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

The Penn Series Limited Maturity Bond Fund returned 6.96% for the twelve-month period ending December 31, 2023, compared to 4.61% for its benchmark, the Bloomberg U.S. Government/Credit 1-3 Year Index, for the same period.

In 2023, short-term interest rates experienced significant volatility as the Federal Reserve (Fed) continued to tighten monetary policy. Despite the Fed’s commitment to “higher for longer” interest rates, fixed income investors started to price in an eventual shift towards more accommodative monetary policy. In early November, the Fed ultimately signaled that rate cuts were in store for 2024, fueling a sharp rally across nearly all financial assets as the year came to a close.

The U.S. economy delivered better-than-expected economic growth during 2023 as the consumer refused to buy into the widespread pessimism from economic forecasters at the start of the year. The labor market remained strong despite the Fed’s aggressive tightening regime with job openings remaining above pre-pandemic levels and the unemployment rate below 4%. Inflation measures also trended favorably throughout the year, moving closer to the Fed’s 2% target.  

Active duration management and the outperformance of corporate and structured holdings contributed to the Portfolio's strong performance. We expect the end of the Fed’s transition to interest rate cuts during the first half of 2024 will continue to provide a favorable environment for short-duration, high-quality fixed-income assets.

We are maintaining our overweight to high-quality structured securities, while opportunistically managing credit risk within the corporate sector. Duration or interest rate risk will also be managed opportunistically to take advantage of anticipated interest rate volatility.

The Penn Series Quality Bond Fund returned 6.78% for the twelve-month period ending December 31, 2023, compared to 5.53% for its benchmark, the Bloomberg U.S. Aggregate Bond Index.

The U.S. bond market was on track to deliver its third consecutive yearly loss through October with long-term rates moving above the 5% level for the first time since 2007. However, an unexpected pivot from the Federal Reserve (Fed) signaling easier monetary policy in 2024 fueled a sharp rally across nearly all financial assets as the year came to a close. The 10-year Treasury yield moved more than 100 basis points lower during November and December, closing 2023 exactly where it started — 3.88%.

U.S. economic growth surprised to the upside during 2023 despite emerging challenges as the year progressed. The sudden failure of Silicon Valley Bank in early March led to a brief window of stress in the banking system. New measures of government support to the banking sector helped limit damage to the economy. Labor market conditions remained historically tight with nearly 9 million job openings and an unemployment rate below 4%. The favorable trends in inflation, now moving closer to the Fed’s 2% target, provided another positive surprise for the U.S. consumer.

Active duration management and spread tightening among corporate and structured holdings benefited Portfolio performance during the year. Recent purchase activity has been focused on U.S. government agency-guaranteed and AAA-rated residential mortgage-backed securities (RMBS), while reducing exposure to corporate credit. We are remaining opportunistic with duration and yield curve management to take advantage of interest rate volatility.

The Penn Series High Yield Bond Fund returned 11.22% for the twelve-month period ending December 31, 2023, compared to 13.55% return for its benchmark, the CSFB High Yield Bond Index for the same time period.

The final two months of 2023 marked a sharp reversal in risk sentiment with virtually every financial asset class rallying materially. The reversal was a very strong period for high-yield credit with over half of the annual performance coming in the final two months of the year. The year-end rally was driven largely by a 90-basis-point (bp) and 110 bp drop in 2- and 10- year Treasury rates respectively, which in turn was the result of declining inflation readings and signals by the Federal Reserve that rate cuts were coming in 2024.

For the bulk of 2023, interest rates rose and lower-quality credit materially outperformed more rate-sensitive bonds as the total return for CCC exceeded BB credit by over 600 bps. Gross new issuance was up over 50% but was still the second lowest total since the Global Financial Crisis. From an earning perspective, it wasn’t a strong year as revenue and margins were hurt by lingering supply chain issues and inventory destocking across many sectors. In addition, higher interest rate levels started to impact companies with large amounts of floating-rate debt or those that had to refinance debt during the year. Still, corporations demonstrated resilience. Overall, other than a handful of distressed situations, default rates remained benign.

The Portfolio’s up-in-quality positioning and shorter duration spread contributed to its underperformance versus the benchmark. The Portfolio added risk positions during the fourth quarter opportunistically in an effort to position for a more constructive macroeconomic backdrop in 2024.

The Penn Series Flexibly Managed Fund returned 18.56% for the twelve-month period ending December 31, 2023, compared to the 26.29% return of its benchmark, the S&P 500 Index for the same time period.

The Portfolio posted a positive return but lagged its all-equity S&P 500 Index benchmark in the 2023 calendar year. The Portfolio’s equity holdings posted a positive return but slightly lagged its S&P 500 Index benchmark. The Portfolio’s fixed income holdings posted a positive return during the one-year period and strongly outperformed its benchmark, the Bloomberg U.S. Aggregate Bond Index.

U.S. equities produced strong gains in 2023, driven by generally favorable corporate earnings, a resilient economy and increased investor interest in artificial intelligence (AI). The market overcame bearish factors such as regional bank turmoil in March; uncertainty about Congress and President Biden agreeing to raise the debt ceiling; geopolitical concerns stemming from the ongoing Russian invasion of Ukraine and from Israel’s response to deadly Hamas attacks in early October; and a sluggish Chinese economic recovery. Arguably the most significant factor affecting the U.S. economy throughout the year was rising interest rates in response to elevated inflation. The Federal Reserve (Fed) raised short-term interest rates four times through the end of July, lifting the fed funds target rate to the range of 5.25% to 5.50%. Equities rallied through year-end as Fed officials projected at their mid-December policy meeting that there could be three quarter-point interest rate cuts in 2024.

