Receivable for capital stock sold........................................ - 306,531
Net unrealized appreciation on forward foreign currency contracts........ - -
Other assets............................................................. 271 273
----------------------- ------------------------
Total Assets................................................... 65,805,755 71,687,684
----------------------- ------------------------
LIABILITIES:
Cash overdraft........................................................... - -
Payable for investment securities purchased.............................. 814,833 15,511,908
Payable for capital stock redeemed....................................... - -
Dividends payable........................................................ 227,526 -
Payable to the investment advisor........................................ 20,805 20,583
Payable to The Penn Mutual Life Insurance Co............................. 23,123 20,937
Other liabilities........................................................ 11,541 13,460
----------------------- ------------------------
Total Liabilities................................................. 1,097,828 15,566,888
----------------------- ------------------------
NET ASSETS............................................................... $64,707,927 $56,120,796
======================= ========================
Shares of $.10 par value capital stock issued
and outstanding....................................................... 64,710,673 5,445,321
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE................. $1.00 $10.31
NET ASSETS CONSIST OF:
Capital paid in....................................................... $64,710,673 $55,828,461
Undistributed net investment loss..................................... - 1,381,191
Accumulated net realized gain (loss) on investment transactions
and foreign exchange............................................... (2,746) 122,495
Net unrealized appreciation (depreciation) in value of investments,
futures contracts and foreign currency related items............... - (1,211,351)
----------------------- ------------------------
TOTAL NET ASSETS................................................ $64,707,927 $ 56,120,796
======================= ========================
(1) Investments at cost.................................................. $65,309,714 $63,739,982
</TABLE>
24
<PAGE>
PENN SERIES FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1999
(RESTUBBED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
HIGH YIELD GROWTH EQUITY
BOND FUND FUND
----------------------- --------------------------
ASSETS:
<S> <C> <C>
Investments at value (1)................................................. $71,541,255 $235,576,925
Cash..................................................................... 777 -
Interest, dividends and reclaims receivable ............................. 1,080,947 144,389
Receivable for investment securities sold................................ - -
Receivable for capital stock sold........................................ 412,492 535,820
Net unrealized appreciation on forward foreign currency contracts........ - -
Other assets............................................................. 395 980
----------------------- --------------------------
Total Assets................................................... 73,035,866 236,258,114
----------------------- --------------------------
LIABILITIES:
Cash overdraft........................................................... - 489,801
Payable for investment securities purchased.............................. 1,000,000 -
Payable for capital stock redeemed....................................... - 2,801
Dividends payable........................................................ - -
Payable to the investment advisor........................................ 29,378 86,262
Payable to The Penn Mutual Life Insurance Co............................. 27,089 83,757
Other liabilities........................................................ 17,600 28,917
----------------------- --------------------------
Total Liabilities................................................. 1,074,067 691,538
----------------------- --------------------------
NET ASSETS............................................................... $71,961,799 $235,566,576
======================= ==========================
Shares of $.10 par value capital stock issued
and outstanding....................................................... 7,615,135 6,960,017
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE................. $9.45 $33.85
NET ASSETS CONSIST OF:
Capital paid in....................................................... $71,743,566 $146,126,070
Undistributed net investment loss..................................... 3,147,060 (116,628)
Accumulated net realized gain (loss) on investment transactions
and foreign exchange............................................... (2,045,050) 39,097,124
Net unrealized appreciation (depreciation) in value of investments,
futures contracts and foreign currency related items............... (883,777) 50,460,010
----------------------- --------------------------
TOTAL NET ASSETS................................................ $71,961,799 $235,566,576
======================= ==========================
(1) Investments at cost.................................................. $72,745,032 $185,116,915
</TABLE>
25
<PAGE>
PENN SERIES FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1999
(RESTUBBED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FLEXIBLY
VALUE EQUITY MANAGED
FUND FUND
-------------------------- --------------------------
ASSETS:
<S> <C> <C>
Investments at value (1)................................................. $337,962,286 $509,922,292
Cash..................................................................... 71,736 -
Interest, dividends and reclaims receivable ............................. 315,393 3,178,950
Receivable for investment securities sold................................ 2,516,928 2,191,366
Receivable for capital stock sold........................................ 15,824 72,060
Net unrealized appreciation on forward foreign currency contracts........ - -
Other assets............................................................. 1,989 3,366
-------------------------- --------------------------
Total Assets................................................... 340,884,156 515,368,034
-------------------------- --------------------------
LIABILITIES:
Cash overdraft........................................................... - -
Payable for investment securities purchased.............................. 597,158 3,098,037
Payable for capital stock redeemed....................................... 912,947 806,718
Dividends payable........................................................ - -
Payable to the investment advisor........................................ 138,688 209,157
Payable to The Penn Mutual Life Insurance Co............................. 126,232 191,287
Other liabilities........................................................ 40,849 78,312
-------------------------- --------------------------
Total Liabilities................................................. 1,815,874 4,383,511
-------------------------- --------------------------
NET ASSETS............................................................... $339,068,282 $510,984,523
========================== ==========================
Shares of $.10 par value capital stock issued
and outstanding....................................................... 14,082,823 25,638,941
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE................. $24.08 $19.93
NET ASSETS CONSIST OF:
Capital paid in....................................................... $228,347,957 $432,166,625
Undistributed net investment loss..................................... 1,626,152 9,266,332
Accumulated net realized gain (loss) on investment transactions
and foreign exchange............................................... 17,352,432 18,861,530
Net unrealized appreciation (depreciation) in value of investments,
futures contracts and foreign currency related items............... 91,741,741 50,690,036
-------------------------- --------------------------
TOTAL NET ASSETS................................................ $ 339,068,282 $ 510,984,523
========================== ==========================
(1) Investments at cost.................................................. $246,220,545 $459,225,569
</TABLE>
<PAGE>
PENN SERIES FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1999
(RESTUBBED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SMALL
INTERNATIONAL CAPITALIZATION
EQUITY FUND FUND
------------------------- ------------------------
ASSETS:
<S> <C> <C>
Investments at value (1)................................................. $155,939,256 $45,838,726
Cash..................................................................... - -
Interest, dividends and reclaims receivable ............................. 567,667 27,554
Receivable for investment securities sold................................ 772,078 270,710
Receivable for capital stock sold........................................ 1,936,167 74,116
Net unrealized appreciation on forward foreign currency contracts........ 1,912,276 -
Other assets............................................................. 635 248
------------------------- ------------------------
Total Assets................................................... 161,128,079 46,211,354
------------------------- ------------------------
LIABILITIES:
Cash overdraft........................................................... - 537,515
Payable for investment securities purchased.............................. 1,539,405 55,856
Payable for capital stock redeemed....................................... 176,319 265,652
Dividends payable........................................................ - -
Payable to the investment advisor........................................ 96,685 18,466
Payable to The Penn Mutual Life Insurance Co............................. 58,442 16,382
Other liabilities........................................................ 47,410 9,542
------------------------- ------------------------
Total Liabilities................................................. 1,918,261 903,413
------------------------- ------------------------
NET ASSETS............................................................... $159,209,818 $45,307,941
========================= ========================
Shares of $.10 par value capital stock issued
and outstanding....................................................... 8,306,582 3,406,732
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE................. $19.17 $13.30
NET ASSETS CONSIST OF:
Capital paid in....................................................... $115,204,432 $44,685,512
Undistributed net investment loss..................................... (1,197,697) 152,967
Accumulated net realized gain (loss) on investment transactions
and foreign exchange............................................... 6,721,554 (1,973,315)
Net unrealized appreciation (depreciation) in value of investments,
futures contracts and foreign currency related items............... 38,481,529 2,442,777
------------------------- ------------------------
TOTAL NET ASSETS................................................ $159,209,818 $45,307,941
========================= ========================
(1) Investments at cost.................................................. $119,354,620 $43,395,949
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
26
<PAGE>
PENN SERIES FUNDS, INC.
