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

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-03459

Penn Series Funds, Inc.

(Exact name of registrant as specified in charter)

600 Dresher Road

Horsham, PA 19044

(Address of principal executive offices) (Zip code)

Steven Viola

Penn Series Funds, Inc.

600 Dresher Road

Horsham, PA 19044

(Name and address of agent for service)

Registrant’s telephone number, including area code: (215) 956-8129

Date of fiscal year end: December 31

Date of reporting period: December 31, 2021

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

Item 1. Reports to Stockholders.

The Report to Shareholders is attached herewith.

Penn Series
Funds, Inc.

■   2021 Annual Report

Available through Penn Mutual Variable Products

Dear Investor:

Thank you for your continued affiliation with The Penn Mutual Life Insurance Company. The confidence and trust you place in us reaffirms our commitment to helping policyholders take advantage of all life’s possibilities. We also take pride in being a financially strong mutual insurance company that delivers on our promises, and I’m very pleased to bring you the following capital markets summary. Please remember that regardless of what the markets may bring, short-term performance changes should not distract you from your long-term financial plan, and it’s a good idea to meet with your financial professional regularly to make sure that your asset allocation remains on target.

Despite moderating growth during the second half of 2021, the economic recovery in the U.S. has proven to be resilient to ongoing challenges from the COVID-19 pandemic. Household spending is likely to grow at the fastest pace since World War II. The U.S. consumer has been supported by record-high household wealth, ongoing fiscal assistance programs and tight labor markets helping to fuel wage gains.

Stocks continued to climb higher this year despite a growing wall of worry: inflation running at the hottest level in nearly four decades, new COVID-19 variants threatening the economic recovery and central bank policy likely to turn less accommodative. Investors have instead remained more focused on the strong corporate earnings picture and the lack of attractive alternatives across the fixed-income markets. Earnings and revenues have consistently exceeded estimates across all sectors. Full-year S&P 500 Index earnings are expected to register a nearly 50% gain over 2020, which was negatively impacted by the COVID-19 pandemic. The year started with investors moving away from growth stocks toward more economically sensitive reopening sectors, including cyclicals, energy and banks. However, the long-anticipated “great rotation” was short-lived. The first-quarter interest rate spike quickly reversed course, helping to bring growth stocks back into favor for the remainder of the year. Even though real gross domestic product (GDP) moderated during the third quarter, nominal GDP registered the strongest increase in decades. Inflation pressures are lasting longer than Federal Reserve (Fed) policymakers expected and have spread across key economic sectors such as food, energy and housing. Supply chain bottlenecks appear to be easing but demand drivers have kept price pressures elevated. In this very volatile environment, the U.S. stock market, as measured by the Wilshire 5000 Total Market Index, returned 26.70 percent for the full twelve-month period ending December 31.

On a relative basis, large-capitalization stocks provided higher returns than mid- and small-capitalization stocks during the year. Large-capitalization stocks, as measured by the Russell 1000 Index, returned 26.45 percent, while mid-capitalization stocks, as measured by the Russell Midcap Index returned 22.58 percent and small-capitalization stocks, as measured by the Russell 2000 Index, returned 14.82 percent. From a style perspective, value stocks outperformed growth stocks for the full year in most market capitalizations, with large-capitalization being the exception. The widest disparity was witnessed in the small-capitalization space. For instance, small-capitalization value stocks, as measured by the Russell 2000 Value Index returned 28.27 percent while small-capitalization growth stocks, as measured by the Russell 2000 Growth Index, returned 2.83 percent.

International markets were mixed during the year and failed to keep pace with the U.S. market performance. China’s regulatory crackdown on a wide range of businesses weighed heavily on emerging markets index performance. In sharp contrast to their U.S. counterparts, large-capitalization technology names in China such as Alibaba and Tencent were especially hard hit by the country’s policy actions. In this environment, emerging markets stocks ended the year with a -2.54 percent return, as measured by the MSCI Emerging Markets Index and developed international stocks returned a more favorable 11.26 percent, as measured by the MSCI EAFE Index.

Fixed-income markets closed the year mixed with investment-grade bonds, as measured by the Bloomberg U.S. Aggregate Bond Index, returning -1.54 percent and high-yield bonds, as measured by the Bloomberg U.S. Corporate High Yield Bond Index, returning 5.28 percent. During the November Federal Open Market Committee (FOMC) meeting, the Fed announced the beginning of the end for its ultra-accommodative monetary policies, starting with a plan to wind down its government bond purchases by $15 billion per month. This plan was quickly revised at the December FOMC meeting following new economic and inflation data coming in stronger than expected. The Fed doubled the pace of tapering to $30 billion every month and is now on a path to end new net asset purchases by the end of the first quarter in 2022. Treasury rates moved higher and the yield curve flattened as the year came to a close in response to the Fed’s abrupt U-turn in monetary policy to rein in high inflation.

Once again, we thank you for the privilege of serving your financial needs and encourage you to work closely with your financial professional to continue to explore your options throughout all life’s stages.

Sincerely,

Keith G. Huckerby
President
Penn Series Funds, Inc.

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Source: This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are subject to change as subsequent conditions vary. All economic and performance information is historical and not indicative of future results.

Table of Contents

Penn Series Funds, Inc.

Management’s Discussion of Fund Performance

Limited Maturity Bond Fund

The Penn Series Limited Maturity Bond Fund returned 0.38% for the twelve-month period ending December 31, 2021, compared to the -0.47% return for its benchmark, the Bloomberg U.S. Government/Credit 1-3 Year Bond Index, for the same period.

Short-term Treasury yields held steady for the majority of 2021 but moved materially higher during the fourth quarter after Federal Reserve (Fed) Chair Powell acknowledged more aggressive monetary policy tightening would be necessary to rein in higher inflation. The Treasury 2-year note rose more than 60 basis points during 2021 to finish the year at 0.73%.

The Fund’s underweight stance to duration or interest rate risk benefited results during 2021. We expect continued upward pressure on short-term interest rates as the Fed begins to normalize monetary policy. The Fund remains positioned conservatively with regards to duration entering 2022.

Fund results also benefited from outperformance across its holdings of corporate and structured securities as credit spreads moved gradually tighter during the year. We are currently maintaining our overweight to high- quality structured securities, including floating-rate collateralized loan obligations and student loan asset-backed securities, while opportunistically managing risk within the more fully valued corporate sector.

Penn Mutual Asset Management, LLC
Investment Adviser

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the Limited Maturity Bond Fund on December 31, 2011 would have grown to $11,716. For the purpose of comparison, the graph also shows the change in the Fund’s benchmark, the Bloomberg U.S. Government/Credit 1–3 Year Bond Index, during the same period. A $10,000 investment in the Bloomberg U.S. Government/Credit 1–3 Year Bond Index on December 31, 2011 would have grown to $11,476.

Average Annual Total Returns1 as of 12/31/21
	1 Year		5 Year		10 Year
Limited Maturity Bond Fund	0.38%		2.39%		1.60%
Bloomberg U.S. Government/Credit 1-3 Year Bond Index	(0.47%)		1.85%		1.39%

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1	The performance information shown here does not reflect variable account charges and fees. Past performance is not predictive of future performance. Shares may be worth more or less when redeemed than when purchased. Assumes reinvestment of all dividends.

Portfolio Composition as of 12/31/21

	Percent of Total Investments1
Corporate Bonds	37.3 %
Asset Backed Securities	31.9 %
Residential Mortgage Backed Securities	15.1 %
Commercial Mortgage Backed Securities	14.0%
U.S. Treasury Obligations	1.7 %
	100.0%

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1	Portfolio holdings are presented as a percentage of total investments before short-term investments.

 

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Penn Series Funds, Inc.

Management’s Discussion of Fund Performance

Quality Bond Fund

The Penn Series Quality Bond Fund returned -0.69% for the twelve-month period ending December 31, 2021, compared to the -1.54% return for its benchmark, the Bloomberg U.S. Aggregate Bond Index for the same time period.

The pace of the U.S. economic recovery from the COVID-19 pandemic accelerated during the first half of 2021 as progress on vaccinations and ongoing government stimulus boosted growth. Consumer spending grew at a very rapid pace with the support of strong household balance sheets and improving labor market conditions. Growth moderated during the second half of the year but remained in positive territory. The outbreak of new COVID-19 variants and intensifying supply chain disruption weighed on economic activity.

