<PAGE>
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, Pa 19103
(215) 963-5000
November 20, 1997
Via EDGAR
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Filing Room
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Re: Penn Mutual Variable Life Account I
File Nos. 33-54662 and 33-87276
-------------------------------
Ladies and Gentlemen:
On behalf of The Penn Mutual Life Insurance Company (the "Company") and Penn
Mutual Variable Life Account I (the "Account"), we present herewith for filing
pursuant to Rule 30b2-1 under the Investment Company Act of 1940, as amended,
copies of the Semi-Annual Reports to contract owners of the Account for the six
months ended June 30, 1997.
Although the attached Semi-Annual Reports were timely mailed to contract owners
in August, we recently learned that filing of the Reports with the Securities
and Exchange Commission was overlooked. We have discussed this with the
Company's management and have been assured that this will not happen again.
If you have any questions regarding this filing, please do not hesitate to
call the undersigned at (215) 963-5913.
Very truly yours,
/s/ C. Ronald Rubley
CRR/ll
Enclosures
cc: Lee Anderson
Harry McWilliams
Richard W. Grant, Esq.
Edward J. Meehan, Jr.
<PAGE>
Penn
[Logo] Mutual(TM)
A better way of life
-----------------------------------
S E M I -A N N U A L R E P O R T
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June 30, 1997
CORNERSTONE
V U L
Penn Series Funds, Inc.
Investment Advisers:
T. Rowe Price Associates, Inc.
OpCap Advisors
Independence Capital Management, Inc.
Vontobel USA Inc.
Robertson Stephens Investment Management, Inc.
American Century Variable Portfolios, Inc.
Investment Adviser:
American Century Investment Management, Inc.
Neuberger & Berman
Advisers Management Trust
Investment Adviser:
Neuberger & Berman Management Incorporated
Fidelity Investments'
Variable Insurance Products Fund
Variable Insurance Products Fund II
Investment Adviser:
Fidelity Management & Research Company
Morgan Stanley Universal Funds, Inc.
Investment Adviser:
Morgan Stanley Asset Management
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TO OUR VARIABLE LIFE INSURANCE CONTRACTHOLDERS:
I am delighted to present the Semi-Annual Reports of Penn Series Funds, Inc.,
Neuberger & Berman Advisers Management Trust, American Century Variable
Portfolios, Inc., Fidelity Investments Variable Insurance Products Fund and
Variable Insurance Products Fund II, and Morgan Stanley Universal Funds, Inc.
for the six month period ending June 30, 1997.
The first 6 months of 1997 were not too much different from what we've been
seeing in the equity markets for the previous 2 years--lots of volatility, but
with a dramatic move upward.
As of June 30, the market as measured by the S&P 500 was up 20.59%, and the
Russell 2000, a measure of small cap stock performance was up 9.31%.
But this bull market trend was interrupted by a near 10% correction amid
fears of continued increases in interest rates by the Federal Reserve to cool
an economy that seemed overheated. However, as the second quarter progressed,
economic reports signaled a slow down from the first quarter's rapid pace, and
inflation remained in check. Corporate earnings were up over 10% and the market
took off once again, rising more than 20% in May and June.
So at this point the "pillars" of the stock market are very solid--benign
inflation and interest and strong corporate earnings. The $64,000 question of
course is, "With the Dow above 8000 and price-earnings ratios above 20, is the
market valuing all of this good news too highly?"
As we've discussed before, if you are a long term investor, try not to be too
influenced with the short term twists and turns of the stock market. Rather,
working with your financial planner, apply solid risk reduction techniques such
as diversification and regular rebalancing of your portfolio to meet your long
term needs.
Penn Mutual's variable products now offer more diversification possibilities
than ever before with 4 new additions to our family of funds:
ICMI/Robertson Stephens Emerging Growth Fund
Morgan Stanley Emerging Markets Equity (Int'l) Portfolio
Neuberger & Berman AMT Partners Portfolio
Fidelity Investments VIP II Index 500 Portfolio
Your CORNERSTONE VUL policy is designed to help you maintain a steady, long-
term approach to investing. It brings the experience and expertise of various
investment advisers to help you build a financial plan that best suits your
individual needs. And we encourage you to work with your financial planner to
take full advantage your policy's features and investment choices.
Percentage changes in accumulation unit values of each of the variable
accounts offered under CORNERSTONE VUL for the six month period ending June 30,
1996 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
1-800-523-0650, or contact your sales representative directly.
Sincerely,
/s/ Richard F. Plush
Richard F. Plush
Vice President, Products & Programs
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PERCENTAGE CHANGE IN
ACCUMULATION UNIT VALUES
SINCE 12/31/96
<TABLE>
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<S> <C>
OPCAP ADVISORS
Value Equity......................................................... 13.24%
Small Capitalization................................................. 14.90%
VONTOBEL USA, INC.
International Equity................................................. 11.76%
INDEPENDENCE CAPITAL MANAGEMENT, INC.
Growth Equity........................................................ 15.51%
Money Market......................................................... 2.11%
Quality Bond......................................................... 2.22%
ICMI/ROBERTSON STEPHENS
Emerging Growth...................................................... 22.45%*
T. ROWE PRICE ASSOCIATES, INC.
Flexibly Managed..................................................... 8.08%
High Yield Bond...................................................... 7.34%
NEUBERGER & BERMAN MANAGEMENT, INC.
AMT Balanced......................................................... 10.85%
AMT Limited Maturity Bond............................................ 2.58%
AMT Partners......................................................... 10.25%*
AMERICAN CENTURY
VP Capital Appreciation.............................................. -3.82%
FIDELITY INVESTMENTS
VIP Growth........................................................... 13.41%
VIP Equity Income.................................................... 15.96%
VIP II Asset Manager................................................. 10.79%
VIP II Index 500..................................................... 10.96%*
MORGAN STANLEY ASSET MANAGEMENT
Emerging Markets Equity (Int'l)...................................... 10.75%*
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</TABLE>
* For the period beginning 5/1/97
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PENN SERIES FUNDS, INC.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
QUALITY BOND FUND
Interest rates reversed course in the second quarter, falling 35-40 basis
points and retracting much of the upward surge in rates experienced in the
first three months of 1997. A sharp deceleration in economic growth led by a
drop-off in consumer spending, coupled with surprisingly low inflation data has
reduced anxieties about further Federal Reserve rate hikes and led to bond
market improvement.
The estimates for second quarter growth range from 1-2%, a dramatic decline
from the 5.8% growth in the first quarter. Consumer spending has inexplicably
changed course, dropping off just as most market observers had assumed
continued growth. Conventional wisdom has it that consumer spending will
rebound due to 1) strong labor market with low unemployment, 2) high consumer
confidence 3) firm income levels and finally 4) rising wealth levels arising
from a soaring stock market. A firm rebound in domestic consumption will in all
likelihood lead to an initial sell-off in the bond market as most market
participants will look for renewed inflationary pressures and further monetary
tightening.
The greatest surprise for this economic cycle has been the absence of inflation
pressures. In fact, the producer price index posted its fifth straight monthly
decline in May, a feat not seen since 1952. It is this development that has
stayed the hand of the Federal Reserve this cycle and allowed this economic
cycle (which began in March, 1991), to persist well beyond the post war average
of 4.5 years.
This low level of inflation also creates an environment where bond yields are
very attractive whenever they reach or approach 7%. With inflation at 2-3%,
real yields of 4-5% are extremely high by historical standards. Indeed, bond
returns have been historically very good when bonds are purchased with 5% real
yields. The second quarter offered another opportunity to purchase bonds with
high real yields which we took advantage of.
Another key consideration in addressing the outlook for the domestic bond
market is the forecasts for economic growth overseas. In this economic cycle
the foreign economies, notably Japan, have been severely hampered by structural
problems. In Japan, the problems are rooted in a difficult banking environment,
itself a hangover from the excesses of the 1980's. Monetary policy in Japan,
the number two economy in the world, has been dramatically accommodative. Short
term rates have been driven down to 0.5%. In Europe, the effort to create a
unified currency has led to severely restrictive fiscal policies, slowing their
economies and resulting in highly stimulative monetary policies as well.
This weakness in the major foreign economies has reduced inflationary
pressures and created liquidity that in many cases has been invested here in
the US. A reversal in these highly accommodative monetary policies should have
significant implications to our fixed income markets. We do not see changes
occurring in the near future.
Currently, our position is long relative to our benchmark. We extended the
portfolio as rates moved above 7% in the long bond. In addition, we moved more
aggressively into corporate bonds as spreads widened in March and April.
Performance for the quarter was fair as the net result of +3.64% for the
Quality Bond Fund exceeded the Salomon Brothers Broad Investment Grade Index of
3.60%. Note that beginning in the second quarter our benchmark measurement
index changed to the Salomon Index vs the Lipper Bond averages. Year to date
figures are misleading due to differences in duration requirements between the
Salomon Index and the Lipper averages.
INDEPENDENCE CAPITAL MANAGEMENT, INC.
INVESTMENT ADVISER
1
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PENN SERIES FUNDS, INC.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
HIGH YIELD BOND FUND
The stars were aligned for the high-yield bond market during the past six
months. Virtually all the principal influences on this market were positive if
not exuberant, especially the U.S. economy and the market's own fundamentals.
The rise in interest rates that dampened returns on high-quality bonds in the
first quarter was not a problem for the credit-sensitive, high-yield market. As
a result, high-yield bonds significantly outperformed high-quality bonds for
the six months ended June 30.
MARKET ENVIRONMENT
Many of the same factors that drove stocks higher fueled the rise in high-yield
(junk) bond prices. Topping this list were the continued and largely unexpected
strength in corporate earnings and the economy's 5.8% annualized growth rate in
the first quarter--roughly double the trend rate since the current upturn began
in 1991. In an attempt to cool this pace and preempt a rise in inflation, the
Federal Reserve raised the federal funds rate (from 5 1/4% to 5 1/2%) for the
first time since 1995, and interest rates rose across the yield curve. However,
stocks and high-yield bonds, which typically are driven by economic growth and
corporate earnings expectations, recovered quickly and forged ahead.
High-yield bonds also benefited from extremely strong demand relative to the
supply of issues. Cash flow into retail high-yield mutual funds was heavy; the
number of institutional investors allocating assets to this market sector
continued to rise; and structured securities called collateralized bond
obligations (CBOs) absorbed billions of dollars worth of high-yield bonds. On
the supply side, new issues appeared at a steady clip, particularly from
smaller companies. Nevertheless, many potential high-yield bond issuers have
elected to refinance existing bonds through a growing number of attractive
alternatives--commercial banks, for example, are returning to this arena--and
this has constrained the opportunities for high-yield bond investors.
PERFORMANCE AND STRATEGY REVIEW
Your fund provided solid returns for the six-month period, with capital
appreciation augmenting income.
We continued our even-keel approach to managing the fund, attempting to
balance the advantages of higher yields and appreciation opportunities against
additional risk. Toward this end, we maintained a strong focus on B-rated
issues. We like the pickup in yield these bonds provide without undue exposure
to interest rate and credit risk. As always, we draw heavily on our in-house
research expertise to help us assess each issue's risk and reward potential.
Allocations remain widely diversified among industry sectors to limit potential
problems from any single area. The only change of note during the six-month
period was a reduction in the strongly performing energy area, reflecting
profit-taking in these investments.
OUTLOOK
Six months ago we sounded a note of caution in looking over the high-yield
landscape. While we anticipated solid returns if the economy continued to grow,
we worried about the high valuations in our market--a concern shared by many
investors about stocks--and also about a possible rise in defaults in the wake
of the large number of new offerings. So far, the default rate has been
declining, and if the year-to-date trend continues, 1997 could have the lowest
such rate in three years. The high-yield market has hardly missed a beat,
principally because of the economy's amazing momentum. We said last winter we
would be happy to be surprised on the upside, and we are happy.
We see nothing on the immediate horizon that might bring this bull market to
a halt. Unless the Fed makes a serious miscalculation, we would expect a
continuation of moderate inflation and a return to moderate growth--a good
environment for all debt securities. Closer to home, we believe the high-yield
market may be more resilient than in the past, when it was less diverse and
problems with one or two high-profile issuers could have a large impact. At the
same time, we know that today's narrow yield spreads among bonds of different
credit quality will eventually correct, and that defaults will rise when and if
the economy slows significantly. We would emphasize equally that our near-term
outlook is positive, and we would expect high-yield bonds to remain rewarding
over the long term.
T. ROWE PRICE ASSOCIATES, INC.
INVESTMENT ADVISER
2
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GROWTH EQUITY FUND
Perhaps it was William Penn who coined the adage "April showers bring May
flowers", but no other five words could better describe the stock market
behavior this year. The new year brought it surprisingly strong earnings and an
early burst of enthusiasm, but by late March and the first part of April
investors found the climate dreary and depressing with no expectation that the
stock market would soon bottom and begin a recovery into record territory. At
the bottom few market pundits had words of encouragement. The bears were almost
gleeful, having warned that a downturn was justifiable, necessary, and long
overdue. Many bulls turned cautious, pulling in their horns and looking a bit
sheepish. Thus were the seeds of the market's dramatic advance sown.
The second half of April and early May brought light and nourishment to the
stock market. The light was economic news that showed a non-inflationary
expansion and the nourishment was provided by the long list of better-than-
expected earnings reports. With the bond market firming and turning higher, the
Fed choosing to keep rates unchanged in May, and inflows of cash to mutual
funds continuing at a solid clip, there were no significant impairments to the
stock market's recovery. By the end of June the rally had carried the stock
market over 20% from its lows.
The Growth Equity Fund advanced 15.94% in the first half of 1997 which
compares with the 15.40% return for the Lipper Growth Index, the 14.28% return
for the overall Lipper Growth Fund average and the S&P 500's return of 20.54%.
For the twelve month period ended June 30 the Growth Equity Fund earned a
return of 27.56%. This return is better than both the 25.54% return of the
Lipper Growth Index and the 23.96% earned by the average growth fund in the
broad Lipper universe, but trailed the S&P 500's gain of 34.72%.
The Fund's first half improvement came primarily from strength in the
Healthcare (+31.9%), Financial (+20.5%) , and Capital Goods (+19.4%) sectors,
but only Healthcare actually outperformed the S&P 500 Stock Index. Relative
performance was negatively impacted by the underperformance of the Utility
(+17.9%), Consumer Staples (+16.3%), Basic Material (+16.7%), Technology
(+12.5%), Consumer Cyclicals (+5.5%), and Energy (+3.7%) sectors.
Transportation (+16.6%) was only nominally represented in the portfolio.
INDEPENDENCE CAPITAL MANAGEMENT, INC.
INVESTMENT ADVISER
VALUE EQUITY FUND
The fund's value approach is to provide superior investment returns with below-
average risk. We seek investments in businesses that generate high returns on
invested capital, run by managements who seek to maximize those returns and
create wealth for shareholders: through reinvestment in high-return business
opportunities, through astute acquisitions, and through share repurchase. Those
high returns must be sustainable, which is only achievable in companies with
very strong competitive advantages. A major goal of our in-depth primary
research is to assess these advantages and the industrial strengths upon which
they depend. Our long-term perspective is a tremendous advantage in identifying
these situations and in buying them opportunistically in a marketplace which is
often driven by transitory considerations. The right price is very important in
that we believe that it should encompass only a moderate degree of risk
relative to upside potential, in our best judgment.
The US stock market keeps rising relentlessly, confounding the skeptics. As
measured by the total return of the S&P 500, the market has now advanced 104%
in the 30 months since year-end 1994, equaling its steepest ascent in history.
What would have been considered miraculous only a few years ago, low
unemployment with low inflation; has become recurring economic reality. In May,
the jobless rate fell to 4.8%, the lowest in 24 years. Defying standard
economic theory, which says that light job markets lead to inflation, the
consumer price index subsided also, rising only 2.2% from a year earlier. When
one stands back from the usual gyrations in short-term economic data, there are
few signs of disruption to this favorable economic environment. If we were to
worry, it would be about tightening labor markets. Rising wage rates could
boost inflation somewhat, but we believe that a protracted problem with
inflation can be caused only by too-rapid growth of the money supply, which we
do not see at this time.
The international economic environment is favorable as well. Inflation is low
virtually worldwide, and the disciplined approach of governments and central
banks to money supply and deficits suggests inflation will remain in check. The
changing dynamics of foreign pension plans are another interesting (and
bullish) investment ingredient. Many foreign countries have demographic
profiles similar to the US: rapid growth in the number of impending retirees,
but much slower growth in the labor force that must provide for them. In
contrast to the US, however, most foreign pension plans are unfunded. Instead
of having money already set aside and invested, these plans operate on a pay-
as-you-go basis. As foreign governments and corporations attempt to fund their
obligations, demand for equities could increase significantly. According to a
report by Goldman Sachs, $1.8 trillion of additional pension money is forecast
to be invested into worldwide equities by 2000.
3
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PENN SERIES FUNDS, INC.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
VALUE EQUITY FUND (CONT'D)
Generally, the stock market keys off of economic news, but recently the
market is the news. According to some reports, if the Federal Reserve raises
rates, an important reason will be concern about excessive speculation in the
stock market rather than about ordinary economic trends. But what is actually
happening in the stock market? Let's take a look.
Most observers of the financial markets draw distinctions among the Nasdaq
Composite index of over-the-counter stocks, the NYSE Composite, the Dow Jones
Industrials, the S&P 400 and 500, and various international market indices,
among others. If pressed to point to a single index that measures "the market"
best, most would probably select the S&P 500. Few know how heavily the S&P 500
is influenced by a small group of very large-capitalization stocks and,
therefore, how much the performance of the S&P 500 deviates from that of the
average large-cap portfolio, unless that portfolio contains disproportionate
positions in Microsoft, Intel, General Electric and a few others.
The effect of these super-large stocks can be seen in comparing the S&P 500,
which is capitalization weighted and on which, therefore, large stocks have
much more influence than smaller stocks, with an unweighted index of those same
500 stocks (each stock having equal influence). According to The Leuthold
Group, the S&P 500 outperformed an equally weighted index of the same 500
stocks by 5.9 percentage points in 1995, by 3.3 percentage points in 1996 and
by 3.6 percentage points from the beginning of this year through June 18. That
disparity occurred because the large capitalization stocks outperformed the
other stocks in the index by a wide margin. We believe large stocks have
benefited from the torrent of money flowing into mutual funds. The easiest way
for the funds to put these cash inflows to work is by purchasing the largest,
most liquid stocks. Also, the unusual length of the bull market has made
"momentum" investing (what goes up will continue to go up) more popular,
further lifting this same group of very large-cap stocks to high multiples. No
wonder so few portfolio managers have been performing as well as "the market"
recently.
Does the recent dominance of the largest stocks mean we should push our
portfolios into them, or that investors should just give up and buy the S&P 500
index? Our answer won't surprise you: no. Let's look at longer periods of time,
again using data from The Leuthold Group: During the 1960s, an equally weighted
version of the S&P 500 outperformed the capitalization weighted S&P 500 by 4.8
percentage points per year. In the 1970s, the equally weighted index
outperformed by 4.0 percentage points per year. In the 1980s, equally weighted
won again, by 1.4 percentage points per year. The equally weighted 500 stocks
continued to outperform from 1990 through 1994, beating the capitalization
weighted S&P 500 by 2.1 percentage points per year.
CONCLUSION
The most recent two-and-a-half years of outperformance by the very largest
components of the S&P 500 have been the exception, not the rule. In contrast to
momentum investors who subscribe to the premise that what goes up will continue
to go up, we believe that what goes up too much will eventually come back down.
Given the high valuations of many very large capitalization S&P 500 stocks at
this time, we think it's unlikely the capitalization weighted index will
continue to perform better than more balanced portfolios for much longer. It
follows, in our opinion, that now is an especially inopportune time to "index."
We continue to invest in businesses that are worth inherently more, in our
judgement, than their asking prices. Looked at another way, we hope to preserve
our clients' capital in all market conditions, including market corrections,
because we have maintained our value-price discipline and because the
businesses in which we invest tend to generate excess cash, which becomes more
valuable in difficult markets.
In general, we find the stock market to be fully valued at this time.
However, we are not market timers and do not have an opinion as to whether the
S&P 500 will be higher or lower a month from now than it is today. We buy
individual stocks, not the market. Using our above-average cash reserves, we
will be opportunistic in buying stocks we like whenever we can get them at
favorable prices.
OPCAP ADVISORS
INVESTMENT ADVISER
4
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FLEXIBLY MANAGED FUND
Financial markets and most subsectors were almost universally strong in the
first half of 1997. Equity markets completed their ninth and tenth consecutive
positive quarters. This hasn't happened in 40 years. Persistently low levels of
inflation and a strong (but not too strong), economy were the key positives.
The Federal Reserve modestly raised interest rates, but this only dampened
enthusiasm temporarily. Meanwhile, the potential vertigo inherent in today's
historically high equity valuations remains largely ignored.
We were not well-positioned for the market's broad trends. First of all, by
design, we attempt to hold down our risk and currently are only about half
invested in common stocks. Our other investments provided solid gains, but not
when compared with equities. Second, we hold only minor positions in the large
growth companies that dominate the S&P 500. The frenzy that has driven up
prices for these securities may or may not be justified, but the resulting high
valuations seem inappropriate for a risk-averse fund. Third, we have large
exposure to electric utility and energy sector companies, groups that
significantly lagged. Fortunately, a series of individual security successes
provided respectable returns.
PORTFOLIO HIGHLIGHTS
The media group, a long-time portfolio focus, and particularly NEW YORK TIMES
and WASHINGTON POST, continued to generate outstanding gains in the first half.
We have been modestly trimming these holdings while maintaining industry
exposure with purchases of TIME WARNER convertible bonds. We swapped portions
of our HOMESTAKE MINING and NEWMONT MINING holdings for an expanded position in
SANTA FE PACIFIC GOLD. This company was then merged into Newmont, re-
establishing a larger but cheaper position in that stock. Unfortunately, the
substantial weakness in gold mining generally left us with an insignificant
loss rather than the gains we might normally have realized with such a
successful series of interrelated trades. We initiated a 1% holding in
WHEELABRATOR TECHNOLOGIES, now the object of a takeover. We continued to add to
our AMERADA HESS and UNION TEXAS PETROLEUM holdings. Finally, we saw through to
completion the merger/sale of PHH, one of our stellar long-term holdings. We
are now attempting to maximize the value of numerous PHH hedging transactions.
OUTLOOK
Stock market cycles, economic cycles, and credit cycles always seem similar,
but only when viewed through the rear window of history. We expect fairly
strong economic growth to continue and with inflation seemingly subdued, it
appears some time will elapse before the next move in Federal Reserve policy.
Nevertheless, when that action does come, we anticipate it will be another
incremental increase in interest rates. As for the stock market, we have not a
shadow of a doubt that it is overvalued and will decline, but we don't know
when or from what level.
T. ROWE PRICE ASSOCIATES, INC.
INVESTMENT ADVISER
5
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PENN SERIES FUNDS, INC.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
INTERNATIONAL EQUITY FUND
Falling interest rates, strengthening balance sheets and a change in the
attitude of corporate management toward shareholders were some of the factors
that helped to spur strong returns in Europe and Latin America during the
second quarter. Asian markets continued their falling trend due to structural
issues like currency risk, interest rate pressure, falling levels of corporate
profitability, and weakening export demand from Europe and Japan. Overall, this
did not affect the fund's performance since we had already reduced most of our
exposure to the peripheral Asian markets.
EUROPE
The major continental European markets are close to being fully valued after a
double-digit run-up in equity prices year to date, e.g., France +23%, Germany
+29%, Switzerland +44%, the Netherlands +35% (in local currency terms). The
region's long string of double-digit returns over the last 18 months is reason
enough to become prudent (although their outperformance doesn't mean they won't
continue to rise!). Based on still falling bond and earnings yields, 8 out of
14 European markets still have the potential to produce returns in the low
teens over the next 12 months.
Still, prevailing corporate sentiment indicates a lack of confidence in a
sustained economic recovery. At the time of the US dollar collapse in 1994-95
European corporations went on a capital investment spending spree. The
resulting imbalance between output and demand has left them cautious, and
inventories are at an unusually low level for this stage in the economic cycle.
So far, corporate Europe has taken the easy road to restructuring, of the sort
that can be achieved through plant closings and employee layoffs. It needs to
do more. The focus should now shift toward more efficient management of the
capital base, including share buybacks, and development of new products. Faced
with the challenges created by falling tariffs and deregulation around the
globe, European corporations can no longer afford to automatically reinvest
retained earnings as they compete with companies in emerging markets with cheap
source of inputs. Nor is domestic leadership a guarantee of survival--European
firms need to create strong global market share and globally recognized brands.
As a result, merger and acquisition activity in Europe, propelled by the need
to grow market share, will remain strong. Some of our current portfolio
holdings that are particularly well positioned to meet these global challenges
include retailer Carrefour and insurer Axa in France, carmaker BMW in Germany,
and publishing giant Elsevier in the Netherlands.
Despite less compelling valuations in Europe than a year ago, we are still
finding enough good, attractively priced companies in which to invest and, for
now, are maintaining our current regional allocation of about 57%. We started
to raise cash in the second quarter by taking profits in France and Germany,
where we now have a combined 14% weighting.
In the UK corporate profits are strong while stock market sentiment is weak,
a good combination for keeping close to a full market weight. The Labor Party's
election win after 18 years of Tory rule should not impact the UK's success in
attracting global capital due to its highly skilled labor force and well-
regulated business environment. The economy hasn't looked this rosy since the
1980's, as reflected by the strength of the sterling and the potential need to
curb the pace of economic growth through further interest rate hikes.
As we've stated repeatedly, a country's economic environment is less
important in our market analysis than the level of market liquidity and the
existence of companies with solid fundamentals. This is reflected in our
overweight positions in three of the best-performing markets in Europe year to
date; Switzerland, the Netherlands and Sweden, where we have a combined
weighting of 20% vs. the MSCI EAFE at 14%.
JAPAN
The Japanese economy is showing growth of around 1% of 1997 after four years of
recession. Due to corporate restructuring, cost controls and sales growth, the
operating environment for large- and mid-size corporations in the manufacturing
sector is generating large amounts of cash flow. For most companies we own,
free cash flow is increasing at about 40% relative to the last peak prior to
the 1989 bubble. Valuation ratios in the Japanese market are still giving mixed
signals: PCF 10X, PB 2.2X and PE 42X (ex-financials and utilities). Earnings,
however, continue to be strong and over the next 12 months should grow by about
38% for the Topix Index. Our allocation to this market has increased to 27%, v.
22% at year end.
CURRENCIES
The US dollar remained extremely strong against the major European currencies
with the exception of the pound sterling, the fund benefitted from our unhedged
position in the latter. We maintained hedges on the German mark, French franc
and Swiss franc. Our hedge against the yen worked against us in view of the
yen's strong appreciation during the quarter.
VONTOBEL, USA
INVESTMENT ADVISER
6
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SMALL CAPITALIZATION FUND
Although small-cap stocks as a class have now underperformed large-cap stocks
for three years, we continue to deliver positive returns, equaling or exceeding
our benchmark, the Russell 2000, in the 1997 second quarter and first half. We
achieved these results by being disciplined in our approach of buying
reasonably valued companies based on their business fundamentals. Our long-term
perspective is a tremendous advantage in identifying undervalued businesses and
buying them opportunistically in a marketplace which is driven by transitory
considerations. The right price is very important in that we believe it should
encompass only a moderate degree of risk relative to upside potential. Our
largest positions include Magellan Health Services, the largest provider of
managed-care behavioral health services; Wang Laboratories, a systems
integration and computer maintenance firm; St. Mary Land & Exploration, an
exploration and production company; E. W. Blanch Holdings, and insurance
broker; and A. Schulman, which produces plastics and resins.
Magellan Health exemplifies the qualities we look for in an investment,
including high returns on invested capital, a leading competitive position to
help protect those returns, significant free cash flow which is being used to
create shareholder value and a management team oriented toward shareholder
interests--and, on top of that, a reasonable valuation. We began accumulating
Magellan in November 1995 at an average price in the high teens. More recently,
Magellan sold its brick-and-mortar hospitals business, realizing about $400
million of cash, which it is using to make acquisitions that complement its
managed care business. Magellan is now focused solely on providing managed-care
mental health programs for corporations and government agencies. It is the
leader in this field, which offers excellent prospects for revenue and earnings
growth. At a recent price of $30 a share, or about 15 times anticipated fiscal
1998 earnings, and with its strong cash flow and favorable growth
characteristics, we still consider the stock to be reasonably valued.
OPCAP ADVISORS
INVESTMENT ADVISER
EMERGING GROWTH FUND
We are pleased to have the opportunity to report on our progress as manager of
the ICMI/Robertson Stephens Emerging Growth portfolio. Commencing the portfolio
on 5/1/97, our two-month performance was aided by a strong rally in small-cap
stocks that began in May. From May 1, 1997, through June 30, 1997, the
subaccount was up 22.60% versus an increase of 17.67% in the Russell 2000
Growth index.
While our investment process is bottom up, driven by stock selection,
portfolio positions tended to be overweighted in several Russell sectors. The
portfolio was overweighted in Technology and Consumer Discretionary Services,
and underweighted in the Health Care sector as measured by Frank Russell.
Also of note was the announcement that Robertson Stephens agreed to be
acquired by BankAmerica, subject to regulatory approvals. If approval is
achieved, we expect the transaction to close in the fourth quarter of 1997. We
are extremely excited about becoming part of the BankAmerica organization. They
will enable us to maintain the unique culture that has made us successful in
the last 18 years, while also affording us access to expanded capital and
resources that will enable us to grow our investment management franchise into
the next decade.
In managing the portfolio, the management team is looking for emerging growth
companies that are growing revenues and earnings by a minimum of 20% annually.
These companies come from traditional growth sectors and industries, and also
come from newer "emerging" industries. These emerging industries develop
quickly around new technologies and market opportunities. We believe our
emerging growth research team provides us a competitive advantage in
identifying and understanding these industries and companies before may of our
competitors on Wall Street.
One such emerging sector we have identified is Information Technology
Education. An opportunity has developed for companies to provide training and
education in a wide range of software programs. In the past many companies
would maintain an IT training capability in house. However, today many
companies now look to hire an information technology provider to train their
employees on an as needed basis. We own a number of companies that provide this
capability including Strayer Education and Education Management Corp.
A resurgence in the Lodging industry has created an improved operating
environment for established and new players in the sector. We are attracted to
several companies in this sector, including Four Seasons Hotel Corporation.
Four Seasons operates hotels at the highest end of the luxury segment where
there is little competition and a finite supply of rooms. This gives Four
Seasons strong pricing power. Room rates in many of their properties have risen
throughout the year, helping to improve profitability.
In conclusion, we are pleased to manage a portfolio in the exciting area of
emerging growth companies. We look forward to our continued dialogue with Penn
Mutual and your clients.
ROBERTSON STEPHENS INVESTMENT MANAGEMENT
INVESTMENT ADVISER
7
<PAGE>
- ----------------------------------------------------
THIS PAGE LEFT INTENTIONALLY BLANK
8
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED)
THE MONEY MARKET FUND
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------- ------ -----------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER (37.2%)
- ------------------------
FINANCIAL SERVICES (12.8%)
American Honda 5.65% ..................... 07/24/97 A-2/P-1 $ 731 $ 728,361
Countrywide Funding Corporation 5.61% .... 07/10/97 A-2/P-1 570 569,201
Ford Motor Credit 5.52%................... 07/07/97 A-2/P-1 1,000 999,080
General Electric Credit Group 5.55% ...... 08/21/97 A-1/P-1 500 496,069
General Electric Capital Corp. 5.60% ..... 09/02/97 A-1/P-1 650 643,630
Merrill Lynch & Co. Inc. 5.60% ........... 08/19/97 A-1/P-1 1,500 1,488,567
-----------
4,924,908
-----------
MISCELLANEOUS (15.4%)
Dekalb County for Emory University 5.75%.. 08/05/97 NR 1,500 1,500,000
American Home 5.59%....................... 07/28/97 NR 1,500 1,493,711
General Motors Acceptance Corp. 5.80%..... 01/06/98 A-1/P-1 1,500 1,454,325
John Deere, Inc. 5.56%.................... 08/20/97 A-1/P-1 1,500 1,488,417
-----------
5,936,453
-----------
UTILITIES (9.0%)
GTE Southwest Inc. 5.58%.................. 07/09/97 A-2/P-1 1,000 998,760
NYNEX 5.55%............................... 07/29/97 A-1/P-1 1,100 1,095,252
San Diego Gas & Electric Co. 5.30%........ 07/15/97 A-1/P-1 1,400 1,400,000
-----------
3,494,012
-----------
TOTAL COMMERCIAL PAPER
(Cost $14,355,373)................................................ 14,355,373
-----------
CORPORATE BONDS (14.6%)
- -----------------------
BankAmerica Corp. 6.00%................... 07/15/97 A+ 100 100,007
Chrysler Financial Corp. 6.41%............ 07/28/97 A 250 250,091
6.50%.................................... 08/21/97 A 100 100,074
Countrywide Funding Corp. 6.57%........... 08/04/97 A 750 750,459
Ford Holdings Inc. 9.25%.................. 07/15/97 A+ 370 370,480
Ford Motor Credit 7.125%.................. 12/01/97 A+ 363 364,759
GTE California Inc. 6.25%................. 01/15/98 A- 680 680,341
H.J. Heinz Co. 5.50%...................... 09/15/97 A+ 1,488 1,486,750
Lehman Brothers Inc. 7.375%............... 08/15/97 A 200 200,361
NationsBank Corp. 6.625%.................. 01/15/98 A+ 390 390,870
Norwest Financial 6.00%................... 08/15/97 AA- 360 360,004
Pepsico Inc. 6.125%....................... 01/15/98 A 115 114,947
Rockwell International Corporate Bond
7.625%................................... 02/17/98 AA 215 216,922
Southwestern Bell Telephone 6.05%......... 02/04/98 AA 250 249,853
-----------
TOTAL CORPORATE BONDS
(Cost $5,635,918)................................................. 5,635,918
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------- ------ -----------
<S> <C> <C> <C> <C>
VARIABLE RATE DEMAND NOTES (36.1%)+
- -----------------------------------
Alabama State Development
Authority 5.65%......... 07/07/97 A-1/P-1 $ 550 $ 550,000
Barton Healthcare 5.75%.. 07/07/97 A-1/P-1 465 465,000
Baylis Group Partnership
Floating Rate 5.90%..... 07/02/97 A-1/P-1 700 700,000
Berks County Industrial
Development Authority
5.80%................... 07/07/97 A-1/P-1 540 540,000
Bloomfield New Mexico
5.95%................... 07/07/97 A-1/P-1 600 600,000
Columbia County Georgia
Development Authority
5.65%................... 07/07/97 A-1/P-1 470 470,000
Community Health Systems,
Inc. 5.95%.............. 07/07/97 A-1/P-1 1,465 1,465,000
Durham Risk Management
Co. 5.65%............... 07/07/97 A-1+/P- 500 500,000
Fairview Hospital and
Healthcare Services
5.60%................... 07/07/97 A-1+/P- 500 500,000
GMG Warehouse American
National 5.75%.......... 07/02/97 NR 975 975,000
Health Insurance Plan of
Greater NY
5.50%................... 07/07/97 A-1/P-1 500 500,000
5.50%................... 07/07/97 A-1/P-1 500 500,000
Illinois Development
Finance Authority 5.75%. 07/07/97 A-1/P-1 600 600,000
Liliha Partners 6.20%.... 07/02/97 NR 1,100 1,100,000
Montgomery County PA
Industrial Development
Authority 5.80%......... 07/07/97 A-1/P-1 805 805,000
New York, New York 5.75%. 09/10/97 A-1/P-1 1,900 1,900,000
Passaic County Utilities
Authority Series 1996-A
6.25%................... 09/03/97 SP1+ 650 650,000
Saint Francis Health
6.15%................... 07/07/97 A-1/P-1 490 490,000
Sliver City New Mexico
5.95%................... 07/07/97 A-1/P-1 600 600,000
-----------
TOTAL VARIABLE RATE DEMAND NOTES
(Cost $13,910,000)............................... 13,910,000
-----------
GOVERNMENT OBLIGATIONS (1.3%)+
- ------------------------------
Student Loan Marketing
Assn. 5.24%
(Cost $499,934)......... 07/01/97 AAA 500 499,934
-----------
MEDIUM TERM NOTES (4.4%)
- ------------------------
Caterpillar, Inc. 7.47%.. 01/15/98 A+ 600 604,861
Pacific Gas & Electric
5.00%................... 10/07/97 A 1,100 1,097,699
-----------
TOTAL MEDIUM TERM NOTES
(Cost $1,702,560).................................. 1,702,560
-----------
</TABLE>
9
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED) (CONTINUED)
THE MONEY MARKET FUND
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
SHORT-TERM INVESTMENTS (6.4%)
- -----------------------------
<S> <C> <C>
Janus Money Mar-
ket Fund....... 1,883,015 $ 1,883,015
Temporary In-
vestment Fund,
Inc............ 572,785 572,785
-----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $2,455,800).......... 2,455,800
-----------
TOTAL INVESTMENTS (100.0%)
(Cost $38,559,585)(a)...... $38,559,585
===========
</TABLE>
- -------
(a) Cost for Federal income tax purposes.
+ The rate shown is the rate as of June 30, 1997, and the maturity shown is
the next interest readjustment date.
The Standard & Poor's Corporation, Moody's Investor Service, Fitch Investors
Service and Duff & Phelps Credit Rating Co. Ratings are the most recent
ratings available at June 30, 1997.
<TABLE>
<CAPTION>
PERCENTAGE OF PORTFOLIO
MATURITY AMOUNT --------------------------------------------------
SCHEDULE PAR (CUM)
-------- ----------- --------------
<S> <C> <C> <C>
1 - 7 days $12,860,000 34.7% 34.7%
8 - 14 days 1,570,000 5.1% 39.8%
15 - 30 days 5,451,000 15.1% 54.9%
31 - 60 days 6,410,000 17.5% 72.4%
61 - 90 days 4,688,000 12.6% 85.0%
91 - 120 days 1,100,000 3.8% 88.8%
Over 150 days 4,113,000 11.2% 100.0%
----------- -----------
$36,192,000 100.0%
=========== ===========
</TABLE>
Average Weighted Maturity - 48 days
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED)
THE QUALITY BOND FUND
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------ -----------
<S> <C> <C> <C> <C>
CORPORATE BONDS (51.5%)
- -----------------------
AGRICULTURAL OPERATIONS (0.6%)
Cargill, Inc. 7.375%..... 10/01/25 AA- $ 250 $ 244,063
-----------
BEVERAGES (1.2%)
Coca-Cola Enterprises
6.95%................... 11/15/26 AA- 475 445,906
-----------
BROADCASTING (4.0%)
News America Holdings
8.50%................... 02/23/25 BBB 360 394,200
9.25%................... 02/01/13 BBB 950 1,067,563
-----------
1,461,763
-----------
CANADIAN GOV'T AGENCY (4.5%)
Hydro Quebec
7.50%................... 04/01/16 A+ 400 396,000
8.05%................... 07/07/06 A+ 1,150 1,247,750
-----------
1,643,750
-----------
ELECTRIC POWER (1.4%)
Korea Electric Power
7.75%................... 04/01/13 AA- 500 501,875
-----------
FINANCIAL (6.9%)
African Development Bank
6.875%.................. 10/15/15 AA- 500 481,250
Associates Corp. N.A.,
Senior Note 7.75%....... 02/15/05 AA- 500 530,625
General Electric Capital
Corp. 8.125%............ 02/01/99 AAA 500 515,000
General Motors Acceptance
Corp. Note 6.40%........ 07/30/97 A- 300 300,207
Morgan Stanley Financial
PLC 8.03%............... 02/28/17 A- 250 247,188
Morgan Stanley 6.95%..... 12/10/07 A- 473 466,737
-----------
2,541,007
-----------
FOODS (2.7%)
Food Lion Inc. 8.05%..... 04/15/27 A- 950 979,688
-----------
GENERAL OBLIGATION BONDS (2.7%)
General Electric Capital
Corp. 6.66%............. 05/01/00 AAA 1,000 1,006,250
-----------
MISCELLANEOUS (1.4%)
Noble Affiliates, Inc.
8.00%................... 04/01/27 BBB 500 511,250
-----------
RAILROADS (0.7%)
Union Pacific Co. 8.35%.. 05/01/25 BBB 250 256,875
-----------
RETAIL (7.5%)
J.C. Penney & Co.
7.60%................... 04/01/07 A- 1,400 1,443,750
9.45%................... 07/15/02 A- 175 187,250
American Stores Co.
