<PAGE> 1
Annuity Apects
[NORTHWESTERN MUTUAL LIFE LOGO]
Variable Annuity Account B
[PHOTO]
December 31, 1999 Annual Report An Information Source For Northwestern Mutual
Life Variable Annuity Investors
AS TIME GOES BY: PERSONAL PLANNING THROUGHOUT YOUR LIFE 2
Growth Stock Fund: A Manager's View 6 Virtues To Invest By 7 Personal Investor
Profile 9
<PAGE> 2
[Northwestern Mutual Life(R) LOGO]
January, 2000
Welcome to a brand new Annuity Aspects. You'll notice we have a fresh new look.
We think that's fitting, considering the exciting year we've had. Of course the
market has been making news, and Northwestern Mutual has been hard at work
analyzing and anticipating what's in store for the future. We're also excited
about the new funds and improved services we're offering contract owners.
[PHOTO]
In the past year we've introduced seven excellent investment opportunities.
Thanks to our purchase of the Frank Russell Company, we've added five Russell
Insurance Funds to Northwestern Mutual's family of Variable Annuity funds. We've
also introduced two new Northwestern Mutual Series Funds, the Small Cap Growth
Stock Fund and the Index 400 Stock Fund. Coupled with the existing funds, we now
have 17 funds to fit your retirement savings goals.
Recognizing your need for timely and accurate account information, we continue
to improve contract owners' services and access to information. In addition to
our existing Annuity Customer Service Center and on-line services, we're
offering our NML Express service. Call any time, day or night, to access the
latest information about your Northwestern Mutual variable contract. You can
read more about NML Express service on the back of this issue.
You can look forward to receiving Annuity Aspects twice a year as it accompanies
Northwestern Mutual Life's Variable Annuity Annual and Semi-Annual Reports. We
hope you will find each issue useful and insightful. Feel free to contact your
Northwestern Mutual Investment Services Registered Representative about any of
the information you read here.
[A]
We have a lot more in store for you this year, and we look forward to sharing it
with you in future issues. Meanwhile, we wish you happiness and prosperity in
the future.
Best Regards,
/S/ Meridee Maynard
Meridee Maynard
Vice President
Annuity & Accumulation Products Department
1 ANNUITY ASPECTS ANNUAL REPORT
<PAGE> 3
[PHOTO]
AS TIME GOES BY: PERSONAL PLANNING THROUGHOUT YOUR LIFE
The penny goes in the slot in the pig. That's about all we need to know about
finances when we're young. With age and added wealth come new responsibilities
and financial challenges. As our lives change, we must continue to re-evaluate
our financial plan to meet our short- and long-term goals. Here are just a few
suggestions that will help you take control of your finances through any stage
of life.
TWENTIES AND THIRTIES
Time is your most valuable asset at this stage in life. Establishing good
financial habits today will pay dividends for many years to come. Consulting a
professional advisor, such as a Northwestern Mutual Investment Services
Registered Representative, can help keep you on track by developing a written
Personal Planning Analysis.
ESTABLISH A SAFETY NET
It's easy to live from one paycheck to the next, but try to save 10% - 20% of
your income. Setting up automatic withdrawal from your paycheck can help you
stick to a schedule. Ideally, you should establish a three- to six-month safety
net of income to protect you should you lose your job or encounter unforeseen
expenses. It's also a good idea to have adequate disability income protection.
Once you've established your safety net, continue saving in investments that
have the potential to generate higher returns.
GET SERIOUS ABOUT RETIREMENT
It's never too early to start saving for retirement, especially since Social
Security and pensions will probably not provide enough retirement income for
your needs. Take full advantage of any 401(k) or 403(b) retirement plan offered
at work. If you qualify, supplement those savings with tax-deferred investments
like an IRA, which allows you to put aside up to $2,000 per person, per year. A
personal variable annuity also provides tax-deferred savings, but with no
contribution limits and a guaranteed lifetime income option.*
(continued)
ANNUAL REPORT ANNUITY ASPECTS 2
<PAGE> 4
[PHOTO]
(continued)
HOME SAFE HOME
If you're saving for a new home, consider keeping your down payment in a
low-risk investment that is readily available.
CONGRATULATIONS, IT'S A BUNDLE OF EXPENSES
Let's take a hypothetical example. Assume today the average cost for one year of
college is about $8,000 a year at a public university and $18,000 at a private
college. If college costs are rising 6% a year, by 2010 attending a public
university could cost $13,500, and a private university could cost an astounding
$30,406 every year. With numbers like that, it's clear you should start a
college fund as soon as you start a family. An Education IRA is a fairly new
option that lets you set aside up to $500 per year, per child. Earnings grow
tax-deferred and funds can be withdrawn tax-free for higher education. You
should also explore other investment and saving options to fund education.
PROTECTING YOUR FAMILY
When you begin your family, draft a will and choose a guardian for your
children. Make sure you have enough life insurance to protect your family should
they ever have to survive without you. The younger you are when you purchase
life insurance for yourself, the less it will cost.
FORTIES
AND FIFTIES
Although your forties are generally your high-earning years, they're also full
of financial responsibilities, like raising children, paying a mortgage and
saving for retirement. Continue to regularly reassess your portfolio with your
professional advisor to make sure you can meet all your immediate and future
needs.
PROTECTING YOUR FAMILY
What suited your family a decade ago may be inadequate now given your increased
financial responsibilities. If necessary, update your life insurance and
purchase additional disability insurance to protect your higher standard of
living.
PAYING FOR COLLEGE
Even if you've been saving for years, chances are savings alone won't cover the
cost of college. Research organizations that offer financial aid such as
scholarships and low-interest student loans. You might ask your children to
assume some responsibility for their own expenses or encourage them to
participate in a work-study program offered by the school.
RETIREMENT
Even with all your other financial responsibilities, don't ignore your own
retirement savings. Independent analysts suggest most people need a retirement
income that's 80% of their current income. Continue to take full advantage of
your 401(k), IRAs, variable annuities, and other investments such as stocks,
bonds, and mutual funds.
FIFTIES
AND BEYOND
These can be wonderful times. Typically your income is still high and your
financial responsibilities are starting to lessen. With the kids finishing
college, and your house paid off, enjoy your disposable income and look forward
to retirement years. As always, periodically re-evaluate your life insurance,
disability insurance, and retirement programs as your individual circumstances
change.
RETIREMENT
Time to put your retirement savings into high gear. If you haven't already,
consider investing in a variable annuity which is designed to provide a steady
stream of income for life.* When re-evaluating your investment portfolio, be
more conservative, but don't go overboard. Remember, your retirement could last
for 30 years.
PROTECTING YOUR FUTURE
Seventy percent of us will need some kind of long-term care in the future, such
as nursing home or in-home care.** Long-term care insurance can help pay for
these expenses, reducing the financial drain on your spouse and family, and
providing you with more choices for quality care. Benefits received will also
help keep the assets in your estate intact.
ESTATE PLANNING
Estate planning isn't just for the wealthy. It's for anyone who wants to make
sure their money goes to their loved ones, not the courts or Uncle Sam. Many
people don't realize they need an estate plan or have an estate liquidity
problem. Generally, a married couple with a net worth of $1.3 million or more
and a single individual with a net worth of $650,000 or more may have an estate
tax liquidity problem. This may seem like a lot of money, but your assets add up
quickly. An estate plan usually involves drawing up a will and setting up trusts
and insurance to minimize estate taxes and administrative expenses, and help
your heirs avoid probate. A good estate plan has the potential to ensure your
estate will pass to your heirs almost entirely intact. It provides your heirs
with the resources to pay the estate taxes without selling any of your assets.
At any age, it's important to have a plan and stay educated about all your
financial options. Continue to seek information from a variety of sources and
talk to a professional advisor on a regular basis. The more you know and the
more you plan, the more you'll be able to enjoy every stage of your life. -
* The investment return and the principal value of a variable fund will
fluctuate so that the accumulation value at maturity or surrender may be
more or less than the original cost. A lifetime income payment plan option
and the guaranteed death benefit are solely backed by Northwestern Mutual
Life's general assets, and are no reflection upon the performance or
stability of the amounts invested in the variable (non-fixed) funds.
** HIAA. "Long-Term Care: Knowing the risk, paying the price," 1992.
3 ANNUITY ASPECTS ANNUAL REPORT
<PAGE> 5
[PHOTO]
[A]
HOW LONG IS YOUR LIFETIME?
How much money you'll need for retirement depends on how long you'll
live. No one can predict for sure how many birthdays you'll celebrate, but
Northwestern Mutual Life's Longevity Game may give you a clue.
You start the game with the average life expectancy for a woman or man.
As you answer questions about factors such as diet, exercise and heredity, years
are automatically added or subtracted from your score. At the end of the game,
your score is tallied to reveal your projected life expectancy. The score isn't
meant to scare you or give you false confidence, but it can help you identify
where you could make improvements in your lifestyle.
For example, you get to add three years for being very active, but you
have to subtract three years if you lead a sedentary life. Other factors that
affect your longevity include whether or not you smoke, manage your blood
pressure regularly, and how you handle stress.
You can play the entire Longevity Game on our Web site
www.northwesternmutual.com. It's also available on CD-ROM by contacting your
Northwestern Mutual Investment Services Registered Representative. Good luck and
good health. -
HOW MUCH SOCIAL SECURITY IS IN YOUR FUTURE?
No one expects Social Security to be their main source of retirement
income, but how big (or small) of a factor will it be? So we can better plan for
our future, the government has started sending out annual Social Security
Statements.
Your statement will contain a summary of what you've contributed so far
and what you can expect to receive based on current law. Compare this
information with your overall retirement savings goals to see how much you need
to supplement with other investments.
The longer you wait to begin collecting, the more you'll receive every
month. The official Social Security Statement Web site gives the example of a
39-year-old woman with taxable earnings of $30,364 in 1998. If she stopped
working
- At age 62 her payments would be about $746 a month.
- At full retirement age (67), her payments would be about $1,096 a
month.
- At age 70, her payments would be about $1,365.
Everyone who is eligible to receive Social Security will get a
statement three months before every birthday. To find out more, visit Social
Security's "My Statement" Web site at www.ssa.gov/mystatement or call The Social
Security Administration. -
ANNUAL REPORT ANNUITY ASPECTS 4
<PAGE> 6
A FAMILY OF FUNDS FOR ANY STAGE OF LIFE
As you move through life, your investment needs change. Our mutual fund family
of Mason Street Funds(R) can help accommodate those changes with a variety of
funds for any of your investment goals, now and in the future. Choose from 11
diversified investment portfolios, ranging from very low-risk to highly
aggressive funds, including our Index 400 and Index 500 Stock Funds.
Mason Street Funds' (R) investment advisor is Northwestern Mutual Investment
Services, LLC. (NMIS), a wholly-owned subsidiary of Northwestern Mutual Life.
This includes separate accounts for Northwestern Mutual Variable Annuity
contract and Variable Life policy.
You can begin with an automatic investment plan for as little as $50 per month.
Call your Northwestern Mutual Registered Representative, who is a registered
representative of Robert W. Baird & Co. Incorporated, Distributor to arrange for
a consultation or Prospectus on Mason Street Funds(R). Together, we'll determine
the portfolio mix that fits your stage of life. -
MASON STREET FUNDS
Stock Funds
For Growth of Capital
+ Mason Street Funds(R) Aggressive Growth Stock Fund
+ Mason Street Funds(R) International Equity Fund
+ Mason Street Funds(R) Growth Stock Fund
+ Mason Street Funds(R) Small Cap Growth Stock Fund
Stock Funds
For Growth and Income
+ Mason Street Funds(R) Growth and Income Stock Fund
+ Mason Street Funds(R) Index 400 Stock Fund
+ Mason Street Funds(R) Index 500 Stock Fund
Multi-Asset Fund
For Growth and Income
+ Mason Street Funds(R) Asset Allocation Fund
Bond Funds
For Current Income
+ Mason Street Funds(R) High Yield Bond Fund
+ Mason Street Funds(R) Municipal Bond Fund
+ Mason Street Funds(R) Select Bond Fund
Robert W. Baird & Co. Incorporated, Distributor.
For more complete information about Mason Street Funds(R) or to obtain a current
Prospectus, including management fees and expenses, call a Northwestern Mutual
Investment Services Registered Representative, who is also a Registered
Representative of Robert W. Baird & Co. Incorporated, Distributor. You will want
to read the Prospectus carefully before investing.
5 ANNUITY ASPECTS ANNUAL REPORT
<PAGE> 7
[NORTHWESTERN
DECEMBER 31, 1999 MUTUAL LIFE(R) LOGO]
[The Quiet Company(T) LOGO]
------------------------------
NML Variable Annuity Account B
------------------------------
Nontax - Qualified Annuities
Individual Retirement Annuities
Roth IRAs
Simplified Employee Pension Plan IRAs
SIMPLE IRAs
Tax Deferred Annuities
457 Deferred Compensation Plan Annuities
Non-Transferable Annuities
[PHOTO]
NORTHWESTERN MUTUAL The Northwestern Mutual Life
SERIES FUND, INC. AND Insurance Company
RUSSELL INSURANCE FUNDS 720 East Wisconsin Avenue
Milwaukee, WI 53202
(414) 271-1444
A N N U A L R E P O R T
<PAGE> 8
C ONTRACT OWNER PRIVILEGES
Free Transfers Among Portfolios
You can change your investment allocation or transfer values among the
portfolios by calling the NML Express line at 800-519-4665. Also, you can Mail
or Fax the request forms to the Home Office for the same day changes.
Contract Owner Communications
NML Express gives you 24-hour access to your contract. You receive Confirmation
Statements on each transaction, VA Quarterly Summary Statements, and the Annuity
Aspects Newsletter providing financial and annuity information.
Automatic Investment Plan
You can invest via the Electronic Funds Transfer (EFT) Plan. Your bank can
transmit money safely and quickly from your bank checking or NOW account.
Automatic Dollar Cost Averaging Plan
Your money is automatically transferred from the Money Market Portfolio to any
of the other 15 variable portfolios on a monthly or quarterly basis.
Portfolio Rebalancing
To help maintain your asset allocation plan percentage over time, this service
will automatically readjust the asset allocations back to the desired specified
percentages.
Interest Sweeps
The Interest Sweep service will automatically sweep or transfer interest
earnings periodically from the Guaranteed Interest Fund to any of the 16
variable investment options.
Special Withdrawal Privilege
You can withdraw the lesser of 10% of the total contract value, or 100% of the
contract earnings without a surrender charge, if the contract has at least a
$10,000 balance, with money in a surrender category, beginning on the first
contract anniversary.
C ONTENTS
<TABLE>
<S> <C>
Letter to Contract Owners 1
Performance Summary for Separate Accounts 2
Economic Overview and Outlook 4
Series Fund Objectives and Schedule of Investments 5
Small Cap Growth Stock Portfolio 5
Aggressive Growth Stock Portfolio 8
International Equity Portfolio 11
Index 400 Stock Portfolio 15
Growth Stock Portfolio 21
Growth and Income Stock Portfolio 24
Index 500 Stock Portfolio 27
Balanced Portfolio 34
High Yield Bond Portfolio 46
Select Bond Portfolio 50
Money Market Portfolio 55
Accountants' Report 58
Statements of Assets and Liabilities 59
Statements of Operations 61
Statements of Changes in Net Assets 63
Financial Highlights 69
Notes to Series Fund Financial Statements 75
Accountants' Report 78
Account B Financial Statements 79
Notes to Account B Financial Statements 88
Directors and Officers 91
The Russell Annual Report Starts After Page 91
</TABLE>
Contents
<PAGE> 9
L ETTER TO CONTRACT OWNERS JANUARY 31, 2000
The last year of the old millennium was an exciting time of persistent economic
strength and soaring stock markets. New and rapidly changing technology and the
improved productivity it is making possible are the dominant forces behind both
the economy and the stock market. The vital importance of technology in today's
world was driven home by concerns about how the change to year 2000 dates would
affect the computers that support utilities, transportation, financial services
and other aspects of our physical and economic infrastructure. Careful
preparation appears to have paid off, as disruptions turned out to be minimal.
Driven largely by consumer spending, the U.S. economy posted real growth above
4% for the fourth consecutive year. As more and more individuals own stocks and
mutual funds, trends in the economy and the stock market are increasingly
interrelated. Consumers feel wealthy and confident because jobs seem secure and
they are making money in the stock market. They therefore spend freely, fueling
further economic growth.
Signals regarding inflation are mixed. Although rises in the Consumer Price
Index have been modest to date, rising oil prices and a tight labor market are
creating inflationary pressure. With three increases in interest rates in the
last six months, and frequent warnings that further increases are possible, the
Federal Reserve has demonstrated its determination to slow economic growth at
any sign of inflation. However, the formerly strong link between interest rates
and economic growth appears to have weakened because technology companies are
taking advantage of their escalating stock prices to raise equity capital,
rather than borrowing money to fund growth.
Many thoughtful observers believe that information technology is transforming
the economy of America and much of the world, making a higher long-term growth
rate sustainable. With the population of the United States growing at about 1%
and measured productivity now expanding at a rate of about 2%, many economists
believe that a long-term non-inflationary economic growth rate as high as 3% is
possible, up from an average of 2% to 2.5% for the prior two decades. While it
is still necessary to question how rapidly the economy can grow without igniting
inflation, it appears that the Federal Reserve's growth target is in the 3%
range. With real growth still above this level, further rate increases seem
likely in 2000.
The funds underlying Northwestern Mutual's annuity products performed in line
with their stated objectives during 1999, though several underperformed the
indices with which they are compared. The stock market's ongoing strength has
been driven mainly by dramatic increases in the prices of a relatively small
group of technology issues and other growth stocks, while share values of many
solid companies have increased only modestly or declined. In this environment,
broadly diversified portfolios tend to underperform indices, whose levels can be
dominated by performance of a small number of stocks. While most of our funds
have significant participation in technology, their emphasis on this area is not
as extreme as that of some funds.
We continue to believe strongly that diversification is the most responsible
strategy for long-term investors. As you
examine the performance of the funds underlying your
annuity holdings, we urge you to maintain a long-term
point of view and avoid being overly influenced by current
market conditions. It is a good idea to adjust your investments among portfolios
as your circumstances, needs and goals evolve, but it would be a mistake to base
your investment strategy on short-term market moves. As you evaluate your
personal financial situation, your Northwestern Mutual agent is available to
provide help as you plan for a secure future. We join our agents in thanking you
for selecting Northwestern Mutual to help you accomplish your financial goals.
The Northwestern Mutual Life
Insurance Company
JAMES A. ERICSON SIGNATURE
James D. Ericson, President and
Chief Executive Officer
[Ericson Photo]
1 Letter to Contract Owners
<PAGE> 10
PERFORMANCE SUMMARY As of December 31, 1999
Front Load Contract
<TABLE>
<CAPTION>
Aggressive Growth &
Total return Small Cap Growth International Index 400 Growth Income Index 500
at unit value Growth Stock Stock Equity Stock Stock Stock Stock Balanced
(as of 12/31/99) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year................ - 37.44% 17.48% - 17.09% 2.74% 15.57% 6.29%
5 years............... - 171.23% 88.42% - 199.46% 154.33% 228.13% 116.40%
Annualized.......... - 22.09% 13.51% - 24.53% 20.53% 26.83% 16.70%
10 year............... - - - - - - - 206.05%
Annualized.......... - - - - - - - 11.84%
Since inception....... 78.18%Y 461.19%* 132.97%' 8.03%Y 203.30%# 154.51%# 408.51%* -
Annualized.......... - 20.93% 13.52% - 21.64% 17.93% 19.62% -
<CAPTION>
Back Load Contract Without Surrender
- ---------------------------------------------------------------------------------------------------------------------------
1 year................ - 41.80% 21.21% - 20.81% 6.00% 19.24% 9.67%
5 years............... - 169.32% 87.10% - 197.37% 152.55% 225.84% 114.89%
Annualized.......... - 21.91% 13.35% - 24.35% 20.36% 26.65% 16.53%
10 year............... - - - - - - - 189.69%
Annualized.......... - - - - - - - 11.22%
Since inception....... 84.56%Y 435.98%* 127.85%' 11.89%Y 199.50%# 151.32%# 385.69%* -
Annualized.......... - 20.32% 13.14% - 21.37% 17.67% 19.02% -
<CAPTION>
Back Load Contract With Surrender
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year................ - 33.80% 13.21% - 12.81% (2.00%) 11.24% 1.67%
5 years............... - 165.32% 83.10% - 193.37% 148.55% 221.84% 110.89%
Annualized.......... - 21.55% 12.86% - 24.02% 19.97% 26.34% 16.09%
10 year............... - - - - - - - 189.69%
Annualized.......... - - - - - - - 11.22%
Since inception....... 76.56%Y 435.98%* 125.85%' 3.89%Y 196.50%# 148.32%# 385.69%* -
Annualized.......... - 20.32% 12.99% - 21.16% 17.42% 19.02% -
</TABLE>
All total return figures are for divisions of NML Variable Annuity Account B and
are based on the change in unit value, which reflects expenses, such as account
charges and fees applied at the contract level; figures for the Front Load
contract reflect a maximum sales load of 4%; figures for the Back Load contract
with surrender reflect deductions for a maximum 8% withdrawal charge, declining
at a rate of 1% per year. The data reflects an initial contract size of $10,000
for the Front Load (minimum size) and $1,000 for the Back Load. Performance data
represents past results and is not a guarantee of future results. Future unit
values and investment returns may vary so an investor's units, when redeemed,
may be worth more or less than their original value. Performance for other
separate accounts will differ.
*Inception date of 12/3/90.
#Inception date of 5/3/94.
'Inception date of 4/30/93.
YInception date of 4/30/99. Reflects total return for the eight month period
4/30/99 - 12/31/99; not annualized.
+Inception date of these portfolios in Account B was 4/30/99. Actual fund
inception was 1/2/97. Reflects total return for the eight month period 4/30/99 -
12/31/99; not annualized.
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.
Performance Summary 2
<PAGE> 11
<TABLE>
<CAPTION>
Russell Russell Russell
High Yield Select Money Multi-Style Aggressive Russell Real Estate Russell
Bond Bond Market Equity Equity Non-U.S. Securities Core Bond
Portfolio Portfolio Portfolio Fund+ Fund+ Fund+ Fund Fund+
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(4.85%) (5.39%) 0.47% - - - - -
48.74% 34.10% 22.34% - - - - -
8.26% 6.04% 4.11% - - - - -
- 90.59% 51.19% - - - - -
- 6.66% 4.22% - - - - -
52.83%# - - 3.02% 6.19% 20.01% (11.21%)Y (5.08%)
7.78% - - - - - - -
- ---------------------------------------------------------------------------------------------------------------------
(1.83%) (2.39%) 3.65% - - - - -
47.70% 33.15% 21.47% - - - - -
8.11% 5.89% 3.97% - - - - -
- 80.39% 43.10% - - - - -
- 6.08% 3.65% - - - - -
50.91% # - - 6.70% 9.99% 24.30% (8.03%)Y 1.69%
7.54% - - - - - - -
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(9.83%) (10.39%) (4.35%) - - - - -
43.70% 29.15% 17.47% - - - - -
7.52% 5.25% 3.27 - - - - -
- 80.39% 43.10% - - - - -
- 6.08% 3.65% - - - - -
47.91%# - - (1.30%) 1.99% 16.30% (16.03%)Y (9.69%)
7.16% - - - - - - -
</TABLE>
3 Performance Summary
<PAGE> 12
The Economy
The current period of economic growth in the United States has now been in place
since 1991, making it the longest peacetime expansion ever. Early in 2000, this
economic expansion, with its unparalleled combination of rapid growth and low
inflation, is likely to become the longest in U.S. history.
Consumer spending, fueled by strong income growth from healthy job markets and
wealth from a surging stock market, continues to be the chief driver of this
powerful economy. Household demand accounted for three-quarters of economic
growth in 1998 and almost 90% in 1999. December's consumer confidence index, the
highest in 30 years, suggests that consumers will continue their buying spree in
2000. Inflation remains tame, with the rise in overall prices for 1999 estimated
at 2.6%; the one percentage point increase from the prior year was almost
entirely due to higher energy prices.
Despite the Federal Reserve's apparent determination to raise interest rates as
necessary to slow spending and keep inflation in check, forecasters are
optimistic about the economy's momentum in 2000. Projections of the 50
economists participating in Business Week's annual survey averaged 3.1% for real
economic growth and an increase of 2.1% in consumer prices, with unemployment
remaining at a three-decade low of 4.2%.
ECONOMIC GROWTH AND INFLATION
[Economic Growth and Inflation Performance Graph]
<TABLE>
<CAPTION>
REAL GDP CPI-U
-------- -----
<S> <C> <C>
90 0.50 6.30
91 1.20 3.00
92 4.10 3.00
93 2.20 2.80
94 4.20 2.60
95 2.20 2.60
96 4.20 3.20
97 4.30 1.70
98 4.60 1.60
99 4.40 2.60
</TABLE>
Source: U.S. Department of Commerce. Year-to-year percentage change in Real
Gross Domestic Product is used for real economic growth.
December-to-December percentage change in the Consumer Price Index - Urban
is used for the inflation rate. 1999 numbers are based on preliminary data
and Business Week's survey of 50 business economists.
- --------------------------------------------------------------------------------
The Equity Market
The domestic equity market continued its long-term upward trend during 1999. For
the S&P 500 Index, there has not been a down year since 1990, and we have now
experienced an unprecedented five consecutive years of returns over 20%. The
market recovered quickly from a modest correction in October, which was driven
by concerns about inflation.
Early in 1999 it appeared that the market's strength was beginning to broaden to
include names outside the technology issues and large growth stocks that have
dominated the long upward trend. As the year progressed, however, the
concentration became even more pronounced than in prior periods. Although total
return from the S&P 500 Index was 21.1%, more stocks in the index were down than
up. The technology-heavy NASDAQ index finished the year up more than 85%, with
more than half the gain in the last two months of the year.
ANNUAL TOTAL RETURNS FROM S&P 500 INDEX
[Annual Total Returns from S&P Performance Graph]
<TABLE>
<CAPTION>
YEAR ENDED
----------
<S> <C>
90 -3.1
91 30.50
92 7.60
93 10.10
94 1.20
95 37.40
96 22.80
97 33.40
98 28.50
99 21.10
</TABLE>
Source: Standard & Poor's
- --------------------------------------------------------------------------------
The Bond Market
Interest rates have moved up fairly steadily during 1999: the yield on 30-year
Treasury bonds was 6.5% at year end, up from 5.1% at the beginning of the year.
At odds with the usual seasonal pattern, yields continued to rise in the fourth
quarter. This movement has been driven largely by the market's nervousness about
higher inflation, which has been fueled by continued strong economic growth and
exacerbated by a doubling of oil prices. The Federal Reserve's three interest
rate increases during the last half of the year provided the most visible sign
of inflation worries. Since bond prices move in the opposite direction from
interest rates, the result for the bond market has been the worst year since
1994 and the second-worst year on record.
As the U.S. Treasury has been running a surplus and issuing fewer securities,
the supply/demand relationship has caused the spread to widen between Treasury
yields and yields of other securities. In addition, lower quality bonds have
been affected by investors' worries about disruptions as the year 2000
approaches. With millennium-related problems having proven to be minimal, a
reversal of the bear market for bonds could begin in early 2000.
ANNUAL TOTAL RETURNS FROM
MERRILL LYNCH DOMESTIC MASTER INDEX
[Annual Total Returns From Merrill Lynch]
<TABLE>
<CAPTION>
YEAR ENDED
----------
<S> <C>
90 9.1
91 15.9
92 7.6
93 10
94 -2.8
95 18.5
96 3.6
97 9.7
98 8.9
99 -0.96
</TABLE>
Source: Merrill Lynch. The Merrill Lynch Domestic Master Index is an
unmanaged market value weighted index comprised of U.S. Government, mortgage
and investment-grade corporate bonds.
Economic Overview and Outlook 4
<PAGE> 13
<TABLE>
<CAPTION>
Objective: Portfolio Strategy: Net Assets:
<S> <C> <C> <C>
Maximum long-term appreciation Strive for the highest possible rate of capital $71,482,646
of capital appreciation by investing in companies with
potential for rapid growth.
</TABLE>
SMALL CAP GROWTH STOCK PORTFOLIO
The Small Cap Growth Stock Portfolio owns the stocks of emerging growth
companies. The Portfolio is managed with a target of $1 billion median market
capitalization; holdings include both larger and smaller companies. Since
portfolios of small-capitalization stocks tend to react strongly to changes in
financial and economic markets, as well as to changes in the prospects for
individual companies, returns of this Portfolio can vary considerably from time
to time. A higher level of risk (with risk defined as variability of returns
over time) is accepted for the potential of greater long-term returns. The focus
in stock selection is on the individual companies' ability to generate revenue,
expanding profit margins and solid balance sheets; industry sector selection is
of secondary importance.
This Portfolio, which began operations April 30, 1999, benefited in its first
eight months from a very healthy environment for small-capitalization stocks,
especially in the technology sector, where internet-related stocks have soared
in value. The Portfolio has participated in a number of initial public offerings
(IPOs) which experienced almost immediate appreciation; in selecting holdings of
these newly-public companies, the focus is on profitability rather than simply
on revenue growth. The Portfolio's total return was 86.09% since inception.
Management estimates that IPO holdings contributed 42% and other issues 44.09%.
In several cases, total market values of small-capitalization stocks have
increased so much that it has become necessary to sell them in order to maintain
the Portfolio's market capitalization target.
The largest concentration of holdings is in technology, an industry that has
become famous for its growth potential. Mediasolve, Tibco Software and Engage
Technology were among the stocks that contributed to the Portfolio's strong
performance. A related industry theme is media stocks, which are benefiting from
heavy advertising by internet companies trying to build brand identities. Other
industry themes include retailers and other consumer cyclicals, which benefit
from a positive consumer environment, and business and communication services.
SECTOR ALLOCATION
12/31/99
[SECTOR ALLOCATION PIE CHART]
<TABLE>
<CAPTION>
SECTOR ALLOCATION
-----------------
<S> <C>
Technology 33
Consumer Cyclical 15
Health Care 8
Industrial & Transportation 7
Energy 6
Consumer Staples 6
Finance 5
Business Services 4
Russell 2000 Index Futures 11
Short-Term Investments 5
</TABLE>
TOP 10 HOLDINGS
12/31/99
<TABLE>
<CAPTION>
Company % of Total Net Assets
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Getty Images, Inc. 2.1%
-------------------------------------------------------------------------------------
FreeShop.com, Inc. 2.1%
-------------------------------------------------------------------------------------
Westwood One, Inc. 2.1%
-------------------------------------------------------------------------------------
CDW Computer Centers, Inc. 2.0%
-------------------------------------------------------------------------------------
Citadel Communications Corporation 2.0%
-------------------------------------------------------------------------------------
Inet Technologies, Inc. 1.9%
-------------------------------------------------------------------------------------
The Corporate Executive Board Company 1.8%
-------------------------------------------------------------------------------------
Cymer, Inc. 1.6%
-------------------------------------------------------------------------------------
Advent Software, Inc. 1.6%
-------------------------------------------------------------------------------------
CBT Group Public Limited Company, ADR 1.6%
</TABLE>
PERFORMANCE RELATIVE TO THE RELEVANT INDICES
[PERFORMANCE RELATIVE TO THE RELEVANT INDICES LINE GRAPH]
<TABLE>
<CAPTION>
SMALL CAP STOCK PORTFOLIO S&P 600 INDEX RUSSELL 2000 INDEX
------------------------- ------------- ------------------
<S> <C> <C> <C>
4/99 10000 10000 10000
12/99 18609 11586 11767
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------
Average Annual Total Return
For Period Ended December 31, 1999
Since
Inception#
- ----------------------------------------------
<S> <C>
Small Cap Stock Portfolio 86.09%
S&P 600 Index 15.86%
Russell 2000 17.67%
- ----------------------------------------------
#Inception date of 4/30/99
(Returns not annualized)
</TABLE>
Since the Portfolio invests primarily in small capitalization issues, the
indices that best reflect the Portfolio's performance are the Standard & Poor's
(S&P) SmallCap 600 Index and Russell 2000 Index.
The Standard & Poor's SmallCap 600 Index is an unmanaged index of 600 selected
common stocks of smaller U.S.-based companies compiled by Standard & Poor's
Corporation. As of December 31, 1999, the 600 companies in the composite had
median market capitalization of $467 million and total market value of $368
billion. The SmallCap 600 represents approximately 2% of the market value of
S&P's database of over 8,200 equities.
The Russell 2000 Index measures the performance of the 2,000 smallest companies
in the Russell 3000 Index. The Russell 3000 Index measures the performance of
the 3,000 largest US companies based on total market capitalization. These 3000
companies represent approximately 98% of the investable US equity market. As of
December 31, 1999, the average market capitalization of companies in the Russell
3000 was $5.3 billion; the median market capitalization was $768.8 million.
Market capitalization of companies in the Index ranged from $602.4 billion to
$10.9 million.
The Russell 2000 Index represents approximately 8% of the total market
capitalization of the Russell 3000. As of December 31, 1999, the average market
capitalization of companies in the Russell 2000 was approximately $629 million;
the median market capitalization was approximately $448 million. The largest
company in the index had a total market capitalization of approximately $13.2
billion.
This chart assumes an initial investment of $10,000 made on 4/30/99
(commencement of the Fund's operations). Returns shown include deductions for
management and other fund expenses, and reinvestment of all dividends. Returns
exclude deductions for separate account sales loads and account fees. Past
performance is not predictive of future performance. Investment return and
principal value will fluctuate, so that your shares, when redeemed, may be worth
more or less than their original cost. Total returns, which reflect deduction of
charges for the separate account, are shown on page 2.
5 Small Cap Growth Stock Portfolio
<PAGE> 14
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (84.2%) PAR (000'S)
-----------------------------------------------------------
<S> <C> <C>
BASIC MATERIALS (1.1%)
Cambrex Corporation 22,000 $ 758
--------
TOTAL 758
--------
BUSINESS SERVICES (2.7%)
*The Corporate Executive Board
Company 22,600 1,263
*Forrester Research, Inc. 9,900 682
--------
TOTAL 1,945
--------
CAPITAL GOODS (3.3%)
*Dycom Industries Inc. 16,100 709
Kaydon Corporation 24,400 654
*Power-One Inc. 21,600 990
--------
TOTAL 2,353
--------
COMMUNICATION SERVICES (1.4%)
*Crown Castle International Co. 18,700 601
*Tessco Technologies Inc. 21,600 402
--------
TOTAL 1,003
--------
CONSUMER CYCLICAL (14.9%)
*1-800-Flowers.com, Inc. 46,600 498
*Catalina Marketing Corporation 8,600 996
*David's Bridal Inc. 56,300 630
*Dollar Tree Stores, Inc. 15,700 761
*Getty Images, Inc. 30,400 1,486
*JAKKS Pacific, Inc. 15,000 280
*Jupiter Communications, Inc. 17,400 526
*Linens 'N Things, Inc. 11,800 350
*Luminant Worldwide Corporation 20,900 951
*MSC Industrial Direct Co., Inc. 71,500 947
*The Management Network Group,
Inc. 16,300 532
*Sonic Automotive, Inc. 34,300 334
The Talbots, Inc. 20,800 928
*Tower Automotive, Inc. 38,500 594
*Whitehall Jewellers, Inc. 3,700 136
*Wild Oats Markets Inc. 30,900 686
--------
TOTAL 10,635
--------
CONSUMER STAPLES (6.2%)
*Acme Communications, Inc. 18,800 625
*American Italian Pasta Co. -CL A 28,900 888
*Citadel Communications Corp. 21,500 1,395
*Westwood One Inc. 19,300 1,467
--------
TOTAL 4,375
--------
ENERGY (5.6%)
*Barrett Resources Corporation 25,200 742
*Basin Exploration Inc. 44,100 777
*Global Industries, Ltd. 81,100 699
*Nabors Industries, Inc. 33,800 1,046
*Stone Energy Corp. 20,100 716
--------
TOTAL 3,980
--------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (84.2%) PAR (000'S)
-----------------------------------------------------------
<S> <C> <C>
FINANCE (4.7%)
*Charles River Associates
Incorporated 25,700 $ 861
Investors Financial Services Corp. 15,800 727
Radian Group Inc. 18,600 888
Waddell & Reed Financial, Inc. 33,900 919
--------
TOTAL 3,395
--------
HEALTHCARE (8.3%)
*Biovail Corporation International 11,800 1,106
*Patterson Dental Company 19,400 827
*Priority Healthcare Corp. 22,800 660
*Province Healthcare 44,800 851
*Shire Pharmaceuticals Group PLC,
ADR 16,200 472
*Sybron International Corporation 31,800 785
*Total Renal Care Holdings 58,400 391
*Wesley Jessen VisionCare, Inc. 23,100 875
--------
TOTAL 5,967
--------
TECHNOLOGY (33.0%)
*Advent Software Inc. 17,900 1,153
*Airnet Communications Corporation 17,000 618
*Aspen Technology, Inc. 22,200 587
*CAIS Internet, Inc. 26,000 923
*CBT Group Public Limited Company,
ADR 34,300 1,149
*CDW Computer Centers, Inc. 17,800 1,400
*Clarify Inc. 8,100 1,021
*Copper Mountain Networks 10,500 512
*Cymer Inc. 25,500 1,173
*Engage Technologies Inc. 16,700 1,002
*Etec Systems, Inc. 21,800 978
*FreeShop.com, Inc. 30,900 1,483
*Great Plains Software, Inc. 15,000 1,121
*Inet Technologies Inc. 19,300 1,349
*JNI Corp. 4,200 277
*Kent Electronics Corp. 49,700 1,131
*Mediaplex, Inc. 1,300 82
*Metalink Ltd. 9,900 202
*Metasolv Software, Inc. 9,500 777
*Northpoint Communications 22,800 547
*PMC-Sierra, Inc. 5,700 914
*Predictive Systems, Inc. 7,800 511
*Qlogic Corporation 5,800 927
*Scient Corp. 8,000 692
*Semtech Corporation 17,600 917
*TIBCO Software, Inc. 5,700 872
*Viant Corp. 6,800 673
*Whittman-Hart Inc. 11,700 627
--------
TOTAL 23,618
--------
TRANSPORTATION (3.0%)
C.H. Robinson Worldwide Inc. 26,700 1,061
*Knight Transportation, Inc. 32,300 553
</TABLE>
Small Cap Growth Stock Portfolio 6
<PAGE> 15
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (84.2%) PAR (000'S)
-----------------------------------------------------------
<S> <C> <C>
TRANSPORTATION continued
*Swift Transportation Co., Inc. 31,300 $ 552
--------
TOTAL 2,166
--------
TOTAL COMMON STOCK
(COST $46,686) 60,195
--------
MONEY MARKET INVESTMENTS (14.2%)
-----------------------------------------------------------
CAPTIVE FINANCE COMPANY (5.5%)
Daimler-Chrysler N.A. Holding,
5.50%, 01/28/00 4,000,000 3,984
--------
FEDERAL AND GOVERNMENT AGENCIES (5.6%)
Federal Home Loan Mortgage Corp.,
4.75%, 01/14/00 3,300,000 3,294
#Federal Home Loan Mortgage Corp.,
5.51%, 01/10/00 300,000 300
#Federal Home Loan Mortgage Corp.,
5.54%, 01/20/00 400,000 398
--------
TOTAL 3,992
--------
MISCELLANEOUS BUSINESS CREDIT INSTITUTIONS (2.1%)
Quincy Capital Corporation,
6.07%, 01/27/00 1,500,000 1,493
--------
SHORT-TERM BUSINESS CREDIT (1.0%)
IBM Credit Corp., 4.00%, 01/04/00 700,000 700
--------
TOTAL MONEY MARKET INVESTMENTS
(COST $10,169) 10,169
--------
TOTAL INVESTMENTS (98.4%)
(COST $56,855)' 70,364
--------
OTHER ASSETS, LESS LIABILITIES
(1.6%) 1,119
--------
TOTAL NET ASSETS (100.0%) $ 71,483
--------
-----------------------------------------------------------
<S> <C> <C>
</TABLE>
* Non-Income Producing
ADR - American Depository Receipt
# Partially held by the custodian in a segregated account as collateral for open
futures positions. Information regarding open futures contracts as of December
31, 1999 is summarized below:
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF EXPIRATION APPRECIATION
ISSUERS CONTRACTS DATE (000'S)
- ------------------------------------------------------------
<S> <C> <C> <C>
Russell 2000 Index 30 03/00 $391
(Total Notional Value
at 12/31/99,
$7,258,000)
</TABLE>
' At December 31,1999, the aggregate cost of securities for federal income tax
purposes was $56,943 and the net unrealized appreciation of investments based
on that cost was $13,421 which is comprised of $14,937 aggregate gross
unrealized appreciation and $1,516 aggregate gross unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements
7 Small Cap Growth Stock Portfolio
<PAGE> 16
<TABLE>
<CAPTION>
Objective: Portfolio Strategy: Net Assets:
<S> <C> <C> <C>
Maximum long-term appreciation of Strive for the highest possible rate of capital $1,485,311,163
capital appreciation by investing in companies with
potential for rapid growth.
</TABLE>
AGGRESSIVE GROWTH STOCK PORTFOLIO
The Aggressive Growth Stock Portfolio owns the stocks of emerging growth
companies, generally with market capitalizations of less than $10 billion. Since
growth stock portfolios tend to react strongly to changes in financial and
economic markets, as well as to changes in the prospects for individual
companies, returns of this Portfolio can vary considerably from time to time. A
higher level of risk (with risk defined as variability of returns over time) is
accepted for the potential of greater long-term returns.
The Portfolio's focus in stock selection is on the individual companies' ability
to generate revenue, expand profit margins and maintain solid balance sheets;
industry sector selection is of secondary importance. However, because
opportunities tend to cluster in certain industry groups, there is a significant
concentration in the technology sector, with a secondary concentration in
consumer cyclicals, particularly in the retail industry. Other areas of
increasing emphasis are energy service and health care, where the focus is on
biotechnology, rather than health care providers.
Within the technology sector, the emphasis is on telecommunications equipment,
semiconductors and semiconductor capital equipment. Internet participation is
focused on service providers such as Vignette and Verisign, which have very
credible business models and are within a year of achieving profitability while
maintaining a very rapid growth pace. Besides their inherent merit, many
technology companies have the potential to merge as technology companies seek to
broaden their product offerings.
SECTOR ALLOCATION
12/31/99
[SECTOR ALLOCATION 12/31/99 PIE CHART]
<TABLE>
<CAPTION>
SECTOR ALLOCATION
-----------------
<S> <C>
Technology 48
Consumer Cyclical 10
Energy 8
Industrial & Transportation 8
Consumer Staples 6
Health Care 5
Finance 3
Business Services 2
S&P 400 Index Futures 5
Short-Term Investments 5
</TABLE>
TOP 10 HOLDINGS
12/31/99
<TABLE>
<CAPTION>
Company % of Net Assets
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gemstar International Group Limited 2.6%
-------------------------------------------------------------------------------------
JDS Uniphase Corporation 2.6%
-------------------------------------------------------------------------------------
Jabil Circuit, Inc. 2.6%
-------------------------------------------------------------------------------------
QLogic Corporation 2.5%
-------------------------------------------------------------------------------------
Comverse Technology, Inc. 2.4%
-------------------------------------------------------------------------------------
Vignette Corporation 2.4%
-------------------------------------------------------------------------------------
Getty Images, Inc. 2.3%
-------------------------------------------------------------------------------------
Sanmina Corporation 2.3%
-------------------------------------------------------------------------------------
Lamar Advertising Company 2.2%
-------------------------------------------------------------------------------------
PMC-Sierra, Inc. 2.1%
</TABLE>
PERFORMANCE RELATIVE TO RELEVANT INDICES
[PERFORMANCE RELATIVE TO RELEVANT INDICES PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH WILSHIRE SMALL CAP WILSHIRE NEXT 1750 S&P MID CAP 400
STOCK PORTFOLIO INDEX INDEX INDEX
----------------- ------------------ ------------------ ---------------
<S> <C> <C> <C> <C>
11/90 10000 10000 10000 10000
10189 10459 10459 10581
12/91 15894 15873 15325 15881
16839 18188 18186 17775
12/93 20057 21464 21357 20256
21141 20801 21065 19531
12/95 29448 26330 27439 25574
34661 31588 31801 30485
12/97 39467 40511 39348 40315
42446 40366 39675 48030
12/99 61028 52244 43829 55084
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Average Annual Total Return
For Periods Ended December 31, 1999
Since
1 Year 5 Years Inception#
- -------------------------------------------------------------
<S> <C> <C> <C>
Aggressive Growth Stock
Portfolio 43.78% 23.62% 22.02%
Wilshire Small Cap 36.86% 21.57% 20.69%
Wilshire Next 1750 10.47% 15.78% 17.66%
S&P MidCap 400 Index 14.69% 23.04% 20.65%
- -------------------------------------------------------------
#Inception date of 11/30/90
</TABLE>
Since the Portfolio invests primarily in medium-capitalization (Mid Cap) issues,
the index that best reflects the Portfolio's performance is the S&P MidCap 400
Index. This is a capitalization-weighted index that measures the performance of
the mid-range sector of the U.S. stock market. Because the average market
capitalization of the Aggressive Growth Fund has recently increased, the S&P
MidCap 400 Index is more representative of the current composition of this
Portfolio than the Wilshire Next 1750 Index and Wilshire Small Cap Index, which
are the small-capitalization indices used in the past.
