-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IXYf1QQiIj4O/0xaCiZ8ZzhkEmkBvePFp8bVWfGQQCpBM32KJeZGy6KMwxJ9nzHg 3bb66wO1ghA1sERUijbvWg== 0000950124-00-000840.txt : 20000223 0000950124-00-000840.hdr.sgml : 20000223 ACCESSION NUMBER: 0000950124-00-000840 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000222 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT CENTRAL INDEX KEY: 0000742277 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 390509570 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-03989 FILM NUMBER: 550038 BUSINESS ADDRESS: STREET 1: 720 E WISCONSIN AVE CITY: MILWAUKEE STATE: WI ZIP: 53202 BUSINESS PHONE: 4142992508 MAIL ADDRESS: STREET 1: 720 EAST WISCONSIN AVENUE CITY: MILWAUKEE STATE: WI ZIP: 53202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHWESTERN MUTUAL SERIES FUND INC CENTRAL INDEX KEY: 0000742212 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 391603401 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-03990 FILM NUMBER: 550039 BUSINESS ADDRESS: STREET 1: 720 E WISCONSIN AVE CITY: MILWAUKEE STATE: WI ZIP: 53202 BUSINESS PHONE: 4142992508 MAIL ADDRESS: STREET 1: 720 EAST WISCONSIN AVE CITY: MILWAUKEE STATE: WI ZIP: 53202 FORMER COMPANY: FORMER CONFORMED NAME: NORTHWESTERN MUTUAL VARIABLE LIFE SERIES FUND INC DATE OF NAME CHANGE: 19940830 N-30D 1 ANNUAL REPORT 1 VISIONS Variable Life Account [PHOTO] December 31, 1999 Annual Report An Information Source For Northwestern Mutual Life Variable Life Policyowners AS TIME GOES BY: PERSONAL PLANNING THROUGHOUT YOUR LIFE 1 Growth Stock Fund: A Manager's View 4 Splitting Heirs: Effective Estate Planning 5 Social Security 6 2 AS TIME GOES BY: The penny goes in the slot in the pig. That's about all we need to know about finances when we're young. With age and added wealth come new responsibilities and financial challenges. As our lives change, we must continue to re-evaluate our financial plan to meet our short- and long-term goals. Here are just a few suggestions that will help you take control of your finances through any stage of life. TWENTIES AND THIRTIES Time is your most valuable asset at this stage in life. Establishing good financial habits today will pay dividends for many years to come. Consulting a professional advisor, such as a Northwestern Mutual Investment Services Registered Representative, can help keep you on track by developing a written Personal Planning Analysis. ESTABLISH A SAFETY NET It's easy to live from one paycheck to the next, but try to save 10% - 20% of your income. Setting up automatic withdrawal from your paycheck can help you stick to a schedule. Ideally, you should establish a three- to six-month safety net of income to protect you should you lose your job or encounter unforeseen expenses. It's also a good idea to have adequate disability income protection. Once you've established your safety net, continue saving in investments that have the potential to generate higher returns. GET SERIOUS ABOUT RETIREMENT It's never too early to start saving for retirement, especially since Social Security and pensions will probably not provide enough retirement income for your needs. Take full advantage of any 401(k) or 403(b) retirement plan offered at work. If you qualify, supplement those savings with tax-deferred investments like an IRA, which allows you to put aside up to $2,000 per person, per year. A personal variable annuity also provides tax-deferred savings, but with no contribution limits and a guaranteed lifetime income option.* HOME SAFE HOME If you're saving for a new home, consider keeping your down payment in a low-risk investment that is readily available. CONGRATULATIONS, IT'S A BUNDLE OF EXPENSES Let's take a hypothetical example. Assume today the average cost for one year of college is about $8,000 a year at a public university and $18,000 at a private college. If college costs are rising 6% a year, by 2010 attending a public university could cost $13,500, and a private university could cost an astounding $30,406 every year. With numbers like [PHOTO] 1 VARIABLE LIFE VISIONS ANNUAL REPORT 3 PERSONAL PLANNING THROUGHOUT YOUR LIFE that, it's clear you should start a college fund as soon as you start a family. An Education IRA is a fairly new option that lets you set aside up to $500 per year, per child. Earnings grow tax-deferred and funds can be withdrawn tax-free for higher education. You should also explore other investment and saving options to fund education. PROTECTING YOUR FAMILY When you begin your family, draft a will and choose a guardian for your children. Make sure you have enough life insurance to protect your family should they ever have to survive without you. The younger you are when you purchase life insurance for yourself, the less it will cost. FORTIES AND FIFTIES Although your forties are generally your high-earning years, they're also full of financial responsibilities, like raising children, paying a mortgage and saving for retirement. Continue to regularly reassess your portfolio with your professional advisor to make sure you can meet all your immediate and future needs. PROTECTING YOUR FAMILY What suited your family a decade ago may be inadequate now given your increased financial responsibilities. If necessary, update your life insurance and purchase additional disability insurance to protect your higher standard of living. PAYING FOR COLLEGE Even if you've been saving for years, chances are savings alone won't cover the cost of college. Research organizations that offer financial aid such as scholarships and low-interest student loans. You might ask your children to assume some responsibility for their own expenses or encourage them to participate in a work-study program offered by the school. RETIREMENT Even with all your other financial responsibilities, don't ignore your own retirement savings. Independent analysts suggest most people need a retirement income that's 80% of their current income. Continue to take full advantage of your 401(k), IRAs, variable annuities, and other investments such as stocks, bonds, and mutual funds. FIFTIES AND BEYOND These can be wonderful times. Typically your income is still high and your financial responsibilities are starting to lessen. With the kids finishing college, and your house paid off, enjoy your disposable income and look forward to retirement years. As always, periodically re-evaluate your life insurance, disability insurance, and retirement programs as your individual circumstances change. RETIREMENT Time to put your retirement savings into high gear. If you haven't already, consider investing in a variable annuity which is designed to provide a steady stream of income for life.* When re-evaluating your investment portfolio, be more conservative, but don't go overboard. Remember, your retirement could last for 30 years. PROTECTING YOUR FUTURE Seventy percent of us will need some kind of long-term care in the future, such as nursing home or in-home care.** Long-term care insurance can help pay for these expenses, reducing the financial drain on your spouse and family, and providing you with more choices for quality care. Benefits received will also help keep the assets in your estate intact. ESTATE PLANNING Estate planning isn't just for the wealthy. It's for anyone who wants to make sure their money goes to their loved ones, not the courts or Uncle Sam. Many people don't realize they need an estate plan or have an estate liquidity problem. Generally, a married couple with a net worth of $1.3 million or more and a single individual with a net worth of $650,000 or more may have an estate tax liquidity problem. This may seem like a lot of money, but your assets add up quickly. An estate plan usually involves drawing up a will and setting up trusts and insurance to minimize estate taxes and administrative expenses, and help your heirs avoid probate. A good estate plan has the potential to ensure your estate will pass to your heirs almost entirely intact. It provides your heirs with the resources to pay the estate taxes without selling any of your assets. At any age, it's important to have a plan and stay educated about all your financial options. Continue to seek information from a variety of sources and talk to a professional advisor on a regular basis. The more you know and the more you plan, the more you'll be able to enjoy every stage of your life. * The investment return and the principal value of a variable fund will fluctuate so that the accumulation value at maturity or surrender may be more or less than the original cost. A lifetime income payment plan option and the guaranteed death benefit are solely backed by Northwestern Mutual Life's general assets, and are no reflection upon the performance or stability of the amounts invested in the variable (non-fixed) funds. ** HIAA. "Long-Term Care: Knowing the risk, paying the price," 1992. ANNUAL REPORT VARIABLE LIFE VISIONS 2 4 SEVEN NEW INVESTMENT DIVISIONS AVAILABLE TO POLICYOWNERS [PHOTO] We've added two additions to the current Northwestern Mutual Series Fund, LLC. and five additions from the newly added Russell Insurance Funds. The purchase of The Frank Russell Company by Northwestern Mutual Life resulted in the addition of the Russell Insurance Funds. Its five divisions provide multi style, multi manager, approach, which will complement the divisions currently available. Important information regarding the divisions is provided in the prospectus and the attached annual report. The seven new investment divisions are as follows: NORTHWESTERN MUTUAL SERIES FUND + Index 400 Stock + Small Cap Growth Stock RUSSELL INSURANCE FUNDS + Russell Multi-Style Equity + Russell Aggressive Equity + Russell Non-U.S. + Russell Real Estate Securities + Russell Core Bond HOW LONG IS YOUR LIFETIME? [PHOTO] How much money you'll need for retirement depends on how long you'll live. No one can predict for sure how many birthdays you'll celebrate, but Northwestern Mutual Life's Longevity Game may give you a clue. You start the game with the average life expectancy for a woman or man. As you answer questions about factors such as diet, exercise and heredity, years are automatically added or subtracted from your score. At the end of the game, your score is tallied to reveal your projected life expectancy. The score isn't meant to scare you or give you false confidence, but it can help you identify where you could make improvements in your lifestyle. For example, you get to add three years for being very active, but you have to subtract three years if you lead a sedentary life. Other factors that affect your longevity include whether or not you smoke, manage your blood pressure regularly, and how you handle stress. You can play the entire Longevity Game on our Web site www.northwesternmutual.com. It's also available on CD-ROM by contacting your Northwestern Mutual Investment Services Registered Representative. Good luck and good health. 3 VARIABLE LIFE VISIONS ANNUAL REPORT 5 DECEMBER 31, 1999 [NORTHWESTERN MUTUAL LIFE (R) LOGO] [The Quiet Company (R) LOGO] NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT [PHOTO] NORTHWESTERN MUTUAL The Northwestern Mutual Life SERIES FUND, INC. AND Insurance Company RUSSELL INSURANCE FUNDS 720 East Wisconsin Avenue Milwaukee, WI 53202 (414) 271-1444 A N N U A L R E P O R T 6 C ONTENTS Letter to Policyowners 1 Performance Summary for Separate Accounts 2 Economic Overview and Outlook 6 Series Fund Objectives and Schedule of Investments 7 Small Cap Growth Stock Portfolio 7 Aggressive Growth Stock Portfolio 10 International Equity Portfolio 13 Index 400 Stock Portfolio 17 Growth Stock Portfolio 23 Growth and Income Stock Portfolio 26 Index 500 Stock Portfolio 29 Balanced Portfolio 36 High Yield Bond Portfolio 48 Select Bond Portfolio 52 Money Market Portfolio 57 Accountants' Report 60 Statements of Assets and Liabilities 61 Statements of Operations 63 Statements of Changes in Net Assets 65 Financial Highlights 71 Notes to Series Fund Financial Statements 77 Accountants' Report 80 Variable Life Account Financial Statements 81 Notes to Variable Life Account Financial Statements 90 Directors and Officers 92 The Russell Annual Report Starts After Page 92
Contents 7 LETTER TO POLICYOWNERS JANUARY 31, 2000 The last year of the old millennium was an exciting time of persistent economic strength and soaring stock markets. New and rapidly changing technology and the improved productivity it is making possible are the dominant forces behind both the economy and the stock market. The vital importance of technology in today's world was driven home by concerns about how the change to year 2000 dates would affect the computers that support utilities, transportation, financial services and other aspects of our physical and economic infrastructure. Careful preparation appears to have paid off, as disruptions turned out to be minimal. Driven largely by consumer spending, the U.S. economy posted real growth above 4% for the fourth consecutive year. As more and more individuals own stocks and mutual funds, trends in the economy and the stock market are increasingly interrelated. Consumers feel wealthy and confident because jobs seem secure and they are making money in the stock market. They therefore spend freely, fueling further economic growth. Signals regarding inflation are mixed. Although rises in the Consumer Price Index have been modest to date, rising oil prices and a tight labor market are creating inflationary pressure. With three increases in interest rates in the last six months, and frequent warnings that further increases are possible, the Federal Reserve has demonstrated its determination to slow economic growth at any sign of inflation. However, the formerly strong link between interest rates and economic growth appears to have weakened because technology companies are taking advantage of their escalating stock prices to raise equity capital, rather than borrowing money to fund growth. Many thoughtful observers believe that information technology is transforming the economy of America and much of the world, making a higher long-term growth rate sustainable. With the population of the United States growing at about 1% and measured productivity now expanding at a rate of about 2%, many economists believe that a long-term non-inflationary economic growth rate as high as 3% is possible, up from an average of 2% to 2.5% for the prior two decades. While it is still necessary to question how rapidly the economy can grow without igniting inflation, it appears that the Federal Reserve's growth target is in the 3% range. With real growth still above this level, further rate increases seem likely in 2000. The funds underlying Northwestern Mutual's variable life insurance products performed in line with their stated objectives during 1999, though several underperformed the indices with which they are compared. The stock market's ongoing strength has been driven mainly by dramatic increases in the prices of a relatively small group of technology issues and other growth stocks, while share values of many solid companies have increased only modestly or declined. In this environment, broadly diversified portfolios tend to underperform indices, whose levels can be dominated by performance of a small number of stocks. While most of our funds have significant participation in technology, their emphasis on this area is not as extreme as that of some funds. We continue to believe strongly that diversification is the most responsible strategy for long-term investors. As you examine the performance of the funds underlying your variable life holdings, we urge you to maintain a long-term point of view and avoid being overly influenced by current market conditions. It is a good idea to adjust your investments among portfolios as your circumstances, needs and goals evolve, but it would be a mistake to base your investment strategy on short-term market moves. As you evaluate your personal financial and insurance situation, your Northwestern Mutual agent is available to provide help as you plan for a secure future. We join our agents in thanking you for selecting Northwestern Mutual to help you accomplish your financial and insurance goals. The Northwestern Mutual Life Insurance Company JAMES A. ERICSON SIGNATURE James D. Ericson, President and Chief Executive Officer [Ericson Photo] 1 Letter to Policyowners 8 PERFORMANCE SUMMARY AS OF DECEMBER 31, 1999 Variable Life -- Policies Issued Before October 11, 1995
GROWTH & SMALL CAP AGGRESSIVE INTERNATIONAL INDEX 400 GROWTH INCOME INDEX 500 TOTAL RETURN GROWTH STOCK GROWTH STOCK EQUITY STOCK STOCK STOCK STOCK BALANCED (AS OF 12/31/99) PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO - ----------------------------------------------------------------------------------------------------------------------------------- 1 year................ - 15.73% (1.08%) - (1.41%) (13.49%) (2.68%) (10.50%) 5 years............... - 125.94% 56.95% - 149.46% 111.86% 173.34% 80.27% Annualized.......... - 17.71% 9.43% - 20.06% 16.20% 22.28% 12.51% 10 years.............. - - - - - - 281.10% 153.39% Annualized.......... - - - - - - 14.32% 9.74% Since inception....... 21.91%Y 134.94%* 56.40%* (14.15%)Y 152.16%* 111.59%* - - Annualized.......... - 16.28% 8.22% - 17.74% 14.15% - -
Variable Complife -- Policies Issued On or After October 11, 1995** Without Surrender - -------------------------------------------------------------------------------- 1 year................ - 24.85% 6.71% - 6.35% (6.68%) 4.98% (3.45%) 5 years............... - 144.73% 70.00% - 170.20% 129.49% 196.07% 95.26% Annualized.......... - 19.60% 11.20% - 21.99% 18.07% 24.25% 14.32% 10 years.............. - - - - - - 314.92% 175.88% Annualized.......... - - - - - - 15.29% 10.68% Since inception....... 34.05%Y 154.65%* 69.51%* (6.86%)Y 173.31%* 129.35%* - - Annualized.......... - 17.94% 9.76% - 19.42% 15.78% - -
Variable Complife -- Policies Issued On or After October 11, 1995** With Surrender Charge - -------------------------------------------------------------------------------- 1 year................ - (14.92%) (33.06%) - (33.42%) (46.45%) (34.79%) (43.22%) 5 years............... - 96.80% 22.07% - 122.27% 81.56% 148.14% 47.33% Annualized.......... - 14.50% 4.07% - 17.32% 12.67% 19.93% 8.06% 10 years.............. - - - - - - 276.22% 137.18% Annualized.......... - - - - - - 14.17% 9.02% Since inception....... (5.72%)Y 108.60%* 23.46%* (46.63%)Y 127.26%* 83.29%* - - Annualized.......... - 13.86% 3.79% - 15.59% 11.29% - -
All total return figures shown above reflect all portfolio expenses, mortality and expense risk charges and all deductions taken from premiums. Returns do not include cost of insurance charges. These charges effectively reduce the dollar amount of any net gains and increase the dollar amount of any net losses. Premium deductions for Variable Life policies are reflected as 18.95% of premium based on average charges during the first ten policy years for a Variable Whole Life policy with a policy size of $100,000 and an annual premium of $1,536 for a male, age 35, select risk. Premium deductions for Variable CompLife policies are reflected as 12.65%. The premium deductions and surrender charges for Variable CompLife policies are based on an assumed average contract size of $200,000 of Variable Whole Life amount, $0 of Additional Protection and an annual premium of $2,610 for a male, age 35, select risk. Assumes annual premiums are paid in renewal years; if not, then a portion of the deductions to be taken from renewal premiums will be deducted from the account assets, reducing the rate of return. Performance data represents past results and is not a guarantee of future results. Future value will fluctuate, so that an investors shares, when redeemed, may be worth more or less than their original cost. *Inception date of 5/3/94. **Product inception date of 10/11/95. Returns prior to 10/11/95 were reflected using the actual investment experience of each division, adjusted for the expenses of the product and premium charges. These returns are not a guarantee of future performance. YInception date of these portfolios in the Variable Life Account was 6/30/99. Actual fund inception was 4/30/99. Returns shown are for the six month period 6/30/99 - 12/31/99; not annualized. +Inception date of these portfolios in the Variable Life Account was 6/30/99. Actual fund inception was 1/2/97. Returns shown are for the six month period 6/30/99 - 12/31/99; not annualized. Note: "Standard and Poor's 500" , "S&P 500" and "S&P 400" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by The Northwestern Mutual Life Insurance Company. The Series Fund and its Portfolios are not sponsored, endorsed, sold or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of investing in them. Performance Summary 2 9
RUSSELL RUSSELL RUSSELL HIGH YIELD SELECT MONEY MULTI-STYLE AGGRESSIVE RUSSELL REAL ESTATE RUSSELL BOND BOND MARKET EQUITY EQUITY NON-U.S. SECURITIES CORE BOND PORTFOLIO PORTFOLIO PORTFOLIO FUND+ FUND+ FUND+ FUND FUND+ - ----------------------------------------------------------------------------------------------------------------------------- (19.88%) (20.33%) (15.40%) - - - - - 23.91% 11.70% 1.91% - - - - - 4.38% 2.24% 0.38% - - - - - - 59.58% 24.98% - - - - - - 4.78% 2.25% - - - - - 27.06%* - - (15.95%) (16.25%) 0.28% (24.21%)Y (18.65%) 4.32% - - - - - - - - ----------------------------------------------------------------------------------------------------------------------------- (13.57%) (14.06%) (8.74%) - - - - - 34.21% 20.99% 10.38% - - - - - 6.06% 3.88% 1.99% - - - - - - 73.74% 36.06% - - - - - - 5.68% 3.13% - - - - - 37.71%* - - (9.00%) (8.55%) 8.50% (18.01%)Y (12.47%) 5.81% - - - - - - - - ----------------------------------------------------------------------------------------------------------------------------- (53.34%) (53.83%) (48.51%) - - - - - (13.72%) (26.94%) (37.55%) - - - - - (2.91%) (6.08%) (8.99%) - - - - - - 35.04% (2.64%) - - - - - - 3.05% (0.27%) - - - - - (8.34%)* - - (48.77%) (48.32%) (31.27%) (57.78%)Y (52.24%) (1.53%) - - - - - - -
3 Performance Summary 10 Variable Executive Life -- Policies First Offered on March 2, 1998*** Without Surrender Charge
GROWTH & SMALL CAP AGGRESSIVE INTERNATIONAL INDEX 400 GROWTH INCOME INDEX 500 TOTAL RETURN GROWTH STOCK GROWTH STOCK EQUITY STOCK STOCK STOCK STOCK BALANCED (AS OF 12/31/99) PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO - ----------------------------------------------------------------------------------------------------------------------------------- 1 year................ - 16.13% (0.86%) - (1.20%) (13.41%) (2.48%) (10.39%) 5 years............... - 126.40% 56.83% - 150.12% 112.12% 174.24% 80.30% Annualized.......... - 17.75% 9.42% - 20.12% 16.23% 22.36% 12.51% 10 years.............. - - - - - - 280.13% 152.03% Annualized.......... - - - - - - 14.29% 9.68% Since inception....... 25.31%Y 136.52%* 57.00%* (12.94%)Y 154.00%* 112.84%* - - Annualized.......... - 16.41% 8.29% - 17.88% 14.26% - -
Variable Executive Life -- Policies First Offered on March 2, 1998*** With Surrender Charge - -------------------------------------------------------------------------------- 1 year................ - 31.13% 14.14% - 13.80% 1.59% 12.52% 4.61% 5 years............... - 126.40% 56.83% - 150.12% 112.12% 174.24% 80.30% Annualized.......... - 17.75% 9.42% - 20.12% 16.23% 22.36% 12.51% 10 years.............. - - - - - - 280.13% 152.03% Annualized.......... - - - - - - 14.29% 9.68% Since inception....... 40.31%Y 136.52%* 57.00%* 2.06%Y 154.00%* 112.84%* - - Annualized.......... - 16.41% 8.29% - 17.88% 14.26% - -
Variable Joint Life -- Policies First Offered on December 28, 1998**** Without Surrender Charge - -------------------------------------------------------------------------------- 1 year................ - 27.38% 8.59% - 8.22% (5.29%) 6.80% (1.94%) 5 years............... - 136.93% 63.51% - 162.21% 122.00% 187.78% 88.34% Annualized.......... - 18.83% 10.33% - 21.26% 17.29% 23.54% 13.50% 10 years.............. - - - - - - 273.76% 146.74% Annualized.......... - - - - - - 14.09% 9.45% Since inception....... 38.55%Y 147.52%* 63.69%* (3.74%)Y 166.28%* 122.75%* - - Annualized.......... - 17.35% 9.09% - 18.87% 15.18% - -
Variable Joint Life -- Policies First Offered on December 28, 1998**** With Surrender Charge - -------------------------------------------------------------------------------- 1 year................ - (22.62%) (41.41%) - (41.78%) (55.29%) (43.20%) (51.94%) 5 years............... - 109.15% 35.73% - 134.43% 94.22% 160.00% 60.56% Annualized.......... - 15.90% 6.30% - 18.58% 14.20% 21.16% 9.93% 10 years.............. - - - - - - 273.76% 146.74% Annualized.......... - - - - - - 14.09% 9.45% Since inception....... (11.45%)Y 123.44%* 39.62%* (53.75%)Y 142.20%* 98.68%* - - Annualized.......... - 15.25% 6.07% - 16.90% 12.88% - -
All total return figures shown above reflect all portfolio expenses, mortality and expense risk charges and all deductions taken from premiums. Returns do not include cost of insurance charges. These charges effectively reduce the dollar amount of any net gains and increase the dollar amount of any net losses. Premium deductions for Variable Executive Life policies are comprised of 3.6% for state premium tax and federal tax and 15% for sales costs. Returns also reflect the annual administrative charge of 0.36% in policy year 1 and 0.12% in all other policy years. The charges against Policy Value assume an average Specified Amount of $500,000, Death Benefit Option A, and an annual premium of $10,000 for a sex-neutral, age 45, guaranteed issue non-tobacco risk. Total returns with surrender for Variable Executive Life policies are based on the same policy assumptions as premium deductions. They include a cash value increase equal to a portion of the sales load previously deducted, which is only applicable for the first two years. Premium deductions for the Variable Joint Life insurance policies are comprised of 3.6% for state premium tax and federal tax and 6.4% for sales costs. Returns also reflect Policy Value charges such as underwriting and issue charge of 0.22%, the deferred sales charge of 0.69% and the annual administrative charge of 0.02%. The charges against Policy Value assume an average Specified Amount of $3,000,000, Death Benefit Option A, and an annual premium of $55,740 for an age 55 male select/age 55 female select risk. Surrender charges are deducted from the policy proceeds upon surrender of the policy during the first 10 policy years (year 1, 50% of the paid premium, years 2-10, charge decreases by the same dollar amount month by month to zero at the end of the 10th year). Performance data reflects past results and is not a guarantee of future results. Future value will fluctuate so that an investors shares, when redeemed, may be worth more or less than their original cost. Performance Summary 4 11
RUSSELL RUSSELL RUSSELL HIGH YIELD SELECT MONEY MULTI-STYLE AGGRESSIVE RUSSELL REAL ESTATE RUSSELL BOND BOND MARKET EQUITY EQUITY NON-U.S. SECURITIES CORE BOND PORTFOLIO PORTFOLIO PORTFOLIO FUND+ FUND+ FUND+ FUND FUND+ - ----------------------------------------------------------------------------------------------------------------------------- (19.88%) (20.33%) (15.35%) - - - - - 23.52% 11.27% 1.46% - - - - - 4.32% 2.16% 0.29% - - - - - - 58.11% 22.90% - - - - - - 4.69% 2.08% - - - - - 27.25%* - - (14.95%) (14.51%) 1.42% (23.36%)Y (18.18%) 4.35% - - - - - - - - ----------------------------------------------------------------------------------------------------------------------------- (4.88%) (5.33%) (0.35%) - - - - - 23.52% 11.27% 1.46% - - - - - 4.32% 2.16% 0.29% - - - - - - 58.11% 22.90% - - - - - - 4.69% 2.08% - - - - - 27.25%* - - 0.05% 0.49% 16.42% (8.36%)Y (3.18%) 4.35% - - - - - - - - ----------------------------------------------------------------------------------------------------------------------------- (12.43%) (12.94%) (7.43%) - - - - - 28.44% 15.56% 5.24% - - - - - 5.13% 2.93% 1.03% - - - - - - 53.94% 19.27% - - - - - - 4.41% 1.78% - - - - - 32.32%* - - (5.96%) (5.48%) 12.13% (15.27%)Y (9.54%) 5.07% - - - - - - - - ----------------------------------------------------------------------------------------------------------------------------- (62.43%) (62.94%) (57.43%) - - - - - 0.66% (12.22%) (22.54%) - - - - - 0.13% (2.57%) (4.98%) - - - - - - 53.94% 19.27% - - - - - - 4.41% 1.78% - - - - - 8.25%* - - (55.96%) (55.48%) (37.87%) (65.27%)Y (59.54%) 1.41% - - - - - - -
*Inception date of 5/3/94. ***Product inception date of 3/2/98. (For use with non-tax qualified executive benefit plans.) Returns prior to 3/2/98 were reflected using the actual investment experience of each division adjusted for expenses of the product and premium charges. These returns are not a guarantee of future performance. ****Policy first offered December 28, 1998 (For use primarily in estate planning, provides coverage on two insureds with a death benefit payable on the second death). Returns prior to 12/28/98 were reflected using the actual investment experience of each division adjusted for expenses of the product and premium charges. These returns are not a guarantee of future performance. YInception date of these portfolios in the Variable Life Account was 6/30/99. Actual fund inception was 4/30/99. Returns shown are for the six month period 6/30/99 - 12/31/99; not annualized. +Inception date of these portfolios in the Variable Life Account was 6/30/99. Actual fund inception was 1/2/97. Returns shown are for the six month period 6/30/99 - 12/31/99; not annualized. Note: "Standard and Poor's 500", "S&P 500" and "S&P 400" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by The Northwestern Mutual Life Insurance Company. The Series Fund and its Portfolios are not sponsored, endorsed, sold or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of investing in them. 5 Performance Summary 12 The Economy The current period of economic growth in the United States has now been in place since 1991, making it the longest peacetime expansion ever. Early in 2000, this economic expansion, with its unparalleled combination of rapid growth and low inflation, is likely to become the longest in U.S. history. Consumer spending, fueled by strong income growth from healthy job markets and wealth from a surging stock market, continues to be the chief driver of this powerful economy. Household demand accounted for three-quarters of economic growth in 1998 and almost 90% in 1999. December's consumer confidence index, the highest in 30 years, suggests that consumers will continue their buying spree in 2000. Inflation remains tame, with the rise in overall prices for 1999 estimated at 2.6%; the one percentage point increase from the prior year was almost entirely due to higher energy prices. Despite the Federal Reserve's apparent determination to raise interest rates as necessary to slow spending and keep inflation in check, forecasters are optimistic about the economy's momentum in 2000. Projections of the 50 economists participating in Business Week's annual survey averaged 3.1% for real economic growth and an increase of 2.1% in consumer prices, with unemployment remaining at a three-decade low of 4.2%. ECONOMIC GROWTH AND INFLATION [Economic Growth and Inflation Performance Graph]
REAL GDP CPI-U -------- ----- 90 0.50 6.30 91 1.20 3.00 92 4.10 3.00 93 2.20 2.80 94 4.20 2.60 95 2.20 2.60 96 4.20 3.20 97 4.30 1.70 98 4.60 1.60 99 4.40 2.60
Source: U.S. Department of Commerce. Year-to-year percentage change in Real Gross Domestic Product is used for real economic growth. December-to-December percentage change in the Consumer Price Index - Urban is used for the inflation rate. 1999 numbers are based on preliminary data and Business Week's survey of 50 business economists. - -------------------------------------------------------------------------------- The Equity Market The domestic equity market continued its long-term upward trend during 1999. For the S&P 500 Index, there has not been a down year since 1990, and we have now experienced an unprecedented five consecutive years of returns over 20%. The market recovered quickly from a modest correction in October, which was driven by concerns about inflation. Early in 1999 it appeared that the market's strength was beginning to broaden to include names outside the technology issues and large growth stocks that have dominated the long upward trend. As the year progressed, however, the concentration became even more pronounced than in prior periods. Although total return from the S&P 500 Index was 21.1%, more stocks in the index were down than up. The technology-heavy NASDAQ index finished the year up more than 85%, with more than half the gain in the last two months of the year. ANNUAL TOTAL RETURNS FROM S&P 500 INDEX [Annual Total Returns from S&P Performance Graph]
YEAR ENDED ---------- 90 -3.1 91 30.50 92 7.60 93 10.10 94 1.20 95 37.40 96 22.80 97 33.40 98 28.50 99 21.10
Source: Standard & Poor's - -------------------------------------------------------------------------------- The Bond Market Interest rates have moved up fairly steadily during 1999: the yield on 30-year Treasury bonds was 6.5% at year end, up from 5.1% at the beginning of the year. At odds with the usual seasonal pattern, yields continued to rise in the fourth quarter. This movement has been driven largely by the market's nervousness about higher inflation, which has been fueled by continued strong economic growth and exacerbated by a doubling of oil prices. The Federal Reserve's three interest rate increases during the last half of the year provided the most visible sign of inflation worries. Since bond prices move in the opposite direction from interest rates, the result for the bond market has been the worst year since 1994 and the second-worst year on record. As the U.S. Treasury has been running a surplus and issuing fewer securities, the supply/demand relationship has caused the spread to widen between Treasury yields and yields of other securities. In addition, lower quality bonds have been affected by investors' worries about disruptions as the year 2000 approaches. With millennium-related problems having proven to be minimal, a reversal of the bear market for bonds could begin in early 2000. ANNUAL TOTAL RETURNS FROM MERRILL LYNCH DOMESTIC MASTER INDEX [Annual Total Returns From Merrill Lynch]
YEAR ENDED ---------- 90 9.10 91 15.90 92 7.60 93 10.00 94 -2.8 95 18.50 96 3.60 97 9.70 98 8.90 99 -0.96
Source: Merrill Lynch. The Merrill Lynch Domestic Master Index is an unmanaged market value weighted index comprised of U.S. Government, mortgage and investment-grade corporate bonds. Economic Overview and Outlook 6 13
Objective: Portfolio Strategy: Net Assets Maximum long-term appreciation of Strive for the highest possible rate of capital $71,482,646 capital appreciation by investing in companies with potential for rapid growth.
SMALL CAP GROWTH STOCK PORTFOLIO The Small Cap Growth Stock Portfolio owns the stocks of emerging growth companies. The Portfolio is managed with a target of $1 billion median market capitalization; holdings include both larger and smaller companies. Since portfolios of small-capitalization stocks tend to react strongly to changes in financial and economic markets, as well as to changes in the prospects for individual companies, returns of this Portfolio can vary considerably from time to time. A higher level of risk (with risk defined as variability of returns over time) is accepted for the potential of greater long-term returns. The focus in stock selection is on the individual companies' ability to generate revenue, expanding profit margins and solid balance sheets; industry sector selection is of secondary importance. This Portfolio began operations April 30, 1999 and was made available to life policyowners on June 30, 1999. In its first months the Portfolio benefited from a very healthy environment for small-capitalization stocks, especially in the technology sector, where internet-related stocks have soared in value. The Portfolio has participated in a number of initial public offerings (IPOs) which experienced almost immediate appreciation; in selecting holdings of these newly-public companies, the focus is on profitability rather than simply on revenue growth. The Portfolio's total return was 86.09% since inception. Management estimates that IPO holdings contributed 42% and other issues 44.09%. In several cases, total market values of small-capitalization stocks have increased so much that it has become necessary to sell them in order to maintain the Portfolio's market capitalization target. The largest concentration of holdings is in technology, an industry that has become famous for its growth potential. Mediasolve, Tibco Software and Engage Technology were among the stocks that contributed to the Portfolio's strong performance. A related industry theme is media stocks, which are benefiting from heavy advertising by internet companies trying to build brand identities. Other industry themes include retailers and other consumer cyclicals, which benefit from a positive consumer environment, and business and communication services. SECTOR ALLOCATION 12/31/99 [PIE CHART]
INDUSTRIAL CONSUMER HEALTH & CONSUMER BUSINESS TECHNOLOGY CYCLICAL CARE TRANSPORTATION ENERGY STAPLES FINANCE SERVICES ---------- -------- ------ -------------- ------ -------- ------- -------- Sector Allocation 33.00 15.00 8.00 7.00 6.00 6.00 5.00 4.00 RUSSELL 2000 SHORT- INDEX TERM FUTURES INVESTMENTS ------- ----------- Sector Allocation 11.00 5.00
TOP 10 HOLDINGS 12/31/99
Company % of Net Assets --------------------------------------------------------------------------------- Getty Images, Inc. 2.1% --------------------------------------------------------------------------------- FreeShop.com, Inc. 2.1% --------------------------------------------------------------------------------- Westwood One, Inc. 2.1% --------------------------------------------------------------------------------- CDW Computer Centers, Inc. 2.0% --------------------------------------------------------------------------------- Citadel Communications Corporation 2.0% --------------------------------------------------------------------------------- Inet Technologies, Inc. 1.9% --------------------------------------------------------------------------------- The Corporate Executive Board Company 1.8% --------------------------------------------------------------------------------- Cymer, Inc. 1.6% --------------------------------------------------------------------------------- Advent Software, Inc. 1.6% --------------------------------------------------------------------------------- CBT Group Public Limited Company, ADR 1.6%
PERFORMANCE RELATIVE TO THE RELEVANT INDICES [LINE GRAPH]
SMALL CAP STOCK PORTFOLIO S&P 600 INDEX RUSSELL 2000 INDEX ------------------------- ------------- ------------------ 4/99 10000.00 10000.00 10000.00 12/99 18609.00 11586.00 11767.00
- ---------------------------------------------- Average Annual Total Return For Period Ended December 31, 1999 Since Inception# - ---------------------------------------------- Small Cap Stock Portfolio 86.09% S&P 600 Index 15.86% Russell 2000 17.67% - ---------------------------------------------- # Inception date of 4/30/99 (Returns not annualized)
Since the Portfolio invests primarily in small capitalization issues, the indices that best reflect the Portfolio's performance are the Standard & Poor's (S&P) SmallCap 600 Index and Russell 2000 Index. The Standard & Poor's SmallCap 600 Index is an unmanaged index of 600 selected common stocks of smaller U.S.-based companies compiled by Standard & Poor's Corporation. As of December 31, 1999, the 600 companies in the composite had median market capitalization of $467 million and total market value of $368 billion. The SmallCap 600 represents approximately 2% of the market value of S&P's database of over 8,200 equities. The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index. The Russell 3000 Index measures the performance of the 3,000 largest US companies based on total market capitalization. These 3000 companies represent approximately 98% of the investable US equity market. As of December 31, 1999, the average market capitalization of companies in the Russell 3000 was $5.3 billion; the median market capitalization was $768.8 million. Market capitalization of companies in the Index ranged from $602.4 billion to $10.9 million. The Russell 2000 Index represents approximately 8% of the total market capitalization of the Russell 3000. As of December 31, 1999, the average market capitalization of companies in the Russell 2000 was approximately $629 million; the median market capitalization was approximately $448 million. The largest company in the index had a total market capitalization of approximately $13.2 billion. This chart assumes an initial investment of $10,000 made on 4/30/99 (commencement of the Fund's operations). Returns shown include deductions for management and other fund expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. Total returns shown on page 2 reflect mortality and expense risk charges and premium charges deducted from the assets of the separate account. The cost of insurance protection, which is not reflected in the returns shown on this chart, would make the returns significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. 7 Small Cap Growth Stock Portfolio 14 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments December 31, 1999
MARKET SHARES/ VALUE COMMON STOCK (84.2%) PAR (000'S) ----------------------------------------------------------- BASIC MATERIALS (1.1%) Cambrex Corporation 22,000 $ 758 -------- TOTAL 758 -------- BUSINESS SERVICES (2.7%) *The Corporate Executive Board Company 22,600 1263 *Forrester Research, Inc. 9,900 682 -------- TOTAL 1,945 -------- CAPITAL GOODS (3.3%) *Dycom Industries Inc. 16,100 709 Kaydon Corporation 24,400 654 *Power-One Inc. 21,600 990 -------- TOTAL 2,353 -------- COMMUNICATION SERVICES (1.4%) *Crown Castle International Co. 18,700 601 *Tessco Technologies Inc. 21,600 402 -------- TOTAL 1,003 -------- CONSUMER CYCLICAL (14.9%) *1-800-Flowers.com, Inc. 46,600 498 *Catalina Marketing Corporation 8,600 996 *David's Bridal Inc. 56,300 630 *Dollar Tree Stores, Inc. 15,700 761 *Getty Images, Inc. 30,400 1,486 *JAKKS Pacific, Inc. 15,000 280 *Jupiter Communications, Inc. 17,400 526 *Linens 'N Things, Inc. 11,800 350 *Luminant Worldwide Corporation 20,900 951 *MSC Industrial Direct Co., Inc. 71,500 947 *The Management Network Group, Inc. 16,300 532 *Sonic Automotive, Inc. 34,300 334 The Talbots, Inc. 20,800 928 *Tower Automotive, Inc. 38,500 594 *Whitehall Jewellers, Inc. 3,700 136 *Wild Oats Markets Inc. 30,900 686 -------- TOTAL 10,635 -------- CONSUMER STAPLES (6.2%) *Acme Communications, Inc. 18,800 625 *American Italian Pasta Co. -CL A 28,900 888 *Citadel Communications Corp. 21,500 1,395 *Westwood One Inc. 19,300 1,467 -------- TOTAL 4,375 -------- ENERGY (5.6%) *Barrett Resources Corporation 25,200 742 *Basin Exploration Inc. 44,100 777 *Global Industries, Ltd. 81,100 699 *Nabors Industries, Inc. 33,800 1,046 *Stone Energy Corp. 20,100 716 -------- TOTAL 3,980 --------
MARKET SHARES/ VALUE COMMON STOCK (84.2%) PAR (000'S) ----------------------------------------------------------- FINANCE (4.7%) *Charles River Associates Incorporated 25,700 $ 861 Investors Financial Services Corp. 15,800 727 Radian Group Inc. 18,600 888 Waddell & Reed Financial, Inc. 33,900 919 -------- TOTAL 3,395 -------- HEALTHCARE (8.3%) *Biovail Corporation International 11,800 1,106 *Patterson Dental Company 19,400 827 *Priority Healthcare Corp. 22,800 660 *Province Healthcare 44,800 851 *Shire Pharmaceuticals Group PLC, ADR 16,200 472 *Sybron International Corporation 31,800 785 *Total Renal Care Holdings 58,400 391 *Wesley Jessen VisionCare, Inc. 23,100 875 -------- TOTAL 5,967 -------- TECHNOLOGY (33.0%) *Advent Software Inc. 17,900 1,153 *Airnet Communications Corporation 17,000 618 *Aspen Technology, Inc. 22,200 587 *CAIS Internet, Inc. 26,000 923 *CBT Group Public Limited Company, ADR 34,300 1,149 *CDW Computer Centers, Inc. 17,800 1,400 *Clarify Inc. 8,100 1,021 *Copper Mountain Networks 10,500 512 *Cymer Inc. 25,500 1,173 *Engage Technologies Inc. 16,700 1,002 *Etec Systems, Inc. 21,800 978 *FreeShop.com, Inc. 30,900 1,483 *Great Plains Software, Inc. 15,000 1,121 *Inet Technologies Inc. 19,300 1,349 *JNI Corp. 4,200 277 *Kent Electronics Corp. 49,700 1,131 *Mediaplex, Inc. 1,300 82 *Metalink Ltd. 9,900 202 *Metasolv Software, Inc. 9,500 777 *Northpoint Communications 22,800 547 *PMC-Sierra, Inc. 5,700 914 *Predictive Systems, Inc. 7,800 511 *Qlogic Corporation 5,800 927 *Scient Corp. 8,000 692 *Semtech Corporation 17,600 917 *TIBCO Software, Inc. 5,700 872 *Viant Corp. 6,800 673 *Whittman-Hart Inc. 11,700 627 -------- TOTAL 23,618 -------- TRANSPORTATION (3.0%) C.H. Robinson Worldwide Inc. 26,700 1,061 *Knight Transportation, Inc. 32,300 553
Small Cap Growth Stock Portfolio 8 15
MARKET SHARES/ VALUE COMMON STOCK (84.2%) PAR (000'S) ----------------------------------------------------------- TRANSPORTATION continued *Swift Transportation Co., Inc. 31,300 $ 552 -------- TOTAL 2,166 -------- TOTAL COMMON STOCK (COST $46,686) 60,195 -------- MONEY MARKET INVESTMENTS (14.2%) ----------------------------------------------------------- CAPTIVE FINANCE COMPANY (5.5%) Daimler-Chrysler N.A. Holding, 5.50%, 01/28/00 4,000,000 3,984 -------- FEDERAL AND GOVERNMENT AGENCIES (5.6%) Federal Home Loan Mortgage Corp., 4.75%, 01/14/00 3,300,000 3,294 #Federal Home Loan Mortgage Corp., 5.51%, 01/10/00 300,000 300 #Federal Home Loan Mortgage Corp., 5.54%, 01/20/00 400,000 398 -------- TOTAL 3,992 -------- MISCELLANEOUS BUSINESS CREDIT INSTITUTIONS (2.1%) Quincy Capital Corporation, 6.07%, 01/27/00 1,500,000 1,493 -------- SHORT-TERM BUSINESS CREDIT (1.0%) IBM Credit Corp., 4.00%, 01/04/00 700,000 700 -------- TOTAL MONEY MARKET INVESTMENTS (COST $10,169) 10,169 -------- TOTAL INVESTMENTS (98.4%) (COST $56,855)' 70,364 -------- OTHER ASSETS, LESS LIABILITIES (1.6%) 1,119 -------- TOTAL NET ASSETS (100.0%) $ 71,483 -------- -----------------------------------------------------------
* Non-Income Producing ADR - American Depository Receipt # Partially held by the custodian in a segregated account as collateral for open futures positions. Information regarding open futures contracts as of December 31, 1999 is summarized below:
UNREALIZED NUMBER OF EXPIRATION APPRECIATION ISSUERS CONTRACTS DATE (000'S) - ------------------------------------------------------------ Russell 2000 Index 30 03/00 $391 (Total Notional Value at 12/31/99, $7,258,000)
' At December 31,1999, the aggregate cost of securities for federal income tax purposes was $56,943 and the net unrealized appreciation of investments based on that cost was $13,421 which is comprised of $14,937 aggregate gross unrealized appreciation and $1,516 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements 9 Small Cap Growth Stock Portfolio 16
Objective Portfolio Strategy Net Assets Maximum long-term appreciation of Strive for the highest possible rate of capital $1,485,311,163 capital appreciation by investing in companies with potential for rapid growth.
