-----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, Sx2YZxsxKYk0V2O7bK2bBs8OHyFPeCrJJ2CX+pkO2it6MeOjMx5WlUUO39vPfPT2 azubTWugFaZe+RiDDF/UWg== 0001047469-99-005782.txt : 19990217 0001047469-99-005782.hdr.sgml : 19990217 ACCESSION NUMBER: 0001047469-99-005782 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT CENTRAL INDEX KEY: 0000742277 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-03989 FILM NUMBER: 99539298 BUSINESS ADDRESS: STREET 1: 720 E WISCONSIN AVE CITY: MILWAUKEE STATE: WI ZIP: 53202 BUSINESS PHONE: 4142711444 MAIL ADDRESS: STREET 1: 720 EAST WISCONSIN AVENUE CITY: MILWAUKEE STATE: WI ZIP: 53202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHWESTERN MUTUAL SERIES FUND INC CENTRAL INDEX KEY: 0000742212 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 391603401 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-03990 FILM NUMBER: 99539299 BUSINESS ADDRESS: STREET 1: 720 E WISCONSIN AVE CITY: MILWAUKEE STATE: WI ZIP: 53202 BUSINESS PHONE: 4142711444 MAIL ADDRESS: STREET 1: 720 EAST WISCONSIN AVE CITY: MILWAUKEE STATE: WI ZIP: 53202 FORMER COMPANY: FORMER CONFORMED NAME: NORTHWESTERN MUTUAL VARIABLE LIFE SERIES FUND INC DATE OF NAME CHANGE: 19940830 N-30D 1 N-30D December 31, 1998 ANNUAL REPORT NORTHWESTERN MUTUAL LIFE-Registered Trademark- The Quiet Company-Registered Trademark- - ----------------------------------------- Northwestern Mutual Variable Life Account - ----------------------------------------- Northwestern Mutual Series Fund, Inc. The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue Milwaukee, WI 53202 CONTENTS CONTENTS Letter to Policyowners 1 Performance Summary for Separate Accounts 2 Overview and Outlook 3 Series Fund Objectives and Schedule of Investments 4 Aggressive Growth Stock Portfolio 4 International Equity Portfolio 7 Growth Stock Portfolio 11 Growth and Income Stock Portfolio 14 Index 500 Stock Portfolio 17 Balanced Portfolio 24 High Yield Bond Portfolio 38 Select Bond Portfolio 42 Money Market Portfolio 48 Accountants' Report 50 Series Fund Financial Statements 51 Aggressive Growth Stock Portfolio 51 International Equity Portfolio 54 Growth Stock Portfolio 57 Growth and Income Stock Portfolio 60 Index 500 Stock Portfolio 63 Balanced Portfolio 66 High Yield Bond Portfolio 69 Select Bond Portfolio 72 Money Market Portfolio 75 Notes to Series Fund Financial Statements 78 Accountants' Report 81 Variable Life Financial Statements 82 Notes to Variable Life Financial Statements 86 Directors and Officers 97
HOW TO GET MORE INFORMATION ON YOUR VARIABLE COMPLIFE & VARIABLE LIFE POLICY NML Express provides 24 hour telephone access to your account information by dialing 1-800-519-4NML (1-800-519-4665) Policyowners must provide a policy number plus a Personal Identification Number (PIN) to utilize this service. Call toll-free to review policy values and portfolio performance. If a signed authorization has been returned to the Home Office, policyowners may also transfer among portfolios by phone. For more information about Northwestern Mutual Life, visit us on our Website at WWW.NORTHWESTERNMUTUAL.COM
LETTER TO POLICYOWNERS LETTER TO POLICYOWNERS January 31, 1999 The year just ended was a period of rather high drama for the U.S. economy and markets. Virtually all observers began the year anticipating slower economic growth, possibly even a recession, accompanied by more modest returns in the stock market, after three years of very large gains. In contrast to expectations, economic growth continued at a healthy pace, and the major equity indexes posted a fourth consecutive year of double-digit gains. In the bond market, ultra-safe 30-year U.S. Treasury bonds produced extraordinary returns of 17% for the year, while the performance of bonds that carry a higher degree of risk lagged. Perhaps the most striking aspect of 1998 trends in both stock and bond markets was volatility. By many measures, the past year was the most volatile since 1987 and one of the most volatile on record. Both the Dow Jones Industrial Average and the S&P 500 Index rose or fell by 1% or more on approximately one-third of all trading days. Historically, the market has risen or fallen by 1% or more on an average of one-fifth of trading days, as measured by the S&P 500 Index in years after 1926 and the Dow Jones Industrial Average back to 1887. For many long-term market watchers, the most worrisome aspect of the 1998 gains was that they applied to such a narrow group of stocks, notably high-tech issues and large-capitalization consumer-related stocks. Bond markets, too, were extremely volatile, especially during the third quarter, when a barrage of concerns caused liquidity to evaporate. A major message to be drawn from the positive returns posted in this difficult year is that the U.S. economy and American investors are highly resilient, even in the face of rather severe pressures. Throughout the year, sagging Asian economies held down demand for industrial goods, impacting earnings growth of U.S. multinationals. Russia effectively defaulted on its debt and devalued the ruble, and fears spread that Latin American countries could follow; these international woes created problems for multinational banks. Forecasters warned of unpleasant possibilities, including inflation that would drive up interest rates, or deflation that could lead to recession. Consumers maintained their confident posture, maintaining economic growth by continuing to buy houses, cars and a variety of other goods. Many observers give much of the credit for continued strength in the economy and markets to Alan Greenspan and the Federal Reserve Board. In September, the collapse of Long-Term Capital Management, a major hedge fund, appeared to threaten the viability of U.S. capital markets. When Mr. Greenspan engineered the buy-out of Long-Term Capital by a group of financial institutions, investors concluded that the Fed would do whatever was necessary to avoid a financial meltdown. A further boost was provided by a series of interest rate cuts in September and October. With these strong signals, money poured back into stocks; investors became so confident that they shrugged off both the presidential impeachment and the bombing of Iraq. Throughout this market turmoil, the portfolios underlying Northwestern Mutual's variable life insurance products continued to perform in line with their stated objectives, providing policyowners returns that will contribute to achieving long-range insurance and financial goals. We continue to invest for the long term, and we urge you to take a long-term view as well, taking current events into account, but basing decisions on long-range goals and prospects. We appreciate the confidence you have shown in Northwestern Mutual by selecting us to help you plan for a secure financial future. We pledge to continue providing you and other policyowners with innovative products that can meet a variety of needs. The Northwestern Mutual Life Insurance Company [SIGNATURE] James D. Ericson, President and Chief Executive Officer -- 1 PERFORMANCE SUMMARY PERFORMANCE SUMMARY as of December 31, 1998 VARIABLE LIFE--POLICIES ISSUED BEFORE OCTOBER 11, 1995
Aggressive Growth & Net Investment Growth International Growth Income Index 500 High Yield Select Money Rates of Return Stock Equity Stock Stock Stock Balanced Bond Bond Market (as of 12/31/98) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio 1 year............. 6.80% 4.09% 25.81% 22.28% 27.82% 18.05% (2.53%) 6.32% 4.69% 5 years............ - - - - 182.31% 100.33% - 36.06% 24.47% Annualized....... - - - - 23.07% 14.91% - 6.35% 4.48% 10 years........... - - - - 360.03% 224.88% - 126.89% 60.22% Annualized....... - - - - 16.49% 12.51% - 8.54% 4.83% Since inception.... 103.01%* 58.10%* 155.76%* 144.59%* - - 58.59%* - - Annualized....... 16.40% 10.32% 22.31% 21.14% - - 10.40% - -
VARIABLE COMPLIFE--POLICES ISSUED ON OR AFTER OCTOBER 11, 1995**
Aggressive Growth & Net Investment Growth International Growth Income Index 500 High Yield Select Money Rates of Return Stock Equity Stock Stock Stock Balanced Bond Bond Market (as of 12/31/98) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio 1 year............. 6.91% 4.20% 25.93% 22.40% 27.95% 18.17% (2.43%) 6.43% 4.80% 5 years............ - - - - 183.71% 101.40% - 36.75% 25.09% Annualized....... - - - - 23.19% 15.03% - 6.46% 4.58% 10 years........... - - - - 364.90% 228.21% - 129.24% 61.81% Annualized....... - - - - 16.61% 12.62% - 8.65% 4.93% Since inception.... 103.97%* 58.86%* 156.98%* 145.76%* - - 59.34%* - - Annualized....... 16.52% 10.44% 22.43% 21.27% - - 10.51% - -
VARIABLE EXECUTIVE LIFE--POLICIES FIRST OFFERED ON MARCH 2, 1998*** AND VARIABLE JOINT LIFE--POLICIES FIRST OFFERED ON DECEMBER 28, 1998****
Aggressive Growth & Net Investment Growth International Growth Income Index 500 High Yield Select Money Rates of Return Stock Equity Stock Stock Stock Balanced Bond Bond Market (as of 12/31/98) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio 1 year............. 7.56% 4.82% 26.69% 23.14% 28.72% 18.88% (1.84%) 7.07% 5.43% 5 years............ - - - - 192.31% 107.10% - 40.12% 28.91% Annualized....... - - - - 23.93% 15.67% - 6.98% 5.21% 10 years........... - - - - 393.84% 248.78% - 143.62% 70.49% Annualized....... - - - - 17.32% 13.31% - 9.31% 5.48% Since inception.... 109.75%* 63.36%* 164.25%* 152.71%* - - 63.85%* - - Annualized....... 17.22% 11.10% 23.17% 22.00% - - 11.17% - -
The net investment rates of return shown above should not be considered a representation of investment results which may be anticipated in the future. The net investment rates of return include investment income, capital gains and all common fees of the divisions of the Variable Life Account, but not the additional charges that are unique to your policy. See the prospectus for a description of the effect of investment performance on policy benefits. Policy benefits reflect the investment rates of return of the divisions in which the policy is invested, and will vary depending on the fees and expenses associated with your policy. * Inception date of 5/3/94. ** Product inception date of 10/11/95. Returns prior to 10/11/95 were reflected using the actual investment experience of each division, adjusted for the expenses of the product. These returns are not a guarantee of future performance. *** 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. These returns are not a guarantee of future performance. **** Policy first offerred December 28, 1998 (For use primarily in estate planning, provides coverage on two insureds with a death benefit payable on the second death). As of the date of this report no policies were in force. Returns prior to 12/28/98 were reflected using the actual investment experience of each division, adjusted for expenses of the product. These returns are not a guarantee of future performance. Note: "Standard and Poor's 500" and "S&P 500" 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. IMPORTANT NOTE: The average annual total returns shown with the graphs on the following pages are not an estimate or a guarantee of future performance. These average annual total returns reflect reinvestment of investment income and capital gain distributions, and deduction of investment management fees and fund expenses, but not product charges. See the prospectus for a description of the effect of investment performance on policy benefits. Policy benefits reflect the investment rates of return of the divisions in which the policy is invested, and will vary depending on the insurance and administrative charges, applicable sales charges, and the mortality and expense risk charge associated with the product. These product charges effectively reduce the dollar amount of any net gains and increase the dollar amount of any net losses. The net investment rates of return shown above reflect the product charges borne by each division of the Variable Life Account, but not the additional charges that are unique to your policy. Your Northwestern Mutual Life agent/registered representative of Northwestern Mutual Investment Service ("NMIS") can provide you with actual rates of return for your variable life insurance policy, showing the effect of all of the applicable charges. -- 2 OVERVIEW AND OUTLOOK - -------------------------------------------------------------------------------- THE ECONOMY The U.S. economy continued to grow throughout 1998, with growth driven almost entirely by consumer spending. While manufacturing continues to suffer from weak foreign demand, factory orders indicate that capital spending on equipment is holding up. Fourth quarter growth appears to have been fairly strong, with real growth continuing at a rate of 3% or more. As we enter 1999, it seems unlikely that the powerful growth of 1998 will be maintained. Last year, the obstacles to growth were largely external, stemming from the Asian financial crisis. Now, as companies seek to boost profits by cutting costs, and as recently announced layoffs take effect, it seems inevitable that growth in household income will slow and capital budgets will be squeezed. Meantime, foreign demand for U.S. goods will remain weak. Economic Growth and Inflation EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
REAL GDP CPI-U 1988 3.8% 4.4% 1989 3.4% 4.6% 1990 1.3% 6.1% 1991 -1.0% 3.1% 1992 2.7% 2.9% 1993 2.3% 2.7% 1994 3.5% 2.7% 1995 2.0% 2.5% 1996 2.2% 3.3% 1997 3.8% 1.9% 1998 3.0% 1.7%
Source: U.S. Department of Commerce. Year-to-year percentage change in Real Gross Domestic Product is used for real economic growth. December-to-December percentage change in the Consumer Price Index-- Urban is used for the inflation rate. - -------------------------------------------------------------------------------- THE EQUITY MARKET On balance, 1998 was another excellent year for the stock market, but with dramatic differences in performance of various groups of companies. Technology names led the way, with soaring values for Internet-related stocks, especially late in the year. The Standard & Poor's 500 Index, a market-value weighted benchmark of large-stock performance, far outpaced the Dow Jones Industrial Average, largely because the S&P Index includes high-tech names such as Microsoft, Intel and Dell Computer Corp. The Dow Jones average includes just 30 "blue-chip" stocks, most of them industrial companies, with only one, IBM, in the realm of technology. Total return (including capital gains and dividends) for the S&P 500 Index was 28.5% for the year, while return for the Dow-Jones Industrial Average was a much more modest 18.03%. The Nasdaq Composite Index, which reflects all stocks traded on the Nasdaq system, had its third best year ever, with an increase of 39.6%. The Nasdaq Composite was paced by the Nasdaq 100 Index, which was up 85.3%; this index, which tracks the largest non-financial stocks traded on Nasdaq, is dominated by high-tech names. In contrast, the Russell 2000 Index, a benchmark of small company stock performance, was down 3.5% for the year. Annual Total Returns from S&P 500 Index EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 12/31/89 31.7% 12/31/90 -3.1% 12/31/91 30.5% 12/31/92 7.6% 12/31/93 10.1% 12/31/94 1.2% 12/31/95 37.4% 12/31/96 22.8% 12/31/97 33.4% 12/31/98 28.5%
Source: Standard & Poor's - -------------------------------------------------------------------------------- THE BOND MARKET For the first time since 1990, the safest bonds performed much better than risky bonds, amid falling interest rates, low inflation and a late-summer flight from bonds with any risk. The total return on 30-year Treasury bonds was 17.1%, compared with 8.9% for the broad Merrill Lynch Domestic Master Index, which includes investment-grade bonds of various types and maturities. The biggest boost for treasuries came from a sudden flight from risky investments in late summer, when markets were deluged with bad news including the devaluation of the Russian ruble, heightened worries about a global recession, and concerns about a meltdown of U.S. markets in the wake of the collapse of the giant hedge fund Long-Term Capital Management. A string of three interest rate cuts by the Federal Reserve in the fall was the major factor in improved liquidity near the end of the year, improving performance of investment-grade corporate bonds for the full year. Annual Total Returns from Merrill Lynch Domestic Master Index EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 12/31/89 14.2% 12/31/90 9.1% 12/31/91 15.9% 12/31/92 7.6% 12/31/93 10.0% 12/31/94 -2.8% 12/31/95 18.5% 12/31/96 3.6% 12/31/97 9.7% 12/31/98 8.9%
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. -- 3 AGGRESSIVE GROWTH STOCK PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Invested Assets: Maximum long-term appreciation of Strive for the highest possible rate of capital $1,137,466,000 capital appreciation by investing in companies with potential for rapid growth.
AGGRESSIVE GROWTH STOCK PORTFOLIO The Aggressive Growth Stock Portfolio owns the stocks of emerging growth companies, generally with market capitalizations of less than $3 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 focus in stock selection is on the individual companies' ability to generate revenue, expanding profit margins and solid balance sheets; industry sector selection is of secondary importance. The Aggressive Growth Stock Portfolio achieved returns significantly higher than the two Wilshire small-stock indexes used as benchmarks, though less than the broad market averages, which are dominated by the large-company stocks that led the market throughout the year. Many of the best-performing holdings are smaller companies that benefited from strength in sectors such as technology and communications. Retail holdings including O'Reilly Automotive and Kohl's benefited from continued strength in consumer spending. The Portfolio participated in the dramatic strength of Knight Trimark, which provides trading for many online brokers, and QLogic, whose new Fiber Channel product enables significant improvement in the management of data storage. A continuing area of emphasis is business services, with holdings including Metzler Group, which provides consulting services to utility companies, and Cintas, a uniform rental company. Sector Allocation EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Technology 26% Consumer Cyclical 15% Business Services 12% Health Care 12% Industrial & Transportation 10% Consumer Staples 7% Finance 6% Energy 2% Index Futures 2% Short-Term Investments 6%
Top 10 Holdings 12/31/98 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC COMPANY % OF NET ASSETS Cintas Corporation 2.44% O...Reilly Automotive, Inc. 2.38% Paychex, Inc. 2.26% Cardinal Health, Inc. 2.15% Jabil Circuit, Inc. 2.09% The Metzler Group, Inc. 2.03% Concord EFS, Inc. 2.00% Catalina Marketing Corporation 1.83% QLogic Corporation 1.79% Dollar Tree Stores, Inc. 1.74%
Performance Relative to Relevant Indices EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
AGGRESSIVE GROWTH STOCK WILSHIRE SMALL WILSHIRE NEXT PORTFOLIO** CAP INDEX 1750 INDEX 11/90 $10,000 $10,000 $10,000 12/90 10,189 10,459 10,459 12/91 15,894 15,873 15,325 12/92 16,839 18,188 18,186 12/93 20,057 21,464 21,357 12/94 21,141 20,801 21,065 12/95 29,448 26,330 27,439 12/96 34,661 31,588 31,801 12/97 39,467 40,511 39,348 12/98 42,446 40,366 39,675 AVERAGE ANNUAL TOTAL RETURN FOR PERIDS ENDED DECEMBER 31, 1998 ONE YEAR FIVE YEARS SINCE INCEPTION Aggressive Growth Stock Portfolio 7.56% 16.18% 19.58% Wilshire Small Cap Index -0.36% 13.46% 18.84% Wilshire Next 1750 Index 0.83% 13.19% 18.58% **INCEPTION DATE OF 11/30/90.
Since the Portfolio invests primarily in small capitalization issues, the indices that best reflect the Portfolio's performance are the Wilshire Next 1750 Index and Wilshire Small Cap Index. The Wilshire Next 1750 is an unmanaged, equally weighted index. Included in this index are those stocks which are ranked 750 to 2500 by market capitalization in the Wilshire 5000. The largest sectors represented in this index are technology, financial services and consumer services. Market capitalization ranges from $1.8 billion to $244 million. The Wilshire Small Cap Index is a subset of the Wilshire Next 1750 and includes 250 stocks chosen based upon their size, sector and liquidity characteristics. Each stock is equally weighted in this unmanaged index. The average market capitalization is approximately $930 million. The largest sector weightings include technology, financial services, and consumer services. On May 3, 1994, the Northwestern Mutual Aggressive Growth Stock Fund, Inc. (the "Fund") merged into the Northwestern Mutual Series Fund, Inc. Aggressive Growth Stock Portfolio (the "Portfolio"). The Portfolio had no assets prior to the merger. After the merger, the assets of the Portfolio were those of the Fund. The investment objectives, policies, management and expenses of the Portfolio are identical to those of the Fund. Accordingly, the performance of the Fund prior to the merge is included with the performance of the Portfolio in the graph and total return figures above. This chart assumes an initial investment of $10,000 made on 11/30/90 (commencement of the Fund's operations). Returns shown include deductions for management and other fund expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. The net investment rates of return shown on page 2 reflect mortality and expense risk 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 return significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. -- 4 AGGRESSIVE GROWTH STOCK PORTFOLIO NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
MARKET SHARES/ VALUE COMMON STOCK (91.8%) PAR (000'S) - --------------------------------------------------------------------------------- BASIC MATERIALS (1.0%) *Cambrex Corporation 454,200 $ 10,901 ----------- BUSINESS SERVICES (10.7%) *Administaff, Inc. 309,900 7,748 Boron Lepore & Associates 222,800 7,687 Cintas Corporation 394,900 27,816 *Interim Services, Inc. 497,700 11,634 *The Metzler Group, Inc. 473,650 23,061 *Robert Half International, Inc. 400,150 17,882 *Steiner Leisure, Ltd. 480,150 15,365 Stewart Enterprises, Inc. 513,300 11,421 ----------- TOTAL 122,614 ----------- CAPITAL GOODS (7.0%) *Ivex Packaging Corporation 336,100 7,814 *Jabil Circuit, Inc. 318,800 23,790 Kaydon Corporation 396,300 15,877 *Kellstrom Industries, Inc. 253,900 7,300 *Tetra Tech, Inc. 677,443 18,333 *Triumph Group, Inc. 189,600 6,067 ----------- TOTAL 79,181 ----------- COMMUNICATION SERVICES (1.5%) Crown Castle International Co. 341,300 8,021 *Pacific Gateway Exchange, Inc. 192,600 9,257 ----------- TOTAL 17,278 ----------- CONSUMER CYCLICAL (15.0%) *99 Cents Only Stores 309,375 15,198 *Catalina Marketing Corporation 305,200 20,868 *Dollar Tree Stores, Inc. 452,300 19,760 Galileo International, Inc. 271,500 11,810 General Cable Corporation 311,300 6,382 *Getty Images, Inc. 575,500 9,891 *Jones Apparel Group, Inc. 269,800 5,952 *K&G Men's Center, Inc. 420,150 3,729 *Kohl's Corporation 238,200 14,634 Linens n Things, Inc. 90,000 3,566 *Michaels Stores, Inc. 97,200 1,759 *O'Reilly Automotive, Inc. 574,300 27,136 Sonic Automotive, Inc. 418,400 14,409 *Tower Automotive, Inc. 536,200 13,371 *VWR Scientific Products Corporation 108,000 1,877 ----------- TOTAL 170,342 ----------- CONSUMER STAPLES (6.9%) *American Italian Pasta Co. - CL A 399,100 10,526 American Tower Systems 272,200 8,047 Cardinal Health, Inc. 322,777 24,491 *Chancellor Media Corp. 187,700 8,986 *Clear Channel Communications, Inc. 145,200 7,913 Golden State Vintners 205,600 2,236 MARKET SHARES/ VALUE COMMON STOCK (91.8%) PAR (000'S) - --------------------------------------------------------------------------------- CONSUMER STAPLES (CONTINUED) Infinity Broadcasting 152,800 $ 4,183 *Lamar Advertising, Co. 336,200 12,523 ----------- TOTAL 78,905 ----------- ENERGY (1.7%) *Barrett Resources Corporation 177,800 4,267 *Global Industries, Ltd. 637,000 3,902 Transocean Offshore Inc. 225,100 6,035 *Weatherford International, Inc. 260,700 5,051 ----------- TOTAL 19,255 ----------- FINANCE (6.0%) *Affiliated Managers Group 257,000 7,678 CMAC Investment Corp. 137,500 6,316 *ESG Re Limited 268,700 5,441 *Headlands Mortgage Company 545,400 11,419 Investors Financial Services Corp. 205,400 12,247 Knight/Trimark Group 607,500 14,542 *Trammell Crow Company 391,500 10,962 ----------- TOTAL 68,605 ----------- HEALTHCARE (11.9%) Bausch & Lomb, Inc. 131,800 7,908 *Lincare Holdings, Inc. 416,100 16,878 *NCS Healthcare, Inc. 125,900 2,990 *Patterson Dental Company 355,925 15,483 *Pediatrix Medical Group, Inc. 261,100 15,650 Province Healthcare 359,000 12,879 *PSS World Medical, Inc. 656,400 15,097 *Quintiles Transnational Corp. 364,400 19,450 *Sybron International Corporation 596,000 16,204 *Wesley Jessen VisionCare, Inc. 446,800 12,399 ----------- TOTAL 134,938 ----------- TECHNOLOGY (27.8%) *CBT Group Public Limited Company 37,500 558 *Computer Horizons Corp. 347,050 9,240 Comverse Technology 242,800 17,239 *Concord EFS, Inc. 536,850 22,749 *CSG Systems International, Inc. 233,400 18,439 *DST Systems, Inc. 306,000 17,461 *Gasonics International Corporation 491,000 4,296 *Gemstar International Group Limited 298,800 17,106 *Integrated Process Equipment Corp. 321,600 3,457 J. D. Edwards & Co. 366,400 10,397 Microchip Technology 348,200 12,883 Molex Incorporated 388,946 12,398 Novellus Systems, Inc. 80,000 3,960 Paychex, Inc. 500,132 25,726 *PMC-Sierra, Inc. 262,700 16,583
-- 5 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
MARKET SHARES/ VALUE COMMON STOCK (91.8%) PAR (000'S) - --------------------------------------------------------------------------------- TECHNOLOGY (CONTINUED) *QLogic Corporation 155,500 $ 20,351 Samina Corp. 308,200 19,262 *Saville Systems PLC- ADR 307,600 5,843 *Semtech Corporation 307,900 11,046 *Sterling Software, Inc. 607,100 16,430 Synopsys Inc. 123,600 6,705 *Tellabs, Inc. 111,900 7,672 Ticketmaster Online 10,000 570 *Transaction Systems Architects, Inc. 283,300 14,165 *Uniphase Corporation 268,900 18,655 *World Access, Inc. 117,700 2,516 ----------- TOTAL 315,707 ----------- TRANSPORTATION (2.3%) *Heartland Express, Inc. 167,000 2,923 *Knight Transportation, Inc. 489,000 13,050 *Swift Transportation Co., Inc. 359,700 10,083 ----------- TOTAL 26,056 ----------- TOTAL COMMON STOCK 1,043,782 ----------- MONEY MARKET INVESTMENTS (8.4%) - --------------------------------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (0.2%) +Federal Home Loan Mortgage Association, 4.92%, 2/26/99 2,000,000 $ 1,985 ----------- FINANCE (1.7%) +Triple A One Funding, 5.55%, 1/19/99 20,000,000 $ 19,945 ----------- PERSONAL CREDIT INSTITUTIONS (6.5%) American Express Credit Corporation, 5.00%, 1/8/99 14,200,000 14,186 American Express Credit Corporation, 5.85%, 1/8/99 20,000,000 19,977 MARKET SHARES/ VALUE MONEY MARKET INVESTMENTS (8.4%) PAR (000'S) - --------------------------------------------------------------------------------- PERSONAL CREDIT INSTITUTIONS (CONTINUED) General Electric Capital Corporation, 5.51%, 1/26/99 20,000,000 $ 19,923 General Electric Capital Corporation, 5.65%, 1/13/99 20,000,000 19,962 ----------- TOTAL 74,048 ----------- TOTAL MONEY MARKET INVESTMENTS 95,978 ----------- TOTAL INVESTMENTS (100.2%) (COST $775,929,704)^ 1,139,760 OTHER ASSETS, LESS LIABILITIES (-0.2%) (2,294) ----------- TOTAL NET ASSETS (100.0%) $1,137,466 -----------
* Non-Income Producing ^At December 31, 1998, the aggregate cost of securities for federal income tax purposes was $776,905,792 and the net unrealized appreciation of investments based on that cost was $362,854,375 which is comprised of $390,885,948 aggregate gross unrealized appreciation and $28,031,573 aggregate gross unrealized depreciation. +Partially held by the custodian in a segregated account as collateral for open futures postions. Information regarding open futures contracts as of December 31, 1998 is summarized below:
UNREALIZED NUMBER OF EXPIRATION APPRECIATION ISSUERS CONTRACTS DATE (000'S) - ---------------------------------------------------------------- S&P 500 Stock Index 84 3/99 $989 (Total Notional Value at 12/31/98, $25,167,288)
The Accompanying Notes are an Integral Part of the Financial Statements -- 6 INTERNATIONAL EQUITY PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Invested Assets: Long-term appreciation of Participate in the growth of foreign economies $671,106,000 capital through diversification by investing in securities with high long-term into markets outside the United earnings potential relative to current market States values.
INTERNATIONAL EQUITY PORTFOLIO The International Equity Portfolio offers contract owners the opportunity to participate in the growth of companies in countries throughout the world, particularly those with expanding economies. In selecting investments, the principal focus is on identifying undervalued stocks of companies with strong finances and good long-term growth opportunities, rather than on choosing regions of the world in which to invest. The Portfolio is normally fully invested in equity securities. The year just ended was challenging for international investors, with extraordinary volatility. Asian economic problems continued and Latin American currencies and markets dropped, while most of Europe experienced low inflation, moderate growth and buoyant markets. The Portfolio remains concentrated in Europe, although exposure to these markets has been reduced as prices of many equities reached full valuations. Performance benefited from selected investments in Asia, where several key markets performed well in the second half of 1998. The most significant industry emphasis is telecommunications, which helped performance as prices of many of these securities, particularly European operators, increased significantly during the year. Newer investments include selected positions in cyclical industries such as paper and capital equipment, where low equity prices have created opportunities to invest in quality companies with growth potential. The International Equity Portfolio is managed for Northwestern Mutual by Templeton Investment Counsel, Inc. Asset Allocation 12/31/98 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Europe 57% Latin America 8% Asia 12% Australia/New Zealand 6% North America 5% Other 1% Non-equity holdings 11%
Top 10 Holdings 12/31/98 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC COMPANY Country % OF NET ASSETS Aegon NV Netherlands 2.57% Merita Limited "A" Finland 2.31% AXA-UAP SA France 2.25% Zurich Versicherungs-Gesellschaft Switzerland 2.19% Koninklijke Philips Electronics N.V. Netherlands 2.08% ING Groep NV Netherlands 1.90% Banque Nationale de Paris, ADR (144a) France 1.80% YPF S.A., ADR Argentina 1.74% Iberdrola S.A. Spain 1.64% National Power U.K. 1.60%
Performance Relative to the EAFE Index EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
INTERNATIONAL EQUITY PORTFOLIO# EAFE INDEX 4/93 $10,000 $10,000 12/93 $12,464 $10,970 12/94 $12,451 $11,859 12/95 $14,266 $13,228 12/96 $17,264 $14,068 12/97 $19,384 $14,364 12/98 $20,319 $17,284 AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED DECEMBER 31, 1998 ONE YEAR International Equity Portfolio 4.82% EAFE Index 20.33% # INCEPTION DATE OF 4/30/93. 4/93 12/93 12/94 12/95 12/96 12/97 12/98 FIVE YEARS SINCE INCEPTION International Equity Portfolio 10.27% 13.32% EAFE Index 9.52% 10.13% # INCEPTION DATE OF 4/30/93.
As depicted in the graph, the International Equity Portfolio is compared against the Morgan Stanley Capital International EAFE ("Europe-Australasia-Far East") Index. The index is composed of approximately 1100 companies in 20 countries in Europe and the Pacific Basin. The objective of the index is to reflect the movements of stock markets in these countries by representing an unmanaged (indexed) portfolio within each country. The indices are constructed so that companies chosen represent about 60% of market capitalization in each market; industry composition of the market is reflected; and a cross section of large, medium, and small capitalization stocks is included, taking into account liquidity concerns. The index is calculated in U. S. dollars. On May 3, 1994, the Northwestern Mutual International Equity Fund, Inc. (the "Fund") merged into the Northwestern Mutual Series Fund, Inc., International Equity Portfolio (the "Portfolio"). The Portfolio had no assets prior to the merger. After the merger, the assets of the Portfolio were those of the Fund. The investment objectives, policies, management and expenses of the Portfolio are identical to those of the Fund. Accordingly, the performance of the Fund prior to the merger is included with the performance of the Portfolio in the graph and total return figures above. This chart assumes an initial investment of $10,000 made on 4/30/93 (commencement of the Fund's operations). Returns shown include deductions for management and other fund expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. The net investment rates of return shown on page 2 reflect mortality and expense risk 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 return significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. -- 7 INTERNATIONAL EQUITY PORTFOLIO NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
MARKET SHARES/ VALUE COMMON STOCK (89.2%) COUNTRY PAR (000'S) - ---------------------------------------------------------------- CAPITAL EQUIPMENT (6.8%) Alcatel Alsthom DG Fr. 40,000 $ 4,898 +Alcatel Alsthom , ADR Fr. 18,400 446 BTR PLC U.K. 202,312 397 BTR, PLC "A" U.K. 4,610,531 9,473 *Fairview Holdings PLC U.K. 450,223 667 Granges AB Swe. 188,100 2,715 Hong Kong Aircraft & Engineering H.K. 2,680,700 3,668 Rolls- Royce PLC U.K. 745,000 3,099 Koninklijke Philips Electronics N.V. Neth. 208,400 13,992 Sirti SPA Italy 643,000 3,888 VA Technologies AG Bearer Aus. 30,000 2,601 ----------- TOTAL 45,844 ----------- CONSUMER GOODS (11.5%) Albert Fisher Group PLC U.K. 5,967,096 595 #Autoliv, Inc. IDR Swe. 65,000 2,334 Autoliv, Inc. Swe. 279,100 10,379 Cafe de Coral Holdings, Ltd. H.K. 7,672,000 2,401 Fiat SPA Ord. Italy 1,527,900 5,319 Hillsdown Holdings U.K. 900,446 1,124 Medeva PLC U.K. 4,250,000 7,566 Nycomed Amersham PLC U.K. 1,323,110 9,204 Ono Pharmaceutical Co., Ltd. Jpn. 233,000 7,292 Tate & Lyle, PLC U.K. 762,600 4,111 *Terranova Foods PLC U.K. 450,223 824 +Teva Pharmaceutical Industries Ltd., ADR Israel 178,200 7,251 Sony Corporation Jpn. 87,500 6,384 Vitro SA NPV Mex. 768,400 1,127 Volvo Aktiebolaget, B Free Swe. 433,000 9,936 Yizheng Chemical Fibre Company China 12,469,200 1,143 ----------- TOTAL 76,990 ----------- ENERGY (14.0%) BG PLC U.K. 701,752 4,518 *Centrica PLC U.K. 1,913,200 3,931 Electricidad de Caracas Venz. 12,792 6 Endesa S.A. Sp. 252,000 6,687 EVN Energie Versorgung Aus. 38,400 5,440 +Gener S.A., ADR Chile 262,800 4,205 Hong Kong Electric H.K. 1,790,000 5,430 Iberdrola S.A. Sp. 587,500 11,008 MARKET SHARES/ VALUE COMMON STOCK (89.2%) COUNTRY PAR (000'S) - ---------------------------------------------------------------- ENERGY (CONTINUED) Korea Electric Power Corp. Kor. 33,000 $ 818 National Power U.K. 1,246,864 10,766 Petroleo Brasileiro SA - Petrobras Braz. 32,500,000 3,685 Ranger Oil Limited Can. 1,055,400 4,683 Repsol S.A. Sp. 122,000 6,518 Saga Petroleum Norw. 260,000 2,372 Societe Nationale Elf Aquitaine Fr. 66,801 7,725 Thames Water U.K. 230,104 4,441 +YPF S.A., ADR Arg. 418,500 11,692 ----------- TOTAL 93,925 ----------- FINANCE (25.8%) Aegon NV Neth. 140,384 17,250 Australia & New Zealand Bank Group Austrl. 1,506,097 9,866 AXA-UAP SA Fr. 104,063 15,089 Banco Bradesco SA Braz. 623,750,000 3,459 *Banco Bradesco SA, Rights Braz. 25,853,902 15 Banco de Andulucia Sp. 120,000 5,454 Banco Itau S.A. Braz. 2,079,000 1,015 Bangkok Bank Public Company Ltd Thai. 3,193,000 6,591 +Banque Nationale de Paris, ADR (144A) Fr. 146,500 12,069 Barclays PLC U.K. 245,016 5,283 BPI SGPS SA Port. 189,363 6,426 Compagnie Financiere de Paribas Fr. 71,300 6,199 Canadian Imperial Bank of Commerce Can. 113,200 2,801 Deutsche Bank AG Ger. 98,600 5,804 EXEL Limited Ber. 131,100 9,833 HSBC Holdings H.K. 316,979 7,897 ING Groep NV Neth. 209,000 12,751 Merita Limited "A" Fin. 2,436,000 15,491 PartnerRe Ltd. Ber. 226,600 10,367 **Peregrine Investments Holdings, Ltd. H.K. 262,000 -- Reinsurance Australia Corporation Limited Austrl. 2,908,000 4,461 Unibanco Uniao de Bancos Braz. 14,033,500 488 Zurich Versicherungs- Gesellschaft Swtz. 19,900 14,735 ----------- TOTAL 173,344 ----------- MATERIALS (10.6%) Agrium, Inc. Can. 473,300 4,112 Akzo Nobel NV Neth. 117,700 5,362
-- 8 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
MARKET SHARES/ VALUE COMMON STOCK (89.2%) COUNTRY PAR (000'S) - ---------------------------------------------------------------- MATERIALS (CONTINUED) Bayer AG Ger. 157,000 $ 6,556 British Steel PLC U.K. 5,270,900 8,002 Carte Holt Harvey Ltd. N.Z. 3,929,357 3,529 Elkem A S Oslo ord "A" Norw. 192,000 2,293 European Vinyls Corp. EVC International Neth. 68,985 548 Grupo Mexico, B Shares Mex. 1,320,000 2,936 Hepworth PLC U.K. 607,200 1,596 Metsa Serla Oyj Fin. 277,500 2,220 +Minorco SA, ADR Lux. 318,150 4,832 +Pechiney "A", ADR Fr. 48,183 776 Pechiney SA "A" Fr. 19,000 621 Pioneer International Ltd. Austrl. 3,197,946 6,767 Rhone Poulenc SA, Series A Fr. 149,108 7,677 Stora Enso OYJ- R Fin. 754,400 6,764 Stora Kapparbergs, Series B Swe. 350,000 3,886 Union Minerie, NPV Bel. 65,171 2,481 ----------- TOTAL 70,958 ----------- MULTI-INDUSTRY (3.4%) Amer Group Ltd., "A" Fin. 175,000 1,821 Elementis PLC U.K. 1,494,000 2,038 Hutchinson Whampoa H.K. 798,000 5,639 Jardine Matheson Holdings Sing. 1,212,301 3,128 Jardine Strategic Holdings Sing. 1,019,055 1,478 Swire Pacific Class "A" H.K. 1,459,500 6,537 Swire Pacific Limited "B" H.K. 3,534,200 2,349 ----------- TOTAL 22,990 ----------- SERVICES (17.1%) Air New Zealand Ltd. "B" N.Z. 1,150,000 1,810 British Telecom U.K. 608,000 9,145 *Cable & Wire Optus Ltd. Austrl. 2,674,560 5,627 +Compania Anonima Nacional, ADR Venz. 293,000 5,219 +Compania de Telecommunicaciones, ADR Chile 155,125 3,209 David Jones Ltd. Austrl. 742,100 819 *Embratel Participacoes S.A. Braz. 13,669,682 1,259 Hitachi Zosen Corporation Jpn. 192,000 266 Hong Kong Telecommunications Ltd. H.K. 6,100,000 10,668 Hyder PLC U.K. 371,666 4,669 MARKET SHARES/ VALUE COMMON STOCK (89.2%) COUNTRY PAR (000'S) - ---------------------------------------------------------------- SERVICES (CONTINUED) Hyder PLC Cum. Red. Pfd. U.K. 401,400 $ 795 Laidlaw Inc. Can. 82,600 831 Mayne Nickless Ltd. Austrl. 1,671,600 6,203 Moebel Walther AG PFD Ger. 103,297 3,535 +Phillipine Long Distance Telephone, ADR Phil. 127,000 3,294 +PT Indosat, ADR Indo. 146,600 1,787 +Quantas Airways (144A) ADR Austrl. 165,000 3,370 SGS Societe Generale de Surveillance Holding SA Swtz. 885 867 Singapore Airlines Ltd. Sing. 105,000 770 +SK Telecom Co., LTD., ADR Fr. 245,037 2,496 *Sobeys Canada Inc Can. 85,258 944 Somerfield PLC U.K. 860,766 5,757 South China Morning Post Ltd. H.K. 2,554,000 1,310 *Swisscom AG Swtz. 21,040 8,807 *Tele Celular Sul Participacoes S.A. Braz. 9,429 144 Tele Centro Oeste Celular Participacoes S.A. Braz. 27,300 80 Tele Centro Sul Participacoes S.A. Braz. 16,380 685 *Tele Leste Celular Participacoes SA Braz. 17,647,838 53 Tele Nordeste Celular Participacoes S.A. Braz. 4,095 76 Tele Norte Celular Participacoes S.A. Braz. 1,638 37 Tele Norte Leste Participacoes S.A. Braz. 81,900 1,019 *Tele Sudeste Celular Participacoes S.A. Braz. 17,662,580 389 Telecom Italia SPA Italy 1,200,000 7,568 *Telecomunicacois Brasileiras SA Braz. 17,728,100 10 +Telefonica de Argentina SA, ADR Argentina 146,300 4,087 +Telefonica del Peru SA B shares, ADR Peru 115,300 1,463 +Telefonos de Mexico SA Mex. 117,802 5,735 Telemig Celular Participacoes S.A. Braz. 4,095 87
-- 9 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
MARKET SHARES/ VALUE COMMON STOCK (89.2%) COUNTRY PAR (000'S) - ---------------------------------------------------------------- SERVICES (CONTINUED) *Telesp Celular Participacoes S.A. Braz. 17,678,960 $ 649 *Telesp Participacoes S.A. Braz. 17,728,100 2,038 The Peninsular and Oriental Steam Navigation Company U.K. 548,000 6,495 Vendex NV Neth. 39,621 963 ----------- TOTAL 115,035 ----------- TOTAL COMMON STOCK 599,086 -----------
BONDS (0.7%) - ------------------------------------------------------------------- SBC Communications DECS, 3.071%, 3/15/01 U.S. 99,350 $ 4,421 ----------- TOTAL BONDS 4,421 -----------
MONEY MARKET INVESTMENTS (10.5%) - ------------------------------------------------------------------- FINANCE (4.1%) CXC Incorporated, 5.375%, 1/26/99 U.S. 12,600,000 $ 12,553 Triple A One Funding, 5.55%, 1/19/99 U.S. 15,000,000 14,958 ----------- TOTAL 27,511 ----------- PERSONAL CREDIT INSTITUTIONS (1.5%) General Electric Capital Corp., 5.65%, 1/13/99 U.S. 10,000,000 9,981 ----------- SHORT TERM BUSINESS CREDIT (4.9%) American Express Credit, 5.00%, 1/8/99 U.S. 18,000,000 17,981 MARKET MONEY MARKET INVESTMENTS SHARES/ VALUE (10.5%) COUNTRY PAR (000'S) - ------------------------------------------------------------------- SHORT TERM BUSINESS CREDIT (CONTINUED) CIT Group Inc., 5.75%, 1/20/99 U.S. 15,000,000 $ 14,955 ----------- TOTAL 32,936 ----------- TOTAL MONEY MARKET INVESTMENTS 70,428 ----------- TOTAL INVESTMENTS (100.4%) (COST $626,944,284)^ 673,935 OTHER ASSETS, LESS LIABILITIES (-0.4%) (2,829 ) ----------- TOTAL NET ASSETS (100.0%) $ 671,106 -----------
* Non-Income Producing + ADR-American Depository Receipt # IDR-International 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. DECS-Debt Exchangeable for Common Stock **Defaulted Security Investment Percentages by Country: 5.51% Australia 8.58 France 6.82 Hong Kong 7.55 Netherlands 15.51 United Kingdom 11.12 U.S. 44.91 Other 100.00 Total ^At December 31, 1998, the aggregate cost of securities for federal income tax purposes was $626,983,601 and the net unrealized appreciation of investments based on that cost was $46,947,724 which is comprised of $141,631,589 aggregate gross unrealized appreciation and $94,683,865 gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements -- 10 GROWTH STOCK PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Invested Assets: Long-term appreciation of Hold a diversified mix of high quality growth $421,282,000 capital with moderate risk stocks of medium and large companies with above-average potential for earnings growth.