The S&P MidCap 400 Index is a capitalization-weighted index that measures the
performance of the mid-range sector of the U.S. stock market. As of December 31,
1999, the 400 companies in the composite had median market capitalization of
$1.6 billion and a total market value of $907 billion. The MidCap 400 represents
approximately 6% of the market value of S&P's database of over 8,200 equities.
The Wilshire Next 1750 is an unmanaged, equally weighted index. Included in this
index are those stocks which are rented 750 to 2500 by market capitalization in
the Wilshire 5000. the largest sectors represented in this index are materials
and services, technology, and consumer non-durables. Market capitalization
ranges from $1.5 billion to $6.24 million.
The Wilshire Small Cap Index is a subset of the Wilshire Next 1750 and includes
250 stocks chosen based upon their size, sector and liquidity characteristics.
Each stock is equally weighted in this unmanaged index. The average market
capitalization is approximately $981 million. The largest sector weightings
include technology, materials and services, and consumer non-durables.
On May 3, 1994, the Northwestern Mutual Aggressive Growth Stock Fund, Inc. (the
"Fund") merged into the Northwestern Mutual Series Fund, Inc. Aggressive Growth
Stock Portfolio (the "Portfolio"). The Portfolio had no assets prior to the
merger. After the merger, the assets of the Portfolio were those of the Fund.
The investment objectives, policies, management and expenses of the Portfolio
are identical to those of the Fund. Accordingly, the performance of the Fund
prior to the merger is included with the performance of the Portfolio in the
graph and total return figures above.
This chart assumes an initial investment of $10,000 made on 11/30/90
(commencement of the Fund's operations). Returns shown include deductions for
management and other fund expenses, and reinvestment of all dividends. Returns
exclude deductions for separate account sales loads and account fees. Past
performance is not predictive of future performance. Investment return and
principal value will fluctuate, so that your shares, when redeemed, may be worth
more or less than their original cost. Total returns, which reflect deduction of
charges for the separate account are shown on page 2.
Aggressive Growth Stock Portfolio 8
<PAGE> 17
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (89.9%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
BUSINESS SERVICES (1.5%)
*The Corporate Executive Board
Company 287,600 $ 16,070
*Waters Corp. 126,700 6,715
-----------
TOTAL 22,785
-----------
CAPITAL GOODS (7.4%)
*Jabil Circuit, Inc. 527,400 38,500
Kaydon Corporation 342,200 9,175
*RSA Security, Inc. 185,200 14,353
*Sanmina Corporation 346,200 34,577
*Tetra Tech, Inc. 848,678 13,048
-----------
TOTAL 109,653
-----------
COMMUNICATION SERVICES (0.4%)
*Crown Castle International
Co. 165,300 5,310
*TeleCorp PCS, Inc. 28,500 1,083
-----------
TOTAL 6,393
-----------
CONSUMER CYCLICAL (10.3%)
*Abercrombie & Fitch Co. 113,300 3,024
*Catalina Marketing
Corporation 178,500 20,661
Cintas Corp. 278,900 14,816
*Dollar Tree Stores, Inc. 191,800 9,290
*eToys, Inc. 218,600 5,738
*FreeMarkets, Inc. 17,500 5,973
*Getty Images, Inc. 714,100 34,902
*Kohl's Corporation 181,800 13,124
*Linens 'N Things, Inc. 261,633 7,751
*O'Reilly Automotive, Inc. 614,400 13,210
Royal Caribbean Ltd. 167,300 8,250
*Sonic Automotive, Inc. 626,800 6,111
*Tower Automotive, Inc. 619,900 9,570
-----------
TOTAL 152,420
-----------
CONSUMER STAPLES (6.4%)
*American Tower Systems 217,722 6,654
*AMFM, Inc. 115,800 9,061
*Clear Channel Communications,
Inc. 308,500 27,534
*Entercom Communications
Corporation 191,000 12,606
*Insight Communications 211,700 6,272
*Lamar Advertising, Co. 526,925 31,912
-----------
TOTAL 94,039
-----------
ENERGY (7.5%)
Anadarko Petroleum Corporation 485,800 16,578
*BJ Services Company 503,000 21,032
*Global Industries, Ltd. 912,900 7,874
*Nabors Industries, Inc. 580,700 17,965
Santa Fe International Corp. 865,401 22,392
*Weatherford International,
Inc. 651,925 26,036
-----------
TOTAL 111,877
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (89.9%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
FINANCE (2.7%)
Investors Financial Services
Corp. 386,300 $ 17,770
*Knight/Trimark Group, Inc. 296,800 13,653
Radian Group, Inc. 182,100 8,695
-----------
TOTAL 40,118
-----------
HEALTHCARE (5.0%)
Bausch & Lomb, Inc. 77,100 5,277
*Elan Corporation Plc - ADR 263,755 7,781
*Lincare Holdings, Inc. 232,600 8,068
*Patterson Dental Company 399,925 17,047
*Province Healthcare 301,200 5,723
*Shire Pharmaceuticals Group
PLC, ADR 286,300 8,338
*Sybron International
Corporation 666,600 16,457
*Visx Inc. 107,000 5,537
-----------
TOTAL 74,228
-----------
TECHNOLOGY (47.6%)
*Aether Systems, Inc. 47,500 3,402
*Altera Corp. 349,500 17,322
*Bluestone Software, Inc. 28,500 3,277
*CDW Computer Centers, Inc. 326,300 25,655
*CIENA Corporation 167,900 9,654
*Comverse Technology, Inc. 245,550 35,543
*Concord EFS, Inc. 651,225 16,769
*Conexant Systems, Inc. 403,000 26,749
*Copper Mountain Networks 177,000 8,629
*DST Systems, Inc. 303,200 23,138
*Electronic Arts Inc. 129,400 10,870
*Etec Systems, Inc. 219,500 9,850
*Fiserv, Inc. 448,750 17,193
*Foundry Networks, Inc. 27,000 8,146
*Gemstar International Group
Limited 549,800 39,173
*Great Plains Software, Inc. 280,100 20,937
*JDS Uniphase Corp. 242,800 39,167
*Keane, Inc. 202,800 6,439
*Microchip Technology, Inc. 400,400 27,402
*Network Appliance Inc. 287,200 23,856
*Netzero, Inc. 33,300 897
*Northpoint Communications 115,800 2,779
*Novellus Systems, Inc. 183,000 22,423
*Paradyne Networks Corp. 68,100 1,856
Paychex, Inc. 540,000 21,600
PE Corp.-PE Biosystems Group 112,000 13,475
*Peregrine Systems, Inc. 368,831 30,475
*PMC-Sierra, Inc. 190,278 30,504
*Proxicom, Inc. 56,300 6,999
*Qlogic Corporation 227,800 36,420
*Sapient Corp. 181,400 25,566
*Scient Corp. 151,020 13,054
*Semtech Corporation 398,600 20,777
*Sycamore Networks, Inc. 4,600 1,417
</TABLE>
9 Aggressive Growth Stock Portfolio
<PAGE> 18
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (89.9%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
TECHNOLOGY continued
*Synopsys, Inc. 285,093 $ 19,030
*Tellabs, Inc. 268,100 17,209
*VeriSign, Inc. 147,000 28,068
*Viant Corp. 61,469 6,085
*Vignette Corporation 215,328 35,098
*ZapMe! Corporation 71,200 614
-----------
TOTAL 707,517
-----------
TRANSPORTATION (1.1%)
Expeditors International of
Washington, Inc. 159,900 7,006
*Swift Transportation Co.,
Inc. 515,490 9,085
-----------
TOTAL 16,091
-----------
TOTAL COMMON STOCK
(COST $724,799) 1,335,121
-----------
MONEY MARKET INVESTMENTS (10.4%)
---------------------------------------------------------
<S> <C> <C>
CAPTIVE FINANCE COMPANY (3.1%)
Daimler-Chrysler N.A. Holding,
5.50%, 01/28/00 20,000,000 19,917
Ford Motor Credit Company,
6.21%, 01/12/00 25,000,000 24,953
-----------
TOTAL 44,870
-----------
FEDERAL GOVERNMENT AND AGENCIES (1.7%)
#Federal Home Loan Mortgage
Corp., 4.74%, 01/14/00 23,000,000 22,961
Federal Home Loan Mortgage
Corp., 5.51%, 01/10/00 100,000 100
#Federal Home Loan Mortgage
Corp., 5.54%, 01/20/00 2,000,000 1,994
-----------
TOTAL 25,055
-----------
FINANCE LESSOR (1.3%)
Variable Funding Capital
Corp., 6.05%, 01/25/00 20,000,000 19,919
-----------
FINANCE SERVICES (1.4%)
Preferred Receivable Funding,
5.25%, 01/27/00 1,500,000 1,494
Preferred Receivable Funding,
6.10%, 01/27/00 19,500,000 19,414
-----------
TOTAL 20,908
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
MONEY MARKET INVESTMENTS SHARES/ VALUE
(10.4%) PAR (000's)
---------------------------------------------------------
<S> <C> <C>
MISCELLANEOUS BUSINESS CREDIT INSTITUTIONS (2.9%)
National Rural, 5.80%,
01/25/00 23,000,000 $ 22,911
Quincy Capital Corporation,
6.02%, 01/28/00 20,000,000 19,910
-----------
TOTAL 42,821
-----------
SHORT-TERM BUSINESS CREDIT (0.0%)
IBM Credit Corp., 4.00%,
01/04/00 700,000 700
-----------
TOTAL MONEY MARKET
INVESTMENTS
(COST $154,273) 154,273
-----------
TOTAL INVESTMENTS (100.3%)
COST ($879,072)' 1,489,394
-----------
OTHER ASSETS, LESS
LIABILITIES (-0.3%) (4,083)
-----------
TOTAL NET ASSETS (100.0%) $ 1,485,311
-----------
</TABLE>
* Non-Income Producing
ADR - American Depository Receipt
# Partially held by the custodian in a segregated account as collateral for open
futures positions. Information regarding open futures contracts as of December
31, 1999 is summarized below:
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF EXPIRATION APPRECIATION
ISSUERS CONTRACTS DATE (000'S)
- ------------------------------------------------------------
<S> <C> <C> <C>
Midcap 400
Stock Index 353 3/00 $2,409
(Total Notional Value
at 12/31/99,
$76,866,400)
</TABLE>
' At December 31, 1999, the aggregate cost of securities for federal income tax
purposes was $880,991 and the net unrealized appreciation of investments based
on that cost was $608,403 which is comprised of $631,235 aggregate gross
unrealized appreciation and $22,832 aggregate gross unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements
Aggressive Growth Stock Portfolio 10
<PAGE> 19
<TABLE>
<CAPTION>
Objective: Portfolio Strategy: Net Assets:
<S> <C> <C> <C>
Long-term appreciation of capital Participate in the growth of foreign economies by $772,170,457
through diversification into markets investing in securities with high long-term
outside the United States earnings potential relative to current market
values.
</TABLE>
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.
International stock markets were generally quite strong in 1999, as economies in
most of the world strengthened. Paced by a very strong Japanese market, Asian
markets improved dramatically, as the financial crisis that began in 1997 seems
to have abated. Most European markets posted gains of 20% or more for the year,
and Latin American markets were generally up, despite continued economic
weakness in these economies.
The Portfolio slightly underperformed its benchmark, the Morgan Stanley Capital
International EAFE ("Europe-Australasia-Far East") Index, mainly because of an
underweighting in Japan, which is a major factor in the index. Balancing this
underexposure was very strong stock selection: major Japanese holdings including
Sony, Nomura and NTT contributed importantly to performance. Holdings in other
Asian nations including Korea also contributed to performance.
European markets are looking increasingly like the U.S. market, with performance
dominated by a few growth companies and technology names. The Portfolio's value
orientation and sell discipline has limited performance somewhat, as some
technology and telecommunications names have been sold after reaching target
values. In the U.K., holdings of large retailers such as Marks & Spencer and
Sainsbury hurt performance as these companies struggled with an increasingly
competitive market environment.
The Portfolio benefited from its Latin American exposure, especially in the
strong Mexican market, where one of the largest holdings, Telefonos de Mexico,
more than doubled in price.
The International Equity Portfolio is managed for Northwestern Mutual Investment
Services, LLC. by Templeton Investment Counsel, Inc.
ASSET ALLOCATION
12/31/99
[PIE CHART]
<TABLE>
<CAPTION>
ASSET ALLOCATION
----------------
<S> <C>
Europe 51
Asia 20
Latin America 12
Australia/New Zealand 7
North America 5
Other 4
Non-equity holdings 1
</TABLE>
TOP 10 HOLDINGS
12/31/99
<TABLE>
<CAPTION>
Company Country % of Net Assets
------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sony Corporation Japan 3.4%
--------------------------------------------------------------------------------
The Nomura Securities Co., Ltd. Japan 2.3%
--------------------------------------------------------------------------------
Telefonos de Mexico SA Mexico 2.2%
--------------------------------------------------------------------------------
AXA-UAP SA France 2.0%
--------------------------------------------------------------------------------
Merita Limited "A" Finland 1.9%
--------------------------------------------------------------------------------
Nippon Telephone & Telegraph Corporation Japan 1.8%
--------------------------------------------------------------------------------
Stora Enso OYJ - R Shares Finland 1.7%
--------------------------------------------------------------------------------
Total Fina SA France 1.7%
--------------------------------------------------------------------------------
Aventis S.A. France 1.7%
--------------------------------------------------------------------------------
Teva Pharmaceutical Industries, Ltd., ADR Israel 1.7%
--------------------------------------------------------------------------------
</TABLE>
PERFORMANCE RELATIVE TO THE EAFE INDEX
[LINE GRAPH]
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO EAFE INDEX
------------------------------ ----------
<S> <C> <C>
4/93 10000 10000
12/93 12464 10970
12/94 12451 11859
12/95 14266 13228
12/96 17264 14068
12/97 19384 14364
12/98 20319 17284
12/99 24968 22002
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Average Annual Total Return
For Periods Ended December 31, 1999
Since
1 Year 5 Years Inception#
- -------------------------------------------------------------
<S> <C> <C> <C>
International Equity Portfolio 22.88% 14.93% 14.70%
EAFE Index 27.30% 13.16% 12.55%
- -------------------------------------------------------------
# Inception date of 4/30/93
</TABLE>
As depicted in the graph, the International Equity Portfolio is compared against
the Morgan Stanley Capital International EAFE ("Europe-Australasia-Far East")
Index. The index is composed of approximately 1100 companies in 20 countries in
Europe and the Pacific Basin. The objective of the index is to reflect the
movements of stock markets in these countries by representing an unmanaged
(indexed) portfolio within each country. The indices are constructed so that
companies chosen represent about 60% of market capitalization in each market;
industry composition of the market is reflected; and a cross section of large,
medium, and small capitalization stocks is included, taking into account
liquidity concerns. The index is calculated in U. S. dollars.
On May 3, 1994, the Northwestern Mutual International Equity Fund, Inc. (the
"Fund") merged into the Northwestern Mutual Series Fund, Inc., International
Equity Portfolio (the "Portfolio"). The Portfolio had no assets prior to the
merger. After the merger, the assets of the Portfolio were those of the Fund.
The investment objectives, policies, management and expenses of the Portfolio
are identical to those of the Fund. Accordingly, the performance of the Fund
prior to the merger is included with the performance of the Portfolio in the
graph and total return figures above.
This chart assumes an initial investment of $10,000 made on 4/30/93
(commencement of the Fund's operations). Returns shown include deductions for
management and other fund expenses, and reinvestment of all dividends. Returns
exclude deductions for separate account sales loads and account fees. Past
performance is not predictive of future performance. Investment return and
principal value will fluctuate, so that your shares, when redeemed, may be worth
more or less than their original cost. Total returns which reflect deduction of
charges for the separate account, are shown on page 2.
11 International Equity Portfolio
<PAGE> 20
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (98.3%) COUNTRY PAR (000'S)
---------------------------------------------------------------
<S> <C> <C> <C>
CAPITAL EQUIPMENT (6.2%)
Alcatel, ADR France 206,000 $ 9,270
Alcatel, DG France 30,300 6,952
Hong Kong Aircraft &
Engineering Hong Kong 2,680,700 4,449
Invensys PLC United Kingdom 107,832 587
Rolls-Royce PLC United Kingdom 2,685,200 9,285
Koninklijke Philips
Electronics N.V. Netherlands 57,960 7,874
The Weir Group PLC United Kingdom 2,702,500 9,606
---------
TOTAL 48,023
---------
CONSUMER GOODS (14.8%)
Autoliv, Inc. Sweden 279,100 8,164
Aventis SA France 221,000 12,833
*Aventis SA Germany 88,297 5,118
Fiat SPA Ord. Italy 152,790 4,359
Medeva PLC United Kingdom 4,250,000 12,085
Nycomed Amersham PLC United Kingdom 1,628,610 10,149
Ono Pharmaceutical
Co., Ltd. Japan 233,000 6,249
Tate & Lyle, PLC United Kingdom 762,600 4,904
Teva Pharmaceutical
Industries Ltd., ADR Israel 178,200 12,775
Sony Corporation Japan 87,500 25,952
Volvo Aktiebolaget, B
Free Sweden 433,000 11,203
---------
TOTAL 113,791
---------
ENERGY (6.6%)
Petroleo Brasileiro
SA - Petrobras Brazil 32,500,000 8,276
Ranger Oil Limited Canada 1,055,400 3,298
*Renaissance Energy
LTD Canada 540,000 5,425
Repsol S.A. Spain 366,000 8,479
Shell Transport &
Trading Company PLC United Kingdom 1,518,500 12,623
Total Fina SA France 97,622 13,017
---------
TOTAL 51,118
---------
FINANCE (21.0%)
Australia & New
Zealand Bank Group Australia 1,506,097 10,965
AXA-UAP SA France 108,413 15,100
Banco Bradesco SA Brazil 623,750,000 4,893
*Banco Bradesco SA,
Rights Brazil 40,502,640 161
Banco de Andulucia Spain 120,000 4,227
Banco Itau S.A. Brazil 2,079,000 1,784
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (98.3%) COUNTRY PAR (000'S)
---------------------------------------------------------------
<S> <C> <C> <C>
FINANCE continued
Bangkok Bank Public
Company Ltd Thailand 1,551,800 $ 3,929
Banque Nationale de
Paris France 103,385 9,530
*Banque Nationale de
Paris, Warrants France 46,345 213
Deutsche Bank AG Germany 108,188 9,129
Hang Lung Development
Co. Hong Kong 2,758,000 3,122
HSBC Holdings Hong Kong 568,137 7,967
ING Groep NV Netherlands 209,000 12,607
Merita Limited "A" Finland 2,436,000 14,341
The Nomura Securities
Co., Ltd. Japan 987,400 17,832
PartnerRe Ltd. Bermuda 226,600 7,350
Scor France 129,900 5,726
Unibanco Uniao de
Bancos Brazil 14,033,500 932
Unidanmark A/S, A
Registered Denmark 180,800 12,711
XL Capital Ltd. Bermuda 178,800 9,275
Zurich
Versicherungs -
Gesellschaft Switzerland 17,900 10,207
---------
TOTAL 162,001
---------
GOLD MINES (2.1%)
AngloGold Limited ADR S. Africa 238,800 6,134
Barrick Gold
Corporation Canada 390,300 6,963
*Kinross Gold
Corporation Canada 1,796,100 3,335
---------
TOTAL 16,432
---------
MATERIALS (11.9%)
Agrium, Inc. Canada 473,300 3,727
Akzo Nobel NV Netherland 163,600 8,199
Asia Pulp & Paper
Company Ltd. ADR Singapore 477,300 3,759
Bayer AG Germany 157,000 7,426
Boehler - Uddeholm AG Austria 119,556 5,510
*Celanese AG Germany 11,770 214
Companhia Vale do Rio
Doce, ADR Brazil 372,000 9,393
Corus Group PLC United Kingdom 4,392,400 11,426
Grupo Mexico, B
Shares Mexico 1,320,000 6,541
Hepworth PLC United Kingdom 607,200 1,869
Metsa Serla Oyj, B
shares Finland 157,500 1,831
Pioneer International
Ltd. Australia 3,197,946 9,644
</TABLE>
International Equity Portfolio 12
<PAGE> 21
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (98.3%) COUNTRY PAR (000'S)
---------------------------------------------------------------
<S> <C> <C> <C>
MATERIALS continued
Stora Enso OYJ - R
shares Finland 754,400 $ 13,142
Stora Kapparbergs,
Series B Sweden 507,997 8,723
---------
TOTAL 91,404
---------
MULTI-INDUSTRY (5.1%)
Elementis PLC United Kingdom 1,494,000 1,943
Hutchinson Whampoa
Limited Hong Kong 798,000 11,600
Pilkington PLC United Kingdom 4,777,300 6,522
Swire Pacific
Limited, A Shares Hong Kong 1,459,500 8,618
Swire Pacific
Limited, B Shares Hong Kong 3,534,200 3,092
Williams PLC United Kingdom 1,652,900 7,524
---------
TOTAL 39,299
---------
SERVICES (23.4%)
Best Denki Co., Ltd. Japan 581,000 5,460
British Airways PLC United Kingdom 1,242,900 8,113
*Cable & Wire Optus
Ltd. Australia 2,674,560 8,944
Compania Anonima
Nacional Telefonos
de Venezuela Venezuela 293,000 7,215
Cia. de
Telecomunicaciones
de Chile S.A. Chile 273,725 4,996
Embratel
Participacoes S.A,
ADR Brazil 241,200 6,573
Hyder PLC Cum. Red.
Pfd. United Kingdom 401,400 572
Korea Telecom
Corporation, ADR Republic Of
Korea 97,000 7,251
Kurita Water
Industries, Ltd. Japan 299,000 4,753
Laidlaw
Transportation
Limited Canada 691,580 3,631
Marks & Spencer PLC United Kingdom 1,148,000 5,467
Mayne Nickless Ltd. Australia 1,671,600 4,316
Moebel Walther AG PFD Germany 103,297 800
News Corporation Ltd. Australia 1,014,400 8,697
Nippon Telephone &
Telegraph
Corporation (NTT) Japan 800 13,704
The Peninsular and
Oriental Steam
Navigation Company United Kingdom 548,000 9,146
Phillipine Long
Distance Telephone,
ADR Philippines 127,000 3,286
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (98.3%) COUNTRY PAR (000'S)
---------------------------------------------------------------
<S> <C> <C> <C>
SERVICES continued
Portugal Telecom SA Portugal 395,000 $ 4,329
Pt Indosat, ADR Indonesia 386,900 8,367
J Sainsbury PLC United Kingdom 1,162,100 6,558
SK Telecom Co., LTD.,
ADR Republic Of
Korea 7,351 282
Somerfield PLC United Kingdom 860,766 1,224
Storehouse PLC United Kingdom 2,879,480 2,163
Telecom Corporation
of New Zealand
Limited New Zealand 1,959,500 9,215
Telecom Italia SPA Italy 1,200,000 7,306
Telefonica de
Argentina SA, ADR Argentina 358,300 11,063
Telefonica del Peru
SA B shares, ADR Peru 370,800 4,959
Telefonos de Mexico
SA, ADR Mexico 154,002 17,325
Telesp Participacoes
S.A., ADR Brazil 210,300 5,139
---------
TOTAL 180,854
---------
UTILITIES (7.2 %)
Endesa S.A. Spain 252,000 4,999
EVN Energie
Versorgung Australia 21,500 3,245
Gener S.A., ADR Chile 299,450 4,641
Hong Kong Electric
Holdings Ltd Hong Kong 1,790,000 5,596
Iberdrola S.A. Spain 587,500 8,135
Korea Electric Power
Corp., ADR Korea 271,000 8,401
National Power PLC United Kingdom 1,246,864 7,222
Thames Water United Kingdom 430,504 5,370
Veba AG Germany 168,100 8,162
---------
TOTAL 55,771
---------
TOTAL COMMON STOCK
(COST $626,644) 758,693
---------
<CAPTION>
MONEY MARKET
INVESTMENTS (1.4%)
---------------------------------------------------------------
<S> <C> <C> <C>
CAPTIVE FINANCE COMPANY (1.3%)
Ford Motor Credit
Company, 5.95%,
01/12/2000 United States 9,700,000 9,681
---------
FEDERAL GOVERNMENT AND AGENCIES (.1%)
Federal Home Loan
Mortgage Corp.,
4.74%, 01/14/2000 United States 1,230,000 1,228
---------
TOTAL MONEY MARKET INVESTMENTS
(COST $10,909) 10,909
---------
</TABLE>
13 International Equity Portfolio
<PAGE> 22
<TABLE>
MARKET
VALUE
(000'S)
- -----------------------------------------------------------------
<S> <C>
TOTAL INVESTMENTS (99.7%)
(COST $637,553)' $ 769,602
---------
OTHER ASSETS, LESS LIABILITIES (0.3%) 2,568
---------
TOTAL NET ASSETS (100.0%) $ 772,170
---------
</TABLE>
* Non-Income Producing
ADR - American Depository Receipt
Investment Percentages by Country:
<TABLE>
<S> <C>
United Kingdom 15.97%
Japan 9.61%
France 9.44%
Australia 5.95%
Hong Kong 5.77%
Other 53.26%
-------
Total 100.00%
</TABLE>
' At December 31, 1999, the aggregate cost of securities for federal income tax
purposes was $637,581 and the net unrealized appreciation of investments based
on that cost was $132,021 which is comprised of $196,727 aggregate gross
unrealized appreciation and $64,706 gross unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements
International Equity Portfolio 14
<PAGE> 23
<TABLE>
<CAPTION>
Objective: Portfolio Strategy: Net Assets:
<S> <C> <C>
Long-term capital appreciation Invest in a portfolio designed to approximate the $59,644,323
through cost-effective participation composition and returns of the S&P 500 Index.
in broad market performance
</TABLE>
INDEX 400 STOCK PORTFOLIO
The Index 400 Stock Portfolio is designed to achieve results that approximate
the performance of the Standard & Poor's MidCap 400 Composite Stock Price Index.
This index is a capitalization-weighted index that measures the performance of
the mid-range sector of the U.S. stock market. As of December 31, 1999, the 400
companies in the composite had a median market capitalization of $1.6 billion
and total market value of $922 billion. For comparison, the 500 large stocks in
the S&P 500 Index had a median market capitalization of $8.0 billion and total
market value of $12,318 billion.
The Index 400 Portfolio, introduced on April 30, 1999, enables contract owners
to participate in the performance of mid-sized companies in the U.S. equity
market. In its first eight months of operation, the Portfolio achieved the
objective of matching the results of the S&P MidCap 400 Index before expenses.
SECTOR ALLOCATION
12/31/99
[PIE CHART]
<TABLE>
<S> <C>
Other Industries 3%
Energy 4%
Consumer Staples 7%
Utilities 8%
Health Care 10%
Finance 11%
Index Futures 5%
Technology 25%
Consumer Cyclical 15%
Basic Materials/Capital Goods 12%
</TABLE>
TOP 10 HOLDINGS
12/31/99
<TABLE>
<CAPTION>
Company % of Net Assets
-----------------------------------------------------------------------------------
<S> <C>
VERITAS Software Corporation 3.8%
-----------------------------------------------------------------------------------
Siebel Systems, Inc. 1.6%
-----------------------------------------------------------------------------------
Biogen, Inc. 1.3%
-----------------------------------------------------------------------------------
Maxim Integrated Products, Inc. 1.3%
-----------------------------------------------------------------------------------
Intuit, Inc. 1.2%
-----------------------------------------------------------------------------------
Linear Technology Corporation 1.1%
-----------------------------------------------------------------------------------
Univision Communications, Inc. 1.1%
-----------------------------------------------------------------------------------
MedImmune, Inc. 1.0%
-----------------------------------------------------------------------------------
Altera Corporation 1.0%
-----------------------------------------------------------------------------------
Harley-Davidson, Inc. 1.0%
</TABLE>
PERFORMANCE RELATIVE TO THE S&P MIDCAP 400 INDEX
[LINE GRAPH]
<TABLE>
<CAPTION>
- ---------------------------------------------------
Average Annual Total Return
For Period Ended December 31, 1999
Since
Inception#
- ---------------------------------------------------
<S> <C>
Index 400 Stock Portfolio 12.83%
S&P MidCap 400 Index 13.58%
- ---------------------------------------------------
# Inception date of 4/30/99
(Returns not annualized)
</TABLE>
The S&P MidCap 400 Index is a capitalization-weighted index that measures the
performance of the mid-range sector of the U.S. stock market. As of December 31,
1999, the 400 companies in the composite had median market capitalization of
$1.6 billion and a total market value of $907 billion. The MidCap 400 represents
approximately 6% of the market value of S&P's database of over 8,200 equities.
This chart assumes an initial investment of $10,000 made on 4/30/99. Returns
shown include deductions for management and other fund expenses, and
reinvestment of all dividends. Returns exclude deductions for separate account
sales loads and account fees. Past performance is not predictive of future
performance. Investment return and principal value will fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. Total
returns, which reflect deduction of charges for the separate account, are shown
on page 2.
15 Index 400 Stock Portfolio
<PAGE> 24
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (94.7%) PAR (000'S)
-------------------------------------------------------
<S> <C> <C>
BASIC MATERIALS (4.6%)
A. Schulman, Inc. 1,900 $ 31
*Airgas, Inc. 4,400 42
AK Steel Holding Corp. 6,200 117
Albemarle Corporation 2,900 56
Bowater Inc. 3,200 174
Cabot Corp. 4,100 84
Carpenter Technology 1,400 38
Chesapeake Corp. 1,300 40
CK Witco Corporation 7,363 98
Cleveland-Cliffs Inc. 700 22
Consolidated Papers, Inc. 5,600 178
*Cytec Industries Inc. 2,600 60
Dexter Corp. 1,400 56
Ethyl Corp. 5,200 20
Ferro Corp. 2,200 48
Georgia Gulf Corp. 1,900 58
Georgia-Pacific Corporation
(Timber Group) 5,100 126
H.B. Fuller Co. 900 50
IMC Global Inc. 7,100 116
Kennametal Inc. 1,800 60
Longview Fibre Co. 3,200 46
Lubrizol Corp. 3,400 105
Lyondell Chemical Company 7,200 92
M.A. Hanna Company 3,000 33
Martin Marietta Materials 2,900 119
*Maxxam Inc. 400 17
Minerals Technologies Inc. 1,300 52
Olin Corp. 2,800 55
Oregon Steel Mills Inc. 1,600 13
P.H. Glatfelter Company 2,600 38
Rayonier Inc. 1,700 82
RPM. Inc. 6,800 69
Ryerson Tull Inc. 1,500 29
Solutia Inc. 6,800 105
Sonoco Products Co. 6,300 143
Southdown Inc. 2,200 114
*Ucar International Inc. 2,800 50
Universal Corp-Va 2,000 46
Wausau-Mosinee Paper Corp. 3,200 37
-------
TOTAL 2,719
-------
CAPITAL GOODS (7.3%)
Agco Corp. 3,700 50
Albany International Corp. 1,900 29
*American Power Conversion 11,900 314
*American Standard Companies 4,400 202
Ametek Inc. 2,000 38
Carlisle Companies. Inc. 1,900 68
Cordant Technologies Inc. 2,300 76
Diebold Inc. 4,300 101
Donaldson Co. Inc. 2,800 67
Federal Signal Corp. 2,800 45
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (94.7%) PAR (000'S)
-------------------------------------------------------
<S> <C> <C>
CAPITAL GOODS continued
Flowserve Corp. 2,300 $ 39
Granite Construction Inc. 1,700 31
Harsco Corp. 2,500 79
Herman Miller Inc. 4,900 113
Hillenbrand Industries 4,100 130
HON Industries 3,800 83
Hubbell Inc. 4,000 109
*Jabil Circuit, Inc. 5,400 394
*Jacobs Engineering Group Inc. 1,600 52
Kaydon Corporation 2,000 54
*Magnetek Inc. 1,900 15
Newport News Shipbuilding 2,100 58
Nordson Corp. 1,000 48
Pentair Inc. 3,000 116
Precision Castparts Corp. 1,500 39
Reynolds & Reynolds 4,800 108
*Sanmina Corporation 3,600 360
*SCI Systems Inc. 4,500 370
*Sensormatic Electronics Corp. 4,700 82
*Sequa Corp. 600 32
*SPX Corp. 1,900 154
Standard Register Co. 1,700 33
Stewart & Stevenson Services 1,700 20
*Symbol Technologies Inc. 5,400 343
Tecumseh Products Co. 1,200 57
Teleflex, Inc. 2,300 72
Trinity Industries 2,500 71
*Vishay Intertechnology Inc. 5,225 165
Wallace Computer Services, Inc. 2,600 43
York International Corp. 2,500 69
-------
TOTAL 4,329
-------
COMMUNICATION SERVICES (1.7%)
Broadwing, Inc. 13,300 490
Comsat Corp. 3,222 64
Telephone & Data Systems Inc. 3,800 479
-------
TOTAL 1,033
-------
CONSUMER CYCLICAL (15.0%)
*A.H. Belo Corporation 7,300 139
*Abercrombie & Fitch Co. 6,400 171
*AC Nielsen Corporation 3,600 89
*Acxiom Corporation 5,200 125
*American Eagle Outfitters, Inc. 2,900 131
*Apollo Group Inc. 4,800 96
Arvin Industries Inc. 1,600 45
Bandag Inc. 1,400 35
*Barnes & Noble, Inc. 4,300 89
*BJ's Wholesale Club Inc. 4,500 164
*Blyth Industries Inc. 3,000 74
*Borders Group Inc. 4,800 77
Borg-Warner Automotive, Inc. 1,600 65
*Burlington Industries, Inc. 3,300 13
</TABLE>
Index 400 Stock Portfolio 16
<PAGE> 25
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (94.7%) PAR (000'S)
-------------------------------------------------------
<S> <C> <C>
CONSUMER CYCLICAL continued
Callaway Golf Company 4,700 $ 83
*CDW Computer Centers, Inc. 2,700 212
Cintas Corp. 6,800 361
Claire's Stores Inc. 3,100 69
Clayton Homes Inc. 8,900 82
*Compusa Inc. 5,700 29
*Convergys Corp. 9,400 289
*DeVry, Inc. 4,300 80
*Dollar Tree Stores, Inc. 3,800 184
Family Dollar Stores 10,700 175
Fastenal Co. 2,300 103
*Federal-Mogul Corp. 4,400 89
*Furniture Brands International
Inc. 3,200 70
*Gtech Holdings Corp. 2,200 48
Harley-Davidson, Inc. 9,400 602
Harte-Hanks Communications 4,300 94
Heilig-Meyers Co. 3,700 10
Houghton Mifflin Co. 1,900 80
International Game Technology 5,600 114
International Speedway Corporation 3,300 166
*Jones Apparel Group, Inc. 7,551 205
Kelly Services Inc. 2,200 55
Lancaster Colony Corp. 2,500 83
*Land's End Inc. 1,900 66
*Lear Corporation 4,100 131
Lee Enterprises 2,700 86
*Mandalay Resort Group 5,600 113
Manpower Inc. 4,700 177
Mark IV Industries Inc. 2,900 51
Media General Inc. 1,600 83
Meritor Automotive Inc. 4,300 83
*Micro Warehouse Inc. 2,200 41
Modine Manufacturing Co. 1,800 45
*Modis Professional Services Inc. 5,900 84
*Mohawk Industries Inc. 3,700 98
*Navigant Consulting Co. 2,600 28
NCH Corp. 300 13
*NCO Group, Inc. 1,500 45
Neiman Marcus Group, Inc 3,000 84
*Officemax Inc. 7,000 39
*Ogden Corp. 3,000 36
Olsten Corp. 5,000 57
*Park Place Entertainment 18,700 234
*Payless Shoesource Inc. 2,000 94
Pittston Brink's Group 2,500 55
*Premier Parks Inc. 4,800 139
The Readers Digest Association,
Inc. 6,600 193
*Robert Half International, Inc. 5,600 160
Rollins Inc. 1,900 28
Ross Stores Inc. 5,600 100
*Saks Incorporated 8,900 139
*Scholastic Corp. 1,000 62
Shaw Industries Inc. 8,500 131
Sotheby's Holdings 3,600 108
Stewart Enterprises, Inc. 6,900 33
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (94.7%) PAR (000'S)
-------------------------------------------------------
<S> <C> <C>
CONSUMER CYCLICAL continued
Superior Industries International 1,700 $ 46
*Sylvan Learning Systems Inc. 3,200 42
*Tech Data Corp. 3,200 87
Tiffany & Co. 4,300 384
*Unifi Inc. 3,700 46
USG Corp. 3,100 146
Viad Corp. 6,000 167
Warnaco Group 3,400 42
Washington Post 600 334
Wellman Inc. 1,900 35
Westpoint Stevens Inc. 3,400 59
*Williams-Sonoma, Inc. 3,400 156
-------
TOTAL 8,976
-------
CONSUMER STAPLES (7.2%)
Banta Corp. 1,700 38
Bergen Brunswig Corp. 8,300 69
Bob Evans Farms, Inc. 2,400 37
*Brinker International Inc. 4,100 98
*Buffets Inc. 2,600 26
Carter-Wallace Inc. 2,800 50
CBRL Group Inc. 3,700 36
*Chris-Craft Industries Inc. 2,100 151
Church & Dwight Inc. 2,400 64
Dean Foods Co. 2,400 95
Dole Food Company 3,500 57
Dreyer's Grand Ice Cream Inc. 1,700 29
Flowers Industries Inc. 6,200 99
Hannaford Brothers Co. 2,600 180
*Hispanic Broadcasting Corp. 3,400 314
Hormel Foods Corp. 4,500 183
IBP Inc. 5,700 103
International Multifoods Corp. 1,200 16
Interstate Bakeries 4,300 78
The J.M. Smucker Co. 1,800 35
Lance Inc. 1,800 18
*Lone Star Steakhouse & Saloon 2,000 18
McCormick & Co. 4,400 131
*Outback Steakhouse Inc. 4,600 119
*Papa John's International Inc. 1,900 49
*Perrigo Company 4,500 36
*PSS World Medical, Inc. 4,400 42
RJ Reynolds Tobacco Holdings Inc. 6,700 118
Ruddick Corp. 2,900 45
*Starbucks Corp. 11,200 272
*Suiza Foods Corp. 2,100 83
The Dial Corporation 6,300 153
Tyson Foods Inc. 14,200 231
*U.S. Foodservice 6,100 102
Universal Foods Corp. 3,100 63
*Univision Communications Inc. 6,300 644
*Vlasic Foods International 2,800 16
*Westwood One Inc. 3,300 251
Whitman Corp. 8,700 117
-------
TOTAL 4,266
-------
</TABLE>
17 Index 400 Stock Portfolio
<PAGE> 26
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (94.7%) PAR (000'S)
-------------------------------------------------------
<S> <C> <C>
ENERGY (4.3%)
*BJ Services Company 4,400 $ 184
Devon Energy Corporation 4,900 161
Ensco International Inc. 8,500 194
*Global Marine Inc. 10,700 178
*Hanover Compressor Company 1,800 68
Murphy Oil Corp. 2,800 161
*Nabors Industries, Inc. 8,400 260
Noble Affiliates Inc. 3,500 75
*Noble Drilling Corp. 8,100 265
*Ocean Energy Inc. 10,300 80
Pennzoil-Quaker State Company 4,800 49
*Pioneer Natural Resources Co. 6,200 55
*Santa Fe Snyder Corp. 11,200 90
*Smith International Inc. 3,100 154
Tidewater Inc. 3,400 122
Ultramar Diamond Shamrock Corp. 5,300 120
Valero Energy Corp. 3,500 70
*Varco International Inc. 4,000 41
*Weatherford International, Inc. 6,500 260
-------
TOTAL 2,587
-------
FINANCE (10.4%)
A.G. Edwards, Inc. 5,800 186
Allmerica Financial Corp. 3,300 184
Ambac Financial Group, Inc. 4,300 224
American Financial Group Inc. 3,700 98
Associated Banc-Corp 3,900 134
Astoria Financial Corporation 3,400 103
CCB Financial Corp. 2,400 105
Charter One Financial Inc. 13,160 252
City National Corp. 2,800 92
Compass Bancshares Inc. 7,000 156
Dime Bancorp, Inc. 7,000 106
*E*TRADE Group Inc. 14,500 379
Everest Reinsurance Hldgs 3,000 67
Finova Group Inc. 3,800 135
First Security Corporation 12,000 306
First Tennessee National Corp. 8,100 231
First Virginia Banks Inc. 3,100 133
FirstMerit Corporation 5,600 129
GreenPoint Financial Corp. 6,700 160
Hibernia Corp. 9,900 105
Horace Mann Educators 2,500 49
HSB Group Inc. 1,800 61
Keystone Financial Inc. 3,000 63
Legg Mason, Inc. 3,500 127
Marshall & Ilsley Corp. 6,400 402
Mercantile Bankshares Corp. 4,300 137
National Commerce Bancorporation 6,500 147
North Fork Bancorporation 8,400 147
Ohio Casualty Corporation 3,800 61
Old Republic International
Corporation 8,000 109
Pacific Century Financial Corp. 5,000 93
The PMI Group Inc. 2,750 134
Protective Life Corp. 4,000 127
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (94.7%) PAR (000'S)
-------------------------------------------------------
<S> <C> <C>
FINANCE continued
Provident Financial Group, Inc. 2,700 $ 97
Reliastar Financial Corp. 5,300 208
Sovereign Bancorp Inc. 13,500 101
TCF Financial Corp. 5,100 127
Unitrin Inc. 4,500 169
Webster Financial Corp. 2,800 66
Westamerica Bancorporation 2,400 67
Wilmington Trust Corporation 2,000 96
*Zions Bancorporation 5,200 308
-------
TOTAL 6,181
-------
HEALTH CARE (9.8%)
*Acuson Corp. 1,700 21
*Apria Healthcare Group Inc. 3,200 57
Beckman Coulter Inc. 1,800 92
*Beverly Enterprises Inc. 6,300 28
*Biogen Inc. 9,300 786
*Chiron Corp. 11,200 475
*Covance Inc. 3,600 39
Dentsply International Inc. 3,300 78
*Express Scripts, Inc. 2,400 154
*First Health Group Corp. 3,100 83
*Forest Laboratories, Inc. 5,100 313
*Foundation Health Systems 7,500 75
*Genzyme Corporation (General
Division) 5,100 230
*Gilead Sciences Inc. 2,600 141
*Health Management Associates Inc. 15,600 209
ICN Pharmaceuticals Inc. 4,800 121
*Ivax Corp. 6,600 170
*Lincare Holdings, Inc. 3,600 125
*Medimmune Inc. 3,700 614
*Millennium Pharmaceuticals 2,200 268
*Minimed Inc. 1,900 139
Mylan Laboratories 8,000 201
Omnicare Inc. 5,600 67
*Oxford Health Plans 5,000 63
*Pacificare Health Systems 2,800 148
*Quorum Health Group, Inc. 4,500 42
*Sepracor Inc. 2,000 198
*Steris Corp. 4,200 43
*Stryker Corp. 6,000 418
*Sybron International Corporation 6,400 158
*Total Renal Care Holdings 5,000 33
*Trigon Healthcare Inc. 2,600 77
*VISX Inc. 3,900 202
-------
TOTAL 5,868
-------
TECHNOLOGY (25.1%)
*Adtran Inc. 2,400 123
*Affiliated Computer Svcs Inc. 3,000 138
*Altera Corp. 12,300 610
*Arrow Electronics Inc. 5,900 150
*Atmel Corporation 12,400 367
Avnet Inc. 2,600 157
</TABLE>
Index 400 Stock Portfolio 18
<PAGE> 27
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (94.7%) PAR (000'S)
-------------------------------------------------------
<S> <C> <C>
TECHNOLOGY continued
*Cadence Design Systems Inc. 15,000 $ 360
*Cambridge Technology Partners
Inc. 3,700 97
*CheckFree Holdings Corporation 3,400 355
*Cirrus Logic Inc. 4,000 53
Comdisco Inc. 9,400 350
*Concord EFS, Inc. 12,650 326
*Cypress Semiconductor Corp. 6,500 210
*DST Systems, Inc. 3,900 298
*Electronic Arts Inc. 3,800 319
*Fiserv, Inc. 7,650 293
*Gartner Group Inc. 5,400 75
Harris Corporation 4,900 131
*Imation Corporation 2,300 77
*Informix Corp. 11,800 134
*Integrated Device Technology Inc. 5,500 160
*Intuit Inc. 11,500 689
*Investment Technology Group Inc. 2,000 58
*Keane Inc. 4,400 140
*Legato Systems Inc. 5,000 344
Linear Technology Corp. 9,400 673
*Litton Industries Inc. 2,800 140
*Maxim Integrated Products 16,600 783
*Mentor Graphics Corp. 4,100 54
*Microchip Technology, Inc. 3,100 212
*NCR Corporation 6,100 231
*Network Associates Inc. 8,600 230
*NOVA Corporation 4,500 142
*Novellus Systems, Inc. 2,400 294
*Policy Management Systems
Corporation 2,200 56
Polycom, Inc. 2,000 127
*Qlogic Corporation 2,200 352
*Quantum Corp.-DLT & Storage 10,200 154
*Rational Software Corp. 5,400 265
*Siebel Systems Inc. 11,400 958
*Sterling Commerce Inc. 5,400 184
*Sterling Software, Inc. 5,200 164
*Storage Technology Corp. 6,200 114
*Structural Dynamics Research 2,200 28
*Sungard Data Systems Inc. 7,400 176
Sykes Enterprises, Inc. 2,600 114
*Symantec Corp. 3,500 205
*Synopsys, Inc. 4,400 294
*Transaction Systems Architects,
Inc. 2,000 56
*VERITAS Software Corp. 15,800 2,261
*Vitesse Semiconductor Corp. 9,500 498
*Waters Corp. 3,800 201
-------
TOTAL 14,980
-------
TRANSPORTATION (1.0%)
Airborne Freight Corp. 3,000 66
*Alaska Airgroup Inc. 1,600 56
Alexander & Baldwin Inc. 2,700 62
Arnold Industries Inc. 1,500 21
CNF Transportation Inc. 3,000 104
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (94.7%) PAR (000'S)
-------------------------------------------------------
<S> <C> <C>
TRANSPORTATION continued
Gatx Corp. 3,100 $ 105
J.B. Hunt Transport Services, Inc. 2,200 30
Overseas Shipholding Group 2,200 33
*Swift Transportation Co., Inc. 4,000 70
*Wisconsin Central Transport 3,200 43
-------
TOTAL 590
-------
UTILITIES (8.3%)
AGL Resources Inc. 3,500 60
Allegheny Energy Inc. 7,100 191
Alliant Energy Corp. 4,800 132
American Water Works Inc. 6,000 127
Black Hills Corp. 1,300 29
*Calpine Corp. 3,800 243
Cleco Corporation 1,400 45
CMP Group Inc. 2,000 55
Conectiv Inc. 5,800 98
DPL Inc. 9,800 170
DQE, Inc. 4,600 159
Energy East Corp. 7,100 148
Hawaiian Electric Industries, Inc. 2,000 58
Idacorp Inc. 2,300 62
Illinova Corp. 4,300 149
Indiana Energy Inc. 1,800 32
Ipalco Enterprises Inc. 5,300 90
Kansas City Power & Light 3,800 84
KeySpan Corporation 8,600 199
Kinder Morgan, Inc. 6,900 139
LG&E Energy Corp. 8,000 139
MCN Energy Group Inc. 5,300 126
*Midamerican Energy Holdings Co. 3,800 128
Minnesota Power Inc. 4,500 76
Montana Power Co. 6,800 245
National Fuel Gas Co. 2,400 112
New England Electric System 3,600 186
NiSource Inc. 7,700 138
*Northeast Utilities 8,100 167
NSTAR 3,900 158
OGE Energy Corp. 4,800 91
Potomac Electric Power 7,300 167
Public Service Co. Of New Mexico 2,500 41
Puget Sound Energy Inc. 5,200 101
Questar Corp. 5,100 76
Scana Corp. 6,400 172
Sierra Pacific Resources 4,781 83
Teco Energy Inc. 8,200 152
Utilicorp United Inc. 5,700 111
Washington Gas Light Co. 2,900 80
Wisconsin Energy Corporation 7,200 139
-------
TOTAL 4,958
-------
TOTAL COMMON STOCK
(COST $52,637) 56,487
-------
</TABLE>
19 Index 400 Stock Portfolio
<PAGE> 28
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
MONEY MARKET INVESTMENTS (4.7%) PAR (000's)
-------------------------------------------------------
<S> <C> <C>
FEDERAL GOVERNMENT AND AGENCIES (4.7%)
Federal Home Loan Mortgage Corp.,
4.75%, 01/14/00 1,800,000 $ 1,797
#Federal Home Loan Mortgage Corp.,
5.51%, 01/10/00 700,000 699
#Federal Home Loan Mortgage Corp.,
5.54%, 01/20/00 300,000 299
-------
TOTAL MONEY MARKET
INVESTMENTS (COST $2,795) 2,795
-------
TOTAL INVESTMENTS (99.4%)
(COST $55,432)' 59,282
OTHER ASSETS, LESS LIABILITIES (0.6%) 362
-------
TOTAL NET ASSETS (100.0%) $59,644
-------
</TABLE>
* Non-Income Producing
# Partially held by the custodian in a segregated account as collateral for open
futures positions. Information regarding open futures contracts as of December
31, 1999 is summarized below:
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF EXPIRATION APPRECIATION
ISSUER CONTRACTS DATE (000'S)
- ------------------------------------------------------------
<S> <C> <C> <C>
Midcap 400 Stock Index 13 3/00 $132
(Total Notional Value
at 12/31/99,
$2,787,400)
</TABLE>
' At December 31, 1999, the aggregate cost of securities for federal income tax
purposes was $55,432 and the net unrealized appreciation of investments based
on that cost was $3,850 which is comprised of $7,710 aggregate gross
unrealized appreciation and $3,860 aggregate gross unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements
Index 400 Stock Portfolio 20
<PAGE> 29
<TABLE>
<CAPTION>
Objective: Portfolio Strategy: Net Assets:
<S> <C> <C>
Long-term appreciation of capital Hold a diversified mix of high quality growth $676,133,829
with moderate risk stocks of medium and large companies with
above-average potential for earnings growth.
