-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ix6wuSeHY/mrDoqIPIDIuY/bdm5j6uKX5CGBp/AD7kumiDriAVJdC47N+RONnVrO rLeeoWv1Q+aK1C32UPbZ1g== 0000950131-03-000746.txt : 20030218 0000950131-03-000746.hdr.sgml : 20030217 20030218112538 ACCESSION NUMBER: 0000950131-03-000746 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030218 EFFECTIVENESS DATE: 20030218 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHWESTERN MUTUAL SERIES FUND INC CENTRAL INDEX KEY: 0000742212 IRS NUMBER: 391603401 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03990 FILM NUMBER: 03570354 BUSINESS ADDRESS: STREET 1: 720 E WISCONSIN AVE CITY: MILWAUKEE STATE: WI ZIP: 53202 BUSINESS PHONE: 4142992508 MAIL ADDRESS: STREET 1: 720 EAST WISCONSIN AVE CITY: MILWAUKEE STATE: WI ZIP: 53202 FORMER COMPANY: FORMER CONFORMED NAME: NORTHWESTERN MUTUAL VARIABLE LIFE SERIES FUND INC DATE OF NAME CHANGE: 19940830 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT CENTRAL INDEX KEY: 0000742277 IRS NUMBER: 390509570 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03989 FILM NUMBER: 03570355 BUSINESS ADDRESS: STREET 1: 720 E WISCONSIN AVE CITY: MILWAUKEE STATE: WI ZIP: 53202 BUSINESS PHONE: 4146652508 MAIL ADDRESS: STREET 1: 720 EAST WISCONSIN AVENUE CITY: MILWAUKEE STATE: WI ZIP: 53202 N-30D 1 dn30d.txt NML VARIABLE LIFE ACCOUNT ANNUAL REPORT Annual Report [PHOTO APPEARS HERE] LifeAccount [PHOTOS APPEAR HERE] Northwestern Mutual Series Fund. Inc. and Russell Insurance Funds The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue Milwaukee, WI 53202 (414) 271-1444 90-1899 (0786) (REV 0103) [LOGO APPEARS HERE] Letter to Policyowners January 31, 2003 During 2002 the stock market was highly volatile within a generally downward trend. The broad S&P 500 Index was down more than 22% for the year, and all major equity indices, domestic and international, posted negative returns. For the third consecutive year, bonds substantially outperformed stocks: total return of the Merrill Lynch Domestic Master Index was 10.4%. Many recent reports in the popular press give the impression that the U.S. economy is in a recession, but all indications are that economic growth was positive for all four quarters of 2002. It appears that the economy grew between two and three percent for the year, about average for the last 20 years. While it is unusual for stock prices to fall when the economy is growing, there are credible explanations for the weakness in equity markets over the past year. Most individuals and business people would agree that the year just ended did not feel like a period of economic expansion. Growth in the economy has been powered almost entirely by consumer spending, as consumers have taken advantage of the low interest rates to refinance mortgages and take on additional debt. But the price discounting necessary to create demand, in categories ranging from clothing to durable goods such as cars and home furnishings, means that corporations have not been able to generate the earnings growth that is usual when the economy is growing. This lack of earnings growth, especially in the wake of a period of extraordinarily high stock valuations, has restrained stock prices. The outlook for the immediate future is clouded by concerns about whether consumers can continue to spend. High debt levels and increasing unemployment are factors in recent drops in consumer confidence. On the positive side, near the end of 2002, there were early signs of a pick-up in business spending. Recent reports showed increasing investments in equipment and software, and new orders for durable goods are building, after several dismal years. Productivity gains continue, as stiff competition, including foreign competition, has forced companies to reduce costs. One positive result of these cost reductions is the potential for significant earnings gains when demand increases. The Federal Reserve's monetary policy continues to be friendly, and it appears possible that interest rates could be cut even further from current levels, which are the lowest in several decades. The program of economic stimulus announced by President Bush in January should begin to take form in the coming months, and tax cuts, if approved, should bolster both consumer confidence and spending. If the tax on dividends is reduced or eliminated, as President Bush has proposed, that should help the stock market. With a new pro-growth economic team in Washington and a presidential election on the horizon, we can expect that the administration will do everything possible to keep the economy growing. While there is considerable divergence among economic forecasts, all the economists surveyed recently by The Wall Street Journal and Business Week expect the U.S. economy to grow in 2003, and that should be positive for the stock market. While we are fairly optimistic about the outlook for the economy and the markets in the year ahead, we think it is likely that we have entered a period of slower economic growth and lower returns compared with the decade of the 1990s. It is reasonable to expect that long-term returns from stocks will be above bond returns, as they have been historically, because stocks are a riskier asset class. But in a period of low inflation and moderate growth, it is almost inevitable that nominal returns from both stocks and bonds will be below those of the last 25 years. Nonetheless, real returns, meaning returns adjusted for inflation, can still be quite attractive, perhaps better than in the past. A closer examination of returns for the years from 1970 through 1990 helps illustrate this point. Total return from the S&P 500 index for that 20-year period averaged just over 12%. But when those returns are adjusted for inflation, which was quite high during many of those years, the average was below 6%. This scenario is not necessarily negative, but it is different from what we experienced in the 1990s. Also, considering the prevailing elements of geopolitical and economic uncertainty, it seems probable that the volatility experienced in the last few years will continue. This environment may require many investors to adjust their expectations and their personal portfolios. With a solid plan and considerable patience, it is still quite possible to invest for a secure future. In a market that takes quality and value very seriously, selection of individual stocks and bonds will continue to be important. The expertise of the investment professionals who manage the portfolios underlying the Variable Life Insurance policies can be of particular value in this challenging market environment. If you decide that you would like to reassess your goals and objectives, we urge you to take advantage of the considerable expertise available through the Northwestern Mutual Financial Network. As always, we are committed to helping our clients plan and invest to meet their goals. [PHOTO] Mark G. Doll /s/ Mark G. Doll Mark G. Doll President, Mason Street Advisors, LLC [GRAPHIC] Northwestern Mutual(R) 1 How To Get More Information Northwestern Mutual Express: 1-800-519-4665 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. Information on the Internet: Northwestern Mutual Financial Network WWW.NMFN.COM You can also visit us at our customer service section from our Web site for information on Policy values and fund performance. This site also allows you to view past confirmation and policy statements, as well as transfer funds online. To sign up for this service please call 1-866-424-2609 between 7 a.m. - 6 p.m. Central Standard Time Monday - Friday. As always, your Investment Services representative of the Northwestern Mutual Financial Network is available to answer any questions you have about your variable life insurance policy or any of our products. For Variable Executive Life and Variable Joint Life inforce policy service questions please call 1-866-464-3800 between 7:30 a.m. - 6 p.m. Central Standard Time Monday - Friday.
Contents Letter to Policyowners 1 Performance Summary for Separate Accounts 4 Economic Overview and Outlook 8 Series Fund Objectives and Schedules of Investments Small Cap Growth Stock Portfolio 9 T. Rowe Price Small Cap Value Portfolio 12 Aggressive Growth Stock Portfolio 15 International Growth Portfolio 18 Franklin Templeton International Equity Portfolio 22 Index 400 Stock Portfolio 26 Growth Stock Portfolio 32 J.P. Morgan Select Growth & Income Stock Portfolio 35 Capital Guardian Domestic Equity Portfolio 38 Index 500 Stock Portfolio 41 Asset Allocation Portfolio 48 Balanced Portfolio 59 High Yield Bond Portfolio 72 Select Bond Portfolio 78 Money Market Portfolio 85 Accountants' Report 88 Statements of Assets and Liabilities 90 Statements of Operations 92 Statements of Changes in Net Assets 94 Financial Highlights 102 Notes to Series Fund Financial Statements 110 Accountants' Report 115 Variable Life Account Financial Statements 116 Notes to Variable Life Account Financial Statements 126 Directors Information 130 Directors and Officers 131 The Russell Annual Report Starts After Page 131
3 Performance Summary as of December 31, 2002 Variable Life--Policies Issued Before October 11, 1995
J.P. Morgan Franklin Select T. Rowe Templeton Growth & Total return (check Small Cap Price Small Aggressive International International Index 400 Growth Income mark) Growth Stock Cap Value Growth Stock Growth Stock Equity Stock Stock Stock (as of 12/31/02) Division Division Division Division Division Division Division Division - ------------------------------------------------------------------------------------------------------------------------------- 1 year.............. (18.99%) 6.24% (21.70%) (12.95%) (17.98%) (15.14%) (21.38%) (28.70%) 5 years............. -- -- 0.17% -- (12.34%) -- (0.77%) (21.27%) Annualized......... -- -- 0.03% -- (2.60%) -- (0.15%) (4.67%) 10 years............ -- -- 126.68% -- -- -- -- -- Annualized......... -- -- 8.53% -- -- -- -- -- Since division inception in Variable Life Account............ 25.83%~ (4.87%)+ 90.39%* (21.36%)+ 33.14%# 3.84%~ 101.74% 57.48%## Annualized......... 6.78% (3.46%) 7.72% (15.58%) 3.36% 1.08% 8.44% 5.38% Since portfolio 51.95%~ (4.87%) 276.18%* (21.36%) 64.43% 9.43%~ 101.74% 57.48% inception++........ Annualized......... 12.07% (3.46%) 11.59% (15.58%) 5.28% 2.48% 8.44% 5.38% Current Yield###.... Variable Complife--Policies Issued On or After October 11, 1995** - ------------------------------------------------------------------------------------------------------------------------------- 1 year.............. (18.91%) (6.14%) (21.62%) (12.86%) (17.90%) (15.05%) (21.30%) (28.63%) 5 years............. -- -- 0.68% -- (11.89%) -- (0.26%) (20.87%) Annualized......... -- -- 0.14% -- (2.50%) -- (0.05%) (4.57%) 10 years............ -- -- 129.00% -- -- -- -- -- Annualized......... -- -- 8.64% -- -- -- -- -- Since division inception in Variable Life Account............ 26.28%~ (4.73%)+ 92.08%* (21.25%)+ 34.32%# 4.21%~ 103.52%## 58.88%## Annualized......... 6.89% (3.36%) 7.83% (15.49%) 3.46% 1.19% 8.55% 5.49% Since portfolio 52.52%~ (4.73%) 280.84%* (21.25%) 66.06% 9.84%~ 103.52% 58.88% inception++........ Annualized......... 12.19% (3.36%) 11.70% (15.49%) 5.38% 2.59% 8.55% 5.49% Current Yield###....
Capital Guardian Total return (check Domestic mark) Equity (as of 12/31/02) Division - -------------------------------------- 1 year.............. (21.79%) 5 years............. -- Annualized......... -- 10 years............ -- Annualized......... -- Since division inception in Variable Life Account............ (23.73%)+ Annualized......... (17.37%) Since portfolio (23.73%) inception++........ Annualized......... (17.37%) Current Yield###.... Variable Complife--Policies Issued On or After October 11, 1995** - ------------------------------------------------------------------------------------------------------------------------------------ 1 year.............. (21.71%) 5 years............. -- Annualized......... -- 10 years............ -- Annualized......... -- Since division inception in Variable Life Account............ (23.62%)+ Annualized......... (17.29%) Since portfolio (23.62%) inception++........ Annualized......... (17.29%) Current Yield###....
All total return figures shown above reflect the deduction of portfolio expenses, as well as mortality and expense risk charges for each product. Returns do not reflect deductions such as sales charges or premium taxes, administrative charges, surrender charges or cost of insurance charges. These deductions would significantly impact the returns if they were included. 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. ` 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. ++Returns stated are as of the inception date of the portfolio which preceeds 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 fund 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 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. ***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 December 28, 1998 (For use primarily in estate planning, provides coverage on two insureds with a death benefit payable on the second death). Returns prior to 12/28/98 were reflected using the actual investment experience of each division adjusted for expenses of the product and premium charges. ~ 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. + Inception date of 7/31/01. ###For the seven-day period ended December 31, 2002, the Money Market Portfolio's yield was 1.51% and was equivalent to a compound effective yield of 1.52%. 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. (check mark)Returns shown include any fee waivers in effect and deductions for all Fund expenses. In the absence of fee waivers, total return would be reduced. Note:"Standard and Poor's 500", "S&P 500" and "S&P 400" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by The Northwestern Mutual Life Insurance Company. The Series Fund and its Portfolios are not sponsored, endorsed, sold or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of investing in them. 4
Russell Russell Russell Index 500 Asset High Yield Select Money Multi-Style Aggressive Russell Real Estate Russell Stock Allocation Balanced Bond Bond Market Equity Equity Non-U.S. Securities Core Bond Division Division Division Division Division Division Division+ Division+ Division+ Division Division+ - ------------------------------------------------------------------------------------------------------------------------------- (21.61%) (10.88%) (8.18%) (3.57%) 11.31% 0.95% (23.72%) (19.62%) (15.74%) 3.08% 8.08% (5.83%) -- 14.11% (8.18%) 39.51% 20.09% (15.81%) (18.77%) (17.66%) -- 32.53% (1.20%) -- 2.68% (1.69%) 6.89% 3.73% (3.38%) (4.07%) (3.81%) -- 5.79% 126.96%` -- 111.35% -- 96.47% 45.90% -- -- -- -- -- 8.54% -- 7.77% -- 6.99% 3.85% -- -- -- -- -- 470.71% (13.01%)+ 454.47% 49.39%## 406.91% 165.61% (41.05%) (19.56%) (31.18%) 30.85%~ 26.12% 9.87% (9.35%) 9.70% 4.74% 9.17% 5.42% (14.00%) (6.02%) (10.11%) 7.98% 6.85% 487.80% (13.01%) 443.34% 49.39% 396.75% 165.82% 7.46% 8.96% (17.98%) 28.74%~ 44.41% 10.04% (9.35%) 9.57% 4.74% 9.04% 5.42% 1.21% 1.44% (3.25%) 7.12% 6.32% 1.51% - ------------------------------------------------------------------------------------------------------------------------------- (22.54%) (10.79%) (8.09%) (3.47%) 11.42% 1.05% (23.65%) (19.54%) (15.65%) 3.18% 8.19% (5.36%) -- 14.69% (7.71%) 40.23% 20.71% (15.38%) (18.35%) (17.24%) -- 33.20% (1.09%) -- 2.78% (1.59%) 7.00% 3.84% (3.29%) (3.97%) (3.71%) -- 5.90% 129.29%` -- 113.52% -- 98.48% 47.39% -- -- -- -- -- 8.65% -- 7.88% -- 7.10% 3.96% -- -- -- -- -- 481.61% (12.89%)+ 465.03% 50.72%## 416.61% 170.67% (40.84%) (19.27%) (30.93%) 31.32%~ 26.57% 9.98% (9.26%) 9.81% 4.85% 9.28% 5.53% (13.91%) (5.92%) (10.02%) 8.08% 6.95% 499.03% (12.89%) 453.70% 50.72% 406.25% 170.89% 8.12% 9.63% (17.48%) 29.22%~ 45.30% 10.15% (9.26%) 9.68% 4.85% 9.15% 5.53% 1.31% 1.55% (3.15%) 7.23% 6.43% 1.51%
5 Performance Summary as of December 31, 2002 Variable Executive Life--Policies First Offered on March 2, 1998***
J.P. Morgan Franklin Select T. Rowe Templeton Growth & Total return (check Small Cap Price Small Aggressive International International Index 400 Growth Income mark) Growth Stock Cap Value Growth Stock Growth Stock Equity Stock Stock Stock (as of 12/31/02) Division Division Division Division Division Division Division Division - ------------------------------------------------------------------------------------------------------------------------------- 1 year.............. (18.42%) (5.58%) (21.15%) (12.34%) (17.40%) (14.54%) (20.83%) (28.20%) 5 years............. -- -- 3.74% -- (9.22%) -- 2.77% (18.46%) Annualized......... -- -- 0.74% -- (1.91%) -- 0.55% (4.00%) 10 years............ -- -- 143.14% -- -- -- -- -- Annualized......... -- -- 9.29% -- -- -- -- -- Since division inception in Variable Life Account............ 28.96%~ (3.92%)+ 102.32%* (20.58%)+ 41.47%# 6.43%~ 114.36%## 67.34%## Annualized......... 7.53% (2.78%) 8.47% (14.98%) 4.09% 1.79% 9.20% 6.12% Since portfolio 55.91%~ (3.92%) 309.44%* (20.58%) 75.97% 12.28%~ 114.36% 67.34% inception++........ Annualized......... 12.86% (2.78%) 12.37% (14.98%) 6.02% 3.21% 9.20% 6.12% Current Yield###... Variable Joint Life--Policies First Offered on December 28, 1998**** - ------------------------------------------------------------------------------------------------------------------------------- 1 year.............. (18.42%) (5.58%) (21.15%) (12.34%) (17.40%) (14.54%) (20.83%) (28.20%) 5 years............. -- -- 3.74% -- (9.22%) -- 2.77% (18.46%) Annualized......... -- -- 0.74% -- (1.91%) -- 0.55% (4.00%) 10 years............ -- -- 143.14% -- -- -- -- -- Annualized......... -- -- 9.29% -- -- -- -- -- Since division inception in Variable Life Account............ 28.96%~ (3.92%)+ 102.32%* (20.58%)+ 41.47%# 6.43%~ 114.36%## 67.34%## Annualized......... 7.53% (2.78%) 8.47% (14.98%) 4.09% 1.79% 9.20% 6.12% Since portfolio 55.91%~ (3.92%) 309.44%* (20.58%) 75.97% 12.28%~ 114.36% 67.34% inception++........ Annualized......... 12.86% (2.78%) 12.37% (14.98%) 6.02% 3.21% 9.20% 6.12% Current Yield###...
Capital Guardian Total return (check Domestic mark) Equity (as of 12/31/02) Division - -------------------------------------- 1 year.............. (21.24%) 5 years............. -- Annualized......... -- 10 years............ -- Annualized......... -- Since division inception in Variable Life Account............ (22.97%) Annualized......... (16.79%) Since portfolio (22.97%) inception++........ Annualized......... (16.79%) Current Yield###... Variable Joint Life--Policies First Offered on December 28, 1998**** - ------------------------------------------------------------------------------------------------------------------------------------ 1 year.............. (21.24%) 5 years............. -- Annualized......... -- 10 years............ -- Annualized......... -- Since division inception in Variable Life Account............ (22.97%)+ Annualized......... (16.79%) Since portfolio (22.97%) inception++........ Annualized......... (16.79%) Current Yield###...
All total return figures shown above reflect the deduction of portfolio expenses, as well as mortality and expense risk charges for each product. Returns do not reflect deductions such as sales charges or premium taxes, administrative charges, surrender charges or cost of insurance charges. These deductions would significantly impact the returns if they were included. 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. ` 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. ++Returns stated are as of the inception date of the portfolio which preceeds 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 fund 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 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. ***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 December 28, 1998 (For use primarily in estate planning, provides coverage on two insureds with a death benefit payable on the second death). Returns prior to 12/28/98 were reflected using the actual investment experience of each division adjusted for expenses of the product and premium charges. ~ 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. + Inception date of 7/31/01. ###For the seven-day period ended December 31, 2002, the Money Market Portfolio's yield was 1.51% and was equivalent to a compound effective yield of 1.52%. 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. (check mark)Returns shown include any fee waivers in effect and deductions for all Fund expenses. In the absence of fee waivers, total return would be reduced. Note:"Standard and Poor's 500", "S&P 500" and "S&P 400" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by The Northwestern Mutual Life Insurance Company. The Series Fund and its Portfolios are not sponsored, endorsed, sold or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of investing in them. 6
Russell Russell Russell Index 500 Asset High Yield Select Money Multi-Style Aggressive Russell Real Estate Russell Stock Allocation Balanced Bond Bond Market Equity Equity Non-U.S. Securities Core Bond Division Division Division Division Division Division Division+ Division+ Division+ Division Division+ - -------------------------------------------------------------------------------------------------------------------------------- (22.07%) (10.26%) (7.54%) (2.89%) 12.09% 1.65% (23.19%) (19.06%) (15.15%) 3.80% 8.84% (2.48%) -- 18.18% (4.91%) 44.49% 24.37% (12.81%) (15.87%) (14.72%) 37.24% (0.50%) -- 3.40% (1.00%) 7.64% 4.46% (2.70%) (3.40%) (3.13%) 6.54% 143.43%` -- 126.68% -- 110.73% 56.48% -- -- -- -- -- 9.30% -- 8.53% -- 7.74% 4.58% -- -- -- -- -- 549.76% (12.14%)+ 531.24% 58.74%## 477.11% 202.38% (39.58%) (17.55%) (29.46%) 34.10%~ 29.25% 10.64% (8.72%) 10.47% 5.48% 9.94% 6.16% (13.39%) (5.36%) (9.48%) 8.73% 7.60% 569.25% (12.14%) 518.61% 58.74% 465.57% 202.63% 12.07% 13.63% (14.47%) 32.09%~ 50.60% 10.81% (8.72%) 10.34% 5.48% 9.81% 6.16% 1.92% 2.15% (2.57%) 7.88% 7.07% 1.51% - -------------------------------------------------------------------------------------------------------------------------------- (22.07%) (10.26%) (7.54%) (2.89%) 12.09% 1.65% (23.19%) (19.06%) (15.15%) 3.80% 8.84% (2.48%) -- 18.18% (4.91%) 44.49% 24.37% (12.81%) (15.87%) (14.72%) 37.24% (0.50%) -- 3.40% (1.00%) 7.64% 4.46% (2.70%) (3.40%) (3.13%) 6.54% 143.43%` -- 126.68% -- 110.73% 56.48% -- -- -- -- -- 9.30% -- 8.53% -- 7.74% 4.58% -- -- -- -- -- 549.76% (12.14%)+ 531.24% 58.74%## 477.11% 202.38% (39.58%) (17.55%) (29.46%) 34.10%~ 29.25% 10.64% (8.72%) 10.47% 5.48% 9.94% 6.16% (13.39%) (5.36%) (9.48%) 8.73% 7.60% 569.25% (12.14%) 518.61% 58.74% 465.57% 202.63% 12.07% 13.63% (14.47%) 32.09%~ 50.60% 10.81% (8.72%) 10.34% 5.48% 9.81% 6.16% 1.92% 2.15% (2.57%) 7.88% 7.07% 1.51%
7 Overview and Outlook The Economy Economic growth was positive in all four quarters of 2002, but the recovery from the brief recession of the prior year was less robust than economists had forecast at the beginning of the year. Growth in real gross domestic product for the full year was approximately 2.4%. Inflation remained quite moderate, at a rate of approximately 1.6% for the year. Consumer spending has been the main driver of the economy for several years now, and there are concerns about whether debt-ridden consumers will keep spending, especially as consumer confidence appears to be weakening. There are early signs of improving business investment, and productivity has continued to improve. Monetary policy continues exceptionally stimulative, with one additional interest rate cut in November 2002, following 11 reductions during 2002. The tax cuts proposed by President Bush in January are intended to stimulate both the consumer and business sectors; even if some aspects of the program are trimmed, it appears certain that some form of fiscal stimulus will be passed. With both monetary and fiscal policy encouraging growth, it appears likely that the economy will strengthen in 2003. Surveys of business economists published in late December and early January by The Wall Street Journal and Business Week indicate a consensus estimate of real economic growth of approximately 3% for 2003, with the growth rate increasing as the year progresses. - -------------------------------------------------------------------------------- The Equity Market The year just ended was the third year of negative returns for all major equity indices. The S&P 500 Index posted a -22.1% return, and returns for each of the 10 industry sectors in the Index were negative. Both the S&P Midcap 400 and the S&P Smallcap 600 were off about 15% for the year. A rally that began in October moved broad indices up from five-year lows, but there is considerable uncertainly as to whether that rally is sustainable. International markets were also very weak: the EAFE Index (an unmanaged market-value weighted index designed to measure the overall condition of overseas markets) was down more than 15% for the year. Investors should remember that the negative returns of the last three years have followed a lengthy period of extraordinarily high equity returns. In the 1990s, the total return of the S&P 500 Index was above 20% for five consecutive years, and the compound annual return for the decade was over 17%. That is very unusual: the total return from the S&P 500 was above 20% in just 10 of the 30 years from 1960 to 1990, and the compound annual return for that period was 10%. By historical standards, it is unusual for the stock market to be down during the early stages of an economic recovery. But this has been an unusual recovery, in which corporations have found it very difficult to grow earnings in a situation of minimal pricing power combined with excess capacity in many industries. Historic returns are not necessarily a good predictor of the future, but if corporate earnings begin to show improvement in 2003, it seems likely that stock returns will also turn positive. - -------------------------------------------------------------------------------- The Bond Market For the third consecutive year bonds substantially outperformed stocks in 2002. Total return from the Merrill Lynch Domestic Master Index was 10.4%, versus a loss of 22.1% in the S&P 500 Index. Within the bond market, the most pronounced trend was a substantial decline in interest rates on U.S. Treasury bonds. There was also a dramatic steepening in the yield curve, which depicts the relationship between yields on short-term bonds and long-term bonds. Short-term yields remained very low, as the Federal Reserve maintained a stimulative monetary policy, and prices of short-term bonds reflected the expectation of further easing. In the first half of the year, yields on bonds with maturities of two to ten years moved up, creating a dramatic steepening in the short end of the curve. The short portion of the curve became somewhat flatter during the summer and early fall, then steepened again after the Federal Reserve cut interest rates in November. Yields on 30-year bonds, especially Treasury securities, fell much less than yields on bonds with shorter maturities because the falling value of the dollar made these bonds less attractive to foreign investors. Among bond categories, mortgage-backed bonds delivered their best performance in many years, as volatility declined from the prior year, because the continued wave of refinancings was reflected in bond prices throughout the year. Treasury securities performed very well in the first nine months, as wary investors sought to avoid risk. Yield spreads between corporate bonds and riskless Treasury securities widened considerably early in the year, as investors responded to the additional risk created by corporate scandals, then became narrower in the fourth quarter, as corporate earnings began to stabilize, and more confident investors began to move money into both stock and bond markets. The net change in yield spreads over the year was therefore quite small. - -------------------------------------------------------------------------------- [CHART] Economic Growth and Inflation Economic Growth Inflation 1983 4.3% 3.2% 1984 7.3% 4.3% 1985 3.8% 3.5% 1986 3.4% 1.9% 1987 3.4% 3.7% 1988 4.2% 4.1% 1989 3.5% 4.8% 1990 1.8% 5.4% 1991 -0.5% 4.2% 1992 3.1% 3.0% 1993 2.7% 3.0% 1994 4.0% 2.6% 1995 2.7% 2.8% 1996 3.6% 2.9% 1997 4.4% 2.3% 1998 4.3% 1.6% 1999 4.1% 2.7% 2000 3.8% 3.4% 2001 0.3% 2.8% 2002 2.4% 1.6% Source: U.S. Department of Commerce. Year-to-year percentage change in Real Gross Domestic Product is used for economic growth. December-to-December change in the Consumer Price Index-Urban is used for the inflation rate. Statistics for 2002 are preliminary. [CHART] Annual Total Returns from S&P 500 Index 1983 22.5% 1984 6.3% 1985 32.2% 1986 18.5% 1987 5.2% 1988 16.8% 1989 31.5% 1990 -3.2% 1991 30.5% 1992 7.7% 1993 10.0% 1994 1.3% 1995 37.4% 1996 23.1% 1997 33.4% 1998 28.6% 1999 21.0% 2000 -9.1% 2001 -11.8% 2002 -23.4% Source: Standard & Poor's [CHART] Annual Total Returns from Merrill Lynch Domestic Master Index 1983 8.0% 1984 15.2% 1985 22.4% 1986 14.2% 1987 2.4% 1988 8.0% 1989 14.2% 1990 9.1% 1991 15.9% 1992 7.6% 1993 10.0% 1994 -2.8% 1995 18.5% 1996 3.6% 1997 9.7% 1998 8.9% 1999 -1.0% 2000 11.7% 2001 8.3% 2002 10.4% 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. 8 Small Cap Growth Stock Portfolio - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: Maximum long-term appreciation of Strive for the highest possible rate of capital appreciation by $254.88 million capital investing in companies with potential for rapid growth.
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 Portfolio can vary considerably from time to time. A higher level of risk (with risk defined as variability of returns over time) is accepted for the potential of greater long-term returns. For 2002, a year in which few equity investors were able to achieve positive returns, the Small Cap Growth Stock Portfolio had a negative return of -18.4%, better than the Russell 2000 Index, but worse than the S&P 600 Index. Since the major focus in managing this portfolio is on stock selection, rather than industry weightings, differences in return relative to the indices resulted mainly from stock selection. In particular, the S&P 600 experienced a rally in the fourth quarter, led by the semiconductor and software categories within the technology sector. Although the Portfolio's representation in technology, at 17% of net assets, is slightly higher than the 15% for technology in the Index, our technology holdings are mainly in more stable categories, particularly technology consulting. A further disadvantage for performance, especially in the fourth quarter, was the Portfolio's concentration in less risky stocks whose performance does not correlate strongly with the market. In the fourth quarter, poor performance of holdings in technology, health care and retail was partially offset by strength in energy, particularly Energy Partners, Ltd., and in materials and industrial stocks, which are considerably overweighted. The industrials category includes business services such as The Corporate Executive Board, which was especially strong in the fourth quarter. Among the best performing stocks in the fourth quarter was UT Starcom, though this holding was off for the full year. [CHART] Sector Allocation 12/31/02 Consumer 22% Health Care 20% Information Technology 17% Industrials 16% Energy 8% Financials 5% Materials 5% Short-Term Investments 7% The Small Cap Growth Stock Portfolio's investment in Initial Public Offerings (IPO's) had a significant impact on its since inception performance. There can be no assurance that IPO's will continue to have a positive affect on the Portfolio's performance. [GRAPHIC] Top 10 Holdings 12/31/02 % of Total Company Net Assets O'Reilly Automotive, Inc. 4.2% The Corporate Executive Board Co. 2.9% UTStarcom, Inc. 2.9% Varian, Inc. 2.7% Lincare Holdings, Inc. 2.7% DaVita, Inc. 2.6% Westwood One, Inc. 2.6% Renal Care Group, Inc. 2.5% Patterson Dental Co. 2.5% Coach, Inc. 2.2% [CHART] Relative Performance Small Cap S&P 600 Russell 2000 4/30/99 $10,000 $10,000 $10,000 12/31/99 18,611 11,586 11,767 12/31/00 19,860 12,954 11,412 12/31/01 19,113 13,801 11,696 12/31/02 15,591 11,782 9,301 Average Annual Total Return For Periods Ended December 31, 2002 Since 1 Year Inception* Small Cap Growth Stock Portfolio -18.42% 12.86% S&P 600 Index -14.63% 4.57% Russell 2000 Index -20.48% -1.96% *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 indices cannot be invested in directly and do not include sales charges. The Standard & Poor's SmallCap 600 Index is an unmanaged index of 600 selected common stocks of smaller U.S.-based companies compiled by Standard & Poor's Corporation. As of December 31, 2002, the 600 companies in the composite had median market capitalization of $428.8 million and total market value of $321.9 billion. The SmallCap 600 represents approximately 2.8% of the market value of Compustat's database of over 11,418 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 3,000 companies represent approximately 98% of the investable US equity market. As of December 31, 2002, the average market capitalization of companies in the Russell 3000 was $4.0 billion; the median market capitalization was $700 million. Market capitalization of companies in the Index ranged from $309 billion to $128 million. The Russell 2000 Index represents approximately 8% of the total market capitalization of the Russell 3000. As of December 31, 2002, the average market capitalization of companies in the Russell 2000 was approximately $490 million; the median market capitalization was approximately $395 million. The largest company in the index had a total market capitalization of approximately $1.3 billion to $128 million. 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 4 reflect mortality and expense risk charges and other 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 Small Cap Growth Stock Portfolio Northwestern Mutual Series Fund, Inc. Schedule of Investments December 31, 2002
Market Shares/ Value Common Stock (93.3%) Par (000's) ---------------------------------------------------------- Consumer Discretionary (20.5%) Aaron Rents, Inc. 118,000 $ 2,582 *Aftermarket Technology Corp. 67,600 980 *AnnTaylor Stores Corp. 200,100 4,086 *Coach, Inc. 166,300 5,475 Fred's, Inc. 107,650 2,767 *Getty Images, Inc. 111,400 3,403 *The Gymboree Corp. 256,800 4,073 *Lin TV Corp. -- Class A 83,000 2,021 *O'Reilly Automotive, Inc. 425,300 10,755 *Orient-Express Hotel, Ltd. -- Class A 238,300 3,217 Polaris Industries, Inc. 65,900 3,862 *Spanish Broadcasting System, Inc. -- Class A 145,300 1,046 *Tommy Hilfiger Corp. 205,800 1,430 *Westwood One, Inc. 175,500 6,556 -------- Total 52,253 -------- Consumer Staples (1.5%) *Peet's Coffee & Tea, Inc. 267,100 3,774 -------- Total 3,774 -------- Energy (8.1%) *Cal Dive International, Inc. 181,200 4,258 *Energy Partners, Ltd. 255,000 2,729 *Forest Oil Corp. 83,900 2,320 *Grant Prideco, Inc. 237,000 2,759 *National Oilwell, Inc. 168,400 3,678 *Patterson-UTI Energy, Inc. 159,600 4,814 -------- Total 20,558 -------- Financials (5.1%) *Corrections Corporation of America 69,100 1,185 Investors Financial Services Corp. 185,800 5,090 *Platinum Underwriters Holdings, Ltd. 15,300 403 Radian Group, Inc. 91,100 3,384 W.P. Stewart & Co., Ltd. 97,300 1,744 Waddell & Reed Financial, Inc. -- Class A 62,300 1,225 -------- Total 13,031 -------- Health Care (20.1%) *Accredo Health, Inc. 112,200 3,955 *The Advisory Board Co. 38,600 1,154 *AmSurg Corp. 61,500 1,256 *Apogent Technologies, Inc. 134,000 2,787 *Bio-Rad Laboratories, Inc. -- Class A 62,300 2,411 *CIMA Labs, Inc. 114,400 2,767 *DaVita, Inc. 269,400 6,646 *IMPAC Medical Systems, Inc. 15,400 285 *Lincare Holdings, Inc. 218,900 6,922
Market Shares/ Value Common Stock (93.3%) Par (000's) ----------------------------------------------------------- Health Care continued *Patterson Dental Co. 145,600 $ 6,369 *Province Healthcare Co. 367,125 3,572 *Renal Care Group, Inc. 202,200 6,398 *Triad Hospitals, Inc. 83,000 2,476 *Ventana Medical Systems, Inc. 179,900 4,147 -------- Total 51,145 -------- Industrials (16.3%) *Atlantic Coast Airlines Holdings, Inc. 160,700 1,933 C.H. Robinson Worldwide, Inc. 151,900 4,739 *Charles River Associates Inc. 83,500 1,182 *The Corporate Executive Board Co. 232,000 7,406 *Education Management Corp. 60,600 2,279 *Hewitt Associates, Inc. -- Class A 47,100 1,493 *Integrated Defense Technologies, Inc. 200 3 *Knight Transportation, Inc. 203,352 4,270 *MSC Industrial Direct Co., Inc. -- Class A 121,700 2,160 *P.A.M. Transportation Services, Inc. 107,100 2,700 *Pacer International, Inc. 277,000 3,684 *Portfolio Recovery Associates, Inc. 127,200 2,322 *Resources Connection, Inc. 178,600 4,145 SkyWest, Inc. 193,900 2,534 *Tetra Tech, Inc. 67,175 820 -------- Total 41,670 -------- Information Technology (16.9%) *Amphenol Corp. -- Class A 68,700 2,611 *Barra, Inc. 37,250 1,130 *Brooks-PRI Automation, Inc. 92,208 1,057 *CACI International, Inc. -- Class A 101,700 3,625 *EPIQ Systems, Inc. 206,150 3,158 *Fargo Electronics, Inc. 343,500 2,995 *Forrester Research, Inc. 144,100 2,244 *Inforte Corp. 227,400 1,762 *MKS Instruments, Inc. 67,300 1,106 *O2Micro International Ltd 111,300 1,085 *Plexus Corp. 177,600 1,559 *Renaissance Learning, Inc. 163,300 3,086 *TESSCO Technologies, Inc. 220,708 2,042 *THQ, Inc. 84,350 1,118 *UTStarcom, Inc. 367,000 7,277 *Varian, Inc. 242,800 6,966 *Verint Systems, Inc. 17,400 351 -------- Total 43,172 -------- Materials (4.8%) *Airgas, Inc. 285,300 4,922 Cambrex Corp. 93,900 2,837 Minerals Technologies, Inc. 83,900 3,620
10 Small Cap Growth Stock Portfolio
Market Shares/ Value Common Stock (93.3%) Par (000's) --------------------------------------------------- Materials continued *Silgan Holdings, Inc. 33,600 $ 829 -------- Total 12,208 -------- Total Common Stock 237,811 (Cost: $253,937) -------- Money Market Investments (6.8%) --------------------------------------------------- Federal Government and Agencies (1.8%) Federal National Mortgage Association, 1.28%, 3/12/03 $4,500,000 4,490 -------- Total 4,490 -------- Finance Lessors (2.0%) Receivables Capital Corp., 1.35%, 1/21/03 5,000,000 4,996 -------- Total 4,996 --------
Market Shares/ Value Money Market Investments (6.8%) Par (000's) ---------------------------------------------------------- Short Term Business Credit (3.0%) Transamerica Financial Corp., 1.34%, 1/21/03 $5,000,000 $ 4,996 UBS Finance LLC, 1.20%, 1/2/03 2,900,000 2,900 -------- Total 7,896 -------- Total Money Market Investments (Cost: $17,381) 17,382 -------- Total Investments (100.1%) (Cost: $271,318)` 255,193 -------- Other Assets, Less Liabilities (0.1%) (313) -------- Total Net Assets (100.0%) $254,880 --------
` At 12/31/2002 the aggregate cost of securities for federal tax purposes was $275,499 and the net unrealized depreciation of investments based on that cost was $20,306 which is comprised of $19,746 aggregate gross unrealized appreciation and $40,052 aggregate gross unrealized depreciation. *Non-Income Producing The Accompanying Notes are an Integral Part of the Financial Statements 11 T. Rowe Price Small Cap Value Portfolio - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: Long-term growth of capital Invest in small companies whose common stocks are $63.08 million believed to be undervalued.
The T. Rowe Price Small Cap Value Portfolio invests primarily in small companies whose current stock prices do not appear to reflect their underlying value. For this Portfolio, value is defined broadly, with consideration given to stock price relative to long-term growth prospects and business franchises, in addition to typical value measures such as assets, current earnings and cash flow. The Portfolio typically holds approximately 100 stocks with market capitalizations within or below the range of companies in the Russell 2000 Value Index, as consideration of smaller companies often makes it possible to invest in higher quality companies without paying a premium. The average price-earnings ratio of stocks in the Portfolio is generally close to that of the Index, but quality measures such as return on equity and financial strength are higher. The major emphasis is on selection of individual stocks, with secondary consideration given to industry weightings in order to keep the Portfolio broadly diversified among economic sectors. Although total return for 2002 was negative, as it was for virtually all equity funds, the T. Rowe Price Small Cap Value Portfolio significantly outperformed its benchmark, the Russell 2000 Index. The Portfolio's return was -5.6% versus - -20.5% for the Index. Selection of individual stocks, especially within the materials, industrial, business services and financial sectors, was the major reason for the outperformance; sector weightings were generally a neutral factor in relative performance for the year. We are well represented in the financial sector because many of the companies in this sector hold the fundamental characteristics we value. Nonetheless, our position, at 24% of assets, is below the benchmark's 30% weighting. Our consumer discretionary holdings (20% of assets) are significantly larger than the Russell benchmark's 14%, which hampered performance in the fourth quarter as investors shifted assets out of conservative investments into more growth-oriented names when the markets rallied in October and November. With over 100 stocks in the Portfolio, and positions ranging from quite small to over 2% of assets, very good performance of the largest holdings can contribute importantly to overall performance. This was the case in 2002 with XTO Energy, an independent oil and gas producer; Landstar System and UTI Worldwide, two freight and logistics companies. Other large holdings that were up significantly for the year are Brown & Brown, an insurance brokerage firm, and RARE Hospitality, which operates casual dining restaurants. The biggest performance detractor was Fred's, a value-oriented retailer that was off nearly 40% for the year. We have added to this position, as we have confidence in the company's management and strategic direction. The T. Rowe Price Small Cap Value Portfolio is managed for Northwestern Mutual by T. Rowe Price. [CHART] Sector Allocation 12/31/02 Financials 24% Consumer 22% Industrials 19% Materials 9% Energy 7% Information Technology 7% Other Equities and Other Net Assets 4% Health Care 4% Utilities 3% Short-Term Investments 1% [GRAPHIC] Top 10 Holdings 12/31/02 Company % of Total Net Assets Brown & Brown, Inc. 2.5% Texas Regional Bancshares, Inc. - Class A 2.4% Landstar System, Inc. 2.4% Ruby Tuesday, Inc. 2.1% RARE Hospitality International, Inc. 1.9% Fred's, Inc. 1.8% XTO Energy, Inc. 1.8% Community First Bankshares, Inc. 1.7% Matthews International Corporation - Class A 1.7% Allied Capital Corp. 1.6% [CHART] Relative Performance T. Rowe Price Russell Small Cap 2000 Value Portfolio Index 7/31/01 $10,000 $10,000 12/31/01 10,176 10,140 12/31/02 9,608 8,063 Average Annual Total Return For Periods Ended December 31, 2002 Since 1 Year Inception* T. Rowe Price Small Cap Value Portfolio -5.58% -2.78% Russell 2000 Index -20.48% -14.07% *inception date of 7/31/01 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 3,000 companies represent approximately 98% of the investable US equity market. As of December 31, 2002, the average market capitalization of companies in the Russell 3000 was $4.0 billion; the median market capitalization was $700 million. Market capitalization of companies in the Index ranged from $309 billion to $128 million. The index cannot be invested in directly and do not include sales charges. The Russell 2000 Index represents approximately 8% of the total market capitalization of the Russell 3000. As of December 31, 2002, the average market capitalization of companies in the Russell 2000 was approximately $490 million; the median market capitalization was approximately $395 million. The largest company in the index had a total market capitalization of approximately $1.3 billion to $128 million. This chart assumes an initial investment of $10,000 made on 7/31/01 (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 4 reflect mortality and expense risk charges and other 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. 12 T. Rowe Price Small Cap Value Portfolio Northwestern Mutual Series Fund, Inc. Schedule of Investments December 31, 2002
Market Shares/ Value Common Stock (97.0%) Par (000's) -------------------------------------------------------- Consumer Discretionary (19.6%) Aaron Rents, Inc. 37,100 $ 812 Aaron Rents, Inc. -- Class A 2,100 48 *CSS Industries, Inc. 12,000 397 *Culp, Inc. 23,000 196 Fred's, Inc. 44,900 1,154 Hancock Fabrics, Inc. 32,000 488 Haverty Furniture Companies, Inc. 56,800 790 *Journal Register Co. 19,200 341 Matthews International Corp. -- Class A 46,500 1,038 *Paxson Communications Corp. 4,000 8 *RARE Hospitality International, Inc. 42,700 1,179 Ruby Tuesday, Inc. 76,900 1,330 *Saga Communications, Inc. -- Class A 49,000 931 *SCP Pool Corp. 26,400 771 *Sinclair Broadcast Group, Inc. -- Class A 19,200 223 Skyline Corp. 21,400 631 *Stanley Furniture Co., Inc. 25,000 581 *Stein Mart, Inc. 86,200 526 *TBC Corp. 44,200 531 *Unifi, Inc. 74,600 392 ------- Total 12,367 ------- Consumer Staples (2.3%) *American Italian Pasta Co. -- Class A 15,600 561 Casey's General Stores, Inc. 50,000 610 *Wild Oats Markets, Inc. 27,100 280 ------- Total 1,451 ------- Energy (7.4%) *Atwood Oceanics, Inc. 13,800 415 CARBO Ceramics, Inc. 17,000 573 *Forest Oil Corp. 21,350 590 *Lone Star Technologies, Inc. 16,500 246 *Magnum Hunter Resources, Inc. 17,800 106 Penn Virginia Corp. 17,850 649 *TETRA Technologies, Inc. 27,100 579 *W-H Energy Services, Inc. 24,500 357 XTO Energy, Inc. 46,000 1,137 ------- Total 4,652 ------- Financials (23.9%) *Allied Capital Corp. 47,250 1,031 *American Capital Strategies, Ltd. 16,000 345 Bedford Property Investors, Inc. 21,400 550 Brown & Brown, Inc. 47,900 1,547 Community First Bankshares, Inc. 41,300 1,092 East West Bancorp, Inc. 24,900 898 *First Republic Bank 33,600 672 Gladstone Capital Corp. 5,400 89
Market Shares/ Value Common Stock (97.0%) Par (000's) ---------------------------------------------------------- Financials continued Glenborough Realty Trust Inc. 37,900 $ 675 Innkeepers USA Trust 49,700 381 Kilroy Realty Corp. 32,000 738 Lasalle Hotel Properties 25,800 361 *Markel Corp. 3,600 740 *Ohio Casualty Corp. 17,900 232 *ProAssurance Corp. 42,700 897 Scottish Annuity & Life Holdings, Ltd. 16,100 281 *Silicon Valley Bancshares 39,100 714 Sun Communities, Inc. 24,900 911 Texas Regional Bancshares, Inc. -- Class A 42,900 1,524 *Triad Guaranty, Inc. 24,600 907 Washington Real Estate Trust 21,400 546 ------- Total 15,131 ------- Health Care (3.5%) Arrow International, Inc. 7,100 289 *Bone Care International, Inc. 33,800 329 *Diversa Corp. 57,200 518 *Guilford Pharmaceuticals, Inc. 55,400 220 *Lexicon Genetics Inc. 10,000 47 Owens & Minor, Inc. 50,100 823 ------- Total 2,226 ------- Industrials (19.1%) Ameron International Corp. 7,200 397 C&D Technologies, Inc. 28,600 505 *Casella Waste Systems, Inc. -- Class A 60,700 540 EDO Corp. 21,400 445 *Electro Rent Corp. 55,850 677 Franklin Electric Co., Inc. 18,500 888 G & K Services, Inc. -- Class A 21,400 758 *Hub Group, Inc. -- Class A 10,000 48 IDEX Corp. 20,200 661 *Insituform Technologies, Inc. -- Class A 46,300 789 *Kirby Corp. 4,800 131 Landauer, Inc. 12,900 448 *Landstar System, Inc. 25,700 1,500 *Layne Christensen Co. 12,400 102 *Littelfuse, Inc. 27,100 457 McGrath Rentcorp 19,000 442 *Midwest Express Holdings, Inc. 18,500 99 Nordson Corp. 21,400 531 *Right Management Consultants, Inc. 28,200 374 Thomas Industries, Inc. 29,100 758 UTI Worldwide, Inc. 28,400 746 *Waste Connections, Inc. 7,100 274 Woodward Governor Co. 10,700 465 ------- Total 12,035 -------
13 T. Rowe Price Small Cap Value Portfolio
Market Shares/ Value Common Stock (97.0%) Par (000's) ----------------------------------------------------- Information Technology (7.1%) Analogic Corp. 13,000 $ 653 *ATMI, Inc. 22,600 419 *Cable Design Technologies Corp. 53,400 315 *Exar Corp. 38,000 471 Methode Electronics, Inc. -- Class A 24,500 269 *MPS Group, Inc. 78,400 434 *Mykrolis Corp. 42,600 311 *Netegrity, Inc. 41,700 136 *Packeteer, Inc. 56,800 390 *Progress Software Corp. 39,300 509 *SPSS, Inc. 35,750 500 *Stellent, Inc. 13,700 61 ------- Total 4,468 ------- Materials (9.1%) *Airgas, Inc. 49,700 858 AptarGroup, Inc. 25,650 801 Arch Chemicals, Inc. 28,500 520 Carpenter Technology Corp. 17,800 222 Deltic Timber Corp. 21,400 571 Florida Rock Industries, Inc. 15,750 599 Gibraltar Steel Corp. 28,500 543 MacDermid, Inc. 14,200 324 Myers Industries, Inc. 35,225 377 *Symyx Technologies, Inc. 21,200 267 Wausau-Mosinee Paper Corp. 56,800 637 ------- Total 5,719 ------- Utilities (3.1%) Black Hills Corp. 21,400 569 Cleco Corp. 32,100 449 Otter Tail Corp. 16,300 438 Vectren Corp. 22,100 508 ------- Total 1,964 ------- Various Other Holdings (1.9%) First Financial Fund, Inc. 48,000 637 Russell 2000 Value Index 5,200 581 ------- Total 1,218 ------- Total Common Stock (Cost: $65,565) 61,231 -------
Market Shares/ Value Money Market Investments (0.7%) Par (000's) ------------------------------------------------------ Other Holdings (0.7%) Reserve Investment Fund $421,816 $ 422 ------- Total Money Market Investments 422 ------- Total Money Market Investments (Cost: $422) 422 ------- Total Investments (97.7%) (Cost $65,987)` 61,653 ------- Other Assets, Less Liabilities (2.3%) 1,430 ------- Total Net Assets (100.0%) $63,083 -------
` At 12/31/2002 the aggregate cost of securities for federal tax purposes was $66,017 and the net unrealized depreciation of investments based on that cost was $4,364 which is comprised of $2,684 aggregate gross unrealized appreciation and $7,048 aggregate gross unrealized depreciation. * Non-Income Producing The Accompanying Notes are an Integral Part of the Financial Statements 14 Aggressive Growth Stock Portfolio - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: Maximum long-term appreciation of Strive for the highest possible rate of capital appreciation by $994.08 Million capital investing in companies with potential for rapid growth.
The Aggressive Growth Stock Portfolio owns the stocks of emerging growth companies, generally with market capitalizations of less than $10 billion. Since growth stock portfolios tend to react strongly to changes in financial and economic markets, as well as to changes in the prospects for individual companies, returns of this Portfolio can vary considerably from time to time. A higher level of risk (with risk defined as variability of returns over time) is accepted for the potential of greater long-term returns. The Portfolio's focus in stock selection is on the individual companies' ability to generate revenue, expand profit margins and maintain solid balance sheets; industry sector selection is of secondary importance. For 2002, a year in which few equity investors were able to achieve positive returns, the Aggressive Growth Stock Portfolio had a negative return of -21.2%, underperforming the S&P MidCap 400 Index by 6.6 percentage points. Differences in return relative to the Index resulted mainly from stock selection, particularly within the technology sector, which rallied significantly in the fourth quarter. The Portfolio has 15% of assets in technology, compared with 13% for the Index, but we have limited holdings in semiconductors and software, the top-performing technology categories. Technology holdings that contributed to fourth quarter performance include Qlogic, Novellus and UTStarcom, though all these stocks were down for the year. A positive influence on the Portfolio's performance for the year was relative strength in stocks we regard as defensive, such as Sigma-Aldrich, a supplier of specialty chemicals to the scientific community, and Ball Corp., which makes metal and plastic packaging. The Portfolio's holdings in the consumer discretionary sector had mixed results, with strength in holdings such as PETCO and Getty Images offset by weakness in some retail stocks including Kohl's and O'Reilly Automotive. [CHART] Sector Allocation 12/31/02 Information Technology 15% Industrials 21% Consumer Discretionary 17% Materials 4% Energy 9% Financials 10% Health Care 14% Short-Term Investments 10% [GRAPHIC] Top 10 Holdings 12/31/02 Company % of Net Assets Lincare Holdings, Inc. 3.5% The Corporate Executive Board Co. 3.0% Expeditors International of Washington, Inc. 2.7% Patterson Dental Co. 2.7% Investors Financial Services Corp. 2.6% Old Republic International Corp. 2.6% Fiserv, Inc. 2.5% Lamar Advertising Company - Class A 2.1% BJ Services Co. 1.8% Swift Transportation Co., Inc. 1.8% [CHART] Relative Performance Aggressive Growth Stock Portfolio S&P 400 Index 12/31/1992 10,000 10,000 12/31/1993 11,911 11,396 12/31/1994 12,555 10,988 12/31/1995 17,488 14,388 12/31/1996 20,584 17,150 12/31/1997 23,437 22,680 12/31/1998 25,208 27,020 12/31/1999 36,245 30,989 12/31/2000 38,485 36,412 12/31/2001 30,837 36,194 12/31/2002 24,314 30,942 Average Annual Total Return For Periods Ended December 31, 2002 1 Year 5 Years 10 Years Aggressive Growth Stock Portfolio -21.15% 0.74% 9.29% S&P MidCap 400 Index -14.51% 6.41% 11.96% Since the Portfolio invests primarily in medium-capitalization (Mid Cap) 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 midrange sector of the U.S. stock market. The index cannot be invested in directly and do not include sales charges. As of December 31, 2002, the 400 companies in the composite had median market capitalization of $1.5 billion and a total market value of $690.7 billion. The MidCap 400 represents approximately 6.0% of the market value of Compustat's database of about 11,418 equities. This chart assumes an initial investment of $10,000 made on 12/31/92. 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 4 reflect mortality and expense risk charges and other 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. 15 Aggressive Growth Stock Portfolio Northwestern Mutual Series Fund, Inc. Schedule of Investments December 31, 2002
Market Shares/ Value Common Stock (89.8%) Par (000's) -------------------------------------------------------- Consumer Discretionary (16.6%) *CDW Computer Centers, Inc. 290,400 $ 12,734 *Dollar Tree Stroes, Inc. 546,750 13,434 *Entercom Communications Corp. -- Class A 271,200 12,725 Fairmont Hotels & Resorts, Inc. 488,700 11,509 *Getty Images, Inc. 547,200 16,717 *Hispanic Broadcasting Corp. -- Class A 335,400 6,892 *Jones Apparel Group, Inc. 485,900 17,220 *Kohl's Corp. 287,300 16,074 *Lamar Advertising Co. -- Class A 616,125 20,733 *Michaels Stores, Inc. 219,200 6,861 *O'Reilly Automotive, Inc. 469,900 11,884 *PETCO Animal Supplies, Inc. 729,000 17,087 -------- Total 163,870 -------- Energy (8.8%) *BJ Services Co. 559,600 18,081 *Cooper Cameron Corp. 261,200 13,013 GlobalSantaFe Corp. 422,101 10,265 *Grant Prideco, Inc. 679,425 7,909 *Nabors Industries, Ltd. 471,000 16,612 Ocean Energy, Inc. 455,500 9,096 *Weatherford International, Ltd. 312,925 12,495 -------- Total 87,471 -------- Financials (9.9%) Eaton Vance Corp. 252,700 7,139 Investors Financial Services Corp. 956,700 26,204 Northern Trust Corp. 177,100 6,207 Old Republic International Corp. 905,000 25,340 Radian Group, Inc. 375,600 13,954 RenaissanceRe Holdings Ltd. 135,500 5,366 SouthTrust Corp. 591,000 14,686 -------- Total 98,896 -------- Health Care (14.1%) *Apogent Technologies, Inc. 521,400 10,845 Biomet, Inc. 490,900 14,069 *Biovail Corp. 400,100 10,567 Health Management Associates, Inc. 374,700 6,707 *Lincare Holdings, Inc. 1,086,000 34,340 *Medlmmune, Inc. 346,600 9,417 *Patterson Dental Co. 601,750 26,321 *Province Healthcare Co. 857,650 8,345 *Shire Pharmaceuticals Group PLC, ADR 262,700 4,962 *St. Jude Medical, Inc. 113,300 4,500 *Universal Health Services, Inc. -- Class B 229,600 10,355 -------- Total 140,428 --------
Market Shares/ Value Common Stock (89.8%) Par (000's) ----------------------------------------------------------- Industrials (21.6%) *Apollo Group, Inc. -- Class A 369,550 $ 16,260 *ARAMARK Corp. -- Class B 584,200 13,729 *The BISYS Group, Inc. 556,100 8,842 *ChoicePoint, Inc. 124,700 4,924 Cintas Corp. 213,950 9,788 *Concord EPS, Inc. 235,750 3,711 *The Corporate Executive Board Co. 943,600 30,120 Deere & Co. 146,700 6,726 Expeditors International of Washington, Inc. 810,200 26,453 Fastenal Co. 266,700 9,972 *Fiserv, Inc. 725,565 24,633 Graco, Inc. 326,000 9,340 *Hewitt Associates, Inc. -- Class A 139,500 4,421 Manpower, Inc. 88,600 2,826 Paychex, Inc. 492,100 13,730 SkyWest, Inc. 518,300 6,774 *Swift Transportation Co., Inc. 869,500 17,406 *Tetra Tech, Inc. 359,197 4,382 -------- Total 214,037 -------- Information Technology (15.0%) *Brooks-PRI Automation, Inc. 380,008 4,355 *Cadence Design Systems, Inc. 627,300 7,396 *Electronic Arts, Inc. 73,100 3,638 Fair, Issac and Co., Inc. 193,300 8,254 *Integtated Circuit Systems, Inc. 312,800 5,709 *Intersil Corp. -- Class A 574,400 8,007 *Intuit, Inc. 311,971 14,638 *Jabil Circuit, Inc. 611,500 10,958 *Keane, Inc. 506,700 4,555 *Mettler -- Toledo International, Inc. 209,000 6,701 Microchip Technology, Inc. 683,275 16,705 *Novellus Systems, Inc. 388,800 10,918 *QLogic Corp. 257,800 8,897 *Semtech Corp. 411,200 4,490 *UTStarcom, Inc. 570,700 11,317 *VeriSign, Inc. 110,300 885 *Waters Corp. 286,000 6,229 *Zebra Tehnologies Corp. -- Class A 278,100 15,934 -------- Total 149,586 -------- Materials (3.8%) Ball Corp. 135,400 6,931 Praxair, Inc. 297,700 17,198 Sigma-Aldrich Corp. 285,300 13,894 -------- Total 38,023 -------- Total Common Stock (Cost: $932,403) 892,311 --------
16 Aggressive Growth Stock Portfolio
Market Shares/ Value Money Market Investments (10.5%) Par (000's) ----------------------------------------------------- Federal Government and Agencies (0.6%) Federal Home Loan Bank, 1.24%, 3/7/03 $ 6,000,000 $ 5,987 -------- Total 5,987 -------- Finance Lessors (2.0%) Receivables Capital Corp., 1.35%, 1/21/03 20,000,000 19,985 -------- Total 19,985 -------- Finance Services (1.9%) Preferred Receivable Funding, 1.35%, 1/9/03 18,600,000 18,594 -------- Total 18,594 -------- Miscellaneous Business Credit Institutions (2.0%) Quincy Capital Corp., 1.37%, 1/21/03 20,000,000 19,985 -------- Total 19,985 --------
Market Shares/ Value Money Market Investments (10.5%) Par (000's) --------------------------------------------------------- Personal Credit Institutions (4.0%) Salomon Smith Barney Hld, 1.325%, 1/24/03 $20,000,000 $ 19,984 Toyota Motor Credit Co., 1.31%, 1/27/03 20,000,000 19,981 -------- Total 39,965 -------- Total Money Market Investments (Cost: $104,515) 104,516 -------- Total Investments (100.3%) (Cost $1,036,918)` 996,827 -------- Other Assets, Less Liabilities (-0.3%) (2,752) -------- Total Net Assets (100.0%) $994,075 --------
` At 12/31/2002 the aggregate cost of securities for federal tax purposes was $1,051,359 and the net unrealized depreciation of investments based on that cost was $54,532 which is comprised of $85,872 aggregate gross unrealized appreciation and $140,404 aggregate gross unrealized depreciation. ADR -- American Depository Receipt * Non-Income Producing The Accompanying Notes are an Integral Part of the Financial Statements 17 International Growth Portfolio - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: Long-term capital appreciation Invest in stocks of companies outside the U.S. that are $35.37 million expected to experience above-average growth.