As always, we remain committed to finding the best risk-adjusted opportunities across the asset class spectrum to help balance our goals of preserving invested capital and generating equity-like returns over the long term with less risk than the broader equity market.

Our overall fixed income weight remained relatively the same compared to the beginning of the year. Within fixed income, we increased our exposure to U.S. Treasuries, which provide ballast, generate income, and are highly liquid should we decide to add to riskier assets if further market stress arises. We continue to favor high-quality bank loans, which offer attractive risk-adjusted return profiles.

Within equities, the health care sector detracted from relative returns due to an overweight exposure. The

The Penn Series Balanced Fund returned 17.84% for the twelve-month period ending December 31, 2023, compared to its benchmarks, the S&P 500 Index’s return of 26.29% and the Bloomberg U.S. Aggregate Bond Index’s return of 5.53% 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 in line 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.

The Penn Series Quality Bond Fund’s active duration management and the outperformance of corporate and structured holdings benefited results during the year.

The Penn Series Large Growth Stock Fund returned 47.31% for the twelve-month period ending December 31, 2023, compared to the 42.68% return for its benchmark, the Russell 1000 Growth Index for the same time period.

Stock selection and sector allocation were both responsible for relative outperformance. Information technology was a notable relative outperformer, followed by industrials, business services and communication services. Financials and consumer discretionary were the relative detractors.

U.S. equities produced strong gains in 2023, driven by generally favorable corporate earnings, a resilient economy and increased investor interest in artificial intelligence (AI). The market overcame bearish factors such as regional bank turmoil in March, uncertainty about Congress and President Biden agreeing to raise the debt ceiling, geopolitical concerns stemming from the ongoing Russian invasion of Ukraine, Israel’s response to deadly Hamas attacks in early October, and a sluggish Chinese economic recovery. Arguably the most significant factor affecting the U.S. economy throughout the year was rising interest rates in response to elevated inflation. The Federal Reserve (Fed) raised short-term interest rates four times through the end of July, lifting the Fed funds target rate to the 5.25% to 5.50% range. Equities rallied through year-end as Fed officials projected at their mid-December policy meeting that there could be three quarter-point interest rate cuts in 2024.

In the information technology sector, stock choices contributed to relative results. Shares of NVIDIA traded higher in a sharp move following improved visibility around future demand for advanced graphics processing units (GPUs) that are critical for the build out of AI infrastructure. NVIDIA’s dominant position in state-of-the-art GPUs, combined with its embedded software, has created an expanding moat behind which the chipmaker should be able to continue to innovate and grow earnings.

An underweight allocation and security selection in the industrials and business services sector also boosted relative performance. Within the sector, we continue to focus on areas where we believe there is secular, rather than cyclical, growth. As such, we continue to emphasize unique, company-specific opportunities that we believe can drive meaningful growth regardless of the economic backdrop.

The Penn Series Large Cap Growth Fund returned 23.84% for the twelve-month period ending December 31, 2023, compared to the 42.68% return for its benchmark, the Russell 1000 Growth Index for the same time period.

During the reporting period, central banks around the world had to combat the strongest inflationary pressures in four decades, fueled by the global fiscal response to the pandemic, disrupted supply chains and the dislocations to energy markets stemming from the war in Ukraine. Interest rates rose substantially, but the effects of a tighter monetary policy may not have been fully experienced yet, given that monetary policy works with long and variable lags. Strains resulting from the abrupt tightening of monetary policy began to affect some parts of the economy, most acutely among small and regional U.S. banks, which suffered from deposit flight as depositors sought higher yields on their savings. Additionally, activity in the U.S. housing sector has slowed as a result of higher mortgage rates. China’s abandonment of its zero-COVID policy ushered in a brief uptick in economic activity in the world’s second-largest economy in early 2023, although its momentum soon stalled as the focus turned to the country’s highly indebted property development sector. In developed markets, consumer demand for services remained stronger than the demand for goods.

Early on in the year, policymakers found themselves in the difficult position of trying to restrain inflation without tipping economies into recession. Despite the challenging macroeconomic and geopolitical environment, central banks focused on controlling price pressures while also confronting increasing financial stability concerns. Central banks had to juggle achieving their inflation mandates while using macroprudential tools to keep banking systems liquid, a potentially difficult balancing act, and one that suggested that we may be nearing a peak in policy rates. As inflationary pressures eased toward the end of the period, financial conditions loosened in anticipation of easier monetary policy, boosting the market’s appetite for risk. Rapid advancements in artificial intelligence were a focus for investors. Normalizing supply chains, low levels of unemployment across developed markets and signs that inflation levels have peaked were supportive factors for the macroeconomic backdrop.

Stock selection and an underweight position in both the information technology and consumer discretionary

The Penn Series Large Core Growth Fund returned 35.38% for the twelve-month period ending December 31, 2023, compared to the 42.68% return for its benchmark, the Russell 1000 Growth Index for the same time period.

The long-term investment horizon and conviction weighted, highly active investment approach embraced by the investment team can result in periods of performance deviation from the benchmark and peers. The Portfolio underperformed the Index this period primarily due to adverse stock selection; sector allocation was a modestly positive contributor.