</TABLE>
GROWTH STOCK PORTFOLIO
The Growth Stock Portfolio is invested in high quality companies of large to
medium capitalization with strong financial characteristics and the ability to
generate internal growth. A key factor in stock selection is the choice of
industries with good earnings potential, based on analysis of economic trends to
determine their impact on various sectors of the economy. Stock selection is
made through "top down" analysis: first industry and market sector choices are
made based on the economic environment, and then the most promising companies
within each sector are selected as holdings. A strategy of this portfolio is to
go beyond the most familiar "blue chip" names to seek out medium-sized companies
with stock prices that do not yet reflect their potential for growth.
Diversification across 70 to 90 stocks in a wide range of industry groups
reduces the portfolio's risk profile.
The Portfolio's performance has benefited from its increased exposure to
technology stocks, with holdings selected from high quality companies that have
already become profitable and have excellent growth prospects. The largest
technology holdings in the Portfolio are among the industry leaders: Microsoft,
IBM and Cisco Systems. Retail holdings, including Kohl's, Costco, Dayton-Hudson
and Wal-Mart, have continued to perform well, as retailers benefit from a strong
consumer economy. Exposure to media stocks has been increased to take advantage
of a very strong advertising environment, which is being driven by the continued
strong economy and spending by Internet companies to build brand identity and
attract consumers to their web sites. With the presidential election and
Olympics coming up in 2000, media companies should continue to perform well. An
underweighted position in financial services, with minimal exposure to banks,
has proven to be a good decision, as bank mergers have generally failed to
produce the anticipated cost savings.
SECTOR ALLOCATION
12/31/99
[PIE CHART]
<TABLE>
<S> <C>
Index Futures 10%
Other Industries 9%
Energy 5%
Health Care 5%
Finance 7%
Basic Materials/Capital Goods 9%
Cash Equivalents 3%
Technology 26%
Consumer Cyclical 16%
Consumer Staples 10%
</TABLE>
TOP 10 HOLDINGS
12/31/99
<TABLE>
<CAPTION>
Company % of Total Net Assets
-------------------------------------------------------------------------------------
<S> <C>
Microsoft Corporation 3.0%
-------------------------------------------------------------------------------------
General Electric Company 2.6%
-------------------------------------------------------------------------------------
Cisco Systems, Inc. 2.5%
-------------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 2.0%
-------------------------------------------------------------------------------------
Citigroup, Inc. 1.8%
-------------------------------------------------------------------------------------
Intel Corporation 1.8%
-------------------------------------------------------------------------------------
The Home Depot, Inc. 1.8%
-------------------------------------------------------------------------------------
Lucent Technologies, Inc. 1.8%
-------------------------------------------------------------------------------------
Nortel Networks Corporation 1.7%
-------------------------------------------------------------------------------------
Enron Corp. 1.7%
</TABLE>
PERFORMANCE RELATIVE TO THE S&P 500 INDEX
[LINE GRAPH]
<TABLE>
<CAPTION>
- ------------------------------------------------------
Average Annual Total Return
For Periods Ended December 31, 1999
Since
1 Year 5 Years Inception#
- ------------------------------------------------------
<S> <C> <C> <C>
Growth Stock Portfolio 22.50% 26.09% 23.05%
S&P 500 Index 21.06% 28.46% 25.45%
- ------------------------------------------------------
# Inception date of 5/3/94
</TABLE>
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of
500 selected common stocks, most of which are listed on the New York Stock
Exchange. The Index is heavily weighted toward stocks with large market
capitalizations and represents approximately two-thirds of the total market
value of all domestic common stocks.
This chart assumes an initial investment of $10,000 made on 5/3/94 (commencement
of operations). Returns shown include deductions for management and other fund
expenses, and reinvestment of all dividends. Returns exclude deductions for
separate account sales loads and account fees. Past performance is not
predictive of future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. Total returns, which reflect deduction of charges for the
separate account, are shown on page 2.
21 Growth Stock Portfolio
<PAGE> 30
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (87.3%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
BASIC MATERIALS (2.0%)
Ecolab, Inc. 203,900 $ 7,978
PPG Industries, Inc. 48,800 3,053
The Mead Corporation 55,000 2,389
---------
TOTAL 13,420
---------
CAPITAL GOODS (7.1%)
Avery Dennison Corporation 91,400 6,661
Emerson Electric Co. 59,400 3,408
General Electric Company 114,500 17,719
Honeywell International, Inc. 69,400 4,003
Illinois Tool Works, Inc. 68,000 4,594
*Republic Services, Inc. 215,600 3,099
Tyco International Ltd. 223,400 8,685
---------
TOTAL 48,169
---------
COMMUNICATION SERVICES (4.8%)
AT&T Corp. 188,900 9,587
GTE Corporation 82,900 5,850
*MCI WorldCom, Inc. 129,750 6,885
*Nextel Communications,
Inc. - Class A 72,500 7,476
SBC Communications, Inc. 50,139 2,444
---------
TOTAL 32,242
---------
CONSUMER CYCLICALS (16.4%)
*Amazon.com, Inc. 41,900 3,190
*Barnes & Noble, Inc. 141,000 2,908
*barnesandnoble.com, inc. - Class
A 81,400 1,155
*Costco Wholesale Corporation 62,300 5,685
Dayton Hudson Corporation 67,000 4,920
*eToys, Inc. 68,100 1,788
Ford Motor Company 93,000 4,970
Harley-Davidson, Inc. 171,500 10,987
*Kohl's Corporation 140,600 10,150
Lennar Corporation 32,700 531
Omnicom Group, Inc. 33,600 3,360
The Gap, Inc. 30,350 1,396
The Home Depot, Inc. 179,250 12,290
The Interpublic Group of
Companies, Inc. 108,300 6,247
The McGraw-Hill Companies, Inc. 142,200 8,763
The New York Times Company -
Class A 129,200 6,347
The ServiceMaster Company 245,250 3,020
Tiffany & Co. 15,800 1,410
Tribune Company 152,000 8,369
Wal-Mart Stores, Inc. 193,000 13,341
---------
TOTAL 110,827
---------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (87.3%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
CONSUMER STAPLES (9.6%)
Anheuser-Busch Companies, Inc. 48,900 $ 3,466
The Coca-Cola Company 112,800 6,571
The Dial Corporation 252,800 6,146
*Keebler Foods Company 108,100 3,040
Kimberly-Clark Corporation 103,000 6,721
McDonald's Corporation 115,400 4,652
PepsiCo, Inc. 102,100 3,599
The Procter & Gamble Company 96,000 10,518
The Quaker Oats Company 65,600 4,305
Time Warner Inc. 52,500 3,803
*Viacom, Inc. - Class B 76,000 4,593
Walgreen Co. 262,400 7,675
---------
TOTAL 65,089
---------
ENERGY (4.8%)
BP Amoco Plc, ADR 90,000 5,338
Chevron Corporation 23,000 1,992
Conoco, Inc. - Class B 210,500 5,236
EOG Resources, Inc. 270,000 4,742
Exxon Mobil Corporation 96,767 7,796
Schlumberger Limited 40,500 2,278
Texaco, Inc. 38,000 2,064
Tosco Corporation 94,000 2,556
Transocean Sedco Forex, Inc. 7,857 265
---------
TOTAL 32,267
---------
FINANCE (7.0%)
American International Group,
Inc. 8,000 865
The Bank of New York Company,
Inc. 133,300 5,332
The Chase Manhattan Corporation 94,880 7,371
Citigroup, Inc. 223,400 12,413
Fifth Third Bancorp 73,300 5,378
The Goldman Sachs Group, Inc. 25,500 2,402
*LaBranche & Co., Inc. 47,200 602
Lehman Brothers Holdings, Inc. 43,600 3,692
Morgan Stanley Dean Witter & Co. 68,700 9,807
---------
TOTAL 47,862
---------
HEALTHCARE (5.2%)
Bristol-Myers Squibb Company 116,500 7,478
Eli Lilly and Company 64,900 4,316
*Guidant Corporation 30,600 1,438
Johnson & Johnson 49,100 4,572
Medtronic, Inc. 165,800 6,041
Merck & Co., Inc. 97,400 6,532
Pfizer, Inc. 43,700 1,418
Warner-Lambert Company 38,600 3,163
---------
TOTAL 34,958
---------
</TABLE>
Growth Stock Portfolio 22
<PAGE> 31
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (87.3%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (25.9%)
*Agilent Technologies, Inc. 24,900 $ 1,925
*Amdocs Limited 210,000 7,245
*America Online, Inc. 77,600 5,854
*Atmel Corporation 43,700 1,292
*Cisco Systems, Inc. 155,200 16,626
*Concord EFS, Inc. 207,900 5,353
*Dell Computer Corporation 86,800 4,427
Electronic Data Systems
Corporation 124,300 8,320
*EMC Corporation 54,800 5,987
*Fiserv, Inc. 266,475 10,209
Hewlett-Packard Company 67,800 7,725
*Intel Corporation 149,600 12,314
International Business Machines
Corporation 80,000 8,640
Lucent Technologies, Inc. 162,884 12,186
*Microsoft Corporation 171,400 20,011
Nortel Networks Corporation 112,000 11,312
*Oracle Corporation 57,000 6,388
*Sun Microsystems, Inc. 89,000 6,892
Texas Instruments, Incorporated 64,200 6,219
*TIBCO Software, Inc. 57,500 8,797
W.W. Grainger, Inc. 85,000 4,064
*Williams Communications Group,
Inc. 106,500 3,082
---------
TOTAL 174,868
---------
TRANSPORTATION (2.8%)
*AMR Corporation 73,900 4,951
Canadian National Railway Company 165,000 4,342
*FDX Corporation 57,000 2,333
*Midwest Express Holdings, Inc. 125,400 3,997
Southwest Airlines Co. 215,775 3,493
---------
TOTAL 19,116
---------
UTILITIES (1.7%)
Enron Corp. 252,000 11,183
---------
TOTAL COMMON STOCK
(COST $379,101) 590,001
---------
MONEY MARKET INVESTMENTS (13.0%)
---------------------------------------------------------
<S> <C> <C>
CAPTIVE FINANCE COMPANY (3.0%)
Ford Motor Credit Company, 6.21%,
01/12/2000 20,000,000 19,962
---------
FEDERAL AND GOVERNMENT AGENCIES (0.9%)
Federal Home Loan Mortgage Corp.,
4.75%, 01/14/2000 2,400,000 2,396
#Federal Home Loan Mortgage
Corp., 5.54%, 01/20/2000 3,700,000 3,689
#Federal Home Loan Mortgage
Corp., 5.57%, 01/20/2000 200,000 199
---------
TOTAL 6,284
---------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
MONEY MARKET INVESTMENTS (13.0%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
FINANCE LESSORS (2.9%)
Variable Funding Capital Corp.,
6.14%, 01/21/2000 20,000,000 $ 19,932
---------
MISCELLANEOUS BUSINESS CREDIT INSTITUTIONS (2.9%)
Quincy Capital Corporation,
6.07%, 01/27/2000 20,000,000 19,912
---------
SHORT-TERM BUSINESS CREDIT (3.3%)
CXC Incorporated, 6.02%,
02/09/2000 20,000,000 19,870
IBM Credit Corp., 4.00%,
01/04/2000 2,400,000 2,399
---------
TOTAL 22,269
---------
TOTAL MONEY MARKET
INVESTMENTS (COST $88,359) 88,359
---------
TOTAL INVESTMENTS (100.3%)
(COST $467,460)' 678,360
---------
OTHER ASSETS, LESS LIABILITIES (-0.3%) (2,226)
---------
TOTAL NET ASSETS (100.0%) $ 676,134
---------
</TABLE>
* Non-Income Producing
ADR - American Depository Receipt
# Partially held by the custodian in a segregated account as collateral for open
futures positions. Information regarding open futures contracts as of December
31, 1999 is summarized below:
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF EXPIRATION APPRECIATION
ISSUERS CONTRACTS DATE (000'S)
- ----------------------------------------------------------------
<S> <C> <C> <C>
S&P 500 Stock Index 189 3/00 $2,875
(Total Notional Value
at 12/31/99,
$67,253,645)
</TABLE>
' At December 31, 1999, the aggregate cost of securities for federal income tax
purposes was $467,460 and the net unrealized appreciation of investments based
on that cost was $210,900 which is comprised of $220,019 aggregate gross
unrealized appreciation and $9,120 aggregate gross unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements
23 Growth Stock Portfolio
<PAGE> 32
<TABLE>
<CAPTION>
Objective: Portfolio Strategy: Net Assets:
<S> <C> <C>
Long-term growth of capital and Actively manage a portfolio of equity securities $661,551,933
income, consistent with moderate with a goal of exceeding the total return of the
investment risk S&P 500 Index.
</TABLE>
GROWTH & INCOME STOCK PORTFOLIO
The Growth and Income Stock Portfolio invests mainly in large-capitalization
stocks, with a focus on seeking the best values in the market based on long-term
earnings forecasts. A sector balance very close to that of the S&P 500 Index is
normally maintained, with the emphasis on undervalued stocks within each
industry group; a valuation discipline mandates the sale of stocks regarded as
overvalued. More focus is placed on capital appreciation and dividend growth
than on current dividends. The Portfolio is normally fully invested in equity
securities.
The Growth and Income Stock Portfolio has posted disappointing performance over
the last year. Market trends, with performance concentrated in technology stocks
and large growth companies have been at odds with this Portfolio's
value-oriented investment style, which focuses on selecting the securities
within each industry group that appear to be most undervalued. In addition,
several major holdings have experienced major earnings problems and consequent
stock declines. Balancing these downward pressures, technology holdings such as
Sun Microsystems, Texas Instruments, Dell and Cisco Systems have helped
performance. A large position in Exxon Mobil Corp. proved advantageous, given
rising oil prices and anticipated benefits of the recent merger of Exxon and
Mobil.
In recent months, the Portfolio's managers have modified the portfolio to
improve overall quality of holdings while remaining true to the value
orientation. There is an increasing focus on maintaining balance between the
technology-focused "new economy" and the more traditional sectors of the economy
including consumer and industrial companies, where many quality names are now
relatively cheap. The present emphasis on the large-capitalization names that
are prominent in the market indices will be maintained, particularly in the
technology area. Other selections will be made from stocks that are undervalued
because of temporary earnings problems or other situations that seem likely to
be reversed, with special focus on high quality companies with long-term
potential for profitable growth.
The Growth and Income Stock Portfolio is managed for Northwestern Mutual
Investment Services, LLC. by J. P. Morgan Investment Management, Inc.
SECTOR ALLOCATION
12/31/99
[PIE CHART]
<TABLE>
<S> <C>
Other Industries 11%
Health Care 6%
Energy 6%
Consumer Staples 9%
Consumer Cyclical 10%
Cash Equivalents 1%
Technology 27%
Basic Materials/Capital Goods 15%
Finance 14%
</TABLE>
TOP 10 HOLDINGS
12/31/99
<TABLE>
<CAPTION>
Company % of Net Assets
---------------------------------------------------------------------------------
<S> <C>
Microsoft Corporation 5.0%
---------------------------------------------------------------------------------
Cisco Systems, Inc. 4.0%
---------------------------------------------------------------------------------
Sun Microsystems, Inc. 3.2%
---------------------------------------------------------------------------------
Tyco International Ltd. 3.0%
---------------------------------------------------------------------------------
AT&T Corp. (various) 2.9%
---------------------------------------------------------------------------------
Exxon Mobil Corporation 2.9%
---------------------------------------------------------------------------------
Intel Corporation 2.6%
---------------------------------------------------------------------------------
MCI WorldCom, Inc. 2.0%
---------------------------------------------------------------------------------
Rohm and Haas Company 1.8%
---------------------------------------------------------------------------------
Monsanto Company 1.8%
</TABLE>
PERFORMANCE RELATIVE TO THE S&P 500 INDEX
[LINE GRAPH]
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Average Annual Total Return
For Periods Ended December 31, 1999
Since
1 Year 5 Years Inception#
- -------------------------------------------------------------
<S> <C> <C> <C>
Growth & Income Stock
Portfolio 7.47% 22.04% 19.29%
S&P 500 Index 21.06% 28.46% 25.45%
- -------------------------------------------------------------
# Inception Date of 5/3/94
</TABLE>
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of
500 selected common stocks, most of which are listed on the New York Stock
Exchange. The index is heavily weighted toward stocks with large market
capitalizations and represents approximately two-thirds of the total market
value of all domestic common stocks.
This chart assumes an initial investment of $10,000 made on 5/3/94 (commencement
of operations). Returns shown include deductions for management and other fund
expenses, and reinvestment of all dividends. Returns exclude deductions for
separate account sales loads and account fees. Past performance is not
predictive of future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. Total returns, which reflect deduction of charges for the
separate account, are shown on page 2.
Growth & Income Stock Portfolio 24
<PAGE> 33
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (98.8%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
BASIC MATERIALS (7.2%)
Allegheny Technologies
Incorporated 160,350 $ 3,598
Bowater Inc. 55,500 3,014
Monsanto Company 325,400 11,592
Reynolds Metals Company 3,400 261
Rohm and Haas Company 291,900 11,877
*Smurfit-Stone Container
Corporation 345,834 8,473
Temple-Inland Inc. 74,200 4,893
USX-U.S. Steel Group, Inc. 125,100 4,128
---------
TOTAL 47,836
---------
CAPITAL GOODS (7.4%)
Cooper Industries, Inc. 137,000 5,540
Deere & Company 82,900 3,596
General Electric Company 47,300 7,320
Honeywell International, Inc. 116,200 6,703
*Republic Services, Inc. 197,100 2,833
Tyco International Ltd. 514,798 20,013
Waste Management, Inc. 157,717 2,711
---------
TOTAL 48,716
---------
COMMUNICATION SERVICES (7.3%)
AT&T Corporation 175,100 8,886
Bell Atlantic Corporation 46,300 2,850
*Global Crossing 73,800 3,690
GTE Corporation 101,400 7,155
*Level 3 Communications, Inc. 29,600 2,424
*MCI WorldCom, Inc. 249,159 13,221
SBC Communications, Inc. 210,610 10,267
---------
TOTAL 48,493
---------
CONSUMER CYCLICALS (9.4%)
*Abercrombie & Fitch Co. 136,700 3,648
*Cendant Corporation 248,904 6,611
Circuit City Stores, Inc. 53,900 2,429
*Federated Department Stores,
Inc. 111,300 5,628
The Gap, Inc. 66,600 3,064
International Game Technology 208,300 4,231
*Jones Apparel Group, Inc. 185,900 5,043
*Lear Corporation 108,300 3,466
Mattel, Inc. 285,900 3,752
The News Corporation Limited,
ADR 226,100 8,648
TJX Companies, Inc. 227,000 4,639
United Parcel Service,
Inc. - Class B 21,000 1,449
Wal-Mart Stores, Inc. 138,200 9,553
---------
TOTAL 62,161
---------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (98.8%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
CONSUMER STAPLES (9.3%)
*AT&T - Liberty Media Group 185,700 $ 10,538
Clorox Company 56,700 2,856
The Coca-Cola Company 30,200 1,759
Gillette Company 155,000 6,384
Kimberly-Clark Corporation 65,800 4,293
PepsiCo, Inc. 149,700 5,277
Philip Morris Companies, Inc. 451,600 10,472
The Procter & Gamble Company 98,500 10,792
The Seagram Company Ltd. 200,200 8,997
---------
TOTAL 61,368
---------
ENERGY (6.8%)
Conoco, Inc. - Class B 370,400 9,213
*Cooper Cameron Corp. 99,600 4,874
Exxon Mobil Corporation 237,627 19,144
Shell Transport & Trading
Company, ADR 92,200 4,541
Tosco Corporation 267,100 7,262
---------
TOTAL 45,034
---------
FINANCE (14.3%)
Ambac Financial Group, Inc. 98,400 5,135
Aon Corporation 218,500 8,740
Bank of America Corporation 187,843 9,427
The CIT Group, Inc. 168,170 3,553
Citigroup, Inc. 154,200 8,568
Dime Bancorp, Inc. 134,900 2,040
Federal National Mortgage
Association 59,100 3,690
First Union Corporation 301,500 9,893
The Goldman Sachs Group, Inc. 76,500 7,205
KeyCorp 242,600 5,368
Marsh & McLennan Companies, Inc. 53,550 5,124
U.S. Bancorp 294,600 7,015
UnumProvident Corp. 238,923 7,661
Washington Mutual, Inc. 247,900 6,445
XL Capital Ltd. 96,000 4,980
---------
TOTAL 94,844
---------
HEALTH CARE (6.4%)
American Home Products
Corporation 134,100 5,289
Bristol-Myers Squibb Company 120,500 7,735
Eli Lilly & Company 84,000 5,586
*Forest Laboratories, Inc. 184,700 11,347
*Tenet Healthcare Corp. 128,500 3,020
Warner-Lambert Company 114,100 9,349
---------
TOTAL 42,326
---------
</TABLE>
25 Growth & Income Stock Portfolio
<PAGE> 34
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (98.8%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
TECHNOLOGY (26.8%)
*America Online, Inc. 82,200 $ 6,202
*Applied Materials, Inc. 29,000 3,674
*BMC Software, Inc. 48,500 3,877
*Cisco Systems, Inc. 244,050 26,144
Compaq Computer Corporation 167,500 4,533
*Dell Computer Corporation 73,200 3,733
*EMC Corporation 67,300 7,352
*Intel Corporation 211,000 17,368
International Business Machines
Corporation 63,900 6,901
Lucent Technologies, Inc. 140,215 10,490
*Microsoft Corporation 284,000 33,157
Motorola, Inc. 67,900 9,998
*Oracle Corporation 62,950 7,054
PE Corp.-PE Biosystems Group 18,400 2,214
*Quantum Corp.-DLT & Storage 93,600 1,416
*Seagate Technology Inc. 52,700 2,454
*Sun Microsystems, Inc. 273,600 21,187
Texas Instruments, Incorporated 96,900 9,387
---------
TOTAL 177,141
---------
TRANSPORTATION (1.5%)
Union Pacific Corporation 221,100 9,646
---------
UTILITIES (2.4%)
Columbia Energy Group 145,800 9,222
DTE Energy Company 90,200 2,830
Northern States Power Company 73,300 1,429
PG&E Corp. 131,000 2,686
---------
TOTAL 16,167
---------
TOTAL COMMON STOCK
(COST $589,891) 653,732
---------
MARKET
SHARES/ VALUE
MONEY MARKET INVESTMENTS (1.3%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
AUTO RELATED (1.2%)
Daimler-Chrysler N.A. Holding,
5.5%, 01/28/2000 8,000,000 $ 7,967
---------
FEDERAL GOVERNMENT AND AGENCIES (0.0%)
Federal Home Loan Mortgage
Corp., 4.74%, 01/14/2000 200,000 199
---------
FINANCE LESSORS (0.1%)
Preferred Receivable Funding,
6.1%, 01/27/2000 500,000 498
---------
TOTAL MONEY MARKET
INVESTMENTS (COST $8,664) 8,664
---------
TOTAL INVESTMENTS (100.1%)
(COST $598,555)' 662,396
---------
OTHER ASSETS, LESS LIABILITIES (-0.1%) (844)
---------
TOTAL NET ASSETS (100.0%) $ 661,552
---------
</TABLE>
* Non-Income Producing
ADR - American Depository Receipt
' At December 31, 1999, the aggregate cost of securities for federal income tax
purposes was $602,714 and the net unrealized appreciation of investments based
on that cost was $59,682 which is comprised of $117,854 aggregate gross
unrealized appreciation and $58,172 aggregate gross unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements
Growth & Income Stock Portfolio 26
<PAGE> 35
<TABLE>
<CAPTION>
Objective: Portfolio Strategy: Net Assets:
<S> <C> <C>
Long-term capital appreciation Invest in a portfolio designed to approximate the $2,271,955,777
through cost-effective participation composition and returns of the S&P 500 Index.
in broad market performance
</TABLE>
INDEX 500 STOCK PORTFOLIO
The Index 500 Stock Portfolio is designed to achieve results that approximate
the performance of the Standard & Poor's 500 Composite Stock Price Index. This
composite of 500 stocks of large U.S.-based companies, compiled by Standard &
Poor's Corporation, is generally regarded as a good proxy for the overall U.S.
equity market; the Portfolio therefore enables contract owners to participate in
overall performance of the equity market. The Portfolio continues to achieve the
objective of matching the results of the S&P 500 before expenses.
SECTOR ALLOCATION
12/31/99
[PIE CHART]
<TABLE>
<S> <C>
Other 11%
Energy 5%
Consumer Cyclical 9%
Health Care 9%
Consumer Staples 11%
S&P 500 Index Future 2%
Technology 29%
Finance 13%
Basic Materials/Capital Goods 12%
</TABLE>
TOP 10 HOLDINGS
12/31/99
<TABLE>
<CAPTION>
Company % of Net Assets
-------------------------------------------------------------------------------------
<S> <C>
Microsoft Corporation 4.8%
-------------------------------------------------------------------------------------
General Electric Company 4.1%
-------------------------------------------------------------------------------------
Cisco Systems, Inc. 2.8%
-------------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 2.5%
-------------------------------------------------------------------------------------
Exxon Mobil Corporation 2.2%
-------------------------------------------------------------------------------------
Intel Corporation 2.2%
-------------------------------------------------------------------------------------
Lucent Technologies, Inc. 1.8%
-------------------------------------------------------------------------------------
International Business Machines Corporation 1.6%
-------------------------------------------------------------------------------------
Citigroup, Inc. 1.5%
-------------------------------------------------------------------------------------
American International Group, Inc. 1.3%
</TABLE>
PERFORMANCE RELATIVE TO THE S&P 500 INDEX
[LINE GRAPH]
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Average Annual Total Return
For Periods Ended December 31, 1999
1 Year 5 Years 10 Years
- -----------------------------------------------------------
<S> <C> <C> <C>
Index 500 Stock Portfolio 20.91% 28.42% 17.56%
S&P 500 Index 21.06% 28.46% 18.16%
- -----------------------------------------------------------
</TABLE>
On April 30, 1993, the Portfolio was indexed to approximate the performance of
the Standard & Poor's 500 Composite Stock Price Index. Before that date, the
Portfolio was actively managed.
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of
500 selected common stocks, most of which are listed on the New York Stock
Exchange. The index is heavily weighted toward stocks with large market
capitalizations and represents approximately two-thirds of the total market
value of all domestic common stocks.
This chart assumes an initial investment of $10,000 made on 12/31/89. Returns
shown include deductions for management and other fund expenses, and
reinvestment of all dividends. Returns exclude deductions for separate account
sales loads and account fees. Past performance is not predictive of future
performance. Investment return and principal value will fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. Total
returns, which reflect deduction of charges for the separate account, are shown
on page 2.
27 Index 500 Stock Portfolio
<PAGE> 36
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (98.5%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
BASIC MATERIALS (3.0%)
Air Products & Chemicals, Inc. 41,700 $ 1,400
Alcan Aluminum Limited 41,100 1,693
Alcoa Inc. 66,800 5,544
Allegheny Technologies
Incorporated 17,367 390
Archer Daniels Midland Company 112,449 1,371
Barrick Gold Corporation 71,000 1,256
Bemis Company, Inc. 9,500 331
*Bethlehem Steel Corporation 23,800 199
Boise Cascade Corporation 10,400 421
Champion International 17,500 1,084
Dow Chemical Company 40,100 5,358
E.I. du Pont de Nemours &
Company 189,900 12,510
Eastman Chemical Company 14,225 678
Ecolab, Inc. 23,600 923
Engelhard Corp. 22,900 432
*FMC Corporation 5,800 332
*Freeport-McMoRan Copper &
Gold, Inc. 29,800 630
Georgia Pacific Corp. 31,200 1,583
Great Lakes Chemical 10,600 405
Hercules Inc. 19,300 538
Homestake Mining Company 47,400 370
*Inco Limited 34,900 820
International Flavors &
Fragrances, Inc. 19,300 729
International Paper Company 75,270 4,248
Louisiana Pacific Corporation 19,600 279
The Mead Corporation 18,600 808
Monsanto Company 115,400 4,111
Newmont Mining Corporation 30,480 747
Nucor Corp. 15,900 872
*Pactiv Corporation 31,000 329
Phelps Dodge Corporation 14,225 955
Placer Dome Inc. 59,300 638
Potlatch Corporation 5,300 237
PPG Industries, Inc. 31,600 1,977
Praxair 29,000 1,459
Reynolds Metals Company 11,400 874
Rohm and Haas Company 39,613 1,612
Sigma-Aldrich Corp. 18,400 553
Temple-Inland Inc. 10,200 673
Union Carbide Corporation 24,200 1,615
USX-U.S. Steel Group, Inc. 16,100 531
Vulcan Materials Co. 18,200 727
*W.R. Grace & Co. 13,000 180
Westvaco Corporation 18,250 595
Weyerhaeuser Company 42,900 3,081
Willamette Industries, Inc. 20,300 943
Worthington Industries 16,750 277
-----------
TOTAL 67,318
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (98.5%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
CAPITAL GOODS (8.3%)
*Allied Waste Industries Inc. 34,300 $ 302
Avery Dennison Corporation 20,700 1,509
B. F. Goodrich Company 20,000 550
Ball Corporation 5,500 217
Boeing Company 174,876 7,268
Briggs & Stratton Corporation 4,200 225
Caterpillar, Inc. 64,700 3,045
Cooper Industries, Inc. 17,200 696
Corning, Inc. 44,600 5,751
Crane Co. 12,275 244
Crown Cork & Seal Company,
Inc. 22,300 499
Cummins Engine Company, Inc. 7,600 367
Danaher Corporation 25,900 1,250
Deere & Company 42,500 1,843
Dover Corporation 37,900 1,720
Eaton Corporation 13,100 951
Emerson Electric Co. 79,100 4,538
Fluor Corporation 13,800 633
Foster Wheeler Corporation 7,400 66
General Dynamics Corporation 36,300 1,915
General Electric Company 597,200 92,417
Honeywell International, Inc. 143,650 8,287
Illinois Tool Works, Inc. 54,600 3,689
*Ingersoll-Rand Company 30,100 1,657
ITT Industries Inc. 16,000 535
Johnson Controls, Inc. 15,500 882
Lockheed Martin Corporation 71,908 1,573
McDermott International, Inc. 10,800 98
Milacron Inc. 6,700 103
Millipore Corp. 8,200 317
Minnesota Mining &
Manufacturing Co. 73,300 7,174
Molex Inc. 28,200 1,599
NACCO Industries, Inc. 1,500 83
National Service Industries,
Inc. 7,400 218
*Navistar International
Corporation 12,000 569
Northrop Grumman Corporation 12,600 681
*Owens-Illinois, Inc. 28,400 712
Paccar Inc. 14,270 632
Pall Corporation 22,600 487
Parker-Hannifin Corporation 19,775 1,015
Pitney Bowes Inc. 48,700 2,353
Rockwell International Corp. 34,800 1,666
*Sealed Air Corporation 15,271 791
*Solectron Corporation 53,300 5,070
Textron Inc. 27,300 2,094
*Thermo Electron Corporation 28,700 430
Thomas & Betts Corporation 10,400 331
Timken Company 11,300 231
Tyco International Ltd. 304,640 11,843
United Technologies Corp. 87,700 5,700
Waste Management, Inc. 112,785 1,938
-----------
TOTAL 188,764
-----------
</TABLE>
Index 500 Stock Portfolio 28
<PAGE> 37
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (98.5%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
COMMUNICATION SERVICES (7.8%)
ALLTEL Corporation 55,600 $ 4,597
AT&T Corporation 581,838 29,528
Bell Atlantic Corporation 282,684 17,403
Bellsouth Corporation 343,300 16,071
CenturyTel Inc. 25,400 1,203
*Global Crossing 139,910 6,996
GTE Corporation 178,600 12,603
*MCI WorldCom, Inc. 511,473 27,140
*Nextel Communications, Inc. 65,800 6,786
SBC Communications, Inc. 621,625 30,304
Sprint Corporation 157,900 10,629
*Sprint PCS 80,050 8,205
U S WEST, Inc. 91,908 6,617
-----------
TOTAL 178,082
-----------
CONSUMER CYCLICALS (9.1%)
American Greetings Corp. 12,300 291
Armstrong World Industries
Inc. 7,300 244
*Autozone, Inc. 27,100 876
*Bed Bath & Beyond Inc. 25,400 883
*Best Buy Co. Inc. 37,100 1,862
Black & Decker Corporation 15,800 826
Brunswick Corporation 16,800 374
Carnival Corporation 111,700 5,341
*Cendant Corporation 131,133 3,483
Centex Corporation 10,900 269
Circuit City Stores, Inc. 36,600 1,649
*Consolidated Stores
Corporation 20,100 327
Cooper Tire & Rubber Company 13,800 215
*Costco Wholesale Corporation 40,207 3,669
Dana Corporation 30,200 904
Dayton Hudson Corporation 80,500 5,912
Delphi Automotive Systems
Corp. 102,837 1,620
Dillard's, Inc. 19,500 394
Dollar General Corp. 40,943 931
Dow Jones & Company, Inc. 16,500 1,122
Dun & Bradstreet Corporation 29,300 864
*Federated Department Stores,
Inc. 38,000 1,921
Fleetwood Enterprises, Inc. 6,100 126
Ford Motor Company 220,300 11,772
Gannet Company Inc. 50,900 4,152
The Gap, Inc. 156,075 7,179
General Motors Corp. 117,300 8,526
Genuine Parts Company 32,600 809
Goodyear Tire & Rubber Company 28,500 803
H & R Block, Inc. 17,800 779
Harcourt General 13,000 523
*Harrahs Entertainment 23,400 619
Hasbro Inc. 35,475 676
Hilton Hotels Corporation 67,100 646
The Home Depot, Inc. 404,994 27,767
*Huttig Building Products,
Inc. 2,727 13
IMS Health Incorporated 57,000 1,550
The Interpublic Group of
Companies, Inc. 51,300 2,959
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (98.5%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
CONSUMER CYCLICALS continued
J.C. Penney Company, Inc. 48,000 $ 957
Jostens, Inc. 6,200 151
Kaufman & Broad Home Corp. 8,700 210
*Kmart Corporation 89,900 905
Knight-Ridder, Inc. 14,800 881
*Kohl's Corporation 29,600 2,137
Leggett & Platt Inc. 35,800 767
The Limited, Inc. 38,974 1,688
Liz Claiborne, Inc. 11,200 421
Lowe's Companies, Inc. 69,400 4,147
Marriott International 45,300 1,430
Masco Corporation 80,600 2,045
Mattel, Inc. 76,488 1,004
May Department Stores Company 60,800 1,961
Maytag Corporation 15,900 763
The McGraw-Hill Companies,Inc. 35,800 2,206
Meredith Corporation 9,400 392
*Mirage Resorts, Incorporated 36,200 554
*The Neiman Marcus Group, Inc. 17 0
The New York Times Company 31,700 1,557
Nike, Inc. 51,200 2,538
Nordstrom, Inc. 25,500 668
*Office Depot Inc. 68,200 746
Omnicom Group, Inc. 32,300 3,230
Owens Corning 10,000 193
Pep Boys - Manny, Moe & Jack 9,600 88
Pulte Corporation 7,900 178
*Reebok International Ltd. 10,200 84
Russell Corp. 6,100 102
Sears Roebuck & Co. 69,300 2,109
Service Corporation
International 49,500 343
Sherwin-Williams Company 30,800 647
Snap-On Inc. 11,950 317
Springs Industries, Inc. 3,300 132
The Stanley Works 16,200 488
*Staples, Inc. 84,600 1,755
Tandy Corporation 35,200 1,731
Times Mirror Company 10,900 730
TJX Companies, Inc. 57,800 1,181
*Toys "R" Us, Inc. 45,100 646
Tribune Company 43,200 2,379
TRW, Inc. 22,100 1,148
VF Corporation 21,600 648
Wal-Mart Stores, Inc. 810,200 56,005
Whirlpool Corporation 13,700 891
-----------
TOTAL 206,029
-----------
CONSUMER STAPLES (10.9%)
Adolph Coors Co. 6,700 352
Alberto-Culver Company 10,200 263
Albertson's, Inc. 76,526 2,468
Anheuser-Busch Companies, Inc. 85,100 6,031
Avon Products, Inc. 47,500 1,567
BESTFOODS 50,800 2,670
Brown-Forman Corporation 12,500 716
</TABLE>
29 Index 500 Stock Portfolio
<PAGE> 38
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (98.5%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
CONSUMER STAPLES continued
Campbell Soup Company 79,000 $ 3,056
Cardinal Health, Inc. 49,650 2,377
*CBS Corporation 138,792 8,874
*Clear Channel Communications,
Inc. 61,500 5,489
Clorox Company 43,000 2,166
The Coca-Cola Company 449,600 26,189
Coca Cola Enterprises Inc. 77,400 1,558
Colgate-Palmolive Co. 106,100 6,896
Comcast Corporation 136,400 6,854
Conagra, Inc. 88,900 2,006
CVS Corporation 71,300 2,848
Darden Restaurant, Inc. 24,100 437
Deluxe Corp. 13,800 379
Fort James Corporation 40,200 1,100
Fortune Brands, Inc. 30,300 1,002
General Mills, Inc. 55,700 1,991
Gillette Company 197,500 8,135
Great Atlantic & Pacific
Tea Co., Inc. 7,000 195
H.J. Heinz Company 65,250 2,598
Hershey Foods Corporation 25,400 1,206
Kellogg Company 73,800 2,274
Kimberly-Clark Corporation 97,044 6,332
*The Kroger Co. 151,000 2,850
Longs Drug Stores Corp. 7,100 183
McDonald's Corporation 246,600 9,941
McKesson HBOC, Inc. 51,245 1,156
*MediaOne Group, Inc. 110,400 8,480
Nabisco Group Holdings Corp. 59,400 631
Newell Rubbermaid Inc. 51,332 1,489
PepsiCo, Inc. 266,200 9,384
Philip Morris Companies, Inc. 435,200 10,091
The Procter & Gamble Company 241,900 26,503
The Quaker Oats Company 24,400 1,601
R.R. Donnelley & Sons Company 23,200 576
Ralston Purina Group 58,900 1,642
Rite Aid Corporation 47,100 527
*Safeway Inc. 92,900 3,304
Sara Lee Corporation 164,500 3,629
The Seagram Company Ltd. 78,700 3,537
Supervalue Inc. 25,300 506
Sysco Corporation 60,300 2,386
Time Warner Inc. 235,500 17,059
*Tricon Global Restaurants,
Inc. 27,990 1,081
Tupperware 10,500 178
Unilever NV 104,067 5,665
UST Incorporated 31,700 798
*Viacom, Inc 126,812 7,664
Walgreen Company 182,700 5,344
Walt Disney Company 375,507 10,984
Wendy's International, Inc. 22,100 456
Winn-Dixie Stores, Inc. 27,100 649
Wm. Wrigley Jr. Company 21,200 1,758
-----------
TOTAL 248,081
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (98.5%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
ENERGY (5.4%)
Amerada Hess Corporation 16,500 $ 936
Anadarko Petroleum Corporation 23,200 792
Apache Corporation 20,700 765
Ashland, Inc. 13,100 431
Atlantic Richfield Company 58,700 5,078
Baker Hughes, Inc. 59,830 1,260
Burlington Resource, Inc. 39,620 1,310
Chevron Corporation 119,400 10,343
Conoco, Inc. 114,200 2,841
Exxon Mobil Corporation 630,185 50,769
Halliburton Company 80,300 3,232
Helmerich & Payne, Inc. 9,000 196
Kerr-McGee Corporation 15,705 974
Occidental Petroleum
Corporation 63,500 1,373
Phillips Petroleum Company 46,100 2,167
*Rowan Companies, Inc. 15,100 327
Royal Dutch Petroleum Co. 390,400 23,595
Schlumberger Limited 99,700 5,608
Sunoco, Inc. 16,500 388
Texaco, Inc. 100,600 5,464
Tosco Corporation 27,700 753
Transocean Sedco Forex, Inc. 19,341 652
Union Pacific Resource Group 45,892 585
Unocal Corp. 44,100 1,480
USX -Marathon Group 56,200 1,387
-----------
TOTAL 122,706
-----------
FINANCE (13.0%)
Aflac Inc. 48,400 2,284
Allstate Corporation 145,328 3,488
American Express Company 81,800 13,599
American General Corporation 45,325 3,439
American International Group,
Inc. 281,895 30,480
AmSouth Bancorporation 71,600 1,383
Aon Corporation 46,600 1,864
Associates First Capital
Corporation 132,610 3,638
Banc One Corporation 213,486 6,845
Bank of America Corp. 314,476 15,783
Bank of New York Company, Inc. 133,900 5,356
BB&T Corporation 58,200 1,593
The Bear Stearns Companies,
Inc. 22,238 951
Capital One Financial
Corporation 36,000 1,735
The Charles Schwab Corporation 148,900 5,714
Chase Manhattan Corporation 151,512 11,771
The Chubb Corporation 32,100 1,808
CIGNA Corporation 33,900 2,731
Cincinnati Financial
Corporation 30,000 936
Citigroup, Inc. 614,911 34,166
Comerica, Inc. 28,450 1,328
Conseco Inc. 59,537 1,064
Countrywide Credit Industries,
Inc. 20,600 520
Federal Home Loan Mortgage
Corp. 126,600 5,958
</TABLE>
Index 500 Stock Portfolio 30
<PAGE> 39
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (98.5%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
FINANCE continued
Federal National Mortgage
Association 186,600 $ 11,651
Fifth Third Bancorp 54,975 4,034
First Union Corporation 174,152 5,714
Firstar Corporation 179,265 3,787
FleetBoston Financial
Corporation 167,820 5,842
Franklin Resources Inc. 45,900 1,472
Golden West Financial
Corporation 30,000 1,005
Hartford Financial Services
Group Inc. 41,100 1,947
Household International Inc. 87,179 3,247
Huntington Bancshares, Inc. 41,884 1,000
J.P. Morgan & Company, Inc. 32,000 4,052
Jefferson-Pilot Corp. 19,150 1,307
KeyCorp 81,700 1,808
Lehman Brothers Holdings, Inc. 21,800 1,846
Lincoln National Corporation 36,200 1,448
Loews Corp. 19,600 1,189
Marsh & McLennan
Companies, Inc. 48,050 4,598
MBIA, Inc. 18,200 961
MBNA Corp. 145,975 3,978
Mellon Financial Corporation 93,600 3,188
Merrill Lynch & Co. 67,300 5,620
MGIC Investment Corp. 19,900 1,198
Morgan Stanley, Dean Witter,
Discover & Co. 103,905 14,832
National City Corp. 112,500 2,665
Northern Trust Corp. 40,600 2,152
Old Kent Financial Corp. 21,600 764
Paine Webber Group Inc. 26,500 1,029
PNC Bank Corp. 55,300 2,461
Price (T. Rowe) Associates 22,100 816
Progressive Corporation 13,300 973
Providian Financial
Corporation 25,800 2,349
Regions Financial Corporation 40,800 1,025
Republic New York Corporation 19,100 1,375
SAFECO, Inc. 23,900 595
SLM Holding Corporation 29,300 1,238
SouthTrust Corporation 30,500 1,153
St. Paul Companies, Inc. 41,286 1,391
State Street Corporation 29,400 2,148
Summit Bancorp 32,200 986
Suntrust Banks Inc. 58,600 4,032
Synovus Financial Corp. 49,350 981
Torchmark Corporation 24,200 703
U.S. Bancorp 133,231 3,173
Union Planters Corporation 26,000 1,025
UnumProvident Corporation 43,431 1,392
Wachovia Corporation 36,800 2,502
Washington Mutual, Inc. 105,436 2,741
Wells Fargo & Company 300,230 12,141
-----------
TOTAL 295,968
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (98.5%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
HEALTH CARE (8.8%)
Abbott Laboratories Inc. 277,000 $ 10,058
Aetna, Inc. 27,263 1,522
Allergan Inc. 24,000 1,194
*Alza Corporation 18,500 640
American Home Products
Corporation 237,900 9,382
*Amgen, Inc. 185,700 11,154
Bard C R Inc 9,300 493
Bausch & Lomb, Inc. 10,500 719
Baxter International, Inc. 53,000 3,329
Becton, Dickinson & Company 45,600 1,220
Biomet, Inc. 20,500 820
*Boston Scientific Corp. 75,300 1,647
Bristol-Myers Squibb Company 361,600 23,210
Columbia/HCA Healthcare
Corporation 102,700 3,010
Eli Lilly and Company 199,000 13,233
*Guidant Corporation 55,000 2,585
*HEALTHSOUTH Corporation 75,600 406
*Humana, Inc. 30,500 250
Johnson & Johnson 244,800 22,797
Mallinckrodt, Inc. 12,900 410
*Manor Care, Inc. 19,500 312
Medtronic, Inc. 213,700 7,787
Merck & Co., Inc. 427,000 28,636
Pfizer, Inc. 705,500 22,885
Pharmacia & Upjohn Inc. 92,205 4,149
*Quintiles Transnational Corp. 20,900 391
Schering-Plough Corporation 267,300 11,277
*St. Jude Medical, Inc. 15,400 473
*Tenet Healthcare Corp. 56,500 1,328
United Healthcare Corp. 31,600 1,679
Warner-Lambert Company 155,600 12,749
*Watson Pharmaceutical Inc. 17,400 623
*Wellpoint Health Networks 12,000 791
-----------
TOTAL 201,159
-----------
TECHNOLOGY (29.2%)
*3COM Corporation 65,100 3,060
*Adaptec, Inc. 18,800 938
*ADC Telecommunications Inc. 27,200 1,974
Adobe Systems, Inc. 22,200 1,493
*Advanced Micro Devices, Inc. 26,800 775
*America Online, Inc. 403,500 30,439
*Analog Devices 31,500 2,929
*Andrew Corporation 14,937 283
*Apple Computer, Inc. 29,300 3,012
*Applied Materials, Inc. 68,400 8,665
Autodesk, Inc. 10,700 361
Automatic Data Processing,
Inc. 112,700 6,072
*BMC Software, Inc. 43,600 3,485
*Cabletron Systems, Inc. 31,700 824
*Ceridian Corp. 26,400 569
*Cisco Systems, Inc. 591,950 63,413
*Citrix Systems Inc. 16,000 1,968
</TABLE>
31 Index 500 Stock Portfolio
<PAGE> 40
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (98.5%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
TECHNOLOGY continued
Compaq Computer Corporation 309,509 $ 8,376
Computer Associates
International, Inc. 97,912 6,848
*Computer Sciences Corp. 29,100 2,754
*Compuware Corporation 65,000 2,421
*Comverse Technology, Inc. 12,700 1,838
*Dell Computer Corporation 462,600 23,593
Eastman Kodak Company 57,600 3,816
Electronic Data Systems
Corporation 89,800 6,011
*EMC Corporation 184,537 20,161
Equifax, Inc. 26,200 617
First Data Corporation 78,100 3,851
*Gateway Inc. 57,000 4,108
*General Instrument
Corporation 31,600 2,686
Hewlett-Packard Company 184,400 21,010
Ikon Office Solutions 27,200 185
*Intel Corporation 602,300 49,577
International Business
Machines Corporation 329,400 35,575
*KLA- Tencor Corporation 16,100 1,793
*Lexmark International Group
Inc. 23,500 2,127
*LSI Logic Corp. 26,800 1,809
Lucent Technologies, Inc. 557,800 41,730
*Micron Technology 45,600 3,545
*Microsoft Corporation 929,200 108,484
Motorola, Inc. 110,600 16,286
*National Semiconductor
Corporation 30,600 1,310
*Network Appliance Inc. 26,800 2,226
Nortel Networks Corporation 241,600 24,402
*Novell, Inc. 61,000 2,436
*Oracle Corporation 262,050 29,366
*Parametric Technology Company 49,000 1,326
Paychex, Inc. 44,750 1,790
PE Corp.-PE Biosystems Group 18,600 2,238
*Peoplesoft, Inc. 44,300 944
PerkinElmer, Inc. 8,300 346
Polaroid Corporation 8,100 152
*Qualcomm Inc. 116,800 20,586
Raytheon Company- Class B 61,500 1,634
Scientific-Atlanta, Inc. 13,900 773
*Seagate Technology Inc. 37,900 1,765
Shared Medical Systems Corp. 4,900 250
*Silicon Graphics 34,400 338
*Sun Microsystems, Inc. 281,800 21,822
Tektronix, Inc. 8,550 332
*Tellabs, Inc. 71,300 4,577
*Teradyne Inc. 31,200 2,059
Texas Instruments,
Incorporated 143,000 13,853
*Unisys Corporation 55,700 1,779
W.W. Grainger, Inc. 17,000 813
Xerox Corporation 120,700 2,738
*Xilinx Inc. 57,600 2,619
*Yahoo!, Inc. 47,900 20,726
-----------
TOTAL 662,661
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (98.5%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
TRANSPORTATION (0.7%)
*AMR Corporation 27,400 $ 1,836
Burlington Northern Santa Fe 84,621 2,052
CSX Corporation 39,600 1,242
Delta Air Lines Inc. 25,600 1,275
*FDX Corporation 54,120 2,216
Kansas City Southern Inds 20,100 1,500
Norfolk Southern Corporation 69,300 1,421
Ryder System, Inc. 11,700 286
Southwest Airlines Co. 91,800 1,486
Union Pacific Corporation 45,100 1,967
*USAir Group, Inc. 13,000 417
-----------
TOTAL 15,698
-----------
UTILITIES (2.3%)
* The AES Corporation 37,500 2,803
Ameren Corporation 25,000 819
American Electric Power Co.