The International Growth Stock Portfolio invests in common stocks of companies that are headquartered or trade primarily on exchanges outside the United States and that are expected to grow more rapidly than market averages. Holdings are selected for their individual characteristics and growth prospects, with only minor consideration given to size, geography, and industry group. Stocks are selected through fundamental analysis of their financial soundness and potential for growth, with emphasis on distinctiveness of products or services and strong market positions. Stocks under consideration are carefully analyzed to make sure the promise of growth is not already reflected in the stock price, with technical analysis used as a further check on the relationship between price, value and market trends. In a year of negative returns for nearly all major international markets, the International Growth Portfolio produced a negative return, but outperformed its benchmark, the EAFE Index. Good relative performance resulted mainly from favorable stock selection, with some concentration in defensive industry groups that are not highly sensitive to economic conditions. Holdings in this category include large consumer products companies such as Reckitt Benckiser and Unilever. Since tobacco companies tend to be relatively immune to economic weakness, we have been successful with holdings Gallaher and Swedish Match. A notable industry weighting is in autos: BMW AG, Porsche AG and Honda all performed well during the year, though with some weakness at year end. Several Canadian companies contributed to performance, including Royal Bank of Canada and Cott, although both positions have been reduced somewhat. In anticipation of renewed economic growth in many international markets, we have begun adding or increasing positions in names with more cyclical exposure, such as Samsung Electronics, Atlas Copco, Daily Mail & General Trust, and BASF. Because of the Portfolio's strong orientation to growth, we own stocks of many smaller companies, which often have greater growth potential than more mature, larger companies. In many cases these stocks are not widely followed, and their prices do not reflect their fundamental value and growth potential. Examples are Jarvis PLC, a British support services company, Neopost, a French mailing equipment manufacturer, and Medion, a German consumer electronics distributor. [CHART] Sector Allocation 12/31/02 Consumer Cyclical 24% Consumer Non-Cyclical 12% Financials 16% Industrial Goods & Services 10% Technology/Telecommunications 10% Energy 8% Transportation/Utilities 7% Health Care 6% Basic Materials 5% Short-Term Investments 2% [GRAPHIC] Top 10 Holdings 12/31/02 Company % of Total Net Assets Anglo Irish Bank Corp PLC - Ireland 1.8% Reckitt Benckiser PLC - U.K. 1.5% Rank Group PLC - U.K. 1.5% Swedish Match AB - Sweden 1.4% Belluna Co., LTD. - Japan 1.4% Saipem SPA - Italy 1.4% Esprit Holdings Limited - Hong Kong 1.4% ResMed, Inc. - Australia 1.3% Corporation Mapfre - Spain 1.3% IHC Caland NV - Netherlands 1.2% [CHART] Relative Performance International Growth Portfolio EAFE Index 7/31/2001 10,000 10,000 12/31/2001 9,060 9,375 12/31/2002 7,942 7,907 Average Annual Total Return For Periods Ended December 31, 2002 Since 1-Year Inception International Growth Portfolio -12.34% -14.98% EAFE Index -15.66% -15.25% *inception date of 7/31/01 As depicted in the graph, the International Growth Portfolio is compared against the Morgan Stanley Capital International EAFE ("Europe-Australasia-Far East") Index. The index is composed of approximately 1,100 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 index is 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. The Index cannot be invested in directly and does not include sales charges. This chart assumes an initial investment of $10,000 made on 7/31/01 (commencement of the Portfolio'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 4 reflect mortality and expense risk charges and other 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. Investors should be aware of the risks of investments in foreign securities, particularly investments in securities of companies in developing nations. These include the risks of currency fluctuation, of political and economic instability and of less well-developed government supervision and regulation of business and industry practices, as well as differences in accounting standards. 18 International Growth Portfolio Northwestern Mutual Series Fund, Inc. Schedule of Investments December 31, 2002
Market Foreign Common Shares/ Value Stock (97.7%) Country Par (000's) ---------------------------------------------------- Basic Materials (5.4%) *Arcelor Luxembourg 18,700 $ 230 BASF AG Germany 6,415 242 *Billerud Sweden 16,498 180 Norske Skogindustrier ASA Norway 8,575 121 *Novozymes A/S -- B Shares Denmark 11,200 234 Rio Tinto Ltd. Australia 12,200 233 *Solvay SA Belgium 5,400 373 UPM-Kymmene OYJ Finland 9,600 308 ------- Total 1,921 ------- Consumer Cyclical (24.1%) Bayerische Motoren Werke AG Germany 9,000 273 *Belluna Co., Ltd. Japan 14,520 504 Berkeley Group PLC United Kingdom 27,975 267 Beru AG Germany 9,300 415 Bridgestone Corp. Japan 30,000 372 *British Sky Broadcasting Group PLC United Kingdom 30,695 316 Carnival Corp. Panama 4,350 109 *Compass Group PLC United Kingdom 51,275 272 *Daily Mail and General Trust United Kingdom 16,550 155 *Denway Motors Limited Hong Kong 1,000,000 340 Electrolux AB -- Series B Sweden 20,000 316 *Esprit Holdings Ltd. Hong Kong 284,500 478 Folli-Folli SA Greece 15,600 265 *Fuji Heavy Industries, Ltd. Japan 56,000 222 Game Group PLC United Kingdom 155,000 90 Greek Organization Of Football Prog- nostics Greece 21,240 224 *HMV Group PLC United Kingdom 101,335 194 *Honda Motor Co., Ltd. Japan 9,000 333
Market Foreign Common Shares/ Value Stock (97.7%) Country Par (000's) ------------------------------------------------------ Consumer Cyclical continued *Hyundai Motor Co., Ltd. Republic Of Korea 11,000 $ 257 *Inditex Spain 6,700 158 Medion AG Germany 6,050 211 MFI Furniture Group PLC United Kingdom 110,760 197 *NCSoft Corp. Republic Of Korea 1,390 121 Nintendo Co., Ltd. Japan 1,900 178 *Porsche AG Germany 850 353 *PSA Peugeot Citroen France 4,250 173 Rank Group PLC United Kingdom 121,400 520 *Swatch Group AG Switzerland 2,850 237 Vivendi Universal SA France 14,250 230 *Volkswagen AG Germany 6,300 228 *Walmart de Mexico -- Series V Mexico 104,000 237 Wolseley PLC United Kingdom 31,770 267 ------- Total 8,512 ------- Consumer Non-Cyclical (11.8%) *Burberry Group PLC United Kingdom 44,305 160 Cadbury Schweppes PLC United Kingdom 19,000 118 *Cott Corp. Canada 16,700 298 *Gallaher Group PLC United Kingdom 36,550 363 *Interbrew Belgium 5,500 130 *Kao Corp. Japan 6,000 132 Kook Soon Dang Brewer Co., Ltd. South Korea 8,400 189 Luxottica Group SPA, ADR Italy 20,900 285 *Nestle SA Switzerland 1,690 358 *Pernod-Ricard SA France 1,200 116 *Puma AG Rudolf Dassler Sport Germany 1,790 122 Reckitt Benckiser PLC United Kingdom 27,500 534 Shiseido Co., Ltd Japan 29,000 377 Swedish Match AB Sweden 65,000 511 Unilever PLC United Kingdom 35,500 338
19 International Growth Portfolio
Market Foreign Common Shares/ Value Stock (97.7%) Country Par (000's) ------------------------------------------------------ Consumer Non-Cyclical continued *Wella AG Germany 2,200 $ 133 ------- Total 4,164 ------- Energy (7.7%) *ENI SPA Italy 16,000 254 *IHC Caland NV Netherlands 8,000 422 *Precision Drilling Corp. Canada 6,760 218 Royal Dutch Petroleum Netherlands 6,500 286 Saipem SPA Italy 71,800 481 Suncor Energy, Inc. Canada 19,000 297 *Technip France 2,205 158 *TGS Nopec Geophysical Co. ASA Norway 24,000 189 Total Fina Elf SA France 2,850 407 ------- Total 2,712 ------- Financials (16.3%) Aegon NV Netherlands 21,250 273 *Anglo Irish Bank Co. Ireland 90,000 640 *BNP Paribas SA France 7,000 285 Cattles PLC United Kingdom 26,200 122 *Converium Holding AG Switzerland 3,500 170 *Corporacion Mapfre Spain 57,000 462 *Danske Bank Denmark 23,200 383 *Deutsche Boerse AG Germany 8,600 343 *Grupo Financiero BBVA Bancomer Mexico 266,320 201 *HSBC Holdings PLC United Kingdom 22,400 245 ING Groep NV Netherlands 13,500 229 *Intrum Justitia AB Sweden 15,800 73 *Irish Life & Permanent Ireland 25,500 276 Lloyds TSB Group PLC United Kingdom 34,000 244 Man Group PLC United Kingdom 25,000 357 Manulife Financial Canada 8,000 174 Muenchener Rueckversicherungs- Gesellschaft AG Germany 875 105 *OTP Bank RT Hungary 27,600 271 Royal Bank of Canada Canada 9,520 349
Market Foreign Common Shares/ Value Stock (97.7%) Country Par (000's) --------------------------------------------------- Financials continued Royal Bank Of Scotland Group PLC United Kingdom 13,190 $ 316 Swiss Reinsurance Co. Switzerland 4,000 262 ------- Total 5,780 ------- Healthcare (6.2%) *Elekta AB -- Class B Sweden 32,300 326 *Nobel Biocare Holding AG Switzerland 2,695 173 *Novartis AG Switzerland 5,700 208 *Perbio Science AB Sweden 5,300 60 *Resmed Australia 15,200 464 Synthes Stratec, Inc. Switzerland 513 315 Takeda Chemical Industries Japan 7,000 293 *Taro Pharmaceutical Industries, Ltd. Israel 5,200 196 Teva Pharmaceutical Industries Ltd., ADR Israel 3,755 145 ------- Total 2,180 ------- Industry Goods and Services (9.8%) *Alfa Laval AB Sweden 12,040 97 *Amcor Ltd. Australia 39,145 187 Atlas Copco AB -- A shares Sweden 13,650 266 BAE Systems PLC United Kingdom 64,275 128 Group 4 Falck A/S Denmark 7,800 165 *Grupo Ferrovial Spain 16,500 419 Huhtamaki OYJ Finland 30,000 301 *Jarvis PLC United Kingdom 22,490 101 *Meggitt PLC United Kingdom 109,600 311 *Neopost SA France 10,000 322 *Schindler Holdings Switzerland 1,295 252 *Serco Group PLC United Kingdom 59,750 147 *SGS Societe Generale de Surveillance Holding SA Switzerland 1,140 343 Vestas Wind Systems A/S Denmark 8,100 81
20 International Growth Portfolio
Market Foreign Common Shares/ Value Stock (97.7%) Country Par (000's) ----------------------------------------------------- Industry Goods and Services continued Vinci SA France 6,250 $ 352 ------- Total 3,472 ------- Technology (6.5%) ASM Pacific Technology Ltd. Hong Kong 62,500 123 *ASML Holding NV Netherlands 9,900 83 Canon, Inc. Japan 6,000 226 *INFOSYS Technologies Ltd. India 2,250 224 *Logitech International- Reg Switzerland 13,600 405 Nokia OYJ Finland 14,000 223 *Riverdeep Group PLC Ireland 96,450 142 Royal Philips Electronics NV Netherlands 11,000 193 Samsung Electronics Co., Ltd. South Korea 970 257 *Sap AG Germany 2,520 198 Taiwan Semiconductor Manufacturing Co., Ltd. Taiwan 67,100 82 *Tandberg ASA Norway 27,100 156 ------- Total 2,312 ------- Telecommunications (2.5%) *KDDI Corp. Japan 50 162 *Orange SA France 40,000 277 Pt Telekomunikasi Indonesia Indonesia 415,500 179 *Vodafone Group PLC United Kingdom 153,350 279 ------- Total 897 ------- Transportation (4.0%) Brisa Auto Estradas de Portugal SA Portugal 72,000 399 *EasyJet PLC United Kingdom 48,545 214 Exel PLC United Kingdom 26,015 288 Fraport AG Germany 9,000 161 Macquarie Infrastructure Group Australia 200,500 361 ------- Total 1,423 -------
Market Foreign Common Shares/ Value Stock (97.7%) Country Par (000's) ----------------------------------------------------- Utilities (3.4%) Centrica PLC United Kingdom 104,900 $ 289 Italgas S.P.A. Italy 19,500 265 National Grid United Group PLC Kingdom 46,180 339 *Snam Rete Gas Italy 38,500 131 *Suez Lyonnaise des Eaux SA France 10,700 186 ------- Total 1,210 ------- Total Foreign Common Stock (Cost: $36,919) 34,583 ------- Money Market Investments (2.3%) ----------------------------------------------------- Short Term Business Credit (2.3%) Old Line Funding Corp., 1.38%, 1/15/03 $800,000 800 ------- Total Money Market Investments (Cost: $800) 800 ------- Total Investments (100.0%) (Cost $37,719)` 35,383 ------- Other Assets, Less Liabilities (0.0%) (10) ------- Total Net Assets (100.0%) $35,373 -------
`At 12/31/2002 the aggregate cost of securities for federal tax purposes was $37,917 and the net unrealized depreciation of investments based on that cost was $2,534 which is comprised of $4,171 aggregate gross unrealized appreciation and $6,705 aggregate gross unrealized depreciation. *Non-Income Producing Investment Percentage by Country: United Kingdom 20.3% Germany 7.9% Japan 7.9% Switzerland 7.7% France 7.1% Other 49.1% ------ Total 100.0% ------
The Accompanying Notes are an Integral Part of the Financial Statements 21 Franklin Templeton International Equity Portfolio - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: Long-term appreciation of capital Participate in the growth of foreign economies by investing $563.10 million through diversification into markets in securities with high long-term earnings potential relative outside the United States to current market values.
The Franklin Templeton International Equity Portfolio offers 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 industry groups or regions of the world in which to invest. The Portfolio is normally fully invested in equity securities. The Portfolio underperformed the EAFE Index by approximately two percentage points during 2002; most of this underperformance came in the fourth quarter of the year and resulted from extreme volatility of a few stocks. Total return for both the Portfolio and the Index was negative for the year, as world economies and equity markets trended generally down. Largely because of weakness in the U.S. dollar relative to other currencies, the EAFE index was down significantly less than the S&P 500 in 2002. News about Asian markets tends to focus on Japan, a nation that has been in recession for a decade; the Portfolio's representation in Japan is half that of the EAFE Index. Other Asian economies are experiencing growth, and we are finding better opportunities in Hong Kong, which provides access to the rapidly growing Chinese market, and South Korea, with one of Asia's strongest economies. Two of the Portfolio's ten largest holdings, Samsung Electronics and KT Corp, South Korea's leading telephone company, are Korean companies. European markets struggled during 2002; most were down more than 20% in local currency, and the German market was off more than 40%. As always, individual stock selection is the main focus of the Portfolio, and sharp drops in stocks of some quality companies have created significant buying opportunities. During the year we added to positions in several holdings including Aventis, a French pharmaceutical company; Shire Pharmaceuticals in the U.K., and E.ON and Deutsche Post in Germany. We reduced positions in Samsung Electronics and Australia & New Zealand Banking Group, which contributed to performance early in the year, and liquidated Elan Corp., which had hurt performance. A new investment in the second half of the year was Suez SA, a French power company that experienced a sharp price drop because of concerns about power holdings in the U.S. Another new holding is Atlas Copco, a leading global machinery company that has performed well; this is a premier company with excellent long-term prospects. The Franklin Templeton International Equity Portfolio is managed for Northwestern Mutual by Templeton Investment Counsel, Inc. [CHART] Asset Allocation 12/31/02 Continental Europe 45% Asia 22% United Kingdom 17% North America 6% Australia/New Zealand 5% Latin America/Caribbean 2% Mid-East/Africa 2% Short-Term Investments 1% [GRAPHIC] Top 10 Holdings 12/31/02 Company % of Total Net Assets Societe' Bic SA - France 2.1% Suez SA - France 2.0% Swiss Reinsurance Co. - Switzerland 2.0% Riunione Adriatica di Sicurta SPA - Italy 1.9% Samsung Electronics Co. LTD - South Korea 1.9% Nestle SA - Switzerland 1.9% KT Corp. South Korea 1.9% Aventis SA - France 1.9% Repsol YPF SA - Spain 1.8% Atlas Copco AB - Sweden 1.8% [CHART] Relative Performance International Equity EAFE Index 4/30/93 $10,000 $10,000 12/31/93 12,464 10,970 12/31/94 12,451 11,859 12/31/95 14,265 13,228 12/31/96 17,263 14,068 12/31/97 19,383 14,364 12/31/98 20,317 17,284 12/31/99 24,970 22,002 12/31/00 24,772 18,931 12/31/01 21,304 14,917 12/31/02 17,597 12,581 Average Annual Total Return For Periods Ended December 31, 2002 Since 1 Year 5 Years Inception* Franklin Templeton International Equity Portfolio -17.40% -1.92% 6.02% EAFE Index -15.66% -2.61% 2.40% *inception date of 4/30/93 As depicted in the graph, the Franklin Templeton International Equity Portfolio is compared against the Morgan Stanley Capital International EAFE ("Europe-Australasia-Far East") Index. The index is composed of approximately 1,100 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 index is 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. The Index cannot be invested in directly and does not include sales charges. This chart assumes an initial investment of $10,000 made on 4/30/93 (commencement of the Portfolio'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 4 reflect mortality and expense risk charges and other 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. Investors should be aware of the risks of investments in foreign securities, particularly investments in securities of companies in developing nations. These include the risks of currency fluctuation, of political and economic instability and of less well-developed government supervision and regulation of business and industry practices, as well as differences in accounting standards. 22 Franklin Templeton International Equity Portfolio Northwestern Mutual Series Fund, Inc. Schedule of Investments December 31, 2002
Market Foreign Common Shares/ Value Stock (98.7%) Country Par (000's) ----------------------------------------------------- Automobiles & Components (3.0%) Autoliv, Inc. Sweden 169,780 $ 3,553 GKN PLC United Kingdom 2,091,540 6,760 Valeo SA France 210,000 6,589 -------- Total 16,902 -------- Banks (7.9%) Australia & New Zealand Banking Group, Ltd. Australia 888,221 8,678 Banca Nazionale Del Lavoro SPA Italy 3,529,070 3,907 *Dbs Group Holdings, Ltd. Singapore 1,192,000 7,560 HSBC Holdings PLC United Kingdom 530,937 5,804 Lloyds TSB Group PLC United Kingdom 1,165,150 8,366 Nordea AB Sweden 1,793,590 8,037 Nordea AB (NDA) Sweden 491,780 2,167 -------- Total 44,519 -------- Basic Materials (3.5%) BASF AG Germany 258,500 9,739 Norske Skogindustrier Norway 684,860 9,688 -------- Total 19,427 -------- Capital Goods (10.3%) Alstom SA France 903,114 4,502 Atlas Copco AB-- Class A Sweden 523,450 10,212 BAE Systems PLC United Kingdom 2,125,020 4,242 Hutchison Whampoa, Ltd. Hong Kong 1,199,000 7,503 Invensys PLC United Kingdom 4,527,820 3,845 KCI Konecranes International PLC Finland 342,900 8,381 Kurita Water Industries, Ltd. Japan 580,000 5,841 Rolls-Royce PLC United Kingdom 2,061,590 3,551 Volvo AB -- Class B Sweden 608,220 9,911 -------- Total 57,988 -------- Commercial Services & Supplies (2.1%) Societe Bic SA France 349,140 12,036 -------- Total 12,036 --------
Market Foreign Common Shares/ Value Stock (98.7%) Country Par (000's) ------------------------------------------------------ Consumer Cyclical (1.5%) Volkswagen AG Germany 230,450 $ 8,343 -------- Total 8,343 -------- Consumer Durables & Apparel (2.4%) Royal Philips Electronics NV Netherlands 576,875 10,110 Sony Corporation Japan 77,300 3,231 -------- Total 13,341 -------- Diversified Financials (3.2%) ING Groep NV Netherlands 436,000 7,384 Nomura Holdings, Inc. Japan 332,400 3,737 Swire Pacific Limited -- Class A Hong Kong 1,260,500 4,825 Swire Pacific Limited -- Class B Hong Kong 3,534,200 2,255 -------- Total 18,201 -------- Energy (7.5%) CNOOC Limited China 293,360 7,642 ENI SPA Italy 416,325 6,619 Husky Energy, Inc. Canada 485,610 5,063 Repsol Ypf SA Spain 783,780 10,364 Shell Transport & Trading Company PLC United Kingdom 1,428,430 9,405 Total Fina Elf SA France 21,182 3,025 -------- Total 42,118 -------- Food & Drug Retailing (1.6%) J. Sainsbury PLC United Kingdom 2,034,900 9,132 -------- Total 9,132 -------- Food Beverage & Tobacco (3.2%) Nestle SA Switzerland 50,220 10,642 Unilever PLC United Kingdom 773,990 7,364 -------- Total 18,006 -------- Health Care Equipment & Services (1.4%) Amersham PLC United Kingdom 883,370 7,842 Mayne Nickless, Ltd. Australia 10 0 -------- Total 7,842 --------
23 Franklin Templeton International Equity Portfolio
Market Foreign Common Shares/ Value Stock (98.7%) Country Par (000's) ------------------------------------------------------- Insurance (10.0%) ACE Ltd. Bermuda 330,080 $ 9,685 Axa SA France 433,842 5,823 Riunione Adriatica Di Sicurta SPA Italy 902,240 10,983 Sompo Japan Insurance, Inc. Japan 1,586,000 9,262 Swiss Reinsurance Switzerland 170,200 11,163 XL Capital, Ltd. -- Class A Bermuda 122,550 9,467 -------- Total 56,383 -------- Materials (6.9%) Akzo Nobel NV Netherlands 316,250 10,033 AngloGold Limited, ADR South Africa 113,870 3,901 Bayer AG Germany 263,150 5,523 Broken Hill Property Billiton, Ltd. Australia 1,743,580 9,965 Stora Enso OYJ -- Class R Finland 842,680 8,887 Stora Enso OYJ -- R Shares Finland 29,567 307 -------- Total 38,616 -------- Media (2.0%) United Business Media PLC United Kingdom 1,463,910 6,835 Wolters Kluwer NV Netherlands 252,530 4,399 -------- Total 11,234 -------- Pharmaceuticals & Biotechnology (4.7%) Aventis SA France 194,710 10,585 *CK Life Sciences International, Inc. Hong Kong 29,640 5 Ono Pharmaceutical Co., Ltd. Japan 266,000 8,047 Shire Pharmaceuticals Group United Kingdom 1,209,710 7,741 -------- Total 26,378 -------- Real Estate (0.5%) Cheung Kong Holdings, Ltd. Hong Kong 441,000 2,870 -------- Total 2,870 -------- Retailing (1.7%) Marks & Spencer Group PLC United Kingdom 1,891,701 9,593 -------- Total 9,593 --------
Market Foreign Common Shares/ Value Stock (98.7%) Country Par (000's) ------------------------------------------------------ Software and Computer Services (1.0%) Check Point Software Tech Israel 442,150 $ 5,735 -------- Total 5,735 -------- Technology Hardware & Equipment (3.2%) *Hitachi, Ltd. Japan 1,973,000 7,565 Samsung Electronics South Korea 40,200 10,643 -------- Total 18,208 -------- Telecommunication Services (9.5%) BCE, Inc. Canada 380,910 6,872 Cable & Wireless PLC United Kingdom 2,428,130 1,749 Compania de Tele comunicaciones de Chile SA, ADR Chile 154,985 1,486 KT Corp. Spons, ADR South Korea 491,440 10,590 Nippon Telegraph & Telephone Corporation Japan 2,084 7,569 Philippine Long Distance Telephone, ADR Philippines 309,100 1,555 PT Indosat, ADR Indonesia 219,970 2,365 Telecom Corporation of New Zealand Limited New Zealand 2,907,170 6,888 *Telefonica SA, ADR Spain 172,867 4,593 Telefonos de Mexico SA, ADR Mexico 301,444 9,640 -------- Total 53,307 -------- Transportation (3.6%) British Airways PLC United Kingdom 1,228,800 2,671 Deutsche Post AG Germany 935,920 9,831 Nippon Express Co., Ltd. Japan 2,026,000 7,939 -------- Total 20,441 --------
24 Franklin Templeton International Equity Portfolio
Market Foreign Common Shares/ Value Stock (98.7%) Country Par (000's) ------------------------------------------------------ Utilities (8.0%) E.On AG Germany 187,200 $ 7,544 Endesa SA Spain 574,510 6,722 Hong Kong Electric Holdings Limited Hong Kong 1,794,500 6,800 Iberdrola SA Spain 467,480 6,549 International Power PLC United Kingdom 2,038,344 3,142 Korea Electric Power Corp. South Korea 192,390 2,960 Suez Lyonnaise France 657,010 11,404 -------- Total 45,121 -------- Total Foreign Common Stock (Cost: $672,686) 555,741 -------- Preferred Stock (0.6%) ------------------------------------------------------ Energy (0.6%) Petroleo Brasileiro SA Brazil 274,860 3,603 -------- Total Preferred Stock (Cost: $5,746) 3,603 --------
Market Money Market Shares/ Value Investments (0.6%) Country Par (000's) ------------------------------------------------------ Short Term Business Credit (0.6%) UBS Finance LLC, 1.2%, 1/2/03 United States $3,200,000 $ 3,200 -------- Total Money Market Investments (Cost: $3,200) 3,200 -------- Total Investments (99.9%) (Cost $681,632)` 562,544 -------- Other Assets, Less Liabilities (0.1%) 558 -------- Total Net Assets (100.0%) $563,102 --------
` At 12/31/2002 the aggregate cost of securities for federal tax purposes was $682,917 and the net unrealized depreciation of investments based on that cost was $120,373 which is comprised of $45,026 aggregate gross unrealized appreciation and $165,399 aggregate gross unrealized depreciation. ADR -- American Depository Receipt * Non-Income Producing Investment Percentage by Country: United Kingdom 17.4% France 9.6% Japan 9.4% Germany 7.3% Sweden 6.0% Other 50.3% ------ Total 100.0% ------
The Accompanying Notes are an Integral Part of the Financial Statements 25 Index 400 Stock Portfolio - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: Long-term capital appreciation through Invest in a portfolio designed to approximate the $225.41 million cost-effective participation in broad composition and returns of the S&P MidCap 400 Index. market performance
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. Of the 400 stocks, 281 are listed on the New York Stock Exchange, 116 on NASDAQ, and 3 on the American Stock Exchange. As of December 31, 2002, the 400 companies in the index had a median market capitalization of $1.5 billion and total market value of $703 billion. For comparison, the 500 large stocks in the S&P 500 Index had a median market capitalization of $6.8 billion and total market value of $8,107 billion. The Index 400 Portfolio provides participation in the performance of mid-sized companies in the U.S. equity market. The Portfolio continues to achieve its objective of matching the results of the S&P 400 MidCap Index before expenses. [CHART] Sector Allocation 12/31/02 Financials 18% Consumer Discretionary 16% Industrials 13% Health Care 12% Information Technology 12% Energy 7% Utiliities 7% Consumer Staples 5% Materials 5% S&P MidCap 400 Index Futures 4% Telecommunications 1% [GRAPHIC] Top 10 Holdings 12/31/02 Company % of Total Net Assets M&T Bank Corp. 1.0% The Washington Post Company - Class B 1.0% Affiliated Computer Services, Inc. - Class A 0.9% Gilead Sciences, Inc. 0.9% Symantec Corp. 0.8% Weatherford International, Ltd. 0.7% IDEC Pharmaceuticals Corp. 0.7% Microchip Technology Inc. 0.7% National Commerce Financial Corp. 0.7% American Water Works Company, Inc. 0.6% [CHART] Relative Performance Index 400 S&P MidCap 400 index 4/30/99 $10,000 $10,000 12/31/99 11,283 11,358 12/31/00 13,225 13,346 12/31/01 13,138 13,266 12/31/02 11,228 11,341 Average Annual Total Return For Periods Ended December 31, 2002 Since 1 Year Inception* Index 400 Stock Portfolio -14.54% 3.21% S&P MidCap 400 Index -14.51% 3.49% *inception date of 4/30/99 The S&P MidCap 400 Index is a capitalization-weighted index that measures the performance of the mid-range sector of the U.S. stock market. As of December 31, 2002, the 400 companies in the composite had median market capitalization of $1.5 billion and a total market value of $690.7 billion. The MidCap 400 represents approximately 6.0% of the market value of Compustat's database of about 11,418 equities. The index cannot be invested in directly and do not include sales charges. "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 (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 4 reflect mortality and expense risk charges and other 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. 26 Index 400 Stock Portfolio Northwestern Mutual Series Fund, Inc. Schedule of Investments December 31, 2002
Market Shares/ Value Common Stock (95.7%) Par (000's) --------------------------------------------------------- Consumer Discretionary (16.0%) #*99 Cents Only Stores 21,533 $ 578 *Abercrombie & Fitch Co. -- Class A 30,400 622 *American Eagle Outfitters, Inc. 22,150 305 ArvinMeritor, Inc. 20,850 348 Bandag Inc. 5,900 228 *Barnes & Noble, Inc. 20,700 374 Belo Corp.--Class A 34,400 733 *BJ's Wholesale Club, Inc. 21,800 399 Blyth, Inc. 14,200 380 Bob Evans Farms, Inc. 10,900 255 *Borders Group, Inc. 25,100 404 BorgWarner, Inc. 8,200 413 *Brinker International, Inc. 30,050 969 *Callaway Golf Co. 23,300 309 *CarMax, Inc. 31,600 565 *Catalina Marketing Corp. 16,800 311 CBRL Group, Inc. 16,100 485 *CDW Computer Centers, Inc. 25,800 1,131 *The Cheesecake Factory, Inc. 15,500 560 Claire's Stores, Inc. 15,000 331 Clayton Homes, Inc. 42,200 514 *Coach, Inc. 27,200 895 *Copart, Inc. 27,900 330 D.R. Horton, Inc. 44,900 779 *Dollar Tree Stores, Inc. 35,000 860 *Emmis Communications Corp. -- Class A 16,300 340 *Entercom Communications Corp. -- Class A 15,300 718 *Extended Stay America, Inc. 28,800 425 Federal Signal Corp. 14,600 284 *Furniture Brands International, Inc. 17,300 413 *Gentex Corp. 23,200 734 *GTECH Holdings Corp. 17,600 490 Harte-Hanks, Inc. 28,250 527 *Hispanic Broadcasting Corp. -- Class A 33,300 684 International Speedway Corp. -- Class A 16,300 608 *Krispy Kreme Doughnuts, Inc. 16,700 564 *Lear Corp. 20,100 669 Lee Enterprises, Inc. 13,600 456 Lennar Corp. 19,800 1,022 *Macrovision Corp. 15,600 250 *Mandalay Resort Group 21,000 643 Media General, Inc. -- Class A 7,100 426 *Michaels Stores, Inc. 20,400 639 Modine Manufacturing Co. 10,300 182 *Mohawk Industries, Inc. 20,500 1,167
Market Shares/ Value Common Stock (95.7%) Par (000's) ----------------------------------------------------------- Consumer Discretionary continued *The Neiman Marcus Group, Inc. -- Class A 14,700 $ 447 Outback Steakhouse, Inc. 23,500 809 *Papa John's International, Inc. 6,000 167 *Park Place Entertainment Corp. 92,500 777 *Payless ShoeSource, Inc. 6,914 356 *PETsMART, Inc. 41,400 709 Pier 1 Imports, Inc. 28,700 543 The Reader's Digest Association, Inc. -- Class A 30,600 462 Ross Stores, Inc. 24,100 1,022 *Saks, Inc. 43,700 513 *Scholastic Corp. 12,000 431 *Six Flags, Inc. 28,400 162 Superior Industries International, Inc. 8,100 335 *The Timberland Co. -- Class A 11,500 410 *Unifi, Inc. 16,500 87 *United Rentals, Inc. 23,500 253 The Washington Post Co. -- Class B 2,900 2,141 *Westwood One, Inc. 32,800 1,225 *Williams-Sonoma, Inc. 35,300 958 -------- Total 36,126 -------- Consumer Staples (5.4%) Church & Dwight Co., Inc. 12,200 371 *Constellation Brands, Inc. -- Class A 27,400 650 *Dean Foods Co. 27,776 1,030 The Dial Corp. 29,100 593 Dole Food Company, Inc. 17,200 560 Dreyer's Grand Ice Cream, Inc. 10,700 759 Hormel Foods Corp. 42,600 994 Interstate Bakeries Corp. 13,500 206 The J.M. Smucker Co. 15,196 605 Lancaster Colony Corp. 11,200 438 Longs Drug Stores Corp. 11,700 243 McCormick & Company, Inc. 42,900 995 PepsiAmericas, Inc. 47,200 634 Ruddick Corp. 14,200 194 Sensient Technologies Corp. 14,500 326 *Smithfield Foods, Inc. 33,500 665 Tootsie Roll Industries, Inc. 15,860 487 Tyson Foods, Inc. -- Class A 108,340 1,215 Universal Corp. 8,000 296 *Whole Foods Market, Inc. 17,600 928 -------- Total 12,189 -------- Energy (7.1%) *Cooper Cameron Corp. 16,600 827 ENSCO International, Inc. 45,600 1,343 *FMC Technologies, Inc. 20,069 410
27 Index 400 Stock Portfolio
Market Shares/ Value Common Stock (95.7%) Par (000's) ------------------------------------------------------ Energy continued *Forest Oil Corp. 14,400 $ 398 *Grant Prideco, Inc. 34,100 397 *Hanover Compressor Co. 20,100 185 Helmerich & Payne, Inc. 15,300 427 Murphy Oil Corp. 28,000 1,200 *National Oilwell, Inc. 24,800 542 Noble Energy, Inc. 17,600 661 Ocean Energy, Inc. 53,900 1,076 Overseas Shipholding Group, Inc. 10,600 190 *Patterson-UTI Energy, Inc. 24,200 730 *Pioneer Natural Resources Co. 35,600 899 *Pride International, Inc. 40,900 609 *Smith International, Inc. 31,100 1,014 Tidewater, Inc. 18,600 578 Valero Energy Corp. 32,400 1,197 *Varco International, Inc. 29,662 516 *Weatherford International, Ltd. 39,900 1,594 Western Gas Resources, Inc. 10,100 372 XTO Energy, Inc. 38,100 941 -------- Total 16,106 -------- Financials (18.2%) A.G. Edwards, Inc. 24,400 804 *Allmerica Financial Corp. 16,300 165 American Financial Group, Inc. 21,100 487 *AmeriCredit Corp. 46,800 362 AmerUs Group Co. 12,200 345 Arthur J. Gallagher & Co. 27,100 796 Associated Banc-Corp. 23,209 788 Astoria Financial Corp. 27,200 738 Bank of Hawaii Corp. 20,900 635 Banknorth Group, Inc. 45,500 1,028 Brown & Brown, Inc. 21,100 682 City National Corp. 15,300 673 The Colonial BancGroup, Inc. 37,900 452 Commerce Bancorp, Inc. 20,600 890 Compass Bancshares, Inc. 39,500 1,235 *E*TRADE Group, Inc. 112,100 545 Eaton Vance Corp. 21,300 602 Everest Re Group, Ltd. 15,700 868 Fidelity National Financial, Inc. 29,240 960 First Virginia Banks, Inc. 22,050 821 FirstMerit Corp. 26,000 563 Greater Bay Bancorp 15,700 271 GreenPoint Financial Corp. 30,400 1,373 HCC Insurance Holdings, Inc. 19,100 470 Hibernia Corp. -- Class A 48,500 934 Horace Mann Educators Corp. 12,500 192 Hospitality Properties Trust 19,200 676 Independence Community Bank Corp. 17,500 444 *IndyMac Bancorp, Inc. 17,600 325 *Investment Technology Group, Inc. 14,800 331 Investors Financial Services Corp. 19,800 542 *LaBranche & Co., Inc. 18,100 482
Market Shares/ Value Common Stock (95.7%) Par (000's) ----------------------------------------------------- Financials continued Legg Mason, Inc. 19,900 $ 966 Leucadia National Corp. 17,000 634 Liberty Property Trust 23,200 741 M&T Bank Corp. 28,200 2,237 Mercantile Bankshares Corp. 21,400 826 Metris Companies, Inc. 17,800 44 The MONY Group, Inc. 14,600 350 National Commerce Financial Corp. 63,225 1,508 Neuberger Berman, Inc. 21,400 717 New Plan Excel Realty Trust, Inc. 29,700 567 New York Community Bancorp, Inc. 33,000 953 *Ohio Casualty Corp. 18,600 241 Old Republic International Corp. 36,900 1,033 The PMI Group, Inc. 27,700 832 Protective Life Corp. 21,100 581 Provident Financial Group, Inc. 14,900 388 Radian Group, Inc. 29,100 1,081 Roslyn Bancorp, Inc. 25,700 463 SEI Investments Co. 33,200 902 *Silicon Valley Bancshares 13,600 248 Sovereign Bancorp, Inc. 80,000 1,124 StanCorp Financial Group, Inc. 9,100 445 TCF Financial Corp. 22,900 1,001 Unitrin, Inc. 20,800 608 Waddell & Reed Financial, Inc. -- Class A 24,600 484 Webster Financial Corp. 14,700 512 Westamerica Bancorporation 10,300 414 Wilmington Trust Corp. 20,100 637 -------- Total 41,016 -------- Health Care (11.6%) *AdvancePCS 28,300 629 *Apogent Technologies, Inc. 32,800 682 *Apria Healthcare Group, Inc. 16,800 374 *Barr Laboratories, Inc. 13,400 872 Beckman Coulter, Inc. 19,000 561 *Charles River Laboratories 13,700 527 *Covance, Inc. 18,500 455 *Cytyc Corp. 37,700 385 DENTSPLY International, Inc. 23,950 892 *Edwards Lifesciences Corp. 18,300 466 *Express Scripts, Inc. -- Class A 24,100 1,158 *First Health Group Corp. 31,100 757 *Gilead Sciences, Inc. 60,100 2,044 *Health Net, Inc. 38,400 1,014 *Henry Schein, Inc. 13,400 603 Hillenbrand Industries, Inc. 18,900 913 ICN Pharmaceuticals, Inc. 25,400 277 *IDEC Pharmaceuticals Corp. 46,800 1,553 *Incyte Genomics, Inc. 20,700 94 *IVAX Corp. 59,625 723 *LifePoint Hospitals, Inc. 12,100 362 *Lincare Holdings, Inc. 32,600 1,031
28 Index 400 Stock Portfolio
Market Shares/ Value Common Stock (95.7%) Par (000's) ---------------------------------------------------------- Health Care continued *Millennium Pharmaceuticals, Inc. 87,200 $ 692 Mylan Laboratories, Inc. 38,400 1,340 Omnicare, Inc. 28,900 689 *Oxford Health Plans, Inc. 27,000 984 *PacifiCare Health Systems, Inc. 10,900 306 *Patterson Dental Co. 20,900 914 *Perrigo Co. 22,200 270 *Protein Design Labs, Inc. 27,300 232 *Sepracor, Inc. 25,800 249 *Sicor, Inc. 35,600 564 *STERIS Corp. 21,100 512 *Triad Hospitals, Inc. 22,739 678 *Universal Health Services, Inc. -- Class B 18,400 830 *Varian Medical Systems, Inc. 20,900 1,037 *Vertex Pharmaceuticals, Inc. 23,300 369 *VISX, Inc. 16,400 157 -------- Total 26,195 -------- Industrials (12.6%) *AGCO Corp. 22,900 506 Airborne, Inc. 14,800 219 *Alaska Air Group, Inc. 8,100 175 *Albany International Corp. -- Class A 9,926 205 Alexander & Baldwin, Inc. 12,600 325 AMETEK, Inc. 10,100 389 Banta Corp. 7,700 241 *The BISYS Group, Inc. 36,600 582 C.H. Robinson Worldwide, Inc. 25,900 808 *Career Education Corp. 13,900 556 Carlisle Companies, Inc. 9,300 385 *Ceridian Corp. 45,500 656 *Certegy, Inc. 21,200 520 *CheckFree Corp. 23,900 382 *ChoicePoint, Inc. 26,300 1,039 CNF, Inc. 15,100 502 *CSG Systems International, Inc. 15,800 216 *DeVry, Inc. 21,400 355 Donaldson Company, Inc. 13,500 486 *DST Systems, Inc. 36,800 1,309 *The Dun & Bradstreet Corp. 22,800 786 *Dycom Industries, Inc. 14,700 195 *Education Management Corp. 10,700 402 *EGL, Inc. 15,000 214 *Energizer Holdings, Inc. 27,000 753 Expeditors International of Washington, Inc. 31,900 1,042 Fastenal Co. 23,300 871 *Flowserve Corp. 16,900 250 GATX Corp. 15,000 342 Granite Construction, Inc. 12,700 197 Harsco Corp. 12,400 395 Herman Miller, Inc. 23,300 429 HON INDUSTRIES, Inc. 18,100 512
Market Shares/ Value Common Stock (95.7%) Par (000's) ----------------------------------------------------------- Industrials continued Hubbell, Inc. -- Class B 18,100 $ 636 *J.B. Hunt Transport Services, Inc. 12,000 352 *Jacobs Engineering Group, Inc. 16,700 595 Kaydon Corp. 9,300 197 Kelly Services, Inc. -- Class A 10,900 269 Kennametal, Inc. 10,600 365 *Korn/Ferry International 11,600 87 *L-3 Communications Holdings, Inc. 28,800 1,293 Manpower, Inc. 23,500 750 Nordson Corp. 10,300 256 Pentair, Inc. 15,100 522 Pittston Brink's Group 16,600 307 Precision Castparts Corp. 16,000 388 *Quanta Services, Inc. 21,300 75 *Republic Services, Inc. 50,200 1,053 Rollins, Inc. 9,300 237 *Sequa Corp. -- Class A 3,200 125 *Sotheby's Holdings, Inc. -- Class A 18,900 170 *SPX Corp. 25,100 940 *Swift Transportation Co., Inc. 26,300 526 *Sylvan Learning Systems, Inc. 12,319 202 Tecumseh Products Co. -- Class A 5,700 252 Teleflex, Inc. 12,000 515 Trinity Industries, Inc. 14,100 267 *Valassis Communications, Inc. 16,300 480 Viad Corp. 27,400 612 Wallace Computer Services, Inc. 12,800 275 York International Corp. 12,100 309 -------- Total 28,299 -------- Information Technology (12.0%) *3Com Corp. 109,900 509 *Activision, Inc. 20,500 299 *Acxiom Corp. 27,000 415 *ADTRAN, Inc. 11,600 382 *Advanced Fibre Communications, Inc. 25,300 422 *Advent Software, Inc. 10,000 136 *Affiliated Computer Services, Inc. -- Class A 40,400 2,126 *Arrow Electronics, Inc. 30,800 394 *Ascential Software Corp. 76,100 183 *Atmel Corp. 143,200 319 *Avnet, Inc. 36,700 397 *Avocent Corp. 13,800 307 *Cabot Microelectronics Corp. 7,392 349 *Cadence Design Systems, Inc. 81,400 960 *Cirrus Logic, Inc. 25,600 74 *CommScope, Inc. 18,900 149 *Credence Systems Corp. 18,600 174 *Cree, Inc. 22,300 365 *Cypress Semiconductor Corp. 37,800 216 Diebold, Inc. 22,100 911 *Fairchild Semiconductor International, Inc. -- Class A 35,900 384
29 Index 400 Stock Portfolio
Market Shares/ Value Common Stock (95.7%) Par (000's) ------------------------------------------------------- Information Technology continued *FEI Co. 9,900 $ 151 *Gartner Group, Inc. -- Class B 25,400 240 Harris Corp. 20,300 534 *Imation Corp. 10,700 375 *InFocus Corp. 12,100 75 *Integrated Device Technology, Inc. 31,700 265 *International Rectifier Corp. 19,500 360 *Internet Security Systems, Inc. 14,800 271 *Intersil Corp. -- Class A 41,800 583 Jack Henry & Associates, Inc. 27,700 334 *Keane, Inc. 23,200 209 *KEMET Corp. 26,400 231 *Lam Research Corp. 39,100 422 *Lattice Semiconductor Corp. 33,600 295 *Legato Systems, Inc. 35,200 177 *LTX Corp. 15,100 91 *Macromedia, Inc. 18,300 195 *McDATA Corp. -- Class A 34,800 247 *Mentor Graphics Corp. 20,300 160 *Micrel, Inc. 28,400 255 Microchip Technology, Inc. 61,912 1,514 *MPS Group, Inc. 31,500 175 *National Instruments Corp. 15,800 513 *Network Associates, Inc. 47,800 769 *Newport Corp. 11,700 147 *Overture Services, Inc. 17,900 489 *Plantronics, Inc. 14,100 213 *Plexus Corp. 12,900 113 *Polycom, Inc. 30,600 291 *Powerwave Technologies, Inc. 20,100 109 *Quantum Corporation -- DLT & Storage Systems 48,300 129 *Retek, Inc. 16,200 44 The Reynolds and Reynolds Co. -- Class A 21,300 543 *RF Micro Devices, Inc. 51,700 379 *RSA Security, Inc. 17,400 104 *SanDisk Corp. 21,100 428 *Semtech Corp. 22,400 245 *Storage Technology Corp. 32,500 696 *Sybase, Inc. 29,800 399 *Sykes Enterprises, Inc. 12,400 41 *Symantec Corp. 44,500 1,799 *Synopsys, Inc. 23,400 1,080 *Tech Data Corp. 17,300 466 *The Titan Corp. 23,900 249 *Transaction Systems Architects, Inc. -- Class A 10,900 71 *TriQuint Semiconductor, Inc. 40,511 172 *Varian, Inc. 10,400 298 *Vishay Intertechnology, Inc. 48,987 548 *Wind River Systems, Inc. 24,200 99 -------- Total 27,064 --------
Market Shares/ Value Common Stock (95.7%) Par (000's) ------------------------------------------------------ Materials (4.8%) A. Schulman, Inc. 9,000 $ 167 *Airgas, Inc. 21,900 378 *AK Steel Holding Corp. 33,100 265 Albemarle Corp. 12,800 364 Arch Coal, Inc. 16,100 348 Bowater, Inc. 16,900 708 Cabot Corp. 18,800 499 Carpenter Technology Corp. 6,800 85 Crompton Corp. 34,863 207 *Cytec Industries, Inc. 12,100 330 Ferro Corp. 12,400 303 *FMC Corp. 10,800 295 *GrafTech International, Ltd. 17,100 102 H.B. Fuller Co. 8,700 225 IMC Global, Inc. 35,300 377 *Longview Fibre Co. 15,700 114 The Lubrizol Corp. 15,800 482 Lyondell Chemical Co. 49,000 619 Martin Marietta Materials, Inc. 15,000 460 Minerals Technologies, Inc. 6,200 268 Olin Corp. 17,400 271 P.H. Glatfelter Co. 13,400 176 *Packaging Corporation of America 32,000 584 Peabody Energy Corp. 16,000 468 Potlatch Corp. 8,700 208 Rayonier, Inc. 8,500 385 RPM, Inc. 35,200 538 Solutia, Inc. 32,100 117 Sonoco Products Co. 29,600 678 The Valspar Corp. 15,400 679 Wausau-Mosinee Paper Corp. 15,800 177 -------- Total 10,877 -------- Telecommunication Services (0.6%) *Broadwing, Inc. 67,100 236 *Price Communications Corp. 16,700 231 Telephone and Data Systems, Inc. 18,000 847 -------- Total 1,314 -------- Utilities (7.4%) AGL Resources, Inc. 17,200 418 ALLETE, Inc. 26,100 592 Alliant Energy Corp. 27,900 462 American Water Works Company, Inc. 30,700 1,396 *Aquila, Inc. 55,300 98 Black Hills Corp. 8,200 217 Cleco Corp. 14,400 202 DPL, Inc. 38,800 595 DQE, Inc. 22,700 346 Energy East Corp. 44,300 979 Equitable Resources, Inc. 19,000 666 Great Plains Energy, Inc. 20,800 476 Hawaiian Electric Industries, Inc. 11,200 493
30 Index 400 Stock Portfolio
Market Shares/ Value Common Stock (95.7%) Par (000's) --------------------------------------------- Utilities continued IDACORP, Inc. 11,600 $ 288 MDU Resources Group, Inc. 21,900 565 National Fuel Gas Co. 24,600 510 Northeast Utilities 41,900 636 NSTAR 16,300 724 OGE Energy Corp. 24,000 422 ONEOK, Inc. 18,500 355 Pepco Holdings, Inc. 50,100 971 PNM Resources, Inc. 12,000 286 Puget Energy, Inc. 28,400 626 Questar Corp. 25,100 698 SCANA Corp. 33,700 1,043 *Sierra Pacific Resources 31,281 203 Vectren Corp. 20,800 478 Westar Energy, Inc. 22,000 218 WGL Holdings, Inc. 14,900 356 Wisconsin Energy Corp. 35,300 890 WPS Resources Corp. 9,700 377 -------- Total 16,586 -------- Total Common Stock (Cost: $248,668) 215,772 --------
Market Shares/ Value Money Market Investments (4.1%) Par (000's) ------------------------------------------------------- Federal Government and Agencies (0.5%) #Federal Home Loan Bank, 1.24%, 3/7/03 $1,200,000 $ 1,197 -------- Total 1,197 -------- Personal Credit Institutions (2.7%) #Salomon Smith Barney Hld, 1.325%, 1/24/03 6,000,000 5,995 -------- Total 5,995 -------- Short Term Business Credit (0.9%) #UBS Finance LLC, 1.20%, 1/2/03 2,100,000 2,100 -------- Total 2,100 -------- Total Money Market Investments (Cost: $9,292) 9,292 -------- Total Investments (99.8%) (Cost $257,960)` 225,064 -------- Other Assets, Less Liabilities (0.2%) 346 -------- Total Net Assets (100.0%) $225,410 --------
` At 12/31/2002 the aggregate cost of securities for federal tax purposes was $260,227 and the net unrealized depreciation of investments based on that cost was $35,163 which is comprised of $19,478 aggregate gross unrealized appreciation and $54,641 aggregate gross unrealized depreciation. * Non-Income Producing # All or a portion of the securities have been committed 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 (000's) Contracts Date (000's) --------------------------------------------------------- MidCap 400 Index Futures 43 3/03 $(113) (Total Notional Value at 12/31/02 $9,356)
The Accompanying Notes are an Integral Part of the Financial Statements 31 Growth Stock Portfolio - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: Long-term appreciation of capital with Hold a diversified mix of high quality growth stocks of $551.42 million moderate risk medium and large companies with above-average potential for earnings growth.
