<PAGE>
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PENN SERIES FUNDS, INC.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
- --------------------------------------------------------------------------------
QUALITY BOND FUND
Interest rates fell 10-30 basis points over the quarter as the bond market
benefited from weaker domestic growth and increased turmoil in overseas
economies and markets. US economic growth dropped sharply in the quarter with
most estimates coming in at below 2%, and some coming in at negative growth. A
sharply widening trade deficit and inventory correction were the primary
drivers of the sharp slowdown in growth in the second quarter.
We expect growth to continue to be sluggish in coming quarters. Consumption is
likely to slow after the run-up in the first half of the year and combined with
continued weakness in corporate profits, we expect capital spending to slow.
Given continued weakness overseas, up-coming economic growth is likely to be
more sluggish than what we have seen over the past several years.
Our cautious view toward aggregate corporate earnings and low spreads available
over treasuries pushes us toward a higher quality portfolio, as a result we
maintain a AA+ average rating.
Our macro outlook for sluggish growth also has leaned us to take off our long-
standing yield curve flattening bet. We think the next major move in the yield
curve is to a steepening eventually led by Federal Reserve easing although that
event may be months away. As a result we have sold some of our long treasuries
and replaced them with a duration equivalent of shorter term treasuries.
We have also maintained our long in duration position in conjunction with our
macro outlook for sluggish growth and eventual Fed easing. Currently our
duration is approximately 105% of the Salomon Bros. BIG Index.
Performance for the quarter was slightly below average however our year to date
performance has been outstanding. The key contributors for this excellent
performance have been very good interest rate anticipation calls, propitious
sector rotation calls between treasuries, investment grade corporates and
mortgage-backed securities.
INDEPENDENCE CAPITAL MANAGEMENT, INC.
INVESTMENT ADVISER
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HIGH YIELD BOND FUND
The economy continued to provide a virtually perfect backdrop for the high-
yield bond market--solid growth, declining inflation, and further declines in
interest rates. Corporate earnings growth remained respectable, although some
industry sectors and individual companies began to be affected by the slowdown
in Asia. However, the market's internal dynamics deteriorated during the
quarter. The quality of the deals coming to market declined, and the volume was
no longer readily digested. Then, in June, renewed turmoil in the emerging
markets debt area depressed high-yield bonds as investors sought safer
securities. In May and June, high-quality bonds outperformed junk bonds.
STRATEGY REVIEW
The fund provided a modest but positive total return for the second quarter
that surpassed its Lipper peer group average. Performance benefited from our
avoidance of emerging markets debt and, for most of the period, from our focus
on B rated bonds. We made few changes in the fund's sector holdings in recent
months and continued to emphasize noncyclical areas. Telecommunications
remained our largest exposure and has been a big winner for your fund.
Reflecting the rigorous efforts of our research team, the fund avoided major
problems and had no holdings go into default. Given economic uncertainties
arising from the Asian situation and our concerns about the high-yield market's
own fundamentals, we continued to focus on companies we believe are solid
credit risks in businesses that should be recession-resistant. While B-rated
issues remained our focus, we began to add more BB-rated bonds.
Even though the economy remains supportive, we do not see a catalyst for the
kind of capital appreciation the fund enjoyed over the past two years. Previous
high-yield gains were driven by falling interest rates and narrowing yield
spreads versus high-quality bonds, but interest rates seem unlikely to decline
significantly from current levels, and yield spreads are already widening. Down
the road, we believe we will see a rise in bond defaults, particularly among
the new issues.
In summary, we are cautious. Our outlook is for positive but more modest
returns in the coming months, with coupon income probably playing a larger role
than price appreciation.
T. ROWE PRICE ASSOCIATES, INC.
INVESTMENT ADVISER
<PAGE>
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PENN SERIES FUNDS, INC.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
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GROWTH EQUITY FUND
Investors have benefited greatly in the 1990's from what has become known as
the "Goldilocks" economy. Our economy has never gotten hot enough to spark
sustainable inflation nor cold enough to cause a deep recession. At the same
time, dramatic changes in corporate America have resulted in a tremendous
upward swing in corporate profitability. Low inflation and declining or stable
interest rates plus rising profits made for an investment environment that was
"just right."
Recently the mood has shifted a bit. Questions have arisen as to how much
further corporate profits can expand, particularly if the economy slows. The
last two quarters have brought this question into sharper focus as after-tax
corporate profits posted their first two quarter-to-quarter declines since the
last recession. Top line growth has slowed and profit margins, reflecting
limited pricing flexibility and upward pressure from employment compensation
costs, have flattened. Add in the uncertainties created by problems in the Far
East, particularly Japan, and some concern is warranted.
On the other hand, while everything may not seem "just right" any longer, there
are still strong positives for the U.S. equity markets. The U.S. economy
continues its excellent performance. Output and employment are high and the
economy is growing in all regions and across most sectors. Inflation remains
low with factors such as productivity improvement, lower interest expense,
improved inventory control and declining commodity costs offsetting rising
employment compensation costs. Corporate profits, although down sequentially,
were still better in the first quarter of 1998 than in 1997's first quarter.
This gain occurred despite weak global demand and a strengthening dollar. The
balance of the year is expected to show even more improvement and most
forecasts call for further earnings expansion in 1999. Given the current
government budget, surplus interest rates do not appear headed higher any time
soon. Finally, funds available for investment (liquidity) remain at
historically high levels relative to the total of investment opportunities.
The Penn Series Growth Equity Fund posted a strong gain of 21.38% for the first
half of 1998, besting the S&P 500's 17.67% return, the 15.57% gain for the
Lipper Growth Index and the 15.10% return of the Lipper Growth Fund average.
Over the past twelve months the fund has produced a total return of 32.69%,
better than the returns for the S&P 500 (30.13%), the Lipper Growth Index
(28.28%) and the Lipper Growth Fund average (25.38%).
While larger capitalization stocks continued to perform well over the past
year, a review of the INDATA universe of large capitalization growth funds
clearly shows how well the Growth Equity Fund has done over that time frame.
Among the approximately 400 large capitalization growth funds reporting to
INDATA the Growth Equity Fund placed in the top fifteen percent (15%) year-to-
date and the top quartile (25%) over the past year. Only 30% of INDATA's large
capitalization growth funds outperformed the S&P 500 thus far in 1998 and over
the last twelve months only 41% have bettered the index.
- --------------------------------------------------------------------------------
The Fund's six month performance was boosted by above-market results from its
holdings in the Technology (+39.1%), Capital Goods (+31.1%), Consumer Cyclical
(+27.1%), Healthcare (+25.9%), Utilities (21.4%), and Financial (17.8%)
sectors. The Consumer Staples sector returned 16.6%, just slightly less than
the S&P 500. Basic Materials produced a -3.1% return, but the sector
represented less than 2% of the Fund's assets and thus had only a nominal
impact on fund performance. Once again the Energy sector hit performance the
hardest with a -24.4% decline, but even here the impact was limited by the
modest 2.5% weighting in this sector.
The Growth Equity Fund continues to emphasize ownership of companies capable of
generating consistent and sustainable earnings growth. The Fund's largest
holdings as of June 30 continued to include Merck & Co., Home Depot, Staples,
Wal-Mart, Safeway, Microsoft, and General Electric. New additions to the
portfolio this year include Lucent Technologies, H.J. Heinz, Nationsbank, and
Computer Sciences. The Fund remains over-weighted in the Healthcare, Consumer
Cyclical and Technology sectors.
Given near-term uncertainty we suspect the stock market will continue the
choppy, trading range pattern of recent months with ongoing bouts of volatility
and sector rotation. However, with economic and business fundamentals
essentially intact we envision the market eventually moving higher as investors
focus on the plusses of continued economic and profit expansion; strong
financial institutions; the benefits accruing to well-managed corporations; and
a constructive interest rate environment.
INDEPENDENCE CAPITAL MANAGEMENT, INC.
INVESTMENT ADVISER
<PAGE>
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VALUE EQUITY FUND
We continue to be optimistic about the prospects for the U.S. economy. In our
view, the benign, low-inflation economic environment that has driven the stock
market's phenomenal performance of the past three-and-a-half years remains
intact.
THE INVESTMENT POWER OF THE BABY BOOMERS
A much-talked-about force fueling the market's advance has been the relentless
demand for stocks from baby boomers saving for retirement. This demand resulted
in an unprecedented net inflow into equity mutual funds of $263 billion in the
12 months through April.
While it's clear that the baby boomers are helping drive the market with their
thirst for equities, households have been net sellers of direct holdings of
stocks during the past three years. This should not be surprising given the
high level of merger activity and large number of corporate share repurchase
programs. Due partly to their net sales of direct equity holdings, households
have increased their liquid assets by $343 billion, or 9.2%, in the year
through March and by $392 billion in the past 3 1/4 years.
We take some comfort in this development. Mutual funds have low cash positions
at this time. By contrast, the large holdings of liquid assets by individuals
provide a cushion of potential buying power if the market were to decline,
assuming individuals try to capitalize on buying opportunities as they have
done in the wake of other recent market dips. The favorable demographic profile
of baby boomers with a need to save for retirement, and investing a significant
portion of their retirement money in equities, will continue for the next
decade.
RISK FACTORS IN THE STOCK MARKET
Stocks seem overvalued today by traditional measures such as price/earnings
ratios and yields. However, several factors mitigate this "overvaluation" and
suggest, in fact, that stocks may be reasonably valued. For instance, monetary
policy, budget restraint, deregulation and the Information Revolution have all
done their part to reduce inflation and interest rates, buttressing equity
prices. Because of the decline in long-term interest rates, stocks on a
dividend discount basis remain within the valuation range of the past quarter
century. The lower equity risk premiums of the 1980s and 1990s are, in turn,
justified by: the sharp decline in the volatility of stock returns relative to
the volatility of bond returns; a more favorable tax treatment for equities as
both inflation and capital gains tax rates have declined; and a more stable
corporate earnings environment.
However, with so much of the good news already reflected in stock prices, there
are some near-term risks. The pattern of low dividend payouts and low interest
rates has increased the sensitivity of stocks to changes in interest rates and
growth expectations. The main risk to interest rates would be renewed concern
about inflation as a result of today's somewhat-too-rapid monetary growth in
the face of a
- --------------------------------------------------------------------------------
tight labor market. This is something of a "Catch-22": a slowdown in monetary
growth would reduce the future inflation risk, but would also reduce the
monetary liquidity that has been a big plus for the market. However, there is
still time before monetary growth affects prices, and in any event near-term
economic growth is likely to be restrained by a reduction in the rate of
inventory accumulation and a weakening trade balance.
Another risk for the market is that corporate profit growth might prove
disappointing. We have already seen poorer profit results because of inventory
losses brought about by declining commodity prices and the impact of the Asian
crisis on high-tech companies and on overall foreign profits. There has also
been a recent squeeze in the ratio of prices received to unit labor costs. The
reduction of inventory losses should help some, but a slowdown in cyclical
productivity in combination with gradually accelerating labor compensation
gains and a poor pricing environment could squeeze margins and slow profit
growth or even cause margins to decline in the event of an even weaker economy.
So far, the Asian crisis has probably helped more than hurt the U.S. stock
market. Capital flows from Japan and perhaps from expatriate Chinese into the
U.S., a resulting strong dollar and our safe haven status have all contributed
to a decline in U.S. long interest rates. The negative impact on U.S. economic
growth of an increased U.S. trade deficit has actually been welcome in the face
of extremely strong domestic demand.
However, there could be serious dangers as the crisis unfolds. Japan seems
unable to deal with its economic problems and could very well remain in
recession if it fails to provide adequate monetary stimulus. The Chinese
economy is also under pressure, although that government seems determined not
to devalue its currency this year. Should it be forced to devalue, this would
create additional pressures on other economies in the region. Ultimately, of
course, the United States could not escape unscathed from such strains on the
international financial system.
SUMMARY
On balance, we think the economic outlook is positive, but we do have some
concerns. As always, we buy individual stocks, not the indexes or the economy.
Nonetheless, we remain alert to macro trends because they affect the overall
investment environment and the stocks we own.
OPCAP ADVISORS
INVESTMENT ADVISER
<PAGE>
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PENN SERIES FUNDS, INC.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
- --------------------------------------------------------------------------------
FLEXIBLY MANAGED FUND
There is no question that the economy is strong. The question is whether it is
too strong, strong but sustainable, or strong but about to slow. Consumer
spending is robust, and unemployment is at 30-year lows, with an amazing 64% of
all people over the age of 16 working. Surging business demand has even caused
unusual operating problems, such as those experienced by the Union Pacific
railroad, surprising managements and customers alike. Normally, one could
expect such prolonged economic strength to trigger a policy response by the
Federal Reserve, but aside from one small rate increase in March 1997, there
has been nothing.
PORTFOLIO HIGHLIGHTS
The fund's basic asset allocation among equities, convertibles, bonds,
preferred stock, and reserves changed little over the past six months. We did,
however, extensively groom the first two categories. Our largest purchases were
Times Mirror convertible bonds and Niagara Mohawk common stock, making them two
of our largest holdings. We significantly reduced FirstEnergy, also a top
holding, in response to its tremendous run over the past 18 months. Three
positions, Union Texas Petroleum, Wheelabrator Technologies, and Energy Group,
were liquidated following favorable takeovers. Our electric utility holdings
did particularly well considering the group's lackluster recent returns. Media
holdings, including New York Times, Washington Post, and Time Warner, were
strong. Two positions had a particularly negative impact on performance:
Newmont Mining, among other natural resource holdings, performed poorly due to
broad economic trends as well as investor disenchantment; and Loews, whose
major subsidiary is CNA Insurance, suffered from its modest cigarette
connection.
OUTLOOK
While we expect the economy to slow from its recent pace largely due to the
current flat yield curve, we rule out nothing concerning the general level of
interest rates. They might fall to surprising lows if the economy slows more
than most anticipate, conversely large increases would be likely only if
inflation were to step up dramatically. Our biggest concern remains the stock
market's high valuation levels. By most measures--price/earnings ratios,
dividend yields, price-to-book values, etc.--stock prices are at record highs.
Furthermore, we see financial accounting being stretched to the limit of
truthfulness. For example, some calculations show that over the last decade
more than one-quarter of all S&P 500 Stock Index earnings were subsequently
written off. We think that high valuation levels and suspect corporate
reporting dramatically lower the odds of successful investing. Why then do we
maintain even 50% in common stocks, with more exposure in convertibles?
Essentially, we are unwilling to be left at the gate in history's most
rewarding investing climate. More importantly, we have been able to make
investments we deem low risk that capture a good bit of the returns enjoyed by
more aggressive investors.
T. ROWE PRICE ASSOCIATES, INC.
INVESTMENT ADVISER
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SMALL CAPITALIZATION FUND
Small-Cap stocks as a class underperformed large caps in the second quarter
even though the average earnings growth of small caps has now outpaced large
caps for four consecutive quarters. This underperformance reflected, at least
in part, investor caution about liquidity in the event of a market downturn.
In our small cap portfolio, we are long-term investors in undervalued companies
that have a significant record of earnings and revenue growth, generate sizable
free cash flow, have high cash flow returns on assets and have quality balance
sheets. By being disciplined in our value philosophy, we seek to control risk,
temper volatility and generate excellent returns over time.
During the quarter, we initiated a position in Unitrode Corporation
(analog/linear and mixed-signal integrated circuits) and added to Wang
Laboratories (computer and network services). We also added to St. Mary Land &
Exploration and KCS Energy, oil and gas companies that have been battered by
the recent decline in energy prices. Our purchase of these stocks reflects
extremely low valuations for quality businesses, including modest multiples to
cash flow, not a bet on oil and gas prices.
Through in-depth original research, we seek to identify companies that meet our
criteria of superior businesses selling at reasonable valuations. CorVel
Corporation, one of our larger holdings, illustrates some of the qualities we
look for in an investment. CorVel is a leading national provider of managed
care services for workers' compensation, accident and health, and auto
insurance, with the industry's best systems. Clients include employers,
insurance companies and government agencies. We believe workers' comp managed
care, in particular, remains relatively undeveloped, offering excellent growth
opportunities. The company benefits from its national presence; large
corporations and insurance companies prefer to deal with one managed care
provider nationwide. Moreover, it generates an extremely attractive return of
more than 30% on operating assets and produces significant free cash flow.
During the past year, the company used part of that cash flow to repurchase
about 10% of its shares. For these reasons, as well as the stock's moderate
valuation, CorVel is one of our holdings.
OPCAP ADVISORS
INVESTMENT ADVISER
<PAGE>
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INTERNATIONAL EQUITY FUND
Our approach to maximizing returns involves a combination of country
allocation, security selection, and active currency management.
Country allocation decisions begin with an analysis of about 35 countries
representing the developed markets; factors taken into account include market
liquidity, accessibility to foreign investors, regulatory protection of
shareholders, accounting and disclosure standards, and foreign exchange
controls. A significant part of our decision-making process involves the use of
proprietary country models which measure the attractiveness of a market based
on current valuations and interest rates. Country weights are determined
relative to the MSCI EAFE index, with caps placed on maximum deviation from
index weights to control overall portfolio risk. Bottom-up company selection
also has a large impact on country weightings.
The company selection process begins with a screen of the universe of large-
and medium-cap companies representing the markets in each country of the
developed world. Companies analyzed are those with growth factors that can be
measured and compared, and that have long records of successful operations in
their core businesses. Portfolio managers visit the companies we hold and the
companies under consideration. We seek to identify strong, stable and reliable
management in addition to sound fundamentals; consistent growth and high return
on equity are two of the most important criterion in our company selection
process. Generally, stocks are held for over a year.
We do not make active currency "bets" but instead hedge currencies primarily as
a defensive measure to lower volatility and protect the portfolio in base
currency terms: we hedge against foreign currencies during times of perceived
dollar strength and leave currencies unhedged during times of perceived dollar
weakness.
MARKET ENVIRONMENT
Disinflation remains a risk to the overall profitability of the Japanese
economy; the Asian economies are contracting on a year-on-year basis as a
result of falling investment and consumer confidence.
Loose monetary policy in Japan is having a negative impact on the stalled
economv: the cost of financing for Japanese businesses is so low that most of
the businesses have little incentive to take immediate action towards resolving
the structural difficulties which precipitated the recent series of financial
woes.
Many companies present balance sheet and profitability risk and are not
providing a sufficient return on investment; low earnings levels are prevalent.
PORTFOLIO POSITIONS
Japan and the Asian region as a whole are slightly underweight in the
portfolio.
- --------------------------------------------------------------------------------
The portfolio does, however, maintain a significant position in Japan,
representing companies that have investment virtues equal to their counterparts
in the U.S. and Europe, i.e. little balance sheet risk, rising R.O.E.'s, and
generation of free cash flow.
Many of the portfolio's Japanese holdings are multinational corporations with
geographically well-diversified client bases; these companies do not, on the
whole, depend primarily on Japanese or Asian client bases.
FACTORS CONTRIBUTING TO/DETRACTING FROM RETURNS
Asia has been a drag on recent short-term returns; however, from a risk/reward
standpoint investments are well balanced and we anticipate stronger performance
over the long term.
We will remain cautious about investing in the region: we will consider only
investible companies that provide clear profit ratios; we foresee no easy way
out for the Asian economy in the near term.
VONTOBEL, USA
INVESTMENT ADVISER
<PAGE>
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PENN SERIES FUNDS, INC.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
- --------------------------------------------------------------------------------
EMERGING GROWTH FUND
The Penn Mutual Emerging Growth Portfolio outperformed its benchmark, the
Russell 2000 Growth Index, by a wide margin over the first half of 1998.
Through June 30,1998 the portfolio is up 26.77% versus the Russell 2000 Growth
index which increased 5.46%.
MARKET TRENDS
Small-cap growth stocks had a very strong start this year. In May and June,
however, the market dropped sharply. Investors became concerned about renewed
turmoil in Asia and potentially lower corporate earnings in the United States.