GROWTH STOCK PORTFOLIO The Growth Stock Portfolio is invested in high quality companies of large to medium capitalization with strong financial characteristics and the ability to generate internal growth. A key factor in stock selection is the choice of industries with good earnings potential, based on analysis of economic trends to determine their impact on various sectors of the economy. Stock selection is made through "top down" analysis: first industry and market sector choices are made based on the economic environment, and then the most promising companies within each sector are selected as holdings. A strategy of this portfolio is to go beyond the most familiar "blue chip" names to seek out medium-sized companies with stock prices that do not yet reflect their potential for growth. Diversification across 70 to 90 stocks in a wide range of industry groups reduces the portfolio's risk profile. The Portfolio benefited from the equity market's strength during 1998, especially from continued market leadership by the largest companies. Holdings in the overweighted consumer cyclical segment, especially retailers such as Kohl's and Wal-Mart, performed quite well, as optimistic consumers used increasing disposable income to maintain their spending spree. Despite the portfolio's underweighted position in high-tech stocks, major increases in the prices of holdings such as Intel and Microsoft were an important factor in the overall gains. Especially during the fourth quarter, holdings of pharmaceuticals including Merck and Bristol-Myers contributed to performance. An underweighting of basic industry stocks was beneficial, as weak demand from Asia hurt demand for capital goods. Sector Allocation EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Consumer Cyclicals 16% Consumer Staples 16% Technology 14% Health Care 10% Basic Materials/Capital Goods 10% Finance 8% Energy 5% Other Industries 9% Index Futures 6% Cash Equivalents 6%
Top 10 Holdings 12/31/98 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
GENERAL ELECTRIC COMPANY 2.78% MCI WorldCom, Inc. 2.62% Microsoft Corporation 2.59% International Business Machines Corporation 2.17% Kohl's Corporation 2.05% Wal-Mart Stores, Inc. 2.05% Cisco Systems, Inc. 1.95% Pfizer Inc. 1.95% Harley-Davidson, Inc. 1.93% Fiserv, Inc. 1.93%
Performance Relative to S&P 500 Index EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
GROWTH STOCK PORTFOLIO# S&P 500 INDEX 5/94 $10,000 $10,000 12/94 $10,155 $10,320 12/95 $13,285 $14,180 12/96 $16,063 $17,413 12/97 $20,858 $23,211 12/98 $26,425 $29,826 AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED DECEMBER 31, 1998 ONE YEAR SINCE INCEPTION Growth Stock Portfolio 26.69% 23.17% S&P 500 Index 28.50% 26.41% #NOTE: INCEPTION DATE OF 5/3/94.
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The index is heavily weighted toward stocks with large market capitalizations and represents approximately two-thirds of the total market value of all domestic common stocks. This chart assumes an initial investment of $10,000 made on 5/3/94 (commencement of operations). Returns shown include deductions for management and other fund expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. The net investment rates of return shown on page 2 reflect mortality and expense risk 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 return significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. -- 11 GROWTH STOCK PORTFOLIO NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31,1998
MARKET SHARES/ VALUE COMMON STOCK (87.8%) PAR (000'S) - --------------------------------------------------------------------------------- BASIC MATERIALS (1.6%) Ecolab, Inc. 181,900 $ 6,583 --------- CAPITAL GOODS (8.2%) AlliedSignal, Inc. 52,400 2,322 Avery Dennison Corporation 83,900 3,781 Emerson Electric Co. 49,300 3,084 General Electric Company 114,500 11,686 Lockheed Martin Corporation 19,800 1,678 *Republic Services, Inc. 94,000 1,733 Tyco International Ltd. 100,600 7,589 Waste Management, Inc. 62,400 2,909 --------- TOTAL 34,782 --------- COMMUNICATION SERVICES (5.4%) AT&T Corp. 103,508 7,789 GTE Corporation 56,900 3,837 MCI WorldCom, Inc. 153,500 11,014 --------- TOTAL 22,640 --------- CONSUMER CYCLICAL (16.6%) *Barnes & Noble, Inc. 71,000 3,018 Borg-Warner Automotive, Inc. 48,900 2,729 Centex Corporation 45,000 2,028 Dayton Hudson Corporation 67,000 3,635 Ford Motor Company 79,000 4,636 Harley-Davidson, Inc. 171,500 8,125 Home Depot, Inc. 119,500 7,312 *Kohl's Corporation 140,600 8,638 Lennar Corporation 45,600 1,151 Mattel, Inc. 30,000 684 McGraw-Hill Companies Inc. 44,600 4,544 The New York Times Company 129,200 4,482 Servicemaster Co. 245,250 5,411 Tribune Company 76,000 5,016 Wal-Mart Stores, Inc. 105,900 8,624 --------- TOTAL 70,033 --------- CONSUMER STAPLES (15.6%) Anheuser-Busch Companies, Inc. 55,500 3,642 Benckiser N.V. 69,000 4,407 Campbell Soup Company 52,800 2,904 Dial Corp. 158,100 4,565 Hershey Foods Corporation 77,300 4,807 McDonald's Corporation 80,200 6,145 Newell Co. 98,600 4,067 PepsiCo, Inc. 174,100 7,127 Philip Morris Companies, Inc. 89,200 4,772 Procter & Gamble Company 62,400 5,698 The Quaker Oats Company 52,600 3,130 Unilever NV 51,100 4,238 Walgreen Co. 131,200 7,683 Walt Disney Company 79,600 2,388 --------- TOTAL 65,573 --------- MARKET SHARES/ VALUE COMMON STOCK (87.8%) PAR (000'S) - --------------------------------------------------------------------------------- ENERGY (5.0%) British Petroleum Company PLC 49,000 $ 4,392 Chevron Corporation 28,300 2,347 *Conoco, Inc. 121,000 2,526 Diamond Offshore Drilling, Inc. 50,000 1,184 Exxon Corporation 26,800 1,960 Mobil Corporation 38,600 3,363 *R&B Falcon Corporation 60,900 464 Schlumberger Limited 44,600 2,057 Tosco Corporation 61,000 1,578 Transocean Offshore Inc. 39,600 1,062 --------- TOTAL 20,933 --------- FINANCE (8.1%) Associates First Capital Corporation 80,208 3,399 BankAmerica Corporation 52,501 3,157 Chase Manhattan Corporation 76,880 5,233 Citigroup, Inc. 36,000 1,782 Fifth Third Bancorp 73,300 5,227 First Union Corporation 83,100 5,054 Morgan Stanley Dean Witter & Co. 68,700 4,878 The Bank New York Company, Inc. 133,300 5,365 --------- TOTAL 34,095 --------- HEALTHCARE (9.6%) Bristol-Myers Squibb Company 54,000 7,226 Eli Lilly and Company 46,900 4,168 Guidant Corporation 25,800 2,844 Johnson & Johnson 49,100 4,118 Medtronic, Inc. 80,600 5,985 Merck & Co., Inc. 35,700 5,272 Pfizer, Inc. 65,400 8,204 Warner-Lambert Company 38,600 2,902 --------- TOTAL 40,719 --------- TECHNOLOGY (14.0%) *Cisco Systems, Inc. 88,500 8,214 Compaq Computer Corporation 101,200 4,244 *DST Systems, Inc. 41,200 2,351 *Fiserv, Inc. 157,650 8,109 Hewlett-Packard Company 47,400 3,238 Intel Corporation 57,300 6,794 International Business Machines Corporation 49,400 9,127 Lucent Technologies, Inc. 41,342 4,548 *Microsoft Corporation 78,700 10,915 W.W. Grainger, Inc. 30,000 1,249 --------- TOTAL 58,789 --------- TRANSPORTATION (3.3%) AMR Corporation 34,800 2,066 Canadian National Railway Company 61,500 3,190 *FDX Corporation 28,500 2,537 *Midwest Express Holdings, Inc. 103,500 2,724
-- 12 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31,1998
MARKET SHARES/ VALUE COMMON STOCK (87.8%) PAR (000'S) - --------------------------------------------------------------------------------- TRANSPORTATION (CONTINUED) Southwest Airlines Co. 143,850 $ 3,228 --------- TOTAL 13,745 --------- UTILITIES (0.4%) Enron Corporation 28,100 1,602 --------- TOTAL COMMON STOCK 369,494 ---------
MARKET VALUE MONEY MARKET INVESTMENTS (12.2%) PAR (000'S) - --------------------------------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (0.3%) +Federal Home Loan Mortgage Corp., 4.919%, 02/26/99 200,000 $ 198 +Federal National Mortgage Association, 4.94%, 02/25/99 1,000,000 992 +Federal National Mortgage Association, 4.98%, 03/15/99 100,000 99 --------- TOTAL 1,289 --------- FINANCE (4.8%) CIT Group, Inc., 5.749%, 01/20/99 6,000,000 5,982 +CXC Incorporated, 5.375%, 01/20/99 10,000,000 9,963 +Triple A One Funding Group, 5.549%, 01/19/99 4,400,000 4,388 --------- TOTAL 20,333 --------- PERSONAL CREDIT INSTITUTIONS (2.6%) General Electric Capital Corp., 5.65%, 01/13/99 5,000,000 4,991 +General Electric Capital Corp., 5.51%, 01/26/99 6,100,000 6,077 --------- TOTAL 11,068 --------- MARKET VALUE MONEY MARKET INVESTMENTS (12.2%) PAR (000'S) - --------------------------------------------------------------------------------- SHORT TERM BUSINESS CREDIT (4.5%) American Express Credit, 5.00%, 01/08/99 14,000,000 $ 13,986 +American Express Credit, 5.85%, 01/08/99 5,000,000 4,994 --------- TOTAL 18,980 --------- TOTAL MONEY MARKET INVESTMENTS 51,670 --------- TOTAL INVESTMENTS (100.0%) (COST $288,025,070)^ 421,164 OTHER ASSETS, LESS LIABILITIES (0.0%) 118 --------- TOTAL NET ASSETS (100.0%) $421,282 ---------
* Non-Income Producing +Partially held by the custodian in a segregated account as collateral for open futures positions. Information regarding open futures contracts as of December 31, 1998 is summarized below:
UNREALIZED NUMBER OF EXPIRATION APPRECIATION ISSUERS CONTRACTS DATE (000'S) - ---------------------------------------------------------------- S&P 500 Stock Index 86 3/99 $1,554 (Total Notional Value at 12/31/98, $25,223,900)
^At December 31, 1998, the aggregate cost of securities for federal tax purposes was $288,036,724 and the net unrealized appreciation of investments based on that cost was $133,127,817 which is comprised of $138,565,266 aggregate gross unrealized appreciation and $5,437,449 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements -- 13 GROWTH AND INCOME STOCK PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Invested Assets: Long-term growth of capital and Actively manage a portfolio of equity securities with $570,970,000 income, consistent with moderate a goal of exceeding the total return of the S&P 500 investment risk Index.
GROWTH AND INCOME STOCK PORTFOLIO The Growth and Income Stock Portfolio invests mainly in large-capitalization stocks, with a focus on seeking the best values in the market based on long-term earnings forecasts. A sector balance very close to that of the S&P 500 Index is normally maintained, with the emphasis on undervalued stocks within each industry group; a valuation discipline mandates the sale of stocks regarded as overvalued. More focus is placed on capital appreciation and dividend growth than on current dividends. The Portfolio is normally fully invested in equity securities. The last year has been a difficult time for the value-oriented investment style that guides the Growth and Income Stock Portfolio. While returns from the S&P 500 Index were quite good, market leadership was very narrow, with few small to mid-size companies participating. The technology and retail sectors were up dramatically, while returns from cyclical industries such as basic industry, capital goods and transportation were low or negative. Technology holdings such as Cisco, EMC, IBM, and Sun Microsystems contributed greatly to the Portfolio's total return of 23.1% for the year. Other strong performers were consumer stocks including Anheuser-Busch and Philip Morris and Comcast, a cable television company. Energy holdings were hurt by falling oil prices, while capital goods stocks were weak, in line with their industries. The Growth and Income Stock Portfolio is managed for Northwestern Mutual by J. P. Morgan Investment Management, Inc. Sector Allocation EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Technology 17% Finance 15% Basic Materials/Capital Goods 15% Consumer Staples 14% Consumer Cyclical 10% Health Care 9% Energy 7% Other Industries 12% Cash Equivalents 2%
Top 10 Holdings 12/31/98 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC COMPANY % OF NET ASSETS MCI WorldCom, Inc. 3.30% Monsanto Co 3.22% BankAmerica Corp 3.15% American Home Products Corp. 2.92% Philip Morris Companies Inc. 2.90% International Business Machines Corporation 2.79% Bristol Myers Squibb Co. 2.65% Mobil Corp. 2.59% Procter & Gamble Company 2.58% Waste Mangement Inc. 2.50%
Performance Relative to S&P 500 Index EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
GROWTH & INCOME STOCK PORTFOLIO 5/94 $10,000 12/94 $10,034 12/95 $13,156 12/96 $15,783 12/97 $20,523 12/98 $25,271 Growth & Income Stock Portfolio S&P 500 Index S&P 500 INDEX 5/94 $10,000 12/94 $10,320 12/95 $14,180 12/96 $17,413 12/97 $23,211 12/98 $29,826 AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED DECEMBER 31, 1998 ONE YEAR SINCE INCEPTION Growth & Income Stock Portfolio 23.14% 22.00% S&P 500 Index 28.50% 26.41%
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The index is heavily weighted toward stocks with large market capitalizations and represents approximately two-thirds of the total market value of all domestic common stocks. This chart assumes an initial investment of $10,000 made on 5/3/94 (commencement of operations). Returns shown include deductions for management and other fund expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. The net investment rates of return shown on page 2 reflect mortality and expense risk 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 return significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. -- 14 GROWTH & INCOME STOCK PORTFOLIO NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
MARKET SHARES/ VALUE COMMON STOCK (98.3%) PAR (000'S) - -------------------------------------------------------------- BASIC MATERIALS (6.5%) Albemarle Corporation 21,200 $ 504 Allegheny Teledyne, Inc. 129,100 2,639 Monsanto Company 387,300 18,397 Rohm and Haas Company 250,100 7,534 *Smurfit-Stone Container Corporation 502,334 7,943 ----------- TOTAL 37,017 ----------- CAPITAL GOODS (8.7%) AlliedSignal, Inc. 153,300 6,793 *Coltec Industries, Inc. 433,000 8,444 Cooper Industries, Inc. 121,000 5,770 General Electric Company 37,600 3,838 *Republic Services, Inc. 102,200 1,884 Tyco International Ltd. 117,669 8,879 Waste Management, Inc. 306,417 14,287 ----------- TOTAL 49,895 ----------- COMMUNICATION SERVICES (7.1%) GTE Corporation 141,900 9,569 MCI WorldCom, Inc. 262,506 18,835 SBC Communications, Inc. 222,200 11,915 ----------- TOTAL 40,319 ----------- CONSUMER CYCLICAL (10.3%) *AutoZone, Inc. 75,300 2,480 *Cendant Corporation 252,800 4,819 Circuit City Stores, Inc. 56,500 2,821 Dayton Hudson Corporation 112,900 6,125 The Gap, Inc. 56,500 3,178 International Game Technology 244,800 5,952 Mattel, Inc. 244,700 5,582 *Mirage Resorts, Incorporated 281,800 4,209 The News Corporation Limited 209,800 5,547 Service Corporation International 204,400 7,780 The TJX Companies, Inc. 161,400 4,681 Wal-Mart Stores, Inc. 69,900 5,692 ----------- TOTAL 58,866 ----------- CONSUMER STAPLES (13.6%) Anheuser-Busch Companies, Inc. 69,900 4,587 Campbell Soup Company 78,000 4,290 Comcast Corporation 59,200 3,474 *Fred Meyer, Inc. 126,400 7,616 Kimberly-Clark Corporation 107,600 5,864 PepsiCo, Inc. 204,200 8,359 Philip Morris Companies, Inc. 309,300 16,548 Procter & Gamble Company 161,400 14,738 Ralston Purina Group 88,700 2,872 The Seagram Company Ltd. 88,700 3,371 *Tele Communications, Inc. 110,300 6,101 ----------- TOTAL 77,820 ----------- MARKET SHARES/ VALUE COMMON STOCK (98.3%) PAR (000'S) - -------------------------------------------------------------- ENERGY (7.1%) *Input/Output, Inc. 683,100 $ 4,995 Mobil Corporation 169,400 14,759 Shell Transport & Trading Company 357,700 13,302 Tosco Corporation 277,000 7,167 ----------- TOTAL 40,223 ----------- FINANCE (14.6%) Astoria Financial Corporation 83,235 3,808 BankAmerica Corporation 298,843 17,968 Bankers Trust Corporation 64,500 5,511 Citigroup Inc. 173,450 8,586 Fannie Mae 26,600 1,968 KeyCorp 164,000 5,248 Marsh & McLennan Companies, Inc. 82,050 4,796 MBIA, Inc. 94,100 6,169 Newcourt Credit Group Inc. 113,600 3,969 Starwood Hotels & Resorts 329,396 7,473 UNUM Corporation 147,900 8,634 Washington Mutual, Inc. 243,200 9,287 ----------- TOTAL 83,417 ----------- HEALTHCARE (9.0%) *Alza Corporation 43,000 2,247 American Home Products Corporation 295,800 16,657 Bristol-Myers Squibb Company 113,200 15,148 *Forest Laboratories, Inc. 61,900 3,292 *Genzyme Corporation (General Division) 131,800 6,557 *Genzyme Molecular Oncology 14,219 46 *HEALTHSOUTH Corporation 231,500 3,574 *Humana, Inc. 34,300 611 Warner-Lambert Company 43,000 3,233 ----------- TOTAL 51,365 ----------- TECHNOLOGY (16.6%) AutoDesk, Inc. 88,700 3,786 *Cisco Systems, Inc. 145,225 13,479 Compaq Computer Corporation 158,000 6,626 *EMC Corporation 91,400 7,769 Intel Corporation 96,800 11,477 International Business Machines Corporation 86,100 15,907 Lucent Technologies Inc. 67,200 7,392 *Microsoft Corporation 96,800 13,425 *Oracle Corporation 53,800 2,320 *Sun Microsystems, Inc. 94,100 8,057 Texas Instruments, Incorporated 53,800 4,603 ----------- TOTAL 94,841 ----------- TRANSPORTATION (2.3%) Union Pacific Corporation 295,800 13,329 -----------
-- 15 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
MARKET SHARES/ VALUE COMMON STOCK (98.3%) PAR (000'S) - -------------------------------------------------------------- UTILITIES (2.5%) K N Energy, Inc. 21,500 $ 782 Northern States Power Company 53,900 1,496 PP & L Resources, Inc. 285,100 7,947 Wisconsin Energy Corporation 128,900 4,052 ----------- TOTAL 14,277 ----------- TOTAL COMMON STOCK 561,369 -----------
MARKET VALUE MONEY MARKET INVESTMENTS (1.6%) PAR (000'S) - -------------------------------------------------------------------------------- FINANCE LESSORS (.1%) Triple A One Funding, 5.55%, 1/19/99 500,000 $ 499 --------- PERSONAL CREDIT INSTITUTIONS (.9%) General Electric Capital Corporation, 5.65%, 1/13/99 1,000,000 998 General Electric Capital Corporation, 5.51%, 1/26/99 2,000,000 1,992 Variable Funding Capital Corp., 5.95%, 1/11/99 2,000,000 1,997 --------- TOTAL 4,987 --------- MARKET VALUE MONEY MARKET INVESTMENTS (1.6%) PAR (000'S) - -------------------------------------------------------------------------------- SHORT TERM BUSINESS CREDIT (.6%) American Express Credit, 5.00%, 1/8/99 600,000 $ 599 American Express Credit, 5.85%, 1/8/99 1,000,000 999 CIT Group, 5.75%, 1/20/99 2,000,000 1,994 --------- TOTAL 3,592 --------- TOTAL MONEY MARKET INVESTMENTS 9,078 --------- TOTAL INVESTMENTS (99.9%) (COST $517,081,519)^ 570,447 OTHER ASSETS, LESS LIABILITIES (0.1%) 523 --------- TOTAL NET ASSETS (100.0%) $570,970 ---------
* Non-Income Producing ^At December 31,1998, the aggregate cost of securities for federal income tax purposes was $519,130,218 and the net unrealized appreciation of investments based on that cost was $51,316,579 which is comprised of $83,932,797 aggregate gross unrealized appreciation and $32,616,218 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements -- 16 INDEX 500 STOCK PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: Long-term capital appreciation Invest in a portfolio designed to approximate $1,690,680,000 through cost-effective the composition and returns of the S&P 500 participation in broad market Index. performance
INDEX 500 STOCK PORTFOLIO The Index 500 Stock Portfolio is designed to achieve results that approximate the performance of the Standard & Poor's 500 Composite Stock Price Index. This composite of 500 stocks of large U.S.-based companies, compiled by Standard & Poor's Corporation, is generally regarded as a good proxy for the overall U.S. equity market; the Portfolio therefore enables contract owners to participate in overall performance of the equity market. The Portfolio continues to achieve the objective of matching the results of the S&P 500 before expenses. Sector Allocation EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Technology 19% Finance 16% Consumer Staples 15% Health Care 12% Basic Materials/Capital Goods 11% Consumer Cyclicals 9% Energy 6% Other Industries 12%
Top 10 Holdings 12/31/98 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
TOP 10 HOLDINGS 12/31/98 % OF NET ASSETS Microsoft Corporation 3.41% General Electric Company 3.32% Intel Corporation 1.99% Wal-Mart Stores, Inc. 1.82% Exxon Corporation 1.78% Merck & Co., Inc. 1.76% International Business Machines Corporation 1.72% The Coca-Cola Company 1.65% Pfizer Inc. 1.64% Lucent Technologies Inc. 1.45%
Performance Relative to S&P 500 Index EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
INDEX 500 PORTFOLIO S&P 500 INDEX 12/88 $10,000 $10,000 12/89 $11,839 $13,170 12/90 $11,328 $12,762 12/91 $14,702 $16,654 12/92 $15,369 $17,920 12/93 $16,891 $19,730 12/94 $17,096 $19,966 12/95 $23,464 $27,434 12/96 $28,802 $33,689 12/97 $38,364 $44,907 12/98 $49,384 $57,706 AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED DECEMBER 31, 1998 ONE YEAR FIVE YEARS TEN YEARS Index 500 Portfolio 28.72% 23.93% 17.32% S&P 500 Index 28.50% 23.94% 19.16%
On April 30, 1993, the Portfolio was indexed to approximate the performance of the Standard & Poor's 500 Composite Stock Price Index. Before that date, the Portfolio was actively managed. The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The index is heavily weighted toward stocks with large market capitalizations and represents approximately two-thirds of the total market value of all domestic common stocks. This chart assumes an initial investment of $10,000 made on 12/31/88. 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. The net investment rates of return shown on page 2 reflect mortality and expense risk 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 return significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. -- 17 INDEX 500 STOCK PORTFOLIO NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
MARKET VALUE COMMON STOCK (99.1%) SHARES (000'S) - ------------------------------------------------------------- BASIC MATERIALS (3.1%) Air Products & Chemicals, Inc. 39,100 $ 1,564 Alcan Aluminum Limited 38,400 1,039 Allegheny Teledyne, Inc. 33,235 679 Aluminum Co. of America 31,500 2,349 Archer Daniels Midland Company 101,080 1,737 ASARCO, Inc. 6,600 99 Barrick Gold Corporation 63,000 1,229 Battle Mountain Gold Company 38,100 157 Bemis Company, Inc. 9,000 341 *Bethlehem Steel Corporation 21,500 180 B. F. Goodrich Company 12,500 448 Boise Cascade Corporation 9,500 295 Champion International 16,100 652 Cyprus Amax Minerals Co. 15,550 156 Dow Chemical Company 37,800 3,437 E.I. du Pont de Nemours & Co. 191,000 10,135 Eastman Chemical Company 13,425 601 Ecolab, Inc. 21,900 793 Engelhard Corp. 24,400 476 *FMC Corporation 5,800 325 Freeport-McMoRan Copper & Gold, Inc. 30,400 317 Georgia Pacific Group 15,700 919 Great Lakes Chemical 10,000 400 Hercules Inc. 16,000 438 Homestake Mining Company 40,300 370 Inco Limited 28,000 296 International Flavors & Fragrances, Inc. 18,100 800 International Paper Company 51,900 2,326 Louisiana Pacific Corporation 18,500 339 Mead Corp. 17,500 513 Monsanto Company 101,400 4,817 Morton International, Inc. 22,000 539 Nalco Chemical Company 11,100 344 Newmont Mining Corporation 28,180 509 Nucor Corp. 14,900 644 Phelps Dodge Corporation 9,900 504 Pioneer Hi-Bred International 40,800 1,102 Placer Dome, Inc. 42,200 485 Potlatch Corporation 4,900 181 PPG Industries, Inc. 29,900 1,742 Praxair 26,700 941 Reynolds Metals Company 12,200 643 Rohm and Haas Company 30,100 907 Sigma-Aldrich Corp. 17,000 499 Temple-Inland Inc. 9,400 558 Union Camp Corporation 11,700 790 Union Carbide Corporation 22,800 969 USX-U.S. Steel Group, Inc. 14,900 343 W.R. Grace & Co. 12,600 198 Westvaco Corporation 17,150 460 MARKET VALUE COMMON STOCK (99.1%) SHARES (000'S) - ------------------------------------------------------------- BASIC MATERIALS (CONTINUED) Weyerhaeuser Company 33,600 $ 1,707 Willamette Industries Inc. 1,880 630 Worthington Industries 16,050 201 ------------ TOTAL 53,123 ------------ CAPITAL GOODS (7.9%) Aeroquip-Vickers Inc. 4,700 141 AlliedSignal, Inc. 94,700 4,196 AMP, Inc. 36,926 1,922 Avery Dennison Corporation 19,800 892 Ball Corporation 5,100 233 Boeing Company 170,576 5,565 Briggs & Stratton Corporation 4,000 200 Browning-Ferris Industries, Inc. 29,300 833 Case Corporation 12,600 275 Caterpillar, Inc. 61,600 2,834 Cooper Industries, Inc. 17,500 835 Corning, Inc. 39,100 1,760 Crane Co. 11,575 349 Crown Cork & Seal Company, Inc. 21,000 647 Cummins Engine Company, Inc. 6,400 227 Danaher Corporation 22,600 1,227 Deere & Company 41,300 1,368 Dover Corporation 37,700 1,381 Eaton Corporation 12,100 855 Emerson Electric Co. 74,300 4,648 Fluor Corporation 13,300 566 Foster Wheeler Corporation 6,800 90 General Dynamics Corporation 21,400 1,255 General Electric Company 549,200 56,053 Harnischfeger Industries, Inc. 7,900 80 Honeywell, Inc. 21,300 1,604 Illinois Tool Works, Inc. 42,200 2,448 Ingersoll-Rand Company 27,900 1,310 Johnson Controls, Inc. 14,300 844 Lockheed Martin Corporation 33,054 2,801 McDermott International, Inc. 10,000 247 Milacron Inc. 6,500 125 Millipore Corp. 7,300 208 Minnesota Mining & Manufacturing Co. 68,200 4,851 Moore Corporation Ltd. 14,910 164 NACCO Industries, Inc. 1,400 129 National Service Industries, Inc. 6,900 262 *Navistar International Corporation 11,300 322 Northrop Grumman Corporation 11,600 848 *Owens-Illinois, Inc. 26,200 802 PACCAR Incorporated 13,170 542 Pall Corporation 20,900 529 Parker-Hannifin Corporation 18,675 612 Pitney Bowes, Inc. 46,300 3,059
-- 18 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
MARKET VALUE COMMON STOCK (99.1%) SHARES (000'S) - ------------------------------------------------------------- CAPITAL GOODS (CONTINUED) Raychem Corp. 13,400 $ 433 Rockwell International Corp. 32,300 1,569 *Sealed Air Corporation 14,071 719 Tenneco Inc. 28,600 974 Textron Inc. 27,700 2,103 *Thermo Electron Corporation 28,000 474 Thomas & Betts Corporation 9,600 416 Timken Company 10,500 198 Tyco International Ltd. 108,759 8,205 United Technologies Corp. 38,500 4,187 Waste Management Inc. 96,485 4,499 ------------ TOTAL 133,916 ------------ COMMUNICATION SERVICES (8.4%) *Airtouch Communications Inc. 96,900 6,989 ALLTEL Corporation 46,300 2,769 Ameritech Corporation 186,100 11,794 AT&T Corporation 304,900 22,944 Bell Atlantic Corporation 262,184 14,895 BellSouth Corporation 332,000 16,559 Frontier Corporation 28,900 983 GTE Corporation 162,700 10,972 *MCI WorldCom, Inc. 299,782 21,509 *Nextel Communications, Inc. 48,200 1,139 SBC Communications Inc. 330,398 17,718 Sprint Corporation 72,600 6,107 *Sprint PCS 70,850 1,638 U S WEST, Inc. 84,708 5,474 ------------ TOTAL 141,490 ------------ CONSUMER CYCLICAL (8.7%) American Greetings Corp. 11,900 489 Armstrong World Industries Inc. 6,800 410 *Autozone, Inc. 25,800 850 Black & Decker Corporation 14,800 830 Brunswick Corporation 16,700 413 *Cendant Corporation 144,854 2,761 Centex Corporation 10,100 455 Circuit City Stores, Inc. 16,900 844 *Consolidated Stores Corporation 18,500 373 Cooper Tire & Rubber Company 13,100 268 *Costco Companies, Inc. 36,507 2,635 Dana Corporation 27,800 1,136 Dayton Hudson Corporation 74,100 4,020 Dillard 's , Inc. 18,700 531 Dollar General Corp. 31,175 737 Dow Jones & Company, Inc. 15,800 760 Dun & Bradstreet Corporation 28,800 909 *Federated Department Stores, Inc. 35,600 1,551 Fleetwood Enterprises, Inc. 5,800 202 Ford Motor Company 204,500 12,002 *Fruit of the Loom, Inc. 12,200 169 Gannet Company Inc. 48,000 3,177 MARKET VALUE COMMON STOCK (99.1%) SHARES (000'S) - ------------------------------------------------------------- CONSUMER CYCLICAL (CONTINUED) Gap, Inc. 99,450 $ 5,594 General Motors Corp. 110,400 7,901 Genuine Parts Company 30,200 1,010 Goodyear Tire & Rubber Company 26,500 1,337 H & R Block, Inc. 17,000 765 Harcourt General 12,000 638 *Harrahs Entertainment 17,100 268 Hasbro Inc. 22,250 804 Hilton Hotels Corporation 44,000 842 Home Depot, Inc. 248,096 15,180 Interpublic Group of Cos., Inc. 23,000 1,834 ITT Industries Inc. 20,000 795 J.C. Penney Company, Inc. 42,700 2,002 Jostens, Inc. 6,100 160 *Kmart Corporation 83,100 1,272 Kaufman & Broad Home Corp. 6,700 193 Knight-Ridder, Inc. 13,300 680 *Kohl's Corporation 26,700 1,640 Laidlaw Transportation Limited 55,700 560 The Limited, Inc. 38,500 1,121 Liz Claiborne, Inc. 11,100 350 Lowe's Companies, Inc. 59,400 3,041 Marriott International 42,200 1,224 Masco Corporation 57,400 1,650 Mattel, Inc. 49,388 1,127 May Department Stores Company 39,000 2,355 Maytag Corporation 15,400 959 McGraw-Hill Companies Inc. 16,800 1,712 Meredith Corporation 8,900 337 *Mirage Resorts, Inc. 30,300 453 The New York Times Company 32,000 1,110 Nike, Inc. 48,600 1,971 Nordstrom, Inc. 25,100 871 Omnicom Group Inc. 28,600 1,659 Owens Corning 9,100 322 Pep Boys - Manny, Moe & Jack 10,600 166 Pulte Corporation 7,200 200 *Reebok International Ltd. 9,400 140 Russell Corp. 6,000 122 Sears Roebuck & Co. 66,200 2,814 Service Corporation International 43,400 1,652 Sherwin-Williams Company 29,200 858 Snap-On Inc. 9,950 346 Springs Industries, Inc. 3,100 128 The Stanley Works 15,000 416 *Staples, Inc. 52,600 2,298 The TJX Companies, Inc. 53,500 1,552 Tandy Corporation 16,900 696 Times Mirror Company 14,600 818 *Toys R Us 44,100 744 Tribune Company 20,600 1,359 TRW, Inc. 20,600 1,157
-- 19 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
MARKET VALUE COMMON STOCK (99.1%) SHARES (000'S) - ------------------------------------------------------------- CONSUMER CYCLICAL (CONTINUED) VF Corporation 20,500 $ 961 Venator Group, Inc. 22,400 144 Wal-Mart Stores, Inc. 377,400 30,734 Whirlpool Corporation 12,800 709 ------------ TOTAL 147,273 ------------ CONSUMER STAPLES (14.8%) Adolph Coors Co. 6,100 344 Alberto-Culver Company 9,300 248 Albertson's, Inc. 41,500 2,643 American Stores Co. 46,300 1,710 Anheuser-Busch Companies, Inc. 81,400 5,342 Avon Products, Inc. 44,500 1,969 BESTFOODS 48,500 2,583 *Brown-Forman Corporation 11,600 878 Campbell Soup Company 75,800 4,169 Cardinal Health Inc. 33,750 2,561 CBS Corporation 120,800 3,956 *Clear Channel Communications, Inc. 41,900 2,284 Clorox Company 17,500 2,044 The Coca-Cola Company 416,200 27,833 Coca Cola Enterprises Inc. 68,300 2,442 Colgate-Palmolive Co. 49,900 4,634 Comcast Corp. 62,350 3,659 Conagra, Inc. 82,400 2,596 CVS Corporation 65,700 3,613 Darden Restaurant, Inc. 23,500 423 Deluxe Corp. 13,600 497 Fort James Corporation 37,200 1,488 Fortune Brands, Inc. 29,200 923 *Fred Meyer, Inc. 26,000 1,567 General Mills, Inc. 26,100 2,029 Gillette Company 189,500 9,155 Great Atlantic & Pacific Tea Co., Inc. 6,500 193 H.J. Heinz Company 61,150 3,463 Hershey Foods Corp. 24,200 1,505 Kellogg Company 68,700 2,344 Kimberly-Clark Corporation 92,444 5,038 *King World Productions, Inc. 12,400 365 Kroger Company 43,300 2,620 Longs Drug Stores Corp. 6,500 244 McDonald's Corporation 115,600 8,858 *MediaOne Group, Inc. 102,900 4,836 Newell Co. 27,400 1,130 PepsiCo Inc. 248,600 10,177 Philip Morris Companies, Inc. 410,500 21,962 Procter & Gamble Company 226,300 20,664 The Quaker Oats Company 23,000 1,369 RJR Nabisco Holdings Corp. 54,800 1,627 R.R. Donnelley & Sons Company 23,500 1,030 MARKET VALUE COMMON STOCK (99.1%) SHARES (000'S) - ------------------------------------------------------------- CONSUMER STAPLES (CONTINUED) Ralston Purina Group 52,700 $ 1,706 Rite Aid Corporation 43,600 2,161 Rubbermaid, Inc. 25,300 795 *Safeway Inc. 82,100 5,003 Sara Lee Corporation 157,600 4,442 The Seagram Company Ltd. 66,500 2,527 Supervalue, Inc. 20,400 571 Sysco Corporation 57,000 1,564 *Tele Communications, Inc. 88,376 4,888 Time Warner Inc. 202,300 12,555 *Tricon Global Restaurants, Inc. 25,790 1,293 Tupperware 9,600 158 Unilever, N.V. 108,100 8,966 UST Incorporated 31,400 1,095 Viacom, Inc. 60,456 4,474 Walgreen Company 84,000 4,919 Walt Disney Company 345,807 10,374 Wendy's International, Inc. 21,500 469 Winn-Dixie Stores, Inc. 25,100 1,126 Wm. Wrigley Jr. Company 19,600 1,755 ------------ TOTAL 249,856 ------------ ENERGY (6.2%) Amerada Hess Corporation 15,400 766 Amoco Company 161,100 9,726 Anadarko Petroleum Corporation 20,300 627 Apache Corporation 16,600 420 Ashland, Inc. 12,900 624 Atlantic Richfield Company 54,200 3,537 Baker Hughes, Inc. 53,630 949 Burlington Resource, Inc. 29,920 1,072 Chevron Corp. 110,500 9,165 Exxon Corporation 411,600 30,098 Halliburton Company 74,100 2,195 Helmerich & Payne, Inc. 8,500 165 Kerr-McGee Corporation 8,100 310 Mobil Corporation 131,900 11,492 Occidental Petroleum Corporation 59,600 1,006 *ORYX Energy Company 17,900 241 PennzEnergy Company 8,100 132 *Pennzoil-Quaker State Company 8,100 120 Phillips Petroleum Company 43,600 1,858 *Rowan Companies, Inc. 14,200 142 Royal Dutch Petroleum Co., ADR 361,900 17,326 Schlumberger Limited 91,900 4,239 Sunoco, Inc. 15,800 570 Texaco Inc. 90,400 4,780 Union Pacific Resource Group 42,392 384 Unocal Corp. 40,700 1,188 USX -Marathon Group 51,900 1,563 ------------ TOTAL 104,695 ------------
-- 20 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
MARKET VALUE COMMON STOCK (99.1%) SHARES (000'S) - ------------------------------------------------------------- FINANCE (15.5%) Allstate Corporation 139,828 $ 5,401 American Express Company 77,000 7,873 American General Corporation 42,725 3,332 American International Group, Inc. 177,237 17,126 Aon Corporation 28,500 1,578 Associates First Capital Corporation 116,910 4,954 Banc One Corporation 197,686 10,094 Bank of New York Company, Inc. 126,100 5,076 BankAmerica Corporation 293,276 17,633 BankBoston Corporation 49,700 1,935 Bankers Trust New York Corporation 16,200 1,384 BB&T Corporation 48,300 1,947 The Bear Stearns Companies, Inc. 19,200 718 Berkshire Hathaway Inc. 44 3,136 Capital One Financial Corporation 11,200 1,288 Charles Schwab Corporation 67,550 3,795 Chase Manhattan Corporation 144,612 9,843 The Chubb Corporation 28,000 1,817 CIGNA Corporation 35,800 2,768 Cincinnati Financial Corporation 28,200 1,033 Citigroup 385,841 19,099 Comerica, Inc. 26,250 1,790 Conseco Inc. 52,737 1,612 Countrywide Credit Industries, Inc. 18,700 939 Federal Home Loan Mortgage Corp. 114,500 7,378 Federal National Mortgage Association 175,000 12,950 Fifth Third Bankcorp 45,175 3,222 First Union Corporation 163,552 9,946 Fleet Financial Group Inc. 95,860 4,284 Franklin Resources Inc. 42,700 1,366 Golden West Financial Corporation 9,700 889 Hartford Financial Services Group Inc. 39,400 2,162 Household International Inc. 83,079 3,292 Huntington Bancshares, Inc. 35,740 1,074 J.P. Morgan & Company, Inc. 29,800 3,131 Jefferson-Pilot Corp. 17,950 1,346 KeyCorp 74,200 2,374 Lehman Brothers Holdings, Inc. 20,000 881 Lincoln National Corporation 17,000 1,391 Loews Corp. 19,400 1,906 Marsh & McLennan Companies, Inc. 43,150 2,522 MBIA, Inc. 16,800 1,101 MBNA Corp. 126,875 3,164 Mellon Bank Corporation 44,000 3,025 Mercantile Bancorp 25,700 1,185 Merrill Lynch & Co. 58,800 3,925 MARKET VALUE COMMON STOCK (99.1%) SHARES (000'S) - ------------------------------------------------------------- FINANCE (CONTINUED) MGIC Investment Corp. 19,100 $ 760 Morgan Stanley, Dean Witter, Discover & Co. 98,905 7,022 National City Corp. 55,700 4,038 Northern Trust Corp. 18,800 1,641 PNC Bank Corp. 50,900 2,755 Progressive Corporation 12,300 2,083 Providian Financial Corporation 24,100 1,808 Provident Companies, Inc. 22,800 946 Regions Financial Corporation 36,100 1,455 Republic New York Corporation 18,200 829 SAFECO, Inc. 23,800 1,022 SLM Holding Corporation 28,300 1,358 St. Paul Companies, Inc. 39,886 1,386 State Street Corporation 27,300 1,899 Summit Bancorp. 29,300 1,280 SunAmerica, Inc. 34,900 2,831 Suntrust Banks Inc. 35,300 2,700 Synovus Financial Corp. 44,450 1,083 Torchmark Corporation 23,700 837 Transamerica Corporation 10,600 1,224 UNUM Corporation 23,300 1,360 U.S. Bancorp 125,431 4,453 Union Planters Corporation 21,500 974 Wachovia Corporation 34,900 3,052 Waddell & Reed Financial, Inc. 5,681 132 Washington Mutual, Inc. 100,036 3,820 Wells Fargo & Company 272,930 10,900 ------------ TOTAL 262,333 ------------ HEALTHCARE (12.0%) Abbott Laboratories Inc. 259,900 12,735 Aetna, Inc. 24,363 1,916 Allergan Inc. 11,000 712 *Alza Corporation 14,600 763 American Home Products Corporation 222,100 12,507 *Amgen, Inc. 42,900 4,486 Bausch & Lomb, Inc. 9,400 564 Baxter International, Inc. 48,200 3,100 Becton, Dickinson & Company 41,700 1,780 Biomet, Inc. 18,900 761 *Boston Scientific Corp. 66,100 1,772 Bristol-Myers Squibb Company 167,900 22,467 C.R. Bard, Inc. 9,500 470 Columbia/HCA Healthcare Corporation 108,900 2,695 Eli Lilly & Company 185,900 16,522 Guidant Corporation 25,500 2,811 *HCR Manor Care Inc. 18,300 538 *HEALTHSOUTH Corporation 71,300 1,101 Humana, Inc. 28,200 502
