N-30D 1 n-30d.txt SEMI-ANNUAL REPORT 1 [PHOTO] Variable Life Account Semi-Annual Report June 30, 2000 variable life visions Baby Boomers: still a new breed NORTHWESTERN MUTUAL(TM) #90-1899 (07/00) 2 Baby Steps To A Financially Secure Future..................... 1 Northwestern Mutual Financial Network............................. 3 Baby Boomers: Pushing Back The Hands Of Time................ 4 Achieving A More Focused Life................. 6 Strategies To Reduce Estate Taxes............. 7 "Standard & Poor's(R)" "S&P MidCap 400 Index" "Standard & Poor's MidCap 400 Index" "S&P 500(R) Index" and "Standard & Poor's 500(R) Index" 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 & Poor's makes no representation regarding the advisability of investing in these funds. Variable Life Visions & the Semi-Annual Report are authorized for distribution only when preceded or accompanied by a current variable life prospectus. Please read the prospectus carefully before sending money. The Northwestern Mutual Life variable life contracts are sold through individuals who, in addition to being licensed life insurance agents of The Northwestern Mutual Investment Services, L.L.C. a wholly-owned subsidiary of Northwestern Mutual Life, 720 East Wisconsin Avenue, Milwaukee, WI 53202 (414) 271-1444. Frank Russell Company is a majority-owned subsidiary of Northwestern Mutual. Northwestern Mutual Investment Services, Inc. 720 East Wisconsin Avenue, Milwaukee, WI 53202 (414) 271-1444. Variable Visions(TM) 2000 Northwestern Mutual Life Insurance, Co. www.northwesternmutual.com Baby Steps To A Financially Secure Future If you are like most people, having a financially secure future is an important concern. Yet if given the chance, most of us spend our dollars as fast, if not faster, than we earn them. Ironically, a financially secure future is not always something money can buy--it's as much a state of mind as it is a dollar figure. A big part of this can be knowing that you are on the path to achieving your financial goals with some simple steps and follow-through. [PHOTO] 01 VARIABLE LIFE VISIONS SEMI-ANNUAL REPORT 3 START WITH A PLAN Most successful endeavors start with a plan, and a financially secure future is no different. Start your plan by defining what it is you want and need to feel financially secure. When you picture your future, what do you see? An exciting retirement with lots of travel? Your son or daughter's appreciation for your contribution towards college tuition? Ample savings available to tap in case of emergency? Take the time to really think about the short-term and long-term goals that are most important to you and what it will take to achieve them financially, since this information will drive the rest of your plan. The next steps are choosing the vehicles you will use to accomplish your goals, and defining the amounts you need to start saving and investing. As you make these choices, it's important to know the difference between "savings" and "investments." Savings are funds you accumulate in liquid, low-volatility forms like CDs and money market accounts that you keep on hand for emergencies and short-term needs. In contrast, investments are funds you accumulate in higher-risk forms like mutual funds or stocks over the long term, and plan to use for long-term goals. People invest over the long term to get a higher return on their assets, and as a general rule, the higher the return, the higher the risk. However, putting all of your assets in a savings account over the long term is also risky. Inflation may grow at a faster rate than your savings, decreasing the value of your assets. DEVELOP A BUDGET Once you've created your plan, develop a budget. Take into account daily, weekly, monthly and annual expenses, then average them out for a monthly living cost. Be sure to include the contributions you need to make in order to reach the goals you've set in your expenses. Many people are surprised to find they are spending $1,000 or $1,500 a month more than they anticipated thanks to seasonal and annual expenses, and also the little expenses that add up. For example, that $1.50 cup of coffee you buy on your way to work each morning comes out to about $375 a year. After you've settled on your budget, stick to it. Make it a policy to pay yourself first, or in other words make contributions toward your goals each month before paying other expenses. Automatic payroll deductions from your paycheck to your retirement account and other investment accounts can help you save regularly.* [PHOTO] LOWER YOUR LIVING EXPENSES There are a number of ways you can lower your daily cost of living without lowering your standard of living. Try to avoid credit card debt by using a no-fee credit card and only charging what you can pay off each month. As you consider ways to trim your expenses, evaluate the short-term versus long-term savings. PROTECT YOUR FAMILY & ASSETS Chances are your vision of a financially secure future includes your family, especially if you are the main or co-breadwinner for your household. You can increase your feeling of financial security by protecting your family and your assets through the purchase of insurance and making a will and an estate plan. REVIEW YOUR PLAN ANNUALLY Finally, review your plan annually to make sure you are on track, adjusting your contributions and financial habits as necessary. Most people find that this process gets easier and faster every time they do it. And, it renews the peace of mind that comes with having a solid financial plan in place. *No investment strategy can guarantee a profit. 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. VARIABLE LIFE VISIONS SEMI-ANNUAL REPORT 02 4 [PHOTO] NORTHWESTERN MUTUAL FINANCIAL NETWORK(tm) EXPERT GUIDANCE, INNOVATIVE SOLUTIONS Northwestern Mutual has created a new identity for our sales force -- one that better reflects the full range of products and problem-solving capabilities we offer our clients. Starting now, you can expect to see and hear more about Northwestern Mutual Financial Network. Representatives of Northwestern Mutual Financial Network offer you expert guidance and exclusive access to life insurance products and an array of quality investment choices from Northwestern Mutual -- a top-rated company. Our Financial Representatives also bring to you the Network's knowledgeable group of financial specialists in areas including retirement planning, estate planning, investment services and business planning. At the heart of this great network stands Northwestern Mutual, the country's largest provider of individual life insurance. In FORTUNE's annual survey of executives, Northwestern Mutual has been identified as the "most admired" company in its industry for 17 years. The company has always received the highest possible financial ratings from the four major rating services: Moody's, Standard & Poor's, Fitch (formerly Duff & Phelps), and A.M. Best Company. Working as a team, our Financial Representatives and specialists help ensure that your needs are evaluated from every perspective. Their personalized approach can lead to innovative solutions that are right for you and those who depend on you. Northwestern Mutual Financial Network identifies the sales and distribution arm of the Northwestern Mutual Life Insurance Company and its subsidiaries and affiliates. Third party ratings are a measure of a company's relative financial strength and security, but are no reflection of the performance or stability of funds invested in a company's variable (non-fixed) funds. 03 VARIABLE LIFE VISIONS SEMI-ANNUAL REPORT 5 JUNE 30, 2000 [PHOTO] SEMI-ANNUAL REPORT NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT NORTHWESTERN MUTUAL SERIES FUND, INC. AND RUSSELL INSURANCE FUNDS The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue NORTHWESTERN MUTUAL Milwaukee, WI 53202 (414) 271-1444 6 C ONTENTS Letter to Policyowners 1 Economic Overview and Outlook 2 Series Fund Objectives and Schedule of Investments 3 Small Cap Growth Stock Portfolio 3 Aggressive Growth Stock Portfolio 6 International Equity Portfolio 9 Index 400 Stock Portfolio 12 Growth Stock Portfolio 18 Growth and Income Stock Portfolio 21 Index 500 Stock Portfolio 24 Balanced Portfolio 31 High Yield Bond Portfolio 44 Select Bond Portfolio 49 Money Market Portfolio 55 Performance Summary for Separate Accounts 58 Statements of Assets and Liabilities 64 Statements of Operations 66 Statements of Changes in Net Assets 68 Financial Highlights 74 Notes to Series Fund Financial Statements 80 Variable Life Account Financial Statements 83 Notes to Variable Life Account Financial Statements 96 Directors and Officers 99 The Russell Semi-Annual Report Starts After Page 99
Contents 7 L ETTER TO POLICYOWNERS JULY 31, 2000 The first six months of 2000 were an interesting time to observe and participate in the economy and the stock and bond markets. As we entered the year, there was widespread concern about how the change to year 2000 dates would affect the computers that support our physical and economic infrastructure. Careful preparation appears to have paid off, as Y2K disruptions turned out to be essentially nonexistent. This good news, accompanied by continued strength in the economy and excitement about emerging technologies, sent equity markets to record high levels by late March. The euphoric bull market ended abruptly in April, when sharp drops in many technology stocks led the market downward. The broad market averages have since recovered, ending June very close to the levels at which they began the year, but shares of many newer technology companies sell at a fraction of former prices. The performance of the stock market and the economy are closely related, and the recent drop in the market reflects real or perceived moderation in the economy. As the year progressed and the economy continued to expand rapidly, the Federal Reserve demonstrated concern about rising inflation with several interest rate increases, which were intended to slow economic growth. Although there are signs of slowing in some sectors of the economy, many of the forces that propelled earlier growth are still at work. Business investment, especially for technology, remains strong, and productivity continues to improve. Despite some weakness in interest-sensitive areas such as homes and automobiles, consumer spending and consumer confidence remain healthy. We believe that there is valid concern that an overheated economy could ignite inflation. Certainly it is not realistic to expect the economy to continue growing at the rates above 5% recorded in the last quarter of 1999 and the first half of 2000. The advent of the "new economy" -- an investment-led, high-productivity expansion with less propensity for inflation -- does not mean that the United States will enjoy an eternal boom. Inflation and recession are real and present concerns, not things of the past. In recent months, perhaps because of growing uncertainty about the economy, the stock market has become increasingly volatile. Along with this volatility has come evidence of a change in attitudes toward value and risk. A renewed appreciation of the value inherent in assets and current earnings seems to be developing, along with a realization that underperforming stocks of some solid companies offer considerable value. As long-term investors dedicated to a thoughtful, analytical approach to selecting securities, we welcome this change. We continue to invest for the long term, and we urge our policyowners to take a long view, as well. We offer a range of investment choices to suit the needs of virtually any investor. One noteworthy aspect of the portfolios underlying our variable life insurance policies is that even the most aggressive ones hold securities in a mix of industry groups. While participating in market sectors such as technology and telecommunications that seem to have especially attractive prospects, we have avoided the temptation to become dependent on any one industry group for performance, and we believe that this approach will continue to temper the volatility of these portfolios. If you have been reading these reports for some time, you will recall that we have stated consistently that the 20%-plus returns the equity market has provided over the last three years are extraordinary. Newer investors may be surprised by the recent weakness in the stock market, and some may have ignored bonds entirely. Industry research indicates that long-term returns averaging 11% to 12%, with considerable year-to-year variability, are the norm for the U.S. stock market over the last 75 years. The same research has found that long- term returns of approximately 6% are normal for corporate bonds; investors in our bond portfolios will have noted that returns have been lower than this in recent years. We see no reason to expect future market trends to be dramatically different from the past; it seems likely that long-term equity returns will be in the low double digits. We urge each of our policyowners to maintain a diversified portfolio with a balance appropriate to your personal investment goals. Your Northwestern Mutual Financial Representative is always available to assist you as you evaluate your goals and make portfolio choices. The Northwestern Mutual Life Insurance Company /s/ James A. Ericson James D. Ericson, Chairman and Chief Executive Officer [Ericson Photo] 1 Letter to Policyowners 8 The Economy The U.S. economy continued its rapid pace of growth in the first half of 2000, with real growth at annualized rates of 4.8% in the first quarter and 5.2% in the second quarter. In contrast to the consumer-led expansion of previous years, recent growth has been driven by business investment, especially in technology. Such investments are an important factor in continued improvement in productivity, which is helping to keep inflation moderate. The core rate of inflation, which excludes the volatile food and energy components, was just 2.2% in the first quarter and 1.7% in the second quarter. Perhaps the most encouraging trend is the absence, so far, of a surge in wage costs, despite an extremely tight labor market. Despite continued overall growth at rates that are generally regarded as unsustainable, there are signs of slowing in certain key sectors. Trends in retail spending, consumer confidence and new home sales now appear to be more in line with real growth at an annual rate of 3.0% to 3.5%. The moderation in growth can be attributed largely to the actions of the Federal Reserve, which has stated and demonstrated a determination to keep inflation low: Interest rates have been raised six times, for a total increase of 1 3/4 percentage points, since the middle of 1999. The Fed's decision to leave rates unchanged in late June was accompanied by a warning that further reports of rapid growth could prompt additional rate increases. ECONOMIC GROWTH AND INFLATION [Economic Growth and Inflation Performance Graph]
REAL GDP CPI-U -------- ----- 90 1.8 6.1 91 -0.5 3.1 92 3 2.9 93 2.7 2.7 94 4 2.7 95 2.7 2.5 96 3.6 3.3 97 4.2 1.7 98 4.3 1.6 99 4.2 2.6
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. -------------------------------------------------------------------------------- The Equity Market The major market averages ended June quite close to the levels at which they began January, but there were two distinctly different periods for the stock market in the first half of 2000. In the first quarter, the market continued to move up, dominated by technology stocks, which reached levels higher than most investors could have imagined. Beginning in early April, prices of technology stocks dropped precipitously. The broader market weakened, as well: by late April the S&P 500 Index was 12% below its March peak. From its highest level in March, the technology-heavy NASDAQ index had lost 37% of its value by the end of May; nonetheless, soaring prices in the last half of 1999 enabled the NASDAQ to show a net gain of 48% for the 12 months ended June 2000. While prices of many technology stocks, especially those with no prospects of near term earnings, have dropped sharply, the market as a whole recovered in May and June. Market leadership has changed: among the best performing industry groups in the second quarter were health care, energy, utilities, and consumer staples. At mid-year, the stock market is very jittery. Warnings of disappointing earnings are increasingly prevalent, and they often send stocks down sharply. The S&P 500 Index is more volatile than it has been at any time since the 1930s, with volatility measured by the number of days on which the index rises or falls by a percentage point or more. The NASDAQ index has been more volatile in recent months than at any time since its volatility was first tracked in the 1970s, with changes of 2% to 3% on many days. ANNUAL TOTAL RETURNS FROM S&P 500(R) INDEX [Annual Total Returns from S&P Performance Graph]
12 MONTHS ENDED --------------- 91 7.3 92 13.4 93 13.6 94 1.3 95 25.9 96 25.9 97 34.6 98 30 99 22.7 00 7.3
Source: Standard & Poor's -------------------------------------------------------------------------------- The Bond Market Total return on long-term corporate bonds, measured by the Merrill Lynch Domestic Master Index, was 4.57% for the 12 months ended June 30, 2000, as a downward trend in prices partially offset coupon income. After moving up fairly steadily in 1999, bond yields began to drop in January of this year. Yields increased in April and May, then moved down again, to end June slightly below the level at the beginning of the year. Yields on corporate bonds are quite high; the spread, or difference between the yield on corporate and Treasury bonds, is at a 15-year high. The reason for the wide spread appears to be high demand for ultra-safe Treasury securities, stimulated by investors' fear that there is too much leverage in the financial system. Spreads have also widened between Treasury bonds and the debt of government agencies such as FNMA and GNMA, mainly because of a recent statement that the U.S. Treasury does not necessarily back agency debt. These pressures come at a time when the supply of Treasury securities is limited by the government's use of surplus funds to buy back outstanding 30-year bonds. These factors combined to make the 30-year Treasury bond the best performer in the bond market; total return on these bonds over the last year was over 11%, more than double that of long-term corporate bonds. The bond market was very quiet in June, with low volume and price movement within a very narrow trading range. This lack of volatility, which is typical of the summer months, may well persist until there are stronger signs as to whether economic growth is slowing. ANNUAL TOTAL RETURNS FROM MERRILL LYNCH DOMESTIC MASTER INDEX [Annual Total Returns From Merrill Lynch]
12 MONTHS ENDED --------------- 91 10.9 92 14.1 93 11.9 94 -1 95 12.6 96 5 97 8.2 98 10.7 99 3.1 00 4.6
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 2 9
Objective: Portfolio Strategy: Net Assets: Maximum long-term appreciation Strive for the highest possible rate of capital $196,725,266 of 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, with the objective of maintaining a median market capitalization of $1 billion. The range of market capitalization is generally between $200 million and $3 billion. The investment process involves detailed studies of individual companies. Factors evaluated include the growth rates of revenues and earnings, opportunities for margin expansion, financial strength and quality of management. 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 fund 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 Small Cap Portfolio has performed quite well since its introduction in April 1999. While its largest concentration is in technology, it is actually less focused on this segment of the market than many other small cap funds; the weakness in technology shares in the second quarter therefore had only a moderate negative impact. Most technology holdings are software or service companies such as Advent Software and Tollgrade Communications with a solid base of business and good near-term earnings prospects; these stocks have contributed to the Portfolio's strong performance. Another area of concentration is health care; quality names including Priority Healthcare and Province Healthcare, Biovail and Patterson Dental have performed especially well in recent months. In the first six months of 2000 the Portfolio total return was 21.54%. Management estimates that Initial Public Offerings (IPOs) contributed 5.8% and other issues 15.74%. SECTOR ALLOCATION 6/30/2000 [SECTOR ALLOCATION PIE CHART]
SECTOR ALLOCATION ----------------- Technology 35 Consumer Cyclicals 15 Health Care 13 Industrial & Transportation 12 Business Services 6 Energy 5 Finance 5 Consumer Staples 3 Short-Term Investments 6
The Small Cap Growth Stock Portfolio's investment in Initial Public Offerings (IPOs) had a significant impact on its performance during the periods shown. There can be no assurance that IPOs will continue to have a positive effect on the Porfolio's performance. Since the fund is relatively small in asset size, it may be easier to achieve higher returns than in a larger fund. TOP 10 EQUITY HOLDINGS 6/30/2000
Security Description % of Total Net Assets ------------------------------------------------------------------------------------- Advent Software, Inc. 2.5% ------------------------------------------------------------------------------------- Priority Healthcare Corporation -- Class B 2.1% ------------------------------------------------------------------------------------- Province Healthcare Company 2.1% ------------------------------------------------------------------------------------- The Corporate Executive Board Company 2.0% ------------------------------------------------------------------------------------- Power-One, Inc. 1.9% ------------------------------------------------------------------------------------- Biovail Corporation 1.9% ------------------------------------------------------------------------------------- The Talbots, Inc. 1.8% ------------------------------------------------------------------------------------- Nabors Industries, Inc. 1.8% ------------------------------------------------------------------------------------- Tollgrade Communications, Inc. 1.8% ------------------------------------------------------------------------------------- Global Industries, Ltd. 1.8%
PERFORMANCE RELATIVE TO THE RELEVANT INDICES [PERFORMANCE RELATIVE TO THE RELEVANT INDICES LINE GRAPH]
SMALL CAP STOCK PORTFOLIO S&P 600 INDEX RUSSELL 2000 INDEX ------------------------- ------------- ------------------ 4/99 10000 10000 10000 6/99 12090 10826 10605 6/00 22513 12384 12125
------------------------------------------------------ Average Annual Total Return For Periods Ended June 30, 2000 Since 1 year Inception# ------------------------------------------------------ Small Cap Stock Portfolio 87.10% 101.25% S&P 600 Index 14.39% 20.10% Russell 2000 Index 14.33% 17.95% ------------------------------------------------------ ------------------------------------------------------ # Inception date of 4/30/99.
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 June 30, 2000, 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 June 30, 2000, the average market capitalization of companies in the Russell 3000 was $5.1 billion; the median market capitalization was $791.1 million. Market capitalization of companies in the Index ranged from $520 billion to $178 million. The Russell 2000 Index represents approximately 8% of the total market capitalization of the Russell 3000. As of June 30, 2000, the average market capitalization of companies in the Russell 2000 was approximately $580 million; the median market capitalization was approximately $466 million. The largest company in the index had a total market capitalization of approximately $1.5 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 58 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. 3 Small Cap Growth Stock Portfolio 10 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments June 30, 2000 (unaudited)
MARKET SHARES/ VALUE COMMON STOCK (94.3%) PAR (000'S) ----------------------------------------------------------- BASIC MATERIALS (2.8%) Cambrex Corporation 56,700 $ 2,552 *Grant Prideco, Inc. 121,700 3,042 --------- TOTAL BASIC MATERIALS 5,594 --------- BUSINESS SERVICES (3.2%) *The Corporate Executive Board Company 65,000 3,892 *Heidrick & Struggles International, Inc. 39,300 2,481 --------- TOTAL BUSINESS SERVICES 6,373 --------- CAPITAL GOODS (6.3%) *Dycom Industries, Inc. 59,250 2,726 Federal Signal Corporation 104,900 1,731 Kaydon Corporation 78,400 1,646 *Power-One, Inc. 33,500 3,816 *Tetra Tech, Inc. 111,200 2,544 --------- TOTAL CAPITAL GOODS 12,463 --------- COMMUNICATION SERVICES (3.1%) *Crown Castle International Corp. 46,900 1,712 *Pinnacle Holdings, Inc. 23,800 1,285 *TESSCO Technologies Incorporated 107,300 3,004 --------- TOTAL COMMUNICATION SERVICES 6,001 --------- CONSUMER CYCLICAL (15.1%) *Catalina Marketing Corporation 19,400 1,979 *David's Bridal, Inc. 155,500 1,798 *Dollar Tree Stores, Inc. 67,100 2,655 *Getty Images, Inc. 64,300 2,383 *Hotel Reservations Network, Inc. - Class A 76,900 2,288 *Linens 'N Things, Inc. 76,200 2,067 *The Management Network Group, Inc. 98,700 3,455 *MSC Industrial Direct Co., Inc. - Class A 122,600 2,567 *O'Reilly Automotive, Inc. 184,800 2,564 The Talbots, Inc. 65,100 3,575 *Tower Automotive, Inc. 134,800 1,685 *Whitehall Jewellers, Inc. 67,900 1,265 *Wild Oats Markets, Inc. 114,700 1,441 --------- TOTAL CONSUMER CYCLICAL 29,722 --------- CONSUMER STAPLES (2.9%) *American Italian Pasta Company - Class A 83,700 1,732 *Citadel Communications Corporation 31,300 1,094 *Westwood One, Inc. 86,700 2,958 --------- TOTAL CONSUMER STAPLES 5,784 ---------
MARKET SHARES/ VALUE COMMON STOCK (94.3%) PAR (000'S) ----------------------------------------------------------- ENERGY (5.2%) *Global Industries, Ltd. 186,800 $ 3,526 *Nabors Industries, Inc. 85,800 3,566 *Stone Energy Corporation 52,300 3,125 --------- TOTAL ENERGY 10,217 --------- FINANCE (4.6%) *Charles River Associates Incorporated 51,900 915 Investors Financial Services Corp. 57,600 2,286 Radian Group, Inc. 61,100 3,162 Waddell & Reed Financial, Inc. - Class A 79,950 2,623 --------- TOTAL FINANCE 8,986 --------- HEALTHCARE (13.6%) *Biovail Corporation 67,700 3,753 *Lincare Holdings, Inc. 88,600 2,182 *ORATEC Interventions, Inc. 42,700 1,425 *Patterson Dental Company 52,500 2,678 *Priority Healthcare Corporation - Class B 56,000 4,161 *Province Healthcare Company 113,400 4,096 *Renal Care Group, Inc. 43,500 1,064 *Shire Pharmaceuticals Group PLC, ADR 50,200 2,604 *Sonic Innovations, Inc. 45,700 848 *Sybron International Corporation 47,700 945 *Universal Health Services, Inc. - Class B 35,600 2,332 *Ventana Medical Systems, Inc. 31,600 743 --------- TOTAL HEALTHCARE 26,831 --------- TECHNOLOGY (34.8%) *Advent Software, Inc. 75,400 4,862 *Applied Materials, Inc. 16,238 1,472 *Aspen Technology, Inc. 63,100 2,429 *Avanex Corporation 7,400 707 *CDW Computer Centers, Inc. 45,000 2,813 *Copper Mountain Networks, Inc. 22,400 1,974 *Cymer, Inc. 55,100 2,631 *Diversinet Corp. 61,200 727 *Documentum, Inc. 19,700 1,761 *Engage Technologies, Inc. 34,200 442 *Eprise Corporation 16,700 275 *Exfo Electro-Optical Engineering Inc. 12,700 557 *FairMarket, Inc. 90,000 636 *Forrester Research, Inc. 27,800 2,024 *FreeShop.com, Inc. 77,500 460
Small Cap Growth Stock Portfolio 4 11
MARKET SHARES/ VALUE COMMON STOCK (94.3%) PAR (000'S) ----------------------------------------------------------- TECHNOLOGY continued *Inet Technologies, Inc. 37,500 $ 2,034 *Infonautics, Inc. - Class A 47,700 209 *Inforte Corp. 42,600 1,534 *Jupiter Communications, Inc. 105,100 2,417 *Kent Electronics Corporation 116,900 3,485 *Marvell Technology Group Ltd. 8,300 473 *Metasolv Software, Inc. 31,900 1,404 *MMC Networks, Inc. 37,200 1,988 *Natural MicroSystems Corporation 25,700 2,890 *Plexus Corp. 27,400 3,096 *PMC-Sierra, Inc. 8,600 1,528 *Predictive Systems, Inc. 35,600 1,279 *PRI Automation, Inc. 24,700 1,615 *QLogic Corporation 16,900 1,116 *Scient Corporation 12,800 565 *Semtech Corporation 30,400 2,325 *SmartForce Public Limited Company, ADR 71,100 3,413 *StorageNetworks, Inc. 7,900 713 *TIBCO Software, Inc. 16,700 1,791 *Tollgrade Communications, Inc. 26,800 3,551 *UTStarcom, Inc. 74,700 2,269 *Varian, Inc. 23,400 1,079 *Viant Corporation 68,000 2,015 *Viasystems Group, Inc. 101,100 1,637 --------- TOTAL TECHNOLOGY 68,196 --------- TRANSPORTATION (2.7%) C.H. Robinson Worldwide, Inc. 66,200 3,277 SkyWest, Inc. 54,200 2,009 --------- TOTAL TRANSPORTATION 5,286 --------- TOTAL COMMON STOCK (COST $156,057) 185,453 --------- MARKET SHARES/ VALUE MONEY MARKET INVESTMENTS (9.5%) PAR (000'S) ----------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (0.4%) Federal National Mortgage Association, 6.40%, 7/17/00 700,000 $ 698 --------- TOTAL FEDERAL GOVERNMENT AND AGENCIES 698 --------- FINANCE (2.0%) CIT Group, 6.6%, 8/9/00 4,000,000 3,968 --------- TOTAL FINANCE 3,968 --------- FINANCE SERVICES (2.5%) CXC Incorporated, 6.63%, 8/25/00 5,000,000 4,949 --------- TOTAL FINANCE SERVICES 4,949 --------- OFFICE MACHINES (2.5%) Xerox Corporation, 6.68%, 7/5/00 5,000,000 4,996 --------- TOTAL OFFICE MACHINES 4,996 --------- PERSONAL CREDIT INSTITUTIONS (2.1%) General Electric Capital Corporation, 6.9%, 7/5/00 4,100,000 4,097 --------- TOTAL PERSONAL CREDIT INSTITUTIONS 4,097 --------- TOTAL MONEY MARKET INVESTMENTS (COST: $18,708) 18,708 --------- TOTAL INVESTMENTS (103.8%) (COST $174,765)/\ 204,161 --------- OTHER ASSETS, LESS LIABILITIES (-3.8%) (7,436) --------- TOTAL NET ASSETS (100.0%) $ 196,725 ---------
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* Non-Income Producing ADR - American Depository Receipt /\ At 6/30/2000, the aggregate cost of securities for federal income tax purposes was $174,765 and the net unrealized appreciation of investments based on that cost was $29,396 which is comprised of $39,768 aggregate gross unrealized appreciation and $10,372 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements 5 Small Cap Growth Stock Portfolio 12
Objective: Portfolio Strategy: Net Assets: Maximum long-term appreciation of Strive for the highest possible rate of capital $1,812,111,548 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 with market capitalizations generally in the range of $1 billion to $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 fund 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. Over the 12 months ended June 2000, the Portfolio achieved a total return of 50.86%, compared with 16.99% for the S&P MidCap 400 Index. Technology holdings, which represent 51% of the Portfolio, were a factor in the good performance, despite pronounced weakness in the overall technology sector in the second quarter. The Portfolio benefited from a concentration of its technology in software and services, rather than in equipment and internet companies. Technology holdings that performed especially well include Concord EFS, Fiserv and Paychex, all of which provide business services. Energy holdings, including Weatherford International and Dynegy, benefited from strength in this market sector. In health care, investments in biotechnology, equipment and drug companies performed well; PE Corporation, Elan and Shire Pharmaceuticals were particularly strong. SECTOR ALLOCATION 6/30/2000 [SECTOR ALLOCATION PIE CHART]
SECTOR ALLOCATION ----------------- Technology 51 Energy 11 Health Care 10 Industrial & Transportation 8 Consumer Cyclicals 6 Consumer Staples 3 Business Services 3 Finance 3 Cash Equivalents 5
The total return for the Aggressive Growth Stock Portfolio for the 12 months ended 6/30/2000 coincides with a period of accelerated growth in the small-cap and mid-cap sectors of the stock market. There can be no assurance that this accelerated growth will continue to have a positive effect on the Portfolio's performance in the future. TOP 10 HOLDINGS 6/30/2000
Security Description % of Total Net Assets ------------------------------------------------------------------------------------- Comverse Technology, Inc. 2.5% ------------------------------------------------------------------------------------- Weatherford International, Inc. 2.1% ------------------------------------------------------------------------------------- ADC Telecommunications, Inc. 2.1% ------------------------------------------------------------------------------------- Sanmina Corporation 2.0% ------------------------------------------------------------------------------------- Altera Corporation 2.0% ------------------------------------------------------------------------------------- Microchip Technology Incorporated 2.0% ------------------------------------------------------------------------------------- Paychex, Inc. 1.9% ------------------------------------------------------------------------------------- Gemstar International Group Limited 1.9% ------------------------------------------------------------------------------------- JDS Uniphase Corporation 1.8% ------------------------------------------------------------------------------------- Novellus Systems, Inc. 1.8%
PERFORMANCE RELATIVE TO RELEVANT INDICES [PERFORMANCE RELATIVE TO RELEVANT INDICES PERFORMANCE GRAPH]
AGGRESSIVE GROWTH PORTFOLIO S&P 400 INDEX --------------------------- ------------- 11/90 10000 10000 6/91 12593 13070 6/92 13994 15305 6/93 17133 19664 6/94 19354 19652 6/95 24448 24042 6/96 35003 29233 6/97 36545 36050 6/98 43439 45838 6/99 46685 53708 6/00 70426 62833
------------------------------------------------------------- Average Annual Total Return For Periods Ended June 30, 2000 Since 1 Year 5 Years Inception# ------------------------------------------------------------- Aggressive Growth Stock Portfolio 50.86% 23.57% 22.60% S&P MidCap 400 Index 16.99% 21.18% 21.15% ------------------------------------------------------------- # Inception date of 11/30/1990
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 representative of the current composition of this Portfolio. 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 June 30, 2000, the 400 companies in the composite had median market capitalization of $1.6 billion and a total market value of $848 billion. The MidCap 400 represents approximately 5% of the market value of S&P's database of over 8,900 equities. 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 58 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 6 13 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments June 30, 2000 (unaudited)
MARKET SHARES/ VALUE COMMON STOCK (94.8%) PAR (000'S) --------------------------------------------------------- BASIC MATERIALS (0.9%) *Grant Prideco, Inc. 651,925 $ 16,298 ----------- TOTAL 16,298 ----------- BUSINESS SERVICES (2.2%) *The Corporate Executive Board Company 320,800 19,208 *Robert Half International, Inc. 731,600 20,851 ----------- TOTAL 40,059 ----------- CAPITAL GOODS (6.6%) *Credence Systems Corporation 185,300 10,226 *Jabil Circuit, Inc. 624,800 31,006 Kaydon Corporation 342,200 7,186 *RSA Security, Inc. 199,800 13,836 *Sanmina Corporation 429,600 36,731 *Tetra Tech, Inc. 888,978 20,335 ----------- TOTAL 119,320 ----------- COMMUNICATION SERVICES (0.9%) *Allegiance Telecom, Inc. 51,250 3,280 *Crown Castle International Corp. 282,000 10,293 *Level 3 Communications, Inc. 35,100 3,089 ----------- TOTAL 16,662 ----------- CONSUMER CYCLICAL (6.4%) *Catalina Marketing Corporation 144,300 14,719 Cintas Corporation 437,750 16,060 *Dollar Tree Stores, Inc. 311,250 12,314 *Getty Images, Inc. 741,600 27,485 *Kohl's Corporation 363,600 20,225 *Linens 'N Things, Inc. 295,433 8,014 *O'Reilly Automotive, Inc. 308,200 4,276 *Tech Data Corporation 123,500 5,380 *Tower Automotive, Inc. 619,900 7,749 ----------- TOTAL 116,222 ----------- CONSUMER STAPLES (2.9%) *American Tower Corporation - Class A 241,222 10,056 *Clear Channel Communications, Inc. 197,300 14,798 *Entercom Communications Corp. - Class A 305,100 14,873 *Lamar Advertising Company - Class A 275,825 11,947 ----------- TOTAL 51,674 ----------- ENERGY (10.7%) Anadarko Petroleum Corporation 326,300 16,091 *BJ Services Company 337,700 21,106 *Cooper Cameron Corporation 301,400 19,892 Dynegy, Inc. - Class A 429,500 29,340 *Nabors Industries, Inc. 580,700 24,135
MARKET SHARES/ VALUE COMMON STOCK (94.8%) PAR (000'S) --------------------------------------------------------- ENERGY continued Santa Fe International Corporation 865,401 $ 30,235 Tosco Corporation 480,700 13,610 *Weatherford International, Inc. 971,925 38,695 ----------- TOTAL 193,104 ----------- FINANCE (3.0%) ACE Limited 398,600 11,161 Investors Financial Services Corp. 752,800 29,877 *Knight/Trimark Group, Inc. - Class A 120,800 3,601 Radian Group, Inc. 182,100 9,424 ----------- TOTAL 54,063 ----------- HEALTHCARE (9.4%) *ALZA Corporation 173,000 10,229 *Elan Corporation PLC, ADR 503,655 24,395 *Health Management Associates, Inc. - Class A 667,600 8,721 *Lincare Holdings, Inc. 261,900 6,449 *MedImmune, Inc. 299,400 22,156 *Patterson Dental Company 417,725 21,304 PE Corporation 257,700 16,976 *Province Healthcare Company 301,200 10,881 *Sepracor, Inc. 130,100 15,693 *Shire Pharmaceuticals Group PLC, ADR 201,000 10,427 Stryker Corporation 324,100 14,179 *Sybron International Corporation 461,000 9,134 ----------- TOTAL 170,544 ----------- TECHNOLOGY (51.0%) *ADC Telecommunications, Inc. 442,900 37,147 *Altera Corporation 359,500 36,646 *Applied Materials, Inc. 210,681 19,093 *BEA Systems, Inc. 381,300 18,851 *Bluestone Software, Inc. 128,300 3,296 *Business Objects S.A., ADR 101,400 8,936 *C-Cube Microsystems, Inc. 220,000 4,318 *CDW Computer Centers, Inc. 278,800 17,425 *CIENA Corporation 122,800 20,469 *Comverse Technology, Inc. 484,600 45,067 *Concord EFS, Inc. 687,225 17,868 *Conexant Systems, Inc. 222,200 10,804 *Copper Mountain Networks, Inc. 238,200 20,991 *DST Systems, Inc. 314,800 23,964 *Electronic Arts, Inc. 199,600 14,558 *Fiserv, Inc. 581,650 25,156 *Foundry Networks, Inc. 107,500 11,879 *FreeMarkets, Inc. 17,500 830 *Gemstar International Group Limited 569,100 34,973 *Harmonic, Inc. 200,782 4,969 *Intuit, Inc. 283,900 11,746
7 Aggressive Growth Stock Portfolio 14
MARKET SHARES/ VALUE COMMON STOCK (94.8%) PAR (000'S) --------------------------------------------------------- TECHNOLOGY continued *JDS Uniphase Corporation 275,600 $ 33,038 *Keane, Inc. 558,600 12,080 *Microchip Technology Incorporated 616,800 35,937 *MMC Networks, Inc. 278,900 14,904 *Nasdaq-100 Shares 258,700 24,108 *Network Appliance, Inc. 370,100 29,793 *Novellus Systems, Inc. 566,500 32,043 *NTL Incorporated 210,000 12,574 Paychex, Inc. 832,700 34,973 *Peregrine Systems, Inc. 288,362 10,003 PerkinElmer, Inc. 106,800 7,062 *PMC-Sierra, Inc. 122,856 21,830 *Portal Software, Inc. 374,900 23,947 *PRI Automation, Inc. 78,800 5,153 *QLogic Corporation 221,700 14,646 *Rational Software Corporation 307,100 28,541 *Sapient Corporation 92,200 9,860 *Scient Corporation 104,120 4,594 *Semtech Corporation 371,400 28,406 *SilverStream Software, Inc. 74,400 4,297 *Sycamore Networks, Inc. 145,400 16,049 *Tellabs, Inc. 410,300 28,080 *TIBCO Software, Inc. 177,100 18,991 *VeriSign, Inc. 138,800 24,498 *Viant Corporation 585,038 17,332 *Vignette Corporation 524,784 27,297 *Waters Corporation 135,800 16,950 ----------- TOTAL 925,972 ----------- TRANSPORTATION (0.8%) Expeditors International of Washington, Inc. 319,800 15,191 ----------- TOTAL 15,191 ----------- TOTAL COMMON STOCK (COST $1,063,394) 1,719,109 ----------- MARKET SHARES/ VALUE MONEY MARKET INVESTMENTS (5.1%) PAR (000'S) ---------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (0.1%) Federal National Mortgage Association, 6.40%, 7/17/00 2,000,000 $ 1,994 ----------- TOTAL 1,994 ----------- FINANCE SERVICES (3.3%) Asset Securitization, 6.55%, 8/15/00 20,000,000 19,982 Ciesco LP, 6.55%, 8/14/00 20,000,000 19,840 CXC Incorporated, 6.63%, 8/25/00 20,000,000 19,797 ----------- TOTAL 59,619 ----------- MISC. BUSINESS CREDIT INSTITUTIONS (1.1%) Quincy Capital, 6.76%, 7/12/00 20,000,000 19,959 ----------- TOTAL 19,959 ----------- SECURITY BROKERS AND DEALERS (0.6%) The Goldman Sachs Group, 6.57%, 7/5/00 10,000,000 9,993 ----------- TOTAL 9,993 ----------- TOTAL MONEY MARKET INVESTMENTS (COST $91,565) 91,565 ----------- TOTAL INVESTMENTS (99.9%) (COST $1,154,959)/\ 1,810,674 ----------- OTHER ASSETS, LESS LIABILITIES (0.1%) 1,438 ----------- TOTAL NET ASSETS (100.0%) $ 1,812,112 -----------
* Non-Income Producing ADR - American Depository Receipt /\ At 6/30/2000, the aggregate cost of securities for federal income tax purposes was $1,154,959 and the net unrealized appreciation of investments based on that cost was $655,715 which is comprised of $703,723 aggregate gross unrealized appreciation and $48,008 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements Aggressive Growth Stock Portfolio 8 15
Objective: Portfolio Strategy: Net Assets: Long-term appreciation of capital Participate in the growth of foreign economies by $835,921,944 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 specific industries or regions of the world in which to invest. The Portfolio is normally fully invested in equity securities. The first half of 2000 was an encouraging period for the International Equity Portfolio's value-oriented investment style. For most of the last three years, a focus on value has been out of step with the market's euphoric valuations of many "new economy" stocks. As in the United States, world markets saw sharp drops in the prices of many technology stocks in the spring. Since then, there have been indications of a shift toward a more rational assessment of stocks in light of probable future earnings. The Portfolio benefited from continuing merger activity, which resulted in double-digit gains in several holdings. Nordic Baltic Holdings, now the largest bank in the Nordic region, was formed through the merger of Merita Nordbanken and Unidanmark. In Canada, Ranger Oil was acquired by Canadian Natural Resource. The main geographic concentration of the Portfolio is in Europe, which, including U.K. holdings, represents 54% of the Portfolio. Among the best performing stocks were Celltech, a British biotechnology company, and Alcatel, a French company that is a leader in broadband access equipment and optical networking. A significantly underweighted position in Japan was beneficial, as the Japanese market dropped in response to disappointment in performance of both the economy and corporate earnings. An exception was Nomura Securities, a large holding that increased in value by more than 40% in the first half of 2000. As the dominant brokerage firm in Japan, Nomura is well positioned for growth as individuals begin to move assets from savings accounts to equity investments. In other Asian markets, there are encouraging signs of economic recovery. Recent weakness in markets in Hong Kong and Korea provided some buying opportunities. The International Equity Portfolio is managed for Northwestern Mutual by Templeton Investment Counsel, Inc. ASSET ALLOCATION 6/30/2000 [SECTOR ALLOCATION PIE CHART]