AGGRESSIVE GROWTH STOCK PORTFOLIO The Aggressive Growth Stock Portfolio owns the stocks of emerging growth companies, generally with market capitalizations of less than $10 billion. Since growth stock portfolios tend to react strongly to changes in financial and economic markets, as well as to changes in the prospects for individual companies, returns of this Portfolio can vary considerably from time to time. A higher level of risk (with risk defined as variability of returns over time) is accepted for the potential of greater long-term returns. The Portfolio's focus in stock selection is on the individual companies' ability to generate revenue, expand profit margins and maintain solid balance sheets; industry sector selection is of secondary importance. However, because opportunities tend to cluster in certain industry groups, there is a significant concentration in the technology sector, with a secondary concentration in consumer cyclicals, particularly in the retail industry. Other areas of increasing emphasis are energy service and health care, where the focus is on biotechnology, rather than health care providers. Within the technology sector, the emphasis is on telecommunications equipment, semiconductors and semiconductor capital equipment. Internet participation is focused on service providers such as Vignette and Verisign, which have very credible business models and are within a year of achieving profitability while maintaining a very rapid growth pace. Besides their inherent merit, many technology companies have the potential to merge as technology companies seek to broaden their product offerings. SECTOR ALLOCATION 12/31/99 [PIE CHART]
INDUSTRIAL CONSUMER & CONSUMER HEALTH BUSINESS TECHNOLOGY CYCLICAL ENERGY TRANSPORTATION STAPLES CARE FINANCE SERVICES ---------- -------- ------ -------------- -------- ------ ------- -------- Sector Allocation 48.00 10.00 8.00 8.00 6.00 5.00 3.00 2.00 S&P 400 SHORT- INDEX TERM FUTURES INVESTMENTS ------- ----------- Sector Allocation 5.00 5.00
TOP 10 HOLDINGS 12/31/99
Company % of net assets --------------------------------------------------------------------------------- Gemstar International Group Limited 2.6% --------------------------------------------------------------------------------- JDS Uniphase Corporation 2.6% --------------------------------------------------------------------------------- Jabil Circuit, Inc. 2.6% --------------------------------------------------------------------------------- QLogic Corporation 2.5% --------------------------------------------------------------------------------- Comverse Technology, Inc. 2.4% --------------------------------------------------------------------------------- Vignette Corporation 2.4% --------------------------------------------------------------------------------- Getty Images, Inc. 2.4% --------------------------------------------------------------------------------- Sanmina Corporation 2.3% --------------------------------------------------------------------------------- Lamar Advertising Company 2.2% --------------------------------------------------------------------------------- PMC-Sierra, Inc. 2.1%
PERFORMANCE RELATIVE TO RELEVANT INDICES [LINE GRAPH]
- ------------------------------------------------------------- Average Annual Total Return For Periods Ended December 31, 1999 Since 1 Year 5 Years Inception# - ------------------------------------------------------------- Aggressive Growth Stock Portfolio 43.78% 23.62% 22.02% Wilshire Small Cap 36.86% 21.57% 20.69% Wilshire Next 1750 10.47% 15.78% 17.66% S&P MidCap 400 Index 14.69% 23.04% 20.65% - ------------------------------------------------------------- # Inception Date of 11/30/90
Since the Portfolio invests primarily in medium-capitalization (MidCap) issues, the index that best reflects the Portfolio's performance is the S&P MidCap 400 Index. This is a capitalization-weighted index that measures the performance of the mid-range sector of the U.S. stock market. Because the average market capitalization of the Aggressive Growth Fund has recently increased, the S&P MidCap 400 Index is more representative of the current composition of this Portfolio than the Wilshire Next 1750 Index and Wilshire Small Cap Index, which are the small-capitalization indices used in the past. The S&P MidCap 400 Index is a capitalization-weighted index that measures the performance of the mid-range sector of the U.S. stock market. As of December 31, 1999, the 400 companies in the composite had median market capitalization of $1.6 billion and a total market value of $907 billion. The MidCap 400 represents approximately 6% of the market value of S&P's database of over 8,200 equities. The Wilshire Next 1750 is an unmanaged, equally weighted index. Included in this index are those stocks which are ranked 750 to 2500 by market capitalization in the Wilshire 5000. The largest sectors represented in this index are materials and services, technology, and consumer non-durables. Market capitalization ranges from $1.5 billion to $624 million. The Wilshire Small Cap Index is a subset of the Wilshire Next 1750 and includes 250 stocks chosen based upon their size, sector and liquidity characteristics. Each stock is equally weighted in this unmanaged index. The average market capitalization is approximately $981 million. The largest sector weightings include technology, materials and services, and consumer non-durables. On May 3, 1994, the Northwestern Mutual Aggressive Growth Stock Fund, Inc. (the "Fund") merged into the Northwestern Mutual Series Fund, Inc. Aggressive Growth Stock Portfolio (the "Portfolio"). The Portfolio had no assets prior to the merger. After the merger, the assets of the Portfolio were those of the Fund. The investment objectives, policies, management and expenses of the Portfolio are identical to those of the Fund. Accordingly, the performance of the Fund prior to the merger is included with the performance of the Portfolio in the graph and total return figures above. This chart assumes an initial investment of $10,000 made on 11/30/90 (commencement of the Fund's operations). Returns shown include deductions for management and other fund expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. Total returns shown on page 2 reflect mortality and expense risk charges and premium charges deducted from the assets of the separate account. The cost of insurance protection, which is not reflected in the returns shown on this chart, would make the returns significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. Aggressive Growth Stock Portfolio 10 17 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments December 31, 1999
MARKET SHARES/ VALUE COMMON STOCK (89.9%) PAR (000'S) --------------------------------------------------------- BUSINESS SERVICES (1.5%) *The Corporate Executive Board Company 287,600 $ 16,070 *Waters Corp. 126,700 6,715 ----------- TOTAL 22,785 ----------- CAPITAL GOODS (7.4%) *Jabil Circuit, Inc. 527,400 38,500 Kaydon Corporation 342,200 9,175 *RSA Security, Inc. 185,200 14,353 *Sanmina Corporation 346,200 34,577 *Tetra Tech, Inc. 848,678 13,048 ----------- TOTAL 109,653 ----------- COMMUNICATION SERVICES (0.4%) *Crown Castle International Co. 165,300 5,310 *TeleCorp PCS, Inc. 28,500 1,083 ----------- TOTAL 6,393 ----------- CONSUMER CYCLICAL (10.3%) *Abercrombie & Fitch Co. 113,300 3,024 *Catalina Marketing Corporation 178,500 20,661 Cintas Corp. 278,900 14,816 *Dollar Tree Stores, Inc. 191,800 9,290 *eToys, Inc. 218,600 5,738 *FreeMarkets, Inc. 17,500 5,973 *Getty Images, Inc. 714,100 34,902 *Kohl's Corporation 181,800 13,124 *Linens 'N Things, Inc. 261,633 7,751 *O'Reilly Automotive, Inc. 614,400 13,210 Royal Caribbean Ltd. 167,300 8,250 *Sonic Automotive, Inc. 626,800 6,111 *Tower Automotive, Inc. 619,900 9,570 ----------- TOTAL 152,420 ----------- CONSUMER STAPLES (6.4%) *American Tower Systems 217,722 6,654 *AMFM, Inc. 115,800 9,061 *Clear Channel Communications, Inc. 308,500 27,534 *Entercom Communications Corporation 191,000 12,606 *Insight Communications 211,700 6,272 *Lamar Advertising, Co. 526,925 31,912 ----------- TOTAL 94,039 ----------- ENERGY (7.5%) Anadarko Petroleum Corporation 485,800 16,578 *BJ Services Company 503,000 21,032 *Global Industries, Ltd. 912,900 7,874 *Nabors Industries, Inc. 580,700 17,965 Santa Fe International Corp. 865,401 22,392 *Weatherford International, Inc. 651,925 26,036 ----------- TOTAL 111,877 -----------
MARKET SHARES/ VALUE COMMON STOCK (89.9%) PAR (000'S) --------------------------------------------------------- FINANCE (2.7%) Investors Financial Services Corp. 386,300 $ 17,770 *Knight/Trimark Group, Inc. 296,800 13,653 Radian Group, Inc. 182,100 8,695 ----------- TOTAL 40,118 ----------- HEALTHCARE (5.0%) Bausch & Lomb, Inc. 77,100 5,277 *Elan Corporation Plc - ADR 263,755 7,781 *Lincare Holdings, Inc. 232,600 8,068 *Patterson Dental Company 399,925 17,047 *Province Healthcare 301,200 5,723 *Shire Pharmaceuticals Group PLC, ADR 286,300 8,338 *Sybron International Corporation 666,600 16,457 *Visx Inc. 107,000 5,537 ----------- TOTAL 74,228 ----------- TECHNOLOGY (47.6%) *Aether Systems, Inc. 47,500 3,402 *Altera Corp. 349,500 17,322 *Bluestone Software, Inc. 28,500 3,277 *CDW Computer Centers, Inc. 326,300 25,655 *CIENA Corporation 167,900 9,654 *Comverse Technology, Inc. 245,550 35,543 *Concord EFS, Inc. 651,225 16,769 *Conexant Systems, Inc. 403,000 26,749 *Copper Mountain Networks 177,000 8,629 *DST Systems, Inc. 303,200 23,138 *Electronic Arts Inc. 129,400 10,870 *Etec Systems, Inc. 219,500 9,850 *Fiserv, Inc. 448,750 17,193 *Foundry Networks, Inc. 27,000 8,146 *Gemstar International Group Limited 549,800 39,173 *Great Plains Software, Inc. 280,100 20,937 *JDS Uniphase Corp. 242,800 39,167 *Keane, Inc. 202,800 6,439 *Microchip Technology, Inc. 400,400 27,402 *Network Appliance Inc. 287,200 23,856 *Netzero, Inc. 33,300 897 *Northpoint Communications 115,800 2,779 *Novellus Systems, Inc. 183,000 22,423 *Paradyne Networks Corp. 68,100 1,856 Paychex, Inc. 540,000 21,600 PE Corp.-PE Biosystems Group 112,000 13,475 *Peregrine Systems, Inc. 368,831 30,475 *PMC-Sierra, Inc. 190,278 30,504 *Proxicom, Inc. 56,300 6,999 *Qlogic Corporation 227,800 36,420 *Sapient Corp. 181,400 25,566 *Scient Corp. 151,020 13,054 *Semtech Corporation 398,600 20,777 *Sycamore Networks, Inc. 4,600 1,417
11 Aggressive Growth Stock Portfolio 18
MARKET SHARES/ VALUE COMMON STOCK (89.9%) PAR (000'S) --------------------------------------------------------- TECHNOLOGY continued *Synopsys, Inc. 285,093 $ 19,030 *Tellabs, Inc. 268,100 17,209 *VeriSign, Inc. 147,000 28,068 *Viant Corp. 61,469 6,085 *Vignette Corporation 215,328 35,098 *ZapMe! Corporation 71,200 614 ----------- TOTAL 707,517 ----------- TRANSPORTATION (1.1%) Expeditors International of Washington, Inc. 159,900 7,006 *Swift Transportation Co., Inc. 515,490 9,085 ----------- TOTAL 16,091 ----------- TOTAL COMMON STOCK (COST $724,799) 1,335,121 ----------- MONEY MARKET INVESTMENTS (10.4%) --------------------------------------------------------- CAPTIVE FINANCE COMPANY (3.1%) Daimler-Chrysler N.A. Holding, 5.50%, 01/28/00 20,000,000 19,917 Ford Motor Credit Company, 6.21%, 01/12/00 25,000,000 24,953 ----------- TOTAL 44,870 ----------- FEDERAL GOVERNMENT AND AGENCIES (1.7%) #Federal Home Loan Mortgage Corp., 4.74%, 01/14/00 23,000,000 22,961 Federal Home Loan Mortgage Corp., 5.51%, 01/10/00 100,000 100 #Federal Home Loan Mortgage Corp., 5.54%, 01/20/00 2,000,000 1,994 ----------- TOTAL 25,055 ----------- FINANCE LESSOR (1.3%) Variable Funding Capital Corp., 6.05%, 01/25/00 20,000,000 19,919 ----------- FINANCE SERVICES (1.4%) Preferred Receivable Funding, 5.25%, 01/27/00 1,500,000 1,494 Preferred Receivable Funding, 6.10%, 01/27/00 19,500,000 19,414 ----------- TOTAL 20,908 -----------
MARKET MONEY MARKET INVESTMENTS SHARES/ VALUE (10.4%) PAR (000's) --------------------------------------------------------- MISCELLANEOUS BUSINESS CREDIT INSTITUTIONS (2.9%) National Rural, 5.80%, 01/25/00 23,000,000 $ 22,911 Quincy Capital Corporation, 6.02%, 01/28/00 20,000,000 19,910 ----------- TOTAL 42,821 ----------- SHORT-TERM BUSINESS CREDIT (0.0%) IBM Credit Corp., 4.00%, 01/04/00 700,000 700 ----------- TOTAL MONEY MARKET INVESTMENTS (COST $154,273) 154,273 ----------- TOTAL INVESTMENTS (100.3%) COST ($879,072)' 1,489,394 ----------- OTHER ASSETS, LESS LIABILITIES (-0.3%) (4,083) ----------- TOTAL NET ASSETS (100.0%) $ 1,485,311 -----------
* Non-Income Producing ADR - American Depository Receipt # Partially held by the custodian in a segregated account as collateral for open futures positions. Information regarding open futures contracts as of December 31, 1999 is summarized below:
UNREALIZED NUMBER OF EXPIRATION APPRECIATION ISSUERS CONTRACTS DATE (000'S) - ------------------------------------------------------------ Midcap 400 Stock Index 353 3/00 $2,409 (Total Notional Value at 12/31/99, $76,866,400)
' At December 31, 1999, the aggregate cost of securities for federal income tax purposes was $880,991 and the net unrealized appreciation of investments based on that cost was $608,403 which is comprised of $631,235 aggregate gross unrealized appreciation and $22,832 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements Aggressive Growth Stock Portfolio 12 19
Objective: Portfolio Strategy: Net Assets Long-term appreciation of capital Participate in the growth of foreign economies by $772,170,457 through diversification into markets investing in securities with high long-term outside the United States earnings potential relative to current market values.
INTERNATIONAL EQUITY PORTFOLIO The International Equity Portfolio offers policyowners the opportunity to participate in the growth of companies in countries throughout the world, particularly those with expanding economies. In selecting investments, the principal focus is on identifying undervalued stocks of companies with strong finances and good long-term growth opportunities, rather than on choosing regions of the world in which to invest. The Portfolio is normally fully invested in equity securities. International stock markets were generally quite strong in 1999, as economies in most of the world strengthened. Paced by a very strong Japanese market, Asian markets improved dramatically, as the financial crisis that began in 1997 seems to have abated. Most European markets posted gains of 20% or more for the year, and Latin American markets were generally up, despite continued economic weakness in these economies. The Portfolio slightly underperformed its benchmark, the Morgan Stanley Capital International EAFE ("Europe-Australasia-Far East") Index, mainly because of an underweighting in Japan, which is a major factor in the index. Balancing this underexposure was very strong stock selection: major Japanese holdings including Sony, Nomura and NTT contributed importantly to performance. Holdings in other Asian nations including Korea also contributed to performance. European markets are looking increasingly like the U.S. market, with performance dominated by a few growth companies and technology names. The Portfolio's value orientation and sell discipline has limited performance somewhat, as some technology and telecommunications names have been sold after reaching target values. In the U.K., holdings of large retailers such as Marks & Spencer and Sainsbury hurt performance as these companies struggled with an increasingly competitive market environment. The Portfolio benefited from its Latin American exposure, especially in the strong Mexican market, where one of the largest holdings, Telefonos de Mexico, more than doubled in price. The International Equity Portfolio is managed for Northwestern Mutual by Templeton Investment Counsel, Inc. ASSET ALLOCATION 12/31/99 [PIE CHART]
AUSTRALIA/NEW NORTH EUROPE ASIA LATIN AMERICA ZEALAND AMERICA OTHER ------ ---- ------------- ------------- ------- ----- Asset Allocation 51.00 20.00 12.00 7.00 5.00 3.00 NON-EQUITY HOLDINGS ---------- Asset Allocation 1.00
TOP 10 HOLDINGS 12/31/99
Company Country % of Net Assets ----------------------------------------------------------------------------------- Sony Corporation Japan 3.4% ----------------------------------------------------------------------------------- The Nomura Securities Co., Ltd. Japan 2.3% ----------------------------------------------------------------------------------- Telefonos de Mexico SA Mexico 2.2% ----------------------------------------------------------------------------------- AXA-UAP SA France 2.0% ----------------------------------------------------------------------------------- Merita Limited "A" Finland 1.9% ----------------------------------------------------------------------------------- Nippon Telephone & Telegraph Corporation Japan 1.8% ----------------------------------------------------------------------------------- Stora Enso OYJ -- R Shares Finland 1.7% ----------------------------------------------------------------------------------- Total Fina SA France 1.7% ----------------------------------------------------------------------------------- Aventis S.A. France 1.7% ----------------------------------------------------------------------------------- Teva Pharmaceutical Industries, Ltd., ADR Israel 1.7%
PERFORMANCE RELATIVE TO THE EAFE INDEX [LINE GRAPH]
INTERNATIONAL EQUITY PORTFOLIO EAFE INDEX ------------------------------ ---------- 4/93 10000.00 10000.00 12/93 12464.00 10970.00 12/94 12451.00 11859.00 12/95 14266.00 13228.00 12/96 17264.00 14068.00 12/97 19384.00 14364.00 12/98 20319.00 17284.00 12/99 24968.00 22002.00
- ------------------------------------------------------------- Average Annual Total Return For Periods Ended December 31, 1999 Since 1 Year 5 Years Inception# - ------------------------------------------------------------- International Equity Portfolio 22.88% 14.93% 14.70% EAFE Index 27.30% 13.16% 12.55% - ------------------------------------------------------------- # Inception date of 4/30/93
As depicted in the graph, the International Equity Portfolio is compared against the Morgan Stanley Capital International EAFE ("Europe-Australasia-Far East") Index. The index is composed of approximately 1100 companies in 20 countries in Europe and the Pacific Basin. The objective of the index is to reflect the movements of stock markets in these countries by representing an unmanaged (indexed) portfolio within each country. The indices are constructed so that companies chosen represent about 60% of market capitalization in each market; industry composition of the market is reflected; and a cross section of large, medium, and small capitalization stocks is included, taking into account liquidity concerns. The index is calculated in U.S. dollars. On May 3, 1994, the Northwestern Mutual International Equity Fund, Inc. (the "Fund") merged into the Northwestern Mutual Series Fund, Inc., International Equity Portfolio (the "Portfolio"). The Portfolio had no assets prior to the merger. After the merger, the assets of the Portfolio were those of the Fund. The investment objectives, policies, management and expenses of the Portfolio are identical to those of the Fund. Accordingly, the performance of the Fund prior to the merger is included with the performance of the Portfolio in the graph and total return figures above. This chart assumes an initial investment of $10,000 made on 4/30/93 (commencement of the Fund's operations). Returns shown include deductions for management and other fund expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. Total returns shown on page 2 reflect mortality and expense risk charges and premium charges deducted from the assets of the separate account. The cost of insurance protection, which is not reflected in the returns shown on this chart, would make the returns significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. 13 International Equity Portfolio 20 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments December 31, 1999
MARKET SHARES/ VALUE COMMON STOCK (98.3%) COUNTRY PAR (000'S) --------------------------------------------------------------- CAPITAL EQUIPMENT (6.2%) Alcatel, ADR France 206,000 $ 9,270 Alcatel, DG France 30,300 6,952 Hong Kong Aircraft & Engineering Hong Kong 2,680,700 4,449 Invensys PLC United Kingdom 107,832 587 Rolls-Royce PLC United Kingdom 2,685,200 9,285 Koninklijke Philips Electronics N.V. Netherlands 57,960 7,874 The Weir Group PLC United Kingdom 2,702,500 9,606 --------- TOTAL 48,023 --------- CONSUMER GOODS (14.8%) Autoliv, Inc. Sweden 279,100 8,164 Aventis SA France 221,000 12,833 *Aventis SA Germany 88,297 5,118 Fiat SPA Ord. Italy 152,790 4,359 Medeva PLC United Kingdom 4,250,000 12,085 Nycomed Amersham PLC United Kingdom 1,628,610 10,149 Ono Pharmaceutical Co., Ltd. Japan 233,000 6,249 Tate & Lyle, PLC United Kingdom 762,600 4,904 Teva Pharmaceutical Industries Ltd., ADR Israel 178,200 12,775 Sony Corporation Japan 87,500 25,952 Volvo Aktiebolaget, B Free Sweden 433,000 11,203 --------- TOTAL 113,791 --------- ENERGY (6.6%) Petroleo Brasileiro SA - Petrobras Brazil 32,500,000 8,276 Ranger Oil Limited Canada 1,055,400 3,298 *Renaissance Energy LTD Canada 540,000 5,425 Repsol S.A. Spain 366,000 8,479 Shell Transport & Trading Company PLC United Kingdom 1,518,500 12,623 Total Fina SA France 97,622 13,017 --------- TOTAL 51,118 --------- FINANCE (21.0%) Australia & New Zealand Bank Group Australia 1,506,097 10,965 AXA-UAP SA France 108,413 15,100 Banco Bradesco SA Brazil 623,750,000 4,893 *Banco Bradesco SA, Rights Brazil 40,502,640 161 Banco de Andulucia Spain 120,000 4,227 Banco Itau S.A. Brazil 2,079,000 1,784
MARKET SHARES/ VALUE COMMON STOCK (98.3%) COUNTRY PAR (000'S) --------------------------------------------------------------- FINANCE continued Bangkok Bank Public Company Ltd Thailand 1,551,800 $ 3,929 Banque Nationale de Paris France 103,385 9,530 *Banque Nationale de Paris, Warrants France 46,345 213 Deutsche Bank AG Germany 108,188 9,129 Hang Lung Development Co. Hong Kong 2,758,000 3,122 HSBC Holdings Hong Kong 568,137 7,967 ING Groep NV Netherlands 209,000 12,607 Merita Limited "A" Finland 2,436,000 14,341 The Nomura Securities Co., Ltd. Japan 987,400 17,832 PartnerRe Ltd. Bermuda 226,600 7,350 Scor France 129,900 5,726 Unibanco Uniao de Bancos Brazil 14,033,500 932 Unidanmark A/S, A Registered Denmark 180,800 12,711 XL Capital Ltd. Bermuda 178,800 9,275 Zurich Versicherungs - Gesellschaft Switzerland 17,900 10,207 --------- TOTAL 162,001 --------- GOLD MINES (2.1%) AngloGold Limited ADR S. Africa 238,800 6,134 Barrick Gold Corporation Canada 390,300 6,963 *Kinross Gold Corporation Canada 1,796,100 3,335 --------- TOTAL 16,432 --------- MATERIALS (11.9%) Agrium, Inc. Canada 473,300 3,727 Akzo Nobel NV Netherland 163,600 8,199 Asia Pulp & Paper Company Ltd. ADR Singapore 477,300 3,759 Bayer AG Germany 157,000 7,426 Boehler - Uddeholm AG Austria 119,556 5,510 *Celanese AG Germany 11,770 214 Companhia Vale do Rio Doce, ADR Brazil 372,000 9,393 Corus Group PLC United Kingdom 4,392,400 11,426 Grupo Mexico, B Shares Mexico 1,320,000 6,541 Hepworth PLC United Kingdom 607,200 1,869 Metsa Serla Oyj, B shares Finland 157,500 1,831 Pioneer International Ltd. Australia 3,197,946 9,644
International Equity Portfolio 14 21
MARKET SHARES/ VALUE COMMON STOCK (98.3%) COUNTRY PAR (000'S) --------------------------------------------------------------- MATERIALS continued Stora Enso OYJ - R shares Finland 754,400 $ 13,142 Stora Kapparbergs, Series B Sweden 507,997 8,723 --------- TOTAL 91,404 --------- MULTI-INDUSTRY (5.1%) Elementis PLC United Kingdom 1,494,000 1,943 Hutchinson Whampoa Limited Hong Kong 798,000 11,600 Pilkington PLC United Kingdom 4,777,300 6,522 Swire Pacific Limited, A Shares Hong Kong 1,459,500 8,618 Swire Pacific Limited, B Shares Hong Kong 3,534,200 3,092 Williams PLC United Kingdom 1,652,900 7,524 --------- TOTAL 39,299 --------- SERVICES (23.4%) Best Denki Co., Ltd. Japan 581,000 5,460 British Airways PLC United Kingdom 1,242,900 8,113 *Cable & Wire Optus Ltd. Australia 2,674,560 8,944 Compania Anonima Nacional Telefonos de Venezuela Venezuela 293,000 7,215 Cia. de Telecomunicaciones de Chile S.A. Chile 273,725 4,996 Embratel Participacoes S.A, ADR Brazil 241,200 6,573 Hyder PLC Cum. Red. Pfd. United Kingdom 401,400 572 Korea Telecom Corporation, ADR Republic Of Korea 97,000 7,251 Kurita Water Industries, Ltd. Japan 299,000 4,753 Laidlaw Transportation Limited Canada 691,580 3,631 Marks & Spencer PLC United Kingdom 1,148,000 5,467 Mayne Nickless Ltd. Australia 1,671,600 4,316 Moebel Walther AG PFD Germany 103,297 800 News Corporation Ltd. Australia 1,014,400 8,697 Nippon Telephone & Telegraph Corporation (NTT) Japan 800 13,704 The Peninsular and Oriental Steam Navigation Company United Kingdom 548,000 9,146 Phillipine Long Distance Telephone, ADR Philippines 127,000 3,286
MARKET SHARES/ VALUE COMMON STOCK (98.3%) COUNTRY PAR (000'S) --------------------------------------------------------------- SERVICES continued Portugal Telecom SA Portugal 395,000 $ 4,329 Pt Indosat, ADR Indonesia 386,900 8,367 J Sainsbury PLC United Kingdom 1,162,100 6,558 SK Telecom Co., LTD., ADR Republic Of Korea 7,351 282 Somerfield PLC United Kingdom 860,766 1,224 Storehouse PLC United Kingdom 2,879,480 2,163 Telecom Corporation of New Zealand Limited New Zealand 1,959,500 9,215 Telecom Italia SPA Italy 1,200,000 7,306 Telefonica de Argentina SA, ADR Argentina 358,300 11,063 Telefonica del Peru SA B shares, ADR Peru 370,800 4,959 Telefonos de Mexico SA, ADR Mexico 154,002 17,325 Telesp Participacoes S.A., ADR Brazil 210,300 5,139 --------- TOTAL 180,854 --------- UTILITIES (7.2 %) Endesa S.A. Spain 252,000 4,999 EVN Energie Versorgung Australia 21,500 3,245 Gener S.A., ADR Chile 299,450 4,641 Hong Kong Electric Holdings Ltd Hong Kong 1,790,000 5,596 Iberdrola S.A. Spain 587,500 8,135 Korea Electric Power Corp., ADR Korea 271,000 8,401 National Power PLC United Kingdom 1,246,864 7,222 Thames Water United Kingdom 430,504 5,370 Veba AG Germany 168,100 8,162 --------- TOTAL 55,771 --------- TOTAL COMMON STOCK (COST $626,644) 758,693 --------- MONEY MARKET INVESTMENTS (1.4%) --------------------------------------------------------------- CAPTIVE FINANCE COMPANY (1.3%) Ford Motor Credit Company, 5.95%, 01/12/2000 United States 9,700,000 9,681 --------- FEDERAL GOVERNMENT AND AGENCIES (.1%) Federal Home Loan Mortgage Corp., 4.74%, 01/14/2000 United States 1,230,000 1,228 --------- TOTAL MONEY MARKET INVESTMENTS (COST $10,909) 10,909 ---------
15 International Equity Portfolio 22
MARKET VALUE (000'S) --------------------------------------------------------------- TOTAL INVESTMENTS (99.7%) (COST $637,553)' $ 769,602 --------- OTHER ASSETS, LESS LIABILITIES (0.3%) 2,568 --------- TOTAL NET ASSETS (100.0%) $ 772,170 ---------
* Non-Income Producing ADR - American Depository Receipt Investment Percentages by Country: United Kingdom 15.97% Japan 9.61% France 9.44% Australia 5.95% Hong Kong 5.77% Other 53.26% ------- Total 100.00%
' At December 31, 1999, the aggregate cost of securities for federal income tax purposes was $637,581 and the net unrealized appreciation of investments based on that cost was $132,021 which is comprised of $196,727 aggregate gross unrealized appreciation and $64,706 gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements International Equity Portfolio 16 23
Objective Portfolio Strategy Net Assets Long-term capital appreciation Invest in a portfolio designed to approximate the $59,644,323 through cost-effective participation composition and returns of the S&P 500 Index. in broad market performance
INDEX 400 STOCK PORTFOLIO The Index 400 Stock Portfolio is designed to achieve results that approximate the performance of the Standard & Poor's MidCap 400 Composite Stock Price Index. This index is a capitalization-weighted index that measures the performance of the mid-range sector of the U.S. stock market. As of December 31, 1999, the 400 companies in the composite had a median market capitalization of $1.6 billion and total market value of $922 billion. For comparison, the 500 large stocks in the S&P 500 Index had a median market capitalization of $8.0 billion and total market value of $12,318 billion. The Index 400 Portfolio, introduced on April 30, 1999, and made available to life policyowners on June 30, 1999, enables policyowners to participate in the performance of mid-sized companies in the U.S. equity market. In its first eight months of operation, the Portfolio achieved the objective of matching the results of the S&P 400 MidCap Index before expenses. SECTOR ALLOCATION 12/31/99 [PIE CHART]
BASIC CONSUMER MATERIALS/CAPITAL HEALTH CONSUMER TECHNOLOGY CYCLICAL GOODS FINANCE CARE UTILITIES STAPLES ENERGY ---------- -------- ----------------- ------- ------ --------- -------- ------ Sector Allocation 25.00 15.00 12.00 11.00 10.00 8.00 7.00 4.00 OTHER INDEX INDUSTRIES FUTURES ---------- ------- Sector Allocation 3.00 5.00
TOP 10 HOLDINGS 12/31/99
Company % of Net Assets ------------------------------------------------------------------------------------ VERITAS Software Corporation 3.8% ------------------------------------------------------------------------------------ Siebel Systems, Inc. 1.6% ------------------------------------------------------------------------------------ Biogen, Inc. 1.3% ------------------------------------------------------------------------------------ Maxim Integrated Products, Inc. 1.3% ------------------------------------------------------------------------------------ Intuit, Inc. 1.2% ------------------------------------------------------------------------------------ Linear Technology Corporation 1.1% ------------------------------------------------------------------------------------ Univision Communications, Inc. 1.1% ------------------------------------------------------------------------------------ MedImmune, Inc. 1.0% ------------------------------------------------------------------------------------ Altera Corporation 1.0% ------------------------------------------------------------------------------------ Harley-Davidson, Inc. 1.0%
PERFORMANCE RELATIVE TO THE S&P 400 MIDCAP INDEX [LINE GRAPH]
INDEX 400 STOCK PORTFOLIO S&P MIDCAP 400 INDEX ------------------------- -------------------- 4/99 10000.00 10000.00 12/99 11288.00 11358.00
- ----------------------------------------------- Average Annual Total Return For Period Ended December 31, 1999 Since Inception# - ----------------------------------------------- Index 400 Stock Portfolio 12.83% S&P MidCap 400 Index 13.58% - ----------------------------------------------- # Inception Date of 4/30/99 (Returns not annualized)
The S&P MidCap 400 Index is a capitalization-weighted index that measures the performance of the mid-range sector of the U.S. stock market. As of December 31, 1999, the 400 companies in the composite had median market capitalization of $1.6 billion and a total market value of $907 billion. The MidCap 400 represents approximately 6% of the market value of S&P's database of over 8,200 equities. This chart assumes an initial investment of $10,000 made on 4/30/99. Returns shown include deductions for management and other fund expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. Total returns shown on page 2 reflect mortality and expense risk charges and premium charges deducted from the assets of the separate account. The loss of insurance protection, which is not reflected in the returns shown on this chart, would make the returns significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the total cost of insurance protection. 17 Index 400 Stock Portfolio 24 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments December 31, 1999
MARKET SHARES/ VALUE COMMON STOCK (94.7%) PAR (000'S) ------------------------------------------------------- BASIC MATERIALS (4.6%) A. Schulman, Inc. 1,900 $ 31 *Airgas, Inc. 4,400 42 AK Steel Holding Corp. 6,200 117 Albemarle Corporation 2,900 56 Bowater Inc. 3,200 174 Cabot Corp. 4,100 84 Carpenter Technology 1,400 38 Chesapeake Corp. 1,300 40 CK Witco Corporation 7,363 98 Cleveland-Cliffs Inc. 700 22 Consolidated Papers, Inc. 5,600 178 *Cytec Industries Inc. 2,600 60 Dexter Corp. 1,400 56 Ethyl Corp. 5,200 20 Ferro Corp. 2,200 48 Georgia Gulf Corp. 1,900 58 Georgia-Pacific Corporation (Timber Group) 5,100 126 H.B. Fuller Co. 900 50 IMC Global Inc. 7,100 116 Kennametal Inc. 1,800 60 Longview Fibre Co. 3,200 46 Lubrizol Corp. 3,400 105 Lyondell Chemical Company 7,200 92 M.A. Hanna Company 3,000 33 Martin Marietta Materials 2,900 119 *Maxxam Inc. 400 17 Minerals Technologies Inc. 1,300 52 Olin Corp. 2,800 55 Oregon Steel Mills Inc. 1,600 13 P.H. Glatfelter Company 2,600 38 Rayonier Inc. 1,700 82 RPM. Inc. 6,800 69 Ryerson Tull Inc. 1,500 29 Solutia Inc. 6,800 105 Sonoco Products Co. 6,300 143 Southdown Inc. 2,200 114 *Ucar International Inc. 2,800 50 Universal Corp-Va 2,000 46 Wausau-Mosinee Paper Corp. 3,200 37 ------- TOTAL 2,719 ------- CAPITAL GOODS (7.3%) Agco Corp. 3,700 50 Albany International Corp. 1,900 29 *American Power Conversion 11,900 314 *American Standard Companies 4,400 202 Ametek Inc. 2,000 38 Carlisle Companies. Inc. 1,900 68 Cordant Technologies Inc. 2,300 76 Diebold Inc. 4,300 101 Donaldson Co. Inc. 2,800 67 Federal Signal Corp. 2,800 45
MARKET SHARES/ VALUE COMMON STOCK (94.7%) PAR (000'S) ------------------------------------------------------- CAPITAL GOODS continued Flowserve Corp. 2,300 $ 39 Granite Construction Inc. 1,700 31 Harsco Corp. 2,500 79 Herman Miller Inc. 4,900 113 Hillenbrand Industries 4,100 130 HON Industries 3,800 83 Hubbell Inc. 4,000 109 *Jabil Circuit, Inc. 5,400 394 *Jacobs Engineering Group Inc. 1,600 52 Kaydon Corporation 2,000 54 *Magnetek Inc. 1,900 15 Newport News Shipbuilding 2,100 58 Nordson Corp. 1,000 48 Pentair Inc. 3,000 116 Precision Castparts Corp. 1,500 39 Reynolds & Reynolds 4,800 108 *Sanmina Corporation 3,600 360 *SCI Systems Inc. 4,500 370 *Sensormatic Electronics Corp. 4,700 82 *Sequa Corp. 600 32 *SPX Corp. 1,900 154 Standard Register Co. 1,700 33 Stewart & Stevenson Services 1,700 20 *Symbol Technologies Inc. 5,400 343 Tecumseh Products Co. 1,200 57 Teleflex, Inc. 2,300 72 Trinity Industries 2,500 71 *Vishay Intertechnology Inc. 5,225 165 Wallace Computer Services, Inc. 2,600 43 York International Corp. 2,500 69 ------- TOTAL 4,329 ------- COMMUNICATION SERVICES (1.7%) Broadwing, Inc. 13,300 490 Comsat Corp. 3,222 64 Telephone & Data Systems Inc. 3,800 479 ------- TOTAL 1,033 ------- CONSUMER CYCLICAL (15.0%) *A.H. Belo Corporation 7,300 139 *Abercrombie & Fitch Co. 6,400 171 *AC Nielsen Corporation 3,600 89 *Acxiom Corporation 5,200 125 *American Eagle Outfitters, Inc. 2,900 131 *Apollo Group Inc. 4,800 96 Arvin Industries Inc. 1,600 45 Bandag Inc. 1,400 35 *Barnes & Noble, Inc. 4,300 89 *BJ's Wholesale Club Inc. 4,500 164 *Blyth Industries Inc. 3,000 74 *Borders Group Inc. 4,800 77 Borg-Warner Automotive, Inc. 1,600 65 *Burlington Industries, Inc. 3,300 13
Index 400 Stock Portfolio 18 25
MARKET SHARES/ VALUE COMMON STOCK (94.7%) PAR (000'S) ------------------------------------------------------- CONSUMER CYCLICAL continued Callaway Golf Company 4,700 $ 83 *CDW Computer Centers, Inc. 2,700 212 Cintas Corp. 6,800 361 Claire's Stores Inc. 3,100 69 Clayton Homes Inc. 8,900 82 *Compusa Inc. 5,700 29 *Convergys Corp. 9,400 289 *DeVry, Inc. 4,300 80 *Dollar Tree Stores, Inc. 3,800 184 Family Dollar Stores 10,700 175 Fastenal Co. 2,300 103 *Federal-Mogul Corp. 4,400 89 *Furniture Brands International Inc. 3,200 70 *Gtech Holdings Corp. 2,200 48 Harley-Davidson, Inc. 9,400 602 Harte-Hanks Communications 4,300 94 Heilig-Meyers Co. 3,700 10 Houghton Mifflin Co. 1,900 80 International Game Technology 5,600 114 International Speedway Corporation 3,300 166 *Jones Apparel Group, Inc. 7,551 205 Kelly Services Inc. 2,200 55 Lancaster Colony Corp. 2,500 83 *Land's End Inc. 1,900 66 *Lear Corporation 4,100 131 Lee Enterprises 2,700 86 *Mandalay Resort Group 5,600 113 Manpower Inc. 4,700 177 Mark IV Industries Inc. 2,900 51 Media General Inc. 1,600 83 Meritor Automotive Inc. 4,300 83 *Micro Warehouse Inc. 2,200 41 Modine Manufacturing Co. 1,800 45 *Modis Professional Services Inc. 5,900 84 *Mohawk Industries Inc. 3,700 98 *Navigant Consulting Co. 2,600 28 NCH Corp. 300 13 *NCO Group, Inc. 1,500 45 Neiman Marcus Group, Inc 3,000 84 *Officemax Inc. 7,000 39 *Ogden Corp. 3,000 36 Olsten Corp. 5,000 57 *Park Place Entertainment 18,700 234 *Payless Shoesource Inc. 2,000 94 Pittston Brink's Group 2,500 55 *Premier Parks Inc. 4,800 139 The Readers Digest Association, Inc. 6,600 193 *Robert Half International, Inc. 5,600 160 Rollins Inc. 1,900 28 Ross Stores Inc. 5,600 100 *Saks Incorporated 8,900 139 *Scholastic Corp. 1,000 62 Shaw Industries Inc. 8,500 131 Sotheby's Holdings 3,600 108 Stewart Enterprises, Inc. 6,900 33
MARKET SHARES/ VALUE COMMON STOCK (94.7%) PAR (000'S) ------------------------------------------------------- CONSUMER CYCLICAL continued Superior Industries International 1,700 $ 46 *Sylvan Learning Systems Inc. 3,200 42 *Tech Data Corp. 3,200 87 Tiffany & Co. 4,300 384 *Unifi Inc. 3,700 46 USG Corp. 3,100 146 Viad Corp. 6,000 167 Warnaco Group 3,400 42 Washington Post 600 334 Wellman Inc. 1,900 35 Westpoint Stevens Inc. 3,400 59 *Williams-Sonoma, Inc. 3,400 156 ------- TOTAL 8,976 ------- CONSUMER STAPLES (7.2%) Banta Corp. 1,700 38 Bergen Brunswig Corp. 8,300 69 Bob Evans Farms, Inc. 2,400 37 *Brinker International Inc. 4,100 98 *Buffets Inc. 2,600 26 Carter-Wallace Inc. 2,800 50 CBRL Group Inc. 3,700 36 *Chris-Craft Industries Inc. 2,100 151 Church & Dwight Inc. 2,400 64 Dean Foods Co. 2,400 95 Dole Food Company 3,500 57 Dreyer's Grand Ice Cream Inc. 1,700 29 Flowers Industries Inc. 6,200 99 Hannaford Brothers Co. 2,600 180 *Hispanic Broadcasting Corp. 3,400 314 Hormel Foods Corp. 4,500 183 IBP Inc. 5,700 103 International Multifoods Corp. 1,200 16 Interstate Bakeries 4,300 78 The J.M. Smucker Co. 1,800 35 Lance Inc. 1,800 18 *Lone Star Steakhouse & Saloon 2,000 18 McCormick & Co. 4,400 131 *Outback Steakhouse Inc. 4,600 119 *Papa John's International Inc. 1,900 49 *Perrigo Company 4,500 36 *PSS World Medical, Inc. 4,400 42 RJ Reynolds Tobacco Holdings Inc. 6,700 118 Ruddick Corp. 2,900 45 *Starbucks Corp. 11,200 272 *Suiza Foods Corp. 2,100 83 The Dial Corporation 6,300 153 Tyson Foods Inc. 14,200 231 *U.S. Foodservice 6,100 102 Universal Foods Corp. 3,100 63 *Univision Communications Inc. 6,300 644 *Vlasic Foods International 2,800 16 *Westwood One Inc. 3,300 251 Whitman Corp. 8,700 117 ------- TOTAL 4,266 -------
19 Index 400 Stock Portfolio 26
MARKET SHARES/ VALUE COMMON STOCK (94.7%) PAR (000'S) ------------------------------------------------------- ENERGY (4.3%) *BJ Services Company 4,400 $ 184 Devon Energy Corporation 4,900 161 Ensco International Inc. 8,500 194 *Global Marine Inc. 10,700 178 *Hanover Compressor Company 1,800 68 Murphy Oil Corp. 2,800 161 *Nabors Industries, Inc. 8,400 260 Noble Affiliates Inc. 3,500 75 *Noble Drilling Corp. 8,100 265 *Ocean Energy Inc. 10,300 80 Pennzoil-Quaker State Company 4,800 49 *Pioneer Natural Resources Co. 6,200 55 *Santa Fe Snyder Corp. 11,200 90 *Smith International Inc. 3,100 154 Tidewater Inc. 3,400 122 Ultramar Diamond Shamrock Corp. 5,300 120 Valero Energy Corp. 3,500 70 *Varco International Inc. 4,000 41 *Weatherford International, Inc. 6,500 260 ------- TOTAL 2,587 ------- FINANCE (10.4%) A.G. Edwards, Inc. 5,800 186 Allmerica Financial Corp. 3,300 184 Ambac Financial Group, Inc. 4,300 224 American Financial Group Inc. 3,700 98 Associated Banc-Corp 3,900 134 Astoria Financial Corporation 3,400 103 CCB Financial Corp. 2,400 105 Charter One Financial Inc. 13,160 252 City National Corp. 2,800 92 Compass Bancshares Inc. 7,000 156 Dime Bancorp, Inc. 7,000 106 *E*TRADE Group Inc. 14,500 379 Everest Reinsurance Hldgs 3,000 67 Finova Group Inc. 3,800 135 First Security Corporation 12,000 306 First Tennessee National Corp. 8,100 231 First Virginia Banks Inc. 3,100 133 FirstMerit Corporation 5,600 129 GreenPoint Financial Corp. 6,700 160 Hibernia Corp. 9,900 105 Horace Mann Educators 2,500 49 HSB Group Inc. 1,800 61 Keystone Financial Inc. 3,000 63 Legg Mason, Inc. 3,500 127 Marshall & Ilsley Corp. 6,400 402 Mercantile Bankshares Corp. 4,300 137 National Commerce Bancorporation 6,500 147 North Fork Bancorporation 8,400 147 Ohio Casualty Corporation 3,800 61 Old Republic International Corporation 8,000 109 Pacific Century Financial Corp. 5,000 93 The PMI Group Inc. 2,750 134 Protective Life Corp. 4,000 127
MARKET SHARES/ VALUE COMMON STOCK (94.7%) PAR (000'S) ------------------------------------------------------- FINANCE continued Provident Financial Group, Inc. 2,700 $ 97 Reliastar Financial Corp. 5,300 208 Sovereign Bancorp Inc. 13,500 101 TCF Financial Corp. 5,100 127 Unitrin Inc. 4,500 169 Webster Financial Corp. 2,800 66 Westamerica Bancorporation 2,400 67 Wilmington Trust Corporation 2,000 96 *Zions Bancorporation 5,200 308 ------- TOTAL 6,181 ------- HEALTH CARE (9.8%) *Acuson Corp. 1,700 21 *Apria Healthcare Group Inc. 3,200 57 Beckman Coulter Inc. 1,800 92 *Beverly Enterprises Inc. 6,300 28 *Biogen Inc. 9,300 786 *Chiron Corp. 11,200 475 *Covance Inc. 3,600 39 Dentsply International Inc. 3,300 78 *Express Scripts, Inc. 2,400 154 *First Health Group Corp. 3,100 83 *Forest Laboratories, Inc. 5,100 313 *Foundation Health Systems 7,500 75 *Genzyme Corporation (General Division) 5,100 230 *Gilead Sciences Inc. 2,600 141 *Health Management Associates Inc. 15,600 209 ICN Pharmaceuticals Inc. 4,800 121 *Ivax Corp. 6,600 170 *Lincare Holdings, Inc. 3,600 125 *Medimmune Inc. 3,700 614 *Millennium Pharmaceuticals 2,200 268 *Minimed Inc. 1,900 139 Mylan Laboratories 8,000 201 Omnicare Inc. 5,600 67 *Oxford Health Plans 5,000 63 *Pacificare Health Systems 2,800 148 *Quorum Health Group, Inc. 4,500 42 *Sepracor Inc. 2,000 198 *Steris Corp. 4,200 43 *Stryker Corp. 6,000 418 *Sybron International Corporation 6,400 158 *Total Renal Care Holdings 5,000 33 *Trigon Healthcare Inc. 2,600 77 *VISX Inc. 3,900 202 ------- TOTAL 5,868 ------- TECHNOLOGY (25.1%) *Adtran Inc. 2,400 123 *Affiliated Computer Svcs Inc. 3,000 138 *Altera Corp. 12,300 610 *Arrow Electronics Inc. 5,900 150 *Atmel Corporation 12,400 367 Avnet Inc. 2,600 157
Index 400 Stock Portfolio 20 27
MARKET SHARES/ VALUE COMMON STOCK (94.7%) PAR (000'S) ------------------------------------------------------- TECHNOLOGY continued *Cadence Design Systems Inc. 15,000 $ 360 *Cambridge Technology Partners Inc. 3,700 97 *CheckFree Holdings Corporation 3,400 355 *Cirrus Logic Inc. 4,000 53 Comdisco Inc. 9,400 350 *Concord EFS, Inc. 12,650 326 *Cypress Semiconductor Corp. 6,500 210 *DST Systems, Inc. 3,900 298 *Electronic Arts Inc. 3,800 319 *Fiserv, Inc. 7,650 293 *Gartner Group Inc. 5,400 75 Harris Corporation 4,900 131 *Imation Corporation 2,300 77 *Informix Corp. 11,800 134 *Integrated Device Technology Inc. 5,500 160 *Intuit Inc. 11,500 689 *Investment Technology Group Inc. 2,000 58 *Keane Inc. 4,400 140 *Legato Systems Inc. 5,000 344 Linear Technology Corp. 9,400 673 *Litton Industries Inc. 2,800 140 *Maxim Integrated Products 16,600 783 *Mentor Graphics Corp. 4,100 54 *Microchip Technology, Inc. 3,100 212 *NCR Corporation 6,100 231 *Network Associates Inc. 8,600 230 *NOVA Corporation 4,500 142 *Novellus Systems, Inc. 2,400 294 *Policy Management Systems Corporation 2,200 56 Polycom, Inc. 2,000 127 *Qlogic Corporation 2,200 352 *Quantum Corp.-DLT & Storage 10,200 154 *Rational Software Corp. 5,400 265 *Siebel Systems Inc. 11,400 958 *Sterling Commerce Inc. 5,400 184 *Sterling Software, Inc. 5,200 164 *Storage Technology Corp. 6,200 114 *Structural Dynamics Research 2,200 28 *Sungard Data Systems Inc. 7,400 176 Sykes Enterprises, Inc. 2,600 114 *Symantec Corp. 3,500 205 *Synopsys, Inc. 4,400 294 *Transaction Systems Architects, Inc. 2,000 56 *VERITAS Software Corp. 15,800 2,261 *Vitesse Semiconductor Corp. 9,500 498 *Waters Corp. 3,800 201 ------- TOTAL 14,980 ------- TRANSPORTATION (1.0%) Airborne Freight Corp. 3,000 66 *Alaska Airgroup Inc. 1,600 56 Alexander & Baldwin Inc. 2,700 62 Arnold Industries Inc. 1,500 21 CNF Transportation Inc. 3,000 104
MARKET SHARES/ VALUE COMMON STOCK (94.7%) PAR (000'S) ------------------------------------------------------- TRANSPORTATION continued Gatx Corp. 3,100 $ 105 J.B. Hunt Transport Services, Inc. 2,200 30 Overseas Shipholding Group 2,200 33 *Swift Transportation Co., Inc. 4,000 70 *Wisconsin Central Transport 3,200 43 ------- TOTAL 590 ------- UTILITIES (8.3%) AGL Resources Inc. 3,500 60 Allegheny Energy Inc. 7,100 191 Alliant Energy Corp. 4,800 132 American Water Works Inc. 6,000 127 Black Hills Corp. 1,300 29 *Calpine Corp. 3,800 243 Cleco Corporation 1,400 45 CMP Group Inc. 2,000 55 Conectiv Inc. 5,800 98 DPL Inc. 9,800 170 DQE, Inc. 4,600 159 Energy East Corp. 7,100 148 Hawaiian Electric Industries, Inc. 2,000 58 Idacorp Inc. 2,300 62 Illinova Corp. 4,300 149 Indiana Energy Inc. 1,800 32 Ipalco Enterprises Inc. 5,300 90 Kansas City Power & Light 3,800 84 KeySpan Corporation 8,600 199 Kinder Morgan, Inc. 6,900 139 LG&E Energy Corp. 8,000 139 MCN Energy Group Inc. 5,300 126 *Midamerican Energy Holdings Co. 3,800 128 Minnesota Power Inc. 4,500 76 Montana Power Co. 6,800 245 National Fuel Gas Co. 2,400 112 New England Electric System 3,600 186 NiSource Inc. 7,700 138 *Northeast Utilities 8,100 167 NSTAR 3,900 158 OGE Energy Corp. 4,800 91 Potomac Electric Power 7,300 167 Public Service Co. Of New Mexico 2,500 41 Puget Sound Energy Inc. 5,200 101 Questar Corp. 5,100 76 Scana Corp. 6,400 172 Sierra Pacific Resources 4,781 83 Teco Energy Inc. 8,200 152 Utilicorp United Inc. 5,700 111 Washington Gas Light Co. 2,900 80 Wisconsin Energy Corporation 7,200 139 ------- TOTAL 4,958 ------- TOTAL COMMON STOCK (COST $52,637) 56,487 -------
21 Index 400 Stock Portfolio 28
MARKET SHARES/ VALUE MONEY MARKET INVESTMENTS (4.7%) PAR (000's) ------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (4.7%) Federal Home Loan Mortgage Corp., 4.75%, 01/14/00 1,800,000 $ 1,797 #Federal Home Loan Mortgage Corp., 5.51%, 01/10/00 700,000 699 #Federal Home Loan Mortgage Corp., 5.54%, 01/20/00 300,000 299 ------- TOTAL MONEY MARKET INVESTMENTS (COST $2,795) 2,795 ------- TOTAL INVESTMENTS (99.4%) (COST $55,432)' 59,282 OTHER ASSETS, LESS LIABILITIES (0.6%) 362 ------- TOTAL NET ASSETS (100.0%) $59,644 -------
* Non-Income Producing # Partially held by the custodian in a segregated account as collateral for open futures positions. Information regarding open futures contracts as of December 31, 1999 is summarized below:
UNREALIZED NUMBER OF EXPIRATION APPRECIATION ISSUER CONTRACTS DATE (000'S) - ------------------------------------------------------------ Midcap 400 Stock Index 13 3/00 $132 (Total Notional Value at 12/31/99, $2,787,400)
' At December 31, 1999, the aggregate cost of securities for federal income tax purposes was $55,432 and the net unrealized appreciation of investments based on that cost was $3,850 which is comprised of $7,710 aggregate gross unrealized appreciation and $3,860 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements Index 400 Stock Portfolio 22 29
Objective: Portfolio Strategy: Net Assets Long-term appreciation of capital Hold a diversified mix of high quality growth $676,133,829 with moderate risk stocks of medium and large companies with above-average potential for earnings growth.