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY QUALITY
MARKET FUND BOND FUND
------------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................................................ $ - $ -
Interest............................................................. 1,500,855 1,594,560
Foreign tax withheld................................................. - -
---------- -----------
Total investment income....................................... 1,500,855 1,594,560
---------- -----------
EXPENSES:
Investment advisory fees ............................................ 117,832 123,057
Administration fees ................................................. 44,187 41,019
Accounting fees...................................................... 22,094 20,509
Custodian fees and expenses.......................................... 10,371 16,370
Other expenses....................................................... 13,974 12,414
---------- -----------
Total expenses................................................ 208,458 213,369
Less: Expense waivers........................................ - -
---------- -----------
Net expenses.................................................. 208,458 213,369
---------- -----------
NET INVESTMENT INCOME (LOSS)......................................... 1,292,397 1,381,191
---------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...............
Net realized gain (loss) on investment transactions ............. 3 159,855
Net realized foreign exchange gain (loss)........................ - -
Change in net unrealized appreciation/depreciation of
investments, futures contracts and foreign currency
related items................................................. - (2,051,403)
---------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS............... 3 (1,891,548)
---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...... $1,292,400 ($510,357)
========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
27
<PAGE>
<TABLE>
<CAPTION>
HIGH YIELD GROWTH
BOND FUND EQUITY FUND
------------ -------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................................................ $313,722 $503,976
Interest............................................................. 3,124,592 166,391
Foreign tax withheld................................................. - -
---------- -----------
Total investment income....................................... 3,438,314 670,367
---------- -----------
EXPENSES:
Investment advisory fees ............................................ 177,267 503,655
Administration fees ................................................. 53,180 159,620
Accounting fees...................................................... 26,590 65,604
Custodian fees and expenses.......................................... 16,385 19,882
Other expenses....................................................... 17,832 38,234
---------- -----------
Total expenses................................................ 291,254 786,995
Less: Expense waivers........................................ - -
---------- -----------
Net expenses.................................................. 291,254 786,995
---------- -----------
NET INVESTMENT INCOME (LOSS)......................................... 3,147,060 (116,628)
---------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...............
Net realized gain (loss) on investment transactions ............. (422,563) 39,149,286
Net realized foreign exchange gain (loss)........................ 4,609 -
Change in net unrealized appreciation/depreciation of
investments, futures contracts and foreign currency
related items................................................. (732,941) (19,342,913)
---------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS............... (1,150,895) 19,806,373
---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...... $1,996,165 $19,689,745
========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
FLEXIBLY
VALUE MANAGED
EQUITY FUND FUND
------------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................................................ $2,103,940 $5,767,350
Interest............................................................. 767,660 5,519,043
Foreign tax withheld................................................. (3,590) (65,684)
----------- -----------
Total investment income....................................... 2,868,010 11,220,709
----------- -----------
EXPENSES:
Investment advisory fees ............................................ 814,641 1,279,697
Administration fees ................................................. 244,392 383,909
Accounting fees...................................................... 91,029 118,932
Custodian fees and expenses.......................................... 23,128 51,277
Other expenses....................................................... 68,668 120,562
----------- -----------
Total expenses................................................ 1,241,858 1,954,377
Less: Expense waivers........................................ - -
----------- -----------
Net expenses.................................................. 1,241,858 1,954,377
----------- -----------
NET INVESTMENT INCOME (LOSS)......................................... 1,626,152 9,266,332
----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...............
Net realized gain (loss) on investment transactions ............. 17,383,484 19,208,671
Net realized foreign exchange gain (loss)........................ - (82,155)
Change in net unrealized appreciation/depreciation of
investments, futures contracts and foreign currency
related items................................................. 4,963,624 14,538,195
----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS............... 22,347,108 33,664,711
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...... $23,973,260 $42,931,043
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMALL
INTERNATIONAL CAPITALIZATION
EQUITY FUND FUND
--------------- ----------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................................................ $1,330,834 $182,733
Interest............................................................. 75,950 142,967
Foreign tax withheld................................................. (82,309) -
---------- ----------
Total investment income....................................... 1,324,475 325,700
---------- ----------
EXPENSES:
Investment advisory fees ............................................ 574,140 105,186
Administration fees ................................................. 114,828 31,556
Accounting fees...................................................... 58,328 15,778
Custodian fees and expenses.......................................... 56,667 9,215
Other expenses....................................................... 36,636 10,998
---------- ----------
Total expenses................................................ 840,599 172,733
Less: Expense waivers........................................ - -
---------- ----------
Net expenses.................................................. 840,599 172,733
---------- ----------
NET INVESTMENT INCOME (LOSS)......................................... 483,876 152,967
---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...............