-- 21 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
MARKET VALUE COMMON STOCK (99.1%) SHARES (000'S) - ------------------------------------------------------------- HEALTHCARE (CONTINUED) Johnson & Johnson 227,000 $ 19,040 Mallinckrodt, Inc. 12,300 379 Medtronic, Inc. 79,200 5,881 Merck & Co., Inc. 201,000 29,685 Pfizer, Inc. 220,500 27,659 Pharmacia & Upjohn Inc. 85,705 4,853 Schering-Plough Corporation 247,800 13,691 *St. Jude Medical, Inc. 14,200 393 *Tenet Healthcare Corp. 52,000 1,365 *United Healthcare Corp. 33,000 1,421 Warner-Lambert Company 138,600 10,421 ------------ TOTAL 202,990 ------------ TECHNOLOGY (18.5%) *3Com Corporation 60,600 2,716 Adobe Systems, Inc. 11,300 528 *Advanced Micro Devices, Inc. 24,300 703 *Andrew Corporation 14,537 240 *Apple Computer, Inc. 22,700 929 *Applied Materials, Inc. 61,800 2,638 *Ascend Communications, Inc. 36,400 2,393 Autodesk, Inc. 7,900 337 Automatic Data Processing, Inc. 50,800 4,074 *BMC Software, Inc. 34,800 1,551 *Cabletron Systems, Inc. 27,800 233 *Ceridian Corp. 12,200 852 *Cisco Systems Inc. 262,425 24,356 Compaq Computer Corporation 282,009 11,827 Computer Associates International, Inc. 94,712 4,037 *Computer Sciences Corp. 26,700 1,720 *Data General Corporation 8,200 135 *Dell Computer Corp. 213,700 15,640 EG&G, Inc. 7,800 217 *EMC Corporation 84,300 7,166 Eastman Kodak Company 54,500 3,924 Electronic Data Systems Corporation 83,100 4,176 Equifax, Inc. 25,000 855 First Data Corporation 75,400 2,389 *Gateway 2000, Inc. 26,300 1,346 *General Instrument Corporation 28,300 960 Harris Corporation 13,500 494 HBO & Company 78,500 2,252 Hewlett-Packard Company 175,500 11,989 IMS Health Incorporated 28,000 2,112 Ikon Office Solutions 22,900 196 Intel Corporation 283,600 33,624 International Business Machines Corporation 157,500 29,098 *KLA- Tencor Corporation 14,700 638 *LSI Logic Corp. 23,800 384 MARKET VALUE COMMON STOCK (99.1%) SHARES (000'S) - ------------------------------------------------------------- TECHNOLOGY (CONTINUED) Lucent Technologies Inc. 221,980 $ 24,418 *Micron Technology 36,000 1,820 *Microsoft Corporation 415,900 57,680 Motorola, Inc. 101,000 6,167 *National Semiconductor Corporation 27,700 374 Northern Telecom Limited 110,100 5,519 *Novell, Inc. 59,700 1,082 *Oracle Corporation 164,300 7,085 *Parametric Technology Company 45,900 752 Paychex, Inc. 27,500 1,415 *Peoplesoft, Inc. 38,900 737 Perkin-Elmer Corporation 8,300 810 Polaroid Corporation 7,300 136 Raytheon Company- Class B 57,200 3,046 Scientific-Atlanta, Inc. 12,700 290 *Seagate Technology Inc. 41,000 1,240 Shared Medical Systems Corp. 4,500 224 *Silicon Graphics 31,900 411 *Sun Microsystems Inc. 63,900 5,471 Tektronix, Inc. 7,950 239 *Tellabs Inc. 32,700 2,242 Texas Instruments, Inc. 65,900 5,639 *Unisys Corporation 42,900 1,477 W.W. Grainger, Inc. 16,500 687 Xerox Corporation 55,500 6,549 ------------ TOTAL 312,239 ------------ TRANSPORTATION (.9%) *AMR Corporation 30,800 1,829 Burlington Northern Santa Fe 79,821 2,694 CSX Corporation 36,900 1,531 Delta Air Lines Inc. 24,100 1,253 *Federal Express Corp. 24,860 2,213 Norfolk Southern Corporation 64,000 2,028 Ryder System, Inc. 12,400 322 Southwest Airlines Co. 56,700 1,272 Union Pacific Corporation 41,700 1,879 *USAir Group, Inc. 14,800 770 ------------ TOTAL 15,791 ------------ UTILITIES (3.1%) The AES Corporation 29,700 1,407 Ameren Corporation 23,200 990 American Electric Power Co. Inc. 32,200 1,515 Baltimore Gas & Electric Co. 25,100 775 Carolina Power & Light Company 25,500 1,200 Central & South West Corporation 35,900 985 Cinergy Corporation 26,717 918 Coastal Corp. 35,900 1,254 Columbia Energy Group 14,050 811 Consolidated Edison Co. of New York 39,500 2,089
-- 22 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
MARKET VALUE COMMON STOCK (99.1%) SHARES (000'S) - ------------------------------------------------------------- UTILITIES (CONTINUED) Consolidated Natural Gas Company 16,200 $ 875 Dominion Resources Inc. 33,200 1,552 DTE Energy Company 24,500 1,050 Duke Energy Corp. 60,965 3,906 Eastern Enterprises 3,800 166 Edison International 59,700 1,664 Enron Corp 55,600 3,173 Entergy Corporation 41,600 1,295 FirstEnergy Corporation 40,000 1,303 FPL Group, Inc. 30,600 1,886 GPU, Inc. 21,600 954 Houston Industries Incorporated 49,962 1,605 New Century Energies, Inc. 18,800 917 *Niagara Mohawk Power Corporation 31,600 510 Nicor, Inc. 8,100 342 Northern States Power Company 25,600 710 ONEOK, Inc. 5,300 191 P P & L Resources, Inc. 25,534 712 PacifiCorp 50,200 1,057 PECO Energy Company 37,600 1,565 Peoples Energy Corporation 5,900 235 PG&E Corp. 64,500 2,032 Public Service Enterprise Group, Inc. 39,200 1,568 *Sempra Energy 40,602 1,030 Sonat Inc. 18,600 503 Southern Company 117,800 3,424 Texas Utilities Company 47,215 2,204 UNICOM Corp. 36,600 1,411 Williams Companies, Inc. 71,700 2,236 ------------ TOTAL 52,020 ------------ TOTAL COMMON STOCK 1,675,726 ------------
MARKET VALUE MONEY MARKET INVESTMENTS (0.7%) PAR (000'S) - ------------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (0.1%) +FHLM, 4.92%, 2/26/99 1,000,000 $ 992 +FHLM, 5.11%, 1/08/99 500,000 500 +FNMA, 4.98%, 3/15/99 100,000 99 ------------ TOTAL 1,591 ------------ FINANCE (0.5%) +Asset Securitization, 5.6%, 1/28/99 2,000,000 1,992 +CXC Incorporated, 5.375%, 1/26/99 4,750,000 4,732 +Triple A One Funding, 5.55%, 1/19/99 2,000,000 1,994 ------------ TOTAL 8,718 ------------ SHORT TERM BUSINESS CREDIT (0.1%) American Express Credit, 5.0%, 1/8/99 2,200,000 2,198 ------------ TOTAL MONEY MARKET INVESTMENTS 12,507 ------------ TOTAL INVESTMENTS (99.8%) (COST $939,455,194)^ 1,688,233 OTHER ASSETS, LESS LIABILITIES (0.2%) 2,447 ------------ TOTAL NET ASSETS (100.0%) $ 1,690,680 ------------
ADR-American Depository Receipt. * Non-Income Producing. +Partially held by the custodian in a segregated account as collateral for open futures positions. Information regarding open futures contracts as of December 31, 1998 is summarized below:
UNREALIZED NUMBER OF EXPIRATION APPRECIATION ISSUER CONTRACTS DATE (000'S) - ---------------------------------------------------------------- S&P 500 Stock Index 40 3/99 $324 (Total Notional Value at 12/31/98, $12,130,969)
^At December 31, 1998, the aggregate cost of securities for federal income tax purposes was $939,535,329 and the net unrealized appreciation of investments based on that cost was $748,698,082 which is comprised of $769,501,002 aggregate gross unrealized appreciation and $20,802,920 aggregate gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements -- 23 BALANCED PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Invested Assets: A high level of current income Achieve consistent returns and low volatility $3,282,071,000 and capital growth with a low by diversifying among assets risk profile
In order to capitalize on changing financial market and economic conditions, the Balanced Portfolio's asset allocation is adjusted as appropriate among three investment classes: stocks, bonds and money market instruments. The equity portion of the Portfolio is indexed, meaning that the Portfolio is designed to achieve results that approximate the performance of the Standard & Poor's 500 Composite Stock Price Index, which is generally regarded as a good proxy for the overall U.S. equity market. The bond portion of the Portfolio is actively managed, with investments in high quality bonds adjusted frequently as to maturity, market sectors and duration. Liquidity is maintained by holding a portion of the Portfolio in money market investments, which are high quality short-term debt securities. During 1998 the portfolio continued to emphasize equities, remaining relatively fully invested during most of the year. The market's volatility was used as an opportunity to adjust the asset mix, with the equity position reduced before the stock market's pronounced drops in early September and again in early October and equity exposure increased on market weakness. The fact that the equity portion of the Portfolio is indexed to the S&P 500 boosted performance in several ways: the portfolio benefited from the continued market leadership of the high-tech and large companies that dominate this index, as well as from the absence of small-capitalization and foreign stocks. Performance of the bond portion of the Portfolio was hurt by weakness during the year in all bonds except Treasury securities. Percentage Holdings 12/31/98 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Equities (including futures) 57% Bonds 34% Short-Term Investments 9%
Performance Relative to Relevant Indices EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
BALANCED PORTFOLIO MERRILL LYNCH DOMESTIC MASTER INDEX ML 91-DAY T-BILL 12/88 10,000 $10,000 $10,000 12/89 11,566 $11,418 $10,899 12/90 11,742 $12,458 $11,816 12/91 14,482 $14,433 $12,570 12/92 15,295 $15,526 $13,064 12/93 16,810 $17,083 $13,481 12/94 16,837 $16,600 $14,046 12/95 21,280 $19,675 $14,893 12/96 24,143 $20,381 $15,683 12/97 29,338 $22,350 $16,518 12/98 34,879 $24,332 $17,382 AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED DECEMBER 31, 1998 ONE YEAR FIVE YEARS Balanced Portfolio 18.88% 15.72% MLDM Index 8.87% 7.33% ML 91-Day T-Bill 5.23% 5.22% S&P 500 Index 28.50% 23.94% S&P 500 INDEX 12/88 $10,000 12/89 $13,170 12/90 $12,762 12/91 $16,654 12/92 $17,920 12/93 $19,730 12/94 $19,966 12/95 $27,434 12/96 $33,689 12/97 $44,907 12/98 $57,706 TEN YEARS Balanced Portfolio 13.31% MLDM Index 9.30% ML 91-Day T-Bill 5.68% S&P 500 Index 19.16%
In the graph, the Portfolio is compared against three indices representing the three major components of the Portfolio: equities, fixed income, and cash equivalent investments. The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The index is heavily weighted toward stocks with large market capitalizations and represents approximately two-thirds of the total market value of all domestic common stocks. The Merrill Lynch Domestic Master Index is an unmanaged market value weighted index comprised of U.S. Government, mortgage and investment-grade corporate bonds. The index measures the income provided by, and the price changes of, the underlying securities. This chart assumes an initial investment of $10,000 made on 12/31/88. 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. The net investment rates of return shown on page 2 reflect mortality and expense risk 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 return significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. -- 24 BALANCED PORTFOLIO NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
SHARES/ MARKET VALUE BONDS (33.9%) PAR (000'S) - ------------------------------------------------------------- CORPORATE BONDS (7.4%) AEROSPACE AND DEFENSE (0.1%) Lockheed Corporation, 6.75%, 3/15/03 3,000,000 $ 3,117 ------------ BANK HOLDING COMPANIES (0.4%) Banco Montevideo, 8.4%, 04/30/08 (144A) 6,250,000 5,367 BT Institutional Capital Trust, 7.75%, 12/01/26 (144A) 1,000,000 1,031 Security Capital Industrial Trust, 7.3%, 5/15/01 8,000,000 8,260 ------------ TOTAL 14,658 ------------ BANKING & FINANCE (0.7%) Associates Corp. of North America, 7.95%, 2/15/10 5,550,000 6,345 Lehman Brothers Holdings, Inc., 8.8%, 3/01/15 5,000,000 5,740 Morgan Stanley Capital, 7.387%, 5/15/06 6,925,000 7,486 Nations Bank Lease, 7.442%, 11/18/05 2,000,000 2,122 ------------ TOTAL 21,693 ------------ CABLE & MEDIA (0.2%) Seagram Joseph E & S, 7.60%, 12/15/28 5,000,000 5,033 ------------ CHEMICALS AND ALLIED PRODUCTS (0.3%) Dow Capital B.V., 8.5%, 6/8/10 8,200,000 9,790 ------------ COMMUNICATIONS (0.2%) Telecommunications, Inc., 7.375%, 2/15/00 8,000,000 8,182 ------------ DURABLE GOODS (0.2%) Tata Engineering & Locomotive, 7.875%, 07/15/07 (144A) 6,500,000 5,404 ------------ ELECTRIC SERVICES (1.8%) Columbia Gas System Inc., 7.32%, 11/28/10 7,571,000 8,061 Comed Financing II, 8.5%, 1/15/27 3,000,000 3,334 Dayton Power & Light Company, 8.15%, 1/15/26 5,750,000 6,296 Niagra Mohawk Power, 7.0%, 10/01/00 3,000,000 3,041 Niagra Mohawk Power, 7.25%, 10/01/02 1,500,000 1,537 Ohio Edison Company, 7.375%, 9/15/02 3,665,000 3,880 PECO Energy Company, 7.75%, 3/1/23 8,850,000 9,298 SHARES/ MARKET VALUE BONDS (33.9%) PAR (000'S) - ------------------------------------------------------------- ELECTRIC SERVICES (CONTINUED) Public Service Electric & Gas Co., 6.875%, 1/1/03 9,000,000 $ 9,458 Southern California Edison Co., 7.25%, 3/1/26 10,000,000 10,233 Texas Utilities Electric Co., 7.875%, 3/1/23 4,000,000 4,281 ------------ TOTAL 59,419 ------------ ENERGY (0.3%) Barrett Resources Corporation, 7.55%, 2/01/07 5,000,000 4,812 Pemex Finance Ltd., 9.15%, 11/15/18 5,000,000 4,963 ------------ TOTAL 9,775 ------------ FOREIGN BANKS - BRANCHES & AGENCIES (0.2%) Fuji Bank, Ltd., 9.87%, 12/31/49 (144A) 7,700,000 5,621 ------------ FOOD AND BEVERAGE (0.3%) Coca Cola Enterprises, Inc., 8%, 1/4/05 10,000,000 11,278 ------------ GENERAL MERCHANDISE STORES (0.3%) May Department Stores Company, 6.7%, 9/15/28 6,150,000 6,371 May Department Stores Company, 7.45%, 10/15/16 4,000,000 4,480 ------------ TOTAL 10,851 ------------ INSURANCE (0.1%) Prudential Insurance Co., 6.375%, 7/23/06 2,500,000 2,574 ------------ LIFE SCIENCES /AGRICULTURE (0.2%) Monsanto Co., 6.60%, 12/01/28 6,900,000 6,887 ------------ MOTION PICTURE (0.5%) News America Holdings Inc., 8.45%, 8/1/34 10,000,000 11,595 Time Warner Entertainment Inc., 8.375%, 3/15/23 3,000,000 3,669 Time Warner Entertainment Inc., 8.375%, 7/15/33 1,500,000 1,854 ------------ TOTAL 17,118 ------------ MOTOR VEHICLES (0.4%) General Motors Acceptance Corp., 6.625%, 10/1/02 5,000,000 5,169 General Motors Corporation, 8.8%, 3/1/21 6,500,000 7,925 ------------ TOTAL 13,094 ------------ RAILROAD (0.3%) Burlington Northern, 7.25%, 8/01/97 5,650,000 6,004
-- 25 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
SHARES/ MARKET VALUE BONDS (33.9%) PAR (000'S) - ------------------------------------------------------------- RAILROAD (CONTINUED) Union Pacific Corp., 7.25%, 11/01/08 2,250,000 $ 2,412 ------------ TOTAL 8,416 ------------ RETAILERS (0.3) LB Mortgage Trust, 8.396%, 6/02/10 9,013,920 10,644 ------------ TECHNOLOGY (0.1%) International Business Machines, 6.22%, 8/01/27 3,000,000 3,136 ------------ TELEPHONE COMMUNICATIONS (0.1%) Cox Communications, Inc., 6.80%, 8/01/28 1,000,000 1,047 GTE Corporation, 6.94%, 4/15/28 3,000,000 3,247 ------------ TOTAL 4,294 ------------ TEXTILES (0.1%) ++Polysindo International Finance, 11.375%, 6/15/06 6,500,000 2,080 ------------ TOBACCO (0.2%) Philip Morris Companies, 9.25%, 2/15/00 1,000,000 1,041 RJR Nabisco Inc., 8.625%, 12/1/02 4,000,000 4,072 ------------ TOTAL 5,113 ------------ UTILITY (0.1%) Atlantic City Electric Company, 6.625%, 8/1/13 4,000,000 4,179 ------------ TOTAL CORPORATE BONDS 242,356 ------------ GOVERNMENT (DOMESTIC AND FOREIGN) AND AGENCY BONDS (19.3%) FOREIGN GOVERNMENT BONDS (0.9%) **Hellenic Republic, 7.50%, 5/20/13 3,000,000,000 11,295 **Hellenic Republic, 8.80%, 6/19/07 1,000,000,000 3,978 Province of Quebec, 6.5%, 1/17/06 7,500,000 7,836 Republic of Korea, 8.875%, 4/15/08 5,650,000 5,801 ------------ TOTAL 28,910 ------------ FEDERAL GOVERNMENT AND AGENCIES (18.4%) Federal Farm Credit, 6.51%, 01/07/08 8,000,000 8,000 Federal Home Loan Mortgage Corporation, 6.5%, 10/01/02 16,995,112 17,269 Federal Home Loan Mortgage Corporation, 7.0%, 4/06/02 7,250,000 7,420 SHARES/ MARKET VALUE BONDS (33.9%) PAR (000'S) - ------------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (CONTINUED) Federal Home Loan Mortgage Corporation, 7.5%, 9/29/01 18,184,121 $ 18,669 Federal National Mortgage Assoc., 5.970%, 10/1/08 1,795,194 1,830 Federal National Mortgage Assoc., 6.07%, 10/1/08 7,136,835 7,355 Federal National Mortgage Assoc., 6.240%, 02/01/06 4,905,514 5,060 Federal National Mortgage Assoc., 6.265%, 10/01/08 5,739,806 5,967 Federal National Mortgage Assoc., 6.315%, 03/01/06 5,178,356 5,363 Federal National Mortgage Assoc., 6.34%, 02/01/08 4,235,545 4,414 Federal National Mortgage Assoc., 6.43%, 06/01/08 7,444,333 7,809 Federal National Mortgage Assoc., 6.500%, 09/25/05 5,689,005 5,687 Federal National Mortgage Assoc., 6.750% 11/01/07 3,093,754 3,306 Federal National Mortgage Assoc., 6.750%, 04/25/18 5,596,921 5,816 Federal National Mortgage Assoc., 6.750%, 12/25/23 6,500,000 6,705 Federal National Mortgage Assoc., 6.834%, 07/01/03 3,213,826 3,327 Federal National Mortgage Assoc., 6.895%, 05/01/06 6,053,149 6,459 Federal National Mortgage Assoc., 6.900%, 04/01/06 2,440,103 2,603 Federal National Mortgage Assoc., 6.960%, 10/01/07 4,454,611 4,813 Federal National Mortgage Assoc., 7.000%, 06/01/03 4,193,589 4,288 Federal National Mortgage Assoc., 7.000%, 06/25/10 8,070,000 8,038 Federal National Mortgage Assoc., 7.000%, 04/01/26 18,905,967 19,299 Federal National Mortgage Assoc., 7.025%, 08/01/05 1,941,557 2,074 Federal National Mortgage Assoc., 7.045%, 08/01/05 7,622,512 8,139 Federal National Mortgage Assoc., 7.120%, 11/01/03 982,485 1,038 Federal National Mortgage Assoc., 7.250%, 05/01/04 1,568,082 1,677 Federal National Mortgage Assoc., 8.400%, 02/25/09 10,910,000 12,165 Federal National Mortgage Assoc., 11.000%, 12/01/12 257,640 283 Federal National Mortgage Assoc., 11.000%, 09/01/17 1,821,316 2,012
-- 26 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
SHARES/ MARKET VALUE BONDS (33.9%) PAR (000'S) - ------------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (CONTINUED) Federal National Mortgage Assoc., 11.000%, 12/01/17 331,515 $ 366 Federal National Mortgage Assoc., 11.000%, 02/01/18 692,895 767 Federal National Mortgage Assoc., 11.500%, 04/01/18 1,292,786 1,452 Federal National Mortgage Assoc., 12.000%, 09/01/12 1,925,478 2,170 Federal National Mortgage Assoc., 12.000%, 12/01/12 368,368 418 Federal National Mortgage Assoc., 12.000%, 09/01/17 511,219 583 Federal National Mortgage Assoc., 12.000%, 10/01/17 886,677 1,009 Federal National Mortgage Assoc., 12.000%, 12/01/17 617,462 703 Federal National Mortgage Assoc., 12.000%, 02/01/18 656,910 749 Federal National Mortgage Assoc., 12.500%, 04/01/18 594,592 680 Federal National Mortgage Assoc., 13.000%, 11/01/12 372,594 432 Federal National Mortgage Assoc., 13.000%, 11/01/17 656,543 761 Federal National Mortgage Assoc., 13.000%, 12/01/17 276,407 319 Federal National Mortgage Assoc., 13.000%, 02/01/18 959,656 1,113 Federal National Mortgage Assoc., 14.000%, 12/01/17 265,482 316 Government National Mortgage Assoc., 7.00%, 05/15/23 11,437,145 11,708 Government National Mortgage Assoc., 7.00%, 06/15/23 740,529 758 Government National Mortgage Assoc., 7.00%, 07/15/23 1,172,190 1,200 Government National Mortgage Assoc., 7.00%, 08/15/23 19,805 20 Government National Mortgage Assoc., 7.00%, 09/15/23 589,936 604 Government National Mortgage Assoc., 7.00%, 10/15/23 452,921 464 Government National Mortgage Assoc., 7.00%, 11/15/23 1,629,974 1,668 SHARES/ MARKET VALUE BONDS (33.9%) PAR (000'S) - ------------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (CONTINUED) Government National Mortgage Assoc., 7.00%, 12/15/27 323,665 $ 331 Government National Mortgage Assoc., 7.00%, 1/15/28 458,923 469 Government National Mortgage Assoc., 7.00%, 2/15/28 134,915 138 Government National Mortgage Assoc., 7.00%, 3/15/28 314,639 322 Government National Mortgage Assoc., 7.00%, 4/15/28 1,077,935 1,103 Government National Mortgage Assoc., 7.00%, 5/15/28 1,269,358 1,299 Government National Mortgage Assoc., 7.00%, 6/15/28 4,387,264 4,489 Government National Mortgage Assoc., 7.00%, 7/15/28 5,115,423 5,234 Government National Mortgage Assoc., 7.50%, 1/15/23 828,163 854 Government National Mortgage Assoc., 7.50%, 6/15/23 464,375 479 Government National Mortgage Assoc., 7.50%, 6/15/24 10,787 11 Government National Mortgage Assoc., 7.50%, 7/15/24 431,075 444 Government National Mortgage Assoc., 7.50%, 8/15/25 17,342 18 Government National Mortgage Assoc., 7.50%, 9/15/25 325,992 336 Government National Mortgage Assoc., 7.50%, 11/15/25 16,148 17 Government National Mortgage Assoc., 7.50%, 12/15/25 574,872 592 Government National Mortgage Assoc., 7.50%, 1/15/26 18,326 19
-- 27 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
SHARES/ MARKET VALUE BONDS (33.9%) PAR (000'S) - ------------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (CONTINUED) Government National Mortgage Assoc., 7.50%, 3/15/26 698,207 $ 719 Government National Mortgage Assoc., 7.50%, 6/15/26 1,361,455 1,403 Government National Mortgage Assoc., 7.50%, 9/15/26 18,315 19 Government National Mortgage Assoc., 7.50%, 10/15/26 113,371 117 Government National Mortgage Assoc., 7.50%, 12/15/26 908,194 936 Government National Mortgage Assoc., 7.50%, 1/15/27 59,524 61 Government National Mortgage Assoc., 7.50%, 2/15/27 583,673 602 Government National Mortgage Assoc., 7.50%, 3/15/27 49,163 51 Government National Mortgage Assoc., 7.50%, 4/15/27 1,850,440 1,908 Government National Mortgage Assoc., 7.50%, 5/15/27 729,156 752 Government National Mortgage Assoc., 7.50%, 7/15/27 763,952 788 Government National Mortgage Assoc., 7.50%, 12/15/27 264,108 272 Government National Mortgage Assoc., 7.50%, 7/15/28 861,165 888 Government National Mortgage Assoc., 8.00%, 9/15/24 537,069 558 Government National Mortgage Assoc., 8.00%, 3/15/26 307,611 319 Government National Mortgage Assoc., 8.00%, 5/15/26 638,699 663 Government National Mortgage Assoc., 8.00%, 6/15/26 548,036 569 SHARES/ MARKET VALUE BONDS (33.9%) PAR (000'S) - ------------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (CONTINUED) Government National Mortgage Assoc., 8.00%, 7/15/26 1,450,312 $ 1,505 Government National Mortgage Assoc., 8.00%, 8/15/26 437,431 454 Government National Mortgage Assoc., 8.00%, 9/15/26 616,170 640 Government National Mortgage Assoc., 8.00%, 10/15/26 1,016,409 1,054 Government National Mortgage Assoc., 8.00%, 12/15/26 491,569 510 Government National Mortgage Assoc., 8.00%, 4/15/27 1,584,497 1,646 Government National Mortgage Assoc., 8.00%, 6/15/27 573,766 596 Government National Mortgage Assoc., 8.00%, 7/15/27 210,499 219 Government National Mortgage Assoc., 8.00%, 7/20/28 4,226,589 4,370 Government National Mortgage Assoc., 8.50%, 05/15/22 5,163 6 Government National Mortgage Assoc., 8.50%, 09/15/22 8,869 9 Government National Mortgage Assoc., 8.50%, 10/15/22 46,432 50 Government National Mortgage Assoc., 8.50%, 12/15/22 34,015 36 Government National Mortgage Assoc., 8.50%, 06/15/24 11,957 13 Government National Mortgage Assoc., 8.50%, 07/15/24 55,154 59 Government National Mortgage Assoc., 8.50%, 08/15/24 63,636 68 Government National Mortgage Assoc., 8.50%, 12/15/24 11,871 13
-- 28 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
SHARES/ MARKET VALUE BONDS (33.9%) PAR (000'S) - ------------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (CONTINUED) Government National Mortgage Assoc., 8.50%, 01/15/25 92,498 $ 98 Government National Mortgage Assoc., 8.50%, 02/15/25 85,321 91 Government National Mortgage Assoc., 8.50%, 11/15/25 12,506 13 Government National Mortgage Assoc., 8.50%, 01/15/26 51,599 55 Government National Mortgage Assoc., 8.50%, 02/15/26 15,602 17 Government National Mortgage Assoc., 8.50%, 03/15/26 32,899 35 Government National Mortgage Assoc., 8.50%, 04/15/26 102,232 109 Government National Mortgage Assoc., 8.50%, 05/15/26 23,193 25 Government National Mortgage Assoc., 11.00%, 01/15/18 8,777,227 9,909 Rural Housing Trust - Class D, 6.33%, 4/1/26 5,730,281 5,789 U.S. Treasury, 3.625%, 07/15/02 2,537,375 2,520 U.S. Treasury, 3.625%, 04/15/28 6,500,000 6,333 U.S. Treasury, 4.000%, 10/31/00 11,650,000 11,526 U.S. Treasury, 4.750%, 11/15/08 3,000,000 3,023 U.S. Treasury, 5.375%, 01/31/00 3,000,000 3,023 U.S. Treasury, 5.375%, 06/30/03 4,800,000 4,937 U.S. Treasury, 5.500%, 08/15/28 4,820,000 5,052 U.S. Treasury, 5.500%, 02/29/00 150,000,000 151,405 U.S. Treasury, 5.500%, 01/31/03 3,500,000 3,602 U.S. Treasury, 5.500%, 03/31/03 15,500,000 15,965 U.S. Treasury, 5.500%, 02/15/08 175,000 186 U.S. Treasury, 5.625%, 04/30/00 10,500,000 10,628 U.S. Treasury, 5.625%, 12/31/99 5,000,000 5,048 U.S. Treasury, 5.625%, 12/31/02 2,300,000 2,375 U.S. Treasury, 6.000%, 07/31/02 4,000,000 4,169 U.S. Treasury, 6.125%, 08/15/07 9,000,000 9,835 U.S. Treasury, 5.625%, 5/15/08 34,000,000 36,274 U.S. Treasury, 6.375%, 05/15/99 45,600,000 45,871 U.S. Treasury, 7.250%, 08/15/04 6,000,000 6,748 Vendee Mortgage Trust, 6.5%, 6/07/08 4,500,000 4,554 SHARES/ MARKET VALUE BONDS (33.9%) PAR (000'S) - ------------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (CONTINUED) Vendee Mortgage Trust, 0.495%, 6/15/23 82,612,291 $ 1,419 ------------ TOTAL 603,807 ------------ TOTAL GOVERNMENT BONDS 632,717 ------------ MORTGAGE/ASSET BACKED SECURITIES (7.0%) AUTO-RELATED (0.6%) Daimler-Benz Vehicle Trust - Class A, 5.85%, 7/20/03 1,044,452 1,049 Eaglemark Trust - Class A, 6.75%, 11/15/02 2,826,860 2,869 Fleetwood Credit Corporation Grantor Trust - Class A, 6.4%, 05/15/13 2,379,414 2,421 Team Fleet Financing Corporation - Class A, 6.65%, 12/15/02 (144A) 11,800,000 11,918 Team Fleet Financing Corporation - Class A, 7.35%, 5/15/03 (144A) 3,000,000 3,086 ------------ TOTAL 21,343 ------------ BANKING AND FINANCE (0.0%) Bankers Trust Co., 6.255%, 1/13/99 227,505 228 ------------ CREDIT CARD (0.8%) Charming Shoppes Master Trust - Class A, 7%, 4/15/03 5,000,000 5,026 Iroquois Trust - Class A, 6.68%, 11/10/03 (144A) 15,000,000 15,107 Iroquois Trust - Class A, 6.752%, 06/25/07 (144A) 4,750,000 4,795 ------------ TOTAL 24,928 ------------ COMMERCIAL MORTGAGES (4.0%) Asset Securitization Corporation - Class CS1, 1.257%, 11/13/26 IO 24,196,896 868 Asset Securitization Corporation - Class PS1, 1.367%, 02/14/41 IO 22,468,376 2,315 BankBoston Marine Asset Backed Trust - Class A6, 6.64%, 08/15/10 7,000,000 7,217 Chase Commercial Mortgage Securities Corp. - Class A2, 6.6%, 11/19/07 8,500,000 8,849 Chase Commercial Mortgage Securities Corp. - Class B, 6.6%, 11/19/07 2,500,000 2,557 Citibank Credit Card Master Trust I - Class A, 0%, 08/15/06 17,000,000 12,355
-- 29 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
SHARES/ MARKET VALUE BONDS (33.9%) PAR (000'S) - ------------------------------------------------------------- COMMERCIAL MORTGAGES (CONTINUED) Commercial Mortgage Acceptance Corporation - Class B, 6.646%, 12/15/07 2,500,000 $ 2,553 Credit Suisse First Boston Mortgage Securities Corp. - Class A2, 7.26%, 6/20/07 (144A) 3,169,613 3,333 Credit Suisse First Boston Mortgage Securities Corp. - Class B, 7.28%, 6/20/07 (144A) 3,250,000 3,430 Credit Suisse First Boston Mortgage Securities Corp. - Class B, 9.5465%, 4/25/25 (144A) 3,000,000 3,418 Credit Suisse First Boston Mortgage Securities Corp. - Class D, 7.46%, 05/20/29 (144A) 6,000,000 6,089 Credit Suisse First Boston Mortgage Securities Corp. - Class D, 9.5465%, 4/25/25 (144A) 2,047,000 2,254 Criimi Mae Commercial Mortgage Trust, 7.0%, 11/02/06 6,500,000 6,194 DLJ Mortgage Acceptance Corporation - Class CF1, 0.718%, 02/18/31 IO 255,065,779 10,205 DLJ Mortgage Acceptance Corporation - Class S, 0.357%, 10/15/17 (144A) IO 18,782,120 428 DLJ Mortgage Acceptance, 8.10%, 6/18/04 2,417,933 2,626 DLJ Mortgage Acceptance, 8.10%, 6/18/04 1,650,000 1,796 First Union-Lehman Brothers Commerical Mortgage Trust - Class C, 7.44%, 04/18/07 2,500,000 2,653 GMAC Commerical Mortgage Securities, Inc. - Class C, 7.81%, 10/15/11 (144A) 7,000,000 7,057 Kmart CMBS Financing, Inc. - Class C, 6.2466%, 03/01/07 (144A) 3,500,000 3,494 Kmart CMBS Financing, Inc. - Class D, 6.6466%, 03/01/07 (144A) 4,500,000 4,486 Merrill Lynch Mortgage Investors, Inc. - Class C, 7.12%, 06/18/29 6,000,000 6,253 SHARES/ MARKET VALUE BONDS (33.9%) PAR (000'S) - ------------------------------------------------------------- COMMERCIAL MORTGAGES (CONTINUED) Merrill Lynch Mortgage Investors, Inc. - Class C, 8.9726%, 11/25/20 5,845,000 $ 5,858 Merrill Lynch Mortgage Investors, Inc. - Class E, 8.3346% , 06/25/22 (144A) 2,000,000 1,947 Midland Realty Acceptance Corp. - Class AEC, 1.389%, 1/25/29 (144A) IO 27,860,189 1,838 Nomura Asset Securities Corp. - Class A2, 6.9918%, 03/17/28 15,000,000 15,307 Nomura Asset Securities Corp. - Class A4, 7.5718%, 03/17/28 2,200,000 2,121 Red Mountain Funding LLC - Class E, 7.365%, 01/15/19 (144A) 1,500,000 1,358 Red Mountain Funding LLC - Class F, 7.471%, 01/15/19 (144A) 1,800,000 1,460 ------------ TOTAL 130,319 ------------ FRANCHISE LOAN RECEIVABLES (0.4%) EMAC Owner Trust - Class A2, 6.38%, 04/15/07 (144A) 6,000,000 5,983 EMAC Owner Trust, 1.378%, 01/15/25 IO (144A) 39,494,414 2,863 Global Franchise Trust, 6.349%, 04/10/04 4,798,408 4,876 ------------ TOTAL 13,722 ------------ HOME EQUITY LOAN (0.1%) Amresco Residential Securities - Class A2, 6.245%, 4/25/22 2,500,000 2,508 ------------ MANUFACTURED HOUSING (0.1%) Vanderbilt Mortgage and Finance, Inc. - Class 1A4, 7.19%, 02/07/14 2,500,000 2,599 ------------ OTHER ASSET BACKED (0.5%) FMAC Loan Receivables Trust - Class A, 6.20%, 09/15/20 (144A) 5,439,364 5,451 Harley Davidson Eaglemark, 5.87%, 04/15/04 1,900,000 1,924 Heilig-Meyers Master Trust - Class A, 6.125%, 01/20/07 (144A) 6,500,000 6,496 Nations Credit Grantor Trust - Class A1, 6.35%, 04/15/14 2,090,918 2,118
-- 30 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
SHARES/ MARKET VALUE BONDS (33.9%) PAR (000'S) - ------------------------------------------------------------- OTHER ASSET BACKED (CONTINUED) Newcourt Equipment - Class B, 6.764%, 09/20/04 (144A) 1,378,694 $ 1,377 Newcourt Equipment - Class C, 7.734%, 09/20/04 (144A) 1,102,955 1,100 ------------ TOTAL 18,466 ------------ RESIDENTIAL MORTGAGES (0.3%) BCF L L C Mortgage Pass Thru Certificate - Class B3, 7.75%, 3/25/37 (144A) 4,874,004 4,804 Blackrock Capital Finance LP, Class B3, 7.25%, 11/25/28 (144A) 5,871,575 5,306 ------------ TOTAL 10,110 ------------ UTILITY (0.2%) Comed Transitional, 5.74%, 12/16/08 5,500,000 5,532 ------------ TOTAL MORTGAGE/ASSET BACKED SECURITIES 229,755 ------------ MUNICIPAL BONDS (0.2%) New Jersey Economic Development Authority, 0.00%, 2/15/25 17,000,000 3,199 New Jersey Economic Development Authority, 0.00%, 2/15/26 11,000,000 1,940 New Jersey Economic Development Authority, 7.425%, 2/15/29 2,250,000 2,641 ------------ TOTAL MUNICIPAL BONDS 7,780 ------------ TOTAL BONDS 1,112,608 ------------ COMMON STOCK (50.0%) - ------------------------------------------------------------- BASIC MATERIALS (1.6%) Air Products & Chemicals, Inc. 38,300 1,532 Alcan Aluminum Limited 37,600 1,018 Allegheny Teledyne, Inc. 32,562 665 Aluminum Co. of America 30,900 2,304 Archer Daniels Midland Company 99,056 1,703 ASARCO, Inc. 6,600 99 Barrick Gold Corporation 61,700 1,203 Battle Mountain Gold Company 38,000 157 Bemis Company, Inc. 8,800 334 *Bethlehem Steel Corporation 21,400 179 B.F. Goodrich Company 12,200 438 Boise Cascade Corporation 9,300 288 Champion International 15,800 640 Cyprus Amax Minerals Co. 15,500 155 Dow Chemical Company 37,000 3,365 SHARES/ MARKET VALUE COMMON STOCK (50.0%) PAR (000'S) - ------------------------------------------------------------- BASIC MATERIALS (CONTINUED) E.I. du Pont de Nemours & Company 187,100 $ 9,928 Eastman Chemical Company 13,075 585 Ecolab, Inc. 21,400 774 Engelhard Corp. 23,900 466 *FMC Corporation 5,700 319 Freeport-McMoRan Copper & Gold, Inc. 29,700 310 Georgia Pacific Group 15,400 902 Great Lakes Chemical 9,800 392 Hercules, Inc. 15,600 427 Homestake Mining Company 39,500 363 Inco Limited 27,400 289 International Flavors & Fragrances, Inc. 17,700 782 International Paper Company 50,800 2,276 Louisiana Pacific Corporation 18,100 331 Mead Corp. 17,200 504 Monsanto Company 99,300 4,717 Morton International, Inc. 21,500 527 Nalco Chemical Company 10,900 338 Newmont Mining Corporation 27,630 499 Nucor Corp. 14,600 631 Phelps Dodge Corporation 9,700 493 Pioneer Hi-Bred International 39,900 1,077 Placer Dome, Inc. 41,300 475 Potlatch Corporation 4,800 177 PPG Industries, Inc. 29,300 1,707 Praxair 26,100 920 Reynolds Metals Company 11,900 627 Rohm and Haas Company 29,500 889 Sigma-Aldrich Corp. 16,600 488 Temple-Inland Inc. 9,200 546 Union Camp Corporation 11,500 776 Union Carbide Corporation 22,400 952 USX-U.S. Steel Group, Inc. 14,600 336 W.R. Grace & Co. 12,500 196 Westvaco Corporation 16,750 449 Weyerhaeuser Company 32,900 1,672 Willamette Industries, Inc. 18,400 616 Worthington Industries 16,000 200 ------------ TOTAL 52,036 ------------ CAPITAL GOODS (4.0%) Aeroquip-Vickers, Inc. 4,700 141 AlliedSignal, Inc. 92,800 4,112 AMP, Inc. 36,169 1,883 Avery Dennison Corporation 19,300 870 Ball Corporation 5,000 229 Boeing Company 167,018 5,449 Briggs & Stratton Corporation 4,000 200 Browning-Ferris Industries, Inc. 28,700 816
-- 31 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
SHARES/ MARKET VALUE COMMON STOCK (50.0%) PAR (000'S) - ------------------------------------------------------------- CAPITAL GOODS (CONTINUED) Case Corporation 12,300 $ 268 Caterpillar, Inc. 60,300 2,774 Cooper Industries, Inc. 17,100 815 Corning, Inc. 38,300 1,724 Crane Co. 11,325 342 Crown Cork & Seal Company, Inc. 20,600 635 Cummins Engine Company, Inc. 6,400 227 Danaher Corporation 22,100 1,200 Deere & Company 40,500 1,342 Dover Corporation 36,900 1,351 Eaton Corporation 11,800 834 Emerson Electric Co. 72,800 4,555 Fluor Corporation 13,000 553 Foster Wheeler Corporation 6,700 88 General Dynamics Corporation 20,900 1,225 General Electric Company 537,800 54,889 Harnischfeger Industries, Inc. 7,900 80 Honeywell, Inc. 20,900 1,574 Illinois Tool Works, Inc. 41,300 2,395 Ingersoll-Rand Company 27,350 1,284 Johnson Controls, Inc. 14,000 826 Lockheed Martin Corporation 32,361 2,743 McDermott International, Inc. 9,800 242 Milacron Inc 6,500 125 Millipore Corp. 7,200 205 Minnesota Mining & Manufacturing Co. 66,800 4,751 Moore Corporation Ltd. 14,573 160 NACCO Industries, Inc. 1,300 120 National Service Industries, Inc. 6,900 262 *Navistar International Corp. 11,070 315 Northrop Grumman Corporation 11,400 834 *Owens-Illinois, Inc. 25,700 787 PACCAR, Inc. 12,890 530 Pall Corporation 20,466 518 Parker-Hannifin Corporation 18,300 599 Pitney Bowes, Inc. 45,400 2,999 Raychem Corp. 13,100 423 Rockwell International Corp. 31,600 1,535 *Sealed Air Corporation 13,786 704 Tenneco, Inc. 28,000 954 Textron, Inc. 27,100 2,058 *Thermo Electron Corporation 27,400 464 Thomas & Betts Corporation 9,400 407 Timken Company 10,300 194 Tyco International Ltd. 106,459 8,031 United Technologies Corp. 37,700 4,100 SHARES/ MARKET VALUE COMMON STOCK (50.0%) PAR (000'S) - ------------------------------------------------------------- CAPITAL GOODS (CONTINUED) Waste Management, Inc. 94,497 $ 4,406 ------------ TOTAL 131,147 ------------ CONSUMER SERVICES (4.2%) *Airtouch Communications, Inc. 94,900 6,845 ALLTEL Corporation 45,300 2,710 Ameritech Corporation 182,200 11,547 AT&T Corporation 298,600 22,470 Bell Atlantic Corporation 256,780 14,588 BellSouth Corporation 325,200 16,219 Frontier Corporation 28,300 962 GTE Corporation 159,300 10,743 *MCI WorldCom, Inc. 293,589 21,065 *Nextel Communications, Inc. 47,200 1,115 SBC Communications, Inc. 323,574 17,352 Sprint Corporation 71,100 5,981 *Sprint PCS 69,350 1,604 US WEST, Inc. 82,905 5,358 ------------ TOTAL 138,559 ------------ CONSUMER CYCLICAL (4.4%) American Greetings Corp. 11,700 480 Armstrong World Industries, Inc. 6,600 398 *AutoZone, Inc. 25,200 830 Black & Decker Corporation 14,500 813 Brunswick Corporation 16,400 406 *Cendant Corporation 141,854 2,704 Centex Corporation 9,900 446 Circuit City Stores, Inc. 16,500 824 *Consolidated Stores Corporation 18,100 365 Cooper Tire & Rubber Company 12,800 262 *Costco Companies, Inc. 35,751 2,581 Dana Corporation 27,265 1,114 Dayton Hudson Corporation 72,600 3,939 Dillard's, Inc. 18,300 519 Dollar General Corp. 30,575 722 Dow Jones & Company, Inc. 15,500 746 Dun & Bradstreet Corporation 28,200 890 *Federated Department Stores, Inc. 34,900 1,520 Fleetwood Enterprises, Inc. 5,700 198 Ford Motor Company 200,300 11,755 *Fruit of the Loom, Inc. 11,900 164 Gannett Company, Inc. 47,000 3,110 Gap, Inc. 97,450 5,482 General Motors Corp. 108,100 7,736 Genuine Parts Company 29,575 989 Goodyear Tire & Rubber Company 26,000 1,311