7.50%................... 05/01/09 BBB+ 1,100 1,117,875
-----------
2,748,875
-----------
SERVICES - EQUIPMENT RENTING & LEASING
(2.9%)
Service Co. International
7.00%................... 06/01/15 BBB- 100 101,125
7.70%................... 04/15/09 BBB- 950 978,500
-----------
1,079,625
-----------
TRANSPORTATION (4.5%)
@ CSX Corp. 7.05%......... 05/01/02 BBB 660 660,821
CSX Corp. 7.25%.......... 05/01/27 BBB 1,000 1,008,750
-----------
1,669,571
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------ -----------
<S> <C> <C> <C> <C>
UTILITIES (10.5%)
GTE Corp. 7.51%............................ 04/01/09 A $1,900 $ 1,947,500
Petroleum Geo-Services 7.50%............... 03/31/07 BBB- 1,900 1,916,625
-----------
3,864,125
-----------
TOTAL CORPORATE BONDS
(Cost $18,525,725)................................................ 18,954,623
-----------
U.S. TREASURY OBLIGATIONS (16.0%)
- ---------------------------------
U.S. Treasury Notes
7.875%.................................... 11/15/99 N/A 750 778,170
7.75%..................................... 12/31/99 N/A 1,000 1,035,770
6.75%..................................... 04/30/00 N/A 1,000 1,013,160
6.25%..................................... 05/31/00 N/A 500 500,355
6.25%..................................... 10/31/01 N/A 1,300 1,294,033
-----------
4,621,488
-----------
U.S. Treasury Bonds
7.125%.................................... 02/15/23 N/A 150 154,565
6.00%..................................... 02/15/26 N/A 350 313,257
6.50%..................................... 11/15/26 N/A 950 814,555
-----------
1,282,377
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $5,883,549)................................................. 5,903,865
-----------
AGENCY OBLIGATIONS (14.3%)
- --------------------------
Federal National Mortgage Assoc. 7.00% due
06/01/11 to 05/01/12...................... 4,045 N/A 4,039,557
Federal National Mortgage Assoc. 6.45%..... 12/01/03 N/A 1,226 1,217,705
-----------
TOTAL AGENCY OBLIGATIONS
(Cost $5,212,727)................................................. 5,257,262
-----------
COMMERCIAL MORTGAGE-BACKED SECURITY (1.3%)
- ------------------------------------------
Sasco 96-CFl Class B 6.303% (Cost 500,000). 02/25/28 AA 500 486,250
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------
<S> <C> <C>
PREFERRED STOCK (5.1%)
- ----------------------
New Jersey Economic Development
(Cost $1,888,480)...................................... 76,000 1,888,480
-----------
SHORT-TERM INVESTMENTS (11.8%)
- ------------------------------
Janus Money Market Fund................................. 1,812,717 1,812,717
Temporary Investment Fund, Inc. ........................ 2,518,108 2,518,108
-----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $4,330,825)................................................. 4,330,825
-----------
TOTAL INVESTMENTS (100.0%)
(Cost $36,341,306)(a)............................................. $36,821,305
===========
</TABLE>
- -------
@ Restricted Security.
(a) Also cost for Federal income tax purposes. At June 30, 1997, the excess of
value over tax cost was $572,143, and the excess of tax cost over value was
$92,144.
The Standard & Poor's corporation ratings are the most recent ratings
available at June 30, 1997.
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED)
THE HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------ ------------
<S> <C> <C> <C> <C>
COLLATERALIZED MORTGAGE SECURITIES (1.2%)
- -----------------------------------------
Airplanes Pass Through Trust 10.875%
(Cost $506,762).......................... 03/15/19 BB $ 500 $ 580,000
------------
CORPORATE BONDS (92.0%)
- -----------------------
AEROSPACE & DEFENSE (4.2%)
BE Aerospace, Inc. 9.875%................. 02/01/06 B 500 526,250
Echo Bay Mines 11.00%..................... 04/01/27 BB- 450 452,250
Dyncorp, Inc. 9.50%....................... 03/01/07 B 425 429,250
L-3 Comms 10.375%......................... 05/01/07 B- 325 343,688
Tracor, Inc. 8.50%........................ 03/01/07 B 350 350,000
------------
2,101,438
------------
AUTOMOBILES & RELATED (1.6%)
Chief Auto Parts Inc. 10.50%.............. 05/15/05 B 250 250,000
K&F Industries 10.375%.................... 09/01/04 B- 225 238,500
Oxford Automotive Inc. 10.125%............ 06/15/07 B- 250 250,625
Walbro Corporation 9.875%................. 07/15/05 B+ 50 51,250
------------
790,375
------------
AUTOMOBILES - CARS (0.2%)
Venture Holdings Trust 9.75%.............. 04/01/04 B 100 98,000
------------
BANKING (0.5%)
Greenpoint Cap Trust I 9.10%.............. 06/01/27 BB 250 252,165
------------
BEVERAGES (2.5%)
Dr. Pepper Bottling Holdings, Inc.
4.4178%++................................ 02/15/03 CCC+ 700 698,250
Beatrice 11.50%........................... 10/01/05 B- 500 565,000
------------
1,263,250
------------
BROADCASTING (0.9%)
Azteca Holdings SA 11.00%................. 06/15/02 B- 200 201,250
Chancellor Radio Broadcasting 9.375%...... 10/01/04 B- 250 256,250
------------
457,500
------------
BUILDING & REAL ESTATE (1.1%)
B.F. Saul Reit. 11.625%................... 04/01/02 B- 500 532,500
------------
BUILDING PRODUCTS (3.1%)
American Builders and Contractors 10.625%. 05/15/07 B 400 414,000
Foamex L.P. 9.875%........................ 06/15/07 B- 350 362,250
Maxxam Group, Inc. 11.25%................. 08/01/03 B- 500 518,125
Reliant Building Products 10.875%......... 05/01/04 B- 250 256,250
------------
1,550,625
------------
CABLE OPERATORS (3.3%)
Frontiervision 11.00%..................... 10/15/06 B 300 314,250
Fundy Cable Ltd. 11.00%................... 11/15/05 BB 500 540,000
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------ ------------
<S> <C> <C> <C> <C>
Marcus Cable Operating Co. 2.772%++....... 08/01/04 B $ 550 $ 478,500
Lomcast U.K. Cable 11.2076 %++............ 11/15/07 NR 450 337,500
------------
1,670,250
------------
CHEMICALS (0.9%)
Sterling Chemicals Hldgs, Units
10.3802%++............................... 08/15/08 B+ 200 134,500
Sterling Chemicals, Inc. 11.25%........... 04/01/07 B+ 300 321,750
------------
456,250
------------
COMMUNICATIONS SERVICES (1.1%)
Communication & Power Industries 12.00%... 08/01/05 B 500 555,000
------------
CONGLOMERATES (1.3%)
ICF Kaiser International Inc. 13.00%...... 12/31/03 B- 225 243,000
Jordan Industries, Inc. 10.375%........... 08/01/03 B- 400 424,000
------------
667,000
------------
CONSUMER PRODUCTS (0.7%)
Revlon Worldwide 11.5728%++............... 03/15/01 B- 500 338,750
------------
CONTAINER (3.4%)
Bway Corp. 10.25%......................... 04/15/07 B 350 374,500
Plastic Containers, Inc. 10.00%........... 12/15/06 B+ 500 520,000
U.S. Can Corp. 10.125%.................... 10/15/06 B 760 807,500
------------
1,702,000
------------
DIVERSIFIED - CHEMICALS (0.6%)
Polytama International 11.25%............. 06/15/07 B+ 300 309,750
------------
ELECTRONIC COMPONENTS (3.4%)
Celestica International 10.50%............ 12/31/06 B 500 537,500
Fairchild Semiconductor 10.125%........... 03/15/07 B 250 265,000
HCC Industries 10.75%..................... 05/15/07 B- 350 367,500
Viasystems Inc 9.75%...................... 06/01/07 B- 500 506,250
------------
1,676,250
------------
ENERGY SERVICES (4.8%)
Dual Drilling Co. 9.875%.................. 01/15/04 B- 500 533,750
Energy Corp of America 9.50%.............. 05/15/07 B 400 404,000
Falcon Drilling Co. 8.875%................ 03/15/03 B+ 150 151,875
Flores & Rucks 9.75%...................... 10/01/06 B- 275 287,375
Kelley Oil & Gas Corp. 10.375%............ 10/15/06 B- 350 360,500
Mesa Operating Co. 7.2429%................ 07/01/06 B 250 192,500
Pride Petroleum Services 9.375%........... 05/01/07 BB- 425 444,125
------------
2,374,125
------------
</TABLE>
12
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED) (CONTINUED)
THE HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------ ------------
<S> <C> <C> <C> <C>
ENTERTAINMENT & LEISURE (6.7%)
AMC Entertainment, Inc. 9.50%............. 03/15/09 B $ 500 $ 520,000
Horseshoe Gaming L.L.C. 9.375%............ 06/15/07 B 400 402,000
Plains Resources, Inc. 10.25%............. 03/15/06 B- 550 583,000
Plitt Theaters, Inc. 10.875%.............. 06/15/04 B- 350 371,000
Six Flags Theme Parks 2.4799%++........... 06/15/05 B 500 514,375
United Artists Theater 9.30%.............. 07/01/15 BB 492 476,828
Travelcenters of America 10.25%........... 04/01/07 B 450 462,375
------------
3,329,578
------------
FINANCE (1.1%)
Ocwen Financial Corp. 11.875%............. 10/01/03 B+ 500 540,000
------------
FOOD/TOBACCO (5.1%)
Archibald Candy Corp 10.25%............... 07/01/04 B 400 407,000
Consolidated Cigar Corp. 10.50%........... 03/01/03 B 750 789,375
Mac Andrews & Forbes Co. 11.875%.......... 11/15/02 B 500 537,500
MBW Foods Inc. 9.875%..................... 02/15/07 B- 325 329,063
Shoppers Food Warehouse 9.75%............. 06/15/04 B+ 500 501,250
------------
2,564,188
------------
HEALTHCARE (2.2%)
Owens & Minor 10.875%..................... 06/01/06 B+ 250 278,750
Quest Diagnostic, Inc. 10.75%............. 12/15/06 B+ 250 271,875
Regency Health Services, Inc. 12.25%...... 07/15/03 B- 500 541,250
------------
1,091,875
------------
HOTELS & GAMING (5.2%)
@Capital Gaming International, Inc.
45.6951%++.............................. 08/01/97 NR 5 250
Courtyard By Marriott 10.75%.............. 02/01/08 B- 350 378,875
Eldorado Resorts LLC 10.50%............... 08/15/06 B 250 265,000
Grand Casinos, Inc. 10.125%............... 12/01/03 BB 300 312,000
Majestic Star Casino 12.75%............... 05/15/03 B 250 274,375
Prime Hospitality 9.75%................... 04/01/07 NR 200 209,000
Red Roof Inns 9.625%...................... 12/15/03 B 500 517,500
Rio Hotel & Casino, Inc.
9.50%.................................... 04/15/07 B 50 51,500
10.625%.................................. 07/15/05 B 250 270,000
Trump Atlantic City Assoc. Funding, Inc.
11.25%................................... 05/01/06 BB- 300 293,250
------------
2,571,750
------------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------ ------------
<S> <C> <C> <C> <C>
INDUSTRIAL - OTHER (1.9%)
Acquisition Properties
9.00%................... 12/15/07 NR $ 400 $ 406,500
Doane Products Co.
10.625%................. 03/01/06 B+ 500 532,500
------------
939,000
------------
MANUFACTURING (5.1%)
Hawk Corp. 10.25%........ 12/01/03 B+ 350 360,500
International Knife & Saw
11.375%................. 11/15/06 B- 300 321,000
International Wire Group
11.75%.................. 06/01/05 B- 500 542,500
Mettler-Toledo, Inc.
9.75%................... 10/01/06 B 300 315,000
Roller Bearing Co.
9.625%.................. 06/15/07 B- 500 506,250
Tokheim Corp. 11.50%..... 08/01/06 B 475 518,938
------------
2,564,188
------------
MEDIA AND COMMUNICATIONS (0.6%)
Intermedia
Communications, Inc.
4.2945%++............... 05/15/06 B- 350 252,000
13.50%.................. 06/01/05 B- 50 61,125
------------
313,125
------------
METALS & MINING (0.8%)
Haynes International,
Inc. 11.625%............ 09/01/04 B- 350 385,000
------------
MISCELLANEOUS (3.9%)
Amerigas Partners L.P.
10.125%................. 04/15/07 BB+ 400 425,500
Associated Materials,
Inc. 11.50%............. 08/15/03 B- 250 265,935
Herff Jones, Inc. 11.00%. 08/15/05 B 500 540,000
ML Capital Pfd. 9.875%... 03/01/27 B 300 300,000
PMI Acquisition Corp.
10.25%.................. 09/01/03 B 100 105,250
Synthetic Industries
9.25%................... 02/15/07 B 325 329,875
------------
1,966,560
------------
MISCELLANEOUS CONSUMER PRODUCTS (5.5%)
American Safety Razor
9.875%.................. 08/01/05 BB- 500 533,750
Chattem Inc. 12.75%...... 06/15/04 B- 500 550,000
Hedstrom Corp 10.00%..... 06/01/07 NR 200 201,500
Keebler Corporation
10.75%.................. 07/01/06 NR 600 672,000
PM Holdings Corp.
5.1115%++............... 09/01/05 B 400 306,000
Windy Hill Pet Food Co.
9.75%................... 05/15/07 NR 500 501,250
------------
2,764,500
------------
MISCELLANEOUS MATERIALS (0.1%)
Hedstrom Holdings Inc.
11.9999%++.............. 06/01/09 NR 100 59,500
------------
</TABLE>
13
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED) (CONTINUED)
THE HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------ ------------
<S> <C> <C> <C> <C>
PAPER & PAPER PRODUCTS (2.2%)
Container Corp. of America 11.25%.......... 05/01/04 B+ $ 250 $ 270,000
Pen-Tab Industries 10.875%................. 02/01/07 B- 250 253,125
S.D. Warren Co. 12.00%..................... 12/15/04 B+ 500 555,000
------------
1,078,125
------------
PRINTING & PUBLISHING (1.0%)
Sun Media Corp. 9.50%...................... 02/15/07 B 500 505,000
------------
RETAIL (0.9%)
Safelite Glass Corp. 9.875%................ 12/15/06 NR 400 428,000
------------
RETAIL MERCHANDISING (1.2%)
Specialty Retail 9.00%..................... 07/15/07 B 250 250,000
Specialty Retail 8.50%..................... 07/15/05 B 325 325,000
------------
575,000
------------
SAVINGS & LOAN ASSOCIATIONS (1.6%)
Bank United Capital Trust 10.25%........... 12/31/26 NR 250 247,500
First Federal Financial Corp. 11.75%....... 10/01/04 B+ 500 544,375
------------
791,875
------------
SERVICE (2.4%)
Allied Waste North America 10.25%.......... 12/01/06 B+ 200 213,000
Coinmach Corp. 11.75%...................... 11/15/05 B+ 482 533,815
Intertek Finance 10.25%.................... 11/01/06 B 445 460,575
------------
1,207,390
------------
TELECOMMUNICATIONS (4.7%)
Brooks Fiber Properties 10.00%............. 06/01/07 NR 100 101,000
Colt Telecom 5.9094%++..................... 12/15/06 NR 700 448,000
Global Star Lp
11.25%.................................... 06/15/04 B 150 139,500
11.375%................................... 02/15/04 B 350 350,875
Microcell Telecommunications 13.3689%++.... 06/01/06 B 200 112,000
Nextel Communications 5.9476%++............ 08/15/04 CCC- 150 114,750
Pricellular Wire 10.75%.................... 11/01/04 B 250 260,625
Sprint Spectrum 11.00%..................... 08/15/06 B+ 200 221,500
Teleport Communications 4.3941%++.......... 07/01/07 B 425 306,531
Telewest
9.625%.................................... 10/01/06 B+ 125 128,750
11.0672%++................................ 10/01/07 B+ 250 180,000
------------
2,363,531
------------
TEXTILES & APPAREL (3.1%)
Dan River, Inc. 10.125%.................... 12/15/03 B 500 530,000
Glenoit Corp. 11.00%....................... 04/15/07 B- 150 157,500
Pillowtex Corp. 10.00%..................... 11/15/06 B+ 375 393,750
#@Plaid Clothing Corp.
11.00%................................... 08/01/03 D 375 27,188
Tultex Corp. 9.625%........................ 04/15/07 BB- 150 158,625
Westpoint Stevens Inc. 9.375%.............. 12/15/05 B+ 250 261,250
------------
1,528,313
------------
TRANSPORTATION (2.5%)
Coach USA, Inc. 9.375%..................... 07/01/07 B+ 250 247,500
Equimar Shipholdings Ltd. 9.875%........... 07/01/07 B 500 490,000
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------ ------------
<S> <C> <C> <C> <C>
Greyhound Lines 11.50%..................... 04/15/07 NR $ 250 $ 265,000
Sea Containers Ltd. 12.50%................. 12/01/04 BB- 215 242,950
------------
1,245,450
------------
WASTE MANAGEMENT (0.6%)
Allied Waste Industries 11.2999%++......... 06/01/07 B+ 500 307,500
------------
TOTAL CORPORATE BONDS
(Cost $44,564,528)................................................ 45,914,676
------------
COMMERCIAL PAPER (2.2%)
- -----------------------
Pfizer, Inc. 5.52%
(Cost $1,099,070)......................... 08/05/97 AAA 1,105 1,099,070
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
--------
<S> <C> <C>
COMMON STOCK (1.4%)
- -------------------
+@ Berg Electronics Corp................................... 3,698 132,897
+@ Capital Gaming International, Inc....................... 13,335 400
+@ Dr. Pepper Bottling Holdings,Inc., Class A.............. 14,800 277,500
+ Gaylord Containers Corp., Class A........................ 7,500 57,656
+ Ocwen Assest Investment Corp............................. 10,000 202,500
+ Protection One, Inc...................................... 4,200 56,700
+ Wireless One Inc......................................... 450 113
-----------
TOTAL COMMON STOCK
(Cost $447,305).................................................... 727,766
-----------
PREFERRED STOCK (3.1%)
- ----------------------
Capstar Broadcasting Partners............................. 3,000 301,500
American Radio Systems.................................... 2,632 280,273
Chancellor Radio Broadcasting............................. 2,500 271,250
Chevy Chase Pfd. Capital Corp............................. 5,185 274,805
Criimi Mae, Inc........................................... 10,000 361,250
Intermedia Communications, Inc., Series B................. 5,000 51,650
-----------
TOTAL PREFERRED STOCK
(Cost $1,380,438).................................................. 1,540,728
-----------
<CAPTION>
WARRANTS
--------
<S> <C> <C>
WARRANTS (0.1%)
- ---------------
@+ Capital Gaming International, Inc....................... 11,375 11
+ ICF Kaiser Intl. Inc,.................................... 1,575 1,575
+ Intermedia Communicaton.................................. 50 2,000
Microcell Telecommunication............................... 800 11,400
Microcell Telecommunication............................... 800 500
@+ President Casinos, Inc.................................. 4,415 1,104
+@ Wright Medical Technology, Inc.......................... 2,676 26,765
-----------
TOTAL WARRANTS
(Cost $84,730)..................................................... 43,355
-----------
TOTAL INVESTMENTS (100.0%)
(Cost $48,082,833)................................................. $49,905,595
===========
</TABLE>
- -------
@ Restricted security.
+ Non-income producing.
++ Effective Yield.
# Securities in default.
(a) Also cost for Federal income tax. At June 30, 1997, the excess of value
over tax cost was $2,432,813, and the excess of tax cost over value was
$610,051.
The Standard & Poor's corporation ratings are the most recent ratings
available at June 30, 1997.
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED)
THE GROWTH EQUITY FUND
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
COMMON STOCK (97.0%)
- --------------------
AEROSPACE - DEFENSE (1.7%)
United Technologies Corp. .............................. 25,000 $ 2,075,000
------------
BEVERAGES (2.1%)
Coca-Cola Co. .......................................... 10,000 675,000
PepsiCo., Inc. ......................................... 50,000 1,878,125
------------
2,553,125
------------
CHEMICALS (3.8%)
Du Pont (E.I.) de Nemours & Co. ........................ 50,000 3,143,750
Monsanto Co. ........................................... 35,000 1,507,188
------------
4,650,938
------------
COMPUTER SOFTWARE & SERVICES (7.5%)
+ Cisco Systems, Inc. ................................... 40,000 2,686,250
First Data Corporation.................................. 25,000 1,098,438
+ Microsoft Corp. ....................................... 35,000 4,426,406
+ PeopleSoft, Inc. ...................................... 15,000 790,313
------------
9,001,407
------------
COMPUTER SYSTEMS (5.4%)
+ Compaq Computer Corp. ................................. 25,000 2,481,250
+ Dell Computer Corp. ................................... 15,000 1,761,094
Hewlett-Packard Co. .................................... 25,000 1,400,000
+ Sun Microsystems, Inc. ................................ 25,000 930,469
------------
6,572,813
------------
COSMETICS & TOILETRIES (3.1%)
Gillette Co. ........................................... 10,000 947,500
Procter & Gamble Co. ................................... 20,000 2,825,000
------------
3,772,500
------------
DIVERSIFIED OPERATIONS (6.8%)
General Electric Company................................ 70,000 4,576,250
Minnesota Mining & Manufacturing Co. ................... 15,000 1,530,000
Tyco International Ltd. ................................ 15,000 1,043,438
Unilever NV and PLC..................................... 5,000 1,090,000
------------
8,239,688
------------
ELECTRONICS (6.4%)
+ Adaptec, Inc. ......................................... 35,000 1,216,250
Honeywell, Inc. ........................................ 25,000 1,896,875
Intel Corp. ............................................ 25,000 3,539,844
Motorola, Inc. ......................................... 15,000 1,140,000
------------
7,792,969
------------
ENTERTAINMENT (2.0%)
The Walt Disney Co. .................................... 30,000 2,407,500
------------
FINANCIAL SERVICES (10.5%)
American Express Co. ................................... 20,000 1,490,000
BankAmerica Corp. ...................................... 30,000 1,936,875
Citicorp................................................ 20,000 2,411,250
Fannie Mae.............................................. 50,000 2,181,250
MBNA Corp. ............................................. 40,000 1,465,000
Merrill Lynch & Co., Inc. .............................. 30,000 1,788,750
SunAmerica, Inc. ....................................... 30,000 1,462,500
------------
12,735,625
------------
INSURANCE (5.9%)
Allstate Corp. ......................................... 20,000 1,460,000
American International Group, Inc. ..................... 15,000 2,240,625
Hartford Financial Services Group, Inc. ................ 15,000 1,241,250
Travelers Group, Inc. .................................. 35,000 2,207,188
------------
7,149,063
------------
MEDICAL SUPPLIES (1.2%)
Guidant Corp. .......................................... 15,000 1,275,000
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
OIL & GAS (4.2%)
Exxon Corp. ............................................ 30,000 $ 1,845,000
+ Global Marine Inc. .................................... 60,000 1,395,000
Schlumberger Ltd. ...................................... 15,000 1,875,000
------------
5,115,000
------------
PAPER & FOREST PRODUCTS (0.8%)
Kimberly-Clark Corp. ................................... 20,000 995,000
------------
PHARMACEUTICALS (16.6%)
Abbott Laboratories..................................... 25,000 1,668,750
American Home Products Corp. ........................... 15,000 1,147,500
Bristol-Myers Squibb Co. ............................... 25,000 2,025,000
Johnson & Johnson....................................... 50,000 3,218,750
Eli Lilly & Company..................................... 20,000 2,186,250
Merck & Co., Inc. ...................................... 40,000 4,140,000
Pfizer Inc. ............................................ 25,000 2,987,500
Schering-Plough Corp. .................................. 30,000 1,436,250
Warner-Lambert Co. ..................................... 10,000 1,242,500
------------
20,052,500
------------
PRINTING & PUBLISHING (0.6%)
+ Electronics for Imaging, Inc. ......................... 15,000 708,281
------------
RETAIL (8.6%)
+ Costco Companies, Inc. ................................ 40,000 1,316,250
Home Depot, Inc. ....................................... 25,000 1,723,438
+ Safeway Inc. .......................................... 50,000 2,306,250
+ Staples, Inc. ......................................... 50,000 1,159,375
Walgreen Co. ........................................... 20,000 1,072,500
Wal-Mart Stores, Inc. .................................. 85,000 2,874,063
------------
10,451,876
------------
TELECOMMUNICATIONS (6.8%)
GTE Corp. .............................................. 25,000 1,096,875
Lucent Technologies, Inc. .............................. 25,000 1,801,563
Northern Telecom Ltd. .................................. 10,000 910,000
Oy Nokia AB (ADR)....................................... 20,000 1,475,000
SBC Communications, Inc. ............................... 35,000 2,165,625
+ Tellabs, Inc. ......................................... 15,000 837,188
------------
8,286,251
------------
TOBACCO (1.8%)
Philip Morris Companies, Inc. .......................... 50,000 2,218,750
------------
TRANSPORT (1.2%)
+ Federal Express Corp. ................................. 25,000 1,443,745
------------
TOTAL COMMON STOCK
(Cost $86,578,437)................................................ 117,497,031
------------
SHORT-TERM INVESTMENTS (3.0%)
- -----------------------------
Temporary Cash Investment Fund, Inc. ................... 1,831,428 1,831,428
Temporary Investment Fund, Inc. ........................ 1,831,390 1,831,390
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $3,662,818)................................................. 3,662,818
------------
TOTAL INVESTMENTS (100.0%)
(Cost $90,241,255)(a)............................................. $121,159,849
============
</TABLE>
- -------
+ Non-income producing.
(a) At June 30, 1997, the cost for Federal income tax purposes was $90,297,341.
The excess of value over tax cost was $30,951,236, and the excess of cost
over value was $88,728.
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED)
THE VALUE EQUITY FUND
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
COMMON STOCK (82.3%)
- --------------------
AEROSPACE - DEFENSE (5.3%)
Lockheed Martin Corp. .................................... 80,000 $ 8,285,000
McDonnell Douglas Corp. .................................. 81,000 5,548,500
------------
13,833,500
------------
AIRLINES (1.5%)
+ AMR Corp. ............................................... 43,000 3,977,500
------------
AUTOMOBILES PARTS - EQUIPMENT (2.5%)
Lucasvarity PLC ADR....................................... 188,520 6,527,501
------------
CHEMICALS (3.6%)
Du Pont (E.I.) de Nemours & Co. .......................... 60,000 3,772,500
Hercules, Inc. ........................................... 50,000 2,393,750
Monsanto Co. ............................................. 77,000 3,315,813
------------
9,482,063
------------
CONGLOMERATES (2.0%)
General Electric Co. ..................................... 80,000 5,230,000
------------
COSMETICS (1.4%)
Avon Products, Inc. ...................................... 50,000 3,528,125
------------
DIVERSIFIED (3.6%)
Canadian Pacific Limited.................................. 140,000 3,981,250
Tenneco, Inc. ............................................ 75,000 3,389,063
Textron Inc. ............................................. 29,700 1,971,338
------------
9,341,651
------------
ENTERTAINMENT & LEISURE (2.0%)
Carnival Corp. Class A.................................... 125,000 5,156,250
------------
ELECTRONIC COMPONENTS (1.3%)
+ Adaptec, Inc. ........................................... 98,000 3,405,500
------------
ELECTRONICS (1.0%)
+ Arrow Electronics, Inc. ................................. 48,000 2,550,000
------------
FINANCIAL SERVICES (12.3%)
Citicorp.................................................. 70,000 8,439,375
Countrywide Credit Industries, Inc. ...................... 210,000 6,549,375
Federal Home Loan Mortgage Corp. ......................... 220,000 7,562,500
Sabre Group Holdings Inc. Class A......................... 80,000 2,170,000
Wells Fargo & Co. ........................................ 27,333 7,366,244
------------
32,087,494
------------
GAS TRANSMISSION (0.1%)
El Paso Natural Gas Co. .................................. 6,510 358,050
------------
HOSPITAL MANAGEMENT (3.2%)
+ Tenet Healthcare Corp. .................................. 282,500 8,351,406
------------
INSURANCE (22.2%)
Ace, Limited.............................................. 175,000 12,928,125
AFLAC, Inc. .............................................. 105,375 4,978,969
American International Group, Inc. ....................... 23,500 3,510,313
Everest Re Holdings, Inc. ................................ 120,000 4,755,000
Exel Limited.............................................. 247,600 13,060,900
General Re Corp. ......................................... 41,000 7,462,000
Mid Ocean Limited......................................... 123,000 6,449,813
Progressive Corp. ........................................ 55,000 4,785,000
------------
57,930,120
------------
MACHINERY - DIVERSIFIED (4.5%)
Caterpillar, Inc. ........................................ 88,000 9,449,000
Dover Corp. .............................................. 38,000 2,337,000
------------
11,786,000
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
MANUFACTURING (0.9%)
AlliedSignal, Inc. ....................................... 27,000 $ 2,268,000
------------
MEDICAL SUPPLIES (2.6%)
Becton, Dickinson & Co. .................................. 134,000 6,783,750
------------
METALS (0.6%)
Freeport-McMoran Copper & Gold, Inc.
Class B.................................................. 47,016 1,463,373
------------
OIL & GAS (1.4%)
+ Triton Energy Limited.................................... 62,000 2,840,375
Union Pacific Resources, Group............................ 28,796 716,301
------------
3,556,676
------------
PAPER & PAPER PRODUCTS (0.4%)
Champion International Corp. ............................. 20,000 1,105,000
------------
RESTAURANTS (1.7%)
McDonald's Corporation.................................... 93,000 4,493,063
------------
RETAIL (2.6%)
May Department Stores Co. ................................ 144,000 6,804,000
------------
TELECOMMUNICATIONS (2.6%)
Sprint Corp. ............................................. 72,250 3,802,156
+ Tele-Communications Inc. Series A........................ 200,000 2,968,750
------------
6,770,906
------------
TEXTILES (0.6%)
Shaw Industries, Inc. .................................... 140,000 1,487,500
------------
TOYS (1.5%)
Mattel, Inc. ............................................. 114,531 3,879,738
------------
TRANSPORT SERVICES (0.9%)
Union Pacific Corp. ...................................... 34,000 2,397,000
------------
TOTAL COMMON STOCK
(Cost $135,477,151)............................................... 214,554,166
------------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000)
-------- -------
<S> <C> <C> <C>
COMMERCIAL PAPER (14.1%)
- ------------------------
Ford Motor Credit Co. 5.53%...................... 07/24/97 $ 6,483 6,460,095
IBM Corp. 5.51%.................................. 07/23/97 10,331 10,296,213
John Deere Credit Corp. 5.53%.................... 07/16/97 10,000 9,976,958
Merrill Lynch & Co., Inc. 5.56%.................. 08/07/97 10,000 9,942,856
------------
TOTAL COMMERCIAL PAPER
(Cost $36,676,122)................................................ 36,676,122
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------
<S> <C> <C>
SHORT-TERM INVESTMENTS (3.6%)
- -----------------------------
Temporary Cash Investment Fund, Inc. ................... 4,743,112 4,743,112
Temporary Investment Fund, Inc. ........................ 4,747,444 4,747,444
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $9,490,556)................................................. 9,490,556
------------
TOTAL INVESTMENTS (100.0%)
(Cost $181,643,829)(a)............................................ $260,720,844
============
</TABLE>
- -------
+ Non-income producing.
(a) Also cost for Federal income tax purposes. At June 30, 1997, the excess of
value over tax cost was $79,500,490, and the excess of tax cost over value
was $423,475.
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED)
THE FLEXIBLY MANAGED FUND
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
COMMON STOCK (50.8%)
- --------------------
AUTOMOTIVE PARTS - EQUIPMENT (0.1%)
Exide Corp. ............................................ 30,000 $ 658,121
------------
BANKS (0.1%)
Bank Fuer Internationalen Zahlungs...................... 44 308,820
------------
BUILDING & CONSTRUCTION (0.5%)
Johns Manville Corp. ................................... 210,000 2,480,625
------------
CHEMICALS (1.6%)
English China Clays PLC................................. 140,689 483,810
Great Lakes Chemical Corp. ............................. 125,000 6,546,875
+ Millenium Chemicals, Inc. ............................. 31,800 723,450
------------
7,754,135
------------
COMPUTERS (0.7%)
International Business Machines Corp. .................. 34,000 3,066,375
+ Silicon Graphics, Inc. ................................ 10,500 157,500
------------
3,223,875
------------
DIVERSIFIED OPERATIONS (2.4%)
+ Chris-Craft Industries, Inc. .......................... 130,000 6,272,500
Corning, Inc. .......................................... 90,000 5,006,250
------------
11,278,750
------------
ELECTRIC UTILITIES (7.1%)
Centerior Energy Corp. ................................. 1,625,000 18,179,688
Ohio Edison Co. ........................................ 225,000 4,907,813
Unicom Corp ............................................ 449,900 10,010,275
------------
33,097,776
------------
ENERGY (1.9%)
Energy Group PLC........................................ 73,125 3,098,672
Wheelabrator Technologies, Inc. ........................ 390,000 6,020,625
------------
9,119,297
------------
FINANCIAL SERVICES (2.0%)
American Express Co. ................................... 52,000 3,874,000
Fannie Mae.............................................. 66,000 2,879,250
Fund American Enterprises, Inc. ........................ 27,000 2,835,000
------------
9,588,250
------------
FOOD/PROCESSING (0.2%)
McCormick & Co., Inc. .................................. 35,000 885,938
------------
HOLDINGS COMPANY DIVERSIFIED (3.7%)
Hanson PLC ADR.......................................... 53,125 1,328,125
Loews Corp. ............................................ 128,000 12,816,000
Lonrho PLC.............................................. 1,500,000 3,184,899
------------
17,329,024
------------
HOTEL - MOTEL (0.5%)
+ HFS, Inc. ............................................. 37,000 2,146,000
------------
INSURANCE (2.0%)
CHUBB Corp ............................................. 0 27
Harleysville Group, Inc. ............................... 40,000 1,522,500
Risk Capital Holdings, Inc. ............................ 19,100 396,325
Unitrin, Inc. .......................................... 57,000 3,494,813
Willis Corroon Group PLC ADR............................ 130,000 1,454,375
Zurich Reinsurance Centre Holdings, Inc. ............... 64,000 2,528,000
------------
9,396,040
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
MEDICAL (0.1%)
+ Perrigo Co. ........................................... 10,000 $ 125,625
+ Quest Diagnostics, Inc. ............................... 11,250 231,328
------------
356,953
------------
MINING (2.7%)
+ Hecla Mining Co. ...................................... 30,000 161,250
Homestake Mining Co. ................................... 165,000 2,155,313
Newmont Mining Corp. ................................... 247,700 9,660,300
Prime Resources Group, Inc. ............................ 111,900 810,341
------------
12,787,204
------------
OFFICE SUPPLIES (0.1%)
Cross (A.T.) Co., Class A............................... 38,000 484,500
------------
OIL & GAS (9.0%)
Amerada Hess Corp. ..................................... 250,000 13,890,625
Atlantic Richfield Co. ................................. 70,000 4,935,000
Kerr-McGee Corp. ....................................... 14,000 887,250
Mitchell Energy & Development Corp.,
Class B................................................ 115,000 2,458,125
Murphy Oil Corp. ....................................... 126,000 6,142,500
Sun Company, Inc. ...................................... 20,000 620,000
Texaco, Inc. ........................................... 64,000 6,960,000
Union Texas Petroleum Holdings, Inc. ................... 290,000 6,071,875
------------
41,965,375
------------
PAPER AND FOREST PRODUCTS (1.5%)
Deltic Timber Corp...................................... 30,000 879,375
International Paper Co. ................................ 28,000 1,359,750
Weyerhaeuser Co. ....................................... 90,000 4,680,000
------------
6,919,125
------------
PHARMACEUTICALS (3.6%)
+ Genetech, Inc. ........................................ 255,000 15,029,063
Schering-Plough Corp. .................................. 42,000 2,010,750
------------
17,039,813
------------
PHOTO EQUIPMENT (1.0%)
Polaroid Corp. ......................................... 82,000 4,551,000
------------
PUBLISHING NEWS (5.7%)
Meredith Corp. ......................................... 100,000 2,900,000
New York Times Co., Class A............................. 260,000 12,870,000
Readers Digest Assoc., Inc., Class B.................... 50,300 1,392,681
Readers Digest Assoc., Inc. ............................ 10,000 286,875
Washington Post Co., Class B............................ 23,000 9,154,000
------------
26,603,556
------------
RETAIL (1.8%)
+ Hills Stores Co. ...................................... 87,000 299,063
Limited, Inc. .......................................... 93,000 1,883,250
+ Petrie Stores Corp. ................................... 1,000,000 3,156,500
+ Toys 'R' Us, Inc. ..................................... 24,500 857,500
Wal-Mart Stores, Inc. .................................. 56,000 1,893,500
------------
8,089,813
------------
TOBACCO (1.4%)
Philip Morris Companies, Inc. .......................... 145,000 6,434,375
------------
TRANSPORTATION - MISCELLANEOUS (1.1%)
Overseas Shipholding Group, Inc. ....................... 135,000 2,649,375
Ryder System, Inc. ..................................... 70,000 2,310,000
------------
4,959,375
------------
TOTAL COMMON STOCK
(Cost $181,984,762)............................................... 237,457,740
------------
</TABLE>
17
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED) (CONTINUED)
THE FLEXIBLY MANAGED FUND
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
PREFERRED STOCK (4.1%)
- ----------------------
Cleveland Electric Illum. Series L 7.00%.................. 34,550 $ 3,053,356
Cleveland Electric Illum. Series R 8.80%.................. 2,550 2,655,188
Cleveland Electric Illum. Series S 9.00%.................. 3,000 3,153,750
Entergy Gulf States Utilities, Inc.
Series B 7.20%........................................... 15,853 768,871
International Paper Company Convertible 5.25%............. 10,000 530,000
Kemper Co. Series E 5.75%................................. 100,000 5,200,000
Niagara Mohawk Power Corp. Series A 6.50%................. 24,000 486,000
Niagara Mohawk Power Corp. Series B 7.50%................. 7,000 154,438
Niagra Mohawk Power Corp. Series C 7.20%.................. 19,500 436,313
Rouse Co. Series B........................................ 55,000 2,653,750
------------
TOTAL PREFERRED STOCK
(Cost $16,738,243)................................................ 19,091,666
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF CONTRACTS
------------
<S> <C> <C>
PUT OPTIONS (0.3%)
- ------------------
+ Automatic Data $50, August 16, 1997................. 105 36,093
+Automatic Data $50, November 22, 1997................ 205 89,683
+ CHUBB $55, July 19, 1997............................ 60 750
+ HFS $60, July 19, 1997.............................. 470 102,813
+ HFS $60, October 18, 1997........................... 150 76,875
+ HFS $70, October 18, 1997........................... 110 138,188
+ IBM $100, January 17, 1998.......................... 140 161,000
+ IBM $78, October 18, 1997........................... 100 13,125
+ IBM $80, July 19, 1997.............................. 100 1,875
+ IBM $88, October 18, 1997........................... 100 37,500
+ IBM $95, January 17, 1998........................... 100 93,750
+ Limited "B" $20, August 16, 1997.................... 105 7,219
+ Limited "B" $23, August 16, 1997.................... 105 25,594
+ Limited "B" $23, November 22, 1997.................. 100 28,125
+ Microsoft $85, July 19, 1997........................ 100 313
+Schering-Plough $50, November 22, 1997............... 110 42,625
+ Schering-Plough $43, August 16, 1997................ 200 5,000
+Schering-Plough $45, November 22, 1997............... 220 38,500
+Silicon Graphics $23, November 22, 1997.............. 105 79,406
+ Silicon Graphics $30, August 16, 1997............... 105 156,844
+ Toys 'R' US $30, September 20, 1997................. 130 6,500
+ Toys 'R' US $35, December 20, 1997.................. 105 26,250
+ Wal-Mart $25, September 20, 1997.................... 210 1,313
+ Wal-Mart $35, December 20, 1997..................... 120 30,750
+ Wal-Mart $33, December 20, 1997..................... 110 15,813
------------
TOTAL PUT OPTIONS
(Cost $2,107,046)................................................. 1,215,904
------------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000)
-------- ------ -----
<S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS (4.3%)
- --------------------------------
U.S Treasury Notes
5.50%.................................... 02/28/99 NA $10,000 9,917,200
5.75%.................................... 10/31/97 NA 2,500 2,501,950
6.125%................................... 07/31/00 NA 1,250 1,245,700
6.25%.................................... 04/30/01 NA 2,500 2,492,975
6.75%.................................... 05/31/99 NA 2,000 2,023,120
7.375%................................... 11/15/97 NA 2,000 2,012,500
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $20,179,805)................................................ 20,193,445
------------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ----- -----
<S> <C> <C> <C> <C>
AGENCY OBLIGATION (2.5%)
- ------------------------
Tennessee Valley Authority 5.98%
(Cost $11,489,607)...................... 04/01/36 AAA $11,400 $ 11,428,500
------------
MEDIUM TERM NOTE (0.3%)
- -----------------------
Federal National Mortgage Assoc. 5.37%
(Cost $1,576,000)....................... 02/07/01 NR 1,600 1,544,656
------------
COMMERCIAL PAPER (11.5%)
- ------------------------
Archer Daniels Midland Corp.
5.52%................................... 07/15/97 NR 2,400 2,394,848
5.60%................................... 07/15/97 NR 412 411,103
Bell Atlantic Network 5.50%.............. 07/02/97 A 10,000 9,998,472
Ciesco L.P.
5.55%................................... 07/01/97 AAA 3,300 3,300,000
6.20%................................... 07/01/97 AAA 12,700 12,700,000
Island Finance Puerto Rico 5.63%......... 07/10/97 NR 1,000 998,582
Motorola Credit Corporation 5.50%........ 08/18/97 NR 8,000 7,941,333
Pitney Bowes Credit Corp 5.52%........... 07/09/97 NR 14,000 13,982,827
Shell Oil Company 5.50%.................. 07/02/97 NR 2,000 1,999,694
------------
TOTAL COMMERCIAL PAPER
(Cost $53,726,859)............................................... 53,726,859
------------
CONVERTIBLE BONDS (26.1%)
- -------------------------
Alza Corp. 5.0261%++..................... 07/14/14 BBB- 5,500 2,433,750
Automatic Data Processing, Inc.