ASSET ALLOCATION ---------------- Continental Europe 36 United Kingdom 18 Latin America 10 Asia 19 Australia/New Zealand 5 North America 5 Other regions 3 Short-term investments 4
TOP 10 HOLDINGS 6/30/2000
Company Country % of Net Assets ----------------------------------------------------------------------------------- Nordic Baltic Holding AB Sweden 4.2% ------------------------------------------------------------------------------- Aventis S.A. France 2.7% ------------------------------------------------------------------------------- Alcatel France 2.4% ------------------------------------------------------------------------------- AXA S.A. France 2.4% ------------------------------------------------------------------------------- Teva Pharmaceutical Industries Ltd Israel 2.1% ------------------------------------------------------------------------------- Nippon Telegraph & Telephone Corporation Japan 2.0% ------------------------------------------------------------------------------- Celltech Group PLC United Kingdom 2.0% ------------------------------------------------------------------------------- Nomura Securities Co Ltd Japan 1.9% ------------------------------------------------------------------------------- Nycomed Amersham PLC United Kingdom 1.9% ------------------------------------------------------------------------------- Telefonos De Mexico SA (Telmex) Mexico 1.9% -------------------------------------------------------------------------------
PERFORMANCE RELATIVE TO THE EAFE INDEX [LINE GRAPH]
INTERNATIONAL EQUITY PORTFOLIO EAFE INDEX ------------------------------ ---------- 4/93 10000 10000 6/93 10118 10060 6/94 12155 11801 6/95 13487 12032 6/96 15569 13670 6/97 19751 15471 6/98 21822 16458 6/99 22715 17761 6/00 25321 20859
------------------------------------------------------------- Average Annual Total Return For Periods Ended June 30, 2000 Since 1 Year 5 Years Inception# ------------------------------------------------------------- International Equity Portfolio 11.47% 13.43% 13.84% EAFE Index 17.44% 11.63% 10.80% ------------------------------------------------------------- # Inception date of 4/30/1993
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 58 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. 9 International Equity Portfolio 16 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments June 30, 2000 (unaudited)
MARKET SHARES/ VALUE COMMON STOCK (94.3%) COUNTRY PAR (000'S) ----------------------------------------------------------------- CAPITAL EQUIPMENT (13.2%) Alcatel France 151,500 $ 9,977 Alcatel, ADR France 145,500 9,676 BAE Systems, PLC United Kingdom 1,207,500 $ 7,531 Fujitsu Limited Japan 183,000 6,348 Hong Kong Aircraft & Engineering Hong Kong 2,680,700 5,158 *Hyundai Electronics Industries Co. Republic of Korea 660,600 13,033 Koninklijke Philips Electronics N.V Netherlands 202,140 9,572 Kurita Water Industries, Ltd. Japan 433,000 9,556 Rolls - Royce PLC United Kingdom 2,685,200 9,532 Sony Corp Japan 135,200 12,650 The Weir Group PLC United Kingdom 2,702,500 7,610 Williams PLC United Kingdom 1,652,900 9,634 --------- TOTAL 110,277 --------- CONSUMER GOODS (13.8%) Autoliv, Inc. United States 279,100 6,716 Aventis S.A. France 309,297 22,551 *Celltech Group PLC United Kingdom 861,000 16,684 Fiat SPA Ord. Italy 152,790 3,981 Mayne Nickless Ltd. Australia 1,671,600 3,442 Nycomed Amersham PLC United Kingdom 1,628,610 15,814 Ono Pharmaceutical Co., Ltd. Japan 233,000 10,020 Tate & Lyle, PLC United Kingdom 762,600 3,810 Teva Pharmaceutical Industries Ltd., ADR Israel 316,750 17,560 Unilever PLC United Kingdom 884,850 5,358 Volvo Aktiebolaget, B Free Sweden 433,000 9,454 --------- TOTAL 115,390 --------- ENERGY (15.0%) Endesa S.A. Spain 252,000 4,901 E.On AG Germany 310,600 15,302 EVN AG Austria 64,500 2,411 Gener S.A., ADR Chile 299,450 4,398 Hong Kong Electric Holdings Limited Hong Kong 1,790,000 5,764 Iberdrola S.A. Spain 587,500 7,603 Korea Electric Power Corp., ADR Republic of Korea 271,000 8,409 National Power PLC United Kingdom 1,246,864 7,947 Petroleo Brasileiro S.A. -- Petrobras Brazil 325,000 9,818 *Ranger Oil Limited Canada 1,055,400 5,805 *Renaissance Energy Ltd. Canada 540,000 5,230 Repsol S.A. Spain 732,000 14,630
MARKET SHARES/ VALUE COMMON STOCK (94.3%) COUNTRY PAR (000'S) ----------------------------------------------------------------- ENERGY continued Shell Transport & Trading Company PLC United Kingdom 1,518,500 $ 12,678 Thames Water United Kingdom 430,504 5,572 Total Fina S.A. France 97,622 15,028 --------- TOTAL 125,496 --------- FINANCE (22.4%) Allied Zurich PLC United Kingdom 778,000 9,204 Australia & New Zealand Bank Group Australia 1,726,641 13,280 *AXA-UAP S.A. France 117,447 18,576 Banca Nazionale del Lavora Italy 2,479,700 8,771 Banco Bradesco, S.A. Rights Brazil 623,750,000 5,428 Banco de Andulucia Spain 96,963 2,630 Banco Itau S.A. Brazil 20,790,000 1,827 Bangkok Bank Public Company, Ltd. Thailand 1,551,800 1,899 Banque Nationale de Paris France 103,385 9,989 *Banque Nationale de Paris, Warrants France 46,345 240 Deutsche Bank AG Germany 108,188 8,960 Hang Lung Development Co. Hong Kong 2,758,000 2,141 HSBC Holdings United Kingdom 568,137 6,505 ING Groep NV Netherlands 209,000 14,184 The Nomura Securities Co., Ltd. Japan 658,400 16,148 *Nordic Baltic Holding Sweden 2,296,883 16,823 Nordic Baltic Holdings, FDR Sweden 2,484,720 18,149 PartnerRe Ltd. Bermuda 226,600 8,030 Scor France 129,900 5,679 Unibanco Uniao de Bancos Brazil 14,033,500 817 XL Capital Ltd. Bermuda 178,800 9,678 Zurich Versicherungs -- Gesellschaft Switzerland 17,900 8,872 --------- TOTAL 187,830 --------- MATERIALS (9.5%) Agrium, Inc. Canada 473,300 4,082 Akzo Nobel N.V Netherlands 348,600 14,870 AngloGold Limited ADR South Africa 238,800 4,910 Asia Pulp & Paper Company Ltd. ADR Singapore 477,300 2,416 Barrick Gold Corporation Canada 390,300 7,046 Bayer AG Germany 157,000 6,140 Boehler -- Uddeholm AG Austria 119,556 4,200 Celanese AG Germany 11,770 228 Companhia Vale do Rio Doce, ADR Brazil 372,000 11,104 Corus Group PLC United Kingdom 4,392,400 6,417
International Equity Portfolio 10 17
MARKET SHARES/ VALUE COMMON STOCK (94.3%) COUNTRY PAR (000'S) ----------------------------------------------------------------- MATERIALS continued Grupo Mexico, B Shares Mexico 1,320,000 $ 3,715 Hepworth PLC United Kingdom 607,200 1,733 *Kinross Gold Corporation Canada 1,796,100 1,600 Merta Limited "A" Finland 157,500 1,170 Stora Enso OYJ -- R Shares Finland 1,074,597 9,849 --------- TOTAL 79,480 --------- MULTI-INDUSTRY (4.0%) Elementis PLC United Kingdom 1,494,000 1,775 Hanson PLC United Kingdom 319,794 2,261 Hutchison Whampoa Limited Hong Kong 877,800 11,036 Pilkington PLC United Kingdom 4,777,300 6,798 Swire Pacific Limited, A Shares Hong Kong 1,459,500 8,556 Swire Pacific Limited, B Shares Hong Kong 3,534,200 2,879 --------- TOTAL 33,305 --------- SERVICES (16.4%) Best Denki Co., Ltd. Japan 725,000 4,995 British Airways PLC United Kingdom 1,242,900 7,150 Compania Anonima Nacional Telefonos de Venezuela Venezuela 181,200 4,926 Compania de telecomunicaciones de Chile, S.A., ADR Chile 273,725 4,961 Hyder PLC Cum. Red. Pfd United Kingdom 401,400 580 J. Sainsbury PLC United Kingdom 1,162,100 5,278 Korea Telecom Corporation, ADR Republic of Korea 97,000 4,692 Marks & Spencer PLC United Kingdom 1,148,000 4,036 Moebel Walter AG Pfd Germany 103,297 1,188 News Corp Ltd. Australia 1,014,400 12,281 Nippon Telegraph & Telephone Corporation (NTT) Japan 1,245 16,592 The Peninsular & Oriental Steam Navagation Company United Kingdom 548,000 4,695 Philippine Long Distance Telephone, ADR Philippines 127,000 2,254 Portugal Telecom SA Portugal 395,000 4,453 PT Indosat, ADR Indonesia 386,900 4,401 Storehouse PLC United Kingdom 2,879,480 1,874 Telecom Corporation of New Zealand, Limited New Zealand 2,723,800 9,553 Telecom Italia SPA Italy 1,200,000 7,994 Telecomunicacoes de Sao Paulo S.A. Brazil 210,300 3,891
MARKET SHARES/ VALUE COMMON STOCK (94.3%) COUNTRY PAR (000'S) ----------------------------------------------------------------- SERVICES continued Telefonica de Argentina S.A., ADR Argentina 358,300 $ 11,376 Telefonica del Peru S.A. B Shares, ADR Peru 370,800 4,218 Telefonos de Mexico SA, ADR Mexico 275,004 15,711 --------- TOTAL 137,099 --------- TOTAL COMMON STOCK (COST $669,807) 788,877 --------- MONEY MARKET INVESTMENTS (4.4%) ----------------------------------------------------------------- MISCELLANEOUS BUSINESS CREDIT INSTITUTIONS (1.2%) Quincy Capital Corporation, 6.56%, 7/24/00 10,000,000 9,958 OFFICE MACHINES (1.2%) Xerox Credit Corporation, 7.02%, 7/5/00 10,000,000 9,993 PERSONAL CREDIT INSTITUTIONS (0.8%) Associates Corp. of NA, 6.94%, 7/3/00 6,500,000 6,497 SECURITY BROKERS AND DEALERS (1.2%) The Goldman Sachs Group, 6.57%, 7/5/00 10,000,000 9,993 --------- TOTAL MONEY MARKET INVESTMENTS (COST $36,441) 36,441 --------- TOTAL INVESTMENTS (98.7%) (COST $706,248)/\ 825,318 --------- OTHER ASSETS, LESS LIABILITIES (1.3%) 10,604 --------- TOTAL NET ASSETS (100.0%) $ 835,922 ---------
* Non-Income Producing ADR--American Depository Receipt FDR--Federal Depository Receipt Investment Percentages by Country: United Kingdom 19.2% France 11.0% Japan 9.1% Sweden 5.3% Netherlands 4.6% Other 50.8% ------ Total 100.0%
/\At 6/30/2000, the aggregate cost of securities for federal income tax purposes was $706,248 and the net unrealized appreciation of investments based on that cost was $119,070 which is comprised of $205,682 aggregate gross unrealized appreciation and $86,612 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements 11 International Equity Portfolio 18
Objective: Portfolio Strategy: Net Assets: Long-term capital appreciation Invest in a portfolio designed to approximate the $107,205,931 through cost-effective participation composition and returns of the S&P MidCap 400. 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 June 30, 2000, the 400 companies in the composite had median market capitalization of $1.6 billion and total market value of $856 billion. For comparison, the 500 large stocks in the S&P 500 Index had median market capitalization of $7.7 billion and total market value of $12,493 billion. The Index 400 Portfolio enables contract owners to participate in performance of mid-sized companies in the U.S. equity market. The Portfolio continues to achieve the objective of matching the results of the S&P 400 MidCap Index before expenses. SECTOR ALLOCATION 6/30/2000 [SECTOR ALLOCATION PIE CHART]
SECTOR ALLOCATION ----------------- Technology 20 Basic Materials/Capital Goods 12 Health Care 12 Consumer Cyclicals 11 Finance 9 Utilities 9 Energy 8 Consumer Staples 6 Other Industries 3 S&P 400 Index Futures 10
TOP 10 EQUITY HOLDINGS 6/30/2000
Security Description % of Total Net Assets ------------------------------------------------------------------------------------- MedImmune, Inc. 1.6% ------------------------------------------------------------------------------------- Vitesse Semiconductor Corporation 1.4% ------------------------------------------------------------------------------------- Univision Communications, Inc. - Class A 1.1% ------------------------------------------------------------------------------------- Dynegy, Inc. - Class A 1.1% ------------------------------------------------------------------------------------- Millennium Pharmaceuticals, Inc. 1.0% ------------------------------------------------------------------------------------- Jabil Circuit, Inc. 1.0% ------------------------------------------------------------------------------------- Chiron Corporation 0.9% ------------------------------------------------------------------------------------- Forest Laboratories, Inc. 0.9% ------------------------------------------------------------------------------------- Stryker Corporation 0.9% ------------------------------------------------------------------------------------- Calpine Corporation 0.9%
PERFORMANCE RELATIVE TO THE S&P MIDCAP 400 INDEX [LINE GRAPH]
--------------------------------------------------------------- Average Annual Total Return For Periods Ended June 30, 2000 One Since Year Inception# --------------------------------------------------------------- Index 400 Stock Portfolio 17.40% 16.99% S&P MidCap 400 Index 20.12% 20.06% --------------------------------------------------------------- # Inception date of 4/30/1999
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 June 30, 2000, the 400 companies in the composite had median market capitalization of $1.6 billion and a total market value of $848 billion. The MidCap 400 represents approximately 5% of the market value of S&P's database of over 8,900 equities. "Standard & Poor's(R)", "S&P(R)", "S&P MidCap 400 Index", "Standard & Poor's MidCap 400 Index", "S&P 500(R)" and "Standard & Poor's 500" are trademarks of The McGraw-Hill Companies, Inc. and have 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 & Poor's makes no representation regarding the advisability of investing in the funds. 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 58 reflect mortality and expense risk charges and premium charges deducted form 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 reflect the total cost of insurance protection. Index 400 Stock Portfolio 12 19 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments June 30, 2000 (unaudited)
MARKET SHARES/ VALUE COMMON STOCK (89.3%) PAR (000'S) ------------------------------------------------------- BASIC MATERIALS (4.5%) A. Schulman, Inc. 3,400 $ 41 *Airgas, Inc. 7,800 44 AK Steel Holding Corporation 12,400 99 Albemarle Corporation 5,200 103 Bowater Incorporated 5,800 256 Cabot Corporation 7,500 204 Carpenter Technology Corporation 2,500 53 Chesapeake Corporation 2,000 59 Cleveland-Cliffs, Inc. 1,200 31 Consolidated Papers, Inc. 10,100 370 Crompton Corporation 13,263 162 *Cytec Industries, Inc. 4,700 116 The Dexter Corporation 2,600 125 Ethyl Corporation 9,300 23 Ferro Corporation 3,900 82 Georgia Gulf Corporation 3,500 73 Georgia-Pacific Corporation (Timber Group) 9,200 199 *Grant Prideco, Inc. 12,100 304 H.B. Fuller Company 1,600 73 IMC Global, Inc. 12,800 166 Kennametal, Inc. 3,400 73 Longview Fibre Company 5,800 64 The Lubrizol Corporation 6,100 128 Lyondell Chemical Company 13,100 219 M. A. Hanna Company 5,500 50 Martin Marietta Materials, Inc. 5,200 210 *MAXXAM, Inc. 800 14 Minerals Technologies, Inc. 2,400 110 Olin Corporation 5,000 83 P.H. Glatfelter Company 4,700 48 Rayonier, Inc. 3,100 111 RPM, Inc. 11,900 120 Ryerson Tull, Inc. 2,800 29 Solutia, Inc. 12,300 169 Sonoco Products Company 11,400 234 Southdown, Inc. 4,000 231 *UCAR International, Inc. 5,000 65 Universal Corporation 3,200 68 The Valspar Corporation 4,700 159 Wausau-Mosinee Paper Corporation 5,700 49 -------- TOTAL BASIC MATERIALS 4,817 -------- BUSINESS SERVICES (0.5%) *Robert Half International, Inc. 20,000 570 -------- TOTAL BUSINESS SERVICES 570 -------- CAPITAL GOODS (7.0%) AGCO Corporation 6,600 81 *Albany International Corp. - Class A 3,426 50 *American Standard Companies, Inc. 7,900 324 AMETEK, Inc. 3,600 63 Carlisle Companies Incorporated 3,400 153
MARKET SHARES/ VALUE COMMON STOCK (89.3%) PAR (000'S) ------------------------------------------------------- CAPITAL GOODS continued Diebold, Incorporated 7,700 $ 215 Donaldson Company, Inc. 5,100 101 Federal Signal Corporation 5,100 84 Flowserve Corporation 4,200 63 Granite Construction Incorporated 3,000 74 Harsco Corporation 4,500 115 Herman Miller, Inc. 8,800 228 Hillenbrand Industries, Inc. 7,000 219 HON INDUSTRIES, Inc. 6,700 157 Hubbell Incorporated - Class B 7,200 184 *Jabil Circuit, Inc. 20,800 1,031 *Jacobs Engineering Group, Inc. 2,900 95 Kaydon Corporation 3,400 71 *MagneTek, Inc. 2,600 21 Newport News Shipbuilding, Inc. 3,500 129 Nordson Corporation 1,800 91 Pentair, Inc. 5,400 192 Precision Castparts Corp. 2,700 122 *Quanta Services, Inc. 6,400 352 The Reynolds and Reynolds Company - Class A 8,500 155 *SCI Systems, Inc. 16,100 631 *Sensormatic Electronics Corporation 8,600 136 *Sequa Corporation - Class A 1,200 46 *SPX Corporation 3,500 423 The Standard Register Company 3,100 44 Stewart & Stevenson Services, Inc. 3,100 47 Symbol Technologies, Inc. 14,800 799 Tecumseh Products Company - Class A 2,200 84 Teleflex Incorporated 4,200 150 Trinity Industries, Inc. 4,400 81 *Vishay Intertechnology, Inc. 15,087 572 Wallace Computer Services, Inc. 4,700 46 York International Corporation 4,300 109 -------- TOTAL CAPITAL GOODS 7,538 -------- COMMUNICATION SERVICES (1.8%) *Broadwing, Inc. 24,100 625 COMSAT Corporation 5,922 146 Media General, Inc. - Class A 3,000 146 *Powerwave Technologies, Inc. 6,700 295 Telephone and Data Systems, Inc. 6,900 692 -------- TOTAL COMMUNICATION SERVICES 1,904 -------- CONSUMER CYCLICAL (11.0%) A. H. Belo Corporation - Class A 13,200 229 *Abercrombie & Fitch Co. - Class A 11,400 139 *ACNielsen Corporation 6,500 143 *Acxiom Corporation 9,700 264 *American Eagle Outfitters, Inc. 5,200 73 *Apollo Group, Inc. - Class A 8,500 238 Arvin Industries, Inc. 2,900 50 Bandag, Incorporated 2,400 58
13 Index 400 Stock Portfolio 20
MARKET SHARES/ VALUE COMMON STOCK (89.3%) PAR (000'S) ------------------------------------------------------- CONSUMER CYCLICAL continued *Barnes & Noble, Inc. 7,700 $ 171 *BJ's Wholesale Club, Inc. 8,200 271 *Blyth Industries, Inc. 5,400 159 *Borders Group, Inc. 8,600 134 Borg-Warner Automotive, Inc. 3,000 105 *Burlington Industries, Inc. 5,200 9 Callaway Golf Company 8,500 139 Cintas Corporation 18,650 683 Claire's Stores, Inc. 5,700 110 Clayton Homes, Inc. 15,600 125 *DeVry, Inc. 7,800 206 *Dollar Tree Stores, Inc. 11,400 451 Family Dollar Stores, Inc. 19,300 378 Fastenal Company 4,200 213 Federal-Mogul Corporation 8,200 78 *Furniture Brands International, Inc. 5,500 83 Galileo International, Inc. 10,200 213 *GTECH Holdings Corporation 3,900 88 Harte-Hanks, Inc. 7,700 193 Houghton Mifflin Company 3,500 163 *International Game Technology 8,400 223 International Speedway Corporation - Class A 5,900 244 *Jones Apparel Group, Inc. 13,651 321 Kelly Services, Inc. - Class A 4,000 93 Lancaster Colony Corporation 4,400 84 *Land's End, Inc. 3,400 113 *Lear Corporation 7,500 150 Lee Enterprises, Incorporated 4,900 114 *Mandalay Resort Group 10,100 202 Manpower, Inc. 8,500 272 Mark IV Industries, Inc. 4,900 102 Meritor Automotive, Inc. 7,000 77 Modine Manufacturing Company 3,300 89 *Modis Professional Services, Inc. 10,700 95 *Mohawk Industries, Inc. 6,100 133 *Navigant Consulting, Inc. 4,600 20 NCH Corporation 600 22 *NCO Group, Inc. 2,800 65 *The Neiman Marcus Group, Inc. - Class A 5,500 163 *OfficeMax, Inc. 12,700 64 *Ogden Corporation 5,500 50 *Park Place Entertainment Corporation 34,000 414 Payless ShoeSource, Inc. 2,514 129 Pittston Brink's Group 5,500 75 *Premier Parks, Inc. 8,700 198 The Reader's Digest Association, Inc. - Class A 11,900 472 Rollins, Inc. 3,400 51 Ross Stores, Inc. 9,900 169 *Saks Incorporated 16,000 168 *Scholastic Corporation 1,900 116 Shaw Industries, Inc. 14,900 186 Sotheby's Holdings, Inc. - Class A 6,600 116
MARKET SHARES/ VALUE COMMON STOCK (89.3%) PAR (000'S) ------------------------------------------------------- CONSUMER CYCLICAL continued Stewart Enterprises, Inc. - Class A 11,900 $ 42 Superior Industries International, Inc. 3,000 77 *Sylvan Learning Systems, Inc. 4,719 65 *Tech Data Corporation 5,800 253 *Unifi, Inc. 6,600 82 USG Corporation 5,500 167 Viad Corp. 10,600 289 The Warnaco Group, Inc. - Class A 6,200 48 The Washington Post Company - Class B 1,000 477 Wellman, Inc. 3,800 62 WestPoint Stevens, Inc. 6,000 67 *Williams-Sonoma, Inc. 6,300 204 -------- TOTAL CONSUMER CYCLICAL 11,789 -------- CONSUMER STAPLES (6.4%) Banta Corporation 2,800 53 Bergen Brunswig Corporation - Class A 15,000 83 Bob Evans Farms, Inc. 4,300 64 *Brinker International, Inc. 7,300 214 *Buffets, Inc. 4,700 60 Carter-Wallace, Inc. 5,000 101 CBRL Group, Inc. 6,500 95 *Chris-Craft Industries, Inc. 3,881 256 Church & Dwight Co., Inc. 4,300 77 Dean Foods Company 4,100 130 The Dial Corporation 11,800 122 Dole Food Company, Inc. 6,200 102 Dreyer's Grand Ice Cream, Inc. 3,100 65 *Energizer Holdings, Inc. 11,200 204 Flowers Industries, Inc. 11,200 223 Hannaford Bros. Co. 4,700 338 *Hispanic Broadcasting Corporation - Class A 10,300 341 Hormel Foods Corporation 15,900 267 IBP, Inc. 11,900 184 International Multifoods Corporation 2,100 36 Interstate Bakeries Corporation 7,600 106 The J. M. Smucker Company - Class A 3,200 62 Lance, Inc. 3,300 30 *Lone Star Steakhouse & Saloon, Inc. 2,600 26 McCormick & Company, Incorporated 7,900 257 *Outback Steakhouse, Inc. 8,400 246 *Papa John's International, Inc. 3,400 83 *Perrigo Company 8,200 52 *PSS World Medical, Inc. 7,900 53 R.J. Reynolds Tobacco Holdings, Inc. 12,200 341 Ruddick Corporation 5,200 61 *Suiza Foods Corporation 3,300 161 Tyson Foods, Inc. - Class A 25,300 221 Universal Foods Corporation 5,500 102 *Univision Communications, Inc. - Class A 11,400 1,181
Index 400 Stock Portfolio 14 21
MARKET SHARES/ VALUE COMMON STOCK (89.3%) PAR (000'S) ------------------------------------------------------- CONSUMER STAPLES continued *Valassis Communications, Inc. 6,300 $ 240 *Westwood One, Inc. 12,400 424 Whitman Corporation 15,700 194 -------- TOTAL CONSUMER STAPLES 6,855 -------- ENERGY (7.6%) *BJ Services Company 9,600 600 Devon Energy Corporation 9,600 539 Dynegy, Inc. - Class A 17,000 1,162 ENSCO International Incorporated 15,300 548 *Global Marine, Inc. 19,500 550 *Hanover Compressor Company 6,400 243 Helmerich & Payne, Inc. 5,500 206 Murphy Oil Corporation 5,000 297 *Nabors Industries, Inc. 15,500 644 Noble Affiliates, Inc. 6,400 238 *Noble Drilling Corporation 14,700 605 *Ocean Energy, Inc. 18,600 264 Pennzoil-Quaker State Company 8,700 105 *Pioneer Natural Resources Company 11,200 143 *Santa Fe Snyder Corporation 20,600 234 *Smith International, Inc. 5,500 400 Tidewater, Inc. 6,200 223 Ultramar Diamond Shamrock Corporation 9,700 241 Valero Energy Corporation 6,200 197 *Varco International, Inc. 10,162 236 *Weatherford International, Inc. 12,100 482 -------- TOTAL ENERGY 8,157 -------- FINANCE (9.0%) A.G. Edwards, Inc. 9,900 386 Allmerica Financial Corporation 6,100 319 Ambac Financial Group, Inc. 7,800 428 American Financial Group, Inc. 6,500 161 Associated Banc-Corp 7,890 172 Astoria Financial Corporation 6,100 157 CCB Financial Corporation 4,500 167 City National Corporation 5,300 184 Compass Bancshares, Inc. 12,700 217 Dime Bancorp, Inc. 12,400 195 *E*TRADE Group, Inc. 32,300 532 Everest Re Group, Ltd. 5,200 171 The FINOVA Group, Inc. 6,800 88 First Security Corporation 21,800 296 First Tennessee National Corporation 14,500 240 First Virginia Banks, Inc. 5,500 191 FirstMerit Corporation 10,000 214 GreenPoint Financial Corp. 12,000 225 Hibernia Corporation - Class A 17,900 195 Horace Mann Educators Corporation 4,600 69 HSB Group, Inc. 3,200 100 Keystone Financial, Inc. 5,400 115 Legg Mason, Inc. 7,000 350 Marshall & Ilsley Corporation 11,900 494
MARKET SHARES/ VALUE COMMON STOCK (89.3%) PAR (000'S) ------------------------------------------------------- FINANCE continued Mercantile Bankshares Corporation 7,700 $ 230 National Commerce Bancorporation 12,100 194 North Fork Bancorporation, Inc. 19,700 298 Ohio Casualty Corporation 6,700 71 Old Republic International Corporation 14,100 233 Pacific Century Financial Corporation 8,900 130 The PMI Group, Inc. 4,950 235 Protective Life Corporation 7,200 192 Provident Financial Group, Inc. 5,400 129 ReliaStar Financial Corp. 9,900 519 Sovereign Bancorp, Inc. 24,500 172 TCF Financial Corporation 9,300 239 Unitrin, Inc. 7,900 232 Waddell & Reed Financial, Inc. - Class A 9,200 302 Webster Financial Corporation 5,100 113 Westamerica Bancorporation 4,200 110 Wilmington Trust Corporation 3,600 154 Zions Bancorporation 9,500 436 -------- TOTAL FINANCE 9,655 -------- HEALTHCARE (11.7%) *Acuson Corporation 3,000 41 *Apria Healthcare Group, Inc. 5,800 71 Beckman Coulter, Inc. 3,200 187 *Beverly Enterprises, Inc. 11,400 32 *Chiron Corporation 20,300 964 *Covance, Inc. 6,400 56 DENTSPLY International, Inc. 5,900 182 *Edwards Lifesciences Corporation 6,500 120 *Express Scripts, Inc. - Class A 4,300 267 *First Health Group Corp. 5,500 180 *Forest Laboratories, Inc. 9,400 949 *Foundation Health Systems, Inc. - Class A 13,600 177 *Genzyme Corporation (General Division) 9,400 559 *Gilead Sciences, Inc. 4,900 349 *Health Management Associates, Inc. - Class A 26,900 351 ICN Pharmaceuticals, Inc. 8,700 242 *Incyte Genomics, Inc. 3,200 263 *IVAX Corporation 17,700 735 *Lincare Holdings, Inc. 6,000 148 *MedImmune, Inc. 22,600 1,671 *Millennium Pharmaceuticals, Inc. 10,000 1,119 *MiniMed, Inc. 3,500 413 Mylan Laboratories, Inc. 14,400 263 Omnicare, Inc. 10,200 92 *Oxford Health Plans, Inc. 9,100 217 *PacifiCare Health Systems, Inc. 4,900 295 *Quorum Health Group, Inc. 7,900 81 *Sepracor, Inc. 7,400 893 *STERIS Corporation 7,500 67 Stryker Corporation 21,600 945
15 Index 400 Stock Portfolio 22
MARKET SHARES/ VALUE COMMON STOCK (89.3%) PAR (000'S) ------------------------------------------------------- HEALTHCARE continued *Sybron International Corporation 11,600 $ 230 *Trigon Healthcare, Inc. - Class A 4,400 227 *VISX, Incorporated 7,200 202 -------- TOTAL HEALTHCARE 12,588 -------- TECHNOLOGY (20.1%) *ADTRAN, Inc. 4,400 263 *Affiliated Computer Services, Inc. - Class A 5,500 182 *ANTEC Corporation 4,200 175 *Arrow Electronics, Inc. 10,700 332 *Atmel Corporation 24,600 907 Avnet, Inc. 4,900 290 *Burr-Brown Corporation 6,200 537 *Cadence Design Systems, Inc. 27,200 554 *Cambridge Technology Partners, Inc. 6,700 58 *CDW Computer Centers, Inc. 9,600 600 *CheckFree Holdings Corporation 6,700 345 *Cirrus Logic, Inc. 7,400 118 Comdisco, Inc. 17,000 379 *CommScope, Inc. 5,700 234 *Concord EFS, Inc. 22,950 597 *CSG Systems International, Inc. 5,800 325 *Cypress Semiconductor Corporation 12,200 515 *DST Systems, Inc. 7,100 540 *Electronic Arts, Inc. 7,200 525 *Fiserv, Inc. 13,650 590 *Gartner Group, Inc. - Class B 9,900 98 Harris Corporation 7,700 252 *Imation Corp. 4,100 120 *Informix Corporation 30,000 223 *Integrated Device Technology, Inc. 10,400 623 *Intuit, Inc. 21,800 902 *Investment Technology Group, Inc. 3,500 149 *Keane, Inc. 8,000 173 *L-3 Communications Holdings, Inc. 3,700 211 *Legato Systems, Inc. 9,500 144 *Litton Industries, Inc. 5,100 214 *Macromedia, Inc. 5,500 532 MarchFirst, Inc. 16,000 292 *Mentor Graphics Corporation 7,200 143 *Micrel, Incorporated 9,200 400 *Microchip Technology Incorporated 8,550 498 *Network Associates, Inc. 15,500 316 *NOVA Corporation 8,200 229 *Novellus Systems, Inc. 4,300 243 *NVIDIA Corporation 6,800 432 *Policy Management Systems Corporation 4,000 62 *Polycom, Inc. 3,700 348 *QLogic Corporation 8,200 542 *Quantum Corporation - DLT & Storage Systems 17,900 173 *Rational Software Corporation 9,900 920 *Sawtek, Inc. 4,700 271
MARKET SHARES/ VALUE COMMON STOCK (89.3%) PAR (000'S) ------------------------------------------------------- TECHNOLOGY continued *Storage Technology Corporation 11,200 $ 123 *Structural Dynamics Research Corporation 4,000 60 *SunGard Data Systems, Inc. 14,300 443 *Sybase, Inc. 9,100 209 *Sykes Enterprises, Incorporated 4,700 61 *Symantec Corporation 6,600 356 *Synopsys, Inc. 7,800 270 *The Titan Corporation 5,600 251 *Transaction Systems Architects, Inc. - Class A 3,600 62 *TranSwitch Corporation 4,400 340 *TriQuint Semiconductor, Inc. 4,200 402 *Vitesse Semiconductor Corporation 20,000 1,472 *Waters Corporation 6,900 861 -------- TOTAL TECHNOLOGY 21,486 -------- TRANSPORTATION (1.1%) Airborne Freight Corporation 5,400 102 *Alaska Air Group, Inc. 2,900 79 Alexander & Baldwin, Inc. 4,800 106 Arnold Industries, Inc. 2,700 33 C.H. Robinson Worldwide, Inc. 4,600 227 CNF Transportation, Inc. 5,400 123 GATX Corporation 5,500 186 *J.B. Hunt Transport Services, Inc. 4,000 62 Overseas Shipholding Group, Inc. 3,800 94 *Swift Transportation Co., Inc. 7,200 101 *Wisconsin Central Transportation Corporation 5,700 74 -------- TOTAL TRANSPORTATION 1,187 -------- UTILITIES (8.6%) AGL Resources, Inc. 6,400 102 Allegheny Energy, Inc. 12,300 337 Alliant Energy Corporation 8,800 229 American Water Works Company, Inc. 10,800 270 Black Hills Corporation 2,400 54 *Calpine Corporation 14,100 927 Cleco Corporation 2,500 84 CMP Group, Inc. 3,600 106 Conectiv, Inc. 10,400 162 DPL, Inc. 14,900 327 DQE, Inc. 8,400 332 Energy East Corporation 13,800 263 Hawaiian Electric Industries, Inc. 3,600 118 IDACORP, Inc. 4,200 135 IPALCO Enterprises, Inc. 9,600 193 Kansas City Power & Light Company 6,900 155 KeySpan Corporation 14,900 458 Kinder Morgan, Inc. 12,600 435 LG&E Energy Corp. 14,500 346 MCN Energy Group, Inc. 9,600 205 Minnesota Power, Inc. 8,200 142 The Montana Power Company 12,300 434
Index 400 Stock Portfolio 16 23
MARKET SHARES/ VALUE COMMON STOCK (89.3%) PAR (000'S) ------------------------------------------------------- UTILITIES continued National Fuel Gas Company 4,400 $ 215 NiSource, Inc. 14,000 261 Northeast Utilities 15,900 346 NSTAR 6,700 273 OGE Energy Corp. 8,700 161 Potomac Electric Power Company 13,200 330 Public Service Company of New Mexico 4,500 69 Puget Sound Energy, Inc. 9,400 200 Questar Corporation 9,200 178 SCANA Corporation 11,600 280 Sierra Pacific Resources 8,781 110 TECO Energy, Inc. 14,400 289 UtiliCorp United, Inc. 10,400 207 Vectren Corporation 6,800 117 Washington Gas Light Company 5,200 125 Wisconsin Energy Corporation 13,200 262 -------- TOTAL UTILITIES 9,237 -------- TOTAL COMMON STOCK (COST $93,432) 95,783 -------- FEDERAL GOVERNMENT AND AGENCIES (2.4%) Federal Farm Credit Bank, 6.42%, 7/17/00 100,000 100 Federal Home Loan Bank, 6.41%, 07/26/00 100,000 100 #Federal Home Loan Mortgage Corporation, 6.40%, 08/01/00 300,000 298 #Federal National Mortgage Association, 6.40%, 7/17/00 1,600,000 1,595 #Federal National Mortgage Association, 6.40%, 7/20/00 500,000 498 -------- TOTAL FEDERAL GOVERNMENT AND AGENCIES 2,591 --------
MARKET SHARES/ VALUE MONEY MARKET INVESTMENTS (10.1%) PAR (000'S) ------------------------------------------------------- OFFICE MACHINES (4.2%) #Xerox Corporation, 6.68%, 7/5/00 4,400,000 $ 4,397 -------- TOTAL OFFICE MACHINES 4,397 -------- PERSONAL CREDIT INSTITUTIONS (3.5%) Associates Corporation of North America, 6.94%, 7/3/00 3,800,000 3,799 -------- TOTAL PERSONAL CREDIT INSTITUTIONS 3,799 -------- TOTAL MONEY MARKET INVESTMENTS (COST $10,787) 10,787 -------- TOTAL INVESTMENTS (99.4%) (COST $104,219)/\ 106,570 OTHER ASSETS, LESS LIABILITIES (0.6%) 636 -------- TOTAL NET ASSETS (100.0%) $107,206 --------
* 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 period end is summarized below.
UNREALIZED APPRECIATION / NUMBER OF EXPIRATION (DEPRECIATION) ISSUERS CONTRACTS DATE (000'S) --------------------------------------------------------------- Midcap 400 43 Sep-00 ($343) Total Notional Value at 6/30/2000 $10,842
/\At 6/30/2000, the aggregate cost of securities for federal income tax purposes was $104,219 and the net unrealized appreciation of investments based on that cost was $2,351 which is comprised of $10,438 aggregate gross unrealized appreciation and $8,087 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements 17 Index 400 Stock Portfolio 24
Objective: Portfolio Strategy: Net Assets: Long-term appreciation of capital Hold a diversified mix of high quality growth $769,055,132 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 Growth Stock Portfolio continued its record of strong performance in the first half of 2000, exceeding total return of the S&P 500 Index by 4.8 percentage points for the last six months and by 6.6 points over the last 12 months. Performance benefited from both industry weightings and selection of individual stocks. The largest industry segment is technology, in which the portfolio is slightly overweighted relative to the S&P 500 Index. Among the largest technology holdings are Intel, Cisco and Nortel, all of which are leading companies with powerful earnings streams. Other technology holdings that performed especially well were Amdocs, which provides customer care and billing services for telecommunications companies, and TIBCO Software. Performance benefited from a substantially overweighted position in consumer cyclicals, with the emphasis on retailers that are adding new stores, such as Kohl's and Walgreen's. Other top performers were drug companies Pfizer and Eli Lilly, which announced promising new product developments. Rising oil and gas prices helped energy and related holdings, including Enron, a wholesale provider of energy and related services. Overall performance has also benefited from the Portfolio's diversified approach and the outperformance of higher quality companies in the marketplace this year. SECTOR ALLOCATION 6/30/2000 [SECTOR ALLOCATION PIE CHART]
SECTOR ALLOCATION ---------- Technology................................ 30 Consumer Cyclicals........................ 13 Consumer Staples.......................... 10 Basic Materials/Capital Goods............. 8 Energy.................................... 7 Finance................................... 7 Other Industries.......................... 7 Health Care............................... 6 S&P Index Futures......................... 9 Cash Equivalents.......................... 3
TOP 10 EQUITY HOLDINGS 6/30/2000
Security Description % of Total Net Assets ------------------------------------------------------------------------------------- Intel Corporation 2.8% ------------------------------------------------------------------------------------- Cisco Systems, Inc. 2.8% ------------------------------------------------------------------------------------- General Electric Company 2.6% ------------------------------------------------------------------------------------- Nortel Networks Corporation 2.1% ------------------------------------------------------------------------------------- Kohl's Corporation 2.0% ------------------------------------------------------------------------------------- Microsoft Corporation 1.9% ------------------------------------------------------------------------------------- Enron Corp. 1.9% ------------------------------------------------------------------------------------- Amdocs Limited 1.8% ------------------------------------------------------------------------------------- TIBCO Software, Inc. 1.7% ------------------------------------------------------------------------------------- Oracle Corporation 1.7% -------------------------------------------------------------------------------------
PERFORMANCE RELATIVE TO THE S&P 500 INDEX [LINE GRAPH]
------------------------------------------------------ Average Annual Total Return For Periods Ended June 30, 2000 Since 1 Year 5 Years Inception# ------------------------------------------------------ Growth Stock Portfolio 13.88% 23.71% 21.80% S&P 500 Index 7.31% 23.74% 23.09% ------------------------------------------------------ # Inception date of 5/3/1994
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 58 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 Stock Portfolio 18 25 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments June 30, 2000 (unaudited)
MARKET SHARES/ VALUE COMMON STOCK (87.1%) PAR (000'S) --------------------------------------------------------- BASIC MATERIALS (1.5%) Ecolab, Inc. 210,000 $ 8,203 The Mead Corporation 56,700 1,432 PPG Industries, Inc. 50,300 2,229 -------- TOTAL 11,864 -------- CAPITAL GOODS (6.4%) Avery Dennison Corporation 94,100 6,316 Corning Incorporated 38,400 10,363 Emerson Electric Co. 18,000 1,087 General Electric Company 378,400 20,055 Illinois Tool Works, Inc. 71,800 4,093 Tyco International Ltd. 152,100 7,206 -------- TOTAL 49,120 -------- COMMUNICATION SERVICES (3.9%) AT&T Corp. 193,700 6,126 *AT&T Wireless Group 37,600 1,048 GTE Corporation 87,600 5,453 *Nextel Communications, Inc. - Class A 149,400 9,141 SBC Communications, Inc. 51,639 2,233 Sprint Corporation (FON Group) 43,500 2,219 *WorldCom, Inc. 86,750 3,980 -------- TOTAL 30,200 -------- CONSUMER CYCLICAL (12.6%) *Amazon.com, Inc. 41,900 1,521 *Barnes & Noble, Inc. 141,000 3,137 *Costco Wholesale Corporation 140,600 4,640 Ford Motor Company 93,000 3,999 Harley-Davidson, Inc. 314,300 12,101 The Home Depot, Inc. 179,250 8,951 The Interpublic Group of Companies, Inc. 104,900 4,511 *Kohl's Corporation 281,200 15,642 The McGraw-Hill Companies, Inc. 154,200 8,327 The New York Times Company - Class A 129,200 5,103 Omnicom Group, Inc. 35,600 3,171 The ServiceMaster Company 245,250 2,790 Target Corporation 75,000 4,350 Tiffany & Co. 27,500 1,856 Tribune Company 152,000 5,320 *Visteon Corporation 576 7 Wal-Mart Stores, Inc. 197,800 11,398 -------- TOTAL 96,824 -------- CONSUMER STAPLES (9.6%) Anheuser-Busch Companies, Inc. 92,600 6,916 Benckiser N.V. 509 32 The Estee Lauder Companies, Inc. - Class A 161,500 7,984 Keebler Foods Company 246,200 9,140
MARKET SHARES/ VALUE COMMON STOCK (87.1%) PAR (000'S) --------------------------------------------------------- CONSUMER STAPLES continued Kimberly-Clark Corporation 108,800 $ 6,242 McDonald's Corporation 160,000 5,270 PepsiCo, Inc. 173,500 7,710 The Procter & Gamble Company 49,900 2,857 The Quaker Oats Company 73,600 5,529 Time Warner, Inc. 87,600 6,658 *Viacom, Inc. - Class B 84,900 5,789 Walgreen Co. 290,800 9,360 -------- TOTAL 73,487 -------- ENERGY (7.1%) BP Amoco PLC, ADR 95,100 5,379 Chevron Corporation 24,400 2,069 Conoco, Inc. - Class B 275,700 6,772 Diamond Offshore Drilling, Inc. 90,300 3,172 EOG Resources, Inc. 294,500 9,866 Exxon Mobil Corporation 139,167 10,924 Santa Fe International Corporation 97,700 3,413 Schlumberger Limited 76,500 5,709 Tosco Corporation 248,500 7,036 -------- TOTAL 54,340 -------- FINANCE (6.5%) American International Group, Inc. 26,800 3,149 The Bank of New York Company, Inc. 140,800 6,547 The Chase Manhattan Corporation 87,420 4,027 Citigroup, Inc. 210,100 12,658 Firth Third Bancorp 75,500 4,775 Lehman Brothers Holdings, Inc. 69,700 6,591 Morgan Stanley Dean Witter & Co. 145,100 12,080 -------- TOTAL 49,827 -------- HEALTHCARE (6.0%) Bristol-Myers Squibb Company 83,500 4,864 Eli Lilly and Company 64,900 6,482 *Guidant Corporation 114,900 5,688 Johnson & Johnson 58,800 5,990 Medtronic, Inc. 170,700 8,503 Merck & Co., Inc. 100,300 7,685 Pfizer, Inc. 142,650 6,847 -------- TOTAL 46,059 -------- TECHNOLOGY (30.4%) *360networks Inc. 33,300 508 *3Com Corporation 50,300 2,899 *Agilent Technologies, Inc. 52,907 3,902 *Amdocs Limited 184,100 14,130 *America Online, Inc. 128,900 6,799 *Atmel Corporation 177,200 6,534 *Avanex Corporation 19,600 1,872 *Cisco Systems, Inc. 333,900 21,224 *Concord EFS, Inc. 174,900 4,547
19 Growth Stock Portfolio 26
MARKET SHARES/ VALUE COMMON STOCK (87.1%) PAR (000'S) --------------------------------------------------------- TECHNOLOGY continued *Dell Computer Corporation 142,700 $ 7,037 Electronic Data Systems Corporation 147,100 6,068 *EMC Corporation 132,200 10,171 *Fiserv, Inc. 281,275 12,165 Hewlett-Packard Company 69,500 8,679 Intel Corporation 162,600 21,738 International Business Machines Corporation 71,100 7,790 *Internet Pictures Corporation 107,800 1,630 *Lexmark International Group, Inc. - Class A 68,700 4,620 *Microsoft Corporation 183,600 14,688 Motorola, Inc. 83,700 2,433 *Nokia Corp., ADR 40,800 2,037 Nortel Networks Corporation 236,400 16,134 *Oracle Corporation 155,800 13,097 *Palm, Inc. 49,700 1,659 *Sun Microsystems, Inc. 94,000 8,548 *Tellabs, Inc. 83,700 5,728 Texas Instruments Incorporated 135,600 9,314 *TIBCO Software, Inc. 123,600 13,254 *Williams Communications Group, Inc. - Class A 158,300 5,254 -------- TOTAL 234,459 -------- TRANSPORTATION (1.2%) *FedEx Corporation 65,000 2,470 *Midwest Express Holdings, Inc. 125,400 2,696 Southwest Airlines Co. 221,175 4,189 -------- TOTAL 9,355 -------- UTILITIES (1.9%) Enron Corp. 224,200 14,461 -------- TOTAL 14,461 -------- TOTAL COMMON STOCK (COST $446,219) 669,996 -------- MONEY MARKET INVESTMENTS (12.3%) --------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (0.5%) #Federal National Mortgage Association, 6.40%, 7/17/00 4,000,000 3,989 -------- TOTAL 3,989 -------- FINANCE (2.6%) #The CIT Group, 6.6%, 8/9/00 20,000,000 19,857 -------- TOTAL 19,857 --------
MARKET SHARES/ VALUE MONEY MARKET INVESTMENTS (12.3%) PAR (000'S) --------------------------------------------------------- FINANCE SERVICES (5.1%) #Asset Securitization, 6.55%, 8/15/00 20,000,000 $ 19,836 #Citicorp, 6.62%, 8/10/00 20,000,000 19,853 -------- TOTAL 39,689 -------- MISC. BUSINESS CREDIT INSTITUTIONS (2.6%) #National Rural Utility, 6.65%, 7/14/00 20,000,000 19,952 -------- TOTAL 19,952 -------- PERSONAL CREDIT INSTITUTIONS (1.5%) General Electric Capital Corporation, 6.9%, 7/5/00 11,300,000 11,291 -------- TOTAL 11,291 -------- TOTAL MONEY MARKET INVESTMENTS (COST $94,778) 94,778 -------- TOTAL INVESTMENTS (99.4%) (COST $540,997)/\ 764,774 -------- OTHER ASSETS, LESS LIABILITIES (0.6%) 4,281 -------- TOTAL NET ASSETS (100.0%) $769,055 --------
* Non-Income Producing # Partially held by the custodian in a segregated account as collateral for open futures positions. Information regarding open futures contracts as of period end is summarized below.