Net realized gain (loss) on investment transactions ............. 6,599,369 (1,964,472)
Net realized foreign exchange gain (loss)........................ (182,156) -
Change in net unrealized appreciation/depreciation of
investments, futures contracts and foreign currency
related items................................................. (297,275) 3,558,048
---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS............... 6,119,938 1,593,576
---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...... $6,603,814 $1,746,543
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EMERGING
GROWTH
FUND
-----------
<S> <C>
INVESTMENT INCOME:
Dividends............................................................ $27,179
Interest............................................................. 137,065
Foreign tax withheld................................................. (143)
-----------
Total investment income....................................... 164,101
-----------
EXPENSES:
Investment advisory fees ............................................ 215,569
Administration fees ................................................. 42,309
Accounting fees...................................................... 21,155
Custodian fees and expenses.......................................... 9,222
Other expenses....................................................... 9,620
-----------
Total expenses................................................ 297,875
Less: Expense waivers......................................... -
-----------
Net expenses.................................................. 297,875
-----------
NET INVESTMENT INCOME (LOSS)......................................... (133,774)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...............
Net realized gain (loss) on investment transactions ............. 13,049,478
Net realized foreign exchange gain (loss)........................ -
Change in net unrealized appreciation/depreciation of
investments, futures contracts and foreign currency
related items................................................. 11,494,698
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS............... 24,544,176
-----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...... $24,410,402
===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
28
<PAGE>
PENN SERIES FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET FUND
----------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
06/30/99 DECEMBER 31,
(UNAUDITED) 1998
------------------------ -----------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income(loss) ......................................... $ 1,292,397 $ 2,216,043
Net realized gain (loss) on investment transactions ................. 3 (992)
Net realized foreign exchange gain (loss) ........................... -- --
Net change in unrealized appreciation (depreciation) of
investments, futures contracts and foreign currency
related items .................................................... -- --
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 1,292,400 2,215,051
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................................... (1,292,397) (2,216,043)
Net realized capital gains .......................................... -- --
In excess of net investment income .................................. -- --
------------ ------------
TOTAL DISTRIBUTIONS ........................................... (1,292,397) (2,216,043)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net increase in net assets from capital share transactions ....... 11,081,502 16,151,030
------------ ------------
TOTAL INCREASE IN NET ASSETS ........................................ 11,081,505 16,150,038
Net Assets, beginning of period ..................................... 53,626,422 37,476,384
------------ ------------
NET ASSETS, END OF PERIOD ........................................... $ 64,707,927 $ 53,626,422
============ ============
</TABLE>
29
<PAGE>
[RESTUBBED]
PENN SERIES FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
QUALITY BOND FUND
------------------------------
SIX MONTHS YEAR
ENDED ENDED
06/30/99 DECEMBER 31,
(UNAUDITED) 1998
------------ --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income(loss) ................................................ $ 1,381,191 $ 2,407,257
Net realized gain (loss) on investment transactions ........................ 159,855 1,533,022
Net realized foreign exchange gain (loss) .................................. -- --
Net change in unrealized appreciation (depreciation) of
investments, futures contracts and foreign currency
related items ........................................................... (2,051,403) 487,720
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...... (510,357) 4,427,999
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ...................................................... -- (2,407,257)
Net realized capital gains ................................................. -- (1,568,759)
In excess of net investment income ......................................... -- (1,623)
------------ ------------
TOTAL DISTRIBUTIONS .................................................. -- (3,977,639)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net increase in net assets from capital share transactions .............. 3,126,047 12,977,718
------------ ------------
TOTAL INCREASE IN NET ASSETS ............................................... 2,615,690 13,428,078
Net Assets, beginning of period ............................................ 53,505,106 40,077,028
------------ ------------
NET ASSETS, END OF PERIOD .................................................. $ 56,120,796 $ 53,505,106
============ ============
</TABLE>
<PAGE>
[RESTUBBED]
PENN SERIES FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE EQUITY FUND
-------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
06/30/99 DECEMBER 31,
(UNAUDITED) 1998
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income(loss) ......................................... $ 1,626,152 $ 4,186,893
Net realized gain (loss) on investment transactions ................. 17,383,484 27,331,911
Net realized foreign exchange gain (loss) ........................... -- --
Net change in unrealized appreciation (depreciation)
of investments, futures contracts and foreign currency
related items .................................................... 4,963,624 (3,543,595)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 23,973,260 27,975,209
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................................... -- (4,186,893)
Net realized capital gains .......................................... -- (27,362,963)
In excess of net investment income .................................. -- --
------------- -------------
TOTAL DISTRIBUTIONS ........................................... -- (31,549,856)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Net increase in net assets from capital share transactions ....... (20,383,508) 36,092,709
------------- -------------
TOTAL INCREASE IN NET ASSETS ........................................ 3,589,752 32,518,062
Net Assets, beginning of period ..................................... 335,478,530 302,960,468
------------- -------------
NET ASSETS, END OF PERIOD ........................................... $ 339,068,282 $ 335,478,530
============= =============
</TABLE>
<PAGE>
[RESTUBBED]
PENN SERIES FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FLEXIBLY MANAGED FUND
-------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
06/30/99 DECEMBER 31,
(UNAUDITED) 1998
---------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income(loss) ......................................... $ 9,266,332 $ 15,107,764
Net realized gain (loss) on investment transactions ................. 19,208,671 55,261,526
Net realized foreign exchange gain (loss) ........................... (82,155) (7,284)
Net change in unrealized appreciation (depreciation)
of investments, futures contracts and foreign currency
related items .................................................... 14,538,195 (39,212,128)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 42,931,043 31,149,878
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................................... -- (15,107,764)
Net realized capital gains .......................................... -- (55,129,786)
In excess of net investment income .................................. -- (363,128)
------------- -------------
TOTAL DISTRIBUTIONS ........................................... -- (70,600,678)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Net increase in net assets from capital share transactions ....... (77,432,092) 68,797,648
------------- -------------
TOTAL INCREASE IN NET ASSETS ........................................ (34,501,049) 29,346,848