That uncertainty drove investors back to blue chips during the second quarter,
even though we believe large-caps stocks are more vulnerable to Asia's economic
downturn than many small-cap companies. Schroder & Company estimates that
companies in the Russell 2000 universe derive 12% of their total sales outside
the US. That contrasts sharply to companies in the S&P 500 which derive 32% of
their sales from outside the US. We think the tide will turn back toward small-
caps, if blue chip companies begin to report slowing revenue growth. By our
estimations, small-caps not only have much stronger growth prospects than
large-caps but also more attractive valuations.
Nonetheless, these concerns prompted investors to return their focus to large-
cap stocks late in the second quarter. In fact, despite periods of interest in
small-cap stocks, investors have favored large-caps throughout 1998. Data from
consulting firm Strategic Insight confirms this trend. Year-to-date cash flow
through May 31, 1998 to mutual funds characterized as large-cap by Morningstar
had attracted net inflow greater than $88 billion. Small-cap funds attracted
only $8 billion in that same period. Worse still, mutual funds characterized as
Small-Cap Growth have endured net redemptions in the year to date period.
PORTFOLIO REVIEW
The Portfolio's strong first-half performance was driven by a variety of
holdings. Some of our most profitable positions were in Internet-related
companies such as Real Networks (1.14%), Excite (0A5%), Amazon.com (1.30%) and
Network Solutions (0.97%). Many of our software and information-technology
holdings also contributed strong gains during the first half. We took some
profits on these stocks during the spring. That turned out to be a wise move,
as many of these stocks subsequently fell into a correction in May and June.
Investors were concerned that Asia weakness would continue to dampen demand for
semiconductors and ICs. While Asian weakness has not dramatically impacted
software companies, investors drove down their shares too.
We took advantage of the downturn by adding positions in software and IT
service companies, among others. This strategy of buying into weakness has
served the Portfolio well in the past. Last fall, for instance, we bought into
Excite when its share price was depressed. In fact, we mentioned Excite in our
year-end 1997 commentary to Penn Mutual. Excite rallied sharply in the first
quarter of 1998 as
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investors focused on the tremendous long-term growth opportunities of many
Internet related companies. Excite was attractive due to its valuation relative
to some of its peers. The stock increased significantly from our average
purchase back in 1997 before we sold it in the second quarter of this year. Our
sale decision paid off as Internet stocks came under pressure in May and June.
Despite the recent sell-off, we're convinced that Internet-related companies
offer tremendous long-term growth potential, and we think our team has the
unique insight that will allow us to exploit this sector.
THINKING "OUTSIDE THE BOX'
Outside the technology arena, we continue to search for growth in areas that
most other emerging growth fund managers overlook. Regional airlines are just
one example. Several of our holdings in this sector performed very well since
we started accumulating positions in November. We have taken profits in a
number of these positions as the stocks have run up in price, driving up their
price/earning multiple and their market cap. Our willingness to think outside
the box is just one of the tactics that we think will enable the Fund to
significantly outperform competitors over the long run.
We are excited about the Portfolio's long-term prospects and we look forward to
your continued support in the future. Thanks for investing with us.
ROBERTSON STEPHENS INVESTMENT MANAGEMENT
INVESTMENT ADVISER
<PAGE>
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PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1998
THE MONEY MARKET FUND
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------- ----- -----------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER (46.8%)
- ------------------------
Allstate Corp.
5.50%..................................... 07/20/98 A-1 1,200 $ 1,196,517
Bell Atlantic Corp.
5.53%..................................... 07/09/98 A-1 1,900 1,897,665
Carolina Power and Light
5.47%..................................... 07/10/98 A-1 1,695 1,692,682
Coca-Cola Co.
5.48%..................................... 07/09/98 A-1 1,300 1,298,417
Countrywide Home Loans
5.55%..................................... 07/09/98 A-1 1,800 1,797,780
Dekalb County for Emory University
5.65%..................................... 07/08/98 A-1 1,500 1,500,000
Dupont (E.I.) de Nemours & Co.
5.51%..................................... 07/08/98 A-1 1,520 1,518,372
Emerson Electric Co.
5.48%..................................... 07/02/98 A-1 1,300 1,299,802
Ford Motor Credit Co.
5.55%..................................... 07/02/98 A-1 1,900 1,899,707
GTE Corp.
5.62%..................................... 07/02/98 A-2 1,900 1,899,703
Lucent Technologies, Inc.
5.52%..................................... 07/09/98 A 1,300 1,298,405
Merrill Lynch & Co., Inc.
5.57%..................................... 07/15/98 A-1 900 898,051
5.49%..................................... 08/28/98 A-1 1,000 991,155
-----------
TOTAL COMMERCIAL PAPER
(Cost $19,188,256)................................................ 19,188,256
-----------
CORPORATE BONDS (10.3%)
- -----------------------
Associates Corporation
North America
5.25%..................................... 09/01/98 AA- 350 349,560
Chrysler Finance Corp.
5.375%.................................... 10/15/98 A 350 349,652
First USA Bank
6.25%..................................... 10/09/98 AA 1,000 1,001,304
GMAC Debentures
7.75%..................................... 01/15/99 A 325 328,220
International Lease
Finance Corp.
5.75%..................................... 07/01/98 A+ 465 465,000
Lehman Brothers
Holdings, Inc.
8.375%.................................... 02/15/99 A 240 243,588
Morgan Stanley Dean Witter 7.875%.......... 12/15/98 A+ 500 504,675
Sears Roebuck Co. 8.45%.................... 11/01/98 A- 100 100,714
Southern California Edison 7.50%........... 04/15/99 A+ 500 506,516
Wachovia Bank 6.00%........................ 03/15/99 AA+ 350 350,598
-----------
TOTAL CORPORATE BONDS
(Cost $4,199,827)................................................. 4,199,827
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------- ----- -----------
<S> <C> <C> <C> <C>
VARIABLE RATE DEMAND NOTES (33.0%)+
- -----------------------------------
Alabama State Development Authority 5.65%.. 07/07/98 A-1 550 $ 550,000
Barton Healthcare 5.70%.................... 07/01/98 A-1 430 430,000
Baylis Group Partnership 5.80%............. 07/01/98 A-1 700 700,000
Berks County Industrial Development
Authority 5.75%........................... 07/07/98 A-1 535 535,000
Bloomfield New Mexico 5.70%................ 07/07/98 A-1 600 600,000
Columbia County Georgia Development
Authority 5.60%........................... 07/07/98 A-1 1,390 1,390,000
Community Health Systems, Inc.
5.85%..................................... 07/07/98 A-1 1,065 1,065,000
5.85%..................................... 07/07/98 A-1 365 365,000
Durham Risk Management Co. 5.58%........... 07/07/98 A-1 500 500,000
Fairview Hospital and Healthcare Services
5.60%..................................... 07/07/98 AAA 500 500,000
GMG Warehouse American National 5.70%...... 07/01/98 A-1 875 875,000
Health Insurance Plan of Greater NY 5.55%.. 07/07/98 A-1 500 500,000
Illinois Development Finance Authority
5.70%..................................... 07/07/98 A-1 600 600,000
Liliha Partners LP
5.85%..................................... 07/01/98 A-1 300 300,000
5.85%..................................... 07/01/98 A-1 1,155 1,155,000
Montgomery County PA Industrial Development
Authority 5.75%........................... 07/07/98 A-1 775 775,000
New York, New York 5.65%................... 07/09/98 AAA 1,600 1,600,000
Saint Francis Health 5.85%................. 07/07/98 A-2 490 490,000
Sliver City New Mexico 5.70%............... 07/07/98 A-1 600 600,000
-----------
TOTAL VARIABLE RATE DEMAND NOTES
(Cost $13,530,000)................................................ 13,530,000
-----------
MEDIUM TERM NOTES (2.7%)
- ------------------------
Chrysler Financial Corp. 5.88%............. 12/21/98 A 650 650,148
Lehman Brothers Holding Corp. 6.65%........ 07/14/98 A 190 190,033
Xerox Corp. 7.01%.......................... 04/30/99 A 250 252,473
-----------
TOTAL MEDIUM TERM NOTES
(Cost $1,092,654)................................................. 1,092,654
-----------
</TABLE>
1
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1998 (CONTINUED)
THE MONEY MARKET FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- -----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (7.2%)
- -----------------------------
Janus Money Market Fund, Inc. .......................... 1,795,810 $ 1,795,810
Temporary Investment Fund, Inc. ........................ 1,151,237 1,151,237
-----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $2,947,047)................................................. 2,947,047
-----------
TOTAL INVESTMENTS (100%)
(Cost $40,957,784)(a)............................................. $40,957,784
===========
</TABLE>
- -------
(a) Cost for Federal income tax purposes.
+ The rate shown is the rate as of June 30, 1998, and the maturity shown is the
next interest readjusted date.
The Standard & Poor's Corporation, Moody's Investors Service, Fitch Investors
Service and Duff & Phelps Credit Rating Co. Ratings are the most recent ratings
available at June 30, 1998.
<TABLE>
<CAPTION>
PERCENTAGE OF PORTFOLIO
MATURITY AMOUNT ----------------------------------------------
SCHEDULE PAR (CUM)
-------- ----------- -------------
<S> <C> <C> <C>
1 - 7 days $17,495,000 46.0% 46.0%
8 - 14 days 12,805,000 33.7% 79.7%
15 - 30 days 2,100,000 5.5% 85.2%
31 - 60 days 1,000,000 2.6% 87.8%
61 - 90 days 350,000 0.9% 88.7%
91 - 120 days 1,350,000 3.6% 92.3%
121 - 150 days 100,000 0.3% 92.6%
Over 150 days 2,815,000 7.4% 100.0%
----------- -----------
$38,015,000 100.0%
=========== ===========
</TABLE>
Average Weighted Maturity -- 28 days
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1998
THE QUALITY BOND FUND
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ----- -----------
<S> <C> <C> <C> <C>
CORPORATE BONDS (16.6%)
- -----------------------
BROADCASTING (1.0%)
News America Holdings 8.50%.................. 02/23/25 BBB- 360 $ 425,250
-----------
CANADIAN GOV'T AGENCYED FRUIT (3.1%)
Hydro-Quebec 8.05%........................... 07/07/06 A+ 1,150 1,372,812
-----------
FINANCIAL (3.0%)
Associates Corp. N.A. 7.75%.................. 02/15/05 AA- 500 541,250
General Electric Capital Corp. 8.125%........ 02/01/99 AAA 500 506,580
Morgan Stanley Financial PLC 8.03%........... 02/28/17 A- 250 273,750
-----------
1,321,580
-----------
GENERAL OBLIGATION BONDS (4.5%)
Beneficial Corp. 6.39%....................... 01/22/08 A 1,000 991,250
General Electric Capital Corp. 6.66%......... 05/01/18 AAA 1,000 1,016,250
-----------
2,007,500
-----------
RAILROADS (0.6%)
Union Pacific Co. 8.35%...................... 05/01/25 A 250 275,000
-----------
RETAIL (0.4%)
Penney (J.C.) Inc. Note 9.45%................ 07/15/02 A+ 175 185,937
-----------
SERVICES-EQUIPMENT RENTING & LEASING (0.2%)
Service Corporation International 7.00%...... 06/01/15 BBB+ 100 103,625
-----------
TELEPHONE COMMUNICATIONS (2.3%)
GTE Corp. 6.94%.............................. 04/15/28 A 1,000 1,027,500
-----------
TRANSPORTATION (1.5%)
CSX Corporation 7.05%........................ 05/01/02 BBB 660 677,325
-----------
TOTAL CORPORATE BONDS
(Cost $6,966,319).................................................. 7,396,529
-----------
U.S. TREASURY OBLIGATIONS (43.0%)
- ---------------------------------
U.S. Treasury Bonds
5.625%...................................... 2/15/06 NR 1,850 1,857,252
7.50%....................................... 11/15/16 NR 1,000 1,200,670
6.125%...................................... 1/15/27 NR 3,490 3,741,734
-----------
6,799,656
-----------
U.S. Treasury Notes
5.875%...................................... 1/15/99 NR 2,550 2,562,265
7.875%...................................... 1/15/99 NR 750 773,160
7.75%....................................... 12/31/99 NR 1,000 1,031,830
5.875%...................................... 1/30/01 NR 3,200 3,232,736
6.25%....................................... 08/31/02 NR 2,750 2,821,500
5.75%....................................... 04/30/03 NR 1,850 1,867,649
-----------
12,289,140
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $18,999,191)................................................. 19,088,796
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ----- ----------
<S> <C> <C> <C> <C>
AGENCY OBLIGATIONS (28.1%)
- --------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION BONDS (28.1%)
Federal National Mortgage Association
5.75%........................................ 07/01/98 NR 3,500 3,500,000
5.625%....................................... 03/15/01 NR 3,100 3,098,543
6.45%........................................ 12/01/03 NR 1,214 1,236,506
6.67%........................................ 12/01/04 NR 1,768 1,822,727
6.825%....................................... 09/01/07 NR 2,722 2,813,490
----------
TOTAL AGENCY OBLIGATIONS
(Cost $12,347,903).................................................. 12,471,266
----------
COMMERCIAL ASSET BACKED SECURITIES (4.6%)
- -----------------------------------------
Morgan Stanley
6.95%........................................ 12/10/07 AA 468 489,361
Railcar-1 A2
7.125%....................................... 01/15/13 AAA 1,000 1,057,500
Sasco 96- CFl Class B
6.303%....................................... 02/25/28 AAA 500 500,707
----------
TOTAL COMMERCIAL ASSET-BACKED SECURITIES
(Cost $2,018,888)................................................... 2,047,568
----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------
<S> <C> <C>
SHORT-TERM INVESTMENTS (7.7%)
- -----------------------------
Janus Money Market Fund................................. 1,887,865 1,887,865
Temporary Investment Fund Class B....................... 1,551,471 1,551,471
-----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $3,439,336)................................................. 3,439,336
-----------
TOTAL INVESTMENTS (100.0%)
(Cost $43,771,637)(a)............................................. $44,443,495
===========
</TABLE>
- -------
(a) At June 30, 1998, the cost for Federal income tax purposes was $43,771,637.
Net unrealized appreciation was $670,740. This consisted of aggregate gross
unrealized appreciation for all securities in which there was an excess of
market value over tax cost of $708,957 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost
over market value of $38,217.
The Standard & Poor's corporation ratings are the most recent ratings
available at June 30, 1998.
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1998
THE HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------- -----------
<S> <C> <C> <C> <C>
ASSET-BACKED SECURITIES (0.8%)
- ------------------------------
Airplanes Pass Through Trust 10.875% (Cost
$506,762)................................ 03/15/19 BB $ 500 $ 551,250
-----------
CORPORATE BONDS (88.1%)
- -----------------------
ADVERTISING (0.4%)
American Business Information, Inc.
9.50%.................................... 06/15/08 B 250 251,250
-----------
AEROSPACE & DEFENSE (2.5%)
Communication & Power Industries 12.00%... 08/01/05 B 750 840,000
Dyncorp, Inc. 9.50%....................... 03/01/07 B 425 433,500
L-3 Communication Corp. 10.375%........... 05/01/07 B 325 358,719
-----------
1,632,219
-----------
AUTOMOBILES & RELATED (1.8%)
Advance Store Co. 10.25%.................. 04/15/08 B- 275 286,000
Diamond Triumph Auto 9.25%................ 04/01/08 B+ 250 255,000
Federal Mogul, Inc. 7.75%................. 07/01/06 BB+ 400 400,500
Trident Automotive 10.00%................. 12/15/05 B- 250 270,000
-----------
1,211,500
-----------
BROADCASTING (3.0%)
Azteca Holdings SA 11.00%................. 06/15/02 B- 200 200,500
Chancellor Media Corporation 8.125%....... 12/15/07 B- 550 557,563
Muzak Limited Partners 10.00%............. 10/01/03 B+ 500 517,500
Pegasus Communications Corporation
9.625%................................... 10/15/05 B- 150 154,875
Sinclair Broadcast Group, Inc. 8.75%...... 12/15/07 B 300 307,500
TV Azteca SA DE CV 10.50%................. 02/15/07 B+ 250 250,000
-----------
1,987,938
-----------
BUILDING PRODUCTS (3.6%)
American Builders and Contractors
10.625%.................................. 05/15/07 NR 400 400,000
Associated Materials Inc. 9.25%........... 03/01/08 BB 500 515,000
JTM Industries, Inc. 10.00%............... 04/15/08 B- 425 431,375
Maxxam Group, Inc. 11.25%................. 08/01/03 CCC+ 500 525,000
Werner Holdings Co. 10.00%................ 11/15/07 B- 500 520,000
-----------
2,391,375
-----------
CABLE OPERATORS (1.9%)
Falcon Holding Group 9.285%++............. 04/15/10 B 200 126,500
Frontiervision L.P. 11.00%................ 10/15/06 B 300 333,000
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------- -----------
<S> <C> <C> <C> <C>
Fundy Cable Ltd. 11.00%................... 11/15/05 BB $ 500 $ 555,000
Telewest Communication plc 9.625%......... 10/01/06 B+ 125 131,875
UIH Australia Pacific
13.897%++................................ 05/15/06 B 175 122,500
-----------
1,268,875
-----------
CHEMICALS (1.3%)
International Specialty Products, Inc.
9.75%.................................... 02/15/02 B- 500 526,250
Sovereign Specialty Chemicals 9.50%....... 08/01/07 B- 350 358,750
-----------
885,000
-----------
CONGLOMERATES (0.7%)
ICF Kaiser International, Inc. 13.00%..... 12/31/03 NR 400 440,000
-----------
CONSUMER PRODUCTS (1.4%)
Purina Mills, Inc. 9.00%.................. 03/15/10 B 425 435,625
Revlon Consumer Products 8.625%........... 02/01/08 B 500 500,000
-----------
935,625
-----------
CONTAINER (2.6%)
Anchor Advanced Products 11.75%........... 04/01/04 B+ 250 276,250
BWAY Corporation 10.25%................... 04/15/07 B 500 545,000
Plastic Containers, Inc. 10.00%........... 12/15/06 B+ 500 537,500
U.S. Can Corp. 10.125%.................... 10/15/06 B 350 368,375
-----------
1,727,125
-----------
DIVERSIFIED CHEMICALS (0.5%)
Koppers Industry, Inc. 9.875%............. 12/01/07 B- 300 306,000
-----------
ELECTRIC UTILITIES (0.7%)
Niagara Mohawk Power Corp.
7.75%.................................... 10/01/08 BB- 200 204,902
8.50%++.................................. 07/01/10 BB- 400 276,500
-----------
481,402
-----------
ELECTRONIC COMPONENTS (2.5%)
Celestica International 10.50%............ 12/31/06 B 275 303,188
Fairchild Semiconductor 10.125%........... 03/15/07 B 250 257,500
Hadco Corp. 9.50%......................... 06/15/08 B 350 350,000
MCMS, Inc. 9.75%.......................... 03/01/08 B- 500 460,000
Viasystems, Inc. 9.75%.................... 06/01/07 B- 250 260,000
-----------
1,630,688
-----------
ENERGY SERVICES (4.4%)
Amerigas Partners LP 10.125%.............. 04/15/07 BB+ 400 427,500
Energy Corporation of America 9.50%....... 05/15/07 B 600 586,500
Flores & Rucks 9.75%...................... 10/01/06 BB- 275 299,063
</TABLE>
4
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1998 (CONTINUED)
THE HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------- ----------
<S> <C> <C> <C> <C>
Kelley Oil & Gas Corporation 10.375%........ 10/15/06 B- $ 300 $ 298,500
Plains Resources, Inc. 10.25%............... 03/15/06 B 550 587,125
Pride Petroleum Services 9.375%............. 05/01/07 BB- 425 452,625
Rutherford-Moran Oil 10.75%................. 10/01/04 CCC+ 250 269,375
----------
2,920,688
----------
ENTERTAINMENT & LEISURE (3.8%)
Bally Total Fitness Holdings 9.875%......... 10/15/07 B- 500 515,000
Premier Parks, Inc. 9.381%++................ 04/01/08 B+ 300 198,750
Six Flags Theme Parks 12.25%................ 06/15/05 B- 600 682,500
Speedway Motorsports, Inc. 8.50%............ 08/15/07 B+ 500 519,375
Empress Entertainment 8.125%................ 07/01/06 B+ 550 551,375
----------
2,467,000
----------
FINANCIAL SERVICES (1.2%)
Ocwen Capital Trust I 10.875%............... 08/01/27 B- 200 218,000
Ocwen Financial Corp. 11.875%............... 10/01/03 BB- 500 560,000
----------
778,000
----------
FOOD PROCESSING (1.3%)
B&G Foods Inc.
