<PAGE>
--------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
PENNSYLVANIA
MUTUAL
FUND
JUNE 30, 1995
THE ROYCE FUNDS
<PAGE>
The Royce Funds
1414 Avenue of the Americas
New York, NY 10019
(212) 355-7311
(800) 221-4268
Dear Shareholder:
If the Dow Jones Industrial Average were to continue its first half pace,
it would top 30,000 in the year 2000! Something to think about.
THE NUMBERS . . . UP, UP AND AWAY
The first half of 1995 was the best six month period for the S&P 500 since
the opening two quarters of 1991. Up 20.2%, the S&P 500 bested both major small
company indices, the Russell 2000 and the S&P Small Cap 600, which were up 14.4%
and 14.7%, respectively.
Pennsylvania Mutual Fund ('PMF') provided a 10.8% return. This is in
keeping with PMF's historical range of capturing 70% to 100% of major small-cap
index returns during dramatic updrafts. As a risk averse fund, PMF has rarely
matched the small-cap indices in early bull market phases. However, as a market
cycle matures, a turn away from growth and momentum to less exciting, low
valuation issues usually takes place. PMF's results are consistent with this
return pattern. OVER THE LAST TWENTY YEARS, WHICH ENCOMPASSES MANY MARKET CYCLES
AND PERIODS OF UNDERPERFORMANCE, THE FUND HAS GENERATED A 17.0% AVERAGE ANNUAL
RETURN.
SMALL-CAP STOCKS -- LAGGING THEIR WAY TO NEW HIGHS
In the movie Star Wars, Luke Skywalker is told to 'Let The Force Be With
You.' The force in the first six months of 1995 was clearly with large-cap,
globally oriented stocks. The drop in the U.S. dollar and the submerging of many
'emerging' markets created a renewed interest in domestic, large-cap equities,
pushing the popular Dow Jones Industrial Average and S&P 500 indices to a long
string of new highs. In contrast, small-caps struggled to keep up. The Russell
2000 index of small-cap stocks finally eclipsed its previous high (March 18,
1994) in early June. In spite of the June surge, small-caps still lag their
large-cap counterparts.
WE HAD OUR 'SOX' KNOCKED OFF
Contributing to the first half's spectacular market returns was a meteoric
rise in technology stocks. The Philadelphia Semiconductor Index ('SOX') was up
over 100% in the last twelve months.
WEEKLY PRICE GRAPH FOR 'SOX'
(PHILA. SEMICONDUCTOR INDEX 6/94-6/95)
[GRAPH]
[Chart showing increase in Philadelphia Semiconductor Index from June 30,
1994 to June 30, 1995, with 1 year percentage change equalling 104.3%, and
6/30/94 and 6/30/95 closes being 119.46 and 244.01, respectively.]
2
<PAGE>
The current atmosphere of euphoria suggests that memories of the 'high
tech, high wreck' experience that occurred with the last technology stock run-up
in 1983 (and subsequent collapse) have been erased. Although small-cap
technology stocks are popular and available, it has never been a market segment
to which we have committed significant amounts of capital.
Imagine if the auto industry, in order to compete, had to produce more
fuel-efficient, easier-to-drive cars every year while cutting prices in half. Or
better yet, consider the airline industry which has a long record of high unit
growth but, as an industry, has yet to make the first dime in profits. We feel
that both examples are analogous to the pressures that many companies face in
the technology sector. The rate of product obsolescence rendered by scientific
advancement has made it difficult for many technology companies to maintain
competitive advantages and generate attractive long-term returns on capital.
Successful high technology companies require staggering amounts of product
innovation, incredible pricing power and uninterrupted earnings per share
gains - very hard to accomplish and very rare, indeed. For those companies that
slip in the competition, turnarounds are highly unusual. What these enterprises
may lack in retained earnings, they often make up in richly priced common
stocks.
For anyone feeling depressed about missing the recent high-tech stock
run-up, we thought we would share some interesting investment trivia which runs
counter to popular current assumptions:
<TABLE>
<CAPTION>
AVERAGE ANNUAL PERFORMANCE RESULTS
(12/31/79 - 6/30/95)
S&P S&P RUSSELL RUSSELL 2000
500 TECHNOLOGY 2000 TECHNOLOGY
---- ---------- ------- ------------
<S> <C> <C> <C>
15.3% 12.9% 13.6% 11.5%
</TABLE>
IN SPITE OF THE RECENT STELLAR MARKET PERFORMANCE AND ENORMOUS UNIT GROWTH,
TECHNOLOGY STOCKS HAVE ACTUALLY BEEN A DRAG ON THE LAST 15+ YEARS OF PERFORMANCE
FOR BOTH THE S&P 500 AND THE RUSSELL 2000.
History provides additional perspective on these exceptionally emotional
phases of the market. Past 'bubbles' have reflected obsessions like the 'tulip
mania' in the 17th century, the 'Nifty Fifty' in the early '70s, the energy
stock bonanza of the early '80s and the 1991 biotech stock craze. In each of
these bubbles, the money made by those smart enough to invest early was only
exceeded by the amount of money lost by those who invested late.
We believe that the appropriate way to participate in the technology sector
is to invest in companies who serve or benefit from the industry. It was the
suppliers of the picks and shovels, not the speculators, who made money during
the California gold rush. Our approach to the technology sector is similar.
[ILLUSTRATION]
[Cartoon showing miners standing in line to purchase picks and shovels.]
3
<PAGE>
WHAT WE DO
Pennsylvania Mutual Fund uses a risk averse approach to invest in the
securities of small-cap companies. The investment approach attempts to
understand and value a company's 'private worth.' Private worth is what we
believe the company would bring if the entire enterprise were sold in a private
transaction to a knowledgeable buyer. The price we will pay for a security must
be significantly under our appraisal of its private worth. The consistent use of
this discipline, applied to less well-known securities, is the source of our
performance.
NO OTHER PLACE WE WOULD RATHER BE
The Fund focuses on companies with market caps below $750 million. Although
our orientation is small-cap, the picking universe is by no means small.
Currently, more than 7,000 securities, representing over $700 billion in total
market capitalization, fall within our range. Our portfolio's size is virtually
insignificant given the scope of this investable universe. We believe small-cap
stocks, especially at the low end of the capitalization range, are generally
less-known and, therefore, less likely to be understood and properly priced by
investors.
HOW IT WORKS
Investment returns in undervalued small-cap companies can be unpredictable,
out-of-sync with the market and generally frustrating. Specific returns in any
given period are related to individual securities and market conditions.
Nevertheless, we expect in any period to have our share of winners and to see a
few laggards.
WINNERS
Our most recent successes are depicted in the table that follows. During
the first half of 1995, each contributed substantially to our performance and
are representative of our approach to investing. PMF's BEST PERFORMERS, as
measured by dollar impact, were:
<TABLE>
<CAPTION>
SECURITY % GAIN
--------------------------------------- --------
<S> <C>
Atlantic Southeast Airlines, Inc. 94%
Penn Eng. & Manufact. Corp. 79%
Ag-Chem Equipment Co., Inc. 148%
Claire's Stores, Inc. 51%
</TABLE>
Atlantic Southeast Airlines and Claire's Stores were relatively large
investments in stocks we knew well and regard as premier companies in their
respective industries. In both cases, we made investments when business
conditions were difficult and Wall Street expectations were low. Since the
beginning of the year, both the airline industry, in the case of Atlantic
Southeast Airlines, and the retail environment, in the case of Claire's Stores,
have improved modestly. However, the investment community's opinion of these two
companies has changed radically and they are now viewed as high quality growth
stocks.
Penn Engineering and Manufacturing Corp. and Ag-Chem Equipment Co. are a
different breed of success story. Both of these companies have been long-term
micro-cap investments in the Fund's portfolio that finally caught the attention
of Wall Street. They are well-run family enterprises with long histories of
superior returns and strong balance sheets. As consistent high quality, low cost
producers in their respective fields, both generated the kind of financial
results that investors like. As long-term investors, we were rewarded for our
patience.
4
<PAGE>
MORE PATIENCE REQUIRED
One happy by-product of a bull market is that most of your stocks go up.