Inc. 35,200 1,131
Carolina Power & Light Company 29,100 886
Central & South West
Corporation 38,700 774
Cinergy Corporation 28,917 698
CMS Energy Corp. 21,500 671
Coastal Corp. 38,900 1,378
Columbia Energy Group 14,950 946
Consolidated Edison Co.
of New York 40,200 1,387
Consolidated Natural Gas
Company 17,500 1,136
Constellation Energy Group
Inc. 27,200 789
Dominion Resources Inc. 35,000 1,374
DTE Energy Company 26,400 828
Duke Energy Corp. 66,465 3,332
Eastern Enterprises 4,900 281
Edison International 63,200 1,655
EL Paso Energy Corporation 41,500 1,611
Enron Corp. 130,000 5,769
Entergy Corporation 44,900 1,156
FirstEnergy Corporation 42,600 966
Florida Progress Corp. 17,900 757
FPL Group, Inc. 32,600 1,396
GPU, Inc. 22,800 683
New Century Energies, Inc. 21,000 638
*Niagra Mohawk Power
Corporation 34,100 475
Nicor, Inc. 8,600 279
Northern States Power Company 28,100 548
ONEOK, Inc. 5,800 146
P P & L Resources, Inc. 28,734 657
PECO Energy Company 34,000 1,181
Peoples Energy Corporation 6,500 218
PG&E Corp. 69,900 1,433
Pinnacle West Capital Corp. 15,400 471
Public Service Enterprise
Group, Inc. 39,900 1,389
Reliant Energy, Inc. 53,862 1,232
ScottishPower PLC, ADR 31,958 895
</TABLE>
Index 500 Stock Portfolio 32
<PAGE> 41
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (98.5%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
UTILITIES continued
Sempra Energy 43,802 $ 761
Southern Company 124,400 2,923
Texas Utilities Company 50,315 1,789
UNICOM Corp. 39,600 1,327
Williams Companies Inc. 79,100 2,417
-----------
TOTAL 52,005
-----------
TOTAL COMMON STOCK (COST
$1,196,495) 2,238,471
-----------
<CAPTION>
MONEY MARKET INVESTMENTS (1.5%)
---------------------------------------------------------
<S> <C> <C>
Daimler-Chrysler N.A. Holding,
5.50%, 01/10/00 13,000,000 12,946
Ford Motor Credit Company,
6.21%, 01/12/00 5,000,000 4,991
-----------
TOTAL 17,937
-----------
FEDERAL GOVERNMENT AND AGENCIES (0.7%)
Federal Home Loan Mortgage
Corp., 4.75%, 01/14/00 9,900,000 9,883
#Federal Home Loan Mortgage
Corp., 5.51%, 01/10/00 5,000,000 4,993
-----------
TOTAL 14,876
-----------
TOTAL MONEY MARKET INVESTMENTS (COST
$32,813) 32,813
-----------
TOTAL INVESTMENTS (100.0%)
(COST $1,229,308)' 2,271,284
-----------
OTHER ASSETS, LESS
LIABILITIES (0.0%) 672
-----------
TOTAL NET ASSETS (100.0%) $ 2,271,956
-----------
<CAPTION>
---------------------------------------------------------
<S> <C> <C>
</TABLE>
* Non-Income Producing
ADR - American Depository Receipt
# Partially held by the custodian in a segregated account as collateral for open
futures positions. Information regarding open futures contracts as of December
31, 1999 is summarized below:
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF EXPIRATION APPRECIATION
ISSUER CONTRACTS DATE (000'S)
- ------------------------------------------------------------
<S> <C> <C> <C>
S&P 500 Stock Index 89 3/00 $1,114
(Total Notional Value
at 12/31/99, $31,909,390)
</TABLE>
' At December 31, 1999, the aggregate cost of securities for federal income tax
purposes was $1,229,539 and the net unrealized appreciation of investments
based on that cost was $1,041,745 which is comprised of $1,097,772 aggregate
gross unrealized appreciation and $56,027 aggregate gross unrealized
depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements.
33 Index 500 Stock Portfolio
<PAGE> 42
<TABLE>
<CAPTION>
Objective: Portfolio Strategy: Net Assets:
<S> <C> <C>
A high level of current income and Achieve consistent returns and low volatility by $3,557,900,234
capital growth with a low risk diversifying among assets
profile
</TABLE>
BALANCED PORTFOLIO
In order to capitalize on changing financial market and economic conditions, the
Balanced Portfolio's asset allocation is adjusted as appropriate among three
investment classes: stocks, bonds and money market instruments. The equity
portion of the Portfolio is indexed, meaning that the Portfolio is designed to
achieve results that approximate the performance of the Standard & Poor's 500
Composite Stock Price Index, which is generally regarded as a good proxy for the
overall U.S. equity market. The bond portion of the Portfolio is actively
managed, with investments in high quality bonds adjusted frequently as to
maturity, market sectors and duration. Liquidity is maintained by holding a
portion of the Portfolio in money market investments, which are high quality
short-term debt securities.
During 1999 the Portfolio continued to emphasize equities, while reducing equity
exposure opportunistically, in order to maintain the desired balance among asset
classes during a period of increasing equity prices. In the bond portion of the
Portfolio, a move to higher quality securities and a defensive stance on
interest rates proved successful, as interest rates increased and the spread
between rates on Treasury securities and riskier bonds widened.
PERCENTAGE HOLDINGS
12/31/99
[PIE CHART]
<TABLE>
<S> <C>
Short-Term Investments 8%
Bonds 37%
Other Assets, net 1%
Equity (including index futures) 54%
</TABLE>
PERFORMANCE RELATIVE TO RELEVANT INDICES
[LINE GRAPH]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Average Annual Total Return
For Periods Ended December 31, 1999
1 Year 5 Years 10 Years
- ----------------------------------------------------------------
<S> <C> <C> <C>
Balanced Portfolio 11.18% 18.16% 12.86%
Merrill Lynch Domestic Master Index -0.96% 7.74% 7.76%
91 Day T-Bill 4.85% 5.35% 5.28%
S&P 500 Index 21.06% 28.46% 18.16%
- ----------------------------------------------------------------
</TABLE>
In the graph, the Portfolio is compared against three indices representing the
three major components of the Portfolio: equities, fixed income, and cash
equivalent investments.
The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of
500 selected common stocks, most of which are listed on the New York Stock
Exchange. The index is heavily weighted toward stocks with large market
capitalizations and represents approximately two-thirds of the total market
value of all domestic common stocks.
The Merrill Lynch Domestic Master Index is an unmanaged market value weighted
index comprised of U.S. Government, mortgage and investment-grade corporate
bonds. The index measures the income provided by, and the price changes of, the
underlying securities.
The Merrill Lynch 91-Day T-Bill Index is comprised of a single issue purchased
at the beginning of each month and held for a full month. The issue selected at
each month-end rebalancing is the outstanding Treasury Bill that matures closest
to, but not beyond, three months from the rebalancing date.
This chart assumes an initial investment of $10,000 made on 12/31/89. Returns
shown include deductions for management and other fund expenses, and
reinvestment of all dividends. Returns exclude deductions for separate account
sales loads and account fees. Past performance is not predictive of future
performance. Investment return and principal value will fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. Total
returns, which reflect deduction of charges for the separate account, are shown
on page 2.
Balanced Portfolio 34
<PAGE> 43
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
BONDS (37.4%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (6.3%)
AEROSPACE AND DEFENSE (0.1%)
Lockheed Corporation, 6.75%,
03/15/03 3,000,000 $ 2,917
-----------
BANK HOLDING COMPANIES (0.2%)
Banco Montevideo, 8.4%,
04/30/08 (144A) 6,250,000 5,578
BT Institutional Capital
Trust, 7.75%, 12/01/26
(144A) 1,000,000 888
-----------
TOTAL 6,466
-----------
BANKING & FINANCE (1.1%)
Associates Corp. of North
America, 7.95%, 02/15/10 5,550,000 5,669
Ford Motor Credit Co., 5.57%,
07/16/02 11,700,000 11,724
Ford Motor Credit Co., 5.75%,
02/23/04 6,000,000 5,684
Ford Motor Credit Co., 6.70%,
07/16/04 2,000,000 1,956
Ford Motor Credit Co.,
7.375%, 10/28/09 14,500,000 14,314
-----------
TOTAL 39,347
-----------
CHEMICALS AND ALLIED PRODUCTS (0.5%)
Chevron Corporation, 6.625%,
10/01/04 4,750,000 4,682
Dow Capital B.V., 8.5%,
06/8/10 8,200,000 8,676
Johnson & Johnson, 6.625%,
09/01/09 2,800,000 2,694
Proctor & Gamble, 6.875%,
09/15/09 3,000,000 2,934
-----------
TOTAL 18,986
-----------
COMMUNICATIONS (0.2%)
Telecommunications, Inc.,
7.375%, 2/15/00 8,000,000 8,012
-----------
DURABLE GOODS (0.2%)
Tata Engineering &
Locomotive, 7.875%, 07/15/07
(144A) 6,500,000 6,009
-----------
ELECTRIC SERVICES (1.3%)
Columbia Gas System Inc.,
7.32%, 11/28/10 7,571,000 7,236
Comed Financing II, 8.5%,
01/15/27 3,000,000 2,925
Dayton Power & Light Company,
8.15%, 1/15/26 5,750,000 5,631
Niagra Mohawk Power, 7.0%,
10/01/00 2,268,293 2,270
Niagra Mohawk Power, 7.25%,
10/01/02 1,134,147 1,130
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
BONDS (37.4%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
ELECTRIC SERVICES continued
Ohio Edison Company, 7.375%,
9/15/02 3,665,000 $ 3,677
Public Service Electric & Gas
Co., 6.875%, 1/1/03 9,000,000 8,927
Southern California Edison
Co., 7.25%, 3/1/26 10,000,000 8,953
Texas Utilities Electric Co.,
7.875%, 3/1/23 4,000,000 3,770
-----------
TOTAL 44,519
-----------
FOOD AND BEVERAGE (0.3%)
Coca Cola Enterprises, Inc.,
8%, 1/4/05 10,000,000 10,389
-----------
GENERAL MERCHANDISE STORES (0.8%)
May Department Stores
Company, 6.7%, 9/15/28 6,150,000 5,406
May Department Stores
Company, 7.45%, 10/15/16 4,000,000 3,923
Wal-Mart Stores, 6.55%,
8/10/04 17,800,000 17,505
Wal-Mart Stores, 6.875%,
8/10/09 3,000,000 2,920
-----------
TOTAL 29,754
-----------
INSURANCE (0.1%)
Prudential Insurance Co.,
6.375%, 7/23/06 2,500,000 2,331
-----------
MOTION PICTURE (0.3%)
News America Holdings Inc.,
8.45%, 8/1/34 10,000,000 10,184
-----------
MOTOR VEHICLES (0.5%)
Daimler-Chrysler North
America, 6.90%, 09/01/04 4,650,000 4,605
General Motors Acceptance
Corp., 6.625%, 10/1/02 5,000,000 4,932
General Motors Corporation,
8.8%, 3/1/21 6,500,000 7,166
-----------
TOTAL 16,703
-----------
PUBLISHING (0.1%)
Times Mirror Co., 7.45%,
10/15/09 5,050,000 4,967
-----------
TELEPHONE COMMUNICATIONS (0.5%)
AT&T Corp, 5.625%, 03/15/04 5,000,000 4,740
AT&T Corp, 6.50%, 9/15/02 5,500,000 5,437
Cox Communications, Inc.,
6.80%, 8/01/28 1,000,000 870
GTE Corporation, 6.94%,
04/15/28 3,000,000 2,709
New England Telephone and
Telegraph, 5.875%, 04/15/09 5,000,000 4,465
-----------
TOTAL 18,221
-----------
</TABLE>
35 Balanced Portfolio
<PAGE> 44
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
BONDS (37.4%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
TEXTILES (0.0%)
++Polysindo International
Finance, 11.375%, 06/15/06 6,500,000 $ 1,170
-----------
TOBACCO (0.0%)
Philip Morris Companies,
9.25%, 02/15/00 1,000,000 1,002
-----------
UTILITY (0.1%)
Atlantic City Electric
Company, 6.625%, 08/1/13 4,000,000 3,595
-----------
TOTAL CORPORATE BONDS 224,572
-----------
GOVERNMENT (DOMESTIC AND FOREIGN) AND AGENCY BONDS
(24.4%)
FOREIGN GOVERNMENT BONDS (0.2%)
Province of Quebec, 6.5%,
1/17/06 7,500,000 7,211
-----------
FEDERAL GOVERNMENT AND AGENCIES (24.2%)
Federal Home Loan Bank,
5.54%, 01/08/09 5,000,000 4,426
Federal Home Loan Mortgage
Corporation, 6.5%, 10/01/02 13,299,367 12,991
Federal Home Loan Mortgage
Corporation, 7.0%, 03/15/07 7,250,000 7,220
Federal Home Loan Mortgage
Corporation, 7.5%, 09/29/01 12,394,153 12,287
Federal National Mortgage
Assoc., 5.970%, 10/1/08 1,765,241 1,624
Federal National Mortgage
Assoc., 6.240%, 02/01/06 4,846,150 4,618
Federal National Mortgage
Assoc., 6.265%, 10/1/08 5,676,231 5,308
Federal National Mortgage
Assoc., 6.315%, 03/01/06 5,116,930 4,890
Federal National Mortgage
Assoc., 6.34%, 2/01/08 4,165,884 3,936
Federal National Mortgage
Assoc., 6.43%, 6/01/08 7,326,929 6,945
Federal National Mortgage
Assoc., 6.500%, 09/25/05 4,991,230 4,871
Federal National Mortgage
Assoc., 6.750%, 12/25/23 6,500,000 6,205
Federal National Mortgage
Assoc., 6.750%, 04/25/18 5,387,176 5,212
Federal National Mortgage
Assoc., 6.750% 11/01/07 3,062,574 2,961
Federal National Mortgage
Assoc., 6.835%, 07/01/03 3,174,568 3,146
Federal National Mortgage
Assoc., 6.895%, 05/01/06 5,987,845 5,870
Federal National Mortgage
Assoc., 6.900%, 04/01/06 2,414,160 2,368
Federal National Mortgage
Assoc., 6.960%, 10/01/07 4,412,264 4,312
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
BONDS (37.4%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
FEDERAL GOVERNMENT AND AGENCIES continued
Federal National Mortgage
Assoc., 7.000%, 06/25/10 7,941,659 $ 7,794
Federal National Mortgage
Assoc., 7.000%, 04/01/26 14,253,333 13,843
Federal National Mortgage
Assoc., 7.000%, 06/01/03 2,917,320 2,916
Federal National Mortgage
Assoc., 7.025%, 08/01/05 1,920,265 1,897
Federal National Mortgage
Assoc., 7.045%, 08/01/05 7,487,934 7,405
Federal National Mortgage
Assoc., 7.120%, 11/01/03 972,959 969
Federal National Mortgage
Assoc., 7.250%, 05/01/04 1,553,417 1,552
Federal National Mortgage
Assoc., 8.400%, 02/25/09 10,910,000 11,268
Federal National Mortgage
Assoc., 11.000%, 12/01/12 73,238 79
Federal National Mortgage
Assoc., 11.000%, 09/01/17 1,135,033 1,242
Federal National Mortgage
Assoc., 11.000%, 12/01/17 205,731 223
Federal National Mortgage
Assoc., 11.000%, 02/01/18 402,571 436
Federal National Mortgage
Assoc., 11.500%, 04/01/18 752,859 827
Federal National Mortgage
Assoc., 12.000%, 09/01/12 1,109,033 1,228
Federal National Mortgage
Assoc., 12.000%, 12/01/12 213,122 236
Federal National Mortgage
Assoc., 12.000%, 09/01/17 348,190 388
Federal National Mortgage
Assoc., 12.000%, 10/01/17 362,966 404
Federal National Mortgage
Assoc., 12.000%, 12/01/17 33,760 376
Federal National Mortgage
Assoc., 12.000%, 02/01/18 363,322 405
Federal National Mortgage
Assoc., 12.500%, 04/01/18 335,757 377
Federal National Mortgage
Assoc., 13.000%, 11/01/12 148,524 167
Federal National Mortgage
Assoc., 13.000%, 11/01/17 342,196 389
Federal National Mortgage
Assoc., 13.000%, 12/01/17 230,432 262
Federal National Mortgage
Assoc., 13.000%, 02/01/18 505,308 575
Federal National Mortgage
Assoc., 14.000%, 12/01/17 133,327 156
Government National Mortgage
Assoc., 7.00%, 05/15/23 9,057,267 8,824
Government National Mortgage
Assoc., 7.00%, 06/15/23 646,981 630
Government National Mortgage
Assoc., 7.00%, 07/15/23 914,975 891
</TABLE>
Balanced Portfolio 36
<PAGE> 45
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
BONDS (37.4%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
FEDERAL GOVERNMENT AND AGENCIES continued
Government National Mortgage
Assoc., 7.00%, 08/15/23 17,574 $ 17
Government National Mortgage
Assoc., 7.00%, 09/15/23 481,156 469
Government National Mortgage
Assoc., 7.00%, 10/15/23 228,213 351
Government National Mortgage
Assoc., 7.00%, 11/15/23 1,242,810 1,212
Government National Mortgage
Assoc., 7.00%, 12/15/27 299,795 290
Government National Mortgage
Assoc., 7.00%, 1/15/28 439,904 425
Government National Mortgage
Assoc., 7.00%, 2/15/28 115,085 111
Government National Mortgage
Assoc., 7.00%, 3/15/28 233,791 226
Government National Mortgage
Assoc., 7.00%, 4/15/28 663,527 641
Government National Mortgage
Assoc., 7.00%, 5/15/28 1,364,544 1,320
Government National Mortgage
Assoc., 7.00%, 6/15/28 3,701,738 3,579
Government National Mortgage
Assoc., 7.00%, 7/15/28 4,557,231 4,407
Government National Mortgage
Assoc., 7.50%, 1/15/23 588,313 585
Government National Mortgage
Assoc., 7.50%, 6/15/23 326,873 325
Government National Mortgage
Assoc., 7.50%, 6/15/24 7,719 8
Government National Mortgage
Assoc., 7.50%, 7/15/24 273,595 272
Government National Mortgage
Assoc., 7.50%, 8/15/25 12,969 13
Government National Mortgage
Assoc., 7.50%, 9/15/25 233,445 231
Government National Mortgage
Assoc., 7.50%, 11/15/25 11,800 12
Government National Mortgage
Assoc., 7.50%, 12/15/25 430,095 426
Government National Mortgage
Assoc., 7.50%, 1/15/26 14,294 14
Government National Mortgage
Assoc., 7.50%, 3/15/26 533,250 529
Government National Mortgage
Assoc., 7.50%, 6/15/26 968,551 960
Government National Mortgage
Assoc., 7.50%, 9/15/26 12,503 12
Government National Mortgage
Assoc., 7.50%, 10/15/26 75,702 75
Government National Mortgage
Assoc., 7.50%, 12/15/26 609,749 604
Government National Mortgage
Assoc., 7.50%, 1/15/27 38,221 38
Government National Mortgage
Assoc., 7.50%, 2/15/27 415,246 411
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
BONDS (37.4%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
FEDERAL GOVERNMENT AND AGENCIES continued
Government National Mortgage
Assoc., 7.50%, 3/15/27 39,780 $ 39
Government National Mortgage
Assoc., 7.50%, 4/15/27 1,291,462 1,398
Government National Mortgage
Assoc., 7.50%, 5/15/27 579,786 574
Government National Mortgage
Assoc., 7.50%, 7/15/27 625,130 619
Government National Mortgage
Assoc., 7.50%, 12/15/27 157,737 156
Government National Mortgage
Assoc., 7.50%, 7/15/28 834,627 827
Government National Mortgage
Assoc., 8.00%, 9/15/24 292,358 297
Government National Mortgage
Assoc., 8.00%, 3/15/26 160,082 162
Government National Mortgage
Assoc., 8.00%, 5/15/26 428,798 434
Government National Mortgage
Assoc., 8.00%, 6/15/26 384,750 389
Government National Mortgage
Assoc., 8.00%, 7/15/26 869,427 880
Government National Mortgage
Assoc., 8.00%, 8/15/26 414,606 420
Government National Mortgage
Assoc., 8.00%, 9/15/26 330,222 334
Government National Mortgage
Assoc., 8.00%, 10/15/26 637,720 645
Government National Mortgage
Assoc., 8.00%, 11/15/26 353,111 357
Government National Mortgage
Assoc., 8.00%, 12/15/26 371,000 375
Government National Mortgage
Assoc., 8.00%, 4/15/27 686,784 695
Government National Mortgage
Assoc., 8.00%, 6/15/27 325,854 330
Government National Mortgage
Assoc., 8.00%, 7/15/27 141,492 143
Government National Mortgage
Assoc., 8.00%, 7/20/28 2,586,971 2,603
Government National Mortgage
Assoc., 8.50%, 05/15/22 3,421 4
Government National Mortgage
Assoc., 8.50%, 09/15/22 4,085 4
Government National Mortgage
Assoc., 8.50%, 10/15/22 30,238 31
Government National Mortgage
Assoc., 8.50%, 12/15/22 20,724 21
Government National Mortgage
Assoc., 8.50%, 06/15/24 6,086 6
Government National Mortgage
Assoc., 8.50%, 07/15/24 21,516 22
Government National Mortgage
Assoc., 8.50%, 08/15/24 45,735 47
Government National Mortgage
Assoc., 8.50%, 12/15/24 6,956 7
</TABLE>
37 Balanced Portfolio
<PAGE> 46
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
BONDS (37.4%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
FEDERAL GOVERNMENT AND AGENCIES continued
Assoc., 8.50%, 01/15/25 74,478 $ 77
Government National Mortgage
Assoc., 8.50%, 02/15/25 54,728 56
Government National Mortgage
Assoc., 8.50%, 11/15/25 8,386 9
Government National Mortgage
Assoc., 8.50%, 01/15/26 43,264 45
Government National Mortgage
Assoc., 8.50%, 02/15/26 8,635 9
Government National Mortgage
Assoc., 8.50%, 03/15/26 24,070 25
Government National Mortgage
Assoc., 8.50%, 04/15/26 71,569 74
Government National Mortgage
Assoc., 8.50%, 05/15/26 20,099 21
Government National Mortgage
Assoc., 11.00%, 01/15/18 6,407,800 7,056
Rural Housing Trust - Class
D, 6.33%, 4/1/26 4,551,312 4,491
U.S. Treasury, 3.625%,
07/15/02 2,537,375 2,513
U.S. Treasury, 3.625%,
04/15/28 6,500,000 5,809
U.S. Treasury, 3.875%,
04/15/29 165,956,265 156,466
U.S. Treasury, 4.000%,
10/31/00 11,650,000 11,457
U.S. Treasury, 4.750%,
02/15/04 19,250,000 18,161
U.S. Treasury, 4.750%,
11/15/08 38,050,000 33,567
U.S. Treasury, 5.000%,
02/28/01 4,500,000 4,444
U.S. Treasury, 5.250%,
05/31/01 8,000,000 7,900
U.S. Treasury, 5.250%,
05/15/04 29,700,000 28,447
U.S. Treasury, 5.250%,
02/15/29 4,500,000 3,722
U.S. Treasury, 5.500%,
02/29/00 54,000,000 54,017
U.S. Treasury, 5.500%,
01/31/03 3,500,000 3,417
U.S. Treasury, 5.500%,
03/31/03 15,500,000 15,113
U.S. Treasury, 5.500%,
02/15/08 175,000 164
U.S. Treasury, 5.625%,
04/30/00 10,500,000 10,497
U.S. Treasury, 5.625%,
12/31/02 2,300,000 2,256
U.S. Treasury, 5.625%,
02/15/06 108,000,000 103,343
U.S. Treasury, 5.625%,
05/15/08 34,000,000 31,981
U.S. Treasury, 5.875%,
11/15/04 3,500,000 3,432
U.S. Treasury, 6.000%,
07/31/02 4,000,000 3,976
U.S. Treasury, 6.000%,
08/15/04 25,000,000 24,609
U.S. Treasury, 6.000%,
08/15/09 32,625,000 31,605
U.S. Treasury, 6.125%,
08/15/07 22,000,000 21,443
U.S. Treasury, 6.125%,
08/15/29 3,000,000 2,860
U.S. Treasury, 6.250%,
02/15/07 4,500,000 4,428
U.S. Treasury, 6.375%,
08/15/27 4,100,000 3,936
U.S. Treasury, 6.875%,
05/15/06 50,000,000 50,875
U.S. Treasury, 7.250%,
08/15/04 6,000,000 6,191
U.S. Treasury, 7.250%,
05/15/16 4,200,000 4,390
Vendee Mortgage Trust, 6.5%,
6/07/08 4,500,000 4,035
-----------
TOTAL 861,248
-----------
TOTAL GOVERNMENT
(DOMESTIC AND FOREIGN)
AND AGENCY BONDS 868,459
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
BONDS (37.4%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
MORTGAGE/ASSET BACKED SECURITIES (6.5%)
AUTO-RELATED (0.5%)
Daimler-Chrysler NA 5.75%
07/18/02 5,000,000 $ 5,008
Eaglemark Trust - Class A,
6.75%, 11/15/02 1,393,234 1,395
Fleetwood Credit Corporation
Grantor Trust - Class A,
6.4%, 05/15/13 1,618,912 1,608
Team Fleet Financing
Corporation - Class A,
6.65%, 12/15/02 (144A) 11,800,000 11,617
-----------
TOTAL 19,628
-----------
BANKING AND FINANCE (0.1%)
Nations Bank Lease Pass Thru
Trust 97-A, 7.442%, 01/10/11
(144A) 2,000,000 1,948
-----------
CREDIT CARD (0.3%)
Iroquois Trust - Class A,
6.68%, 11/10/03 (144A) 6,621,337 6,598
Iroquois Trust - Class A,
6.752%, 06/25/07 (144A) 3,280,352 3,256
-----------
TOTAL 9,854
-----------
COMMERCIAL MORTGAGES (4.1%)
Asset Securitization
Corporation - Class CS1,
1.257%, 11/13/26 IO 20,004,872 564
Asset Securitization
Corporation - Class PS1,
1.367%, 02/14/41 IO 22,152,797 1,940
BankBoston Marine Asset
Backed Trust - Class A6,
6.64%, 08/15/10 7,000,000 6,815
Chase Commercial Mortgage
Securities Corp. - Class A2,
6.6%, 12/12/29 8,500,000 8,077
Chase Commercial Mortgage
Securities Corp. Class B,
6.6% 12/12/29 2,500,000 2,364
Citibank Credit Card Master
Trust I - Class A, 0%,
08/15/06 17,000,000 12,175
Credit Suisse First Boston
Mortgage Securities Corp. -
Class A2, 7.26%, 6/20/29
(144A) 3,139,367 2,987
Credit Suisse First Boston
Mortgage Securities Corp. -
Class B, 7.28%, 6/20/29
(144A) 3,250,000 3,138
Criimi Mae Commercial
Mortgage Trust, 7.0%,
12/01/06 6,500,000 5,773
Criimi Mae Commercial
Mortgage Trust, 7.0%,
11/02/11 5,700,000 4,167
DLJ Mortgage Acceptance
Corporation - Class CF1,
0.718%, 02/18/31 IO 252,256,132 8,821
</TABLE>
Balanced Portfolio 38
<PAGE> 47
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
BONDS (37.4%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
COMMERCIAL MORTGAGES continued
DLJ Mortgage Acceptance
Corporation - Class S,
0.357%, 10/15/17 (144A) IO 18,565,159 $ 382
DLJ Mortgage Acceptance,
8.10%, 6/18/04 1,927,334 1,981
DLJ Mortgage Acceptance,
8.10%, 6/18/04 1,650,000 1,690
Kmart CMBS Financing, Inc. -
Class B, 5.330%, 03/01/07
(144A) 8,000,000 7,990
Kmart CMBS Financing, Inc. -
Class C, 5.630%, 03/01/07
(144A) 12,500,000 12,434
Kmart CMBS Financing, Inc. -
Class D, 6.980%, 03/01/07
(144A) 4,500,000 4,476
LB Mortgage Trust, 8.396%,
01/20/17 9,475,090 9,515
Midland Realty Acceptance
Corp. - Class AEC, 1.389%
01/25/29 (144A) IO 27,053,140 1,525
Morgan Stanley, 6.54%,
015/15/08 (144a) 15,000,000 14,165
Mortgage Capital Funding,
Inc., 7.288% 03/20/07 19,000,000 18,742
Nomura Asset Securities
Corp. - Class A2, 7.016%,
03/17/28 15,000,000 13,367
Red Mountain Funding LLC -
Class F, 7.471%, 01/15/19
(144A) 1,800,000 1,202
-----------
TOTAL 144,290
-----------
FRANCHISE LOAN RECEIVABLES (0.4%)
EMAC Owner Trust - Class A2,
6.38%, 01/15/25 (144A) 6,000,000 5,639
EMAC Owner Trust, 1.378%,
01/15/25 IO (144A) 38,461,647 2,508
CMAC, 6.644%, 12/15/07 (144A) 2,500,000 2,368
Global Franchise Trust,
6.349%, 8/16/01 3,145,433 3,084
-----------
TOTAL 13,599
-----------
HOME EQUITY LOAN (0.1%)
Amresco Residential
Securities - Class A2,
6.245%, 04/25/22 2,500,000 2,479
-----------
MANUFACTURED HOUSING (0.1%)
Vanderbilt Mortgage and
Finance, Inc. - Class 1A4,
7.19%, 02/07/14 2,500,000 2,485
-----------
OTHER ASSET BACKED (0.5%)
FMAC Loan Receivables Trust -
Class A, 6.20%, 09/15/20
(144A) 4,609,247 4,487
Harley Davidson Eaglemark,
5.87%, 1/20/01 1,900,000 1,870
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
BONDS (37.4%) PAR (000'S)
---------------------------------------------------------
<S> <C> <C>
OTHER ASSET BACKED continued
Health Care Receivables,
6.250% 02/01/03 (144A) 3,000,000 $ 2,909
Heilig-Meyers Master Trust -
Class A, 6.125%, 01/20/07
(144A) 6,500,000 6,244
Nations Credit Grantor
Trust - Class A1, 6.35,
12/15/04 1,474,742 1,461
Newcourt Equipment - Class B,
6.764%, 09/20/04 (144A) 742,420 731
Newcourt Equipment - Class C,
7.734%, 09/20/04 (144A) 593,936 583
-----------
TOTAL 18,285
-----------
RESIDENTIAL MORTGAGES (0.1%)
BCF L L C Mortgage Pass Thru
Certificate - Class B3,
7.75%, 3/25/37 (144A) 4,795,031 2,255
Blackrock Capital Finance LP,
Class B3, 7.25%, 11/25/28
(144A) 5,787,664 2,720
-----------
TOTAL 4,975
-----------
UTILITY (0.3%)
Comed Transitional, 5.74%,
12/16/08 5,500,000 4,959
Peco Energy Trust, 6.130%,
03/01/09 8,000,000 7,361
-----------
TOTAL 12,320
-----------
TOTAL MORTGAGE/ASSET BACKED SECURITIES 229,863
-----------
MUNICIPAL BONDS (0.2%)
New Jersey Economic
Development Authority,
0.00%, 2/15/25 17,000,000 2,475
New Jersey Economic
Development Authority,
0.00%, 2/15/26 11,000,000 1,483
New Jersey Economic
Development Authority,
7.425%, 2/15/29 2,250,000 2,182
-----------
TOTAL MUNICIPAL BONDS 6,140
-----------
TOTAL BONDS (COST
$1,382,544) 1,329,034
-----------
</TABLE>
39 Balanced Portfolio
<PAGE> 48
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (50.8%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
BASIC MATERIALS (1.5%)
Air Products & Chemicals, Inc. 33,700 $ 1,131
Alcan Aluminum, Ltd. 33,200 1,367
Alcoa Inc. 53,900 4,474
Allegheny Technologies, Inc. 13,981 314
Archer Daniels Midland Company 90,823 1,107
Barrick Gold Corporation 57,400 1,015
Bemis Company, Inc. 7,700 269
*Bethlehem Steel Corporation 19,200 161
B.F. Goodrich Company 16,200 446
Boise Cascade Corporation 8,400 340
Champion International 14,100 873
Dow Chemical Company 32,400 4,329
E.I. du Pont de Nemours & Co. 153,500 10,112
Eastman Chemical Company 11,475 547
Ecolab, Inc. 19,000 743
Engelhard Corp. 18,500 349
*FMC Corporation 4,700 269
*Freeport-McMoRan Copper &
Gold, Inc. 24,000 507
Georgia Pacific Corp. 25,200 1,279
Great Lakes Chemical 8,600 328
Hercules Inc. 15,600 435
Homestake Mining Company 38,300 299
*Inco Limited 28,200 663
International Flavors &
Fragrances, Inc. 15,600 589
International Paper Company 60,831 3,433
Louisiana Pacific Corporation 15,800 225
Mead Corp. 15,100 656
Monsanto Company 93,200 3,320
Newmont Mining Corporation 24,630 603
Nucor Corp. 12,800 702
Pactiv Corporation 25,100 267
Phelps Dodge Corporation 11,510 773
Placer Dome Inc. 47,900 515
Potlatch Corporation 4,300 192
PPG Industries, Inc. 25,500 1,595
Praxair 23,400 1,177
Reynolds Metals Company 9,300 713
Rohm and Haas Company 32,001 1,302
Sigma-Aldrich Corp. 14,800 445
Temple-Inland Inc. 8,200 541
Union Carbide Corporation 19,600 1,308
USX-U.S. Steel Group, Inc. 13,000 429
*W.R. Grace & Co. 10,500 146
Westvaco Corporation 14,750 481
Weyerhaeuser Company 34,700 2,492
Willamette Industries, Inc. 16,400 762
Worthington Industries 13,500 224
-----------
TOTAL 54,247
-----------
CAPITAL GOODS (4.3%)
Avery Dennison Corporation 16,700 1,217
Allied Waste Industries 27,700 244
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (50.8%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
CAPITAL GOODS continued
Ball Corporation 4,500 $ 177
Boeing Company 141,318 5,874
Briggs & Stratton Corporation 3,400 182
Caterpillar, Inc. 52,300 2,461
Cooper Industries, Inc. 13,900 562
Corning, Inc. 36,000 4,642
Crane Co. 9,925 197
Crown Cork & Seal Company,
Inc. 18,000 403
Cummins Engine Company, Inc. 6,200 300
Danaher Corporation 20,900 1,008
Deere & Company 34,400 1,492
Delphi Automotive Systems
Corporation 83,144 1,310
Dover Corporation 30,700 1,393
Eaton Corporation 10,600 770
Emerson Electric Co. 63,900 3,666
Fluor Corporation 11,200 514
Foster Wheeler Corporation 6,000 53
General Dynamics Corporation 29,300 1,546
General Electric Company 482,600 74,682
Honeywell International, Inc. 116,150 6,700
Huttig Building Products, Inc. 2,205 11
Illinois Tool Works, Inc. 44,100 2,980
Ingersoll-Rand Company 24,250 1,335
Johnson Controls, Inc. 12,600 717
Lockheed Martin Corporation 58,122 1,271
McDermott International, Inc. 8,700 79
Milacron Inc. 5,400 83
Millipore Corp. 6,600 255
Minnesota Mining &
Manufacturing Co. 59,200 5,794
NACCO Industries, Inc. 1,200 67
National Service Industries,
Inc. 5,900 174
*Navistar International
Corporation 9,770 463
Northrop Grumman Corporation 10,200 551
*Owens-Illinois, Inc. 22,900 574
Paccar Incorporated 11,490 509
Pall Corporation 18,266 394
Parker-Hannifin Corporation 16,000 821
Pitney Bowes Inc. 39,400 1,904
Rockwell International Corp. 28,100 1,345
*Sealed Air Corporation 12,286 637
*Solectron Corporation 43,100 4,100
Textron Inc. 22,100 1,695
*Thermo Electron Corporation 23,200 348
Thomas & Betts Corporation 8,400 268
Timken Company 9,100 186
Tyco International Ltd. 246,118 9,568
United Technologies Corp. 70,900 4,608
Vulcan Materials Company 14,700 587
Waste Management, Inc. 91,097 1,566
-----------
TOTAL 152,283
-----------
</TABLE>
Balanced Portfolio 40
<PAGE> 49
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (50.8%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
COMMUNICATION SERVICES (3.9%)
ADC Telecommunications 22,000 $ 1,596
ALLTEL Corporation 44,900 3,713
AT&T Corporation 470,155 23,860
Bell Atlantic Corporation 228,380 14,060
Bellsouth Corporation 277,400 12,986
CenturyTel Inc. 20,500 971
GTE Corporation 144,300 10,182
*MCI WorldCom, Inc. 413,383 21,935
*Nextel Communications, Inc. 53,200 5,486
SBC Communications, Inc. 502,250 24,485
Sprint Corporation 127,600 8,589
*Sprint PCS 64,650 6,627
U S WEST, Inc. 74,205 5,343
-----------
TOTAL 139,833
-----------
CONSUMER CYCLICALS (4.8%)
American Greetings Corp. 9,900 234
Armstrong World Industries
Inc. 5,900 197
*Autozone, Inc. 21,900 708
Bed, Bath, & Beyond, Inc. 20,500 712
Best Buy, Inc. 30,000 1,506
Black & Decker Corporation 12,800 669
Brunswick Corporation 13,500 300
Carnival Corporation 90,200 4,313
*Cendant Corporation 105,973 2,815
Centex Corporation 8,800 217
Circuit City Stores, Inc. 29,600 1,334
*Consolidated Stores
Corporation 16,200 263
Cooper Tire & Rubber Company 11,200 174
*Costco Companies, Inc. 32,451 2,961
Dana Corporation 24,365 729
Dayton Hudson Corporation 65,000 4,773
Dillard's, Inc. 15,700 317
Dollar General Corp. 33,068 752
Dow Jones & Company, Inc. 13,400 911
Dun & Bradstreet Corporation 23,700 699
Eastman Kodak Company 46,600 3,087
*Federated Department Stores,
Inc. 30,700 1,552
Fleetwood Enterprises, Inc. 4,900 101
Ford Motor Company 178,000 9,512
Gannet Company Inc. 41,100 3,352
Gap, Inc. 126,125 5,802
General Motors Corp. 94,800 6,891
Genuine Parts Company 26,375 654
Goodyear Tire & Rubber Company 23,000 648
H & R Block, Inc. 14,400 630
Harcourt General 10,500 423
*Harrahs Entertainment 18,900 500
Hasbro Inc. 28,625 546
Hilton Hotels Corporation 54,300 523
Home Depot, Inc. 327,297 22,440
Ikon Office Solutions 21,900 149
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (50.8%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
CONSUMER CYCLICALS continued
IMS Health Incorporated 46,000 $ 1,251
Interpublic Group of Cos. Inc. 41,500 2,394
ITT Industries Inc. 12,900 431
J.C. Penney Company, Inc. 38,800 774
Jostens, Inc. 5,000 122
Kaufman & Broad Home Corp. 7,000 169
Kmart Corp. 72,600 731
Knight-Ridder, Inc. 11,900 708
*Kohl's Corporation 24,000 1,733
Leggett & Platt, Inc. 28,900 620
Liz Claiborne, Inc. 9,000 339
Lowe's Companies, Inc. 56,100 3,352
Marriott International 36,600 1,155
Masco Corporation 65,200 1,654
Mattel, Inc. 61,860 812
May Department Stores Company 49,150 1,585
Maytag Corporation 12,800 614
McGraw-Hill Companies Inc. 29,000 1,787
Meredith Corporation 7,600 317
*Mirage Resorts, Incorporated 29,300 449
Neiman Marcus Group 13 0
Nike, Inc. 41,400 2,052
Nordstrom, Inc. 20,600 539
Office Depot, Inc. 55,100 603
Omnicom Group Inc. 26,100 2,610
Owens Corning 8,100 156
Pep Boys - Manny, Moe & Jack 7,700 70
Polaroid Corporation 6,500 122
Pulte Corporation 6,400 144
*Reebok International Ltd. 8,300 68
Russell Corp. 4,900 82
Sears Roebuck & Co. 56,000 1,705
Service Corporation
International 40,000 278
Sherwin-Williams Company 24,900 523
Snap-On Inc. 9,650 256
Springs Industries, Inc. 2,600 104
*Staples, Inc. 68,350 1,418
Tandy Corporation 28,400 1,397
The Limited, Inc. 31,485 1,364
The New York Times Company 25,600 1,258
The Stanley Works 13,100 395
Times Mirror Company 8,800 590
TJX Companies, Inc. 46,700 954
*Toys "R" Us 36,400 521
Tribune Company 34,900 1,922
TRW, Inc. 17,800 924
VF Corporation 17,500 525
Wal-Mart Stores, Inc. 654,700 45,256
Whirlpool Corporation 11,100 722
Xerox Corporation 97,500 2,212
-----------
TOTAL 171,161
-----------
</TABLE>
41 Balanced Portfolio
<PAGE> 50
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (50.8%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
CONSUMER STAPLES (5.6%)
Adolph Coors Co. 5,400 $ 283
Alberto-Culver Company 8,200 212
Albertson's, Inc. 61,850 1,995
Anheuser-Busch Companies, Inc. 68,800 4,876
Avon Products, Inc. 38,400 1,267
BESTFOODS 41,000 2,155
Brown-Forman Corporation 10,100 578
Campbell Soup Company 63,900 2,472
Cardinal Health, Inc. 40,100 1,920
CBS Corporation 112,205 7,174
*Clear Channel Communications,
Inc. 49,700 4,436
Clorox Company 34,700 1,748
Coca Cola Enterprises Inc. 62,500 1,258