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 strong positions in their markets whose stock prices do not reflect their potential for growth. Diversification across 70 to 90 stocks in a wide range of industry groups reduces the Portfolio's risk profile. Like essentially all equity funds, the Growth Stock Portfolio had negative total return for 2002, but the Portfolio outperformed the S&P 500 Index for the year and for the last five years. Relative to the Index, the Portfolio is most overweighted in the Consumer Discretionary and Consumer Staples sectors and underweighted in Financials, Industrials, Information Technology, Telecommunications and Utilities. The relative performance of this high-quality portfolio was stronger for the first nine months of the year than in the fourth quarter, when a market rally that began in October was concentrated in riskier issues, particularly in the technology and telecommunications sectors, which had been extremely weak earlier in the year. Despite an underweight in technology, some holdings in this sector, such as Intel and Texas Instruments, had a negative impact on performance for the year. Also negative for performance was GE, a solid company that has been subject to problems in some of its industries; this position has been reduced, though we still have confidence in the company's long-term prospects. Some of the Portfolio's retail holdings, particularly Kohl's, were down in the fourth quarter, as concerns about consumer spending mounted. For the year, the holdings that contributed most to performance were generally not the largest positions. These include Ecolab, a leader in premium commercial cleaning and sanitizing products and services; Tribune Company, a newspaper publisher and media company; consumer giant Kraft Foods; and Principal Financial Group, a provider of insurance and other financial services. [CHART] Sector Allocation 12/31/02 Consumer Discretionary 24% Financials 16% Health Care 13% Information Technology 12% Consumer Staples 12% Industrials 7% Energy 7% Materials 4% Short-Term Investments 5% [GRAPHIC] Top 10 Holdings 12/31/02 Company % of Total Net Assets Microsoft Corp. 3.8% PepsiCo, Inc. 3.0% Pfizer, Inc. 3.0% Harley-Davidson, Inc. 2.7% Kohl's Corp. 2.6% Wal-Mart Stores, Inc. 2.4% Johnson & Johnson 2.4% The McGraw-Hill Companies, Inc. 2.4% Medtronic, Inc. 2.3% Exxon Mobil Corp. 2.3% [CHART] Relative Performance Growth Stock Portfolio S&P 500 Index 5/3/94 $10,000 $10,000 12/31/94 10,155 10,320 12/31/95 13,285 14,180 12/31/96 16,063 17,413 12/31/97 20,858 23,211 12/31/98 26,425 29,826 12/31/99 32,369 36,108 12/31/00 31,563 32,851 12/31/01 27,077 28,945 12/31/02 21,436 22,548 Average Annual Total Return For Periods Ended December 31, 2002 Since 1 Year 5 Years Inception* Growth Stock Portfolio -20.83% -0.55% 9.20% S&P 500 Index -22.10% -0.58% 9.85% *inception date of 5/03/94 The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The Index is heavily weighted toward stocks with large market capitalizations and represents approximately two-thirds of the total market value of all domestic common stocks. The index cannot be invested in directly and do not include sales charges. 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 4 reflect mortality and expense risk charges and other 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. 32 Growth Stock Portfolio Northwestern Mutual Series Fund, Inc. Schedule of Investments December 31, 2002
Market Shares/ Value Common Stock (94.7%) Par (000's) ------------------------------------------------------- Consumer Discretionary (24.5%) *Bed Bath & Beyond, Inc. 147,400 $ 5,090 *Comcast Corp. -- Class A 39,984 942 Darden Restaurants, Inc. 267,500 5,470 Fortune Brands, Inc. 172,300 8,014 Gannett Co., Inc. 35,000 2,513 Harley-Davidson, Inc. 320,800 14,822 *Kohl's Corp. 255,800 14,313 Lowe's Companies, Inc. 127,600 4,785 The McGraw-Hill Companies, Inc. 216,000 13,055 The New York Times Co. -- Class A 195,900 8,959 Newell Rubbermaid, Inc. 310,100 9,405 Target Corp. 268,500 8,055 Tiffany & Co. 71,200 1,702 Tribune Co. 246,900 11,224 *Viacom, Inc. -- Class B 172,700 7,039 Wal-Mart Stores, Inc. 263,700 13,320 Wendy's International, Inc. 229,200 6,204 -------- Total 134,912 -------- Consumer Staples (11.7%) Anheuser-Busch Companies, Inc. 209,200 10,125 Colgate-Palmolive Co. 114,400 5,998 *Dean Foods Co. 49,500 1,836 General Mills, Inc. 146,500 6,878 Kellogg Co. 180,000 6,169 Kraft Foods, Inc. -- Class A 131,300 5,112 PepsiCo, Inc. 396,200 16,727 Walgreen Co. 395,200 11,536 -------- Total 64,381 -------- Energy (6.6%) ChevronTexaco Corp. 83,800 5,571 ConocoPhillips 172,908 8,367 EOG Resources, Inc. 240,500 9,601 Exxon Mobil Corp. 362,034 12,649 -------- Total 36,188 -------- Financials (16.1%) American Express Co. 160,000 5,656 American International Group, Inc. 99,700 5,768 The Bank of New York Company, Inc. 206,300 4,943 The Charles Schwab Corp. 231,700 2,514 Citigroup, Inc 107,600 3,786 Fifth Third Bancorp 187,250 10,963 Freddie Mac 101,800 6,011 Lehman Brothers Holdings, Inc. 146,700 7,818 Marsh & McLennan Companies, Inc. 130,800 6,044
Market Shares/ Value Common Stock (94.7%) Par (000's) ------------------------------------------------------- Financials continued Morgan Stanley 168,000 $ 6,707 Northern Trust Corp. 130,800 4,585 Principal Financial Group, Inc. 372,200 11,214 Prudential Financial, Inc. 111,800 3,549 Wells Fargo & Co. 194,800 9,130 -------- Total 88,688 -------- Health Care (12.7%) Abbott Laboratories 66,000 2,640 *Amgen, Inc. 143,100 6,917 Baxter International, Inc. 216,200 6,054 Eli Lilly and Co. 72,400 4,597 Johnson & Johnson 246,300 13,229 Medtronic, Inc. 280,800 12,804 Merck & Co., Inc. 54,800 3,102 Pfizer, Inc. 538,650 16,467 UnitedHealth Group, Inc. 48,500 4,050 -------- Total 69,860 -------- Industrials (7.4%) *American Standard Companies, Inc. 106,900 7,605 Avery Dennison Corp. 117,700 7,189 FedEx Corp. 132,000 7,157 *Fiserv, Inc. 365,362 12,404 General Electric Co. 260,600 6,346 -------- Total 40,701 -------- Information Technology (11.6%) *Applied Materials, Inc. 337,500 4,398 *Cisco Systems, Inc. 262,800 3,443 *Electronic Arts, Inc. 72,900 3,628 Intel Corp. 432,700 6,737 International Business Machines Corp. 132,400 10,261 *Microsoft Corp. 404,300 20,902 *NASDAQ-100 Trust, Series 1 72,500 1,769 Nokia Corp., ADR 52,400 812 *QUALCOMM, Inc. 89,000 3,239 *Semiconductor HOLDRS (SM) Trust 212,900 4,716 Texas Instruments, Inc. 283,700 4,258 -------- Total 64,163 -------- Materials (4.0%) Air Products and Chemicals, Inc. 207,800 8,883 Ecolab, Inc. 214,200 10,604 PPG Industries, Inc. 56,200 2,818 -------- Total 22,305 --------
33 Growth Stock Portfolio
Market Shares/ Value Common Stock (94.7%) Par (000's) -------------------------------------------------------- Telecommunication Services (0.1%) AT&T Corp. 24,720 $ 645 -------- Total 645 -------- Total Common Stock (Cost: $519,924) 521,843 -------- Money Market Investments (5.4%) -------------------------------------------------------- Federal Government and Agencies (0.7%) #Federal National Mortgage Association, 1.28%, 3/12/03 $ 4,000,000 3,991 -------- Total 3,991 -------- Miscellaneous Business Credit Institutions (3.6%) Quincy Capital Corp., 1.37%, 1/21/03 20,000,000 19,984 -------- Total 19,984 -------- Short Term Business Credit (1.1%) UBS Finance LLC, 1.20%, 1/2/03 6,000,000 6,000 -------- Total 6,000 -------- Total Money Market Investments (Cost: $29,975) 29,975 -------- Total Investments (100.1%) (Cost $549,899)` 551,818 -------- Other Assets, Less Liabilities (-0.1%) (397) -------- Total Net Assets (100.0%) $551,421 --------
` At 12/31/2002 the aggregate cost of securities for federal tax purposes was $550,482 and the net unrealized appreciation of investments based on that cost was $1,336 which is comprised of $72,519 aggregate gross unrealized appreciation and $71,183 aggregate gross unrealized depreciation. ADR -- American Depository Receipt * Non-Income Producing # All or a portion of the securities have been committed 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 (000's) Contracts Date (000's) ------------------------------------------------------ S&P 500 Index Futures 17 3/03 $(74) (Total Notional Value at 12/31/02 $3,809)
The Accompanying Notes are an Integral Part of the Financial Statements 34 J.P. Morgan Select Growth and Income Stock Portfolio - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: Long-term growth of capital and income, Actively manage a portfolio of equity securities with a goal $365.94 million consistent with moderate investment risk of exceeding the total return of the S&P 500 Index.
The J.P. Morgan Select Growth and Income Stock Portfolio invests mainly in large-capitalization stocks, with a focus on seeking the best values in the market based on long-term earnings forecasts. A sector balance very close to that of the S&P 500 Index is normally maintained, with the emphasis on undervalued stocks within each industry group; a valuation discipline mandates the sale of stocks regarded as overvalued. More focus is placed on capital appreciation and dividend growth than on current dividends. The Portfolio is normally fully invested in equity securities. In a very challenging market environment, the J.P. Morgan Select Growth and Income Stock Portfolio underperformed its major benchmark, the S&P 500 Index, during 2002. The Portfolio's underperformance has resulted largely from several large holdings that have experienced major problems. The most costly has been Tyco International, a longtime holding that lost more than two-thirds of its value during 2002. Several other holdings that hurt performance earlier in the year have been sold, including Dynegy and Gemstar. Price weakness has created opportunities to add to several large holdings, including General Electric, Citigroup and Microsoft. Some of the better performing stocks in the Portfolio, including Mattel and Kraft Foods, were smaller positions and therefore did not have a strongly positive effect on overall results. The J.P. Morgan Select Growth and Income Stock Portfolio is managed for Northwestern Mutual by J.P. Morgan Fleming Asset Management. Effective January 31, 2003, the name of the Portfolio changed to Large Cap Core Stock, and the Portfolio is managed by Mason Street Advisors, LLC. These changes are subject to shareholder approval. [CHART] Sector Allocation 12/31/02 Health Care 13% Materials 2% Industrials 9% Telecommunications 4% Utilities 4% Consumer Staples 9% Information Technology 14% Financials 20% Energy 8% Consumer Discretionary 15% Short-Term Investments 2% [GRAPHIC] Top 10 Holdings 12/31/02 Company % of Total Net Assets Citigroup, Inc. 4.2% Microsoft Corp. 3.9% General Electric Co. 3.8% Exxon Mobil Corp. 2.6% U.S. Bancorp 2.3% Pfizer, Inc. 2.3% ChevronTexaco Corp. 2.2% Tyco International, Ltd. 2.1% Cisco Systems, Inc. 2.0% The Procter & Gamble Co. 2.0% [CHART] Relative Performance Growth & Income S&P 500 Stock Portfolio Index 5/3/94 $10,000 $10,000 12/31/94 10,034 10,320 12/31/95 13,156 14,180 12/31/96 15,783 17,413 12/31/97 20,523 23,211 12/31/98 25,271 29,826 12/31/99 27,162 36,108 12/31/00 25,269 32,851 12/31/01 23,305 28,945 12/31/02 16,734 22,548 Average Annual Total Return For Periods Ended December 31, 2002 Since 1 Year 5 Years Inception* J. P. Morgan Select Growth & Income Stock Portfolio -28.20% -4.00% 6.12% S&P 500 Index -22.10% -0.58% 9.85% *inception date of 5/03/94 The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The index is heavily weighted toward stocks with large market capitalizations and represents approximately two-thirds of the total market value of all domestic common stocks. The index cannot be invested in directly and do not include sales charges. 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 4 reflect mortality and expense risk charges and other 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. 35 J.P. Morgan Select Growth and Income Stock Portfolio Northwestern Mutual Series Fund, Inc. Schedule of Investments December 31, 2002
Market Shares/ Value Common Stock (97.8%) Par (000's) ----------------------------------------------------------- Consumer Discretionary (15.2%) *Abercrombie & Fitch Co. -- Class A 93,200 $ 1,907 *AOL Time Warner, Inc. 280,800 3,678 *Comcast Corp. -- Class A 78,014 1,839 *Comcast Corp. -- Class A 76,400 1,726 *Costco Wholesale Corp. 41,900 1,176 *Federated Department Stores, Inc. 49,100 1,412 The Home Depot, Inc. 187,000 4,481 *Jones Apparel Group, Inc. 53,100 1,882 *Lear Corp. 59,600 1,983 *Liberty Media Corp. -- Class A 593,000 5,301 Marriott International, Inc. -- Class A 53,300 1,752 Mattel, Inc. 202,400 3,876 NIKE, Inc. -- Class B 40,600 1,805 Target Corp. 175,600 5,268 The TJX Companies, Inc. 216,900 4,234 Tribune Co. 57,300 2,605 *Viacom, Inc. -- Class B 85,200 3,473 Wal-Mart Stores, Inc. 144,100 7,279 -------- Total 55,677 -------- Consumer Staples (8.8%) The Coca-Cola Co. 128,000 5,609 CVS Corp. 68,400 1,708 The Gillette Co. 191,800 5,823 Kraft Foods, Inc. -- Class A 84,500 3,290 Philip Morris Companies, Inc. 111,400 4,515 The Procter & Gamble Co. 84,900 7,296 Unilever NV, ADR 66,800 4,122 -------- Total 32,363 -------- Energy (7.5%) Anadarko Petroleum Corp. 24,700 1,183 ChevronTexaco Corp. 119,000 7,911 ConocoPhillips 58,544 2,833 *Cooper Cameron Corp. 44,900 2,237 Devon Energy Corp. 34,100 1,565 Exxon Mobil Corp. 267,954 9,362 GlobalSantaFe Corp. 94,151 2,290 -------- Total 27,381 -------- Financials (19.9%) Ambac Financial Group, Inc. 125,325 7,048 American International Group, Inc. 45,900 2,655 Aon Corp. 99,300 1,876 Bank One Corp. 140,300 5,128 Capital One Financial Corp. 115,100 3,421 The Charles Schwab Corp. 129,800 1,408 *CIT Group, Inc. 82,400 1,615 Citigroup, Inc. 431,856 15,196 Countrywide Credit Industries, Inc. 94,300 4,871 *E*TRADE Group, Inc. 95,800 466 Fannie Mae 51,100 3,287 Freddie Mac 118,500 6,997
Market Shares/ Value Common Stock (97.8%) Par (000's) --------------------------------------------------------- Financials continued The Goldman Sachs Group, Inc. 49,200 $ 3,351 *Travelers Property Casualty Corp. -- Class A 242,051 3,546 U.S. Bancorp 398,132 8,448 Washington Mutual, Inc. 99,900 3,450 -------- Total 72,763 -------- Health Care (12.7%) Abbott Laboratories 88,900 3,556 *Amgen, Inc. 84,100 4,065 Baxter International, Inc. 77,400 2,167 CIGNA Corp. 89,700 3,688 Eli Lilly and Co. 88,800 5,639 *Human Genome Sciences, Inc. 34,366 303 Johnson & Johnson 115,150 6,185 Pfizer, Inc. 274,900 8,404 Pharmacia Corp. 117,152 4,897 Schering-Plough Corp. 67,800 1,505 *Tenet Healthcare Corp. 48,700 799 Wyeth 144,600 5,408 -------- Total 46,616 -------- Industrials (9.4%) *Cendant Corp. 233,804 2,450 General Electric Co. 564,300 13,741 Lockheed Martin Corp. 42,600 2,460 Tyco International, Ltd. 447,192 7,638 United Technologies Corp. 46,300 2,868 Waste Management, Inc. 226,917 5,201 -------- Total 34,358 -------- Information Technology (14.4%) *Accenture LTD -- Class A 86,000 1,547 *Altera Corp. 167,200 2,063 *Analog Devices, Inc. 65,500 1,563 *Applied Materials, Inc. 67,200 876 *CIENA Corp. 77,200 397 *Cisco Systems, Inc. 561,200 7,352 *Dell Computer Corp. 108,500 2,901 Hewlett-Packard Co. 178,002 3,090 Intel Corp. 345,000 5,372 International Business Machines Corp. 77,000 5,968 *Microsoft Corp. 277,800 14,362 Motorola, Inc. 177,100 1,532 *NCR Corp. 115,200 2,735 *Oracle Corp. 166,400 1,797 *Sun Microsystems, Inc. 344,700 1,072 -------- Total 52,627 --------
36 J.P. Morgan Select Growth and Income Stock Portfolio
Market Shares/ Value Common Stock (97.8%) Par (000's) -------------------------------------------------- Materials (2.0%) Alcoa, Inc. 145,864 $ 3,322 Monsanto Co. 58,809 1,132 PPG Industries, Inc. 18,400 923 Temple-Inland, Inc. 46,900 2,102 -------- Total 7,479 -------- Telecommunication Services (4.3%) *American Tower Corp. -- Class A 249,900 882 AT&T Corp. 23,440 612 *AT&T Wireless Services, Inc. 265,100 1,498 SBC Communications, Inc. 162,810 4,414 *Sprint Corp. (PCS Group) 426,500 1,868 Verizon Communications, Inc. 163,548 6,337 -------- Total 15,611 -------- Utilities (3.6%) Dominion Resources, Inc. 44,500 2,443 DTE Energy Co. 50,100 2,325 *Edison International 70,501 835 El Paso Corp. 156,800 1,091 *PG&E Corp. 178,600 2,483 Pinnacle West Capital Corp. 116,862 3,984 -------- Total 13,161 -------- Total Common Stock (Cost: $487,362) 358,036 --------
Market Shares/ Value Money Market Investments (2.1%) Par (000's) --------------------------------------------------------- Short Term Business Credit (2.1%) UBS Finance LLC, 1.20%, 1/2/03 $7,700,000 $ 7,700 -------- Total Money Market Investments (Cost: $7,700) 7,700 -------- Total Investments (99.9%) (Cost $495,062)` 365,736 -------- Other Assets, Less Liabilities (0.1%) 208 -------- Total Net Assets (100.0%) $365,944 --------
` At 12/31/2002 the aggregate cost of securities for federal tax purposes was $498,712 and the net unrealized depreciation of investments based on that cost was $132,976 which is comprised of $13,770 aggregate gross unrealized appreciation and $146,746 aggregate gross unrealized depreciation. ADR--American Depository Receipt * Non-Income Producing The Accompanying Notes are an Integral Part of the Financial Statements 37 Capital Guardian Domestic Equity Portfolio - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: Long-term growth of capital and income Invest in larger American companies that exhibit value $74.27 million characteristics relative to S&P 500 Index.
The Capital Guardian Domestic Equity Portfolio invests mainly in large companies with well-known names, proven track records, and a history of dividends. This value-oriented Portfolio emphasizes stocks that have lower price-earnings ratios, lower price to book value ratios, and higher dividend yields than the S&P 500 Index. In a year of negative equity returns, the Portfolio modestly outperformed the S&P 500 Index. The selection process focuses on individual stocks that are underpriced relative to their inherent value and long-term prospects, based largely on Capital Guardian's solid research capabilities. Industry selection receives minor consideration, and industry weightings may diverge significantly from the major market indices. At the end of 2002, the Portfolio was overweighted relative to the Index in energy, industrials, materials, telecommunications and utilities, and underweighted in consumer stocks, health care and information technology. The overweighted positions in cyclical industries are held in the belief that these stocks stand to benefit as the economic recovery progresses. The largest holding in this broad category is Air Products and Chemicals, a supplier of specialty chemicals and gases that is well positioned to benefit from increased manufacturing activity. The Portfolio's largest holding is Sprint Corporation, a leading provider of long-distance and local telephone service. This is a company in an out-of-favor industry with significant free cash flow, a good yield and sound management. The 2002 bankruptcy of its largest competitor places Sprint in a more favorable competitive situation, and earnings should increase significantly as industry pricing stabilizes. Another large holding, NiSource, is a well-positioned utility whose stock price recovered significantly in the last quarter of 2002. A large bank holding, J.P. Morgan Chase, is a well-managed company with a high yield that is beginning to realize benefits from a 2000 merger and is well positioned to benefit from improving capital markets. A core holding that has underperformed this year is General Electric, a very solid company whose stock has been penalized by questions about accounting practices in its industry. We continue to have confidence in GE's long-term prospects, based not only on the company's business positions and strategies but also on a strong culture of integrity and competitiveness. The Capital Guardian Domestic Equity Portfolio is managed for Northwestern Mutual by Capital Guardian Trust Company. [CHART] Sector Allocation 12/31/02 Financials 21% Industrials 15% Energy 10% Consumer 13% Materials 9% Health Care 8% Utilities 7% Information Technology 5% Telecommunications 8% Short-Term Investments 4% [GRAPHIC] Top 10 Holdings 12/31/02 Company % of Total Net Assets Sprint Corp. 5.6% J.P. Morgan Chase & Co. 4.8% Air Products and Chemicals, Inc. 4.3% Bank One Corp. 4.1% General Electric Co. 2.9% Becton, Dickinson and Co. 2.8% United Technologies Corp. 2.8% Philip Morris Companies, Inc. 2.6% Washington Mutual, Inc. 2.3% NiSource, Inc. 2.3% [CHART] Relative Performance Capital Guardian Domestic Equity S&P 500 Index 7/31/2001 $10,000 $10,000 12/31/2001 9,781 9,480 12/31/2002 7,703 7,385 Average Annual Total Return For Periods Ended December 31, 2002 Since 1 year Inception Capital Guardian Domestic Equity Portfolio -21.24% -16.79% S&P 500 Index -22.10% -19.23% *inception date of 7/31/01 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 index cannot be invested in directly and do not include sales charges. This chart assumes an initial investment of $10,000 made on 7/31/01 (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 4 reflect mortality and expense risk charges and other 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. 38 Capital Guardian Domestic Equity Portfolio Northwestern Mutual Series Fund, Inc. Schedule of Investments December 31, 2002
Market Shares/ Value Common Stock (94.0%) Par (000's) --------------------------------------------------------- Consumer Discretionary (7.0%) *AOL Time Warner, Inc. 45,700 $ 599 *AutoNation, Inc. 38,400 482 Carnival Corp. 60,700 1,514 Ford Motor Co. 21,300 198 The Interpublic Group of Companies, Inc. 19,900 280 Knight-Ridder, Inc. 25,700 1,626 The Thomson Corp. 16,000 428 *TMP Worldwide, Inc. 8,300 94 ------- Total 5,221 ------- Consumer Staples (5.0%) Campbell Soup Co. 68,100 1,598 Kraft Foods, Inc. -- Class A 4,800 187 Philip Morris Companies, Inc. 48,100 1,950 ------- Total 3,735 ------- Energy (9.5%) Baker Hughes, Inc. 37,300 1,201 *BJ Services Co. 13,900 449 ChevronTexaco Corp. 2,200 146 Exxon Mobil Corp. 16,900 590 Royal Dutch Petroleum Co., ADR 22,600 995 Schlumberger Ltd. 4,400 185 Shell Transport & Trading Co., ADR 31,700 1,234 Unocal Corp. 54,900 1,679 *Weatherford International, Ltd. 14,200 567 ------- Total 7,046 ------- Financials (20.8%) *AmeriCredit Corp. 82,100 635 Bank One Corp. 82,700 3,023 Citigroup, Inc. 13,900 489 Everest Re Group, Ltd. 25,400 1,405 General Growth Properties, Inc. 5,600 291 The Goldman Sachs Group, Inc. 8,600 586 The Hartford Financial Services Group, Inc. 23,500 1,068 Household International, Inc. 10,600 295 J.P. Morgan Chase & Co. 147,500 3,539 The PMI Group, Inc. 23,900 718 *Travelers Property Casualty Corp. -- Class A 18,010 264 Washington Mutual, Inc. 49,700 1,716 Wells Fargo & Co. 18,600 872 XL Capital, Ltd. -- Class A 6,200 479 ------- Total 15,380 ------- Health Care (8.3%) Applera Corp. -- Applied Biosystems Group 36,500 640
Market Shares/ Value Common Stock (94.0%) Par (000's) ---------------------------------------------------- Health Care continued AstraZeneca PLC ADR 33,100 $ 1,161 Becton, Dickinson and Co. 68,800 2,112 Eli Lilly and Co. 19,800 1,258 *Lincare Holdings, Inc. 30,500 964 Pfizer, Inc. 1,400 43 ------- Total 6,178 ------- Industrials (15.0%) Canadian National Railway Co. 4,500 187 Dover Corp. 23,800 694 Emerson Electric Co. 10,900 554 Fluor Corp. 24,100 675 General Electric Co. 89,400 2,178 Illinois Tool Works, Inc. 5,000 324 Ingersoll-Rand Co. -- Class A 30,700 1,322 *Navistar International Corp. 23,100 562 *Sabre Holdings Corp. -- Class A 78,700 1,425 Siemens AG ADR 5,700 240 Southwest Airlines Co. 18,800 261 Tyco International, Ltd. 20,100 343 Union Pacific Corp. 4,600 275 United Technologies Corp. 33,900 2,100 ------- Total 11,140 ------- Information Technology (4.9%) *Amdocs Ltd. 79,000 776 *Applied Materials, Inc. 62,800 819 Hewlett-Packard Co. 36,184 628 *KLA-Tencor Corp. 20,000 707 *Nortel Networks Corp. 84,000 135 *Polycom, Inc. 36,700 349 *VeriSign, Inc. 29,200 234 ------- Total 3,648 ------- Materials (7.9%) Air Products and Chemicals, Inc. 74,400 3,180 Alcoa, Inc. 8,600 196 The Dow Chemical Co. 13,800 410 E. I. du Pont de Nemours and Co. 20,700 878 Lyondell Chemical Co. 48,400 612 Nucor Corp. 3,900 161 *Phelps Dodge Corp. 13,800 437 ------- Total 5,874 ------- Telecommunication Services (8.4%) AT&T Corp. 18,400 480 CenturyTel, Inc. 13,700 403 SBC Communications, Inc. 45,900 1,244 Sprint Corp. 286,400 4,147 ------- Total 6,274 -------
39 Capital Guardian Domestic Equity Portfolio
Market Shares/ Value Common Stock (94.0%) Par (000's) ------------------------------------------------------ Utilities (7.2%) *The AES Corp. 162,900 $ 492 Duke Energy Corp. 31,700 619 El Paso Corp. 64,100 446 *Kinder Morgan Management, LLC. 19,628 620 NiSource, Inc. 84,200 1,684 Pinnacle West Capital Corp. 39,300 1,340 The Williams Companies, Inc. 40,700 110 ------- Total 5,311 ------- Total Common Stock (Cost: $80,545) 69,807 ------- Preferred Stock (1.8%) ------------------------------------------------------ Consumer Discretionary (1.2%) Ford Motor Company Capital Trust II 22,500 919 ------- Total 919 ------- Materials (0.6%) Phelps Dodge Co. 5,000 427 ------- Total 427 ------- Total Preferred Stock Investments (Cost: $1,616) 1,346 -------
Market Shares/ Value Money Market Investments (4.0%) Par (000's) ---------------------------------------------------- Federal Government and Agencies (3.3%) Federal National Mortgage Association, 1.26%, 1/27/03 $2,500,000 $ 2,498 ------- Total 2,498 ------- Short Term Business Credit (0.7%) UBS Finance LLC, 1.20%, 1/2/03 500,000 500 ------- Total 500 ------- Total Money Market Investments (Cost: $2,998) 2,998 ------- Total Investments (99.8%) (Cost $85,159)` 74,151 ------- Other Assets, Less Liabilities (0.2%) 123 ------- Total Net Assets (100.0%) $74,274 -------
` At 12/31/2002 the aggregate cost of securities for federal tax purposes was $85,457 and the net unrealized depreciation of investments based on that cost was $11,306 which is comprised of $1,629 aggregate gross unrealized appreciation and $12,935 aggregate gross unrealized depreciation. ADR -- American Depository Receipt * Non-Income Producing The Accompanying Notes are an Integral Part of the Financial Statements 40 Index 500 Stock Portfolio - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: Long-term capital appreciation through Invest in a portfolio designed to approximate the $1.36 billion cost-effective participation in broad composition and returns of the S&P 500 Index. market performance
The Index 500 Stock Portfolio is designed to achieve results that approximate the performance of the Standard & Poor's 500 Composite Stock Price Index. As of December 31, 2002, the 500 stocks in the Index had a median market capitalization of $6.8 billion and total market value of $8,107 billion. Of the 500 stocks, 424 are listed on the New York Stock Exchange, 74 on NASDAQ, and 2 on the American Stock Exchange. 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 portion of the U.S. equity market; the Portfolio therefore provides participation in overall performance of the equity market. The Portfolio continues to achieve the objective of matching the results of the S&P 500 before expenses. [CHART] Sector Allocation 12/31/02 Financials 20% Health Care 15% Information Technology 14% Industrials 12% Consumer Discretionary 13% Consumer Staples 9% Energy 6% Telecommunications 4% Materials 3% Utilities 3% Short-Term Investments 1% [GRAPHIC] Top 10 Holdings 12/31/02 Company % of Total Net Assets Microsoft Corp. 3.4% General Electric Co. 2.9% Exxon Mobil Corp. 2.9% Wal-Mart Stores, Inc. 2.7% Pfizer, Inc. 2.3% Citigroup, Inc. 2.2% Johnson & Johnson 1.9% American International Group, Inc. 1.8% International Business Machines Corp. 1.6% Merck & Co., Inc. 1.6% [CHART] Relative Performance Index 500 Stock Portfolio S&P 500 Index 12/31/92 $10,000 $10,000 12/31/93 10,990 11,010 12/31/94 11,123 11,142 12/31/95 15,267 15,309 12/31/96 18,740 18,800 12/31/97 24,961 25,060 12/31/98 32,131 32,202 12/31/99 38,849 38,984 12/31/00 35,448 35,468 12/31/01 31,237 31,251 12/31/02 24,343 24,344 Average Annual Total Return For Periods Ended December 31, 2002 1 Year 5 Years 10 Years Index 500 Stock Portfolio -22.07% -0.50% 9.30% S&P 500 Index -22.10% -0.58% 9.30% 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 index cannot be invested in directly and do not include sales charges. 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 12/31/92. 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 4 reflect mortality and expense risk charges and other 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. 41 Index 500 Stock Portfolio Northwestern Mutual Series Fund, Inc. Schedule of Investments December 31, 2002
Market Shares/ Value Common Stock (98.8%) Par (000's) --------------------------------------------------------- Consumer Discretionary (13.3%) *American Greetings Corp. -- Class A 10,900 $ 172 *AOL Time Warner, Inc. 738,900 9,680 *AutoZone, Inc. 16,325 1,153 *Bed Bath & Beyond, Inc. 48,400 1,671 *Best Buy Co., Inc. 53,250 1,286 *Big Lots, Inc. 19,200 254 The Black & Decker Corp. 13,300 570 Brunswick Corp. 14,900 296 Carnival Corp. 97,109 2,423 Centex Corp. 10,200 512 Circuit City Stores, Inc. 34,800 258 *Clear Channel Communications, Inc. 101,350 3,779 *Comcast Corp. -- Class A 379,470 8,944 Cooper Tire & Rubber Co. 12,200 187 *Costco Wholesale Corp. 75,264 2,112 Dana Corp. 24,550 289 Darden Restaurants, Inc. 28,350 580 Delphi Automotive Systems Corp. 92,587 745 Dillard's, Inc. -- Class A 13,964 221 Dollar General Corp. 55,148 659 Dow Jones & Company, Inc. 13,920 602 Eastman Kodak Co. 48,283 1,692 *eBay, Inc. 50,600 3,432 Family Dollar Stores, Inc. 28,700 896 *Federated Department Stores, Inc. 33,351 959 Ford Motor Co. 301,794 2,807 Fortune Brands, Inc. 24,867 1,157 Gannett Co., Inc. 44,150 3,170 The Gap, Inc. 143,975 2,234 General Motors Corp. 92,727 3,418 Genuine Parts Co. 28,900 890 The Goodyear Tire & Rubber Co. 29,000 197 Harley-Davidson, Inc. 50,100 2,315 *Harrah's Entertainment, Inc. 18,450 731 Hasbro, Inc. 28,625 331 Hilton Hotels Corp. 62,250 791 The Home Depot, Inc. 390,094 9,347 *International Game Technology 14,300 1,086 The Interpublic Group of Companies, Inc. 63,500 894 J. C. Penney Company, Inc. 44,250 1,018 Johnson Controls, Inc. 14,700 1,178 *Jones Apparel Group, Inc. 21,300 755 KB Home 8,200 351 Knight-Ridder, Inc. 13,750 870 *Kohl's Corp. 55,767 3,120 Leggett & Platt Inc. 32,433 728 The Limited, Inc. 86,305 1,202
Market Shares/ Value Common Stock (98.8%) Par (000's) ------------------------------------------------------- Consumer Discretionary continued Liz Claiborne, Inc. 17,700 $ 525 Lowe's Companies, Inc. 128,850 4,832 Marriott International, Inc. -- Class A 40,000 1,315 Mattel, Inc. 72,288 1,384 The May Department Stores Co. 47,750 1,097 Maytag Corp. 12,933 369 McDonald's Corp. 211,078 3,394 The McGraw-Hill Companies, Inc. 32,160 1,944 Meredith Corp. 8,200 337 The New York Times Co. -- Class A 25,070 1,146 Newell Rubbermaid, Inc. 44,192 1,340 NIKE, Inc. -- Class B 44,200 1,966 Nordstrom, Inc. 22,367 424 *Office Depot, Inc. 51,157 755 Omnicom Group, Inc. 31,100 2,009 Pulte Corp. 10,100 483 RadioShack Corp. 28,400 532 *Reebok International, Ltd. 9,900 291 Sears, Roebuck & Co. 52,350 1,254 The Sherwin-Williams Co. 24,913 704 Snap-On, Inc. 9,617 270 The Stanley Works 14,150 489 *Staples, Inc. 77,400 1,416 *Starbucks Corp. 64,250 1,309 Starwood Hotels & Resorts Worldwide, Inc. 33,000 783 Target Corp. 150,157 4,505 Tiffany & Co. 24,167 578 The TJX Companies, Inc. 89,400 1,745 *TMP Worldwide, Inc. 18,467 209 *Toys "R" Us, Inc. 35,150 352 Tribune Co. 50,036 2,275 Tupperware Corp. 9,700 146 *Univision Communications, Inc. -- Class A 37,900 929 V. F. Corp. 18,157 655 *Viacom, Inc. -- Class B 292,148 11,909 Visteon Corp. 21,683 151 Wal-Mart Stores, Inc. 736,400 37,197 The Walt Disney Co. 337,857 5,510 Wendy's International, Inc. 19,150 518 Whirlpool Corp. 11,250 587 *Yum! Brands, Inc. 49,180 1,191 ---------- Total 180,787 ---------- Consumer Staples (9.4%) Adolph Coors Co. -- Class B 6,000 368 Alberto-Culver Co. -- Class B 9,600 484
42 Index 500 Stock Portfolio
Market Shares/ Value Common Stock (98.8%) Par (000's) ------------------------------------------------------ Consumer Staples continued Albertson's, Inc. 67,354 $ 1,499 Anheuser-Busch Companies, Inc. 143,849 6,962 Archer-Daniels-Midland Co. 107,903 1,338 Avon Products, Inc. 39,100 2,106 Brown-Forman Corp. -- Class B 11,300 739 Campbell Soup Co. 67,922 1,594 The Clorox Co. 38,150 1,574 The Coca-Cola Co. 410,975 18,009 Coca-Cola Enterprises, Inc. 74,200 1,612 Colgate-Palmolive Co. 89,822 4,709 ConAgra Foods, Inc. 88,967 2,225 CVS Corp. 64,967 1,622 *Del Monte Foods Co. 25,955 200 General Mills, Inc. 60,867 2,858 The Gillette Co. 175,135 5,317 H.J. Heinz Co. 58,117 1,910 Hershey Foods Corp. 22,650 1,528 Kellogg Co. 67,857 2,325 Kimberly-Clark Corp. 85,556 4,061 *The Kroger Co. 130,605 2,018 The Pepsi Bottling Group, Inc. 47,200 1,213 PepsiCo, Inc. 293,430 12,389 Philip Morris Companies, Inc. 349,922 14,182 The Procter & Gamble Co. 215,205 18,494 R.J. Reynolds Tobacco Holdings, Inc. 14,800 623 *Safeway, Inc. 73,000 1,705 Sara Lee Corp. 129,835 2,923 SUPERVALU, Inc. 22,150 366 SYSCO Corp. 109,825 3,272 UST, Inc. 28,067 938 Walgreen Co. 169,646 4,952 Winn-Dixie Stores, Inc. 23,250 355 Wm. Wrigley Jr. Co. 37,367 2,051 ---------- Total 128,521 ---------- Energy (5.9%) Amerada Hess Corp. 14,800 815 Anadarko Petroleum Corp. 41,162 1,972 Apache Corp. 23,760 1,354 Ashland, Inc. 11,400 325 Baker Hughes, Inc. 55,830 1,797 *BJ Services Co. 26,000 840 Burlington Resources, Inc. 33,283 1,420 ChevronTexaco Corp. 176,857 11,757 ConocoPhillips 112,010 5,420 Devon Energy Corp. 25,900 1,189 EOG Resources, Inc. 19,260 769 Exxon Mobil Corp. 1,118,756 39,089 Halliburton Co. 72,269 1,352 Kerr-McGee Corp. 16,605 736 Marathon Oil Corp. 51,309 1,092 *Nabors Industries, Ltd. 23,950 845 *Noble Corp. 22,250 782 Occidental Petroleum Corp. 62,320 1,773
Market Shares/ Value Common Stock (98.8%) Par (000's) ---------------------------------------------------------- Energy continued *Rowan Companies, Inc. 15,550 $ 353 Schlumberger Ltd. 95,567 4,022 Sunoco, Inc. 12,650 420 *Transocean Sedco Forex, Inc. 52,851 1,226 Unocal Corp. 42,667 1,305 ---------- Total 80,653 ---------- Financials (20.2%) ACE Ltd. 43,400 1,273 AFLAC Inc. 85,650 2,580 The Allstate Corp. 116,828 4,321 Ambac Financial Group, Inc. 17,500 984 American Express Co. 219,975 7,776 American International Group, Inc. 432,230 25,006 AmSouth Bancorporation 59,355 1,140 Aon Corp. 50,500 954 Bank of America Corp. 248,801 17,309 The Bank of New York Company, Inc. 120,253 2,881 Bank One Corp. 194,286 7,101 BB&T Corp. 80,000 2,959 The Bear Stearns Companies, Inc. 16,295 968 Capital One Financial Corp. 36,700 1,091 The Charles Schwab Corp. 225,939 2,451 Charter One Financial, Inc. 38,020 1,092 The Chubb Corp. 28,450 1,485 Cincinnati Financial Corp. 26,780 1,006 Citigroup, Inc. 837,848 29,485 Comerica, Inc. 28,950 1,252 Countrywide Credit Industries, Inc. 20,800 1,074 Equity Office Properties Trust 69,300 1,731 Equity Residential Properties Trust 45,600 1,121 Fannie Mae 164,748 10,598 Fifth Third Bancorp 96,134 5,629 First Tennessee National Corp. 20,900 751 FleetBoston Financial Corp. 173,505 4,216 Franklin Resources, Inc. 43,050 1,467 Freddie Mac 115,186 6,802 Golden West Financial Corp. 25,550 1,835 The Goldman Sachs Group, Inc. 79,700 5,428 The Hartford Financial Services Group, Inc. 41,050 1,865 Household International, Inc. 75,285 2,094 Huntington Bancshares, Inc. 39,842 745 J.P. Morgan Chase & Co. 330,048 7,921 Jefferson-Pilot Corp. 24,434 931 John Hancock Financial Services, Inc. 48,100 1,342 KeyCorp 70,575 1,774 Lehman Brothers Holdings, Inc. 40,322 2,149 Lincoln National Corp. 30,540 964 Loews Corp. 30,767 1,368
43 Index 500 Stock Portfolio
Market Shares/ Value Common Stock (98.8%) Par (000's) -------------------------------------------------------- Financials continued Marsh & McLennan Companies, Inc. 88,680 $ 4,098 Marshall & Ilsley Corp. 34,800 953 MBIA, Inc. 24,350 1,068 MBNA Corp. 211,515 4,023 Mellon Financial Corp. 72,068 1,882 Merrill Lynch & Co., Inc. 143,300 5,438 MetLife, Inc. 116,236 3,143 MGIC Investment Corp. 17,000 702 Moody's Corp. 25,775 1,064 Morgan Stanley 181,413 7,242 National City Corp. 101,197 2,765 North Fork Bancorporation, Inc. 27,100 914 Northern Trust Corp. 36,650 1,285 Plum Creek Timber Company, Inc. 30,600 722 The PNC Financial Services Group, Inc. 47,067 1,972 Principal Financial Group, Inc. 57,400 1,729 The Progressive Corp. 36,000 1,787 *Providian Financial Corp. 47,857 311 Prudential Financial, Inc. 96,100 3,050 Regions Financial Corp. 36,586 1,221 SAFECO Corp. 22,650 785 Simon Property Group, Inc. 30,700 1,046 SLM Corp. 25,614 2,660 SouthTrust Corp. 57,367 1,426 The St. Paul Companies, Inc. 37,472 1,276 State Street Corp. 53,600 2,090 *Stilwell Financial, Inc. 36,829 481 SunTrust Banks, Inc. 47,233 2,689 Synovus Financial Corp. 49,050 952 T. Rowe Price Group, Inc. 20,300 554 Torchmark Corp. 19,750 721 *Travelers Property Casualty CL B 165,547 2,425 U.S. Bancorp 316,921 6,725 Union Planters Corp. 33,137 932 UnumProvident Corp. 39,931 700 Wachovia Corp. 227,081 8,275 Washington Mutual, Inc. 160,187 5,531 Wells Fargo & Co. 281,280 13,184 XL Capital, Ltd. -- Class A 22,500 1,738 Zions Bancorporation 15,200 598 ---------- Total 275,076 ---------- Health Care (14.7%) Abbott Laboratories 258,650 10,346 Aetna, Inc. 24,877 1,023 Allergan, Inc. 21,367 1,231 AmerisourceBergen Corp. 17,500 950 *Amgen, Inc. 211,617 10,230 *ANTHEM, INC. 23,300 1,466 Applera Corp. -- Applied Biosystems Group 35,133 616
Market Shares/ Value Common Stock (98.8%) Par (000's) ---------------------------------------------------------- Health Care continued Bausch & Lomb, Inc. 8,900 $ 320 Baxter International, Inc. 99,800 2,794 Becton, Dickinson and Co. 42,550 1,306 *Biogen, Inc. 24,600 985 Biomet, Inc. 43,545 1,248 *Boston Scientific Corp. 67,386 2,865 Bristol-Myers Squibb Co. 320,708 7,424 C. R. Bard, Inc. 8,550 496 Cardinal Health, Inc. 74,825 4,429 *Chiron Corp. 31,322 1,178 CIGNA Corp. 23,229 955 Eli Lilly and Co. 186,006 11,811 *Forest Laboratories, Inc. 29,733 2,920 *Genzyme Corp. 35,500 1,050 *Guidant Corp. 50,588 1,561 HCA, Inc. 85,811 3,561 Health Management Associates, Inc. 39,500 707 *HEALTHSOUTH Corp. 65,600 276 *Humana, Inc. 28,100 281 IMS Health, Inc. 46,967 751 Johnson & Johnson 492,637 26,460 *King Pharmaceuticals, Inc. 40,366 694 *Manor Care, Inc. 16,300 303 McKesson HBOC, Inc. 48,005 1,298 *Medimmune, Inc. 41,500 1,128 Medtronic, Inc. 200,900 9,161 Merck & Co., Inc. 372,420 21,083 *Millipore Corp. 8,000 272 Pfizer, Inc. 1,024,736 31,326 Pharmacia Corp. 213,570 8,927 *Quest Diagnostics, Inc. 16,100 916 *Quintiles Transnational Corp. 19,500 236 Schering-Plough Corp. 242,750 5,389 *St. Jude Medical, Inc. 29,300 1,164 Stryker Corp. 32,750 2,198 *Tenet Healthcare Corp. 80,950 1,328 UnitedHealth Group, Inc. 50,186 4,191 *Watson Pharmaceuticals, Inc. 17,700 500 *Wellpoint Health Networks, Inc. -- Class A 24,100 1,715 Wyeth 219,429 8,207 *Zimmer Holdings, Inc. 32,237 1,338 ---------- Total 200,614 ---------- Industrials (11.4%) 3M Co. 64,588 7,964 *Allied Waste Industries, Inc. 32,650 327 *American Power Conversion Corp. 32,450 492 *American Standard Companies, Inc. 11,900 847 *AMR Corp. 25,700 170 *Apollo Group, Inc. -- Class A 28,700 1,263
44 Index 500 Stock Portfolio
Market Shares/ Value Common Stock (98.8%) Par (000's) ------------------------------------------------------- Industrials continued Automatic Data Processing, Inc. 102,650 $ 4,029 Avery Dennison Corp. 18,150 1,109 The Boeing Co. 138,976 4,585 Burlington Northern Santa Fe Corp. 62,985 1,638 Caterpillar, Inc. 56,988 2,605 *Cendant Corp. 172,233 1,805 Cintas Corp. 28,133 1,287 *Concord EPS, Inc. 84,900 1,336 *Convergys Corp. 28,650 434 Cooper Industries, Ltd. 15,400 561 Crane Co. 9,875 197 CSX Corp. 35,250 998 Cummins, Inc. 6,800 191 Danaher Corp. 25,000 1,643 Deere & Co. 39,460 1,809 Delta Air Lines, Inc. 20,367 246 Deluxe Corp. 10,351 436 Dover Corp. 33,567 979 Eaton Corp. 11,700 914 Emerson Electric Co. 69,750 3,547 Equifax, Inc. 23,800 551 FedEx Corp. 49,320 2,674 First Data Corp. 125,326 4,438 *Fiserv, Inc. 31,825 1,080 Fluor Corp. 13,400 375 General Dynamics Corp. 33,400 2,651 General Electric Co. 1,647,206 40,110 Goodrich Corp. 19,100 350 H&R Block, Inc. 29,950 1,204 Honeywell International, Inc. 135,650 3,256 Illinois Tool Works, Inc. 50,700 3,288 Ingersoll-Rand Co. -- Class A 27,980 1,205 ITT Industries, Inc. 15,200 922 Lockheed Martin Corp. 75,308 4,349 Masco Corp. 82,100 1,728 *McDermott International, Inc. 10,500 46 *Navistar International Corp. 10,050 244 *Norfolk Southern Corp. 64,357 1,286 Northrop Grumman Corp. 30,110 2,921 PACCAR, Inc. 19,205 886 Pall Corp. 20,350 339 Parker-Hannifin Corp. 19,575 903 Paychex, Inc. 62,235 1,736 Pitney Bowes, Inc. 39,437 1,288 *Power-One, Inc. 13,200 75 R. R. Donnelley & Sons Co. 18,734 408 Raytheon Co. 66,700 2,051 *Robert Half International, Inc. 29,040 468 Rockwell Automation, Inc. 30,750 637 Rockwell Collins, Inc. 30,250 704 Ryder System, Inc. 10,300 231 *Sabre Holdings Corp. -- Class A 23,967 434 Southwest Airlines Co. 127,967 1,779
Market Shares/ Value Common Stock (98.8%) Par (000's) ------------------------------------------------------ Industrials continued Textron, Inc. 22,850 $ 982 *Thomas & Betts Corp. 9,700 164 Tyco International, Ltd. 330,308 5,642 Union Pacific Corp. 41,860 2,506 United Parcel Service, Inc. 184,800 11,657 United Technologies Corp. 78,067 4,835 W.W. Grainger, Inc. 15,400 794 Waste Management, Inc. 101,285 2,321 ---------- Total 154,930 ---------- Information Technology (14.2%) *ADC Telecommunications, Inc. 131,850 276 Adobe Systems, Inc. 39,725 990 *Advanced Micro Devices, Inc. 56,700 366 *Agilent Technologies, Inc. 76,837 1,380 *Altera Corp. 63,211 780 *Analog Devices, Inc. 60,557 1,445 *Andrew Corp. 16,237 167 *Apple Computer, Inc. 59,400 851 *Applied Materials, Inc. 272,300 3,548 *Applied Micro Circuits Corp. 49,800 184 Autodesk, Inc. 19,034 272 *Avaya, Inc. 59,916 147 *BMC Software, Inc. 39,960 684 *Broadcom Corp. -- Class A 45,400 684 *CIENA Corp. 71,500 368 *Cisco Systems, Inc. 1,211,300 15,868 *Citrix Systems, Inc. 28,920 356 Computer Associates International, Inc. 95,592 1,290 *Computer Sciences Corp. 28,450 980 *Compuware Corp. 62,257 299 *Comverse Technology, Inc. 31,000 311 *Corning, Inc. 190,000 629 *Dell Computer Corp. 429,533 11,486 *Electronic Arts, Inc. 23,100 1,150 Electronic Data Systems Corp. 79,567 1,466 *EMC Corp. 364,774 2,240 *Gateway, Inc. 53,650 168 Hewlett-Packard Co. 505,226 8,771 Intel Corp. 1,103,463 17,181 International Business Machines Corp. 280,539 21,742 *Intuit, Inc. 35,000 1,642 *Jabil Circuit, Inc. 32,767 587 *JDS Uniphase Corp. 225,400 557 *KLA-Tencor Corp. 31,300 1,107 *Lexmark International Group, Inc. -- Class A 20,900 1,264 Linear Technology Corp. 52,550 1,352 *LSI Logic Corp. 61,600 355 *Lucent Technologies, Inc. 568,236 716 Maxim Integrated Products, Inc. 53,500 1,768 *Mercury Interactive Corp. 13,900 412
45 Index 500 Stock Portfolio
Market Shares/ Value Common Stock (98.8%) Par (000's) ------------------------------------------------------ Information Technology continued *Micron Technology, Inc. 99,950 $ 974 *Microsoft Corp. 896,600 46,354 Molex, Inc. 32,050 738 Motorola, Inc. 380,577 3,292 *National Semiconductor Corp. 29,943 449 *NCR Corp. 16,200 385 *Network Appliance, Inc. 55,700 557 *Novell, Inc. 60,300 201 *Novellus Systems, Inc. 24,000 674 *Nvidia Corp. 25,300 291 *Oracle Corp. 899,525 9,715 *Parametric Technology Corp. 43,280 109 *PeopleSoft, Inc. 51,700 946 PerkinElmer, Inc. 20,700 171 *PMC-Sierra, Inc. 27,700 154 *QLogic Corp. 15,450 533 *QUALCOMM, Inc. 128,667 4,682 *Rational Software Corp. 32,000 332 *Sanmina-SCI Corp. 86,800 390 Scientific-Atlanta, Inc. 25,900 307 *Siebel Systems, Inc. 79,100 592 *Solectron Corp. 136,400 484 *Sun Microsystems, Inc. 537,397 1,671 *SunGard Data Systems, Inc. 46,800 1,103 Symbol Technologies, Inc. 37,950 312 *Tektronix, Inc. 14,760 268 *Tellabs, Inc. 68,092 495 *Teradyne, Inc. 30,350 395 Texas Instruments, Inc. 287,000 4,308 *Thermo Electron Corp. 27,600 555 *Unisys Corp. 53,450 529 *VERITAS Software Corp. 67,932 1,061 *Waters Corp. 21,700 473 *Xerox Corp. 120,900 973 *Xilinx, Inc. 55,900 1,152 *Yahoo!, Inc. 99,400 1,625 --------- Total 193,089 --------- Materials (2.8%) Air Products and Chemicals, Inc. 37,667 1,610 Alcoa, Inc. 139,807 3,186 Allegheny Technologies, Inc. 13,317 83 Ball Corp. 9,366 479 Bemis Company, Inc. 8,750 434 Boise Cascade Corp. 9,600 242 The Dow Chemical Co. 150,809 4,480 E. I. du Pont de Nemours and Co. 164,428 6,973 Eastman Chemical Co. 12,825 472 Ecolab, Inc. 21,400 1,059 Engelhard Corp. 21,300 476 *Freeport-McMoRan Copper & Gold, Inc. -- Class B 23,981 402 Georgia-Pacific Corp. 38,104 616 Great Lakes Chemical Corp. 8,300 198
Market Shares/ Value Common Stock (98.8%) Par (000's) ------------------------------------------------------- Materials contioued *Hercules, Inc. 18,100 $ 159 International Flavors & Fragrances, Inc. 15,700 551 International Paper Co. 79,766 2,789 *Louisiana-Pacific Corp. 17,300 139 MeadWestvaco Corp. 33,079 817 Monsanto Co. 43,253 833 Newmont Mining Corp. 66,480 1,930 Nucor Corp. 12,933 534 *Pactiv Corp. 26,200 573 *Phelps Dodge Corp. 14,724 466 PPG Industries, Inc. 28,067 1,408 Praxair, Inc. 26,700 1,542 Rohm and Haas Co. 36,580 1,188 *Sealed Air Corp. 13,921 519 Sigma-Aldrich Corp. 12,100 589 Temple-Inland, Inc. 8,900 399 United States Steel Corp. 16,850 221 Vulcan Materials Co. 16,800 630 Weyerhaeuser Co. 36,280 1,785 Worthington Industries, Inc. 14,200 216 ---------- Total 37,998 ---------- Telecommunication Services (4.1%) ALLTEL Corp. 51,457 2,624 AT&T Corp. 127,307 3,324 *AT&T Wireless Services, Inc. 448,197 2,532 BellSouth Corp. 309,865 8,016 CenturyTel, Inc. 23,500 690 *Citizens Communications Co. 46,700 493 *Nextel Communications, Inc. -- Class A 150,750 1,741 *Qwest Communications International, Inc. 277,635 1,388 SBC Communications, Inc. 550,447 14,923 Sprint Corp. 147,809 2,140 *Sprint Corp. (PCS Group) 165,060 723 Verizon Communications, Inc. 451,742 17,506 ---------- Total 56,100 ---------- Utilities (2.8%) *The AES Corp. 89,800 271 *Allegheny Energy, Inc. 20,800 157 Ameren Corp. 23,967 996 American Electric Power Company, Inc. 56,140 1,534 *Calpine Corp. 62,360 203 CenterPoint Energy, Inc. 50,362 428 Cinergy Corp. 27,784 937 CMS Energy Corp. 23,800 225 Consolidated Edison, Inc. 35,250 1,509 Constellation Energy Group, Inc. 27,200 757 Dominion Resources, Inc. 50,395 2,767 DTE Energy Co. 27,750 1,288 Duke Energy Corp. 146,930 2,871
46 Index 500 Stock Portfolio
Market Shares/ Value Common Stocks (98.8%) Par (000's) ------------------------------------------------------- Utilities continued *Dynegy, Inc. -- Class A 61,100 $ 72 *Edison International 53,920 639 El Paso Corp. 96,771 674 Entergy Corp. 37,109 1,692 Exelon Corp. 53,312 2,813 FirstEnergy Corp. 49,265 1,624 FPL Group, Inc. 30,157 1,813 KeySpan Corp. 23,400 825 Kinder Morgan, Inc. 20,167 852 *Mirant Corp. 66,526 126 Nicor, Inc. 7,250 247 NiSource, Inc. 40,373 807 Peoples Energy Corp. 5,900 228 *PG&E Corp. 65,125 905 Pinnacle West Capital Corp. 15,000 511 PPL Corp. 26,834 931 Progress Energy, Inc. 39,092 1,695 Public Service Enterprise Group, Inc. 36,736 1,179 Sempra Energy 33,902 802 The Southern Co. 117,300 3,330 TECO Energy, Inc. 28,700 444 TXU Corp. 51,165 956 The Williams Companies, Inc. 85,500 231 #Xcel Energy, Inc. 65,920 725 ---------- Total 38,064 ---------- Total Common Stock (Cost: $1,320,019) 1,345,832 ---------- Money Market Investments (1.2%) ------------------------------------------------------- Federal Government and Agencies (0.5%) #Federal Home Loan Bank, 1.24%, 3/7/03 $ 6,400,000 6,386 ---------- Total 6,386 ---------- Finance Services (0.7%) #Preferred Receivable Funding, 1.28%, 1/17/03 10,000,000 9,995 ---------- Total 9,995 ----------
Market Shares/ Value Money Market Investments (1.2%) Par (000's) ------------------------------------------------------- Short Term Business Credit (0.0%) #UBS Finance LLC, 1.2%, 1/2/03 $400,000 $ 400 ---------- Total 400 ---------- Total Money Market Investments (Cost: $16,780) 16,781 ---------- Total Investments (100.0%) (Cost $1,336,799)` 1,362,613 ---------- Other Assets, Less Liabilities (0.0%) 268 ---------- Total Net Assets (100.0%) $1,362,881 ----------
` At 12/31/2002 the aggregate cost of securities for federal tax purposes was $1,340,508 and the net unrealized appreciation of investments based on that cost was $22,105 which is comprised of $297,918 aggregate gross unrealized appreciation and $275,813 aggregate gross unrealized depreciation. * Non-Income Producing # All or a portion of the securities have been committed as collateral for open futures positions. Information regarding open futures contracts as of period end is summarized below:
Unrealized Number Appreciation / of Expiration (Depreciation) Issuer (000's) Contracts Date (000's) ------------------------------------------------------ S & P 500 Index Futures 76 3/03 $(349) (Total Notional Value at 12/31/02 $17,048)
The Accompanying Notes are an Integral Part of the Financial Statements 47 Asset Allocation Portfolio - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: Realize highest total return, Flexible policy of allocating $87.26 million including current income and assets among stocks, bonds and capital appreciation, cash, with mix adjusted to consistent with reasonable capitalize on changing investment risk financial markets and economic conditions.