-- 32 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
SHARES/ MARKET VALUE COMMON STOCK (50.0%) PAR (000'S) - ------------------------------------------------------------- CONSUMER CYCLICAL (CONTINUED) H & R Block, Inc. 16,600 $ 747 Harcourt General 11,700 622 *Harrahs Entertainment 16,700 262 Hasbro, Inc. 21,750 786 Hilton Hotels Corporation 43,100 824 Home Depot, Inc. 242,898 14,862 Interpublic Group of Cos., Inc. 22,500 1,794 ITT Industries, Inc. 19,600 779 J.C. Penney Company, Inc. 41,800 1,959 Jostens, Inc. 6,100 160 *Kmart Corporation 81,400 1,246 Kaufman & Broad Home Corp. 6,600 190 Knight-Ridder, Inc. 13,000 665 *Kohl's Corporation 26,100 1,604 Laidlaw Transportation Limited 54,500 548 The Limited Inc. 37,700 1,098 Liz Claiborne, Inc. 10,900 344 Lowe's Companies, Inc. 58,100 2,974 Marriott International 41,300 1,198 Masco Corporation 56,200 1,616 Mattel, Inc. 48,360 1,103 May Department Stores Company 38,200 2,306 Maytag Corporation 15,100 940 McGraw-Hill Companies, Inc. 16,400 1,671 Meredith Corporation 8,700 330 *Mirage Resorts, Inc. 29,700 444 The New York Times Company 31,300 1,086 Nike, Inc. 47,600 1,931 Nordstrom, Inc. 24,600 853 Omnicom Group Inc. 28,100 1,630 Owens Corning 8,900 315 Pep Boys-Manny, Moe & Jack 10,500 165 Pulte Corporation 7,100 197 *Reebok International Ltd. 9,300 138 Russell Corp. 6,000 122 Sears Roebuck & Co. 64,900 2,758 Service Corporation International 42,500 1,618 Sherwin-Williams Company 28,600 840 Snap-On, Inc. 9,750 339 Springs Industries, Inc. 3,100 128 The Stanley Works 14,700 408 *Staples, Inc. 51,500 2,250 The TJX Companies, Inc. 52,400 1,520 Tandy Corporation 16,600 684 Times Mirror Company 14,300 801 *Toys R Us 43,200 729 Tribune Company 20,200 1,333 TRW, Inc. 20,200 1,135 VF Corporation 20,100 942 SHARES/ MARKET VALUE COMMON STOCK (50.0%) PAR (000'S) - ------------------------------------------------------------- CONSUMER CYCLICAL (CONTINUED) Venator Group, Inc. 22,400 $ 144 Wal-Mart Stores, Inc. 369,500 30,091 Whirlpool Corporation 12,600 698 ------------ TOTAL 144,231 ------------ CONSUMER STAPLES (7.4%) Adolph Coors Co. 6,000 339 Alberto-Culver Company 9,100 243 Albertson's, Inc. 40,600 2,586 American Stores Co. 45,400 1,677 Anheuser-Busch Companies, Inc. 79,700 5,230 Avon Products, Inc. 43,500 1,925 BESTFOODS 47,500 2,529 *Brown-Forman Corporation 11,400 863 Campbell Soup Company 74,200 4,081 Cardinal Health, Inc. 33,100 2,511 CBS Corporation 118,300 3,874 *Clear Channel Communications, Inc. 41,000 2,235 Clorox Company 17,200 2,009 The Coca Cola Company 407,500 27,252 Coca Cola Enterprises Inc . 66,900 2,392 Colgate-Palmolive Co. 48,900 4,542 Comcast Corp. 61,050 3,583 Conagra, Inc. 80,700 2,542 CVS Corporation 64,400 3,542 Darden Restaurant, Inc. 23,000 414 Deluxe Corp. 13,400 490 Fort James Corporation 36,500 1,460 Fortune Brands, Inc. 28,600 904 General Mills, Inc. 25,600 1,990 Gillette Company 185,600 8,967 Great Atlantic & Pacific Tea Co., Inc. 6,300 187 H.J. Heinz Company 59,850 3,389 Hershey Foods Corporation 23,700 1,474 Kellogg Company 67,300 2,297 Kimberly-Clark Corporation 90,432 4,929 *King World Productions, Inc. 12,100 356 *Kroger Co. 42,400 2,565 Longs Drug Stores Corp. 6,400 240 Fred Meyer, Inc. 25,500 1,536 McDonald's Corporation 113,200 8,674 *MediaOne Group, Inc. 100,700 4,733 Newell Co. 26,900 1,110 PepsiCo, Inc. 243,400 9,964 Philip Morris Companies, Inc. 402,000 21,507 Procter & Gamble Company 221,700 20,244 The Quaker Oats Company 22,500 1,339 R.R. Donnelley & Sons Company 23,000 1,008
-- 33 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
SHARES/ MARKET VALUE COMMON STOCK (50.0%) PAR (000'S) - ------------------------------------------------------------- CONSUMER STAPLES (CONTINUED) Ralston Purina Group 51,600 $ 1,670 Rite Aid Corporation 42,700 2,115 RJR Nabisco Holdings Corp. 53,700 1,593 Rubbermaid, Inc. 24,800 780 *Safeway, Inc. 80,400 4,898 Sara Lee Corporation 154,400 4,351 The Seagram Company Ltd. 65,200 2,478 Supervalue, Inc. 20,000 560 Sysco Corporation 55,800 1,530 *Tele Communications, Inc. 86,514 4,784 Time Warner, Inc. 198,100 12,295 *Tricon Global Restaurants, Inc. 25,190 1,263 Tupperware 9,500 156 Unilever, N.V. 105,800 8,775 UST, Incorporated 30,700 1,071 Viacom, Inc. 59,156 4,378 Walt Disney Company 338,608 10,158 Walgreen Company 82,200 4,814 Wendy's International, Inc. 21,000 458 Winn-Dixie Stores, Inc. 24,600 1,104 Wm. Wrigley Jr. Company 19,200 1,720 ------------ TOTAL 244,683 ------------ ENERGY (3.1%) Amerada Hess Corporation 15,000 746 Amoco Company 157,700 9,521 Anadarko Petroleum Corporation 19,800 611 Apache Corporation 16,300 413 Ashland, Inc. 12,600 610 Atlantic Richfield Company 53,100 3,465 Baker Hughes, Inc. 52,540 929 Burlington Resource, Inc. 29,375 1,052 Chevron Corp. 108,200 8,974 Exxon Corporation 403,000 29,469 Halliburton Company 72,500 2,148 Helmerich & Payne, Inc. 8,300 161 Kerr-McGee Corporation 7,900 302 Mobil Corporation 129,200 11,257 Occidental Petroleum Corporation 58,400 986 *ORYX Energy Company 17,600 237 PennzEnergy Company 7,900 129 *Pennzoil-Quaker State Company 7,900 117 Phillips Petroleum Company 42,700 1,820 *Rowan Companies, Inc. 14,100 141 Royal Dutch Petroleum Co., ADR 354,400 16,967 Schlumberger Limited 90,000 4,151 Sunoco, Inc. 15,500 559 Texaco, Inc. 88,600 4,685 SHARES/ MARKET VALUE COMMON STOCK (50.0%) PAR (000'S) - ------------------------------------------------------------- ENERGY (CONTINUED) Union Pacific Resource Group 41,458 $ 376 Unocal Corp. 39,900 1,165 USX-Marathon Group 50,800 1,530 ------------ TOTAL 102,521 ------------ FINANCE (7.8%) Allstate Corporation 136,894 5,288 American Express Company 75,400 7,710 American General Corporation 41,803 3,260 American International Group, Inc. 173,562 16,770 Aon Corporation 27,950 1,548 Associates First Capital Corporation 114,438 4,849 Banc One Corporation 193,545 9,883 Bank of New York Company, Inc. 123,500 4,971 BankAmerica Corporation 287,195 17,268 BankBoston Corporation 48,600 1,892 Bankers Trust New York Corporation 15,900 1,358 BB&T Corporation 47,300 1,907 The Bear Stearns Companies, Inc. 18,800 703 Berkshire Hathaway Inc 44 3,063 Capital One Financial Corporation 10,900 1,254 Charles Schwab Corporation 66,225 3,721 Chase Manhattan Corporation 141,548 9,634 The Chubb Corporation 27,400 1,778 CIGNA Corporation 35,100 2,714 Cincinnati Financial Corporation 27,600 1,011 Citigroup 377,888 18,705 Comerica, Inc. 25,700 1,752 Conseco, Inc. 51,670 1,579 Countrywide Credit Industries, Inc. 18,400 923 Federal Home Loan Mortgage Corp. 112,200 7,230 Federal National Mortgage Corporation 171,400 12,684 Fifth Third Bancorp 44,275 3,157 First Union Corporation 160,186 9,741 Fleet Financial Group, Inc. 93,838 4,193 Franklin Resources, Inc. 41,800 1,338 Golden West Financial Corporation 9,500 871 Hartford Financial Services Group Inc. 38,600 2,118 Household International, Inc. 81,359 3,224 Huntington Bancshares, Inc. 34,980 1,052
-- 34 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
SHARES/ MARKET VALUE COMMON STOCK (50.0%) PAR (000'S) - ------------------------------------------------------------- FINANCE (CONTINUED) J.P. Morgan & Company, Inc. 29,200 $ 3,068 Jefferson-Pilot Corp. 17,575 1,318 KeyCorp 72,700 2,326 Lehman Brothers Holdings, Inc. 19,600 864 Lincoln National Corporation 16,600 1,358 Loews Corp. 19,000 1,867 Marsh & McLennan Companies, Inc. 42,300 2,472 MBIA, Inc. 16,400 1,075 MBNA Corp. 124,232 3,098 Mellon Bank Corporation 43,100 2,963 Mercantile Bancorp 25,100 1,158 Merrill Lynch & Co. 57,600 3,845 MGIC Investment Corp. 18,700 744 Morgan Stanley, Dean Witter Discover & Co. 96,780 6,871 National City Corp. 54,500 3,951 Northern Trust Corp. 18,400 1,607 PNC Bank Corp. 49,800 2,695 Progressive Corporation 12,000 2,033 Provident Companies, Inc. 22,300 925 Providian Financial Corporation 23,550 1,766 Regions Financial Corp 35,400 1,427 Republic New York Corporation 17,800 811 SAFECO, Inc. 23,300 1,000 SLM Holding Corporation 27,700 1,330 St. Paul Companies, Inc. 39,006 1,355 State Street Corporation 26,700 1,857 Summit Bancorp 28,700 1,254 SunAmerica, Inc. 34,200 2,774 Suntrust Banks, Inc. 34,500 2,639 Synovus Financial Corp. 43,550 1,062 Torchmark Corporation 23,200 819 Transamerica Corporation 10,300 1,190 UNUM Corporation 22,900 1,337 U.S. Bancorp 122,787 4,359 Union Planters Corporation 21,000 952 Wachovia Corporation 34,200 2,990 Waddell & Reed Financial, Inc. 5,706 133 Washington Mutual, Inc. 98,014 3,743 Wells Fargo & Company 267,260 10,674 ------------ TOTAL 256,859 ------------ HEALTHCARE (6.1%) Abbott Laboratories, Inc. 254,500 12,471 Aetna, Inc. 23,893 1,879 Allergan, Inc. 10,800 699 *Alza Corporation 14,300 747 American Home Products Corporation 217,500 12,248 *Amgen, Inc. 42,000 4,392 Bausch & Lomb, Inc. 9,200 552 SHARES/ MARKET VALUE COMMON STOCK (50.0%) PAR (000'S) - ------------------------------------------------------------- HEALTHCARE (CONTINUED) Baxter International, Inc. 47,200 $ 3,036 Becton, Dickinson & Company 40,900 1,746 Biomet, Inc. 18,500 745 *Boston Scientific Corp. 64,700 1,735 Bristol-Myers Squibb Company 164,400 21,999 C.R. Bard, Inc 9,300 460 Columbia/HCA Healthcare Corporation 106,650 2,640 Eli Lilly & Company 182,000 16,175 Guidant Corporation 24,900 2,745 *HCR Manor Care Inc. 17,900 526 *HEALTHSOUTH Corporation 69,900 1,079 Humana, Inc. 27,600 492 Johnson & Johnson 222,300 18,645 Mallinckrodt, Inc. 12,100 373 Medtronic, Inc. 77,600 5,762 Merck & Co., Inc. 196,800 29,065 Pfizer, Inc 216,000 27,095 Pharmacia & Upjohn, Inc. 83,930 4,753 Schering-Plough Corporation 242,600 13,404 *St. Jude Medical, Inc. 13,950 386 *Tenet Healthcare Corp. 50,900 1,336 *United Healthcare Corp. 32,300 1,391 Warner-Lambert Company 135,700 10,203 ------------ TOTAL 198,779 ------------ TECHNOLOGY (9.3%) *3Com Corporation 59,300 2,657 Adobe Systems, Inc. 11,100 519 *Advanced Micro Devices, Inc. 23,800 689 *Andrew Corporation 14,262 235 *Apple Computer, Inc. 22,300 913 *Applied Materials, Inc. 60,500 2,583 *Ascend Communications, Inc. 35,700 2,347 Autodesk, Inc. 7,800 333 Automatic Data Processing, Inc. 49,800 3,993 *BMC Software Inc 34,100 1,520 *Cabletron Systems, Inc. 27,200 228 *Ceridian Corp. 12,000 838 *Cisco Systems, Inc. 257,000 23,853 Compaq Computer Corporation 276,167 11,582 Computer Associates International, Inc. 92,812 3,956 *Computer Sciences Corp. 26,100 1,682 *Data General Corporation 8,200 135 *Dell Computer Corp. 209,200 15,311 EG&G, Inc. 7,600 211 *EMC Corporation 82,600 7,021 Eastman Kodak Company 53,400 3,845 Electronic Data Systems Corporation 81,400 4,090 Equifax, Inc. 24,500 838 First Data Corporation 73,800 2,339
-- 35 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
SHARES/ MARKET VALUE COMMON STOCK (50.0%) PAR (000'S) - ------------------------------------------------------------- TECHNOLOGY (CONTINUED) *Gateway 2000, Inc. 25,700 $ 1,316 *General Instrument Corporation 27,700 940 Harris Corporation 13,200 483 HBO & Company 76,900 2,206 Hewlett-Packard Company 171,800 11,736 IMS Health Incorporated 27,500 2,075 Ikon Office Solutions 22,400 192 Intel Corporation 277,700 32,925 International Business Machines Corporation 154,200 28,488 *KLA-Tencor Corporation 14,400 625 *LSI Logic Corp. 23,300 376 Lucent Technologies, Inc. 217,386 23,912 *Micron Technology 35,200 1,780 *Microsoft Corporation 407,300 56,487 Motorola, Inc. 98,900 6,039 *National Semiconductor Corporation 27,100 366 Northern Telecom Limited 107,760 5,401 *Novell, Inc. 58,400 1,059 *Oracle Corporation 160,850 6,937 *Parametric Technology Company 45,000 737 Paychex, Inc 27,000 1,389 *Peoplesoft, Inc 38,100 722 Perkin-Elmer Corporation 8,100 790 Polaroid Corporation 7,300 136 Raytheon Company - Class B 56,000 2,982 Scientific-Atlanta, Inc. 12,400 283 *Seagate Technology Inc. 40,200 1,216 Shared Medical Systems Corp. 4,400 219 *Silicon Graphics 31,200 402 *Sun Microsystems, Inc. 62,600 5,360 Tektronix, Inc. 7,800 234 *Tellabs, Inc. 32,000 2,194 Texas Instruments, Inc. 64,500 5,519 *Unisys Corporation 42,000 1,446 W.W Grainger, Inc. 16,100 670 Xerox Corporation 54,300 6,407 ------------ TOTAL 305,767 ------------ TRANSPORTATION (0.5%) *AMR Corporation 30,100 1,787 Burlington Northern Santa Fe 78,199 2,639 CSX Corporation 36,100 1,498 Delta Air Lines, Inc. 23,600 1,227 *Federal Express Corp 24,420 2,173 Norfolk Southern Corporation 62,600 1,984 Ryder System, Inc. 12,100 315 Southwest Airlines Co. 55,450 1,244 Union Pacific Corporation 40,900 1,843 *USAir Group, Inc 14,400 749 ------------ TOTAL 15,459 ------------ SHARES/ MARKET VALUE COMMON STOCK (50.0%) PAR (000'S) - ------------------------------------------------------------- UTILITIES (1.6%) The AES Corporation 29,100 $ 1,379 Ameren Corporation 22,700 969 American Electric Power Co., Inc. 31,600 1,487 Baltimore Gas & Electric Co. 24,600 760 Carolina Power & Light Company 25,000 1,177 Central & South West Corporation 35,100 963 Cinergy Corporation 26,205 901 Coastal Corp. 35,100 1,226 Columbia Energy Group 13,800 797 Consolidated Edison Co. of New York 38,700 2,046 Consolidated Natural Gas Company 15,800 853 Dominion Resources, Inc. 32,500 1,519 DTE Energy Company 24,000 1,029 Duke Energy Corp. 59,671 3,823 Eastern Enterprises 3,700 162 Edison International 58,500 1,631 Enron Corp. 54,500 3,110 Entergy Corporation 40,800 1,270 FirstEnergy Corporation 39,200 1,276 FPL Group, Inc. 30,000 1,849 GPU, Inc. 21,100 932 Houston Industries, Incorporated 48,926 1,572 New Century Energies, Inc. 18,400 897 *Niagara Mohawk Power Corporation 31,000 500 Nicor, Inc. 7,900 334 Northern States Power Company 25,000 694 ONEOK, Inc. 5,200 188 P P & L Resources, Inc. 25,033 698 PacifiCorp 49,100 1,034 PECO Energy Company 36,800 1,532 Peoples Energy Corporation 5,800 231 PG&E Corp. 63,100 1,988 Public Service Enterprise Group, Inc. 38,300 1,532 *Sempra Energy 39,759 1,009 Sonat, Inc. 18,200 493 Southern Company 115,300 3,351 Texas Utilities Company 46,195 2,157 UNICOM Corp. 35,900 1,384 Williams Companies, Inc. 70,200 2,188 ------------ TOTAL 50,941 ------------ TOTAL COMMON STOCK 1,640,982 ------------
-- 36 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
SHARES/ MARKET VALUE SHORT TERM INVESTMENTS (15.7%) PAR (000'S) - ------------------------------------------------------------- MONEY MARKET INVESTMENTS (13.5%) AUTOMOBILE REPAIR, SERVICES, & PARKING (0.7%) +PHH Corp., 5.48%, 1/22/99 25,000,000 $ 24,920 ------------ CHEMICALS & ALLIED PRODUCTS (0.7%) +American Home Products, 5.15%, 2/10/99 25,000,000 24,857 ------------ DEPARTMENT STORES (0.8%) +J.C. Penney, Co., Inc., 5.22%, 2/24/99 25,690,000 25,489 ------------ FEDERAL GOVERNMENT AND AGENCIES (0.5%) +Federal Home Loan Mortgage Corporation, 4.92%, 2/26/99 15,000,000 14,885 ------------ FINANCE (4.6%) +BAT Capital Corp., 5.55%, 1/08/99 25,000,000 24,973 Household Finance Co., 5.55%, 1/29/99 25,000,000 24,892 +Chrysler Financial Corp., 5.24%, 2/10/99 25,000,000 24,854 CIESCO LP 5.25%, 1/27/99 25,000,000 24,905 +CXC Incorporated, 5.18%, 1/25/99 25,000,000 24,914 CIT Group Holdings, 5.35%, 1/28/99 25,000,000 24,900 ------------ TOTAL 149,438 ------------ PERSONAL CREDIT INSTITUTIONS (4.6%) +General Electric Capital, 5.23%, 2/16/99 25,000,000 24,833 +General Motors Acceptance, 5.07%, 1/29/99 25,000,000 24,901 Commercial Credit Co., 5.35%, 1/20/99 25,000,000 24,929 +Transamerica Finance, 5.18%, 1/20/99 25,000,000 24,932 IBM Credit Corp., 6.90%, 1/4/99 25,000,000 24,986 +Variable Funding Capital Corp., 5.17%, 1/06/99 25,000,000 24,982 ------------ TOTAL 149,563 ------------ SHORT TERM BUSINESS CREDIT (1.6%) American Express Credit, 5.00%, 1/08/99 26,800,000 26,774 +Sears Roebuck Acceptance Corp., 5.27%, 2/11/99 25,000,000 24,850 ------------ TOTAL 51,624 ------------ TOTAL MONEY MARKET INVESTMENTS 440,776 ------------ SHARES/ MARKET VALUE SHORT TERM INVESTMENTS (15.7%) PAR (000'S) - ------------------------------------------------------------- ASSET-BACKED SECURITIES (2.2%) AUTO RELATED (0.8%) +New Center Asset Trust, 5.39%, 1/8/99 25,000,000 $ 24,974 ------------ COMMERCIAL MORTGAGES (0.7% ) +Asset Securitization, 5.18%, 3/10/99 25,000,000 24,765 ------------ FINANCE LESSORS (0.7%) +Triple A One Funding, 5.22%, 2/16/99 24,000,000 23,840 ------------ TOTAL ASSET-BACKED SECURITIES 73,579 ------------ TOTAL SHORT TERM INVESTMENTS 514,355 ------------ TOTAL BALANCED PORTFOLIO (99.6%) (COST $2,280,568,518)^ 3,267,945 OTHER ASSETS, LESS LIABILITIES (0.4%) 14,126 ------------ TOTAL NET ASSETS (100.0%) $ 3,282,071 ------------
IO-Interest Only Security 144A after the name of a security represents a security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold as transactions exempt from registration, normally to qualified institutional buyers. * Non-Income Producing. ++ Defaulted security ** Denominated in Greek Drachma + Partially held by the custodian in a segregated account as collateral for open futures postions. Information regarding open futures contracts as of December 31, 1998 is summarized below:
UNREALIZED NUMBER OF EXPIRATION APPRECIATION ISSUER CONTRACTS DATE (000'S) - ---------------------------------------------------------------- S&P 500 Stock Index 741 3/99 $13,320 (Total Notional Value at 12/31/98, $217,408,980)
^At December 31, 1998, the aggregate cost of securities for federal income tax purposes was $2,287,836,541 and the net unrealized appreciation of investments based on that cost was $980,108,923 which is comprised of $1,012,402,159 aggregate gross unrealized appreciation and $32,293,236 gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements -- 37 HIGH YIELD BOND PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Invested Assets: High current income and capital Generate superior performance by investing in a $184,782,000 appreciation with moderate risk diversified mix of fixed income securities rated below investment grade
HIGH YIELD BOND PORTFOLIO Investing in a portfolio of high yield bonds provides investors who can accept a moderate level of risk with a high level of current income, coupled with the opportunity for capital gains. Holdings of particular interest include solid investments in entities that have the possibility of a positive event, such as a significant improvement in credit rating or earnings or a change in ownership. In a high-yield portfolio, some credit losses over time are inevitable; high coupons and diversification across many holdings mitigate the impact of individual securities on the performance of the total Portfolio. The Portfolio underperformed somewhat in 1998 based on setbacks experienced during the third quarter. However, consistent with long-term performance, the portfolio did outperform its benchmarks in the first, second and fourth quarters of the year. Extraordinary volatility in global securities markets during the last half of 1998 has been accompanied by minimal liquidity, resulting in significant weakness in trading levels of high yield bonds. During the third quarter, a series of negative events in emerging markets, capped by Russia's devaluation of the ruble, inspired a dramatic global flight to quality. In the United States, highly-leveraged hedge funds that were heavily invested in emerging markets had to raise cash quickly to cover losses and meet redemptions. With few ready bids for emerging market assets, domestic high yield bonds were especially hard hit. Many higher quality, more liquid securities, such as those emphasized in the Portfolio, traded down very quickly. The result has been an unusually wide yield spread between U.S. Treasury securities (the ultimate quality instrument) and corporate issues of all types, especially smaller and/or more leveraged high yield issues. The eight-month period ending in October 1998 was the second worst such period in the last 20 years for high-yield returns. Although market values have dropped for holdings of many individual securities, particularly media and telecommunications bonds, the Portfolio has had no defaults. The Portfolio ended the year positioned relatively defensively, with moderate credit risk, and above-average seniority; exposure to highly cyclical industries and emerging markets is minimal. Investors should remember that, although the Portfolio's total return (defined as income plus change in market value) has been slightly negative for the year, interest payments have continued to provide steady cash flow. At year end, the Portfolio had a yield of more than 13%, at a time when Treasury securities yield less than 5% and inflation is below 2%. In addition, investors in bonds have the issuer's pledge to pay face value at maturity; in contrast, equity investors participate in future earnings streams, with no guarantees. For long-term investors willing to accept some price volatility, high-yield securities, which continue to trade near third-quarter lows, may be attractive at current levels. Percentage Holdings by Industry Sector 12/31/98 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Telecommunications 19% Leisure 11% Consumer Related/Health Care 11% Broadcasting/Media 11% Basic Materials/Energy 11% Cable Television 9% Transportation 7% Other Industries 7% Finance 6% Services 5% Cash and Other 3%
Performance Relative to Lehman Brothers High Yield Index EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
HIGH YIELD LEHMAN BROTHERS HIGH YIELD BOND PORTFOLIO# INTERMEDIATE MARKET INDEX 5/94 $10,000 $10,000 12/94 $10,302 $10,188 12/95 $12,030 $11,952 12/96 $14,409 $13,409 12/97 $16,693 $15,020 12/98 $16,388 $15,244 AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED DECEMBER 31, 1998 ONE YEAR SINCE INCEPTION High Yield Bond Portfolio -1.84% 11.17% Lehman Brothers Index 1.49% 9.46% #NOTE: INCEPTION DATE OF 5/3/94
The total return performance for the High Yield Bond Portfolio is shown in comparison with the Lehman Brothers High Yield Intermediate Market Index. The Lehman Brothers index is an appropriate measure of portfolio performance since it has a quality and maturity profile that resembles the High Yield Bond Portfolio. The Lehman Brothers High Yield Intermediate Market Index is made up of dollar-denominated, nonconvertible, SEC publicly registered fixed rate noninvestment grade issues. The bonds will have remaining maturities of between one and ten years and have an outstanding par value of at least $100 million. Yankee and global bonds (SEC registered) of issuers in G-7 countries are included. Original issue zero coupon bonds and step-up coupon structures are also included; however, the index excludes pay-in-kind (PIK) bonds. Each bond must be rated Ba1 or lower by Moody's Investor Service. If a Moody's rating is unavailable, the bonds must be rated BB+ or lower by Standard & Poor's, or by Fitch if an S&P rating is unavailable. A few unrated bonds are included in the index; to be eligible they must have previously held a high yield rating or have been associated with a high yield issuer. The index is an unmanaged market value weighted index and measures the income provided by, and the price changes of, the underlying securities. This chart assumes an initial investment of $10,000 made on 5/3/94 (commencement of operations). Returns shown include deductions for management and other fund expenses, and reinvestment of all dividends. Returns exclude deductions for separate account sales loads and account fees. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. The net investment rates of return shown on page 2 reflect mortality and expense risk 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 return significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. -- 38 HIGH YIELD BOND PORTFOLIO NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
MARKET SHARES/ VALUE BONDS (79.0%) PAR (000'S) - --------------------------------------------------------------------------------- BASIC MATERIALS (1.4%) PAPER (0.7%) Pindo Deli Fin Mauritius, 10.75%, 10/01/07 2,500,000 $ 1,359 --------- STEEL (0.7%) Renco Steel Holdings, Inc., 10.875%, 2/01/05 (144A) 1,500,000 1,290 --------- TOTAL BASIC MATERIALS 2,649 --------- BROADCASTING/MEDIA (3.8%) BROADCASTING (3.1%) +Big City Radio, Inc., 11.25%, 3/15/05 (144A) 5,750,000 3,795 +Fox Family Worldwide, Inc., 10.25%, 11/01/07 3,100,000 1,953 --------- TOTAL 5,748 --------- PRINTING AND PUBLISHING (0.7%) +Diva System Corp., 12.625%, 3/01/08 (144A) 3,375,000 1,257 --------- TOTAL BROADCASTING/MEDIA 7,005 --------- CABLE TELEVISION (4.9%) +International Cabletel, Inc., 11.50%, 02/01/06 3,000,000 2,460 +NTL, Inc.,9.75%, 4/01/08, 4,250,000 2,635 NTL Incorporated, 11.50%, 10/01/08 (144A) 1,000,000 1,093 Supercanal Holdings S A, 11.50%, 05/15/05 (144A) 2,500,000 1,500 +Telewest PLC, 11.25%, 11/1/08 1,150,000 1,288 --------- TOTAL CABLE TELEVISION 8,976 --------- CONSUMER RELATED (5.3%) CONSUMER STAPLES (0.6%) +SF Holdings Group, Inc., 12.75%, 3/15/08 3,250,000 1,137 --------- FOODS/FOOD SERVICES (4.1%) Favorite Brands Int'l, Inc., 10.75%, 05/15/06 (144A) 2,250,000 1,845 Global Health Sciences, Inc., 11.0%, 05/01/08 (144A) 2,500,000 1,650 Iowa Select Farms L.P., 10.75%, 12/01/05 (144A) 4,200,000 3,402 Planet Hollywood, 12.00%, 4/01/05 (144A) 2,100,000 735 --------- TOTAL 7,632 --------- HOUSEHOLD PRODUCTS (0.2%) +Diamond Brands, 12.875%, 04/15/09 (144A) 1,250,000 437 --------- SOAPS & TOILETRIES (0.4%) Styling Technologies, 10.875%, 07/01/08 (144A) 800,000 760 --------- TOTAL CONSUMER RELATED 9,966 --------- MARKET SHARES/ VALUE BONDS (79.0%) PAR (000'S) - --------------------------------------------------------------------------------- ENERGY RELATED (9.2%) ELECTRIC AND OTHER SERVICES (0.5%) CE Casecnan Water & Energy, 11.95%, 11/15/2010 1,000,000 $ 850 --------- OIL AND GAS INDEPENDENT (6.3%) Belden & Blake Corp., 9.875%, 6/15/07 3,950,000 3,200 Chesapeake Energy, 9.625%, 05/01/05 (144A) 3,750,000 2,812 Gothic Production Corp., 11.125%, 05/01/05 (144A) 5,250,000 4,095 Grey Wolf, Inc., 8.875%, 07/01/07 2,100,000 1,523 --------- TOTAL 11,630 --------- OIL FIELD SERVICES (2.4%) Pride International, Inc., 9.375%, 05/01/07 2,525,000 2,348 R&B Falcon Corp., 9.5%, 12/15/08 (144A) 2,000,000 2,000 --------- TOTAL 4,348 --------- TOTAL ENERGY RELATED 16,828 --------- FINANCE (4.7%) FINANCE COMPANIES (3.4%) Arcadia Financial, Ltd., 11.50%, 3/15/07 3,675,000 2,793 BF Saul Real Estate, 9.75%, 4/01/08 2,250,000 2,093 Metris Companies, Inc., 10.00%, 11/01/04 1,400,000 1,386 --------- TOTAL 6,272 --------- INSURANCE (1.3%) Superior Nat'l Capital Trust I, 10.75%, 12/01/17 2,400,000 2,376 --------- TOTAL FINANCE 8,648 --------- HEALTHCARE (4.4%) Magellan Health Services, 9.00%, 02/15/08 2,800,000 2,464 Vencor, Inc., 9.875%, 05/01/05 (144A) 6,550,000 5,633 --------- TOTAL HEALTHCARE 8,097 --------- LEISURE (10.3%) GAMING (5.7%) Circus Circus Enterprise, 9.25%, 12/01/05 1,500,000 1,515 Trump Atlantic, 11.25%, 5/1/06 2,500,000 2,200 Trump Hotels & Casino Resorts, 15.50%, 6/15/03 2,000,000 2,120 Venetian Casino/LV Sands, 12.25%, 11/15/04 5,000,000 4,725 --------- TOTAL 10,560 --------- HOTELS AND OTHER LODGING PLACES (2.2%) HMH Properties, Inc., 8.45%, 12/01/08 1,200,000 1,200 John Q. Hammons Hotels, 8.875%, 02/15/04 500,000 470
-- 39 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
MARKET SHARES/ VALUE BONDS (79.0%) PAR (000'S) - --------------------------------------------------------------------------------- HOTELS AND OTHER LODGING PLACES (CONTINUED) Starwood Hotels & Resorts, 6.75%, 11/15/05 450,000 $ 415 Starwood Hotels & Resorts, 7.875%, 11/15/15 2,250,000 1,992 --------- TOTAL 4,077 --------- LEISURE RELATED (0.8%) +Hedstrom Holdings Inc., 12.00%, 6/1/09 3,325,000 1,530 --------- MOVIE THEATERS (1.6%) Hollywood Theaters, Inc., 10.625%, 08/01/07 2,600,000 1,918 Silver Cinemas, 10.50%, 04/15/05 (144A) 1,400,000 952 --------- TOTAL 2,870 --------- TOTAL LEISURE 19,037 --------- OTHER INDUSTRIES (6.8%) AUTO RELATED (2.6%) Exide Corporation, 10.00%, 04/15/05 (144A) 3,250,000 3,209 Exide Corporation, 2.90%, 12/15/05 (144A) 3,000,000 1,758 --------- TOTAL 4,967 --------- HOUSEHOLD FURNISHINGS, APPLIANCES (2.9%) Corning Consumer Products Co., 9.625%, 05/01/08 (144A) 3,900,000 2,730 Renters Choice, Inc., 11.00%, 08/15/08 (144A) 2,500,000 2,538 --------- TOTAL 5,268 --------- INDUSTRIAL MACHINERY AND EQUIPMENT (0.8%) United Rentals, Inc., 9.25%, 01/15/09 (144A) 1,500,000 1,504 --------- OFFICE EQUIPMENT (0.5%) US Office Products Co., 9.75%, 06/15/08 1,300,000 848 --------- TOTAL OTHER INDUSTRIES 12,587 --------- SERVICES (5.0%) PROFESSIONAL SERVICES (1.5%) Decisionone Holdings, 9.75%, 8/1/07 1,800,000 828 +Decisionone Holdings, 11.50%, 8/1/08 3,875,000 891 Federal Data Corp., 10.125%, 8/01/05 1,000,000 990 --------- TOTAL 2,709 --------- BUSINESS SERVICES (3.5%) Loewen Group International, Inc., 7.5%, 04/15/01 2,000,000 1,765 Loewen Group International, Inc., 7.75%, 10/15/01 3,000,000 2,625 MARKET SHARES/ VALUE BONDS (79.0%) PAR (000'S) - --------------------------------------------------------------------------------- BUSINESS SERVICES (CONTINUED) Loewen Group International, Inc., 8.25%, 10/15/03 500,000 $ 430 Loewen Group International, Inc., 7.6%, 06/01/08 2,100,000 1,690 --------- TOTAL 6,510 --------- TOTAL SERVICES 9,219 --------- TELECOMMUNICATIONS (16.1%) Arch Communications, 12.75%, 07/01/07 (144A) 6,000,000 6,000 +Bestel S A de CV, 12.75%, 05/15/05 1,950,000 1,072 +Firstworld Communications, 13.00%, 04/15/08 2,500,000 750 +GST Network Funding, Inc., 10.50%, 05/01/08 (144A) 3,000,000 1,290 +Hyperion Telecommunications, 13.00%, 4/15/03 400,000 286 Hyperion Telecommunications, 12.25%, 9/01/04 4,000,000 4,060 +KMC Telecommunication Hldgs, 12.50%, 2/15/08 6,250,000 3,000 Metromedia Fiber Network, 10.00%, 11/15/08 (144A) 1,500,000 1,541 ++Mobilemedia Communications Inc., 10.50%, 12/01/03 2,000,000 220 Northeast Optic Network, 12.75%, 08/15/08 3,300,000 3,234 Splitrock Services, Inc., 11.75%, 07/15/08 3,000,000 2,595 +21st Century Telecom, 12.25%, 2/15/08 (144A) 1,750,000 735 Verio, Inc.......................11.25%, 12/01/08 (144A) 2,000,000 2,010 Viatel, Inc., 11.25%, 04/15/08 1,500,000 1,534 +Viatel, Inc., 12.50%, 04/15/08 2,500,000 1,475 --------- TOTAL TELECOMMUNICATIONS 29,802 --------- TRANSPORTATION (6.6%) TRUCKING AND SHIPPING (6.6%) Greyhound Lines, Inc., 11.50%, 4/15/07 2,500,000 2,838 Navigator Gas Trans PLC, 10.50%, 06/30/07 (144A) 1,550,000 1,364 Navigator Gas Trans PLC, 12.00%, 06/30/07 900,000 810 Stena AB, 8.75%, 06/15/07 2,500,000 2,381 Stena Line AB, 10.625%, 06/01/08 5,400,000 4,860 --------- TOTAL TRANSPORTATION 12,253 --------- UTILITIES (0.5%) Companhia De Saneamento Basico, 10%, 7/28/05 (144A) 1,235,000 840 --------- TOTAL BONDS 145,907 ---------
-- 40 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
MARKET SHARES/ VALUE PREFERRED STOCK (16.0%) PAR (000'S) - --------------------------------------------------------------------------------- BROADCASTING MEDIA (7.6%) BROADCASTING (5.1%) Cumulus Media, Inc. 43,656 $ 4,693 Sinclair Capital 43,500 4,742 --------- TOTAL 9,435 --------- PRINTING AND PUBLISHING (2.5%) Primedia, Inc. 45,000 4,631 --------- TOTAL BROADCASTING MEDIA 14,066 --------- CABLE TELEVISION (3.7%) **CSC Holdings, Inc. (PIK) 59,276 6,817 --------- ENERGY RELATED (0.6%) GAS UTILITY (0.6%) Petroleum Heat & Power Inc. 48,750 1,023 --------- FINANCE (0.8%) BANKS (0.8%) California Fed Pfd Capital 60,000 1,519 --------- LEISURE RELATED (0.3%) **Samsonite Corp. (PIK) 6,663 513 --------- MEDICAL PRODUCTS (0.4%) Fresenius Medical Care AG 750,000 743 --------- TELECOMMUNICATIONS (2.6%) +Crown Castle International Corp. 20,000 2,012 +Global Crossing Holdings, Ltd. 2,500 245 **21st Century Telecom (PIK) 9,110 592 **Hyperion Telecommunications (PIK) 22,260 1,770 **Viatel, Inc. (PIK) 2,052 226 --------- TOTAL TELECOMMUNICATIONS 4,845 --------- TOTAL PREFERRED STOCK 29,526 --------- COMMON STOCK AND WARRANTS (0.5%) - --------------------------------------------------------------------------------- APPAREL AND TEXTILE (0.1%) *Ithaca Industries Inc. 136,000 $ 247 --------- BROADCASING/MEDIA (0.1%) *Diva System Corp. (144A) 10,125 162 --------- CONSUMER STAPLES (0.0%) *SF Holdings Group, Inc. (144A) 6,500 13 --------- ENERGY RELATED (0.0%) GAS UTILITY (0.0%) Petroleum Heat & Power, Inc. 4,111 3 --------- FINANCE (0.0%) FINANCE COMPANIES (0.00%) *Arcadia Financial, Ltd. 4,000 20 --------- MARKET SHARES/ VALUE COMMON STOCK AND WARRANTS (0.5%) PAR (000'S) - --------------------------------------------------------------------------------- LEISURE (0.2%) LEISURE RELATED (0.2%) *Hedstrom Holdings, Inc. (144A) 201,674 $ 202 Meditrust Corp. 11,117 168 *Samsonite Corp. 6,250 19 --------- TOTAL 389 --------- TELECOMMUNICATIONS (0.1%) *Bestel S A de CV 1,950 4 *Firstworld Communications 2,500 25 *KMC Telecom Holdings, Inc. 6,250 20 *Splitrock Services, Inc. 3,000 33 *21st Century Telecom 8,500 25 --------- TOTAL 107 --------- TOTAL COMMON STOCK AND WARRANTS 941 --------- MONEY MARKET INVESTMENTS (2.1%) - --------------------------------------------------------------------------------- PERSONAL CREDIT INSTITUTIONS (2.1%) American Express Credit, 4.999%, 01/08/99 3,900,000 $ 3,896 --------- TOTAL MONEY MARKET INVESTMENTS 3,896 --------- TOTAL INVESTMENTS (97.6%) (COST $199,646,191)^ 180,270 OTHER ASSETS, LESS LIABILITIES (2.4%) 4,512 --------- TOTAL NET ASSETS (100.0%) $184,782 ---------
* Non-Income Producing + Deferred interest security that presently receives no coupon payments. At a predetermined date the stated coupon rate becomes effective. ++ Defaulted Security **PIK-Payment in Kind 144A after the name of a security represents a security exempt from registration under Rule 144A of the Securities Act of 1933. These securites may be resold as transactions exempt from registration, normally to qualified institutional buyers. ^ At December 31, 1998, the aggregate cost of securites for federal income tax purposes was $199,971,590 and the net unrealized depreciation of investments based on that cost was $19,701,115 which is comprised of $5,103,845 aggregate gross unrealized appreciation and $24,804,960 aggregated gross unrealized depreciation. The Accompanying Notes are an Integral Part of the Financial Statements -- 41 SELECT BOND PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Invested Assets: A stable and relatively high Invest in high grade corporate bonds, U.S. $298,034,000 level of long-term total government bonds and bonds of government return and preservation of agencies. capital