There are always a few exceptions. Our laggards generally fall into two
categories: undervalued companies that got cheaper (caught the flu) and those in
intensive care (with pneumonia). Fortunately, over the last two quarters, we
have suffered from only one of the latter. The five WORST PERFORMERS, as
measured by dollar impact, were:
<TABLE>
<CAPTION>
SECURITY % LOSS
------------------------------------------- ------
<S> <C>
Delta Woodside Industries, Inc. 34%
Anacomp, Inc. Cum. Cv. Pfd 72%
NCH Corporation 14%
Arnold Industries, Inc. 16%
Flexsteel Industries, Inc. 21%
</TABLE>
The only position in which we are
doubtful of recovering our full investment is
Anacomp. Although we were aware of the risk in owning a high yielding senior
security of this once successful technology company, it was a mistake and we now
have little hope for full recovery in this manufacturer of micro-fiche
equipment. As for our other underachievers, with a little more patience, any one
of these could make next year's winners list.
NO LONGER SMALL, UNKNOWN OR UNDER-OWNED
THERE HAVE BEEN SOME EXTRAORDINARY DEVELOPMENTS IN THE SMALL-CAP SECTOR,
BUT THEY ARE NOT WHAT YOU MAY THINK.
Small-caps are no longer 'small' when compared to industry definitions of a
decade ago. The upward bias (success) of the overall equity market has elevated
the capitalization of small-cap stocks dramatically over the last ten years. For
example, the weighted average market cap of the Russell 2000 index of small-cap
issues has risen from $140 million in June 1985 to $410 million as of June 30,
1995.
Morningstar, the leading independent mutual fund evaluation service, has
devised a set of market capitalization parameters that places equity mutual
funds into one of three capitalization boxes: small, medium or large. Portfolios
with median market caps under $1 billion are considered small-cap. Although we
do not have exact numbers, we believe the weighted average market cap in many of
these funds is close to $1 billion, a more revealing picture of just how 'big'
small-cap has become.
TEN YEARS OF EXPLOSIVE GROWTH!
[GRAPH]
[Pictorial chart showing increase in number of small-cap funds and assets
under management from 1984 to 1995; in 1995, 310 funds with $50 billion in
assets.]
Performance success and investor acceptance has translated into a
significant flow of funds into the small-cap sector. In the mutual fund arena,
there are now over 300 small-cap funds representing approximately $50 billion in
assets. By contrast, there were only 24 small-cap funds with assets totaling $4
billion at the end of 1984. This over ten-fold increase in the number of
small-cap funds and category assets has changed the playing field in a
significant way. It is interesting to note that the majority
5
<PAGE>
of the funds have elected to focus their energies at the upper end of the
Morningstar capitalization range ($500 million - $1 billion) where there is
greater liquidity but, by definition, more competition. In addition, something
similar to what happened in the late '80s with the S&P 500 now appears to be
unfolding in the small-cap arena with the Russell 2000. Indexation is alive and
well in the sector.
The growth in small company funds and assets has dramatically decreased the
number of unknown, inefficiently priced stocks at the upper end of the small-cap
market. We have taken two countermeasures for the benefit of our investors.
In the zone where most small-cap funds traffic ($500 million - $1 billion
in market capitalization), we believe that a higher level of portfolio
concentration is appropriate. Higher concentration will manifest itself in the
form of larger position weightings and an increased use of premier companies.
This approach implies confidence in our non-quantitative and non-Wall Street
research abilities. We believe that we are uniquely equipped to accomplish this
task by virtue of our 20+ years of small-cap investment experience and our
sizeable research effort.
A second area of opportunity is at the other end of the capitalization
range, the sector known as micro-cap. The micro-cap universe has the largest
number of companies in which to invest, but the smallest number of institutional
investors who do so. Currently, fewer than 10 mutual funds have a micro-cap
charter. Micro-cap companies are the antithesis of what most professional
small-cap investors are looking for - they are not well known, not well
researched and their securities are not easy to buy and sell. These are
precisely the conditions that breed undervalued securities. As an experienced
institutional investor in a sector dominated by individuals, we believe that we
have a particular advantage in micro-cap research and trading capabilities, key
components for success. We believe that micro-caps offer today the investment
opportunities that small-caps did 15 years ago. We will continue to increase
their weighting in the portfolio.
[ILLUSTRATION]
[Cartoon of fortune teller and customer]
STAR GAZING
In spite of the spectacular run-up by large-cap equities since the market
lows of last December, there are several indications that small-cap stocks may
soon resume a leadership role. June was the first month of small-cap
outperformance since February, with the Russell 2000 up 5.2% versus a 2.4%
return for the S&P 500. This performance momentum has continued into the first
part of the third quarter, a good omen for small-cap issues. Also, now that the
U.S. dollar has stopped declining against other major currencies, domestic
small-cap stocks are competing on a level playing field. This has historically
given small-cap stocks a performance edge.
6
<PAGE>
Finally, one has to wonder if the current level of low volatility is
sustainable in light of the market's high returns. While we cannot explain this
phenomena, we do not view this as a permanent condition. Since the last 10%
market correction in 1990, the pay-off has been with investors who took the
highest risk. We believe that over the next three years risk management will
have a similar pay-off. WE REMAIN COMMITTED TO ACHIEVING ABOVE AVERAGE LONG-TERM
RETURNS WITH THIS LOW RISK APPROACH.
Your continued confidence is appreciated.
Yours faithfully,
<TABLE>
<S> <C>
Charles M. Royce Jack E. Fockler, Jr.
President W. Whitney George
Vice Presidents
</TABLE>
July 31, 1995
NOTE: S&P 500, Russell 2000 and S&P 600 are unmanaged and include the
reinvestment of dividends.
7
<PAGE>
FINANCIAL REVIEW
<TABLE>
<CAPTION>
ANNUAL RETURNS
----------------------------------------------------------------
<S> <C> <C> <C>
1995 (thru 6/30)........ 10.8% 1985.................... 26.8%
1994.................... (0.7%) 1984.................... 3.1%
1993.................... 11.3% 1983.................... 40.5%
1992.................... 16.2% 1982.................... 33.5%
1991.................... 31.8% 1981.................... 0.7%
1990.................... (11.5%) 1980.................... 25.7%
1989.................... 16.7% 1979.................... 35.5%
1988.................... 24.6% 1978.................... 16.6%
1987.................... 1.4% 1977.................... 23.8%
1986.................... 11.2% 1976.................... 49.0%
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
------------------------------------
(AS OF 6/30/95)
<S> <C>
20-year....................... 17.0%
15-year....................... 15.5%
10-year....................... 11.7%
5-year........................ 10.1%
3-year........................ 10.7%
1-year........................ 13.7%
POSITIVE RETURNS IN 18 OF THE LAST
20 CALENDAR YEARS (1975-1994).
</TABLE>
TWENTY YEARS OF BUILDING WEALTH
VALUE OF $10,000 INVESTED ON 6/30/75
[GRAPH]
[Line graph showing change in value of $10,000 investment in Fund, the S&P
500 and 3-month T-bill between June 1975 and June 1995.]
<PAGE>
The total returns and risk measurements presented in this report should not
be considered representative of total return or risk of an investment in the
Fund today. They are provided only to give an historical perspective of the
Fund. Total return and principal value of Fund shares will fluctuate, so that
shares may be worth more or less than their original cost when redeemed.
8
<PAGE>
RISK AND VOLATILITY ANALYSIS
To focus solely on the return component of the investment equation is the
equivalent of evaluating one's time (return) in a road race without knowing
anything about the course (risk). For example, was the course hilly or flat, did
weather hinder or help performance, were thousands participating or merely a
handful? By knowing the answers to these and related matters, you then can
properly evaluate the quality of the performance. The same is true in the
investment world. Although PMF has had one of the lowest risk profiles among
small-cap funds, that in and of itself is not particularly helpful. Somehow, one
must link the concepts of risk and return together because one without the other
may be incomplete.
Fund risk (volatility) versus relevant indices and peers can be evaluated
by using the generally accepted measures of standard deviation and beta, as well
as the Morningstar Risk Ratio.