Net Assets, beginning of period ..................................... 545,485,572 516,138,724
------------- -------------
NET ASSETS, END OF PERIOD ........................................... $ 510,984,523 $ 545,485,572
============= =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTERGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
HIGH YIELD BOND FUND
-----------------------------------------
SIX MONTHS YEAR
ENDED ENDED
06/30/99 DECEMBER 31,
(UNAUDITED) 1998
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income(loss)................................................... $ 3,147,060 $ 5,413,458
Net realized gain (loss) on investment transactions .......................... (422,563) (34,795)
Net realized foreign exchange gain (loss) .................................... 4,609 -
Net change in unrealized appreciation (depreciation) of investments, futures
contracts and foreign currency related items............................... (732,941) (2,434,085)
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS......... 1,996,165 2,944,578
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income......................................................... - (5,413,458)
Net realized capital gains ................................................... - -
In excess of net investment income............................................ - (6,598)
----------- -----------
TOTAL DISTRIBUTIONS..................................................... - (5,420,056)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Net increase in net assets from capital share transactions ................ 962,400 12,341,048
----------- -----------
TOTAL INCREASE IN NET ASSETS.................................................. 2,958,565 9,865,570
Net Assets, beginning of period............................................... 69,003,234 59,137,664
----------- -----------
NET ASSETS, END OF PERIOD..................................................... $71,961,799 $69,003,234
=========== ===========
</TABLE>
<PAGE>
[RESTUBBED]
<TABLE>
<CAPTION>
GROWTH EQUITY FUND
-----------------------------------------
SIX MONTHS YEAR
ENDED ENDED
06/30/99 DECEMBER 31,
(UNAUDITED) 1998
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income(loss)................................................... $ (116,628) $ 131,289
Net realized gain (loss) on investment transactions .......................... 39,149,286 20,481,154
Net realized foreign exchange gain (loss) .................................... - -
Net change in unrealized appreciation (depreciation) of investments, futures
contracts and foreign currency related items............................... (19,342,913) 36,064,087
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS......... 19,689,745 56,676,530
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income......................................................... - (131,289)
Net realized capital gains ................................................... - (20,497,332)
In excess of net investment income............................................ - -
------------ ------------
TOTAL DISTRIBUTIONS..................................................... - (20,628,621)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net increase in net assets from capital share transactions ................ 20,184,942 23,585,734
------------ ------------
TOTAL INCREASE IN NET ASSETS.................................................. 39,874,687 59,633,643
Net Assets, beginning of period............................................... 195,691,889 136,058,246
------------ ------------
NET ASSETS, END OF PERIOD..................................................... $235,566,576 $195,691,889
============ ============
</TABLE>
<PAGE>
[RESTUBBED]
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
06/30/99 DECEMBER 31,
(UNAUDITED) 1998
------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income(loss)................................................... $ 483,876 $ 647,444
Net realized gain (loss) on investment transactions .......................... 6,599,369 5,177,853
Net realized foreign exchange gain (loss) .................................... (182,156) 114,386
Net change in unrealized appreciation (depreciation) of investments, futures
contracts and foreign currency related items............................... (297,275) 18,456,661
------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS......... 6,603,814 24,396,344
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income......................................................... - (647,443)
Net realized capital gains ................................................... - (4,938,505)
In excess of net investment income............................................ - (769,507)
------------- ------------
TOTAL DISTRIBUTIONS..................................................... - (6,355,455)
------------- ------------
CAPITAL SHARE TRANSACTIONS:
Net increase in net assets from capital share transactions ................ (1,216,204) 6,143,763
------------- ------------
TOTAL INCREASE IN NET ASSETS.................................................. 5,387,610 24,184,652
Net Assets, beginning of period............................................... 153,822,208 129,637,556
------------- ------------
NET ASSETS, END OF PERIOD..................................................... $ 159,209,818 $153,822,208
============= ============
</TABLE>
<PAGE>
[RESTUBBED]
<TABLE>
<CAPTION>
SMALL CAPITALIZATION FUND
-----------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
06/30/99 DECEMBER 31,
(UNAUDITED) 1998
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income(loss)................................................... $ 152,967 $ 274,511
Net realized gain (loss) on investment transactions .......................... (1,964,472) 712,102
Net realized foreign exchange gain (loss) .................................... -
Net change in unrealized appreciation (depreciation) of investments, futures
contracts and foreign currency related items............................... 3,558,048 (5,286,799)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS......... 1,746,543 (4,300,186)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income......................................................... - (274,511)
Net realized capital gains ................................................... - (711,962)
In excess of net investment income............................................ - -
------------ ------------
TOTAL DISTRIBUTIONS..................................................... - (986,473)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net increase in net assets from capital share transactions ................ (73,442) 10,195,405
------------ ------------
TOTAL INCREASE IN NET ASSETS.................................................. 1,673,101 4,908,746
Net Assets, beginning of period............................................... 43,634,840 38,726,094
------------ ------------
NET ASSETS, END OF PERIOD..................................................... $ 45,307,941 $ 43,634,840
============ ============
</TABLE>
<PAGE>
[RESTUBBED]
<TABLE>
<CAPTION>
EMERGING GROWTH FUND
---------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
06/30/99 DECEMBER 31,
(UNAUDITED) 1998
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income(loss)................................................... $ (133,774) $ (174,741)
Net realized gain (loss) on investment transactions .......................... 13,049,478 (2,191,288)
Net realized foreign exchange gain (loss) .................................... - -
Net change in unrealized appreciation (depreciation) of investments, futures
contracts and foreign currency related items............................... 11,494,698 10,934,484
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS......... 24,410,402 8,568,455
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income......................................................... - -
Net realized capital gains ................................................... - (8,966)
In excess of net investment income............................................ - -
------------ ------------
TOTAL DISTRIBUTIONS..................................................... - (8,966)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net increase in net assets from capital share transactions ................ 16,626,189 12,162,475
------------ ------------
TOTAL INCREASE IN NET ASSETS.................................................. 41,036,591 20,721,964
Net Assets, beginning of period............................................... 38,663,682 17,941,718
------------ ------------
NET ASSETS, END OF PERIOD..................................................... $ 79,700,273 $ 38,663,682
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTERGRAL PART OF THESE FINANCIAL STATEMENTS.