GROWTH STOCK PORTFOLIO The Growth Stock Portfolio is invested in high quality companies of large to medium capitalization with strong financial characteristics and the ability to generate internal growth. A key factor in stock selection is the choice of industries with good earnings potential, based on analysis of economic trends to determine their impact on various sectors of the economy. Stock selection is made through "top down" analysis: first industry and market sector choices are made based on the economic environment, and then the most promising companies within each sector are selected as holdings. A strategy of this portfolio is to go beyond the most familiar "blue chip" names to seek out medium-sized companies with stock prices that do not yet reflect their potential for growth. Diversification across 70 to 90 stocks in a wide range of industry groups reduces the portfolio's risk profile. The Portfolio's performance has benefited from its increased exposure to technology stocks, with holdings selected from high quality companies that have already become profitable and have excellent growth prospects. The largest technology holdings in the Portfolio are among the industry leaders: Microsoft, IBM and Cisco Systems. Retail holdings, including Kohl's, Costco, Dayton-Hudson and Wal-Mart, have continued to perform well, as retailers benefit from a strong consumer economy. Exposure to media stocks has been increased to take advantage of a very strong advertising environment, which is being driven by the continued strong economy and spending by Internet companies to build brand identity and attract consumers to their web sites. With the presidential election and Olympics coming up in 2000, media companies should continue to perform well. An underweighted position in financial services, with minimal exposure to banks, has proven to be a good decision, as bank mergers have generally failed to produce the anticipated cost savings. SECTOR ALLOCATION 12/31/99 [PIE CHART]
BASIC CONSUMER CONSUMER MATERIALS/CAPITAL HEALTH OTHER TECHNOLOGY CYCLICALS STAPLES GOODS FINANCE CARE ENERGY INDUSTRIES ---------- --------- -------- ----------------- ------- ------ ------ ---------- Sector Allocation 26.00 16.00 10.00 9.00 7.00 5.00 5.00 9.00 INDEX CASH FUTURES EQUIVALENTS ------- ----------- Sector Allocation 10.00 3.00
TOP 10 HOLDINGS 12/31/99
Company % of net assets --------------------------------------------------------------------------------- Microsoft Corporation 3.0% --------------------------------------------------------------------------------- General Electric Company 2.6% --------------------------------------------------------------------------------- Cisco Systems, Inc. 2.5% --------------------------------------------------------------------------------- Wal-Mart Stores, Inc. 2.0% --------------------------------------------------------------------------------- Citigroup, Inc. 1.8% --------------------------------------------------------------------------------- Intel Corporation 1.8% --------------------------------------------------------------------------------- The Home Depot, Inc. 1.8% --------------------------------------------------------------------------------- Lucent Technologies, Inc. 1.8% --------------------------------------------------------------------------------- Nortel Networks Corporation 1.7% --------------------------------------------------------------------------------- Enron Corp. 1.7%
PERFORMANCE RELATIVE TO THE S&P 500 INDEX [LINE GRAPH]
GROWTH STOCK PORTFOLIO S&P 500 INDEX ---------------------- ------------- 5/94 10000.00 10000.00 12/94 10155.00 10320.00 12/95 13285.00 14180.00 12/96 16063.00 17413.00 12/97 20858.00 23211.00 12/98 26425.00 29826.00 12/99 32370.00 36108.00
- ----------------------------------------------------- Average Annual Total Return For Periods Ended December 31, 1999 Since 1 Year 5 Years Inception# - ----------------------------------------------------- Growth Stock Portfolio 22.50% 26.09% 23.05% S&P 500 Index 21.06% 28.46% 25.45% - ----------------------------------------------------- # Inception date of 5/3/94
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The index is heavily weighted toward stocks with large market capitalizations and represents approximately two-thirds of the total market value of all domestic common stocks. This chart assumes an initial investment of $10,000 made on 5/3/94 (commencement of operations). Returns shown include deductions for management and other fund expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. Total returns shown on page 2 reflect mortality and expense risk charges and premium charges deducted from the assets of the separate account. The cost of insurance protection, which is not reflected in the returns shown on this chart, would make the returns significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. 23 Growth Stock Portfolio 30 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments December 31, 1999
MARKET SHARES/ VALUE COMMON STOCK (87.3%) PAR (000'S) --------------------------------------------------------- BASIC MATERIALS (2.0%) Ecolab, Inc. 203,900 $ 7,978 PPG Industries, Inc. 48,800 3,053 The Mead Corporation 55,000 2,389 --------- TOTAL 13,420 --------- CAPITAL GOODS (7.1%) Avery Dennison Corporation 91,400 6,661 Emerson Electric Co. 59,400 3,408 General Electric Company 114,500 17,719 Honeywell International, Inc. 69,400 4,003 Illinois Tool Works, Inc. 68,000 4,594 *Republic Services, Inc. 215,600 3,099 Tyco International Ltd. 223,400 8,685 --------- TOTAL 48,169 --------- COMMUNICATION SERVICES (4.8%) AT&T Corp. 188,900 9,587 GTE Corporation 82,900 5,850 *MCI WorldCom, Inc. 129,750 6,885 *Nextel Communications, Inc. - Class A 72,500 7,476 SBC Communications, Inc. 50,139 2,444 --------- TOTAL 32,242 --------- CONSUMER CYCLICALS (16.4%) *Amazon.com, Inc. 41,900 3,190 *Barnes & Noble, Inc. 141,000 2,908 *barnesandnoble.com, inc. - Class A 81,400 1,155 *Costco Wholesale Corporation 62,300 5,685 Dayton Hudson Corporation 67,000 4,920 *eToys, Inc. 68,100 1,788 Ford Motor Company 93,000 4,970 Harley-Davidson, Inc. 171,500 10,987 *Kohl's Corporation 140,600 10,150 Lennar Corporation 32,700 531 Omnicom Group, Inc. 33,600 3,360 The Gap, Inc. 30,350 1,396 The Home Depot, Inc. 179,250 12,290 The Interpublic Group of Companies, Inc. 108,300 6,247 The McGraw-Hill Companies, Inc. 142,200 8,763 The New York Times Company - Class A 129,200 6,347 The ServiceMaster Company 245,250 3,020 Tiffany & Co. 15,800 1,410 Tribune Company 152,000 8,369 Wal-Mart Stores, Inc. 193,000 13,341 --------- TOTAL 110,827 ---------
MARKET SHARES/ VALUE COMMON STOCK (87.3%) PAR (000'S) --------------------------------------------------------- CONSUMER STAPLES (9.6%) Anheuser-Busch Companies, Inc. 48,900 $ 3,466 The Coca-Cola Company 112,800 6,571 The Dial Corporation 252,800 6,146 *Keebler Foods Company 108,100 3,040 Kimberly-Clark Corporation 103,000 6,721 McDonald's Corporation 115,400 4,652 PepsiCo, Inc. 102,100 3,599 The Procter & Gamble Company 96,000 10,518 The Quaker Oats Company 65,600 4,305 Time Warner Inc. 52,500 3,803 *Viacom, Inc. - Class B 76,000 4,593 Walgreen Co. 262,400 7,675 --------- TOTAL 65,089 --------- ENERGY (4.8%) BP Amoco Plc, ADR 90,000 5,338 Chevron Corporation 23,000 1,992 Conoco, Inc. - Class B 210,500 5,236 EOG Resources, Inc. 270,000 4,742 Exxon Mobil Corporation 96,767 7,796 Schlumberger Limited 40,500 2,278 Texaco, Inc. 38,000 2,064 Tosco Corporation 94,000 2,556 Transocean Sedco Forex, Inc. 7,857 265 --------- TOTAL 32,267 --------- FINANCE (7.0%) American International Group, Inc. 8,000 865 The Bank of New York Company, Inc. 133,300 5,332 The Chase Manhattan Corporation 94,880 7,371 Citigroup, Inc. 223,400 12,413 Fifth Third Bancorp 73,300 5,378 The Goldman Sachs Group, Inc. 25,500 2,402 *LaBranche & Co., Inc. 47,200 602 Lehman Brothers Holdings, Inc. 43,600 3,692 Morgan Stanley Dean Witter & Co. 68,700 9,807 --------- TOTAL 47,862 --------- HEALTHCARE (5.2%) Bristol-Myers Squibb Company 116,500 7,478 Eli Lilly and Company 64,900 4,316 *Guidant Corporation 30,600 1,438 Johnson & Johnson 49,100 4,572 Medtronic, Inc. 165,800 6,041 Merck & Co., Inc. 97,400 6,532 Pfizer, Inc. 43,700 1,418 Warner-Lambert Company 38,600 3,163 --------- TOTAL 34,958 ---------
Growth Stock Portfolio 24 31
MARKET SHARES/ VALUE COMMON STOCK (87.3%) PAR (000'S) --------------------------------------------------------- TECHNOLOGY (25.9%) *Agilent Technologies, Inc. 24,900 $ 1,925 *Amdocs Limited 210,000 7,245 *America Online, Inc. 77,600 5,854 *Atmel Corporation 43,700 1,292 *Cisco Systems, Inc. 155,200 16,626 *Concord EFS, Inc. 207,900 5,353 *Dell Computer Corporation 86,800 4,427 Electronic Data Systems Corporation 124,300 8,320 *EMC Corporation 54,800 5,987 *Fiserv, Inc. 266,475 10,209 Hewlett-Packard Company 67,800 7,725 *Intel Corporation 149,600 12,314 International Business Machines Corporation 80,000 8,640 Lucent Technologies, Inc. 162,884 12,186 *Microsoft Corporation 171,400 20,011 Nortel Networks Corporation 112,000 11,312 *Oracle Corporation 57,000 6,388 *Sun Microsystems, Inc. 89,000 6,892 Texas Instruments, Incorporated 64,200 6,219 *TIBCO Software, Inc. 57,500 8,797 W.W. Grainger, Inc. 85,000 4,064 *Williams Communications Group, Inc. 106,500 3,082 --------- TOTAL 174,868 --------- TRANSPORTATION (2.8%) *AMR Corporation 73,900 4,951 Canadian National Railway Company 165,000 4,342 *FDX Corporation 57,000 2,333 *Midwest Express Holdings, Inc. 125,400 3,997 Southwest Airlines Co. 215,775 3,493 --------- TOTAL 19,116 --------- UTILITIES (1.7%) Enron Corp. 252,000 11,183 --------- TOTAL COMMON STOCK (COST $379,101) 590,001 --------- MONEY MARKET INVESTMENTS (13.0%) --------------------------------------------------------- CAPTIVE FINANCE COMPANY (3.0%) Ford Motor Credit Company, 6.21%, 01/12/2000 20,000,000 19,962 --------- FEDERAL AND GOVERNMENT AGENCIES (0.9%) Federal Home Loan Mortgage Corp., 4.75%, 01/14/2000 2,400,000 2,396 #Federal Home Loan Mortgage Corp., 5.54%, 01/20/2000 3,700,000 3,689 #Federal Home Loan Mortgage Corp., 5.57%, 01/20/2000 200,000 199 --------- TOTAL 6,284 ---------
MARKET SHARES/ VALUE MONEY MARKET INVESTMENTS (13.0%) PAR (000'S) --------------------------------------------------------- FINANCE LESSORS (2.9%) Variable Funding Capital Corp., 6.14%, 01/21/2000 20,000,000 $ 19,932 --------- MISCELLANEOUS BUSINESS CREDIT INSTITUTIONS (2.9%) Quincy Capital Corporation, 6.07%, 01/27/2000 20,000,000 19,912 --------- SHORT-TERM BUSINESS CREDIT (3.3%) CXC Incorporated, 6.02%, 02/09/2000 20,000,000 19,870 IBM Credit Corp., 4.00%, 01/04/2000 2,400,000 2,399 --------- TOTAL 22,269 --------- TOTAL MONEY MARKET INVESTMENTS (COST $88,359) 88,359 --------- TOTAL INVESTMENTS (100.3%) (COST $467,460)' 678,360 --------- OTHER ASSETS, LESS LIABILITIES (-0.3%) (2,226) --------- TOTAL NET ASSETS (100.0%) $ 676,134 ---------
* Non-Income Producing ADR - American Depository Receipt # Partially held by the custodian in a segregated account as collateral for open futures positions. Information regarding open futures contracts as of December 31, 1999 is summarized below:
UNREALIZED NUMBER OF EXPIRATION APPRECIATION ISSUERS CONTRACTS DATE (000'S) - ---------------------------------------------------------------- S&P 500 Stock Index 189 3/00 $2,875 (Total Notional Value at 12/31/99, $67,253,645)
' At December 31, 1999, the aggregate cost of securities for federal income tax purposes was $467,460 and the net unrealized appreciation of investments based on that cost was $210,900 which is comprised of $220,019 aggregate gross unrealized appreciation and $9,120 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements 25 Growth Stock Portfolio 32
Objective: Portfolio Strategy: Net Assets Long-term growth of capital and Actively manage a portfolio of equity securities $661,551,933 income, consistent with moderate with a goal of exceeding the total return of the investment risk S&P 500 Index.
GROWTH AND INCOME STOCK PORTFOLIO The Growth and Income Stock Portfolio invests mainly in large-capitalization stocks, with a focus on seeking the best values in the market based on long-term earnings forecasts. A sector balance very close to that of the S&P 500 Index is normally maintained, with the emphasis on undervalued stocks within each industry group; a valuation discipline mandates the sale of stocks regarded as overvalued. More focus is placed on capital appreciation and dividend growth than on current dividends. The Portfolio is normally fully invested in equity securities. The Growth and Income Stock Portfolio has posted disappointing performance over the last year. Market trends, with performance concentrated in technology stocks and large growth companies have been at odds with this Portfolio's value-oriented investment style, which focuses on selecting the securities within each industry group that appear to be most undervalued. In addition, several major holdings have experienced major earnings problems and consequent stock declines. Balancing these downward pressures, technology holdings such as Sun Microsystems, Texas Instruments, Dell and Cisco Systems have helped performance. A large position in Exxon Mobil Corp. proved advantageous, given rising oil prices and anticipated benefits of the recent merger of Exxon and Mobil. In recent months, the Portfolio's managers have modified the portfolio to improve overall quality of holdings while remaining true to the value orientation. There is an increasing focus on maintaining balance between the technology-focused "new economy" and the more traditional sectors of the economy including consumer and industrial companies, where many quality names are now relatively cheap. The present emphasis on the large-capitalization names that are prominent in the market indices will be maintained, particularly in the technology area. Other selections will be made from stocks that are undervalued because of temporary earnings problems or other situations that seem likely to be reversed, with special focus on high quality companies with long-term potential for profitable growth. The Growth and Income Stock Portfolio is managed for Northwestern Mutual by J.P. Morgan Investment Management, Inc. SECTOR ALLOCATION 12/31/99 [PIE CHART]
BASIC MATERIALS/CAPITAL CONSUMER CONSUMER HEALTH OTHER TECHNOLOGY GOODS FINANCE CYCLICALS STAPLES ENERGY CARE INDUSTRIES ---------- ----------------- ------- --------- -------- ------ ------ ---------- Sector Allocation 27.00 15.00 14.00 10.00 9.00 7.00 6.00 11.00 CASH AND EQUIVALENTS ----------- Sector Allocation 1.00
TOP 10 HOLDINGS 12/31/99
Company % of Net Assets --------------------------------------------------------------------------------- Microsoft Corporation 5.0% --------------------------------------------------------------------------------- Cisco Systems, Inc. 4.0% --------------------------------------------------------------------------------- Sun Microsystems, Inc. 3.2% --------------------------------------------------------------------------------- Tyco International Ltd. 3.0% --------------------------------------------------------------------------------- AT&T Corp. 2.9% --------------------------------------------------------------------------------- Exxon Mobil Corporation 2.9% --------------------------------------------------------------------------------- Intel Corporation 2.6% --------------------------------------------------------------------------------- MCI WorldCom, Inc. 2.0% --------------------------------------------------------------------------------- Rohm and Haas Company 1.8% --------------------------------------------------------------------------------- Monsanto Company 1.8%
PERFORMANCE RELATIVE TO THE S&P 500 INDEX [LINE GRAPH]
GROWTH & INCOME STOCK PORTFOLIO S&P 500 INDEX ------------------------------- ------------- 5/94 10000.00 10000.00 12/94 10034.00 10320.00 12/95 13156.00 14180.00 12/96 15783.00 17413.00 12/97 20523.00 23211.00 12/98 25271.00 29826.00 12/99 27158.00 36108.00
- ------------------------------------------------------------- Average Annual Total Return For Periods Ended December 31, 1999 Since 1 Year 5 Years Inception# - ------------------------------------------------------------- Growth & Income Stock Portfolio 7.47% 22.04% 19.29% S&P 500 Index 21.06% 28.46% 25.45% - ------------------------------------------------------------- # Inception date of 5/3/94
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The index is heavily weighted toward stocks with large market capitalizations and represents approximately two-thirds of the total market value of all domestic common stocks. This chart assumes an initial investment of $10,000 made on 5/3/94 (commencement of operations). Returns shown include deductions for management and other fund expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. Total returns shown on page 2 reflect mortality and expense risk charges and premium charges deducted from the assets of the separate account. The cost of insurance protection, which is not reflected in the returns shown on this chart, would make the returns significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. Growth and Income Stock Portfolio 26 33 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments December 31, 1999
MARKET SHARES/ VALUE COMMON STOCK (98.8%) PAR (000'S) -------------------------------------------------------- BASIC MATERIALS (7.2%) Allegheny Technologies Incorporated 160,350 $ 3,598 Bowater Inc. 55,500 3,014 Monsanto Company 325,400 11,592 Reynolds Metals Company 3,400 261 Rohm and Haas Company 291,900 11,877 *Smurfit-Stone Container Corporation 345,834 8,473 Temple-Inland Inc. 74,200 4,893 USX-U.S. Steel Group, Inc. 125,100 4,128 --------- TOTAL 47,836 --------- CAPITAL GOODS (7.4%) Cooper Industries, Inc. 137,000 5,540 Deere & Company 82,900 3,596 General Electric Company 47,300 7,320 Honeywell International, Inc. 116,200 6,703 *Republic Services, Inc. 197,100 2,833 Tyco International Ltd. 514,798 20,013 Waste Management, Inc. 157,717 2,711 --------- TOTAL 48,716 --------- COMMUNICATION SERVICES (7.3%) AT&T Corporation 175,100 8,886 Bell Atlantic Corporation 46,300 2,850 *Global Crossing 73,800 3,690 GTE Corporation 101,400 7,155 *Level 3 Communications, Inc. 29,600 2,424 *MCI WorldCom, Inc. 249,159 13,221 SBC Communications, Inc. 210,610 10,267 --------- TOTAL 48,493 --------- CONSUMER CYCLICALS (9.4%) *Abercrombie & Fitch Co. 136,700 3,648 *Cendant Corporation 248,904 6,611 Circuit City Stores, Inc. 53,900 2,429 *Federated Department Stores, Inc. 111,300 5,628 The Gap, Inc. 66,600 3,064 International Game Technology 208,300 4,231 *Jones Apparel Group, Inc. 185,900 5,043 *Lear Corporation 108,300 3,466 Mattel, Inc. 285,900 3,752 The News Corporation Limited, ADR 226,100 8,648 TJX Companies, Inc. 227,000 4,639 United Parcel Service, Inc. - Class B 21,000 1,449 Wal-Mart Stores, Inc. 138,200 9,553 --------- TOTAL 62,161 ---------
MARKET SHARES/ VALUE COMMON STOCK (98.8%) PAR (000'S) -------------------------------------------------------- CONSUMER STAPLES (9.3%) *AT&T - Liberty Media Group 185,700 $ 10,538 Clorox Company 56,700 2,856 The Coca-Cola Company 30,200 1,759 Gillette Company 155,000 6,384 Kimberly-Clark Corporation 65,800 4,293 PepsiCo, Inc. 149,700 5,277 Philip Morris Companies, Inc. 451,600 10,472 The Procter & Gamble Company 98,500 10,792 The Seagram Company Ltd. 200,200 8,997 --------- TOTAL 61,368 --------- ENERGY (6.8%) Conoco, Inc. - Class B 370,400 9,213 *Cooper Cameron Corp. 99,600 4,874 Exxon Mobil Corporation 237,627 19,144 Shell Transport & Trading Company, ADR 92,200 4,541 Tosco Corporation 267,100 7,262 --------- TOTAL 45,034 --------- FINANCE (14.3%) Ambac Financial Group, Inc. 98,400 5,135 Aon Corporation 218,500 8,740 Bank of America Corporation 187,843 9,427 The CIT Group, Inc. 168,170 3,553 Citigroup, Inc. 154,200 8,568 Dime Bancorp, Inc. 134,900 2,040 Federal National Mortgage Association 59,100 3,690 First Union Corporation 301,500 9,893 The Goldman Sachs Group, Inc. 76,500 7,205 KeyCorp 242,600 5,368 Marsh & McLennan Companies, Inc. 53,550 5,124 U.S. Bancorp 294,600 7,015 UnumProvident Corp. 238,923 7,661 Washington Mutual, Inc. 247,900 6,445 XL Capital Ltd. 96,000 4,980 --------- TOTAL 94,844 --------- HEALTH CARE (6.4%) American Home Products Corporation 134,100 5,289 Bristol-Myers Squibb Company 120,500 7,735 Eli Lilly & Company 84,000 5,586 *Forest Laboratories, Inc. 184,700 11,347 *Tenet Healthcare Corp. 128,500 3,020 Warner-Lambert Company 114,100 9,349 --------- TOTAL 42,326 ---------
27 Growth & Income Stock Portfolio 34
MARKET SHARES/ VALUE COMMON STOCK (98.8%) PAR (000'S) -------------------------------------------------------- TECHNOLOGY (26.8%) *America Online, Inc. 82,200 $ 6,202 *Applied Materials, Inc. 29,000 3,674 *BMC Software, Inc. 48,500 3,877 *Cisco Systems, Inc. 244,050 26,144 Compaq Computer Corporation 167,500 4,533 *Dell Computer Corporation 73,200 3,733 *EMC Corporation 67,300 7,352 *Intel Corporation 211,000 17,368 International Business Machines Corporation 63,900 6,901 Lucent Technologies, Inc. 140,215 10,490 *Microsoft Corporation 284,000 33,157 Motorola, Inc. 67,900 9,998 *Oracle Corporation 62,950 7,054 PE Corp.-PE Biosystems Group 18,400 2,214 *Quantum Corp.-DLT & Storage 93,600 1,416 *Seagate Technology Inc. 52,700 2,454 *Sun Microsystems, Inc. 273,600 21,187 Texas Instruments, Incorporated 96,900 9,387 --------- TOTAL 177,141 --------- TRANSPORTATION (1.5%) Union Pacific Corporation 221,100 9,646 --------- UTILITIES (2.4%) Columbia Energy Group 145,800 9,222 DTE Energy Company 90,200 2,830 Northern States Power Company 73,300 1,429 PG&E Corp. 131,000 2,686 --------- TOTAL 16,167 --------- TOTAL COMMON STOCK (COST $589,891) 653,732 --------- MARKET SHARES/ VALUE MONEY MARKET INVESTMENTS (1.3%) PAR (000'S) -------------------------------------------------------- AUTO RELATED (1.2%) Daimler-Chrysler N.A. Holding, 5.5%, 01/28/2000 8,000,000 $ 7,967 --------- FEDERAL GOVERNMENT AND AGENCIES (0.0%) Federal Home Loan Mortgage Corp., 4.74%, 01/14/2000 200,000 199 --------- FINANCE LESSORS (0.1%) Preferred Receivable Funding, 6.1%, 01/27/2000 500,000 498 --------- TOTAL MONEY MARKET INVESTMENTS (COST $8,664) 8,664 --------- TOTAL INVESTMENTS (100.1%) (COST $598,555)' 662,396 --------- OTHER ASSETS, LESS LIABILITIES (-0.1%) (844) --------- TOTAL NET ASSETS (100.0%) $ 661,552 ---------
* Non-Income Producing ADR - American Depository Receipt ' At December 31, 1999, the aggregate cost of securities for federal income tax purposes was $602,714 and the net unrealized appreciation of investments based on that cost was $59,682 which is comprised of $117,854 aggregate gross unrealized appreciation and $58,172 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements Growth & Income Stock Portfolio 28 35
Objective Portfolio Strategy Net Assets Long-term capital appreciation Invest in a portfolio designed to approximate the $2,271,955,777 through cost-effective participation composition and returns of the S&P 500 Index. in broad market performance
INDEX 500 STOCK PORTFOLIO The Index 500 Stock Portfolio is designed to achieve results that approximate the performance of the Standard & Poor's 500 Composite Stock Price Index. This composite of 500 stocks of large U.S.-based companies, compiled by Standard & Poor's Corporation, is generally regarded as a good proxy for the overall U.S. equity market; the Portfolio therefore enables contract owners to participate in overall performance of the equity market. The Portfolio continues to achieve the objective of matching the results of the S&P 500 before expenses. SECTOR ALLOCATION 12/31/99 [PIE CHART]
TECHNOLOGY FINANCE BASIC ENERGY OTHER ---------- ------- MATERIALS/CAPITAL CONSUMER HEALTH CONSUMER ------ ----- GOODS STAPLES CARE CYCLICAL ----------------- -------- ------ -------- Sector Allocation 29.00 13.00 11.00 11.00 9.00 9.00 5.00 11.00 S&P 500 INDEX FUTURES ------- Sector Allocation 2.00
TOP 10 HOLDINGS 12/31//99
Company % of Net Assets ------------------------------------------------------------------------------------ Microsoft Corporation 4.8% ------------------------------------------------------------------------------------ General Electric Company 4.1% ------------------------------------------------------------------------------------ Cisco Systems, Inc. 2.8% ------------------------------------------------------------------------------------ Wal-Mart Stores, Inc. 2.5% ------------------------------------------------------------------------------------ Exxon Mobil Corporation 2.2% ------------------------------------------------------------------------------------ Intel Corporation 2.2% ------------------------------------------------------------------------------------ Lucent Technologies, Inc. 1.8% ------------------------------------------------------------------------------------ International Business Machines Corporation 1.6% ------------------------------------------------------------------------------------ Citigroup, Inc. 1.5% ------------------------------------------------------------------------------------ American International Group, Inc. 1.3%
PERFORMANCE RELATIVE TO THE S&P 500 INDEX [LINE GRAPH]
INDEX 500 PORTFOLIO S&P 500 INDEX ------------------- ------------- 12/89 10000.00 10000.00 9568.00 9690.00 12/91 12418.00 12645.00 12982.00 13607.00 12/93 14267.00 14981.00 14440.00 15161.00 12/95 19819.00 20831.00 24328.00 25580.00 12/97 32404.00 34098.00 41713.00 43816.00 12/99 50437.00 53044.00
- ----------------------------------------------------------- Average Annual Total Return For Periods Ended December 31, 1999 1 Year 5 Years 10 Years - ----------------------------------------------------------- Index 500 Stock Portfolio 20.91% 28.42% 17.56% S&P 500 Index 21.06% 28.46% 18.16% - -----------------------------------------------------------
On April 30, 1993, the Portfolio was indexed to approximate the performance of the Standard & Poor's 500 Composite Stock Price Index. Before that date, the Portfolio was actively managed. The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The index is heavily weighted toward stocks with large market capitalizations and represents approximately two-thirds of the total market value of all domestic common stocks. This chart assumes an initial investment of $10,000 made on 12/31/89. Returns shown include deductions for management and other fund expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. Total returns shown on page 2 reflect mortality and expense risk charges and premium charges deducted from the assets of the separate account. The cost of insurance protection, which is not reflected in the returns shown on this chart, would make the returns significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. 29 Index 500 Stock Portfolio 36 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments December 31, 1999
MARKET SHARES/ VALUE COMMON STOCK (98.5%) PAR (000'S) --------------------------------------------------------- BASIC MATERIALS (3.0%) Air Products & Chemicals, Inc. 41,700 $ 1,400 Alcan Aluminum Limited 41,100 1,693 Alcoa Inc. 66,800 5,544 Allegheny Technologies Incorporated 17,367 390 Archer Daniels Midland Company 112,449 1,371 Barrick Gold Corporation 71,000 1,256 Bemis Company, Inc. 9,500 331 *Bethlehem Steel Corporation 23,800 199 Boise Cascade Corporation 10,400 421 Champion International 17,500 1,084 Dow Chemical Company 40,100 5,358 E.I. du Pont de Nemours & Company 189,900 12,510 Eastman Chemical Company 14,225 678 Ecolab, Inc. 23,600 923 Engelhard Corp. 22,900 432 *FMC Corporation 5,800 332 *Freeport-McMoRan Copper & Gold, Inc. 29,800 630 Georgia Pacific Corp. 31,200 1,583 Great Lakes Chemical 10,600 405 Hercules Inc. 19,300 538 Homestake Mining Company 47,400 370 *Inco Limited 34,900 820 International Flavors & Fragrances, Inc. 19,300 729 International Paper Company 75,270 4,248 Louisiana Pacific Corporation 19,600 279 The Mead Corporation 18,600 808 Monsanto Company 115,400 4,111 Newmont Mining Corporation 30,480 747 Nucor Corp. 15,900 872 *Pactiv Corporation 31,000 329 Phelps Dodge Corporation 14,225 955 Placer Dome Inc. 59,300 638 Potlatch Corporation 5,300 237 PPG Industries, Inc. 31,600 1,977 Praxair 29,000 1,459 Reynolds Metals Company 11,400 874 Rohm and Haas Company 39,613 1,612 Sigma-Aldrich Corp. 18,400 553 Temple-Inland Inc. 10,200 673 Union Carbide Corporation 24,200 1,615 USX-U.S. Steel Group, Inc. 16,100 531 Vulcan Materials Co. 18,200 727 *W.R. Grace & Co. 13,000 180 Westvaco Corporation 18,250 595 Weyerhaeuser Company 42,900 3,081 Willamette Industries, Inc. 20,300 943 Worthington Industries 16,750 277 ----------- TOTAL 67,318 -----------
MARKET SHARES/ VALUE COMMON STOCK (98.5%) PAR (000'S) --------------------------------------------------------- CAPITAL GOODS (8.3%) *Allied Waste Industries Inc. 34,300 $ 302 Avery Dennison Corporation 20,700 1,509 B. F. Goodrich Company 20,000 550 Ball Corporation 5,500 217 Boeing Company 174,876 7,268 Briggs & Stratton Corporation 4,200 225 Caterpillar, Inc. 64,700 3,045 Cooper Industries, Inc. 17,200 696 Corning, Inc. 44,600 5,751 Crane Co. 12,275 244 Crown Cork & Seal Company, Inc. 22,300 499 Cummins Engine Company, Inc. 7,600 367 Danaher Corporation 25,900 1,250 Deere & Company 42,500 1,843 Dover Corporation 37,900 1,720 Eaton Corporation 13,100 951 Emerson Electric Co. 79,100 4,538 Fluor Corporation 13,800 633 Foster Wheeler Corporation 7,400 66 General Dynamics Corporation 36,300 1,915 General Electric Company 597,200 92,417 Honeywell International, Inc. 143,650 8,287 Illinois Tool Works, Inc. 54,600 3,689 *Ingersoll-Rand Company 30,100 1,657 ITT Industries Inc. 16,000 535 Johnson Controls, Inc. 15,500 882 Lockheed Martin Corporation 71,908 1,573 McDermott International, Inc. 10,800 98 Milacron Inc. 6,700 103 Millipore Corp. 8,200 317 Minnesota Mining & Manufacturing Co. 73,300 7,174 Molex Inc. 28,200 1,599 NACCO Industries, Inc. 1,500 83 National Service Industries, Inc. 7,400 218 *Navistar International Corporation 12,000 569 Northrop Grumman Corporation 12,600 681 *Owens-Illinois, Inc. 28,400 712 Paccar Inc. 14,270 632 Pall Corporation 22,600 487 Parker-Hannifin Corporation 19,775 1,015 Pitney Bowes Inc. 48,700 2,353 Rockwell International Corp. 34,800 1,666 *Sealed Air Corporation 15,271 791 *Solectron Corporation 53,300 5,070 Textron Inc. 27,300 2,094 *Thermo Electron Corporation 28,700 430 Thomas & Betts Corporation 10,400 331 Timken Company 11,300 231 Tyco International Ltd. 304,640 11,843 United Technologies Corp. 87,700 5,700 Waste Management, Inc. 112,785 1,938 ----------- TOTAL 188,764 -----------
Index 500 Stock Portfolio 30 37