5.1212%++............................... 02/20/12 AA 21,800 13,182,024
Comcast Corp. 3.375%..................... 09/09/05 BB- 4,900 5,174,057
Deutsche Bank Financial 4.4999%++........ 02/12/17 AAA 2,500 1,150,525
Ensearch Corp. 6.375%.................... 04/01/02 BBB- 5,325 5,319,995
Grand Metro PLC Euro-Bond 6.50%.......... 01/31/00 A+ 3,000 4,214,730
Grand Metropolitan PLC 6.50%............. 01/31/00 A+ 1,300 1,826,383
Homestake Mining Co. 5.50%............... 06/23/00 BBB- 4,900 4,705,764
Lonhro Finance Conv. Euro Bond 6.00%..... 02/27/04 BB 1,800 2,810,205
Marriott International 3.8867%++......... 03/25/99 BBB 7,100 4,328,728
McKesson Corp. 4.50%..................... 03/01/04 A- 1,500 1,316,250
Merck & Company 5.76%.................... 05/03/37 AAA 1,150 1,159,315
Office Depot Inc.
4.6260%++............................... 12/11/07 BB- 1,200 815,364
4.2615%++............................... 11/01/08 BB- 5,000 3,105,550
Ogden Corp. 5.75%........................ 10/20/02 BBB 250 233,750
Outboard Marine Corp. 7.00%.............. 07/01/02 B+ 1,850 1,852,313
Peninsular & Oriental 7.25%.............. 05/19/03 NR 1,600 2,836,017
</TABLE>
18
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ----- -----
<S> <C> <C> <C> <C>
Pep Boys Convertible 4.2031%++............ 09/20/11 BBB $ 3,694 $ 2,109,052
Potomac Electric Power Co. 5.00%.......... 09/01/02 A- 2,300 2,139,000
Roche Holdings, Inc. 144A 6.375%++........ 05/06/12 NR 17,700 7,743,750
Rouse Company Euro Bond 5.75%............. 07/23/02 BBB- 6,700 7,051,750
Sandoz Capital 2.00%...................... 10/06/02 AAA 500 767,500
Silicon Graphics 3.8396%++................ 11/02/13 BB+ 4,500 2,206,215
Time Warner Inc
6.2910%++................................ 12/17/12 BBB- 20,000 7,906,800
5.1063%.................................. 06/22/13 BBB- 16,600 7,724,810
UBS Finance 2.00%......................... 12/15/00 AAA 300 289,596
USF&G Corp. 4.3663%++..................... 03/03/09 BBB- 5,100 3,687,198
U.S. Cellular Corp. 6.0276%++............. 06/15/15 BBB- 11,900 4,164,643
U.S. West, Inc. 7.1386%++................. 06/25/11 BBB 23,800 9,177,042
WMX Technologies 2.00%.................... 01/24/05 A 8,550 8,039,736
Zurich Insurance Eurobond 1.00%........... 04/15/03 A 2,700 2,598,750
------------
TOTAL CONVERTIBLE BONDS
(Cost $112,299,627)............................................... 122,070,562
------------
<CAPTION>
SHARES
-------
<S> <C> <C>
SHORT-TERM INVESTMENTS (0.1%)
- -----------------------------
Temporary Investment Fund, Inc.
(Cost $448,474).......................................... 448,474 448,474
------------
TOTAL INVESTMENTS (100.0%)
(Cost $400,550,423)(a)............................................ $467,177,806
============
</TABLE>
- -------
+ Non-income producing.
++ Effective Yield.
(a) At June 30, 1997, the cost for Federal income tax purposes was
$400,556,401. The excess of value over tax cost was $73,629,989 and the
excess of tax cost over value was $7,008,584.
ADR--American Depository Receipt
The Standard & Poor's Corporation ratings are the most recent ratings
available at June 30, 1997.
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED)
THE INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
COMMON STOCK (88.5%)
- --------------------
AUSTRALIA (0.6%)
National Austrailia Bank Limited.......................... 50,000 $ 717,148
------------
BELGIUM (0.7%)
+ Barco N.V. .............................................. 4,500 911,503
------------
BRAZIL (0.6%)
Companhia Cervejaria Brahma (ADR)......................... 47,000 719,688
------------
FINLAND (0.5%)
Cultor Oy, Series II...................................... 12,000 631,774
------------
FRANCE (7.8%)
AXA SA.................................................... 27,500 1,710,211
Carrefour Supermarche SA.................................. 2,100 1,525,012
Compagnie Generale Des Eaux............................... 8,400 1,076,227
+ Dassault Systemes SA..................................... 17,500 1,241,663
Scor SA................................................... 22,000 885,660
Societe Bic SA............................................ 10,000 1,635,132
Total SA-B................................................ 14,185 1,433,657
Valeo SA.................................................. 8,063 500,748
------------
10,008,310
------------
GERMANY (5.5%)
Adidas AG................................................. 14,000 1,565,277
Bayer AG.................................................. 35,000 1,348,546
Bayerische Motoren Werke (BMW) AG......................... 1,000 824,494
CKAG Colonia Konzern AG................................... 4,400 416,261
Gehe AG................................................... 10,800 743,077
SGL Carbon AG............................................. 9,700 1,324,775
VEBA AG................................................... 16,000 903,618
------------
7,126,048
------------
HONG KONG (1.6%)
Dah Sing Financial Group.................................. 130,800 724,340
Sun Hung Kai Properties Limited........................... 115,000 1,384,281
------------
2,108,621
------------
IRELAND (3.7%)
Allied Irish Banks PLC.................................... 191,801 1,467,678
CRH PLC................................................... 92,021 961,601
+ Elan Corp. PLC (ADR)..................................... 31,000 1,402,750
Greencore Group PLC....................................... 202,027 987,442
------------
4,819,471
------------
JAPAN (27.1%)
Bank of Tokyo-Mitsubishi.................................. 75,000 1,505,236
Bridgestone Corp. ........................................ 100,000 2,321,117
Canon, Inc. .............................................. 40,000 1,089,005
Credit Saison Co.limited.................................. 67,000 1,636,998
Ezaki Glico Co. Limited................................... 82,000 736,998
Fuji Photo Film Co. Limited............................... 60,000 2,413,613
Hitachi Maxell Limited.................................... 25,000 619,546
Hoya Corp ................................................ 28,000 1,246,073
Ito-Yokado Co. Limited.................................... 18,000 1,044,503
JUSCO Co. Limited......................................... 56,000 1,891,100
Komatsu Limited........................................... 150,000 1,217,278
Kyocera Corp. ............................................ 11,000 873,473
Mitsubishi Heavy Industries Limited....................... 275,000 2,109,293
Mitsui & Co. Limited...................................... 125,000 1,199,825
Murata Manufacturing Co. Limited.......................... 18,000 716,230
Nikko Securities Co. Limited.............................. 60,000 369,110
Nippon Steel Corp. ....................................... 500,000 1,596,859
NTT Data Corp. ........................................... 29,000 1,121,030
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
Omron Corp. .............................................. 73,000 $ 1,547,906
Rohm Co. Limited.......................................... 25,000 2,574,171
SMC Corp. ................................................ 10,000 844,677
Sony Corp. ............................................... 16,000 1,394,764
Taisho Pharmaceutical Co. Limited......................... 58,000 1,563,874
Takeda Chemical Ind. ..................................... 60,000 1,685,864
Tokyo Broadcasting System, Inc. .......................... 30,000 615,183
Yasuda Fire & Marine Insurance Co. Limited................ 145,000 974,258
------------
34,907,984
------------
MALAYSIA (1.3%)
Malayan Banking Berhad.................................... 80,000 840,003
Telekom Malaysia Berhad................................... 45,000 210,397
United Engineers (Malaysia) Limited....................... 90,000 649,021
------------
1,699,421
------------
NETHERLANDS (6.7%)
Aegon N.V. (ADR).......................................... 9,918 694,880
Aegon N.V. ............................................... 10,246 714,971
Elsevier N.V. ............................................ 105,000 1,754,189
Hagemeyer N.V. ........................................... 24,218 1,250,805
Ing Groep N.V. ........................................... 27,409 1,263,441
Oce-Van Der Grinten N.V. ................................. 6,000 773,799
Vendex International N.V. ................................ 39,494 2,162,484
------------
8,614,569
------------
NORWAY (0.5%)
+ Smedving-ASA (ADR) B..................................... 25,000 637,500
------------
PHILIPPINES (0.3%)
Manila Electric Co. B..................................... 88,725 437,235
------------
SINGAPORE (0.6%)
City Developments Limited................................. 80,000 783,381
------------
SPAIN (1.2%)
Banco Intercontinental Espanol SA......................... 2,600 458,803
Banco Popular Espanol SA.................................. 4,500 1,102,552
------------
1,561,355
------------
SWEDEN (5.3%)
Assa Abloy AB B........................................... 66,000 1,349,938
Astra AB B................................................ 80,000 1,423,981
Autoliv AB................................................ 27,000 1,056,375
Hennes & Mauritz AB B..................................... 35,000 1,255,049
OM Gruppen AB............................................. 17,000 528,169
Telefonaktiebolaget LM Ericsson B......................... 30,000 1,182,555
------------
6,796,067
------------
SWITZERLAND (7.7%)
Nestle SA................................................. 1,100 1,450,698
+ Pharma Vision 2000 AG.................................... 3,050 1,743,872
Roche Holding AG-Genusshein............................... 485 4,385,391
Schweizerische Bankgesellschaft........................... 2,002 2,289,332
------------
9,869,293
------------
THAILAND (0.3%)
Bangkok Bank Public Co. Limited (Foreign)................. 60,000 428,916
------------
UNITED KINGDOM (16.5%)
Baa PLC................................................... 765 7,051
Barclays PLC.............................................. 1 20
British Petroleum Co. PLC (ADR)........................... 20,202 1,512,628
Dixons Group PLC.......................................... 145,000 1,127,662
EMI Group PLC............................................. 32,188 577,571
General Accident PLC...................................... 90,000 1,314,427
</TABLE>
20
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
GKN PLC................................................... 102,474 $ 1,765,381
HSBC Holdings PLC......................................... 76,618 2,358,547
Lloyds Tsb Group PLC...................................... 120,000 1,230,995
Mirror Group PLC.......................................... 170,000 532,232
Misys PLC................................................. 50,000 1,134,490
Norwich Union PLC......................................... 85,000 452,256
Powerscreen International PLC............................. 110,450 1,203,842
Provident Financial PLC................................... 93,293 865,363
Rentokil Initial PLC...................................... 244,000 857,366
Reuters Holdings PLC...................................... 90,000 948,725
Shell Transport & Trading Co. PLC......................... 276,000 1,882,163
Siebe PLC................................................. 94,090 1,593,524
Smiths Industries PLC..................................... 90,000 1,153,308
Zeneca Group PLC.......................................... 23,000 760,679
------------
21,278,230
------------
TOTAL COMMON STOCK
(Cost $88,634,993)................................................ 114,056,514
------------
WARRANTS (0.0%)
- ---------------
+Cie Generale
(Cost $6,246)........................................... 4,700 2,815
------------
PREFERRED STOCK (0.6%)
- ----------------------
SAP AG
(Cost $824,494).......................................... 4,000 824,494
------------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000)
-------- ------
<S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATION (1.6%)
- ---------------------------------
U.S. Treasury Bill 5.07%
(Cost $1,999,437)................................ 07/03/97 $2,000 1,999,442
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------
<S> <C> <C>
SHORT-TERM INVESTMENTS (9.3%)
- -----------------------------
Temporary Cash Investment Fund, Inc. ................... 6,011,506 6,011,506
Temporary Investment Fund, Inc. ........................ 6,010,424 6,010,424
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $12,021,930)................................................ 12,021,930
------------
TOTAL INVESTMENTS (100.0%)
(Cost $103,487,100)(a)............................................ $128,905,195
============
</TABLE>
- -------
+ Non-income producing.
(a) Also cost for Federal income tax purposes. At June 30, 1997, the excess of
value over tax cost $26,191,043 and the excess of tax cost over value was
$772,948.
ADR--American Depository Receipt
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED)
THE SMALL CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C> <C>
COMMON STOCK (86.0%)
- --------------------
ADVERTISING (0.2%)
+ Katz Media Group, Inc. ................................ 9,000 $ 59,063
-----------
AUTO-PARTS/EQUIPMENT (2.0%)
Borg-Warner Automotive, Inc. ........................... 10,200 551,438
-----------
BROADCASTING (1.7%)
+ American Radio Systems Corp. .......................... 11,900 474,513
-----------
BUILDING MATERIALS (1.8%)
Chicago Bridge & Iron Co. .............................. 14,500 320,813
+ Dal-Tile International, Inc. .......................... 9,600 178,200
-----------
499,013
-----------
CABLE OPERATORS (1.5%)
+ Cable Design Techologies............................... 3,500 103,031
TCA Cable T.V., Inc. ................................... 10,900 409,431
-----------
512,462
-----------
CHEMICALS (4.4%)
+ McWhorter Technologies, Inc. .......................... 23,000 549,125
Schulman (A.), Inc. .................................... 27,100 669,878
-----------
1,219,003
-----------
COMPUTER SOFTWARE & SERVICES (10.3%)
+ Auspex Systems, Inc. .................................. 63,300 613,219
BA Merchant Services, Inc. ............................. 10,600 202,062
+ BanTec, Inc. .......................................... 22,000 570,625
+ The BISYS Group, Inc. ................................. 15,500 650,516
+ Wang Laboratories, Inc. ............................... 38,000 811,063
-----------
2,847,485
-----------
CONSUMER NON-DURABLE (0.9%)
Jostens, Inc. .......................................... 9,500 254,125
-----------
ELECTRONICS (7.7%)
AMETEK, Inc. ........................................... 13,800 324,300
EG&G, Inc. ............................................. 15,100 339,750
+ Exar Corp. ............................................ 26,300 567,094
+ Oak Industries, Inc. .................................. 16,060 461,725
+ Tracor, Inc. .......................................... 14,100 352,500
-----------
2,045,369
-----------
FINANCIAL SERVICES (1.3%)
Enhance Financial Services Group........................ 8,300 364,163
-----------
HEALTH CARE (5.5%)
+ CorVel Corp. .......................................... 18,700 549,313
+ Magellan Health Services, Inc. ........................ 32,600 961,700
-----------
1,511,013
-----------
INFORMATION PROCESSING (0.7%)
Reynolds & Reynolds Co., Class A........................ 12,300 193,725
-----------
INSURANCE (11.2%)
Capsure Holdings Corp. ................................. 31,400 406,238
+ Delphi Financial Group Inc. Class A.................... 10,914 420,189
E.W. Blanch Holdings, Inc. ............................. 26,400 704,550
+ Gryphon Holdings, Inc. ................................ 22,500 348,750
Horace Mann Educators Corp. ............................ 6,900 338,100
United Wisconsin Services Inc. ......................... 13,200 444,675
Renaissance Re Holdings Limited......................... 11,300 430,813
-----------
3,093,315
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C> <C>
MACHINERY (DIVERSIFIED) (4.5%)
+ Baldwin Technology Co., Inc. .......................... 87,600 $ 251,850
JLG Industries, Inc. ................................... 21,100 287,488
+ OmniQuip International, Inc. .......................... 27,000 623,531
United Dominion Industries, Limited..................... 3,100 76,144
-----------
1,239,013
-----------
MANUFACTURING (4.6%)
Durco International, Inc. .............................. 14,600 429,788
Keystone International,Inc. ............................ 15,500 537,656
Watts Industries, Inc. ................................. 12,100 290,400
-----------
1,257,844
-----------
MEDICAL SUPPLIES (4.6%)
DENTSPLY International Inc. ............................ 10,100 494,269
+ SpaceLabs Medical, Inc. ............................... 22,200 564,713
Vital Signs, Inc. ...................................... 11,700 201,094
-----------
1,260,076
-----------
METAL FABRICATE/HARDWARE (2.4%)
EASCO, Inc. ............................................ 25,800 256,388
Kaydon Corp. ........................................... 8,200 406,925
-----------
663,313
-----------
MISCELLANEOUS (0.7%)
Roper Industries, Inc. ................................. 3,600 186,750
-----------
OFFICE EQUIPMENT & SERVICES (2.7%)
+ International Imaging Materials, Inc. ................. 39,500 634,461
+ Nu-Kote Holdings, Inc. ................................ 45,600 116,850
-----------
751,311
-----------
OIL & GAS (5.6%)
KCS Energy, Inc. ....................................... 16,800 342,300
+ Nuevo Energy Co. ...................................... 10,500 430,500
St. Mary Land & Exploration Co. ........................ 22,300 779,106
-----------
1,551,906
-----------
PAPER AND FOREST PRODUCTS (0.6%)
Rock-Tenn Company....................................... 9,600 168,600
-----------
PRINTING AND PUBLISHING (2.1%)
Bowne & Co., Inc. ...................................... 9,200 320,850
John H. Harland Co. .................................... 7,600 173,375
Merrill Corp. .......................................... 2,900 104,581
-----------
598,806
-----------
POLLUTION CONTROL (1.6%)
+ Lydall, Inc. .......................................... 21,300 449,963
-----------
PUBLISHING NEWS (1.8%)
Hollinger International, Inc. .......................... 43,700 488,894
-----------
RETAIL (0.8%)
+ Ann Taylor Stores Corporation.......................... 11,800 230,100
-----------
TECHNOLOGY (0.7%)
BDM International Inc. ................................. 8,400 193,200
-----------
TELEPHONE (0.9%)
ACC Corp. .............................................. 8,800 272,250
-----------
TEXTILES (2.1%)
+ Burlington Industries, Inc. ........................... 9,700 116,400
+ Westpoint Stevens, Inc. ............................... 11,800 460,938
-----------
577,338
-----------
</TABLE>
22
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED) (CONTINUED)
THE SMALL CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
TRANSPORTATION
(1.1%)
Interpool, Inc. ............................................ 19,800 $ 292,050
-----------
TOTAL COMMON STOCK
(Cost $20,489,409)... 23,806,101
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000)
-------- ------
<S> <C> <C> <C>
AGENCY OBLIGATIONS (9.2%)
- -------------------------
Federal Farm Credit Bureau 5.37%................... 07/21/97 $1,250 1,246,271
Federal Home Loan Bank 5.46%....................... 08/14/97 240 238,396
Federal National Mortgage Disc. Note 5.44%......... 08/27/97 1,060 1,050,796
-----------
TOTAL AGENCY OBLIGATIONS
(Cost $2,530,653).................................................. 2,535,463
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS (4.8%)
- -----------------------------
Temporary Investmen Fund Class B
(Cost $1,334,175)........................................1,334,175 1,334,175
-----------
TOTAL INVESTMENTS (100.0%)
(Cost $24,354,237)(a).............................................. $27,675,739
===========
</TABLE>
- -------
+ Non-income producing.
(a) At June 30, 1997, the cost for Federal income tax purposes was $24,355,388.
The excess of value over tax cost was $4,089,059 and the excess of tax cost
over value was $768,708.
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED)
THE EMERGING GROWTH FUND
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
COMMON STOCK (68.7%)
- --------------------
ADVERTISING (0.4%)
+ Universal Outdoor Holdings, Inc. .......................... 1,400 $ 48,913
-----------
AUDIO/VIDEO (0.7%)
+ Gemstar International Group Limited........................ 4,900 90,956
-----------
AUTO-PARTS/EQUIPMENT (0.3%)
+ Miller Industries, Inc. ................................... 2,200 35,200
-----------
BROADCASTING (0.9%)
+ Emmis Broadcasting Corp. .................................. 1,700 74,481
VDI Media................................................... 3,000 34,875
-----------
109,356
-----------
BUILDING MAINTANCE & SERVICES (0.2%)
Fairfield Communities Inc. ................................. 900 30,263
-----------
BUSINESS SERVICES (5.1%)
+ Accu Staff, Inc. .......................................... 2,800 66,325
+ Apollo Group, Inc. ........................................ 1,500 52,969
ASI Solutions, Inc. ........................................ 3,700 36,075
Comdisco, Inc. ............................................. 2,500 65,000
+ CoreStaff, Inc. ........................................... 2,300 62,244
+ Forrester Research, Inc. .................................. 2,400 70,050
MAXIMUS, Inc. .............................................. 4,000 71,500
+ On Assignment, Inc. ....................................... 1,600 62,600
+ Romac International, Inc. ................................. 2,800 92,750
Sothebys Holdings, Inc. .................................... 2,100 35,438
-----------
614,951
-----------
CARE FACILITY (0.9%)
+ Assisted Living Concepts................................... 2,100 58,013
+ Sunrise Assisted Living, Inc. ............................. 1,300 45,663
-----------
103,676
-----------
COLLECTIBLES (0.3%)
Racing Champions Corp. ..................................... 2,600 40,137
-----------
COMMERCIAL SERVICES (0.7%)
+ The Profit Recovery Group International, Inc. ............. 5,900 81,309
-----------
COMMUNICATION EQUIPMENT (1.0%)
+ Digital Microwave Corp. ................................... 1,600 47,400
RF Micro Devices, Inc. ..................................... 3,900 74,344
-----------
121,744
-----------
COMMUNICATIONS SERVICES (0.6%)
+ Technology Solutions Company............................... 1,700 67,044
-----------
COMPUTERS (3.9%)
+ Complete Business Solutions, Inc. ......................... 3,400 82,875
+ Great Plains Software, Inc. ............................... 2,100 56,962
Intelligroup, Inc. ......................................... 7,500 73,594
+ Iomega Corp. .............................................. 2,800 55,650
Peerless Systems Corp. ..................................... 3,000 42,000
+ Siebl Systems, Inc. ....................................... 2,900 93,706
+ UniComp, Inc. ............................................. 8,300 58,619
-----------
463,406
-----------
COMMUNICATIONS (2.0%)
+ RadiSys Corp. ............................................. 1,700 67,044
+ SpecTran Corp. ............................................ 1,800 34,537
+ Spectrian Corp. ........................................... 3,800 140,005
-----------
241,586
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<S> <C> <C>
COMPUTER SERVICES & SOFTWARE (18.1%)
Accelr8 Technology Corp. .................................. 3,700 $ 55,731
Analysts International Corp. .............................. 1,000 33,500
+ Arbor Software Corp. ..................................... 1,700 60,031
Aris Corp. ................................................ 4,500 97,312
+ BDM International, Inc. .................................. 1,600 36,600
+ Citrix Systems, Inc. ..................................... 1,600 70,250
+ Computer Concepts Corp. .................................. 63,000 29,531
+ Computer Horizons Corp. .................................. 500 17,094
+ Computer Learning Centers, Inc. .......................... 1,800 75,375
+ Computer Management Sciences, Inc. ....................... 3,200 66,800
Computer Task Group, Inc. ................................. 1,200 44,700
+ Compuware Corp. .......................................... 1,500 71,812
Crystal Systems Solutions.................................. 1,600 33,400
Data Dimensions, Inc. ..................................... 2,500 54,922
DataWorks Corp. ........................................... 1,000 21,812
ECsoft Group PLC........................................... 6,400 89,200
+ JDA Software Group, Inc. ................................. 1,300 44,444
Keane, Inc. ............................................... 1,200 62,400
LGS Group, Inc. ........................................... 6,400 44,029
Mastech Corp. ............................................. 1,300 26,081
+ Metro Information Services, Inc. ......................... 1,900 37,406
+ Micro Focus Group......................................... 3,000 89,625
New Era of Networks........................................ 5,200 87,750
ONTRAK Data International, Inc. ........................... 3,300 75,075
+ Pure Atria Corp. ......................................... 3,000 42,562
Rational Software Corp. ................................... 2,600 43,631
+ Remedy Corp. ............................................. 3,100 123,516
RWD Technologies, Inc. .................................... 1,700 29,644
SEEC, Inc. ................................................ 4,500 84,938
+ Segue Software, Inc. ..................................... 2,900 39,694
Simulation Sciences, Inc. ................................. 3,400 51,212
Smallworldwide PLC (ADR)................................... 3,600 61,200
+ Software Artistry, Inc. .................................. 4,600 73,312
+ Strategia Corp. .......................................... 400 5,425
Technology Modeling Association Inc. ...................... 2,500 34,219
+ The Vantive Corp. ........................................ 4,000 113,500
+ Transactions Systems Architects, Inc. .................... 1,300 44,769
Vanstar Corp. ............................................. 2,900 40,963
+ Viasoft, Inc. ............................................ 1,200 61,050
------------
2,174,515
------------
DISTRIBUTION SERVICES (0.4%)
+ MicroAge, Inc. ........................................... 2,800 51,975
------------
EDUCATION (1.2%)
Abacus Direct Corp. ....................................... 1,000 32,562
Education Management Corp. ................................ 1,200 30,900
Strayer Education, Inc. ................................... 2,100 81,375
------------
144,837
------------
ELECTRONICS (0.2%)
CellStar Corp. ............................................ 800 24,550
------------
ELECTRONICS - DEFENSE (0.2%)
Nichols Research Corp. .................................... 1,400 28,963
------------
ELECTRONICS - INSTRUMENTS (0.0%)
Intest Corp. .............................................. 600 5,475
------------
FINANCE (1.5%)
Resource Bancshares Mortgage Group......................... 2,800 55,125
+ Financial Federal Corp. .................................. 3,100 68,200
+ Southern Pacific Funding.................................. 3,400 56,525
------------
179,850
------------
</TABLE>
24
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
HEALTHCARE (0.6%)
+ MedQuist, Inc. ............................................ 1,400 $ 42,437
+ Renal Care Group, Inc. .................................... 800 33,400
-----------
75,837
-----------
HELP SUPPORT SERVICES (0.8%)
+ Alternative Resources Corporation.......................... 3,300 67,134
+ SCB Computer Technology, Inc. ............................. 1,200 29,100
-----------
96,234
-----------
HEATING & AIR CONDITIONING (0.3%)
Comfort Systems USA, Inc. .................................. 2,300 35,938
-----------
HOTEL & MOTELS (2.1%)
+ Doubletree Corp. .......................................... 2,300 94,516
Four Seasons Hotels, Inc. .................................. 3,400 100,725
+ Suburban Lodges of America, Inc. .......................... 2,800 58,275
-----------
253,516
-----------
HUMAN RESOURCES (1.0%)
RCM Technologies, Inc. ..................................... 6,600 70,537
Staff Leasing, Inc. ........................................ 2,700 50,119
-----------
120,656
-----------
INSURANCE (1.4%)
ARM Financial Group, Inc. .................................. 1,700 34,000
SunAmerica, Inc. ........................................... 1,500 73,125
-----------
107,125
-----------
MACHINERY (DIVERSIFIED) (0.8%)
+ ASM Lithography Holding.................................... 1,600 93,450
Hirsch International Co. ................................... 200 4,413
-----------
97,863
-----------
MEDICAL SERVICES (3.6%)
+ Cerner Corp. .............................................. 2,100 44,100
+ Coventry Corp. ............................................ 5,200 79,138
+ Cytyc Corp. ............................................... 2,200 59,538
+ Lincare Holdings, Inc. .................................... 1,600 68,850
+ Medical Manager Corp. ..................................... 2,600 38,837
SeaMed Corp. ............................................... 2,200 44,688
+ Sunquest Information Systems, Inc. ........................ 2,400 36,450
+ Universal Health Services, Inc. ........................... 1,700 65,450
-----------
437,051
-----------
MEDICAL INFORMATION SYSTEMS (1.4%)
HBO & Co. .................................................. 1,500 103,313
+ Transition Systems, Inc. .................................. 3,500 63,766
-----------
167,079
-----------
MANUFACTURING (1.0%)
Optical Coating Laboratory, Inc. ........................... 1,900 25,412
+ Vans, Inc. ................................................ 3,800 57,356
Wesley Jessen VisionCare, Inc. ............................. 1,600 38,300
-----------
121,068
-----------
PHARMACEUTICALS (1.5%)
+ Medicis Pharmaceutical Corp. .............................. 2,300 114,569
+ Vertex Pharmaceuticals, Inc. .............................. 1,600 61,000
-----------
175,569
-----------
PUBLISHING NEWS (0.6%)
Journal Register Co. ....................................... 3,400 67,575
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
RACE TRACKS (0.3%)
+ Speedway Motorsports, Inc. ................................ 1,600 $ 34,800
-----------
REAL ESTATE (0.3%)
CB Commercial Real Estate Services Gourp, Inc. ............. 1,300 39,569
-----------
RECREATIONAL (0.6%)
Silverleaf Resorts, Inc. ................................... 4,600 70,725
-----------
RESTAURANTS (0.7%)
+ Foodmaker Inc. ............................................ 2,900 47,487
+ NPC International, Inc. ................................... 2,600 30,712
-----------
78,199
-----------
RETAIL (5.9%)
+ Bed Bath & Beyond, Inc. ................................... 2,300 69,934
Claire's Stores, Inc. ...................................... 4,900 85,750
Coldwater Creek, Inc. ...................................... 2,300 58,363
+ Delia's, Inc. ............................................. 2,400 44,400
+ DM Management Co. ......................................... 3,500 39,375
+ Dress Barn, Inc. .......................................... 1,900 36,991
+ Gadzooks, Inc. ............................................ 2,400 47,100
+ General Nutrition Companies, Inc. ......................... 1,400 39,113
+ K&G Mens Center, Inc. ..................................... 2,000 44,750
+ Pacific Sunwear of California.............................. 1,400 45,500
+ Piercing Pagoda, Inc. ..................................... 1,600 40,000
+ The Wet Seal, Inc. ........................................ 4,900 154,503
-----------
705,779
-----------
SEMICONDUCTORS (0.9%)
Vitesse Semiconductor Corp. ................................ 3,300 107,766
-----------
TELECOMMUNICATIONS (5.0%)
ACE*COMM Corp. ............................................. 1,700 33,256
+ Brightpoint, Inc. ......................................... 2,900 94,522
Geotel Communications Corp. ................................ 3,100 40,881
LCC International, Inc. .................................... 3,200 49,600
Melita International Corp. ................................. 2,000 25,000
+ Natural Microsystems Corp. ................................ 2,700 97,116
+ P-COM, Inc. ............................................... 1,300 42,737
+ Premiere Technologies, Inc. ............................... 1,500 39,094
+ Tekelec.................................................... 1,500 52,969
+ Tellabs, Inc. ............................................. 1,000 55,812
+ Uniphase Corp. ............................................ 1,300 75,400
-----------
606,387
-----------
TEXTILE-APPAREL (0.4%)
+ Sport-Haley, Inc. ......................................... 3,100 52,312
-----------
TOBACCO (0.3%)
800-JR CIGAR, Inc. ......................................... 1,800 37,688
-----------
WATER TREATMENT SYSTEMS (0.6%)
Waterlink, Inc. ............................................ 5,800 75,400
-----------
TOTAL COMMON STOCK
(Cost $7,578,534).................................................. 8,222,842
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000)
-------- -----
<S> <C> <C> <C>
U.S. TREASURY OBLIGATION (25.1%)
- --------------------------------
Treasury Bill 4.55%
(Cost $2,999,242)................................. 07/03/97 $3,000 2,999,242
-----------
</TABLE>
25
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED) (CONTINUED)
THE EMERGING GROWTH FUND
<TABLE>
<CAPTION>
SHARES
-------
<S> <C> <C>
SHORT-TERM INVESTMENTS (6.2%)
- -----------------------------
Temporary Cash Investment Fund, Inc. ..................... 373,668 $ 373,668
Temporary Investment Fund, Inc. .......................... 373,668 373,668
-----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $747,336)................................................... 747,336
-----------
TOTAL INVESTMENTS (100.0%)
(Cost $11,325,112)(a)............................................. $11,969,420
===========
</TABLE>
- -------
+ Non-income producing.
(a) Also cost for Federal income tax purposes. At June 30, 1997, the excess of
value over tax cost was $719,700, and the excess of tax cost over value was
$75,392.
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
- ----------------------------------------------------
THIS PAGE LEFT INTENTIONALLY BLANK
27
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES - (UNAUDITED)
JUNE 30, 1997
<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).. $38,559,585 $36,821,305 $49,905,595 $121,159,849
Cash...................... -- -- 16,434 --
Interest, dividends and
reclaims receivable...... 275,147 453,076 862,616 98,727
Receivable for investment
securities sold.......... -- 906,068 593,892 3,132,195
Receivable for capital
stock sold............... -- 96,764 164,724 12,769
Other assets.............. 297 324 354 876
----------- ----------- ----------- ------------
Total assets............. 38,835,029 38,277,537 51,543,615 124,404,416
----------- ----------- ----------- ------------
LIABILITIES:
Cash overdraft............ -- -- -- 370,338
Payable for investment
securities purchased..... -- 888,480 400,000 --
Payables for capital stock
redeemed................. -- 22,214 -- 123,089
Dividends payable......... 160,645 -- -- --
Payable to the investment
advisor.................. 15,048 17,929 20,691 49,372
Payable to The Penn Mutual
Life Insurance Co. ...... 14,051 13,715 18,031 43,465
Net unrealized
depreciation on forward
foreign currency
contracts................ -- -- -- --
Other liabilities......... 8,762 5,504 13,353 19,886
----------- ----------- ----------- ------------
Total Liabilities........ 198,506 947,842 452,075 606,150
----------- ----------- ----------- ------------
NET ASSETS................. $38,636,523 $37,329,695 $51,091,540 $123,798,266
=========== =========== =========== ============
Shares of $.10 par value
capital stock issued and
outstanding............... 38,683,055 3,637,639 5,323,411 4,975,571
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SHARE..................... $ 1.00 $ 10.26 $ 9.60 $ 24.88
NET ASSETS CONSIST OF:
Capital paid in........... $38,638,055 $38,695,507 $49,700,841 $ 87,451,010
Undistributed net
investment income (loss). -- 1,132,003 2,113,809 276,778
Accumulated net realized
gain (loss) on investment
transactions and foreign
exchange................. (1,532) (977,814) (2,545,872) 5,151,884
Net unrealized
appreciation in value of
investments, futures
contracts and foreign
currency related items... -- 479,999 1,822,762 30,918,594
----------- ----------- ----------- ------------
TOTAL NET ASSETS......... $38,636,523 $37,329,695 $51,091,540 $123,798,266
=========== =========== =========== ============
(1) Investments at cost.... $38,559,585 $36,341,306 $48,082,833 $ 90,241,255
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL
VALUE FLEXIBLY INTERNATIONAL CAPITALIZATION EMERGING
EQUITY FUND MANAGED FUND EQUITY FUND FUND GROWTH FUND
------------ ------------ ------------- -------------- -----------
<S> <C> <C> <C> <C>
$260,720,844 $467,177,806 $128,905,195 $27,675,739 $11,969,420
-- -- -- -- --
296,544 1,925,359 469,727 12,431 1,876
-- 1,890,956 -- 204,430 28,879
9,887 356,199 118,687 20,619 176,967
1,646 1,420 887 123 --
------------ ------------ ------------ ----------- -----------
261,028,921 471,351,740 129,494,496 27,913,342 12,177,142
------------ ------------ ------------ ----------- -----------
-- -- -- -- --
359,912 1,096,823 -- 244,868 3,612,764
686,798 440,136 54,536 19,030 4,249
-- -- -- -- --
104,900 190,732 77,814 11,004 2,777
88,977 165,962 44,450 9,013 280
-- -- 1,318,652 -- --
27,182 63,379 53,535 3,884 2,600
------------ ------------ ------------ ----------- -----------
1,267,769 1,957,032 1,548,987 287,799 3,622,670
------------ ------------ ------------ ----------- -----------
$259,761,152 $469,394,708 $127,945,509 $27,625,543 $ 8,554,472
============ ============ ============ =========== ===========
11,829,135 23,085,300 7,307,523 1,910,984 697,820
$ 21.96 $ 20.33 $ 17.51 $ 14.46 $ 12.26
$175,903,667 $381,520,330 $ 98,167,923 $22,827,927 $ 7,708,690
1,636,509 6,614,674 316,593 78,983 (2,861)
3,143,961 14,631,424 5,361,551 1,397,131 204,335
79,077,015 66,628,280 24,099,442 3,321,502 644,308
------------ ------------ ------------ ----------- -----------
$259,761,152 $469,394,708 $127,945,509 $27,625,543 $ 8,554,472
============ ============ ============ =========== ===========
$181,643,829 $400,550,423 $103,487,100 $24,354,237 $11,325,112
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
MONEY QUALITY HIGH YIELD GROWTH
MARKET FUND BOND FUND BOND FUND EQUITY FUND
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.................... $ -- $ 10,300 $ 72,364 $ 577,964
Interest..................... 1,010,108 1,255,853 2,228,987 137,696
Foreign tax withheld......... -- -- -- (3,051)
---------- ---------- ---------- -----------
Total investment income..... 1,010,108 1,266,153 2,301,351 712,609
---------- ---------- ---------- -----------
EXPENSES:
Investment advisory fees..... 70,005 81,892 116,765 271,290
Administration fees.......... 26,646 27,297 35,029 85,140
Accounting fees.............. 13,323 13,722 17,515 40,766
Custodian fees and expenses.. 7,214 5,577 9,861 15,079
Professional fees............ 1,691 1,555 2,081 5,000
Other expenses............... 7,235 4,107 6,291 18,556
---------- ---------- ---------- -----------
Total expenses.............. 126,114 134,150 187,542 435,831
Less: Expense waivers....... -- -- -- --
---------- ---------- ---------- -----------
Net expenses................ 126,114 134,150 187,542 435,831
---------- ---------- ---------- -----------
NET INVESTMENT INCOME (LOSS).. 883,994 1,132,003 2,113,809 276,778
---------- ---------- ---------- -----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on
investment transactions..... -- (97,449) 1,994,018 5,343,998
Net realized foreign exchange
gain........................ -- -- -- --
Change in net unrealized
appreciation (depreciation)
of investments, futures
contracts and foreign
currency related items...... -- (81,034) (578,688) 11,447,198
---------- ---------- ---------- -----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS... -- (178,483) 1,415,330 16,791,196
---------- ---------- ---------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.... $ 883,994 $ 953,520 $3,529,139 $17,067,974
========== ========== ========== ===========
</TABLE>
- -----------------------
* For the period from May 1, 1997 (commencement of operations) to June 30,
1997.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FLEXIBLY SMALL EMERGING
VALUE MANAGED INTERNATIONAL CAPITALIZATION GROWTH
EQUITY FUND FUND EQUITY FUND FUND FUND *
- ----------- ----------- ------------- -------------- --------
<S> <C> <C> <C> <C>
$ 1,449,658 $ 3,291,485 $ 1,091,077 $ 76,129 $ 717
1,049,053 4,955,142 294,781 95,668 4,178
(4,325) (9,982) (72,785) (798) --
- ----------- ----------- ----------- ---------- --------
2,494,386 8,236,645 1,313,073 170,999 4,895
- ----------- ----------- ----------- ---------- --------
563,108 1,065,767 420,608 53,194 5,396
168,932 319,730 84,122 15,958 1,012
68,708 106,097 46,038 13,637 506
17,441 47,254 57,062 4,309 1,470
10,530 20,370 5,624 1,022 77
29,158 62,753 23,737 3,896 758
- ----------- ----------- ----------- ---------- --------
857,877 1,621,971 637,191 92,016 9,219
-- -- -- -- (1,463)
- ----------- ----------- ----------- ---------- --------
857,877 1,621,971 637,191 92,016 7,756
- ----------- ----------- ----------- ---------- --------
1,636,509 6,614,674 675,882 78,983 (2,861)
- ----------- ----------- ----------- ---------- --------
3,143,961 14,610,808 2,499,300 1,398,282 204,335
-- 26,593 2,797,258 -- --
25,506,428 14,862,923 7,610,865 2,024,857 644,308
- ----------- ----------- ----------- ---------- --------
28,650,389 29,500,324 12,907,423 3,423,139 848,643
- ----------- ----------- ----------- ---------- --------
$30,286,898 $36,114,998 $13,583,305 $3,502,122 $845,782
=========== =========== =========== ========== ========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MONEY MARKET FUND QUALITY BOND FUND
-------------------------- --------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
6/30/97 ENDED 6/30/97 ENDED
(UNAUDITED) 12/31/96 (UNAUDITED) 12/31/96
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS:
Net investment income
(loss)................ $ 883,994 $ 1,467,263 $ 1,132,003 $ 2,357,782
Net realized gain
(loss) on investment
transactions.......... -- (97,449) (117,033)
Net realized foreign
exchange gain (loss).. -- -- -- --
Net change in
unrealized
appreciation
(depreciation) of
investments and
foreign currency
related items......... -- -- (81,034) (692,970)
------------ ------------ ------------ ------------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS........... 883,994 1,467,263 953,520 1,547,779
------------ ------------ ------------ ------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income.. (883,994) (1,467,263) -- (2,342,476)
Net realized capital
gains................. -- -- -- --
In excess of net
investment income..... -- -- -- --
------------ ------------ ------------ ------------
TOTAL DISTRIBUTIONS... (883,994) (1,467,263) -- (2,342,476)
------------ ------------ ------------ ------------
CAPITAL SHARE
TRANSACTIONS:
Net increase (decrease)
in net assets from
capital share
transactions.......... 4,135,904 9,775,026 (1,235,166) 357,633
------------ ------------ ------------ ------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS............... 4,135,904 9,775,026 (281,646) (437,064)
Net Assets, beginning of
period................. 34,500,619 24,725,593 37,611,341 38,048,405
------------ ------------ ------------ ------------
NET ASSETS, END OF
PERIOD................. $ 38,636,523 $ 34,500,619 $ 37,329,695 $ 37,611,341
============ ============ ============ ============
<CAPTION>
VALUE EQUITY FUND FLEXIBLY MANAGED FUND
-------------------------- --------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
6/30/97 ENDED 6/30/97 ENDED
(UNAUDITED) 12/31/96 (UNAUDITED) 12/31/96
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS:
Net investment income
(loss)................ $ 1,636,509 $ 2,210,027 $ 6,614,674 $ 12,850,451
Net realized gain
(loss) on investment
transactions.......... 3,143,961 8,252,470 14,610,808 16,818,384
Net realized foreign
exchange gain (loss).. -- -- 26,593 (2,411)
Net change in
unrealized
appreciation
(depreciation) of
investments and
foreign currency
related items......... 25,506,428 25,690,221 14,862,923 21,020,920
------------ ------------ ------------ ------------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS........... 30,286,898 36,152,718 36,114,998 50,687,344
------------ ------------ ------------ ------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income.. -- (2,210,027) -- (12,850,451)
Net realized capital
gains................. -- (8,252,470) -- (16,768,765)
In excess of net
investment income..... -- -- -- (4,084)
------------ ------------ ------------ ------------
TOTAL DISTRIBUTIONS... -- (10,462,497) -- (29,623,300)
------------ ------------ ------------ ------------
CAPITAL SHARE
TRANSACTIONS:
Net increase (decrease)
in net assets from
capital share
transactions ......... 28,800,361 47,723,822 34,735,571 110,923,988
------------ ------------ ------------ ------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS............... 59,087,259 73,414,043 70,850,569 131,988,032
Net Assets, beginning of
period................. 200,673,893 127,259,850 398,544,139 266,556,107
------------ ------------ ------------ ------------
NET ASSETS, END OF
PERIOD................. $259,761,152 $200,673,893 $469,394,708 $398,544,139
============ ============ ============ ============
</TABLE>
- -----------------------
* For the period from May 1, 1997 (commencement of operations) to June 30,
1997.