30
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE MONEY MARKET FUND
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements. It should be read in conjunction with the financial statements and
notes thereto.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1999 -------------------------
(UNAUDITED) 1998 1997
---------------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period......................... $ 1.00 $ 1.00 $ 1.00
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................................ 0.0217 0.0489 0.0503
------- ------- -------
Total from investment operations.......................... 0.0217 0.0489 0.0503
------- ------- -------
LESS DIVIDENDS:
Dividends from net investment income......................... (0.0217) (0.0489) (0.0503)
------- ------- -------
Total dividends........................................... (0.0217) (0.0489) (0.0503)
------- ------- -------
Net asset value, end of period............................... $ 1.00 $ 1.00 $ 1.00
======= ======= =======
Total return.............................................. 2.19% 5.00% 5.15%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)..................... $64,708 $53,626 $37,476
======= ======= =======
Ratio of expenses to average net assets...................... 0.71%(a) 0.72% 0.70%
======= ======= =======
Ratio of net investment income
to average net assets..................................... 4.39%(a) 4.88% 5.04%
======= ======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period......................... $ 1.00 $ 1.00 $ 1.00
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................................ 0.0489 0.0538 0.0365
------- ------- -------
Total from investment operations.......................... 0.0489 0.0538 0.0365
------- ------- -------
LESS DIVIDENDS:
Dividends from net investment income......................... (0.0489) (0.0538) (0.0365)
------- ------- -------
Total dividends........................................... (0.0489) (0.0538) (0.0365)
------- ------- -------
Net asset value, end of period............................... $ 1.00 $ 1.00 $ 1.00
======= ======= =======
Total return.............................................. 5.00% 5.51% 3.71%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)..................... $34,501 $24,726 $16,531
======= ======= =======
Ratio of expenses to average net assets...................... 0.73%(b) 0.69%(b) 0.73%(b)
======= ======= =======
Ratio of net investment income
to average net assets..................................... 4.88%(b) 5.37%(b) 3.74%(b)
======= ======= =======
</TABLE>
- --------------------------------------------------------------------------------
(a) Annualized.
(b) Had fees not been waived by the investment adviser and administrator of the
Fund, the ratio of expenses to average net assets would have been 0.74%,
0.74%, and 0.79%, and the ratio of net investment income to average net
assets would have been 4.87%, 5.32%, and 3.68% for the years ended December
31, 1996, 1995, and 1994, respectively.
<PAGE>
- --------------------------------------------------------------------------------
THE QUALITY BOND FUND
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements. It should be read in conjunction with the financial statements and
notes thereto.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1999 -------------------------
(UNAUDITED) 1998 1997
---------------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period......................... $ 10.40 $ 10.20 $ 10.00
------- ------- -------
INCOME(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income........................................ 0.25 0.51 0.60
Net realized and unrealized gain (loss)
on investment transactions................................ (0.34) 0.53 0.20
------- ------- -------
Total from investment operations.......................... (0.09) 1.04 0.80
------- ------- -------
LESS DISTRIBUTIONS:
Dividend from net investment income.......................... 0.00 (0.51) (0.60)
Distribution from net realized gain.......................... 0.00 (0.33) 0.00
Distribution in excess of net realized gain.................. 0.00 0.00 0.00
------- ------- -------
Total distributions....................................... 0.00 (0.84) (0.60)
------- ------- -------
Net asset value, end of period............................... $10.31 $ 10.40 $ 10.20
======= ======= =======
Total return.............................................. (0.87)% 10.17% 8.03%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)..................... $56,121 $53,505 $40,077
======= ======= =======
Ratio of expenses to average net assets...................... 0.78%(a) 0.77% 0.75%
======= ======= =======
Ratio of net investment income
to average net assets..................................... 5.05%(a) 5.26% 5.87%
======= ======= =======
Portfolio turnover rate...................................... 472.2% 477.2% 317.3%
======= ======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period......................... $ 10.24 $ 9.04 $ 10.19
------- ------- -------
INCOME(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income........................................ 0.66 0.61 0.61
Net realized and unrealized gain (loss)
on investment transactions................................ (0.24) 1.21 (1.15)
------- ------- -------
Total from investment operations.......................... 0.42 1.82 (0.54)
------- ------- -------
LESS DISTRIBUTIONS:
Dividend from net investment income.......................... (0.66) (0.61) (0.61)
Distribution from net realized gain.......................... 0.00 0.00 0.00
Distribution in excess of net realized
gain...................................................... 0.00 (0.01) 0.00
------- ------- -------
Total distributions....................................... (0.66) (0.62) (0.61)
------- ------- -------
Net asset value, end of period............................... $ 10.00 $ 10.24 $ 9.04
======= ======= =======
Total return.............................................. 4.14% 20.14% (5.29)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)..................... $37,611 $38,048 $31,338
======= ======= =======
Ratio of expenses to average net assets...................... 0.77%(b) 0.73%(b) 0.78%(b)
======= ======= =======
Ratio of net investment income
to average net assets..................................... 6.03%(b) 6.20%(b) 6.14%(b)
======= ======= =======
Portfolio turnover rate...................................... 107.6% 449.2% 380.9%
======= ======= =======
</TABLE>
- ---------------------------------------------------------------
(a) Annualized.
(b) Had fees not been waived by the investment adviser and administrator of the
Fund, the ratio of expenses to average net assets would have been 0.78%,
0.78%, and 0.83%, and the ratio of net investment income to average net
assets would have been 6.02%, 6.15%, and 6.09% for the years ended December
31, 1996, 1995, and 1994, respectively.