MARKET SHARES/ VALUE COMMON STOCK (98.5%) PAR (000'S) --------------------------------------------------------- COMMUNICATION SERVICES (7.8%) ALLTEL Corporation 55,600 $ 4,597 AT&T Corporation 581,838 29,528 Bell Atlantic Corporation 282,684 17,403 Bellsouth Corporation 343,300 16,071 CenturyTel Inc. 25,400 1,203 *Global Crossing 139,910 6,996 GTE Corporation 178,600 12,603 *MCI WorldCom, Inc. 511,473 27,140 *Nextel Communications, Inc. 65,800 6,786 SBC Communications, Inc. 621,625 30,304 Sprint Corporation 157,900 10,629 *Sprint PCS 80,050 8,205 U S WEST, Inc. 91,908 6,617 ----------- TOTAL 178,082 ----------- CONSUMER CYCLICALS (9.1%) American Greetings Corp. 12,300 291 Armstrong World Industries Inc. 7,300 244 *Autozone, Inc. 27,100 876 *Bed Bath & Beyond Inc. 25,400 883 *Best Buy Co. Inc. 37,100 1,862 Black & Decker Corporation 15,800 826 Brunswick Corporation 16,800 374 Carnival Corporation 111,700 5,341 *Cendant Corporation 131,133 3,483 Centex Corporation 10,900 269 Circuit City Stores, Inc. 36,600 1,649 *Consolidated Stores Corporation 20,100 327 Cooper Tire & Rubber Company 13,800 215 *Costco Wholesale Corporation 40,207 3,669 Dana Corporation 30,200 904 Dayton Hudson Corporation 80,500 5,912 Delphi Automotive Systems Corp. 102,837 1,620 Dillard's, Inc. 19,500 394 Dollar General Corp. 40,943 931 Dow Jones & Company, Inc. 16,500 1,122 Dun & Bradstreet Corporation 29,300 864 *Federated Department Stores, Inc. 38,000 1,921 Fleetwood Enterprises, Inc. 6,100 126 Ford Motor Company 220,300 11,772 Gannet Company Inc. 50,900 4,152 The Gap, Inc. 156,075 7,179 General Motors Corp. 117,300 8,526 Genuine Parts Company 32,600 809 Goodyear Tire & Rubber Company 28,500 803 H & R Block, Inc. 17,800 779 Harcourt General 13,000 523 *Harrahs Entertainment 23,400 619 Hasbro Inc. 35,475 676 Hilton Hotels Corporation 67,100 646 The Home Depot, Inc. 404,994 27,767 *Huttig Building Products, Inc. 2,727 13 IMS Health Incorporated 57,000 1,550 The Interpublic Group of Companies, Inc. 51,300 2,959
MARKET SHARES/ VALUE COMMON STOCK (98.5%) PAR (000'S) --------------------------------------------------------- CONSUMER CYCLICALS continued J.C. Penney Company, Inc. 48,000 $ 957 Jostens, Inc. 6,200 151 Kaufman & Broad Home Corp. 8,700 210 *Kmart Corporation 89,900 905 Knight-Ridder, Inc. 14,800 881 *Kohl's Corporation 29,600 2,137 Leggett & Platt Inc. 35,800 767 The Limited, Inc. 38,974 1,688 Liz Claiborne, Inc. 11,200 421 Lowe's Companies, Inc. 69,400 4,147 Marriott International 45,300 1,430 Masco Corporation 80,600 2,045 Mattel, Inc. 76,488 1,004 May Department Stores Company 60,800 1,961 Maytag Corporation 15,900 763 The McGraw-Hill Companies, Inc. 35,800 2,206 Meredith Corporation 9,400 392 *Mirage Resorts, Incorporated 36,200 554 *The Neiman Marcus Group, Inc. 17 0 The New York Times Company 31,700 1,557 Nike, Inc. 51,200 2,538 Nordstrom, Inc. 25,500 668 *Office Depot Inc. 68,200 746 Omnicom Group, Inc. 32,300 3,230 Owens Corning 10,000 193 Pep Boys - Manny, Moe & Jack 9,600 88 Pulte Corporation 7,900 178 *Reebok International Ltd. 10,200 84 Russell Corp. 6,100 102 Sears Roebuck & Co. 69,300 2,109 Service Corporation International 49,500 343 Sherwin-Williams Company 30,800 647 Snap-On Inc. 11,950 317 Springs Industries, Inc. 3,300 132 The Stanley Works 16,200 488 *Staples, Inc. 84,600 1,755 Tandy Corporation 35,200 1,731 Times Mirror Company 10,900 730 TJX Companies, Inc. 57,800 1,181 *Toys "R" Us, Inc. 45,100 646 Tribune Company 43,200 2,379 TRW, Inc. 22,100 1,148 VF Corporation 21,600 648 Wal-Mart Stores, Inc. 810,200 56,005 Whirlpool Corporation 13,700 891 ----------- TOTAL 206,029 ----------- CONSUMER STAPLES (10.9%) Adolph Coors Co. 6,700 352 Alberto-Culver Company 10,200 263 Albertson's, Inc. 76,526 2,468 Anheuser-Busch Companies, Inc. 85,100 6,031 Avon Products, Inc. 47,500 1,567 BESTFOODS 50,800 2,670 Brown-Forman Corporation 12,500 716
31 Index 500 Stock Portfolio 38
MARKET SHARES/ VALUE COMMON STOCK (98.5%) PAR (000'S) --------------------------------------------------------- CONSUMER STAPLES continued Campbell Soup Company 79,000 $ 3,056 Cardinal Health, Inc. 49,650 2,377 *CBS Corporation 138,792 8,874 *Clear Channel Communications, Inc. 61,500 5,489 Clorox Company 43,000 2,166 The Coca-Cola Company 449,600 26,189 Coca Cola Enterprises Inc. 77,400 1,558 Colgate-Palmolive Co. 106,100 6,896 Comcast Corporation 136,400 6,854 Conagra, Inc. 88,900 2,006 CVS Corporation 71,300 2,848 Darden Restaurant, Inc. 24,100 437 Deluxe Corp. 13,800 379 Fort James Corporation 40,200 1,100 Fortune Brands, Inc. 30,300 1,002 General Mills, Inc. 55,700 1,991 Gillette Company 197,500 8,135 Great Atlantic & Pacific Tea Co., Inc. 7,000 195 H.J. Heinz Company 65,250 2,598 Hershey Foods Corporation 25,400 1,206 Kellogg Company 73,800 2,274 Kimberly-Clark Corporation 97,044 6,332 *The Kroger Co. 151,000 2,850 Longs Drug Stores Corp. 7,100 183 McDonald's Corporation 246,600 9,941 McKesson HBOC, Inc. 51,245 1,156 *MediaOne Group, Inc. 110,400 8,480 Nabisco Group Holdings Corp. 59,400 631 Newell Rubbermaid Inc. 51,332 1,489 PepsiCo, Inc. 266,200 9,384 Philip Morris Companies, Inc. 435,200 10,091 The Procter & Gamble Company 241,900 26,503 The Quaker Oats Company 24,400 1,601 R.R. Donnelley & Sons Company 23,200 576 Ralston Purina Group 58,900 1,642 Rite Aid Corporation 47,100 527 *Safeway Inc. 92,900 3,304 Sara Lee Corporation 164,500 3,629 The Seagram Company Ltd. 78,700 3,537 Supervalue Inc. 25,300 506 Sysco Corporation 60,300 2,386 Time Warner Inc. 235,500 17,059 *Tricon Global Restaurants, Inc. 27,990 1,081 Tupperware 10,500 178 Unilever NV 104,067 5,665 UST Incorporated 31,700 798 *Viacom, Inc 126,812 7,664 Walgreen Company 182,700 5,344 Walt Disney Company 375,507 10,984 Wendy's International, Inc. 22,100 456 Winn-Dixie Stores, Inc. 27,100 649 Wm. Wrigley Jr. Company 21,200 1,758 ----------- TOTAL 248,081 -----------
MARKET SHARES/ VALUE COMMON STOCK (98.5%) PAR (000'S) --------------------------------------------------------- ENERGY (5.4%) Amerada Hess Corporation 16,500 $ 936 Anadarko Petroleum Corporation 23,200 792 Apache Corporation 20,700 765 Ashland, Inc. 13,100 431 Atlantic Richfield Company 58,700 5,078 Baker Hughes, Inc. 59,830 1,260 Burlington Resource, Inc. 39,620 1,310 Chevron Corporation 119,400 10,343 Conoco, Inc. 114,200 2,841 Exxon Mobil Corporation 630,185 50,769 Halliburton Company 80,300 3,232 Helmerich & Payne, Inc. 9,000 196 Kerr-McGee Corporation 15,705 974 Occidental Petroleum Corporation 63,500 1,373 Phillips Petroleum Company 46,100 2,167 *Rowan Companies, Inc. 15,100 327 Royal Dutch Petroleum Co. 390,400 23,595 Schlumberger Limited 99,700 5,608 Sunoco, Inc. 16,500 388 Texaco, Inc. 100,600 5,464 Tosco Corporation 27,700 753 Transocean Sedco Forex, Inc. 19,341 652 Union Pacific Resource Group 45,892 585 Unocal Corp. 44,100 1,480 USX -Marathon Group 56,200 1,387 ----------- TOTAL 122,706 ----------- FINANCE (13.0%) Aflac Inc. 48,400 2,284 Allstate Corporation 145,328 3,488 American Express Company 81,800 13,599 American General Corporation 45,325 3,439 American International Group, Inc. 281,895 30,480 AmSouth Bancorporation 71,600 1,383 Aon Corporation 46,600 1,864 Associates First Capital Corporation 132,610 3,638 Banc One Corporation 213,486 6,845 Bank of America Corp. 314,476 15,783 Bank of New York Company, Inc. 133,900 5,356 BB&T Corporation 58,200 1,593 The Bear Stearns Companies, Inc. 22,238 951 Capital One Financial Corporation 36,000 1,735 The Charles Schwab Corporation 148,900 5,714 Chase Manhattan Corporation 151,512 11,771 The Chubb Corporation 32,100 1,808 CIGNA Corporation 33,900 2,731 Cincinnati Financial Corporation 30,000 936 Citigroup, Inc. 614,911 34,166 Comerica, Inc. 28,450 1,328 Conseco Inc. 59,537 1,064 Countrywide Credit Industries, Inc. 20,600 520 Federal Home Loan Mortgage Corp. 126,600 5,958
Index 500 Stock Portfolio 32 39
MARKET SHARES/ VALUE COMMON STOCK (98.5%) PAR (000'S) --------------------------------------------------------- FINANCE continued Federal National Mortgage Association 186,600 $ 11,651 Fifth Third Bancorp 54,975 4,034 First Union Corporation 174,152 5,714 Firstar Corporation 179,265 3,787 FleetBoston Financial Corporation 167,820 5,842 Franklin Resources Inc. 45,900 1,472 Golden West Financial Corporation 30,000 1,005 Hartford Financial Services Group Inc. 41,100 1,947 Household International Inc. 87,179 3,247 Huntington Bancshares, Inc. 41,884 1,000 J.P. Morgan & Company, Inc. 32,000 4,052 Jefferson-Pilot Corp. 19,150 1,307 KeyCorp 81,700 1,808 Lehman Brothers Holdings, Inc. 21,800 1,846 Lincoln National Corporation 36,200 1,448 Loews Corp. 19,600 1,189 Marsh & McLennan Companies, Inc. 48,050 4,598 MBIA, Inc. 18,200 961 MBNA Corp. 145,975 3,978 Mellon Financial Corporation 93,600 3,188 Merrill Lynch & Co. 67,300 5,620 MGIC Investment Corp. 19,900 1,198 Morgan Stanley, Dean Witter, Discover & Co. 103,905 14,832 National City Corp. 112,500 2,665 Northern Trust Corp. 40,600 2,152 Old Kent Financial Corp. 21,600 764 Paine Webber Group Inc. 26,500 1,029 PNC Bank Corp. 55,300 2,461 Price (T. Rowe) Associates 22,100 816 Progressive Corporation 13,300 973 Providian Financial Corporation 25,800 2,349 Regions Financial Corporation 40,800 1,025 Republic New York Corporation 19,100 1,375 SAFECO, Inc. 23,900 595 SLM Holding Corporation 29,300 1,238 SouthTrust Corporation 30,500 1,153 St. Paul Companies, Inc. 41,286 1,391 State Street Corporation 29,400 2,148 Summit Bancorp 32,200 986 Suntrust Banks Inc. 58,600 4,032 Synovus Financial Corp. 49,350 981 Torchmark Corporation 24,200 703 U.S. Bancorp 133,231 3,173 Union Planters Corporation 26,000 1,025 UnumProvident Corporation 43,431 1,392 Wachovia Corporation 36,800 2,502 Washington Mutual, Inc. 105,436 2,741 Wells Fargo & Company 300,230 12,141 ----------- TOTAL 295,968 -----------
MARKET SHARES/ VALUE COMMON STOCK (98.5%) PAR (000'S) --------------------------------------------------------- HEALTH CARE (8.8%) Abbott Laboratories Inc. 277,000 $ 10,058 Aetna, Inc. 27,263 1,522 Allergan Inc. 24,000 1,194 *Alza Corporation 18,500 640 American Home Products Corporation 237,900 9,382 *Amgen, Inc. 185,700 11,154 Bard C R Inc 9,300 493 Bausch & Lomb, Inc. 10,500 719 Baxter International, Inc. 53,000 3,329 Becton, Dickinson & Company 45,600 1,220 Biomet, Inc. 20,500 820 *Boston Scientific Corp. 75,300 1,647 Bristol-Myers Squibb Company 361,600 23,210 Columbia/HCA Healthcare Corporation 102,700 3,010 Eli Lilly and Company 199,000 13,233 *Guidant Corporation 55,000 2,585 *HEALTHSOUTH Corporation 75,600 406 *Humana, Inc. 30,500 250 Johnson & Johnson 244,800 22,797 Mallinckrodt, Inc. 12,900 410 *Manor Care, Inc. 19,500 312 Medtronic, Inc. 213,700 7,787 Merck & Co., Inc. 427,000 28,636 Pfizer, Inc. 705,500 22,885 Pharmacia & Upjohn Inc. 92,205 4,149 *Quintiles Transnational Corp. 20,900 391 Schering-Plough Corporation 267,300 11,277 *St. Jude Medical, Inc. 15,400 473 *Tenet Healthcare Corp. 56,500 1,328 United Healthcare Corp. 31,600 1,679 Warner-Lambert Company 155,600 12,749 *Watson Pharmaceutical Inc. 17,400 623 *Wellpoint Health Networks 12,000 791 ----------- TOTAL 201,159 ----------- TECHNOLOGY (29.2%) *3COM Corporation 65,100 3,060 *Adaptec, Inc. 18,800 938 *ADC Telecommunications Inc. 27,200 1,974 Adobe Systems, Inc. 22,200 1,493 *Advanced Micro Devices, Inc. 26,800 775 *America Online, Inc. 403,500 30,439 *Analog Devices 31,500 2,929 *Andrew Corporation 14,937 283 *Apple Computer, Inc. 29,300 3,012 *Applied Materials, Inc. 68,400 8,665 Autodesk, Inc. 10,700 361 Automatic Data Processing, Inc. 112,700 6,072 *BMC Software, Inc. 43,600 3,485 *Cabletron Systems, Inc. 31,700 824 *Ceridian Corp. 26,400 569 *Cisco Systems, Inc. 591,950 63,413 *Citrix Systems Inc. 16,000 1,968
33 Index 500 Stock Portfolio 40
MARKET SHARES/ VALUE COMMON STOCK (98.5%) PAR (000'S) --------------------------------------------------------- TECHNOLOGY continued Compaq Computer Corporation 309,509 $ 8,376 Computer Associates International, Inc. 97,912 6,848 *Computer Sciences Corp. 29,100 2,754 *Compuware Corporation 65,000 2,421 *Comverse Technology, Inc. 12,700 1,838 *Dell Computer Corporation 462,600 23,593 Eastman Kodak Company 57,600 3,816 Electronic Data Systems Corporation 89,800 6,011 *EMC Corporation 184,537 20,161 Equifax, Inc. 26,200 617 First Data Corporation 78,100 3,851 *Gateway Inc. 57,000 4,108 *General Instrument Corporation 31,600 2,686 Hewlett-Packard Company 184,400 21,010 Ikon Office Solutions 27,200 185 *Intel Corporation 602,300 49,577 International Business Machines Corporation 329,400 35,575 *KLA- Tencor Corporation 16,100 1,793 *Lexmark International Group Inc. 23,500 2,127 *LSI Logic Corp. 26,800 1,809 Lucent Technologies, Inc. 557,800 41,730 *Micron Technology 45,600 3,545 *Microsoft Corporation 929,200 108,484 Motorola, Inc. 110,600 16,286 *National Semiconductor Corporation 30,600 1,310 *Network Appliance Inc. 26,800 2,226 Nortel Networks Corporation 241,600 24,402 *Novell, Inc. 61,000 2,436 *Oracle Corporation 262,050 29,366 *Parametric Technology Company 49,000 1,326 Paychex, Inc. 44,750 1,790 PE Corp.-PE Biosystems Group 18,600 2,238 *Peoplesoft, Inc. 44,300 944 PerkinElmer, Inc. 8,300 346 Polaroid Corporation 8,100 152 *Qualcomm Inc. 116,800 20,586 Raytheon Company- Class B 61,500 1,634 Scientific-Atlanta, Inc. 13,900 773 *Seagate Technology Inc. 37,900 1,765 Shared Medical Systems Corp. 4,900 250 *Silicon Graphics 34,400 338 *Sun Microsystems, Inc. 281,800 21,822 Tektronix, Inc. 8,550 332 *Tellabs, Inc. 71,300 4,577 *Teradyne Inc. 31,200 2,059 Texas Instruments, Incorporated 143,000 13,853 *Unisys Corporation 55,700 1,779 W.W. Grainger, Inc. 17,000 813 Xerox Corporation 120,700 2,738 *Xilinx Inc. 57,600 2,619 *Yahoo!, Inc. 47,900 20,726 ----------- TOTAL 662,661 -----------
MARKET SHARES/ VALUE COMMON STOCK (98.5%) PAR (000'S) --------------------------------------------------------- TRANSPORTATION (0.7%) *AMR Corporation 27,400 $ 1,836 Burlington Northern Santa Fe 84,621 2,052 CSX Corporation 39,600 1,242 Delta Air Lines Inc. 25,600 1,275 *FDX Corporation 54,120 2,216 Kansas City Southern Inds 20,100 1,500 Norfolk Southern Corporation 69,300 1,421 Ryder System, Inc. 11,700 286 Southwest Airlines Co. 91,800 1,486 Union Pacific Corporation 45,100 1,967 *USAir Group, Inc. 13,000 417 ----------- TOTAL 15,698 ----------- UTILITIES (2.3%) * The AES Corporation 37,500 2,803 Ameren Corporation 25,000 819 American Electric Power Co. Inc. 35,200 1,131 Carolina Power & Light Company 29,100 886 Central & South West Corporation 38,700 774 Cinergy Corporation 28,917 698 CMS Energy Corp. 21,500 671 Coastal Corp. 38,900 1,378 Columbia Energy Group 14,950 946 Consolidated Edison Co. of New York 40,200 1,387 Consolidated Natural Gas Company 17,500 1,136 Constellation Energy Group Inc. 27,200 789 Dominion Resources Inc. 35,000 1,374 DTE Energy Company 26,400 828 Duke Energy Corp. 66,465 3,332 Eastern Enterprises 4,900 281 Edison International 63,200 1,655 EL Paso Energy Corporation 41,500 1,611 Enron Corp. 130,000 5,769 Entergy Corporation 44,900 1,156 FirstEnergy Corporation 42,600 966 Florida Progress Corp. 17,900 757 FPL Group, Inc. 32,600 1,396 GPU, Inc. 22,800 683 New Century Energies, Inc. 21,000 638 *Niagra Mohawk Power Corporation 34,100 475 Nicor, Inc. 8,600 279 Northern States Power Company 28,100 548 ONEOK, Inc. 5,800 146 P P & L Resources, Inc. 28,734 657 PECO Energy Company 34,000 1,181 Peoples Energy Corporation 6,500 218 PG&E Corp. 69,900 1,433 Pinnacle West Capital Corp. 15,400 471 Public Service Enterprise Group, Inc. 39,900 1,389 Reliant Energy, Inc. 53,862 1,232 ScottishPower PLC, ADR 31,958 895
Index 500 Stock Portfolio 34 41
MARKET SHARES/ VALUE COMMON STOCK (98.5%) PAR (000'S) --------------------------------------------------------- UTILITIES continued Sempra Energy 43,802 $ 761 Southern Company 124,400 2,923 Texas Utilities Company 50,315 1,789 UNICOM Corp. 39,600 1,327 Williams Companies Inc. 79,100 2,417 ----------- TOTAL 52,005 ----------- TOTAL COMMON STOCK (COST $1,196,495) 2,238,471 ----------- MONEY MARKET INVESTMENTS (1.5%) --------------------------------------------------------- AUTO RELATED (0.8%) Daimler-Chrysler N.A. Holding, 5.50%, 01/10/00 13,000,000 12,946 Ford Motor Credit Company, 6.21%, 01/12/00 5,000,000 4,991 ----------- TOTAL 17,937 ----------- FEDERAL GOVERNMENT AND AGENCIES (0.7%) Federal Home Loan Mortgage Corp., 4.75%, 01/14/00 9,900,000 9,883 #Federal Home Loan Mortgage Corp., 5.51%, 01/10/00 5,000,000 4,993 ----------- TOTAL 14,876 ----------- TOTAL MONEY MARKET INVESTMENTS (COST $32,813) 32,813 ----------- TOTAL INVESTMENTS (100.0%) (COST $1,229,308)' 2,271,284 ----------- OTHER ASSETS, LESS LIABILITIES (0.0%) 672 ----------- TOTAL NET ASSETS (100.0%) $ 2,271,956 ----------- ---------------------------------------------------------
* Non-Income Producing ADR - American Depository Receipt # Partially held by the custodian in a segregated account as collateral for open futures positions. Information regarding open futures contracts as of December 31, 1999 is summarized below:
UNREALIZED NUMBER OF EXPIRATION APPRECIATION ISSUER CONTRACTS DATE (000'S) - ------------------------------------------------------------ S&P 500 Stock Index 89 3/00 $1,114 (Total Notional Value at 12/31/99, $31,909,390)
' At December 31, 1999, the aggregate cost of securities for federal income tax purposes was $1,229,539 and the net unrealized appreciation of investments based on that cost was $1,041,745 which is comprised of $1,097,772 aggregate gross unrealized appreciation and $56,027 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements. 35 Index 500 Stock Portfolio 42
Objective: Portfolio Strategy: Net Assets A high level of current income and Achieve consistent returns and low volatility by $3,557,900,234 capital growth with a low risk diversifying among assets profile
BALANCED PORTFOLIO In order to capitalize on changing financial market and economic conditions, the Balanced Portfolio's asset allocation is adjusted as appropriate among three investment classes: stocks, bonds and money market instruments. The equity portion of the Portfolio is indexed, meaning that the Portfolio is designed to achieve results that approximate the performance of the Standard & Poor's 500 Composite Stock Price Index, which is generally regarded as a good proxy for the overall U.S. equity market. The bond portion of the Portfolio is actively managed, with investments in high quality bonds adjusted frequently as to maturity, market sectors and duration. Liquidity is maintained by holding a portion of the Portfolio in money market investments, which are high quality short-term debt securities. During 1999 the Portfolio continued to emphasize equities, while reducing equity exposure opportunistically, in order to maintain the desired balance among asset classes during a period of increasing equity prices. In the bond portion of the Portfolio, a move to higher quality securities and a defensive stance on interest rates proved successful, as interest rates increased and the spread between rates on Treasury securities and riskier bonds widened. PERCENTAGE HOLDINGS 12/31/99 [PIE CHART]
EQUITIES (INCLUDING INDEX FUTURES) BONDS SHORT-TERM INVESTMENTS OTHER ASSETS, NET ------------------- ----- ---------------------- ----------------- Percentage Holdings 54.00 37.00 8.00 1.00
PERFORMANCE RELATIVE TO RELEVANT INDICES [LINE GRAPH]
MERRILL LYNCH DOMESTIC BALANCED PORTFOLIO MASTER INDEX 91 DAY T-BILL S&P 500 INDEX ------------------ ---------------------- ------------- ------------- 12/89 10000.00 10000.00 10000.00 10000.00 10153.00 10910.00 10842.00 9690.00 12/91 12521.00 12640.00 11534.00 12645.00 13224.00 13598.00 11987.00 13607.00 12/93 14534.00 14961.00 12369.00 14981.00 14558.00 14539.00 12887.00 15161.00 12/95 18399.00 17231.00 13664.00 20831.00 20875.00 17850.00 14389.00 25580.00 12/97 25366.00 19574.00 15156.00 34098.00 30157.00 21310.00 15949.00 43816.00 12/99 33529.00 21105.00 16722.00 53044.00
- ---------------------------------------------------------------- Average Annual Total Return For Periods Ended December 31, 1999 1 Year 5 Years 10 Years - ---------------------------------------------------------------- Balanced Portfolio 11.18% 18.16% 12.86% Merrill Lynch Domestic Master Index -0.96% 7.74% 7.76% 91 Day T-Bill 4.85% 5.35% 5.28% S&P 500 Index 21.06% 28.46% 18.16% - ----------------------------------------------------------------
In the graph, the Portfolio is compared against three indices representing the three major components of the Portfolio: equities, fixed income, and cash equivalent investments. The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The index is heavily weighted toward stocks with large market capitalizations and represents approximately two-thirds of the total market value of all domestic common stocks. The Merrill Lynch Domestic Master Index is an unmanaged market value weighted index comprised of U.S. Government, mortgage and investment-grade corporate bonds. The index measures the income provided by, and the price changes of, the underlying securities. The Merrill Lynch 91-Day T-Bill Index is comprised of a single issue purchased at the beginning of each month and held for a full month. The issue selected at each month-end rebalancing is the outstanding Treasury Bill that matures closest to, but not beyond, three months from the rebalancing date. This chart assumes an initial investment of $10,000 made on 12/31/89. Returns shown include deductions for management and other fund expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. Total returns shown on page 2 reflect mortality and expense risk charges and premium charges deducted from the assets of the separate account. The cost of insurance protection, which is not reflected in the returns shown on this chart, would make the returns significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. Balanced Portfolio 36 43 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments December 31, 1999
MARKET SHARES/ VALUE BONDS (37.4%) PAR (000'S) --------------------------------------------------------- CORPORATE BONDS (6.3%) AEROSPACE AND DEFENSE (0.1%) Lockheed Corporation, 6.75%, 03/15/03 3,000,000 $ 2,917 ----------- BANK HOLDING COMPANIES (0.2%) Banco Montevideo, 8.4%, 04/30/08 (144A) 6,250,000 5,578 BT Institutional Capital Trust, 7.75%, 12/01/26 (144A) 1,000,000 888 ----------- TOTAL 6,466 ----------- BANKING & FINANCE (1.1%) Associates Corp. of North America, 7.95%, 02/15/10 5,550,000 5,669 Ford Motor Credit Co., 5.57%, 07/16/02 11,700,000 11,724 Ford Motor Credit Co., 5.75%, 02/23/04 6,000,000 5,684 Ford Motor Credit Co., 6.70%, 07/16/04 2,000,000 1,956 Ford Motor Credit Co., 7.375%, 10/28/09 14,500,000 14,314 ----------- TOTAL 39,347 ----------- CHEMICALS AND ALLIED PRODUCTS (0.5%) Chevron Corporation, 6.625%, 10/01/04 4,750,000 4,682 Dow Capital B.V., 8.5%, 06/8/10 8,200,000 8,676 Johnson & Johnson, 6.625%, 09/01/09 2,800,000 2,694 Proctor & Gamble, 6.875%, 09/15/09 3,000,000 2,934 ----------- TOTAL 18,986 ----------- COMMUNICATIONS (0.2%) Telecommunications, Inc., 7.375%, 2/15/00 8,000,000 8,012 ----------- DURABLE GOODS (0.2%) Tata Engineering & Locomotive, 7.875%, 07/15/07 (144A) 6,500,000 6,009 ----------- ELECTRIC SERVICES (1.3%) Columbia Gas System Inc., 7.32%, 11/28/10 7,571,000 7,236 Comed Financing II, 8.5%, 01/15/27 3,000,000 2,925 Dayton Power & Light Company, 8.15%, 1/15/26 5,750,000 5,631 Niagra Mohawk Power, 7.0%, 10/01/00 2,268,293 2,270 Niagra Mohawk Power, 7.25%, 10/01/02 1,134,147 1,130
MARKET SHARES/ VALUE BONDS (37.4%) PAR (000'S) --------------------------------------------------------- ELECTRIC SERVICES continued Ohio Edison Company, 7.375%, 9/15/02 3,665,000 $ 3,677 Public Service Electric & Gas Co., 6.875%, 1/1/03 9,000,000 8,927 Southern California Edison Co., 7.25%, 3/1/26 10,000,000 8,953 Texas Utilities Electric Co., 7.875%, 3/1/23 4,000,000 3,770 ----------- TOTAL 44,519 ----------- FOOD AND BEVERAGE (0.3%) Coca Cola Enterprises, Inc., 8%, 1/4/05 10,000,000 10,389 ----------- GENERAL MERCHANDISE STORES (0.8%) May Department Stores Company, 6.7%, 9/15/28 6,150,000 5,406 May Department Stores Company, 7.45%, 10/15/16 4,000,000 3,923 Wal-Mart Stores, 6.55%, 8/10/04 17,800,000 17,505 Wal-Mart Stores, 6.875%, 8/10/09 3,000,000 2,920 ----------- TOTAL 29,754 ----------- INSURANCE (0.1%) Prudential Insurance Co., 6.375%, 7/23/06 2,500,000 2,331 ----------- MOTION PICTURE (0.3%) News America Holdings Inc., 8.45%, 8/1/34 10,000,000 10,184 ----------- MOTOR VEHICLES (0.5%) Daimler-Chrysler North America, 6.90%, 09/01/04 4,650,000 4,605 General Motors Acceptance Corp., 6.625%, 10/1/02 5,000,000 4,932 General Motors Corporation, 8.8%, 3/1/21 6,500,000 7,166 ----------- TOTAL 16,703 ----------- PUBLISHING (0.1%) Times Mirror Co., 7.45%, 10/15/09 5,050,000 4,967 ----------- TELEPHONE COMMUNICATIONS (0.5%) AT&T Corp, 5.625%, 03/15/04 5,000,000 4,740 AT&T Corp, 6.50%, 9/15/02 5,500,000 5,437 Cox Communications, Inc., 6.80%, 8/01/28 1,000,000 870 GTE Corporation, 6.94%, 04/15/28 3,000,000 2,709 New England Telephone and Telegraph, 5.875%, 04/15/09 5,000,000 4,465 ----------- TOTAL 18,221 -----------
37 Balanced Portfolio 44
MARKET SHARES/ VALUE BONDS (37.4%) PAR (000'S) --------------------------------------------------------- TEXTILES (0.0%) ++Polysindo International Finance, 11.375%, 06/15/06 6,500,000 $ 1,170 ----------- TOBACCO (0.0%) Philip Morris Companies, 9.25%, 02/15/00 1,000,000 1,002 ----------- UTILITY (0.1%) Atlantic City Electric Company, 6.625%, 08/1/13 4,000,000 3,595 ----------- TOTAL CORPORATE BONDS 224,572 ----------- GOVERNMENT (DOMESTIC AND FOREIGN) AND AGENCY BONDS (24.4%) --------------------------------------------------------- FOREIGN GOVERNMENT BONDS (0.2%) Province of Quebec, 6.5%, 1/17/06 7,500,000 7,211 ----------- FEDERAL GOVERNMENT AND AGENCIES (24.2%) Federal Home Loan Bank, 5.54%, 01/08/09 5,000,000 4,426 Federal Home Loan Mortgage Corporation, 6.5%, 10/01/02 13,299,367 12,991 Federal Home Loan Mortgage Corporation, 7.0%, 03/15/07 7,250,000 7,220 Federal Home Loan Mortgage Corporation, 7.5%, 09/29/01 12,394,153 12,287 Federal National Mortgage Assoc., 5.970%, 10/1/08 1,765,241 1,624 Federal National Mortgage Assoc., 6.240%, 02/01/06 4,846,150 4,618 Federal National Mortgage Assoc., 6.265%, 10/1/08 5,676,231 5,308 Federal National Mortgage Assoc., 6.315%, 03/01/06 5,116,930 4,890 Federal National Mortgage Assoc., 6.34%, 2/01/08 4,165,884 3,936 Federal National Mortgage Assoc., 6.43%, 6/01/08 7,326,929 6,945 Federal National Mortgage Assoc., 6.500%, 09/25/05 4,991,230 4,871 Federal National Mortgage Assoc., 6.750%, 12/25/23 6,500,000 6,205 Federal National Mortgage Assoc., 6.750%, 04/25/18 5,387,176 5,212 Federal National Mortgage Assoc., 6.750% 11/01/07 3,062,574 2,961 Federal National Mortgage Assoc., 6.835%, 07/01/03 3,174,568 3,146 Federal National Mortgage Assoc., 6.895%, 05/01/06 5,987,845 5,870 Federal National Mortgage Assoc., 6.900%, 04/01/06 2,414,160 2,368 Federal National Mortgage Assoc., 6.960%, 10/01/07 4,412,264 4,312
MARKET SHARES/ VALUE BONDS (37.4%) PAR (000'S) --------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES continued Federal National Mortgage Assoc., 7.000%, 06/25/10 7,941,659 $ 7,794 Federal National Mortgage Assoc., 7.000%, 04/01/26 14,253,333 13,843 Federal National Mortgage Assoc., 7.000%, 06/01/03 2,917,320 2,916 Federal National Mortgage Assoc., 7.025%, 08/01/05 1,920,265 1,897 Federal National Mortgage Assoc., 7.045%, 08/01/05 7,487,934 7,405 Federal National Mortgage Assoc., 7.120%, 11/01/03 972,959 969 Federal National Mortgage Assoc., 7.250%, 05/01/04 1,553,417 1,552 Federal National Mortgage Assoc., 8.400%, 02/25/09 10,910,000 11,268 Federal National Mortgage Assoc., 11.000%, 12/01/12 73,238 79 Federal National Mortgage Assoc., 11.000%, 09/01/17 1,135,033 1,242 Federal National Mortgage Assoc., 11.000%, 12/01/17 205,731 223 Federal National Mortgage Assoc., 11.000%, 02/01/18 402,571 436 Federal National Mortgage Assoc., 11.500%, 04/01/18 752,859 827 Federal National Mortgage Assoc., 12.000%, 09/01/12 1,109,033 1,228 Federal National Mortgage Assoc., 12.000%, 12/01/12 213,122 236 Federal National Mortgage Assoc., 12.000%, 09/01/17 348,190 388 Federal National Mortgage Assoc., 12.000%, 10/01/17 362,966 404 Federal National Mortgage Assoc., 12.000%, 12/01/17 33,760 376 Federal National Mortgage Assoc., 12.000%, 02/01/18 363,322 405 Federal National Mortgage Assoc., 12.500%, 04/01/18 335,757 377 Federal National Mortgage Assoc., 13.000%, 11/01/12 148,524 167 Federal National Mortgage Assoc., 13.000%, 11/01/17 342,196 389 Federal National Mortgage Assoc., 13.000%, 12/01/17 230,432 262 Federal National Mortgage Assoc., 13.000%, 02/01/18 505,308 575 Federal National Mortgage Assoc., 14.000%, 12/01/17 133,327 156 Government National Mortgage Assoc., 7.00%, 05/15/23 9,057,267 8,824 Government National Mortgage Assoc., 7.00%, 06/15/23 646,981 630 Government National Mortgage Assoc., 7.00%, 07/15/23 914,975 891
Balanced Portfolio 38 45
MARKET SHARES/ VALUE BONDS (37.4%) PAR (000'S) --------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES continued Government National Mortgage Assoc., 7.00%, 08/15/23 17,574 $ 17 Government National Mortgage Assoc., 7.00%, 09/15/23 481,156 469 Government National Mortgage Assoc., 7.00%, 10/15/23 228,213 351 Government National Mortgage Assoc., 7.00%, 11/15/23 1,242,810 1,212 Government National Mortgage Assoc., 7.00%, 12/15/27 299,795 290 Government National Mortgage Assoc., 7.00%, 1/15/28 439,904 425 Government National Mortgage Assoc., 7.00%, 2/15/28 115,085 111 Government National Mortgage Assoc., 7.00%, 3/15/28 233,791 226 Government National Mortgage Assoc., 7.00%, 4/15/28 663,527 641 Government National Mortgage Assoc., 7.00%, 5/15/28 1,364,544 1,320 Government National Mortgage Assoc., 7.00%, 6/15/28 3,701,738 3,579 Government National Mortgage Assoc., 7.00%, 7/15/28 4,557,231 4,407 Government National Mortgage Assoc., 7.50%, 1/15/23 588,313 585 Government National Mortgage Assoc., 7.50%, 6/15/23 326,873 325 Government National Mortgage Assoc., 7.50%, 6/15/24 7,719 8 Government National Mortgage Assoc., 7.50%, 7/15/24 273,595 272 Government National Mortgage Assoc., 7.50%, 8/15/25 12,969 13 Government National Mortgage Assoc., 7.50%, 9/15/25 233,445 231 Government National Mortgage Assoc., 7.50%, 11/15/25 11,800 12 Government National Mortgage Assoc., 7.50%, 12/15/25 430,095 426 Government National Mortgage Assoc., 7.50%, 1/15/26 14,294 14 Government National Mortgage Assoc., 7.50%, 3/15/26 533,250 529 Government National Mortgage Assoc., 7.50%, 6/15/26 968,551 960 Government National Mortgage Assoc., 7.50%, 9/15/26 12,503 12 Government National Mortgage Assoc., 7.50%, 10/15/26 75,702 75 Government National Mortgage Assoc., 7.50%, 12/15/26 609,749 604 Government National Mortgage Assoc., 7.50%, 1/15/27 38,221 38 Government National Mortgage Assoc., 7.50%, 2/15/27 415,246 411
