<PAGE>
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PENN SERIES FUNDS, INC.
ANNUAL REPORT
DECEMBER 31, 1995
<PAGE>
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PENN SERIES FUNDS, INC.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
QUALITY BOND FUND
In 1995, the bond market exhibited one of its strongest years on record as
interest rates fell sharply across the yield curve. Over the year, 30 year
Treasury rates fell roughly 200 basis points while 2 year Treasury rates fell
250 basis points.
The market rally in 1995 was a function of primarily four factors. First, a
slowdown in the rate of economic growth. Growth is estimated to have averaged
only 2% in 1995 vs the 4% seen in 1994. Second, the market has reacted
favorably to the prospects of the much ballyhooed Balanced Budget agreement
worked over in Washington during the course of 1995. In fact, the significance
of the potential of fiscal prudence was in evidence early on as the low in bond
prices came on election day November 1994, as the Republicans were swept into
power in Congress. Third, inflation has remained subdued throughout 1995 and
the single strongest consensus of investment professionals is that inflation is
all but dead in the years ahead. Finally, a portion of the 1995 rally can be
attributed to some of the excesses of 1994, namely a correction of the oversold
conditions that existed then after a 200 basis point increase in rates.
Performance generated in 1995 was accomplished in a similar fashion to how we
have achieved excellent performance in our bond portfolios throughout the
years. Portfolio sector rotation, relative value has been the hallmark of the
performance generation. 1995 was a year that the interest rate decline
significantly exceeded our expectations yet we were still able to achieve
excellent relative performance. Our early year participation in the municipal
market generated strong capital gains that we captured. Our move into
corporates in June and then back out in September paved the way for enhanced
returns. Our belief that there are a number of ways to achieve relative
performance allows us to not take to aggressive duration bets.
We end 1995 reducing our duration. Our belief is that the strong rally in
1995 has led too many investors into the raging and risky consensus of zero
inflation expectations, the Federal budget balance utopia and economic growth
sputtering to a halt. Worldwide central bank easings, rising oil and grain
markets and presidential politics threaten the aforementioned consensus. The
bond market is as overbought today as oversold one year ago and vulnerable to
at least a correction. Our sector outlook for lower rates over the long time
period has not changed however, and we look for a significant back up to be a
buying opportunity.
INDEPENDENCE CAPITAL MANAGEMENT, INC.INVESTMENT ADVISER
Comparison of Change in Value of $10,000 Investment in Penn Series Quality Bond
Fund and Lehman Aggregate Bond Index
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Penn Series Lehman Index
<S> <C> <C>
11/1/92 10,000 10,000
12/31/92 10,198 10,161
12/31/93 11,388 11,152
12/31/94 10,778 10,826
12/31/95 12,949 12,826
</TABLE>
The performance information shown here does not reflect variable account charges
and fees nor does it reflect the period prior to November 1, 1992 when
Independence Capital Management, Inc. became the Fund's investment adviser. Past
performance is not predictive of future performance. Shares may be worth more or
less when redeemed than when purchased. Assumes reinvestment of all dividends.
2
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HIGH YIELD FUND
The Penn Series High Yield funds generated strong returns during the final six
months of 1995. At mid-year, we said that the high-yield bond market faced a
crossroads and that continued progress would depend on the course of the
economy. We're happy to say that the economic environment remained favorable
for high-yield bonds, as did the high-yield bond market's supply and demand
fundamentals. Your fund extended its advance during the second half of 1995 and
recorded double-digit returns for the year as a whole.
During the fourth quarter, the environment was even better for Treasury and
other high-quality bonds, which outpaced the high-yield sector. This is not
unusual during periods when interest rates fall sharply, since rates are not as
overwhelming an influence on high-yield bond prices as they are on high-quality
bond prices. Additionally, the lag in high-yield bond returns may have
reflected the uptick in the default rate, which fell through mid-1994 and then
edged higher -- a typical development as economic upswings age.
PERFORMANCE AND STRATEGY REVIEW
1995 marked a year of transition for the Penn Series High Yield Fund. We
generally implemented a more defensive tilt in the portfolio and reduced many
of the higher volatility securities that had proven disappointing in the past.
Nevertheless, a few of these positions continued to hinder performance last
year. Our emphasis on higher-quality, double B-rated bonds paid off handsomely
last year, since they outperformed medium-quality, single B-rated bonds by
about six percentage points (600 basis points) over the past 12 months. We also
increased our holdings in more stable industries, such as supermarkets and
media, in light of a possible slower economy in 1996. Overall, the fund
currently has relatively moderate exposure to cyclical sectors, with our
biggest bets in fertilizer producers and paper companies.
In spite of our more conservative posture, we remain on the lookout for
undervalued companies that can lead to meaningful
capital appreciation for the fund. Our purchases in the fourth quarter of Trump
Taj Mahal, Alpine Group, and JQ Hammons all led to attractive gains. We were
particularly relieved to see the casino sector post a solid recovery in late
1995, and continued to add selectively here in anticipation of strong results
in 1996. Finally, we expect many of our credits to achieve investment-grade
status in 1996, which should lead to more positive performance.
The results of our portfolio restructuring are now bearing fruit in terms of
more stable performance. Although the second quarter was a bit rocky, returns
for both the last half of 1995 and the full year tracked the fund's Lipper peer
group average.
LOOKING AHEAD
The 1995 bond market rally, one of the strongest on record, followed the 1994
market sell-off, one of the sharpest in history. For the high-yield market, we
expect a continuing favorable environment for the following reasons:
. The combination of stable to declining rates and an attractive yield
spread versus Treasuries should enhance the appeal of high-yield
securities and support inflows into high-yield bond funds;
. Steady growth (though probably slower than the third quarter's 4.2% rate)
and a good stock market (though less ebullient than 1995's) should enable
high-yield bond issuers to maintain or improve their financial strength;
. The market's clear preference for higher-quality borrowers, evidenced by
the stronger returns of double B-rated bonds over single B in recent
months, should provide some insurance against a sharp jump in future
defaults.
The economic expansion is now over 4 1/2 years old and shows few, if any,
signs of a coming recession. Nevertheless, there are small clouds on the
horizon, particularly the still-low but rising default rate. We will remain
vigilant and expect to continue de-emphasizing cyclicals and to maintain the
portfolio's more defensive structure. The bond markets are also vulnerable to
developments in Washington these days, and failure to make credible progress on
federal deficit reduction could have adverse repercussions. Thus, while the
outlook is broadly positive there could be setbacks, and we would remind all
shareholders that this fund is appropriate for those who can ride out setbacks
to achieve the long-term benefits of high-yield investing.
T. ROWE PRICE ASSOCIATES, INC.
INVESTMENT ADVISER
Comparison of Change in Value of $10,000 Investment in Penn Series High Yield
Bond Fund and First Boston High Yield Index
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Penn Series First Boston
<S> <C> <C>
3/1/87 10,000 10,000
12/31/87 9,677 10,101
12/31/88 11,397 11,480
12/31/89 11,330 11,523
12/31/90 10,316 10,788
12/31/91 14,122 15,508
12/31/92 16,354 18,092
12/31/93 19,587 21,513
12/31/94 18,151 21,302
12/31/95 21,128 25,010
</TABLE>
The performance information shown here does not reflect variable account charges
and fees nor does it reflect the period prior to March 1, 1987 when T. Rowe
Price Associates, Inc. became the Fund's investment adviser. Past performance
is not predictive of future performance. Shares may be worth more or less when
redeemed than when purchased. Assumes reinvestment of all dividends.
3
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PENN SERIES FUNDS, INC.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
GROWTH EQUITY FUND
At the beginning of 1995 expectations were that the stock market would increase
during the course of the year but that it would level off at a significantly
lower level than was eventually attained. Throughout most of the year
conditions were nearly perfect. Inflation was not a significant concern and, as
a result, the Federal Reserve, after aggressively tightening monetary policy in
1994, was finally able to begin lowering interest rates. At the same time,
corporate earnings rose at a much better-than-expected pace with positive
surprises exceeding negative ones by a large margin for the first three
quarters of the year.
While all of the broad sectors participated in the S&P 500's 37.54% advance
for 1995, it was not any easy year to beat the index for most growth stock
managers. A review of the Lipper Universe of growth fund managers found that
only 15% of funds outperformed the index for the full year. The Growth Equity
Fund was in the majority, posting a 26.45% return for the year. At the end of
May there was a change in the day-to-day management of the Fund. Subsequent to
that change the Fund has shown improved performance relative to its peer group,
outperforming the Lipper Growth Fund Index 16.18% versus 15.74%. Both figures
slightly trailed the 17.13% return for the S&P 500.
Much of the difficulty in besting the index in 1995 can be attributed to the
nature of the advance and, in particular, its narrowing as the year progressed.
Illustrative of this latter point is the fact that in each successive quarter
only fifty stocks or 10% of the companies comprising the index accounted for
52%, 60%, 64% and an incredible 85% of each quarter's gain. Additionally, when
the index is broken-down into market capitalization quintiles, only the
quintile comprised of the 100 largest companies in the index outperformed the
index for the full year.
With the bond market's bottom in November 1994, the stock market was poised
to advance, requiring only improvement in the interest rate environment before
responding to higher corporate earnings with a valuation-driven price/earnings
multiple expansion. Importantly, these factors are not likely to diminish as
the U.S. corporate sector is in the early stages of a long-term reversal of a
20-year erosion in productivity and profitability and inflation shows no
imminent sign of resurgence. Companies are making tremendous progress in
restructuring balance sheets and there has been a technology driven surge in
capital investment.
The Growth Equity Fund's managers have striven over the past seven months to
improve the Fund's absolute performance and positioning relative to other funds
in its peer group. The returns of the past seven months bear witness to this
improvement. Throughout the process the Fund has remained focused on growth
while, also becoming larger-capitalization oriented and decidedly more
diversified. This shift continues with the express purpose being to improve the
risk/reward profile of the Fund.
INDEPENDENCE CAPITAL MANAGEMENT, INC.
INVESTMENT ADVISER
Comparison of Change in value of $10,000 Investment in Penn Series Growth Equity
Fund, S&P 500 and Willshire Large Capital Growth Index
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Penn Series S&P 500 Willshire Index
<S> <C> <C> <C>
11/1/92 10,000 10,000 10,000
12/31/92 10,661 10,467 10,505
12/31/93 11,986 11,522 11,448
12/31/94 11,013 11,687 10,759
12/31/95 13,926 16,075 14,835
</TABLE>
The performance information shown here does not reflect variable account charges
and fees nor does it reflect the period prior to November 1, 1992 when
Independence Capital Management, Inc. became the Fund's investment adviser.
Past performance is not predictive of future performance. Shares may be worth
more or less when redeemed than when purchased. Assumes reinvestment of all
dividends.
4
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VALUE EQUITY
A year ago, we were cautious on the market but confident in our stock picks.
Even though we did not see the bull market coming, our stock selections did
indeed produce superior performance. However, we concluded that positive
factors for equities might be offset by Federal Reserve actions to curtail
inflationary pressures as well as by the high level of short-term rates and the
uncertain prospects for a soft economic landing. Our caution was misplaced. In
fact, the Fed's prior tightening moves worked: the economy slowed, inflation
was below expectations and long-term rates fell by 200 basis points. The
reduction in long bond rates helped propel impressive flows into equity mutual
funds, which provided the fire power, along with record merger and acquisition
activity, to drive the stock market to new highs. The market's total return of
37.5%, as measured by the S&P 500 Index, was the best in 20 years.
ENVIRONMENT FOR FINANCIAL ASSETS REMAINS FAVORABLE; A CORRECTION IS OVERDUE
When we reduce the fundamentals for financial assets to the basics, four
factors emerge: 1) inflation trends; 2) actions of the Federal Reserve; 3) the
treatment of capital; and 4) valuations. While the first three remain
favorable, valuations are at the high end of historic norms.
Inflation appears well contained for all the reasons we discussed in prior
investment outlooks: responsible monetary policies, global competition,
benefits from the Information Revolution, etc. With the economy having slowed,
the dollar firmer and prospects for slow growth in the first half of 1996,
inflation is not likely to be a big problem this year. The bottlenecks in the
economy evident a year ago have been eliminated. Total manufacturing capacity
is now increasing at a 4.5% rate, making price increases difficult. Capital
spending, which grew at double-digit rates for each of the past three years,
should slow markedly in 1996 to a single digit rate. Together with excess
inventories and rising delinquencies of bank credit cards, these factors all
suggest slow economic growth with little upward pressure on inflation.
The second key influence on financial assets, Federal Reserve policy, is also
positive. The Fed has lowered rates in response to moderating growth and
subdued inflation. The markets are assuming further cuts in short-term interest
rates. If that does not occur, investors would no doubt be disappointed given
today's expectations. However, it is difficult to imagine the need for a
tightening in Federal Reserve policy.
Third, the environment for capital is favorable. Individuals have responded
to this environment by shifting a larger proportion of their assets into
financial instruments. While the acceleration in the shift since 1990 has been
truly incredible and cause for some concern, the absolute levels are just
getting back to the levels of the 1950s and 1960s, when inflation was also low.
We note, too, that the record inflows into domestic equity mutual funds of
about $125 billion in 1995 did not represent net inflows, since some of that
investment was financed by the sale of stocks by individuals.
The big incremental demand for stocks actually came from corporations. Merger
and acquisition activity soared in 1995 to $450 billion, exceeding the prior
1988 peak by some 40%. Largely fueled by strategic needs, rather than by
financial buyers, this activity should continue. Not only is moderate growth
with low inflation an ideal environment for M&A activity, but also the
consolidation of major industries, such as banking, insurance, retailing,
defense and health care, seems likely to continue. The need for global
partnering, good profitability and the availability of money at attractive
nominal rates are additional reasons to believe M&A activity will continue to
reduce the supply of stock and, therefore, be a positive for the stock market.
Other factors contributing to a favorable environment for capital in the U.S.
include: 1) The U.S. has strengthened its lead as the most competitive
industrialized society. 2) The U.S. government deficit as a share of G.D.P. is
currently the lowest of any major industrialized society. 3) The U.S. has the
lowest tax burden among industrialized countries, plus the tax on capital may
be further reduced if the capital gains tax rate is cut as expected. The
recognition of this sharply improved competitive position of the U.S. could
eventually bring in another source of demand for stocks, the foreign buyer.
HIGH VALUATIONS
The valuation concerns are easy to enumerate, namely: (1) the lowest yield ever
on the S&P 500; (2) a high ratio of equity capitalization to G.D.P.; (3) the
longest period without as much as a 10% stock market correction in the 20th
century and a record low retracement of only 3.3% during 1995; (4) a well above
normal ten year rate of return, of about 15%; and (5) the widely accepted view
that stocks are now the asset of choice. At the very least, one has to
acknowledge that risks have risen. True, price-earnings ratios do not look
excessive, but this conclusion depends on today's high level of profitability
remaining intact. As the economy slows, manufacturing capacity increases and
the dollar rises, margin pressures and earnings disappointments are likely,
making the new year a more treacherous environment than was 1995.
5
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PENN SERIES FUNDS, INC.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
VALUE EQUITY (CONT'D)
SUMMARY
We think the probabilities favor modest market gains in 1996. Earnings
disappointments will become more prevalent after five years of growth and
expanding profit margins. We expect S&P 500 earnings to be relatively flat,
compared to an increase of about 15% in 1995, making stock selection even more
important. With stocks at much higher levels and earnings growth more subdued,
increased volatility is probably in store. Even the long-term positive of a cut
in the capital gains tax could be a short-term negative if it triggers selling
postponed into 1996. However, we do not foresee the ingredients for a major
bear market, especially if inflation and short-term rates move lower, as now
appears likely. In fact, a short drop in short rates could unlock the large
amounts of money in money market mutual funds, time deposits and CD's and
actually accelerate inflows into equity mutual funds. As usual, a challenging
year lies ahead.
OPCAP ADVISORSINVESTMENT ADVISER
Comparison of Change in Value of $10,000 Investment in Penn series Value Equity
Fund and S&P 500
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Penn Series S&P 500
<S> <C> <C>
11/1/92 10,000 10,000
12/31/92 10,402 10,467
12/31/93 11,138 11,522
12/31/94 11,464 11,674
12/31/95 15,761 16,056
</TABLE>
The perfomance information shown here does not reflect variable account charges
and fees nor does it reflect the period prior to November 1, 1992 when OpCap
became the Fund's investment adviser. Past performance is not predictive of
future performance. Shares may be worth more or less when redeemed than when
purchased. Assumes reinvestment of all dividends.
FLEXIBLY MANAGED FUND
Strong corporate earnings, low inflation, a possible balanced budget, and two
Federal Reserve rate reductions were all major positives for U.S. financial
markets in 1995. The stock market soared to new highs and the bond market more
than recovered its 1994 losses.
The Flexibly Managed Fund performed well but lagged the broad market as
represented by the Standard & Poor's 500 Stock
Index. Our risk-averse style was not in sync with the go-for-broke stock market
of 1995, although results were reasonable nonetheless.
MARKET ENVIRONMENT
Almost all stock market sectors were strong -- blue chips, value stocks, growth
stocks, technology stocks, most industries, and so on. Retailing, one of the
largest segments of the economy but only a moderate portion of the equities
market, was one of the few poor performers. As companies have reduced costs by
downsizing, the wages that drive retail sales have stagnated -- an unusual
development given strong overall profit growth. This, in turn, explains the low
level of inflation. Wages represent nearly two-thirds of costs throughout the
economy, and when they are stagnant there is little upward pressure on prices.
