<PAGE>
- --------------------------------------------------------------------------------
TO OUR VARIABLE LIFE INSURANCE CONTRACTHOLDERS:
It is my pleasure to present the Semi-Annual reports of Penn Mutual Variable
Life Account I--Momentum Builder and Penn Series Funds, Inc. for the six-month
period ending June 30, 1995.
The first six months of 1995 painted a dramatically different picture from the
first six months of 1994. Who would have imagined that the dark, dismal
performance of the stock market last year would have been transformed into a
robust and rigorous force that sparked life back into stocks this year. And
this dramatic impact was no less noticeable on the bond market as well. With
help from an accommodating Federal Reserve, a strengthening economy and a more
upbeat, positive outlook among investors, the Dow index was pushed to new
record highs.
Two questions loom. Will the stock market continue its stellar performance for
the last six months of 1995? There is no crystal ball for predicting the future
trends of the market, but there are signals of continued growth. Easing
inflationary pressures coupled with higher earnings among America's
corporations today makes the outlook favorable.
Even more important is the second question: does your investment approach take
advantage of the ups and downs of the market. The key lesson is the ability of
investors today to "take the long view." Human nature forces us to focus on the
short term volatility of the market--concentrating on the down turns more than
the upswings. But the real risk of investing is not reaping the rewards of the
market at all; standing on the sidelines waiting for just the "right" time to
invest.
Your MOMENTUM BUILDER policy is designed to help you maintain a steady, long-
term approach to investing. It brings the experience and expertise of various
investment advisors to help you build a financial plan that best suits your
individual needs. And we encourage you to work with your financial advisor to
take full advantage of your policy's features and investment choices.
Percentage changes in accumulation unit values of each of the variable accounts
offered under MOMENTUM BUILDER for the six month period ending June 30, 1995
are set forth in the accompanying table.
Management discussions of the performance of the funds are included in the
accompanying reports.
We thank you for the opportunity to serve your financial needs. If we can be of
further service, please don't hesitate to contact our VUL service center at
1-800-766-7366, or contact your sales representative directly.
Sincerely,
/s/ Richard Feinstein
Richard Feinstein
Director, Insurance Product Support
- --------------------------------------------------------------------------------
PERCENTAGE CHANGE IN
ACCUMULATION UNIT VALUES
SINCE 12/31/94
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
T. ROWE PRICE ASSOCIATES, INC.
Flexibly Managed........................................................ 12.54%
High Yield Bond......................................................... 9.22%
QUEST FOR VALUE ADVISORS
(A SUBSIDIARY OF OPPENHEIMER CAPITAL)
Value Equity............................................................ 22.02%
INDEPENDENCE CAPITAL MANAGEMENT, INC.
Growth Equity........................................................... 12.91%
Money Market............................................................ 2.41%
Quality Bond............................................................ 12.25%
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
----------------------------------------------------
PENN MUTUAL
VARIABLE LIFE ACCOUNT I
--MOMENTUM BUILDER
SEMI-ANNUAL REPORT
JUNE 30, 1995
<PAGE>
- --------------------------------------------------------------------------------
PENN MUTUAL VARIABLE LIFE ACCOUNT I - MOMENTUM BUILDER
STATEMENT OF ASSETS AND LIABILITIES - JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
MONEY MARKET QUALITY BOND
TOTAL FUND FUND
---------- ------------ ------------
<S> <C> <C> <C>
INVESTMENT IN PENN SERIES FUNDS, INC.