MARKET SHARES/ VALUE BONDS (37.4%) PAR (000'S) --------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES continued Government National Mortgage Assoc., 7.50%, 3/15/27 39,780 $ 39 Government National Mortgage Assoc., 7.50%, 4/15/27 1,291,462 1,398 Government National Mortgage Assoc., 7.50%, 5/15/27 579,786 574 Government National Mortgage Assoc., 7.50%, 7/15/27 625,130 619 Government National Mortgage Assoc., 7.50%, 12/15/27 157,737 156 Government National Mortgage Assoc., 7.50%, 7/15/28 834,627 827 Government National Mortgage Assoc., 8.00%, 9/15/24 292,358 297 Government National Mortgage Assoc., 8.00%, 3/15/26 160,082 162 Government National Mortgage Assoc., 8.00%, 5/15/26 428,798 434 Government National Mortgage Assoc., 8.00%, 6/15/26 384,750 389 Government National Mortgage Assoc., 8.00%, 7/15/26 869,427 880 Government National Mortgage Assoc., 8.00%, 8/15/26 414,606 420 Government National Mortgage Assoc., 8.00%, 9/15/26 330,222 334 Government National Mortgage Assoc., 8.00%, 10/15/26 637,720 645 Government National Mortgage Assoc., 8.00%, 11/15/26 353,111 357 Government National Mortgage Assoc., 8.00%, 12/15/26 371,000 375 Government National Mortgage Assoc., 8.00%, 4/15/27 686,784 695 Government National Mortgage Assoc., 8.00%, 6/15/27 325,854 330 Government National Mortgage Assoc., 8.00%, 7/15/27 141,492 143 Government National Mortgage Assoc., 8.00%, 7/20/28 2,586,971 2,603 Government National Mortgage Assoc., 8.50%, 05/15/22 3,421 4 Government National Mortgage Assoc., 8.50%, 09/15/22 4,085 4 Government National Mortgage Assoc., 8.50%, 10/15/22 30,238 31 Government National Mortgage Assoc., 8.50%, 12/15/22 20,724 21 Government National Mortgage Assoc., 8.50%, 06/15/24 6,086 6 Government National Mortgage Assoc., 8.50%, 07/15/24 21,516 22 Government National Mortgage Assoc., 8.50%, 08/15/24 45,735 47 Government National Mortgage Assoc., 8.50%, 12/15/24 6,956 7
39 Balanced Portfolio 46
MARKET SHARES/ VALUE BONDS (37.4%) PAR (000'S) --------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES continued Government National Mortgage Assoc., 8.50%, 01/15/25 74,478 $ 77 Government National Mortgage Assoc., 8.50%, 02/15/25 54,728 56 Government National Mortgage Assoc., 8.50%, 11/15/25 8,386 9 Government National Mortgage Assoc., 8.50%, 01/15/26 43,264 45 Government National Mortgage Assoc., 8.50%, 02/15/26 8,635 9 Government National Mortgage Assoc., 8.50%, 03/15/26 24,070 25 Government National Mortgage Assoc., 8.50%, 04/15/26 71,569 74 Government National Mortgage Assoc., 8.50%, 05/15/26 20,099 21 Government National Mortgage Assoc., 11.00%, 01/15/18 6,407,800 7,056 Rural Housing Trust - Class D, 6.33%, 4/1/26 4,551,312 4,491 U.S. Treasury, 3.625%, 07/15/02 2,537,375 2,513 U.S. Treasury, 3.625%, 04/15/28 6,500,000 5,809 U.S. Treasury, 3.875%, 04/15/29 165,956,265 156,466 U.S. Treasury, 4.000%, 10/31/00 11,650,000 11,457 U.S. Treasury, 4.750%, 02/15/04 19,250,000 18,161 U.S. Treasury, 4.750%, 11/15/08 38,050,000 33,567 U.S. Treasury, 5.000%, 02/28/01 4,500,000 4,444 U.S. Treasury, 5.250%, 05/31/01 8,000,000 7,900 U.S. Treasury, 5.250%, 05/15/04 29,700,000 28,447 U.S. Treasury, 5.250%, 02/15/29 4,500,000 3,722 U.S. Treasury, 5.500%, 02/29/00 54,000,000 54,017 U.S. Treasury, 5.500%, 01/31/03 3,500,000 3,417 U.S. Treasury, 5.500%, 03/31/03 15,500,000 15,113 U.S. Treasury, 5.500%, 02/15/08 175,000 164 U.S. Treasury, 5.625%, 04/30/00 10,500,000 10,497 U.S. Treasury, 5.625%, 12/31/02 2,300,000 2,256 U.S. Treasury, 5.625%, 02/15/06 108,000,000 103,343 U.S. Treasury, 5.625%, 05/15/08 34,000,000 31,981 U.S. Treasury, 5.875%, 11/15/04 3,500,000 3,432 U.S. Treasury, 6.000%, 07/31/02 4,000,000 3,976 U.S. Treasury, 6.000%, 08/15/04 25,000,000 24,609 U.S. Treasury, 6.000%, 08/15/09 32,625,000 31,605 U.S. Treasury, 6.125%, 08/15/07 22,000,000 21,443 U.S. Treasury, 6.125%, 08/15/29 3,000,000 2,860 U.S. Treasury, 6.250%, 02/15/07 4,500,000 4,428 U.S. Treasury, 6.375%, 08/15/27 4,100,000 3,936 U.S. Treasury, 6.875%, 05/15/06 50,000,000 50,875 U.S. Treasury, 7.250%, 08/15/04 6,000,000 6,191 U.S. Treasury, 7.250%, 05/15/16 4,200,000 4,390 Vendee Mortgage Trust, 6.5%, 6/07/08 4,500,000 4,035 ----------- TOTAL 861,248 ----------- TOTAL GOVERNMENT (DOMESTIC AND FOREIGN) AND AGENCY BONDS 868,459 -----------
MARKET SHARES/ VALUE BONDS (37.4%) PAR (000'S) --------------------------------------------------------- MORTGAGE/ASSET BACKED SECURITIES (6.5%) AUTO-RELATED (0.5%) Daimler-Chrysler NA 5.75% 07/18/02 5,000,000 $ 5,008 Eaglemark Trust - Class A, 6.75%, 11/15/02 1,393,234 1,395 Fleetwood Credit Corporation Grantor Trust - Class A, 6.4%, 05/15/13 1,618,912 1,608 Team Fleet Financing Corporation - Class A, 6.65%, 12/15/02 (144A) 11,800,000 11,617 ----------- TOTAL 19,628 ----------- BANKING AND FINANCE (0.1%) Nations Bank Lease Pass Thru Trust 97-A, 7.442%, 01/10/11 (144A) 2,000,000 1,948 ----------- CREDIT CARD (0.3%) Iroquois Trust - Class A, 6.68%, 11/10/03 (144A) 6,621,337 6,598 Iroquois Trust - Class A, 6.752%, 06/25/07 (144A) 3,280,352 3,256 ----------- TOTAL 9,854 ----------- COMMERCIAL MORTGAGES (4.1%) Asset Securitization Corporation - Class CS1, 1.257%, 11/13/26 IO 20,004,872 564 Asset Securitization Corporation - Class PS1, 1.367%, 02/14/41 IO 22,152,797 1,940 BankBoston Marine Asset Backed Trust - Class A6, 6.64%, 08/15/10 7,000,000 6,815 Chase Commercial Mortgage Securities Corp. - Class A2, 6.6%, 12/12/29 8,500,000 8,077 Chase Commercial Mortgage Securities Corp. Class B, 6.6% 12/12/29 2,500,000 2,364 Citibank Credit Card Master Trust I - Class A, 0%, 08/15/06 17,000,000 12,175 Credit Suisse First Boston Mortgage Securities Corp. - Class A2, 7.26%, 6/20/29 (144A) 3,139,367 2,987 Credit Suisse First Boston Mortgage Securities Corp. - Class B, 7.28%, 6/20/29 (144A) 3,250,000 3,138 Criimi Mae Commercial Mortgage Trust, 7.0%, 12/01/06 6,500,000 5,773 Criimi Mae Commercial Mortgage Trust, 7.0%, 11/02/11 5,700,000 4,167 DLJ Mortgage Acceptance Corporation - Class CF1, 0.718%, 02/18/31 IO 252,256,132 8,821
Balanced Portfolio 40 47
MARKET SHARES/ VALUE BONDS (37.4%) PAR (000'S) --------------------------------------------------------- COMMERCIAL MORTGAGES continued DLJ Mortgage Acceptance Corporation - Class S, 0.357%, 10/15/17 (144A) IO 18,565,159 $ 382 DLJ Mortgage Acceptance, 8.10%, 6/18/04 1,927,334 1,981 DLJ Mortgage Acceptance, 8.10%, 6/18/04 1,650,000 1,690 Kmart CMBS Financing, Inc. - Class B, 5.330%, 03/01/07 (144A) 8,000,000 7,990 Kmart CMBS Financing, Inc. - Class C, 5.630%, 03/01/07 (144A) 12,500,000 12,434 Kmart CMBS Financing, Inc. - Class D, 6.980%, 03/01/07 (144A) 4,500,000 4,476 LB Mortgage Trust, 8.396%, 01/20/17 9,475,090 9,515 Midland Realty Acceptance Corp. - Class AEC, 1.389% 01/25/29 (144A) IO 27,053,140 1,525 Morgan Stanley, 6.54%, 015/15/08 (144a) 15,000,000 14,165 Mortgage Capital Funding, Inc., 7.288% 03/20/07 19,000,000 18,742 Nomura Asset Securities Corp. - Class A2, 7.016%, 03/17/28 15,000,000 13,367 Red Mountain Funding LLC - Class F, 7.471%, 01/15/19 (144A) 1,800,000 1,202 ----------- TOTAL 144,290 ----------- FRANCHISE LOAN RECEIVABLES (0.4%) EMAC Owner Trust - Class A2, 6.38%, 01/15/25 (144A) 6,000,000 5,639 EMAC Owner Trust, 1.378%, 01/15/25 IO (144A) 38,461,647 2,508 CMAC, 6.644%, 12/15/07 (144A) 2,500,000 2,368 Global Franchise Trust, 6.349%, 8/16/01 3,145,433 3,084 ----------- TOTAL 13,599 ----------- HOME EQUITY LOAN (0.1%) Amresco Residential Securities - Class A2, 6.245%, 04/25/22 2,500,000 2,479 ----------- MANUFACTURED HOUSING (0.1%) Vanderbilt Mortgage and Finance, Inc. - Class 1A4, 7.19%, 02/07/14 2,500,000 2,485 ----------- OTHER ASSET BACKED (0.5%) FMAC Loan Receivables Trust - Class A, 6.20%, 09/15/20 (144A) 4,609,247 4,487 Harley Davidson Eaglemark, 5.87%, 1/20/01 1,900,000 1,870
MARKET SHARES/ VALUE BONDS (37.4%) PAR (000'S) --------------------------------------------------------- OTHER ASSET BACKED continued Health Care Receivables, 6.250% 02/01/03 (144A) 3,000,000 $ 2,909 Heilig-Meyers Master Trust - Class A, 6.125%, 01/20/07 (144A) 6,500,000 6,244 Nations Credit Grantor Trust - Class A1, 6.35, 12/15/04 1,474,742 1,461 Newcourt Equipment - Class B, 6.764%, 09/20/04 (144A) 742,420 731 Newcourt Equipment - Class C, 7.734%, 09/20/04 (144A) 593,936 583 ----------- TOTAL 18,285 ----------- RESIDENTIAL MORTGAGES (0.1%) BCF L L C Mortgage Pass Thru Certificate - Class B3, 7.75%, 3/25/37 (144A) 4,795,031 2,255 Blackrock Capital Finance LP, Class B3, 7.25%, 11/25/28 (144A) 5,787,664 2,720 ----------- TOTAL 4,975 ----------- UTILITY (0.3%) Comed Transitional, 5.74%, 12/16/08 5,500,000 4,959 Peco Energy Trust, 6.130%, 03/01/09 8,000,000 7,361 ----------- TOTAL 12,320 ----------- TOTAL MORTGAGE/ASSET BACKED SECURITIES 229,863 ----------- MUNICIPAL BONDS (0.2%) New Jersey Economic Development Authority, 0.00%, 2/15/25 17,000,000 2,475 New Jersey Economic Development Authority, 0.00%, 2/15/26 11,000,000 1,483 New Jersey Economic Development Authority, 7.425%, 2/15/29 2,250,000 2,182 ----------- TOTAL MUNICIPAL BONDS 6,140 ----------- TOTAL BONDS (COST $1,382,544) 1,329,034 -----------
41 Balanced Portfolio 48
MARKET SHARES/ VALUE COMMON STOCK (50.8%) PAR (000'S) -------------------------------------------------------- BASIC MATERIALS (1.5%) Air Products & Chemicals, Inc. 33,700 $ 1,131 Alcan Aluminum, Ltd. 33,200 1,367 Alcoa Inc. 53,900 4,474 Allegheny Technologies, Inc. 13,981 314 Archer Daniels Midland Company 90,823 1,107 Barrick Gold Corporation 57,400 1,015 Bemis Company, Inc. 7,700 269 *Bethlehem Steel Corporation 19,200 161 B.F. Goodrich Company 16,200 446 Boise Cascade Corporation 8,400 340 Champion International 14,100 873 Dow Chemical Company 32,400 4,329 E.I. du Pont de Nemours & Co. 153,500 10,112 Eastman Chemical Company 11,475 547 Ecolab, Inc. 19,000 743 Engelhard Corp. 18,500 349 *FMC Corporation 4,700 269 *Freeport-McMoRan Copper & Gold, Inc. 24,000 507 Georgia Pacific Corp. 25,200 1,279 Great Lakes Chemical 8,600 328 Hercules Inc. 15,600 435 Homestake Mining Company 38,300 299 *Inco Limited 28,200 663 International Flavors & Fragrances, Inc. 15,600 589 International Paper Company 60,831 3,433 Louisiana Pacific Corporation 15,800 225 Mead Corp. 15,100 656 Monsanto Company 93,200 3,320 Newmont Mining Corporation 24,630 603 Nucor Corp. 12,800 702 Pactiv Corporation 25,100 267 Phelps Dodge Corporation 11,510 773 Placer Dome Inc. 47,900 515 Potlatch Corporation 4,300 192 PPG Industries, Inc. 25,500 1,595 Praxair 23,400 1,177 Reynolds Metals Company 9,300 713 Rohm and Haas Company 32,001 1,302 Sigma-Aldrich Corp. 14,800 445 Temple-Inland Inc. 8,200 541 Union Carbide Corporation 19,600 1,308 USX-U.S. Steel Group, Inc. 13,000 429 *W.R. Grace & Co. 10,500 146 Westvaco Corporation 14,750 481 Weyerhaeuser Company 34,700 2,492 Willamette Industries, Inc. 16,400 762 Worthington Industries 13,500 224 ----------- TOTAL 54,247 -----------
MARKET SHARES/ VALUE COMMON STOCK (50.8%) PAR (000'S) -------------------------------------------------------- CAPITAL GOODS (4.3%) Avery Dennison Corporation 16,700 $ 1,217 Allied Waste Industries 27,700 244 Ball Corporation 4,500 177 Boeing Company 141,318 5,874 Briggs & Stratton Corporation 3,400 182 Caterpillar, Inc. 52,300 2,461 Cooper Industries, Inc. 13,900 562 Corning, Inc. 36,000 4,642 Crane Co. 9,925 197 Crown Cork & Seal Company, Inc. 18,000 403 Cummins Engine Company, Inc. 6,200 300 Danaher Corporation 20,900 1,008 Deere & Company 34,400 1,492 Delphi Automotive Systems Corporation 83,144 1,310 Dover Corporation 30,700 1,393 Eaton Corporation 10,600 770 Emerson Electric Co. 63,900 3,666 Fluor Corporation 11,200 514 Foster Wheeler Corporation 6,000 53 General Dynamics Corporation 29,300 1,546 General Electric Company 482,600 74,682 Honeywell International, Inc. 116,150 6,700 Huttig Building Products, Inc. 2,205 11 Illinois Tool Works, Inc. 44,100 2,980 Ingersoll-Rand Company 24,250 1,335 Johnson Controls, Inc. 12,600 717 Lockheed Martin Corporation 58,122 1,271 McDermott International, Inc. 8,700 79 Milacron Inc. 5,400 83 Millipore Corp. 6,600 255 Minnesota Mining & Manufacturing Co. 59,200 5,794 NACCO Industries, Inc. 1,200 67 National Service Industries, Inc. 5,900 174 *Navistar International Corporation 9,770 463 Northrop Grumman Corporation 10,200 551 *Owens-Illinois, Inc. 22,900 574 Paccar Incorporated 11,490 509 Pall Corporation 18,266 394 Parker-Hannifin Corporation 16,000 821 Pitney Bowes Inc. 39,400 1,904 Rockwell International Corp. 28,100 1,345 *Sealed Air Corporation 12,286 637 *Solectron Corporation 43,100 4,100 Textron Inc. 22,100 1,695 *Thermo Electron Corporation 23,200 348 Thomas & Betts Corporation 8,400 268 Timken Company 9,100 186 Tyco International Ltd. 246,118 9,568 United Technologies Corp. 70,900 4,608
Balanced Portfolio 42 49
MARKET SHARES/ VALUE COMMON STOCK (50.8%) PAR (000'S) -------------------------------------------------------- CAPITAL GOODS continued Vulcan Materials Company 14,700 $ 587 Waste Management, Inc. 91,097 1,566 ----------- TOTAL 152,283 ----------- COMMUNICATION SERVICES (3.9%) ADC Telecommunications 22,000 1,596 ALLTEL Corporation 44,900 3,713 AT&T Corporation 470,155 23,860 Bell Atlantic Corporation 228,380 14,060 Bellsouth Corporation 277,400 12,986 CenturyTel Inc. 20,500 971 GTE Corporation 144,300 10,182 *MCI WorldCom, Inc. 413,383 21,935 *Nextel Communications, Inc. 53,200 5,486 SBC Communications, Inc. 502,250 24,485 Sprint Corporation 127,600 8,589 *Sprint PCS 64,650 6,627 U S WEST, Inc. 74,205 5,343 ----------- TOTAL 139,833 ----------- CONSUMER CYCLICALS (4.8%) American Greetings Corp. 9,900 234 Armstrong World Industries Inc. 5,900 197 *Autozone, Inc. 21,900 708 Bed, Bath, & Beyond, Inc. 20,500 712 Best Buy, Inc. 30,000 1,506 Black & Decker Corporation 12,800 669 Brunswick Corporation 13,500 300 Carnival Corporation 90,200 4,313 *Cendant Corporation 105,973 2,815 Centex Corporation 8,800 217 Circuit City Stores, Inc. 29,600 1,334 *Consolidated Stores Corporation 16,200 263 Cooper Tire & Rubber Company 11,200 174 *Costco Companies, Inc. 32,451 2,961 Dana Corporation 24,365 729 Dayton Hudson Corporation 65,000 4,773 Dillard's, Inc. 15,700 317 Dollar General Corp. 33,068 752 Dow Jones & Company, Inc. 13,400 911 Dun & Bradstreet Corporation 23,700 699 Eastman Kodak Company 46,600 3,087 *Federated Department Stores, Inc. 30,700 1,552 Fleetwood Enterprises, Inc. 4,900 101 Ford Motor Company 178,000 9,512 Gannet Company Inc. 41,100 3,352 Gap, Inc. 126,125 5,802 General Motors Corp. 94,800 6,891 Genuine Parts Company 26,375 654 Goodyear Tire & Rubber Company 23,000 648 H & R Block, Inc. 14,400 630 Harcourt General 10,500 423 *Harrahs Entertainment 18,900 500 Hasbro Inc. 28,625 546 Hilton Hotels Corporation 54,300 523
MARKET SHARES/ VALUE COMMON STOCK (50.8%) PAR (000'S) -------------------------------------------------------- CONSUMER CYCLICALS continued Home Depot, Inc. 327,297 $ 22,440 Ikon Office Solutions 21,900 149 IMS Health Incorporated 46,000 1,251 Interpublic Group of Cos. Inc. 41,500 2,394 ITT Industries Inc. 12,900 431 J.C. Penney Company, Inc. 38,800 774 Jostens, Inc. 5,000 122 Kaufman & Broad Home Corp. 7,000 169 Kmart Corp. 72,600 731 Knight-Ridder, Inc. 11,900 708 *Kohl's Corporation 24,000 1,733 Leggett & Platt, Inc. 28,900 620 Liz Claiborne, Inc. 9,000 339 Lowe's Companies, Inc. 56,100 3,352 Marriott International 36,600 1,155 Masco Corporation 65,200 1,654 Mattel, Inc. 61,860 812 May Department Stores Company 49,150 1,585 Maytag Corporation 12,800 614 McGraw-Hill Companies Inc. 29,000 1,787 Meredith Corporation 7,600 317 *Mirage Resorts, Incorporated 29,300 449 Neiman Marcus Group 13 0 Nike, Inc. 41,400 2,052 Nordstrom, Inc. 20,600 539 Office Depot, Inc. 55,100 603 Omnicom Group Inc. 26,100 2,610 Owens Corning 8,100 156 Pep Boys - Manny, Moe & Jack 7,700 70 Polaroid Corporation 6,500 122 Pulte Corporation 6,400 144 *Reebok International Ltd. 8,300 68 Russell Corp. 4,900 82 Sears Roebuck & Co. 56,000 1,705 Service Corporation International 40,000 278 Sherwin-Williams Company 24,900 523 Snap-On Inc. 9,650 256 Springs Industries, Inc. 2,600 104 *Staples, Inc. 68,350 1,418 Tandy Corporation 28,400 1,397 The Limited, Inc. 31,485 1,364 The New York Times Company 25,600 1,258 The Stanley Works 13,100 395 Times Mirror Company 8,800 590 TJX Companies, Inc. 46,700 954 *Toys "R" Us 36,400 521 Tribune Company 34,900 1,922 TRW, Inc. 17,800 924 VF Corporation 17,500 525 Wal-Mart Stores, Inc. 654,700 45,256 Whirlpool Corporation 11,100 722 Xerox Corporation 97,500 2,212 ----------- TOTAL 171,161 -----------
43 Balanced Portfolio 50
MARKET SHARES/ VALUE COMMON STOCK (50.8%) PAR (000'S) -------------------------------------------------------- CONSUMER STAPLES (5.6%) Adolph Coors Co. 5,400 $ 283 Alberto-Culver Company 8,200 212 Albertson's, Inc. 61,850 1,995 Anheuser-Busch Companies, Inc. 68,800 4,876 Avon Products, Inc. 38,400 1,267 BESTFOODS 41,000 2,155 Brown-Forman Corporation 10,100 578 Campbell Soup Company 63,900 2,472 Cardinal Health, Inc. 40,100 1,920 CBS Corporation 112,205 7,174 *Clear Channel Communications, Inc. 49,700 4,436 Clorox Company 34,700 1,748 Coca Cola Enterprises Inc. 62,500 1,258 Colgate-Palmolive Co. 85,800 5,577 Comcast Corporation 110,300 5,542 Conagra, Inc. 71,800 1,620 CVS Corporation 57,600 2,300 Darden Restaurant, Inc. 19,400 352 Deluxe Corp. 11,200 307 Fort James Corporation 32,500 890 Fortune Brands, Inc. 24,500 810 General Mills, Inc. 45,000 1,609 Gillette Company 159,600 6,573 Great Atlantic & Pacific Tea Co., Inc. 5,600 156 H.J. Heinz Company 52,750 2,100 Hershey Foods Corporation 20,500 974 Kellogg Company 59,600 1,836 Kimberly-Clark Corporation 78,332 5,111 *Kroger Company 122,000 2,303 Longs Drug Stores Corp. 5,800 150 McDonald's Corporation 199,300 8,034 McKesson HBOC, Inc. 41,353 933 *MediaOne Group, Inc. 89,200 6,852 Nabisco Group Holdings Corp. 48,000 510 Newell Rubbermaid Inc. 41,471 1,203 PepsiCo, Inc. 215,100 7,582 Philip Morris Companies, Inc. 351,600 8,153 Procter & Gamble Company 195,400 21,409 R.R. Donnelley & Sons Company 18,800 466 Ralston Purina Group 47,600 1,327 Rite Aid Corporation 38,100 426 *Safeway Inc. 75,100 2,671 Sara Lee Corporation 132,900 2,932 Supervalue Inc. 20,400 408 Sysco Corporation 48,700 1,927 The Coca-Cola Company 363,200 21,156 The Quaker Oats Company 19,700 1,293 The Seagram Company Ltd. 63,600 2,858 Time Warner Inc. 190,300 13,785 *Tricon Global Restaurants, Inc. 22,590 873 Tupperware 8,500 144 Unilever N.V 84,107 4,579 UST Incorporated 25,600 645
MARKET SHARES/ VALUE COMMON STOCK (50.8%) PAR (000'S) -------------------------------------------------------- CONSUMER STAPLES continued *Viacom, Inc. 102,512 $ 6,196 Walgreen Company 147,600 4,317 Walt Disney Company 303,408 8,875 Wendy's International, Inc. 17,900 369 Winn-Dixie Stores, Inc. 21,900 524 Wm. Wrigley Jr. Company 17,100 1,418 ----------- TOTAL 200,449 ----------- ENERGY (2.8%) Amerada Hess Corporation 13,300 755 Anadarko Petroleum Corporation 18,700 638 Apache Corporation 16,800 620 Ashland, Inc. 10,600 349 Atlantic Richfield Company 47,400 4,100 Baker Hughes, Inc. 48,340 1,018 Burlington Resource, Inc. 31,975 1,057 Chevron Corporation 96,500 8,359 Conoco, Inc. 92,300 2,296 Exxon Mobil Corporation 509,273 41,028 Halliburton Company 64,900 2,612 Helmerich & Payne, Inc. 7,300 159 Kerr-McGee Corporation 12,757 791 Occidental Petroleum Corporation 51,300 1,109 Phillips Petroleum Company 37,300 1,753 *Rowan Companies, Inc. 12,200 265 Royal Dutch Petroleum Co., ADR 315,400 19,062 Schlumberger Limited 80,600 4,534 Sunoco, Inc. 13,300 313 Texaco Inc. 81,300 4,416 Tosco, Corp. 22,400 609 Transocean Offshore Sedco Forex, Inc. 15,636 527 Union Pacific Resource Group 37,058 472 Unocal Corp. 35,700 1,198 USX -Marathon Group 45,400 1,121 ----------- TOTAL 99,161 ----------- FINANCIALS (6.7%) Aetna, Inc. 21,993 1,227 Aflac Inc. 39,100 1,845 Allstate Corporation 117,494 2,820 American Express Company 66,100 10,989 American General Corporation 36,603 2,777 American International Group, Inc. 227,778 24,628 AMSOUTH BANCORPORATION 57,900 1,118 Aon Corporation 37,675 1,507 Associates First Capital Corporation 107,138 2,939 Banc One Corporation 172,545 5,532 Bank of America Corp. 254,095 12,752 Bank of New York Company, Inc. 108,200 4,328 BB&T Corporation 47,000 1,287 Capital One Financial Corporation 29,100 1,402 Chase Manhattan Corporation 122,448 9,513 CIGNA Corporation 27,400 2,207 Cincinnati Financial Corporation 24,300 758
Balanced Portfolio 44 51
MARKET SHARES/ VALUE COMMON STOCK (50.8%) PAR (000'S) -------------------------------------------------------- FINANCIALS continued Citigroup, Inc. 496,882 $ 27,608 Comerica, Inc. 23,000 1,074 Conseco Inc. 48,070 859 Countrywide Credit Industries, Inc. 16,600 419 Federal Home Loan Mortgage Corp. 102,300 4,814 Federal National Mortgage Association 150,800 9,415 Fifth Third Bankcorp 44,375 3,256 First Union Corporation 140,686 4,616 Firstar Corporation 144,829 3,060 FleetBoston Financial Corp. 135,551 4,719 Franklin Resources Inc. 37,100 1,190 Golden West Financial Corporation 24,300 814 Hartford Financial Services Group Inc. 33,200 1,573 Household International Inc. 70,459 2,625 Huntington Bancshares, Inc. 33,928 810 J.P. Morgan & Company, Inc. 25,800 3,267 Jefferson-Pilot Corp. 15,475 1,056 KeyCorp 66,000 1,460 Lehman Brothers Holdings, Inc. 17,600 1,491 Lincoln National Corporation 29,200 1,168 Loews Corp. 15,800 959 Marsh & McLennan Companies, Inc. 38,800 3,713 MBIA, Inc. 14,700 776 MBNA Corp. 117,932 3,214 Mellon Financial Corporation 75,600 2,575 Merrill Lynch & Co. 54,400 4,542 MGIC Investment Corp. 16,100 969 Morgan Stanley, Dean Witter, Discover & Co. 83,980 11,988 National City Corp. 90,900 2,153 Northern Trust Corp. 32,800 1,738 Old Kent Financial, Corp. 17,500 619 Paine Webber Group Inc. 21,400 831 PNC Bank Corp. 44,700 1,989 Progressive Corporation 10,700 782 Providian Financial Corporation 20,850 1,899 Regions Financial Corporation 32,900 827 Republic New York Corporation 15,400 1,109 SAFECO, Inc. 19,300 480 Schwab Charles Corp New 120,350 4,618 SLM Holding Corporation 23,700 1,001 SouthTrust Corporation 24,600 930 St. Paul Companies, Inc. 33,306 1,122 State Street Corporation 23,700 1,732 Summit Bancorp 26,000 796 Suntrust Banks Inc. 47,300 3,255 Synovus Financial Corp. 39,950 794 The Bear Stearns Companies, Inc. 18,002 770 The Chubb Corporation 25,900 1,458 Torchmark Corporation 19,600 570 T. Rowe Price & Associates 17,900 661 U.S. Bancorp 107,587 2,562
MARKET SHARES/ VALUE COMMON STOCK (50.8%) PAR (000'S) -------------------------------------------------------- FINANCIALS continued Union Planters Corporation 21,000 $ 828 UNUMProvident Corporation 35,106 1,126 Wachovia Corporation 29,800 2,026 Washington Mutual, Inc. 85,214 2,216 Wells Fargo & Company 242,660 9,813 ----------- TOTAL 240,364 ----------- HEALTH CARE (4.3%) Abbott Laboratories Inc. 223,800 8,127 Allergan Inc. 19,400 965 *Alza Corporation 14,900 516 American Home Products Corporation 192,200 7,580 Bard C R Inc 7,500 398 Bausch & Lomb, Inc. 8,400 575 Baxter International, Inc. 42,800 2,688 Becton, Dickinson & Company 36,800 984 Biomet, Inc. 16,500 660 *Boston Scientific Corp. 60,800 1,330 Bristol-Myers Squibb Company 292,200 18,755 Columbia/HCA Healthcare Corporation 83,050 2,434 Eli Lilly & Company 160,800 10,693 *Guidant Corporation 44,400 2,087 *HEALTHSOUTH Corporation 61,000 328 *Humana, Inc. 24,700 202 Johnson & Johnson 197,800 18,420 Mallinckrodt, Inc. 10,400 331 Manor Care Inc. 15,800 253 Medtronic, Inc. 172,600 6,289 Merck & Co., Inc. 345,100 23,143 Pfizer, Inc. 570,000 18,489 Pharmacia & Upjohn Inc. 74,530 3,354 Quintiles Transnational Corporation 16,900 316 Schering-Plough Corporation 216,000 9,112 *St. Jude Medical, Inc. 12,450 382 *Tenet Healthcare Corp. 45,700 1,074 *United Healthcare Corp. 25,500 1,355 Warner-Lambert Company 125,700 10,300 *Watson Pharmaceutical Inc. 14,100 505 *Wellpoint Health Networks 9,700 640 ----------- TOTAL 152,285 ----------- TECHNOLOGY (15.3%) *3COM Corporation 52,600 2,472 Adobe Systems, Inc. 18,000 1,211 Adaptec, Inc. 15,200 758 *Advanced Micro Devices, Inc. 21,700 628 *America Online, Inc. 326,000 24,593 *Amgen, Inc. 150,000 9,009 Analog Devices, Inc. 25,400 2,362 *Andrew Corporation 12,062 228 *Apple Computer, Inc. 23,700 2,437 *Applied Materials, Inc. 55,200 6,993 Autodesk, Inc. 8,700 294
45 Balanced Portfolio 52
MARKET SHARES/ VALUE COMMON STOCK (50.8%) PAR (000'S) -------------------------------------------------------- TECHNOLOGY continued Automatic Data Processing, Inc. 91,000 $ 4,903 *BMC Software, Inc. 35,200 2,814 *Cabletron Systems, Inc. 25,600 666 *Ceridian Corp. 21,300 459 *Cisco Systems, Inc. 478,300 51,238 Citrix Systems, Inc. 12,900 1,587 Compaq Computer Corporation 250,067 6,767 Computer Associates International, Inc. 79,112 5,533 *Computer Sciences Corp. 23,500 2,224 *Compuware Corporation 52,500 1,956 Comverse Technology 10,300 1,491 *Dell Computer Corp. 373,800 19,064 Electronic Data Systems Corporation 72,500 4,853 *EMC Corporation 149,043 16,283 Equifax, Inc. 21,100 497 First Data Corporation 63,100 3,112 *Gateway Inc. 46,100 3,322 *General Instrument Corporation 25,500 2,168 Global Crossing, Ltd. 112,985 5,649 Hewlett-Packard Company 149,000 16,977 Intel Corporation 486,600 40,053 International Business Machines Corporation 266,100 28,739 *KLA- Tencor Corporation 13,000 1,448 Lexmark International Group, Inc. 18,900 1,710 *LSI Logic Corp. 21,700 1,465 Lucent Technologies, Inc. 450,747 33,722 *Micron Technology 36,800 2,861 *Microsoft Corporation 750,800 87,656 Molex, Inc. 22,800 1,292 Motorola, Inc. 89,300 13,149 *National Semiconductor Corporation 24,700 1,057 Network Appliance, Inc. 21,600 1,794 Nortel Networks Corporation 195,220 19,717 *Novell, Inc. 49,300 1,969 *Oracle Corporation 211,725 23,726 *Parametric Technology Company 39,600 1,072 Paychex, Inc. 36,200 1,448 PE Corp.-PE Biosystems Group 15,000 1,805 *Peoplesoft, Inc. 35,800 763 Perkinelmer, Inc. 6,700 279 Raytheon Company- Class B 49,700 1,320 Qualcomm, Inc. 94,400 16,638 Scientific-Atlanta, Inc. 11,300 629 *Seagate Technology Inc. 30,600 1,425 Shared Medical Systems Corp. 3,900 199 *Silicon Graphics 27,800 273 *Sun Microsystems, Inc. 227,700 17,633 Tektronix, Inc. 6,900 268 *Tellabs, Inc. 57,600 3,697 Teradyne, Inc. 25,200 1,663 Texas Instruments, Incorporated 115,600 11,199
MARKET SHARES/ VALUE COMMON STOCK (50.8%) PAR (000'S) -------------------------------------------------------- TECHNOLOGY continued *Unisys Corporation 45,000 $ 1,437 W.W. Grainger, Inc. 13,700 655 Xilinnx, Inc. 46,600 2,119 Yahoo, Inc. 38,700 16,745 ----------- TOTAL 544,173 ----------- TRANSPORTATION (0.4%) *AMR Corporation 22,100 1,481 Burlington Northern Santa Fe 68,399 1,659 CSX Corporation 32,000 1,004 Delta Air Lines Inc. 20,600 1,026 *FDX Corporation 43,740 1,791 Kansas City Southern Inds 16,300 1,216 Norfolk Southern Corporation 56,000 1,148 Ryder System, Inc. 9,400 230 Southwest Airlines Co. 74,175 1,201 Union Pacific Corporation 36,500 1,592 *USAir Group, Inc. 10,500 337 ----------- TOTAL 12,685 ----------- UTILITIES (1.2%) Ameren Corporation 20,200 662 American Electric Power Co. Inc. 28,400 912 Carolina Power & Light Company 23,500 715 Central & South West Corporation 31,300 626 Cinergy Corporation 23,405 565 CMS Energy Corp. 17,400 543 Coastal Corp. 31,400 1,113 Columbia Energy Group 12,100 765 Consolidated Edison Co. of New York 32,500 1,121 Consolidated Natural Gas Company 14,100 916 Constellation Energy Group Inc. 22,000 638 Dominion Resources Inc. 28,200 1,107 DTE Energy Company 21,300 668 Duke Energy Corp. 53,671 2,690 Eastern Enterprises 3,900 224 Edison International 51,100 1,338 EL Paso Energy Corp. 33,500 1,300 Enron Corporation 105,000 4,659 Entergy Corporation 36,300 935 FirstEnergy Corporation 34,400 780 Florida Progress Corp. 14,400 609 FPL Group, Inc. 26,400 1,130 GPU, Inc. 18,500 554 New Century Energies, Inc. 17,000 516 *Niagra Mohawk Power Corporation 27,600 385 Nicor, Inc. 6,900 224 Northern States Power Company 22,700 443 ONEOK, Inc. 4,700 118 P P & L Resources, Inc. 23,233 531 PECO Energy Company 27,500 956 Pinnacle West Capital 12,500 382 Peoples Energy Corporation 5,200 174 PG&E Corp. 56,500 1,158
Balanced Portfolio 46 53
MARKET SHARES/ VALUE COMMON STOCK (50.8%) PAR (000'S) -------------------------------------------------------- UTILITIES continued Public Service Enterprise Group, Inc. 32,300 $ 1,124 Reliant Energy, Inc. 43,526 996 Scottish Power PLC 25,520 715 Sempra Energy 35,359 614 Southern Company 100,500 2,362 Texas Utilities Company 40,695 1,447 *The AES Corporation 30,300 2,265 UNICOM Corp. 32,000 1,072 Williams Companies Inc. 63,900 1,954 ----------- TOTAL 42,006 ----------- TOTAL COMMON STOCK (COST $691,041) 1,808,647 ----------- SHORT TERM INVESTMENTS (11.3%) -------------------------------------------------------- MONEY MARKET INVESTMENTS (10.2%) PHARMACEUTICAL (0.7%) American Home Products, 5.72%, 01/26/00 25,000,000 24,901 ----------- CAPTIVE FINANCE COMPANY (0.7%) Ford Motor Credit Company, 5.68%, 01/12/00 25,000,000 24,957 ----------- FEDERAL GOVERNMENT AND AGENCIES (1.0%) #Federal Home Loan Mortgage Corp., 5.51%, 01/10/00 20,200,000 20,172 Federal Home Loan Mortgage Corp., 0.47%, 01/14/00 17,000,000 16,971 ----------- TOTAL 37,143 ----------- FINANCE LESSOR (0.8%) Receivable Capital Trust, 6%, 01/28/00 29,000,000 28,870 ----------- FINANCE SERVICES (1.6%) Asset Securitization, 5.80%, 01/21/00 25,000,000 24,919 CXC Incorporated, 5.78%, 01/24/00 30,100,000 29,989 ----------- TOTAL 54,908 PERSONAL CREDIT INSTITUTIONS (3.4%) Associates Corp. of America, 5.67%, 01/12/00 50,000,000 49,913 General Electric Capital Corporation, 5.32%, 01/26/00 25,000,000 24,908 General Electric Capital Corporation, 0.62%, 02/02/00 20,000,000 19,890 Variable Funding Capital Corp., 5.84%, 01/12/00 25,000,000 24,955 ----------- TOTAL 119,666 SHORT TERM BUSINESS CREDIT (1.4%) IBM Credit Corporation, 5.70%, 01/26/00 50,000,000 49,802 -----------
MARKET SHARES/ VALUE SHORT TERM INVESTMENTS (11.3%) PAR (000'S) -------------------------------------------------------- UTILITY-ELECTRIC (0.6%) National Rural Utility, 5.80%, 01/24/00 22,100,000 $ 22,018 ----------- TOTAL MONEY MARKET INVESTMENTS 362,265 ----------- ASSET-BACKED SECURITIES (1.1%) FINANCE LESSORS (1.1%) Preferred Receivable Funding, 6.12%, 01/20/00 23,675,000 23,598 Preferred Receivable Funding, 5.85%, 01/28/00 15,000,000 14,934 ----------- TOTAL ASSET-BACKED SECURITIES 38,532 ----------- TOTAL SHORT TERM INVESTMENTS (COST $400,797) 400,797 ----------- TOTAL INVESTMENTS (99.5%) (COST $2,474,382)' 3,538,478 ----------- OTHER ASSETS, LESS LIABILITIES (0.5%) 19,422 ----------- TOTAL NET ASSETS (100.0%) $ 3,557,900 -----------
IO - Interest Only Security ++ - Defaulted Securities 144A after the name of a security represents a security exempt from registration under rule 144A of the Securities Act of 1933. These securities may be resold as transactions exempt from registration, normally to qualified institutional buyers. * Non-Income Producing. # Partially held by the custodian in a segregated account as collateral for open futures positions. Information regarding open futures contracts as of December 31, 1999 is summarized below:
UNREALIZED NUMBER OF EXPIRATION APPRECIATION ISSUER CONTRACTS DATE (000'S) - ------------------------------------------------------------ S&P 500 Stock Index 290 03/00 $4,411 (Total Notional Value at 12/31/99, $103,193,600)
' At December 31, 1999, the aggregate cost of securities for federal income tax purposes was $2,476,485 and the net unrealized appreciation based on that cost was $1,061,993 which is comprised of $1,155,249 in aggregate gross unrealized appreciation and $93,256 in aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements 47 Balanced Portfolio 54
Objective: Portfolio Strategy: Net Assets High current income and capital Generate superior performance by investing in a $161,424,443 appreciation with moderate risk diversified mix of fixed income securities rated below investment grade.