Supply chain disruptions also contributed to a broad-based pick-up in inflation throughout 2021. Federal Reserve (Fed) Chair Powell – who for most of the year argued higher inflation would be transitory – did an abrupt U-turn during his December congressional testimony, retiring the word transitory from his inflation forecast. The Fed is now prepared to conclude its bond purchase activity or quantitative easing by March and increase interest rates two to three times by the end of 2022.

Interest rates rose across the entire yield curve for the year with long-term yields initially under pressure. 10-year Treasury note yields peaked around 1.75% as the first quarter came to a close. Shorter-term Treasury yields were relatively stable until the fourth quarter when fixed income investors started to price in more aggressive Fed tightening to rein in inflation. Fund performance benefited from conservative duration or interest rate risk management relative to the benchmark.

Fund returns also benefited from outperformance among its corporate and structured bond holdings as credit spreads moved gradually tighter. Current overweight positioning includes multi-family commercial mortgage-backed securities, high-quality collateralized loan obligations and investment-grade corporate bonds. The Fund’s largest underweight remains agency residential mortgage-backed securities, where valuations remain elevated from Fed purchase activity.

Penn Mutual Asset Management, LLC
Investment Adviser

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the Quality Bond Fund on December 31, 2011 would have grown to $13,543. For the purpose of comparison, the graph also shows the change in the Fund’s benchmark, the Bloomberg U.S. Aggregate Bond Index, during the same period. A $10,000 investment in the Bloomberg U.S. Aggregate Bond Index on December 31, 2011 would have grown to $13,307.

Average Annual Total Returns1 as of 12/31/21
	1 Year		5 Year		10 Year
Quality Bond Fund	(0.69%)		4.21%		3.08%
Bloomberg U.S. Aggregate Bond Index	(1.54%)		3.57%		2.90%

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1	The performance information shown here does not reflect variable account charges and fees. Past performance is not predictive of future performance. Shares may be worth more or less when redeemed than when purchased. Assumes reinvestment of all dividends.

Portfolio Composition as of 12/31/21

	Percent of Total Investments1
Corporate Bonds	44.9 %
Commercial Mortgage Backed Securities	17.5 %
Asset Backed Securities	17.3 %
Residential Mortgage Backed Securities	11.6 %
U.S. Treasury Obligations	6.5 %
Preferred Stocks	1.1 %
Municipal Bonds	1.1 %
	100.0%

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1	Portfolio holdings are presented as a percentage of total investments before short-term investments.

 

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Table of Contents

Penn Series Funds, Inc.

Management’s Discussion of Fund Performance

High Yield Bond Fund

The Penn Series High Yield Bond Fund returned 5.12% for the twelve-month period ending December 31, 2021, compared to the 5.49% return for its benchmark, the CSFB High Yield Bond Index for the same time period.

2021 was a strong year for risk markets, particularly equities, as COVID-19 vaccine rollouts led to a reopening of the global economy and created a robust tailwind for earnings. Fixed-income total returns were largely in negative territory due to a 70 basis-point increase in 10-year Treasury rates, but the high-yield asset class returned approximately 5.5%. Credit fundamentals improved dramatically as most companies used free cash flow to reduce elevated debt levels and took advantage of wide-open capital markets to refinance near-term maturities. CCC-rated bonds outperformed BB-rated bonds by approximately 400 basis points as much of the distressed energy universe rallied sharply. The benign credit environment is reflected in current and projected default rates, which are at record-low levels, and spread levels were hovering around post-crisis tights at year-end. For 2022, macro risks center around the pace of the Federal Reserve rate-hiking cycle and the trajectory of inflation, as well as the potential for new COVID-19 variants to emerge, while company-specific risks relate to margin performance and debt-financed mergers and acquisitions.

During the year, the Fund added risk in the health care, airline, retail and auto sectors but still maintained its up-in-quality orientation. The Fund’s energy exposure was also increased in response to higher energy prices and a much better fundamental outlook, resulting in a modest overweight position by the end of the period.

Entering 2022, the Fund is market weight the energy sector, which remains the high-yield index’s largest and most volatile subsector. The Fund remains underweight lower-quality risk, based largely on valuation as we maintain a constructive view on earnings growth, default risk and market liquidity. The Fund’s duration and spread duration remain below benchmark levels as higher interest rate levels and market volatility are anticipated going forward.

Penn Mutual Asset Management, LLC
Investment Adviser

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the High Yield Bond Fund on December 31, 2011 would have grown to $19,312. For the purpose of comparison, the graph also shows the change in the Fund’s benchmark, the CSFB High Yield Bond Index, during the same period. A $10,000 investment in the CSFB High Yield Bond Index on December 31, 2011 would have grown to $18,725.

Average Annual Total Returns1 as of 12/31/21
	1 Year		5 Year		10 Year
High Yield Bond Fund	5.12%		6.54%		6.80%
CSFB High Yield Bond Index	5.49%		5.80%		6.47%

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1	The performance information shown here does not reflect variable account charges and fees. Past performance is not predictive of future performance. Shares may be worth more or less when redeemed than when purchased. Assumes reinvestment of all dividends.

Portfolio Composition as of 12/31/21

	Percent of Total Investments1
BB/B Rated	40.1 %
BBB/BB Rated & Above	18.4 %
BB Rated	15.3 %
B/CCC Rated	11.4 %
B Rated	6.6 %
Not Rated	2.6 %
CCC and Below	0.9 %
Loan Agreements	3.3 %
Equity Securities	1.4 %
	100.0%

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1	Portfolio holdings are presented as a percentage of total investments before short-term investments.

 

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Table of Contents

Penn Series Funds, Inc.

Management’s Discussion of Fund Performance

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the Flexibly Managed Fund on December 31, 2011 would have grown to $35,829. For the purpose of comparison, the graph also shows the change in the Fund’s benchmark, the S&P 500 Index, during the same period. A $10,000 investment in the S&P 500 Index on December 31, 2011 would have grown to $46,257.

Average Annual Total Returns1 as of 12/31/21
	1 Year		5 Year		10 Year
Flexibly Managed Fund	18.29%		14.93%		13.61%
S&P 500 Index	28.71%		18.47%		16.55%

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1	The performance information shown here does not reflect variable account charges and fees. Past performance is not predictive of future performance. Shares may be worth more or less when redeemed than when purchased. Assumes reinvestment of all dividends.

Portfolio Composition as of 12/31/21

	Percent of Total Investments1
Consumer, Non-cyclical	23.2 %
Financial	17.0%
Communications	16.8 %
Technology	15.0%
Consumer, Cyclical	10.7 %
Industrial	9.3 %
Utilities	7.7 %
Asset Backed Securities	0.3 %
Basic Materials	0.0% 2
	100.0%

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1	Portfolio holdings are presented as a percentage of total investments before short-term investments.
2	Less than 0.05%.

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Penn Series Funds, Inc.

Management’s Discussion of Fund Performance

Balanced Fund

The Penn Series Balanced Fund returned 15.77% for the twelve-month period ending December 31, 2021, compared to its benchmarks, the S&P 500 Index’s return of 28.71% and the Bloomberg U.S. Aggregate Bond Index’s return of -1.54% 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 seeks a total return that corresponds to that of the S&P 500 Index. The fixed income allocation of the Fund consists of an allocation to the Penn Series Quality Bond Fund.

At the broad asset class level, the Balanced Fund’s equity allocation performed inline with its broad equity benchmark, the S&P 500 Index, for the twelve-month period. The Fund’s fixed income allocation outperformed the Bloomberg U.S. Aggregate Bond Index for the same period.

Quality Bond Fund’s yield curve positioning, credit risk positioning and exposure in structured products contributed positively to the performance.

Penn Mutual Asset Management, LLC
Investment Adviser

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the Balanced Fund on December 31, 2011 would have grown to $27,693. For the purpose of comparison, the graph also shows the change in the Fund’s benchmarks, the S&P 500 Index and the Bloomberg U.S. Aggregate Bond Index, during the same period. A $10,000 investment in the S&P 500 Index on December 31, 2011 would have grown to $46,257.

A $10,000 investment in the Bloomberg U.S. Aggregate Bond Index on December 31, 2011 would have grown to $13,307.

Average Annual Total Returns1 as of 12/31/21
	1 Year		5 Year		10 Year
Balanced Fund	15.77%		12.40%		10.72%
S&P 500 Index	28.71%		18.47%		16.55%
Bloomberg U.S. Aggregate Bond Index	(1.54%)		3.57%		2.90%

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1	The performance information shown here does not reflect variable account charges and fees. Past performance is not predictive of future performance. Shares may be worth more or less when redeemed than when purchased. Assumes reinvestment of all dividends.