UNREALIZED APPRECIATION/ NUMBER OF EXPIRATION (DEPRECIATION) ISSUERS CONTRACTS DATE (000'S) -------------------------------------------------------------- S&P 500 189 Sep-00 ($ 249) Total Notional Value at 6/30/2000 $69,617
ADR -- American Depository Receipt /\ At 6/30/2000, the aggregate cost of securities for federal income tax purposes was $540,997 and the net unrealized appreciation of investments based on that cost was $223,777 which is comprised of $248,021 aggregate gross unrealized appreciation and $24,244 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements Growth Stock Portfolio 20 27
Objective: Portfolio Strategy: Net Assets: Long-term growth of capital and Actively manage a portfolio of equity securities $624,029,213 income, consistent with moderate with investment risk a goal of exceeding the total return of the S&P 500 Index.
GROWTH & INCOME STOCK PORTFOLIO The Growth and Income Portfolio invests mainly in large-capitalization stocks, with a focus on seeking the most attractive valuations in the market based on long-term earnings forecasts. A sector balance within a few percentage points 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. Despite some change in market sentiment, with more attention to assets and earnings and less enthusiasm for unproven technology issues, the market remains focused largely on growth. It is therefore very difficult for managers whose main focus is on value to outperform the major indices. Although several of the largest holdings are leading technology names, the percentages of the total Portfolio invested in most of these stocks do not represent an overweighting relative to the S&P 500 Index. In fact, technology represents 30% of equity holdings (29% of total assets), compared with 32% for the index; in line with the Portfolio's stated strategy, the technology stocks that are considered to represent the best values within their industry are selected in order to keep the industry representation within approximately three percentage points of the broad index. The stocks with the largest weightings relative to the S&P 500 represent a broad range of industries. These include Tyco International, a diversified manufacturer of consumer and industrial products; Sun Microsystems, which sells computer networking systems; ALZA, a health care company; Liberty Media, a tracking stock for AT&T's media holdings; Ambac, an insurance company; Exxon Mobil, a leading international oil company; and Rohm & Haas, a specialty chemical company. Several of these large holdings were among the best performing stocks in recent months; Eli Lilly, Philip Morris and MetLife also contributed to performance. Offsetting these positive trends were downward moves in stocks of several companies that reported disappointing earnings, including Motorola, Computer Associates, Honeywell and First Union Corporation. The Growth and Income Stock Portfolio is managed for Northwestern Mutual by J. P. Morgan Investment Management, Inc. SECTOR ALLOCATION 6/30/2000 [SMALL CAP GROWTH STOCK PORTFOLIO PIE CHART]
SECTOR ALLOCATION ----------------- Consumer Cyclicals 7 Consumer Staples 7 Health Care 11 Basic Materials/Capital Goods 12 Energy 6 Technology 29 Finance 13 Other Industries 12 Cash Equivalents 3
TOP 10 HOLDINGS 6/30/2000
Security Description % of Total Net Assets ------------------------------------------------------------------------------------ Cisco Systems, Inc. 4.3% ------------------------------------------------------------------------------------ Intel Corporation 4.2% ------------------------------------------------------------------------------------ Microsoft Corporation 3.8% ------------------------------------------------------------------------------------ Tyco International Ltd. 3.5% ------------------------------------------------------------------------------------ Exxon Mobil Corporation 3.4% ------------------------------------------------------------------------------------ Sun Microsystems, Inc. 2.9% ------------------------------------------------------------------------------------ General Electric Company 2.9% ------------------------------------------------------------------------------------ Eli Lilly and Company 1.9% ------------------------------------------------------------------------------------ Pfizer, Inc. 1.8% ------------------------------------------------------------------------------------ AT&T Corp. - Liberty Media Group 1.8%
PERFORMANCE RELATIVE TO THE S&P 500 INDEX [LINE GRAPH]
------------------------------------------------------------- Average Annual Total Return For Periods Ended June 30, 2000 Since 1 Year 5 Years Inception# ------------------------------------------------------------- Growth & Income Stock Portfolio -4.10% 17.91% 17.35% S&P 500 Index 7.31% 23.74% 23.09% ------------------------------------------------------------- # Inception Date of 5/3/1994
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 58 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. 21 Growth & Income Stock Portfolio 28 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments June 30, 2000 (unaudited)
MARKET SHARES/ VALUE COMMON STOCK (97.7%) PAR (000'S) ------------------------------------------------------------ BASIC MATERIALS (3.4%) Alcoa, Inc. 118,064 $ 3,424 Allegheny Technologies Incorporated 145,250 2,615 Rohm and Haas Company 254,600 8,783 *Smurfit-Stone Container Corporation 272,934 3,514 Temple-Inland, Inc. 67,200 2,822 --------- TOTAL 21,158 --------- CAPITAL GOODS (8.3%) Cooper Industries, Inc. 127,700 4,158 General Electric Company 335,800 17,797 Honeywell International, Inc. 105,200 3,544 *Sensormatic Electronics Corporation 118,600 1,875 Tyco International Ltd. 462,698 21,921 Waste Management, Inc. 141,217 2,683 --------- TOTAL 51,978 --------- COMMUNICATION SERVICES (9.1%) *Allegiance Telecom, Inc. 29,550 1,891 AT&T Corp. 165,600 5,237 *AT&T Corp. - Liberty Media Group 456,500 11,070 *Global Crossing Ltd. 124,000 3,263 GTE Corporation 138,400 8,615 *Level 3 Communications, Inc. 34,100 3,001 *Qwest Communications International, Inc. 60,200 2,991 SBC Communications, Inc. 198,510 8,586 *Sprint Corporation (PCS Group) 52,200 3,106 *WorldCom, Inc. 197,559 9,063 --------- TOTAL 56,823 --------- CONSUMER CYCLICAL (7.4%) *Abercrombie & Fitch Co. - Class A 128,300 1,564 *Cendant Corporation 225,304 3,154 Circuit City Stores, Inc. 71,300 2,366 *Federated Department Stores, Inc. 82,600 2,788 Ford Motor Company 72,300 3,109 The Gap, Inc. 61,300 1,916 *Jones Apparel Group, Inc. 81,600 1,918 *Lear Corporation 99,800 1,996 The News Corporation Limited, ADR 174,400 9,504 Target Corporation 79,500 4,611 The TJX Companies, Inc. 218,800 4,103 *Visteon Corporation 9,296 113 Wal-Mart Stores, Inc. 151,800 8,747 --------- TOTAL 45,889 --------- CONSUMER STAPLES (7.0%) The Clorox Company 62,500 2,801 The Coca-Cola Company 93,900 5,393
MARKET SHARES/ VALUE COMMON STOCK (97.7%) PAR (000'S) ------------------------------------------------------------ CONSUMER STAPLES continued *Comcast Corporation - Class A 61,200 $ 2,479 The Gillette Company 178,800 6,247 Philip Morris Companies, Inc. 357,100 9,485 The Procter & Gamble Company 75,800 4,340 The Seagram Company Ltd. 122,000 7,076 Time Warner, Inc. 73,500 5,586 --------- TOTAL 43,407 --------- ENERGY (6.2%) Baker Hughes Incorporated 99,600 3,187 Dynegy, Inc. - Class A 50,900 3,477 Exxon Mobil Corporation 268,327 21,063 *Global Marine, Inc. 133,200 3,755 Shell Transport & Trading Company 84,900 4,240 Tosco Corporation 102,500 2,902 --------- TOTAL 38,624 --------- FINANCE (12.9%) Ambac Financial Group, Inc. 147,700 8,097 Bank of America Corporation 85,443 3,674 Capital One Financial Corporation 119,600 5,337 CIGNA Corporation 49,700 4,647 The CIT Group, Inc. 198,670 3,228 Citigroup, Inc. 144,900 8,731 Dime Bancorp, Inc. 124,400 1,959 *E*TRADE Group, Inc. 90,600 1,495 Federal National Mortgage Association 55,400 2,891 First Union Corporation 296,400 7,354 The Goldman Sachs Group, Inc. 65,900 6,252 KeyCorp 171,200 3,017 *MetLife, Inc. 214,600 4,520 U.S. Bancorp 382,300 7,360 Washington Mutual, Inc. 208,000 6,006 XL Capital Ltd. - Class A 110,300 5,970 --------- TOTAL 80,538 --------- HEALTHCARE (11.0%) *ALZA Corporation 185,200 10,950 American Home Products Corporation 111,100 6,527 Bristol-Myers Squibb Company 126,700 7,380 Eli Lilly and Company 120,300 12,015 PE Corporation 36,400 2,398 Pfizer, Inc. 236,200 11,338 Pharmacia Corporation 209,452 10,826 Schering-Plough Corporation 144,400 7,292 --------- TOTAL 68,726 ---------
Growth & Income Stock Portfolio 22 29
MARKET SHARES/ VALUE COMMON STOCK (97.7%) PAR (000'S) ------------------------------------------------------------ TECHNOLOGY (29.4%) *America Online, Inc. 142,000 $ 7,491 *Applied Materials, Inc. 38,200 3,462 *Cisco Systems, Inc. 421,200 26,772 *Citrix Systems, Inc. 56,700 1,074 Compaq Computer Corporation 154,300 3,944 Computer Associates International, Inc. 154,300 7,898 *Dell Computer Corporation 87,800 4,330 *EMC Corporation 124,200 9,556 Intel Corporation 196,600 26,283 International Business Machines Corporation 37,900 4,152 Lucent Technologies, Inc. 111,815 6,625 *Microsoft Corporation 296,900 23,752 *MicroStrategy Incorporated 12,700 381 Motorola, Inc. 200,600 5,830 Nortel Networks Corporation 91,900 6,272 *Oracle Corporation 80,400 6,759 *Parametric Technology Corporation 25,000 275 *Quantum Corporation - DLT & Storage Systems 86,200 835 *Seagate Technology, Inc. 71,300 3,922 *Siebel Systems, Inc. 20,500 3,353 *Sun Microsystems, Inc. 200,800 18,260 *Tellabs, Inc. 45,000 3,080 Texas Instruments Incorporated 128,500 8,826 --------- TOTAL 183,132 --------- TRANSPORTATION (1.1%) Union Pacific Corporation 189,400 7,043 --------- TOTAL 7,043 --------- UTILITIES (1.9%) Columbia Energy Group 93,200 6,116 DTE Energy Company 100,500 3,072 PG&E Corporation 120,700 2,972 --------- TOTAL 12,160 --------- TOTAL COMMON STOCK (COST $566,854) 609,478 --------- MARKET SHARES/ VALUE MONEY MARKET INVESTMENTS (3.3%) PAR (000'S) ------------------------------------------------------------ FINANCE (0.8%) The CIT Group, 6.6%, 8/9/00 5,000,000 $ 4,964 --------- TOTAL 4,964 --------- FINANCE SERVICES (2.2%) Ciesco LP, 6.55%, 8/14/00 4,000,000 3,968 Citicorp, 6.62%, 8/10/00 5,000,000 4,963 CXC Incorporated, 6.63%, 8/25/00 5,000,000 4,949 --------- TOTAL 13,880 --------- PERSONAL CREDIT INSTITUTIONS (0.3%) Associates Corporation of North America, 6.94%, 7/3/00 1,900,000 1,899 --------- TOTAL 1,899 --------- TOTAL MONEY MARKET INVESTMENTS (COST $20,743) 20,743 --------- TOTAL INVESTMENTS (101.0%) (COST $587,597)/\ 630,221 --------- OTHER ASSETS, LESS LIABILITIES (-1.0%) (6,192) --------- TOTAL NET ASSETS (100.0%) $ 624,029
---------
* Non-Income Producing ADR -- American Depository Receipt /\ At 6/30/2000, the aggregate cost of securities for federal income tax purposes was $587,597 and the net unrealized appreciation of investments based on that cost was $42,624 which is comprised of $117,753 aggregate gross unrealized appreciation and $75,129 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements 23 Growth & Income Stock Portfolio 30
Objective: Portfolio Strategy: Net Assets: Long-term capital appreciation Invest in a portfolio designed to approximate the $2,269,770,407 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 large-capitalization segment of the U.S. equity market. The Portfolio therefore enables contract owners to participate in overall performance of this broad segment of the U.S. equity market. The Portfolio continues to achieve the objective of matching the results of the S&P 500 before expenses. SECTOR ALLOCATION 6/30/2000 [SECTOR ALLOCATION PIE CHART]
SECTOR ALLOCATION ----------------- Technology 31 Finance 13 Health Care 11 Other 11 Consumer Staples 10 Basic Materials/Capital Goods 10 Consumer Cyclicals 7 Energy 5 S&P 500 Index Futures 2
TOP 10 HOLDINGS 6/30/2000
Security Description % of Total Net Assets ------------------------------------------------------------------------------------- General Electric Company 4.1% ------------------------------------------------------------------------------------- Intel Corporation 3.5% ------------------------------------------------------------------------------------- Cisco Systems, Inc. 3.4% ------------------------------------------------------------------------------------- Microsoft Corporation 3.3% ------------------------------------------------------------------------------------- Pfizer, Inc. 2.4% ------------------------------------------------------------------------------------- Exxon Mobil Corporation 2.1% ------------------------------------------------------------------------------------- Wal-Mart Stores, Inc. 2.0% ------------------------------------------------------------------------------------- Oracle Corporation 1.9% ------------------------------------------------------------------------------------- Citigroup, Inc. 1.6% ------------------------------------------------------------------------------------- International Business Machines Corporation 1.6%
PERFORMANCE RELATIVE TO THE S&P 500 INDEX [LINE GRAPH]
----------------------------------------------------------- Average Annual Total Return For Periods Ended June 30, 2000 1 Year 5 Years 10 Years ----------------------------------------------------------- Index 500 Stock Portfolio 7.24% 23.74% 17.52% S&P 500 Index 7.31% 23.74% 17.73% -----------------------------------------------------------
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. "Standard & Poor's(R)", "S&P(R)", "S&P MidCap 400 Index", "Standard & Poor's MidCap 400 Index", "S&P 500(R)" and "Standard & Poor's 500" are trademarks of The McGraw-Hill Companies, Inc. and have 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 & Poor's makes no representation regarding the advisability of investing in the funds. This chart assumes an initial investment of $10,000 made on 6/30/90. 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 58 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. Index 500 Stock Portfolio 24 31 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments June 30, 2000 (unaudited)
MARKET SHARES/ VALUE COMMON STOCK (97.9%) PAR (000'S) -------------------------------------------------------- BASIC MATERIALS (1.9%) Air Products and Chemicals, Inc. 41,100 $ 1,266 Alcan Aluminium Ltd. 39,300 1,218 Alcoa, Inc. 155,868 4,521 Allegheny Technologies Incorporated 14,867 268 Archer-Daniels-Midland Company 108,749 1,067 Barrick Gold Corporation 70,600 1,284 Bemis Company, Inc. 9,400 316 *Bethlehem Steel Corporation 23,500 84 Boise Cascade Corporation 10,200 264 The Dow Chemical Company 117,900 3,559 E.I. du Pont de Nemours and Company 187,100 8,187 Eastman Chemical Company 14,025 670 Ecolab, Inc. 23,200 906 Engelhard Corporation 22,500 384 *FMC Corporation 5,500 319 *Freeport-McMoRan Copper & Gold, Inc. - Class B 29,300 271 Georgia-Pacific Corporation 30,600 803 Great Lakes Chemical Corporation 9,800 309 Hercules Incorporated 19,000 267 Homestake Mining Company 46,600 320 *Inco Limited 34,400 529 International Flavors & Fragrances, Inc. 18,800 568 International Paper Company 86,406 2,576 Louisiana-Pacific Corporation 19,100 208 The Mead Corporation 18,400 465 Newmont Mining Corporation 29,980 648 Nucor Corporation 15,600 518 *Pactiv Corporation 30,700 242 Phelps Dodge Corporation 14,524 540 Placer Dome, Inc. 58,300 557 Potlatch Corporation 5,200 172 PPG Industries, Inc. 31,100 1,378 Praxair, Inc. 28,500 1,067 Rohm and Haas Company 39,213 1,353 Sigma-Aldrich Corporation 18,100 529 Temple-Inland, Inc. 10,000 420 Union Carbide Corporation 24,000 1,188 USX-U. S. Steel Group 15,800 293 Vulcan Materials Company 17,900 764 *W.R. Grace & Co. 12,900 156 Westvaco Corporation 17,950 445 Weyerhaeuser Company 42,100 1,810 Willamette Industries, Inc. 20,000 545 Worthington Industries, Inc. 15,950 167 ----------- TOTAL BASIC MATERIALS 43,421 -----------
MARKET SHARES/ VALUE COMMON STOCK (97.9%) PAR (000'S) -------------------------------------------------------- CAPITAL GOODS (8.3%) *Allied Waste Industries, Inc. 33,800 $ 338 *American Power Conversion Corporation 34,500 1,408 Avery Dennison Corporation 20,200 1,356 The B.F. Goodrich Company 19,700 671 Ball Corporation 5,400 174 The Boeing Company 155,676 6,509 Briggs & Stratton Corporation 4,100 140 Caterpillar, Inc. 63,700 2,158 Cooper Industries, Inc. 16,900 550 Corning Incorporated 49,400 13,332 Crane Co. 11,775 286 Crown Cork & Seal Company, Inc. 23,200 348 Cummins Engine Company, Inc. 7,400 202 Danaher Corporation 25,500 1,261 Deere & Company 41,900 1,550 Dover Corporation 36,500 1,481 Eaton Corporation 13,200 884 Emerson Electric Co. 77,200 4,661 Fluor Corporation 13,600 430 General Dynamics Corporation 36,000 1,881 General Electric Company 1,763,400 93,459 Honeywell International, Inc. 141,850 4,779 Illinois Tool Works, Inc. 53,800 3,067 *Ingersoll-Rand Company 29,300 1,179 ITT Industries, Inc. 15,800 480 Johnson Controls, Inc. 15,300 785 Lockheed Martin Corporation 70,908 1,759 McDermott International, Inc. 10,700 94 Milacron, Inc. 6,600 96 Millipore Corporation 8,100 611 Minnesota Mining and Manufacturing Company 71,500 5,899 Molex Incorporated 35,100 1,689 NACCO Industries, Inc. - Class A 1,500 53 National Service Industries, Inc. 7,300 142 *Navistar International Corporation 11,300 351 Northrop Grumman Corporation 12,400 822 *Owens-Illinois, Inc. 26,900 314 PACCAR Inc. 14,070 558 Pall Corporation 22,200 411 Parker-Hannifin Corporation 20,075 688 Pitney Bowes, Inc. 47,500 1,900 Rockwell International Corporation 34,000 1,071 *Sealed Air Corporation 14,971 784 *Solectron Corporation 106,200 4,447 Textron, Inc. 26,600 1,445 *Thermo Electron Corporation 28,300 596
25 Index 500 Stock Portfolio 32
MARKET SHARES/ VALUE COMMON STOCK (97.9%) PAR (000'S) -------------------------------------------------------- CAPITAL GOODS continued Thomas & Betts Corporation 10,400 $ 199 The Timken Company 11,100 207 Tyco International Ltd. 302,940 14,352 United Technologies Corporation 85,100 5,010 Waste Management, Inc. 110,985 2,109 ----------- TOTAL CAPITAL GOODS 188,976 ----------- COMMUNICATION SERVICES (6.7%) ALLTEL Corporation 56,200 3,481 AT&T Corp. 676,938 21,408 Bell Atlantic Corporation 278,184 14,135 BellSouth Corporation 337,200 14,373 CenturyTel, Inc. 25,000 719 *Global Crossing Ltd. 139,710 3,676 GTE Corporation 174,100 10,838 *Nextel Communications, Inc. - Class A 130,600 7,991 SBC Communications, Inc. 611,125 26,431 Sprint Corporation (FON Group) 156,100 7,961 *Sprint Corporation (PCS Group) 154,400 9,187 U S WEST, Inc. 90,508 7,761 *WorldCom, Inc. 508,473 23,326 ----------- TOTAL COMMUNICATION SERVICES 151,287 ----------- CONSUMER CYCLICAL (7.3%) American Greetings Corporation - Class A 11,600 220 Armstrong World Industries, Inc. 7,200 110 *AutoZone, Inc. 24,800 546 *Bed Bath & Beyond, Inc. 25,100 910 *Best Buy Co., Inc. 36,600 2,315 The Black & Decker Corporation 15,600 613 Brunswick Corporation 16,500 273 Carnival Corporation 110,500 2,155 *Cendant Corporation 126,533 1,771 Centex Corporation 10,600 249 Circuit City Stores, Inc. 36,400 1,208 *Consolidated Stores Corporation 19,900 239 *Convergys Corporation 27,400 1,421 Cooper Tire & Rubber Company 13,600 151 *Costco Wholesale Corporation 79,614 2,627 Dana Corporation 29,500 625 Delphi Automotive Systems Corporation 101,237 1,474 Dillard's, Inc. - Class A 18,800 230 Dollar General Corporation 59,228 1,155 Dow Jones & Company, Inc. 16,100 1,179 The Dun & Bradstreet Corporation 28,800 824 *Federated Department Stores, Inc. 37,600 1,269 Ford Motor Company 216,400 9,304 Gannett Co., Inc. 49,900 2,985 The Gap, Inc. 152,475 4,765 General Motors Corporation 99,247 5,763 Genuine Parts Company 31,900 638
MARKET SHARES/ VALUE COMMON STOCK (97.9%) PAR (000'S) -------------------------------------------------------- CONSUMER CYCLICAL continued The Goodyear Tire & Rubber Company 28,000 $ 560 H&R Block, Inc. 17,600 570 Harcourt General, Inc. 12,700 691 Harley-Davidson, Inc. 54,200 2,087 *Harrah's Entertainment, Inc. 23,000 482 Hasbro, Inc. 31,475 474 Hilton Hotels Corporation 66,100 620 The Home Depot, Inc. 412,494 20,598 IMS Health Incorporated 55,200 994 The Interpublic Group of Companies, Inc. 50,300 2,163 J. C. Penney Company, Inc. 46,700 861 Kaufman and Broad Home Corporation 8,500 168 *Kmart Corporation 87,200 594 Knight-Ridder, Inc. 13,900 739 *Kohl's Corporation 58,400 3,249 Leggett & Platt, Incorporated 35,200 581 The Limited, Inc. 76,948 1,664 Liz Claiborne, Inc. 10,600 374 Lowe's Companies, Inc. 68,500 2,813 Marriott International, Inc. - Class A 44,600 1,608 Masco Corporation 80,100 1,447 Mattel, Inc. 75,388 994 The May Department Stores Company 59,600 1,430 Maytag Corporation 15,100 557 The McGraw-Hill Companies, Inc. 35,100 1,895 Meredith Corporation 9,200 311 The New York Times Company - Class A 30,700 1,213 NIKE, Inc. - Class B 49,400 1,967 Nordstrom, Inc. 24,100 581 *Office Depot, Inc. 59,000 369 Omnicom Group, Inc. 31,800 2,832 Owens Corning 9,800 91 Pulte Corporation 7,700 167 *RadioShack Corporation 34,600 1,639 *Reebok International Ltd. 10,100 161 Russell Corporation 5,900 118 Sears, Roebuck & Co. 67,700 2,209 The Sherwin-Williams Company 29,700 629 Snap-on Incorporated 10,450 278 Springs Industries, Inc. - Class A 3,200 103 The Stanley Works 16,000 380 *Staples, Inc. 84,200 1,295 Target Corporation 78,500 4,553 The TJX Companies, Inc. 55,600 1,043 *Toys 'R' Us, Inc. 43,000 626 Tribune Company 56,900 1,992 TRW, Inc. 21,800 946 V. F. Corporation 21,200 505 *Visteon Corporation 28,333 344
Index 500 Stock Portfolio 26 33
MARKET SHARES/ VALUE COMMON STOCK (97.9%) PAR (000'S) -------------------------------------------------------- CONSUMER CYCLICAL continued Wal-Mart Stores, Inc. 797,900 $ 45,978 Whirlpool Corporation 13,300 620 Young & Rubicam, Inc. 12,500 715 ----------- TOTAL CONSUMER CYCLICAL 164,897 ----------- CONSUMER STAPLES (10.0%) Adolph Coors Company - Class B 6,600 399 Alberto-Culver Company - Class B 10,000 306 Albertson's, Inc. 75,926 2,525 Anheuser-Busch Companies, Inc. 83,400 6,229 Avon Products, Inc. 43,400 1,931 Bestfoods 50,000 3,463 Brown-Forman Corporation - Class B 12,300 661 Campbell Soup Company 76,400 2,225 Cardinal Health, Inc. 50,350 3,726 *Clear Channel Communications, Inc. 60,600 4,545 The Clorox Company 42,400 1,900 The Coca-Cola Company 442,500 25,415 Coca-Cola Enterprises, Inc. 76,200 1,243 Colgate-Palmolive Company 104,400 6,251 Comcast Corporation - Class A 166,000 6,723 ConAgra, Inc. 88,200 1,681 CVS Corporation 70,200 2,808 Darden Restaurants, Inc. 23,000 374 Deluxe Corporation 13,200 311 Fort James Corporation 38,800 897 Fortune Brands, Inc. 29,400 678 General Mills, Inc. 53,900 2,062 The Gillette Company 192,200 6,715 The Great Atlantic & Pacific Tea Company, Inc. 6,900 115 H.J. Heinz Company 63,550 2,780 Hershey Foods Corporation 24,800 1,203 Kellogg Company 72,600 2,160 Kimberly-Clark Corporation 99,544 5,711 *The Kroger Co. 149,500 3,298 Longs Drug Stores Corporation 7,000 152 McDonald's Corporation 242,600 7,991 McKesson HBOC, Inc. 50,445 1,056 Nabisco Group Holdings Corp. 58,400 1,515 Newell Rubbermaid, Inc. 50,532 1,301 PepsiCo, Inc. 260,800 11,589 Philip Morris Companies, Inc. 423,900 11,260 The Procter & Gamble Company 235,700 13,494 The Quaker Oats Company 24,000 1,803 R. R. Donnelley & Sons Company 22,700 512 Ralston Purina Company 54,100 1,079 Rite Aid Corporation 46,400 305 *Safeway, Inc. 91,200 4,115 Sara Lee Corporation 162,800 3,144 The Seagram Company Ltd. 77,700 4,507 *Starbucks Corporation 32,900 1,256 SUPERVALU INC 25,000 477 SYSCO Corporation 59,100 2,490
MARKET SHARES/ VALUE COMMON STOCK (97.9%) PAR (000'S) -------------------------------------------------------- CONSUMER STAPLES continued Time Warner, Inc. 230,500 $ 17,518 *Tricon Global Restaurants, Inc. 27,090 765 Tupperware Corporation 10,300 227 UST, Inc. 30,700 451 *Viacom, Inc. - Class B 273,048 18,618 Walgreen Co. 180,300 5,803 The Walt Disney Company 370,807 14,392 Wendy's International, Inc. 21,400 381 Winn-Dixie Stores, Inc. 26,200 375 Wm. Wrigley Jr. Company 20,700 1,660 ----------- TOTAL CONSUMER STAPLES 226,571 ----------- ENERGY (5.5%) Amerada Hess Corporation 16,200 1,000 Anadarko Petroleum Corporation 22,800 1,124 Apache Corporation 20,400 1,200 Ashland, Inc. 12,700 445 Baker Hughes Incorporated 58,930 1,886 Burlington Resources, Inc. 38,920 1,489 Chevron Corporation 117,600 9,974 Conoco, Inc. - Class B 112,200 2,756 Exxon Mobil Corporation 618,685 48,567 Halliburton Company 79,100 3,733 Kerr-McGee Corporation 17,105 1,008 Occidental Petroleum Corporation 65,900 1,388 Phillips Petroleum Company 45,400 2,301 *Rowan Companies, Inc. 16,500 501 Royal Dutch Petroleum Company 384,200 23,652 Schlumberger Limited 98,500 7,351 Sunoco, Inc. 16,200 477 Texaco, Inc. 99,100 5,277 Tosco Corporation 25,800 730 Unilever N.V. 102,367 4,402 Transocean Sedco Forex, Inc. 37,401 1,999 Union Pacific Resources Group, Inc. 45,192 994 Unocal Corporation 43,400 1,438 USX-Marathon Group 55,700 1,396 ----------- TOTAL ENERGY 125,088 ----------- FINANCE (12.6%) AFLAC Incorporated 47,700 2,191 The Allstate Corporation 144,328 3,211 American Express Company 240,600 12,541 American General Corporation 44,225 2,698 American International Group, Inc. 277,395 32,594 AmSouth Bancorporation 70,100 1,104 Aon Corporation 46,000 1,429 Associates First Capital Corporation - Class A 130,510 2,912 Bank of America Corporation 305,876 13,153 The Bank of New York Company, Inc. 131,900 6,133 Bank One Corporation 205,486 5,458 BB&T Corporation 62,200 1,485
27 Index 500 Stock Portfolio 34
MARKET SHARES/ VALUE COMMON STOCK (97.9%) PAR (000'S) -------------------------------------------------------- FINANCE continued The Bear Stearns Companies, Inc. 20,338 $ 847 Capital One Financial Corporation 35,300 1,575 The Charles Schwab Corporation 237,550 7,988 The Chase Manhattan Corporation 221,618 10,208 The Chubb Corporation 31,500 1,937 CIGNA Corporation 30,200 2,824 Cincinnati Financial Corporation 29,400 924 Citigroup, Inc. 604,011 36,391 Comerica Incorporated 28,050 1,259 Conseco, Inc. 58,637 572 Countrywide Credit Industries, Inc. 20,300 615 Federal Home Loan Mortgage Corporation 124,500 5,042 Federal National Mortgage Association 183,600 9,582 First Union Corporation 176,952 4,391 Firstar Corporation 175,565 3,698 Firth Third Bancorp 55,275 3,496 FleetBoston Financial Corporation 164,020 5,577 Franklin Resources, Inc. 44,500 1,352 Golden West Financial Corporation 29,000 1,184 The Hartford Financial Services Group, Inc. 39,700 2,221 Household International, Inc. 84,179 3,499 Huntington Bancshares Incorporated 40,984 648 J.P. Morgan & Co. Incorporated 31,000 3,414 Jefferson-Pilot Corporation 18,750 1,058 KeyCorp 80,100 1,412 Lehman Brothers Holdings, Inc. 21,500 2,033 Lincoln National Corporation 35,000 1,264 Loews Corporation 19,000 1,140 Marsh & McLennan Companies, Inc. 47,750 4,987 MBIA, Inc. 17,800 858 MBNA Corporation 143,675 3,897 Mellon Financial Corporation 91,100 3,319 Merrill Lynch & Co., Inc. 66,400 7,636 MGIC Investment Corporation 18,900 860 Morgan Stanley Dean Witter & Co. 204,110 16,992 National City Corporation 110,500 1,885 Northern Trust Corporation 39,900 2,596 Old Kent Financial Corporation 24,885 666 Paine Webber Group, Inc. 25,600 1,165 The PNC Financial Services Group, Inc. 52,700 2,470 The Progressive Corporation 13,100 969 Providian Financial Corporation 25,400 2,286 Regions Financial Corporation 39,200 779 SAFECO Corporation 23,300 463 SLM Holding Corporation 28,500 1,067 SouthTrust Corporation 30,100 681 The St. Paul Companies, Inc. 40,686 1,388 State Street Corporation 28,700 3,044 Summit Bancorp 31,300 771
MARKET SHARES/ VALUE COMMON STOCK (97.9%) PAR (000'S) -------------------------------------------------------- FINANCE continued SunTrust Banks, Inc. 57,300 $ 2,618 Synovus Financial Corp. 50,150 884 T. Rowe Price Associates, Inc. 21,400 910 Torchmark Corporation 23,600 583 U.S. Bancorp 134,931 2,597 Union Planters Corporation 25,300 707 UnumProvident Corporation 43,031 863 Wachovia Corporation 36,300 1,969 Washington Mutual, Inc. 103,436 2,987 Wells Fargo & Company 295,730 11,460 ----------- TOTAL FINANCE 285,417 ----------- HEALTHCARE (11.3%) Abbott Laboratories 275,400 12,273 Aetna, Inc. 25,663 1,647 Allergan, Inc. 23,600 1,758 *ALZA Corporation 18,300 1,082 American Home Products Corporation 233,900 13,742 *Amgen, Inc. 183,000 12,856 Bausch & Lomb Incorporated 9,500 735 Baxter International, Inc. 52,100 3,663 Becton, Dickinson and Company 45,100 1,294 *Biogen, Inc. 26,900 1,735 Biomet, Inc. 20,200 776 *Boston Scientific Corporation 74,300 1,630 Bristol-Myers Squibb Company 355,400 20,702 C. R. Bard, Inc. 9,200 443 Columbia/HCA Healthcare Corporation 100,900 3,065 Eli Lilly and Company 195,400 19,516 *Guidant Corporation 55,100 2,727 *HEALTHSOUTH Corporation 69,200 497 *Humana, Inc. 30,000 146 Johnson & Johnson 249,300 25,397 Mallinckrodt, Inc. 12,300 534 *Manor Care, Inc. 18,500 130 Medtronic, Inc. 214,000 10,660 Merck & Co., Inc. 418,800 32,091 PE Corporation 36,900 2,431 Pfizer, Inc. 1,116,550 53,593 Pharmacia Corporation 224,270 11,592 *Quintiles Transnational Corp. 20,600 291 Schering-Plough Corporation 263,200 13,292 *St. Jude Medical, Inc. 15,100 693 *Tenet Healthcare Corporation 55,900 1,509 UnitedHealth Group Incorporated 30,400 2,607 *Watson Pharmaceuticals, Inc. 17,200 925 *Wellpoint Health Networks, Inc. - Class A 11,400 826 ----------- TOTAL HEALTHCARE 256,858 ----------- TECHNOLOGY (31.2%) *3Com Corporation 61,300 3,532 *Adaptec, Inc. 18,600 423
Index 500 Stock Portfolio 28 35
MARKET SHARES/ VALUE COMMON STOCK (97.9%) PAR (000'S) -------------------------------------------------------- TECHNOLOGY continued *ADC Telecommunications, Inc. 53,800 $ 4,512 Adobe Systems Incorporated 21,200 2,756 *Advanced Micro Devices, Inc. 26,400 2,039 *Agilent Technologies, Inc. 80,980 5,972 *Altera Corporation 35,700 3,639 *America Online, Inc. 408,800 21,564 *Analog Devices, Inc. 62,700 4,765 *Andrew Corporation 14,437 485 *Apple Computer, Inc. 58,000 3,038 *Applied Materials, Inc. 137,100 12,425 Autodesk, Inc. 11,000 382 Automatic Data Processing, Inc. 112,900 6,047 *BMC Software, Inc. 43,700 1,594 *Cabletron Systems, Inc. 32,700 826 *Ceridian Corporation 25,900 623 *Cisco Systems, Inc. 1,225,900 77,921 *Citrix Systems, Inc. 32,100 608 Compaq Computer Corporation 303,509 7,758 Computer Associates International, Inc. 105,412 5,396 *Computer Sciences Corporation 30,000 2,241 *Compuware Corporation 64,600 670 *Comverse Technology, Inc. 27,400 2,548 *Conexant Systems, Inc. 38,500 1,872 *Dell Computer Corporation 459,600 22,664 Eastman Kodak Company 56,500 3,362 Electronic Data Systems Corporation 84,300 3,477 *EMC Corporation 364,574 28,049 Equifax, Inc. 25,300 664 First Data Corporation 75,100 3,727 *Gateway, Inc. 56,700 3,218 Hewlett-Packard Company 180,100 22,490 IKON Office Solutions, Inc. 26,900 104 Intel Corporation 598,600 80,025 International Business Machines Corporation 322,900 35,378 *KLA-Tencor Corporation 32,900 1,927 *Lexmark International Group, Inc. - Class A 22,900 1,540 Linear Technology Corporation 55,700 3,561 *LSI Logic Corporation 53,300 2,885 Lucent Technologies, Inc. 571,100 33,838 *Maxim Integrated Products, Inc. 49,700 3,376 *Micron Technology, Inc. 96,800 8,524 *Microsoft Corporation 932,500 74,600 *MIPS Technologies, Inc. - Class B 4,573 176 Motorola, Inc. 381,110 11,076 *National Semiconductor Corporation 30,700 1,742 *NCR Corporation 17,300 674 *Network Appliance, Inc. 54,600 4,395 Nortel Networks Corporation 517,300 35,306 *Novell, Inc. 58,500 541 *Oracle Corporation 505,500 42,494
MARKET SHARES/ VALUE COMMON STOCK (97.9%) PAR (000'S) -------------------------------------------------------- TECHNOLOGY continued *Parametric Technology Corporation 49,300 $ 542 Paychex, Inc. 66,375 2,788 *PeopleSoft, Inc. 48,100 806 PerkinElmer, Inc. 8,600 569 Polaroid Corporation 8,000 145 QUALCOMM, Incorporated 132,200 7,932 Raytheon Company - Class B 60,600 1,167 Sabre Holdings Corporation - Class A 23,167 660 *Sapient Corporation 10,500 1,123 Scientific-Atlanta, Inc. 28,300 2,108 *Seagate Technology, Inc. 40,700 2,239 Shared Medical Systems Corporation 4,800 350 *Siebel Systems, Inc. 34,500 5,643 *Silicon Graphics, Inc. 33,000 124 *Sun Microsystems, Inc. 282,800 25,717 Tektronix, Inc. 8,450 625 *Tellabs, Inc. 72,100 4,934 *Teradyne, Inc. 30,600 2,249 Texas Instruments Incorporated 291,300 20,009 *Unisys Corporation 55,600 810 *VERITAS Software Corporation 69,600 7,866 W.W. Grainger, Inc. 16,700 515 Xerox Corporation 119,000 2,469 *Xilinx, Inc. 57,600 4,756 *Yahoo!, Inc. 94,300 11,681 ----------- TOTAL TECHNOLOGY 711,276 ----------- TRANSPORTATION (0.6%) *AMR Corporation 26,500 701 Burlington Northern Santa Fe Corporation 81,821 1,877 CSX Corporation 39,100 828 Delta Air Lines, Inc. 23,100 1,168 *FedEx Corporation 51,920 1,973 Kansas City Southern Industries, Inc. 19,800 1,756 Norfolk Southern Corporation 68,400 1,017 Ryder System, Inc. 10,600 201 Southwest Airlines Co. 90,400 1,712 Union Pacific Corporation 44,500 1,655 *US Airways Group, Inc. 12,800 499 ----------- TOTAL TRANSPORTATION 13,387 ----------- UTILITIES (2.5%) *The AES Corporation 77,800 3,550 Ameren Corporation 24,600 830 American Electric Power Company, Inc. 57,720 1,710 Carolina Power & Light Company 28,600 913 Cinergy Corp. 28,517 725 CMS Energy Corporation 20,700 458 The Coastal Corporation 38,300 2,332 Columbia Energy Group 14,550 955
29 Index 500 Stock Portfolio 36
MARKET SHARES/ VALUE COMMON STOCK (97.9%) PAR (000'S) -------------------------------------------------------- UTILITIES continued Consolidated Edison, Inc. 39,600 $ 1,173 Constellation Energy Group 26,800 873 Dominion Resources, Inc. 42,595 1,826 DTE Energy Company 26,000 795 Duke Energy Corporation 65,465 3,691 Eastern Enterprises 4,900 309 Edison International 62,200 1,275 El Paso Energy Corporation 40,900 2,083 Enron Corp. 128,200 8,269 Entergy Corporation 44,200 1,202 FirstEnergy Corp. 41,700 975 Florida Progress Corporation 17,600 825 FPL Group, Inc. 32,100 1,589 GPU, Inc. 22,100 598 New Century Energies, Inc. 20,700 621 *Niagara Mohawk Holdings, Inc. 31,800 443 Nicor, Inc. 8,400 274 Northern States Power Company 27,700 559 ONEOK, Inc. 5,500 143 PECO Energy Company 33,300 1,342 Peoples Energy Corporation 6,400 207 PG&E Corporation 68,800 1,694 Pinnacle West Capital Corporation 15,200 515 PPL Corporation 25,734 565 Public Service Enterprise Group Incorporated 39,200 1,357 Reliant Energy, Inc. 52,962 1,566 Sempra Energy 36,602 622 The Southern Company 120,600 2,811 TXU Corp. 49,515 1,461 Unicom Corporation 39,000 1,509 The Williams Companies, Inc. 77,900 3,247 ----------- TOTAL UTILITIES 55,892 ----------- TOTAL COMMON STOCK (COST $1,227,153) 2,223,070 ----------- MONEY MARKET INVESTMENTS (2.0%) -------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (0.2%) #Federal National Mortgage Association, 6.40%, 7/17/00 5,000,000 4,986 ----------- TOTAL FEDERAL GOVERNMENT AND AGENCIES 4,986 ----------- FINANCE SERVICES (0.4%) #Ciesco LP, 6.55%, 8/14/00 10,000,000 9,916 ----------- TOTAL FINANCE SERVICES 9,916 -----------
MARKET MONEY MARKET INVESTMENTS SHARES/ VALUE (2.0%) PAR (000'S) -------------------------------------------------------- MISC. BUSINESS CREDIT INSTITUTIONS (0.5%) Quincy Capital, 6.76%, 7/12/00 10,000,000 $ 9,979 ----------- TOTAL MISC. BUSINESS CREDIT INSTITUTIONS 9,979 ----------- OFFICE MACHINES (0.5%) #Xerox Corporation, 6.68%, 7/5/00 10,000,000 9,993 ----------- TOTAL OFFICE MACHINES 9,993 ----------- PERSONAL CREDIT INSTITUTIONS (0.0%) Associates Corporation of North America, 6.94%, 7/3/00 700,000 700 ----------- TOTAL PERSONAL CREDIT INSTITUTIONS 700 ----------- SECURITY BROKERS AND DEALERS (0.4%) #Salomon Smith Barney Holdings Inc., 6.58%, 8/07/00 10,000,000 9,932 ----------- TOTAL SECURITY BROKERS AND DEALERS 9,932 ----------- TOTAL MONEY MARKET INVESTMENTS (COST $45,506) 45,506 ----------- TOTAL INVESTMENTS (99.9%) (COST $1,272,659)/\ 2,268,576 ----------- OTHER ASSETS, LESS LIABILITIES (0.1%) 1,194 ----------- TOTAL NET ASSETS (100.0%) $ 2,269,770 -----------
* 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 period end is summarized below.