HIGH YIELD BOND PORTFOLIO Investing in a portfolio of high yield bonds provides investors who can accept a moderate level of risk with a high level of current income, coupled with the opportunity for capital gains. Holdings of particular interest include solid investments in entities that have the possibility of a positive event, such as a significant improvement in credit rating or earnings or a change in ownership. In a high-yield portfolio, some credit losses over time are inevitable; high coupons and diversification across many holdings mitigate the impact of individual securities on the performance of the total Portfolio. The last 18 months have been a difficult period for bond holders, including high yield investors. During 1999, high yield bonds outperformed investment grade bonds as an asset class mainly because of the higher current income high yield bonds provide. Nevertheless, a series of negative factors have combined to limit returns for high yield investors. Problems began with the Asian financial crisis in August 1998, followed by the collapse of a prominent U.S. hedge fund. Liquidity in the high yield market evaporated as nervous dealers retrenched and hedge funds liquidated. An unexpected rise in the default rate in early 1999 reinforced negative market sentiment even as the economy boomed. Three interest rate increases by the Federal Reserve during 1999 put downward pressure on all bond prices. Each time the high yield market showed signs of firming, demand was overwhelmed by new bond issues from telecommunications companies determined to fund their explosive growth regardless of interest rates. Low returns, especially relative to much-publicized high-tech stocks, led to cash outflows from high yield mutual funds, putting further pressure on the market. Finally, Y2K fears affected the corporate bond sector in the last half of 1999, depressing prices of both investment-grade and high yield bonds. This combination of forces produced credit losses and trading price declines that essentially offset coupon income to produce low total returns for high yield investors. The High Yield Portfolio lagged the Lehman High Yield Intermediate Index during 1999, largely because of a few concurrent credit problems early in the year. In response to market conditions, steps have been taken to minimize credit risk: average credit quality has been raised, exposure to emerging markets has been minimized, cyclical risk is being maintained at a very low level, and the average capitalization and liquidity of holdings has been increased. The portfolio enters the new year better positioned for a period of increasingly volatile markets. Investors should remember that, although the Fund's total return (defined as income plus change in market value) has been slightly negative over the last year, interest payments have continued to provide steady cash flow. High yield bonds have been and should continue to be intermediate risk and return assets over time. These bonds provide diversification benefits for balanced portfolios because high yield bonds tend to move up and down at different points in the market cycle from traditional stock and bond investments. For investors who want high income and are willing to accept some price volatility, this may be an opportune time to consider investing in high-yield securities. PERCENTAGE HOLDINGS BY INDUSTRY SECTOR 12/31/99 [PIE CHART]
CONSUMER CABLE BASIC RELATED/HEALTH TELECOMMUNICATIONS FINANCE TELEVISION LEISURE MATERIALS/ENERGY CARE ------------------ ------- ---------- ------- ---------------- -------------- Percentage Holdings 15.00 14.00 12.00 10.00 9.00 8.00 by Industry Sector OTHER CASH AND BROADCASTING/MEDIA TRANSPORTATION INDUSTRIES OTHER ------------------ -------------- ---------- -------- Percentage Holdings 8.00 3.00 16.00 5.00 by Industry Sector
PERFORMANCE RELATIVE TO THE LEHMAN BROTHERS INDEX [LINE GRAPH]
LEHMAN BROTHERS HIGH YIELD HIGH YIELD BOND PORTFOLIO INTERMEDIATE MARKET INDEX ------------------------- -------------------------- 5/94 10000.00 10000.00 12/94 10302.00 10188.00 12/95 12030.00 11952.00 12/96 14409.00 13409.00 12/97 16693.00 15020.00 12/98 16388.00 15244.00 12/99 16316.00 15646.00
- -------------------------------------------------------------- Average Annual Total Return For Periods Ended December 31, 1999 Since 1 Year 5 Years Inception# - -------------------------------------------------------------- High Yield Bond Portfolio -0.44% 9.63% 9.03% Lehman Brothers High Yield Intermediate Market Index 2.64% 8.96% 8.23% - -------------------------------------------------------------- # Inception Date of 5/3/94
The total return performance for the High Yield Bond Portfolio is shown in comparison with the Lehman Brothers High Yield Intermediate Market Index. The Lehman Brothers index is an appropriate measure of portfolio performance since it has a quality and maturity profile that resembles the High Yield Bond Portfolio. The Lehman Brothers High Yield Intermediate Market Index is made up of dollar-denominated, nonconvertible, SEC publicly registered fixed rate noninvestment grade issues. The bonds will have remaining maturities of between one and ten years and have an outstanding par value of at least $100 million. Yankee and global bonds (SEC registered) of issuers in G-7 countries are included. Original issue zero coupon bonds and step-up coupon structures are also included; however, the index excludes pay-in-kind (PIK) bonds. Each bond must be rated Ba1 or lower by Moody's Investor Service. If a Moody's rating is unavailable, the bonds must be rated BB+ or lower by Standard & Poor's, or by Fitch if an S&P rating is unavailable. A few unrated bonds are included in the index; to be eligible they must have previously held a high yield rating or have been associated with a high yield issuer. The index is an unmanaged market value weighted index and measures the income provided by, and the price changes of, the underlying securities. This chart assumes an initial investment of $10,000 made on 5/3/94 (commencement of operations). Returns shown include deductions for management and other fund expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. Total returns shown on page 2 reflect mortality and expense risk charges and premium charges deducted from the assets of the separate account. The cost of insurance protection, which is not reflected in the returns shown on this chart, would make the returns significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. High Yield Bond Portfolio 48 55 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments December 31, 1999
MARKET SHARES/ VALUE BONDS (78.0%) PAR (000'S) -------------------------------------------------------- BASIC MATERIALS (2.6%) Glencore Nickel, LTD, 9%, 12/1/14 500,000 $ 419 Great Central Mines, Ltd., 8.875%, 04/01/08 2,400,000 2,214 Murrin Murrin Holdings, 9.375%, 8/31/07 1,850,000 1,628 --------- TOTAL BASIC MATERIALS 4,261 --------- BROADCASTING/MEDIA (3.1%) BROADCASTING (1.2%) +Big City Radio, Inc., 11.25%, 3/15/05 3,100,000 1,999 --------- PRINTING AND PUBLISHING (1.9%) Marvel Enterprises, Inc., 12.0%, 06/15/09 2,200,000 2,024 WRC Media Inc., 12.75%, 11/15/09 1,000,000 993 --------- 3,017 --------- TOTAL BROADCASTING/MEDIA 5,016 --------- CABLE TELEVISION (7.4%) Century Communications, 0.0%, 1/15/08 2,050,000 898 +International Cabletel, Inc., 11.50%, 02/01/06 3,000,000 2,715 +NTL, Inc.,9.75%, 4/01/08 3,500,000 2,415 NTL Incorporated, 11.50%, 10/01/08 1,000,000 1,085 +Telewest PLC, 9.25%, 04/15/09 (144A) 2,400,000 1,512 +United International Holdings, 10.75%, 2/15/08 2,600,000 1,664 United Pan-Europe Co., 10.875%, 8/01/09 (144A) 1,550,000 1,569 --------- TOTAL CABLE TELEVISION 11,858 --------- CONSUMER RELATED (1.9%) Boyds Collection Ltd., 9.0%, 5/15/08 750,000 713 Global Health Sciences, Inc., 11.0%, 05/01/08 850,000 527 Iowa Select Farms L.P., 10.75%, 12/01/05 (144A) 3,600,000 1,799 --------- TOTAL CONSUMER RELATED 3,039 --------- ENERGY RELATED (6.7%) OIL AND GAS INDEPENDENT (2.0%) Chesapeake Energy, 9.625%, 05/01/05 1,000,000 944 Grey Wolf Inc., 8.875%, 7/01/07 600,000 552 Pioneer Natural Resources, 8.875%, 04/15/05 500,000 500 Pioneer Natural Resources, 8.25%, 08/15/07 500,000 477 Pioneer Natural Resources, 6.5%, 01/15/08 800,000 679 --------- TOTAL 3,152 ---------
MARKET SHARES/ VALUE BONDS (78.0%) PAR (000'S) -------------------------------------------------------- OIL FIELD SERVICES (2.4%) Eott Energy, 11%, 10/1/09 1,800,000 $ 1,863 Pride International, Inc., 10.00%, 06/01/09 1,500,000 1,530 R&B Falcon Corp., 12.25%, 03/15/06 400,000 436 --------- TOTAL 3,829 --------- REFINING (2.3%) PDV America, Inc., 7.875%, 08/01/03 2,250,000 2,118 Port Authority Finance Corporation, 12.5%, 1/15/09 (144A) 1,650,000 1,667 --------- TOTAL 3,785 --------- TOTAL ENERGY RELATED 10,766 --------- FINANCE (11.3%) BANKS (2.2%) BF Saul Real Estate, 9.75%, 4/01/08 1,750,000 1,598 Sovereign Bancorp Inc., 10.5%, 11/15/06 1,900,000 1,938 --------- TOTAL 3,536 --------- FINANCE COMPANIES (8.4%) Americredit Corp., 9.875%, 04/15/06 1,000,000 1,008 Metris Companies, Inc., 10.125%, 7/15/06 2,600,000 2,483 Arcadia Financial, Ltd., 11.5%, 3/15/07 5,775,000 6,006 PDV SA Finance, Ltd. 99-I, 9.75%, 02/15/10 (144A) 4,400,000 4,131 --------- TOTAL 13,628 --------- INSURANCE (0.7%) Willis Corron Corp., 9.0%, 2/01/09 1,350,000 1,124 --------- TOTAL FINANCE 18,288 --------- HEALTHCARE (5.4%) Columbia/HCA Healthcare, 7.69%, 06/15/25 1,450,000 1,172 HEALTHSOUTH Corporation, 6.875%, 6/15/05 750,000 656 HEALTHSOUTH Corporation, 3.25%, 4/01/03 3,200,000 2,468 ICN Pharmaceuticals, 8.75%, 11/15/08 (144A) 450,000 430 Total Renal Care Hldgs, 7.0%, 05/15/09 (144A) 6,300,000 3,938 --------- TOTAL HEALTHCARE 8,664 --------- LEISURE (9.4%) GAMING (3.9%) Circus Circus Enterprise, 7.625%, 7/15/13 1,850,000 1,610 Hollywood Casino, 13.0%, 8/01/06 (144A) 1,750,000 1,873
49 High Yield Bond Portfolio 56
MARKET SHARES/ VALUE BONDS (78.0%) PAR (000'S) -------------------------------------------------------- GAMING continued Hollywood Casino, 11.25%, 5/01/07 1,700,000 $ 1,777 MGM Grand Inc., 6.875%, 2/06/08 1,250,000 1,107 --------- TOTAL 6,367 --------- HOTELS AND OTHER LODGING PLACES (4.2%) HMH Properties, Inc., 8.45%, 12/01/08 1,000,000 925 HMH Properties, Inc., 7.875%, 08/01/08 900,000 802 Hilton Hotels Corporation, 5.0%, 5/15/06 2,000,000 1,518 ITT Corp., 7.375%, 11/15/15 2,650,000 2,027 Lodgian Financing Corp., 12.25%, 7/15/09 1,500,000 1,485 --------- TOTAL 6,757 --------- LEISURE RELATED (1.0%) Bally Total Fitness, 9.875%, 10/15/07 1,600,000 1,552 Hedstrom Holdings Inc., 10.0%, 06/01/07 750,000 45 --------- TOTAL 1,597 --------- MOVIE THEATERS (0.3%) Cinemark USA, 9.625%, 8/1/08 500,000 450 --------- TOTAL LEISURE 15,171 --------- OTHER INDUSTRIES (13.6%) AUTO RELATED (2.3%) AVIS Rent a Car, Inc., 11.0%, 05/01/09 1,000,000 1,050 Budget Group, Inc., 9.125%, 04/01/06 2,900,000 2,697 --------- TOTAL 3,747 --------- BUILDING AND CONSTRUCTION (0.7%) United Rentals Inc., 8.8%, 8/15/08 1,250,000 1,167 --------- ENVIRONMENTAL CONTROL (5.5%) Allied Waste of North America, 10.000%, 08/01/09 (144A) 2,850,000 2,551 Allied Waste of North America, 7.875%, 01/01/09 2,500,000 2,209 IT Group Inc., 11.25%, 4/01/09 1,450,000 1,407 USA Waste Services, 7.125%, 10/01/07 1,750,000 1,528 Waste Management, Inc., 4.0%, 02/01/02 1,350,000 1,181 --------- TOTAL 8,876 --------- FOOD SERVICES (0.5%) Sbarro Inc., 11.0%, 9/15/09 (144A) 750,000 780 --------- OFFICE EQUIPMENT (1.4%) Buhrmann US Inc., 12.25%, 11/01/09 (144A) 2,150,000 2,233 --------- HOUSEHOLD FURNISHINGS, APPLIANCES (0.6%) Home Interiors and Gifts, 10.125%, 6/01/08 1,150,000 983 ---------
MARKET SHARES/ VALUE BONDS (78.0%) PAR (000'S) -------------------------------------------------------- REAL ESTATE (1.8%) Crescent Real Estate, 7.5%, 09/15/07 2,950,000 $ 2,440 Crescent Real Estate, 7.0%, 09/15/02 500,000 454 --------- TOTAL 2,894 --------- REIT (0.8%) Macerich Co., 7.25%, 12/15/02 (144A) 1,550,000 1,285 --------- TOTAL OTHER INDUSTRIES 21,965 --------- SERVICES (1.5%) Building One Services Co., 10.5%, 5/01/09 1,500,000 1,440 +Decisionone Holdings, 11.50%, 8/1/08 3,875,000 19 Decisionone Holdings, 7.94%, 08/07/05 101,265 37 Decisionone Holdings, 7.98%, 08/07/05 145,822 54 Decisionone Holdings, 8.29%, 08/07/05 26,518 10 ++Decisionone Holdings, 9.75%, 8/1/07 1,375,000 5 Service Corp. International, 7.7%, 04/15/09 1,200,000 912 --------- TOTAL SERVICES 2,477 --------- TECHNOLOGY (0.6%) Amkor Technologies, Inc., 9.25%, 05/01/06 (144A) 1,000,000 975 --------- TELECOMMUNICATIONS (11.9%) Arch Escrow Corp, 13.75%, 04/15/08 4,100,000 3,326 Arch Communications, 12.75%, 07/01/07 1,800,000 1,424 +Call-Net Enterprises, Inc., 10.80%, 05/15/09 1,800,000 887 Call-Net Enterprises, Inc., 9.375%, 05/15/09 900,000 740 Global Crossing Holding, 9.5%, 11/15/09 (144A) 1,000,000 985 Hyperion Telecommunications, 12.25%, 9/01/04 350,000 377 Intermedia Communication, 9.5%, 3/01/09 1,150,000 1,098 +Intermedia Communication, 9.5%, 5/01/06 600,000 525 +KMC Telecommunication Hldgs, 12.50%, 2/15/08 750,000 428 KMC Telecommunication Hldgs, 13.5%, 05/15/09 (144A) 2,400,000 2,400 +Nextel Communications, 9.75%, 9/15/07 1,000,000 745 Nextlink Communications, 10.50%, 12/01/09 (144A) 1,000,000 1,015 PSI Net Inc., 11.0%, 08/01/09 750,000 773 Splitrock Services, Inc., 11.75%, 07/15/08 1,200,000 1,122 Viatel, Inc., 11.25%, 04/15/08 1,500,000 1,489
High Yield Bond Portfolio 50 57
MARKET SHARES/ VALUE BONDS (78.0%) PAR (000'S) -------------------------------------------------------- TELECOMMUNICATIONS continued Williams Communications, 10.875%, 10/01/09 1,850,000 $ 1,933 --------- TOTAL TELECOMMUNICATIONS 19,267 --------- TRANSPORTATION (2.6%) North American Van Lines, 13.375%, 12/01/09 (144A) 1,250,000 1,250 Stena AB, 10.5%, 12/15/05 1,400,000 1,274 Stena AB, 8.75%, 06/15/07 2,150,000 1,752 --------- TOTAL TRANSPORTATION 4,276 --------- TOTAL BONDS (COST $134,752) 126,023 --------- PREFERRED SECURITIES (15.0%) -------------------------------------------------------- BANKS (1.0%) California Fed Pfd Capital 74,000 1,670 --------- BROADCASTING AND MEDIA (5.4%) BROADCASTING (4.5%) **Crown Castle Intl. Corp. 10,310 1,067 **Cumulus Media, Inc. 25,740 2,883 Sinclair Capital 34,000 3,298 --------- TOTAL 7,248 --------- PRINTING AND PUBLISHING (0.9%) Primedia, Inc. 5,000 485 Primedia, Inc. 10,000 915 --------- TOTAL 1,400 --------- TOTAL BROADCASTING AND MEDIA 8,648 --------- CABLE TELEVISION (4.5%) Adelphia Communications 10,000 1,150 **CSC Holdings, Inc. 47,464 5,221 **21st Century Telecom 10,760 915 --------- TOTAL CABLE TELEVISION 7,286 --------- INSURANCE (1.3%) Superior Nat'l Capital Trust I, 10.75%, 12/01/17 4,700,000 2,115 --------- HEALTHCARE (1.0%) Fresenius Medical, 7.875%, 2/1/08 1,750,000 1,628 --------- LEISURE RELATED (0.4%) **Samsonite Corp. 7,610 609 --------- TELECOMMUNICATIONS (1.4%) **Adelphia Business Solutions 13,890 1,354 **Nextlink Communications 16,560 885 --------- TOTAL TELECOMMUNICATIONS 2,239 --------- TOTAL PREFERRED SECURITIES (COST $26,557) 24,195 --------- COMMON STOCK AND WARRANTS (1.5%) -------------------------------------------------------- CABLE TELEVISION (0.0%) *21st Century Telecom 8,500 17 ---------
MARKET SHARES/ VALUE COMMON STOCK AND WARRANTS (1.5%) PAR (000'S) -------------------------------------------------------- CONSUMER RELATED (0.0%) *Ithaca Industries Inc. 136,000 $ 28 --------- FINANCE COMPANIES (0.0%) *Arcadia Financial Ltd. 4,000 4 --------- LEISURE (0.1%) *Hedstrom Holdings, Inc. 201,674 2 Meditrust Corp. 11,117 61 *Samsonite Corp. 6,250 19 --------- TOTAL LEISURE 82 --------- TELECOMMUNICATIONS (1.4%) *Arch Communications Class A 134,177 885 *Arch Communications Class B 35,377 233 *Arch Communications Warrants 32,686 13 *KMC Telecom Holdings, Inc. 6,250 19 *Splitrock Services, Inc. 3,000 282 *Viatel, Inc. 16,325 875 --------- TOTAL TELECOMMUNICATIONS 2,307 --------- TOTAL COMMON STOCK AND WARRANTS (COST $4,532) 2,438 --------- MONEY MARKET INVESTMENTS (3.8%) -------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (3.8%) Federal Home Loan Mortgage, 4.7%, 1/14/00 6,100,000 6,089 --------- TOTAL MONEY MARKET INVESTMENTS (COST $6,089) 6,089 --------- TOTAL INVESTMENTS (98.3%) (COST $171,930)' 158,745 --------- OTHER ASSETS, LESS LIABILITIES (1.7%) 2,679 --------- TOTAL NET ASSETS (100.0%) $ 161,424 ---------
* Non-Income Producing + Step Bond security that presently receives no coupon payments. At a predetermined date the stated coupon rate becomes effective. ++ Defaulted Security ** PIK- Payment in Kind 144A after the name of a security represents a security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold as transactions exempt from registration, normally to qualified institutional buyers. ' At December 31, 1999, the aggregate cost of securities for federal income tax purposes was $172,290 and the net unrealized depreciation of investments based on that cost was $13,545 which is comprised of $5,113 aggregate gross unrealized appreciation and $18,658 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements 51 High Yield Bond Portfolio 58
Objective Portfolio Strategy Net Assets A stable and relatively high level of Invest in high grade corporate bonds, U.S. $286,492,754 long-term total return and government bonds and bonds of government agencies. preservation of capital
SELECT BOND PORTFOLIO The Select Bond Portfolio invests primarily in high quality debt securities, mainly government bonds, corporate bonds and mortgage-backed securities. Exposure to market sectors is adjusted as yield spreads change among the various classes of securities. Duration and maturities are altered with moderate adjustments in recognition or anticipation of interest rate changes. The recent market environment has been difficult for bond funds in general because investors have shunned the modest but relatively secure returns offered by bonds in favor of the excitement and uncertain but potentially high returns of technology stocks. The result has been a net outflow of cash from virtually all bond funds. The Select Bond Portfolio outperformed the universe with which it is compared during 1999, largely because it has been managed with a defensive posture toward interest rates, predicting correctly that rates were likely to rise. At the end of the year, the Portfolio is in a neutral position with regard to interest rates. With interest rates now approximately 100 basis points (one percentage point) higher than they were at the beginning of 1999, the bond market's expectation that interest rates would rise has been realized. Although further rate increases during 2000 are possible, especially in light of recent reports that suggest inflation is increasing, the market is now more focused on credit risk than on interest rate risk. If an economic slowdown develops, the effect on the financial strength of companies that issue bonds could cause concern about credit risk to increase. The Portfolio's focus in recent months has been on quality and liquidity, with holdings concentrated in well-known names with ratings of AA or better. To take advantage of the relatively wide spreads between corporate and U.S. government bonds, a portion of the position in government securities has been replaced with quality corporate issues. During the fourth quarter the position in mortgages has been reduced because mortgages appeared somewhat rich at the end of the third quarter. PERCENTAGE HOLDINGS 12/31/99 [PIE CHART]
MORTGAGE-BACKED GOVERNMENT AND AND ASSET-BACKED GOVERNMENT SHORT-TERM CORPORATE BONDS SECURITIES AGENCIES INVESTMENTS OTHER ASSETS --------------- ---------------- -------------- ----------- ------------ Percentage Holdings 24.00 33.00 39.00 3.00 1.00
The Corporate Bonds sector includes bonds of companies headquartered outside the United States. The Government and Government Agencies category includes taxable bonds of domestic and foreign governments and a small position in municipal bonds. Consistent with the Portfolio's stated parameters, no more than 20% of the Portfolio is invested in foreign securities, and no more than 10% is invested in high-yield securities. PERFORMANCE RELATIVE TO THE MERRILL LYNCH DOMESTIC MASTER INDEX [LINE GRAPH]
SELECT BOND PORTFOLIO MERRILL LYNCH DOMESTIC MASTER INDEX --------------------- ----------------------------------- 12/89 10000.00 10000.00 10810.00 10910.00 12/91 12682.00 12640.00 13664.00 13958.00 12/93 15142.00 14961.00 14796.00 14539.00 12/95 17621.00 17231.00 18205.00 17850.00 12/97 19928.00 19574.00 21340.00 21310.00 12/99 21126.00 21105.00
- ---------------------------------------------------- Average Annual Total Return For Periods Ended December 31, 1999 1 Year 5 Years 10 Years - ---------------------------------------------------- Select Bond Portfolio -1.00% 7.38% 7.77% Merrill Lynch Domestic Master Index -0.96% 7.74% 7.76% - ----------------------------------------------------
Since the Portfolio invests broadly in U.S. Government, mortgage and corporate bonds, a useful basis for comparing returns is the Merrill Lynch Domestic Master Index. The index is an unmanaged market value weighted index comprised of U.S. Government, mortgage and investment-grade corporate bonds. The index measures the income provided by, and the price changes of, the underlying securities. This chart assumes an initial investment of $10,000 made on 12/31/89. Returns shown include deductions for management and other fund expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. Total returns shown on page 2 reflect mortality and expense risk charges and premium charges deducted from the assets of the separate account. The cost of insurance protection, which is not reflected in the returns shown on this chart, would make the returns significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. Select Bond Portfolio 52 59 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments December 31, 1999
MARKET VALUE BONDS (96.2%) PAR (000'S) -------------------------------------------------------- CORPORATE BONDS (25.9%) AUTO-RELATED (1.5%) Daimler-Chrysler North America, 6.9%, 09/01/04 4,500,000 $ 4,457 --------- BANK HOLDING COMPANIES (2.0%) BT Institutional Capital Trust, 7.75%, 12/1/26 (144A) 3,000,000 2,665 Nations Bank Lease Pass Thru Trust 97-A, 7.442%, 11/18/2005 3,000,000 2,922 --------- TOTAL 5,587 --------- CHEMICALS AND ALLIED PRODUCTS (4.1%) Chevron Corporation, 6.625%, 10/01/04 4,500,000 4,436 Dow Capital B.V., 8.5%, 6/8/10 1,800,000 1,905 Johnson & Johnson, 6.625%, 09/01/09 2,750,000 2,645 Proctor & Gamble Co., 6.875%, 09/15/09 2,900,000 2,836 --------- TOTAL 11,822 --------- ELECTRIC SERVICES (4.9%) Comed Transitional, 5.74%, 12/16/2008 3,500,000 3,156 Comed Financing II, 8.5%, 1/15/27 1,750,000 1,706 Ohio Edison Company, 7.375%, 9/15/02 1,000,000 1,003 PECO Energy Company, 6.13%, 3/1/09 5,500,000 5,061 Public Service Electric & Gas Co., 6.875%, 1/1/03 2,250,000 2,232 Texas Utilities Electric Co., 7.875%, 3/1/23 1,000,000 943 --------- TOTAL 14,101 --------- FINANCE (3.2%) Associates Corp. of North America, 7.95%, 2/15/10 1,500,000 1,532 Ford Motor Credit Co., 5.75%, 02/23/04 4,000,000 3,789 Ford Motor Credit Co., 6.7%, 07/16/04 2,000,000 1,956 Ford Motor Credit Co., 7.375%, 10/28/09 2,000,000 1,974 --------- TOTAL 9,251 --------- GENERAL MERCHANDISE STORES (3.4%) May Dept Stores Company, 7.45%, 10/15/16 1,000,000 981 Wal-Mart Stores, 6.55%, 08/10/04 7,000,000 6,884 Wal-Mart Stores, 6.875%, 08/10/09 1,800,000 1,752 --------- TOTAL 9,617 ---------
MARKET VALUE BONDS (96.2%) PAR (000'S) -------------------------------------------------------- MOTION PICTURE (0.3%) News America Holdings Inc., 8.25%, 8/10/18 1,000,000 $ 1,002 --------- PUBLISHING (2.0%) Times Mirror Co, 7.45%, 10/15/09 5,850,000 5,752 --------- TELECOMMUNICATIONS (4.0%) AT & T Corp., 5.625%, 3/15/04 4,000,000 3,792 AT & T Corp., 6.5%, 09/15/02 4,000,000 3,954 New England Telephone and Telegraph, 5.875%, 04/15/09 4,000,000 3,572 --------- TOTAL 11,318 --------- TEXTILES (0.3%) ++Polysindo International Finance, 11.375%, 6/15/06 4,200,000 756 --------- TOBACCO (0.2%) Philip Morris Companies, 9.25%, 2/15/00 500,000 501 --------- TOTAL CORPORATE BONDS 74,164 --------- GOVERNMENT BONDS AND AGENCY BONDS (39.3%) FEDERAL GOVERNMENT AND AGENCIES (39.3%) Federal Home Loan Bank, 5.54%, 1/8/09 3,700,000 3,275 Federal Home Loan Mortgage Corporation, 7.5%, 9/29/01 7,255,114 7,193 Federal National Mortgage Assoc., 5.97%, 10/1/08 3,992,760 3,610 Federal National Mortgage Assoc., 6.22%, 2/01/06 1,893,865 1,802 Federal National Mortgage Assoc., 6.24%, 1/1/06 5,338,515 5,090 Federal National Mortgage Assoc., 6.265%, 10/1/08 2,961,512 2,770 Federal National Mortgage Assoc., 6.32%, 2/1/06 3,839,343 3,672 Federal National Mortgage Assoc., 6.360%, 4/1/08 3,733,406 3,524 Federal National Mortgage Assoc., 6.390%, 4/1/08 1,436,724 1,360 Federal National Mortgage Assoc., 6.500%, 09/25/05 2,139,521 2,088 Federal National Mortgage Assoc., 6.750%, 04/25/18 2,308,790 2,234 Federal National Mortgage Assoc., 6.750%, 12/25/23 3,500,000 3,341 Federal National Mortgage Assoc., 6.960%, 10/01/07 3,235,660 3,162 Federal National Mortgage Assoc., 7.0%, 6/1/03 245,399 245
53 Select Bond Portfolio 60
MARKET VALUE BONDS (96.2%) PAR (000'S) -------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES continued Federal National Mortgage Assoc., 7.360%, 4/1/11 3,290,209 $ 3,282 Federal National Mortgage Assoc., 8.400%, 02/25/09 2,500,000 2,582 Federal National Mortgage Assoc., 10%, 10/1/17 50,235 53 Federal National Mortgage Assoc., 11.000%, 12/01/12 58,278 63 Federal National Mortgage Assoc., 11.000%, 09/01/17 906,960 992 Federal National Mortgage Assoc., 11.000%, 12/01/17 295,391 320 Federal National Mortgage Assoc., 11.000%, 02/01/18 321,481 348 Federal National Mortgage Assoc., 11.500%, 04/01/18 376,535 414 Federal National Mortgage Assoc., 12.000%, 09/01/12 888,346 984 Federal National Mortgage Assoc., 12.000%, 12/01/12 170,623 189 Federal National Mortgage Assoc., 12.000%, 09/01/17 278,552 310 Federal National Mortgage Assoc., 12.000%, 10/01/17 289,503 322 Federal National Mortgage Assoc., 12.000%, 12/01/17 270,152 301 Federal National Mortgage Assoc., 12.000%, 02/01/18 290,481 323 Federal National Mortgage Assoc., 12.25%, 1/1/18 212,903 237 Federal National Mortgage Assoc., 12.500%, 04/01/18 167,464 188 Federal National Mortgage Assoc., 13.000%, 11/01/12 118,633 133 Federal National Mortgage Assoc., 13.000%, 11/01/17 273,853 311 Federal National Mortgage Assoc., 13.000%, 12/01/17 184,544 209 Federal National Mortgage Assoc., 13.000%, 02/01/18 404,240 460 Federal National Mortgage Assoc., 14.000%, 12/01/17 106,657 125 Government National Mortgage Assoc., 7.0%, 05/15/23 292,444 285 Government National Mortgage Assoc., 7.5%, 04/15/22 228,057 227 Government National Mortgage Assoc., 7.5%, 10/15/23 618,833 616 Government National Mortgage Assoc., 7.5%, 10/15/25 38,128 38 Government National Mortgage Assoc., 7.5%, 11/15/25 12,397 12 Government National Mortgage Assoc., 7.5%, 05/15/26 12,081 12
MARKET VALUE BONDS (96.2%) PAR (000'S) -------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES continued Government National Mortgage Assoc., 7.5%, 01/15/27 350,302 $ 347 Government National Mortgage Assoc., 7.5%, 02/15/27 448,775 444 Government National Mortgage Assoc., 7.5%, 03/15/27 47,109 47 Government National Mortgage Assoc., 7.5%, 04/15/27 93,557 93 Government National Mortgage Assoc., 7.5%, 08/15/27 11,987 12 Government National Mortgage Assoc., 7.5%, 06/15/28 418,831 415 Government National Mortgage Assoc., 8.0%, 01/15/26 360,504 365 Government National Mortgage Assoc., 8.0%, 02/15/26 447,270 453 Government National Mortgage Assoc., 8.0%, 08/15/26 530,571 537 Government National Mortgage Assoc., 8.0%, 09/15/26 259,685 263 Government National Mortgage Assoc., 8.0%, 12/15/26 139,918 142 Government National Mortgage Assoc., 8.0%, 01/15/27 359,670 364 Government National Mortgage Assoc., 8.0%, 03/15/27 411,734 416 Government National Mortgage Assoc., 8.0%, 04/15/27 820,402 830 Government National Mortgage Assoc., 8.0%, 06/15/27 373,942 378 Government National Mortgage Assoc., 8.0%, 07/15/27 410,166 415 Government National Mortgage Assoc., 8.0%, 08/15/27 327,861 332 Government National Mortgage Assoc., 8.0%, 09/15/27 316,162 320 Government National Mortgage Assoc., 8.5%, 09/15/21 61,689 64 Government National Mortgage Assoc., 8.5%, 03/15/23 2,379 2 Government National Mortgage Assoc., 8.5%, 06/15/23 6,459 7 Government National Mortgage Assoc., 8.5%, 06/15/24 104,425 108 Government National Mortgage Assoc., 8.5%, 07/15/24 50,798 52 Government National Mortgage Assoc., 8.5%, 09/15/24 1,458 2 Government National Mortgage Assoc., 8.5%, 11/15/24 429,922 443 Government National Mortgage Assoc., 8.5%, 02/15/25 46,545 47 Government National Mortgage Assoc., 11.0%, 01/15/18 4,101,497 4,516 U.S. Treasury, 4.0%, 10/31/00 1,350,000 1,328
Select Bond Portfolio 54 61
MARKET VALUE BONDS (96.2%) PAR (000'S) -------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES continued U.S. Treasury, 5.0%, 02/28/01 4,000,000 3,950 U.S. Treasury, 5.25%, 02/15/29 1,000,000 827 U.S. Treasury, 5.5%, 8/15/28 888,000 758 U.S. Treasury, 5.875%, 11/15/04 3,000,000 2,942 U.S. Treasury, 6.0%, 08/15/09 23,750,000 23,008 U.S. Treasury, 6.125%, 11/15/27 1,030,000 958 U.S. Treasury, 6.375%, 08/15/27 3,000,000 2,880 U.S. Treasury, 7.25%, 05/15/16 775,000 810 U.S. Treasury Inflation Index Bond, 3.875%, 04/15/29 5,069,150 4,779 --------- TOTAL GOVERNMENT BONDS 112,699 --------- MORTGAGE BACKED AND ASSET BACKED SECURITIES (31.0%) AUTO-RELATED (1.4%) Eaglemark Trust - Class A, 6.75%, 11/15/02 278,647 279 Fleetwood Credit Corporation Grantor Trust - Class A, 6.4%, 5/15/13 693,819 689 Team Fleet Financing Corporation - Class A, 6.65%, 12/15/02 (144A) 3,200,000 3,150 --------- TOTAL 4,118 --------- COMMERCIAL MORTGAGES (20.0%) Asset Securitization Corporation, Class CS1, 1.257%, 11/13/26 IO 15,839,171 447 Asset Securitization Corporation, Class CS2, 1.097%, 11/13/26 IO 52,000,000 2,385 Asset Securitization Corporation, Class PS1, 1.367%, 2/14/41 IO 11,928,429 1,045 Chase Commercial Mortgage Securities Corp., Class B, 6.6%, 12/12/29 2,000,000 1,891 Chase Commercial Mortgage Securities Corp., Class A2, 6.6%, 12/12/29 5,000,000 4,751 Chase Commercial Mortgage Securities Corp., Class B, 7.37%, 6/19/29 1,000,000 983 Commercial Mortgage Acceptance Corporation, Class B, 6.566%, 12/15/07 2,000,000 1,894 Credit Suisse First Boston Mortgage Securities Corp., Class C1, 7.26%, 6/20/29 (144A) 1,434,668 1,379 Credit Suisse First Boston Mortgage Securities Corp., Class C1, 7.28%, 6/20/29 (144A) 1,500,000 1,449 Criimi Mae Commercial Mortgage Trust, 7.0%, 12/01/06 3,000,000 2,664 Criimi Mae Commercial Mortgage Trust, 7.0%, 11/02/11 4,000,000 2,924
MARKET VALUE BONDS (96.2%) PAR (000'S) -------------------------------------------------------- COMMERCIAL MORTGAGES continued DLJ Mortgage Acceptance Corporation, Class S, .3571%, 10/15/17 (144A) IO 103,587,822 $ 2,132 DLJ Mortgage Acceptance Corporation, Class S, .718%, 2/18/31 IO 119,159,123 4,167 DLJ Mortgage Acceptance Corporation, 8.100%, 6/18/2004 1,454,592 1,495 DLJ Mortgage Acceptance Corporation, 8.100%, 6/18/2004 1,000,000 1,024 Kmart CMBS Financing, Inc., Class D, 6.7875%, 03/01/07 (144A) 2,000,000 1,989 Kmart CMBS Financing, Inc., Class C, 6.3875%, 03/01/07 (144A) 2,500,000 2,487 Kmart CMBS Financing, Inc., Class D, 5.81%, 03/01/07 (144A) 2,000,000 1,997 LB Mortgage Trust, 8.396%, 6/2/10 5,348,842 5,371 Malan Mortgage Securities Trust, Class A3, 7.8%, 8/15/05 (144A) 3,000,000 3,011 Midland Realty Acceptance Corp., Class AEC, 1.389%, 1/25/29 (144A) IO 13,526,570 763 Mortgage Capital Funding, Inc., 7.288%, 03/20/07 5,323,000 5,251 Nomura Asset Securities Corp. - Class A2, 7.014%, 3/17/28 2,800,000 2,495 Red Mountain Funding LLC, Class F, 7.471%, 1/15/19 (144A) 1,800,000 1,202 The Equitable Life Insurance Society of the U S, Class C1, 7.52%, 5/15/06 2,000,000 1,973 --------- TOTAL 57,169 --------- CREDIT CARD ASSET BACKED (0.5%) Iroquois Trust, Class A, 6.752%, 6/25/07 (144A) 1,381,201 1,371 --------- FRANCHISE LOAN RECEIVABLES (2.3%) EMAC Owner Trust, 1.378%, 1/15/25 (144A) IO 30,155,554 1,967 EMAC Owner Trust - Class A2, 6.38%, 1/15/25 (144A) 3,100,000 2,913 Global Franchise Trust, 6.349%, 8/16/01 1,635,625 1,603 --------- TOTAL 6,483 --------- HOME EQUITY LOAN (0.8%) Amresco Residential Securities - Class A2, 6.245%, 04/25/22 2,200,000 2,182 ---------
55 Select Bond Portfolio 62
MARKET VALUE BONDS (96.2%) PAR (000'S) -------------------------------------------------------- MANUFACTURED HOUSING (1.2%) Mid-State Trust VI, Class A3, 7.54%, 7/1/35 998,067 $ 968 Vanderbilt Mortgage and Finance, Inc., Class 1A4, 7.19%, 2/7/14 2,500,000 2,485 --------- TOTAL 3,453 --------- OTHER ASSET BACKED (3.5%) FMAC Loan Receivables Trust - Class A, 6.2%, 9/15/20 (144A) 1,305,953 1,271 Harley-Davidson Eaglemark, 5.87%, 1/20/2001 1,500,000 1,476 Health Care Receivable Corp., 6.25%, 2/01/03 1,125,000 1,091 Heilig-Meyers Master Trust - Class A, 6.125%, 1/20/07 (144A) 3,000,000 2,882 Nations Credit Grantor Trust - Class A1, 6.35%, 12/15/04 1,474,742 1,461 Newcourt Equipment - Class B, 6.764%, 9/20/04 (144A) 593,936 585 Rural Housing Trust, 6.33%, 4/17/2001 1,228,132 1,212 --------- TOTAL 9,978 --------- RESIDENTIAL MORTGAGES (1.3%) BCF L L C Mortgage Pass Thru Certificate, Class B3, 7.75%, 3/25/37 (144A) 3,836,025 1,803 Blackrock Capital Finance, Class B3, 7.25%, 11/25/28 (144A) 4,334,793 2,037 --------- TOTAL 3,840 --------- TOTAL MORTGAGE BACKED AND ASSET BACKED SECURITIES 88,594 --------- TOTAL BONDS (COST $293,821) 275,457 --------- MONEY MARKET INVESTMENTS (2.6%) -------------------------------------------------------- FEDERAL AND GOVERNMENT AGENCIES (2.6%) Federal Home Loan Mortgage Company, 0.047%, 01/14/00 5,800,000 5,790 #Federal Home Loan Mortgage Company, 5.540%, 01/20/00 1,700,000 1,695 ---------
MARKET VALUE MONEY MARKET INVESTMENTS (000'S) -------------------------------------------------------- TOTAL MONEY MARKET INVESTMENTS (COST $7,485) $ 7,485 --------- TOTAL INVESTMENTS (98.8%) (COST $301,306)' 282,942 --------- OTHER ASSETS, LESS LIABILITIES (1.2%) 3,551 --------- TOTAL NET ASSETS (100.0%) $ 286,493 ---------
IO Interest Only Security ++Defaulted Security 144A after the name of a security represents a security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold as transactions exempt from registration, normally to qualified institutional buyers. #Partially held by the custodian in a segregated account as collateral for open futures positions. Information regarding open futures contracts as of December 31, 1999 is summarized below:
UNREALIZED APPRECIATION/ NUMBER OF EXPIRATION (DEPRECIATION) ISSUERS CONTRACTS DATE (000'S) - --------------------------------------------------------------- Euro Bond Future 31 03/00 $ 13 US Treasury Bond Futures 100 03/00 (38) (Total Notional Value at 12/31/99, $16,416,250)
' At December 31, 1999, the aggregate cost of securities for federal income tax purposes was $301,944 and the net unrealized depreciation of investments based on that cost was $19,002 which is comprised of $615 aggregate gross unrealized appreciation and $19,617 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements. Select Bond Portfolio 56 63
Objective Portfolio Strategy Net Assets Maximum current income consistent Achieve stability of capital by investing in $404,283,745 with liquidity and stability of short-term debt securities. capital
MONEY MARKET PORTFOLIO The Money Market Portfolio, which invests only in high quality commercial paper and other short-term debt securities with maturities generally not exceeding one year, is the least risky of the Portfolios. Accurate forecasts of interest rate increases by the Federal Reserve enabled the Money Market Portfolio to perform well during 1999. Maturities have been kept longer than average since June, as market prices reflected anticipated rate increases in June, August and November, then lengthened in the correct expectation that rates would not be raised in December. In the last weeks of the year, maturities have been stretched out to January and February dates. These moves were made to take advantage of the year-end market illiquidity that has resulted from Y2K concerns. In contrast to the usual December pattern, when corporate issuers raise cash to show positive balances at year end, in 1999 there was little new paper because concerns about availability of cash at year end led corporations to plan earlier for year-end cash needs. At the same time, there was strong demand for short-term instruments from portfolio managers who needed to maintain cash reserves for possible redemptions. AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE PORTFOLIO SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, THERE IS NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE SO IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE PORTFOLIO. 57 Money Market Portfolio 64 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments December 31, 1999
MARKET VALUE MONEY MARKET INVESTMENTS (82.3%) PAR (000'S) -------------------------------------------------------- AGRICULTURAL SERVICES (2.2%) Cargill, Inc., 6.00%, 1/28/00 9,040,000 $ 8,999 --------- AIRCRAFT, GUIDED MISSILES & PARTS (3.9%) Alliedsignal, Inc., 5.27%, 2/23/00 16,000,000 15,876 --------- AUTOMOBILE REPAIR, SERVICES & PARKING (12.4%) Daimler-Chrysler NA. Holding, 5.50%, 1/28/00 17,780,000 17,707 Ford Holdings, Inc., 9.25%, 3/01/00 8,425,000 8,480 Ford Motor Credit Co., 5.68%, 1/12/00 8,000,000 7,986 GMAC, 6.625%, 6/08/00 6,000,000 6,024 GMAC, 6.75%, 06/02/00 10,000,000 10,044 --------- TOTAL 50,241 --------- FEDERALLY SPONSORED CREDIT (5.0%) Federal Home Loan Mtg, 5.14%, 1/14/00 9,140,000 9,123 Federal Home Loan Mtg, 4.74%, 1/14/00 10,970,000 10,951 --------- TOTAL 20,074 --------- FINANCE (17.2%) Asset Securitization, 6.25%, 1/21/00 15,000,000 14,948 Ciesco LP, 6.03%, 1/31/00 3,000,000 2,985 Ciesco LP, 5.95%, 2/07/00 10,000,000 9,939 CIT Group 6.07%, 2/15/00 7,000,000 6,947 CIT Group, 6.00%, 1/21/00 4,630,000 4,615 CXC Incorporated, 6.07%, 1/28/00 2,500,000 2,489 CXC Incorporated, 6.03%, 1/28/00 10,000,000 9,955 Delaware Funding, 5.87%, 1/28/00 7,500,000 7,467 Delaware Funding, 5.87%, 1/27/00 10,000,000 9,958 --------- TOTAL 69,303 --------- PERSONAL CREDIT INSTITUTIONS (17.0%) American General Finance, 6.12%, 2/22/00 7,300,000 7,235 General Electric Capital Corp., 5.32%, 1/26/00 11,600,000 11,557 General Electric Capital Corp., 5.36%, 01/26/00 4,400,000 4,384 Household Finance Corp. 6.05%, 1/21/00 10,000,000 9,966 New Center Asset Trust, 5.94%, 2/15/00 17,000,000 16,874
MARKET VALUE MONEY MARKET INVESTMENTS (82.3%) PAR (000'S) -------------------------------------------------------- PERSONAL CREDIT INSTITUTIONS continued Variable Funding Capital Corp., 5.7%, 2/17/00 4,000,000 $ 3,970 Variable Funding Capital Corp., 6.7%, 1/12/00 5,000,000 4,990 Variable Funding Capital Corp., 5.84%, 1/12/00 10,000,000 9,982 --------- TOTAL 68,958 --------- PHARMACEUTICAL PREPARATIONS (3.8%) American Home Products, 7.7%, 2/15/00 5,450,000 5,467 American Home Products, 5.72%, 1/26/00 10,000,000 9,960 --------- TOTAL 15,427 --------- RETAIL (2.3%) Sears Roebuck Acceptance, 6.0%, 2/15/00 9,500,000 9,429 --------- SHORT TERM BUSINESS CREDIT (10.3%) IBM Credit Corporation, 5.75%, 01/28/00 9,625,000 9,584 Quincy Capital Corporation, 5.95%, 1/28/00 4,000,000 3,982 Quincy Capital Corporation, 6.07%, 1/27/00 10,000,000 9,956 Receivables Capital Corp, 6.00%, 1/28/00 15,000,000 14,933 Receivables Capital Corp, 6.07%, 1/26/00 3,190,000 3,176 --------- TOTAL 41,631 --------- TOBACCO PRODUCTS (3.9%) Philip Morris, 6.15%, 03/15/00 15,500,000 15,523 --------- UTILITY-ELECTRIC (4.3%) National Rural Utility, 5.8%, 1/25/00 14,985,000 14,927 National Rural Utility, 5.8%, 1/24/00 2,500,000 2,490 --------- TOTAL 17,417 --------- TOTAL MONEY MARKET INVESTMENTS (COST $332,878) 332,878 ---------
Money Market Portfolio 58 65 MARKET VALUE ASSET-BACKED SECURITIES (17.7%) PAR (000'S) - ----------------------------------------------------------- FINANCE LESSORS (17.7%) Fidelity Equipment Lease, 6.132%, 12/15/00 13,798,073 $ 13,798 Orix Credit Alliance, 6.123%, 12/15/00 13,389,780 13,390 Preferred Receivable Funding, 6.12%, 1/20/00 10,400,000 10,366 Preferred Receivable Funding, 6.08%, 1/20/00 7,105,000 7,082 Short Term Repackage Asset Trust, 6.521%, 4/13/00 15,000,000 15,000 Triple A One Funding, 6.15%, 1/20/00 6,000,000 5,981 Triple A One Funding, 6.20%, 1/14/00 5,727,000 5,714 --------- TOTAL 71,331 --------- TOTAL ASSET-BACKED SECURITIES '(COST $71,331) 71,331 --------- TOTAL INVESTMENTS (100.0%), (COST $404,209)' 404,209 --------- OTHER ASSETS, LESS LIABILITIES (0.0%) 75 --------- TOTAL NET ASSETS (100.0%) $ 404,284 ---------
' Also represents cost for federal income tax purposes. The Accompanying Notes are an Integral Part of the Financial Statements 59 Money Market Portfolio 66 [PRICEWATERHOUSECOOPERS LLC - LETTERHEAD] REPORT OF INDEPENDENT ACCOUNTANTS To The Shareholders and Board of Directors of Northwestern Mutual Series Fund, Inc. In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Small Cap Growth Stock Portfolio, Aggressive Growth Stock Portfolio, International Equity Portfolio, Index 400 Stock Portfolio, Growth Stock Portfolio, Growth and Income Stock Portfolio, Index 500 Stock Portfolio, Balanced Portfolio, High Yield Bond Portfolio, Select Bond Portfolio and Money Market Portfolio (constituting Northwestern Mutual Series Fund, Inc., hereafter referred to as the "Fund") at December 31, 1999, the results of each of their operations for the year or period then ended, the changes in each of their net assets and financial highlights for the years or periods indicated, in conformity with accounting principles generally accepted in the United States. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 1999 by correspondence with the custodians and brokers, provide a reasonable basis for the opinion expressed above. [PRICEWATERHOUSECOOPERS LLC] Milwaukee, Wisconsin January 27, 2000 Accountants' Report 60 67 NORTHWESTERN MUTUAL SERIES FUND, INC. Statements of Assets and Liabilities December 31, 1999 (in thousands, except per share amounts)
SMALL CAP AGGRESSIVE INTERNATIONAL INDEX 400 GROWTH GROWTH AND GROWTH STOCK GROWTH STOCK EQUITY STOCK STOCK INCOME STOCK PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO - ------------------------------------------------------------------------------------------------------------------------------- ASSETS Investments, at value (1)............... $ 70,364 $1,489,394 $ 769,602 $ 59,282 $ 678,360 $ 662,396 Cash.................................... -- 489 185 168 1,028 1,505 Due from Futures Variation Margin....... 144 494 -- 18 161 -- Due from Sale of Fund Shares............ 1,093 358 273 60 393 68 Due from Sale of Securities............. 7 347 11,577 204 1,879 390 Dividends and Interest Receivable....... 4 92 3,260 32 425 681 ---------- ---------- ---------- ---------- ---------- ---------- TOTAL ASSETS.......................... 71,612 1,491,174 784,897 59,764 682,246 665,040 ---------- ---------- ---------- ---------- ---------- ---------- LIABILITIES Due on Purchase of Securities........... -- 3,572 90 -- 5,357 2,095 Due on Redemption of Fund Shares........ -- 1,662 12,139 40 482 1,047 Due to Investment Advisor............... 99 605 423 39 234 311 Accrued Expenses........................ 30 24 75 41 39 Due on Futures Variation Margin......... -- -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- TOTAL LIABILITIES..................... 129 5,863 12,727 120 6,112 3,488 ---------- ---------- ---------- ---------- ---------- ---------- NET ASSETS............................ $ 71,483 $1,485,311 $ 772,170 $ 59,644 $ 676,134 $ 661,552 ========== ========== ========== ========== ========== ========== REPRESENTED BY: Aggregate Paid in Capital (2), (3)...... $ 53,502 $ 672,923 $ 582,268 $ 54,415 $ 433,185 $ 566,133 Undistributed Net Investment Income..... -- -- 16,150 -- 1,365 4,979 Undistributed Accumulated Net Realized Gain (Loss) on Investments............ 4,081 199,657 41,774 1,247 27,809 26,599 Net Unrealized Appreciation (Depreciation) of: Investment Securities................. 13,509 610,322 132,049 3,850 210,900 63,841 Index Futures Contracts............... 391 2,409 -- 132 2,875 -- Foreign Currency Transactions......... -- -- (71) -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- Net Assets for Shares Outstanding (2)... $ 71,483 $1,485,311 $ 772,170 $ 59,644 $ 676,134 $ 661,552 ========== ========== ========== ========== ========== ========== Net Asset Value, Offering and Redemption Price per Share....................... $ 1.79 $ 4.81 $ 1.78 $ 1.11 $ 2.66 $ 1.56 ========== ========== ========== ========== ========== ========== (1) Investments, at cost.................. $ 56,855 $ 879,072 $ 637,553 $ 55,432 $ 467,460 $ 598,555 (2) Shares outstanding.................... 39,849 309,009 433,636 53,567 254,560 423,861 (3) Shares authorized, $.01 par value..... 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000
The Accompanying Notes are an Integral Part of the Financial Statements 61 Statements of Assets and Liabilities 68 NORTHWESTERN MUTUAL SERIES FUND, INC. Statements of Assets and Liabilities December 31, 1999 (in thousands, except per share amounts)
INDEX 500 HIGH YIELD SELECT MONEY STOCK BALANCED BOND BOND MARKET PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO - ------------------------------------------------------------------------------------------------------------------------- ASSETS Investments, at value (1)................. $2,271,284 $3,538,478 $ 158,745 $ 282,942 $ 404,209 Cash...................................... 32 2,350 250 353 Due from Futures Variation Margin......... 75 247 -- -- -- Due from Sale of Fund Shares.............. 638 158 -- 57 12,979 Due from Sale of Securities............... 24 2,018 9 -- -- Dividends and Interest Receivable......... 2,143 20,687 3,212 3,742 1,100 ---------- ---------- ---------- ---------- ---------- TOTAL ASSETS............................ 2,274,196 3,563,938 162,216 287,094 418,293 ---------- ---------- ---------- ---------- ---------- LIABILITIES Due on Purchase of Securities............. -- -- 450 -- 13,091 Due on Redemption of Fund Shares.......... 1,806 5,139 252 344 820 Due to Investment Advisor................. 375 899 90 74 98 Accrued Expenses.......................... 59 -- -- -- -- Due on Futures Variation Margin........... -- -- -- 183 -- ---------- ---------- ---------- ---------- ---------- TOTAL LIABILITIES....................... 2,240 6,038 792 601 14,009 ---------- ---------- ---------- ---------- ---------- NET ASSETS.............................. $2,271,956 $3,557,900 $ 161,424 $ 286,493 $ 404,284 ========== ========== ========== ========== ========== REPRESENTED BY: Aggregate Paid in Capital (2), (3)........ $1,141,931 $2,213,979 $ 204,186 $ 292,977 $ 404,284 Undistributed Net Investment Income....... 22,921 114,394 273 19,088 -- Undistributed Accumulated Net Realized Gain (Loss) on Investments.............. 64,012 161,020 (29,850) (7,183) -- Net Unrealized Appreciation (Depreciation) of: Investment Securities................... 1,041,976 1,064,096 (13,185) (18,364) -- Index Futures Contracts................. 1,114 4,411 -- (25) -- Foreign Currency Transactions........... -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- Net Assets for Shares Outstanding (2)..... $2,271,956 $3,557,900 $ 161,424 $ 286,493 $ 404,284 ========== ========== ========== ========== ========== Net Asset Value, Offering and Redemption Price per Share......................... $ 3.89 $ 2.22 $ 0.82 $ 1.13 $ 1.00 ========== ========== ========== ========== ========== (1) Investments, at cost.................... $1,229,308 $2,474,382 $ 171,930 $ 301,306 $ 404,209 (2) Shares outstanding...................... 584,474 1,601,484 196,343 253,258 404,298 (3) Shares authorized, $.01 par value....... 2,000,000 3,000,000 2,000,000 1,000,000 1,000,000
The Accompanying Notes are an Integral Part of the Financial Statements Statements of Assets and Liabilities 62 69 NORTHWESTERN MUTUAL SERIES FUND, INC. Statements of Operations For the Year Ended December 31, 1999 (in thousands, except per share data)
SMALL CAP AGGRESSIVE INDEX GROWTH AND GROWTH GROWTH INTERNATIONAL 400 GROWTH INCOME STOCK STOCK EQUITY STOCK STOCK STOCK PORTFOLIO* PORTFOLIO PORTFOLIO PORTFOLIO* PORTFOLIO PORTFOLIO - --------------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Income Interest................................. $ 150 $ 4,580 $ 1,034 $ 297 $ 4,450 $ 488 Dividends(1)............................. 12 1,123 22,138 244 4,493 8,056 ------- -------- -------- ------ -------- ------- TOTAL INCOME........................ 162 5,703 23,172 541 8,943 8,544 ------- -------- -------- ------ -------- ------- Expenses Management Fees.......................... 139 5,867 4,600 66 2,323 3,544 Custodian Expenses....................... 20 35 237 26 18 32 Other Expenses........................... 22 16 252 28 25 21 ------- -------- -------- ------ -------- ------- TOTAL EXPENSES...................... 181 5,918 5,089 120 2,366 3,597 ------- -------- -------- ------ -------- ------- Less Waived Fees: Paid by Affiliate................... (6) (26) -- (28) (12) (32) Paid Indirectly..................... (2) (9) -- (2) (6) -- ------- -------- -------- ------ -------- ------- TOTAL NET EXPENSES.................. 173 5,883 5,089 90 2,348 3,565 ------- -------- -------- ------ -------- ------- Net Investment Income (Loss)............... (11) (180) 18,083 451 6,595 4,979 ------- -------- -------- ------ -------- ------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES Net Realized Gain (Loss) on: Investment Securities.................... 6,283 200,188 44,438 1,274 23,312 28,648 Index Futures Contracts.................. 166 1,434 -- 305 6,061 -- Foreign Currency Transactions............ -- -- (1,849) -- -- -- ------- -------- -------- ------ -------- ------- NET REALIZED GAIN (LOSS) ON INVESTMENTS....................... 6,449 201,622 42,589 1,579 29,373 28,648 ------- -------- -------- ------ -------- ------- Net Change in Unrealized Appreciation (Depreciation) of: Investment Securities.................... 13,510 246,491 85,058 3,850 77,761 10,475 Index Futures Contracts.................. 391 1,420 -- 132 1,321 -- Foreign Currency Transactions............ -- -- (105) -- -- -- ------- -------- -------- ------ -------- ------- NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS....................... 13,901 247,911 84,953 3,982 79,082 10,475 ------- -------- -------- ------ -------- ------- Net Gain (Loss) on Investments............. 20,350 449,533 127,542 5,561 108,455 39,123 ------- -------- -------- ------ -------- ------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.................. $20,339 $449,353 $145,625 $6,012 $115,050 $44,102 ======= ======== ======== ====== ======== ======= (1) Less Foreign dividend tax.............. $ -- $ -- $ 1,914 $ -- $ 97 $ 70