Number of shares................................ 350,873 89,663 63,215
Identified cost................................. $3,472,537 $89,663 $638,487
ASSETS:
Investment in Penn Series Funds Inc., at value.. $3,825,954 $89,663 $643,534
Dividends receivable............................ 407 407 0
LIABILITIES:
Due to the Penn Mutual Life Insurance Company... 1,409 3 1,048
---------- ------- --------
NET ASSETS...................................... $3,824,952 $90,067 $642,486
---------- ------- --------
Variable life accumulation units................. 6,194 34,069
------- --------
Accumulation unit values......................... $ 14.54 $ 18.86
------- --------
<CAPTION>
- ----------------------------------------------------------------------------------------
PENN MUTUAL VARIABLE LIFE ACCOUNT I - MOMENTUM BUILDER
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
MONEY MARKET QUALITY BOND
TOTAL FUND FUND
---------- ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends....................................... $ 3,304 $ 3,304 $ 0
EXPENSE:
Mortality and expense risk charges (Note 3)..... 12,110 412 2,041
---------- ------- --------
Net investment income (loss).................... (8,806) 2,892 (2,041)
---------- ------- --------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVEST-
MENTS:
Realized gains (losses) from redemption of
shares of Penn Series Funds, Inc. (Note 2)..... (28,340) 0 322
Net change in unrealized
appreciation/depreciation of investments....... 501,321 0 72,065
---------- ------- --------
Net realized and unrealized gains on invest-
ments.......................................... 472,981 0 72,387
---------- ------- --------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS...................................... $ 464,175 $ 2,892 $ 70,346
---------- ------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH YIELD FLEXIBLY
BOND GROWTH EQUITY VALUE EQUITY MANAGED
FUND FUND FUND FUND
- ---------- ------------- ------------ --------
<S> <C> <C> <C>
43,743 44,638 56,723 52,891
$437,801 $823,459 $692,601 $790,526
$380,568 $925,336 $879,768 $907,085
0 0 0 0
56 88 101 113
-------- -------- -------- --------
$380,512 $925,248 $879,667 $906,972
-------- -------- -------- --------
20,083 56,635 41,088 38,291
-------- -------- -------- --------
$ 18.95 $ 16.34 $ 21.41 $ 23.69
-------- -------- -------- --------
- ---------------------------------------------------------------------------------------------
<CAPTION>
HIGH YIELD FLEXIBLY
BOND GROWTH EQUITY VALUE EQUITY MANAGED
FUND FUND FUND FUND
- ---------- ------------- ------------ --------
<S> <C> <C> <C>
$ 0 $ 0 $ 0 $ 0
1,393 3,064 2,745 2,455
-------- -------- -------- --------
(1,393) (3,064) (2,745) (2,455)
-------- -------- -------- --------
(38,594) 2,682 809 6,441
75,983 109,063 161,085 83,125
-------- -------- -------- --------
37,389 111,745 161,894 89,566
-------- -------- -------- --------
$ 35,996 $108,681 $159,149 $ 87,111
-------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
- --------------------------------------------------------------------------------
PENN MUTUAL VARIABLE LIFE ACCOUNT I - MOMENTUM BUILDER
STATEMENTS OF CHANGES IN NET ASSETS - FOR THE SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED) AND THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
TOTAL MONEY MARKET FUND
---------------------- ----------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS:
Net investment income (loss).................... $ (8,806) $ 117,212 $ 2,892 $ 11,308
Net realized gain (loss) from investment
transactions................................... (28,340) 55,593 0 0
Net change in unrealized
appreciation/depreciation of investments....... 501,321 (316,522) 0 0
---------- ---------- ---------- ----------
Net increase (decrease) in net assets resulting
from operations................................. 464,175 (143,717) 2,892 11,308
---------- ---------- ---------- ----------
VARIABLE LIFE ACTIVITIES:
Cost of insurance............................... (12,713) (28,936) (346) (2,248)
Premium tax charges............................. (4,743) (5,697) (118) (521)
Policy loans.................................... (44,402) (26,546) 0 0
Contract administration charges................. (998) (1,821) (26) (98)
Transfers between funds......................... 0 0 (257,128) (500,231)
Surrender benefits.............................. 0 (144,752) 0 (14,942)
Other transfers and charges..................... (1,067) (3,793) (192) 79
---------- ---------- ---------- ----------
Net increase (decrease) in net assets resulting