The accompanying notes are an integral part of these financial statements.
32
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH YIELD BOND FUND GROWTH EQUITY FUND
- ------------------------------ -------------------------------
SIX MONTHS
SIX MONTHS YEAR ENDED YEAR
ENDED 6/30/97 ENDED 6/30/97 ENDED
(UNAUDITED) 12/31/96 (UNAUDITED) 12/31/96
- -------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
$ 2,113,809 $ 3,194,439 $ 276,778 $ 475,615
1,994,018 (499,838) 5,343,998 10,366,718
-- -- -- --
(578,688) 2,501,662 11,447,198 7,073,178
- ------------- ------------- ------------ ------------
3,529,139 5,196,263 17,067,974 17,915,511
- ------------- ------------- ------------ ------------
-- (3,194,439) -- (475,615)
-- -- -- (10,558,832)
-- (25,808) --
- ------------- ------------- ------------ ------------
-- (3,220,247) -- (11,034,447)
- ------------- ------------- ------------ ------------
3,520,842 5,623,807 690,832 3,565,102
- ------------- ------------- ------------ ------------
7,049,981 7,599,823 17,758,806 10,446,166
44,041,559 36,441,736 106,039,460 95,593,294
- ------------- ------------- ------------ ------------
$ 51,091,540 $ 44,041,559 $123,798,266 $106,039,460
============= ============= ============ ============
<CAPTION>
EMERGING
INTERNATIONAL EQUITY FUND SMALL CAPITALIZATION FUND GROWTH FUND
- ------------------------------ ------------------------------- -----------
SIX MONTHS
SIX MONTHS YEAR ENDED YEAR PERIOD
ENDED 6/30/97 ENDED 6/30/97 ENDED ENDED
(UNAUDITED) 12/31/96 (UNAUDITED) 12/31/96 6/30/97*
- -------------- ------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
$ 675,882 $ 567,625 $ 78,983 $ 87,435 $ (2,861)
2,499,300 5,713,489 1,398,282 588,102 204,335
2,797,258 3,145,612 -- -- --
7,610,865 4,322,244 2,024,857 1,130,459 644,308
- ------------- ------------- ------------ ------------ ----------
13,583,305 13,748,970 3,502,122 1,805,996 845,782
- ------------- ------------- ------------ ------------ ----------
-- (567,625) -- (87,435) --
-- (4,589,862) -- (607,875) --
-- (2,877,835) -- --
- ------------- ------------- ------------ ------------ ----------
-- (8,035,322) -- (695,310) --
- ------------- ------------- ------------ ------------ ----------
9,944,616 29,173,205 7,989,389 10,195,439 7,708,690
- ------------- ------------- ------------ ------------ ----------
23,527,921 34,886,853 11,491,511 11,306,125 8,554,472
104,417,588 69,530,735 16,134,032 4,827,907 0
- ------------- ------------- ------------ ------------ ----------
$ 127,945,509 $ 104,417,588 $ 27,625,543 $ 16,134,032 $8,554,472
============= ============= ============ ============ ==========
</TABLE>
33
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE MONEY MARKET FUND
The table below sets forth financial data for a share outstanding throughout
each period
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1997 ------------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
---------------- -------- -------- -------- -------- --------
<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.... 0.0246 0.0489 0.0538 0.0365 0.0250 0.0306
-------- -------- -------- -------- -------- --------
Total from investment
operations............. 0.0246 0.0489 0.0538 0.0365 0.0250 0.0306
-------- -------- -------- -------- -------- --------
LESS DIVIDENDS:
Dividends from net
investment income....... (0.0246) (0.0489) (0.0538) (0.0365) (0.0250) (0.0306)
-------- -------- -------- -------- -------- --------
Total dividends......... (0.0246) (0.0489) (0.0538) (0.0365) (0.0250) (0.0306)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total return............. 2.48% 5.00% 5.51% 3.71% 2.53% 3.08%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands).......... $ 38,637 $ 34,501 $ 24,726 $ 16,531 $ 13,005 $ 11,862
-------- -------- -------- -------- -------- --------
Ratio of expenses to
average net assets...... 0.71%(a) 0.73%(b) 0.69%(b) 0.73%(b) 0.74%(b) 0.77%(b)
-------- -------- -------- -------- -------- --------
Ratio of net investment
income to average net
assets.................. 4.98%(a) 4.88%(b) 5.37%(b) 3.74%(b) 2.51%(b) 3.07%(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%, .82%, and .84%, and the ratios of net investment income to
average net assets would have been 4.87%, 5.32%, 3.68%, 2.43%, and 3.00%
for the years ended December 31, 1996, 1995, 1994, 1993, and 1992,
respectively.
- --------------------------------------------------------------------------------
THE QUALITY BOND FUND
The table below sets forth financial data for a share outstanding throughout
each period
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1997 -------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
---------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 10.00 $ 10.24 $ 9.04 $ 10.19 $ 10.03 $ 10.51
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.31 0.66 0.61 0.61 0.46 0.75
Net realized and
unrealized gain (loss)
on investment
transactions........... (0.05) (0.24) 1.21 (1.15) 0.71 (0.06)
------- ------- ------- ------- ------- -------
Total from investment
operations............ 0.26 0.42 1.82 (0.54) 1.17 0.69
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividend from net
investment income...... -- (0.66) (0.61) (0.61) (0.46) (0.75)
Distribution from net
realized gain.......... -- -- -- -- (0.54) (0.42)
Distribution in excess
of net realized gain... -- -- (0.01) -- (0.01) 0.00
------- ------- ------- ------- ------- -------
Total distributions.... -- (0.66) (0.62) (0.61) (1.01) (1.17)
------- ------- ------- ------- ------- -------
Net asset value, end of
period................. $ 10.26 $ 10.00 $ 10.24 $ 9.04 $ 10.19 $ 10.03
======= ======= ======= ======= ======= =======
Total return............ 2.60% 4.14% 20.14% (5.29)% 11.67% 6.57%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in thousands).. $37,330 $37,611 $38,048 $31,338 $33,027 $20,314
------- ------- ------- ------- ------- -------
Ratio of expenses to
average net assets..... 0.74%(a) 0.77%(b) 0.73%(b) 0.78%(b) 0.79%(b) 0.84%(b)
------- ------- ------- ------- ------- -------
Ratio of net investment
income to average net
assets................. 6.22%(a) 6.03%(b) 6.20%(b) 6.14%(b) 5.21%(b) 6.25%(b)
------- ------- ------- ------- ------- -------
Portfolio turnover rate. 137.6% 107.6% 449.2% 380.9% 389.4% 190.8%
------- ------- ------- ------- ------- -------
- ---------------------------------------
</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 .78%,
.78%, .83%, .84%, and .87%, and the ratio of net investment income to
average net assets would have been 6.02%, 6.15%, 6.09%, 5.16%, and 6.22%
for the years ended December 31, 1996, 1995, 1994, 1993, and 1992,
respectively.
34
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE HIGH YIELD BOND FUND
The table below sets forth financial data for a share outstanding throughout
each period
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1997 --------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
---------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 8.91 $ 8.44 $ 7.94 $ 9.55 $ 8.63 $ 8.23
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.40 0.70 0.80 0.90 0.77 0.87
Net realized and
unrealized gain (loss)
on investment
transactions........... 0.29 0.47 0.50 (1.60) 0.94 0.43
------- ------- ------- ------- ------- -------
Total from investment
operations............ 0.69 1.17 1.30 (0.70) 1.71 1.30
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividend from net
investment income...... -- (0.70) (0.80) (0.90) (0.77) (0.87)
Distribution in excess
of net investment
income................. -- -- -- (0.01) (0.02) (0.03)
------- ------- ------- ------- ------- -------
Total distributions.... -- (0.70) (0.80) (0.91) (0.79) (0.90)
------- ------- ------- ------- ------- -------
Net asset value, end of
period................. $ 9.60 $ 8.91 $ 8.44 $ 7.94 $ 9.55 $ 8.63
======= ======= ======= ======= ======= =======
Total return............ 7.74% 13.87% 16.41% (7.33)% 19.81% 15.80%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in thousands).. $51,092 $44,042 $36,442 $32,081 $35,305 $19,840
------- ------- ------- ------- ------- -------
Ratio of expenses to
average net assets..... 0.80%(a) 0.84% 0.87% 0.86% 0.87% 0.88%(b)
------- ------- ------- ------- ------- -------
Ratio of net investment
income to average net
assets................. 8.98%(a) 8.14% 9.20% 9.18% 9.21% 9.87%(b)
------- ------- ------- ------- ------- -------
Portfolio turnover rate. 64.0% 118.5% 84.3% 90.7% 118.7% 94.3%
------- ------- ------- ------- ------- -------
- ---------------------------------------
</TABLE>
(a) Annualized.
(b) Had fees not been waived by the investment advisor and administrator of the
Fund, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets would have been .93% and 9.82% for
the year ended December 31, 1992.
- --------------------------------------------------------------------------------
THE GROWTH EQUITY FUND
The table below sets forth financial data for a share outstanding throughout
each period
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1997 --------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
---------------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period..... $ 21.46 $ 20.00 $ 18.30 $ 20.49 $ 18.82 $ 21.47
-------- -------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.... 0.06 0.11 0.09 0.13 0.06 0.16
Net realized and
unrealized gain (loss)
on investment
transactions............ 3.36 3.85 4.75 (1.80) 2.28 1.12
-------- -------- ------- ------- ------- -------
Total from investment
operations............. 3.42 3.96 4.84 (1.67) 2.34 1.28
-------- -------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividend from net
investment income....... 0.00 (0.11) (0.09) (0.13) (0.06) (0.16)
Distribution from capital
gains................... 0.00 (2.39) (3.05) (0.39) (0.61) (3.77)
-------- -------- ------- ------- ------- -------
Total distributions..... 0.00 (2.50) (3.14) (0.52) (0.67) (3.93)
-------- -------- ------- ------- ------- -------
Net asset value, end of
period.................. $ 24.88 $ 21.46 $ 20.00 $ 18.30 $ 20.49 $ 18.82
======== ======== ======= ======= ======= =======
Total return............. 15.94% 19.76% 26.45% (8.12)% 12.43% 5.96%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands).......... $123,798 $106,039 $95,593 $80,078 $83,938 $73,977
-------- -------- ------- ------- ------- -------
Ratio of expenses to
average net assets...... 0.76%(a) 0.80%(b) 0.77%(b) 0.79%(b) 0.77%(b) 0.88%(b)
-------- -------- ------- ------- ------- -------
Ratio of net investment
income to average net
assets.................. 0.48%(a) 0.48%(b) 0.43%(b) 0.70%(b) 0.30%(b) 0.81%(b)
-------- -------- ------- ------- ------- -------
Portfolio turnover rate.. 89.3% 177.1% 169.8% 156.2% 185.3% 120.7%
-------- -------- ------- ------- ------- -------
Average commission rate
paid (c)................ $ 0.0776 $ 0.0774 -- -- -- --
-------- -------- ------- ------- ------- -------
- ---------------------------------------
</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%, .82%, and .89% and the ratio of net investment income to average
net assets would have been .47%, .38%, .65%, .25% and .80% for the years
ended December 31, 1996, 1995, 1994, 1993 and 1992, respectively.
(c)Computed by dividing the total amount of commissions paid by total number of
shares purchased and sold during the period for which commissions were
charged, as required by the SEC beginning after September 1, 1995.
Note: The Fund changed to its current investment advisor on November 1, 1992.
35
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE VALUE EQUITY PORTFOLIO
The table below sets forth financial data for a share outstanding throughout
each period
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1997 ---------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
---------------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 19.32 $ 16.28 $ 12.67 $ 12.68 $ 12.14 $ 11.89
-------- -------- -------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.14 0.22 0.25 0.20 0.17 0.45
Net realized and
unrealized gain on
investment
transactions........... 2.50 3.88 4.50 0.17 0.69 1.32
-------- -------- -------- ------- ------- -------
Total from investment
operations............ 2.64 4.10 4.75 0.37 0.86 1.77
-------- -------- -------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividend from net
investment income...... -- (0.22) (0.25) (0.20) (0.17) (0.45)
Distribution from net
realized gain.......... -- (0.84) (0.89) (0.18) (0.15) (1.07)
-------- -------- -------- ------- ------- -------
Total distributions.... -- (1.06) (1.14) (0.38) (0.32) (1.52)
-------- -------- -------- ------- ------- -------
Net asset value, end of
period................. $ 21.96 $ 19.32 $ 16.28 $ 12.67 $ 12.68 $ 12.14
======== ======== ======== ======= ======= =======
Total return............ 13.66% 25.19% 37.48% 2.92% 7.08% 14.89%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in thousands).. $259,761 $200,674 $127,260 $79,021 $69,980 $49,199
-------- -------- -------- ------- ------- -------
Ratio of expenses to
average net assets..... 0.76%(a) 0.78% 0.80% 0.82% 0.83% 0.88%(b)
-------- -------- -------- ------- ------- -------
Ratio of net investment
income to average net
assets................. 1.44%(a) 1.38% 1.71% 1.59% 1.49% 3.87%(b)
-------- -------- -------- ------- ------- -------
Portfolio turnover rate. 4.7% 25.0% 34.3% 30.6% 17.2% 117.4%
-------- -------- -------- ------- ------- -------
Average commission rate
paid (c)............... $ 0.0598 $ 0.0588 -- -- -- --
-------- -------- -------- ------- ------- -------
- ---------------------------------------
</TABLE>
(a) Annualized.
(b) Had fees not been waived by the investment advisor and administrator of the
Fund, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets would have been .90% and 3.85%,
respectively, for the year ended December 31, 1992.
(c) Computed by dividing the total amount of commissions paid by total number
of shares purchased and sold during the period for which commissions were
charged, as required by the SEC beginning after September 1, 1995.
- --------------------------------------------------------------------------------
THE FLEXIBLY MANAGED FUND
The table below sets forth financial data for a share outstanding throughout
each period
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1997 -----------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
---------------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 18.74 $ 17.40 $ 15.19 $ 15.70 $ 14.31 $ 13.73
-------- -------- -------- -------- -------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.29 0.65 0.53 0.43 0.34 0.58
Net realized and
unrealized gain on
investment
transactions........... 1.30 2.19 2.86 0.22 1.92 0.74
-------- -------- -------- -------- -------- -------
Total from investment
operations............ 1.59 2.84 3.39 0.65 2.26 1.32
-------- -------- -------- -------- -------- -------
LESS DISTRIBUTIONS:
Dividend from net
investment income...... -- (0.65) (0.53) (0.43) (0.34) (0.58)
Distribution in excess
of net investment
income................. -- 0.00 (0.01) (0.02) 0.00 0.00
Distribution from
capital gains.......... -- (0.85) (0.64) (0.71) (0.53) (0.16)
-------- -------- -------- -------- -------- -------
Total distributions.... -- (1.50) (1.18) (1.16) (0.87) (0.74)
-------- -------- -------- -------- -------- -------
Net asset value, end of
period................. $ 20.33 $ 18.74 $ 17.40 $ 15.19 $ 15.70 $ 14.31
======== ======== ======== ======== ======== =======
Total return............ 8.48% 16.37% 22.28% 4.14% 15.79% 9.61%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in thousands).. $469,395 $398,544 $266,556 $169,847 $113,492 $70,979
-------- -------- -------- -------- -------- -------
Ratio of expenses to
average net assets..... 0.76%(a) 0.77% 0.79% 0.82% 0.85% 0.89%(b)
-------- -------- -------- -------- -------- -------
Ratio of net investment
income to average net
assets................. 3.08%(a) 3.90% 3.45% 3.14% 2.62% 4.56%(b)
-------- -------- -------- -------- -------- -------
Portfolio turnover rate. 17.3% 32.9% 37.2% 37.3% 42.6% 29.5%
-------- -------- -------- -------- -------- -------
Average commission rate
paid (c)............... $ 0.0436 $ 0.0627 -- -- -- --
-------- -------- -------- -------- -------- -------
- ---------------------------------------
</TABLE>
(a) Annualized.
(b) Had fees not been waived by the investment advisor and administrator of the
Fund, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets would have been .90% and 4.55%,
respectively, for the year ended December 31, 1992.
(c) Computed by dividing the total amount of commissions paid by total number
of shares purchased and sold during the period for which commissions were
charged, as required by the SEC beginning after September 1, 1995.
36
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE INTERNATIONAL EQUITY PORTFOLIO
The table below sets forth financial data for a share outstanding throughout
each period
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1997 --------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992*
---------------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 15.61 $ 14.47 $ 13.01 $ 13.94 $ 10.12 $ 10.00
-------- -------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.10 0.63 0.13 0.09 0.03 0.03
Net realized and
unrealized gain (loss)
on investments and
foreign currency
related transactions... 1.80 1.81 1.67 (0.97) 3.83 0.17
-------- -------- ------- ------- ------- -------
Total from investment
operations............ 1.90 2.44 1.80 (0.88) 3.86 0.20
-------- -------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividend from net
investment income...... -- (0.56) (0.12) (0.02) (0.01) (0.03)
Distribution in excess
of net investment
income................. -- (0.74) (0.22) -- -- (0.05)
Distribution from
capital gains.......... -- -- -- -- (0.03) --
Distribution from
capital................ -- -- -- (0.03) -- --
-------- -------- ------- ------- ------- -------
Total distributions.... -- (1.30) (0.34) (0.05) (0.04) (0.08)
-------- -------- ------- ------- ------- -------
Net asset value, end of
period................. $ 17.51 $ 15.61 $ 14.47 $ 13.01 $ 13.94 $ 10.12
======== ======== ======= ======= ======= =======
Total return............ 12.17% 16.87% 13.80% 6.31% 38.14% 2.00%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in thousands).. $127,946 $104,418 $69,531 $59,393 $40,798 $11,137
-------- -------- ------- ------- ------- -------
Ratio of expenses to
average net assets..... 1.14%(a) 1.17% 1.23% 1.22% 1.21% 1.54%(a)(b)
-------- -------- ------- ------- ------- -------
Ratio of net investment
income to average net
assets................. 1.20%(a) 0.66% 0.91% 0.82% 0.63% 1.56%(a)(b)
-------- -------- ------- ------- ------- -------
Portfolio turnover rate. 19.3% 54.8% 62.5% 15.6% 11.1% 0.0%
-------- -------- ------- ------- ------- -------
Average commission rate
paid (c)............... $ 0.0490 $ 0.0397 -- -- -- --
-------- -------- ------- ------- ------- -------
- ----------------------------------------------------------------------------------------------
</TABLE>
(a) Annualized.
(b) Had fees not been waived by the investment advisor and administrator of the
Fund, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets would have been 1.90% annualized
and 1.20% annualized, respectively, for the period ended December 31, 1992.
(c) Computed by dividing the total amount of commissions paid by total number
of shares purchased and sold during the period for which commissions were
charged, as required by the SEC beginning after September 1, 1995.
* For the period from November 2, 1992 (commencement of operations) to December
31, 1992.
- --------------------------------------------------------------------------------
THE SMALL CAPITALIZATION FUND
The table below sets forth financial data for a share outstanding throughout
each period
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
JUNE 30, 1997 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1996 1995*
---------------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of
period........................ $ 12.53 $ 10.96 $10.00
------- ------- ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.......... -- 0.07 0.09
Net realized and unrealized
gain on investment
transactions.................. 1.93 2.09 1.19
------- ------- ------
Total from investment
operations................... 1.93 2.16 1.28
------- ------- ------
LESS DISTRIBUTIONS:
Dividend from net investment
income........................ -- (0.07) (0.09)
Distribution from capital
gains......................... -- (0.52) (0.23)
------- ------- ------
Total distributions........... -- (0.59) (0.32)
------- ------- ------
Net asset value, end of period. $ 14.46 $ 12.53 $10.96
======= ======= ======
Total return................... 15.40% 19.76% 12.76%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands).................... $27,626 $16,134 $4,828
------- ------- ------
Ratio of expenses to average
net assets.................... 0.86%(a) 0.99%(b) 1.00%(a)(b)
------- ------- ------
Ratio of net investment income
to average net assets......... 0.74%(a) 0.85%(b) 1.53%(a)(b)
------- ------- ------
Portfolio turnover rate........ 54.6% 39.2% 64.3%
------- ------- ------
Average commission rate paid
(c)........................... $0.0556 $0.0486 --
------- ------- ------
- ---------------------------------------------------------------------------------
</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 1.06% and
1.29%, respectively, and the ratio 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) Computed by dividing the total amount of commissions paid by total number
of shares purchased and sold during the period for which commissions were
charged, as required by the SEC beginning after September 1, 1995.
* For the period from March 1, 1995 (commencement of operations) through
December 31, 1995.
37
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE EMERGING GROWTH FUND
The table below sets forth financial data for a share outstanding throughout
the period
<TABLE>
<CAPTION>
PERIOD ENDED
JUNE 30,
1997
(UNAUDITED)*
------------
<S> <C>
Net asset value, beginning of period......................... $ 10.00
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss.......................................... (0.42)
Net realized and unrealized gain on investment transactions.. 2.68
-------
Total from investment operations............................ 2.26
-------
LESS DISTRIBUTIONS:
Dividend from net investment income.......................... 0.00
Distribution from capital gains.............................. 0.00
-------
Total distributions......................................... 0.00
-------
Net asset value, end of period............................... $ 12.26
=======
Total return................................................ 22.60%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)..................... $ 8,554
-------
Ratio of expenses to average net assets...................... 1.15% (a)(b)
-------
Ratio of net investment income to average net assets......... (0.42%)(a)(b)
-------
Portfolio turnover rate...................................... 44.5%
-------
Average commission rate paid (c)............................. $0.0545
-------
- ---------------------------------------
</TABLE>
(a) Annualized.
(b) Had fees not been waived by the investment advisor and administrator of the
Fund, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets would have been 1.37% and (0.64%),
respectively, for the period ended June 30, 1997.
(c) Computed by dividing the total amount of commissions paid by total number
of shares purchased and sold during the period for which commissions were
charged, as required by the SEC beginning after September 1, 1995.
* For the period from May 1, 1997 (commencement of operations) through June 30,
1997.
38
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
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 conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
INVESTMENT VALUATION:
MONEY MARKET FUND - Investments in securities are valued under the amortized
cost method, which approximates current market value. Under this method,
securities are valued at cost on the date of purchase and thereafter a
proportionate amortization of any discount or premium until maturity is
assumed. Penn Series has agreed to maintain a dollar weighted average portfolio
maturity appropriate to the objective of maintaining a stable net asset value
per share. The Penn Series Board of Directors (The Board) has established
procedures reasonably designed to stabilize the net asset value per share for
purposes of sales and redemptions at $1.00. The Board performs regular review
and monitoring of the valuation in an attempt to avoid dilution or unfair
results to shareholders.
QUALITY BOND, HIGH YIELD BOND, GROWTH EQUITY, VALUE EQUITY, FLEXIBLY MANAGED,
INTERNATIONAL EQUITY, SMALL CAPITALIZATION AND EMERGING GROWTH FUNDS -
Portfolio securities listed on a national securities exchange are valued at
the last sale price on the securities exchange or securities market on which
such securities primarily are traded or, if there has been no sale on that day,
at the mean between the current closing bid and asked prices. All other
securities for which over-the-counter market quotations are readily available
will be valued on the basis of the mean between the last current bid and asked
prices. When market quotations are not readily available, or when restricted or
other assets are being valued, the securities or assets will be valued at fair
value as determined by The Board.
The high yield securities in which the High Yield Bond Fund may invest are
predominantly speculative as to the issuer's continuing ability to meet
principal and interest payments. The value of the lower quality securities in
which the High Yield Bond Fund may invest will be affected by the credit
worthiness of individual issuers, general economic and specific industry
conditions, and will fluctuate inversely with changes in interest rates. In
addition, the secondary trading market for lower quality bonds may be less
active and less liquid than the trading market for higher quality bonds.
FOREIGN CURRENCY TRANSLATION - The books and records of the Funds are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis: market value of investment securities, assets
and liabilities at the current rate of exchange; and purchase and sales of
investment securities, income and expenses at the relevant rates of exchange
prevailing on the respective dates of such transactions.
The Funds do not isolate that portion of realized and unrealized gains and
losses on investments in equity securities which are due to changes in the
foreign exchange rate from that which is due to changes in market prices of
equity securities.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. dollar denominated
transactions as a result of, among other factors, the level of governmental
supervision and regulation of foreign securities markets and the possibility of
political or economic instability.
SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date and interest income is accrued as earned. The cost of investment
securities sold is determined by using the specific identification method for
both financial reporting and income tax purposes.
DIVIDENDS TO SHAREHOLDERS: Dividends of investment income and realized
capital gains of the Quality Bond, High Yield Bond, Growth Equity, Value
Equity, Flexibly Managed, International Equity 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: It is the policy of each of the Funds to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income, including
realized gains, to its shareholders. Therefore, no provision is made for
federal income or excise taxes.
39
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
2 - DERIVATIVE FINANCIAL INSTRUMENTS
OFF-BALANCE SHEET RISK
The Funds may trade financial instruments with off-balance sheet risk in the
normal course of investing activities and to assist in managing exposure to
market risks such as interest rates and foreign currency exchange rates. These
financial instruments include written options, forward foreign currency
exchange contracts and futures contracts.
The notional or contractual amounts of these instruments represent the
investment the Funds have in particular classes of financial instruments and do
not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered.
DERIVATIVE FINANCIAL INSTRUMENTS HELD OR ISSUED FOR PURPOSES OTHER THAN TRADING
FUTURES CONTRACTS - Each of the Funds, other than Money Market, may enter
into financial futures contracts for the delayed delivery of securities,
currency or contracts based on financial indices on a future date. A Fund is
required to deposit either in cash or securities an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received by
a Fund each day, dependent on daily fluctuations in the value of the underlying
security, and are recorded for financial statement purposes as unrealized gains
or losses by a Fund. A Fund's investment in financial futures contracts is
designed only to hedge against anticipated future changes in interest or
exchange rates. Should interest or exchange rates move unexpectedly, a Fund may
not achieve the anticipated benefits of the financial futures contracts and may
realize a loss. There were no open futures contracts at June 30, 1997.
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 period ended June 30, 1997.
Purchased put options open and outstanding at June 30, 1997 are disclosed in
the schedule of investments.
FORWARD FOREIGN CURRENCY CONTRACTS - The Funds may enter into forward foreign
currency exchange contracts as a way of managing foreign exchange rate risk. A
Fund may enter into these contracts to fix the U.S. dollar value of a security
that it has agreed to buy or sell for the period between the date the trade was
entered into and the date the security is delivered and paid for. A Fund may
also use these contracts to hedge the U.S. dollar value of securities it
already owns denominated in foreign currencies.
Forward foreign currency contracts are valued at the forward rate, and are
marked-to-market daily. The change in market value is recorded by the Fund as
an unrealized gain or loss. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate fluctuations
in the underlying prices of the Fund's portfolio securities, but it does
establish a rate of exchange that can be achieved in the future. Although
forward foreign currency contracts limit the risk of loss due to a decline in
the value of the hedged currency, they also limit any potential gain that might
result should the value of the currency increase. In addition, the Funds could
be exposed to risks if the counterparties to the contracts are unable to meet
the terms of their contracts. The Flexibly Managed and International Equity
funds have entered into forward foreign currency contracts for the period ended
June 30, 1997.
At June 30, 1997 there were no open contracts in the Flexibly Managed Fund.
Open forward foreign currency contracts held by the International Equity Fund
at June 30, 1997 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
FOREIGN FOREIGN
FORWARD FOREIGN CURRENCY SETTLEMENT CURRENCY TO CONTRACT CONTRACT EXCHANGE
CONTRACT DATE BE SOLD AMOUNT VALUE GAIN/(LOSS)
------------------------ ---------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Deutsche Mark........... 10/16/97 17,000,000 $ 9,993,651 $ 9,825,794 $ 167,857
Deutsche Mark........... 09/08/97 15,000,000 8,849,557 8,641,798 207,759
French Franc............ 10/16/97 21,000,000 3,668,443 3,599,095 69,348
French Franc............ 09/08/97 21,000,000 3,675,002 3,588,314 86,688
Japanese Yen............ 09/08/97 1,600,000,000 13,445,378 14,095,882 (650,504)
Japanese Yen............ 10/14/97 1,600,000,000 13,034,305 14,181,547 (1,147,242)
Swiss Franc............. 10/16/97 8,000,000 5,557,099 5,549,082 8,017
Swiss Franc............. 09/08/97 5,000,000 4,109,589 4,140,358 (30,769)
----------- ----------- -----------
$62,333,024 $63,621,870 $(1,288,846)
----------- ----------- -----------
</TABLE>
40
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2 - DERIVATIVE FINANCIAL INSTRUMENTS, CONTINUED
<TABLE>
<CAPTION>
FORWARD FOREIGN CURRENCY SETTLEMENT CURRENCY TO CONTRACT CONTRACT EXCHANGE
CONTRACT DATE BE PURCHASED AMOUNT VALUE GAIN/(LOSS)
------------------------ ---------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Deutsche Mark........... 09/08/97 15,000,000 $ 9,083,752 $ 8,619,749 $(464,003)
French Franc............ 09/08/97 21,000,000 3,775,484 3,588,314 (187,170)
Japanese Yen............ 09/08/97 1,600,000,000 13,356,708 14,095,882 739,174
Swiss Franc............. 09/08/97 6,000,000 4,256,225 4,140,358 (115,867)
----------- ----------- ---------
$30,472,169 $30,444,303 $ (27,866)
----------- ----------- ---------
</TABLE>
3 - INVESTMENT ADVISORY AND OTHER CORPORATE SERVICES
ADMINISTRATIVE AND CORPORATE SERVICES
Under an administrative and corporate services agreement, The Penn Mutual
Life Insurance Company ("Penn Mutual") serves as administrative and corporate
services agent for Penn Series. Each of the Funds pays Penn Mutual, on a
quarterly basis, an annual fee equal to 0.15% of each of the Fund's average
daily net assets.
INVESTMENT ADVISORY SERVICES
Under investment advisory agreements, the following advisors manage the
investments of their respective Fund and provide guidance on certain accounting
matters:
<TABLE>
<CAPTION>
ADVISOR PENN SERIES FUND
------- ----------------
<S> <C>
Independence Capital Management, Inc. Money Market Fund
(A wholly owned subsidiary of Penn Quality Bond Fund
Mutual) Growth Equity Fund
Emerging Growth Fund
T. Rowe Price Associates Flexibly Managed Fund
High Yield Bond Fund
Vontobel USA, Inc. International Equity Fund
Op Cap Advisors Value Equity Fund
Small Capitalization Fund
</TABLE>
Each of the Funds pays their respective advisors, on a monthly basis, an
annual advisory fee based on the average daily net assets of each Fund, at the
following rates pursuant to the investment advisory agreements: Money Market
Fund: 0.40% for first $100 million and 0.35% thereafter; Quality Bond Fund:
0.45% for first $100 million and 0.40% thereafter; Growth Equity Fund: 0.50%
for the first $100 million and 0.45% thereafter; Flexibly Managed Fund: 0.50%;
High Yield Bond Fund: 0.50%; Emerging Growth Fund: 0.08%; International Equity
Fund: 0.75%; Value Equity Fund: 0.50%; Small Capitalization Fund: 0.50%.
Independence Capital Management currently serves as the investment advisor for
the Emerging Growth Fund and Robertson Stephens acts as sub-adviser to assist
in working to achieve the investment objectives of the Fund.
EXPENSES AND LIMITATIONS THEREON
Each Fund bears all expenses of its operations other than those incurred by
the investment advisors under their respective investment advisory agreements
and those incurred by Penn Mutual under its administrative and corporate
services agreement. The investment advisors and Penn Mutual have each
voluntarily agreed to waive fees or reimburse expenses to the extent each of
the Fund's expense ratio (excluding interest, taxes, brokerage, other
capitalized expenses, but including investment advisory and administrative and
corporate services fees) exceeds the applicable expense limitations for each
Fund. The expense limitations for the Funds are as follows: Money Market:
0.80%; Quality Bond: 0.90%; High Yield Bond: 0.90%; Growth Equity: 1.00%; Value
Equity: 1.00%; Flexibly Managed: 1.00%; International Equity: 1.50%; and Small
Capitalization 1.00% and Emerging Growth: 1.15%.
Fees were paid to non-affiliated Directors of Penn Series for the period
ended June 30, 1997. 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.
41
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
4 - CAPITAL STOCK
At June 30, 1997, 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 class of common stock is
presently designated Class I and no shares have been issued.
Transactions in capital stock of the Money Market Fund were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold.............. 22,683,325 $ 22,683,325 44,071,472 $ 44,071,472
Shares issued to
shareholders in
reinvestment of net
investment income....... 861,030 861,030 1,440,949 1,440,949
Shares reacquired........ (19,408,451) (19,408,451) (35,737,395) (35,737,395)
----------- ------------ ----------- ------------
4,135,904 $ 4,135,904 9,775,026 $ 9,775,026
----------- ------------ ----------- ------------
Transactions in capital stock of the Quality Bond Fund were as follows:
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold.............. 274,455 $ 2,750,880 816,952 $ 8,374,183
Shares issued to
shareholders in
reinvestment of
Net investment income... 0 0 234,248 2,342,476
Shares reacquired........ (397,380) (3,986,046) (1,006,891) (10,359,026)
----------- ------------ ----------- ------------
(122,925) $ (1,235,166) 44,309 $ 357,633
----------- ------------ ----------- ------------
Transactions in capital stock of the High Yield Bond Fund were as follows:
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold.............. 872,603 $ 8,040,963 1,055,047 $ 9,465,000
Shares issued to
shareholders in
reinvestment of
Net investment income... 0 0 361,419 3,220,247
Shares reacquired........ (490,958) (4,520,121) (792,896) (7,061,440)
----------- ------------ ----------- ------------
381,645 $ 3,520,842 623,570 $ 5,623,807
----------- ------------ ----------- ------------
Transactions in capital stock of the Growth Equity Fund were as follows:
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold.............. 304,907 $ 7,007,265 320,394 $ 7,089,450
Shares issued to
shareholders in
reinvestment of
Net investment income... 0 0 22,163 475,615
Net realized gain from
investment
transactions........... 0 0 492,024 10,558,832
Shares reacquired........ (271,356) (6,316,433) (673,246) (14,558,795)
----------- ------------ ----------- ------------
33,551 $ 690,832 161,335 $ 3,565,102
----------- ------------ ----------- ------------
</TABLE>
42
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4 - CAPITAL STOCK, CONTINUED
Transactions in capital stock of the Value Equity Fund were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Shares sold.................. 1,749,462 $ 35,114,264 2,485,344 $ 45,626,673
Shares issued to shareholders
in reinvestment of
Net investment income....... 0 0 114,391 2,210,027
Net realized gain from
investment transactions.... 0 0 427,146 8,252,470
Shares reacquired............ (308,220) (6,313,903) (457,053) (8,365,348)
--------- ------------ --------- ------------
1,441,242 $ 28,800,361 2,569,828 $ 47,723,822
--------- ------------ --------- ------------
Transactions in capital stock of the Flexibly Managed Fund were as follows:
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Shares sold.................. 2,388,801 $ 45,771,325 5,176,205 $ 96,448,634
Shares issued to shareholders
in reinvestment of
Net investment income....... 0 0 685,941 12,854,535
Net realized gain from
investment transactions.... 0 0 894,811 16,768,765
Shares reacquired............ (569,397) (11,035,754) (807,605) (15,147,946)
--------- ------------ --------- ------------
1,819,404 $ 34,735,571 5,949,352 $110,923,988
--------- ------------ --------- ------------
Transactions in capital stock of the International Equity Fund were as follows:
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Shares sold.................. 983,754 $ 15,823,777 1,812,851 $ 28,060,006
Shares issued to shareholders
in reinvestment of
Net investment income....... 0 0 220,720 3,445,460
Distribution in excess of
net investment income...... 0 0 294,034 4,589,862
Shares reacquired............ (364,795) (5,879,161) (442,745) (6,922,123)
--------- ------------ --------- ------------
618,959 $ 9,944,616 1,884,860 $ 29,173,205
--------- ------------ --------- ------------
Transactions in capital stock of the Small Capitalization Fund were as follows:
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Shares sold.................. 700,139 $ 8,988,781 1,108,381 $ 13,236,881
Shares issued to shareholders
in reinvestment of
Net investment income....... 0 0 6,978 87,435
Net realized gain from
investment transactions.... 0 0 48,711 607,875
Shares reacquired............ (76,471) (999,392) (317,129) (3,736,752)
--------- ------------ --------- ------------
623,668 $ 7,989,389 846,941 $ 10,195,439
--------- ------------ --------- ------------
Transactions in capital stock of the Emerging Growth Fund were as follows:
<CAPTION>
PERIOD ENDED*
JUNE 30, 1997
-----------------------
SHARES AMOUNT
--------- ------------
<S> <C> <C>
Shares sold.................. 699,598 $ 7,730,110
Shares reacquired............ (1,778) (21,420)
--------- ------------
697,820 $ 7,708,690
--------- ------------
</TABLE>
* For the period from May 1, 1997 (commencement of operations) through June 30,
1997.
43
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
5 - PURCHASES AND SALES OF INVESTMENTS
During the period ended June 30, 1997, 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 .......... $ 25,895,241 $39,413,794 $ 0 $ 0
Other Long-Term Securities ... 18,251,159 5,014,094 36,204,168 29,363,184
------------ ----------- ----------- -----------
Totals ...................... $ 44,146,400 $44,427,888 $36,204,168 $29,363,184
------------ ----------- ----------- -----------
<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 ... 97,118,952 99,412,742 22,470,273 10,439,871
------------ ----------- ----------- -----------
Totals ...................... $ 97,118,952 $99,412,742 $22,470,273 $10,439,871
------------ ----------- ----------- -----------
<CAPTION>
INTERNATIONAL EQUITY
FLEXIBLY MANAGED FUND 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 ... 120,552,121 74,996,192 28,600,388 19,713,307
------------ ----------- ----------- -----------
Totals ...................... $120,552,121 $74,996,192 $28,600,388 $19,713,307
------------ ----------- ----------- -----------
<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 ... 16,868,574 10,208,806 9,990,546 2,623,997
------------ ----------- ----------- -----------
Totals ...................... $ 16,868,574 $10,208,806 $ 9,990,546 $ 2,623,997
------------ ----------- ----------- -----------
</TABLE>
*For the period from May 1, 1997 (commencement of operations) through June 30,
1997.
- --------------------------------------------------------------------------------
6 - CAPITAL LOSS CARRYOVERS
Capital loss carryovers expire as follows:
<TABLE>
<CAPTION>
MONEY
MARKET QUALITY HIGH YIELD
FUND BOND FUND BOND FUND
------- --------- -----------
<S> <C> <C> <C>
1997 .......................................... $ 0 $ 0 $ 0
1998 .......................................... (872) 0 0
1999 .......................................... 0 0 (1,355,386)
2000 .......................................... (61) 0 0
2001 .......................................... (183) 0 0
2002 .......................................... 0 (778,292) (1,572,728)
2003 .......................................... (416) 0 (1,086,129)
2004 .......................................... 0 (89,807) (525,647)
------- --------- -----------
Total ........................................ $(1,532) $(868,099) $(4,539,890)
------- --------- -----------
</TABLE>
44
<PAGE>
S E M I - A N N U A L R E P O R T
June 30, 1997
- ---------------------------------------------------
C O R N E R S T O N E V U L I I
Variable Universal Life Insurance
- ---------------------------------------------------
- ---------------------------------------------------
V A R I A B L E E S T A T E MAX
Survivorship Variable Universal Life Insurance
- ---------------------------------------------------
Penn Series Funds, Inc.
