Penn Series Funds N-CSRCertified annual shareholder report (management investment company)

Limited Maturity Bond Fund

The Penn Series Limited Maturity Bond Fund returned 4.89% for the twelve-month period ending December 31, 2019, compared to the 4.03% return for its benchmark, the Bloomberg Barclays Capital U.S. Government/Credit 1-3 Year Index, for the same period.

The Federal Reserve (Fed) quickly reversed course to easier monetary policy this year following four rate hikes in 2018. The Fed’s pivot contributed to a strong rebound in performance across almost all financial asset classes. The bond market was no exception as interest rates declined and prices rose across the entire Treasury yield curve. The 2-year Treasury note fell more than 90 basis points to finish the year at 1.57%. The Fed lowered short-term rates three times during the second half of the year but is likely to pause on additional cuts until U.S. economic growth weakens materially from current levels.

Fund positioning slightly long duration (interest rate risk) benefited performance in the declining rate environment. We are currently positioned neutral relative to the benchmark given the likely pause in Fed rate cuts but will remain opportunistic with duration and yield curve management in 2020. Fund holdings of Treasury Inflation Protected securities (TIPs) detracted from relative performance during 2019 as inflation expectations declined despite continued tightness across the labor market.

Corporate bond spreads tightened throughout the year with positive news on a ‘Phase One’ U.S./China trade agreement in December boosting demand for all spread sectors to close out 2019. Our overweight positioning in corporate credit contributed to the year’s positive results. Structured security spreads, including collateralized loan obligations, also tightened but trailed the strength of the corporate sector. We are gradually increasing Fund exposure to more attractively priced structured securities, including short duration mortgage-backed securities (MBS).

Penn Mutual Asset Management, LLC

Investment Adviser

Quality Bond Fund

The Penn Series Quality Bond Fund returned 9.21% for the twelve-month period ending December 31, 2019, compared to the 8.72% return for its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index.

The Fund finished in the top quartile among actively managed core bond funds during the period as measured by Morningstar.

2019 witnessed a significant rebound in financial market performance following a weak close to 2018. Investment grade corporate bond spreads tightened by 60 basis points during the year and outperformed duration-matched Treasuries by nearly 700 basis points. Structured securities lagged the strong results in the corporate sector but still generated outperformance versus Treasuries.

The long-anticipated bond bear market ended almost as quickly as it started with Treasury yields falling throughout 2019. 10-year Treasury yields declined more than 75 basis points and closed the year at 1.92%. The Federal Reserve followed the lead of the bond market and cut interest rates three times beginning at the July Federal Open Market Committee (FOMC) meeting. Disappointing global economic conditions, partly resulting from the U.S.-China trade dispute, led to a surge in the volume of sovereign debt trading with negative yields, peaking at $17 trillion in August.

Duration (interest rate risk) management and yield curve positioning benefited Fund performance during the year while holdings of Treasury Inflation Protected securities (TIPs) detracted. We are currently positioned neutral in duration relative to the benchmark but will remain opportunistic with duration and yield curve management in 2020.

Fund holdings of corporate bonds and structured securities, including collateralized loan obligations, represented another source of value added performance during 2019. Our underweight exposure to U.S. government agency mortgage-backed securities (MBS) also benefitted returns versus the benchmark as fears of higher prepayments capped performance in the MBS sector. We are gradually reducing our overweight positioning in corporate credit and adding more attractively valued structured securities, including agency MBS.

Penn Mutual Asset Management, LLC

Investment Adviser

High Yield Bond Fund

The Penn Series High Yield Bond Fund returned 15.68% for the twelve-month period ending December 31, 2019, compared to the 14.00% return for its benchmark, the CSFB High Yield Bond Index for the same time period.

2019 was a very strong period across equity and all fixed income asset classes. Rebounding off a weak fourth quarter of 2018, the reversal in psychology was largely driven by an abrupt change in Federal Reserve posture with respect to its interest rate trajectory and balance sheet holdings of Treasuries and mortgages. In response, 10-year Treasury rates declined about 75 basis points during the year, and about 120 basis points from November 2018. The other major overhangs in the market, the U.S.-China trade dispute, BREXIT and the United States-Mexico-Canada Agreement trade deal also concluded favorably. The combination led to a very strong rally at year-end and set the stage for further spread tightening coming into 2020.

The CSFB High Bond Yield Index returned 2.1% in December 2019, capping off an impressive 14% return for the year. December was an anomaly as it was driven by material outperformance in CCC credit and lower- rated energy bonds, as opposed to the prior 11 months of the year which was “quality” led. For example BB-rated bonds outperformed CCCs by over 400 basis points in 2019, an unusual phenomenon in the context of a 30% return in the S&P 500 Index. The energy sector was a notable laggard generating a total return of about 6%.

During 2019, the Fund outperformed its benchmark by 168 basis points due largely to its up- in-quality orientation and lack of material credit issues in the portfolio. The Fund added risk selectively during the fourth quarter in credits such as Denbury Resources Inc., FXI Holdings Inc., Scientific Games Corp, Hexion Inc., Commscope Inc., and Blue Racer Midstream LLC. Despite adding some energy risk in the fourth quarter, the high yield market’s largest sector, the Fund exited the year still underweight the subsector on a risk-adjusted basis. The Fund’s bank loan exposure stood at about 2%. Syndicated leveraged loans materially underperformed the high yield market in 2019 as underwriting issues began to appear, and investor appetite waned for the asset class as interest rates fell.

Penn Mutual Asset Management, LLC

Investment Adviser

Flexibly Managed Fund

The Penn Series Flexibly Managed Fund returned 24.53% for the twelve-month period ending December 31, 2019, compared to the 31.49% return of its benchmark, the S&P 500 Index for the same time period.

The portfolio posted a positive return but underperformed its all-equity S&P 500 Index in the 2019 calendar year. However, it outperformed its Morningstar and Lipper peer groups. The portfolio’s equity holdings posted a positive return, outpacing the S&P 500 Index benchmark. The portfolio’s fixed income holdings posted a positive return during the one-year period, outperforming the benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index.

U.S. stocks surged in 2019, as equities bounced back strongly from deep losses in the fourth quarter of 2018, with several major indexes hitting new all-time highs in the latter part of the year. A major driver of U.S. market performance was that the Federal Reserve — instead of continuing to raise short-term interest rates in 2019 — decided to keep rates steady in the first half of the year but then reduced rates three times starting in late July as a “midcycle adjustment” of its monetary policy. U.S.-China trade discussions were another major driver of market sentiment in 2019.

Overall, given we are late in an economic cycle and markets are pricing in quite a lot of good news, we are defensively positioned and believe there is potential for significant downside risk. We remain focused on identifying high-quality businesses with strong and/or improving fundamentals that we believe will be solid performers across a variety of market environments.