from variable life activities................... (63,923) (211,545) (257,810) (517,961)
---------- ---------- ---------- ----------
Total increase (decrease) in net assets.......... 400,252 (355,262) (254,918) (506,653)
NET ASSETS:
Beginning of period............................. 3,424,700 3,779,962 344,985 851,638
---------- ---------- ---------- ----------
END OF PERIOD................................... $3,824,952 $3,424,700 $ 90,067 $ 344,985
---------- ---------- ---------- ----------
<CAPTION>
VALUE EQUITY FUND FLEXIBLY MANAGED FUND
---------------------- ----------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS:
Net investment income (loss).................... $ (2,745) $ 6,037 $ (2,455) $ 5,817
Net realized gain (loss) from investment
transactions................................... 809 13,744 6,441 29,319
Net change in unrealized
appreciation/depreciation of investments....... 161,085 (516) 83,125 (24,453)
---------- ---------- ---------- ----------
Net increase (decrease) in net assets resulting
from operations................................. 159,149 19,265 87,111 10,683
---------- ---------- ---------- ----------
VARIABLE LIFE ACTIVITIES:
Cost of insurance............................... (3,122) (6,409) (2,125) (2,247)
Premium tax charges............................. (1,164) (1,293) (882) (447)
Policy loans.................................... (300) (3,085) (5,024) (23,787)
Contract administration charges................. (139) (277) (138) (288)
Transfers between funds......................... 0 0 547,314 27,292
Surrender benefits.............................. 0 (43,091) 0 (48,767)
Other transfers and charges..................... 205 (1,568) 37 (1,021)
---------- ---------- ---------- ----------
Net increase (decrease) in net assets resulting
from variable life activities................... (4,520) (55,723) 539,182 (49,265)
---------- ---------- ---------- ----------
Total increase (decrease) in net assets.......... 154,629 (36,458) 626,293 (38,582)
NET ASSETS:
Beginning of period............................. 725,038 761,496 280,679 319,261
---------- ---------- ---------- ----------
END OF PERIOD................................... $ 879,667 $ 725,038 $ 906,972 $ 280,679
---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
QUALITY BOND FUND HIGH YIELD BOND FUND GROWTH EQUITY FUND
- --------------------- ------------------------- -----------------------
1995 1994 1995 1994 1995 1994
- --------- --------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
$ (2,041) $ 32,783 $ (1,393) $ 61,103 $ (3,064) $ 164
322 (2,478) (38,594) (379) 2,682 15,387
72,065 (73,066) 75,983 (115,805) 109,063 (102,682)
- --------- --------- ---------- ---------- -------- ----------
70,346 (42,761) 35,996 (55,081) 108,681 (87,131)
- --------- --------- ---------- ---------- -------- ----------
(1,754) (3,599) (1,290) (4,189) (4,076) $ (10,244)
(747) (844) (452) (918) (1,380) (1,674)
0 (2,846) (26) 3,172 (39,052) 0
(67) (145) (80) (145) (548) (868)
0 472,939 (290,186) 0 0 0
0 0 0 0 0 (37,952)
(961) (5) 22 38 (178) (1,316)
- --------- --------- ---------- ---------- -------- ----------
(3,529) 465,500 (292,012) (2,042) (45,234) (52,054)
- --------- --------- ---------- ---------- -------- ----------
66,817 422,739 (256,016) (57,123) 63,447 (139,185)
575,669 152,930 636,528 693,651 861,801 1,000,986
- --------- --------- ---------- ---------- -------- ----------
$ 642,486 $ 575,669 $ 380,512 $ 636,528 $925,248 $ 861,801
- --------- --------- ---------- ---------- -------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
- -------------------------------------------------------------------------------
PENN MUTUAL VARIABLE LIFE ACCOUNT I - MOMENTUM BUILDER
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1995
- -------------------------------------------------------------------------------
NOTE 1.
The significant accounting policies of Penn Mutual Variable Life Account
I--Momentum Builder sub-accounts (Momentum Builder) are as follows:
GENERAL - Momentum Builder was established by The Penn Mutual Life
Insurance Company (Penn Mutual) under the provisions of the Pennsylvania
Insurance Law. Penn Mutual has structured Momentum Builder as a unit
investment trust registered under the Investment Company Act of 1940.
Momentum Builder offers units to variable life contractholders to provide
for the accumulation of value and for the payment of death benefits.
INVESTMENTS - Assets of Momentum Builder are invested in shares of the
Money Market, Quality Bond, High Yield Bond, Growth Equity, Value Equity
and Flexibly Managed Funds of Penn Series Funds, Inc. (Penn Series).