SELECT BOND PORTFOLIO The Select Bond Portfolio invests primarily in high quality debt securities, mainly government bonds, corporate bonds and mortgage-backed securities. Exposure to market sectors is adjusted as yield spreads change among the various classes of securities. Duration and maturities are altered with moderate adjustments in recognition or anticipation of interest rate changes. Like most actively managed bond funds, the Select Bond Portfolio underperformed the broad market indexes in 1998. The main reason is that the indexes have a significant component of U.S. Treasury securities, which provided significantly higher returns than any other class of bonds during the year, as investors sought to minimize risk. Early in the year, the portfolio suffered from a limited exposure to Asian bonds. In August, the failure of Long-Term Capital Management, a very large hedge fund, raised doubts regarding the survival of many banks and brokerage firms. Liquidity in the bond market became almost non-existent as investors dumped securities perceived as risky, creating chaos in markets and extraordinarily wide spreads between bid and offer prices. The values of high-yield bonds plummeted, and, with minimal liquidity, it became difficult to gauge the value of even investment grade bonds. Meanwhile, values of Treasury bonds soared, driven by a combination of interest rate reductions and investors' flight to quality. In the fourth quarter, liquidity began to redevelop and spreads among bond classes narrowed, though they remained wider than at the beginning of the year. At present, the portfolio has a major position in mortgage-backed securities, which are being used as a substitute for corporate bonds. While these well- structured mortgage-backed securities involve some risk of prepayment, we believe that they are safer than high-grade corporate bonds with comparable yields, many of which are subject to economic problems in Asia and other international markets. The unusual volatility of the bond market over the last year, with true values of securities difficult to determine at times in the face of very limited liquidity, has raised questions regarding the appropriate level of risk in a conservatively managed portfolio. We enter 1999 with the portfolio structured in a more risk-averse manner, with limited credit risk and a neutral position with regard to duration. We believe the portfolio is well positioned to provide protection in the event that the economy weakens in the months ahead. Percentage Holdings 12/31/98 [CHART] The Corporate Bonds sector includes bonds of companies headquartered outside the United States. The Government and Government Agencies category includes taxable bonds of domestic and foreign governments and a small position in municipal bonds. Consistent with the Portfolio's stated parameters, no more than 20% of the Portfolio is invested in foreign securities, and no more than 10% is invested in high-yield securities. Performance Relative to Merrill Lynch Domestic Master Index [CHART] Since the Portfolio invests broadly in U.S. Government, mortgage and corporate bonds, a useful basis for comparing returns is the Merrill Lynch Domestic Master Index. The index is an unmanaged market value weighted index comprised of U.S. Government, mortgage and investment-grade corporate bonds. The index measures the income provided by, and the price changes of, the underlying securities. This chart assumes an initial investment of $10,000 made on 12/31/88. 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. The net investment rates of return shown on page 2 reflect mortality and expense risk 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 return significantly lower. Investors are urged to obtain a personalized illustration of historical performance which reflects the cost of insurance protection. -- 42 SELECT BOND PORTFOLIO NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
MARKET VALUE BONDS (95.0%) PAR (000'S) - -------------------------------------------------------------- CORPORATE BONDS (15.8%) BANK HOLDING COMPANIES (1.0%) BT Institutional Capital Trust, 7.75%, 12/1/26 (144A) 3,000,000 $ 3,094 ----------- BANKING AND FINANCE (1.7%) Lehman Brothers Holdings, Inc., 8.8%, 3/1/15 4,500,000 5,166 ----------- CABLE AND MEDIA (1.5%) Seagram Joseph E & S, 7.60%, 12/15/28 4,400,000 4,429 ----------- CHEMICALS AND ALLIED PRODUCTS (0.8%) Dow Capital B.V., 8.5%, 6/8/10 1,800,000 2,149 ----------- ELECTRIC SERVICES (2.6%) Comed Financing II, 8.5%, 1/15/27 1,750,000 1,945 Ohio Edison Company, 7.375%, 9/15/02 1,000,000 1,059 PECO Energy Company, 7.75%, 3/1/23 1,150,000 1,208 Public Service Electric & Gas Co., 6.875%, 1/1/03 2,250,000 2,364 Texas Utilities Electric Co., 7.875%, 3/1/23 1,000,000 1,070 ----------- TOTAL 7,646 ----------- ENERGY (1.3%) Pemex Finance Ltd., 9.15%, 11/15/18 4,000,000 3,970 ----------- FINANCE (1.7%) Associates Corp. of North America, 7.95%, 2/15/10 1,500,000 1,715 Tokai Preferred Capital Co. LLC, 9.98%, 12/29/49 4,000,000 3,400 ----------- TOTAL 5,115 ----------- FOREIGN BANKS - BRANCHES & AGENCIES (0.3%) Fuji Bank, Ltd., 9.87%, 12/31/49 (144A) 1,300 949 ----------- GENERAL MERCHANDISE STORES (0.4%) May Dept Stores Company, 7.45%, 10/15/16 1,000,000 1,119 ----------- LIFE SCIENCES AND AGRICULTURE (0.9%) Monsanto Co., 6.60%, 12/01/28 2,750,000 2,745 ----------- MOTION PICTURE (0.4%) News America Holdings Inc., 8.25%, 8/10/18 1,000,000 1,135 ----------- RAILROAD (2.2%) Burlington Northern, 7.25%, 8/1/97 4,000,000 4,250 MARKET VALUE BONDS (95.0%) PAR (000'S) - -------------------------------------------------------------- RAILROAD (CONTINUED) Union Pacific Corp., 7.25%, 11/01/08 2,250,000 $ 2,412 ----------- TOTAL 6,662 ----------- TEXTILES (0.5%) #Polysindo International Finance, 11.375%, 6/15/06 4,200,000 1,344 ----------- TOBACCO (0.5%) Philip Morris Companies, 9.25%, 2/15/00 500,000 520 RJR Nabisco Inc., 8.625%, 12/1/02 1,000,000 1,018 ----------- TOTAL 1,538 ----------- TOTAL CORPORATE BONDS 47,061 ----------- GOVERNMENT BONDS (DOMESTIC AND FOREIGN) AND AGENCY BONDS (35.2%) FOREIGN GOVERNMENT BONDS (2.2%) *Hellenic Republic, 7.5%, 5/20/13 850,000,000 3,200 *Hellenic Republic, 8.8%, 6/19/07 850,000,000 3,381 ----------- TOTAL 6,581 ----------- FEDERAL GOVERNMENT AND AGENCIES (33.0%) Federal Farm Credit, 6.51%, 1/7/08 2,000,000 2,000 Federal Home Loan Mortgage Corporation, 7.5%, 9/29/01 10,644,364 10,928 Federal National Mortgage Assoc., 5.97%, 10/1/08 3,989,321 4,066 Federal National Mortgage Assoc., 6.07%, 10/1/08 2,994,476 3,086 Federal National Mortgage Assoc., 6.22%, 2/01/06 1,917,146 1,976 Federal National Mortgage Assoc., 6.24%, 1/1/06 5,405,115 5,573 Federal National Mortgage Assoc., 6.265%, 10/1/08 2,994,681 3,113 Federal National Mortgage Assoc., 6.32%, 2/1/06 3,885,724 4,024 Federal National Mortgage Assoc., 6.360%, 4/1/08 3,784,254 3,952 Federal National Mortgage Assoc., 6.390%, 4/1/08 1,460,225 1,527 Federal National Mortgage Assoc., 6.500%, 09/25/05 2,438,626 2,438 Federal National Mortgage Assoc., 6.750%, 04/25/18 2,398,681 2,492 Federal National Mortgage Assoc., 6.750%, 12/25/23 3,500,000 3,610 Federal National Mortgage Assoc., 6.960%, 10/01/07 3,266,715 3,529 Federal National Mortgage Assoc., 7.0%, 6/1/03 583,690 597
-- 43 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
MARKET VALUE BONDS (95.0%) PAR (000'S) - -------------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (CONTINUED) Federal National Mortgage Assoc., 7.360%, 4/1/11 3,370,703 $ 3,767 Federal National Mortgage Assoc., 8.400%, 02/25/09 2,500,000 2,788 Federal National Mortgage Assoc., 10%, 10/1/17 116,204 126 Federal National Mortgage Assoc., 11.000%, 12/01/12 205,013 226 Federal National Mortgage Assoc., 11.000%, 09/01/17 1,455,341 1,609 Federal National Mortgage Assoc., 11.000%, 12/01/17 475,993 527 Federal National Mortgage Assoc., 11.000%, 02/01/18 553,326 613 Federal National Mortgage Assoc., 11.500%, 04/01/18 646,573 726 Federal National Mortgage Assoc., 12.000%, 12/01/12 1,542,325 1,738 Federal National Mortgage Assoc., 12.000%, 12/01/12 294,911 335 Federal National Mortgage Assoc., 12.000%, 09/01/17 493,970 562 Federal National Mortgage Assoc., 12.000%, 10/01/17 707,215 805 Federal National Mortgage Assoc., 12.000%, 12/01/17 408,891 466 Federal National Mortgage Assoc., 12.000%, 02/01/18 525,209 598 Federal National Mortgage Assoc., 12.25%, 1/1/18 436,396 495 Federal National Mortgage Assoc., 12.500%, 04/01/18 296,562 339 Federal National Mortgage Assoc., 13.000%, 11/01/12 220,779 255 Federal National Mortgage Assoc., 13.000%, 11/01/17 525,420 609 Federal National Mortgage Assoc., 13.000%, 12/01/17 298,396 346 Federal National Mortgage Assoc., 13.000%, 02/01/18 767,712 890 Federal National Mortgage Assoc., 14.000%, 12/01/17 212,378 253 Government National Mortgage Assoc., 7.0%, 05/15/23 341,794 350 Government National Mortgage Assoc., 7.5%, 04/15/22 320,005 330 Government National Mortgage Assoc., 7.5%, 06/15/28 467,035 482 Government National Mortgage Assoc., 7.5%, 10/15/23 773,158 797 Government National Mortgage Assoc., 7.5%, 10/15/25 78,692 81 MARKET VALUE BONDS (95.0%) PAR (000'S) - -------------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (CONTINUED) Government National Mortgage Assoc., 7.5%, 11/15/25 17,136 $ 18 Government National Mortgage Assoc., 7.5%, 05/15/26 16,501 17 Government National Mortgage Assoc., 7.5%, 02/15/27 640,485 660 Government National Mortgage Assoc., 7.5%, 03/15/27 55,090 57 Government National Mortgage Assoc., 7.5%, 04/15/27 134,562 139 Government National Mortgage Assoc., 7.5%, 08/15/27 17,524 18 Government National Mortgage Assoc., 7.5%, 06/15/28 481,639 497 Government National Mortgage Assoc., 8.0%, 01/15/26 531,624 552 Government National Mortgage Assoc., 8.0%, 02/15/26 584,032 606 Government National Mortgage Assoc., 8.0%, 08/15/26 321,346 334 Government National Mortgage Assoc., 8.0%, 08/15/26 442,102 459 Government National Mortgage Assoc., 8.0%, 09/15/26 551,925 573 Government National Mortgage Assoc., 8.0%, 12/15/26 206,248 214 Government National Mortgage Assoc., 8.0%, 01/15/27 590,313 613 Government National Mortgage Assoc., 8.0%, 03/15/27 574,718 597 Government National Mortgage Assoc., 8.0%, 04/15/27 449,946 467 Government National Mortgage Assoc., 8.0%, 04/15/27 605,863 629 Government National Mortgage Assoc., 8.0%, 06/15/27 550,082 571 Government National Mortgage Assoc., 8.0%, 07/15/27 543,556 565 Government National Mortgage Assoc., 8.0%, 08/15/27 404,685 420 Government National Mortgage Assoc., 8.0%, 09/15/27 413,078 429 Government National Mortgage Assoc., 8.5%, 09/15/21 11,037 12 Government National Mortgage Assoc., 8.5%, 09/15/24 4,678 5 Government National Mortgage Assoc., 8.5%, 03/15/23 149,150 159 Government National Mortgage Assoc., 8.5%, 06/15/23 104,470 112 Government National Mortgage Assoc., 8.5%, 07/15/24 64,283 68
-- 44 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
MARKET VALUE BONDS (95.0%) PAR (000'S) - -------------------------------------------------------------- FEDERAL GOVERNMENT AND AGENCIES (CONTINUED) Government National Mortgage Assoc., 8.5%, 09/15/24 5,886 $ 6 Government National Mortgage Assoc., 8.5%, 11/15/24 147,407 157 Government National Mortgage Assoc., 8.5%, 11/15/24 131,350 140 Government National Mortgage Assoc., 8.5%, 11/15/24 272,589 290 Government National Mortgage Assoc., 8.5%, 02/15/25 55,568 59 Government National Mortgage Assoc., 8.5%, 02/15/25 7,632 8 Government National Mortgage Assoc., 11.0%, 01/15/18 5,618,110 6,342 U.S. Treasury, 5.5%, 8/15/28 638,000 669 U.S. Treasury, 6.125%, 11/15/27 3,730,000 4,178 U.S. Treasury, 4.75%, 11/15/08 2,000,000 2,016 U.S. Treasury, 4.0%, 10/31/00 1,350,000 1,336 Vendee Mortgage Trust, .4951%, 6/15/23 (IO) 81,189,546 1,395 ----------- TOTAL 98,411 ----------- TOTAL GOVERNMENT BONDS AND AGENCY BONDS 104,992 ----------- MORTGAGE BACKED AND ASSET BACKED SECURITIES (44.0%) AUTO-RELATED (2.2%) Daimler-Benz Vehicle Trust - Class A, 5.85%, 7/20/03 435,189 437 Eaglemark Trust - Class A, 6.75%, 11/15/02 565,372 574 Fleetwood Credit Corporation Grantor Trust - Class A, 6.4%, 5/15/13 1,019,749 1,038 Team Fleet Financing Corporation - Class A, 6.65%, 12/15/02 (144A) 3,200,000 3,232 Team Fleet Financing Corporation - Class A, 7.35%, 5/15/03 (144A) 1,125,000 1,157 ----------- TOTAL 6,438 ----------- BANK AND FINANCE (2.2%) Bankers Trust Co., 6.255%, 1/13/99 91,002 91 Morgan Stanley Capital Trust, 7.387%, 5/15/06 3,000,000 3,243 Nations Bank Lease Pass Thru Trust 97-A, 7.442%, 11/18/05 3,000,000 3,183 ----------- TOTAL 6,517 ----------- COMMERCIAL MORTGAGES (26.9%) Asset Securitization Corporation, Class CS1, 1.257%, 11/13/26 IO 19,158,273 687 MARKET VALUE BONDS (95.0%) PAR (000'S) - -------------------------------------------------------------- COMMERCIAL MORTGAGES (CONTINUED) Asset Securitization Corporation, Class CS2, 1.097%, 11/13/26 IO 52,000,000 $ 3,083 Asset Securitization Corporation, Class PS1, 1.367%, 2/14/41 IO 12,098,357 1,247 Chase Commercial Mortgage Securities Corp., Class B, 6.6%, 11/19/07 2,000,000 2,046 Chase Commercial Mortgage Securities Corp., Class A2, 6.6%, 11/19/07 5,000,000 5,205 Chase Commercial Mortgage Securities Corp., Class B, 7.37%, 6/19/29 1,000,000 1,073 Commercial Mortgage Acceptance Corporation, Class B, 6.646%, 12/15/07 2,000,000 2,043 Credit Suisse First Boston Mortgage Securities Corp., Class D, 7.46%, 05/20/29 (144A) 3,500,000 3,552 Credit Suisse First Boston Mortgage Securities Corp., Class B, 9.546%, 4/25/25 (144A) 682,000 751 Credit Suisse First Boston Mortgage Securities Corp., Class C1, 7.26%, 6/20/07 (144A) 1,465,292 1,541 Credit Suisse First Boston Mortgage Securities Corp., Class C1, 7.28%, 6/20/07 (144A) 1,500,000 1,583 Credit Suisse First Boston Mortgage Securities Corp., Class D, 9.546%, 4/25/25 (144A) 2,000,000 2,279 Criimi Mae Commercial Mortgage Trust, 7.0%, 11/02/06 3,000,000 2,859 DLJ Mortgage Acceptance Corporation, Class S, .3571%, 10/15/17 (144A) IO 104,798,235 2,391 DLJ Mortgage Acceptance Corporation, Class S, .718%, 2/18/31 IO 120,486,326 4,821 DLJ Mortgage Acceptance Corporation, 8.100%, 6/18/04 1,824,855 1,982 DLJ Mortgage Acceptance Corporation, 8.100%, 6/18/04 1,000,000 1,089 First Union-Lehman Brothers Commercial Mortgage Trust, Class C, 7.44%, 4/18/07 2,500,000 2,653 GMAC Commercial Mortgage Securities, Inc., Class C, 7.81%, 10/15/11 (144A) 5,000,000 5,040 Kmart CMBS Financing, Inc., Class D, 6.6466%, 03/01/07 (144A) 2,000,000 1,994
-- 45 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
MARKET VALUE BONDS (95.0%) PAR (000'S) - -------------------------------------------------------------- COMMERCIAL MORTGAGES (CONTINUED) Kmart CMBS Financing, Inc., Class C, 6.2466%, 03/01/07 (144A) 1,500,000 $ 1,497 LB Mortgage Trust, 8.396%, 6/2/10 5,088,504 6,009 Malan Mortgage Securities Trust, Class A3, 7.8%, 8/15/05 (144A) 3,000,000 3,118 Merrill Lynch Mortgage Investors, Inc., Class C, 7.12%, 6/18/29 2,500,000 2,605 Merrill Lynch Mortgage Investors, Inc., Class E, 7.12%, 6/18/29 4,500,000 4,240 Merrill Lynch Mortgage Investors, Inc., Class E, 8.3346%, 6/25/22 (144A) 2,000,000 1,947 Merrill Lynch Mortgage Investors, Inc., Class C, 8.9726%, 11/25/20 1,950,000 1,954 Midland Realty Acceptance Corp., Class AEC, 1.389%, 1/25/29 (144A) IO 13,930,095 919 Nomura Asset Securities Corp. - Class A2, 6.9918%, 3/17/28 2,800,000 2,857 Nomura Asset Securities Corp. - Class A4, 7.5718%, 3/17/28 2,200,000 2,121 Red Mountain Funding LLC, Class E, 7.365%, 1/15/19 (144A) 1,500,000 1,358 Red Mountain Funding LLC, Class F, 7.471%, 1/15/19 (144A) 1,800,000 1,460 The Equitable Life Insurance Society of the U S, Class C1, 7.52%, 5/15/06 2,000,000 2,148 ----------- TOTAL 80,152 ----------- CREDIT CARD ASSET BACKED (0.7%) Iroquois Trust, Class A, 6.752%, 6/25/07 (144A) 2,000,000 2,019 ----------- FRANCHISE LOAN RECEIVABLES (2.6%) EMAC Owner Trust, 1.378%, 1/15/25 (144A) IO 30,965,287 2,245 EMAC Owner Trust - Class A2, 6.38%, 04/15/07 (144A) 3,100,000 3,091 Global Franchise Trust, 6.349%, 4/10/04 2,495,173 2,536 ----------- TOTAL 7,872 ----------- HOME EQUITY LOAN (0.7%) Amresco Residential Securities - Class A2, 6.245%, 04/25/22 2,200,000 2,207 ----------- MARKET VALUE BONDS (95.0%) PAR (000'S) - -------------------------------------------------------------- MANUFACTURED HOUSING (1.3%) Mid-State Trust VI, Class A3, 7.54%, 7/1/35 1,126,317 $ 1,159 Vanderbilt Mortgage and Finance, Inc., Class 1A4, 7.19%, 2/7/14 2,500,000 2,599 ----------- TOTAL 3,758 ----------- OTHER ASSET BACKED (3.6%) FMAC Loan Receivables Trust - Class A, 6.2%, 9/15/20 (144A) 1,541,153 1,545 Harley-Davidson Eaglemark, 5.87%, 4/15/04 1,500,000 1,519 Heilig-Meyers Master Trust - Class A, 6.125%, 1/20/07 (144A) 3,000,000 2,998 Nations Credit Grantor Trust - Class A1, 6.35%, 4/15/14 2,090,919 2,118 Newcourt Equipment - Class B, 6.764%, 9/20/04 (144A) 1,102,955 1,102 Rural Housing Trust, 6.33%, 4/17/01 1,546,266 1,562 ----------- TOTAL 10,844 ----------- RESIDENTIAL MORTGAGES (2.6%) BCF L L C Mortgage Pass Thru Certificate, Class B3, 7.75%, 3/25/37 (144A) 3,899,204 3,843 Blackrock Capital Finance, Class B3, 7.25%, 11/25/28 (144A) 4,403,682 3,979 ----------- TOTAL 7,822 ----------- UTILITY (1.2%) Comed Transitional, 5.74%, 12/16/2008 3,500,000 3,520 ----------- TOTAL MORTGAGE BACKED AND ASSET BACKED SECURITIES 131,149 ----------- TOTAL BONDS 283,202 ----------- MONEY MARKET INVESTMENTS (3.8%) - -------------------------------------------------------------- FEDERAL GOVERMENT AND AGENCIES (0.5%) ++Federal Home Loan Mortgage Company, 4.92%, 2/26/99 1,500,000 $ 1,489 ----------- FINANCE SERVICES (2.3%) ++American Express Credit, 5.0%, 1/8/99 6,800,000 6,793 -----------
-- 46 NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
MARKET VALUE MONEY MARKET INVESTMENTS (3.8%) PAR (000'S) - -------------------------------------------------------------- COMMERCIAL MORTGAGE (1.0%) ++Asset Securitization, 5.6%, 1/28/99 3,000,000 $ 2,987 ----------- TOTAL MONEY MARKET INVESTMENTS 11,269 ----------- TOTAL INVESTMENTS (98.8%) (COST $292,980,971)^ 294,471 OTHER ASSETS, LESS LIABILITIES (1.2%) 3,563 ----------- TOTAL NET ASSETS (100.0%) $ 298,034 -----------
IO-Interest Only Security 144A after the name of a security represents a security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold as transactions exempt from registration, normally to qualified institutional buyers. # Defaulted Security ++ Partially held by the custodian in a segregated account as collateral for open futures postions. Information regarding open futures contracts as of December 31, 1998 is summarized below:
UNREALIZED NUMBER OF DEPRECIATION DEPRECIATION ISSUERS CONTRACTS DATE (000'S) - ----------------------------------------------------------------- U.S. Treasury Bond 47 3/99 $3 Future (Total Notional Value at 12/31/98, $6,002,781)
* Foreign securities denominated in Greek Drachma. ^ At December 31, 1998, the aggregate cost of securities for federal income tax purposes was $296,076,635 and the net unrealized depreciation of investments based on that cost was $1,605,662 which is comprised of $6,694,897 aggregated gross unrealized appreciation and $8,300,559 aggregated gross unrealied depreciation. The Accompanying Notes are an Integral Part of the Financial Statements. -- 47 MONEY MARKET PORTFOLIO - -------------------------------------------------------------------------------- Objective: Portfolio Strategy: Net Assets: Maximum current income Achieve stability of capital by investing in $291,464,000 consistent with liquidity and short- term debt securities. stability of capital
MONEY MARKET PORTFOLIO The Money Market Portfolio, which invests only in high quality commercial paper and other short-term debt securities with maturities generally not exceeding one year, is the least risky of the Portfolios. Like all portfolios that include debt instruments, the Money Market Portfolio was affected by the extreme volatility of financial markets during the last half of 1998. During the third quarter, maturities in this Portfolio were extended to as much as 50 days; this action helped performance as rates fell in September and October. At year end, the policy is balanced, with relatively short maturities. AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. -- 48 MONEY MARKET PORTFOLIO NORTHWESTERN MUTUAL SERIES FUND, INC. Schedule of Investments DECEMBER 31, 1998
MARKET VALUE MONEY MARKET INVESTMENTS (69.2%) PAR (000'S) - --------------------------------------------------------------- CHEMICALS & ALLIED PRODUCTS (4.8%) American Home Product Co., 5.15%, 02/10/99 14,000,000 $ 13,920 ----------- DEPARTMENT STORES (4.8%) J.C. Penny Company, Inc., 5.04%, 02/05/99 1,940,000 1,930 J.C. Penny Company, Inc., 5.22%, 02/24/99 4,310,000 4,276 J.C. Penny Company, Inc., 5.07%, 03/05/99 7,750,000 7,681 ----------- TOTAL 13,887 ----------- ELECTRONIC COMPUTERS (4.9%) International Business Machines, 5.04%, 01/22/99 14,200,000 14,158 ----------- FINANCE (12.5%) Chrysler Financial Corporation, 5.24%, 02/10/99 13,638,000 13,559 Ciesco LP, 5.10%, 01/22/99 2,000,000 1,994 Ciesco LP, 5.20%, 02/05/99 5,600,000 5,572 Ciesco LP, 5.25%, 02/05/99 1,240,000 1,234 CXC Incorporated, 5.13%, 01/28/99 14,200,000 14,145 ----------- TOTAL 36,504 ----------- INDUSTRIAL INORGANIC CHEMICALS (4.9%) Monsanto Company, 5.07%, 02/16/99 14,300,000 14,207 ----------- PERSONAL CREDIT INSTITUTIONS (24.7%) American General Finance, 5.28%, 01/21/99 12,760,000 12,723 Ford Motor Credit Company, 5.03%, 01/22/99 14,200,000 14,158 General Electric Capital Corp., 5.059%, 01/27/99 2,510,000 2,501 General Electric Capital Corp., 5.40%, 01/29/99 1,975,000 1,967 General Electric Capital Corp., 5.48%, 02/03/99 2,234,000 2,223 General Motors Acceptance Corp., 5.16%, 01/27/99 6,200,000 6,177 General Motors Acceptance Corp., 5.07%, 01/29/99 8,000,000 7,969 Household Finance Company, 5.35%, 01/15/99 10,555,000 10,533 Variable Funding Capital Corp., 5.20%, 01/20/99 5,200,000 5,186 Variable Funding Capital Corp., 5.27%, 02/18/99 8,800,000 8,738 ----------- TOTAL 72,175 ----------- PETROLEUM AND COAL PRODUCTS (1.5%) E. I. Dupont De Nemours, 5.21%, 01/13/99 4,355,000 4,347 ----------- MARKET VALUE MONEY MARKET INVESTMENTS (69.2%) PAR (000'S) - --------------------------------------------------------------- SHORT TERM BUSINESS CREDIT (11.1%) American Express Credit, 5.00%, 01/08/99 9,855,000 $ 9,845 CIT Group, 5.35%, 01/28/99 8,980,000 8,944 Sears Roebuck Acceptance Corp., 5.10%, 02/22/99 13,900,000 13,798 ----------- TOTAL 32,587 ----------- TOTAL MONEY MARKET INVESTMENTS 201,785 ----------- ASSET-BACKED SECURITIES (30.5%) - --------------------------------------------------------------- AUTO RELATED (4.1%) New Center Asset Trust, 5.39%, 01/08/99 11,990,000 $ 11,977 ----------- FINANCE LESSORS (26.4%) Asset Securitization, 5.20%, 01/22/99 11,000,000 10,967 Asset Securitization, 5.10%, 03/19/99 2,900,000 2,868 Preferred Receivable Funding, 5.26%, 01/05/99 6,300,000 6,296 Preferred Receivable Funding, 5.40%, 02/02/99 5,900,000 5,872 Preferred Receivable Funding, 5.22%, 02/18/99 2,160,000 2,145 Quincy Capital Corporation, 5.44%, 01/14/99 14,200,000 14,172 Receivable Capital Trust, 5.29%, 02/04/99 8,355,000 8,313 Receivable Capital Trust, 5.299%, 02/04/99 2,036,000 2,026 Short Term Repackage Asset Trust, 5.686%, 04/13/99 10,100,000 10,099 Triple A One Funding, 5.60%, 01/06/99 3,671,000 3,668 Triple A One Funding, 5.28%, 01/29/99 5,148,000 5,127 Triple A One Funding, 5.22%, 02/16/99 5,450,000 5,414 ----------- TOTAL 76,967 ----------- TOTAL ASSET-BACKED SECURITIES 88,944 ----------- TOTAL INVESTMENTS (99.7%), (COST $290,729,450)^ 290,729 OTHER ASSETS, LESS LIABILITIES (.3%) 735 ----------- TOTAL NET ASSETS (100.0%) $ 291,464 -----------
^ Also represents cost for federal income tax purposes. The Accompanying Notes are an Integral Part of the Financial Statements -- 49 ACCOUNTANTS' REPORT [LOGO] 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 Aggressive Growth Stock Portfolio, International Equity Portfolio, Growth Stock Portfolio, Growth and Income Stock Portfolio, Index 500 Stock Portfolio, Balanced Portfolio, High Yield Bond Portfolio, Select Bond Portfolio and Money Market Portfolio (constituting Northwestern Mutual Series Fund, Inc., hereafter referred to as the "Fund") at December 31, 1998, the results of each of their operations for the year then ended, the changes in each of their net assets for the two years in the period ended December 31, 1998, and the financial highlights for the periods indicated, in conformity with generally accepted accounting principles. 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 generally accepted auditing standards 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 presentations. We believe that our audits, which included confirmations of the securities at December 31, 1998 by correspondence with the custodian and brokers provide a reasonable basis for the opinion expressed above. [SIG] Milwaukee, Wisconsin January 25, 1999 -- 50 AGGRESSIVE GROWTH STOCK PORTFOLIO NORTHWESTERN MUTUAL SERIES FUND, INC. Aggressive Growth Stock Portfolio Financial Statements (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998 ASSETS Common Stocks (cost $679,951)................................................. $1,043,782 Money Market Investments (cost $95,978)....................................... 95,978 ----------- 1,139,760 Cash.......................................................................... 17 Due from Sale of Securities................................................... 5,022 Due from Futures Variation Margin............................................. 92 Dividends and Interest Receivable............................................. 58 Due from Sale of Fund Shares.................................................. 5 ----------- Total Assets................................................................ 1,144,954 ----------- LIABILITIES Due on Purchase of Securities................................................. 6,087 Due on Redemption of Fund Shares.............................................. 911 Due to Investment Advisor..................................................... 466 Accrued Expenses.............................................................. 24 ----------- Total Liabilities........................................................... 7,488 ----------- NET ASSETS...................................................................... $1,137,466 ----------- ----------- REPRESENTED BY: Aggregate Paid in Capital (2,000,000 shares authorized, $.01 par value; 328,396 shares outstanding).................................................. $ 736,043 Undistributed Net Investment Income........................................... 390 Undistributed Accumulated Net Realized Gain on Investments.................... 36,213 Net Unrealized Appreciation of: Investment Securities....................................................... 363,831 Index Futures Contracts..................................................... 989 ----------- Net Assets for 328,396 Shares Outstanding..................................... $1,137,466 ----------- ----------- Net Asset Value, Offering and Redemption Price per Share...................... $ 3.46 ----------- -----------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 INVESTMENT INCOME Income Interest.................................................................... $ 5,107 Dividends................................................................... 850 --------- Total Income.............................................................. 5,957 --------- Expenses Management Fees............................................................. 5,550 Custodian Fees.............................................................. 26 Other Expenses.............................................................. 18 --------- Total Expenses............................................................ 5,594 --------- Less Custodian Fees: Paid by Affiliate.................................................... (16) Paid Indirectly...................................................... (10) --------- Total Net Expenses........................................................ 5,568 --------- Net Investment Income......................................................... 389 --------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net Realized Gain on Investments: Investment Securities....................................................... 33,076 Index Futures Contracts..................................................... 3,149 --------- Net Realized Gain on Investments for the Year............................. 36,225 --------- Net Change in Unrealized Appreciation of: Investment Securities....................................................... 42,088 Index Futures Contracts..................................................... 1,371 --------- Net Change in Unrealized Appreciation of Investments for the Year......... 43,459 --------- Net Gain on Investments....................................................... 79,684 --------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...................................................... $ 80,073 --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements --- 51 NORTHWESTERN MUTUAL SERIES FUND, INC. Aggressive Growth Stock Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE FOR THE YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1998 1997 ----------------- ----------------- INCREASE IN NET ASSETS Operations Net Investment Income............... $ 389 $ 600 Net Realized Gain on Investments.... 36,225 44,968 Net Change in Unrealized Appreciation of Investments for the Period............................. 43,459 82,701 ----------------- ----------------- Net Increase in Net Assets Resulting from Operations......... 80,073 128,269 ----------------- ----------------- Distributions to Shareholders from: Net Investment Income............... (389) -- Net Realized Gain on Investments.... (39,790) (57,365) ----------------- ----------------- Net Decrease in Net Assets Resulting from Distributions to Shareholders...................... (40,179) (57,365) ----------------- ----------------- Fund Share Transactions Proceeds from Sale of 23,019 and 35,663 Shares...................... 74,489 110,666 Proceeds from Shares Issued on Reinvestment of Distributions Paid (11,431 and 20,913 shares, respectively)...................... 40,180 57,365 Payments for 25,793 and 14,059 Shares Redeemed.................... (84,165) (43,793) ----------------- ----------------- Net Increase in Net Assets Resulting from Fund Share Transactions (8,657 and 42,517 shares, respectively)..................... 30,504 124,238 ----------------- ----------------- Total Increase in Net Assets.......... 70,398 195,142 NET ASSETS Beginning of Period................... 1,067,068 871,926 ----------------- ----------------- End of Period (includes undistributed net investment income of $390 and $390, respectively).................. $1,137,466 $1,067,068 ----------------- ----------------- ----------------- -----------------
The Accompanying Notes are an Integral Part of the Financial Statements --- 52 NORTHWESTERN MUTUAL SERIES FUND, INC. Aggressive Growth Stock Portfolio Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
FOR THE PERIOD MAY 3, FOR THE YEAR ENDED DECEMBER 31, 1994* THROUGH ---------------------------------------------------- DECEMBER 31, 1998 1997 1996 1995 1994 -------------- ----------- --------- --------- --------------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period............................... $ 3.34 $ 3.15 $ 2.77 $ 2.00 $ 1.91 Income from Investment Operations: Net Investment Income............. -- -- -- -- -- Net Realized and Unrealized Gains on Investments................... 0.24 0.39 0.49 0.78 0.09 -------------- ----------- --------- --------- --------------- Total from Investment Operations..................... 0.24 0.39 0.49 0.78 0.09 -------------- ----------- --------- --------- --------------- Less Distributions: Distributions from Net Investment Income........................... (0.00) -- -- -- -- Distributions from Realized Gains on Investments................... (0.12) (0.20) (0.11) (0.01) -- -------------- ----------- --------- --------- --------------- Total Distributions............. (0.12) (0.20) (0.11) (0.01) -- -------------- ----------- --------- --------- --------------- Net Asset Value, End of Period.......... $ 3.46 $ 3.34 $ 3.15 $ 2.77 $ 2.00 -------------- ----------- --------- --------- --------------- -------------- ----------- --------- --------- --------------- Total Return+........................... 7.56% 13.86% 17.70% 39.29% 4.47%++ -------------- ----------- --------- --------- --------------- -------------- ----------- --------- --------- --------------- RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands)............................. $1,137,466 $1,067,068 $871,926 $577,014 $327,096 -------------- ----------- --------- --------- --------------- -------------- ----------- --------- --------- --------------- Ratio of Expenses to Average Net Assets................................. 0.52% 0.53% 0.54% 0.56% 0.58%** -------------- ----------- --------- --------- --------------- -------------- ----------- --------- --------- --------------- Ratio of Net Investment Income/(Loss) to Average Net Assets..................... 0.04% 0.06% (0.03)% 0.13% 0.29%** -------------- ----------- --------- --------- --------------- -------------- ----------- --------- --------- --------------- Portfolio Turnover Rate................. 50.43% 57.27% 47.25% 37.84% 21.54% -------------- ----------- --------- --------- --------------- -------------- ----------- --------- --------- ---------------