9.625%..................................... 08/01/07 B- 200 202,000
Mrs. Fields Original
10.125%.................................... 12/01/04 BB+ 250 242,500
Shoppers Food Warehouse
9.75%...................................... 06/15/04 B+ 400 443,000
----------
887,500
----------
FOOD/TOBACCO (3.1%)
Archibald Candy Corp.
10.25%..................................... 07/01/04 B 300 318,000
Del Monte Foods Co.
11.106%++.................................. 12/15/07 B- 300 195,000
Eagle Family Foods
8.75%...................................... 01/15/08 B- 250 245,000
Keebler Corporation
10.75%..................................... 07/01/06 BB+ 600 681,000
Smithfield Foods, Inc.
7.625%..................................... 02/15/08 BB+ 125 123,750
Southern Foods, Inc.
9.875%..................................... 09/01/07 B 500 521,250
----------
2,084,000
----------
HEALTHCARE (2.4%)
Hudson Respiratory Care
9.125%..................................... 04/15/08 B- 300 292,500
Kinetic Concepts, Inc.
9.625%..................................... 11/01/07 B- 150 151,500
Owens & Minor, Inc.
10.875%.................................... 06/01/06 B+ 250 272,500
Oxford Health Plans, Inc.
11.00%..................................... 05/15/05 B- 200 203,250
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------- ----------
<S> <C> <C> <C> <C>
Paragon Health Network, Inc.
10.145%++................................. 11/01/07 B- $ 400 $ 264,000
Quest Diagnostic, Inc.
10.75%.................................... 12/15/06 B+ 250 279,375
Sun Healthcare Group
9.50%..................................... 07/01/07 B- 150 151,875
----------
1,615,000
----------
HOTELS & GAMING (6.7%)
Boyd Gaming Corp. 144A
9.50%..................................... 07/15/07 BB 400 416,000
Casino America, Inc.
12.50%.................................... 08/01/03 B+ 250 282,500
Courtyards By Marriott
10.75%.................................... 02/01/08 B- 500 548,750
Grand Casinos, Inc.
10.125%................................... 12/01/03 BB 200 218,000
9.00%..................................... 10/15/04 BB 300 325,500
HMC Acquisition Properties
9.00%..................................... 12/15/07 NR 400 434,000
Horseshoe Gaming L.L.C.
9.375%.................................... 06/15/07 B 600 635,250
Host Marriott Travel Plaza
9.50%..................................... 05/15/05 BB- 600 639,750
Red Roof Inns Senior Note
9.625%.................................... 12/15/03 B 500 515,000
Rio Hotel & Casino, Inc.
10.625%................................... 07/15/05 B+ 350 376,250
9.50%..................................... 04/15/07 B+ 50 53,000
----------
4,444,000
----------
MANUFACTURING (3.5%)
Amtrol, Inc.
10.625%................................... 12/31/06 B- 100 97,000
Goss Graphic Systems, Inc.
12.00%.................................... 10/15/06 B 300 318,000
Grove Holdings L.L.C.
11.625%++................................. 05/01/09 B 150 85,500
Grove Worldwide L.L.C.
9.25%..................................... 05/01/08 NR 200 196,000
Hawk Corp.
10.25%.................................... 12/01/03 B+ 300 325,500
HCC Industries, Inc.
10.75%.................................... 05/15/07 B- 500 530,000
International Wire Group
11.75%.................................... 06/01/05 B- 500 550,000
Paragon Corp. Holdings
9.625%.................................... 04/01/08 B+ 250 225,000
----------
2,327,000
----------
MEDIA AND COMMUNICATIONS (1.5%)
Mediacom L.L.C.
8.50%..................................... 04/15/08 B+ 175 174,344
Northland Cable Television
10.25%.................................... 11/15/07 B- 500 535,000
Transwestern Holdings
11.875%++................................. 11/15/08 B- 250 165,000
Transwestern Publishing
9.625%.................................... 11/15/07 B- 100 102,000
----------
976,344
----------
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1998 (CONTINUED)
THE HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------- -----------
<S> <C> <C> <C> <C>
METALS AND MINING (1.6%)
AEI Holding Co.
10.00%.................................... 11/15/07 B- $ 500 $ 498,750
Columbus McKinnon Corporation
8.50%..................................... 04/01/08 B 275 270,187
P&L Holdings Corp.
8.875%.................................... 05/15/08 B+ 275 282,906
-----------
1,051,843
-----------
MISCELLANEOUS CONSUMER PRODUCTS (5.7%)
American Safety Razor Co.
9.875%.................................... 08/01/05 BB- 500 535,000
Chattem, Inc.
12.75%.................................... 06/15/04 B- 500 562,500
Doane Products Co.
10.625%................................... 03/01/06 B 500 545,000
Hedstrom Corp.
10.00%.................................... 06/01/07 B- 500 512,500
Hedstrom Holdings, Inc.
10.00%++.................................. 06/01/09 B- 50 31,312
Herff Jones, Inc.
11.00%.................................... 08/15/05 B 500 545,000
Holmes Products Corp.
9.875%.................................... 11/15/07 B- 150 155,250
Revlon Worldwide
10.75%++.................................. 03/15/01 B- 500 388,750
Windy Hill Pet Food Co.
9.75%..................................... 05/15/07 B- 500 522,500
-----------
3,797,812
-----------
PAPER & PAPER PRODUCTS (2.0%)
Repap New Brunswick
9.00%..................................... 06/01/04 B- 300 301,500
10.625%................................... 04/15/05 B- 500 505,000
Riverwood International Corp.
10.25%.................................... 04/01/06 B- 300 306,000
10.625%................................... 08/01/07 B- 200 208,000
-----------
1,320,500
-----------
PRINTING AND PUBLISHING (2.3%)
American Lawyer Media Holdings
12.25%++.................................. 12/15/08 CCC+ 175 111,344
9.75%..................................... 12/15/07 B 150 155,625
Hollinger International Publishing
9.25%..................................... 03/15/07 BB- 300 316,500
Liberty Group Publishing
9.375%.................................... 02/01/08 CCC+ 250 256,250
Sun Media Corp.
9.50%..................................... 02/15/07 B- 325 342,875
Ziff Davis Inc.
8.50%..................................... 05/01/08 B+ 300 303,000
-----------
1,485,594
-----------
RETAIL (4.0%)
Community Distributors
10.25%.................................... 10/15/04 B+ 250 252,500
Eye Care Centers of America
9.125%.................................... 05/01/08 B- 350 344,750
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------- -----------
<S> <C> <C> <C> <C>
Finley Fine Jewelers Corp.
8.375%.................................... 05/01/08 B+ $ 600 $ 603,000
MTS, Inc.
9.375%.................................... 05/01/05 B 300 295,500
Pantry, Inc.
10.25%.................................... 10/15/07 NR 350 355,250
Safelite Glass Corp.
9.875%.................................... 12/15/06 B 400 420,000
Specialty Retailers, Inc.
8.50%..................................... 07/15/05 BB- 325 333,125
-----------
2,604,125
-----------
SAVINGS & LOAN ASSOCIATIONS (0.8%)
First Federal Financial Corp.
11.75%.................................... 10/01/04 B+ 500 560,000
-----------
SERVICE (5.8%)
Alliance Imaging
9.625%.................................... 12/15/05 B- 450 463,500
Allied Waste Industries
9.66%++................................... 06/01/07 B+ 250 183,750
AP Holdings Inc.
11.195%++................................. 03/15/08 B- 200 122,000
APCOA, Inc.
9.249%.................................... 03/15/08 B- 600 597,000
Coinmach Corp.
11.75%.................................... 11/15/05 B+ 307 342,305
Intertek Finance PLC
10.25%.................................... 11/01/06 B 445 465,025
Iron Mountain, Inc.
8.75%..................................... 09/30/09 B- 500 510,000
MSX International, Inc.
11.375%................................... 01/15/08 B- 400 412,000
Protection One Alarm
13.625%................................... 06/30/05 B- 260 296,400
Rural Metro Corp.
7.875%.................................... 03/15/08 BB- 250 239,375
Sitel Corporation
9.25%..................................... 03/15/06 B+ 200 200,000
-----------
3,831,355
-----------
SPECIALTY CHEMICALS (0.9%)
Furon Co.
8.125%.................................... 03/01/08 B+ 325 324,594
Octel Developments
10.00%.................................... 05/01/06 B+ 250 256,250
-----------
580,844
-----------
SUPERMARKETS (0.8%)
Jitney-Jungle Stores
10.375%................................... 09/15/07 B- 500 533,750
-----------
TELECOMMUNICATIONS (9.8%)
21St Century Telecom Group
12.736%++................................. 02/15/08 NR 150 83,250
Allegiance Telecom, Inc.
13.021%++................................. 02/15/08 NR 250 133,125
Colt Telecom Group PLC
5.024%++.................................. 12/15/06 B 700 735,000
</TABLE>
6
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1998 (CONTINUED)
THE HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------- -----------
<S> <C> <C> <C> <C>
Firstworld Communication
15.572%++................................. 04/15/08 NR $ 250 $ 111,250
ICG Holdings Inc.
11.178%++................................. 09/15/05 NR 250 213,750
Intercel, Inc.
10.71%++.................................. 02/01/06 B- 250 200,230
Intermedia Communication, Inc.
8.50%..................................... 01/15/08 B 100 100,250
10.203%++................................. 05/15/06 B 150 122,625
8.46%..................................... 07/15/07 B 125 91,250
Mastec Inc.
7.75%..................................... 02/01/08 BB- 200 190,500
Metrocall, Inc.
9.75%..................................... 11/01/07 CCC 500 510,000
Metronet Communications, Corp.
12.00%.................................... 08/15/07 B 150 172,500
10.169%++................................. 11/01/07 B 300 199,500
9.501%++.................................. 06/15/08 B 150 92,812
Microcell Telecommunications Inc.
14.00%++.................................. 06/01/06 NR 300 224,250
Nextel Communication, Inc.
9.93%++................................... 10/31/07 CCC+ 150 97,875
9.00%++................................... 08/15/04 CCC+ 100 97,250
10.092%++................................. 09/15/07 CCC+ 150 101,250
NEXTLINK Communications, Inc.
12.50%.................................... 04/15/06 B 250 281,250
Omnipoint Corp.
11.625%................................... 08/15/06 CCC+ 150 159,000
Price Communications
9.125%.................................... 12/15/06 B 300 300,000
PSINet Inc.
10.00%.................................... 02/15/05 B- 300 306,000
Qwest Communications International
8.111%++.................................. 10/15/07 B+ 600 450,000
Satelites Mexicanos SA
10.125%................................... 11/01/04 B- 250 242,500
Sprint Spectrum L.P.
11.00%.................................... 08/15/06 B+ 300 347,250
Startec Global Communications
12.00%.................................... 05/15/08 NR 275 275,000
United International Holdings
10.75%++.................................. 02/15/08 B 400 247,000
Verio, Inc.
10.375%................................... 04/01/05 NR 225 231,750
Viatel, Inc.
12.50%++.................................. 04/15/08 NR 200 121,000
-----------
6,437,417
-----------
TEXTILES & APPAREL (2.2%)
Delta Mills, Inc.
9.625%.................................... 09/01/07 B+ 500 492,500
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------- -----------
<S> <C> <C> <C> <C>
Dyersburg Corp.
9.75%.................................. 09/01/07 B+ $ 400 $ 390,000
Glenoit Corp.
11.00%................................. 04/15/07 B- 300 321,000
#@Plaid Clothing Corp.
11.00%................................. 08/01/03 D 375 450
Stevens JP & Co.
9.00%.................................. 03/01/17 BB+ 237 246,480
-----------
1,450,430
-----------
TRANSPORTATION (1.5%)
Greyhound Lines, Inc.
11.50%................................. 04/15/07 B- 500 555,625
Travelcenters of America
10.25%................................. 04/01/07 B 450 470,250
-----------
1,025,875
-----------
TOTAL CORPORATE BONDS
(Cost $57,147,993).............................................. 58,328,074
-----------
COMMERCIAL PAPER (4.3%)
- -----------------------
Dupont (E.I.) de Nemours & Co.
5.55%.................................. 07/10/98 A-1+ 290 289,598
5.52%.................................. 07/20/98 A-1+ 2,580 2,572,483
-----------
TOTAL COMMERCIAL PAPER
(Cost $2,862,081)............................................... 2,862,081
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
------
<S> <C> <C>
COMMON STOCK (1.2%)
- -------------------
+Berg Electronics Corp......................................... 7,396 144,685
@+Dr. Pepper Bottling Holdings, Inc., Class A.................. 14,800 495,800
+Gaylord Containers Corp., Class A............................. 7,500 57,656
+Hedstrom Holdings............................................. 6,065 7,581
+Nextel Communications, Inc.................................... 232 5,771
+Protection One, Inc........................................... 8,400 91,875
---------
TOTAL COMMON STOCK
(Cost $245,451)...................................................... 803,368
---------
PREFERRED STOCK (5.5%)
- ----------------------
Anvil Holdings, Inc........................................... 4,264 106,600
Bank United Capital Trust..................................... 250 268,750
Capstar Broadcasting Partners................................. 3,386 382,577
CBS Radio, Inc................................................ 2,631 304,538
Citadel Broadcasting Co....................................... 1,706 200,668
Clarke USA, Inc. ............................................. 2,640 277,200
Concentric Network Corp....................................... 150 149,250
CSC Holdings, Inc. Series H................................... 1,683 196,914
CSC Holdings, Inc. Series M................................... 4,990 571,359
Cumulus Media, Inc. .......................................... 150 152,625
E. Spire Communication, Inc................................... 1,630 177,302
Intermedia Communications, Inc. .............................. 5,771 68,094
Nextel Communications, Inc.................................... 970 107,670
Pegasus Communications Corp................................... 160 179,508
Primedia, Inc................................................. 3,065 298,807
Rural Cellular Corp........................................... 200 199,000
---------
TOTAL PREFERRED STOCK
(Cost $3,472,382).................................................... 3,640,862
---------
</TABLE>
7
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1998 (CONTINUED)
THE HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
WARRANTS (0.1%)
- ---------------
+Allegiance Telecom, Inc................................... 250 $ 250
+Globalstar Inc............................................ 350 38,500
+ICF Kaiser Intl. Inc...................................... 1,575 1,575
+Intermedia Communication.................................. 50 3,650
+Metronet Communications................................... 150 6,150
+Microcell Telecom......................................... 800 13,200
@+President Casinos, Inc.................................... 4,415 221
+UIH Australia Exp......................................... 175 1,769
+Wireless One, Inc......................................... 450 4
@+Wright Medical Technology, Inc............................ 2,676 26,765
-----------
TOTAL WARRANTS
(Cost $35,524).................................................... 92,084
-----------
TOTAL INVESTMENTS (100.0%)
(Cost $64,270,193)................................................ $66,277,719
===========
</TABLE>
- -------
@ Restricted Security
+ Non-income producing.
++ Effective yield.
# Securities in default.
(a) At June 30, 1998, the cost for Federal income tax purposes was
$64,262,576. Net unrealized appreciation was $2,007,526. This consisted of
aggregate gross unrealized appreciation for all securities in which there
was an excess of market value over tax cost of $2,832,073 and aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over market value of $824,547.
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1998
THE GROWTH EQUITY FUND
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
COMMON STOCK (96.6%)
- --------------------
BEVERAGES - SOFT DRINKS (1.5%)
PepsiCo, Inc. ............................................ 60,000 $ 2,471,250
-----------
CHEMICALS (1.8%)
Du Pont (E.I.) de Nemours & Co. .......................... 40,000 2,985,000
-----------
COMPUTER SOFTWARE & SERVICES (9.0%)
+ Cisco Systems, Inc. ..................................... 50,000 4,604,687
Computer Science Corp. ................................... 40,000 2,560,000
+ Microsoft Corp. ......................................... 70,000 7,588,438
-----------
14,753,125
-----------
COMPUTER SYSTEMS (2.3%)
+ Dell Computer Corp. ..................................... 40,000 3,711,250
-----------
DIVERSIFIED OPERATIONS (6.9%)
General Electric Co. ..................................... 75,000 6,825,000
Tyco International Ltd. .................................. 70,000 4,410,000
-----------
11,235,000
-----------
ENTERTAINMENT (2.6%)
The Walt Disney Co. ...................................... 40,000 4,202,500
-----------
FOODS (1.0%)
Heinz Co., H.J. .......................................... 30,000 1,683,750
-----------
FINANCIAL SERVICES (13.5%)
American Express Co. ..................................... 30,000 3,420,000
Chase Manhattan Corp. .................................... 50,000 3,775,000
Citicorp.................................................. 20,000 2,985,000
Fannie Mae................................................ 50,000 3,037,500
MBNA Corp. ............................................... 75,000 2,475,000
Nations Bank Corporation.................................. 40,000 3,060,000
SunAmerica, Inc. ......................................... 60,000 3,446,250
-----------
22,198,750
-----------
HOUSEHOLD PRODUCTS (2.8%)
The Procter & Gamble Co. ................................. 50,000 4,553,125
-----------
INSURANCE (3.2%)
American International Group, Inc. ....................... 25,000 3,650,000
Travelers Group, Inc. .................................... 25,000 1,515,625
-----------
5,165,625
-----------
MEDICAL SUPPLIES (3.5%)
Guidant Corp. ............................................ 50,000 3,565,625
HBO & Company............................................. 60,000 2,116,875
-----------
5,682,500
-----------
RETAIL STORES (20.3%)
+ Costco Companies, Inc. .................................. 75,000 4,732,031
CVS Corporation........................................... 100,000 3,893,750
Home Depot, Inc. ......................................... 80,000 6,645,000
Safeway, Inc. ............................................ 150,000 6,103,125
+ Staples, Inc. ........................................... 200,000 5,793,750
Wal Mart Stores, Inc. .................................... 100,000 6,075,000
-----------
33,242,656
-----------
OIL & GAS - EQUIPMENT & SERVICES (2.5%)
Schlumberger Limited...................................... 60,000 4,098,750
-----------
PHARMACEUTICALS (16.5%)
Bristol-Myers Squibb Co. ................................. 40,000 4,597,500
Eli Lilly and Co. ........................................ 25,000 1,651,563
Johnson & Johnson......................................... 60,000 4,425,000
Merck & Co., Inc. ........................................ 50,000 6,687,500
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
Pfizer, Inc. .......................................... 35,000 $ 3,804,062
Schering-Plough Corp................................... 40,000 3,665,000
Warner-Lambert Co. .................................... 30,000 2,081,250
------------
26,911,875
------------
TELECOMMUNICATIONS (9.2%)
+ AirTouch Communications, Inc. ........................ 90,000 5,259,375
Lucent Technologies, Inc. ............................. 60,000 4,991,250
+ WorldCom, Inc. ....................................... 100,000 4,834,375
------------
15,085,000
------------
TOTAL COMMON STOCK
(Cost $101,695,497).............................................. 157,980,156
------------
SHORT TERM INVESTMENTS (3.4%)
- -----------------------------
Temporary Cash Investment Fund, Inc. .................. 3,103,085 3,103,085
Temporary Investment Fund, Inc. ....................... 3,103,085 3,103,085
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $6,206,170)................................................ 6,206,170
------------
TOTAL INVESTMENTS (100.0%)
(Cost $107,901,667)(a)........................................... $164,186,326
============
</TABLE>
- -------
+ Non-Income Producing
(a) At June 30, 1998, the cost for Federal income tax purposes was
$107,029,595. Net unrealized appreciation was $56,284,659. This consisted
of aggregate gross unrealized appreciation for all securities in which
there was an excess of market value over tax cost of $56,732,382 and
aggregate gross unrealized depreciation for all securities in which there
was an excess of tax cost over market value of $447,723.