- -------------------------------------------------------------------------------
NOTE 2.
For the six months ended June 30, 1995 and the year ended December 31,
1994, transactions of Momentum Builder in shares of Penn Series were as
follows:
<TABLE>
<CAPTION>
HIGH YIELD
MONEY MARKET FUND QUALITY BOND FUND BOND FUND
------------------ ------------------ -----------------
1995 1994 1995 1994 1995 1994
-------- -------- -------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased........ 28,240 27,088 0 48,597 0 339
Shares received from
reinvestment of:
Net investment income.. 3,404 13,411 0 4,031 0 8,244
Capital gains
distribution.......... 0 0 0 0 0 0
-------- -------- ------- --------- -------- -------
Total shares acquired... 31,644 40,499 0 52,628 0 8,583
Shares redeemed......... (285,503) (547,691) (468) (3,954) (36,429) (1,050)
-------- -------- ------- --------- -------- -------
Net increase (decrease)
in shares owned........ (253,859) (507,192) (468) 48,674 (36,429) 7,533
Shares owned beginning
of year................ 343,522 850,714 63,683 15,009 80,172 72,639
-------- -------- ------- --------- -------- -------
Shares owned end of
year................... 89,663 343,522 63,215 63,683 43,743 80,172
-------- -------- ------- --------- -------- -------
Cost of shares acquired. $ 31,644 $ 40,499 $ 0 $ 536,505 $ 0 $68,777
-------- -------- ------- --------- -------- -------
Proceeds from shares
redeemed............... $285,503 $547,691 $ 4,549 $ 38,206 $293,387 $ 9,730
-------- -------- ------- --------- -------- -------
</TABLE>
The cost of shares redeemed is determined on a last-in, first-out basis.
- -------------------------------------------------------------------------------
NOTE 3.
Operations are charged for mortality and expense risks assumed by Penn
Mutual as determined daily at an annual rate of 0.65% of the average value
of Momentum Builder. No investment expenses are charged to Momentum
Builder. Each month on the date specified in the
6
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTE 1., CONT'D.
Penn Series is a no-load, open-end diversified investment company. The
shares are carried at market value as determined by the underlying net
asset value of the respective Funds. Dividend income is recorded on the ex-
dividend date. Investment transactions are accounted for on a trade date
basis.
FEDERAL INCOME TAXES - Under current law, no federal income taxes are
imposed on income or gains from investments held in Momentum Builder.
RELATED PARTY TRANSACTION - As of June 30, 1995, Penn Mutual owns 2,000
units of each sub-account at a cost of $120,000 and market value of
$227,580 in the aggregate.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH EQUITY FUND VALUE EQUITY FUND FLEXIBLY MANAGED FUND
- --------------------- ---------------------- --------------------------
1995 1994 1995 1994 1995 1994
- --------- --------- -------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
0 24 0 0 42,845 1,628
0 331 0 863 0 510
0 986 0 811 0 801
- --------- --------- -------- --------- ----------- ----------
0 1,341 0 1,674 42,845 2,939
(2,458) (3,102) (504) (4,507) (8,433) (4,797)
- --------- --------- -------- --------- ----------- ----------
(2,458) (1,761) (504) (2,833) 34,412 (1,858)
47,096 48,857 57,227 60,060 18,479 20,337
- --------- --------- -------- --------- ----------- ----------
44,638 47,096 56,723 57,227 52,891 18,479
- --------- --------- -------- --------- ----------- ----------
$ 0 $ 24,545 $ 0 $ 21,208 $ 674,265 $ 46,715
- --------- --------- -------- --------- ----------- ----------
$ 48,261 $ 58,421 $ 7,197 $ 60,644 $ 137,440 $ 78,002
- --------- --------- -------- --------- ----------- ----------
</TABLE>
- -------------------------------------------------------------------------------
NOTE 3., CONT'D.
Contract (and on the date the Contract Value is withdrawn in full if other
than the date specified), a $4 contract administration charge, or a lesser
amount as required under state insurance laws, is deducted from the
Contract Value.
A copy of the June 30, 1995 semi-annual report of Penn Series accompanies
this report.
7