Investment Advisers:
T. Rowe Price Associates, Inc.
OpCap Advisors
Independence Capital Management, Inc.
Vontobel USA Inc.
Robertson Stephens Investment Management, Inc.
American Century Variable Portfolios, Inc.
Investment Adviser:
American Century Investment Management, Inc.
Neuberger & Berman
Advisers Management Trust
Investment Adviser:
Neuberger & Berman Management Incorporated
Fidelity Investments'
Variable Insurance Products Fund
Variable Insurance Products Fund II
Investment Adviser:
Fidelity Management & Research Company
Morgan Stanley Universal Funds, Inc.
Investment Adviser:
Morgan Stanley Asset Management
Penn
[Logo] Mutual(TM)
A better way of life
<PAGE>
- --------------------------------------------------------------------------------
TO OUR VARIABLE LIFE INSURANCE CONTRACTHOLDERS:
I am delighted to present the Semi-Annual Reports of Penn Series Funds, Inc.,
Neuberger & Berman Advisers Management Trust, American Century Variable
Portfolios, Inc., Fidelity Investments Variable Insurance Products Fund and
Variable Insurance Products Fund II, and Morgan Stanley Universal Funds, Inc.
for the six month period ending June 30, 1997.
The first 6 months of 1997 were not too much different from what we've been
seeing in the equity markets for the previous 2 years--lots of volatility, but
with a dramatic move upward.
As of June 30, the market as measured by the S&P 500 was up 20.59%, and the
Russell 2000, a measure of small cap stock performance was up 9.31%.
But this bull market trend was interrupted by a near 10% correction amid
fears of continued increases in interest rates by the Federal Reserve to cool
an economy that seemed overheated. However, as the second quarter progressed,
economic reports signaled a slow down from the first quarter's rapid pace, and
inflation remained in check. Corporate earnings were up over 10% and the market
took off once again, rising more than 20% in May and June.
So at this point the "pillars" of the stock market are very solid--benign
inflation and interest and strong corporate earnings. The $64,000 question of
course is, "With the Dow above 8000 and price-earnings ratios above 20, is the
market valuing all of this good news too highly?"
As we've discussed before, if you are a long term investor, try not to be too
influenced with the short term twists and turns of the stock market. Rather,
working with your financial planner, apply solid risk reduction techniques such
as diversification and regular rebalancing of your portfolio to meet your long
term needs.
Penn Mutual's variable products now offer more diversification possibilities
than ever before with 4 new additions to our family of funds:
ICMI/Robertson Stephens Emerging Growth Fund
Morgan Stanley Emerging Markets Equity (Int'l) Portfolio
Neuberger & Berman AMT Partners Portfolio
Fidelity Investments VIP II Index 500 Portfolio
Your CORNERSTONE VUL II & VARIABLE ESTATEMAX policies are designed to help
you maintain a steady, long-term approach to investing. It brings the
experience and expertise of various investment advisers to help you build a
financial plan that best suits your individual needs. And we encourage you to
work with your financial planner to take full advantage your policy's features
and investment choices.
Percentage changes in accumulation unit values of each of the variable
accounts offered under CORNERSTONE VUL II & VARIABLE ESTATEMAX for the year
ending December 31, 1996 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
1-800-523-0650, or contact your sales representative directly.
Sincerely,
/s/ Richard F. Plush
Richard F. Plush
Vice President, Products & Programs
- --------------------------------------------------------------------------------
PERCENTAGE CHANGE IN
ACCUMULATION UNIT VALUES
SINCE 12/31/96
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
OPCAP ADVISORS
Value Equity........................................................... 13.16%
Small Capitalization................................................... 14.81%
VONTOBEL USA, INC.
International Equity................................................... 11.67%
INDEPENDENCE CAPITAL MANAGEMENT, INC.
Growth Equity.......................................................... 15.42%
Money Market
Cornerstone VUL II.................................................... 2.02%
Variable EstateMax.................................................... 2.03%
Quality Bond........................................................... 2.14%
ICMI/ROBERTSON STEPHENS
Emerging Growth........................................................ 22.42%*
T. ROWE PRICE ASSOCIATES, INC.
Flexibly Managed....................................................... 8.00%
High Yield Bond........................................................ 7.26%
NEUBERGER & BERMAN MANAGEMENT, INC.
AMT Balanced........................................................... 10.77%
AMT Limited Maturity Bond.............................................. 2.50%
AMT Partners........................................................... 10.23%*
AMERICAN CENTURY
VP Capital Appreciation................................................ -3.89%
FIDELITY INVESTMENTS
VIP Growth............................................................. 13.32%
VIP Equity Income...................................................... 15.88%
VIP II Asset Manager................................................... 10.71%
VIP II Index 500....................................................... 10.93%*
MORGAN STANLEY ASSET MANAGEMENT
Emerging Markets Equity (Int'l)........................................ 10.72%*
- --------------------------------------------------------------------------------
</TABLE>
* For the period beginning 5/1/97
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
QUALITY BOND FUND
Interest rates reversed course in the second quarter, falling 35-40 basis
points and retracting much of the upward surge in rates experienced in the
first three months of 1997. A sharp deceleration in economic growth led by a
drop-off in consumer spending, coupled with surprisingly low inflation data has
reduced anxieties about further Federal Reserve rate hikes and led to bond
market improvement.
The estimates for second quarter growth range from 1-2%, a dramatic decline
from the 5.8% growth in the first quarter. Consumer spending has inexplicably
changed course, dropping off just as most market observers had assumed
continued growth. Conventional wisdom has it that consumer spending will
rebound due to 1) strong labor market with low unemployment, 2) high consumer
confidence 3) firm income levels and finally 4) rising wealth levels arising
from a soaring stock market. A firm rebound in domestic consumption will in all
likelihood lead to an initial sell-off in the bond market as most market
participants will look for renewed inflationary pressures and further monetary
tightening.
The greatest surprise for this economic cycle has been the absence of inflation
pressures. In fact, the producer price index posted its fifth straight monthly
decline in May, a feat not seen since 1952. It is this development that has
stayed the hand of the Federal Reserve this cycle and allowed this economic
cycle (which began in March, 1991), to persist well beyond the post war average
of 4.5 years.
This low level of inflation also creates an environment where bond yields are
very attractive whenever they reach or approach 7%. With inflation at 2-3%,
real yields of 4-5% are extremely high by historical standards. Indeed, bond
returns have been historically very good when bonds are purchased with 5% real
yields. The second quarter offered another opportunity to purchase bonds with
high real yields which we took advantage of.
Another key consideration in addressing the outlook for the domestic bond
market is the forecasts for economic growth overseas. In this economic cycle
the foreign economies, notably Japan, have been severely hampered by structural
problems. In Japan, the problems are rooted in a difficult banking environment,
itself a hangover from the excesses of the 1980's. Monetary policy in Japan,
the number two economy in the world, has been dramatically accommodative. Short
term rates have been driven down to 0.5%. In Europe, the effort to create a
unified currency has led to severely restrictive fiscal policies, slowing their
economies and resulting in highly stimulative monetary policies as well.
This weakness in the major foreign economies has reduced inflationary
pressures and created liquidity that in many cases has been invested here in
the US. A reversal in these highly accommodative monetary policies should have
significant implications to our fixed income markets. We do not see changes
occurring in the near future.
Currently, our position is long relative to our benchmark. We extended the
portfolio as rates moved above 7% in the long bond. In addition, we moved more
aggressively into corporate bonds as spreads widened in March and April.
Performance for the quarter was fair as the net result of +3.64% for the
Quality Bond Fund exceeded the Salomon Brothers Broad Investment Grade Index of
3.60%. Note that beginning in the second quarter our benchmark measurement
index changed to the Salomon Index vs the Lipper Bond averages. Year to date
figures are misleading due to differences in duration requirements between the
Salomon Index and the Lipper averages.
INDEPENDENCE CAPITAL MANAGEMENT, INC.
INVESTMENT ADVISER
1
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
HIGH YIELD BOND FUND
The stars were aligned for the high-yield bond market during the past six
months. Virtually all the principal influences on this market were positive if
not exuberant, especially the U.S. economy and the market's own fundamentals.
The rise in interest rates that dampened returns on high-quality bonds in the
first quarter was not a problem for the credit-sensitive, high-yield market. As
a result, high-yield bonds significantly outperformed high-quality bonds for
the six months ended June 30.
MARKET ENVIRONMENT
Many of the same factors that drove stocks higher fueled the rise in high-yield
(junk) bond prices. Topping this list were the continued and largely unexpected
strength in corporate earnings and the economy's 5.8% annualized growth rate in
the first quarter--roughly double the trend rate since the current upturn began
in 1991. In an attempt to cool this pace and preempt a rise in inflation, the
Federal Reserve raised the federal funds rate (from 5 1/4% to 5 1/2%) for the
first time since 1995, and interest rates rose across the yield curve. However,
stocks and high-yield bonds, which typically are driven by economic growth and
corporate earnings expectations, recovered quickly and forged ahead.
High-yield bonds also benefited from extremely strong demand relative to the
supply of issues. Cash flow into retail high-yield mutual funds was heavy; the
number of institutional investors allocating assets to this market sector
continued to rise; and structured securities called collateralized bond
obligations (CBOs) absorbed billions of dollars worth of high-yield bonds. On
the supply side, new issues appeared at a steady clip, particularly from
smaller companies. Nevertheless, many potential high-yield bond issuers have
elected to refinance existing bonds through a growing number of attractive
alternatives--commercial banks, for example, are returning to this arena--and
this has constrained the opportunities for high-yield bond investors.
PERFORMANCE AND STRATEGY REVIEW
Your fund provided solid returns for the six-month period, with capital
appreciation augmenting income.
We continued our even-keel approach to managing the fund, attempting to
balance the advantages of higher yields and appreciation opportunities against
additional risk. Toward this end, we maintained a strong focus on B-rated
issues. We like the pickup in yield these bonds provide without undue exposure
to interest rate and credit risk. As always, we draw heavily on our in-house
research expertise to help us assess each issue's risk and reward potential.
Allocations remain widely diversified among industry sectors to limit potential
problems from any single area. The only change of note during the six-month
period was a reduction in the strongly performing energy area, reflecting
profit-taking in these investments.
OUTLOOK
Six months ago we sounded a note of caution in looking over the high-yield
landscape. While we anticipated solid returns if the economy continued to grow,
we worried about the high valuations in our market--a concern shared by many
investors about stocks--and also about a possible rise in defaults in the wake
of the large number of new offerings. So far, the default rate has been
declining, and if the year-to-date trend continues, 1997 could have the lowest
such rate in three years. The high-yield market has hardly missed a beat,
principally because of the economy's amazing momentum. We said last winter we
would be happy to be surprised on the upside, and we are happy.
We see nothing on the immediate horizon that might bring this bull market to
a halt. Unless the Fed makes a serious miscalculation, we would expect a
continuation of moderate inflation and a return to moderate growth--a good
environment for all debt securities. Closer to home, we believe the high-yield
market may be more resilient than in the past, when it was less diverse and
problems with one or two high-profile issuers could have a large impact. At the
same time, we know that today's narrow yield spreads among bonds of different
credit quality will eventually correct, and that defaults will rise when and if
the economy slows significantly. We would emphasize equally that our near-term
outlook is positive, and we would expect high-yield bonds to remain rewarding
over the long term.
T. ROWE PRICE ASSOCIATES, INC.
INVESTMENT ADVISER
2
<PAGE>
- --------------------------------------------------------------------------------
GROWTH EQUITY FUND
Perhaps it was William Penn who coined the adage "April showers bring May
flowers", but no other five words could better describe the stock market
behavior this year. The new year brought it surprisingly strong earnings and an
early burst of enthusiasm, but by late March and the first part of April
investors found the climate dreary and depressing with no expectation that the
stock market would soon bottom and begin a recovery into record territory. At
the bottom few market pundits had words of encouragement. The bears were almost
gleeful, having warned that a downturn was justifiable, necessary, and long
overdue. Many bulls turned cautious, pulling in their horns and looking a bit
sheepish. Thus were the seeds of the market's dramatic advance sown.
The second half of April and early May brought light and nourishment to the
stock market. The light was economic news that showed a non-inflationary
expansion and the nourishment was provided by the long list of better-than-
expected earnings reports. With the bond market firming and turning higher, the
Fed choosing to keep rates unchanged in May, and inflows of cash to mutual
funds continuing at a solid clip, there were no significant impairments to the
stock market's recovery. By the end of June the rally had carried the stock
market over 20% from its lows.
The Growth Equity Fund advanced 15.94% in the first half of 1997 which
compares with the 15.40% return for the Lipper Growth Index, the 14.28% return
for the overall Lipper Growth Fund average and the S&P 500's return of 20.54%.
For the twelve month period ended June 30 the Growth Equity Fund earned a
return of 27.56%. This return is better than both the 25.54% return of the
Lipper Growth Index and the 23.96% earned by the average growth fund in the
broad Lipper universe, but trailed the S&P 500's gain of 34.72%.
The Fund's first half improvement came primarily from strength in the
Healthcare (+31.9%), Financial (+20.5%) , and Capital Goods (+19.4%) sectors,
but only Healthcare actually outperformed the S&P 500 Stock Index. Relative
performance was negatively impacted by the underperformance of the Utility
(+17.9%), Consumer Staples (+16.3%), Basic Material (+16.7%), Technology
(+12.5%), Consumer Cyclicals (+5.5%), and Energy (+3.7%) sectors.
Transportation (+16.6%) was only nominally represented in the portfolio.
INDEPENDENCE CAPITAL MANAGEMENT, INC.
INVESTMENT ADVISER
VALUE EQUITY FUND
The fund's value approach is to provide superior investment returns with below-
average risk. We seek investments in businesses that generate high returns on
invested capital, run by managements who seek to maximize those returns and
create wealth for shareholders: through reinvestment in high-return business
opportunities, through astute acquisitions, and through share repurchase. Those
high returns must be sustainable, which is only achievable in companies with
very strong competitive advantages. A major goal of our in-depth primary
research is to assess these advantages and the industrial strengths upon which
they depend. Our long-term perspective is a tremendous advantage in identifying
these situations and in buying them opportunistically in a marketplace which is
often driven by transitory considerations. The right price is very important in
that we believe that it should encompass only a moderate degree of risk
relative to upside potential, in our best judgment.
The US stock market keeps rising relentlessly, confounding the skeptics. As
measured by the total return of the S&P 500, the market has now advanced 104%
in the 30 months since year-end 1994, equaling its steepest ascent in history.
What would have been considered miraculous only a few years ago, low
unemployment with low inflation; has become recurring economic reality. In May,
the jobless rate fell to 4.8%, the lowest in 24 years. Defying standard
economic theory, which says that light job markets lead to inflation, the
consumer price index subsided also, rising only 2.2% from a year earlier. When
one stands back from the usual gyrations in short-term economic data, there are
few signs of disruption to this favorable economic environment. If we were to
worry, it would be about tightening labor markets. Rising wage rates could
boost inflation somewhat, but we believe that a protracted problem with
inflation can be caused only by too-rapid growth of the money supply, which we
do not see at this time.
The international economic environment is favorable as well. Inflation is low
virtually worldwide, and the disciplined approach of governments and central
banks to money supply and deficits suggests inflation will remain in check. The
changing dynamics of foreign pension plans are another interesting (and
bullish) investment ingredient. Many foreign countries have demographic
profiles similar to the US: rapid growth in the number of impending retirees,
but much slower growth in the labor force that must provide for them. In
contrast to the US, however, most foreign pension plans are unfunded. Instead
of having money already set aside and invested, these plans operate on a pay-
as-you-go basis. As foreign governments and corporations attempt to fund their
obligations, demand for equities could increase significantly. According to a
report by Goldman Sachs, $1.8 trillion of additional pension money is forecast
to be invested into worldwide equities by 2000.
3
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
VALUE EQUITY FUND (CONT'D)
Generally, the stock market keys off of economic news, but recently the
market is the news. According to some reports, if the Federal Reserve raises
rates, an important reason will be concern about excessive speculation in the
stock market rather than about ordinary economic trends. But what is actually
happening in the stock market? Let's take a look.
Most observers of the financial markets draw distinctions among the Nasdaq
Composite index of over-the-counter stocks, the NYSE Composite, the Dow Jones
Industrials, the S&P 400 and 500, and various international market indices,
among others. If pressed to point to a single index that measures "the market"
best, most would probably select the S&P 500. Few know how heavily the S&P 500
is influenced by a small group of very large-capitalization stocks and,
therefore, how much the performance of the S&P 500 deviates from that of the
average large-cap portfolio, unless that portfolio contains disproportionate
positions in Microsoft, Intel, General Electric and a few others.
The effect of these super-large stocks can be seen in comparing the S&P 500,
which is capitalization weighted and on which, therefore, large stocks have
much more influence than smaller stocks, with an unweighted index of those same
500 stocks (each stock having equal influence). According to The Leuthold
Group, the S&P 500 outperformed an equally weighted index of the same 500
stocks by 5.9 percentage points in 1995, by 3.3 percentage points in 1996 and
by 3.6 percentage points from the beginning of this year through June 18. That
disparity occurred because the large capitalization stocks outperformed the
other stocks in the index by a wide margin. We believe large stocks have
benefited from the torrent of money flowing into mutual funds. The easiest way
for the funds to put these cash inflows to work is by purchasing the largest,
most liquid stocks. Also, the unusual length of the bull market has made
"momentum" investing (what goes up will continue to go up) more popular,
further lifting this same group of very large-cap stocks to high multiples. No
wonder so few portfolio managers have been performing as well as "the market"
recently.
Does the recent dominance of the largest stocks mean we should push our
portfolios into them, or that investors should just give up and buy the S&P 500
index? Our answer won't surprise you: no. Let's look at longer periods of time,
again using data from The Leuthold Group: During the 1960s, an equally weighted
version of the S&P 500 outperformed the capitalization weighted S&P 500 by 4.8
percentage points per year. In the 1970s, the equally weighted index
outperformed by 4.0 percentage points per year. In the 1980s, equally weighted
won again, by 1.4 percentage points per year. The equally weighted 500 stocks
continued to outperform from 1990 through 1994, beating the capitalization
weighted S&P 500 by 2.1 percentage points per year.
CONCLUSION
The most recent two-and-a-half years of outperformance by the very largest
components of the S&P 500 have been the exception, not the rule. In contrast to
momentum investors who subscribe to the premise that what goes up will continue
to go up, we believe that what goes up too much will eventually come back down.
Given the high valuations of many very large capitalization S&P 500 stocks at
this time, we think it's unlikely the capitalization weighted index will
continue to perform better than more balanced portfolios for much longer. It
follows, in our opinion, that now is an especially inopportune time to "index."
We continue to invest in businesses that are worth inherently more, in our
judgement, than their asking prices. Looked at another way, we hope to preserve
our clients' capital in all market conditions, including market corrections,
because we have maintained our value-price discipline and because the
businesses in which we invest tend to generate excess cash, which becomes more
valuable in difficult markets.
In general, we find the stock market to be fully valued at this time.
However, we are not market timers and do not have an opinion as to whether the
S&P 500 will be higher or lower a month from now than it is today. We buy
individual stocks, not the market. Using our above-average cash reserves, we
will be opportunistic in buying stocks we like whenever we can get them at
favorable prices.
OPCAP ADVISORS
INVESTMENT ADVISER
4
<PAGE>
- --------------------------------------------------------------------------------
FLEXIBLY MANAGED FUND
Financial markets and most subsectors were almost universally strong in the
first half of 1997. Equity markets completed their ninth and tenth consecutive
positive quarters. This hasn't happened in 40 years. Persistently low levels of
inflation and a strong (but not too strong), economy were the key positives.
The Federal Reserve modestly raised interest rates, but this only dampened
enthusiasm temporarily. Meanwhile, the potential vertigo inherent in today's
historically high equity valuations remains largely ignored.
We were not well-positioned for the market's broad trends. First of all, by
design, we attempt to hold down our risk and currently are only about half
invested in common stocks. Our other investments provided solid gains, but not
when compared with equities. Second, we hold only minor positions in the large
growth companies that dominate the S&P 500. The frenzy that has driven up
prices for these securities may or may not be justified, but the resulting high
valuations seem inappropriate for a risk-averse fund. Third, we have large
exposure to electric utility and energy sector companies, groups that
significantly lagged. Fortunately, a series of individual security successes
provided respectable returns.
PORTFOLIO HIGHLIGHTS
The media group, a long-time portfolio focus, and particularly NEW YORK TIMES
and WASHINGTON POST, continued to generate outstanding gains in the first half.
We have been modestly trimming these holdings while maintaining industry
exposure with purchases of TIME WARNER convertible bonds. We swapped portions
of our HOMESTAKE MINING and NEWMONT MINING holdings for an expanded position in
SANTA FE PACIFIC GOLD. This company was then merged into Newmont, re-
establishing a larger but cheaper position in that stock. Unfortunately, the
substantial weakness in gold mining generally left us with an insignificant
loss rather than the gains we might normally have realized with such a
successful series of interrelated trades. We initiated a 1% holding in
WHEELABRATOR TECHNOLOGIES, now the object of a takeover. We continued to add to
our AMERADA HESS and UNION TEXAS PETROLEUM holdings. Finally, we saw through to
completion the merger/sale of PHH, one of our stellar long-term holdings. We
are now attempting to maximize the value of numerous PHH hedging transactions.
OUTLOOK
Stock market cycles, economic cycles, and credit cycles always seem similar,
but only when viewed through the rear window of history. We expect fairly
strong economic growth to continue and with inflation seemingly subdued, it
appears some time will elapse before the next move in Federal Reserve policy.
Nevertheless, when that action does come, we anticipate it will be another
incremental increase in interest rates. As for the stock market, we have not a
shadow of a doubt that it is overvalued and will decline, but we don't know
when or from what level.
T. ROWE PRICE ASSOCIATES, INC.
INVESTMENT ADVISER
5
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
INTERNATIONAL EQUITY FUND
Falling interest rates, strengthening balance sheets and a change in the
attitude of corporate management toward shareholders were some of the factors
that helped to spur strong returns in Europe and Latin America during the
second quarter. Asian markets continued their falling trend due to structural
issues like currency risk, interest rate pressure, falling levels of corporate
profitability, and weakening export demand from Europe and Japan. Overall, this
did not affect the fund's performance since we had already reduced most of our
exposure to the peripheral Asian markets.
EUROPE
The major continental European markets are close to being fully valued after a
double-digit run-up in equity prices year to date, e.g., France +23%, Germany
+29%, Switzerland +44%, the Netherlands +35% (in local currency terms). The
region's long string of double-digit returns over the last 18 months is reason
enough to become prudent (although their outperformance doesn't mean they won't
continue to rise!). Based on still falling bond and earnings yields, 8 out of
14 European markets still have the potential to produce returns in the low
teens over the next 12 months.
Still, prevailing corporate sentiment indicates a lack of confidence in a
sustained economic recovery. At the time of the US dollar collapse in 1994-95
European corporations went on a capital investment spending spree. The
resulting imbalance between output and demand has left them cautious, and
inventories are at an unusually low level for this stage in the economic cycle.
So far, corporate Europe has taken the easy road to restructuring, of the sort
that can be achieved through plant closings and employee layoffs. It needs to
do more. The focus should now shift toward more efficient management of the
capital base, including share buybacks, and development of new products. Faced
with the challenges created by falling tariffs and deregulation around the
globe, European corporations can no longer afford to automatically reinvest
retained earnings as they compete with companies in emerging markets with cheap
source of inputs. Nor is domestic leadership a guarantee of survival--European
firms need to create strong global market share and globally recognized brands.
As a result, merger and acquisition activity in Europe, propelled by the need
to grow market share, will remain strong. Some of our current portfolio
holdings that are particularly well positioned to meet these global challenges
include retailer Carrefour and insurer Axa in France, carmaker BMW in Germany,
and publishing giant Elsevier in the Netherlands.
Despite less compelling valuations in Europe than a year ago, we are still
finding enough good, attractively priced companies in which to invest and, for
now, are maintaining our current regional allocation of about 57%. We started
to raise cash in the second quarter by taking profits in France and Germany,
where we now have a combined 14% weighting.
In the UK corporate profits are strong while stock market sentiment is weak,
a good combination for keeping close to a full market weight. The Labor Party's
election win after 18 years of Tory rule should not impact the UK's success in
attracting global capital due to its highly skilled labor force and well-
regulated business environment. The economy hasn't looked this rosy since the
1980's, as reflected by the strength of the sterling and the potential need to
curb the pace of economic growth through further interest rate hikes.
As we've stated repeatedly, a country's economic environment is less
important in our market analysis than the level of market liquidity and the
existence of companies with solid fundamentals. This is reflected in our
overweight positions in three of the best-performing markets in Europe year to
date; Switzerland, the Netherlands and Sweden, where we have a combined
weighting of 20% vs. the MSCI EAFE at 14%.
JAPAN
The Japanese economy is showing growth of around 1% of 1997 after four years of
recession. Due to corporate restructuring, cost controls and sales growth, the
operating environment for large- and mid-size corporations in the manufacturing
sector is generating large amounts of cash flow. For most companies we own,
free cash flow is increasing at about 40% relative to the last peak prior to
the 1989 bubble. Valuation ratios in the Japanese market are still giving mixed
signals: PCF 10X, PB 2.2X and PE 42X (ex-financials and utilities). Earnings,
however, continue to be strong and over the next 12 months should grow by about
38% for the Topix Index. Our allocation to this market has increased to 27%, v.
22% at year end.
CURRENCIES
The US dollar remained extremely strong against the major European currencies
with the exception of the pound sterling, the fund benefitted from our unhedged
position in the latter. We maintained hedges on the German mark, French franc
and Swiss franc. Our hedge against the yen worked against us in view of the
yen's strong appreciation during the quarter.
VONTOBEL, USA
INVESTMENT ADVISER
6
<PAGE>
- --------------------------------------------------------------------------------
SMALL CAPITALIZATION FUND
Although small-cap stocks as a class have now underperformed large-cap stocks
for three years, we continue to deliver positive returns, equaling or exceeding
our benchmark, the Russell 2000, in the 1997 second quarter and first half. We
achieved these results by being disciplined in our approach of buying
reasonably valued companies based on their business fundamentals. Our long-term
perspective is a tremendous advantage in identifying undervalued businesses and
buying them opportunistically in a marketplace which is driven by transitory
considerations. The right price is very important in that we believe it should
encompass only a moderate degree of risk relative to upside potential. Our
largest positions include Magellan Health Services, the largest provider of
managed-care behavioral health services; Wang Laboratories, a systems
integration and computer maintenance firm; St. Mary Land & Exploration, an
exploration and production company; E. W. Blanch Holdings, and insurance
broker; and A. Schulman, which produces plastics and resins.
Magellan Health exemplifies the qualities we look for in an investment,
including high returns on invested capital, a leading competitive position to
help protect those returns, significant free cash flow which is being used to
create shareholder value and a management team oriented toward shareholder
interests--and, on top of that, a reasonable valuation. We began accumulating
Magellan in November 1995 at an average price in the high teens. More recently,
Magellan sold its brick-and-mortar hospitals business, realizing about $400
million of cash, which it is using to make acquisitions that complement its
managed care business. Magellan is now focused solely on providing managed-care
mental health programs for corporations and government agencies. It is the
leader in this field, which offers excellent prospects for revenue and earnings
growth. At a recent price of $30 a share, or about 15 times anticipated fiscal
1998 earnings, and with its strong cash flow and favorable growth
characteristics, we still consider the stock to be reasonably valued.
OPCAP ADVISORS
INVESTMENT ADVISER
EMERGING GROWTH FUND
We are pleased to have the opportunity to report on our progress as manager of
the ICMI/Robertson Stephens Emerging Growth portfolio. Commencing the portfolio
on 5/1/97, our two-month performance was aided by a strong rally in small-cap
stocks that began in May. From May 1, 1997, through June 30, 1997, the
subaccount was up 22.60% versus an increase of 17.67% in the Russell 2000
Growth index.
While our investment process is bottom up, driven by stock selection,
portfolio positions tended to be overweighted in several Russell sectors. The
portfolio was overweighted in Technology and Consumer Discretionary Services,
and underweighted in the Health Care sector as measured by Frank Russell.
Also of note was the announcement that Robertson Stephens agreed to be
acquired by BankAmerica, subject to regulatory approvals. If approval is
achieved, we expect the transaction to close in the fourth quarter of 1997. We
are extremely excited about becoming part of the BankAmerica organization. They
will enable us to maintain the unique culture that has made us successful in
the last 18 years, while also affording us access to expanded capital and
resources that will enable us to grow our investment management franchise into
the next decade.
In managing the portfolio, the management team is looking for emerging growth
companies that are growing revenues and earnings by a minimum of 20% annually.
These companies come from traditional growth sectors and industries, and also
come from newer "emerging" industries. These emerging industries develop
quickly around new technologies and market opportunities. We believe our
emerging growth research team provides us a competitive advantage in
identifying and understanding these industries and companies before may of our
competitors on Wall Street.
One such emerging sector we have identified is Information Technology
Education. An opportunity has developed for companies to provide training and
education in a wide range of software programs. In the past many companies
would maintain an IT training capability in house. However, today many
companies now look to hire an information technology provider to train their
employees on an as needed basis. We own a number of companies that provide this
capability including Strayer Education and Education Management Corp.
A resurgence in the Lodging industry has created an improved operating
environment for established and new players in the sector. We are attracted to
several companies in this sector, including Four Seasons Hotel Corporation.
Four Seasons operates hotels at the highest end of the luxury segment where
there is little competition and a finite supply of rooms. This gives Four
Seasons strong pricing power. Room rates in many of their properties have risen
throughout the year, helping to improve profitability.
In conclusion, we are pleased to manage a portfolio in the exciting area of
emerging growth companies. We look forward to our continued dialogue with Penn
Mutual and your clients.
ROBERTSON STEPHENS INVESTMENT MANAGEMENT
INVESTMENT ADVISER
7
<PAGE>
- ----------------------------------------------------
THIS PAGE LEFT INTENTIONALLY BLANK
8
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED)
THE MONEY MARKET FUND
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------- ------ -----------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER (37.2%)
- ------------------------
FINANCIAL SERVICES (12.8%)
American Honda 5.65% ..................... 07/24/97 A-2/P-1 $ 731 $ 728,361
Countrywide Funding Corporation 5.61% .... 07/10/97 A-2/P-1 570 569,201
Ford Motor Credit 5.52%................... 07/07/97 A-2/P-1 1,000 999,080
General Electric Credit Group 5.55% ...... 08/21/97 A-1/P-1 500 496,069
General Electric Capital Corp. 5.60% ..... 09/02/97 A-1/P-1 650 643,630
Merrill Lynch & Co. Inc. 5.60% ........... 08/19/97 A-1/P-1 1,500 1,488,567
-----------
4,924,908
-----------
MISCELLANEOUS (15.4%)
Dekalb County for Emory University 5.75%.. 08/05/97 NR 1,500 1,500,000
American Home 5.59%....................... 07/28/97 NR 1,500 1,493,711
General Motors Acceptance Corp. 5.80%..... 01/06/98 A-1/P-1 1,500 1,454,325
John Deere, Inc. 5.56%.................... 08/20/97 A-1/P-1 1,500 1,488,417
-----------
5,936,453
-----------
UTILITIES (9.0%)
GTE Southwest Inc. 5.58%.................. 07/09/97 A-2/P-1 1,000 998,760
NYNEX 5.55%............................... 07/29/97 A-1/P-1 1,100 1,095,252
San Diego Gas & Electric Co. 5.30%........ 07/15/97 A-1/P-1 1,400 1,400,000
-----------
3,494,012
-----------
TOTAL COMMERCIAL PAPER
(Cost $14,355,373)................................................ 14,355,373
-----------
CORPORATE BONDS (14.6%)
- -----------------------
BankAmerica Corp. 6.00%................... 07/15/97 A+ 100 100,007
Chrysler Financial Corp. 6.41%............ 07/28/97 A 250 250,091
6.50%.................................... 08/21/97 A 100 100,074
Countrywide Funding Corp. 6.57%........... 08/04/97 A 750 750,459
Ford Holdings Inc. 9.25%.................. 07/15/97 A+ 370 370,480
Ford Motor Credit 7.125%.................. 12/01/97 A+ 363 364,759
GTE California Inc. 6.25%................. 01/15/98 A- 680 680,341
H.J. Heinz Co. 5.50%...................... 09/15/97 A+ 1,488 1,486,750
Lehman Brothers Inc. 7.375%............... 08/15/97 A 200 200,361
NationsBank Corp. 6.625%.................. 01/15/98 A+ 390 390,870
Norwest Financial 6.00%................... 08/15/97 AA- 360 360,004
Pepsico Inc. 6.125%....................... 01/15/98 A 115 114,947
Rockwell International Corporate Bond
7.625%................................... 02/17/98 AA 215 216,922
Southwestern Bell Telephone 6.05%......... 02/04/98 AA 250 249,853
-----------
TOTAL CORPORATE BONDS
(Cost $5,635,918)................................................. 5,635,918
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------- ------ -----------
<S> <C> <C> <C> <C>
VARIABLE RATE DEMAND NOTES (36.1%)+
- -----------------------------------
Alabama State Development
Authority 5.65%......... 07/07/97 A-1/P-1 $ 550 $ 550,000
Barton Healthcare 5.75%.. 07/07/97 A-1/P-1 465 465,000
Baylis Group Partnership
Floating Rate 5.90%..... 07/02/97 A-1/P-1 700 700,000
Berks County Industrial
Development Authority
5.80%................... 07/07/97 A-1/P-1 540 540,000
Bloomfield New Mexico
5.95%................... 07/07/97 A-1/P-1 600 600,000
Columbia County Georgia
Development Authority
5.65%................... 07/07/97 A-1/P-1 470 470,000
Community Health Systems,
Inc. 5.95%.............. 07/07/97 A-1/P-1 1,465 1,465,000
Durham Risk Management
Co. 5.65%............... 07/07/97 A-1+/P- 500 500,000
Fairview Hospital and
Healthcare Services
5.60%................... 07/07/97 A-1+/P- 500 500,000
GMG Warehouse American
National 5.75%.......... 07/02/97 NR 975 975,000
Health Insurance Plan of
Greater NY
5.50%................... 07/07/97 A-1/P-1 500 500,000
5.50%................... 07/07/97 A-1/P-1 500 500,000
Illinois Development
Finance Authority 5.75%. 07/07/97 A-1/P-1 600 600,000
Liliha Partners 6.20%.... 07/02/97 NR 1,100 1,100,000
Montgomery County PA
Industrial Development
Authority 5.80%......... 07/07/97 A-1/P-1 805 805,000
New York, New York 5.75%. 09/10/97 A-1/P-1 1,900 1,900,000
Passaic County Utilities
Authority Series 1996-A
6.25%................... 09/03/97 SP1+ 650 650,000
Saint Francis Health
6.15%................... 07/07/97 A-1/P-1 490 490,000
Sliver City New Mexico
5.95%................... 07/07/97 A-1/P-1 600 600,000
-----------
TOTAL VARIABLE RATE DEMAND NOTES
(Cost $13,910,000)............................... 13,910,000
-----------
GOVERNMENT OBLIGATIONS (1.3%)+
- ------------------------------
Student Loan Marketing
Assn. 5.24%
(Cost $499,934)......... 07/01/97 AAA 500 499,934
-----------
MEDIUM TERM NOTES (4.4%)
- ------------------------
Caterpillar, Inc. 7.47%.. 01/15/98 A+ 600 604,861
Pacific Gas & Electric
5.00%................... 10/07/97 A 1,100 1,097,699
-----------
TOTAL MEDIUM TERM NOTES
(Cost $1,702,560).................................. 1,702,560
-----------
</TABLE>
9
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED) (CONTINUED)
THE MONEY MARKET FUND
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
SHORT-TERM INVESTMENTS (6.4%)
- -----------------------------
<S> <C> <C>
Janus Money Mar-
ket Fund....... 1,883,015 $ 1,883,015
Temporary In-
vestment Fund,
Inc............ 572,785 572,785
-----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $2,455,800).......... 2,455,800
-----------
TOTAL INVESTMENTS (100.0%)
(Cost $38,559,585)(a)...... $38,559,585
===========
</TABLE>
- -------
(a) Cost for Federal income tax purposes.
+ The rate shown is the rate as of June 30, 1997, and the maturity shown is
the next interest readjustment date.
The Standard & Poor's Corporation, Moody's Investor Service, Fitch Investors
Service and Duff & Phelps Credit Rating Co. Ratings are the most recent
ratings available at June 30, 1997.
<TABLE>
<CAPTION>
PERCENTAGE OF PORTFOLIO
MATURITY AMOUNT --------------------------------------------------
SCHEDULE PAR (CUM)
-------- ----------- --------------
<S> <C> <C> <C>
1 - 7 days $12,860,000 34.7% 34.7%
8 - 14 days 1,570,000 5.1% 39.8%
15 - 30 days 5,451,000 15.1% 54.9%
31 - 60 days 6,410,000 17.5% 72.4%
61 - 90 days 4,688,000 12.6% 85.0%
91 - 120 days 1,100,000 3.8% 88.8%
Over 150 days 4,113,000 11.2% 100.0%
----------- -----------
$36,192,000 100.0%
=========== ===========
</TABLE>
Average Weighted Maturity - 48 days
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED)
THE QUALITY BOND FUND
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------ -----------
<S> <C> <C> <C> <C>
CORPORATE BONDS (51.5%)
- -----------------------
AGRICULTURAL OPERATIONS (0.6%)
Cargill, Inc. 7.375%..... 10/01/25 AA- $ 250 $ 244,063
-----------
BEVERAGES (1.2%)
Coca-Cola Enterprises
6.95%................... 11/15/26 AA- 475 445,906
-----------
BROADCASTING (4.0%)
News America Holdings
8.50%................... 02/23/25 BBB 360 394,200
9.25%................... 02/01/13 BBB 950 1,067,563
-----------
1,461,763
-----------
CANADIAN GOV'T AGENCY (4.5%)
Hydro Quebec
7.50%................... 04/01/16 A+ 400 396,000
8.05%................... 07/07/06 A+ 1,150 1,247,750
-----------
1,643,750
-----------
ELECTRIC POWER (1.4%)
Korea Electric Power
7.75%................... 04/01/13 AA- 500 501,875
-----------
FINANCIAL (6.9%)
African Development Bank
6.875%.................. 10/15/15 AA- 500 481,250
Associates Corp. N.A.,
Senior Note 7.75%....... 02/15/05 AA- 500 530,625
General Electric Capital
Corp. 8.125%............ 02/01/99 AAA 500 515,000
General Motors Acceptance
Corp. Note 6.40%........ 07/30/97 A- 300 300,207
Morgan Stanley Financial
PLC 8.03%............... 02/28/17 A- 250 247,188
Morgan Stanley 6.95%..... 12/10/07 A- 473 466,737
-----------
2,541,007
-----------
FOODS (2.7%)
Food Lion Inc. 8.05%..... 04/15/27 A- 950 979,688
-----------
GENERAL OBLIGATION BONDS (2.7%)
General Electric Capital
Corp. 6.66%............. 05/01/00 AAA 1,000 1,006,250
-----------
MISCELLANEOUS (1.4%)
Noble Affiliates, Inc.
8.00%................... 04/01/27 BBB 500 511,250
-----------
RAILROADS (0.7%)
Union Pacific Co. 8.35%.. 05/01/25 BBB 250 256,875
-----------
RETAIL (7.5%)
J.C. Penney & Co.
7.60%................... 04/01/07 A- 1,400 1,443,750
9.45%................... 07/15/02 A- 175 187,250
American Stores Co.