The Asset Allocation Portfolio invests in seven categories of assets: large capitalization stocks, small capitalization stocks, foreign stocks, investment-grade bonds, below investment-grade bonds, convertible securities and cash equivalents. The proportion of investments in each category is adjusted as appropriate to take advantage of market trends and opportunities, and securities within each category are actively managed by a team of investment professionals. The Portfolio is managed to maintain broad diversification, while blending asset classes to achieve both capital appreciation and current income. Comparison of returns of the Asset Allocation Portfolio with stock or bond indices is of limited usefulness because there is no index that includes both equity and debt securities. During 2002 the bond market performed significantly better than the stock market. As expected, the Portfolio's performance for the year was a blend of the two, with a total return of -10.3%, better than the return of -22.1% from the S&P 500 Index, but less than the return of the bond benchmark, the Merrill Lynch Domestic Master Index, which had a return of 10.41%. The Portfolio has maintained a fairly defensive posture, with equity exposure near the low end of its normal range, which is 45% to 75% of assets, while taking advantage of market dips to selectively increase equity holdings. Equity exposure was increased as the market continued to move down during the second quarter of 2002; at mid-year, the equity exposure was a fairly neutral 60%. By the end of the third quarter, equity exposure was at 56%, and the cash position was 10% of assets. Throughout the first nine months of the year, the bond portion of the Portfolio outperformed stocks. The emphasis on high quality companies in both the equity and the fixed-income sectors of the Portfolio helped performance, as nervous markets reacted very negatively to any suggestion of financial problems. Bond performance benefited from emphasis on low-risk government securities and mortgage-backed securities and an underweighted position in corporate bonds. The fourth quarter of 2002 was quite different from the first three quarters: the stock market rallied, bond prices fell, and riskier issues outperformed higher quality securities in both stock and bond markets. As the market rallied beginning in October, we let cash build up as new money flowed into the Portfolio, in anticipation of better buying opportunities. The equity position was increased in December, as the stock market began to move back down. Within the equity segment of the Portfolio, none of the three equity categories -- large cap stocks, small cap stocks, and foreign equities -- is currently being particularly emphasized. In part as a more conservative substitute for greater equity exposure, we maintained holdings of below investment-grade bonds during the fourth quarter. The year-end cash position, 10% of the Portfolio (net of Index futures), is somewhat higher than usual. With yields on three-year Treasury notes barely higher than money market instruments, this cash position does not significantly sacrifice income, and it provides the flexibility to add to equity or bond holdings at opportune times. [CHART] Sector Allocation 12/31/02 Large Cap Stocks 33% (includes S&P 500 Index Futures) Investment-Grade Bonds 24% Small Cap Stocks 12% Foreign Stocks 12% Short-Term Investments 10% Below Investment-Grade Bonds 9% [CHART] Relative Performance
Merrill Lynch Merrill Lynch Asset Allocation Domestic Master 91-Day Portfolio S&P 500 Inde Index T-Bill Index 7/31/2001 10,000 10,000 10,000 10,000 12/31/2001 9,790 9,480 10,240 10,139 12/31/2002 8,786 7,385 11,306 10,320
Average Annual Total Return For Periods Ended December 31, 2002 Since 1 Year Inception* Asset Allocation Portfolio -10.26% -8.72% S&P 500 Index -22.10% -19.23% Merrill Lynch Domestic Master Index 10.41% 9.03% Merrill Lynch 91 Day T-Bill Index 1.78% 2.24% *inception date of 7/31/01 In the graph, the Fund is compared against three indices representing the three major components of the Fund: equities, fixed income and cash equivalent investments. The indices cannot be invested in directly and do not include sales charges. The Standard & Poor's 500(R) 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 7/31/01 (commencement of operations). Returns shown include fee waivers and deductions for all Fund expenses. In the absence of fee waivers, total return would be reduced. 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 4 reflect mortality and expense risk charges and other 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. Investors should be aware of the risks of investments in foreign securities, particularly investments in securities of companies in developing nations. These include the risks of currency fluctuation, of political and economic instability and of less well-developed government supervision and regulation of business and industry practices, as well as differences in accounting standards. Small-cap stocks also may carry additional risk. Small or newer issuers are more likely to realize more substantial growth as well as suffer more significant losses than larger or more established issuers. Investments in such companies can be both more volatile and more speculative. 48 Asset Allocation Portfolio Northwestern Mutual Series Fund, Inc. Schedule of Investments December 31, 2002
Market Domestic Common Stocks & Shares/ Value Warrants (34.6%) Par (000's) ----------------------------------------------------- Large Cap Common Stock (22.7%) ----------------------------------------------------- Consumer Discretionary (5.9%) *Bed Bath & Beyond, Inc. 4,000 $ 138 Carnival Corp. 1,335 33 Darden Restaurants, Inc. 4,900 100 Fortune Brands, Inc. 8,200 381 Gannett Co., Inc. 4,900 352 Harley-Davidson, Inc. 10,800 499 *Kohl's Corp. 7,400 414 The McGraw-Hill Companies, Inc. 7,100 429 Newell Rubbermaid, Inc. 12,000 364 Omnicom Group, Inc. 4,000 258 Target Corp. 7,700 231 Tribune Co. 9,300 423 *Viacom, Inc. -- Class B 7,900 322 Wal-Mart Stores, Inc. 12,300 621 Wendy's International, Inc. 9,700 263 Weyerhaeuser Co. 5,200 256 ------- Total 5,084 ------- Consumer Staples (2.6%) Anheuser-Busch Companies, Inc. 9,400 455 Colgate-Palmolive Co. 5,700 299 General Mills, Inc. 4,400 207 Kellogg Co. 5,300 182 Kraft Foods, Inc. -- Class A 5,000 195 PepsiCo, Inc. 11,800 497 Walgreen Co. 15,900 464 ------- Total 2,299 ------- Energy (1.4%) ChevronTexaco Corp. 4,700 312 EOG Resources, Inc. 8,000 319 Exxon Mobil Corp. 17,100 597 ------- Total 1,228 ------- Financials (3.4%) American International Group, Inc. 6,900 399 The Bank of New York Company, Inc. 8,300 199 The Chubb Corp. 3,100 162 Citigroup, Inc. 4,000 141 Fifth Third Bancorp 7,100 416 Freddie Mac 5,300 313 The Goldman Sachs Group, Inc. 3,600 245 Lehman Brothers Holdings, Inc. 3,000 160 Marsh & McLennan Companies, Inc. 5,000 231 Morgan Stanley Dean Witter & Co. 6,100 244 Wells Fargo & Co. 9,300 435 ------- Total 2,945 -------
Market Shares/ Value Large Cap Common Stock (22.7%) Par (000's) -------------------------------------------------------- Health Care (3.2%) Abbott Laboratories 4,000 $ 160 *Amgen, Inc. 8,800 425 Baxter International, Inc. 8,300 232 Eli Lilly and Co. 1,600 102 Johnson & Johnson 9,300 500 Medtronic, Inc. 10,900 497 Pfizer, Inc. 20,800 635 UnitedHealth Group, Inc. 3,300 276 ------- Total 2,827 ------- Industrials (2.1%) Canadian National Railway Co. 6,000 249 *Fiserv, Inc. 12,800 436 General Electric Co. 15,900 387 Lockheed Martin Corp. 2,700 156 Paychex, Inc. 3,800 106 Raytheon Co. 6,300 194 Union Pacific Corp. 5,000 299 ------- Total 1,827 ------- Information Technology (2.8%) *Cisco Systems, Inc. 8,900 117 *Electronic Arts, Inc. 1,700 85 Intel Corp. 16,000 249 International Business Machines Corp. 5,200 403 *Microsoft Corp. 15,100 780 *PeopleSoft, Inc. 5,800 106 *QUALCOMM, Inc. 6,700 244 *Semiconductor Holders Trust 10,000 222 Texas Instruments, Inc. 13,200 198 ------- Total 2,404 ------- Materials (1.3%) Air Products and Chemicals, Inc. 8,900 380 Alcoa, Inc. 13,300 303 Ecolab, Inc. 8,700 431 ------- Total 1,114 ------- Total Large Cap Common Stock 19,728 ------- Small Cap Common Stock (11.9%) -------------------------------------------------------- Consumer Discretionary (2.7%) *AnnTaylor Stores Corp. 7,250 148 *CDW Computer Centers, Inc. 2,300 101 *Coach, Inc. 6,000 198 *Entercom Communications Corp. -- Class A 2,200 103 Fairmont Hotels & Resorts, Inc. 3,900 92 *The Gymboree Corp. 9,600 152 *Hispanic Broadcasting Corp. -- Class A 2,900 60
49 Asset Allocation Portfolio
Market Shares/ Value Small Cap Common Stock (11.9%) Par (000's) --------------------------------------------------------- Consumer Discretionary (continued) *Jones Apparel Group, Inc. 2,900 $ 103 *Lamar Advertising Co. -- Class A 3,200 108 Leggett & Platt, Inc. 10,600 238 *Lin TV Corp. -- Class A 1,200 29 Manpower, Inc. 1,100 35 *Michaels Stores, Inc. 6,400 200 *O'Reilly Automotive, Inc. 13,800 349 *Orient-Express Hotel, Ltd. -- Class A 5,500 74 *Platinum Underwriters Holdings, Ltd. 600 16 Polaris Industries, Inc. 2,300 135 *Stoneridge, Inc. 2,000 24 *Tommy Hilfiger Corp. 10,400 72 *Westwood One, Inc. 3,800 142 ------- Total 2,379 ------- Energy (0.9%) *BJ Services Co. 4,800 155 *Cal Dive International, Inc. 7,000 165 *Energy Partners, Ltd. 9,700 104 Ocean Energy, Inc. 2,800 56 *Patterson-UTI Energy, Inc. 6,600 199 *Weatherford International, Ltd. 3,200 128 ------- Total 807 ------- Financials (0.9%) GreenPoint Financial Corp. 1,500 68 Investors Financial Services Corp. 11,600 318 Old Republic International Corp. 3,800 106 Radian Group, Inc. 3,100 115 SouthTrust Corp. 5,400 134 *Trammell Crow Co. 9,000 81 ------- Total 822 ------- Health Care (3.2%) *AdvancePCS 6,700 149 *The Advisory Board Co. 1,700 51 *Apogent Technologies, Inc. 4,500 94 *Biovail Corp. 4,200 111 *Bio-Rad Laboratories, Inc. -- Class A 2,600 101 *CIMA Labs, Inc. 3,000 73 D & K Healthcare Resources, Inc. 5,300 54 *DaVita, Inc. 24,200 597 Health Management Associates, Inc. -- Class A 4,500 81 *IMPAC Medical Systems, Inc. 700 13 *Lincare Holdings, Inc. 16,700 528 *Patterson Dental Co. 6,700 293 *Province Healthcare Co. 17,950 175 *Renal Care Group, Inc. 6,400 202 *Triad Hospitals, Inc. 3,800 113 *Universal Health Services, Inc. -- Class B 3,000 135 ------- Total 2,770 ------- Industrials (2.4%) *The BISYS Group, Inc. 5,400 86 C.H. Robinson Worldwide, Inc. 5,900 184
Market Shares/ Value Small Cap Common Stock (11.9%) Par (000's) --------------------------------------------------------- Industrials (continued) *Charles River Associates, Inc. 1,400 $ 20 Cintas Corp. 2,200 101 *Concord EPS, Inc. 2,500 39 *The Corporate Executive Board Co. 6,400 204 Expeditors International of Washington, Inc. 5,200 170 *Hewitt Associates, Inc. -- Class A 3,500 111 *Knight Transportation, Inc. 13,150 276 *MSC Industrial Direct Co., Inc. -- Class A 6,400 114 *P.A.M. Transportation Services, Inc. 4,800 121 *Resources Connection, Inc. 4,800 111 SkyWest, Inc. 5,700 74 *Swift Transportation Co., Inc. 8,000 160 Teleflex, Inc. 7,600 326 *Tetra Tech, Inc. 1,664 20 ------- Total 2,117 ------- Information Technology (1.8%) *Brooks-PRI Automation, Inc. 6,180 71 *CACI International, Inc. -- Class A 1,600 57 *EPIQ Systems, Inc. 8,050 123 *Intersil Corp. -- Class A 6,400 89 *Keane, Inc. 8,900 80 *Mettler -- Toledo International, Inc. 2,300 74 Microchip Technology, Inc. 6,800 166 *Novellus Systems, Inc. 4,600 129 *QLogic Corp. 2,500 86 *Renaissance Learning, Inc. 3,100 59 *Semtech Corp. 6,400 70 *UTStarcom, Inc. 6,400 127 *Varian, Inc. 8,400 241 *Verint Systems, Inc. 800 16 *Zebra Tehnologies Corp. -- Class A 2,500 143 ------- Total 1,531 ------- Total Small Cap Common Stock 10,426 ------- Total Domestic Common Stocks & Warrants (Cost: $33,597) 30,154 -------
Foreign Common Stock (12.3%) -------------------------------------------------- Basic Materials (0.7%) *Arcelor Luxembourg 6,850 84 BASF AG Germany 2,000 76 *Billerud Sweden 4,862 53 Norske Skogindustrier ASA Norway 2,285 32 *Novozymes A/S -- B Shares Denmark 3,450 72 Rio Tinto Ltd. Australia 3,750 72 *Solvay SA Belgium 2,210 152 UPM-Kymmene OYJ Finland 3,420 111 ------ Total 652 ------
50 Asset Allocation Portfolio
Market Foreign Common Shares/ Value Stock (12.3%) Country Par (000's) ------------------------------------------------------- Consumer Cyclical (2.9%) Bayerische Motoren Werke AG Germany 2,980 $ 91 *Belluna Co., Ltd. Japan 3,070 107 Berkeley Group PLC United Kingdom 8,350 80 Beru AG Germany 2,625 116 Bridgestone Corp. Japan 9,000 111 *British Sky Broadcasting Group PLC United Kingdom 9,610 99 *Compass Group PLC United Kingdom 15,785 84 *Daily Mail and General Trust United Kingdom 4,900 46 *Denway Motors Limited Hong Kong 323,100 109 Electrolux AB -- Series B Sweden 6,550 103 *Esprit Holdings Ltd. Hong Kong 58,000 98 Folli-Follie SA Greece 4,100 70 *Fuji Heavy Industries, Ltd. Japan 11,000 44 Game Group PLC United Kingdom 61,450 36 Greek Organization of Football Prognostics Greece 8,680 91 *HMV Group PLC United Kingdom 29,800 57 *Honda Motor Co., Ltd. Japan 3,000 111 *Hyundai Motor Co., Ltd. Republic Of Korea 3,820 89 *Inditex Spain 2,200 52 Medion AG Germany 2,000 70 MFI Furniture Group PLC United Kingdom 35,800 64 *NCsoft Corp. Republic Of Korea 435 38 Nintendo Co., Ltd. Japan 700 65 *Porsche AG Germany 250 104 *PSA Peugeot Citroen France 1,050 43 Rank Group PLC United Kingdom 34,600 147 *Swatch Group AG Switzerland 890 74 Vivendi Universal SA France 4,340 70 *Volkswagen AG Germany 2,145 78 *Walmart de Mexico -- Series V Mexico 31,500 72 Wolseley PLC United Kingdom 10,250 86 ------- Total 2,505 -------
Market Foreign Common Shares/ Value Stock (12.3%) Country Par (000's) ----------------------------------------------------- Consumer Non-Cyclical (1.6%) *Altadis, S.A. Spain 3,500 $ 80 *Burberry Group PLC United Kingdom 16,250 59 Cadbury Schweppes PLC United Kingdom 5,700 36 *Cott Corp. Canada 5,300 94 *Gallaher Group PLC United Kingdom 11,175 111 *Interbrew Belgium 2,730 64 *Kao Corp. Japan 2,000 44 Kook Soon Dang Brewer Co., Ltd. South Korea 3,000 68 Luxottica Group SPA, ADR Italy 6,385 87 *Nestle SA Switzerland 525 111 *Pernod-Ricard SA France 375 36 *Puma AG Rudolf Dassler Sport Germany 550 37 Reckitt Benckiser PLC United Kingdom 5,960 116 Shiseido Co., Ltd. Japan 10,000 130 Swedish Match AB Sweden 15,500 122 Unilever PLC United Kingdom 14,900 142 *Wella AG Germany 675 41 ------- Total 1,378 ------- Energy (1.0%) *ENI SPA Italy 8,230 131 *IHC Caland NV Netherlands 2,270 120 *Precision Drilling Corp. Canada 2,080 67 Royal Dutch Petroleum Netherlands 2,000 88 Saipem SPA Italy 23,500 157 Suncor Energy, Inc. Canada 5,670 89 *Technip France 500 36 *TGS Nopec Geophysical Co. ASA Norway 6,800 53 Total Fina Elf SA France 800 114 ------- Total 855 ------- Financials (2.1%) Aegon NV Netherlands 6,825 88 *Anglo Irish Bank Co. Ireland 23,650 167 *BNP Paribas SA France 2,260 92 Cattles PLC United Kingdom 10,500 49 *Converium Holding AG Switzerland 1,085 53 *Corporacion Mapfre Spain 15,150 123 *Danske Bank Denmark 7,875 130 *Deutsche Boerse AG Germany 2,750 110 *Grupo Financiero BBVA Bancomer Mexico 75,500 57
51 Asset Allocation Portfolio
Market Foreign Common Shares/ Value Stock (12.3%) Country Par (000's) ------------------------------------------------------- Financials continued *HSBC Holdings PLC United Kingdom 6,400 $ 70 ING Groep NV Netherlands 4,200 71 *Intrum Justitia AB Sweden 5,450 25 *Irish Life & Permanent Ireland 7,810 84 Lloyds TSB Group PLC United Kingdom 11,925 86 Man Group PLC United Kingdom 8,245 118 Manulife Financial Canada 2,520 55 Muenchener Rueckversicherungs- Gesellschaft AG Germany 270 32 *OTP Bank RT Hungary 12,775 126 Royal Bank of Canada Canada 3,020 111 Royal Bank of Scotland Group PLC United Kingdom 4,400 105 Swiss Reinsurance Co. Switzerland 1,310 86 ------- Total 1,838 ------- Healthcare (0.7%) *Elekta AB -- Class B Sweden 10,725 108 *Nobel Biocare Holding AG Switzerland 850 55 *Novartis AG Switzerland 1,790 65 *Perbio Science AB Sweden 1,600 18 *Resmed Australia 2,700 83 Synthes Stratec, Inc. Switzerland 100 61 Takeda Chemical Industries Japan 2,200 92 *Taro Pharmaceutical Industries, Ltd. Israel 2,875 108 Teva Pharmaceutical Industries Ltd., ADR Israel 1,165 45 ------- Total 635 ------- Industry Goods and Services (1.2%) *Alfa Laval AB Sweden 5,900 47 *Amcor Ltd. Australia 12,025 57 Atlas Copco AB -- A Shares Sweden 4,330 84 BAE Systems PLC United Kingdom 19,885 40 Group 4 Falck A/S Denmark 2,600 55 *Grupo Ferrovial Spain 5,695 145 Huhtamaki OYJ Finland 9,540 96 *Jarvis PLC United Kingdom 6,950 31 *Meggitt PLC United Kingdom 22,700 64 *Neopost SA France 3,410 111 *Schindler Holdings Switzerland 400 78 *Serco Group PLC United Kingdom 17,500 43
Market Foreign Common Shares/ Value Stock (12.3%) Country Par (000's) ----------------------------------------------------- Industry Goods and Services continued *SGS Societe Generale de Surveillance Holding SA Switzerland 300 $ 90 Vestas Wind Systems A/S Denmark 2,570 26 Vinci SA France 1,670 94 ------ Total 1,061 ------ Technology (0.8%) ASM Pacific Technology Ltd. Hong Kong 22,000 42 *ASML Holding NV Netherlands 5,975 50 Canon, Inc. Japan 2,000 75 *INFOSYS Technologies Ltd. India 690 69 *Logitech International-Reg Switzerland 3,580 108 Nokia OYJ Finland 4,350 68 *Riverdeep Group PLC Ireland 26,250 33 Royal Philips Electronics NV Netherlands 4,050 71 Samsung Electronics Co., Ltd. South Korea 300 80 *Sap AG Germany 610 48 Taiwan Semiconductor Manufacturing Co., Ltd. Taiwan 24,600 30 *Tandberg ASA Norway 5,800 33 ------ Total 707 ------ Telecommunication Services (0.3%) *KDDI Corp. Japan 20 65 *Orange SA France 14,280 98 PT Telekomunikasi Indonesia Indonesia 120,000 52 *Vodafone Group PLC United Kingdom 47,200 86 ------ Total 301 ------ Transportation (0.6%) Brisa-Auto Estradas de Portugal SA Portugal 23,860 132 *EasyJetPLC United Kingdom 18,875 83 Exel PLC United Kingdom 7,150 79 Fraport AG Germany 2,875 51 Macquarie Infrastructure Group Australia 79,900 145 ------ Total 490 ------
52 Asset Allocation Portfolio
Market Foreign Common Stock Shares/ Value (12.3%) Country Par (000's) --------------------------------------------------- Utilities (0.4%) Centrica PLC United Kingdom 32,300 $ 89 Italgas S.P.A. Italy 6,000 82 National Grid Group PLC United Kingdom 12,580 92 *Snam Rete Gas Italy 11,850 40 *Suez Lyonnaise des Eaux SA France 2,600 45 ------- Total 348 ------- Total Foreign Common Stock (Cost: $11,638) 10,770 -------
Preferred Stock (0.2%) -------------------------------------------------------- Technology (0.2%) Cable (0.2%) CSC Holdings, Inc. -- Series M 500 47 CSC Holdings, Inc. -- Series H 1,000 94 ------ Total 141 ------ Telecommunications Wireless: Towers (0.0%) **Crown Castle International Corp. 2 0 ------ Total 0 ------ Telecommunications Wireline: CLEC (0.0%) **Intermedia Communications, Inc. 2 0 ------ Total 0 ------ Total Technology 141 ------ Trucking (0.0%) **American Commercial Lines LLC 261 2 ------ Total Trucking 2 ------ Total Preferred Stock (Cost: $136) 143 ------ Warrants (0.0%) -------------------------------------------------------- Telecommunication Services (0.0%) IWO Holdings, Inc. 144A 50 0 ------ Total Warrants (Cost: $4) 0 ------ Investment-Grade Bonds (23.4%) -------------------------------------------------------- Corporate Bonds Domestic (6.6%) -------------------------------------------------------- Beverages, Malt Beverages (0.3%) Anheuser-Busch Companies, Inc., 7.50%, 3/15/12 $ 23,000 28 Coca-Cola Enterprises, Inc., 5.25%, 5/15/07 125,000 135 Coca-Cola Enterprises, Inc., 5.375%, 8/15/06 75,000 81 ------ Total 244 ------ Capital Goods (0.1%) Raytheon Co., 7.20%, 8/15/27 75,000 82 ------ Total 82 ------
Market Shares/ Value Investment-Grade Bonds (23.4%) Par (000's) ---------------------------------------------------------- Consumer Cyclical (0.1%) Royal Caribbean Cruises Ltd., 7.00%, 10/15/07 $ 100,000 $ 89 ------- Total 89 ------- Crude Petroleum and Natural Gas (0.5%) Occidental Petroleum, 6.75%, 1/15/12 350,000 399 ------- Total 399 ------- Diversified Industrials (0.3%) United Technologies Corp., 6.10%, 5/15/12 250,000 280 ------- Total 280 ------- Drilling Oil and Gas Wells (0.4%) Transocean, Inc., 7.50%, 4/15/31 300,000 344 ------- Total 344 ------- Electric and Other Services Combined (0.3%) Wisconsin Public Service, 4.875%, 12/1/12 250,000 253 ------- Total 253 ------- Electrical Equipment and Supplies (0.6%) Cooper Industries, Inc., 5.50%, 11/1/09 200,000 208 Hubbell Inc., 6.375%, 5/15/12 300,000 331 ------- Total 539 ------- Environmental Controls (0.1%) Pall Corp., 6.00%, 8/1/12 144A 95,000 102 ------- Total 102 ------- Finance Services (0.6%) Credit Suisse First Boston USA Inc., 4.625%, 1/15/08 350,000 354 General Motors Acceptance Corp., 6.875%, 8/28/12 300,000 296 ------- Total 650 ------- Fire, Marine and Casualty Insurance (0.3%) Allstate Corp., 6.125%, 12/15/32 135,000 138 Progressive Corp., 6.25%, 12/1/32 125,000 128 ------- Total 266 ------- Food Retail (0.3%) Delhaize America Inc., 8.125%, 4/15/11 250,000 242 ------- Total 242 ------- Motor Vehicle Parts/Accessories (0.2%) TRW, Inc., 7.125%, 6/1/09 48,000 54 TRW, Inc., 7.75%, 6/1/29 72,000 85 ------- Total 139 ------- Motors and Generators (0.1%) Emerson Electric Co., 5.75%, 11/1/11 48,000 52 ------- Total 52 -------
53 Asset Allocation Portfolio
Market Shares/ Value Investment-Grade Bonds (23.4%) Par (000's) ---------------------------------------------------------- National Commercial Banks (0.3%) Bank One Corp., 5.25%, 1/30/13 $ 250,000 $ 257 ------- Total 257 ------- News Dealers and Newsstands (0.1%) News America Holdings, 7.75%, 12/1/45 100,000 98 ------- Total 98 ------- Office Machines (0.1%) Pitney Bowes Credit Corp., 5.75%, 8/15/08 100,000 111 ------- Total 111 ------- Oil and Gas Field Machinery (0.3%) National-Oilwell, Inc., 5.65%, 11/15/12 144A 250,000 253 ------- Total 253 ------- Pharmaceuticals (0.3%) Eli Lilly & Company, 7.125%, 6/1/25 210,000 248 ------- Total 248 ------- Plastics Materials and Resins (0.3%) Eastman Chemical, 7.00%, 4/15/12 260,000 293 ------- Total 293 ------- Plumbing Fixture Fittings/Trim (0.3%) Masco Corp., 4.625%, 8/15/07 125,000 130 Masco Corp., 6.50%, 8/15/32 125,000 128 ------- Total 258 ------- Retail-Retail Stores (0.4%) Limited Brands, 6.125%, 12/1/12 300,000 316 ------- Total 316 ------- Search and Navigation Equipment (0.1%) Raytheon Co., 7.00%, 11/1/28 120,000 128 ------- Total 128 ------- Telephone Communications (0.2%) Alltel Corp., 7.00%, 7/1/12 120,000 138 ------- Total 138 ------- Total Corporate Bonds Domestic 5,781 ------- Government (Domestic and Foreign) and Agency Bonds (16.8%) ---------------------------------------------------------- Federal Government and Agencies (16.8%) Government National Mortgage Association TBA, 5.50%, 12/1/25 150,000 151 Housing & Urban Development, 6.08%, 8/1/13 100,000 113 US Treasury, 2.125%, 10/31/04 550,000 556 US Treasury, 2.875%, 6/30/04 150,000 153 US Treasury, 3.00%, 1/31/04 165,000 168 US Treasury, 3.00%, 11/15/07 800,000 810 US Treasury, 3.25%, 8/15/07 189,000 194 US Treasury, 3.50%, 11/15/06 4,129,000 4,296
Market Shares/ Value Investment-Grade Bonds (23.4%) Par (000's) --------------------------------------------------------- Federal Government and Agencies continued US Treasury, 3.875%, 7/31/03 $1,325,000 $ 1,344 US Treasury, 4.375%, 5/15/07 427,000 459 US Treasury, 4.625%, 5/15/06 153,000 165 US Treasury, 5.375%, 2/15/31 215,000 234 US Treasury, 5.50%, 5/15/09 1,000,000 1,135 US Treasury, 6.125%, 8/15/07 550,000 632 US Treasury, 6.50%, 8/15/05 1,000,000 1,119 US Treasury, 6.50%, 5/15/05 2,370,000 2,630 US Treasury Inflation Index Bond, 3.375%, 1/15/07 223,129 242 US Treasury Stripped, 0.00%, 5/15/30 870,000 211 ------- Total Government (Domestic and Foreign) and Agency Bonds 14,612 ------- Total Investment-Grade Bonds (Cost: $19,607) 20,393 ------- Below Investment-Grade Bonds (9.4%) --------------------------------------------------------- Basic Materials (0.2%) Chemicals (0.1%) Lyondell Chemical Co., 11,125%, 7/15/12 50,000 49 ------- Total 49 ------- Metals and Mining (0.0%) UCAR Finance, Inc., 10.25%, 2/15/12 100,000 79 ------- Total 79 ------- Paper (0.1%) Appleton Papers, Inc., 12.50%, 12/15/08 50,000 55 ------- Total 55 ------- Total Basic Materials 183 ------- Cable and Other Pay Television Services (0.0%) Charter Communications Holdings, 10.75%, 10/1/09 25,000 11 ------- Total Cable and Other Pay Television Services 11 ------- Capital Goods (0.8%) Aerospace (0.1%) K & F Industries Inc., 9.625%, 12/15/10 144A 50,000 51 ------- Total 51 ------- Building and Construction (0.4%) Brickman Group Ltd., 11.75%, 12/15/09 144A 100,000 104 H & E Equipment/Finance, 11.125%, 6/15/12 144A 100,000 75 Integrated Electrical Services, Inc., 9.375%, 2/1/09 50,000 46 Integrated Electrical Services, Inc., Series B, 9.375%, 2/1/09 50,000 46 United Rentals, Inc., 10.375%, 4/15/08 100,000 100 ------- Total 371 -------
54 Asset Allocation Portfolio
Market Shares/ Value Below Investment-Grade Bonds (9.4%) Par (000's) ---------------------------------------------------------- Industrial Equipment (0.3%) Perkinelmer, Inc., 8.875%, 1/15/13 144A $ 50,000 $ 49 Rexnord Corp., 10.125%, 12/15/12 144A 100,000 103 Tyco International Group, 6.375%, 2/15/06 50,000 49 Tyco International Group S.A., 6.375%, 6/15/05 25,000 24 Tyco International Group SA, 6.375%, 10/15/11 25,000 23 ------- Total 248 ------- Total Capital Goods 670 ------- Chemicals and Allied Products (0.1%) Lyondell Chemical Co., 9.50%, 12/15/08 144A 75,000 70 ------- Total Chemicals and Allied Products 70 ------- Construction and Building Materials (0.0%) United Rentals, Inc., 10.75%, 4/15/08 144A 25,000 25 ------- Total Construction and Building Materials 25 ------- Consumer Cyclical (2.6%) Apparel, Textile (0.1%) Levi Strauss & Co., 11.625%, 1/15/08 75,000 73 Tommy Hilfiger USA, Inc., 6.85%, 6/1/08 50,000 47 ------- Total 120 ------- Auto Related (0.2%) Avis Group Holdings, Inc., 11.00%, 5/1/09 50,000 55 Collins & Aikman Products, Inc., 11.50%, 4/15/06 50,000 42 Trimas Corp., 9.875%, 6/15/12 144A 100,000 99 ------- Total 196 ------- Home Construction (0.2%) Beazer Homes USA, 8.875%, 4/1/08 50,000 52 K. Hovanian Enterprises, 10.50%, 10/1/07 50,000 54 Schuler Homes, 9.375%, 7/15/09 50,000 51 Tech Olympic USA, Inc., 9.00%, 7/1/10 144A 50,000 49 ------- Total 206 ------- Household Appliances (0.1%) Rent-A-Center Inc., 11.00%, 8/15/08 50,000 54 ------- Total 54 ------- Leisure Related (0.2%) Bally Total Fitness Holdings, Series D, 9.875%, 10/15/07 75,000 65 Premier Parks, Inc., 9.50%, 2/1/09 100,000 97 ------- Total 162 -------
Market Shares/ Value Below Investment-Grade Bonds (9.4%) Par (000's) --------------------------------------------------------- Lodging / Resorts (0.6%) Corrections Corporation of America, 9.875%, 5/1/09 144A $ 75,000 $ 80 Felcor Lodging LP, 9.50%, 9/15/08 100,000 101 Hilton Hotels Corp., 7.625%, 12/1/12 100,000 101 John Q. Hammons, 8.875%, 5/15/12 100,000 100 Meristar Hospitality Finance Corp., 9.00%, 1/15/08 50,000 44 Lodging / Resorts continued Meristar Hospitality Finance Corp., 9.125%, 1/15/11 50,000 44 RFS Partnership LP, 9.75%, 3/1/12 25,000 26 ------- Total 496 ------- Printing and Publishing (0.6%) American Achievement Corp., 11.625%, 1/1/07 100,000 105 DEX Media East LLC, 9.875%, 11/15/09 144A 50,000 54 Mail-Well Corp., 9.625%, 3/15/12 75,000 67 RH Donnelley Fin Corp., 10.875%, 12/15/12 144A 100,000 108 Vertis Inc., 10.875%, 6/15/09 100,000 103 Von Hoffman Corp., 10.25%, 3/15/09 100,000 94 ------- Total 531 ------- Retail -- General (0.6%) Asbury Automotive Group, Inc., 9.00%, 6/15/12 50,000 44 Autonation, Inc., 9.00%, 8/1/08 25,000 25 Buhrmann U.S., Inc., 12.25%, 11/1/09 75,000 70 CSK Auto, Inc, 12.00%, 6/15/06 50,000 54 The Gap, Inc., 8.15%, 12/15/05 100,000 105 Hollywood Entertainment Inc., 9.625%, 3/15/11 50,000 51 Saks, Inc., 8.25%, 11/15/08 50,000 50 Sonic Automotive, Inc., 11.00%, 8/1/08 50,000 51 United Auto Group, Inc. 9.625%, 3/15/12 144A 50,000 49 ------- Total 499 ------- Total Consumer Cyclical 2,264 ------- Consumer Staples (2.5%) Containers (0.3%) Applied Extrusion Tech., Inc., 10.75%, 7/1/11 25,000 16 BWAY Corp., 10.00%, 10/15/10 144A 100,000 104 Owens-Brockway Glass Container, Inc., 8.75%, 11/15/12 144A 125,000 127 ------- Total 247 ------- Food Service (0.1%) Buffets, Inc., 11.25%, 7/15/10 144A 50,000 47 Sbarro, Inc., 11.00%, 9/15/09 75,000 70 ------- Total 117 -------
55 Asset Allocation Portfolio
Market Shares/ Value Below Investment-Grade Bonds (9.4%) Par (000's) ---------------------------------------------------------- Foods (0.1%) Corn Products International, Inc., 8.25%, 7/15/07 $ 50,000 $ 51 Swift & Co., 10.125%, 10/1/09 144A 50,000 47 ------- Total 98 ------- Gaming (1.4%) Aztar Corp., 8.875%, 5/15/07 25,000 26 Choctaw Resort Development, 9.25%, 4/1/09 100,000 105 Chumash Casino & Resort, 9.00%, 7/15/10 144A 100,000 105 Herbst Gaming, Inc., 10.75% 9/1/08 100,000 105 Hollywood Casino Shreveport, 13.00%, 8/1/06 50,000 50 Jacobs Entertainment, Inc. 11.875%, 02/01/09 100,000 104 Majestic Investment Holdings, Inc., 11.653%, 11/30/07 50,000 46 The Majestic Star Casino LLC, 10.875%, 7/1/06 100,000 102 Park Place Entertainment Corporation, 9.375%, 2/15/07 25,000 27 Resort International Hotel/Casino, 11.50%, 3/15/09 75,000 68 Riviera Holdings Corp., 11.00%, 6/15/10 100,000 90 Venetian Casino Resort LLC, 11.00%, 6/15/10 144A 100,000 105 Wheeling Island Gaming, 10.125%, 12/15/09 75,000 77 Wynn Las Vegas Corp., 12.00%, 11/1/10 125,000 125 ------- Total 1,135 ------- Healthcare (0.5%) AmerisourceBergen Corp., 7.25%, 11/15/12 144A 75,000 77 HEALTHSOUTH Corp., 8.50%, 2/1/08 100,000 86 InSight Health Services Corp., 9.875%, 11/1/11 100,000 96 Pacificare Health Systems, Inc., 10.75%, 6/1/09 50,000 54 Rotech Healthcare Inc., 9.50%, 4/1/12 144A 100,000 100 Ventas Realty, 9.00%, 5/1/12 50,000 52 ------- Total 465 ------- Retail - Food (0.1%) Fleming Companies, Inc., 10.125%, 4/1/08 50,000 43 Great Atlantic & Pacific Tea Co., Inc., 7.75%, 4/15/07 100,000 72 ------- Total 115 -------
Market Shares/ Value Below Investment-Grade Bonds (9.4%) Par (000's) -------------------------------------------------------- Soaps and Toiletries (0.0%) Elizabeth Arden, Inc., 11.75%, 2/1/11 $ 25,000 $ 26 ------- Total 26 ------- Total Consumer Staples 2,203 ------- Energy (0.4%) Oil and Gas Independent (0.1%) PDVSA Finance, Ltd., 1999-I, 9.75%, 2/15/10 50,000 45 ------- Total 45 ------- Oil and Gas Integrated (0.1%) Compton Petroleum Corp., 9.90%, 5/15/09 50,000 52 ------- Total 52 ------- Oil Field Services (0.2%) BRL Universal Equipment, 8.875%, 2/15/08 50,000 52 Grant Prideco Escrow, 9.00%, 12/15/09 144A 100,000 103 Hanover Equipment Trust, 8.75%, 9/1/11 144A 100,000 97 ------- Total 252 ------- Refining (0.0%) Tesoro Petroleum Corp., 9.625%, 11/1/08 25,000 17 ------- Total 17 ------- Total Energy 366 ------- Finance (0.3%) Banks (0.1%) Western Financial Bank-FSB, 9.625%, 5/15/12 50,000 49 ------- Total 49 ------- Finance Companies (0.1%) AmeriCredit Corp., 9.875%, 4/15/06 25,000 21 Americredit Corp., 9.25%, 5/1/09 144A 50,000 39 IOS Capital, Inc., 9.75%, 6/15/04 50,000 51 Metris Companies, Inc., 10.125%, 7/15/06 50,000 28 ------- Total 139 ------- Financial Services (0.1%) Labranche & Company, Inc., 12.00%, 3/2/07 50,000 55 ------- Total 55 ------- Total Finance 243 -------
56 Asset Allocation Portfolio
Market Shares/ Value Below Investment-Grade Bonds (9.4%) Par (000's) ---------------------------------------------------------- Miscellaneous (0.3%) CB Richards Ellis Services, Inc., 11.25%, 6/15/11 $ 75,000 $ 69 Crescent Real Estate Equities, 7.50%, 9/15/07 100,000 97 Istar Financial, Inc., 8.75%, 8/15/08 50,000 53 ------- Total Miscellaneous 219 ------- Professional Services (0.1%) Kindercare Learning Centers, 9.50%, 2/15/09 90,000 87 ------- Total Professional Services 87 ------- Real Estate (0.1%) LNR Property Corp., 10.50%, 1/15/09 100,000 101 ------- Total Real Estate 101 ------- Technology (1.2%) Cable (0.3%) Charter Communications Holdings LLC, 9.625%, 11/15/09 75,000 33 Echostar DBS Corp., 10.375%, 10/1/07 100,000 107 Insight Midwest, 9.75%, 10/01/09 144A 50,000 48 Rogers Communications, Inc., 8.875%, 7/15/07 50,000 48 ++Telewest Communications PLC, 9.875%, 2/1/10 50,000 9 ------- Total 245 ------- Electronics (0.1%) Amkor Technology, Inc., 5.00%, 3/15/07 25,000 12 Sanmina-Sci Corporation, 10.375%, 1/15/10 144A 50,000 51 Solectron Corp., 9.625%, 2/15/09 50,000 49 ------- Total 112 ------- Office Equipment (0.1%) Xerox Corp., 7.15%, 8/01/04 50,000 48 ------- Total 48 ------- Telecommunications Wireless: Cellular/PCS (0.6%) Alamosa Delaware, Inc., 12.50%, 2/1/11 25,000 8 Alamosa Delaware, Inc., 13.625%, 08/15/11 37,500 12 +Alamosa PCS Holdings, Inc., 12.875%, 2/15/10 226,000 41 Dobson Communications Corp., 10.875%, 7/1/10 50,000 42 !Nextel Communications, Inc., 10.65%, 9/15/07 85,000 81 Nextel Partners, Inc., 12.50%, 11/15/09 75,000 68 Qwest Services Corp., 12/15/10, 13.50% 144A 48,000 50 Rogers Cantel, Inc., 8.30%, 10/1/07 75,000 66 Rogers Cantel, Inc., 9.75%, 6/1/16 50,000 45
Market Shares/ Value Below Investment-Grade Bonds (9.4%) Par (000's) ------------------------------------------------------- Telecommunications Wireless: Cellular/PCS continued +Triton PCS, Inc., 11.00%, 5/1/08 $ 100,000 $ 83 TSI Telecommunications Service, 12.75%, 2/1/09 100,000 89 +US Unwired, Inc., 13.375%, 11/1/09 125,000 8 ------- Total 593 ------- Telecommunications Wireless: Towers (0.1%) +Crown Castle International Corp., 10.625%, 11/15/07 50,000 45 ------- Total 45 ------- Total Technology 1,043 ------- Transport Services (0.4%) Railroads (0.1%) Railamerica Transportation Corp., 12.875%, 8/15/10 50,000 50 TFM SA DE CV, 12.50%, 6/15/12 144A 50,000 51 ------- Total 101 ------- Trucking and Shipping (0.3%) American Commercial LLC, 11.25%, 1/1/08 29,794 10 CP Ships Ltd., 10.375%, 7/15/12 50,000 53 International Shipbuilding Corp., 7.75%, 10/15/07 35,000 28 North American Van Lines, 13.375%, 12/1/09 100,000 97 Stena AB, 9.625%, 12/1/12 144A 100,000 102 ------- Total 290 ------- Total Transport Services 391 ------- Utilities (0.4%) Utility -- Electric (0.3%) Calpine Canada Energy, 8.50%, 5/1/08 25,000 11 Calpine Corp., 8.625%, 8/15/10 50,000 21 Calpine Corp., 8.75%, 7/15/07 50,000 22 Edison Mission Energy, 10.00%, 8/15/08 100,000 48 Orion Power Holdings, Inc., 12.00%, 5/1/10 100,000 72 ++PG&E National Energy Group, Inc., 10.375%, 5/16/11 50,000 19 Western Resources, 9.75%, 5/1/07 50,000 46 ------- Total 239 ------- Utility -- Garbage Disposal (0.1%) Allied Waste North America, Inc., 8.50%, 12/1/08 100,000 100 ------- Total 100 ------- Total Utilities 339 ------- Total Below Investment-Grade Bonds (Cost: $8,424) 8,215 -------
57 Asset Allocation Portfolio
Market Shares/ Value Money Market Investments (19.9%) Par (000's) ---------------------------------------------------------- Federal and Federally-Sponsored Credit (3.6%) #Federal Home Loan Mortgage Corporation, 1.10%, 1/8/03 $3,100,000 $ 3,099 ------- Total Federal and Federally-Sponsored Credit 3,099 ------- Federal Government and Agencies (16.3%) Federal Home Loan Bank, 1.24%, 3/7/03 1,000,000 998 #Federal National Mortgage Association, 1.26%, 1/27/03 8,600,000 8,593 Federal National Mortgage Association, 1.28%, 1/22/03 4,700,000 4,696 ------- Total Federal Government and Agencies 14,287 ------- Total Money Market Investments (Cost: $17,386) 17,386 ------- Total Investments (99.8%) (Cost $90,792)` 87,061 ------- Other Assets, Less Liabilities (0.2%) 199 ------- Total Net Assets (100.0%) $87,260 -------
` At 12/31/2002 the aggregate cost of securities for federal tax purposes was $91,184 and the net unrealized depreciation of investments based on that cost was $4,123 which is comprised of $2,275 aggregate gross unrealized appreciation and $6,398 aggregate gross unrealized depreciation. ADR -- American Depository Receipt 144A after the name of a security represents a security exempt from registration under rule 144a of the Securities Act of 1933. These securities may be resold as transactions exempt from registration, normally to qualified institutional buyers. * Non-Income Producing + Step bond security that presently receives no coupon payments. At the predetermined date the stated coupon rate becomes effective. ++Defaulted Security **PIK -- Payment In Kind # All or a portion of the securities have been committed 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 (000's) Contracts Date (000's) --------------------------------------------------------- S & P 500 INDEX FUTURES 40 3/03 $(247) (Total Notional Value at 12/31/02 $9,037) US TEN YEAR TREASURY NOTE 3 3/03 $(7) (Total Notional Value at 12/31/02 $339)
The Accompanying Notes are an Integral Part of the Financial Statements 58 Balanced Portfolio - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: A high level of current income and Achieve consistent returns and low volatility by diversifying $2.56 billion capital growth with a low risk profile among assets.