The Federal Reserve, which had raised short-term interest rates six times in
1994, took advantage of the benign price environment to lower them twice this
past year. Investors responded enthusiastically to this shift. Another positive
for the market occurred in the second half, when progress toward a balanced
budget seemed imminent. The stalemate that developed at year-end was not well
received by investors. Looking ahead, however, it seems likely that some
progress will be made eventually.
PORTFOLIO HIGHLIGHTS
Two holdings were exceptionally successful last year: Loews rose 80% in price,
and Student Loan Marketing (Sallie Mae) doubled. Each of these positions offset
the negative impact of all our losers. Not surprisingly, our retail sector
holdings, including Petrie Stores, Hills Stores, and Toys "R" Us, were the
biggest disappointments, although actual losses were moderate.
In recent months, the strong price gains of major holdings caused us to trim
some of our winners. The cash raised was largely used to establish new
positions or to add to laggards that remain attractive. On balance, the
portfolio became a shade more conservative since our last report on June 30.
FUND OPERATING GUIDELINES
We like to review these guidelines from time to time for new investors and
because we believe they differentiate the fund from its competitors.
. We work as hard to reduce risk as to maximize gain.
. Attractively priced value stocks (as opposed to growth stocks) are our
investment of choice.
6
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FLEXIBLY MANAGED FUND (CONT'D)
. We will make short-term, opportunistic investments as well as more
typical long-term ones.
. No type of investment is off-limits (bonds, stocks, convertibles, etc.)
if the risk/reward characteristics are attractive.
. Our decisions reflect case-by-case investment judgment; we have no all-
encompassing formula.
. Our asset allocations result from individual security decisions, not vice
versa.
. In general, we favor large-cap stocks over small-cap, because we usually
take big positions to make the most of our intensive analysis of
individual securities.
OUTLOOK
As always, the economy, corporate profits, interest rates, inflation, and
market valuation combine as keys to our outlook for the upcoming year. These
seem neutral to modestly positive except for valuations, which we view as a
negative. But this year there is a wild card. By March, the presidential
campaign will be under way, and we think it likely that governmental
policies -- both fiscal and monetary-- will be geared toward accentuating
growth.
With this as likely background, we intend as always to focus our attention on
individual securities, buying when others are discouraged, selling when they
are enthusiastic and continually searching for good values.
T. ROWE PRICE ASSOCIATES, INC.
INVESTMENT ADVISER
Comparison of Change in Value of $10,000 Investment in Penn Series Flexibly
Managed Fund and S&P 500
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Penn Series S&P 500
<S> <C> <C>
3/1/87 10,000 10,000
12/31/87 10,420 8,915
12/31/88 12,395 10,394
12/31/89 15,020 13,658
12/31/90 14,893 13,278
12/31/91 18,118 17,315
12/31/92 19,851 18,634
12/31/93 22,986 20,511
12/31/94 23,938 20,868
12/31/95 29,271 28,702
</TABLE>
The performance information shown here does not reflect variable account charges
and fees nor does it reflect the period prior to March 1, 1987 when T. Rowe
Price Associates, Inc. became the Fund's investment adviser. Past performance
is not predictive of future performance. Shares may be worth more or less when
redeemed than when purchased. Assumes reinvestment of all dividends.
THE INTERNATIONAL EQUITY FUND
It paid to be a contrarian in 1995 and ignore the consensus views on worldwide
capital shortage and hyperaccelerating growth rates. With only moderate growth
in the global economy, monetary policy took center stage. Reductions in
interest rates, falling bond yields and abundant liquidity all benefited the
international equity markets. When the central banks ease, whether acting
proactively or responding to market forces, stock prices tend to react
positively. We tested this relationship over a time frame of 30 years and found
that the European markets with the highest correlation between central bank
easing and equity returns were Germany and the UK; each time the Bundesbank and
the Bank of England cut interest rates, the market indices rose on average 16%
over the next six months. The global decline in interest rates is explained by
(i) the shrinking private demand for capital and structural changes in
government attitude to debt; (ii) the strengthening of corporate balance sheets
and a drop in household borrowing; and (iii) an absence of speculation in
financial assets, as was the case in 1993, as well as in commodity or property
prices.
The fund rebounded strongly from a negative return in 1994 to outperform both
the benchmark index and the average international equity fund tracked by
Lipper. Fund performance benefited from our disciplined approach to top-down
country allocation, which is based on the expected country returns produced by
our multi-factor model. Generally, we concentrated on investments in large,
more liquid markets, avoiding countries with low return visibility, unclear
monetary and fiscal policies, weak valuations, unstable macroeconomic
variables, or heavy government participation in the economy, such as France,
Italy, Spain, Austria, Mexico and Korea. We added aggressively to Japan and the
UK in the second and third quarters at a time when both markets were trading at
below fair market value. We reduced our Latin American holdings after a
recovery in the second quarter, maintaining only a 0.1% position in Brazil. In
Europe we sold out of Austria and Belgium when our models signaled low expected
returns, and we reduced France in favor of Switzerland, the year's best-
performing international market.
7
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PENN SERIES FUNDS, INC.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
THE INTERNATIONAL EQUITY FUND (CONT'D)
Throughout the year we reinforced our bottom-up stock selection discipline by
enlarging our stock universe to 2800 names and by screening for companies that
(1) achieve consistent returns by concentrating on their core business (Dutch
publisher Elsevier, French insurer Axa and Japanese electronics components
maker Omron); (2) have a long-term track record of preserving market share or
unit volume growth (Germany's Bayer, Sweden's Astra and Japan's Rohm); and (3)
earn above average rates of return on invested capital (Switzerland's Roche,
Australian media conglomerate News Corp. and Hong Kong's property company Sun
Hung Kai).
Also contributing to the fund's return was our 70% dollar/yen hedge, which
boosted performance in the 4th quarter when the dollar appreciated against the
yen.
VONTOBEL USA INC.
INVESTMENT ADVISER
Comparison of Change in Value of $10,000 Investment in Penn Series International
Equity Fund and MSCI Europe Australia Far East (EAFE) Index
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Penn Series EAFE
<S> <C> <C>
11/2/92 10,000 10,000
12/31/92 10,200 10,140
12/31/93 14,090 13,446
12/31/94 13,201 14,491
12/31/95 15,023 16,114
</TABLE>
The performance information shown here does not reflect variable account charges
and fees. Past performance is not predictive of future performance. Shares may
be worth more or less when redeemed than when purchased. Assumes reinvestment
of all dividends.
SMALL-CAPITALIZATION EQUITY
The small-cap market was dominated in 1995 by technology and financial service
stocks. We were underweighted in both sectors and consequently, underperformed
the Russell 2000's total return of 30.4%. Technology issues are only part of
the small-cap universe, and an expensive and volatile part at that. The rest of
the index carries valuations that are, in many cases, quite reasonable.
We are conservative investors in small-cap stocks, seeking to control
volatility and generate superior returns by purchasing quality businesses that
are mispriced by the market. We own an eclectic group of companies
distinguished by their excellent business and financial characteristics,
including high cash flow and strong competitive positions. An example is Oak
Industries. Oak's strategy is to focus entirely on communications products and
to divest unrelated businesses. Since Oak is the dominant supplier of coaxial
cable connectors, it benefits as the cable television industry upgrades its
systems. The telecommunications bill before the Congress, if passed in its
current form, should further boost Oak's business by promoting increased
competition in the delivery of telecommunications services to the home, which
will be implemented via further increases in spending on systems upgrades.
Moreover, international revenues account for approximately 40% of the sales of
Oak's major subsidiary, and those revenues are increasing at a rate of about
40% a year as Oak capitalizes on the rapid growth of cable TV overseas. Oak
earns a high return on capital and has increased its gross margins from 18.7%
in 1989 to 40.1% in 1995. Despite those superior characteristics, the stock
fell from a high of $32 per share in September to $16.50 in December due
primarily to a small delay in the timing of customer orders. The stock has in
addition, been overlooked by many investors because of the company's complex
tax reporting, which depresses reported earnings through 1996 and masks
significant cash flow. Oak trades at a modest 11 times reported earnings. We
believe the recent price decline has created an unusual opportunity to buy this
well-managed company with excellent growth prospects at a very attractive
valuation.
8
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SMALL-CAPITALIZATION EQUITY (CONT'D)
We continue to own a number of real estate investment trusts (REITs), such as
Security Capital Industrial Trust, which develops and manages industrial
warehouses in the Southeast and Southwest. Although REIT stocks languished in
the first 11 months of 1995 because of their defensive investment
characteristics, they began to come to life in December. Nothing has happened
to change the superior business and financial characteristics of the REITs we
own. What has changed is that the market appears poised to recognize their
value.
We remain disciplined and confident in our approach and continue to perform
rigorous, in-depth analysis to identify quality businesses where the value of
the franchise is underpriced in the market. Our research intensive approach has
worked well in the past, and we are convinced that the market will recognize
the merits of the undervalued stocks we own.
OPCAP ADVISORS
INVESTMENT ADVISER
Comparison of Change in Value of $10,000 Investment in Penn Series Small Cap
Fund and Russel 2,000
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Penn Series Russell 2,000
<S> <C> <C>
3/1/95 10,000 10,000
12/31/95 11,276 12,490
</TABLE>
The performance information shown here does not reflect variable account charges
and fees. Past performance is not predictive of future performance. Shares may
be worth more or less when redeemed than when purchased. Assumes reinvestment
of all dividends.
* Denotes annualized total return for the period of March 1, 1995 (commencement
of operations) to December 31, 1995.
9
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1995
THE MONEY MARKET FUND
<TABLE>
<CAPTION>
SHORT TERM PAR
MATURITY RATINGS (000) VALUE
-------- ----------- ----- -----------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER (43.5%)
- ------------------------
AUTOMOBILES (2.0%)
General Motors Acceptance Corp. 5.65%.. 02/16/96 A-2/P-1/D-1 $ 500 $ 496,390
-----------
BEVERAGES (4.0%)
Pepsico, Inc.
5.68%................................. 01/25/96 A-1/P-1 500 498,107
5.40%................................. 05/10/96 A-1/P-1 500 490,250
-----------
988,357
-----------
BROKERAGE (12.1%)
Dean Witter
Discover & Co.
5.68%................................. 01/30/96 A-1/P-1 500 497,712
5.70%................................. 02/06/96 A-1/P-1 460 457,378
Merrill Lynch & Co., Inc. 5.76%........ 01/16/96 A-1+/P-1 250 249,400
5.66%................................. 02/29/96 A-1+/P-1 500 495,362
5.62%................................. 03/01/96 A-1+/P-1 300 297,190
Morgan Stanley Group, Inc. 5.75%....... 01/29/96 A-1+/P-1 1,000 995,528
-----------
2,992,570
-----------
CHEMICALS (1.6%)
Monsanto Co. 5.65%..................... 02/12/96 A-1/P-1 400 397,363
-----------
FINANCIAL SERVICES (16.8%)
American Express
Credit Corp.
5.70%................................. 03/08/96 A-1/P-1 500 494,696
5.59%................................. 05/28/96 A-1/P-1 500 488,509
Bell Atlantic Corp. 5.80%.............. 01/16/96 A-1/P-1 300 299,275
Countrywide
Funding Corp.
5.80%................................. 01/18/96 A-1/P-2/F-1 500 498,631
5.85%................................. 01/23/96 A-1/P-2/F-1 500 498,212
General Electric Capital Corp. 5.50%... 04/15/96 A-1/P-1 500 491,979
Hanson Finance UK 5.65%................ 02/23/96 A-1/P-1 500 495,841
IBM Credit Corp. 5.82%................. 01/05/96 A-1/P-1 380 379,754
Sears Acceptance Corp. 5.71%........... 01/30/96 A-2/P-1/D-1 500 497,700
-----------
4,144,597
-----------
FOODS (1.0%)
McCormick and Co, Inc. 5.70%........... 05/21/96 A-1/P-1 250 244,419
-----------
PHARMACEUTICALS (2.0%)
Warner Lambert Co. 5.44%............... 05/14/96 A-1+/P-1 500 489,876
-----------
TELECOMMUNICATIONS (2.0%)
American Telephone & Telegraph Co.
5.70%................................. 01/24/96 A-1/P-1 500 498,179
-----------
UTILITIES - ELECTRIC (2.0%)
Georgia Power 5.65%.................... 02/12/96 A-1/P-1 500 496,704
-----------
TOTAL COMMERCIAL PAPER
(Cost $10,748,455)................................................ 10,748,455
-----------
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM PAR
MATURITY RATINGS (000) VALUE
-------- ---------- ----- -----------
<S> <C> <C> <C> <C>
CORPORATE BONDS (4.7%)
- ----------------------
First Interstate 10.50%................. 03/01/96 A2 $ 500 $ 503,569
Hertz Corp. 9.125%...................... 08/01/96 A3 650 660,805
-----------
TOTAL CORPORATE BONDS
(Cost $1,164,374)................................................. 1,164,374
-----------
MEDIUM TERM NOTES (6.1%)
- ------------------------
Chrysler Financial Corp. 6.00%.......... 04/15/96 A3 500 500,161
General Motors Acceptance Corp. 8.60%... 04/12/96 A3 500 502,641
Sears Discover Credit Corp. 8.73%....... 08/15/96 A2 500 508,374
-----------
TOTAL MEDIUM TERM NOTES
(Cost $1,511,176)................................................. 1,511,176
-----------
<CAPTION>
SHORT-TERM
RATINGS
----------
<S> <C> <C> <C> <C>
VARIABLE RATE DEMAND NOTES (38.1%)+
- -----------------------------------
Alabama State Development Authority
(LOC-First Fidelity Bank) 6.00%........ 01/05/96 A-1/P-1 500 500,000
Barton Healthcare
(LOC-American National Bank & Trust)
5.95%.................................. 01/05/96 A-1/P-1 480 480,000
Baylis Group Partnership Floating Rate
(LOC-Kredietbank) 6.10%................ 01/03/96 A-1/P-1 700 700,000
Berks County Industrial Development
Authority (LOC-Meridian Bank) 6.10%.... 01/05/96 A-1/P-1 395 395,000
Bloomfield New Mexico (LOC-LaSalle
National Bank & Trust) 6.15%........... 01/05/96 A-1/P-1 600 600,000
Columbia County Georgia Development
Authority (LOC-Trust Co. Bank) 5.95%... 01/03/96 A-1/P-1 500 500,000
Community Health Systems, Inc. (LOC-
First Union National Bank) 6.10%....... 01/05/96 A-1/P-1 865 865,000
Durham Risk Management Co. (LOC-Wachovia
Bank) 5.89%............................ 01/05/96 A-1+/P-1 500 500,000
Fairview Hospital and Healthcare
Services (MBIA Insurance) 5.95%........ 01/05/96 A-1+/P-1 500 500,000
</TABLE>
10
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHORT-TERM PAR
MATURITY RATINGS (000) VALUE
-------- ----------- ------ -----------
<S> <C> <C> <C> <C>
Health Insurance Plan of Greater NY
(LOC-Morgan Guaranty) 5.95%.......... 01/03/96 A-1+/P-1 $1,000 $ 1,000,000
Illinois Development Finance Authority
(LOC-Harris Trust & Savings) 5.95%... 01/05/96 A-1/P-1 200 200,000
Montgomery County PA Industrial
Development Authority (LOC-Meridian
Bank) 6.10%.......................... 01/05/96 A-1/P-1 700 700,000
Richmond County Georgia Industrial
Development Authority (Monsanto)
6.27%................................ 06/01/96 A-1+/P-1 700 700,000
San Bernardino County California (LOC-
Canadian Imperial Bank) 6.00%........ 01/05/96 A-1+/P-1 700 700,000
Saint Francis Health (LOC-First
Hawaiian Bank) 6.10%................. 01/05/96 A-1/P-1 490 490,000
Silver City New Mexico (LOC-LaSalle
National Bank & Trust) 6.15%......... 01/05/96 A-1/P-1 600 600,000
-----------
TOTAL VARIABLE RATE DEMAND NOTES
(Cost $9,430,000)................................................. 9,430,000
-----------
FLOATING RATE OBLIGATIONS (2.0%)++
- ----------------------------------
American Honda Corp. 5.975%
(Cost $499,933)...................... 02/09/96 A-2/P-1/F-1 500 499,933
-----------
GOVERNMENT OBLIGATIONS (2.0%)+++
- --------------------------------
Student Loan Marketing Assoc. 5.22%
(Cost $499,686)...................... 01/02/96 A-1/P-1 500 499,686
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
-------
<S> <C> <C>
SHORT-TERM INVESTMENTS (3.6%)
- -----------------------------
Temporary Investment Fund Class B
(Cost $883,890).......................................... 883,890 883,890
-----------
TOTAL INVESTMENTS (100.0%)
(Cost $24,737,514) (a)............................................ $24,737,514
===========
</TABLE>
- -------
(a) Cost for Federal income tax purposes.
+ Reset Demand Notes - The rate shown is the rate as of December 31, 1995, and
the maturity shown is the next interest readjustment date.
++ Floating Rate Obligations - The rate shown is the rate as of December 31,
1995.
+++ Government Obligations - The rate shown is the rate as of December 31,
1995, and the maturity shown 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 December 31, 1995. These ratings have not been
verified by the Independent Accountants and, therefore, are not covered by
the Report of Independent Accountants.