Colgate-Palmolive Co. 85,800 5,577
Comcast Corporation 110,300 5,542
Conagra, Inc. 71,800 1,620
CVS Corporation 57,600 2,300
Darden Restaurant, Inc. 19,400 352
Deluxe Corp. 11,200 307
Fort James Corporation 32,500 890
Fortune Brands, Inc. 24,500 810
General Mills, Inc. 45,000 1,609
Gillette Company 159,600 6,573
Great Atlantic & Pacific Tea
Co., Inc. 5,600 156
H.J. Heinz Company 52,750 2,100
Hershey Foods Corporation 20,500 974
Kellogg Company 59,600 1,836
Kimberly-Clark Corporation 78,332 5,111
*Kroger Company 122,000 2,303
Longs Drug Stores Corp. 5,800 150
McDonald's Corporation 199,300 8,034
McKesson HBOC, Inc. 41,353 933
*MediaOne Group, Inc. 89,200 6,852
Nabisco Group Holdings Corp. 48,000 510
Newell Rubbermaid Inc. 41,471 1,203
PepsiCo, Inc. 215,100 7,582
Philip Morris Companies, Inc. 351,600 8,153
Procter & Gamble Company 195,400 21,409
R.R. Donnelley & Sons Company 18,800 466
Ralston Purina Group 47,600 1,327
Rite Aid Corporation 38,100 426
*Safeway Inc. 75,100 2,671
Sara Lee Corporation 132,900 2,932
Supervalue Inc. 20,400 408
Sysco Corporation 48,700 1,927
The Coca-Cola Company 363,200 21,156
The Quaker Oats Company 19,700 1,293
The Seagram Company Ltd. 63,600 2,858
Time Warner Inc. 190,300 13,785
*Tricon Global Restaurants,
Inc. 22,590 873
Tupperware 8,500 144
Unilever N.V 84,107 4,579
UST Incorporated 25,600 645
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (50.8%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
CONSUMER STAPLES continued
*Viacom, Inc. 102,512 $ 6,196
Walgreen Company 147,600 4,317
Walt Disney Company 303,408 8,875
Wendy's International, Inc. 17,900 369
Winn-Dixie Stores, Inc. 21,900 524
Wm. Wrigley Jr. Company 17,100 1,418
-----------
TOTAL 200,449
-----------
ENERGY (2.8%)
Amerada Hess Corporation 13,300 755
Anadarko Petroleum Corporation 18,700 638
Apache Corporation 16,800 620
Ashland, Inc. 10,600 349
Atlantic Richfield Company 47,400 4,100
Baker Hughes, Inc. 48,340 1,018
Burlington Resource, Inc. 31,975 1,057
Chevron Corporation 96,500 8,359
Conoco, Inc. 92,300 2,296
Exxon Mobil Corporation 509,273 41,028
Halliburton Company 64,900 2,612
Helmerich & Payne, Inc. 7,300 159
Kerr-McGee Corporation 12,757 791
Occidental Petroleum
Corporation 51,300 1,109
Phillips Petroleum Company 37,300 1,753
*Rowan Companies, Inc. 12,200 265
Royal Dutch Petroleum Co., ADR 315,400 19,062
Schlumberger Limited 80,600 4,534
Sunoco, Inc. 13,300 313
Texaco Inc. 81,300 4,416
Tosco, Corp. 22,400 609
Transocean Offshore Sedco
Forex, Inc. 15,636 527
Union Pacific Resource Group 37,058 472
Unocal Corp. 35,700 1,198
USX -Marathon Group 45,400 1,121
-----------
TOTAL 99,161
-----------
FINANCIALS (6.7%)
Aetna, Inc. 21,993 1,227
Aflac Inc. 39,100 1,845
Allstate Corporation 117,494 2,820
American Express Company 66,100 10,989
American General Corporation 36,603 2,777
American International Group,
Inc. 227,778 24,628
AMSOUTH BANCORPORATION 57,900 1,118
Aon Corporation 37,675 1,507
Associates First Capital
Corporation 107,138 2,939
Banc One Corporation 172,545 5,532
Bank of America Corp. 254,095 12,752
Bank of New York Company, Inc. 108,200 4,328
BB&T Corporation 47,000 1,287
Capital One Financial
Corporation 29,100 1,402
Chase Manhattan Corporation 122,448 9,513
CIGNA Corporation 27,400 2,207
Cincinnati Financial
Corporation 24,300 758
</TABLE>
Balanced Portfolio 42
<PAGE> 51
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (50.8%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
FINANCIALS continued
Citigroup, Inc. 496,882 $ 27,608
Comerica, Inc. 23,000 1,074
Conseco Inc. 48,070 859
Countrywide Credit Industries,
Inc. 16,600 419
Federal Home Loan Mortgage
Corp. 102,300 4,814
Federal National Mortgage
Association 150,800 9,415
Fifth Third Bankcorp 44,375 3,256
First Union Corporation 140,686 4,616
Firstar Corporation 144,829 3,060
FleetBoston Financial Corp. 135,551 4,719
Franklin Resources Inc. 37,100 1,190
Golden West Financial
Corporation 24,300 814
Hartford Financial Services
Group Inc. 33,200 1,573
Household International Inc. 70,459 2,625
Huntington Bancshares, Inc. 33,928 810
J.P. Morgan & Company, Inc. 25,800 3,267
Jefferson-Pilot Corp. 15,475 1,056
KeyCorp 66,000 1,460
Lehman Brothers Holdings, Inc. 17,600 1,491
Lincoln National Corporation 29,200 1,168
Loews Corp. 15,800 959
Marsh & McLennan Companies,
Inc. 38,800 3,713
MBIA, Inc. 14,700 776
MBNA Corp. 117,932 3,214
Mellon Financial Corporation 75,600 2,575
Merrill Lynch & Co. 54,400 4,542
MGIC Investment Corp. 16,100 969
Morgan Stanley, Dean Witter,
Discover & Co. 83,980 11,988
National City Corp. 90,900 2,153
Northern Trust Corp. 32,800 1,738
Old Kent Financial, Corp. 17,500 619
Paine Webber Group Inc. 21,400 831
PNC Bank Corp. 44,700 1,989
Progressive Corporation 10,700 782
Providian Financial
Corporation 20,850 1,899
Regions Financial Corporation 32,900 827
Republic New York Corporation 15,400 1,109
SAFECO, Inc. 19,300 480
Schwab Charles Corp New 120,350 4,618
SLM Holding Corporation 23,700 1,001
SouthTrust Corporation 24,600 930
St. Paul Companies, Inc. 33,306 1,122
State Street Corporation 23,700 1,732
Summit Bancorp 26,000 796
Suntrust Banks Inc. 47,300 3,255
Synovus Financial Corp. 39,950 794
The Bear Stearns Companies,
Inc. 18,002 770
The Chubb Corporation 25,900 1,458
Torchmark Corporation 19,600 570
T. Rowe Price & Associates 17,900 661
U.S. Bancorp 107,587 2,562
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (50.8%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
FINANCIALS continued
Union Planters Corporation 21,000 $ 828
UNUMProvident Corporation 35,106 1,126
Wachovia Corporation 29,800 2,026
Washington Mutual, Inc. 85,214 2,216
Wells Fargo & Company 242,660 9,813
-----------
TOTAL 240,364
-----------
HEALTH CARE (4.3%)
Abbott Laboratories Inc. 223,800 8,127
Allergan Inc. 19,400 965
*Alza Corporation 14,900 516
American Home Products
Corporation 192,200 7,580
Bard C R Inc 7,500 398
Bausch & Lomb, Inc. 8,400 575
Baxter International, Inc. 42,800 2,688
Becton, Dickinson & Company 36,800 984
Biomet, Inc. 16,500 660
*Boston Scientific Corp. 60,800 1,330
Bristol-Myers Squibb Company 292,200 18,755
Columbia/HCA Healthcare
Corporation 83,050 2,434
Eli Lilly & Company 160,800 10,693
*Guidant Corporation 44,400 2,087
*HEALTHSOUTH Corporation 61,000 328
*Humana, Inc. 24,700 202
Johnson & Johnson 197,800 18,420
Mallinckrodt, Inc. 10,400 331
Manor Care Inc. 15,800 253
Medtronic, Inc. 172,600 6,289
Merck & Co., Inc. 345,100 23,143
Pfizer, Inc. 570,000 18,489
Pharmacia & Upjohn Inc. 74,530 3,354
Quintiles Transnational
Corporation 16,900 316
Schering-Plough Corporation 216,000 9,112
*St. Jude Medical, Inc. 12,450 382
*Tenet Healthcare Corp. 45,700 1,074
*United Healthcare Corp. 25,500 1,355
Warner-Lambert Company 125,700 10,300
*Watson Pharmaceutical Inc. 14,100 505
*Wellpoint Health Networks 9,700 640
-----------
TOTAL 152,285
-----------
TECHNOLOGY (15.3%)
*3COM Corporation 52,600 2,472
Adobe Systems, Inc. 18,000 1,211
Adaptec, Inc. 15,200 758
*Advanced Micro Devices, Inc. 21,700 628
*America Online, Inc. 326,000 24,593
*Amgen, Inc. 150,000 9,009
Analog Devices, Inc. 25,400 2,362
*Andrew Corporation 12,062 228
*Apple Computer, Inc. 23,700 2,437
*Applied Materials, Inc. 55,200 6,993
Autodesk, Inc. 8,700 294
</TABLE>
43 Balanced Portfolio
<PAGE> 52
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (50.8%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
TECHNOLOGY continued
Automatic Data Processing,
Inc. 91,000 $ 4,903
*BMC Software, Inc. 35,200 2,814
*Cabletron Systems, Inc. 25,600 666
*Ceridian Corp. 21,300 459
*Cisco Systems, Inc. 478,300 51,238
Citrix Systems, Inc. 12,900 1,587
Compaq Computer Corporation 250,067 6,767
Computer Associates
International, Inc. 79,112 5,533
*Computer Sciences Corp. 23,500 2,224
*Compuware Corporation 52,500 1,956
Comverse Technology 10,300 1,491
*Dell Computer Corp. 373,800 19,064
Electronic Data Systems
Corporation 72,500 4,853
*EMC Corporation 149,043 16,283
Equifax, Inc. 21,100 497
First Data Corporation 63,100 3,112
*Gateway Inc. 46,100 3,322
*General Instrument
Corporation 25,500 2,168
Global Crossing, Ltd. 112,985 5,649
Hewlett-Packard Company 149,000 16,977
Intel Corporation 486,600 40,053
International Business
Machines Corporation 266,100 28,739
*KLA- Tencor Corporation 13,000 1,448
Lexmark International Group,
Inc. 18,900 1,710
*LSI Logic Corp. 21,700 1,465
Lucent Technologies, Inc. 450,747 33,722
*Micron Technology 36,800 2,861
*Microsoft Corporation 750,800 87,656
Molex, Inc. 22,800 1,292
Motorola, Inc. 89,300 13,149
*National Semiconductor
Corporation 24,700 1,057
Network Appliance, Inc. 21,600 1,794
Nortel Networks Corporation 195,220 19,717
*Novell, Inc. 49,300 1,969
*Oracle Corporation 211,725 23,726
*Parametric Technology Company 39,600 1,072
Paychex, Inc. 36,200 1,448
PE Corp.-PE Biosystems Group 15,000 1,805
*Peoplesoft, Inc. 35,800 763
Perkinelmer, Inc. 6,700 279
Raytheon Company- Class B 49,700 1,320
Qualcomm, Inc. 94,400 16,638
Scientific-Atlanta, Inc. 11,300 629
*Seagate Technology Inc. 30,600 1,425
Shared Medical Systems Corp. 3,900 199
*Silicon Graphics 27,800 273
*Sun Microsystems, Inc. 227,700 17,633
Tektronix, Inc. 6,900 268
*Tellabs, Inc. 57,600 3,697
Teradyne, Inc. 25,200 1,663
Texas Instruments,
Incorporated 115,600 11,199
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (50.8%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
TECHNOLOGY continued
*Unisys Corporation 45,000 $ 1,437
W.W. Grainger, Inc. 13,700 655
Xilinnx, Inc. 46,600 2,119
Yahoo, Inc. 38,700 16,745
-----------
TOTAL 544,173
-----------
TRANSPORTATION (0.4%)
*AMR Corporation 22,100 1,481
Burlington Northern Santa Fe 68,399 1,659
CSX Corporation 32,000 1,004
Delta Air Lines Inc. 20,600 1,026
*FDX Corporation 43,740 1,791
Kansas City Southern Inds 16,300 1,216
Norfolk Southern Corporation 56,000 1,148
Ryder System, Inc. 9,400 230
Southwest Airlines Co. 74,175 1,201
Union Pacific Corporation 36,500 1,592
*USAir Group, Inc. 10,500 337
-----------
TOTAL 12,685
-----------
UTILITIES (1.2%)
Ameren Corporation 20,200 662
American Electric Power Co.
Inc. 28,400 912
Carolina Power & Light Company 23,500 715
Central & South West
Corporation 31,300 626
Cinergy Corporation 23,405 565
CMS Energy Corp. 17,400 543
Coastal Corp. 31,400 1,113
Columbia Energy Group 12,100 765
Consolidated Edison Co. of New
York 32,500 1,121
Consolidated Natural Gas
Company 14,100 916
Constellation Energy Group
Inc. 22,000 638
Dominion Resources Inc. 28,200 1,107
DTE Energy Company 21,300 668
Duke Energy Corp. 53,671 2,690
Eastern Enterprises 3,900 224
Edison International 51,100 1,338
EL Paso Energy Corp. 33,500 1,300
Enron Corporation 105,000 4,659
Entergy Corporation 36,300 935
FirstEnergy Corporation 34,400 780
Florida Progress Corp. 14,400 609
FPL Group, Inc. 26,400 1,130
GPU, Inc. 18,500 554
New Century Energies, Inc. 17,000 516
*Niagra Mohawk Power
Corporation 27,600 385
Nicor, Inc. 6,900 224
Northern States Power Company 22,700 443
ONEOK, Inc. 4,700 118
P P & L Resources, Inc. 23,233 531
PECO Energy Company 27,500 956
Pinnacle West Capital 12,500 382
Peoples Energy Corporation 5,200 174
PG&E Corp. 56,500 1,158
</TABLE>
Balanced Portfolio 44
<PAGE> 53
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK (50.8%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
UTILITIES continued
Public Service Enterprise
Group, Inc. 32,300 $ 1,124
Reliant Energy, Inc. 43,526 996
Scottish Power PLC 25,520 715
Sempra Energy 35,359 614
Southern Company 100,500 2,362
Texas Utilities Company 40,695 1,447
*The AES Corporation 30,300 2,265
UNICOM Corp. 32,000 1,072
Williams Companies Inc. 63,900 1,954
-----------
TOTAL 42,006
-----------
TOTAL COMMON STOCK (COST $691,041) 1,808,647
-----------
SHORT TERM INVESTMENTS (11.3%)
--------------------------------------------------------
MONEY MARKET INVESTMENTS (10.2%)
--------------------------------
PHARMACEUTICAL (0.7%)
AMERICAN HOME PRODUCTS, 5.72%,
01/26/00 25,000,000 24,901
-----------
CAPTIVE FINANCE COMPANY (0.7%)
Ford Motor Credit Company,
5.68%, 01/12/00 25,000,000 24,957
-----------
FEDERAL GOVERNMENT AND AGENCIES (1.0%)
#Federal Home Loan Mortgage
Corp., 5.51%, 01/10/00 20,200,000 20,172
Federal Home Loan Mortgage
Corp., 0.47%, 01/14/00 17,000,000 16,971
-----------
TOTAL 37,143
-----------
FINANCE LESSOR (0.8%)
Receivable Capital Trust, 6%,
01/28/00 29,000,000 28,870
-----------
FINANCE SERVICES (1.6%)
Asset Securitization, 5.80%,
01/21/00 25,000,000 24,919
CXC Incorporated, 5.78%,
01/24/00 30,100,000 29,989
-----------
TOTAL 54,908
PERSONAL CREDIT INSTITUTIONS (3.4%)
Associates Corp. of America,
5.67%, 01/12/00 50,000,000 49,913
General Electric Capital
Corporation, 5.32%, 01/26/00 25,000,000 24,908
General Electric Capital
Corporation, 0.62%, 02/02/00 20,000,000 19,890
Variable Funding Capital
Corp., 5.84%, 01/12/00 25,000,000 24,955
-----------
TOTAL 119,666
SHORT TERM BUSINESS CREDIT (1.4%)
IBM Credit Corporation, 5.70%,
01/26/00 50,000,000 49,802
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
SHORT TERM INVESTMENTS (11.3%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
UTILITY-ELECTRIC (0.6%)
National Rural Utility, 5.80%,
01/24/00 22,100,000 $ 22,018
-----------
TOTAL MONEY MARKET INVESTMENTS 362,265
-----------
<CAPTION>
ASSET-BACKED SECURITIES (1.1%)
------------------------------
<S> <C> <C>
FINANCE LESSORS (1.1%)
Preferred Receivable Funding,
6.12%, 01/20/00 23,675,000 23,598
Preferred Receivable Funding,
5.85%, 01/28/00 15,000,000 14,934
-----------
TOTAL ASSET-BACKED SECURITIES 38,532
-----------
TOTAL SHORT TERM INVESTMENTS
(COST $400,797) 400,797
-----------
TOTAL INVESTMENTS (99.5%)
(COST $2,474,382)' 3,538,478
-----------
OTHER ASSETS, LESS LIABILITIES (0.5%) 19,422
-----------
TOTAL NET ASSETS (100.0%) $ 3,557,900
-----------
</TABLE>
IO - Interest Only Security
++ - Defaulted Securities
144A after the name of a security represents a security exempt from registration
under rule 144A of the Securities Act of 1933. These securities may be resold as
transactions exempt from registration, normally to qualified institutional
buyers.
* Non-Income Producing.
# Partially held by the custodian in a segregated account as collateral for open
futures positions. Information regarding open futures contracts as of December
31, 1999 is summarized below:
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF EXPIRATION APPRECIATION
ISSUER CONTRACTS DATE (000'S)
- -------------------------------------------------------------
<S> <C> <C> <C>
S&P 500 Stock Index 290 03/00 $4,411
(Total Notional Value
at 12/31/99,
$103,193,600)
</TABLE>
' At December 31, 1999, the aggregate cost of securities for federal income tax
purposes was $2,476,485 and the net unrealized appreciation based on that cost
was $1,061,993 which is comprised of $1,155,249 in aggregate gross unrealized
appreciation and $93,256 in aggregate gross unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements
45 Balanced Portfolio
<PAGE> 54
<TABLE>
<CAPTION>
Objective: Portfolio Strategy: Net Assets:
<S> <C> <C> <C>
High current income and capital Generate superior performance by investing in a $161,424,443
appreciation with moderate risk diversified mix of fixed income securities rated
below investment grade.
</TABLE>
HIGH YIELD BOND PORTFOLIO
Investing in a portfolio of high yield bonds provides investors who can accept a
moderate level of risk with a high level of current income, coupled with the
opportunity for capital gains. Holdings of particular interest include solid
investments in entities that have the possibility of a positive event, such as a
significant improvement in credit rating or earnings or a change in ownership.
In a high-yield portfolio, some credit losses over time are inevitable; high
coupons and diversification across many holdings mitigate the impact of
individual securities on the performance of the total Portfolio.
The last 18 months have been a difficult period for bond holders, including high
yield investors. During 1999, high yield bonds outperformed investment grade
bonds as an asset class mainly because of the higher current income high yield
bonds provide. Nevertheless, a series of negative factors have combined to limit
returns for high yield investors. Problems began with the Asian financial crisis
in August 1998, followed by the collapse of a prominent U.S. hedge fund.
Liquidity in the high yield market evaporated as nervous dealers retrenched and
hedge funds liquidated. An unexpected rise in the default rate in early 1999
reinforced negative market sentiment even as the economy boomed. Three interest
rate increases by the Federal Reserve during 1999 put downward pressure on all
bond prices. Each time the high yield market showed signs of firming, demand was
overwhelmed by new bond issues from telecommunications companies determined to
fund their explosive growth regardless of interest rates. Low returns,
especially relative to much-publicized high-tech stocks, led to cash outflows
from high yield mutual funds, putting further pressure on the market. Finally,
Y2K fears affected the corporate bond sector in the last half of 1999,
depressing prices of both investment-grade and high yield bonds. This
combination of forces produced credit losses and trading price declines that
essentially offset coupon income to produce low total returns for high yield
investors.
The High Yield Portfolio lagged the Lehman High Yield Intermediate Index during
1999, largely because of a few concurrent credit problems early in the year. In
response to market conditions, steps have been taken to minimize credit risk:
average credit quality has been raised, exposure to emerging markets has been
minimized, cyclical risk is being maintained at a very low level, and the
average capitalization and liquidity of holdings has been increased. The
portfolio enters the new year better positioned for a period of increasingly
volatile markets.
Investors should remember that, although the Fund's total return (defined as
income plus change in market value) has been slightly negative over the last
year, interest payments have continued to provide steady cash flow. High yield
bonds have been and should continue to be intermediate risk and return assets
over time. These bonds provide diversification benefits for balanced portfolios
because high yield bonds tend to move up and down at different points in the
market cycle from traditional stock and bond investments. For investors who want
high income and are willing to accept some price volatility, this may be an
opportune time to consider investing in high-yield securities.
PERCENTAGE HOLDINGS BY INDUSTRY SECTOR
12/31/99
[PIE CHART]
<TABLE>
<S> <C>
Other Industries 16%
Transportation 3%
Broadcasting/Media 8%
Consumer Related/Health Care 8%
Basic Materials/Energy 9%
Cash and Other 5%
Telecommunications 15%
Finance 14%
Cable Television 12%
Leisure 10%
</TABLE>
PERFORMANCE RELATIVE TO THE LEHMAN BROTHERS INDEX
[LINE GRAPH]
<TABLE>
<CAPTION>
- --------------------------------------------------------------
Average Annual Total Return
For Periods Ended December 31, 1999
Since
1 Year 5 Years Inception#
- --------------------------------------------------------------
<S> <C> <C> <C>
High Yield Bond Portfolio -0.44% 9.63% 9.03%
Lehman Brothers High Yield
Intermediate Market Index 2.64% 8.96% 8.23%
- --------------------------------------------------------------
# Inception date of 5/3/94
</TABLE>
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
High Yield Bond Portfolio
Investor Service. If a Moody's rating is unavailable, the bonds must be rated
BB+ or lower by Standard & Poor's, or by Fitch if an S&P rating is unavailable.
A few unrated bonds are included in the index; to be eligible they must have
previously held a high yield rating or have been associated with a high yield
issuer. The index is an unmanaged market value weighted index and measures the
income provided by, and the price changes of, the underlying securities.
This chart assumes an initial investment of $10,000 made on 5/3/94 (commencement
of operations). Returns shown include deductions for management and other fund
expenses, and reinvestment of all dividends. Returns exclude deductions for
separate account sales loads and account fees. Past performance is not
predictive of future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. Total returns, which reflect deduction of charges for the
separate account, are shown on page 2.
46 High Yield Bond Portfolio
<PAGE> 55
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
BONDS (78.0%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
BASIC MATERIALS (2.6%)
Glencore Nickel, LTD, 9%, 12/1/14 500,000 $ 419
Great Central Mines, Ltd.,
8.875%, 04/01/08 2,400,000 2,214
Murrin Murrin Holdings, 9.375%,
8/31/07 1,850,000 1,628
---------
TOTAL BASIC MATERIALS 4,261
---------
BROADCASTING/MEDIA (3.1%)
BROADCASTING (1.2%)
+Big City Radio, Inc., 11.25%,
3/15/05 3,100,000 1,999
---------
PRINTING AND PUBLISHING (1.9%)
Marvel Enterprises, Inc., 12.0%,
06/15/09 2,200,000 2,024
WRC Media Inc., 12.75%, 11/15/09 1,000,000 993
---------
3,017
---------
TOTAL BROADCASTING/MEDIA 5,016
---------
CABLE TELEVISION (7.4%)
Century Communications, 0.0%,
1/15/08 2,050,000 898
+International Cabletel, Inc.,
11.50%, 02/01/06 3,000,000 2,715
+NTL, Inc.,9.75%, 4/01/08 3,500,000 2,415
NTL Incorporated, 11.50%,
10/01/08 1,000,000 1,085
+Telewest PLC, 9.25%, 04/15/09
(144A) 2,400,000 1,512
+United International Holdings,
10.75%, 2/15/08 2,600,000 1,664
United Pan-Europe Co., 10.875%,
8/01/09 (144A) 1,550,000 1,569
---------
TOTAL CABLE TELEVISION 11,858
---------
CONSUMER RELATED (1.9%)
Boyds Collection Ltd., 9.0%,
5/15/08 750,000 713
Global Health Sciences, Inc.,
11.0%, 05/01/08 850,000 527
Iowa Select Farms L.P., 10.75%,
12/01/05 (144A) 3,600,000 1,799
---------
TOTAL CONSUMER RELATED 3,039
---------
ENERGY RELATED (6.7%)
OIL AND GAS INDEPENDENT (2.0%)
Chesapeake Energy, 9.625%,
05/01/05 1,000,000 944
Grey Wolf Inc., 8.875%, 7/01/07 600,000 552
Pioneer Natural Resources,
8.875%, 04/15/05 500,000 500
Pioneer Natural Resources, 8.25%,
08/15/07 500,000 477
Pioneer Natural Resources, 6.5%,
01/15/08 800,000 679
---------
TOTAL 3,152
---------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
BONDS (78.0%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
OIL FIELD SERVICES (2.4%)
Eott Energy, 11%, 10/1/09 1,800,000 $ 1,863
Pride International, Inc.,
10.00%, 06/01/09 1,500,000 1,530
R&B Falcon Corp., 12.25%,
03/15/06 400,000 436
---------
TOTAL 3,829
---------
REFINING (2.3%)
PDV America, Inc., 7.875%,
08/01/03 2,250,000 2,118
Port Authority Finance
Corporation, 12.5%, 1/15/09
(144A) 1,650,000 1,667
---------
TOTAL 3,785
---------
TOTAL ENERGY RELATED 10,766
---------
FINANCE (11.3%)
BANKS (2.2%)
BF Saul Real Estate, 9.75%,
4/01/08 1,750,000 1,598
Sovereign Bancorp Inc., 10.5%,
11/15/06 1,900,000 1,938
---------
TOTAL 3,536
---------
FINANCE COMPANIES (8.4%)
Americredit Corp., 9.875%,
04/15/06 1,000,000 1,008
Metris Companies, Inc., 10.125%,
7/15/06 2,600,000 2,483
Arcadia Financial, Ltd., 11.5%,
3/15/07 5,775,000 6,006
PDV SA Finance, Ltd. 99-I, 9.75%,
02/15/10 (144A) 4,400,000 4,131
---------
TOTAL 13,628
---------
INSURANCE (0.7%)
Willis Corron Corp., 9.0%,
2/01/09 1,350,000 1,124
---------
TOTAL FINANCE 18,288
---------
HEALTHCARE (5.4%)
Columbia/HCA Healthcare, 7.69%,
06/15/25 1,450,000 1,172
HEALTHSOUTH Corporation, 6.875%,
6/15/05 750,000 656
HEALTHSOUTH Corporation, 3.25%,
4/01/03 3,200,000 2,468
ICN Pharmaceuticals, 8.75%,
11/15/08 (144A) 450,000 430
Total Renal Care Hldgs, 7.0%,
05/15/09 (144A) 6,300,000 3,938
---------
TOTAL HEALTHCARE 8,664
---------
LEISURE (9.4%)
GAMING (3.9%)
Circus Circus Enterprise, 7.625%,
7/15/13 1,850,000 1,610
Hollywood Casino, 13.0%, 8/01/06
(144A) 1,750,000 1,873
</TABLE>
47 High Yield Bond Portfolio
<PAGE> 56
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
BONDS (78.0%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
GAMING continued
Hollywood Casino, 11.25%, 5/01/07 1,700,000 $ 1,777
MGM Grand Inc., 6.875%, 2/06/08 1,250,000 1,107
---------
TOTAL 6,367
---------
HOTELS AND OTHER LODGING PLACES (4.2%)
HMH Properties, Inc., 8.45%,
12/01/08 1,000,000 925
HMH Properties, Inc., 7.875%,
08/01/08 900,000 802
Hilton Hotels Corporation, 5.0%,
5/15/06 2,000,000 1,518
ITT Corp., 7.375%, 11/15/15 2,650,000 2,027
Lodgian Financing Corp., 12.25%,
7/15/09 1,500,000 1,485
---------
TOTAL 6,757
---------
LEISURE RELATED (1.0%)
Bally Total Fitness, 9.875%,
10/15/07 1,600,000 1,552
Hedstrom Holdings Inc., 10.0%,
06/01/07 750,000 45
---------
TOTAL 1,597
---------
MOVIE THEATERS (0.3%)
Cinemark USA, 9.625%, 8/1/08 500,000 450
---------
TOTAL LEISURE 15,171
---------
OTHER INDUSTRIES (13.6%)
AUTO RELATED (2.3%)
AVIS Rent a Car, Inc., 11.0%,
05/01/09 1,000,000 1,050
Budget Group, Inc., 9.125%,
04/01/06 2,900,000 2,697
---------
TOTAL 3,747
---------
BUILDING AND CONSTRUCTION (0.7%)
United Rentals Inc., 8.8%,
8/15/08 1,250,000 1,167
---------
ENVIRONMENTAL CONTROL (5.5%)
Allied Waste of North America,
10.000%, 08/01/09 (144A) 2,850,000 2,551
Allied Waste of North America,
7.875%, 01/01/09 2,500,000 2,209
IT Group Inc., 11.25%, 4/01/09 1,450,000 1,407
USA Waste Services, 7.125%,
10/01/07 1,750,000 1,528
Waste Management, Inc., 4.0%,
02/01/02 1,350,000 1,181
---------
TOTAL 8,876
---------
FOOD SERVICES (0.5%)
Sbarro Inc., 11.0%, 9/15/09
(144A) 750,000 780
---------
OFFICE EQUIPMENT (1.4%)
Buhrmann US Inc., 12.25%,
11/01/09 (144A) 2,150,000 2,233
---------
HOUSEHOLD FURNISHINGS, APPLIANCES (0.6%)
Home Interiors and Gifts,
10.125%, 6/01/08 1,150,000 983
---------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
BONDS (78.0%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
REAL ESTATE (1.8%)
Crescent Real Estate, 7.5%,
09/15/07 2,950,000 $ 2,440
Crescent Real Estate, 7.0%,
09/15/02 500,000 454
---------
TOTAL 2,894
---------
REIT (0.8%)
Macerich Co., 7.25%, 12/15/02
(144A) 1,550,000 1,285
---------
TOTAL OTHER INDUSTRIES 21,965
---------
SERVICES (1.5%)
Building One Services Co., 10.5%,
5/01/09 1,500,000 1,440
+Decisionone Holdings, 11.50%,
8/1/08 3,875,000 19
Decisionone Holdings, 7.94%,
08/07/05 101,265 37
Decisionone Holdings, 7.98%,
08/07/05 145,822 54
Decisionone Holdings, 8.29%,
08/07/05 26,518 10
++Decisionone Holdings, 9.75%,
8/1/07 1,375,000 5
Service Corp. International,
7.7%, 04/15/09 1,200,000 912
---------
TOTAL SERVICES 2,477
---------
TECHNOLOGY (0.6%)
Amkor Technologies, Inc., 9.25%,
05/01/06 (144A) 1,000,000 975
---------
TELECOMMUNICATIONS (11.9%)
Arch Escrow Corp, 13.75%,
04/15/08 4,100,000 3,326
Arch Communications, 12.75%,
07/01/07 1,800,000 1,424
+Call-Net Enterprises, Inc.,
10.80%, 05/15/09 1,800,000 887
Call-Net Enterprises, Inc.,
9.375%, 05/15/09 900,000 740
Global Crossing Holding, 9.5%,
11/15/09 (144A) 1,000,000 985
Hyperion Telecommunications,
12.25%, 9/01/04 350,000 377
Intermedia Communication, 9.5%,
3/01/09 1,150,000 1,098
+Intermedia Communication, 9.5%,
5/01/06 600,000 525
+KMC Telecommunication Hldgs,
12.50%, 2/15/08 750,000 428
KMC Telecommunication Hldgs,
13.5%, 05/15/09 (144A) 2,400,000 2,400
+Nextel Communications, 9.75%,
9/15/07 1,000,000 745
Nextlink Communications, 10.50%,
12/01/09 (144A) 1,000,000 1,015
PSI Net Inc., 11.0%, 08/01/09 750,000 773
Splitrock Services, Inc., 11.75%,
07/15/08 1,200,000 1,122
Viatel, Inc., 11.25%, 04/15/08 1,500,000 1,489
</TABLE>
High Yield Bond Portfolio 48
<PAGE> 57
<TABLE>
<CAPTION>
MARKET
SHARES/ VALUE
BONDS (78.0%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS continued
Williams Communications, 10.875%,
10/01/09 1,850,000 $ 1,933
---------
TOTAL TELECOMMUNICATIONS 19,267
---------
TRANSPORTATION (2.6%)
North American Van Lines,
13.375%, 12/01/09 (144A) 1,250,000 1,250
Stena AB, 10.5%, 12/15/05 1,400,000 1,274
Stena AB, 8.75%, 06/15/07 2,150,000 1,752
---------
TOTAL TRANSPORTATION 4,276
---------
TOTAL BONDS (COST $134,752) 126,023
---------
<CAPTION>
PREFERRED SECURITIES (15.0%)
--------------------------------------------------------
BANKS (1.0%)
California Fed Pfd Capital 74,000 1,670
---------
BROADCASTING AND MEDIA (5.4%)
BROADCASTING (4.5%)
**Crown Castle Intl. Corp. 10,310 1,067
**Cumulus Media, Inc. 25,740 2,883
Sinclair Capital 34,000 3,298
---------
TOTAL 7,248
---------
PRINTING AND PUBLISHING (0.9%)
Primedia, Inc. 5,000 485
Primedia, Inc. 10,000 915
---------
TOTAL 1,400
---------
TOTAL BROADCASTING AND MEDIA 8,648
---------
CABLE TELEVISION (4.5%)
Adelphia Communications 10,000 1,150
**CSC Holdings, Inc. 47,464 5,221
**21st Century Telecom 10,760 915
---------
TOTAL CABLE TELEVISION 7,286
---------
INSURANCE (1.3%)
Superior Nat'l Capital Trust I,
10.75%, 12/01/17 4,700,000 2,115
---------
HEALTHCARE (1.0%)
Fresenius Medical, 7.875%, 2/1/08 1,750,000 1,628
---------
LEISURE RELATED (0.4%)
**Samsonite Corp. 7,610 609
---------
TELECOMMUNICATIONS (1.4%)
**Adelphia Business Solutions 13,890 1,354
**Nextlink Communications 16,560 885
---------
TOTAL TELECOMMUNICATIONS 2,239
---------
TOTAL PREFERRED SECURITIES
(COST $26,557) 24,195
---------
<CAPTION>
COMMON STOCK AND WARRANTS (1.5%)
--------------------------------------------------------
<S> <C> <C>
CABLE TELEVISION (0.0%)
*21st Century Telecom 8,500 17
---------
</TABLE>
<TABLE>
<S> <C> <C>
<CAPTION>
MARKET
SHARES/ VALUE
COMMON STOCK AND WARRANTS (1.5%) PAR (000'S)
--------------------------------------------------------
CONSUMER RELATED (0.0%)
*Ithaca Industries Inc. 136,000 $ 28
---------
FINANCE COMPANIES (0.0%)
*Arcadia Financial Ltd. 4,000 4
---------
LEISURE (0.1%)
*Hedstrom Holdings, Inc. 201,674 2
Meditrust Corp. 11,117 61
*Samsonite Corp. 6,250 19
---------
TOTAL LEISURE 82
---------
TELECOMMUNICATIONS (1.4%)
*Arch Communications Class A 134,177 885
*Arch Communications Class B 35,377 233
*Arch Communications Warrants 32,686 13
*KMC Telecom Holdings, Inc. 6,250 19
*Splitrock Services, Inc. 3,000 282
*Viatel, Inc. 16,325 875
---------
TOTAL TELECOMMUNICATIONS 2,307
---------
TOTAL COMMON STOCK AND
WARRANTS (COST $4,532) 2,438
---------
<CAPTION>
MONEY MARKET INVESTMENTS (3.8%)
--------------------------------------------------------
<S> <C> <C>
FEDERAL GOVERNMENT AND AGENCIES (3.8%)
Federal Home Loan Mortgage, 4.7%,
1/14/00 6,100,000 6,089
---------
TOTAL MONEY MARKET INVESTMENTS
(COST $6,089) 6,089
---------
TOTAL INVESTMENTS (98.3%)
(COST $171,930)' 158,745
---------
OTHER ASSETS, LESS LIABILITIES (1.7%) 2,679
---------
TOTAL NET ASSETS (100.0%) $ 161,424
---------
</TABLE>
* Non-Income Producing
+ Step Bond security that presently receives no coupon payments. At a
predetermined date the stated coupon rate becomes effective.
++ Defaulted Security
** PIK- Payment in Kind
144A after the name of a security represents a security exempt from registration
under Rule 144A of the Securities Act of 1933. These securities may be resold as
transactions exempt from registration, normally to qualified institutional
buyers.
' At December 31, 1999, the aggregate cost of securities for federal income tax
purposes was $172,290 and the net unrealized depreciation of investments based
on that cost was $13,545 which is comprised of $5,113 aggregate gross
unrealized appreciation and $18,658 aggregate gross unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements
49 High Yield Bond Portfolio
<PAGE> 58
<TABLE>
<CAPTION>
Objective: Portfolio Strategy: Net Assets:
<S> <C> <C>
A stable and relatively high level Invest in high grade corporate bonds, U.S. $286,492,754
of long-term total return and government bonds and bonds of government
preservation of capital agencies.
</TABLE>
SELECT BOND PORTFOLIO
The Select Bond Portfolio invests primarily in high quality debt securities,
mainly government bonds, corporate bonds and mortgage-backed securities.
Exposure to market sectors is adjusted as yield spreads change among the various
classes of securities. Duration and maturities are altered with moderate
adjustments in recognition or anticipation of interest rate changes.
The recent market environment has been difficult for bond funds in general
because investors have shunned the modest but relatively secure returns offered
by bonds in favor of the excitement and uncertain but potentially high returns
of technology stocks. The result has been a net outflow of cash from virtually
all bond funds. The Select Bond Portfolio outperformed the universe with which
it is compared during 1999, largely because it has been managed with a defensive
posture toward interest rates, predicting correctly that rates were likely to
rise. At the end of the year, the Portfolio is in a neutral position with regard
to interest rates.
With interest rates now approximately 100 basis points (one percentage point)
higher that they were at the beginning of 1999, the bond market's expectation
that interest rates would rise has been realized. Although further rate
increases, the market is now more focused on credit risk than on interest rate
risk. If an economic slowdown develops, the effect on the financial strength of
companies that issue bonds could cause concern about credit risk to increase.
The Portfolio's focus in recent months has been on quality and liquidity, with
holdings concentrated in well-known names with ratings of AA or better. To take
advantage of the relatively wide spreads between corporate and U.S. government
bonds, a portion of the position in government securities has been replaced with
quality corporate issues. During the fourth quarter the position in mortgages
has been reduced because mortgages appeared somewhat rich at the end of the
third quarter.