Asset Allocation Target as of 12/31/21
Index 500	60.0%
Intermediate Bonds	40.0%
	100.0%

 

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Penn Series Funds, Inc.

Management’s Discussion of Fund Performance

Large Growth Stock Fund

The Penn Series Large Growth Stock Fund returned 16.44% for the twelve-month period ending December 31, 2021, compared to the 27.60% return for its benchmark, the Russell 1000 Growth Index for the same time period.

The portfolio delivered positive returns for the 12 months ended December 31, 2021, but underperformed its benchmark Russell 1000 Growth Index. Overall, stock selection was responsible for relative underperformance. Information technology was the largest relative underperformer, followed by consumer discretionary and communication services. Consumer staples and health care were the major relative contributors.

Even though the coronavirus pandemic continued, major U.S. stock indexes climbed in 2021, extending the brisk rebound that started in March 2020. Many indexes repeatedly reached record highs throughout the year. Equities advanced as the economy reopened and recovered—facilitated by the rollout of coronavirus vaccines and some federal fiscal relief—and as corporations reported robust earnings growth. Elevated inflation, which stemmed in part from shortages of some goods and materials and global supply chain disruptions; the emergence of variants of the coronavirus; and the Federal Reserve’s decision to taper its monthly asset purchases starting in November were among the factors that occasionally weighed on the financial markets.

In information technology, stock choices detracted from relative results. Our underweight position in NVIDIA led to the underperformance. Shares of NVIDIA climbed higher during the year as the company’s data center business showed signs of reacceleration, underpinned by the demand for chips that can support artificial intelligence and deep learning applications. NVIDIA’s state-of-the-art graphics-processing units, combined with its embedded software intellectual property, have created an expanding moat behind which we believe NVIDIA should be able to continue to innovate and grow earnings. Security selection in consumer discretionary also weighed on relative performance, driven by holdings in Amazon.com.

Unfavorable stock choices in communication services hindered relative results. Shares of Snap Inc. sold off during the quarter as results were impacted by a one-two punch: Apple’s iOS platform changes caused a loss of signal for advertisers, and supply chain issues and labor shortages among advertisers weighed on their

ability to support the incremental demand from advertising spend.

In contrast, a lack of exposure to consumer staples benefited relative results as the defensive haven fell out of favor during the past 12 months, with risk-seeking behavior prevailing. The sector generally lacks compelling growth opportunities that meet our investment criteria. An underweight to health care further modestly contributed to relative performance as the largely defensive sector lagged the Index overall. Within the sector, adverse stock selection partially offset the positive impact.

After back-to-back years of strong performance across most equity and credit sectors, global markets face more uncertain prospects in 2022. Investors will need to use greater selectivity to identify potential opportunities. Higher inflation, a shift toward monetary tightening and new coronavirus variants all pose potential challenges for economic growth and earnings—at a time when valuations appear elevated across many asset categories. Many believe that as governments and central banks withdraw the massive stimulus applied during the pandemic, economic growth inevitably will slow sharply. But slower growth does not necessarily mean low growth. A number of tailwinds should sustain the recovery in 2022, including strong consumer and corporate balance sheets.

Penn Mutual Asset Management, LLC
Investment Adviser
T. Rowe Price Associates, Inc.
Investment Sub-Adviser

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the Large Growth Stock Fund on December 31, 2011 would have grown to $54,678. For the purpose

 

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Table of Contents

Penn Series Funds, Inc.

Management’s Discussion of Fund Performance

MFS Investments
Investment Sub-Adviser

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the Large Cap Growth Fund on December 31, 2011 would have grown to $44,309. 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, 2011 would have grown to $60,825.

Average Annual Total Returns1 as of 12/31/21
	1 Year		5 Year		10 Year
Large Cap Growth Fund	25.85%		22.63%		16.05%
Russell 1000 Growth Index	27.60%		25.32%		19.79%

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1	The performance information shown here does not reflect variable account charges and fees. Past performance is not predictive of future performance. Shares may be worth more or less when redeemed than when purchased. Assumes reinvestment of all dividends.

Portfolio Composition as of 12/31/21

	Percent of Total Investments1
Technology	30.1 %
Consumer, Non-cyclical	26.2 %
Communications	11.9 %
Financial	11.7 %
Consumer, Cyclical	9.4 %
Industrial	8.7 %
Basic Materials	1.1 %
Utilities	0.9 %
	100.0%

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1	Portfolio holdings are presented as a percentage of total investments before short-term investments. The categories shown represent broad industry sectors. Each industry sector consists of one or more specific industry classifications.

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Penn Series Funds, Inc.

Management’s Discussion of Fund Performance

Large Core Growth Fund

The Penn Series Large Core Growth Fund returned -3.94% for the twelve-month period ending December 31, 2021, compared to the 27.60% return for its benchmark, the Russell 1000 Growth Index for the same time period.

U.S. equity markets saw increased short-term volatility in 2021 but ultimately overcame concerns about new COVID-19 variants, inflation, and fiscal and monetary policy uncertainties to end the year higher. The economic recovery progressed due to easing restrictions and increasing vaccinations, along with support from the federal government’s pandemic relief and accommodative monetary policy. Inflation persisted longer than expected, in part due to pandemic-related supply-side disruptions and labor shortages, leading the U.S. Federal Reserve and other central banks around the world to begin withdrawing monetary stimulus measures. The clarity on monetary policy and early evidence that the highly contagious omicron variant could be less deadly led markets to rally at year-end.

Large-cap growth equities, as measured by the Russell 1000 Growth Index, advanced over the period. All sectors in the Index had positive performance, led by energy. Utilities had the smallest gain and was the largest relative underperformer in the Index.

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.

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 Fund underperformed the Index in this reporting period largely due to adverse stock selection.

Greater market volatility and a widespread sell-off in high growth and high multiple equities was a significant headwind to Fund performance through much of 2021. We believe the sell-off was driven by a broad rotation out of such names and not due to company-specific fundamentals, which, across most of the Fund, remained largely robust.

The information technology and communication services sectors were the largest detractors from relative performance, primarily due to mixed stock selection. Consumer discretionary, health care, industrials, financials, materials, energy and consumer staples weighed on relative performance to a lesser extent, where either stock selection, relative sector weightings or both detracted across each position. Zero weight allocations to real estate and utilities also detracted slightly from relative performance.

At the sector level, there were no positive contributors for the period. A sector overweight in communication services and a sector underweight in consumer discretionary were modestly advantageous, but gains were more than offset by the underperformance of our stock selection in each sector. Marginally favorable stock selection in consumer staples was outweighed by the negative impact of a sector underweight there.

As a team, we believe having a market outlook can be an anchor. Our focus is on assessing company prospects over a five-year horizon, and owning a portfolio of unique companies whose market value we believe can increase significantly for underlying fundamental reasons.

Penn Mutual Asset Management, LLC
Investment Adviser
Morgan Stanley Investment Management
Investment Sub-Adviser

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the Large Core Growth Fund on December 31, 2011 would have grown to $51,755. For the purpose of comparison, the graph also shows the change in the Fund’s benchmark, the Russell 1000 Growth Index, during the same

 

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Penn Series Funds, Inc.

Management’s Discussion of Fund Performance

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the Large Cap Value Fund on December 31, 2011 would have grown to $30,644. 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, 2011 would have grown to $33,846.

Average Annual Total Returns1 as of 12/31/21
	1 Year		5 Year		10 Year
Large Cap Value Fund	27.88%		11.32%		11.85%
Russell 1000 Value Index	25.16%		11.16%		12.97%

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1	The performance information shown here does not reflect variable account charges and fees. Past performance is not predictive of future performance. Shares may be worth more or less when redeemed than when purchased. Assumes reinvestment of all dividends.

Portfolio Composition as of 12/31/21

	Percent of Total Investments1
Consumer, Non-cyclical	23.4 %
Financial	20.8 %
Industrial	17.3 %
Consumer, Cyclical	14.3 %
Communications	11.5 %
Technology	6.1 %
Energy	3.1 %
Basic Materials	2.5 %
Utilities	1.0%
	100.0%

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1	Portfolio holdings are presented as a percentage of total investments before short-term investments. The categories shown represent broad industry sectors. Each industry sector consists of one or more specific industry classifications.

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Penn Series Funds, Inc.