UNREALIZED APPRECIATION/ NUMBER OF EXPIRATION (DEPRECIATION) ISSUERS CONTRACTS DATE (000'S) --------------------------------------------------------------- S & P 500 125 Sep-00 ($107) Total Notional Value at 6/30/2000 $45,985
/\At 6/30/2000, the aggregate cost of securities for federal income tax purposes was $1,272,659 and the net unrealized appreciation of investments based on that cost was $995,917 which is comprised of $1,084,945 aggregate gross unrealized appreciation and $89,028 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements Index 500 Stock Portfolio 30 37
Objective: Portfolio Strategy: Net Assets: A high level of current income and Achieve consistent returns and low volatility by $3,443,516,967 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. The mix of securities in the Balanced Portfolio is only slightly different from that of six months ago. However, the highly volatile stock market of recent months has provided the opportunity to increase returns through opportunistic selling and adjustments among asset classes. In March, when the stock market rose to a level that appeared overvalued, the equity position was reduced. After the subsequent market drop, equity exposure was increased moderately, in order to take advantage of good values in the equity market. The Portfolio's bond exposure has been expanded modestly since December. A move to higher quality bonds, accompanied by 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 6/30/2000 [SECTOR ALLOCATION PIE CHART] Equities (including futures) 55 Bonds 40 Short-Term Investments 5
PERFORMANCE RELATIVE TO RELEVANT INDICES [LINE GRAPH]
---------------------------------------------------------------- Average Annual Total Return For Periods Ended June 30, 2000 1 Year 5 Years 10 Years ---------------------------------------------------------------- Balanced Portfolio 5.89% 15.37% 13.05% Merrill Lynch Domestic Master Index 4.57% 6.26% 7.89% 91 Day T-Bill 5.53% 5.33% 5.16% S&P 500 Index 7.31% 23.74% 17.73% ----------------------------------------------------------------
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 6/30/90. 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 58 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. 31 Balanced Portfolio 38 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments June 30, 2000 (unaudited)
MARKET SHARES/ VALUE CORPORATE BONDS (5.4%) PAR (000'S) --------------------------------------------------------- BANK HOLDING COMPANIES (0.2%) Banco Montevideo, 8.4%, 04/30/08 (144A) 6,250,000 $ 4,875 BT Institutional Capital Trust, 7.75%, 12/01/26 (144A) 1,000,000 836 ----------- TOTAL 5,711 ----------- BEVERAGES (0.4%) Anheuser-Busch Companies, Inc., 7.5%, 3/15/12 4,500,000 4,510 Coca Cola Enterprises, Inc., 8%, 1/4/05 8,750,000 8,940 ----------- TOTAL 13,450 ----------- CHEMICALS & ALLIED PRODUCTS (0.5%) Chevron Corporation, 6.625%, 10/1/04 4,750,000 4,691 Dow Capital B.V., 8.5%, 6/8/10 8,200,000 8,625 Johnson & Johnson, 6.625%, 9/1/09 2,800,000 2,710 ----------- TOTAL 16,026 ----------- DURABLE GOODS (0.2%) Tata Engineering & Locomotive, 7.875%, 7/15/07, (144A) 6,500,000 5,863 ----------- TOTAL 5,863 ----------- ELECTRIC SERVICES (1.3%) Columbia Energy Group, 7.32%, 11/28/10 7,571,000 7,306 Dayton Power & Light Company, 8.15%, 1/15/26 5,750,000 5,513 Niagra Mohawk Power, 7%, 10/1/00 2,268,293 2,265 Niagra Mohawk Power, 7.25%, 10/1/02 1,134,147 1,119 Ohio Edison Company, 7.375%, 9/15/02 3,665,000 3,666 Public Service Electric & Gas Co., 6.875%, 1/1/03 9,000,000 8,925 Scottish Power PLC, 5.65%, 11/1/06 4,650,000 4,190 South Carolina Electric & Gas, 6.125%, 3/1/09 3,000,000 2,755 Southern California Edison Co., 7.25%, 3/1/26 10,000,000 8,897 Texas Utilities Electric Co., 7.875%, 3/1/23 4,000,000 3,773 ----------- TOTAL 48,409 -----------
MARKET SHARES/ VALUE CORPORATE BONDS (5.4%) PAR (000'S) --------------------------------------------------------- FINANCE COMPANIES (0.9%) Ford Motor Credit Company, 6.3%, 7/16/02 11,700,000 $ 11,710 Ford Motor Credit Corporation, 7.375%, 10/28/09 5,971,000 5,777 General Electric Capital Corporation, 8.75%, 5/21/07 5,000,000 5,372 General Motors Acceptance Corporation, 6.625%, 10/1/02 5,000,000 4,932 General Motors Acceptance Corporation, 7.75%, 1/19/10 5,000,000 4,970 ----------- TOTAL 32,761 ----------- GENERAL MERCHANDISE STORES (0.7%) The Home Depot, Inc., 6.5%, 9/15/04 8,550,000 8,470 Wal-Mart Stores, Inc., 6.55%, 8/10/04 13,300,000 13,125 Wal-Mart Stores, Inc., 6.875%, 8/10/09 3,000,000 2,934 ----------- TOTAL 24,529 ----------- INSURANCE CARRIERS (0.1%) Prudential Insurance Co., 6.375%, 7/23/06 (144A) 2,500,000 2,310 ----------- TOTAL 2,310 ----------- MOTOR VEHICLES & CARS BODIES (0.4%) General Motors Corporation, 6.75%, 5/1/28 6,000,000 5,209 General Motors Corporation, 8.8%, 3/1/21 6,500,000 7,086 ----------- TOTAL 12,295 ----------- NEWSPAPERS (0.1%) Times Mirror Company, 7.45%, 10/15/09 5,050,000 4,990 ----------- TOTAL 4,990 ----------- REAL ESTATE OPERATOR LESSORS (0.1%) Post Apartment Homes, 8.125%, 6/15/2005 2,250,000 2,247 ----------- TOTAL 2,247 ----------- TELEPHONE COMMUNICATIONS (0.3%) Deutsche Telekom Int AG, 7.75%, 6/15/2005 3,150,000 3,171 New England Telephone and Telegraph, 5.875%, 4/15/09 5,000,000 4,405 Sprint Capital Corp., 6.875%, 11/15/28 5,000,000 4,325 ----------- TOTAL 11,901 -----------
Balanced Portfolio 32 39
MARKET SHARES/ VALUE CORPORATE BONDS (5.4%) PAR (000'S) --------------------------------------------------------- TEXTILE GOODS (0.0%) +Polysindo International Finance, 11.375%, 6/15/06 6,500,000 $ 1,235 ----------- TOTAL 1,235 ----------- TRANSPORTATION SERVICES (0.1%) United Parcel Service, 8.375%, 4/1/20 1,750,000 1,934 ----------- TOTAL 1,934 ----------- UTILITIES (0.1%) Atlantic City Electric Company, 6.625%, 8/1/13 4,000,000 3,677 ----------- TOTAL 3,677 ----------- TOTAL CORPORATE BONDS (COST $198,150) 187,338 ----------- GOVERNMENT (DOMESTIC AND FOREIGN) AND AGENCY BONDS (27.3%) --------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (27.1%) AID-ISRAEL, 0.00%, 11/15/22 11,600,000 2,697 AID-ISRAEL, 0.00%, 11/15/23 11,500,000 2,509 Federal Home Loan Bank, 5.54%, 1/8/09 5,000,000 4,436 Federal Home Loan Mortgage Corporation, 6.5%, 5/5/04 12,267,913 11,913 Federal Home Loan Mortgage Corporation, 7.0%, 03/15/07 7,250,000 7,195 Federal National Mortgage Association, 5.97%, 10/1/08 1,749,519 1,619 Federal National Mortgage Association, 6.24%, 2/1/06 4,814,804 4,581 Federal National Mortgage Association, 6.265%, 10/1/08 5,642,836 5,304 Federal National Mortgage Association, 6.315%, 3/1/06 5,084,479 4,851 Federal National Mortgage Association, 6.34%, 2/1/08 4,129,191 3,915 Federal National Mortgage Association, 6.43%, 6/1/08 7,265,045 6,915 Federal National Mortgage Association, 6.5%, 9/25/05 4,625,009 4,497 Federal National Mortgage Association, 6.75%, 11/1/07 3,046,087 2,952 Federal National Mortgage Association, 6.75%, 4/25/18 5,276,643 5,144 Federal National Mortgage Association, 6.75%, 12/25/23 6,500,000 6,088 Federal National Mortgage Association, 6.835%, 7/1/03 3,153,764 3,107 Federal National Mortgage Association, 6.895%, 5/1/06 5,953,225 5,822 Federal National Mortgage Association, 6.9%, 4/1/06 2,400,394 2,348
GOVERNMENT (DOMESTIC AND MARKET FOREIGN) AND AGENCY BONDS SHARES/ VALUE (27.3%) PAR (000'S) --------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES continued Federal National Mortgage Association, 7%, 6/1/03 2,697,747 $ 2,673 Federal National Mortgage Association, 7%, 6/25/10 7,680,222 7,519 Federal National Mortgage Association, 7%, 4/1/26 13,297,218 12,861 Federal National Mortgage Association, 7.025%, 9/1/05 1,908,957 1,878 Federal National Mortgage Association, 7.12%, 11/1/03 967,896 956 Federal National Mortgage Association, 7.25%, 5/1/04 1,545,625 1,531 Federal National Mortgage Association, 7.5%, 10/1/27 11,635,126 11,521 Federal National Mortgage Association, 8.4%, 2/25/09 10,910,000 11,149 Federal National Mortgage Association, 11%, 12/1/12 64,282 70 Federal National Mortgage Association, 11%, 9/1/17 930,732 1,035 Federal National Mortgage Association, 11%, 12/1/17 153,406 169 Federal National Mortgage Association, 11%, 2/1/18 387,799 428 Federal National Mortgage Association, 11.5%, 4/1/18 608,449 681 Federal National Mortgage Association, 12%, 9/1/12 874,105 983 Federal National Mortgage Association, 12%, 12/1/12 189,837 214 Federal National Mortgage Association, 12%, 9/1/17 262,610 298 Federal National Mortgage Association, 12%, 10/1/17 296,702 337 Federal National Mortgage Association, 12%, 12/1/17 281,135 319 Federal National Mortgage Association, 12%, 2/1/18 308,595 350 Federal National Mortgage Association, 12.5%, 4/1/18 251,675 288 Federal National Mortgage Association, 13%, 11/1/12 146,361 167 Federal National Mortgage Association, 13%, 11/1/17 252,061 293 Federal National Mortgage Association, 13%, 12/1/17 166,523 193 Federal National Mortgage Association, 13%, 2/1/18 369,640 429 Federal National Mortgage Association, 14%, 12/1/17 100,683 120 Government National Mortgage Association, 7%, 11/3/08 232,506 226 Government National Mortgage Association, 7%, 5/15/23 8,352,747 8,155 Government National Mortgage Association, 7%, 6/15/23 602,599 588
33 Balanced Portfolio 40
GOVERNMENT (DOMESTIC AND MARKET FOREIGN) AND AGENCY BONDS SHARES/ VALUE (27.3%) PAR (000'S) --------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES continued Government National Mortgage Association, 7%, 7/15/23 859,190 $ 839 Government National Mortgage Association, 7%, 8/15/23 15,567 15 Government National Mortgage Association, 7%, 9/15/23 439,370 429 Government National Mortgage Association, 7%, 10/15/23 333,147 325 Government National Mortgage Association, 7%, 11/15/23 1,119,664 1,093 Government National Mortgage Association, 7%, 12/15/27 289,439 282 Government National Mortgage Association, 7%, 1/15/28 383,617 373 Government National Mortgage Association, 7%, 2/15/28 106,790 104 Government National Mortgage Association, 7%, 4/15/28 651,471 634 Government National Mortgage Association, 7%, 5/15/28 1,304,174 1,269 Government National Mortgage Association, 7%, 6/15/28 3,223,195 3,407 Government National Mortgage Association, 7%, 7/15/28 4,454,107 4,333 Government National Mortgage Association, 7.5%, 1/15/23 546,026 545 Government National Mortgage Association, 7.5%, 6/15/23 298,281 298 Government National Mortgage Association, 7.5%, 6/15/24 7,663 8 Government National Mortgage Association, 7.5%, 7/15/24 252,719 252 Government National Mortgage Association, 7.5%, 8/15/25 12,236 12 Government National Mortgage Association, 7.5%, 9/15/25 216,241 215 Government National Mortgage Association, 7.5%, 11/15/25 11,726 12 Government National Mortgage Association, 7.5%, 12/15/25 406,463 404 Government National Mortgage Association, 7.5%, 1/15/26 13,798 14 Government National Mortgage Association, 7.5%, 3/15/26 527,983 525 Government National Mortgage Association, 7.5%, 6/15/26 878,040 873 Government National Mortgage Association, 7.5%, 9/15/26 12,231 12 Government National Mortgage Association, 7.5%, 10/15/26 71,377 71 Government National Mortgage Association, 7.5%, 12/15/26 578,260 575 Government National Mortgage Association, 7.5%, 1/15/27 33,508 33 Government National Mortgage Association, 7.5%, 2/15/27 369,365 367
GOVERNMENT (DOMESTIC AND MARKET FOREIGN) AND AGENCY BONDS SHARES/ VALUE (27.3%) PAR (000'S) --------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES continued Government National Mortgage Association, 7.5%, 3/15/27 37,851 $ 38 Government National Mortgage Association, 7.5%, 4/15/27 1,324,660 1,317 Government National Mortgage Association, 7.5%, 5/15/27 139,525 139 Government National Mortgage Association, 7.5%, 7/15/27 595,036 592 Government National Mortgage Association, 7.5%, 12/15/27 156,873 156 Government National Mortgage Association, 7.5%, 5/04/28 397,785 396 Government National Mortgage Association, 7.5%, 7/15/28 725,628 721 Government National Mortgage Association, 8%, 9/15/24 178,275 181 Government National Mortgage Association, 8%, 3/15/26 59,148 60 Government National Mortgage Association, 8%, 5/15/26 426,210 432 Government National Mortgage Association, 8%, 6/15/26 357,293 362 Government National Mortgage Association, 8%, 7/15/26 819,590 831 Government National Mortgage Association, 8%, 8/15/26 347,141 352 Government National Mortgage Association, 8%, 9/15/26 311,961 316 Government National Mortgage Association, 8%, 10/15/26 604,736 613 Government National Mortgage Association, 8%, 11/15/26 338,483 343 Government National Mortgage Association, 8%, 12/15/26 358,821 364 Government National Mortgage Association, 8%, 4/15/27 659,293 668 Government National Mortgage Association, 8%, 6/15/27 297,910 302 Government National Mortgage Association, 8%, 7/15/27 134,061 136 Government National Mortgage Association, 8%, 7/20/28 2,246,770 2,259 Government National Mortgage Association, 8.5%, 5/15/22 3,009 3 Government National Mortgage Association, 8.5%, 9/15/22 3,891 4 Government National Mortgage Association, 8.5%, 10/15/22 25,232 26 Government National Mortgage Association, 8.5%, 12/15/22 17,777 18 Government National Mortgage Association, 8.5%, 6/15/24 6,036 6 Government National Mortgage Association, 8.5%, 7/15/24 21,392 22
Balanced Portfolio 34 41
GOVERNMENT (DOMESTIC AND MARKET FOREIGN) AND AGENCY BONDS SHARES/ VALUE (27.3%) PAR (000'S) --------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES continued Government National Mortgage Association, 8.5%, 8/15/24 45,477 $ 47 Government National Mortgage Association, 8.5%, 12/15/24 6,910 7 Government National Mortgage Association, 8.5%, 1/15/25 65,315 67 Government National Mortgage Association, 8.5%, 2/15/25 59,335 61 Government National Mortgage Association, 8.5%, 11/15/25 8,008 8 Government National Mortgage Association, 8.5%, 1/15/26 40,427 41 Government National Mortgage Association, 8.5%, 2/15/26 4,823 5 Government National Mortgage Association, 8.5%, 3/15/26 19,435 20 Government National Mortgage Association, 8.5%, 4/15/26 66,046 68 Government National Mortgage Association, 8.5%, 5/15/26 17,982 18 Government National Mortgage Association, 11%, 1/15/18 5,654,965 6,155 Rural Housing Trust - Class D, 6.33%, 4/1/26 4,089,556 4,024 US Treasury Inflation Index Bond, 3.625%, 7/15/02 2,537,375 2,521 US Treasury Inflation Index Bond, 3.625%, 4/15/28 6,500,000 6,199 US Treasury Inflation Index Bond, 3.875%, 4/15/29 168,439,903 172,611 US Treasury Inflation Index Bond, 4.25%, 1/15/10 68,412,760 70,214 US Treasury, 4%, 10/31/00 11,650,000 11,559 US Treasury, 4.75%, 2/15/04 19,250,000 18,300 US Treasury, 4.75%, 11/15/08 38,050,000 34,554 #US Treasury, 5%, 2/28/01 4,500,000 4,458 US Treasury, 5.25%, 5/31/01 8,000,000 7,913 US Treasury, 5.25%, 5/15/04 29,700,000 28,651 US Treasury, 5.25%, 2/15/29 3,749,000 3,326 US Treasury, 5.5%, 1/31/03 3,500,000 3,427 US Treasury, 5.5%, 3/31/03 15,500,000 15,151 US Treasury, 5.5%, 2/15/08 175,000 168 US Treasury, 5.625%, 12/31/02 2,300,000 2,259 US Treasury, 5.625%, 2/15/06 108,000,000 104,726 US Treasury, 5.625%, 5/15/08 34,000,000 32,789 US Treasury, 6%, 7/31/02 4,000,000 3,965 US Treasury, 6%, 8/15/04 25,000,000 24,766 US Treasury, 6%, 8/15/09 3,818,000 3,787 US Treasury, 6.125%, 8/15/07 22,000,000 21,869 #US Treasury, 6.125%, 8/15/29 13,738,000 13,884 US Treasury, 6.25%, 2/15/07 4,500,000 4,504 #US Treasury, 6.375%, 8/15/07 4,100,000 4,217 US Treasury, 6.5%, 2/28/02 55,000,000 55,000 #US Treasury, 6.5%, 2/15/10 25,434,000 26,300 #US Treasury, 6.75%, 05/15/05 1,300,000 1,330
GOVERNMENT (DOMESTIC AND MARKET FOREIGN) AND AGENCY BONDS SHARES/ VALUE (27.3%) PAR (000'S) --------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES continued US Treasury, 6.875%, 5/15/06 50,000,000 $ 51,453 US Treasury, 7.25%, 8/15/04 6,000,000 6,201 US Treasury, 7.25%, 5/15/16 4,200,000 4,621 Vendee Mortgage Trust, Series 1998-3, Class E, 6.5%, 3/15/29 4,500,000 4,057 ----------- TOTAL 934,601 ----------- FOREIGN GOVERNMENT BONDS (0.2%) Province of Quebec, 6.5%, 1/17/06 7,500,000 7,203 ----------- TOTAL 7,203 ----------- TOTAL GOVERNMENT (DOMESTIC AND FOREIGN) AND AGENCY BONDS (COST $944,552) 941,804 ----------- MORTGAGE/ ASSET BACKED SECURITIES (6.5%) --------------------------------------------------------- ASSET-BACKED SECURITIES (CMO'S) (0.7%) BankBoston Marine Asset Backed Trust - Class A6, 6.64%, 08/15/10 7,000,000 6,815 Citibank Credit Card Master Trust I - Class A, 0%, 8/15/06 17,000,000 12,662 Commercial Mortgage Acceptance Corporation, Series 1997-ML1, Class B, 6.6437%, 12/15/07 (144A) 2,500,000 2,386 Iroquois Trust - Class A, 6.68%, 11/10/03 (144A) 4,898,603 4,876 Newcourt Equipment - Class C, 7.734%, 09/20/04 (144A) 399,470 390 ----------- TOTAL 27,129 ----------- AUTO RELATED (0.4%) Fleetwood Credit Corporation Grantor Trust - Class A, 6.4%, 05/15/13 1,396,533 1,381 Team Fleet Financing - Class A, 6.65%, 12/15/02 (144A) 11,800,000 11,544 ----------- TOTAL 12,925 ----------- AUTOMOBILES AND OTHER MOTOR VEHICLES (0.1%) Daimler-Chrysler N.A. Holdings, 6.38%, 8/23/02 5,000,000 5,012 ----------- TOTAL 5,012 ----------- BANK HOLDING COMPANIES (0.1%) Nationsbank Lease Pass Through Trust, Series 1997-A, Class 1, 7.442%, 1/10/11 (144A) 1,917,387 1,873 ----------- TOTAL 1,873 -----------
35 Balanced Portfolio 42
MARKET MORTGAGE/ ASSET BACKED SHARES/ VALUE SECURITIES (6.5%) PAR (000'S) --------------------------------------------------------- COMMERCIAL MORTGAGES (3.6%) Asset Securitization Corporation, Series 1996-MD6, Class CS1, 1.257%, 11/13/26, IO 17,806,426 $ 442 Asset Securitization Corporation, Series 1997-D5, Class PS1, 1.367%, 2/14/41, IO 21,999,609 1,872 Chase Commercial Mortgage Securities Corporation, Series 1997-2, Class A2, 6.6%, 11/19/07 8,500,000 8,120 Chase Commercial Mortgage Securities Corporation, Series 1997-2, Class B, 6.6%, 11/19/07 2,500,000 2,363 Credit Suisse First Boston Mortgage Securities Corporation, Series 1997-C1, Class A2, 7.26%, 6/20/07 (144A) 3,075,911 3,000 Credit Suisse First Boston Mortgage Securities Corporation, Series 1997-C1, Class B, 7.28%, 6/20/07 (144A) 3,250,000 3,139 Criimi Mae Commercial Mortgage Trust, Series 1998-C1, Class A1, 7%, 11/2/06 6,500,000 5,839 Criimi Mae Commercial Mortgage Trust, Series 1998-C1, Class B, 7%, 11/2/11 5,700,000 4,501 DLJ Mortgage Acceptance Corporation, Series 1997-CF2, Class S, .357%, 10/15/17 (144A) IO 18,449,916 369 DLJ Commercial Mortgage Corporation, Series 1998-CF1, Class S, .718%, 1/15/18, IO 250,790,199 8,710 DLJ Mortgage Acceptance Corp., Series 1994-MF11, Class A2, 8.1%, 6/18/04 1,650,000 1,686 DLJ Mortgage Acceptance Corporation, Series 1994-MF11, Class A1, 8.1%, 6/18/04 1,650,414 1,686 Kmart CMBS Financing, Inc. - Class B, 6.597%, 3/01/07 8,000,000 7,987 Kmart CMBS Financing, Inc. - Class C, 6.897%, 03/01/07 (144A) 12,500,000 12,441 Kmart CMBS Financing, Inc. - Class D, 7.297%, 03/01/07 (144A) 4,500,000 4,479 LB Mortgage Trust, Series 1991-2, Class A3, 8.3962%, 1/20/17 9,714,449 10,040
MARKET MORTGAGE/ ASSET BACKED SHARES/ VALUE SECURITIES (6.5%) PAR (000'S) --------------------------------------------------------- COMMERCIAL MORTGAGES continued Midland Realty Acceptance Corporation, Series 1996-C2, Class AEC, 1.389%, 1/25/29, IO 26,079,789 $ 1,400 Morgan Stanley Capital, Series 1998-WF2 - Class A, 6.54%, 5/15/08 15,000,000 14,246 Mortgage Capital Funding, Inc., Series 1997-MC1, Class A3, 7.288%, 3/20/07 19,000,000 18,739 Nomura Asset Securities Corporation, Series 1998-D6, Class A2, 7.028%, 3/17/28 15,000,000 14,038 RMF Commercial Mortgage Pass- Through, Series 1997-1, Class F, 7.471%, 1/15/19 (144A) 1,800,000 1,222 ----------- TOTAL 126,319 ----------- CREDIT CARD ASSET BACKED (0.1%) Iroquois Trust, Series 1997-2, Class A, 6.752%, 6/25/07 (144A) 2,672,585 2,615 ----------- TOTAL 2,615 ----------- FRANCHISE LOAN RECEIVABLES (0.3%) Enterprise Mortgage Acceptance Company, Series 1998-1, Class IO, 1.378%, 1/15/23 (144A) IO 37,709,606 2,419 Enterprise Mortgage Acceptance Company, Series 1998-1, Class A2, 6.38%, 4/15/07 (144A) 6,000,000 5,661 Global Franchise Trust, Series 1998-1, Class A1, 6.349%, 4/10/04 2,581,122 2,519 ----------- TOTAL 10,599 ----------- HOME EQUITY LOAN (0.1%) Amresco Residential Securities, Series 1998-2, Class A2, 6.245%, 5/25/22 2,151,857 2,134 ----------- TOTAL 2,134 ----------- MANUFACTURED HOUSING (0.1%) Vanderbilt Mortgage and Finance Inc. - Series 1997-B - Class 1A4, 7.19%, 2/7/14 2,500,000 2,474 ----------- TOTAL 2,474 -----------
Balanced Portfolio 36 43
MARKET MORTGAGE/ ASSET BACKED SHARES/ VALUE SECURITIES (6.5%) PAR (000'S) --------------------------------------------------------- OTHER ASSET BACKED (0.4%) FMAC Loan Receivables Trust, Series 1998-A, Class A1, 6.2%, 9/15/20 (144A) 4,150,905 $ 4,026 Harley-Davidson Eaglemark Motorcycle Trust, Series 1998-2, Class A2, 5.87%, 4/15/04 1,900,000 1,870 Health Care Receivables, 6.25%, 2/01/03 (144A) 3,000,000 2,927 Heilig-Meyers Master Trust, Series 1998-1A, Class A, 6.125%, 1/20/07 (144A) 6,500,000 6,318 ----------- TOTAL 15,141 ----------- OTHER INDUSTRIES (0.1%) Nations Credit Grantor Trust - Class A1, 6.35%, 4/15/14 1,335,020 1,314 Newcourt Equipment Receivables, Series 1997-A, Class B, 6.764%, 9/20/04 (144A) 499,338 489 ----------- TOTAL 1,803 ----------- RESIDENTIAL MORTGAGES (0.1%) Blackrock Capital Finance L.P., Series 1997-R3, Class B3, 7.25%, 11/25/28 (144A) 5,730,428 1,777 Blackrock Capital Finance L.P., Series 1997-R1, Class B3, 7.75%, 3/25/37 (144A) 4,752,683 1,378 ----------- TOTAL 3,155 ----------- UTILITIES (0.4%) Comed Transitional Funding Trust, Series 1998-1, Class A7, 5.74%, 12/25/10 5,500,000 4,934 Peco Energy Transition Trust, Series 1999-A, Class A7, 6.13%, 3/1/09 8,000,000 7,375 ----------- TOTAL 12,309 ----------- TOTAL MORTGAGE/ASSET BACKED SECURITIES (COST $239,595) 223,488 ----------- MUNICIPAL BONDS (0.2%) --------------------------------------------------------- MUNICIPAL BONDS - REVENUE (0.2%) New Jersey Economic Development Authority, 0%, 2/15/25 17,000,000 2,612 New Jersey Economic Development Authority, 0%, 2/15/26 11,000,000 1,568
MARKET SHARES/ VALUE MUNICIPAL BONDS (0.2%) PAR (000'S) --------------------------------------------------------- MUNICIPAL BONDS continued New Jersey Economic Development Authority, 7.425%, 2/15/29 2,250,000 $ 2,210 ----------- TOTAL MUNICIPAL BONDS (COST $6,215) 6,390 ----------- COMMON STOCK (47.8%) --------------------------------------------------------- BASIC MATERIALS (0.9%) Air Products and Chemicals, Inc. 30,400 937 Alcan Aluminium Ltd. 29,000 899 Alcoa, Inc. 115,308 3,344 Allegheny Technologies Incorporated 10,981 198 Archer-Daniels-Midland Company 80,423 789 Barrick Gold Corporation 52,200 949 Bemis Company, Inc. 6,900 232 *Bethlehem Steel Corporation 17,400 62 Boise Cascade Corporation 7,600 197 The Dow Chemical Company 87,300 2,635 E. I. du Pont de Nemours and Company 138,400 6,054 Eastman Chemical Company 10,375 495 Ecolab, Inc. 17,200 672 Engelhard Corporation 16,700 285 *FMC Corporation 4,100 238 *Freeport-McMoRan Copper & Gold, Inc. - Class B 21,700 201 Georgia-Pacific Corporation 22,700 596 Great Lakes Chemical Corporation 7,200 227 Hercules Incorporated 14,100 198 Homestake Mining Company 34,500 237 *Inco Limited 25,400 391 International Flavors & Fragrances, Inc. 13,900 420 International Paper Company 63,884 1,905 Louisiana-Pacific Corporation 14,100 153 The Mead Corporation 13,600 343 Newmont Mining Corporation 22,230 481 Nucor Corporation 11,600 385 *Pactiv Corporation 22,700 179 Phelps Dodge Corporation 10,710 398 Placer Dome, Inc. 43,100 412 Potlatch Corporation 3,800 126 PPG Industries, Inc. 23,000 1,019 Praxair, Inc. 21,100 790 Rohm and Haas Company 29,001 1,001 Sigma-Aldrich Corporation 13,400 392 Temple-Inland, Inc. 7,400 311 Union Carbide Corporation 17,700 876 USX-U. S. Steel Group 11,700 217 Vulcan Materials Company 13,300 568 *W.R. Grace & Co. 9,500 115 Westvaco Corporation 13,250 329 Weyerhaeuser Company 31,100 1,337
37 Balanced Portfolio 44
MARKET SHARES/ VALUE COMMON STOCK (47.8%) PAR (000'S) --------------------------------------------------------- BASIC MATERIALS continued Willamette Industries, Inc. 14,800 $ 403 Worthington Industries, Inc. 11,800 124 ----------- TOTAL 32,120 ----------- CAPITAL GOODS (4.1%) *Allied Waste Industries, Inc. 25,000 250 *American Power Conversion Corporation 25,500 1,041 Avery Dennison Corporation 14,900 1,000 The B.F. Goodrich Company 14,600 497 Ball Corporation 4,000 129 The Boeing Company 115,118 4,813 Briggs & Stratton Corporation 3,000 103 Caterpillar, Inc. 47,100 1,596 Cooper Industries, Inc. 12,500 407 Corning Incorporated 36,500 9,850 Crane Co. 8,725 212 Crown Cork & Seal Company, Inc. 17,100 257 Cummins Engine Company, Inc. 5,500 150 Danaher Corporation 18,900 934 Deere & Company 31,000 1,147 Dover Corporation 27,000 1,095 Eaton Corporation 9,800 657 Emerson Electric Co. 57,100 3,447 Fluor Corporation 10,100 319 General Dynamics Corporation 26,600 1,390 General Electric Company 1,304,300 69,128 Honeywell International, Inc. 104,850 3,532 Illinois Tool Works, Inc. 39,800 2,269 *Ingersoll-Rand Company 21,650 871 ITT Industries, Inc. 11,600 352 Johnson Controls, Inc. 11,300 580 Lockheed Martin Corporation 52,422 1,301 McDermott International, Inc. 7,900 70 Milacron, Inc. 4,900 71 Millipore Corporation 6,000 452 Minnesota Mining and Manufacturing Company 52,900 4,364 Molex Incorporated 26,025 1,252 NACCO Industries, Inc. - Class A 1,100 39 National Service Industries, Inc. 5,400 105 *Navistar International Corporation 8,370 260 Northrop Grumman Corporation 9,200 610 *Owens-Illinois, Inc. 19,900 233 PACCAR Inc. 10,390 412 Pall Corporation 16,466 305 Parker-Hannifin Corporation 14,900 510 Pitney Bowes, Inc. 35,100 1,404 Rockwell International Corporation 25,100 791 *Sealed Air Corporation 11,086 581 *Solectron Corporation 78,500 3,287 Textron, Inc. 19,700 1,070 *Thermo Electron Corporation 21,000 442 Thomas & Betts Corporation 7,700 147 The Timken Company 8,200 153
MARKET SHARES/ VALUE COMMON STOCK (47.8%) PAR (000'S) --------------------------------------------------------- CAPITAL GOODS continued Tyco International Ltd. 224,118 $ 10,618 United Technologies Corporation 62,900 3,703 Waste Management, Inc. 82,097 1,560 ----------- TOTAL 139,766 ----------- COMMUNICATION SERVICES (3.3%) ALLTEL Corporation 41,600 2,577 AT&T Corp. 501,070 15,846 Bell Atlantic Corporation 205,780 10,456 BellSouth Corporation 249,400 10,631 CenturyTel, Inc. 18,500 532 *Global Crossing Ltd. 103,285 2,718 GTE Corporation 128,800 8,018 *Nextel Communications, Inc. - Class A 96,600 5,911 SBC Communications, Inc. 452,050 19,550 Sprint Corporation (FON Group) 115,500 5,891 *Sprint Corporation (PCS Group) 114,200 6,795 U S WEST, Inc. 67,005 5,746 *WorldCom, Inc. 376,083 17,252 ----------- TOTAL 111,923 ----------- CONSUMER CYCLICAL (3.5%) American Greetings Corporation - Class A 8,500 162 Armstrong World Industries, Inc. 5,300 81 *AutoZone, Inc. 18,300 403 *Bed Bath & Beyond, Inc. 18,600 674 *Best Buy Co., Inc. 27,100 1,714 The Black & Decker Corporation 11,500 452 Brunswick Corporation 12,200 202 Carnival Corporation 81,800 1,595 *Cendant Corporation 93,573 1,310 Centex Corporation 7,900 186 Circuit City Stores, Inc. 26,900 893 *Consolidated Stores Corporation 14,700 176 *Convergys Corporation 20,200 1,048 Cooper Tire & Rubber Company 10,100 112 *Costco Wholesale Corporation 58,902 1,944 Dana Corporation 21,765 461 Delphi Automotive Systems Corporation 74,844 1,090 Dillard's, Inc. - Class A 13,900 170 Dollar General Corporation 43,785 854 Dow Jones & Company, Inc. 11,900 872 The Dun & Bradstreet Corporation 21,300 610 *Federated Department Stores, Inc. 27,800 938 Ford Motor Company 160,100 6,884 Gannett Co., Inc. 36,900 2,207 The Gap, Inc. 112,725 3,523 General Motors Corporation 73,405 4,262 Genuine Parts Company 23,575 472 The Goodyear Tire & Rubber Company 20,700 414 H&R Block, Inc. 13,000 421
Balanced Portfolio 38 45
MARKET SHARES/ VALUE COMMON STOCK (47.8%) PAR (000'S) --------------------------------------------------------- CONSUMER CYCLICAL continued Harcourt General, Inc. 9,400 $ 511 Harley-Davidson, Inc. 40,100 1,544 *Harrah's Entertainment, Inc. 17,000 356 Hasbro, Inc. 23,325 351 Hilton Hotels Corporation 48,900 458 The Home Depot, Inc. 305,097 15,235 IMS Health Incorporated 40,800 734 The Interpublic Group of Companies, Inc. 37,200 1,600 J. C. Penney Company, Inc. 34,500 636 Kaufman and Broad Home Corporation 6,300 125 *Kmart Corporation 64,500 439 Knight-Ridder, Inc. 10,300 548 *Kohl's Corporation 43,200 2,403 Leggett & Platt, Incorporated 26,000 429 The Limited, Inc. 56,970 1,232 Liz Claiborne, Inc. 7,800 275 Lowe's Companies, Inc. 50,700 2,082 Marriott International, Inc. - Class A 33,000 1,190 Masco Corporation 59,200 1,069 Mattel, Inc. 55,760 735 The May Department Stores Company 44,050 1,057 Maytag Corporation 11,200 413 The McGraw-Hill Companies, Inc. 26,000 1,404 Meredith Corporation 6,800 230 The New York Times Company - Class A 22,700 897 NIKE, Inc. - Class B 36,600 1,457 Nordstrom, Inc. 17,800 429 *Office Depot, Inc. 43,600 273 Omnicom Group, Inc. 23,500 2,093 Owens Corning 7,300 68 Pulte Corporation 5,700 123 *RadioShack Corporation 25,600 1,213 *Reebok International Ltd. 7,500 120 Russell Corporation 4,400 88 Sears, Roebuck & Co. 50,100 1,635 The Sherwin-Williams Company 22,000 466 Snap-on Incorporated 7,750 206 Springs Industries, Inc. - Class A 2,400 77 The Stanley Works 11,800 280 *Staples, Inc. 62,250 957 Target Corporation 58,100 3,370 The TJX Companies, Inc. 41,100 771 *Toys 'R Us, Inc. 31,800 463 Tribune Company 42,100 1,474 TRW, Inc. 16,100 698 V. F. Corporation 15,700 374 *Visteon Corporation 20,962 254 Wal-Mart Stores, Inc. 590,200 34,009 Whirlpool Corporation 9,900 462 Young & Rubicam, Inc. 9,200 526 ----------- TOTAL 121,969 -----------
MARKET SHARES/ VALUE COMMON STOCK (47.8%) PAR (000'S) --------------------------------------------------------- CONSUMER STAPLES (5.0%) Adolph Coors Company - Class B 4,900 $ 296 Alberto-Culver Company - Class B 7,400 226 Albertson's, Inc. 56,150 1,867 Anheuser-Busch Companies, Inc. 61,700 4,608 Avon Products, Inc. 32,100 1,428 Bestfoods 37,000 2,562 Brown-Forman Corporation - Class B 9,100 489 Campbell Soup Company 56,500 1,646 Cardinal Health, Inc. 37,300 2,760 *Clear Channel Communications, Inc. 44,900 3,368 The Clorox Company 31,300 1,403 The Coca-Cola Company 327,300 18,799 Coca-Cola Enterprises, Inc. 56,400 920 Colgate-Palmolive Company 77,200 4,622 Comcast Corporation - Class A 122,800 4,973 ConAgra, Inc. 65,300 1,245 CVS Corporation 51,900 2,076 Darden Restaurants, Inc. 17,000 276 Deluxe Corporation 9,700 229 Fort James Corporation 28,700 664 Fortune Brands, Inc. 21,700 500 General Mills, Inc. 39,900 1,526 The Gillette Company 142,100 4,965 The Great Atlantic & Pacific Tea Company, Inc. 5,100 85 H.J. Heinz Company 46,950 2,054 Hershey Foods Corporation 18,300 888 Kellogg Company 53,700 1,598 Kimberly-Clark Corporation 73,632 4,225 *The Kroger Co. 110,600 2,440 Longs Drug Stores Corporation 5,200 113 McDonald's Corporation 179,400 5,909 McKesson HBOC, Inc. 37,353 782 Nabisco Group Holdings Corp. 43,200 1,121 Newell Rubbermaid, Inc. 37,371 962 PepsiCo, Inc. 192,900 8,572 Philip Morris Companies, Inc. 313,500 8,327 The Procter & Gamble Company 174,300 9,979 The Quaker Oats Company 17,700 1,330 R. R. Donnelley & Sons Company 16,800 379 Ralston Purina Company 40,000 798 Rite Aid Corporation 34,300 225 *Safeway, Inc. 67,400 3,041 Sara Lee Corporation 120,400 2,325 The Seagram Company Ltd. 57,400 3,329 *Starbucks Corporation 24,300 928 SUPERVALU INC 18,500 353 SYSCO Corporation 43,700 1,841 Time Warner, Inc. 170,500 12,958 *Tricon Global Restaurants, Inc. 19,990 565 Tupperware Corporation 7,600 167 UST, Inc. 22,700 333 *Viacom, Inc. - Class B 201,961 13,771 Walgreen Co. 133,300 4,291
39 Balanced Portfolio 46
MARKET SHARES/ VALUE COMMON STOCK (47.8%) PAR (000'S) --------------------------------------------------------- CONSUMER STAPLES continued The Walt Disney Company 274,308 $ 10,647 Wendy's International, Inc. 15,800 281 Winn-Dixie Stores, Inc. 19,400 278 Wm. Wrigley Jr. Company 15,300 1,227 ----------- TOTAL 167,570 ----------- ENERGY (2.6%) Amerada Hess Corporation 12,000 741 Anadarko Petroleum Corporation 16,900 833 Apache Corporation 15,100 888 Ashland, Inc. 9,400 330 Baker Hughes Incorporated 43,640 1,396 Burlington Resources, Inc. 28,775 1,101 Chevron Corporation 87,000 7,379 Conoco, Inc. - Class B 83,000 2,039 Exxon Mobil Corporation 457,673 35,927 Halliburton Company 58,500 2,760 Kerr-McGee Corporation 12,657 746 Occidental Petroleum Corporation 48,700 1,026 Phillips Petroleum Company 33,600 1,703 *Rowan Companies, Inc. 12,200 371 Royal Dutch Petroleum Company 284,100 17,490 Schlumberger Limited 72,900 5,440 Sunoco, Inc. 12,000 353 Texaco, Inc. 73,300 3,903 Tosco Corporation 19,100 541 Transocean Sedco Forex, Inc. 27,704 1,480 Unilever N.V. 75,707 3,255 Union Pacific Resources Group, Inc. 33,358 734 Unocal Corporation 32,100 1,063 USX-Marathon Group 41,200 1,033 ----------- TOTAL 92,532 ----------- FINANCE (6.1%) AFLAC Incorporated 35,300 1,622 The Allstate Corporation 106,694 2,374 American Express Company 178,000 9,278 American General Corporation 32,703 1,995 American International Group, Inc. 205,178 24,108 AmSouth Bancorporation 51,800 816 Aon Corporation 33,975 1,055 Associates First Capital Corporation - Class A 96,538 2,154 Bank of America Corporation 226,195 9,726 The Bank of New York Company, Inc. 97,600 4,538 Bank One Corporation 151,945 4,036 BB&T Corporation 46,000 1,098 The Bear Stearns Companies, Inc. 15,002 624 Capital One Financial Corporation 26,100 1,165 The Charles Schwab Corporation 175,675 5,907 The Chase Manhattan Corporation 163,972 7,553 The Chubb Corporation 23,300 1,433 CIGNA Corporation 22,300 2,085 Cincinnati Financial Corporation 21,700 682
MARKET SHARES/ VALUE COMMON STOCK (47.8%) PAR (000'S) --------------------------------------------------------- FINANCE continued Citigroup, Inc. 446,782 $ 26,919 Comerica Incorporated 20,700 929 Conseco, Inc. 43,370 423 Countrywide Credit Industries, Inc. 15,000 455 Federal Home Loan Mortgage Corporation 92,100 3,730 Federal National Mortgage Association 135,800 7,087 First Union Corporation 130,886 3,248 Firstar Corporation 129,929 2,737 Firth Third Bancorp 40,875 2,585 FleetBoston Financial Corporation 121,351 4,126 Franklin Resources, Inc. 32,900 999 Golden West Financial Corporation 21,400 873 The Hartford Financial Services Group, Inc. 29,400 1,645 Household International, Inc. 62,259 2,588 Huntington Bancshares Incorporated 30,328 480 J.P. Morgan & Co. Incorporated 22,900 2,522 Jefferson-Pilot Corporation 13,875 783 KeyCorp 59,300 1,045 Lehman Brothers Holdings, Inc. 15,900 1,504 Lincoln National Corporation 25,900 936 Loews Corporation 14,100 846 Marsh & McLennan Companies, Inc. 35,400 3,697 MBIA, Inc. 13,200 636 MBNA Corporation 106,232 2,882 Mellon Financial Corporation 67,400 2,456 Merrill Lynch & Co., Inc. 49,100 5,647 MGIC Investment Corporation 14,000 637 Morgan Stanley Dean Witter & Co. 150,960 12,567 National City Corporation 81,700 1,394 Northern Trust Corporation 29,500 1,919 Old Kent Financial Corporation 18,480 494 Paine Webber Group, Inc. 18,900 860 The PNC Financial Services Group, Inc. 39,000 1,828 The Progressive Corporation 9,700 718 Providian Financial Corporation 18,850 1,697 Regions Financial Corporation 29,000 576 SAFECO Corporation 17,200 342 SLM Holding Corporation 21,100 790 SouthTrust Corporation 22,200 502 The St. Paul Companies, Inc. 30,106 1,027 State Street Corporation 21,200 2,249 Summit Bancorp 23,200 571 SunTrust Banks, Inc. 42,400 1,937 Synovus Financial Corp. 37,050 653 T. Rowe Price Associates, Inc. 15,900 676 Torchmark Corporation 17,400 430 U.S. Bancorp 99,787 1,921 Union Planters Corporation 18,700 522 UnumProvident Corporation 31,806 638
Balanced Portfolio 40 47
MARKET SHARES/ VALUE COMMON STOCK (47.8%) PAR (000'S) --------------------------------------------------------- FINANCE continued Wachovia Corporation 26,900 $ 1,459 Washington Mutual, Inc. 76,514 2,209 Wells Fargo & Company 218,760 8,477 ----------- TOTAL 211,120 ----------- HEALTHCARE (5.5%) Abbott Laboratories 203,700 9,077 Aetna, Inc. 18,993 1,219 Allergan, Inc. 17,400 1,296 *ALZA Corporation 13,500 798 American Home Products Corporation 173,000 10,164 *Amgen, Inc. 135,400 9,512 Bausch & Lomb Incorporated 7,000 542 Baxter International, Inc. 38,600 2,714 Becton, Dickinson and Company 33,300 955 *Biogen, Inc. 19,900 1,284 Biomet, Inc. 15,000 577 *Boston Scientific Corporation 55,000 1,207 Bristol-Myers Squibb Company 262,900 15,314 C. R. Bard, Inc. 6,800 327 Columbia/HCA Healthcare Corporation 74,650 2,267 Eli Lilly and Company 144,500 14,432 *Guidant Corporation 40,700 2,015 *HEALTHSOUTH Corporation 51,200 368 *Humana, Inc. 22,200 108 Johnson & Johnson 184,400 18,786 Mallinckrodt, Inc. 9,100 395 *Manor Care, Inc. 13,700 96 Medtronic, Inc. 158,300 7,885 Merck & Co., Inc. 309,700 23,731 PE Corporation 27,300 1,798 Pfizer, Inc. 825,950 39,646 Pharmacia Corporation 165,821 8,571 *Quintiles Transnational Corp. 15,200 215 Schering-Plough Corporation 194,700 9,832 *St. Jude Medical, Inc. 11,150 512 *Tenet Healthcare Corporation 41,300 1,115 UnitedHealth Group Incorporated 22,500 1,929 *Watson Pharmaceuticals, Inc. 12,700 683 *Wellpoint Health Networks, Inc. - Class A 8,400 608 ----------- TOTAL 189,978 ----------- TECHNOLOGY (15.3%) *3Com Corporation 45,400 2,616 *Adaptec, Inc. 13,700 312 *ADC Telecommunications, Inc. 39,800 3,338 Adobe Systems Incorporated 15,700 2,041 *Advanced Micro Devices, Inc. 19,500 1,506 *Agilent Technologies, Inc. 59,845 4,414 *Altera Corporation 26,400 2,691 *America Online, Inc. 302,400 15,952 *Analog Devices, Inc. 46,300 3,519 *Andrew Corporation 10,662 358
MARKET SHARES/ VALUE COMMON STOCK (47.8%) PAR (000'S) --------------------------------------------------------- TECHNOLOGY continued *Apple Computer, Inc. 42,800 $ 2,242 *Applied Materials, Inc. 101,400 9,189 Autodesk, Inc. 8,200 284 Automatic Data Processing, Inc. 83,500 4,472 *BMC Software, Inc. 32,400 1,182 *Cabletron Systems, Inc. 24,100 609 *Ceridian Corporation 19,200 462 *Cisco Systems, Inc. 906,700 57,632 *Citrix Systems, Inc. 23,700 449 Compaq Computer Corporation 224,467 5,738 Computer Associates International, Inc. 78,012 3,993 *Computer Sciences Corporation 22,200 1,658 *Compuware Corporation 47,800 496 *Comverse Technology, Inc. 20,200 1,879 *Conexant Systems, Inc. 28,500 1,386 *Dell Computer Corporation 339,900 16,761 Eastman Kodak Company 41,800 2,487 Electronic Data Systems Corporation 62,400 2,574 *EMC Corporation 269,686 20,749 Equifax, Inc. 18,700 491 First Data Corporation 55,500 2,754 *Gateway, Inc. 41,900 2,378 Hewlett-Packard Company 133,200 16,633 IKON Office Solutions, Inc. 19,900 77 Intel Corporation 442,700 59,184 International Business Machines Corporation 238,900 26,174 *KLA-Tencor Corporation 24,300 1,423 *Lexmark International Group, Inc. - Class A 16,900 1,137 Linear Technology Corporation 41,200 2,634 *LSI Logic Corporation 39,400 2,133 Lucent Technologies, Inc. 422,347 25,024 *Maxim Integrated Products, Inc. 36,800 2,500 *Micron Technology, Inc. 71,600 6,305 *Microsoft Corporation 689,700 55,176 *MIPS Technologies, Inc. - Class B 3,381 130 Motorola, Inc. 281,886 8,192 *National Semiconductor Corporation 22,700 1,288 *NCR Corporation 12,800 498 *Network Appliance, Inc. 40,400 3,252 Nortel Networks Corporation 382,640 26,115 *Novell, Inc. 43,300 401 *Oracle Corporation 373,850 31,427 *Parametric Technology Corporation 36,300 399 Paychex, Inc. 49,100 2,062 *PeopleSoft, Inc. 35,600 596 PerkinElmer, Inc. 6,300 417 Polaroid Corporation 5,900 107 QUALCOMM, Incorporated 97,800 5,868 Raytheon Company - Class B 44,800 862
41 Balanced Portfolio 48
MARKET SHARES/ VALUE COMMON STOCK (47.8%) PAR (000'S) --------------------------------------------------------- TECHNOLOGY continued Sabre Holdings Corporation - Class A 17,109 $ 488 *Sapient Corporation 7,700 823 Scientific-Atlanta, Inc. 21,000 1,565 *Seagate Technology, Inc. 30,100 1,656 Shared Medical Systems Corporation 3,600 263 *Siebel Systems, Inc. 25,500 4,171 *Silicon Graphics, Inc. 24,400 92 *Sun Microsystems, Inc. 209,200 19,024 Tektronix, Inc. 6,300 466 *Tellabs, Inc. 53,300 3,648 *Teradyne, Inc. 22,700 1,668 Texas Instruments Incorporated 215,500 14,802 *Unisys Corporation 41,200 600 *VERITAS Software Corporation 51,500 5,820 W.W. Grainger, Inc. 12,400 382 Xerox Corporation 88,000 1,826 *Xilinx, Inc. 42,600 3,517 *Yahoo!, Inc. 69,800 8,646 ----------- TOTAL 526,083 ----------- TRANSPORTATION (0.3%) *AMR Corporation 19,600 518 Burlington Northern Santa Fe Corporation 60,599 1,390 CSX Corporation 28,900 612 Delta Air Lines, Inc. 17,100 865 *FedEx Corporation 38,440 1,460 Kansas City Southern Industries, Inc. 14,600 1,295 Norfolk Southern Corporation 50,600 753 Ryder System, Inc. 7,900 150 Southwest Airlines Co. 66,875 1,266 Union Pacific Corporation 32,900 1,223 *US Airways Group, Inc. 9,500 371 ----------- TOTAL 9,903 ----------- UTILITIES (1.2%) *The AES Corporation 57,500 2,623 Ameren Corporation 18,200 614 American Electric Power Company, Inc. 42,740 1,266 Carolina Power & Light Company 21,100 674 Cinergy Corp. 21,105 537 CMS Energy Corporation 15,300 339 The Coastal Corporation 28,300 1,723 Columbia Energy Group 10,800 709 Consolidated Edison, Inc. 29,300 868 Constellation Energy Group 19,800 645 Dominion Resources, Inc. 31,525 1,352 DTE Energy Company 19,200 587 Duke Energy Corporation 48,471 2,733 Eastern Enterprises 3,600 227 Edison International 46,000 943
MARKET SHARES/ VALUE COMMON STOCK (47.8%) PAR (000'S) --------------------------------------------------------- UTILITIES continued El Paso Energy Corporation 30,300 $ 1,543 Enron Corp. 94,800 6,114 Entergy Corporation 32,700 889 FirstEnergy Corp. 30,900 722 Florida Progress Corporation 13,000 609 FPL Group, Inc. 23,800 1,178 GPU, Inc. 16,400 444 New Century Energies, Inc. 15,300 459 *Niagara Mohawk Holdings, Inc. 23,500 328 Nicor, Inc. 6,200 202 Northern States Power Company 20,500 414 ONEOK, Inc. 4,100 106 PECO Energy Company 24,600 992 Peoples Energy Corporation 4,700 152 PG&E Corporation 50,900 1,253 Pinnacle West Capital Corporation 11,200 379 PPL Corporation 19,033 418 Public Service Enterprise Group Incorporated 29,000 1,004 Reliant Energy, Inc. 39,226 1,160 Sempra Energy 27,059 460 The Southern Company 89,200 2,079 TXU Corp. 36,595 1,080 Unicom Corporation 28,800 1,114 The Williams Companies, Inc. 57,600 2,401 ----------- TOTAL 41,340 ----------- TOTAL COMMON STOCK (COST $663,124) 1,644,304 ----------- MONEY MARKET INVESTMENTS (12.2%) --------------------------------------------------------- CAPTIVE FINANCE COMPANIES (2.9%) Daimler-Chrysler N.A. Holdings, 6.54%, 7/31/00 23,500,000 23,372 General Motors Acceptance Corporation, 6.55%, 8/21/00 40,000,000 39,630 Toyota Motor Credit, 6.6%, 8/2/00 39,000,000 38,771 ----------- TOTAL 101,773 ----------- FEDERAL GOVERNMENT AND AGENCIES (0.6%) #Federal National Mortgage Association, 6.40%, 7/17/00 21,000,000 20,940 ----------- TOTAL 20,940 ----------- FINANCE SERVICES (4.0%) #Asset Securitization, 6.55%, 8/15/00 40,000,000 39,964 #Ciesco LP, 6.55%, 8/14/00 24,500,000 24,304 #Citicorp, 6.62%, 8/10/00 40,000,000 39,706 CXC Incorporated, 6.63%, 8/25/00 20,000,000 19,797 CXC Incorporated, 6.66%, 8/9/00 16,500,000 16,381 ----------- TOTAL 140,152 -----------
Balanced Portfolio 42 49
MARKET MONEY MARKET INVESTMENTS SHARES/ VALUE (12.2%) PAR (000'S) --------------------------------------------------------- MISC. BUSINESS CREDIT INSTITUTIONS (0.6%) Quincy Capital, 6.76%, 7/12/00 19,023,000 $ 18,984 ----------- TOTAL 18,984 ----------- OFFICE MACHINES (0.3%) #Xerox Corporation, 6.68%, 7/5/00 8,900,000 8,893 ----------- TOTAL 8,893 ----------- PERSONAL CREDIT INSTITUTIONS (1.2%) Associates Corporation of North America, 6.94%, 7/3/00 13,300,000 13,295 New Center Asset Trust, 6.55%, 8/21/00 30,000,000 29,721 ----------- TOTAL 43,016 ----------- SECURITY BROKERS AND DEALERS (2.0%) The Goldman Sachs Group, 6.57%, 7/5/00 28,270,000 28,249 The Goldman Sachs Group, 6.95%, 7/5/00 10,000,000 9,992 Salomon Smith Barney Holdings, Inc., 6.56%, 8/14/00 18,100,000 17,955 #Salomon Smith Barney Holdings Inc., 6.58%, 8/07/00 11,100,000 11,025 ----------- TOTAL 67,221 ----------- SHORT TERM BUSINESS CREDIT (0.6%) Transamerica Financial, 6.57%, 8/14/00 20,000,000 19,839 ----------- TOTAL 19,839 ----------- TOTAL MONEY MARKET INVESTMENTS (COST $420,818)/\ 420,818 ----------- TOTAL INVESTMENTS (99.4%) (COST $2,472,454)' 3,424,142 -----------
MARKET VALUE (000'S) --------------------------------------------------------- OTHER ASSETS, LESS LIABILITIES (0.6%) $ 19,375 ----------- TOTAL NET ASSETS (100.0%) $ 3,443,517 -----------
144A after the name of a security represents a security exempt from registration under Rule 144A of the Securities Act of 1993. These securities may be resold as transactions exempt from registration, normally to qualified institutional buyers. * Non-Income Producing + Defaulted security # Partially held by the custodian in a segregated account as collateral for open futures positions. Information regarding open futures contracts as of period end is summarized below.