<TABLE>
<CAPTION>
STANDARD MORNINGSTAR
DEVIATION* BETA* RISK RATIO*
----------- ----------- -----------
<S> <C> <C> <C>
PENNSYLVANIA MUTUAL FUND 6.09 0.59 0.51
Indices
--------------
S&P 500 8.14 1.00 0.71+
Russell 2000 10.33 1.01 0.81+
Peer Group**
--------------
Group Average 11.72 0.95 0.98
</TABLE>
OVER THE PAST THREE YEARS, PMF HAD LOWER VOLATILITY
THAN THE ABOVE MARKET INDICES AND WAS AMONG
THE LOWEST IN ITS PEER GROUP.
STANDARD DEVIATION is a statistical measure of fund volatility over time.
The lower the standard deviation, the less volatile and more consistent a fund's
historical monthly returns. BETA measures a fund's sensitivity to market
movements. The beta of the S&P 500 index, chosen to represent the market, is
1.00. A fund with a 1.10 beta is expected to perform 10% better in up markets
and 10% worse in down markets. MORNINGSTAR RISK RATIO is a proprietary
measurement of a fund's downside volatility relative to other funds in its
investment category. The average score for the 3 years ended June 30, 1995 for
all equity funds was 1.00. These measures of risk are historical, may change
monthly, and are not necessarily predictive of future volatility.
* Source: Morningstar Mutual Funds. Data reported for the 3-year period ended
June 30, 1995. The indices listed above are unmanaged.
+ Note: Vanguard Index Trust 500 and Small Cap Stock Portfolios are used as
proxies for measuring the Morningstar Risk Ratio of the S&P 500 and Russell
2000.
** In constructing our peer group, we used the following method. We isolated all
small company mutual funds as identified by Morningstar. We began this
process by first screening the domestic equity mutual fund universe (1,803
funds) for funds with a small company investment style. Of the 312 funds with
a small company investment style, only 267 fell within the small company
style box, which Morningstar has categorized as funds with median market
capitalizations below $1 billion. In other words, we only included funds
whose actual investment practice matched their investment style. We further
narrowed the universe by identifying funds which were in existence at the
last general market peak (6/30/90) so, at a minimum, at least one full market
cycle of comparison would be available. And finally, of the 84 funds which
passed these screens, only 24 funds (managed by other investment advisers)
had $100 million in assets or greater at the last general market peak. We
believe that these 24 funds constitute a relevant peer group. This segment's
$14 billion in assets represents approximately 26% of all small-cap category
assets.
9
<PAGE>
RISK ADJUSTED RETURNS
High relative returns delivered with low relative risk is the goal of our
investment program. Beating appropriate indices or competitive entities with
less risk is the desired outcome.
Two of the techniques for evaluating 'risk adjusted returns' are the
Risk/Return Profile and the Return Per Unit of Risk calculation, a method used
by Fidelity Investments in their Mutual Fund Guide. Both depict results within
the context of the risk taken to achieve those results.
RISK/RETURN PROFILE
The Risk/Return Profile measures risk as standard deviation, which is a
statistical measure of fund volatility. The greater the standard deviation, the
higher the volatility and the higher the expected return. The actual risk
spectrum is defined at one end by the riskless 3 month T-bill and at the other
end by the Russell 2000 index of small-cap stocks. Any point plotted along the
risk/return line would indicate a level of risk and return comparable to either
the T-bill or the small-cap index. A result above the line indicates a better
risk-adjusted return; the highest goal is to beat the small-cap index return
with less risk.
[GRAPH]
[Pictorial chart showing average annual return of the Fund, the Russell
2000 and 3-month T-bills for the 10-year period from 6/30/85 to 6/30/95]
Risk (Standard Deviation)
OVER THE LAST TEN YEARS, PMF HAS GENERATED A HIGHER AVERAGE ANNUAL RETURN THAN
THE RUSSELL 2000 INDEX OF SMALL-CAP COMPANIES WITH SUBSTANTIALLY LOWER
VOLATILITY.
Average annualized standard deviations of monthly returns for PMF, Russell
2000 and 3 month T-bills for the 10-year period ended 6/30/95 were 13.7%, 21.5%
& 1.0%, respectively.
Average annual total returns for PMF, Russell 2000 and 3 month T-bills for
the period were 11.7%, 11.2% & 5.8%, respectively. See the Financial Review on
page 7 for additional information.
10
<PAGE>
RETURN PER UNIT OF RISK
The Return Per Unit of Risk calculation shows the relationship between a
fund's historical return and the amount of risk associated with the production
of that total return. It is calculated by dividing a fund's average annual total
return by its average annualized standard deviation over a designated period.
PMF's return per unit of risk calculations versus relevant indices and peers
over the past three general market cycles are depicted below.
[GRAPH]
[Line graph showing general market cycles, including peaks and troughs, for
the period from June 1979 through June 1995.]
Market peaks and troughs were derived by taking the daily S&P 500 cycle
highs and lows, defined as a change of 10% or greater from the previous peak or
trough, and rounding to the nearest quarter. (Viz. peaks: 11/26/80; 8/25/87;
7/16/90; troughs: 8/12/82; 12/4/87; 10/11/90.)
RETURN PER UNIT OF RISK
(PEAK TO PEAK COMPARISON)
<TABLE>
<CAPTION>
1ST PEAK 2ND PEAK 3RD PEAK 1ST PEAK
TO 2ND PEAK TO 3RD PEAK TO CURRENT TO CURRENT
12/31/80- 9/31/87- 6/30/90- 12/31/80-
9/30/87 6/30/90 6/30/95 6/30/95
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
PENNSYLVANIA MUTUAL FUND 1.34 0.55 0.98 1.05
Indices
--------------
S&P 500 1.28 0.39 1.05 0.97
Russell 2000 0.91 0.07 0.81 0.66
Peer Group*
--------------
Group Average 0.87 0.25 0.80 0.71
(# of Funds) (10) (22) (24) (10)
PMF Rank 1 out of 10 3 out of 22 6 out of 24 1 out of 10
</TABLE>
PMF'S RISK ADJUSTED RETURNS HAVE BEEN CONSISTENTLY AMONG THE HIGHEST IN ITS PEER
GROUP.
* See page 8 for a discussion of how the peer group was constructed. The number
of peer group funds in existence during each cycle is shown above.
11
<PAGE>
PORTFOLIO SUMMARY
The following information is provided as a 'bird's eye' view of the PMF
portfolio. For a more complete picture, the full portfolio and accompanying
financial statements should be read in their entirety.