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. Definition of an appropriate benchmark for comparison of returns of the Balanced Portfolio is difficult because there is no index that includes both equity and debt securities. Accordingly, comparisons are provided with three different indices: the S&P 500 Index for stocks, Merrill Lynch Domestic Master Index for bonds, and 91-day Treasury bills for short-term investments. As expected, the Portfolio's performance over the last year was between these measures, with a total return of -7.5%, better than the return of -22.1% from the S&P 500 Index, but less than the return of the Merrill Lynch Domestic Master Index, which had a return of 10.4%, or Treasury bills, which had a return of 1.8%. The target asset mix for the Balanced Portfolio is established and adjusted with input from an asset valuation model designed to gauge the relative attractiveness of stocks versus bonds. Changes are at the margin, so that there are always core positions in both stocks and bonds. The extreme volatility of the equity market over the last year has created many opportunities to sell on strength and buy on weakness. At the beginning of January 2002, the Portfolio was invested 54% in stocks, 42% in bonds, and 4% in cash equivalents. The equity position was increased in February, following a January market drop, then reduced in March after a rally. Modest additions were made to the equity position after a market drop in April, and stock exposure was further increased on the pronounced weakness near the end of June. A brief rally in August created an opportunity to reduce the equity position, which was then increased again on weakness in September and into early October. This decision proved sound, as the equity market continued to strengthen through much of the fourth quarter. Equity exposure was reduced in November on a market rebound and then increased in late December when the market weakened, to 54% of assets at year end. Performance was boosted by excellent results from the bond portion of the Portfolio, which is managed actively, using a strategy very similar to that of the Select Bond Portfolio. Bonds as a whole have provided higher returns than stocks over the last year, and the Portfolio benefited from an emphasis on high quality securities and an overweighted position in low-risk government bonds and mortgage-backed securities. [CHART] Sector Allocation 12/31/02 Equities (including index futures) 54% Government and Agency Bonds 28% Corporate Bonds 12% Mortgage-Backed and Asset-Backed Securities 5% Short-Term Investments 1% [CHART] Relative Performance
Balanced Merrill Lynch Domestic Merrill Lynch 91 Day Portfolio Master Index T-Bill Index S&P 500 Index 12/31/1992 10,000 10,000 10,000 10,000 12/31/1993 10,991 11,002 10,319 11,010 12/31/1994 11,008 10,692 10,751 11,142 12/31/1995 13,913 12,672 11,400 15,309 12/31/1996 15,785 13,127 12,004 18,800 12/31/1997 19,182 14,395 12,644 25,060 12/31/1998 22,803 15,671 13,305 32,202 12/31/1999 25,357 15,521 13,951 38,984 12/31/2000 25,314 17,342 14,813 35,468 12/31/2001 24,516 18,786 15,468 31,251 12/31/2002 22,668 20,742 15,743 24,344
Average Annual Total Return For Period Ended December 31, 2002 1 Year 5 Years 10 Years Balanced Portfolio -7.54% 3.40% 8.53% Merrill Lynch Domestic Master Index 10.41% 7.58% 7.57% Merrill Lynch 91 Day T-Bill Index 1.78% 4.48% 4.64% S&P 500 Index -22.10% -0.58% 9.30% 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 indices cannot be invested in directly and do not include sales charges. 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. The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The index is heavily weighted toward stocks with large market capitalizations and represents approximately two-thirds of the total market value of all domestic common stocks. This chart assumes an initial investment of $10,000 made on 12/31/92. 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 4 reflect mortality and expense risk charges and other 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. 59 Balanced Portfolio Northwestern Mutual Series Fund, Inc. Schedule of Investments December 31, 2002
Market Shares/ Value Corporate Bonds (11.6%) Par (000's) --------------------------------------------------------- Aerospace -- Defense (0.7%) Lockheed Martin Corp., 8.20%, 12/1/09 $ 7,450,000 $ 9,207 Raytheon Co., 7.20%, 8/15/27 8,705,000 9,515 ---------- Total 18,722 ---------- Auto Related (0.4%) Toyota Motor Credit Corp., 5.65%, 1/15/07 9,750,000 10,594 ---------- Total 10,594 ---------- Beverages, Malt Beverages (1.3%) Anheuser-Busch Companies, Inc., 7.00%, 12/1/25 4,800,000 5,154 Anheuser-Busch Companies, Inc., 7.50%, 3/15/12 910,000 1,121 Coca-Cola Enterprises, Inc., 5.25%, 5/15/07 8,975,000 9,649 Coca-Cola Enterprises, Inc., 5.375%, 8/15/06 4,175,000 4,525 Coca-Cola Enterprises, Inc., 5.75%, 3/15/11 10,000,000 10,971 ---------- Total 31,420 ---------- Broad Woven Fabric Mills, Manmade (0.0%) ++Polysindo International Finance, 11.375%, 6/15/06 6,500,000 455 ---------- Total 455 ---------- Commercial Banks (0.4%) ++Banco Montevideo, 8.40%, 4/30/08 144A 6,250,000 1,125 Bank of America Corp., 7.40%, 1/15/11 2,668,000 3,143 Wells Fargo Bank, 6.45%, 2/1/11 4,850,000 5,444 ---------- Total 9,712 ---------- Crude Petroleum and Natural Gas (0.7%) Occidental Petroleum, 6.75%, 1/15/12 11,017,000 12,549 Occidental Petroleum, 8.45%, 2/15/29 4,751,000 6,095 ---------- Total 18,644 ---------- Diversified Industrials (0.3%) United Technologies Corp., 6.10%, 5/15/12 7,840,000 8,766 ---------- Total 8,766 ---------- Drilling Oil and Gas Wells (0.3%) Transocean, Inc., 7.50%, 4/15/31 5,844,000 6,704 ---------- Total 6,704 ----------
Market Shares/ Value Corporate Bonds (11.6%) Par (000's) --------------------------------------------------------- Electric and Other Services Combined (0.1%) Wisconsin Public Service, 4.875%, 12/1/12 $ 3,250,000 $ 3,292 ---------- Total 3,292 ---------- Electric Services (1.2%) Atlantic City Electric, 6.625%, 8/1/13 4,000,000 4,395 Exelon Generation Co. LLC, 6.95%, 6/15/11 11,787,000 12,743 Public Service Electric & Gas Co., 6.875%, 1/1/03 9,000,000 9,000 South Carolina Electric & Gas, 6.125%, 3/1/09 3,000,000 3,341 ---------- Total 29,479 ---------- Electrical Equipment and Supplies (0.2%) Cooper Industries, Inc., 5.50%, 11/1/09 5,100,000 5,315 ---------- Total 5,315 ---------- Enviromental Controls (0.1%) Pall Corp., 6.00%, 8/1/12 144A 2,500,000 2,673 ---------- Total 2,673 ---------- Finance Services (0.8%) Credit Suisse First Boston USA, Inc., 4.625%, 1/15/08 8,050,000 8,160 General Motors Acceptance Corp., 6.875%, 8/28/12 11,900,000 11,730 ---------- Total 19,890 ---------- Fire, Marine and Casualty Insurance (0.4%) Allstate Corp., 6.125%, 12/15/32 2,520,000 2,567 Progressive Corp., 6.25%, 12/1/32 8,475,000 8,695 ---------- Total 11,262 ---------- Food Retailers (0.3%) Delhaize America Inc., 8.125%, 4/15/11 8,000,000 7,740 ---------- Total 7,740 ---------- Foreign Government Bonds (0.3%) Province of Quebec, 6.50%, 1/17/06 7,500,000 8,312 ---------- Total 8,312 ---------- Grocery Stores (0.2%) The Kroger Co., 7.50%, 4/1/31 5,000,000 5,593 ---------- Total 5,593 ---------- Metal Mining (0.1%) Rio Tinto Finance, Ltd., 5.75%, 7/3/06 2,500,000 2,731 ---------- Total 2,731 ----------
60 Balanced Portfolio
Market Shares/ Value Corporate Bonds (11.6%) Par (000's) -------------------------------------------------------- Motor Vehicle Parts Accessories (0.4%) TRW, Inc., 7.125%, 6/1/09 $ 3,047,000 $ 3,407 TRW, Inc., 7.75%, 6/1/29 6,591,000 7,774 ---------- Total 11,181 ---------- Motors and Generators (0.1%) Emerson Electric Co., 5.75%, 11/1/11 1,918,000 2,060 ---------- Total 2,060 ---------- National Commercial Banks (0.2%) Bank One Corp., 5.25%, 1/30/13 5,000,000 5,147 ---------- Total 5,147 ---------- News Dealers and Newsstands (0.1%) News America Holdings, 7.75%, 12/1/45 3,050,000 2,997 ---------- Total 2,997 ---------- Office Machines (0.2%) Pitney Bowes Credit Corp., 5.75%, 8/15/08 5,000,000 5,534 ---------- Total 5,534 ---------- Oil and Gas Extraction (0.2%) Chevron Corp., 6.625%, 10/1/04 4,750,000 5,113 ---------- Total 5,113 ---------- Oil and Gas Field Machinery (0.2%) National-Oilwell, Inc., 5.65%, 11/15/12 144A 4,750,000 4,803 ---------- Total 4,803 ---------- Pharmaceuticals (1.3%) Eli Lilly & Co., 5.50%, 7/15/06 4,800,000 5,184 Eli Lilly & Co., 7.125%, 6/1/25 5,180,000 6,114 Johnson & Johnson, 6.625%, 9/1/09 2,800,000 3,264 Merck & Co., Inc., 5.95%, 12/1/28 3,774,000 3,991 Pfizer, Inc., 5.625%, 2/1/06 11,300,000 12,338 ---------- Total 30,891 ---------- Plastics Materials and Resins (0.3%) Eastman Chemical, 7.00%, 4/15/12 6,580,000 7,427 ---------- Total 7,427 ---------- Plumbing Fixture Fittings/Trim (0.1%) Masco Corp., 4.625%, 8/15/07 750,000 774 Masco Corp., 6.50%, 8/15/32 1,250,000 1,285 ---------- Total 2,059 ---------- Retail -- Retail Stores (0.3%) Limited Brands, 6.125%, 12/1/12 6,900,000 7,263 ---------- Total 7,263 ---------- Search and Navigation Equipment (0.1%) Raytheon Co., 6.75%, 3/15/18 1,648,000 1,727 ---------- Total 1,727 ----------
Market Shares/ Value Corporate Bonds (11.6%) Par (000's) ---------------------------------------------------------- Telephone Communications (0.3%) Alltel Corp., 7.00%, 7/1/12 $ 2,160,000 $ 2,489 Alltel Corp., 7.875%, 7/1/32 4,875,000 5,982 ---------- Total 8,471 ---------- Total Corporate Bonds (Cost: $284,627) 295,977 ---------- Government (Domestic and Foreign) and Agency Bonds (28.3%) ---------------------------------------------------------- Federal Government and Agencies (28.3%) Aid-Israel, 0.00%, 11/15/22 11,600,000 3,767 Aid-Israel, 0.00%, 11/15/23 11,500,000 3,508 Federal Home Loan Bank, 5.54%, 1/8/09 5,000,000 5,556 Federal Home Loan Mortgage Corporation, 6.50%, 4/1/11 5,413,505 5,748 Federal Home Loan Mortgage Corporation, 7.00%, 3/15/07 2,170,929 2,241 Federal Home Loan Mortgage Corporation, 7.50%, 10/1/27 3,890,402 4,159 Federal National Mortgage Association, 5.97%, 10/1/08 1,662,760 1,825 Federal National Mortgage Association, 6.24%, 2/1/06 4,639,725 5,021 Federal National Mortgage Association, 6.265%, 10/1/08 5,458,292 6,072 Federal National Mortgage Association, 6.315%, 3/1/06 4,903,013 5,324 Federal National Mortgage Association, 6.34%, 2/1/08 3,925,255 4,361 Federal National Mortgage Association, 6.43%, 6/1/08 6,920,635 7,730 Federal National Mortgage Association, 6.75%, 11/1/07 2,953,722 3,327 Federal National Mortgage Association, 6.75%, 4/25/18 4,661,753 4,976 Federal National Mortgage Association, 6.75%, 12/25/23 6,500,000 6,781 Federal National Mortgage Association, 6.835%, 7/1/03 1,960,881 1,965 Federal National Mortgage Association, 6.895%, 5/1/06 5,758,273 6,356 Federal National Mortgage Association, 6.90%, 4/1/06 2,322,728 2,560 Federal National Mortgage Association, 7.00%, 6/1/03 551,124 560 Federal National Mortgage Association, 7.00%, 6/25/10 1,080,100 1,078 Federal National Mortgage Association, 7.00%, 4/1/26 4,963,174 5,250 Federal National Mortgage Association, 7.025%, 9/1/05 1,845,033 2,009 Federal National Mortgage Association, 7.25%, 5/1/04 1,501,550 1,569 Federal National Mortgage Association, 8.40%, 2/25/09 966,350 966
61 Balanced Portfolio
Government (Domestic and Market Foreign) and Agency Bonds Shares/ Value (28.3%) Par (000's) ----------------------------------------------------- Federal Government and Agencies continued Federal National Mortgage Association, 11.00%, 12/1/12 $ 34,223 $ 40 Federal National Mortgage Association, 11.00%, 9/1/17 237,506 281 Federal National Mortgage Association, 11.00%, 12/1/17 25,249 30 Federal National Mortgage Association, 11.00%, 2/1/18 112,807 134 Federal National Mortgage Association, 11.50%, 4/1/18 173,177 208 Federal National Mortgage Association, 12.00%, 9/1/12 342,847 409 Federal National Mortgage Association, 12.00%, 12/1/12 80,253 96 Federal National Mortgage Association, 12.00%, 9/1/17 100,643 122 Federal National Mortgage Association, 12.00%, 10/1/17 73,964 90 Federal National Mortgage Association, 12.00%, 12/1/17 84,571 103 Federal National Mortgage Association, 12.00%, 2/1/18 122,197 148 Federal National Mortgage Association, 12.50%, 4/1/18 71,826 88 Federal National Mortgage Association, 13.00%, 11/1/12 60,792 74 Federal National Mortgage Association, 13.00%, 11/1/17 62,609 77 Federal National Mortgage Association, 13.00%, 12/1/17 65,732 81 Federal National Mortgage Association, 13.00%, 2/1/18 140,725 174 Federal National Mortgage Association, 14.00%, 12/1/17 32,641 41 Government National Mortgage Association, 5.50%, 1/15/32 967,638 995 Government National Mortgage Association, 5.50%, 2/15/32 7,024,162 7,220 Government National Mortgage Association, 5.50%, 9/15/32 243,855 251 Government National Mortgage Association, 7.00%, 5/15/23 3,606,366 3,850 Government National Mortgage Association, 7.00%, 6/15/23 340,038 363 Government National Mortgage Association, 7.00%, 7/15/23 422,002 451 Government National Mortgage Association, 7.00%, 8/15/23 6,562 7 Government National Mortgage Association, 7.00%, 9/15/23 161,956 173 Government National Mortgage Association, 7.00%, 10/15/23 148,758 159 Government National Mortgage Association, 7.00%, 11/15/23 736,475 786 Government National Mortgage Association, 7.00%, 12/15/27 174,249 185
Government (Domestic and Market Foreign) and Agency Bonds Shares/ Value (28.3%) Par (000's) ----------------------------------------------------- Federal Government and Agencies continued Government National Mortgage Association, 7.00%, 1/15/28 $ 221,293 $ 235 Government National Mortgage Association, 7.00%, 2/15/28 49,997 53 Government National Mortgage Association, 7.00%, 3/15/28 53,450 57 Government National Mortgage Association, 7.00%, 4/15/28 331,515 352 Government National Mortgage Association, 7.00%, 5/15/28 472,319 502 Government National Mortgage Association, 7.00%, 6/15/28 1,347,094 1,429 Government National Mortgage Association, 7.00%, 7/15/28 1,928,235 2,048 Government National Mortgage Association, 7.50%, 1/15/23 263,626 284 Government National Mortgage Association, 7.50%, 6/15/23 142,271 153 Government National Mortgage Association, 7.50%, 6/15/24 2,872 3 Government National Mortgage Association, 7.50%, 7/15/24 117,817 126 Government National Mortgage Association, 7.50%, 8/15/25 5,109 5 Government National Mortgage Association, 7.50%, 9/15/25 67,300 72 Government National Mortgage Association, 7.50%, 11/15/25 2,203 2 Government National Mortgage Association, 7.50%, 12/15/25 153,010 164 Government National Mortgage Association, 7.50%, 1/15/26 5,369 6 Government National Mortgage Association, 7.50%, 3/15/26 218,553 234 Government National Mortgage Association, 7.50%, 6/15/26 230,598 247 Government National Mortgage Association, 7.50%, 9/15/26 4,294 5 Government National Mortgage Association, 7.50%, 10/15/26 26,720 29 Government National Mortgage Association, 7.50%, 12/15/26 309,303 331 Government National Mortgage Association, 7.50%, 1/15/27 10,199 11 Government National Mortgage Association, 7.50%, 2/15/27 144,645 155 Government National Mortgage Association, 7.50%, 3/15/27 13,027 14 Government National Mortgage Association, 7.50%, 4/15/27 508,878 544 Government National Mortgage Association, 7.50%, 5/15/27 179,000 191 Government National Mortgage Association, 7.50%, 7/15/27 141,036 151 Government National Mortgage Association, 7.50%, 12/15/27 29,900 32
62 Balanced Portfolio
Government (Domestic and Market Foreign) and Agency Bonds Shares/ Value (28.3%) Par (000's) ----------------------------------------------------- Federal Government and Agencies continued Government National Mortgage Association, 7.50%, 7/15/28 $ 75,557 $ 81 Government National Mortgage Association, 8.00%, 7/15/27 66,022 72 Government National Mortgage Association, 8.00%, 9/15/24 138,964 152 Government National Mortgage Association, 8.00%, 5/15/26 173,666 189 Government National Mortgage Association, 8.00%, 6/15/26 154,061 168 Government National Mortgage Association, 8.00%, 7/15/26 222,983 242 Government National Mortgage Association, 8.00%, 8/15/26 77,780 85 Government National Mortgage Association, 8.00%, 9/15/26 137,943 150 Government National Mortgage Association, 8.00%, 10/15/26 281,786 307 Government National Mortgage Association, 8.00%, 11/15/26 68,403 75 Government National Mortgage Association, 8.00%, 12/15/26 104,945 114 Government National Mortgage Association, 8.00%, 4/15/27 279,025 304 Government National Mortgage Association, 8.00%, 6/15/27 59,413 65 Government National Mortgage Association, 8.00%, 7/20/28 627,889 676 Government National Mortgage Association, 8.50%, 5/15/22 1,389 2 Government National Mortgage Association, 8.50%, 9/15/22 1,954 2 Government National Mortgage Association, 8.50%, 10/15/22 8,843 9 Government National Mortgage Association, 8.50%, 12/15/22 6,106 7 Government National Mortgage Association, 8.50%, 6/15/24 3,745 4 Government National Mortgage Association, 8.50%, 7/15/24 8,304 9 Government National Mortgage Association, 8.50%, 8/15/24 23,075 25 Government National Mortgage Association, 8.50%, 12/15/24 2,023 2 Government National Mortgage Association, 8.50%, 1/15/25 39,287 43 Government National Mortgage Association, 8.50%, 2/15/25 8,448 9 Government National Mortgage Association, 8.50%, 11/15/25 3,142 3 Government National Mortgage Association, 8.50%, 1/15/26 17,395 19 Government National Mortgage Association, 8.50%, 2/15/26 1,919 2 Government National Mortgage Association, 8.50%, 3/15/26 7,302 8
Government (Domestic and Market Foreign) and Agency Bonds Shares/ Value (28.3%) Par (000's) --------------------------------------------------------- Federal Government and Agencies continued Government National Mortgage Association, 8.50%, 4/15/26 $ 34,281 $ 37 Government National Mortgage Association, 8.50%, 5/15/26 4,061 4 Government National Mortgage Association, 11.00%, 1/15/18 2,795,351 3,242 Government National Mortgage Association TBA, 5.50%, 1/1/25 15,000,000 15,384 Government National Mortgage Association TBA, 5.50%, 12/1/25 15,900,000 15,997 Government National Mortgage Association TBA, 5.50%, 2/15/32 61,000,000 62,316 Housing & Urban Development, 6.17%, 8/1/14 14,981,000 16,927 Rural Housing Trust 1987-1, Series 1, Class D, 6.33%, 4/1/26 2,096,977 2,165 US Treasury, 2.125%, 10/31/04 1,025,000 1,036 US Treasury, 3.00%, 1/31/04 14,795,000 15,070 US Treasury, 3.25%, 12/31/03 51,900,000 52,938 US Treasury, 3.25%, 8/15/07 1,465,000 1,501 US Treasury, 3.50%, 11/15/06 11,250,000 11,707 US Treasury, 3.625%, 3/31/04 58,520,000 60,202 US Treasury, 3.875%, 6/30/03 18,827,000 19,075 US Treasury, 4.375%, 5/15/07 6,688,000 7,182 US Treasury, 4.625%, 2/28/03 13,022,000 13,091 US Treasury, 4.75%, 11/15/08 16,257,000 17,746 US Treasury, 5.25%, 5/15/04 25,875,000 27,255 US Treasury, 6.25%, 5/15/30 9,965,000 11,925 US Treasury Inflation Index Bond, 3.375%, 1/15/07 17,842,290 19,323 US Treasury Inflation Index Bond, 3.625%, 1/15/08 26,168,771 28,712 US Treasury Inflation Index Bond, 3.625%, 4/15/28 7,285,655 8,525 US Treasury Inflation Index Bond, 3.875%, 4/15/29 85,612,513 104,689 US Treasury Inflation Index Bond, 4.25%, 1/15/10 73,272,720 83,566 Vendee Mortgage Trust, Series 1998-3, Class E, 6.50%, 3/15/29 4,500,000 4,732 ---------- Total Government (Domestic and Foreign) and Agency Bonds (Cost: $668,798) 723,951 ---------- Mortgage/Asset Backed Securities (5.4%) --------------------------------------------------------- Auto Related (0.0%) Fleetwood Credit Corporation Grantor Trust, Series 1997-B, Class A, 6.40%, 5/15/13 603,600 624 ---------- Total 624 ----------
63 Balanced Portfolio
Market Mortgage/Asset Backed Shares/ Value Securities (5.4%) Par (000's) --------------------------------------------------------- Boat Dealers (0.0%) Nationscredit Grantor Trust, Series 1997-2, Class A1, 6.35%, 4/15/14 $ 456,758 $ 463 ---------- Total 463 ---------- Commercial Banks (0.1%) Nationsbank Lease Pass-Through Trust, Series 1997-A, Class 1, 7.442%, 1/10/11 144A 1,641,406 1,834 ---------- Total 1,834 ---------- Commercial Mortgages (4.0%) Asset Securitization Corp., Series 1996-MD6, Class CS1, 1.632%, 11/13/26 IO 5,177,199 31 Asset Securitization Corp., Series 1996-MD6, Class CS2, 1.098%, 11/13/26 IO 79,473,178 880 Asset Securitization Corp., Series 1997-D5, Class PS1, 1.616%, 2/14/41 IO 20,898,243 1,405 Chase Commercial Mortgage Securities Corp., Series 1997-2, Class A2, 6.60%, 11/19/07 8,500,000 9,484 Chase Commercial Mortgage Securities Corp., Series 1997-2, Class B, 6.60%, 11/19/07 2,500,000 2,797 Commercial Mortgage Acceptance Corp., Series 1997- ML1, Class B, 6.644%, 12/15/07 2,500,000 2,764 Credit Suisse First Boston Mortgage Securities Corp., Series 1997-C1, Class A2, 7.26%, 6/20/07 144A 2,883,950 3,212 Credit Suisse First Boston Mortgage Securities Corp., Series 1997-C1, Class B, 7.28%, 6/20/07 144A 3,250,000 3,689 Criimi Mae Commercial Mortgage Trust, Series 1998-C1, Class A1, 7.00%, 11/2/06 144A 6,500,000 7,029 Criimi Mae Commercial Mortgage Trust, Series 1998-C1, Class B, 7.00%, 11/2/11 144A 5,700,000 5,661 DLJ Commercial Mortgage Corp., Series 1998-CF1, Class S, 0.70%, 1/15/18 IO 237,037,014 7,311 DLJ Mortgage Acceptance Corp., Series 1997-CF2, Class S, 0.35%, 10/15/17 IO 144A 16,704,771 314 Midland Realty Acceptance Corp., Series 1996-C2, Class AEC, 1.35%, 1/25/29 IO 144A 20,874,068 920 Morgan Stanley Capital, Series 1998-WF2, Class A2, 6.54%, 5/15/08 15,000,000 16,939
Market Mortgage/Asset Backed Shares/ Value Securities (5.4%) Par (000's) --------------------------------------------------------- Commercial Mortgages continued Mortgage Capital Funding, Inc., Series 1997-MC1, Class A3, 7.28%, 3/20/07 $19,000,000 $ 21,595 Nomura Asset Securities Corporation, Series 1998-D6, Class A2, 6.99%, 3/17/28 15,000,000 17,309 RMF Commercial Mortgage Pass- Through, Series 1997-1, Class F, 7.47%, 1/15/19 144A 1,800,000 920 ---------- Total 102,260 ---------- Credit Card Asset Backed (0.6%) Citibank Credit Card Master Trust I, Series 1997-6, Class A, 0.00%, 8/15/06 17,000,000 16,534 Heilig-Meyers Master Trust, Series 1998-1A, Class A, 6.125%, 1/20/07 144A 2,771,293 14 ---------- Total 16,548 ---------- Franchise Loan Receivables (0.1%) Enterprise Mortgage Acceptance Co., Series 1998-1, Class IO, 1.37%, 1/15/23 IO 144A 32,707,836 1,063 Global Franchise Trust, Series 1998-1, Class A1, 6.35%, 4/10/04 144A 448,873 440 ---------- Total 1,503 ---------- Home Equity Loan (0.1%) Vanderbilt Mortgage Finance, Inc., Series 1997-B, Class 1A4, 7.19%, 2/7/14 2,096,751 2,164 ---------- Total 2,164 ---------- Residential Mortgages (0.0%) Blackrock Capital Finance LP, Series 1997-R1, Class B3, 7.75%, 3/25/37 144A 2,807,513 182 Blackrock Capital Finance LP, Series 1997-R3, Class B3, 7.25%, 11/25/28 144A 5,287,262 529 ---------- Total 711 ---------- Retail -- Retail Stores (0.5%) LB Mortgage Trust, Series 1991-2, Class A3, 8.40%, 1/20/17 10,776,324 12,608 ---------- Total 12,608 ---------- Total Mortgage/Asset Backed Securities (Cost: $138,452) 138,715 ---------- Common Stock (40.1%) --------------------------------------------------------- Consumer Discretionary (5.4%) * American Greetings Corp. -- Class A 8,300 131 * AOL Time Warner, Inc. 564,400 7,394 * AutoZone, Inc. 12,475 881
64 Balanced Portfolio
Market Shares/ Value Common Stock (40.1%) Par (000's) ------------------------------------------------------- Consumer Discretionary continued * Bed Bath & Beyond, Inc. 36,900 $ 1,274 * Best Buy Co., Inc. 40,600 980 * Big Lots, Inc. 14,600 193 The Black & Decker Corp. 10,200 437 Brunswick Corp. 11,400 226 Carnival Corp. 74,173 1,851 Centex Corp. 7,800 392 Circuit City Stores, Inc. 26,500 197 *Clear Channel Communications, Inc. 77,450 2,888 *Comcast Corp. -- Class A 289,837 6,831 Cooper Tire & Rubber Co. 9,300 143 *Costco Wholesale Corp. 57,552 1,615 Dana Corp. 18,815 221 Darden Restaurants, Inc. 21,649 443 Delphi Automotive Systems Corp. 70,769 570 Dillard's, Inc. -- Class A 10,636 169 Dollar General Corp. 42,165 504 Dow Jones & Company, Inc. 10,680 462 Eastman Kodak Co. 36,917 1,294 *eBay, Inc. 38,600 2,618 Family Dollar Stores, Inc. 21,900 683 *Federated Department Stores, Inc. 25,512 734 Ford Motor Co. 230,507 2,144 Fortune Brands, Inc. 18,933 881 Gannett Co., Inc. 33,750 2,423 The Gap, Inc. 110,025 1,708 General Motors Corp. 70,825 2,611 Genuine Parts Co. 22,075 680 The Goodyear Tire & Rubber Co. 22,200 151 Harley-Davidson, Inc. 38,275 1,768 *Harrah's Entertainment, Inc. 14,150 560 Hasbro, Inc. 21,875 253 Hilton Hotels Corp. 47,550 604 The Home Depot, Inc. 297,897 7,138 *International Game Technology 11,000 835 The Interpublic Group of Companies, Inc. 48,500 683 J. C. Penney Company, Inc. 33,825 778 Johnson Controls, Inc. 11,200 898 *Jones Apparel Group, Inc. 16,300 578 KB Home 6,300 270 Knight-Ridder, Inc. 10,550 667 *Kohl's Corp. 42,533 2,380 Leggett & Platt, Inc. 24,767 556 The Limited, Inc. 65,913 918 Liz Claiborne, Inc. 13,500 400 Lowe's Companies, Inc. 98,450 3,692 Marriott International, Inc. -- Class A 30,600 1,006 Mattel, Inc. 55,260 1,058 The May Department Stores Co. 36,400 836 Maytag Corp. 9,867 281 McDonald's Corp. 161,271 2,593
Market Shares/ Value Common Stock (40.1%) Par (000's) ------------------------------------------------------- Consumer Discretionary continued The McGraw-Hill Companies, Inc. 24,540 $ 1,483 Meredith Corp. 6,300 259 The New York Times Co. -- Class A 19,192 878 Newell Rubbermaid, Inc. 33,811 1,025 NIKE, Inc. -- Class B 33,700 1,499 Nordstrom, Inc. 17,033 323 * Office Depot, Inc. 39,143 578 Omnicom Group, Inc. 23,800 1,537 Pulte Corp. 7,700 369 RadioShack Corp. 21,667 406 *Reebok International, Ltd. 7,600 223 Sears, Roebuck & Co. 39,950 957 The Sherwin-Williams Co. 19,060 538 Snap-On Inc. 7,417 208 The Stanley Works 10,850 375 *Staples, Inc. 59,150 1,082 *Starbucks Corp. 49,150 1,002 Starwood Hotels & Resorts Worldwide, Inc. 25,200 598 Target Corp. 114,743 3,442 Tiffany & Co. 18,433 441 The TJX Companies, Inc. 68,300 1,333 *TMP Worldwide, Inc. 14,133 160 *Toys "R" Us, Inc. 26,850 269 Tribune Co. 38,231 1,738 Tupperware Corp. 7,400 112 *Univision Communications, Inc. -- Class A 29,000 711 V. F. Corp. 13,843 499 *Viacom, Inc. -- Class B 223,161 9,096 Visteon Corp. 16,512 115 Wal-Mart Stores, Inc. 562,433 28,407 The Walt Disney Co. 258,033 4,209 Wendy's International, Inc. 14,650 397 Whirlpool Corp. 8,650 452 *Yum! Brands, Inc. 37,580 910 ---------- Total 138,112 ---------- Consumer Staples (3.8%) Adolph Coors Co. -- Class B 4,600 282 Alberto-Culver Co. -- Class B 7,300 368 Albertson's, Inc. 51,495 1,146 Anheuser-Busch Companies, Inc. 109,819 5,315 Archer-Daniels-Midland Co. 82,375 1,021 Avon Products, Inc. 29,875 1,609 Brown-Forman Corp. -- Class B 8,600 562 Campbell Soup Co. 51,854 1,217 The Clorox Co. 29,150 1,202 The Coca-Cola Co. 313,900 13,755 Coca-Cola Enterprises, Inc. 56,700 1,232 Colgate-Palmolive Co. 68,654 3,600 ConAgra Foods, Inc. 67,933 1,699 CVS Corp. 49,633 1,239 *Del Monte Foods Co. 19,821 153
65 Balanced Portfolio
Market Shares/ Value Common Stock (40.1%) Par (000's) ------------------------------------------------------- Consumer Staples continued General Mills, Inc. 46,533 $ 2,185 The Gillette Co. 133,765 4,061 H.J. Heinz Co. 44,383 1,459 Hershey Foods Corp. 17,250 1,163 Kellogg Co. 51,843 1,777 Kimberly-Clark Corp. 65,397 3,104 *The Kroger Co. 99,773 1,541 The Pepsi Bottling Group, Inc. 36,000 925 PepsiCo, Inc. 224,100 9,462 Philip Morris Companies, Inc. 267,304 10,834 The Procter & Gamble Co. 164,373 14,126 R.J. Reynolds Tobacco Holdings, Inc. 11,300 476 *Safeway, Inc. 55,800 1,303 Sara Lee Corp. 99,184 2,233 SUPERVALU, Inc. 16,950 280 SYSCO Corp. 83,850 2,498 UST, Inc. 21,433 717 Walgreen Co. 129,554 3,782 Winn-Dixie Stores, Inc. 17,750 271 Wm. Wrigley Jr. Co. 28,533 1,566 ---------- Total 98,163 ---------- Energy (2.4%) Amerada Hess Corp. 11,300 622 Anadarko Petroleum Corp. 31,377 1,503 Apache Corp. 18,200 1,037 Ashland, Inc. 8,700 248 Baker Hughes, Inc. 42,640 1,373 *BJ Services Co. 19,800 640 Burlington Resources, Inc. 25,486 1,087 ChevronTexaco Corp. 135,084 8,980 ConocoPhillips 85,603 4,142 Devon Energy Corp. 19,800 909 EOG Resources, Inc. 14,640 584 Exxon Mobil Corp. 854,471 29,855 Halliburton Co. 55,185 1,033 Kerr-McGee Corp. 12,657 561 Marathon Oil Corp. 39,191 834 *Nabors Industries, Ltd. 18,250 644 *Noble Corp. 16,950 596 Occidental Petroleum Corp. 47,580 1,354 *Rowan Companies, Inc. 11,850 269 Schlumberger Ltd. 73,033 3,074 Sunoco, Inc. 9,650 320 *Transocean Sedco Forex, Inc. 40,354 936 Unocal Corp. 32,633 998 ---------- Total 61,599 ---------- Financials (8.2%) ACE Ltd. 33,200 974 AFLAC Inc. 65,450 1,971 The Allstate Corp. 89,269 3,302 Ambac Financial Group, Inc. 13,400 754 American Express Co. 168,000 5,939 American International Group, Inc. 330,090 19,095
Market Shares/ Value Common Stock (40.1%) Par (000's) ------------------------------------------------------- Financials continued AmSouth Bancorporation 45,345 $ 871 Aon Corp. 38,575 729 Bank of America Corp. 190,020 13,220 The Bank of New York Company, Inc. 91,820 2,200 Bank One Corp. 148,345 5,422 BB&T Corp. 61,100 2,260 The Bear Stearns Companies, Inc. 12,445 739 Capital One Financial Corp. 28,000 832 The Charles Schwab Corp. 172,586 1,873 Charter One Financial, Inc. 29,071 835 The Chubb Corp. 21,750 1,135 Cincinnati Financial Corp. 20,480 769 Citigroup, Inc. 639,974 22,520 Comerica, Inc. 22,100 956 Countrywide Credit Industries, Inc. 15,900 821 Equity Office Properties Trust 53,000 1,324 Equity Residential Properties Trust 34,800 855 Fannie Mae 125,829 8,095 Fifth Third Bancorp 73,343 4,294 First Tennessee National Corp. 16,000 575 FleetBoston Financial Corp. 132,528 3,220 Franklin Resources, Inc. 32,850 1,120 Freddie Mac 88,014 5,197 Golden West Financial Corp. 19,550 1,404 The Goldman Sachs Group, Inc. 60,900 4,147 The Hartford Financial Services Group, Inc. 31,350 1,424 Household International, Inc. 57,525 1,600 Huntington Bancshares, Inc. 30,400 569 J.P. Morgan Chase & Co. 252,062 6,049 Jefferson-Pilot Corp. 18,653 711 John Hancock Financial Services, Inc. 36,700 1,024 KeyCorp 53,925 1,356 Lehman Brothers Holdings, Inc. 30,756 1,639 Lincoln National Corp. 23,260 735 Loews Corp. 23,533 1,046 Marsh & McLennan Companies, Inc. 67,780 3,132 Marshall & Ilsley Corp. 26,600 728 MBIA, Inc. 18,650 818 MBNA Corp. 161,595 3,074 Mellon Financial Corp. 55,009 1,436 Merrill Lynch & Co., Inc. 109,400 4,152 MetLife, Inc. 88,715 2,399 MGIC Investment Corp. 13,000 537 Moody's Corp. 19,600 809 Morgan Stanley 138,531 5,530 National City Corp. 77,279 2,111 North Fork Bancorporation, Inc. 20,700 698 Northern Trust Corp. 28,050 983 Plum Creek Timber Company, Inc. 23,400 552
66 Balanced Portfolio
Market Shares/ Value Common Stock (40.1%) Par (000's) -------------------------------------------------------- Financials continued The PNC Financial Services Group, Inc. 35,900 $ 1,504 Principal Financial Group, Inc. 43,900 1,323 The Progressive Corp. 27,500 1,365 *Providian Financial Corp. 36,443 237 Prudential Financial, Inc. 73,400 2,330 Regions Financial Corp. 27,990 934 SAFECO Corp. 17,350 602 Simon Property Group, Inc. 23,500 801 SLM Corp. 19,586 2,034 SouthTrust Corp. 43,833 1,089 The St. Paul Companies, Inc. 28,620 975 State Street Corp. 41,000 1,599 *Stilwell Financial, Inc. 28,071 367 SunTrust Banks, Inc. 36,067 2,053 Synovus Financial Corp. 37,450 727 T. Rowe Price Group, Inc. 15,500 423 Torchmark Corp. 15,050 550 *Travelers Property Casualty CL B 126,430 1,852 U.S. Bancorp 242,109 5,138 Union Planters Corp. 25,312 712 UnumProvident Corp. 30,506 535 Wachovia Corp. 173,357 6,317 Washington Mutual, Inc. 122,338 4,224 Wells Fargo & Co. 214,785 10,067 XL Capital, Ltd. -- Class A 17,200 1,329 Zions Bancorporation 11,600 456 ---------- Total 210,103 ---------- Health Care (6.0%) Abbott Laboratories 197,525 7,901 Aetna, Inc. 18,979 780 Allergan, Inc. 16,333 941 AmerisourceBergen Corp. 13,400 728 *Amgen, Inc. 161,623 7,813 *ANTHEM, INC. 17,800 1,120 Applera Corp. -- Applied Biosystems Group 26,867 471 Bausch & Lomb, Inc. 6,800 245 Baxter International, Inc. 76,300 2,136 Becton, Dickinson and Co. 32,450 996 *Biogen, Inc. 18,800 753 Biomet, Inc. 33,255 953 *Boston Scientific Corp. 51,490 2,189 Bristol-Myers Squibb Co. 244,944 5,670 C. R. Bard, Inc. 6,550 380 Cardinal Health, Inc. 57,150 3,383 *Chiron Corp. 23,878 898 CIGNA Corp. 17,671 727 Eli Lilly and Co. 142,066 9,021 *Forest Laboratories, Inc. 22,767 2,236 *Genzyme Corp. 27,100 801 *Guidant Corp. 38,612 1,191 HCA, Inc. 65,515 2,719 Health Management Associates, Inc. 30,100 539
Market Shares/ Value Common Stock (40.1%) Par (000's) -------------------------------------------------------- Health Care continued *HEALTHSOUTH Corp. 50,100 $ 210 *Humana, Inc. 21,400 214 IMS Health, Inc. 35,833 573 Johnson & Johnson 376,223 20,207 *King Pharmaceuticals, Inc. 30,766 529 *Manor Care, Inc. 12,400 231 McKesson HBOC, Inc. 36,693 992 *Medlmmune, Inc. 31,700 861 Medtronic, Inc. 153,400 6,995 Merck & Co., Inc. 284,500 16,106 *Millipore Corp. 6,100 207 Pfizer, Inc. 782,690 23,928 Pharmacia Corp. 163,121 6,818 *Quest Diagnostics, Inc. 12,300 700 *Quintiles Transnational Corp. 14,900 180 Schering-Plough Corp. 185,450 4,117 *St. Jude Medical, Inc. 22,400 890 Stryker Corp. 24,950 1,675 *Tenet Healthcare Corp. 61,850 1,014 UnitedHealth Group, Inc. 38,414 3,208 *Watson Pharmaceuticals, Inc. 13,500 382 *Wellpoint Health Networks, Inc. -- Class A 18,400 1,309 Wyeth 167,571 6,267 *Zimmer Holdings, Inc. 24,673 1,024 ---------- Total 153,228 ---------- Industrials (4.6%) 3M Co. 49,312 6,080 *Allied Waste Industries, Inc. 24,950 250 *American Power Conversion Corp. 24,750 375 *American Standard Companies, Inc. 9,100 647 *AMR Corp. 19,600 129 *Apollo Group, Inc. -- Class A 21,900 964 Automatic Data Processing, Inc. 78,400 3,077 Avery Dennison Corp. 13,850 846 The Boeing Co. 106,118 3,501 Burlington Northern Santa Fe Corp. 48,108 1,251 Caterpillar, Inc. 43,512 1,989 *Cendant Corp. 131,573 1,379 Cintas Corp. 21,467 982 *Concord EPS, Inc. 64,900 1,022 *Convergys Corp. 21,850 331 Cooper Industries, Ltd. 11,800 430 Crane Co. 7,525 150 CSX Corp. 26,950 763 Cummins, Inc. 5,200 146 Danaher Corp. 19,100 1,255 Deere & Co. 30,140 1,382 Delta Air Lines, Inc. 15,533 188 Deluxe Corp. 7,912 333 Dover Corp. 25,633 747 Eaton Corp. 8,900 695
67 Balanced Portfolio
Market Shares/ Value Common Stock (40.1%) Par (000's) -------------------------------------------------------- Industrials continued Emerson Electric Co. 53,225 $ 2,706 Equifax, Inc. 18,200 421 FedEx Corp. 37,640 2,041 First Data Corp. 95,722 3,390 *Fiserv, Inc. 24,325 826 Fluor Corp. 10,200 286 General Dynamics Corp. 25,500 2,024 General Electric Co. 1,258,098 30,636 Goodrich Corp. 14,600 267 H&R Block, Inc. 22,850 919 Honeywell International, Inc. 103,550 2,485 Illinois Tool Works, Inc. 38,700 2,510 Ingersoll-Rand Co.--Class A 21,370 920 ITT Industries, Inc. 11,600 704 Lockheed Martin Corp. 57,522 3,322 Masco Corp. 62,700 1,320 *McDermott International, Inc. 8,000 35 *Navistar International Corp. 7,620 185 *Norfolk Southern Corp. 49,143 982 Northrop Grumman Corp. 23,031 2,234 PACCAR, Inc. 14,685 677 Pall Corp. 15,516 259 Parker-Hannifin Corp. 14,900 687 Paychex, Inc. 47,540 1,326 Pitney Bowes, Inc. 30,127 984 *Power-One, Inc. 10,000 57 R. R. Donnelley & Sons Co. 14,333 312 Raytheon Co. 50,900 1,565 *Robert Half International, Inc. 22,160 357 Rockwell Automation, Inc. 23,450 486 Rockwell Collins, Inc. 23,150 538 Ryder System, Inc. 7,900 177 *Sabre Holdings Corp. -- Class A 18,309 332 Southwest Airlines Co. 97,695 1,358 Textron, Inc. 17,450 750 *Thomas & Betts Corp. 7,400 125 Tyco International, Ltd. 252,283 4,309 Union Pacific Corp. 31,940 1,912 United Parcel Service, Inc. 141,200 8,908 United Technologies Corp. 59,633 3,694 W.W. Grainger, Inc. 11,800 608 Waste Management, Inc. 77,297 1,772 ---------- Total 118,318 ---------- Information Technology (5.8%) *ADC Telecommunications, Inc. 100,350 210 Adobe Systems, Inc. 30,375 757 *Advanced Micro Devices, Inc. 43,300 280 *Agilent Technologies, Inc. 58,688 1,054 *Altera Corp. 48,265 596 *Analog Devices, Inc. 46,243 1,104 *Andrew Corp. 12,362 127 *Apple Computer, Inc. 45,400 651 *Applied Materials, Inc. 208,000 2,710 *Applied Micro Circuits Corp. 38,100 141
Market Shares/ Value Common Stock (40.1%) Par (000's) ------------------------------------------------------- Information Technology continued Autodesk, Inc. 14,466 $ 207 *Avaya, Inc. 45,612 112 *BMC Software, Inc. 30,440 521 *Broadcom Corp. -- Class A 34,600 521 *CIENA Corp. 54,400 280 *Cisco Systems, Inc. 925,167 12,119 *Citrix Systems, Inc. 22,080 272 Computer Associates International, Inc. 73,032 986 *Computer Sciences Corp. 21,650 746 *Compuware Corp. 47,543 228 *Comverse Technology, Inc. 23,600 236 *Corning, Inc. 145,200 481 *Dell Computer Corp. 328,067 8,772 *Electronic Arts, Inc. 17,600 876 Electronic Data Systems Corp. 60,700 1,119 *EMC Corp. 278,586 1,711 *Gateway, Inc. 40,950 129 Hewlett-Packard Co. 385,867 6,698 Intel Corp. 842,743 13,121 International Business Machines Corp. 214,210 16,600 *Intuit, Inc. 26,800 1,257 *Jabil Circuit, Inc. 25,033 449 *JDS Uniphase Corp. 172,000 425 *KLA-Tencor Corp. 23,900 845 *Lexmark International Group, Inc. -- Class A 16,000 968 Linear Technology Corp. 40,150 1,033 *LSI Logic Corp. 47,000 271 *Lucent Technologies, Inc. 434,062 547 Maxim Integrated Products, Inc. 40,800 1,348 *Mercury Interactive Corp. 10,600 314 *Micron Technology, Inc. 76,350 744 *Microsoft Corp. 684,800 35,403 Molex, Inc. 24,475 564 Motorola, Inc. 290,719 2,515 *National Semiconductor Corp. 22,843 343 *NCR Corp. 12,400 294 *Network Appliance, Inc. 42,600 426 *Novell, Inc. 45,800 153 *Novellus Systems, Inc. 18,300 514 *Nvidia Corp. 19,300 222 *Oracle Corp. 687,050 7,419 *Parametric Technology Corp. 32,920 83 *PeopleSoft, Inc. 39,500 723 PerkinElmer, Inc. 15,800 130 *PMC-Sierra, Inc. 21,000 117 *QLogic Corp. 11,850 409 *QUALCOMM, Inc. 98,233 3,575 *Rational Software Corp. 24,400 254 *Sanmina-SCI Corp. 66,200 297 Scientific-Atlanta, Inc. 19,800 235 *Siebel Systems, Inc. 60,400 452 *Solectron Corp. 104,000 369 *Sun Microsystems, Inc. 410,454 1,277
68 Balanced Portfolio
Market Shares/ Value Common Stock (40.1%) Par (000's) ------------------------------------------------------- Information Technology continued *SunGard Data Systems, Inc. 35,700 $ 841 Symbol Technologies, Inc. 28,950 238 *Tektronix, Inc. 11,240 204 *Tellabs, Inc. 51,908 377 *Teradyne, Inc. 23,150 301 Texas Instruments, Inc. 219,175 3,290 *Thermo Electron Corp. 21,100 425 *Unisys Corp. 40,850 404 *VERITAS Software Corp. 51,901 811 *Waters Corp. 16,600 362 *Xerox Corp. 92,300 743 *Xilinx, Inc. 42,700 880 *Yahoo!, Inc. 75,900 1,241 ---------- Total 147,457 ---------- Materials (1.1%) Air Products and Chemicals, Inc. 28,733 1,228 Alcoa, Inc. 106,743 2,432 Allegheny Technologies, Inc. 10,131 63 Ball Corp. 7,134 365 Bemis Company, Inc. 6,650 330 Boise Cascade Corp. 7,400 187 The Dow Chemical Co. 115,124 3,419 E. I. du Pont de Nemours and Co. 125,645 5,327 Eastman Chemical Co. 9,775 359 Ecolab, Inc. 16,400 812 Engelhard Corp. 16,300 364 *Freeport-McMoRan Copper & Gold, Inc. -- Class B 18,319 307 Georgia-Pacific Corp. 29,058 470 Great Lakes Chemical Corp. 6,300 150 *Hercules, Inc. 13,800 121 International Flavors & Fragrances, Inc. 11,975 420 International Paper Co. 60,924 2,131 *Louisiana-Pacific Corp. 13,200 106 MeadWestvaco Corp. 25,314 626 Monsanto Co. 33,078 637 Newmont Mining Corp. 50,730 1,473 Nucor Corp. 9,867 408 *Pactiv Corp. 20,000 437 *Phelps Dodge Corp. 11,210 355 PPG Industries, Inc. 21,433 1,075 Praxair, Inc. 20,400 1,179 Rohm and Haas Co. 27,934 907 *Sealed Air Corp. 10,636 397 Sigma-Aldrich Corp. 9,300 453 Temple-Inland, Inc. 6,800 305 United States Steel Corp. 12,850 169 Vulcan Materials Co. 12,800 480 Weyerhaeuser Co. 27,720 1,364 Worthington Industries, Inc. 10,850 165 ---------- Total 29,021 ---------- Telecommunication Services (1.7%) ALLTEL Corp. 39,343 2,006 AT&T Corp. 97,274 2,540
Market Shares/ Value Common Stock (40.1%) Par (000's) ------------------------------------------------------- Telecommunication Services continued *AT&T Wireless Services, Inc. 342,416 $ 1,935 BellSouth Corp. 236,635 6,122 CenturyTel, Inc. 17,900 526 *Citizens Communications Co. 35,600 376 *Nextel Communications, Inc. -- Class A 115,133 1,330 *Qwest Communications International, Inc. 212,020 1,060 SBC Communications, Inc. 420,433 11,398 Sprint Corp. 112,891 1,635 *Sprint Corp. (PCS Group) 126,040 552 Verizon Communications, Inc. 345,038 13,369 ---------- Total 42,849 ---------- Utilities (1.1%) *The AES Corp. 68,675 207 *Allegheny Energy, Inc. 15,900 120 Ameren Corp. 18,333 762 American Electric Power Company, Inc. 42,820 1,170 *Calpine Corp. 47,640 155 CenterPoint Energy, Inc. 38,326 326 Cinergy Corp. 21,238 716 CMS Energy Corp. 18,200 172 Consolidated Edison, Inc. 26,925 1,153 Constellation Energy Group, Inc. 20,800 579 Dominion Resources, Inc. 38,525 2,115 DTE Energy Co. 21,150 981 Duke Energy Corp. 112,242 2,193 *Dynegy, Inc. -- Class A 45,600 54 *Edison International 41,180 488 El Paso Corp. 73,917 514 Entergy Corp. 28,291 1,290 Exelon Corp. 40,762 2,151 FirstEnergy Corp. 37,674 1,242 FPL Group, Inc. 23,043 1,386 KeySpan Corp. 17,900 631 Kinder Morgan, Inc. 15,433 652 *Mirant Corp. 50,784 96 Nicor, Inc. 5,550 189 NiSource, Inc. 30,784 616 Peoples Energy Corp. 4,500 174 *PG&E Corp. 49,675 690 Pinnacle West Capital Corp. 10,900 372 PPL Corp. 20,433 709 Progress Energy, Inc. 29,879 1,295 Public Service Enterprise Group, Inc. 28,040 900 Sempra Energy 25,859 612 The Southern Co. 89,600 2,544 TECO Energy, Inc. 21,900 339 TXU Corp. 39,015 729 The Williams Companies, Inc. 65,200 176 Xcel Energy, Inc. 50,370 554 ---------- Total 29,052 ---------- Total Common Stock (Cost: $728,721) 1,027,902 ----------
69 Balanced Portfolio
Market Money Market Investments Shares/ Value (20.2%) Par (000's) ---------------------------------------------------------- Agricultural Services (1.2%) #Cargill Inc., 1.31%, 1/22/03 $15,000,000 $ 14,988 #Cargill Inc., 1.33%, 1/23/03 15,000,000 14,988 ---------- Total 29,976 ---------- Asset-Backed Securities (CMO'S) (0.6%) #Fcar Owner Trust 1, 1.35%, 2/4/03 15,000,000 14,981 ---------- Total 14,981 ---------- Auto Related (1.0%) #General Motors Corp., 1.95%, 1/9/03 10,000,000 9,996 #Toyota Motor Credit Co., 1.31%, 1/30/03 15,000,000 14,984 ---------- Total 24,980 ---------- Diversified Business Finance (0.6%) #General Electric Capital, 1.31%, 2/14/03 15,000,000 14,976 ---------- Total 14,976 ---------- Federal Government and Agencies (1.1%) #Federal National Mortgage Association, 1.275%, 3/5/03 28,500,000 28,441 ---------- Total 28,441 ---------- Finance Lessors (1.2%) #Receivables Capital Corp., 1.35%, 2/7/03 15,000,000 14,979 #Receivables Capital Corp., 1.35%, 1/21/03 15,000,000 14,989 ---------- Total 29,968 ---------- Finance Services (2.8%) #Asset Securitization, 1.32%, 1/21/03 15,000,000 14,989 #Ciesco LP, 1.32%, 1/16/03 15,000,000 14,991 #Ciesco LP, 1.34%, 2/6/03 15,000,000 14,980 #Preferred Receivable Funding, 1.34%, 1/23/03 15,000,000 14,988 #Preferred Receivable Funding, 1.35%, 1/10/03 14,700,000 14,695 ---------- Total 74,643 ---------- Machinery (0.4%) John Deere Capital Corp., 1.64%, 1/7/03 10,000,000 9,997 ---------- Total 9,997 ----------
Market Money Market Investments Shares/ Value (20.2%) Par (000's) ----------------------------------------------------- Miscellaneous Business Credit Institutions (1.7%) # National Rural Utility C, 1.40%, 1/21/03 $15,000,000 $ 14,988 #Quincy Capital Corp., 1.35%, 1/6/03 15,000,000 14,998 # Toyota Motor Credit Co., 1.32%, 2/13/03 15,000,000 14,976 ---------- Total 44,962 ---------- Nonclassifiable Establishments (1.2%) # Thunder Bay Funding, Inc., 1.34%, 1/21/03 15,000,000 14,989 # Thunder Bay Funding, Inc., 1.35%, 2/18/03 15,000,000 14,973 ---------- Total 29,962 ---------- Passenger Car Rental (0.6%) # Delaware Funding Corp., 1.35%, 2/13/03 15,000,000 14,976 ---------- Total 14,976 ---------- Personal Credit Institutions (0.6%) # Salomon Smith Barney Hld, 1.34%, 1/30/03 15,100,000 15,084 ---------- Total 15,084 ---------- Pharmaceutical Preparations (0.4%) # Wyeth, 1.85%, 1/6/03 10,000,000 9,998 ---------- Total 9,998 ---------- Security Brokers and Dealers (1.2%) # Goldman Sachs Group, Inc., 1.78%, 2/3/03 15,000,000 14,976 # Morgan St. Dean Witter, 1.32%, 2/4/03 15,000,000 14,981 ---------- Total 29,957 ---------- Short Term Business Credit (5.0%) CXC Inc., 1.34%, 2/6/03 15,000,000 14,980 CXC Inc., 1.76%, 1/17/03 15,000,000 14,988 Old Line Funding Corp., 1.38%, 1/15/03 30,000,000 29,984 Quincy Capital Corp., 1.35%, 1/23/03 15,000,000 14,988 Transamerica Financial Corporation, 1.76%, 2/7/03 15,000,000 14,973 UBS Finance LLC, 1.2%, 1/2/03 24,960,000 24,958
70 Balanced Portfolio
Market Money Market Investments Shares/ Value (20.2%) Par (000's) ------------------------------------------------------------ Short Term Business Credit continued UBS Finance LLC, 1.3%, 1/28/03 $15,000,000 $ 14,985 ---------- Total 129,856 ---------- Tobacco Products (0.6%) Philip Morris Disc, 1.33%, 1/30/03 15,000,000 14,984 ---------- Total 14,984 ---------- Total Money Market Investments (Cost: $517,737) 517,741 ---------- Total Investments (105.6%) (Cost $2,338,335)` 2,704,286 ---------- Other Assets, Less Liabilities (-5.6%) (142,757) ---------- Total Net Assets (100.0%) $2,561,529 ----------
` At 12/31/2002 the aggregate cost of securities for federal tax purposes was $2,357,594 and the net unrealized appreciation of investments based on that cost was $346,692 which is comprised of $552,721 aggregate gross unrealized appreciation and $206,029 aggregate gross unrealized depreciation. 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. IO -- Interest Only Security * Non-Income Producing ++ Defaulted Security # All or a portion of the securities have been committed 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 (000's) Contracts Date (000's) ------------------------------------------------------ S & P 500 Index Futures 1564 3/03 $(9,466) (Total Notional Value at 12/31/02 $353,116)
The Accompanying Notes are an Integral Part of the Financial Statements 71 High Yield Bond Portfolio - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: High current income and capital Generate superior performance $137.55 million appreciation with moderate risk. by investing in a diversified mix of fixed income securities rated below investment grade.