Management’s Discussion of Fund Performance

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the Large Core Value Fund on December 31, 2011 would have grown to $32,343. 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, 2011 would have grown to $33,846.

Average Annual Total Returns1 as of 12/31/21
	1 Year		5 Year		10 Year
Large Core Value Fund	24.46%		12.26%		12.45%
Russell 1000 Value Index	25.16%		11.16%		12.97%

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1	The performance information shown here does not reflect variable account charges and fees. Past performance is not predictive of future performance. Shares may be worth more or less when redeemed than when purchased. Assumes reinvestment of all dividends.

Portfolio Composition as of 12/31/21

	Percent of Total Investments1
Consumer, Non-cyclical	26.4 %
Financial	24.2 %
Industrial	12.2 %
Communications	10.7 %
Technology	6.9 %
Energy	6.3 %
Utilities	6.0%
Consumer, Cyclical	5.8 %
Basic Materials	1.5 %
	100.0%

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1	Portfolio holdings are presented as a percentage of total investments before short-term investments. The categories shown represent broad industry sectors. Each industry sector consists of one or more specific industry classifications.

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Table of Contents

Penn Series Funds, Inc.

Management’s Discussion of Fund Performance

Index 500 Fund

The Penn Series Index 500 Fund returned 28.29% for the twelve-month period ending December 31, 2021, compared to the 28.71% return for its benchmark, the S&P 500 Index for the same time period.

The investment objective of the Penn Series Index 500 Fund is to seek a total return (capital appreciation and income) which correspond to that of the S&P 500 Index.

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. As-of flows contributed to the difference between the Fund’s performance and that of the Index.

At the start of 2021, the Democratic Party’s victory in Georgia paved way for further stimulus measures, resulting in the S&P 500 Index gaining 6.17% during the first quarter. In addition, the COVID-19 infection rate continued to trend down and the vaccine rollout accelerated during the period with President Biden raising his vaccination goal from 100 million to 200 million. President Biden also announced a stimulus package worth 9% of U.S. GDP leading to upgrades in consensus forecasts for U.S. growth this year.

In the second quarter of 2021, the S&P 500 Index gained 8.55% as the pandemic was reined in, consumer spending increased, growth stocks rebounded, first-quarter earnings grew strongly and the prospects of fiscal stimulus improved in the context of President Biden concluding a bipartisan deal to boost infrastructure spending by $600 billion.

The S&P 500 Index delivered modest returns of 0.58% in the third quarter of 2021. In the U.S., the economic growth remained strong during the third quarter as the manufacturing and services sector contributed towards the economic progress. The job market improved with approximately 850,000 and 943,000 jobs being added in June and July respectively, which are the largest additions since August 2020.

In the last quarter of the year, President Biden made progress on his infrastructure spending proposals by signing the long-awaited Infrastructure Investment and

Jobs Act, which is a $1.2 trillion bipartisan infrastructure bill. The bill includes $550 billion of additional spending in order to upgrade roads, bridges and railways and deploy electric vehicle charging stations across the country. The S&P 500 index increased 11.03% during the fourth quarter.

The Fund used S&P 500 Index futures contracts in order to gain exposure to the Index during the reporting period. The Fund’s use of index futures helped the Fund track the Index.

On an individual security level, the top positive contributors to the Fund’s performance during the reporting period were Microsoft Corporation, Apple Inc., and NVIDIA Corporation. The top negative contributors to the Fund’s performance during the reporting period were Walt Disney Company, Global Payments Inc., and PayPal Holdings, Inc.

Penn Mutual Asset Management, LLC
Investment Adviser
State Street Global Advisors
Investment Sub-Adviser

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the Index 500 Fund on December 31, 2011 would have grown to $44,811. For the purpose of comparison, the graph also shows the change in the Fund’s benchmark, the S&P 500 Index, during the same period. A $10,000 investment in the S&P 500 Index on December 31, 2011 would have grown to $46,257.

 

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Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the Mid Cap Growth Fund on December 31, 2011 would have grown to $48,815. For the purpose of comparison, the graph also shows the change in the Fund’s benchmark, the Russell Midcap Growth Index, during the same period. A $10,000 investment in the Russell Midcap Growth Index on December 31, 2011 would have grown to $46,550.

Average Annual Total Returns1 as of 12/31/21
	1 Year		5 Year		10 Year
Mid Cap Growth Fund	16.66%		25.11%		17.18%
Russell Midcap Growth Index	12.73%		19.83%		16.63%

---

1	The performance information shown here does not reflect variable account charges and fees. Past performance is not predictive of future performance. Shares may be worth more or less when redeemed than when purchased. Assumes reinvestment of all dividends.

Portfolio Composition as of 12/31/21

	Percent of Total Investments1
Technology	27.9 %
Consumer, Non-cyclical	25.0%
Industrial	18.6 %
Consumer, Cyclical	16.2 %
Communications	6.4 %
Financial	4.5 %
Basic Materials	1.4 %
	100.0%

---

1	Portfolio holdings are presented as a percentage of total investments before short-term investments. The categories shown represent broad industry sectors. Each industry sector consists of one or more specific industry classifications.

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Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the Mid Cap Value Fund on December 31, 2011 would have grown to $23,449. 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, 2011 would have grown to $35,286.

Average Annual Total Returns1 as of 12/31/21
	1 Year		5 Year		10 Year
Mid Cap Value Fund	19.27%		4.05%		8.90%
Russell Midcap Value Index	28.34%		11.22%		13.44%

---

1	The performance information shown here does not reflect variable account charges and fees. Past performance is not predictive of future performance. Shares may be worth more or less when redeemed than when purchased. Assumes reinvestment of all dividends.

Portfolio Composition as of 12/31/21

	Percent of Total Investments1
Financial	24.8 %
Industrial	17.9 %
Consumer, Cyclical	13.8 %
Consumer, Non-cyclical	12.6 %
Technology	10.7 %
Basic Materials	5.6 %
Communications	5.4 %
Utilities	4.6 %
Energy	4.6 %
	100.0%

---

1	Portfolio holdings are presented as a percentage of total investments before short-term investments. The categories shown represent broad industry sectors. Each industry sector consists of one or more specific industry classifications.

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generating strong returns on capital, buying back stock and growing dividends. Moreover, industry consolidation over time has enabled the companies to pass cost increases to consumers. We believe actions to offset inflation, including fewer promotions and price increases, should support earnings and margins. The sector has underperformed significantly since the market bottom in 2020. Some consumer staples companies were not direct beneficiaries of the reopening and are perceived relative losers in an inflationary environment. We think these conditions are temporary and can lead to outperformance.

Our portfolio remains overweight in the financials sector, where we have identified higher-quality companies selling at attractive valuations. Our financials positions include holdings in the banking, capital markets and insurance industries. In the fourth quarter, we reduced or eliminated our positions in several individual holdings as their valuations moved higher, while also selectively adding to existing positions in companies with attractive risk/reward profiles.

The extended valuation of real estate stocks has led to a continued underweight position in the sector. While we are underweight the information technology sector, we have found select stocks that meet our investment criteria.

Penn Mutual Asset Management, LLC
Investment Adviser
American Century Investment Management
Investment Sub-Adviser

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the Mid Core Value Fund on December 31, 2011 would have grown to $32,498. 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, 2011 would have grown to $35,286.

Average Annual Total Returns1 as of 12/31/21
	1 Year		5 Year		10 Year
Mid Core Value Fund	23.13%		9.33%		12.51%
Russell Midcap Value Index	28.34%		11.22%		13.44%

---

1	The performance information shown here does not reflect variable account charges and fees. Past performance is not predictive of future performance. Shares may be worth more or less when redeemed than when purchased. Assumes reinvestment of all dividends.

Portfolio Composition as of 12/31/21

	Percent of Total Investments1
Financial	26.7 %
Consumer, Non-cyclical	23.9 %
Consumer, Cyclical	13.3 %
Industrial	11.8 %
Utilities	7.9 %
Technology	6.1 %
Energy	4.6 %
Communications	3.3 %
Basic Materials	2.4 %
	100.0%

---

1	Portfolio holdings are presented as a percentage of total investments before short-term investments. The categories shown represent broad industry sectors. Each industry sector consists of one or more specific industry classifications.

 

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SMID Cap Growth Fund

The Penn Series SMID Cap Growth Fund returned 7.73% for the twelve-month period ending December 31, 2021, compared to the 5.04% return for its benchmark, the Russell 2500 Growth Index for the same time period.