UNREALIZED APPRECIATION/ NUMBER OF EXPIRATION (DEPRECIATION) ISSUER CONTRACTS DATE (000'S) ------------------------------------------------------------- S & P 500 626 Sep-00 $(1,990) Total Notional Value at 6/30/2000 $231,748 US Long Bond 245 Sep-00 $(1,040) Total Notional Value at 6/30/2000 $23,610
/\At 6/30/2000, the aggregate cost of securities for federal income tax purposes was $2,472,454 and the net unrealized appreciation of investments based on that cost was $951,688 which is comprised of $1,048,418 aggregate gross unrealized appreciation and $97,130 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements 43 Balanced Portfolio 50
Objective: Portfolio Strategy: Net Assets: High current income and capital Generate superior performance by investing in a $149,036,789 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. In a difficult environment for high yield bonds, the Portfolio performed slightly better than its benchmark, the Lehman Brothers High Yield Intermediate Market Index, for the six months ended June 2000 but underperformed for the last 12 months. High yield bond funds have been under pressure from several forces over the last two years. A rising level of defaults of bonds issued two to three years ago, when the market was very bullish and credit standards became somewhat lax, has hurt the asset class. Rising interest rates and generally difficult conditions in the bond market have exacerbated a challenging credit environment. Disappointing short-term performance, especially relative to stock funds, has caused retail investors to reduce investments in high yield bond funds, more than offsetting increases in exposure by institutional investors such as insurance companies and pension funds. Fund managers have had to sell securities to meet net redemptions; these sales have created downward pressure on bond prices. PERCENTAGE HOLDINGS BY INDUSTRY SECTOR 6/30/2000 [SECTOR ALLOCATION PIE CHART]
INDUSTRY SECTOR --------------- Telecommunications 20 Consumer Cyclicals 17 Broadcast & Cable 13 Basic Materials/Capital Goods/Energy 9 Consumer Staples 9 Financials 8 Utilities 8 Transport Services 5 Miscellaneous 4 Cash Equivalents 7
To cope with this situation, and also in anticipation that an economic slowdown may result in further market pressure, the Portfolio's managers have adopted a defensive stance. The focus is on relatively high quality issues that offer long-term value and above-average liquidity; some yield has been sacrificed for greater safety. The industry exposure has emphasized domestic sectors such as telecommunications, cable, broadcasting, health care and lodging, which are less subject to economic cycles than heavy industries. This approach is proving successful, as there have been no major credit losses in the Portfolio during 2000; the annualized market default rate for high yield bonds at mid-year is approximately 6%. PERFORMANCE RELATIVE TO THE LEHMAN BROTHERS INDEX [LINE GRAPH]
-------------------------------------------------------------- Average Annual Total Return For Periods Ended June 30, 2000 Since 1 Year 5 Years Inception# -------------------------------------------------------------- High Yield Bond Portfolio -2.14% 7.01% 8.07% Lehman Brothers High Yield Intermediate Market Index -1.05% 6.40% 7.32% -------------------------------------------------------------- # Inception date of 5/3/1994
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 67 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 58 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 44 51 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments June 30, 2000 (unaudited)
MARKET SHARES/ VALUE BONDS (83.8%) PAR (000'S) -------------------------------------------------------- BASIC MATERIALS (3.6%) METALS & MINING (3.1%) Centaur Mining & Exploration Limited, 11%, 12/01/07 1,250,000 $ 1,000 Glencore Nickel, Ltd., 9%, 12/01/14 500,000 415 Great Central Mines, Ltd., 8.875%, 04/01/08 2,400,000 1,944 USEC Inc., 6.625%, 01/20/06 1,650,000 1,318 --------- TOTAL 4,677 --------- PAPER (0.5%) APP China Group, Ltd., 14%, 03/15/10 (144A) 1,200,000 756 --------- TOTAL 756 --------- TOTAL BASIC MATERIALS 5,433 --------- CAPITAL GOODS (2.4%) Building One Services, 10.5%, 05/01/09 1,500,000 1,275 Integrated Electrical Services, Series B, 9.375%, 02/12/09 1,450,000 1,175 United Rentals, Inc., 8.8%, 08/15/08 1,250,000 1,100 --------- TOTAL CAPITAL GOODS 3,550 --------- CONSUMER CYCLICAL (15.7%) AUTO & TRUCKS (1.5%) Avis Group Holdings, Inc., 11%, 05/01/09 1,250,000 1,303 Budget Group Inc., 9.125%, 04/01/06 1,500,000 960 --------- TOTAL 2,263 --------- AUTO RELATED (1.4%) American Axle & Manufacturing Inc., 9.75%, 03/01/09 800,000 746 Federal-Mogul Corporation, 7.375%, 01/15/06 1,400,000 1,018 Lear Corporation, 8.11%, 05/15/09 400,000 364 --------- TOTAL 2,128 --------- FOOD SERVICE (0.6%) Host Marriott L.P., 8.375%, 02/15/06 1,000,000 930 --------- TOTAL 930 --------- HOME CONSTRUCTION (0.8%) Lennar Corporation, 9.95%, 05/01/10 (144A) 1,250,000 1,231 --------- TOTAL 1,231 --------- HOUSEHOLD FURNISHINGS - APPLIANCES (1.2%) Rent-A-Center, Inc, 11%, 08/15/08 1,800,000 1,746 --------- TOTAL 1,746 ---------
MARKET SHARES/ VALUE BONDS (83.8%) PAR (000'S) -------------------------------------------------------- LEISURE RELATED (2.6%) Bally Total Fitness Holdings, Series D, 9.875%, 10/15/07 1,600,000 $ 1,448 Boyds Collection Ltd., Series B, 9%, 05/15/08 750,000 660 Park Place Entertainment Corporation, 9.375%, 02/15/07 1,200,000 1,200 Royal Caribbean Cruises Ltd., 7%, 10/15/07 600,000 532 --------- TOTAL 3,840 --------- LODGING/RESORTS (4.2%) Felcor Suites LP, 7.625%, 10/01/07 1,250,000 1,086 Hilton Hotels Corp., 5%, 05/15/06 2,450,000 1,936 HMH Properties, Inc., Series B, 7.875%, 08/01/08 900,000 808 John Q. Hammons Hotels, Inc., 8.875%, 02/15/04 1,200,000 1,056 Starwood Hotels & Resorts, 7.375%, 11/15/15 1,650,000 1,390 --------- TOTAL 6,276 --------- PRINTING & PUBLISHING (1.9%) Jostens, Inc., 12.75%, 05/01/10 (144A) 1,000,000 985 Mail-Well, Inc., 5%, 11/01/02 1,800,000 1,469 Marvel Enterprises, Inc., 12%, 06/15/09 400,000 320 --------- TOTAL 2,774 --------- RETAIL - GENERAL (1.5%) Buhrmann US Inc., 12.25%, 11/01/09 2,150,000 2,258 --------- TOTAL 2,258 --------- TOTAL CONSUMER CYCLICAL 23,446 --------- CONSUMER STAPLES (9.4%) DRUGS (0.7%) ICN Pharmaceuticals, Inc., 8.75%, 11/15/08 (144A) 750,000 739 ICN Pharmaceuticals, Inc., 9.25%, 08/15/05 350,000 347 --------- TOTAL 1,086 --------- GAMING (2.9%) Hollywood Casino, 13%, 08/01/06 (144A) 850,000 903 Jupiters Limited, 8.5%, 03/01/06 1,000,000 933 Mandalay Resort Group, 7.625%, 07/15/13 1,850,000 1,516 Station Casinos, Inc., 9.875%, 07/01/10 (144A) 1,000,000 1,003 --------- TOTAL 4,355 ---------
45 High Yield Bond Portfolio 52
MARKET SHARES/ VALUE BONDS (83.8%) PAR (000'S) -------------------------------------------------------- HEALTHCARE (5.8%) Columbia/HCA Healthcare, Inc., 7.69%, 06/15/25 1,450,000 $ 1,146 Hanger Orthopedic Group, Inc., 11.25%, 06/15/09 1,150,000 1,001 HEALTHSOUTH Corporation, 3.25%, 04/01/03 3,700,000 2,904 HEALTHSOUTH Corporation, 6.875%, 06/15/05 300,000 257 Renal Treatment Centers, Inc., 5.625%, 07/15/06 1,200,000 798 Total Renal Care Holdings, Inc., 7%, 05/15/09 3,600,000 2,425 --------- TOTAL 8,531 --------- TOTAL CONSUMER STAPLES 13,972 --------- ENERGY (2.9%) COAL (0.7%) P&L Coal Holdings Corporation, 8.875%, 05/15/08 1,100,000 1,037 --------- TOTAL 1,037 --------- REFINING (2.2%) Conproca S.A., 12%, 06/16/10 (144A) 1,100,000 1,133 PDV America, Inc., 7.875%, 08/01/03 2,250,000 2,128 --------- TOTAL 3,261 --------- TOTAL ENERGY 4,298 --------- FINANCE (6.6%) BANKS (1.3%) Sovereign Bancorp, 10.5%, 11/15/06 1,900,000 1,876 --------- TOTAL 1,876 --------- FINANCE COMPANIES (3.2%) Metris Companies, Inc., 10.125%, 07/15/06 2,600,000 2,470 PDVSA Finance Ltd. 1999-i, 9.75%, 02/15/10 2,600,000 2,483 --------- TOTAL 4,953 --------- FINANCIAL SERVICES (1.1%) Labranche & Company, Series 144A, 12%, 03/01/07 1,600,000 1,594 --------- TOTAL 1,594 --------- INSURANCE (1.0%) Willis Corroon Corp., 9%, 02/01/09 1,750,000 1,470 --------- TOTAL 1,470 --------- TOTAL FINANCE 9,893 --------- MISCELLANEOUS (4.8%) R.E.I.T. (2.0%) Macerich Company, 7.25%, 12/15/02 (144A) 1,200,000 1,065 Security Capital U.S. Realty, 2%, 05/22/03 (144A) 2,500,000 1,969 --------- TOTAL 3,034 ---------
MARKET SHARES/ VALUE BONDS (83.8%) PAR (000'S) -------------------------------------------------------- REAL ESTATE (2.8%) Crescent Real Estate, 7%, 09/15/02 500,000 $ 460 Crescent Real Estate, 7.5%, 09/15/07 2,950,000 2,391 JDN Realty Corporation, 6.918%, 03/31/03 600,000 501 JDN Realty Corporation, 6.95%, 08/01/07 1,000,000 739 --------- TOTAL 4,091 --------- TOTAL MISCELLANEOUS 7,125 --------- TECHNOLOGY (27.1%) BROADCASTING (1.8%) Crown Castle International Corp., 10.75%, 08/01/11 1,000,000 1,014 +Spectrasite Holdings, Inc., 12.875%, 03/15/10 (144A) 800,000 436 XM Satellite Radio Holdings Inc., 14%, 03/15/10 1,400,000 1,232 --------- TOTAL 2,682 --------- CABLE (7.1%) Charter Communication Holdings, LLC, 8.625%, 04/01/09 800,000 703 +Charter Communication Holdings, LLC, 11.75%, 01/15/10 750,000 427 +Charter Communications Holdings, LLC, 9.92%, 04/01/11 750,000 426 +International Cabletel, Inc. 11.5%, 02/01/06 1,000,000 923 NTL Communications Corp., 11.5%, 10/01/08 1,950,000 1,940 +NTL, Inc., 9.75%, 04/01/08 1,900,000 1,188 Telewest Communications Plc, 9.875%, 02/01/10 (144A) 400,000 372 +Telewest Communications Plc, 9.25%, 04/15/09 1,000,000 540 +United Global Communications, Inc., Series B, 1.75%, 02/15/08 3,300,000 2,309 United Pan-Europe Communications N.V., 10.875%, 08/01/09 1,550,000 1,349 +United Pan-Europe Communications N.V., 13.75%, 2/01/10 600,000 282 --------- TOTAL 10,459 --------- ELECTRONICS (0.5%) Flextronics International Ltd., 9.875%, 07/01/10 800,000 806 --------- TOTAL 806 --------- TELECOMMUNICATIONS (17.7%) Adelphia Business Solutions, Inc., 12.25%, 09/01/04 1,900,000 1,919 Arch Communications Inc., 12.75%, 07/01/07 200,000 153 Arch Communications Inc., 13.75%, 04/15/08 4,100,000 3,300 Dobson Communications Corporation, 10.875%, 07/01/10 (144A) 600,000 603
High Yield Bond Portfolio 46 53
MARKET SHARES/ VALUE BONDS (83.8%) PAR (000'S) -------------------------------------------------------- TELECOMMUNICATIONS continued Exodus Communications, Inc., 11.625%, 07/15/10 (144A) 1,975,000 $ 1,980 FLAG Telecom Holdings Limited, 11.625%, 03/30/10 1,000,000 970 Global Crossing Holding, Ltd., 9.5%, 11/15/09 1,000,000 965 +GT Group Telecom, 13.25%, 02/01/10 (144A) 1,650,000 916 +Intermedia Communications, Inc., 12.5%, 05/15/06 600,000 545 +KMC Telecommunications Holdings, Inc., 12.5%, 02/15/08 750,000 353 KMC Telecommunications Holdings, 13.5%, 05/15/09 1,550,000 1,364 Level 3 Communications, 11%, 03/15/08 2,000,000 1,980 Metrocall, Inc., 9.75%, 11/01/07 300,000 206 Metrocall, Inc., 11%, 09/15/08 1,250,000 875 Nextel Communications, Inc., 9.375%, 11/15/09 1,150,000 1,098 +Nextel Communications, 9.95%, 02/15/08 1,150,000 842 NEXTLINK Communications, Inc., 10.75%, 06/01/09 1,050,000 1,034 PSINet Inc., 10%, 02/15/05 1,250,000 1,150 PSINet Inc., 11.5%, 11/01/08 250,000 235 Verio Inc., 10.625%, 11/15/09 800,000 887 Viatel, Inc., 11.25%, 04/15/08 2,400,000 1,776 Voicestream Wireless, 10.375%, 11/15/09 400,000 414 Williams Communications Group, 10.875%, 10/01/09 2,750,000 2,687 --------- TOTAL 26,252 --------- TOTAL TECHNOLOGY 40,199 --------- TRANSPORT SERVICES (3.1%) PROFESSIONAL SERVICES (0.6%) Coinmach Corp, 11.75%, 11/15/05 800,000 768 Decisionone Holdings, 7.94%, 08/07/05 101,266 47 Decisionone Holdings, 7.98%, 08/07/05 145,823 67 Decisionone Holdings, 8.29%, 08/07/05 26,519 12 --------- TOTAL 894 --------- TRUCKING - SHIPPING (2.5%) North American Van Lines, 13.375%, 12/01/09 (144A) 1,650,000 1,551 Stena AB, 8.75%, 06/15/07 1,150,000 1,003 Vectura Group Inc., Series B, 10.25%, 06/30/08 1,500,000 1,230 --------- TOTAL 3,784 --------- TOTAL TRANSPORT SERVICES 4,678 ---------
MARKET SHARES/ VALUE BONDS (83.8%) PAR (000'S) -------------------------------------------------------- UTILITIES (8.2%) UTILITY - ELECTRIC (1.7%) AES Corporation, 8.5%, 11/01/07 1,000,000 $ 913 Orion Power Holdings Inc., 12%, 05/01/10 (144A) 1,600,000 1,656 --------- TOTAL 2,569 --------- UTILITY - GARBAGE DISPOSAL (5.3%) Allied Waste North America, Inc., 7.625%, 01/01/06 2,100,000 1,837 Allied Waste North America, Inc., 7.875%, 01/01/09 1,750,000 1,492 Allied Waste North America, Inc., Series B, 10%, 08/01/09 500,000 418 IT Group, Series B, 11.25%, 04/01/09 600,000 537 Waste Management, Inc., 4%, 02/01/02 2,100,000 1,947 Waste Management, Inc., 7.125%, 10/01/07 1,750,000 1,567 --------- TOTAL 7,798 --------- UTILITY - GAS (1.2%) Eott Energy, 11%, 10/01/09 1,800,000 1,827 --------- TOTAL 1,827 --------- TOTAL UTILITIES 12,194 --------- TOTAL BONDS (COST $129,419) 124,788 --------- PREFERRED SECURITIES (7.6%) -------------------------------------------------------- CONSUMER CYCLICAL (1.3%) HOUSEHOLD FURNITURE, A (0.4%) **Samsonite Corporation 7,870 567 --------- TOTAL 567 --------- PRINTING & PUBLISHING (0.9%) PRIMEDIA, Inc. - Series D 5,000 480 PRIMEDIA, Inc. - Series F 10,000 904 --------- TOTAL 1,384 --------- TOTAL CONSUMER CYCLICAL 1,951 --------- FINANCE (1.1%) California Federal Preferred Capital 74,000 1,568 --------- TOTAL FINANCE 1,568 --------- HEALTHCARE (0.3%) Fresenius Medical Capital Trust II, 7.875%, 02/01/08 500,000 448 --------- TOTAL HEALTHCARE 448 --------- INFORMATIONAL RETRIEVAL SERVICES (0.5%) PSINet Inc. 20,000 678 --------- TOTAL INFORMATIONAL RETRIEVAL SERVICES 678 --------- TECHNOLOGY (4.4%) BROADCASTING (2.8%) **Crown Castle International Corp. 10,960 1,107 **Cumulus Media Inc. 21,320 1,731 Sinclair Capital 16,000 1,448 --------- TOTAL 4,286 ---------
47 High Yield Bond Portfolio 54
MARKET SHARES/ VALUE PREFERRED SECURITIES (7.6%) PAR (000'S) -------------------------------------------------------- CABLE (0.1%) Adelphia Communications Corporation 2,000 $ 201 --------- TOTAL 201 --------- TELECOMMUNICATIONS (1.5%) **Adelphia Business Solutions, Inc. 14,790 1,331 **NEXTLINK Communications, Inc. 17,738 914 --------- TOTAL 2,245 --------- TOTAL TECHNOLOGY 6,732 --------- TOTAL PREFERRED SECURITIES (COST $12,541) 11,377 --------- COMMON STOCK (1.5%) -------------------------------------------------------- COMPUTER PROGRAMMING SERVICES (0.0%) *Decisionone Corporation 4,062 23 --------- TOTAL COMPUTER PROGRAMMING SERVICES 23 --------- CONSUMER CYCLICAL (0.0%) APPAREL, TEXTILE (0.0%) *++Ithaca Industries, Inc. 136,000 0 --------- TOTAL 0 --------- LEISURE RELATED (0.0%) *Hedstrom Holdings, Inc. 201,674 2 --------- TOTAL CONSUMER CYCLICAL 2 --------- MISCELLANEOUS (0.0%) Meditrust Corporation 11,117 42 --------- TOTAL MISCELLANEOUS 42 --------- TECHNOLOGY (1.5%) *Arch Communications Inc. 202,240 1,102 *McLeodUSA Incorporated 27,405 567 *Viatel, Inc. 16,325 466 --------- TOTAL TECHNOLOGY 2,135 --------- TELEPHONE COMMUNICATIONS (0.0%) *RCN Corporation 2,494 63 --------- TOTAL TELEPHONE COMMUNICATIONS 63 --------- TOTAL COMMON STOCK (COST $6,895) 2,265 --------- WARRANTS (0.0%) -------------------------------------------------------- COMPUTER RELATED SERVICES (0.0%) *Decisionone Corporation 7,054 0 --------- TOTAL COMPUTER RELATED SERVICES 0 --------- CONSUMER CYCLICAL (0.0%) *Samsonite Corp. 6,250 19 --------- TOTAL CONSUMER CYCLICAL 19 ---------
MARKET SHARES/ VALUE WARRANTS (0.0%) PAR (000'S) -------------------------------------------------------- TECHNOLOGY (0.0%) *Arch Communications Inc. 32,686 $ 30 *KMC Telecom Holdings, Inc. 6,250 19 --------- TOTAL TECHNOLOGY 49 --------- TOTAL WARRANTS (COST $1,692) 68 --------- MONEY MARKET INVESTMENTS (7.1%) -------------------------------------------------------- FINANCE SERVICES (3.5%) Ciesco-LP, 6.55%, 08/16/00 5,100,000 5,057 --------- TOTAL FINANCE SERVICES 5,057 --------- PERSONAL CREDIT INSTITUTIONS (0.3%) Associates Corporation of North America 6.94%, 07/03/00 500,000 500 --------- TOTAL PERSONAL CREDIT INSTITUTIONS 500 --------- SECURITY BROKERS AND DEALERS (3.3%) Salomon Smith Barney Holdings, 6.58%, 08/07/00 5,000,000 4,966 --------- TOTAL SECURITY BROKERS AND DEALERS 4,966 --------- TOTAL MONEY MARKET INVESTMENTS (COST $10,523) 10,523 --------- TOTAL INVESTMENTS (100.0%) (COST $161,070) /\ 149,021 --------- OTHER ASSETS, LESS LIABILITIES (0.0%) 16 --------- TOTAL NET ASSETS (100.0%) $ 149,037 ---------
* Non-Income Producing 144A after the name of a security represents a security exempt from registration under Rule 144A of the Securities Act of 1993. These securities may be resold as transactions exempt from registration, normally to qualified institutional buyers. + 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 /\At 6/30/2000, the aggregate cost of securities for federal income tax purposes was $161,070 and the net unrealized depreciation of investments based on that cost was $12,049 which is comprised of $3,367 aggregate gross unrealized appreciation and $15,416 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements High Yield Bond Portfolio 48 55
Objective: Portfolio Strategy: Net Assets: A stable and relatively high level Invest in high grade corporate bonds, U.S. $275,428,134 of long-term total return and government bonds and bonds of government preservation of capital agencies.