Our overall fixed income weight declined from the prior year, as we eliminated our position in U.S. Treasuries on strength. Our largest exposure in fixed income remains in high yield, where we are focused on short-duration and/or idiosyncratic issues. Our position in investment-grade decreased during the year as spreads tightened, although we continue to hold a sizable position in mostly high-quality, shorter-duration corporates.

Within equities, the information technology sector detracted from relative returns due to stock selection, although the negative impact was partially offset by a beneficial overweight allocation. Analog semiconductor company Maxim Integrated Products advanced but lagged sector peers due to soft demand in its industrial segment, including in China, and slower auto sales. No other sector detracted during the period. Conversely, the financials sector drove relative outperformance due to stock selection. S&P Global outperformed during the year amid strong corporate debt issuance and a healthy equity market backdrop. Security selection in the health care

Average Annual Total Returns¹as of 12/31/19

Portfolio Composition as of 12/31/19

Balanced Fund

The Penn Series Balanced Fund returned 21.66% for the twelve-month period ending December 31, 2019, compared to its benchmarks, the S&P 500 Index’s return of 31.49% and the Bloomberg Barclays U.S. Aggregate Bond Index’s return of 8.72% for the same time period.

The Balanced Fund is comprised of a target allocation of 60% to an equity fund and 40% to a fixed income fund. The equity allocation of the Fund is comprised of the Penn Series Index 500 Fund, which is a passively managed S&P 500 Index fund. The fixed income allocation of the Fund consists of an allocation to the Penn Series Quality Bond Fund.

The Fund is actively managed and seeks to outperform its benchmark while generating consistent excess performance. Fund equity performance slightly trailed its benchmark in 2019 while the Fund’s fixed income allocation outperformed its benchmark. The Fund finished in the top 20% among actively managed balanced funds as measured by Morningstar.

Penn Mutual Asset Management, LLC

Investment Adviser

Cumulative Performance Comparison

December 31, 2009 — December 31, 2019

Large Growth Stock Fund

The Penn Series Large Growth Stock Fund returned 30.41% for the twelve-month period ending December 31, 2019, compared to the 36.39% return for its benchmark, the Russell 1000 Growth Index for the same time period.

The portfolio delivered positive returns for the twelve-months ended December 31, 2019, but underperformed the benchmark Russell 1000 Growth Index. Overall, both stock selection and sector allocation were responsible for relative outperformance. Information technology was the largest relative underperformer, followed by financials and health care. Consumer staples and utilities were major relative contributors.

U.S. stocks surged in 2019, with several major indexes hitting all-time highs in the second half of the year. The Federal Reserve’s decision to keep rates steady in the first half of the year and then reduce them three times starting in July was a major driver of market performance. Trade discussions between the U.S. and China also drove market sentiment. Speculation arose numerous times during the year that the two countries were “close” to reaching an agreement, though occasional tensions seemed to reduce its likelihood. A preliminary “phase one” trade deal was not officially struck until December. As part of the agreement, the U.S. would lower or cancel the scheduled tariff rate on various Chinese goods. The agreement would also require “structural reforms and other changes to China’s economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange.” Large-cap shares outperformed their smaller peers. As measured by various Russell indices, growth stocks soundly outperformed value across all market capitalizations.

In information technology, stock choices and an underweight exposure detracted from relative results. Our underweight position in Apple hurt as shares marched higher over the past 12 months, driven by accelerating growth of services and wearables, along with improving conditions for iPhone sales in China. We maintain an underweight position relative to the benchmark due to concerns over saturation and elongation of replacement cycles for smartphones and Apple’s ability to monetize its installed base of users as hardware reaches parity and operating systems become less differentiated.

Security selection in financials also weighed on relative performance, driven by holdings in TD Ameritrade Holding. Shares of the company underperformed over the past year due to unfavorable interest rate cuts by the Federal Reserve and fee pressure among online brokers that eventually

Average Annual Total Returns¹ as of 12/31/19

Portfolio Composition as of 12/31/19

Large Cap Growth Fund

The Penn Series Large Cap Growth Fund returned 39.78% for the twelve-month period ending December 31, 2019, compared to the 36.39% return for its benchmark, the Russell 1000 Growth Index for the same time period.

Fading fears of a near-term global recession, the announcement of a partial trade deal between the United States and China and decline in Brexit uncertainty helped bolster market sentiment late in the period. Changes in market sentiment, largely driven by uncertainty over the outcome of trade negotiations between the U.S. and China, had contributed to periodic bouts of volatility during the reporting period. The global economy decelerated, led by weakness in China and Europe, although the pace of the slowdown moderated late in the period amid nascent signs of stabilization in the manufacturing sector.

The deteriorating global growth backdrop, along with declining inflationary pressures, prompted the U.S. Federal Reserve (Fed) to adopt a more dovish posture beginning in early 2019, resulting in the first interest rate cut in over a decade at the end of July, followed by additional cuts in September and October. The Fed’s actions led to a sharp decline in long-term interest rates during the period’s second half, causing the inversion of portions of the U.S. Treasury yield curve for a time. Amid an improvement in risk sentiment in Q4 2019 and indications of a bottoming in growth and potential upturn in activity, the Fed indicated in October that further rate cuts were unlikely unless the outlook for the economy materially worsened.

Globally, central banks have tilted more dovish as well, with the European Central Bank unveiling a package of easing measures, which included cutting overnight rates further — sending them deeper into negative territory — restarting its bond-buying program and lengthening the term of cheap loans to banks to three years from two. The central banks of India and Australia are among those that have cut rates several times in recent months, although China has been more cautious in increasing liquidity as it continues to attempt to deleverage its economy, cutting rates only marginally.

Emerging markets experienced considerable volatility through the end of 2018, as tighter global financial conditions exposed structural weakness in some countries. Those conditions improved in 2019 as the Fed became more dovish. Notwithstanding the periodic headwinds on market sentiment from significant trade friction between the US and China over much of the year, emerging market

Security selection and an overweight position in the consumer staples sector further hindered relative performance. Within this sector, holding shares of household products manufacturer Reckitt Benckiser and overweighting shares of global consumer products company Colgate-Palmolive held back relative returns.

Stocks in other sectors that also detracted from relative performance included the timing of the portfolio’s position in animal health services firm Elanco Animal Health and electronic brokerage firm TD Ameritrade, as well an overweight position in diversified industrial growth company Fortive.

Penn Mutual Asset Management, LLC

Investment Adviser

MFS Investments

Investment Sub-Adviser

Cumulative Performance Comparison

December 31, 2009 — December 31, 2019

An investment of $10,000 in the Large Cap Growth Fund on December 31, 2009 would have grown to $30,217. For the purpose of comparison, the graph also shows the change in the Fund’s benchmark, the Russell 1000 Growth Index, during the same period. A $10,000 investment in the Russell 1000 Growth Index on December 31, 2009 would have grown to $41,234.