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1998
THE VALUE EQUITY FUND
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
COMMON STOCK (86.2%)
- --------------------
ADVERTISING (1.4%)
Omnicom Group, Inc. ...................................... 100,000 $ 4,987,500
-----------
AEROSPACE & DEFENSE (4.5%)
The Boeing Company........................................ 60,000 2,673,750
Lockheed Martin Corp...................................... 126,000 13,340,250
-----------
16,014,000
-----------
AIRLINES (2.0%)
+ AMR Corp................................................. 86,000 7,159,500
-----------
AUTOMOTIVE PARTS - EQUIPMENT (2.0%)
LucasVarity PLC........................................... 178,520 7,107,328
-----------
BUILDING PRODUCTS (0.6%)
Armstrong World Industries, Inc........................... 32,000 2,156,000
-----------
CHEMICALS (2.3%)
Dupont (E.I.) de Nemours & Co. ........................... 80,000 5,970,000
Hercules, Inc............................................. 50,000 2,056,250
-----------
8,026,250
-----------
CONSUMER NON-DURABLE (2.6%)
Philip Morris Companies................................... 230,000 9,056,250
-----------
COSMETICS - TOILETRY (2.1%)
International Flavors & Fragrances, Inc................... 170,000 7,384,375
-----------
DIVERSIFIED (3.6%)
Canadian Pacific, Ltd..................................... 180,000 5,107,500
Textron, Inc.............................................. 105,000 7,527,187
-----------
12,634,687
-----------
ENTERTAINMENT & LEISURE (2.5%)
Carnival Corp. - Class A.................................. 220,000 8,717,500
-----------
ELECTRONIC SYSTEMS (1.8%)
Rockwell International Corp. (New)........................ 130,000 6,248,125
-----------
ELECTRONICS (1.8%)
+ Arrow Electronics, Inc................................... 96,000 2,088,000
Avnet, Inc................................................ 81,000 4,429,688
-----------
6,517,688
-----------
FINANCIAL SERVICES (16.1%)
BankBoston Corp........................................... 102,000 5,673,750
Citicorp.................................................. 53,000 7,910,250
Countrywide Credit Industries, Inc........................ 190,000 9,642,500
Freddie Mac............................................... 190,000 8,941,875
Green Tree Financial Corp. ............................... 340,000 14,556,250
Wells Fargo & Co.......................................... 28,333 10,454,877
-----------
57,179,502
-----------
HEALTHCARE (2.5%)
+ Tenet Healthcare Corp. .................................. 282,500 8,828,125
-----------
INSURANCE (21.6%)
Ace Limited............................................... 525,000 20,475,000
AFLAC, Inc................................................ 194,750 5,903,359
American International Group, Inc......................... 30,250 4,416,500
Everest Reinsurance Holdings, Inc......................... 250,000 9,609,375
EXEL Limited.............................................. 242,600 18,877,313
General Re Corp........................................... 43,000 10,900,500
Mid Ocean Limited......................................... 78,900 6,193,650
-----------
76,375,697
-----------
MACHINERY - DIVERSIFIED (3.7%)
Caterpillar, Inc. ........................................ 137,000 7,243,875
Dover Corp................................................ 176,000 6,028,000
-----------
13,271,875
-----------
MEDICAL SUPPLIES (2.2%)
Becton, Dickinson & Co.................................... 99,000 7,684,875
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
PAPER & PAPER PRODUCTS (1.4%)
Champion International Corp............................... 100,000 $ 4,918,750
-----------
PHOTOGRAPHIC EQUIPMENT (1.2%)
Polaroid Corp............................................. 115,000 4,089,687
-----------
RESTAURANTS (2.6%)
McDonald's Corp........................................... 136,000 9,384,000
-----------
RETAIL (2.8%)
The May Department Stores Co. ............................ 154,000 10,087,000
-----------
TELECOMMUNICATIONS (1.5%)
Sprint Corp. ............................................. 72,250 5,093,625
-----------
TEXTILES (0.2%)
Unifi, Inc................................................ 20,700 708,975
-----------
TOYS (1.1%)
Mattel, Inc............................................... 89,531 3,788,280
-----------
TRANSPORTATION (0.8%)
Union Pacific, Corp....................................... 65,000 2,868,125
-----------
TRAVEL SERVICES (1.3%)
+ The SABRE Group Holdings, Inc. .......................... 125,000 4,750,000
-----------
TOTAL COMMON STOCK
(Cost $199,485,371)............................................... 305,037,719
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000)
-------- ------
<S> <C> <C> <C>
COMMERCIAL PAPER (11.5%)
- ------------------------
American Express Credit Corp. 5.52%................. 07/29/98 12,000 11,948,480
Ford Motor Credit Corp. 5.52%....................... 07/22/98 13,782 13,737,622
Merrill Lynch 5.53%................................. 07/15/98 14,836 14,804,094
----------
TOTAL COMMERCIAL PAPER
(Cost $40,490,196).................................................. 40,490,196
----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------
<S> <C> <C>
SHORT TERM INVESTMENTS (2.3%)
- -----------------------------
Temporary Cash Investment Fund, Inc. .................. 4,128,102 4,128,102
Temporary Investment Fund, Inc. ....................... 4,131,209 4,131,209
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $8,259,311)................................................ 8,259,311
------------
TOTAL INVESTMENTS (100.0%)
(Cost $248,234,878)(a)........................................... $353,787,226
============
</TABLE>
- -------
+ Non-income producing.
(a) At June 30, 1998, the cost for Federal income tax purposes was
$248,234,878. Net unrealized appreciation was $105,552,348. This consisted
of aggregate gross unrealized appreciation for all securities in which
there was an excess of market value over tax cost of $109,873,851 and
aggregate gross unrealized depreciation for all securities in which there
was an excess of tax cost over market value of $4,321,503.
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1998
THE FLEXIBLY MANAGED FUND
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
COMMON STOCK (51.6%)
- --------------------
AUTOMOTIVE PARTS - EQUIPMENT (0.1%)
Exide Corp. ........................................... 35,000 $ 588,437
------------
BANKS (0.2%)
Bank Fuer International Zahlungs ...................... 146 957,734
------------
CHEMICALS (2.0%)
Great Lakes Chemical Corp. ............................ 215,000 8,479,062
+ Octel Corp............................................ 142,000 2,822,250
------------
11,301,312
------------
COMPUTERS (0.4%)
International Business Machines Corp. ................. 20,000 2,296,250
------------
CONSTRUCTION (0.5%)
Johns Manville Corp.................................... 173,000 2,605,812
------------
CONSUMER NON-DURABLE (0.6%)
+ Nine West Group, Inc. ................................ 13,000 348,562
+ Reebok International, Ltd. ........................... 102,000 2,824,125
------------
3,172,687
------------
ELECTRIC UTILITIES (8.3%)
First Energy Corp...................................... 544,000 16,728,000
Kansas City Power & Light Co........................... 183,000 5,307,000
+ Niagara Mohawk Power Corp. ........................... 1,064,000 15,893,500
Unicom Corp. Holding Co................................ 254,000 8,905,875
------------
46,834,375
------------
ELECTRONIC COMPONENTS (0.1%)
AMP, Inc............................................... 13,000 446,875
------------
EXPLORATION & PRODUCTION (0.5%)
Mitchell Energy & Development, Class B................. 139,000 2,675,750
------------
FINANCIAL SERVICES (0.9%)
Fund American Enterprises Holdings, Inc. .............. 35,000 5,180,000
------------
FOOD PROCESSING (0.7%)
McCormick & Co., Inc. ................................. 108,000 3,857,625
------------
GENERAL MERCHANDISERS (0.5%)
+ Hills Stores Co. ..................................... 86,000 494,500
Wal Mart Stores, Inc................................... 37,000 2,247,750
------------
2,742,250
------------
HOLDINGS COMPANY DIVERSIFIED (4.3%)
BTR PLC................................................ 124,313 352,607
Hanson PLC (ADR)....................................... 53,125 1,610,351
Loews Corp. ........................................... 217,000 18,906,125
+ Lonrho Africa PLC..................................... 425,200 521,444
Lonrho PLC............................................. 637,500 2,999,550
------------
24,390,077
------------
HOTELS & GAMING (0.3%)
+ Circus Circus Enterprises, Inc........................ 116,000 1,964,750
------------
INSURANCE (2.4%)
Aetna Inc. ............................................ 25,000 1,903,125
+ Leucadia National Corp. .............................. 132,000 4,364,250
Unitrin, Inc. ......................................... 54,000 3,739,500
Willis Corroon Group PLC (ADR)......................... 277,000 3,479,812
------------
13,486,687
------------
MEDIA AND COMMUNICATIONS (3.5%)
+ Chris-Craft Industries, Inc........................... 182,800 9,996,875
Meredith Corp. ........................................ 95,000 4,459,062
Time Warner, Inc....................................... 63,972 5,465,608
------------
19,921,545
------------
MEDICAL (0.6%)
Smith and Nephew PLC................................... 1,340,000 3,348,100
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
METALS (0.0%)
Inco Ltd. .............................................. 13,000 $ 177,125
------------
MINING (2.2%)
Homestake Mining Co. ................................... 229,000 2,375,875
Newmont Mining Corp. ................................... 310,000 7,323,750
Prime Resources Group, Inc. ............................ 420,200 2,915,137
------------
12,614,762
------------
MISCELLANEOUS CONSUMER DURABLES (0.5%)
Corning Incorporated.................................... 87,000 3,023,250
------------
MISCELLANEOUS CONSUMER PRODUCTS (1.6%)
Cross (A.T.) Co., Class A............................... 38,000 565,250
Philip Morris Co., Inc. ................................ 195,000 7,678,125
Tupperware Corp......................................... 20,500 576,562
------------
8,819,937
------------
OIL & GAS (8.2%)
Amerada Hess Corp. ..................................... 426,000 23,137,125
Atlantic Richfield Co................................... 45,000 3,515,625
Kerr-McGee Corp......................................... 14,000 810,250
Murphy Oil Corp......................................... 172,000 8,718,250
Texaco, Inc. ........................................... 167,000 9,967,812
------------
46,149,062
------------
PAPER & FOREST PRODUCTS (2.3%)
Domtar, Inc............................................. 450,000 3,037,500
Macmillian Bloedel Limited.............................. 551,000 5,906,031
Weyerhaeuser Co......................................... 90,000 4,156,875
------------
13,100,406
------------
PHARMACEUTICALS (2.5%)
+ Genetech, Inc. Special Common.......................... 158,000 10,724,250
Pharmacia & Upjohn, Inc................................. 22,500 1,037,812
Schering-Plough Corp. .................................. 26,000 2,382,250
------------
14,144,312
------------
PHOTOGRAPHIC EQUIPMENT (0.5%)
Polaroid Corp........................................... 77,000 2,738,313
------------
PUBLISHING (5.3%)
New York Times Co., Class A............................. 144,000 11,412,000
Readers Digest Assoc., Inc. ............................ 61,700 1,673,613
Readers Digest Assoc., Inc. Class B..................... 50,300 1,364,388
Washington Post Co., Class B............................ 26,300 15,148,800
------------
29,598,801
------------
SPECIALTY MERCHANDISERS (1.0%)
+ Petrie Stores Corp. ................................... 1,332,500 3,820,944
+ Toys "R' Us, Inc. ..................................... 77,000 1,814,313
------------
5,635,257
------------
TELECOMMUNICATIONS (1.0%)
MCI Communications Corp................................. 102,000 5,925,563
------------
TRANSPORTATION SERVICES (0.6%)
Overseas Shipholding Group, Inc. ....................... 155,000 3,158,125
------------
TOTAL COMMON STOCK
(Cost $233,430,585) .............................................. 290,855,179
------------
PREFERRED STOCK (5.0%)
- ----------------------
Cleveland Electric Illum. Series L 7.00%................ 34,550 3,455,000
Cleveland Electric Illum. Series R 8.80%................ 2,550 2,757,570
Cleveland Electric Illum. Series S 9.00%................ 2,100 2,280,327
Entergy Gulf States Utilities Inc. Series B 7.20%....... 4,414 728,808
International Paper Capital 5.25% Convertible........... 10,000 483,750
Kemper Co. Series E 5.75%............................... 100,000 5,237,500
Niagara Mohawk Power Corp. Series A 6.50%............... 24,000 604,500
</TABLE>
11
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1998 (CONTINUED)
THE FLEXIBLY MANAGED FUND
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
Niagara Mohawk Power Corp. Series B 7.50%................ 7,000 $ 178,063
Niagra Mohawk Power Corp. Series C 7.20%................. 5,500 137,156
Rouse Co. $3 Series B Convertible........................ 192,500 9,576,875
Union Pac Cap Trust 6.25%................................ 52,000 2,398,500
------------
TOTAL PREFERRED STOCK
(Cost $24,928,569)............................................... 27,838,049
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
CONTRACTS VALUE
--------- -----------
<S> <C> <C>
PUT OPTIONS (0.4%)
- ------------------
+Alza $40, July 18, 1998................................. 25 $ 3,906
+AMP $45, November 21, 1998.............................. 130 139,750
+Automatic Data Processing $75, November 21, 1998........ 115 54,625
+Clear Channel Communications $110, January 16, 1998..... 63 61,031
+Clear Channel Communications $120, January 16, 1999..... 15 23,437
+IBM $120, July 18, 1998................................. 120 66,000
+IBM $130, January 16, 1999.............................. 125 223,438
+News Corp. $30, July 18, 1998........................... 25 781
+News Corp. $30, October 17, 1998........................ 125 10,547
+Nine West $30, September 19, 1998....................... 130 51,187
+Pharmacia & Upjohn $50, October 17, 1998................ 105 54,469
+Pharmacia & Upjohn $50, January 16, 1999................ 120 71,302
+Reebok $35, January 16, 1999............................ 130 102,375
+Rouse $40, July 18, 1998................................ 35 29,750
+Schering-Plough $65, August 22, 1998.................... 120 1,500
+Schering-Plough $95, November 21, 1998.................. 130 97,500
+Schering-Plough $90, November 21, 1998.................. 130 68,250
+Time Warner $95, December 19, 1998...................... 150 159,375
+Time Warner $85, December 12, 1998...................... 255 113,156
+Time Warner $80, September 19, 1998..................... 200 31,250
+Tupperware Corporation $30, October 17, 1998............ 205 62,781
+Wal Mart $45, September 19, 1998........................ 120 1,125
+Wal Mart $55, September 9, 1998......................... 120 12,000
+Wal Mart $65, December 19, 1998......................... 120 64,500
+Wal Mart $60, December 19, 1998......................... 250 78,125
+WorldCom $50, December 19, 1998......................... 900 371,250
+WorldCom $50, September 19, 1998........................ 260 94,250
+WorldCom $37.50, September 19, 1998..................... 240 9,000
+WorldCom $55, January 16, 1999.......................... 130 99,125
-----------
TOTAL OPTIONS
(Cost $3,725,679).................................................. 2,155,785
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000)
-------- ------ -------
<S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS (5.6%)
- --------------------------------
U.S. TREASURY NOTES
5.50%..................................... 02/28/99 NR $10,000 10,001,600
6.75%..................................... 05/31/99 NR 2,000 2,021,560
5.875%.................................... 02/15/00 NR 12,900 12,970,563
6.125%.................................... 07/31/00 NR 1,250 1,264,838
6.25%..................................... 04/30/01 NR 2,500 2,546,475
6.25%..................................... 10/31/01 NR 2,500 2,551,950
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $31,343,445)................................................ 31,356,986
------------
AGENCY OBLIGATIONS (5.4%)
- -------------------------
Tennessee Valley Authority
5.88%.................................... 04/01/36 NR 15,195 15,514,916
5.98%.................................... 04/01/36 AAA 4,600 4,697,115
6.235%................................... 07/15/45 NR 9,950 10,273,962
------------
TOTAL AGENCY OBLIGATIONS
(Cost $30,257,595)................................................ 30,485,993
------------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------- ------------
<S> <C> <C> <C> <C>
MEDIUM TERM NOTES (1.1%)
- ------------------------
FNMA-Global Bond 6.375%.................. 01/16/02 NR $ 3,200 $ 3,271,360
FNMA Medium Term Note 5.37% ............. 02/07/01 NR 1,600 1,587,680
Merck & Company 5.76%.................... 05/03/37 AAA 1,150 1,165,203
------------
TOTAL MEDIUM TERM NOTES
(Cost $5,930,256)................................................ 6,024,243
------------
COMMERCIAL PAPER (10.7%)
- ------------------------
Island Finance Puerto Rico Inc. 5.55%.... 07/15/98 A1+ 520 518,878
Kellogg Company
5.51%................................... 07/21/98 A1+ 19,344 19,284,786
5.51%................................... 07/24/98 A1+ 1,500 1,494,720
Metlife Funding, Inc. 5.50%.............. 07/14/98 A1+ 19,590 19,551,092
Schering Corp. 5.50%..................... 07/14/98 A1+ 19,110 19,072,045
------------
TOTAL COMMERCIAL PAPER
(Cost $59,921,521)............................................... 59,921,521
------------
CONVERTIBLE BONDS (12.1%)
- -------------------------
BellSouth Telecommunications Debentures
5.85%................................... 01/15/45 AAA 3,800 3,821,546
Chiron Corp. 1.90%....................... 11/17/00 BBB+ 8,250 7,579,687
Clear Channel 2.625%..................... 04/01/03 BBB- 1,050 1,126,125
Exide Corp. 2.90%........................ 12/15/05 B 1,020 634,950
Homestake Mining Co. 5.50%............... 06/23/00 B+ 5,750 5,505,625
Homestake Mining Co. Euro Bond 5.50%..... 06/23/00 NR 600 574,500
Inco Limited 7.75%....................... 03/15/16 BBB- 1,300 1,290,978
Inco Limited 5.75%....................... 07/01/04 BBB- 9,200 8,617,364
Interpublic Group COS Inc. 1.80%......... 09/16/04 NR 600 561,000
Lonhro Conv. Euro Bond 6.00%............. 02/27/04 NR 2,800 4,280,542
McKesson Corp. 4.50%..................... 03/01/04 BBB+ 1,500 1,372,965
National Semiconductor Corp. 6.50%....... 10/01/02 BB 1,500 1,376,250
National Semiconductor Corp. 6.50%....... 10/01/02 NR 1,075 986,312
Ogden Corp. Euro Bond 5.75%.............. 10/20/02 NR 250 248,750
Pep Boys 4.00%........................... 09/01/99 BBB 2,500 2,466,675
Phycor, Inc. 4.50%....................... 02/15/03 BB- 2,370 1,987,838
Potomac Electric Power Co. 5.00%......... 09/01/02 A- 4,050 3,888,000
Rouse Company Euro Bond 5.75%............ 07/23/02 NR 6,425 7,355,276
Teck Corp. 3.75%......................... 07/15/06 BBB- 4,020 3,085,350
Thomas Nelson 5.75%...................... 11/30/99 NR 1,050 1,044,750
WMX Technologies 2.00%................... 01/24/05 BBB 10,300 10,213,068
------------
TOTAL CONVERTIBLE BONDS
(Cost $65,662,322)............................................... 68,017,551
------------
ZERO COUPON BONDS (7.7%)
- ------------------------
Automatic Data Processing, Inc.
4.9925%++............................... 02/20/12 AA 10,800 10,056,960
</TABLE>
12
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1998 (CONTINUED)
THE FLEXIBLY MANAGED FUND
<TABLE>
<CAPTION>
MATURITY RATING PAR (000) VALUE
-------- ------ --------- ------------
<S> <C> <C> <C> <C>
Deutsche Bank Finance Bv 4.2499%++...... 02/12/02 NR $ 1,050 $ 585,375
Marriott International 3.9325%++........ 03/25/99 BBB 3,505 2,296,126
News America Holdings Lyons 5.2359%++... 03/11/98 BBB- 3,850 2,484,290
Office Depot Inc. 4.4062%++............. 11/01/08 BB+ 1,250 974,937
Pep Boys Convertible 4.3051%++.......... 09/20/11 BBB 2,500 1,382,025
Roche Holdings, Inc. 6.3750%++.......... 05/06/04 NR 14,000 6,807,500
Times Mirror Co. 4.4191%++.............. 04/15/02 A 29,000 13,217,910
U.S. Cellular 5.9722%++................. 06/15/15 BBB- 14,000 5,321,820
------------
TOTAL ZERO COUPON BONDS
(Cost $35,567,185)................................................ 43,126,943
------------
<CAPTION>
SHARES
---------
<S> <C> <C>
SHORT TERM INVESTMENTS (0.4%)
- -----------------------------
Temporary Investment Fund, Inc.