31
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE HIGH YIELD BOND FUND
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements. It should be read in conjunction with the financial statements and
notes thereto.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1999 -------------------------------------
(UNAUDITED) 1998 1997
--------------------- ---------------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.19 $ 9.52 $ 8.91
--------------------- ---------------- ----------------
INCOME(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income......................................... 0.41 0.79 0.80
Net realized and unrealized gain (loss)
on investment transactions................................. (0.15) (0.33) 0.61
--------------------- ---------------- ----------------
Total from investment operations........................... 0.26 0.46 1.41
--------------------- ---------------- ----------------
LESS DISTRIBUTIONS:
Dividend from net investment income........................... 0.00 (0.79) (0.80)
Distribution in excess of net
investment income.......................................... 0.00 0.00 0.00
--------------------- ---------------- ----------------
Total distributions........................................ 0.00 (0.79) (0.80)
--------------------- ---------------- ----------------
Net asset value, end of period................................ $ 9.45 $ 9.19 $ 9.52
===================== ================ ================
Total return............................................... 2.83% 4.79% 15.78%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)..................... $ 71,962 $ 69,003 $ 59,138
===================== ================ ================
Ratio of expenses to average net assets....................... 0.82%(a) 0.82% 0.81%
===================== ================ ================
Ratio of net investment income
to average net assets...................................... 8.88%(a) 8.30% 8.96%
===================== ================ ================
Portfolio turnover rate....................................... 50.6% 82.7% 111.3%
===================== ================ ================
</TABLE>
<PAGE>
(RESTUBBED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1996 1995 1994
---------------- ---------------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 8.44 $ 7.94 $ 9.55
---------------- ---------------- ----------------
INCOME(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income......................................... 0.70 0.80 0.90
Net realized and unrealized gain (loss)
on investment transactions................................. 0.47 0.50 (1.60)
---------------- ---------------- ----------------
Total from investment operations........................... 1.17 1.30 (0.70)
---------------- ---------------- ----------------
LESS DISTRIBUTIONS:
Dividend from net investment income........................... (0.70) (0.80) (0.90)
Distribution in excess of net
investment income.......................................... 0.00 0.00 (0.01)
---------------- ---------------- ----------------
Total distributions........................................ (0.70) (0.80) (0.91)
---------------- ---------------- ----------------
Net asset value, end of period................................ $ 8.91 $ 8.44 $ 7.94
================ ================ ================
Total return............................................... 13.87% 16.41% 7.33%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)..................... $ 44,042 $ 36,442 $ 32,081
================ ================ ================
Ratio of expenses to average net assets....................... 0.84% 0.87% 0.86%
================ ================ ================
Ratio of net investment income
to average net assets...................................... 8.14% 9.20% 9.18%
================ ================ ================
Portfolio turnover rate....................................... 118.5% 84.3% 90.7%
================ ================ ================
- ---------------------------------------------------------------
(a) Annualized.
</TABLE>
- --------------------
<PAGE>
THE GROWTH EQUITY FUND
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements. It should be read in conjunction with the financial statements and
notes thereto.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1999 -------------------------------------
(UNAUDITED) 1998 1997
--------------------- ---------------- ---------------
<S> <C> <C> <C>
Net asset value, beginning of period.................... $ 30.88 $ 24.37 $ 21.46
--------------------- ---------------- ----------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.02) 0.02 0.10
Net realized and unrealized gain (loss)
on investment transactions............................. 2.99 10.12 5.64
--------------------- ---------------- ----------------
Total from investment operations....................... 2.97 10.14 5.74
--------------------- ---------------- ----------------
LESS DISTRIBUTIONS:
Dividend from net investment income........................ 0.00 (0.02) (0.10)
Distribution from net realized gains....................... 0.00 (3.61) (2.73)
--------------------- ---------------- ----------------
Total distributions..................................... 0.00 (3.63) (2.83)
--------------------- ---------------- ----------------
Net asset value, end of period.......................... $ 33.85 $ 30.88 $ 24.37
===================== ================ ================
Total return........................................... 9.62% 41.67% 26.74%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)................ $ 235,567 $ 195,692 $ 136,058
===================== ================ ================
Ratio of expenses to average net assets.................. 0.74%(a) 0.76% 0.77%
===================== ================ ================
Ratio of net investment income(loss)
to average net assets................................. (.11)%(a) 0.08% 0.39%
===================== ================ ================
Portfolio turnover rate................................... 123.0% 161.3% 169.1%
===================== ================ ================
</TABLE>
<PAGE>
(RESTUBBED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1996 1995 1994
---------------- ---------------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period..................... $ 20.00 $ 18.30 $ 20.49
---------------- ---------------- ----------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)............................... 0.11 0.09 0.13
Net realized and unrealized gain (loss)
on investment transactions.............................. 3.85 4.75 (1.80)
---------------- ---------------- ----------------
Total from investment operations........................ 3.96 4.84 (1.67)
---------------- ---------------- ----------------
LESS DISTRIBUTIONS:
Dividend from net investment income........................ (0.11) (0.09) (0.13)
Distribution from net realized gains....................... (2.39) (3.05) (0.39)
---------------- ---------------- ----------------
Total distributions..................................... (2.50) (3.14) (0.52)
---------------- ---------------- ----------------
Net asset value, end of period........................... $ 21.46 $ 20.00 $ 18.30
================ ================ ================
Total return............................................ 19.76% 26.45% (8.12)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)................. $ 106,039 $ 95,593 $ 80,078
================ ================ ================
Ratio of expenses to average net assets................... 0.80%(b) 0.77%(b) 0.79%(b)
================ ================ ================
Ratio of net investment income(loss)
to average net assets.................................. 0.48%(b) 0.43%(b) 0.70%(b)
================ ================ ================
Portfolio turnover rate.................................... 177.1% 169.8% 156.2%
================ ================ ================
</TABLE>
- ---------------------------------------------------------------
(a) Annualized.
(b) Had fees not been waived by the investment adviser and administrator of the
Fund, the ratio of expenses to average net assets would have been 0.81%,
0.82%, and 0.84%, and the ratio of net investment income to average net
assets would have been 0.47%, 0.38%, and 0.65% for the years ended December
31, 1996, 1995, and 1994, respectively.
32
<PAGE>
- -------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1999
- -------------------------------------------------------------------------------
1 -- SIGNIFICANT ACCOUNTING POLICIES
Penn Series Funds, Inc. (Penn Series) was incorporated in Maryland on April
22, 1982. Penn Series is registered under the Investment Company Act of 1940, as
amended, as an open-end, diversified management investment company.
Penn Series is presently offering shares in its Money Market, Quality Bond,
High Yield Bond, Growth Equity, Value Equity, Flexibly Managed, International
Equity, Small Capitalization and Emerging Growth Funds (the Funds). It is
authorized under its Articles of Incorporation to issue a separate class of
shares in one additional fund. The Fund would have its own investment objective
and policy.
The following is a summary of significant accounting policies followed by
Penn Series in the 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.
INVESTMENT VALUATION:
MONEY MARKET FUND -- Investments in securities are valued under the
amortized cost method, which approximates current market value. Under this
method, securities are valued at cost on the date of purchase and thereafter a
proportionate amortization of any discount or premium until maturity is assumed.
Penn Series maintains a dollar weighted average portfolio maturity appropriate
to the objective of maintaining a stable net asset value per share. The Penn
Series Board of Directors (The Board) has established procedures reasonably
designed to stabilize the net asset value per share for purposes of sales and
redemptions at $1.00. The Board performs regular review and monitoring of the
valuation in an attempt to avoid dilution or unfair results to shareholders.