<TABLE>
<CAPTION>
PERCENTAGE OF PORTFOLIO
MATURITY PAR -----------------------
SCHEDULE AMOUNT CUMULATIVE
-------- ----------- ----------
<S> <C> <C> <C>
1 - 7 days $ 9,605,000 40.2% 40.2%
8 - 14 days 0 0.0% 40.2%
15 - 30 days 4,550,000 19.0% 59.2%
31 - 60 days 3,360,000 14.1% 73.3%
61 - 90 days 1,300,000 5.4% 78.7%
91 - 120 days 1,500,000 6.3% 85.0%
121 - 150 days 1,750,000 7.3% 92.3%
Over 150 days 1,850,000 7.7% 100.0%
----------- -----------
$23,915,000 100.0%
=========== ===========
</TABLE>
Average Weighted Maturity - 49 days
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1995
THE QUALITY BOND FUND
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------ -----------
<S> <C> <C> <C> <C>
CORPORATE BONDS (29.4%)
- -----------------------
AEROSPACE (0.5%)
Martin-Marietta Corp. Note 8.50%........... 03/01/96 A- $ 175 $ 175,656
-----------
BROADCASTING (2.4%)
News America Holdings 8.50%................ 02/23/25 BBB 360 416,700
9.25%..................................... 02/01/13 BBB 400 476,500
-----------
893,200
-----------
CANADIAN GOV'T AGENCY (3.5%)
Hydro Quebec 8.05%......................... 07/07/06 A+ 1,150 1,318,188
-----------
ELECTRIC POWER (2.1%)
Korea Electric Power
7.75%..................................... 04/01/13 AA- 500 533,750
Minnesota Power & Light First Mortgage
7.375%.................................... 03/01/97 A- 250 255,000
-----------
788,750
-----------
ENTERTAINMENT (1.4%)
Time Warner Inc. Notes 9.125%.............. 01/15/13 BBB- 465 527,775
-----------
FINANCE & CREDIT (0.7%)
American Express Credit Corp. Senior Note
7.75%..................................... 03/01/97 A+ 250 256,250
-----------
FINANCIAL (5.1%)
Associates Corp. N.A. 7.75%................ 02/15/05 AA- 500 555,625
General Electric Capital Corp. 8.125%...... 02/01/99 AAA 500 535,000
General Motors Acceptance Corp. Note
8.60%..................................... 05/10/96 A- 500 505,165
6.40%..................................... 07/30/97 A- 300 303,750
-----------
1,899,540
-----------
INDUSTRIAL - OTHERS (0.7%)
@ Cargill, Inc. 7.375%...................... 10/01/25 AA- 250 270,937
-----------
INSURANCE (8.0%)
John Hancock Surplus Notes 7.375%.......... 02/15/24 AA- 1,000 1,001,250
Liberty Mutual 8.20%....................... 05/04/07 NR 500 556,875
Metropolitan Life Insurance Co.
7.00%..................................... 11/01/05 NR 875 900,156
Pacific Mutual Life Surplus Notes 7.90%.... 12/30/23 AA- 500 524,375
-----------
2,982,656
-----------
MANUFACTURING (1.4%)
ITT Industries 7.40%....................... 11/15/25 BBB 500 525,625
-----------
RAILROADS (0.8%)
Union Pacific Co. 8.35%.................... 05/01/25 A- 250 286,250
-----------
RETAIL (0.5%)
Penney (J.C.) Inc. Note 9.45%.............. 07/15/02 A+ 175 198,844
-----------
SERVICES - EQUIPMENT RENTING & LEASING (0.3%)
Service Co. Int'l 7.00%.................... 06/01/15 BBB+ 100 105,125
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------ -----------
<S> <C> <C> <C> <C>
TELECOMMUNICATIONS (0.7%)
Telecommunications, Inc. 9.80%............. 02/01/12 BBB- $ 225 $ 267,469
-----------
TELEPHONE (1.3%)
U.S. West Communications 7.20%............. 11/10/26 AA- 500 511,250
-----------
TOTAL CORPORATE BONDS
(Cost $10,312,337)................................................ 11,007,515
-----------
MUNICIPAL BONDS (3.7%)+
- -----------------------
Community Health Systems, Inc. 6.10%
(Cost $1,400,000)......................... 01/03/96 1,400 1,400,000
-----------
U.S. TREASURY OBLIGATIONS (25.7%)
- ---------------------------------
U.S. Treasury Notes
8 .00%.................................... 10/15/96 N/A 10 10,206
6.375%.................................... 07/15/99 N/A 7,500 7,759,049
7.50%..................................... 02/15/05 N/A 1,500 1,701,225
6.50%..................................... 08/15/05 N/A 125 133,269
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $9,189,937)................................................. 9,603,749
-----------
AGENCY OBLIGATIONS (34.2%)
- --------------------------
Federal Home Loan Mortgage Corp. 5.50%..... 01/02/96 N/A 2,000 1,999,694
Federal National Mortgage Assoc. 7.40%..... 07/01/04 N/A 750 826,965
Federal National Mortgage Assoc. 6.50%
due 09/01/25 to 12/01/25.................. N/A 4,900 4,843,706
Government National Mortgage Assoc. 8.00%
due 06/15/23 to 10/15/25.................. N/A 4,890 5,096,995
-----------
TOTAL AGENCY OBLIGATIONS
(Cost $12,612,710)................................................ 12,767,360
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------
<S> <C> <C>
PREFERRED STOCK (2.4%)
- ----------------------
Cleveland Electric Illuminating 9.125%
(Cost $897,412)......................................... 8,900 887,775
-----------
SHORT-TERM INVESTMENTS (4.6%)
- -----------------------------
Temporary Investment Fund - Class B (Cost $1,704,257).... 1,704,257 $ 1,704,257
-----------
TOTAL INVESTMENTS (100.0%)
(Cost $36,116,653) (a) (b)......................................... $37,370,656
===========
</TABLE>
- -------
+ Floating Rate Security - The rate shown is the rate as of December 31, 1995,
and the maturity shown is the next interest readjustment date.
@ Restricted security under Rule 144A.
(a) Cost for Federal income tax purposes.
(b) At December 31, 1995 the excess of value over tax cost was $1,277,197, and
the excess of tax cost over value was $23,194.
The Standard & Poors corporation ratings are the most recent ratings
available at December 31, 1995. These ratings have not been verified by the
Independent Accountants and, therefore, are not covered by the Report of
Independent Accountants.
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1995
THE HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ----- -----------
<S> <C> <C> <C> <C>
CORPORATE BONDS (95.2%)
- -----------------------
AEROSPACE & DEFENSE (2.4%)
K & F Industries, Inc. 11.875%.............. 12/01/03 B+ $550 $ 591,250
Tracor, Inc. 10.875%....................... 08/15/01 B 250 258,750
-----------
850,000
-----------
AUTOMOBILES & RELATED (1.5%)
Exide Corp. 10.75%.......................... 12/15/02 BB- 500 542,500
-----------
BEVERAGES (3.0%)
Dr. Pepper Bottling Holdings, Inc.
13.5597%++................................. 02/15/03 CCC+ 700 574,000
Texas Bottling Group, Inc. 9.00%............ 11/15/03 B+ 500 495,000
-----------
1,069,000
-----------
BROADCASTING (4.6%)
Argyle Television 9.75%..................... 11/01/05 B- 500 497,500
Heritage Media Corp. 11.00%................. 10/01/02 B 550 578,875
# Spectravision, Inc. 12.65%................. 12/01/02 CCC- 454 29,510
Young Broadcasting Corp. 11.75%............. 11/15/04 B 250 280,000
10.125%.................................... 02/15/05 B 250 263,750
-----------
1,649,635
-----------
BUILDING & REAL ESTATE (1.4%)
B.F. Saul Reit 11.625%...................... 04/01/02 B- 500 510,000
-----------
BUILDING PRODUCTS (3.1%)
Maxxam Group, Inc. 11.25%................... 08/01/03 B- 500 475,000
Overhead Door Corp. 12.25%.................. 02/01/00 B- 375 358,125
Southdown, Inc. 14.00%...................... 10/15/01 B 250 275,000
-----------
1,108,125
-----------
CABLE OPERATORS (5.3%)
Continental Cablevision, Inc. 11.00%........ 06/01/07 BB- 500 558,750
Fundy Cable Limited 11.00%.................. 11/15/05 BB 500 520,000
Lenfest Communications, Inc. 8.375%......... 11/01/05 BB+ 300 301,125
Marcus Cable Operating Co. 3.4051%++........ 08/01/04 B 675 507,938
-----------
1,887,813
-----------
COMMUNICATIONS SERVICES (1.4%)
Communication & Power Industries 12.00%..... 08/01/05 B 500 513,750
-----------
CONGLOMERATES (4.0%)
Alpine Group, Inc. 12.25%................... 07/15/03 B 500 490,000
Interlake Corp. 12.125%..................... 03/01/02 CCC+ 500 475,000
Jordan Industries, Inc. 10.375%............. 08/01/03 B- 300 267,000
5.362%++................................... 08/01/05 B- 350 203,000
-----------
1,435,000
-----------
CONTAINER (7.3%)
Plastic Containers 10.75%................... 04/01/01 B+ 750 772,500
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ----- -----------
<S> <C> <C> <C> <C>
Portola Packaging, Inc. 10.75%............... 10/01/05 B $500 $ 517,500
Riverwood International Corp. 11.25%......... 06/15/02 B 250 271,250
10.375%..................................... 06/30/04 B 250 278,125
Silgan Corp. 11.75%.......................... 06/15/02 B- 375 401,250
Silgan Holdings, Inc.
1.3149%++................................... 12/15/02 B- 375 354,375
-----------
2,595,000
-----------
ENERGY (2.7%)
Petroleum Heat & Power, Inc. 12.25%.......... 02/01/05 B+ 500 551,250
Trans Texas Gas Corp. 11.50%................. 06/15/02 BB- 400 413,000
-----------
964,250
-----------
ENTERTAINMENT & LEISURE (2.8%)
Alliance Entertainment Corp. 11.25%.......... 07/15/05 B- 500 502,500
United Artists Theatre 9.30%................. 07/01/15 NR 500 500,625
-----------
1,003,125
-----------
FOOD/PROCESSING (1.4%)
Mac Andrews & Forbes Co. 11.875%............. 11/15/02 B 500 515,000
-----------
FOOD/TOBACCO (1.4%)
Consolidated Cigar Corp. 10.50%.............. 03/01/03 B 500 512,500
-----------
HEALTHCARE (3.9%)
Quorum Health Group 11.875%.................. 12/15/02 B- 490 548,800
Wright Medical Technology, Inc. 10.75%....... 07/01/00 NR 800 824,000
-----------
1,372,800
-----------
HOTELS (1.1%)
John Q. Hammons, L.P. 8.875%................. 02/15/04 BB- 400 396,000
-----------
HOTELS & GAMING (6.5%)
# Belle Casinos, Inc. 12.00%.................. 10/15/00 NR 350 140,000
#Capital Gaming International, Inc.
45.6951%++................................. 08/01/96 NR 5 500
@# Elsinore Corp. 12.50%...................... 10/01/00 NR 500 225,000
Grand Casinos, Inc. 10.125%.................. 12/01/03 BB 500 524,375
Players International, Inc. 10.875%.......... 04/15/05 BB 500 470,000
President Riverboat Casinos, Inc. 13.00%..... 09/15/01 B 500 420,000
Stratosphere Corp. 14.25%.................... 05/15/02 B 250 282,812
Trump Taj Mahal, Inc. 11.35%................. 11/15/99 NR 250 240,625
-----------
2,303,312
-----------
INDUSTRIAL - OTHER (1.1%)
HMC Acquisition Properties 9.00%............. 12/15/07 NR 400 404,000
-----------
</TABLE>
13
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1995
THE HIGH YIELD BOND FUND, CONT'D
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ----- -----------
<S> <C> <C> <C> <C>
MANUFACTURING (4.0%)
Coltec Industries, Inc. 10.25%............... 04/01/02 BB- $750 $ 770,625
IMO Industries, Inc.
12.25%...................................... 08/15/97 B- 159 159,000
12.00%...................................... 11/01/01 B- 500 510,000
-----------
1,439,625
-----------
METALS (0.9%)
UCAR Global Enterprises, Inc. 12.00%......... 01/15/05 B+ 265 306,075
-----------
MISCELLANEOUS (3.0%)
Coleman Holdings, Inc. 9.17152%++............ 05/27/98 B 650 526,500
Herff Jones, Inc. 11.00%..................... 08/15/05 B 500 535,000
-----------
1,061,500
-----------
NATURAL RESOURCE (2.2%)
Gulf Canada Resources Limited 9.625%......... 07/01/05 B+ 750 791,250
-----------
PAPER & FOREST PRODUCTS (1.4%)
Asia Pulp & Paper Co. 11.75%................. 10/01/05 BB 500 490,000
-----------
PAPER & PAPER PRODUCTS (5.7%)
Container Corp. 11.25%....................... 05/01/04 B+ 250 257,500
Repap Wisconsin, Inc. 9.875%................. 05/01/06 B 500 472,500
S.D. Warren Co. 12.00%....................... 12/15/04 B+ 500 551,250
Stone Container Corp.
10.75%...................................... 04/01/02 B- 250 245,000
10.75%...................................... 10/01/02 B+ 500 516,250
-----------
2,042,500
-----------
RETAIL MERCHANDISING (1.4%)
Federated Department Stores, Inc. 8.125%..... 10/15/02 BB- 500 502,500
-----------
RETAIL - SPECIALTY (1.4%)
Loehmanns Holdings, Inc. 10.50%.............. 10/01/97 NR 500 502,500
-----------
SAVINGS & LOAN HOLDING COMPANY (1.4%)
First Federal Financial Corp. 11.75%......... 10/01/04 B+ 500 490,000
-----------
SERVICE (1.9%)
Anacomp International N.V. 9.00%............. 01/15/96 NR 100 30,000
Coinmach Corp. 11.75%........................ 11/15/05 NR 633 644,078
-----------
674,078
-----------
SPECIALTY CHEMICALS (6.1%)
Agricultural Minerals, Inc. 10.75%........... 09/30/03 B+ 750 828,750
Arcadian Partners L.P. 10.75%................ 05/01/05 BB- 500 552,500
IMC Fertilizer Group, Inc. 9.45%............. 12/15/11 B 750 810,000
-----------
2,191,250
-----------
SUPERMARKETS (2.2%)
Pathmark Stores, Inc. 6.2459%++.............. 11/01/03 B 875 535,938
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ----- -----------
<S> <C> <C> <C> <C>
Ralphs Grocery Co. 10.45%................... 06/15/04 B $225 $ 228,375
-----------
764,313
-----------
TELECOMMUNICATIONS (5.7%)
Mobilemedia Communications, Inc. 6.60341%++. 12/01/03 B- 600 468,000
Mobilemedia Corp. 9.375%.................... 11/01/07 B- 250 257,500
Pricellular Wireless Corp. 4.5052%++........ 10/01/03 CCC+ 575 448,500
Pronet, Inc. 11.875%........................ 06/15/05 B- 500 552,500
Wireless One, Inc. 13.00%................... 10/15/03 B- 275 291,500
-----------
2,018,000
-----------
TEXTILES & APPAREL (1.5%)
Dan River, Inc. 10.125%..................... 12/15/03 B 500 455,000
#Plaid Clothing Corp. 11.00%................. 08/01/03 CCC+ 375 52,500
-----------
507,500
-----------
TRANSPORTATION - MISCELLANEOUS (1.5%)
Sea Containers Limited 12.50%............... 12/01/04 BB- 500 540,000
-----------
TOTAL CORPORATE BONDS
(Cost $34,401,471)................................................ 33,952,901
-----------
COMMERCIAL PAPER (1.2%)
- -----------------------
Dun & Bradstreet Corp. 5.80% (Cost $444,928)
........................................... 01/02/96 NR 445 444,928
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
------
<S> <C> <C>
COMMON STOCK (2.1%)
- -------------------
+Berg Electronics Holdings Corp. ............................ 30,820 184,920
Borg Warner Automotive, Inc. ............................... 6,100 194,437
+ Capital Gaming International, Inc.......................... 13,335 8,334
+Dr. Pepper Bottling Holdings, Inc.,
Class A................................................... 53,000 212,000
+Dr. Pepper Bottling Holdings, Inc.,
Class B................................................... 7,000 28,000
+ Gaylord Containers Corp., Class A.......................... 7,500 60,465
+ Loehmanns Holdings, Inc., Class B.......................... 11,080 16,620
+ Protection One, Inc........................................ 4,200 42,000
-----------
TOTAL COMMON STOCK
(Cost $550,143).................................................... 746,776
-----------
PREFERRED STOCK (1.3%)
- ----------------------
Berg Electronics Holdings Corp.............................. 16,726 468,328
+ Loehmanns Holdings, Inc. Sr A.............................. 20,890 4,178
-----------
TOTAL PREFERRED STOCK
(Cost $300,605).................................................... 472,506
-----------
</TABLE>
14
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
WARRANTS (0.2%)
- ---------------
+ Belle Casinos, Inc........................................ 350 $ 4
+ Capital Gaming International, Inc......................... 11,375 1,058
+ Elsinore Corp............................................. 26,647 5,329
+ Loehmanns Holdings, Inc................................... 31,735 31,735
+ President Riverboat Casinos, Inc.......................... 4,415 4,415
+ Wright Medical Technology, Inc............................ 2,676 44,162
-----------
TOTAL WARRANTS
(Cost $106,879)................................................... 86,703
-----------
TOTAL INVESTMENTS (100.0%)
(Cost $35,804,026) (a) (b)........................................ $35,703,814
===========
</TABLE>
- -------
+ Non-income Producing.