Large-cap growth equities, as measured by the Index, advanced over the four-month period ended April 30, 2023. Most sectors within the Index delivered positive performance, led by information technology. Energy, which declined, was the largest underperformer in the Index. Against this backdrop, the investment team continued to focus on bottom-up stock selection and the long-term outlook for companies owned in the Portfolio.

Stock selection in information technology was the main detractor from relative performance, along with a moderate drag from an average underweight in the sector. Stock selection in health care and communication services also weighed on relative performance.

Favorable stock selection in industrials was the largest positive contributor, followed by an average overweight in communication services that was advantageous due to the sector’s outperformance. A lack of exposure to consumer staples, energy and real estate also benefited relative performance as the sectors lagged the broad index. Stock selection in consumer discretionary and financials also contributed positively.

The commentary provided above was from the former sub-adviser of the Fund, Morgan Stanley Investment Management Inc. who was the manager of the Fund until April 30, 2023.

After declining in the prior fiscal period, U.S. equity markets staged a strong rally in the fiscal year ended December 31, 2023. The narrative gradually transitioned from the expectation of an imminent recession to a soft landing scenario. Investors saw this as confirmation of their existing optimism, sustaining the rally in lower-quality, higher-risk stocks.

The Penn Series Large Cap Value Fund returned 11.68% for the twelve-month period ending December 31, 2023, compared to the 11.46% return for its benchmark, the Russell 1000 Value Index for the same time period.

Early in 2023, aggressive central bank tightening — led by the U.S Federal Reserve (Fed) — pressured global equity markets. Bouts of volatility continued as central banks reduced and then began to pause rate hikes but reiterated hawkish higher-for-longer rhetoric that weighed on sentiment. Later in the period, stronger-than-expected third-quarter economic growth triggered a rapid rise in bond yields, especially the 10-year U.S. Treasury note, which briefly crossed the 5% threshold for the first time in 16 years and helped send all major indices briefly into correction territory. Equity markets rallied sharply during November and December, as optimism rose that the Fed would begin to cut interest rates in 2024 — both earlier and more than previously anticipated. Although U.S. mega-cap technology stocks drove returns through much of the year, the rally broadened considerably during the fourth quarter as soft-landing expectations in the U.S. continued to be underpinned by cooling inflation and moderating economic growth. Within large-cap markets, both growth- and value-oriented stocks rose, but growth significantly outperformed value, led by the technology sector and artificial intelligence (AI) optimism. Large cap stocks outperformed small cap stocks, although both rose in absolute terms.

For the twelve-month period ending December 31, 2023, the Portfolio rose in absolute terms and outperformed its benchmark, the Russell 1000 Value Index. An underweight to the utilities sector and an overweight to technology contributed the most, while an underweight to communication services and stock selection within technology detracted.

Leading contributors to relative performance included Builders FirstSource, which benefited from a move lower in interest rates. QUALCOMM contributed after reporting better-than-expected earnings driven by normalizing smartphone inventories and improving demand for handsets, particularly in China. Alphabet Inc. contributed on increased enthusiasm about the company’s AI opportunity.

Leading detractors from relative performance included Elevance Health, which fell out of favor with investors with the period defined by a markedly more risk-on

The Penn Series Large Core Value Fund returned 8.31% for the twelve-month period ending December 31, 2023, compared to the 11.46% return for its benchmark, the Russell 1000 Value Index for the same time period.

As 2023 came to a close, the question that had dogged markets the entire year — could the U.S. Federal Reserve (Fed) defy history and bring the U.S. economy in for a soft landing without sparking a recession — seemed about to be answered in the affirmative, and it appeared it might be time to lower the landing gear and turn on the seat belt sign. Capping a year of abrupt market reversals, one month into the fourth quarter investor sentiment seemed to change from “the sky is falling” to “everything’s coming up roses,” and it remained positive through year-end.

Many who foresaw continued outperformance by value over growth stocks at the end of 2022 have been disappointed by this past year's growth surge. Among U.S. large-cap equities, value stocks (+11.46%) as represented by the Russell 1000 Value Index, underperformed growth stocks (+42.68%) as represented by the Russell 1000 Growth Index. However, when you look at the Russell 1000 Growth Index, excluding the seven heavyweights, the story becomes more surprising and murkier. Without the so-called Magnificent Seven — a group that consists of Alphabet, Apple, Amazon, Meta Platforms, Microsoft, Nvidia and Tesla — the growth index's returns are far closer to those of the Russell 1000 Value Index in 2023. For the three years ending December 31, 2023, even with the Magnificent Seven factored in, value and growth had exactly equal performance of 8.9%.

Sector performance for the Russell 1000 Value Index was primarily positive for the year, with just four sectors (utilities, health care, consumer staples and energy) posting negative results. The best-performing sectors included communication services, information technology, industrials and consumer discretionary.

Against this backdrop, the Portfolio underperformed the Index for the twelve-month period ending December 31, 2023. Our strategy remains true to its “value” style approach and does not swing around to follow a market trend. Amongst this backdrop, stock selection was the primary driver of underperformance, with negative selection results across seven of the 11 GICS sectors. Overall sector allocation was also negative for the year, as the Portfolio’s overweight to health care and

The Penn Series Index 500 Fund returned 25.87% for the twelve-month period ending December 31, 2023, compared to the 26.29%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 corresponds to that of the S&P 500 Index.