Average Annual Total Returns¹as of 12/31/19

Large Core Growth Fund

The Penn Series Large Core Growth Fund returned 27.27% for the twelve-month period ending December 31, 2019, compared to the 36.39% return for its benchmark, the Russell 1000 Growth Index for the same time period.

Easing geopolitical tensions, reduced recession fears and central bank support drove U.S. equities sharply higher over 2019. The U.S.-China trade war dampened the U.S. manufacturing sector and weighed on business confidence. However, consumers’ resilience helped the U.S. economy maintain slow but steady growth. Acknowledging the downside risks to the economy, the U.S. Federal Reserve stopped raising its benchmark interest rate in the first half of the year, then cut rates three times to try to prolong the economic cycle. Volatility increased in 2019, but stock prices continued to rally higher, notably at year end when the U.S. and China announced a partial trade deal.

U.S. large-cap growth stocks advanced during the year. Within the Russell 1000 Growth Index, information technology and communication services were the top-performing sectors for the year. All sectors had positive performance, with energy posting the smallest gain.

Counterpoint Global seeks high quality companies, which we define primarily as those with sustainable competitive advantages. We manage concentrated portfolios that are highly differentiated from the benchmark, with securities weighted on our assessment of the quality of the company and our conviction. The value added or detracted in any period of time will result from stock selection, given our philosophy and process. For the year, the Fund underperformed the Index.

The long-term investment horizon and conviction-weighted investment approach embraced by the team since 1998 can result in periods of performance deviation from the benchmark and peers. The portfolio underperformed the Index in this reporting period due to unfavorable results from both stock selection and sector allocations.

The information technology and communication services sectors were the chief drivers of the Fund’s relative underperformance. The portfolio’s lack of exposure to some of the largest benchmark holdings within these two sectors weighed on relative performance as these index-heavyweights performed very strongly in 2019. Although nearly all of the IT and communication services stocks owned in the portfolio performed well, they lagged the stronger performance of other stocks in the Index. The

Average Annual Total Returns¹ as of 12/31/19

Portfolio Composition as of 12/31/19

Large Cap Value Fund

The Penn Series Large Cap Value Fund returned 23.53% for the twelve-month period ending December 31, 2019, compared to the 26.54% return for its benchmark, the Russell 1000 Value Index for the same time period.

After declining sharply at the end of 2018, equity markets rebounded dramatically in January, as strong corporate earnings and optimism about a trade truce between the U.S. and China calmed investors. Trade war tensions resurfaced, however, and emerging geopolitical pressures drove market volatility. Tariff wars, restrictive monetary policy and a decline in industrial production stoked recessionary fears throughout the global economy. Late in the third quarter, equity market performance was accompanied by a sharp style rotation in the U.S. Quality-growth and lower-volatility stocks, which had been strong performers, lagged, and value stocks outperformed. However, for the most part, growth stocks continued to outperform value over the entire period. From a market-capitalization perspective, large-cap stocks outperformed their small-cap peers.

For the year, the portfolio rose in absolute terms but underperformed its benchmark, the Russell 1000 Value Index. Stock selection in healthcare detracted, while selection in energy contributed. The portfolio’s cash balance detracted, while an overweight to industrials contributed.

Healthcare provider Cigna detracted during the year on concerns around the future profitability of its recently acquired Express Scripts pharmacy benefit management business and around political rhetorical regarding Medicare For All. Biotechnology company Biogen detracted after announcing that Phase 3 trials for its Alzheimer’s treatment would be discontinued. Online travel agency Expedia detracted. Challenged fundamental performance was initially perceived as being due to an issue in the online travel market; however, poor execution by management was more likely the root cause.

Defense contractor Raytheon contributed on increasing investor confidence around its merger with United Technologies. Shares of homebuilder D.R. Horton contributed amid improved sentiment on housing, as the 10-year rate rallied significantly. Financial services company Wells Fargo outperformed, helped by the appointment of a new CEO after a lengthy search process.

Strong absolute market returns without corresponding fundamental profit growth concern us, especially with

Average Annual Total Returns¹as of 12/31/19

Portfolio Composition as of 12/31/19

Large Core Value Fund

The Penn Series Large Core Value Fund returned 29.70% for the twelve-month period ending December 31, 2019, compared to the 26.54% return for its benchmark, the Russell 1000 Value Index for the same time period.

Despite the backdrop of continued trade war fears and mixed economic indicators, equity markets rallied during the period as an accommodating U.S. Federal Reserve (Fed) and a continuation of historically low unemployment levels provided a tailwind for equity market returns.

After holding interest rates steady in the first half of 2019, the Fed cut its benchmark rate in late July, its first reduction in a decade. The Fed followed with additional quarter point cuts in September and October, bringing rates to a range of 1.50% — 1.75% in an effort to keep the U.S. economy strong amid China trade tensions and weakening economic data from overseas.

Key economic indicators were mixed amid continued slow growth overall in the U.S economy. The U.S. unemployment rate fell to 3.5% in November, matching September for the lowest since 1989.

Overseas, Boris Johnson’s overwhelming election victory in December appeared to settle the Brexit question, which has represented a market overhang for some time, in favor of Britain’s departure from the European Union.

In the U.S., the S&P 500 Index posted a robust 31.49% return during the period. Globally, the MSCI EAFE Index returned 22.01%, while the MSCI EM Index posted an 18.42% gain. Large cap stocks outperformed their small cap counterparts during the period.

The Fund’s outperformance versus the Index during the period was primarily the result of strong stock selection, while sector allocation results also contributed, to a lesser extent, to relative performance. Among U.S. large-cap equities, growth stocks outperformed value stocks during the period by a wide margin. All 11 of the economic sectors within the Index registered positive returns, with information technology, industrials, and financials delivering the strongest returns.

Strong broad-based stock selection boosted relative performance results over the period, with positive stock selection results registered in 9 of the 11 sectors. Stock selection contributed most in the financials, utilities, and consumer staples sectors. Additionally, an overweight to the strong-performing industrials sector and underweight to the energy sector aided relative performance results.

An investment of $10,000 in the Large Core Value Fund on December 31, 2009 would have grown to $26,785. For the purpose of comparison, the graph also shows the change in the Fund’s benchmark, the Russell 1000 Value Index, during the same period. A $10,000 investment in the Russell 1000 Value Index on December 31, 2009 would have grown to $30,505.

Average Annual Total Returns¹ as of 12/31/19

Portfolio Composition as of 12/31/19

Index 500 Fund

The Penn Series Index 500 Fund returned 31.06% for the twelve-month period ending December 31, 2019, compared to the 31.49% return for its benchmark, the S&P 500 Index for the same time period.

The Fund’s performance reflects the expenses of managing the Fund, including brokerage and advisory expenses. The Index is unmanaged and Index returns do not reflect fees and expenses of any kind, which would have a negative impact on returns.