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 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. For 2002, the High Yield Bond Portfolio had a return of -2.89%, versus -1.36% for its benchmark, the Lehman Brothers High Yield Intermediate Market Index. These returns were better than the stock market, but substantially below investment-grade bonds. In the current market environment, with many defaults and downgrades of high yield bonds, it is especially difficult for managed funds to outperform the Index because defaulted bonds are removed from the Index, but they affect portfolio performance whether held in hope of recovery or written off. The high yield bond market was quite turbulent during the year, with many defaults and widespread downward credit rating migration in response to deterioration in the financial situation of issuers. Volatility increased greatly as investment-grade bond investors attempted to sell very large issues that were downgraded to below investment-grade status. After a period of dismal performance, high yield bonds recovered markedly in the fourth quarter of 2002, as investor fears subsided, the stock market recovered, and credit spreads narrowed on expectations of improving fundamentals. The Portfolio's performance relative to the Index has been negatively affected by holdings in three industry sectors: cable television, wireless communication and electric power producers. Each of these industries has been affected by well-publicized financial problems experienced by highly visible participants. In these sectors, prices of some bonds held by the Portfolio have fallen significantly, as technical trading factors have compounded the problems caused by fundamental deterioration. We evaluate each issue on its own merits, often keeping those bonds for which an eventual workout may create more value than a sale at current distressed levels, even though such a sale might boost the Portfolio's short-term performance. The Portfolio's current strategic direction is focused largely on reducing risk by improving credit quality and emphasizing industries that are relatively stable, such as gaming, health care, publishing, home building, real estate and oil field services. As market conditions permit, we are reducing exposure to more volatile industries such as electric utilities, cable and wireless. We have increased the number of holdings in the Portfolio, in order to spread risk among many issues. [CHART] Percentage Holdings by Industry Sector 12/31/02 Consumer Cyclical 23% Consumer Staples 20% Technology 14% Basic Material/Capital Goods 11% Short-Term Investments and Other Assets, Net 7% Utilities 5% Transport Services 5% Energy 5% Finance 5% Other Industries 5% [CHART] Relative Performance High Yield Lehman Brothers High Bond Portfolio Yield Intermediate Market Index 5/3/1994 10,000 10,000 12/31/1994 10,302 10,188 12/31/1995 12,030 11,952 12/31/1996 14,409 13,409 12/31/1997 16,693 15,020 12/31/1998 16,388 15,244 12/31/1999 16,314 15,646 12/31/2000 15,564 14,635 12/31/2001 16,347 15,189 12/31/2002 15,874 14,982 Average Annual Total Return For Periods Ended December 31, 2002 1 Year 5 Years 10 Years High Yield Bond Portfolio -2.89% -1.00% 5.48% Lehman Brothers High Yield Intermediate Market Index -1.36% -0.05% 4.78% 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 index cannot be invested in directly and do not include sales charges. The Lehman Brothers High Yield Intermediate Market Index is made up of dollar-denominated, nonconvertible, SEC publicly registered fixed rate noninvestment grade issues. The bonds will have remaining maturities of between one and ten years and have an outstanding par value of at least $100 million. Yankee and global bonds (SEC registered) of issuers in G-7 countries are included. Original issue zero coupon bonds and step-up coupon structures are also included; however, the index excludes pay-in-kind (PIK) bonds. Each bond must be rated Ba1 or lower by Moody's Investor Service. If a Moody's rating is unavailable, the bonds must be rated BB+ or lower by Standard & Poor's, or by Fitch if an S&P rating is unavailable. A few unrated bonds are included in the index; to be eligible they must have previously held a high yield rating or have been associated with a high yield issuer. The index is an unmanaged market value weighted index and measures the income provided by, and the price changes of, the underlying securities. This chart assumes an initial investment of $10,000 made on 5/3/94 (commencement of operations). Returns shown include deductions for management and other fund expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. Total returns shown on page 4 reflect mortality and expense risk charges and other 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. 72 High Yield Bond Portfolio Northwestern Mutual Series Fund, Inc. Schedule of Investments December 31, 2002
Market Shares/ Value Bonds (90.5%) Par (000's) --------------------------------------------------------- Basic Materials (3.3%) Chemicals (0.5%) Lyondell Chemical Co., 11.125%, 7/15/12 $ 750,000 $ 739 -------- Total 739 -------- Metals and Mining (1.6%) Great Central Mines, Ltd., 8.875%, 4/1/08 1,250,000 1,244 UCAR Finance, Inc., 10.25%, 2/15/12 1,125,000 894 -------- Total 2,138 -------- Paper (1.2%) Appleton Papers, Inc., 12.50%, 12/15/08 1,500,000 1,641 -------- Total 1,641 -------- Total Basic Materials 4,518 -------- Capital Goods (6.7%) Aerospace (0.6%) K & F Industries Inc., 9.625%, 12/15/10 144A 750,000 763 -------- Total 763 -------- Building -- Forest Products (0.5%) Georgia-Pacific Corp., 8.125%, 5/15/11 750,000 713 -------- Total 713 -------- Building and Construction (3.5%) Brickman Group Ltd., 11.75%, 12/15/09 144A 1,325,000 1,384 H & E Equipment / Finance, 11.125%, 6/15/12 144A 1,125,000 844 Integrated Electrical Services, Inc., 9.375%, 2/1/09 1,500,000 1,379 United Rentals, Inc., 10.75%, 4/15/08 1,250,000 1,243 -------- Total 4,850 -------- Industrial (2.1%) Perkinelmer, Inc., 8.875%, 1/15/13 144A 750,000 739 Rexnord Corp., 10.125%, 12/15/12 144A 750,000 769 Tyco International Group, 6.375%, 2/15/06 750,000 728 Tyco International Group S.A., 6.375%, 6/15/05 375,000 364 Tyco International Group SA, 6.375%,10/15/11 375,000 351 -------- Total 2,951 -------- Total Capital Goods 9,277 --------
Market Shares/ Value Bonds (90.5%) Par (000's) -------------------------------------------------------- Chemicals and Allied Products (1.1%) FMC Corp., 10.25%, 11/1/09 144A $ 750,000 $ 810 Lyondell Chemical Co., 9.50%, 12/15/08 144A 750,000 698 -------- Total Chemicals and Allied Products 1,508 -------- Construction and Building Materials (0.3%) United Rentals, Inc., 10.75%, 4/15/08 144A 375,000 369 -------- Total Construction and Building Materials 369 -------- Consumer Cyclical (22.9%) Apparel, Textile (1.6%) Guess ?, Inc., 9.50%, 8/15/03 1,000,000 980 Levi Strauss & Co., 11.625%, 1/15/08 1,125,000 1,100 Tommy Hilfiger USA, Inc., 6.85%, 6/1/08 200,000 188 -------- Total 2,268 -------- Auto Related (2.3%) Avis Group Holdings, Inc., 11.00%, 5/1/09 1,250,000 1,368 Collins & Aikman Products, Inc., 11.50%, 4/15/06 750,000 630 Trimas Corp., 9.875%, 6/15/12 144A 1,125,000 1,113 -------- Total 3,111 -------- Home Construction (3.1%) Beazer Homes USA, 8.875%, 4/1/08 925,000 957 K Hovnanian Enterprises, 10.50%, 10/1/07 750,000 806 Schuler Homes, 9.375%, 7/15/09 725,000 740 Standard Pacific Corp., 9.50%, 9/15/10 1,025,000 1,074 Tech Olympic USA, Inc., 9.00%, 7/1/10 144A 750,000 728 -------- Total 4,305 -------- Household Appliances (0.6%) Rent-A-Center, Inc., 11.00%, 8/15/08 750,000 807 -------- Total 807 -------- Leisure Related (2.1%) Bally Total Fitness Holdings, Series D, 9.875%, 10/15/07 1,300,000 1,130 Premier Parks, Inc., 9.50%, 2/1/09 750,000 724 Royal Caribbean Cruises Ltd., 7.00%, 10/15/07 1,125,000 1,001 -------- Total 2,855 --------
73 High Yield Bond Portfolio
Market Shares/ Value Bonds (90.5%) Par (000's) -------------------------------------------------------- Lodging / Resorts (3.7%) Corrections Corporation of America, 9.875%, 5/1/09 144A $ 725,000 $ 769 Felcor Lodging Limited Partnership, 9.50%, 9/15/08 1,350,000 1,376 Hilton Hotels Corp., 7.625%, 12/1/12 750,000 757 John Q. Hammons, 8.875%, 5/15/12 550,000 553 Meristar Hospitality Finance Corp., 9.00%, 1/15/08 450,000 396 Meristar Hospitality Finance Corp., 9.125%, 1/15/11 550,000 479 RFS Partnership LP, 9.75%, 3/1/12 750,000 766 -------- Total 5,096 -------- Printing and Publishing (4.0%) American Achievement Corp., 11.625%, 1/1/07 700,000 743 DEX Media East LLC, 9.875%, 11/15/09 144A 750,000 803 Mail-Well Corp., 9.625%, 3/15/12 1,125,000 1,001 RH Donnelley Fin Corp., 10.875%, 12/15/12 144A 950,000 1,036 Vertis Inc., 10.875%, 6/15/09 725,000 754 Vertis, Inc., 10.875, 6/15/09 144A 425,000 442 Von Hoffman Corp., 10.25%, 3/15/09 750,000 701 -------- Total 5,480 -------- Retail -- General (5.5%) Asbury Automotive Group, Inc., 9.00%, 6/15/12 750,000 653 Autonation, Inc., 9.00%, 8/1/08 725,000 732 Buhrmann US, Inc., 12.25%, 11/1/09 1,500,000 1,394 CSK Auto, Inc, 12.00%, 6/15/06 750,000 803 The Gap, Inc., 8.15%, 12/15/05 350,000 372 The Gap, Inc., 10.55%, 12/15/08 375,000 409 Hollywood Entertainment Inc., 9.625%, 3/15/11 950,000 969 Saks, Inc., 8.25%, 11/15/08 750,000 746 Sonic Automotive, Inc., 11.00%, 8/1/08 750,000 765 United Auto Group, Inc. 9.625%, 3/15/12 144A 750,000 728 -------- Total 7,571 -------- Total Consumer Cyclical 31,493 -------- Consumer Staples (19.7%) Containers (1.6%) Applied Extrusion Tech., Inc., 10.75%, 7/1/11 375,000 242 BWAY Corp., 10.00%, 10/15/10 144A 750,000 778 Owens-Brockway Glass Container, Inc., 8.75%, 11/15/12 144A 1,125,000 1,142 -------- Total 2,162 --------
Market Shares/ Value Bonds (90.5%) Par (000's) --------------------------------------------------------- Food Service (1.3%) Buffets, Inc., 11.25%, 7/15/10 144A $ 750,000 $ 709 Sbarro, Inc., 11.00%, 9/15/09 1,150,000 1,070 -------- Total 1,779 -------- Foods (0.9%) Corn Products International, Inc., 8.25%, 7/15/07 575,000 581 Swift & Co., 10.125%, 10/1/09 144A 750,000 709 -------- Total 1,290 -------- Gaming (10.8%) Aztar Corp., 8.875%, 5/15/07 150,000 153 Choctaw Resort Development, 9.25%, 4/1/09 1,400,000 1,480 Chumash Casino & Resort, 9.00%, 7/15/10 144A 750,000 795 Herbst Gaming, Inc., 10.75%, 9/1/08 1,125,000 1,176 Hollywood Casino Shreveport, 13.00%, 8/1/06 700,000 700 Jacobs Entertainment, Inc. 11.875%, 2/01/09 1,500,000 1,552 Majestic Investment Holdings, Inc., 11.653%, 11/30/07 900,000 833 The Majestic Star Casino LLC, 10.875%, 7/1/06 850,000 867 Mandalay Resort Group, 7.625%, 7/15/13 500,000 500 Park Place Entertainment Corporation, 9.375%, 2/15/07 150,000 160 Resort International Hotel/Casino, 11.50%, 3/15/09 1,000,000 905 Riviera Holdings Corp., 11.00%, 6/15/10 1,500,000 1,350 Venetian Casino Resort LLC, 11.00%, 6/15/10 144A 1,875,000 1,958 Wheeling Island Gaming, 10.125%, 12/15/09 950,000 979 Wynn Las Vegas Corp., 12.00%, 11/1/10 1,500,000 1,514 -------- Total 14,922 -------- Healthcare (4.1%) AmerisourceBergen Corp., 7.25%, 11/15/12 144A 550,000 564 Fresenius Medical Capital Trust II, 7.875%, 2/1/08 650,000 640 HEALTHSOUTH Corp., 8.50%, 2/1/08 1,125,000 968 InSight Health Services Corp., 9.875%, 11/1/11 144A 1,115,000 1,070 Pacificare Health Systems, Inc., 10.75%, 6/1/09 750,000 803 Rotech Healthcare Inc., 9.50%, 4/1/12 144A 750,000 751 Ventas Realty, 9.00%, 5/1/12 750,000 784 -------- Total 5,580 --------
74 High Yield Bond Portfolio
Market Shares/ Value Bonds (90.5%) Par (000's) ----------------------------------------------------------- Retail -- Food (0.7%) Fleming Companies, Inc., 10.125%, 4/1/08 $ 350,000 $ 301 Great Atlantic & Pacific Tea Co., Inc., 7.75%, 4/15/07 925,000 666 -------- Total 967 -------- Soaps and Toiletries (0.3%) Elizabeth Arden, Inc., 11.75%, 2/1/11 350,000 361 -------- Total 361 -------- Total Consumer Staples 27,061 -------- Energy (4.7%) Oil and Gas Independent (0.9%) PDVSA Finance, Ltd., 1999-I, 9.75%, 2/15/10 1,325,000 1,179 -------- Total 1,179 -------- Oil and Gas Integrated (0.6%) Compton Petroleum Corp., 9.90%, 5/15/09 144A 750,000 780 -------- Total 780 -------- Oil Field Services (3.0%) BRL Universal Equipment, 8.875%, 2/15/08 1,400,000 1,456 El Paso Energy Partners, 8.50%, 6/1/11 1,125,000 1,043 Grant Prideco Escrow, 9.00%, 12/15/09 144A 1,050,000 1,092 Hanover Equipment Trust, 8.75%, 9/1/11 144A 725,000 700 -------- Total 4,291 -------- Refining (0.2%) Tesoro Petroleum Corp., 9.625%, 11/1/08 375,000 255 -------- Total 255 -------- Total Energy 6,505 -------- Finance (5.6%) Banks (1.9%) Sovereign Real Estate Investment Trust, 12.00%, 5/16/20 144A 1,325,000 1,470 Western Financial Bank-FSB, 9.625%, 5/15/12 1,125,000 1,091 -------- Total 2,561 -------- Finance Companies (2.8%) AmeriCredit Corp., 9.875%, 4/15/06 1,100,000 924 Americredit Corp., 9.25%, 5/1/09 144A 450,000 351 IOS Capital, Inc., 9.75%, 6/15/04 1,225,000 1,246 Metris Companies, Inc., 10.125%, 7/15/06 2,600,000 1,430 -------- Total 3,951 --------
Market Shares/ Value Bonds (90.5%) Par (000's) ---------------------------------------------------------------- Financial Services (0.9%) Labranche & Company, Inc., 12.00%, 3/2/07 $1,100,000 $ 1,227 -------- Total 1,227 -------- Total Finance 7,739 -------- Miscellaneous (2.0%) CB Richards Ellis Services, Inc., 11.25%, 6/15/11 1,400,000 1,287 Crescent Real Estate Equities, 7.50%, 9/15/07 650,000 631 Istar Financial, Inc., 8.75%, 8/15/08 725,000 772 -------- Total Miscellaneous 2,690 -------- Professional Services (1.8%) Kindercare Learning Centers, 9.50%, 2/15/09 1,880,000 1,824 Service Corp. International, 7.70%, 4/15/09 650,000 611 -------- Total Professional Services 2,435 -------- Real Estate (1.0%) LNR Property Corp., 10.50%, 1/15/09 1,350,000 1,364 -------- Total Real Estate 1,364 -------- Technology (11.2%) Cable (3.2%) Charter Communications Holdings LLC, 9.625%, 11/15/09 750,000 334 Charter Communications Holdings LLC, 10.75%, 10/1/09 850,000 385 Echostar DBS Corp., 10.375%, 10/1/07 1,150,000 1,244 Insight Midwest, 9.75%, 10/01/09 950,000 903 ++NTL Communications Corp., 11.50%, 10/1/08 900,000 86 (check mark) NTL, Inc., 9.75%, 4/1/08 1,900,000 152 Rogers Communications, Inc., 8.875%, 7/15/07 1,000,000 954 (check mark)Telewest Communications PLC, 9.25%, 4/15/09 1,000,000 140 ++Telewest Communications PLC, 9.875%, 2/1/10 900,000 162 (check mark)United Pan-Europe Communications NV, 13.75%, 2/1/10 600,000 36 -------- Total 4,396 -------- Electronics (1.1%) Amkor Technology, Inc., 5.00%, 3/15/07 475,000 232 Sanmina-Sci Corporation, 10.375%, 1/15/10 144A 750,000 758 Solectron Corp., 9.625%, 2/15/09 575,000 561 -------- Total 1,551 --------
75 High Yield Bond Portfolio
Market Shares/ Value Bonds (90.5%) Par (000's) --------------------------------------------------------- Office Equipment (0.5%) Xerox Corp., 7.15%, 8/01/04 $ 750,000 $ 724 -------- Total 724 -------- Telecommunications Wireless: Cellular /PCS (6.4%) Alamosa Delaware, Inc., 12.50%, 2/1/11 450,000 135 Alamosa Delaware, Inc., 13.625%, 8/15/11 1,262,500 417 +Alamosa PCS Holdings, Inc., 12.875%, 2/15/10 2,900,000 522 Dobson Communications Corp., 10.875%, 7/1/10 1,000,000 845 +Nextel Communications, Inc., 10.65%, 9/15/07 1,750,000 1,670 Nextel Partners Inc., 11.00%, 3/15/10 350,000 298 Nextel Partners, Inc., 12.50%, 11/15/09 775,000 698 Qwest Services Corp., 12/15/10, 13.50% 144A 720,000 749 Rogers Cantel, Inc., 8.30%, 10/1/07 650,000 575 Rogers Cantel, Inc., 9.75%, 6/1/16 300,000 271 Rogers Wireless Inc., 9.625%, 5/1/11 450,000 425 +Trition PCS, Inc., 11.00%, 5/1/08 1,050,000 874 TSI Telecommunications Service, 12.75%, 2/1/09 1,300,000 1,156 +US Unwired, Inc., 13.375%, 11/1/09 2,625,000 158 -------- Total 8,793 -------- Total Technology 15,464 -------- Transport Services (4.9%) Railroads (1.6%) Railamerica Transportation Corp., 12.875%, 8/15/10 1,400,000 1,400 TFM SA DE CV, 12.50%, 6/15/12 144A 750,000 758 -------- Total 2,158 -------- Trucking -- Shipping (3.3%) ++American Commercial LLC, 11.25%, 1/1/08 551,186 176 CP Ships Ltd., 10.375%, 7/15/12 750,000 788 International Shipbuilding Corp., 7.75%, 10/15/07 700,000 560 North American Van Lines, 13.375%, 12/1/09 1,650,000 1,604 Stena AB, 9.625%, 12/1/12 144A 1,475,000 1,523 -------- Total 4,651 -------- Total Transport Services 6,809 -------- Utilities (5.3%) Utility -- Electric (4.4%) Calpine Canada Energy, 8.50%, 5/1/08 1,425,000 620 Calpine Corp., 8.625%, 8/15/10 1,000,000 425 Calpine Corp., 8.75%, 7/15/07 750,000 326
Market Shares/ Value Bonds (90.5%) Par (000's) -------------------------------------------------------- Utilities continued Edison Mission Energy, 10.00%, 8/15/08 $ 1,500,000 $ 720 Orion Power Holdings, Inc., 12.00%, 5/1/10 1,800,000 1,296 ++PG&E National Energy Group, Inc., 10.375%, 5/16/11 1,500,000 570 USEC, Inc., 6.625%, 1/20/06 1,325,000 1,139 Western Resources, 9.75%, 5/1/07 1,125,000 1,024 -------- Total 6,120 -------- Utility -- Garbage Disposal (0.9%) Allied Waste North America, Inc., 8.50%, 12/1/08 1,170,000 1,176 -------- Total 1,176 -------- Total Utilities 7,296 -------- Total Bonds (Cost: $133,348) 124,528 -------- Preferred Stock (2.6%) -------------------------------------------------------- Technology (2.6%) Broadcasting (0.7%) Sinclair Capital 9,500 1,007 -------- Total 1,007 -------- Cable (1.9%) CSC Holdings, Inc. -- Series H 17,750 1,686 CSC Holdings, Inc. -- Series M 8,708 810 ++NTL Inc., 13.00%, 2/15/09 3 0 -------- Total 2,496 -------- Telecommunications Wireless: Towers (0.0%) **Crown Castle International Corp. 3 0 -------- Total 0 -------- Telecommunications Wireline: CLEC (0.0%) **Intermedia Communications, Inc. 1 0 -------- Total 0 -------- Total Technology 3,503 -------- Trucking (0.0%) **American Commercial Lines LLC 4,948 28 -------- Total Trucking 28 -------- Total Preferred Stock (Cost: $4,122) 3,531 -------- Common Stocks and Warrants (0.1%) -------------------------------------------------------- Consumer Cyclical (0.1%) Leisure Related (0.0%) *Hedstrom Holdings, Inc. 201,674 0 -------- Total 0 --------
76 High Yield Bond Portfolio
Market Shares/ Value Common Stocks and Warrants (0.1%) Par (000's) --------------------------------------------------------- Printing and Publishing (0.1%) *Jostens, Inc. 1,550 $ 53 -------- Total Consumer Cyclical 53 -------- Railroads (0.0%) *Railamerica, Inc. 1,400 28 -------- Total Railroads 28 -------- Real Estate Investment Trusts (0.0%) *La Quinta Corporation 11,117 49 -------- Total Real Estate Investment Trusts 49 -------- Telecommunication Services (0.0%) Horizon PCS, Inc. -- Warrant 2,000 0 IWO Holdings, Inc. 144A 1,150 0 -------- Total Telecommunication Services 0 -------- Total Common Stocks and Warrants (Cost: $615) 130 -------- Money Market Investments (4.3%) --------------------------------------------------------- Short Term Business Credit (4.3%) Old Line Funding Corp., 1.38%, 1/15/03 $5,900,000 5,897 -------- Total Money Market Investments (Cost: $5,897) 5,897 -------- Total Investments (97.5%) (Cost $143,982)` 134,086 -------- Other Assets, Less Liabilities (2.5%) 3,467 -------- Total Net Assets (100.0%) $137,553 --------
` At 12/31/2002 the aggregate cost of securities for federal tax purposes was $144,255 and the net unrealized depreciation of investments based on that cost was $10,169 which is comprised of $5,111 aggregate gross unrealized appreciation and $15,280 aggregate gross unrealized depreciation. 144A after the name of a security represents a security exempt from registration under rule 144A of the Securities Act of 1933. These securities may be resold as transactions exempt from registration, normally to qualified institutional buyers. * Non-Income Producing + Step bond security that presently receives no coupon payments. At the predetermined date the stated coupon rate becomes effective. ++ Defaulted Security (check mark) Defaulted security and step bond security that presently receives no coupon payments. At the predetermined date the stated coupon rate becomes effective. ** PIK -- Payment In Kind The Accompanying Notes are an Integral Part of the Financial Statements 77 Select Bond Portfolio - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: A stable and relatively high level of Invest in high grade corporate bonds, U.S. government $584.02 million long-term total return and preservation bonds and bonds of government agencies. of capital
The Select Bond Portfolio invests primarily in high quality debt securities, mainly government bonds, corporate bonds and mortgage-backed securities. Exposure to market sectors is adjusted as yield spreads change among the various classes of securities. Duration and maturities are altered with moderate adjustments in recognition or anticipation of interest rate changes. In the third consecutive year in which bonds provided significantly higher returns than equities, the Select Bond Portfolio substantially outperformed its major benchmark, the Merrill Lynch Domestic Master Index. The Portfolio's performance benefited from advantageous positioning with regard to credit risk, interest rate changes and bond sectors. Throughout the year, we were positioned defensively with regard to credit risk, with holdings concentrated in securities of very high quality, so we avoided losses when concerns about corporate scandals drove prices of riskier corporate bonds down. Careful credit analysis was of special benefit in a year when the credit quality of many issuers or corporate bonds deteriorated very swiftly. This defensive credit risk positioning hurt performance in the fourth quarter, as lower quality bonds outperformed high quality issues when investors fearful of missing a rally rushed into the market. We began the year positioned for lower interest rates, which came about in response to a further rate cut by the Federal Reserve in November. We were also well positioned for a steeper Treasury yield curve. Performance also benefited from a large position early in the year in mortgage-backed securities; this position was reduced in the third and fourth quarters. [CHART] Percentage Holdings 12/31/02 Mortgage-Backed and Asset-Backed Securities 10% Corporate Bonds 28% Short-Term Investments & Other Net Assets 10% Government and Government Agencies 52% 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. Consistent with the Portfolio's stated parameters, no more than 10% of the Portfolio is invested in foreign securities, and no more than 10% is invested in high-yield securities. [CHART] Relative Performance Select Bond Merrill Lynch Domestic Portfolio Master Index 12/31/1992 10,000 10,000 12/31/1993 11,081 11,002 12/31/1994 10,829 10,692 12/31/1995 12,896 12,672 12/31/1996 13,324 13,127 12/31/1997 14,585 14,395 12/31/1998 15,616 15,671 12/31/1999 15,456 15,521 12/31/2000 17,034 17,342 12/31/2001 18,800 18,786 12/31/2002 21,073 20,742 Average Annual Total Return For Periods Ended December 31, 2002 1 Year 5 Years 10 Years Select Bond Portfolio 12.09% 7.64% 7.74% Merrill Lynch Domestic Master Index 10.41% 7.58% 7.57% 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. The index cannot be invested in directly and do not include sales charges. This chart assumes an initial investment of $10,000 made on 12/31/92. 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 4 reflect mortality and expense risk charges and other 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. 78 Select Bond Portfolio Northwestern Mutual Series Fund, Inc. Schedule of Investments December 31, 2002
Market Shares/ Value Corporate Bonds (28.4%) Par (000's) -------------------------------------------------------- Aerospace -- Defense (1.9%) Lockheed Martin Corp., 8.20%, 12/1/09 $ 3,850,000 $ 4,758 Raytheon Co., 7.20%, 8/15/27 5,685,000 6,214 -------- Total 10,972 -------- Auto Related (0.7%) Toyota Motor Credit Corp., 5.65%, 1/15/07 4,000,000 4,346 -------- Total 4,346 -------- Beverages, Malt Beverages (2.8%) Anheuser-Busch Companies, Inc., 7.00%, 12/1/25 4,200,000 4,510 Anheuser-Busch Companies, Inc., 7.50%, 3/15/12 378,000 466 Coca-Cola Enterprises, Inc., 5.25%, 5/15/07 5,000,000 5,375 Coca-Cola Enterprises, Inc., 5.375%, 8/15/06 1,500,000 1,626 Coca-Cola Enterprises, Inc., 5.75%, 3/15/11 4,000,000 4,388 -------- Total 16,365 -------- Broad Woven Fabric Mills, Manmade (0.1%) ++Polysindo International Finance, 11.375%, 6/15/06 4,200,000 294 -------- Total 294 -------- Commercial Banks (0.2%) Bank of America Corp., 7.40%, 1/15/11 1,133,000 1,335 -------- Total 1,335 -------- Crude Petroleum and Natural Gas (1.5%) Occidental Petroleum, 6.75%, 1/15/12 3,417,000 3,892 Occidental Petroleum, 8.45%, 2/15/29 3,579,000 4,592 -------- Total 8,484 -------- Diversified Industrials (1.1%) United Technologies Corp., 6.10%, 5/15/12 6,000,000 6,709 -------- Total 6,709 -------- Drilling Oil and Gas Wells (0.9%) Transocean, Inc., 7.50%, 4/15/31 4,500,000 5,162 -------- Total 5,162 -------- Electric and Other Services Combined (0.4%) Wisconsin Public Service, 4.875%, 12/1/12 2,500,000 2,532 -------- Total 2,532 --------
Market Shares/ Value Corporate Bonds (28.4%) Par (000's) ------------------------------------------------------- Electric Services (2.0%) Exelon Generation Co. LLC, 6.95%, 6/15/11 $ 6,788,000 $ 7,338 Public Service Electric & Gas Co., 6.875%, 1/1/03 2,250,000 2,250 South Carolina Electric & Gas, 6.125%, 3/1/09 1,750,000 1,949 -------- Total 11,537 -------- Electrical Equipment and Supplies (1.3%) Cooper Industries, Inc., 5.50%, 11/1/09 4,000,000 4,169 Hubbell Inc., 6.375%, 5/15/12 3,200,000 3,523 -------- Total 7,692 -------- Environmental Controls (0.4%) Pall Corp., 6.00%, 8/1/12 144A 2,105,000 2,250 -------- Total 2,250 -------- Finance Services (2.1%) Credit Suisse First Boston USA, Inc., 4.625%, 1/15/08 6,000,000 6,082 General Motors Acceptance Corp., 6.875%, 8/28/12 6,500,000 6,407 -------- Total 12,489 -------- Fire, Marine and Casualty Insurance (0.8%) Allstate Corp., 6.125%, 12/15/32 1,575,000 1,604 Progressive Corp., 6.25%, 12/1/32 3,000,000 3,078 -------- Total 4,682 -------- Food Retailers (0.9%) Delhaize America Inc., 8.125%, 4/15/11 3,500,000 3,386 Delhaize America, Inc., 9.00%, 4/15/31 2,000,000 1,840 -------- Total 5,226 -------- Metal Mining (0.4%) Rio Tinto Finance, Ltd., 5.75%, 7/3/06 2,000,000 2,185 -------- Total 2,185 -------- Motor Vehicle Parts/Accessories (0.8%) TRW, Inc., 7.125%, 6/1/09 1,000,000 1,118 TRW, Inc., 7.75%, 6/1/29 3,113,000 3,672 -------- Total 4,790 -------- Motors and Generators (0.1%) Emerson Electric Co., 5.75%, 11/1/11 796,000 855 -------- Total 855 --------
79 Select Bond Portfolio
Market Shares/ Value Corporate Bonds (28.4%) Par (000's) ------------------------------------------------------ National Commercial Banks (0.7%) Bank One Corp., 5.25%, 1/30/13 $ 4,000,000 $ 4,117 -------- Total 4,117 -------- News Dealers and Newsstands (0.7%) News America Holdings, 7.75%, 12/1/45 4,000,000 3,931 -------- Total 3,931 -------- Office Machines (0.4%) Pitney Bowes Credit Corp., 5.75%, 8/15/08 2,250,000 2,490 -------- Total 2,490 -------- Oil and Gas Extraction (0.8%) Chevron Corp., 6.625%, 10/1/04 4,500,000 4,844 -------- Total 4,844 -------- Oil and Gas Field Machinery (0.7%) National-Oilwell, Inc., 5.65%, 11/15/12 144A 4,000,000 4,045 -------- Total 4,045 -------- Pharmaceuticals (3.3%) Eli Lilly & Co., 5.50%, 7/15/06 2,600,000 2,808 Eli Lilly & Co., 7.125%, 6/1/25 1,400,000 1,653 Johnson & Johnson, 6.625%, 9/1/09 2,750,000 3,206 Johnson & Johnson, 6.95%, 9/1/29 2,200,000 2,640 Merck & Co., Inc., 5.95%, 12/1/28 4,841,000 5,119 Pfizer, Inc., 5.625%, 2/1/06 2,975,000 3,248 -------- Total 18,674 -------- Plastics Materials and Resins (0.9%) Eastman Chemical, 7.00%, 4/15/12 4,600,000 5,192 -------- Total 5,192 -------- Plumbing Fixture Fittings/Trim (0.4%) Masco Corp., 4.625%, 8/15/07 750,000 774 Masco Corp., 6.50%, 8/15/32 1,250,000 1,285 -------- Total 2,059 -------- Retail -- Retail Stores (0.8%) Limited Brands, 6.125%, 12/1/12 4,500,000 4,737 -------- Total 4,737 -------- Search and Navigation Equipment (0.4%) Raytheon Co., 7.00%, 11/1/28 2,310,000 2,471 -------- Total 2,471 -------- Telephone Communications (0.9%) Alltel Corp., 7.00%, 7/1/12 600,000 691 Alltel Corp., 7.875%, 7/1/32 3,750,000 4,602 -------- Total 5,293 -------- Total Corporate Bonds (Cost: $156,274) 165,758 --------
Market Government (Domestic and Shares/ Value Foreign) and Agency Bonds (51.8%) Par (000's) ------------------------------------------------------ Federal Government and Agencies (51.8%) Aid-Israel, 0.00%, 11/1/24 $ 8,900,000 $ 2,554 Federal Home Loan Bank, 5.54%, 1/8/09 3,700,000 4,111 Federal Home Loan Mortgage Corporation, 7.50%, 10/1/27 2,277,308 2,434 Federal National Mortgage Association, 5.97%, 10/1/08 3,695,022 4,056 Federal National Mortgage Association, 6.22%, 2/1/06 1,812,946 1,964 Federal National Mortgage Association, 6.24%, 1/1/06 5,107,234 5,519 Federal National Mortgage Association, 6.265%, 10/1/08 2,847,804 3,168 Federal National Mortgage Association, 6.36%, 4/1/08 3,557,334 3,961 Federal National Mortgage Association, 6.39%, 4/1/08 1,355,462 1,510 Federal National Mortgage Association, 6.75%, 4/25/18 1,997,894 2,133 Federal National Mortgage Association, 6.75%, 12/25/23 3,500,000 3,651 Federal National Mortgage Association, 7.00%, 6/1/03 28,144 29 Federal National Mortgage Association, 7.36%, 4/1/11 3,004,284 3,545 Federal National Mortgage Association, 8.40%, 2/25/09 221,437 221 Federal National Mortgage Association, 11.00%, 12/1/12 27,233 32 Federal National Mortgage Association, 11.00%, 9/1/17 189,782 225 Federal National Mortgage Association, 11.00%, 12/1/17 36,253 43 Federal National Mortgage Association, 11.00%, 2/1/18 90,084 107 Federal National Mortgage Association, 11.50%, 4/1/18 86,613 104 Federal National Mortgage Association, 12.00%, 9/1/12 274,624 328 Federal National Mortgage Association, 12.00%, 12/1/12 64,250 77 Federal National Mortgage Association, 12.00%, 9/1/17 80,515 97 Federal National Mortgage Association, 12.00%, 10/1/17 58,994 71 Federal National Mortgage Association, 12.00%, 12/1/17 67,643 82 Federal National Mortgage Association, 12.00%, 2/1/18 97,698 119 Federal National Mortgage Association, 12.25%, 1/1/18 59,546 72 Federal National Mortgage Association, 12.50%, 4/1/18 35,824 44
80 Select Bond Portfolio
Market Government (Domestic and Foreign) Shares/ Value and Agency Bonds (51.8%) Par (000's) ------------------------------------------------------ Federal Government and Agencies continued Federal National Mortgage Association, 13.00%, 11/1/12 $ 48,557 $ 59 Federal National Mortgage Association, 13.00%, 11/1/17 50,105 62 Federal National Mortgage Association, 13.00%, 12/1/17 52,642 65 Federal National Mortgage Association, 13.00%, 2/1/18 112,578 139 Federal National Mortgage Association, 14.00%, 12/1/17 26,112 33 Government National Mortgage Association, 5.50%, 10/15/31 148,230 152 Government National Mortgage Association, 5.50%, 11/15/31 35,329 36 Government National Mortgage Association, 5.50%, 12/15/31 793,793 816 Government National Mortgage Association, 5.50%, 1/15/32 1,112,980 1,144 Government National Mortgage Association, 5.50%, 2/15/32 472,007 485 Government National Mortgage Association, 5.50%, 2/15/32 84,856 87 Government National Mortgage Association, 5.50%, 3/15/32 912,865 938 Government National Mortgage Association, 5.50%, 4/15/32 41,952 43 Government National Mortgage Association, 5.50%, 7/15/32 73,828 76 Government National Mortgage Association, 5.50%, 9/15/32 15,797,321 16,238 Government National Mortgage Association, 7.00%, 5/15/23 111,340 119 Government National Mortgage Association, 7.50%, 4/15/22 84,383 91 Government National Mortgage Association, 7.50%, 10/15/23 245,317 264 Government National Mortgage Association, 7.50%, 10/15/25 3,319 4 Government National Mortgage Association, 7.50%, 11/15/25 4,416 5 Government National Mortgage Association, 7.50%, 5/15/26 5,092 5 Government National Mortgage Association, 7.50%, 1/15/27 110,903 119 Government National Mortgage Association, 7.50%, 2/15/27 132,608 142 Government National Mortgage Association, 7.50%, 3/15/27 22,065 24 Government National Mortgage Association, 7.50%, 4/15/27 30,531 33 Government National Mortgage Association, 7.50%, 8/15/27 4,064 4 Government National Mortgage Association, 7.50%, 6/15/28 192,170 205 Government National Mortgage Association, 8.00%, 1/15/26 119,937 131
Market Government (Domestic and Foreign) Shares/ Value and Agency Bonds (51.8%) Par (000's) ----------------------------------------------------------- Federal Government and Agencies continued Government National Mortgage Association, 8.00%, 2/15/26 $ 179,309 $ 195 Government National Mortgage Association, 8.00%, 8/15/26 222,931 243 Government National Mortgage Association, 8.00%, 9/15/26 92,448 101 Government National Mortgage Association, 8.00%, 12/15/26 29,374 32 Government National Mortgage Association, 8.00%, 1/15/27 90,876 99 Government National Mortgage Association, 8.00%, 3/15/27 170,040 185 Government National Mortgage Association, 8.00%, 4/15/27 397,207 432 Government National Mortgage Association, 8.00%, 6/15/27 114,323 124 Government National Mortgage Association, 8.00%, 7/15/27 131,189 143 Government National Mortgage Association, 8.00%, 8/15/27 102,990 112 Government National Mortgage Association, 8.00%, 9/15/27 108,336 118 Government National Mortgage Association, 8.50%, 9/15/21 5,916 7 Government National Mortgage Association, 8.50%, 3/15/23 859 1 Government National Mortgage Association, 8.50%, 6/15/23 687 1 Government National Mortgage Association, 8.50%, 6/15/24 31,017 34 Government National Mortgage Association, 8.50%, 7/15/24 48,660 53 Government National Mortgage Association, 8.50%, 11/15/24 200,600 221 Government National Mortgage Association, 8.50%, 2/15/25 23,773 26 Government National Mortgage Association, 11.00%, 1/15/18 1,789,245 2,075 Government National Mortgage Association TBA, 5.50%, 12/1/25 11,000,000 11,067 Government National Mortgage Association TBA, 5.50%, 2/15/32 3,400,000 3,473 Housing & Urban Development, 6.08%, 8/1/13 4,000,000 4,512 Housing & Urban Development, 6.17%, 8/1/14 3,000,000 3,390 Rural Housing Trust 1987-1, Series 1, Class D, 6.33%, 4/1/26 565,851 584 US Treasury, 2.125%, 10/31/04 2,150,000 2,174 US Treasury, 3.00%, 1/31/04 2,700,000 2,750 US Treasury, 3.00%, 2/29/04 15,619,000 15,930 US Treasury, 3.25%, 5/31/04 25,000,000 25,666 US Treasury, 3.25%, 8/15/07 3,010,000 3,085 US Treasury, 3.50%, 11/15/06 944,000 982 US Treasury, 3.625%, 3/31/04 3,500,000 3,601 US Treasury, 4.375%, 5/15/07 8,400,000 9,020
81 Select Bond Portfolio
Market Government (Domestic and Foreign) Shares/ Value and Agency Bonds (51.8%) Par (000's) --------------------------------------------------------- Federal Government and Agencies continued US Treasury, 4.625%, 2/28/03 $ 4,145,000 $ 4,167 US Treasury, 4.75%, 11/15/08 2,600,000 2,838 US Treasury, 5.375%, 2/15/31 21,956,000 23,935 US Treasury, 6.25%, 5/15/30 2,502,000 2,994 US Treasury Bond, 6.50%, 5/15/05 61,150,000 67,878 US Treasury Inflation Index Bond, 3.375%, 1/15/07 6,689,026 7,244 US Treasury Inflation Index Bond, 3.625%, 1/15/08 26,701,696 29,297 US Treasury Inflation Index Bond, 3.875%, 4/15/29 4,796,093 5,865 US Treasury Stripped, 0.00%, 5/15/30 25,820,000 6,250 -------- Total Government (Domestic and Foreign) and Agency Bonds (Cost:3 $290,608) 302,680 -------- Mortgage/Asset Backed Securities (9.7%) --------------------------------------------------------- Auto Related (0.0%) Fleetwood Credit Corporation Grantor Trust, Series 1997-B, Class A, 6.40%, 5/15/13 258,686 267 -------- Total 267 -------- Boat Dealers (0.1%) Nationscredit Grantor Trust, Series 1997-2, Class A1, 6.35%, 4/15/14 456,759 463 -------- Total 463 -------- Commercial Banks (0.5%) Nationsbank Lease Pass-Through Trust, Series 1997-A, Class 1, 7.442%, 1/10/11 144A 2,462,108 2,750 -------- Total 2,750 -------- Commercial Mortgages (7.1%) Asset Securitization Corp., Series 1996-MD6, Class CS1, 1.632%, 11/13/26 IO 4,099,129 24 Asset Securitization Corp., Series 1996-MD6, Class CS2, 1.098%, 11/13/26 IO 85,000,000 941 Asset Securitization Corp., Series 1997-D5, Class PS1, 1.616%, 2/14/41 IO 11,252,900 756 Chase Commercial Mortgage Securities Corp., Series 1997-1, Class B, 7.37%, 4/19/07 1,000,000 1,151 Chase Commercial Mortgage Securities Corp., Series 1997-2, Class A2, 6.60%, 11/19/07 5,000,000 5,579 Chase Commercial Mortgage Securities Corp., Series 1997-2, Class B, 6.60%, 11/19/07 2,000,000 2,238 Commercial Mortgage Acceptance Corp., Series 1997-ML1, Class B, 6.644%, 12/15/07 2,000,000 2,211
Market Mortgage/Asset Backed Shares/ Value Securities (9.7%) Par (000's) -------------------------------------------------------- Commercial Mortgages continued Credit Suisse First Boston Mortgage Securities Corp., Series 1997-C1, Class A2, 7.26%, 6/20/07 144A $ 1,331,054 $ 1,483 Credit Suisse First Boston Mortgage Securities Corp., Series 1997-C1, Class B, 7.28%, 6/20/07 144A 1,500,000 1,702 Criimi Mae Commercial Mortgage Trust, Series 1998-C1, Class A1, 7.00%, 11/2/06 144A 3,000,000 3,244 Criimi Mae Commercial Mortgage Trust, Series 1998-C1, Class B, 7.00%, 11/2/11 144A 4,000,000 3,973 DLJ Commercial Mortgage Corp., Series 1998-CF1, Class S, 0.70%, 1/15/18 IO 111,970,014 3,454 DLJ Mortgage Acceptance Corp., Series 1997-CF2, Class S, 0.35%, 10/15/17 IO 144A 93,196,038 1,751 The Equitable Life Assurance Society, Series 174, Class C1, 7.52%, 5/15/06 144A 2,000,000 2,249 Midland Realty Acceptance Corp., Series 1996-C2, Class AEC, 1.35%, 1/25/29 IO 144A 10,437,034 460 Mortgage Capital Funding, Inc., Series 1997-MC1, Class A3, 7.28%, 3/20/07 5,323,000 6,050 Nomura Asset Securities Corporation, Series 1998-D6, Class A2, 6.99%, 3/17/28 2,800,000 3,231 RMF Commercial Mortgage Pass- Through, Series 1997-1, Class F, 7.47%, 1/15/19 144A 1,800,000 920 -------- Total 41,417 -------- Credit Card Asset Backed (0.0%) Heilig-Meyers Master Trust, Series 1998-1A, Class A, 6.125%, 1/20/07 144A 1,108,517 6 -------- Total 6 -------- Franchise Loan Receivables (0.2%) Enterprise Mortgage Acceptance Co., Series 1998-1, Class IO, 1.37%, 1/15/23 IO 144A 25,644,324 833 Global Franchise Trust, Series 1998-1, Class A1, 6.35%, 4/10/04 144A 233,414 229 -------- Total 1,062 -------- Home Equity Loan (0.4%) Vanderbilt Mortgage Finance, Inc., Series 1997-B, Class 1A4, 7.19%, 2/7/14 2,096,751 2,164 -------- Total 2,164 --------
82 Select Bond Portfolio
Market Mortgage/Asset Backed Shares/ Value Securities (9.7%) Par (000's) --------------------------------------------------------- Commercial Mortgages continued Manufactured Housing (0.1%) Mid-State Trust, Series 6, Class A3, 7.54%, 7/1/35 $ 761,105 $ 784 -------- Total 784 -------- Residential Mortgages (0.1%) Blackrock Capital Finance LP, Series 1997-R1, Class B3, 7.75%, 3/25/37 144A 2,246,011 146 Blackrock Capital Finance LP, Series 1997-R3, Class B3, 7.25%, 11/25/28 144A 3,965,446 397 -------- Total 543 -------- Retail-Retail Stores (1.2%) LB Mortgage Trust, Series 1991-2, Class A3, 8.40%, 1/20/17 6,083,409 7,118 -------- Total 7,118 -------- Total Mortgage/Asset Backed Securities (Cost: $61,131) 56,574 -------- Money Market Investments (17.9%) --------------------------------------------------------- Asset-Backed Securities (CMO'S) (0.9%) # Fcar Owner Trust 1, 1.35%, 2/4/03 5,000,000 4,994 -------- Total 4,994 -------- Federal Government and Agencies (0.3%) Federal Home Loan Bank, 1.24%, 3/7/03 1,600,000 1,597 -------- Total 1,597 -------- Finance Lessors (0.9%) #Receivables Capital Corp., 1.35%, 1/21/03 5,000,000 4,996 -------- Total 4,996 -------- Finance Services (0.9%) Ciesco LP, 1.33%, 1/30/03 5,000,000 4,995 -------- Total 4,995 -------- Financials (0.8%) Salomon Smith Barney Holdings, 2.06%, 4/9/03 4,830,000 4,832 -------- Total 4,832 -------- Machinery (0.5%) John Deere Capital Corp., 1.64%, 1/7/03 3,000,000 2,999 -------- Total 2,999 -------- Miscellaneous Business Credit Institutions (1.5%) National Rural Utility Co., 1.38%, 1/13/03 5,000,000 4,998 Quincy Capital Corp., 1.35%, 1/6/03 4,400,000 4,399 -------- Total 9,397 --------
Market Money Market Investments Shares/ Value (17.9%) Par (000's) ------------------------------------------------------------ Miscellaneous Manufacturing Industries (0.9%) Koch Industries, 1.20%, 1/2/03 $ 5,880,000 $ 5,880 -------- Total 5,880 -------- Nonclassifiable Establishments (0.8%) Thunder Bay Funding, Inc, 1.35%, 1/7/03 5,000,000 4,999 -------- Total 4,999 -------- Passenger Car Rental (0.9%) Delaware Funding Corp., 1.35%, 1/7/03 5,000,000 4,999 -------- Total 4,999 -------- Personal Credit Institutions (0.9%) Toyota Motor Credit Co., 1.32%, 1/23/03 5,000,000 4,996 -------- Total 4,996 -------- Pharmaceutical Preparations (0.9%) Wyeth, 1.85%, 1/7/03 5,000,000 4,998 -------- Total 4,998 -------- Security Brokers and Dealers (0.9%) Morgan St. Dean Witter, 1.32%, 2/4/03 5,000,000 4,994 -------- Total 4,994 -------- Short Term Business Credit (5.9%) American Express Credit, 1.25%, 2/4/03 5,000,000 4,994 Asset Securitization, 1.33%, 1/8/03 5,000,000 4,998 CXC Inc., 1.76%, 1/17/03 5,000,000 4,996 Old Line Funding Corp., 1.38%, 1/15/03 5,000,000 4,997 Preferred Receivable Funding, 1.35%, 1/27/03 5,000,000 4,995 Transamerica Financial Corp., 1.33%, 1/17/03 5,000,000 4,997 UBS Finance LLC, 1.32%, 2/10/03 5,000,000 4,993 -------- Total 34,970 -------- Tobacco Products (0.9%) Philip Morris Disc, 1.31%, 1/27/03 5,000,000 4,995 -------- Total 4,995 -------- Total Money Market Investments (Cost: $104,641) 104,641 -------- Total Investments (107.8%) (Cost $612,654)` 629,653 -------- Other Assets, Less Liabilities (-7.8%) (45,635) -------- Total Net Assets (100.0%) $584,018 --------
83 Select Bond Portfolio ` At 12/31/2002 the aggregate cost of securities for federal tax purposes was $621,308 and the net unrealized appreciation of investments based on that cost was $8,345 which is comprised of $30,096 aggregate gross unrealized appreciation and $21,751 aggregate gross unrealized depreciation. 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. IO -- Interest Only Security ++Defaulted Security # All or a portion of the securities have been committed as collateral for open futures positions. Information regarding open futures contracts as of period end is summarized below:
Unrealized Number Appreciation / of Expiration (Depreciation) Issuer (000's) Contracts Date (000's) ------------------------------------------------------ US TEN YEAR TREASURY NOTE 87 3/03 $(190) (Total Notional Value at 12/31/02 $9,819)
The Accompanying Notes are an Integral Part of the Financial Statements 84 Money Market Portfolio - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: Maximum current income consistent Achieve stability of capital by investing in short-term debt $501.31 million with liquidity and stability of capital securities.
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, providing a moderate return in line with prevailing short-term interest rates. In a year in which stock values declined significantly, the Money Market Portfolio has surpassed returns of most equity funds and indices, with a return of 1.65% for the 12 months ending December 2002. The main determinant of returns from the Money Market Portfolio is short-term interest rates in general. After dropping significantly in 2001, short-term interest rates were fairly stable during 2002; the Fed reduced the targeted Federal Funds rate just once, in November, from 1.75% to 1.25%. Aware that rates could change in either direction in the future, we have positioned the Portfolio for more nimble action. We now anticipate maintaining a maturity range of 30 to 80 days, versus 35 to 50 days in the past and an industry average of approximately 50 to 55 days. During 2002, quality commercial paper became increasingly scarce, as the debt of many issuers was downgraded, and rating agencies pressured corporations to replace short-term debt with bonds with longer maturities. With fewer issuers, it has become more difficult to diversify risk in a money market portfolio. In order to maintain credit risk at the desired level, we are buying more Treasury bills and government-guaranteed agency discount notes. Although yields on these securities are below those on commercial paper, all short-term rates are so low now that the income sacrificed is minimal. 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. 85 Money Market Portfolio Northwestern Mutual Series Fund, Inc. Schedule of Investments December 31, 2002
Market Shares/ Value Short Term Paper (92.1%) Par (000's) --------------------------------------------------------- Agricultural Services (1.9%) Cargill Inc., 1.32%, 3/21/03 $ 9,740,000 $ 9,712 -------- Total 9,712 -------- Asset Backed Security (5.5%) Fcar Owner Trust I, 1.64%, 3/13/03 12,500,000 12,460 New Center Asset Trust, 1.34%, 2/18/03 15,000,000 14,973 -------- Total 27,433 -------- Auto Related (8.1%) BMW U.S. Capital Corp., 1.31%, 1/15/03 11,955,000 11,949 Daimler-Chrysler Na Hldg, 1.92%, 1/24/03 4,500,000 4,494 Ford Motor Credit, 1.96%, 1/21/03 4,500,000 4,495 General Motors Corp., 1.95%, 1/9/03 4,500,000 4,498 Toyota Motor Credit Co., 1.31%, 1/30/03 15,000,000 14,985 -------- Total 40,421 -------- Commercial Banks (7.5%) Dresdner, 1.32%, 2/11/03 12,500,000 12,481 Marshall &Isley Bank, 1.37%, 1/31/03 10,000,000 9,989 UBS Finance LLC, 1.3%, 3/18/03 15,000,000 14,959 -------- Total 37,429 -------- Diversified Business Finance (3.0%) General Electric, 1.84%, 7/9/03 5,000,000 5,000 General Electric Capital, 1.31%, 2/14/03 5,000,000 4,992 General Electric Capital, 1.77%, 6/16/03 5,000,000 4,959 -------- Total 14,951 -------- Finance Lessors (3.0%) Receivables Capital Corp., 1.32%, 1/17/03 6,000,000 5,996 Receivables Capital Corp., 1.77%, 1/27/03 9,220,000 9,209 -------- Total 15,205 -------- Finance Services (11.6%) American General, 1.37%, 2/6/03 13,000,000 12,981 Asset Securitization, 1.32%, 1/21/03 10,000,000 9,993 Asset Securitization, 1.34%, 1/17/03 5,000,000 4,997 Ciesco LP, 1.34%, 1/22/03 10,080,000 10,072 Ciesco LP, 1.77%, 1/10/03 5,190,000 5,188 Preferred Receivable Funding, 1.32%, 1/13/03 11,500,000 11,495
Market Shares/ Value Short Term Paper (92.1%) Par (000's) ---------------------------------------------------------- Finance Services continued Preferred Receivable Funding, 1.35%, 1/24/03 $ 4,000,000 $ 3,997 -------- Total 58,723 -------- Government (8.1%) Federal Home Loan Bank, 1.53%, 3/26/03 15,925,000 15,868 Federal National Mortgage Association, 1.26%, 3/19/03 15,000,000 14,960 U.S. Treasury Bill, 1.515%, 4/10/03 10,000,000 9,958 -------- Total 40,786 -------- Machinery ( 3.5%) Catepillar Financial, 1.31%, 1/14/03 8,715,000 8,711 Caterpillar Financial Services Corp., 1.92%, 6/1/03 4,000,000 4,000 John Deere Capital Corp., 1.64%, 1/7/03 5,000,000 4,999 -------- Total 17,710 -------- Miscellaneous Business Credit Institutions (5.3%) Delaware Funding Corp., 1.31%, 2/3/03 12,900,000 12,885 Quincy Capital Corp., 1.35%, 1/31/03 13,772,000 13,756 -------- Total 26,641 -------- Miscellaneous Manufacturing Industries (3.5%) Koch Industries, 1.20%, 1/2/03 17,790,000 17,789 -------- Total 17,789 -------- National Commercial Banks (0.6%) Marshall & Ilsley Corp., 1.34%, 1/17/03 3,000,000 2,998 -------- Total 2,998 -------- Nonclassifiable Establishments (3.1%) Thunder Bay Funding, Inc., 1.33%, 1/24/03 9,535,000 9,527 Thunder Bay Funding, Inc., 1.35%, 1/10/03 6,000,000 5,998 -------- Total 15,525 -------- Personal Credit Institutions (8.1%) American Express Credit, 1.32%, 1/14/03 10,500,000 10,495 American Express Credit, 1.32%, 1/31/03 12,500,000 12,486 Associates First Capital Corp., 1.86%, 6/26/03 5,000,000 5,000
86 Money Market Portfolio
Market Shares/ Value Short Term Paper (92.1%) Par (000's) -------------------------------------------------------- Personal Credit Institutions continued Household Finance Corp., 1.55%, 1/21/03 $ 6,200,000 $ 6,195 Household Finance Corp., 1.60%, 2/5/03 6,200,000 6,190 -------- Total 40,366 -------- Pharmaceutical Preparations (2.5%) Wyeth, 1.78%, 2/4/03 6,200,000 6,190 Wyeth, 1.85%, 1/6/03 6,300,000 6,298 -------- Total 12,488 -------- Security Brokers and Dealers (6.2%) Goldman Sachs Group, Inc., 1.89%, 3/5/03 5,000,000 5,000 Goldman Sachs Group, Inc., 1.78%, 2/3/03 11,720,000 11,701 Morgan St. Dean Witter, 1.32%, 2/4/03 9,000,000 8,989 Salomon Smith Barney Hlds., 1.33%, 2/24/03 5,300,000 5,289 -------- Total 30,979 -------- Short Term Business Credit (5.7%) CXC Inc., 1.33%, 2/3/03 10,355,000 10,342 CXC Inc., 1.34%, 2/6/03 3,150,000 3,146 Old Line Funding Corp., 1.31%, 2/6/03 10,000,000 9,987 Old Line Funding Corp., 1.34%, 2/7/03 5,000,000 4,993 -------- Total 28,468 -------- Telephone Communications (1.0%) BellSouth Corp., 4.105%, 4/26/03 5,000,000 5,023 -------- Total 5,023 -------- Tobacco Products (2.6%) Philip Morris Companies, Inc., 1.32%, 2/4/03 10,000,000 9,987 Philip Morris Companies, Inc., 1.33%, 1/21/03 3,000,000 2,998 -------- Total 12,985 --------
Market Shares/ Value Short Term Paper (92.1%) Par (000's) ----------------------------------------------------------- Utility -- Electric (1.3%) National Rural Utility, 1.40%, 1/27/03 $ 6,300,000 $ 6,294 -------- Total 6,294 -------- Total Short Term Paper (Cost: $461,926) 461,926 -------- Corporate Bonds Domestic (7.9%) ----------------------------------------------------------- Security Brokers and Dealers (3.7%) Merrill Lynch Co., Inc., 4.97%, 4/30/03 2,500,000 2,518 Merrill Lynch Co., Inc., 7.18%, 2/11/03 3,100,000 3,116 Merrill Lynch Co., Inc., 7.85%, 3/01/03 4,000,000 4,083 Morgan Stanley Dean Witter, 6.875%, 3/1/03 3,700,000 3,728 Salomon Smith Barney Holdings, Inc., 7.50%, 2/1/03 5,000,000 5,024 -------- Total 18,469 -------- Short Term Business Credit (2.8%) Transamerica Financial Corp., 1.31%, 2/10/03 14,000,000 13,980 -------- Total 13,980 -------- Utility -- Electric (1.4%) National Rural Utilities, 7.375%, 2/10/03 7,000,000 7,036 -------- Total 7,036 -------- Total Corporate Bonds Domestic (Cost: $39,485) 39,485 -------- Total Investments (100.0%) (Cost $501,411)` 501,411 -------- Other Assets, Less Liabilities (0.0%) (98) -------- Total Net Assets (100.0%) $501,313 --------
` Also represents cost for federal income tax purposes. The Accompanying Notes are an Integral Part of the Financial Statements 87 Accountants' Report [GRAPHIC] PricewaterhouseCoopers PricewaterhouseCoopers LLP 100 E. Wisconsin Ave. Suite 1500 Milwaukee WI 53202 Telephone (414) 212-1600 Facsimile (414) 212-1880 Report of Independent Accountants To the Shareholders and Board of Directors of Northwestern Mutual Series Fund, Inc. In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Small Cap Growth Stock Portfolio, T. Rowe Price Small Cap Value Portfolio, Aggressive Growth Stock Portfolio, International Growth Portfolio, Franklin Templeton International Equity Portfolio, Index 400 Stock Portfolio, Growth Stock Portfolio, J.P. Morgan Select Growth and Income Stock Portfolio, Capital Guardian Domestic Equity Portfolio, Index 500 Stock Portfolio, Asset Allocation Portfolio, Balanced Portfolio, High Yield Bond Portfolio, Select Bond Portfolio and Money Market Portfolio (constituting Northwestern Mutual Series Fund, Inc., hereafter referred to as the "Fund") at December 31, 2002 and the results of each of their operations, the changes in each of their net assets and their financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2002 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Milwaukee, Wisconsin January 31, 2003 88 (This page intentionally left blank.) 89 Statements of Assets and Liabilities Northwestern Mutual Series Fund, Inc. December 31, 2002 (in thousands, except per share amounts)
Franklin Templeton Small Cap T. Rowe Price Aggressive International International Index 400 Growth Stock Small Cap Value Growth Stock Growth Equity Stock Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio - --------------------------------------------------------------------------------------------------------------------------- Assets Investments, at value (1).............. $ 255,193 $ 61,653 $ 996,827 $ 35,383 $ 562,544 $ 225,064 Cash................................... -- 1,725 -- 116 97 207 Due from Futures Variation Margin...... -- -- -- -- -- 55 Due from Sale of Fund Shares........... -- -- -- 41 209 -- Due from Sale of Securities............ -- 26 -- 5 -- -- Due from Sale of Foreign Currency...... -- -- -- 224 -- -- Dividends and Interest Receivable...... 18 90 227 93 1,164 153 ---------- ---------- ---------- ---------- ---------- ---------- Total Assets......................... 255,211 63,494 997,054 35,862 564,014 225,479 ---------- ---------- ---------- ---------- ---------- ---------- Liabilities Due on Purchase of Securities and Securities Lending Collateral......... 185 309 2,496 221 -- -- Due on Purchase of Foreign Currency.... -- -- -- 228 -- -- Due on Redemption of Fund Shares....... -- -- -- 1 506 -- Due to Investment Advisor.............. 133 82 467 14 353 50 Accrued Expenses....................... 13 20 16 25 53 19 Due on Futures Variation Margin........ -- -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- Total Liabilities.................... 331 411 2,979 489 912 69 ---------- ---------- ---------- ---------- ---------- ---------- Net Assets........................... $ 254,880 $ 63,083 $ 994,075 $ 35,373 $ 563,102 $ 225,410 ========== ========== ========== ========== ========== ========== Represented By: Aggregate Paid in Capital (2), (3)..... $ 316,909 $ 67,686 $1,251,056 $ 42,335 $ 746,099 $ 260,933 Undistributed Accumulated Net Investment Income (Loss).............. -- 36 -- (5) 10,960 1,961 Undistributed Accumulated Net Realized Gain (Loss) on Investments............ (45,904) (305) (216,890) (4,623) (74,953) (4,475) Net Unrealized Appreciation (Depreciation) of: Investment Securities................ (16,125) (4,334) (40,091) (2,336) (119,088) (32,896) Futures Contracts.................... -- -- -- -- -- (113) Foreign Currency Transactions........ -- -- -- 2 84 -- ---------- ---------- ---------- ---------- ---------- ---------- Net Assets for Shares Outstanding (2).. $ 254,880 $ 63,083 $ 994,075 $ 35,373 $ 563,102 $ 225,410 ========== ========== ========== ========== ========== ========== Net Asset Value, Offering and Redemption Price per Share............ $ 1.46 $ 0.95 $ 2.18 $ 0.79 $ 1.02 $ 0.95 ========== ========== ========== ========== ========== ========== (1) Investments, at cost................. $ 271,318 $ 65,987 $1,036,918 $ 37,719 $ 681,632 $ 257,960 (2) Shares outstanding................... 175,132 66,203 455,396 44,768 549,889 236,841 (3) Shares authorized, $.01 par value.... 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000
The Accompanying Notes are an Integral Part of the Financial Statements. 90
J.P. Morgan Select Growth and Income Capital Guardian High Yield Growth Stock Stock Domestic Equity Index 500 Stock Asset Allocation Balanced Bond Select Bond Money Market Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio - ------------------------------------------------------------------------------------------------------------------------------- $ 551,818 $ 365,736 $ 74,151 $1,362,613 $ 87,061 $2,704,286 $ 134,086 $ 629,653 $ 501,411 -- -- 228 -- 137 -- 240 664 -- 6 -- -- 27 11 369 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 1 2,300 14 -- -- -- -- -- -- 1 -- -- -- -- 450 485 167 2,116 443 14,107 3,289 5,605 740 ---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- 552,274 366,221 74,546 1,364,756 87,654 2,721,062 137,629 635,922 502,151 ---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- 631 77 220 1,604 301 158,860 -- 51,648 838 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 211 190 42 243 61 673 61 152 -- 11 10 10 28 32 -- 15 1 -- -- -- -- -- -- -- -- 103 -- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- 853 277 272 1,875 394 159,533 76 51,904 838 ---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- $ 551,421 $ 365,944 $ 74,274 $1,362,881 $ 87,260 $ 2,561,529 $ 137,553 $ 584,018 $ 501,313 ========== ========== ========== ========== ========== =========== ========== ========== ========== $ 662,923 $ 572,953 $ 89,159 $1,310,825 $ 96,076 $ 2,179,629 $ 231,614 $ 538,100 $ 501,313 4,774 3,769 17 21,934 (2) 85,237 159 24,109 -- (118,121) (81,452) (3,894) 4,657 (4,829) (59,822) (84,324) 5,000 -- 1,919 (129,326) (11,008) 25,814 (3,731) 365,951 (9,896) 16,999 -- (74) -- -- (349) (254) (9,466) -- (190) -- -- -- -- -- -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- $ 551,421 $ 365,944 $ 74,274 $1,362,881 $ 87,260 $ 2,561,529 $ 137,553 $ 584,018 $ 501,313 ========== ========== ========== ========== ========== =========== ========== ========== ========== $ 1.59 $ 0.87 $ 0.76 $ 2.17 $ 0.86 $ 1.62 $ 0.56 $ 1.27 $ 1.00 ========== ========== ========== ========== ========== =========== ========== ========== ========== $ 549,899 $ 495,062 $ 85,159 $1,336,799 $ 90,792 $ 2,338,335 $ 143,982 $ 612,654 $ 501,411 347,218 421,624 97,978 629,065 101,691 1,579,113 244,296 459,566 501,334 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 3,000,000 2,000,000 1,000,000 2,000,000
91 Statements of Operations Northwestern Mutual Series Fund, Inc. For the Year Ended December 31, 2002 (in thousands)
Franklin Templeton Small Cap T. Rowe Price Aggressive International International Index 400 Growth Stock Small Cap Value Growth Stock Growth Equity Stock Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio - -------------------------------------------------------------------------------------------------------------------------------- Investment Income Income........................................ Interest..................................... $ 652 $ 37 $ 2,271 $ 23 $ 817 $ 256 Dividends (1)................................ 272 707 2,484 534 15,441 2,342 -------- ------- --------- ------- --------- -------- Total Income.............................. 924 744 4,755 557 16,258 2,598 -------- ------- --------- ------- --------- -------- Expenses Management Fees.............................. 1,625 412 6,030 243 4,396 571 Custodian Expenses........................... 23 67 24 102 475 45 Other Expenses............................... -- -- -- 3 2 -- Audit Fees................................... 18 13 19 18 23 18 Shareholder Reporting Expenses............... 2 1 1 -- -- 5 -------- ------- --------- ------- --------- -------- Total Expenses............................ 1,668 493 6,074 366 4,896 639 -------- ------- --------- ------- --------- -------- Less Waived Fees: Paid by Affiliate......................... -- (9) -- (10) -- -- Paid Indirectly........................... (4) (1) (5) -- -- (4) -------- ------- --------- ------- --------- -------- Total Net Expenses........................ 1,664 483 6,069 356 4,896 635 -------- ------- --------- ------- --------- -------- Net Investment Income (Loss)................. (740) 261 (1,314) 201 11,362 1,963 Realized and Unrealized Gain (Loss) on Investments and Foreign Currencies Net Realized Gain (Loss) on: Investment Securities........................ (17,952) (107) (186,384) (3,545) (59,141) 508 Futures Contracts............................ (598) (128) (10,475) -- -- (1,958) Foreign Currency Transactions................ -- -- -- (4) (323) -- -------- ------- --------- ------- --------- -------- Net Realized Gain (Loss) on Investments.............................. (18,550) (235) (196,859) (3,549) (59,464) (1,450) -------- ------- --------- ------- --------- -------- Net Unrealized Appreciation (Depreciation) of Investments for the Period: Investment Securities........................ (38,361) (5,490) (79,605) (1,089) (65,979) (38,601) Futures Contracts............................ (291) -- (255) -- -- (313) Foreign Currency Transactions................ -- -- -- (7) 46 -- -------- ------- --------- ------- --------- -------- Net Unrealized Appreciation (Depreciation) of Investments for the Period............................... (38,652) (5,490) (79,860) (1,096) (65,933) (38,914) -------- ------- --------- ------- --------- -------- Net Gain (Loss) on Investments................ (57,202) (5,725) (276,719) (4,645) (125,397) (40,364) -------- ------- --------- ------- --------- -------- Net Increase (Decrease) in Net Assets Resulting from Operations................................ $(57,942) $(5,464) $(278,033) $(4,444) $(114,035) $(38,401) ======== ======= ========= ======= ========= ======== (1) Less Foreign dividend tax................. $ -- $ -- $ 1 $ 66 $ 1,608 $ --
The Accompanying Notes are an Integral Part of the Financial Statements. 92
J.P. Morgan Select Growth and Income Capital Guardian Index 500 Asset High Yield Growth Stock Stock Domestic Equity Stock Allocation Balanced Bond Select Bond Money Market Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio - ---------------------------------------------------------------------------------------------------------------- $ 997 $ 164 $ 64 $ 404 $ 1,563 $ 75,118 $ 14,591 $25,689 $8,907 6,463 6,174 1,241 24,835 327 18,657 828 -- -- - ----------- --------- -------- --------- ------- --------- -------- ------- ------ 7,460 6,338 1,305 25,239 1,890 93,775 15,419 25,689 8,907 - ----------- --------- -------- --------- ------- --------- -------- ------- ------ 2,655 2,542 380 3,142 387 8,318 716 1,452 1,401 14 8 17 69 146 -- 18 -- -- -- -- -- -- -- -- -- -- -- 19 19 9 19 15 -- 21 -- -- 1 2 1 7 13 -- 6 -- -- - ----------- --------- -------- --------- ------- --------- -------- ------- ------ 2,689 2,571 407 3,237 561 8,318 761 1,452 1,401 - ----------- --------- -------- --------- ------- --------- -------- ------- ------ -- -- -- -- (78) -- -- -- (130) (3) (3) (1) (4) (1) -- (1) -- -- - ----------- --------- -------- --------- ------- --------- -------- ------- ------ 2,686 2,568 406 3,233 482 8,318 760 1,452 1,271 - ----------- --------- -------- --------- ------- --------- -------- ------- ------ 4,774 3,770 899 22,006 1,408 85,457 14,659 24,237 7,636 (60,577) (51,494) (3,717) 10,195 (3,079) 30,825 (18,912) 10,356 -- (4,409) -- -- (2,638) (1,545) (68,166) -- 182 -- -- -- -- -- -- -- -- 74 -- - ----------- --------- -------- --------- ------- --------- -------- ------- ------ (64,986) (51,494) (3,717) 7,557 (4,624) (37,341) (18,912) 10,612 -- - ----------- --------- -------- --------- ------- --------- -------- ------- ------ (86,277) (105,636) (11,278) (431,637) (3,606) (263,210) (272) 20,663 -- (410) -- -- (467) (285) (10,553) -- (190) -- -- -- -- -- -- -- -- -- -- - ----------- --------- -------- --------- ------- --------- -------- ------- ------ (86,687) (105,636) (11,278) (432,104) (3,891) (273,763) (272) 20,473 -- - ----------- --------- -------- --------- ------- --------- -------- ------- ------ (151,673) (157,130) (14,995) (424,547) (8,515) (311,104) (19,184) 31,085 -- - ----------- --------- -------- --------- ------- --------- -------- ------- ------ $(146,899) $(153,360) $(14,096) $(402,541) $(7,107) $(225,647) $ (4,525) $55,322 $7,636 =========== ========= ======== ========= ======= ========= ======== ======= ====== $ -- $ 12 $ 8 $ 57 $ 20 $ 33 $ -- $ -- $ --
93 Statement of Changes in Net Assets Northwestern Mutual Series Fund, Inc.
For the For the Year Ended Year Ended December 31, December 31, Small Cap Growth Stock Portfolio 2002 2001 - ------------------------------------------------------------------------------- (in thousands) Changes in Net Assets Operations Net Investment Income (Loss)...................... $ (740) $ 433 Net Realized Gain (Loss) on Investments........... (18,550) (22,674) Net Unrealized Appreciation (Depreciation) of Investments for the Period...................... (38,652) 13,879 -------- -------- Net Increase (Decrease) in Net Assets Resulting from Operations...................... (57,942) (8,362) -------- -------- Distributions to Shareholders from: Net Investment Income............................. (432) (19) Net Realized Gain on Investments.................. -- (5) -------- -------- Net Decrease in Net Assets Resulting from Distributions to Shareholders.................. (432) (24) -------- -------- Fund Share Transactions Proceeds from Sale of 38,312 and 45,505 Shares.... 63,816 78,169 Proceeds from Shares Issued on Reinvestment of Distributions Paid (233 and 13 shares, respectively)................................... 432 24 Payments for 26,639 and 17,164 Shares Redeemed.... (42,442) (28,673) -------- -------- Net Increase (Decrease) in Net Assets Resulting from Fund Share Transactions (11,906 and 28,354 shares, respectively)....... 21,806 49,520 -------- -------- Total Increase (Decrease) in Net Assets............. (36,568) 41,134 Net Assets Beginning of Period............................... 291,448 250,314 -------- -------- End of Period (Includes undistributed net investment income of $0 and $433, respectively)................................... $254,880 $291,448 ======== ========
For the period For the July 31, 2001** Year Ended through December 31, December 31, T. Rowe Price Small Cap Value Portfolio 2002 2001 - ---------------------------------------------------------------------------------- (in thousands) Changes in Net Assets Operations Net Investment Income (Loss)...................... $ 261 $ 52 Net Realized Gain (Loss) on Investments........... (235) 12 Net Unrealized Appreciation (Depreciation) of Investments for the Period...................... (5,490) 1,156 -------- ------- Net Increase (Decrease) in Net Assets Resulting from Operations...................... (5,464) 1,220 -------- ------- Distributions to Shareholders from: Net Investment Income............................. (330) (51) Net Realized Gain on Investments.................. (20) -- -------- ------- Net Decrease in Net Assets Resulting from Distributions to Shareholders.................. (350) (51) -------- ------- Fund Share Transactions Proceeds from Sale of 55,011 and 22,033 Shares.... 57,721 21,131 Proceeds from Shares Issued on Reinvestment of Distributions Paid (358 and 50 shares, respectively)................................... 350 51 Payments for 9,858 and 1,391 Shares Redeemed...... (10,177) (1,348) -------- ------- Net Increase (Decrease) in Net Assets Resulting from Fund Share Transactions (45,511 and 20,692 shares, respectively)....... 47,894 19,834 -------- ------- Total Increase (Decrease) in Net Assets............. 42,080 21,003 Net Assets Beginning of Period............................... 21,003 -- -------- ------- End of Period (Includes undistributed net investment income of $36 and $10, respectively)................................... $ 63,083 $21,003 ======== =======
**Portfolio commenced operations July 31, 2001. The Accompanying Notes are an Integral Part of the Financial Statements. 94 Statement of Changes in Net Assets Northwestern Mutual Series Fund, Inc.