The Portfolio and Index returns reflect the reinvestment of dividends and other income. The Portfolio’s performance reflects the expenses of managing the Portfolio, 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 Portfolio’s performance and that of the Index.

The U.S. economy rebounded in 2023 after a difficult 2022. The Index not only completely recouped the previous year’s loss of over 18% but surpassed it by a generous amount.

The Index’s first quarter return of 7.50% was caused by optimism that the U.S. Federal Reserve (Fed) could halt their recent interest rate hike pattern. Although that didn’t end up happening, the positive earnings announcements from many S&P 500 constituents during the quarter buoyed the U.S. market.

Momentum carried into the second quarter as the Index added another 8.74%, its biggest quarterly advance since the fourth quarter of 2021. The U.S. market was driven significantly by a select group of stocks known as the “Magnificent Seven.” These stocks were responsible for the majority of the market rally due to optimism around artificial intelligence (AI), while the rest of the market remained relatively flat.

The aforementioned third quarter was the outlier of 2023 as the Index lost 3.27% during the period. The prolonged hope of rate cuts finally waned as the Fed kept rates unchanged in September. Fed Chair Jerome Powell cautioned that inflation remains high and interest rates could stay elevated for a longer period of time than previously anticipated.

As the year came to a close, the fourth quarter proved to be the most fruitful of the calendar year. The Index

The Penn Series Mid Cap Growth Fund returned 19.90% for the twelve-month period ending December 31, 2023, compared to the 25.87% return for its benchmark, the Russell Midcap Growth Index for the same time period.

All sectors in the Portfolio's benchmark, the Russell Midcap Growth Index, posted positive absolute returns during the year. The deconstruction of the Index’s return profile saw companies with lower debt, greater profits, higher revenues and earnings growth, and higher valuations outperforming during the year.

In 2023, asset allocation sector overweights and underweights contributed to relative performance while stock selection detracted. Sector overweight and underweight positions are primarily a by-product of bottom-up selection, and we remain vigilant in our fundamental research, maintaining a concentrated portfolio of profitable, lower-debt companies that we think can grow throughout a market and economic cycle. During the twelve-month period, our fundamentally driven bottom-up approach led us to notable overweight positions in information technology (IT), real estate, communication services and healthcare. Notable underweights included financials and industrials, consumer staples and materials, with consumer discretionary at relative market weight. Lack of exposure to energy was the leading sector allocation contributor to relative performance for the year, while the Portfolio’s underweight to financials provided the largest relative detractor from performance.

The leading detractors to relative performance where the Portfolio had exposure were consumer discretionary, financials, IT, industrials, real estate, consumer staples and communication services. The strongest contribution to relative outperformance where the Portfolio had exposure was in the healthcare sector, followed only by the materials sector. The Portfolio’s lack of exposure to both energy and utilities also contributed to relative performance for the twelve-month period.

The consumer discretionary sector, a relative market weight in the Portfolio, was the largest relative detractor from performance in the period. National Vision Holdings Inc. was the largest detractor from relative performance in the sector and the second largest detractor to overall performance for the year. National Vision is the second-largest optical retailer in the U.S. providing affordable eye care and eyewear. The company unexpectedly announced early in the year that

The Penn Series Mid Cap Value Fund returned 11.38% for the twelve-month period ending December 31, 2023, compared to the 12.71% return for its benchmark, the Russell Midcap Value Index for the same time period.

In 2023, the U.S. equity market delivered positive returns. However, stocks encountered periods of volatility as investors awaited clarity on the direction of Federal Reserve (Fed) policy, interest rates and inflation. Economic growth appeared relatively resilient, as a strong job market supported consumer spending. Yet there were signs of slowing in other areas of the economy, especially manufacturing and housing. The Fed continued to raise its policy rates through July before leaving rates unchanged starting in September. However, policymakers warned that interest rates may need to remain high for an extended period to contain inflation, especially as oil prices surged in the third quarter. This led to a broad-based third-quarter market decline. Stocks continued to decline into October but rallied strongly in November and December as investor expectations shifted from fears of additional interest rate hikes to hopes that moderating inflation might persuade the Fed to reduce rates in 2024. Declining bond yields and falling crude oil prices were also tailwinds for investor sentiment and stock performance.

Stock selection in the financials and industrials sectors detracted from relative performance, while stock selection in the information technology and communication services sectors contributed. While the Portfolio underperformed for the twelve-month period, we were pleased with how our Portfolio defended against periods of market volatility. We were also gratified with the degree to which the Portfolio participated in the end-of-the-year rally despite our defensive positioning. We also stand by our disciplined approach to managing downside risk.

Stock selection in the financials sector was a notable detractor from relative performance. The first quarter proved challenging for our bank stocks, as a crisis of confidence led customers to pull deposits out of several regional banks. These included Silicon Valley Bank, a subsidiary of our holding SVB Financial. This run on deposits was not caused by credit concerns but rather by the relative maturities of balance sheet assets and liabilities in a rising interest rate environment. As a result, we responded to this situation and liquidated our investment in SVB Financial. Nonetheless, the stock was a significant detractor for the twelve-month period. This

The Penn Series Mid Core Value Fund returned 5.93% for the twelve-month period ending December 31, 2023, compared to the 12.71% return for its benchmark, the Russell Midcap Value Index for the same time period.