* Commencement of Operations. ** Computed on an annualized basis. + Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees. ++ Reflects total return for the period; not annualized. The Accompanying Notes are an Integral Part of the Financial Statements --- 53 INTERNATIONAL EQUITY PORTFOLIO NORTHWESTERN MUTUAL SERIES FUND, INC. International Equity Portfolio Financial Statements (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998 ASSETS Common Stocks (cost $551,444)................................................. $599,086 Money Market Investments (cost $70,428)....................................... 70,428 Bonds (cost $5,072)........................................................... 4,421 --------- 673,935 Cash.......................................................................... 886 Dividends and Interest Receivable............................................. 3,769 Due from Sale of Securities................................................... 1,948 Due from Foreign Currency Contracts........................................... 1,639 Due from Purchase of Fund Shares.............................................. 708 --------- Total Assets................................................................ 682,885 --------- LIABILITIES Due on Purchase of Securities................................................. 7,818 Due on Redemption of Fund Shares.............................................. 1,820 Due on Foreign Currency Contracts............................................. 1,628 Due to Investment Advisor..................................................... 374 Accrued Expenses.............................................................. 139 --------- Total Liabilities........................................................... 11,779 --------- NET ASSETS...................................................................... $671,106 --------- --------- REPRESENTED BY: Aggregate Paid in Capital (2,000,000 shares authorized, $.01 par value; 400,191 shares outstanding).................................................. $528,316 Undistributed Net Investment Income........................................... 19,912 Undistributed Accumulated Net Realized Gain on Investments.................... 75,853 Net Unrealized Appreciation of: Investment Securities....................................................... 46,991 Foreign Currency Transactions............................................... 34 --------- Net Assets for 400,191 Shares Outstanding..................................... $671,106 --------- --------- Net Asset Value, Offering and Redemption Price per Share...................... $ 1.68 --------- ---------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 INVESTMENT INCOME Income Dividends (less foreign dividend tax of $672)............................... $ 20,714 Interest.................................................................... 2,645 --------- Total Income.............................................................. 23,359 --------- Expenses Management Fees............................................................. 4,602 Custodian Fees.............................................................. 362 Other Expenses.............................................................. 297 --------- Total Expenses............................................................ 5,261 --------- Net Investment Income......................................................... 18,098 --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES Net Realized Gain (Loss) on: Investment Securities....................................................... 78,474 Foreign Currency Transactions............................................... (238) --------- Net Realized Gain For the Period.......................................... 78,236 Net Change in Unrealized Appreciation (Depreciation) of: Investment Securities....................................................... (66,986) Foreign Currency Transactions............................................... 79 --------- Net Change in Unrealized Depreciation for the Period...................... (66,907) --------- Net Gain on Investments....................................................... 11,329 --------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $ 29,427 --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements --- 54 NORTHWESTERN MUTUAL SERIES FUND, INC. International Equity Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE YEAR ENDED FOR THE DECEMBER YEAR ENDED 31, DECEMBER 31, 1998 1997 ----------- ------------ INCREASE IN NET ASSETS Operations Net Investment Income............................ $ 18,098 $ 16,845 Net Realized Gain on Investments................. 78,236 22,636 Net Unrealized Appreciation (Depreciation) of Investments for the Period...................... (66,907) 25,359 ----------- ------------ Net Increase in Net Assets Resulting from Operations..................................... 29,427 64,840 ----------- ------------ Distributions to Shareholders from: Net Investment Income............................ (16,649) (12,704) Net Realized Gain on Investments................. (22,793) (7,542) ----------- ------------ Net Decrease in Net Assets Resulting from Distributions to Shareholders.................. (39,442) (20,246) ----------- ------------ Fund Share Transactions Proceeds from Sale of 35,076 and 66,307 Shares... 60,890 110,618 Proceeds from Shares Issued on Reinvestment of Dividends Paid (21,530 and 12,598 shares, respectively)........ 39,442 20,246 Payments for 47,205 and 12,361 Shares Redeemed... (79,061) (20,797) ----------- ------------ Net Increase in Net Assets Resulting from Fund Share Transactions (9,401 and 66,544 shares, respectively)......... 21,271 110,067 ----------- ------------ Total Increase in Net Assets....................... 11,256 154,661 NET ASSETS Beginning of Period................................ 659,850 505,189 ----------- ------------ End of Period (includes undistributed net investment income of $19,912 and $16,682 respectively)..................................... $671,106 $659,850 ----------- ------------ ----------- ------------
The Accompanying Notes are an Integral Part of the Financial Statements --- 55 NORTHWESTERN MUTUAL SERIES FUND, INC. International Equity Portfolio Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
FOR THE PERIOD MAY 3, 1994* FOR THE YEAR ENDED DECEMBER 31, THROUGH --------------------------------------------- DECEMBER 31, 1998 1997 1996 1995 1994 --------- --------- --------- --------- --------------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period............................... $ 1.69 $ 1.56 $ 1.35 $ 1.19 $ 1.22 Income from Investment Operations: Net Investment Income............. 0.05 0.04 0.04 0.04 0.02 Net Realized and Unrealized Gains on Investments................... 0.04 0.15 0.24 0.13 (0.02) --------- --------- --------- --------- --------------- Total from Investment Operations..................... 0.09 0.19 0.28 0.17 0.00 --------- --------- --------- --------- --------------- Less Distributions: Distributions from Net Investment Income........................... (0.04) (0.04) (0.03) -- (0.02) Distributions from Realized Gains on Investments................... (0.06) (0.02) (0.04) (0.01) (0.01) --------- --------- --------- --------- --------------- Total Distributions............. (0.10) (0.06) (0.07) (0.01) (0.03) --------- --------- --------- --------- --------------- Net Asset Value, End of Period.......... $ 1.68 $ 1.69 $ 1.56 $ 1.35 $ 1.19 --------- --------- --------- --------- --------------- --------- --------- --------- --------- --------------- Total Return+........................... 4.82% 12.28% 21.01% 14.57% 0.11%++ --------- --------- --------- --------- --------------- --------- --------- --------- --------- --------------- RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands)............................. $671,106 $659,850 $505,189 $342,127 $292,533 --------- --------- --------- --------- --------------- --------- --------- --------- --------- --------------- Ratio of Expenses to Average Net Assets................................. 0.76% 0.77% 0.81% 0.85% 0.87%** --------- --------- --------- --------- --------------- --------- --------- --------- --------- --------------- Ratio of Net Investment Income to Average Net Assets..................... 3.38% 2.75% 3.02% 2.68% 2.28%** --------- --------- --------- --------- --------------- --------- --------- --------- --------- --------------- Portfolio Turnover Rate................. 30.41% 16.74% 17.07% 26.71% 10.97% --------- --------- --------- --------- --------------- --------- --------- --------- --------- ---------------
* Commencement of Operations. ** Computed on an annualized basis. + Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees. ++ Reflects total return for the period; not annualized. The Accompanying Notes are an Integral Part of the Financial Statements --- 56 GROWTH STOCK PORTFOLIO NORTHWESTERN MUTUAL SERIES FUND, INC. Growth Stock Portfolio Financial Statements (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998 ASSETS Common Stocks (cost $236,355)................................................. $369,494 Money Market Investments (cost $51,670)....................................... 51,670 --------- 421,164 Cash.......................................................................... 58 Due from Sale of Securities................................................... 394 Dividends and Interest Receivable............................................. 321 Due from Sale of Fund Shares.................................................. 302 Due from Futures Variation Margin............................................. 73 --------- Total Assets................................................................ 422,312 --------- LIABILITIES Due on Purchase of Securities................................................. 807 Due to Investment Advisor..................................................... 149 Accrued Expenses.............................................................. 44 Due on Redemption of Fund Shares.............................................. 30 --------- Total Liabilities........................................................... 1,030 --------- NET ASSETS...................................................................... $421,282 --------- --------- REPRESENTED BY: Aggregate Paid in Capital (2,000,000 shares authorized, $.01 par value; 187,469 shares outstanding).................................................. $273,705 Undistributed Net Investment Income........................................... 916 Undistributed Accumulated Net Realized Gain on Investments.................... 11,968 Net Unrealized Appreciation of: Investment Securities....................................................... 133,139 Index Futures Contracts..................................................... 1,554 --------- Net Assets for 187,469 Shares Outstanding..................................... $421,282 --------- --------- Net Asset Value, Offering and Redemption Price per Share...................... $ 2.25 --------- ---------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 INVESTMENT INCOME Income Dividends (less foreign dividend tax of $39)................................ $ 2,918 Interest.................................................................... 2,135 -------- Total Income.............................................................. 5,053 -------- Expenses Management Fees............................................................. 1,456 Custodian Fees.............................................................. 15 Other Expenses.............................................................. 36 -------- Total Expenses............................................................ 1,507 -------- Less Custodian Fees: Paid by Affiliate....................................................... (11) Paid Indirectly......................................................... (4) -------- Total Net Expenses........................................................ 1,492 -------- Net Investment Income......................................................... 3,561 -------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net Realized Gain on Investments: Investment Securities....................................................... 10,339 Index Futures Contracts..................................................... 1,637 -------- Net Realized Gain on Investments for the Period........................... 11,976 -------- Net Change in Unrealized Appreciation of: Investments Securities...................................................... 60,643 Index Futures Contracts..................................................... 1,554 -------- Net Change in Unrealized Appreciation of Investments for the Period....... 62,197 -------- Net Gain on Investments..................................................... 74,173 -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...................................................... $77,734 -------- --------
The Accompanying Notes are an Integral Part of the Financial Statements --- 57 NORTHWESTERN MUTUAL SERIES FUND, INC. Growth Stock Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE FOR THE YEAR ENDED YEAR ENDED DECEMBER DECEMBER 31, 31, 1998 1997 ----------- ------------ INCREASE IN NET ASSETS Operations Net Investment Income................................ $ 3,561 $ 2,669 Net Realized Gain on Investments..................... 11,976 11,942 Net Change in Unrealized Appreciation of Investments for the Period...................................... 62,197 42,501 ----------- ------------ Net Increase in Net Assets Resulting from Operations......................................... 77,734 57,112 ----------- ------------ Distributions to Shareholders from: Net Investment Income................................ (2,645) (2,685) Net Realized Gain on Investments..................... (4,068) (8,527) ----------- ------------ Net Decrease in Net Assets Resulting from Distributions to Shareholders...................... (6,713) (11,212) ----------- ------------ Fund Share Transactions Proceeds from Sale of 56,014 and 42,594 Shares....... 112,510 70,967 Proceeds from Shares Issued on Reinvestment of Distributions Paid (3,330 and 6,422 shares, respectively).............. 6,713 11,212 Payments for 6,148 and 31,206 Shares Redeemed........ (12,033) (55,490) ----------- ------------ Net Increase in Net Assets Resulting from Fund Share Transactions (53,196 and 17,810 shares, respectively)............ 107,190 26,689 ----------- ------------ Total Increase in Net Assets........................... 178,211 72,589 NET ASSETS Beginning of Period.................................... 243,071 170,482 ----------- ------------ End of Period (includes undistributed net investment income of $916 and $0, respectively)....... $421,282 $243,071 ----------- ------------ ----------- ------------
The Accompanying Notes are an Integral Part of the Financial Statements --- 58 NORTHWESTERN MUTUAL SERIES FUND, INC. Growth Stock Portfolio Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
FOR THE PERIOD MAY 3, 1994* FOR THE YEAR ENDED DECEMBER 31, THROUGH ---------------------------------------------- DECEMBER 31, 1998 1997 1996 1995 1994 ----------- --------- --------- -------- -------------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period............ $ 1.81 $ 1.46 $ 1.26 $ 1.00 $ 1.00 Income from Investment Operations: Net Investment Income....................... 0.02 0.02 0.02 0.02 0.01 Net Realized and Unrealized Gains on Investments................................ 0.46 0.42 0.25 0.28 -- ----------- --------- --------- -------- -------------- Total from Investment Operations.......... 0.48 0.44 0.27 0.30 0.01 ----------- --------- --------- -------- -------------- Less Distributions: Distributions from Net Investment Income.... (0.02) (0.02) (0.02) (0.02) (0.01) Distributions from Realized Gains on Investments................................ (0.02) (0.07) (0.05) (0.02) -- ----------- --------- --------- -------- -------------- Total Distributions....................... (0.04) (0.09) (0.07) (0.04) (0.01) ----------- --------- --------- -------- -------------- Net Asset Value, End of Period.................... $ 2.25 $ 1.81 $ 1.46 $ 1.26 $ 1.00 ----------- --------- --------- -------- -------------- ----------- --------- --------- -------- -------------- Total Return+..................................... 26.69% 29.85% 20.91% 30.82% 1.55%++ ----------- --------- --------- -------- -------------- ----------- --------- --------- -------- -------------- RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands).......... $421,282 $243,071 $170,482 $85,557 $41,868 ----------- --------- --------- -------- -------------- ----------- --------- --------- -------- -------------- Ratio of Expenses to Average Net Assets........... 0.46% 0.49% 0.57% 0.61% 0.71%** ----------- --------- --------- -------- -------------- ----------- --------- --------- -------- -------------- Ratio of Net Investment Income to Average Net Assets........................................... 1.10% 1.24% 1.41% 1.77% 2.30%** ----------- --------- --------- -------- -------------- ----------- --------- --------- -------- -------------- Portfolio Turnover Rate........................... 21.64% 33.20% 37.61% 46.83% 16.51% ----------- --------- --------- -------- -------------- ----------- --------- --------- -------- --------------
* Commencement of Operations. ** Computed on an annualized basis. + Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees. ++ Reflects total return for the period; not annualized. The Accompanying Notes are an Integral Part of the Financial Statements --- 59 GROWTH AND INCOME STOCK PORTFOLIO NORTHWESTERN MUTUAL SERIES FUND, INC. Growth and Income Stock Portfolio Financial Statements (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998 ASSETS Common Stocks (cost $508,003)................................................. $561,369 Money Market Investments (cost $9,078)........................................ 9,078 --------- 570,447 Cash.......................................................................... 89 Dividends and Interest Receivable............................................. 687 Due from Sale of Fund Shares.................................................. 175 --------- Total Assets................................................................ 571,398 --------- LIABILITIES Due to Investment Advisor..................................................... 265 Due on Redemption of Fund Shares.............................................. 119 Accrued Expenses.............................................................. 44 --------- Total Liabilities........................................................... 428 --------- NET ASSETS...................................................................... $570,970 --------- --------- REPRESENTED BY: Aggregate Paid in Capital (2,000,000 shares authorized, $.01 par value; 351,523 shares outstanding).................................................. $450,101 Undistributed Net Investment Income........................................... 163 Undistributed Accumulated Net Realized Gain on Investments.................... 67,340 Net Unrealized Appreciation of Investments.................................... 53,366 --------- Net Assets for 351,523 Shares Outstanding..................................... $570,970 --------- --------- Net Asset Value, Offering and Redemption Price per Share...................... $ 1.62 --------- ---------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 INVESTMENT INCOME Income Dividends (less foreign dividend tax of $11)................................ $ 6,368 Interest.................................................................... 457 --------- Total Income.............................................................. 6,825 --------- Expenses Management Fees............................................................. 2,685 Custodian Fees.............................................................. 30 Other Expenses.............................................................. 44 --------- Total Expenses............................................................ 2,759 --------- Less Custodian Fees: Paid by Affiliate.................................................... (27) Paid Indirectly...................................................... (3) --------- Total Net Expenses........................................................ 2,729 --------- Net Investment Income......................................................... 4,096 --------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net Realized Gain on Investments.............................................. 67,556 Net Change in Unrealized Appreciation of Investments for the Period........... 26,191 --------- Net Gain on Investments....................................................... 93,747 --------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...................................................... $ 97,843 --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements --- 60 NORTHWESTERN MUTUAL SERIES FUND, INC. Growth and Income Stock Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE FOR THE YEAR ENDED YEAR ENDED DECEMBER DECEMBER 31, 31, 1998 1997 ----------- ------------ INCREASE IN NET ASSETS Operations Net Investment Income................................ $ 4,096 $ 3,174 Net Realized Gain on Investments..................... 67,556 72,633 Net Change in Unrealized Appreciation of Investments for the Period...................................... 26,191 2,850 ----------- ------------ Net Increase in Net Assets Resulting from Operations......................................... 97,843 78,657 ----------- ------------ Distributions to Shareholders from: Net Investment Income................................ (3,933) (3,200) Net Realized Gain on Investments..................... (731) (78,180) ----------- ------------ Net Decrease in Net Assets Resulting from Distributions to Shareholders...................... (4,664) (81,380) ----------- ------------ Fund Share Transactions Proceeds from Sale of 82,937 and 75,470 Shares....... 120,879 116,134 Proceeds from Shares Issued on Reinvestment of Distributions Paid (3,111 and 61,873 shares, respectively)............. 4,664 81,380 Payments for 14,061 and 35,535 Shares Redeemed....... (19,687) (57,040) ----------- ------------ Net Increase in Net Assets Resulting from Fund Share Transactions (71,987 and 101,808 shares, respectively)......... 105,856 140,474 ----------- ------------ Total Increase in Net Assets........................... 199,035 137,751 NET ASSETS Beginning of Period.................................... 371,935 234,184 ----------- ------------ End of Period (includes undistributed net investment income of $163 and $0, respectively).................. $570,970 $371,935 ----------- ------------ ----------- ------------
The Accompanying Notes are an Integral Part of the Financial Statements --- 61 NORTHWESTERN MUTUAL SERIES FUND, INC. Growth and Income Stock Portfolio Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
FOR THE PERIOD MAY 3, 1994* FOR THE YEAR ENDED DECEMBER 31, THROUGH ----------------------------------------------- DECEMBER 31, 1998 1997 1996 1995 1994 ----------- --------- --------- --------- --------------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period............ $ 1.33 $ 1.32 $ 1.21 $ 0.98 $ 1.00 Income from Investment Operations: Net Investment Income....................... 0.01 0.01 0.02 0.02 0.01 Net Realized and Unrealized Gains on Investments................................ 0.29 0.37 0.23 0.29 (0.01) ----------- --------- --------- --------- --------------- Total from Investment Operations.......... 0.30 0.38 0.25 0.31 (0.00) ----------- --------- --------- --------- --------------- Less Distributions: Distributions from Net Investment Income.... (0.01) (0.01) (0.02) (0.02) (0.01) Distributions from Realized Gains on Investments................................ 0.00 (0.36) (0.12) (0.06) (0.01) ----------- --------- --------- --------- --------------- Total Distributions....................... (0.01) (0.37) (0.14) (0.08) (0.02) ----------- --------- --------- --------- --------------- Net Asset Value, End of Period.................... $ 1.62 $ 1.33 $ 1.32 $ 1.21 $ 0.98 ----------- --------- --------- --------- --------------- ----------- --------- --------- --------- --------------- Total Return+..................................... 23.14% 30.03% 19.97% 31.12% 0.34%++ ----------- --------- --------- --------- --------------- ----------- --------- --------- --------- --------------- RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands).......... $570,970 $371,935 $234,184 $136,923 $ 64,700 ----------- --------- --------- --------- --------------- ----------- --------- --------- --------- --------------- Ratio of Expenses to Average Net Assets........... 0.58% 0.60% 0.62% 0.69% 0.78%** ----------- --------- --------- --------- --------------- ----------- --------- --------- --------- --------------- Ratio of Net Investment Income to Average Net Assets........................................... 1.00% 1.04% 1.44% 1.68% 1.93%** ----------- --------- --------- --------- --------------- ----------- --------- --------- --------- --------------- Portfolio Turnover Rate........................... 160.40% 144.52% 93.92% 80.00% 54.18% ----------- --------- --------- --------- --------------- ----------- --------- --------- --------- ---------------
* Commencement of Operations. ** Computed on an annualized basis. + Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees. ++ Reflects total return for the period; not annualized. The Accompanying Notes are an Integral Part of the Financial Statements --- 62 INDEX 500 STOCK PORTFOLIO NORTHWESTERN MUTUAL SERIES FUND, INC. Index 500 Stock Portfolio Financial Statements (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998 ASSETS Common Stocks (cost $926,948)................................................. $1,675,726 Money Market Investments (cost $12,507)....................................... 12,507 ----------- 1,688,233 Cash.......................................................................... 14 Dividends and Interest Receivable............................................. 1,763 Due From Sale of Fund Shares.................................................. 1,154 Due From Futures Margin Variation............................................. 34 ----------- Total Assets................................................................ 1,691,198 ----------- LIABILITIES Due to Investment Advisor..................................................... 276 Due on Redemption of Fund Shares.............................................. 162 Accrued Expenses.............................................................. 80 ----------- Total Liabilities........................................................... 518 ----------- NET ASSETS...................................................................... $1,690,680 ----------- ----------- REPRESENTED BY: Aggregate Paid in Capital (2,000,000 shares authorized, $.01 par value; 514,113 shares outstanding).................................................. $ 896,075 Undistributed Net Investment Income........................................... 19,630 Undistributed Accumulated Net Realized Gain on Investments.................... 25,873 Net Unrealized Appreciation of: Investment Securities....................................................... 748,778 Index Futures Contracts..................................................... 324 ----------- Net Assets for 514,113 Shares Outstanding..................................... $1,690,680 ----------- ----------- Net Asset Value, Offering and Redemption Price per Share...................... $ 3.29 ----------- -----------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 INVESTMENT INCOME Income Dividends (less foreign dividend tax of $119)............................... $ 20,213 Interest.................................................................... 2,332 --------- Total Income.............................................................. 22,545 --------- Expenses Management Fees............................................................. 2,807 Custodian Fees.............................................................. 49 Other Expenses.............................................................. 108 --------- Total Expenses............................................................ 2,964 --------- Less Custodian Fees: Paid by Affiliate.................................................... (45) Paid Indirectly...................................................... (4) --------- Total Net Expenses........................................................ 2,915 --------- Net Investment Income......................................................... 19,630 --------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net Realized Gain on Investments: Investment Securities....................................................... 19,544 Index Futures Contracts..................................................... 7,550 --------- Net Realized Gain on Investments for the Period........................... 27,094 --------- Net Change in Unrealized Appreciation (Depreciation) of: Investment Securities....................................................... 309,036 Index Futures Contracts..................................................... (345) --------- Net Change in Unrealized Appreciation of Investments for the Period....... 308,691 --------- Net Gain on Investments..................................................... 335,785 --------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $355,415 --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements --- 63 NORTHWESTERN MUTUAL SERIES FUND, INC. Index 500 Stock Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE YEAR ENDED FOR THE DECEMBER YEAR ENDED 31, DECEMBER 31, 1998 1997 ----------- ------------ INCREASE IN NET ASSETS Operations Net Investment Income............................ $ 19,630 $ 17,811 Net Realized Gain on Investments................. 27,094 27,640 Net Change in Unrealized Appreciation of Investments for the Period...................... 308,691 219,972 ----------- ------------ Net Increase in Net Assets Resulting from Operations..................................... 355,415 265,423 ----------- ------------ Disributions to Shareholders from: Net Investment Income............................ (17,811) (13,866) Net Realized Gain on Investments................. (28,519) (16,994) ----------- ------------ Net Decrease in Net Assets Resulting from Distributions to Shareholders.................. (46,330) (30,860) ----------- ------------ Fund Share Transactions Proceeds from Sale of 79,805 and 75,307 Shares... 233,133 178,554 Proceeds from Shares Issued on Reinvestment of Distributions Paid (16,132 and 13,655 shares, respectively)................................... 46,330 30,860 Payments for 17,928 and 12,917 Shares Redeemed... (50,725) (31,186) ----------- ------------ Net Increase in Net Assets Resulting from Fund Share Transactions (78,009 and 76,045 shares, respectively)................................... 228,738 178,228 ----------- ------------ Total Increase in Net Assets....................... 537,823 412,791 NET ASSETS Beginning of Period................................ 1,152,857 740,066 ----------- ------------ End of Period (includes undistributed net investment income of $19,630 and $17,811 respectively)..................................... $1,690,680 $1,152,857 ----------- ------------ ----------- ------------
The Accompanying Notes are an Integral Part of the Financial Statements --- 64 NORTHWESTERN MUTUAL SERIES FUND, INC. Index 500 Stock Portfolio Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------------------------- 1998 1997 1996 1995 1994 ----------- ----------- --------- --------- --------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period....... $ 2.64 $ 2.06 $ 1.72 $ 1.27 $ 1.29 Income from Investment Operations: Net Investment Income.................. 0.04 0.04 0.04 0.04 0.03 Net Realized and Unrealized Gain (Loss) on Investments........................ 0.71 0.62 0.35 0.42 (0.01) ----------- ----------- --------- --------- --------- Total from Investment Operations..... 0.75 0.66 0.39 0.46 0.02 ----------- ----------- --------- --------- --------- Less Distributions: Distributions from Net Investment Income................................ (0.04) (0.04) (0.02) (0.01) (0.03) Distributions from Realized Gains on Investments........................... (0.06) (0.04) (0.03) -- (0.01) ----------- ----------- --------- --------- --------- Total Distributions.................. (0.10) (0.08) (0.05) (0.01) (0.04) ----------- ----------- --------- --------- --------- Net Asset Value, End of Period............... $ 3.29 $ 2.64 $ 2.06 $ 1.72 $ 1.27 ----------- ----------- --------- --------- --------- ----------- ----------- --------- --------- --------- Total Return+................................ 28.72% 33.20% 22.75% 37.25% 1.21% ----------- ----------- --------- --------- --------- ----------- ----------- --------- --------- --------- RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands)..... $1,690,680 $1,152,857 $740,066 $495,133 $316,123 ----------- ----------- --------- --------- --------- ----------- ----------- --------- --------- --------- Ratio of Expenses to Average Net Assets...... 0.21% 0.21% 0.21% 0.21% 0.24% ----------- ----------- --------- --------- --------- ----------- ----------- --------- --------- --------- Ratio of Net Investment Income to Average Net Assets...................................... 1.40% 1.86% 2.27% 2.51% 3.10% ----------- ----------- --------- --------- --------- ----------- ----------- --------- --------- --------- Portfolio Turnover Rate...................... 3.03% 3.15% 3.45% 3.19% 5.59% ----------- ----------- --------- --------- --------- ----------- ----------- --------- --------- ---------
+ Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees. The Accompanying Notes are an Integral Part of the Financial Statements --- 65 BALANCED PORTFOLIO NORTHWESTERN MUTUAL SERIES FUND, INC. Balanced Portfolio Financial Statements (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998 ASSETS Common Stock (cost $674,270).................................................. $1,640,982 Bonds (cost $1,091,953)....................................................... 1,112,608 Money Market Investments (cost $514,345)...................................... 514,355 ----------- 3,267,945 Cash.......................................................................... 905 Dividends and Interest Receivable............................................. 15,825 Due from Futures Variation Margin............................................. 688 ----------- Total Assets................................................................ 3,285,363 ----------- LIABILITIES Due on Redemption of Fund Shares.............................................. 2,473 Due to Investment Advisor..................................................... 819 ----------- Total Liabilities........................................................... 3,292 ----------- NET ASSETS...................................................................... $3,282,071 ----------- ----------- REPRESENTED BY: Aggregate Paid in Capital (3,000,000 shares authorized, $.01 par value; 1,475,966 shares outstanding)................................................................. $1,945,788 Undistributed Net Investment Income........................................... 103,557 Undistributed Accumulated Net Realized Gain on Investments.................... 232,015 Net Unrealized Appreciation of: Investment Securities....................................................... 987,377 Index Futures Contracts..................................................... 13,320 Foreign Currency Transactions............................................... 14 ----------- Net Assets for 1,475,966 Shares Outstanding................................... $3,282,071 ----------- ----------- Net Asset Value, Offering and Redemption Price per Share...................... $ 2.22 ----------- -----------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 INVESTMENT INCOME Income Interest (less foreign withholding tax of $29).............................. $ 90,182 Dividends (less foreign dividend tax of $128)............................... 23,405 --------- Total Income.............................................................. 113,587 --------- Expenses Management Fees............................................................. 9,039 --------- Net Investment Income......................................................... 104,548 --------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net Realized Gain (Loss) on Investments: Investment Securities....................................................... 199,569 Index Futures Contracts..................................................... 33,083 Foreign Currency Transactions............................................... (882) --------- Net Realized Gain on Investments for the Period........................... 231,770 --------- Net Change In Unrealized Appreciation of: Investment Securities....................................................... 173,063 Futures Contracts........................................................... 13,799 Foreign Currency Transactions............................................... 138 --------- Net Change in Unrealized Appreciation of Investments for the Period....... 187,000 --------- Net Gain on Investments....................................................... 418,770 --------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $523,318 --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements --- 66 NORTHWESTERN MUTUAL SERIES FUND, INC. Balanced Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE YEAR ENDED FOR THE DECEMBER YEAR ENDED 31, DECEMBER 31, 1998 1997 ----------- ------------ INCREASE IN NET ASSETS Operations Net Investment Income............... $ 104,548 $ 94,986 Net Realized Gain on Investments.... 231,770 83,356 Net Change in Unrealized Appreciation of Investments for the Period............................. 187,000 318,351 ----------- ------------ Net Increase in Net Assets Resulting from Operations......... 523,318 496,693 ----------- ------------ Distributions to Shareholders from: Net Investment Income............... (95,131) (86,698) Net Realized Gain on Investments.... (85,841) (29,228) ----------- ------------ Net Decrease in Net Assets Resulting from Distributions to Shareholders...................... (180,972) (115,926) ----------- ------------ Fund Share Transactions Proceeds from Sale of 54,658 and 42,694 Shares...................... 113,335 79,608 Proceeds from Shares Issued on Reinvestment of Distributions Paid (89,901 and 65,384 shares, respectively)...................... 180,971 115,926 Payments for 69,339 and 61,284 Shares Redeemed.................... (143,075) (114,041) ----------- ------------ Net Increase in Net Assets Resulting from Fund Share Transactions (75,220 and 46,794 shares, respectively)...................... 151,231 81,493 ----------- ------------ Total Increase in Net Assets.......... 493,577 462,260 NET ASSETS Beginning of Period................... 2,788,494 2,326,234 ----------- ------------ End of Period (includes undistributed net investment income of $103,557 and $94,962 respectively)... $3,282,071 $2,788,494 ----------- ------------ ----------- ------------