(Cost $2,553,139)...................................... 2,553,139 2,553,139
------------
TOTAL INVESTMENTS (100.0%)
(Cost $493,320,296)(a)............................................ $562,335,389
============
</TABLE>
- -------
+Non-income producing.
++Effective Yield.
(a) At June 30, 1998, the cost for Federal income tax purposes was
$493,170,664. Net unrealized appreciation was $69,015,093. This consisted
of aggregate gross unrealized appreciation for all securities in which
there was an excess of market value over tax cost of $84,041,255 and
aggregate gross unrealized depreciation for all securities in which there
was an excess of tax cost over market value of $15,026,162.
ADR--American Depository Receipt
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1998
THE INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
COMMON STOCK (91.1%)
- --------------------
AUSTRALIA (0.8%)
National Australia Bank Limited........................... 94,025 $ 1,240,190
------------
BELGIUM (1.0%)
Barco N.V................................................. 5,500 1,537,221
------------
DENMARK (0.3%)
Bang & Olufsen Holding-B.................................. 6,600 475,060
------------
FINLAND (0.4%)
Cultor Oyj................................................ 36,000 577,419
------------
FRANCE (8.7%)
Axa--AUP.................................................. 25,000 2,811,762
Compagnie Generale D'Industrie Et de Participations....... 2,100 1,109,736
Dassault Systemes SA...................................... 39,000 1,838,396
L'OREAL................................................... 3,300 1,835,568
Scor...................................................... 35,000 2,220,052
Societe BIC SA............................................ 19,566 1,391,554
Total SA-B................................................ 14,185 1,844,088
------------
13,051,156
------------
GERMANY (6.6%)
Adidas Salomon AG......................................... 9,300 1,607,508
Allianz AG................................................ 3,700 1,219,647
Axa Colonia Konzern AG.................................... 7,500 928,655
Bayer AG.................................................. 35,000 1,805,233
Bayerische Motoren Werke (BMW) AG......................... 1,000 1,008,848
Bayerische Motoren Werke (BMW) AG-New..................... 300 298,333
Mannesmann AG............................................. 18,500 1,876,617
SGL Carbon AG............................................. 9,700 1,133,887
------------
9,878,728
------------
HONG KONG (1.3%)
Cheung Kong Holdings Limited.............................. 220,000 1,081,746
Dah Sing Financial Group.................................. 172,100 199,895
Sun Hung Kai Properties Limited........................... 150,000 636,891
------------
1,918,532
------------
IRELAND (4.4%)
Allied Irish Banks PLC.................................... 150,290 2,172,828
CRH PLC................................................... 49,021 697,274
+ Elan Corp PLC (ADR)...................................... 31,000 1,993,688
Greencore Group PLC....................................... 222,027 1,185,448
Viridian Group PLC........................................ 56,000 520,439
------------
6,569,677
------------
JAPAN (19.4%)
The Bank of Tokyo-Mitsubishi, Limited..................... 85,000 899,701
Bridgestone Corp.......................................... 90,000 2,127,031
Canon, Inc................................................ 32,000 726,303
Credit Saison Co. Limited................................. 80,000 1,585,185
Fuji Photo Film Co. Limited............................... 58,000 2,018,518
Hitachi Maxell Limited.................................... 45,000 852,758
Hoya Corp................................................. 33,000 934,467
Ito-Yokado Co. Limited.................................... 23,000 1,082,177
JUSCO Co. Limited......................................... 56,000 1,026,912
Komatsu Limited........................................... 150,000 728,465
Murata Manufacturing Co. Limited.......................... 25,000 810,606
Nintendo Co. Limited...................................... 20,000 1,851,785
NTT Data Corp............................................. 26,000 938,574
Omron Corp................................................ 93,000 1,420,614
Rohm Co. Limited.......................................... 31,000 3,182,980
SMC Corp.................................................. 13,500 1,026,227
Sony Corp................................................. 22,000 1,894,297
Takeda Chemical Industries................................ 93,000 2,472,673
Taisho Pharmaceutical Co. Limited......................... 65,000 1,213,027
Tokyo Broadcasting System, Inc............................ 30,000 335,051
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
Tokyo Electron Limited................................... 40,000 $ 1,224,916
Yasuda Fire & Marine Insurance Co. Limited............... 145,000 616,421
------------
28,968,688
------------
MALAYSIA (0.1%)
Malayan Banking Berhad................................... 160,000 161,254
------------
NETHERLANDS (9.9%)
AEGON N.V. (ADR)......................................... 24,010 2,076,865
AEGON N.V................................................ 32,672 2,842,831
Ahrend N.V............................................... 13,000 424,340
+ ASM Lithography Holding................................. 47,000 1,390,902
Elsevier N.V............................................. 70,000 1,056,425
Hagemeyer N.V............................................ 28,418 1,229,358
ING Groep N.V............................................ 26,000 1,702,470
Philips Electronics N.V. Ords............................ 18,500 1,555,142
Vedior N.V.--CVA......................................... 39,190 1,107,753
Vendex N.V............................................... 39,714 1,493,507
------------
14,879,593
------------
NORWAY (0.2%)
Smedvig--ASA (ADR)--B.................................... 25,000 284,375
------------
SPAIN (1.4%)
Banco Intercontinental Espanol SA........................ 7,800 506,956
Banco Popular Espanol SA................................. 18,000 1,537,919
------------
2,044,875
------------
SWEDEN (6.6%)
ABB AB B Shares.......................................... 130,000 1,809,416
ASSA Abloy AB-B.......................................... 54,500 2,142,427
Astra AB B-F............................................. 80,000 1,594,994
Hennes & Mauritz AB-B.................................... 28,000 1,787,096
OM Gruppen AB............................................ 47,100 980,395
Skandia Forsakrings AB................................... 110,000 1,572,424
------------
9,886,752
------------
SWITZERLAND (10.6%)
Credit Suisse Group...................................... 19,000 4,227,622
Nestle SA................................................ 1,250 2,675,022
Novartis Limited......................................... 1,050 1,747,219
+ Pharma Vision 2000 AG................................... 1,950 1,155,748
Roche Holding AG......................................... 70 1,037,210
Roche Holding AG--Genusshein............................. 330 3,240,584
Swiss Reinsurance........................................ 700 1,770,294
------------
15,853,699
------------
UNITED KINGDOM (19.4%)
BAA PLC.................................................. 765 8,258
Barclays PLC............................................. 1 29
British Petroleum Co. PLC (ADR).......................... 13,467 1,188,463
Capita Group PLC......................................... 25,000 215,028
Compass Group PLC........................................ 298,000 3,430,774
Dixons Group PLC......................................... 128,000 1,034,738
EMI Group PLC............................................ 84,185 736,023
General Accident PLC..................................... 73,000 1,693,029
Hays PLC................................................. 75,000 1,258,885
HSBC Holdings PLC........................................ 65,000 1,649,564
Lloyds TSB Group PLC..................................... 166,000 2,330,714
Misys PLC................................................ 76,528 4,347,746
Norwich Union PLC........................................ 200,000 1,456,602
Powerscreen International PLC............................ 111,691 172,380
+ Provident Financial PLC................................. 77,476 1,224,818
Rentokil Initial PLC..................................... 470,000 3,379,885
Shell Transport & Trading Co. PLC........................ 140,000 985,751
Siebe PLC................................................ 74,090 1,482,196
Smithkline Beecham PLC................................... 75,000 912,879
Zeneca Group PLC......................................... 35,000 1,501,986
------------
29,009,748
------------
TOTAL COMMON STOCK
(Cost $103,806,868).............................................. 136,336,967
------------
</TABLE>
14
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1998 (CONTINUED)
THE INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
PREFERRED STOCK (2.9%)
- ----------------------
GERMANY (2.9%)
+ Allianz AG............................................ 108 $ 35,301
SAP AG Prf............................................. 6,300 4,282,533
------------
TOTAL PREFERRED STOCK
(Cost $1,350,266)................................................ 4,317,834
------------
CORPORATE BONDS (0.0%)
- ----------------------
IRELAND
Viridian Group PLC Loan Notes (Cost $28,307)........... 40,000 31,688
------------
WARRANTS (1.7%)
- ---------------
+ Compagnie Generale de Eaux............................ 4,700 9,251
+ Credit Suisse......................................... 280,000 2,547,451
------------
TOTAL WARRANTS
(Cost $1,415,624)................................................ 2,556,702
------------
SHORT TERM INVESTMENTS (4.3%)
- -----------------------------
Temporary Cash Investment Fund, Inc.................... 3,196,732 3,196,732
Temporary Investment Fund, Inc......................... 3,195,009 3,195,009
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $6,391,741)................................................ 6,391,741
------------
TOTAL INVESTMENTS (100.0%)
(Cost $112,992,806)(a)........................................... $149,634,932
============
</TABLE>
- -------
+ Non-Income Producing.
(a) At June 30, 1998, the cost for Federal income tax purposes was
$112,992,806. Net unrealized appreciation was $36,642,126. This consisted
of aggregate gross unrealized appreciation for all securities in which
there was an excess of market value over tax cost of $43,833,443 and
aggregate gross unrealized depreciation for all securities in which there
was an excess of tax cost over market value of $7,191,317.
ADR--American Depository Receipt
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
% OF
MARKET VALUE
VALUE (000'S)
------ --------
<S> <C> <C>
COMMON AND PREFERRED STOCK SECTOR DIVERSIFICATION
- -------------------------------------------------
Financial Services........................................... 14.5% $ 20,420
Insurance.................................................... 12.2 17,096
Electronics.................................................. 10.2 14,329
Retail....................................................... 9.0 12,514
Manufacturing................................................ 8.8 12,393
Pharmaceuticals.............................................. 8.6 12,029
Computers.................................................... 7.4 10,469
Miscellaneous................................................ 6.2 8,756
Chemicals.................................................... 4.7 6,625
Food......................................................... 4.3 6,106
Consumer Products............................................ 4.2 5,968
Oil.......................................................... 3.1 4,303
Automotive................................................... 2.4 3,434
Real Estate.................................................. 1.2 1,719
Diversified.................................................. 1.1 1,537
Telecommunications........................................... 0.9 1,273
Investment Co................................................ 0.8 1,156
Utilities.................................................... 0.4 520
Airlines..................................................... 0.0 8
----- --------
100.0% $140,655
===== ========
</TABLE>
15
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1998
SMALL CAPITALIZATION FUND
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
COMMON STOCK (77.7%)
- --------------------
AGRICULTURAL PRODUCTS (0.7%)
+ Agribrands International, Inc............................. 10,800 $ 326,700
-----------
AUTOMOBILES & RELATED (0.2%)
+ Dollar Thrifty Automotive Group........................... 9,000 119,250
-----------
AUTO-PARTS/EQUIPMENT (1.0%)
Borg-Warner Automotive, Inc................................ 9,000 432,562
-----------
CABLE OPERATORS (0.3%)
TCA Cable TV, Inc.......................................... 2,300 138,288
-----------
CHEMICALS - DIVERSIFIED (0.8%)
M.A. Hanna Co.............................................. 19,400 355,262
-----------
CHEMICALS (4.0%)
+ McWhorter Technologies, Inc............................... 15,000 396,563
Schulman, A. Inc........................................... 65,800 1,283,100
+ Tetra Technology, Inc..................................... 8,600 144,050
-----------
1,823,713
-----------
COMPUTERS (0.2%)
+ Artesyn Technologies, Inc................................. 6,000 95,625
-----------
COMPUTER SERVICES & SOFTWARE (9.2%)
+ BA Merchant Services, Inc................................. 27,400 553,137
+ Banctec, Inc.............................................. 20,800 481,000
The BISYS Group, Inc....................................... 22,100 906,791
+ Volt Information Sciences, Inc............................ 17,400 471,975
+ Wallace Computer Service, Inc............................. 6,100 144,875
+ Wang Laboratories, Inc.................................... 62,800 1,599,437
-----------
4,157,215
-----------
ELECTRICAL EQUIPMENT (1.2%)
AMETEK, Inc................................................ 17,900 524,694
-----------
ELECTRONIC COMPONENTS (3.1%)
CTS Corp. ................................................. 14,600 430,700
Pioneer-Standard Electronics, Inc. ........................ 17,200 164,475
+ Unitrode Corp. ........................................... 69,700 801,550
-----------
1,396,725
-----------
ELECTRONICS (5.9%)
Belden, Inc................................................ 9,000 275,625
+ Exar Corp................................................. 21,000 439,687
+ General Semiconductor, Inc................................ 31,100 307,112
Lydall, Inc................................................ 51,600 751,425
Watkins-Johnson Co......................................... 33,900 881,400
-----------
2,655,249
-----------
ENVIRONMENTAL INSTRUMENTS (0.2%)
+ AEP Industries, Inc....................................... 3,800 82,294
-----------
FINANCIAL SERVICES (1.0%)
Enhance Financial Services Group, Inc. .................... 13,800 465,750
-----------
HEALTHCARE (4.7%)
+ Corvel Corp. ............................................. 17,100 663,694
+ Magellan Health Services, Inc. ........................... 45,100 1,144,413
Trigon Healthcare, Inc. ................................... 8,600 311,212
-----------
2,119,319
-----------
HOLDINGS COMPANY DIVERSIFIED (1.4%)
+ Triarc Companies, Inc. ................................... 28,800 631,800
-----------
HUMAN RESOURCES (0.3%)
Norrell Corp............................................... 6,400 127,600
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
INSURANCE (17.1%)
+ Annunity and Life R.E., Ltd............................... 19,600 $ 437,325
Chartwell RE Corp. ........................................ 20,000 588,750
+ Chicago Title Corp........................................ 14,400 665,100
+ CNA Surety Corp........................................... 36,900 544,275
Delphi Financial Group, Inc................................ 17,396 979,612
E.W. Blanch Holdings, Inc.................................. 21,700 797,475
Horace Mann Educators Corp. ............................... 11,000 379,500
Renaissance RE Holdings Ltd................................ 30,200 1,398,638
+ Terra Nova (Bermuda) Holdings, Class A.................... 22,400 702,800
United Wisconsin Services, Inc............................. 43,700 1,239,988
-----------
7,733,463
-----------
MACHINERY (DIVERSIFIED) (1.9%)
+ Baldwin Technology Company, Inc........................... 76,000 446,500
OmniQuip International, Inc................................ 22,600 418,806
-----------
865,306
-----------
MANUFACTURING (8.8%)
+ Albany International Corp. ............................... 2,000 47,875
Flowserve Corporation...................................... 51,100 1,258,338
+ GP Strategies Corp........................................ 38,500 563,062
Harman International Industries, Inc....................... 16,500 635,250
+ Paxar Corp................................................ 75,950 873,425
Roper Industries, Inc...................................... 15,200 397,100
Woodhead Industries, Inc. ................................. 13,800 216,488
-----------
3,991,538
-----------
MEDICAL SUPPLIES (0.6%)
Vital Signs, Inc........................................... 15,400 280,569
-----------
METAL FABRICATE/HARDWARE (0.9%)
EASCO, Inc................................................. 20,400 205,912
Kaydon Corp................................................ 5,100 180,094
-----------
386,006
-----------
OIL/GAS - EXPLORATION (1.9%)
KCS Energy, Inc............................................ 74,900 856,669
-----------
OIL & GAS (6.0%)
+ Basin Exploration, Inc. .................................. 22,600 402,562
Cabot Oil & Gas Corp. ..................................... 52,100 1,042,000
+ Nuevo Energy Co. ......................................... 16,600 533,275
St. Mary Land & Exploration Co............................. 30,600 739,181
-----------
2,717,018
-----------
PAPER AND FOREST PRODUCTS (0.5%)
Rock Tenn Co............................................... 18,600 233,663
-----------
PROPERTY & CASUALTY INSURANCE (0.2%)
+ Gryphon Holdings, Inc. ................................... 4,800 79,200
-----------
PRINTING AND PUBLISHING (1.7%)
Hollinger International, Inc. ............................. 44,600 758,200
-----------
RECYCLING (0.4%)
+ Newfield Exploration Co. ................................. 7,200 179,100
-----------
TEXTILES (2.6%)
Guilford Mills, Inc........................................ 31,200 624,000
WestPoint Stevens, Inc. ................................... 17,100 565,369
-----------
1,189,369
-----------
TRANSPORTATION (0.9%)
Interpool, Inc............................................. 29,500 425,906
-----------
TOTAL COMMON STOCK
(Cost $34,089,884)................................................ 35,148,053
-----------
</TABLE>
16
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1998 (CONTINUED)
SMALL CAPITALIZATION FUND
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
-------- --------- -----------
<S> <C> <C> <C>
AGENCY OBLIGATIONS (19.5%)
- --------------------------
Federal Home Loan Bank
5.37%......................................... 07/03/98 2,280 $ 2,279,320
5.36%......................................... 07/09/98 800 799,073
5.39%......................................... 08/26/98 2,660 2,637,326
5.42%......................................... 08/28/98 3,130 3,102,668
-----------
TOTAL AGENCY OBLIGATIONS
(Cost $8,818,387).................................................. 8,818,387
-----------
<CAPTION>
SHARES
---------
<S> <C> <C> <C>
SHORT TERM INVESTMENTS (2.8%)
- -----------------------------
Temporary Investment Fund, Inc. ............... 1,270,435 1,270,435
-----------
TOTAL INVESTMENTS (100.0%)
(Cost $44,178,706)(a).............................................. $45,236,875
===========
</TABLE>
- -------
+ Non-Income Producing.
(a) At June 30, 1998, the cost for Federal income tax purposes was $44,161,448.
Net unrealized appreciation was $1,058,169. This consisted of aggregate
gross unrealized appreciation for all securities in which there was an
excess of market value over tax cost of $3,700,334 and aggregate gross
unrealized depreciation for all securities in which there was an excess of
tax cost over market value of $2,642,165.