In 2021, the Fund outperformed the Russell 2500 Growth Index. Stock selection in the health care and information technology sectors contributed to returns, while holdings in consumer staples and an underweight to real estate detracted from performance.

Power storage company, Generac Holdings, Inc., was a top contributor to returns in 2021. Extreme weather events, such as those in Texas, spurred demand for generators and energy storage. Generac Holdings demonstrated its ability to grow the top line and execute accretive acquisitions during the year, driving the stock higher. We sold out of the position as the market cap became too big for the portfolio, allocating proceeds of the sale to better risk-reward opportunities elsewhere in the portfolio. Life sciences diagnostics company, PerkinElmer, Inc., was also a top contributor during the year. The stock’s strength was broadly due to the company’s exposure to COVID-19 testing and its PCR test’s accuracy despite the emergence of the Omicron variant. We continue to like this company, as a greater share of its revenue is recurring and its business mix shifts toward life sciences segments.

Vertex, Inc., a tax compliance software provider, detracted from returns. The market reacted negatively to consistently conservative guidance and to an increasingly difficult competitive environment. While we liked the stock and saw room for revenue and earnings growth, we sold out of the position in the second quarter, as we do not expect this stock to experience sufficient multiple expansion in the foreseeable future. Pet food company Freshpet, Inc. also detracted from performance. The stock’s weakness can largely be attributed to management commentary and lowered guidance related to supply chain issues. While input cost pressures may be a headwind in the short term, we believe the secular growth tailwinds driving Freshpet sales remain intact, and we expect earnings to grow and margins to expand over time.

The end of 2021 was cast with the development of the Omicron variant. We expect this to remain a major focus of the market in the first quarter of 2022, as entities around the world continue to navigate pockets of outbreaks and implement responses accordingly. Other

major themes such as the acceleration in the Federal Reserve’s winding down of its asset purchasing program and interest rate hikes, inflation readings, supply chain issues, and the global energy shortage may test the market again. The unclear future of the social spending bill will also be in play in 2022. We will stay true to our quality-first investment approach and seek to invest in businesses with healthy balance sheets, relatively stable cash flows, and differentiated business models aligned to secular tailwinds. We continue to test our models and re-evaluate our assumptions with increasing information, remain focused on the long-term investment horizon, and believe this fundamental approach will generate excess return in the long run for our clients.

Penn Mutual Asset Management, LLC
Investment Adviser
Goldman Sachs Asset Management
Investment Sub-Adviser

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the SMID Cap Growth Fund on December 31, 2011 would have grown to $47,341. For the purpose of comparison, the graph also shows the change in the Fund’s benchmark, the Russell 2500 Growth Index, during the same period. A $10,000 investment in the Russell 2500 Growth Index on December 31, 2011 would have grown to $43,169.

Average Annual Total Returns1 as of 12/31/21
	1 Year		5 Year		10 Year
SMID Cap Growth Fund	7.73%		22.23%		16.82%
Russell 2500 Growth Index	5.04%		17.65%		15.75%

---

1	The performance information shown here does not reflect variable account charges and fees. Past performance is not predictive of future performance. Shares may be worth more or less when redeemed than when purchased. Assumes reinvestment of all dividends.

 

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SMID Cap Value Fund

The Penn Series SMID Cap Value Fund returned 35.58% for the twelve-month period ending December 31, 2021, compared to the 27.78% return for its benchmark, the Russell 2500 Value Index for the same time period.

Global markets were supported by accommodative monetary policy and strong company earnings growth, while economic turbulence in China, geopolitical risks and inflation pressured emerging markets. Increased market volatility periodically sent risk assets lower, but investors continued to buy the dip. Toward the end of the period, global markets fell as the rapid spread of the coronavirus omicron variant triggered concern that new restrictions could derail the economic recovery.

The Portfolio rose in absolute terms and outperformed its benchmark, the Russell 2500 Value Index, for the 12-month period. Security selection in consumer discretionary contributed, while selection in energy detracted. An underweight to healthcare contributed, while an underweight to energy detracted.

Textbook and education technology company Houghton Mifflin Harcourt (HMH) rose after agreeing to sell its HMH Books & Media trade publishing business for $349 million. Shares of ON Semiconductor rose on continued outperformance that began in early 2020. Management reported 3Q21 results exemplified by notable margin improvement, driven by an exit from lower profitability contracts combined with cyclically strong pricing.

Nomad Foods, a European manufacturer of frozen foods underperformed as end-market volumes declined after strong pandemic-driven increases in 2020. The Portfolio does not hold any shares in GameStop, and this lack of exposure detracted over the 12-month period as the stock was driven up by speculative fervor.

In 2021, value stocks enjoyed better performance relative to growth than any point over the past five years. We believe that the main driver of this stronger performance was and remains earnings growth. Investors’ view that the recession would destroy value profits was shown to be wrong, and they proved more resilient and grew dramatically faster than expected. Despite better performance, the valuation discount of value stocks relative to growth remains among the largest since the tech bubble. We continue to believe that the key to value closing this gap, in 2022 and beyond, will lie in sustained strong earnings and cash-flow growth. Investors remain

anxious. They see four obstacles to earnings growth for value stocks and remain concerned about the continuing effects of the pandemic, the severity of supply-chain disruptions, the impact of inflation and what the new normal will look like. Further challenges for companies relate to the environmental, social and governance (ESG) behaviors with companies likely focusing on improving their scores across a number of metrics. Value companies that wish to grow earnings and close the valuation gap with their growth peers will have to navigate each of these challenges. We remain convinced that the most interesting opportunities exist in companies that combine attractive free-cash-flow-based valuation, compelling company or niche industry catalysts, strong quality and a proactive approach to ESG issues.

Penn Mutual Asset Management, LLC
Investment Adviser
AllianceBernstein
Investment Sub-Adviser

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the SMID Cap Value Fund on December 31, 2011 would have grown to $33,465. For the purpose of comparison, the graph also shows the change in the Fund’s benchmark, the Russell 2500 Value Index, during the same period. A $10,000 investment in the Russell 2500 Value Index on December 31, 2011 would have grown to $32,265.

 

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higher input costs without sacrificing profit margins. We believe these kinds of companies may be better able to navigate near-term market uncertainty while they capitalize on long-term trends.

Penn Mutual Asset Management, LLC
Investment Adviser
Janus Capital Management, LLC
Investment Sub-Adviser

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the Small Cap Growth Fund on December 31, 2011 would have grown to $37,506. 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, 2011 would have grown to $37,519.

Average Annual Total Returns1 as of 12/31/21
	1 Year		5 Year		10 Year
Small Cap Growth Fund	8.70%		16.99%		14.13%
Russell 2000 Growth Index	2.83%		14.53%		14.14%

---

1	The performance information shown here does not reflect variable account charges and fees. Past performance is not predictive of future performance. Shares may be worth more or less when redeemed than when purchased. Assumes reinvestment of all dividends.

Portfolio Composition as of 12/31/21

	Percent of Total Investments1
Consumer, Non-cyclical	30.0%
Technology	24.8 %
Industrial	19.4 %
Financial	7.6 %
Communications	7.1 %
Consumer, Cyclical	6.8 %
Basic Materials	2.4 %
Diversified	1.1 %
Utilities	0.6 %
Energy	0.2 %
	100.0%

---

1	Portfolio holdings are presented as a percentage of total investments before short-term investments. The categories shown represent broad industry sectors. Each industry sector consists of one or more specific industry classifications.

 

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Small Cap Value Fund

The Penn Series Small Cap Value Fund returned 26.67% for the twelve-month period ending December 31, 2021, compared to the 28.27% return for its benchmark, the Russell 2000 Value Index for the same time period.

In 2021, the Fund underperformed the Russell 2000 Value Index. Stock selection in the financials and consumer discretionary sectors detracted from performance, while holdings in the health care and industrials sectors contributed to returns.

Novavax, Inc., a developer of vaccines for infectious diseases, was a top detractor during the year. We initiated a position in the company following the announcement of strong efficacy data for its COVID-19 vaccine. We later sold our position as the fast-evolving regulatory, supply chain, and competitor dynamics of the industry proved a challenge for the company. Ovintiv, Inc., an oil and gas company, was also a top detractor over the one-year period. We initiated a position in the third quarter of 2021, as the company has benefited from the rally in commodity prices. We are optimistic on Ovintiv, as we believe sustainable free cash flows and continued de-levering of the balance sheet can drive return of capital to shareholders.