++ Effective Yield.
@ Restricted Securities.
# Securities in default.
(a) Cost for Federal income tax purposes.
(b) At December 31, 1995 the excess of value over tax cost was $1,795,290, and
the excess of tax cost over value was $1,895,502.
The Standard & Poor's Corporation ratings are the most recent ratings
available at December 31, 1995. These ratings have not been verified by the
Independent Accountants and, therefore, are not covered by the report of
Independent Accountants.
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1995
THE GROWTH EQUITY FUND
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
COMMON STOCK (97.9%)
- --------------------
AEROSPACE - DEFENSE (2.6%)
Loral Corp. ................................................ 30,000 $ 1,061,250
United Technologies Corp. .................................. 15,000 1,423,125
-----------
2,484,375
-----------
AIRLINES (1.2%)
Delta Air Lines, Inc.. ..................................... 15,000 1,108,125
-----------
BROADCAST MEDIA (2.0%)
Capital Cities/ABC, Inc. ................................... 15,000 1,850,625
-----------
BEVERAGES - SOFT DRINKS (2.1%)
Pepsico, Inc. .............................................. 35,000 1,955,625
-----------
CHEMICALS (2.3%)
Du Pont (E.I.) de Nemours & Co. ............................ 20,000 1,397,500
Sigma Aldrich Corp. ........................................ 15,000 744,375
-----------
2,141,875
-----------
COMMERCIAL SERVICES (1.3%)
Paychex, Inc. .............................................. 25,000 1,242,188
-----------
COMMUNICATION EQUIPMENT (1.8%)
Bellsouth Corp. ............................................ 20,000 870,000
SBC Communications, Inc. ................................... 15,000 862,500
-----------
1,732,500
-----------
COMPUTER SOFTWARE & SERVICES (8.5%)
First Data Corp. ........................................... 30,000 2,006,250
+ Fiserv, Inc. .............................................. 35,000 1,047,812
General Motors Corp. Class E................................ 30,000 1,560,000
International Business Machines Corp. ...................... 10,000 917,500
+ Microsoft Corp. ........................................... 15,000 1,317,187
+ Seagate Technology, Inc. .................................. 25,000 1,187,500
-----------
8,036,249
-----------
COMPUTER SYSTEMS (5.7%)
+ Adaptec, Inc. ............................................. 25,000 1,025,000
+Cabletron Systems, Inc. .................................... 15,000 1,215,000
+Cisco Systems............................................... 10,000 746,875
+Compaq Computer Corp. ...................................... 35,000 1,680,000
+Computer Science Corp. ..................................... 10,000 702,500
-----------
5,369,375
-----------
COSMETICS (0.8%)
Gilliette Co. .............................................. 15,000 781,875
-----------
DRUGS & PHARMACEUTICALS (11.5%)
+Amgen, Inc. ................................................ 30,000 1,779,375
Johnson & Johnson, Inc. .................................... 25,000 2,140,625
Merck & Company, Inc. ...................................... 30,000 1,972,500
Pfizer, Inc. ............................................... 35,000 2,205,000
Schering Plough Corp. ...................................... 25,000 1,368,750
Smithkline Beecham.......................................... 25,000 1,387,500
-----------
10,853,750
-----------
ELECTRICAL EQUIPMENT (2.5%)
General Electric Co. ....................................... 15,000 1,080,000
+Vishay Intertechnology, Inc. ............................... 40,000 1,260,000
-----------
2,340,000
-----------
ELECTRONICS (2.3%)
Hewlett Packard Co. ........................................ 15,000 1,256,250
Motorola, Inc. ............................................. 10,000 570,000
+Ultratech Stepper, Inc. .................................... 15,000 386,250
-----------
2,212,500
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
ELECTRONICS - INSTRUMENTS (0.9%)
Computer Associates International 15,000 $ 853,125
-----------
ELECTRONICS - SEMICONDUCTORS (5.2%)
Intel Corp. ............................................... 25,000 1,420,313
+KLA Instruments Corp. ..................................... 35,000 914,375
Micron Technology, Inc. ................................... 30,000 1,188,750
+Teradyne, Inc. ............................................ 35,000 875,000
Texas Instruments, Inc. ................................... 10,000 517,500
-----------
4,915,938
-----------
ENTERTAINMENT (1.1%)
Mattel, Inc. .............................................. 35,000 1,076,250
-----------
FOODS (1.5%)
CPC International, Inc. ................................... 20,000 1,372,500
-----------
FINANCIAL SERVICES (6.7%)
Advanta Corp. ............................................. 35,000 1,277,500
American Express Co. ...................................... 25,000 1,034,375
First USA, Inc. ........................................... 20,000 887,500
Franklin Resources, Inc. .................................. 15,000 755,625
Mercury Finance Co. ....................................... 60,000 795,000
+Olympic Financial Ltd ..................................... 35,000 570,938
Wells Fargo & Co. ......................................... 5,000 1,080,000
-----------
6,400,938
-----------
HEALTH CARE - MISCELLANEOUS (1.5%)
+Idexx Lab. Corp. .......................................... 30,000 1,402,500
-----------
HOSPITAL MANAGEMENT (1.2%)
+Healthsouth Corp. ......................................... 40,000 1,165,000
-----------
HOUSEHOLD PRODUCTS (1.3%)
Procter & Gamble Co. ...................................... 15,000 1,245,000
-----------
INSURANCE (1.5%)
American International Group, Inc. ........................ 15,000 1,387,500
-----------
LIFE INSURANCE (1.4%)
United Healthcare Corp. ................................... 20,000 1,310,000
-----------
MACHINERY - DIVERSIFIED (1.4%)
Caterpillar Inc. .......................................... 15,000 881,250
+Kulicke & Soffa Industries, Inc. .......................... 20,000 462,500
-----------
1,343,750
-----------
MAJOR REGIONAL BANK (2.3%)
Green Tree Financial, Corp. ............................... 40,000 1,055,000
MBNA Corp. ................................................ 30,000 1,106,250
-----------
2,161,250
-----------
MANUFACTURING - DIVERSIFIED (0.7%)
Eastman Kodak Co. ......................................... 10,000 670,000
-----------
MEDICAL (1.1%)
+St. Jude Medical, Inc. .................................... 25,000 1,071,875
-----------
METALS - DIVERSIFIED (0.8%)
Aluminum Company of America ............................... 15,000 793,125
-----------
METALS - MISCELLANEOUS (1.0%)
Kennametal, Inc. .......................................... 30,000 952,500
-----------
MISCELLANEOUS - SERVICES (1.0%)
Danka Business Systems..................................... 25,000 923,437
-----------
MISCELLANEOUS - FINANCIAL (0.8%)
First Bank System, Inc. ................................... 15,000 744,375
-----------
MONEY CENTER BANKS (1.1%)
Citicorp .................................................. 15,000 1,008,750
-----------
</TABLE>
16
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
MULTI-LINE INSURANCE (1.8%)
Aetna Life & Casualty Co. .................................. 15,000 $ 1,038,750
Allstate Corp. ............................................. 15,000 616,875
-----------
1,655,625
-----------
NATURAL GAS (2.3%)
Halliburton Co. ............................................ 25,000 1,265,625
Williams Cos. Inc. ......................................... 20,000 877,500
-----------
2,143,125
-----------
OFFICE EQUIPMENT & SUPPLIES (1.0%)
Alco Standard Corp. ........................................ 20,000 912,500
-----------
OIL - INTEGRATED INTERNATIONAL (3.1%)
Amoco Corp. ................................................ 15,000 1,078,125
Chevron Corp. .............................................. 20,000 1,050,000
Texaco, Inc. ............................................... 10,000 785,000
-----------
2,913,125
-----------
OIL SERVICE (1.1%)
Schlumberger Ltd. .......................................... 15,000 1,038,750
-----------
PAPER & FOREST PRODUCTS (0.8%)
International Paper Co. .................................... 20,000 757,500
-----------
PUBLISHING & PRINTING (0.8%)
+ Scholastic Corp. .......................................... 10,000 778,750
-----------
RAILROADS (1.5%)
Burlington Northern, Santa Fe Corp. ........................ 10,000 780,000
Conrail, Inc. .............................................. 10,000 700,000
-----------
1,480,000
-----------
RESTAURANTS (2.4%)
+Lone Star Steakhouse ....................................... 30,000 1,149,375
McDonald's Corp. ........................................... 25,000 1,128,125
-----------
2,277,500
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C>
RETAIL - SPECIALTY (0.8%)
+Officemax,Inc. .......................................... 35,000 $ 783,125
-----------
SHOES (1.8%)
Nike, Inc. .............................................. 25,000 1,740,625
-----------
TELECOMMUNICATIONS (2.3%)
AT&T Corp. .............................................. 15,000 971,250
NYNEX Corp. ............................................. 15,000 810,000
+U.S. Robotics Corp. ..................................... 5,000 439,375
-----------
2,220,625
-----------
TOBACCO (1.1%)
UST, Inc. ............................................... 30,000 1,001,250
-----------
TOTAL COMMON STOCK
(Cost $80,211,157)................................................. 92,609,375
-----------
SHORT TERM INVESTMENTS (2.1%)
Temporary Investment Fund, Inc. (Cost $1,961,039)........ 1,961,039 1,961,039
-----------
TOTAL INVESTMENTS (100.0%)
(Cost $82,172,196) (a) (b)......................................... $94,570,414
===========
</TABLE>
- -------
+ Non-Income Producing.
(a) Cost for Federal income tax purposes.
(b) At December 31, 1995 the excess of value over tax cost was $15,477,346, and
the excess of tax cost over value was $3,079,128.
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1995
THE VALUE EQUITY FUND
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
COMMON STOCK (84.3%)
- --------------------
AEROSPACE & DEFENSE (6.7%)
Allied-Signal, Inc. ..................................... 52,000 $ 2,470,000
+Coltec Industries, Inc. ................................. 155,000 1,801,875
McDonnell Douglas Corp. ................................. 46,500 4,278,000
------------
8,549,875
------------
AUTOMOTIVE PARTS - EQUIPMENT (1.5%)
+Varity Corp. ............................................ 50,000 1,856,250
------------
BANK & TRUST (5.6%)
Citicorp ................................................ 57,000 3,833,250
First Interstate Bancorp ................................ 24,000 3,276,000
------------
7,109,250
------------
CHEMICALS (4.2%)
Dupont (E.I.) de Nemours & Co. .......................... 30,000 2,096,250
Hercules, Inc. .......................................... 21,000 1,183,875
Monsanto Co. ............................................ 17,000 2,082,500
------------
5,362,625
------------
CONGLOMERATES (2.4%)
General Electric Co. .................................... 42,000 3,024,000
------------
CONSUMER PRODUCTS (5.3%)
Avon Products, Inc. ..................................... 25,000 1,884,375
Mattel, Inc. ............................................ 91,625 2,817,469
Hasbro, Inc. ............................................ 65,000 2,015,000
------------
6,716,844
------------
ELECTRONICS (1.9%)
Arrow Electronics, Inc. ................................. 56,000 2,415,000
------------
FINANCIAL SERVICES (6.6%)
American Express Co. .................................... 51,000 2,110,125
Federal Home Loan Mortgage Corp. ........................ 76,000 6,346,000
------------
8,456,125
------------
HEALTHCARE (4.2%)
Columbia HCA Healthcare Corp. ........................... 45,000 2,283,750
Tenet Healthcare Corp. .................................. 145,000 3,008,750
------------
5,292,500
------------
INSURANCE (19.9%)
Ace Ltd. ................................................ 92,000 3,657,000
AFLAC, Inc. ............................................. 33,250 1,442,219
American International Group, Inc. ...................... 37,500 3,468,750
Exel Ltd. ............................................... 103,800 6,331,800
General Re Corp. ........................................ 9,000 1,395,000
Progressive Corp., Ohio ................................. 63,000 3,079,125
Prudential Reinsurance Holdings, Inc. ................... 150,000 3,506,250
Transamerica Corp. ...................................... 33,000 2,404,875
------------
25,285,019
------------
MANUFACTURING (0.7%)
Nokia Corp. ............................................. 24,000 933,000
------------
MINING (1.0%)
Freeport McMoran Copper & Gold, Inc. (Class B) .......... 47,016 1,322,325
------------
OIL (2.3%)
Triton Energy Corp. ..................................... 52,000 2,983,500
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
PAPER & PAPER PRODUCTS (3.1%)
Champion International Corp. ............................ 42,000 $ 1,764,000
Temple Inland, Inc. ..................................... 49,000 2,162,125
------------
3,926,125
------------
PHARMACEUTICALS (4.2%)
Becton, Dickinson & Co. ................................. 55,000 4,125,000
Warner Lambert Co. ...................................... 13,000 1,262,625
------------
5,387,625
------------
RAILROADS (2.2%)
CSX Corp. ............................................... 60,000 2,737,500
------------
RETAIL (4.1%)
May Department Stores Co. ............................... 124,000 5,239,000
------------
TECHNOLOGY (1.9%)
Intel Corp. ............................................. 43,000 2,442,937
------------
TELECOMMUNICATIONS (2.3%)
Sprint Corp. ............................................ 72,250 2,880,969
------------
TEXTILES & APPAREL (2.7%)
Shaw Industries, Inc. ................................... 140,000 2,065,000
Warnaco Group, Inc. ..................................... 54,000 1,350,000
------------
3,415,000
------------
TRANSPORTATION (1.5%)
+AMR Corp. ............................................... 26,000 1,930,500
------------
TOTAL COMMON STOCK
(Cost $79,385,603)....................................... 107,265,969
------------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000)
-------- ------
COMMERCIAL PAPER (13.4%)
- -------------------------
<S> <C> <C> <C>
Beneficial Corp. 5.80%............................ 01/24/96 $2,200 2,191,848
Ford Motor Credit Co. 5.60%....................... 01/10/96 3,900 3,894,540
Household Finance Corp. 5.77%..................... 01/10/96 3,200 3,195,384
Merrill Lynch & Co., Inc. 5.80%................... 01/03/96 3,800 3,798,775
Norwest Financial Corp. 5.73%..................... 01/03/96 4,000 3,998,727
------------
TOTAL COMMERCIAL PAPER
(Cost $17,079,274)................................................ 17,079,274
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------
<S> <C> <C>
SHORT TERM INVESTMENTS (2.3%)
- -----------------------------
Temporary Investment Fund, Inc. (Cost $2,912,263)....... 2,912,263 2,912,263
------------
TOTAL INVESTMENTS (100.0%) (Cost $99,377,140) (a) (b) ............. $127,257,506
============
</TABLE>
- -------
+ Non-income Producing.
(a) Cost for Federal income tax purposes.
(b) At December 31, 1995 the excess of value over tax cost was $29,903,018, and
the excess of tax cost over value was $2,022,652.