Despite the uncertainty over the U.S.-China trade agreement, better than expected economic data, low interest rates and robust domestic demand were primary drivers of Fund performance during the reporting period. Specifically, the prospect of more accommodative monetary conditions allowed large-cap companies to finish the quarter with a gain of 13.5%. U.S. large cap equities rebounded from a sharp decline in May amid trade tensions to end the quarter at a record high as factors bolstered the sentiment, including apparent progress and favorable communications related to trade negotiations between the United States and China, as well as developments that further reinforced the idea that the Federal Reserve will be on hold for some time to come. U.S. equities posted modestly constructive results for the third quarter; interest rate-sensitive and defensive sectors established leadership over the quarter. The flight to safety and dramatic decline in interest rates bolstered the relatively strong results from these defensive and interest rate-sensitive sectors.

Turning to November, a better than expected October jobs report helped provide support for the rally of U.S. equities. Easing trade tensions led to better risk appetite and relatively lackluster economic data bolstered views of continued easy money policies. U.S. markets were still a little jittery in early December as President Trump announced the reimposition of steel and aluminum tariffs on Brazil and Argentina, but the announcement later in the month of a “Phase One” trade deal with China carried equity markets into a strong close for 2019. Information technology, financials and communication services were the top three sectors that contributed to the outperformance of U.S. large cap equities while materials, utilities and energy were the bottom three contributors over the period. Fueled by an improving trade environment as well as solid earnings beats, the technology sector was the best performing equity sector. Conversely, being the worst performing sector within U.S. large cap equities, the energy sector appeared to be heading for another ignominious

Portfolio Composition as of 12/31/19

Mid Cap Growth Fund

The Penn Series Mid Cap Growth Fund returned 37.98% for the twelve-month period ending December 31, 2019, compared to the 35.47% return for its benchmark, the Russell Midcap Growth Index for the same time period.

During the measurement period, the Fund experienced positive results in all sectors except for real estate and consumer staples. The strongest sector exposure was in consumer discretionary, followed by information technology, healthcare, materials, communication services, industrials and financials. All sectors benefitted from strong stock selection. Negative contributions to relative performance came from real estate, where we had no exposure, and consumer staples, where the benefit of our underweight position was overcome by poor stock selection within that sector. Equity options were additive to returns in the form of a portfolio hedge implemented in July, when the trade agreement was in doubt and there was no substantial talk by the Federal Reserve regarding interest rate policy changes. While we maintained cash at the low end of our comfortable range, it was a significant drag on the Fund throughout the year.

Holdings within the consumer discretionary sector made the greatest positive contribution to the Fund’s return for the measurement period. We were overweight this sector, with our names outperforming the names held in the index. While the consumer discretionary sector is composed of 85 names in the benchmark, we chose to focus on 12 names in the sector, a couple of which are not in the index.

Information technology names within the Fund were a strong positive performance group in aggregate. With 124 names comprising the benchmark’s information technology sector, our portfolio of 23 names, while underweight the benchmark allocation, outperformed the Index. Stock selection within this sector more than offset the underperformance caused by our strategy being underweight this strong performing sector.

Healthcare was an overweight sector in the Fund relative to the benchmark where both allocation effect and stock selection were positive. Industrials, like healthcare, contributed positively to the Fund on both an allocation and security selection basis. Our materials exposure was a source of alpha generation, primarily related to a strong year from Scotts Miracle-Gro Companies.

Consumer staples was the only sector where the Fund had negative stock selection for the measurement period. Sprouts Farmers Markets, Inc. experienced weaker than

Average Annual Total Returns¹as of 12/31/19

Portfolio Composition as of 12/31/19

Mid Cap Value Fund

The Penn Series Mid Cap Value Fund returned 17.04% for the twelve-month period ending December 31, 2019, compared to the 27.06% return for its benchmark, the Russell Midcap Value Index (the “Index”) for the same time period.

The Strategy’s underperformance in 2019 was due to several factors which specifically impacted companies with investment characteristics core to our long-term philosophy:

Over many decades, we have invested with strong management teams in restructurings or turnaround situations with great success and we believe that these situations can still generate very attractive investment returns, albeit with increased volatility. In the current market environment, it has become very difficult to undertake restructurings/turnarounds in the public markets as investors have become extremely short-term oriented. Most investors, both fundamental and quantitative, have very little tolerance for earnings disappointments. Turnaround situations, by their very nature generally take more time to show improvement and as such are subject to short-term earnings setbacks. Notwithstanding already deeply discounted stock prices, value stocks that miss earnings estimates can decline further. Adding to this pressure, over the last 24 months we have seen that companies in the portfolio with negative earnings revisions tend to experience stock declines much more severe than price increases generated by portfolio names that had upward earnings revisions. Looking back over a ten-year period, this was an unusual occurrence and one that we believe should reverse over time.

Capital allocation and the appropriate use of leverage has long been a driver for attractive investments. When we undertake an investment in a company with financial leverage, our analysts are careful to examine future cash flow and free cash flow that can be used to service and pay down debt. In more leveraged companies, we try to ensure that there is a margin of safety in case the company’s fundamentals deteriorate. Recently, companies with leveraged balance sheets with short-term fundamentals below expectations can become further depressed in the market.

Being a contrarian investor has been extremely rewarding over time. Lately however, it has been very difficult to be a contrarian value investor in a growth-oriented market. While we have largely avoided “deep” value names, we have found that these investments do well over time, but can be very volatile in the short run.

Average Annual Total Returns¹as of 12/31/19

Portfolio Composition as of 12/31/19

Mid Core Value Fund

The Penn Series Mid Core Value Fund returned 28.78% for the twelve-month period ending December 31, 2019, compared to the 27.06% return for its benchmark, the Russell Midcap Value Index for the same time period.

Resilient U.S. economic growth and positive earnings fueled strong stock market performance for 2019, despite periods of volatility sparked by trade tensions and global economic uncertainty. The Federal Reserve cut interest rates three times in response to global economic risks, but central bank policymakers signaled a pause in the fourth quarter as economic data improved. Stocks ended the year on a strong note as news of a potential U.S.-China trade deal helped ease trade-related uncertainty. All sectors of the index had positive returns, led by information technology. Energy was the weakest-performing sector.

Mid-cap stocks as measured by the Russell family of indices outperformed small caps but underperformed large caps. Value stocks underperformed growth for the period. Stock selection drove relative outperformance in health care, where medical device maker Zimmer Biomet Holdings was a top contributor. Stock selection among food products companies lifted relative performance in the consumer staples sector. Stock selection in the insurance and bank industries detracted from relative performance.

Applied Materials, a semiconductor company, was a strong performer as it delivered solid financial results despite an uncertain global economic environment. While we trimmed the position as the stock appreciated, we believe this company remains well positioned, supported by greenfield investments and share gain from its new tool offerings.