SELECT BOND PORTFOLIO The Select Bond Portfolio invests in high quality debt securities, primarily 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 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 unusually wide spreads between corporate and U.S. government bonds, some government securities were replaced with high quality corporate issues. Over the last six months the Select Bond Portfolio has moved toward a more defensive posture with regard to spread and duration. At the end of June, the Portfolio remains defensive, in the belief that wider spreads and higher yields are likely in the near future. During the first quarter of 2000 the position in mortgages was reduced because mortgages appeared somewhat rich relative to corporate bonds. Despite this reduced exposure, mortgage holdings hurt performance because defaults on underlying loans caused the prices of two mortgage issues in the Portfolio to fall. These two issues were the main reason the Portfolio's return was below its benchmark. Overall, the Portfolio's mortgage holdings are of very good quality, and no further defaults are expected. PERCENTAGE HOLDINGS 6/30/2000 [SECTOR ALLOCATION PIE CHART]
PERCENTAGE HOLDINGS ------------------- Corporate Bonds 24 Mortgage-Backed and Asset-Backed Securities 35 Government and Government Agencies 36 Short-Term Investments 5
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]
---------------------------------------------------- Average Annual Total Return For Periods Ended June 30, 2000 1 Year 5 Years 10 Years ---------------------------------------------------- Select Bond Portfolio 2.34% 5.62% 8.08% Merrill Lynch Domestic Master Index 4.57% 6.26% 7.89% ----------------------------------------------------
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 6/30/90. 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 58 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. 49 Select Bond Portfolio 56 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments June 30, 2000 (unaudited)
MARKET SHARES/ VALUE CORPORATE BONDS (24.0%) PAR (000'S) -------------------------------------------------------- BANK HOLDING COMPANIES (0.9%) BT Institutional Capital Trust, 7.75%, 12/01/26 (144A) 3,000,000 $ 2,508 --------- TOTAL BANK HOLDING COMPANIES 2,508 --------- BEVERAGES (1.6%) Anheuser-Busch Companies, Inc., 7.5%, 3/15/12 4,500,000 4,510 --------- TOTAL BEVERAGES 4,510 --------- CHEMICALS & ALLIED PRODUCTS (3.3%) Chevron Corporation, 6.625%, 10/1/04 4,500,000 4,444 Dow Capital B.V., 8.5%, 6/8/10 1,800,000 1,893 Johnson & Johnson, 6.625%, 9/1/09 2,750,000 2,661 --------- TOTAL CHEMICALS & ALLIED PRODUCTS 8,998 --------- ELECTRIC SERVICES (3.6%) Ohio Edison Company, 7.375%, 9/15/02 1,000,000 1,000 Public Service Electric & Gas Co., 6.875%, 1/1/03 2,250,000 2,231 Scottish Power PLC, 5.65%, 11/1/06 4,500,000 4,056 South Carolina Electric & Gas, 6.125%, 3/1/09 1,750,000 1,607 Texas Utilities Electric Co., 7.875%, 3/1/23 1,000,000 943 --------- TOTAL ELECTRIC SERVICES 9,837 --------- FINANCE COMPANIES (3.4%) Ford Motor Credit Corporation, 7.375%, 10/28/09 824,000 797 General Electric Capital Corporation, 8.75%, 5/21/07 4,000,000 4,298 General Motors Acceptance Corporation, 7.75%, 1/19/10 4,250,000 4,225 --------- TOTAL FINANCE COMPANIES 9,320 --------- GENERAL MERCHANDISE STORES (3.6%) The Home Depot, Inc., 6.5%, 9/15/04 6,300,000 6,240 Wal-Mart Stores, Inc., 6.55%, 8/10/04 2,300,000 2,270 Wal-Mart Stores, Inc., 6.875%, 8/10/09 1,800,000 1,760 --------- TOTAL GENERAL MERCHANDISE STORES 10,270 --------- NEWSPAPERS (2.1%) Times Mirror Company, 7.45%, 10/15/09 5,850,000 5,781 --------- TOTAL NEWSPAPERS 5,781 ---------
MARKET SHARES/ VALUE CORPORATE BONDS (24.0%) PAR (000'S) -------------------------------------------------------- REAL ESTATE OPERATOR LESSORS (0.8%) Post Apartment Homes, 8.125%, 6/15/2005 2,125,000 $ 2,122 --------- TOTAL REAL ESTATE OPERATOR LESSORS 2,122 --------- TELEPHONE COMMUNICATIONS (2.4%) Deutsche Telekom Int AG, 7.75%, 6/15/2005 2,975,000 2,995 New England Telephone and Telegraph, 5.875%, 4/15/09 4,000,000 3,524 --------- TOTAL TELEPHONE COMMUNICATIONS 6,519 --------- TEXTILE GOODS (0.3%) +Polysindo International Finance, 11.375%, 6/15/06 4,200,000 798 --------- TOTAL TEXTILE GOODS 798 --------- TRANSPORTATION SERVICES (2.0%) United Parcel Service, 8.375%, 4/1/20 5,000,000 5,525 --------- TOTAL TRANSPORTATION SERVICES 5,525 --------- TOTAL CORPORATE BONDS (COST $70,488) 66,188 --------- GOVERNMENT (DOMESTIC AND FOREIGN) AND AGENCY BONDS (36.4%) -------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (36.4%) #Aid-Israel, 0%, 11/1/24 8,900,000 1,826 Federal Home Loan Bank, 5.54%, 1/8/09 3,700,000 3,283 Federal National Mortgage Association, 5.97%, 10/1/08 3,887,820 3,597 Federal National Mortgage Association, 6.22%, 2/1/06 1,881,574 1,788 Federal National Mortgage Association, 6.24%, 1/1/06 5,303,365 5,049 Federal National Mortgage Association, 6.265%, 10/1/08 2,944,088 2,767 Federal National Mortgage Association, 6.32%, 2/1/06 3,814,839 3,642 Federal National Mortgage Association, 6.36%, 4/1/08 3,706,599 3,514 Federal National Mortgage Association, 6.39%, 4/1/08 1,424,340 1,353 Federal National Mortgage Association, 6.5%, 9/25/05 1,982,538 1,928 Federal National Mortgage Association, 6.75%, 4/25/18 2,261,418 2,204 Federal National Mortgage Association, 6.75%, 12/25/23 3,500,000 3,278
Select Bond Portfolio 50 57
GOVERNMENT (DOMESTIC AND MARKET FOREIGN) AND AGENCY SHARES/ VALUE BONDS (36.4%) PAR (000'S) -------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES continued Federal National Mortgage Association, 7%, 6/1/03 217,187 $ 215 Federal National Mortgage Association, 7.36%, 4/1/11 3,247,376 3,249 Federal National Mortgage Association, 7.5%, 10/1/27 6,810,806 6,744 Federal National Mortgage Association, 8.4%, 2/25/09 2,500,000 2,555 Federal National Mortgage Association, 10%, 10/1/17 49,533 53 Federal National Mortgage Association, 11%, 12/1/12 51,151 56 Federal National Mortgage Association, 11%, 9/1/17 743,711 827 Federal National Mortgage Association, 11%, 12/01/17 220,261 243 Federal National Mortgage Association, 11%, 2/1/18 309,685 342 Federal National Mortgage Association, 11.5%, 4/1/18 304,309 341 Federal National Mortgage Association, 12%, 9/1/12 700,166 788 Federal National Mortgage Association, 12%, 12/1/12 151,981 171 Federal National Mortgage Association, 12%, 9/1/17 210,088 238 Federal National Mortgage Association, 12%, 10/1/17 236,650 269 Federal National Mortgage Association, 12%, 12/01/17 224,862 255 Federal National Mortgage Association, 12%, 2/1/18 246,726 280 Federal National Mortgage Association, 12.25%, 1/1/18 147,174 167 Federal National Mortgage Association, 12.5%, 4/1/18 125,527 144 Federal National Mortgage Association, 13%, 11/1/12 116,905 134 Federal National Mortgage Association, 13%, 11/01/17 201,720 234 Federal National Mortgage Association, 13%, 12/01/17 133,362 155 Federal National Mortgage Association, 13%, 2/1/18 295,707 343 Federal National Mortgage Association, 14%, 12/01/17 80,543 96 Government National Mortgage Association, 7%, 5/15/23 275,202 269 Government National Mortgage Association, 7.5%, 4/15/22 211,904 211 Government National Mortgage Association, 7.5%, 10/15/23 582,603 581 Government National Mortgage Association, 7.5%, 10/15/25 27,449 27
GOVERNMENT (DOMESTIC AND MARKET FOREIGN) AND AGENCY SHARES/ VALUE BONDS (36.4%) PAR (000'S) -------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES continued Government National Mortgage Association, 7.5%, 11/15/25 11,602 $ 12 Government National Mortgage Association, 7.5%, 5/15/26 11,720 12 Government National Mortgage Association, 7.5%, 1/15/27 332,539 331 Government National Mortgage Association, 7.5%, 2/15/27 431,811 429 Government National Mortgage Association, 7.5%, 3/15/27 44,022 44 Government National Mortgage Association, 7.5%, 4/15/27 91,339 91 Government National Mortgage Association, 7.5%, 8/15/27 11,537 11 Government National Mortgage Association, 7.5%, 6/15/28 416,494 414 Government National Mortgage Association, 8%, 1/15/26 341,420 346 Government National Mortgage Association, 8%, 2/15/26 414,811 420 Government National Mortgage Association, 8%, 8/15/26 491,058 498 Government National Mortgage Association, 8%, 9/15/26 226,266 229 Government National Mortgage Association, 8%, 12/15/26 116,335 118 Government National Mortgage Association, 8%, 1/15/27 357,887 362 Government National Mortgage Association, 8%, 3/15/27 383,683 388 Government National Mortgage Association, 8%, 4/15/27 747,523 757 Government National Mortgage Association, 8%, 6/15/27 356,261 361 Government National Mortgage Association, 8%, 7/15/27 371,918 377 Government National Mortgage Association, 8%, 8/15/27 298,119 302 Government National Mortgage Association, 8%, 9/15/27 284,917 288 Government National Mortgage Association, 8.5%, 9/15/21 47,700 49 Government National Mortgage Association, 8.5%, 3/15/23 1,842 2 Government National Mortgage Association, 8.5%, 6/15/23 3,879 4 Government National Mortgage Association, 8.5%, 6/15/24 86,913 89 Government National Mortgage Association, 8.5%, 7/15/24 50,485 52 Government National Mortgage Association, 8.5%, 9/15/24 1,449 1 Government National Mortgage Association, 8.5%, 11/15/24 385,988 396
51 Select Bond Portfolio 58
GOVERNMENT (DOMESTIC AND MARKET FOREIGN) AND AGENCY SHARES/ VALUE BONDS (36.4%) PAR (000'S) -------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES continued Government National Mortgage Association, 8.5%, 2/15/25 45,869 $ 47 Government National Mortgage Association, 11%, 1/15/18 3,619,623 3,940 Rural Housing Trust - Class D, 6.33%, 4/1/26 1,103,531 1,086 US Treasury Inflation Index Bond, 3.875%, 4/15/29 3,497,868 3,584 #US Treasury, 4.875%, 3/31/01 2,380,000 2,351 #US Treasury, 5%, 2/28/01 4,000,000 3,963 #US Treasury, 5.5%, 8/15/28 580,000 532 #US Treasury, 6.125%, 11/15/27 1,030,000 1,027 #US Treasury, 6.125%, 8/15/29 11,050,000 11,168 #US Treasury, 6.375%, 8/15/07 1,300,000 1,337 #US Treasury, 6.5%, 2/15/10 10,055,000 10,398 #US Treasury, 6.75%, 05/15/05 1,235,000 1,264 --------- TOTAL GOVERNMENT (DOMESTIC AND FOREIGN) AND AGENCY BONDS (COST $101,955) 100,296 --------- MORTGAGE/ASSET BACKED SECURITIES (34.6%) -------------------------------------------------------- ASSET-BACKED SECURITIES (CMO'S) (1.4%) Commercial Mortgage Acceptance Corporation, Series 1997-ML1, Class B, 6.6437%, 12/15/07 (144A) 2,000,000 1,909 The Equitable Life Insurance Society of the U S, Class C1, 7.52%, 5/15/06 2,000,000 1,967 --------- TOTAL ASSET-BACKED SECURITIES (CMO'S) 3,876 --------- AUTO RELATED (1.4%) Fleetwood Credit Corporation Grantor Trust - Class A, 6.4%, 05/15/13 598,514 592 Team Fleet Financing - Class A, 6.65%, 12/15/02 (144A) 3,200,000 3,130 --------- TOTAL AUTO RELATED 3,722 --------- BANK HOLDING COMPANIES (1.0%) Nationsbank Lease Pass Through Trust, Series 1997-A, Class 1, 7.442%, 1/10/11 (144A) 2,876,081 2,810 --------- TOTAL BANK HOLDING COMPANIES 2,810 ---------
MARKET MORTGAGE/ASSET BACKED SHARES/ VALUE SECURITIES (34.6%) PAR (000'S) -------------------------------------------------------- COMMERCIAL MORTGAGES (19.3%) Asset Securitization Corporation, Series 1996-MD6, Class CS2, 1.098%, 11/13/26, IO 52,000,000 $ 2,126 Asset Securitization Corporation, Series 1996-MD6, Class CS1, 1.257%, 11/13/26, IO 14,098,517 350 Asset Securitization Corporation, Series 1997-D5, Class PS1, 1.367%, 2/14/41, IO 11,845,943 1,008 Chase Commercial Mortgage Securities Corporation, Class B, 7.37%, 6/19/29 1,000,000 990 Chase Commercial Mortgage Securities Corporation, Series 1997-2, Class A2, 6.6%, 11/19/07 5,000,000 4,777 Chase Commercial Mortgage Securities Corporation, Series 1997-2, Class B, 6.6%, 11/19/07 2,000,000 1,891 Credit Suisse First Boston Mortgage Securities Corporation, Series 1997-C1, Class A2, 7.26%, 6/20/07 (144A) 1,419,651 1,385 Credit Suisse First Boston Mortgage Securities Corporation, Series 1997-C1, Class B, 7.28%, 6/20/07 (144A) 1,500,000 1,449 Criimi Mae Commercial Mortgage Trust, Series 1998-C1, Class A1, 7%, 11/2/06 3,000,000 2,695 Criimi Mae Commercial Mortgage Trust, Series 1998-C1, Class B, 7%, 11/2/11 4,000,000 3,159 DLJ Mortgage Acceptance Corporation, Series 1997-CF2, Class S, .357%, 10/15/17 (144A) IO 102,944,885 2,059 DLJ Commercial Mortgage Corporation, Series 1998-CF1, Class S, .718%, 1/15/18, IO 118,466,655 4,114 DLJ Mortgage Acceptance Corp., Series 1994-MF11, Class A2, 8.1%, 6/18/04 1,000,000 1,022 DLJ Mortgage Acceptance Corporation, Series 1994-MF11, Class A1, 8.1%, 6/18/04 1,245,595 1,273 Kmart CMBS Financing, Inc. - Class B, 6.597%, 3/01/07 2,000,000 1,997 Kmart CMBS Financing, Inc. - Class C, 6.897%, 03/01/07 (144A) 2,500,000 2,488 Kmart CMBS Financing, Inc. - Class D, 7.297%, 03/01/07 (144A) 2,000,000 1,991 LB Mortgage Trust, Series 1991-2, Class A3, 8.3962%, 1/20/17 5,483,963 5,667
Select Bond Portfolio 52 59
MARKET MORTGAGE/ASSET BACKED SHARES/ VALUE SECURITIES (34.6%) PAR (000'S) -------------------------------------------------------- COMMERCIAL MORTGAGES continued Malan Mortgage Series Trust, Class A3, 7.8%, 8/15/05 (144A) 3,000,000 $ 3,005 Midland Realty Acceptance Corporation, Series 1996-C2, Class AEC, 1.389%, 1/25/29, IO 13,039,894 700 Mortgage Capital Funding, Inc., Series 1997-MC1, Class A3, 7.288%, 3/20/07 5,323,000 5,250 Nomura Asset Securities Corporation, Series 1998-D6, Class A2, 7.028%, 3/17/28 2,800,000 2,620 RMF Commercial Mortgage Pass- Through, Series 1997-1, Class F, 7.471%, 1/15/19 (144A) 1,800,000 1,222 --------- TOTAL COMMERCIAL MORTGAGES 53,238 --------- CREDIT CARD ASSET BACKED (0.4%) Iroquois Trust, Series 1997-2, Class A, 6.752%, 6/25/07 (144A) 1,125,299 1,101 --------- TOTAL CREDIT CARD ASSET BACKED 1,101 --------- FRANCHISE LOAN RECEIVABLES (2.2%) Enterprise Mortgage Acceptance Company, Series 1998-1, Class A2, 6.38%, 4/15/07 (144A) 3,100,000 2,924 Enterprise Mortgage Acceptance Company, Series 1998-1, Class IO, 1.378%, 1/15/23 (144A) IO 29,565,923 1,897 Global Franchise Trust, Series 1998-1, Class A1, 6.349%, 4/10/04 1,342,183 1,310 --------- TOTAL FRANCHISE LOAN RECEIVABLES 6,131 --------- HOME EQUITY LOAN (0.7%) Amresco Residential Securities, Series 1998-2, Class A2, 6.245%, 5/25/22 1,893,635 1,878 --------- TOTAL HOME EQUITY LOAN 1,878 --------- MANUFACTURED HOUSING (1.2%) Mid-State Trust, Series 6, Class A3, 7.54%, 7/1/35 949,285 892 Vanderbilt Mortgage and Finance Inc. - Series 1997-B - Class 1A4, 7.19%, 2/7/14 2,500,000 2,473 --------- TOTAL MANUFACTURED HOUSING 3,365 ---------
MARKET MORTGAGE/ASSET BACKED SHARES/ VALUE SECURITIES (34.6%) PAR (000'S) -------------------------------------------------------- OTHER ASSET BACKED (2.5%) Eaglemark Trust - Class A, 6.75%, 11/15/02 193,066 $ 193 FMAC Loan Receivables Trust, Series 1998-A, Class A1, 6.2%, 9/15/20 (144A) 1,176,090 1,141 Harley-Davidson Eaglemark Motorcycle Trust, Series 1998-2, Class A2, 5.87%, 4/15/04 1,500,000 1,476 Health Care Receivables, 6.25%, 2/01/03 (144A) 1,125,000 1,098 Heilig-Meyers Master Trust, Series 1998-1A, Class A, 6.125%, 1/20/07 (144A) 3,000,000 2,915 --------- TOTAL OTHER ASSET BACKED 6,823 --------- OTHER INDUSTRIES (0.6%) Nations Credit Grantor Trust - Class A1, 6.35%, 4/15/14 1,335,020 1,314 Newcourt Equipment Receivables, Series 1997-A, Class B, 6.764%, 9/20/04 (144A) 399,470 391 --------- TOTAL OTHER INDUSTRIES 1,705 --------- RESIDENTIAL MORTGAGES (0.9%) Blackrock Capital Finance L.P., Series 1997-R1, Class B3, 7.75%, 3/25/37 (144A) 3,802,146 1,103 Blackrock Capital Finance L.P., Series 1997-R3, Class B3, 7.25%, 11/25/28 (144A) 4,297,821 1,332 --------- TOTAL RESIDENTIAL MORTGAGES 2,435 --------- UTILITIES (3.0%) Comed Transitional Funding Trust, Series 1998-1, Class A7, 5.74%, 12/25/10 3,500,000 3,140 Peco Energy Transition Trust, Series 1999-A, Class A7, 6.13%, 3/1/09 5,500,000 5,070 --------- TOTAL UTILITIES 8,210 --------- TOTAL MORTGAGE/ASSET BACKED SECURITIES (COST $105,776) 95,294 --------- MONEY MARKET INVESTMENTS (4.7%) -------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (0.6%) #Federal National Mortgage Association, 6.40%, 7/17/00 1,600,000 1,595 --------- TOTAL FEDERAL GOVERNMENT AND AGENCIES 1,595 --------- FINANCE (1.8%) #The CIT Group, 6.6%, 8/9/00 5,000,000 4,965 --------- TOTAL FINANCE 4,965 ---------
53 Select Bond Portfolio 60
MARKET MONEY MARKET INVESTMENTS SHARES/ VALUE (4.7%) PAR (000'S) -------------------------------------------------------- FINANCE SERVICES (1.8%) #Citicorp, 6.62%, 8/10/00 5,000,000 $ 4,963 --------- TOTAL FINANCE SERVICES 4,963 --------- PERSONAL CREDIT INSTITUTIONS (0.5%) Associates Corporation of North America, 6.94%, 7/3/00 1,400,000 1,399 --------- TOTAL PERSONAL CREDIT INSTITUTIONS 1,399 --------- TOTAL MONEY MARKET INVESTMENTS (COST $12,922) 12,922 --------- TOTAL INVESTMENTS (99.7%) (COST $291,141)/\ 274,700 --------- OTHER ASSETS, LESS LIABILITIES (0.3%) 728 --------- TOTAL NET ASSETS (100.0%) $ 275,428 ---------
#Partially held by the custodian in a segregated account as collateral for open futures positions. Information regarding open futures contracts as of period end is summarized below.
UNREALIZED APPRECIATION/ NUMBER OF EXPIRATION (DEPRECIATION) ISSUERS CONTRACTS DATE (000'S) --------------------------------------------------------------- US 10 Yr Agency 165 Sep-00 $ (40) Total Notional Value at 6/30/2000, $15,220 90 Day Euro 31 Sep-00 $ (10) Total Notional Value at 6/30/2000, $7,202 US 10 Yr Note 165 Sep-00 $ 56 Total Notional Value at 6/30/2000, $16,194 US Long Bond 475 Sep-00 $(451) Total Notional Value at 6/30/2000, $45,788
IO-- Interest Only 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. +Defaulted Security /\ At 6/30/2000, the aggregate cost of securities for federal income tax purposes was $291,141 and the net unrealized depreciation of investments based on that cost was $16,441 which is comprised of $1,116 aggregate gross unrealized appreciation and $17,557 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements Select Bond Portfolio 54 61
Objective: Portfolio Strategy: Net Assets: Maximum current income consistent Achieve stability of capital by investing in $358,519,221 with liquidity and stability of short-term debt securities. capital
THE 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. During the first six months of 2000, managers of the Money Market Portfolio continued to successfully forecast Federal Reserve policy. Maturities were kept short in anticipation of the interest rate increases that occurred in February, March and May, then lengthened slightly in the correct expectation that there would be no increase at the June meeting of the Federal Reserve Board. At the end of June, maturities are shorter than the market index, which is indicating less than a 50% probability that rates will again be pushed upward in August or September. In contrast, the Portfolio's managers believe that warning signs of inflation will cause the Fed to raise rates 25 basis points or more by the end of September. It is therefore advantageous to keep maturities short so that funds will be available to take advantage of the higher returns on money market instruments that are likely over the next few months. 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. 55 Money Market Portfolio 62 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments June 30, 2000 (unaudited)
MARKET SHARES/ VALUE MONEY MARKET INVESTMENTS (107.2%) PAR (000'S) -------------------------------------------------------- ASSET-BACKED SECURITIES (CMO'S) (9.7%) Asset Securitization, 6.55%, 8/15/00 9,825,000 $ 9,745 Asset Securitization, 6.6%, 7/6/00 5,000,000 4,995 Copelco Captial Funding, 6.13%, 3/19/01 11,000,000 11,000 Fidelity Equipment Lease, 6.13%, 12/15/00 5,073,126 5,073 Orix Credit Alliance, 6.12%, 12/15/00 4,075,783 4,076 --------- TOTAL ASSET-BACKED SECURITIES (CMO'S) 34,889 --------- AUTO & TRUCKS (8.0%) Ford Motor Credit Co., 6.55%, 7/17/00 9,000,000 8,974 General Motors Acceptance Corp., 6.55%, 8/15/00 9,000,000 8,926 Toyota Motor Credit, 6.6%, 8/2/00 11,000,000 10,936 --------- TOTAL AUTO & TRUCKS 28,836 --------- CAPTIVE FINANCE COMPANIES (2.5%) Daimler-Chrysler N.A., 6.54%, 7/31/00 9,000,000 8,951 --------- TOTAL CAPTIVE FINANCE COMPANIES 8,951 --------- ELECTRICAL EQUIPMENT (5.0%) General Electric Capital Corp., 6.68%, 7/13/00 11,000,000 10,975 General Electric Capital Corp., 6.9%, 7/5/00 7,000,000 6,995 --------- TOTAL ELECTRICAL EQUIPMENT 17,970 --------- ELECTRONIC COMPUTERS (1.4%) International Business Machines Corporation, 6.8%, 7/14/00 5,000,000 4,988 --------- TOTAL ELECTRONIC COMPUTERS 4,988 --------- FEDERAL GOVERNMENT AND AGENCIES (4.7%) Federal Home Loan Bank, 6.48%, 7/3/00 16,850,000 16,844 --------- TOTAL FEDERAL GOVERNMENT AND AGENCIES 16,844 --------- FINANCE LESSORS (3.3%) Receivable Capital Trust, 6.58%, 7/26/00 6,000,000 5,973 Receivable Capital Trust, 6.59%, 7/6/00 5,000,000 4,995 Receivable Capital Trust, 6.85%, 7/11/00 700,000 699 --------- TOTAL FINANCE LESSORS 11,667 ---------
MARKET SHARES/ VALUE MONEY MARKET INVESTMENTS (107.2%) PAR (000'S) -------------------------------------------------------- FINANCE SERVICES (15.1%) Caterpillar Financial Services Corporation, 6.86%, 6/1/01 10,000,000 $ 10,000 Centric Capital Corp., 6.78%, 7/12/00 11,000,000 10,977 Ciesco LP, 6.54%, 8/21/00 11,000,000 10,898 Citicorp, 6.57%, 8/9/00 11,000,000 10,922 CXC Incorporated, 6.66%, 8/9/00 5,000,000 4,964 International Securitization Corp., 6.65%, 7/31/00 6,461,000 6,425 --------- TOTAL FINANCE SERVICES 54,186 --------- FLAVORING EXTRACTS & SYRUPS (1.0%) Coca-Cola Company, 6.63%, 7/13/00 3,500,000 3,492 --------- TOTAL FLAVORING EXTRACTS & SYRUPS 3,492 --------- FOOD AND KINDRED PRODUCTS (2.5%) Philip Morris Capital Company, 6.65%, 7/21/00 9,000,000 8,967 --------- TOTAL FOOD AND KINDRED PRODUCTS 8,967 --------- MISC. BUSINESS CREDIT INSTITUTIONS (5.8%) National Rural Utility, 6.54%, 8/16/00 11,000,000 10,908 Quincy Capital Corporation, 6.56%, 7/24/00 10,000,000 9,958 --------- TOTAL MISC. BUSINESS CREDIT INSTITUTIONS 20,866 --------- OFFICE MACHINES (0.3%) Xerox Credit Corporation, 7.02%, 7/5/00 1,100,000 1,099 --------- TOTAL OFFICE MACHINES 1,099 --------- PERSONAL CREDIT INSTITUTIONS (22.4%) American General Finance, 6.6%, 8/21/00 9,000,000 8,916 Associates Corp. of NA, 6.77%, 6/26/01 10,000,000 10,000 Associates Corp. of NA, 6.94%, 7/3/00 8,000,000 7,997 The CIT Group Holdings, 5.63%, 2/2/01 10,500,000 10,442 CXC Incorporated, 6.56%, 8/1/00 6,000,000 5,966 Household Finance Corp., 6.7%, 7/14/00 9,000,000 8,978 Household Finance Corp., 6.88%, 7/3/00 8,000,000 7,997 New Center Asset Trust, 6.56%, 8/14/00 11,000,000 10,911 Variable Funding Capital, 6.57%, 7/5/00 8,930,000 8,923 --------- TOTAL PERSONAL CREDIT INSTITUTIONS 80,130 ---------
Money Market Portfolio 56 63
MARKET SHARES/ VALUE MONEY MARKET INVESTMENTS (107.2%) PAR (000'S) -------------------------------------------------------- PHARMACEUTICAL PREPARATIONS (1.6%) Pfizer, Inc., 6.63%, 7/27/00 5,600,000 $ 5,573 --------- TOTAL PHARMACEUTICAL PREPARATIONS 5,573 --------- PHONE COMMUNICATIONS EXCEPT RADIOPHONE (4.5%) BellSouth Telecommunications, Inc., 6.54%, 8/11/00 7,200,000 7,146 U.S. West Communication, 6.63, 7/12/00 9,000,000 8,982 --------- TOTAL PHONE COMMUNICATIONS EXCEPT RADIOPHONE 16,128 --------- RETAIL-GENERAL (3.0%) Wal-Mart Stores, 6.57%, 8/15/00 11,000,000 10,910 --------- TOTAL RETAIL-GENERAL 10,910 --------- SECURITY BROKERS AND DEALERS (11.6%) The Goldman Sachs Group, 6.95%, 7/5/00 13,620,000 13,610 Merrill Lynch, 6.67%, 8/21/00 8,090,000 8,014 Morgan Stanley, Dean Witter, Discover, & Co., 6.65%, 7/17/00 11,000,000 10,967 Salomon Smith Barney Holdings, Inc., 6.56%, 8/14/00 9,000,000 8,928 --------- TOTAL SECURITY BROKERS AND DEALERS 41,519 ---------
MARKET SHARES/ VALUE MONEY MARKET INVESTMENTS (107.2%) PAR (000'S) -------------------------------------------------------- SHORT TERM BUSINESS CREDIT (4.8%) American Express Credit, 6.6%, 8/11/00 2,300,000 $ 2,283 American Express Credit, 6.78%, 7/7/00 7,000,000 6,992 Transamerica Financial Corporation, 6.62%, 7/18/00 8,000,000 7,975 --------- TOTAL SHORT TERM BUSINESS CREDIT 17,250 --------- TOTAL MONEY MARKET INVESTMENTS (COST $384,265) 384,265 --------- TOTAL INVESTMENTS (107.2%) (COST $384,265)/\ 384,265 --------- OTHER ASSETS, LESS LIABILITIES (-7.2%) (25,746) --------- TOTAL NET ASSETS (100.0%) $ 358,519 ---------
/\Also represents cost for federal income tax purposes. The Accompanying Notes are an Integral Part of the Financial Statements 57 Money Market Portfolio 64 PERFORMANCE SUMMARY AS OF JUNE 30, 2000 Variable Life -- Policies Issued Before October 11, 1995
AGGRESSIVE GROWTH & SMALL CAP GROWTH INTERNATIONAL INDEX 400 GROWTH INCOME INDEX 500 TOTAL RETURN GROWTH STOCK STOCK EQUITY STOCK STOCK STOCK STOCK BALANCED (AS OF 6/ 30/ 2000) DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION -------------------------------------------------------------------------------------------------------------------------------- 1 year................ 50.59% 21.42% (10.28%) (5.51%) (8.34%) (22.81%) (13.68%) (14.77%) 5 years............... - 125.45% 46.92% - 126.77% 78.33% 127.03% 59.94% Annualized.......... - 17.66% 8.00% - 17.79% 12.26% 17.82% 9.85% 10 years.............. - - - - - - 275.99%' 153.29% Annualized.......... - - - - - - 14.16% 9.74% Since division inception in Variable Life Account............. 50.59%Y 170.16%* 58.02%# (5.51%)Y 161.51%## 107.91%## - - Annualized.......... - 17.51% 7.71% - 16.89% 12.62% - - Since portfolio inception++......... 81.81%Y 401.16%* 95.17% (0.47%)Y - - - - Annualized.......... 66.90% 18.32% 9.78% (0.41%) - - - - Current Yield###.... Variable Complife -- Policies Issued On or After October 11, 1995** Without Surrender Charge -------------------------------------------------------------------------------------------------------------------------------- 1 year................ 62.28% 30.98% (3.22%) 1.93% (1.12%) (16.73%) (6.89%) (8.07%) 5 years............... - 144.21% 59.14% - 145.62% 93.16% 145.90% 73.24% Annualized.......... - 19.55% 9.74% - 19.69% 14.07% 19.72% 11.62% 10 years.............. - - - - - - 309.34%' 175.75% Annualized.......... - - - - - - 15.14% 10.68% Since division inception in Variable Life Account............. 62.28%Y 192.97%* 71.37%# 1.93%Y 183.59%## 125.48%## - - Annualized.......... - 19.07% 9.14% - 18.44% 14.11% - - Since portfolio inception ++........ 96.16%Y 445.35%* 111.87% 7.38%Y - - - - Annualized.......... 78.12% 19.37% 11.04% 6.29% - - - - Current Yield###.... Variable Complife -- Policies Issued On or After October 11, 1995** With Surrender Charge -------------------------------------------------------------------------------------------------------------------------------- 1 year................ 22.51% (8.79%) (42.99%) (37.84%) (40.89%) (56.50%) (46.66%) (47.84%) 5 years............... - 96.30% 11.23% - 97.71% 45.25% 97.99% 25.33% Annualized.......... - 14.44% 2.15% - 14.60% 7.75% 14.66% 4.61% 10 years.............. - - - - - - 270.63%' 137.04% Annualized.......... - - - - - - 14.00% 9.01% Since division inception in Variable Life Account............. 22.51%Y 148.74%* 27.14%# (37.84%)Y 139.36%## 81.25%## - - Annualized.......... - 15.95% 3.98% - 15.23% 10.14% - - Since portfolio inception ++........ 54.35%Y 406.64%* 69.48% (34.44%)Y - - - - Annualized.......... 45.05% 18.45% 7.64% (30.35%) - - - - Current Yield###....
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 this division in the Variable Life Account was 5/3/94. Actual portfolio inception was 4/30/93. Performance quoted prior to 4/30/93 is based on actual investment experience, adjusted for expenses of the product and premium charges. These returns are not a guarantee of future performance. ##Inception date of 5/3/94. 'On April 30, 1993, the Index 500 Stock Portfolio was indexed to approximate the performance of the Standard and Poor's 500 Composite Stock Price Index. Before then, the Portfolio was actively managed. Performance Summary 58 65
RUSSELL RUSSELL RUSSELL HIGH YIELD SELECT MONEY MULTI-STYLE AGGRESSIVE RUSSELL RUSSELL REAL ESTATE BOND BOND MARKET EQUITY EQUITY NON-U.S. CORE BOND SECURITIES DIVISION DIVISION DIVISION DIVISION+ DIVISION+ DIVISION+ DIVISION+ DIVISION ------------------------------------------------------------------------------------------------------------------------------- (21.23%) (17.63%) (14.94%) (19.58%) (12.60%) (4.40%) (16.12%) (15.22%) 9.81% 2.87% 1.92% - - - - - 1.89% 0.57% 0.38% - - - - - - 60.75% 23.58% - - - - - - 4.86% 2.14% - - - - - 25.15%## - - (19.58%) (12.60%) (4.40%) (16.12%) (15.22%)-- 3.71% - - - - - - - - - - 46.61% 18.38% 13.93% (3.95%) (16.59%)-- - - - 11.59% 4.95% 3.81% (1.15%) (14.40%) 6.21% ------------------------------------------------------------------------------------------------------------------------------- (15.03%) (11.14%) (8.25%) (13.24%) (5.72%) 3.13% (9.52%) (8.55%) 18.94% 11.42% 10.40% - - - - - 3.53% 2.19% 2.00% - - - - - - 75.01% 34.54% - - - - - - 5.76% 3.01% - - - - - 35.71%## - - (13.24%) (5.72%) 3.13% (9.52%) (8.55%)-- 5.08% - - - - - - - - - - 58.55% 28.03% 23.21% 3.87% (10.01%)-- - - - 14.12% 7.34% 6.16% 1.09% (8.64%) 6.21% ------------------------------------------------------------------------------------------------------------------------------- (54.80%) (50.91%) (48.02%) (53.01%) (45.49%) (36.64%) (49.29%) (48.32%) (28.97%) (36.49%) (37.51%) - - - - - (6.62%) (8.69%) (8.98%) - - - - - - 36.30% (4.17%) - - - - - - 3.15% (0.42%) - - - - - (8.52%)## - - (53.01%) (45.49%) (36.64%) (49.29%) (48.32%)-- (1.43%) - - - - - - - - - - 12.68% (17.84%) (22.66%) (42.00%) (51.82%)-- - - - 3.48% (5.48%) (7.10%) (14.45%) (46.51%) 6.21%
++Returns stated are as of the inception date of the portfolio which precedes availability in the Variable Life Account. See the following footnotes for portfolio inception dates. *Inception date of this division in the Variable Life Account was 5/3/94. Actual Portfolio inception was 11/30/1990. Performance quoted prior to 11/30/1990 is based on actual investment experience, adjusted for expenses of the product and premium charges. **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. --Inception date of this division in the Variable Life Account was 6/30/99. Actual fund inception was 4/30/99. Performance quoted prior to 6/30/99 is based on actual investment experience, adjusted for expenses of the product and premium charges. +Inception date of this division in the Variable Life Account was 6/30/99. Actual fund inception was 1/2/97. Performance quoted prior to 6/30/99 is based on actual investment experience, adjusted for expenses of the product and premium charges. ###For the seven-day period ended June 30, 2000, the Money Market Portfolio's yield was 6.21% and was equivalent to a compound effective yield of 6.40%. The seven-day yield does not include deductions that are included in the separate accounts. The yield quotation more closely reflects the current earnings of the Money Market Portfolio than the total return quotation. 59 Performance Summary 66 PERFORMANCE SUMMARY AS OF JUNE 30, 2000 VARIABLE EXECUTIVE LIFE -- POLICIES FIRST OFFERED ON MARCH 2, 1998*** WITHOUT SURRENDER CHARGE
AGGRESSIVE GROWTH & SMALL CAP GROWTH INTERNATIONAL INDEX 400 GROWTH INCOME INDEX 500 TOTAL RETURN GROWTH STOCK STOCK EQUITY STOCK STOCK STOCK STOCK BALANCED (AS OF 6/ 30/ 2000) DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION ------------------------------------------------------------------------------------------------------------------------------- 1 year................ 49.98% 20.83% (10.84%) (6.07%) (8.90%) (23.35%) (14.24%) (15.32%) 5 years............... - 128.49% 34.65% - 111.85% 54.36% 105.37% 48.85% Annualized.......... - 17.97% 6.13% - 16.20% 9.07% 15.48% 8.28% 10 years.............. - - - - - - 364.50% 176.36% Annualized.......... - - - - - - 16.60% 10.70% Since division inception in Variable Life Account............. 49.98%-- 225.03%* 62.27%** (6.07%)-- 200.84%# 107.09%# - - Annualized.......... - 18.34% 7.16% - 17.04% 10.96% - - Since portfolio inception++......... 154.50%-- 481.06%* 94.19% (13.17%)-- - - - - Annualized.......... 59.53% 19.24% 8.65% (6.82%) - - - - Current Yield###.... VARIABLE EXECUTIVE LIFE -- POLICIES FIRST OFFERED ON MARCH 2, 1998*** WITH SURRENDER CHARGE ------------------------------------------------------------------------------------------------------------------------------- 1 year................ 64.98% 35.83% 4.16% 8.93% 6.10% (8.35%) 0.76% (0.32%) 5 years............... - 128.49% 34.65% - 111.85% 54.36% 105.37% 48.85% Annualized.......... - 17.97% 6.13% - 16.20% 9.07% 15.48% 8.28% 10 years.............. - - - - - - 364.50% 176.36% Annualized.......... - - - - - - 16.60% 10.70% Since division inception in Variable Life Account............. 64.98%-- 225.03%* 62.27%** 8.93%-- 200.84%# 107.09%# - - Annualized.......... - 18.34% 7.16% - 17.04% 10.96% - - Since portfolio inception++......... 189.27%-- 481.06%* 94.19% 8.33%-- - - - - Annualized.......... 70.08% 19.24% 8.65% 4.08% - - - - Current Yield###....
Performance Summary 60 67
RUSSELL RUSSELL RUSSELL HIGH YIELD SELECT MONEY MULTI-STYLE AGGRESSIVE RUSSELL RUSSELL REAL ESTATE BOND BOND MARKET EQUITY EQUITY NON-U.S. CORE BOND SECURITIES DIVISION DIVISION DIVISION DIVISION+ DIVISION+ DIVISION+ DIVISION+ DIVISION --------------------------------------------------------------------------------------------------------------------------- (21.77%) (18.17%) (15.49%) (20.12%) (13.15%) (4.96%) (16.66%) (15.77%) (8.26%) (1.59%) 0.70% - - - - - (1.71%) (0.32%) 0.14% - - - - - - 45.20% 26.02% - - - - - - 3.80% 2.34% - - - - - 3.63%# - - (20.12%) (13.15%) (4.96%) (16.66%) (15.77%)-- 0.51% - - - - - - - - - - 27.88% 2.79% 16.09% (10.89%) (36.38%)-- - - - 6.34% 0.69% 3.80% (2.84%) (20.24%) 6.21% --------------------------------------------------------------------------------------------------------------------------- (6.77%) (3.17%) (0.49%) (5.12%) 1.85% 10.04% (1.66%) (0.77%) (8.26%) (1.59%) 0.70% - - - - - (1.71%) (0.32%) 0.14% - - - - - - 45.20% 26.02% - - - - - - 3.80% 2.34% - - - - - 3.63%# - - (5.12%) 1.85% 10.04% (1.66%) (0.77%)-- 0.51% - - - - - - - - - - 27.88% 2.79% 16.09% (10.89%) (17.70%)-- - - - 6.34% 0.69% 3.80% (2.84%) (9.28%) 6.21%
61 Performance Summary 68 VARIABLE JOINT LIFE -- POLICIES FIRST OFFERED ON DECEMBER 28, 1998**** WITHOUT SURRENDER CHARGE
AGGRESSIVE GROWTH & SMALL CAP GROWTH INTERNATIONAL INDEX 400 GROWTH INCOME INDEX 500 TOTAL RETURN GROWTH STOCK STOCK EQUITY STOCK STOCK STOCK STOCK BALANCED (AS OF 6/ 30/ 2000) DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION ------------------------------------------------------------------------------------------------------------------------------- 1 year................ 47.20% 17.14% (15.34%) (10.47%) (13.36%) (28.09%) (18.81%) (19.92%) 5 years............... - 92.71% 10.73% - 79.24% 28.85% 74.04% 23.13% Annualized.......... - 14.02% 2.06% - 12.38% 5.20% 11.72% 4.25% 10 years.............. - - - - - - 282.60%/\ 122.79% Annualized.......... - - - - - - 14.36% 8.34% Since division inception in Variable Life Account............. 47.20%-- 164.07%* 27.06%** (10.47%)-- 144.60%# 65.90%# - - Annualized.......... - 14.88% 3.48% - 13.63% 7.50% - - Since portfolio inception ++........ 145.89%-- 382.33%* 52.89% (21.64%)-- - - - - Annualized.......... 56.81% 17.04% 5.45% (11.48%) - - - - Current Yield###.... VARIABLE JOINT LIFE -- POLICIES FIRST OFFERED ON DECEMBER 28, 1998**** WITH SURRENDER CHARGE ------------------------------------------------------------------------------------------------------------------------------- 1 year................ (2.80%) (32.86%) (65.34%) (60.47%) (63.36%) (78.09%) (68.81%) (69.92%) 5 years............... - 81.89% 1.36% - 68.66% 19.06% 63.48% 13.47% Annualized.......... - 12.71% 0.27% - 11.02% 3.55% 10.33% 2.56% 10 years.............. - - - - - - 282.60%/\ 122.79% Annualized.......... - - - - - - 14.36% 8.34% Since division inception in Variable Life Account............. (2.80%)-- 154.72%* 19.76%** (60.47%)-- 135.55%# 57.87%# - - Annualized.......... - 14.29% 2.61% - 13.02% 6.74% - - Since portfolio inception ++........ 45.68%-- 381.51%* 47.97% (73.47%)-- - - - - Annualized.......... 20.70% 17.02% 5.02% (48.49%) - - - - Current Yield###....