Herc Holdings, an equipment rental supplier, was a top contributor in 2021. In July, Herc Holdings announced strong second quarter earnings, which included top and bottom line beats and optimistic commentary from management. The stock’s upward moves continued on the back of the company’s investor day in September, as the market reacted favorably to new strategic initiatives and capital allocation plans. We exited our position in Herc Holdings in the fourth quarter following continued outperformance, and deployed the proceeds to what we felt were better opportunities elsewhere. Zurn Water Solutions was also a top contributor to returns during the year. The market reacted favorably to the announced combination of Rexnord’s Process & Motion Control Business with Regal Beloit, in which Rexnord retained its water management business as a standalone called Zurn Water Solutions Corp. The deal closed in early October 2021 and the standalone high growth water management business re-rated higher. We continue to like Zurn Water Solutions going forward, as the water management business was Rexnord’s highest growth segment and has higher growth and margins than other pure water plays.

The end of 2021 was cast with the development of the Omicron variant. We expect this to remain a major focus

of the market in the first quarter of 2022, as entities around the world continue to navigate pockets of outbreaks and implement responses accordingly. Other major themes such as the acceleration in the Federal Reserve’s winding down of its asset purchasing program and interest rate hikes, inflation readings, supply chain issues, and the global energy shortage may test the market again. The unclear future of the social spending bill will also be in play in 2022. We will stay true to our quality-first investment approach and seek to invest in businesses with healthy balance sheets, relatively stable cash flows, and differentiated business models aligned to secular tailwinds. We continue to test our models and re-evaluate our assumptions with increasing information, remain focused on the long-term investment horizon, and believe this fundamental approach will generate excess return in the long run for our clients.

Penn Mutual Asset Management, LLC
Investment Adviser
Goldman Sachs Asset Management
Investment Sub-Adviser

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the Small Cap Value Fund on December 31, 2011 would have grown to $31,444. For the purpose of comparison, the graph also shows the change in the Fund’s benchmark, the Russell 2000 Value Index, during the same period. A $10,000 investment in the Russell 2000 Value Index on December 31, 2011 would have grown to $31,141.

 

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Small Cap Index Fund

The Penn Series Small Cap Index Fund returned 14.35% for the twelve-month period ending December 31, 2021, compared to the 14.82% return for its benchmark, the Russell 2000 Index for the same time period.

The investment objective of the Penn Series Small Cap Index Fund is to seek to replicate the returns and characteristics of a small cap index.

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 cumulative effect of small weighting differences between the securities and the currencies in the Fund and the Index contributed to the difference between the Portfolio’s performance and that of the Index.

The Fund had positive performance in 2021. Despite the negative impact from multiple COVID-19 variants and inflation fears, positive performance was driven mostly by earnings growth, fiscal and monetary policy and the distribution of vaccines in response to the global pandemic. The first and second quarter of 2021 had positive performance due to vaccine rollouts, falling infection rates and the announcement of a stimulus package. Third quarter performance was negative on the back of ongoing supply chain issues and inflation worries even with the reopening of the economy. Performance in the fourth quarter was positive with the passage of a bipartisan infrastructure bill and strong earnings growth despite ongoing supply chain bottlenecks, hawkish sentiment from the Federal Reserve and the emergence of a new COVID-19 variant.

The Fund used Russell 2000 Index futures contracts in order to gain exposure to the Index during the reporting period. The Fund’s use of index futures helped the Fund track the Index.

On an individual security level, the top positive contributors to the Fund’s performance during the reporting period were GameStop Corp. Class A, Avis Budget Group, Inc., and Synaptics Incorporated. The top negative contributors to the Fund’s performance during the reporting period were Allakos, Inc., BridgeBio Pharma, Inc., and Invitae Corp.

Penn Mutual Asset Management, LLC
Investment Adviser
State Street Global Advisors
Investment Sub-Adviser

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the Small Cap Index Fund on December 31, 2011 would have grown to $32,533. For the purpose of comparison, the graph also shows the change in the Fund’s benchmark, the Russell 2000 Index, during the same period. A $10,000 investment in the Russell 2000 Index on December 31, 2011 would have grown to $34,652.

Average Annual Total Returns1 as of 12/31/21
	1 Year		5 Year		10 Year
Small Cap Index Fund	14.35%		11.37%		12.52%
Russell 2000 Index	14.82%		12.02%		13.23%

---

1	The performance information shown here does not reflect variable account charges and fees. Past performance is not predictive of future performance. Shares may be worth more or less when redeemed than when purchased. Assumes reinvestment of all dividends.

 

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Developed International Index Fund

The Penn Series Developed International Index Fund returned 10.54% for the twelve-month period ending December 31, 2021, compared to the 11.26% return for its benchmark, the MSCI EAFE Index for the same time period.

The investment objective of the Fund is to seek to replicate the returns and characteristics of an international index comprised of securities from developed countries.

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 cumulative effect of small weighting differences between the securities and the currencies in the Fund and the Index contributed to the difference between the Portfolio’s performance and that of the Index.

The Fund had positive performance in 2021. The MSCI EAFE Index gained almost 9% over the first six months of the year, as much of the developed world experienced economic recovery. Widespread COVID-19 vaccine availability and distribution, along with initiatives throughout Europe and Asia collectively contributed to the Index’s success. During the first quarter, the UK developed a £65 billion stimulus package and Japan approved a relatively large budget equivalent to $1 trillion to kickstart their respective economies. Following those plans, the second quarter brought recovery funding approvals for many European countries including Portugal, Spain and Greece. The second half of the year saw a more modest, but positive return of 2.24%. The third quarter produced a small dip in the Index of -0.45% as supply chain disruptions and the unfortunate reality of a new COVID-19 variant emerged. As the year closed, however, the Index righted the ship thanks to strong earnings announcements and healthy holiday spending.

The Fund used MSCI EAFE Index futures contracts in order to gain exposure to the Index during the reporting period. The Fund’s use of index futures helped the Fund track the Index.

On an individual security level, the top positive contributors to the Fund’s performance during the reporting period were Nestle S.A., Novo Nordisk A/S Class B and ASML Holding NV. The top negative contributors to the Fund’s performance during the reporting period were SoftBank Group Corp., AIA Group Limited and M3, Inc.

Penn Mutual Asset Management, LLC
Investment Adviser
State Street Global Advisors
Investment Sub-Adviser

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the Developed International Index Fund on December 31, 2011 would have grown to $20,512. For the purpose of comparison, the graph also shows the change in the Fund’s benchmark, the MSCI EAFE Index, during the same period. A $10,000 investment in the MSCI EAFE Index on December 31, 2011 would have grown to $21,650.

Average Annual Total Returns1 as of 12/31/21
	1 Year		5 Year		10 Year
Developed International Index Fund	10.54%		9.06%		7.45%
MSCI EAFE Index	11.26%		9.55%		8.03%

---

1	The performance information shown here does not reflect variable account charges and fees. Past performance is not predictive of future performance. Shares may be worth more or less when redeemed than when purchased. Assumes reinvestment of all dividends.

 

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world’s best consumer staples and luxury goods companies can be found in Europe.

Penn Mutual Asset Management, LLC
Investment Adviser
Vontobel Asset Management
Investment Sub-Adviser

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the International Equity Fund on December 31, 2011 would have grown to $24,726. 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, 2011 would have grown to $20,196.

Average Annual Total Returns1 as of 12/31/21
	1 Year		5 Year		10 Year
International Equity Fund	12.23%		13.76%		9.48%
MSCI ACWI ex-U.S. Index	7.82%		9.61%		7.28%

---

1	The performance information shown here does not reflect variable account charges and fees. Past performance is not predictive of future performance. Shares may be worth more or less when redeemed than when purchased. Assumes reinvestment of all dividends.

Portfolio Composition as of 12/31/21

	Percent of Total Investments1
United Kingdom	18.1 %
Canada	12.9 %
Switzerland	10.4 %
Japan	9.9 %
France	8.6 %
Netherlands	7.2 %
United States	6.9 %
South Korea	4.8 %
Ireland	4.5 %
India	3.9 %
Luxembourg	3.2 %
Mexico	2.9 %
Sweden	2.6 %
China	2.1 %
Italy	2.0%
	100.0%

---

1	Portfolio holdings are presented as a percentage of total investments before short-term investments. The categories shown represent the countries in which the securities are denominated.