PERCENTAGE HOLDINGS
12/31/99
[PIE CHART]
<TABLE>
<S> <C>
Short-Term Investments 3%
Government and Government Agencies 39%
Other Assets 1%
Corporate Bonds 26%
Mortgage-Backed and Asset-Backed Securities 31%
</TABLE>
The Corporate Bonds sector includes bonds of companies headquartered outside the
United States. The Government and Government Agencies category includes taxable
bonds of domestic and foreign governments and a small position in municipal
bonds. Consistent with the Portfolio's stated parameters, no more than 20% of
the Portfolio is invested in foreign securities, and no more than 10% is
invested in high-yield securities.
PERFORMANCE RELATIVE TO THE MERRILL LYNCH DOMESTIC MASTER INDEX
[LINE GRAPH]
<TABLE>
<CAPTION>
- ----------------------------------------------------
Average Annual Total Return
For Periods Ended December 31, 1999
1 Year 5 Years 10 Years
- ----------------------------------------------------
<S> <C> <C> <C>
Select Bond Portfolio -1.00% 7.38% 7.77%
Merrill Lynch Domestic
Master Index -0.96% 7.74% 7.76%
- ----------------------------------------------------
</TABLE>
Since the Portfolio invests broadly in U.S. Government, mortgage and corporate
bonds, a useful basis for comparing returns is the Merrill Lynch Domestic Master
Index. The index is an unmanaged market value weighted index comprised of U.S.
Government, mortgage and investment-grade corporate bonds. The index measures
the income provided by, and the price changes of, the underlying securities.
This chart assumes an initial investment of $10,000 made on 12/31/89. Returns
shown include deductions for management and other fund expenses, and
reinvestment of all dividends. Returns exclude deductions for separate account
sales loads and account fees. Past performance is not predictive of future
performance. Investment return and principal value will fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. Total
returns, which reflect deduction of charges for the separate account, are shown
on page 2.
Select Bond Portfolio 50
<PAGE> 59
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
December 31, 1999
<TABLE>
<CAPTION>
MARKET
VALUE
BONDS (96.2%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (25.9%)
AUTO-RELATED (1.5%)
Daimler-Chrysler North
America, 6.9%, 09/01/04 4,500,000 $ 4,457
---------
BANK HOLDING COMPANIES (2.0%)
BT Institutional Capital
Trust, 7.75%, 12/1/26 (144A) 3,000,000 2,665
Nations Bank Lease Pass Thru
Trust 97-A, 7.442%,
11/18/2005 3,000,000 2,922
---------
TOTAL 5,587
---------
CHEMICALS AND ALLIED PRODUCTS (4.1%)
Chevron Corporation, 6.625%,
10/01/04 4,500,000 4,436
Dow Capital B.V., 8.5%, 6/8/10 1,800,000 1,905
Johnson & Johnson, 6.625%,
09/01/09 2,750,000 2,645
Proctor & Gamble Co., 6.875%,
09/15/09 2,900,000 2,836
---------
TOTAL 11,822
---------
ELECTRIC SERVICES (4.9%)
Comed Transitional, 5.74%,
12/16/2008 3,500,000 3,156
Comed Financing II, 8.5%,
1/15/27 1,750,000 1,706
Ohio Edison Company, 7.375%,
9/15/02 1,000,000 1,003
PECO Energy Company, 6.13%,
3/1/09 5,500,000 5,061
Public Service Electric & Gas
Co., 6.875%, 1/1/03 2,250,000 2,232
Texas Utilities Electric Co.,
7.875%, 3/1/23 1,000,000 943
---------
TOTAL 14,101
---------
FINANCE (3.2%)
Associates Corp. of North
America, 7.95%, 2/15/10 1,500,000 1,532
Ford Motor Credit Co., 5.75%,
02/23/04 4,000,000 3,789
Ford Motor Credit Co., 6.7%,
07/16/04 2,000,000 1,956
Ford Motor Credit Co., 7.375%,
10/28/09 2,000,000 1,974
---------
TOTAL 9,251
---------
GENERAL MERCHANDISE STORES (3.4%)
May Dept Stores Company,
7.45%, 10/15/16 1,000,000 981
Wal-Mart Stores, 6.55%,
08/10/04 7,000,000 6,884
Wal-Mart Stores, 6.875%,
08/10/09 1,800,000 1,752
---------
TOTAL 9,617
---------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
BONDS (96.2%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
MOTION PICTURE (0.3%)
News America Holdings Inc.,
8.25%, 8/10/18 1,000,000 $ 1,002
---------
PUBLISHING (2.0%)
Times Mirror Co, 7.45%,
10/15/09 5,850,000 5,752
---------
TELECOMMUNICATIONS (4.0%)
AT & T Corp., 5.625%, 3/15/04 4,000,000 3,792
AT & T Corp., 6.5%, 09/15/02 4,000,000 3,954
New England Telephone and
Telegraph, 5.875%, 04/15/09 4,000,000 3,572
---------
TOTAL 11,318
---------
TEXTILES (0.3%)
++Polysindo International
Finance, 11.375%, 6/15/06 4,200,000 756
---------
TOBACCO (0.2%)
Philip Morris Companies,
9.25%, 2/15/00 500,000 501
---------
TOTAL CORPORATE BONDS 74,164
---------
GOVERNMENT BONDS AND AGENCY BONDS (39.3%)
FEDERAL GOVERNMENT AND AGENCIES (39.3%)
Federal Home Loan Bank, 5.54%,
1/8/09 3,700,000 3,275
Federal Home Loan Mortgage
Corporation, 7.5%, 9/29/01 7,255,114 7,193
Federal National Mortgage
Assoc., 5.97%, 10/1/08 3,992,760 3,610
Federal National Mortgage
Assoc., 6.22%, 2/01/06 1,893,865 1,802
Federal National Mortgage
Assoc., 6.24%, 1/1/06 5,338,515 5,090
Federal National Mortgage
Assoc., 6.265%, 10/1/08 2,961,512 2,770
Federal National Mortgage
Assoc., 6.32%, 2/1/06 3,839,343 3,672
Federal National Mortgage
Assoc., 6.360%, 4/1/08 3,733,406 3,524
Federal National Mortgage
Assoc., 6.390%, 4/1/08 1,436,724 1,360
Federal National Mortgage
Assoc., 6.500%, 09/25/05 2,139,521 2,088
Federal National Mortgage
Assoc., 6.750%, 04/25/18 2,308,790 2,234
Federal National Mortgage
Assoc., 6.750%, 12/25/23 3,500,000 3,341
Federal National Mortgage
Assoc., 6.960%, 10/01/07 3,235,660 3,162
Federal National Mortgage
Assoc., 7.0%, 6/1/03 245,399 245
</TABLE>
51 Select Bond Portfolio
<PAGE> 60
<TABLE>
<CAPTION>
MARKET
VALUE
BONDS (96.2%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
FEDERAL GOVERNMENT AND AGENCIES continued
Federal National Mortgage
Assoc., 7.360%, 4/1/11 3,290,209 $ 3,282
Federal National Mortgage
Assoc., 8.400%, 02/25/09 2,500,000 2,582
Federal National Mortgage
Assoc., 10%, 10/1/17 50,235 53
Federal National Mortgage
Assoc., 11.000%, 12/01/12 58,278 63
Federal National Mortgage
Assoc., 11.000%, 09/01/17 906,960 992
Federal National Mortgage
Assoc., 11.000%, 12/01/17 295,391 320
Federal National Mortgage
Assoc., 11.000%, 02/01/18 321,481 348
Federal National Mortgage
Assoc., 11.500%, 04/01/18 376,535 414
Federal National Mortgage
Assoc., 12.000%, 09/01/12 888,346 984
Federal National Mortgage
Assoc., 12.000%, 12/01/12 170,623 189
Federal National Mortgage
Assoc., 12.000%, 09/01/17 278,552 310
Federal National Mortgage
Assoc., 12.000%, 10/01/17 289,503 322
Federal National Mortgage
Assoc., 12.000%, 12/01/17 270,152 301
Federal National Mortgage
Assoc., 12.000%, 02/01/18 290,481 323
Federal National Mortgage
Assoc., 12.25%, 1/1/18 212,903 237
Federal National Mortgage
Assoc., 12.500%, 04/01/18 167,464 188
Federal National Mortgage
Assoc., 13.000%, 11/01/12 118,633 133
Federal National Mortgage
Assoc., 13.000%, 11/01/17 273,853 311
Federal National Mortgage
Assoc., 13.000%, 12/01/17 184,544 209
Federal National Mortgage
Assoc., 13.000%, 02/01/18 404,240 460
Federal National Mortgage
Assoc., 14.000%, 12/01/17 106,657 125
Government National Mortgage
Assoc., 7.0%, 05/15/23 292,444 285
Government National Mortgage
Assoc., 7.5%, 04/15/22 228,057 227
Government National Mortgage
Assoc., 7.5%, 10/15/23 618,833 616
Government National Mortgage
Assoc., 7.5%, 10/15/25 38,128 38
Government National Mortgage
Assoc., 7.5%, 11/15/25 12,397 12
Government National Mortgage
Assoc., 7.5%, 05/15/26 12,081 12
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
BONDS (96.2%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
FEDERAL GOVERNMENT AND AGENCIES continued
Government National Mortgage
Assoc., 7.5%, 01/15/27 350,302 $ 347
Government National Mortgage
Assoc., 7.5%, 02/15/27 448,775 444
Government National Mortgage
Assoc., 7.5%, 03/15/27 47,109 47
Government National Mortgage
Assoc., 7.5%, 04/15/27 93,557 93
Government National Mortgage
Assoc., 7.5%, 08/15/27 11,987 12
Government National Mortgage
Assoc., 7.5%, 06/15/28 418,831 415
Government National Mortgage
Assoc., 8.0%, 01/15/26 360,504 365
Government National Mortgage
Assoc., 8.0%, 02/15/26 447,270 453
Government National Mortgage
Assoc., 8.0%, 08/15/26 530,571 537
Government National Mortgage
Assoc., 8.0%, 09/15/26 259,685 263
Government National Mortgage
Assoc., 8.0%, 12/15/26 139,918 142
Government National Mortgage
Assoc., 8.0%, 01/15/27 359,670 364
Government National Mortgage
Assoc., 8.0%, 03/15/27 411,734 416
Government National Mortgage
Assoc., 8.0%, 04/15/27 820,402 830
Government National Mortgage
Assoc., 8.0%, 06/15/27 373,942 378
Government National Mortgage
Assoc., 8.0%, 07/15/27 410,166 415
Government National Mortgage
Assoc., 8.0%, 08/15/27 327,861 332
Government National Mortgage
Assoc., 8.0%, 09/15/27 316,162 320
Government National Mortgage
Assoc., 8.5%, 09/15/21 61,689 64
Government National Mortgage
Assoc., 8.5%, 03/15/23 2,379 2
Government National Mortgage
Assoc., 8.5%, 06/15/23 6,459 7
Government National Mortgage
Assoc., 8.5%, 06/15/24 104,425 108
Government National Mortgage
Assoc., 8.5%, 07/15/24 50,798 52
Government National Mortgage
Assoc., 8.5%, 09/15/24 1,458 2
Government National Mortgage
Assoc., 8.5%, 11/15/24 429,922 443
Government National Mortgage
Assoc., 8.5%, 02/15/25 46,545 47
Government National Mortgage
Assoc., 11.0%, 01/15/18 4,101,497 4,516
U.S. Treasury, 4.0%, 10/31/00 1,350,000 1,328
</TABLE>
Select Bond Portfolio 52
<PAGE> 61
<TABLE>
<CAPTION>
MARKET
VALUE
BONDS (96.2%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
FEDERAL GOVERNMENT AND AGENCIES continued
U.S. Treasury, 5.0%, 02/28/01 4,000,000 3,950
U.S. Treasury, 5.25%, 02/15/29 1,000,000 827
U.S. Treasury, 5.5%, 8/15/28 888,000 758
U.S. Treasury, 5.875%,
11/15/04 3,000,000 2,942
U.S. Treasury, 6.0%, 08/15/09 23,750,000 23,008
U.S. Treasury, 6.125%,
11/15/27 1,030,000 958
U.S. Treasury, 6.375%,
08/15/27 3,000,000 2,880
U.S. Treasury, 7.25%, 05/15/16 775,000 810
U.S. Treasury Inflation Index
Bond, 3.875%, 04/15/29 5,069,150 4,779
---------
TOTAL GOVERNMENT BONDS 112,699
---------
<CAPTION>
MORTGAGE BACKED AND ASSET BACKED SECURITIES (31.0%)
---------------------------------------------------
AUTO-RELATED (1.4%)
Eaglemark Trust - Class A,
6.75%, 11/15/02 278,647 279
Fleetwood Credit Corporation
Grantor Trust - Class A,
6.4%, 5/15/13 693,819 689
Team Fleet Financing
Corporation - Class A, 6.65%,
12/15/02 (144A) 3,200,000 3,150
---------
TOTAL 4,118
---------
COMMERCIAL MORTGAGES (20.0%)
Asset Securitization
Corporation, Class CS1,
1.257%, 11/13/26 IO 15,839,171 447
Asset Securitization
Corporation, Class CS2,
1.097%, 11/13/26 IO 52,000,000 2,385
Asset Securitization
Corporation, Class PS1,
1.367%, 2/14/41 IO 11,928,429 1,045
Chase Commercial Mortgage
Securities Corp., Class B,
6.6%, 12/12/29 2,000,000 1,891
Chase Commercial Mortgage
Securities Corp., Class A2,
6.6%, 12/12/29 5,000,000 4,751
Chase Commercial Mortgage
Securities Corp., Class B,
7.37%, 6/19/29 1,000,000 983
Commercial Mortgage Acceptance
Corporation, Class B, 6.566%,
12/15/07 2,000,000 1,894
Credit Suisse First Boston
Mortgage Securities Corp.,
Class C1, 7.26%, 6/20/29
(144A) 1,434,668 1,379
Credit Suisse First Boston
Mortgage Securities Corp.,
Class C1, 7.28%, 6/20/29
(144A) 1,500,000 1,449
Criimi Mae Commercial Mortgage
Trust, 7.0%, 12/01/06 3,000,000 2,664
Criimi Mae Commercial Mortgage
Trust, 7.0%, 11/02/11 4,000,000 2,924
</TABLE>
<TABLE>
<S> <C> <C>
<CAPTION>
MARKET
VALUE
BONDS (96.2%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
COMMERCIAL MORTGAGES continued
DLJ Mortgage Acceptance
Corporation, Class S, .3571%,
10/15/17 (144A) IO 103,587,822 $ 2,132
DLJ Mortgage Acceptance
Corporation, Class S, .718%,
2/18/31 IO 119,159,123 4,167
DLJ Mortgage Acceptance
Corporation, 8.100%,
6/18/2004 1,454,592 1,495
DLJ Mortgage Acceptance
Corporation, 8.100%,
6/18/2004 1,000,000 1,024
Kmart CMBS Financing, Inc.,
Class D, 6.7875%, 03/01/07
(144A) 2,000,000 1,989
Kmart CMBS Financing, Inc.,
Class C, 6.3875%, 03/01/07
(144A) 2,500,000 2,487
Kmart CMBS Financing, Inc.,
Class D, 5.81%, 03/01/07
(144A) 2,000,000 1,997
LB Mortgage Trust, 8.396%,
6/2/10 5,348,842 5,371
Malan Mortgage Securities
Trust, Class A3, 7.8%,
8/15/05 (144A) 3,000,000 3,011
Midland Realty Acceptance
Corp., Class AEC, 1.389%,
1/25/29 (144A) IO 13,526,570 763
Mortgage Capital Funding,
Inc., 7.288%, 03/20/07 5,323,000 5,251
Nomura Asset Securities
Corp. - Class A2, 7.014%,
3/17/28 2,800,000 2,495
Red Mountain Funding LLC,
Class F, 7.471%, 1/15/19
(144A) 1,800,000 1,202
The Equitable Life Insurance
Society of the U S, Class C1,
7.52%, 5/15/06 2,000,000 1,973
---------
TOTAL 57,169
---------
CREDIT CARD ASSET BACKED (0.5%)
Iroquois Trust, Class A,
6.752%, 6/25/07 (144A) 1,381,201 1,371
---------
FRANCHISE LOAN RECEIVABLES (2.3%)
EMAC Owner Trust, 1.378%,
1/15/25 (144A) IO 30,155,554 1,967
EMAC Owner Trust - Class A2,
6.38%, 1/15/25 (144A) 3,100,000 2,913
Global Franchise Trust,
6.349%, 8/16/01 1,635,625 1,603
---------
TOTAL 6,483
---------
HOME EQUITY LOAN (0.8%)
Amresco Residential
Securities - Class A2,
6.245%, 04/25/22 2,200,000 2,182
---------
</TABLE>
53 Select Bond Portfolio
<PAGE> 62
<TABLE>
<CAPTION>
MARKET
VALUE
BONDS (96.2%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
MANUFACTURED HOUSING (1.2%)
Mid-State Trust VI, Class A3,
7.54%, 7/1/35 998,067 $ 968
Vanderbilt Mortgage and
Finance, Inc., Class 1A4,
7.19%, 2/7/14 2,500,000 2,485
---------
TOTAL 3,453
---------
OTHER ASSET BACKED (3.5%)
FMAC Loan Receivables Trust -
Class A, 6.2%, 9/15/20 (144A) 1,305,953 1,271
Harley-Davidson Eaglemark,
5.87%, 1/20/2001 1,500,000 1,476
Health Care Receivable Corp.,
6.25%, 2/01/03 1,125,000 1,091
Heilig-Meyers Master Trust -
Class A, 6.125%, 1/20/07
(144A) 3,000,000 2,882
Nations Credit Grantor Trust -
Class A1, 6.35%, 12/15/04 1,474,742 1,461
Newcourt Equipment - Class B,
6.764%, 9/20/04 (144A) 593,936 585
Rural Housing Trust, 6.33%,
4/17/2001 1,228,132 1,212
---------
TOTAL 9,978
---------
RESIDENTIAL MORTGAGES (1.3%)
BCF L L C Mortgage Pass Thru
Certificate, Class B3, 7.75%,
3/25/37 (144A) 3,836,025 1,803
Blackrock Capital Finance,
Class B3, 7.25%, 11/25/28
(144A) 4,334,793 2,037
---------
TOTAL 3,840
---------
TOTAL MORTGAGE BACKED AND
ASSET BACKED SECURITIES 88,594
---------
TOTAL BONDS (COST
$293,821) 275,457
---------
<CAPTION>
MONEY MARKET INVESTMENTS (2.6%)
--------------------------------------------------------
Federal Home Loan Mortgage
Company, 0.047%, 01/14/00 5,800,000 5,790
#Federal Home Loan Mortgage
Company, 5.540%, 01/20/00 1,700,000 1,695
---------
</TABLE>
<TABLE>
<S> <C> <C>
<CAPTION>
MARKET
VALUE
MONEY MARKET INVESTMENTS (000'S)
--------------------------------------------------------
<S> <C> <C>
TOTAL MONEY MARKET INVESTMENTS (COST
$7,485) $ 7,485
---------
TOTAL INVESTMENTS (98.8%)
(COST $301,306)' 282,942
---------
OTHER ASSETS, LESS LIABILITIES (1.2%) 3,551
---------
TOTAL NET ASSETS (100.0%) $ 286,493
---------
</TABLE>
IO Interest Only Security
++Defaulted Security
144A after the name of a security represents a security exempt from registration
under Rule 144A of the Securities Act of 1933. These securities may be resold as
transactions exempt from registration, normally to qualified institutional
buyers.
#Partially held by the custodian in a segregated account as collateral for open
futures positions. Information regarding open futures contracts as of December
31, 1999 is summarized below:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION/
NUMBER OF EXPIRATION (DEPRECIATION)
ISSUERS CONTRACTS DATE (000'S)
- ---------------------------------------------------------------
<S> <C> <C> <C>
Euro Bond Future 31 03/00 $ 13
US Treasury Bond
Futures 100 03/00 (38)
(Total Notional Value
at 12/31/99,
$16,416,250)
</TABLE>
' At December 31, 1999, the aggregate cost of securities for federal income tax
purposes was $301,944 and the net unrealized depreciation of investments based
on that cost was $19,002 which is comprised of $615 aggregate gross unrealized
appreciation and $19,617 aggregate gross unrealized depreciation.
The Accompanying Notes are an Integral Part of the Financial Statements.
Select Bond Portfolio 54
<PAGE> 63
<TABLE>
<CAPTION>
Objective: Portfolio Strategy: Net Assets:
<S> <C> <C> <C>
Maximum current income consistent Achieve stability of capital by investing in $404,283,745
with liquidity and stability of short-term debt securities.
capital
</TABLE>
Money Market Portfolio
The Money Market Portfolio, which invests only in high quality commercial paper
and other short-term debt securities with maturities generally not exceeding one
year, is the least risky of the Portfolios.
Accurate forecasts of interest rate increases by the Federal Reserve enabled the
Money Market Portfolio to perform well during 1999. Maturities have been kept
longer than average since June, as market prices reflected anticipated rate
increases in June, August and November, then lengthened in the correct
expectation that rates would not be raised in December. In the last weeks of the
year, maturities have been
stretched out to January and February dates. These moves were made to take
advantage of the year-end market illiquidity that has resulted from Y2K
concerns. In contrast to the usual December pattern, when corporate issuers
raise cash to show positive balances at year end, in 1999 there was little new
paper because concerns about availability of cash at year end led corporations
to plan earlier for year-end cash needs. At the same time, there was strong
demand for short-term instruments from portfolio managers who needed to maintain
cash reserves for possible redemptions.
AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
ALTHOUGH THE PORTFOLIO SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00
PER SHARE, THERE IS NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE SO IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE
PORTFOLIO.
55 Money Market Portfolio
<PAGE> 64
NORTHWESTERN MUTUAL SERIES FUND, INC.
Schedule of Investments
December 31, 1999
<TABLE>
<CAPTION>
MARKET
VALUE
MONEY MARKET INVESTMENTS (82.3%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
AGRICULTURAL SERVICES (2.2%)
Cargill, Inc., 6.00%, 1/28/00 9,040,000 $ 8,999
---------
AIRCRAFT, GUIDED MISSILES & PARTS (3.9%)
Alliedsignal, Inc., 5.27%,
2/23/00 16,000,000 15,876
---------
AUTOMOBILE REPAIR, SERVICES & PARKING (12.4%)
Daimler-Chrysler NA. Holding,
5.50%, 1/28/00 17,780,000 17,707
Ford Holdings, Inc., 9.25%,
3/01/00 8,425,000 8,480
Ford Motor Credit Co., 5.68%,
1/12/00 8,000,000 7,986
GMAC, 6.625%, 6/08/00 6,000,000 6,024
GMAC, 6.75%, 06/02/00 10,000,000 10,044
---------
TOTAL 50,241
---------
FEDERALLY SPONSORED CREDIT (5.0%)
Federal Home Loan Mtg, 5.14%,
1/14/00 9,140,000 9,123
Federal Home Loan Mtg, 4.74%,
1/14/00 10,970,000 10,951
---------
TOTAL 20,074
---------
FINANCE (17.2%)
Asset Securitization, 6.25%,
1/21/00 15,000,000 14,948
Ciesco LP, 6.03%, 1/31/00 3,000,000 2,985
Ciesco LP, 5.95%, 2/07/00 10,000,000 9,939
CIT Group 6.07%, 2/15/00 7,000,000 6,947
CIT Group, 6.00%, 1/21/00 4,630,000 4,615
CXC Incorporated, 6.07%,
1/28/00 2,500,000 2,489
CXC Incorporated, 6.03%,
1/28/00 10,000,000 9,955
Delaware Funding, 5.87%,
1/28/00 7,500,000 7,467
Delaware Funding, 5.87%,
1/27/00 10,000,000 9,958
---------
TOTAL 69,303
---------
PERSONAL CREDIT INSTITUTIONS (17.0%)
American General Finance,
6.12%, 2/22/00 7,300,000 7,235
General Electric Capital Corp.,
5.32%, 1/26/00 11,600,000 11,557
General Electric Capital Corp.,
5.36%, 01/26/00 4,400,000 4,384
Household Finance Corp. 6.05%,
1/21/00 10,000,000 9,966
New Center Asset Trust, 5.94%,
2/15/00 17,000,000 16,874
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
MONEY MARKET INVESTMENTS (82.3%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
PERSONAL CREDIT INSTITUTIONS continued
Variable Funding Capital Corp.,
5.7%, 2/17/00 4,000,000 $ 3,970
Variable Funding Capital Corp.,
6.7%, 1/12/00 5,000,000 4,990
Variable Funding Capital Corp.,
5.84%, 1/12/00 10,000,000 9,982
---------
TOTAL 68,958
---------
PHARMACEUTICAL PREPARATIONS (3.8%)
American Home Products, 7.7%,
2/15/00 5,450,000 5,467
American Home Products, 5.72%,
1/26/00 10,000,000 9,960
---------
TOTAL 15,427
---------
RETAIL (2.3%)
Sears Roebuck Acceptance, 6.0%,
2/15/00 9,500,000 9,429
---------
SHORT TERM BUSINESS CREDIT (10.3%)
IBM Credit Corporation, 5.75%,
01/28/00 9,625,000 9,584
Quincy Capital Corporation,
5.95%, 1/28/00 4,000,000 3,982
Quincy Capital Corporation,
6.07%, 1/27/00 10,000,000 9,956
Receivables Capital Corp,
6.00%, 1/28/00 15,000,000 14,933
Receivables Capital Corp,
6.07%, 1/26/00 3,190,000 3,176
---------
TOTAL 41,631
---------
TOBACCO PRODUCTS (3.9%)
Philip Morris, 6.15%, 03/15/00 15,500,000 15,523
---------
UTILITY-ELECTRIC (4.3%)
National Rural Utility, 5.8%,
1/25/00 14,985,000 14,927
National Rural Utility, 5.8%,
1/24/00 2,500,000 2,490
---------
TOTAL 17,417
---------
TOTAL MONEY MARKET INVESTMENTS (COST
$332,878) 332,878
---------
</TABLE>
Money Market Portfolio 56
<PAGE> 65
<TABLE>
<CAPTION>
MARKET
VALUE
ASSET-BACKED SECURITIES (17.7%) PAR (000'S)
--------------------------------------------------------
<S> <C> <C>
Fidelity Equipment Lease,
6.132%, 12/15/00 13,798,073 $ 13,798
Orix Credit Alliance, 6.123%,
12/15/00 13,389,780 13,390
Preferred Receivable Funding,
6.12%, 1/20/00 10,400,000 10,366
Preferred Receivable Funding,
6.08%, 1/20/00 7,105,000 7,082
Short Term Repackage Asset
Trust, 6.521%, 4/13/00 15,000,000 15,000
Triple A One Funding, 6.15%,
1/20/00 6,000,000 5,981
Triple A One Funding, 6.20%,
1/14/00 5,727,000 5,714
---------
TOTAL 71,331
---------
TOTAL ASSET-BACKED SECURITIES
'(COST $71,331) 71,331
---------
TOTAL INVESTMENTS (100.0%),
(COST $404,209)' 404,209
---------
OTHER ASSETS, LESS LIABILITIES (0.0%) 75
---------
TOTAL NET ASSETS (100.0%) $ 404,284
---------
</TABLE>
' Also represents cost for federal income tax purposes.
The Accompanying Notes are an Integral Part of the Financial Statements
57 Money Market Portfolio
<PAGE> 66
[PRICEWATERHOUSECOOPERS LLC - LETTERHEAD]
R EPORT OF INDEPENDENT ACCOUNTANTS
To The Shareholders and Board of Directors of
Northwestern Mutual Series Fund, Inc.
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Small Cap Growth Stock
Portfolio, Aggressive Growth Stock Portfolio, International Equity Portfolio,
Index 400 Stock Portfolio, Growth Stock Portfolio, Growth and Income Stock
Portfolio, Index 500 Stock Portfolio, Balanced Portfolio, High Yield Bond
Portfolio, Select Bond Portfolio and Money Market Portfolio (constituting
Northwestern Mutual Series Fund, Inc., hereafter referred to as the "Fund") at
December 31, 1999, the results of each of their operations for the year or
period then ended, the changes in each of their net assets and financial
highlights for the years or periods indicated, in conformity with accounting
principles generally accepted in the United States. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at December
31, 1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
[PRICEWATERHOUSECOOPERS LLC]
Milwaukee, Wisconsin
January 27, 2000
Accountants' Report 58
<PAGE> 67
NORTHWESTERN MUTUAL SERIES FUND, INC.
Statements of Assets and Liabilities
December 31, 1999
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
SMALL CAP AGGRESSIVE INTERNATIONAL INDEX 400 GROWTH GROWTH AND
GROWTH STOCK GROWTH STOCK EQUITY STOCK STOCK INCOME STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at value (1)............... $ 70,364 $1,489,394 $ 769,602 $ 59,282 $ 678,360 $ 662,396
Cash.................................... -- 489 185 168 1,028 1,505
Due from Futures Variation Margin....... 144 494 -- 18 161 --
Due from Sale of Fund Shares............ 1,093 358 273 60 393 68
Due from Sale of Securities............. 7 347 11,577 204 1,879 390
Dividends and Interest Receivable....... 4 92 3,260 32 425 681
---------- ---------- ---------- ---------- ---------- ----------
TOTAL ASSETS.......................... 71,612 1,491,174 784,897 59,764 682,246 665,040
---------- ---------- ---------- ---------- ---------- ----------
LIABILITIES
Due on Purchase of Securities........... -- 3,572 90 -- 5,357 2,095
Due on Redemption of Fund Shares........ -- 1,662 12,139 40 482 1,047
Due to Investment Advisor............... 99 605 423 39 234 311
Accrued Expenses........................ 30 24 75 41 39
Due on Futures Variation Margin......... -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
TOTAL LIABILITIES..................... 129 5,863 12,727 120 6,112 3,488
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS............................ $ 71,483 $1,485,311 $ 772,170 $ 59,644 $ 676,134 $ 661,552
========== ========== ========== ========== ========== ==========
REPRESENTED BY:
Aggregate Paid in Capital (2), (3)...... $ 53,502 $ 672,923 $ 582,268 $ 54,415 $ 433,185 $ 566,133
Undistributed Net Investment Income..... -- -- 16,150 -- 1,365 4,979
Undistributed Accumulated Net Realized
Gain (Loss) on Investments............ 4,081 199,657 41,774 1,247 27,809 26,599
Net Unrealized Appreciation
(Depreciation) of:
Investment Securities................. 13,509 610,322 132,049 3,850 210,900 63,841
Index Futures Contracts............... 391 2,409 -- 132 2,875 --
Foreign Currency Transactions......... -- -- (71) -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Net Assets for Shares Outstanding (2)... $ 71,483 $1,485,311 $ 772,170 $ 59,644 $ 676,134 $ 661,552
========== ========== ========== ========== ========== ==========
Net Asset Value, Offering and Redemption
Price per Share....................... $ 1.79 $ 4.81 $ 1.78 $ 1.11 $ 2.66 $ 1.56
========== ========== ========== ========== ========== ==========
(1) Investments, at cost.................. $ 56,855 $ 879,072 $ 637,553 $ 55,432 $ 467,460 $ 598,555
(2) Shares outstanding.................... 39,849 309,009 433,636 53,567 254,560 423,861
(3) Shares authorized, $.01 par value..... 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
59 Statements of Assets and Liabilities
<PAGE> 68
NORTHWESTERN MUTUAL SERIES FUND, INC.
Statements of Assets and Liabilities
December 31, 1999
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
INDEX 500 HIGH YIELD SELECT MONEY
STOCK BALANCED BOND BOND MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at value (1)................. $2,271,284 $3,538,478 $ 158,745 $ 282,942 $ 404,209
Cash...................................... 32 2,350 250 353
Due from Futures Variation Margin......... 75 247 -- -- --
Due from Sale of Fund Shares.............. 638 158 -- 57 12,979
Due from Sale of Securities............... 24 2,018 9 -- --
Dividends and Interest Receivable......... 2,143 20,687 3,212 3,742 1,100
---------- ---------- ---------- ---------- ----------
TOTAL ASSETS............................ 2,274,196 3,563,938 162,216 287,094 418,293
---------- ---------- ---------- ---------- ----------
LIABILITIES
Due on Purchase of Securities............. -- -- 450 -- 13,091
Due on Redemption of Fund Shares.......... 1,806 5,139 252 344 820
Due to Investment Advisor................. 375 899 90 74 98
Accrued Expenses.......................... 59 -- -- -- --
Due on Futures Variation Margin........... -- -- -- 183 --
---------- ---------- ---------- ---------- ----------
TOTAL LIABILITIES....................... 2,240 6,038 792 601 14,009
---------- ---------- ---------- ---------- ----------
NET ASSETS.............................. $2,271,956 $3,557,900 $ 161,424 $ 286,493 $ 404,284
========== ========== ========== ========== ==========
REPRESENTED BY:
Aggregate Paid in Capital (2), (3)........ $1,141,931 $2,213,979 $ 204,186 $ 292,977 $ 404,284
Undistributed Net Investment Income....... 22,921 114,394 273 19,088 --
Undistributed Accumulated Net Realized
Gain (Loss) on Investments.............. 64,012 161,020 (29,850) (7,183) --
Net Unrealized Appreciation (Depreciation)
of:
Investment Securities................... 1,041,976 1,064,096 (13,185) (18,364) --
Index Futures Contracts................. 1,114 4,411 -- (25) --
Foreign Currency Transactions........... -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Net Assets for Shares Outstanding (2)..... $2,271,956 $3,557,900 $ 161,424 $ 286,493 $ 404,284
========== ========== ========== ========== ==========
Net Asset Value, Offering and Redemption
Price per Share......................... $ 3.89 $ 2.22 $ 0.82 $ 1.13 $ 1.00
========== ========== ========== ========== ==========
(1) Investments, at cost.................... $1,229,308 $2,474,382 $ 171,930 $ 301,306 $ 404,209
(2) Shares outstanding...................... 584,474 1,601,484 196,343 253,258 404,298
(3) Shares authorized, $.01 par value....... 2,000,000 3,000,000 2,000,000 1,000,000 1,000,000
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
Statements of Assets and Liabilities 60
<PAGE> 69
NORTHWESTERN MUTUAL SERIES FUND, INC.
Statements of Operations
For the Year Ended December 31, 1999
(in thousands, except per share data)
<TABLE>
<CAPTION>
SMALL CAP AGGRESSIVE INDEX GROWTH AND
GROWTH GROWTH INTERNATIONAL 400 GROWTH INCOME
STOCK STOCK EQUITY STOCK STOCK STOCK
PORTFOLIO* PORTFOLIO PORTFOLIO PORTFOLIO* PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Income
Interest................................. $ 150 $ 4,580 $ 1,034 $ 297 $ 4,450 $ 488
Dividends(1)............................. 12 1,123 22,138 244 4,493 8,056
------- -------- -------- ------ -------- -------
TOTAL INCOME........................ 162 5,703 23,172 541 8,943 8,544
------- -------- -------- ------ -------- -------
Expenses
Management Fees.......................... 139 5,867 4,600 66 2,323 3,544
Custodian Expenses....................... 20 35 237 26 18 32
Other Expenses........................... 22 16 252 28 25 21
------- -------- -------- ------ -------- -------
TOTAL EXPENSES...................... 181 5,918 5,089 120 2,366 3,597
------- -------- -------- ------ -------- -------
Less Waived Fees:
Paid by Affiliate................... (6) (26) -- (28) (12) (32)
Paid Indirectly..................... (2) (9) -- (2) (6) --
------- -------- -------- ------ -------- -------
TOTAL NET EXPENSES.................. 173 5,883 5,089 90 2,348 3,565
------- -------- -------- ------ -------- -------
Net Investment Income (Loss)............... (11) (180) 18,083 451 6,595 4,979
------- -------- -------- ------ -------- -------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES
Net Realized Gain (Loss) on:
Investment Securities.................... 6,283 200,188 44,438 1,274 23,312 28,648
Index Futures Contracts.................. 166 1,434 -- 305 6,061 --
Foreign Currency Transactions............ -- -- (1,849) -- -- --
------- -------- -------- ------ -------- -------
NET REALIZED GAIN (LOSS) ON
INVESTMENTS....................... 6,449 201,622 42,589 1,579 29,373 28,648
------- -------- -------- ------ -------- -------
Net Change in Unrealized Appreciation
(Depreciation) of:
Investment Securities.................... 13,510 246,491 85,058 3,850 77,761 10,475
Index Futures Contracts.................. 391 1,420 -- 132 1,321 --
Foreign Currency Transactions............ -- -- (105) -- -- --
------- -------- -------- ------ -------- -------
NET CHANGE IN UNREALIZED
APPRECIATION (DEPRECIATION) OF
INVESTMENTS....................... 13,901 247,911 84,953 3,982 79,082 10,475
------- -------- -------- ------ -------- -------
Net Gain (Loss) on Investments............. 20,350 449,533 127,542 5,561 108,455 39,123
------- -------- -------- ------ -------- -------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.................. $20,339 $449,353 $145,625 $6,012 $115,050 $44,102
======= ======== ======== ====== ======== =======
(1) Less Foreign dividend tax.............. $ -- $ -- $ 1,914 $ -- $ 97 $ 70
</TABLE>
* Portfolio commenced operations April 30, 1999.
The Accompanying Notes are an Integral Part of the Financial Statements
61 Statements of Operations
<PAGE> 70
NORTHWESTERN MUTUAL SERIES FUND, INC.
Statements of Operations
For the Year Ended December 31, 1999
(in thousands, except per share data)
<TABLE>
<CAPTION>
INDEX HIGH
500 YIELD SELECT MONEY
STOCK BALANCED BOND BOND MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Income
Interest..................................... $ 1,894 $102,993 $ 17,280 $ 20,188 $17,693
Dividends(1)................................. 25,047 22,191 2,699 -- --
-------- -------- -------- -------- -------
TOTAL INCOME............................ 26,941 125,184 19,979 20,188 17,693
-------- -------- -------- -------- -------
Expenses
Management Fees.............................. 3,960 10,282 835 882 1,001
Custodian Expenses........................... 46 -- 18 -- --
Other Expenses............................... 20 -- 17 -- --
-------- -------- -------- -------- -------
TOTAL EXPENSES.......................... 4,026 10,282 870 882 1,001
-------- -------- -------- -------- -------
Less Waived Fees:
Paid by Affiliate....................... -- -- (17) -- --
Paid Indirectly......................... (6) -- (1) -- --
-------- -------- -------- -------- -------
TOTAL NET EXPENSES...................... 4,020 10,282 852 882 1,001
-------- -------- -------- -------- -------
Net Investment Income (Loss)................... 22,921 114,902 19,127 19,306 16,692
-------- -------- -------- -------- -------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES
Net Realized Gain (Loss) on:
Investment Securities........................ 59,857 147,639 (26,106) (3,481) --
Index Futures Contracts...................... 4,560 34,373 -- 1,137 --
Foreign Currency Transactions................ -- (447) -- (14) --
-------- -------- -------- -------- -------
NET REALIZED GAIN (LOSS) ON
INVESTMENTS........................... 64,417 181,565 (26,106) (2,358) --
-------- -------- -------- -------- -------
Net Change in Unrealized Appreciation
(Depreciation) of:
Investment Securities........................ 293,198 76,719 6,190 (19,854) --
Index Futures Contracts...................... 790 (8,909) -- (22) --
Foreign Currency Transactions................ -- (14) -- (7) --
-------- -------- -------- -------- -------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF INVESTMENTS......... 293,988 67,796 6,190 (19,883) --
-------- -------- -------- -------- -------
Net Gain (Loss) on Investments................. 358,405 249,361 (19,916) (22,241) --
-------- -------- -------- -------- -------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS................................ $381,326 $364,263 $ (789) $ (2,935) $16,692
======== ======== ======== ======== =======
(1) Less Foreign dividend tax.................. $ 249 $ 230 $ -- $ -- $ --
</TABLE>
* Portfolio commenced operations April 30, 1999.
The Accompanying Notes are an Integral Part of the Financial Statements
Statements of Operations 62
<PAGE> 71
NORTHWESTERN MUTUAL SERIES FUND, INC.
Statements of Changes in Net Assets
SMALL CAP GROWTH STOCK PORTFOLIO
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1999*
THROUGH
DECEMBER 31,
1999
- ------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Loss..................................... $ (11)
Net Realized Gain on Investments........................ 6,449
Net Change in Unrealized Appreciation of Investments for
the Period............................................. 13,901
-------
Net Increase in Net Assets Resulting from
Operations........................................... 20,339
-------
Distributions to Shareholders from:
Net Investment Income................................... --
Net Realized Gain on Investments........................ (2,362)
-------
Net Decrease in Net Assets Resulting from
Distributions to Shareholders........................ (2,362)
-------
Fund Share Transactions
Proceeds from Sale of 41,794 Shares..................... 55,379
Proceeds from Shares Issued on Reinvestment of
Distributions Paid (1,007 shares)...................... 2,362
Payments for 2,952 Shares Redeemed...................... (4,235)
-------
Net Increase in Net Assets Resulting from Fund Share
Transactions (39,849 shares)......................... 53,506
-------
Total Increase in Net Assets.............................. 71,483
NET ASSETS
Beginning of Period..................................... --
-------
End of Period (includes undistributed net investment
income of $0).......................................... $71,483
=======
</TABLE>
* Portfolio commenced operations on April 30, 1999
AGGRESSIVE GROWTH STOCK PORTFOLIO
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
- -----------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income (Loss)............................ $ (180) $ 389
Net Realized Gain on Investments........................ 201,622 36,225
Net Change in Unrealized Appreciation of Investments for
the Period............................................. 247,911 43,459
---------- ----------
Net Increase in Net Assets Resulting from
Operations........................................... 449,353 80,073
---------- ----------
Distributions to Shareholders from:
Net Investment Income................................... (389) (389)
Net Realized Gain on Investments........................ (38,180) (39,790)
---------- ----------
Net Decrease in Net Assets Resulting from
Distributions to Shareholders........................ (38,569) (40,179)
---------- ----------
Fund Share Transactions
Proceeds from Sale of 14,536 and 23,019 Shares.......... 53,705 74,489
Proceeds from Shares Issued on Reinvestment of
Distributions Paid (11,023 and 11,431 shares,
respectively).......................................... 38,569 40,180
Payments for 44,946 and 25,793 Shares Redeemed.......... (155,213) (84,165)
---------- ----------
Net Increase (Decrease) in Net Assets Resulting from
Fund Share Transactions ((19,387) and 8,657 shares,
respectively)........................................ (62,939) 30,504
---------- ----------
Total Increase in Net Assets.............................. 347,845 70,398
NET ASSETS
Beginning of Period..................................... 1,137,466 1,067,068
---------- ----------
End of Period (includes undistributed net investment
income of $0 and $390, respectively)................... $1,485,311 $1,137,466
========== ==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
63 Statement of Changes in Net Assets
<PAGE> 72
NORTHWESTERN MUTUAL SERIES FUND, INC.
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
- ----------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income................................... $ 18,083 $ 18,098
Net Realized Gain on Investments........................ 42,589 78,236
Net Unrealized Appreciation(Depreciation) of Investments
for the Period......................................... 84,953 (66,907)
-------- --------
Net Increase in Net Assets Resulting from
Operations........................................... 145,625 29,427
-------- --------
Distributions to Shareholders from:
Net Investment Income................................... (18,221) (16,649)
Net Realized Gain on Investments........................ (78,977) (22,793)
-------- --------
Net Decrease in Net Assets Resulting from
Distributions to Shareholders........................ (97,198) (39,442)
-------- --------
Fund Share Transactions
Proceeds from Sale of 210,725 and 35,076 Shares......... 347,201 60,890
Proceeds from Shares Issued on Reinvestment of Dividends
Paid
(58,943 and 21,530 shares, respectively).............. 97,198 39,442
Payments for 236,223 and 47,205 Shares Redeemed......... (391,762) (79,061)
-------- --------
Net Increase in Net Assets Resulting from Fund Share
Transactions
(33,445 and 9,401 shares, respectively)............ 52,637 21,271
-------- --------
Total Increase in Net Assets.............................. 101,064 11,256
NET ASSETS
Beginning of Period..................................... 671,106 659,850
-------- --------
End of Period (includes undistributed net investment
income of $16,150 and $19,912, respectively)........... $772,170 $671,106
======== ========
</TABLE>
INDEX 400 STOCK PORTFOLIO
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1999*
THROUGH
DECEMBER 31,
1999
- -----------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income................................... $ 451
Net Realized Gain on Investments........................ 1,579
Net Change in Unrealized Appreciation of Investments for
the Period............................................. 3,982
-------
Net Increase in Net Assets Resulting from
Operations........................................... 6,012
-------
Distributions to Shareholders from:
Net Investment Income................................... (473)
Net Realized Gain on Investments........................ (319)
-------
Net Increase in Net Assets Resulting from
Distributions to Shareholders........................ (792)
-------
Fund Share Transactions
Proceeds from Sale of 55,140 Shares..................... 55,323
Proceeds from Shares Issued on Reinvestment of
Distributions Paid (35 shares)......................... 792
Payments for 1,608 Shares Redeemed...................... (1,691)
-------
Net Increase in Net Assets Resulting from Fund Share
Transactions (53,567 shares)......................... 54,424
-------
Total Increase in Net Assets.............................. 59,644
NET ASSETS
Beginning of Period..................................... --
-------
End of Period (includes undistributed net investment
income of $0).......................................... $59,644
=======
</TABLE>
* Portfolio commenced operations on April 30, 1999
The Accompanying Notes are an Integral Part of the Financial Statements
Statement of Changes in Net Assets 64
<PAGE> 73
NORTHWESTERN MUTUAL SERIES FUND, INC.