<TABLE>
<CAPTION>
PORTFOLIO COMPOSITION % OF COMMON STOCKS VALUE % OF NET ASSETS
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------
Top 200 Stocks 82.2% $ 545,388,898 77.5%
Other Stocks 17.8 117,967,931 16.8
------ --------------- -------
Common Stocks 100.0% 663,356,829 94.3
------
------
Preferred Stocks 1,653,285 0.2
Cash & Other Net Assets 38,641,749 5.5
--------------- -------
Total Net Assets $ 703,651,863 100.0%
--------------- -------
--------------- -------
PORTFOLIO DIAGNOSTICS
--------------------------------------------------------------------------------------------------------
Weighted Average Market Capitalization (Total Portfolio) $482 Million
Median Market Capitalization (Total Portfolio) $227 Million
Weighted Average P/E Ratio (200 Largest Positions) 14.7x
Weighted Average P/B Ratio (200 Largest Positions) 1.6x
Weighted Average Portfolio Yield (200 Largest Positions) 1.9%
COMMON STOCK SECTORS % OF NET ASSETS
--------------------------------------------------------------------------------------------------------
Industrial Cyclicals 24.0%
Financial 23.4
Services 19.7
Consumer Durables 7.3
Retail 5.8
Energy 5.0
Consumer Staples 4.4
Technology 3.2
Health 1.3
Utilities 0.2
TOP TWENTY POSITIONS MARKET VALUE % OF NET ASSETS
--------------------------------------------------------------------------------------------------------
1 Comdisco, Inc. $6,986,402 1.0%
2 Alleghany Corporation 6,647,732 0.9
3 The Pioneer Group, Inc. 6,350,563 0.9
4 Claire's Stores, Inc. 6,196,938 0.9
5 Farmer Bros. Co. 5,929,000 0.8
6 Kimball International, Inc. Cl. B 5,804,250 0.8
7 Marshall Industries 5,413,600 0.8
8 Mine Safety Appliances Company 5,406,000 0.8
9 Penn Engineering and Manufacturing Corp. 5,402,025 0.8
10 U.S. Trust Corp. 5,385,600 0.8
11 ALLIED Group, Inc. 5,369,400 0.8
12 Orion Capital Corporation 5,339,334 0.8
13 Camco International Inc. 5,301,450 0.8
14 W.H. Brady Co. Cl. A 5,177,250 0.7
15 Baldwin & Lyons, Inc. Cl. B 5,069,709 0.7
16 The Standard Register Company 4,934,490 0.7
17 Atlantic Southeast Airlines, Inc. 4,880,250 0.7
18 NCH Corporation 4,738,000 0.7
19 Fab Industries, Inc. 4,710,176 0.7
20 Grey Advertising Inc. 4,665,024 0.7
</TABLE>
12
<PAGE>
PENNSYLVANIA
MUTUAL FUND
FINANCIAL STATEMENTS
<PAGE>
PENNSYLVANIA MUTUAL FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
COMMON STOCKS - 94.3%
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- ------------
CONSUMER DURABLES - 7.3%
<S> <C> <C>
37,711 Allen Organ Company Cl. B... $ 1,678,098
61,900 Arctco, Inc................. 727,325
105,422 *Athey Products Corp........ 632,532
39,100 *Baldwin Piano & Organ
Company................... 547,400
49,375 Bassett Furniture
Industries,
Incorporated.............. 1,382,500
32,900 Fleetwood Enterprises,
Inc....................... 649,775
242,600 Flexsteel Industries, Inc... 2,486,650
23,800 Forest City Enterprises,
Inc. Cl. A................ 913,325
49,900 Garan Incorporated.......... 835,825
138,800 *Johnson Worldwide
Associates, Inc. Cl. A.... 3,261,800
178,500 Juno Lighting, Inc.......... 2,856,000
213,000 Kimball International, Inc.
Cl. B..................... 5,804,250
71,000 La-Z-Boy Chair Company...... 1,872,625
85,600 *Lazare Kaplan
International, Inc........ 642,000
186,450 `D'Liberty Homes, Inc. Cl.
A......................... 1,747,969
161,890 *Lifetime Hoan
Corporation............... 1,821,263
86,750 National Presto Industries,
Inc....................... 3,936,281
52,592 Oakwood Homes Corporation... 1,347,670
195,200 The Rival Company........... 2,879,200
101,600 Russ Berrie and Company,
Inc....................... 1,409,700
25,300 The Singer Company N.V...... 654,638
120,000 Skyline Corporation......... 2,175,000
38,300 Springs Industries, Inc. Cl.
A......................... 1,426,675
104,000 Stanhome Inc................ 3,432,000
122,000 Sturm, Ruger & Company,
Inc....................... 3,980,250
<CAPTION>
Value
Shares (Note 1)
------ ------------
<S> <C> <C>
123,100 Thor Industries, Inc........ $ 2,431,225
------------
51,531,976
------------
CONSUMER STAPLES - 4.4%
147,688 Alico, Inc.................. 2,621,462
67,600 BIC Corporation............. 2,653,300
108,293 Block Drug Company, Inc. Cl.
A......................... 3,654,889
48,400 Farmer Bros. Co............. 5,929,000
34,800 Flowers Industries, Inc..... 687,300
21,800 Haggar Corp................. 425,100
58,900 K-Swiss Inc. Cl. A.......... 765,700
2,640 *Maui Land & Pineapple
Company, Inc.............. 132,000
109,200 Midwest Grain Products,
Inc....................... 2,020,200
24,600 Russell Corporation......... 707,250
30,829 SL Industries, Inc.......... 157,999
122,700 Savannah Foods & Industries,
Inc....................... 1,349,700
235,100 The Stride Rite
Corporation............... 2,439,163
207,100 *The Topps Company, Inc..... 1,294,375
63,600 Velcro Industries N.V....... 3,672,900
73,500 WLR Foods, Inc.............. 1,056,563
38,500 Weyco Group, Inc............ 1,386,000
------------
30,952,901
------------
ENERGY - 5.0%
81,800 *American Oilfield Divers,
Inc....................... 531,700
75,700 Ashland Coal, Inc........... 2,024,975
226,800 Camco International Inc..... 5,301,450
5,172 The Coal Creek Mining and
Manufacturing Company..... 587,022
26,500 Devon Energy Corporation.... 569,750
90,650 *Equity Oil Company......... 396,594
36,900 *Gulfmark International
Inc....................... 691,875
56,900 Helmerich & Payne, Inc...... 1,678,550
72,700 *Hornbeck Offshore Services,
Inc....................... 1,145,025
69,700 The Louisiana Land and
Exploration Company....... 2,779,288
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
PENNSYLVANIA MUTUAL FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- ------------
ENERGY - (continued)
<S> <C> <C>
94,044 Lufkin Industries, Inc...... $ 1,763,325
189,440 *Nabors Industries, Inc..... 1,562,880
61,500 *Noble Drilling
Corporation............... 453,563
247,900 *Oceaneering International,
Inc....................... 2,200,113
234,000 *Offshore Logistics, Inc.... 3,276,000
100,243 Penn Virginia Corporation... 2,819,334
33,100 Petroleum Helicopters,
Inc....................... 289,625
72,300 Plains Petroleum Company.... 2,141,888
77,600 *Pool Energy Services Co.... 640,200
103,280 *Santa Fe Energy Resources,
Inc....................... 981,160
54,900 *Seagull Energy
Corporation............... 905,850
10,300 *Tide West Oil Company...... 115,875
83,900 Western Gas Resources,
Inc....................... 1,447,275
76,500 The Wiser Oil Company....... 1,042,313
------------
35,345,630
------------
FINANCIAL - 23.4%
41,744 *Alleghany Corporation...... 6,647,732
188,400 ALLIED Group, Inc........... 5,369,400
59,700 AMRESCO, INC................ 559,688
115,850 Argonaut Group, Inc......... 3,678,238
64,269 *Avatar Holdings Inc........ 2,345,819
121,000 AVEMCO Corporation.......... 2,102,375
29,920 Baker Boyer Bancorp......... 912,560
327,078 Baldwin & Lyons, Inc. Cl.