* Portfolio commenced operations April 30, 1999. The Accompanying Notes are an Integral Part of the Financial Statements 63 Statements of Operations 70 NORTHWESTERN MUTUAL SERIES FUND, INC. Statements of Operations For the Year Ended December 31, 1999 (in thousands, except per share data)
INDEX HIGH 500 YIELD SELECT MONEY STOCK BALANCED BOND BOND MARKET PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO - ------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Income Interest..................................... $ 1,894 $102,993 $ 17,280 $ 20,188 $17,693 Dividends(1)................................. 25,047 22,191 2,699 -- -- -------- -------- -------- -------- ------- TOTAL INCOME............................ 26,941 125,184 19,979 20,188 17,693 -------- -------- -------- -------- ------- Expenses Management Fees.............................. 3,960 10,282 835 882 1,001 Custodian Expenses........................... 46 -- 18 -- -- Other Expenses............................... 20 -- 17 -- -- -------- -------- -------- -------- ------- TOTAL EXPENSES.......................... 4,026 10,282 870 882 1,001 -------- -------- -------- -------- ------- Less Waived Fees: Paid by Affiliate....................... -- -- (17) -- -- Paid Indirectly......................... (6) -- (1) -- -- -------- -------- -------- -------- ------- TOTAL NET EXPENSES...................... 4,020 10,282 852 882 1,001 -------- -------- -------- -------- ------- Net Investment Income (Loss)................... 22,921 114,902 19,127 19,306 16,692 -------- -------- -------- -------- ------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES Net Realized Gain (Loss) on: Investment Securities........................ 59,857 147,639 (26,106) (3,481) -- Index Futures Contracts...................... 4,560 34,373 -- 1,137 -- Foreign Currency Transactions................ -- (447) -- (14) -- -------- -------- -------- -------- ------- NET REALIZED GAIN (LOSS) ON INVESTMENTS........................... 64,417 181,565 (26,106) (2,358) -- -------- -------- -------- -------- ------- Net Change in Unrealized Appreciation (Depreciation) of: Investment Securities........................ 293,198 76,719 6,190 (19,854) -- Index Futures Contracts...................... 790 (8,909) -- (22) -- Foreign Currency Transactions................ -- (14) -- (7) -- -------- -------- -------- -------- ------- NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS......... 293,988 67,796 6,190 (19,883) -- -------- -------- -------- -------- ------- Net Gain (Loss) on Investments................. 358,405 249,361 (19,916) (22,241) -- -------- -------- -------- -------- ------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................ $381,326 $364,263 $ (789) $ (2,935) $16,692 ======== ======== ======== ======== ======= (1) Less Foreign dividend tax.................. $ 249 $ 230 $ -- $ -- $ --
* Portfolio commenced operations April 30, 1999. The Accompanying Notes are an Integral Part of the Financial Statements Statements of Operations 64 71 NORTHWESTERN MUTUAL SERIES FUND, INC. Statements of Changes in Net Assets SMALL CAP GROWTH STOCK PORTFOLIO
FOR THE PERIOD APRIL 30, 1999* THROUGH DECEMBER 31, 1999 - ------------------------------------------------------------------------------ (IN THOUSANDS) INCREASE IN NET ASSETS Operations Net Investment Loss..................................... $ (11) Net Realized Gain on Investments........................ 6,449 Net Change in Unrealized Appreciation of Investments for the Period............................................. 13,901 ------- Net Increase in Net Assets Resulting from Operations........................................... 20,339 ------- Distributions to Shareholders from: Net Investment Income................................... -- Net Realized Gain on Investments........................ (2,362) ------- Net Decrease in Net Assets Resulting from Distributions to Shareholders........................ (2,362) ------- Fund Share Transactions Proceeds from Sale of 41,794 Shares..................... 55,379 Proceeds from Shares Issued on Reinvestment of Distributions Paid (1,007 shares)...................... 2,362 Payments for 2,952 Shares Redeemed...................... (4,235) ------- Net Increase in Net Assets Resulting from Fund Share Transactions (39,849 shares)......................... 53,506 ------- Total Increase in Net Assets.............................. 71,483 NET ASSETS Beginning of Period..................................... -- ------- End of Period (includes undistributed net investment income of $0).......................................... $71,483 =======
* Portfolio commenced operations on April 30, 1999 AGGRESSIVE GROWTH STOCK PORTFOLIO
FOR THE FOR THE YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1999 1998 - ----------------------------------------------------------------------------------------- (IN THOUSANDS) INCREASE IN NET ASSETS Operations Net Investment Income (Loss)............................ $ (180) $ 389 Net Realized Gain on Investments........................ 201,622 36,225 Net Change in Unrealized Appreciation of Investments for the Period............................................. 247,911 43,459 ---------- ---------- Net Increase in Net Assets Resulting from Operations........................................... 449,353 80,073 ---------- ---------- Distributions to Shareholders from: Net Investment Income................................... (389) (389) Net Realized Gain on Investments........................ (38,180) (39,790) ---------- ---------- Net Decrease in Net Assets Resulting from Distributions to Shareholders........................ (38,569) (40,179) ---------- ---------- Fund Share Transactions Proceeds from Sale of 14,536 and 23,019 Shares.......... 53,705 74,489 Proceeds from Shares Issued on Reinvestment of Distributions Paid (11,023 and 11,431 shares, respectively).......................................... 38,569 40,180 Payments for 44,946 and 25,793 Shares Redeemed.......... (155,213) (84,165) ---------- ---------- Net Increase (Decrease) in Net Assets Resulting from Fund Share Transactions ((19,387) and 8,657 shares, respectively)........................................ (62,939) 30,504 ---------- ---------- Total Increase in Net Assets.............................. 347,845 70,398 NET ASSETS Beginning of Period..................................... 1,137,466 1,067,068 ---------- ---------- End of Period (includes undistributed net investment income of $0 and $390, respectively)................... $1,485,311 $1,137,466 ========== ==========
The Accompanying Notes are an Integral Part of the Financial Statements 65 Statement of Changes in Net Assets 72 NORTHWESTERN MUTUAL SERIES FUND, INC. INTERNATIONAL EQUITY PORTFOLIO
FOR THE FOR THE YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1999 1998 - ---------------------------------------------------------------------------------------- (IN THOUSANDS) INCREASE IN NET ASSETS Operations Net Investment Income................................... $ 18,083 $ 18,098 Net Realized Gain on Investments........................ 42,589 78,236 Net Unrealized Appreciation(Depreciation) of Investments for the Period......................................... 84,953 (66,907) -------- -------- Net Increase in Net Assets Resulting from Operations........................................... 145,625 29,427 -------- -------- Distributions to Shareholders from: Net Investment Income................................... (18,221) (16,649) Net Realized Gain on Investments........................ (78,977) (22,793) -------- -------- Net Decrease in Net Assets Resulting from Distributions to Shareholders........................ (97,198) (39,442) -------- -------- Fund Share Transactions Proceeds from Sale of 210,725 and 35,076 Shares......... 347,201 60,890 Proceeds from Shares Issued on Reinvestment of Dividends Paid (58,943 and 21,530 shares, respectively).......... 97,198 39,442 Payments for 236,223 and 47,205 Shares Redeemed......... (391,762) (79,061) -------- -------- Net Increase in Net Assets Resulting from Fund Share Transactions (33,445 and 9,401 shares, respectively)........................................ 52,637 21,271 -------- -------- Total Increase in Net Assets.............................. 101,064 11,256 NET ASSETS Beginning of Period..................................... 671,106 659,850 -------- -------- End of Period (includes undistributed net investment income of $16,150 and $19,912, respectively)........... $772,170 $671,106 ======== ========
INDEX 400 STOCK PORTFOLIO
FOR THE PERIOD APRIL 30, 1999* THROUGH DECEMBER 31, 1999 - ----------------------------------------------------------------------------- (IN THOUSANDS) INCREASE IN NET ASSETS Operations Net Investment Income................................... $ 451 Net Realized Gain on Investments........................ 1,579 Net Change in Unrealized Appreciation of Investments for the Period............................................. 3,982 ------- Net Increase in Net Assets Resulting from Operations........................................... 6,012 ------- Distributions to Shareholders from: Net Investment Income................................... (473) Net Realized Gain on Investments........................ (319) ------- Net Increase in Net Assets Resulting from Distributions to Shareholders........................ (792) ------- Fund Share Transactions Proceeds from Sale of 55,140 Shares..................... 55,323 Proceeds from Shares Issued on Reinvestment of Distributions Paid (35 shares)......................... 792 Payments for 1,608 Shares Redeemed...................... (1,691) ------- Net Increase in Net Assets Resulting from Fund Share Transactions (53,567 shares)......................... 54,424 ------- Total Increase in Net Assets.............................. 59,644 NET ASSETS Beginning of Period..................................... -- ------- End of Period (includes undistributed net investment income of $0).......................................... $59,644 =======
* Portfolio commenced operations on April 30, 1999 The Accompanying Notes are an Integral Part of the Financial Statements Statement of Changes in Net Assets 66 73 NORTHWESTERN MUTUAL SERIES FUND, INC. GROWTH STOCK PORTFOLIO
FOR THE FOR THE YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1999 1998 - ---------------------------------------------------------------------------------------- (IN THOUSANDS) INCREASE IN NET ASSETS Operations Net Investment Income................................... $ 6,595 $ 3,561 Net Realized Gain on Investments........................ 29,373 11,976 Net Change in Unrealized Appreciation of Investments for the Period............................................. 79,082 62,197 -------- -------- Net Increase in Net Assets Resulting from Operations........................................... 115,050 77,734 -------- -------- Distributions to Shareholders from: Net Investment Income................................... (6,147) (2,645) Net Realized Gain on Investments........................ (13,531) (4,068) -------- -------- Net Decrease in Net Assets Resulting from Distributions to Shareholders........................ (19,678) (6,713) -------- -------- Fund Share Transactions Proceeds from Sale of 65,947 and 56,014 Shares.......... 156,519 112,510 Proceeds from Shares Issued on Reinvestment of Distributions Paid (8,157 and 3,330 shares, respectively).......................................... 19,678 6,713 Payments for 7,013 and 6,148 Shares Redeemed............ (16,717) (12,033) -------- -------- Net Increase in Net Assets Resulting from Fund Share Transactions (67,091 and 53,196 shares, respectively)........................................ 159,480 107,190 -------- -------- Total Increase in Net Assets.............................. 254,852 178,211 NET ASSETS Beginning of Period..................................... 421,282 243,071 -------- -------- End of Period (includes undistributed net investment income of $1,365 and $916, respectively)............... $676,134 $421,282 ======== ========
GROWTH AND INCOME STOCK PORTFOLIO
FOR THE FOR THE YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1999 1998 - ---------------------------------------------------------------------------------------- (IN THOUSANDS) INCREASE IN NET ASSETS Operations Net Investment Income................................... $ 4,979 $ 4,096 Net Realized Gain on Investments........................ 28,648 67,556 Net Change in Unrealized Appreciation of Investments for the Period............................................. 10,475 26,191 -------- -------- Net Increase in Net Assets Resulting from Operations........................................... 44,102 97,843 -------- -------- Distributions to Shareholders from: Net Investment Income................................... (164) (3,933) Net Realized Gain on Investments........................ (69,388) (731) -------- -------- Net Decrease in Net Assets Resulting from Distributions to Shareholders........................ (69,552) (4,664) -------- -------- Fund Share Transactions Proceeds from Sale of 53,719 and 82,937 Shares.......... 85,448 120,879 Proceeds from Shares Issued on Reinvestment of Distributions Paid (43,992 and 3,111 shares, respectively).......................................... 69,552 4,664 Payments for 25,373 and 14,061 Shares Redeemed.......... (38,968) (19,687) -------- -------- Net Increase in Net Assets Resulting from Fund Share Transactions (72,338 and 71,987 shares, respectively)........................................ 116,032 105,856 -------- -------- Total Increase in Net Assets.............................. 90,582 199,035 NET ASSETS Beginning of Period..................................... 570,970 371,935 -------- -------- End of Period (includes undistributed net investment income of $4,979 and $163, respectively)............... $661,552 $570,970 ======== ========
The Accompanying Notes are an Integral Part of the Financial Statements 67 Statement of Changes in Net Assets 74 NORTHWESTERN MUTUAL SERIES FUND, INC. INDEX 500 STOCK PORTFOLIO
FOR THE FOR THE YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1999 1998 - ---------------------------------------------------------------------------------------- (IN THOUSANDS) INCREASE IN NET ASSETS Operations Net Investment Income................................... $ 22,921 $ 19,630 Net Realized Gain on Investments........................ 64,417 27,094 Net Change in Unrealized Appreciation of Investments for the Period............................................. 293,988 308,691 ---------- ---------- Net Increase in Net Assets Resulting from Operations........................................... 381,326 355,415 ---------- ---------- Distributions to Shareholders from: Net Investment Income................................... (19,629) (17,811) Net Realized Gain on Investments........................ (25,890) (28,519) ---------- ---------- Net Decrease in Net Assets Resulting from Distributions to Shareholders........................ (45,519) (46,330) ---------- ---------- Fund Share Transactions Proceeds from Sale of 79,345 and 79,805 Shares.......... 277,173 233,133 Proceeds from Shares Issued on Reinvestment of Distributions Paid (12,786 and 16,132 shares, respectively).......................................... 45,519 46,330 Payments for 21,770 and 17,928 Shares Redeemed.......... (77,223) (50,725) ---------- ---------- Net Increase in Net Assets Resulting from Fund Share Transactions (70,361 and 78,009 shares, respectively)........................................ 245,469 228,738 ---------- ---------- Total Increase in Net Assets.............................. 581,276 537,823 NET ASSETS Beginning of Period..................................... 1,690,680 1,152,857 ---------- ---------- End of Period (includes undistributed net investment income of $22,921 and $19,630, respectively)........... $2,271,956 $1,690,680 ========== ==========
BALANCED PORTFOLIO
FOR THE FOR THE YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1999 1998 - ---------------------------------------------------------------------------------------- (IN THOUSANDS) INCREASE IN NET ASSETS Operations Net Investment Income................................... $ 114,902 $ 104,548 Net Realized Gain on Investments........................ 181,565 231,770 Net Change in Unrealized Appreciation of Investments for the Period............................................. 67,796 187,000 ---------- ---------- Net Increase in Net Assets Resulting from Operations........................................... 364,263 523,318 ---------- ---------- Distributions to Shareholders from: Net Investment Income................................... (104,192) (95,131) Net Realized Gain on Investments........................ (250,227) (85,841) ---------- ---------- Net Decrease in Net Assets Resulting from Distributions to Shareholders........................ (354,419) (180,972) ---------- ---------- Fund Share Transactions Proceeds from Sale of 47,979 and 54,658 Shares.......... 105,834 113,335 Proceeds from Shares Issued on Reinvestment of Distributions Paid (167,416 and 89,901 shares, respectively).......................................... 354,419 180,971 Payments for 89,877 and 69,339 Shares Redeemed.......... (194,268) (143,075) ---------- ---------- Net Increase in Net Assets Resulting from Fund Share Transactions (125,518 and 75,220 shares, respectively)........................................ 265,985 151,231 ---------- ---------- Total Increase in Net Assets.............................. 275,829 493,577 NET ASSETS Beginning of Period..................................... 3,282,071 2,788,494 ---------- ---------- End of Period (includes undistributed net investment income of $114,394 and $103,557, respectively)......... $3,557,900 $3,282,071 ========== ==========
The Accompanying Notes are an Integral Part of the Financial Statements Statement of Changes in Net Assets 68 75 NORTHWESTERN MUTUAL SERIES FUND, INC. HIGH YIELD BOND PORTFOLIO
FOR THE FOR THE YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1999 1998 - ---------------------------------------------------------------------------------------- (IN THOUSANDS) INCREASE IN NET ASSETS Operations Net Investment Income................................... $ 19,127 $ 19,029 Net Realized Loss on Investments........................ (26,106) (3,333) Net Change in Unrealized Appreciation (Depreciation) of Investments for the Period............................. 6,190 (20,988) -------- -------- Net Decrease in Net Assets Resulting from Operations........................................... (789) (5,292) -------- -------- Distributions to Shareholders from: Net Investment Income................................... (19,051) (18,974) Net Realized Gain on Investments........................ -- -- -------- -------- Net Decrease in Net Assets Resulting from Distributions to Shareholders........................ (19,051) (18,974) -------- -------- Fund Share Transactions Proceeds from Sale of 14,760 and 60,216 Shares.......... 11,697 65,439 Proceeds from Shares Issued on Reinvestment of Distributions Paid (21,045 and 20,380 shares, respectively).............. 19,052 18,974 Payments for 36,981 and 26,994 Shares Redeemed.......... (34,267) (28,403) -------- -------- Net Increase (Decrease) in Net Assets Resulting from Fund Share Transactions ((1,176) and 53,602 shares, respectively).......... (3,518) 56,010 -------- -------- Total Increase (Decrease) in Net Assets................... (23,358) 31,744 NET ASSETS Beginning of Period..................................... 184,782 153,038 -------- -------- End of Period (includes undistributed net investment income of $273 and $55, respectively)........................... $161,424 $184,782 ======== ========
SELECT BOND PORTFOLIO
FOR THE FOR THE YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1999 1998 - ---------------------------------------------------------------------------------------- (IN THOUSANDS) INCREASE IN NET ASSETS Operations Net Investment Income................................... $ 19,306 $ 18,143 Net Realized Gain/(Loss) on Investments................. (2,358) 2,546 Net Change in Unrealized Depreciation of Investments for the Period............................................. (19,883) (2,027) -------- -------- Net Increase (Decrease) in Net Assets Resulting from Operations........................................... (2,935) 18,662 -------- -------- Distributions to Shareholders from: Net Investment Income................................... (17,828) (15,746) Net Realized Gain on Investments........................ (7,228) (2,700) -------- -------- Net Decrease in Net Assets Resulting from Distributions to Shareholders........................ (25,056) (18,446) -------- -------- Fund Share Transactions Proceeds from Sale of 23,659 and 45,867 Shares.......... 27,875 56,278 Proceeds from Shares Issued on Reinvestment of Distributions Paid (22,018 and 15,606 shares, respectively).............. 25,056 18,446 Payments for 31,015 and 17,649 Shares Redeemed.......... (36,481) (21,741) -------- -------- Net Increase in Net Assets Resulting from Fund Share Transactions (14,662 and 43,824 shares, respectively)........... 16,450 52,983 -------- -------- Total Increase (Decrease) in Net Assets................... (11,541) 53,199 NET ASSETS Beginning of Period..................................... 298,034 244,835 -------- -------- End of Period (includes undistributed net investment income of $19,088 and $17,466, respectively)............................ $286,493 $298,034 ======== ========
The Accompanying Notes are an Integral Part of the Financial Statements 69 Statement of Changes in Net Assets 76 NORTHWESTERN MUTUAL SERIES FUND, INC. MONEY MARKET PORTFOLIO
FOR THE FOR THE YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1999 1998 - ---------------------------------------------------------------------------------------- (IN THOUSANDS) INCREASE IN NET ASSETS Operations Net Investment Income................................... $ 16,692 $ 12,077 --------- --------- Net Increase in Net Assets Resulting from Operations........................................... 16,692 12,077 --------- --------- Distributions to Shareholders from: Net Investment Income................................... (16,692) (12,077) --------- --------- Net Decrease in Net Assets Resulting from Distributions to Shareholders........................ (16,692) (12,077) --------- --------- Fund Share Transactions Proceeds from Sale of 543,084 and 222,296 Shares........ 543,082 222,308 Proceeds from Shares Issued on Reinvestment of Distributions Paid (16,692 and 12,077 shares, respectively)......................................... 16,692 12,077 Payments for 446,954 and 137,391 Shares Redeemed........ (446,954) (137,391) --------- --------- Net Increase in Net Assets Resulting from Fund Share Transactions (112,822 and 96,982 shares, respectively)........................................ 112,820 96,994 --------- --------- Total Increase in Net Assets................................ 112,820 96,994 NET ASSETS Beginning of Period..................................... 291,464 194,470 --------- --------- End of Period (includes no undistributed net investment income)................................................ $ 404,284 $ 291,464 ========= =========
The Accompanying Notes are an Integral Part of the Financial Statements Statement of Changes in Net Assets 70 77 NORTHWESTERN MUTUAL SERIES FUND, INC. Financial Highlights SMALL CAP GROWTH STOCK PORTFOLIO
FOR THE PERIOD APRIL 30, 1999* THROUGH DECEMBER 31, (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) 1999 - ----------------------------------------------------------------------------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period........................ $ 1.00 Income from Investment Operations: Net Investment Loss..................................... (0.00) Net Realized and Unrealized Gains on Investments........ 0.85 ------- Total from Investment Operations...................... 0.85 ------- Less Distributions: Distributions from Net Investment Income................ -- Distributions from Realized Gains on Investments........ (0.06) ------- Total Distributions................................... (0.06) ------- Net Asset Value, End of Period.............................. $ 1.79 ======= Total Return+............................................... 86.09%++ ======= RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands).................... $71,483 ======= Ratio of Gross Expenses to Average Net Assets............... 1.03%** ======= Ratio of Net Expenses to Average Net Assets................. 1.00%** ======= Ratio of Net Investment Loss to Average Net Assets.......... (0.07)%** ======= Portfolio Turnover Rate..................................... 70.72% =======
AGGRESSIVE GROWTH STOCK PORTFOLIO
FOR THE YEAR ENDED DECEMBER 31, ---------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------ SELECTED PER SHARE DATA Net Asset Value, Beginning of Period........................ $ 3.46 $ 3.34 $ 3.15 $ 2.77 $ 2.00 Income from Investment Operations: Net Investment Income................................... -- -- -- -- -- Net Realized and Unrealized Gains on Investments........ 1.48 0.24 0.39 0.49 0.78 ---------- ---------- ---------- -------- -------- Total from Investment Operations...................... 1.48 0.24 0.39 0.49 0.78 ---------- ---------- ---------- -------- -------- Less Distributions: Distributions from Net Investment Income................ -- -- -- -- -- Distributions from Realized Gains on Investments........ (0.13) (0.12) (0.20) (0.11) (0.01) ---------- ---------- ---------- -------- -------- Total Distributions................................... (0.13) (0.12) (0.20) (0.11) (0.01) ---------- ---------- ---------- -------- -------- Net Asset Value, End of Period.............................. $ 4.81 $ 3.46 $ 3.34 $ 3.15 $ 2.77 ========== ========== ========== ======== ======== Total Return+............................................... 43.78% 7.56% 13.86% 17.70% 39.29% ========== ========== ========== ======== ======== RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands).................... $1,485,311 $1,137,466 $1,067,068 $871,926 $577,014 ========== ========== ========== ======== ======== Ratio of Expenses to Average Net Assets..................... 0.51% 0.52% 0.53% 0.54% 0.56% ========== ========== ========== ======== ======== Ratio of Net Investment Income/(Loss) to Average Net Assets.................................................... (0.02%) 0.04% 0.06% (0.03%) 0.13% ========== ========== ========== ======== ======== Portfolio Turnover Rate..................................... 68.64% 50.43% 57.27% 47.25% 37.84% ========== ========== ========== ======== ========
* Portfolio commenced operations April 30, 1999. ** Computed on an annualized basis. + Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees. ++ Reflects total return for the period; not annualized. The Accompanying Notes are an Integral Part of the Financial Statements 71 Financial Highlights 78 NORTHWESTERN MUTUAL SERIES FUND, INC. INTERNATIONAL EQUITY PORTFOLIO
FOR THE YEAR ENDED DECEMBER 31, -------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) 1999 1998 1997 1996 1995 - ---------------------------------------------------------------------------------------------------------------------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period........................ $ 1.68 $ 1.69 $ 1.56 $ 1.35 $ 1.19 Income from Investment Operations: Net Investment Income................................... 0.03 0.05 0.04 0.04 0.04 Net Realized and Unrealized Gains on Investments........ 0.33 0.04 0.15 0.24 0.13 -------- -------- -------- -------- -------- Total from Investment Operations...................... 0.36 0.09 0.19 0.28 0.17 -------- -------- -------- -------- -------- Less Distributions: Distributions from Net Investment Income................ (0.05) (0.04) (0.04) (0.03) -- Distributions from Realized Gains on Investments........ (0.21) (0.06) (0.02) (0.04) (0.01) -------- -------- -------- -------- -------- Total Distributions................................... (0.26) (0.10) (0.06) (0.07) (0.01) -------- -------- -------- -------- -------- Net Asset Value, End of Period.............................. $ 1.78 $ 1.68 $ 1.69 $ 1.56 $ 1.35 ======== ======== ======== ======== ======== Total Return+............................................... 22.88% 4.82% 12.28% 21.01% 14.57% ======== ======== ======== ======== ======== RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands).................... $772,170 $671,106 $659,850 $505,189 $342,127 ======== ======== ======== ======== ======== Ratio of Expenses to Average Net Assets..................... 0.74% 0.76% 0.77% 0.81% 0.85% ======== ======== ======== ======== ======== Ratio of Net Investment Income to Average Net Assets........ 2.62% 3.38% 2.75% 3.02% 2.68% ======== ======== ======== ======== ======== Portfolio Turnover Rate..................................... 38.37% 30.41% 16.74% 17.07% 26.71% ======== ======== ======== ======== ========
INDEX 400 STOCK PORTFOLIO
FOR THE PERIOD APRIL 30, 1999* THROUGH DECEMBER 31, (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) 1999 - ---------------------------------------------------------------------------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period........................ $ 1.00 Income for Investment Operations: Net Investment Income................................... 0.01 Net Realized and Unrealized Gains on Investments........ 0.12 ------- Total from Investment Operations...................... 0.13 ------- Less Distributions: Distributions from Net Investment Income................ (0.01) Distributions from Realized Gains on Investments........ (0.01) ------- Total Distributions................................... (0.02) ------- Net Asset Value, End of Period.............................. $ 1.11 ======= Total Return+............................................... 12.83%++ ======= RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands).................... $59,644 ======= Ratio of Gross Expenses to Average Net Assets............... 0.46%** ======= Ratio of Net Expenses to Average Net Assets................. 0.35%** ======= Ratio of Net Investment Income to Average Net Assets........ 1.69%** ======= Portfolio Turnover Rate..................................... 26.51% =======
* Portfolio commenced operations on April 30, 1999 ** Computed on an annualized basis. + Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees. ++ Reflects total return for the period; not annualized. The Accompanying Notes are an Integral Part of the Financial Statements Financial Highlights 72 79 NORTHWESTERN MUTUAL SERIES FUND, INC. GROWTH STOCK PORTFOLIO
FOR THE YEAR ENDED DECEMBER 31, --------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) 1999 1998 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period........................ $ 2.25 $ 1.81 $ 1.46 $ 1.26 $ 1.00 Income from Investment Operations: Net Investment Income................................... 0.03 0.02 0.02 0.02 0.02 Net Realized and Unrealized Gains on Investments........ 0.47 0.46 0.42 0.25 0.28 -------- -------- -------- -------- ------- Total from Investment Operations...................... 0.50 0.48 0.44 0.27 0.30 -------- -------- -------- -------- ------- Less Distributions: Distributions from Net Investment Income................ (0.03) (0.02) (0.02) (0.02) (0.02) Distributions from Realized Gains on Investments........ (0.06) (0.02) (0.07) (0.05) (0.02) -------- -------- -------- -------- ------- Total Distributions................................... (0.09) (0.04) (0.09) (0.07) (0.04) -------- -------- -------- -------- ------- Net Asset Value, End of Period.............................. $ 2.66 $ 2.25 $ 1.81 $ 1.46 $ 1.26 ======== ======== ======== ======== ======= Total Return+............................................... 22.50% 26.69% 29.85% 20.91% 30.82% ======== ======== ======== ======== ======= RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands).................... $676,134 $421,282 $243,071 $170,482 $85,557 ======== ======== ======== ======== ======= Ratio of Expenses to Average Net Assets..................... 0.43% 0.46% 0.49% 0.57% 0.61% ======== ======== ======== ======== ======= Ratio of Net Investment Income to Average Net Assets........ 1.22% 1.10% 1.24% 1.41% 1.77% ======== ======== ======== ======== ======= Portfolio Turnover Rate..................................... 27.26% 21.64% 33.20% 37.61% 46.83% ======== ======== ======== ======== =======
GROWTH AND INCOME STOCK PORTFOLIO
FOR THE YEAR ENDED DECEMBER 31, ---------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------ SELECTED PER SHARE DATA Net Asset Value, Beginning of Period........................ $ 1.62 $ 1.33 $ 1.32 $ 1.21 $ 0.98 Income from Investment Operations: Net Investment Income................................... 0.01 0.01 0.01 0.02 0.02 Net Realized and Unrealized Gains on Investments........ 0.12 0.29 0.37 0.23 0.29 -------- -------- -------- -------- -------- Total from Investment Operations...................... 0.13 0.30 0.38 0.25 0.31 -------- -------- -------- -------- -------- Less Distributions: Distributions from Net Investment Income................ (0.00) (0.01) (0.01) (0.02) (0.02) Distributions from Realized Gains on Investments........ (0.19) (0.00) (0.36) (0.12) (0.06) -------- -------- -------- -------- -------- Total Distributions................................... (0.19) (0.01) (0.37) (0.14) (0.08) -------- -------- -------- -------- -------- Net Asset Value, End of Period.............................. $ 1.56 $ 1.62 $ 1.33 $ 1.32 $ 1.21 ======== ======== ======== ======== ======== Total Return+............................................... 7.47% 23.14% 30.03% 19.97% 31.12% ======== ======== ======== ======== ======== RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands).................... $661,552 $570,970 $371,935 $234,184 $136,923 ======== ======== ======== ======== ======== Ratio of Expenses to Average Net Assets..................... 0.57% 0.58% 0.60% 0.62% 0.69% ======== ======== ======== ======== ======== Ratio of Net Investment Income to Average Net Assets........ 0.80% 1.00% 1.04% 1.44% 1.68% ======== ======== ======== ======== ======== Portfolio Turnover Rate..................................... 106.93% 160.40% 144.52% 93.92% 80.00% ======== ======== ======== ======== ========
+ Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fee. The Accompanying Notes are an Integral Part of the Financial Statements 73 Financial Highlights 80 NORTHWESTERN MUTUAL SERIES FUND, INC. INDEX 500 STOCK PORTFOLIO
FOR THE YEAR ENDED DECEMBER 31, ---------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------ SELECTED PER SHARE DATA Net Asset Value, Beginning of Period........................ $ 3.29 $ 2.64 $ 2.06 $ 1.72 $ 1.27 Income from Investment Operations: Net Investment Income................................... 0.04 0.04 0.04 0.04 0.04 Net Realized and Unrealized Gain on Investments......... 0.64 0.71 0.62 0.35 0.42 ---------- ---------- ---------- -------- -------- Total from Investment Operations...................... 0.68 0.75 0.66 0.39 0.46 ---------- ---------- ---------- -------- -------- Less Distributions: Distributions from Net Investment Income................ (0.03) (0.04) (0.04) (0.02) (0.01) Distributions from Realized Gains on Investments........ (0.05) (0.06) (0.04) (0.03) -- ---------- ---------- ---------- -------- -------- Total Distributions................................... (0.08) (0.10) (0.08) (0.05) (0.01) ---------- ---------- ---------- -------- -------- Net Asset Value, End of Period.............................. $ 3.89 $ 3.29 $ 2.64 $ 2.06 $ 1.72 ========== ========== ========== ======== ======== Total Return+............................................... 20.91% 28.72% 33.20% 22.75% 37.25% ========== ========== ========== ======== ======== RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands).................... $2,271,956 $1,690,680 $1,152,857 $740,066 $495,133 ========== ========== ========== ======== ======== Ratio of Expenses to Average Net Assets..................... 0.20% 0.21% 0.21% 0.21% 0.21% ========== ========== ========== ======== ======== Ratio of Net Investment Income to Average Net Assets........ 1.16% 1.40% 1.86% 2.27% 2.51% ========== ========== ========== ======== ======== Portfolio Turnover Rate..................................... 5.65% 3.03% 3.15% 3.45% 3.19% ========== ========== ========== ======== ========
BALANCED PORTFOLIO
FOR THE YEAR ENDED DECEMBER 31, -------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) 1999 1998 1997 1996 1995 - ---------------------------------------------------------------------------------------------------------------------------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period........................ $ 2.22 $ 1.99 $ 1.72 $ 1.60 $ 1.31 Income from Investment Operations: Net Investment Income................................... 0.07 0.07 0.07 0.06 0.07 Net Realized and Unrealized Gain on Investments......... 0.17 0.29 0.28 0.15 0.27 ---------- ---------- ---------- ---------- ---------- Total from Investment Operations...................... 0.24 0.36 0.35 0.21 0.34 ---------- ---------- ---------- ---------- ---------- Less Distributions: Distributions from Net Investment Income................ (0.07) (0.07) (0.06) (0.06) (0.04) Distributions from Realized Gains on Investments........ (0.17) (0.06) (0.02) (0.03) (0.01) ---------- ---------- ---------- ---------- ---------- Total Distributions................................... (0.24) (0.13) (0.08) (0.09) (0.05) ---------- ---------- ---------- ---------- ---------- Net Asset Value, End of Period.............................. $ 2.22 $ 2.22 $ 1.99 $ 1.72 $ 1.60 ========== ========== ========== ========== ========== Total Return+............................................... 11.18% 18.88% 21.52% 13.45% 26.39% ========== ========== ========== ========== ========== RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands).................... $3,557,900 $3,282,071 $2,788,494 $2,326,234 $2,083,289 ========== ========== ========== ========== ========== Ratio of Expenses to Average Net Assets..................... 0.30% 0.30% 0.30% 0.30% 0.30% ========== ========== ========== ========== ========== Ratio of Net Investment Income to Average Net Assets........ 3.36% 3.48% 3.70% 3.95% 4.40% ========== ========== ========== ========== ========== Portfolio Turnover Rate..................................... 27.16% 44.18% 29.94% 67.66% 37.28% ========== ========== ========== ========== ==========
+ Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees. The Accompanying Notes are an Integral Part of the Financial Statements Financial Highlights 74 81 NORTHWESTERN MUTUAL SERIES FUND, INC. HIGH YIELD BOND PORTFOLIO
FOR THE YEAR ENDED DECEMBER 31, -------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) 1999 1998 1997 1996 1995 - --------------------------------------------------------------------------------------------------------------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period........................ $ 0.94 $ 1.06 $ 1.10 $ 1.03 $ 0.97 Income from Investment Operations: Net Investment Income................................... 0.11 0.10 0.11 0.09 0.10 Net Realized and Unrealized Gains (Losses) on Investments............................................ (0.12) (0.12) 0.06 0.10 0.07 -------- -------- -------- ------- ------- Total from Investment Operations...................... (0.01) (0.02) 0.17 0.19 0.17 -------- -------- -------- ------- ------- Less Distributions: Distributions from Net Investment Income................ (0.11) (0.10) (0.14) (0.09) (0.10) Distributions from Realized Gains on Investments........ -- -- (0.07) (0.03) (0.01) -------- -------- -------- ------- ------- Total Distributions................................... (0.11) (0.10) (0.21) (0.12) (0.11) -------- -------- -------- ------- ------- Net Asset Value, End of Period.............................. $ 0.82 $ 0.94 $ 1.06 $ 1.10 $ 1.03 ======== ======== ======== ======= ======= Total Return+............................................... (0.44%) (1.84%) 15.85% 19.77% 16.78% ======== ======== ======== ======= ======= RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands).................... $161,424 $184,782 $153,038 $93,878 $55,974 ======== ======== ======== ======= ======= Ratio of Expenses to Average Net Assets..................... 0.50% 0.50% 0.55% 0.60% 0.65% ======== ======== ======== ======= ======= Ratio of Net Investment Income to Average Net Assets........ 11.15% 10.85% 9.95% 9.54% 9.90% ======== ======== ======== ======= ======= Portfolio Turnover Rate..................................... 139.87% 153.71% 129.49% 143.91% 116.57% ======== ======== ======== ======= =======
SELECT BOND PORTFOLIO
FOR THE YEAR ENDED DECEMBER 31, ------------------------------------------------------------ (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) 1999 1998 1997 1996 1995 - ---------------------------------------------------------------------------------------------------------------------------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period........................ $ 1.25 $ 1.26 $ 1.22 $ 1.23 $ 1.06 Income for Investment Operations: Net Investment Income................................... 0.08 0.08 0.08 0.07 0.07 Net Realized and Unrealized Gain (Loss) on Investments........................................... (0.09) 0.00 0.04 (0.04) 0.13 -------- -------- -------- -------- -------- Total from Investment Operations...................... (0.01) 0.08 0.12 0.03 0.20 -------- -------- -------- -------- -------- Less Distributions: Distributions from Net Investment Income................ (0.08) (0.08) (0.08) (0.04) (0.03) Distributions from Realized Gains on Investments........ (0.03) (0.01) -- -- -- -------- -------- -------- -------- -------- Total Distributions................................... (0.11) (0.09) (0.08) (0.04) (0.03) -------- -------- -------- -------- -------- Net Asset Value, End of Period.............................. $ 1.13 $ 1.25 $ 1.26 $ 1.22 $ 1.23 ======== ======== ======== ======== ======== Total Return+............................................... (1.00%) 7.07% 9.46% 3.31% 19.10% ======== ======== ======== ======== ======== RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands).................... $286,493 $298,034 $244,835 $214,333 $198,142 ======== ======== ======== ======== ======== Ratio of Net Expenses to Average Net Assets................. 0.30% 0.30% 0.30% 0.30% 0.30% ======== ======== ======== ======== ======== Ratio of Net Investment Income to Average Net Assets........ 6.56% 6.87% 7.03% 6.48% 6.61% ======== ======== ======== ======== ======== Portfolio Turnover Rate..................................... 76.65% 161.79% 184.93% 195.98% 69.06% ======== ======== ======== ======== ========
+ Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fee. The Accompanying Notes are an Integral Part of the Financial Statements 75 Financial Highlights 82 NORTHWESTERN MUTUAL SERIES FUND, INC. MONEY MARKET PORTFOLIO
FOR THE YEARS ENDED DECEMBER 31, ---------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) 1999 1998 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Net Investment Income....................................... 0.05 0.05 0.05 0.05 0.06 Less Distributions from Net Investment Income............... (0.05) (0.05) (0.05) (0.05) (0.06) -------- -------- -------- -------- -------- Net Asset Value, End of Period.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total Return+............................................... 5.10% 5.43% 5.47% 5.29% 5.82% ======== ======== ======== ======== ======== RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands).................... $404,284 $291,464 $194,470 $176,298 $132,572 ======== ======== ======== ======== ======== Ratio of Expenses to Average Net Assets..................... 0.30% 0.30% 0.30% 0.30% 0.30% ======== ======== ======== ======== ======== Ratio of Net Investment Income to Average Net Assets........ 4.99% 5.26% 5.33% 5.13% 5.61% ======== ======== ======== ======== ========
+ Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account loss. The Accompanying Notes are an Integral Part of the Financial Statements. Financial Highlights 76 83 NORTHWESTERN MUTUAL SERIES FUND, INC. Notes to Financial Statements December 31, 1999 NOTE 1 -- Northwestern Mutual Series Fund, Inc. (the "Series Fund"), is registered as a diversified open-end investment company under the Investment Company Act of 1940. The Series Fund consists of the Small Cap Growth Stock Portfolio, Aggressive Growth Stock Portfolio, International Equity Portfolio, Index 400 Stock Portfolio, Growth Stock Portfolio, Growth and Income Stock Portfolio, Index 500 Stock Portfolio, Balanced Portfolio, High Yield Bond Portfolio, Select Bond Portfolio and the Money Market Portfolio (the "Portfolios"). Shares are presently offered only to The Northwestern Mutual Life Insurance Company ("Northwestern Mutual") and its segregated asset accounts. On April 30, 1999, two new portfolios commenced operations in the Series Fund: Small Cap Growth Stock Portfolio and Index 400 Stock Portfolio. These two new portfolios were each organized with 2,000,000,000 authorized shares of Common Stock. Par value is $.01 per share. Northwestern Mutual purchased 25,010,000 shares of the Index 400 Stock Portfolio at $1.00 per share and 5,010,000 shares of the Small Cap Growth Stock Portfolio at $1.00 per share. NOTE 2 -- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principal accounting policies are summarized below. NOTE 3 -- Bonds are valued on the basis of prices furnished by a service which determines prices for normal institutional size trading units of bonds, without regard to exchange or over-the-counter prices. When quotations are not readily available, bonds are valued at fair market value determined by procedures approved by the Board of Directors. Stocks listed on a national or foreign stock exchange are valued at the final sale price, or final bid price in absence of a sale. Stocks not listed on a national or foreign stock exchange are valued at the closing bid price on the over-the-counter market. Money market investments, other than in the Money Market Portfolio, with maturities exceeding sixty days but generally not exceeding one year are valued by marking to market on the basis of an average of the most recent bid prices or yields. Money market investments with maturities of sixty days or less and all securities in the Money Market Portfolio are valued on an amortized cost basis or, if the current market value differs substantially from the amortized cost, by marking to market. NOTE 4 -- Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts on the date of valuation. Purchases and sales of securities and income items denominated in foreign currencies are translated in U.S. dollar amounts on the respective dates of such transactions. When the International Equity Portfolio, Balanced Portfolio and Select Bond Portfolio purchases or sells a foreign security they may enter into a foreign exchange currency contract to minimize currency risk from the trade date to the settlement date of such transaction. Such foreign exchange currency contracts are marked to market daily. The Portfolios may enter into forward foreign currency contracts to hedge against exchange rate risk arising from investments in securities denominated in foreign currencies. Contracts are valued at the contractual forward rate and are marked to market daily, with the change in market value recorded as an unrealized gain or loss. When the contracts are closed, a realized gain or loss is incurred. Risks may arise from changes in market value of the underlying instruments and from the possible inability of counter parties to meet the terms of their contracts. The International Equity Portfolio, Balanced Portfolio and Select Bond Portfolio do not separately report the results of operations due to changes in foreign exchange rates on equity investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade date and the settlement date on security transactions, changes in foreign exchange rates on bond investments sold, the differences between the amounts of dividends and foreign withholding taxes recorded on the portfolio's books, and the U.S. dollar equivalent of the amounts actually received or paid. 77 Notes to Financial Statements 84 NOTE 5 -- The Small Cap Growth Stock, Aggressive Growth Stock, Index 400 Stock, Growth Stock, Index 500 Stock, Balanced and Select Bond Portfolios invest in futures contracts as an alternative to investing in individual securities. The Portfolios could be exposed to market risk due to changes in the value of the underlying securities or due to an illiquid secondary market. Futures contracts are marked to market daily based upon quoted settlement prices. The Portfolios receive from or pay to brokers an amount of cash equal to the daily fluctuation in the value of the contracts. Such receipts or payments, known as the "variation margin," are recorded by the Portfolios as unrealized gains or losses. When the contract is closed, the Portfolios record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. ................................................................................ NOTE 6 -- Interest income and discounts earned are recorded daily on the accrual basis and dividend income is recorded on the ex-dividend date or as soon as information from foreign issuers is available. Where applicable, dividends are recorded net of foreign dividend tax. Discounts and premiums on securities purchased are amortized over the life of the respective securities when required for federal income tax purposes using the effective interest method. Securities transactions are accounted for on trade date. The basis for determining cost on sale of securities is identified cost. For the year ended December 31, 1999, transactions in securities other than money market investments were:
U.S. GOVT. TOTAL SECURITY U.S. GOVT. TOTAL SECURITY SECURITY SALES/ SECURITY SALES/ PORTFOLIOS PURCHASES PURCHASES MATURITIES MATURITIES - ---------- -------------- ---------- -------------- --------------- Small Cap Growth Stock............................ $ 59,239,842 -- $ 18,837,180 -- Aggressive Growth Stock........................... 724,417,673 -- 879,649,835 -- International Equity.............................. 284,421,452 -- 257,192,284 -- Index 400 Stock................................... 60,494,178 -- 9,130,783 -- Growth Stock...................................... 244,899,560 -- 125,466,523 -- Growth and Income Stock........................... 709,907,715 -- 656,669,741 -- Index 500 Stock................................... 319,125,521 -- 109,437,406 -- Balanced.......................................... 1,011,591,271 $683,006,914 786,645,495 $341,321,930 High Yield Bond................................... 225,990,412 -- 234,801,506 -- Select Bond....................................... 251,574,994 140,640,335 213,300,662 102,671,243
................................................................................ NOTE 7 -- The Series Fund and its Portfolios are parties to annually renewable contracts pursuant to which each Portfolio pays a charge for investment management and administrative services. Each Portfolio pays a monthly fee for these investment advisory services at an annual rate based on the average daily net asset values of each Portfolio. For the Index 500 Stock Portfolio the rate is .20%, for the Index 400 Stock Portfolio the rate is .25%, and for the Balanced, Select Bond and Money Market Portfolios the rate is .30%. For the other Portfolios the rate for the investment advisory fee is graded by the asset size of the Portfolio according to the following schedule:
FIRST NEXT $50 $50 PORTFOLIOS MILLION MILLION EXCESS - ---------- ------- ------- ------ Small Cap Growth Stock....... .80% .65% .50% Aggressive Growth Stock...... .80% .65% .50% International Equity......... .85% .65% .65% Growth Stock................. .60% .50% .40% Growth and Income Stock...... .70% .60% .55% High Yield Bond.............. .60% .50% .40%
These amounts are paid to Northwestern Mutual Investment Services, LLC. ("NMIS") a wholly owned subsidiary of Northwestern Mutual, which is the manager and investment adviser of the Fund. Northwestern Mutual is also a party to the agreement. Other costs for each Portfolio are paid either by the Portfolios, Northwestern Mutual, or NMIS, depending upon the applicable agreement in place. Notes to Financial Statements 78 85 The Small Cap Growth Stock Portfolio, International Equity Portfolio, Index 400 Stock Portfolio and the Index 500 Stock Portfolio pay their own custodian fees. In addition, certain Portfolios pay a portion of their custodian fees indirectly through expense offset arrangements. Custodian fees are reduced for Portfolios that maintain compensating balances in non-interest bearing accounts. The Portfolios could have invested the assets used to pay for the custodian fees, had the assets not been used in the expense offset arrangements. For the year ended December 31, 1999, the amounts paid through expense offset arrangements are $2,137 in the Small Cap Growth Stock Portfolio, $9,164 in the Aggressive Growth Stock Portfolio, $1,888 in the Index 400 Stock Portfolio, $5,740 in the Growth Stock Portfolio, $377 in the Growth and Income Stock Portfolio, $6,063 in the Index 500 Stock Portfolio and $1,227 in the High Yield Bond Portfolio. J. P. Morgan Investment Management, Inc. ("J. P. Morgan") and Templeton Investment Counsel, Inc. ("Templeton Counsel") have been retained under an investment sub-advisory agreement to provide investment advice and, in general, to conduct the management investment program of the Growth and Income Stock Portfolio and the International Equity Portfolio, respectively. NMIS pays J. P. Morgan .45% on the first $100 million of the combined net assets for all funds managed for Northwestern Mutual by J. P. Morgan, .40% on the next $100 million, .35% on the next $200 million and .30% in excess of $400 million. NMIS pays Templeton Counsel .50% on the first $100 million of the combined net assets for all funds managed for Northwestern Mutual by Templeton Counsel and .40% in excess of $100 million. NMIS has agreed to waive their management fee for the Small Cap Growth Stock Portfolio and the Index 400 Stock Portfolio to the extent necessary so that total operating expenses will not exceed 1.00% and .35%, respectively. For the period April 30, 1999 to December 31, 1999, NMIS waived $5,919 and $27,990 of fees for the Small Cap Growth Stock Portfolio and the Index 400 Stock Portfolio, respectively. The Small Cap Growth Stock, Aggressive Growth Stock, and Growth Stock Portfolios paid commissions on Fund transactions to an affiliated broker in the amounts of $3,180, $29,430, and $1,800, respectively, for the year ended December 31, 1999. NOTE 8 -- Each Portfolio in the Series Fund has elected to be taxed as a regulated investment company meeting certain requirements under the Internal Revenue Code. Since each Portfolio expects to distribute all net investment income and net realized capital gains, the Portfolios anticipate incurring no federal income taxes. Taxable distributions from net investment income and realized capital gains in the Portfolios differ from book amounts earned during the period due to differences in the timing of capital recognition and due to the reclassification of certain gains or losses from capital to income. The differences between cost amounts for book purposes and tax purposes are due to treatment of deferred losses. It is the policy of the Series Fund to reclassify the net effect of permanent differences between book and taxable income to capital accounts on the statements of assets and liabilities. After October 31, 1999, the High Yield Bond Portfolio and the Select Bond Portfolio had capital losses in the amounts of $2,850,813 and $5,182,726, respectively. These amounts are deferred and deemed to have occurred in the next fiscal year. For federal income tax purposes, the High Yield Bond and Select Bond Portfolios also have a net realized capital loss of $23,977,979 and $1,399,790, respectively, expiring in 2007. The High Yield Bond Portfolio also has a net realized capital loss of $2,661,875, which expires in 2006. These amounts will be carried forward to offset future net realized capital gains. For federal income tax purposes, net unrealized appreciation (depreciation) on open regulated futures contracts is required to be treated as realized gains (losses). NOTE 9 -- Dividends from net investment income and net realized capital gains are declared each year for the Small Cap Growth Stock, Aggressive Growth Stock, International Equity, Index 400 Stock, Growth Stock, Growth and Income Stock, Index 500 Stock, Balanced, High Yield Bond and Select Bond Portfolios and each business day for the Money Market Portfolio. NOTE 10 -- Northwestern Mutual voluntarily reimburses the International Equity Portfolio for the benefit Northwestern Mutual receives from foreign dividend taxes charged against the Portfolio. The amount reimbursed represents approximately 65% of the foreign dividend tax withheld from the Portfolio. Reimbursements are recorded when foreign dividend taxes are accrued. This voluntary reimbursement for the year ended December 31, 1999 was $1,243,988. 79 Notes to Financial Statements 86 [PRICEWATERHOUSECOOPERS LLC - LETTERHEAD] Report of Independent Accountants To the Northwestern Mutual Life Insurance Company and Contract Owners of Northwestern Mutual Variable Life Account In our opinion, the accompanying combined statement of assets and liabilities and the related combined and separate statements of operations and of changes in equity present fairly, in all material respects, the financial position of Northwestern Mutual Variable Life Account and the Small Cap Growth Stock Division, Aggressive Growth Stock Division, International Equity Division, Index 400 Stock Division, Growth Stock Division, Growth & Income Stock Division, Index 500 Stock Division, Balanced Division, High Yield Bond Division, Select Bond Division, Money Market Division, Russell Multi-Style Equity Division, Russell Aggressive Equity Division, Russell Non-U.S. Division, Russell Real Estate Securities Division and Russell Core Bond Division thereof at December 31, 1999, the results of each of their operations for each of the two years or the period then ended and the changes in each of their equity for the two years or the period then ended in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of The Northwestern Mutual Life Insurance Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included direct confirmation of the number of shares owned at December 31, 1999 with Northwestern Mutual Series Fund, Inc. and the Russell Insurance Funds, provide a reasonable basis for the opinion expressed above. [PRICEWATERHOUSECOOPERS LLC] Milwaukee, Wisconsin January 27, 2000 Accountants' Report 80 87 NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Statement of Assets and Liabilities December 31, 1999 (in thousands)
ASSETS Investments at Market Value: Northwestern Mutual Series Fund, Inc. Small Cap Growth Stock 4,228 shares (cost $6,122)......................... $ 7,561 Aggressive Growth Stock 42,894 shares (cost $135,037)...................... 206,058 International Equity 68,837 shares (cost $110,160)...................... 122,508 Index 400 Stock 3,839 shares (cost $3,940)......................... 4,260 Growth Stock 47,373 shares (cost $92,844)....................... 125,759 Growth and Income Stock 66,188 shares (cost $96,173)....................... 103,251 Index 500 Stock 84,461 shares (cost $220,153)...................... 328,044 Balanced 84,819 shares (cost $140,282)...................... 188,428 High Yield Bond 21,865 shares (cost $22,132)....................... 17,965 Select Bond 13,558 shares (cost $16,226)....................... 15,328 Money Market 67,006 shares (cost $67,006)....................... 67,400 Russell Insurance Funds Multi-Style Equity 819 shares (cost $13,258).......................... 13,738 Aggressive Equity 401 shares (cost $4,918)........................... 5,356 Non-U.S. 395 shares (cost $5,025)........................... 5,609 Real Estate Securities 131 shares (cost $1,160)........................... 1,151 Core Bond 159 shares (cost $1,580)........................... 1,536 $1,213,952 -------- Due from Sale of Fund Shares.............................. 1,180 Due from Northwestern Mutual Life Insurance Company....... 1,736 ---------- Total Assets..................................... $1,216,868 ========== LIABILITIES Due to Northwestern Mutual Life Insurance Company......... $ 1,180 Due on Purchase of Fund Shares............................ 1,736 ---------- Total Liabilities................................ 2,916 ---------- EQUITY (NOTE 8) Variable Life Policies Issued Before October 11, 1995..... 479,924 Variable Complife Policies Issued On or After October 11, 1995.................................................... 717,227 Variable Executive Life Policies Issued On or After March 2, 1998................................................. 7,901 Variable Joint Life Policies Issued On or After December 10, 1998................................................ 8,900 ---------- Total Equity..................................... 1,213,952 ---------- Total Liabilities and Equity..................... $1,216,868 ==========
The Accompanying Notes are an Integral Part of the Financial Statements 81 Variable Life Financial Statements 88 NML VARIABLE LIFE ACCOUNT
Statement of Operations SMALL CAP (in thousands) GROWTH STOCK AGGRESSIVE GROWTH COMBINED DIVISION# STOCK DIVISION ---------------------------- ------------ ---------------------------- SIX MONTHS YEAR ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1999 1998 1999 1999 1998 - --------------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Dividend Income............................ $ 60,160 $24,922 $ 239 $ 4,628 $3,287 Mortality and Expense Risks................ 4,044 2,755 5 605 424 Taxes...................................... 1,737 1,178 3 259 181 -------- ------- ------ ------- ------ Net Investment Income...................... 54,379 20,989 231 3,764 2,682 -------- ------- ------ ------- ------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized Gain (Loss) on Investments........ 7,370 4,332 -- 1,888 523 Unrealized Appreciation (Depreciation) of Investments During the Period............ 115,169 68,780 1,440 54,225 4,928 -------- ------- ------ ------- ------ Net Gain (Loss) on Investments............. 122,539 73,112 1,440 56,113 5,451 -------- ------- ------ ------- ------ Increase (Decrease) in Equity Derived from Investment Activity...................... $176,918 $94,101 $1,671 $59,877 $8,133 ======== ======= ====== ======= ======
# The initial investment in this Division was made on June 30, 1999. The Accompanying Notes are an Integral Part of the Financial Statements Variable Life Financial Statements 82 89
INDEX 400 STOCK GROWTH & INCOME DIVISION# INTERNATIONAL EQUITY DIVISION GROWTH STOCK DIVISION STOCK DIVISION - ----------------- ----------------------------- --------------------------- --------------------------- SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1999 1999 1998 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------------------------- $ 58 $13,164 $ 3,591 $ 3,284 $ 956 $ 9,123 $ 537 4 420 308 395 211 372 234 2 180 132 170 91 159 100 ---- ------- ------- ------- ------- ------- ------- 52 12,564 3,151 2,719 654 8,592 203 ---- ------- ------- ------- ------- ------- ------- 4 504 284 595 143 514 220 321 7,108 (1,424) 16,158 10,533 (3,359) 10,574 ---- ------- ------- ------- ------- ------- ------- 325 7,612 (1,140) 16,753 10,676 (2,845) 10,794 ---- ------- ------- ------- ------- ------- ------- $377 $20,176 $ 2,011 $19,472 $11,330 $ 5,747 $10,997 ==== ======= ======= ======= ======= ======= ======= INDEX 500 STOCK DIVISION - -------------------------------- YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1999 1998 - -------------------------------- $ 5,542 $ 4,530 1,104 671 473 287 ------- ------- 3,965 3,572 ------- ------- 1,529 1,125 42,832 31,738 ------- ------- 44,361 32,863 ------- ------- $48,326 $36,435 ======= =======
83 Variable Life Financial Statements 90 NML VARIABLE LIFE ACCOUNT
Statement of Operations BALANCED DIVISION HIGH YIELD BOND DIVISION SELECT BOND DIVISION (in thousands) ---------------------------- ---------------------------- ---------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, (CONTINUED) 1999 1998 1999 1998 1999 1998 - --------------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Dividend Income.................. $ 17,659 $ 8,344 $ 2,112 $ 1,489 $ 1,211 $ 743 Mortality and Expense Risks...... 769 681 70 53 62 51 Taxes............................ 330 292 30 22 27 22 -------- -------- ------- ------- ------- ------- Net Investment Income............ 16,560 7,371 2,012 1,414 1,122 670 -------- -------- ------- ------- ------- ------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized Gain (Loss) on Investments.................... 2,596 1,893 (288) 47 33 97 Unrealized Appreciation (Depreciation) of Investments During the Period.............. (1,744) 14,317 (1,879) (1,828) (1,386) (58) -------- -------- ------- ------- ------- ------- Net Gain (Loss) on Investments... 852 16,210 (2,167) (1,781) (1,353) 39 -------- -------- ------- ------- ------- ------- Increase (Decrease) in Equity Derived from Investment Activity....................... $ 17,412 $ 23,581 $ (155) $ (367) $ (231) $ 709 ======== ======== ======= ======= ======= =======
# The initial investment in this Division was made on June 30, 1999. The Accompanying Notes are an Integral Part of the Financial Statements Variable Life Financial Statements 84 91
RUSSELL RUSSELL RUSSELL RUSSELL MULTI-STYLE EQUITY# AGGRESSIVE EQUITY# NON-U.S.# REAL ESTATE SECURITIES# MONEY MARKET DIVISION ------------------- ------------------ ---------------- ----------------------- - ------------------------------- SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS YEAR ENDED YEAR ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1999 1998 1999 1999 1999 1999 - ----------------------------------------------------------------------------------------------------------------------- $2,507 $1,445 $381 $ 19 $145 $ 35 212 122 14 4 5 1 92 51 5 3 2 1 ------ ------ ---- ---- ---- ---- 2,203 1,272 362 12 138 33 ------ ------ ---- ---- ---- ---- -- -- (1) (4) -- -- -- -- 484 438 585 (9) ------ ------ ---- ---- ---- ---- -- -- 483 434 585 (9) ------ ------ ---- ---- ---- ---- $2,203 $1,272 $845 $446 $723 $ 24 ====== ====== ==== ==== ==== ==== RUSSELL CORE BOND# - --------------------- SIX MONTHS ENDED DECEMBER 31, 1999 - --------------------- $ 53 2 1 ---- 50 ---- -- (45) ---- (45) ---- $ 5 ====
85 Variable Life Financial Statements 92 NML VARIABLE LIFE ACCOUNT
Statement of Changes in Equity SMALL CAP (in thousands) GROWTH STOCK AGGRESSIVE GROWTH COMBINED DIVISION# STOCK DIVISION ---------------------------- ------------ ---------------------------- SIX MONTHS YEAR ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1999 1998 1999 1999 1998 - --------------------------------------------------------------------------------------------------------------------------------- OPERATIONS Net Investment Income...................... $ 54,379 $ 20,989 $ 231 $ 3,764 $ 2,682 Net Realized Gain (Loss)................... 7,370 4,332 -- 1,888 523 Net Change in Unrealized Appreciation (Depreciation)........................... 115,169 68,780 1,440 54,225 4,928 ---------- -------- ------ -------- -------- Increase (Decrease) in Equity................ 176,918 94,101 1,671 59,877 8,133 ---------- -------- ------ -------- -------- EQUITY TRANSACTIONS Policyowners' Net Payments................. 403,531 258,672 319 37,031 30,145 Policy Loans, Surrenders, and Death Benefits................................. (54,502) (37,427) (74) (9,017) (6,454) Mortality and Other (net).................. (61,013) (39,611) (25) (7,239) (5,193) Transfers from Other Divisions............. 243,273 133,775 5,878 23,525 20,371 Transfers to Other Divisions............... (244,190) (133,773) (207) (17,347) (6,419) ---------- -------- ------ -------- -------- Increase in Equity Derived from Equity Transactions............................... 287,099 181,636 5,891 26,953 32,450 ---------- -------- ------ -------- -------- Net Increase in Equity....................... 464,017 275,737 7,562 86,830 40,583 EQUITY Beginning of Period........................ 749,935 474,198 -- 119,230 78,647 ---------- -------- ------ -------- -------- End of Period.............................. $1,213,952 $749,935 $7,562 $206,060 $119,230 ========== ======== ====== ======== ========
# The initial investment in this Division was made on June 30, 1999. The Accompanying Notes are an Integral Part of the Financial Statements Variable Life Financial Statements 86 93
INDEX 400 STOCK GROWTH & INCOME DIVISION# INTERNATIONAL EQUITY DIVISION GROWTH STOCK DIVISION STOCK DIVISION - ---------------- ----------------------------- --------------------------- --------------------------- SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1999 1999 1998 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------------------------ $ 52 $ 12,564 $ 3,151 $ 2,719 $ 654 $ 8,592 $ 203 4 504 284 595 143 514 220 321 7,108 (1,424) 16,158 10,533 (3,359) 10,574 ------ -------- ------- -------- ------- -------- ------- 377 20,176 2,011 19,472 11,330 5,747 10,997 ------ -------- ------- -------- ------- -------- ------- 165 25,923 20,672 22,738 12,991 23,731 14,771 (43) (5,642) (4,327) (5,004) (2,859) (5,239) (2,902) (27) (4,876) (3,785) (4,452) (2,494) (4,489) (2,847) 4,152 19,043 15,743 33,353 16,839 22,159 17,225 (364) (10,533) (5,013) (6,373) (2,015) (9,185) (3,106) ------ -------- ------- -------- ------- -------- ------- 3,883 23,915 23,290 40,262 22,462 26,977 23,141 ------ -------- ------- -------- ------- -------- ------- 4,260 44,091 25,301 59,734 33,792 32,724 34,138 -- 78,417 53,116 66,025 32,233 70,527 36,389 ------ -------- ------- -------- ------- -------- ------- $4,260 $122,508 $78,417 $125,759 $66,025 $103,251 $70,527 ====== ======== ======= ======== ======= ======== ======= INDEX 500 STOCK DIVISION - -------------------------------- YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1999 1998 - -------------------------------- $ 3,965 $ 3,572 1,529 1,125 42,832 31,738 -------- -------- 48,326 36,435 -------- -------- 56,388 29,665 (14,992) (8,924) (10,807) (5,367) 72,157 37,076 (14,168) (5,443) -------- -------- 88,578 47,007 -------- -------- 136,904 83,442 191,141 107,699 -------- -------- $328,045 $191,141 ======== ========
87 Variable Life Financial Statements 94 NML VARIABLE LIFE ACCOUNT
Statement of Changes in Equity BALANCED DIVISION HIGH YIELD BOND DIVISION SELECT BOND DIVISION (in thousands) ---------------------------- ---------------------------- ---------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, (CONTINUED) 1999 1998 1999 1998 1999 1998 - --------------------------------------------------------------------------------------------------------------------------------- OPERATIONS Net Investment Income............ $ 16,560 $ 7,371 $ 2,012 $ 1,414 $ 1,122 $ 670 Net Realized Gain (Loss)......... 2,596 1,893 (288) 47 33 97 Net Change in unrealized Appreciation (Depreciation).... (1,744) 14,317 (1,879) (1,828) (1,386) (58) -------- -------- ------- ------- ------- ------- Increase (Decrease) in Equity...... 17,412 23,581 (155) (367) (231) 709 -------- -------- ------- ------- ------- ------- EQUITY TRANSACTIONS Policyowners' Net Payments....... 20,488 17,811 5,513 3,490 3,020 2,004 Policy Loans, Surrenders, and Death Benefits................. (9,916) (8,879) (933) (690) (985) (620) Mortality and Other (net)........ (4,412) (3,232) (928) (641) (557) (250) Transfers from Other Divisions... 16,340 7,905 3,662 5,399 3,874 3,951 Transfers to Other Divisions..... (9,591) (5,398) (3,710) (1,476) (2,463) (2,217) -------- -------- ------- ------- ------- ------- Increase in Equity Derived from Equity Transactions.............. 12,909 8,207 3,604 6,082 2,889 2,868 -------- -------- ------- ------- ------- ------- Net Increase in Equity............. 30,321 31,788 3,449 5,715 2,658 3,577 EQUITY Beginning of Period.............. 158,110 126,322 14,516 8,801 12,669 9,092 -------- -------- ------- ------- ------- ------- End of Period.................... $188,431 $158,110 $17,965 $14,516 $15,327 $12,669 ======== ======== ======= ======= ======= =======
# The initial investments in this Division was made on June 30, 1999. The Accompanying Notes are an Integral Part of the Financial Statements Variable Life Financial Statements 88 95
RUSSELL RUSSELL RUSSELL RUSSELL MONEY MARKET DIVISION MULTI-STYLE EQUITY# AGGRESSIVE EQUITY# NON-U.S.# REAL ESTATE SECURITIES# - ------------------------------- ------------------- ------------------ ---------------- ----------------------- SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS YEAR ENDED YEAR ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1999 1998 1999 1999 1999 1999 - ----------------------------------------------------------------------------------------------------------------------- $ 2,203 $ 1,272 $ 362 $ 12 $ 138 $ 33 -- -- (1) (4) -- -- -- -- 484 438 585 (9) --------- --------- ------- ------ ------ ------ 2,203 1,272 845 446 723 24 --------- --------- ------- ------ ------ ------ 207,164 127,123 669 28 254 49 (2,420) (1,772) (109) (34) (48) (8) (23,000) (15,802) (114) (37) (34) (8) 13,433 9,266 13,008 5,080 4,917 1,097 (169,279) (102,686) (561) (127) (205) (6) --------- --------- ------- ------ ------ ------ 25,898 16,129 12,893 4,910 4,884 1,124 --------- --------- ------- ------ ------ ------ 28,101 17,401 13,738 5,356 5,607 1,148 39,300 21,899 -- -- -- -- --------- --------- ------- ------ ------ ------ $ 67,401 $ 39,300 $13,738 $5,356 $5,607 $1,148 ========= ========= ======= ====== ====== ====== RUSSELL CORE BOND# - --------------------- SIX MONTHS ENDED DECEMBER 31, 1999 - --------------------- $ 50 -- (45) ------ 5 ------ 51 (38) (8) 1,595 (71) ------ 1,529 ------ 1,534 -- ------ $1,534 ======
89 Variable Life Financial Statements 96 NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Notes to Financial Statements December 31, 1999 NOTE 1 -- Northwestern Mutual Variable Life Account (the "Account") is registered as a unit investment trust under the Investment Company Act of 1940 and is a segregated asset account of The Northwestern Mutual Life Insurance Company ("Northwestern Mutual") used to fund variable life insurance policies. NOTE 2 -- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principal accounting policies are summarized below. NOTE 3 -- All assets of each Division of the Account are invested in shares of the corresponding Portfolio of Northwestern Mutual Series Fund, Inc and the Russell Insurance Funds (collectively known as "the Funds"). The shares are valued at the Funds' offering and redemption prices per share. The Funds are diversified open-end investment companies registered under the Investment Company Act of 1940. NOTE 4 -- Dividend income from the Funds is recorded on the record date of the dividends. Transactions in the Funds shares are accounted for on the trade date. The basis for determining cost on sale of Funds shares is identified cost. Purchases and sales of the Funds shares for the period ended December 31, 1999 by each Division are shown below:
DIVISIONS PURCHASES SALES --------- --------- ----- Small Cap Growth Stock.... $ 6,123,393 $ 1,068 Aggressive Growth Stock... 35,131,629 4,386,856 International Equity...... 38,347,289 1,854,037 Index 400 Stock........... 4,056,200 119,396 Growth Stock.............. 44,024,329 1,042,030 Growth & Income Stock..... 37,069,503 1,491,279 Index 500 Stock........... 95,056,887 2,520,734 Balanced.................. 35,493,036 6,023,989 High Yield Bond........... 7,296,571 1,680,853 Select Bond............... 6,205,815 2,193,634 Money Market.............. 73,757,754 45,658,376 Russell Multi-Style Equity Fund.................... 13,280,682 21,745 Russell Aggressive Equity Fund.................... 5,000,413 77,631 Russell Non-U.S. Fund..... 5,030,954 6,175 Russell Real Estate Securities Fund......... 1,160,771 619 Russell Core Bond Fund.... 1,664,332 84,103
NOTE 5 -- A deduction for mortality and expense risks is determined daily and paid to Northwestern Mutual. Generally, for Variable Life policies issued before October 11, 1995, and Variable Complife policies issued on or after October 11, 1995 the deduction is at an annual rate of .50% and .60%, respectively, of the net assets of the Account. A deduction for the mortality and expense risks for the Variable Executive Life policies issued on or after March 3, 1998 is determined monthly at an annual rate of .75% of the amount invested in the Account for the Policy for the first ten Policy years, and .30% thereafter. The mortality risk is that insureds may not live as long as estimated. The expense risk is that expenses of issuing and administering the policies may exceed the estimated costs. Certain deductions are also made from the annual, single or other premiums before amounts are allocated to the Account. These deductions are for (1) sales load, (2) administrative expenses, (3) taxes and (4) a risk charge for the guaranteed minimum death benefit. Additional mortality costs are deducted from the policy annually and are paid to Northwestern Mutual to cover the cost of providing insurance protection. This cost is actuarially calculated based upon the insured's age, the 1980 Commissioners Standard Ordinary Mortality Table and the amount of insurance provided under the policy. NOTE 6 -- Northwestern Mutual is taxed as a "life insurance company" under the Internal Revenue Code. The variable life insurance policies which are funded in the Account are taxed as part of the operations of Northwestern Mutual. Policies provide that a charge for taxes may be made against the assets of the Account. Generally, for Variable Life policies issued before October 11, 1995, Northwestern Mutual charges the Account at an annual rate of .20% of the Account's net assets and reserves the right to increase, decrease or eliminate the charge for taxes in the future. Generally, for Variable Complife policies issued on or after October 11, 1995, and for Variable Executive Life policies issued on or after March 3, 1998, there is no charge being made against the assets of the Account for federal income taxes, but Northwestern Mutual reserves the right to charge for taxes in the future. NOTE 7 -- The Account is credited for the policyowners' net annual premiums at the respective policy anniversary dates regardless of when policyowners actually pay their premiums. Northwestern Mutual's equity represents any unpaid portion of net annual premiums. This applies to Variable Life and Variable Complife policies only. Notes to Financial Statements 90 97 NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Notes to Financial Statements December 31, 1999 (in thousands) NOTE 8 -- Equity Values by Division are shown below:
VARIABLE LIFE VARIABLE COMPLIFE POLICIES ISSUED POLICIES ISSUED BEFORE OCTOBER 11, 1995 ON OR AFTER OCTOBER 11, 1995 EQUITY OF: EQUITY OF: ------------------------- TOTAL ----------------------------- TOTAL POLICYOWNERS NML EQUITY POLICYOWNERS NML EQUITY ---------------------------------------------------------------------------------------- Small Cap Growth Stock................. $ 2,395 $ 90 $ 2,485 $ 3,094 $ 1,599 $ 4,693 Aggressive Growth Stock................ 60,387 3,459 63,846 115,775 25,627 141,402 International Equity................... 40,534 2,738 43,272 62,788 15,362 78,150 Index 400 Stock........................ 920 49 969 1,710 1,334 3,044 Growth Stock........................... 31,720 1,600 33,320 70,935 19,665 90,600 Growth and Income Stock................ 28,633 1,702 30,335 56,046 16,098 72,144 Index 500 Stock........................ 124,843 5,072 129,915 149,358 44,339 193,697 Balanced............................... 145,265 4,576 149,841 28,647 8,243 36,890 High Yield Bond........................ 4,049 332 4,381 10,475 2,941 13,416 Select Bond............................ 7,403 386 7,789 5,475 1,478 6,953 Money Market........................... 8,133 372 8,505 23,834 32,439 56,273 Russell Multi-Style Equity............. 2,095 91 2,186 6,289 3,973 10,262 Russell Aggressive Equity.............. 1,248 54 1,302 2,141 1,591 3,732 Russell Non-U.S. ...................... 1,029 42 1,071 2,659 1,460 4,119 Russell Real Estate Securities......... 302 12 314 469 324 793 Russell Core Bond...................... 368 25 393 761 298 1,059 -------- ------- -------- -------- -------- -------- $459,324 $20,600 $479,924 $540,456 $176,771 $717,227 ======== ======= ======== ======== ======== ========
VARIABLE EXECUTIVE LIFE VARIABLE JOINT LIFE POLICIES ISSUED POLICIES ISSUED ON OR AFTER MARCH 2, 1998 ON OR AFTER DECEMBER 10, 1998 -------------------------- ----------------------------- TOTAL TOTAL EQUITY EQUITY -------------------------------------------------------------- Small Cap Growth Stock.................................... $ 1 $ 374 Aggressive Growth Stock................................... 441 420 International Equity...................................... 687 393 Index 400 Stock........................................... 193 52 Growth Stock.............................................. 934 897 Growth and Income Stock................................... 122 648 Index 500 Stock........................................... 1,965 2,453 Balanced.................................................. 1,429 266 High Yield Bond........................................... 127 41 Select Bond............................................... 503 85 Money Market.............................................. 1,024 1,598 Russell Multi-Style Equity................................ 190 1,095 Russell Aggressive Equity................................. 164 155 Russell Non-U.S. ......................................... 113 304 Russell Real Estate Securities............................ 2 42 Russell Core Bond......................................... 6 77 ------ ------ $7,901 $8,900 ====== ======
91 Notes to Financial Statements 98 NORTHWESTERN MUTUAL SERIES FUND, INC. DIRECTORS James D. Ericson.................................. President and Chief Executive Officer, Northwestern Mutual Life,
Martin F. Stein................................... Founder, Stein Optical, .................................................. Milwaukee John K. MacIver................................... Senior Partner, Michael Best & Friedrich, LLC, .................................................. Milwaukee Stephen N. Graff.................................. Retired Partner, Arthur Andersen LLP .................................................. Milwaukee William J. Blake.................................. Chairman, Blake Investment Corp., .................................................. Milwaukee William A. McIntosh............................... Retired Division Head-U.S. Fixed Income, Salomon Brothers, .................................................. Chicago
.................................................. MILWAUKEE
OFFICERS James D. Ericson.................................. President
Merrill C. Lundberg............................... Secretary Barbara E. Courtney............................... Controller
Directors and Officers 92 99 This report is submitted for the general information of owners of Northwestern Mutual Variable Life policies. This report is not authorized for distribution to prospective purchasers of variable life policies unless it is accompanied by an effective prospectus. Northwestern Mutual Variable Life policies are sold through individuals who, in addition to being licensed life insurance agents of Northwestern Mutual Life, are registered representatives of Northwestern Mutual Investment Services, LLC, a wholly-owned subsidiary of Northwestern Mutual Life and a registered broker-dealer under the Securities Exchange Act of 1934 and a member of the National Association of Securities Dealers, Inc. 90-1899 (12-99) 100 GROWTH STOCK FUND: A MANAGER'S VIEW [Julie Van Cleave Photo] Julie Van Cleave has quite a view from her office overlooking the shores of Lake Michigan. "I have to remind myself to enjoy it," she laughs. After all, she's a tad preoccupied managing millions of dollars in the Growth Stock Fund for Northwestern Mutual's Variable Life Account. Julie has managed the Growth Stock Fund since its inception in 1994 and has established a pattern of successful returns. WHAT'S THE FOCUS OF THE GROWTH STOCK FUND? We focus on long-term capital growth. We position this product as a high quality, diversified growth fund. It's a blue chip-oriented growth fund with a blend of about 80% large cap and 20% mid cap. It really competes with other large cap growth funds. IS THAT PRETTY TYPICAL OF MOST GROWTH FUNDS? There are such a wide variety of growth funds, you shouldn't view them all as one category. Some are much more aggressive than others. When you look at growth funds, you have to look at how they're compiled and managed. HOW DO YOU MANAGE THIS GROWTH FUND? We concentrate on quality and diversification. Some growth funds put all their money into a few of the fastest growing areas. We represent more of the entire market and are more diversified. There have been times when a sector like technology will pull back and severely impact other growth funds. That's why we include some holdings in less supercharged areas, then we look for the most growth-oriented companies within those sectors. That's served us very well. HOW WOULD YOU COMPARE YOUR GROWTH FUND TO OTHERS? Over time, we performed very competitively verses other growth funds. We've enjoyed very positive market returns.* We can also compare turnover ratios in portfolios. Last year we had a 27.26% turnover ratio. The average turnover ratio** for growth funds was 100%***. That shows we're investing in companies for a while, not just trading whatever's hot that week. A more efficiently run portfolio also means trading costs are lower. We do, however, keep our portfolio fresh with new growth ideas, and our returns show that. We try to get a lot of the big things right and do it with a high quality focus. We also take a stand in areas we really like. For example, about two years ago a lot of the retailing stocks had been sold off. We saw a lot of exciting growth potential in retail. As an example, at calender year-end 1999, we held as a percentage of net assets Kohl's Department Stores at 1.5%, Costco at 0.84%, and Home Depot at 1.8%. We invested in that area without taking a great amount of undue risk, and it's been very successful. To use a sports analogy, if you're hitting singles and doubles all the time, pretty soon they're going to add up. WHAT'S DONE WELL THIS YEAR? This year we've concentrated on two sectors: consumer goods and technology. The sector that's had the most change this year has been technology. Last year, technology comprised 15-18% of the market value of the S&P 500(R). By the end of 1999, it had gone up to 28.6%. WHAT DO YOU EXPECT WILL DO WELL IN THE FUTURE? Technology will continue to grow as we change how we communicate and move information. Consumer spending also looks good for quite a while. Five years ago people said the baby boomers would start curtailing their expenses as they matured, but instead they want nicer homes, more vacations, nicer cars ... this upgrade in the standard of living can continue for a while. WHAT'S THE BIGGEST CHALLENGE YOU FACE MANAGING THIS FUND? Keeping a reasonable horizon is always a question. There's so much noise in the short term, you have to make sure you keep the focus. With such an overload of information you can get thrown off. THAT SOUNDS LIKE A LOT OF PRESSURE ... I take it very seriously, managing all of those personal dollars. I never really lose the sense that there are people behind those numbers. How you can do that everyday and not drive yourself crazy is to have a management approach you're comfortable with. We've established a logical investment discipline that's worked very well for us and our investors. Thanks for your views, Julie. Remember to enjoy your own view once in a while. Contact your Northwestern Mutual Investment Services Registered Representative to discuss if the Growth Stock Fund fits with your retirement savings goals. * Northwestern Mutual Life Variable Life Annual Report, December 31, 1999 ** Turnover rate equals the lesser of purchases or sales divided by the average month-end net portfolio assets. *** Morningstar, December 1999 ANNUAL REPORT VARIABLE LIFE VISIONS 4 101 SPLITTING HEIRS: EFFECTIVE ESTATE PLANNING CAN PRESERVE WEALTH AND MAINTAIN HARMONY AMONG SURVIVORS When it comes to estate planning, the biggest mistake is often what's not done. Even people you'd think would realize the importance of an estate plan often don't have one in place. According to Nation's Business (April 1999), 40 percent of 429 chief executives at fast-growing companies did not have an estate plan. The reasons people avoid developing an estate plan are as diverse as the individuals themselves, from psychological difficulties facing mortality, to not finding the time, to not considering themselves wealthy enough. Still, nearly everyone - from the wealthy to those of very modest means - can benefit from a well-designed plan. If you don't have an estate plan in place, federal and state laws will dictate how your property, personal items, and assets will be divided with no regard to your wishes. As a result, conflicts due to family issues and legal problems could occur, tying up the estate and slowing down the distribution of assets. Administrative services and taxes must also be deducted from the estate, which can further reduce its overall value. Although a will often serves as its cornerstone, a true estate plan encompasses much more, presenting a broader picture of your current estate and how it might look upon your death. Other documents address powers of attorney and health care powers, which specify who can act on your behalf in legal, financial and medical matters if you are unable to do so. All of this information can be used to develop an estate plan that will serve as a road map, guiding you to the goals you would like to achieve. In order to be truly effective, an estate plan must be well written. A few quick thoughts jotted on the back of an envelope will probably not be comprehensive enough to cover all the issues that need to be addressed. Such a hastily written document might not even hold up in court. Trusted professionals such as an attorney, accountant, and/or insurance agent, can help you develop a solid estate plan that can help ensure quick and efficient distribution of your estate with a minimal amount of expenses. [PHOTO] STEPS TO DEVELOPING AN ESTATE PLAN Here's a four-step process that can help you develop a good estate plan: 1. Establish goals and needs 2. Identify and quantify resources 3. Subtract expenses 4. Develop a plan to meet these needs The first step is to establish the goals of your estate plan. These goals can cover any tangible item (such as who will receive your most coveted pieces of jewelry or the vacation home), as well as more complex issues, such as the care of a special needs dependent. If you own a business, you must also develop a succession plan if you would like the company to continue after your death. Next, you must identify and quantify your resources. You can begin by totaling any income and deferred income, stocks, bonds and business interests, retirement plans, life insurance policies, and other assets. Personal property also must be included. Review bank and brokerage account statements, life insurance policies and annuity contracts, real estate deeds, and other such documents to determine legal ownership rights that could affect future transfers. For the third stage in developing a plan, calculate the amount of money needed to pay taxes, estate expenses, and any current and expected debts, then subtract that amount from the total value of the estate. Separate resources that are liquid and could be used to pay some of the estate expenses from those that are not. After all this information has been assembled, you can develop your plan. Trusts, such as an irrevocable insurance trust, charitable and personal gifting and other techniques may be suggested as ways to minimize future expenses and help you preserve as much of your estate as possible for your heirs. Once your plan is in place, make sure to review it periodically. Major life changes such as divorce, remarriage, or death of a family member, might make it necessary to adapt the plan. But once the process is understood and the basic plan is in place, life is yours to enjoy. 5 VARIABLE LIFE VISIONS ANNUAL REPORT 102 HOW MUCH SOCIAL SECURITY IS IN YOUR FUTURE? No one expects Social Security to be their main source of retirement income, but how big (or small) of a factor will it be? So we can better plan for our future, the government has started sending out Social Security Statements. Your statement will contain a summary of what you've contributed so far and what you can expect to receive based on current law. Compare this information with your overall retirement savings goals to see how much you need to supplement with other investments. The longer you wait to begin collecting, the more you'll receive every month. The official Social Security Statement Web site gives the example of a 39-year-old woman with taxable earnings of $30,364 in 1998. If she stopped working ... -- At age 62 her payments would be about $746 a month. -- At full retirement age (67), her payments would be about $1,096 a month. -- At age 70, her payments would be about $1,365. Everyone who is eligible to receive Social Security will get a statement three months before their birthday. To find out more, visit Social Security's "My Statement" Web site at www.ssa.gov/mystatement or call The Social Security Administration. A FAMILY OF FUNDS FOR ANY STAGE OF LIFE As you move through life, your investment needs change. Our mutual fund family of Mason Street Funds(R) can help accommodate those changes with a variety of funds for any of your investment goals, now and in the future. Choose from 11 diversified investment portfolios, ranging from very low-risk to highly aggressive funds, including our Index 400 and Index 500 Stock Funds. Mason Street Funds' (R) investment advisor is Northwestern Mutual Investment Services, LLC. (NMIS), a wholly-owned subsidiary of Northwestern Mutual Life. This includes separate accounts for Northwestern Mutual Variable Annuity contract and Variable Life policy You can begin with an automatic investment plan for as little as $50 per month. Call your Northwestern Mutual Investment Services Registered Representative, who is a registered representative of Robert W. Baird & Co. Incorporated, Distributor to arrange for a consultation or Prospectus on Mason Street Funds.(R) Together, we'll determine the portfolio mix that fits your stage of life. [MASON STREET FUNDS(R) LOGO] Robert W. Baird & Co. Incorporated, Distributor. For more complete information about Mason Street Funds(R) or to obtain a current Prospectus, including management fees and expenses, call a Northwestern Mutual Investment Services Registered Representative, who is also a Registered Representative of Robert W. Baird & Co. Incorporated, Distributor. You will want to read the Prospectus carefully before investing. ANNUAL REPORT VARIABLE LIFE VISIONS 6 103 VARIABLE COMPLIFE INFORMATION AT YOUR FINGERTIPS... There is a wealth of information about Variable CompLife available at the touch of a button. For the latest information about policy values and performance data, call the toll-free NML Express line any time. 1-800-519-4NML (1-800-519-4665). Policyowners must provide a policy number plus a Personal Identification Number (PIN) to utilize this service. You can also visit us at our customer service section from our Web site for information on policy values, fund performance, and other information about Northwestern Mutual Life. www.northwesternmutual.com/service/csi/ To sign up for this service please call 1-800-388-8023 between 7 a.m. - 8 p.m. Central Standard Time Monday - Friday. As always, your Northwestern Mutual Registered Representative is available to answer any questions you have about your variable life policy or any of our products. "Standard & Poor's(R)," "S&P(R)" and "S&P 500(R)" are trademarks of The McGraw-Hill Companies, Inc. and has been licensed for use by The Northwestern Mutual Life Insurance Company. The funds are not sponsored, endorsed, sold or promoted by Standard & Poor's, and Standard and Poor's makes no representation regarding the advisability of investing in these funds. Variable Life Visions and the Annual Report are authorized for distribution only when preceded or accompanied by a current variable life insurance prospectus. Please read the prospectus carefully before sending money. Northwestern Mutual Life variable life contracts are sold through individuals who, in addition to being licensed life insurance agents of The Northwestern Mutual Life Insurance Company, are Registered Representatives of Northwestern Mutual Investment Services, LLC, a wholly owned subsidiary of Northwestern Mutual Life, 720 E. Wisconsin Avenue, Milwaukee, WI 53202 (414)-271-1444. Frank Russell Company is a majority-owned subsidiary of Northwestern Mutual Life. Northwestern Mutual Investment Services, Inc. 720 East Wisconsin Avenue, Milwaukee, WI 53202 (414) 271-1444 Variable Visions 1999 Northwestern Mutual Life Insurance, Co. #90-1899 (12/99) [PRSRT STD MAIL US POSTAGE PAID MILWAUKEE WI PERMIT NO. 426] NORTHWESTERN MUTUAL LIFE(R) PO BOX 3095 Milwaukee WI 53201-3095 CHANGE SERVICE REQUESTED [IMSA LOGO] INSURANCE MARKETPLACE STANDARDS ASSOCIATION MEMBERSHIP PROMOTES ETHICAL MARKET CONDUCT FOR INDIVIDUAL LIFE INSURANCE AND ANNUITIES -----END PRIVACY-ENHANCED MESSAGE-----