The high-quality industrials company Hubbell reported solid results with continued strength in electrical transmission and distribution. In our view, it remained disciplined on driving price and productivity to offset inflationary headwinds, which enabled it to expand operating margins despite its accelerated investment in footprint optimization.

Zimmer Biomet Holdings, a medical device company, reported better-than-expected revenues, margins and earnings. It also reported positive updates on its early ROSA robot placements and improvements in FDA-related supply constraints.

Weak gas prices hurt the stock of EQT, a natural gas producer. If gas prices remain at depressed levels, we believe

Cumulative Performance Comparison

December 31, 2009 — December 31, 2019

An investment of $10,000 in the Mid Core Value Fund on December 31, 2009 would have grown to $31,435. For the purpose of comparison, the graph also shows the change in the Fund’s benchmark, the Russell Midcap Value Index, during the same period. A $10,000 investment in the Russell Midcap Value Index on December 31, 2009 would have grown to $32,226.

Average Annual Total Returns¹as of 12/31/19

SMID Cap Growth Fund

The Penn Series SMID Cap Growth Fund returned 37.95% for the twelve-month period ending December 31, 2019, compared to the 32.65% return for its benchmark, the Russell 2500 Growth Index for the same time period.

In 2019, the Penn Series SMID Cap Growth Fund outperformed the Russell 2500 Growth Index. During the twelve-month period, stock selection in the information technology and healthcare sectors contributed to returns, while stock selection in the financials sector detracted from performance. There were no other detracting sectors.

Immuno-oncology company Synthorx, Inc. was a top contributor to returns during the year. Its shares rallied sharply after it was announced that French drugmaker, Sanofi, would acquire Synthorx at a significant premium. We continue to monitor the combined entity’s prospects going forward. Commercial gene therapy firm Spark Therapeutics was also a top contributor to returns. Its shares spiked late in February 2019 after news broke that Swiss drug maker Roche Holding AG had agreed to acquire Spark for roughly $115 per share, representing a total equity value of roughly $5 billion. Given that Spark Therapeutics had a market value of just under $2 billion at the prior session’s close, its stock price more than doubled upon the announcement. With this in mind, we felt that the valuation for Spark Therapeutics became less attractive and were pleased to sell out of our position and allocate the gains to more appealing risk/reward opportunities.

Okta, Inc. was a top detractor from returns in 2019. The company uses cloud-based software to manage companies’ digital access rights, making work simpler for employees and helping employers keep track of who’s who on their networks. Solid quarterly results announced in September weren’t enough to sustain strong investor enthusiasm for the stock. Specifically, the company revealed that sales rose 49%, far ahead of management’s guidance, but earnings actually turned slightly negative, and investors may have focused on these losses. Furthermore, its shares appear to have been pressured by a new debt issuance. In our view, the quarter represents a small setback and management is continuing to prioritize long-term growth over short-term profit, which may induce some share price volatility. However, from our perspective, Okta is still a relatively small business and is just getting started on winning contracts with some of the largest companies in the world. Alkermes PLC was also a top detractor from returns. Alkermes is a biotechnology firm that focuses on unmet patient needs in major therapeutic

Average Annual Total Returns¹as of 12/31/19

Portfolio Composition as of 12/31/19

SMID Cap Value Fund

The Penn Series SMID Cap Value Fund returned 19.86% for the twelve-month period ending December 31, 2019, compared to the 23.56% return for its benchmark, the Russell 2500 Value Index for the same time period.

After declining sharply at the end of 2018, equity markets rebounded dramatically in January, as strong corporate earnings and optimism about a trade truce between the U.S. and China calmed investors. Trade war tensions resurfaced, however, and emerging geopolitical pressures drove market volatility. Tariff wars, restrictive monetary policy and a decline in industrial production stoked recessionary fears throughout the global economy. Late in the third quarter, equity market performance was accompanied by a sharp style rotation in the U.S. Quality-growth and lower-volatility stocks, which had been strong performers, lagged, and value stocks outperformed. However, growth stocks continued to outperform value over the full year. From a market-capitalization perspective, large-cap stocks outperformed their small-cap peers.

For the year, the portfolio rose in absolute terms but underperformed its benchmark, the Russell 2500 Value Index. Overall stock selection detracted for the period, primarily owing to holdings in the industrials and materials sectors, while selection in consumer staples contributed. Sector selection contributed for the year led by an overweight to technology and an underweight to utilities more than offsetting a detracting overweight to consumer staples.

Cooper Standard detracted after the auto supplier missed 3Q19 earnings expectations and gave disappointing 2019 guidance on revenue and cash flow. The shortfall was driven by continued weakness in Asia. Commvault Systems, a data protection and information management software company, detracted on disappointing first-quarter revenues and investors skepticism of the company’s efforts to improve its execution of getting products to market.

Cypress Semiconductor contributed after reporting better-than-expected earnings guidance and positive commentary on order and revenue patterns. Shares of Sotheby’s, a leading global art auction house, surged after the company agreed to be acquired at a significant premium in an all-cash deal.

Now into its fourth year, value’s underperformance has left valuation spreads between value and growth stocks at levels not seen in almost twenty years. We believe that there have been three primary drivers of this underperformance; economic anxiety, low interest rates and technological

Average Annual Total Returns¹as of 12/31/19

Portfolio Composition as of 12/31/19

Small Cap Growth Fund

The Penn Series Small Cap Growth Fund returned 28.24% for the twelve-month period ending December 31, 2019, compared to the 28.48% return for its benchmark, the Russell 2000 Growth Index for the same time period.

Small-cap stocks delivered strong performance for the year, aided by resilient U.S. economic growth and solid corporate earnings. However, uncertainty over the global economic outlook and trade policy contributed to periods of volatility. The Federal Reserve acknowledged economic risks posed by slower global growth and higher tariffs with three interest rate cuts. In December, news that the U.S. and China were close to an initial trade deal helped stocks end the year on a strong note.

Stock selection in healthcare was a notable detractor from relative performance. Stock selection in information technology contributed to relative results.

In healthcare, we continue to focus on innovative companies addressing unmet medical needs. While we continue to see positive trends for many of our healthcare investments, we recognize short-term issues may at times overshadow their long-term potential. AnaptysBio is a healthcare company developing clinical-stage antibody treatments for a variety of medical conditions. The stock fell sharply in the fourth quarter after the company reported a third quarter loss as well as weaker-than-expected revenue growth. As a result, it was a leading detractor from absolute returns. We sold the position as we looked for investments with better risk-reward characteristics.

Wave Life Sciences, another detractor from absolute performance, is a clinical-stage biopharmaceutical company developing antisense oligonucleotides-based treatments for genetically defined diseases. The stock declined in December after the company reported disappointing clinical results for its treatment for Huntington’s Disease. We exited the position, as this development changed our outlook for the company.