B......................... 5,069,709
129,325 W. R. Berkley Corp.......... 4,591,038
50,500 E.W. Blanch Holdings,
Inc....................... 940,563
30,000 The Boston Bancorp.......... 1,275,000
26,000 *Brooklyn Bancorp, Inc...... 877,500
24,800 CMAC Investment
Corporation............... 1,075,700
18,700 Capital Re Corporation...... 486,200
230,005 Comdisco, Inc............... 6,986,402
47,542 The Commerce Group, Inc..... 849,813
48,363 Community Banks, Inc........ 1,281,620
<CAPTION>
Value
Shares (Note 1)
-------- ------------
<S> <C> <C>
59,800 Consolidated-Tomoka Land
Co........................ $ 807,300
89,450 Cousins Properties
Incorporated.............. 1,587,738
73,250 Dauphin Deposit Corp........ 1,776,313
87,100 DUFF & PHELPS CORPORATION... 936,325
53,000 Eaton Vance Corp............ 1,709,250
47,200 Equitable of Iowa
Companies................. 1,551,700
8,936 Exchange Bank............... 589,840
13,800 F & M Bancorporation........ 524,400
2,079 Farmers & Merchants Bank of
Long Beach................ 3,534,300
64,800 The First American Financial
Corporation............... 1,498,500
974 The First National Bank of
Anchorage................. 1,470,740
17,850 Foremost Corporation of
America................... 691,688
33,900 Franklin Resources, Inc..... 1,508,550
121,000 Fremont General
Corporation............... 2,919,125
95,700 Arthur J. Gallagher & Co.... 3,481,088
143,300 *Gryphon Holdings Inc....... 2,328,625
149,800 Guaranty National
Corporation............... 2,771,300
114,562 *Hanmi Bank................. 744,653
63,977 Harleysville Group, Inc..... 1,599,425
143,725 Hilb, Rogal & Hamilton
Company................... 1,796,563
60,100 Horace Mann Educators
Corporation............... 1,382,300
54,700 Intercargo Corporation...... 601,700
64,800 The John Nuveen Company..... 1,555,200
69,412 Keystone Heritage Group,
Inc....................... 1,787,359
102,500 Lehman Bros. Holdings
Inc....................... 2,242,188
71,186 Leucadia National
Corporation............... 3,594,893
30,760 *Markel Corporation......... 1,714,870
51,300 Mercury General
Corporation............... 1,763,438
404 *MidCity Financial Corp.*... 910,212
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
PENNSYLVANIA MUTUAL FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- ------------
FINANCIAL - (continued)
<S> <C> <C>
81,600 Mid Ocean Limited........... $ 2,580,600
41,643 *Mutual Assurance, Inc...... 1,249,290
48,200 NYMAGIC, INC................ 765,175
32,171 National Bancorp of Alaska,
Inc....................... 1,640,721
50,700 *The Navigators Group,
Inc....................... 798,525
45,700 New England Investment
Companies, L.P............ 856,875
184,900 The Newhall Land and Farming
Company................... 2,565,488
27,132 Old Republic International
Corporation............... 708,824
10,000 ONBANCorp, Inc.............. 283,750
136,906 Orion Capital Corporation... 5,339,334
151,675 Paine Webber Group Inc...... 2,862,866
62,300 PartnerRe Holdings Ltd...... 1,627,588
21,800 Pennsylvania Manufacturers
Corporation............... 337,900
236,300 The Pioneer Group, Inc...... 6,350,563
157,400 Piper Jaffray Companies
Inc....................... 2,380,675
14,900 Poe & Brown, Inc............ 346,425
53,961 Portsmouth Bank Shares,
Inc....................... 661,022
94,100 T. Rowe Price Associates,
Inc....................... 3,622,850
123,125 RLI Corp.................... 2,801,094
19,591 *Reliance Group Holdings,
Inc....................... 36,733
63,000 SEI Corporation............. 1,417,500
97,000 Security-Connecticut Life
Insurance Company......... 2,497,750
72,400 Student Loan Corporation.... 1,945,750
95,639 *Sunrise Bancorp............ 257,030
74,900 Susquehanna Bancshares,
Inc....................... 1,760,150
41,700 Transatlantic Holdings,
Inc....................... 2,710,500
66,200 *Transnational Re
Corporation Cl. A......... 1,328,138
<CAPTION>
Value
Shares (Note 1)
-------- ------------
<S> <C> <C>
65,300 Trenwick Group Inc.......... $ 2,775,250
21,806 TriCo Bancshares............ 348,896
74,800 U. S. Trust Corp............ 5,385,600
35,300 *Vista Resources, Inc....... 714,825
22,050 Vornado Realty Trust........ 768,994
50,630 Webster Financial
Corporation............... 1,208,791
29,300 Wesco Financial
Corporation............... 3,699,125
208,300 `DD'Willis Corroon Group plc
ADR....................... 2,499,600
75,500 Zenith National Insurance
Corp...................... 1,623,250
60,100 *Zurich Reinsurance Centre,
Inc....................... 1,720,363
------------
164,906,750
------------
HEALTH - 1.3%
54,100 C. R. Bard, Inc............. 1,623,000
40,100 Diagnostic Products
Corporation............... 1,463,650
75,200 *HAEMONETICS CORPORATION.... 1,447,600
21,300 Jones Medical Industries,
Inc....................... 236,963
107,500 Life Technologies, Inc...... 2,418,750
29,600 *Marquette Electronics, Inc.
Cl. A..................... 469,900
98,491 Medex, Inc.................. 1,231,138
------------
8,891,001
------------
INDUSTRIAL CYCLICALS - 24.0%
58,304 Aceto Corporation........... 859,984
39,900 *Ag-Chem Equipment Co.,
Inc....................... 3,910,200
68,300 American Filtrona
Corporation............... 2,014,850
57,400 Ameron, Inc................. 2,080,750
15,509 Ash Grove Cement Company.... 1,132,157
124,800 Guy F. Atkinson Company of
California................ 1,170,000
63,325 BHA Group, Inc.............. 791,563
71,800 BW/IP, Inc. Cl. A........... 1,328,300
67,100 *Banister Foundation Inc.... 578,738
106,500 *Bird Corp.................. 732,188
81,300 Blessings Corporation....... 1,016,250
76,700 W. H. Brady Co. Cl. A....... 5,177,250
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
PENNSYLVANIA MUTUAL FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- ------------
INDUSTRIAL CYCLICALS - (continued)
<S> <C> <C>
17,600 Brenco, Incorporated........ $ 213,400
37,506 Burnham Corporation Cl. A... 1,068,921
204,600 CalMat Co................... 4,245,450
41,600 Carpenter Technology
Corporation............... 2,834,000
126,000 Cascade Corp................ 2,016,000
874 Central Steel & Wire
Company................... 511,290
7,600 *Chase Brass Industries,
Inc....................... 89,300
14,300 Chicago Rivet & Machine
Co........................ 427,213
75,250 CLARCOR Inc................. 1,721,344
40,600 Cohu, Inc................... 949,025
9,030 ConBraCo Industries, Inc.... 4,515,000
31,000 Core Industries Inc......... 333,250
78,800 Curtiss-Wright
Corporation............... 3,516,450
230,848 Delta Woodside Industries,
Inc....................... 1,760,216
26,100 *Detrex Corporation......... 195,750
137,500 *Devcon International
Corp...................... 996,875
85,000 *DeVlieg-Bullard, Inc....... 116,875
73,300 Donaldson Company, Inc...... 1,914,963
60,400 The Duriron Company, Inc.... 1,359,000
17,600 Eastern Co.................. 242,000
154,432 Fab Industries, Inc......... 4,710,176
120,700 Fansteel Inc................ 829,813
73,433 Federal Signal
Corporation............... 1,587,989
156,300 Florida Rock Industries,
Inc....................... 4,435,013
77,800 Giddings & Lewis, Inc....... 1,390,675
130,487 Gilbert Associates, Inc. Cl.
A......................... 1,696,331
147,300 P. H. Glatfelter Company.... 2,964,413
85,812 Gorman-Rupp Company......... 1,244,274
66,300 A. P. Green Industries,
Inc....................... 1,309,425
139,300 Greif Bros. Corporation Cl.
A......................... 3,256,138
<CAPTION>
Value
Shares (Note 1)
-------- ------------
<S> <C> <C>
16,875 Guardsman Products, Inc..... $ 217,266
89,125 Guilford Mills, Inc......... 2,172,422
69,300 *C. H. Heist Corp........... 563,063
35,400 Hunt Manufacturing Co....... 539,850
146,800 *Insituform Technologies,
Inc....................... 1,945,100
129,500 International Aluminum
Corporation............... 4,111,625
95,200 Kaman Corporation Cl. A..... 1,213,800
53,300 Kaydon Corporation.......... 1,585,675
23,300 Knape & Vogt Manufacturing
Company................... 349,500
22,800 *Laclede Steel Company...... 273,600
22,300 *Lancer Corporation......... 437,638
94,920 Lawter International,
Inc....................... 1,139,040
172,860 LeaRonal, Inc............... 3,651,668
285,012 Lilly Industries, Inc. Cl.
A......................... 3,348,891
31,690 The Lincoln Electric
Company................... 990,313
92,190 *The Lincoln Electric
Company................... 2,765,700
53,450 Lindberg Corporation........ 350,766
41,200 Liqui-Box Corporation....... 1,318,400
13,406 MacDermid, Incorporated..... 616,676
142,000 The Manitowoc Company,
Inc....................... 4,100,250
31,100 Herman Miller, Inc.......... 769,725
102,000 Mine Safety Appliances
Company................... 5,406,000
96,100 Minuteman International,
Inc....................... 948,988
58,300 The Monarch Machine Tool
Company................... 568,425
32,900 Paul Mueller Company........ 1,036,350
125,837 Myers Industries, Inc....... 1,808,907
33,750 *NCI Building Systems,
Inc....................... 565,313
35,300 Nordson Corporation......... 1,923,850
46,750 Oil-Dri Corporation of
America................... 695,406
37,500 The Oilgear Company......... 675,000
133,400 Oregon Steel Mills, Inc..... 2,284,475
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
PENNSYLVANIA MUTUAL FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- ------------
INDUSTRIAL CYCLICALS - (continued)
<S> <C> <C>
140,800 Oshkosh Truck Corporation
Cl. B..................... $ 1,742,400
71,550 Penn Engineering and
Manufacturing Corp........ 5,402,025
75,100 *Perini Corporation......... 769,775
99,200 Precision Castparts Corp.... 3,484,400
89,693 Preformed Line Products
Company................... 3,004,716
62,000 *Proler International
Corp...................... 441,750
122,000 Puerto Rican Cement Company,
Inc....................... 3,721,000
195,764 Quaker Chemical
Corporation............... 3,181,165
49,700 Regal-Beloit Corporation.... 770,350
97,310 Robroy Industries, Inc. Cl.