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1998
THE EMERGING GROWTH FUND
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
COMMON STOCK (92.9%)
- --------------------
ADVERTISING (1.6%)
+ TMP Worldwide, Inc. ...................................... 12,500 $ 435,547
-----------
AIRLINES (1.5%)
SkyWest, Inc. ............................................. 15,000 420,000
-----------
BROADCASTING (2.0%)
+ CD Radio, Inc. ........................................... 3,400 130,581
+ Emmis Broadcasting Corp. ................................. 4,400 211,063
+ Jacor..................................................... 3,800 224,438
-----------
566,082
-----------
BUILDING & REAL ESTATE (0.4%)
+ Fairfield Communities, Inc. .............................. 5,200 99,775
-----------
BUSINESS SERVICES (1.9%)
+ CorporateFamily Solutions, Inc. .......................... 2,700 67,163
+ NCO Group, Inc. .......................................... 3,100 68,588
+ Professional Detailing, Inc. ............................. 5,400 131,963
+ Ritchie Bros Auctioneers, Inc. ........................... 9,500 252,344
-----------
520,058
-----------
CABLE OPERATORS (0.9%)
+ Univision Communications, Inc. ........................... 7,000 260,750
-----------
COMMUNICATIONS SERVICES (1.7%)
+ Paging Network Inc. ...................................... 16,300 227,691
+ Technology Solutions Corp. ............................... 7,200 228,375
-----------
456,066
-----------
COMPUTER SERVICES & SOFTWARE (31.8%)
+ Aspect Development, Inc. ................................. 900 68,006
+ Atlantic Data Services, Inc. ............................. 10,500 202,125
+ Brightstar Information Technology Group, Inc. ............ 13,300 182,875
+ Brio Technology, Inc. .................................... 4,200 56,569
+ Carreker-Antinori, Inc. .................................. 5,000 51,875
+ Cognizant Technology Solutions, Inc. ..................... 6,700 80,819
+ Concord Communications, Inc. ............................. 10,700 275,191
+ Earthlink Network, Inc. .................................. 3,300 253,481
+ Ecsoft Group PLC (ADR).................................... 25,600 822,400
+ Electronic Processing, Inc. .............................. 8,000 95,500
+ Excite, Inc. ............................................. 1,200 112,237
+ Exodus Communications, Inc. .............................. 5,000 223,438
+ Filenet Corp. ............................................ 14,200 408,250
+ Information Management Resources, Inc. ................... 7,400 250,444
+ Inktomi Corp. ............................................ 300 11,906
+ Inspire Insurance Solutions, Inc. ........................ 3,500 115,938
+ Intelligroup, Inc. ....................................... 7,900 139,978
+ International Network Services............................ 5,300 215,809
+ JDA Software Group, Inc. ................................. 7,000 306,688
+ Macromedia, Inc .......................................... 14,500 271,422
+ Mapics, Inc. ............................................. 4,900 96,622
+ Mastech Corp. ............................................ 3,000 84,000
+ Memco Software Ltd. ...................................... 8,000 152,500
+ Micromuse, Inc. .......................................... 11,900 486,041
+ Microstrategy, Inc. ...................................... 1,900 54,031
+ MMC Networks, Inc. ....................................... 3,500 111,453
+ Network Solutions, Inc. .................................. 5,000 224,688
+ New Era of Networks, Inc. ................................ 6,900 211,744
+ Ovid Technologies, Inc. .................................. 5,000 116,250
+ Pervasive Software, Inc. ................................. 17,200 178,450
+ Realnetworks, Inc. ....................................... 11,000 410,781
+ Remedy Corp............................................... 8,600 146,469
+ Sapient Corp.............................................. 1,700 89,356
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
+ Saville Systems PLC (ADR)................................. 5,200 $ 260,650
+ Siebl Systems, Inc. ...................................... 2,500 80,469
+ Software AG Systems, Inc. ................................ 10,900 318,825
+ Systems & Computer Technology Corp........................ 9,800 267,050
+ The Ultimate Software Group, Inc. ........................ 1,300 12,025
+ Tier Technolngies, Inc. .................................. 15,700 281,128
+ Timberline Software Corp. ................................ 2,600 61,100
+ TSI International Software Ltd. .......................... 21,000 477,094
+ Verio, Inc. .............................................. 7,900 197,006
+ Vista Information Solutions, Inc ......................... 5,000 38,750
+ Visual Networks, Inc. .................................... 7,400 271,256
+ Wavephore, Inc. .......................................... 4,900 56,503
-----------
8,829,192
-----------
CONSUMER PRODUCTS (0.9%)
+ Balance Bar Co. .......................................... 6,100 85,781
+ 1-800 Contacts, Inc. ..................................... 11,200 170,100
-----------
255,881
-----------
COSMETICS (0.2%)
+ French Fragrances, Inc. .................................. 3,300 50,944
-----------
DRUGS AND COSMETICS (1.6%)
+ Twinlab Corp. ............................................ 7,500 328,359
+ USAna, Inc. .............................................. 3,900 121,631
-----------
449,990
-----------
EDUCATION (2.9%)
+ Bright Horizons, Inc. .................................... 400 11,300
+ Computer Learning Centers, Inc. .......................... 9,000 224,156
+ Education Management Corp. ............................... 14,600 481,800
Strayer Education, Inc. ................................... 2,100 75,797
-----------
793,053
-----------
ELECTRONIC COMPONENTS (3.1%)
+ Applied Micro Circuits Corp. ............................. 10,000 259,687
+ inTest Corporation........................................ 6,000 37,500
+ PMC-Sierra, Inc. ......................................... 9,000 421,312
+ TranSwitch Corporation.................................... 9,300 29,328
-----------
847,827
-----------
ENTERTAINMENT & LEISURE (5.0%)
+ Championship Auto Racing, Inc. ........................... 14,500 264,625
+ Resortquest International, Inc. .......................... 6,000 97,875
+ Royal Olympic Cruise Lines, Inc. ......................... 13,600 136,425
+ SFX Entertainment, Inc. .................................. 7,000 320,906
+ Silverleaf Resorts, Inc. ................................. 5,200 79,300
+ Steiner Leisure Ltd. ..................................... 11,025 334,884
+ Travel Services International, Inc. ...................... 4,800 157,500
-----------
1,391,515
-----------
FINANCE (0.5%)
+ Indigo Aviation (ADR)..................................... 12,400 134,850
-----------
FINANCIAL SERVICES (3.9%)
+ Financial Federal Corp. .................................. 16,500 442,406
+ Franchise Mortgage Acceptance Company..................... 11,900 309,400
+ Healthcare Financial Partners, Inc. ...................... 1,800 110,306
+ Imperial Credit Industries, Inc. ......................... 9,200 213,900
-----------
1,076,012
-----------
FOODS (0.5%)
+ Natural Alternatives International, Inc. ................. 7,100 142,888
-----------
</TABLE>
18
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1998 (CONTINUED)
THE EMERGING GROWTH FUND
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
HEALTHCARE (1.4%)
+ Balanced Care Corp........................................ 15,000 $ 108,750
+ Orthodontic Centers of America, Inc. ..................... 5,000 104,687
+ Sunrise Assisted Living, Inc. ............................ 5,400 185,794
-----------
399,231
-----------
HOTELS (1.7%)
Four Seasons Hotels, Inc. ................................. 6,200 218,550
+ Pegusus Systems, Inc. .................................... 10,000 255,625
-----------
474,175
-----------
HUMAN RESOURCES (7.1%)
+ ACSYS, Inc. .............................................. 9,900 134,269
+ Data Processing Resources Corp............................ 5,100 158,897
+ Hall Kinion & Associates, Inc. ........................... 8,800 58,025
+ Labor Ready, Inc. ........................................ 15,000 453,281
+ On Assignment, Inc. ...................................... 1,300 45,541
+ Romac International, Inc. ................................ 13,800 420,900
+ Select Appointments Holdings, PLC (ADR)................... 7,200 210,375
+ Staffmark, Inc. .......................................... 9,500 349,719
+ Vincam Group, Inc. ....................................... 6,300 126,000
-----------
1,957,007
-----------
INSURANCE (0.8%)
ARM Financial Group, Inc. ................................. 10,500 232,312
-----------
MEDICAL INSTRUMENTS & DEVICES (1.1%)
+ Ocular Sciences, Inc. .................................... 9,400 304,912
-----------
MEDICAL SERVICES (0.8%)
+ Lincare Holdings, Inc. ................................... 3,200 134,500
+ Schick Technologies, Inc. ................................ 5,800 88,994
-----------
223,494
-----------
MEDICAL INFORMATION SYSTEMS (1.0%)
+ Envoy Corp. .............................................. 5,800 275,681
-----------
NETWORK SYSTEMS (0.9%)
+ Tekelec, Inc. ............................................ 5,500 246,813
-----------
OFFICE EQUIPMENT (0.2%)
Aaron Rents, Inc. ......................................... 2,600 52,000
-----------
PUBLISHING (0.5%)
+ The Petersen Companies, Inc. ............................. 5,300 135,812
-----------
REAL ESTATE (1.6%)
+ CB Richard Ellis Services, Inc. .......................... 8,700 290,906
Intrawest Corp. ........................................... 7,000 139,562
-----------
430,468
-----------
RECREATIONAL VEHICLES (0.6%)
+ National R.V. Holdings, Inc. ............................. 3,400 153,000
-----------
RESTAURANTS (0.7%)
+ PJ America, Inc. ......................................... 10,000 181,875
-----------
RETAIL (3.7%)
+ Gadzooks, Inc. ........................................... 10,600 293,819
+ Media Arts Group, Inc. ................................... 13,200 256,575
Movado Group, Inc. ........................................ 8,000 241,500
+ N2K, Inc. ................................................ 5,000 98,281
+ Restoration Hardware, Inc. ............................... 1,600 40,100
+ Software.Net Corp......................................... 5,000 105,016
-----------
1,035,291
-----------
SERVICES (1.9%)
+ ITT Educational Services, Inc. ........................... 16,400 528,900
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
SPECIALTY RETAILER (1.9%)
+ NBTY, Inc. .............................................. 15,100 $ 276,047
+ Timberland Co............................................ 1,200 86,325
+ Tropical Sportswear International Corp. ................. 8,200 175,275
-----------
537,647
-----------
TELECOMMUNICATIONS (2.8%)
+ COM21, Inc. ............................................. 7,500 158,906
+ Echostar Communications Corp............................. 10,400 250,250
+ Premisys Communications, Inc. ........................... 3,700 92,269
+ Skytel Communications, Inc. ............................. 12,300 288,281
-----------
789,706
-----------
VIDEO COMPONENTS (2.9%)
+ Gemstar International Group, Ltd. ....................... 20,400 760,537
+ Macrovision Corp. ....................................... 2,200 52,112
-----------
812,649
-----------
WASTE MANAGEMENT (0.9%)
+ US Liquids, Inc. ........................................ 12,100 263,175
-----------
TOTAL COMMON STOCK
(Cost $21,321,304)................................................ 25,764,578
-----------
SHORT TERM INVESTMENTS (7.1%)
- -----------------------------
Temporary Cash Investment Fund, Inc. ..................... 980,442 980,442
Temporary Investment Fund, Inc. .......................... 980,420 980,420
-----------
TOTAL SHORT TERM INVESTMENTS
(Cost $1,960,862)................................................. 1,960,862
-----------
TOTAL INVESTMENTS (100.0%)
(Cost $23,282,166)(a)............................................. $27,725,440
===========
</TABLE>
- -------
+ Non-income producing
(a) At June 30, 1998, the cost for Federal income tax purposes was $23,231,346.
Net unrealized appreciation was $4,443,274. This consisted of aggregate
gross unrealized appreciation for all securities in which there was an
excess of market value over tax cost of $5,274,626 and aggregate gross
unrealized depreciation for all securities in which there was an excess of
tax cost over market value of $831,352.
ADR--American Depository Receipt
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES - (UNAUDITED)
JUNE 30, 1998
<TABLE>
<CAPTION>
MONEY QUALITY HIGH YIELD GROWTH
MARKET FUND BOND FUND BOND FUND EQUITY FUND
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments at value (1).... $40,957,784 $44,443,495 $66,277,719 $164,186,326
Cash........................ -- -- 9,059 0
Interest, dividends and
reclaims receivable........ 190,452 448,286 1,131,957 119,768
Receivable for investment
securities sold............ -- -- 53,787 --
Receivable for capital stock
sold....................... -- 8,150 34,048 302,631
Net unrealized appreciation
on forward foreign currency
contracts.................. -- -- -- --
Other assets................ -- 301 395 1,081
----------- ----------- ----------- ------------
Total Assets............... 41,148,236 44,900,232 67,506,965 164,609,806
----------- ----------- ----------- ------------
LIABILITIES:
Payable for investment
securities purchased....... -- -- 149,996 1,098,113
Payable for capital stock
redeemed................... -- 39,027 10,897 409,482
Dividends payable........... 166,415 -- -- --
Payable to the investment
advisor.................... 13,412 16,407 27,248 62,202
Payable to The Penn Mutual
Life Insurance Co.......... 14,669 16,245 24,563 57,996
Other liabilities........... 8,088 6,933 8,734 19,260
----------- ----------- ----------- ------------
Total Liabilities.......... 202,584 78,612 221,438 1,647,053
----------- ----------- ----------- ------------
NET ASSETS................... $40,945,652 $44,821,620 $67,285,527 $162,962,753
=========== =========== =========== ============
Shares of $.10 par value
capital stock issued and
outstanding................. 40,947,399 4,202,937 6,697,302 5,509,088
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE.. $ 1.00 $ 10.66 $ 10.05 $ 29.58
NET ASSETS CONSIST OF:
Capital paid in............. $40,947,399 $42,584,548 $61,632,372 $100,307,652
Undistributed net investment
income (loss).............. -- 1,146,004 2,545,977 122,693
Accumulated net realized
gain (loss) on investment
transactions and foreign
exchange................... (1,747) 420,328 1,099,652 6,247,749
Net unrealized appreciation
in value of investments,
futures contracts and
foreign currency related
items...................... -- 670,740 2,007,526 56,284,659
----------- ----------- ----------- ------------
TOTAL NET ASSETS........... $40,945,652 $44,821,620 $67,285,527 $162,962,753
=========== =========== =========== ============
(1) Investments at cost...... $40,957,784 $43,771,637 $64,270,193 $107,901,667
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FLEXIBLY SMALL EMERGING
VALUE MANAGED INTERNATIONAL CAPITALIZATION GROWTH
EQUITY FUND FUND EQUITY FUND FUND FUND
------------ ------------ ------------- -------------- -----------
<S> <C> <C> <C> <C>
$353,787,226 $562,335,389 $149,634,932 $45,236,875 $27,725,440
-- -- -- -- --
469,369 3,199,446 772,209 14,681 6,751
-- 341,594 959,494 889,276 85,259
250,855 435,114 9,009 599,608 120,330
-- -- 1,625,106 -- --
2,376 5,758 (323) 295 134
------------ ------------ ------------ ----------- -----------
354,509,826 566,317,301 153,000,427 46,740,735 27,937,914
------------ ------------ ------------ ----------- -----------
-- 2,810,836 -- 1,527,304 467,437
230,224 159,375 371,942 -- 26,339
-- -- -- -- --
143,099 229,089 92,089 18,322 16,284
131,309 209,880 55,808 17,160 9,260
37,262 67,448 50,299 8,155 4,393
------------ ------------ ------------ ----------- -----------
541,894 3,476,628 570,138 1,570,941 523,713
------------ ------------ ------------ ----------- -----------
$353,967,932 $562,840,673 $152,430,289 $45,169,794 $27,414,201
============ ============ ============ =========== ===========
13,975,685 26,810,807 8,026,498 3,148,719 1,683,329
$ 25.33 $ 20.99 $ 18.99 $ 14.34 $ 16.29
$225,916,421 $456,739,965 $110,109,528 $41,561,783 $22,021,193
2,201,705 7,324,757 (223,912) 122,303 (157,500)
20,297,457 29,759,141 4,277,440 2,427,884 1,107,234
105,552,349 69,016,810 38,267,233 1,057,824 4,443,274
------------ ------------ ------------ ----------- -----------
$353,967,932 $562,840,673 $152,430,289 $45,169,794 $27,414,201
============ ============ ============ =========== ===========
$248,234,878 $493,320,296 $112,992,806 $44,178,706 $23,282,166
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED JUNE 30, 1998 - (UNAUDITED)
<TABLE>
<CAPTION>
MONEY QUALITY HIGH YIELD GROWTH
MARKET FUND BOND FUND BOND FUND EQUITY FUND
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends...................... $ -- $ -- $ 171,161 $ 542,763
Interest....................... 1,096,389 1,305,081 2,626,625 135,313
Foreign tax withheld........... -- -- -- --
---------- ---------- ---------- -----------
Total investment income....... 1,096,389 1,305,081 2,797,786 678,076
---------- ---------- ---------- -----------
EXPENSES:
Investment advisory fees....... 76,806 94,439 157,843 355,884
Administration fees............ 28,802 31,479 47,353 110,363
Accounting fees................ 14,401 15,740 23,676 49,185
Custodian fees and expenses.... 7,098 9,576 10,667 13,826
Other expenses................. 10,628 7,843 12,270 26,125
---------- ---------- ---------- -----------
Total expenses................ 137,735 159,077 251,809 555,383
Less: Expense waivers......... -- -- -- --
---------- ---------- ---------- -----------
Net expenses.................. 137,735 159,077 251,809 555,383
---------- ---------- ---------- -----------
NET INVESTMENT INCOME (LOSS).... 958,654 1,146,004 2,545,977 122,693
---------- ---------- ---------- -----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investment
transactions.................. 10 420,328 1,103,070 6,492,700
Net realized foreign exchange
gain (loss)................... -- -- (3,418) --
Change in net unrealized
appreciation of investments,
futures contracts and foreign
currency related items........ -- 318,408 (275,721) 22,545,823
---------- ---------- ---------- -----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS.......... 10 738,736 823,931 29,038,523
---------- ---------- ---------- -----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS..................... $ 958,664 $1,884,740 $3,369,908 $29,161,216
========== ========== ========== ===========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FLEXIBLY SMALL EMERGING
VALUE MANAGED INTERNATIONAL CAPITALIZATION GROWTH
EQUITY FUND FUND EQUITY FUND FUND FUND
- ----------- ----------- ------------- -------------- ----------
<S> <C> <C> <C> <C>
$1,967,909 $ 3,393,494 $ 1,399,455 $ 126,457 $ 8,981
1,499,992 6,161,542 208,784 169,113 24,372
(16,781) (85,226) (107,053) -- (399)
- ----------- ----------- ----------- ----------- ----------
3,451,120 9,469,810 1,501,186 295,570 32,954
- ----------- ----------- ----------- ----------- ----------
827,634 1,355,032 529,758 107,865 93,862
248,290 406,510 105,952 32,359 17,644
91,726 123,453 54,778 16,184 12,281
22,621 48,399 40,132 8,409 10,163
59,144 105,986 33,018 8,450 5,592
- ----------- ----------- ----------- ----------- ----------
1,249,415 2,039,380 763,638 173,267 139,542
-- -- -- -- (4,272)
- ----------- ----------- ----------- ----------- ----------
1,249,415 2,039,380 763,638 173,267 135,270
- ----------- ----------- ----------- ----------- ----------
2,201,705 7,430,430 737,548 122,303 (102,316)
- ----------- ----------- ----------- ----------- ----------
20,297,457 29,799,241 5,300,037 2,445,089 1,158,055
-- 3,861 (1,022,597) -- --
15,230,637 (6,347,160) 17,945,090 (3,113,705) 3,938,450
- ----------- ----------- ----------- ----------- ----------
35,528,094 23,455,942 22,222,530 (668,616) 5,096,505
- ----------- ----------- ----------- ----------- ----------
$37,729,799 $30,886,372 $22,960,078 $ (546,313) $4,994,189
=========== =========== =========== =========== ==========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS - (UNAUDITED)
<TABLE>
<CAPTION>
MONEY MARKET FUND QUALITY BOND FUND
------------------------- --------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
06/30/98 DECEMBER 31, 06/30/98 DECEMBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS:
Net investment income
(loss)................. $ 958,654 $ 1,896,676 $ 1,146,004 $ 2,207,510
Net realized gain (loss)
on investment
transactions........... 10 (225) 420,328 912,980
Net realized gain (loss)
from foreign currency.. -- -- -- --
Net change in unrealized
appreciation
(depreciation) of
investments, futures
contracts and foreign
currency related
items.................. -- -- 318,408 (208,702)
----------- ----------- ------------ ------------
NET INCREASE (DECREASE)
IN NET ASSETS
RESULTING FROM
OPERATIONS............ 958,664 1,896,451 1,884,740 2,911,788
----------- ----------- ------------ ------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income... (958,654) (1,896,676) -- (2,207,510)
Net realized capital
gains.................. -- -- -- (16,338)
In excess of net
investment income...... -- -- -- (16,277)
----------- ----------- ------------ ------------
TOTAL DISTRIBUTIONS.... (958,654) (1,896,676) -- (2,240,125)
----------- ----------- ------------ ------------
CAPITAL SHARE
TRANSACTIONS:
Net increase (decrease)
in net assets from
capital share
transactions........... 3,469,258 2,975,990 2,859,852 1,794,024
----------- ----------- ------------ ------------
TOTAL INCREASE IN NET
ASSETS................ 3,469,268 2,975,765 4,744,592 2,465,687
Net Assets, beginning of
period.................. 37,476,384 34,500,619 40,077,028 37,611,341
----------- ----------- ------------ ------------
NET ASSETS, END OF
PERIOD.................. $40,945,652 $37,476,384 $ 44,821,620 $ 40,077,028
=========== =========== ============ ============
<CAPTION>
HIGH YIELD BOND FUND GROWTH EQUITY FUND
------------------------- --------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
06/30/98 DECEMBER 31, 06/30/98 DECEMBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS:
Net investment income
(loss)................. $ 2,545,977 $ 4,560,298 $ 122,693 $ 482,003
Net realized gain (loss)
on investment
transactions........... 1,103,070 2,964,765 6,492,700 13,834,988
Net realized gain (loss)
from foreign currency.. (3,418) -- -- --
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currency related
items.................. (275,721) (118,203) 22,545,823 14,267,440
----------- ----------- ------------ ------------
NET INCREASE (DECREASE)
IN NET ASSETS
RESULTING FROM
OPERATIONS............ 3,369,908 7,406,860 29,161,216 28,584,431
----------- ----------- ------------ ------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income... -- (4,560,298) -- (482,003)
Net realized capital
gains.................. -- -- (208,968) (13,678,856)
In excess of net
investment income...... -- (10,576) -- --
----------- ----------- ------------ ------------
TOTAL DISTRIBUTIONS.... -- (4,570,874) (208,968) (14,160,859)
----------- ----------- ------------ ------------
CAPITAL SHARE
TRANSACTIONS:
Net increase (decrease)
in net assets from
capital share
transactions........... 4,777,955 12,260,119 (2,047,741) 15,595,214
----------- ----------- ------------ ------------
TOTAL INCREASE IN NET
ASSETS................ 8,147,863 15,096,105 26,904,507 30,018,786
Net Assets, beginning of
period.................. 59,137,664 44,041,559 136,058,246 106,039,460
----------- ----------- ------------ ------------
NET ASSETS, END OF
PERIOD.................. $67,285,527 $59,137,664 $162,962,753 $136,058,246
=========== =========== ============ ============
</TABLE>
- -----------------------
* For the period from May 1, 1997 (commencement of operations) through December
31, 1997.