 

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developed markets, and intervention could level the playing field for some companies such as JD.com, China’s second largest B2C online platform after Alibaba. The consumer staples space is less affected. For example, ChaCha Food is able to pursue volume growth and expansion opportunities with strong pricing coming through, and stationery maker Shanghai M&G has room for consolidation.

Retail investors in China have pushed up valuations of some stocks, particularly A-shares, although there are select quality names that are trading at reasonable valuations. As fundamental long-term investors, we can take advantage of this volatility by focusing on companies with leading industry positions and good volume growth that are taking market share.

Penn Mutual Asset Management, LLC
Investment Adviser
Vontobel Asset Management, Inc.
Investment Sub-Adviser

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the Emerging Markets Equity Fund on December 31, 2011 would have grown to $14,606. 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, 2011 would have grown to $17,062.

Average Annual Total Returns1 as of 12/31/21
	1 Year		5 Year		10 Year
Emerging Markets Equity Fund	(5.69%)		6.62%		3.86%
MSCI Emerging Markets Index	(2.54%)		9.87%		5.49%

---

1	The performance information shown here does not reflect variable account charges and fees. Past performance is not predictive of future performance. Shares may be worth more or less when redeemed than when purchased. Assumes reinvestment of all dividends.

Portfolio Composition as of 12/31/21

	Percent of Total Investments1
China	27.7 %
India	21.3 %
Taiwan	14.1 %
South Korea	12.9 %
Indonesia	7.0%
Mexico	5.4 %
Hong Kong	4.4 %
Brazil	4.1 %
United Kingdom	2.5 %
Thailand	0.6 %
	100.0%

---

1	Portfolio holdings are presented as a percentage of total investments before short-term investments. The categories shown represent the countries in which the securities are denominated.

 

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Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the Real Estate Securities Fund on December 31, 2011 would have grown to $32,552. For the purpose of comparison, the graph also shows the change in the Fund’s benchmark, the FTSE NAREIT All Equity REITs Index, during the same period. A $10,000 investment in the FTSE NAREIT All Equity REITs Index on December 31, 2011 would have grown to $31,669.

Average Annual Total Returns1 as of 12/31/21
	1 Year		5 Year		10 Year
Real Estate Securities Fund	42.70%		13.49%		12.53%
FTSE NAREIT All Equity REITs Index	41.30%		12.46%		12.22%

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1	The performance information shown here does not reflect variable account charges and fees. Past performance is not predictive of future performance. Shares may be worth more or less when redeemed than when purchased. Assumes reinvestment of all dividends.

Portfolio Composition as of 12/31/21

	Percent of Total Investments1
Diversified	32.4 %
Apartments	14.8 %
Healthcare	12.0%
Storage & Warehousing	10.3 %
Regional Malls	6.5 %
Single Tenant	4.8 %
Industrial	4.8 %
Strip Centers	3.6 %
Hotels & Resorts	2.9 %
Real Estate	2.5 %
Manufactured Homes	2.2 %
Office Property	1.9 %
Lodging	0.8 %
Entertainment	0.5 %
	100.0%

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1	Portfolio holdings are presented as a percentage of total investments before short-term investments.

 

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Table of Contents

Penn Series Funds, Inc.

Management’s Discussion of Fund Performance

Aggressive Allocation Fund

The Penn Series Aggressive Allocation Fund returned 16.42% for the twelve-month period ending December 31, 2021, compared to its benchmarks, the Russell 3000 Index’s return of 25.66% and the Bloomberg U.S. Aggregate Bond Index’s return of -1.54% 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 large cap value stocks, small cap growth stocks, mid cap growth stocks, emerging markets and international equities underperformed the Russell 3000 Index. The allocation in large cap growth stocks, small cap value stocks, mid cap value stocks and REITs generated positive asset allocation performance. On the fixed income side, allocation to high yield bonds and short-term bonds contributed positively to performance.

Fund selection of the Aggressive Allocation Fund contributed negatively to its performance. During the period, our managers for the Penn Series Large Cap Value, Mid Cap Growth, SMID Cap Growth, SMID Cap Value, Small Cap Growth, Flexibly Managed and International Equity Funds outperformed their respective benchmark by more than 2%, while the Penn Series Large Growth Stock, Mid Core Value, Mid Cap Value and Emerging Markets Equity Funds underperformed their respective benchmarks by more than 2%. On the fixed income side, Penn Series Limited Maturity Bond outperformed its benchmark and the Penn Series High Yield Bond Fund underperformed its benchmark.

Looking ahead, interest rate policy is expected to tighten in response to rising inflation. The market is currently predicting three rate hikes throughout the course of 2022, along with the end of quantitative easing. We will continually review the Fund to help ensure that it remains consistent with its investment objective by making adjustments, when necessary.

Penn Mutual Asset Management, LLC
Investment Adviser

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the Aggressive Allocation Fund on December 31, 2011 would have grown to $27,203. For the purpose of comparison, the graph also shows the change in the Fund’s benchmarks, the Russell 3000 Index and the Bloomberg U.S. Aggregate Bond Index, during the same period. A $10,000 investment in the Russell 3000 Index on December 31, 2011 would have grown to $45,285. A $10,000 investment in the Bloomberg U.S. Aggregate Bond Index on December 31, 2011 would have grown to $13,307.

Average Annual Total Returns1 as of 12/31/21
	1 Year		5 Year		10 Year
Aggressive Allocation Fund	16.42%		11.23%		10.53%
Russell 3000 Index	25.66%		17.97%		16.30%
Bloomberg U.S. Aggregate Bond Index	(1.54%)		3.57%		2.90%

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1	The performance information shown here does not reflect variable account charges and fees. Past performance is not predictive of future performance. Shares may be worth more or less when redeemed than when purchased. Assumes reinvestment of all dividends.

    

 

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Table of Contents

Penn Series Funds, Inc.

Management’s Discussion of Fund Performance

Moderately Aggressive Allocation Fund

The Penn Series Moderately Aggressive Allocation Fund returned 15.33% for the twelve-month period ending December 31, 2021, compared to its benchmarks, the Russell 3000 Index’s return of 25.66% and the Bloomberg U.S. Aggregate Bond Index’s return of -1.54% 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 large cap value stocks, small cap growth stocks, mid cap growth stocks, emerging markets and international equities underperformed the Russell 3000 Index. The allocation in large cap growth, small cap value stocks, mid cap value stocks and REITs generated positive asset allocation performance. On the fixed income side, allocation to high yield bonds and short-term bonds contributed positively to performance.

Fund selection of the Moderately Aggressive Allocation Fund contributed negatively to its performance. During the period, our managers for the Penn Series Large Cap Value, Mid Cap Growth, SMID Cap Growth, SMID Cap Value, Small Cap Growth, Flexibly Managed and International Equity Funds outperformed their respective benchmark by more than 2%, while the Penn Series Large Growth Stock, Mid Core Value, Mid Cap Value and Emerging Markets Equity Funds underperformed their respective benchmarks by more than 2%. On the fixed income side, Penn Series Quality Bond and Limited Maturity Bond Funds outperformed their respective benchmarks, while the Penn Series High Yield Bond Fund underperformed its benchmark.

Looking ahead, interest rate policy is expected to tighten in response to rising inflation. The market is currently predicting three rate hikes throughout the course of 2022, along with the end of quantitative easing. We will continually review the Fund to help ensure that it

remains consistent with its investment objective by making adjustments, when necessary.

Penn Mutual Asset Management, LLC
Investment Adviser

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the Moderately Aggressive Allocation Fund on December 31, 2011 would have grown to $25,471. For the purpose of comparison, the graph also shows the change in the Fund’s benchmarks, the Russell 3000 Index and the Bloomberg U.S. Aggregate Bond Index, during the same period. A $10,000 investment in the Russell 3000 Index on December 31, 2011 would have grown to $45,285. A $10,000 investment in the Bloomberg U.S. Aggregate Bond Index on December 31, 2011 would have grown to $13,307.

Average Annual Total Returns1 as of 12/31/21
	1 Year		5 Year		10 Year
Moderately Aggressive Allocation Fund	15.33%		10.74%		9.80%
Russell 3000 Index	25.66%		17.97%		16.30%
Bloomberg U.S. Aggregate Bond Index	(1.54%)		3.57%		2.90%

---

1	The performance information shown here does not reflect variable account charges and fees. Past performance is not predictive of future performance. Shares may be worth more or less when redeemed than when purchased. Assumes reinvestment of all dividends.