A......................... 1,605,615
47,500 St. Joe Paper Company....... 3,016,250
86,100 *Shiloh Industries, Inc..... 914,813
52,700 *Simpson Manufacturing Co.,
Inc....................... 638,988
23,700 *Steel of West Virginia,
Inc....................... 272,550
199,600 Tab Products Co............. 1,197,600
78,500 Tecumseh Products Company
Cl. A..................... 3,454,000
12,650 Tecumseh Products Company
Cl. B..................... 553,438
95,100 Thomaston Mills, Inc. Cl.
A......................... 1,188,750
88,400 *Todd Shipyards
Corporation............... 530,400
69,300 *The Turner Corporation..... 693,000
90,532 Versa Technologies, Inc..... 1,312,714
54,400 Vulcan Materials Company.... 2,964,800
70,000 Watts Industries, Inc. Cl.
A......................... 1,754,375
62,850 Woodhead Industries, Inc.... 864,188
39,318 Woodward Governor Company... 2,477,034
95,200 Zero Corporation............ 1,428,000
------------
169,000,577
------------
<CAPTION>
Value
Shares (Note 1)
-------- ------------
<S> <C> <C>
RETAIL - 5.8%
85,000 Blair Corporation........... $ 2,921,875
3,800 *The Buckle, Inc............ 60,325
73,400 *CATHERINES STORES
CORPORATION............... 816,575
413,600 Charming Shoppes, Inc....... 2,171,400
341,900 Claire's Stores, Inc........ 6,196,938
232,750 *The Clothestime, Inc....... 669,156
36,900 *Crown Books Corporation.... 415,125
28,100 Dart Group Corporation Cl.
A......................... 2,370,938
382,700 *The Dress Barn, Inc........ 3,731,325
138,800 *Ethan Allen Interiors
Inc....................... 2,463,700
294,200 Family Dollar Stores,
Inc....................... 4,339,450
37,800 *InterTAN Inc............... 283,500
10,800 LANDS' END, INC............. 175,500
13,600 Melville Corporation........ 465,800
92,200 *Mikasa, Inc................ 1,371,475
107,300 The Neiman Marcus Group,
Inc....................... 1,529,025
57,700 *Old America Stores, Inc.... 663,550
84,000 Oshkosh B'Gosh, Inc. Cl.
A......................... 1,344,000
345,030 Pier 1 Imports, Inc......... 3,191,528
71,300 *Stein Mart, Inc............ 962,550
114,205 Strawbridge & Clothier Cl.
A......................... 2,284,100
71,100 Tiffany & Co................ 2,417,400
------------
40,845,235
------------
SERVICES - 19.7%
83,900 AAR CORP.................... 1,499,713
52,400 ADT Limited................. 615,700
135,700 ABM Industries
Incorporated.............. 3,138,063
69,892 ADVO, Inc................... 1,319,212
190,900 Air Express International
Corporation............... 4,486,150
124,400 *American City Business
Journals, Inc............. 2,736,800
219,700 Arnold Industries, Inc...... 3,844,750
162,000 Atlantic Southeast Airlines,
Inc....................... 4,880,250
59,950 Banta Corporation........... 1,993,338
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
PENNSYLVANIA MUTUAL FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- ------------
SERVICES - (continued)
<S> <C> <C>
75,002 *Bell Industries, Inc....... $ 1,603,168
102,300 Bowl America Incorporated
Cl. A..................... 805,613
198,600 Bowne & Co., Inc............ 3,401,025
49,300 CPI Corp.................... 942,863
5,900 *Jenny Craig, Inc........... 48,675
175,550 Crawford & Company Cl. A.... 3,028,238
91,900 Crawford & Company Cl. B.... 1,550,813
165,700 Dames & Moore............... 2,154,100
5,000 *Devon Group, Inc........... 147,500
22,133 DUFF & PHELPS CREDIT RATING
CO........................ 287,729
26,900 *Duplex Products, Inc....... 223,606
41,000 Ennis Business Forms,
Inc....................... 507,375
63,600 Expeditors International of
Washington, Inc........... 1,431,000
85,900 *FRP Properties, Inc........ 1,846,850
127,000 *FCA International Ltd...... 286,562
4,768 Fisher Companies Inc........ 345,680
63,800 FlightSafety International,
Inc....................... 3,110,250
46,600 Florida East Coast
Industries, Inc........... 3,436,750
228,521 Frozen Food Express
Industries, Inc........... 2,213,800
163,567 G & K Services, Inc. Cl.
A......................... 3,189,557
24,297 Grey Advertising Inc........ 4,665,024
182,537 The Harper Group............ 3,057,495
28,200 *IHOP Corp.................. 726,150
67,700 *International Dairy Queen,
Inc. Cl. A................ 1,320,150
83,600 *International Dairy Queen,
Inc. Cl. B................ 1,713,800
27,800 Kansas City Southern
Industries, Inc........... 1,035,550
55,800 Kenan Transport Company..... 1,116,000
10,471 Lady Baltimore Foods,
Inc....................... 638,731
105,100 Lawson Products, Inc........ 2,785,150
53,500 The Marcus Corporation...... 1,618,375
161,600 *Marshall Industries........ 5,413,600
143,700 Merrill Corporation......... 2,730,300
<CAPTION>
Value
Shares (Note 1)
-------- ------------
<S> <C> <C>
32,600 *Milgray Electronics, Inc... $ 733,500
82,400 NCH Corporation............. 4,738,000
118,950 Nash Finch Company.......... 1,932,938
90,900 New England Business
Service, Inc.............. 1,795,275
44,400 *Nichols Research
Corporation............... 760,350
31,100 PCA International, Inc...... 365,425
83,000 *Payco American
Corporation............... 643,250
100,500 *Pinkerton's, Inc........... 1,846,688
38,767 Pioneer-Standard
Electronics, Inc.......... 949,792
89,650 Plenum Publishing
Corporation............... 3,137,750
81,400 Quebecor Inc. Cl. A......... 1,170,125
848 *Queen City Investments,
Inc....................... 217,088
41,500 The Reynolds and Reynolds
Company Cl. A............. 1,224,250
55,262 Richardson Electronics,
Ltd....................... 400,650
125,300 *Rollins Environmental
Services, Inc............. 595,175
126,156 Rykoff-Sexton, Inc.......... 2,223,500
14,700 Scope Industries............ 369,338
308,100 Sotheby's Holdings, Inc. Cl.
A......................... 4,197,863
259,710 The Standard Register
Company................... 4,934,490
113,200 Stone & Webster, Inc........ 3,339,400
181,250 Super Food Services, Inc.... 2,152,344
355,377 *TBC Corporation............ 3,820,303
73,600 True North Communications
Inc....................... 1,389,200
150,900 *UNC, Inc................... 811,088
165,500 *The Union Corporation...... 2,627,313
183,200 *Vallen Corporation......... 3,297,600
71,743 *Vie De France
Corporation............... 233,165
52,500 Wallace Computer Services,
Inc....................... 2,014,688
38,600 Werner Enterprises, Inc..... 772,000
22,800 John Wiley & Sons, Inc. Cl.
A......................... 1,296,750
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
PENNSYLVANIA MUTUAL FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- ------------
SERVICES - (continued)
<S> <C> <C>
63,625 Wyle Electronics............ $ 1,789,453
------------
137,674,206
------------
TECHNOLOGY - 3.2%
40,925 *American Software, Inc. Cl.