For the For the Year Ended Year Ended December 31, December 31, Aggressive Growth Stock Portfolio 2002 2001 - ----------------------------------------------------------------------------------- (in thousands) Changes in Net Assets Operations Net Investment Income (Loss)....................... $ (1,314) $ 1,100 Net Realized Gain (Loss) on Investments............ (196,859) 8,908 Net Unrealized Appreciation (Depreciation) of Investments for the Period....................... (79,860) (348,808) ---------- ---------- Net Increase (Decrease) in Net Assets Resulting from Operations....................... (278,033) (338,800) ---------- ---------- Distributions to Shareholders from: Net Investment Income.............................. (1,101) (1,517) Net Realized Gain on Investments................... (24,420) (310,659) ---------- ---------- Net Decrease in Net Assets Resulting from Distributions to Shareholders................... (25,521) (312,176) ---------- ---------- Fund Share Transactions Proceeds from Sale of 39,350 and 86,780 Shares.......................................... 99,265 305,560 Proceeds from Shares Issued on Reinvestment of Distributions Paid (9,223 and 101,785 shares, respectively)........................... 25,521 312,176 Payments for 68,530 and 92,520 Shares Redeemed........................................ (169,033) (320,897) ---------- ---------- Net Increase (Decrease) in Net Assets Resulting from Fund Share Transactions ((19,957) and 96,045 shares, respectively).... (44,247) 296,839 ---------- ---------- Total Increase (Decrease) in Net Assets.............. (347,801) (354,137) Net Assets Beginning of Period................................ 1,341,876 1,696,013 ---------- ---------- End of Period (Includes undistributed net investment income of $0 and $1,100, respectively).................................... $ 994,075 $1,341,876 ========== ========== For the period For the July 31, 2001** Year Ended through December 31, December 31, International Growth Portfolio 2002 2001 - ----------------------------------------------------------------------------------- (in thousands) Changes in Net Assets Operations Net Investment Income (Loss)....................... $ 201 $ 6 Net Realized Gain (Loss) on Investments............ (3,549) (1,110) Net Unrealized Appreciation (Depreciation) of Investments for the Period....................... (1,096) (1,238) ---------- ---------- Net Increase (Decrease) in Net Assets Resulting from Operations....................... (4,444) (2,342) ---------- ---------- Distributions to Shareholders from: Net Investment Income.............................. (186) -- Net Realized Gain on Investments................... -- -- ---------- ---------- Net Decrease in Net Assets Resulting from Distributions to Shareholders................... (186) -- ---------- ---------- Fund Share Transactions Proceeds from Sale of 33,327 and 29,730 Shares..... 28,213 29,286 Proceeds from Shares Issued on Reinvestment of Distributions Paid (239 and 0 shares, respectively).................................... 186 -- Payments for 18,478 and 50 Shares Redeemed......... (15,296) (44) ---------- ---------- Net Increase (Decrease) in Net Assets Resulting from Fund Share Transactions (15,088 and 29,680 shares, respectively)........ 13,103 29,242 ---------- ---------- Total Increase (Decrease) in Net Assets.............. 8,473 26,900 Net Assets Beginning of Period................................ 26,900 -- ---------- ---------- End of Period (Includes undistributed net investment income of ($5) and $0, respectively).................................... $ 35,373 $ 26,900 ========== ==========
**Portfolio commenced operations July 31, 2001. The Accompanying Notes are an Integral Part of the Financial Statements. 95 Statement of Changes in Net Assets Northwestern Mutual Series Fund, Inc.
For the For the Year Ended Year Ended December 31, December 31, Franklin Templeton International Equity Portfolio 2002 2001 - ----------------------------------------------------------------------------------------- (in thousands) Changes in Net Assets Operations Net Investment Income (Loss)................................ $ 11,362 $ 14,894 Net Realized Gain (Loss) on Investments..................... (59,464) (16,599) Net Unrealized Appreciation (Depreciation) of Investments for the Period................................ (65,933) (106,892) --------- ----------- Net Increase (Decrease) in Net Assets Resulting from Operations............................................... (114,035) (108,597) --------- ----------- Distributions to Shareholders from: Net Investment Income....................................... (13,714) (13,356) Net Realized Gain on Investments............................ -- (67,555) --------- ----------- Net Decrease in Net Assets Resulting from Distributions to Shareholders............................ (13,714) (80,911) --------- ----------- Fund Share Transactions Proceeds from Sale of 793,092 and 897,043 Shares............ 933,407 1,261,855 Proceeds from Shares Issued on Reinvestment of Distributions Paid (10,614 and 57,917 shares, respectively)............................................. 13,714 80,911 Payments for 821,108 and 883,476 Shares Redeemed............ (972,683) (1,246,462) --------- ----------- Net Increase (Decrease) in Net Assets Resulting from Fund Share Transactions ( (17,402) and 71,484 shares, respectively)............................................ (25,562) 96,304 --------- ----------- Total Increase (Decrease) in Net Assets....................... (153,311) (93,204) Net Assets Beginning of Period......................................... 716,413 809,617 --------- ----------- End of Period (Includes undistributed net investment income of $10,960 and $13,635, respectively).............. $ 563,102 $ 716,413 ========= ===========
For the For the Year Ended Year Ended December 31, December 31, Index 400 Stock Portfolio 2002 2001 - ----------------------------------------------------------------------------------------- (in thousands) Changes in Net Assets Operations Net Investment Income (Loss)................................ $ 1,963 $ 1,833 Net Realized Gain (Loss) on Investments..................... (1,450) (2,974) Net Unrealized Appreciation (Depreciation) of Investments for the Period................................ (38,914) 2,256 -------- -------- Net Increase (Decrease) in Net Assets Resulting from Operations............................................... (38,401) 1,115 -------- -------- Distributions to Shareholders from: Net Investment Income....................................... (1,830) (21) Net Realized Gain on Investments............................ -- (2,155) -------- -------- Net Decrease in Net Assets Resulting from Distributions to Shareholders............................ (1,830) (2,176) -------- -------- Fund Share Transactions Proceeds from Sale of 74,689 and 77,185 Shares.............. 80,833 84,032 Proceeds from Shares Issued on Reinvestment of Distributions Paid (1,547 and 1,962 shares, respectively)............................................. 1,830 2,176 Payments for 27,258 and 11,583 Shares Redeemed.............. (27,756) (12,029) -------- -------- Net Increase (Decrease) in Net Assets Resulting from Fund Share Transactions (48,978 and 67,564 shares, respectively)............................................ 54,907 74,179 -------- -------- Total Increase (Decrease) in Net Assets....................... 14,676 73,118 Net Assets Beginning of Period......................................... 210,734 137,616 -------- -------- End of Period (Includes undistributed net investment income of $1,961 and $1,833, respectively)................ $225,410 $210,734 ======== ========
The Accompanying Notes are an Integral Part of the Financial Statements. 96 Statement of Changes in Net Assets Northwestern Mutual Series Fund, Inc.
For the For the Year Ended Year Ended December 31, December 31, Growth Stock Portfolio 2002 2001 - ----------------------------------------------------------------------------------------- (in thousands) Changes in Net Assets Operations Net Investment Income (Loss)................................ $ 4,774 $ 7,118 Net Realized Gain (Loss) on Investments..................... (64,986) (49,900) Net Unrealized Appreciation (Depreciation) of Investments for the Period................................ (86,687) (69,647) --------- --------- Net Increase (Decrease) in Net Assets Resulting from Operations............................................... (146,899) (112,429) --------- --------- Distributions to Shareholders from: Net Investment Income....................................... (7,118) (5,419) Net Realized Gain on Investments............................ -- (25,531) --------- --------- Net Decrease in Net Assets Resulting from Distributions to Shareholders............................ (7,118) (30,950) --------- --------- Fund Share Transactions Proceeds from Sale of 46,554 and 37,823 Shares.............. 84,505 81,112 Proceeds from Shares Issued on Reinvestment of Distributions Paid (3,673 and 14,152 shares, respectively)............................................. 7,118 30,950 Payments for 46,693 and 20,655 Shares Redeemed.............. (82,763) (42,921) --------- --------- Net Increase (Decrease) in Net Assets Resulting from Fund Share Transactions (3,534 and 31,320 shares, respectively)............................................ 8,860 69,141 --------- --------- Total Increase (Decrease) in Net Assets....................... (145,157) (74,238) Net Assets Beginning of Period......................................... 696,578 770,816 --------- --------- End of Period (Includes undistributed net investment income of $4,774 and $7,118, respectively)................ $ 551,421 $ 696,578 ========= =========
For the For the Year Ended Year Ended December 31, December 31, J.P. Morgan Select Growth and Income Stock Portfolio 2002 2001 - ----------------------------------------------------------------------------------------- (in thousands) Changes in Net Assets Operations Net Investment Income (Loss)................................ $ 3,770 $ 4,120 Net Realized Gain (Loss) on Investments..................... (51,494) (19,827) Net Unrealized Appreciation (Depreciation) of Investments for the Period................................ (105,636) (30,330) --------- -------- Net Increase (Decrease) in Net Assets Resulting from Operations............................................... (153,360) (46,037) --------- -------- Distributions to Shareholders from: Net Investment Income....................................... (4,121) (4,262) Net Realized Gain on Investments............................ -- (15,376) --------- -------- Net Decrease in Net Assets Resulting from Distributions to Shareholders............................ (4,121) (19,638) --------- -------- Fund Share Transactions Proceeds from Sale of 39,423 and 39,693 Shares.............. 41,359 49,815 Proceeds from Shares Issued on Reinvestment of Distributions Paid (3,763 and 15,282 shares, respectively)............................................. 4,121 19,638 Payments for 71,491 and 28,597 Shares Redeemed.............. (70,727) (35,087) --------- -------- Net Increase (Decrease) in Net Assets Resulting from Fund Share Transactions ((28,305) and 26,378 shares, respectively)............................................ (25,247) 34,366 --------- -------- Total Increase (Decrease) in Net Assets....................... (182,728) (31,309) Net Assets Beginning of Period......................................... 548,672 579,981 --------- -------- End of Period (Includes undistributed net investment income of $3,769 and $4,120, respectively)................ $ 365,944 $548,672 ========= ========
The Accompanying Notes are an Integral Part of the Financial Statements. 97 Statement of Changes in Net Assets Northwestern Mutual Series Fund, Inc.
For the period For the July 31, 2001 ** Year Ended through December 31, December 31, Capital Guardian Domestic Equity Portfolio 2002 2001 - ----------------------------------------------------------------------------------- (in thousands) Changes in Net Assets Operations Net Investment Income (Loss)...................... $ 899 $ 171 Net Realized Gain (Loss) on Investments........... (3,717) (183) Net Unrealized Appreciation (Depreciation) of Investments for the Period...................... (11,278) 270 -------- ------- Net Increase (Decrease) in Net Assets Resulting from Operations...................... (14,096) 258 -------- ------- Distributions to Shareholders from: Net Investment Income............................. (882) (168) Net Realized Gain on Investments.................. -- -- -------- ------- Net Decrease in Net Assets Resulting from Distributions to Shareholders.................. (882) (168) -------- ------- Fund Share Transactions Proceeds from Sale of 58,893 and 42,542 Shares.... 50,973 41,341 Proceeds from Shares Issued on Reinvestment of Distributions Paid (1,153 and 174 shares, respectively)................................... 882 168 Payments for 3,873 and 911 Shares Redeemed........ (3,325) (877) -------- ------- Net Increase (Decrease) in Net Assets Resulting from Fund Share Transactions (56,173 and 41,805 shares, respectively)........ 48,530 40,632 -------- ------- Total Increase (Decrease) in Net Assets............. 33,552 40,722 Net Assets Beginning of Period............................... 40,722 -- -------- ------- End of Period (Includes undistributed net investment income of $17 and $3, respectively)................................... $ 74,274 $40,722 ======== =======
For the For the Year Ended Year Ended December 31, December 31, Index 500 Stock Portfolio 2002 2001 - ------------------------------------------------------------------------------- (in thousands) Changes in Net Assets Operations Net Investment Income (Loss)...................... $ 22,006 $ 21,311 Net Realized Gain (Loss) on Investments........... 7,557 32,819 Net Unrealized Appreciation (Depreciation) of Investments for the Period...................... (432,104) (302,274) ---------- ---------- Net Increase (Decrease) in Net Assets Resulting from Operations...................... (402,541) (248,144) ---------- ---------- Distributions to Shareholders from: Net Investment Income............................. (21,302) (24,105) Net Realized Gain on Investments.................. (35,471) (59,088) ---------- ---------- Net Decrease in Net Assets Resulting from Distributions to Shareholders.................. (56,773) (83,193) ---------- ---------- Fund Share Transactions Proceeds from Sale of 69,220 and 47,523 Shares.... 173,178 142,837 Proceeds from Shares Issued on Reinvestment of Distributions Paid (21,521 and 26,836 shares, respectively)........................... 56,773 83,193 Payments for 95,445 and 49,022 Shares Redeemed.... (229,631) (145,755) ---------- ---------- Net Increase (Decrease) in Net Assets Resulting from Fund Share Transactions ((4,704) and 25,337 shares, respectively)...... 320 80,275 ---------- ---------- Total Increase (Decrease) in Net Assets............. (458,994) (251,062) Net Assets Beginning of Period............................... 1,821,875 2,072,937 ---------- ---------- End of Period (Includes undistributed net investment income of $21,934 and $21,311, respectively)................................... $1,362,881 $1,821,875 ========== ==========
**Portfolio commenced operations July 31, 2001. The Accompanying Notes are an Integral Part of the Financial Statements. 98 Statement of Changes in Net Assets Northwestern Mutual Series Fund, Inc.
For the period For the July 31, 2001** Year Ended through December 31, December 31, Asset Allocation Portfolio 2002 2001 ------------------------------------------------------------------------ (in thousands) Changes in Net Assets Operations Net Investment Income (Loss)............ $ 1,408 $ 286 Net Realized Gain (Loss) on Investments........................... (4,624) (202) Net Unrealized Appreciation (Depreciation) of Investments for the Period............................ (3,891) (94) ------- ------- Net Increase (Decrease) in Net Assets Resulting from Operations..... (7,107) (10) ------- ------- Distributions to Shareholders from: Net Investment Income................... (1,415) (284) Net Realized Gain on Investments........ -- -- ------- ------- Net Decrease in Net Assets Resulting from Distributions to Shareholders......................... (1,415) (284) ------- ------- Fund Share Transactions Proceeds from Sale of 66,250 and 41,212 Shares......................... 61,003 40,347 Proceeds from Shares Issued on Reinvestment of Distributions Paid (1,657 and 292 shares, respectively)......................... 1,415 284 Payments for 7,491 and 229 Shares Redeemed.............................. (6,752) (221) ------- ------- Net Increase (Decrease) in Net Assets Resulting from Fund Share Transactions (60,416 and 41,275 shares, respectively)................ 55,666 40,410 ------- ------- Total Increase (Decrease) in Net Assets... 47,144 40,116 Net Assets Beginning of Period..................... 40,116 -- ------- ------- End of Period (Includes undistributed net investment income of ($2) and $2, respectively)......................... $87,260 $40,116 ======= =======
For the For the Year Ended Year Ended December 31, December 31, Balanced Portfolio 2002 2001 --------------------------------------------------------------------- (in thousands) Changes in Net Assets Operations Net Investment Income (Loss)............ $ 85,457 $ 115,576 Net Realized Gain (Loss) on Investments........................... (37,341) (11,248) Net Unrealized Appreciation (Depreciation) of Investments for the Period............................ (273,763) (207,767) ---------- ---------- Net Increase (Decrease) in Net Assets Resulting from Operations..... (225,647) (103,439) ---------- ---------- Distributions to Shareholders from: Net Investment Income................... (106,128) (127,987) Net Realized Gain on Investments........ -- (112,544) ---------- ---------- Net Decrease in Net Assets Resulting from Distributions to Shareholders......................... (106,128) (240,531) ---------- ---------- Fund Share Transactions Proceeds from Sale of 100,999 and 44,213 Shares......................... 173,165 82,145 Proceeds from Shares Issued on Reinvestment of Distributions Paid (61,452 and 129,457 shares, respectively)......................... 106,128 240,531 Payments for 237,957 and 118,592 Shares Redeemed....................... (397,126) (220,768) ---------- ---------- Net Increase (Decrease) in Net Assets Resulting from Fund Share Transactions ( (75,506) and 55,078 shares, respectively)......... (117,833) 101,908 ---------- ---------- Total Increase (Decrease) in Net Assets... (449,608) (242,062) Net Assets Beginning of Period..................... 3,011,137 3,253,199 ---------- ---------- End of Period (Includes undistributed net investment income of $85,237 and $105,732, respectively)......................... $2,561,529 $3,011,137 ========== ==========
**Portfolio commenced operations July 31, 2001. The Accompanying Notes are an Integral Part of the Financial Statements. 99 Statement of Changes in Net Assets Northwestern Mutual Series Fund, Inc.
For the For the Year Ended Year Ended December 31, December 31, High Yield Bond Portfolio 2002 2001 --------------------------------------------------------------------- (in thousands) Changes in Net Assets Operations Net Investment Income (Loss)............ $ 14,659 $ 15,629 Net Realized Gain (Loss) on Investments........................... (18,912) (19,780) Net Unrealized Appreciation (Depreciation) of Investments for the Period............................ (272) 10,959 --------- -------- Net Increase (Decrease) in Net Assets Resulting from Operations..... (4,525) 6,808 --------- -------- Distributions to Shareholders from: Net Investment Income................... (14,697) (15,601) Net Realized Gain on Investments........ -- -- --------- -------- Net Decrease in Net Assets Resulting from Distributions to Shareholders......................... (14,697) (15,601) --------- -------- Fund Share Transactions................... Proceeds from Sale of 34,172 and 35,236 Shares......................... 21,670 25,721 Proceeds from Shares Issued on Reinvestment of Distributions Paid (26,069 and 24,080 shares, respectively)......................... 14,697 15,601 Payments for 43,587 and 31,719 Shares Redeemed....................... (27,262) (23,066) --------- -------- Net Increase (Decrease) in Net Assets Resulting from Fund Share Transactions (16,654 and 27,597 shares, respectively)................ 9,105 18,256 --------- -------- Total Increase (Decrease) in Net Assets... (10,117) 9,463 Net Assets Beginning of Period..................... 147,670 138,207 --------- -------- End of Period (Includes undistributed net investment income of $159 and $196, respectively)......................... $ 137,553 $147,670 ========= ========
For the For the Year Ended Year Ended December 31, December 31, Select Bond Portfolio 2002 2001 --------------------------------------------------------------------- (in thousands) Changes in Net Assets Operations Net Investment Income (Loss)............ $ 24,237 $ 21,595 Net Realized Gain (Loss) on Investments........................... 10,612 10,082 Net Unrealized Appreciation (Depreciation) of Investments for the Period............................ 20,473 1,654 -------- -------- Net Increase (Decrease) in Net Assets Resulting from Operations..... 55,322 33,331 -------- -------- Distributions to Shareholders from:....... Net Investment Income................... (21,737) (19,294) Net Realized Gain on Investments........ (3,098) -- -------- -------- Net Decrease in Net Assets Resulting from Distributions to Shareholders......................... (24,835) (19,294) -------- -------- Fund Share Transactions................... Proceeds from Sale of 155,728 and 87,848 Shares......................... 189,851 104,150 Proceeds from Shares Issued on Reinvestment of Distributions Paid (21,354 and 16,955 shares, respectively)......................... 24,835 19,294 Payments for 54,469 and 20,005 Shares Redeemed....................... (66,561) (23,753) -------- -------- Net Increase (Decrease) in Net Assets Resulting from Fund Share Transactions (122,613 and 84,798 shares, respectively)................ 148,125 99,691 -------- -------- Total Increase (Decrease) in Net Assets... 178,612 113,728 Net Assets Beginning of Period..................... 405,406 291,678 -------- -------- End of Period (Includes undistributed net investment income of $24,109 and $21,476, respectively)......................... $584,018 $405,406 ======== ========
The Accompanying Notes are an Integral Part of the Financial Statements. 100 Statement of Changes in Net Assets Northwestern Mutual Series Fund, Inc.
For the For the Year Ended Year Ended December 31, December 31, Money Market Portfolio 2002 2001 --------------------------------------------------------------------- (in thousands) Changes in Net Assets Operations Net Investment Income (Loss)............ $ 7,636 $ 15,878 Net Realized Gain (Loss) on Investments........................... -- -- Net Unrealized Appreciation (Depreciation) of Investments for the Period............................ -- -- ----------- ----------- Net Increase (Decrease) in Net Assets Resulting from Operations..... 7,636 15,878 ----------- ----------- Distributions to Shareholders from: Net Investment Income................... (7,657) (15,878) Net Realized Gain on Investments........ -- -- ----------- ----------- Net Decrease in Net Assets Resulting from Distributions to Shareholders......................... (7,657) (15,878) ----------- ----------- Fund Share Transactions Proceeds from Sale of 1,171,850 and 1,720,066 Shares...................... 1,171,850 1,720,084 Proceeds from Shares Issued on Reinvestment of Distributions Paid (7,657 and 15,879 shares, respectively)......................... 7,657 15,879 Payments for 1,136,862 and 1,661,729 Shares Redeemed....................... (1,136,862) (1,661,729) ----------- ----------- Net Increase (Decrease) in Net Assets Resulting from Fund Share Transactions (42,645 and 74,216 shares, respectively)................ 42,645 74,234 ----------- ----------- Total Increase (Decrease) in Net Assets... 42,624 74,234 Net Assets Beginning of Period..................... 458,689 384,455 ----------- ----------- End of Period (Includes undistributed net investment income of $0 and $0, respectively).... $ 501,313 $ 458,689 =========== ===========
The Accompanying Notes are an Integral Part of the Financial Statements. 101 Financial Highlights Northwestern Mutual Series Fund, Inc.
For the Period April 30, 1999* For the Year Ended through December 31, December 31, Small Cap Growth Stock Portfolio ---------------------------- 1999 (For a share outstanding throughout the period) 2002 2001 2000 --------------- - ----------------------------------------------------------------------------------------------- Selected Per Share Data Net Asset Value, Beginning of Period............................ $ 1.79 $ 1.86 $ 1.79 $ 1.00 Income from Investment Operations: Net Investment Income....................................... -- -- -- -- Net Realized and Unrealized Gains (Losses) on Investments... (0.33) (0.07) 0.13 0.85 -------- -------- -------- ------- Total from Investment Operations........................... (0.33) (0.07) 0.13 0.85 -------- -------- -------- ------- Less Distributions: Distributions from Net Investment Income.................... -- -- -- -- Distributions from Realized Gains on Investments............ -- -- (0.06) (0.06) -------- -------- -------- ------- Total Distributions........................................ -- -- (0.06) (0.06) -------- -------- -------- ------- Net Asset Value, End of Period.................................. $ 1.46 $ 1.79 $ 1.86 $ 1.79 ======== ======== ======== ======= Total Return+................................................... (18.42%) (3.76%) 6.71% 86.09% ======== ======== ======== ======= Ratios and Supplemental Data Net Assets, End of Period (in thousands)........................ $254,880 $291,448 $250,314 $71,483 ======== ======== ======== ======= Ratio of Gross Expenses to Average Net Assets................... 0.60% 0.60% 0.67% 1.03%*** ======== ======== ======== ======= Ratio of Net Expenses to Average Net Assets..................... 0.60% 0.60% 0.67% 1.00%*** ======== ======== ======== ======= Ratio of Net Investment Income (Loss) to Average Net Assets..... (0.26%) 0.17% 0.19% (0.07%)*** ======== ======== ======== ======= Portfolio Turnover Rate......................................... 41.87% 70.58% 86.13% 70.72% ======== ======== ======== =======
For the Period For the Year July 31, 2001** T. Rowe Price Small Cap Value Portfolio Ended December 31, through 2002 December 31, (For a share outstanding throughout the period) ------------------ 2001 - ------------------------------------------------------------------ Selected Per Share Data Net Asset Value, Beginning of Period............................ $ 1.02 $ 1.00 Income from Investment Operations: Net Investment Income....................................... 0.01 -- Net Realized and Unrealized Gains (Losses) on Investments... (0.07) 0.02 ------- ------- Total from Investment Operations........................... (0.06) 0.02 ------- ------- Less Distributions: Distributions from Net Investment Income.................... (0.01) -- Distributions from Realized Gains on Investments............ -- -- ------- ------- Total Distributions........................................ (0.01) -- ------- ------- Net Asset Value, End of Period.................................. $ 0.95 $ 1.02 ======= ======= Total Return+................................................... (5.58%) 1.76% ======= ======= Ratios and Supplemental Data Net Assets, End of Period (in thousands)........................ $63,083 $21,003 ======= ======= Ratio of Gross Expenses to Average Net Assets................... 1.02% 1.36%*** ======= ======= Ratio of Net Expenses to Average Net Assets..................... 1.00% 1.00%*** ======= ======= Ratio of Net Investment Income (Losses) to Average Net Assets... 0.54% 1.03%*** ======= ======= Portfolio Turnover Rate......................................... 28.26% 49.70% ======= =======
* Portfolio commenced operations April 30, 1999. ** Portfolio commenced operations July 31, 2001. *** Computed on an annualized basis. + Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees, not annualized for periods less than one year. The Accompanying Notes are an Integral Part of the Financial Statements. 102 Financial Highlights Northwestern Mutual Series Fund, Inc.
For the Year Ended December 31, Aggressive Growth Stock Portfolio -------------------------------------------------------- (For a share outstanding throughout the period) 2002 2001 2000 1999 1998 - -------------------------------------------------------------------------------------------------------------------------- Selected Per Share Data Net Asset Value, Beginning of Period............................ $ 2.82 $ 4.47 $ 4.81 $ 3.46 $ 3.34 Income from Investment Operations: Net Investment Income....................................... -- -- -- -- -- Net Realized and Unrealized Gains (Losses) on Investments... (0.59) (0.83) 0.29 1.48 0.24 -------- ---------- ---------- ---------- ---------- Total from Investment Operations........................... (0.59) (0.83) 0.29 1.48 0.24 -------- ---------- ---------- ---------- ---------- Less Distributions: Distributions from Net Investment Income.................... -- -- -- -- -- Distributions from Realized Gains on Investments............ (0.05) (0.82) (0.63) (0.13) (0.12) -------- ---------- ---------- ---------- ---------- Total Distributions........................................ (0.05) (0.82) (0.63) (0.13) (0.12) -------- ---------- ---------- ---------- ---------- Net Asset Value, End of Period.................................. $ 2.18 $ 2.82 $ 4.47 $ 4.81 $ 3.46 ======== ========== ========== ========== ========== Total Return+................................................... (21.15%) (19.87%) 6.18% 43.78% 7.56% ======== ========== ========== ========== ========== Ratios and Supplemental Data Net Assets, End of Period (in thousands)........................ $994,075 $1,341,876 $1,696,013 $1,485,311 $1,137,466 ======== ========== ========== ========== ========== Ratio of Expenses to Average Net Assets......................... 0.52% 0.52% 0.52% 0.51% 0.52% ======== ========== ========== ========== ========== Ratio of Net Investment Income (Loss) to Average Net Assets..... (0.11%) 0.08% 0.09% (0.02%) 0.04% ======== ========== ========== ========== ========== Portfolio Turnover Rate......................................... 43.37% 70.40% 63.18% 68.64% 50.43% ======== ========== ========== ========== ==========
For the Period For the Year July 31, 2001** International Growth Portfolio Ended December 31, through 2002 December 31, (For a share outstanding throughout the period) ------------------ 2001 - ------------------------------------------------------------------ Selected Per Share Data Net Asset Value, Beginning of Period............................ $ 0.91 $ 1.00 Income from Investment Operations: Net Investment Income....................................... -- -- Net Realized and Unrealized Gains (Losses) on Investments... (0.12) (0.09) -------- ------- Total from Investment Operations........................... (0.12) (0.09) -------- ------- Less Distributions: Distributions from Net Investment Income.................... -- -- Distributions from Realized Gains on Investments............ -- -- -------- ------- Total Distributions........................................ -- -- -------- ------- Net Asset Value, End of Period.................................. $ 0.79 $ 0.91 ======== ======= Total Return+................................................... (12.34%) (9.40%) ======== ======= Ratios and Supplemental Data Net Assets, End of Period (in thousands)........................ $ 35,373 $26,900 ======== ======= Ratio of Gross Expenses to Average Net Assets................... 1.15% 1.25%*** ======== ======= Ratio of Net Expenses to Average Net Assets..................... 1.10% 1.10%*** ======== ======= Ratio of Net Investment Income (Loss) to Average Net Assets..... 0.62% 0.05%*** ======== ======= Portfolio Turnover Rate......................................... 27.28% 18.45% ======== =======
** Portfolio commenced operations July 31, 2001. *** Computed on an annualized basis. + Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees, not annualized for periods less than one year. The Accompanying Notes are an Integral Part of the Financial Statements. 103 Financial Highlights Northwestern Mutual Series Fund, Inc.
For the Year Ended December 31, Franklin Templeton International Equity Portfolio ------------------------------------------------ (For a share outstanding throughout the period) 2002 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------ Selected Per Share Data Net Asset Value, Beginning of Period............................ $ 1.26 $ 1.63 $ 1.78 $ 1.68 $ 1.69 Income from Investment Operations: Net Investment Income....................................... 0.02 0.02 0.02 0.03 0.05 Net Realized and Unrealized Gains (Losses) on Investments... (0.24) (0.23) (0.04) 0.33 0.04 -------- -------- -------- -------- -------- Total from Investment Operations........................... (0.22) (0.21) (0.02) 0.36 0.09 -------- -------- -------- -------- -------- Less Distributions: Distributions from Net Investment Income.................... (0.02) (0.03) (0.04) (0.05) (0.04) Distributions from Realized Gains on Investments............ -- (0.13) (0.09) (0.21) (0.06) -------- -------- -------- -------- -------- Total Distributions........................................ (0.02) (0.16) (0.13) (0.26) (0.10) -------- -------- -------- -------- -------- Net Asset Value, End of Period.................................. $ 1.02 $ 1.26 $ 1.63 $ 1.78 $ 1.68 ======== ======== ======== ======== ======== Total Return+................................................... (17.40%) (14.00%) (0.79%) 22.88% 4.82% ======== ======== ======== ======== ======== Ratios and Supplemental Data Net Assets, End of Period (in thousands)........................ $563,102 $716,413 $809,617 $772,170 $671,106 ======== ======== ======== ======== ======== Ratio of Gross Expenses to Average Net Assets................... 0.74% 0.74% 0.73% 0.74% 0.76% ======== ======== ======== ======== ======== Ratio of Net Investment Income (Loss) to Average Net Assets..... 1.72% 1.99% 1.77% 2.62% 3.38% ======== ======== ======== ======== ======== Portfolio Turnover Rate......................................... 30.94% 34.52% 26.95% 38.37% 30.41% ======== ======== ======== ======== ========
For the Period April 30, 1999* through For the Year Ended December 31, December 31, Index 400 Stock Portfolio ---------------------------- 1999 (For a share outstanding throughout the period) 2002 2001 2000 --------------- - ------------------------------------------------------------------------------------------------- Selected Per Share Data Net Asset Value, Beginning of Period............................ $ 1.12 $ 1.14 $ 1.11 $ 1.00 Income from Investment Operations: Net Investment Income....................................... 0.01 -- 0.01 0.01 Net Realized and Unrealized Gains (Losses) on Investments... (0.17) (0.01) 0.16 0.12 -------- -------- -------- ------- Total from Investment Operations............................ (0.16) (0.01) 0.18 0.13 -------- -------- -------- ------- Less Distributions: Distributions from Net Investment Income.................... (0.01) -- (0.02) (0.01) Distributions from Realized Gains on Investments............ -- (0.01) (0.13) (0.01) -------- -------- -------- ------- Total Distributions........................................ (0.01) (0.01) (0.15) (0.02) -------- -------- -------- ------- Net Asset Value, End of Period.................................. $ 0.95 $ 1.12 $ 1.14 $ 1.11 ======== ======== ======== ======= Total Return+................................................... (14.54%) (0.65%) 17.21% 12.83% ======== ======== ======== ======= Ratios and Supplemental Data Net Assets, End of Period (in thousands)........................ $225,410 $210,734 $137,616 $59,644 ======== ======== ======== ======= Ratio of Gross Expenses to Average Net Assets................... 0.28% 0.31% 0.32% 0.46%*** ======== ======== ======== ======= Ratio of Net Expenses to Average Net Assets..................... 0.28% 0.31% 0.32% 0.35%*** ======== ======== ======== ======= Ratio of Net Investment Income (Loss) to Average Net Assets..... 0.86% 1.06% 1.71% 1.69%*** ======== ======== ======== ======= Portfolio Turnover Rate......................................... 15.60% 19.06% 54.60% 26.51% ======== ======== ======== =======
* Portfolio commenced operations April 30, 1999. *** Computed on an annualized basis. + Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees, not annualized for periods less than one year. The Accompanying Notes are an Integral Part of the Financial Statements. 104 Financial Highlights Northwestern Mutual Series Fund, Inc.
For the Year Ended December 31, Growth Stock Portfolio ------------------------------------------------ (For a share outstanding throughout the period) 2002 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------ Selected Per Share Data Net Asset Value, Beginning of Period............................ $ 2.03 $ 2.47 $ 2.66 $ 2.25 $ 1.81 Income from Investment Operations: Net Investment Income....................................... 0.01 0.02 0.03 0.03 0.02 Net Realized and Unrealized Gains (Losses) on Investments... (0.43) (0.36) (0.09) 0.47 0.46 -------- -------- -------- -------- -------- Total from Investment Operations........................... (0.42) (0.34) (0.06) 0.50 0.48 -------- -------- -------- -------- -------- Less Distributions:........................................... Distributions from Net Investment Income.................... (0.02) (0.02) (0.02) (0.03) (0.02) Distributions from Realized Gains on Investments............ -- (0.08) (0.11) (0.06) (0.02) -------- -------- -------- -------- -------- Total Distributions........................................ (0.02) (0.10) (0.13) (0.09) (0.04) -------- -------- -------- -------- -------- Net Asset Value, End of Period.................................. $ 1.59 $ 2.03 $ 2.47 $ 2.66 $ 2.25 ======== ======== ======== ======== ======== Total Return+................................................... (20.83%) (14.22%) (2.49%) 22.50% 26.69% ======== ======== ======== ======== ======== Ratios and Supplemental Data Net Assets, End of Period (in thousands)........................ $551,421 $696,578 $770,816 $676,134 $421,282 ======== ======== ======== ======== ======== Ratio of Expenses to Average Net Assets......................... 0.43% 0.43% 0.43% 0.43% 0.46% ======== ======== ======== ======== ======== Ratio of Net Investment Income (Loss) to Average Net Assets..... 0.76% 1.01% 1.12% 1.22% 1.10% ======== ======== ======== ======== ======== Portfolio Turnover Rate......................................... 28.06% 27.98% 28.01% 27.26% 21.64% ======== ======== ======== ======== ========
J.P. Morgan Select Growth and Income Stock Portfolio For the Year Ended December 31, ------------------------------------------------ (For a share outstanding throughout the period) 2002 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------ Selected Per Share Data Net Asset Value, Beginning of Period............................ $ 1.22 $ 1.37 $ 1.56 $ 1.62 $ 1.33 Income from Investment Operations: Net Investment Income....................................... 0.01 0.01 0.01 0.01 0.01 Net Realized and Unrealized Gains (Losses) on Investments... (0.35) (0.11) (0.11) 0.12 0.29 -------- -------- -------- -------- -------- Total from Investment Operations........................... (0.34) (0.10) (0.10) 0.13 0.30 -------- -------- -------- -------- -------- Less Distributions: Distributions from Net Investment Income.................... (0.01) (0.01) (0.01) -- (0.01) Distributions from Realized Gains on Investments............ -- (0.04) (0.08) (0.19) -- -------- -------- -------- -------- -------- Total Distributions........................................ (0.01) (0.05) (0.09) (0.19) (0.01) -------- -------- -------- -------- -------- Net Asset Value, End of Period.................................. $ 0.87 $ 1.22 $ 1.37 $ 1.56 $ 1.62 ======== ======== ======== ======== ======== Total Return+................................................... (28.20%) (7.77%) (6.97%) 7.47% 23.14% ======== ======== ======== ======== ======== Ratios and Supplemental Data Net Assets, End of Period (in thousands)........................ $365,944 $548,672 $579,981 $661,552 $570,970 ======== ======== ======== ======== ======== Ratio of Expenses to Average Net Assets......................... 0.58% 0.58% 0.57% 0.57% 0.58% ======== ======== ======== ======== ======== Ratio of Net Investment Income (Loss) to Average Net Assets..... 0.85% 0.75% 0.68% 0.80% 1.00% ======== ======== ======== ======== ======== Portfolio Turnover Rate......................................... 29.20% 44.37% 47.67% 106.93% 160.40% ======== ======== ======== ======== ========
+ Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees, not annualized for periods less than one year. The Accompanying Notes are an Integral Part of the Financial Statements. 105 Financial Highlights Northwestern Mutual Series Fund, Inc.
For the Period July 31, 2001** Capital Guardian Domestic Equity Portfolio For the Year through Ended December 31, December 31, (For a share outstanding throughout the period) 2002 2001 - --------------------------------------------------------------------------------------------------- Selected Per Share Data Net Asset Value, Beginning of Period............................ $ 0.97 $ 1.00 Income from Investment Operations: Net Investment Income....................................... 0.01 -- Net Realized and Unrealized Gains (Losses) on Investments... (0.21) (0.03) -------- ------- Total from Investment Operations........................... (0.20) (0.03) -------- ------- Less Distributions: Distributions from Net Investment Income.................... (0.01) -- Distributions from Realized Gains on Investments............ -- -- -------- ------- Total Distributions........................................ (0.01) -- -------- ------- Net Asset Value, End of Period.................................. $ 0.76 $ 0.97 ======== ======= Total Return+................................................... (21.24%) (2.19%) ======== ======= Ratios and Supplemental Data Net Assets, End of Period (in thousands)........................ $ 74,274 $40,722 ======== ======= Ratio of Gross Expenses to Average Net Assets................... 0.70% 0.90%*** ======== ======= Ratio of Net Expenses to Average Net Assets..................... 0.70% 0.75%*** ======== ======= Ratio of Net Investment Income (Loss) to Average Net Assets..... 1.54% 1.32%*** ======== ======= Portfolio Turnover Rate......................................... 22.42% 18.98% ======== =======
Index 500 Stock Portfolio For the Year Ended December 31, ---------------------------------------------------------- (For a share outstanding throughout the period) 2002 2001 2000 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------- Selected Per Share Data Net Asset Value, Beginning of Period............................ $ 2.87 $ 3.41 $ 3.89 $ 3.29 $ 2.64 Income from Investment Operations: Net Investment Income....................................... 0.03 0.03 0.04 0.04 0.04 Net Realized and Unrealized Gains (Losses) on Investments... (0.64) (0.43) (0.37) 0.64 0.71 ---------- ---------- ---------- ---------- ---------- Total from Investment Operations........................... (0.61) (0.40) (0.33) 0.68 0.75 ---------- ---------- ---------- ---------- ---------- Less Distributions: Distributions from Net Investment Income.................... (0.03) (0.04) (0.04) (0.03) (0.04) Distributions from Realized Gains on Investments............ (0.06) (0.10) (0.11) (0.05) (0.06) ---------- ---------- ---------- ---------- ---------- Total Distributions........................................ (0.09) (0.14) (0.15) (0.08) (0.10) ---------- ---------- ---------- ---------- ---------- Net Asset Value, End of Period.................................. $ 2.17 $ 2.87 $ 3.41 $ 3.89 $ 3.29 ========== ========== ========== ========== ========== Total Return+................................................... (22.07%) (11.88%) (8.75%) 20.91% 28.72% ========== ========== ========== ========== ========== Ratios and Supplemental Data Net Assets, End of Period (in thousands)........................ $1,362,881 $1,821,875 $2,072,937 $2,271,956 $1,690,680 ========== ========== ========== ========== ========== Ratio of Expenses to Average Net Assets......................... 0.21% 0.21% 0.20% 0.20% 0.21% ========== ========== ========== ========== ========== Ratio of Net Investment Income (Loss) to Average Net Assets..... 1.40% 1.13% 1.08% 1.16% 1.40% ========== ========== ========== ========== ========== Portfolio Turnover Rate......................................... 6.55% 2.92% 6.47% 5.65% 3.03% ========== ========== ========== ========== ==========
** Portfolio commenced operations July 31, 2001. *** Computed on an annualized basis. + Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees, not annualized for periods less than one year. The Accompanying Notes are an Integral Part of the Financial Statements. 106 Financial Highlights Northwestern Mutual Series Fund, Inc.
For the Period For the Year July 31, 2001** Asset Allocation Portfolio Ended December 31, through 2002 December 31, (For a share outstanding throughout the period) ------------------ 2001 - ------------------------------------------------------------------ Selected Per Share Data Net Asset Value, Beginning of Period............................ $ 0.97 $ 1.00 Income from Investment Operations: Net Investment Income....................................... 0.01 0.01 Net Realized and Unrealized Gains (Losses) on Investments... (0.11) (0.03) -------- ------- Total from Investment Operations........................... (0.10) (0.02) -------- ------- Less Distributions: Distributions from Net Investment Income.................... (0.01) (0.01) Distributions from Realized Gains on Investments............ -- -- -------- ------- Total Distributions........................................ (0.01) (0.01) -------- ------- Net Asset Value, End of Period.................................. $ 0.86 $ 0.97 ======== ======= Total Return+................................................... (10.26%) (2.10%) ======== ======= Ratios and Supplemental Data Net Assets, End of Period (in thousands)........................ $ 87,260 $40,116 ======== ======= Ratio of Gross Expenses to Average Net Assets................... 0.87% 0.92%*** ======== ======= Ratio of Net Expenses to Average Net Assets..................... 0.75% 0.75%*** ======== ======= Ratio of Net Investment Income (Loss) to Average Net Assets..... 2.18% 2.19%*** ======== ======= Portfolio Turnover Rate......................................... 112.73% 55.88% ======== =======
Balanced Portfolio For the Year Ended December 31, ---------------------------------------------------------- (For a share outstanding throughout the period) 2002 2001 2000 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------- Selected Per Share Data Net Asset Value, Beginning of Period............................ $ 1.82 $ 2.03 $ 2.22 $ 2.22 $ 1.99 Income from Investment Operations: Net Investment Income....................................... 0.06 0.08 0.08 0.07 0.07 Net Realized and Unrealized Gains (Losses) on Investments... (0.20) (0.13) (0.09) 0.17 0.29 ---------- ---------- ---------- ---------- ---------- Total from Investment Operations........................... (0.14) (0.05) (0.01) 0.24 0.36 ---------- ---------- ---------- ---------- ---------- Less Distributions: Distributions from Net Investment Income.................... (0.06) (0.08) (0.07) (0.07) (0.07) Distributions from Realized Gains on Investments............ -- (0.08) (0.11) (0.17) (0.06) ---------- ---------- ---------- ---------- ---------- Total Distributions........................................ (0.06) (0.16) (0.18) (0.24) (0.13) ---------- ---------- ---------- ---------- ---------- Net Asset Value, End of Period.................................. $ 1.62 $ 1.82 $ 2.03 $ 2.22 $ 2.22 ========== ========== ========== ========== ========== Total Return+................................................... (7.54%) (3.15%) (0.17%) 11.18% 18.88% ========== ========== ========== ========== ========== Ratios and Supplemental Data Net Assets, End of Period (in thousands)........................ $2,561,529 $3,011,137 $3,253,199 $3,557,900 $3,282,071 ========== ========== ========== ========== ========== Ratio of Expenses to Average Net Assets......................... 0.30% 0.30% 0.30% 0.30% 0.30% ========== ========== ========== ========== ========== Ratio of Net Investment Income (Loss) to Average Net Assets..... 3.08% 3.75% 3.47% 3.36% 3.48% ========== ========== ========== ========== ========== Portfolio Turnover Rate......................................... 53.12% 50.37% 24.36% 27.16% 44.18% ========== ========== ========== ========== ==========
** Portfolio commenced operations July 31, 2001. *** Computed on an annualized basis. + Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees, not annualized for periods less than one year. The Accompanying Notes are an Integral Part of the Financial Statements. 107 Financial Highlights Northwestern Mutual Series Fund, Inc.
For the Year Ended December 31, High Yield Bond Portfolio ------------------------------------------------ (For a share outstanding throughout the period) 2002 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------ Selected Per Share Data Net Asset Value, Beginning of Period............................ $ 0.65 $ 0.69 $ 0.82 $ 0.94 $ 1.06 Income from Investment Operations: Net Investment Income....................................... 0.07 0.08 0.09 0.11 0.10 Net Realized and Unrealized Gains (Losses) on Investments... (0.09) (0.04) (0.13) (0.12) (0.12) -------- -------- -------- -------- -------- Total from Investment Operations........................... (0.02) 0.04 (0.04) (0.01) (0.02) -------- -------- -------- -------- -------- Less Distributions: Distributions from Net Investment Income.................... (0.07) (0.08) (0.09) (0.11) (0.10) Distributions from Realized Gains on Investments............ -- -- -- -- -- -------- -------- -------- -------- -------- Total Distributions........................................ (0.07) (0.08) (0.09) (0.11) (0.10) -------- -------- -------- -------- -------- Net Asset Value, End of Period.................................. $ 0.56 $ 0.65 $ 0.69 $ 0.82 $ 0.94 ======== ======== ======== ======== ======== Total Return+................................................... (2.89%) 5.03% (4.60%) (0.44%) (1.84%) ======== ======== ======== ======== ======== Ratios and Supplemental Data Net Assets, End of Period (in thousands)........................ $137,553 $147,670 $138,207 $161,424 $184,782 ======== ======== ======== ======== ======== Ratio of Gross Expenses to Average Net Assets................... 0.54% 0.53% 0.53% 0.50% 0.50% ======== ======== ======== ======== ======== Ratio of Net Expenses to Average Net Assets..................... 0.54% 0.53% 0.52% 0.50% 0.50% ======== ======== ======== ======== ======== Ratio of Net Investment Income (Loss) to Average Net Assets..... 10.37% 10.48% 10.90% 11.15% 10.85% ======== ======== ======== ======== ======== Portfolio Turnover Rate......................................... 89.20% 96.41% 124.91% 139.87% 153.71% ======== ======== ======== ======== ========
Select Bond Portfolio For the Year Ended December 31, ------------------------------------------------ (For a share outstanding throughout the period) 2002 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------ Selected Per Share Data Net Asset Value, Beginning of Period............................ $ 1.20 $ 1.16 $ 1.13 $ 1.25 $ 1.26 Income from Investment Operations: Net Investment Income....................................... 0.05 0.06 0.08 0.08 0.08 Net Realized and Unrealized Gains (Losses) on Investments... 0.09 0.05 0.03 (0.09) -- -------- -------- -------- -------- -------- Total from Investment Operations........................... 0.14 0.11 0.11 (0.01) 0.08 -------- -------- -------- -------- -------- Less Distributions: Distributions from Net Investment Income.................... (0.06) (0.07) (0.08) (0.08) (0.08) Distributions from Realized Gains on Investments............ (0.01) -- -- (0.03) (0.01) -------- -------- -------- -------- -------- Total Distributions........................................ (0.07) (0.07) (0.08) (0.11) (0.09) -------- -------- -------- -------- -------- Net Asset Value, End of Period.................................. $ 1.27 $ 1.20 $ 1.16 $ 1.13 $ 1.25 ======== ======== ======== ======== ======== Total Return+................................................... 12.09% 10.37% 10.21% (1.00%) 7.07% ======== ======== ======== ======== ======== Ratios and Supplemental Data Net Assets, End of Period (in thousands)........................ $584,018 $405,406 $291,678 $286,493 $298,034 ======== ======== ======== ======== ======== Ratio of Expenses to Average Net Assets......................... 0.30% 0.30% 0.30% 0.30% 0.30% ======== ======== ======== ======== ======== Ratio of Net Investment Income (Loss) to Average Net Assets..... 5.01% 6.15% 6.84% 6.56% 6.87% ======== ======== ======== ======== ======== Portfolio Turnover Rate......................................... 184.37% 151.27% 139.89% 76.65% 161.79% ======== ======== ======== ======== ========
+ Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees, not annualized for periods less than one year. The Accompanying Notes are an Integral Part of the Financial Statements. 108 Financial Highlights Northwestern Mutual Series Fund, Inc.