The Accompanying Notes are an Integral Part of the Financial Statements --- 67 NORTHWESTERN MUTUAL SERIES FUND, INC. Balanced Portfolio Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------------------------------- 1998 1997 1996 1995 1994 ----------- ----------- ----------- ----------- ----------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period............................... $ 1.99 $ 1.72 $ 1.60 $ 1.31 $ 1.33 Income from Investment Operations: Net Investment Income............. 0.07 0.07 0.06 0.07 0.04 Net Realized and Unrealized Gain (Loss) on Investments............ 0.29 0.28 0.15 0.27 (0.05) ----------- ----------- ----------- ----------- ----------- Total from Investment Operations..................... 0.36 0.35 0.21 0.34 (0.01) ----------- ----------- ----------- ----------- ----------- Less Distributions: Distributions from Net Investment Income........................... (0.07) (0.06) (0.06) (0.04) (0.00) Distributions from Realized Gains on Investments................... (0.06) (0.02) (0.03) (0.01) (0.01) ----------- ----------- ----------- ----------- ----------- Total Distributions............. (0.13) (0.08) (0.09) (0.05) (0.01) ----------- ----------- ----------- ----------- ----------- Net Asset Value, End of Period.......... $ 2.22 $ 1.99 $ 1.72 $ 1.60 $ 1.31 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total Return+........................... 18.88% 21.52% 13.45% 26.39% 0.16% ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands)............................. $3,282,071 $2,788,494 $2,326,234 $2,083,289 $1,727,127 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Ratio of Expenses to Average Net Assets................................. 0.30% 0.30% 0.30% 0.30% 0.30% ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Ratio of Net Investment Income to Average Net Assets..................... 3.48% 3.70% 3.95% 4.40% 4.78% ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Portfolio Turnover Rate................. 44.18% 29.94% 67.66% 37.28% 42.35% ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
+ Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees. The Accompanying Notes are an Integral Part of the Financial Statements --- 68 HIGH YIELD BOND PORTFOLIO NORTHWESTERN MUTUAL SERIES FUND, INC. High Yield Bond Portfolio Financial Statements (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998 ASSETS Bonds (cost $164,578)......................................................... $145,907 Preferred Stock (cost $28,969)................................................ 29,526 Money Market Investments (cost $3,896)........................................ 3,896 Common Stock (cost $2,202).................................................... 941 --------- 180,270 Cash.......................................................................... 110 Dividends and Interest Receivable............................................. 3,787 Due from Sale of Securities................................................... 1,718 --------- Total Assets................................................................ 185,885 --------- LIABILITIES Due on Purchase of Securities................................................. 589 Due on Redemption of Fund Shares.............................................. 409 Due to Investment Advisor..................................................... 76 Accrued Expenses.............................................................. 29 --------- Total Liabilities........................................................... 1,103 --------- NET ASSETS...................................................................... $184,782 --------- --------- REPRESENTED BY: Aggregate Paid in Capital (2,000,000 shares authorized, $.01 par value; 197,519 shares outstanding).................................................. $207,516 Undistributed Net Investment Income........................................... 55 Undistributed Accumulated Net Realized Loss on Investments.................... (3,414) Net Unrealized Depreciation of Investments.................................... (19,375) --------- Net Assets for 197,519 Shares Outstanding..................................... $184,782 --------- --------- Net Asset Value, Offering and Redemption Price per Share...................... $ 0.94 --------- ---------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 INVESTMENT INCOME Income Interest.................................................................... $16,708 Dividends................................................................... 3,197 -------- Total Income.............................................................. 19,905 -------- Expenses Management Fees............................................................. 854 Custodian Fees.............................................................. 18 Other Expenses.............................................................. 22 -------- Total Expenses............................................................ 894 -------- Less Custodian Fees: Paid by Affiliate....................................................... (13) Paid Indirectly......................................................... (5) -------- Total Net Expenses.......................................................... 876 -------- Net Investment Income......................................................... 19,029 -------- REALIZED AND UNREALIZED LOSS ON INVESTMENTS Net Realized Loss on Investments.............................................. (3,333) Net Change in Unrealized Depreciation of Investments for the Period........... (20,988) -------- Net Loss on Investments....................................................... (24,321) -------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $(5,292) -------- --------
The Accompanying Notes are an Integral Part of the Financial Statements -- 69 NORTHWESTERN MUTUAL SERIES FUND, INC. High Yield Bond Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE YEAR ENDED FOR THE YEAR DECEMBER ENDED 31, DECEMBER 31, 1998 1997 ----------- ------------ INCREASE IN NET ASSETS Operations Net Investment Income................................ $ 19,029 $ 12,561 Net Realized Gain (Loss) on Investments.............. (3,333) 7,437 Net Change in Unrealized Depreciation of Investments for the Period...................................... (20,988) (1,416) ----------- ------------ Net Increase (Decrease) in Net Assets Resulting from Operations.................................... (5,292) 18,582 ----------- ------------ Distributions to Shareholders from: Net Investment Income................................ (18,974) (16,554) Net Realized Gain on Investments..................... -- (8,429) ----------- ------------ Net Decrease in Net Assets Resulting from Distributions to Shareholders...................... (18,974) (24,983) ----------- ------------ Fund Share Transactions Proceeds from Sale of 60,216 and 48,820 Shares....... 65,439 56,788 Proceeds from Shares Issued on Reinvestment of Distributions Paid (20,380 and 23,165 shares, respectively)....................................... 18,974 24,983 Payments for 26,994 and 13,489 Shares Redeemed....... (28,403) (16,210) ----------- ------------ Net Increase in Net Assets Resulting from Fund Share Transactions (53,602 and 58,496 shares, respectively)...................................... 56,010 65,561 ----------- ------------ Total Increase in Net Assets........................... 31,744 59,160 NET ASSETS Beginning of Period.................................... 153,038 93,878 ----------- ------------ End of Period (includes undistributed net investment income of $55 and ($143), respectively)............... $184,782 $153,038 ----------- ------------ ----------- ------------
The Accompanying Notes are an Integral Part of the Financial Statements -- 70 NORTHWESTERN MUTUAL SERIES FUND, INC. High Yield Bond Portfolio Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
FOR THE PERIOD MAY FOR THE YEAR ENDED 3, 1994* DECEMBER 31, THROUGH ------------------------------------------------ DECEMBER 31, 1998 1997 1996 1995 1994 -------------- --------- -------- -------- ------------ SELECTED PER SHARE DATA Net Asset Value, Beginning of Period............................... $ 1.06 $ 1.10 $ 1.03 $ 0.97 $ 1.00 Income from Investment Operations: Net Investment Income............. 0.10 0.11 0.09 0.10 0.06 Net Realized and Unrealized Gains (Losses) on Investments.......... (0.12) 0.06 0.10 0.07 (0.03) -------------- --------- -------- -------- ------------ Total from Investment Operations..................... (0.02) 0.17 0.19 0.17 0.03 -------------- --------- -------- -------- ------------ Less Distributions: Distributions from Net Investment Income........................... (0.10) (0.14) (0.09) (0.10) (0.06) Distributions from Realized Gains on Investments................... -- (0.07) (0.03) (0.01) -- -------------- --------- -------- -------- ------------ Total Distributions............. (0.10) (0.21) (0.12) (0.11) (0.06) -------------- --------- -------- -------- ------------ Net Asset Value, End of Period.......... $ 0.94 $ 1.06 $ 1.10 $ 1.03 $ 0.97 -------------- --------- -------- -------- ------------ -------------- --------- -------- -------- ------------ Total Return+........................... (1.84%) 15.85% 19.77% 16.78% 3.02%++ -------------- --------- -------- -------- ------------ -------------- --------- -------- -------- ------------ RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands)............................. $184,782 $153,038 $93,878 $55,974 $35,537 -------------- --------- -------- -------- ------------ -------------- --------- -------- -------- ------------ Ratio of Expenses to Average Net Assets................................. 0.50% 0.55% 0.60% 0.65% 0.73%** -------------- --------- -------- -------- ------------ -------------- --------- -------- -------- ------------ Ratio of Net Investment Income to Average Net Assets..................... 10.85% 9.95% 9.54% 9.90% 9.40%** -------------- --------- -------- -------- ------------ -------------- --------- -------- -------- ------------ Portfolio Turnover Rate................. 153.71% 129.49% 143.91% 116.57% 119.48% -------------- --------- -------- -------- ------------ -------------- --------- -------- -------- ------------
* Commencement of Operations. ** Computed on an annualized basis. + Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees. ++ Reflects total return for the period; not annualized. The Accompanying Notes are an Integral Part of the Financial Statements -- 71 SELECT BOND PORTFOLIO NORTHWESTERN MUTUAL SERIES FUND, INC. Select Bond Portfolio Financial Statements (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998 ASSETS Bonds (cost $281,712)......................................................... $283,202 Money Market Investments (cost $11,269)....................................... 11,269 --------- 294,471 Cash.......................................................................... 189 Interest Receivable........................................................... 3,044 Due from Sale of Fund Shares.................................................. 268 Due from Futures Variation Margin............................................. 155 --------- Total Assets................................................................ 298,127 --------- LIABILITIES Due to Investment Advisor..................................................... 75 Due on Redemption of Fund Shares.............................................. 18 --------- Total Liabilities........................................................... 93 --------- NET ASSETS...................................................................... $298,034 --------- --------- REPRESENTED BY: Aggregate Paid in Capital (1,000,000 shares authorized, $.01 par value; 238,596 shares outstanding).................................................. $276,525 Undistributed Net Investment Income........................................... 17,466 Undistributed Accumulated Net Realized Gain on Investments.................... 2,549 NET UNREALIZED APPRECIATION (DEPRECIATION) OF: Investments Securities........................................................ 1,490 Foreign Currency Transactions................................................. 7 Futures Contracts............................................................. (3) --------- Net Assets for 238,596 Shares Outstanding..................................... $298,034 --------- --------- Net Asset Value, Offering and Redemption Price per Share...................... $ 1.25 --------- ---------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 INVESTMENT INCOME Income Interest (less foreign withholding tax of $21).............................. $18,946 -------- Expenses Management Fees............................................................. 803 -------- Net Investment Income......................................................... 18,143 -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net Realized Gain (Loss) on Investments: Investment Securities....................................................... 4,478 Foreign Currency Transactions............................................... (742) Futures Contracts........................................................... (1,190) -------- Net Realized Gain on Investments for the Period............................... 2,546 -------- NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF: Investment Securities......................................................... (2,556) Foreign Currency Transactions................................................. 101 Futures Contracts............................................................. 428 -------- Net Change in Unrealized Depreciation for the Period........................ (2,027) -------- Net Gain on Investments....................................................... 519 -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...................................................... $18,662 -------- --------
The Accompanying Notes are an Integral Part of the Financial Statements -- 72 NORTHWESTERN MUTUAL SERIES FUND, INC. Select Bond Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE FOR THE YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1998 1997 ------------ ------------ INCREASE IN NET ASSETS Operations Net Investment Income............... $ 18,143 $ 15,676 Net Realized Gain on Investments.... 2,546 2,865 Net Change in Unrealized Appreciation (Depreciation) of Investments for the Period......... (2,027) 1,736 ------------ ------------ Net Increase in Net Assets Resulting from Operations......... 18,662 20,277 ------------ ------------ Distributions to Shareholders from: Net Investment Income............... (15,746) (13,300) Net Realized Gain on Investments.... (2,700) -- ------------ ------------ Net Decrease in Net Assets Resulting from Distributions to Shareholders...................... (18,446) (13,300) ------------ ------------ Fund Share Transactions Proceeds from Sale of 45,867 and 26,095 Shares...................... 56,278 32,098 Proceeds from Shares Issued on Reinvestment of Distributions Paid (15,606 and 11,396 shares, respectively)...................... 18,446 13,300 Payments for 17,649 and 17,885 Shares Redeemed.................... (21,741) (21,873) ------------ ------------ Net Increase in Net Assets Resulting from Fund Share Transactions (43,824 and 19,606 shares, respectively)........................ 52,983 23,525 ------------ ------------ Total Increase in Net Assets.......... 53,199 30,502 NET ASSETS Beginning of Period................... 244,835 214,333 ------------ ------------ End of Period (includes undistributed net investment income of $17,466 and $15,722 respectively).... $298,034 $244,835 ------------ ------------ ------------ ------------
The Accompanying Notes are an Integral Part of the Financial Statements -- 73 NORTHWESTERN MUTUAL SERIES FUND, INC. Select Bond Portfolio Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
FOR THE YEARS ENDED DECEMBER 31, --------------------------------------------------------- 1998 1997 1996 1995 1994 --------- --------- --------- --------- --------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period............................... $ 1.26 $ 1.22 $ 1.23 $ 1.06 $ 1.15 Income from Investment Operations: Net Investment Income............. 0.08 0.08 0.07 0.07 0.06 Net Realized and Unrealized Gain (Loss) on Investments............ 0.00 0.04 (0.04) 0.13 (0.09) --------- --------- --------- --------- --------- Total from Investment Operations..................... 0.08 0.12 0.03 0.20 (0.03) --------- --------- --------- --------- --------- Less Distributions: Dividends from Net Investment Income........................... (0.08) (0.08) (0.04) (0.03) (0.06) Distributions from Realized Gains on Investments................... (0.01) -- -- -- -- --------- --------- --------- --------- --------- Total Distributions............. (0.09) (0.08) (0.04) (0.03) (0.06) --------- --------- --------- --------- --------- Net Asset Value, End of Period.......... $ 1.25 $ 1.26 $ 1.22 $ 1.23 $ 1.06 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Total Return+........................... 7.07% 9.46% 3.31% 19.10% (2.28%) --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands)............................. $298,034 $244,835 $214,333 $198,142 $158,508 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Ratio of Expenses to Average Net Assets................................. 0.30% 0.30% 0.30% 0.30% 0.30% --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Ratio of Net Investment Income to Average Net Assets..................... 6.87% 7.03% 6.48% 6.61% 7.02% --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Portfolio Turnover Rate................. 161.79% 184.93% 195.98% 69.06% 108.00% --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
+ Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees. The Accompanying Notes are an Integral Part of the Financial Statements -- 74 MONEY MARKET PORTFOLIO NORTHWESTERN MUTUAL SERIES FUND, INC. Money Market Portfolio Financial Statements (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998 ASSETS Money Market Investments (cost $290,729)...................................... $290,729 Cash.......................................................................... 3 Due from Sale of Fund Shares.................................................. 774 Interest Receivable........................................................... 31 --------- Total Assets................................................................ 291,537 --------- LIABILITIES Due to Investment Advisor..................................................... 73 --------- Total Liabilities........................................................... 73 --------- NET ASSETS...................................................................... $291,464 --------- --------- REPRESENTED BY: Aggregate Paid in Capital (1,000,000 shares authorized, $.01 par value; 291,476 shares outstanding).................................................. $291,464 --------- Net Assets for 291,476 Shares Outstanding..................................... $291,464 --------- --------- Net Asset Value, Offering and Redemption Price per Share...................... $ 1.00 --------- ---------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 INVESTMENT INCOME Income Interest.................................................................... $ 12,764 --------- Expenses Management Fees............................................................. 687 --------- Net Investment Income......................................................... 12,077 --------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...................................................... $ 12,077 --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements --- 75 NORTHWESTERN MUTUAL SERIES FUND, INC. Money Market Portfolio Statement of Changes in Net Assets (IN THOUSANDS)
FOR THE FOR THE YEAR ENDED YEAR ENDED DECEMBER DECEMBER 31, 31, 1998 1997 ----------- ------------ INCREASE IN NET ASSETS Operations Net Investment Income................................ $ 12,077 $ 9,878 ----------- ------------ Net Increase in Net Assets Resulting from Operations......................................... 12,077 9,878 ----------- ------------ Distributions to Shareholders from: Net Investment Income................................ (12,077) (9,885) ----------- ------------ Net Decrease in Net Assets Resulting from Distributions to Shareholders...................... (12,077) (9,885) ----------- ------------ Fund Share Transactions Proceeds from Sale of 222,296 and 130,864 Shares..... 222,308 130,863 Proceeds from Shares Issued on Reinvestment of Distributions Paid (12,077 and 9,878 shares, respectively)....................................... 12,077 9,878 Payments for 137,391 and 122,562 Shares Redeemed..... (137,391) (122,562) ----------- ------------ Net Increase in Net Assets Resulting from Fund Share Transactions (96,982 and 18,180) shares, respectively)...................................... 96,994 18,179 ----------- ------------ Total Increase in Net Assets........................... 96,994 18,172 NET ASSETS Beginning of Period.................................... 194,470 176,298 ----------- ------------ End of Period (includes no undistributed net investment income)............................................... $291,464 $194,470 ----------- ------------ ----------- ------------
The Accompanying Notes are an Integral Part of the Financial Statements --- 76 NORTHWESTERN MUTUAL SERIES FUND, INC. Money Market Portfolio Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
FOR THE YEARS ENDED DECEMBER 31, ----------------------------------------------------------------- 1998 1997 1996 1995 1994 ----------- --------- --------- --------- --------------- SELECTED PER SHARE DATA Net Asset Value, Beginning of Period............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Net Investment Income......................... 0.05 0.05 0.05 0.06 0.05 Less Distributions from Net Investment Income....................................... (0.05) (0.05) (0.05) (0.06) (0.05) ----------- --------- --------- --------- --------------- Net Asset Value, End of Period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ----------- --------- --------- --------- --------------- ----------- --------- --------- --------- --------------- Total Return+................................... 5.43% 5.47% 5.29% 5.82% 4.06% ----------- --------- --------- --------- --------------- ----------- --------- --------- --------- --------------- RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (in thousands).......... $291,464 $194,470 $176,298 $132,572 $104,217 ----------- --------- --------- --------- --------------- ----------- --------- --------- --------- --------------- Ratio of Expenses to Average Net Assets........... 0.30% 0.30% 0.30% 0.30% 0.30% ----------- --------- --------- --------- --------------- ----------- --------- --------- --------- --------------- Ratio of Net Investment Income to Average Net Assets........................................... 5.26% 5.33% 5.13% 5.61% 4.64% ----------- --------- --------- --------- --------------- ----------- --------- --------- --------- ---------------
+ Total Return includes deductions for management and other fund expenses; excludes deductions for sales loads and account fees. The Accompanying Notes are an Integral Part of the Financial Statements --- 77 NOTES TO FINANCIAL STATEMENTS NORTHWESTERN MUTUAL SERIES FUND, INC. Notes to Financial Statements DECEMBER 31, 1998 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 Aggressive Growth Stock Portfolio, International Equity Portfolio, Growth Stock Portfolio, Growth and Income Stock Portfolio, Index 500 Stock Portfolio, Balanced Portfolio, High Yield Bond Portfolio, Select Bond Portfolio and the Money Market Portfolio (the "Portfolios"). Shares are presently offered only to The Northwestern Mutual Life Insurance Company ("Northwestern Mutual") and its segregated asset accounts. NOTE 2 -- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principal accounting policies are summarized below. NOTE 3 -- Bonds are valued on the basis of prices furnished by a service which determines prices for normal institutional size trading units of bonds, without regard to exchange or over-the-counter prices. When quotations are not readily available, bonds are valued at fair market value determined by procedures approved by the Board of Directors. Stocks listed on a national or foreign stock exchange are valued at the final sale price, or final bid price in absence of a sale. Stocks not listed on a national or foreign stock exchange are valued at the closing bid price on the over-the-counter market. Money market investments, other than in the Money Market Portfolio, with maturities exceeding sixty days but generally not exceeding one year are valued by marking to market on the basis of an average of the most recent bid prices or yields. Money market investments with maturities of sixty days or less and all securities in the Money Market Portfolio are valued on an amortized cost basis or, if the current market value differs substantially from the amortized cost, by marking to market. NOTE 4 -- Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts on the date of valuation. Purchases and sales of securities and income items denominated in foreign currencies are translated in U.S. dollar amounts on the respective dates of such transactions. When the International Equity Portfolio, Balanced Portfolio and Select Bond Portfolio purchases or sells a foreign security they may enter into a foreign exchange currency contract to minimize market risk from the trade date to the settlement date of such transaction. Such foreign exchange currency contracts are marked to market daily. The Portfolios may enter into forward foreign currency contracts to hedge against exchange rate risk arising from investments in securities denominated in foreign currencies. Contracts are valued at the contractual forward rate and are marked to market daily, with the change in market value recorded as an unrealized gain or loss. When the contracts are closed, a realized gain or loss is incurred. Risks may arise from changes in market value of the underlying instruments and from the possible inability of counter parties to meet the terms of their contracts. The International Equity Portfolio, Balanced Portfolio and Select Bond Portfolio do not separately report the results of operations due to changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade date and the settlement date on security transactions, the differences between the amounts of dividends and foreign withholding taxes recorded on the Portfolio's books, and the U.S. dollar equivalent of the amounts actually received or paid. NOTE 5 -- The Aggressive Growth Stock, Growth Stock, Index 500 Stock, Balanced and Select Bond Portfolios invest in futures contracts as an alternative to investing in individual securities. The Aggressive Growth Stock, Growth Stock, Index 500 Stock, Balanced and Select Bond Portfolios could be exposed to market risk due to changes in the value of the underlying securities or due to an illiquid secondary market. Futures contracts are marked to market daily based upon quoted settlement prices. 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. -- 78 NORTHWESTERN MUTUAL SERIES FUND, INC. Notes to Financial Statements DECEMBER 31, 1998 NOTE 6 -- Interest income and discounts earned are recorded daily on the accrual basis and dividend income is recorded on the ex-dividend date or as soon as information from foreign issuers is available. Where applicable, dividends are recorded net of foreign dividend tax. Discounts and premiums on securities purchased are amortized over the life of the respective securities when required for federal income tax purposes using the effective interest method. Securities transactions are accounted for the trade date. The basis for determining cost on sale of securities is identified cost. For the period ended December 31, 1998, transactions in securities other than money market investments were:
U.S. GOVT U.S. GOVT TOTAL SECURITY SECURITY TOTAL SECURITY SECURITY SALES/ SALES/ PORTFOLIOS PURCHASES PURCHASES MATURITIES MATURITIES - ---------------------------------------------------------- --------------- -------------- --------------- -------------- Aggressive Growth Stock................................... $ 494,286,839 $ -- $ 498,668,396 $ -- International Equity...................................... 194,391,889 -- 242,088,311 -- Growth Stock.............................................. 127,830,431 -- 62,233,240 -- Growth and Income Stock................................... 839,516,702 -- 735,710,238 -- Index 500 Stock........................................... 289,575,538 -- 41,383,764 -- Balanced.................................................. 1,160,320,109 528,782,629 1,201,082,980 377,671,643 High Yield Bond........................................... 309,136,258 -- 257,337,234 -- Select Bond............................................... 481,394,554 157,848,606 423,532,859 151,008,239
NOTE 7 -- The Series Fund and its Portfolios are parties to annually renewable contracts pursuant to which each Portfolio pays a charge for investment management and administrative services. Each Portfolio pays a monthly fee for these investment advisory services at an annual rate based on the average daily net asset values of each Portfolio. For the Index 500 Stock Portfolio the rate is .20%, 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 $50 NEXT $50 PORTFOLIOS MILLION MILLION EXCESS - --------------------------------- ----------- ----------- ----------- Aggressive Growth Stock.......... .80% .65% .50% International Equity............. .85% .65% .65% Growth Stock..................... .60% .50% .40% Growth and Income Stock.......... .70% .60% .55% High Yield Bond.................. .60% .50% .40%
These amounts are paid to Northwestern Mutual Investment Services, LLC ("NMIS") a wholly-owned subsidiary of Northwestern Mutual, which is the manager and investment adviser of the Fund. Northwestern Mutual is also a party to the agreement. Other costs for each Portfolio are paid either by the Portfolios, Northwestern Mutual, or NMIS depending upon the applicable agreement in place. Certain Portfolios pay a portion of their custodian fees indirectly through expense offset arrangements. Custodian fees are reduced for Portfolios that maintain compensating balances in non-interest bearing accounts. The Portfolios could have invested the assets used to pay for the custodian fees, had the assets not been used in the expense offset arrangements. As of December 31, 1998, the amounts paid through expense offset arrangements are $9,752 in the Aggressive Growth Stock Portfolio, $3,630 in the Growth Stock Portfolio, $3,143 in the Growth and Income Stock Portfolio, $4,031 in the Index 500 Portfolio and $5,010 in the High Yield Bond Portfolio. J. P. Morgan Investment Management, Inc. ("J. P. Morgan") and Templeton Investment Counsel, Inc. ("Templeton Counsel") have been retained under an investment sub-advisory agreement to provide investment advice and, in general, to conduct the management investment program of the Growth and Income Stock Portfolio and the International Equity Portfolio, respectively. NMIS pays J. P. Morgan .45% on the first $100 million of the combined net assets for all funds managed for Northwestern Mutual by J. P. Morgan, .40% on the next $100 million, .35% on the next $200 million and .30% in excess of $400 million. NMIS pays Templeton Counsel .50% on the first $100 million of the combined net assets for all funds managed for Northwestern Mutual by Templeton Counsel and .40% in excess of $100 million. NOTE 8 -- The Series Fund has elected to be taxed as a regulated investment company meeting certain requirements under the Internal Revenue Code. Since it expects to distribute all net investment income and net realized capital gains, the Series Fund anticipates incurring no federal income taxes. Taxable distributions from net investment income and realized capital gains in the Portfolios differ from book amounts earned during the period due to differences in the timing of capital recognition and due to the reclassification of certain gains or losses from capital to income. The differences between cost amounts for book purposes and tax purposes are due to treatment of deferred losses. It is the policy of the Series Fund to reclassify the net effect of permanent differences between book and taxable income to capital accounts on the statements of assets and liabilities. For Federal income tax purposes, the High Yield Bond Portfolio has a net realized capital loss of $2,519,798 which will -- 79 NORTHWESTERN MUTUAL SERIES FUND, INC. Notes to Financial Statements DECEMBER 31, 1998 be carried forward to offset future net realized capital gains. The amount expires in 2006. For Federal income tax purposes, net unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gains (losses). NOTE 9 -- Dividends from net investment income and net realized capital gains are declared each year for the Aggressive Growth Stock, International Equity, Growth Stock, Growth and Income Stock, Index 500 Stock, Balanced, High Yield Bond and Select Bond Portfolios and each business day for the Money Market Portfolio. NOTE 10 -- Effective April 1, 1996, Northwestern Mutual voluntarily reimburses the International Equity Portfolio for the benefit Northwestern Mutual receives from foreign dividend taxes charged against the Portfolio. The amount reimbursed represents approximately 65% of the foreign dividend tax withheld from the Portfolio. Reimbursements are recorded when foreign dividend taxes are accrued. This voluntary reimbursement for the years ended December 31, 1998 and 1997 was $1,235,277 and $1,313,579, respectively. -- 80 VARIABLE LIFE ACCOUNTANTS' REPORT [LOGO] Report of Independent Accountants To The Northwestern Mutual Life Insurance Company and Policyowners of Northwestern Mutual Variable Life Account In our opinion, the accompanying combined statement of assets and liabilities and the related combined and separate statements of operations and changes in equity present fairly, in all material respects, the financial position of Northwestern Mutual Variable Life Account and Aggressive Growth Stock Division, International Equity Division, Growth Stock Division, Growth and Income Stock Division, Index 500 Stock Division, Balanced Division, High Yield Bond Division, Select Bond Division, and the Money Market Division thereof at December 31, 1998, the results of each of their operations and the changes in each of their equity for each of the two years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of The Northwestern Mutual Life Insurance Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included direct confirmation of the number of shares owned at December 31, 1998 with Northwestern Mutual Series Fund, Inc., provide a reasonable basis for the opinion expressed above. [SIG] Milwaukee, Wisconsin January 25, 1999 -- 81 VARIABLE LIFE FINANCIAL STATEMENTS NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Financial Statements DECEMBER 31, 1998 STATEMENT OF ASSETS AND LIABILITIES (IN THOUSANDS) ASSETS Investments at Market Value: Northwestern Mutual Series Fund, Inc. Aggressive Growth Stock 34,420 shares (cost $102,404).............. $ 119,230 International Equity 46,760 shares (cost $73,163)............... 78,416 Growth Stock 29,383 shares (cost $49,267)............... 66,025 Growth and Income Stock 43,428 shares (cost $60,081)............... 70,528 Index 500 Stock 58,115 shares (cost $126,062).............. 191,141 Balanced 71,092 shares (cost $108,217).............. 158,110 High Yield Bond 15,509 shares (cost $16,804)............... 14,516 Select Bond 10,143 shares (cost $12,181)............... 12,669 Money Market 39,300 shares (cost $39,300)............... 39,300 $ 749,935 --------- Due from Sale of Fund Shares.................................. 95 Due from Northwestern Mutual Life Insurance Company........... 328 --------- Total Assets.................................................. $ 750,358 --------- --------- LIABILITIES Due to Northwestern Mutual Life Insurance Company........... $ 95 Due on Purchase of Fund Shares.............................. 328 --------- Total Liabilities....................................... 423 --------- EQUITY (NOTE 8) Variable Life Policies Issued Before October 11, 1995....... 392,772 Variable Complife Policies Issued On or After October 11, 1995....................................................... 356,862 Variable Executive Life Policies Issued On or After March 2, 1998....................................................... 301 --------- Total Equity............................................ 749,935 --------- Total Liabilities and Equity............................ $ 750,358 --------- ---------