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE EQUITY FUND FLEXIBLY MANAGED FUND
- ---------------------------- --------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
06/30/98 DECEMBER 31, 06/30/98 DECEMBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
- ------------- ------------- ------------ ------------
<S> <C> <C> <C>
$ 2,201,705 $ 3,663,616 $ 7,430,430 $ 14,346,115
20,297,457 16,381,602 29,799,241 29,490,467
-- -- 3,861 80,506
15,230,637 36,751,125 (6,347,160) 23,598,612
- ------------- ------------- ------------ ------------
37,729,799 56,796,343 30,886,372 67,515,700
- ------------- ------------- ------------ ------------
-- (3,663,616) -- (14,346,115)
-- (16,381,602) (123,319) (29,491,615)
-- -- -- (99,694)
- ------------- ------------- ------------ ------------
-- (20,045,218) (123,319) (43,937,424)
- ------------- ------------- ------------ ------------
13,277,665 65,535,450 15,938,896 94,016,309
- ------------- ------------- ------------ ------------
51,007,464 102,286,575 46,701,949 117,594,585
302,960,468 200,673,893 516,138,724 398,544,139
- ------------- ------------- ------------ ------------
$ 353,967,932 $ 302,960,468 $562,840,673 $516,138,724
============= ============= ============ ============
<CAPTION>
INTERNATIONAL EQUITY FUND SMALL CAPITALIZATION FUND EMERGING GROWTH FUND
- ---------------------------- -------------------------- -------------------------
SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
06/30/98 DECEMBER 31, 06/30/98 DECEMBER 31, 06/30/98 DECEMBER 31,
(UNAUDITED) 1997 (UNAUDITED) 1997 (UNAUDITED) 1997 *
- ------------- ------------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
$ 737,548 $ 754,837 $ 122,303 $ 181,451 $ (102,316) $ (56,325)
5,300,037 4,305,835 2,445,089 2,278,532 1,158,055 1,331,710
(1,022,597) 2,563,120 -- -- -- --
17,945,090 3,833,566 (3,113,705) 2,875,385 3,938,450 504,824
- ------------- ------------- ------------ ------------ ----------- -----------
22,960,078 11,457,358 (546,313) 5,335,368 4,994,189 1,780,209
- ------------- ------------- ------------ ------------ ----------- -----------
-- (754,837) -- (181,451) -- --
-- (4,305,835) (8,222) (2,286,865) (8,966) (1,373,564)
-- (3,230,284) -- -- -- --
- ------------- ------------- ------------ ------------ ----------- -----------
-- (8,290,956) (8,222) (2,468,316) (8,966) (1,373,564)
- ------------- ------------- ------------ ------------ ----------- -----------
(167,345) 22,053,566 6,998,235 19,725,010 4,487,260 17,535,073
- ------------- ------------- ------------ ------------ ----------- -----------
22,792,733 25,219,968 6,443,700 22,592,062 9,472,483 17,941,718
129,637,556 104,417,588 38,726,094 16,134,032 17,941,718 --
- ------------- ------------- ------------ ------------ ----------- -----------
$ 152,430,289 $ 129,637,556 $ 45,169,794 $ 38,726,094 $27,414,201 $17,941,718
============= ============= ============ ============ =========== ===========
</TABLE>
25
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE MONEY MARKET FUND
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements. It should be read in conjunction with the financial statements and
notes thereto.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 ----------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
---------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.0247 0.0503 0.0489 0.0538 0.0365 0.0250
------- ------- ------- ------- ------- -------
Total from investment
operations............ 0.0247 0.0503 0.0489 0.0538 0.0365 0.0250
------- ------- ------- ------- ------- -------
LESS DIVIDENDS:
Dividends from net
investment income...... (0.0247) (0.0503) (0.0489) (0.0538) (0.0365) (0.0250)
------- ------- ------- ------- ------- -------
Total dividends........ (0.0247) (0.0503) (0.0489) (0.0538) (0.0365) (0.0250)
------- ------- ------- ------- ------- -------
Net asset value, end of
period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total return............ 2.50% 5.15% 5.00% 5.51% 3.71% 2.53%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in thousands).. $40,946 $37,476 $34,501 $24,726 $16,531 $13,005
------- ------- ------- ------- ------- -------
Ratio of expenses to
average net assets..... 0.72%(a) 0.70% 0.73%(b) 0.69%(b) 0.73%(b) 0.74%(b)
------- ------- ------- ------- ------- -------
Ratio of net investment
income to average net
assets................. 4.99%(a) 5.04% 4.88%(b) 5.37%(b) 3.74%(b) 2.51%(b)
------- ------- ------- ------- ------- -------
- ---------------------------------------
</TABLE>
(a) Annualized.
(b) 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%,
.74%, .79%, and .82%, and the ratios of net investment income to average
net assets would have been 4.87%, 5.32%, 3.68%, and 2.43% for the years
ended December 31, 1996, 1995, 1994, and 1993, respectively.
- --------------------------------------------------------------------------------
THE QUALITY BOND FUND
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements. It should be read in conjunction with the financial statements and
notes thereto.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 ----------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
---------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 10.20 $ 10.00 $ 10.24 $ 9.04 $ 10.19 $ 10.03
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.27 0.60 0.66 0.61 0.61 0.46
Net realized and
unrealized gain (loss)
on investment
transactions........... 0.19 0.20 (0.24) 1.21 (1.15) 0.71
------- ------- ------- ------- ------- -------
Total from investment
operations............ 0.46 0.80 0.42 1.82 (0.54) 1.17
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividend from net
investment income...... 0.00 (0.60) (0.66) (0.61) (0.61) (0.46)
Distribution from net
realized gain.......... 0.00 0.00 0.00 0.00 0.00 (0.54)
Distribution in excess
of net realized gain... 0.00 0.00 0.00 (0.01) 0.00 (0.01)
------- ------- ------- ------- ------- -------
Total distributions.... 0.00 (0.60) (0.66) (0.62) (0.61) (1.01)
------- ------- ------- ------- ------- -------
Net asset value, end of
period................. $ 10.66 $ 10.20 $ 10.00 $ 10.24 $ 9.04 $ 10.19
======= ======= ======= ======= ======= =======
Total return............ 4.51% 8.03% 4.14% 20.14% (5.29)% 11.67%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in thousands).. $44,822 $40,077 $37,611 $38,048 $31,338 $33,027
------- ------- ------- ------- ------- -------
Ratio of expenses to
average net assets..... 0.76%(a) 0.75% 0.77%(b) 0.73%(b) 0.78%(b) 0.79%(b)
------- ------- ------- ------- ------- -------
Ratio of net investment
income to average net
assets................. 5.46%(a) 5.87% 6.03%(b) 6.20%(b) 6.14%(b) 5.21%(b)
------- ------- ------- ------- ------- -------
Portfolio turnover
rate................... 189.2% 317.3% 107.6% 449.2% 380.9% 389.4%
------- ------- ------- ------- ------- -------
- ---------------------------------------
</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 would have been .78%,
.78%, .83%, and .84%, and the ratio of net investment income to average net
assets would have been 6.02%, 6.15%, 6.09%, and 5.16% for the years ended
December 31, 1996, 1995, 1994, and 1993, respectively.
26
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE HIGH YIELD BOND FUND
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements. It should be read in conjunction with the financial statements and
notes thereto.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 -------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
---------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 9.52 $ 8.91 $ 8.44 $ 7.94 $ 9.55 $ 8.63
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.38 0.80 0.70 0.80 0.90 0.77
Net realized and
unrealized gain (loss)
on investment
transactions........... 0.15 0.61 0.47 0.50 (1.60) 0.94
------- ------- ------- ------- ------- -------
Total from investment
operations............ 0.53 1.41 1.17 1.30 (0.70) 1.71
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividend from net
investment income...... 0.00 (0.80) (0.70) (0.80) (0.90) (0.77)
Distribution in excess
of net investment in-
come................... 0.00 0.00 0.00 0.00 (0.01) (0.02)
------- ------- ------- ------- ------- -------
Total distributions.... 0.00 (0.80) (0.70) (0.80) (0.91) (0.79)
------- ------- ------- ------- ------- -------
Net asset value, end of
period................. $ 10.05 $ 9.52 $ 8.91 $ 8.44 $ 7.94 $ 9.55
======= ======= ======= ======= ======= =======
Total return........... 5.57% 15.78% 13.87% 16.41% 7.33% 19.81%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in thousands).. $67,286 $59,138 $44,042 $36,442 $32,081 $35,305
------- ------- ------- ------- ------- -------
Ratio of expenses to
average net assets..... 0.80%(a) 0.81% 0.84% 0.87% 0.86% 0.87%
------- ------- ------- ------- ------- -------
Ratio of net investment
income to average net
assets................. 8.06%(a) 8.96% 8.14% 9.20% 9.18% 9.21%
------- ------- ------- ------- ------- -------
Portfolio turnover
rate................... 48.1% 111.3% 118.5% 84.3% 90.7% 118.7%
------- ------- ------- ------- ------- -------
</TABLE>
- -----------------------
(a) Annualized.
- --------------------------------------------------------------------------------
THE GROWTH EQUITY FUND
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements. It should be read in conjunction with the financial statements and
notes thereto.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 ------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
---------------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 24.37 $ 21.46 $ 20.00 $ 18.30 $ 20.49 $ 18.82
-------- -------- -------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.02 0.10 0.11 0.09 0.13 0.06
Net realized and
unrealized gain (loss)
on investment
transactions........... 5.19 5.64 3.85 4.75 (1.80) 2.28
-------- -------- -------- ------- ------- -------
Total from investment
operations............ 5.21 5.74 3.96 4.84 (1.67) 2.34
-------- -------- -------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividend from net
investment income...... 0.00 (0.10) (0.11) (0.09) (0.13) (0.06)
Distribution from
capital gains.......... 0.00 (2.73) (2.39) (3.05) (0.39) (0.61)
-------- -------- -------- ------- ------- -------
Total distributions.... 0.00 (2.83) (2.50) (3.14) (0.52) (0.67)
-------- -------- -------- ------- ------- -------
Net asset value, end of
period................. $ 29.58 $ 24.37 $ 21.46 $ 20.00 $ 18.30 $ 20.49
======== ======== ======== ======= ======= =======
Total return........... 21.38% 26.74% 19.76% 26.45% (8.12)% 12.43%
RATIOS/SUPPLEMENTAL DA-
TA:
Net assets, end of
period (in thousands).. $162,963 $136,058 $106,039 $95,593 $80,078 $83,938
-------- -------- -------- ------- ------- -------
Ratio of expenses to
average net assets..... 0.75%(a) 0.77% 0.80%(b) 0.77%(b) 0.79%(b) 0.77%(b)
-------- -------- -------- ------- ------- -------
Ratio of net investment
income to average net
assets................. 0.17%(a) 0.39% 0.48%(b) 0.43%(b) 0.70%(b) 0.30%(b)
-------- -------- -------- ------- ------- -------
Portfolio turnover
rate................... 52.0% 169.1% 177.1% 169.8% 156.2% 185.3%
-------- -------- -------- ------- ------- -------
</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 would have been .81%,
.82%, .84% and .82%, and the ratio of net investment income to average net
assets would have been .47%, .38%, .65% and .25% for the years ended
December 31, 1996, 1995, 1994, and 1993, respectively.
27
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE VALUE EQUITY PORTFOLIO
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements. It should be read in conjunction with the financial statements and
notes thereto.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 ----------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
---------------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 22.55 $ 19.32 $ 16.28 $ 12.67 $ 12.68 $ 12.14
-------- -------- -------- -------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.16 0.29 0.22 0.25 0.20 0.17
Net realized and
unrealized gain (loss)
on investment
transactions........... 2.62 4.53 3.88 4.50 0.17 0.69
-------- -------- -------- -------- ------- -------
Total from investment
operations............ 2.78 4.82 4.10 4.75 0.37 0.86
-------- -------- -------- -------- ------- -------
LESS DISTRIBUTIONS:
Dividend from net
investment income...... 0.00 (0.29) (0.22) (0.25) (0.20) (0.17)
Distribution from net
realized gain.......... 0.00 (1.30) (0.84) (0.89) (0.18) (0.15)
-------- -------- -------- -------- ------- -------
Total distributions.... 0.00 (1.59) (1.06) (1.14) (0.38) (0.32)
-------- -------- -------- -------- ------- -------
Net asset value, end of
period................. $ 25.33 $ 22.55 $ 19.32 $ 16.28 $ 12.67 $ 12.68
======== ======== ======== ======== ======= =======
Total return........... 12.33% 24.98% 25.19% 37.48% 2.92% 7.08%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in thousands).. $353,968 $302,960 $200,674 $127,260 $79,021 $69,980
-------- -------- -------- -------- ------- -------
Ratio of expenses to
average net assets..... 0.75%(a) 0.76% 0.78% 0.80% 0.82% 0.83%
-------- -------- -------- -------- ------- -------
Ratio of net investment
income to average net
assets................. 1.33%(a) 1.43% 1.38% 1.71% 1.59% 1.49%
-------- -------- -------- -------- ------- -------
Portfolio turnover
rate................... 14.0% 18.7% 25.0% 34.3% 30.6% 17.2%
-------- -------- -------- -------- ------- -------
</TABLE>
- -----------------------
(a) Annualized.
- --------------------------------------------------------------------------------
THE FLEXIBLY MANAGED FUND
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements. It should be read in conjunction with the financial statements and
notes thereto.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 ------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 19.83 $ 18.74 $ 17.40 $ 15.19 $ 15.70 $ 14.31
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.28 0.61 0.65 0.53 0.43 0.34
Net realized and
unrealized gain (loss)
on investment
transactions........... 0.88 2.33 2.19 2.86 0.22 1.92
-------- -------- -------- -------- -------- --------
Total from investment
operations............ 1.16 2.94 2.84 3.39 0.65 2.26
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividend from net
investment income...... 0.00 (0.61) (0.65) (0.53) (0.43) (0.34)
Distribution in excess
of net investment
income................. 0.00 0.00 0.00 (0.01) (0.02) 0.00
Distribution from
capital gains.......... 0.00 (1.24) (0.85) (0.64) (0.71) (0.53)
-------- -------- -------- -------- -------- --------
Total distributions.... 0.00 (1.85) (1.50) (1.18) (1.16) (0.87)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period................. $ 20.99 $ 19.83 $ 18.74 $ 17.40 $ 15.19 $ 15.70
======== ======== ======== ======== ======== ========
Total return........... 5.85% 15.65% 16.37% 22.28% 4.14% 15.79%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in thousands).. $562,841 $516,139 $398,544 $266,556 $169,847 $113,492
-------- -------- -------- -------- -------- --------
Ratio of expenses to
average net assets..... 0.75%(a) 0.76% 0.77% 0.79% 0.82% 0.85%
-------- -------- -------- -------- -------- --------
Ratio of net investment
income to average net
assets................. 2.74%(a) 3.10% 3.90% 3.45% 3.14% 2.62%
-------- -------- -------- -------- -------- --------
Portfolio turnover
rate................... 25.6% 37.1% 32.9% 37.2% 37.3% 42.6%
-------- -------- -------- -------- -------- --------
</TABLE>
- -----------------------
(a) Annualized.
28
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE INTERNATIONAL EQUITY FUND
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements. It should be read in conjunction with the financial statements and
notes thereto.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 ---------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
---------------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 16.13 $ 15.61 $ 14.47 $ 13.01 $ 13.94 $ 10.12
-------- -------- -------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss)................. 0.09 0.58 0.63 0.13 0.09 0.03
Net realized and
unrealized gain on
investments and foreign
currency related
transactions........... 2.77 1.04 1.81 1.67 (0.97) 3.83
-------- -------- -------- ------- ------- -------
Total from investment
operations............ 2.86 1.62 2.44 1.80 (0.88) 3.86
-------- -------- -------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividend from net in-
vestment income........ 0.00 (0.53) (0.56) (0.12) (0.02) (0.01)
Distribution in excess
of net investment in-
come................... 0.00 0.00 (0.74) (0.22) 0.00 0.00
Distribution from capi-
tal gains.............. 0.00 (0.57) 0.00 0.00 0.00 (0.03)
Distribution from capi-
tal.................... 0.00 0.00 0.00 0.00 (0.03) 0.00
-------- -------- -------- ------- ------- -------
Total distributions.... 0.00 (1.10) (1.30) (0.34) (0.05) (0.04)
-------- -------- -------- ------- ------- -------
Net asset value, end of
period................. $ 18.99 $ 16.13 $ 15.61 $ 14.47 $ 13.01 $ 13.94
======== ======== ======== ======= ======= =======
Total return............ 17.73% 10.41% 16.87% 13.80% 6.31% 38.14%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of pe-
riod (in thousands).... $152,430 $129,638 $104,418 $69,531 $59,393 $40,798
-------- -------- -------- ------- ------- -------
Ratio of expenses to av-
erage net assets....... 1.08%(a) 1.13% 1.17% 1.23% 1.22% 1.21%
-------- -------- -------- ------- ------- -------
Ratio of net investment
income to average net
assets................. 1.04%(a) 0.62% 0.66% 0.91% 0.82% 0.63%
-------- -------- -------- ------- ------- -------
Portfolio turnover
rate................... 23.2% 35.7% 54.8% 62.5% 15.6% 11.1%
-------- -------- -------- ------- ------- -------
</TABLE>
- -----------------------
(a) Annualized.
- --------------------------------------------------------------------------------
THE SMALL CAPITALIZATION FUND
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements. It should be read in conjunction with the financial statements and
notes thereto.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 -----------------------------
(UNAUDITED) 1997 1996 1995*
---------------- -------- -------- ------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 14.43 $ 12.53 $ 10.96 $10.00
------- -------- -------- ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.04 0.07 0.07 0.09
Net realized and
unrealized gain (loss)
on investment
transactions........... (0.13) 2.81 2.09 1.19
------- -------- -------- ------
Total from investment
operations............ (0.09) 2.88 2.16 1.28
------- -------- -------- ------
LESS DISTRIBUTIONS:
Dividend from net
investment income...... 0.00 (0.07) (0.07) (0.09)
Distribution from
capital gains.......... 0.00 (0.91) (0.52) (0.23)
------- -------- -------- ------
Total distributions.... 0.00 (0.98) (0.59) (0.32)
------- -------- -------- ------
Net asset value, end of
period................. $ 14.34 $ 14.43 $ 12.53 $10.96
======= ======== ======== ======
Total return............ (0.62)% 23.02% 19.76% 12.76%(c)
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in thousands).. $45,170 $338,726 $116,134 $4,828
------- -------- -------- ------
Ratio of expenses to
average net assets..... 0.80%(a) 0.85% 0.99%(b) 1.00%(a)(b)
------- -------- -------- ------
Ratio of net investment
income to average net
assets................. 0.57%(a) 0.66% 0.85%(b) 1.53%(a)(b)
------- -------- -------- ------
Portfolio turnover
rate................... 37.6% 71.1% 39.2% 64.3%
------- -------- -------- ------
</TABLE>
- -----------------------
(a) Annualized.