7.50%................... 05/01/09 BBB+ 1,100 1,117,875
-----------
2,748,875
-----------
SERVICES - EQUIPMENT RENTING & LEASING
(2.9%)
Service Co. International
7.00%................... 06/01/15 BBB- 100 101,125
7.70%................... 04/15/09 BBB- 950 978,500
-----------
1,079,625
-----------
TRANSPORTATION (4.5%)
@ CSX Corp. 7.05%......... 05/01/02 BBB 660 660,821
CSX Corp. 7.25%.......... 05/01/27 BBB 1,000 1,008,750
-----------
1,669,571
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------ -----------
<S> <C> <C> <C> <C>
UTILITIES (10.5%)
GTE Corp. 7.51%............................ 04/01/09 A $1,900 $ 1,947,500
Petroleum Geo-Services 7.50%............... 03/31/07 BBB- 1,900 1,916,625
-----------
3,864,125
-----------
TOTAL CORPORATE BONDS
(Cost $18,525,725)................................................ 18,954,623
-----------
U.S. TREASURY OBLIGATIONS (16.0%)
- ---------------------------------
U.S. Treasury Notes
7.875%.................................... 11/15/99 N/A 750 778,170
7.75%..................................... 12/31/99 N/A 1,000 1,035,770
6.75%..................................... 04/30/00 N/A 1,000 1,013,160
6.25%..................................... 05/31/00 N/A 500 500,355
6.25%..................................... 10/31/01 N/A 1,300 1,294,033
-----------
4,621,488
-----------
U.S. Treasury Bonds
7.125%.................................... 02/15/23 N/A 150 154,565
6.00%..................................... 02/15/26 N/A 350 313,257
6.50%..................................... 11/15/26 N/A 950 814,555
-----------
1,282,377
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $5,883,549)................................................. 5,903,865
-----------
AGENCY OBLIGATIONS (14.3%)
- --------------------------
Federal National Mortgage Assoc. 7.00% due
06/01/11 to 05/01/12...................... 4,045 N/A 4,039,557
Federal National Mortgage Assoc. 6.45%..... 12/01/03 N/A 1,226 1,217,705
-----------
TOTAL AGENCY OBLIGATIONS
(Cost $5,212,727)................................................. 5,257,262
-----------
COMMERCIAL MORTGAGE-BACKED SECURITY (1.3%)
- ------------------------------------------
Sasco 96-CFl Class B 6.303% (Cost 500,000). 02/25/28 AA 500 486,250
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------
<S> <C> <C>
PREFERRED STOCK (5.1%)
- ----------------------
New Jersey Economic Development
(Cost $1,888,480)...................................... 76,000 1,888,480
-----------
SHORT-TERM INVESTMENTS (11.8%)
- ------------------------------
Janus Money Market Fund................................. 1,812,717 1,812,717
Temporary Investment Fund, Inc. ........................ 2,518,108 2,518,108
-----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $4,330,825)................................................. 4,330,825
-----------
TOTAL INVESTMENTS (100.0%)
(Cost $36,341,306)(a)............................................. $36,821,305
===========
</TABLE>
- -------
@ Restricted Security.
(a) Also cost for Federal income tax purposes. At June 30, 1997, the excess of
value over tax cost was $572,143, and the excess of tax cost over value was
$92,144.
The Standard & Poor's corporation ratings are the most recent ratings
available at June 30, 1997.
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED)
THE HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------ ------------
<S> <C> <C> <C> <C>
COLLATERALIZED MORTGAGE SECURITIES (1.2%)
- -----------------------------------------
Airplanes Pass Through Trust 10.875%
(Cost $506,762).......................... 03/15/19 BB $ 500 $ 580,000
------------
CORPORATE BONDS (92.0%)
- -----------------------
AEROSPACE & DEFENSE (4.2%)
BE Aerospace, Inc. 9.875%................. 02/01/06 B 500 526,250
Echo Bay Mines 11.00%..................... 04/01/27 BB- 450 452,250
Dyncorp, Inc. 9.50%....................... 03/01/07 B 425 429,250
L-3 Comms 10.375%......................... 05/01/07 B- 325 343,688
Tracor, Inc. 8.50%........................ 03/01/07 B 350 350,000
------------
2,101,438
------------
AUTOMOBILES & RELATED (1.6%)
Chief Auto Parts Inc. 10.50%.............. 05/15/05 B 250 250,000
K&F Industries 10.375%.................... 09/01/04 B- 225 238,500
Oxford Automotive Inc. 10.125%............ 06/15/07 B- 250 250,625
Walbro Corporation 9.875%................. 07/15/05 B+ 50 51,250
------------
790,375
------------
AUTOMOBILES - CARS (0.2%)
Venture Holdings Trust 9.75%.............. 04/01/04 B 100 98,000
------------
BANKING (0.5%)
Greenpoint Cap Trust I 9.10%.............. 06/01/27 BB 250 252,165
------------
BEVERAGES (2.5%)
Dr. Pepper Bottling Holdings, Inc.
4.4178%++................................ 02/15/03 CCC+ 700 698,250
Beatrice 11.50%........................... 10/01/05 B- 500 565,000
------------
1,263,250
------------
BROADCASTING (0.9%)
Azteca Holdings SA 11.00%................. 06/15/02 B- 200 201,250
Chancellor Radio Broadcasting 9.375%...... 10/01/04 B- 250 256,250
------------
457,500
------------
BUILDING & REAL ESTATE (1.1%)
B.F. Saul Reit. 11.625%................... 04/01/02 B- 500 532,500
------------
BUILDING PRODUCTS (3.1%)
American Builders and Contractors 10.625%. 05/15/07 B 400 414,000
Foamex L.P. 9.875%........................ 06/15/07 B- 350 362,250
Maxxam Group, Inc. 11.25%................. 08/01/03 B- 500 518,125
Reliant Building Products 10.875%......... 05/01/04 B- 250 256,250
------------
1,550,625
------------
CABLE OPERATORS (3.3%)
Frontiervision 11.00%..................... 10/15/06 B 300 314,250
Fundy Cable Ltd. 11.00%................... 11/15/05 BB 500 540,000
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------ ------------
<S> <C> <C> <C> <C>
Marcus Cable Operating Co. 2.772%++....... 08/01/04 B $ 550 $ 478,500
Lomcast U.K. Cable 11.2076 %++............ 11/15/07 NR 450 337,500
------------
1,670,250
------------
CHEMICALS (0.9%)
Sterling Chemicals Hldgs, Units
10.3802%++............................... 08/15/08 B+ 200 134,500
Sterling Chemicals, Inc. 11.25%........... 04/01/07 B+ 300 321,750
------------
456,250
------------
COMMUNICATIONS SERVICES (1.1%)
Communication & Power Industries 12.00%... 08/01/05 B 500 555,000
------------
CONGLOMERATES (1.3%)
ICF Kaiser International Inc. 13.00%...... 12/31/03 B- 225 243,000
Jordan Industries, Inc. 10.375%........... 08/01/03 B- 400 424,000
------------
667,000
------------
CONSUMER PRODUCTS (0.7%)
Revlon Worldwide 11.5728%++............... 03/15/01 B- 500 338,750
------------
CONTAINER (3.4%)
Bway Corp. 10.25%......................... 04/15/07 B 350 374,500
Plastic Containers, Inc. 10.00%........... 12/15/06 B+ 500 520,000
U.S. Can Corp. 10.125%.................... 10/15/06 B 760 807,500
------------
1,702,000
------------
DIVERSIFIED - CHEMICALS (0.6%)
Polytama International 11.25%............. 06/15/07 B+ 300 309,750
------------
ELECTRONIC COMPONENTS (3.4%)
Celestica International 10.50%............ 12/31/06 B 500 537,500
Fairchild Semiconductor 10.125%........... 03/15/07 B 250 265,000
HCC Industries 10.75%..................... 05/15/07 B- 350 367,500
Viasystems Inc 9.75%...................... 06/01/07 B- 500 506,250
------------
1,676,250
------------
ENERGY SERVICES (4.8%)
Dual Drilling Co. 9.875%.................. 01/15/04 B- 500 533,750
Energy Corp of America 9.50%.............. 05/15/07 B 400 404,000
Falcon Drilling Co. 8.875%................ 03/15/03 B+ 150 151,875
Flores & Rucks 9.75%...................... 10/01/06 B- 275 287,375
Kelley Oil & Gas Corp. 10.375%............ 10/15/06 B- 350 360,500
Mesa Operating Co. 7.2429%................ 07/01/06 B 250 192,500
Pride Petroleum Services 9.375%........... 05/01/07 BB- 425 444,125
------------
2,374,125
------------
</TABLE>
12
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED) (CONTINUED)
THE HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------ ------------
<S> <C> <C> <C> <C>
ENTERTAINMENT & LEISURE (6.7%)
AMC Entertainment, Inc. 9.50%............. 03/15/09 B $ 500 $ 520,000
Horseshoe Gaming L.L.C. 9.375%............ 06/15/07 B 400 402,000
Plains Resources, Inc. 10.25%............. 03/15/06 B- 550 583,000
Plitt Theaters, Inc. 10.875%.............. 06/15/04 B- 350 371,000
Six Flags Theme Parks 2.4799%++........... 06/15/05 B 500 514,375
United Artists Theater 9.30%.............. 07/01/15 BB 492 476,828
Travelcenters of America 10.25%........... 04/01/07 B 450 462,375
------------
3,329,578
------------
FINANCE (1.1%)
Ocwen Financial Corp. 11.875%............. 10/01/03 B+ 500 540,000
------------
FOOD/TOBACCO (5.1%)
Archibald Candy Corp 10.25%............... 07/01/04 B 400 407,000
Consolidated Cigar Corp. 10.50%........... 03/01/03 B 750 789,375
Mac Andrews & Forbes Co. 11.875%.......... 11/15/02 B 500 537,500
MBW Foods Inc. 9.875%..................... 02/15/07 B- 325 329,063
Shoppers Food Warehouse 9.75%............. 06/15/04 B+ 500 501,250
------------
2,564,188
------------
HEALTHCARE (2.2%)
Owens & Minor 10.875%..................... 06/01/06 B+ 250 278,750
Quest Diagnostic, Inc. 10.75%............. 12/15/06 B+ 250 271,875
Regency Health Services, Inc. 12.25%...... 07/15/03 B- 500 541,250
------------
1,091,875
------------
HOTELS & GAMING (5.2%)
@Capital Gaming International, Inc.
45.6951%++.............................. 08/01/97 NR 5 250
Courtyard By Marriott 10.75%.............. 02/01/08 B- 350 378,875
Eldorado Resorts LLC 10.50%............... 08/15/06 B 250 265,000
Grand Casinos, Inc. 10.125%............... 12/01/03 BB 300 312,000
Majestic Star Casino 12.75%............... 05/15/03 B 250 274,375
Prime Hospitality 9.75%................... 04/01/07 NR 200 209,000
Red Roof Inns 9.625%...................... 12/15/03 B 500 517,500
Rio Hotel & Casino, Inc.
9.50%.................................... 04/15/07 B 50 51,500
10.625%.................................. 07/15/05 B 250 270,000
Trump Atlantic City Assoc. Funding, Inc.
11.25%................................... 05/01/06 BB- 300 293,250
------------
2,571,750
------------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------ ------------
<S> <C> <C> <C> <C>
INDUSTRIAL - OTHER (1.9%)
Acquisition Properties
9.00%................... 12/15/07 NR $ 400 $ 406,500
Doane Products Co.
10.625%................. 03/01/06 B+ 500 532,500
------------
939,000
------------
MANUFACTURING (5.1%)
Hawk Corp. 10.25%........ 12/01/03 B+ 350 360,500
International Knife & Saw
11.375%................. 11/15/06 B- 300 321,000
International Wire Group
11.75%.................. 06/01/05 B- 500 542,500
Mettler-Toledo, Inc.
9.75%................... 10/01/06 B 300 315,000
Roller Bearing Co.
9.625%.................. 06/15/07 B- 500 506,250
Tokheim Corp. 11.50%..... 08/01/06 B 475 518,938
------------
2,564,188
------------
MEDIA AND COMMUNICATIONS (0.6%)
Intermedia
Communications, Inc.
4.2945%++............... 05/15/06 B- 350 252,000
13.50%.................. 06/01/05 B- 50 61,125
------------
313,125
------------
METALS & MINING (0.8%)
Haynes International,
Inc. 11.625%............ 09/01/04 B- 350 385,000
------------
MISCELLANEOUS (3.9%)
Amerigas Partners L.P.
10.125%................. 04/15/07 BB+ 400 425,500
Associated Materials,
Inc. 11.50%............. 08/15/03 B- 250 265,935
Herff Jones, Inc. 11.00%. 08/15/05 B 500 540,000
ML Capital Pfd. 9.875%... 03/01/27 B 300 300,000
PMI Acquisition Corp.
10.25%.................. 09/01/03 B 100 105,250
Synthetic Industries
9.25%................... 02/15/07 B 325 329,875
------------
1,966,560
------------
MISCELLANEOUS CONSUMER PRODUCTS (5.5%)
American Safety Razor
9.875%.................. 08/01/05 BB- 500 533,750
Chattem Inc. 12.75%...... 06/15/04 B- 500 550,000
Hedstrom Corp 10.00%..... 06/01/07 NR 200 201,500
Keebler Corporation
10.75%.................. 07/01/06 NR 600 672,000
PM Holdings Corp.
5.1115%++............... 09/01/05 B 400 306,000
Windy Hill Pet Food Co.
9.75%................... 05/15/07 NR 500 501,250
------------
2,764,500
------------
MISCELLANEOUS MATERIALS (0.1%)
Hedstrom Holdings Inc.
11.9999%++.............. 06/01/09 NR 100 59,500
------------
</TABLE>
13
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED) (CONTINUED)
THE HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------ ------------
<S> <C> <C> <C> <C>
PAPER & PAPER PRODUCTS (2.2%)
Container Corp. of America 11.25%.......... 05/01/04 B+ $ 250 $ 270,000
Pen-Tab Industries 10.875%................. 02/01/07 B- 250 253,125
S.D. Warren Co. 12.00%..................... 12/15/04 B+ 500 555,000
------------
1,078,125
------------
PRINTING & PUBLISHING (1.0%)
Sun Media Corp. 9.50%...................... 02/15/07 B 500 505,000
------------
RETAIL (0.9%)
Safelite Glass Corp. 9.875%................ 12/15/06 NR 400 428,000
------------
RETAIL MERCHANDISING (1.2%)
Specialty Retail 9.00%..................... 07/15/07 B 250 250,000
Specialty Retail 8.50%..................... 07/15/05 B 325 325,000
------------
575,000
------------
SAVINGS & LOAN ASSOCIATIONS (1.6%)
Bank United Capital Trust 10.25%........... 12/31/26 NR 250 247,500
First Federal Financial Corp. 11.75%....... 10/01/04 B+ 500 544,375
------------
791,875
------------
SERVICE (2.4%)
Allied Waste North America 10.25%.......... 12/01/06 B+ 200 213,000
Coinmach Corp. 11.75%...................... 11/15/05 B+ 482 533,815
Intertek Finance 10.25%.................... 11/01/06 B 445 460,575
------------
1,207,390
------------
TELECOMMUNICATIONS (4.7%)
Brooks Fiber Properties 10.00%............. 06/01/07 NR 100 101,000
Colt Telecom 5.9094%++..................... 12/15/06 NR 700 448,000
Global Star Lp
11.25%.................................... 06/15/04 B 150 139,500
11.375%................................... 02/15/04 B 350 350,875
Microcell Telecommunications 13.3689%++.... 06/01/06 B 200 112,000
Nextel Communications 5.9476%++............ 08/15/04 CCC- 150 114,750
Pricellular Wire 10.75%.................... 11/01/04 B 250 260,625
Sprint Spectrum 11.00%..................... 08/15/06 B+ 200 221,500
Teleport Communications 4.3941%++.......... 07/01/07 B 425 306,531
Telewest
9.625%.................................... 10/01/06 B+ 125 128,750
11.0672%++................................ 10/01/07 B+ 250 180,000
------------
2,363,531
------------
TEXTILES & APPAREL (3.1%)
Dan River, Inc. 10.125%.................... 12/15/03 B 500 530,000
Glenoit Corp. 11.00%....................... 04/15/07 B- 150 157,500
Pillowtex Corp. 10.00%..................... 11/15/06 B+ 375 393,750
#@Plaid Clothing Corp.
11.00%................................... 08/01/03 D 375 27,188
Tultex Corp. 9.625%........................ 04/15/07 BB- 150 158,625
Westpoint Stevens Inc. 9.375%.............. 12/15/05 B+ 250 261,250
------------
1,528,313
------------
TRANSPORTATION (2.5%)
Coach USA, Inc. 9.375%..................... 07/01/07 B+ 250 247,500
Equimar Shipholdings Ltd. 9.875%........... 07/01/07 B 500 490,000
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ------ ------------
<S> <C> <C> <C> <C>
Greyhound Lines 11.50%..................... 04/15/07 NR $ 250 $ 265,000
Sea Containers Ltd. 12.50%................. 12/01/04 BB- 215 242,950
------------
1,245,450
------------
WASTE MANAGEMENT (0.6%)
Allied Waste Industries 11.2999%++......... 06/01/07 B+ 500 307,500
------------
TOTAL CORPORATE BONDS
(Cost $44,564,528)................................................ 45,914,676
------------
COMMERCIAL PAPER (2.2%)
- -----------------------
Pfizer, Inc. 5.52%
(Cost $1,099,070)......................... 08/05/97 AAA 1,105 1,099,070
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
--------
<S> <C> <C>
COMMON STOCK (1.4%)
- -------------------
+@ Berg Electronics Corp................................... 3,698 132,897
+@ Capital Gaming International, Inc....................... 13,335 400
+@ Dr. Pepper Bottling Holdings,Inc., Class A.............. 14,800 277,500
+ Gaylord Containers Corp., Class A........................ 7,500 57,656
+ Ocwen Assest Investment Corp............................. 10,000 202,500
+ Protection One, Inc...................................... 4,200 56,700
+ Wireless One Inc......................................... 450 113
-----------
TOTAL COMMON STOCK
(Cost $447,305).................................................... 727,766
-----------
PREFERRED STOCK (3.1%)
- ----------------------
Capstar Broadcasting Partners............................. 3,000 301,500
American Radio Systems.................................... 2,632 280,273
Chancellor Radio Broadcasting............................. 2,500 271,250
Chevy Chase Pfd. Capital Corp............................. 5,185 274,805
Criimi Mae, Inc........................................... 10,000 361,250
Intermedia Communications, Inc., Series B................. 5,000 51,650
-----------
TOTAL PREFERRED STOCK
(Cost $1,380,438).................................................. 1,540,728
-----------
<CAPTION>
WARRANTS
--------
<S> <C> <C>
WARRANTS (0.1%)
- ---------------
@+ Capital Gaming International, Inc....................... 11,375 11
+ ICF Kaiser Intl. Inc,.................................... 1,575 1,575
+ Intermedia Communicaton.................................. 50 2,000
Microcell Telecommunication............................... 800 11,400
Microcell Telecommunication............................... 800 500
@+ President Casinos, Inc.................................. 4,415 1,104
+@ Wright Medical Technology, Inc.......................... 2,676 26,765
-----------
TOTAL WARRANTS
(Cost $84,730)..................................................... 43,355
-----------
TOTAL INVESTMENTS (100.0%)
(Cost $48,082,833)................................................. $49,905,595
===========
</TABLE>
- -------
@ Restricted security.
+ Non-income producing.
++ Effective Yield.
# Securities in default.
(a) Also cost for Federal income tax. At June 30, 1997, the excess of value
over tax cost was $2,432,813, and the excess of tax cost over value was
$610,051.
The Standard & Poor's corporation ratings are the most recent ratings
available at June 30, 1997.
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED)
THE GROWTH EQUITY FUND
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
COMMON STOCK (97.0%)
- --------------------
AEROSPACE - DEFENSE (1.7%)
United Technologies Corp. .............................. 25,000 $ 2,075,000
------------
BEVERAGES (2.1%)
Coca-Cola Co. .......................................... 10,000 675,000
PepsiCo., Inc. ......................................... 50,000 1,878,125
------------
2,553,125
------------
CHEMICALS (3.8%)
Du Pont (E.I.) de Nemours & Co. ........................ 50,000 3,143,750
Monsanto Co. ........................................... 35,000 1,507,188
------------
4,650,938
------------
COMPUTER SOFTWARE & SERVICES (7.5%)
+ Cisco Systems, Inc. ................................... 40,000 2,686,250
First Data Corporation.................................. 25,000 1,098,438
+ Microsoft Corp. ....................................... 35,000 4,426,406
+ PeopleSoft, Inc. ...................................... 15,000 790,313
------------
9,001,407
------------
COMPUTER SYSTEMS (5.4%)
+ Compaq Computer Corp. ................................. 25,000 2,481,250
+ Dell Computer Corp. ................................... 15,000 1,761,094
Hewlett-Packard Co. .................................... 25,000 1,400,000
+ Sun Microsystems, Inc. ................................ 25,000 930,469
------------
6,572,813
------------
COSMETICS & TOILETRIES (3.1%)
Gillette Co. ........................................... 10,000 947,500
Procter & Gamble Co. ................................... 20,000 2,825,000
------------
3,772,500
------------
DIVERSIFIED OPERATIONS (6.8%)
General Electric Company................................ 70,000 4,576,250
Minnesota Mining & Manufacturing Co. ................... 15,000 1,530,000
Tyco International Ltd. ................................ 15,000 1,043,438
Unilever NV and PLC..................................... 5,000 1,090,000
------------
8,239,688
------------
ELECTRONICS (6.4%)
+ Adaptec, Inc. ......................................... 35,000 1,216,250
Honeywell, Inc. ........................................ 25,000 1,896,875
Intel Corp. ............................................ 25,000 3,539,844
Motorola, Inc. ......................................... 15,000 1,140,000
------------
7,792,969
------------
ENTERTAINMENT (2.0%)
The Walt Disney Co. .................................... 30,000 2,407,500
------------
FINANCIAL SERVICES (10.5%)
American Express Co. ................................... 20,000 1,490,000
BankAmerica Corp. ...................................... 30,000 1,936,875
Citicorp................................................ 20,000 2,411,250
Fannie Mae.............................................. 50,000 2,181,250
MBNA Corp. ............................................. 40,000 1,465,000
Merrill Lynch & Co., Inc. .............................. 30,000 1,788,750
SunAmerica, Inc. ....................................... 30,000 1,462,500
------------
12,735,625
------------
INSURANCE (5.9%)
Allstate Corp. ......................................... 20,000 1,460,000
American International Group, Inc. ..................... 15,000 2,240,625
Hartford Financial Services Group, Inc. ................ 15,000 1,241,250
Travelers Group, Inc. .................................. 35,000 2,207,188
------------
7,149,063
------------
MEDICAL SUPPLIES (1.2%)
Guidant Corp. .......................................... 15,000 1,275,000
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
OIL & GAS (4.2%)
Exxon Corp. ............................................ 30,000 $ 1,845,000
+ Global Marine Inc. .................................... 60,000 1,395,000
Schlumberger Ltd. ...................................... 15,000 1,875,000
------------
5,115,000
------------
PAPER & FOREST PRODUCTS (0.8%)
Kimberly-Clark Corp. ................................... 20,000 995,000
------------
PHARMACEUTICALS (16.6%)
Abbott Laboratories..................................... 25,000 1,668,750
American Home Products Corp. ........................... 15,000 1,147,500
Bristol-Myers Squibb Co. ............................... 25,000 2,025,000
Johnson & Johnson....................................... 50,000 3,218,750
Eli Lilly & Company..................................... 20,000 2,186,250
Merck & Co., Inc. ...................................... 40,000 4,140,000
Pfizer Inc. ............................................ 25,000 2,987,500
Schering-Plough Corp. .................................. 30,000 1,436,250
Warner-Lambert Co. ..................................... 10,000 1,242,500
------------
20,052,500
------------
PRINTING & PUBLISHING (0.6%)
+ Electronics for Imaging, Inc. ......................... 15,000 708,281
------------
RETAIL (8.6%)
+ Costco Companies, Inc. ................................ 40,000 1,316,250
Home Depot, Inc. ....................................... 25,000 1,723,438
+ Safeway Inc. .......................................... 50,000 2,306,250
+ Staples, Inc. ......................................... 50,000 1,159,375
Walgreen Co. ........................................... 20,000 1,072,500
Wal-Mart Stores, Inc. .................................. 85,000 2,874,063
------------
10,451,876
------------
TELECOMMUNICATIONS (6.8%)
GTE Corp. .............................................. 25,000 1,096,875
Lucent Technologies, Inc. .............................. 25,000 1,801,563
Northern Telecom Ltd. .................................. 10,000 910,000
Oy Nokia AB (ADR)....................................... 20,000 1,475,000
SBC Communications, Inc. ............................... 35,000 2,165,625
+ Tellabs, Inc. ......................................... 15,000 837,188
------------
8,286,251
------------
TOBACCO (1.8%)
Philip Morris Companies, Inc. .......................... 50,000 2,218,750
------------
TRANSPORT (1.2%)
+ Federal Express Corp. ................................. 25,000 1,443,745
------------
TOTAL COMMON STOCK
(Cost $86,578,437)................................................ 117,497,031
------------
SHORT-TERM INVESTMENTS (3.0%)
- -----------------------------
Temporary Cash Investment Fund, Inc. ................... 1,831,428 1,831,428
Temporary Investment Fund, Inc. ........................ 1,831,390 1,831,390
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $3,662,818)................................................. 3,662,818
------------
TOTAL INVESTMENTS (100.0%)
(Cost $90,241,255)(a)............................................. $121,159,849
============
</TABLE>
- -------
+ Non-income producing.
(a) At June 30, 1997, the cost for Federal income tax purposes was $90,297,341.
The excess of value over tax cost was $30,951,236, and the excess of cost
over value was $88,728.
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED)
THE VALUE EQUITY FUND
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
COMMON STOCK (82.3%)
- --------------------
AEROSPACE - DEFENSE (5.3%)
Lockheed Martin Corp. .................................... 80,000 $ 8,285,000
McDonnell Douglas Corp. .................................. 81,000 5,548,500
------------
13,833,500
------------
AIRLINES (1.5%)
+ AMR Corp. ............................................... 43,000 3,977,500
------------
AUTOMOBILES PARTS - EQUIPMENT (2.5%)
Lucasvarity PLC ADR....................................... 188,520 6,527,501
------------
CHEMICALS (3.6%)
Du Pont (E.I.) de Nemours & Co. .......................... 60,000 3,772,500
Hercules, Inc. ........................................... 50,000 2,393,750
Monsanto Co. ............................................. 77,000 3,315,813
------------
9,482,063
------------
CONGLOMERATES (2.0%)
General Electric Co. ..................................... 80,000 5,230,000
------------
COSMETICS (1.4%)
Avon Products, Inc. ...................................... 50,000 3,528,125
------------
DIVERSIFIED (3.6%)
Canadian Pacific Limited.................................. 140,000 3,981,250
Tenneco, Inc. ............................................ 75,000 3,389,063
Textron Inc. ............................................. 29,700 1,971,338
------------
9,341,651
------------
ENTERTAINMENT & LEISURE (2.0%)
Carnival Corp. Class A.................................... 125,000 5,156,250
------------
ELECTRONIC COMPONENTS (1.3%)
+ Adaptec, Inc. ........................................... 98,000 3,405,500
------------
ELECTRONICS (1.0%)
+ Arrow Electronics, Inc. ................................. 48,000 2,550,000
------------
FINANCIAL SERVICES (12.3%)
Citicorp.................................................. 70,000 8,439,375
Countrywide Credit Industries, Inc. ...................... 210,000 6,549,375
Federal Home Loan Mortgage Corp. ......................... 220,000 7,562,500
Sabre Group Holdings Inc. Class A......................... 80,000 2,170,000
Wells Fargo & Co. ........................................ 27,333 7,366,244
------------
32,087,494
------------
GAS TRANSMISSION (0.1%)
El Paso Natural Gas Co. .................................. 6,510 358,050
------------
HOSPITAL MANAGEMENT (3.2%)
+ Tenet Healthcare Corp. .................................. 282,500 8,351,406
------------
INSURANCE (22.2%)
Ace, Limited.............................................. 175,000 12,928,125
AFLAC, Inc. .............................................. 105,375 4,978,969
American International Group, Inc. ....................... 23,500 3,510,313
Everest Re Holdings, Inc. ................................ 120,000 4,755,000
Exel Limited.............................................. 247,600 13,060,900
General Re Corp. ......................................... 41,000 7,462,000
Mid Ocean Limited......................................... 123,000 6,449,813
Progressive Corp. ........................................ 55,000 4,785,000
------------
57,930,120
------------
MACHINERY - DIVERSIFIED (4.5%)
Caterpillar, Inc. ........................................ 88,000 9,449,000
Dover Corp. .............................................. 38,000 2,337,000
------------
11,786,000
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
MANUFACTURING (0.9%)
AlliedSignal, Inc. ....................................... 27,000 $ 2,268,000
------------
MEDICAL SUPPLIES (2.6%)
Becton, Dickinson & Co. .................................. 134,000 6,783,750
------------
METALS (0.6%)
Freeport-McMoran Copper & Gold, Inc.
Class B.................................................. 47,016 1,463,373
------------
OIL & GAS (1.4%)
+ Triton Energy Limited.................................... 62,000 2,840,375
Union Pacific Resources, Group............................ 28,796 716,301
------------
3,556,676
------------
PAPER & PAPER PRODUCTS (0.4%)
Champion International Corp. ............................. 20,000 1,105,000
------------
RESTAURANTS (1.7%)
McDonald's Corporation.................................... 93,000 4,493,063
------------
RETAIL (2.6%)
May Department Stores Co. ................................ 144,000 6,804,000
------------
TELECOMMUNICATIONS (2.6%)
Sprint Corp. ............................................. 72,250 3,802,156
+ Tele-Communications Inc. Series A........................ 200,000 2,968,750
------------
6,770,906
------------
TEXTILES (0.6%)
Shaw Industries, Inc. .................................... 140,000 1,487,500
------------
TOYS (1.5%)
Mattel, Inc. ............................................. 114,531 3,879,738
------------
TRANSPORT SERVICES (0.9%)
Union Pacific Corp. ...................................... 34,000 2,397,000
------------
TOTAL COMMON STOCK
(Cost $135,477,151)............................................... 214,554,166
------------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000)
-------- -------
<S> <C> <C> <C>
COMMERCIAL PAPER (14.1%)
- ------------------------
Ford Motor Credit Co. 5.53%...................... 07/24/97 $ 6,483 6,460,095
IBM Corp. 5.51%.................................. 07/23/97 10,331 10,296,213
John Deere Credit Corp. 5.53%.................... 07/16/97 10,000 9,976,958
Merrill Lynch & Co., Inc. 5.56%.................. 08/07/97 10,000 9,942,856
------------
TOTAL COMMERCIAL PAPER
(Cost $36,676,122)................................................ 36,676,122
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------
<S> <C> <C>
SHORT-TERM INVESTMENTS (3.6%)
- -----------------------------
Temporary Cash Investment Fund, Inc. ................... 4,743,112 4,743,112
Temporary Investment Fund, Inc. ........................ 4,747,444 4,747,444
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $9,490,556)................................................. 9,490,556
------------
TOTAL INVESTMENTS (100.0%)
(Cost $181,643,829)(a)............................................ $260,720,844
============
</TABLE>
- -------
+ Non-income producing.
(a) Also cost for Federal income tax purposes. At June 30, 1997, the excess of
value over tax cost was $79,500,490, and the excess of tax cost over value
was $423,475.
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED)
THE FLEXIBLY MANAGED FUND
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
COMMON STOCK (50.8%)
- --------------------
AUTOMOTIVE PARTS - EQUIPMENT (0.1%)
Exide Corp. ............................................ 30,000 $ 658,121
------------
BANKS (0.1%)
Bank Fuer Internationalen Zahlungs...................... 44 308,820
------------
BUILDING & CONSTRUCTION (0.5%)
Johns Manville Corp. ................................... 210,000 2,480,625
------------
CHEMICALS (1.6%)
English China Clays PLC................................. 140,689 483,810
Great Lakes Chemical Corp. ............................. 125,000 6,546,875
+ Millenium Chemicals, Inc. ............................. 31,800 723,450
------------
7,754,135
------------
COMPUTERS (0.7%)
International Business Machines Corp. .................. 34,000 3,066,375
+ Silicon Graphics, Inc. ................................ 10,500 157,500
------------
3,223,875
------------
DIVERSIFIED OPERATIONS (2.4%)
+ Chris-Craft Industries, Inc. .......................... 130,000 6,272,500
Corning, Inc. .......................................... 90,000 5,006,250
------------
11,278,750
------------
ELECTRIC UTILITIES (7.1%)
Centerior Energy Corp. ................................. 1,625,000 18,179,688
Ohio Edison Co. ........................................ 225,000 4,907,813
Unicom Corp ............................................ 449,900 10,010,275
------------
33,097,776
------------
ENERGY (1.9%)
Energy Group PLC........................................ 73,125 3,098,672
Wheelabrator Technologies, Inc. ........................ 390,000 6,020,625
------------
9,119,297
------------
FINANCIAL SERVICES (2.0%)
American Express Co. ................................... 52,000 3,874,000
Fannie Mae.............................................. 66,000 2,879,250
Fund American Enterprises, Inc. ........................ 27,000 2,835,000
------------
9,588,250
------------
FOOD/PROCESSING (0.2%)
McCormick & Co., Inc. .................................. 35,000 885,938
------------
HOLDINGS COMPANY DIVERSIFIED (3.7%)
Hanson PLC ADR.......................................... 53,125 1,328,125
Loews Corp. ............................................ 128,000 12,816,000
Lonrho PLC.............................................. 1,500,000 3,184,899
------------
17,329,024
------------
HOTEL - MOTEL (0.5%)
+ HFS, Inc. ............................................. 37,000 2,146,000
------------
INSURANCE (2.0%)
CHUBB Corp ............................................. 0 27
Harleysville Group, Inc. ............................... 40,000 1,522,500
Risk Capital Holdings, Inc. ............................ 19,100 396,325
Unitrin, Inc. .......................................... 57,000 3,494,813
Willis Corroon Group PLC ADR............................ 130,000 1,454,375
Zurich Reinsurance Centre Holdings, Inc. ............... 64,000 2,528,000
------------
9,396,040
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
MEDICAL (0.1%)
+ Perrigo Co. ........................................... 10,000 $ 125,625
+ Quest Diagnostics, Inc. ............................... 11,250 231,328
------------
356,953
------------
MINING (2.7%)
+ Hecla Mining Co. ...................................... 30,000 161,250
Homestake Mining Co. ................................... 165,000 2,155,313
Newmont Mining Corp. ................................... 247,700 9,660,300
Prime Resources Group, Inc. ............................ 111,900 810,341
------------
12,787,204
------------
OFFICE SUPPLIES (0.1%)
Cross (A.T.) Co., Class A............................... 38,000 484,500
------------
OIL & GAS (9.0%)
Amerada Hess Corp. ..................................... 250,000 13,890,625
Atlantic Richfield Co. ................................. 70,000 4,935,000
Kerr-McGee Corp. ....................................... 14,000 887,250
Mitchell Energy & Development Corp.,
Class B................................................ 115,000 2,458,125
Murphy Oil Corp. ....................................... 126,000 6,142,500
Sun Company, Inc. ...................................... 20,000 620,000
Texaco, Inc. ........................................... 64,000 6,960,000
Union Texas Petroleum Holdings, Inc. ................... 290,000 6,071,875
------------
41,965,375
------------
PAPER AND FOREST PRODUCTS (1.5%)
Deltic Timber Corp...................................... 30,000 879,375
International Paper Co. ................................ 28,000 1,359,750
Weyerhaeuser Co. ....................................... 90,000 4,680,000
------------
6,919,125
------------
PHARMACEUTICALS (3.6%)
+ Genetech, Inc. ........................................ 255,000 15,029,063
Schering-Plough Corp. .................................. 42,000 2,010,750
------------
17,039,813
------------
PHOTO EQUIPMENT (1.0%)
Polaroid Corp. ......................................... 82,000 4,551,000
------------
PUBLISHING NEWS (5.7%)
Meredith Corp. ......................................... 100,000 2,900,000
New York Times Co., Class A............................. 260,000 12,870,000
Readers Digest Assoc., Inc., Class B.................... 50,300 1,392,681
Readers Digest Assoc., Inc. ............................ 10,000 286,875
Washington Post Co., Class B............................ 23,000 9,154,000
------------
26,603,556
------------
RETAIL (1.8%)
+ Hills Stores Co. ...................................... 87,000 299,063
Limited, Inc. .......................................... 93,000 1,883,250
+ Petrie Stores Corp. ................................... 1,000,000 3,156,500
+ Toys 'R' Us, Inc. ..................................... 24,500 857,500
Wal-Mart Stores, Inc. .................................. 56,000 1,893,500
------------
8,089,813
------------
TOBACCO (1.4%)
Philip Morris Companies, Inc. .......................... 145,000 6,434,375
------------
TRANSPORTATION - MISCELLANEOUS (1.1%)
Overseas Shipholding Group, Inc. ....................... 135,000 2,649,375
Ryder System, Inc. ..................................... 70,000 2,310,000
------------
4,959,375
------------
TOTAL COMMON STOCK
(Cost $181,984,762)............................................... 237,457,740
------------
</TABLE>
17
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED) (CONTINUED)
THE FLEXIBLY MANAGED FUND
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
PREFERRED STOCK (4.1%)
- ----------------------
Cleveland Electric Illum. Series L 7.00%.................. 34,550 $ 3,053,356
Cleveland Electric Illum. Series R 8.80%.................. 2,550 2,655,188
Cleveland Electric Illum. Series S 9.00%.................. 3,000 3,153,750
Entergy Gulf States Utilities, Inc.
Series B 7.20%........................................... 15,853 768,871
International Paper Company Convertible 5.25%............. 10,000 530,000
Kemper Co. Series E 5.75%................................. 100,000 5,200,000
Niagara Mohawk Power Corp. Series A 6.50%................. 24,000 486,000
Niagara Mohawk Power Corp. Series B 7.50%................. 7,000 154,438
Niagra Mohawk Power Corp. Series C 7.20%.................. 19,500 436,313
Rouse Co. Series B........................................ 55,000 2,653,750
------------
TOTAL PREFERRED STOCK
(Cost $16,738,243)................................................ 19,091,666
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF CONTRACTS
------------
<S> <C> <C>
PUT OPTIONS (0.3%)
- ------------------
+ Automatic Data $50, August 16, 1997................. 105 36,093
+Automatic Data $50, November 22, 1997................ 205 89,683
+ CHUBB $55, July 19, 1997............................ 60 750
+ HFS $60, July 19, 1997.............................. 470 102,813
+ HFS $60, October 18, 1997........................... 150 76,875
+ HFS $70, October 18, 1997........................... 110 138,188
+ IBM $100, January 17, 1998.......................... 140 161,000
+ IBM $78, October 18, 1997........................... 100 13,125
+ IBM $80, July 19, 1997.............................. 100 1,875
+ IBM $88, October 18, 1997........................... 100 37,500
+ IBM $95, January 17, 1998........................... 100 93,750
+ Limited "B" $20, August 16, 1997.................... 105 7,219
+ Limited "B" $23, August 16, 1997.................... 105 25,594
+ Limited "B" $23, November 22, 1997.................. 100 28,125
+ Microsoft $85, July 19, 1997........................ 100 313
+Schering-Plough $50, November 22, 1997............... 110 42,625
+ Schering-Plough $43, August 16, 1997................ 200 5,000
+Schering-Plough $45, November 22, 1997............... 220 38,500
+Silicon Graphics $23, November 22, 1997.............. 105 79,406
+ Silicon Graphics $30, August 16, 1997............... 105 156,844
+ Toys 'R' US $30, September 20, 1997................. 130 6,500
+ Toys 'R' US $35, December 20, 1997.................. 105 26,250
+ Wal-Mart $25, September 20, 1997.................... 210 1,313
+ Wal-Mart $35, December 20, 1997..................... 120 30,750
+ Wal-Mart $33, December 20, 1997..................... 110 15,813
------------
TOTAL PUT OPTIONS
(Cost $2,107,046)................................................. 1,215,904
------------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000)
-------- ------ -----
<S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS (4.3%)
- --------------------------------
U.S Treasury Notes
5.50%.................................... 02/28/99 NA $10,000 9,917,200
5.75%.................................... 10/31/97 NA 2,500 2,501,950
6.125%................................... 07/31/00 NA 1,250 1,245,700
6.25%.................................... 04/30/01 NA 2,500 2,492,975
6.75%.................................... 05/31/99 NA 2,000 2,023,120
7.375%................................... 11/15/97 NA 2,000 2,012,500
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $20,179,805)................................................ 20,193,445
------------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ----- -----
<S> <C> <C> <C> <C>
AGENCY OBLIGATION (2.5%)
- ------------------------
Tennessee Valley Authority 5.98%
(Cost $11,489,607)...................... 04/01/36 AAA $11,400 $ 11,428,500
------------
MEDIUM TERM NOTE (0.3%)
- -----------------------
Federal National Mortgage Assoc. 5.37%
(Cost $1,576,000)....................... 02/07/01 NR 1,600 1,544,656
------------
COMMERCIAL PAPER (11.5%)
- ------------------------
Archer Daniels Midland Corp.
5.52%................................... 07/15/97 NR 2,400 2,394,848
5.60%................................... 07/15/97 NR 412 411,103
Bell Atlantic Network 5.50%.............. 07/02/97 A 10,000 9,998,472
Ciesco L.P.
5.55%................................... 07/01/97 AAA 3,300 3,300,000
6.20%................................... 07/01/97 AAA 12,700 12,700,000
Island Finance Puerto Rico 5.63%......... 07/10/97 NR 1,000 998,582
Motorola Credit Corporation 5.50%........ 08/18/97 NR 8,000 7,941,333
Pitney Bowes Credit Corp 5.52%........... 07/09/97 NR 14,000 13,982,827
Shell Oil Company 5.50%.................. 07/02/97 NR 2,000 1,999,694
------------
TOTAL COMMERCIAL PAPER
(Cost $53,726,859)............................................... 53,726,859
------------
CONVERTIBLE BONDS (26.1%)
- -------------------------
Alza Corp. 5.0261%++..................... 07/14/14 BBB- 5,500 2,433,750
Automatic Data Processing, Inc.