A......................... 209,741
17,450 Astro-Med, Inc.............. 199,584
109,600 *Astrosystems, Inc.......... 500,050
28,400 Augat Inc................... 582,200
13,000 BGS Systems, Inc............ 425,750
44,800 *CEM Corporation............ 560,000
38,900 *Comptek Research, Inc...... 700,200
37,525 *DH Technology, Inc......... 1,031,938
63,800 *Data I/O Corporation....... 558,250
38,419 *Dionex Corporation......... 1,757,669
100,300 *Exar Corporation........... 2,958,850
49,205 Hach Company................ 664,268
16,500 Joslyn Corporation.......... 433,125
16,300 Keithley Instruments,
Inc....................... 358,600
117,600 *MDL Information Systems,
Inc....................... 1,749,300
19,300 MacNeal-Schwendler
Corporation............... 270,200
52,900 Modern Controls, Inc........ 482,713
74,400 *Moore Products Co.......... 1,376,400
123,003 National Computer Systems,
Inc....................... 2,552,312
135,900 Newport Corporation......... 1,274,063
125,500 Scitex Corporation
Limited................... 2,698,250
79,900 *Wang Laboratories, Inc..... 1,308,363
------------
22,651,826
------------
UTILITIES - .2%
64,647 *Southern Union Company..... 1,171,727
<CAPTION>
Value
Shares (Note 1)
-------- ------------
<S> <C> <C>
44,000 Southwest Water Company..... $ 385,000
------------
1,556,727
------------
Total Common Stocks (Cost
$450,852,523)............. 663,356,829
------------
PREFERRED STOCKS - .2%
47,000 `D'Anacomp, Inc. $4.125 Cum.
Conv. Rd. Exch............ 335,110
23,700 Bird Corp. $1.85 Conv....... 444,375
25,700 Glendale Federal Bank,
F.S.B. 8.75% Non-Cum.
Conv. Ser E............... 873,800
------------
Total Preferred Stocks (Cost
$2,400,093)............... 1,653,285
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
-------------
<S> <C> <C>
U.S. TREASURY OBLIGATION - 1.5%
$10,000,000 U.S. Treasury Notes 7%
due 4/15/99 (Cost
$10,175,000)......... 10,345,300
------------
REPURCHASE AGREEMENT - 3.4%
State Street Bank and Trust
Company, 5.50% due 7/3/95,
collateralized by U.S. Treasury
Notes, 7.50% due 1//31/97, valued
at $24,004,412 (Cost
$24,000,000)....................... 24,000,000
------------
TOTAL INVESTMENTS - 99.4% (COST
$487,427,616)...................... 699,355,414
CASH AND OTHER ASSETS LESS
LIABILITIES - .6%.................. 4,296,449
------------
NET ASSETS - 100.0%.................. $703,651,863
------------
------------
</TABLE>
* Non-income producing.
`D' At June 30, 1995, the Fund owned 5% or more of the Company's outstanding
shares thereby making the Company an affiliated person as defined in the
Investment Company Act of 1940. (See Note 5).
`DD' American Depository Receipt.
INCOME TAX INFORMATION -- The cost for federal income tax purposes was
$487,453,286. At June 30, 1995, net unrealized appreciation for all securities
amounted to $211,902,128, consisting of aggregate gross unrealized appreciation
of $232,786,965 and aggregate gross unrealized depreciation of $20,884,837.
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
PENNSYLVANIA MUTUAL FUND
STATEMENT OF ASSETS AND LIABILITIES AT JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments at value (identified cost $487,427,616) (Note 1).................................. $699,355,414
Cash.......................................................................................... 127,430
Receivable for investments sold............................................................... 6,938,219
Receivable for dividends and interest......................................................... 1,245,776
Receivable for shares of beneficial interest sold............................................. 66,913
Prepaid expenses and other assets............................................................. 67,112
------------
TOTAL ASSETS........................................................................... 707,800,864
------------
LIABILITIES:
Payable for investments purchased............................................................. 3,255,311
Payable for shares of beneficial interest redeemed............................................ 160,810
Investment advisory fee payable (Note 2)...................................................... 449,493
Accrued expenses.............................................................................. 283,387
------------
TOTAL LIABILITIES...................................................................... 4,149,001
------------
NET ASSETS............................................................................. $703,651,863
------------
------------
ANALYSIS OF NET ASSETS:
Undistributed net investment income........................................................... $ 4,582,853
Accumulated net realized gains on investments................................................. 34,635,435
Net unrealized appreciation on investments.................................................... 211,927,798
Shares of beneficial interest (Note 3)........................................................ 85,747
Additional paid-in capital.................................................................... 452,420,030
------------
NET ASSETS............................................................................. $703,651,863
------------
------------
PRICING OF SHARES:
Net asset value, offering and redemption price per share
($703,651,863[div]85,746,607 shares outstanding) (Note 3)................................... $8.21
-----
-----
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31,
(unaudited) 1994
------------- --------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Net investment income...................................................... $ 4,491,510 $ 11,804,371
Net realized gain on investments........................................... 36,475,506 70,357,152
Net unrealized appreciation (depreciation) on investments.................. 32,129,792 (88,633,065)
------------- --------------
Increase (decrease) in net assets resulting from operations................ 73,096,808 (6,471,542)
Dividends paid from net investment income.................................. -- (10,380,594)
Distributions paid from net realized gains................................. -- (68,889,610)
FROM CAPITAL SHARE TRANSACTIONS:
Decrease in net assets from capital share transactions (Note 3)............ (140,861,569 ) (165,002,473)
------------- --------------
DECREASE IN NET ASSETS....................................................... (67,764,761 ) (250,744,219)
NET ASSETS:
Beginning of period........................................................ 771,416,624 1,022,160,843
------------- --------------
End of period (including undistributed net investment income of $4,582,853
and $91,343, respectively)............................................... $703,651,863 $ 771,416,624
------------- --------------
------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
PENNSYLVANIA MUTUAL FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends....................................................................................... $ 6,914,240
Interest........................................................................................ 1,090,750
-----------
Total income............................................................................. 8,004,990
-----------
Expenses:
Investment advisory fee (Note 2)................................................................ 2,786,185
Custodian and transfer agent fees............................................................... 243,422
Administrative and clerical services............................................................ 156,402
Supplies and postage............................................................................ 91,767
Miscellaneous................................................................................... 77,311
Insurance....................................................................................... 50,620
Legal and auditing fees......................................................................... 48,657
Trustees' fees.................................................................................. 45,793
Facilities and office space..................................................................... 43,425
Shareholder reports and notices................................................................. 33,274
Federal and state registration fees............................................................. 24,797
Fee waived by Investment Adviser................................................................ (88,173)
-----------
Total Expenses........................................................................... 3,513,480
-----------
Net Investment Income.................................................................... 4,491,510
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments.................................................................. 36,475,506
Net unrealized appreciation on investments........................................................ 32,129,792
-----------
Net realized and unrealized gain on investments................................................... 68,605,298
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............................................. $73,096,808
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
PENNSYLVANIA MUTUAL FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
This table is presented to show selected data for a share outstanding
throughout each period, and to assist shareholders in evaluating the Fund's
performance over the last five years.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1995 YEARS ENDED DECEMBER 31,
(unaudited) 1994 1993 1992 1991 1990
------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD.......................... $7.41 $8.31 $8.00 $7.29 $5.78 $6.85
------ ----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income........... 0.05 0.12 0.11 0.11 0.12 0.17
Net Gain (Loss) on Investments
(realized and unrealized)..... 0.75 (0.18) 0.79 1.07 1.72 (0.96)
------ ----- ----- ----- ----- -----
Total from Investment
Operations................. 0.80 (0.06) 0.90 1.18 1.84 (0.79)
------ ----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends (from net investment
income)....................... -- (0.11) (0.11) (0.10) (0.12) (0.16)
Distributions (from capital
gains)........................ -- (0.73) (0.48) (0.37) (0.21) (0.12)
------ ----- ----- ----- ----- -----
Total Distributions........... -- (0.84) (0.59) (0.47) (0.33) (0.28)
------ ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD.... $8.21 $7.41 $8.31 $8.00 $7.29 $5.78
------ ----- ----- ----- ----- -----
------ ----- ----- ----- ----- -----
TOTAL RETURN...................... 10.8% (0.7%) 11.3% 16.2% 31.8% (11.5%)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in
thousands)...................... $703,652 $771,417 $1,022,161 $1,102,224 $789,141 $548,873
Ratio of Expenses to Average Net
Assets.......................... 0.97%*(a) 0.98% 0.98% 0.91% 0.95% 0.96%
Ratio of Net Investment Income to
Average Net Assets.............. 1.24%* 1.33% 1.23% 1.48% 1.73% 2.62%
Portfolio Turnover Rate........... 5% 17% 24% 22% 29% 15%
</TABLE>
* Annualized.