GROWTH STOCK PORTFOLIO
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
- ----------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income................................... $ 6,595 $ 3,561
Net Realized Gain on Investments........................ 29,373 11,976
Net Change in Unrealized Appreciation of Investments for
the Period............................................. 79,082 62,197
-------- --------
Net Increase in Net Assets Resulting from
Operations........................................... 115,050 77,734
-------- --------
Distributions to Shareholders from:
Net Investment Income................................... (6,147) (2,645)
Net Realized Gain on Investments........................ (13,531) (4,068)
-------- --------
Net Decrease in Net Assets Resulting from
Distributions to Shareholders........................ (19,678) (6,713)
-------- --------
Fund Share Transactions
Proceeds from Sale of 65,947 and 56,014 Shares.......... 156,519 112,510
Proceeds from Shares Issued on Reinvestment of
Distributions Paid
(8,157 and 3,330 shares, respectively)................ 19,678 6,713
Payments for 7,013 and 6,148 Shares Redeemed............ (16,717) (12,033)
-------- --------
Net Increase in Net Assets Resulting from Fund Share
Transactions
(67,091 and 53,196 shares, respectively)........... 159,480 107,190
-------- --------
Total Increase in Net Assets.............................. 254,852 178,211
NET ASSETS
Beginning of Period..................................... 421,282 243,071
-------- --------
End of Period (includes undistributed net investment
income of $1,365 and $916, respectively)............... $676,134 $421,282
======== ========
</TABLE>
GROWTH AND INCOME STOCK PORTFOLIO
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
- ----------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income................................... $ 4,979 $ 4,096
Net Realized Gain on Investments........................ 28,648 67,556
Net Change in Unrealized Appreciation of Investments for
the Period............................................. 10,475 26,191
-------- --------
Net Increase in Net Assets Resulting from
Operations........................................... 44,102 97,843
-------- --------
Distributions to Shareholders from:
Net Investment Income................................... (164) (3,933)
Net Realized Gain on Investments........................ (69,388) (731)
-------- --------
Net Decrease in Net Assets Resulting from
Distributions to Shareholders........................ (69,552) (4,664)
-------- --------
Fund Share Transactions
Proceeds from Sale of 53,719 and 82,937 Shares.......... 85,448 120,879
Proceeds from Shares Issued on Reinvestment of
Distributions Paid
(43,992 and 3,111 shares, respectively)............... 69,552 4,664
Payments for 25,373 and 14,061 Shares Redeemed.......... (38,968) (19,687)
-------- --------
Net Increase in Net Assets Resulting from Fund Share
Transactions
(72,338 and 71,987 shares, respectively)........... 116,032 105,856
-------- --------
Total Increase in Net Assets.............................. 90,582 199,035
NET ASSETS
Beginning of Period..................................... 570,970 371,935
-------- --------
End of Period (includes undistributed net investment
income of $4,979 and $163, respectively)............... $661,552 $570,970
======== ========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
65 Statement of Changes in Net Assets
<PAGE> 74
NORTHWESTERN MUTUAL SERIES FUND, INC.
INDEX 500 STOCK PORTFOLIO
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
- ----------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income................................... $ 22,921 $ 19,630
Net Realized Gain on Investments........................ 64,417 27,094
Net Change in Unrealized Appreciation of Investments for
the Period............................................. 293,988 308,691
---------- ----------
Net Increase in Net Assets Resulting from
Operations........................................... 381,326 355,415
---------- ----------
Distributions to Shareholders from:
Net Investment Income................................... (19,629) (17,811)
Net Realized Gain on Investments........................ (25,890) (28,519)
---------- ----------
Net Decrease in Net Assets Resulting from
Distributions to Shareholders........................ (45,519) (46,330)
---------- ----------
Fund Share Transactions
Proceeds from Sale of 79,345 and 79,805 Shares.......... 277,173 233,133
Proceeds from Shares Issued on Reinvestment of
Distributions Paid (12,786 and 16,132 shares,
respectively).......................................... 45,519 46,330
Payments for 21,770 and 17,928 Shares Redeemed.......... (77,223) (50,725)
---------- ----------
Net Increase in Net Assets Resulting from Fund Share
Transactions (70,361 and 78,009 shares,
respectively)........................................ 245,469 228,738
---------- ----------
Total Increase in Net Assets.............................. 581,276 537,823
NET ASSETS
Beginning of Period..................................... 1,690,680 1,152,857
---------- ----------
End of Period (includes undistributed net investment
income of $22,921 and $19,630, respectively)........... $2,271,956 $1,690,680
========== ==========
</TABLE>
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
- ----------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income................................... $ 114,902 $ 104,548
Net Realized Gain on Investments........................ 181,565 231,770
Net Change in Unrealized Appreciation of Investments for
the Period............................................. 67,796 187,000
---------- ----------
Net Increase in Net Assets Resulting from
Operations........................................... 364,263 523,318
---------- ----------
Distributions to Shareholders from:
Net Investment Income................................... (104,192) (95,131)
Net Realized Gain on Investments........................ (250,227) (85,841)
---------- ----------
Net Decrease in Net Assets Resulting from
Distributions to Shareholders........................ (354,419) (180,972)
---------- ----------
Fund Share Transactions
Proceeds from Sale of 47,979 and 54,658 Shares.......... 105,834 113,335
Proceeds from Shares Issued on Reinvestment of
Distributions Paid (167,416 and 89,901 shares,
respectively).......................................... 354,419 180,971
Payments for 89,877 and 69,339 Shares Redeemed.......... (194,268) (143,075)
---------- ----------
Net Increase in Net Assets Resulting from Fund Share
Transactions (125,518 and 75,220 shares,
respectively)........................................ 265,985 151,231
---------- ----------
Total Increase in Net Assets.............................. 275,829 493,577
NET ASSETS
Beginning of Period..................................... 3,282,071 2,788,494
---------- ----------
End of Period (includes undistributed net investment
income of $114,394 and $103,557, respectively)......... $3,557,900 $3,282,071
========== ==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
Statement of Changes in Net Assets 66
<PAGE> 75
NORTHWESTERN MUTUAL SERIES FUND, INC.
HIGH YIELD BOND PORTFOLIO
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
- ----------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income................................... $ 19,127 $ 19,029
Net Realized Loss on Investments........................ (26,106) (3,333)
Net Change in Unrealized Appreciation (Depreciation) of
Investments for the Period............................. 6,190 (20,988)
-------- --------
Net Decrease in Net Assets Resulting from
Operations........................................... (789) (5,292)
-------- --------
Distributions to Shareholders from:
Net Investment Income................................... (19,051) (18,974)
Net Realized Gain on Investments........................ -- --
-------- --------
Net Decrease in Net Assets Resulting from
Distributions to Shareholders........................ (19,051) (18,974)
-------- --------
Fund Share Transactions
Proceeds from Sale of 14,760 and 60,216 Shares.......... 11,697 65,439
Proceeds from Shares Issued on Reinvestment of
Distributions Paid
(21,045 and 20,380 shares, respectively).............. 19,052 18,974
Payments for 36,981 and 26,994 Shares Redeemed.......... (34,267) (28,403)
-------- --------
Net Increase (Decrease) in Net Assets Resulting from
Fund Share Transactions
((1,176) and 53,602 shares, respectively).......... (3,518) 56,010
-------- --------
Total Increase (Decrease) in Net Assets................... (23,358) 31,744
NET ASSETS
Beginning of Period..................................... 184,782 153,038
-------- --------
End of Period (includes undistributed net investment
income of
$273 and $55, respectively)........................... $161,424 $184,782
======== ========
</TABLE>
SELECT BOND PORTFOLIO
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
- ----------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income................................... $ 19,306 $ 18,143
Net Realized Gain/(Loss) on Investments................. (2,358) 2,546
Net Change in Unrealized Depreciation of Investments for
the Period............................................. (19,883) (2,027)
-------- --------
Net Increase (Decrease) in Net Assets Resulting from
Operations........................................... (2,935) 18,662
-------- --------
Distributions to Shareholders from:
Net Investment Income................................... (17,828) (15,746)
Net Realized Gain on Investments........................ (7,228) (2,700)
-------- --------
Net Decrease in Net Assets Resulting from
Distributions to Shareholders........................ (25,056) (18,446)
-------- --------
Fund Share Transactions
Proceeds from Sale of 23,659 and 45,867 Shares.......... 27,875 56,278
Proceeds from Shares Issued on Reinvestment of
Distributions Paid
(22,018 and 15,606 shares, respectively).............. 25,056 18,446
Payments for 31,015 and 17,649 Shares Redeemed.......... (36,481) (21,741)
-------- --------
Net Increase in Net Assets Resulting from Fund Share
Transactions
(14,662 and 43,824 shares, respectively)........... 16,450 52,983
-------- --------
Total Increase (Decrease) in Net Assets................... (11,541) 53,199
NET ASSETS
Beginning of Period..................................... 298,034 244,835
-------- --------
End of Period (includes undistributed net investment
income of $19,088
and $17,466, respectively)............................ $286,493 $298,034
======== ========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
67 Statement of Changes in Net Assets
<PAGE> 76
NORTHWESTERN MUTUAL SERIES FUND, INC.
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
- ----------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net Investment Income................................... $ 16,692 $ 12,077
--------- ---------
Net Increase in Net Assets Resulting from
Operations........................................... 16,692 12,077
--------- ---------
Distributions to Shareholders from:
Net Investment Income................................... (16,692) (12,077)
--------- ---------
Net Decrease in Net Assets Resulting from
Distributions to Shareholders........................ (16,692) (12,077)
--------- ---------
Fund Share Transactions
Proceeds from Sale of 543,084 and 222,296 Shares........ 543,082 222,308
Proceeds from Shares Issued on Reinvestment of
Distributions Paid (16,692 and 12,077 shares,
respectively)......................................... 16,692 12,077
Payments for 446,954 and 137,391 Shares Redeemed........ (446,954) (137,391)
--------- ---------
Net Increase in Net Assets Resulting from Fund Share
Transactions (112,822 and 96,982 shares,
respectively)........................................ 112,820 96,994
--------- ---------
Total Increase in Net Assets................................ 112,820 96,994
NET ASSETS
Beginning of Period..................................... 291,464 194,470
--------- ---------
End of Period (includes no undistributed net investment
income)................................................ $ 404,284 $ 291,464
========= =========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
Statement of Changes in Net Assets 68
<PAGE> 77
NORTHWESTERN MUTUAL SERIES FUND, INC.
Financial Highlights
SMALL CAP GROWTH STOCK PORTFOLIO
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1999*
THROUGH
DECEMBER 31,
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) 1999
- -----------------------------------------------------------------------------
<S> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period........................ $ 1.00
Income from Investment Operations:
Net Investment Loss..................................... (0.00)
Net Realized and Unrealized Gains on Investments........ 0.85
-------
Total from Investment Operations...................... 0.85
-------
Less Distributions:
Distributions from Net Investment Income................ --
Distributions from Realized Gains on Investments........ (0.06)
-------
Total Distributions................................... (0.06)
-------
Net Asset Value, End of Period.............................. $ 1.79
=======
Total Return+............................................... 86.09%++
=======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands).................... $71,483
=======
Ratio of Gross Expenses to Average Net Assets............... 1.03%**
=======
Ratio of Net Expenses to Average Net Assets................. 1.00%**
=======
Ratio of Net Investment Loss to Average Net Assets.......... (0.07)%**
=======
Portfolio Turnover Rate..................................... 70.72%
=======
</TABLE>
AGGRESSIVE GROWTH STOCK PORTFOLIO
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period........................ $ 3.46 $ 3.34 $ 3.15 $ 2.77 $ 2.00
Income from Investment Operations:
Net Investment Income................................... -- -- -- -- --
Net Realized and Unrealized Gains on Investments........ 1.48 0.24 0.39 0.49 0.78
---------- ---------- ---------- -------- --------
Total from Investment Operations...................... 1.48 0.24 0.39 0.49 0.78
---------- ---------- ---------- -------- --------
Less Distributions:
Distributions from Net Investment Income................ -- -- -- -- --
Distributions from Realized Gains on Investments........ (0.13) (0.12) (0.20) (0.11) (0.01)
---------- ---------- ---------- -------- --------
Total Distributions................................... (0.13) (0.12) (0.20) (0.11) (0.01)
---------- ---------- ---------- -------- --------
Net Asset Value, End of Period.............................. $ 4.81 $ 3.46 $ 3.34 $ 3.15 $ 2.77
========== ========== ========== ======== ========
Total Return+............................................... 43.78% 7.56% 13.86% 17.70% 39.29%
========== ========== ========== ======== ========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands).................... $1,485,311 $1,137,466 $1,067,068 $871,926 $577,014
========== ========== ========== ======== ========
Ratio of Expenses to Average Net Assets..................... 0.51% 0.52% 0.53% 0.54% 0.56%
========== ========== ========== ======== ========
Ratio of Net Investment Income/(Loss) to Average Net
Assets.................................................... (0.02%) 0.04% 0.06% (0.03%) 0.13%
========== ========== ========== ======== ========
Portfolio Turnover Rate..................................... 68.64% 50.43% 57.27% 47.25% 37.84%
========== ========== ========== ======== ========
</TABLE>
* Portfolio commenced operations April 30, 1999.
** Computed on an annualized basis.
+ Total Return includes deductions for management and other fund expenses;
excludes deductions for sales loads and account fees.
++ Reflects total return for the period; not annualized.
The Accompanying Notes are an Integral Part of the Financial Statements
69 Financial Highlights
<PAGE> 78
NORTHWESTERN MUTUAL SERIES FUND, INC.
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period........................ $ 1.68 $ 1.69 $ 1.56 $ 1.35 $ 1.19
Income from Investment Operations:
Net Investment Income................................... 0.03 0.05 0.04 0.04 0.04
Net Realized and Unrealized Gains on Investments........ 0.33 0.04 0.15 0.24 0.13
-------- -------- -------- -------- --------
Total from Investment Operations...................... 0.36 0.09 0.19 0.28 0.17
-------- -------- -------- -------- --------
Less Distributions:
Distributions from Net Investment Income................ (0.05) (0.04) (0.04) (0.03) --
Distributions from Realized Gains on Investments........ (0.21) (0.06) (0.02) (0.04) (0.01)
-------- -------- -------- -------- --------
Total Distributions................................... (0.26) (0.10) (0.06) (0.07) (0.01)
-------- -------- -------- -------- --------
Net Asset Value, End of Period.............................. $ 1.78 $ 1.68 $ 1.69 $ 1.56 $ 1.35
======== ======== ======== ======== ========
Total Return+............................................... 22.88% 4.82% 12.28% 21.01% 14.57%
======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands).................... $772,170 $671,106 $659,850 $505,189 $342,127
======== ======== ======== ======== ========
Ratio of Expenses to Average Net Assets..................... 0.74% 0.76% 0.77% 0.81% 0.85%
======== ======== ======== ======== ========
Ratio of Net Investment Income to Average Net Assets........ 2.62% 3.38% 2.75% 3.02% 2.68%
======== ======== ======== ======== ========
Portfolio Turnover Rate..................................... 38.37% 30.41% 16.74% 17.07% 26.71%
======== ======== ======== ======== ========
</TABLE>
INDEX 400 STOCK PORTFOLIO
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 30, 1999*
THROUGH
DECEMBER 31,
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) 1999
- ----------------------------------------------------------------------------
<S> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period........................ $ 1.00
Income for Investment Operations:
Net Investment Income................................... 0.01
Net Realized and Unrealized Gains on Investments........ 0.12
-------
Total from Investment Operations...................... 0.13
-------
Less Distributions:
Distributions from Net Investment Income................ (0.01)
Distributions from Realized Gains on Investments........ (0.01)
-------
Total Distributions................................... (0.02)
-------
Net Asset Value, End of Period.............................. $ 1.11
=======
Total Return+............................................... 12.83%++
=======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands).................... $59,644
=======
Ratio of Gross Expenses to Average Net Assets............... 0.46%**
=======
Ratio of Net Expenses to Average Net Assets................. 0.35%**
=======
Ratio of Net Investment Income to Average Net Assets........ 1.69%**
=======
Portfolio Turnover Rate..................................... 26.51%
=======
</TABLE>
* Portfolio commenced operations on April 30, 1999
** Computed on an annualized basis.
+ Total Return includes deductions for management and other fund expenses;
excludes deductions for sales loads and account fees.
++ Reflects total return for the period; not annualized.
The Accompanying Notes are an Integral Part of the Financial Statements
Financial Highlights 70
<PAGE> 79
NORTHWESTERN MUTUAL SERIES FUND, INC.
GROWTH STOCK PORTFOLIO
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period........................ $ 2.25 $ 1.81 $ 1.46 $ 1.26 $ 1.00
Income from Investment Operations:
Net Investment Income................................... 0.03 0.02 0.02 0.02 0.02
Net Realized and Unrealized Gains on Investments........ 0.47 0.46 0.42 0.25 0.28
-------- -------- -------- -------- -------
Total from Investment Operations...................... 0.50 0.48 0.44 0.27 0.30
-------- -------- -------- -------- -------
Less Distributions:
Distributions from Net Investment Income................ (0.03) (0.02) (0.02) (0.02) (0.02)
Distributions from Realized Gains on Investments........ (0.06) (0.02) (0.07) (0.05) (0.02)
-------- -------- -------- -------- -------
Total Distributions................................... (0.09) (0.04) (0.09) (0.07) (0.04)
-------- -------- -------- -------- -------
Net Asset Value, End of Period.............................. $ 2.66 $ 2.25 $ 1.81 $ 1.46 $ 1.26
======== ======== ======== ======== =======
Total Return+............................................... 22.50% 26.69% 29.85% 20.91% 30.82%
======== ======== ======== ======== =======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands).................... $676,134 $421,282 $243,071 $170,482 $85,557
======== ======== ======== ======== =======
Ratio of Expenses to Average Net Assets..................... 0.43% 0.46% 0.49% 0.57% 0.61%
======== ======== ======== ======== =======
Ratio of Net Investment Income to Average Net Assets........ 1.22% 1.10% 1.24% 1.41% 1.77%
======== ======== ======== ======== =======
Portfolio Turnover Rate..................................... 27.26% 21.64% 33.20% 37.61% 46.83%
======== ======== ======== ======== =======
</TABLE>
GROWTH AND INCOME STOCK PORTFOLIO
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period........................ $ 1.62 $ 1.33 $ 1.32 $ 1.21 $ 0.98
Income from Investment Operations:
Net Investment Income................................... 0.01 0.01 0.01 0.02 0.02
Net Realized and Unrealized Gains on Investments........ 0.12 0.29 0.37 0.23 0.29
-------- -------- -------- -------- --------
Total from Investment Operations...................... 0.13 0.30 0.38 0.25 0.31
-------- -------- -------- -------- --------
Less Distributions:
Distributions from Net Investment Income................ (0.00) (0.01) (0.01) (0.02) (0.02)
Distributions from Realized Gains on Investments........ (0.19) (0.00) (0.36) (0.12) (0.06)
-------- -------- -------- -------- --------
Total Distributions................................... (0.19) (0.01) (0.37) (0.14) (0.08)
-------- -------- -------- -------- --------
Net Asset Value, End of Period.............................. $ 1.56 $ 1.62 $ 1.33 $ 1.32 $ 1.21
======== ======== ======== ======== ========
Total Return+............................................... 7.47% 23.14% 30.03% 19.97% 31.12%
======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands).................... $661,552 $570,970 $371,935 $234,184 $136,923
======== ======== ======== ======== ========
Ratio of Expenses to Average Net Assets..................... 0.57% 0.58% 0.60% 0.62% 0.69%
======== ======== ======== ======== ========
Ratio of Net Investment Income to Average Net Assets........ 0.80% 1.00% 1.04% 1.44% 1.68%
======== ======== ======== ======== ========
Portfolio Turnover Rate..................................... 106.93% 160.40% 144.52% 93.92% 80.00%
======== ======== ======== ======== ========
</TABLE>
+ Total Return includes deductions for management and other fund expenses;
excludes deductions for sales loads and account fee.
The Accompanying Notes are an Integral Part of the Financial Statements
71 Financial Highlights
<PAGE> 80
NORTHWESTERN MUTUAL SERIES FUND, INC.
INDEX 500 STOCK PORTFOLIO
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period........................ $ 3.29 $ 2.64 $ 2.06 $ 1.72 $ 1.27
Income from Investment Operations:
Net Investment Income................................... 0.04 0.04 0.04 0.04 0.04
Net Realized and Unrealized Gain on Investments......... 0.64 0.71 0.62 0.35 0.42
---------- ---------- ---------- -------- --------
Total from Investment Operations...................... 0.68 0.75 0.66 0.39 0.46
---------- ---------- ---------- -------- --------
Less Distributions:
Distributions from Net Investment Income................ (0.03) (0.04) (0.04) (0.02) (0.01)
Distributions from Realized Gains on Investments........ (0.05) (0.06) (0.04) (0.03) --
---------- ---------- ---------- -------- --------
Total Distributions................................... (0.08) (0.10) (0.08) (0.05) (0.01)
---------- ---------- ---------- -------- --------
Net Asset Value, End of Period.............................. $ 3.89 $ 3.29 $ 2.64 $ 2.06 $ 1.72
========== ========== ========== ======== ========
Total Return+............................................... 20.91% 28.72% 33.20% 22.75% 37.25%
========== ========== ========== ======== ========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands).................... $2,271,956 $1,690,680 $1,152,857 $740,066 $495,133
========== ========== ========== ======== ========
Ratio of Expenses to Average Net Assets..................... 0.20% 0.21% 0.21% 0.21% 0.21%
========== ========== ========== ======== ========
Ratio of Net Investment Income to Average Net Assets........ 1.16% 1.40% 1.86% 2.27% 2.51%
========== ========== ========== ======== ========
Portfolio Turnover Rate..................................... 5.65% 3.03% 3.15% 3.45% 3.19%
========== ========== ========== ======== ========
</TABLE>
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period........................ $ 2.22 $ 1.99 $ 1.72 $ 1.60 $ 1.31
Income from Investment Operations:
Net Investment Income................................... 0.07 0.07 0.07 0.06 0.07
Net Realized and Unrealized Gain on Investments......... 0.17 0.29 0.28 0.15 0.27
---------- ---------- ---------- ---------- ----------
Total from Investment Operations...................... 0.24 0.36 0.35 0.21 0.34
---------- ---------- ---------- ---------- ----------
Less Distributions:
Distributions from Net Investment Income................ (0.07) (0.07) (0.06) (0.06) (0.04)
Distributions from Realized Gains on Investments........ (0.17) (0.06) (0.02) (0.03) (0.01)
---------- ---------- ---------- ---------- ----------
Total Distributions................................... (0.24) (0.13) (0.08) (0.09) (0.05)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period.............................. $ 2.22 $ 2.22 $ 1.99 $ 1.72 $ 1.60
========== ========== ========== ========== ==========
Total Return+............................................... 11.18% 18.88% 21.52% 13.45% 26.39%
========== ========== ========== ========== ==========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands).................... $3,557,900 $3,282,071 $2,788,494 $2,326,234 $2,083,289
========== ========== ========== ========== ==========
Ratio of Expenses to Average Net Assets..................... 0.30% 0.30% 0.30% 0.30% 0.30%
========== ========== ========== ========== ==========
Ratio of Net Investment Income to Average Net Assets........ 3.36% 3.48% 3.70% 3.95% 4.40%
========== ========== ========== ========== ==========
Portfolio Turnover Rate..................................... 27.16% 44.18% 29.94% 67.66% 37.28%
========== ========== ========== ========== ==========
</TABLE>
+ Total Return includes deductions for management and other fund expenses;
excludes deductions for sales loads and account fees.
The Accompanying Notes are an Integral Part of the Financial Statements
Financial Highlights 72
<PAGE> 81
NORTHWESTERN MUTUAL SERIES FUND, INC.
HIGH YIELD BOND PORTFOLIO
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period........................ $ 0.94 $ 1.06 $ 1.10 $ 1.03 $ 0.97
Income from Investment Operations:
Net Investment Income................................... 0.11 0.10 0.11 0.09 0.10
Net Realized and Unrealized Gains (Losses) on
Investments............................................ (0.12) (0.12) 0.06 0.10 0.07
-------- -------- -------- ------- -------
Total from Investment Operations...................... (0.01) (0.02) 0.17 0.19 0.17
-------- -------- -------- ------- -------
Less Distributions:
Distributions from Net Investment Income................ (0.11) (0.10) (0.14) (0.09) (0.10)
Distributions from Realized Gains on Investments........ -- -- (0.07) (0.03) (0.01)
-------- -------- -------- ------- -------
Total Distributions................................... (0.11) (0.10) (0.21) (0.12) (0.11)
-------- -------- -------- ------- -------
Net Asset Value, End of Period.............................. $ 0.82 $ 0.94 $ 1.06 $ 1.10 $ 1.03
======== ======== ======== ======= =======
Total Return+............................................... (0.44%) (1.84%) 15.85% 19.77% 16.78%
======== ======== ======== ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands).................... $161,424 $184,782 $153,038 $93,878 $55,974
======== ======== ======== ======= =======
Ratio of Expenses to Average Net Assets..................... 0.50% 0.50% 0.55% 0.60% 0.65%
======== ======== ======== ======= =======
Ratio of Net Investment Income to Average Net Assets........ 11.15% 10.85% 9.95% 9.54% 9.90%
======== ======== ======== ======= =======
Portfolio Turnover Rate..................................... 139.87% 153.71% 129.49% 143.91% 116.57%
======== ======== ======== ======= =======
</TABLE>
SELECT BOND PORTFOLIO
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period........................ $ 1.25 $ 1.26 $ 1.22 $ 1.23 $ 1.06
Income for Investment Operations:
Net Investment Income................................... 0.08 0.08 0.08 0.07 0.07
Net Realized and Unrealized Gain (Loss) on
Investments........................................... (0.09) 0.00 0.04 (0.04) 0.13
-------- -------- -------- -------- --------
Total from Investment Operations...................... (0.01) 0.08 0.12 0.03 0.20
-------- -------- -------- -------- --------
Less Distributions:
Distributions from Net Investment Income................ (0.08) (0.08) (0.08) (0.04) (0.03)
Distributions from Realized Gains on Investments........ (0.03) (0.01) -- -- --
-------- -------- -------- -------- --------
Total Distributions................................... (0.11) (0.09) (0.08) (0.04) (0.03)
-------- -------- -------- -------- --------
Net Asset Value, End of Period.............................. $ 1.13 $ 1.25 $ 1.26 $ 1.22 $ 1.23
======== ======== ======== ======== ========
Total Return+............................................... (1.00%) 7.07% 9.46% 3.31% 19.10%
======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands).................... $286,493 $298,034 $244,835 $214,333 $198,142
======== ======== ======== ======== ========
Ratio of Net Expenses to Average Net Assets................. 0.30% 0.30% 0.30% 0.30% 0.30%
======== ======== ======== ======== ========
Ratio of Net Investment Income to Average Net Assets........ 6.56% 6.87% 7.03% 6.48% 6.61%
======== ======== ======== ======== ========
Portfolio Turnover Rate..................................... 76.65% 161.79% 184.93% 195.98% 69.06%
======== ======== ======== ======== ========
</TABLE>
+ Total Return includes deductions for management and other fund expenses;
excludes deductions for sales loads and account fee.
The Accompanying Notes are an Integral Part of the Financial Statements
73 Financial Highlights
<PAGE> 82
NORTHWESTERN MUTUAL SERIES FUND, INC.
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income....................................... 0.05 0.05 0.05 0.05 0.06
Less Distributions from Net Investment Income............... (0.05) (0.05) (0.05) (0.05) (0.06)
-------- -------- -------- -------- --------
Net Asset Value, End of Period.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return+............................................... 5.10% 5.43% 5.47% 5.29% 5.82%
======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (in thousands).................... $404,284 $291,464 $194,470 $176,298 $132,572
======== ======== ======== ======== ========
Ratio of Expenses to Average Net Assets..................... 0.30% 0.30% 0.30% 0.30% 0.30%
======== ======== ======== ======== ========
Ratio of Net Investment Income to Average Net Assets........ 4.99% 5.26% 5.33% 5.13% 5.61%
======== ======== ======== ======== ========
</TABLE>
+ Total Return includes deductions for management and other fund expenses;
excludes deductions for sales loads and account loss.
The Accompanying Notes are an Integral Part of the Financial Statements.
Financial Highlights 74
<PAGE> 83
NORTHWESTERN MUTUAL SERIES FUND, INC.
Notes to Financial Statements
December 31, 1999
NOTE 1 -- Northwestern Mutual Series Fund, Inc. (the "Series Fund"), is
registered as a diversified open-end investment company under the Investment
Company Act of 1940. The Series Fund consists of the Small Cap Growth Stock
Portfolio, Aggressive Growth Stock Portfolio, International Equity Portfolio,
Index 400 Stock Portfolio, Growth Stock Portfolio, Growth and Income Stock
Portfolio, Index 500 Stock Portfolio, Balanced Portfolio, High Yield Bond
Portfolio, Select Bond Portfolio and the Money Market Portfolio (the
"Portfolios"). Shares are presently offered only to The Northwestern Mutual Life
Insurance Company ("Northwestern Mutual") and its segregated asset accounts.
On April 30, 1999, two new portfolios commenced operations in the Series Fund:
Small Cap Growth Stock Portfolio and Index 400 Stock Portfolio. These two new
portfolios were each organized with 2,000,000,000 authorized shares of Common
Stock. Par value is $.01 per share. Northwestern Mutual purchased 25,010,000
shares of the Index 400 Stock Portfolio at $1.00 per share and 5,010,000 shares
of the Small Cap Growth Stock Portfolio at $1.00 per share.
NOTE 2 -- The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Principal accounting policies are summarized below.
NOTE 3 -- Bonds are valued on the basis of prices furnished by a service which
determines prices for normal institutional size trading units of bonds, without
regard to exchange or over-the-counter prices. When quotations are not readily
available, bonds are valued at fair market value determined by procedures
approved by the Board of Directors. Stocks listed on a national or foreign stock
exchange are valued at the final sale price, or final bid price in absence of a
sale. Stocks not listed on a national or foreign stock exchange are valued at
the closing bid price on the over-the-counter market. Money market investments,
other than in the Money Market Portfolio, with maturities exceeding sixty days
but generally not exceeding one year are valued by marking to market on the
basis of an average of the most recent bid prices or yields. Money market
investments with maturities of sixty days or less and all securities in the
Money Market Portfolio are valued on an amortized cost basis or, if the current
market value differs substantially from the amortized cost, by marking to
market.
NOTE 4 -- Securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollar amounts on the date of valuation.
Purchases and sales of securities and income items denominated in foreign
currencies are translated in U.S. dollar amounts on the respective dates of such
transactions. When the International Equity Portfolio, Balanced Portfolio and
Select Bond Portfolio purchases or sells a foreign security they may enter into
a foreign exchange currency contract to minimize currency risk from the trade
date to the settlement date of such transaction. Such foreign exchange currency
contracts are marked to market daily.
The Portfolios may enter into forward foreign currency contracts to hedge
against exchange rate risk arising from investments in securities denominated in
foreign currencies. Contracts are valued at the contractual forward rate and are
marked to market daily, with the change in market value recorded as an
unrealized gain or loss. When the contracts are closed, a realized gain or loss
is incurred. Risks may arise from changes in market value of the underlying
instruments and from the possible inability of counter parties to meet the terms
of their contracts.
The International Equity Portfolio, Balanced Portfolio and Select Bond Portfolio
do not separately report the results of operations due to changes in foreign
exchange rates on equity investments from the fluctuations arising from changes
in market prices of securities held. Such fluctuations are included with the net
realized and unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade date and the
settlement date on security transactions, changes in foreign exchange rates on
bond investments sold, the differences between the amounts of dividends and
foreign withholding taxes recorded on the portfolio's books, and the U.S. dollar
equivalent of the amounts actually received or paid.
75 Notes to Financial Statements
<PAGE> 84
NOTE 5 -- The Small Cap Growth Stock, Aggressive Growth Stock, Index 400 Stock,
Growth Stock, Index 500 Stock, Balanced and Select Bond Portfolios invest in
futures contracts as an alternative to investing in individual securities. The
Portfolios could be exposed to market risk due to changes in the value of the
underlying securities or due to an illiquid secondary market. Futures contracts
are marked to market daily based upon quoted settlement prices. The Portfolios
receive from or pay to brokers an amount of cash equal to the daily fluctuation
in the value of the contracts. Such receipts or payments, known as the
"variation margin," are recorded by the Portfolios as unrealized gains or
losses. When the contract is closed, the Portfolios record a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
...............................................................................
NOTE 6 -- Interest income and discounts earned are recorded daily on the accrual
basis and dividend income is recorded on the ex-dividend date or as soon as
information from foreign issuers is available. Where applicable, dividends are
recorded net of foreign dividend tax. Discounts and premiums on securities
purchased are amortized over the life of the respective securities when required
for federal income tax purposes using the effective interest method. Securities
transactions are accounted for on trade date. The basis for determining cost on
sale of securities is identified cost. For the year ended December 31, 1999,
transactions in securities other than money market investments were:
<TABLE>
<CAPTION>
U.S. GOVT. TOTAL SECURITY U.S. GOVT.
TOTAL SECURITY SECURITY SALES/ SECURITY SALES/
PORTFOLIOS PURCHASES PURCHASES MATURITIES MATURITIES
- ---------- -------------- ---------- -------------- ---------------
<S> <C> <C> <C> <C>
Small Cap Growth Stock............................ $ 59,239,842 -- $ 18,837,180 --
Aggressive Growth Stock........................... 724,417,673 -- 879,649,835 --
International Equity.............................. 284,421,452 -- 257,192,284 --
Index 400 Stock................................... 60,494,178 -- 9,130,783 --
Growth Stock...................................... 244,899,560 -- 125,466,523 --
Growth and Income Stock........................... 709,907,715 -- 656,669,741 --
Index 500 Stock................................... 319,125,521 -- 109,437,406 --
Balanced.......................................... 1,011,591,271 $683,006,914 786,645,495 $341,321,930
High Yield Bond................................... 225,990,412 -- 234,801,506 --
Select Bond....................................... 251,574,994 140,640,335 213,300,662 102,671,243
</TABLE>
...............................................................................
NOTE 7 -- The Series Fund and its Portfolios are parties to annually renewable
contracts pursuant to which each Portfolio pays a charge for investment
management and administrative services.
Each Portfolio pays a monthly fee for these investment advisory services at an
annual rate based on the average daily net asset values of each Portfolio. For
the Index 500 Stock Portfolio the rate is .20%, for the Index 400 Stock
Portfolio the rate is .25%, and for the Balanced, Select Bond and Money Market
Portfolios the rate is .30%. For the other Portfolios the rate for the
investment advisory fee is graded by the asset size of the Portfolio according
to the following schedule:
<TABLE>
<CAPTION>
FIRST NEXT
$50 $50
PORTFOLIOS MILLION MILLION EXCESS
- ---------- ------- ------- ------
<S> <C> <C> <C>
Small Cap Growth Stock....... .80% .65% .50%
Aggressive Growth Stock...... .80% .65% .50%
International Equity......... .85% .65% .65%
Growth Stock................. .60% .50% .40%
Growth and Income Stock...... .70% .60% .55%
High Yield Bond.............. .60% .50% .40%
</TABLE>
These amounts are paid to Northwestern Mutual Investment Services, LLC. ("NMIS")
a wholly owned subsidiary of Northwestern Mutual, which is the manager and
investment adviser of the Fund. Northwestern Mutual is also a party to the
agreement. Other costs for each Portfolio are paid either by the Portfolios,
Northwestern Mutual, or NMIS, depending upon the applicable agreement in place.
Notes to Financial Statements 76
<PAGE> 85
The Small Cap Growth Stock Portfolio, International Equity Portfolio, Index 400
Stock Portfolio and the Index 500 Stock Portfolio pay their own custodian fees.
In addition, certain Portfolios pay a portion of their custodian fees indirectly
through expense offset arrangements. Custodian fees are reduced for Portfolios
that maintain compensating balances in non-interest bearing accounts. The
Portfolios could have invested the assets used to pay for the custodian fees,
had the assets not been used in the expense offset arrangements. For the year
ended December 31, 1999, the amounts paid through expense offset arrangements
are $2,137 in the Small Cap Growth Stock Portfolio, $9,164 in the Aggressive
Growth Stock Portfolio, $1,888 in the Index 400 Stock Portfolio, $5,740 in the
Growth Stock Portfolio, $377 in the Growth and Income Stock Portfolio, $6,063 in
the Index 500 Stock Portfolio and $1,227 in the High Yield Bond Portfolio.
J. P. Morgan Investment Management, Inc. ("J. P. Morgan") and Templeton
Investment Counsel, Inc. ("Templeton Counsel") have been retained under an
investment sub-advisory agreement to provide investment advice and, in general,
to conduct the management investment program of the Growth and Income Stock
Portfolio and the International Equity Portfolio, respectively. NMIS pays J. P.
Morgan .45% on the first $100 million of the combined net assets for all funds
managed for Northwestern Mutual by J. P. Morgan, .40% on the next $100 million,
.35% on the next $200 million and .30% in excess of $400 million. NMIS pays
Templeton Counsel .50% on the first $100 million of the combined net assets for
all funds managed for Northwestern Mutual by Templeton Counsel and .40% in
excess of $100 million.
NMIS has agreed to waive their management fee for the Small Cap Growth Stock
Portfolio and the Index 400 Stock Portfolio to the extent necessary so that
total operating expenses will not exceed 1.00% and .35%, respectively. For the
period April 30, 1999 to December 31, 1999, NMIS waived $5,919 and $27,990 of
fees for the Small Cap Growth Stock Portfolio and the Index 400 Stock Portfolio,
respectively.
The Small Cap Growth Stock, Aggressive Growth Stock, and Growth Stock Portfolios
paid commissions on Fund transactions to an affiliated broker in the amounts of
$3,180, $29,430, and $1,800, respectively, for the year ended December 31, 1999.
NOTE 8 -- Each Portfolio in the Series Fund has elected to be taxed as a
regulated investment company meeting certain requirements under the Internal
Revenue Code. Since each Portfolio expects to distribute all net investment
income and net realized capital gains, the Portfolios anticipates incurring no
federal income taxes.
Taxable distributions from net investment income and realized capital gains in
the Portfolios differ from book amounts earned during the period due to
differences in the timing of capital recognition and due to the reclassification
of certain gains or losses from capital to income. The differences between cost
amounts for book purposes and tax purposes are due to treatment of deferred
losses.
It is the policy of the Series Fund to reclassify the net effect of permanent
differences between book and taxable income to capital accounts on the
statements of assets and liabilities.
After October 31, 1999, the High Yield Bond Portfolio and the Select Bond
Portfolio had capital losses in the amounts of $2,850,813 and $5,182,726,
respectively. These amounts are deferred and deemed to have occurred in the next
fiscal year. For federal income tax purposes, the High Yield Bond and Select
Bond Portfolios also have a net realized capital loss of $23,977,979 and
$1,399,790, respectively, expiring in 2007. The High Yield Bond Portfolio also
has a net realized capital loss of $2,661,875, which expires in 2006. These
amounts will be carried forward to offset future net realized capital gains.
For federal income tax purposes, net unrealized appreciation (depreciation) on
open regulated futures contracts is required to be treated as realized gains
(losses).
NOTE 9 -- Dividends from net investment income and net realized capital gains
are declared each year for the Small Cap Growth Stock, Aggressive Growth Stock,
International Equity, Index 400 Stock, Growth Stock, Growth and Income Stock,
Index 500 Stock, Balanced, High Yield Bond and Select Bond Portfolios and each
business day for the Money Market Portfolio.
NOTE 10 -- Northwestern Mutual voluntarily reimburses the International Equity
Portfolio for the benefit Northwestern Mutual receives from foreign dividend
taxes charged against the Portfolio. The amount reimbursed represents
approximately 65% of the foreign dividend tax withheld from the Portfolio.
Reimbursements are recorded when foreign dividend taxes are accrued. This
voluntary reimbursement for the year ended December 31, 1999 was $1,243,988.
77 Notes to Financial Statements
<PAGE> 86
[PRICEWATERHOUSECOOPERS LLC - LETTERHEAD]
Report of Independent Accountants
To The Northwestern Mutual Life Insurance Company and
Contract Owners of NML Variable Annuity Account B
In our opinion, the accompanying combined statement of assets and liabilities
and the related combined and separate statements of operations and of changes in
equity present fairly, in all material respects, the financial position of NML
Variable Annuity Account B and the Small Cap Growth Stock Division, Aggressive
Growth Stock Division, International Equity Division, Index 400 Stock Division,
Growth Stock Division, Growth & Income Stock Division, Index 500 Stock Division,
Balanced Division, High Yield Bond Division, Select Bond Division, Money Market
Division, Russell Multi-Style Equity Division, Russell Aggressive Equity
Division, Russell Non-U.S. Division, Russell Real Estate Securities Division and
Russell Core Bond Division thereof at December 31, 1999, the results of each of
their operations for each of the two years on the period then ended and the
changes in each of their equity for the two years or the period then ended in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of The Northwestern Mutual
Life Insurance Company's management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of
these financial statements in accordance with auditing standards generally
accepted in the United States which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included direct confirmation of the number of shares owned at
December 31, 1999 with Northwestern Mutual Series Fund, Inc. and the Russell
Insurance Funds, provide a reasonable basis for the opinion expressed above.
[PRICEWATERHOUSECOOPERS LLC]
Milwaukee, Wisconsin
January 27, 2000
Accountants' Report 78
<PAGE> 87
NML VARIABLE ANNUITY ACCOUNT B
Statement of Assets and Liabilities
December 31, 1999
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments at Market Value:
Northwestern Mutual Series Fund, Inc.
Small Cap Growth Stock
27,193 shares (cost $37,604)....................... $ 48,783
Aggressive Growth Stock
215,334 shares (cost $555,089)..................... 1,034,844
International Equity
303,030 shares (cost $504,068)..................... 539,533
Index 400 Stock
21,966 shares (cost $22,628)....................... 24,446
Growth Stock
177,511 shares (cost $317,010)..................... 471,358
Growth and Income Stock
308,439 shares (cost $430,942)..................... 481,356
Index 500 Stock
399,680 shares (cost $819,803)..................... 1,553,169
Balanced
1,297,394 shares (cost $1,973,688)................. 2,882,069
High Yield Bond
139,784 shares (cost $147,597)..................... 114,877
Select Bond
204,593 shares (cost $242,359)..................... 231,339
Money Market
288,940 shares (cost $288,940)..................... 288,865
Russell Insurance Funds
Multi-Style Equity
2,914 shares (cost $47,148)........................ 48,928
Aggressive Equity
1,224 shares (cost $15,133)........................ 16,353
Non-U.S.