Stocks rose in the first half of the year as economic growth remained relatively resilient despite higher interest rates. Investors also hoped the Federal Reserve (Fed) would slow or pause its rate-hike campaign. Stocks retreated in the third quarter, however, as stubbornly high inflation raised expectations for interest rates to remain higher for longer than previously expected. Stocks rallied in the fourth quarter as moderating inflation spurred renewed hopes that the Fed was finished with rate hikes. Economic growth and corporate earnings also remained relatively resilient.

Value stocks underperformed growth for the twelve-month period ending December 31, 2023. Mid cap stocks lagged large caps but outperformed small caps, as measured by the Russell indices. Security selection and an underweight in the consumer discretionary sector weighed on results. Financials also weighed on results with stock selection in the capital markets industry hindering relative performance. This was due in part to a lack of exposure to stocks that were strong performers for the market. Lastly, selection in the materials sector helped relative performance as not owning several benchmark companies in the chemicals industry proved beneficial.

Key detractors from relative performance included Conagra Brands and Advance Auto Parts. Along with its peers, shares of packaged-food producer Conagra Brands were pressured as investors shifted toward less defensive sectors. Also, investors became concerned about consumers shifting to store brands to save money and about pushback on future price increases. Advance Auto Parts, an automotive replacement parts retailer, was another detractor during the reporting period. The company underperformed due to a quarterly earnings miss and guidance reduction. The company has also been forced to raise prices less than product cost inflation in its commercial channel as competitors have become more promotional.

Key contributors included Cie de Saint-Gobain and First Republic Bank. Cie de Saint-Gobain is a global diversified building products manufacturer with notable exposure to Europe. Its shares outperformed early in the period as fears of an energy crisis in Europe eased due to a much

The Penn Series SMID Cap Growth Fund returned 13.97% for the twelve-month period ending December 31, 2023, compared to the 18.93% return for its benchmark, the Russell 2500 Growth Index for the same time period.

Stock selection in the information technology and industrials sectors contributed to returns, while holdings in health care and consumer discretionary detracted from performance.

Specialty chemical solutions provider Ashland, Inc. was the top detractor from returns in 2023. In its forward second quarter earnings release, management noted that China’s reopening was progressing at a slower pace than expected and, although de-stocking that Ashland saw last December had slowed down, it was still persistent throughout the quarter. With the second half of the year uncertain, Ashland lowered fiscal-year-2023 sales and EBITDA guidance, causing the stock price to drop. Furthermore, the company continued to face headwinds pertaining to customer destocking actions across various supply chains, macroeconomic uncertainty and limited visibility into short-term global consumer demand. The management team has actively divested parts of its non-core business in response to a low-volume environment to focus their efforts and investments into high-growth products and capacity optimization. Despite a challenged macroeconomic environment, we continue to really like Ashland given the company’s opportunity for self-help margin expansion, diversified nature of the business and attractive valuation relative to its 20-year historical median. Oncological biopharmaceutical company Halozyme Therapeutics, was another top detractor from returns. The company’s share price sold off substantially at the beginning of the year after the announcement of its total and royalty revenue 2023 guidance releasing below market expectations, as well as reflecting changes in partner clinical and regulatory timelines which are expected to impact the timing of milestone payments. Additionally, the stock came under pressure after the Centers for Medicare and Medicaid Services released initial guidance on Inflation Reduction Act negotiation provisions, which the market believed could put Halozyme Therapeutics’ Enhanze products at risk of being subject to price controls that would diminish the company’s margins. However, there is still significant uncertainty on how these rules will impact the company’s primary source of revenue. Near the end of the year, Halozyme Therapeutics faced headwinds regarding a

The Penn Series SMID Cap Value Fund returned 16.65% for the twelve-month period ending December 31, 2023, compared to the 15.98% return for its benchmark, the Russell 2500 Value Index for the same time period.

Early in 2023, aggressive central bank tightening — led by the U.S. Federal Reserve (Fed) — pressured global equity markets. Bouts of volatility continued as central banks reduced and then began to pause rate hikes but reiterated hawkish higher-for-longer rhetoric that weighed on sentiment. Later in the period, stronger-than-expected third-quarter economic growth triggered a rapid rise in bond yields, especially the 10-year U.S. Treasury note, which briefly crossed the 5% threshold for the first time in sixteen years. Equity markets rallied sharply during November and December as optimism rose that the Fed would begin to cut interest rates in 2024, both earlier and more than previously anticipated.

For the twelve-month period ending December 31, 2023, the Portfolio rose in absolute terms and outperformed its benchmark, the Russell 2500 Value Index. Both sector and stock selection contributed to relative returns. An overweight to industrials contributed, while an overweight to financials detracted. Stock selection within financials contributed, while selection in healthcare detracted.

Vertiv, which specializes in equipment used in data center construction, outperformed after it reported that their first and second quarter 2023 results were ahead of company guidance after prior supply chain shortages began to resolve. Additionally, investors continue to forecast a benefit to Vertiv from the significant increases in technology spending related to artificial intelligence. Another contributor to results was Canada-based uranium producer Cameco. Uranium prices have climbed amid the global transition to low-carbon energy sources, helping lift Cameco’s third-quarter earnings, which easily beat analyst expectations.