    

 

46

Table of Contents

Penn Series Funds, Inc.

Management’s Discussion of Fund Performance

Moderate Allocation Fund

The Penn Series Moderate Allocation Fund returned 11.32% for the twelve-month period ending December 31, 2021, compared to its benchmarks, the Russell 3000 Index’s return of 25.66% and the Bloomberg U.S. Aggregate Bond Index’s return of -1.54% 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 large cap value stocks, small cap growth stocks, mid cap growth stocks, emerging markets and international equities underperformed the Russell 3000 Index. The allocation in large cap growth, small cap value stocks, mid cap value stocks and REITs generated positive asset allocation performance. On the fixed income side, allocation to high yield bonds and short-term bonds contributed positively to performance.

Fund selection of the Moderate Allocation Fund contributed negatively to its performance. During the period, our managers for the Penn Series Large Cap Value, Mid Cap Growth, SMID Cap Growth, SMID Cap Value, Flexibly Managed and International Equity Funds outperformed their respective benchmark by more than 2%, while the Penn Series Large Growth Stock, Mid Core Value and Emerging Markets Equity Funds underperformed their respective benchmarks by more than 2%. On the fixed income side, Penn Series Quality Bond and Limited Maturity Bond Funds outperformed their respective benchmarks, while the Penn Series High Yield Bond Fund underperformed its benchmark.

Looking ahead, interest rate policy is expected to tighten in response to rising inflation. The market is currently predicting three rate hikes throughout the course of 2022, along with the end of quantitative easing. We will continually review the Fund to help ensure that it remains consistent with its investment objective by making adjustments, when necessary.

Penn Mutual Asset Management, LLC
Investment Adviser

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the Moderate Allocation Fund on December 31, 2011 would have grown to $22,120. For the purpose of comparison, the graph also shows the change in the Fund’s benchmarks, the Russell 3000 Index and the Bloomberg U.S. Aggregate Bond Index, during the same period. A $10,000 investment in the Russell 3000 Index on December 31, 2011 would have grown to $45,285. A $10,000 investment in the Bloomberg U.S. Aggregate Bond Index on December 31, 2010 would have grown to $13,307.

Average Annual Total Returns1 as of 12/31/21
	1 Year		5 Year		10 Year
Moderate Allocation Fund	11.32%		9.24%		8.26%
Russell 3000 Index	25.66%		17.97%		16.30%
Bloomberg U.S. Aggregate Bond Index	(1.54%)		3.57%		2.90%

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1	The performance information shown here does not reflect variable account charges and fees. Past performance is not predictive of future performance. Shares may be worth more or less when redeemed than when purchased. Assumes reinvestment of all dividends.

    

 

48

Table of Contents

Penn Series Funds, Inc.

Management’s Discussion of Fund Performance

Moderately Conservative Allocation Fund

The Penn Series Moderately Conservative Allocation Fund returned 8.58% for the twelve-month period ending December 31, 2021, compared to its benchmarks, the Russell 3000 Index’s return of 25.66% and the Bloomberg U.S. Aggregate Bond Index’s return of -1.54% for the same time period.

The Moderately Conservative Allocation Fund is comprised of a target allocation of 40% equity funds and 60% 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.

Although the Moderately Conservative Allocation Fund’s allocation to large cap value stocks, small cap growth stocks, emerging markets and international equities underperformed the Russell 3000 Index, the allocation in large cap growth stocks, small cap value stocks, mid cap value stocks and REITs generated positive asset allocation performance. On the fixed income side, allocation to high yield bonds and short-term bonds contributed positively to performance.

Fund selection of the Moderately Conservative Allocation Fund contributed positively to its performance. During the period, our managers for the Penn Series Large Cap Value, SMID Cap Value, Flexibly Managed and International Equity Funds outperformed their respective benchmark by more than 2%, while the Penn Series Mid Core Value and Emerging Markets Equity Funds underperformed their respective benchmarks by more than 2%. On the fixed income side, Penn Series Quality Bond and Limited Maturity Bond Funds outperformed their respective benchmarks, while the Penn Series High Yield Bond Fund underperformed its benchmark.

Looking ahead, interest rate policy is expected to tighten in response to rising inflation. The market is currently predicting three rate hikes throughout the course of 2022, along with the end of quantitative easing. We will continually review the Fund to help ensure that it remains consistent with its investment objective by making adjustments, when necessary.

Penn Mutual Asset Management, LLC
Investment Adviser

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the Moderately Conservative Allocation Fund on December 31, 2011 would have grown to $18,814. For the purpose of comparison, the graph also shows the change in the Fund’s benchmarks, the Russell 3000 Index and the Bloomberg U.S. Aggregate Bond Index, during the same period. A $10,000 investment in the Russell 3000 Index on December 31, 2011 would have grown to $45,285. A $10,000 investment in the Bloomberg U.S. Aggregate Bond Index on December 31, 2011 would have grown to $13,307.

Average Annual Total Returns1 as of 12/31/21
	1 Year		5 Year		10 Year
Moderately Conservative Allocation Fund	8.58%		7.41%		6.52%
Russell 3000 Index	25.66%		17.97%		16.30%
Bloomberg U.S. Aggregate Bond Index	(1.54%)		3.57%		2.90%

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1	The performance information shown here does not reflect variable account charges and fees. Past performance is not predictive of future performance. Shares may be worth more or less when redeemed than when purchased. Assumes reinvestment of all dividends.

    

 

50

Table of Contents

Penn Series Funds, Inc.

Management’s Discussion of Fund Performance

Conservative Allocation Fund

The Penn Series Conservative Allocation Fund returned 4.52% for the twelve-month period ending December 31, 2021, compared to its benchmarks, the Russell 3000 Index’s return of 25.66% and the Bloomberg U.S. Aggregate Bond Index’s return of -1.54% for the same time period.

The Conservative Allocation Fund is comprised of a target allocation of 20% equity funds and 80% 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 Conservative Allocation Fund contributed positively to its performance. During the period, the Fund’s allocation to large cap growth stocks, mid cap value stocks and REITs outperformed the Russell 3000 Index. However, allocations to large cap value stocks and international equities contributed negatively to performance. On the fixed income side, allocation to high yield bonds and short-term bonds contributed positively to performance.

Fund selection of the Conservative Allocation Fund contributed positively to its performance. During the period, our managers for the Penn Series Large Cap Value, Flexibly Managed and International Equity Funds outperformed their respective benchmark by more than 2%, while the Penn Series Mid Core Value Fund underperformed its respective benchmark by more than 2%. On the fixed income side, Penn Series Quality Bond and Limited Maturity Bond Funds outperformed their respective benchmarks, while the Penn Series High Yield Bond Fund underperformed its benchmark.

Looking ahead, interest rate policy is expected to tighten in response to rising inflation. The market is currently predicting three rate hikes throughout the course of 2022, along with the end of quantitative easing. We will continually review the Fund to help ensure that it remains consistent with its investment objective by making adjustments, when necessary.

Penn Mutual Asset Management, LLC
Investment Adviser

Cumulative Performance Comparison

December 31, 2011 — December 31, 2021

An investment of $10,000 in the Conservative Allocation Fund on December 31, 2011 would have grown to $15,589. For the purpose of comparison, the graph also shows the change in the Fund’s benchmarks, the Russell 3000 Index and the Bloomberg U.S. Aggregate Bond Index, during the same period. A $10,000 investment in the Russell 3000 Index on December 31, 2011 would have grown to $45,285. A $10,000 investment in the Bloomberg U.S. Aggregate Bond Index on December 31, 2011 would have grown to $13,307.

Average Annual Total Returns1 as of 12/31/21
	1 Year		5 Year		10 Year
Conservative Allocation Fund	4.52%		5.41%		4.54%
Russell 3000 Index	25.66%		17.97%		16.30%
Bloomberg U.S. Aggregate Bond Index	(1.54%)		3.57%		2.90%

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1	The performance information shown here does not reflect variable account charges and fees. Past performance is not predictive of future performance. Shares may be worth more or less when redeemed than when purchased. Assumes reinvestment of all dividends.

Asset Allocation Target as of 12/31/21
Intermediate Bonds	42.0%
Short Term Bonds	33.0%
Large Cap Value Stocks	10.0%
High Yield Bonds	5.0%
Large Cap Growth Stocks	4.0%
International Stocks	3.0%
Mid Cap Value Stocks	2.0%
Domestic REITs	1.0%
	100.0%

 

52