1,614 shares (cost $20,196)........................ 22,899
Real Estate Securities
757 shares (cost $6,897)........................... 6,666
Core Bond
1,418 shares (cost $14,136)........................ 13,668 $7,779,153
----------
Due from Sale of Fund Shares.............................. 22,988
Due from Northwestern Mutual Life Insurance Company....... 14,544
----------
Total Assets..................................... $7,816,685
==========
LIABILITIES
Due to Participants....................................... $ 10,731
Due to Northwestern Mutual Life Insurance Company......... 22,988
Due on Purchase of Fund Shares............................ 14,544
----------
Total Liabilities................................ 48,263
----------
EQUITY (NOTE 8)
Contracts Issued Prior to December 17, 1981............... 123,366
Contracts Issued After December 16, 1981 and Prior to
March 31, 1995.......................................... 4,739,831
Contracts Issued On or After March 31, 1995:
Front Load Version...................................... 956,368
Back Load Version....................................... 1,948,857
----------
Total Equity..................................... 7,768,422
----------
Total Liabilities and Equity..................... $7,816,685
==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
79 Account B Financial Statements
<PAGE> 88
NML VARIABLE ANNUITY ACCOUNT B
<TABLE>
<CAPTION>
Statement of Operations SMALL CAP
(in thousands) GROWTH STOCK AGGRESSIVE GROWTH
COMBINED DIVISION# STOCK DIVISION
---------------------------- ------------ ----------------------------
EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income............................ $ 529,297 $279,975 $ 1,623 $ 27,399 $29,446
Annuity Rate and Expense Guarantees........ 79,966 67,916 114 9,338 9,236
---------- -------- ------- -------- -------
Net Investment Income (Loss)............... 449,331 212,059 1,509 18,061 20,210
---------- -------- ------- -------- -------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized Gain on Investments............... 206,068 88,924 152 59,354 27,122
Unrealized Appreciation (Depreciation) of
Investments During the Period............ 384,910 521,055 11,180 227,531 650
---------- -------- ------- -------- -------
Net Gain (Loss) on Investments............. 590,978 609,979 11,332 286,885 27,772
---------- -------- ------- -------- -------
Increase (Decrease) in Equity Derived from
Investment Activity...................... $1,040,309 $822,038 $12,841 $304,946 $47,982
========== ======== ======= ======== =======
</TABLE>
# The initial investment in this Division was made on April 30, 1999.
The Accompanying Notes are an Integral Part of the Financial Statements
Account B Financial Statements 80
<PAGE> 89
<TABLE>
<CAPTION>
INDEX 400
STOCK
INTERNATIONAL EQUITY DIVISION DIVISION# GROWTH STOCK DIVISION
----------------------------- ------------ ---------------------------
EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 69,655 $ 29,263 $ 321 $13,945 $ 4,848
5,699 6,000 76 4,263 2,665
-------- -------- ------ ------- -------
63,956 23,263 245 9,682 2,183
-------- -------- ------ ------- -------
78,270 17,380 14 2,979 1,471
(44,084) (24,915) 1,819 64,234 49,578
-------- -------- ------ ------- -------
34,186 (7,535) 1,833 67,213 51,049
-------- -------- ------ ------- -------
$ 98,142 $ 15,728 $2,078 $76,895 $53,232
======== ======== ====== ======= =======
<CAPTION>
GROWTH & INCOME INDEX 500
STOCK DIVISION STOCK DIVISION
--------------------------- ---------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
- --- ---------------------------------------------------------
<S> <C> <C> <C> <C>
$ 51,672 $ 3,489 $ 31,626 $ 32,261
5,158 4,034 15,550 11,266
-------- ------- -------- --------
46,514 (545) 16,076 20,995
-------- ------- -------- --------
5,902 2,454 24,827 15,353
(24,965) 67,034 206,443 198,764
-------- ------- -------- --------
(19,063) 69,488 231,270 214,117
-------- ------- -------- --------
$ 27,451 $68,943 $247,346 $235,112
======== ======= ======== ========
</TABLE>
81 Account B Financial Statements
<PAGE> 90
NML VARIABLE ANNUITY ACCOUNT B
<TABLE>
<CAPTION>
Statement of Operations
(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,
(CONTINUED) 1999 1998 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend Income.................. $284,717 $143,628 $ 13,571 $ 13,983 $ 20,187 $14,579
Annuity Rate and Expense
Guarantees..................... 32,960 29,061 1,319 1,408 2,641 2,437
-------- -------- -------- -------- -------- -------
Net Investment Income (Loss)..... 251,757 114,567 12,252 12,575 17,546 12,142
-------- -------- -------- -------- -------- -------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized Gain (Loss) on
Investments.................... 38,856 24,370 (4,630) 87 294 687
Unrealized Appreciation
(Depreciation) of Investments
During the Period.............. (29,796) 248,726 (9,614) (18,317) (22,857) (465)
-------- -------- -------- -------- -------- -------
Net Gain (Loss) on Investments... 9,060 273,096 (14,244) (18,230) (22,563) 222
-------- -------- -------- -------- -------- -------
Increase (Decrease) in Equity
Derived from Investment
Activity....................... $260,817 $387,663 $ (1,992) $ (5,655) $ (5,017) $12,364
======== ======== ======== ======== ======== =======
</TABLE>
# The initial investments in this Division was made on April 30, 1999.
The Accompanying Notes are an Integral Part of the Financial Statements
Account B Financial Statements 82
<PAGE> 91
<TABLE>
<CAPTION>
RUSSELL RUSSELL RUSSELL RUSSELL RUSSELL
MULTI-STYLE EQUITY AGGRESSIVE EQUITY NON-U.S. REAL ESTATE CORE BOND
MONEY MARKET DIVISION DIVISION# DIVISION# DIVISION # SECURITIES DIVISION# DIVISION #
- ------------------------------- ------------------ ----------------- ------------- -------------------- ------------
EIGHT MONTHS EIGHT MONTHS EIGHT MONTHS EIGHT MONTHS EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1999 1999 1999 1999
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$11,719 $8,478 $1,443 $ 64 $ 604 $ 249 $ 502
2,547 1,809 135 48 60 22 36
------- ------ ------ ------ ------ ----- -----
9,172 6,669 1,308 16 544 227 466
------- ------ ------ ------ ------ ----- -----
-- -- -- (17) 130 (62) (1)
-- -- 1,788 1,221 2,706 (231) (465)
------- ------ ------ ------ ------ ----- -----
-- -- 1,788 1,204 2,836 (293) (466)
------- ------ ------ ------ ------ ----- -----
$ 9,172 $6,669 $3,096 $1,220 $3,380 $ (66) $ --
======= ====== ====== ====== ====== ===== =====
</TABLE>
83 Account B Financial Statements
<PAGE> 92
NML VARIABLE ANNUITY ACCOUNT B
<TABLE>
<CAPTION>
Statement of Changes in Equity SMALL CAP
(in thousands) GROWTH STOCK AGGRESSIVE GROWTH
COMBINED DIVISION# STOCK DIVISION
---------------------------- ------------ ----------------------------
EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS
Net Investment Income...................... $ 449,331 $ 212,059 $ 1,509 $ 18,061 $ 20,210
Net Realized gain (loss)................... 206,068 88,924 152 59,354 27,122
Net Change in unrealized appreciation
(depreciation)........................... 384,910 521,055 11,180 227,531 650
---------- ---------- ------- ---------- ---------
Increase (Decrease) in Equity................ 1,040,309 822,038 12,841 304,946 47,982
---------- ---------- ------- ---------- ---------
EQUITY TRANSACTIONS
Contract Owners' Net Payments.............. 836,316 804,374 5,800 62,382 94,566
Annuity Payments........................... (14,043) (11,449) (3) (673) (737)
Surrenders and Other (net)................. (478,867) (370,626) (366) (58,870) (55,445)
Transfers from Other Divisions or
Sponsor.................................. 1,766,343 812,385 38,489 64,476 57,046
Transfers to Other Divisions or Sponsor.... (1,783,287) (825,382) (7,980) (155,561) (113,076)
---------- ---------- ------- ---------- ---------
Increase (Decrease) in Equity Derived from
Equity Transactions........................ 326,462 409,302 35,940 (88,246) (17,646)
---------- ---------- ------- ---------- ---------
Net Increase (Decrease) in Equity............ 1,366,771 1,231,340 48,781 216,700 30,336
EQUITY
Beginning of Period........................ 6,401,651 5,170,311 -- 817,218 786,882
---------- ---------- ------- ---------- ---------
End of Period.............................. $7,768,422 $6,401,651 $48,781 $1,033,918 $ 817,218
========== ========== ======= ========== =========
</TABLE>
# The initial investment in this Division was made on April 30, 1999.
The Accompanying Notes are an Integral Part of the Financial Statements
Account B Financial Statements 84
<PAGE> 93
<TABLE>
<CAPTION>
INDEX 400
STOCK
INTERNATIONAL EQUITY DIVISION DIVISION# GROWTH STOCK DIVISION
----------------------------- ------------ ---------------------------
EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 63,956 $ 23,263 $ 245 $ 9,682 $ 2,183
78,270 17,380 14 2,979 1,471
(44,084) (24,915) 1,819 64,234 49,578
--------- --------- ------- -------- --------
98,142 15,728 2,078 76,895 53,232
--------- --------- ------- -------- --------
39,987 60,272 7,316 65,324 54,754
(630) (559) (7) (572) (268)
(33,344) (33,875) (323) (23,057) (12,505)
396,413 56,567 19,597 111,147 56,084
(449,369) (102,582) (4,217) (59,550) (28,461)
--------- --------- ------- -------- --------
(46,943) (20,177) 22,366 93,292 69,604
--------- --------- ------- -------- --------
51,199 (4,449) 24,444 170,187 122,836
487,983 492,432 -- 300,246 177,410
--------- --------- ------- -------- --------
$ 539,182 $ 487,983 $24,444 $470,433 $300,246
========= ========= ======= ======== ========
<CAPTION>
GROWTH & INCOME INDEX 500
STOCK DIVISION STOCK DIVISION
--------------------------- ---------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
- --- ---------------------------------------------------------
<S> <C> <C> <C> <C>
$ 46,514 $ (545) $ 16,076 $ 20,995
5,902 2,454 24,827 15,353
(24,965) 67,034 206,443 198,764
-------- -------- ---------- ----------
27,451 68,943 247,346 235,112
-------- -------- ---------- ----------
59,687 73,068 167,133 152,424
(868) (642) (2,567) (1,910)
(27,142) (19,173) (85,802) (53,430)
73,083 63,150 223,692 154,924
(74,859) (46,768) (169,952) (115,601)
-------- -------- ---------- ----------
29,901 69,635 132,504 136,407
-------- -------- ---------- ----------
57,352 138,578 379,850 371,519
423,325 284,747 1,170,970 799,451
-------- -------- ---------- ----------
$480,677 $423,325 $1,550,820 $1,170,970
======== ======== ========== ==========
</TABLE>
85 Account B Financial Statements
<PAGE> 94
NML VARIABLE ANNUITY ACCOUNT B
<TABLE>
<CAPTION>
Statement of 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,
(CONTINUED) 1999 1998 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net Investment Income............ $ 251,757 $ 114,567 $ 12,252 $ 12,575 $ 17,546 $ 12,142
Net Realized gain (loss)......... 38,856 24,370 (4,630) 87 294 687
Net Change in unrealized
appreciation (depreciation).... (29,796) 248,726 (9,614) (18,317) (22,857) (465)
---------- ---------- -------- -------- -------- --------
Increase (Decrease) in Equity
Derived from Investment
Activity......................... 260,817 387,663 (1,992) (5,655) (5,017) 12,364
---------- ---------- -------- -------- -------- --------
EQUITY TRANSACTIONS
Contract Owners' Net Payments.... 228,829 220,919 14,760 40,941 27,862 33,881
Annuity Payments................. (7,284) (6,278) (308) (301) (729) (570)
Surrenders and Other (net)....... (176,628) (153,449) (8,909) (8,012) (17,847) (13,382)
Transfers from Other Divisions or
Sponsor........................ 130,806 103,591 17,472 39,779 38,916 50,470
Transfers to Other Divisions or
Sponsor........................ (181,406) (133,506) (42,377) (31,044) (50,320) (36,471)
---------- ---------- -------- -------- -------- --------
Increase (Decrease) in Equity
Derived from Equity
Transactions..................... (5,683) 31,277 (19,362) 41,363 (2,118) 33,928
---------- ---------- -------- -------- -------- --------
Net Increase (Decrease) in
Equity........................... 255,134 418,940 (21,354) 35,708 (7,135) 46,292
EQUITY
Beginning of Period.............. 2,621,697 2,202,757 136,369 100,661 238,257 191,965
---------- ---------- -------- -------- -------- --------
End of Period.................... $2,876,831 $2,621,697 $115,015 $136,369 $231,122 $238,257
========== ========== ======== ======== ======== ========
</TABLE>
# The initial investment in this Division was made on April 30, 1999.
The Accompanying Notes are an Integral Part of the Financial Statements
Account B Financial Statements 86
<PAGE> 95
<TABLE>
<CAPTION>
RUSSELL RUSSELL RUSSELL RUSSELL RUSSELL
MULTI-STYLE EQUITY AGGRESSIVE EQUITY NON-U.S. REAL ESTATE SECURITIES CORE BOND
MONEY MARKET DIVISION DIVISION# DIVISION# DIVISION # DIVISION# DIVISION #
- ------------------------------- ------------------ ----------------- ------------ ---------------------- ------------
EIGHT MONTHS EIGHT MONTHS EIGHT MONTHS EIGHT MONTHS EIGHT MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1999 1999 1999 1999
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 9,172 $ 6,669 $ 1,308 $ 16 $ 544 $ 227 $ 466
-- -- -- (17) 130 (62) (1)
-- -- 1,788 1,221 2,706 (231) (465)
--------- --------- ------- ------- ------- ------ -------
9,172 6,669 3,096 1,220 3,380 (66) --
--------- --------- ------- ------- ------- ------ -------
122,518 73,549 16,904 4,683 5,356 2,060 5,715
(359) (184) (24) (3) (6) (2) (8)
(46,116) (21,355) (279) (12) 8 (96) (84)
568,077 230,774 33,711 11,989 21,654 6,530 10,291
(570,187) (217,873) (4,479) (1,531) (7,493) (1,760) (2,246)
--------- --------- ------- ------- ------- ------ -------
73,933 64,911 45,833 15,126 19,519 6,732 13,668
--------- --------- ------- ------- ------- ------ -------
83,105 71,580 48,929 16,346 22,899 6,666 13,668
205,586 134,006 -- -- -- -- --
--------- --------- ------- ------- ------- ------ -------
$ 288,691 $ 205,586 $48,929 $16,346 $22,899 $6,666 $13,668
========= ========= ======= ======= ======= ====== =======
</TABLE>
87 Account B Financial Statements
<PAGE> 96
NML VARIABLE ANNUITY ACCOUNT B
Notes to Financial Statements
December 31, 1999
NOTE 1 -- NML Variable Annuity Account B (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" or "Sponsor") used to fund variable annuity contracts ("contracts") for
tax-deferred annuities, individual retirement annuities and non-qualified plans.
Beginning March 31, 1995, two versions of the contract are offered: Front Load
contracts with a sales charge up to 4% of purchase payments and Back Load
contracts with a withdrawal charge of 0-8%.
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 reported
period. Actual results could differ from those estimates. Principal accounting
policies are summarized below.
NOTE 3 -- All assets of each Division of the Account are invested in shares of
the corresponding Portfolio of Northwestern Mutual Series Fund, Inc. and the
Russell Insurance Funds (collectively known as "the Funds"). The shares are
valued at the Funds' offering and redemption prices per share.
The Funds are open-end investment companies registered under the Investment
Company Act of 1940.
NOTE 4 -- Annuity reserves are based on published annuity tables with age
adjustment and benefit payments which reflect actual investment experience. For
variable payment plans issued prior to January 1, 1974, annuity reserves are
based on the 1955 American Annuity Table with assumed interest rates of 3% or
5%. For variable payment plans issued on or after January 1, 1974 and before
January 1, 1985, annuity reserves are based on the 1971 Individual Annuity Table
with assumed interest rates of 3 1/2% or 5%. For variable payment plans issued
on or after January 1, 1985, annuity reserves are based on the 1983 Table a with
assumed interest rates of 3 1/2% or 5%.
NOTE 5 -- Dividend income from the Funds is recorded on the record date of the
dividends. Transactions in Funds shares are accounted for on the trade date. The
basis for determining cost on sale of the Fund shares is identified cost.
Purchases and sales of the Funds shares for the period ended December 31, 1999
by each Division are shown below:
<TABLE>
<CAPTION>
DIVISIONS PURCHASES SALES
--------- --------- -----
<S> <C> <C>
Small Cap Growth
Stock................. $ 38,296,546 $ 845,567
Aggressive Growth
Stock................. 34,771,762 104,562,461
International Equity.... 384,796,045 367,729,044
Index 400 Stock......... 23,338,058 724,505
Growth Stock............ 108,687,411 5,055,604
Growth & Income Stock... 95,275,712 18,290,526
Index 500 Stock......... 182,480,585 33,272,697
Balanced................ 353,238,684 105,669,410
High Yield Bond......... 17,862,405 24,902,416
Select Bond............. 38,088,064 22,743,183
Money Market............ 442,385,056 359,078,119
Russell Multi-Style
Equity Fund........... 47,166,840 18,127
Russell Aggressive
Equity Fund........... 15,399,751 250,029
Russell Non-U.S. Fund... 21,739,048 1,672,878
Russell Real Estate
Securities Fund....... 7,618,762 659,336
Russell Core Bond
Fund.................. 14,168,221 31,074
</TABLE>
NOTE 6 -- A deduction for annuity rate and expense guarantees is determined
daily and paid to Northwestern Mutual as compensation for assuming the risk that
annuity payments will continue for longer periods than anticipated because the
annuitants as a group live longer than expected, and the risk that the charges
made by Northwestern Mutual may be insufficient to cover the actual costs
incurred in connection with the contracts.
For contracts issued on or after March 31, 1995, for the Front Load version and
the Back Load version, the deduction for annuity rate and expense guarantees is
determined daily at annual rates of 4/10 of 1% and 1 1/4%, respectively, of the
net assets of each Division attributable to these contracts and is paid to
Northwestern Mutual. For these contracts, the rates may be increased or
decreased by the Board of Trustees of Northwestern Mutual not to exceed 3/4 of
1% and 1 1/2% annual rate, respectively.
For contracts issued after December 16, 1981 and prior to March 31, 1995, the
deduction is at an annual rate of 1 1/4% of the net assets of each Division
attributable to these contracts. For these contracts, the rate may be increased
or decreased by
Notes to Financial Statements 88
<PAGE> 97
the Board of Trustees of Northwestern Mutual not to exceed a 1 1/2% annual rate.
For contracts issued prior to December 17, 1981, the deduction is at an annual
rate of 3/4 of 1% of the net assets of each Division attributable to these
contracts. For these contracts, the rate may be increased or decreased by the
Board of Trustees of Northwestern Mutual not to exceed a 1% annual rate.
Since 1995, Northwestern Mutual has paid a dividend to certain contracts. The
dividend is re-invested in the Account and has been reflected as a Contract
Owners' Net Deposit in the accompanying financial statements.
NOTE 7 -- Northwestern Mutual is taxed as a "life insurance company" under the
Internal Revenue Code and the operations of the Account form a part of and are
taxed with those of Northwestern Mutual. Under current law, no federal income
taxes are payable with respect to the Account. Accordingly, no provision for any
such liability has been made.
89 Notes to Financial Statements
<PAGE> 98
NML VARIABLE ANNUITY ACCOUNT B
Notes to Financial Statements
December 31, 1999
(in thousands)
NOTE 8 -- Equity Values by Division are shown below:
<TABLE>
<CAPTION>
CONTRACTS ISSUED:
CONTRACTS ISSUED: AFTER DECEMBER 16, 1981 AND
PRIOR TO DECEMBER 17, 1981 PRIOR TO MARCH 31, 1995
--------------------------------------- -----------------------------------------
ACCUMULATION UNITS ACCUMULATION UNITS
DIVISION UNIT VALUE OUTSTANDING EQUITY UNIT VALUE OUTSTANDING EQUITY
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Small Cap Growth Stock.................. $1.851783 215 $ 398 $1.845580 13,315 $ 24,574
Aggressive Growth Stock................. 5.679928 987 5,606 5.427804 118,954 645,659
International Equity.................... 2.375600 1,529 3,632 2.297694 143,591 329,928
Index 400 Stock......................... 1.122676 66 74 1.118909 7,870 8,806
Growth Stock............................ 3.099518 595 1,844 3.012947 66,688 200,927
Growth and Income Stock................. 2.600855 645 1,678 2.528256 83,677 211,557
Index 500 Stock......................... 5.146736 9,856 50,727 4.918509 165,311 813,084
Balanced................................ 8.176347 5,216 42,649 7.473141 281,204 2,101,477
High Yield Bond......................... 1.563339 128 200 1.519653 25,580 38,873
Select Bond............................. 7.656679 844 6,462 6.996057 17,091 119,570
Money Market............................ 2.767058 1,360 3,763 2.528768 52,169 131,923
Russell Multi-Style Equity.............. 1.070614 244 261 1.067018 14,784 15,775
Russell Aggressive Equity............... 1.103591 108 119 1.099895 6,268 6,894
Russell Non-U.S. ....................... 1.247160 34 42 1.242993 7,403 9,202
Russell Real Estate Securities.......... 0.922768 2 2 0.919674 2,244 2,064
Russell Core Bond....................... 0.986452 2 2 0.983142 3,415 3,357
-------- ----------
Equity................................ 117,459 4,663,670
Annuity Reserves...................... 5,907 76,161
-------- ----------
Total Equity.......................... $123,366 $4,739,831
======== ==========
</TABLE>
<TABLE>
<CAPTION>
CONTRACTS ISSUED: CONTRACTS ISSUED:
ON OR AFTER MARCH 31, 1995 ON OR AFTER MARCH 31, 1995
FRONT LOAD VERSION BACK LOAD VERSION
--------------------------------------- -----------------------------------------
ACCUMULATION UNITS ACCUMULATION UNITS
DIVISION UNIT VALUE OUTSTANDING EQUITY UNIT VALUE OUTSTANDING EQUITY
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Small Cap Growth Stock.................. $1.856086 5,929 $ 11,005 $1.845580 6,829 $ 12,603
Aggressive Growth Stock................. 2.661899 38,181 101,634 5.427804 50,370 273,398
International Equity.................... 1.964300 32,351 63,547 2.297694 59,168 135,950
Index 400 Stock......................... 1.125296 6,253 7,036 1.118909 7,577 8,478
Growth Stock............................ 2.898070 29,613 85,821 3.012947 58,031 174,844
Growth and Income Stock................. 2.431081 34,269 83,311 2.528256 69,826 176,538
Index 500 Stock......................... 3.127888 64,985 203,266 4.918509 93,537 460,064
Balanced................................ 2.117903 102,079 216,192 7.473141 60,554 452,529
High Yield Bond......................... 1.483036 17,636 26,155 1.519653 31,364 47,662
Select Bond............................. 1.331215 29,870 39,763 6.996057 8,674 60,684
Money Market............................ 1.259407 57,765 72,750 2.528768 30,819 77,934
Russell Multi-Style Equity.............. 1.073107 14,702 15,777 1.067018 15,269 16,292
Russell Aggressive Equity............... 1.106159 4,174 4,617 1.099895 4,194 4,613
Russell Non-U.S......................... 1.250059 5,811 7,264 1.242993 4,937 6,137
Russell Real Estate Securities.......... 0.924920 2,829 2,617 0.919674 2,073 1,906
Russell Core Bond....................... 0.988747 5,501 5,439 0.983142 4,595 4,518
-------- ----------
Equity................................ 946,194 1,914,150
Annuity Reserves...................... 10,174 34,707
-------- ----------
Total Equity.......................... $956,368 $1,948,857
======== ==========
</TABLE>
Notes to Financial Statements 90
<PAGE> 99
NORTHWESTERN MUTUAL SERIES FUND, INC.
D IRECTORS
<TABLE>
<S> <C>
James D. Ericson.................................. President and Chief Executive Officer, Northwestern Mutual Life,
</TABLE>
<TABLE>
<S> <C>
Martin F. Stein................................... Founder, Stein Optical,
.................................................. Milwaukee
John K. MacIver................................... Senior Partner, Michael Best & Friedrich, LLC,
.................................................. Milwaukee
Stephen N. Graff.................................. Retired Partner, Arthur Andersen LLP
.................................................. Milwaukee
William J. Blake.................................. Chairman, Blake Investment Corp.,
.................................................. Milwaukee
William A. McIntosh............................... Retired Division Head-U.S. Fixed Income, Salomon Brothers,
.................................................. Chicago
</TABLE>
<TABLE>
<S> <C>
.................................................. MILWAUKEE
</TABLE>
O FFICERS
<TABLE>
<S> <C>
James D. Ericson.................................. President
</TABLE>
<TABLE>
<S> <C>
Merrill C. Lundberg............................... Secretary
Barbara E. Courtney............................... Controller
</TABLE>
91 Directors and Officers
<PAGE> 100
This report is submitted for the general information of owners of NML Variable
Annuity Account B contracts. This report is not authorized for distribution to
prospective purchasers of variable annuity contracts unless it is accompanied by
an effective prospectus. Northwestern Mutual Life variable annuity contracts
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. L.L.C. a wholly-owned subsidairy 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.
<PAGE> 101
GROWTH STOCK FUND: A Manager's View
Julie Van Cleave [PHOTO]
Julie Van Cleave has quite a view from her office overlooking the shores of Lake
Michigan. "I have to remind myself to enjoy it," she laughs. After all, she's a
tad preoccupied managing millions of dollars in the Growth Stock Fund for
Northwestern Mutual's Variable Annuities. Julie has managed the Growth Stock
Fund since its inception in 1994 and has established a pattern of successful
returns.
WHAT'S THE FOCUS OF THE GROWTH STOCK FUND?
We focus on long-term capital growth. We position this product as a high
quality, diversified growth fund. It's a blue chip-oriented growth fund with a
blend of about 80% large cap and 20% mid cap. It really competes with other
large cap growth funds.
IS THAT PRETTY TYPICAL OF MOST GROWTH FUNDS?
There are such a wide variety of growth funds, you shouldn't view them all as
one category. Some are much more aggressive than others. When you look at growth
funds, you have to look at how they're compiled and managed.
HOW DO YOU MANAGE THIS GROWTH FUND?
We concentrate on quality and diversification. Some growth funds put all their
money into a few of the fastest growing areas. We represent more of the entire
market and are more diversified. There have been times when a sector like
technology will pull back and severely impact other growth funds. That's why we
include some holdings in less supercharged areas, then we look for the most
growth-oriented companies within those sectors. That's served us very well.
HOW WOULD YOU COMPARE YOUR GROWTH FUND TO OTHERS?
Over time, we performed very competitively verses other growth funds. We've
enjoyed very positive market returns.* We can also compare turnover ratios in
portfolios. Last year we had a 27.26% turnover ratio. The average turnover
ratio** for growth funds was 100%***. That shows we're investing in companies
for a while, not just trading whatever's hot that week. A more efficiently run
portfolio also means trading costs are lower. We do, however, keep our portfolio
fresh with new growth ideas, and our returns show that.
We try to get a lot of the big things right and do it with a high quality focus.
We also take a stand in areas we really like. For example, about two years ago a
lot of the retailing stocks had been sold off. We saw a lot of exciting growth
potential in retail. As an example, at calender year-end 1999, we held as a
percentage of net assets Kohl's Department Stores at 1.5%, Costco at 0.84%, and
Home Depot at 1.8%. We invested in that area without taking a great amount of
undue risk, and it's been very successful. To use a sports analogy, if you're
hitting singles and doubles all the time, pretty soon they're going to add up.
WHAT'S DONE WELL THIS YEAR?
This year we've concentrated on two sectors: consumer goods and technology. The
sector that's had the most change this year has been technology. Last year,
technology comprised 15-18% of the market value of the S&P 500(R). By the end of
1999, it had gone up to 28.6%.
WHAT DO YOU EXPECT WILL DO WELL IN THE FUTURE?
Technology will continue to grow as we change how we communicate and move
information. Consumer spending also looks good for quite a while. Five years ago
people said the baby boomers would start curtailing their expenses as they
matured, but instead they want nicer homes, more vacations, nicer cars ... this
upgrade in the standard of living can continue for a while.
WHAT'S THE BIGGEST CHALLENGE YOU FACE MANAGING THIS FUND?
Keeping a reasonable horizon is always a question. There's so much noise in the
short term, you have to make sure you keep the focus. With such an overload of
information you can get thrown off.
THAT SOUNDS LIKE A LOT OF PRESSURE
I take it very seriously, managing all of those personal dollars. I never really
lose the sense that there are people behind those numbers. How you can do that
everyday and not drive yourself crazy is to have a management approach you're
comfortable with. We've established a logical investment discipline that's
worked very well for us and our investors. Thanks for your views, Julie.
Remember to enjoy your own view once in a while. [_]
Contact your Northwestern Mutual Investment Services Registered Representative
to discuss if the Growth Stock Fund fits with your retirement savings goals.
* Northwestern Mutual Life Variable Annuity Annual Report, December 31, 1999
** Turnover rate equals the lesser of purchases or sales divided by the
average month-end net portfolio assets.
*** Morningstar, December 1999
ANNUAL REPORT ANNUITY ASPECTS 6
<PAGE> 102
VIRTUES TO INVEST BY BY ERNIE ANKRIM
What makes a successful investor? How about a slice of humble pie? Honesty,
humility, discipline - traits to aspire to in daily life. Yet when it comes to
investing, many of us apply principles such as risk and reward, and may fall
prey to temptations such as greed - although we may not admit it. When we check
what the market did, we don't think about admirable characteristics - we want to
know how much our investments made or lost. But the values that influence our
daily lives also apply to investing. Consider my five virtues to invest by:
Ernie Ankrim [PHOTO]
HUMILITY - Accept Reasonable Rewards for Reasonable Risk. Are you
disappointed if you don't see "great" returns every quarter? Reflect on the
real-life example of Long Term Capital Management, LP (LTCM). As reported in a
1998 Wall Street Journal story, during 1995 and 1996, the LTCM fund generated
returns exceeding 40%. Investors were ecstatic while others scrambled to get in.
But in 1997, thanks to market volatility, returns dropped to 17.7%. Reasonable,
yes, but not phenomenal and not what investors had come to expect. And then came
August 21, 1998, when the market plummeted. LTCM's investors experienced returns
of -50%, a staggering loss. Long Term Capital Management partners lost nearly
$1.6 billion. (1)
The lesson of LTCM is this: staggering returns come with the risk of losing
a lot of money. So exercise humility. Be humble enough to accept reasonable
rewards in exchange for taking less risk.
HONESTY - Recognize that the Person with the Most Wealth at the end is not
necessarily the Winner. Sophistication and risk tolerance are not synonymous.
Just because your knowledge of investing is high doesn't mean your risk
tolerance is.
It's easy to get greedy in a bull market with stocks posting returns of
more than 28% for the one-year period ending December 31, 1998. But are you
prepared for a year like 1974, when stocks lost almost as much, posting a
year-end return of -26.5%? Be honest with yourself about the trade-off between
return and risk. In your quest for hot returns, are you willing to risk a year
like 1974 when you may have lost a sizable portion of your investment and
earnings?
Take my wife, for example. When we carpool to work we pass an outdoor
electronic ticker that shows how the Dow Jones Industrial Average is performing.
When the Dow's up she never says a word, but when it's down she's immediately
concerned. She knows about the markets, yet she's anxious when her investments
decrease in value.
POISE - Recent Winners could be Tomorrow's Losers. Do you question your
investment strategy based on what you read or hear in the news? Consider the
lists compiled by Morningstar, Inc., of the 15 best and worst performing growth
mutual funds in 1996. Amazingly, seven of the funds appeared on both lists. For
example, the Dreyfus Aggressive Growth Fund registered an impressive 67% gain
between January and May 1996 - making it the top performing growth fund the
first five months of that year. But, between June and December, the fund fell
30% - making it the nation's second worst performing growth fund during the last
six months of 1996. (2)
Maintain your poise in the face of market volatility. Accept that the value
of your investments will rise and fall in the short term based on market
behavior. And that's OK because what matters is the size of your account balance
on retirement day.
COMMITMENT - Keep your Eye on the Prize and Ignore Short-term Market
Events. History shows moving in and out of the market may reduce return, so
don't bail out. Consider a "sticker," a hypothetical investor who started
investing in a portfolio of 60% stocks and 40% bonds in January 1960 and stuck
with it through December 1994. His average annual return would have been 9.47%.
Now consider a "bailer," a hypothetical investor who starts out with a 60/40
strategy in 1960, but who tries to time the market by periodically bailing from
stocks to bonds. During the same time period, this investor would have changed
the allocation of his portfolio to 20% stocks and 80% bonds on 21 occasions for
a total of 87 months, or 20.7% of the total time period. In 1994, his average
annual return would have been 8.26%.3 Our "sticker" fared much better.
Hopefully your investment strategy was selected based on your risk
tolerance, age, how long you plan to work, financial circumstances, retirement
goals, and attitudes about investing. Stay committed to your strategy and don't
alter it unless your life changes.
DISCIPLINE - Don't be Ruled by Consumption. We live in a spend-happy
society. We spend often without considering the consequences.
7 ANNUITY ASPECTS ANNUAL REPORT
<PAGE> 103
Instead of setting money aside, we count on the markets to finance our
retirements. But remember, exceptional investment performance cannot replace a
sustained savings effort. Conversely, a dedicated savings effort may lead to a
substantial accumulation of wealth independent of external factors such as
market volatility.
Imagine a hypothetical investor with a $30,000 income, who sets aside 2%
of his income annually each quarter ($150). If his return on these funds matched
the S&P 500(R) over a twenty-five year period (from the 4th quarter 1974 through
the 3rd quarter 1999), he'd have accumulated $164,805 by the end. Now imagine
you had to chose for this person either: 1) the ability to select investments
that would beat the market consistently by 5% per year, or 2) the discipline to
set aside 8% of his income ($600 every quarter). Which person would end up
wealthier? In the graph the answer is obvious. The phenomenal investor would
have accumulated $417,562, but the outstanding saver would have accumulated
$659,222.
Saving may not be as exciting as looking for the next "secret to the
market" in the hopes of increasing returns, but it does pay off. The discipline
of forgoing spending and investing the proceeds is the most reliable way to
accumulate wealth. It is important to stress that this example was not meant to
equate saving with putting money into bank deposits. "Savings" in this
illustration simply means the act of setting aside, rather than spending, some
of one's income.
THE POINT - The Moral of the Story... I'm not suggesting these simple
virtues will make you wealthy. I'm merely offering that one's approach to
investing can be handled with the same grace we strive for in other aspects of
life. So run through these five virtues in your mind the next time the market
nose-dives or you're tempted to act on a "hot tip" from a co-worker. As Socrates
said, "Virtue does not come from wealth, but ... wealth, and every other good
thing which men have ... comes from virtue. -
Unless otherwise noted, all references to stock performance are
represented by Standard & Poor's 500(R) Stock Index. Bonds are represented by
the Lehman Brothers Aggregate Bond Index.
1 Wall Street Journal article, "All Bets Are Off," November 16, 1998,
pages A1, A18 A19.
2 FORTUNE Magazine, "The Mighty Fall," John Wyatt, January 13, 1997, pages
156-158.
3 Change to 20% stock/ 80% bond allocation would occur in months in which
the previous 24 months' equity/bond risk premium has fallen below -2%
per year, and would return to 60% stock/ 40% bonds in any following
month when the last 24 months' equity/bond risk premium exceeds -2% per
year. The 21 occasions of 20%stock/ 80% bond allocation would have been:
7/62, 10/66, 1/67, 2/70, 5/70 to 7/71, 9/71 to 1/72, 1/74 to 1/76, 6/77
to 7/77, 2/78 to 8/78, 11/78, 1/79, 3/82, 8/82 to 6/83, 8/83, 7/85 to
11/85, 7/89 to 10/89, 10/91, 12/91, 7/92, 6/93, and 8/93. Based on
Russell Research Commentary, "Don't Bail Out: The Value of a Disciplined
Investment Philosophy", Dr. Ernie Ankrim, Frank Russell Company, June
1995.
Article is based on the research report, "Characteristics of Successful
Investors" developed by Dr. Ernie Ankrim, Frank Russell Company, 1999.
Dr. Ernie Ankrim is Frank Russell Company's director of portfolio
research and a frequent public speaker and writer on investment issues. He lives
in Tacoma, WA, with his wife Karen and their two children.
Frank Russell Company, one of the world's leading investment management
and advisory firms, provides investment advice, analytical tools and funds to
institutional and individual investors in more than 30 countries. Russell's
investment management business employs a manager-of-managers approach and has
approximately $60 billion in assets under management. The company has retainer
consulting relationships with clients representing more than US $1 trillion
worldwide. Frank Russell Company became a subsidiary of The Northwestern Mutual
Life Insurance Company in January, 1999. Founded in 1936, Russell is
headquartered in Tacoma, Wash., and has offices in New York, Toronto, London,
Singapore, Paris, Sydney, Auckland and Tokyo. Founded in 1936, Russell is
headquartered in Tacoma, Wash., and has offices in New York, Toronto, London,
Singapore, Paris, Sydney, Auckland and Tokyo.
<TABLE>
<CAPTION>
Saving vs. investing
A hypothetical 25 year example
<S> <C> <C> <C>
$800,000
---------------------------------------------------------------
$700,000
---------------------------------------------------------------
$659,222
$600,000
---------------------------------------------------------------
$500,000
---------------------------------------------------------------
$417,562
$400,000
---------------------------------------------------------------
$300,000
---------------------------------------------------------------
$200,000
---------------------------------------------------------------
$164,805
$100,000
---------------------------------------------------------------
Baseline Great Investor Great Saver
</TABLE>
Baseline: Invests 2% annually ($150) per quarter; Returns match S&P
500(R).
Great Investor: Invests 2% annually ($150) per quarter; Returns beat S&P
500(R) by 5% per year.
Great Saver: Invests 8% annually ($600) per quarter; Returns match S&P
500(R).
The Hypothetical example is for illustration only and is not intended to reflect
the return of any actual investment. Investments do not typically grow at an
even rate of return and may experience negative growth.
It is not possible to invest directly in an unmanaged index such as the Standard
& Poors 500(R) Stock Index.
ANNUAL REPORT ANNUITY ASPECTS 8
<PAGE> 104
PERSONAL INVESTOR PROFILE
THIS WORKSHEET IS DESIGNED TO HELP YOU DEVELOP AN INVESTMENT APPROACH THAT FITS
YOUR INDIVIDUAL FINANCIAL GOALS. AS YOU ANSWER THE QUESTIONS, YOU'LL BETTER
DEFINE INVESTMENT OBJECTIVES, TIME HORIZON AND ATTITUDES TOWARD RISK AND
INVESTING. YOUR FINAL SCORE WILL HELP YOU DETERMINE WHERE YOUR ASSETS SHOULD BE
ALLOCATED. FEEL FREE TO CONTACT YOUR NORTHWESTERN MUTUAL INVESTMENT SERVICES
REGISTERED REPRESENTATIVE TO DISCUSS YOUR PROFILE AND YOUR CURRENT PORTFOLIO
ASSET ALLOCATION.
QUESTION OF TIME Circle Value And Total The Corresponding Numbers
1. What is your time frame for wanting to reach your financial goals?
1 Year or less (1) 2 - 5 Years (2) 6 - 10 Years (3)
11 - 15 Years (4) 16 Years or Longer (5)
2. What is your age?
60+ Years (1) 50 - 59 (2) 40 - 49 (3)
30 - 39 (4) 20 - 29 (5)
3. What is your primary financial goal?
Capital Protection Protection against decline in market value of your
investments. (1)
Current Income Income generated from your investments. (2)
Consistency A high degree of stability and predictability of
your investment return over time. (3)
Long-Term Inflation Hedge High degree of protection of long-term purchasing
power of your investment. (4)
Capital Appreciation Increase in market value of your investments is
primarily through price appreciation. (5)
TIME HORIZON TOTAL (Apply at right)
<TABLE>
<CAPTION>
INVESTMENT RISK ATTITUDE Circle and Total Numbers Strongly Strongly
Agree Agree Neutral Disagree Disagree
<S> <C> <C> <C> <C> <C>
1. I would like to get as much long-term growth from 5 4 3 2 1
my investment funds as possible, even if it means
dramatic ups and downs on a year-to-year or
month-to-month basis in my investment results.
2. I believe I will have enough money to reach my 1 2 3 4 5
goal; therefore, I must protect what I have.
3. I believe I will not have enough money to reach 5 4 3 2 1
my goal; therefore, I must take risk to get ahead.
4. I would like to protect the money that I invest 1 2 3 4 5
even if it means getting very little long-term growth.
5. I believe I will have enough money to reach my goal; 5 4 3 2 1
therefore, I can afford to take some risk.
6. I believe I will not have enough money to 1 2 3 4 5
reach my goal; therefore, I cannot afford
to risk what I have.
<CAPTION>
INVESTMENT RISK TOTAL (Apply at right) Strongly Strongly
Agree Agree Neutral Disagree Disagree
INVESTMENT OBJECTIVE ATTITUDE Circle and Total Numbers
<S> <C> <C> <C> <C> <C>
1. Earning the highest possible return is the first 5 4 3 2 1
priority, even if it requires taking some risks
to do so.
2. I prefer an investment strategy designed to grow 1 2 3 4 5
steadily and avoid sharp ups and downs, even if it
lowers the long-term returns.
3. Short-term losses are acceptable if I have 5 4 3 2 1
confidence that the long-term returns will be good.
4. Protecting the money I have is a higher priority 1 2 3 4 5
for me than making it grow.
5. If I inherited a large sum of money, I would put 1 2 3 4 5
it in the bank rather than invest it in stocks.
6. For the right opportunity, I would quit my job and 5 4 3 2 1
start my own business.
7. I do not think I will need to spend any of my 5 4 3 2 1
principal before the end of my planning horizon.
8. Other assets I own, such as a pension, inheritance 5 4 3 2 1
or personal savings account form a substantial
portion of my net worth.
9. Apart from this investment, I expect my earnings 5 4 3 2 1
to increase over the next 5 years.
10. I have a very adequate emergency fund that would 5 4 3 2 1
cover most emergencies.
</TABLE>
INVESTMENT OBJECTIVE TOTAL (Apply at right)
<PAGE> 105
NOW THAT YOU'VE COMPLETED THE QUESTIONNAIRE
Please score your Profile and find the asset allocation model that may be
appropriate for you.
ENTER YOUR TOTALS FOR EACH CATEGORY
TIME HORIZON TOTAL: INVESTMENT RISK TOTAL: INVESTMENT OBJECTIVE TOTAL:
GRAND TOTAL:
Compare your GRAND TOTAL figure and its corresponding letter to the model
descriptions below to get an idea of the asset allocation that most closely
matches your risk and return parameters.
A (19) Conservative Model B (38) Moderate Model C (57) Balanced Model
D (76) Aggressive Model E (95) Equity Aggressive Model
WHERE DO YOU FALL ON THE PROFILE CONTINUUM?
A 19
B 38
C 57
D 76
E 95
ASSET ALLOCATION MODELS FOR THE SELECT(SM) VARIABLE ANNUITY
Bonds 80%
Medium/Large Company Stocks 12%
International Securities 5%
Real Estate Securities 3%
[PIE CHART]
A. CONSERVATIVE ASSET ALLOCATION MODEL
seeks to achieve a moderate total rate of return through low capital
appreciation and reinvestment of a high level of current income.
Bonds 60%
Medium/Large Company Stocks 22%
Small Company Stocks 2%
International Securities 12%
Real Estate Securities 4%
[PIE CHART]
B. MODERATE ASSET ALLOCATION MODEL
seeks to achieve moderate, long-term capital appreciation with high current
income, while recognizing the possibility of moderate fluctuation in
year-to-year market values.
Bonds 40%
Medium/Large Company Stocks 34%
Small Company Stocks 4%
International Securities 17%
Real Estate Securities 5%
[PIE CHART]
C. BALANCED ASSET ALLOCATION MODEL
seeks a moderate level of current income and, over time, above-average capital
appreciation with moderate risk.
Bonds 20%
Medium/Large Company Stocks 44%
Small Company Stocks 7%
International Securities 24%
Real Estate Securities 5%
[PIE CHART]
D. AGGRESSIVE ASSET ALLOCATION MODEL
seeks to achieve high, long-term capital appreciation with low current income,
while recognizing the possibility of substantial fluctuation in year-to-year
market values.
Medium/Large Company Stocks 60%
Small Company Stocks 8%
International Securities 27%
Real Estate Securities 5%
[PIE CHART]
E. EQUITY AGGRESSIVE ASSET ALLOCATION MODEL
seeks to achieve high, long-term capital appreciation, while recognizing the
possibility of substantial fluctuation in year-to-year market values.
<PAGE> 106
VARIABLE ANNUITY INFORMATION AT YOUR FINGERTIPS...
There is a wealth of information about Variable Annuities
available at the touch of a button. For the latest information
about contract values and performance data, call the toll-free
NML Express line any time.
1-800-519-4NML (1-800-519-4665).
Contract Owners must provide a contract number plus a Personal
Identification Number (PIN) to utilize this service. If you
have lost or forgotten your PIN, you can call the NML Express
Line to request a new PIN.
Visit our Web site for information on fund performance and
other information about Northwestern Mutual Life.
www.northwesternmutual.com/service/unitvalue/
As always, your Northwestern Mutual Investment Services
Registered Representative is available to answer any questions
you have about your Variable Annuity or any of our products.
"Standard & Poor's(R)," "S&P(R)"and "S&P 500(R)" are trademarks of The
McGraw-Hill Companies, Inc. and has been licensed for use by THE NORTHWESTERN
MUTUAL LIFE INSURANCE COMPANY. The funds are not sponsored, endorsed, sold or
promoted by Standard & Poor's, and Standard & Poor's makes no representation
regarding the advisability of investing in these funds. Annuity Aspects & the
Annual Report are authorized for distribution only when preceded or accompanied
by a current prospectus or offering circular for the Northwestern Mutual Select
Variable Annuity. The variable annuity contract has limitations. Please read the
prospectus or offering circular carefully before investing or sending money. The
Northwestern Mutual Select Variable Annuity is sold through individuals who, in
addition to being licensed life insurance agents of The Northwestern Mutual Life
Insurance Company, are Registered Representatives of Northwestern Mutual
Investment Services, LLC, a wholly-owned subsidiary of Northwestern Mutual Life,
720 East Wisconsin Avenue, Milwaukee, WI 53202 (414) 271-1444.
Frank Russell Company is a majority-owned subsidiary of Northwestern Mutual
Life.
Northwestern Mutual Investment Services, Inc. 720 East Wisconsin Avenue,
Milwaukee, WI 53202 (414) 271-1444 Annuity Aspects(TM) 1999 Northwestern Mutual
Life Insurance, Co. #90-1777 (12/99)
NORTHWESTERN MUTUAL LIFE(R)
PO BOX 3095
MILWAUKEE WI 53201-3095
CHANGE SERVICE REQUESTED