Diplomat Pharmacy, a provider of specialty pharmacy services, was also a prominent detractor for the year. The stock dropped in the first quarter after the company announced it would need to record an impairment charge related to acquisitions it made for its pharmacy benefits management (PBM) business. We were concerned about the impairment and other executional issues from the company and sold the stock during the quarter.

An investment of $10,000 in the Small Cap Growth Fund on December 31, 2009 would have grown to $27,668. For the purpose of comparison, the graph also shows the change in the Fund’s benchmark, the Russell 2000 Growth Index, during the same period. A $10,000 investment in the Russell 2000 Growth Index on December 31, 2009 would have grown to $33,965.

Average Annual Total Returns¹as of 12/31/19

Portfolio Composition as of 12/31/19

Small Cap Value Fund

The Penn Series Small Cap Value Fund returned 23.03% for the twelve-month period ending December 31, 2019, compared to the 22.39% return for its benchmark, the Russell 2000 Value Index for the same time period.

In 2019, the Fund outperformed the Russell 2000 Value Index. Stock selection in the Consumer Discretionary and Financials sectors contributed to returns, while holdings in the Real Estate and Information Technology sectors detracted from performance.

Lattice Semiconductor Corp., a semiconductor company that produces programmable logic devices used in the circuits of mobile phones, telecom and internet-of-things (IOT), was a top contributor for the year. At the end of 2018, the company named Jim Anderson, a former Vice President that turned around operations at chipmaker Advanced Micro Devices, as its new President and Chief Executive Officer. Under his recent tenure, Anderson has driven revenue growth and executed on company expectations, as evidenced through subsequent earnings reports in 2019. Due to the stock’s great appreciation in 2019, we sold out of the position in the summer. For the year, as well as since we initiated a position in our small-cap value strategy in 2017, the stock has contributed to the portfolio’s returns.

CommVault Systems, Inc., a data software company that provides the government with data protection services, was a top detractor from returns during the year. A majority of the stock’s underperformance can be explained by the market’s reaction to mixed earnings reports. The first was in late April, when the stock dropped following the release of fourth quarter earnings of fiscal year 2019. The quarter experienced large deal weakness and challenged channel execution. Subsequently, management revised down forward guidance, expecting improvement in the back half of next year. However, the stock was off to a rocky start, when it missed fiscal first quarter earnings expectations at the end of July. Despite some of the near-term issues, we believe that the newly appointed chief executive officer and chief revenue officer, both appointed this calendar year, could correct mid-market execution issues and simplify the sales organization to better monetize their products. In our view, the stock is under-earning its potential with a sizeable market opportunity given the growing demand for cloud data.

The U.S. equity market delivered robust performance in 2019, gaining more than 30%. Growth remains near-trend

Portfolio Composition as of 12/31/19

Small Cap Index Fund

The Penn Series Small Cap Index Fund returned 24.48% for the twelve-month period ending December 31, 2019, compared to the 25.52% return for its benchmark, the Russell 2000 Index (the “Index”) for the same time period.

The Fund and Index returns reflect the reinvestment of dividends and other income. The Fund’s performance reflects the expenses of managing the Fund, including brokerage and advisory expenses. The Index is unmanaged and Index returns do not reflect fees and expenses of any kind, which would have a negative impact on returns. Small security misweights, cash drag, futures exposure, as-of cash flows, and compounding contributed to the difference between the Fund’s performance and that of the Index.

Despite the uncertainty over the U.S.-China trade agreement, better than expected economic data, low interest rates and robust domestic demand were primary drivers of Fund performance during the reporting period. Specifically, the prospect of more accommodative monetary conditions allowed small-cap companies to rebound vigorously during the first quarter. However, the onslaught of heightened trade uncertainty and the imposition of additional tariffs between the United States and China quickly caused U.S. equity markets to turn with small cap shares shifting more to the downside over the second quarter. In November, a better than expected October jobs report helped provide support for the rally of U.S. equities. Easing trade tensions led to better risk appetite and relatively lackluster economic data bolstered views of continued easy money policies.

U.S. markets were still a little jittery in early December as President Trump announced the reimposition of steel and aluminum tariffs on Brazil and Argentina, but the announcement later in the month of a “Phase One” trade deal with China carried equity markets into a strong close for 2019. Information protection, healthcare and industrials were the top 3 sectors that contributed to the outperformance of U.S. small cap equities while consumer staples, communication services and energy were the bottom 3 contributors over the period. Fueled by an improving trade environment as well as solid earnings beats, the technology sector was the best performing equity sector. Conversely, being the worst performing sector within U.S. small cap equities, the energy sector appeared to be heading for another ignominious quarter up until oil prices rebounded amidst a surprise OPEC production cut in early December and an improved trade atmosphere.

Portfolio Composition as of 12/31/19

Developed International Index Fund

The Penn Series Developed International Index Fund returned 21.03% for the twelve-month period ending December 31, 2019, compared to the 22.01% return for its benchmark, the MSCI EAFE Index (the “Index”) for the same time period.

The Fund and Index returns reflect the reinvestment of dividends and other income. The Fund’s performance reflects the expenses of managing the Fund, including brokerage and advisory expenses. The Index is unmanaged and Index returns do not reflect fees and expenses of any kind, which would have a negative impact on returns.

The Fund had positive performance in 2019. The Fund’s performance was driven by progress on U.S. and China trade relations, accommodative monetary policy and progress in the UK regarding Brexit. In the first calendar quarter of 2019, positive factors such as optimism about progress in trade talks between the U.S. and China, a strong earnings season, an accommodative Federal Reserve and a deal to temporarily reopen the U.S. government helped performance and offset negative factors such as geopolitical tensions between India and Pakistan, Brexit and slowing economic growth. The second quarter of the reporting period also had positive performance driven by dovish comments from central banks, a trade deal between the U.S. and Mexico, strong earnings data despite concerns about global trade, Brexit and tensions with Iran. Performance in the third quarter was negative on the back of weak macroeconomic data, escalating trade hostilities between the U.S. and China, unrest in the Middle East and a strong dollar. Performance in the fourth quarter was positive and driven by a partial trade agreement between the U.S. and China, a new Brexit deal between the UK and EU, a strong earnings season and interest rate cuts in the U.S. despite geopolitical concerns like North Korea’s test-firing of ballistic missiles and China threatening to retaliate against the U.S. for supporting Hong Kong protesters.

The Fund used futures in order to gain market exposure for the cash position during the reporting period. The Fund’s use of futures detracted 0.4 basis points from Fund performance relative to the Index.

On an individual security level, the top positive contributors to the Fund’s performance during the reporting period were Nestle S.A, Roche Holding AG and ASML Holding NV. The top negative contributors to the Fund’s performance during the

Portfolio Composition as of 12/31/19

International Equity Fund

The Penn Series International Equity Fund returned 28.07% for the twelve-month period ending December 31, 2019, compared to the 21.51% return for its benchmark, the MSCI ACWI ex-U.S. Index for the same time period.