(b) 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 1.06%
and 1.29%, and the ratios of net investment income to average net assets
would have been 0.78% and 1.24%, respectively, for the year ended December
31, 1996 and the period ended December 31, 1995.
(c) Not annualized.
* For the period from March 1, 1995 (commencement of operations) through
December 31, 1995.
29
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE EMERGING GROWTH FUND
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements. It should be read in conjunction with the financial statements and
notes thereto.
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
JUNE 30, 1998 DECEMBER
(UNAUDITED) 31, 1997*
---------------- ------------
<S> <C> <C>
Net asset value, beginning of period... $ 12.85 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................. (0.06) 0.00
Net realized and unrealized gain (loss)
on investment transactions............ 3.50 3.92
------- -------
Total from investment operations...... 3.44 3.92
------- -------
LESS DISTRIBUTIONS:
Dividend from net investment income.... 0.00 0.00
Distribution from capital gains........ 0.00 (1.07)
------- -------
Total distributions................... 0.00 (1.07)
------- -------
Net asset value, end of period......... $ 16.29 $ 12.85
======= =======
Total return.......................... 26.77% 39.22%(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)............................ $27,414 $17,942
======= =======
Ratio of expenses to average net
assets................................ 1.15%(a)(b) 1.15%(a)(b)
======= =======
Ratio of net investment income to
average net assets.................... (0.87%)(a)(b) (0.73%)(a)(b)
======= =======
Portfolio turnover rate................ 152.9% 392.3%
======= =======
</TABLE>
- -----------------------
(a) Annualized.
(b) 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 1.19%
and 1.41%, and the ratios of net investment income to average net assets
would have been (0.90)% and (0.99)%, respectively, for the periods ended
June 30, 1998 and December 31, 1997.
(c) Not annualized.
* For the period from May 1, 1997 (commencement of operations) through December
31, 1997.
30
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1998
- --------------------------------------------------------------------------------
1 - SIGNIFICANT ACCOUNTING POLICIES
Penn Series Funds, Inc. (Penn Series) was incorporated in Maryland on April
22, 1982. Penn Series is registered under the Investment Company Act of 1940,
as amended, as an open-end, diversified management investment company.
Penn Series is presently offering shares in its Money Market, Quality Bond,
High Yield Bond, Growth Equity, Value Equity, Flexibly Managed, International
Equity, Small Capitalization and Emerging Growth Funds (the Funds). It is
authorized under its Articles of Incorporation to issue a separate class of
shares in one additional fund. The Fund would have its own investment objective
and policy.
The following is a summary of significant accounting policies followed by
Penn Series in the preparation of its financial statements. The preparation of
financial statements in accordance with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
INVESTMENT VALUATION:
MONEY MARKET FUND - Investments in securities are valued under the amortized
cost method, which approximates current market value. Under this method,
securities are valued at cost on the date of purchase and thereafter a
proportionate amortization of any discount or premium until maturity is
assumed. Penn Series maintains a dollar weighted average portfolio maturity
appropriate to the objective of maintaining a stable net asset value per share.
The Penn Series Board of Directors (The Board) has established procedures
reasonably designed to stabilize the net asset value per share for purposes of
sales and redemptions at $1.00. The Board performs regular review and
monitoring of the valuation in an attempt to avoid dilution or unfair results
to shareholders.
QUALITY BOND, HIGH YIELD BOND, GROWTH EQUITY, VALUE EQUITY, FLEXIBLY MANAGED,
INTERNATIONAL EQUITY, SMALL CAPITALIZATION AND EMERGING GROWTH FUNDS -
Portfolio securities listed on a national securities exchange are valued at
the last sale price on the securities exchange or securities market on which
such securities primarily are traded or, if there has been no sale on that day,
at the mean between the current closing bid and asked prices. All other
securities for which over-the-counter market quotations are readily available
will be valued on the basis of the mean between the last current bid and asked
prices. When market quotation are not readily available, or when restricted or
other assets are being valued, the securities or assets will be valued at fair
value as determined by The Board.
The high yield securities in which the High Yield Bond Fund may invest are
predominantly speculative as to the issuer's continuing ability to meet
principal and interest payments. The value of the lower quality securities in
which the High Yield Bond Fund may invest will be affected by the credit
worthiness of individual issuers, general economic and specific industry
conditions, and will fluctuate inversely with changes in interest rates. In
addition, the secondary trading market for lower quality bonds may be less
active and less liquid than the trading market for higher quality bonds.
FOREIGN CURRENCY TRANSLATION - The books and records of the Funds are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis: market value of investment securities, assets
and liabilities at the current rate of exchange, purchases and sales of
investment securities, income and expenses at the relevant rates of exchange
prevailing on the respective dates of such transactions.
The Funds do not isolate the portion of realized and unrealized gains and
losses on investments which is due to changes in the foreign exchange rate from
that which is due to changes in market prices of equity securities. Such
fluctuations are included with net realized and unrealized gain or loss from
investments.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. dollar denominated
transactions as a result of, among other factors, the level of governmental
supervision and regulation of foreign securities markets and the possibility of
political or economic instability.
SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date and interest income is accrued as earned. The cost of investment
securities sold is determined by using the specific identification method for
both financial reporting and income tax purposes.
DIVIDENDS TO SHAREHOLDERS: Dividends of investment income and realized
capital gains of the Quality Bond, High Yield Bond, Growth Equity, Value
Equity, Flexibly Managed, International Equity, Small Capitalization and
Emerging Growth Funds will be declared and paid annually. Dividends of net
investment income of the Money Market Fund are declared daily and paid monthly.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for mortgage-backed securities, market discount and foreign currency
transactions.
FEDERAL INCOME TAXES: The Funds intend to continue to qualify as regulated
investment companies under Subchapter M of the Internal Revenue code and to
distribute all of their taxable income, including realized gains, to their
shareholders. Therefore, no federal income tax provision is required.
31
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1998
- --------------------------------------------------------------------------------
2 - DERIVATIVE FINANCIAL INSTRUMENTS
OFF-BALANCE SHEET RISK
The Funds may trade financial instruments with off-balance sheet risk in the
normal course of investing activities and to assist in managing exposure to
market risks such as interest rates and foreign currency exchange rates. These
financial instruments include written options, forward foreign currency
exchange contracts and futures contracts.
The notional or contractual amounts of these instruments represent the
investment the Funds have in particular classes of financial instruments and do
not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transaction are considered.
DERIVATIVE FINANCIAL INSTRUMENTS HELD OR ISSUED FOR PURPOSES OTHER THAN TRADING
FUTURES CONTRACTS - Each of the Funds, other than Money Market, may enter
into financial futures contracts for the delayed delivery of securities,
currency or contracts based on financial indices on a future date. A Fund is
required to deposit either in cash or securities an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received by
a Fund each day, dependent on daily fluctuations in the value of the underlying
security, and are recorded for financial statement purposes as unrealized gains
or losses by a Fund. A Fund's investment in financial futures contracts is
designed only to hedge against anticipated future changes in interest or
exchange rates. Should interest or exchange rates move unexpectedly, a Fund may
not achieve the anticipated benefits of the financial futures contracts and may
realize a loss. The Quality Bond Fund has entered into futures contracts during
the six month period ended June 30, 1998. There were no open futures contracts
at June 30, 1998.
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 six month period ended June 30,
1998. Purchased put options open and outstanding at June 30, 1998 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 six month 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 the 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 six month
period ended June 30, 1998. At June 30, 1998 there were no open contracts in
the Flexibly Managed Fund. Open forward foreign currency contracts held by the
International Equity Fund at June 30, 1998 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
FOREIGN
FOREIGN EXCHANGE
FORWARD FOREIGN EXPIRATION CURRENCY FORWARD CONTRACT CONTRACT GAIN/
CURRENCY CONTRACT DATE TO BE SOLD RATE AMOUNT VALUE (LOSS)
----------------- ---------- ------------- --------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
French Franc............ 07/31/98 5,820,598 6.03615 $ 955,481 $ 964,290 $ (8,809)
French Franc............ 09/10/98 35,000,000 6.02446 5,749,014 5,809,649 (60,635)
German Deutsche Mark.... 09/10/98 28,000,000 1.79728 15,421,474 15,579,097 (157,623)
Japanese Yen............ 09/10/98 1,500,000,000 137.43800 11,990,408 10,914,012 1,076,396
Japanese Yen............ 10/05/98 1,700,000,000 136.80300 13,040,810 12,426,628 614,182
Swiss Franc............. 09/10/98 8,000,000 1.50682 5,475,702 5,309,194 166,507
----------- ----------- ----------
$52,632,889 $51,002,870 $1,630,018
=========== =========== ==========
</TABLE>
32
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1998
- --------------------------------------------------------------------------------
3 - INVESTMENT ADVISORY AND OTHER CORPORATE SERVICES
INVESTMENT ADVISORY SERVICES
Independence Capital Management, Inc. ("ICMI") serves as investment adviser
to each of the funds. ICMI is a wholly-owned subsidiary of The Penn Mutual Life
Insurance Company.
T. Rowe Price Associates, Inc. ("Price Associates") is sub-adviser to the
FLEXIBLY MANAGED and the HIGH YIELD BOND FUNDS pursuant to an investment sub-
advisory agreement entered into by ICMI and Price Associates on May 1, 1998. As
sub-adviser, Price Associates provides investment management services to the
Funds.
OpCap Advisors ("OpCap") is sub-adviser to VALUE EQUITY and SMALL
CAPITALIZATION FUNDS pursuant to an investment sub-adviser agreement entered
into by ICMI and OpCap on May 1, 1998. As sub-adviser, OpCap provides
investment management services to the Funds. OpCap is a subsidiary of
Oppenheimer Capital.
Vontobel USA Inc. ("Vontobel") is sub-advisor to the INTERNATIONAL EQUITY
FUND pursuant to an investment sub-adviser agreement entered into by ICMI and
Vontobel on May 1, 1998. As sub-adviser, Vontobel provides investment
management services to the Fund. Vontobel is a wholly owned subsidiary of
Vontobel Holding Ltd., an affiliate of, Bank J. Vontobel & Co. Ltd.
RS Investment Management, Inc. (formerly Robertson Stephens Investment
Management, Inc. ) ("RS") is sub-adviser to the EMERGING GROWTH FUND pursuant
to an investment sub-adviser agreement entered into by ICMI and RS on May 1,
1998. As sub-adviser, RS provides investment management services to the Fund.
Each of the Funds pay ICMI, 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% and Emerging Growth Fund: .80% for the first $25
million, 0.75% for next $25 million and 0.70% thereafter.
For providing investment management services to the Funds, ICMI pays the sub-
advisers, on a monthly basis, a sub-advisory fee.
ADMINISTRATIVE AND CORPORATE SERVICES
Under an administrative and corporate services agreement, The Penn Mutual
Life Insurance Company ("Penn Mutual") serves as administrative and corporate
services agent for Penn Series. Each of the Funds pay 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: 1.00%; Growth Equity: 1.00%; Value
Equity: 1.00%; Flexibly Managed: 1.00%; International Equity: 1.50%; Small
Capitalization 1.00%; and Emerging Growth 1.15%.
Fees were paid to non-affiliated Directors of Penn Series for the six month
period ended June 30, 1998. 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 June 30, 1998, there were one billion shares of $.10 par value capital
stock authorized for Penn Series. The shares are divided into ten classes of
100 million shares of capital stock. Nine of the classes designated are Penn
Series Money Market Fund Common Stock, Penn Series Quality Bond Fund Common
Stock, Penn Series High Yield Bond Fund Common Stock, Penn Series Growth Equity
Fund Common Stock, Penn Series Value Equity Fund Common Stock, Penn Series
Flexibly Managed Fund Common Stock, Penn Series International Equity Fund
Common Stock and Penn Series Small Capitalization Fund Common Stock and Penn
Series Emerging Growth Fund Common Stock. One of the classes of common stock is
presently designated Class I, and no shares have been issued.
33
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1998
- --------------------------------------------------------------------------------
4 - CAPITAL STOCK, CONTINUED
Transactions in capital stock of the Money Market Fund were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Shares sold................. 29,761,279 $29,761,279 52,596,243 $52,596,243
Shares issued to
shareholders in
reinvestment of
Net investment income...... 968,765 968,765 1,857,904 1,857,904
Shares reacquired........... (27,260,786) (27,260,786) (51,478,157) (51,478,157)
----------- ----------- ----------- -----------
3,469,258 $ 3,469,258 2,975,990 $ 2,975,990
----------- ----------- ----------- -----------
Transactions in capital stock of the Quality Bond Fund were as follows:
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Shares sold................. 604,958 $ 6,315,912 695,043 $ 7,228,270
Shares issued to
shareholders in
reinvestment of
Net investment income...... 0 0 216,422 2,207,510
Net realized gain from
investment transactions... 0 0 1,602 16,338
Distribution in excess of
net investment income..... 0 0 1,596 16,277
Shares reacquired........... (331,055) (3,456,060) (745,923) (7,674,394)
----------- ----------- ----------- -----------
273,903 $ 2,859,852 168,740 $ 1,794,001
----------- ----------- ----------- -----------
Transactions in capital stock of the High Yield Bond Fund were as follows:
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Shares sold................. 767,375 7,596,267 1,621,677 15,567,712
Shares issued to
shareholders in
reinvestment of
Net investment income...... 0 0 479,026 4,560,298
Distribution in excess of
net investment income..... 0 0 1,111 10,576
Shares reacquired........... (284,322) (2,818,312) (829,328) (7,878,467)
----------- ----------- ----------- -----------
483,053 $ 4,777,955 1,272,486 $12,260,119
----------- ----------- ----------- -----------
Transactions in capital stock of the Growth Equity Fund were as follows:
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Shares sold................. 255,489 $ 6,816,141 560,843 $13,907,900
Shares issued to
shareholders in
reinvestment of
Net investment income...... 0 0 19,779 482,003
Net realized gain from
investment transactions... 8,137 208,968 561,299 13,678,854
Shares reacquired........... (337,781) (9,072,850) (500,698) (12,473,543)
----------- ----------- ----------- -----------
(74,155) $(2,047,741) 641,223 $15,595,214
----------- ----------- ----------- -----------
</TABLE>
Transactions in capital stock of the Value Equity Fund were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
-------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Shares sold................... 976,665 $ 23,832,000 2,867,800 $ 61,202,630
Shares issued to shareholders
in reinvestment of
Net investment income........ 0 0 162,466 3,663,616
Distribution in excess of net
investment income........... 0 0 726,457 16,381,602
Shares reacquired............. (433,454) (10,554,335) (712,142) (15,712,398)
-------- ------------ --------- ------------
543,211 $ 13,277,665 3,044,581 $ 65,535,450
-------- ------------ --------- ------------
</TABLE>
34
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1998
- --------------------------------------------------------------------------------
4 - CAPITAL STOCK, CONTINUED
Transactions in capital stock of the Flexibly Managed Fund were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold................ 1,806,516 $ 37,127,296 4,061,684 $ 80,965,783
Shares issued to
shareholders in
reinvestment of
Net investment income..... 0 0 728,483 14,445,809
Net realized gain from
investment transactions.. 6,084 123,319 1,487,222 29,491,615
Shares reacquired.......... (1,031,363) (21,311,719) (1,513,715) (30,886,898)
---------- ------------ ---------- ------------
781,237 $ 15,938,896 4,763,674 $ 94,016,309
---------- ------------ ---------- ------------
Transactions in capital stock of the International Equity Fund were as follows:
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold................ 917,926 $ 16,214,595 1,665,223 $ 27,762,536
Shares issued to
shareholders in
reinvestment of
Net investment income..... 0 0 247,062 3,985,121
Net realized gain from
investment transactions.. 0 0 266,946 4,305,835
Shares reacquired.......... (929,962) (16,381,940) (829,261) (13,999,926)
---------- ------------ ---------- ------------
(12,036) $ (167,345) 1,349,970 $ 22,053,566
---------- ------------ ---------- ------------
Transactions in capital stock of the Small Capitalization Fund were as follows:
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold................ 582,155 $ 8,739,764 1,398,053 $ 19,734,987
Shares issued to
shareholders in
reinvestment of
Net investment income..... 0 0 12,575 181,452
Net realized gain from
investment transactions.. 555 8,222 158,480 2,286,864
Shares reacquired.......... (117,378) (1,749,751) (173,037) (2,478,293)
---------- ------------ ---------- ------------
465,332 $ 6,998,235 1,396,071 $ 19,725,010
---------- ------------ ---------- ------------
Transactions in capital stock of the Emerging Growth Fund were as follows:
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997*
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold................ 601,342 $ 9,228,148 1,427,602 $ 18,230,138
Shares issued to
shareholders in
reinvestment of
Net investment income..... 0 0 0 0
Net realized gain from
investment transactions.. 638 8,966 106,892 1,373,564
Shares reacquired.......... (314,625) (4,750,994) (138,520) (2,069,490)
---------- ------------ ---------- ------------
287,355 $ 4,486,120 1,395,974 $ 17,534,212
---------- ------------ ---------- ------------
</TABLE>
* For the period from May 1, 1997 (commencement of operations) through December
1997.
35
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
5 - PURCHASES AND SALES OF INVESTMENTS
During the period ended June 30, 1998 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....... $ 32,949,155 $ 21,085,738 $ 0 $ 1,512,670
Other Long-Term
Securities............... 38,839,341 47,006,557 35,285,422 27,535,512
------------ ------------ ------------ ------------
Totals................... $ 71,788,496 $ 68,092,295 $ 35,285,422 $ 29,048,182
------------ ------------ ------------ ------------
<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 $ 0 $ 0 $ 0
Other Long-Term
Securities............... 74,686,780 74,467,022 57,919,842 39,429,472
------------ ------------ ------------ ------------
Totals................... $ 74,686,780 $ 74,467,022 $ 57,919,842 $ 39,429,472
------------ ------------ ------------ ------------
<CAPTION>
FLEXIBLY MANAGED FUND INTERNATIONAL EQUITY FUND
------------------------- -------------------------
PURCHASES SALES PURCHASES SALES
------------ ------------ -------------------------
<S> <C> <C> <C> <C>
Long Term U.S. Govt. and
Agency Obligations....... $ 17,081,675 $ 0 $ 0 $ 0
Other Long-Term
Securities............... 143,687,144 123,010,183 34,366,709 31,214,338
------------ ------------ ------------ ------------
Totals................... $160,768,819 $123,010,183 $ 34,366,709 $ 31,214,338
------------ ------------ ------------ ------------
<CAPTION>
SMALL CAPITALIZATION FUND EMERGING GROWTH FUND
------------------------- -------------------------
PURCHASES SALES PURCHASES SALES
------------ ------------ -------------------------
<S> <C> <C> <C> <C>
Long Term U.S. Govt. and
Agency Obligations....... $ 0 $ 0 $ 0 $ 0
Other Long-Term
Securities............... 8,880,097 7,225,296 41,494,933 34,577,794
------------ ------------ ------------ ------------
Totals................... $ 8,880,097 $ 7,225,296 $ 41,494,933 $ 34,577,794
------------ ------------ ------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
6 - CAPITAL LOSS CARRYOVERS
Capital loss carryovers expire as follows:
<TABLE>
<CAPTION>
MONEY HIGH YIELD
MARKET BOND
FUND FUND
------ ----------
<S> <C> <C>
1998.......................................................... $ 872 $ 0
2000.......................................................... 61 0
2001.......................................................... 183 0
2003.......................................................... 416 1,052,436
2004.......................................................... 0 525,647
2005.......................................................... 225 0
------ ----------
Total........................................................ $1,757 $1,578,083
====== ==========
</TABLE>
36