For the Year Ended December 31, Money Market Portfolio ------------------------------------------------ (For a share outstanding throughout the period) 2002 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------- Selected Per Share Data Net Asset Value, Beginning of Period....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from Investment Operations: Net Investment Income.................................. 0.02 0.04 0.06 0.05 0.05 -------- -------- -------- -------- -------- Total from Investment Operations...................... 0.02 0.04 0.06 0.05 0.05 -------- -------- -------- -------- -------- Less Distributions: Distributions from Net Investment Income............... (0.02) (0.04) (0.06) (0.05) (0.05) -------- -------- -------- -------- -------- Total Distributions................................... (0.02) (0.04) (0.06) (0.05) (0.05) -------- -------- -------- -------- -------- Net Asset Value, End of Period............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total Return+.............................................. 1.65% 3.91% 6.28% 5.10% 5.43% ======== ======== ======== ======== ======== Ratios and Supplemental Data Net Assets, End of Period (in thousands)................... $501,313 $458,689 $384,455 $404,284 $291,464 ======== ======== ======== ======== ======== Ratio of Gross Expenses to Average Net Assets.............. 0.30% 0.30% 0.30% 0.30% 0.30% ======== ======== ======== ======== ======== Ratio of Net Expenses to Average Net Assets................ 0.27% 0.30% 0.30% 0.30% 0.30% ======== ======== ======== ======== ======== Ratio of Net Investment Income (Loss) to Average Net Assets 1.63% 3.76% 6.08% 4.99% 5.26% ======== ======== ======== ======== ========
+Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees, not annualized for periods less than one year. The Accompanying Notes are an Integral Part of the Financial Statements. 109 Notes to Financial Statements Northwestern Mutual Series Fund, Inc. December 31, 2002 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, T. Rowe Price Small Cap Value Portfolio, Aggressive Growth Stock Portfolio, International Growth Stock Portfolio, Franklin Templeton International Equity Portfolio, Index 400 Stock Portfolio, Growth Stock Portfolio, J.P. Morgan Select Growth & Income Stock Portfolio, Capital Guardian Domestic Equity Portfolio, Index 500 Stock Portfolio, Asset Allocation 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 -- 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. Stocks for which current market quotations are not readily available are valued at fair value determined by procedures approved by the Board of Directors. The fair value procedure is used if a significant event that is likely to have affected the value of the securities takes place after the time of the most recent market quotations or the market quotations for other reasons do not reflect information material to the value of those securities. Bonds are valued on the basis of prices furnished by a service which determines prices for normal institutional size trading units of bonds. 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. When quotations for bonds or money market instruments are not readily available, these securities are valued at fair value determined by procedures approved by the Board of Directors. 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 Growth Stock Portfolio, Franklin Templeton International Equity Portfolio, Asset Allocation 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 valued at the contractual forward rate 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 counterparties to meet the terms of their contracts. The International Growth Stock Portfolio, Franklin Templeton International Equity Portfolio, Asset Allocation 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 or unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade date and the settlement date on security transactions, and the differences between the amounts of dividends and foreign withholding taxes recorded on a 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, Asset Allocation, Balanced and Select Bond Portfolios invest in futures contracts as an alternative to investing in individual securities. The Small Cap Growth Stock, 110 Notes to Financial Statements Aggressive Growth Stock, Index 400 Stock, Growth Stock, Index 500 Stock, Asset Allocation, 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. 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. For Federal income tax purposes, net unrealized appreciation (depreciation) on open futures contracts is generally required to be treated as realized gains (losses). Note 6 -- The Series Fund has a securities lending program that enables each Portfolio, except the Money Market Portfolio, to loan securities to approved broker-dealers. The Portfolio receives cash (U.S. currency), U.S. Government or U.S. Government agency obligations as collateral against the loaned securities. To the extent that a loan is collateralized by cash, such collateral shall be invested by the Portfolio to earn interest in accordance with the Portfolio's investment policies. The collateral received under the securities lending program is recorded on the Portfolio's statement of assets and liabilities along with the related obligation to return the collateral. Income generated from the investment of cash collateral, less negotiated rebate fees paid to participating brokers and transaction costs, is recorded as income for the Portfolio. All collateral received will be in an amount at least equal to 102% (for loans of U.S. securities) or 105% (for non-U.S. securities) of the market value of the loaned securities at the inception of each loan. Thereafter, each loan must be continuously secured by collateral at least equal at all times to the value of the securities lent. In addition, the Portfolio is entitled to terminate any securities loan at any time. As of December 31, 2002, the value of outstanding securities on loan and the value of collateral amounted to the following:
Value of Value of Securities on Loan Collateral ------------------ ----------- Balanced... $59,351,321 $61,267,250 Select Bond 35,968,870 37,117,875
As of December 31, 2002, collateral received for securities on loan is invested in money market instruments and included in Investments on the Portfolio's Statement of Assets and Liabilities. Note 7 -- Interest income is 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 using the effective interest method. Securities transactions are accounted for on trade date. The basis for determining cost on sale of securities is identified cost. For the year ended December 31, 2002, transactions in securities other than money market investments were:
U.S. Total U.S. Govt. Total Govt. Security Security Security Security Sales/ Sales/ Portfolios Purchases Purchases Maturities Maturities - ---------- ---------- --------- ---------- ---------- (Amounts in thousands) Small Cap Growth Stock.................. $ 152,502 $ 103,166 T. Rowe Price Small Cap Value........... 60,082 13,541 Aggressive Growth Stock................. 452,368 499,231 International Growth Stock.............. 21,474 8,468 Franklin Templeton International Equity. 190,692 193,661 Index 400 Stock......................... 86,735 33,731 Growth Stock............................ 221,300 160,997 J.P. Morgan Select Growth & Income Stock 127,298 145,565 Capital Guardian Domestic Equity........ 61,139 12,419 Index 500 Stock......................... 101,729 135,299 Asset Allocation........................ 102,857 $ 30,207 57,769 $ 22,123 Balanced................................ 1,256,969 620,109 1,373,782 762,494 High Yield Bond......................... 126,591 116,400 Select Bond............................. 947,579 654,076 779,918 520,550
111 Notes to Financial Statements Note 8 -- 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 at an annual rate based on the average daily net asset values of each Portfolio. For the T. Rowe Price Small Cap Value Portfolio the rate is .85%, 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% Franklin Templeton International Equity .85% .65% .65% Growth Stock........................... .60% .50% .40% J.P. Morgan Select Growth & Income Stock................................. .70% .60% .55% High Yield Bond........................ .60% .50% .40% First Next $100 $150 Portfolios Million Million Excess ---------- ------- ------- ------ International Growth Stock............. .75% .65% .55% Capital Guardian Domestic Equity....... .65% .55% .50% Asset Allocation....................... .60% .50% .40%
These amounts are paid to Mason Street Advisors, a wholly owned subsidiary of Northwestern Mutual, which is the manager and investment adviser of the Series Fund. Northwestern Mutual is also a party to the agreement. Other costs for each Portfolio are paid either by the Portfolios, Northwestern Mutual, or Mason Street Advisors depending upon the applicable agreement in place. The Small Cap Growth Stock Portfolio, T. Rowe Price Small Cap Value Portfolio, Aggressive Growth Stock Portfolio, International Growth Stock Portfolio, Franklin Templeton International Equity Portfolio, Index 400 Stock Portfolio, Growth Stock Portfolio, J.P. Morgan Select Growth & Income Stock Portfolio, Capital Guardian Domestic Equity Portfolio, Index 500 Stock Portfolio, Asset Allocation Portfolio, and High Yield Bond Portfolio pay their own custodian fees. In addition, certain Portfolios pay a portion of their custodian fees indirectly through expense offset arrangements. Custodian fees are reduced for Portfolios that maintain compensating balances in non-interest bearing accounts. The Portfolios could have invested the assets used to pay for the custodian fees, had the assets not been used in the expense offset arrangements. For the year ended December 31, 2002, the amounts paid through expense offset arrangements are $4,015 in the Small Cap Growth Stock Portfolio, $1,460 in the T. Rowe Price Small Cap Value Portfolio, $4,745 in the Aggressive Growth Stock Portfolio, $3,650 in the Index 400 Stock Portfolio, $3,285 in the Growth Stock Portfolio, $2,555 in the J.P. Morgan Select Growth & Income Stock Portfolio, $730 in the Capital Guardian Domestic Equity Portfolio, $4,356 in the Index 500 Stock Portfolio, $1,095 in the Asset Allocation Portfolio, and $1,460 in the High Yield Bond Portfolio. J.P. Morgan Fleming Asset Management, ("J.P. Morgan"), Templeton Investment Counsel, Inc. ("Templeton Counsel"), T. Rowe Price Associates, Inc. ("T. Rowe Price") and Capital Guardian Trust Company ("Capital Guardian") have been retained under investment subadvisory agreements to provide investment advice and, in general, to conduct the management investment program of the J.P. Morgan Select Growth & Income Stock Portfolio, the Franklin Templeton International Equity Portfolio, the T. Rowe Price Small Cap Value Portfolio and the Capital Guardian Domestic Equity Portfolio, respectively. Mason Street Advisors pays J.P. Morgan .45% on the first $100 million of 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. Mason Street Advisors pays Templeton Counsel .50% on the first $100 million of combined net assets for all funds managed for Northwestern Mutual by Templeton Counsel and .40% in excess of $100 million. Mason Street Advisors pays T. Rowe Price an annual rate of .60% of the Portfolio's average daily net assets. Mason Street Advisors pays Capital Guardian a flat annual fee of $375,000 on the Portfolio's assets of $100 million or less and .275% on net assets in excess of $100 million. The Small Cap Growth Stock, T. Rowe Small Cap Value, and Aggressive Growth Stock Portfolios paid commissions on Fund transactions to an affiliated broker in the amounts of $11,428, $845, and $180,690, respectively, for the year ended December 31, 2002. Note 9 -- Each of the Portfolios of the Series Fund has elected to be taxed as a regulated investment company meeting certain requirements under the Internal Revenue Code. Since each expects to distribute all net investment income and net realized capital gains, the Portfolios anticipate incurring no federal income taxes. Taxable distributions from net investment income and realized capital gains in the Portfolios may 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 between capital and income. The differences between cost amounts for book purposes and tax purposes are primarily due to treatment of deferred losses. 112 Notes to Financial Statements It is the policy of the Portfolios to reclassify the net effect of permanent differences between book and taxable income to capital accounts on the statements of assets and liabilities. Certain losses incurred by the Portfolios after October 31st are deferred and deemed to have occurred in the next fiscal year for income tax purposes. Net realized capital losses for Federal income tax purposes are carried forward to offset future net realized gains. A summary of the Portfolios' post October losses and capital loss carryovers as of December 31, 2002 is provided below:
Post October Capital Loss Losses Carryovers ------------ ------------------- Portfolio Capital Amount Expiration --------- ------------ -------- ---------- (Amounts in Thousands) Small Cap Growth Stock.................. $ -- $ 41,724 2009-2010 T. Rowe Price Small Cap Value........... 140 98 2010 Aggressive Growth Stock................. 10,137 192,312 2010 International Growth Stock.............. 620 3,805 2009-2010 Franklin Templeton International Equity. -- 73,668 2009-2010 Index 400 Stock......................... 142 2,153 2009-2010 Growth Stock............................ 1,983 115,629 2009-2010 J.P. Morgan Select Growth & Income Stock 4,543 73,258 2009-2010 Capital Guardian Domestic Equity........ 1,186 2,410 2009-2010 Index 500 Stock......................... -- -- -- Asset Allocation........................ 289 4,396 2009-2010 Balanced................................ -- 50,014 2009-2010 High Yield Bond......................... 6,888 77,164 2006-2010 Select Bond............................. 251 -- -- Money Market............................ -- -- --
Note 10 -- Dividends from net investment income and net realized capital gains are declared at least annually for the Small Cap Growth Stock, T. Rowe Price Small Cap Value, Aggressive Growth Stock, International Growth Stock, Franklin Templeton International Equity, Index 400 Stock, Growth Stock, J.P. Morgan Select Growth & Income Stock, Capital Guardian Domestic Equity, Index 500 Stock, Asset Allocation, Balanced, High Yield Bond and Select Bond Portfolios and each business day for the Money Market Portfolio. Note 11 -- Northwestern Mutual voluntarily reimburses the Franklin Templeton International Equity and International Growth Stock Portfolios for the benefit Northwestern Mutual receives from foreign dividend taxes charged against the Portfolios. The amounts reimbursed represent approximately 65% of the foreign dividend taxes withheld from the Portfolios. Reimbursements are recorded when foreign dividend taxes are accrued. Voluntary reimbursements amounted to $1,045,186 and $1,296,498 for the Franklin Templeton International Equity Portfolio and $41,412 and $0 for the International Growth Stock Portfolio for the years ended December 31, 2002 and December 31, 2001, respectively. 113 Notes to Financial Statements Note 12 Distributions to Shareholders When applicable, each of the Portfolios made distributions during the year of ordinary income and long-term capital gains. The tax character of distributions paid for the years ended December 31, 2002 and 2001was as follows:
2002 Distributions Paid From: 2001 Distributions Paid From: - - ----------------------------- ----------------------------- Ordinary Long-term Ordinary Long-term Portfolio Income Capital Gain Income Capital Gain - --------- -------- ------------ -------- ------------ (Amounts in Thousands) Small Cap Growth Stock.................. $ 432 $ -- $ 24 $ -- T. Rowe Price Small Cap Value........... 337 13 51 -- Aggressive Growth Stock................. 1,101 24,420 1,517 310,659 International Growth Stock.............. 186 -- -- -- Franklin Templeton International Equity. 13,714 -- 26,699 54,212 Index 400 Stock......................... 1,830 -- 969 1,207 Growth Stock............................ 7,118 -- 5,419 25,531 J.P. Morgan Select Growth & Income Stock 4,121 -- 7,206 12,432 Capital Guardian Domestic Equity........ 882 -- 168 -- Index 500 Stock......................... 21,302 35,471 24,105 59,088 Asset Allocation........................ 1,415 -- 284 -- Balanced................................ 106,128 -- 127,987 112,544 High Yield Bond......................... 14,697 -- 15,601 -- Select Bond............................. 24,835 -- 19,294 -- Money Market............................ 7,657 -- 15,878 --
As of December 31, 2002, the components of distributable earnings on a tax basis were as follows:
Undistributed Undistributed Unrealized Ordinary Long-term Accumulated Appreciation Portfolio Income Gains Losses (Depreciation)* - --------- ------------- ------------- ----------- --------------- (Amounts in Thousands) Small Cap Growth Stock.................. $ -- $ -- $ (41,724) $ (20,305) T. Rowe Price Small Cap Value........... -- -- (238) (4,365) Aggressive Growth Stock................. -- -- (202,449) (54,532) International Growth Stock.............. 2 -- (4,425) (2,539) Franklin Templeton International Equity. 11,039 -- (73,668) (120,368) Index 400 Stock......................... 1,934 -- (2,295) (35,162) Growth Stock............................ 4,774 -- (117,612) 1,336 J.P. Morgan Select Growth & Income Stock 3,770 -- (77,801) (132,978) Capital Guardian Domestic Equity........ 14 -- (3,596) (11,303) Index 500 Stock......................... 21,914 8,036 -- 22,106 Asset Allocation........................ 4 -- (4,685) (4,135) Balanced................................ 85,974 -- (50,014) 345,940 High Yield Bond......................... 364 -- (84,052) (10,373) Select Bond............................. 38,274 -- (251) 7,895 Money Market............................ -- -- -- --
*Differs from disclosures on Schedules of Investments due primarily to timing of recognition of certain gains and losses for tax purposes. Note 13 -- Effective January 31st, 2003 the J.P. Morgan Select Growth and Income Stock Portfolio will experience name and manager changes. The Large Cap Core Stock Fund, formerly known as the J.P. Morgan Select Growth and Income Stock Portfolio, will be managed by Mason Street Advisors, LLC. The management fee will be decreased effective with the change in investment advisers. Effective January 31, 2003, the management fee will be calculated at an annual rate of 0.60% on the first $50 million in net assets, 0.50% on the next $50 million in net assets and 0.40% on net assets greater than $100 million. The annual fee will be based on the average daily net assets and payable on a monthly basis. 114 Accountants' Report [LOGO] PRICEWATERHOUSECOOPERS Report of Independent Accountants To The Northwestern Mutual Life Insurance Company and Contract Owners of Northwestern Mutual Variable Life Account In our opinion, the accompanying statement of assets and liabilities and the related statements of operations and of changes in equity and the financial highlights present fairly, in all material respects, the financial position of Northwestern Mutual Variable Life Account and its Small Cap Growth Stock Division, T. Rowe Price Small Cap Value Division, Aggressive Growth Stock Division, International Growth Stock Division, Franklin Templeton International Equity Division, Index 400 Stock Division, Growth Stock Division, J.P. Morgan Select Growth and Income Stock Division, Capital Guardian Domestic Equity Division, Index 500 Stock Division, Asset Allocation Division, Balanced Division, High Yield Bond Division, Select Bond Division, Money Market Division, Russell Multi-Style Equity Division, Russell Aggressive Equity Division, Russell Non-U.S. Division, Russell Core Bond Division, and Russell Real Estate Securities Division at December 31, 2002, and the results of each of their operations, the changes in each of their equity and their financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of The Northwestern Mutual Life Insurance Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included direct confirmation of securities owned at December 31, 2002 with Northwestern Mutual Series Fund, Inc. and the Russell Insurance Funds, provide a reasonable basis for our opinion. /s/ Pricewaterhouse Coopers LLP Milwaukee, Wisconsin January 30, 2003 115 Financial Statements Northwestern Mutual Variable Life Account Statement of Assets and Liabilities December 31, 2002 (in thousands) Assets Investments at Market Value: Northwestern Mutual Series Fund, Inc. Small Cap Growth Stock 60,988 shares (cost $109,977)...................................... $ 88,737 T. Rowe Price Small Cap Value 24,810 shares (cost $25,180)....................................... 23,644 Aggressive Growth Stock 112,441 shares (cost $370,716)..................................... 245,459 International Growth Stock 5,596 shares (cost $4,584)......................................... 4,421 Franklin Templeton International Equity 159,554 shares (cost $236,427)..................................... 163,382 Index 400 Stock 75,571 shares (cost $83,113)....................................... 71,944 Growth Stock 117,667 shares (cost $247,216)..................................... 186,856 J.P. Morgan Select Growth and Income Stock 126,706 shares (cost $170,047)..................................... 109,981 Capital Guardian Domestic Equity 24,831 shares (cost $21,334)....................................... 18,822 Index 500 Stock 181,007 shares (cost $514,808)..................................... 392,243 Asset Allocation 9,203 shares (cost $8,491)......................................... 7,897 Balanced 129,031 shares (cost $227,716)..................................... 209,288 High Yield Bond 58,130 shares (cost $43,624)....................................... 32,727 Select Bond 59,452 shares (cost $70,746)....................................... 75,563 Money Market 119,895 shares (cost $119,895)..................................... 119,895 Russell Insurance Funds Multi-Style Equity 6,865 shares (cost $88,572)........................................ 62,056 Aggressive Equity 3,252 shares (cost $37,473)........................................ 30,116 Non-U.S. 4,937 shares (cost $47,060)........................................ 35,546 Core Bond 3,333 shares (cost $33,989)........................................ 34,729 Real Estate Securities 2,750 shares (cost $29,435)........................................ 28,905 $1,942,211 -------- Due from Northwestern Mutual Life Insurance Company.................... 486 ---------- Total Assets..................................................... $1,942,697 ========== Liabilities Due to Northwestern Mutual Life Insurance Company..................... $ 132 ---------- Total Liabilities................................................ 132 ---------- Equity (Note 8) Variable Life Policies Issued Before October 11, 1995............... 382,814 Variable Complife Policies Issued On or After October 11, 1995...... 1,401,357 Variable Executive Life Policies Issued On or After March 2, 1998... 87,373 Variable Joint Life Policies Issued On or After December 10, 1998... 71,021 ---------- Total Equity..................................................... 1,942,565 ---------- Total Liabilities and Equity..................................... $1,942,697 ==========
The Accompanying Notes are an Integral Part of the Financial Statements 116 Northwestern Mutual Variable Life Account Statements of Operations (in thousands)
T. Rowe Price Small Cap Growth Small Cap Value Combined Stock Division Division# ------------------------ ------------------------ ------------------------ Year Ended Year Ended Year Ended Year Ended Year Ended Period Ended December 31, December 31, December 31, December 31, December 31, December 31, 2002 2001 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------------- Investment Income Dividend Income.............. $ 31,707 $ 127,172 $ 131 $ 5 $ 124 $ 15 Mortality and Expense Risks.............. (10,183) (7,362) (487) (276) (86) (6) Taxes........................ (814) (2,636) (18) (93) (6) (1) --------- --------- -------- ----- ------- ---- Net Investment Income (Loss).............. 20,710 117,174 (374) (364) 32 8 --------- --------- -------- ----- ------- ---- Realized and Unrealized Gain (Loss) on Investments Realized Gain (Loss) on Investments................ (11,929) 199 (736) (296) 172 -- Unrealized Appreciation (Depreciation) of Investments During the Period.......... (369,861) (300,285) (17,491) 21 (2,018) 483 --------- --------- -------- ----- ------- ---- Net Gain (Loss) on Investments................ (381,790) (300,086) (18,227) (275) (1,846) 483 --------- --------- -------- ----- ------- ---- Increase (Decrease) in Equity Derived from Investment Activity................... $(361,080) $(182,912) $(18,601) $(639) $(1,814) $491 ========= ========= ======== ===== ======= ====
Aggressive Growth International Growth Stock Division Stock Division# ------------------------ ------------------------ Year Ended Year Ended Year Ended Period Ended December 31, December 31, December 31, December 31, 2002 2001 2002 2001 - ---------------------------------------------------------------------------------- Investment Income Dividend Income.............. $ 238 $ 55,735 $ 23 $ -- Mortality and Expense Risks.............. (1,457) (1,156) (15) (1) Taxes........................ (101) (419) (1) -- -------- --------- ----- ---- Net Investment Income (Loss).............. (1,320) 54,160 7 (1) -------- --------- ----- ---- Realized and Unrealized Gain (Loss) on Investments Realized Gain (Loss) on Investments................ (2,733) 470 (297) -- Unrealized Appreciation (Depreciation) of Investments During the Period.......... (59,041) (113,399) (173) 10 -------- --------- ----- ---- Net Gain (Loss) on Investments................ (61,774) (112,929) (470) 10 -------- --------- ----- ---- Increase (Decrease) in Equity Derived from Investment Activity................... $(63,094) $ (58,769) $(463) $ 9 ======== ========= ===== ====
#The initial investment in this Division was made on July 31, 2001. The Accompanying Notes are an Integral Part of the Financial Statements 117 Northwestern Mutual Variable Life Account Statements of Operations (in thousands)
Franklin Templeton International Index 400 Equity Division Stock Division Growth Stock Division ------------------------ ------------------------ ------------------------ Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, December 31, December 31, (continued) 2002 2001 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------------------- Investment Income Dividend Income . . . . .......... $ 3,431 $ 16,480 $ 502 $ 439 $ 2,122 $ 7,586 Mortality and Expense Risks....... (954) (719) (354) (163) (1,057) (773) Taxes............................. (70) (260) (13) (53) (52) (271) -------- -------- -------- ----- -------- -------- Net Investment Income (Loss)...... 2,407 15,501 135 223 1,013 6,542 -------- -------- -------- ----- -------- -------- Realized and Unrealized Gain (Loss) on Investments Realized Gain (Loss) on Investments................... (2,938) (282) (236) (7) (1,528) 352 Unrealized Appreciation (Depreciation) of Investments During the Period.... (33,186) (40,155) (11,036) 718 (45,647) (34,280) -------- -------- -------- ----- -------- -------- Net Gain (Loss) on Investments.... (36,124) (40,437) (11,272) 711 (47,175) (33,928) -------- -------- -------- ----- -------- -------- Increase (Decrease) in Equity Derived from Investment Activity. $(33,717) $(24,936) $(11,137) $ 934 $(46,162) $(27,386) ======== ======== ======== ===== ======== ========
J.P. Morgan Select Capital Guardian Growth and Income Domestic Equity Stock Division Division# ------------------------ ------------------------ Year Ended Year Ended Year Ended Period Ended December 31, December 31, December 31, December 31, (continued) 2002 2001 2002 2001 - ---------------------------------------------------------------------------------------- Investment Income Dividend Income . . . . .......... $ 1,053 $ 4,135 $ 222 $ 23 Mortality and Expense Risks....... (655) (530) (59) (5) Taxes............................. (39) (188) (4) (1) -------- -------- ------- ---- Net Investment Income (Loss)...... 359 3,417 159 17 -------- -------- ------- ---- Realized and Unrealized Gain (Loss) on Investments Realized Gain (Loss) on Investments................... (2,575) (204) (94) (2) Unrealized Appreciation (Depreciation) of Investments During the Period.... (38,293) (13,126) (2,814) 302 -------- -------- ------- ---- Net Gain (Loss) on Investments.... (40,868) (13,330) (2,908) 300 -------- -------- ------- ---- Increase (Decrease) in Equity Derived from Investment Activity. $(40,509) $ (9,913) $(2,749) $317 ======== ======== ======= ====
#The initial investment in this Division was made on July 31, 2001. The Accompanying Notes are an Integral Part of the Financial Statements 118 Northwestern Mutual Variable Life Account Statements of Operations (in thousands)
Index 500 Stock Division Asset Allocation Division# Balanced Division ------------------------ ------------------------ ------------------------ Year Ended Year Ended Year Ended Period Ended Year Ended Year Ended December 31, December 31, December 31, December 31, December 31, December 31, (continued) 2002 2001 2002 2001 2002 2001 - -------------------------------------------------------------------------------------------------------------- Investment Income Dividend Income.............. $ 5,269 $ 16,748 $ 129 $15 $ 7,713 $ 15,012 Mortality and Expense Risks.............. (2,191) (1,726) (28) (2) (1,069) (915) Taxes........................ (181) (633) (3) -- (252) (376) --------- -------- ----- --- -------- -------- Net Investment Income (Loss).............. 2,897 14,389 98 13 6,392 13,721 --------- -------- ----- --- -------- -------- Realized and Unrealized Gain (Loss) on Investments Realized Gain (Loss) on Investments................ 5,110 2,729 (22) 5 (625) 559 Unrealized Appreciation (Depreciation) of Investments During the Period.......... (112,454) (67,629) (654) 60 (23,644) (21,699) --------- -------- ----- --- -------- -------- Net Gain (Loss) on Investments................ (107,344) (64,900) (676) 65 (24,269) (21,140) --------- -------- ----- --- -------- -------- Increase (Decrease) in Equity Derived from Investment Activity................... $(104,447) $(50,511) $(578) $78 $(17,877) $ (7,419) ========= ======== ===== === ======== ========
High Yield Bond Division Select Bond Division Money Market Division ------------------------ ------------------------ ------------------------ Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, December 31, December 31, (continued) 2002 2001 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------------ Investment Income Dividend Income.............. $ 3,479 $ 2,905 $2,499 $ 1,762 $1,835 $3,627 Mortality and Expense Risks.............. (161) (108) (258) (123) (592) (419) Taxes........................ (8) (38) (24) (44) (17) (112) ------- ------- ------ ------- ------ ------ Net Investment Income (Loss).............. 3,310 2,759 2,217 1,595 1,226 3,096 ------- ------- ------ ------- ------ ------ Realized and Unrealized Gain (Loss) on Investments Realized Gain (Loss) on Investments................ (1,107) (1,060) 704 (45) -- -- Unrealized Appreciation (Depreciation) of Investments During the Period.......... (3,189) (861) 3,467 1,419 -- -- ------- ------- ------ ------- ------ ------ Net Gain (Loss) on Investments................ (4,296) (1,921) 4,171 1,374 -- -- ------- ------- ------ ------- ------ ------ Increase (Decrease) in Equity Derived from Investment Activity................... $ (986) $ 838 $6,388 $ 2,969 $1,226 $3,096 ======= ======= ====== ======= ====== ======
#The initial investment in this Division was made on July 31, 2001. The Accompanying Notes are an Integral Part of the Financial Statements 119 Northwestern Mutual Variable Life Account Statements of Operations (in thousands)
Russell Multi- Russell Aggressive Russell Non- Style Equity Division Equity Division U.S. Division ------------------------ ------------------------ ------------------------ Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, December 31, December 31, (continued) 2002 2001 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------------------- Investment Income Dividend Income . . . . .......... $ 356 $ 1,011 $ -- $ 26 $ 629 $ 195 Mortality and Expense Risks....... (285) (180) (146) (85) (159) (103) Taxes............................. (6) (60) (5) (28) (5) (35) -------- ------- ------- ----- ------- ------- Net Investment Income (Loss)...... 65 771 (151) (87) 465 57 -------- ------- ------- ----- ------- ------- Realized and Unrealized Gain (Loss) on Investments Realized Gain (Loss) on Investments................... (1,625) (545) (937) (173) (3,644) (1,972) Unrealized Appreciation (Depreciation) of Investments During the Period.... (14,783) (7,053) (5,584) 217 (2,812) (5,137) -------- ------- ------- ----- ------- ------- Net Gain (Loss) on Investments.... (16,408) (7,598) (6,521) 44 (6,456) (7,109) -------- ------- ------- ----- ------- ------- Increase (Decrease) in Equity Derived from Investment Activity. $(16,343) $(6,827) $(6,672) $ (43) $(5,991) $(7,052) ======== ======= ======= ===== ======= =======
Russell Core Russell Real Estate Bond Division Securities Division ------------------------ ------------------------ Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, (continued) 2002 2001 2002 2001 - ---------------------------------------------------------------------------------------- Investment Income Dividend Income . . . . .......... $ 661 $820 $ 1,291 $ 633 Mortality and Expense Risks....... (52) (25) (118) (47) Taxes............................. (3) (8) (6) (16) ------ ---- ------- ----- Net Investment Income (Loss)...... 606 787 1,167 570 ------ ---- ------- ----- Realized and Unrealized Gain (Loss) on Investments Realized Gain (Loss) on Investments................... 976 184 206 486 Unrealized Appreciation (Depreciation) of Investments During the Period.... 573 (46) (1,082) (130) ------ ---- ------- ----- Net Gain (Loss) on Investments.... 1,549 138 (876) 356 ------ ---- ------- ----- Increase (Decrease) in Equity Derived from Investment Activity. $2,155 $925 $ 291 $ 926 ====== ==== ======= =====
The Accompanying Notes are an Integral Part of the Financial Statements 120 Northwestern Mutual Variable Life Account Statements of Changes in Equity (in thousands)
T. Rowe Price Small Cap Growth Small Cap Value Combined Stock Division Division# ------------------------ ------------------------ ------------------------ Year Ended Year Ended Year Ended Year Ended Year Ended Period Ended December 31, December 31, December 31, December 31, December 31, December 31, 2002 2001 2002 2001 2002 2001 - ----------------------------------------------------------------------------------------------------------------------- Operations Net Investment Income (Loss).......... $ 20,710 $ 117,174 $ (374) $ (364) $ 32 $ 8 Net Realized Gain (Loss).............. (11,929) 199 (736) (296) 172 -- Net Change in Unrealized Appreciation (Depreciation)....................... (369,861) (300,285) (17,491) 21 (2,018) 483 ---------- ---------- -------- ------- ------- ------ Increase (Decrease) in Equity........... (361,080) (182,912) (18,601) (639) (1,814) 491 ---------- ---------- -------- ------- ------- ------ Equity Transactions Policyowners' Net Payments............ 671,423 697,763 28,498 23,485 4,209 434 Policy Loans, Surrenders, and Death Benefits............................. (153,434) (112,180) (7,487) (4,593) (708) (67) Mortality and Other (net)............. (109,889) (107,907) (5,498) (4,385) (738) (58) Transfers from Other Divisions........ 396,497 402,319 20,009 26,320 20,173 5,543 Transfers to Other Divisions.......... (396,497) (402,319) (10,825) (7,922) (3,781) (41) ---------- ---------- -------- ------- ------- ------ Increase in Equity Derived from Equity Transactions...... 408,100 477,676 24,697 32,905 19,155 5,811 ---------- ---------- -------- ------- ------- ------ Net Increase (Decrease) in Equity....... 47,020 294,764 6,096 32,266 17,341 6,302 Equity Beginning of Period................... 1,895,545 1,600,781 82,643 50,377 6,302 -- ---------- ---------- -------- ------- ------- ------ End of Period......................... $1,942,565 $1,895,545 $ 88,739 $82,643 $23,643 $6,302 ========== ========== ======== ======= ======= ======
Aggressive Growth International Growth Stock Division Stock Division# ------------------------ ------------------------ Year Ended Year Ended Year Ended Period Ended December 31, December 31, December 31, December 31, 2002 2001 2002 2001 - -------------------------------------------------------------------------------------------- Operations Net Investment Income (Loss).......... $ (1,320) $ 54,160 $ 7 $ (1) Net Realized Gain (Loss).............. (2,733) 470 (297) -- Net Change in Unrealized Appreciation (Depreciation)....................... (59,041) (113,399) (173) 10 -------- --------- ------- ------ Increase (Decrease) in Equity........... (63,094) (58,769) (463) 9 -------- --------- ------- ------ Equity Transactions Policyowners' Net Payments............ 67,922 66,834 808 98 Policy Loans, Surrenders, and Death Benefits............................. (20,224) (18,126) (158) -- Mortality and Other (net)............. (13,292) (13,223) (147) (11) Transfers from Other Divisions........ 30,778 43,394 6,020 1,041 Transfers to Other Divisions.......... (31,416) (23,039) (2,767) (1) -------- --------- ------- ------ Increase in Equity Derived from Equity Transactions...... 33,768 55,840 3,756 1,127 -------- --------- ------- ------ Net Increase (Decrease) in Equity....... (29,326) (2,929) 3,293 1,136 Equity Beginning of Period................... 274,896 277,825 1,136 -- -------- --------- ------- ------ End of Period......................... $245,570 $ 274,896 $ 4,429 $1,136 ======== ========= ======= ======
#The initial investment in this Division was made on July 31, 2001. The Accompanying Notes are in Integral Part of the Financial Statements 121 Northwestern Mutual Variable Life Account Statements of Changes in Equity (in thousands)
Franklin Templeton International Index 400 Equity Division Stock Division Growth Stock Division ------------------------ ------------------------ ------------------------ Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, December 31, December 31, (continued) 2002 2001 2002 2001 2002 2001 - ----------------------------------------------------------------------------------------------------------------------- Operations Net Investment Income (Loss).......... $ 2,407 $ 15,501 $ 135 $ 223 $ 1,013 $ 6,542 Net Realized Gain (Loss).............. (2,938) (282) (236) (7) (1,528) 352 Net Change in Unrealized Appreciation (Depreciation)....................... (33,186) (40,155) (11,036) 718 (45,647) (34,280) -------- -------- -------- ------- -------- -------- Increase (Decrease) in Equity........... (33,717) (24,936) (11,137) 934 (46,162) (27,386) -------- -------- -------- ------- -------- -------- Equity Transactions Policyowners' Net Payments............ 43,862 41,543 20,450 12,735 56,456 52,360 Policy Loans, Surrenders, and Death Benefits............................. (13,590) (10,571) (4,145) (2,168) (15,648) (11,723) Mortality and Other (net)............. (8,065) (7,910) (3,916) (2,455) (10,956) (10,223) Transfers from Other Divisions........ 22,387 26,521 22,086 25,046 24,065 37,491 Transfers to Other Divisions.......... (18,085) (11,896) (6,096) (3,729) (16,982) (16,082) -------- -------- -------- ------- -------- -------- Increase in Equity Derived from Equity Transactions...... 26,509 37,687 28,379 29,429 36,935 51,823 -------- -------- -------- ------- -------- -------- Net Increase (Decrease) in Equity....... (7,208) 12,751 17,242 30,363 (9,227) 24,437 Equity Beginning of Period................... 170,668 157,917 54,677 24,314 196,115 171,678 -------- -------- -------- ------- -------- -------- End of Period......................... $163,460 $170,668 $ 71,919 $54,677 $186,888 $196,115 ======== ======== ======== ======= ======== ========
J.P. Morgan Select Capital Guardian Growth and Income Domestic Equity Stock Division Stock Division# ------------------------ ------------------------ Year Ended Year Ended Year Ended Period Ended December 31, December 31, December 31, December 31, (continued) 2002 2001 2002 2001 - -------------------------------------------------------------------------------------------- Operations Net Investment Income (Loss).......... $ 359 $ 3,417 $ 159 $ 17 Net Realized Gain (Loss).............. (2,575) (204) (94) (2) Net Change in Unrealized Appreciation (Depreciation)....................... (38,293) (13,126) (2,814) 302 -------- -------- ------- ------ Increase (Decrease) in Equity........... (40,509) (9,913) (2,749) 317 -------- -------- ------- ------ Equity Transactions Policyowners' Net Payments............ 34,103 32,889 3,500 420 Policy Loans, Surrenders, and Death Benefits............................. (9,579) (9,380) (338) (62) Mortality and Other (net)............. (6,256) (6,571) (597) (47) Transfers from Other Divisions........ 13,448 20,061 15,134 4,971 Transfers to Other Divisions.......... (12,836) (7,529) (1,690) (28) -------- -------- ------- ------ Increase in Equity Derived from Equity Transactions...... 18,880 29,470 16,009 5,254 -------- -------- ------- ------ Net Increase (Decrease) in Equity....... (21,629) 19,557 13,260 5,571 Equity Beginning of Period................... 131,656 112,099 5,571 -- -------- -------- ------- ------ End of Period......................... $110,027 $131,656 $18,831 $5,571 ======== ======== ======= ======
#The initial investment in this Division was made on July 31, 2001. The Accompanying Notes are an Integral Part of the Financial Statements 122 Northwestern Mutual Variable Life Account Statements of Changes in Equity (in thousands)
Index 500 Stock Division Asset Allocation Division# Balanced Division ------------------------ ------------------------ ------------------------ Year Ended Year Ended Year Ended Period Ended Year Ended Year Ended December 31, December 31, December 31, December 31, December 31, December 31, (continued) 2002 2001 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------------------------ Operations Net Investment Income (Loss).......... $ 2,897 $ 14,389 $ 98 $ 13 $ 6,392 $ 13,721 Net Realized Gain (Loss).............. 5,110 2,729 (22) 5 (625) 559 Net Change in Unrealized Appreciation (Depreciation)....................... (112,454) (67,629) (654) 60 (23,644) (21,699) --------- -------- ------ ------ -------- -------- Increase (Decrease) in Equity........... (104,447) (50,511) (578) 78 (17,877) (7,419) --------- -------- ------ ------ -------- -------- Equity Transactions Policyowners' Net Payments............ 111,260 104,548 1,179 76 32,640 30,367 Policy Loans, Surrenders, and Death Benefits............................. (33,947) (25,831) (269) (15) (14,335) (11,836) Mortality and Other (net)............. (21,509) (20,549) (262) (30) (6,804) (6,614) Transfers from Other Divisions........ 45,341 67,234 6,375 2,086 20,990 21,637 Transfers to Other Divisions.......... (30,043) (29,177) (739) (1) (13,327) (11,057) --------- -------- ------ ------ -------- -------- Increase in Equity Derived from Equity Transactions...... 71,102 96,225 6,284 2,116 19,164 22,497 --------- -------- ------ ------ -------- -------- Net Increase (Decrease) in Equity....... (33,345) 45,714 5,706 2,194 1,287 15,078 Equity Beginning of Period................... 425,707 379,993 2,194 -- 208,026 192,948 --------- -------- ------ ------ -------- -------- End of Period......................... $ 392,362 $425,707 $7,900 $2,194 $209,313 $208,026 ========= ======== ====== ====== ======== ========
High Yield Bond Division Select Bond Division Money Market Division ------------------------ ------------------------ ------------------------ Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, December 31, December 31, (continued) 2002 2001 2002 2001 2002 2001 - ---------------------------------------------------------------------------------------------------------------------- Operations Net Investment Income (Loss).......... $ 3,310 $ 2,759 $ 2,217 $ 1,595 $ 1,226 $ 3,096 Net Realized Gain (Loss).............. (1,107) (1,060) 704 (45) -- -- Net Change in Unrealized Appreciation (Depreciation)....................... (3,189) (861) 3,467 1,419 -- -- ------- ------- -------- -------- --------- --------- Increase (Decrease) in Equity........... (986) 838 6,388 2,969 1,226 3,096 ------- ------- -------- -------- --------- --------- Equity Transactions Policyowners' Net Payments............ 7,500 6,831 12,009 8,111 192,709 265,283 Policy Loans, Surrenders, and Death Benefits............................. (2,307) (2,040) (3,313) (1,894) (15,625) (7,403) Mortality and Other (net)............. (1,496) (1,318) (2,922) (1,589) (17,291) (24,561) Transfers from Other Divisions........ 6,166 6,262 30,764 23,459 51,384 35,827 Transfers to Other Divisions.......... (3,757) (3,473) (10,812) (12,147) (199,919) (252,248) ------- ------- -------- -------- --------- --------- Increase in Equity Derived from Equity Transactions...... 6,106 6,262 25,726 15,940 11,258 16,898 ------- ------- -------- -------- --------- --------- Net Increase (Decrease) in Equity....... 5,120 7,100 32,114 18,909 12,484 19,994 Equity Beginning of Period................... 27,597 20,497 43,382 24,473 107,420 87,426 ------- ------- -------- -------- --------- --------- End of Period......................... $32,717 $27,597 $ 75,496 $ 43,382 $ 119,904 $ 107,420 ======= ======= ======== ======== ========= =========
#The initial investment in this Division was made on July 31, 2001. The Accompanying Notes are an Integral Part of the Financial Statements 123 Northwestern Mutual Variable Life Account Statements of Changes in Equity (in thousands)
Russell Multi- Russell Aggressive Russell Non- Style Equity Division Equity Division U.S. Division ------------------------ ------------------------ ------------------------ Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, December 31, December 31, (continued) 2002 2001 2002 2001 2002 2001 - ----------------------------------------------------------------------------------------------------------------------- Operations Net Investment Income (Loss).......... $ 65 $ 771 $ (151) $ (87) $ 465 $ 57 Net Realized Gain (Loss).............. (1,625) (545) (937) (173) (3,644) (1,972) Net Change in Unrealized Appreciation (Depreciation)....................... (14,783) (7,053) (5,584) 217 (2,812) (5,137) -------- ------- ------- ------- -------- -------- Increase (Decrease) in Equity........... (16,343) (6,827) (6,672) (43) (5,991) (7,052) -------- ------- ------- ------- -------- -------- Equity Transactions Policyowners' Net Payments............ 22,082 21,720 9,224 8,802 11,645 12,021 Policy Loans, Surrenders, and Death Benefits............................. (4,487) (2,510) (2,165) (1,295) (2,408) (1,528) Mortality and Other (net)............. (3,993) (3,622) (1,852) (1,605) (1,943) (1,813) Transfers from Other Divisions........ 11,287 16,182 8,160 8,226 13,956 15,996 Transfers to Other Divisions.......... (7,331) (5,154) (5,758) (4,141) (12,413) (10,603) -------- ------- ------- ------- -------- -------- Increase in Equity Derived from Equity Transactions...... 17,558 26,616 7,609 9,987 8,837 14,073 -------- ------- ------- ------- -------- -------- Net Increase (Decrease) in Equity....... 1,215 19,789 937 9,944 2,846 7,021 Equity Beginning of Period................... 60,864 41,075 29,181 19,237 32,708 25,687 -------- ------- ------- ------- -------- -------- End of Period......................... $ 62,079 $60,864 $30,118 $29,181 $ 35,554 $ 32,708 ======== ======= ======= ======= ======== ========
Russell Core Russell Real Estate Bond Division Securities Division ------------------------ ------------------------ Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, (continued) 2002 2001 2002 2001 - -------------------------------------------------------------------------------------------- Operations Net Investment Income (Loss).......... $ 606 $ 787 $ 1,167 $ 570 Net Realized Gain (Loss).............. 976 184 206 486 Net Change in Unrealized Appreciation (Depreciation)....................... 573 (46) (1,082) (130) ------- ------- ------- ------- Increase (Decrease) in Equity........... 2,155 925 291 926 ------- ------- ------- ------- Equity Transactions Policyowners' Net Payments............ 5,412 6,006 5,955 3,200 Policy Loans, Surrenders, and Death Benefits............................. (804) (305) (1,897) (833) Mortality and Other (net)............. (1,096) (663) (1,256) (660) Transfers from Other Divisions........ 13,069 6,903 14,905 8,119 Transfers to Other Divisions.......... (3,048) (1,554) (4,872) (2,497) ------- ------- ------- ------- Increase in Equity Derived from Equity Transactions...... 13,533 10,387 12,835 7,329 ------- ------- ------- ------- Net Increase (Decrease) in Equity....... 15,688 11,312 13,126 8,255 Equity Beginning of Period................... 19,035 7,723 15,767 7,512 ------- ------- ------- ------- End of Period......................... $34,723 $19,035 $28,893 $15,767 ======= ======= ======= =======
The Accompanying Notes are an Integral Part of the Financial Statements 124 Financial Highlights Northwestern Mutual Variable Life Account (For a unit outstanding during the period)
Dividend Income as a % of Expense Ratio, Unit Value, Average Net Lowest to Total Return (2), Division Lowest to Highest Assets Highest Lowest to Highest - ------------------------------------------------------------------------------------------------------------------- Small Cap Growth Stock Year Ended 12/31/02..................... $1.258323 to $ 15.591407 0.15% 0.20% to 0.75% (18.99%) to (18.42%) Year Ended 12/31/01..................... $1.553320 to $ 19.112629 0.01% 0.20% to 0.75% (4.44%) to (3.76%) T. Rowe Price Small Cap Value (1) Year Ended 12/31/02..................... $0.951303 to $ 9.607906 0.72% 0.20% to 0.75% (6.24%) to (5.58%) Period Ended 12/31/01................... $1.014592 to $ 10.175772 0.42% 0.20% to 0.75% 1.46% to 1.76% Aggressive Growth Stock Year Ended 12/31/02..................... $1.464237 to $ 38.441232 0.09% 0.20% to 0.75% (21.70%) to (21.15%) Year Ended 12/31/01..................... $1.868189 to $ 48.753408 21.57% 0.20% to 0.75% (20.44%) to (19.87%) International Growth Stock (1) Year Ended 12/31/02..................... $0.786402 to $ 7.942434 0.78% 0.20% to 0.75% (12.95%) to (12.34%) Period Ended 12/31/01................... $0.903343 to $ 9.060000 0.00% 0.20% to 0.75% (9.67%) to (9.40%) Franklin Templeton International Equity Year Ended 12/31/02..................... $1.216308 to $ 1.759773 1.99% 0.20% to 0.75% (17.98%) to (17.40%) Year Ended 12/31/01..................... $1.481423 to $ 2.130553 10.20% 0.20% to 0.75% (14.60%) to (14.00%) Index 400 Stock Year Ended 12/31/02..................... $1.038438 to $ 11.227976 0.75% 0.20% to 0.75% (15.14%) to (14.54%) Year Ended 12/31/01..................... $1.223656 to $ 13.138452 1.13% 0.20% to 0.75% (1.35%) to (0.65%) Growth Stock Year Ended 12/31/02..................... $1.645371 to $ 21.414901 1.10% 0.20% to 0.75% (21.38%) to (20.83%) Year Ended 12/31/01..................... $2.090785 to $ 27.049526 4.25% 0.20% to 0.75% (14.82%) to (14.22%) J.P. Morgan Select Growth and Income Stock Year Ended 12/31/02..................... $1.296529 to $ 16.717038 0.90% 0.20% to 0.75% (28.70%) to (28.20%) Year Ended 12/31/01..................... $1.816535 to $ 23.281928 3.45% 0.20% to 0.75% (8.42%) to (7.77%) Capital Guardian Domestic Equity (1) Year Ended 12/31/02..................... $0.762737 to $ 7.703469 1.77% 0.20% to 0.75% (21.79%) to (21.24%) Period Ended 12/31/01................... $0.975250 to $ 9.781208 0.73% 0.20% to 0.75% (2.48%) to (2.19%) Index 500 Stock Year Ended 12/31/02..................... $1.630187 to $ 35.246385 1.30% 0.20% to 0.75% (22.61%) to (22.07%) Year Ended 12/31/01..................... $2.104460 to $ 45.228886 4.26% 0.20% to 0.75% (12.50%) to (11.88%) Asset Allocation (1) Year Ended 12/31/02..................... $0.869901 to $ 8.785751 2.35% 0.20% to 0.75% (10.88%) to (10.26%) Period Ended 12/31/01................... $0.976111 to $ 9.789803 1.19% 0.20% to 0.75% (2.39%) to (2.10%) Balanced Year Ended 12/31/02..................... $1.640075 to $ 84.486469 3.70% 0.20% to 0.75% (8.18%) to (7.54%) Year Ended 12/31/01..................... $1.784400 to $ 91.372736 7.58% 0.20% to 0.75% (3.83%) to (3.15%) High Yield Bond Year Ended 12/31/02..................... $1.276280 to $ 15.870922 11.64% 0.20% to 0.75% (3.57%) to (2.89%) Year Ended 12/31/01..................... $1.322201 to $ 16.343831 11.57% 0.20% to 0.75% 4.29% to 5.03% Select Bond Year Ended 12/31/02..................... $1.624374 to $121.279756 4.23% 0.20% to 0.75% 11.31% to 12.09% Year Ended 12/31/01..................... $1.457873 to $108.200259 5.07% 0.20% to 0.75% 9.59% to 10.37% Money Market Year Ended 12/31/02..................... $1.339422 to $ 34.132616 1.63% 0.20% to 0.75% 0.95% to 1.65% Year Ended 12/31/01..................... $1.325528 to $ 33.577318 3.73% 0.20% to 0.75% 3.19% to 3.92% Russell Multi-Style Equity Year Ended 12/31/02..................... $0.589495 to $ 6.221208 0.58% 0.20% to 0.75% (23.72%) to (23.19%) Year Ended 12/31/01..................... $0.772852 to $ 8.099453 2.00% 0.20% to 0.75% (14.81%) to (14.21%) Russell Aggressive Equity Year Ended 12/31/02..................... $0.804447 to $ 8.707578 0.00% 0.20% to 0.75% (19.62%) to (19.06%) Year Ended 12/31/01..................... $1.000805 to $ 10.757522 0.11% 0.20% to 0.75% (3.05%) to (2.36%) Russell Non-U.S. Year Ended 12/31/02..................... $0.688244 to $ 7.095865 1.79% 0.20% to 0.75% (15.74%) to (15.15%) Year Ended 12/31/01..................... $0.816787 to $ 8.362558 0.67% 0.20% to 0.75% (22.58%) to (22.03%) Russell Core Bond Year Ended 12/31/02..................... $1.261197 to $ 12.748590 2.67% 0.20% to 0.75% 3.08% to 3.80% Year Ended 12/31/01..................... $1.166871 to $ 11.713217 5.52% 0.20% to 0.75% 7.08% to 7.84% Russell Real Estate Securities Year Ended 12/31/02..................... $1.308500 to $ 13.208871 5.44% 0.20% to 0.75% 8.08% to 8.84% Year Ended 12/31/01..................... $1.269394 to $ 12.725061 5.23% 0.20% to 0.75% 6.65% to 7.41%
(1)Portfolio commenced operations on July 31, 2001. (2)Total Return includes deductions for management and other expenses; excludes deductions for sales loads and other charges. Returns are not annualized for periods less than one year. The Accompanying Notes are an Integral Part of the Financial Statements 125 Notes to Financial Statements Northwestern Mutual Variable Life Account December 31, 2002 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 accounting principles generally accepted in the United States of America 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 and distributions of net realized gains from the Funds are 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. Purchase and sales of the Funds' shares for the period ended December 31, 2002 by each Division are shown below:
Division Purchases Sales -------- ------------ ----------- Small Cap Growth Stock.............. $ 34,043,299 $ 9,722,770 T. Rowe Price Small Cap Value....... 20,382,966 1,188,788 Aggressive Growth Stock............. 61,832,611 24,205,263 International Growth Stock.......... 3,987,596 231,555 Franklin Templeton International Equity............................. 45,458,635 16,619,794 Index 400 Stock..................... 34,210,532 5,672,107 Growth Stock........................ 57,290,950 19,375,293 J.P. Morgan Select Growth and Income Stock.............................. 30,997,265 11,804,760 Capital Guardian Domestic Equity.... 16,848,196 688,642 Index 500 Stock..................... 124,130,408 41,476,724 Asset Allocation.................... 6,735,736 356,878 Balanced............................ 42,828,391 17,297,112 High Yield Bond..................... 12,274,052 2,848,592 Select Bond......................... 33,076,658 4,710,128 Money Market........................ 78,016,176 65,432,842 Russell Multi-Style Equity.......... 24,085,977 6,485,367 Russell Aggressive Equity........... 10,381,195 2,925,476 Russell Non-U.S..................... 12,693,867 3,399,985 Russell Core Bond................... 16,654,392 1,600,641 Russell Real Estate Securities...... 16,814,887 2,671,527
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 Variable Executive Life policies issued on or after March 2, 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 .32% thereafter for policies with the Cash Value Amendment, or .30% thereafter for policies without the Cash Value Amendment. A deduction for the mortality and expense risks for Variable Joint Life policies issued on or after December 10, 1998 is determined monthly at an annual rate of .20% of the amounts invested in the Account for the Policy. 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 for Variable Life and Variable Complife policies, and monthly for Variable Executive Life and Variable Joint Life policies, and are paid to Northwestern Mutual to cover the cost of providing insurance protection. For Variable Life and Variable Complife policies 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. For Variable Executive Life and Variable Joint Life policies the cost reflects expected mortality costs based upon actual experience. 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, 126 Notes to Financial Statements 1995, and for Variable Executive Life policies issued on or after March 2, 1998, and Variable Joint Life policies issued on or after December 10, 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. 127 Notes to Financial Statements Note 8 -- Equity Values by Division are shown below: (in thousands, except accumulation unit values)
Variable Life Policies Issued Before October 11, 1995 Equity of: --------------------- Total Division Policyowners NML Equity -------- ------------ -------- ---------- Small Cap Growth Stock.................... $ 7,183 $ 417 $ 7,600 T. Rowe Price Small Cap Value............. 2,961 155 3,116 Aggressive Growth Stock................... 42,159 2,841 45,000 International Growth Stock................ 369 21 390 Franklin Templeton International Equity... 29,911 2,076 31,987 Index 400 Stock........................... 5,758 295 6,053 Growth Stock.............................. 22,121 1,341 23,462 J.P. Morgan Select Growth and Income Stock 15,746 1,144 16,890 Capital Guardian Domestic Equity.......... 3,018 205 3,223 Index 500 Stock........................... 77,690 3,927 81,617 Asset Allocation.......................... 1,840 79 1,919 Balanced.................................. 119,027 3,538 122,565 High Yield Bond........................... 4,174 246 4,420 Select Bond............................... 13,685 424 14,109 Money Market.............................. 8,135 276 8,411 Russell Multi-Style Equity................ 2,832 147 2,979 Russell Aggressive Equity................. 2,039 103 2,142 Russell Non-U.S........................... 2,323 119 2,442 Russell Core Bond......................... 1,612 70 1,682 Russell Real Estate Securities............ 2,699 108 2,807 ---------- -------- ---------- $ 365,282 $ 17,532 $ 382,814 ========== ======== ========== Variable Life Policies Issued On or After October 11, 1995 Equity of: --------------------- Total Division Policyowners NML Equity -------- ------------ -------- ---------- Small Cap Growth Stock.................... $ 58,132 $ 17,776 $ 75,908 T. Rowe Price Small Cap Value............. 13,996 4,291 18,287 Aggressive Growth Stock................... 157,812 35,683 193,495 International Growth Stock................ 2,494 953 3,447 Franklin Templeton International Equity... 101,886 23,399 125,285 Index 400 Stock........................... 45,611 13,944 59,555 Growth Stock.............................. 121,581 30,399 151,980 J.P. Morgan Select Growth and Income Stock 71,371 16,592 87,963 Capital Guardian Domestic Equity.......... 10,028 3,190 13,218 Index 500 Stock........................... 231,059 55,981 287,040 Asset Allocation.......................... 4,222 1,213 5,435 Balanced.................................. 64,964 14,555 79,519 High Yield Bond........................... 21,376 4,401 25,777 Select Bond............................... 38,936 8,427 47,363 Money Market.............................. 70,720 27,663 98,383 Russell Multi-Style Equity................ 35,241 11,391 46,632 Russell Aggressive Equity................. 17,882 5,455 23,337 Russell Non-U.S........................... 19,535 5,956 25,491 Russell Core Bond......................... 7,945 2,238 10,183 Russell Real Estate Securities............ 17,845 5,214 23,059 ---------- -------- ---------- $1,112,636 $288,721 $1,401,357 ========== ======== ==========
128 Notes to Financial Statements
Variable Variable Executive Life Joint Life Policies Issued Policies Issued On or After On or After March 2, 1998 December 10, 1998 --------------- ----------------- Division Total Equity Total Equity - -------- --------------- ----------------- Small Cap Growth Stock............................................ $ 1,187 $ 4,044 T. Rowe Price Small Cap Value..................................... 617 1,624 Aggressive Growth Stock........................................... 3,172 3,903 International Growth Stock........................................ 125 467 Franklin Templeton International Equity........................... 2,647 3,540 Index 400 Stock................................................... 2,329 3,982 Growth Stock...................................................... 5,492 5,954 J.P. Morgan Select Growth and Income Stock........................ 2,206 2,967 Capital Guardian Domestic Equity.................................. 834 1,556 Index 500 Stock................................................... 7,065 16,641 Asset Allocation.................................................. 150 396 Balanced.......................................................... 2,657 4,572 High Yield Bond................................................... 1,662 858 Select Bond....................................................... 10,247 3,778 Money Market...................................................... 6,560 6,550 Russell Multi-Style Equity........................................ 8,375 4,092 Russell Aggressive Equity......................................... 3,157 1,483 Russell Non-U.S................................................... 5,468 2,153 Russell Core Bond................................................. 22,058 800 Russell Real Estate Securities . . . . . . . . . . . . . . . . . . 1,365 1,661 ------- ------- $87,373 $71,021 ======= =======
129 Director Information (Unaudited) Northwestern Mutual Series Fund, Inc. The name, age and address of the directors, as well as their affiliations, positions held with the Fund, principal occupations during the past five years and the number of portfolios overseen in the Northwestern Mutual fund complex, are shown below. Each director will serve until that person's successor is elected and qualified. Independent Directors
Number of Portfolios Length of in Fund Complex Other Directorships Name Age and Address Position Time Served Overseen by Director Held - -------------------------------------------------------------------------------------------------------------------------------- William J. Blake (69) Director Since 1988 26 None 731 North Jackson St. Milwaukee, WI 53202 Principal Occupation During Past 5 Years: Chairman, Blake Investment Corp. (real estate investments and venture capital) - -------------------------------------------------------------------------------------------------------------------------------- William A. McIntosh (63) Director Since 1997 26 MGIC Investment Corporation 525 Sheridan Road Kenilworth, IL 60043 Principal Occupation During Past 5 Years: Retired Division Head, U.S. Fixed Income of Salomon Brothers (investment securities) - -------------------------------------------------------------------------------------------------------------------------------- Martin F. Stein (65) Director Since 1995 26 Koss Corporation 1800 East Capitol Drive Milwaukee, WI 53211 Principal Occupation During Past 5 Years: Founder of Stein Optical (retail sales of eyewear) - -------------------------------------------------------------------------------------------------------------------------------- Other Directors Number of Portfolios Length of in Fund Complex Other Directorships Name Age and Address Position Time Served Overseen by Director Held - -------------------------------------------------------------------------------------------------------------------------------- Stephen N. Graff (67) Director Since 1995 26 Regal-Beloit Corporation 805 Lone Tree Road Trustee of Elm Grove, WI 53122 Northwestern Mutual Principal Occupation During Past 5 Years: Retired Partner, Arthur Andersen LLP (public accountants) - -------------------------------------------------------------------------------------------------------------------------------- Edward J. Zore (56) President and Director Since 2000 26 Manpower, Inc. 720 East Wisconsin Avenue Trustee of Milwaukee, WI 53202 Northwestern Mutual Principal Occupation During Past 5 Years: President and Chief Executive Officer of Northwestern Mutual since 2001; President, 2000-2001; prior thereto, Executive Vice Pre - --------------------------------------------------------------------------------------------------------------------------------
130 Directors and Officers Northwestern Mutual Series Fund, Inc. Directors
Edward J. Zore..President and Chief Executive Officer, Northwestern Mutual Life, ........................................................................Milwaukee Martin F. Stein...........................................Founder, Stein Optical ........................................................................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 Officers Edward J. Zore.........................................................President Mark G. Doll..........................................Vice President & Treasurer Merrill C. Lundberg....................................................Secretary Barbara E. Courtney...................................................Controller
131 The Northwestern Mutual Life Insurance Company . Milwaukee, WI www.northwesternmutual.com 90-1899 (0786) (REV 0103) 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 Investments Services, LLC, a wholly owned subsidiary of Northwestern Mutual life, a registered broker dealer, under the Securities Exchange Act of 1934 and a member of the National Association of Securities Dealers, Inc. [Logo appears here] PO Box 3095 Milwaukee, WI 53201-3095 -----END PRIVACY-ENHANCED MESSAGE-----