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. ++Returns stated are as of the inception date of the portfolio which precedes availability in the Variable Life Account. See the following footnotes for portfolio inception dates. *Inception date of this division in the Variable Life Account 5/3/94. Actual portfolio inception was 11/30/1990. Performance quoted prior to 5/3/94 is based on actual investment experience, adjusted for expenses of the product and premium charges. **Inception date of this division in the Variable Life Account was 5/3/94. Actual portfolio inception was 4/30/93. Performance quoted prior to 5/3/94 is based on actual investment experience, adjusted for expenses of the product and premium charges. ***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. ****Product inception date of 12/28/98. (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. --Inception date of this division in the Variable Life Account was 6/30/99. Actual fund inception was 4/30/99. Performance quoted prior to 6/30/99 is based on actual investment experience, adjusted for expenses of the product and premium charges. +Inception date of this division in the Variable Life Account was 6/30/99. Actual fund inception was 1/2/97. Performance quoted prior to 6/30/99 is based on actual investment experience, adjusted for expenses of the product and premium charges. #Inception date of 5/3/94. ###For the seven-day period ended June 30, 2000, the Money Market Portfolio's yield was 6.21% and was equivalent to a compound effective yield of 6.40%. The seven-day yield does not include deductions that are included in the separate accounts. The yield quotation more closely reflects the current earnings of the Money Market Portfolio than the total return quotation. /\On April 30, 1993, the Index 500 Stock Portfolio was indexed to approximate the performance of the Standard and Poor's 500 Composite Stock Price Index. Before then, the Portfolio was actively managed. Performance Summary 62 69
RUSSELL RUSSELL RUSSELL HIGH YIELD SELECT MONEY MULTI-STYLE AGGRESSIVE RUSSELL RUSSELL REAL ESTATE BOND BOND MARKET EQUITY EQUITY NON-U.S. CORE BOND SECURITIES DIVISION DIVISION DIVISION DIVISION+ DIVISION+ DIVISION+ DIVISION+ DIVISION --------------------------------------------------------------------------------------------------------------------------- (26.49%) (22.82%) (20.09%) (24.81%) (17.70%) (9.33%) (21.28%) (20.37%) (26.14%) (21.14%) (19.39%) - - - - - (5.88%) (4.64%) (4.22%) - - - - - - 13.34% (3.45%) - - - - - - 1.26% (0.35%) - - - - - (20.48%)# - - (24.81%) (17.70%) (9.33%) (21.28%) (20.37%)-- (3.22%) - - - - - - - - - - 6.56% (15.95%) (5.87%) (28.80%) (44.21%)-- - - - 1.60% (4.25%) (1.50%) (8.14%) (25.31%) 6.21% --------------------------------------------------------------------------------------------------------------------------- (76.49%) (72.82%) (70.09%) (74.81%) (67.70%) (59.33%) (71.28%) (70.37%) (34.48%) (29.72%) (28.00%) - - - - - (8.11%) (6.81%) (6.36%) - - - - - - 13.34% (3.45%) - - - - - - 1.26% (0.35%) - - - - - (26.54%)# - - (74.81%) (67.70%) (59.33%) (71.28%) (70.37%)-- (4.31%) - - - - - - - - - - (11.36%) (32.32%) (22.95%) (44.15%) (85.63%)-- - - - (2.97%) (9.30%) (6.31%) (13.55%) (62.09%) 6.21%
63 Performance Summary 70 NORTHWESTERN MUTUAL SERIES FUND, INC. Statement of Assets and Liabilities June 30, 2000 (in thousands, except per share amounts)
SMALL CAP AGGRESSIVE INTERNATIONAL INDEX 400 GROWTH GROWTH STOCK GROWTH STOCK EQUITY STOCK STOCK PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ---------------------------------------------------------------------------------------------------------------------------- ASSETS Investments, at value (1)........................... $ 204,161 $1,810,674 $ 825,318 $ 106,570 $ 764,774 Cash................................................ -- 10,649 -- -- -- Due from Futures Variation Margin................... -- -- -- -- 477 Due from Sale of Fund Shares........................ 1,525 11,981 40,775 846 196 Due from Sale of Securities......................... 3,987 3,608 24,049 -- 8,789 Due from Sale of Foreign Currency................... -- -- 1,314 -- -- Dividends and Interest Receivable................... 15 166 3,096 62 374 ---------- ---------- ---------- ---------- ---------- TOTAL ASSETS...................................... 209,688 1,837,078 894,552 107,478 774,610 ---------- ---------- ---------- ---------- ---------- LIABILITIES Due on Purchase of Securities....................... 12,742 8,343 15,423 16 4,248 Due on Purchase of Foreign Currency................. -- -- 1,311 -- -- Due on Redemption of Fund Shares.................... -- 15,108 41,229 -- 737 Due to Investment Advisor........................... 183 1,499 444 -- 536 Accrued Expenses.................................... 38 16 223 99 34 Due on Futures Variation Margin..................... -- -- -- 157 -- ---------- ---------- ---------- ---------- ---------- TOTAL LIABILITIES................................. 12,963 24,966 58,630 272 5,555 ---------- ---------- ---------- ---------- ---------- NET ASSETS........................................ $ 196,725 $1,812,112 $ 835,922 $ 107,206 $ 769,055 ========== ========== ========== ========== ========== REPRESENTED BY: Aggregate Paid in Capital (2), (3).................. $ 159,807 $ 967,829 $ 687,333 $ 96,144 $ 528,786 Undistributed Net Investment Income................. 75 529 8,454 737 3,772 Undistributed Accumulated Net Realized Gain (Loss) on Investments.................................... 7,447 188,039 21,775 8,317 12,969 Net Unrealized Appreciation (Depreciation) of: Investment Securities............................. 29,396 655,715 119,070 2,351 223,777 Index Futures Contracts........................... -- -- -- (343) (249) Foreign Currency Transactions..................... -- -- (710) -- -- ---------- ---------- ---------- ---------- ---------- Net Assets for Shares Outstanding (2)............... $ 196,725 $1,812,112 $ 835,922 $ 107,206 $ 769,055 ========== ========== ========== ========== ========== Net Asset Value, Offering and Redemption Price per Share............................................. $ 2.12 $ 4.86 $ 1.67 $ 1.20 $ 2.64 ========== ========== ========== ========== ========== (1) Investments, at cost.............................. $ 174,765 $1,154,959 $ 706,248 $ 104,219 $ 540,997 (2) Shares outstanding................................ 92,902 372,944 500,776 89,010 290,912 (3) Shares authorized, $.01 par value................. 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 (Prepared from Unaudited Figures) Statements of Assets and Liabilities 64 71
GROWTH AND INDEX 500 HIGH YIELD SELECT MONEY INCOME STOCK STOCK BALANCED BOND BOND MARKET PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ----------------------------------------------------------------------------- $ 630,221 $2,268,576 $3,424,142 $ 149,021 $ 274,700 $ 384,265 -- 165 1,141 525 -- -- -- 316 1,619 -- 64 -- 160 243 -- 104 54 28,215 5,623 4,420 14,016 999 4,069 -- -- -- -- -- -- -- 527 1,973 20,220 3,097 3,180 350 ---------- ---------- ---------- ---------- ---------- ---------- 636,531 2,275,693 3,461,138 153,746 282,067 412,830 ---------- ---------- ---------- ---------- ---------- ---------- 10,999 -- 10,492 4,352 5,782 27,260 -- -- -- -- -- -- 868 5,078 5,364 216 715 26,793 605 772 1,764 128 141 192 30 73 1 13 1 66 -- -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- 12,502 5,923 17,621 4,709 6,639 54,311 ---------- ---------- ---------- ---------- ---------- ---------- $ 624,029 $2,269,770 $3,443,517 $ 149,037 $ 275,428 $ 358,519 ========== ========== ========== ========== ========== ========== $ 573,718 $1,237,035 $2,326,267 $ 193,882 $ 293,282 $ 358,519 2,126 11,484 58,833 8,283 9,238 -- 5,561 25,441 109,759 (41,079) (10,206) -- 42,624 995,917 951,688 (12,049) (16,441) -- -- (107) (3,030) -- (445) -- -- -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- $ 624,029 $2,269,770 $3,443,517 $ 149,037 $ 275,428 $ 358,519 ========== ========== ========== ========== ========== ========== $ 1.45 $ 3.72 $ 2.07 $ 0.81 $ 1.08 $ 1.00 ========== ========== ========== ========== ========== ========== $ 587,597 $1,272,659 $2,472,454 $ 161,070 $ 291,141 $ 384,265 430,199 610,132 1,662,433 183,739 254,833 358,536 2,000,000 2,000,000 3,000,000 2,000,000 1,000,000 1,000,000
65 Statements of Assets and Liabilities 72 NORTHWESTERN MUTUAL SERIES FUND, INC. Statement of Operations June 30, 2000 (in thousands)
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.................................... $ 477 $ 4,184 $ 1,549 $ 500 $ 3,080 $ 219 Dividends (1)............................... 70 619 9,821 376 2,201 3,695 ------- -------- -------- ------- ------- -------- TOTAL INCOME........................... 547 4,803 11,370 876 5,281 3,914 ------- -------- -------- ------- ------- -------- Expenses Management Fees............................. 443 4,264 2,592 103 1,497 1,777 Custodian Expenses.......................... 10 14 129 16 10 10 Other Expenses.............................. 18 10 173 12 12 11 Audit Fees.................................. -- -- -- 10 -- -- ------- -------- -------- ------- ------- -------- TOTAL EXPENSES......................... 471 4,288 2,894 141 1,519 1,798 ------- -------- -------- ------- ------- -------- Less Waived Fees: Paid by Affiliate...................... -- (5) -- -- (2) (5) Paid Indirectly........................ (4) (9) -- (2) (8) (5) ------- -------- -------- ------- ------- -------- TOTAL NET EXPENSES..................... 467 4,274 2,894 139 1,509 1,788 ------- -------- -------- ------- ------- -------- Net Investment Income (Loss).................. 80 529 8,476 737 3,772 2,126 ------- -------- -------- ------- ------- -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES Net Realized Gain (Loss) on: Investment Securities....................... 7,579 193,923 21,917 6,536 15,408 9,721 Index Futures Contracts..................... 342 (1,556) -- 1,913 435 -- Foreign Currency Transactions............... -- -- (114) -- -- -- ------- -------- -------- ------- ------- -------- NET REALIZED GAIN (LOSS) ON INVESTMENTS.......................... 7,921 192,367 21,803 8,449 15,843 9,721 ------- -------- -------- ------- ------- -------- Net Change in Unrealized Appreciation (Depreciation) of: Investment Securities....................... 15,886 45,393 (12,979) (1,499) 12,878 (21,217) Index Futures Contracts..................... (391) (2,409) -- (475) (3,124) -- Foreign Currency Transactions............... -- -- (638) -- -- -- ------- -------- -------- ------- ------- -------- NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS........ 15,495 42,984 (13,617) (1,974) 9,754 (21,217) ------- -------- -------- ------- ------- -------- Net Gain (Loss) on Investments................ 23,416 235,351 8,186 6,475 25,597 (11,496) ------- -------- -------- ------- ------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $23,496 $235,880 $ 16,662 $ 7,212 $29,369 $ (9,370) ======= ======== ======== ======= ======= ======== (1) Less Foreign dividend tax................. $ -- $ -- $ 697 $ -- $ 7 $ 17
* Portfolio commenced operations April 30, 1999. The Accompanying Notes are an Integral Part of the Financial Statements (Prepared from Unaudited Figures) Statement of Operations 66 73
INDEX 500 HIGH YIELD SELECT MONEY STOCK BALANCED BOND BOND MARKET PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO -------------------------------------------------------------- $ 1,249 $ 54,815 $ 7,722 $ 9,911 $11,429 12,489 9,657 951 -- -- -------- --------- -------- ------- ------- 13,738 64,472 8,673 9,911 11,429 -------- --------- -------- ------- ------- 2,214 5,140 381 413 563 22 -- 14 -- -- 21 -- 11 -- -- -- -- -- -- -- -------- --------- -------- ------- ------- 2,257 5,140 406 413 563 -------- --------- -------- ------- ------- -- -- (13) -- -- (3) -- (1) -- -- -------- --------- -------- ------- ------- 2,254 5,140 392 413 563 -------- --------- -------- ------- ------- 11,484 59,332 8,281 9,498 10,866 -------- --------- -------- ------- ------- 26,837 120,010 (11,229) (1,959) -- (50) (3,737) -- (1,064) -- -- -- -- -- -- -------- --------- -------- ------- ------- 26,787 116,273 (11,229) (3,023) -- -------- --------- -------- ------- ------- (46,060) (112,408) 1,137 1,923 -- (1,221) (7,441) -- (420) -- -- -- -- -- -- -------- --------- -------- ------- ------- (47,281) (119,849) 1,137 1,503 -- -------- --------- -------- ------- ------- (20,494) (3,576) (10,092) (1,520) -- -------- --------- -------- ------- ------- $ (9,010) $ 55,756 $ (1,811) $ 7,978 $10,866 ======== ========= ======== ======= ======= $ 67 $ 50 $ -- $ -- $ --
67 Statement of Operations 74 NORTHWESTERN MUTUAL SERIES FUND, INC. Statements of Changes in Net Assets (in thousands) SMALL CAP GROWTH STOCK PORTFOLIO
FOR THE FOR THE PERIOD SIX MONTHS APRIL 30, 1999* ENDED THROUGH JUNE 30, 2000 DECEMBER 31, (UNAUDITED) 1999 ---------------------------------------------------------------------------------------------- INCREASE IN NET ASSETS Operations Net Investment Income (Loss)............................ $ 80 $ (11) Net Realized Gain on Investments........................ 7,921 6,449 Net Change in Unrealized Appreciation of Investments for the Period............................................. 15,495 13,901 -------- ------- Net Increase in Net Assets Resulting from Operations........................................... 23,496 20,339 -------- ------- Distributions to Shareholders from: Net Investment Income................................... -- -- Net Realized Gain on Investments........................ (4,560) (2,362) -------- ------- Net Decrease in Net Assets Resulting from Distributions to Shareholders........................ (4,560) (2,362) -------- ------- Fund Share Transactions Proceeds from Sale of 60,108 and 41,794 Shares.......... 119,897 55,379 Proceeds from Shares Issued on Reinvestment of Distributions Paid (2,378 and 1,007 shares, respectively).......................................... 4,560 2,362 Payments for 9,434 and 2,952 Shares Redeemed............ (18,151) (4,235) -------- ------- Net Increase in Net Assets Resulting from Fund Share Transactions (53,052 and 39,849 shares, respectively)........................................ 106,306 53,506 -------- ------- Total Increase in Net Assets.............................. 125,242 71,483 NET ASSETS Beginning of Period..................................... 71,483 -- -------- ------- End of Period (Includes undistributed net investment income of $75 and $0, respectively).................... $196,725 $71,483 ======== =======
* Portfolio commenced operations April 30, 1999. AGGRESSIVE GROWTH STOCK PORTFOLIO
FOR THE SIX MONTHS FOR THE ENDED YEAR ENDED JUNE 30, 2000 DECEMBER 31, (UNAUDITED) 1999 ------------------------------------------------------------------------------------------ INCREASE IN NET ASSETS Operations Net Investment Income (Loss)............................ $ 529 $ (180) Net Realized Gain on Investments........................ 192,367 201,622 Net Change in Unrealized Appreciation of Investments for the Period............................................. 42,984 247,911 ---------- ---------- Net Increase in Net Assets Resulting from Operations........................................... 235,880 449,353 ---------- ---------- Distributions to Shareholders from: Net Investment Income................................... -- (389) Net Realized Gain on Investments........................ (203,984) (38,180) ---------- ---------- Net Decrease in Net Assets Resulting from Distributions to Shareholders........................ (203,984) (38,569) ---------- ---------- Fund Share Transactions Proceeds from Sale of 86,558 and 14,536 Shares.......... 439,770 53,705 Proceeds from Shares Issued on Reinvestment of Distributions Paid (45,880 and 11,023 shares, respectively).......................................... 203,984 38,569 Payments for 68,503 and 44,946 Shares Redeemed.......... (348,849) (155,213) ---------- ---------- Net Increase (Decrease) in Net Assets Resulting from Fund Share Transactions (63,935 and (19,387) shares, respectively)........................................ 294,905 (62,939) ---------- ---------- Total Increase in Net Assets.............................. 326,801 347,845 NET ASSETS Beginning of Period..................................... 1,485,311 1,137,466 ---------- ---------- End of Period (Includes undistributed net investment income of $529 and $0, respectively)................... $1,812,112 $1,485,311 ========== ==========
The Accompanying Notes are an Integral Part of the Financial Statements Statement of Changes in Net Assets 68 75 NORTHWESTERN MUTUAL SERIES FUND, INC. INTERNATIONAL EQUITY PORTFOLIO
FOR THE SIX MONTHS ENDED FOR THE JUNE 30, YEAR ENDED 2000 DECEMBER 31, (UNAUDITED) 1999 -------------------------------------------------------------------------------------------- (IN THOUSANDS) INCREASE IN NET ASSETS Operations Net Investment Income................................... $ 8,476 $ 18,083 Net Realized Gain on Investments........................ 21,803 42,589 Net Change in Unrealized Appreciation (Depreciation) of Investments for the Period............................. (13,617) 84,953 --------- --------- Net Increase in Net Assets Resulting from Operations........................................... 16,662 145,625 --------- --------- Distributions to Shareholders from: Net Investment Income................................... (16,173) (18,221) Net Realized Gain on Investments........................ (41,802) (78,977) --------- --------- Net Decrease in Net Assets Resulting from Distributions to Shareholders........................ (57,975) (97,198) --------- --------- Fund Share Transactions Proceeds from Sale of 437,225 and 210,725 Shares........ 725,402 347,201 Proceeds from Shares Issued on Reinvestment of Distributions Paid (37,092 and 58,943 shares, respectively).......................................... 57,975 97,198 Payments for 398,842 and 236,223 Shares Redeemed........ (678,312) (391,762) --------- --------- Net Increase in Net Assets Resulting from Fund Share Transactions (75,475 and 33,445 shares, respectively)........................................ 105,065 52,637 --------- --------- Total Increase in Net Assets.............................. 63,752 101,064 NET ASSETS Beginning of Period..................................... 772,170 671,106 --------- --------- End of Period (Includes undistributed net investment income of $8,454 and $16,150, respectively)............ $ 835,922 $ 772,170 ========= =========
INDEX 400 STOCK PORTFOLIO
FOR THE FOR THE PERIOD SIX MONTHS ENDED APRIL 30, 1999* JUNE 30, THROUGH 2000 DECEMBER 31, (UNAUDITED) 1999 ----------------------------------------------------------------------------------------------- (IN THOUSANDS) INCREASE IN NET ASSETS Operations Net Investment Income................................... $ 737 $ 451 Net Realized Gain on Investments........................ 8,449 1,579 Net Change in Unrealized Appreciation (Depreciation) of Investments for the Period............................. (1,974) 3,982 -------- ------- Net Increase in Net Assets Resulting from Operations........................................... 7,212 6,012 -------- ------- Distributions to Shareholders from: Net Investment Income................................... -- (473) Net Realized Gain on Investments........................ (1,379) (319) -------- ------- Net Decrease in Net Assets Resulting from Distributions to Shareholders........................ (1,379) (792) -------- ------- Fund Share Transactions Proceeds from Sale of 35,721 and 55,140 Shares.......... 42,052 55,323 Proceeds from Shares Issued on Reinvestment of Distributions Paid (1,160 and 35 shares, respectively).......................................... 1,379 792 Payments for 1,438 and 1,608 Shares Redeemed............ (1,702) (1,691) -------- ------- Net Increase in Net Assets Resulting from Fund Share Transactions (35,443 and 53,567 shares, respectively)........................................ 41,729 54,424 -------- ------- Total Increase in Net Assets.............................. 47,562 59,644 NET ASSETS Beginning of Period..................................... 59,644 -- -------- ------- End of Period (Includes undistributed net investment income of $737 and $0, respectively)................... $107,206 $59,644 ======== =======
* Portfolio commenced operations April 30, 1999. The Accompanying Notes are an Integral Part of the Financial Statements 69 Statement of Changes in Net Assets 76 NORTHWESTERN MUTUAL SERIES FUND, INC. GROWTH STOCK PORTFOLIO
FOR THE FOR THE SIX MONTHS ENDED YEAR ENDED JUNE 30, 2000 DECEMBER 31, (UNAUDITED) 1999 -------------------------------------------------------------------------------------------- (IN THOUSANDS) INCREASE IN NET ASSETS Operations Net Investment Income................................... $ 3,772 $ 6,595 Net Realized Gain on Investments........................ 15,843 29,373 Net Change in Unrealized Appreciation of Investments for the Period............................................. 9,754 79,082 -------- -------- Net Increase in Net Assets Resulting from Operations........................................... 29,369 115,050 -------- -------- Distributions to Shareholders from: Net Investment Income................................... (1,365) (6,147) Net Realized Gain on Investments........................ (30,684) (13,531) -------- -------- Net Decrease in Net Assets Resulting from Distributions to Shareholders........................ (32,049) (19,678) -------- -------- Fund Share Transactions Proceeds from Sale of 29,219 and 65,947 Shares.......... 77,574 156,519 Proceeds from Shares Issued on Reinvestment of Distributions Paid (12,470 and 8,157 shares, respectively)............... 32,049 19,678 Payments for 5,336 and 7,013 Shares Redeemed............ (14,022) (16,717) -------- -------- Net Increase in Net Assets Resulting from Fund Share Transactions (36,353 and 67,091 shares, respectively)........... 95,601 159,480 -------- -------- Total Increase in Net Assets.............................. 92,921 254,852 NET ASSETS Beginning of Period..................................... 676,134 421,282 -------- -------- End of Period (includes undistributed net investment income of $3,772 and $1,365, respectively)............. $769,055 $676,134 ======== ========
GROWTH AND INCOME STOCK PORTFOLIO
FOR THE FOR THE SIX MONTHS ENDED YEAR ENDED JUNE 30, 2000 DECEMBER 31, (UNAUDITED) 1999 -------------------------------------------------------------------------------------------- (IN THOUSANDS) INCREASE IN NET ASSETS Operations Net Investment Income................................... $ 2,126 $ 4,979 Net Realized Gain on Investments........................ 9,721 28,648 Net Change in Unrealized Appreciation (Depreciation) of Investments for the Period............................. (21,217) 10,475 -------- -------- Net Increase (Decrease) in Net Assets Resulting from Operations........................................... (9,370) 44,102 -------- -------- Distributions to Shareholders from: Net Investment Income................................... (4,979) (164) Net Realized Gain on Investments........................ (30,759) (69,388) -------- -------- Net Decrease in Net Assets Resulting from Distributions to Shareholders........................ (35,738) (69,552) -------- -------- Fund Share Transactions Proceeds from Sale of 12,184 and 53,719 Shares.......... 18,362 85,448 Proceeds from Shares Issued on Reinvestment of Distributions Paid (24,732 and 43,992 shares, respectively).............. 35,738 69,552 Payments for 30,592 and 25,373 Shares Redeemed.......... (46,515) (38,968) -------- -------- Net Increase in Net Assets Resulting from Fund Share Transactions (6,375 and 72,338 shares, respectively)............ 7,585 116,032 -------- -------- Total Increase (Decrease) in Net Assets................... (37,523) 90,582 NET ASSETS Beginning of Period..................................... 661,552 570,970 -------- -------- End of Period (includes undistributed net investment income of $2,126 and $4,979, respectively)............. $624,029 $661,552 ======== ========
The Accompanying Notes are an Integral Part of the Financial Statements Statement of Changes in Net Assets 70 77 NORTHWESTERN MUTUAL SERIES FUND, INC. INDEX 500 STOCK PORTFOLIO
FOR THE SIX MONTHS ENDED FOR THE JUNE 30, YEAR ENDED 2000 DECEMBER 31, (UNAUDITED) 1999 -------------------------------------------------------------------------------------------- (IN THOUSANDS) INCREASE IN NET ASSETS Operations Net Investment Income................................... $ 11,484 $ 22,921 Net Realized Gain on Investments........................ 26,787 64,417 Net Change in Unrealized Appreciation (Depreciation) of Investments for the Period............................. (47,281) 293,988 ---------- ---------- Net Increase (Decrease) in Net Assets Resulting from Operations........................................... (9,010) 381,326 ---------- ---------- Distributions to Shareholders from: Net Investment Income................................... (22,921) (19,629) Net Realized Gain on Investments........................ (65,358) (25,890) ---------- ---------- Net Decrease in Net Assets Resulting from Distributions to Shareholders........................ (88,279) (45,519) ---------- ---------- Fund Share Transactions Proceeds from Sale of 22,634 and 79,345 Shares.......... 85,293 277,173 Proceeds from Shares Issued on Reinvestment of Distributions Paid (24,021 and 12,786 shares, respectively).............. 88,278 45,519 Payments for 20,937 and 21,770 Shares Redeemed.......... (78,468) (77,223) ---------- ---------- Net Increase in Net Assets Resulting from Fund Share Transactions (610,132 and 70,361 shares, respectively).......... 95,103 245,469 ---------- ---------- Total Increase (Decrease) in Net Assets................... (2,186) 581,276 NET ASSETS Beginning of Period..................................... 2,271,956 1,690,680 ---------- ---------- End of Period (includes undistributed net investment income of $11,484 and $22,921, respectively)........... $2,269,770 $2,271,956 ========== ==========
BALANCED PORTFOLIO
FOR THE SIX MONTHS ENDED FOR THE JUNE 30, YEAR ENDED 2000 DECEMBER 31, (UNAUDITED) 1999 -------------------------------------------------------------------------------------------- (IN THOUSANDS) INCREASE IN NET ASSETS Operations Net Investment Income................................... $ 59,332 $ 114,902 Net Realized Gain on Investments........................ 116,273 181,565 Net Change in Unrealized Appreciation (Depreciation) of Investments for the Period............................. (119,849) 67,796 ---------- ---------- Net Increase in Net Assets Resulting from Operations........................................... 55,756 364,263 ---------- ---------- Distributions to Shareholders from: Net Investment Income................................... (114,893) (104,192) Net Realized Gain on Investments........................ (167,534) (250,227) ---------- ---------- Net Decrease in Net Assets Resulting from Distributions to Shareholders........................ (282,427) (354,419) ---------- ---------- Fund Share Transactions Proceeds from Sale of 8,124 and 47,979 Shares........... 17,508 105,834 Proceeds from Shares Issued on Reinvestment of Distributions Paid (139,058 and 167,416 shares, respectively)............ 282,427 354,419 Payments for 86,234 and 89,877 Shares Redeemed.......... (187,647) (194,268) ---------- ---------- Net Increase in Net Assets Resulting from Fund Share Transactions (60,948 and 125,518 shares, respectively).......... 112,288 265,985 ---------- ---------- Total Increase (Decrease) in Net Assets................... (114,383) 275,829 NET ASSETS Beginning of Period..................................... 3,557,900 3,282,071 ---------- ---------- End of Period (includes undistributed net investment income of $58,833 and $114,394, respectively).......... $3,443,517 $3,557,900 ========== ==========
The Accompanying Notes are an Integral Part of the Financial Statements 71 Statement of Changes in Net Assets 78 NORTHWESTERN MUTUAL SERIES FUND, INC. HIGH YIELD BOND PORTFOLIO
FOR THE SIX MONTHS ENDED FOR THE JUNE 30, YEAR ENDED 2000 DECEMBER 31, (UNAUDITED) 1999 --------------------------------------------------------------------------------------------- (IN THOUSANDS) INCREASE IN NET ASSETS Operations Net Investment Income................................... $ 8,281 $ 19,127 Net Realized Loss on Investments........................ (11,229) (26,106) Net Change in Unrealized Appreciation of Investments for the Period............................................. 1,137 6,190 -------- -------- Net Decrease in Net Assets Resulting from Operations........................................... (1,811) (789) -------- -------- Distributions to Shareholders from: Net Investment Income................................... (271) (19,051) Net Realized Gain on Investments........................ -- -- -------- -------- Net Decrease in Net Assets Resulting from Distributions to Shareholders........................ (271) (19,051) -------- -------- Fund Share Transactions Proceeds from Sale of 6,186 and 14,760 Shares........... 5,035 11,697 Proceeds from Shares Issued on Reinvestment of Distributions Paid (340 and 21,045 shares, respectively).......................................... 271 19,052 Payments for 19,132 and 36,981 Shares Redeemed.......... (15,611) (34,267) -------- -------- Net Decrease in Net Assets Resulting from Fund Share Transactions ((12,606) and (1,176) shares, respectively)........ (10,305) (3,518) -------- -------- Total Decrease in Net Assets.............................. (12,387) (23,358) NET ASSETS Beginning of Period..................................... 161,424 184,782 -------- -------- End of Period (Includes undistributed net investment income of $8,283 and $273, respectively)............... $149,037 $161,424 ======== ========
SELECT BOND PORTFOLIO
FOR THE FOR THE SIX MONTHS ENDED YEAR ENDED JUNE 30, 2000 DECEMBER 31, (UNAUDITED) 1999 -------------------------------------------------------------------------------------------- (IN THOUSANDS) INCREASE IN NET ASSETS Operations Net Investment Income..................................... $ 9,498 $ 19,306 Net Realized Loss on Investments........................ (3,023) (2,358) Net Change in Unrealized Appreciation (Depreciation) of Investments for the Period............................. 1,503 (19,883) -------- -------- Net Increase (Decrease) in Net Assets Resulting from Operations........................................... 7,978 (2,935) -------- -------- Distributions to Shareholders from: Net Investment Income................................... (19,349) (17,828) Net Realized Gain on Investments........................ -- (7,228) -------- -------- Net Decrease in Net Assets Resulting from Distributions to Shareholders........................ (19,349) (25,056) -------- -------- Fund Share Transactions Proceeds from Sale of 7,161 and 23,659 Shares........... 8,057 27,875 Proceeds from Shares Issued on Reinvestment of Distributions Paid (18,463 and 22,018 shares, respectively).............. 19,349 25,056 Payments for 24,043 and 31,015 Shares Redeemed.......... (27,100) (36,481) -------- -------- Net Increase in Net Assets Resulting from Fund Share Transactions (1,580 and 14,662 shares, respectively)........................................ 306 16,450 -------- -------- Total Decrease in Net Assets.............................. (11,065) (11,541) NET ASSETS Beginning of Period..................................... 286,493 298,034 -------- -------- End of Period (Includes undistributed net investment income of $9,238 and $19,088, respectively)............ $275,428 $286,493 ======== ========
The Accompanying Notes are an Integral Part of the Financial Statements Statement of Changes in Net Assets 72 79 NORTHWESTERN MUTUAL SERIES FUND, INC. MONEY MARKET PORTFOLIO
FOR THE SIX MONTHS ENDED FOR THE JUNE 30, YEAR ENDED 2000 DECEMBER 31, (UNAUDITED) 1999 -------------------------------------------------------------------------------------------- (IN THOUSANDS) INCREASE IN NET ASSETS Operations Net Investment Income................................... $ 10,866 $ 16,692 ----------- --------- Net Increase in Net Assets Resulting from Operations........................................... 10,866 16,692 ----------- --------- Distributions to Shareholders from: Net Investment Income................................... (10,866) (16,692) ----------- --------- Net Decrease in Net Assets Resulting from Distributions to Shareholders........................ (10,866) (16,692) ----------- --------- Fund Share Transactions Proceeds from Sale of 1,050,021 and 543,084 Shares...... 1,050,021 543,082 Proceeds from Shares Issued on Reinvestment of Distributions Paid 10,801 and 16,692 shares, respectively........... 10,798 16,692 Payments for 1,106,584 and 446,954 Shares Redeemed...... (1,106,584) (446,954) ----------- --------- Net Increase (Decrease) in Net Assets Resulting from Fund Share Transactions ((45,762) and 112,822 shares, respectively)........ (45,765) 112,820 ----------- --------- Total Increase (Decrease) in Net Assets..................... (45,765) 112,820 NET ASSETS Beginning of Period..................................... 404,284 291,464 ----------- --------- End of Period (includes no undistributed net investment income)................................................ $ 358,519 $ 404,284 =========== =========
The Accompanying Notes are an Integral Part of the Financial Statements 73 Statement of Changes in Net Assets 80 NORTHWESTERN MUTUAL SERIES FUND, INC. Financial Highlights SMALL CAP GROWTH STOCK PORTFOLIO
FOR THE FOR THE PERIOD SIX MONTHS ENDED APRIL 30, 1999* JUNE 30, THROUGH 2000 DECEMBER 31, (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) (UNAUDITED) 1999 ------------------------------------------------------------------------------------------------ SELECTED PER SHARE DATA Net Asset Value, Beginning of Period........................ $ 1.79 $ 1.00 Income from Investment Operations: Net Investment Income................................... -- -- Net Realized and Unrealized Gains on Investments........ 0.38 0.85 -------- ------- Total from Investment Operations...................... 0.38 0.85 -------- ------- Less Distributions: Distributions from Net Investment Income................ -- -- Distributions from Realized Gains on Investments........ (0.05) (0.06) -------- ------- Total Distributions................................... (0.05) (0.06) -------- ------- Net Asset Value, End of Period.............................. $ 2.12 $ 1.79 ======== ======= Total Return+............................................... 21.54%++ 86.09%++ ======== ======= RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands).................... $196,725 $71,483 ======== ======= Ratio of Gross Expenses to Average Net Assets............... 0.70%** 1.03%** ======== ======= Ratio of Net Expenses to Average Net Assets................. 0.70%** 1.00%** ======== ======= Ratio of Net Investment Income (Loss) to Average Net Assets.................................................... 0.12%** (0.07)%** ======== ======= Portfolio Turnover Rate..................................... 12.11% 70.72% ======== =======
AGGRESSIVE GROWTH STOCK PORTFOLIO
FOR THE SIX MONTHS ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31, 2000 ---------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) (UNAUDITED) 1999 1998 1997 1996 1995 --------------------------------------------------------------------------------------------------------------------------------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period.............. $ 4.81 $ 3.46 $ 3.34 $ 3.15 $ 2.77 $ 2.00 Income from Investment Operations: Net Investment Income......................... -- -- -- -- -- -- Net Realized and Unrealized Gains on Investments................................. 0.68 1.48 0.24 0.39 0.49 0.78 ---------- ---------- ---------- ---------- -------- -------- Total from Investment Operations............ 0.68 1.48 0.24 0.39 0.49 0.78 ---------- ---------- ---------- ---------- -------- -------- Less Distributions: Distributions from Net Investment Income...... -- -- -- -- -- -- Distributions from Realized Gains on Investments................................. (0.63) (0.13) (0.12) (0.20) (0.11) (0.01) ---------- ---------- ---------- ---------- -------- -------- Total Distributions......................... (0.63) (0.13) (0.12) (0.20) (0.11) (0.01) ---------- ---------- ---------- ---------- -------- -------- Net Asset Value, End of Period.................... $ 4.86 $ 4.81 $ 3.46 $ 3.34 $ 3.15 $ 2.77 ========== ========== ========== ========== ======== ======== Total Return+............................... 15.39%++ 43.78% 7.56% 13.86% 17.70% 39.29% ========== ========== ========== ========== ======== ======== RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands).......... $1,812,112 $1,485,311 $1,137,466 $1,067,068 $871,926 $577,014 ========== ========== ========== ========== ======== ======== Ratio of Net Expenses to Average Net Assets....... 0.51%** 0.51% 0.52% 0.53% 0.54% 0.56% ========== ========== ========== ========== ======== ======== Ratio of Net Investment Income (Loss) to Average Net Assets...................................... 0.06%** (0.02%) 0.04% 0.06% (0.03%) 0.13% ========== ========== ========== ========== ======== ======== Portfolio Turnover Rate........................... 30.43% 68.64% 50.43% 57.27% 47.25% 37.84% ========== ========== ========== ========== ======== ========
* Portfolio commenced operations on April 30, 1999 ** Computed on a 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 74 81 NORTHWESTERN MUTUAL SERIES FUND, INC. INTERNATIONAL EQUITY PORTFOLIO
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31, JUNE 30, 2000 ---------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) (UNAUDITED) 1999 1998 1997 1996 1995 ------------------------------------------------------------------------------------------------------------------------------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period.................. $ 1.78 $ 1.68 $ 1.69 $ 1.56 $ 1.35 $ 1.19 Income from Investment Operations: Net Investment Income............................. 0.02 0.03 0.05 0.04 0.04 0.04 Net Realized and Unrealized Gains (Loss) on Investments..................................... (0.02) 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.......... (0.03) (0.05) (0.04) (0.04) (0.03) -- Distributions from Realized Gains on Investments..................................... (0.08) (0.21) (0.06) (0.02) (0.04) (0.01) -------- -------- -------- -------- -------- -------- Total Distributions............................. (0.11) (0.26) (0.10) (0.06) (0.07) (0.01) -------- -------- -------- -------- -------- -------- Net Asset Value, End of Period........................ $ 1.67 $ 1.78 $ 1.68 $ 1.69 $ 1.56 $ 1.35 ======== ======== ======== ======== ======== ======== Total Return+......................................... 1.39%++ 22.88% 4.82% 12.28% 21.01% 14.57% ======== ======== ======== ======== ======== ======== RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands).............. $835,922 $772,170 $671,106 $659,850 $505,189 $342,127 ======== ======== ======== ======== ======== ======== Ratio of Net Expenses to Average Net Assets........... 0.74%** 0.74% 0.76% 0.77% 0.81% 0.85% ======== ======== ======== ======== ======== ======== Ratio of Net Investment Income to Average Net Assets.............................................. 2.95%** 2.62% 3.38% 2.75% 3.02% 2.68% ======== ======== ======== ======== ======== ======== Portfolio Turnover Rate............................... 8.34% 38.37% 30.41% 16.74% 17.07% 26.71% ======== ======== ======== ======== ======== ========
INDEX 400 STOCK PORTFOLIO
FOR THE PERIOD FOR THE APRIL 30, 1999* SIX MONTHS ENDED THROUGH JUNE 30, 2000 DECEMBER 31, (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) (UNAUDITED) 1999 ------------------------------------------------------------------------------------------------ SELECTED PER SHARE DATA Net Asset Value, Beginning of Period........................ $ 1.11 $ 1.00 Income from Investment Operations: Net Investment Income................................... 0.01 0.01 Net Realized and Unrealized Gains on Investments........ 0.10 0.12 -------- ------- Total from Investment Operations...................... 0.11 0.13 -------- ------- Less Distributions: Distributions from Net Investment Income................ -- (0.01) Distributions from Realized Gains on Investments........ (0.02) (0.01) -------- ------- Total Distributions................................... (0.02) (0.02) -------- ------- Net Asset Value, End of Period.............................. $ 1.20 $ 1.11 ======== ======= Total Return+............................................... 9.77%++ 12.83%++ ======== ======= RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands).................... $107,206 $59,644 ======== ======= Ratio of Gross Expenses to Average Net Assets............... 0.34%** 0.46%** ======== ======= Ratio of Net Expenses to Average Net Assets................. 0.34%** 0.35%** ======== ======= Ratio of Net Investment Income to Average Net Assets........ 1.78%** 1.69%** ======== ======= Portfolio Turnover Rate..................................... 10.09% 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 75 Financial Highlights 82 NORTHWESTERN MUTUAL SERIES FUND, INC. GROWTH STOCK PORTFOLIO
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31, JUNE 30, 2000 --------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) (UNAUDITED) 1999 1998 1997 1996 1995 -------------------------------------------------------------------------------------------------------------------------------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period....................... $ 2.66 $ 2.25 $ 1.81 $ 1.46 $ 1.26 $ 1.00 Income from Investment Operations: Net Investment Income.................................. 0.01 0.03 0.02 0.02 0.02 0.02 Net Realized and Unrealized Gains on Investments....... 0.09 0.47 0.46 0.42 0.25 0.28 -------- -------- -------- -------- -------- ------- Total from Investment Operations..................... 0.10 0.50 0.48 0.44 0.27 0.30 -------- -------- -------- -------- -------- ------- Less Distributions: Distributions from Net Investment Income............... (0.01) (0.03) (0.02) (0.02) (0.02) (0.02) Distributions from Realized Gains on Investments....... (0.11) (0.06) (0.02) (0.07) (0.05) (0.02) -------- -------- -------- -------- -------- ------- Total Distributions.................................. (0.12) (0.09) (0.04) (0.09) (0.07) (0.04) ======== ======== ======== ======== ======== ======= Net Asset Value, End of Period............................. $ 2.64 $ 2.66 $ 2.25 $ 1.81 $ 1.46 $ 1.26 ======== ======== ======== ======== ======== ======= Total Return+........................................ 4.07%++ 22.50% 26.69% 29.85% 20.91% 30.82% ======== ======== ======== ======== ======== ======= RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands)................... $769,055 $676,134 $421,282 $243,071 $170,482 $85,557 ======== ======== ======== ======== ======== ======= Ratio of Net Expenses to Average Net Assets................ 0.42%** 0.43% 0.46% 0.49% 0.57% 0.61% ======== ======== ======== ======== ======== ======= Ratio of Net Investment Income to Average Net Assets....... 1.05%** 1.22% 1.10% 1.24% 1.41% 1.77% ======== ======== ======== ======== ======== ======= Portfolio Turnover Rate.................................... 13.66% 27.26% 21.64% 33.20% 37.61% 46.83% ======== ======== ======== ======== ======== =======
GROWTH AND INCOME STOCK PORTFOLIO
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31, JUNE 30, 2000 ---------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) (UNAUDITED) 1999 1998 1997 1996 1995 -------------------------------------------------------------------------------------------------------------------------------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period...................... $ 1.56 $ 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 (Loss) on Investments......................................... (0.03) 0.12 0.29 0.37 0.23 0.29 ---------- -------- -------- -------- -------- -------- Total from Investment Operations.................... (0.03) 0.13 0.30 0.38 0.25 0.31 ---------- -------- -------- -------- -------- -------- Less Distributions: Distributions from Net Investment Income.............. (0.01) -- (0.01) (0.01) (0.02) (0.02) Distributions from Realized Gains on Investments...... (0.07) (0.19) -- (0.36) (0.12) (0.06) ---------- -------- -------- -------- -------- -------- Total Distributions................................. (0.08) (0.19) (0.01) (0.37) (0.14) (0.08) ---------- -------- -------- -------- -------- -------- Net Asset Value, End of Period............................ $ 1.45 $ 1.56 $ 1.62 $ 1.33 $ 1.32 $ 1.21 ========== ======== ======== ======== ======== ======== Total Return+....................................... (1.40%)++ 7.47% 23.14% 30.03% 19.97% 31.12% ========== ======== ======== ======== ======== ======== RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands).................. $ 624,029 $661,552 $570,970 $371,935 $234,184 $136,923 ========== ======== ======== ======== ======== ======== Ratio of Net Expenses to Average Net Assets............... .56%** 0.57% 0.58% 0.60% 0.62% 0.69% ========== ======== ======== ======== ======== ======== Ratio of Net Investment Income to Average Net Assets...... .67%** 0.80% 1.00% 1.04% 1.44% 1.68% ========== ======== ======== ======== ======== ======== Portfolio Turnover Rate................................... 25.61% 106.93% 160.40% 144.52% 93.92% 80.00% ========== ======== ======== ======== ======== ========
** Computed on a 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 76 83 NORTHWESTERN MUTUAL SERIES FUND, INC. INDEX 500 STOCK PORTFOLIO
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31, JUNE 30, 2000 -------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) (UNAUDITED) 1999 1998 1997 1996 1995 --------------------------------------------------------------------------------------------------------------------------------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period............ $ 3.89 $ 3.29 $ 2.64 $ 2.06 $ 1.72 $ 1.27 Income from Investment Operations: Net Investment Income....................... 0.02 0.04 0.04 0.04 0.04 0.04 Net Realized and Unrealized Gains (Loss) on Investments............................... (0.04) 0.64 0.71 0.62 0.35 0.42 ---------- ---------- ---------- ---------- -------- -------- Total from Investment Operations.......... (0.02) 0.68 0.75 0.66 0.39 0.46 ---------- ---------- ---------- ---------- -------- -------- Less Distributions: Distributions from Net Investment Income.... (0.04) (0.03) (0.04) (0.04) (0.02) (0.01) Distributions from Realized Gains on Investments............................... (0.11) (0.05) (0.06) (0.04) (0.03) -- ---------- ---------- ---------- ---------- -------- -------- Total Distributions....................... (0.15) (0.08) (0.10) (0.08) (0.05) (0.01) ---------- ---------- ---------- ---------- -------- -------- Net Asset Value, End of Period.................. $ 3.72 $ 3.89 $ 3.29 $ 2.64 $ 2.06 $ 1.72 ========== ========== ========== ========== ======== ======== Total Return+................................... (0.37%)++ 20.91% 28.72% 33.20% 22.75% 37.25% ========== ========== ========== ========== ======== ======== RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands)........ $2,269,770 $2,271,956 $1,690,680 $1,152,857 $740,066 $495,133 ========== ========== ========== ========== ======== ======== Ratio of Net Expenses to Average Net Assets..... 0.20%** 0.20% 0.21% 0.21% 0.21% 0.21% ========== ========== ========== ========== ======== ======== Ratio of Net Investment Income to Average Net Assets........................................ 1.03%** 1.16% 1.40% 1.86% 2.27% 2.51% ========== ========== ========== ========== ======== ======== Portfolio Turnover Rate......................... 2.56% 5.65% 3.03% 3.15% 3.45% 3.19% ========== ========== ========== ========== ======== ========
BALANCED PORTFOLIO
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31, JUNE 30, 2000 ------------------------------------------------------------------ (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) (UNAUDITED) 1999 1998 1997 1996 1995 ------------------------------------------------------------------------------------------------------------------------------------ SELECTED PER SHARE DATA Net Asset Value, Beginning of Period..... $ 2.22 $ 2.22 $ 1.99 $ 1.72 $ 1.60 $ 1.31 Income from Investment Operations: Net Investment Income (Loss)......... 0.03 0.07 0.07 0.07 0.06 0.07 Net Realized and Unrealized Gains (Loss) on Investments........................ -- 0.17 0.29 0.28 0.15 0.27 ---------- ---------- ---------- ---------- ---------- ---------- Total from Investment Operations... 0.03 0.24 0.36 0.35 0.21 0.34 ---------- ---------- ---------- ---------- ---------- ---------- Less Distributions: Distributions from Net Investment Income... (0.07) (0.07) (0.07) (0.06) (0.06) (0.04) Distributions from Realized Gains on Investments........................ (0.11) (0.17) (0.06) (0.02) (0.03) (0.01) ---------- ---------- ---------- ---------- ---------- ---------- Total Distributions................ (0.18) (0.24) (0.13) (0.08) (0.09) (0.05) ---------- ---------- ---------- ---------- ---------- ---------- Net Asset Value, End of Period........... $ 2.07 $ 2.22 $ 2.22 $ 1.99 $ 1.72 $ 1.60 ========== ========== ========== ========== ========== ========== Total Return+............................ 1.65%++ 11.18% 18.88% 21.52% 13.45% 26.39% ========== ========== ========== ========== ========== ========== RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands)... $3,443,517 $3,557,900 $3,282,071 $2,788,494 $2,326,234 $2,083,289 ========== ========== ========== ========== ========== ========== Ratio of Net Expenses to Average Net Assets... 0.30%** 0.30% 0.30% 0.30% 0.30% 0.30% ========== ========== ========== ========== ========== ========== Ratio of Net Investment Income to Average Net Assets................................. 3.43%** 3.36% 3.48% 3.70% 3.95% 4.40% ========== ========== ========== ========== ========== ========== Portfolio Turnover Rate.................. 14.26% 27.16% 44.18% 29.94% 67.66% 37.28% ========== ========== ========== ========== ========== ==========
** Computed on a 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 77 Financial Highlights 84 NORTHWESTERN MUTUAL SERIES FUND, INC. HIGH YIELD BOND PORTFOLIO
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31, JUNE 30, 2000 -------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) (UNAUDITED) 1999 1998 1997 1996 1995 ------------------------------------------------------------------------------------------------------------------------------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period........................ $ 0.82 $ 0.94 $ 1.06 $ 1.10 $ 1.03 $ 0.97 Income from Investment Operations: Net Investment Income................................... 0.05 0.11 0.10 0.11 0.09 0.10 Net Realized and Unrealized Gains (Loss) on Investments........................................... (0.06) (0.12) (0.12) 0.06 0.10 0.07 -------- -------- -------- -------- ------- ------- Total from Investment Operations...................... (0.01) (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.............................. $ 0.81 $ 0.82 $ 0.94 $ 1.06 $ 1.10 $ 1.03 ======== ======== ======== ======== ======= ======= Total Return+......................................... (1.16%)++ 0.44% (1.84%) 15.85% 19.77% 16.78% ======== ======== ======== ======== ======= ======= RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands).................... $149,037 $161,424 $184,782 $153,038 $93,878 $55,974 ======== ======== ======== ======== ======= ======= Ratio of Net Expenses to Average Net Assets................. 0.49%** 0.50% 0.50% 0.55% 0.60% 0.65% ======== ======== ======== ======== ======= ======= Ratio of Net Investment Income to Average Net Assets........ 10.76%** 11.15% 10.85% 9.95% 9.54% 9.90% ======== ======== ======== ======== ======= ======= Portfolio Turnover Rate..................................... 67.06% 139.87% 153.71% 129.49% 143.91% 116.57% ======== ======== ======== ======== ======= =======
SELECT BOND PORTFOLIO
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31, JUNE 30, 2000 ---------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) (UNAUDITED) 1999 1998 1997 1996 1995 -------------------------------------------------------------------------------------------------------------------------------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period....................... $ 1.13 $ 1.25 $ 1.26 $ 1.22 $ 1.23 $ 1.06 Income from Investment Operations: Net Investment Income.................................. 0.04 0.08 0.08 0.08 0.07 0.07 Net Realized and Unrealized Gains (Loss) on Investments.......................................... (0.01) (0.09) -- 0.04 (0.04) 0.13 -------- -------- -------- -------- -------- -------- Total from Investment Operations..................... 0.03 (0.01) 0.08 0.12 0.03 0.20 -------- -------- -------- -------- -------- -------- Less Distributions: Distributions from Net Investment Income............... (0.08) (0.08) (0.08) (0.08) (0.04) (0.03) Distributions from Realized Gains on Investments....... -- (0.03) (0.01) -- -- -- -------- -------- -------- -------- -------- -------- Total Distributions.................................. (0.08) (0.11) (0.09) (0.08) (0.04) (0.03) -------- -------- -------- -------- -------- -------- Net Asset Value, End of Period............................. $ 1.08 $ 1.13 $ 1.25 $ 1.26 $ 1.22 $ 1.23 ======== ======== ======== ======== ======== ======== Total Return+........................................ 2.97%++ (1.00%) 7.07% 9.46% 3.31% 19.10% ======== ======== ======== ======== ======== ======== RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands)................... $275,428 $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% 0.30% ======== ======== ======== ======== ======== ======== Ratio of Net Investment Income to Average Net Assets....... 6.84%** 6.56% 6.87% 7.03% 6.48% 6.61% ======== ======== ======== ======== ======== ======== Portfolio Turnover Rate.................................... 77.31% 76.65% 161.79% 184.93% 195.98% 69.06% ======== ======== ======== ======== ======== ========