QUALITY BOND, HIGH YIELD BOND, GROWTH EQUITY, VALUE EQUITY, FLEXIBLY
MANAGED, INTERNATIONAL EQUITY, SMALL CAPITALIZATION AND EMERGING GROWTH FUNDS --
Portfolio securities listed on a national securities exchange are valued at the
last sale price on the securities exchange or securities market on which such
securities primarily are traded or, if there has been no sale on that day, at
the mean between the current closing bid and asked prices. All other securities
for which over-the-counter market quotations are readily available will be
valued on the basis of the mean between the last current bid and asked prices.
When market quotations are not readily available, or when restricted or other
assets are being valued, the securities or assets will be valued at fair value
as determined by the Board.
The high yield securities in which the High Yield Bond Fund may invest are
predominantly speculative as to the issuer's continuing ability to meet
principal and interest payments. The value of the lower quality securities in
which the High Yield Bond Fund may invest will be affected by the credit
worthiness of individual issuers, general economic and specific industry
conditions, and will fluctuate inversely with changes in interest rates. In
addition, the secondary trading market for lower quality bonds may be less
active and less liquid than the trading market for higher quality bonds.
FOREIGN CURRENCY TRANSLATION -- The books and records of the Funds are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis: market value of investment securities, assets
and liabilities at the current rate of exchange, purchases and sales of
investment securities, income and expenses at the relevant rates of exchange
prevailing on the respective dates of such transactions.
The Funds do not isolate the portion of realized and unrealized gains and
losses on investments which is due to changes in the foreign exchange rate from
that which is due to changes in market prices of equity securities. Such
fluctuations are included with net realized and unrealized gain or loss from
investments.
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 level of
governmental supervision and regulation of foreign securities markets and the
possibility of political or economic instability.
SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date and interest income is accrued as earned. The cost of investment securities
sold is determined by using the specific identification method for both
financial reporting and income tax purposes.
<PAGE>
DIVIDENDS TO SHAREHOLDERS: Dividends of investment income and realized
capital gains of the Quality Bond, High Yield Bond, Growth Equity, Value Equity,
Flexibly Managed, International Equity, Small Capitalization and Emerging Growth
Funds will be declared and paid annually. Dividends of net investment income of
the Money Market Fund are declared daily and paid monthly. Income distributions
and capital gain distributions are determined in accordance with income tax
regulations, which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for mortgage -
backed securities, market discount and foreign currency transactions.
FEDERAL INCOME TAXES: The Funds intend to continue to qualify as regulated
investment companies under Subchapter M of the Internal Revenue code and to
distribute all of their taxable income, including realized gains, to their
shareholders. Therefore, no federal income tax provision is required.
Dividends from net investment income and distributions from net realized
gains are determined in accordance with federal income tax regulations which may
differ from net investment income and net realized capital gains recorded in
accordance with generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification. Distributions from net realized gains for
book purposes may involve short-term capital gains, which are included as
ordinary income for tax purposes.
33
<PAGE>
- -------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1999
- -------------------------------------------------------------------------------
2 -- DERIVATIVE FINANCIAL INSTRUMENTS
OFF-BALANCE SHEET RISK
The Funds may trade financial instruments with off-balance sheet risk in the
normal course of investing activities and to assist in managing exposure to
market risks such as interest rates and foreign currency exchange rates. These
financial instruments include written options, forward foreign currency exchange
contracts and futures contracts.
The notional or contractual amounts of these instruments represent the
investment the Funds have in particular classes of financial instruments and do
not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transaction are considered.
DERIVATIVE FINANCIAL INSTRUMENTS HELD OR ISSUED FOR PURPOSES OTHER THAN TRADING
FUTURES CONTRACTS -- Each of the Funds, other than Money Market, may enter
into financial futures contracts for the delayed delivery of securities,
currency or contracts based on financial indices on a future date. A Fund is
required to deposit either in cash or securities an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received by a
Fund each day, dependent on daily fluctuations in the value of the underlying
security, and are recorded for financial statement purposes as unrealized gains
or losses by a Fund. A Fund's investment in financial futures contracts is
designed only to hedge against anticipated future changes in interest or
exchange rates. Should interest or exchange rates move unexpectedly, a Fund may
not achieve the anticipated benefits of the financial futures contracts and may
realize a loss. The Quality Bond Fund has entered into futures contracts during
the six month period ended June 30, 1999. There were no open futures contracts
at June 30, 1999.
OPTIONS -- Each of the Funds, other than Money Market, may write covered
calls. Additionally, each of the Funds may buy put or call options for which
premiums are paid whether or not the option is exercised. Premiums received from
writing options, which expire, are treated as realized gains. Premiums received
from writing options, which are exercised or are closed are offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. If a put option is exercised the premium increases the cost basis of the
securities purchased by a Fund. As writer of an option, the Fund may have no
control over whether the underlying securities may be sold (call) and, as a
result, bears the market risk of an unfavorable change in the price of the
securities underlying the written option. The Flexibly Managed Fund has entered
into put options during the six month period ended June 30, 1999. Purchased put
options open and outstanding at June 30, 1999 are disclosed in the schedule of
investments.
FORWARD FOREIGN CURRENCY CONTRACTS -- The Funds may enter into forward
foreign currency exchange contracts as a way of managing foreign exchange rate
risk. A Fund may enter into these contracts to fix the U.S. dollar value of a
security that it has agreed to buy or sell for the period between the date the
trade was entered into and the date the security is delivered and paid for. A
Fund may also use these contracts to hedge the U.S. dollar value of securities
it already owns denominated in foreign currencies.