Shares of Pediatrix Medical Group detracted after the company reported third quarter 2023 results that included disappointing revenue and profitability. A combination of less newborns requiring neonatal care, shortened stays in Pediatrix units and higher labor expenses pressured the company’s results. MasTec detracted after reporting delays in contract signings following concerns over federal stimulus spending. Long-

The Penn Series Small Cap Growth Fund returned 18.64% for the twelve-month period ending December 31, 2023, compared to the 18.66% return for its benchmark, the Russell 2000 Growth Index for the same time period.

In 2023, the U.S. equity market delivered positive returns, despite periods of volatility, as investors awaited clarity on the direction of Federal Reserve (Fed) policy, interest rates, inflation and economic growth. Economic growth appeared resilient, as a strong job market helped support consumer spending. However, there were signs of slowing in other areas of the economy, especially in manufacturing and housing. The Fed continued to raise rates through July before leaving rates unchanged starting in September. However, policymakers warned that interest rates may need to remain high for an extended period to contain inflation, especially as oil prices surged in the third quarter. These signals put upward pressure on long-term bond yields while adding to fears of a more pronounced economic slowdown. This led to a broad-based third-quarter market decline. Stocks continued to decline into October but rallied strongly in November and December as investor expectations abruptly shifted from fears of additional interest rate hikes to hopes that moderating inflation might persuade the Fed to reduce rates in 2024. The 10-year Treasury yield also fell below 4% by the end of December, after reaching nearly 5% in mid-October. Declining bond yields and falling crude oil prices provided a further tailwind for investor sentiment and stock performance. As a result, stocks ended the year with very strong fourth-quarter returns.

Stock selection and an overweight in the industrials sector aided relative performance. Stock selection in the consumer staples sector was also beneficial. Stock selection in the information technology and healthcare sectors detracted from relative performance.

Among individual holdings, Core & Main was a top relative contributor. This industrials company distributes products used in storm drainage and other large water-related infrastructure projects. It has benefited from higher infrastructure spending, which helped it report better-than-expected results. The company also indicated some stabilization in input prices, leading it to raise guidance on operating margins. We continue to like Core & Main for its advantaged competitive positioning and the earnings visibility provided by long-term infrastructure projects.

The Penn Series Small Cap Value Fund returned 11.41% for the twelve-month period ending December 31, 2023, compared to the 14.65% return for its benchmark, the Russell 2000 Value Index for the same time period.

Stock selection in the industrials and consumer staples sectors contributed to returns, while holdings in the consumer discretionary and financials sectors detracted from performance.

Carbon neutral oil and gas producer Civitas Resources, Inc. was a top detractor from returns in 2023. The stock price fell in the back half of the year, as both natural gas and oil prices depreciated due to a combination of demand concerns from China, U.S. crude oil inventories illustrating a surprisingly large draw and a much greater gasoline inventory build than expected. Many investors were disappointed with Civitas Resources’ third quarter earnings release, as the company did not provide an update on the 2024 plan despite a conservative guidance. Additionally, its stock fell more than 8% in a single day on news that the company was acquiring Vencer Energy’s Midland Basin assets for a premium. Despite the challenged macro environment for Civitas Resources, we continue to have conviction in the stock given Civitas’ diversified asset base, strong balance sheet and attractive valuation relative to peers. Specialty chemical solutions provider Ashland, Inc. was another top detractor from returns. The stock has struggled over the past year due to a combination of persistent de-stocking, a slower-than-expected China reopening and consumer-related headwinds. Ashland took its biggest hit following its second-quarter 2022 earnings release in which the company lowered its fiscal-year-2023 sales and EBITDA guidance, causing the stock price to drop 10% in one day. Nevertheless, we continue to like Ashland given the company’s opportunity for self-help margin expansion, the diversified nature of the business, its strong management team, and relatively low multiple compared to peers given Ashland’s focus on expanding margins and improving its financial position.

Packaged food provider Hostess Brands, Inc. was a top contributor to returns during the year. The stock price skyrocketed at the end of August on news that the company was exploring a sale. Two weeks later, the stock rallied another 20% after J.M. Smucker announced the acquisition of Hostess Brands. We ultimately sold out of the name upon the completion of the acquisition. Meritage Homes Corp., a company that engages in the design and construction of single-family attached and

The Penn Series Small Cap Index Fund returned 16.23% for the twelve-month period ending December 31, 2023, compared to the 16.93% 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 Portfolio and Index returns reflect the reinvestment of dividends and other income. The Portfolio’s performance reflects the expenses of managing the Portfolio, 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 in the Portfolio and the Index contributed to the difference between the Portfolio’s performance and that of the Index.

Performance was positive in the first quarter amid optimism that the Federal Reserve might halt interest rate hikes despite stronger-than-expected economic data and the banking crisis centered on Silicon Valley Bank. Second quarter performance was also positive driven by strong performers in technology, optimism on artificial intelligence (AI), a healthy job market and a decrease in inflation. Third quarter performance was negative as weakness was widespread across most sectors amid slowing growth, a reduction in consumer spending and a slump in exports. Performance in the fourth quarter was positive on the back of better inflation numbers and strong earnings growth.

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

On an individual security level, the top positive contributors to Portfolio performance during the reporting period were Super Micro Computer Inc., MicroStrategy Inc. and ImmunoGen Inc. The top negative contributors to Portfolio performance were Chegg Inc., Patterson-UTI Energy Inc. and Halozyme Therapeutics Inc.