5.1212%++............................... 02/20/12 AA 21,800 13,182,024
Comcast Corp. 3.375%..................... 09/09/05 BB- 4,900 5,174,057
Deutsche Bank Financial 4.4999%++........ 02/12/17 AAA 2,500 1,150,525
Ensearch Corp. 6.375%.................... 04/01/02 BBB- 5,325 5,319,995
Grand Metro PLC Euro-Bond 6.50%.......... 01/31/00 A+ 3,000 4,214,730
Grand Metropolitan PLC 6.50%............. 01/31/00 A+ 1,300 1,826,383
Homestake Mining Co. 5.50%............... 06/23/00 BBB- 4,900 4,705,764
Lonhro Finance Conv. Euro Bond 6.00%..... 02/27/04 BB 1,800 2,810,205
Marriott International 3.8867%++......... 03/25/99 BBB 7,100 4,328,728
McKesson Corp. 4.50%..................... 03/01/04 A- 1,500 1,316,250
Merck & Company 5.76%.................... 05/03/37 AAA 1,150 1,159,315
Office Depot Inc.
4.6260%++............................... 12/11/07 BB- 1,200 815,364
4.2615%++............................... 11/01/08 BB- 5,000 3,105,550
Ogden Corp. 5.75%........................ 10/20/02 BBB 250 233,750
Outboard Marine Corp. 7.00%.............. 07/01/02 B+ 1,850 1,852,313
Peninsular & Oriental 7.25%.............. 05/19/03 NR 1,600 2,836,017
</TABLE>
18
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR
MATURITY RATING (000) VALUE
-------- ------ ----- -----
<S> <C> <C> <C> <C>
Pep Boys Convertible 4.2031%++............ 09/20/11 BBB $ 3,694 $ 2,109,052
Potomac Electric Power Co. 5.00%.......... 09/01/02 A- 2,300 2,139,000
Roche Holdings, Inc. 144A 6.375%++........ 05/06/12 NR 17,700 7,743,750
Rouse Company Euro Bond 5.75%............. 07/23/02 BBB- 6,700 7,051,750
Sandoz Capital 2.00%...................... 10/06/02 AAA 500 767,500
Silicon Graphics 3.8396%++................ 11/02/13 BB+ 4,500 2,206,215
Time Warner Inc
6.2910%++................................ 12/17/12 BBB- 20,000 7,906,800
5.1063%.................................. 06/22/13 BBB- 16,600 7,724,810
UBS Finance 2.00%......................... 12/15/00 AAA 300 289,596
USF&G Corp. 4.3663%++..................... 03/03/09 BBB- 5,100 3,687,198
U.S. Cellular Corp. 6.0276%++............. 06/15/15 BBB- 11,900 4,164,643
U.S. West, Inc. 7.1386%++................. 06/25/11 BBB 23,800 9,177,042
WMX Technologies 2.00%.................... 01/24/05 A 8,550 8,039,736
Zurich Insurance Eurobond 1.00%........... 04/15/03 A 2,700 2,598,750
------------
TOTAL CONVERTIBLE BONDS
(Cost $112,299,627)............................................... 122,070,562
------------
<CAPTION>
SHARES
-------
<S> <C> <C>
SHORT-TERM INVESTMENTS (0.1%)
- -----------------------------
Temporary Investment Fund, Inc.
(Cost $448,474).......................................... 448,474 448,474
------------
TOTAL INVESTMENTS (100.0%)
(Cost $400,550,423)(a)............................................ $467,177,806
============
</TABLE>
- -------
+ Non-income producing.
++ Effective Yield.
(a) At June 30, 1997, the cost for Federal income tax purposes was
$400,556,401. The excess of value over tax cost was $73,629,989 and the
excess of tax cost over value was $7,008,584.
ADR--American Depository Receipt
The Standard & Poor's Corporation ratings are the most recent ratings
available at June 30, 1997.
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED)
THE INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
COMMON STOCK (88.5%)
- --------------------
AUSTRALIA (0.6%)
National Austrailia Bank Limited.......................... 50,000 $ 717,148
------------
BELGIUM (0.7%)
+ Barco N.V. .............................................. 4,500 911,503
------------
BRAZIL (0.6%)
Companhia Cervejaria Brahma (ADR)......................... 47,000 719,688
------------
FINLAND (0.5%)
Cultor Oy, Series II...................................... 12,000 631,774
------------
FRANCE (7.8%)
AXA SA.................................................... 27,500 1,710,211
Carrefour Supermarche SA.................................. 2,100 1,525,012
Compagnie Generale Des Eaux............................... 8,400 1,076,227
+ Dassault Systemes SA..................................... 17,500 1,241,663
Scor SA................................................... 22,000 885,660
Societe Bic SA............................................ 10,000 1,635,132
Total SA-B................................................ 14,185 1,433,657
Valeo SA.................................................. 8,063 500,748
------------
10,008,310
------------
GERMANY (5.5%)
Adidas AG................................................. 14,000 1,565,277
Bayer AG.................................................. 35,000 1,348,546
Bayerische Motoren Werke (BMW) AG......................... 1,000 824,494
CKAG Colonia Konzern AG................................... 4,400 416,261
Gehe AG................................................... 10,800 743,077
SGL Carbon AG............................................. 9,700 1,324,775
VEBA AG................................................... 16,000 903,618
------------
7,126,048
------------
HONG KONG (1.6%)
Dah Sing Financial Group.................................. 130,800 724,340
Sun Hung Kai Properties Limited........................... 115,000 1,384,281
------------
2,108,621
------------
IRELAND (3.7%)
Allied Irish Banks PLC.................................... 191,801 1,467,678
CRH PLC................................................... 92,021 961,601
+ Elan Corp. PLC (ADR)..................................... 31,000 1,402,750
Greencore Group PLC....................................... 202,027 987,442
------------
4,819,471
------------
JAPAN (27.1%)
Bank of Tokyo-Mitsubishi.................................. 75,000 1,505,236
Bridgestone Corp. ........................................ 100,000 2,321,117
Canon, Inc. .............................................. 40,000 1,089,005
Credit Saison Co.limited.................................. 67,000 1,636,998
Ezaki Glico Co. Limited................................... 82,000 736,998
Fuji Photo Film Co. Limited............................... 60,000 2,413,613
Hitachi Maxell Limited.................................... 25,000 619,546
Hoya Corp ................................................ 28,000 1,246,073
Ito-Yokado Co. Limited.................................... 18,000 1,044,503
JUSCO Co. Limited......................................... 56,000 1,891,100
Komatsu Limited........................................... 150,000 1,217,278
Kyocera Corp. ............................................ 11,000 873,473
Mitsubishi Heavy Industries Limited....................... 275,000 2,109,293
Mitsui & Co. Limited...................................... 125,000 1,199,825
Murata Manufacturing Co. Limited.......................... 18,000 716,230
Nikko Securities Co. Limited.............................. 60,000 369,110
Nippon Steel Corp. ....................................... 500,000 1,596,859
NTT Data Corp. ........................................... 29,000 1,121,030
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
Omron Corp. .............................................. 73,000 $ 1,547,906
Rohm Co. Limited.......................................... 25,000 2,574,171
SMC Corp. ................................................ 10,000 844,677
Sony Corp. ............................................... 16,000 1,394,764
Taisho Pharmaceutical Co. Limited......................... 58,000 1,563,874
Takeda Chemical Ind. ..................................... 60,000 1,685,864
Tokyo Broadcasting System, Inc. .......................... 30,000 615,183
Yasuda Fire & Marine Insurance Co. Limited................ 145,000 974,258
------------
34,907,984
------------
MALAYSIA (1.3%)
Malayan Banking Berhad.................................... 80,000 840,003
Telekom Malaysia Berhad................................... 45,000 210,397
United Engineers (Malaysia) Limited....................... 90,000 649,021
------------
1,699,421
------------
NETHERLANDS (6.7%)
Aegon N.V. (ADR).......................................... 9,918 694,880
Aegon N.V. ............................................... 10,246 714,971
Elsevier N.V. ............................................ 105,000 1,754,189
Hagemeyer N.V. ........................................... 24,218 1,250,805
Ing Groep N.V. ........................................... 27,409 1,263,441
Oce-Van Der Grinten N.V. ................................. 6,000 773,799
Vendex International N.V. ................................ 39,494 2,162,484
------------
8,614,569
------------
NORWAY (0.5%)
+ Smedving-ASA (ADR) B..................................... 25,000 637,500
------------
PHILIPPINES (0.3%)
Manila Electric Co. B..................................... 88,725 437,235
------------
SINGAPORE (0.6%)
City Developments Limited................................. 80,000 783,381
------------
SPAIN (1.2%)
Banco Intercontinental Espanol SA......................... 2,600 458,803
Banco Popular Espanol SA.................................. 4,500 1,102,552
------------
1,561,355
------------
SWEDEN (5.3%)
Assa Abloy AB B........................................... 66,000 1,349,938
Astra AB B................................................ 80,000 1,423,981
Autoliv AB................................................ 27,000 1,056,375
Hennes & Mauritz AB B..................................... 35,000 1,255,049
OM Gruppen AB............................................. 17,000 528,169
Telefonaktiebolaget LM Ericsson B......................... 30,000 1,182,555
------------
6,796,067
------------
SWITZERLAND (7.7%)
Nestle SA................................................. 1,100 1,450,698
+ Pharma Vision 2000 AG.................................... 3,050 1,743,872
Roche Holding AG-Genusshein............................... 485 4,385,391
Schweizerische Bankgesellschaft........................... 2,002 2,289,332
------------
9,869,293
------------
THAILAND (0.3%)
Bangkok Bank Public Co. Limited (Foreign)................. 60,000 428,916
------------
UNITED KINGDOM (16.5%)
Baa PLC................................................... 765 7,051
Barclays PLC.............................................. 1 20
British Petroleum Co. PLC (ADR)........................... 20,202 1,512,628
Dixons Group PLC.......................................... 145,000 1,127,662
EMI Group PLC............................................. 32,188 577,571
General Accident PLC...................................... 90,000 1,314,427
</TABLE>
20
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
GKN PLC................................................... 102,474 $ 1,765,381
HSBC Holdings PLC......................................... 76,618 2,358,547
Lloyds Tsb Group PLC...................................... 120,000 1,230,995
Mirror Group PLC.......................................... 170,000 532,232
Misys PLC................................................. 50,000 1,134,490
Norwich Union PLC......................................... 85,000 452,256
Powerscreen International PLC............................. 110,450 1,203,842
Provident Financial PLC................................... 93,293 865,363
Rentokil Initial PLC...................................... 244,000 857,366
Reuters Holdings PLC...................................... 90,000 948,725
Shell Transport & Trading Co. PLC......................... 276,000 1,882,163
Siebe PLC................................................. 94,090 1,593,524
Smiths Industries PLC..................................... 90,000 1,153,308
Zeneca Group PLC.......................................... 23,000 760,679
------------
21,278,230
------------
TOTAL COMMON STOCK
(Cost $88,634,993)................................................ 114,056,514
------------
WARRANTS (0.0%)
- ---------------
+Cie Generale
(Cost $6,246)........................................... 4,700 2,815
------------
PREFERRED STOCK (0.6%)
- ----------------------
SAP AG
(Cost $824,494).......................................... 4,000 824,494
------------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000)
-------- ------
<S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATION (1.6%)
- ---------------------------------
U.S. Treasury Bill 5.07%
(Cost $1,999,437)................................ 07/03/97 $2,000 1,999,442
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------
<S> <C> <C>
SHORT-TERM INVESTMENTS (9.3%)
- -----------------------------
Temporary Cash Investment Fund, Inc. ................... 6,011,506 6,011,506
Temporary Investment Fund, Inc. ........................ 6,010,424 6,010,424
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $12,021,930)................................................ 12,021,930
------------
TOTAL INVESTMENTS (100.0%)
(Cost $103,487,100)(a)............................................ $128,905,195
============
</TABLE>
- -------
+ Non-income producing.
(a) Also cost for Federal income tax purposes. At June 30, 1997, the excess of
value over tax cost $26,191,043 and the excess of tax cost over value was
$772,948.
ADR--American Depository Receipt
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED)
THE SMALL CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C> <C>
COMMON STOCK (86.0%)
- --------------------
ADVERTISING (0.2%)
+ Katz Media Group, Inc. ................................ 9,000 $ 59,063
-----------
AUTO-PARTS/EQUIPMENT (2.0%)
Borg-Warner Automotive, Inc. ........................... 10,200 551,438
-----------
BROADCASTING (1.7%)
+ American Radio Systems Corp. .......................... 11,900 474,513
-----------
BUILDING MATERIALS (1.8%)
Chicago Bridge & Iron Co. .............................. 14,500 320,813
+ Dal-Tile International, Inc. .......................... 9,600 178,200
-----------
499,013
-----------
CABLE OPERATORS (1.5%)
+ Cable Design Techologies............................... 3,500 103,031
TCA Cable T.V., Inc. ................................... 10,900 409,431
-----------
512,462
-----------
CHEMICALS (4.4%)
+ McWhorter Technologies, Inc. .......................... 23,000 549,125
Schulman (A.), Inc. .................................... 27,100 669,878
-----------
1,219,003
-----------
COMPUTER SOFTWARE & SERVICES (10.3%)
+ Auspex Systems, Inc. .................................. 63,300 613,219
BA Merchant Services, Inc. ............................. 10,600 202,062
+ BanTec, Inc. .......................................... 22,000 570,625
+ The BISYS Group, Inc. ................................. 15,500 650,516
+ Wang Laboratories, Inc. ............................... 38,000 811,063
-----------
2,847,485
-----------
CONSUMER NON-DURABLE (0.9%)
Jostens, Inc. .......................................... 9,500 254,125
-----------
ELECTRONICS (7.7%)
AMETEK, Inc. ........................................... 13,800 324,300
EG&G, Inc. ............................................. 15,100 339,750
+ Exar Corp. ............................................ 26,300 567,094
+ Oak Industries, Inc. .................................. 16,060 461,725
+ Tracor, Inc. .......................................... 14,100 352,500
-----------
2,045,369
-----------
FINANCIAL SERVICES (1.3%)
Enhance Financial Services Group........................ 8,300 364,163
-----------
HEALTH CARE (5.5%)
+ CorVel Corp. .......................................... 18,700 549,313
+ Magellan Health Services, Inc. ........................ 32,600 961,700
-----------
1,511,013
-----------
INFORMATION PROCESSING (0.7%)
Reynolds & Reynolds Co., Class A........................ 12,300 193,725
-----------
INSURANCE (11.2%)
Capsure Holdings Corp. ................................. 31,400 406,238
+ Delphi Financial Group Inc. Class A.................... 10,914 420,189
E.W. Blanch Holdings, Inc. ............................. 26,400 704,550
+ Gryphon Holdings, Inc. ................................ 22,500 348,750
Horace Mann Educators Corp. ............................ 6,900 338,100
United Wisconsin Services Inc. ......................... 13,200 444,675
Renaissance Re Holdings Limited......................... 11,300 430,813
-----------
3,093,315
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C> <C>
MACHINERY (DIVERSIFIED) (4.5%)
+ Baldwin Technology Co., Inc. .......................... 87,600 $ 251,850
JLG Industries, Inc. ................................... 21,100 287,488
+ OmniQuip International, Inc. .......................... 27,000 623,531
United Dominion Industries, Limited..................... 3,100 76,144
-----------
1,239,013
-----------
MANUFACTURING (4.6%)
Durco International, Inc. .............................. 14,600 429,788
Keystone International,Inc. ............................ 15,500 537,656
Watts Industries, Inc. ................................. 12,100 290,400
-----------
1,257,844
-----------
MEDICAL SUPPLIES (4.6%)
DENTSPLY International Inc. ............................ 10,100 494,269
+ SpaceLabs Medical, Inc. ............................... 22,200 564,713
Vital Signs, Inc. ...................................... 11,700 201,094
-----------
1,260,076
-----------
METAL FABRICATE/HARDWARE (2.4%)
EASCO, Inc. ............................................ 25,800 256,388
Kaydon Corp. ........................................... 8,200 406,925
-----------
663,313
-----------
MISCELLANEOUS (0.7%)
Roper Industries, Inc. ................................. 3,600 186,750
-----------
OFFICE EQUIPMENT & SERVICES (2.7%)
+ International Imaging Materials, Inc. ................. 39,500 634,461
+ Nu-Kote Holdings, Inc. ................................ 45,600 116,850
-----------
751,311
-----------
OIL & GAS (5.6%)
KCS Energy, Inc. ....................................... 16,800 342,300
+ Nuevo Energy Co. ...................................... 10,500 430,500
St. Mary Land & Exploration Co. ........................ 22,300 779,106
-----------
1,551,906
-----------
PAPER AND FOREST PRODUCTS (0.6%)
Rock-Tenn Company....................................... 9,600 168,600
-----------
PRINTING AND PUBLISHING (2.1%)
Bowne & Co., Inc. ...................................... 9,200 320,850
John H. Harland Co. .................................... 7,600 173,375
Merrill Corp. .......................................... 2,900 104,581
-----------
598,806
-----------
POLLUTION CONTROL (1.6%)
+ Lydall, Inc. .......................................... 21,300 449,963
-----------
PUBLISHING NEWS (1.8%)
Hollinger International, Inc. .......................... 43,700 488,894
-----------
RETAIL (0.8%)
+ Ann Taylor Stores Corporation.......................... 11,800 230,100
-----------
TECHNOLOGY (0.7%)
BDM International Inc. ................................. 8,400 193,200
-----------
TELEPHONE (0.9%)
ACC Corp. .............................................. 8,800 272,250
-----------
TEXTILES (2.1%)
+ Burlington Industries, Inc. ........................... 9,700 116,400
+ Westpoint Stevens, Inc. ............................... 11,800 460,938
-----------
577,338
-----------
</TABLE>
22
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED) (CONTINUED)
THE SMALL CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
TRANSPORTATION
(1.1%)
Interpool, Inc. ............................................ 19,800 $ 292,050
-----------
TOTAL COMMON STOCK
(Cost $20,489,409)... 23,806,101
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000)
-------- ------
<S> <C> <C> <C>
AGENCY OBLIGATIONS (9.2%)
- -------------------------
Federal Farm Credit Bureau 5.37%................... 07/21/97 $1,250 1,246,271
Federal Home Loan Bank 5.46%....................... 08/14/97 240 238,396
Federal National Mortgage Disc. Note 5.44%......... 08/27/97 1,060 1,050,796
-----------
TOTAL AGENCY OBLIGATIONS
(Cost $2,530,653).................................................. 2,535,463
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS (4.8%)
- -----------------------------
Temporary Investmen Fund Class B
(Cost $1,334,175)........................................1,334,175 1,334,175
-----------
TOTAL INVESTMENTS (100.0%)
(Cost $24,354,237)(a).............................................. $27,675,739
===========
</TABLE>
- -------
+ Non-income producing.
(a) At June 30, 1997, the cost for Federal income tax purposes was $24,355,388.
The excess of value over tax cost was $4,089,059 and the excess of tax cost
over value was $768,708.
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED)
THE EMERGING GROWTH FUND
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
COMMON STOCK (68.7%)
- --------------------
ADVERTISING (0.4%)
+ Universal Outdoor Holdings, Inc. .......................... 1,400 $ 48,913
-----------
AUDIO/VIDEO (0.7%)
+ Gemstar International Group Limited........................ 4,900 90,956
-----------
AUTO-PARTS/EQUIPMENT (0.3%)
+ Miller Industries, Inc. ................................... 2,200 35,200
-----------
BROADCASTING (0.9%)
+ Emmis Broadcasting Corp. .................................. 1,700 74,481
VDI Media................................................... 3,000 34,875
-----------
109,356
-----------
BUILDING MAINTANCE & SERVICES (0.2%)
Fairfield Communities Inc. ................................. 900 30,263
-----------
BUSINESS SERVICES (5.1%)
+ Accu Staff, Inc. .......................................... 2,800 66,325
+ Apollo Group, Inc. ........................................ 1,500 52,969
ASI Solutions, Inc. ........................................ 3,700 36,075
Comdisco, Inc. ............................................. 2,500 65,000
+ CoreStaff, Inc. ........................................... 2,300 62,244
+ Forrester Research, Inc. .................................. 2,400 70,050
MAXIMUS, Inc. .............................................. 4,000 71,500
+ On Assignment, Inc. ....................................... 1,600 62,600
+ Romac International, Inc. ................................. 2,800 92,750
Sothebys Holdings, Inc. .................................... 2,100 35,438
-----------
614,951
-----------
CARE FACILITY (0.9%)
+ Assisted Living Concepts................................... 2,100 58,013
+ Sunrise Assisted Living, Inc. ............................. 1,300 45,663
-----------
103,676
-----------
COLLECTIBLES (0.3%)
Racing Champions Corp. ..................................... 2,600 40,137
-----------
COMMERCIAL SERVICES (0.7%)
+ The Profit Recovery Group International, Inc. ............. 5,900 81,309
-----------
COMMUNICATION EQUIPMENT (1.0%)
+ Digital Microwave Corp. ................................... 1,600 47,400
RF Micro Devices, Inc. ..................................... 3,900 74,344
-----------
121,744
-----------
COMMUNICATIONS SERVICES (0.6%)
+ Technology Solutions Company............................... 1,700 67,044
-----------
COMPUTERS (3.9%)
+ Complete Business Solutions, Inc. ......................... 3,400 82,875
+ Great Plains Software, Inc. ............................... 2,100 56,962
Intelligroup, Inc. ......................................... 7,500 73,594
+ Iomega Corp. .............................................. 2,800 55,650
Peerless Systems Corp. ..................................... 3,000 42,000
+ Siebl Systems, Inc. ....................................... 2,900 93,706
+ UniComp, Inc. ............................................. 8,300 58,619
-----------
463,406
-----------
COMMUNICATIONS (2.0%)
+ RadiSys Corp. ............................................. 1,700 67,044
+ SpecTran Corp. ............................................ 1,800 34,537
+ Spectrian Corp. ........................................... 3,800 140,005
-----------
241,586
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<S> <C> <C>
COMPUTER SERVICES & SOFTWARE (18.1%)
Accelr8 Technology Corp. .................................. 3,700 $ 55,731
Analysts International Corp. .............................. 1,000 33,500
+ Arbor Software Corp. ..................................... 1,700 60,031
Aris Corp. ................................................ 4,500 97,312
+ BDM International, Inc. .................................. 1,600 36,600
+ Citrix Systems, Inc. ..................................... 1,600 70,250
+ Computer Concepts Corp. .................................. 63,000 29,531
+ Computer Horizons Corp. .................................. 500 17,094
+ Computer Learning Centers, Inc. .......................... 1,800 75,375
+ Computer Management Sciences, Inc. ....................... 3,200 66,800
Computer Task Group, Inc. ................................. 1,200 44,700
+ Compuware Corp. .......................................... 1,500 71,812
Crystal Systems Solutions.................................. 1,600 33,400
Data Dimensions, Inc. ..................................... 2,500 54,922
DataWorks Corp. ........................................... 1,000 21,812
ECsoft Group PLC........................................... 6,400 89,200
+ JDA Software Group, Inc. ................................. 1,300 44,444
Keane, Inc. ............................................... 1,200 62,400
LGS Group, Inc. ........................................... 6,400 44,029
Mastech Corp. ............................................. 1,300 26,081
+ Metro Information Services, Inc. ......................... 1,900 37,406
+ Micro Focus Group......................................... 3,000 89,625
New Era of Networks........................................ 5,200 87,750
ONTRAK Data International, Inc. ........................... 3,300 75,075
+ Pure Atria Corp. ......................................... 3,000 42,562
Rational Software Corp. ................................... 2,600 43,631
+ Remedy Corp. ............................................. 3,100 123,516
RWD Technologies, Inc. .................................... 1,700 29,644
SEEC, Inc. ................................................ 4,500 84,938
+ Segue Software, Inc. ..................................... 2,900 39,694
Simulation Sciences, Inc. ................................. 3,400 51,212
Smallworldwide PLC (ADR)................................... 3,600 61,200
+ Software Artistry, Inc. .................................. 4,600 73,312
+ Strategia Corp. .......................................... 400 5,425
Technology Modeling Association Inc. ...................... 2,500 34,219
+ The Vantive Corp. ........................................ 4,000 113,500
+ Transactions Systems Architects, Inc. .................... 1,300 44,769
Vanstar Corp. ............................................. 2,900 40,963
+ Viasoft, Inc. ............................................ 1,200 61,050
------------
2,174,515
------------
DISTRIBUTION SERVICES (0.4%)
+ MicroAge, Inc. ........................................... 2,800 51,975
------------
EDUCATION (1.2%)
Abacus Direct Corp. ....................................... 1,000 32,562
Education Management Corp. ................................ 1,200 30,900
Strayer Education, Inc. ................................... 2,100 81,375
------------
144,837
------------
ELECTRONICS (0.2%)
CellStar Corp. ............................................ 800 24,550
------------
ELECTRONICS - DEFENSE (0.2%)
Nichols Research Corp. .................................... 1,400 28,963
------------
ELECTRONICS - INSTRUMENTS (0.0%)
Intest Corp. .............................................. 600 5,475
------------
FINANCE (1.5%)
Resource Bancshares Mortgage Group......................... 2,800 55,125
+ Financial Federal Corp. .................................. 3,100 68,200
+ Southern Pacific Funding.................................. 3,400 56,525
------------
179,850
------------
</TABLE>
24
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
HEALTHCARE (0.6%)
+ MedQuist, Inc. ............................................ 1,400 $ 42,437
+ Renal Care Group, Inc. .................................... 800 33,400
-----------
75,837
-----------
HELP SUPPORT SERVICES (0.8%)
+ Alternative Resources Corporation.......................... 3,300 67,134
+ SCB Computer Technology, Inc. ............................. 1,200 29,100
-----------
96,234
-----------
HEATING & AIR CONDITIONING (0.3%)
Comfort Systems USA, Inc. .................................. 2,300 35,938
-----------
HOTEL & MOTELS (2.1%)
+ Doubletree Corp. .......................................... 2,300 94,516
Four Seasons Hotels, Inc. .................................. 3,400 100,725
+ Suburban Lodges of America, Inc. .......................... 2,800 58,275
-----------
253,516
-----------
HUMAN RESOURCES (1.0%)
RCM Technologies, Inc. ..................................... 6,600 70,537
Staff Leasing, Inc. ........................................ 2,700 50,119
-----------
120,656
-----------
INSURANCE (1.4%)
ARM Financial Group, Inc. .................................. 1,700 34,000
SunAmerica, Inc. ........................................... 1,500 73,125
-----------
107,125
-----------
MACHINERY (DIVERSIFIED) (0.8%)
+ ASM Lithography Holding.................................... 1,600 93,450
Hirsch International Co. ................................... 200 4,413
-----------
97,863
-----------
MEDICAL SERVICES (3.6%)
+ Cerner Corp. .............................................. 2,100 44,100
+ Coventry Corp. ............................................ 5,200 79,138
+ Cytyc Corp. ............................................... 2,200 59,538
+ Lincare Holdings, Inc. .................................... 1,600 68,850
+ Medical Manager Corp. ..................................... 2,600 38,837
SeaMed Corp. ............................................... 2,200 44,688
+ Sunquest Information Systems, Inc. ........................ 2,400 36,450
+ Universal Health Services, Inc. ........................... 1,700 65,450
-----------
437,051
-----------
MEDICAL INFORMATION SYSTEMS (1.4%)
HBO & Co. .................................................. 1,500 103,313
+ Transition Systems, Inc. .................................. 3,500 63,766
-----------
167,079
-----------
MANUFACTURING (1.0%)
Optical Coating Laboratory, Inc. ........................... 1,900 25,412
+ Vans, Inc. ................................................ 3,800 57,356
Wesley Jessen VisionCare, Inc. ............................. 1,600 38,300
-----------
121,068
-----------
PHARMACEUTICALS (1.5%)
+ Medicis Pharmaceutical Corp. .............................. 2,300 114,569
+ Vertex Pharmaceuticals, Inc. .............................. 1,600 61,000
-----------
175,569
-----------
PUBLISHING NEWS (0.6%)
Journal Register Co. ....................................... 3,400 67,575
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
RACE TRACKS (0.3%)
+ Speedway Motorsports, Inc. ................................ 1,600 $ 34,800
-----------
REAL ESTATE (0.3%)
CB Commercial Real Estate Services Gourp, Inc. ............. 1,300 39,569
-----------
RECREATIONAL (0.6%)
Silverleaf Resorts, Inc. ................................... 4,600 70,725
-----------
RESTAURANTS (0.7%)
+ Foodmaker Inc. ............................................ 2,900 47,487
+ NPC International, Inc. ................................... 2,600 30,712
-----------
78,199
-----------
RETAIL (5.9%)
+ Bed Bath & Beyond, Inc. ................................... 2,300 69,934
Claire's Stores, Inc. ...................................... 4,900 85,750
Coldwater Creek, Inc. ...................................... 2,300 58,363
+ Delia's, Inc. ............................................. 2,400 44,400
+ DM Management Co. ......................................... 3,500 39,375
+ Dress Barn, Inc. .......................................... 1,900 36,991
+ Gadzooks, Inc. ............................................ 2,400 47,100
+ General Nutrition Companies, Inc. ......................... 1,400 39,113
+ K&G Mens Center, Inc. ..................................... 2,000 44,750
+ Pacific Sunwear of California.............................. 1,400 45,500
+ Piercing Pagoda, Inc. ..................................... 1,600 40,000
+ The Wet Seal, Inc. ........................................ 4,900 154,503
-----------
705,779
-----------
SEMICONDUCTORS (0.9%)
Vitesse Semiconductor Corp. ................................ 3,300 107,766
-----------
TELECOMMUNICATIONS (5.0%)
ACE*COMM Corp. ............................................. 1,700 33,256
+ Brightpoint, Inc. ......................................... 2,900 94,522
Geotel Communications Corp. ................................ 3,100 40,881
LCC International, Inc. .................................... 3,200 49,600
Melita International Corp. ................................. 2,000 25,000
+ Natural Microsystems Corp. ................................ 2,700 97,116
+ P-COM, Inc. ............................................... 1,300 42,737
+ Premiere Technologies, Inc. ............................... 1,500 39,094
+ Tekelec.................................................... 1,500 52,969
+ Tellabs, Inc. ............................................. 1,000 55,812
+ Uniphase Corp. ............................................ 1,300 75,400
-----------
606,387
-----------
TEXTILE-APPAREL (0.4%)
+ Sport-Haley, Inc. ......................................... 3,100 52,312
-----------
TOBACCO (0.3%)
800-JR CIGAR, Inc. ......................................... 1,800 37,688
-----------
WATER TREATMENT SYSTEMS (0.6%)
Waterlink, Inc. ............................................ 5,800 75,400
-----------
TOTAL COMMON STOCK
(Cost $7,578,534).................................................. 8,222,842
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000)
-------- -----
<S> <C> <C> <C>
U.S. TREASURY OBLIGATION (25.1%)
- --------------------------------
Treasury Bill 4.55%
(Cost $2,999,242)................................. 07/03/97 $3,000 2,999,242
-----------
</TABLE>
25
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 1997 (UNAUDITED) (CONTINUED)
THE EMERGING GROWTH FUND
<TABLE>
<CAPTION>
SHARES
-------
<S> <C> <C>
SHORT-TERM INVESTMENTS (6.2%)
- -----------------------------
Temporary Cash Investment Fund, Inc. ..................... 373,668 $ 373,668
Temporary Investment Fund, Inc. .......................... 373,668 373,668
-----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $747,336)................................................... 747,336
-----------
TOTAL INVESTMENTS (100.0%)
(Cost $11,325,112)(a)............................................. $11,969,420
===========
</TABLE>
- -------
+ Non-income producing.
(a) Also cost for Federal income tax purposes. At June 30, 1997, the excess of
value over tax cost was $719,700, and the excess of tax cost over value was
$75,392.
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
- ----------------------------------------------------
THIS PAGE LEFT INTENTIONALLY BLANK
27
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES - (UNAUDITED)
JUNE 30, 1997
<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).. $38,559,585 $36,821,305 $49,905,595 $121,159,849
Cash...................... -- -- 16,434 --
Interest, dividends and
reclaims receivable...... 275,147 453,076 862,616 98,727
Receivable for investment
securities sold.......... -- 906,068 593,892 3,132,195
Receivable for capital
stock sold............... -- 96,764 164,724 12,769
Other assets.............. 297 324 354 876
----------- ----------- ----------- ------------
Total assets............. 38,835,029 38,277,537 51,543,615 124,404,416
----------- ----------- ----------- ------------
LIABILITIES:
Cash overdraft............ -- -- -- 370,338
Payable for investment
securities purchased..... -- 888,480 400,000 --
Payables for capital stock
redeemed................. -- 22,214 -- 123,089
Dividends payable......... 160,645 -- -- --
Payable to the investment
advisor.................. 15,048 17,929 20,691 49,372
Payable to The Penn Mutual
Life Insurance Co. ...... 14,051 13,715 18,031 43,465
Net unrealized
depreciation on forward
foreign currency
contracts................ -- -- -- --
Other liabilities......... 8,762 5,504 13,353 19,886
----------- ----------- ----------- ------------
Total Liabilities........ 198,506 947,842 452,075 606,150
----------- ----------- ----------- ------------
NET ASSETS................. $38,636,523 $37,329,695 $51,091,540 $123,798,266
=========== =========== =========== ============
Shares of $.10 par value
capital stock issued and
outstanding............... 38,683,055 3,637,639 5,323,411 4,975,571
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SHARE..................... $ 1.00 $ 10.26 $ 9.60 $ 24.88
NET ASSETS CONSIST OF:
Capital paid in........... $38,638,055 $38,695,507 $49,700,841 $ 87,451,010
Undistributed net
investment income (loss). -- 1,132,003 2,113,809 276,778
Accumulated net realized
gain (loss) on investment
transactions and foreign
exchange................. (1,532) (977,814) (2,545,872) 5,151,884
Net unrealized
appreciation in value of
investments, futures
contracts and foreign
currency related items... -- 479,999 1,822,762 30,918,594
----------- ----------- ----------- ------------
TOTAL NET ASSETS......... $38,636,523 $37,329,695 $51,091,540 $123,798,266
=========== =========== =========== ============
(1) Investments at cost.... $38,559,585 $36,341,306 $48,082,833 $ 90,241,255
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL
VALUE FLEXIBLY INTERNATIONAL CAPITALIZATION EMERGING
EQUITY FUND MANAGED FUND EQUITY FUND FUND GROWTH FUND
------------ ------------ ------------- -------------- -----------
<S> <C> <C> <C> <C>
$260,720,844 $467,177,806 $128,905,195 $27,675,739 $11,969,420
-- -- -- -- --
296,544 1,925,359 469,727 12,431 1,876
-- 1,890,956 -- 204,430 28,879
9,887 356,199 118,687 20,619 176,967
1,646 1,420 887 123 --
------------ ------------ ------------ ----------- -----------
261,028,921 471,351,740 129,494,496 27,913,342 12,177,142
------------ ------------ ------------ ----------- -----------
-- -- -- -- --
359,912 1,096,823 -- 244,868 3,612,764
686,798 440,136 54,536 19,030 4,249
-- -- -- -- --
104,900 190,732 77,814 11,004 2,777
88,977 165,962 44,450 9,013 280
-- -- 1,318,652 -- --
27,182 63,379 53,535 3,884 2,600
------------ ------------ ------------ ----------- -----------
1,267,769 1,957,032 1,548,987 287,799 3,622,670
------------ ------------ ------------ ----------- -----------
$259,761,152 $469,394,708 $127,945,509 $27,625,543 $ 8,554,472
============ ============ ============ =========== ===========
11,829,135 23,085,300 7,307,523 1,910,984 697,820
$ 21.96 $ 20.33 $ 17.51 $ 14.46 $ 12.26
$175,903,667 $381,520,330 $ 98,167,923 $22,827,927 $ 7,708,690
1,636,509 6,614,674 316,593 78,983 (2,861)
3,143,961 14,631,424 5,361,551 1,397,131 204,335
79,077,015 66,628,280 24,099,442 3,321,502 644,308
------------ ------------ ------------ ----------- -----------
$259,761,152 $469,394,708 $127,945,509 $27,625,543 $ 8,554,472
============ ============ ============ =========== ===========
$181,643,829 $400,550,423 $103,487,100 $24,354,237 $11,325,112
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
MONEY QUALITY HIGH YIELD GROWTH
MARKET FUND BOND FUND BOND FUND EQUITY FUND
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.................... $ -- $ 10,300 $ 72,364 $ 577,964
Interest..................... 1,010,108 1,255,853 2,228,987 137,696
Foreign tax withheld......... -- -- -- (3,051)
---------- ---------- ---------- -----------
Total investment income..... 1,010,108 1,266,153 2,301,351 712,609
---------- ---------- ---------- -----------
EXPENSES:
Investment advisory fees..... 70,005 81,892 116,765 271,290
Administration fees.......... 26,646 27,297 35,029 85,140
Accounting fees.............. 13,323 13,722 17,515 40,766
Custodian fees and expenses.. 7,214 5,577 9,861 15,079
Professional fees............ 1,691 1,555 2,081 5,000
Other expenses............... 7,235 4,107 6,291 18,556
---------- ---------- ---------- -----------
Total expenses.............. 126,114 134,150 187,542 435,831
Less: Expense waivers....... -- -- -- --
---------- ---------- ---------- -----------
Net expenses................ 126,114 134,150 187,542 435,831
---------- ---------- ---------- -----------
NET INVESTMENT INCOME (LOSS).. 883,994 1,132,003 2,113,809 276,778
---------- ---------- ---------- -----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on
investment transactions..... -- (97,449) 1,994,018 5,343,998
Net realized foreign exchange
gain........................ -- -- -- --
Change in net unrealized
appreciation (depreciation)
of investments, futures
contracts and foreign
currency related items...... -- (81,034) (578,688) 11,447,198
---------- ---------- ---------- -----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS... -- (178,483) 1,415,330 16,791,196
---------- ---------- ---------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.... $ 883,994 $ 953,520 $3,529,139 $17,067,974
========== ========== ========== ===========
</TABLE>
- -----------------------
* For the period from May 1, 1997 (commencement of operations) to June 30,
1997.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FLEXIBLY SMALL EMERGING
VALUE MANAGED INTERNATIONAL CAPITALIZATION GROWTH
EQUITY FUND FUND EQUITY FUND FUND FUND *
- ----------- ----------- ------------- -------------- --------
<S> <C> <C> <C> <C>
$ 1,449,658 $ 3,291,485 $ 1,091,077 $ 76,129 $ 717
1,049,053 4,955,142 294,781 95,668 4,178
(4,325) (9,982) (72,785) (798) --
- ----------- ----------- ----------- ---------- --------
2,494,386 8,236,645 1,313,073 170,999 4,895
- ----------- ----------- ----------- ---------- --------
563,108 1,065,767 420,608 53,194 5,396
168,932 319,730 84,122 15,958 1,012
68,708 106,097 46,038 13,637 506
17,441 47,254 57,062 4,309 1,470
10,530 20,370 5,624 1,022 77
29,158 62,753 23,737 3,896 758
- ----------- ----------- ----------- ---------- --------
857,877 1,621,971 637,191 92,016 9,219
-- -- -- -- (1,463)
- ----------- ----------- ----------- ---------- --------
857,877 1,621,971 637,191 92,016 7,756
- ----------- ----------- ----------- ---------- --------
1,636,509 6,614,674 675,882 78,983 (2,861)
- ----------- ----------- ----------- ---------- --------
3,143,961 14,610,808 2,499,300 1,398,282 204,335
-- 26,593 2,797,258 -- --
25,506,428 14,862,923 7,610,865 2,024,857 644,308
- ----------- ----------- ----------- ---------- --------
28,650,389 29,500,324 12,907,423 3,423,139 848,643
- ----------- ----------- ----------- ---------- --------
$30,286,898 $36,114,998 $13,583,305 $3,502,122 $845,782
=========== =========== =========== ========== ========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MONEY MARKET FUND QUALITY BOND FUND
-------------------------- --------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
6/30/97 ENDED 6/30/97 ENDED
(UNAUDITED) 12/31/96 (UNAUDITED) 12/31/96
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS:
Net investment income
(loss)................ $ 883,994 $ 1,467,263 $ 1,132,003 $ 2,357,782
Net realized gain
(loss) on investment
transactions.......... -- (97,449) (117,033)
Net realized foreign
exchange gain (loss).. -- -- -- --
Net change in
unrealized
appreciation
(depreciation) of
investments and
foreign currency
related items......... -- -- (81,034) (692,970)
------------ ------------ ------------ ------------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS........... 883,994 1,467,263 953,520 1,547,779
------------ ------------ ------------ ------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income.. (883,994) (1,467,263) -- (2,342,476)
Net realized capital
gains................. -- -- -- --
In excess of net
investment income..... -- -- -- --
------------ ------------ ------------ ------------
TOTAL DISTRIBUTIONS... (883,994) (1,467,263) -- (2,342,476)
------------ ------------ ------------ ------------
CAPITAL SHARE
TRANSACTIONS:
Net increase (decrease)
in net assets from
capital share
transactions.......... 4,135,904 9,775,026 (1,235,166) 357,633
------------ ------------ ------------ ------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS............... 4,135,904 9,775,026 (281,646) (437,064)
Net Assets, beginning of
period................. 34,500,619 24,725,593 37,611,341 38,048,405
------------ ------------ ------------ ------------
NET ASSETS, END OF
PERIOD................. $ 38,636,523 $ 34,500,619 $ 37,329,695 $ 37,611,341
============ ============ ============ ============
<CAPTION>
VALUE EQUITY FUND FLEXIBLY MANAGED FUND
-------------------------- --------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
6/30/97 ENDED 6/30/97 ENDED
(UNAUDITED) 12/31/96 (UNAUDITED) 12/31/96
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS:
Net investment income
(loss)................ $ 1,636,509 $ 2,210,027 $ 6,614,674 $ 12,850,451
Net realized gain
(loss) on investment
transactions.......... 3,143,961 8,252,470 14,610,808 16,818,384
Net realized foreign
exchange gain (loss).. -- -- 26,593 (2,411)
Net change in
unrealized
appreciation
(depreciation) of
investments and
foreign currency
related items......... 25,506,428 25,690,221 14,862,923 21,020,920
------------ ------------ ------------ ------------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS........... 30,286,898 36,152,718 36,114,998 50,687,344
------------ ------------ ------------ ------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income.. -- (2,210,027) -- (12,850,451)
Net realized capital
gains................. -- (8,252,470) -- (16,768,765)
In excess of net
investment income..... -- -- -- (4,084)
------------ ------------ ------------ ------------
TOTAL DISTRIBUTIONS... -- (10,462,497) -- (29,623,300)
------------ ------------ ------------ ------------
CAPITAL SHARE
TRANSACTIONS:
Net increase (decrease)
in net assets from
capital share
transactions ......... 28,800,361 47,723,822 34,735,571 110,923,988
------------ ------------ ------------ ------------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS............... 59,087,259 73,414,043 70,850,569 131,988,032
Net Assets, beginning of
period................. 200,673,893 127,259,850 398,544,139 266,556,107
------------ ------------ ------------ ------------
NET ASSETS, END OF
PERIOD................. $259,761,152 $200,673,893 $469,394,708 $398,544,139
============ ============ ============ ============
</TABLE>
- -----------------------
* For the period from May 1, 1997 (commencement of operations) to June 30,
1997.