The Accompanying Notes are an Integral Part of the Financial Statements -- 82 VARIABLE LIFE FINANCIAL STATEMENTS NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Statements of Operations and Changes in Equity (IN THOUSANDS)
AGGRESSIVE GROWTH INTERNATIONAL EQUITY COMBINED STOCK DIVISION 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, 1998 1997 1998 1997 1998 1997 ------------- ------------- ------------- ------------- ------------- ------------- INVESTMENT INCOME Dividend Income............... $ 24,922 $ 24,262 $ 3,287 $3,345 $ 3,591 $ 1,286 Mortality and Expense Risks... 2,755 1,788 424 271 308 197 Taxes......................... 1,178 767 181 116 132 85 ------------- ------------- ------------- ------------- ------------- ------------- Net Investment Income......... 20,989 21,707 2,682 2,958 3,151 1,004 ------------- ------------- ------------- ------------- ------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized Gain on Investments............... 4,332 4,871 523 231 284 203 Unrealized Appreciation (Depreciation) of Investments During the Period.................... 68,780 42,532 4,928 5,109 (1,424) 2,358 ------------- ------------- ------------- ------------- ------------- ------------- Net Gain (Loss) on Investments............... 73,112 47,403 5,451 5,340 (1,140) 2,561 ------------- ------------- ------------- ------------- ------------- ------------- Increase in Equity Derived from Investment Activity.................. 94,101 69,110 8,133 8,298 2,011 3,565 ------------- ------------- ------------- ------------- ------------- ------------- EQUITY TRANSACTIONS Policyowners' Net Deposits.................. 258,672 170,672 30,145 21,502 20,672 12,656 Policy Loans, Surrenders, and Death Benefits........ (37,427) (23,728) (6,454) (4,003) (4,327) (2,787) Mortality and Other (net)... (39,611) (28,427) (5,193) (3,791) (3,785) (2,368) Transfers from Other Divisions................. 133,775 86,366 20,371 19,008 15,743 14,866 Transfers to Other Divisions................. (133,773) (86,366) (6,419) (4,091) (5,013) (2,149) ------------- ------------- ------------- ------------- ------------- ------------- Increase in Equity Derived from Equity Transactions.... 181,636 118,517 32,450 28,625 23,290 20,218 ------------- ------------- ------------- ------------- ------------- ------------- Net Increase in Equity........ 275,737 187,627 40,583 36,923 25,301 23,783 EQUITY Beginning of Year........... 474,198 286,571 78,647 41,724 53,116 29,333 ------------- ------------- ------------- ------------- ------------- ------------- End of Year................. $749,935 $474,198 $119,230 $78,647 $78,417 $53,116 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
The Accompanying Notes are an Integral Part of the Financial Statements --- 83 NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Statements of Operations and Changes in Equity (IN THOUSANDS)
GROWTH & INCOME INDEX 500 GROWTH STOCK DIVISION STOCK DIVISION 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, 1998 1997 1998 1997 1998 1997 ------------- ------------- ------------- ------------- ------------- ------------- INVESTMENT INCOME Dividend Income............... $ 956 $ 1,413 $ 537 $ 7,776 $ 4,530 $ 2,579 Mortality and Expense Risks... 211 105 234 120 671 395 Taxes......................... 91 45 100 52 287 169 ------------- ------------- ------------- ------------- ------------- ------------- Net Investment Income......... 654 1,263 203 7,604 3,572 2,015 ------------- ------------- ------------- ------------- ------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized Gain on Investments............... 143 172 220 173 1,125 2,375 Unrealized Appreciation (Depreciation) of Investments During the Period.................... 10,533 4,151 10,574 (1,823) 31,738 17,772 ------------- ------------- ------------- ------------- ------------- ------------- Net Gain (Loss) on Investments............... 10,676 4,323 10,794 (1,650) 32,863 20,147 ------------- ------------- ------------- ------------- ------------- ------------- Increase in Equity Derived from Investment Activity.................. 11,330 5,586 10,997 5,954 36,435 22,162 ------------- ------------- ------------- ------------- ------------- ------------- EQUITY TRANSACTIONS Policyowners' Net Deposits.................. 12,991 7,334 14,771 7,537 29,665 19,733 Policy Loans, Surrenders, and Death Benefits........ (2,859) (1,314) (2,902) (1,842) (8,924) (5,039) Mortality and Other (net)... (2,494) (1,329) (2,847) (1,457) (5,367) (4,127) Transfers from Other Divisions................. 16,839 8,851 17,225 10,673 37,076 20,024 Transfers to Other Divisions................. (2,015) (1,341) (3,106) (1,104) (5,443) (3,783) ------------- ------------- ------------- ------------- ------------- ------------- Increase in Equity Derived from Equity Transactions.... 22,462 12,201 23,141 13,807 47,007 26,808 ------------- ------------- ------------- ------------- ------------- ------------- Net Increase in Equity........ 33,792 17,787 34,138 19,761 83,442 48,970 EQUITY Beginning of Year........... 32,233 14,446 36,389 16,628 107,699 58,729 ------------- ------------- ------------- ------------- ------------- ------------- End of Year................. $66,025 $32,233 $70,527 $36,389 $191,141 $107,699 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
The Accompanying Notes are an Integral Part of the Financial Statements --- 84 NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Statements of Operations and Changes in Equity (IN THOUSANDS)
BALANCED DIVISION HIGH YIELD BOND DIVISION SELECT BOND 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, 1998 1997 1998 1997 1998 1997 ------------- ------------- ------------- ------------- ------------- ------------- INVESTMENT INCOME Dividend Income............... $ 8,344 $ 5,105 $ 1,489 $1,370 $ 743 $ 436 Mortality and Expense Risks... 681 558 53 29 51 35 Taxes......................... 292 239 22 12 22 15 ------------- ------------- ------------- ------------- ------------- ------------- Net Investment Income......... 7,371 4,308 1,414 1,329 670 386 ------------- ------------- ------------- ------------- ------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized Gain on Investments............... 1,893 1,655 47 26 97 36 Unrealized Appreciation (Depreciation) of Investments During the Period.................... 14,317 15,262 (1,828) (531) (58) 234 ------------- ------------- ------------- ------------- ------------- ------------- Net Gain (Loss) on Investments............... 16,210 16,917 (1,781) (505) 39 270 ------------- ------------- ------------- ------------- ------------- ------------- Increase in Equity Derived from Investment Activity.................. 23,581 21,225 (367) 824 709 656 ------------- ------------- ------------- ------------- ------------- ------------- EQUITY TRANSACTIONS Policyowners' Net Deposits.................. 17,811 15,394 3,490 1,922 2,004 1,820 Policy Loans, Surrenders, and Death Benefits........ (8,879) (7,260) (690) (349) (620) (311) Mortality and Other (net)... (3,232) (3,395) (641) (339) (250) (560) Transfers from Other Divisions................. 7,905 4,266 5,399 3,276 3,951 2,000 Transfers to Other Divisions................. (5,398) (4,734) (1,476) (425) (2,217) (756) ------------- ------------- ------------- ------------- ------------- ------------- Increase in Equity Derived from Equity Transactions.... 8,207 4,271 6,082 4,085 2,868 2,193 ------------- ------------- ------------- ------------- ------------- ------------- Net Increase in Equity........ 31,788 25,496 5,715 4,909 3,577 2,849 EQUITY Beginning of Year........... 126,322 100,826 8,801 3,892 9,092 6,243 ------------- ------------- ------------- ------------- ------------- ------------- End of Year................. $158,110 $126,322 $14,516 $8,801 $12,669 $9,092 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- MONEY MARKET DIVISION ----------------------------- YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1998 1997 ------------- ------------- INVESTMENT INCOME Dividend Income............... $ 1,445 $ 952 Mortality and Expense Risks... 122 78 Taxes......................... 51 34 ------------- ------------- Net Investment Income......... 1,272 840 ------------- ------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized Gain on Investments............... -- -- Unrealized Appreciation (Depreciation) of Investments During the Period.................... -- -- ------------- ------------- Net Gain (Loss) on Investments............... -- -- ------------- ------------- Increase in Equity Derived from Investment Activity.................. 1,272 840 ------------- ------------- EQUITY TRANSACTIONS Policyowners' Net Deposits.................. 127,123 82,774 Policy Loans, Surrenders, and Death Benefits........ (1,772) (823) Mortality and Other (net)... (15,802) (11,061) Transfers from Other Divisions................. 9,266 3,402 Transfers to Other Divisions................. (102,686) (67,983) ------------- ------------- Increase in Equity Derived from Equity Transactions.... 16,129 6,309 ------------- ------------- Net Increase in Equity........ 17,401 7,149 EQUITY Beginning of Year........... 21,899 14,750 ------------- ------------- End of Year................. $39,300 $21,899 ------------- ------------- ------------- -------------
The Accompanying Notes are an Integral Part of the Financial Statements --- 85 NOTES TO FINANCIAL STATEMENTS NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Notes to Financial Statements DECEMBER 31, 1998 NOTE 1 -- Northwestern Mutual Variable Life Account (the "Account") is registered as a unit investment trust under the Investment Company Act of 1940 and is a segregated asset account of The Northwestern Mutual Life Insurance Company ("Northwestern Mutual") used to fund variable life insurance policies. NOTE 2 -- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principal accounting policies are summarized below. NOTE 3 -- All assets of each Division of the Account are invested in shares of the corresponding Portfolio of Northwestern Mutual Series Fund, Inc. (the "Fund"). The shares are valued at the Fund's offering and redemption price per share. The Fund is a diversified open-end investment company registered under the Investment Company Act of 1940. NOTE 4 -- Dividend income from the Fund is recorded on the record date of the dividends. Transactions in Fund shares are accounted for on the trade date. The basis for determining cost on sale of Fund shares is identified cost. Purchases and sales of Fund shares for the year ended December 31, 1998 by each Division are shown below:
PURCHASES SALES ------------ ------------ Aggressive Growth Division....... $ 36,381,397 $ 1,248,015 International Equity Division.... 27,429,118 990,001 Growth Stock Division............ 23,393,892 279,458 Growth & Income Stock Division....................... 24,059,882 715,896 Index 500 Stock Division......... 52,625,759 2,046,627 Balanced Division................ 20,647,579 5,068,597 High Yield Bond Division......... 8,131,249 635,946 Select Bond Division............. 5,351,461 1,813,834 Money Market Division............ 47,332,350 29,930,945
NOTE 5 -- A deduction for mortality and expense risks is determined daily and paid to Northwestern Mutual. Generally, for Variable Life policies issued before October 11, 1995, and Variable Complife policies issued on or after October 11, 1995 the deduction is at an annual rate of .50% and .60%, respectively, of the net assets of the Account. A deduction for the mortality and expense risks for the Variable Executive Life policies issued on or after March 3, 1998 is determined monthly at an annual rate of .75% of the amount invested in the Account for the Policy for the first ten Policy years, and .30% thereafter. The mortality risk is that insureds may not live as long as estimated. The expense risk is that expenses of issuing and administering the policies may exceed the estimated costs. Certain deductions are also made from the annual, single or other premiums before amounts are allocated to the Account. These deductions are for (1) sales load, (2) administrative expenses, (3) taxes and (4) a risk charge for the guaranteed minimum death benefit. Additional mortality costs are deducted from the policy annually and are paid to Northwestern Mutual to cover the cost of providing insurance protection. This cost is actuarially calculated based upon the insured's age, the 1980 Commissioners Standard Ordinary Mortality Table and the amount of insurance provided under the policy. NOTE 6 -- Northwestern Mutual is taxed as a "life insurance company" under the Internal Revenue Code. The variable life insurance policies which are funded in the Account are taxed as part of the operations of Northwestern Mutual. Policies provide that a charge for taxes may be made against the assets of the Account. Generally, for Variable Life policies issued before October 11, 1995, Northwestern Mutual charges the Account at an annual rate of .20% of the Account's net assets and reserves the right to increase, decrease or eliminate the charge for taxes in the future. Generally, for Variable Complife policies issued on or after October 11, 1995, and for Variable Executive Life policies issued on or after March 3, 1998, there is no charge being made against the assets of the Account for federal income taxes, but Northwestern Mutual reserves the right to charge for taxes in the future. NOTE 7 -- The Account is credited for the policyowners' net annual premiums at the respective policy anniversary dates regardless of when policyowners actually paid their premiums. Northwestern Mutual's equity represents any unpaid portion of net annual premiums. This applies to Variable Life and Variable Complife policies only. -- 86 NORTHWESTERN MUTUAL VARIABLE LIFE ACCOUNT Notes to Financial Statements (in thousands) DECEMBER 31, 1998 NOTE 8 -- Equity Values by Division are shown below:
VARIABLE LIFE POLICIES ISSUED BEFORE OCTOBER 11, 1995 EQUITY OF: ------------------------ TOTAL POLICYOWNERS NML EQUITY ------------- --------- --------- Aggressive Growth Stock Division......................................................... $ 42,391 $ 3,793 $ 46,184 International Equity Division............................................................ 32,539 3,074 35,613 Growth Stock Division.................................................................... 22,888 1,510 24,398 Growth and Income Stock Division......................................................... 26,309 1,808 28,117 Index 500 Stock Division................................................................. 95,615 4,943 100,558 Balanced Division........................................................................ 134,029 5,006 139,035 High Yield Bond Division................................................................. 4,916 428 5,344 Select Bond Division..................................................................... 6,911 417 7,328 Money Market Division.................................................................... 5,918 277 6,195 ------------- --------- --------- $ 371,516 $ 21,256 $ 392,772 ------------- --------- --------- ------------- --------- ---------
VARIABLE COMPLIFE POLICIES ISSUED ON OR AFTER OCTOBER 11, 1995 EQUITY OF: ------------------------ TOTAL POLICYOWNERS NML EQUITY ------------- --------- --------- Aggressive Growth Stock Division........................................................ $ 54,132 $ 18,846 $ 72,978 International Equity Division........................................................... 31,302 11,492 42,794 Growth Stock Division................................................................... 30,575 11,026 41,601 Growth and Income Stock Division........................................................ 30,515 11,841 42,356 Index 500 Stock Division................................................................ 65,609 24,890 90,499 Balanced Division....................................................................... 14,142 4,909 19,051 High Yield Bond Division................................................................ 6,565 2,594 9,159 Select Bond Division.................................................................... 4,161 1,171 5,332 Money Market Division................................................................... 13,154 19,938 33,092 ------------- --------- --------- $ 250,155 $ 106,707 $ 356,862 ------------- --------- --------- ------------- --------- ---------
VARIABLE EXECUTIVE LIFE POLICIES ISSUED ON OR AFTER MARCH 2, 1998 ------------------------- TOTAL EQUITY ------------------------- Aggressive Growth Stock Division...................................................................... $ 67 International Equity Division......................................................................... 10 Growth Stock Division................................................................................. 25 Growth and Income Stock Division...................................................................... 55 Index 500 Stock Division.............................................................................. 84 Balanced Division..................................................................................... 24 High Yield Bond Division.............................................................................. 13 Select Bond Division.................................................................................. 9 Money Market Division................................................................................. 14 ----- $ 301 ----- -----
-- 87 NOTES -- 88 NORTHWESTERN MUTUAL LIFE-REGISTERED TRADEMARK- P. O. Box 3220 Milwaukee, Wisconsin 53201-3220 Fax: (414) 299-4268 APPLICABLE ONLY FOR VARIABLE COMPLIFE, VARIABLE WHOLE LIFE, VARIABLE EXTRA ORDINARY LIFE & VARIABLE SINGLE PREMIUM LIFE VARIABLE LIFE TRANSFER / ALLOCATION / DOLLAR COST AVERAGING POLICYOWNER SERVICES Insured Policy Number Date GA# SA# Business Number: Home Number:
A TOTAL OF SIX DIVISIONS MAY BE ELECTED WITH A MINIMUM OF 10% IN EACH DIVISION. THIS APPLIES TO EXISTING ASSETS, FUTURE ALLOCATIONS AND DOLLAR COST AVERAGING. 1. REDISTRIBUTION OF EXISTING ASSETS: Complete this section if you want to redistribute the money already invested. Future investments will continue to be allocated as they were prior to the transfer, unless section 2 is completed. INVESTMENT DIVISIONS CHANGE TO Select Bond ------------% International Equity ------------% Money Market ------------% Balanced ------------% Index 500 Stock ------------% Aggressive Growth Stock ------------% High Yield Bond ------------% Growth Stock ------------% Growth and Income Stock ------------% Total ----100 ----% 2. ALLOCATION OF FUTURE PREMIUM/DIVIDENDS: Complete this section to change where your future Premium/ Dividends are invested. Allocations of future investments will be effective with the next Premium/Dividend deposit. ALLOCATION OF FUTURE INVESTMENT DIVISIONS PREMIUMS/DIVIDENDS Select Bond ------------% International Equity ------------% Money Market ------------% Balanced ------------% Index 500 Stock ------------% Aggressive Growth Stock ------------% High Yield Bond ------------% Growth Stock ------------% Growth and Income Stock ------------% Total ----100 ----% 3. DOLLAR COST AVERAGING (DCA): FOR VCL ONLY Effective date for the first DCA transfer. / / The month following the date this form is signed. Must have assets in Money Market on that date. Choose Money Market in section 1 and Money Market in section 2 / / With the next Premium/Dividend deposit, choose Money Market in section 2. How would you like the fund transferred? Choose one: Option One: / / Transfer in monthly installments so that at year end, Money Market valance will be zero. Option Two: / / Specified amount to be transferred monthly of $ ----------------. Select Bond ------------% International Equity ------------% Balanced ------------% Index 500 Stock ------------% Aggressive Growth Stock ------------% High Yield Bond ------------% Growth Stock ------------% Growth and Income Stock ------------% Total ----100 ----% 4. TERMINATION OF DOLLAR COST AVERAGING: / / IMMEDIATELY / / NEXT POLICY ANNIVERSARY Any existing funds will remain in the Money Market Division unless you elect to transfer assets. Future premium and dividends will be allocated on the policy anniversary date according to your allocation instructions.
5. SPECIAL INSTRUCTIONS: - -------------------------------------------------------------------------------- ------------------------------------------------------------------------------ 6. EFFECTIVE DATE: This asset transfer and/or allocation of future investments shall be effective on the date it is received (complete and signed) at NML's Home Office. Forms received prior to 3:00 p.m. Central time will be effective on the day of receipt. 7. SIGNATURE OF OWNER(S)/TRUSTEE REQUIRED (TITLE MUST BE INCLUDED): - ------------------------------ Date signed ------------------------------ - ------------------------------- Date signed ------------------------------ 18-1425 (2/96) WORD 6 - 89 ADDITIONAL INFORMATION 1. REDISTRIBUTION OF EXISTING ASSETS: The Owner may transfer the assets invested for a Variable Life or Variable CompLife policy to any of the Divisions, as long as these assets, following the transfer, are allocated among not more than six Divisions. Transfers may be made as often as twelve times in a policy year. 2. ALLOCATION OF FUTURE PREMIUM/DIVIDENDS: Allocation of the first net annual premium will be allocated to the Money Market Division until the Initial Allocation Date. On the Initial Allocation Date, amounts in the Money Market Division will be allocated in accordance with the application. 3. DOLLAR COST AVERAGING (DCA): If DCA is chosen, Money Market must be one of the Divisions elected for future premium/dividend allocation. A total of six Divisions may be elected between current and future assets and DCA. 4. TERMINATION OF DOLLAR COST AVERAGING (DCA): Any assets still in the Money Market Division will remain, unless YOU elect to transfer them. HOW TO SUBMIT THIS FORM FIRST CLASS MAIL Please mail form to Northwestern Mutual Life, P.O. Box 3220, Milwaukee, WI 53201-3220. FAX The properly completed and signed form may be FAXed to the Home Office at 414-299-4268. The original form is NOT needed. Please keep it for your records. SIGNATURE INSTRUCTIONS SIGNATURE BY OWNER All Owners must sign their name as it appears in the policy contract. If the Owner's name has changed since the policy was issued, he/she should add his/her present surname to his/her name as it appears in the policy contract. SIGNATURE BY ASSIGNEE If the policy is assigned, the assignee must sign the form. See rules below if the assignee is a corporation, partnership or trust. SIGNATURE ON BEHALF OF CORPORATION If the policyowner is a corporation, an officer of the corporation must sign on behalf of the corporation with his/her title. The name of the corporation must appear above the signature. SIGNATURE ON BEHALF OF PARTNERSHIP If the policyowner is a partnership, the name of the partnership must appear above the signature. A partner other than the Insured must sign. SIGNATURE ON BEHALF OF TRUST If the partnership is a trust, the authorized Trustee must sign his/her name, followed by the word "Trustee." The name of the trust must appear above the signature. ---- 90 VARIABLE EXECUTIVE LIFE [LOGO] SEND TO: ADVANCED BUSINESS SERVICES - E13 NORTHWESTERN MUTUAL LIFE INS CO 720 East Wisconsin Avenue 720 E. WISCONSIN AVENUE Milwaukee, Wisconsin 53202 MILWAUKEE, WI 53202 ASSET TRANSFER / PREMIUM ALLOCATION / DOLLAR COST AVERAGING Policy Number(s)*: Insured Name(s): Group ID Number: Group Name: Owner Name*
* USE A SEPARATE FORM FOR EACH OWNER. A LISTING OF POLICIES CAN BE ATTACHED WHEN THE SAME TRANSACTION IS BEING REQUESTED ON SEVERAL POLICIES. IF SAME CHANGE DOES NOT APPLY TO ALL POLICIES IN THE GROUP, ATTACH A SEPARATE LISTING. - -------------------------------------------------------------------------------- SECTION 1 - ASSET TRANSFER: This transfer does not impact the allocation of any future premiums. To change how future premiums are invested, complete SECTION 2 below. To transfer the entire amount in a division, indicate "ALL". TRANSFER FROM: (SELECT ONE) TRANSFER TO: (SELECT ONE) DOLLAR PERCENT NUMBER DOLLAR AMOUNT PERCENT INVESTMENT DIVISIONS AMOUNT (WHOLE % ONLY) OF UNITS (IF FROM DOLLARS) (WHOLE % ONLY) Money Market $ % $ % Aggressive Growth Stock $ % $ % Balanced $ % $ % Growth & Income Stock $ % $ % Growth Stock $ % $ % High Yield Bond $ % $ % Index 500 Stock $ % $ % International Equity $ % $ % Select Bond $ % $ % TOTAL $ N/A $ 100% TOTAL DOLLARS MUST BE EQUAL
- -------------------------------------------------------------------------------- SECTION 2 - ALLOCATION OF FUTURE PREMIUM: Complete this section to change where future premiums are invested. PERCENT INVESTMENT DIVISIONS (WHOLE % ONLY) Money Market % Aggressive Growth Stock % Balanced % Growth & Income Stock % Growth Stock % High Yield Bond % Index 500 Stock % International Equity % Select Bond % TOTAL 100% (TOTAL MUST ADD UP TO 100%)
- 91 - -------------------------------------------------------------------------------- SECTION 3 - DOLLAR COST AVERAGING (DCA): REQUESTED AMOUNT TO BE TRANSFERRED MONTHLY OF $__________. (THE FIRST DCA TRANSFER WILL OCCUR ON THE NEXT MONTHLY PROCESSING DATE OF THE POLICY. YOU MUST HAVE ASSETS IN THE MONEY MARKET DIVISION BY THAT DATE. DCA IS AVAILABLE ONLY FROM THE MONEY MARKET DIVISION). INDICATE WHERE DOLLAR COST AVERAGING (DCA) IS TO BE INVESTED: PERCENT INVESTMENT DIVISIONS (WHOLE % ONLY) Money Market N/A Aggressive Growth Stock % Balanced % Growth & Income Stock % Growth Stock % High Yield Bond % Index 500 Stock % International Equity % Select Bond % TOTAL 100% (TOTAL MUST ADD UP TO 100%)
- -------------------------------------------------------------------------------- SECTION 4 - TERMINATION OF DOLLAR COST AVERAGING: At termination of Dollar Cost Averaging, any existing funds will remain in the Money Market Division. / / IMMEDIATELY / / SPECIFIED DATE / / (THE NEXT MONTHLY PROCESSING DATE ON OR FOLLOWING (THE NEXT MONTHLY PROCESSING DATE ON OR FOLLOWING THE RECEIPT OF THIS REQUEST IN NML'S HOME OFFICE.) DATE SPECIFIED.) / / NEXT POLICY ANNIVERSARY
- -------------------------------------------------------------------------------- SECTION 5 - SPECIFIED DATE FOR ASSET TRANSFERS/ALLOCATION CHANGES: This asset transfer and/ or allocation of future premiums shall be effective on _____________ (INSERT SPECIFIED FUTURE DATE IF DESIRED). If no date is specified, or if this form is not received at NML's Home Office on or prior to the close of the New York Stock Exchange on the specified date, this transfer shall be effective on the date this form is received (complete and signed) at NML's Home Office. - -------------------------------------------------------------------------------- SECTION 6 - SPECIAL INSTRUCTIONS: - -------------------------------------------------------------------------------- SECTION 7 - SIGNATURE OF OWNER(S)/TRUSTEE REQUIRED (TITLE MUST BE INCLUDED): OWNER/TRUSTEE: DATE SIGNED: PRINT OR TYPE NAME AND TITLE OWNER/TRUSTEE: DATE SIGNED: PRINT OR TYPE NAME AND TITLE ASSIGNEE, IF DATE SIGNED: ANY:
Rev 12/98 --- 92 VARIABLE JOINT LIFE [LOGO] SEND TO: ADVANCED BUSINESS SERVICES - E13 NORTHWESTERN MUTUAL LIFE INS CO 720 E. WISCONSIN AVENUE 720 East Wisconsin Avenue MILWAUKEE, WI 53202 Milwaukee, Wisconsin 53202 ASSET TRANSFER / PREMIUM ALLOCATION / DOLLAR COST AVERAGING Policy Number(s)*: Insured Name(s): Owner Name*
* USE A SEPARATE FORM FOR EACH OWNER. - -------------------------------------------------------------------------------- SECTION 1 - ASSET TRANSFER: This transfer does not impact the allocation of any future premiums. To change how future premiums are invested, complete SECTION 2 below. To request a future effective date, complete SECTION 5. INDICATE WHERE TO TRANSFER TO: PERCENT INVESTMENT DIVISIONS (WHOLE % ONLY) Money Market % Aggressive Growth Stock % Balanced % Growth & Income Stock % Growth Stock % High Yield Bond % Index 500 Stock % International Equity % Select Bond % TOTAL 100% (TOTAL MUST ADD UP TO 100%)
- -------------------------------------------------------------------------------- SECTION 2 - ALLOCATION OF FUTURE PREMIUM: Complete this section to change where future premiums are invested. To request a future effective date, complete SECTION 5. INDICATE WHERE TO INVEST FUTURE PREMIUMS: PERCENT INVESTMENT DIVISIONS (WHOLE % ONLY) Money Market % Aggressive Growth Stock % Balanced % Growth & Income Stock % Growth Stock % High Yield Bond % Index 500 Stock % International Equity % Select Bond % TOTAL 100% (TOTAL MUST ADD UP TO 100%)
- 93 - -------------------------------------------------------------------------------- SECTION 3 - DOLLAR COST AVERAGING (DCA): CHOOSE ONE OPTION: / / OPTION ONE: Transfer in monthly installments so that on the policy anniversary the Money Market balance will be zero. / / OPTION TWO: Requested amount to be transferred monthly of $_____________. (THE FIRST DCA TRANSFER WILL OCCUR ON THE NEXT MONTHLY PROCESSING DATE OF THE POLICY. YOU MUST HAVE ASSETS IN THE MONEY MARKET DIVISION BY THAT DATE. DCA IS AVAILABLE ONLY FROM THE MONEY MARKET DIVISION). INDICATE WHERE DOLLAR COST AVERAGING (DCA) IS TO BE INVESTED: PERCENT INVESTMENT DIVISIONS (WHOLE % ONLY) Money Market N/A Aggressive Growth Stock % Balanced % Growth & Income Stock % Growth Stock % High Yield Bond % Index 500 % International Equity % Select Bond % TOTAL 100% (TOTAL MUST ADD UP TO 100%)
- -------------------------------------------------------------------------------- SECTION 4 - TERMINATION OF DOLLAR COST AVERAGING: At termination of Dollar Cost Averaging, any existing funds will remain in the Money Market Division. / / IMMEDIATELY / / SPECIFIED DATE / / (THE NEXT MONTHLY PROCESSING DATE ON OR FOLLOWING (THE NEXT MONTHLY PROCESSING DATE ON OR FOLLOWING THE RECEIPT OF THIS REQUEST IN NML'S HOME OFFICE.) DATE SPECIFIED.) / / NEXT POLICY ANNIVERSARY
- -------------------------------------------------------------------------------- SECTION 5 - SPECIFIED DATE FOR ASSET TRANSFERS/ALLOCATION CHANGES: This asset transfer and/ or allocation of future premiums shall be effective on _____________ (INSERT SPECIFIED FUTURE DATE IF DESIRED). If no date is specified, or if this form is not received at NML's Home Office on or prior to the close of the New York Stock Exchange on the specified date, this transfer shall be effective on the date this form is received (complete and signed) at NML's Home Office. - -------------------------------------------------------------------------------- SECTION 6 - SPECIAL INSTRUCTIONS: - -------------------------------------------------------------------------------- SECTION 7 - SIGNATURE OF OWNER(S)/TRUSTEE REQUIRED (TITLE MUST BE INCLUDED): OWNER/TRUSTEE: DATE SIGNED: PRINT OR TYPE NAME AND TITLE OWNER/TRUSTEE: DATE SIGNED: PRINT OR TYPE NAME AND TITLE ASSIGNEE, IF DATE SIGNED: ANY:
Rev 12/98 --- 94 NOTES -- 95 NOTES -- 96 DIRECTORS AND OFFICERS NORTHWESTERN MUTUAL SERIES FUND, INC. DIRECTORS JAMES D. ERICSON .... PRESIDENT AND CHIEF EXECUTIVE OFFICER, NORTHWESTERN MUTUAL LIFE, ..................................................................... MILWAUKEE MARTIN F. STEIN ................ CHAIRMAN OF THE BOARD, EYECARE ONE CORPORATION, ..................................................................... MILWAUKEE JOHN K. MACIVER ........... PARTNER, MICHAEL BEST & FRIEDRICH, ATTORNEYS AT LAW, ..................................................................... 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 JAMES D. ERICSON ..................................................... PRESIDENT MARK G. DOLL ........................................ VICE PRESIDENT & TREASURER MERRILL C. LUNDBERG .................................................. SECRETARY BARBARA E. COURTNEY ................................................. CONTROLLER --- 97 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 Life Variable Life policies are sold through individuals who, in addition to being licensed life insurance agents of Northwestern Mutual Life, are registered representatives of Northwestern Mutual Investment Services, LLC, a wholly-owned subsidiary of Northwestern Mutual Life and a registered broker-dealer under the Securities Exchange Act of 1934 and a member of the National Association of Securities Dealers, Inc. 90-1899 (12-98) NORTHWESTERN MUTUAL LIFE-Registered Trademark- PO Box 3095 Milwaukee WI 53201-3095 Change Service Requested -----END PRIVACY-ENHANCED MESSAGE-----