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1995
THE FLEXIBLY MANAGED FUND
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
COMMON STOCK (50.2%)
- --------------------
AEROSPACE & DEFENSE (0.9%)
+Litton Industries, Inc. .................................. 13,000 $ 578,500
Teledyne, Inc. ........................................... 70,000 1,793,750
------------
2,372,250
------------
BUILDING & REAL ESTATE (0.3%)
Debartolo Realty ......................................... 20,000 260,000
Skyline Corp. ............................................ 26,000 539,500
------------
799,500
------------
CHEMICALS (1.1%)
Great Lakes Chemical Corp. ............................... 32,000 2,304,000
Petrolite Corp. .......................................... 17,000 484,500
------------
2,788,500
------------
COMPUTERS (0.5%)
IBM France ............................................... 14,525 1,299,055
------------
CONSTRUCTION (1.4%)
+Manville Corp. ........................................... 280,000 3,675,000
------------
DRUGS (0.4%)
+Pharmacia & Upjohn, Inc................................... 26,100 1,011,375
------------
DRUGS & COSMETICS (0.7%)
Schering Plough Corp. .................................... 34,000 1,861,500
------------
ELECTRIC UTILITIES (4.9%)
Centerior Energy Corp. ................................... 350,000 3,106,250
Entergy Corp. ............................................ 210,000 6,142,500
+Public Service Co. of New Mexico ......................... 150,000 2,643,750
SCE Corp. ................................................ 65,000 1,153,750
------------
13,046,250
------------
ENERGY SERVICES (0.4%)
Helmerich & Payne, Inc. .................................. 40,000 1,190,000
------------
EXPLORATION & PRODUCTION (0.0%)
Cross Timbers Oil Co. .................................... 2,000 35,250
------------
FINANCIAL SERVICES (3.9%)
American Express Co. ..................................... 72,000 2,979,000
Federal National Mortgage Assoc. ......................... 20,000 2,482,500
Green Point Financial Corp. .............................. 7,000 187,250
Student Loan Marketing Assoc. ............................ 70,000 4,611,250
------------
10,260,000
------------
FOREST PRODUCTS (1.5%)
International Paper Co. .................................. 26,000 984,750
Weyerhaeuser Co. ......................................... 70,000 3,027,500
------------
4,012,250
------------
GENERAL MERCHANDISERS (0.2%)
+Hills Stores Co. ......................................... 60,000 592,500
------------
HOSPITAL SUPPLIES/HOSPITAL MANAGEMENT (0.0%)
+Lynx Therapeutics, Inc. .................................. 1,620 324
------------
INSURANCE (5.5%)
Fund American Enterprises Holdings, Inc. ................. 20,000 1,490,000
Home Beneficial Corp. .................................... 25,000 600,000
+Kemper Corp. ............................................. 38,000 1,885,750
Loews Corp. .............................................. 100,000 7,837,500
Unitrin, Inc. ............................................ 40,000 1,920,000
Zurich Reinsurance ....................................... 30,000 911,250
------------
14,644,500
------------
INTEGRATED PETROLEUM - DOMESTIC (5.0%)
Atlantic Richfield Co. ................................... 35,000 3,876,250
Kerr McGee Corp. ......................................... 6,000 381,000
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
Murphy Oil Corp. ......................................... 80,000 $ 3,320,000
+Oryx Energy Co. .......................................... 70,000 936,250
Pennzoil Co. ............................................. 29,000 1,225,250
Sun Company, Inc. ........................................ 30,000 821,250
Union Texas Petroleum Holding, Inc. ...................... 110,000 2,131,250
Unocal Corp. ............................................. 16,000 466,000
------------
13,157,250
------------
INTEGRATED PETROLEUM (1.7%)
International Texaco, Inc. ............................... 58,000 4,553,000
------------
MANUFACTURING (0.1%)
A. T. Cross Co., Class A ................................. 26,000 393,250
------------
MEDIA & COMMUNICATIONS (6.1%)
+Chris-Craft Industries, Inc. ............................. 65,000 2,811,250
Meredith Corp. ........................................... 50,000 2,093,750
New York Times Co., Class A .............................. 230,000 6,813,750
Washington Post Co., Class B ............................. 16,000 4,512,000
------------
16,230,750
------------
MINING (2.5%)
+Hecla Mining Co. ......................................... 60,000 412,500
Homestake Mining Co. ..................................... 80,000 1,250,000
Newmont Mining Corp. ..................................... 103,466 4,681,837
Santa Fe Pacific Gold Corp. .............................. 25,000 303,125
------------
6,647,462
------------
MISCELLANEOUS BUSINESS SERVICES (0.2%)
Harland, John H. Co. ..................................... 22,000 459,250
------------
MISCELLANEOUS CONSUMER DURABLES (2.0%)
Corning, Inc. ............................................ 45,000 1,440,000
Polaroid Corp. ........................................... 80,000 3,790,000
------------
5,230,000
------------
MISCELLANEOUS CONSUMER PRODUCTS (1.8%)
Philip Morris Companies, Inc. ............................ 52,000 4,706,000
------------
PETROLEUM & GAS (0.7%)
Ciba Geigy AG ............................................ 2,200 1,936,183
------------
PETROLEUM - INTERNATIONAL (0.8%)
Petro Canada ............................................. 185,000 2,134,302
------------
PHARMACEUTICALS (3.3%)
+Genetech, Inc. Special Common ............................ 165,000 8,745,000
------------
PUBLISHING (0.4%)
Times Mirror Co. Series A ................................ 30,000 1,016,250
------------
SPECIALTY MERCHANDISERS (0.8%)
Petrie Stores Corp. ...................................... 785,477 2,160,062
------------
TRANSPORTATION SERVICES (2.2%)
Overseas Shipholding Group, Inc. ......................... 55,000 1,045,000
PHH Corp. ................................................ 70,000 3,272,500
Ryder System, Inc. ....................................... 60,000 1,485,000
------------
5,802,500
------------
UTILITIES - ELECTRIC (0.3%)
Niagara Mohawk Power Corp. ............................... 80,000 770,000
------------
MISCELLANEOUS (0.6%)
Lonrho Ltd. .............................................. 301,935 825,190
+Republic of Austria Stock Index Growth Notes.............. 37,100 653,888
------------
1,479,078
------------
TOTAL COMMON STOCK
(Cost $106,778,253)............................................... 133,008,591
------------
</TABLE>
19
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1995
THE FLEXIBLY MANAGED FUND, CONT'D
<TABLE>
<CAPTION>
SHARES VALUE
------------ ------------
<S> <C> <C>
PREFERRED STOCK (6.5%)
- ----------------------
Cleveland Electric Illum. 7.00% ..................... 22,500 $ 1,586,250
Cleveland Electric Illum. 8.80% ..................... 1,850 1,628,000
Cleveland Electric Illum. 9.00% ..................... 2,650 2,358,500
Gulf States Utilities Co. Depositary 7.55% .......... 12,426 596,448
@ Kemper Corp. 5.75% ................................. 100,000 5,218,700
Manville Corp. Series B $2.70 ....................... 145,000 3,643,125
Niagara Mohawk Power Corp.
Series A 6.50% ..................................... 16,700 269,288
Niagara Mohawk Power Corp.
Series C 7.20% ..................................... 22,000 415,250
Rouse Corp. 6.50% Convertible ....................... 30,000 1,548,750
Teledyne, Inc. Preferred Series E $1.20 ............. 2,790 40,106
------------
TOTAL PREFERRED STOCK
(Cost $15,980,404)................................................ 17,304,417
------------
<CAPTION>
NUMBER
OF CONTRACTS
------------
<S> <C> <C>
PUT OPTIONS (0.1%)
- ------------------
+Aud $85 May 18, 1996 ................................ 50 54,375
+Guidant $30 January 20, 1996 ........................ 40 250
+IBM $105 April 20, 1995 ............................. 20 28,250
+IBM $110 April 20, 1996 ............................. 20 37,250
+IBM $110 January 20, 1996 ........................... 20 40,000
+IBM $120 January 20, 1996 ........................... 20 56,500
+Kerr McGee $65 April 20, 1996 ....................... 30 9,938
+Times Mirror $35 June 22, 1996 ...................... 30 8,062
+Upjohn $55 April 20, 1996 ........................... 20 5,125
------------
TOTAL PUT OPTIONS
(Cost $210,000) .................................................. 239,750
------------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000)
-------- ------ --------
<S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS (2.7%)
- --------------------------------
U.S. Treasury Notes 4.625% .............. 02/15/96 N/A $ 500 499,685
4.625% ................................. 02/29/96 N/A 1,500 1,498,830
4.25% .................................. 05/15/96 N/A 500 498,205
5.75% .................................. 10/31/97 N/A 2,500 2,524,225
7.375% ................................. 11/15/97 N/A 2,000 2,075,620
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $6,890,313)................................................. 7,096,565
------------
COMMERCIAL PAPER (24.2%)
- ------------------------
Abbott Labs 5.75% ....................... 01/16/96 AAA 9,600 9,577,000
Asset Securitization Coop Corp.
5.75% .................................. 01/19/96 A-1+ 2,085 2,079,247
5.70% .................................. 02/02/96 A-1+ 6,000 5,970,075
Ciesco 5.65% ............................ 02/09/96 AAA 5,900 5,864,246
Ciesco, L.P. 5.73% ...................... 01/05/96 AAA 3,180 3,178,457
Corporate Asset Funding Co.
5.70% .................................. 01/23/96 AAA 1,190 1,185,978
5.54% .................................. 02/27/96 AAA 9,700 9,615,014
Falcon Asset Securitization 5.73% ....... 01/18/96 A-1 3,285 3,276,111
5.73% .................................. 01/19/96 A-1 500 498,625
5.74% .................................. 01/19/96 A-1 970 967,328
Heinz (H.J) Co. 5.60% ................... 02/05/96 A+ 7,500 7,459,167
Home Depot 5.90% ........................ 01/05/96 A+ 2,600 2,598,296
Met Life Funding Corp. 5.60% ............ 01/22/96 AA+ 650 647,877
Mobil 5.80% ............................. 01/19/96 AA 11,000 10,968,100
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------- ------------
<S> <C> <C> <C> <C>
Preferred Receivable Fund Co. 6.00% ..... 01/04/96 A-1 $ 300 $ 299,850
------------
TOTAL COMMERCIAL PAPER
(Cost $64,183,422)............................................... 64,185,371
------------
CONVERTIBLE BONDS (16.1%)
- -------------------------
Alza Corp. 5.0908%++ .................... 07/14/14 BBB- 4,500 1,802,475
Automatic Data Processing, Inc.
5.1212%++ .............................. 02/20/12 AA 26,000 12,480,000
CHUBB Capital Euro Bond 6.00% ........... 05/15/98 AA 2,400 2,693,280
Comcast Corp. 3.375% .................... 09/09/05 B+ 1,300 1,228,500
Cooper Industries, Inc. 7.05% ........... 01/01/15 BBB+ 594 611,820
Cross Timbers Oil Co. 5.25% ............. 11/01/03 B 1,200 1,118,064
Fifth Third Bank Conv. 4.25% ............ 01/15/98 A+ 400 462,264
@ Food Lion, Inc. 5.00% .................. 06/01/03 NR 1,300 1,240,200
@ Homestake Mining Co. 5.50% ........... 06/23/00 BBB- 1,400 1,442,000
Lonhro Conv. Euro Bond 6.00% ............ 02/27/04 NR 500 760,893
Manville Deferred Interest Subordinate
Debenture 9.00% ........................ 12/31/03 B 709 709,000
McKesson Corp. 4.50% .................... 03/01/04 A 350 325,990
Outboard Marine Corp. 7.00% ............. 07/01/02 B+ 1,000 1,040,000
Pennzoil Co. 4.75% ...................... 10/01/03 BBB 1,000 1,007,800
Potomac Electric Debenture 5.00% ........ 09/01/02 A- 1,850 1,729,750
Price Co. Subordinated Debenture 6.75% .. 03/01/01 BBB 1,300 1,326,000
5.50% .................................. 02/28/12 BBB 1,800 1,705,500
Rouse Company Euro Bond 5.75% ........... 07/23/02 BBB- 3,400 3,400,000
Turner Broadcasting 7.1695%++ ........... 02/13/07 BB- 4,500 2,056,320
UBS Finance 2.00% ....................... 12/15/00 AAA 300 300,750
U.S. West, Inc. 7.0646%++ ............... 06/25/11 A 7,500 2,625,000
WMX Technologies 2.00% .................. 01/24/05 A 3,000 2,595,000
------------
TOTAL CONVERTIBLE BONDS
(Cost $39,708,534) .............................................. 42,660,606
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
-----------
<S> <C> <C> <C> <C>
SHORT TERM IN-
VESTMENTS
(0.2%)
- --------------
Temporary
Investment Fund,
Inc.
(Cost $555,631).. 555,631 555,631
------------
TOTAL INVESTMENTS (100%)
(Cost $234,306,557) (a)
(b)....................... $265,050,931
============
</TABLE>
- -------
+ Non-income producing.
++ Effective Yield.
@ Restricted security under Rule 144A.
(a) Cost for Federal income tax purposes.
(b) At December 31, 1995 the excess of value over tax cost was $35,296,627, and
the excess of tax cost over value was $4,552,253.
The Standard & Poors corporation ratings are the most recent ratings
available at December 31, 1995. These ratings have not been verified by the
Independent Accountants and, therefore, are not covered by the Report of
Independent Accountants.
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1995
THE INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
COMMON STOCK (94.2%)
- --------------------
AUSTRALIA (3.4%)
Broken Hill Proprietary Co. Limited........................ 65,948 $ 932,231
News Corp. Limited......................................... 120,577 644,106
Westpac Banking Corp....................................... 170,584 756,403
-----------
2,332,740
-----------
BRAZIL (0.1%)
Centrais Eletrocas Brasileiras SA (ADR).................... 5,000 67,500
-----------
FINLAND (0.6%)
Cultor OY, Series II....................................... 10,000 413,983
-----------
FRANCE (6.8%)
AXA SA..................................................... 25,000 1,684,533
+ Axime..................................................... 2,600 200,143
Compagnie Generale Des Eaux................................ 5,628 561,823
Credit Local De France SA.................................. 11,950 956,488
LVMH (Moet-Hennessy Louis Vuitton)......................... 2,200 458,193
Total SA - B............................................... 7,000 472,384
Valeo SA................................................... 8,000 370,475
-----------
4,704,039
-----------
GERMANY (6.5%)
Bayer AG - Bearer.......................................... 1,500 398,271
Bayerische Hypotheken-und Wechsel-Bank AG.................. 15,000 378,399
BMW AG..................................................... 600 309,580
Deutsche Bank AG........................................... 7,000 332,380
Gehe AG.................................................... 850 435,609
+ Gehe AG - New............................................. 150 74,833
Mannesmann AG.............................................. 1,600 509,273
+ Muenchener Rueckvers E95.................................. 14 30,124
Muenchener Rueckversicherungs-Gesellschaft................. 150 272,452
+ SGL Carbon AG............................................. 10,000 780,923
Siemens AG................................................. 1,000 549,435
Veba AG.................................................... 10,000 428,113
-----------
4,499,392
-----------
HONG KONG (5.9%)
Bank of East Asia Limited.................................. 277,479 995,815
Cheung Kong Holdings Limited............................... 115,000 700,494
Hutchison Whampoa.......................................... 100,000 609,125
Sun Hung Kai Properties Limited............................ 210,000 1,717,772
-----------
4,023,206
-----------
IRELAND (2.0%)
Allied Irish Banks PLC..................................... 84,867 462,566
CRH PLC.................................................... 60,000 452,809
Greencore Group PLC........................................ 55,607 484,418
-----------
1,399,793
-----------
ITALY (0.8%)
Danieli & Co............................................... 132,000 357,318
Stet (Societa Finanziaria Telefonica)...................... 80,000 226,125
-----------
583,443
-----------
JAPAN (29.8%)
Amada Metrecs.............................................. 20,000 319,396
Bridgestone Corp........................................... 50,000 793,651
Canon Inc.................................................. 60,000 1,085,947
Futaba Industrial.......................................... 30,000 490,708
Hitachi.................................................... 140,000 1,409,214
Ito-Yokado Co.............................................. 12,000 738,676
Jaccs Co. Limited.......................................... 30,000 310,685
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
Jusco Co................................................... 30,000 $ 781,069
Kyocera Corp............................................... 9,000 668,118
Marubeni Corp.............................................. 95,000 513,986
Mitsubishi Bank............................................ 11,000 258,711
Mitsubishi Electric Corp................................... 100,000 719,125
Mitsubishi Heavy Industries................................ 170,000 1,354,142
Mitsui & Co................................................ 50,000 438,444
Murata Manufacturing Co.................................... 18,000 662,021
Nikko Securities Co........................................ 25,000 321,816
Nippon Steel Corp.......................................... 100,000 342,625
Nippon Telegraph & Telephone Corp.......................... 152 1,228,417
Nomura Securities Co. Limited.............................. 35,000 762,195
Omron Corp................................................. 65,000 1,497,290
Promise Co. Limited........................................ 8,000 384,824
Rohm Co.................................................... 20,000 1,128,533
SMC........................................................ 8,000 578,397
Sony Corp.................................................. 8,700 521,225
Suzuki Motor Corp.......................................... 47,000 523,132
Taisho Pharmaceutical Co................................... 30,000 592,335
Toda Construction Co....................................... 35,000 303,184
Tokyo Broadcasting System.................................. 20,000 329,075
Tokyo Denpa Co. Limited.................................... 7,000 327,913
Tokyo Electron Limited..................................... 10,000 387,147
Yamato Transport Co. Limited............................... 60,000 714,286
-----------
20,486,287
-----------
MALAYSIA (3.2%)
Genting Berhad............................................. 75,000 626,132
Malayan Banking Berhad..................................... 44,500 375,010
Pilecon Engineering Berhad................................. 150,000 150,626
Sime Darby Berhad.......................................... 132,000 350,870
Telekom Malaysia Berhad.................................... 50,000 389,856
United Engineers Berhad.................................... 50,000 318,973
-----------
2,211,467
-----------
NETHERLANDS (2.9%)
Aegon N.V. (ADR)........................................... 9,495 417,780
Akzo Nobel N.V. (ADR)...................................... 4,000 232,000
Elsevier N.V............................................... 80,000 1,066,866
Polygram N.V. (ADR)........................................ 5,000 262,500
-----------
1,979,146
-----------
PHILIPPINES (0.6%)
Manila Electric Co. - B.................................... 52,500 429,144
-----------
SINGAPORE (4.2%)
City Developments.......................................... 66,000 480,696
Cycle & Carriage Limited................................... 50,000 498,515
Development Bank of Singapore Limited (Foreign)............ 10,000 124,452
Jardine Matheson Holdings Limited.......................... 78,730 539,301
Keppel Corp. Limited....................................... 50,000 445,482
United Overseas Bank Limited (Foreign)..................... 85,000 817,423
-----------
2,905,869
-----------
SPAIN (1.5%)
Banco Intercontinental Espanol SA.......................... 2,600 253,868
Banco Popular Espanol SA................................... 2,500 462,764
Empresa Nacional De Electricidad SA (ADR).................. 3,500 200,375
Omsa Alimentacion SA....................................... 24,000 89,764
-----------
1,006,771
-----------
</TABLE>
21
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1995
THE INTERNATIONAL EQUITY FUND, CONT'D
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
SWEDEN (2.3%)
Astra AB B - F............................................. 25,000 $ 989,540
+ Foreningsbanken AB A...................................... 125,000 353,676
Hennes & Mauritz AB B...................................... 4,000 222,741
-----------
1,565,957
-----------
SWITZERLAND (8.1%)
Nestle AG R................................................ 500 553,195
+ Pharma Vision 2000 Limited B.............................. 230 1,214,515
Roche Holding AG-Genusschein............................... 280 2,215,382
Swiss Bank Corp. Schweizerischer Bankverein B.............. 1,000 408,393
Union Bank of Switzerland B................................ 1,102 1,194,399
-----------
5,585,884
-----------
THAILAND (0.8%)
Bangkok Bank Public Co. Limited (Foreign).................. 30,000 364,430
Siam Cement Co. Limited (Foreign).......................... 3,000 166,256
-----------
530,686
-----------
UNITED KINGDOM (14.7%)
BAA PLC.................................................... 50,301 378,831
Barclays PLC............................................... 58,067 666,349
BTR PLC.................................................... 125,000 638,607
Dixons Group PLC........................................... 183,513 1,270,952
General Accident PLC....................................... 70,000 707,631
GKN PLC.................................................... 100,852 1,219,971
HSBC Holdings PLC.......................................... 100,719 1,573,392
Lloyds Abbey Life PLC...................................... 100,000 698,779
Powergen PLC............................................... 50,463 417,276
Powerscreen International PLC.............................. 115,000 691,986
Rank Organisation PLC (REGD)............................... 110,000 795,987
Reuters Holdings PLC....................................... 60,000 549,707
Vodafone Group PLC......................................... 125,819 450,344
-----------
10,059,812
-----------
TOTAL COMMON STOCK
(Cost $53,509,422)......................................... 64,785,119
-----------
WARRANTS (2.4%)
- ---------------
+ Alusuisse 11/13/96........................................ 55,000 312,365
+ Bank Vision 01/15/97...................................... 15,000 409,694
+ Pharma Vision 10/10/96.................................... 3,000 306,945
+ Roche Holding 01/31/97.................................... 2,500 217,853
+ SCHW Ruckver 09/20/96..................................... 15,000 360,921
-----------
TOTAL WARRANTS
(Cost $1,414,485).......................................... 1,607,778
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000)
-------- -----
<S> <C> <C> <C>
CORPORATE BONDS (0.0%)
- ----------------------
Michelin France 2.50%
(Cost $8,599)...................................... 01/01/01 $10 10,785
-----------
</TABLE>
<TABLE>
<S> <C> <C>
SHARES VALUE
--------- -----------
SHORT TERM INVESTMENTS (3.4%)
- -----------------------------
Temporary Cash Investment Fund, Inc..................... 1,174,747 $ 1,174,747
Temporary Investment Fund, Inc.......................... 1,174,745 1,174,745
-----------
TOTAL SHORT TERM INVESTMENTS
(Cost $2,349,492)................................................. 2,349,492
-----------
TOTAL INVESTMENTS (100.0%)
(Cost $57,281,998) (a) (b)........................................ $68,753,174
===========
</TABLE>
- -------
+ Non-income Producing.