Forward foreign currency contracts are valued at the forward rate, and are
marked-to-market daily. The change in market value is recorded by the Fund as an
unrealized gain or loss. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
<PAGE>
The use of forward foreign currency contracts does not eliminate
fluctuations in the underlying prices of the Fund's portfolio securities, but it
does establish a rate of exchange that can be achieved in the future. Although
forward foreign currency contracts limit the risk of loss due to a decline in
the value of the hedged currency, they also limit any potential gain that might
result should the value of the currency increase. In addition, the Funds could
be exposed to risks if the counterparties to the contracts are unable to meet
the terms of their contracts. The High Yield Bond, Flexibly Managed and
International Equity Funds have entered into forward foreign currency contracts
for the six month period ended June 30, 1999. At June 30, 1999 there were no
open contracts in the High Yield Bond Fund and the Flexibly Managed Fund. Open
forward foreign currency contracts held by the International Equity Fund at June
30, 1999 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
FOREIGN
FORWARD FOREIGN EXPIRATION FOREIGN FORWARD CONTRACT CONTRACT EXCHANGE
CURRENCY CONTRACT DATE CURRENCY RATE AMOUNT VALUE GAIN/LOSS
----------------- ---- --------- ---- ------ ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Sell European Currency Unit 08/24/99 (19,000,000) 0.96538 $(21,162,199) $(19,681,369) $1,480,830
Sell Japanese Yen 08/24/99 (950,000,000) 119.99949 (8,041,988) (7,916,700) 125,288
Sell Swiss Franc 08/24/99 (9,500,000) 1.54293 (6,673,223) (6,157,117) 516,106
Buy Eurpoean Currency Unit 07/30/99 230,670 0.96713 239,043 238,509 (534)
Buy Eurpoean Currency Unit 07/01/99 430,681 0.96956 446,315 444,203 (2,112)
Buy Eurpoean Currency Unit 07/01/99 94,542 0.96956 97,974 97,510 (464)
Buy Japanese Yen 07/01/99 33,145,342 121.01036 274,314 273,905 (409)
Buy Japanese Yen 08/24/99 950,000,000 119.99950 8,123,129 7,916,700 (206,429)
---------
Net unrealized foreign exchange appreciation $1,912,276
==========
</TABLE>
34
<PAGE>
- -------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1999
- -------------------------------------------------------------------------------
3 -- INVESTMENT ADVISORY AND OTHER CORPORATE SERVICES
INVESTMENT ADVISORY SERVICES
Effective May 1, 1998 Independence Capital Management, Inc. ("ICMI") serves
as investment adviser to each of the funds. ICMI is a wholly-owned subsidiary of
The Penn Mutual Life Insurance Company.
T. Rowe Price Associates, Inc. ("Price Associates") is sub-adviser to the
Flexibly Managed and the High Yield Bond Funds pursuant to an investment
sub-advisory agreement entered into by ICMI and Price Associates on May 1, 1998.
As sub-adviser, Price Associates provides investment management services to the
Funds.
OpCap Advisors ("OpCap") is sub-adviser to Value Equity and Small
Capitalization Funds pursuant to an investment sub-advisory agreement entered
into by ICMI and OpCap on May 1, 1998. As sub-adviser, OpCap provides investment
management services to the Funds. OpCap is a subsidiary of Oppenheimer Capital.
Vontobel USA Inc. ("Vontobel") is sub-adviser to the International Equity
Fund pursuant to an investment sub-advisory agreement entered into by ICMI and
Vontobel on May 1, 1998. As sub-adviser, Vontobel provides investment management
services to the Fund. Vontobel is a wholly owned subsidiary of Vontobel Holding
Ltd., and affiliate of Bank J. Vontobel & Co. Ltd.
RS Investment Management, Inc. (formerly Robertson Stephens Investment
Management, Inc.) ("RSIM") is sub-adviser to the Emerging Growth Fund pursuant
to an investment sub-advisory agreement entered into by ICMI and RSIM on April
26, 1998. As sub-adviser, RSIM provides investment management services to the
Fund.
Each of the Funds pay ICMI, on a monthly basis, an advisory fee based on the
average daily net assets of each Fund, at the following rates pursuant to the
investment advisory agreements: Money Market Fund: 0.40% for first $100 million
and 0.35% thereafter; Quality Bond Fund: 0.45% for first $100 million and 0.40%
thereafter; Growth Equity Fund: 0.50% for the first $100 million and 0.45%
thereafter; Flexibly Managed Fund and High Yield Bond Fund: 0.50% for first $250
million and 0.40% for next $500 million; International Equity Fund: 0.75%; Value
Equity Fund: 0.50%; Small Capitalization Fund: 0.50% and Emerging Growth Fund:
.80% for the first $25 million, 0.75% for next $25 million and 0.70% thereafter.
For providing investment management services to the Funds, ICMI pays the
sub-advisers, on a monthly basis, a sub-advisory fee.
ADMINISTRATIVE AND CORPORATE SERVICES
Under an administrative and corporate service agreement, The Penn Mutual Life
Insurance Company ("Penn Mutual") serves as administrative and corporate
services agent for Penn Series. Each of the Funds pays Penn Mutual, on a
quarterly basis, an annual fee equal to 0.15% of each of the Fund's average
daily net assets.
EXPENSES AND LIMITATIONS THEREON
Each Fund bears all expenses of its operations other than those incurred by
the investment adviser and sub-advisers under their respective investment
advisory agreements and those incurred by Penn Mutual under its administrative
and corporate service agreement. The investment adviser, sub-advisers and Penn
Mutual have agreed to waive fees or reimburse expenses to the extent the Fund's
total expense ratio (excluding interest, taxes, brokerage, other capitalized
expenses, but including investment advisory and administrative and corporate
services fees) exceeds the applicable expense limitation for the Fund. The
expense limitations for the Funds are as follows: Money Market, 0.80%; Quality
Bond: 0.90%; High Yield Bond: 0.90%; Growth Equity: 1.00%; Value Equity: 1.00%;
Flexibly Managed: 1.00%; International Equity: 1.50%; Small Capitalization
1.00%; and Emerging Growth 1.15%.
Fees were paid to non-affiliated Directors of Penn Series for the six month
period ended June 30, 1999. However, no person received compensation from Penn
Series who is an officer, director, or employee of Penn Series, the investment
adviser, sub-advisers, administrator, accounting agent or any parent or
subsidiary thereof.
<PAGE>
4 -- CAPITAL STOCK
At June 30, 1999, there were one billion shares of $.10 par value capital
stock authorized for Penn Series. The shares are divided into ten classes of 100
million shares of capital stock. Nine of the classes designated are Penn Series
Money Market Fund Common Stock, Penn Series Quality Bond Fund Common Stock, Penn
Series High Yield Bond Fund Common Stock, Penn Series Growth Equity Fund Common
Stock, Penn Series Value Equity Fund Common Stock, Penn Series Flexibly Managed
Fund Common Stock, Penn Series International Equity Fund Common Stock, Penn
Series Small Capitalization Fund Common Stock and Penn Series Emerging Growth
Fund Common Stock. One of the classes of common stock is presently designated
Class I, and no shares have been issued.
35