** 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 78 85 NORTHWESTERN MUTUAL SERIES FUND, INC. MONEY MARKET PORTFOLIO
FOR THE SIX MONTHS ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31, 2000 ---------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) (UNAUDITED) 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 $ 1.00 Net Investment Income.................................. 0.03 0.05 0.05 0.05 0.05 0.06 Less Distributions from Net Investment Income.......... (0.03) (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 $ 1.00 ======== ======== ======== ======== ======== ======== Total Return+.......................................... 2.92%++ 5.10% 5.43% 5.47% 5.29% 5.82% ======== ======== ======== ======== ======== ======== RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands)............... $358,519 $404,284 $291,464 $194,470 $176,298 $132,572 ======== ======== ======== ======== ======== ======== Ratio of Net Expenses to Average Net Assets............ 0.30%** 0.30% 0.30% 0.30% 0.30% 0.30% ======== ======== ======== ======== ======== ======== Ratio of Net Investment Income to Average Net Assets... 5.74%** 4.99% 5.26% 5.33% 5.13% 5.61% ======== ======== ======== ======== ======== ========
** 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 79 Financial Highlights 86 NORTHWESTERN MUTUAL SERIES FUND, INC. Notes to Financial Statements June 30, 2000 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. 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 market 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 investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized 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, 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. 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 Small Cap Growth Stock, Aggressive Growth Stock, Index 400 Stock, Growth Stock, Index 500 Stock, Balanced and Select Bond 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. Notes to Financial Statements 80 87 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 period ended June 30, 2000, transactions in securities other than money market investments were:
TOTAL U.S. GOVT. TOTAL U.S. GOVT. SECURITY SECURITY SECURITY SECURITY SALES/ SALES/ PORTFOLIOS PURCHASES PURCHASES MATURITIES MATURITIES ---------- --------- ---------- ---------- ---------- Small Cap Growth Stock............................. $152,777,716 -- $ 51,402,973 -- Aggressive Growth Stock............................ 611,358,986 -- 466,688,550 -- International Equity............................... 90,784,118 -- 61,651,802 -- Index 400 Stock.................................... 55,112,108 -- 20,853,094 -- Growth Stock....................................... 136,566,005 -- 84,857,826 -- Growth and Income Stock............................ 160,104,870 -- 192,847,741 -- Index 500 Stock.................................... 59,856,916 -- 56,036,485 -- Balanced........................................... 442,963,255 $238,063,120 559,243,317 $164,128,308 High Yield Bond.................................... 97,509,461 -- 103,469,737 -- Select Bond........................................ 209,701,545 140,155,939 214,706,091 77,407,571
............................................................................... 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. 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. As of June 30, 2000, the amounts paid through expense offset arrangements are $3,754 in the Small Cap Growth Stock Portfolio, $5,199 in the Aggressive Growth Stock Portfolio, $1,758 in the Index 400 Stock Portfolio, $2,351 in the Growth Stock Portfolio, $5,451 in the Growth and Income Stock Portfolio, $3,000 in the Index 500 Stock Portfolio and $1,124 in the High Yield Bond Portfolio. 81 Notes to Financial Statements 88 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. The Small Cap Growth Stock and Aggressive Growth Stock Portfolios paid commissions on Fund transactions to an affiliated broker in the amounts of $1,458 and $16,044, respectively for the period ended June 30, 2000. NOTE 8 -- The Series Fund has elected to be taxed as a regulated investment company meeting certain requirements under the Internal Revenue Code. Since it expects to distribute all net investment income and net realized capital gains, the Series Fund anticipates 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 losses in the amounts of $2,850,813 and $3,815,499, respectively. These amounts are deferred and deemed to have occurred in the next fiscal year. For Federal income tax purposes, the High Yield Bond Portfolio also has a net realized capital loss of $26,639,854 which will be carried forward to offset future net realized capital gains. The amount expires as follows: $2,661,875 in 2006 and $23,977,979 in 2007. For Federal income tax purposes, net unrealized appreciation (depreciation) on open 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 -- Effective April 1, 1996, 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 period ended June 30, 2000 and the year ended December 31, 1999 was $452,907 and $1,243,988, respectively. Notes to Financial Statements 82 89 NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Statement of Assets and Liabilities June 30, 2000 (in thousands) ASSETS Investments at Market Value: Northwestern Mutual Series Fund, Inc. Small Cap Growth Stock 15,756 shares (cost $29,236)....................... $ 33,213 Aggressive Growth Stock 55,334 shares (cost $196,024)...................... 268,870 International Equity 86,503 shares (cost $141,019)...................... 144,374 Index 400 Stock 9,374 shares (cost $10,477)........................ 11,286 Growth Stock 58,844 shares (cost $123,798)...................... 155,582 Growth and Income Stock 75,673 shares (cost $111,302)...................... 109,802 Index 500 Stock 100,073 shares (cost $280,035)..................... 372,273 Balanced 92,457 shares (cost $159,144)...................... 191,479 High Yield Bond 24,070 shares (cost $23,611)....................... 19,521 Select Bond 17,498 shares (cost $20,548)....................... 18,915 Money Market 76,557 shares (cost $76,551)....................... 76,557 Russell Insurance Funds Multi-Style Equity 1,835 shares (cost $29,167)........................ 28,572 Aggressive Equity 890 shares (cost $11,444).......................... 11,998 Non-U.S 1,283 shares (cost $16,926)........................ 16,815 Real Estate Securities 298 shares (cost $2,676)........................... 2,902 Core Bond 415 shares (cost $4,038)........................... 4,088 $1,466,247 -------- Due from Sale of Fund Shares.............................. 237 Due from Northwestern Mutual Life Insurance Company....... 1,508 ---------- Total Assets..................................... $1,467,992 ========== LIABILITIES Due to Northwestern Mutual Life Insurance Company......... $ 237 Due on Purchase of Fund Shares............................ 1,508 ---------- Total Liabilities................................ 1,745 ---------- EQUITY (NOTE 8) Variable Life Policies Issued Before October 11, 1995..... 498,568 Variable Complife Policies Issued On or After October 11, 1995.................................................... 924,333 Variable Executive Life Policies Issued On or After March 2, 1998................................................. 22,221 Variable Joint Life Policies Issued On or After December 10, 1998................................................ 21,125 ---------- Total Equity..................................... 1,466,247 ---------- Total Liabilities and Equity..................... $1,467,992 ==========
The Accompanying Notes are an Integral Part of the Financial Statements (Prepared from Unaudited Figures) 83 Variable Life Financial Statements 90 NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Statement of Operations (in thousands)
SMALL CAP GROWTH COMBINED STOCK DIVISION# --------------------------- --------------------------- SIX MONTHS SIX MONTHS ENDED ENDED SIX MONTHS JUNE 30, YEAR ENDED JUNE 30, ENDED 2000 DECEMBER 31, 2000 DECEMBER 31, (UNAUDITED) 1999 (UNAUDITED) 1999 -------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Dividend Income........................................... $ 86,845 $ 60,160 $ 740 $ 239 Mortality and Expense Risks............................... 2,848 4,044 41 5 Taxes..................................................... 1,221 1,737 18 3 -------- -------- ------- ------ Net Investment Income..................................... 82,776 54,379 681 231 -------- -------- ------- ------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized Gain (Loss) on Investments....................... (85,736) 7,370 (1,407) -- Unrealized Appreciation (Depreciation) of Investments During the Period....................................... 47,813 115,169 3,977 1,440 -------- -------- ------- ------ Net Gain (Loss) on Investments............................ (37,923) 122,539 2,570 1,440 -------- -------- ------- ------ Increase (Decrease) in Equity Derived from Investment Activity................................................ $44,853 $176,918 $ 3,251 $1,671 ======== ======== ======= ======
# 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
AGGRESSIVE GROWTH INDEX 400 INTERNATIONAL EQUITY STOCK DIVISION STOCK DIVISION# DIVISION GROWTH STOCK DIVISION -------------------------- -------------------------- -------------------------- -------------------------- SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS ENDED ENDED SIX MONTHS ENDED ENDED JUNE 30, YEAR ENDED JUNE 30, ENDED JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED 2000 DECEMBER 31, 2000 DECEMBER 31, 2000 DECEMBER 31, 2000 DECEMBER 31, (UNAUDITED) 1999 (UNAUDITED) 1999 (UNAUDITED) 1999 (UNAUDITED) 1999 ----------------------------------------------------------------------------------------------------------------- $ 29,746 $ 4,628 $ 135 $ 58 $ 9,884 $13,164 $ 6,306 $ 3,284 516 605 16 4 276 420 291 395 221 259 6 2 120 180 125 170 -------- ------- ----- ---- ------- ------- ------- ------- 29,009 3,764 113 52 9,488 12,564 5,890 2,719 -------- ------- ----- ---- ------- ------- ------- ------- (45,019) 1,888 (264) 4 (9,162) 504 (9,133) 595 48,682 54,225 809 321 1,767 7,108 8,689 16,158 -------- ------- ----- ---- ------- ------- ------- ------- 3,663 56,113 545 325 (7,395) 7,612 (444) 16,753 -------- ------- ----- ---- ------- ------- ------- ------- $ 32,672 $59,877 $ 658 $377 $ 2,093 $20,176 $ 5,446 $19,472 ======== ======= ===== ==== ======= ======= ======= =======
85 Variable Life Financial Statements 92 NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Statement of Operations (in thousands)
GROWTH AND INCOME INDEX 500 STOCK DIVISION STOCK DIVISION BALANCED DIVISION --------------------------- --------------------------- --------------------------- SIX MONTHS SIX MONTHS SIX MONTHS ENDED ENDED ENDED JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED 2000 DECEMBER 31, 2000 DECEMBER 31, 2000 DECEMBER 31, (CONTINUED) (UNAUDITED) 1999 (UNAUDITED) 1999 (UNAUDITED) 1999 --------------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Dividend Income....................... $ 6,106 $ 9,123 $ 14,015 $ 5,542 $ 15,457 $17,659 Mortality and Expense Risks......... 225 372 741 1,104 437 769 Taxes............................... 96 159 317 473 187 330 -------- ------- -------- ------- -------- ------- Net Investment Income............... 5,785 8,592 12,957 3,965 14,833 16,560 -------- ------- -------- ------- -------- ------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized Gain (Loss) on Investments....................... 3,261 514 (21,904) 1,529 (2,393) 2,596 Unrealized Appreciation (Depreciation) of Investments During the Period................. (10,777) (3,359) 7,357 42,832 (10,010) (1,744) -------- ------- -------- ------- -------- ------- Net Gain (Loss) on Investments...... (7,516) (2,845) (14,547) 44,361 (12,403) 852 -------- ------- -------- ------- -------- ------- Increase (Decrease) in Equity Derived from Investment Activity.......................... $ (1,731) $ 5,747 $ (1,590) $48,326 $ 2,430 $17,412 ======== ======= ======== ======= ======== =======
The Accompanying Notes are an Integral Part of the Financial Statements Variable Life Financial Statements 86 93
HIGH YIELD BOND DIVISION SELECT BOND DIVISION MONEY MARKET DIVISION -------------------------- -------------------------- -------------------------- SIX MONTHS SIX MONTHS SIX MONTHS ENDED ENDED ENDED JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED 2000 DECEMBER 31, 2000 DECEMBER 31, 2000 DECEMBER 31, (UNAUDITED) 1999 (UNAUDITED) 1999 (UNAUDITED) 1999 ------------------------------------------------------------------------------------ $ 34 $ 2,112 $1,285 $ 1,211 $2,067 $2,507 40 70 35 62 143 212 17 30 15 27 60 92 ------- ------- ------ ------- ------ ------ (23) 2,012 1,235 1,122 1,864 2,203 ------- ------- ------ ------- ------ ------ 1,790 (288) 4 33 -- -- (2,032) (1,879) (774) (1,386) -- -- ------- ------- ------ ------- ------ ------ (242) (2,167) (770) (1,353) -- -- ------- ------- ------ ------- ------ ------ $ (265) $ (155) $ 465 $ (231) $1,864 $2,203 ======= ======= ====== ======= ====== ======
87 Variable Life Financial Statements 94 NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Statement of Operations (in thousands)
RUSSELL MULTI-STYLE RUSSELL AGGRESSIVE EQUITY DIVISION# EQUITY DIVISION# --------------------------- --------------------------- SIX MONTHS SIX MONTHS ENDED SIX MONTHS ENDED SIX MONTHS JUNE 30, ENDED JUNE 30, ENDED 2000 DECEMBER 31, 2000 DECEMBER 31, (CONTINUED) (UNAUDITED) 1999 (UNAUDITED) 1999 ---------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Dividend Income........................................... $ 534 $381 $195 $ 19 Mortality and Expense Risks............................... 40 14 17 4 Taxes..................................................... 17 5 8 3 ------- ---- ---- ---- Net Investment Income..................................... 477 362 170 12 ------- ---- ---- ---- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized Gain (Loss) on Investments....................... (591) (1) (425) (4) Unrealized Appreciation (Depreciation) of Investments During the Period....................................... (594) 484 555 438 ------- ---- ---- ---- Net Gain (Loss) on Investments............................ (1,185) 483 130 434 ------- ---- ---- ---- Increase (Decrease) in Equity Derived from Investment Activity................................................ $ (708) $845 $300 $446 ======= ==== ==== ====
# 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 88 95
RUSSELL NON- RUSSELL REAL ESTATE SECURITIES RUSSELL CORE U.S. DIVISION# SECURITIES DIVISION# BOND DIVISION# -------------------------- ------------------------------ -------------------------- SIX MONTHS SIX MONTHS SIX MONTHS ENDED SIX MONTHS ENDED SIX MONTHS ENDED SIX MONTHS JUNE 30, ENDED JUNE 30, ENDED JUNE 30, ENDED 2000 DECEMBER 31, 2000 DECEMBER 31, 2000 DECEMBER 31, (UNAUDITED) 1999 (UNAUDITED) 1999 (UNAUDITED) 1999 -------------------------------------------------------------------------------------------- $ 286 $145 $ 26 $35 $ 29 $ 53 22 5 4 1 4 2 10 2 2 1 2 1 ----- ---- ---- --- ---- ---- 254 138 20 33 23 50 ----- ---- ---- --- ---- ---- (542) -- 7 -- 42 -- (111) 585 225 (9) 50 (45) ----- ---- ---- --- ---- ---- (653) 585 232 (9) 92 (45) ----- ---- ---- --- ---- ---- $(399) $723 $252 $24 $115 $ 5 ===== ==== ==== === ==== ====
89 Variable Life Financial Statements 96 NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Statement of Changes in Equity (in thousands)
SMALL CAP GROWTH COMBINED STOCK DIVISION# --------------------------- --------------------------- SIX MONTHS SIX MONTHS ENDED ENDED SIX MONTHS JUNE 30, YEAR ENDED JUNE 30, ENDED 2000 DECEMBER 31, 2000 DECEMBER 31, (UNAUDITED) 1999 (UNAUDITED) 1999 -------------------------------------------------------------------------------------------------------------------------- OPERATIONS Net Investment Income..................................... $ 82,776 $ 54,379 $ 681 $ 231 Net Realized Gain (Loss).................................. (85,736) 7,370 (1,407) -- Net Change in Unrealized Appreciation (Depreciation)...... 47,813 115,169 3,977 1,440 ---------- ---------- ------- ------ Increase (Decrease) in Equity............................... 44,853 176,918 3,251 1,671 ---------- ---------- ------- ------ EQUITY TRANSACTIONS Policyowners' Net Payments................................ 283,580 403,531 2,343 319 Policy Loans, Surrenders, and Death Benefits.............. (47,535) (54,502) (494) (74) Mortality and Other (net)................................. (28,607) (61,013) (318) (25) Transfers from Other Divisions............................ 219,363 243,273 22,591 5,878 Transfers to Other Divisions.............................. (219,359) (244,190) (1,722) (207) ---------- ---------- ------- ------ Increase in Equity Derived from Equity Transactions....... 207,442 287,099 22,400 5,891 ---------- ---------- ------- ------ Net Increase in Equity...................................... 252,295 464,017 25,651 7,562 EQUITY Beginning of Period....................................... 1,213,952 749,935 7,562 -- ---------- ---------- ------- ------ End of Period............................................. $1,466,247 $1,213,952 $33,213 $7,562 ========== ========== ======= ======
# 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 90 97
AGGRESSIVE GROWTH INDEX 400 INTERNATIONAL EQUITY STOCK DIVISION STOCK DIVISION# DIVISION GROWTH STOCK DIVISION -------------------------- -------------------------- -------------------------- -------------------------- SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS ENDED ENDED SIX MONTHS ENDED ENDED JUNE 30, YEAR ENDED JUNE 30, ENDED JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED 2000 DECEMBER 31, 2000 DECEMBER 31, 2000 DECEMBER 31, 2000 DECEMBER 31, (UNAUDITED) 1999 (UNAUDITED) 1999 (UNAUDITED) 1999 (UNAUDITED) 1999 ----------------------------------------------------------------------------------------------------------------- $ 29,009 $ 3,764 $ 113 $ 52 $ 9,488 $ 12,564 $ 5,890 $ 2,719 (45,019) 1,888 (264) 4 (9,162) 504 (9,133) 595 48,682 54,225 809 321 1,767 7,108 8,689 16,158 -------- -------- ------- ------ -------- -------- -------- -------- 32,672 59,877 658 377 2,093 20,176 5,446 19,472 -------- -------- ------- ------ -------- -------- -------- -------- 21,470 37,031 632 165 15,577 25,923 18,323 22,738 (9,085) (9,017) (182) (43) (3,924) (5,642) (4,800) (5,004) (4,789) (7,239) (113) (27) (2,646) (4,876) (3,464) (4,452) 33,664 23,525 6,813 4,152 15,395 19,043 21,973 33,353 (11,122) (17,347) (783) (364) (4,630) (10,533) (7,655) (6,373) -------- -------- ------- ------ -------- -------- -------- -------- 30,138 26,953 6,367 3,883 19,772 23,915 24,377 40,262 -------- -------- ------- ------ -------- -------- -------- -------- 62,810 86,830 7,025 4,260 21,865 44,091 29,823 59,734 206,060 119,230 4,260 -- 122,508 78,417 125,759 66,025 -------- -------- ------- ------ -------- -------- -------- -------- $268,870 $206,060 $11,285 $4,260 $144,373 $122,508 $155,582 $125,759 ======== ======== ======= ====== ======== ======== ======== ========
91 Variable Life Financial Statements 98 NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Statement of Changes in Equity (in thousands)
GROWTH AND INCOME INDEX 500 STOCK DIVISION STOCK DIVISION --------------------------- --------------------------- SIX MONTHS SIX MONTHS ENDED ENDED JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED 2000 DECEMBER 31, 2000 DECEMBER 31, (CONTINUED) (UNAUDITED) 1999 (UNAUDITED) 1999 ------------------------------------------------------------------------------------------------------------------------ OPERATIONS Net Investment Income..................................... $ 5,785 $ 8,592 $ 12,957 $ 3,965 Net Realized Gain (Loss).................................. 3,261 514 (21,904) 1,529 Net Change in unrealized Appreciation (Depreciation)...... (10,777) (3,359) 7,357 42,832 -------- -------- -------- -------- Increase (Decrease) in Equity............................... (1,731) 5,747 (1,590) 48,326 -------- -------- -------- -------- EQUITY TRANSACTIONS Policyowners' Net Payments................................ 14,862 23,731 41,623 56,388 Policy Loans, Surrenders, and Death Benefits.............. (3,563) (5,239) (16,020) (14,992) Mortality and Other (net)................................. (2,841) (4,489) (2,843) (10,807) Transfers from Other Divisions............................ 9,557 22,159 38,923 72,157 Transfers to Other Divisions.............................. (9,733) (9,185) (15,865) (14,168) -------- -------- -------- -------- Increase in Equity Derived from Equity Transactions......... 8,282 26,977 45,818 88,578 -------- -------- -------- -------- Net Increase in Equity...................................... 6,551 32,724 44,228 136,904 EQUITY Beginning of Period....................................... 103,251 70,527 328,045 191,141 -------- -------- -------- -------- End of Period............................................. $109,802 $103,251 $372,273 $328,045 ======== ======== ======== ========
The Accompanying Notes are an Integral Part of the Financial Statements Variable Life Financial Statements 92 99
BALANCED DIVISION HIGH YIELD BOND DIVISION SELECT BOND DIVISION MONEY MARKET DIVISION ------------------------------ -------------------------- -------------------------- -------------------------- SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS ENDED ENDED ENDED ENDED JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED 2000 DECEMBER 31, 2000 DECEMBER 31, 2000 DECEMBER 31, 2000 DECEMBER 31, (UNAUDITED) 1999 (UNAUDITED) 1999 (UNAUDITED) 1999 (UNAUDITED) 1999 --------------------------------------------------------------------------------------------------------------------- $ 14,833 $ 16,560 $ (23) $ 2,012 $ 1,235 $ 1,122 $ 1,864 $ 2,203 (2,393) 2,596 1,790 (288) 4 33 -- -- (10,010) (1,744) (2,032) (1,879) (774) (1,386) -- -- -------- -------- ------- ------- ------- ------- --------- --------- 2,430 17,412 (265) (155) 465 (231) 1,864 2,203 -------- -------- ------- ------- ------- ------- --------- --------- 12,347 20,488 2,988 5,513 2,263 3,020 146,503 207,164 (6,038) (9,916) (500) (933) (554) (985) (1,366) (2,420) (2,545) (4,412) (502) (928) (340) (557) (7,594) (23,000) 7,618 16,340 1,953 3,662 3,684 3,874 13,847 13,433 (10,764) (9,591) (2,118) (3,710) (1,930) (2,463) (144,098) (169,279) -------- -------- ------- ------- ------- ------- --------- --------- 618 12,909 1,821 3,604 3,123 2,889 7,292 25,898 -------- -------- ------- ------- ------- ------- --------- --------- 3,048 30,321 1,556 3,449 3,588 2,658 9,156 28,101 188,431 158,110 17,965 14,516 15,327 12,669 67,401 39,300 -------- -------- ------- ------- ------- ------- --------- --------- $191,479 $188,431 $19,521 $17,965 $18,915 $15,327 $ 76,557 $ 67,401 ======== ======== ======= ======= ======= ======= ========= =========
93 Variable Life Financial Statements 100 NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Statement of Changes in Equity (in thousands)
RUSSELL MULTI-STYLE RUSSELL AGGRESSIVE EQUITY DIVISION# EQUITY DIVISION# --------------------------- --------------------------- SIX MONTHS SIX MONTHS ENDED SIX MONTHS ENDED SIX MONTHS JUNE 30, ENDED JUNE 30, ENDED 2000 DECEMBER 31, 2000 DECEMBER 31, (CONTINUED) (UNAUDITED) 1999 (UNAUDITED) 1999 ---------------------------------------------------------------------------------------------------------------------------- OPERATIONS Net Investment Income..................................... $ 477 $ 362 $ 170 $ 12 Net Realized Gain (Loss).................................. (591) (1) (425) (4) Net Change in unrealized Appreciation (Depreciation)...... (594) 484 555 438 ------- ------- ------- ------ Increase (Decrease) in Equity............................. (708) 845 300 446 ------- ------- ------- ------ EQUITY TRANSACTIONS Policyowners' Net Payments................................ 2,168 669 702 28 Policy Loans, Surrenders, and Death Benefits.............. (500) (109) (191) (34) Mortality and Other (net)................................. (275) (114) (108) (37) Transfers from Other Divisions............................ 17,500 13,008 7,900 5,080 Transfers to Other Divisions.............................. (3,350) (561) (1,960) (127) ------- ------- ------- ------ INCREASE IN EQUITY Derived from Equity Transactions.......................... 15,543 12,893 6,343 4,910 ------- ------- ------- ------ Net Increase in Equity...................................... 14,835 13,738 6,643 5,356 EQUITY Beginning of Period....................................... 13,738 -- 5,356 -- ------- ------- ------- ------ End of Period............................................. $28,573 $13,738 $11,999 $5,356 ======= ======= ======= ======
# The initial investment in this Division was made on June 30, 1999. The Accompanying Notes are in Integral Part of the Financial Statements Variable Life Financial Statements 94 101
RUSSELL NON- RUSSELL REAL ESTATE SECURITIES RUSSELL CORE U.S. DIVISION# SECURITIES DIVISION# BOND DIVISION# -------------------------- ------------------------------ -------------------------- SIX MONTHS SIX MONTHS SIX MONTHS ENDED SIX MONTHS ENDED SIX MONTHS ENDED SIX MONTHS JUNE 30, ENDED JUNE 30, ENDED JUNE 30, ENDED 2000 DECEMBER 31, 2000 DECEMBER 31, 2000 DECEMBER 31, (UNAUDITED) 1999 (UNAUDITED) 1999 (UNAUDITED) 1999 -------------------------------------------------------------------------------------------- $ 254 $ 138 $ 20 $ 33 $ 23 $ 50 (542) -- 7 -- 42 -- (111) 585 225 (9) 50 (45) ------- ------ ------ ------ ------ ------ (399) 723 252 24 115 5 ------- ------ ------ ------ ------ ------ 1,381 254 171 49 227 51 (232) (48) (29) (8) (57) (38) (167) (34) (21) (8) (41) (8) 13,930 4,917 1,560 1,097 2,455 1,595 (3,305) (205) (179) (6) (145) (71) ------- ------ ------ ------ ------ ------ 11,607 4,884 1,502 1,124 2,439 1,529 ------- ------ ------ ------ ------ ------ 11,208 5,607 1,754 1,148 2,554 1,534 5,607 -- 1,148 -- 1,534 -- ------- ------ ------ ------ ------ ------ $16,815 $5,607 $2,902 $1,148 $4,088 $1,534 ======= ====== ====== ====== ====== ======
95 Variable Life Financial Statements 102 NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Notes to Financial Statements June 30, 2000 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 June 30, 2000 by each Division are shown below:
DIVISIONS: PURCHASES SALES ---------- --------- ----- Small Cap Growth Stock.... $23,164,072 $ 82,523 Aggressive Growth Stock... 62,154,577 3,005,686 International Equity...... 36,134,506 6,873,842 Index 400 Stock........... 6,918,534 437,616 Growth Stock.............. 31,379,426 1,112,312 Growth & Income Stock..... 17,196,529 3,129,463 Index 500 Stock........... 60,577,201 1,775,079 Balanced.................. 23,124,769 7,671,019 High Yield Bond........... 2,584,467 786,594 Select Bond............... 5,295,984 938,916 Money Market.............. 45,422,430 36,265,634 Russell Multi-Style Equity.................. 17,201,810 1,180,706 Russell Aggressive Equity.................. 7,127,674 614,534 Russell Non-U.S........... 12,301,453 441,926 Russell Real Estate Securities.............. 1,590,611 71,497 Russell Core Bond......... 2,586,609 126,459
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 96 103 NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Notes to Financial Statements June 30, 2000 (in thousands) NOTE 8 -- Equity Values by Division are shown below:
VARIABLE LIFE POLICIES ISSUED BEFORE OCTOBER 11, 1995 EQUITY OF: -------------------------- TOTAL DIVISION POLICYOWNERS NML EQUITY --------------------------------------------------------------------------------------------------------- Small Cap Growth Stock...................................... $ 8,097 $ 321 $ 8,418 Aggressive Growth Stock..................................... 72,636 3,141 75,777 International Equity........................................ 42,120 2,528 44,648 Index 400 Stock............................................. 2,165 85 2,250 Growth Stock................................................ 34,163 1,506 35,669 Growth and Income Stock..................................... 26,333 1,439 27,772 Index 500 Stock............................................. 124,744 4,970 129,714 Balanced.................................................... 141,321 4,343 145,664 High Yield Bond............................................. 3,613 264 3,877 Select Bond................................................. 7,305 381 7,686 Money Market................................................ 6,470 225 6,695 Russell Multi-Style Equity.................................. 3,561 164 3,725 Russell Aggressive Equity................................... 2,187 97 2,284 Russell Non-U.S............................................. 3,215 159 3,374 Russell Real Estate Securities.............................. 622 20 642 Russell Core Bond........................................... 359 14 373 -------- ------- -------- $478,911 $19,657 $498,568 ======== ======= ========
VARIABLE COMPLIFE POLICIES ISSUED ON OR AFTER OCTOBER 11, 1995 EQUITY OF: --------------------------- TOTAL DIVISION POLICYOWNERS NML EQUITY ---------------------------------------------------------------------------------------------------------- Small Cap Growth Stock...................................... $ 15,427 $ 7,894 $ 23,321 Aggressive Growth Stock..................................... 155,937 34,442 190,379 International Equity........................................ 77,569 19,549 97,118 Index 400 Stock............................................. 5,617 3,032 8,649 Growth Stock................................................ 89,868 26,087 115,955 Growth and Income Stock..................................... 63,456 17,196 80,652 Index 500 Stock............................................. 180,762 52,889 233,651 Balanced.................................................... 33,674 9,990 43,664 High Yield Bond............................................. 11,901 3,232 15,133 Select Bond................................................. 6,752 1,852 8,604 Money Market................................................ 28,469 34,755 63,224 Russell Multi-Style Equity.................................. 13,783 6,945 20,728 Russell Aggressive Equity................................... 5,301 2,866 8,167 Russell Non-U.S............................................. 7,740 3,610 11,350 Russell Real Estate Securities.............................. 1,341 703 2,044 Russell Core Bond........................................... 1,233 461 1,694 -------- -------- -------- $698,830 $225,503 $924,333 ======== ======== ========
97 Notes to Financial Statements 104
VARIABLE EXECUTIVE LIFE VARIABLE JOINT LIFE POLICIES ISSUED POLICIES ISSUED ON OR AFTER MARCH 2, 1998 ON OR AFTER DECEMBER 10, 1998 ------------------------- ----------------------------- DIVISION TOTAL EQUITY TOTAL EQUITY ----------------------------------------------------------------------------------------------------------------------------- Small Cap Growth Stock...................................... $ 100 $ 1,375 Aggressive Growth Stock..................................... 1,154 1,559 International Equity........................................ 1,603 1,006 Index 400 Stock............................................. 70 319 Growth Stock................................................ 2,253 1,706 Growth and Income Stock..................................... 550 829 Index 500 Stock............................................. 4,236 4,672 Balanced.................................................... 1,424 727 High Yield Bond............................................. 384 127 Select Bond................................................. 2,362 263 Money Market................................................ 2,284 4,353 Russell Multi-Style Equity.................................. 1,720 2,399 Russell Aggressive Equity................................... 1,071 476 Russell Non-U.S............................................. 1,140 950 Russell Real Estate Securities.............................. 56 159 Russell Core Bond........................................... 1,814 205 ------- ------- $22,221 $21,125 ======= =======
Notes to Financial Statements 98 105 NORTHWESTERN MUTUAL SERIES FUND, INC. D IRECTORS James D. Ericson.................................. Chairman and Chief Executive Officer, Northwestern Mutual, .................................................. Milwaukee 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
O FFICERS James D. Ericson.................................. President Mark G. Doll...................................... Vice President & Treasurer Merrill C. Lundberg............................... Secretary Barbara E. Courtney............................... Controller
99 Directors and Officers 106 BABY BOOMERS: PUSHING BACK THE HANDS OF TIME As the oldest of the Baby Boomers nears a 55th birthday, and many more turn 50, don't expect to see many black balloons or hear "Over The Hill" jokes soon. This generation of 78 million has changed and reshaped every aspect of American life as it has matured, from popular culture and values to nationwide financial trends, and experts predict that retirement will be no different. Boomers have always held very negative perceptions about aging. However, now they have the social and financial influence, and the motivation, to change and improve what it means to grow old in our society. In all likelihood, our notions of retirement will get their own facelift in the coming years. For an example of this generation's impact, just take a look at today's workplace. The themes of empowerment, teamwork and face-to-face, personal relationships so prevalent in the corporate world all emerged as Baby Boomers ascended high enough in the corporate ranks to wield corporate-wide influence, bringing their own values along. In his book BOBOS in Paradise; The New Upper Class and How They Got There, David Brooks credits Baby Boomers for an unprecedented period of business innovation and productivity, a result of their workaholic tendencies, creativity and willingness to break the rules. Americans outside of the Baby Boom generation have had to comply with these changes even if we don't buy into the accompanying attitudes and lifestyles. According to Ken Dychtwald, author of best-selling books Age Power and Age Wave, Baby Boomers are a new breed of consumers whose wants, needs and buying habits will have a fundamental effect on the choice of products and services will continue to grow as Boomers' priorities shift to maintaining their health and financial security. Recreation industries will grow while durable goods shrink as businesses seek to capture the immense Baby Boomer market interested in purchasing experiences rather than things. Dychtwald believes this new breed of consumers will also affect the ways in which products and services are designed, packaged and sold. Security, safety and physical comfort will become key product attributes. In the coming years, we can expect to see larger print on road signs, pedestrian street lights that change more slowly, and more restaurant menu choices driven by age-related dietary restrictions. Within the financial industry, the effects of the Baby Boomers are already apparent. This generation has a very different concept of financial risk than earlier generations, driving their greater involvement in the stock market, and more aggressive investments. Their penchant for risk has also encouraged a profusion of market-oriented retirement and insurance products such as variable life insurance, annuities and mutual funds. In general, Boomers have saved less and taken on more personal debt than any generation before, leading to some estimates that more than half of the them will not be prepared for retirement. Other estimates indicate that most Boomers are financially secure, but have continually postponed their retirement planning. As Baby Boomers start looking toward retirement, more and more are turning to financial professionals for help in planning their financial futures. With 30-plus years of life left, Boomers are finding there are steps they can take now to get into good financial shape for retirement. GET STARTED NOW. If you've procrastinated on retirement planning, the most important thing you can do is get moving now. It is a good time to evaluate your financial situation and see what it will take to make your retirement years, whenever they arrive, just as satisfying as your life today. If you are like many Boomers, you may be pleasantly surprised by the results. [PHOTO] CONSIDER WORKING LONGER. If, after your financial evaluation, you realize there is a shortfall in your retirement savings, there are a number of options you can consider to improve your retirement picture. According to a recent survey by the Employee Benefit Research Institute, 68% of people currently working plan to hold paying jobs after they reach retirement age. Reasons for this new trend range from a need for supplemental retirement income to a desire for continued challenge and involvement. This percentage will most likely climb higher thanks to a new law that provides full Social Security benefits for people over 65 regardless of their income level. 04 VARIABLE LIFE VISIONS SEMI ANNUAL REPORT 107 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 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 (7-2000) 108 BY THE NUMBERS BABY BOOMERS IMPACT OVER THE DECADES At 78 million strong, the Baby Boomer generation has swept over our country like a wave, changing everything from our cultural values to the way we do business. Decade by decade, the Baby Boom generation has reshaped American life. 1940s and 50s [PHOTO] Even as they were being born, the Boomer generation was a force for change. Sales of baby food, toys and diapers skyrocketed. Civic construction soared as new elementary schools and hospitals were built to accommodate the growing population of children. For the first time, children were recognized as a market in their own right, leading to a deluge of television shows and advertisements aimed at kids. As Baby Boomers moved into their early teen years, they became the first generation to spend significant amounts of their own money on products such as pimple cream and cosmetics. [PHOTO] [PHOTO] 1960s and 70s The institutions of education and marriage changed significantly with the Baby Boomers. College completion levels rose to approximately 25% for both male and female Boomers, making Boomers better educated than any previous generation. At the same time, the percentage of young adults that married declined as Boomers chose to marry later in life, or not at all. [PHOTO] 1980s and 90s Boomers penchant for health had a direct affect on our lifestyles. Frozen yogurt, kiwi fruits, bottled water and oat products made the top 10 list of most-highly consumed foods, while items such as veal, whole milk, beef and eggs fell to the bottom of the list. Boomers created escalating markets for health clubs, home exercise equipment, dieting books and herbal supplements. [PHOTO] [PHOTO] The New Millennium Today Baby Boomers are reaching their 50s, changing traditional ideas about aging and retirement. Experts predict the financial, health and recreation/entertainment industries will continue to expand as Boomers move into their golden years of life. Retirement or college tuition? If you have children at or near college age, you may be caught in a dilemma- should you pay for college tuition or set aside funds for retirement? Experts advise choosing retirement over college since you can take out a loan for tuition, but not for your retirement. Explore some of the many creative ways to pay for school expenses, including scholarships, student loans, federal tax credits, and short and long term investments. Build some healthy living habits. Like retirement planning, its's never too soon to build some healthy living habits. Getting back to the basics-a nutritious diet, regular exercise and enough sleep all go a long way toward reducing health care costs later in life. And, with good health, you can be sure to enjoy every minute of your retirement, whatever you choose to pursue. Explore life, disability and long-term care insurance. Your earning potential is one of your greatest assets, and it pays to protect it, especially if you plan to continue working past retirement age. A life insurance policy can be used to help pay estate taxes. Cash values may also be utilized as an additional source of income. If you have been in the working world for a while, chances are you already have disability insurance. Now is a good time to re-evaluate your policy, and consider whether supplemental disability insurance is necessary. If you don't have disability insurance, do some research into your options. If you plan to switch to a new job at retirement age, purchasing a portable policy through an insurance company may be a better idea than purchasing it through your current employer. You should also start exploring long-term care insurance now, while you are in good health. VARIABLE LIFE VISIONS SEMI-ANNUAL REPORT 05 109 Make the time for your most important activities ACHIEVING A MORE FOCUSED LIFE In today's hectic world, it's easy to feel stressed for time. The demands of work can take most of our time and energy, leaving less than adequate room in our lives for family, friends and other responsibilities. Often, we feel like we are on a treadmill, always running to catch up, always tired and never feeling a true sense of accomplishment. Finding a balance between work and family is popular advice for coping with this situation, but for many of us, it is an unsatisfactory solution, for a number of reasons. The word "balance" implies allocating similar amounts of time to different activities, advocating that we cut back sharply on time spent at work. However, that's often not feasible, or even compatible with personal career goals. Striving for balance can also leave us feeling less in control and less satisfied as we end up doing a greater number of activities with lesser levels of involvement. As a result, we may accomplish everything while doing nothing well, continuing to feel stressed for time. So if balance is not the solution, what is? For many of us, striving for "focus" is a better way to take control of our time and achieve more personal satisfaction. Focus is about concentrating on the few things that are most important in your life, and organizing your time around these activities. It often means sacrificing some of the more peripheral activities, but it can lead to a higher level of happiness with the things that are most important to you. And, focus can reduce that stressed-for-time feeling. To achieve a more focused life, start by identifying those activities and goals that are most important in your life. Be sure to include both personal and professional goals in this short list. Then, identify the trade-offs you will need to make in order to focus on your most important activities and goals. These sacrifices may be difficult, even life-changing decisions, so keep in mind that they will help make your life more personally satisfying. Also, realize that your focus may change at different points in your life, which may allow you to return to activities or goals you had sacrificed at an earlier time. [PHOTO] With your decisions made, start transitioning your time to your most important activities. If you are more comfortable with gradual change, phase out your peripheral activities slowly, giving yourself time to adjust to your new, more focused way of life. Other people may prefer a more dramatic change. Either way, it is important to allow yourself the flexibility to adjust your schedule until it works for you. Finally, be sure to monitor your progress. Do an occasional check of your time to make sure you are still concentrating on the things that mean the most, and that you have not slipped back into activities that are less important. It's also a good idea to re-evaluate your focus from time to time, adjusting it as necessary. How soon can you expect results? Depending on your rate of transition, you may begin to notice small, upbeat differences immediately, or gradual, positive change in your overall state of mind. Either way, as you reduce your time-stressed feeling, you will most likely notice a corresponding improvement in your physical being. STRIVING FOR FOCUS AT WORK The same principles you apply to achieve a more focused life can also help you become more productive at work. If you are spending large quantities of time on the job, explore the reasons why. Are you mired down by the responsibilities of your position? Are all of the hours you spend at work productive? Could some of the activities you normally do be performed by your subordinates? Striving for focus at work can help you deal with some of these issues, allowing you to feel less time-stressed on the job, and to spend more time on other important activities outside of work. Start by taking the time to identify the activities and goals at work that are most important to you and to the company. Chances are that these are the activities that best match your skills, and may be the ones you find most enjoyable too. Evaluate every task to make sure it adds value to the company, and discard work that is unnecessary. Then, look for new ways to get the remaining tasks accomplished, including delegating work to your subordinates and possibly even colleagues. [PHOTO] 06 VARIABLE LIFE VISIONS SEMI-ANNUAL REPORT 110 STRATEGIES TO REDUCE ESTATE TAXES By J. Edward Tippetts, JD, Vice President, Advanced Markets, and Bradford P. Bauer, JD, Assistant Director, Advanced Marketing, Northwestern Mutual Life Insurance Company, Milwaukee, Wisconsin It is the preservation of wealth and its safe transfer to family which is most desired by clients. Our daily associations with attorneys, accountants and life insurance planners have offered [PHOTO] us telling glimpses of what top professionals discuss with their clients on this subject. Some suggestions to preserve wealth are remarkably simple and effective; others more subtle and complex. Many of these may not seem initially digestible to individuals whose hard work has amassed considerable wealth. "In estate tax planning," said Los Angeles estate attorney Bill Lynch, "all choices are between bad and worse." Here is a list of the "betters." IT IS BETTER TO GIVE THAN TO RECEIVE. Everyone can give $10,000 ($20,000 if married) annually, transfer tax-free, to an unlimited number of donees. In addition, the transfer-tax system allows each person a tax credit which will pay for the first $675,000 of transfers. Each taxpayer may pass up to $1,000,000 free of generation-skipping tax. The key is that any tax paid on lifetime gifts is not itself subject to transfer tax - as it would be at death. IT IS BETTER TO GIVE APPRECIATING ASSETS ("LEVERAGED GIVING"). The benefit of lifetime giving is that the appreciation on the gifted assets will grow in the hands of lower-generation family members - not in your 55-percent taxable hands. This feature is accentuated when vastly appreciating assets are given, such as to-be-developed real estate, growth company stock, or life insurance. In the last case, the death benefit will escape estate taxation for a lifetime gift-cost of the policy's cash value or the policy premiums - a huge leveraging factor. IT IS BETTER STILL TO GIVE DISCOUNTED VALUE ASSETS. The benefit of lifetime giving is that the appreciation on the gifted assets will grow in the hands of lower-generation family members - not in your 55-percent taxable hands. This feature is accentuated when vastly appreciating assets are given, such as to-be-developed real estate, growth company stock, or life insurance. In the last case, the death benefit will escape estate taxation for a lifetime gift-cost of the policy's cash value or the policy premiums - a huge leveraging factor. IT IS BETTER STILL TO GIVE DISCOUNTED VALUE ASSETS. What could be better than giving assets which will appreciate in value? How about reducing the gift value of those assets before the transfer to reduce the taxable value of the gift? It is a principal of valuation that the sum of minority parts does not equal what is ordinarily considered to be the value of the whole. A 10-percent interest in a family business worth $5,000,000 is not equal to $500,000. Because that 10 percent lacks any control over the business and is most likely not marketable, its value may be discounted by as much as 40-to-50 percent, making its gift value not $500,000, but more like $200,000. This planning device consists of fragmenting an asset into particles, the discounted values of which are then transferred to lower-generation family members. WITH QUALIFIED PLANS, A TAX DEFERRED IS A TAX...DOUBLED! If held until death, the pillage of estate and income taxes on qualified plans can consume up to 80 percent of qualified plan assets. Consider taking current retirement distributions. These income-taxable distributions may then be used to create estate tax-free wealth (e.g., life insurance in a trust). IT IS BETTER FOR YOU TO DIRECT YOUR "SOCIAL FUNDS." Many planners are advocating charitable giving on a large scale, either through simple outright gifts or through various charitable, lead, and remainder trusts. The trust frequently pays an income interest to the donor. Any amount passing to the charity escapes "Uncle's" reallocation, but does not escape from the community you wish to benefit. Again, the amount ultimately passing to your family can be replenished with life insurance owned outside of your estate. IT HURTS WHEN I ACCUMULATE BY DEFERRING CURRENT INCOME: STOP DEFERRING! If you are deferring current income as part of an overall plan to marshal retirement resources, this option is not for you. However, a number of high-wealth individuals defer solely to avoid current income tax. We think that this select group may be losing sight of the real tax ball. We are so accustomed to thinking that the deferral of income is inherently good. These deferrals may translate into a large estate which is double-taxed (estate and income tax). It's like borrowing from the bartender to delay the hang-over. Consider executive benefit plans which reduce or eliminate ordinary income in favor of capital gain, or which provide for growth outside of the executive's estate (e.g., restricted stock or stock option plans, or a split-dollar life insurance plan). IT IS BETTER TO PAY TAXES WITH LIFE INSURANCE DEATH PROCEEDS THAN WITH ESTATE-TAXED ASSETS. Individuals of considerable wealth will pay considerable transfer taxes, and no amount of planning will prevent that. But life insurance helps to achieve the real goal of getting more to the family. Insurance in an irrevocable trust escapes income and estate taxation for the price of the premiums. The death proceeds may be used to lend the money to, or to buy assets from, your estate. Finally, surround yourself with a good team of advisors. Give them the time to educate you as to the risks and rewards, and never lose sight of what your real family planning goals are. Reprinted with permission of LEADERS Magazine, Inc., Volume (20), Number (2) April, May, June, 1997 (updated May 2000). VARIABLE LIFE VISIONS SEMI-ANNUAL REPORT 07 111 Non-Qualified Benefits For Businesses A common tool of businesses, large and small, high tech to industrial, is their use of life insurance to recruit, reward, and retain top talent. Northwestern Mutual's products are being used by all kinds of these businesses to help them finance excellent executive benefit programs including Supplemental Employee Retirement Programs (SERPs), deferred compensation, split dollar plans, bonus plans, key person and buy/sell arrangements. Northwestern Mutual's product portfolio is varied, spanning traditional and universal, portfolio and variable. #90-1899 (07/00) 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 Northwestern Mutual Express line any time. 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. To sign up for this service please call 1-800-388-8123 between 7 a.m. - 8 p.m. Central Standard Time Monday - Friday. As always, your Northwestern Mutual Registered Representative of the Northwestern Mutual Financial Network is available to answer any questions you have about your variable life policy or any of our products. [LOGO] NORTHWESTERN MUTUAL PO BOX 3095 MILWAUKEE WI 53201-3095 CHANGE SERVICE REQUESTED