(a) Cost for Federal income tax purposes.
(b) At December 31, 1995 the excess of value over tax cost was $11,917,425, and
the excess of tax cost over value was $446,249.
ADR - American Depository Receipt
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1995
THE SMALL CAPITALIZATION FUND
<TABLE>
<CAPTION>
SHARES VALUE
------ ----------
<S> <C> <C>
COMMON STOCK (71.8%)
- --------------------
ADVERTISING (4.9%)
+ Katz Media Group, Inc....................................... 7,000 $ 123,375
True North Communications, Inc............................... 6,000 111,000
----------
234,375
----------
AUTOMOBILES - REPLACEMENT PARTS (0.9%)
+ Jason, Inc.................................................. 2,100 14,044
Stant Corp................................................... 3,000 28,500
----------
42,544
----------
BANKING (0.6%)
+ MTL, Inc.................................................... 2,000 27,500
----------
BUILDING PRODUCTS (4.7%)
Carlisle Companies, Inc...................................... 2,000 80,750
+ D.R. Horton, Inc............................................ 2,652 31,161
+ Falcon Building Products, Inc............................... 4,000 38,500
Martin Marietta Materials, Inc............................... 3,500 72,187
----------
222,598
----------
CHEMICALS (0.9%)
+ Sybron Chemicals, Inc....................................... 4,000 44,000
----------
COMPUTER SERVICES & SOFTWARE (5.4%)
+ Banctec, Inc................................................ 7,500 138,750
Exabyte Corp................................................. 5,000 73,437
Keane, Inc................................................... 2,000 44,500
----------
256,687
----------
CONGLOMERATES (1.5%)
+ Ralcorp Holdings, Inc....................................... 2,900 70,325
----------
CONSUMER DURABLES (1.4%)
+ Singer Co................................................... 2,300 64,112
----------
ELECTRONICS (7.7%)
EG&G, Inc.................................................... 4,500 109,125
+ Marshall Industries......................................... 3,600 115,650
+ Oak Industries, Inc......................................... 7,560 141,750
----------
366,525
----------
ENGINEERED INDUSTRIAL PRODUCERS (2.3%)
Crane Co..................................................... 3,000 110,625
----------
ENTERTAINMENT & LEISURE (0.2%)
+ Hollywood Park, Inc......................................... 800 8,000
----------
FINANCIAL SERVICES (1.4%)
First Financial Caribbean Corp............................... 2,200 40,837
First Financial Corp......................................... 1,200 27,300
----------
68,137
----------
FOODS (0.3%)
+ Sylvan Foods Holdings, Inc.................................. 1,000 11,875
----------
HOSPITAL SUPPLIES/HOSPITAL MANAGEMENT (1.6%)
+ Magellan Health Services, Inc............................... 1,800 43,200
+ Summit Care Corp............................................ 1,500 34,219
----------
77,419
----------
HOUSEHOLD PRODUCTS (1.5%)
Crown Crafts, Inc............................................ 1,200 13,800
Libbey, Inc.................................................. 2,500 56,250
----------
70,050
----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ ----------
<S> <C> <C>
INSURANCE (4.5%)
Ace Limited.................................................. 900 $ 35,775
+ Capsure Holdings Corp....................................... 3,000 52,875
E.W. Blanch Holdings, Inc.................................... 2,700 63,112
Horace Mann Educators........................................ 1,000 31,250
Prudential Reinsurance Holdings.............................. 1,400 32,725
----------
215,737
----------
IRON/STEEL (0.6%)
+ Olympic Steel, Inc.......................................... 3,000 26,625
----------
MACHINERY (DIVERSIFIED) (4.0%)
+ Baldwin Technology Co., Inc................................. 3,800 19,237
Briggs & Stratton Corp....................................... 1,500 65,063
Harmon Industries, Inc....................................... 2,000 30,000
Regal Beloit Corp............................................ 3,500 76,125
----------
190,425
----------
MANUFACTURING (0.3%)
+ Alltrista Corporation....................................... 700 12,731
----------
MEDICAL (2.2%)
Dentsply International, Inc.................................. 1,200 48,000
+ Spacelabs Medical, Inc...................................... 2,000 57,250
----------
105,250
----------
METAL FABRICATE/HARDWARE (0.4%)
Easco, Inc................................................... 2,600 21,450
----------
OFFICE EQUIPMENT & SERVICES (1.3%)
+ NU-Kote Holdings, Inc. (Class A)............................ 3,600 61,650
----------
OIL & GAS (5.9%)
+ Belden & Blake Corp......................................... 2,700 47,925
+ Global Natural Resources, Inc............................... 4,200 44,100
Petroleum Heat & Power Co., Inc.............................. 10,000 80,000
St. Mary Land & Exploration Co............................... 2,400 33,600
+ Swift Energy Co............................................. 2,000 24,000
+ Tesoro Petroleum Corp....................................... 3,400 29,325
UGI Corp..................................................... 1,000 20,750
----------
279,700
----------
PAPER & PAPER PRODUCTS (3.8%)
+ Repap Enterprises, Inc...................................... 18,000 78,750
+ Shorewood Packaging Corp.................................... 7,100 102,063
----------
180,813
----------
PUBLISHING (1.2%)
+ International Imaging Materials, Inc........................ 1,900 47,738
Merrill Corp................................................. 500 8,125
----------
55,863
----------
REAL ESTATE (4.6%)
Post Properties, Inc......................................... 1,000 31,875
Security Capital Industrial Trust............................ 1,600 28,000
Security Capital Pacific Trust............................... 7,400 146,150
Taubman Centers, Inc......................................... 1,000 10,000
----------
216,025
----------
RESTAURANTS (1.1%)
+ IHOP Corp................................................... 2,000 51,500
----------
RETAIL (2.0%)
Baker (J), Inc............................................... 2,200 12,238
Blair Corp................................................... 1,000 31,500
+ Maxim Group, Inc............................................ 3,600 49,500
----------
93,238
----------
</TABLE>
23
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1995
THE SMALL CAPITALIZATION FUND, CONT'D
<TABLE>
<CAPTION>
SHARES VALUE
------ ----------
<S> <C> <C>
TEXTILES (3.8%)
Culp, Inc.................................................... 2,100 $ 23,100
Dyersberg Corp............................................... 3,400 17,000
Fab Industries, Inc.......................................... 300 9,563
+ Mohawk Industries, Inc...................................... 2,300 35,219
+ Westpoint Stevens, Inc...................................... 4,900 97,694
----------
182,576
----------
UTILITIES - ELECTRIC (0.8%)
+ Sithe Energies, Inc......................................... 6,000 36,000
----------
TOTAL COMMON STOCK
(Cost $3,238,183) .................................................. 3,404,355
----------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000)
-------- -----
<S> <C> <C> <C>
AGENCY OBLIGATIONS (25.6%)
- --------------------------
Federal Home Loan Mortgage Corp.
5.49%................................................ 01/18/96 $150 149,611
5.51%................................................ 02/05/96 100 99,471
5.58%................................................ 01/05/96 100 99,938
Federal Home Loan Bank
5.65%................................................ 01/02/96 190 189,970
Federal National Mortgage Assoc.
5.42%................................................ 02/07/96 350 348,050
5.54%................................................ 02/09/96 230 228,620
Tennessee Valley Authority
5.52%................................................ 02/01/96 100 99,532
---------
TOTAL AGENCY OBLIGATIONS
(Cost $1,215,178).................................................... 1,215,192
---------
</TABLE>
<TABLE>
<CAPTION>
SHARES
-------
<S> <C> <C>
SHORT TERM INVESTMENTS (2.6%)
- -----------------------------
Temporary Investment Fund Class B
(Cost $123,755)........................................... 123,755 123,755
----------
TOTAL INVESTMENTS (100.0%)
(Cost $4,577,116) (a) (b).......................................... $4,743,302
==========
</TABLE>
- -------
+ Non-income producing.
(a) Cost for Federal income tax purposes.
(b) At December 31, 1995, the excess of value over tax cost was $324,671, and
the excess of tax cost over value was $158,485.
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 1995
<TABLE>
<CAPTION>
MONEY QUALITY HIGH YIELD GROWTH EQUITY
MARKET FUND BOND FUND BOND FUND FUND
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments at value (1)
(See accompanying sched-
ule) (Note 1)........... $24,737,514 $37,370,656 $35,703,814 $94,570,414
Cash..................... -- 601 710 100
Interest, dividends and
reclaims receivable..... 127,524 627,008 741,680 103,595
Receivable for investment
securities sold......... -- -- -- 1,043,302
Receivable for capital
stock sold.............. -- 88,805 54,792 9,972
Net unrealized apprecia-
tion on forward foreign
currency contracts...... -- -- -- --
Other assets............. 623 1,213 1,243 3,033
----------- ----------- ----------- -----------
Total Assets............ 24,865,661 38,088,283 36,502,239 95,730,416
----------- ----------- ----------- -----------
LIABILITIES:
Payable for investment
securities purchased.... -- -- -- --
Payable for capital stock
redeemed................ -- 2,362 19,453 37,184
Dividends payable........ 111,368 -- -- --
Payable to the investment
advisor................. 7,392 12,811 15,369 36,781
Payable to The Penn Mu-
tual Life Insurance Co.. 9,157 14,005 13,520 36,119
Other liabilities........ 12,151 10,700 12,161 27,038
----------- ----------- ----------- -----------
Total Liabilities....... 140,068 39,878 60,503 137,122
----------- ----------- ----------- -----------
NET ASSETS............... $24,725,593 $38,048,405 $36,441,736 $95,593,294
=========== =========== =========== ===========
Shares of $.10 par value
capital stock issued and
outstanding............. 24,727,125 3,715,985 4,318,196 4,780,685
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SHARE................... $ 1.00 $ 10.24 $ 8.44 $ 20.00
NET ASSETS CONSIST OF:
Capital paid in......... $24,727,125 $37,573,040 $40,556,192 $83,195,076
Distribution in excess
of net investment in-
come................... -- -- -- --
Accumulated net realized
gain (loss) on invest-
ment transactions and
foreign exchange....... (1,532) (778,638) (4,014,244) --
Net unrealized apprecia-
tion (depreciation) in
value of investments,
futures contracts and
foreign currency re-
lated items............ -- 1,254,003 (100,212) 12,398,218
----------- ----------- ----------- -----------
TOTAL NET ASSETS........ $24,725,593 $38,048,405 $36,441,736 $95,593,294
=========== =========== =========== ===========
(1) Investments at cost... $24,737,514 $36,116,653 $35,804,026 $82,172,196
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FLEXIBLY SMALL
VALUE EQUITY MANAGED INTERNATIONAL CAPITALIZATION
FUND FUND EQUITY FUND FUND
- ------------ ------------ ------------- --------------
<S> <C> <C> <C>
$127,257,506 $265,050,931 $68,753,174 $4,743,302
-- -- -- 813
109,317 762,486 153,091 4,623
-- 1,589,253 -- 88,998
22,768 99,640 55,182 15,224
-- -- 692,058 --
3,934 11,382 2,189 130
- ------------ ------------ ----------- ----------
127,393,525 267,513,692 69,655,694 4,853,090
- ------------ ------------ ----------- ----------
-- 682,703 -- 18,685
850 1,667 2,245 834
-- -- -- --
53,552 111,882 43,091 1,002
46,011 95,810 24,816 --
33,262 65,523 54,807 4,662
- ------------ ------------ ----------- ----------
133,675 957,585 124,959 25,183
- ------------ ------------ ----------- ----------
$127,259,850 $266,556,107 $69,530,735 $4,827,907
============ ============ =========== ==========
7,818,065 15,316,544 4,803,704 440,375
$ 16.28 $ 17.40 $ 14.47 $ 10.96
$99,379,547 $235,864,520 $59,050,102 $4,643,099
(63) -- (627,066) --
-- (52,850) (1,058,634) 18,622
27,880,366 30,744,437 12,166,333 166,186
- ------------ ------------ ----------- ----------
$127,259,850 $266,556,107 $69,530,735 $4,827,907
============ ============ =========== ==========
$99,377,140 $234,306,557 $57,281,998 $4,577,116
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
STATEMENT OF OPERATIONS - FOR THE YEAR OR PERIOD ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
MONEY QUALITY HIGH YIELD GROWTH
MARKET FUND BOND FUND BOND FUND EQUITY FUND
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.................... $ -- $ 75,255 $ 18,889 $ 595,332
Interest..................... 1,175,887 2,319,520 3,427,637 472,577
Foreign tax withheld......... -- -- -- (486)
---------- ---------- ---------- -----------
Total investment income..... 1,175,887 2,394,775 3,446,526 1,067,423
---------- ---------- ---------- -----------
EXPENSES:
Investment advisory fees
(Note 3).................... 77,564 155,476 170,581 444,980
Administration fees (Note 3). 29,059 51,238 51,420 133,494
Accounting fees.............. 14,917 27,616 27,418 67,062
Custodian fees and expenses.. 7,423 13,592 19,906 27,955
Other expenses............... 14,353 22,725 28,471 56,183
---------- ---------- ---------- -----------
Total expenses.............. 143,316 270,647 297,796 729,674
Less: Expense waivers....... (9,700) (17,275) -- (44,498)
---------- ---------- ---------- -----------
Net expenses................ 133,616 253,372 297,796 685,176
---------- ---------- ---------- -----------
NET INVESTMENT INCOME......... $1,042,271 $2,141,403 $3,148,730 $ 382,247
---------- ---------- ---------- -----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on
investment transactions..... (416) 2,350,516 (1,070,877) 12,597,090
Net realized foreign exchange
gain (loss)................. -- -- -- --
Change in net unrealized ap-
preciation of investments,
futures contracts and for-
eign currency related items. -- 1,752,675 3,034,116 7,613,791
---------- ---------- ---------- -----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS... (416) 4,103,191 1,963,239 20,210,881
---------- ---------- ---------- -----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERA-
TIONS........................ $1,041,855 $6,244,594 $5,111,969 $20,593,128
========== ========== ========== ===========
</TABLE>
- -----------------------
* Period from March 1, 1995 (commencement of operations) through December 31,
1995.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FLEXIBLY SMALL
VALUE MANAGED INTERNATIONAL CAPITALIZATION*
EQUITY FUND FUND EQUITY FUND FUND
- ----------- ----------- ------------- ---------------
<S> <C> <C> <C>
$1,541,415 $ 4,056,715 $1,185,462 $ 24,776
1,087,965 5,209,267 218,179 36,531
-- (4,370) (87,976) --
- ----------- ----------- ---------- --------
2,629,380 9,261,612 1,315,665 61,307
- ----------- ----------- ---------- --------
523,127 1,090,740 462,151 12,149
157,021 327,756 92,430 3,644
76,467 133,697 52,431 8,559
15,531 56,832 100,557 2,997
62,385 119,453 48,174 3,945
- ----------- ----------- ---------- --------
834,531 1,728,478 755,743 31,294
-- -- -- (7,143)
- ----------- ----------- ---------- --------
834,531 1,728,478 755,743 24,151
- ----------- ----------- ---------- --------
$ 1,794,849 $ 7,533,134 $ 559,922 $ 37,156
- ----------- ----------- ---------- --------
6,520,338 9,328,518 (551,350) 116,284
-- (3,841) 331,107 --
23,682,719 25,862,516 7,975,550 166,186
- ----------- ----------- ---------- --------
30,203,057 35,187,193 7,755,307 282,470
- ----------- ----------- ---------- --------
$31,997,906 $42,720,327 $8,315,229 $319,626
=========== =========== ========== ========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS - FOR THE YEARS OR PERIOD ENDED DECEMBER 31,
1995 AND 1994
<TABLE>
<CAPTION>
MONEY MARKET FUND QUALITY BOND FUND
-------------------------- --------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income.... $ 1,042,271 $ 537,489 $ 2,141,403 $ 1,984,269
Net realized gain (loss)
on investment transac-
tions................... (416) 138 2,350,516 (3,102,230)
Net realized foreign ex-
change loss............. -- -- -- --
Net change in unrealized
appreciation/depreciation
of investments and for-
eign currency related
items................... -- -- 1,752,675 (802,018)
------------ ------------ ------------ ------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ 1,041,855 537,627 6,244,594 (1,919,979)
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHARE-
HOLDERS FROM:
Net investment income.... (1,042,271) (537,489) (2,141,403) (1,982,402)
Net realized capital
gains................... -- -- -- --
In excess of net invest-
ment income............. -- -- (28,700) --
In excess of net realized
capital gains........... -- -- -- --
------------ ------------ ------------ ------------
TOTAL DISTRIBUTIONS..... (1,042,271) (537,489) (2,170,103) (1,982,402)
------------ ------------ ------------ ------------
CAPITAL SHARE TRANSAC-
TIONS:
Net increase in net as-
sets from capital share
transactions (Note 4)... 8,194,917 3,525,126 2,636,284 2,213,017
------------ ------------ ------------ ------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. 8,194,501 3,525,264 6,710,775 (1,689,364)
Net Assets, beginning of
year..................... 16,531,092 13,005,828 31,337,630 33,026,994
------------ ------------ ------------ ------------
NET ASSETS, END OF YEAR... $ 24,725,593 $ 16,531,092 $ 38,048,405 $ 31,337,630
============ ============ ============ ============
<CAPTION>
FLEXIBLY MANAGED FUND INTERNATIONAL EQUITY FUND
-------------------------- --------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income.... $ 7,533,134 $ 4,467,412 $ 559,922 $ 435,065
Net realized gain (loss)
on investment transac-
tions................... 9,328,518 7,507,141 (551,350) (64,795)
Net realized foreign ex-
change gain (loss)...... (3,841) (2,076) 331,107 (542,428)
Net change in unrealized
appreciation/depreciation
of investments and for-
eign currency related
items................... 25,862,516 (6,337,661) 7,975,550 (3,753,499)
------------ ------------ ------------ ------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ 42,720,327 5,634,816 8,315,229 (3,925,657)
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHARE-
HOLDERS FROM:
Net investment income.... (7,533,134) (4,467,412) (559,922) (99,627)
Net realized capital
gains................... (9,122,820) (7,356,357) -- --
In excess of net invest-
ment income............. (189,189) (214,225) (1,014,490) --
Return of capital........ -- -- -- (129,984)
------------ ------------ ------------ ------------
TOTAL DISTRIBUTIONS..... (16,845,143) (12,037,994) (1,574,412) (229,611)
------------ ------------ ------------ ------------
CAPITAL SHARE TRANSAC-
TIONS:
Net increase in net as-
sets from capital share
transactions (Note 4)... 70,833,754 62,758,743 3,397,112 22,749,790
------------ ------------ ------------ ------------
TOTAL INCREASE IN NET
ASSETS................. 96,708,938 56,355,565 10,137,929 18,594,522
Net Assets, beginning of
period................... 169,847,169 113,491,604 59,392,806 40,798,284
------------ ------------ ------------ ------------
NET ASSETS, END OF PERIOD. $266,556,107 $169,847,169 $ 69,530,735 $ 59,392,806
============ ============ ============ ============
</TABLE>
- -----------------------
*For the period from March 1, 1995 (commencement of operations) through
December 31, 1995.