The Penn Series Developed International Index Fund returned 17.23% for the twelve-month period ending December 31, 2023, compared to the 18.24% return for its benchmark, the MSCI EAFE Index for the same time period.

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

The Portfolio and Index returns reflect the reinvestment of dividends and other income. The Portfolio’s performance reflects the expenses of managing the Portfolio, 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 Portfolio and the Index contributed to the difference between the Portfolio’s performance and that of the Index.

The Portfolio experienced positive performance for the twelve-month period ending December 31, 2023. Performance in the first quarter was positive driven by falling energy prices and prospects of easier monetary policy despite fears of financial instability after the collapse of several banks. Second quarter performance was also positive on the back of successful efforts to combat inflation and solid macroeconomic data although weak manufacturing data tempered the positive performance. Persistent high interest rates led to negative performance in the third quarter. Despite real estate concerns in Asia, performance in the fourth quarter was positive as recession concerns eased, inflation declined sharply and hopes of interest rate cuts. 

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

On an individual security level, the top positive contributors to Portfolio performance during the reporting period were ASML Holding NV, SAP SE and Novo Nordisk A/S Class B. The top negative contributors to Portfolio performance during the reporting period were Anglo American plc, British American Tobacco and AIA Group Limited.

The Penn Series International Equity Fund returned 15.25% for the twelve-month period ending December 31, 2023, compared to the 15.62% return for its benchmark, the MSCI ACWI ex U.S. Index for the same time period.

Stocks that helped absolute performance included Constellation Software Inc., RELX Plc and Ferrari N.V. Constellation Software, a conglomerate of small to mid-sized mission-critical software companies, reported strong 2023 results. We believe this is a growing and predictable company that may benefit from a scenario of lower inflation and soft landing. Another top contributor during the reporting period was RELX. Company fundamentals remain strong and we think it can implement artificial intelligence into its Legal and Scientific, Technical & Medical (STM) modules to make users more productive and potentially get better pricing. Regarding fundamentals, RELX has been reporting a solid pickup in organic growth as their STM segment business is being driven more by the faster growing Database and Tools segment. Additionally, the Risk segment continues to grow near 7-8%, which allows RELX to sustain 6% organic growth (excluding exhibitions). Ferrari had a good year aided by an upgrade to full year 2023 guidance mid-year and strong demand for a new 4-door product with order books full till 2026.

Stocks that hurt absolute performance included Rentokil Initial Plc, Hong Kong Exchanges & Clearing and Yum China Holdings Inc. Rentokil Initial gave a trading update early in the fourth quarter that showed weaker-than-expected organic growth in the U.S. and resulting margin pressure. While the company maintained full year expectations, this highlighted worries over the Terminix acquisition and potential integration issues, along with the competitive environment. We believe this complicates the earnings growth profile over the next couple of years and may increase volatility as management has to show there is no longer-term implications. As a result we sold the position during the reporting period. Hong Kong Exchanges & Clearing, another detractor during the reporting period, underperformed in 2023 due to weak sentiment in China. Yum China, the operator of Pizza Hut and KFC and other quick service dining brands in China, missed expectations in the third quarter due to lower-than-expected margins as a result of the promotional environment.

The Penn Series Emerging Markets Equity Fund returned 1.67% for the twelve-month period ending December 31, 2023, compared to the 9.83% return for its benchmark, the MSCI Emerging Markets Index for the same time period.

Stocks that hurt absolute performance included Jd.Com Inc., Meituan and China Tourism Group Duty Free (CDF). China’s number two e-commerce company, JD.com, detracted from absolute returns during the reporting period. Given the weak discretionary consumption recovery and the concern that competition will intensify after a news report suggested the company will step up subsidies, we sold our position in JD.com. Another detractor during the reporting period was Meituan. The company’s share price is highly correlated with the health of the Chinese economy and consumer sentiment. We exited the position due to the uncertainty of its recovery trajectory compounded with heightened competition in the in-store business. CDF, another stock that hurt absolute performance, has been under pressure due to weak consumer sentiment in China and per-capita duty-free spending growth being weak despite the resumption of traffic. Its long-term outlook is clouded with the Hainan Island set to go duty-free, which would pressure CDF’s market share. As a result, we sold this holding during the reporting period.

Stocks that helped absolute performance included Samsung Electronics Co Ltd, Taiwan Semiconductor Manufacturing Co. (TSMC) and Raia Drogasil. Samsung’s strong performance was mainly driven by expectations of a recovery in the memory prices after eight quarters of downturn. After a difficult first half of 2023, the cyclical recovery is playing out and Samsung’s guidance implies meaningful earnings recovery from the fourth quarter onwards. Thanks to prudent capex control and production cutback initiatives, as well as a cyclical demand recovery from consumer applications, the memory market is beginning to show gradual improvement. Moreover, investor interest in the memory industry, particularly in Samsung, is also fueled by the strong demand for high band width memory (HBM), used in artificial intelligence (AI) chips. Another stock that aided absolute performance was TSMC. The company reaffirmed their view for a healthy growth year in 2024, which suggests potential share gains and Apple’s further migration to 3nm. Fabless customer inventory ended at a healthier level in 2023. The recent sales ramp was driven by artificial intelligence (AI) and

The Penn Series Real Estate Securities Fund returned 11.78% for the twelve-month period ending December 31, 2023, compared to the 11.36%  return for its benchmark, the FTSE NAREIT All Equity REITs Index for the same time period.