Stocks that helped absolute performance was Mastercard Inc. and Constellation Software.

Mastercard Inc. reported first quarter 2019 EPS that exceeded consensus expectations, thanks to an increase in revenues, lower client incentives, higher operating margins and lower tax rates. Mastercard is a dominant card payment network second only to Visa. It has a durable competitive advantage due to its indispensable place in the payment ecosystem and should continue to benefit from strong secular tailwinds, which in turn, can sustain its long-term, stable, and above-market earnings growth. Constellation Software benefitted from vibrant acquisition opportunities and stable organic growth. The company also announced a special dividend for investors early in 2019. Constellation Software is a leading Canadian-listed conglomerate of mission-critical niche software businesses in the private and public sectors specializing in vertical market solutions-back office/operational software in a wide range of verticals such as health care, law and public transit. The company grows through bolt-on acquisitions and the industry is still quite fragmented. We believe the business is predictable because customers usually do not switch to a competitor’s product and they pay annual maintenance fees.

Stocks that Hurt Absolute Performance was Unilever and Bank Itau. Unilever is one of the largest fast-moving consumer goods companies in the world whose products, such as soaps, shampoos, detergents, teas and ice creams, are consumed by 2.5 billion people per day in over 190 countries. Emerging markets account for roughly 60% of Unilever’s sales. Unilever reduced its sales guidance due to a slowdown in Southeast Asia and West Africa, as well as ongoing challenges in Europe and the US. We continue to feel that the company can grow earnings in the near term through a combination of top-line growth and cost-efficiency initiatives and we believe it is well- positioned for the long-term tailwind of demand for goods meeting basic needs primarily in emerging markets. Bank Itau, Itau Unibanco is the largest non-government-controlled financial institution in Latin America and has a diversified revenue stream. In its domestic market, Itau has a strong deposit franchise in a consolidated banking system.

gives investors access to diversification, as well as different business models and potentially better companies.

Penn Mutual Asset Management, LLC

Investment Adviser

Vontobel Asset Management

Investment Sub-Adviser

Cumulative Performance Comparison

December 31, 2009 — December 31, 2019

An investment of $10,000 in the International Equity Fund on December 31, 2009 would have grown to $21,487. For the purpose of comparison, the graph also shows the change in the Fund’s benchmark, the MSCI ACWI ex-U.S. Index, during the same period. A $10,000 investment in the MSCI ACWI ex-U.S. Index on December 31, 2009 would have grown to $16,236.

Average Annual Total Returns¹as of 12/31/19

Emerging Markets Equity Fund

The Penn Series Emerging Markets Equity Fund returned 18.70% for the twelve-month period ending December 31, 2019, compared to the 18.42% return for its benchmark, the MSCI Emerging Markets Index for the same time period.

In broad terms, the regime shift we have expected — of greater dispersion in country returns and investor recognition of not only improving country growth but also a wider number of quality companies delivering steady earnings — began to play out in 2019. While information technology companies delivered the highest aggregate returns, companies in other compelling sectors — which had lagged in the previous three years when tech was all-encompassing — were recognized and rewarded by investors. China outperformed the MSCI Emerging Markets (EM) Index for the year, but in a shift from 2016-2018, even higher equity returns occurred in several other countries where investors recognized and rewarded reforms that have been enacted, accelerating economic growth, cheap currencies, low debt levels and the beginnings of healthy credit cycles. We are confident these trends could play out even further in 2020 and beyond.

For the full year, our aggregate stock selection contributed positively to performance and country allocation contributed effectively in all but a handful of cases. Our underweight allocation to and stock selection in Korea and stock selection in China were the top contributors to performance. In China, our allocation to our high conviction growth companies — specifically those geared toward rising demand in select areas and benefiting from industry consolidation like New Oriental Education — contributed strongly to returns. Our stock selection in Taiwan and Russia also contributed strongly.

Our stock selection in India detracted from returns. Similar to much of 2018, 2019 was characterized by a domestic growth slowdown which led to a narrow rally where investors flocked to the safety of index heavyweights. Detractors included our overweight allocation to Ashok Leyland, which benefited from years of industry upscale but suffered from the economic slowdown, and Zee Entertainment, which underperformed from group-level complexities and the pledged share sale transmission mechanism.

From a sector perspective, our overweight allocation to consumer staples hampered returns, but we note that some of the best quality growth companies in emerging markets are in this sector, and we believe the stocks may

Cumulative Performance Comparison

December 31, 2009 — December 31, 2019

An investment of $10,000 in the Emerging Markets Equity Fund on December 31, 2009 would have grown to $13,629. For the purpose of comparison, the graph also shows the change in the Fund’s benchmark, the MSCI Emerging Markets Index, during the same period. A $10,000 investment in the MSCI Emerging Markets Index on December 31, 2009 would have grown to $14,350.

Average Annual Total Returns¹as of 12/31/19

Real Estate Securities Fund

The Penn Series Real Estate Securities Fund returned 32.47% for the twelve-month period ending December 31, 2019, compared to the 28.66% return for its benchmark, the FTSE NAREIT All Equity REIT Index for the same time period.

U.S. REITs enjoyed one of their best years in more than a decade in 2019, supported by generally healthy fundamentals and declining interest rates. Prospects of slowing growth prompted the U.S. Federal Reserve and other central banks to respond forcefully with rate cuts and other easing measures, driving meaningful gains in the equity market. A resilient economy — marked by a 50-year low in unemployment and 111 consecutive months of job growth — resulted in healthy demand for most property types, coinciding with peaking supply in many sectors. Companies also benefited from easy access to capital at historically low rates, providing a strong environment for cash flow growth.

The growing influence of e-commerce remained a key driver of real estate performance. Industrial landlords were a top-performing sector. Supply struggled to keep pace with the demand for well-located distribution centers, as Amazon and other online retailers expanded supply-chain logistics capabilities to rapidly fulfill customer orders. Data centers and towers also continued to benefit from rapid data growth in e-commerce and capital spending on 5G infrastructure.

Factors that helped the Portfolio’s relative performance in the period included an underweight allocation in regional malls. The sector generated weak results during the year, as store closures continued at a brisk pace and regional malls experienced secular headwinds from online retailers. Stock selection in healthcare contributed to portfolio outperformance, specifically a significant underweight in Ventas contributed to results as its shares underperformed amid weak earnings. An overweight position in Sabra Health Care REIT was also beneficial. The company has demonstrated improving fundamentals, and recent Medicare reimbursement trends for skilled nursing facilities have been favorable; the stock remains undervalued, in our opinion.