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH YIELD BOND FUND GROWTH EQUITY FUND VALUE EQUITY FUND
- ------------------------- ------------------------ -------------------------
1995 1994 1995 1994 1995 1994
- ----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
$ 3,148,730 $ 3,267,476 $ 382,247 $ 562,875 $ 1,794,849 $ 1,192,404
(1,070,877) (1,538,281) 12,597,090 1,678,399 6,520,338 1,120,950
-- -- -- -- -- --
3,034,116 (4,448,669) 7,613,791 (9,254,862) 23,682,719 (248,954)
- ----------- ----------- ----------- ----------- ------------ -----------
5,111,969 (2,719,474) 20,593,128 (7,013,588) 31,997,906 2,064,400
- ----------- ----------- ----------- ----------- ------------ -----------
(3,148,730) (3,267,476) (382,247) (562,875) (1,794,912) (1,192,404)
-- -- (12,597,090) (1,678,399) (6,520,338) (1,120,950)
(15,253) (34,447) -- -- -- --
-- -- -- -- -- --
- ----------- ----------- ----------- ----------- ------------ -----------
(3,163,983) (3,301,923) (12,979,337) (2,241,274) (8,315,250) (2,313,354)
- ----------- ----------- ----------- ----------- ------------ -----------
2,412,668 2,797,426 7,901,598 5,394,570 24,556,320 9,289,649
- ----------- ----------- ----------- ----------- ------------ -----------
4,360,654 (3,223,971) 15,515,389 (3,860,292) 48,238,976 9,040,695
32,081,082 35,305,053 80,077,905 83,938,197 79,020,874 69,980,179
- ----------- ----------- ----------- ----------- ------------ -----------
$36,441,736 $32,081,082 $95,593,294 $80,077,905 $127,259,850 $79,020,874
=========== =========== =========== =========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
SMALL CAPITALIZATION FUND
1995*
-----
<S> <C>
$ 37,156
116,284
--
166,186
----------
319,626
----------
(37,156)
(97,662)
--
--
----------
(134,818)
----------
4,643,099
----------
4,827,907
0
----------
$4,827,907
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE MONEY MARKET FUND
The table below sets forth financial data for a share outstanding throughout
each year
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.0538 0.0365 0.0250 0.0306 0.0536
------- ------- ------- ------- -------
Total from investment
operations............ 0.0538 0.0365 0.0250 0.0306 0.0536
------- ------- ------- ------- -------
LESS DIVIDENDS:
Dividends from net in-
vestment income........ (0.0538) (0.0365) (0.0250) (0.0306) (0.0536)
------- ------- ------- ------- -------
Total dividends........ (0.0538) (0.0365) (0.0250) (0.0306) (0.0536)
------- ------- ------- ------- -------
Net asset value, end of
year................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total return............ 5.51% 3.71% 2.53% 3.08% 5.49%
RATIOS/SUPPLEMENTAL DA-
TA:
Net assets, end of year
(in thousands)......... $24,726 $16,531 $13,005 $11,862 $12,811
------- ------- ------- ------- -------
Ratio of expenses to av-
erage net assets....... 0.69%(a) 0.73%(a) 0.74%(a) 0.77%(a) 0.79%(a)
------- ------- ------- ------- -------
Ratio of net investment
income to average net
assets................. 5.37%(a) 3.74%(a) 2.51%(a) 3.07%(a) 5.47%(a)
------- ------- ------- ------- -------
</TABLE>
- -----------------------
(a) Had fees not been waived by the investment advisor and administrator of the
Fund, the ratios of expenses to average net assets would have been .74%,
.79%, .82%, .84%, and .83%, and the ratios of net investment income to
average net assets would have been 5.32%, 3.68%, 2.43%, 3.00%, and 5.43%
for the years ended December 31, 1995, 1994, 1993, 1992 and 1991,
respectively.
- --------------------------------------------------------------------------------
THE QUALITY BOND FUND
The table below sets forth financial data for a share outstanding throughout
each year
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year........... $ 9.04 $ 10.19 $ 10.03 $ 10.51 $ 9.73
------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.61 0.61 0.46 0.75 0.71
Net realized and
unrealized gain (loss)
on investment
transactions........... 1.21 (1.15) 0.71 (0.06) 0.81
------- ------- ------- ------- -------
Total from investment
operations............ 1.82 (0.54) 1.17 0.69 1.52
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividend from net in-
vestment income........ (0.61) (0.61) (0.46) (0.75) (0.71)
Distribution from net
realized gain.......... 0.00 0.00 (0.54) (0.42) (0.03)
Distribution in excess
of net realized gain... (0.01) 0.00 (0.01) 0.00 0.00
------- ------- ------- ------- -------
Total distributions.... (0.62) (0.61) (1.01) (1.17) (0.74)
------- ------- ------- ------- -------
Net asset value, end of
year................... $ 10.24 $ 9.04 $ 10.19 $ 10.03 $ 10.51
======= ======= ======= ======= =======
Total return............ 20.14% (5.29)% 11.67% 6.57% 15.62%
RATIOS/SUPPLEMENTAL DA-
TA:
Net assets, end of year
(in thousands)......... $38,048 $31,338 $33,027 $20,314 $21,153
------- ------- ------- ------- -------
Ratio of expenses to av-
erage net assets....... 0.73%(a) 0.78%(a) 0.79%(a) 0.84%(a) 0.83%
------- ------- ------- ------- -------
Ratio of net investment
income to average net
assets................. 6.20%(a) 6.14%(a) 5.21%(a) 6.25%(a) 7.41%
------- ------- ------- ------- -------
Portfolio turnover rate. 449.2% 380.9% 389.4% 190.8% 44.1%
------- ------- ------- ------- -------
</TABLE>
- -----------------------
(a) Had fees not been waived by the investment advisor and administrator of the
Fund, the ratio of expenses to average net assets would have been .78%,
.83%, .84% and .87%, and the ratio of net investment income to average net
assets would have been 6.15%, 6.09%, 5.16% and 6.22% for the years ended
December 31, 1995, 1994, 1993 and 1992, respectively.
32
<PAGE>
- -------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
THE HIGH YIELD BOND FUND
The table below sets forth financial data for a share outstanding throughout
each year
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year........... $ 7.94 $ 9.55 $ 8.63 $ 8.23 $ 6.70
------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.80 0.90 0.77 0.87 0.93
Net realized and
unrealized gain (loss)
on investment
transactions........... 0.50 (1.60) 0.94 0.43 1.55
------- ------- ------- ------- -------
Total from investment
operations............ 1.30 (0.70) 1.71 1.30 2.48
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividend from net in-
vestment income........ (0.80) (0.90) (0.77) (0.87) (0.93)
Distribution in excess
of net investment in-
come................... 0.00 (0.01) (0.02) (0.03) (0.02)
------- ------- ------- ------- -------
Total distributions.... (0.80) (0.91) (0.79) (0.90) (0.95)
------- ------- ------- ------- -------
Net asset value, end of
year................... $ 8.44 $ 7.94 $ 9.55 $ 8.63 $ 8.23
======= ======= ======= ======= =======
Total return............ 16.41% 7.33% 19.81% 15.80% 37.01%
RATIOS/SUPPLEMENTAL DA-
TA:
Net assets, end of year
(in thousands)......... $36,442 $32,081 $35,305 $19,840 $15,304
------- ------- ------- ------- -------
Ratio of expenses to av-
erage net assets....... 0.87% 0.86% 0.87% 0.88%(a) 0.90%(a)
------- ------- ------- ------- -------
Ratio of net investment
income to average net
assets................. 9.20% 9.18% 9.21% 9.87%(a) 11.37%(a)
------- ------- ------- ------- -------
Portfolio turnover rate. 84.3% 90.7% 118.7% 94.3% 83.7%
------- ------- ------- ------- -------
- -----------------------
(a) Had fees not been waived by the investment advisor and administrator of
the Fund, the ratios of expenses to average net assets would have been
.93% and .98%, and the ratios of net investment income to average net
assets would have been 9.82% and 11.29% for the years ended December 31,
1992 and 1991, respectively.
- -------------------------------------------------------------------------------------
THE GROWTH EQUITY FUND
The table below sets forth financial data for a share outstanding throughout
each year
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year........... $ 18.30 $ 20.49 $ 18.82 $ 21.47 $ 16.35
------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.09 0.13 0.06 0.16 0.23
Net realized and
unrealized gain (loss)
on investment
transactions........... 4.75 (1.80) 2.28 1.12 5.45
------- ------- ------- ------- -------
Total from investment
operations............ 4.84 (1.67) 2.34 1.28 5.68
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividend from net in-
vestment income........ (0.09) (0.13) (0.06) (0.16) (0.23)
Distribution from capi-
tal gains.............. (3.05) (0.39) (0.61) (3.77) (0.33)
------- ------- ------- ------- -------
Total distributions.... (3.14) (0.52) (0.67) (3.93) (0.56)
------- ------- ------- ------- -------
Net asset value, end of
year................... $ 20.00 $ 18.30 $ 20.49 $ 18.82 $ 21.47
======= ======= ======= ======= =======
Total return............ 26.45% 8.12% 12.43% 5.96% 34.74%
RATIOS/SUPPLEMENTAL DA-
TA:
Net assets, end of year
(in thousands)......... $95,593 $80,078 $83,938 $73,977 $59,670
------- ------- ------- ------- -------
Ratio of expenses to av-
erage net assets....... 0.77%(a) 0.79%(a) 0.77%(a) 0.88%(a) 0.87%
------- ------- ------- ------- -------
Ratio of net investment
income to average net
assets................. 0.43%(a) 0.70%(a) 0.30%(a) 0.81%(a) 1.28%
------- ------- ------- ------- -------
Portfolio turnover rate. 169.8% 156.2% 185.3% 120.7% 41.7%
------- ------- ------- ------- -------
</TABLE>
- -----------------------
(a) Had fees not been waived by the investment advisor and administrator of
the Fund, the ratio of expenses to average net assets would have been
.82%, .84%, .82%, and .89% and the ratio of net investment income to
average net assets would have been .38%, .65%, .25% and .80% for the years
ended December 31, 1995, 1994, 1993 and 1992, respectively.
33
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE VALUE EQUITY FUND
The table below sets forth financial data for a share outstanding throughout
each year
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year.................... $ 12.67 $ 12.68 $ 12.14 $ 11.89 $ 9.68
-------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPER-
ATIONS:
Net investment income....... 0.25 0.20 0.17 0.45 0.47
Net realized and unrealized
gain on investment transac-
tions...................... 4.50 0.17 0.69 1.32 2.21
-------- -------- -------- ------- -------
Total from investment oper-
ations.................... 4.75 0.37 0.86 1.77 2.68
-------- -------- -------- ------- -------
LESS DISTRIBUTIONS:
Dividend from net investment
income..................... (0.25) (0.20) (0.17) (0.45) (0.47)
Distribution from net real-
ized gain.................. (0.89) (0.18) (0.15) (1.07) 0.00
-------- -------- -------- ------- -------
Total distributions........ (1.14) (0.38) (0.32) (1.52) (0.47)
-------- -------- -------- ------- -------
Net asset value, end of
year....................... $ 16.28 $ 12.67 $ 12.68 $ 12.14 $ 11.89
======== ======== ======== ======= =======
Total return................ 37.48% 2.92% 7.08% 14.89% 27.69%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands)................. $127,260 $ 79,021 $ 69,980 $49,199 $33,610
-------- -------- -------- ------- -------
Ratio of expenses to average
net assets................. 0.80% 0.82% 0.83% 0.88%(a) 0.88%
-------- -------- -------- ------- -------
Ratio of net investment in-
come to average net assets. 1.71% 1.59% 1.49% 3.87%(a) 4.44%
-------- -------- -------- ------- -------
Portfolio turnover rate..... 34.3% 30.6% 17.2% 117.4% 32.4%
-------- -------- -------- ------- -------
- -----------------------
(a) Had fees not been waived by the investment advisor and administrator of the
Fund, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets would have been .90% and 3.85%,
respectively, for the year ended December 31,1992.