(a) The expense ratio, shown after the waiver of fee by the investment adviser,
would have been 0.98% before the waiver.
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
PENNSYLVANIA MUTUAL FUND
NOTES TO FINANCIAL STATEMENTS (unaudited)
--------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Pennsylvania Mutual Fund (the 'Fund'), is a diversified open-end management
investment company established as a business trust under the laws of
Massachusetts.
a. Valuation of investments:
Securities listed on an exchange or on the Nasdaq National Market System
are valued on the basis of the last reported sale prior to the time the
valuation is made or, if no sale is reported for such day, at their bid price
for exchange-listed securities and at the average of their bid and asked prices
for Nasdaq securities. Quotations are taken from the market where the security
is primarily traded. Other over-the-counter securities for which market
quotations are readily available are valued at their bid price. Securities for
which market quotations are not readily available are valued at their fair value
under procedures established and supervised by the Board of Trustees. Bonds and
other fixed income securities may be valued by reference to other securities
with comparable ratings, interest rates and maturities, using established
independent pricing services.
b. Investment transactions and related investment income:
Investment transactions are accounted for on the trade date and dividend
income is recorded on the ex-dividend date. Interest income is recorded on the
accrual basis. Realized gains and losses from investment transactions and
unrealized appreciation and depreciation of investments are determined on the
basis of identified cost for book and tax purposes.
c. Taxes:
As a qualified regulated investment company under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the extent
that it distributes substantially all of its taxable income for its fiscal year.
The schedule of investments includes information regarding income taxes under
the caption 'Income Tax Information'.
d. Distributions:
Dividend and capital gain distributions are recorded on the ex-dividend
date and paid annually in December. Dividend and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. Permanent book and tax basis
differences relating to shareholder distributions will result in
reclassifications to paid-in capital and may affect net investment income per
share. Undistributed net investment income may include temporary book and tax
basis differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
e. Repurchase agreements:
The Fund enters into repurchase agreements with respect to its portfolio
securities solely with State Street Bank and Trust Company ('SSB&T'), the
custodian of its assets. The Fund restricts repurchase agreements to maturities
of no more than seven days. Securities pledged as collateral for repurchase
agreements are held by SSB&T until maturity of the repurchase agreements.
Repurchase agreements could involve certain risks in the event of default or
insolvency of SSB&T, including possible delays or restrictions upon the ability
of the Fund to dispose of the underlying securities.
24
<PAGE>
PENNSYLVANIA MUTUAL FUND
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
--------------------------------------------------------------------------------
2. INVESTMENT ADVISER:
Under its investment advisory agreement with Quest Advisory Corp.
('Quest'), the Fund paid Quest fees totaling $2,698,012 (net of $88,173
voluntarily waived by Quest) for the six months ended June 30, 1995. The
agreement provides for fees equal to 1.0% per annum of the first $50 million of
the Fund's average total net assets, .875% per annum of the next $50 million of
such net assets and .75% per annum of additional amounts of average total net
assets. Such fees are computed daily and are payable monthly to Quest.
3. FUND SHARES:
The Board of Trustees has authority to issue an unlimited number of shares
of beneficial interest of the Fund, with a par value of $.001. Share
transactions were as follows:
<TABLE>
<CAPTION>
Six months ended Year ended
June 30, 1995 December 31, 1994
---------------------------- ----------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold........................................ 2,791,982 $ 21,391,530 7,980,922 $ 65,918,424
Issued as reinvested dividends and
distributions............................. -- -- 9,687,741 71,786,160
Redeemed.................................... (21,113,982) (162,253,099) (36,575,906) (302,707,057)
</TABLE>
4. PURCHASES AND SALES OF SECURITIES:
For the six months ended June 30, 1995, the cost of purchases and the
proceeds from sales of portfolio securities, other than short-term securities,
amounted to $34,044,614 and $194,715,991, respectively.
5. TRANSACTIONS IN SHARES OF AFFILIATED COMPANIES:
An 'Affiliated Company' as defined in the Investment Company Act of 1940,
is a company in which the Fund owns at least 5% of the company's outstanding
voting securities. The Fund effected the following transactions in shares of
these companies for the six months ended June 30, 1995.
<TABLE>
<CAPTION>
Purchases Sales
------------------- ----------------- Realized Dividend
Shares Cost Shares Cost Gain/(Loss) Income
------- -------- ------ ------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Anacomp, Inc............................. -- -- -- -- -- --
Liberty Homes, Inc....................... -- -- 2,500 $23,775 $(1,275) --
</TABLE>
25
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
TRUSTEES
Hubert L. Cafritz
Thomas R. Ebright
Richard M. Galkin
Stephen L. Isaacs
William L. Koke
David L. Meister
Charles M. Royce
OFFICERS
Charles M. Royce, President and Treasurer
Jack E. Fockler, Jr., Vice President
W. Whitney George, Vice President
Daniel A. O'Byrne, Vice President and Assistant Secretary
Susan I. Grant, Secretary
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
CUSTODIAN
State Street Bank and Trust Company
<PAGE>
POSTSCRIPT: WATCH US IN THE CORNERS
There isn't much joy sitting in a summer traffic jam when you're headed for
the beach. One's mind tends to wander, contemplating some of the farfetched
symmetries of life; for example, how similar driving to a vacation home is to
investing. In both, the goal is clearly defined, and earlier achievement is
preferable to a long delay. Nevertheless, getting to the destination requires
both attention and patience. Once the traffic jam clears and more aggressive
drivers speed by on both sides, a sense of frustration sets in. We don't
appreciate it when we are going along at a good clip, only to see others rocket
by at very high speeds.
But, in both investing and road racing, you have to finish in order to
finish first. There is usually challenging terrain with hills, straightaways and
curves. There are also obstacles, some foreseeable, others totally
unpredictable. Oil slicks and accidents are no more predictable than the exact
course of interest rates or inflation. At the end, victory belongs to those who
navigate the course with speed, precision and caution.
Our own feeling of inadequacy on the highway is a reminder of our recent
underperformance in the dynamic stock market rally now underway. The well-tuned
small-cap vehicles in which we have invested are currently being passed by
momentum muscle cars and technology dragsters. As we barrel down one of the
longest straightaways in decades, more powerful equities have made our stock
cars look like little jalopies. Yet we believe we have not selected inferior
clunkers, but rather well-tuned vehicles with high return suspensions and strong
balance sheet brakes. Our diverse team can maneuver well in the economic turns,
ease by the interest rate slicks and avoid the overpriced accidents.
Watch us in the corners. At some point the momentum muscle cars will run
out of fuel and pull over to wait for the tax loss tow trucks. The technology
dragsters, lacking brakes, will deploy their parachutes at the first turn or
become tech wrecks. The investment corners are where our vehicle performs at its
best. We think we see some of those yellow caution signs signalling curves in
the distance, so this race is far from over. We have competed in these races for
many years and we know our companies will finish well.
Drive carefully.
------------------------------------------------------
THE ROYCE FUNDS
General Information and Telephone Purchases ....... 1 (800) 221-4268
Shareholder Account Services ...................... 1 (800) 841-1180
Investment Advisor Services ....................... 1 (800) 33-ROYCE
The Royce Funds InfoLine .......................... 1 (800) 78-ROYCE
1414 Avenue of the Americas, New York, New York 10019
This report must be accompanied by or preceded by a current prospectus of the
Fund
<PAGE>
STATEMENT OF DIFFERENCES
------------------------
The dagger symbol shall be expressed as...........'D'
The double dagger symbol shall be expressed as.... 'DD'
The division sign shall be expressed as........... [div]