The accompanying notes are an integral part of these financial statements.
32
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH YIELD BOND FUND GROWTH EQUITY FUND
- ------------------------------ -------------------------------
SIX MONTHS
SIX MONTHS YEAR ENDED YEAR
ENDED 6/30/97 ENDED 6/30/97 ENDED
(UNAUDITED) 12/31/96 (UNAUDITED) 12/31/96
- -------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
$ 2,113,809 $ 3,194,439 $ 276,778 $ 475,615
1,994,018 (499,838) 5,343,998 10,366,718
-- -- -- --
(578,688) 2,501,662 11,447,198 7,073,178
- ------------- ------------- ------------ ------------
3,529,139 5,196,263 17,067,974 17,915,511
- ------------- ------------- ------------ ------------
-- (3,194,439) -- (475,615)
-- -- -- (10,558,832)
-- (25,808) --
- ------------- ------------- ------------ ------------
-- (3,220,247) -- (11,034,447)
- ------------- ------------- ------------ ------------
3,520,842 5,623,807 690,832 3,565,102
- ------------- ------------- ------------ ------------
7,049,981 7,599,823 17,758,806 10,446,166
44,041,559 36,441,736 106,039,460 95,593,294
- ------------- ------------- ------------ ------------
$ 51,091,540 $ 44,041,559 $123,798,266 $106,039,460
============= ============= ============ ============
<CAPTION>
EMERGING
INTERNATIONAL EQUITY FUND SMALL CAPITALIZATION FUND GROWTH FUND
- ------------------------------ ------------------------------- -----------
SIX MONTHS
SIX MONTHS YEAR ENDED YEAR PERIOD
ENDED 6/30/97 ENDED 6/30/97 ENDED ENDED
(UNAUDITED) 12/31/96 (UNAUDITED) 12/31/96 6/30/97*
- -------------- ------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
$ 675,882 $ 567,625 $ 78,983 $ 87,435 $ (2,861)
2,499,300 5,713,489 1,398,282 588,102 204,335
2,797,258 3,145,612 -- -- --
7,610,865 4,322,244 2,024,857 1,130,459 644,308
- ------------- ------------- ------------ ------------ ----------
13,583,305 13,748,970 3,502,122 1,805,996 845,782
- ------------- ------------- ------------ ------------ ----------
-- (567,625) -- (87,435) --
-- (4,589,862) -- (607,875) --
-- (2,877,835) -- --
- ------------- ------------- ------------ ------------ ----------
-- (8,035,322) -- (695,310) --
- ------------- ------------- ------------ ------------ ----------
9,944,616 29,173,205 7,989,389 10,195,439 7,708,690
- ------------- ------------- ------------ ------------ ----------
23,527,921 34,886,853 11,491,511 11,306,125 8,554,472
104,417,588 69,530,735 16,134,032 4,827,907 0
- ------------- ------------- ------------ ------------ ----------
$ 127,945,509 $ 104,417,588 $ 27,625,543 $ 16,134,032 $8,554,472
============= ============= ============ ============ ==========
</TABLE>
33
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE MONEY MARKET FUND
The table below sets forth financial data for a share outstanding throughout
each period
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1997 ------------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
---------------- -------- -------- -------- -------- --------
<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.... 0.0246 0.0489 0.0538 0.0365 0.0250 0.0306
-------- -------- -------- -------- -------- --------
Total from investment
operations............. 0.0246 0.0489 0.0538 0.0365 0.0250 0.0306
-------- -------- -------- -------- -------- --------
LESS DIVIDENDS:
Dividends from net
investment income....... (0.0246) (0.0489) (0.0538) (0.0365) (0.0250) (0.0306)
-------- -------- -------- -------- -------- --------
Total dividends......... (0.0246) (0.0489) (0.0538) (0.0365) (0.0250) (0.0306)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total return............. 2.48% 5.00% 5.51% 3.71% 2.53% 3.08%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands).......... $ 38,637 $ 34,501 $ 24,726 $ 16,531 $ 13,005 $ 11,862
-------- -------- -------- -------- -------- --------
Ratio of expenses to
average net assets...... 0.71%(a) 0.73%(b) 0.69%(b) 0.73%(b) 0.74%(b) 0.77%(b)
-------- -------- -------- -------- -------- --------
Ratio of net investment
income to average net
assets.................. 4.98%(a) 4.88%(b) 5.37%(b) 3.74%(b) 2.51%(b) 3.07%(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%, .82%, and .84%, and the ratios of net investment income to
average net assets would have been 4.87%, 5.32%, 3.68%, 2.43%, and 3.00%
for the years ended December 31, 1996, 1995, 1994, 1993, and 1992,
respectively.
- --------------------------------------------------------------------------------
THE QUALITY BOND FUND
The table below sets forth financial data for a share outstanding throughout
each period
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1997 -------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
---------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 10.00 $ 10.24 $ 9.04 $ 10.19 $ 10.03 $ 10.51
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.31 0.66 0.61 0.61 0.46 0.75
Net realized and
unrealized gain (loss)
on investment
transactions........... (0.05) (0.24) 1.21 (1.15) 0.71 (0.06)
------- ------- ------- ------- ------- -------
Total from investment
operations............ 0.26 0.42 1.82 (0.54) 1.17 0.69
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividend from net
investment income...... -- (0.66) (0.61) (0.61) (0.46) (0.75)
Distribution from net
realized gain.......... -- -- -- -- (0.54) (0.42)
Distribution in excess
of net realized gain... -- -- (0.01) -- (0.01) 0.00
------- ------- ------- ------- ------- -------
Total distributions.... -- (0.66) (0.62) (0.61) (1.01) (1.17)
------- ------- ------- ------- ------- -------
Net asset value, end of
period................. $ 10.26 $ 10.00 $ 10.24 $ 9.04 $ 10.19 $ 10.03
======= ======= ======= ======= ======= =======
Total return............ 2.60% 4.14% 20.14% (5.29)% 11.67% 6.57%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in thousands).. $37,330 $37,611 $38,048 $31,338 $33,027 $20,314
------- ------- ------- ------- ------- -------
Ratio of expenses to
average net assets..... 0.74%(a) 0.77%(b) 0.73%(b) 0.78%(b) 0.79%(b) 0.84%(b)
------- ------- ------- ------- ------- -------
Ratio of net investment
income to average net
assets................. 6.22%(a) 6.03%(b) 6.20%(b) 6.14%(b) 5.21%(b) 6.25%(b)
------- ------- ------- ------- ------- -------
Portfolio turnover rate. 137.6% 107.6% 449.2% 380.9% 389.4% 190.8%
------- ------- ------- ------- ------- -------
- ---------------------------------------
</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 .78%,
.78%, .83%, .84%, and .87%, and the ratio of net investment income to
average net assets would have been 6.02%, 6.15%, 6.09%, 5.16%, and 6.22%
for the years ended December 31, 1996, 1995, 1994, 1993, and 1992,
respectively.
34
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE HIGH YIELD BOND FUND
The table below sets forth financial data for a share outstanding throughout
each period
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1997 --------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
---------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 8.91 $ 8.44 $ 7.94 $ 9.55 $ 8.63 $ 8.23
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.40 0.70 0.80 0.90 0.77 0.87
Net realized and
unrealized gain (loss)
on investment
transactions........... 0.29 0.47 0.50 (1.60) 0.94 0.43
------- ------- ------- ------- ------- -------
Total from investment
operations............ 0.69 1.17 1.30 (0.70) 1.71 1.30
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividend from net
investment income...... -- (0.70) (0.80) (0.90) (0.77) (0.87)
Distribution in excess
of net investment
income................. -- -- -- (0.01) (0.02) (0.03)
------- ------- ------- ------- ------- -------
Total distributions.... -- (0.70) (0.80) (0.91) (0.79) (0.90)
------- ------- ------- ------- ------- -------
Net asset value, end of
period................. $ 9.60 $ 8.91 $ 8.44 $ 7.94 $ 9.55 $ 8.63
======= ======= ======= ======= ======= =======
Total return............ 7.74% 13.87% 16.41% (7.33)% 19.81% 15.80%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in thousands).. $51,092 $44,042 $36,442 $32,081 $35,305 $19,840
------- ------- ------- ------- ------- -------
Ratio of expenses to
average net assets..... 0.80%(a) 0.84% 0.87% 0.86% 0.87% 0.88%(b)
------- ------- ------- ------- ------- -------
Ratio of net investment
income to average net
assets................. 8.98%(a) 8.14% 9.20% 9.18% 9.21% 9.87%(b)
------- ------- ------- ------- ------- -------
Portfolio turnover rate. 64.0% 118.5% 84.3% 90.7% 118.7% 94.3%
------- ------- ------- ------- ------- -------
- ---------------------------------------
</TABLE>
(a) Annualized.
(b) Had fees not been waived by the investment advisor and administrator of the
Fund, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets would have been .93% and 9.82% for
the year ended December 31, 1992.
- --------------------------------------------------------------------------------
THE GROWTH EQUITY FUND
The table below sets forth financial data for a share outstanding throughout
each period
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1997 --------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
---------------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period..... $ 21.46 $ 20.00 $ 18.30 $ 20.49 $ 18.82 $ 21.47
-------- -------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.... 0.06 0.11 0.09 0.13 0.06 0.16
Net realized and
unrealized gain (loss)
on investment
transactions............ 3.36 3.85 4.75 (1.80) 2.28 1.12
-------- -------- ------- ------- ------- -------
Total from investment
operations............. 3.42 3.96 4.84 (1.67) 2.34 1.28
-------- -------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividend from net
investment income....... 0.00 (0.11) (0.09) (0.13) (0.06) (0.16)
Distribution from capital
gains................... 0.00 (2.39) (3.05) (0.39) (0.61) (3.77)
-------- -------- ------- ------- ------- -------
Total distributions..... 0.00 (2.50) (3.14) (0.52) (0.67) (3.93)
-------- -------- ------- ------- ------- -------
Net asset value, end of
period.................. $ 24.88 $ 21.46 $ 20.00 $ 18.30 $ 20.49 $ 18.82
======== ======== ======= ======= ======= =======
Total return............. 15.94% 19.76% 26.45% (8.12)% 12.43% 5.96%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands).......... $123,798 $106,039 $95,593 $80,078 $83,938 $73,977
-------- -------- ------- ------- ------- -------
Ratio of expenses to
average net assets...... 0.76%(a) 0.80%(b) 0.77%(b) 0.79%(b) 0.77%(b) 0.88%(b)
-------- -------- ------- ------- ------- -------
Ratio of net investment
income to average net
assets.................. 0.48%(a) 0.48%(b) 0.43%(b) 0.70%(b) 0.30%(b) 0.81%(b)
-------- -------- ------- ------- ------- -------
Portfolio turnover rate.. 89.3% 177.1% 169.8% 156.2% 185.3% 120.7%
-------- -------- ------- ------- ------- -------
Average commission rate
paid (c)................ $ 0.0776 $ 0.0774 -- -- -- --
-------- -------- ------- ------- ------- -------
- ---------------------------------------
</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%, .82%, and .89% and the ratio of net investment income to average
net assets would have been .47%, .38%, .65%, .25% and .80% for the years
ended December 31, 1996, 1995, 1994, 1993 and 1992, respectively.
(c)Computed by dividing the total amount of commissions paid by total number of
shares purchased and sold during the period for which commissions were
charged, as required by the SEC beginning after September 1, 1995.
Note: The Fund changed to its current investment advisor on November 1, 1992.
35
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE VALUE EQUITY PORTFOLIO
The table below sets forth financial data for a share outstanding throughout
each period
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1997 ---------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
---------------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 19.32 $ 16.28 $ 12.67 $ 12.68 $ 12.14 $ 11.89
-------- -------- -------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.14 0.22 0.25 0.20 0.17 0.45
Net realized and
unrealized gain on
investment
transactions........... 2.50 3.88 4.50 0.17 0.69 1.32
-------- -------- -------- ------- ------- -------
Total from investment
operations............ 2.64 4.10 4.75 0.37 0.86 1.77
-------- -------- -------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividend from net
investment income...... -- (0.22) (0.25) (0.20) (0.17) (0.45)
Distribution from net
realized gain.......... -- (0.84) (0.89) (0.18) (0.15) (1.07)
-------- -------- -------- ------- ------- -------
Total distributions.... -- (1.06) (1.14) (0.38) (0.32) (1.52)
-------- -------- -------- ------- ------- -------
Net asset value, end of
period................. $ 21.96 $ 19.32 $ 16.28 $ 12.67 $ 12.68 $ 12.14
======== ======== ======== ======= ======= =======
Total return............ 13.66% 25.19% 37.48% 2.92% 7.08% 14.89%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in thousands).. $259,761 $200,674 $127,260 $79,021 $69,980 $49,199
-------- -------- -------- ------- ------- -------
Ratio of expenses to
average net assets..... 0.76%(a) 0.78% 0.80% 0.82% 0.83% 0.88%(b)
-------- -------- -------- ------- ------- -------
Ratio of net investment
income to average net
assets................. 1.44%(a) 1.38% 1.71% 1.59% 1.49% 3.87%(b)
-------- -------- -------- ------- ------- -------
Portfolio turnover rate. 4.7% 25.0% 34.3% 30.6% 17.2% 117.4%
-------- -------- -------- ------- ------- -------
Average commission rate
paid (c)............... $ 0.0598 $ 0.0588 -- -- -- --
-------- -------- -------- ------- ------- -------
- ---------------------------------------
</TABLE>
(a) Annualized.
(b) Had fees not been waived by the investment advisor and administrator of the
Fund, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets would have been .90% and 3.85%,
respectively, for the year ended December 31, 1992.
(c) Computed by dividing the total amount of commissions paid by total number
of shares purchased and sold during the period for which commissions were
charged, as required by the SEC beginning after September 1, 1995.
- --------------------------------------------------------------------------------
THE FLEXIBLY MANAGED FUND
The table below sets forth financial data for a share outstanding throughout
each period
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1997 -----------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
---------------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 18.74 $ 17.40 $ 15.19 $ 15.70 $ 14.31 $ 13.73
-------- -------- -------- -------- -------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.29 0.65 0.53 0.43 0.34 0.58
Net realized and
unrealized gain on
investment
transactions........... 1.30 2.19 2.86 0.22 1.92 0.74
-------- -------- -------- -------- -------- -------
Total from investment
operations............ 1.59 2.84 3.39 0.65 2.26 1.32
-------- -------- -------- -------- -------- -------
LESS DISTRIBUTIONS:
Dividend from net
investment income...... -- (0.65) (0.53) (0.43) (0.34) (0.58)
Distribution in excess
of net investment
income................. -- 0.00 (0.01) (0.02) 0.00 0.00
Distribution from
capital gains.......... -- (0.85) (0.64) (0.71) (0.53) (0.16)
-------- -------- -------- -------- -------- -------
Total distributions.... -- (1.50) (1.18) (1.16) (0.87) (0.74)
-------- -------- -------- -------- -------- -------
Net asset value, end of
period................. $ 20.33 $ 18.74 $ 17.40 $ 15.19 $ 15.70 $ 14.31
======== ======== ======== ======== ======== =======
Total return............ 8.48% 16.37% 22.28% 4.14% 15.79% 9.61%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in thousands).. $469,395 $398,544 $266,556 $169,847 $113,492 $70,979
-------- -------- -------- -------- -------- -------
Ratio of expenses to
average net assets..... 0.76%(a) 0.77% 0.79% 0.82% 0.85% 0.89%(b)
-------- -------- -------- -------- -------- -------
Ratio of net investment
income to average net
assets................. 3.08%(a) 3.90% 3.45% 3.14% 2.62% 4.56%(b)
-------- -------- -------- -------- -------- -------
Portfolio turnover rate. 17.3% 32.9% 37.2% 37.3% 42.6% 29.5%
-------- -------- -------- -------- -------- -------
Average commission rate
paid (c)............... $ 0.0436 $ 0.0627 -- -- -- --
-------- -------- -------- -------- -------- -------
- ---------------------------------------
</TABLE>
(a) Annualized.
(b) Had fees not been waived by the investment advisor and administrator of the
Fund, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets would have been .90% and 4.55%,
respectively, for the year ended December 31, 1992.
(c) Computed by dividing the total amount of commissions paid by total number
of shares purchased and sold during the period for which commissions were
charged, as required by the SEC beginning after September 1, 1995.
36
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE INTERNATIONAL EQUITY PORTFOLIO
The table below sets forth financial data for a share outstanding throughout
each period
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1997 --------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992*
---------------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 15.61 $ 14.47 $ 13.01 $ 13.94 $ 10.12 $ 10.00
-------- -------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... 0.10 0.63 0.13 0.09 0.03 0.03
Net realized and
unrealized gain (loss)
on investments and
foreign currency
related transactions... 1.80 1.81 1.67 (0.97) 3.83 0.17
-------- -------- ------- ------- ------- -------
Total from investment
operations............ 1.90 2.44 1.80 (0.88) 3.86 0.20
-------- -------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividend from net
investment income...... -- (0.56) (0.12) (0.02) (0.01) (0.03)
Distribution in excess
of net investment
income................. -- (0.74) (0.22) -- -- (0.05)
Distribution from
capital gains.......... -- -- -- -- (0.03) --
Distribution from
capital................ -- -- -- (0.03) -- --
-------- -------- ------- ------- ------- -------
Total distributions.... -- (1.30) (0.34) (0.05) (0.04) (0.08)
-------- -------- ------- ------- ------- -------
Net asset value, end of
period................. $ 17.51 $ 15.61 $ 14.47 $ 13.01 $ 13.94 $ 10.12
======== ======== ======= ======= ======= =======
Total return............ 12.17% 16.87% 13.80% 6.31% 38.14% 2.00%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in thousands).. $127,946 $104,418 $69,531 $59,393 $40,798 $11,137
-------- -------- ------- ------- ------- -------
Ratio of expenses to
average net assets..... 1.14%(a) 1.17% 1.23% 1.22% 1.21% 1.54%(a)(b)
-------- -------- ------- ------- ------- -------
Ratio of net investment
income to average net
assets................. 1.20%(a) 0.66% 0.91% 0.82% 0.63% 1.56%(a)(b)
-------- -------- ------- ------- ------- -------
Portfolio turnover rate. 19.3% 54.8% 62.5% 15.6% 11.1% 0.0%
-------- -------- ------- ------- ------- -------
Average commission rate
paid (c)............... $ 0.0490 $ 0.0397 -- -- -- --
-------- -------- ------- ------- ------- -------
- ----------------------------------------------------------------------------------------------
</TABLE>
(a) Annualized.
(b) Had fees not been waived by the investment advisor and administrator of the
Fund, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets would have been 1.90% annualized
and 1.20% annualized, respectively, for the period ended December 31, 1992.
(c) Computed by dividing the total amount of commissions paid by total number
of shares purchased and sold during the period for which commissions were
charged, as required by the SEC beginning after September 1, 1995.
* For the period from November 2, 1992 (commencement of operations) to December
31, 1992.
- --------------------------------------------------------------------------------
THE SMALL CAPITALIZATION FUND
The table below sets forth financial data for a share outstanding throughout
each period
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
JUNE 30, 1997 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1996 1995*
---------------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of
period........................ $ 12.53 $ 10.96 $10.00
------- ------- ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.......... -- 0.07 0.09
Net realized and unrealized
gain on investment
transactions.................. 1.93 2.09 1.19
------- ------- ------
Total from investment
operations................... 1.93 2.16 1.28
------- ------- ------
LESS DISTRIBUTIONS:
Dividend from net investment
income........................ -- (0.07) (0.09)
Distribution from capital
gains......................... -- (0.52) (0.23)
------- ------- ------
Total distributions........... -- (0.59) (0.32)
------- ------- ------
Net asset value, end of period. $ 14.46 $ 12.53 $10.96
======= ======= ======
Total return................... 15.40% 19.76% 12.76%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands).................... $27,626 $16,134 $4,828
------- ------- ------
Ratio of expenses to average
net assets.................... 0.86%(a) 0.99%(b) 1.00%(a)(b)
------- ------- ------
Ratio of net investment income
to average net assets......... 0.74%(a) 0.85%(b) 1.53%(a)(b)
------- ------- ------
Portfolio turnover rate........ 54.6% 39.2% 64.3%
------- ------- ------
Average commission rate paid
(c)........................... $0.0556 $0.0486 --
------- ------- ------
- ---------------------------------------------------------------------------------
</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 1.06% and
1.29%, respectively, and the ratio 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) Computed by dividing the total amount of commissions paid by total number
of shares purchased and sold during the period for which commissions were
charged, as required by the SEC beginning after September 1, 1995.
* For the period from March 1, 1995 (commencement of operations) through
December 31, 1995.
37
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE EMERGING GROWTH FUND
The table below sets forth financial data for a share outstanding throughout
the period
<TABLE>
<CAPTION>
PERIOD ENDED
JUNE 30,
1997
(UNAUDITED)*
------------
<S> <C>
Net asset value, beginning of period......................... $ 10.00
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss.......................................... (0.42)
Net realized and unrealized gain on investment transactions.. 2.68
-------
Total from investment operations............................ 2.26
-------
LESS DISTRIBUTIONS:
Dividend from net investment income.......................... 0.00
Distribution from capital gains.............................. 0.00
-------
Total distributions......................................... 0.00
-------
Net asset value, end of period............................... $ 12.26
=======
Total return................................................ 22.60%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)..................... $ 8,554
-------
Ratio of expenses to average net assets...................... 1.15% (a)(b)
-------
Ratio of net investment income to average net assets......... (0.42%)(a)(b)
-------
Portfolio turnover rate...................................... 44.5%
-------
Average commission rate paid (c)............................. $0.0545
-------
- ---------------------------------------
</TABLE>
(a) Annualized.
(b) Had fees not been waived by the investment advisor and administrator of the
Fund, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets would have been 1.37% and (0.64%),
respectively, for the period ended June 30, 1997.
(c) Computed by dividing the total amount of commissions paid by total number
of shares purchased and sold during the period for which commissions were
charged, as required by the SEC beginning after September 1, 1995.
* For the period from May 1, 1997 (commencement of operations) through June 30,
1997.
38
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
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 conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
INVESTMENT VALUATION:
MONEY MARKET FUND - Investments in securities are valued under the amortized
cost method, which approximates current market value. Under this method,
securities are valued at cost on the date of purchase and thereafter a
proportionate amortization of any discount or premium until maturity is
assumed. Penn Series has agreed to maintain a dollar weighted average portfolio
maturity appropriate to the objective of maintaining a stable net asset value
per share. The Penn Series Board of Directors (The Board) has established
procedures reasonably designed to stabilize the net asset value per share for
purposes of sales and redemptions at $1.00. The Board performs regular review
and monitoring of the valuation in an attempt to avoid dilution or unfair
results to shareholders.
QUALITY BOND, HIGH YIELD BOND, GROWTH EQUITY, VALUE EQUITY, FLEXIBLY MANAGED,
INTERNATIONAL EQUITY, SMALL CAPITALIZATION AND EMERGING GROWTH FUNDS -
Portfolio securities listed on a national securities exchange are valued at
the last sale price on the securities exchange or securities market on which
such securities primarily are traded or, if there has been no sale on that day,
at the mean between the current closing bid and asked prices. All other
securities for which over-the-counter market quotations are readily available
will be valued on the basis of the mean between the last current bid and asked
prices. When market quotations are not readily available, or when restricted or
other assets are being valued, the securities or assets will be valued at fair
value as determined by The Board.
The high yield securities in which the High Yield Bond Fund may invest are
predominantly speculative as to the issuer's continuing ability to meet
principal and interest payments. The value of the lower quality securities in
which the High Yield Bond Fund may invest will be affected by the credit
worthiness of individual issuers, general economic and specific industry
conditions, and will fluctuate inversely with changes in interest rates. In
addition, the secondary trading market for lower quality bonds may be less
active and less liquid than the trading market for higher quality bonds.
FOREIGN CURRENCY TRANSLATION - The books and records of the Funds are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis: market value of investment securities, assets
and liabilities at the current rate of exchange; and purchase and sales of
investment securities, income and expenses at the relevant rates of exchange
prevailing on the respective dates of such transactions.
The Funds do not isolate that portion of realized and unrealized gains and
losses on investments in equity securities which are due to changes in the
foreign exchange rate from that which is due to changes in market prices of
equity securities.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. dollar denominated
transactions as a result of, among other factors, the level of governmental
supervision and regulation of foreign securities markets and the possibility of
political or economic instability.
SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are
accounted for on the trade date. Dividend income is recorded on the ex-dividend
date and interest income is accrued as earned. The cost of investment
securities sold is determined by using the specific identification method for
both financial reporting and income tax purposes.
DIVIDENDS TO SHAREHOLDERS: Dividends of investment income and realized
capital gains of the Quality Bond, High Yield Bond, Growth Equity, Value
Equity, Flexibly Managed, International Equity 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: It is the policy of each of the Funds to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income, including
realized gains, to its shareholders. Therefore, no provision is made for
federal income or excise taxes.
39
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
2 - DERIVATIVE FINANCIAL INSTRUMENTS
OFF-BALANCE SHEET RISK
The Funds may trade financial instruments with off-balance sheet risk in the
normal course of investing activities and to assist in managing exposure to
market risks such as interest rates and foreign currency exchange rates. These
financial instruments include written options, forward foreign currency
exchange contracts and futures contracts.
The notional or contractual amounts of these instruments represent the
investment the Funds have in particular classes of financial instruments and do
not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered.
DERIVATIVE FINANCIAL INSTRUMENTS HELD OR ISSUED FOR PURPOSES OTHER THAN TRADING
FUTURES CONTRACTS - Each of the Funds, other than Money Market, may enter
into financial futures contracts for the delayed delivery of securities,
currency or contracts based on financial indices on a future date. A Fund is
required to deposit either in cash or securities an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received by
a Fund each day, dependent on daily fluctuations in the value of the underlying
security, and are recorded for financial statement purposes as unrealized gains
or losses by a Fund. A Fund's investment in financial futures contracts is
designed only to hedge against anticipated future changes in interest or
exchange rates. Should interest or exchange rates move unexpectedly, a Fund may
not achieve the anticipated benefits of the financial futures contracts and may
realize a loss. There were no open futures contracts at June 30, 1997.
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 period ended June 30, 1997.
Purchased put options open and outstanding at June 30, 1997 are disclosed in
the schedule of investments.
FORWARD FOREIGN CURRENCY CONTRACTS - The Funds may enter into forward foreign
currency exchange contracts as a way of managing foreign exchange rate risk. A
Fund may enter into these contracts to fix the U.S. dollar value of a security
that it has agreed to buy or sell for the period between the date the trade was
entered into and the date the security is delivered and paid for. A Fund may
also use these contracts to hedge the U.S. dollar value of securities it
already owns denominated in foreign currencies.
Forward foreign currency contracts are valued at the forward rate, and are
marked-to-market daily. The change in market value is recorded by the Fund as
an unrealized gain or loss. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate fluctuations
in the underlying prices of the Fund's portfolio securities, but it does
establish a rate of exchange that can be achieved in the future. Although
forward foreign currency contracts limit the risk of loss due to a decline in
the value of the hedged currency, they also limit any potential gain that might
result should the value of the currency increase. In addition, the Funds could
be exposed to risks if the counterparties to the contracts are unable to meet
the terms of their contracts. The Flexibly Managed and International Equity
funds have entered into forward foreign currency contracts for the period ended
June 30, 1997.
At June 30, 1997 there were no open contracts in the Flexibly Managed Fund.
Open forward foreign currency contracts held by the International Equity Fund
at June 30, 1997 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
FOREIGN FOREIGN
FORWARD FOREIGN CURRENCY SETTLEMENT CURRENCY TO CONTRACT CONTRACT EXCHANGE
CONTRACT DATE BE SOLD AMOUNT VALUE GAIN/(LOSS)
------------------------ ---------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Deutsche Mark........... 10/16/97 17,000,000 $ 9,993,651 $ 9,825,794 $ 167,857
Deutsche Mark........... 09/08/97 15,000,000 8,849,557 8,641,798 207,759
French Franc............ 10/16/97 21,000,000 3,668,443 3,599,095 69,348
French Franc............ 09/08/97 21,000,000 3,675,002 3,588,314 86,688
Japanese Yen............ 09/08/97 1,600,000,000 13,445,378 14,095,882 (650,504)
Japanese Yen............ 10/14/97 1,600,000,000 13,034,305 14,181,547 (1,147,242)
Swiss Franc............. 10/16/97 8,000,000 5,557,099 5,549,082 8,017
Swiss Franc............. 09/08/97 5,000,000 4,109,589 4,140,358 (30,769)
----------- ----------- -----------
$62,333,024 $63,621,870 $(1,288,846)
----------- ----------- -----------
</TABLE>
40
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2 - DERIVATIVE FINANCIAL INSTRUMENTS, CONTINUED
<TABLE>
<CAPTION>
FORWARD FOREIGN CURRENCY SETTLEMENT CURRENCY TO CONTRACT CONTRACT EXCHANGE
CONTRACT DATE BE PURCHASED AMOUNT VALUE GAIN/(LOSS)
------------------------ ---------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Deutsche Mark........... 09/08/97 15,000,000 $ 9,083,752 $ 8,619,749 $(464,003)
French Franc............ 09/08/97 21,000,000 3,775,484 3,588,314 (187,170)
Japanese Yen............ 09/08/97 1,600,000,000 13,356,708 14,095,882 739,174
Swiss Franc............. 09/08/97 6,000,000 4,256,225 4,140,358 (115,867)
----------- ----------- ---------
$30,472,169 $30,444,303 $ (27,866)
----------- ----------- ---------
</TABLE>
3 - INVESTMENT ADVISORY AND OTHER CORPORATE SERVICES
ADMINISTRATIVE AND CORPORATE SERVICES
Under an administrative and corporate services agreement, The Penn Mutual
Life Insurance Company ("Penn Mutual") serves as administrative and corporate
services agent for Penn Series. Each of the Funds pays Penn Mutual, on a
quarterly basis, an annual fee equal to 0.15% of each of the Fund's average
daily net assets.
INVESTMENT ADVISORY SERVICES
Under investment advisory agreements, the following advisors manage the
investments of their respective Fund and provide guidance on certain accounting
matters:
<TABLE>
<CAPTION>
ADVISOR PENN SERIES FUND
------- ----------------
<S> <C>
Independence Capital Management, Inc. Money Market Fund
(A wholly owned subsidiary of Penn Quality Bond Fund
Mutual) Growth Equity Fund
Emerging Growth Fund
T. Rowe Price Associates Flexibly Managed Fund
High Yield Bond Fund
Vontobel USA, Inc. International Equity Fund
Op Cap Advisors Value Equity Fund
Small Capitalization Fund
</TABLE>
Each of the Funds pays their respective advisors, on a monthly basis, an
annual advisory fee based on the average daily net assets of each Fund, at the
following rates pursuant to the investment advisory agreements: Money Market
Fund: 0.40% for first $100 million and 0.35% thereafter; Quality Bond Fund:
0.45% for first $100 million and 0.40% thereafter; Growth Equity Fund: 0.50%
for the first $100 million and 0.45% thereafter; Flexibly Managed Fund: 0.50%;
High Yield Bond Fund: 0.50%; Emerging Growth Fund: 0.08%; International Equity
Fund: 0.75%; Value Equity Fund: 0.50%; Small Capitalization Fund: 0.50%.
Independence Capital Management currently serves as the investment advisor for
the Emerging Growth Fund and Robertson Stephens acts as sub-adviser to assist
in working to achieve the investment objectives of the Fund.
EXPENSES AND LIMITATIONS THEREON
Each Fund bears all expenses of its operations other than those incurred by
the investment advisors under their respective investment advisory agreements
and those incurred by Penn Mutual under its administrative and corporate
services agreement. The investment advisors and Penn Mutual have each
voluntarily agreed to waive fees or reimburse expenses to the extent each of
the Fund's expense ratio (excluding interest, taxes, brokerage, other
capitalized expenses, but including investment advisory and administrative and
corporate services fees) exceeds the applicable expense limitations for each
Fund. The expense limitations for the Funds are as follows: Money Market:
0.80%; Quality Bond: 0.90%; High Yield Bond: 0.90%; Growth Equity: 1.00%; Value
Equity: 1.00%; Flexibly Managed: 1.00%; International Equity: 1.50%; and Small
Capitalization 1.00% and Emerging Growth: 1.15%.
Fees were paid to non-affiliated Directors of Penn Series for the period
ended June 30, 1997. 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.
41
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
4 - CAPITAL STOCK
At June 30, 1997, 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 class of common stock is
presently designated Class I and no shares have been issued.
Transactions in capital stock of the Money Market Fund were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold.............. 22,683,325 $ 22,683,325 44,071,472 $ 44,071,472
Shares issued to
shareholders in
reinvestment of net
investment income....... 861,030 861,030 1,440,949 1,440,949
Shares reacquired........ (19,408,451) (19,408,451) (35,737,395) (35,737,395)
----------- ------------ ----------- ------------
4,135,904 $ 4,135,904 9,775,026 $ 9,775,026
----------- ------------ ----------- ------------
Transactions in capital stock of the Quality Bond Fund were as follows:
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold.............. 274,455 $ 2,750,880 816,952 $ 8,374,183
Shares issued to
shareholders in
reinvestment of
Net investment income... 0 0 234,248 2,342,476
Shares reacquired........ (397,380) (3,986,046) (1,006,891) (10,359,026)
----------- ------------ ----------- ------------
(122,925) $ (1,235,166) 44,309 $ 357,633
----------- ------------ ----------- ------------
Transactions in capital stock of the High Yield Bond Fund were as follows:
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold.............. 872,603 $ 8,040,963 1,055,047 $ 9,465,000
Shares issued to
shareholders in
reinvestment of
Net investment income... 0 0 361,419 3,220,247
Shares reacquired........ (490,958) (4,520,121) (792,896) (7,061,440)
----------- ------------ ----------- ------------
381,645 $ 3,520,842 623,570 $ 5,623,807
----------- ------------ ----------- ------------
Transactions in capital stock of the Growth Equity Fund were as follows:
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold.............. 304,907 $ 7,007,265 320,394 $ 7,089,450
Shares issued to
shareholders in
reinvestment of
Net investment income... 0 0 22,163 475,615
Net realized gain from
investment
transactions........... 0 0 492,024 10,558,832
Shares reacquired........ (271,356) (6,316,433) (673,246) (14,558,795)
----------- ------------ ----------- ------------
33,551 $ 690,832 161,335 $ 3,565,102
----------- ------------ ----------- ------------
</TABLE>
42
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4 - CAPITAL STOCK, CONTINUED
Transactions in capital stock of the Value Equity Fund were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Shares sold.................. 1,749,462 $ 35,114,264 2,485,344 $ 45,626,673
Shares issued to shareholders
in reinvestment of
Net investment income....... 0 0 114,391 2,210,027
Net realized gain from
investment transactions.... 0 0 427,146 8,252,470
Shares reacquired............ (308,220) (6,313,903) (457,053) (8,365,348)
--------- ------------ --------- ------------
1,441,242 $ 28,800,361 2,569,828 $ 47,723,822
--------- ------------ --------- ------------
Transactions in capital stock of the Flexibly Managed Fund were as follows:
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Shares sold.................. 2,388,801 $ 45,771,325 5,176,205 $ 96,448,634
Shares issued to shareholders
in reinvestment of
Net investment income....... 0 0 685,941 12,854,535
Net realized gain from
investment transactions.... 0 0 894,811 16,768,765
Shares reacquired............ (569,397) (11,035,754) (807,605) (15,147,946)
--------- ------------ --------- ------------
1,819,404 $ 34,735,571 5,949,352 $110,923,988
--------- ------------ --------- ------------
Transactions in capital stock of the International Equity Fund were as follows:
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Shares sold.................. 983,754 $ 15,823,777 1,812,851 $ 28,060,006
Shares issued to shareholders
in reinvestment of
Net investment income....... 0 0 220,720 3,445,460
Distribution in excess of
net investment income...... 0 0 294,034 4,589,862
Shares reacquired............ (364,795) (5,879,161) (442,745) (6,922,123)
--------- ------------ --------- ------------
618,959 $ 9,944,616 1,884,860 $ 29,173,205
--------- ------------ --------- ------------
Transactions in capital stock of the Small Capitalization Fund were as follows:
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Shares sold.................. 700,139 $ 8,988,781 1,108,381 $ 13,236,881
Shares issued to shareholders
in reinvestment of
Net investment income....... 0 0 6,978 87,435
Net realized gain from
investment transactions.... 0 0 48,711 607,875
Shares reacquired............ (76,471) (999,392) (317,129) (3,736,752)
--------- ------------ --------- ------------
623,668 $ 7,989,389 846,941 $ 10,195,439
--------- ------------ --------- ------------
Transactions in capital stock of the Emerging Growth Fund were as follows:
<CAPTION>
PERIOD ENDED*
JUNE 30, 1997
-----------------------
SHARES AMOUNT
--------- ------------
<S> <C> <C>
Shares sold.................. 699,598 $ 7,730,110
Shares reacquired............ (1,778) (21,420)
--------- ------------
697,820 $ 7,708,690
--------- ------------
</TABLE>
* For the period from May 1, 1997 (commencement of operations) through June 30,
1997.
43
<PAGE>
- --------------------------------------------------------------------------------
PENN SERIES FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
5 - PURCHASES AND SALES OF INVESTMENTS
During the period ended June 30, 1997, 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 .......... $ 25,895,241 $39,413,794 $ 0 $ 0
Other Long-Term Securities ... 18,251,159 5,014,094 36,204,168 29,363,184
------------ ----------- ----------- -----------
Totals ...................... $ 44,146,400 $44,427,888 $36,204,168 $29,363,184
------------ ----------- ----------- -----------
<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 ... 97,118,952 99,412,742 22,470,273 10,439,871
------------ ----------- ----------- -----------
Totals ...................... $ 97,118,952 $99,412,742 $22,470,273 $10,439,871
------------ ----------- ----------- -----------
<CAPTION>
INTERNATIONAL EQUITY
FLEXIBLY MANAGED FUND 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 ... 120,552,121 74,996,192 28,600,388 19,713,307
------------ ----------- ----------- -----------
Totals ...................... $120,552,121 $74,996,192 $28,600,388 $19,713,307
------------ ----------- ----------- -----------
<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 ... 16,868,574 10,208,806 9,990,546 2,623,997
------------ ----------- ----------- -----------
Totals ...................... $ 16,868,574 $10,208,806 $ 9,990,546 $ 2,623,997
------------ ----------- ----------- -----------
</TABLE>
*For the period from May 1, 1997 (commencement of operations) through June 30,
1997.
- --------------------------------------------------------------------------------
6 - CAPITAL LOSS CARRYOVERS
Capital loss carryovers expire as follows:
<TABLE>
<CAPTION>
MONEY
MARKET QUALITY HIGH YIELD
FUND BOND FUND BOND FUND
------- --------- -----------
<S> <C> <C> <C>
1997 .......................................... $ 0 $ 0 $ 0
1998 .......................................... (872) 0 0
1999 .......................................... 0 0 (1,355,386)
2000 .......................................... (61) 0 0
2001 .......................................... (183) 0 0
2002 .......................................... 0 (778,292) (1,572,728)
2003 .......................................... (416) 0 (1,086,129)
2004 .......................................... 0 (89,807) (525,647)
------- --------- -----------
Total ........................................ $(1,532) $(868,099) $(4,539,890)
------- --------- -----------
</TABLE>
44