Stock selection in the regional mall sector detracted from relative performance, specifically overweight positions in The Macerich Company and Taubman Centers. Along with Simon Property Group, these are the leading Class A-Mall companies in the U.S. While Macerich and Taubman were

Cumulative Performance Comparison

December 31, 2009 — December 31, 2019

An investment of $10,000 in the Real Estate Securities Fund on December 31, 2009 would have grown to $31,576. For the purpose of comparison, the graph also shows the change in the Fund’s benchmark, the FTSE NAREIT All Equity REIT Index, during the same period. A $10,000 investment in the FTSE NAREIT All Equity REIT Index on December 31, 2009 would have grown to $32,728.

Average Annual Total Returns¹as of 12/31/19

Aggressive Allocation Fund

The Penn Series Aggressive Allocation Fund returned 23.26% for the twelve-month period ending December 31, 2019, compared to its benchmarks, the Russell 3000 Index’s return of 31.02% and the Bloomberg Barclays U.S. Aggregate Bond Index’s return of 8.72% for the same time period.

The Aggressive Allocation Fund is comprised of a target allocation of 90% equity funds and 10% fixed income funds. The equity allocation of the Fund is comprised of domestic equity funds ranging from large capitalization funds to small capitalization funds as well as developed international and emerging markets equity funds and the fixed income portion is primarily allocated to intermediate-term and short-term bond funds.

The asset allocation of the Aggressive Allocation Fund contributed negatively to its performance. During the period, the Fund’s allocation to value stocks and international equities underperformed the Russell 3000 Index. The allocation in large cap growth equities and mid cap growth equities generated positive asset allocation performance. On the fixed income side, allocation to high yield bonds contributed positively, while the allocation to short-term bonds contributed negatively to performance.

Fund selection of the Aggressive Allocation Fund contributed slightly negatively to its performance. During the period, our managers for the Penn Series Flexibly Managed, Large Cap Growth, Large Core Value, Mid Cap Growth, SMID Cap Growth, Real Estate Securities and International Equity Funds outperformed their respective benchmark by more than 2%, while the Penn Series Large Growth Stock, Large Cap Value, Mid Cap Value and SMID Cap Value Funds underperformed their respective benchmarks by more than 2%. On the fixed income side, all Funds outperformed their respective benchmarks.

In 2019, global economic growth has slowed. In the absence of inflation, the Federal Reserve cut interest rates by 75 basis points. The U.S.-China trade war persisted for most of 2019. To reduce risk exposure from the trade war, we moved some allocation from small cap stocks to large cap stocks and from emerging market stocks to developed international stocks. A "Phase One" trade deal has been reached in December. Riding the tailwinds of the easy monetary policies and the "Phase One" trade deal, equities rallied towards the end of the year.

Looking ahead, U.S. economic growth is projected to remain healthy in 2020. The biggest risk event is the U.S.

Asset Allocation Target as of 12/31/19

Moderately Aggressive Allocation Fund

The Penn Series Moderately Aggressive Allocation Fund returned 21.75% for the twelve-month period ending December 31, 2019, compared to its benchmarks, the Russell 3000 Index’s return of 31.02% and the Bloomberg Barclays U.S. Aggregate Bond Index’s return of 8.72% for the same time period.

The Moderately Aggressive Allocation Fund is comprised of a target allocation of 80% equity funds and 20% fixed income funds. The equity allocation of the Fund is comprised of domestic equity funds ranging from large capitalization funds to small capitalization funds as well as developed international and emerging markets equity funds and the fixed income portion is primarily allocated to intermediate-term and short-term bond funds.

The asset allocation of the Moderately Aggressive Allocation Fund contributed negatively to its performance. During the period, the Fund’s allocation to value stocks and international equities underperformed the Russell 3000 Index. The allocation in large cap growth equities and mid cap growth equities generated positive asset allocation performance. On the fixed income side, allocation to high yield bonds contributed positively, while the allocation to short-term bonds contributed negatively to performance.

Fund selection of the Moderately Aggressive Allocation Fund contributed slightly negatively to its performance. During the period, our managers for the Penn Series Flexibly Managed, Large Cap Growth, Large Core Value, Mid Cap Growth, SMID Cap Growth, Real Estate Securities and International Equity Funds outperformed their respective benchmarks by more than 2%, while the Penn Series Large Growth Stock, Large Cap Value, Mid Cap Value and SMID Cap Value Funds underperformed their respective benchmarks by more than 2%. On the fixed income side, all Funds outperformed their respective benchmarks.

In 2019, global economic growth has slowed. In the absence of inflation, the Federal Reserve cut interest rates by 75 basis points. The U.S.-China trade war persisted for most of 2019. To reduce risk exposure from the trade war, we moved some allocation from small cap stocks to large cap stocks and from emerging market stocks to developed international stocks. A “Phase One” trade deal has been reached in December. Riding the tailwinds of the easy monetary policies and the “Phase One” trade deal, equities rallied towards the end of the year.

Asset Allocation Target as of 12/31/19

Moderate Allocation Fund

The Penn Series Moderate Allocation Fund returned 18.63% for the twelve-month period ending December 31, 2019, compared to its benchmarks, the Russell 3000 Index’s return of 31.02% and the Bloomberg Barclays U.S. Aggregate Bond Index’s return of 8.72% for the same time period.

The Moderate Allocation Fund is comprised of a target allocation of 60% equity funds and 40% fixed income funds. The equity allocation of the Fund is comprised of domestic equity funds ranging from large capitalization funds to small capitalization funds as well as developed international and emerging markets equity funds and the fixed income portion is primarily allocated to intermediate-term and short-term bond funds.

The asset allocation of the Moderate Allocation Fund contributed negatively to its performance. During the period, the Fund’s allocation to value stocks and international equities underperformed the Russell 3000 Index. The allocation in large cap growth equities and mid cap growth equities generated positive asset allocation performance. On the fixed income side, allocation to high yield bonds contributed positively, while the allocation to short-term bonds contributed negatively to performance.

Fund selection of the Moderate Allocation Fund contributed positively to its performance. During the period, our managers for the Penn Series Flexibly Managed, Large Cap Growth, Large Core Value, Mid Cap Growth, SMID Cap Growth, Real Estate Securities and International Equity Funds outperformed their respective benchmarks by more than 2%, while the Penn Series Large Growth Stock, Large Cap Value, Mid Cap Value and SMID Cap Value Funds underperformed their respective benchmarks by more than 2%. On the fixed income side, all Funds outperformed their respective benchmarks.

In 2019, global economic growth has slowed. In the absence of inflation, the Federal Reserve cut interest rates by 75 basis points. The U.S.-China trade war persisted for most of 2019. To reduce risk exposure from the trade war, we moved some allocation from small cap stocks to large cap stocks. A “Phase One” trade deal has been reached in December. Riding the tailwinds of the easy monetary policies and the “Phase One” trade deal, equities rallied towards the end of the year.

Looking ahead, U.S. economic growth is projected to remain healthy in 2020. The biggest risk event is the U.S. 2020 presidential election. Going forward, we will continually

Asset Allocation Target as of 12/31/19