Real estate shares rose in 2023, bolstered by generally healthy real estate fundamentals and, toward year-end, optimism around a “soft landing” for the economy. Interest rates played an outsized role in influencing share prices throughout the year, with the market focused on the potential timing and magnitude of a Federal Reserve (Fed) pivot following extensive monetary policy tightening. Expectations rose that the Fed could begin cutting benchmark lending rates as early as the first half of 2024.

Data centers benefited from strength in cloud demand and the early innings of an expected multi-year tailwind from artificial intelligence, resulting in an upward trend in pricing. Solid leasing activity and retailer strength buoyed retail-oriented property types, led by regional malls. Single-family homes for rent benefited from favorable supply and demand fundamentals. Apartments trailed on weakened rent growth, with the previously strong Sunbelt region challenged by increased supply.

Industrial REITs outperformed on the prospect of an economic “soft landing”. But while rent growth in some U.S. cities appears to be stabilizing, other markets are still decelerating. Lower mortgage rates could lead to more housing transactions, driving demand for self storage space. For now, however, new-tenant rents for U.S. based storage companies may not have bottomed. Office REITs, where longer-term demand is uncertain, posted relatively modest gains. Infrastructure was pressured during the year as new leasing activity in the U.S. softened due, at least in part, to slowing tenant spending on 5G. However, mobile usage continues to climb.

The Portfolio had a positive total return for the year and outperformed its benchmark. Contributors to relative performance included stock selection in health care led by an overweight allocation in Welltower, driven by customer rate increases, growing occupancy and declining labor costs. The timing of our allocations in infrastructure also contributed, as did an overweight allocation and selection in single-family homes. The latter benefited from positive supply/demand

The Penn Series Aggressive Allocation Fund returned 15.38% for the twelve-month period ending December 31, 2023, compared to its benchmarks, the Russell 3000 Index’s return of 25.96% and the Bloomberg U.S. Aggregate Bond Index’s return of 5.53% 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, small- and mid-cap growth stocks, international equities, emerging markets and REITs underperformed the Russell 3000 Index. The Fund’s allocation to large-cap growth stocks outperformed the Russell 3000 Index. In fixed income, the Fund’s allocation to short-term bonds contributed negatively, while the allocation to high yield bonds contributed positively to performance.

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

We will continue to review the Fund to help ensure it remains consistent with its investment objective by making adjustments, when necessary.

The Penn Series Moderately Aggressive Allocation Fund returned 14.45% for the twelve-month period ending December 31, 2023, compared to its benchmarks, the Russell 3000 Index’s return of 25.96% and the Bloomberg U.S. Aggregate Bond Index’s return of 5.53%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, small- and mid-cap growth stocks, international equities, emerging markets and REITs underperformed the Russell 3000 Index. The Fund’s allocation to large-cap growth stocks outperformed the Russell 3000 Index. In fixed income, the Fund’s allocation to short-term bonds contributed negatively, while the allocation to high yield bonds contributed positively to performance.

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

We will continue to review the Fund to help ensure it remains consistent with its investment objective by making adjustments, when necessary.

The Penn Series Moderate Allocation Fund returned 12.77% for the twelve-month period ending December 31, 2023, compared to its benchmarks, the Russell 3000 Index’s return of 25.96% and the Bloomberg U.S. Aggregate Bond Index’s return of 5.53% 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, small- and mid-cap growth stocks, international equities, emerging markets and REITs underperformed the Russell 3000 Index. The Fund’s allocation to large-cap growth stocks outperformed the Russell 3000 Index. In fixed income, the Fund’s allocation to short-term bonds contributed negatively, while the allocation to high yield bonds contributed positively to performance.

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

We will continue to review the Fund to help ensure it remains consistent with its investment objective by making adjustments, when necessary.

The Penn Series Moderately Conservative Allocation Fund returned 10.71% for the twelve-month period ending December 31, 2023, compared to its benchmarks, the Russell 3000 Index’s return of 25.96% and the Bloomberg U.S. Aggregate Bond Index’s return of 5.53% 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.

The asset allocation of the Moderately Conservative Allocation Fund contributed negatively to its performance. During the period, the Fund’s allocation to value stocks, small-cap growth stocks, international equities, emerging markets and REITs underperformed the Russell 3000 Index. The Fund’s allocation to large-cap growth stocks outperformed the Russell 3000 Index. In fixed income, the Fund’s allocation to short-term bonds contributed negatively, while the allocation to high yield bonds contributed positively to performance

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

We will continue to review the Fund to help ensure it remains consistent with its investment objective by making adjustments, when necessary.

The Penn Series Conservative Allocation Fund returned 9.02% for the twelve-month period ending December 31, 2023, compared to its benchmarks, the Russell 3000 Index’s return of 25.96% and the Bloomberg U.S. Aggregate Bond Index’s return of 5.53% 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 outperformed the Russell 3000 Index. The Fund’s allocation to mid- and large-cap value stocks, international equities and REITs underperformed the Russell 3000 Index. In fixed income, the Fund’s allocation to high yield bonds contributed positively, while the allocation to short-term bonds contributed negatively to performance.

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

We will continue to review the Fund to help ensure it remains consistent with its investment objective by making adjustments, when necessary.