- --------------------------------------------------------------------------------
THE FLEXIBLY MANAGED FUND
The table below sets forth financial data for a share outstanding throughout
each year
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year.................... $ 15.19 $ 15.70 $ 14.31 $ 13.73 $ 12.30
-------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPER-
ATIONS:
Net investment income....... 0.53 0.43 0.34 0.58 0.52
Net realized and unrealized
gain (loss) on investment
transactions............... 2.86 0.22 1.92 0.74 2.14
-------- -------- -------- ------- -------
Total from investment oper-
ations.................... 3.39 0.65 2.26 1.32 2.66
-------- -------- -------- ------- -------
LESS DISTRIBUTIONS:
Dividend from net investment
income..................... (0.53) (0.43) (0.34) (0.58) (0.52)
Distribution in excess of
net investment income...... (0.01) (0.02) 0.00 0.00 0.00
Distribution from capital
gains...................... (0.64) (0.71) (0.53) (0.16) (0.71)
-------- -------- -------- ------- -------
Total distributions........ (1.18) (1.16) (0.87) (0.74) (1.23)
-------- -------- -------- ------- -------
Net asset value, end of
year....................... $ 17.40 $ 15.19 $ 15.70 $ 14.31 $ 13.73
======== ======== ======== ======= =======
Total return................ 22.28% 4.14% 15.79% 9.61% 21.63%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands)................. $266,556 $169,847 $113,492 $70,979 $47,141
-------- -------- -------- ------- -------
Ratio of expenses to average
net assets................. 0.79% 0.82% 0.85% 0.89%(a) 0.91%
-------- -------- -------- ------- -------
Ratio of net investment in-
come to average net assets. 3.45% 3.14% 2.62% 4.56%(a) 4.45%
-------- -------- -------- ------- -------
Portfolio turnover rate..... 37.2% 37.3% 42.6% 29.5% 53.6%
-------- -------- -------- ------- -------
</TABLE>
- -----------------------
(a) Had fees not been waived by the investment advisor and administrator of the
Fund, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets would have been .90% and 4.55%,
respectively, for the year ended December 31,1992.
34
<PAGE>
- -------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
THE INTERNATIONAL EQUITY FUND
The table below sets forth financial data for a share outstanding throughout
each period
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994 1993 1992*
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period. $ 13.01 $ 13.94 $ 10.12 $ 10.00
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................ 0.13 0.09 0.03 0.03
Net realized and unrealized gain
(loss) on investments and foreign
currency related transactions....... 1.67 (0.97) 3.83 0.17
------- ------- ------- -------
Total from investment operations.... 1.80 (0.88) 3.86 0.20
------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividend from net investment income.. (0.12) (0.02) (0.01) (0.03)
Distribution in excess of net invest-
ment income......................... (0.22) 0.00 0.00 (0.05)
Distribution from capital gains...... 0.00 0.00 (0.03) 0.00
Return of capital.................... 0.00 (0.03) 0.00 0.00
------- ------- ------- -------
Total distributions................. (0.34) (0.05) (0.04) (0.08)
------- ------- ------- -------
Net asset value, end of period....... $ 14.47 $ 13.01 $ 13.94 $ 10.12
======= ======= ======= =======
Total return......................... 13.80% 6.31% 38.14% 2.00%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thou-
sands).............................. $69,531 $59,393 $40,798 $11,137
------- ------- ------- -------
Ratio of expenses to average net as-
sets................................ 1.23% 1.22% 1.21% 1.54%(a)(b)
------- ------- ------- -------
Ratio of net investment income to av-
erage net assets.................... 0.91% 0.82% 0.63% 1.56%(a)(b)
------- ------- ------- -------
Portfolio turnover rate.............. 62.5% 15.6% 11.1% 0.0%
------- ------- ------- -------
</TABLE>
- -----------------------
(a) Annualized.
(b) Had fees not been waived by the investment advisor and administrator of
the Fund, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets would have been 1.90% annualized
and 1.20% annualized, respectively, for the period ended December 31,
1992.
* For the period from November 2, 1992 (commencement of operations) to
December 31, 1992.
- -------------------------------------------------------------------------------
THE SMALL CAPITALIZATION FUND
The table below sets forth financial data for a share outstanding throughout
the period
<TABLE>
<CAPTION>
PERIOD
ENDED
DECEMBER 31, 1995*
------------------
<S> <C>
Net asset value, beginning of period....................... $10.00
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income...................................... 0.09
Net realized and unrealized gain (loss) on investment
transactions.............................................. 1.19
------
Total from investment operations.......................... 1.28
------
LESS DISTRIBUTIONS:
Dividend from net investment income........................ (0.09)
Distribution from capital gains............................ (0.23)
------
Total distributions....................................... (0.32)
------
Net asset value, end of period............................. $10.96
======
Total return............................................... 12.76%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)................... $4,828
------
Ratio of expenses to average net assets.................... 1.00%(a)(b)
------
Ratio of net investment income to average net assets....... 1.53%(a)(b)
------
Portfolio turnover rate.................................... 64.3%
------
</TABLE>
- -----------------------
(a) Annualized.
(b) Had fees not been waived by the investment advisor and administrator of
the Fund, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets would have been 1.29% and 1.24%
annualized, respectively, for the period from March 1, 1995 to December
31, 1995.
* For the period from March 1, 1995 (commencement of operations) through
December 31, 1995.
35
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995
- --------------------------------------------------------------------------------
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 and Small Capitalization Funds (the Funds). It is authorized under its
Articles of Incorporation to issue a separate class of shares in each of two
additional funds. Each 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 requires the use of management's 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 has agreed to maintain 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 AND SMALL CAPITALIZATION 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; and purchase 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 that portion of realized and unrealized gains and
losses on investments in equity securities which are due to changes in the
foreign exchange rate from that which is due to changes in market prices of
equity securities.
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.
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 and Small Capitalization 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: It is the policy of each of the Funds to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income, including
realized gains, to its shareholders. Therefore, no provision is made for
federal income or excise taxes.
36
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 transactions 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 year ended December 31, 1995. There were no open futures contracts at
December 31, 1995.
WRITTEN 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 year ended December 31, 1995.
Purchased put options open and outstanding at December 31, 1995 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.
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 Flexibly Managed and International Equity
funds have entered into forward foreign currency contracts for the year ended
December 31, 1995.
At December 31, 1995 there were no open contracts in the Flexibly Managed
Fund. Open forward foreign currency contracts held by the International Equity
Fund at December 31, 1995 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
FOREIGN FOREIGN
FORWARD SETTLEMENT CURRENCY CONTRACT CONTRACT EXCHANGE
CURRENCY CONTRACT DATE TO BE SOLD AMOUNT VALUE GAIN
----------------- ---------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Japanese Yen............ 01/26/96 450,000,000 $ 4,556,847 $ 4,373,971 $182,876
Japanese Yen............ 01/26/96 900,000,000 9,072,581 8,747,943 324,638
British Pound........... 02/16/96 3,500,000 5,460,000 5,428,395 31,605
Deutsch Mark............ 02/16/96 7,500,000 5,330,490 5,242,812 87,678
French Franc............ 02/16/96 15,000,000 3,073,723 3,065,034 8,689
Swiss Franc............. 02/16/96 4,000,000 3,543,900 3,487,328 56,572
----------- ----------- --------
$31,037,541 $30,345,483 $692,058
----------- ----------- --------
</TABLE>
37
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995
- --------------------------------------------------------------------------------
3 - INVESTMENT ADVISORY AND OTHER CORPORATE SERVICES
INVESTMENT ADVISORY SERVICES
Under investment advisory agreements, the following advisors manage the
investments of their respective Fund and provide guidance on certain accounting
matters:
<TABLE>
<CAPTION>
ADVISOR PENN SERIES FUND
------- ----------------
<S> <C>
Independence Capital Management, Inc. Money Market Fund
(A wholly owned subsidiary of Penn Quality Bond Fund
Mutual) Growth Equity Fund
T. Rowe Price Associates, Inc. Flexibly Managed Fund
High Yield Bond Fund
Vontobel USA, Inc. International Equity Fund
OpCap Advisors Value Equity Fund
Small Capitalization Fund
</TABLE>
Each of the Funds pays their respective advisors, on a monthly basis, an
annual 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: 0.50%;
High Yield Bond Fund: 0.50%; International Equity Fund: 0.75%; Value Equity
Fund: 0.50%; Small Capitalization Fund: 0.50%. Independence Capital Management
currently waives receipt of a portion of its fees equal to 0.05% of the average
daily net assets of each of the Funds that it manages.
ADMINISTRATIVE AND CORPORATE SERVICES
Under an administrative and corporate services 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 advisors under their respective investment advisory agreements
and those incurred by Penn Mutual under its administrative and corporate
services agreement. The investment advisors and Penn Mutual have each
voluntarily agreed to waive fees or reimburse expenses to the extent each of
the Fund's expense ratio (excluding interest, taxes, brokerage, other
capitalized expenses, but including investment advisory and administrative and
corporate services fees) exceeds the applicable expense limitations for each
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%; and Small
Capitalization 1.00%.
Fees were paid to non-affiliated Directors of Penn Series for the year ended
December 31, 1995. However, no person received compensation from Penn Series
who is an officer, director, or employee of Penn Series, the investment
advisors, administrator, accounting agent or any parent or subsidiary thereof.
- --------------------------------------------------------------------------------
4 - CAPITAL STOCK
At December 31, 1995, 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. Eight 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 and Penn Series Small Capitalization Fund Common Stock. Two of the
classes of common stock are presently designated Class H and I, and no shares
have been issued.
Transactions in capital stock of the Money Market Fund were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold.............. 24,631,336 $ 24,631,336 24,124,114 $ 24,124,114
Shares issued to
shareholders in
reinvestment of net
investment income....... 1,003,043 1,003,043 495,077 495,077
Shares reacquired........ (17,439,462) (17,439,462) (21,094,065) (21,094,065)
----------- ------------ ----------- ------------
8,194,917 $ 8,194,917 3,525,126 $ 3,525,126
----------- ------------ ----------- ------------
</TABLE>
38
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4 - CAPITAL STOCK, CONTINUED
Transactions in capital stock of the Quality Bond Fund were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold................. 503,916 $ 5,106,936 811,401 $ 8,015,437
Shares issued to
shareholders in
reinvestment of
Net investment income...... 211,924 2,170,103 219,293 1,982,404
Net realized gain from
investment transactions... 0 0 0 0
Distribution in excess of
net investment income..... 0 0 0 0
Shares reacquired........... (465,354) (4,640,755) (805,049) (7,784,824)
--------- ------------ ---------- ------------
250,486 $ 2,636,284 225,645 $ 2,213,017
--------- ------------ ---------- ------------
Transactions in capital stock of the High Yield Bond Fund were as follows:
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold................. 598,550 $ 5,210,863 1,131,826 $ 10,655,899
Shares issued to
shareholders in
reinvestment of
Net investment income...... 374,880 3,163,983 415,895 3,301,923
Distribution in excess of
net investment income..... 0 0 0 0
Shares reacquired........... (695,380) (5,962,178) (1,205,884) (11,160,396)
--------- ------------ ---------- ------------
278,050 $ 2,412,668 341,837 $ 2,797,426
--------- ------------ ---------- ------------
Transactions in capital stock of the Growth Equity Fund were as follows:
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold................. 255,618 $ 5,357,105 504,163 $ 9,676,502
Shares issued to
shareholders in
reinvestment of
Net investment income...... 19,112 382,248 30,758 562,875
Net realized gain from
investment transactions... 629,855 12,597,090 91,716 1,678,399
Shares reacquired........... (500,318) (10,434,845) (347,606) (6,523,206)
--------- ------------ ---------- ------------
404,267 $ 7,901,598 279,031 $ 5,394,570
--------- ------------ ---------- ------------
Transactions in capital stock of the Value Equity Fund were as follows:
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold................. 1,658,765 $ 25,527,797 1,013,563 $ 13,157,473
Shares issued to
shareholders in
reinvestment of
Net investment income...... 110,253 1,794,912 94,112 1,192,404
Net realized gain from
investment transactions... 400,512 6,520,338 88,473 1,120,950
Shares reacquired........... (588,540) (9,286,727) (478,034) (6,181,178)
--------- ------------ ---------- ------------
1,580,990 $ 24,556,320 718,114 $ 9,289,649
--------- ------------ ---------- ------------
Transactions in capital stock of the Flexibly Managed Fund were as follows:
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold................. 3,828,143 $ 65,639,740 3,432,665 $ 55,075,210
Shares issued to
shareholders in
reinvestment of
Net investment income...... 443,812 7,722,323 308,205 4,681,637
Net realized gain from
investment transactions... 524,300 9,122,820 484,289 7,356,357
Shares reacquired........... (662,762) (11,651,129) (270,932) (4,354,461)
--------- ------------ ---------- ------------
4,133,493 $ 70,833,754 3,954,227 $ 62,758,743
--------- ------------ ---------- ------------
</TABLE>
39
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995
- --------------------------------------------------------------------------------
4 - CAPITAL STOCK, CONTINUED
Transactions in capital stock of the International Equity Fund were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
---------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
-------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold.................. 980,799 $ 13,291,658 2,799,905 $ 38,625,161
Shares issued to shareholders
in reinvestment of
Net investment income....... 108,805 1,574,412 17,649 229,611
Distribution in excess of
net investment income...... 0 0 0 0
Shares reacquired............ (852,234) (11,468,958) (1,177,992) (16,104,982)
-------- ------------ ---------- ------------
237,370 $ 3,397,112 1,639,562 $ 22,749,790
-------- ------------ ---------- ------------
</TABLE>
Transactions in capital stock of the Small Capitalization Fund were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED*
DECEMBER 31, 1995
-------------------
SHARES AMOUNT
------- ----------
<S> <C> <C>
Shares sold................................................ 433,221 $4,564,368
Shares issued to shareholders in reinvestment of
Net investment income..................................... 3,390 37,156
Net realized gain from investment transactions............ 8,911 97,662
Shares reacquired.......................................... (5,147) (56,087)
------- ----------
440,375 $4,643,099
------- ----------
</TABLE>
* For the period from March 1, 1995 (commencement of operations) through
December 31, 1995.
- --------------------------------------------------------------------------------
5 - PURCHASES AND SALES OF INVESTMENTS
During the year ended December 31, 1995 the Funds made the following purchases
and sales of portfolios securities:
<TABLE>
<CAPTION>
QUALITY BOND FUND HIGH YIELD BOND FUND
------------------------- -------------------------
PURCHASES SALES PURCHASES SALES
------------ ------------ -------------------------
<S> <C> <C> <C> <C>
Long Term U.S. Govt. and
Agency Obligations........ $ 96,868,966 $ 88,421,262 $ 0 $ 0
Other Long-Term Securities. 37,686,610 45,086,795 33,682,468 26,861,708
------------ ------------ ------------ ------------
Totals.................... $134,555,576 $133,508,057 $ 33,682,468 $ 26,861,708
------------ ------------ ------------ ------------
<CAPTION>
GROWTH EQUITY FUND VALUE EQUITY FUND
------------------------- -------------------------
PURCHASES SALES PURCHASES SALES
------------ ------------ -------------------------
<S> <C> <C> <C> <C>
Long Term U.S. Govt. and
Agency Obligations........ $ 0 $ 3,813,750 $ 0 $ 0
Other Long-Term Securities. 146,013,968 135,006,790 42,027,200 29,554,533
------------ ------------ ------------ ------------
Totals.................... $146,013,968 $138,820,540 $ 42,027,200 $ 29,554,533
------------ ------------ ------------ ------------
<CAPTION>
FLEXIBLY MANAGED FUND INTERNATIONAL EQUITY FUND
------------------------- -------------------------
PURCHASES SALES PURCHASES SALES
------------ ------------ -------------------------
<S> <C> <C> <C> <C>
Long Term U.S. Govt. and
Agency Obligations........ $ 2,435,547 $ 0 $ 0 $ 0
Other Long-Term Securities. 97,360,743 66,683,231 44,640,903 35,909,872
------------ ------------ ------------ ------------
Totals.................... $ 99,796,290 $ 66,683,231 $ 44,640,903 $ 35,909,872
------------ ------------ ------------ ------------
<CAPTION>
SMALL CAPITALIZATION FUND
-------------------------
PURCHASES SALES
-------------------------
<S> <C> <C> <C> <C>
Long Term U.S. Govt. and Agency Obligations.......... $ 0 $ 0
Other Long-Term Securities........................... 4,590,572 1,468,673
------------ ------------
Totals.............................................. $ 4,590,572 $ 1,468,673
------------ ------------
</TABLE>
40
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6 - CAPITAL LOSS CARRYOVERS
Capital loss carryovers for the Funds expire as follows:
<TABLE>
<CAPTION>
MONEY QUALITY HIGH YIELD INTERNATIONAL
MARKET BOND BOND EQUITY
FUND FUND FUND FUND
------- --------- ----------- -------------
<S> <C> <C> <C> <C>
1997............................. $ (62) $ 0 $ 0 $ 0
1998............................. (1,117) 0 0 0
1999............................. 0 0 (1,355,386) 0
2000............................. (61) 0 0 0
2001............................. (183) 0 0 0
2002............................. 0 (780,436) (1,572,728) (64,796)
2003............................. (416) 0 (1,086,130) (1,002,514)
------- --------- ----------- -----------
Total........................... $(1,839) $(780,436) $(4,014,244) $(1,067,310)
------- --------- ----------- -----------
</TABLE>
41
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OF PENN SERIES FUNDS, INC.
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Penn Series Funds, Inc. (comprising
respectively, the Money Market Fund, Quality Bond Fund, High Yield Bond Fund,
Growth Equity Fund, Value Equity Fund, Flexibly Managed Fund, International
Equity Fund, and Small Capitalization Fund) as of December 31, 1995, and the
related statements of operations for the year or period then ended, the
statements of changes in net assets for each of the two years or period then
ended and the financial highlights for each of the periods presented. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995 by correspondence with the custodians and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
respective portfolios of Penn Series Funds, Inc. as of December 31, 1995, and
the results of their operations for the year or period then ended, the changes
in their net assets for each of the two years or period then ended and the
financial highlights for each of the periods presented in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
January 31, 1996
